Prof G Markets: How Scott Manages His Money

In a sweeping conversation, Scott shares the source of his anxieties around money, how he thinks about money and marriage, his approach to spending, and his financial plan for his death. Finally, he answers one big question: is wealth worth the work? 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?

  Support for the show comes from Northwest Registered Agent. Your business identity is everything that makes your business legitimate and professional. With Northwest Registered Agent, you don't just form a business, you start a complete foundation built for privacy, credibility, and growth. That includes registered agent service, a business address, operating agreement, domain, website, professional email, phone number, and built-in privacy. In other words, your home address, personal email, and phone number stay private. Don't pay hundreds or thousands of dollars for what you can get from Northwest for free. Visit northwestregisteredagent.com/profgfree and start using free resources to build something amazing. Get more with Northwest Registered Agent at northwestregisteredagent.com/profgfree.

• 0:49Speaker 01

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• 1:32Scott Galloway?

  This week's number, $400 million. That's how much pickleball injuries could cost Americans this year. Contact sports, mainly football, are estimated to cost $20 billion per year for high schools and colleges. Ed, in college, I experimented with sex, drugs, and rock and roll. Unfortunately, I was the control group, Ed. I was the control group.

• 2:03Scott Galloway?

  That's good. Ed, what's on tap for today? That's why you're here. You're here for this intergenerational comedy.

• 2:10Ed Elson?

  Exactly. So for this week's episode, Scott, we're going to do something different. I'm going to ask you a series of personal finance questions. And the idea is to get sort of a big picture, understanding of your approach to investing, specifically how you achieved economic security, how you kept it.

• 2:27Scott Galloway?

  Be born white and male. Let's move on to the next podcast.

• 2:32Ed Elson?

  And just, you know, all the lessons that you learned along the way. So does that sound good with you?

• 2:37Scott Galloway?

  Oh, yeah. Sounds, sounds great. Yeah. No, I'm super excited about this. Super excited. It was the wrong day to give up meth. I'm sorry. Go ahead.

• 2:46Ed Elson?

  Let's just start with this. What do you consider your greatest strengths and your greatest weaknesses as an investor?

• 2:52Scott Galloway?

  As I've gotten older, I've become less emotional about investing. I think I understand that the markets, essentially when a market becomes over invested, the returns go down. So if everybody wants to be an actor, the returns are going to go down and fewer and fewer people are going to make a living there. And the things people are running from and don't want to invest in, like Florida real estate in 2010, that means the returns are going to go up. And it took me, it sounds like a basic concept, but I don't think I realized that until I was 40. And so I was always chasing the hot thing. And I was thinking, oh, these people are smarter than me. And once something got hot, then I'd go in recognizing that's the wrong time to get into something because word's out and everyone's already investing in internet stocks or, you know, salon or whatever

• 3:37Scott Galloway?

  it is. So recognizing that your emotions are a bit sort of your enemy. And you should run into the fire because I think the best returns I've ever had have been in distress situations with, I made a lot of money in a Yellow Pages company. And you think like, everybody goes Yellow Pages, like stay away from it. Well, you're right. And everyone does stay away from it. And as a result, it has a difficult time attracting capital, meaning it has to offer incredible rates of return to capital that goes into it.

• 4:03Ed Elson?

  By the way, on that Yellow Pages investment, did you purchase equity in the company? Or you're talking about rates of return. Was it debt? What was the, how did you make money on the, on the Yellow Pages?

• 4:14Scott Galloway?

  A friend of mine brought a company called Dex Media, which was the largest Yellow Pages company in America out of bankruptcy. And I invested four million and then another five million in a later round. And I think I ended up getting 15 or 20 back. And I served on the board there for four years. I really liked the CEO. And he was trading it, I think something like two times EBITDA. And we all knew the Yellow Pages were going away, but it wasn't going to go away in 24 months. And the business model was pretty straightforward. Go to another Yellow Pages company, buy for two times EBITDA, lay off the majority of the staff, cut costs, and just make sure you're cutting costs faster than the business is declining and your EBITDA would go up each year. And it's not a romantic business. It wasn't fun.

• 4:57Scott Galloway?

  It's not easy to buy companies and lay off everybody. But it was consolidation and it needed to happen and it was a good investment. Where I have really fucked up is believing my own press. And when I started Red Envelope, I thought, oh, this is a great company. I was very emotionally involved. I got into a war with the board. I spent too much time and money on that war and too much mental energy. I should have just moved on. And I have, in several points in my life, been way too concentrated in one asset, thinking, there's no way e-commerce won't go to the moon. There's no way. I mean, what I tell people, when you're young and you have your own business, it's impossible not to be concentrated because you're kind of going all in on your business.

• 5:41Scott Galloway?

  And I understand that level of concentration. But the moment you have anything resembling success financially, you want to start diversifying. And so I was with an entrepreneur yesterday who has this amazing ad tech company. It does 30 or 40 million in EBITDA, but he keeps plowing it all back into the business. And I'm like, how much money do you have? And he said, what? I'm like, well, how much money do you have? And he said, well, you know, technically on paper, I'm worth, I'm worth 300 million because I own 90, you know, 80% of this company. And I think it's worth about four or 500 million. I'm like, how much cash do you have? And he said, well, I own my home, so I got about three million bucks in equity in that. And I have about a million bucks in cash. I'm like, okay, so. You've put 99% of your wealth at risk in one asset.

