Office Hour’s Best of Business

Today, we’re kicking off a special three-part series, featuring some of our favorite Office Hours moments: Best of Business, Best of Career, and Best of Parenting. In today’s episode, we start with Best of Business, where Scott answers your questions surrounding the brand era, big tech companies and their ethical responsibility, and when a founder CEO should step down. Music: https://www.davidcuttermusic.com / @dcuttermusic Subscribe to No Mercy / No Malice Buy "The Algebra of Wealth," out now. Follow the podcast across socials @profgpod: Instagram Threads X Reddit 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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• 0:48Scott Galloway?

  Welcome to the Prof G Pod's Office Hours. Today, we're kicking off a special three-part series. Uno, dos, tres series. That's right. Featuring some of our favorite Office Hours moments, best of business, best of career, and best of parenting. Not good business, or good career, or good parenting, but the best of. In today's episode, we start with best of business, where we'll answer your questions surrounding the brand era, big tech companies, and their ethical responsibility, and when a founder/CEO should step down. So with that, first question.

• 1:17Speaker 01

  Hi Scott, Matt here, and a big fan of your podcast. I've followed you for a while, and one of your enduring takes has been that advertising and building brand through paid media is a dying business strategy. Outside of some companies seeing hypergrowth without big media budgets, mainly in the tech sector, most major firms continue to increase budgets. And those tech companies are now some of the biggest advertisers in the world. Even Tesla, famously averse to advertising, is now paying for media to try to differentiate versus the growing EV market. As someone who also follows closely, there's been a golden age of advertising effectiveness research from professors like Byron Sharp showing the value of paid media. I'd be curious how much of your successful Prof G media business is supported by advertising. I work in this space, so I'm obviously biased,

• 2:02Speaker 01

  but curious if you've amended any of your opinions here. Thank you for all you do, and go Gunners.

• 2:07Scott Galloway?

  Go Gunners, I love that. Look, I make these provocative statements that if you're advertising, it means your product sucks. And I've also said, and this is, I think, more true, if you constantly are having Dinner with strangers, it means you're selling an undifferentiated product. So if you're in the services business and your job is to have these full relationships with people, it means you're all selling the same damn widget and you're dependent upon relationships. One of the things I loved about, I started a brand strategy firm. And basically, we were good at what we did, but there were a lot of good firms out there, interbrand, doing brand strategy. And the way we got business is I would develop sort of these proxy father-son relationships with the CMO or the CEO. And I found it just fucking exhausting. They were really interesting, wonderful men, and they were all men.

• 2:50Scott Galloway?

  This was in the nineties, but I'm an introvert and I just found it difficult. I vacationed with clients. I mean, it was just so much, but anyways, I do think advertising is sort of a tell for a company that doesn't have a truly differentiated product. And I would push back that the tech companies, yeah, they advertise a lot, but as a percentage of their top line budget, they don't. And, you know, Netflix uses, I, I met with Ted Sarandos, the CEO of Netflix. And I said, why wouldn't you start a TikTok competitor? I still, by the way, I think they should partner with an AI firm and buy a hopefully divested TikTok. But he said, no, we use TikTok as free advertising. It's amazing. We give them a certain number of clips and it's fantastic marketing for us. And they don't spend a lot of money, I don't think, on marketing.

• 3:33Scott Galloway?

  And I think that companies that, the companies that have had the most shareholder value over the last 10, 20 years have a few things in common. One, they're typically asset light. Why build a factory when you can just design the chip, Nvidia? Why invest in expensive real estate when you can just create a platform and take fees, Airbnb? Why buy and maintain cars when you can just create software, a thick layer of software on top of them? That's Uber. They have, tend to have recurring revenue streams that are more predictable, like a, a, you know, a software company. But also I have found they tend to be less reliant on advertising. And the thing about advertising, one of the reasons Google killed, largely killed the traditional ad business, and I think it has. Google loses or gains the value of IPG, WPP.

• 4:19Scott Galloway?

  Publacy and Omnicom every day. Those guys used to be the big swinging dicks and now they basically work and they beg for the crumbs off of the Google and Meta cookie, if you will, is that those companies have difficult times finding attribution or building it. Basically, all the research that Condonast or IPG does all leads to one place. You should spend more money on our advertising, right? And it's kind of bullshit and it's kind of a model where the lack of attribution was both the sin and the opportunity in the sense that brand building is difficult to reverse engineer to specific sales. So there's been a dearth of it, which probably means it's going to offer higher ROI. And direct response advertising, specifically Meta and Alphabet with their unbelievable targeting.

• 5:03Scott Galloway?

