Pod Insights The Prof G Pod with Scott Galloway Hail Marys in History, Politics, and Business — with Bill Silber About this episode Bill Silber, a senior advisor with Cornerstone Research and a former professor of finance and economics at NYU Stern, joins Scott to discuss inflation, wealth distribution, investment advice, and the learnings from his latest book, The Power of Nothing to Lose: The Hail Mary Effect in Politics, War, and Business.
Scott opens with how the media got played when Amazon announced its paying “full college tuition” for its hourly employees. He also explains how college rankings are beginning to reflect what really matters.
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:18 Scott Galloway? Episode 100.
1:21 Scott Galloway? Can you believe this shit? Anyways, the atomic number of fermium, the US $100 bill is the largest US bill in print. My new approach to money is I'm gonna give all my money to charity. And if she's not dancing that night, I'm giving all my money to destiny. Go, go, go!
1:48 Scott Galloway? Welcome to the 100th episode of the Prop G Pod. Just a quick shout out to all my dozens and dozens of fans who have made all this possible. All this meaning me and Drew and Claire and Caroline actually trying to pull this shit together. But I'm being very sincere when I say that people constantly come up to me. I mean constantly. And they say, hey, I love your pod. And not only that, they'll come up and they'll interrupt me. I'll be at lunch with a friend in the midst of a very intense conversation, and they think nothing of coming up and interrupting my lunch and saying, hi, Prof. G, or they yell at me or something, or, I mean, just absolutely no hesitance whatsoever
2:30 Scott Galloway? to interrupt my day. And I, and I gotta be honest, how does that feel to be interrupted at lunch? It feels wonderful. It feels wonderful. And I, just to shout out, I don't even call you fans, but just appreciate the same topics I appreciate. A lot of people have come up to me or sent me nice emails and sent us emails. Thank you so much. This has really been very rewarding. So anyways, anyways, in today's episode, we speak with my former colleague, Bill Silber. Bill is a senior advisor with Cornerstone Research and was a chair professor at NYU Stern School of Business and most recently as a professor of finance and economics. We discuss a number of topics, including inflation, wealth distribution,
3:13 Scott Galloway? and the learnings from his latest book, The Power of Nothing to Lose: The Hail Mary Effect and Politics War in Business. I have a ton of respect for Professor Silber. I just, this is a guy who's devoted his life to the study of finance and economics, has taught probably somewhere between 10,000 and 15,000 kids, and has had a really positive impact on corporate America, the government's approach to debt and money. This has really been a career and a life well-lived, and it's a pleasure to have him on. Okay, what's happening? It was all glitter and gold in the media last week, and Amazon dropped their press release explaining that they'd pay full college tuition for its 750,000 hourly employees. What great
3:53 Scott Galloway? guys! What great guys! As in those working in Amazon's operations network and its physical stores. Full college tuition.
4:03 Scott Galloway? Okay, full college tuition? Question mark? At first glance, this sounds awesome. See above glitter and gold in the media. A headline, actually, let's not call it glitter and gold. Let's call it champagne and cocaine. That's right. It's Fashion Week. Anyways, a headline from CNBC reads, "Amazon to Cover 100% of College Tuition for U.S. Hourly Employees." Now, I know what you're thinking. CNBC isn't just the home of sleeveless dresses and that help pump up the corporation sanitation that are SPACs, but it's also the home of hard-hitting journalism. So it must be true, right? Like, when Joe Kieran told Andrew Ross Sorkin that he was blowing the pandemic out of proportion and having a hysterical reaction, I mean, Joe, what a genius you are. Let me think.
4:47 Scott Galloway? We'd lost 50,000 people or when you made these comments that we were being, or your colleague was being hysterical about the pandemic on a business show, on a business show. Yeah, what the fuck were you thinking, Joe? And CNBC, what are you doing deciding that in addition to giving market commentary, that you're going to take political positions and spread death, disease, and disability? Anyways, I don't know where I was going there. That's not even in the script. This is a Jedi mind trick, and I'm talking specifically from the House of Bezos, the dark side of the force, and the mainstream media got fed total bullshit here. According to Amazon, this announcement is an extension of its Career Choice program,
5:30 Scott Galloway? which is a program designed to upskill its workers in high-demand fields such as IT, transportation, and healthcare. Many of the classes are held within Amazon's facilities. If that sounds like an internal upskilling program masquerading as a college degree, trust your instincts. Amazon's recent announcement says that it will work with various education partners and fund full college tuition, as well as high school diplomas, GEDs, and English as a second language proficiency certification for its hourly employees. The company says that it's still working on the list of partners and will not release that information until the program takes off in January 2022. The funding is actually capped at $5,250 per year for each employee, which is the maximum amount companies can provide for education assistance before the employee
6:13 Scott Galloway? Gets taxed. So just to be clear, 5,200 bucks pays for about nine weeks of my one course brand strategy at NYU. And that both highlights how outrageous the tuition is at universities, specifically NYU. But when they say they're paying full or they're going to fund full college tuition, that's just not true, is it? Now, this is a step in the right direction. But when a company says, I know, let's turn chicken shit into chicken salad and pretend that pretend that this wine in a box is champagne and try and spend more time trying to spin it. And by the way, the media just lapped this shit up. They really prostrated themselves on this one. And the reality is, this is a good thing.
