Scott Galloway: Unfiltered lessons for business and life

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1:17Everybody interviewed everybody and we liked each other and we had fun. And, you know, couldn't pull this off now, but we used to all take company trips. No spouses allowed. Consumption of alcohol encouraged. It's a pretty good bet you recognize that voice. That's business professor, best-selling author, and prolific podcaster Scott Galloway. He's reminiscing about how he built company culture early in his career. I had read this study when I was younger saying the number one source of retention in any company is if the person has a friend. if they have friends at the company, if they get that dopa hit when they walk off the elevator and they see friends.

1:58Hey, buddy. Morning. Hey, what's up? Howdy. This week on Masters of Scale, we've asked Scott Galloway to answer your questions. Think of him as the slightly acerbic, sharp-witted friend at the office who's not shy about giving advice. It's a bit of a different episode for us. A great hang with Scott's typically unfiltered takes. We think you're going to enjoy this one.

2:53This is Masters of Scale.

3:19most of them inspired by questions from you. We're getting into issues like when CEOs should speak out on politics, AI disruption, and building company culture. First, we wanted to hear about Scott's approach to scale in his own life and work. Scott, welcome to Masters of Scale. Oh, thanks for having me, John. You've done an extraordinary job scaling the distribution of your ideas, your worldview. what has worked best for you on that front? And what can our audience take from that as they try to extend the reach and influence that they have? People consistently come up to me and say, I just think the amount of content you push out is remarkable.

4:00You must work eight hours a week. I'm fundamentally a lazy person. I work 30 to 40 hours a week. I'm really outstanding at doing nothing. What I'm pretty good at. So my core competence is storytelling. My superpower though is attracting and retaining talented people. I have 14 people at Prop 2 Media. So if you want to scale your content, you got to focus on what part of this content am I really good at? And hopefully you have the resources to hire talented people to kind of build it out. That's the most obvious thing. And some people don't have those resources, I'm blessed. But if you find people who are good, you want to hold onto them, give them a vested interest and ownership in your success.

4:36From a qualitative standpoint, and then I'll talk about channels, I'm in a very blessed position. And that is, I have people who love me unconditionally. and I have economic security, which gives me license to say pretty much whatever the f*** I want. Not that we have a problem with Scott's F-bombs, but we don't quite have the same license here. We have to bleep those F-bombs mostly to avoid being blocked by podcasting apps in certain parts of the world. Anyway, on with Scott. Your willingness to be kind of unfiltered, I think, over the long term draws people in. So when I write my newsletter, I have a newsletter that goes out to half a million people every Friday.

5:12I write as if only my sons are going to read it. I want them to understand the world and I want them to understand me a little bit better in an entirely unfiltered, raw way. And I'm very vulnerable. I talk about things like, you know, I talk about sex. I talk about my strained relationship with my father. I'm a 59-year-old man that hasn't gone over the death of his mother 20 years ago. I talk about stuff in a very kind of open, raw way. And from a marketing standpoint, the space I'm trying to fill or the opportunity I saw is that straight white men don't talk about their emotions. and people usually in my business are so busy kissing the ass of somebody who they want to invest in their next round or whatever, they don't say this company's stupid and the CEO has done a terrible job.

5:53So if you can be really kind of, I hate the word authentic, but if you can be a bit raw and unfiltered, I'm profane and vulgar. It turns off people, it turns off advertising, but I think people appreciate it and it's authentic. I'm generally a profane and vulgar person. It's not an act. So I would say try and be, if you're in a position of having some economic security, and most young people don't. But if you do, and people who love you unconditionally, you have an obligation to speak in an unfiltered manner. And then in terms of channel strategy, I always said, how do I get in front of the emerging medium?

6:23Trying to be as unafraid around content as possible. I think that really resonates with people in a world where they feel as if media and content is so starched and so biased. And then I personally am trying to occupy this space of men my age who aren't really open or don't really talk a lot about their failures or their successes or their joys or their upsets in a really honest way. Yeah. And thank you for doing that. I mean, there's precious little of that being role modeled by business leaders. On the political side of it, to the extent there ever was neutral, and I'd argue there never was neutral, there's certainly no more neutral.

