Love in the Time of Corona

Scott explores the idea of “Love in the Time of Corona” answering listener questions about how to prepare, adapt, and respond during these volatile times. He also sits down with Aswath Damodaran, Professor of Finance at the NYU Stern School of Business, to understand his take on the virus, markets, and investing. 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?

  All right, here we go.

• 0:07Scott Galloway?

  That's right, Neil Armstrong steps onto the lunar surface. The Olympic flame is catalyzed, is lit, sparks up for the first Olympic Games. Christopher Columbus stumbles upon America, or Florida, or Cuba, or wherever the hell it was. These are the initial moments, the inaugural moments that have changed history. This is not one of those.

• 0:39Scott Galloway?

  So what if you threw a podcast and the only person that showed up was a pandemic? My name is Scott Galloway, professor of marketing at NYU Stern School of Business, and this is the inaugural episode podcast shitshow of Prof G. And what a difference seven days make. We had several podcasts in the can, upbeat, irreverent, provocative, trying to taxonomize business concepts and today's news, interviews, algebra of happiness. And to be blunt, we just didn't know what the fuck to do. This is unusual times. We have approximately 212,000 people have been infected with the new coronavirus.

• 1:24Scott Galloway?

  9,000 people have died. What's unusual here is the mortality rates that we're getting are somewhere between 0.2% reported in Norway. And for a brief time, the US had the highest, the highest mortality rate at 6%, mostly because we have demonstrated an extraordinary level of incompetence around testing. And the first, if you will, business issue taxonomized in the news is simple. You can't manage what you can't measure. And that the notion that we're going to be able to attack this without being able to do what South Korea has done, testing 10,000 people a day when total tests thus far are somewhere around, I believe, between 11,000 and 15,000 in the US. Drive-through testing in Germany, which they've had for a while, although we now have drive-through

• 2:09Scott Galloway?

  testing in Colorado and certain parts of New York. But the reality is you can't, you have to, for any issue you want to measure professionally, personally, biologically, you have to be in a position to measure it so you know what you're dealing with. And it's likely the fatality rate will go down substantially as we find, in fact, that the number of cases here in the US is a lot greater than what we think it is. This is going to be, this is going to be an unbelievable case study in crisis management. And one of my courses at NYU, or one of the sessions of my brand strategy class, is all about crisis management. And simply put, there are only three things you have to remember in crisis management. One, the top guy or gal has to address the

• 2:50Scott Galloway?

  issue. And in this instance, the top guy or gal, you would think would be the president. The president has handed it off to Michael Pence, Vice President Pence, who, distinct of the constant sycophantry, has, I think, done a decent job of trying to assure the nation that they're, that they're doing their best. What is really unusual about this communication strategy is they're acting as if it's V-Day, not D-Day. They're giving victory speeches instead of trying to rally us onto a war footing in a sober, motivational communication strategy around what needs to be done and to rally us to face the issue. They're acting as if we've won the war, and it's created a sense of panic, not only in the markets,

• 3:31Scott Galloway?

  we're now back to 2017 levels, it was down another, I believe, another 1,300 points today. We're seeing stocks ranging from Simon Properties to Restoration Hardware to Boeing off 60, 70, 80%. Big Tech holding at about 20 to 30% off, but we've seen essentially some of the greatest, one of the greatest stretches in the bull market over the last several years is wiped out in a matter of days. I do believe that the weak in the old leadership of this administration is going to be a victim here. I think that the mortality rate on this administration is approaching 60, 70%, meaning the likelihood that this presidency comes to an end at the ballot box this November goes up every day with

• 4:15Scott Galloway?

  this poor crisis management. So, the top guy or gal has to address the issue. That should be Dr. Anthony Fauci, not the Vice President or the President. You need to acknowledge the issue. This administration has never acknowledged the issue, and that's a big part of the problem. They've never actually said, this is what's going on, and this is how serious it is. And that has created a great deal of panic and distress. And then finally... And most importantly, you need to overcorrect. You need to overcorrect. Tylenol didn't say this is an isolated incident of cyanide being put in a Tylenol bottle. They said, we are going to clear all the shelves of every bottle of Tylenol because consumer trust is our greatest and most important asset. The company came back stronger. It has a fantastic reputation.

• 4:59Scott Galloway?

  And as a result of that reputation, it's some of the greatest margins in the healthcare and consumer products industry and has built a company that is one of the 10 most valuable companies in America because they overcorrected. And we are pretty, pretty fucking far from an overcorrection when it comes to this administration. And I would argue that as a father, as a son, as a girlfriend, as a granddaughter, as a boss, as a manager, you want to be known right now as the guy or gal that overcorrects. I think there's very little downside to overcorrecting here. Let's all be the person that when we look back on, they say we overcorrected and overreacted. But that is a much, much better place to be than the boss, the boyfriend, the son, the spouse that undercorrected.

• 5:51Scott Galloway?

  Hello, this is Fraser Crane and I'm listening. Raj, let's take another listener call. Just kidding. It's the dog. Office hour starts now. Griffin, first question.

• 6:03Speaker 01

  Hi, Professor Galloway. My name's Kyle. I'm a senior in college who's ready to graduate this spring and join the workforce, specifically investment banking. How will this COVID-19 epidemic affect job markets, specifically for young workers like me? Will companies put off hiring over fear of a recession? Thanks for your time.

• 6:19Scott Galloway?

