Scott Galloway: “We Should Have Protected People”

CHRISTIANE AMANPOUR: Now, the United States seems to be buckling up for an unrestrained coronavirus winter hitting new records like nearly every single day this month, the number of new COVID-19 cases surpassed 100,000. Scott Galloway is a best-selling author and professor of marketing at the NYU Stern School of Business. His new book “Post-Corona: From Crisis to Opportunity” takes a look at what the country will look like after the pandemic from jobs to health care. And here is talking to our Hari Sreenivasan about it.

HARI SREENIVASAN: Christiane, Thanks. Scott Galloway, welcome back. We’ve got now more than a quarter of a million people who have died. That number is likely to go up significantly. This book, “Post-Corona,” that you’ve written, it’s not just trying to find, I guess, the silver lining because it’s hard to ever come up with anything that counts or counteracts that. But this pandemic, as you point out, has been both revelatory and also an accelerant in showing us both our weaknesses but also some of the opportunities to fix those weaknesses.

SCOTT GALLOWAY, AUTHOR, “POST CORONA: FROM CRISIS TO OPPORTUNITY”: Yes. So, first off, Hari, thanks for having me. Yes. There is a silver lining here, whether it’s hopefully we’re maturing a generation of young people that recognize the cooperation across border, the empathy that the economy was working really well for many people but some of the morbidities of our nation, optimism verging on arrogance, lack of respect for our institutions, for our government institutions that were woefully underfunded and somewhat vulnerable once this pandemic hit. But, yes, moving forward, there’s tremendous opportunity, both to bring down the costs of education, bring down the costs of health care, to spend more time with our families, to have less emissions had. So, a crisis is a terrible thing to waive. Let’s hope we don’t waste this one.

SREENIVASAN: Yes. You’ve pointed out that this is an accelerant for huge shifts when it comes to health care, when it comes to higher education, to e-commerce. We’ve spoken at length about what you think about higher ed. So, why don’t you start with health care. What are the opportunities here?

GALLOWAY: I think the greatest shift in stakeholder value is about to occur in business history, and that is 17 percent of the U.S. GDP is health care, it’s arguably the largest business in the world clocking it at, you know, $3 trillion to $4 trillion a year, but the outcomes have been decreasing. Life expectancy has been going down, infant mortality is stuck at a certain level, customer satisfaction is pretty anemic. And even if you think about the medical profession as retail, it’s probably the second worst retail in America behind gas stations. Imagine going into a Sephora and asking to see sun block and somebody takes a plexiglass slide and says, fill out this paperwork, we’ll be with you in 30 minutes. It’s just a fairly uninspiring experience. And the exciting thing is 99 percent of the people who have contracted, endured and developed antibodies for novel coronavirus did it without entering a doctor’s office much less a hospital. This morning I got a COVID-19 test in my kitchen. So, just as e-commerce took the store to your living room, just as movie theaters are moving from the — moving to your living room, could doctors’ offices and hospitals and diagnostics move to your house? It might give us an opportunity to not only reduce costs but take us off our heels as a nation around being reactive or defensive to health care and get on our toes and talk more about primary care, make people more comfortable with a more fluid relationship with a health care provider. We saw Amazon announced that they’re going to have 24/7 pharmacists available and two-hour delivery. So, you could see an explosion in innovation around health care. I think that’s arguably the most exciting place in our economy post-corona because regulations have come crashing down and consumers are now comfortable receiving health care over their hand-held in their home.

SREENIVASAN: We saw a big boom in e-commerce, I mean, what happened in the pandemic was almost — it took years for that kind of growth to happen in the cycle of e-commerce but, you know, what was also interesting is that it laid bare that this was a boon for those who could afford it. I mean, it’s kind of like a blue-collar pandemic and a white-collar pandemic. A white- collar pandemic, meaning, yes, everything was great. I can get everything from Instacart and Amazon. But if you’re an essential worker, that doesn’t really apply to you on the same day.

