Office Hours: Online Advertising, Seed Funding, and Teaching Entrepreneurship

Scott answers a question about what advertising might look like after the death of the cookie. He also shares his thoughts on what it takes to capture the attention of investors, and considers a proposal for an entrepreneurial-focused high school. Music: https://www.davidcuttermusic.com / @dcuttermusic Learn more about your ad choices. Visit podcastchoices.com/adchoices

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

• 0:01Scott Galloway?

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• 0:48Speaker 01

  Flowing ad budget on metrics that look great till the CFO sees them? That's bull spend. And marketers are calling it out in Dashboard Confessions.

• 0:57Speaker 02

  I remember telling my boss, "It'll be good for the brand," when leads were slow. Yeah, it wasn't.

• 1:05Speaker 01

  Cut the bull spend. LinkedIn lets you target by company, job title, and more. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 1:27Scott Galloway?

  Welcome to the Prof G Pod's Office Hours. This is a part of the show where we answer your questions about business, big tech, entrepreneurship, and whatever else is on your mind. If you'd like to submit a question, please email a voice recording to [email protected]. Again, that's [email protected]. First question.

• 1:47Speaker 04

  Hi Scott, this is Thomas calling in from sunny Vienna today. My question is, given the onslaught of third-party cookies and increasing tracking sensitivity among users, I'm actually a firm believer that we'll see the return of good old-fashioned contextual advertising in one way or another. Probably not by big tech, but rather a new generation, which I would call the middleman of clean advertising. What is your take on this?

• 2:14Scott Galloway?

  Thomas from Vienna. Vienna, I've been to Vienna several times. I don't know. I've actually ended up there more times than I want for some reason. I love it. I think it's a clean city, a beautiful city, well-run, actually a decent amount of fun. You think of Vienna as not being a fun place, but it is a pretty fun place. But I always end up there for some reason. I don't know why. There'll be a conference there. Anyways, in, over-indexed in Wien or Vienna, whatever they call it. Not to say I don't love it. Anyways, this is a complicated topic. So if you think about marketing, it's gone from sort of demographic targeting to contextual to behavioral. And behavioral advertising is just a bomb. And that is, rather than saying, okay, all white dudes over the age

• 2:58Scott Galloway?

  or between the ages of 40 and 50 who are in a midlife crisis, i.e. BMW owners, we recognize that it's just better to target someone who's at the BMW site configuring a BMW 740 or 750i, regardless of their demographic group. That we let them raise their hand and say, regardless of the stereotypes you've built for my cohort, if I'm on the site and you can drop a cookie and then start haunting me. So I'm a narcissist and I go to Section 4 to look at my videos and things I've done, and now I'm served ads like crazy. Obviously, the targeting's not that good. I'm not a buyer. I am the product, if you will. But behavioral targeting has sort of changed everything.

• 3:40Scott Galloway?

  And when Apple says we're no longer letting Facebook do this under the auspices of privacy, it's got nothing to do, well, maybe it does. I don't know if they're principled or not here, but it's awfully convenient because they're not in an ad-driven world. They're in a product-driven world. They make money selling products and taking commissions on apps, not on advertising. So anything they do to kneecap anybody else's ability to find data, to promote and create shareholder value through an ad-supported ecosystem, takes away from their ability to move to a world where everyone has to pay for apps and they get a commission because... I mean, just as an example, in OTT, Apple, I mean, if Apple TV is a failure, it doesn't matter because streaming is going to be huge or a success for Apple.

• 4:22Scott Galloway?

  Why? Because they take between 3% and 12% of the total revenues of every streaming platform because the place where a lot of people download these apps is in the App Store. And so they are the ultimate toll keeper. So they can get very indignant very fast around the ills of advertising. Having said that, I do think that advertising is the cancer of our marketing corpus. What do I mean by that? It's social media, if you will, is nicotine. It's addictive, but it's not bad for you. It doesn't give you cancer. The shit that gives you cancer is the ad model. And that is, when we move to an ad model where the more Nissan ads we are able to present, the more shareholder

• 5:03Scott Galloway?

  value, we create content and algorithms to promote content that enrage us because unfortunately, and this is a flaw in the species, the more enraged we are, the more engaged we are. And so we end up with this very toxic antagonistic ecosystem where these algorithms are purposely trying to make our discourse more coarse. So we start with the advertising model and that just kind of fucks up everything. We move to a cookie-less environment where the folks that can get signal liquidity, whether it's TikTok, or Facebook, or Google, actually benefit because the majority of advertisers no longer have any signal liquidity or ability to target because Facebook and Google do have enough touchpoints to build

• 5:46Scott Galloway?