  Hi, Kyle. Thanks for the question. So typically, investment banks, accounting firms, big consulting firms don't like to rescind offers. If you already have an offer, you don't need to be worried because large institutions don't want to tarnish their brand image by rescinding offers because quite frankly, college grads are inexpensive relative to some of the other people they have on payroll. And they want to maintain good relationships with their primary sources or their primary pools of talent, which are world-class universities. They will likely, I would imagine, coming through this scale-back hiring. There's just no getting around it. We're, it looks like we're entering into a recession. There will be a reduction in hiring. There will be a reduction in competition.

• 7:04Scott Galloway?

  That's probably not a terrible thing in the long run. At least at NYU, kids were coming out of school with four, five, and six offers. Investment banking, just let me do a riff on this. My first and only real job was working for Morgan Stanley while out of UCLA. It's a fantastic training ground. I would argue that being in investment banking is like being in the Marines in the sense that you're glad you did it in the past tense. Most jobs are usually one of two things. They're either very interesting with a lot of stress placed on them, whether that's being an anesthesiologist, or a air traffic control person, or a litigator, or they're somewhat relatively non-stressful but boring.

• 7:43Scott Galloway?

  Monotonous, think of a security guard, or think about a lifeguard who never gets to save anybody. But investment banking, I found, was this unique combination of incredibly boring material with a tremendous amount of stress placed on it. I did not like it. It's a great training. I think it's a terrible career, quite frankly, unless you're just fascinated by the markets. But it is a great thing to do right out of school in a mix for a good platform. They're generally good firms. They treat their people well. You're amongst the best and brightest of other 22-year-olds who have no idea what they want to do with their lives. Why did I go into investment banking? Because my roommate, Gary Leshgold, wanted desperately to be an investment banker, and I was very competitive with Gary. And despite the fact I knew nothing about investment banking,

• 8:27Scott Galloway?

  I decided if he wanted it, I was going to do it. I lied about my grades and got a job with Morgan Stanley. Went there, found out I hated it and that I was terrible at it. But that is part of being a young person, is not only finding out what you want to do, but what you don't want to do, and decided to go back to business school. But anyways, yes, hiring is going to be down. But if you already have an offer, sit tight, don't worry. They're not going to rescind the offer, they might delay it. But what a great time to be a senior in college. The job market's going to go down a bit, but it's wonderful to be 22 and in the greatest country on earth. Congratulations, Kyle. Next question.

• 9:03Speaker 02

  Hi Scott, thank you so much for taking questions. This is Uros in Los Angeles. And my question for you is, for those of us that are currently in self-quarantine, but blessed to continue providing for our families by working remotely, what is your recommendation as far as structuring our days now with some extra time having to stay at home and not commute? Really appreciate your thoughts, suggestions. Hopefully as well, and stay safe.

• 9:24Scott Galloway?

  Uros, thanks so much for the call and the thoughtful question. So, yeah, a lot of us, we're going through what is, I would argue, the greatest work-from-home experiment in the history of mankind. But I think you also want to make it a love-from-home experiment and a workout-from-home experiment in the sense that because of the social distancing, we're unable to be around the people we care about. We're unable to touch the people or many of the people we care about. But you need to take time to reach out to people digitally and just reinforce your relationships. Maybe even spend a little bit more time thinking about the people who are alone and don't have the opportunity to socially distance with their family. So the first is I would make time, additional time, for texting, phone calling, reaching out emails with the people in your life that you care about

• 10:08Scott Galloway?

  that you might not have as much opportunity to see, at least in the short term. I've worked from home a lot because I've always been an entrepreneur. And what I've found is useful is, one, you have to create boundaries in the sense that it's very easy to sort of be working all the time. And what I found was more useful to have actual work hours and decide, okay, during work hours, I am working. And then I take regular breaks and then at a certain time, I close the laptop, I shut down the emails, and I try and spend time on myself or with my family, what have you. I think it's important, some just basic hygiene. Get up and shower, get up and put on real work clothes. I'm not saying necessarily a suit, but get up and maintain a schedule. Also, commit to getting outside on a regular basis.

• 10:52Scott Galloway?

  I think one of the advantages of being at home is an opportunity to take walks, really enjoy nature. I would also, I think this is true in general, but I think it's very important to get out of the house and exercise because if you're both working... Socializing, playing at home, it's the walls are going to close in on you pretty fast. I also think about a couple of small indulgences and whether it's a cashmere blanket, or a bigger TV, or finally ordering that Sono sound system, something that makes the home seem a little bit brighter, lighter, more joyous in the short term. But regular work hours, knowing when to stop, some hygiene around showering, putting on

• 11:34Scott Galloway?

  clothes, brighten up the place a little bit, and enjoy this opportunity to be at home with loved ones, and also create a space that's just for work, such that your kids don't bother you. I'm doing podcasting from our vacation villa right now, and have found it exceptionally challenging. So I have cordoned off a nice quiet place and have said, "All right, this is what, this is for Dad. No one comes in here, and no one bothers me when the door is closed. The door is closed." As if anyone listens to the dog. No, they don't. No, they don't. Next question, Griffin.

• 12:07Speaker 03

  Professor Galloway, this is Bobby from New Orleans, Louisiana. My question to you is, is Facebook's soul salvageable? For instance, with the CDC's guidance of social distancing during the coronavirus crisis, couldn't the world's largest social network do something good and leverage its social graph to help inform people of their first, second, third, order connections, et cetera? For those people that have tested positively for the virus, what are your thoughts? Thanks, stay safe and healthy.

• 12:35Scott Galloway?