• 6:22Scott Galloway?

  And that at every turn, you want to be doing secondaries, taking money out of the business and diversifying. Cause here's the thing, Ed, you never know. And one of the most amazing and wonderful things about the market is that nobody knows. And so if you, you don't want to, you absolutely pass the age of 35 and never pass the age of 45, have all of your eggs in one basket. You want them in a bunch of baskets and you want to diversify out of eggs and get into cheese. I mean, you just want to, you want to move everything around. And my biggest, or sort of my lowest moments professionally have been when, oh, red envelope is going chapter 11. We had a longshoreman's strike at the port of Long Beach. We can't get our shit off a ship.

• 7:08Scott Galloway?

  And what do you know, the warehouse is spitting out the wrong labels with the wrong addresses for the labels. And then Wells Fargo calls and pulls our credit line. And this all happened within five days, these three things. And we went from a stock trading at, I don't know, eight bucks a share to zero in about two weeks. And I, because I believe so much in the company and was so invested in it, had, you know, I don't know, 70, 80% of my net worth at the age of 40 in one asset, which was just stupid.

• 7:34Ed Elson?

  Did you ever sell? Did you ever take out secondary? Did you ever sell your stock when it went public or you just kept it all in there?

• 7:40Scott Galloway?

  Not a dollar. As a matter of fact, I kept investing more. And so I had everything. And so when it went to zero, I literally lost everything. And, and I could talk myself into it again today. It was a great company, it was doing well. E-commerce was hot. We were the only retail IPO of 2002. I managed to wrest control of the board away from who I thought were incompetent venture capitalists. It all seemed like we'd be going well and lost everything because, you know, a bunch of dudes in Long Beach went on strike. And a piece of software started malfunctioning at the warehouses. So biggest strength, I think I'm able to compartmentalize my emotions and be a stoic around investing. Biggest weakness is I did not appreciate the power of diversity until I was, until I was older.

• 8:25Ed Elson?

  When did you officially learn that lesson? I mean, did you do, did you take out secondary on profit? Or when you started L2, like when you started your other businesses? Did you have that lesson in mind that, okay, I've got to actually make some money here? And I can't just be trying to go to the moon with these, these companies?

• 8:47Scott Galloway?

  It wasn't a market lesson, it was a life lesson. When my, when my first son came marching out of my girlfriend, it just, it just dawned on me. It's supposed to be this wonderful moment with bright lights and angels speaking. And for me, I just felt so ridiculously nauseous. And not only because childbirth is disgusting. And do not be in the room with your wife when you have kids. All right? I don't care what they say, I don't care what the pressure is. Get a pack of cigarettes, stay in the waiting room and tell them to bring you the baby when it's clean. And just stay out of the room. Birthing is a gross experience. Anyways, uh, beyond that, the reason I was so nauseous was not only because of the birth itself, but because I realized I'd fucked up and that I was 40 years old and didn't have, given all my success,

• 9:32Scott Galloway?

  given all my blessings, given all my hard work, I wasn't financially secure. And it was really humiliating. And from like minute one, when my son turned a minute old, I felt like I was failing him. And that was like, okay, I gotta get my shit together. And part of that is stop swinging for the fence and slipping seven discs in my back. I'm swinging so hard and start hitting singles. And from that moment on, you know, I, I love the statement, but I think it was like Andrew Carnegie or one of the Melons, and I say this all the time. I got rich selling too early. So with L2, we raised capital, uh, four years after we started the company, we raised 10 million bucks to put into the company and we did 7 million in secondary.

• 10:16Scott Galloway?

  And I took 5 million off the table and I gave some of the other employees the opportunity to sell some of their stock, but I immediately banked 5 million bucks. And my attitude was, well, let's hope I'm wrong. Let's hope I'm selling stock too cheaply. And now at almost every turn, when I'm in a company, if there's a good offer on the table, a good financing, I move to cash a little bit and I sell some. The first thing I do, if I invest in a company, I invested in public this stock trading company. If they do another round at a hugely stepped up valuation, I'll take my basis out and then I'm just playing with the house's money. So for me, it was a life lesson and that is, it was no longer just about me. It was about my kids and I needed to start acting like an adult.

• 10:59Ed Elson?

  You said you didn't feel financially secure when your first kid was born. What was your financial situation like and what? At what stage in your career were you at? Had you started Profit? Had you started L2? Where were you?

• 11:16Scott Galloway?

  So I always made a lot of money. I always worked hard, was in a position to take advantage of that hard work. Being born in sixties California, got free education, came of professional age during the year of the internet and processing power in the nineties. So I just had these massive winds in my back. I never really appreciated that until I was in my forties. It was all about, this is just how fucking awesome I am. Was I was very good at crediting my character, my grit for my success, not really appreciating until I got older that I had these gale force winds at my back. But when that happened, when I had my first kid, I was making a hundred and sixty thousand dollars a year as a clinical professor at NYU. I would do deals with hedge funds, sometimes make a quarter or a half a million dollars a year and doing something else.