GALLOWAY: You’re exactly right. So, look, if you’re in the top 10 percent of income earners, there’s no change in unemployment. It means, you’re no less vulnerable than you were professionally before the pandemic. There’s a 60 percent likelihood you can work from home, meaning, spend more time with your family, you maybe got 10 hours back a week. If you make less than 40,000 a year, 40 percent of those people have lost their job and less than 10 percent can work from home. So, you don’t like to say this out loud, but if you’re in the top 10 percent and you’re blessed with good health, you’re most likely spending more time with Netflix, your kids and less time commuting. And by the way, your stocks are probably up. And I would argue that a lot of stimulus, unfortunately, hasn’t been about arresting the pandemic, it hasn’t been about helping the neediest, it’s been about flattening the curve for rich people. The savings rate in America have never been higher. The NASDAQ has never been higher. There are more — if you do a Google search for COVID and markets, you’ll find more articles than if you put COVID and mortality. It’s as if as a nation our priorities are reflected in our spend and our priority seems to be that a velocity of death, which is unprecedented. And more people are dying every day from this than every crisis in history and that’s meaningful. What would be profoundly tragic is that the NASDAQ declines or at least that’s what our spending seems to indicate. We seem to want to save restaurants but not keep schools open. We seem to want to ensure that the markets are washed in liquidity and people are wanting stimulus, but we aren’t protecting people. We’ve seen infection rates rising. We’re seeing our state health officials wanting for PPE equipment. It does definitely seem as if we have decided that corporations are people and they are the ones that we have to save.

SREENIVASAN: How is there and why is there such a disconnect between Wall Street and how the economic realities are being felt on main street today?

GALLOWAY: I think there’s a couple things. I think as a nation, we suffer from an idolatry of innovators and we personify company and believe that it all starts with the shareholder. The shareholder class is the premiere class and as long as the economy is strong, everything will fall into place. And we measure the economy’s health by these dangerous industries called the NASDAQ where 90 percent of stocks are run by the top 10 percent. The NASDAQ and the DAL aren’t indicators on the health of our economy, they are a proxy for how well the wealthy are doing, and spoiler alert, they are killing. Also, through a lack of DOJ and FTC action, we end up with private power that has now overrun government. There are more full-time lobbyists from Amazon living in Washington, D.C. than there are sitting U.S. senators. There are more people manicuring Sheryl Sandberg and Mark Zuckerberg’s image in the communications department of Facebook than there are journalists at “The Washington Post.” So, we now have a situation where if you look across the markets, the S&P 500, the companies, the 50 biggest 50 companies are up for the year, the companies in middle are down high single digits and the smallest 50 companies in the S&P 500 are down double digits. We have decided that companies are either big tech monopolies or too big to fail. That is our priority. And the wealthiest cohort in America, small business owners, have received one of the largest bailouts. And there will be very well publicized examples of the owner of a small cupcake bakery that made it to the other end. But mostly what PPP has done is do two things, not given bridges to small business but given them peers or, in fact, they’re not — they’re still going to go out of business, we just kick the can down the road because this economy is reshaping. It’s coming back differently. And, two, we flattened the curve for rich people. Small business owners are millionaires typically, and there was no reason they needed a bailout. The big mistake here looking back will be we should have protected people not companies. We should have put that money in the hands of people and then let them decide what businesses survived and which perish. Capitalism and rough individualism or rugged individualism on the way up and cronyism and bailouts on the way down. It’s just cronyism. It doesn’t help an economy, and money is nothing but the transfer of time and work, and all we’ve decided is that we want our kids and our grandkids to spend less time with their loved ones such that wealthy people now can stay wealthy.

SREENIVASAN: You wrote a book, the first time that we spoke, was about “The Four,” and that is Google, Apple, Facebook and Amazon, and you spent a good chunk of this book updating. One of the key finding is that the pandemic has been exceptional for them.