6:54 Scott Galloway? But come on, come on. There have been, and this is what happens when you cut the number of journalists in half in 30 years, and you increase the number of corporate PR executives by 6X. They're like, let's call it a game changer. They'll eat it up. Right? And they'll believe pretty much anything we say. Let's get Charlie Rose to come in and see our drones 15 years ago and how the whole world is going to be getting their Advil and their Ben and Jerry's via drone. Yeah. Anyone got anything from a drone recently? Anyways, I like the idea of a drone landing on my driveway and killing all those stray cats. Not that we have a lot of stray cats. I just don't like cats. I just don't like cats. I like the idea of them chopped up by an Amazon, by an Amazon drone. Too much? Anyways, just lost the cat,
7:38 Scott Galloway? people. Just lost the cat, people. So this is a little misleading when Amazon announces it's covering full tuition. When according to US News, the average cost of tuition and fees for the 2020 2021 school year was roughly $41,000 for private schools, $11,000 for state residents at public colleges, and $27,000 for out of state students at state schools. Walmart, Target, McDonald's, and Disney already have similar programs. So why did Amazon get this type of heat or hype? Because the media is enamored by Amazon and they know that sells headlines. Another reason, Amazon has a small army of PR and communications professionals overrunning the media and government. Amazon has, get this, more than 500 people massaging corporate communications and that's still not enough.
8:23 Scott Galloway? The Seattle Bahamut currently has another 79 open positions for PR and comms professionals. So there is a learning here. I'm going to stop as I'm criticizing Amazon. By the way, disclosure, I'm a shareholder, I've owned Amazon for 13 years and net-net, I think Amazon is a positive for society, largest recruiter for my class. But come on, this is just such bullshit. And by the way, I think what Google's done with their certificates, training or offering non-college-bound younger people the opportunity to get certified in things like UIUX or product planning or product management, I think that's fantastic, but they're calling it what it is. They're not saying, oh, we're going to pay for college. They're calling it what it is.
9:03 Scott Galloway? Okay, so in 2020, Amazon also had 118 lobbyists in Washington and 82 of those lobbyists, or seven of 10, previously held government jobs. See above revolving door. So there are more full-time paid lobbyists living in DC than there are sitting US senators. Now, let's compare that to the antitrust division of the DOJ. In 2020, they had 335 attorneys. So get this, at the Department of Justice, there are fewer full-time attorneys at the DOJ trying to levy justice across the greatest experiment in mankind called the United States. And key to the United States, you know one other thing? I hang out with a lot of immigrants. A lot of my friends came here from other nations.
9:46 Scott Galloway? And the thing that constantly remind me of is that the rule of law is incredibly powerful and something we take for granted, that if you work hard, you have certain protections. That someone just can't show up and take your shit away. Someone can't just show up and be unfair or sign a contract and then ignore it. He said, you have no idea how powerful the rule of law is. In terms of trying to root out corruption and the folks, the premier cops around the rule of law, the Department of Justice, they have fewer professionals, fewer lawyers, than Amazon has PR executives. I mean, this is just, I don't know, I don't know, the world in which we live in. Anyways, what might have gone down at Amazon HQ around this decision? The HR team is struggling to hire people in the middle of a labor shortage, so they
10:31 Scott Galloway? make an unholy alliance with the PR and comms people to put lipstick on the pig that was internal training. So they go out and they feed it to the lemmings in the media, and as long as it says Amazon at the top, they're going to print it in pretty much the tone that it's presented to them. And it's hard to blame them. They're so busy that it's like, okay, you do my work for me, and maybe you give me some access to an interesting Amazon story, whatever it is. And they just don't have the time to do the diligence on this. We have to have more onramps to the American dream. Apprenticeships, different types of certifications. I'm a huge fan of the component of the infrastructure bill that will offer free two-year college education. My roommate my junior year at UCLA was someone
11:14 Scott Galloway? who went to junior college for two years, and then came to UCLA. That dramatically brings down the cost. We've got to have different means, civil service, different ways of saying, you know, come to the great American economy, come to the great American middle class, even if it means not going through what has become an increasingly corrupt enforcement of the caste system, and that is my employers for your private universities, and to a certain extent, public universities. Now, have they all lost the script? No, no. There's some really wonderful things happening in public education, specifically my alma mater, University of California, their biggest class in history, more people of color than