7:00And we know historically in countries that have faced threats to their democracy, business leaders are the last bulwark. They're the last line of defense. And yet there remains this extraordinary fear about speaking out. Go back to Michael Jordan, Republicans buy sneakers too. What do you say to business leaders who are struggling with when to take that public position or even internally with their team when to say something about an issue that is going to inflame passions on one side or the other, if not both? so i've been on the board of seven public companies i think 17 or 18 private companies and generally speaking i tell them not to and that is for the most part like if you're ben and jerry's or you know hobby lobby or whatever and part of your identity as a political position fine but for the most part i think the american corporation is meant to be a platform to help people garner economic security for them and their families and i feel like the tech sector got a little out over its skis, and that is CEO started virtue signaling and trying to appeal to their younger employees by emoting and articulating these fairly progressive values that sometimes are disingenuous.

8:08And that is that when really push came to shove, they weren't just honest. I like a CEO who says, I'm here to make money and create shareholder value that you'll share in, and we're going to be good citizens, we're going to be ethical people, we're going to be respectful of one another, but we don't have to take a political stand on everything. And I don't need to weigh in on George Floyd as the CEO of a company just because it happened. And I like kind of the wrap of trying to, unless it's part of your identity, stay out of it. And at the same time, I think government and citizens make the mistake of believing that we've personified companies.

8:42Companies are for profit. They are so good at making money. U.S. corporations make more money in a year than, you know, whatever, 150 to 190 nations in the world make in a decade. they're so good at making money they shouldn't be trusted to do anything else and unfortunately they've done a great job of personifying themselves and we believe them and we believe that they're actually trying to connect the world you know make the world a better place no they're trying to increase the value of their shares such that the ceo can exercise his or her options and buy their second golf stream that is their entire focus and to believe anything else is just naive for 99 % of CEOs, my suggestion would be just avoid it at all costs and say, we're going to try and create economic security for you and your family, such that on weekends, whatever you want to do politically, recreational, if you want to be a DJ or you want to go to a, you know, save the whales rally, that's your business.

9:31And we respect your viewpoint, but that's not why we're here. Masters of scale focuses on the positive lens of scale on how to get there, you know, the entrepreneurial journey to make it happen. But there's a concern that we don't talk enough about when a company's influence goes beyond what's healthy for society or for even the business itself long-term. And you talk a lot about the quasi-monopolistic companies in our universe and that they're great investments. I'm curious at what point or how you think that scale is actually bad for society. That's a thoughtful question. And society is basically economies kind of go through a similar cycle.

10:12And that is there's a group of talented, hardworking, and lucky people that garner a disproportionate amount of wealth. They tend to become exceptionally influential on government and policies, and they encourage policymakers to create policies that further enrich them. Not that they don't love their country, but no, do away with the import tax on my input, whatever it is, right? Give me favorable tax status, tax corporations at the lowest rate since 1939, which is where we are in the U.S. and then income inequality skyrockets and the bottom 99 % at some point decide the fastest way to double their income is to either kill or get rid of the 1 % and we have a revolution and we start over.

10:56The same could be said for companies and that is companies scale and in this environment with kind of network effects and access to capital being such a weapon that once you get to a certain point, if you have relationships with 93 % of the global corporate workforce, you know, Microsoft, if you have 90 % of the search market, Google, if you have two-thirds share of all social media globally, Meta, can anyone catch up? And then you have so much power and so much wealth, and you have a government that, with Citizens United, can take your money. Do you just end up with companies that are sort of impossible to topple, impossible to disrupt, distinct of the product quality?

