Office Hours: America’s Super App, Online Sports Betting, and Career Bubbles

Scott answers a question about why the U. S. is so behind China in developing a super app. He then shares his thoughts on whether the online sports betting industry is a good investment, and offers advice to someone who fears his booming career path may be unsustainable. 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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• 0:49Speaker 01

  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration blog, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies, 18 plus.

• 1:22Scott Galloway?

  Welcome to the Prof G Pod'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 visit officehours.profgmedia.com. Again, that's officehours.profgmedia.com. First question.

• 1:39Speaker 02

  Hi, Prof G. This is Mary Catherine in California. And my question is about what you're saying is going to be the business word of the year, the super app. So I lived in China for most of the 2010s, and we all lived in WeChat. We sent messages to our friends, posted about our weekends, paid rent and utilities. We even booked travel all in WeChat. And when I moved back to the US in 2017, I was surprised that an app like this didn't exist for the US market. Now, fast forward four years, and this is all I am reading about, the super app. This technology is not new, and a model like WeChat has existed for many years.

• 2:21Speaker 02

  I agree with most of your commentary on innovation in the US versus China. Though here, I think we're kind of late to the party. So why do you think the super app craze is just now going mainstream here? I'm really interested to hear your thoughts. Thanks for taking the time.

• 2:37Scott Galloway?

  Yeah, that's a great question, Mary Catherine, and we agree. So if you look at the super apps in China and in India, they're typically some of the most valuable companies in those regions. And whoever establishes sort of super app dominance in the US, that's the iron throne of market capitalization. That will probably be the most valuable company in the world. And unfortunately, it's probably going to come from one of the existing players. I'm not sure it's going to be a new person. But you could see a payments platform, a PayPal, or even Jack's current company Block buying Twitter, and overnight, they kind of have social and payments. And boom, they're the closest thing that the US has to a super app. Their stock goes crazy, and they use that to go buy ride hailing, or they use that to go get into some sort of social with Pinterest or what have you.

• 3:22Scott Galloway?

  And what's so powerful about a super app is when you establish super app dominance, people tend to spend 30, 50, 70% more time because they're very comfortable in an operating system. I will endure a less quality app on iOS, even if the Android app is better because I'm used to the operating system. So once you get used to one interface, it becomes very powerful. And everyone is pursuing the same thing. They want to be the operating system for our digital lives. To a certain extent, the reason I think it hasn't happened in the US is that Google and Apple, who are dominant and control 99% of our operating system around mobile, have put their elbows out and purposely don't want a super app, unless it's them. Apple would rather have ride hailing companies and social go into their app store, and they would rather just take a toll.

• 4:07Scott Galloway?

  Also, privacy laws in the US limit how data can be shared between apps, making it more difficult to integrate programs into the ecosystem of a super app. In contrast, in China, WeChat started as a messaging app in around 2011, 2012, but added other services, including shopping, food delivery, ride hailing over time, mostly through mini programs. The businesses developed to work within WeChat, to work within their operating system. And China is also a mobile-first country and the internet there really just sort of skipped PCs and really took off after the advent of smartphones. China has about 1 billion internet users or roughly 70% of its population,

• 4:50Scott Galloway?

  but 90% of Chinese users access the internet through mobile phones. The Chinese market also has less competition as the country has blocked dominant US platforms, including Facebook, Google, Twitter, essentially any large American internet company that's data-driven. The Chinese have a pretty basic business model and that is they let them in long enough to steal their IP and then they kick them out, prop up a local entrepreneur and capture all the value themselves. And I think it's a model that's worked for them. We look at it and say, well, that's wrong because it doesn't serve our interests. But has the Chinese way been better than the Italian way? The Italian way, they led in Google, they led in Facebook, their elections, their privacy,

• 5:33Scott Galloway?

  their newspapers, their middle class, all get the shit kicked out of them. But yes, they're engaging in Western competition. So I would argue that when the Chinese look back on the decision to let these Western companies in just long enough to steal their IP, you know, that was probably the right move. And also theft is the best business model in the world. We practiced it through the, I think mostly the 19th century with European manufacturing and textile technology. So any company that's growing its GDP faster than 10% off a big base is probably engaging in some sort of IP theft. Anyways, you're correct to point out that the super app is going to be the kind of big shiny ring. At the same time, Google and Apple kind of exist to stop the creation of a super app

• 6:18Scott Galloway?

  because it doesn't play to their interests because they've chosen a different model. That's sort of the innovator's dilemma where someone comes around them and establishes it. I don't know. I think you're going to see a couple acquisitions and an attempt by one firm to say, hello, we're the super app in the largest market in the world and thereby at some point we're going to be the most valuable company in the world. Thanks for the question. Question number two.