11:54 Scott Galloway? history, more kids with Pell Grants in history. I mean, this is really exciting stuff. Speaking, speaking of higher ed, you know how the world is about to change here? The Forbes ranking, Forbes has decided to incorporate the percentage of kids who receive Pell Grants into the ranking. Why is this huge? Why is this huge? Young people. Are stupid. And because they're stupid, they defer to the brand. And that is, they are brand obsessed. Why does CNN get much higher CPMs or ad rates than Fox? Because old people watch Fox, and just sort of old people watch CNN. Or I would, maybe I should rephrase that. Old people watch CNN, and people who are dead watch Fox. I mean, Fox literally has an average age of 70, meaning that if a 40-year-old actually
12:39 Scott Galloway? accidentally flips on Fox, that means there's someone 100 watching it. Seriously, that's how old people watching TV are. But the reason we hate, or the reason that CNN gets much higher ad rates with younger viewers, is because the younger you are, the stupider you are. And that is, people in their 50s are going through midlife crises, and will buy fancy cars, and $2,000 suits, and just basically stupid shit, because we're still clinging to youth. And young people, oh my god, let's go full Monty stupid, will spend $8 on coffee, and 200 bucks on tennis shoes, or sneakers, or trainers, whatever you want to call them,
13:19 Scott Galloway? or $1,200 on a pair of Manolo Blahniks, or spend a lot of money at a bar, right, to feel better about themselves, such that they can then get the confidence to go speak to somebody wearing Manolo Blahniks. The point is, young people love brands. And they love the self-expressive benefit, they love the confidence it gives them, and it helps them make decisions and choices. Now, how does this relate to the college rankings? The most powerful thing about a college is its brand. You know, people say, there's, every year, there's a national ranking of brands, or an international ranking of brands, there's a bunch of them, and they leave out the strongest brands in the world. MIT and Michigan are much superior brands to Coca-Cola or Apple.
14:00 Scott Galloway? Nobody puts, nobody donates $100 million to the Cupertino computer manufacturer, hardware manufacturer, to get their name on the side of the spaceship headquarters. Whereas you can't, you can't get your name on a urinal at NYU for a million bucks. These are the strongest brands in the world. They've been around for decades, if not centuries. They're about light, they're about enlightenment, they're about youth, they're about trying to make America a better place, they're about the pursuit of truth, they're about joy.
14:29 Scott Galloway? And also beer, that's a big one. Anyways, this is, these are outstanding brands. And young people base their selection of a university, and think about this, this is a quarter of a million dollar purchase oftentimes. Whether or not you go to Michigan or Michigan State, or Kellogg, or Indiana, it's kind of a quarter of a million dollar decision. This is the most expensive purchase you will make at that margin. People say, well, it's the second most expensive purchase behind your house. Your house doesn't have 98 points of gross margin. These things cost money to build and maintain. When we bring people to NYU, or to Michigan, or to Stanford, it's gotta be 90 plus points of gross margin, meaning every incremental student just doesn't cost us that much.
15:11 Scott Galloway? So this is the highest margin, six-figure purchase in the world, which translates to brand equity. And what is the key pulse? What is the key driver of that brand equity? The rankings. The moment one school goes into the top 10, and the other drops out of the top 20, you're talking about a head-to-head yield where one will get 80 or 90% of the 100 applicants that get into both schools. NYU, in my opinion, and almost every exit survey shows this, is a better experience than Columbia. They do exit interviews with the students, the NPS ranking. People enjoy going to NYU and living downtown more than they enjoy going to Columbia. But Columbia continues to get greater yield than NYU.
15:56 Scott Galloway? It used to be 80/20, now I think it's 55, 45, or 60/40. Why does that happen? Because of the brand. And there's two key components to the Columbia brand. One, it's an Ivy League, which is an unbelievable halo brand. But two, most importantly, it consistently gets ranked in the top 10. NYU does not get consistently ranked in the top 10, it gets consistently ranked in the top 20. The difference, the difference between margin power, endowments, the difference between being Apple and, I don't know, something that's somewhere in between Samsung and Apple, is these rankings. And this is where it has become Totally corrupt and really negative.
16:39 Scott Galloway? There is a huge negative externality around these rankings that Business Week kind of pioneered. And that is, they have a variety of criteria, things like the bump in your salary, things such as the prestige of the faculty. But what is really insidious here? What is the dark side of the force? What is the fucking toxin here? What is the novel coronavirus of these rankings? I wonder if that's going to become an element or part of our popular culture that we continue to reference for, you know, the next 100 years. Anyways, it's this one component called admissions rates, or specifically, how many people do they not admit? And that is, the rankings say, if your admissions rates are lower, that's a good thing and you go up in the rankings. So what do we do?