• 12:00Scott Galloway?

  So I was making kind of, you know, I was making good money, but it was inconsistent.

• 12:04Ed Elson?

  Did you own a home? Sorry, did you, did you have a home in that one?

• 12:06Scott Galloway?

  No, I was in faculty housing. I was in faculty housing at NYU. But living in New York with current income and, and two kids, I just, it's, no one's gonna feel sorry for you, but I'm like, okay, I need to make a million bucks just to keep my, a year, just to keep my head above water to live in Manhattan. And that's when we made the move to Florida to significantly lower our burn. And then, and that's a key component of financial security is, quite frankly, is, is living below your means and figuring out a way to spend less than you make. The other thing that really fucked me, or where I really screwed up, self inflicted injury was divorce. And that is, I was very full of myself. I thought I'm gonna be a billionaire.

• 12:51Scott Galloway?

  I want to move to New York. I'm just this awesome guy. I want to live this different lifestyle. So I got divorced when I was about thirty-three, thirty-four. And it was a tragically amicable divorce. We got out of yellow pad. I said, this is all our assets. I'm going to give you 60% because I didn't want to have a lawyer. My ex is a really high character, good person, and I felt some guilt around the whole situation. So she got 60%. And immediately, like, it just karma immediately, you know, it was 2000, the bomb implosion had happened. So I went from being kind of 33 or 34 and having probably what was 5 million in assets as a married couple to a couple hundred thousand dollars as a single guy in New York.

• 13:35Scott Galloway?

  And divorce is ruinous financially because inevitably it happens at the wrong time. It takes you off track professionally, emotionally. And so it doesn't take just 50 or 60% of your assets. It probably takes 70 or 80. And you're forced, you become a forced seller, a forced seller of a home, a forced seller of assets. You never want to be a forced seller. And then if it's a acrimonious divorce, you're spending money on lawyers. You're now trying to support two sets of expenses and homes. So I always say that probably the best financial decision you're going to make, and the most important financial decision you make is who you decide to partner with. Making sure that you find that you have a really strong physical connection with that person. That's important, too, that you share values. Where do you want to live? How do you

• 14:18Scott Galloway?

  want to raise your kids? And then third, and people don't talk about this, what is each of your approaches to money? And that is who's responsible for economic weight class. And my father, who's always made a lot of money, ended up broke basically at 65 because he got married and divorced four times. There's nothing like divorce to snatch defeat from the jaws of financial success. So you really need to be thoughtful about not only picking the right person, but bringing a certain level of commitment and a certain level of generosity to try and to try and make things work.

• 14:53Ed Elson?

  Do you think that people should, that married couples should actively be thinking about what life might look like if they were to get divorced, or people who are about to get married? Do you think people should sign prenups? How do you think that people should approach marriage from a purely personal finance perspective?

• 15:10Scott Galloway?

  I think the most important thing is just to have an open and honest conversation around how much money do we expect to make? What is the lifestyle we expect each of us expects to have? Who is responsible for fueling that? Is it a joint production? We expect to live in New York and have a nice life and maybe own a place and have two kids. All right, that means we're gonna have to make a million dollars plus. Are you husband expecting me wife to be responsible for that? Am I supposed to be a partner at Goldman by the time I'm there? I mean, or am I the man supposed to be doing, making a million bucks a year in eight, in eight years? Like, what if we don't? What is your approach to spending? But a real team approach to attacking your financial

• 15:54Scott Galloway?

  objectives is so powerful because I could start Profit right in business school. I started Profit when I was 26 because my girlfriend at the time had a traditional job. She was working at Arthur Andersen, making 70 or 80,000 a year. And she paid for our rent. So I could start a business and she was totally down with that. And then when I started making a lot of money at Profit, you know, it was all hers. I mean, I didn't, we were in it together. The team is really powerful when you're on, when you're on the same page financially. But you gotta get on the same page financially. You know, these conversations are difficult to have early. I think everyone should have a prenup and a postnup or whatever it is. Young people aren't gonna do that.

• 16:36Scott Galloway?

  It's just, you wanna talk about, you know, a boner killer? Okay, let's, let's imagine us getting divorced right now. So yeah, everyone should do it. Most aren't gonna do it. I don't think it's practical. But I think if you have assets, you should have, you have to have a prenup. And it just makes things easier. It's just like, okay, this isn't working. We don't have to go to war with each other. This is what everyone's getting. You know, it's, it's really, uh, those conversations are hard. I think they're important early though, and they, I think they make you feel closer. I, I remember I was very much in love with a woman and we were thinking about getting married. And I just told her, I just in a conversation, I said, this is exactly how much money I have. And I was already divorced. It was, and I, this is how much I make.

• 17:21Scott Galloway?

  This is what I'm worried about. This is where I hold stock. These are my businesses. This is how the businesses is going. And she was a second year resident in surgery. And she's like, well, this is how much money I think I'm gonna make. And it was just, it just made us closer. It was just made it feel a lot more transparent around we're, we're thinking about building a life together. And in a capitalist society, finances are really important. And I would encourage everybody.

• 17:51Scott Galloway?