• 6:38Speaker 04

  Hi Scott, Dave here from the United Kingdom. I'd be really interested to get your perspective on the growing sports betting industry in the US and whether you think there is value in the space for the retail investor. More and more states are legalizing gambling and the early signs are that partnerships between key players like DraftKings and FanDuel and the major leagues are going to be far more integrated into the core content of the sport. We're seeing things like the integration of odds into normal sports broadcasts and even sports betting specific content being produced by the likes of ESPN. I think that bodes well for the growth in the industry. And so I just

• 7:23Speaker 04

  wanted to see what you thought of the industry as a whole. And yeah, whether you think there's any value in the space for retail investors listening to this pod. Thanks very much. I love the podcast and the newsletter. Thanks for everything you do.

• 7:39Scott Galloway?

  Dave from UK. Thanks for the thoughtful question. The online gaming space or the online betting is an industry that I'm interested in, but I just don't know a lot about. And I have a negative impression of it. And let me be clear, I love gambling. I go to Vegas, I take a thousand bucks, I assume I'm going to lose it all. So it's consumption for me. I get free drinks. I try and get two or $300 back in Zacapa drinks. Hello, substance abuse. I put on a kilt, no joke. Great, great conversation starter at the craps table. Anyways, someone asked me last time I wore a kilt, they're like, are you performing tonight? Like I was doing some sort of drum roll band or something. Anyway, I don't know much about online sports betting, although people are very excited about it and a lot of stocks ran up dramatically and a lot

• 8:24Scott Galloway?

  of them have come way back. DraftKings is an example of a company that's done really well. It was $2 billion in 2019 and it's about $19 billion now. Online betting recently became legal in New York and according to Financial Times, the state expects to accrue $500 million a year in tax revenue by 2025. So you're going to see more legalization because states are desperate for tax revenues. Goldman estimates that the online sports betting market could grow to about $40 billion in 2033, up from less than a billion currently. But I wonder I wonder from an investor's standpoint, if it's going to be a rough place to invest the next couple of years. Now, why is that? The reason why I think that valuations have probably gotten ahead of themselves and that the growth might not live up to the expectations

• 9:09Scott Galloway?

  is that this new class of online, quote unquote, investing is effectively gambling. Does that mean it's not a great industry? No. Does that mean it's not going to grow? No, but I would be worried about valuations. Some of the stuff you've talked about that's been hit hard. I know Penn National Gaming is about, down about 50 or 70% from its highs just a year ago. Again, I just think it's like most technologies and then it'll be evolutionary, not revolutionary. And I think in this instance, the growth is not going to meet the expectations. I don't think the music is going to match the words here. Why? Because at the end of the day, Robinhood is gambling and it scratches the same itch. By the way, some stats about gambling, and I know this because my mother was a docent

• 9:50Scott Galloway?

  at the Bellagio when she lived in Las Vegas and used to show other old people in Vegas around to see the art and the plumbing and what happened behind the scenes to make the Bellagio work. Gambling is a very serious addiction and about 80 to 90% of people who suffer from gambling addiction are male. There's something about the male brain that's drawn to it. It also has the highest suicide rate of any addiction, which really shocked me. Why? And it makes sense. When you're on opiates, when you're addicted to alcohol or heroin or whatever it is, other people notice that John doesn't look the same and isn't behaving the same. And people will usually intervene or you will intervene on yourself.

• 10:33Scott Galloway?

  Whereas a gambling addiction, you can get in so far, so fast, and no one around you has any idea that you just decide you're in too deep and you can't get out and you feel like you only have one exit or one out. So this online gaming, online betting and online trading, I think have morphed. I think they're both probably pretty good businesses, but I think their valuations are going to come down. So just as online gaming has come down, Robinhood is now off, I think about 70 or 80%. But thank you for the question. We have one quick break before our final question. Stay with us.

• 11:13Scott Galloway?

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• 11:58Scott Galloway?

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• 12:16Scott Galloway?

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• 13:01Scott Galloway?

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• 13:23Scott Galloway?

  Welcome back. Question number three.