17:22 Scott Galloway? What do we do when our livelihoods, our endowments, our margin power, our prestige, how cool it feels to wear that sweatshirt feels? We study to the test and we start adapting everything around this goddamn ranking. That is the key. We live and die by these things. So what do we do? We figure out a way to improve the offering, improve the program, improve our faculty, all those things, which are good things. And we also figure out a way to reject more children. These are children. They're 17 when they apply. And we take pride in rejecting them. And I can't tell you how many times the dean of my school has stood up and said, "This year, we turned away 92% of applicants." What the fuck? That's a good thing?
18:06 Scott Galloway? I wouldn't be here right now if UCLA had turned away 92% of their applicants. When I went to UCLA, they turned away 30%. They had a 70% acceptance rate. And I had to apply twice. America isn't about admissions or exceptionalism. America is about acceptance. It's about giving people opportunity. It's about giving good kids remarkable opportunities, whether it's admissions to a good university at a decent admissions rate, or giving them another on-ramp to our economy. So Forbes has said, "I know, let's come up with a new input, a new criteria." It's the percentage of kids who receive Pell Grants. By the way, I was a Pell kid. What does that mean?
18:49 Scott Galloway? That means they've decided, a conscious decision around the ranking of a university, the quality, the value, the prestige of a university should be directly linked to how many people's lives it transforms, to the access to this incredible opportunity. So who's the number one university this year, according to Forbes? The University of California at Berkeley, where 27% of its students, of its students, are Pell Grant recipients. A university that will graduate more kids from a long-term household this year than the entire Ivy League combined. That's what you call the best fucking university in the world. That's what you call the Bears. And oh, who else is in the top 10? The University of California of Los Angeles, because they too, they too, are helping kids who can't afford.
19:33 Scott Galloway? And the University of California is dramatically expanding its roles. And by the way, by the way, nine public universities in the top 25, four public universities in the top 10. Boom! That's right. America is getting its shit together. America's decided that, all right, we need more on-ramps, and the on-ramps called college are going to be more about access and affordability than about fucking Harvard deciding to let in 1,400 students off an application base of 55,000, despite sitting on an endowment that's the size of the GDP of Costa Rica. That's not America. That's self-absorption, arrogance, a caste system. That's not what we're about.
20:17 Scott Galloway? Anyways, Forbes, changing the rankings, changing the rankings, changing brand equity, and opening up the incredible opportunities that unremarkable kids have had. America is not about taking the top 1% and turning them into billionaires. It's about giving the top 50% a chance to be in the top 10% and about giving everyone a shot, a shot. That's what America's about. Stay with us. We'll be right back for our conversation with Bill Silver to discuss the power of downside protection and how it triggers risky behavior, specifically throughout history, business, and investment strategies.
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23:12 Scott Galloway? Welcome back. Here's our conversation with Bill Silber, a senior advisor with Cornerstone Research and the author of The Power of Nothing to Lose: The Hail Mary Effect in Politics, War, and Business. Professor Silber, where does this podcast find you?
23:25 Speaker 02 Where does it find me?
23:27 Scott Galloway? Where does, where are you? Where are you, Bill?
23:31 Speaker 02 Teaneck, New Jersey, in my home.
23:33 Scott Galloway? Teaneck, New Jersey. Nice. Are you teaching this semester?
23:36 Speaker 02 No, I'm not.
23:38 Scott Galloway? No?
23:38 Speaker 02 I stopped teaching about a year ago.
23:41 Scott Galloway? I did not know that. So for, for our listeners, Professor Silber is a bit of a legend. He's one of best professor and is kind of a role model for all of us who aspire to be great, great instructors. So let me, let me ask you, I'm just, you've advised a lot of very important people and agencies and governments. I'm just curious, the markets right now, your thoughts?
24:08 Speaker 02 Well, the biggest puzzle that I find is Bitcoin. I find that to be unintelligible.
24:22 Speaker 02 Not because people aren't looking for something alternative to paper currencies, but it's just a surprise to me that something like Bitcoin seems to have taken over from conventional assets that have some protection against the unknown. You know, people talk about gold as an inflation hedge. I almost view it more as protection against sovereign risk so that the sovereign can do what they want necessarily. And Bitcoin seems to have attracted lots of
25:07 Speaker 02 people and that's a little bit of a surprise to me. It's not such a big surprise that the stock market is going up because so many people have been worried that it's going to go down. When people worry that something is going to go down, usually it's going to go up. Almost a bit of a contrarianism. So the stock market is not a big surprise. Bitcoin is a surprise.
25:34 Scott Galloway? And looking forward, are you worried about the markets? Do you see this as being vulnerable right now? I mean, it feels like 13 years of a kind of a bull market. At some point, the music has to stop. What are your thoughts?