  Thank you, Bobby from Louisiana. The CEO of our company, Greg Shove, his son Bobby Shove is actually at Tulane. I wonder if this is a planted question, but I do know Bobby, and that doesn't sound like him. But anyways, that's neither here nor there, other Bobby from Louisiana. So first off, Facebook does not have a soul. Companies or legal entities are not concerned with your well-being or the condition of your soul. They will not take care of you when you are older. It's about the management team. It's about the culture of an organization. And at Facebook, we have what is one of the worst cultures in the history of corporate America, which has resulted in arguably the most dangerous company in the history of all of business.

• 13:16Scott Galloway?

  This is a company whose culture is largely set, the DNA which largely imprinted by a sociopath, whose first professional endeavor was a website that evaluated women based on their physical appearance, who screwed over his close friends in college and then royally fucked over his best friend soon after college, and then has gone on to command the algorithms that decide the information and propaganda of a population greater than the Southern Hemisphere plus India, who denies anti-vaxxers, Holocaust deniers, and gives platforms to white nationalist people, information to radicalize young men, and quite frankly, just doesn't give a fuck. And as a result of a dual-class structure, you have a board that has become totally

• 13:58Scott Galloway?

  neutered and ineffectual, and he has brilliantly engaged a $2 billion beard, a $2 billion lipstick on cancer called Sheryl Sandberg, who runs around the world telling people to lean in, as she has negligently allowed her platform to be weaponized by the foreign intelligence arm of a Russian government that paid for ads in rubles that suppressed the turnout in key swing districts in Ohio and other swing states, resulting in an illegitimate president that has put in, that has placed people on the Supreme Court who are slowly but surely eroding a woman's right to choose. Lean in. This company does not have a soul. One of two things needs to happen. We need to either break this company up, or senior executives or this organization need to show up in orange jumpsuits. This organization does not have a soul, nor does any other organization.

• 14:43Scott Galloway?

  What it has is a sociopath and his lipstick running around the world, doing tremendous damage that results in self-cutting depression among teens and a general danger and lack of concern for the Commonwealth. Oh, my God, that was a rant. That was a rant. We're out of oxygen. I'm about to have a stroke. So, we love your questions, and obviously, Office Hours isn't going to go very far if you don't submit questions. So, please submit your questions and voice memos to [email protected]. Again, that's [email protected].

• 15:17Scott Galloway?

  Support for the show comes from Bilt. Most of us work hard to earn our keep, but usually there's no one around to hand you a cookie when you successfully pay your monthly housing bill. No one except Bilt, that is. Bilt has expanded from their original rental rewards program, and they have a lot more going on for members now. For example, members can earn points on mortgage payments, too. Every housing payment gets you points that get you a lot more than baked goods, such as flights with top travel partners, including United and Hyatt, Lyft rides, Amazon.com purchases, and much, much more. Here's another benefit of Bilt membership. You also get access to what they call a neighborhood concierge. You can make restaurant reservations, book fitness classes, and find new local spots, all while rewarding you at more than 45,000 merchant partners. It's simple. Being a renter and now owning a home feels a lot better with Bilt.

• 16:02Scott Galloway?

  You can download the Bilt app and join the membership for where you live at joinbilt.com/provg. That's J-O-I-N-B-I-L-T.com/provg. Use our link so they know we sent you.

• 16:17Scott Galloway?

  So if we were to pick who we would want for our first interview, it would be our guest, Aswath Damodaran. Aswath Damodaran is a professor of finance at the NYU Stern School of Business. I was fortunate enough to be named alongside of Aswath, one of the 50 best business professors, and I'm boasting because I'm fundamentally an insecure person, in 2012. And then Forbes did, took that same ranking, and said, "Who are the 10 best professors in the world of graduate business education?" And one of us made the cut, the other did not, i.e., Aswath Damodaran made the cut. And most academics would argue or would agree that Professor Damodaran is one of the best teachers alive in graduate education. And every year, he is recognized as one of the top professors in the world, literally. He's passionate about teaching.

• 17:01Scott Galloway?

  And even more impressive is that he is a very decent, generous man. Every time I've ever asked Aswath to do anything, and it's not just me, it's anyone on the faculty at NYU, he says, "Yes." So in addition to being, literally having written the textbook on valuation, being considered the dean of valuation, and being an exceptionally generous person, he is probably one of a half a dozen people in the world right now that can literally move markets. And I'm not exaggerating. When the president says something ridiculously stupid, as he does on a regular basis, and the markets throw up 1,000 or 2,000 points, or when Jay Powell says he's cutting interest rates, the markets may move. But another individual that can move markets is Professor Aswath Damodaran, who when he goes on CNBC and talks about a company being under overvalued, you see movement in that stock.

• 17:45Scott Galloway?

  So this is with great joy and pride that we present our first interview, and that is with Professor Aswath Damodaran.

• 18:03Scott Galloway?

  Aswath, how are you?

• 18:05Aswath Damodaran?

  I'm doing well, Scott. How are you?

• 18:07Scott Galloway?

  Good. This message finds you or this podcast finds you in San Diego. Is that right?

• 18:11Aswath Damodaran?

  Absolutely. I'm in La Jolla now that leaves out the beach in front of me. So, you know, social distancing is a little more tolerable.

• 18:18Scott Galloway?