  Even if they don't understand investments or finance, to make sure they have a baseline level of understanding, because one spouse doesn't want to disappoint the other if they're not doing well in their investments, so they don't tell them, then there's an unwelcome surprise, and one individual's incurred huge stress keeping shit, you know, playing hide the ball around how much their stocks are down, or that they don't have as much money as they thought, and the other person feels lied to, you know, just, they always say the key is communication, you should once a month sit down and say, this is kind of where we are financially and what's happened. We'll be right back.

• 18:39Scott Galloway?

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• 19:22Scott Galloway?

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• 19:40Scott Galloway?

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• 20:23Scott Galloway?

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• 20:55Ed Elson?

  We're back with Prof G Markets. I just want to go back to that feeling that you had when you had your first kid. You did not feel financially secure. When did you first feel financially secure? Do you feel financially secure now? And what do you think it takes for people to feel that way?

• 21:17Scott Galloway?

  I don't. I passed nine figures a long time ago. And by any objective measure, I'm financially secure and I have huge financial anxiety. It's just something that's hardwired into me. When I was a kid, the biggest source of stress in my life wasn't my parents' divorce. It wasn't that my father was absent. It wasn't, you know, I had wild insecurities. It was that we didn't have, my mom and I didn't have money. And it was like this ghost following us around everywhere, telling us we weren't worthy. You know, every, every time, you know, I'd lose a jacket at elementary school in the fifth grade, I'm like, oh, fuck, I'm, this is going to be the most horrible evening because

• 21:58Scott Galloway?

  I'm going to have to tell my mom I lost my jacket and jackets cost $33 from JCPenney's and we don't have that money. It was really, and I think this is how the majority of the world lives, you know, they just are very worried about money. And I am always financially anxious. And when I lose money in the market, I'm just always thinking about money. And I think that's part of the reason I am wealthy now, is it's always on my mind. And everything's a trade-off. This notion that you're just... That rich people try to present that they're just carefree and I hate it when people say, oh, you know, I never really think about money. I'm just trying to build a great company. They're thinking about money every goddamn moment. And if you want to have a lot of money, if you want to be good at money, then guess what?

• 22:42Scott Galloway?

  You better be thinking about it all the goddamn time. That's like saying Roger Federer doesn't think about tennis. You know, it's just, you need a certain level of basic financial literacy and you should be thinking about it a lot because I can guarantee you when you don't think about money, you're going to find out you have less than you thought. And I'm not saying have a neurosis about it. I'm not saying be obsessed with it, but if you have real financial aspirations, if you want to be in the top 1% financially, and I did early, I'm like, that's it. I'd really like to have a nice life. I'd really like to be good for the world, but I am gonna have money. When did that happen for you? When was that? Did that trigger moment occur?

• 23:27Scott Galloway?

  My mom and I were like financially insecure, but we were never hungry. So it wasn't, it was like, it was motivating, but it wasn't scarring. Where the scarring started is when my mom got sick. And I remember I was in my second year of business school, didn't have any money. I was totally broke. I was driving a 1984 Honda, had borrowed money to get through, you know, a year of grad school, second year of grad school. And my mom called and my mom is not an alarmist and said, you need to come home right away. I'm really not doing well. And she had just gotten out of the hospital, I think about a week before, for what was the, her first mastectomy. She'd had breast cancer that would recur and then recur a third time, a metastasizing her stomach. But I went down there. I got on the first plane down there

• 24:11Scott Galloway?

  and I walked into our condo where she lived and it was dark. And she was just in a terrible state. I mean, a terrible state. And it was frightening. And so I started calling nursing agencies to try and get a nurse to come to our house. And it was like 38 bucks an hour. And I'm like, we don't have that kind of money. And then I'm like, well, all right, I need to take her back to the hospital. And we were members, I think of, I think it was Kaiser, and we couldn't take her back to a hospital. They wanted us to call an ambulance. And I'm like, well, then where does she go? And they go, well, she's probably going to have to go to county. And it was just like, I was trapped. And I remember at that moment, I'm like, okay, I'm a 27 year old male. The only person in my life that matters is my mother. She took

• 24:53Scott Galloway?

  great care of me, really sacrificed for me. And now I've been called to care for her and I can't. And it was just so humiliating. It was like, God, I'm just failing on a cosmic level here. I can't take care of my mom. And that was really like, okay, this is time. I got, I really gotta get my shit together. And the other side also involved women, quite frankly. And that is, I noticed early on, the guys who had their act together professionally and had money, had a broader selection set of mates than they deserved. And I wanted to be in that category. So the motivators for me around money have been, one, growing up without it, and two, women. Specifically, I wanted to take care of my mom. And I wanted

• 25:34Scott Galloway?

  to have a broader selection set of mates. And I noticed that guys with like, you know, fairly mediocre characters, but parents who had homes in Aspen and Palm Springs seemed to get more than their fair share of women. I mean, I just connected the dots pretty early. And I know how crass that sounds. But I wanted both of those things. Have you ever been in significant debt? Some student debt, not a lot. I mean, it was always manageable. I was, I got Pell Grants, and I borrowed some, some debt undergrad. But when I went to school, it was so inexpensive, you didn't have to take on a lot of debt. I borrowed, I think I had a total of like $20,000 debt by the time I got out of graduate school. So that was pretty manageable. You

• 26:15Scott Galloway?

  know, bought homes, but the debt was always cheap. I never was in a position where I had too much debt. What I did do is debt has a bad name. In a low interest rate environment over the last 10 years, I have borrowed on margin and levered up on stock purchases. So if I have a million dollars in stock, I would Take out two, three, $500,000 on margin because I could literally borrow money like one and a half percent. And then I would invest it in a massively diversified basket of stocks. And that's dangerous because you're levered. But what I found is in a low interest rate environment, leverage was a real feature because you're essentially getting free money and the market was going up.

