Inclusive Capitalism & Moral Leadership — with Jacqueline Novogratz

Jacqueline Novogratz is the founder, and CEO of Acumen, a global nonprofit investing in sustainable businesses, leaders, and ideas. She is also the author of, Manifesto for a Moral Revolution: Practices to Build a Better World. Jacqueline shares her ideas around moral leadership and how to use capital and networks as means, not ends, to solving the issues of poverty. Follow Jacqueline on Twitter, @jnovogratz. Scott opens with his thoughts on Coinbase’s “broken IPO.” He also discusses Spotify’s recent developments and the broader social audio wave — AKA why every company is trying to become Clubhouse. Algebra of Happiness: teaching masculinity. 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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• 1:07Scott Galloway?

  Episode 61, The Atomic Number of Promethium, the code for international direct dial phone calls to Australia. I dated an Australian woman for three years. She used to make me low-sodium bacon. At that point, I realized she loved me, but she wasn't in love with me. Go, go, go!

• 1:32Scott Galloway?

  Welcome to the 61st episode of The Prov G Show. In today's episode, we speak with Jaclyn Novogratz, the founder and CEO of Acumen, a global nonprofit investing in sustainable businesses, leaders, and ideas. She's also the author of Manifesto for a Moral Revolution: Practices to Build a Better World. Setting the bar pretty low there. Anyways, we discuss with Jaclyn her ideas around moral leadership and how to use capital in the networks as means, not ends, to solving the issues of poverty. All right, let's break it down. Let's break it down. What's on the dog's mind other than pork or a pig's ear or playing tug of war with a meat flavored rope? Do you know that exists? I have a puppy, in case you've never listened to the show. But a meat flavored rope. I mean, how good is it to be a dog?

• 2:17Scott Galloway?

  A piece of cloth soaked in some sort of meat broth? I can't imagine how they make this broth. I don't want to know. And then you just tear the piece of cloth apart slowly. Good to be a dog. Anyways, what's on our mind? Coinbase, as I'm probably the first person to lose money in crypto in the history of our economy. Coinbase went public via direct listing last week, and the company wants you to think the listing was a success. And if you go on or went on Yahoo Finance that day, it said it was up 30% because the stock traded above its so-called reference price of $250. Now, this pisses the dog off.

• 2:55Scott Galloway?

  I want to piddle all over this PR Facebook-like bullshit spin. That $250 reference price is totally meaningless. Nobody got to buy the stock at $250. I don't know who came up with this reference price, but the first opening trade was $383. For a hot minute, it popped to 410, and then throughout the rest of the day, it pinged down to about 310, and then I think it closed around 330, meaning that it lost around 15%. So in reality here, the reality versus the first person who purchased the stock is that this is a broken IPO. In a traditional IPO, the bankers take company management on a roadshow.

• 3:40Scott Galloway?

  That is a series of meetings with institutional investors, and the bankers sell a large number of shares to those buyers before the stock is available to the public. The price of that transaction is called the offering price. Ideally, when the stock is available to the public, it trades at a 10% to 20% premium to the offering price. The institutional buyers get a reward for taking some risk on large private purchases. And lately, it's not much of a risk. It's mostly asymmetric risk that rewards the institutional clients of the underwriter. And the company gets a big PR boost from a Pop in the share price over the past 12 months, the median pop has been around 13% or two out of every three IPOs have closed above their offering price.

• 4:19Scott Galloway?

  That means that Coinbase is the three, that the other one that doesn't close above its offering price of 384, that closes 15% below that, below that. We will not be fooled. Two out of three IPOs above their offering price. When the company trades below its offering price, that's bad. The institutions that took a chance are stuck with stock they paid too much for. And the company doesn't get a good PR story on its first day as a public company. We call that a broken IPO. We call that Coinbase. That's right. First person in history to lose money on crypto. That's something. That's something. None of this happens in a direct listing.

• 5:01Scott Galloway?

  Shares are simply made available to the market on the exchange on the day of the listing. So in order to manufacture the PR that they get from a pop, companies promote a so-called reference price. If you can't tell, I hate this term, reference price. But unlike the offering price in an IPO, which is the price at which real buyers paid money for millions of shares, the reference price can be anything. The reference price for Coinbase was 250 again. So when the stock closed trading on its first day at 328, the company declared that a win. Oh my God. How do you say bullshit in every language in the world? But about that $250, according to Coinbase's own S1 filing, there's been several private market transactions in the months leading up to the company's offering. And the average price that Coinbase's stock was selling for in the private markets during

• 5:46Scott Galloway?

  that time was $343. So in other words, that $250 was not only not a real number, it was a hype number, but everybody, almost everybody who has bought stock in Coinbase for the last several months, including people who opened, who bought on the IPO and didn't sell in the first 10 minutes or flip it, has lost money in this company. And they are establishing negative momentum and they want to pretend, oh no, it's positive momentum. And to be fair, the venture capitalists and the employees of the company say, you know what? We don't want to give an unearned pop to institutional investors. So we want to capture that pop. So this is really just a transfer of wealth. From the institutional clients of investment banks and the underwriter to the existing shareholders. That's neither here nor there, but don't try and give us

• 6:28Scott Galloway?

  this bullshit that this is a successful IPO. No, it's a broken IPO. And a lot of people complain, or specifically venture capitalists who want to be wealthier, say, when Airbnb sets its or sells shares at $68 to its institutional clients and it opens at $150, $160, that they left a lot of money on the table. Well, yes, but not really, because they say they're floating 10% of their stock. If the stock doubles, that means they could have essentially diluted themselves by 5% for the same amount of money. That's real dilution, 5%, but it's not as if they're leaving half their company on the table. And I would argue, I would argue, that that 5% dilution is worth it. Why? Because the next

