Office Hours: The Lab-Grown Diamond Boom, Investment in Women’s Sports, and Deciding Whether to Quit Your Job

Scott gives his thoughts on the diamond market, specifically how the rise in lab-grown diamonds has affected the industry. He then discusses why women’s sports are a good investment and whether he’d invest in an athlete representation agency. He wraps up with advice to an investment banker planning to quit his job to travel the world. 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

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• 1:16Scott Galloway?

  Welcome to the ProftyPod's Office Hours. This is the 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]. First question.

• 1:30Speaker 02

  My question is about the diamond market. Given the advent of lab-grown diamonds, the price of traditional diamonds have dropped. In fact, I've read somewhere that the prices of traditional diamonds have gone back to 2004 levels. So my question to you is, do you think the price of traditional diamonds will come back? Or due to the advent of artificial diamonds, which are much lower in cost as compared to traditional diamonds, do you think they're going to take over and the value of the traditional diamonds are going to go down? Thank you and look forward to hearing from you. Keep up your great work. Thanks.

• 2:07Scott Galloway?

  Well, thank you for the thoughtful questions, Kartik from India. Many ring shoppers have opted for lab-grown diamonds because... You know, they're visibly and chemically literally identical, but are a fraction of the cost. According to analysis by Paul Zimnisky, a New York-based diamond industry analyst, lab-grown diamonds' global sales rose to 12 billion in 2022. That's up 38%. I mean, this is very few things doing more than 10 billion, growing 38%. Mainstream jewelry retailers, including K. Jewelers, have been selling lab-grown diamonds since 2019. Pandora introduced its own lab-grown collection last year. Luxury brands, including Gucci and watchmaker Breitling, have started to integrate synthetic diamonds into their high-end collections. The downside? Lab diamonds don't appreciate in value at all.

• 2:51Scott Galloway?

  According to Zimnisky, lab-grown diamonds sell at an 80% discount compared to natural diamonds. That's up from 20% discount just five years ago. De Beers, a major industry player, anticipates further price drops in lab-grown diamonds due to increased supply. Overall, diamond demand is falling. According to Zimnisky Global Rough Diamond Price Index, natural diamond prices are down 18% from their all-time peak in February 2022 and are expected to continue on that trend. Diamonds, along with other jewelry, experienced increased prices amid the COVID-19 pandemic, which is what led it to reach its all-time high early last year. So what's going on here? There's utility and there's scarcity. And with respect to utility, you know, giving someone a beautiful diamond, or the aesthetic value of a diamond, or the sort of expression of affection that De Beers convinced you

• 3:35Scott Galloway?

  that a diamond is forever, and somehow you're supposed to take two months' salary and spend it on a diamond, which makes no fucking sense. There's utility there. An expression of love, they're beautiful, they have an extraordinary aesthetic quality to them. And then there is the scarcity value, and that is their store of value. And so if shit gets real, and there is, you know, another depression, or, you know, you need your go-bag for whatever reason, or the AI takes over, or Taiwan's invaded, and we start... You know, people get worried we start firing missiles at each other and all these rich people head to New Zealand. What the fuck is with these people and their go bags? Anyway, maybe the equivalent example would be the art market, and that is they came up with prints or lithographs where instead of just having one, the artist would sign

• 4:20Scott Galloway?

  a cast or a casting of 200 and then break the mold and they could sell 200. And those still sell for good money, but not nearly as much as the original. I don't know what happened to the art market after that. That would be the interesting analogy, but the originals still sell for a great deal of money. So what's going to happen here? The market is probably going to continue to be under pressure as there's now a substitute. But the truly fine rough cut, or maybe not even rough cut, the truly fine naturally grown diamonds that took millions of years for carbon and pressure and heat to create, those will always have value. Those will always have a value that supersedes lab grown diamonds. And it's a case study in scarcity. What is really marketing? They say, well, marketing is an attempt to find the right product for consumers. I think

• 5:05Scott Galloway?

  most marketing, especially marketing to try and get high margins, is about creating the illusion of scarcity. Try and convince people that, oh, wait, we're only going to let in 5% of you, even though we could let in 80% of our applicants, we're only going to lose, we're only going to admit 5% of our applicants. Why? So we can create artificial scarcity and keep raising tuition faster than inflation. Oh, Panerai watch, not a complicated piece of machinery. We could produce 10,000 of these of this model a year and charge $1,100. No, let's just produce 400 and let's charge $11,000. Let's create artificial scarcity. And once you create artificial scarcity, create aspirational value, desire, want, passion, love, and you can squelch or throttle supply such that