11:39And I think that happens. And the reason why we have such a proud legacy of antitrust until like the last 30 years is that there are a few breakups we look back on and think that we screwed up. When we broke up the AT &T into the Baby Bells, all seven of those companies were more valuable than the original AT &T on their own within about a decade. And things like fiber and analytics and cell and broadband were all lying fallow in Bell Labs because AT &T didn't want to disrupt itself. So yeah, these companies get so big. And the reason that antitrust has been sort of asleep for 20 or 30 years is one, because these companies have weaponized or taken advantage of the fact that money can just wash over government to any greater extent than it ever has.

12:24I think too big to fail or whatever the term you want to use, concentration of power. I think the best thing we could do for inflation would be a series of breaking up everything from big chicken and big pharma to big tech. So yeah, I think these companies get too big. And whether it's Teddy Roosevelt and trust busting, breaking up the aluminum companies, oil companies, I think we have a proud legacy of antitrust that we've sort of shelved. And I think we're paying the price for it. Well, and often these companies are getting fined and the fines are just a rounding error when you're talking about trillion dollar companies paying a billion dollar fine.

12:58So Lena Kahn has come in with a different perspective on how to approach this and has been demonized for it. although I saw this morning even Bill Gurley was praising her for how she's approaching some of the gaming of the pharmaceutical world. What's the answer? I mean, okay, so on a macro level, I think you empower Lena Kahn and Jonathan Cantor, and we need new laws that, or not new laws, but maybe apply the Brandeisian test where it's more around market channel power, and we need to start breaking in companies. And there's evidence that that's already happening because quite frankly, the worm's turn.

13:31Consumers see, you know, they hear stories about several houses on the block where their daughters are self-cutting. And they think, well, why is Instagram even allowed for a 14-year-old girl? I mean, it's impossible to opt out. I'm fairly sophisticated with technology, and I've tried to figure out parental control. Shouldn't it be the other way around? Shouldn't it be really difficult to figure out a way for Instagram to be on my 14-year-old's phone? And so I think consumers are just fed up. And so the consumer support has stiffened the backbone of regulators and legislators and lawmakers despite the fact they've had 40 hearings on child safety and social media and passed zero laws.

14:09It does feel as if we're on the precipice. The decision to break up or the decision that Google has found guilty of monopoly maintenance, I think people are getting a little bit sick of thinking that Apple is totally, I don't know, in no way complicit with this when it would be pretty easy for them to age gate all of their devices. And I think companies are starting to feel like dealing with these companies. They just feel as if, okay, they're starching all the margin out of the ecosystem here. And even in the marketplace, when you have seven companies responsible for a quarter of the market gains, it means 493 of the S &P are actually just not doing that well.

14:47So these guys are feeling it. Parents are feeling it. And what can we do about it? I think the most immediate thing is antitrust. And then I would remove section 230 for all algorithmically elevated content. I just don't understand why these companies wouldn't be held to the same standard. as old media. News Corp paid$750 million fine for circulating misinformation around Dominion voting machines. That was a dumpster fire compared to the nuclear mushroom cloud that was on Meta. They're off Scott III. So I would remove Section 230 content for all algorithmically elevated content. Additional regulation and more aggressive antitrust would probably be where I would start.

15:26We wanted to share with Scott some questions from our Masters of Scale community on a wide variety of issues. Not only is Scott game to tackle pretty much any question in any area of business or life, but we also thought lobbing a set of wild cards his way would make this more entertaining both for him and for you. You referenced the dozens of board seats you've held. Sally from our audience wanted to know, as a board member, Scott, how do you assess whether a company has a strong company culture, whether it is a healthy company culture? is it something you even are caring about and are trying to figure out and is it a forward-looking financial indicator for you when you're sitting on a board yeah but generally it's hard for the board because the board doesn't spend that much time in the company and the company everything about the company is filtered through the ceo when you've when you terminate a ceo i'm going through this right now on my boards you find out all this stuff about the ceo because all of a sudden you're forced to speak to the people below that person and generally when you deal with the CEO of a public company, you're generally dealing with the rush chairman or the rush chairwoman, and that is the most popular person in his or her fraternity or sorority.

