How to Invest When Nothing Makes Sense

24:22I just think about what James Sexton told us last week, where he was like, hurt people, hurt people. I mean, the effects of having an erratic parent and the long-lasting traumatic effects on the child are very well documented and studied, and we all know what happens there. But it's interesting, when you draw that parallel, it does make me think, what are going to be the PTSD post-traumatic effects on the American people that will last decades as a result of this ridiculously uncertain and fraught environment that he has brought upon us? I mean, I guess we're getting a little bit therapist here.

25:03Maybe that's not our lane. But it does certainly make me a little concerned.

25:07Scott Galloway:little concern. Just real quick, I feel as if I can diagnose President Trump fairly well. He's an asshole, and he's an obese man with no love in his life and will be dead soon. That's my diagnosis here. We'll be right back after the break. And if you're enjoying the show so far, send it to a friend and please follow us on YouTube, Spotify, or wherever you get your podcasts.

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27:24Scott Galloway:You can target your buyers by job title, industry, company role, seniority skills, company revenue also can stop wasting budget on the wrong audience. That's why LinkedIn ads boasts one of the highest B2B return on ad spend of all online ad networks. Seriously, all of them. Spend$250 on your first campaign on LinkedIn ads and get a free$250 credit for the next one. Just go to linkedin.com slash Scott. That's linkedin.com slash Scott. Terms and conditions apply.

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29:06We're back with ProfG Markets. SpaceX has officially filed for an IPO and it could be the biggest one ever. The company has confidentially filed with the SEC with a potential listing coming as soon as June. It's reportedly targeting a valuation of more than$2 trillion and could raise up to$75 billion in the offering. We have known this was coming, but now it is imminent. Scott, there is a ton here to talk about. I mean, just the fact that this is going to be the largest IPO ever. Also, what it says about the space industry, which has been ripping. And of course, everyone's very excited about it right now because of the launch of Artemis 2 and other things as well.

29:49We could talk about what this will do for Elon, the fact that he will become a trillionaire if this happens, if it goes through, he'll be the world's first trillionaire. A lot of different angles here. Where do you want to start?

30:01Scott Galloway:A decent definition of intelligence, the ability to hold two thoughts in your head at once, being able to understand nuance and there's nuance here and that is people have a tendency to go is this an amazing company buy the stock or is it not an amazing company don't buy the stock and what they fail to realize is that they also have to set all of this against the valuation that it's being priced at so first off let's talk about spacex it has moats the size of the amazon i think it has greater barriers of entry right now than any company in the world it's responsible for 85 of all space launches in the U.S.

30:34Scott Galloway:last year, and its launch costs are a fifth of its closest competitor. And that's basically, when you talk about launch, it's like talking about a semiconductor. It's pretty much how fast and how cheap it is. It doesn't matter how quickly you get shit into low earth orbit. It matters how inexpensively, and they can do it for five times less. They can shoot up five satellites for the same cost as their closest competitor cost to send one satellite into space. It's got incredible adjacent products. I'm going to be using Starlink on my flight home. I will now choose an airline or a means of transportation based on whether it has Starlink or not.

31:16Scott Galloway:So you're talking about airlines that are flying the same goddamn tin can at the same price to the same area. The only thing they can differentiate on is service, the configuration internally, which is getting harder and harder because you can't maintain differentiation there. But Starlink, for a brief moment, is a point of differentiation. It's sweeping the maritime market. It comes in with a better product at like a quarter of the price. So in sum, is this an amazing company or is it ridiculously overvalued? The answer is yes. And also this man of the people bullshit where he's saying he's reserving 30 % of the shares for the retail investors.

32:00Scott Galloway:He's doing that because retail investors are the only ones stupid enough to pay this price. Institutions weren't going to cover the allotment here. So he gets to say, oh, I'm a man of the people and I'm allocating it to retail as if they're getting in on something. So anyway, it's just a bit of a prediction here. If you get allocation in the IPO, great. And within two minutes, you want out of this thing. There might be a pop. They'll probably, the bankers and Musk will price it such that there is a pop out of the gates. But you do not in six months, if this thing gets out anywhere near 1.8 trillion or 1.7 trillion in valuation, you do not want to be in this stock three, six months in when people start to rationalize.

32:46Scott Galloway:Even Musk and his jazz hands can't figure out a way to justify anything resembling this valuation. The point you make that holding two things in your head at the same time, another aspect on this IPO is that there is both a lot of BS and a lot of jazz hands here, and also a lot of actual material business substance. So, I mean, let's just look at like what SpaceX is. I mean, as you mentioned, they are the leader, the world leader in getting stuff out into space, responsible for more than half of all orbital launches globally last year. So they're launching more than the entire world combined. If you look at the US, they account for 85 % of launches.