  That's good distancing. So let's bust right into it. Give us, give us the state of play. What's your sense of the markets right now? I guess we're down 1,700 points. It's March 18th, Wednesday, March 18th, at approximately 1,300 hours Eastern Standard Time. Markets just dipped a little bit below 20,000 points. I guess that's the first time in a couple of years, right?

• 18:38Aswath Damodaran?

  Four years. It's not since 1916. I'm sorry, 2016.

• 18:44Scott Galloway?

  Wow, since 2016. I was going to say, let's hope it's not this bad since 1916. Anyways, give us, give us your state of play regarding the markets right now.

• 18:51Aswath Damodaran?

  I think markets reflect the confusion. We all feel the uncertainty. So it's, it's, you know, investors are human beings. So, you know, whatever you're feeling in your, in your regular life, you're taken out on markets. And I think if you add to that the economic shock that is going to come out of this, you have tremendous worries about liquidity, whether, what, how much money you will need. So it's a combination of panic. And I think it's also a need for liquidity, people recognizing that they might have to cash out, not because they're scared, but because they will need the money.

• 19:23Scott Galloway?

  And what's your sense? It feels to me that stocks are kind of trifurcating. And that is, just as the virus is going after the weakened, the vulnerable in our species, if you will, the elderly or people with underlying health conditions. The virus is likely, the fatality rate in stocks here is going to be companies that underlying illnesses are weak to begin with. So there's stocks that will probably just are companies that will just be wiped out, not even Chapter 11, but Chapter 7 here, some specialty retailers that were weak, some airlines or transportation companies. Then there's companies that are way off, that present a huge opportunity, that are down 60 or 70%, and assuming they can survive, there's no reason to think they shouldn't resume to normal levels. And then there's other companies that are either down 20 to 30% like Big Tech, or even up, whether

• 20:06Scott Galloway?

  it's a company like Walmart or the Zooms. How would you break down the market here? What are you seeing in terms of the reaction of individual sectors and stocks?

• 20:15Aswath Damodaran?

  I wrote a post breaking down by dimension where I thought companies would be hurt or helped by this virus. And I looked at six dimensions, three related to the business you are. The more discretionary the product or service you provide as a company, the more affected you are by the virus. So in a sense, luxury retail is going to be, even within retail, luxury goods are going to be affected far more than groceries and necessities. It's going to be broken down. If you're travel related in any way, it could be a logistics company, transportation company, an airline, obviously Boeing indirectly, more travel-related your business, the more you're affected. Expedia is being taken down, just as United Airlines

• 20:57Aswath Damodaran?

  is being taken down. And the more people-centric your business is, the more in trouble you are, right? I mean, if you're a business that you can run from behind a computer somewhere in Bangalore, and still, like Zoom, I mean, you don't need a whole lot of people running the business at any point in time. But if you're Uber, you can call yourself a tech company, but you are very people-centric. I mean, your drivers have to be out there, people have to be calling for Ubers and that. So those three are business-related. In a sense, you don't control them. I don't feel, and there I can feel sorry for companies that got caught in the whirlwind. There are two that are self-inflicted, or at least partially self-inflicted, and that relates to leverage. One is, how much fixed cost do you have as a company? As a company, if you have lots of fixed cost, high operating

• 21:41Aswath Damodaran?

  leverage, you're far more exposed to this problem, because small swings in revenues are going to create huge swings in your losses. The second is completely self-inflicted, which is how much debt have you chosen to take on? Let's face it, in the last decade, with low interest rates and good times, there are some companies that are overloaded. And this, I mean, Warren Buffett is always saying, it's only when the tide goes out that you realize who's been swimming without clothes on. And this is the tide going on. You're seeing companies with debt that are going to be exposed. Part of the reason Boeing is going, is being punished so much is not so much that, that it's travel related. That's part of the problem. That precipitates the problem, but it has high operating leverage and high financial leverage.

• 22:27Aswath Damodaran?

  So you, you, you mentioned a key word that I think investors need to think about. When the economy comes back, and maybe you, you, you believe that this is the apocalypse, in which case, don't worry about your portfolio. What's the point, right? Step up in food and get into wherever you need to go. If you believe economies are going to come back, and I believe they will. Then you got to bet on companies that will survive and come back. Which means there are some of these companies that look awfully cheap. And if you load up on right now, they might not be around when the comeback arrives. So. That's what I'd be screening for is who's got the biggest buffer. One of the reasons the big tech companies are doing better is they have the biggest buffer. They have little debt, they have huge cash balances.

• 23:10Aswath Damodaran?

  And in a, in a, in a very perverse way, this is going to make big tech even more powerful because. Hundred percent. Yeah, because many of the smaller tech companies will run out of cash and they're going to have to be desperately looking for potential buyers. And you know what? The Apples, the Googles, they're, they're just loaded up with cash and they can go out and buy technologies they could not have touched. A few months ago because of the pricing. They're going to be able to buy those technologies for pennies on the dollar. So. In a, in a weird way, in a perverse way, this is going to make the Fang plus Microsoft. If you were terrified of them before, you should be even more terrified of them coming out of this crisis. Because they're going to be one of the few, you know, one of the few groups of companies with money to throw around.

• 23:55Scott Galloway?

  It all comes back to biology and evolution. And when you think about the culling of the herd, once the herd is culled and the rains return, there's fewer animals and more food. And the species thrives. The species comes back. If you make it through the other end, the times have not been this good in a while. And I can't imagine that media companies, services companies, technology companies, all the few remaining ones that are competing with Apple, Amazon, Facebook, Google, and Microsoft, they just come back with, instead of 62% combined, Facebook and Google, of digital marketing, they pop to 70. Amazon doesn't go from 7% of retail, it goes from 9%. It goes from 33% of online sales to 40%.