  I mean, what, you only have 70% of your budget in digital marketing? It should probably be more. I mean, every year, these companies just take more and more share of an industry. Advertising is a weird industry. It's almost like 1.5% of GDP. It doesn't go below that. It doesn't go above it. So this is not a growth industry, but you have some companies that are growing 20 and 25% a year. Everyone from Meta and Alphabet to TikTok, which means they are sucking the oxygen out of the room for the other folks. Does that mean traditional based advertising and brand building is going to go away? No, but it's going to be a shitty place to work or invest. If you're absolutely in love with it, or you're scaling and have senior level sponsorship, or you're rounding third, then by all means, stay there. But if you're younger, don't love it.

• 5:46Scott Galloway?

  I just think it's going to get more and more difficult for the traditional advertiser slash brand building complex. And this is from someone who made a really good living preaching about brand. I think things have generally changed. I think we've moved from a brand era, and I don't want to call it innovation era, to a supply chain era. Most of the big, big advances in shareholder value, in addition to being asset light, recurring revenue, lack of advertising, have been supply chain. So, you know, my brother, I just, and I'm a professor of brand strategy. I think the era of brand, the sun has passed midday and Don Draper has been drawn and quartered. Thanks for the question.

• 6:25Speaker 02

  Question number two. Hey Scott, this is Sean from Seattle. Love the podcast. Thank you so much for taking my question. I recently fielded offers from Amazon and Meta and got into a debate with friends around which was less ethically problematic. Given the contentious business practices and societal implications associated with both companies, do you truly believe there is a distinction in choosing one over the other for ethical reasons? Can someone realistically better at eye choosing to work at one big tech company over another? We'd love to hear your insight.

• 6:56Scott Galloway?

  Sean, this is the mother of all good problems. And so let me be clear, both firms from an employee perspective are great firms. I would say somewhere, probably a third of my kids, when I say my kids, my students, would go to work for big tech. And at one point, 20% were going to Amazon. And the people I know that went to Amazon described it as intense, unforgiving, and very rewarding. Meta has a fantastic reputation in terms of how they treat their employees. They pay them really well, a lot of investments in human capital. Around the ethics, I think your first priority is to develop economic security for you and your family. And I think big tech is good for the world. I think if

• 7:39Scott Galloway?

  we had a button we could press and make big tech vanish, we would not push that button. We are net gainers from big tech. The problem is with the word net. And that is we're net gainers from pesticides, we're net gainers from fossil fuels, I still believe, but we choose to have emission standards and an EPA. I would argue at this point, at this point, Meta is probably a net negative. Whether it's teen suicide, self harm, self cutting among girls, election misinformation, I mean, these guys really are mendacious fucks. And Amazon might be mendacious fucks, but the implications of that are monopoly abuse and small retailers go out of business and bigger retailers who are great employers might have gone out of business faster than they otherwise would have. But they're not

• 8:23Scott Galloway?

  spreading conspiracy theory. They're not, they're not spreading anti-vax information. And some of it might not be that they're, the people are any less or more ethical. It's that they're just in different businesses. So if you really, if you really got to the point where it was, came down to who was less bad or more ethical, I would say you'd probably choose Amazon just by virtue of the fact that they're in the business. Of e-commerce and cloud versus media. Having said that, I think most likely you should probably make the decision based on what's best for you personally. Do you want to live in Seattle? Do you want to live in the Bay Area? Where do you think you'll have senior level sponsorship? Where do you have a better rapport or relationship?

• 9:06Scott Galloway?

  Do you believe currently or that you'll develop with who you'll be reporting into? What does the career path look like at each organization? I find with decisions like this, you don't want to listen to a podcast or that is yours truly, you want to build a kitchen cabinet of people and say, okay, these are the offers. This is the opportunity. This is the division. You know, what, what do you think? And then at the end of the day, you'll probably ignore all those decisions and just go with your gut and make your original decision. So these are personal decisions. I would say the quote unquote ethical stuff, if you will, is a tiebreaker. Unless it's something that really weighs on you. Corporate America, these are platforms for making profits and folks in the media and

• 9:49Scott Galloway?

  people such as myself, I think play a role in holding them accountable and trying to urge our elected officials to put in place the regulations such that there's guardrails around these companies. But at the end of the day, they are going to do whatever increases their profits, full stop. That's just what they do. But anyways, like I said, let me end where I began. This is a great problem. Congratulations to you. Offers from Amazon and Meta. Jesus, Jesus, man. Good luck to you. That's fantastic. We have one quick break before our final question. Stay with us.

• 10:27Scott Galloway?

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

• 11:12Scott Galloway?

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

• 11:30Scott Galloway?

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• 12:15Scott Galloway?

  and other administrative tasks, so you can spend less time managing logistics and more time focused on what's next. Visit upwork.com/profg right now and post your job for free. That's upwork.com/profg to connect with top talent ready to help your business grow. That's U.P.W.O.R.K. com/profg. Upwork.com/profg.

• 12:42Scott Galloway?

  Welcome back. Question number three.