• 26:58Scott Galloway?

  So all you needed to do is beat it by one and a half percent. So I don't like to, you know, all debt is not bad. All of these financial or personal financial advisors will say all debt is bad. It's not. Leverage is an amazing thing if you diversify against it and you can borrow money at a real low cost. Now, you want to be really careful with it and want to make sure you're diversified and be ready to lower your leverage quickly, but and, and, and, you know, you're upping your risk. But borrowing against my stocks and against assets for me, you know, I could have paid all cash for my houses. I didn't. I was able to borrow money for 2.25%. So I always borrowed the maximum amount and I put it into the market, but I diversified like crazy.

• 27:38Ed Elson?

  When did you buy your first house?

• 27:40Scott Galloway?

  When I was 28 in San Francisco, two years out of business school, I bought a house for $285,000 in Potrero Hill, San Francisco with my girlfriend. And I was, I had just started Profit and she was working at, I think, Arthur Andersen. And I think we borrowed the money for the down payment from her parents, which was like, the down payment was like 60 grand.

• 28:04Ed Elson?

  What is your approach? What is your philosophy on buying homes? It's sort of a big topic among young people right now. Do you think young people should be buying homes? Should be, should they be renting? What percentage of their net worth should they be spending on, on the down payment? What's your approach to home buy?

• 28:22Scott Galloway?

  It's situational and I look at it through the lens of someone who was able to kind of buy homes and ride what has been this unprecedented increase in the cost of housing or increase in real estate prices. So I think my advice is a little bit tenuous. Buying homes and real estate has been really good for me. If you're living in. A part of the nation that's been hit hard and you feel like there's an opportunity to buy a home and you have the down and it's not going to place a huge amount of stress on you in terms of the monthly. I think buying a home not only has economic return, but has great psychic return and a decent way to aggregate wealth is to get to know the local area, find, scrape together the money for the down payment.

• 29:06Scott Galloway?

  There's very few assets you can lever up kind of four or five to one and that is tax advantage and then fix up the home. Hopefully you or your partner has some skills and then two years later sell it and up to quarter of a million dollars or 500,000 is tax free in terms of the gain and then wash, rinse and repeat. It's like a decent strategy for building real wealth. But having said that, I mean, you live in Brooklyn, Ed. Mm hmm. Where do you live? Williamsburg. You live in Brooklyn? I mean, how the fuck are you going to buy a home? Yeah. I mean, I know, I, I, I know how much money you make. You make, you're in the top 1% for whatever you are, 14 year olds. You're for your age group, you're in the top 1% and you still can't buy a home in Brooklyn

• 29:47Scott Galloway?

  or at least a, you know, I don't, I would imagine starter homes there are like a million and a half, two million bucks. I don't even know what they are. Probably higher. Yeah. Okay. Two to three million and you need to be really thoughtful about taking on seven figures of debt at your age. And so what I would say is unless, unless you're smart enough to be born with rich parents, you want to do the math and you want to find people who can help you do the math and say, does it make sense for me to buy a home? What kind of financial stress is it going to put on me? Cause a lot of people now will say, based on the Case Shiller index, that you're in a lot of cities better off renting. They say the tri-state area of New York is a better place to rent than to buy because the yields are so low that you can rent it for less than the cost of the mortgage payment, right?

• 30:32Scott Galloway?

  But I think it's, these are one of those decisions where if you don't understand how to do the math, you need to find someone who does and make a really informed decision. So I think it's situational, but there's also real advantages to renting, slamming the keys down on the kitchen counter and heading to Las Vegas to be, to be a blackjack dealer, open a cigar bar and date strippers. Ed, that's what I see for you.

• 30:54Ed Elson?

  Good, bright future. You've also been very active in alternative investments. I mean, you talk about psychic income on your house, but you've also bought a lot of real estate purely for the investment benefits. And you've done a lot of angel investing. You've invested in a lot of private companies. When did you start getting involved in that stuff?

• 31:17Scott Galloway?