  a very robust digital corpus. So if they shut off cookies for everybody, it just kind of creates even greater disparity between them and everybody else. So where do we go with this? I think at the end of the day, and I realize my go-to here is kind of the same, but I think you need to break these companies up because it'll force them to create a new business model, a new ecosystem that's maybe a little bit healthier, such that, again, we don't promote more rage and we don't have a few players that have the signal liquidity to gather enough information to create or to engage in behavioral targeting while everyone else goes back to contextual targeting. I think contextual marketing is still going to be inferior and it's just going to create a greater divide between

• 6:30Scott Galloway?

  the haves and the have-nots. The haves being the duopoly that is Facebook and Google. You could argue that Amazon also has. You know, they're also getting some traction in digital marketing between Amazon, Facebook and Google. That's 90 cents on the digital marketing dollar. I think TikTok is gonna also be pretty powerful here. Anyway, a complicated issue, but I think all roads lead to the same place, and that is advertising online is contaminating our discourse. I do think we need to move to subscription, or even if it's subsidized by government subscription like a PBS model such that people who don't have the money to pay for subscriptions aren't getting their news from media outlets that engage in conspiracy theory because it's more novel and keeps you more engaged. And also, we need to break

• 7:12Scott Galloway?

  companies up. Long-winded answer. Thank you for the question, Thomas from Vienna. Next question.

• 7:17Speaker 05

  Hey, Scott. I'm Taylor, and I recently moved to Denver from Texas to start a title company. But more importantly, to use the money from the title company to build an app that gives homebuyers and sellers more power to do things themselves, but helps them with the harder parts such as contracts and negotiating repairs. But we charge half a percent to 1% instead of 6%. You've recently said you were shifting your investments into the private space and less in the public space. My question has to do with seed funding. If I wish to go on to successfully raise seed funding, what is the best way to capture the interest of investors and turn that interest into investment? Thanks, Scott.

• 7:50Scott Galloway?

  Thanks very much. Taylor from Denver. That read more like an ad, but I respect that. You need to be aggressive when you're an entrepreneur. By the way, what does entrepreneur mean, Taylor? What is entrepreneur? You know what entrepreneur means? It's Latin for salesperson. It means you're willing to sell. And you say, well, that's not a big deal. Guess what? I bet 97, 98% of the general public isn't willing to sell. Why? Selling fucking sucks. You know what selling is? Selling is calling someone who doesn't want to hear from you and is rude to you, and then calling them back the next day. I just heard from this kid who's running for Congress in Kansas, and he's a military vet. And I like Democrats who've served in the military. I guess I like Republicans who've served

• 8:31Scott Galloway?

  in the military. Anyways, I feel as if people who serve in uniform should get should get a little cabbage from the dog if they decide to continue to serve their country. Anyways, enough virtue signaling from me, but.

• 8:43Scott Galloway?

  This kid has to call me and I'm like, oh hey, what's up? You know, I'm night tone, I can just hear my tone, like you're bothering me, what's up? He said, remember me, I called last week, I'm hoping you'll give me some money. I mean, you have to sell all the time when you're an entrepreneur. You have to sell people to invest, you have to sell employees to join you, and then you have to sell, hire an actual client. I'm a relatively successful entrepreneur and I'm constantly selling, selling, and it's just getting harder. And I think one of the reasons that older people don't typically make, for good entrepreneurs, although they say the majority of people, the average age of entrepreneurs now is in their 40s, I'm still not sure they buy it, the really successful entrepreneurs usually start earlier. It's a personality trait. You have to be willing to just sell and eat, get out a big spoon and eat shit all the time. So anyways, I'm glad you're being aggressive and selling, that's not what we asked, seed

• 9:28Scott Galloway?

  funding. I don't know much about seed investing. I get a lot of opportunities to seed invest and if you look at the ecosystem or kind of the lifespan of different investment classes by the stage of the company, there's seed, then there's venture, then there's venture growth, then there's public growth companies, then there's mature, then there's distressed. I have found that actually the best part of the ecosystem from a pure financial standpoint is distressed. Why? Because distressed are like old people and no one wants to hang with them. I'm shocked about how ageist our society is. I've seen this, I've been hanging out with more seniors recently, and people are nice to them, people are mean to them, but they're kind of invisible. People aren't interested in them and don't really want to spend time with them or be

• 10:13Scott Galloway?