25:45 Speaker 02 Yeah, I think you're gonna get a down, you're gonna get a pullback. But the pullback comes, of course, when you least expect it. And there's an old adage on Wall Street, which contains a tremendous amount of truth. And that is bull markets climb a wall of worry.
26:09 Scott Galloway? Mm hmm.
26:09 Speaker 02 As long as everybody's worried, it means that all the money isn't committed yet. And as long as there's caution, as soon as people say, all right, we're, we're never gonna see a pullback. That's when you are most vulnerable to news, which is unanticipated. It's not the anticipated news that's going to make a difference.
26:39 Scott Galloway? And you spend, or spend a lot of time teaching kids how to, when I say kids, the 27 and 35 year olds that we teach, how to think about capital and fundraising and managing the financial complexion of a corporation. What do you see that's different about the way companies approach the capital markets, their fundraising, share buybacks? That's different now and any observations around those changes?
27:02 Speaker 02 You know, there's always an incentive to borrow money in order to invest. This is what corporations do. They are always leveraged and leverages, you know, just a fancy word for borrowing money to buy assets. That's what the word means, you know, it comes from a old lever where you, you know, you pick something up. Well, when you borrow money to buy assets, you get the possibility of a high returns.
27:35 Scott Galloway? Mm hmm.
27:36 Speaker 02 But you also get.
27:39 Speaker 02 The downside potential, if you don't borrow money, you can't go bankrupt. On the other hand, if you borrow a lot, you can go bankrupt. And in fact, what we have now is very, very leveraged companies. So they are vulnerable. They are vulnerable to negative surprises.
28:02 Scott Galloway? Would you consider, is the same true for America as a sovereign? It feels like we're getting more and more levered.
28:07 Speaker 02 Well, you know, you get a big argument about that from people who say, well, the world is different today because interest rates are so low, we can afford to borrow. And the answer to that is yes, you can afford to borrow as long as interest rates stay low. But we know, the one thing we know about markets is they will fluctuate. And that means that when interest rates start to go up, the burden of the debt, which we used to say in the old days, I'll say the old days, in the 1960s, before even you were born, Scott, it's hard to believe that.
28:48 Scott Galloway? You have to go way back, way back, Bill.
28:49 Speaker 02 But yeah, before even you were born.
28:52 Scott Galloway? Yeah.
28:52 Speaker 02 In the 60s, we used to say, oh, don't worry about the debt, we owe it to ourselves. That, of course, is no longer true. So higher interest rates will create a burden to carry the debt and that those interest payments will go abroad. Because 30% of, maybe even more, 30% of, of America's debt is held overseas. Although we borrow it in our own currency, the interest payments go abroad.
29:23 Scott Galloway? So let's talk about the likelihood that interest rates could spike, or specifically inflation, because if we look at the 10-year, it doesn't look as if the market's worried about inflation. But I see signs of inflation everywhere, and then I see technology being deflationary. Any thoughts or signals that you look at in your view on inflation?
29:42 Speaker 02 Yeah, I mean, one of the problems with inflation is that I think the measured Consumer Price Index, which is run by the Bureau of Labor Statistics, I don't think measures all the inflation that we see. I'm going to give you an example. So I went to the supermarket the other day to buy soda, and usually I can get four two-liter bottles for $4. It runs that for about $1.30. They're always on sale, except the last two times
30:21 Speaker 02 they weren't, and I had to pay $2 a bottle. Well, $2 a bottle versus $1.33 is a 50% increase. And I wonder whether the quote-unquote "normal" sales that we get in supermarkets are in fact properly registered by the Bureau of Labor Statistics surveyors. I mean, they don't, they don't go every day. I know that I get items on sale, but I'm not so sure
31:02 Speaker 02 that they have properly recorded that. My bet is that inflation is higher than what is recorded in the Consumer Price Index.
31:12 Scott Galloway? Yeah, I was talking to a friend who owns Nissan dealerships, and because of the chip shortages, I didn't realize how many chips went into cars, but because of the chip shortages, there is a dramatic decline in the supply of Nissans. And you'd think that was a bad thing, but what it's, the net effect of it is that it's taken so many, so much supply out of the system that they, for the first time, and he said in 30 years, they have incredible pricing power. And literally, the profitability on every Nissan has quintupled. And even if they're selling half as many units, they're, he said this will be the most profitable year in his history of owning a Nissan dealership. And so the question I have is, I wonder if your soda going up 30 or 40%, if that will correct
31:56 Scott Galloway? itself once some of the supply chain...
32:00 Scott Galloway? Problems or gunk gets removed and the production lines get and the production channels get flowing again, or if in fact, we're seeing the evidence that all of this printing of money, we just have too much money facing too few products. Any thoughts on whether this, let's assume we do have a spike in inflation in the short term. Do you think it sustains? Or do you think we start this deflation or no inflation environment again, once the supply chain comes back online?