16:35And they become very good friends with the board because the board's in charge of their compensation, and they edit and manicure kind of the messaging that the board gets. And I demand or I ask of every board member that at least two or three of his or her reports or other people in the company come in and present something because we just want to get to know these people. Generally speaking, the way a board, the board gets very few indications of culture. They can go on Glassdoor. But generally the way we evaluate culture through a shareholder lens, quite frankly, is retention. And that is you should have 8 % to 12 % turnover a year.

17:08And if you have a lot more than that, something's wrong with the culture of the compensation. We don't know how much we don't know. We don't know how in the dark we are. And it's also difficult because if you start talking to too many people in the company, it makes the CEO insecure. And you want to respect their ability to get shit done. And so it's difficult. I would say that for bigger public companies, you have more of an idea because there's more liquidity around messaging and employees bubbling up. I know more of it. I feel like I'm better at building a culture as a CEO than I am, and I've never built a big company, but than I am observing or assessing a culture from a board level.

17:46You know, boards basically are there for two things. They're there to hire and fire the guy or gal running the company. They're there also to decide if and when to sell the company. That's about it. And maybe make sure the chairman of the audit committee is smart enough to know if there's fraud. But other than that, we're just kind of heckling from the cheap seats. It's the CEO that makes most of these decisions. And so for the board to start making comments about culture, what's right and what's wrong with it, I don't know. I would say if you're really, really having issues with the culture and they bubble up to the board level, that means you should have fired the CEO about six months ago.

18:15What I try and do as a CEO when I used to do all hands, especially in small companies, I used to try and imprint values from the beginning. I used to start off everything all hands with. Hi, I'm Sky Gow. I'm the CEO of Profit Brand Strategy. We are about a passion for brand and attention to detail and camaraderie. And you know, couldn't pull this off now, but we used to all take company trips, no spouses allowed, consumption of alcohol encouraged. I mean, all this that makes HR people go crazy now, because I had read this study when I was younger saying, the number one source of retention in any company is if the person has a friend, if they have friends at the company, if they get that dopa hit when they walk off the elevator and they see friends.

18:53And so I thought, and I do that now with Prop2 Media, which is 14 people. I tell them, anytime four of you are together, you have my credit card. And I'm not exaggerating, Jeff. They've sent pictures to me from Tulum. We all got on a plane today and went to Tulum. It's like a Tuesday. And I've said this to them, any four of them together at any time, I don't care what they're doing. They've got my credit card. So I feel better about my ability to create a culture than I do assessing it from a board level. Jeff, have you served on many boards? Yeah. And I mean, I served on the board of Buddy Media, which was founded by our mutual friends, Mike and Cass Lazaro.

19:28And they did an exceptional job managing the board in part by answering the questions before they got asked. They were proactive in messaging to the board and they came up with their own metrics for managing culture. And to your point, if half of a board's job is to decide when to hire or fire a CEO to be proactively messaging things are good or, hey, things aren't great, but here's what we're doing to fix what isn't working. Yeah. The best CEOs are the ones that say, this is what I'm worried about. They signal problems. I find boards don't mind bad news, but they hate surprises. Surprises, yeah.

20:01Okay. You've had a problem with our operations in China for nine months. I mean, how long have known about this. Or what, there are 17 lawsuits all around discrimination and the chief legal counsel is now forcing you to tell us about this. I mean, so I've always said as a good CEO over communicates during bad times and under communicates in good times. And I've always tried to practice that as a CEO. I always say to people, if you don't hear from me, it means you're doing really well. When you're in my office a lot, it means something's wrong. And I think good CEOs, especially during bad times, over-communicate with the board.