• 13:25Speaker 05

  Hey, Prof G. This is Tyler Rogers calling from Crested Butte, Colorado. I bought my first house a year, a year ago after I left New York City's Chinatown after six years. My question is about bubbles and job markets. I'm a freelance product designer. I design websites and apps for various companies, large and small. I started freelancing two years ago after I left WeWork during the big implosion. I had a great salary at WeWork, but in the past two years, my income has nearly tripled. Working from home means I have more flexibility than ever. There's seemingly unlimited work opportunities with increasingly oversized budget. If I'm being honest, it feels like I'm getting away with something. Not in the imposter syndrome sense. I know I'm good at my craft, but I can't shake the feeling that I'm sitting squarely in the middle of a massive bubble.

• 14:10Speaker 05

  Well-funded companies will pay basically anything for good user experience and user interface design. Is this sustainable? Have you seen other careers in the past that had a huge demand and then burst? Do I need to prepare for a downturn? Or did I just get lucky falling into this career path?

• 14:25Scott Galloway?

  Tyler, that's a great question, and you are a lot more thoughtful than I was at your age. So typically, it's human nature to take your greatest year of earnings, right? The year you made the most money and anchor off of that. And you think, well, that's the natural state of the world. That's what I deserve, and anything below that is a disappointment. And what it sounds like is that you're more thoughtful, and you realize oftentimes, that's the anomaly. That, no, you don't deserve, if you're a banker making a million dollars a year, that that's a big year, and that may not happen again for a while. So let me back up. Just as VCs always used to ask, who's the technologist on the founding team? I think the new technology, the new secret sauce, is in fact user interface or industrial design.

• 15:05Scott Galloway?

  When I think of Brian Chesky, when I think of Evan Spiegel at Airbnb and Snap respectively, they're designers. They're Stanford D School and RISD. The ability to create a seamless swath between technology and human behavior and instinct and how we interact with technology. Is design, is UI UX? And if you are good at this and you can take someone's vision for a product and how they want to communicate that product and figure out a way for people to interact with it using a small three by five screen known as an iPhone or an Android device, you are going to be in demand for a while. Will you be able to command the types of margins you have right now? Maybe not.

• 15:47Scott Galloway?

  Will you be able to negotiate the types of fees and flexibility? Maybe not. The way you prep for the downturn is pretty basic. You save some money. If you want to scale the company, maybe you take some of that money and reinvest it and hiring somebody, try and create an enterprise as opposed to just a practice. But you're smart. Recognize that you may be a baller now and you may be killing it, but take some of that money and start investing it in things where you don't have to work. Right now, you're selling your time. And what you want to do is sell a lot of your time when you can make a lot of money at it. So work your ass off right now, but try to take 20, 30, 40, Christ, if you're smart, 50% of that income and put it in tax advantage investments or investments that will start

• 16:31Scott Galloway?

  paying you even when you're sleeping. That's the definition of rich, passive income that's greater than your burn. And then diversify out of that. Find other things, real estate, stocks in Latin America, China, different things such that you're not all in on what sounds like a technology-driven industry right now. Be very good to your clients, develop loyalty, even when you can charge them more, don't give them a fair price, be really good to them, establish a cadre of very loyal clients because at some point, they will again have the upper hand. The pendulum is never at the bottom. It's either the client has all the momentum or the vendor has all the momentum or all the leverage. And over the last 30 years, the client has had all the leverage. Whoever was writing the check had all the leverage.

• 17:16Scott Galloway?

  There was a lot of vendors out there. And now it's swung to the vendors. So I think that's a good thing. Take advantage of it, but live like a stoic, spend less than you make so you can save money, diversify, think about building an enterprise of a few, a team of small people. And while it may not be champagne and cocaine, it's going to be disco for anyone who understands the intersection between technology and how we as humans interact with it. Thanks for the question, Tyler. That's it for this episode. Again, if you'd like to submit a question, please submit a voice recording by visiting officehours.proptumedia.com.

• 17:57Scott Galloway?

  Our producers are Caroline Shager and Drew Burrows. Claire Miller is our assistant producer. If you like what you heard, please follow, download and subscribe. Thank you for listening to the Prop G Pod from the Vox Media Podcast Network. We will catch you on Thursday.

• 18:16Scott Galloway?

  You know, when the quacks are duck, when the quacks are ducking? What the fuck is wrong with me today? When the ducks are quacking, feed them.

• 18:27Speaker 06

  This podcast is supported by Anthropic, the public benefit corporation behind Claude. Everyone's got a hard question about AI. Anthropic was built to surface those questions and share what it finds along the way, because there's hope in hard questions. Ask yours at claude.ai/spotify and keep thinking. That's claude.ai/spotify.

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