• 5:47Scott Galloway?

  demand always best supply, even if you artificially constrain it, you create a cash tap. And by the way, it's very hard to do. It's very hard to maintain or choke supply like that. And what's that cash tap? When the CFO of Hermes walks into the North American COO and says, oh, we're a little short on earnings. Could you produce another 50 million in EBITDA? That's like another 100 million in bags. No problem, because our demand is so much greater than our supply. So you're gonna, that kind of scarcity value here will continue. And I do believe the industry is going to continue to decline in terms of prices for everyone. Thank you so much for the question. Question number two.

• 6:22Speaker 03

  Hi, Professor Galloway. This is Sarah, based in Florida. I'm actually one of your old Branshetti students from back in 2007. It's been heartwarming to see your revolution from brilliant but intimidating professor to empathetic thought leader.

• 6:35Speaker 03

  So in 2021, I became a minority investor in a women's professional soccer team. And I've noticed most conversations about team ownership fail to include the women's game. I listened to your earlier episode about team investment and I wondered, would your positions from that episode still hold for women's team? I'm also interested in the business ecosystem within sports and I wondered about the talent side of the equation. Would you invest in an athlete representation agency? Why or why not? Very thankful to still be learning from you 15 years later. Thank you so much.

• 7:03Scott Galloway?

  A nice message, Sarah, from Florida. And I've become nicer and more cuddly as I've gotten older. I think a lot, I think I started at NYU when I was like 33. And I think my harshness or getting in people's faces, I used to think that it was, I want to toughen you up and I want to challenge you. I think some of it was insecurity. I think that I was trying to just show, I don't know, a little bit about how powerful I was in that environment because maybe I was disappointed I didn't have as much power or currency professionally as I'd hoped for at that point in my life. Anyways, I think it was more a function of insecurity than anyone else. But anyways, women's soccer, women's football, I would bet, I would argue, is probably a good bet. And that is, first off, just generally speaking in the ecosystem, there are still a ton of

• 7:46Scott Galloway?

  advertisers trying to find a way to get in front, get their message in front of people. They sell an undifferentiated product, a salty snack, a sugary soda, a decent shoe, not a great shoe, a decent car, not a great car. And what do these guys need? They need branding, they need awareness, they need to be top of mind, they need to imbue and say, teen mobile, we're more innovative, we're more cool, or Budweiser, we have funny frogs, we're kind of cool and interesting and we're top of mind and grab the six pack of Bud Light because you like Tom Brady and he's in a cardboard cutout. So, marketing and branding still does matter. The problem is there's no way to reach the most valuable consumer in the world, specifically young people who are stupid because they're entering their mating years and their hormones are being poured over their organs and they just want to be more attracted to potential mates.

• 8:31Scott Galloway?

  And so they will spend money on stupid things at a very high margin. And we need to reach those people. And unfortunately, those are the people who are cutting the cord and we can't find using traditional advertising anymore because they're watching Netflix or listening to Spotify and they're upping for their subscription and they don't want to endure advertising. What is advertising? How do you know your life hasn't worked out? You're watching a lot of advertising because it's become the tax the poor and the technologically illiterate have to pay. Having said that, the one last bastion, the reservoir, the...

• 9:01Scott Galloway?

  Eden, the watering hole, the last Mohican, if you will, is live sports. My kids will not watch football. They will not DVR it. Once it's over, they'll look at the score, but they won't watch it because the magic has already happened. So they will endure ads because they have to. And so there's more, even though brand marketing budgets are going down, the funnels through which, or the doors through which they can actually go through to meet people in a broadcast video environment that aggregates a shit ton of people is getting smaller and smaller. Meaning if you can bring a lot of people together to watch live TV, you have something really valuable. As a result, the sports licensing fees have skyrocketed and sports continues to be an asset class that increases in values. One of my predictions last year was that the best

• 9:45Scott Galloway?

