Lead with Resilience

Jeffrey Sonnenfeld, the senior associate dean of leadership programs for the Yale School of Management, joins Scott to discuss leadership during a time of COVID-19 and the characteristics that make great business leaders. Follow Jeffrey on Twitter, @JeffSonnenfeld. (9:50) Scott opens with his thoughts on the second coronavirus relief package and Walmart’s shoppable live stream on TikTok. This Week’s Office Hours: whether music labels might put their catalogs behind a wall, brand likability, and the bifurcation of an Android vs. iOS world. Have a question for Scott? Email a voice recording to [email protected]. (36:44) Algebra of Happiness: Prof G’s Person of the Year. (48:05) 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.

• 0:00Scott Galloway?

  Episode 41, the atomic number of niobium, the precinct number that appears on the NYC police car in the film Ghostbusters during the earthquake moment of the film's climax. When I'm making sweets we love, and just as I'm about to climax, I go to my happy place, which is the Wizard of Oz, and I immediately yell out, "Surrender Dorothy!" Is that wrong? Go, go, go!

• 0:31Scott Galloway?

  Welcome to the 41st episode of The Prov G Show. In today's episode, we speak with Jeffrey Sonnenfeld, the Senior Associate Dean of Leadership Programs and the Lester Crown Professor in the Practice of Management for the Yale School of Management. We brought Jeffrey on to discuss, or we'll bring him on to discuss, a new era of leadership and the importance of resilience. Professor Sonnenfeld is, I would call him a friend, but we're friendly, and I find that he is really a clear blue flame thinker. You've probably seen him on CNBC, but he's not someone that shies away from controversy in both providing a lot of praise to corporate leaders, but also holding them accountable. I'm just, a lot of time for Professor Sonnenfeld. Anyways, what's happening?

• 1:15Scott Galloway?

  The COVID-19 pandemic continues to get worse amidst great progress in vaccine deployment. According to the New York Times COVID-19 Tracking Project, over the past week, the United States has averaged more than 216,000 cases per day. That's a 7% increase from the average just two weeks ago. The death toll has surpassed 300,000. That's more than double the number of lives we lost during World War I. Save your comments about how it's different because it was younger people, percentage of the population. Tell that to the people who are losing their dad or their grandmother. The UK is facing new lockdowns after reports came in about a potentially more infectious strain of the virus. Fuck me, really? England's Chief Medical Officer.

• 2:01Scott Galloway?

  Said that this new variant was responsible for 60% of infections in December. However, health experts do not believe this could undermine a vaccine. Well, it's kind of a good news, bad news thing. Mostly bad news, but there is a saving grace here. And to stay on the topic of vaccines, the European Union's drug agency approved use for Pfizer's vaccine this week. And in the U.S., the CDC reports that more than 4.6 million doses of the vaccine have been distributed so far, and there have been more than 614,000 administered doses. This is going to be a crazy amount of death. Why? It looks as if the virus or a specific strain of the virus is becoming much more contagious. We have the cold comfort of a vaccine, a technology solution which the world loves, right? Let's not actually fight the war.

• 2:46Scott Galloway?

  Let's just wait to split the atom. Let's not build tanks. Let's not make any sacrifice. Let's just trust that the Alamo project is going to split the atom and save us all. Notice how we didn't do that in World War II when we won. So what are we doing here? Or what I'm worried about, what we should all be worried about, is that because the vaccine is quote unquote "here," we are going to show less discipline around distancing and masking, and we're going to see unprecedented levels of death as, A, a bunch of people have their heads up their asses and are making all sorts of narcissistic excuses for why they're going to not be the first in line. My fear is that the line clears and then there's no one in the goddamn line. And we like to think that, oh, things are getting better because of a vaccine.

• 3:26Scott Galloway?

  And we see newer levels, newer records every day of death and despair. And I think it's happening. So while the virus continues to rage on and we try to keep up with the spread through vaccinations, the U.S. Congress finally passed a second stimulus bill on Monday. The $900 billion coronavirus relief package includes extended unemployment benefits of $300 per week for 11 weeks, billions of dollars for small businesses, and $69 billion for vaccine distribution. And what do you know, PPP gets new legs with $284 billion in aid, while $166 billion was allocated for one-time direct payments. And $7 billion is going to fund broadband internet access. We need to protect people, not businesses.

• 4:10Scott Galloway?

  The first round of PPP proved to be a way to steal money from future generations. And ProPublica found that over half a billion dollars of PPP went to just 15 large companies who were able to get multiple loans sent to each of their entities. They create separate legal entities and even public companies, i.e. Shake Shack, can basically rob future generations and claim they need this shit when they don't. There are a few changes to this round of PPP that could mitigate a few of the previous risks. For one, it's more restrictive on who can apply and caps the loans at $2 million compared to the $10 million last time. Previous recipients will need to show they have 300 or fewer employees and that revenues declined 25% in any one quarter of 2020 compared to the same one in 2019.

• 4:55Scott Galloway?