• 7:07Scott Galloway?

  day, Airbnb's IPO is the lead story in every business email, broadcast, podcast, Joey Bagged Donuts blog, everything. And it establishes positive momentum and a feeling of goodwill around the management team and the prospects of the company and the equity itself. And it is really your kind of your one debutante, bad mitzvah, coming out party, whatever you want to call it for the company. You only go public once, or most companies only go public once. And I think it's worth pricing it below and getting that pop, if you will. Okay, enough about direct listings and IPOs. Let's check in on a few updates coming from

• 7:47Scott Galloway?

  a company we like, specifically Spotify. Think about what Spotify has done here. Spotify has taken an entire medium, music, not only just music, audio, and put it in one, put it on one button on your phone in one app that's searchable, elegant. TV hasn't done that. Think about it. Not even close, right? Newspapers haven't done that. Print hasn't done that. What other company has captured an entire medium and made it searchable and friendly and accessible in one app?

• 8:18Scott Galloway?

  Correct for 20. Who is Spotify? One company, una compañía, has accomplished this. Spotify has been making various product and service developments over the past few months in order to position itself as a leader in the audio space. Now, I'm not just talking about music, I'm talking about audio. I think when we say audio, we mean stuff like this, with me droning in your ears. Spotify has 345 million active users, up 27% year-on-year, and 155 million paying subscribers, up 24%. Spotify's ad revenue is growing even faster and makes up 13% of revenue, previously made up less than 10%. The company is valued at around $70 billion. In terms of a business model, the mix of subscription and ad revenue feels very LinkedIn. Link it in.

• 9:00Scott Galloway?

  Before we jump to the hot topic of social audio, or more specifically, how everyone and their mother is trying to compete with Clubhouse, which is now valued at $4 billion. But let's be honest, where did they get that $4 billion number? From previous investors, similar to the way WeWork kept juicing and smoking its own supply and got to a $47 billion valuation in hopes of creating the illusion of value such that they could foist or begin flinging unicorn feces at visitors to the unicorn zoo. I don't think that $4 billion is a real number. I don't think that valuation is credible. Let's take a look at Spotify's latest development in vertical integration, or part of what I like to call the T-algorithm. #RegistrationMarkTheDog. In the case of vertical integration, you need to look at how a company is controlling as much of the consumer end-to-end experience as possible, whether it's Lululemon is a

• 9:45Scott Galloway?

  retailer, they reverse integrate into production with unique materials, and then they forward integrate with Mirror into the home. The moment you get over, I would call it, a billion dollars in market capitalization, you need to start thinking, how do I start to crawl forwards or backwards? It is very difficult. It is very difficult to maintain momentum over $100 billion in market capitalization without vertical distribution. Oh, my gosh. Who is bitch-slapping the mother of all bitches around? Mark Zuckerberg? Tim Cook. Tim Cook's handprint is on the side, or both sides, of the Zuck's face right now. I love that image. I love that image. Why? Why? Because Apple is vertical, and they control the end user with their appliance called

• 10:28Scott Galloway?

  the iPhone, the most profitable product in the history of mankind, the production volumes of Toyota with the margins of Ferrari. Boom and boom. Boom and boom. But they control the interface. And so they can say, you know what? We're going to do sort of a panda-like cookie thing and make it impossible for Facebook to track people on different sites that are non-Facebook properties if they want to use iOS. And all of a sudden, Mark Zuckerberg goes home and twists the legs off his Barbie doll or kicks the dog because he doesn't control distribution because he is not vertical. So what does that mean? I think it means Facebook is probably going to try and go vertical with a dumb appliance. They tried to do it with Portal, which supposedly was a pretty good product, but no one trusts them. I think there's an outside shot that they acquire LG's handset division because I think

• 11:12Scott Galloway?

  they realize they need some sort of appliance, smart or dumb, and they need to get control of the rails such that Mark doesn't continue to get bitch slapped by Tim Cook. There's that analogy, that metaphor again. Hello, hello. So I've always thought Spotify could go vertical by acquiring Sonos. I love Sonos. It was kind of, I made three stock predictions in 2020. Twitter, Restoration Hardware, and Sonos. I thought Sonos and Resto would both double because of the dispersion of headquarters into the home. I'm already right on Sonos. And Resto's up about, I think about 23% year-to-date. I might have got over my skis there. Restoration Hardware was pretty fully valued at that point, but still, still, that's not bad. Anyways, but here they are.

• 11:54Scott Galloway?

  Spotify launching their first hardware device for the car. Spotify announced Car Thing last week, which is a voice-controlled smart player available in the US on an invite-only basis. Woo, smell you. Did you get your Car Thing invite? Anyways, Spotify recognizes the need to capture users' attention in the car. The car is going to become even more autonomous or more, even if it doesn't go directly to autonomous driving, we're going to have more attention to focus on things away from driving, which is dangerous, which is dangerous. Supposedly, texting is more dangerous than drinking. Hmm, hmm. All right, let's round this out with Spotify's acquisition of Locker Room, the live sports talk app. Spotify said the acquisition will accelerate the company's entry into the live audio space,

• 12:38Scott Galloway?

  which is Latin for Spotify realizing Clubhouse created a medium that it should have capitalized on a year ago. Spotify says it will evolve and expand Locker Room to cover more than just sports and provide ways for creators to take advantage of the social audio wave. It is very difficult to create a content company when you don't, that gets above several billion dollars without controlling the end appliance. I think it's going to be very interesting to see how, for example, some of these Headspace and Calm apps do when they don't have influence over the end user. I think distribution. Especially in the digital world where there are a few players, they manage to starch out all the margin. I love the bullshit lie that people are making money off of YouTube. Yeah, there's a small like 0.01% of people actually making money here. And they make a lot, but everybody else just basically subsidizes the content.