  performing asset class of this year would be sports teams. Why? Because the number of billionaires has quintupled in the last 10 years. Can you get over that? Quintupled, it's gone from 500 to 2,500. And they all happen to me, men in their 50s and 60s, who are going through this arrested adolescence, fear of death thing, and they think, fuck, if I'm worth 12 billion, why wouldn't I spend a billion dollars on a sports team and overnight become the most interesting person in Milwaukee? Because I bought the soccer team or the second most interesting person behind the guy who owns the box. Anyway, where was I? Okay, according to ESPN, an NCAA women's basketball championship game drew a record audience of 9.9 million TV viewers, twice more than the previous year. Wow, NCAA women's basketball. What's interesting is the WNBA has not worked. The women's NCAA March Madness tournament earlier this year saw a 42% jump in viewership

• 10:30Scott Galloway?

  from the previous season. This year's women's national soccer team's opening game averaged 5.26 million viewers, up 99% from the team's opening game in 2019. The Wall Street Journal reported that FIFA values the broadcast rights for the 2023 Women's World Cup at around $300 million. I wonder what it is for men's. I know it's more, we just don't know how much more. According to Sports Pro Media, the WNBA has seen a 67% surge in viewership when compared to the previous season. A study conducted by the Wasserman Collective revealed that female athletes get twice the social engagement when compared to the male counterparts. Isn't that interesting? The reason why I think women's football is probably going to, or soccer, as you unwashed Americans call it, the reason why I think it will probably be a good investment and they'll increase in asset value is I do think you're going

• 11:14Scott Galloway?

  to see more women billionaires over the next 20 years, which will be a good thing. And I think they will probably be interested in investing in women's or owning women's sports teams. More than that, more than that. When I go to soccer practice, I coached soccer for a brief time because I know nothing about soccer. And I was out of town a lot. Oh, that's the coach that's never here, but doesn't, but when he's here, he doesn't know what he's talking about. The one thing that was wonderful was when they were younger, it was coed. I really liked that. I thought it made for a nice vibe. And in addition, there's just a ton of female athletes now. It's been wonderful. And a lot of girls grow up playing sports. And I think one of their biggest sports in the US is soccer, which is just going to create a lot of soccer enthusiasts. And with respect to the second part of

• 11:58Scott Galloway?

  your question, would you invest in an athlete representation agency? These businesses are all about relationships. I think this is like investing in a consulting firm, or investing in an investment bank, a small niche investment bank. And that is, you're so vulnerable to the people. It's generally speaking, these types of firms that are very relationship dependent, don't make great investments, because you're just vulnerable and you're kind of, the assets truly do go home in the elevator. And the majority of the equity should be owned by the agents and the people maintaining those relationships. So as a general rule, without knowing more specifics, I would say that talent or representation businesses or agencies are not great investments for a passive investor. Thanks for the question.

• 12:41Scott Galloway?

  We have one quick break before our final question. Stay with us.

• 12:51Scott Galloway?

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• 13:36Scott Galloway?

  Find out why Nutriful is the best-selling hair growth supplement brand at nutriful.com, spelled N-U-T-R-A-F-O-L dot com, promo code PROP G. That's nutriful.com promo code PROP G.

• 13:54Scott Galloway?

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• 14:37Scott Galloway?

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• 15:09Scott Galloway?

  Welcome back. Question number three.

• 15:11Speaker 04

  Hey, Scott. Love the show and appreciate all the help and guidance you bestow upon the masses. My name's Robert. I'm 30 and living in Los Angeles, and I've been working in investment banking since leaving grad school, about 10 years. Thus far, I've made a good living with this career, but as of late, gotten to the point of complete disillusionment with where the field ultimately takes you. Among the many red flags, most of the higher-ups of the firm are workaholics and/or divorced, and seem to just be supporting an expensive lavish lifestyle without size pay. While I understand this is a privileged problem, I'm about to cut the cord and quit in the near future. I envision my next chapter being one to two years playing the tourist visa game, working odd jobs around the world and figuring out what my next chapter in life is going to be. While I have enough saved to support many months on the road, I do plan to look for professional and investment opportunities throughout the odyssey.

• 15:56Speaker 04

  Any advice you'd send my way prior to embarking?

• 15:58Scott Galloway?