  The loan still requires that 60% goes to covering payroll expenses. However, businesses can now use the other 40% to cover expenses, including software and personal protective equipment for employees. What is PPP? Yeah, there'll be some very well-publicized examples of the owner of a cupcake bakery that is able to maintain her employees and gets to the other side, gets a bridge. What I worry is that for most of these companies, it's a peer, or it's two groups of companies. Most companies, it's a peer. A lot of these restaurants should go out of business. The world is reshaping and it's not going to be hospitable to these companies. We're just kicking the can down the road with a lot of these companies that aren't prepared for the new economy. Or, or it's companies, and I think this is the vast majority of companies, quite frankly, that don't really need it.

• 5:38Scott Galloway?

  Yeah, they took a hit and yeah, that's okay. We're in a fucking pandemic. It's okay if the wealthiest cohort in America, small business owners, feel a fraction of the pain of our frontline workers. The package also gives schools and universities $82 billion, with $54 billion going to public K through 12 schools and $23 billion for colleges and universities. The transportation sector will receive $45 billion, which in many instances is a good thing, as a lot of lower and middle-income people need public transportation to get to work and they've been the ones who've been most impacted by this. But guess who's also receiving $15 billion?

• 6:17Scott Galloway?

  That's right, airlines getting a bailout. Fun fact, the five largest US airlines over the last five years have given more than $45 billion to shareholders and executives. But a rainy day comes along and we're socialists and we need a bailout. God, burn, baby, burn. Let the bondholders take the planes. Anyway, enough about how the government has literally flipped the script and is being heavy-handed with the wrong people. That is citizens and empathetic and loving with corporations. Let's move on to something that perked up the dog's ears in a good way. TikTok and Walmart finally collaborated with a shoppable livestream. What does that mean? Walmart hosted a 60-minute livestream on TikTok where TikTok users shop for Walmart fashion items showcased by popular creators without leaving the app.

• 7:01Scott Galloway?

  TechCrunch says that as products were shown during the livestream, pins popped up so users could add them to their cart and then were directed to a mobile checkout, or users could choose to browse all the featured items at the end of the event. Live shopping will play an interesting role in e-commerce moving forward. Bloomberg looked at data from CoreSite and found that this type of shopping led to $60 billion in global sales in 2019 and is expected to almost double this year. The US accounts for less than $1 billion of that. That's right, a term we have coined here at the kennel, A-commerce, algorithmic commerce, and it's going to be big. And while everyone was focused on Microsoft or Oracle, the real gangster move here or

• 7:44Scott Galloway?

  the most important marriage or coupling here is between Walmart and the algorithm of TikTok that might result in an explosion of A-commerce. According to E-Marketer, China has outpaced the US when it comes to social commerce. Social commerce sales in China reached $186 billion in 2019, nearly 10 times the amount of sales in the US, which reached just $19 billion last year. We'll be watching this space. Stay with us. We'll be right back for our conversation with Professor Jeffrey Son of Al, the Senior Associate Dean of Leadership Programs at the Yale School of Management.

• 8:22Scott Galloway?

  Support for the show comes from Superhuman. The pace of modern work can be relentless. You're getting a constant influx of messages from a ton of different apps. You haven't closed all your browser tabs in a year. Everything seems urgent and staying on top of it all feels like an impossible task. Superhuman Go is an AI chat that's always there when you need it. Already aware of what you're doing and doesn't ask you to start from zero. Superhuman Go, from the makers of Grammarly, help you be the best version of yourself at work. It handles the repetitive stuff so you can focus on the work that only you can do. Whether you need to summarize an endless email thread or prep for a meeting that's happening in five minutes, Superhuman Go works inside the tools and sites you already use, your browser, inbox, docs, and your project tools. And its AI chat is available on the side of your browser and it's always ready.

• 9:07Scott Galloway?

  No new tabs, no switching apps, no losing your place. This is AI that works with you, not on top of you, so that you have the time and brain space to solve the problems that matter. Check it out, find out more at superhuman.com.

• 9:35Scott Galloway?

  Welcome back. Here's our conversation with Jeffrey Sonnenfeld.

• 9:42Scott Galloway?

  Professor Sonnenfeld, where does this podcast find you?

• 9:45Speaker 01

  This finds me in my home office where I-- nobody except you and I know that I'm barefoot, but now the world knows.

• 9:53Scott Galloway?

  That's a-- that's an image. So where is home?

• 9:57Speaker 01

  Strictly barefoot, everything else fully clad, in Branford, Connecticut.

• 10:01Scott Galloway?

  Let's talk about COVID-19. I think when we think about the devastation that's being levied on us right now, on Americans, 5% of the world's population, 20% of the infections and 20% of the deaths. I mean, what role? Obviously, there's a lot of comorbidities in the US. We're not healthy as a nation. We have a certain level of arrogance. But it feels like, to use a terrible cliche, it's been an extraordinary failure in leadership. Can you-- can you be more specific around what types of leadership failed here and how we can prevent this tragedy of the commons from continuing or happening again?

• 10:39Speaker 01

  We've had a crushing failure of political leadership, of course, where there was a lot of mythology and conspiracy talk being pumped out there. I know we're talking about business leaders today and not political leaders, but business leaders who were acquiescent, subservient to that, obsequious even to that, were problematic. And what we saw is business leaders, for the most part, stopped themselves from being used as potted plants, for photo ops, to endorse superstition. Most dramatically, the pharmaceutical industry, which sometimes had a mixed reputation because of drug pricing issues and other concerns,

• 11:20Speaker 01

  there were actually often the, like, Turing Technologies and Theranos and some companies that were rapacious bad guy performers on the edges of the space and medical devices as well as pharmaceuticals, had sullied the reputation of the clean players. Well, those major players got together this fall in a remarkable act of strength and shouted back at government, "We're not going to politicize science." Einstein, who said, well, he did say it, that physics is easy, it's politics that's hard. And they realized that the politics of science were going to cause a big problem. You could take a look at anybody's research.