  This is a good story. In 1997, Kleiner Perkins invested in this wedding registry that would be on the internet called Dellen James. And the CEO was this very impressive woman. I don't remember her name. And we had done the brand strategy, I think, for Dellen James to profit. So Kleiner called and said, this is amazing news. We're going to let you co-invest with us in this round. I called my partner. I'm like, oh, my God, Kleiner Perkins is letting us co-invest without fees. And so we scraped together every nickel we had. Maybe it was even earlier than that. Maybe it was 96. It was like a quarter of a million bucks. And we put it into Dellen James alongside of Kleiner Perkins. And we're waiting to get a 250 million back, you know, because everything Kleiner Perkins does is got to turn to gold, right? They invested in Amazon and Google. And basically, the

• 32:00Scott Galloway?

  company went out of business like nine months later. It was a zero within. My first VC investment went from a quarter of a million dollars to zero in about nine months. And what you realize is nobody knows. You know, there are some people that are smarter than others. You're better off investing in Berkshire Hathaway than some Joey Bag of Donuts thing, but no one really knows. But my advantage that I've leaned into is that because I advise a lot of these funds, I get a look at a lot of investments and they'll let me invest alongside of them. Now, I never go all in on anything. What I do is say, okay, this looks cool. I can add some value here. So I'll invest, you know, 2%, 3%, 5% of my net worth in this alongside of you. And I'll go on the board or I'll help, I'll be an advisor

• 32:44Scott Galloway?

  and you're going to give me additional equity. So effectively, I'm investing not only without fees, but with negative fees. I'm getting better, I'm getting, to a certain extent, I'm getting better economics than the investor. That is my advantage. So I lean into it. And even Goldman Sachs, who manages my money and wants to put me in private equity funds or their funds, I say, what are the fees? And they say, well, it's like 220. I'm like, why would I pay you guys fees when I can invest in very similar investments at no fee or negative fees? And Goldman, being good fiduciaries, they say to me, you should absolutely do that. They don't try and sell me on their funds. They take the responsibility to me really seriously. But that is my advantage. And so you want to think to yourself, what is my advantage?

• 33:25Scott Galloway?

  And if the answer is none right now, then just low cost, vanguard, diversified index funds and ETFs. But over time, you might develop advantage. I really understand, I don't know, food trucks. And I'm going to buy, you know, a food truck and I'm going to lease it out to somebody. I just understand the economics. I understand, you know, I don't need this capital. I can lock it up. Well, you can go into more illiquid investments that should have a higher return. I'm a small investor. Well, then you should probably be investing maybe in micro cap stocks or micro cap funds. Or, you know, it just, everyone has at some point an advantage and you want to lean into that advantage.

• 34:04Ed Elson?

  One thing it feels like you did, though, is position yourself to have an advantage in the highest risk and highest reward categories. Like you didn't just become an expert in VC. It feel, at least from my understanding of your career trajectory, it was very intentional working your way to be in a position where you can have that advantage and enjoy that position and that access to those high return investments.

• 34:35Scott Galloway?

  You're being generous. It was accidental. I didn't have a plan to figure out a way to position myself to get advantaged investments. I positioned myself to try and do something I was good at, build a business, work hard, try and create financial security, and then just do the course of, I mean, Ed, I'm 35 years older than you. So if you were to spend 35 years, working as hard as you are, being as successful as you are, and the rest of the team were to do the same thing, over the course of those 35 years, you aggregate a series of relationships with companies and people that will provide opportunities. And the key is recognizing the opportunities and taking advantage of them. But I didn't, by any stretch of the imagination, I thought I was going to make all my money starting and selling companies.

• 35:20Scott Galloway?

  And I have made a lot of money from starting and selling companies, but where I've made actually more money. Is that along the way, I do work for a hedge fund evaluating a company and they say, we think we're going to take the company private. And they say, well, would you be interested in going on the board? I'm like, yes, but I want additional equity. All right. And then I'll say, I'm only going to do this unless I can co-invest. I'm not interested in going on a board and just collecting some money and free dinner once every three months. I want to be able to co-invest. I have elbowed my way into deals. I've called the CEOs of companies that are going public. I know I have a public profile and I call them and I say, I love this company. Can I invest in the IPO? And most of the times they don't return my email, but some of the times I get a call

• 36:02Scott Galloway?

  back or an email back saying so and so is a fan of the show and a fan of yours and you can invest. And let me be clear, that is privilege. And in some instances, it's probably unfair and I absolutely take advantage of it. And it goes back to the same reason, if you want to be successful professionally, economically, romantically, you have to be willing to endure rejection. Failure is usually in isolation. Good investments in victory are in the agency of others. You know, the majority of really stupid fucking mistakes you make are individual mistakes. And the majority of great decisions you make, I find are crowdsourced. And you want to trust your gut, but, but you want to save yourself from yourself.

• 36:43Scott Galloway?

  And the way you do that is before you double down on something and put 10 million or, you know, half your net worth in something because you're so excited about it, you call some people and say, this is what I'm thinking of doing because it's very hard to read the label from inside of the bottle. We'll be right back after a quick break. Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation,

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• 38:11Scott Galloway?

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• 38:57Ed Elson?

  We're back with Prof G Markets. What is your approach to spending? How much do you spend? How much is appropriate? Did you spend a lot as a young person? I mean, you talk about, you know, that feeling of, one, you want to pay for your mother's healthcare bills. And two, you see the dudes whose parents have the Aspen house and the Hampton's house, and you want to be a part of that. I mean, how has spending played a part in your life, purely discretionary?

• 39:28Scott Galloway?