• 24:39Scott Galloway?

  So these companies feel like, and tell me if you disagree with it, a pretty safe way to make 20 or 30% over the next 12 to 24 months, assuming that we don't, as you said, don't enter into an apocalypse and the economy does come back. The question I would have is, is the opportunity here to find companies that are hammered, down 70%, whether it's our Restoration Hardware?

• 25:05Aswath Damodaran?

  All of the brick and mortar retailers.

• 25:06Scott Galloway?

  All of the retailers that have the Kevlar, they have the balance sheets to survive. And there's no reason to think that if they survive, things wouldn't return to normalcy. People aren't going to stop shopping. People aren't going to stop flying. So if they survive, isn't there an opportunity, wouldn't the right strategy to be, to find four or five of these companies? Because some of those companies might come back 200 or 300%.

• 25:31Aswath Damodaran?

  With the caveat, which is you need personal liquidity to be able to do this. In a crisis like this, liquidity is king. So if you have cash in your portfolio, you're in good shape. So the first thing I would ask is, can you pass the sleep test if you do this? I know in the abstract and rationally, you can say, hey, why don't you take your cash and buy Boeing? It's cheap. Or Restoration Hardware, it's cheap. But I tell people, if you do that and you're not able to sleep, then whatever you get. Right. So I think in a sense, you've got to get to a comfort level that you're okay investing that cash. And for a lot of people, that we are different points in this crisis. My guess is you've got to feel less under personal crisis to be able to make investment

• 26:13Aswath Damodaran?

  decisions like this. And right now, the problem you're facing across the world is people are so personally under, under, they're, they're afraid for their personal selves, their families, they can't even think beyond that. Right. So one reason you're not finding a bottom in this market, because usually when, when stocks fall this much, the bargain hunters come out. Yep. You're not seeing that happen in this market. My guess is the bargain hunters are now at the grocery stores trying to get milk to make it through the next week. They're not thinking about, should I buy restoration hardware or should I buy? And for, for those people who feel more secure, and we'll all reach that point of security at different points in this crisis, I would make a list of stocks. You don't even have to act right

• 26:56Aswath Damodaran?

  now. Make a list of stocks and here are the things you look for. You look for, for companies that have solid balance sheets, that have lots of cash, relatively little debt, that have margins that are, that are high by, by peer group standards. Let's face, one of the reasons retailing is under trouble is their margins are already in the mid-single digits. So unless you're a Walmart or a Kroger, a grocery store, and you're, you're going to see revenues drop, your margins are already so low, you're going to get, you know, you're going to get whacked in the middle. But my suggestion to people is, even though you might not feel comfortable pulling the trigger right now, get a list of stocks together and track

• 27:37Aswath Damodaran?

  them. And when you feel comfortable, if you have the liquidity, go out and start investing. I think one size fits all in this market is a terribly dangerous assumption to make because I hear people saying, just hold on, nothing will happen. Hey, what if you need liquidity? I don't, I think, holding on, nothing will happen is terrible advice to give to people who might need the liquidity to make it through the next six months or a year. So start with liquidity needs and then start thinking about what can I do with my portfolio?

• 28:08Scott Galloway?

  Yeah, I think that's great advice. The person, I love that, the sleep test, right? How much money do you need for the next 12 to 24 months? Make sure that that's, that's in cash. And then if you're unfortunate enough to play offense, think about, on a risk-adjusted basis, you know, the tech guys, or if you want to put together a basket of, of riskier stuff. Something you said about indebtedness, and I think of a company like Boeing. It looks like Boeing's going to try and, my guess is, put together a proposal for a bailout. I can't even imagine, you know, I think a bailout's almost like reparations. And that is, it's a good idea in theory, but where does it stop? You know, you, okay, Carnival Cruises, Boeing, I get it. But what about retailers? What about rest? I mean, where, do you bail out McDonald's?

• 28:52Scott Galloway?

  I mean, I, I think it's going to be a very interesting question where we stop. But let me go back to indebtedness. AT&T, the most indebted company in the world. Does a company like that, is, are they at risk?

• 29:03Aswath Damodaran?

  I think they will make it through simply. It's, it's a combination of indebtedness and revenues collapsing. The advantage of AT&T is so much of the revenues are subscription-based that until people start to cancel subscriptions, they won't feel the pain. And what they're hoping for is, if this passes in eight weeks or 12 weeks, they're okay. If this takes six months or nine months, then you're going to see the second level. The first level, what you're going to get are the companies who have seen the revenues collapse. If I were picking a travel company, I'd pick Expedia over United Airlines. And for a simple reason, United I worry about. Because when you get a bailout, you might survive as a company. But remember, your equity will not survive. I mean, GM got bailed out in 2009. It survived as a company.

• 29:47Aswath Damodaran?

  But the people who are at GM equity essentially got wiped out in that bailout. So it's not just that the company needs to survive, but you as an equity investor need to be able to walk away with some of the upside when it survives. And rightly, if the government bails you out, why should the equity investors be, you know, be able to walk away with money? So I think you're looking for companies that have the capacity to survive. So as you're looking through the debris, that's what I would look for.

• 30:13Scott Galloway?