• 12:03Speaker 01

  Morning Consult, I think Kyle Drop is especially effective, but Edelman's and others show this, that the pharmaceutical, trust in the pharmaceutical industries these days has been soaring as people are excited about these vaccines coming out. But the trust in the vaccination itself has been plummeting because they were so afraid of the public endorsements. Historically, trust in vaccines was disappointing to be between the 70 and 80%. You would expect it to be, to be a lot higher. And in certain populations, it was lower. In minority groups and in the GOP, historically, it was lower. What happened through the summer because of the infiltrations of superstition into the CDC and the Food and Drug Administration is that the public trust was falling.

• 12:49Speaker 01

  To below 50% and and with no difference between Democrats and Republicans, which was a big change. Pharmaceutical industry realized that coming out with vaccines won't be heroic enough to be sufficiently successful for society if people don't trust them. So they got together, the nine of them signed a release saying a joint statement that they are not going to be rushed until the science was ready and to be very transparent about the reviews that are often, they have these third party reviews that a lot of us don't really know how the biostatistician and the medical ethicists, the others gets get chosen to be on those groups. Who are those people and what are they coming up with? They they decided to be unusually public as to who the the FDA review parties were

• 13:34Speaker 01

  because there's a third party that's outside the FDA that would review the drugs and they were fantastic about sharing that information and and step by step. And as AstraZeneca had some troubles, they were forced to be much more transparent. And with Moderna and Pfizer racing ahead and of course Merck is going to have a very promising candidate for vaccines, two of them by the summer, based on a different technology. But explaining the technology, explaining what's going along has been a big change. And that's that's sort of out the right way of doing it. The other side, though, is there have been problems in, say, and I don't mean to disparage them, but in the agriculture business where you've had people work congregate setting

• 14:15Speaker 01

  and poultry processing, there's been some disparagement of the of the ethnic communities that feed those those plants suggesting it's the work life, it's the home life, not necessarily the work life. But we weren't sure that enough was done with dividers and other truthful conveyance of information where you've heard that there were supervisors that's gone public now. It won in particular a company which has often in its past been quite ethical. You can have rogue CEO rogue employees anywhere. And we saw some problems with supervisors that were allegedly misleading, intentionally misleading employees about safety issues in some Tyson poultry processing plants. And those are examples of the far less than perfect. So we have a distribution out there and what's

• 14:59Speaker 01

  Important is the truth get out there as well as we insert efforts at public safety. But the enthusiasm around the drug companies, some of which won't make any very much money, if any, out of all this, both with the vaccines and of course, the therapeutics that Gilead and Regeneron has been remarkably patriotic and humanitarian in their incentives and not just driven by pure short term greed.

• 15:26Scott Galloway?

  So when I see candidates for Senate in Georgia refusing to acknowledge that Biden and Biden Harris have are going to be our president and vice president, I immediately think, well, that's a failure of leadership. But if you go to second order effects here or the cause, isn't it that we as a populace have stopped rewarding leadership? Haven't we endorsed a continual lack of leadership? Isn't the problem us?

• 15:55Speaker 01

  Well, there is a an old cartoon strip from the 40s and 50s called Pogo. It was about a possum that was in the Okefenokee swamps of Georgia. And this possum, it was a very political cartoon, although it ran in the in the papers daily, used to take a twist on the old admonition that we have seen the enemy and it is us. And he would say, we have seen the enemy and we are it is is that to blame ourselves is a part of this, that we surely have gone for easy solutions and falling victim to conspiratorial thinking or allowing these these simplistic notions of of good and evil and looking for scapegoats

• 16:40Speaker 01

  is is a problem. You see this when there are times of hardship and yeah, there are people have been suffering, but through the the last 15 years or so, the economy has been doing quite well. And there isn't the same excuse of a shrinking pie. There have been some wrenching dislocations. However, some of the people and a good numbers of the people, as we're learning from the surveys that are doing the scapegoating, aren't just people from who who have lost work and dislocated communities. But we do have a problem with what's gone on with with shattered families, shattered home life, unstable work conditions, and a loss of faith in a lot of critical institutions. And it's it's hard to figure out how you you break. The whole chain effect of this, the whole cycle of it.

• 17:25Speaker 01

  But you've got to start somewhere. And I would start with the leaders, leaders who have become followers instead of leaders. People who point out and say, well, X million Republicans tend to believe that this is not true, that, that say President-elect Biden and Vice President-elect Harris aren't necessarily the winners because X million people don't believe it to be so. Well, you're not showing leadership by following that. What's great about the CEO community, and you and I have talked about this elsewhere in your class and privately, is how remarkable it is that on so many occasions, private corporate leaders have stepped in to fill that void.