20:36We have a problem here. I'm going to look into it. This is what's going on. This is my plan. This is how we're going to try and fix it here. But, you know, you should know this quarter, we're probably going to the bet in terms of earnings. I think good CEOs tend to under-promise and over-deliver and are very transparent and also willing to make mistakes. It's interesting to go to all hands and just look at the body language of everyone. I love going to all hands. I'd say, hey, I'd love to come to an all hands sometime. And I just think it's really interesting to just, you can just see the body language in the room of how people are reacting to what they're saying.

21:09But it's so important now because there's so much transparency and young people are so mobile now and they change careers so quickly. The biggest structural change from COVID is probably remote work and it's especially acute in the US. 70 to 90 % of office space is released in Europe. It's like 40 to 60 in the US. And so trying to create a culture without everyone in the same place at the same time is especially challenging. I think that's probably the biggest challenge I think facing these guys right now is how to maintain and cement. And by the way, it's not all sunshine and daisies. I mean, the culture at Morgan Stanley, when I started there, it's the only real job I ever had was we own your ass, you have no life, you're gonna be emotionally and mentally taxed, physically unfit, and you're gonna make more money than your parents did by the time you're 28.

21:57Do you want that? I mean, if you don't want it, if you want balance, you wanna be a DJ and you wanna get in great shape and you want to work out and make sure you're home for family time and dinner, go somewhere else. That's a culture. Some people want that. And then I worked very closely with Levi Strauss and company. They would give everyone summer Fridays, spend time with your kids or you're coaching little league. We're going to give you another four hours a week. It was a very maternal culture. So I think there's all sorts of cultures that work. And as long as you're just kind of clear and you can articulate not only who would do well at this company, but who it's not for.

22:35Still ahead, Scott weighs in on AI in the job market, how technology could change voting in America, and more.

22:57Real leaders don't back down when the stakes are high. They innovate, they push forward, and then they take the stage at the Masters of Scale Summit. Join us in San Francisco, October 7th to 9th, to hear from the CEO of the New York Times, scientists using cutting-edge technology to find cures, the leader of crypto powerhouse Coinbase, a retired four-star general, and many, many more. Apply now at mastersofscale.com slash apply25. That's mastersofscale.com slash apply25. If you're ready to take your startup from idea to impact, then AWS is your launchpad. From data storage to machine learning to secure app hosting, AWS gives you the tech trusted by the world's fastest scaling startups.

23:47And here's the best part. Join AWS Activate today and you could score up to$100 ,000 in AWS credits tailored to your stage and network. Go to aws.amazon.com slash activate and start building. Expanding your business in the U.S. can feel like a maze. Every state has its own payroll, benefits, and compliance rules, which can pull your focus away from growth. That's why founders use Deal. Deal is the professional employer organization, or PEO, that gives you a dedicated HR expert plus Fortune 500 level benefits for your team. The National Association of PEOs says businesses can grow twice as fast if they use one.

24:31So if you're scaling, make it simple with Deal. Go to deel.com slash mos and get up to three months free. Welcome back to Masters of Scale. You can find this interview and more on the Masters of Scale YouTube channel. Up next, I asked Scott how he approaches talent retention in his own company.

24:58I want to be the most influential thought leader in the history of business. And I want to create a ton of economic value. I want to create economic security. I want to get wealthier. I don't know, maybe I'm too much virtue signaling, but a close second. I want to create economic security for people I work with. When I was younger, I wanted to pay people less than markets such that I could grow shareholder value, give them options, then we'd all get rich. Now I want to overcompensate people because I don't want to take outside capital. And my goal is to pay people somewhere between 30 and 80 % more than they would get in the market.

25:28That's one of my goals. I got the idea from Netflix. They said they wanted to be the best compensated employees in that deck. And I thought, that's so unusual to purposely say, we want to overpay people. And I thought, I like that. I'm going to try and do the same thing. But I think just being very straight and very honest, what are your objectives? Because if you're the founder or CEO of a company, your objectives are going to bubble up no matter what. You get to make these decisions. And then imprinting that DNA very early in the company so people, it's like conceiving a child. The company is going to look, smell, and feel like you.