  What about some of these, what about some of these unicorns, a company you talked about service coming, companies like Lyft and Uber, do you think these guys make it, a company like Tesla, which is, I just got off the phone with the Washington Post and they called me and said, Elon Musk is trying to keep the factories open, what do you think of this, I would argue that means there's absolutely no corporate governance there, but what do you think of, what do you think of some of these, uh, well Lyft and Uber, do they survive this?

• 30:37Aswath Damodaran?

  I think they will, and I think for, luckily for them, it was timing, I mean Uber had two and a half billion at least a month ago when I looked at the balance sheet. And my guess is they're going to go into complete savings mode and, because a lot of their spending, if you think about Uber and Lyft, was discretionary, adding cities, signing up drivers, my guess is a lot of that is just going to come to a stop and they're going to live off the cash for a little while. So I think that again, in a strange way, this might actually be what allows Uber and Lyft to eventually see the right side of the profit margin because, you know, where at the start, I mean, if you're worried about startups trying to eating into their base, those startups are going to essentially get wiped out.

• 31:18Aswath Damodaran?

  So when you look at the, again, this is, this is going to be a crisis that tilts in favor of bigger companies that have had the capacity already to raise capital. Luckily for Tesla, they raised that $2 billion, it's like three months ago. In fact, I've been pushing for them to raise cash when the times were good, I said, what the heck are you guys doing borrowing money? But Tesla's, and I describe it as my corporate teenager, it's a company that wakes up every day and asks, what can I do today to screw it all up? And, and now for the, you know, the good times, that's exactly, the way they behaved made me think about, hey, there's so much they could have done to solidify their balance sheet, get the capacity built when they had access to capital.

• 31:59Aswath Damodaran?

  They chose not to do it because Elon Musk was so caught up in showing, showing the rest of the world that he was positive earnings and positive cash flow, as if anybody really cares about that with a young company that's growing. And in the process, he's put the company at risk, I mean, I, you know, I had a ride on the Tesla train, you know, it's when I bought in June of last year and I sold last month. But it was a ride where I constantly worried about what they would do. Going forward. So and I think in a sense, you're going to see those companies that were forward. I mean, people forget that Amazon came really close to going under in two thousand and one. And what saved them was the fact that Jeff Bezos, at the start of the year before

• 32:42Aswath Damodaran?

  the collapse, actually raised one point six billion dollars in cash and kept it as cash. And that allowed them to kind of survive those six or nine months right after the dot com bust and allowed them to come out strong. So you're going to see companies that were forward looking enough, that were prudent enough. It doesn't even have to be forward looking, prudent enough to recognize that this too, the good times will pass and you need to be able to go through the bad times. I don't think any of them are prepared for bad times arriving so quickly and so precipitously. But no, I think you're going to get a sense of prudent management principles being room. I mean, we're reminded again of the importance of prudence.

• 33:21Scott Galloway?

  It's interesting. So a year ago, Tesla was at three hundred bucks. Then it went to nine hundred. Now it's back to three hundred. It does. Yeah, I'm sure they're wishing they'd done about two or three secondaries in the last twelve months. But does that that strikes me as a company that survives? I don't I will tell me.

• 33:41Aswath Damodaran?

  I think so too. I think in a in a in a strange way, this has shaken up the status quo so much that everything is up for grabs in a sense, right after this crisis ends. I have the sense that you're going to see companies that were left for dead coming back because there are aspects of this crisis reminded you that these companies are still going to be around the craft tines of the world. Might be back again as investments because, you know, people are turning their attention away from those, you know, those stars that were giving them fifty percent return saying, maybe we need to go back to safety. So in a sense, this is a rewinding of things that have been going on for a decade. And some

• 34:22Aswath Damodaran?

  of that is going to mean that companies that were left for dead might come back and companies that you thought were going to, there's no chance of them failing. I did a few roadblocks. But I have a feel I agree with you. Tesla is going to survive, but only Elon Musk lets it survive.

• 34:39Scott Galloway?

  And you brought up something interesting I hadn't considered, and that is with a company like Uber and Lyft. One of the advantages they have, if you were to put together a screens to try and identify where you want to play offense. If you're in a position, you have the liquidity to do that eventually and start buying. The first is cash and balance sheet strength. Another one that's interesting that both Uber and Lyft had that and thought about it was an ability to variabilize your cost structure.

• 35:03Aswath Damodaran?

  Exactly. They can scale down, but they're called as a scaling effect. Some companies can scale down to essentially go almost, it's like one of those superheroes, right? You go, we can get really small or really big quickly. And the scaling effect, I think, is something I would look for in companies because some, the older legacy companies, that's a problem. Their models are not designed for scaling down quickly. And in fact, Tesla might have that advantage over GM or Ford, which they're not taking advantage of now is they should be able to scale down quickly. Because they want, they've got only two big plants, the Shanghai plant and the Fremont plant. So it's not like they have 50 plants around the world and all these different mechanisms.

• 35:46Aswath Damodaran?

  I mean, they should be able to scale down and scale up faster than their competition. But they just don't seem to be using.

• 35:53Scott Galloway?

  So construct a portfolio for me and I'll give you a scenario. Let's assume that your table stakes are that you have to be fairly certain that between your job and cash at hand, that you can go for 12 to 24 months. So you have that kind of short to slash medium term liquidity. Let's assume that's table stakes. And that might mean you're just not in a position to be thinking about buying anything. That's the first thing you gotta, you gotta take care of yourself and your own. But let's assume you're 25 and you have $10,000. Talk to me about putting your toes back in the water for a 25 and a 45 year old. And what that portfolio might look like and when would you begin? What signs would you look for about when to re-enter the market?