• 18:06Speaker 01

  When we saw business leaders unsure what to do as this administration became increasingly divisive and polarizing, even before the administration stepped in, by the way, we saw these movements by some on the right in Indiana under, when Mike Pence was, was governor, in Arkansas and in North Carolina, just to name three, they came out with these divisive bathroom bills, or as they were euphemistically called, the Religious Freedom Acts. Well, who was it that led to the repeal of all of these? It was Walmart. It was Doug McMillan of Walmart. It was David Avney of UPS, and it was Randall Stephenson of AT&T, and these bedrock companies that said, no, this is wrong. We don't want divided workforces.

• 18:51Speaker 01

  We don't want angry communities. It's not good for business. It's not good for the nation. And they, they forced the repeal of these things. And the voice of business mattered a great deal. We had the, what, the Trump administration officials from Department of Homeland Security and Department of Justice and elsewhere confirmed for us and the FBI, as well as these Secretaries of State around the nation, the, the cleanest election in, in history that we know of. And it was in part because the CEOs, in addition to the technology of policing it, is these CEOs, for the first time in American history, gave paid time off to millions and millions of their workers. The Business Roundtable is one of many who set the pace on doing this and then encouraged

• 19:36Speaker 01

  their employee, their companies to actually work on the polls where we have at-risk oxygenarians and cetogenarians. As volunteers, they had over a million workers out there as volunteers to fortify or replace these at-risk seniors, at risk, of course, for symptoms and infection, of course, of COVID, but also at risk for being bullied by political extremists trying to come in there and upset them, or just dealing with the enormous surge in the volume of mail-in ballots this year, is that fortification was from the business community. It's remarkable, and it should make any populist cynic to sit back and think, you know, sometimes

• 20:18Speaker 01

  business can do it right, and they surely have in the last two years.

• 20:23Scott Galloway?

  You were quoted recently in a Wall Street Journal article talking about the kind of white-hot IPO market, saying that we're in the midst of a transformation. What did you mean by that?

• 20:32Speaker 01

  Well, there is just a huge redefinition in the way we're doing business. Obviously, we've got new technologies of energy that are overwhelmingly disruptive. I happen to have been, to the horror of perhaps, not 99%, but perhaps 100% of the people listening right now, I've been critical of, believe it or not, the Tesla board. You know, I didn't ever want Elon Musk removed, but I wanted him to be harnessed in terms of his investor relations. He's grudgingly improved enormously. He just did it his own way. But obviously, he is, I think, a great lightning rod, to use an energy term, for the kind of change

• 21:17Speaker 01

  that we see in the energy world, and that's had enormous ripple effects. We have also seen that in the post-COVID world, nobody's going back to the kind of travel we did before. But when we return, as people have gotten quite comfortable with their living rooms, there isn't a company that I work with that I know of right now that's going back to five board meetings a year in person. You know, you always have, you know, four quarterly and a fifth one for some other reason, whether or not it's annual shareholders meeting or some special meeting of some reason, or the committee meetings, and which are happening sometimes in intervals in between, and the annual shareholders Meetings themselves is almost every company I know of, including tech companies, had thought it would be illegitimate to do them virtual,

• 22:02Speaker 01

  that the Securities and Exchange Commission perhaps wouldn't consider them as fully transparent and accessible to shareholders. Well, nobody was showing up, very few people ever showing up to the annual shareholders meetings anyway. And you're getting a much better engagement online. So we're seeing that that's a huge change in terms of servicing the way we work online from restaurants to shareholder exchanges and now that's led to new kinds of problems is employee isolation, employee training and a sense of a company culture as a differentiation in quality and things is becoming problematic. So those are the kind of changes that are creating lots of new opportunities for us as well as, of course, in in life sciences, which have been so revolutionary. So

• 22:47Speaker 01

  if you don't think about the, what you opened our call with today, talking about how we have a quarter of the of the deaths in the world and only 4% or so of the world's population, that horrible tragedy can't be minimized, but it has brought us to new realities about the way we can work and live in in very different ways.

• 23:11Scott Galloway?

  So you teach leadership and I think of leadership in some ways as I think of porn. And that is I have a difficult time describing it, but recognize it when I see it. We have a very, very male, very young listenership. What advice or what are the cliff notes around trying to demonstrate or developing qualities as a leader? What what piece of advice or pieces of advice would you offer young people as they try to develop the skills around demonstrating leadership?

• 23:44Speaker 01

  Well, thanks for reminding me of the demography who's on with us. And it's interesting because there was a while back, a Harvard Business Review article that was entitled, The Ways Women Lead. It was written by a UC Irvine professor who is a good friend of mine and she's a wonderful person, however, a very misguided piece because it suggested that when it comes to truly engaging effective leadership, the women have it over the guys. And you took a look at what she pointed to, it was a lot of specious research, if there was even any research. There are a lot

• 24:28Speaker 01

  of homilies there and ignoring some of the really tough women leaders that were out at the time and some of the really compassionate male leaders out at the time to kind of present a selective, distorting view that was intended to be feminist of a new age feminism, which was actually, in fact, reifying sexism in a new way by coming out with gender-defined roles. Is that she, she talked about how any of those tough women that I alluded to were misguided because they were aping the male model. Well, they, she only presented the male model as apes to start with and that's not, even when you take a look at the 70