  around with them unless they're your parents or your grandparents. I think people feel the same way about companies in distress. Companies that are struggling, people just don't, they begin, you know, they think they smell funny, they want away from them, and as a result, because of the, that dislocation, there's an absence of capital and human capital, and that's where you get huge returns. I think one of my best investments over the last several years has been in, get this, a Yellow Pages company. So distressed investing is part of the investment lifecycle, I think, has some of the highest returns. I think seed has some of the lowest. Now, why is that? It's fun and it's interesting, and I think there's a lot of psychic income. I think there are a lot of former entrepreneurs or successful people who want to help young entrepreneurs,

• 10:55Scott Galloway?

  find interesting ideas, romanticize the idea of thinking that they're smart and they'll find the next Google out of a garage. But it's generally a very difficult place to invest because so many things have to come together for a company. Something like 90% of companies or tech companies never get to revenues, and then of those 10%, only 1 in 10 get to a million in revenues. So you're talking about just incredible infant mortality across the seed stage. I don't like investing in seed companies because I just don't have the mentality for it. I think you have to be a crazy optimist and spread a lot of money across a lot of different bets. And as a result, I invest mostly in private growth. The reason I'm not investing in public is the public markets have gotten

• 11:40Scott Galloway?

  so expensive, which isn't to say the private markets aren't as expensive, but I also am starting to register a lot more around the investment I make in my time. And I don't like public stocks because I check them too much, whereas private companies, I typically can add value, and that is I can help the CEO. I'm at a stage where I can add some value there, and I know the CEOs of some interesting private companies. And I'd like not checking my phone five times a day to see what Apple stock is doing. In terms of getting visibility, I think you want to, one, where are you an alum of? Did you go to college? And if so, what angel networks can you tap into? There are so many angel networks right now that at the end of the day, you just want to figure out a way to

• 12:20Scott Galloway?

  get in front. I raised money from the angel fund, which was Ron Conway. By the way, I think a lot of angels on the Bay Area have turned into total grifters that have tried to massively promote their own brands and give entrepreneurs terrible documents and low returns. I think it's become a place, unfortunately, where some fairly high-profile angels through self-promotion have become borderline grifters. But anyways, we're in an ecosystem right now where money has never been cheaper. What do I mean by that? It's never easy to raise money. People say, oh, it's easy to raise money. There's a certain profile that can raise money really easily. But I've never found it easy. And then I look back and think, oh, it was just less hard. But it's never been less hard.

• 13:05Scott Galloway?

  And if you were to type in any community that you're associated with, whether it's your region, whether you're an alumni of a certain school, and then type in Angel, you're going to find a lot of Angel. There are Angel communities now for people of color, for women. There's Golden Seeds. There's Bruin Angels, which is for UCLA. And they don't even exclude across having necessarily gone to UCLA, but they just get together and they hear pitches. And you can even do them virtually right now across. So I think there's probably a lot of places you can pitch. The only thing I would add is that nothing sells, nothing gets you money like progress. And every day, make sure you're spending a lot of time focused on the product and trying to get to revenues or product market fit or beta or something along those lines.

• 13:48Scott Galloway?

  Because the mistake I made as a young entrepreneur was thinking that raising money meant I had a business. And I actually, in many businesses, was much more successful raising the money than actually building the business. And I always thought, well, if I raise enough money, everything will work out. Not necessarily. Anyway, stay focused on the business and then tap into your geographic and educational cohorts. But there's a ton of Angel networks out there. And I think you just want to apply. I think you can apply from many of them online and get in front of those. On Hails, on Hails. Okay. Thank you, Taylor from Denver, Colorado. We'll be right back.

• 14:31Scott Galloway?

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• 15:15Scott Galloway?

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• 15:48Scott Galloway?

  Support for the show comes from Upwork. Trying to scale your business? At some point, you're probably going to hit a point where you need some help. Sometimes, the best way to break through that is bringing in the right talent at the right time. Upwork can help. Upwork is a one-stop platform where you can find, hire, and pay expert freelancers across more than 125 categories. Whether you need specialized skills for a single project or extra support to keep up with demand, it's easy to connect with experienced professionals, review their work, and find the right fit. You can move faster without taking on the commitment of full-time hires. And for businesses that need the very best talent, Upwork Business Plus provides access to the top 1% of freelancers on the platform. AI-powered matching connects you with qualified candidates in under six hours, cutting down the time spent searching. Upwork also takes care of contracts,

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• 16:59Scott Galloway?

  Welcome back. Question number three.

• 17:02Speaker 06

  Hi Scott, this is Stephen from Surrey in the UK. I am what I guess over on your side of the pond, you would call a high school teacher, teaching business and entrepreneurship to 16 to 18 year olds. I've got a real passion for this and believe that the skills and knowledge that I've been lucky enough to pick up in my career in startups should be available to school aged kids, especially 16 to 18 year olds. To this end, I want to start an entrepreneurship focused high school here in the UK. And I would love to get your thoughts on what you think this could look like. What kind of curriculum, vision and culture would make you send your kids to a school

• 17:48Speaker 06

  which has the entrepreneurial playbook at its core?