GALLOWAY: Yes. So, if you owned $100 worth of Amazon, Apple, Facebook and Google on January 1, post-pandemic or post — now, we’re in the midst of this pandemic, I would argue we’re kind of at the median probably or the halfway point, you’re up 47 percent. And so, if Tesla, the ultimate story stock in March of this year, sitting here in March, Tesla was the second most valuable automobile company in the world. Sitting here today, it’s not only the most valuable company in the world, it’s worth more than numbers two, three and four combined. So, the market — if you think of the market as an organism that absorbs millions of data points and spits back a verdict, the market is saying it loves unregulated monopolies and these are fantastic companies, but let’s be honest, they’re monopolies and they’re able to extract rents like other companies can and also companies that are too big to fail. You have airlines that have reinvested 93 percent of their free cash flow back into stock buy backs, which chooses the equity-based compensation of their CEOs. And then on the way down, they wrap themselves an American flag and say, we’re all in this together, and look for bail outs. So, the big four, Amazon, Apple, Facebook and Google have only come out of this stronger. There were 60 cents on the digiting marketing dollar went to Facebook and Google pre-pandemic coming out of this, it will be 80 cents because there’s a calling of the herd right now in business. And the biggest elephants will come out of this with more foliage to feed off of across fewer elephants. So, we’ve had a very scary trend towards more and more consolidation of power across fewer and fewer companies. It’s bad for the economy because typically the companies that generate two-thirds of our jobs are small and medium-sized companies. There are half as many companies being formed today as there were during the Carter administration. So, the concentration of power, the tyrannical march of big tech taking share from everybody else continues unabated.

SREENIVASAN: Do you think that Congress and regulators will be able to come in and break these companies up whether it’s through antitrust or other means? I mean, because it’s almost like they are doing them a favor because companies often spend millions of dollars for consultants to figure out how to break out if Congress was able to — or if the FTC was able to do this?

GALLOWAY: I hope so. I believe the most oxygenating thing we can do over the medium and the long-term. Obviously, in the short-term, it’s massive stimulus. We’ve had that. But the most oxygenating thing we could do long- term for the economy would be to massively increase the funding to the DOJ and FTC and have them restore their proud legacy of coming to a company when it becomes so dominant that it can perform jedi mind tricks and begin killing other companies by just announcing it’s going into that business. Look what happened when Amazon announced they were getting into home delivery prescriptions with (INAUDIBLE), you saw retail pharmacies and pharmaceutical firms shed tens of billions of dollars in market capitalization. I think we need to go into these companies not only across big tech but big pharma and big AG and break them up and restore and oxygenate the marketplace. If we go back to the At&T break-up, all seven companies were more valuable than the original one. So, you have more jobs, more acquisitions, more funding, broader tax base. Everybody wins, typically, in break-ups except for one stakeholder and that’s the CEO. And unfortunately, with these dual class shareholder companies and people that love sitting on the throne of all of Westeros instead of one of the seven realms, they haven’t been broken up. So, I hope more than anything the Biden/Harris administration has more of a backbone, funds the FTC and DOJ and we oxygenate our economy with a bunch of fantastic firms that get split up into even more robust, more scrappy, you know, smaller firms only worth a quarter of a trillion dollars each.

SREENIVASAN: Just to be clear, you’re saying this as a fan of capitalism, not someone who is for excessive government overreach?

GALLOWAY: I’m a full-throated capitalist. I don’t like this weird form of socialism we’re in now I would describe as cronyism. Part of capitalism is that you want to oxygenate the marketplace. When we look back on break-ups, typically not only has everyone done better but companies themselves are worth a lot more than the original company. So, I think this is an exercise in capitalism that we have to have a robust ecosystem. We have to have opportunities for other companies to get a seat at table. And also, we find that innovation is always buried inside these companies. When we broke up AT&T, we found out that cell, data, wireless, optics were all lying dormant in Bell Labs. So, yes, this is the capitalist handbook. Break companies up when they become so powerful that they are performing fantasied on small companies and prematurely euthanizing big companies, which tend to be great employers and good tax payers. We don’t break them up because they are bad people, we don’t break them up because we’re angry, we break them up because we are capitalists. This is absolutely a capitalist thing to do.