• 25:10Speaker 01

  years of perhaps of research, of academic research we have in leadership, you would have thought it was longer, but 70 or maybe a little bit more than that, 75 years of leadership. It's been overly male audiences and so studied. However, even with male subjects studied, there's a whole spectrum of leadership styles. Even all the research on the military has a huge spectrum of leadership styles from, from Patton and MacArthur, I don't know, Montgomery, Westmoreland as, as, as pretty rough and a, an assertive to Omar Bradley and Colin Powell and Eisenhower as a very, much more intellectual and engaging side. Is there all kinds of, a whole spectrum of leadership styles everywhere. We shouldn't

• 25:54Speaker 01

  preordain them that no gender has a monopoly on superior leadership. It was Justice Potter Stewart, I think you were quoting from Supreme Court about pornography when it came up. He knows it when he sees it. So I don't know how much of the Supreme Court was watching at the time to make those judgments, but there was a, even an, an older, parallel reference to knowing it when you see it is Dizzy Gillespie, the great jazz musician, had once said, if, if you ask what jazz is, Then you'll never know what it is because it can't be defined that it's a state of mind. Well, I don't think that's fair when it comes to leadership. It can be defined. It doesn't mean that everybody is going to do it the same way, or there's a magical formula.

• 26:36Speaker 01

  But even the term charismatic leadership, it's something more than backslapping cheerleading. There is a great charisma, no matter how this audience feels about President Trump. When you're in his presence, there is something catalyzing. Bill Clinton, when he's at the top of his game, something catalyzing. When he's in before large audiences, Barack Obama can be that way. Is that they have a presence, but that's not the entirety of what charisma is. Is charismatic leadership starts with one dimension. I've studied 500 highly effective leaders and not based on what made he or she think they're so effective by just asking them. But to all the poor souls who work for them, I would survey the management team.

• 27:21Speaker 01

  We had to have at least four data points from each one of these 500 top leaders. So make sure we pinpoint it accurately and we weren't just getting people with the halo effect. Trying to suck up to the boss sycophantically or trying to trash the boss in some sort of revenge maneuver. I wanted to get a couple of data points to nail each one of them. Is one leadership quality that was critical is personal dynamism. That is something that if you don't have it, you find a way to do it or compliment yourself with finding others who can do it for you. But it's a little bit of that old management by wandering around, but it's being out there. It's your accessibility, using evocative language and exciting the crowd by being able to paint a really vivid imagery.

• 28:04Speaker 01

  The language you use, your availability, accessibility. Some of these best CEOs, which is they're really challenged right now. Up until these last eight, nine months, they're traveling perhaps two thirds of the year. That was very important to them. Now how they do it, come up with a proxy for that is really hard. And we could talk about how their pandemic pivots have worked to try to do that with technology. But a second dimension has to do with empathy, the caring dimension. That's not the Donald Strong suit. That's the showing. That that happens to be a Joe Biden strength, showing genuine concern. He remembers people and Bill Clinton was amazing at this one, too. Is you think there's nobody else in the world but you when you're talking with them. They block it off. They truly, truly listen.

• 28:48Speaker 01

  It doesn't have to cost a lot, but the empathy dimension is a recognition and concern for the individual's well being. People will take risks on your behalf if they think you care. But also a third dimension is trust, the moral model that's set. That has to do with your authenticity. I think it was Lee Strasberg, the head of the Actors Studio School of Acting, used to say that was the essence of great acting was authenticity, believability, that once you can fake that, you've really got it made. But that believability, a fourth dimension is a stretch dimension. It has to do with inspirational goals is to kind of reach for not be happy with the status quo, to reach for more.

• 29:31Speaker 01

  And and the last dimension has to do with the fifth dimension is a certain boldness. That's what we see happily in the millennial generation and Gen X. And we'll see if it if it is in our a rising generation beneath them is that Scott, my generation reaching into yours to the extent to which you and I are in the same one, we're doing OK on that one. The generation ahead of us was a disaster that we had the the Bobby Soxers that they were very much of a conforming generation. The generation ahead of that, that had, which was the Second World War generation of soldiers and great heroes, whether or not they're in the battlefield or in diplomacy or in

• 30:14Speaker 01

  business, they were they were great visionaries in academia. They they thought intellectually across fields, they spliced things together, sometimes out of necessity. But the generation that followed them, there were some exceptions to it, but the Jack Welch generation was not an impressive generation overall as a cohort. The baby boomers, OK, some better than others, but we've we've seen that what follows is in boldness is very exciting. You know, we saw a generation of recklessness with some of the baby boomers, of course, that took us into the financial crisis. It isn't just reckless risk, but it's inspired risk taking and that's prudent risk taking, if you will. And that's what's very exciting to see is coming along, which is not to be pandering to your listenership.

• 30:58Speaker 01

  But that's the types of folks that listen to this podcast are the ones that are taking those big risks. I just hope they don't forget the empathy and authenticity aspects.

• 31:07Scott Galloway?

  And I always like to end these conversations with one question. What would your advice to your 25 year old self be, Jeff?