• 36:37Aswath Damodaran?

  I think the signs have to be personal. I think, as I said, you know, if you're looking for market signs, you're going to be waiting a long time because I think this market, you're going to get waves of people get comfortable at different points in time. Now, I tell people, you know, when you wake, when you wake up in the morning, if you're not watching the index insistently through the rest of the day, that's a healthy sign. That's a sign that you're kind of disassociating from the day-to-day panic. If you're not thinking about personal safety for the next hour, then I think you're starting to get to a point where you can start thinking about investment safety. If I were constructing a portfolio, I'd split it half and half between stocks that have been relatively insulated from this crisis,

• 37:18Aswath Damodaran?

  the big tech stocks. I would say we have never been in Facebook, Alphabet, Netflix, Google. I mean, this is perhaps the time to start thinking about adding those. I also think that, you know, I would stay away from the Zooms of the world. Not because I don't think Zoom is a great technology, but I think it's been pushed up so much. There are so few places to go that I think people are flocking into these individual stocks. I'd pick Cisco over Zoom, to be quite honest, because Cisco has done a terrible job pushing WebEx as an alternative to Zoom. They've let Zoom kind of eat the ground from under them, but I think that I would pick Cisco over Zoom. But I would also look at the debris. I would look at adding an ExxonMobil to my portfolio.

• 38:02Aswath Damodaran?

  I know oil is so beaten up, but ExxonMobil is going nowhere. We still will have the need for oil when we come out of this, and twenty-eight-dollar oil prices are just not steady state. I mean, there are, only Aramco can make money at twenty-eight dollars a barrel. You cannot have, and Aramco is not going to produce enough oil for everybody in the world. So I would, no, I would look at an ExxonMobil partly because it's, it's safe. It has no debt, it has huge amounts of cash. You might even be able to collect a dividend because of the cash you keep paying dividends for the next two years, even if oil prices stay at twenty-eight dollars a barrel. I would look at the travel sector. I would look at, if you're looking at airlines,

• 38:43Aswath Damodaran?

  I would say, no, I would pick a Southwest over many of the other airlines, because this is an airline that's been built. You talk about scaling up and scaling down. It's very difficult to have a scaling down structure in an airline. But Southwest through its entire lifetime has built a business model that's ca- that can scale up a little faster and scale down a little faster than the rest of the competition.

• 39:05Scott Galloway?

  Hmm.

• 39:06Aswath Damodaran?

  So, you know, you look at Southwest, look at Ryanair in Europe because it has less debt than the typical European airline, partly because it's Ireland-based and the tax benefits didn't kick in as much, it didn't borrow as much. Singapore Air, you know, I, I think these are airline, you, again, you have to think about if we come out of this, and no, when we come out of this, if is today, you know, is a word I don't want to use, if when we come out of this, people are going to get back on planes, they might not fly as much, but there's still going to be a need for airlines. You know, so I think in a sense, you want to go, you know, you want to, to pick those survivors and, but I would make it half and half, because when you pick all survivors, you're betting on the virus ending and coming back to, to steady state pretty quickly.

• 39:51Aswath Damodaran?

  And that might not be a perfect assumption. It might take a while for us to come back. So I would split it half and half between safety and going for bargains and try to spread it across the world. Don't make it all US stocks or all European stocks, because I think, again, there will be regional differences in how we come out of this crisis.

• 40:12Scott Galloway?

  So Aswath, the reason your class is consistently, I think for 20 years, been the most popular class at NYU, is that you're not only seen as a domain expert, but you're a self-aware guy who has a lot of great perspective. Do you have any advice for our listeners? Our listeners tend to skew young. What, what, what words or, or thoughts would you, would you want to share with them?

• 40:37Aswath Damodaran?

  Uh, I'm gonna go biblical on here. This too shall pass. I mean, that is always my, it's always been my perspective in crisis, because when you're in the heart of a crisis, it looks like it will never end. I remember November of 2008 saying that, you know, they were, and I tell people, be okay with the fact that you will feel doubtful, that you will feel scared, it's natural. In fact, if you don't, you're probably some kind of a psychopath. I mean, this is the kind of environment. Well, you have to, you know, you should feel nervous, but again, you've got to step back and keep perspective. One of, one of the reasons I go, what's the ocean is the tides come in and the tides go out. And they've been doing this before humanity walked the earth, they will continue to do it. And you've got to think of this as the tide going out, but it'll come back in again.

• 41:22Aswath Damodaran?

  And you just have to kind of back in the hatches, do whatever you need to do to kind of stay as comfortable as you can with this environment. And then be ready when it does come back to do whatever you, you know, to take, to take advantage of the new world that you'll be in. Because this is going to change the way people behave. And there'll be new businesses that pop up, take advantage of it. And maybe you can start one of those businesses.

• 41:47Scott Galloway?

  Aswath Damodaran is a professor of finance at NYU Stern School of Business and a colleague. Aswath, appreciate your time. Stay well.

• 41:55Aswath Damodaran?

  Thank you. You too, Scott.

• 42:04Scott Galloway?

  So on the Proggy Podcast, we'll finish every week with an Algebra of Happiness segment. What is Algebra of Happiness? It's a book I wrote about a year ago or published about a year ago, based on my Friday posts, No Mercy, No Malice, that are more personal in nature and focus on relationships. It's based on the last session of every class I teach where I attempt to distill best practices and research and personal experiences around how to live a more rewarding life, down to a series of algebraic equations that help inform the kids around how do you make the nice moments in your life burn a little bit brighter? And how do you recover from the lower moments a little bit faster? Now, how did I stumble into this art of happiness of yours or the science?