32:25 Speaker 02 Look, Scott, I think you've hit on the two alternative explanations for what's going on. Clearly, the supply, the supply chain discussion supports what Jerome Powell at the Fed is suggesting, namely, this is temporary. And if that's right, then there's nothing to worry about. On the other hand, the alternative is we've had huge increases in the supply of money. We've had huge stimulus from the from the fiscal side, and that will sustain a longer term increase in the rate of inflation. And I
33:08 Speaker 02 don't think anyone knows which one of those is true, including me and including Jerome Powell. And what that means is there's great uncertainty. And in my mind, what that required was at least some show of restraint by the central bank, show of restraint by stopping buying long term government bonds, because we're not in the problem that we were a year ago, a year and a half ago. And it would seem to me would have been prudent to pull back a little,
33:50 Speaker 02 not because I know which of those explanations is true. I don't. And because I don't, it would have been prudent to be less expansive than we were, when it was clear that there was a big problem, namely, back in March of 2020.
34:18 Scott Galloway? And I don't know if you saw, but Biden introduces a tax plan or gave a preview of a tax plan or a plan to increase taxes, mostly on corporations and also on wealthy people and taking capital gains from 20% to 25. And, you know, of course, a lot of people are trying to present this as radical. It's, you know, I look at it and say, okay, we're going back to just a very low interest or taxation on wealthy people. But it is obviously an increase. Do you have any thoughts on the relationship between increases and decreases in the proposed corporate or personal tax rates for corporations and wealthy people and the impact it might have on the economy, negative or positive?
34:59 Speaker 02 That's a hard question because it really has to focus on how much do we need the infrastructure expenditures? How much do we need to fix the distribution of income? These are, that's just a very complicated question. Could you make marginal changes in the tax rate? Yeah, you could raise it up. I don't think much would happen. But if you really ask me to, you know, what would I really like to see? I'd like to see a flat tax.
35:41 Scott Galloway? Yeah.
35:42 Speaker 02 A flat tax with no deductions for nothing. Okay?
35:48 Scott Galloway? Agreed.
35:49 Speaker 02 And just let it, because that, I think, would fix more of the distribution problems than, you know, changing the marginal tax rate on people above $450,000 a year.
36:13 Scott Galloway? Coming up after the break.
36:15 Speaker 02 So Hail Marys can have what I would call positive externalities, positive benefits, but most often they have big negative collateral damage. And the best example is Adolf Hitler.
36:35 Scott Galloway? Stay with us.
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38:18 Scott Galloway? Let's talk about your latest book, The Power of Nothing to Lose: The Hail Mary Effect in Politics, War, and Business. And you show how presidents, generals, dictators, and ordinary people have used the power of downside protection to alter history. Can you explain what downside protection is and walk us through the strategy?
38:34 Speaker 02 Sure. So, everybody knows what a Hail Mary pass is. I mean, we're football-obsessed in the United States. We know that Aaron Rodgers, when he's paying attention, will, in fact, throw a Hail Mary pass in the last few seconds of a game when Green Bay is trailing by less than a touchdown. At the end of a game, he has nothing to lose by throwing a Hail Mary because the downside is protected. What is the downside? Having another interception.
39:18 Speaker 02 That's the worst that can happen. That's almost inconsequential compared with the huge upside. What's the huge upside? Winning a game. So, when you have, and I'm going to use a term which everybody would understand, even though it sounds a little technical, a skewed payoff. What's a skewed payoff? I don't get hurt very much if the bad outcome occurs. Why is that? I'm going to lose anyway. On the other hand, I get huge upside. And that kind of payoff promotes risk-taking. That may sound pretty obvious,
40:03 Speaker 02 but it has had a huge impact historically, a huge impact historically. And second, very often, there are...
40:16 Speaker 02 Consequences that I call collateral damage. And that's what this book focuses on. The collateral damage of Hail Mary type decisions.
40:31 Scott Galloway? Give us some examples, politics, war, personal decisions we make. When have the Hail Mary, give us examples of Hail Marys that have, that have come to levied damage.
40:41 Speaker 02 Well, before I do the damage, let me give you an example, which is really a very subtle example from American politics. So that if you go back over the past 40 years, we've had a number of presidential elections that have had Hail Mary decisions with respect to vice presidential candidates. Walter Mondale in 1984, Robert Dole in 1996, John McCain in 2008, were all in presidential
41:23 Speaker 02 rates where as they got closer, before they chose their vice presidential candidates, they were in big trouble. So what each of those candidates did was choose an unconventional vice presidential candidate, one that would normally not be chosen. Mondale chose Geraldine Ferraro.
41:48 Speaker 02 John McCain chose Sarah Palin.
41:52 Scott Galloway? Yeah, a book called Game Change was written about it, right? The title of the book literally feeds into your thesis, Game Change.