• 31:14Speaker 01

  Well, it's, there are a lot of languages that need to be mastered right now. And in the past, you could see people glide by without having some of the language of finance, some of the language of law, some of the multiple languages of technology. Now, to use a telephone 30 years ago, 40 years ago, you didn't have to say, understand the way flash drives were working. You didn't have to understand the way of the different circuits were working. And it's the same today. You don't have to understand all the mechanics of how our systems work. But you have to know, know more than just gliding by on what you can sell by reading headlines.

• 31:57Speaker 01

  So technological savvy is more than just user sophistication, but some notion of where limits are, where you can push it, where the frontiers are. Information technology, we need to know more. Life sciences, technology, average business person needs to know more to be comfortable. Also, understanding law, understanding, as painful it is, rudiments of accounting. But that's not enough. Social impact is really critical. What we're seeing in all the surveys out there is while it seemed to be a life stage issue to be able to talk about the Woodstock generation and others about being concerned about ESG,

• 32:39Speaker 01

  or it used to be called social responsibility or whatever, is we see now the rising generations. People are actually making product decisions and employment decisions by how they feel about the image of a company. CEOs who are engaged in addressing the issues we're talking about, the younger the audiences we turn to, the more they seem to really care about that. But even the overall population is 70, 75% of general population surveys show they want to see their top leaders engage in social issues. And the numbers get even higher the younger we go in these surveys. So, understanding community impact really matters and how doing good is not antithetical to doing well. There are these win-win solutions out there.

• 33:23Speaker 01

  It's not just Sunday school stuff that we're preaching. When Ken, Ken Frazier, the CEO of Merck, decides to leave the president's Business Advisory Council and ultimately leads to a mass exodus stampeding with him after a brief pause because of the murder in Charlottesville and the president's inability to clearly condemn the Nazis, is that that was a magnificent act of leadership, Ken Frazier of Merck, to do that. He stood alone. What the last line in Enemy of the People by Ibsen is the strongest, it's a doctor who decide, who comes out and tells the village in this Norwegian village, the town's water supply is polluted and their economic survival, the town is based on the spas that are there.

• 34:07Speaker 01

  He makes it a public fact and they run him out of town. But Ibsen says, the strongest person in the world is the person who can stand alone. That's what Ken Frazier of Merck did. That's what really great leaders do these days that I celebrate and we've seen them in all different fields. And that's what I'd want to make sure that our rising leaders do is have the courage to do that. This is the first time in American history that we've had the American, the US business community say no to the commander in chief to a call to action on a statement of principle. And we need to see more of that.

• 34:37Scott Galloway?

  Jeffrey Sonnenfeld is the Senior Associate Dean of Leadership Programs as well as the Lester Crown Professor in the Practice of Management for the Yale School of Management. He's also the founder and president of the Chief Executive Leadership Institute, a nonprofit educational and research institute focused on CEO leadership and corporate governance. He joins us from his home in Connecticut. Jeff, thanks for continuing to fight the good fight and stay safe.

• 35:02Speaker 01

  Thank you very much. Same to you, Scott.

• 35:07Scott Galloway?

  We'll be right back.

• 35:10Scott Galloway?

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• 35:55Scott Galloway?

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• 36:25Scott Galloway?

  Okay, it's time for Office Hours, a part of the show where we answer your questions about the business world, big tech, higher education, and whatever else is on your mind. If you'd like to submit a question, please email a voice recording to [email protected]. Question number one.

• 36:43Speaker 02

  Hey, Scott. This is Jack from New York, New York, and I'm 28 years old. With Universal's recent acquisition of Bob Dylan's music catalog, do you see companies like Universal eventually pulling their music from streaming platforms like Spotify and Apple in favor of their own subscription-based streaming service? Sort of like what NBC did with Peacock in pulling The Office from Netflix? Is it more profitable for a company like Universal to have direct paid subscribers as opposed to whatever Spotify and Apple are paying them now for the rights to their music library? Thanks.

• 37:13Scott Galloway?

  That is a really, so first off, I do not listen to these questions before they're answered, so you get more organic, more authentic dog, if you will. That is a really interesting thought, and I wish I'd thought of that first. So the idea, so let's, what has happened here? When Spotify went original content with The Joe Rogan Show and made it exclusive to Spotify, their stock went on a tear. When Netflix decided to go vertical with original content, specifically House of Cards, boom, their stock went parabolic. So could you, could you double down on original, ownable, defensible IP and start buying music catalogs from someone like Bob Dylan or the gangster one would be, you know, The Beatles or Michael Jackson or Coldplay? It's a really interesting thought, and the big players

• 37:58Scott Galloway?

  have the capital to do it. I wonder if there'd be a consumer backlash, though, because there's a bit of a, an egalitarian field of music, that if Apple all of a sudden decided only Apple Music listeners or iOS users could have access to The Beatles, I think they would get a lot of pushback, and it might indicate, or might sort of buttress or cement the notion that these companies are monopolies that no one can compete with. It might find that, that might be Exhibit 38A in the government or an AG's case on consumer harm, demonstrating consumer harm of monopolies, that if I can't listen to Let It Be, unless I'm an Apple subscriber, that it has really gone too far, if you will. So it's a really interesting

• 38:42Scott Galloway?

  idea. It's estimated that Universal Music Group paid more than $300 million for the exclusive rights to Bob Dylan, so it'd be interesting if they put it behind a specific wall. The four largest music labels account for 87% of the content available on Spotify. However, many of these labels own equity stakes in the company. So the, one of the terrible things about antitrust and letting these companies grow in an unfettered fashion, such that they become monopolies or duopolies, is it distracts from the fact that a bunch of industries are too concentrated. My industry, my publisher, Penguin Portfolio Random House, that rolls right off the tongue, just purchased Simon & Schuster. That industry, specifically the publishing industry, is now incredibly concentrated.