• 17:52Scott Galloway?

  An entrepreneurial based high school? That is really interesting. I think it's great

• 17:58Scott Galloway?

  that Britain is blessed with people such as yourself. You're clearly a talented young man and that you apply it to teaching high school. I've often thought about being a substitute teacher in high school because let's be honest, these questions are just a chance for me to talk about my favorite subject, me. But I'd only want to do substitute because I think I'd start to hate kids if I had to spend five days a week with them as you do. Anyway.

• 18:22Scott Galloway?

  Look, I don't, so just some viewpoints on entrepreneurship. I don't think entrepreneurship can be taught, if you will. And that is, I've been approached regarding a totally different part of the ecosystem of the education lifecycle. And that is in graduate business school about being involved in the entrepreneurship program. And I've always said entrepreneurship really is more about a personality trait. It's more about a willingness to tolerate risk, an ability to sell, a willingness to sell, as we said in a previous question. And a lot of it comes down to your circumstance. On a risk adjusted basis, if you're fortunate enough to get certified with an undergraduate degree and a graduate degree, on a risk adjusted basis, entrepreneurship is a bug, not a feature.

• 19:06Scott Galloway?

  And that is the reason I'm an entrepreneur and people. Assume that I have additional qualities, that I am somehow blessed with qualities that mean I should be an entrepreneur versus work for a company. That's bullshit. It's actually the reverse. Entrepreneurship is a defense mechanism for me. And that is, I worked at a big company for two years, Morgan Stanley, in the analyst program. And I recognize I didn't have the skills to be successful in a big company. Why? Too insecure. I was always, if people went into a conference room, I thought they were talking about me. Impatient, over, kind of inflated my own contribution, was resentful of anyone senior to me that I didn't think was as smart or as hardworking as me.

• 19:48Scott Galloway?

  I wasn't good at, I was okay at establishing relationships, I guess, but there's a lot of bullshit you have to put up with in organizations. But if you have the ability to navigate that bullshit, there is no platform that on a risk-adjusted basis will offer you better opportunities than the US or the European corporation. So, entrepreneurship, entrepreneurship. I think the way you teach entrepreneurship is you teach the basics and teach people to be very skilled. And then maybe what you would do in high school, as I just think about it, is ask them to do a very small business and just find a way to create a hundred dollars in revenue. I don't care if it's going door-to-door and offering to mow people's lawns, or selling lemonade, or offering to tutor.

• 20:30Scott Galloway?

  But I think just connecting the dots and showing that effort and a willingness to sell and a willingness to put yourself out there can be connected to money and could potentially be connected to economic security. I think just that small, I grew up, I grew up as an entrepreneur. I washed cars. I mowed lawns. I did all kinds of shit. I sold magazine subscriptions. I sold newspaper subscriptions. And I began connecting creativity and entrepreneurship and grit with money. Because at a young age, I needed money, I wanted money, and an infrastructure of traditional, traditional jobs wasn't available to me. So, what do you do in high school? I think it's a really interesting idea.

• 21:15Scott Galloway?

  I think it's absolutely worth trying. What would the curriculum look like? Simple. Everybody here has to make a hundred bucks. You give each of them 20 for supplies or something and say, all right, you have to within three months or within 30 days, figure out a way to make a hundred bucks through, from unrelated parties. It can't be dad or your aunt. In a small business and just give them a sense and then the business planning stuff. But for the most part, the real skills, I wonder if the real skills for entrepreneurship were kind of baked in at a very young age in terms of the toys you play with or don't play with. I constantly get people coming to me saying, I need more credentials, I'm going to go to Google and then I'm going to start my own business. I'm like, boss, you're not an entrepreneur. Entrepreneurs have no choice. They just decide they're going to be entrepreneurs from a very young age.

• 21:57Scott Galloway?

  But look, Stephen, headline news here is I think it's a great idea. I think the kind of creativity you're bringing to high schools is wonderful. I mean, you're adding real value. So, thank you for your good work. But I would say that in addition to the straight stuff, writing a business plan, it's like, okay, guys, everybody and gals, everybody here has to go start a business and then come back and report on it. Thanks for the question.

• 22:24Scott Galloway?

  That's all for this episode. Again, if you'd like to submit a question, please email a voice recording to [email protected]. 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 Prop G Pod from the Vox Media Podcast Network. We will catch you on Thursday.

• 22:51Speaker 07

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