SREENIVASAN: One of the things that is interesting in the book, you point out basically certain social trends that are occurring because of the pandemic that are unintended consequences. One of them was that work from home actually exacerbates certain inequalities that have already existent, and specifically for women in the workforce.

GALLOWAY: Yes. So, I mean, there’s a few things that are going to happen. One, you have work from home is seen as — it’s mostly a good thing. It will have a lot of positive benefits. But another thing that will happen is that folks that slowly but surely — if they can move your job to Denver, they can move it to Bangalore. So, sort of be careful what you ask for and that is, I think you’re going to see continued pressure on the working class as we get better and better at creating outsourcing jobs. I think that the ability, if you will, for people to be at headquarters, the people who can afford to be at headquarters, the people who are proximity is a key component of relationships. And because women are still, typically, carry a larger burden around the household and child rearing, if, in fact, they spend more time in the house, which is in many ways a good thing, but don’t have that quality time, that proximity to power, if you will, at HQ, I wonder if we’ll end up fomenting the same trends that we have now, where less than, you know, whatever it is, 2 percent of the S&P 500 CEOs are women. In other words, are we making it — are we creating an infrastructure where basically HQ is just going to be filled with white guys? And as a result — I mean, there’s just no getting around it. Proximity to headquarters puts you on a different path in terms of advancement within the organization. So, I think there will be some positives and some negatives that we’ll have to adjust for and recognize that people who serve or have the money or don’t have the kids or have the ability to live close to work will have to adjust for the fact that just naturally as a tribal species that likes affinity and proximity, we’ll have to adjust for people who aren’t capable of being in headquarters every day.

SREENIVASAN: So, what’s your advice to the incoming Biden administration? What should they do whether it comes to stimulus, whether it comes to trying to increase entrepreneurship or trying to even out some of these inequalities?

GALLOWAY: I think in general, any additional stimulus has to be focused on protecting people, and that is, if we had taken $2 trillion or $3 trillion in stimulus and divided it among the most vulnerable households, I mean, we don’t like to say this, Hari, because I think both of you are probably in this cohort. But if you’re in the top 10 percent, you’re living your best life. But the other 90 percent, the key is how do we protect them. And I think the stimulus should take the most vulnerable, say the lower third households, that’s 30 million households, at $3 trillion, that’s $100,000 had a household. So, say it’s even a trillion, that’s $30,000 a household, and help them make better decisions such that they don’t have to pile their diabetes medication and a bunch of diet cokes into an igloo and head out and turn on their app and run a pay day loan against their car called Uber and put themselves in harm’s way and not be home for their kid to do remote learning. We seem to be obsessed with keeping restaurants open. You know what, probably the biggest long-term scarring here outside of the health issues, we’re losing a generation of kids. Pre-pandemic low-income kids largely tracked with middle- and higher-income kids in public schools on math. And since the pandemic hit, they have fallen off the map. And regardless of the moral corruption there, we’re going to lose half our scientists, half our military leaders, half our civic, half our social leaders when 50 percent of kids don’t have the skills to enter college. So, we’re losing an entire generation of leaders and scientists because we have decided that we’re — it’s more important to keep businesses open than keep our schools open. So, I think it’s really if it comes down to one theme it’s protect people, not jobs. And also, that capitalism doesn’t work. It’s not an organic state unless it rests on a groundswell, a tied pool of empathy.

SREENIVASAN: The book is called “Post Corona.” Scott Galloway, thank you so much.

GALLOWAY: Thing you, Hari.