• 39:25Scott Galloway?

  But the FTC and the DOJ let it go through because they realized, we can't break these guys up because they're under threat from Amazon, who is its own form of monopoly. So there's this trickle-down behavior of bad things, or specifically this trickle-down gestalt of a lack of regulatory scrutiny that results in higher prices, lower innovation, tax avoidance, and on and on. Rolling Stone says that licensing fees in the US are roughly split 50-50 between publishers and songwriters and record labels and artists. But with streaming, publishers and songwriters are paid a 10% to 15% headline share of Spotify's revenues, divided up by their market share, while the major record labels are paid 52% or get a 52% share divided up based on their market share.

• 40:09Scott Galloway?

  In other words, the distribution points have still figured out a way to get in between you and the end creators. I wonder if there'll be a dispersion of creativity where some, and they keep threatening to do this, they keep trying, but the record labels have a lot of power. But I think at some point, you are going to see, I don't think you're going to see one artist go behind a specific wall, but I think what you might see, what you might see is an artist go direct, if you will, to the end platforms and bypass or disperse or leapfrog the record labels, just as we're going to see healthcare leapfrog hospitals and doctors' offices, we're going to see education leapfrog universities, and we're going to see human capital, specifically workers, leapfrog HQ right into their home. What an interesting question. Thank you, Jack, from New York City. Next question.

• 40:52Speaker 03

  What's up, Scott? Dylan reporting live from New York City. I recently took your strategy sprint, which was totally worth the time and money. And in that sprint, you talked a lot about likability. In a US that's more polarized than it's ever been, how does a brand navigate likability, given two different people on two different sides of the aisle could have totally different views on what's right and wrong?

• 41:20Scott Galloway?

  Thanks, Dylan, from New York City. Likability is underrated or underappreciated in terms of just how incredibly important it is for shareholder value. Tim Cook is much more, infinitely more likable than Steve Ballmer and Bill Gates. I'm not talking about vaccine, save-the-world philanthropist Bill Gates. I'm talking about Darth Vader Bill Gates in 1999. These two are very unlikable. Tim Cook is infinitely likable, and the result is Apple probably has more dominance, more market power. Than Microsoft did when the DOJ decided to move in on them in 1999. So your likability is incredibly important. The ultimate likability shield until about a year ago, when everyone realized she was disingenuous, a liar, not concerned with the Commonwealth, not really concerned with

• 42:05Scott Galloway?

  teens, is Sheryl Sandberg. So this likability shield is incredibly important. Now, to your point around politics in the organization, there is a weird dynamic as it comes to specific political ideology. And that is, in general, in general, we stereotype political ideologies. And that is, we view conservatives as being smart but mean, and we stereotype progressives as being empathetic but ineffective. Oh, my gosh, what a great cloud cover, what a great blanket to wrap yourself in if you're a corporation, right? Talk about your progressive politics, because what that means is you're soft and cuddly and stupid. You couldn't be a monopoly. You're too nice and too ineffective.

• 42:49Scott Galloway?

  So if Sheryl Sandberg wants to talk about the important role of a gender conversation, if Tim Cook wants to be the first openly gay Fortune 500 CEO, which is a wonderful thing, and I commend him on his leadership there, but it's also fantastic for shareholder value, because we assume that those people are just too nice to develop monopolies. So by the way, if a corporate CEO wants to talk about the rights of the unborn or gun rights, I think the board would say, well, that's great. We respect your political opinions, but keep it to yourself. Keep that shit to yourself. So progressive politics are somewhat of a heat shield for corporations, because we stereotype liberals as being soft and stupid, which is great, great sheep's clothing for

• 43:34Scott Galloway?

  the wolf. Thanks for the question, Dylan. Next question.

• 43:37Speaker 04

  Hi, Scott. Tom McGinnis from the UK here. One remedy for Facebook and Google's pathological business models would be to go iOS, in your language, and create a premium subscription offering. However, this has to be incredibly unlikely to happen in a world in which they get to keep 100% of ad revenues currently, but would need to pay the Apple tax on subscription revenues. What other pivots, businesses, or entire business models do you think are simply untenable with Apple taxing that chunk of the economy?

• 44:03Scott Galloway?