  It's totally flipped. When I was younger, I always lived below my means. And but when you're young, you can have a lot of fun without money. You know, beer. Beer and dating and college football is a lot of fun. And it doesn't have to be that expensive. Spending time with friends is a lot of fun. I lived for one summer at UCLA off of, I literally lived off of top ramen, bananas and milk. I needed $3,300 by the end of the summer to pay off my fraternity house bill and tuition. Otherwise, I wasn't going back for my junior at college. And I had a job changing beer taps in downtown LA. And I thought, okay, if I spend like, I think $110 a week total, including my apartment, including food, including everything, I can save $3,300. And I did it. And you know what?

• 40:13Scott Galloway?

  I still had a nice summer. You know, when you're, when you're, whatever I was, 2021, at UCLA, living in Los Angeles, you can have a nice life and not a lot of money. Until the age, and then I had student debt. I was always starting companies. I'm comfortable not spending money. Once I sold my first company profit, once I then sold L2, and then the bull markets, I kind of flipped my complexion around this. And that is, one of the reasons I moved to Europe is I want to get really good at spending money. My reductive analysis, after molesting the globe for the last 30 years, is that America is the best place to make money and Europe is the best place to spend it.

• 40:57Scott Galloway?

  I have no desire to give a lot of money to my kids. Most of the kids I know of rich people are fairly fucked up. So I'm going to give them enough money such that they can do anything they want, but they can't do nothing. That's a famous Buffett quote. But I am really into spending money right now. I spend a lot of money, not on things, but on experiences. And I've got my kids for a few more years. I'm in a great relationship. I'm healthy. My job is not that taxing or stressful. I love what I do. I like the people I work with. So I am spending an absolute shit ton of money. And, you know, I, I fly private. I go to the nicest places in the world. I invite friends. I'm now taxing myself 100 and between 100 and 200% a year.

• 41:41Scott Galloway?

  Every dollar I spend, I try and give away one or $2 a year. Because I now rationally know I have a lot more money than I need. But I spend two to $400,000 a month and it's worth it. I'm just loving the shit out of it. I love capitalism. I love making a ton of money. I love spending a ton of money. I love giving away a ton of money. And I don't think there's anything wrong with it. I think it's wonderful. I want to grow the economy. I want to pay people well. I want to enjoy the shit out of this. The world offers so many amazing things with money. It offers so many amazing ways to transfer time and money to other people. And I'm an atheist. Time's going faster. I know I'm going to be at the end sooner than I like.

• 42:25Scott Galloway?

  There for me not to do everything and use my fears or insecurities around money would just be a waste. So I am in the spending part of my life and I am enjoying the shit out of it.

• 42:38Ed Elson?

  Are you spending, when you say, because you have a lot more money now, but are you spending more as a percentage of your income than you were as a young person?

• 42:46Scott Galloway?

  No, because I've built up an asset base. So I'm still, actually, I think my net worth is actually still growing because I've got that base. And I had some big wins and got very lucky. But I'm, I mean, I'm spending more in a month than I would spend in a year, just 15, 10 years ago. And I'm spending more than I would spend, you know, the entire decade in my twenties. And such that I can feel okay about myself. Every year I look at the amount of money I spend and I give that between one and two X that away. You know, I want to add value, right? And I was very non philanthropic growing up. I didn't spend a dime or a minute of my life helping others.

• 43:31Scott Galloway?

  And it's like, it's, it's just kind of dawned on me that I haven't really added a lot of value, other than the bullshit capitalist notion. Well, I create jobs and I'm productive. That's such horseshit, right? That just means you're part of the capitalist society. Okay, there's some value there, but there's not a lot. So I'm trying to catch up. But at the same time, I'm not going to, I'm not going to sacrifice. I don't need to sacrifice. I just do, oh, there's Formula One in Las Vegas in October. Let's book it. Let's book it. Oh, you're going to be in Aspen. What are your friends doing? I don't know. Let's fly them out. Why wouldn't we? Why wouldn't we? Right? I mean, you're going to be, my attitude is, I'm going to be dead soon. And I can't take it with me and I don't want to give it to my kids.

• 44:16Scott Galloway?

  I want to give it away. Why wouldn't I start giving away now? And why wouldn't I just spend the shit out of it and enjoy it? I mean, I hear myself saying this stuff and it just sounds so douchebaggie. But I think capitalism, you know, money is a wonderful thing. You can save a lot of people, a lot of time and energy. You can do a ton of great things with it. You can enjoy it. Your family can enjoy it. You can do wonderful things for your friends. It's just, it's a ton of fun. And why, why would you work this hard and get this lucky and not really enjoy it?

• 44:49Ed Elson?

  You know, we spend a lot of time talking about planning for retirement. That's a big topic in personal finance. But then another crucial part of personal finance is planning for your death. So how do you think about that? Do you think about your will often? When did you decide, come to this conclusion about giving your kids money? What are your thoughts on what to do with your money when you die?

• 45:14Scott Galloway?

  Well, as soon as I had my first kid, I took out a $5 million life insurance policy because I realized that if I died, I mean, my partner and my kids would be okay. But I always thought if I die, I want them to be sad, but I don't want them to be scared. And at that time, I didn't have enough money that if I passed, they would be fine. It would be stressful for them, right? So I got life insurance. And then once I sold profit and then sold L2 and then some of my investments started hitting, I did what most people do. I got a lawyer. I have a trust. Trying to be smart about it. The hard part is trying to figure out, assuming you pass away. And I'm, you know, by most actuarial tables, I'll pass away probably 20 years before my wife does.