  First off, I feel you. Jobs typically bifurcate into one of two things. They're either very stressful, but very interesting and rewarding, or they're very, very non-stressful, but boring and not that intellectually stimulating. I found investment banking to be this unique combination of an incredibly boring subject matter with a shit-ton of pressure placed on it. I spent a lot of my life at the printer. We actually printed prospectuses or S1s for public offerings, and my job was to go through this fucking prospectus, this 80-page prospectus, read it frontwards and backwards to find errors, to make sure the base rental payment on page 33 wasn't base rental payments on page 81.

• 16:43Scott Galloway?

  And if I missed anything and there was a typo, I could, no joke, there was a good chance I'd be fired the next day. So I'd be up till four in the goddamn morning proofing a prospectus. It was just awful work. I thought I was going to be doing deals on the Concord and hanging out with interesting people. Instead, I worked with a bunch of abusive assholes, and they were assholes, and it was just incredibly boring work. Now, having said that, it was fantastic training, because work is hard, taught me attention to detail, taught me sort of how to manage people with big egos. But everyone in my firm, not everyone, the majority of the senior people, not happy, would rather be doing something else, but had gotten to the point where they'd built a lifestyle where they needed to clock their half a million, million, $2 million a year

• 17:27Scott Galloway?

  in investment banking, and could either go be the CFO of a company and take a 60% pay cut, or go try and start a business, and none of them were really entrepreneurs at heart. So they were kind of all trapped, if you will. Now, there's some, a small subset of them, that really enjoyed it, but I literally think for most of them, the term "work" was the appropriate term. Anyway. The fact you're getting out and you're pulling the ripcord, good for you. Having said that, I wouldn't take too much time on the road. As a matter of fact, and it may be too late for this. You know, boss, it's so much easier to find a job with a job. Is there any way you could find a job or try and figure out what you want to do next? Whether it's a startup and then, and then take your three months sojourn?

• 18:11Scott Galloway?

  And I know that I'm sounding like your dad right now, but you're just a used car. You're not as attractive when you're interviewing and you don't have a job. There's no sense of urgency. In addition, my experience with people who kind of go to touch Indians and, you know, practice yoga or whatever it is you're going to do, or hang out with llamas in Argentina. Do people do that? Is that a thing? I don't think you're going to have this epiphany of what you were meant to do. Maybe, maybe. I think most people who do that kind of stuff and they have an epiphany, it's that they should return to their religious roots or get more involved in nonprofit. But they usually don't, they usually don't think, oh, I should really be in healthcare maintenance software or something. I don't, I don't know if that's going to happen on the road. So, look, I don't know enough about what your skillset is.

• 18:55Scott Galloway?

  If you're at an investment bank and you've done well, you're good in services. So that lends itself really well to consulting. You have an understanding of finance. So that lends itself to operations or to be the CFO or in finance. But my suggestion is at your age, I would go where you think there's, you have some interest, where you think you can leverage your investment banking skills and, and an industry that's growing. Having said that, it means I don't know. I would need to know more about you, my brother. What I would suggest though, is that you begin to make those inquiries sooner rather than later. And just so I can play dad for a moment, time's going to go really fast. And what you don't want to be is wake up a year, two years later and you let perfect be the enemy of good and you didn't take any offers, didn't chase anything down and you start to smell. What do I mean by that?

• 19:40Scott Galloway?

  Once you're out of the job market for longer than a year, you begin to smell. And I know how terrible that sounds now to people like, what is wrong? And your skills begin to atrophy. So I would be making as many contacts as possible, having coffees, following up with people, get an idea of what you want to do, have a plan maybe, and then take off. But anyways, you're obviously a very talented guy. Investment banking, I found, paid off for the rest of my life in terms of the skills and the discipline and attention to detail it taught me, even if you don't like it. And I also think if you don't love it, or you don't have to have the money, I think you're smart to get out. It is, in my opinion, a fairly soul-crushing, non-redeeming way to make a living. Too much? Too much? Thanks for the question. That's all for this episode.

• 20:25Scott Galloway?

  If you'd like to submit a question, please email a voice recording to [email protected]. Again, that's [email protected].

• 20:40Scott Galloway?

  This episode was produced by Caroline Shageran. Jennifer Sanchez is our associate producer, and Drew Burrows is our technical director. Thank you for listening to the Prop G Pod from the Vox Media Podcast Network. We will catch you on Saturday for No Mercy, No Malice, as read by George Hahn, and on Monday with our weekly market show.

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