• 13:23Scott Galloway?

  So YouTube can step in specifically Alphabet and capture all the margins similar to what Facebook does with their quote unquote partners. Anyways, Facebook will begin testing also speaking of Facebook, live audio rooms. They're coming, they're sitting next. They're sitting next to, what is it, Clubhouse and saying, hey, you're gonna eat your fries? Anyways, Facebook experimenting with live audio rooms and groups and with public figures and plans on rolling it out to all Facebook app users and Messenger this summer. Users will also be able to record the audio discussions and charge for access to these through either a single purchase or a subscription. In addition, Facebook is also bringing soundbites, short form creative audio clips, to the platform

• 14:04Scott Galloway?

  and building its own podcast app, attributing the need for this to the 35 million people that are members of fan groups around podcasts. In addition, in addition, The Verge reported that Facebook will partner with Spotify so users can listen and share Spotify podcasts without leaving Facebook's platform. So first off, why is audio the hottest guy or girl at the dance? It's because there's an NPS arbitrage here, similar to what the NPS arbitrage that took place with original scripted television, where Amazon realized, okay, the NPS or emotional connection with an e-commerce company is never going to be that high. But the emotional connection with Transparent or The Marvelous Mrs. Mizel is huge.

• 14:45Scott Galloway?

  So even if we lose a billion or $2 billion a year, which is what at least Apple TV Plus will lose for a long time, it creates an emotional connection that can be arbitrage to reduce churn, increase brand power, that they can monetize in much better ways. The Marvelous Mrs. Mizel. And Greyhound, an interesting World War II drama starring Tom Hanks, who is 62 and plays a 42-year-old captain. But that's Hollywood. And isn't Tom Hanks ageless? Isn't he ageless? Anyways, those things can be monetized to a much greater extent than original scripted television could on its own, because it had high NPS, high emotional connection. And so they're coming in and recognizing that there's an arbitrage, that you can buy

• 15:27Scott Galloway?

  audio businesses at a fairly low price relative to the intimacy and loyalty that they inspire, which these big platforms, whether it's Facebook, or Apple, or Google, or Amazon for that matter, can better monetize than these independent companies. Another example of why antitrust is so desperately needed, but look for Clubhouse. Supposedly their value's four billion. Boy, boy, would I be selling fast. There are some recent numbers that have come out showing downloads of the Clubhouse app show that their growth has decelerated dramatically. Stay with us, we'll be right back for our conversation with Jacqueline Novogratz. Support for the show comes from Superhuman. The pace of modern work can be relentless.

• 16:11Scott Galloway?

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• 18:31Scott Galloway?

  Welcome back. Here's our conversation with Jaclyn Novogratz, the founder and CEO of Acumen and a leading voice on inclusive capitalism and moral leadership. Jaclyn, where does this podcast find you?

• 18:42Speaker 02

  In eastern Long Island, Scott.

• 18:44Scott Galloway?

  We're going to segue into your domain. You're essentially sort of the Yoda of impact investing, moral leadership, and what's referred to as human-centered capitalism. Can you talk to us a little bit about the work Acumen does and the ethos around using capital and networks as a means, not ends, to solving issues of poverty?

• 19:07Speaker 02

  Sure. I started Acumen 20 years ago after having both worked on Wall Street and worked on in development. I started the first microfinance bank in Rwanda. And Wall Street had showed me the power of capitalism and the power of using markets to make change. But it also showed how that too often markets alone overlook the poor and sometimes exploit the poor. And on the other hand, saw how development top-down assistance too often created dependency. And so what I'd learned through the whole experience about 15 years was that the opposite of poverty is actually dignity. It's not income. It's not wealth.

• 19:49Speaker 02

  And so Acumen was born with this idea that if we took philanthropic capital, which should be the most risk-oriented capital that we have, invest it equity and debt for 10 to 15 years, so seriously patient, supported those entrepreneurs who are trying to solve problems of poverty like energy, healthcare, housing, agriculture, that maybe we could create financially sustainable companies that actually allowed the poor the dignity of solving their own problems. And that's the model.

• 20:21Scott Galloway?

  So was that essentially a pioneer? Isn't that called ESG investing now? Isn't it? I mean, there's microfinance, which is more about the divisibility and ease or frictionless financing. And it sounded like what you were doing was more about duration that say, okay, we're going to be more patient capital. Is that sort of, has this, is that more loosely morphed to ESG investing?

• 20:40Speaker 02

  No, I think it's part of the spectrum, though. Patient capital, and it's something I didn't understand at the beginning, is really about creating markets that have never existed. So you need the patience to allow entrepreneurs to try and fail sometimes several times, sometimes more, to understand what the market is. Remember, our customers of our companies make $2, $3, $4 a day. They live in areas where there's very little infrastructure, low skills, almost no trust, but an abundance of corruption, bureaucracy, and complacency. And so The way we invest is to find those entrepreneurs that are willing to take a

• 21:22Speaker 02

  long place to solve problems like the fact that in 2007, a billion and a half people had no access to electricity. So you're starting with no real competitors, except for dirty kerosene. You're starting with no real understanding of where you should price. You're dealing with the fact that nobody has financing and you're going to build a company anyway. In the case of D Light, which was one of our early energy companies, they've now grown to reach over 100 million people with light and electricity. Now, the guys that are really focused on ESG are much more likely to invest. But it's at that point of significant commercial viability, profitability, that then the bigger impact investors will come in.

• 22:07Scott Galloway?

  So do your limited partners, your investors, are they looking for return on capital? Or are they looking for social return or both? Does this attempt to thread the needle between the two? Because typically, I think of it as a binary. You're either trying to you're, I don't call it consumption, but you're willing to lose it all to change the world, or you're looking for a return. And it strikes me that the middle ground has been a weird place.