  Hey, Tom. Thanks for the question. So in sum, the whole world is going to iOS or Android. And simply put, iOS is the premium offering. I pay $1,200 for a phone. I pay more money for an app and I get an ad-free, superior experience that doesn't molest my data. Now, Android says, here is free. Here's a free phone. Here is free pictures of your friends with filters on them, and you are going to have to endure some advertising. And by the way, by the way, the majority of the world picks the latter. They're fine with some advertising. Quite frankly, if you look at their actions, they're fine with their privacy being violated. They're fine with 1,200 points being pulled from their Android phone versus only 200 at iOS

• 44:46Scott Galloway?

  because they see it as a good trade. It's the difference between cable or HBO and traditional cable where they get some subscription and also get advertising revenue to just full broadcast television that just pelts you with ads. The world is bifurcating into iOS or Android. Now, there's some externalities around Android, and that is we've seen that these platforms are easier to weaponize. When you're totally focused on eyeballs and targeting, it leads to bad behavior. Netflix was not weaponized by the foreign intelligence arm of the Russian government. It's unlikely, it's unlikely that we'll see teen depression as a function of LinkedIn because the majority of their revenues comes from subscription, not advertising. So there

• 45:28Scott Galloway?

  is some externality to what I'll call the ad-supported Android model. Now, now, I think you're going to need to regulate the App Store as it's easy for Tim Cook to insult or stick his finger in the eye or on the wound of privacy around Android and Facebook because it plays to their strength. And basically, every single app provider, or even every streaming video platform, pays somewhere between 3% and 12% tax to Apple. Roblox pays somewhere between 20% and 30% of all of their revenue, either to Apple, or the Google Play Store, or even Amazon, to distribute their app. So when you own the rails, it's a great business, but it's a different type of toll keeper. One is pelting you with advertising in exchange

• 46:10Scott Galloway?

  for a free product. The other is charging you upfront and taking a huge commission.

• 46:18Scott Galloway?

  The problem is, the problem is, A, you have one company, Apple, that's monopoly on the app or the iOS premium model, and it needs to be regulated. And two, we need to start implementing some sort of fines or regulation for the folks that live off the ad-supported model, because they seem to be prone to all sorts of weaponization of their platforms. And also, their algorithms want more and more eyeballs, which leads to this dangerous thing of enrage and polarization. So there is what I'd call anti-monopoly intervention required on both. The externalities of monopoly power on the app side is bad, it reduces competition innovation. And the externalities on the Android or the free side is even worse, because it results in algorithms that will do whatever's required, including

• 47:01Scott Galloway?

  pissing you off, or making you be pissed off at the other 50% of America, such that you will be more engaged and have more Nissan ads. I don't know where this market heads, but this is definitely the battle here, iOS versus Android. And when Tim Cook preaches about privacy, yeah, I believe him. I believe he's a principled man. It's also awfully self-serving. He's basically saying, come to the paid app ecosystem, of which I control 80, 90% share by dollar volume. Thank you for the question. Keep sending in your questions.

• 47:32Scott Galloway?

  Again, if you'd like to submit one, please email a voice recording to [email protected]. Alzira of Happiness, our Person of the Year here at the Prop G Show is the founder of Amazon, who's an inspiration and has given us a lot of pause to think about generosity and what it means to change the world. I'm, of course, referring to Mackenzie Scott, the ex-wife of Jeffrey Bezos. A lot of people think Mackenzie Scott does not get the credit she deserves in terms of the early days and the actual founding of Amazon. Also, that's

• 48:14Scott Galloway?

  not why we find her Person of the Year. Most recently, Ms. Scott has decided to give away about $6 billion of her $40, $60, $70 billion fortune.

• 48:25Scott Galloway?

  And it was inspiring, not that she gave it, but how she gave it. And that is, the majority of philanthropy, especially kind of big baller philanthropy, is billions of dollars and it's a transaction. I want my name edged, etched on the side of the building. I want diligence done. I expect a certain level of input as to how we approach the homeless problem, or Meals on Wheels, or education. And Ms. Scott just said, "We are in the midst of a pandemic, and we need to push out billions of dollars to needy organizations and people in need." She didn't demand her name be involved. She didn't see it as a transaction. She didn't implement her own philosophy or big baller thinking. You know, it's just so easy to conflate money with some sort of insider intelligence. And NYU, I see this all the time.

• 49:10Scott Galloway?

  We invite two types of people to speak. One incredibly insightful, interesting people, and two billionaires. We've decided that anyone who amasses a billion dollars in wealth has insight into life. What I find so inspiring about Mackenzie Scott's philanthropy is that she's being more what I would call maternal, and that it is real giving. It's not consumption. It's not, "Hey, look at me." It's not, there's no strings attached here. It's pure generosity. It's pure empathy, and it's pure love. And I think we can all take, pause and learn from this. It's the end of the year. We're doing year-end reviews. A lot of us are sitting down, our employees, and doing year-end reviews. And I think of year-end reviews as an opportunity for honest feedback and then goal-setting. And in this year, year-end reviews really should be about, obviously, honest feedback,

• 49:55Scott Galloway?

  but more about recognition and generosity. People are hurting. This has been such a difficult year. This is an opportunity for philanthropy, but not philanthropy with this kind of bullshit male layer of transaction and recognition. But what I would call a more maternal, empathetic form of philanthropy, as evidenced and inspired by the founder of Amazon, Mackenzie Scott. Well done. Prop G's Person of the Year, who has really brought new meaning, and complexion, and depth, and color, and texture to what it means, to what it means to be a philanthropist, what it means to give, what it means to be a generous person. Well done. Thank you so much.

• 50:37Scott Galloway?

  That's it for this episode. Our producers are Caroline Shager and Drew Burrows. If you like what you heard, please follow, download and subscribe. Thank you for listening. We'll catch you next week with another episode of The Prof G Show from Section 4 and the Westwood One Podcast Network.

• 51:01Speaker 05

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