• 12:45Speaker 03

  Hi Scott. My name is Melissa in Chapel Hill, North Carolina. I'm a four-time CMO and B2B SaaS with 30 years of experience and many startups. I saw your recent post about the probability a startup will be successful by the number of attempts. I've been part of startups that have been very successful and some that have been total flops. One thing I've noticed that is critical to success is the founder-CEO. Many founder-CEOs are not always strong business operators. They can be great ideators and innovators, but many don't seem self-aware of their shortcomings as operators. What are

• 13:25Speaker 03

  your thoughts about when a founder-CEO needs to step aside to bring in an experienced team of business operators to drive the company's next level of growth? Thank you for considering my question. Love you and love the show.

• 13:40Scott Galloway?

  Well, Melissa from North Carolina, I love you. That's a really nice thing to say. This is a tough one because you're exactly right. Entrepreneurs have role models, as they should, and they look at Steve Jobs and Bill Gates, who are unicorns. They're a rare species, and that is if you think of a company as an idea as letter A, and then the startup getting the initial seed funding, hiring and firing a group of people, like hand-to-hand combat for the first 20, 30 people, and that's what you have to do with the first 20 or 30 people, and working around the clock and sharing a vision and being just sort of irrationally passionate and a little bit crazy, if you will. That's kind of A to D or E. And then the company leans in or discovers something that is differentiated

• 14:21Scott Galloway?

  and is a real product that's generating more gross income or has gross, positive gross margins. You don't need to be profitable, but when you sell a widget for a buck, it should be at least on a marginal basis, and that is the cost to deliver that incremental consulting engagement or that incremental piece of software, that incremental, whatever it is, widget, that you have positive gross margins. You say, okay, if I hire enough people here, I can start to scale and I can build an enterprise and maintain some culture and show that this is more than just a practice. So, the ones that succeed oftentimes never get to scale, and that is their practice. Typically, a small group of people in the services industry are great at PR, are great investment banking, or are great at a specific product or service.

• 15:06Scott Galloway?

  And the people who started the company are selfish and think that they're the real innovators and they don't want to share in the upside of people to scale the company. And so whenever I meet with people that have a great company, 20, 30, 50 people and they're wondering why they can't scale, I'm like, it's usually because you are too fucking selfish and don't realize that people want to have a nice life like you and you need to give away large chunks of the company. If you want people to act like owners, which is the key early in a company, you have to make them owners. Anyways, back to your question. Most CEOs think they're Steve Jobs or Bill Gates and they go A to Z. And key part of self-actualization and also success is recognizing, as I did fairly early, quite frankly, as a CEO, that about the time we get a CFO, about the time we have someone

• 15:49Scott Galloway?

  in HR, it is time for me to step down as CEO and become kind of the thought leader, the person that is responsible for driving new business. I really enjoy that. Play a big role in strategy, but somebody needs to be Mr. or Mrs. Inside and basically run the company. And I was always a fan of giving them the CEO title. Why? As a founder, my objective was always to build shareholder value and get economic security for me and my family, which is Latin for get rich. And titles are inexpensive, so I was always up for giving away the CEO title. I've never been the CEO of a company when I've left. Typically, within three to five years, I find someone that is outstanding, that I want to retain, and I give them 5, 7, 10, 15% of the company and say, congratulations, you're now the CEO.

• 16:34Scott Galloway?

  And this is kind of what I'm responsible for and this is what you're responsible for. A lot of founders never come to that conclusion. And the question is, how do you nudge them to that realization? That's a tough one. A board? I don't, I don't know how you, how you tell someone to be more self-actualized and that they have limits on their capabilities and we'd all be better off if you brought in someone to run this organization that isn't you. It's a difficult one. Typically, typically, that's the kind of conversation a board should have with the founder CEO that used to be very common in the 90s. Essentially, there are absolutely no founders that are good enough to be CEOs. So what happened was a guy like Steve Jobs was immediately assumed to be crazy.

• 17:15Scott Galloway?

  We need to bring in the gray haired old guy from Pepsi, John Sculley, and let him or her run it. Things have changed so dramatically. The pendulum has swung so far to the other side because of the return of Steve Jobs and people like Marc Benioff and Bill Gates that are able to build a company from A to Z and be outstanding CEOs. You should assume if you're the CEO, you are not Bill Gates. You should assume you are not Steve Jobs. I apologize, I don't have a direct answer for how to convince possibly your CEO to step down. But the fact you're thinking that way means you're going to be, or you're probably successful and can, and can kind of gauge whether or not this company has the, the right stuff to get to the next level. Again, CEOs out there, you know, search your feelings. Are you really the person to get to the letter M?

• 18:00Scott Galloway?

  Cash in, cash in, recognize how awesome you are. And if you have the ability to bring in somebody who will be outstanding and compliment your skills, by all means, hit that bit. Thanks for the question.

• 18:11Scott Galloway?

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

• 18:30Speaker 04

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