• 22:32Speaker 02

  A weird and necessary place.

• 22:34Scott Galloway?

  Yep.

• 22:36Speaker 02

  So we're both. Acumen is at the highest level of the nonprofit. So let's say it's about 130 million of philanthropy, which we do not want to lose. We want to get the capital back so that we can continually reinvest it in an evergreen way. That's for the super early stage, like the company I just described. Then we have for for-profit investment vehicles, where we have much more traditional LPs who are looking for both long-term financial returns and measured and significant social impact. Across the whole spectrum, though, is a decision that we made early on that we wanted to see whether

• 23:19Speaker 02

  we could operate with the same values, whether we were in the nonprofit space or the for-profit space. And Scott, I actually just feel that what we have to do is get more nuanced about the spectrum of capital that's needed by staying focused on the problems that we want to solve. And here comes the human-centric, rather than just the instrument of capital itself. And that's why we talked about capital that we control, rather than having capital control us.

• 23:46Scott Galloway?

  What do you make of, I've heard that, I mean, everybody is starting these ESG funds or climate funds. It's just been an explosion. And I don't even know what there's an umbrella term for it, socially conscious investing. What is your take on that asset class or that strategy exploding in terms of AUM right now? Is it a, do you see it as entirely a positive thing? What are the dynamics or the underpinnings of that?

• 24:13Speaker 02

  I see it entirely as a positive in that it is a response to a new generation that will, is demanding that we start to take more seriously our environmental, social, and societal responsibilities. Do I think that all of the companies that use the labels of ESG are actually living up to it? No. But language and narrative really matters. And so I'm actually quite hopeful that we're starting to see a shift. I also think that the financial sector tends to be laggards in terms of real fundamental change. But

• 24:57Speaker 02

  nonetheless, we didn't have these conversations 10 years ago.

• 25:00Scott Galloway?

  Yeah, it does feel as if it's, something has changed, that there, it's just such a bigger part of the nomenclature around investing right now. And where do you, where do you see the biggest need? If you said, all right, we want to bring this more, I don't know, private market or capital, we want to leverage the winds of capitalism or the full force of capitalism into this type of investing. Where do you see the greatest need? If you said, this is where we're going to get the greatest return in terms of making the world a better place, what's most thirsty for capital right now?

• 25:41Speaker 02

  Early-stage innovation that impacts some of our biggest problems. Energy, agriculture, water, healthcare, education. I gave the example of D Light in that energy space. Since 2007, we've become the largest off-grid solar investor in the world for the poor. So we have a portfolio of 30-odd companies that have, you know, probably reached 140 million people by now. But it's given me a front-row seat to watching an entire sector develop around us. So that through entrepreneurial efforts and increasingly traditional investment vehicles,

• 26:24Speaker 02

  we have now seen 400 and some odd million people get access to electricity they did not have it 20 years ago. That's a major advancement that wouldn't have happened without the early-stage patient capital. And now comes the hard part. We still have another 600 million people with no access to electricity. We are not going to get them electricity with business as usual. Yet to throw out the tools of investment and go back to the hammer of charity is going to be an abject failure. And so I see that that creative catalytic capital

• 27:03Speaker 02

  that is willing to take a mix of return, use both grant capital as well as investment capital as part of the answer to solving our biggest problems. And, you know, you talk about the ridiculous binary between socialism and capitalism. We've got to get away from binaries and make more pleas for nuance when we're talking about using the tools of investment to solve our problems.

• 27:28Scott Galloway?

  There's also a tension between private market philanthropy.

• 27:33Scott Galloway?

  Wealthy people getting involved in social causes and then the work the government does. And technically, government aid is, should be representative of all of us, right? We elect these individuals. And I'll put this forward and you tell me where I got it right or wrong. It feels as if so much capital has been garnered by individuals that they are playing an outsized role in determining what causes get financing and which don't. You know, we're now, it's now going to be SpaceX that decides if we go to Mars, not NASA. Do you see this additional capital coming into the social realm as a positive? Or is there a problem when Mark Zuckerberg is dictating that we should be focused on charter schools as opposed to, you know, the Department of Education?

• 28:18Speaker 02

  I think whenever you're at a societal place of such extreme inequalities we have right now, we lose the real capability to operate as a democracy. The, the poor feel fully left out of society and the rich feel above society. And so part of our challenge is to find ways to build a more robust middle class again. It's hard for me to answer the, the role of philanthropists versus the role of governments, given that I work globally, including in the United States. But in some countries where, where there is no real education system, there's a real

• 29:00Speaker 02

  power in using private resources, philanthropy, to build business models that could then be taken up by government. And, and so that's where I'm hopeful. Too much concentrated power in any sector is not a good thing.

• 29:15Scott Galloway?

  And do you see, if, I'm curious, through COVID, have, have you seen a reticence for people to get more involved in projects abroad, given just the incredible toll that America has registered? Are people sort of turning inward and less, less likely to get involved in projects outside our borders?

• 29:36Speaker 02

  I've seen a lot of people turn inward and focus on our problems. And that's a good thing that we have to take care of this country before we start telling the rest of the world what to do. At the same time, it may feel good in the short term. It's long term blind. We have to do both because in addition to the inequality, the divisiveness, climate change, so are we seeing a greater level of refugees, immigration. We have to find ways to deal with the fact that we're a single world. We're interdependent. Covid is a perfect example.

• 30:16Speaker 02

  But just in this last year, 20 million individuals were made migrants displaced from their farms, their homes, only because of climate. And so, put yourself in those people's shoes, you're going to go where you can get an opportunity. And so, I actually think we've got to be doing both and we've got to get away from either or thinking.

• 30:38Scott Galloway?