41:58 Speaker 02 Each of those choices were labeled in the press as Hail Marys. Why? Because they were, they had such low, because the people who made the decision, Mondale and Dole and McCain, had so little to lose, they were going to lose anyway. What was the outcome of that? They lost anyway, didn't they? Every one of those candidates lost. Mm hmm. And yet, two of those choices were women. Mm hmm.
42:34 Speaker 02 And I would suggest that the choice of Kamala Harris in two thousand and twenty benefited from those choices. Why is that? This was a, this was, they paved the way for a woman to be a vice presidential choice in, uh, in a presidential election. So here were examples of Hail Marys that failed. But if you look at the wider perspective, historically, it
43:15 Speaker 02 had some benefit. So Hail Marys can have what I would call positive externalities, positive benefits, but most often they have big negative collateral damage. And the best example is Adolf Hitler in December of nineteen forty-four, in the middle of World War Two, towards the end of World War Two, where the Germans were basically defeated. And everyone, every one of the generals told Hitler, you might as well stop and save manpower. On the other
43:57 Speaker 02 hand, Hitler's propaganda minister, Joseph Goebbels, said, the Americans demand unconditional surrender. Every German understands that they have nothing to lose by continuing to fight. That's not my words. Those are his words. And what Hitler did in December nineteen forty-four was to have a desperate counterattack, which we now call by the name of the Battle of the Bulge. That's right. The Battle of the Bulge was a famous US, was a famous movie, but it in fact was a devastating.
44:45 Speaker 02 Attack, one that was destined to fail. But who paid the price? Two groups paid the price. One, the ordinary Germans. The United States Army had one of its bloodiest encounters. And there was, in fact, one of the greatest atrocities visited on American troops during the Battle of the Bulge. It was the massacre of American POWs near the Belgian town of Malmedy. So here was an example of nothing to lose. By whom? By Hitler. But that had great collateral damage
45:30 Speaker 02 because he did not bear all of the costs of the negative decision.
45:38 Scott Galloway? I mean, that brings up a whole host of issues around whether we should have given them a sense of it didn't need to be on conditional surrender. And some people would argue, I mean, you could go a lot of ways with this. Was our Hail Mary, the dropping the first bomb and the second bomb? I mean, there's so many places you could go with this. So let's bring it to more present day. And where I go with this is I wonder or I worry, Bill, that a lot of young men are taking outsized risk in the investment markets because they feel like they have less to lose. Because the standard path of building a career, saving some money in a 401k, that that doesn't work for them or no longer works as effectively for them because assets are so expensive.
46:23 Scott Galloway? So they're taking, they're embracing more risk. They're embracing the Hail Mary. Do you think there's any veracity to that?
46:31 Speaker 02 Absolutely.
46:34 Speaker 02 We see it in meme stocks where people who
46:40 Speaker 02 Can't afford it can in fact go in and buy stocks which have almost no intrinsic value, except they are following the momentum. And you know, the problem with meme stocks is not so much that they don't have value, but the what you see in meme stocks is simply the tip of the iceberg. You only hear about the winners. You do not hear about the losers. This is a perfect example of what you and I call selection bias.
47:21 Scott Galloway? Yeah.
47:22 Speaker 02 This is all selection bias. And what has happened more recently is that meme stock investors have chosen to do what I call buy out of the money call options on meme stocks. Now, this is a very technical term, which I'm not going to go into. But when you buy an option, you have limited downside, because the worst that you can lose is the premium that you pay, and unlimited upside. And all they see is the unlimited upside.
47:58 Speaker 02 They don't see the fact that 95% of the time, these kind of options fall by the way worthless. And it acts the same way as a lottery ticket. And lottery tickets are another example of what I call downside protection. The worst you can lose is the is the dollar or two premium. Why do you get attracted? Because you have that big upside potential, a life changing event that has infinitesimal probabilities. So that attracts people who cannot afford
48:38 Speaker 02 to do it into an activity which looks like it is attractive, but really isn't.
48:45 Scott Galloway? So let's let's let's pan out, try and distill. I mean, you've been teaching finance and how companies manage their finances and also to a more.
48:59 Scott Galloway? You know, a bigger, broader question then is how do we all achieve some, some level of economic security by being smarter about finance? What advice? Can you try to distill down a few pieces of advice to young people around building economic security?
49:13 Speaker 02 Don't try to get rich quickly. Do it slowly. Anybody who goes out and takes a big bet on one stock is making a mistake. They hear of people who said, oh, I bought Amazon when it was, you know, four cents and I bought this and I bought that and I feel like a fool if I hadn't done that. And all I'm going to say is I repeat, you hear only about the winners.
49:49 Scott Galloway? Yeah.