• 45:59Scott Galloway?

  So I want to make sure she's fine and never has to worry about anything. And then you set up the trust and the questions get really hard, really fast. Like, when do you want your kids to have access to this money? I mean, I can already tell my youngest, like if I give him a bunch of money at 21, he's gonna have a Range Rover and a cocaine habit. So is it 30? Is it 40? What happens if they get sick? Do they have access to it before that? Or do you just throw up your arms and give it all away? Because everybody talks a big game about cutting their kids off when they're out of college. And then you just see how hard it is for young people now. And what if your kid wants to do something wonderful like going to social work?

• 46:41Scott Galloway?

  Or become the country manager in Malawi for the Peace Corps is the head of the Peace Corps we were talking to. Wouldn't you want to afford them that opportunity? And why have you worked so hard if not to make your kids' life easier? So there's a balance there. And I don't know if I've got the right balance. I'm working through a lot of these issues right now. But I'm kind of coming to the fact that I want to give my kids enough money such I know they they won't want for anything. They'll have housing. They could get a good education. But I also don't want them, I don't know, the kids who just have a lot of money? I don't know if it's good for them. I think you gotta, I think they need to have a sense of a sense of drive and grit. You know, I always say if I had what my kids have,

• 47:26Scott Galloway?

  I wouldn't have what I have. And so it's like, this is a big question we have in our household a lot. How do you instill that sense of grit? And we try to do it with sports and summer jobs and things like that. But I don't know, I just might snort it all up my nose and that might be the way I spend it all.

• 47:41Ed Elson?

  That's good. And so I asked Profty Media, the company, what if they could ask you any question about money and investments? What would they want to ask you? One of the main ones was, is it worth it? Mia said, has being rich lived up to your expectations? Patrick, our producer, said, how much of this makes you happy? You know, I've, I see you have worked so hard. I mean, you say that you live a stress-free, not-too-taxing lifestyle. From my view, I feel like you work very hard.

• 48:26Ed Elson?

  And that's something that I want to do as well. It's it's super important to me. But when, when is it enough? How do you?

• 48:40Ed Elson?

  How do you reach that conclusion that yeah, this is worth it? And also reach the conclusion, okay, I don't really need to do this anymore. Do you think you'll ever reach that point?

• 48:47Scott Galloway?

  Everything I do now, there's a guy named Barry Rosenstein, who ran Jana Partners, a hedge fund. I would call him a friend and maybe even a mentor. And I had lunch with him once and he said something really profound or something that resonated with me. He said, life is three buckets. There's the things you have to do. So when I'm in town, Ed, and I say, Ed, I want to catch up about your career. You have to meet with me. You have to do that. There's things you want to do. Hey, Ed, the whole team is going to Tulum. You want to do that. And there's the things you should do. A coworker at Prop G is, you know, getting married. You're not that close to them, but you go because you should do that. You should invest in the relationship. You're not really excited about traveling to Short Hills, New Jersey for a wedding, but you go because you should do it.

• 49:30Scott Galloway?

  The wonderful thing about having some economic security and where I am in my life is I have taken the should bucket and I've eliminated it. I only do want and have to do. And my entire professional life is things I want to do. And there's some components of do you have to do. But I love what we do here and that is such a gift. I really enjoy it. And I spent a good three decades of my life not doing things I love because I wanted to get economic security. Is it worth it? This is what's worth it. I have absence mostly from stress now from money. All I need to do is sit down and rationally work through the math and those demons go away. And that is a huge source of comfort.

• 50:13Scott Galloway?

  In addition, I can take my family and another family to World Cup. And we get to share these amazing experiences together that money lubricates. And, you know, of that $300,000 a month I spend, I spend $100,000 on travel and experiences. Because what I want is a series of experiences that make me feel closer to my family and my friends. And it exposed me to all the amazing things the world has to offer. I don't, but the money has been, where the money has made me happy, and it has, is I'm able to take care of people who mean a lot to me. I'm able to cement those relationships by doing these extraordinary things.

• 50:57Scott Galloway?

  And so that is just immensely rewarding. And also there's a certain amount of Reward and a feel of achievement, a feeling of masculinity, that I'm able to be a great provider and that I'm able to give money away to organizations that I think are worthwhile. It makes me feel strong. It makes me feel, you know, it makes me feel like masculine, like I'm, I've achieved something. It feels really wonderful. So, yeah, it's, it has brought me a lot of reward. I mean, happiness is an emotion. You can get happiness or a sensation, you can get that from Netflix or THC.

• 51:38Scott Galloway?

  What it's brought me is a series of experiences and absence of stress that makes me less neurotic, less anxious, and has been an amazing opportunity to do amazing things that make me feel closer and deepen some of the relationships I have.

• 52:00Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our executive producers are Jason Stavers and Catherine Dillon. Mia Silverio is our research lead and Drew Burrows is our technical director. Thanks for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Wednesday for office hours and we'll be back with a fresh take on markets every Monday.

• 52:57Speaker 04

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