  And what would you, so if you think about the world of, well, let's talk about capitalism. And this is, this question is pregnant with a comment. And that is, my sense of capitalism is that it only functions if you have sort of this full body contact violence at a corporate level that creates competition, innovation, and prosperity. But the only way that translates to progress is if it sits on a bed of empathy. And it feels as if we've become more empathetic to companies and less, and more harsh or Darwinian with individuals. And it's just, it's just very dangerous. So my, in my view, my first question is, do you agree with that? And two, how did it happen? And what can be done about it?

• 31:24Speaker 02

  I do agree that it happened. And you and I are about the same age. And I think, you know, I graduated from business school in 91. And

• 31:33Speaker 02

  You know, we were taught that it was not only our fiduciary, but our ethical responsibility.

• 31:38Scott Galloway?

  And maximize profits.

• 31:39Speaker 02

  Yeah. And when we looked at business in the changing environment, I think was our course. We were taught to minimize government, keep them out, not partner with government. And so the rise of unbridled capitalism, where we literally raised it to the rank of religion. And the acceleration of technology put the individual and profit at the center of all of our systems. And here's where the moral leadership piece comes in, because in an interdependent world, that no longer works. And it did create a lot of prosperity for a long time. But today, we have to deal with the divisiveness, the hyper individualism and the inequality

• 32:23Speaker 02

  that we have as a world, or we're going to get where we're going. The good news for me, and I'm seeing it across the United States as well as in every other nation in which we operate, is that there is a new generation of entrepreneurs that are building companies that put our shared humanity at the center. And especially in this pandemic, they are coming up with new, much more radical business models that are insisting on long-term profitability, but in ways that are inclusive, in ways that are sustainable, in ways that confront the systematic racism within this nation, in ways that I just find beyond thrilling.

• 33:04Scott Galloway?

  Coming up after the break.

• 33:05Speaker 02

  When you look at the 80-year-olds that are constantly renewing, that are full of life and energy and excited, it's most always, rich or poor, those individuals that have made a commitment to something a lot bigger than themselves.

• 33:21Scott Galloway?

  Stay with us.

• 33:25Scott Galloway?

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• 34:10Scott Galloway?

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• 35:02Scott Galloway?

  So I'm going to ask you to coach, coach me. I'm the founder of two small companies. One is an education, an ed tech company called Section 4 that's trying to democratize elite MBAs or the elite MBA instruction. We just raised 30 million. That makes us not a unicorn, but somewhere in the value of $100 million. And then I have, so it's a high, you know, kind of. Information economy, venture capital, you know, shoot to the moon, ed tech, small business. Then I have another business where I put all my media assets. That company is not a venture-backed company. We do things like this and we generate revenue, good revenue and profitable,

• 35:44Scott Galloway?

  but it's a different complexion. It's more like a practice or a niche company. And then the other one is the VC-backed, kind of go for the stars. Assuming I have some influence here and I said, all right, I'm interested in being a moral leader. What does that mean? And how should I be thinking differently? And what are some actionable steps to try and incorporate moral leadership? As someone who was raised in that, you know, I don't call it Ayn Ren, but Jack Welch kind of maximized profits. Everyone makes their money and then they go decide how to, how to save the world with it. How do I become more of a moral leader?

• 36:20Speaker 02

  Well, first and foremost, you know, how do you define success?

• 36:25Speaker 02

  Is the question you have to ask yourself. If it's simply how much money that you're going to make for yourself or you're hopefully not just for the PCs, which I doubt is,

• 36:37Speaker 02

  but that's putting you on the track to hyper individualism. So if the definition of success is that I not only want to teach those MBA students what it actually takes to succeed, quote unquote, in the material world, but how do they develop their character? How do they ensure that they're putting the collective we in front of the individual I? How do they build meaning into their lives? So is my curriculum actually building character and not just putting content into the brains of all the people who are taking it? How do I treat the people who work with me? And what's my responsibility to the society beyond us? So this, these are the beginning conversations that I would be wanting to have.

• 37:20Speaker 02

  And, and it's not about moral as, you know, that is now your category, but that is someone who is driven by the practice of thinking about others as they, they build, but holding themselves accountable to building for profit, profitability and impact.

• 37:38Scott Galloway?

  So these inspiring smaller companies with people who figure out a way to come up with great value proposition where the the output is a social good in addition to return on investment. And you know, I think of this guy, Iron Mike Stedman, who started this thing called, I think it's called Ironbound, which was a boxing gym in Newark. And with COVID, they couldn't box. And he pivoted to helping young people, mostly of color in the inner city, try and find jobs and purpose. And this is a guy, former Marine, you know, he just kind of something out of Central Casting for what you want young Americans to look like and behave, you know, smart, innovative, scrappy, and, you know, putting

• 38:21Scott Galloway?

  the full, the full force of his character behind helping others. And I find we, I find there's no shortage of those companies. And maybe there can always be more. What I see is the most damaging thing lately is that the people who are the most powerful, not only don't share your sense of moral leadership, there's a total absence, I would call it moral corruption, that the biggest companies or most profitable companies in the world, Google, Facebook, are not only not, you know, demonstrating moral leadership, they're demonstrating moral corruption at a scale we'd never seen before. What is your

• 38:59Scott Galloway?

  view on, on not only getting behind the good guys and gals, and I think there's a lot of them, let me put it out there, that the most urgent need, the best way to move the world forward would be to go after the moral corruption that's infected our leadership. Do you, I'll leave it there. I'd love your response to that.