49:50 Speaker 02 You do not hear about the losers. How should you become self-sufficient economically? Save as much as you can. Put as much as you can into a pension fund and then buy stocks with it, a diversified portfolio, a portfolio if you want. I call it an index fund and I don't care what index you're tracking. You can track the S and P 500, you can track the Russell 2000. I don't care what index it is. Put money into something that looks like an index fund and then decide how much of
50:33 Speaker 02 your wealth belongs in stocks and how much wealth belongs in riskless assets, CDs. Right now, CDs, savings earn zero, but they do something else. They protect the downside. How much should you put in stocks versus into riskless assets? The answer is so that you can sleep well at night.
51:05 Speaker 02 It could be 60%, it could be 80%, it could be 40% of your net worth. Put the rest in savings bank, in a savings account or in CDs. And hopefully, the growth in those values in the stock market over a long period of time will give you enough accumulation, especially if it is in a tax-deferred account.
51:35 Scott Galloway? Bill Silber is a senior advisor with Cornerstone Research and was a chaired professor at NYU Stern School of Business, most recently as the Marcus Nadler Professor of Finance and Economics. He's also the author of eight books. And his latest, The Power of Nothing to Lose: The Hail Mary Effect in Politics, War, and Business, is out now. In government service, he's been a senior economist with the President's Council of Economic Adviser and was a member of the Economic Advisory Board of the Federal Reserve Bank of New York. And most impressive, in 1980, he received the Excellence in Teaching Award at NYU Stern School of Business and was voted Professor of the Year. And this is across 190 of us. Professor of the Year by MBA students in 1990, 1997, in 2018.
52:19 Scott Galloway? And in 1999, he was awarded NYU's Distinguished Teaching Medal. Bill, thanks for your service. Thanks for being a great role model for your colleagues and stay safe.
52:29 Speaker 02 It's been a pleasure, Scott. Thank you very much.
52:41 Scott Galloway? Algebra of happiness. Life and professional success are not only a function of what you do, but what you don't do. Or specifically, I was struck by talking to one of our guests about productivity, what you decide not to allocate your finite capital to. And as I get older, I realize I now have more money than time. And so I'm getting much more. Prude is the term with my time. And that is, I still waste a lot of time, but I enjoy wasting time. And wasting time is like anger. It's fine, as long as it's planned. Find some parts of your life that you could potentially attack and transfer time, or specifically reinvest that capital. I had referenced, when I grew up on the West Coast,
53:26 Scott Galloway? one of the few ways my father and I bonded was golfing. And I started playing a lot in college and then in graduate school. Actually, I became a fairly competent golfer. He was fantastic. It was a weapon for me professionally, starting a consulting company. Because essentially in a consulting company, you're renting your brain to kind of older white guys. And the key to services, or key to a successful services company, is establishing relationships. Because there's a lot of people that can do the brand strategy for Toyota. There's a lot of people that can do the brand strategy for Audi. Those were both clients. There's a lot of people that can do the brand strategy for Clor. I mean, we'd had all these iconic firms, or dryers, or Williams Sonoma. A lot of those people I played golf with. And it's a chance to spend five hours outside and get to know somebody.
54:11 Scott Galloway? Anyway, when I moved to New York, I made the conscious decision to take, I played golf once a week, sometimes twice a week. I made the purposeful decision to say, I'm going to take that six hours, and that's what it costs. It costs six hours. And I'm going to put it all back. I'm going to reinvest that capital in working out. And I think physical fitness is a gift from God. And, or a gift from evolution. We are meant to hunt. We are meant to gather. We are meant to raise kids. We are meant to love. And one of the ways, one of the ways your brain figures out if you're adding any value, is you exert yourself physically and emotionally. And that exertion releases a hormone that is good for you mentally,
54:54 Scott Galloway? emotionally, biologically. And one thing you can control, you can control, is how much you work out. Find a part of your life. That you can get rid of. For me, it was golf and reinvest it in physical fitness. Does that mean being ripped? Does it mean being super skinny or whatever the ideal is from the Met Gala last night? Hell to the no. It means being a stronger version of you and two, three, four times a week, sending a signal to your brain that you are hunting prey, that you are loving with abandon, that you are building housing, that you are lifting children off the ground. And what that says to the brain is, I add value. Keep this person, keep this being around longer.
55:41 Scott Galloway? Our producers are Caroline Chagrin 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 Prof G Pod from the Vox Media Podcast Network. We will catch you next week on Monday and Thursday.
56:02 Speaker 02 If there's one thing that I taught my class that they will benefit from forever is never write an option.
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Previous Office Hours: Square’s Social Solution, How Labor Got Crushed, and the Dangers of Bad Corporate Governance Next Office Hours: Betting on Alibaba, When to Sell Your Start-Up, and Going to College Abroad Page updated September 30, 2026 · transcript and summary are machine-generated