• 42:48Scott Galloway?

  Two years ago, my sister, while on the phone, I speak to her almost every Sunday night, reminded me that I had less right to be pissed off than anyone else and that I was just pissed off too much. She bluntly said, why are you so angry all the time? And I do suffer from a certain, I would say mild clinical depression or mild depression, largely fueled by anger. I think it's just the way I'm hardwired. I think I got it from my dad. But happiness is not just a sensation that you can expect to show up. I think you need to develop it. It's a skill, creating behavioral. Modification, understanding inputs, understand what puts you in a good place and a bad place. And that is not to avoid down moments, but to recognize them and understand when you deserve to be down and when you don't deserve to.

• 43:31Scott Galloway?

  And oftentimes I find that my mood does not foot to my blessings. And so this has been a great personal journey, trying to figure out how to get those two more congruent with one another as I am truly blessed. So with that, with that, in this time of incredible, a mix of panic, paralysis and paranoia. What has given me real comfort is the notion that nothing is ever as good or as bad as it seems. And that is in the moment, we have a tendency to inflate our response to things. And when you talk to people at the end of their lives, what they are most upset about in terms of their behavior is that they overreacted to things. And what they have found is that life is not about what happens to you. It's more about how you react to what has happened to you and that they wish they hadn't been so hard on themselves.

• 44:17Scott Galloway?

  They wish they hadn't been as upset about what had happened, that the real damage in their life was a function of how they reacted to things as opposed to the actual event itself, or put another way, this too shall pass. I have found that getting off of texting, not listening to my friends, circulate all their panic memes and what have you has been helpful. And also to recognize that our grandparents were called to war and we have been called to basically sit on a couch and that we have this. I think about my grandfather, Norman Levine, who used to shepherd his five kids, four daughters and one son to the Wembley Tube Station that was a makeshift bomb shelter as their home had been destroyed during the Blitzkrieg by a Stuka.

• 45:01Scott Galloway?

  And they had to sleep in the subway, which would become again, a makeshift bomb shelter. They would pass out gas masks in the form of Mickey Mouse characters, such that the kids wouldn't be scared to put them on. They wear a gas mask in the shape of Donald Duck and Goofy and Mickey Mouse. And on the way. To the bomb shelter one night during an air raid, there was a panic. And my nine-year-old, I guess she would be my aunt, was run over by an army lorry, which is a truck. So I am sitting in Mexico worried about my wealth and the stock market declining, and then getting occasionally paranoid about the virus. And my grandfather's daughter was run over by a fucking truck.

• 45:43Scott Galloway?

  So this is a fraction of the adversity, a fraction of the disaster that people face before us. And there is absolutely no reason that we can't summon the dignity and the courage to face this. And a true test of anyone's mettle is how they behave under stress. And who do you want to be? Who do you want to be coming out of this? The reason we don't talk about the Spanish flu is that we are ashamed of how we behaved as a nation. And that is we panicked, we became feral, we became hoarders. We're seeing some of that now. And you don't hear about it much because it was a dark moment in our history, not because of the deaths, but because of how we responded. We were not heroic, we were cowardly. And there's an opportunity here.

• 46:26Scott Galloway?

  I think about wanting to go down to the pile after 9/11. And what did I do? I didn't do fucking anything. I think about Hurricane Katrina and thinking I should just rent a couple Winnebago's, preload some credit cards or charge cards and go down there and pass them out. And what did I do? Again, I did nothing. And not this time. And I want to encourage all of us to, at a minimum, reach out to people who we can't touch physically and check in on them. Whether it's checking in on your dad, checking in on neighbors, checking in on friends that are feeling especially stressed, or reaching out and helping people either economically or just emotionally. This is our chance to show the type of courage and heroism that we like to think we all have inside of each of us. This crisis, and the terrible thing about crises is they always happen.

• 47:11Scott Galloway?

  The wonderful thing about them is that they always end. As I mentioned, I'm in the Riviera Maya at a place, at a resort down here, doing my social distancing, which is either a very good or a very bad idea. We'll see. And I ran into Troy Aikman. Troy Aikman won four Super Bowls and also Troy and I graduated from UCLA in 1987. We are both exactly the same age. He looks like he's from a different species than me, but anyways, we are exactly the same age. He was the best athlete arguably in all of college athletics and one of the best athletes in history. I was arguably the worst athlete at UCLA or the worst varsity athlete. I was on the crew team, which was sort of where everyone ended up if you couldn't, if you got cut from every other sport. And

• 47:53Scott Galloway?

  I was by far the worst person in my boat. I am 6'2", 187 pounds. The majority of my colleagues were about 6'5", 195 pounds, much more disciplined, much stronger than me. Troy Aikman, best athlete. Scott Galloway, worst athlete. But we both ended up at the same place. We got there different ways, but it made me feel good and gave me some perspective that I was fortunate enough to be, ended up in the same place as Troy Aikman. And if you are in a position now where you are healthy, even if you catch the virus, it's likely you're going to be just fine. If you're in a position to help other people, if you are with loved ones, then you are blessed. Or put another way, you are on the same beach as Troy Aikman. We'll see you next week.

• 48:38Scott Galloway?

  Our producers are Griffin Kalberg and Drew Burrows. If you like what you heard, please follow, download, and subscribe. Thanks 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.