• 39:24Speaker 02

  Well, I actually think, I just literally came from a talk with students at Notre Dame. And, and this came up, that, that They look around and they see all of these leaders, not just in the corporate sphere, but in every sphere that they know they don't trust. And yet, these leaders seem to be quote unquote, winning. And it makes it hard to go this other path. On the other hand, Scott, I was asked to be on a board recently that was very systematically looking at the long term possibilities for companies based on how they're dealing with stakeholders,

• 40:07Speaker 02

  how they're employing people, their environment, et cetera, et cetera. And also, as activist investors are going after shame. And I think that those kinds of voices are going to get louder and louder. And that long term, you won't be able to run a company because of the employees that you hire or the customers that we have.

• 40:30Scott Galloway?

  So let me, let me, let me just stop right there. I see no evidence of that. I, I think everyone who orders a $10 little black dress is engaging in supply chain that is impossible to be ethical. I think we all talk a big game about Facebook and they grow their revenues and profits 20, 25% a year. I just think, and my sense is we always impart this or project a better moral standard on the new consumer. And we're, we're waiting for this consumer revolution or this worker revolution and Facebook has no trouble attracting people. So, but you see evidence that in fact, it's different this time.

• 41:11Scott Galloway?

  The consumers and workers are rising up and forcing their companies to be, demonstrate more moral leadership. I think it's a great talk track. I just don't see evidence of it.

• 41:22Speaker 02

  I do see evidence in it. And I see a growing generation of, of young people, not only in the United States.

• 41:27Scott Galloway?

  Could I sound more cynical right now? I don't think I've had breakfast.

• 41:30Speaker 02

  You're freaking me out, Matt.

• 41:31Scott Galloway?

  Yeah, sorry.

• 41:32Speaker 02

  Seriously. Because this is our world.

• 41:36Scott Galloway?

  Yeah. So that's a depressed guy. Sorry, go ahead.

• 41:41Speaker 02

  No, but I want to, I want to, I want to take you on, you know, because look, there's a lot of big things that we've got to change. And I actually feel that this is a moment for a cultural shift. But I have sat with company, with CEOs of companies in grimy industries and.

• 42:00Speaker 02

  They're having real conversations about, you know, paying a living wage. And yet, sometimes they will hide behind being the first mover and their shareholders will kill them. And they will. And yet, you get enough of them together. And even if government isn't the one that first demands it, and I actually believe government should insist on living wage in this country. You see a first mover, not just one company in isolation, but a mix of companies. That's right, guys. I, you know, granted, my world is the world of people who believe in change and have made change. When I started investing in off-grid solar.

• 42:41Speaker 02

  This was a it'll never work proposition. Big oil had the monopoly, solar was $4 a watt. There was no battery capability and poor people were never going to be able to afford this nor even trust a new technology like that. When I see now half the world that didn't have electricity have it. Sometimes in partnership with corporations, it makes me think that we can solve these problems. We lack the moral imagination to make the decision, but I'm seeing it. I mean, IKEA just made a billion dollar commitment today to, to climate. And we're starting to see more and more of these. I gotta believe in incremental progress.

• 43:26Speaker 02

  And I think right now, the realization that we only have 10 years is that that incremental better lead to exponential really fast. But you are sounding mighty cynical to me, which I would say is the greatest ally to the status quo. That it's when we get to that point of like, forget it. It's not going to work, that nothing changes. And it's when you really focus on relentlessly going after it that we see change.

• 43:56Scott Galloway?

  Yeah, I was even just going back to the advisory giving. Think about what is, what is the goal? What is a CEO or founder of a company? What is your goal? And I think about it and I'm not proud of this, but I think until about the age of 40, my goal was to be two things, awesome and rich. And I wanted-

• 44:12Speaker 02

  And how did it feel when you got there?

• 44:14Scott Galloway?

  I'm still working on it.

• 44:16Speaker 02

  No, but seriously, how did you feel?

• 44:18Scott Galloway?

  Well, look, I, you know, and of course, I'm very good at turning all of these things into a story about Scott, but I'm, you know, I grew up with no money and it was very important to me. And I find that in a capitalist society that offers you better healthcare, better opportunities for your children, greater selection set of mates, people laugh at your jokes, primarily linked to how much money you have. I wonder if capitalism has become so incredibly rewarding for people who garner resources, specifically money, that it's, it is very difficult to break out of that wheel of pursuing that the ends, the ends to all ends is money. And that was what it was for me. And everybody I find that most venture capitalists who get on stage and say, follow your passion,

• 45:01Scott Galloway?

  say that because they're already rich and engaged in what I would call the most perpacious, aggressive behavior imaginable. And then kind of found God once they, once they got money. And I'm trying to, and now I'd like to think that I demonstrate an entirely different complexion. I focus on my employees more. I want them to make a lot of money, even if it makes I make a little bit less. I don't think there's anything wrong with that. That feels good. And I've changed a lot and I'm trying to figure out, how do we get more people thinking that way? I mean, you need the hunger, right? For-profit companies are an incredible engine and they need that hunger for stakeholder value and profits because it doesn't matter how noble you are if you go out of business. But where do you think the root problem is?

• 45:44Scott Galloway?

  Is the root problem a society that just basically evaluates, and I would say evaluates men more in the context of their resources than women, but that value keeps going up? That nobility keeps getting tighter and tighter, more correlated to how many resources you have. Where do we go? Is it, you know, are we suffering from a lack in church attendance? Is because we're teaching the wrong things in business school? Is it because Instagram is showing you, you know, it just sucks to be anything but rich? Like, how do we get to the root- Problem here and instill a different and in my senses, you think it is working that we have a new generation. What is different about this new generation? Is it just that

• 46:26Scott Galloway?

  they recognize the problems are that much more urgent? Or has there been a change in society? What can we do to go earlier to the root problem?

• 46:35Speaker 02

  So Scott, all of the above. Look, I have four brothers. I know you're an only child.

• 46:43Speaker 02

  But I'm one of seven and I have four kind of masters of the universe brothers. And I remember when my brother, Michael, became incredibly wealthy. And he said, you know what happens, Jacqueline, is suddenly my IQ just went up by 10 points. You know, everybody thinks you're smarter. Everybody thinks you're more handsome.

• 47:01Scott Galloway?

  Funnier, nicer.

• 47:02Speaker 02

  Funnier, everything. And so I really agree with you. And I do think it is at the rotten core of a definition of success that has held us all in its grip. I also think that when you look at the 80 year olds that are constantly renewing, that are full of life and energy and excited, it's most always, rich or poor, those individuals that have made a commitment to something a lot bigger than themselves. And that it's not that you start off saying, I want to follow my passion. I agree with you. I think that that's a false conceit and a ridiculous starting off statement, but that they kept

• 47:43Speaker 02

  daring to take on things that were much bigger than themselves. So is it Instagram? Yes. You know, Regent Heights, Coddling of the American Mind and the depression levels in this country because of a generation that's seeing how they look on the outside, not how they feel on the inside. Is it a lack of religion? I think we have to figure out how we replace the guidelines and the continued moral teaching for good and for bad with something else.

• 48:16Scott Galloway?

  Yeah.

• 48:17Speaker 02

  We're not having those conversations. We are certainly not having those conversations in our school. And that's got to change, too. I do believe that this is a moment to move away from just throwing content at kids and valuing them, judging them, grading them on their character. Do they show up? Do they partner? How do they collaborate? How do they develop the muscles of empathy and frankly, even moral courage? So it's a wholesale cultural shift.

• 48:47Speaker 02

  Not just a technical shift. And, and that's, you know, when I started writing my book, as you said, I was quote unquote, called the fighter of impact investing. And I was thinking, I need to write this book on like, how do you structure investments for the long term, blah, blah, blah. And I realized that one, anybody can write. But if you look at those individuals who succeed, not just in building companies, but in solving problems wholesale and shifting culture within their nations, it all comes down to character. And you're not born with that. You learn that. And you learn that partially, you know, the stories you tell, the stories of your mother,

• 49:30Speaker 02

  the stories of hardship, stories of overcoming hardship. I think this is, this is what we have to do. And I frankly think we can be teaching in our businesses as well, in the way that we model and in the way that we expect other people to show up.

• 49:46Scott Galloway?

  A lot of what you talk about, it strikes me as really important, or it feeds into me for me is, I want your advice on parenting. And that is, you know, I really struggle. I have two boys who are 10 and 13, and I struggle mostly with, how do I create a sense of grit and hunger in them? Because I always joke that if I had my boy's life, the only thing I'd know I would have when I was an adult is a Range Rover and a cocaine habit. That if I was growing up with the resources they have, I just wouldn't be successful now. And it's not a humble brag.

• 50:25Scott Galloway?

  I, I, you know, very early, I made the connection, you know, we could have a much better life if we had more money. I figured that out at about age 10. I can remember the moment it happened. And my kids aren't going to make that, or hopefully they will. But a close second there is you want your kids to have, you just said, character is something that's, that it's nurture, it's not nature. Do you, are you willing to offer any advice to parents for how to instill that sense of moral leadership and character at a young age?

• 50:59Speaker 02

  Well, far be it for me to offer advice because it's so hard to be a parent. I'm a stepmom. I am an aunt of 23 kids. And, and it's, it's interesting to what you're saying that growing up in our household.

• 51:16Speaker 02

  Required us to be super entrepreneurial cowboy like because you know, we had essentially two working bathrooms, usually one working bathroom for the nine of us. But you see these character traits across the seven of us. And sometimes my nieces and nephews will express jealousy that we were so scrappy and we're so close and we have this language of tribe almost, but they have the tribe language, but they know how privileged they are. And so I asked those same questions. I think it is a great experiment. My mother was an amazing model. She didn't solve problems for you. You had to solve the problems, even if it was painful for her to watch.

• 52:01Speaker 02

  She was a myth maker, tribe builder, tough. And lots of adages, you must show up. I don't care if you have a headache. Your brother's in a wrestling match. That's what you do. And I don't think we do that enough. We think of love as all soft and mushy and letting kids be special all the time, rather than actually paying enough attention to say the truth. And I don't know, Scott.

• 52:31Scott Galloway?

  Yeah, yeah, like, yeah, I've read a bunch of parenting books and they all basically collectively say, we have no idea. There's some basic guardrails.

• 52:46Scott Galloway?

  But I can show different, I've never seen a science or domain that has more contrasting thoughtful opinions that are in direct contradiction with one another than parenting books. And it's just, you know, the one thing I've come to, I think somewhat of a realization lately is that real parenting and love is uncomfortable moments. Your kid is not behaving, is being a jerk, and it's so easy to make a series of empty threats, just hoping to get through dinner. Because saying, that's it, you're in your room, you're out. And you're eating in your room and you are not part of this family this evening because you haven't earned a right to be. It's really uncomfortable. It ruins everyone's night.

• 53:30Scott Galloway?

  And I've finally come to the conclusion that that, the fun stuff, having fun dinners and playing Jenga and all this stuff, you know, that's, that's easy. I find the moments of engagement much easier. It's the, you know, where the love comes in, at least for me, is like actual the discipline and the tough part, because it's just so much easier not to. And the, the moral leadership piece you're talking about, it's funny, we, we kind of defer to school and we're going back to religion. I'm a devout atheist, but I remember going to Sunday, Sunday school and they would ask, what would Jesus do? They would have, they would ask us that all the time. Do you know Jesus well enough? And they'd say, what would Jesus do? And I, that still sits with me. I think, God, that's just such

• 54:14Scott Galloway?

  a great role model, right? I knew that this guy started with love the poor. And that was just a decent place to start. And I wonder what, you know, you talked about, where do we replace that? I don't know. Do we replace it in schools? Is it our political leaders? I find the leadership and ethics classes in business schools primarily bullshit to give some tenured professor a job where there's no accountability. I don't find that those are useful at all. Do you see any emerging things among young people that you're hopeful about that are replacing the decline in church attendance?

• 54:46Speaker 02

  Yeah, well, you know, in addition to building companies across the world, we have an Acumen Academy, which is, we're trying to create as the world's school for social change. And it has a decidedly moral component to entrepreneurial success. And so number one, there's a real yearning. We've had over a million signups for these courses from every country except for Malta, I think. So, so yes, we just ran an 11 week course called The Path of Moral Leadership. We've done it three times now, but we've had over 6,000 people take these 11 week courses and they're uncomfortable. They meet people they'd never

• 55:28Speaker 02

  met around the world. I see a yearning for ritual as well as for practices. So we have an, something we call the one-armed hug, where I will tell you the truth in the most uncomfortable way, but with my other arm, I will hug you. And so I hear now, whether I'm in Pakistan, or Nigeria, or Los Angeles, I hear-

• 55:55Speaker 02

  The people within this community, which is now thousand strong, using that language, practicing it. Their role models are people like Benji Williams, who graduated from Stanford Business School, moves to Pakistan, starts a program to train tertiary level university grads. So the first kids in their, in their, in a generation to go to school. And I see him modeling for them what it means to be a guest in another country, listening to older people and valuing that wisdom. So I'm a huge believer that we not only need new business models for capitalism, but we also need equally role models. And they don't have to be the corporate science.

• 56:39Speaker 02

  In fact, I think that no one relates to the corporate science anyway. Finding those people that your sons can see themselves in is really important. And in our ethics class, and this is how we teach ethics at Acumen, it's, it's much more experiential and it's at that line between success and failure, which is where I frankly have lived my life. That the, the book Manifesto for Moral Revolution sounds like it has elements of righteousness in it, when in fact it's just the opposite. It's what do you do when you've got everything online? The world is looking at you. Your friends have all paid bribes to build whatever companies that they're building,

• 57:23Speaker 02

  because that's business as usual in your country. Do you pay the bribe or don't you pay the bribe? And I will teach at universities and some kids will say, Ms. Novogratz, it's, isn't it more unethical not to pay the bribe and make the poor wait until you can get the land registered? That's a conversation we need to have. So what is the role of bribery? Who gets impacted? And how are you going to change culturally unless you've got those few courageous people who are, who dare to pay the price? And how do we support them in doing it? I think that we have to just get clear on what our North Stars are. And in a way, that's what. Religions allowed us. I grew up in a very Catholic family, going to Catholic school,

• 58:07Speaker 02

  and also rejected the idea of the institutional religion. But inside me are those stories of standing with the poor, of to whom much is given, much is expected, being an instrument of peace. And I think it is incumbent on us to find ways to integrate in all of our institutions as we reimagine them, that moral, call it spiritual if you will, understanding that now science teaches us that we truly are all part of each other, not just all human beings, but all living things.

• 58:51Speaker 02

  And so to pretend that it's all about one species, one individual, one metric is a fool's errand. And it doesn't build the kind of world that we want our children and our grandchildren to grow up in.

• 59:07Scott Galloway?

  Jaclyn Novogratz is the founder and CEO of Acumen and a leading voice on inclusive capitalism and moral leadership. She has devoted 30-plus years working to enable human flourishing and building a movement in which we define success based on the amount of human energy we release in the world. Under Jaclyn's leadership, Acumen has invested 135 million to build 136 social enterprises across Africa, Latin America, South Asia, and the United States. She joins us from her home in eastern Long Island. Jaclyn, stay safe.

• 59:37Speaker 02

  Thanks, Alaska.

• 59:47Scott Galloway?

  Algebra of happiness. What does it mean to be a man? I think that there's this dangerous notion, this conflation that we've Basically decided that all masculinity is toxic. And I don't think that's true. I think masculinity is a wonderful thing. And one of the things I'm trying to do with my 10 and 13 year old boys is on a regular basis, on a regular basis, I am sitting them down and I'm saying, this is, this is how a man acts. This is what it means to be a man. And it's little things. We have guests staying with us and I say, I say to my son, this is what a man does. A man, a man sees that they're leaving that morning and offers to take their luggage to the car. This is what a man does. Right? A man immediately engages people.

• 1:00:30Scott Galloway?

  He, he immediately looks people in the eye and he shakes their hand immediately. This is what a man does. A man protects his 10 year old brother when people are giving, giving him a hard time. And we've had some of that at, at our school. This is what a man does. And I think that is really helpful. I didn't have any of that when I was a kid and I try and reinforce behavior, positive behavior. My older son is a pleaser and I find distinct of all the, of all the eye rolls that they listen and they might not listen right away, but I did, I did notice this weekend that my son took luggage out to a car, some visitors.

• 1:01:12Scott Galloway?

  And it's those moments, those dumb moments where you see your, you know, your, your son who's a bean and can't weigh more than 70 pounds, trying to wrestle with a piece of luggage because his father said, this is what a man does. But I think, I think men remind their boys what it is to be a man. And it's something that's been exceptionally rewarding for me. Masculinity is a wonderful thing. You just need to help your, your boys understand what it means to be a man.

• 1:01:41Scott Galloway?

  Our producers are Caroline Chagrin and Drew Burrows. If you like what you heard, please follow, download and subscribe. Thank you for listening to the Prop G Show from the Vox Media Podcast Network. We'll catch you next week on Monday and Thursday. Dos dias, unless they mona para el perro. Bacon humor? That's good. So was a pleaser.

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