33:31So they've got that business. We've called it space hauling in the past. And in that sense, they are the market leader by a huge, huge margin. And also they're doing it at the cheapest price. Also, the satellite business, Starlink, they control over 10 ,000 satellites in orbit as of last month. That's more than two-thirds of the entire world's total. So they've got this telecommunications business as well, which is also very exciting and also ripping, and there's a lot of reason to be excited about that. And then also, they've got XAI, which has merged into SpaceX as of last year. It's very unclear how that actually played, out and to what extent they are actually properly merged at this point.

34:14And I guess we'll start to find that out when they start to release the filings as they file for IPO, which will be very interesting to see what is going on there. But also consider the fact that XAI is one of the leading frontier model companies in the world. I mean, they are competing. Yes, they're behind, but they are competing with OpenAI and Anthropic. And so in a lot of ways, there's also a big AI play here that is separate from the space business that you should also consider. And then also consider the fact that XAI is now an owner of X, formerly known as Twitter. So then at the same time, it's also a social media company.

34:55And then the question becomes, are you bullish on X as a social media platform? Is that something that you're excited about? All of these businesses are getting melded into one. And I do think that that is by design because Elon, I mean, he's such a magician of commanding these extraordinary multiples because he promises all of these complex and interesting things that you can only really think about way far out into the future, which leaves investors with no choice but to basically just say, you know, screw it. The TAM's going to be massive because they're doing space and they're doing AI and also telecommunications and digital media.

35:31They're doing all of these different things. So it would be stupid to put a normal multiple on the revenues here. So whatever, let's just say that the market cap is, call it$2 trillion. We'll make it the largest IPO in history. We'll cross our fingers and wait and see. And that is kind of the approach here. It has been his approach before, especially in the case of Tesla, where he just wraps the taxis and the humanoid robots all into one thing. And it's going to be the same thing with SpaceX.

36:02Scott Galloway:Yeah, I think that he's conglomerating. And I think what he's trying to do is SpaceX is lipstick. It's an amazing company with an amazing product. And XAI and Twitter are the pig. I mean, okay, XAI is growing within the Twitter community, but the reality is people are coming to grips with the fact that the winners and losers in AI in terms of LLMs, it's all about one thing. It's about the enterprise market. And that is consumers have access to a ton of free product and there's some revenue there. Nothing, nothing in the consumer market is going to justify these types of valuations when they have access to a ton of free open-weight LLMs.

36:47Scott Galloway:So this is all about the enterprise market. And let's talk about the enterprise market. You have, Anthropic is now 40 % of enterprise spend. And I read yesterday that they're getting 70 % share on new spending in the enterprise market. And it's evidenced by the fact that OpenAI is focusing because they are clearly freaked out. OpenAI has about 27 % share, Google 21. XAI is negligible, like barely even registers. So I'm not sure I buy that XAI is a better LLM. Now, what's interesting is can the superior connectivity of SpaceX slash whatever there is doing with Starlink going to give XAI an advantage.

37:37Scott Galloway:I think what he's effectively doing here is he's saying, okay, I have one amazing company in space. There's nothing cooler. I can talk about it and have videos of launches. It's going to be really dramatic, really cool. It's perfect for him as like the ultimate carnival barker. And then I can bury this other shit in it, which will give it an AI and a media spin. And then I think eventually he'll roll in Tesla, which is also starting to collapse, and talk about autonomous connectivity that's unrivaled, all flowing through LLMs, which inform these incredible products. So it's going to be a story.

38:10Scott Galloway:There's going to be so much spin here. But it's perfect for him because he was able to artificially elevate Tesla for a decade. There's just no fucking way to rationalize Tesla's valuation other than him saying, oh, Reboven or autonomous driving. It's coming a million autonomous Tesla taxis on the road within 12 months. I think he said that in 2017. So what is he? He's bored of that now. Now it's humanoid robots. I mean, now that the taxis - Look over here, a humanoid robot. We haven't heard much about those humanoid robots lately. So this is the ultimate, he's got an amazing company that'll be sort of the lead, the lipstick on these different pigs.

38:52Scott Galloway:This is going to be an incredible act of showmanship, an amazing company, maybe worth$300 billion. I don't know, maybe worth$400 billion. I think that segues us well into this retail investor element. I mean, the stat that is important for people to know is that SpaceX is allocating more than 30 % of the IPO shares to retail investors, most IPOs will save 10 % for retail. So there is clearly, I mean, you could read this as, oh, this is nice of them because they're opening up to retail investors and they're giving retail investors a shot. Or you read it as they need the retail investor to prop up this very, very ridiculous valuation because perhaps it will be the retail investors.

39:40Maybe they view it quite cynically. Maybe they see that the retail investors might be the dumb money, and they say retail investors will be the ones who are most susceptible to our kind of ridiculous narrative laundering story here about a future of AI combined with space. By the way, we should mention that he's also talking about building data centers in space. That's like one of his big themes for SpaceX, which many people, many experts have said is completely ridiculous and doesn't make any sense whatsoever. The idea that we're going to, I mean, we have land on Earth. Why are you going to go build a data center on a space station in space?

40:17It just doesn't really make sense. But it might be the kind of story that retail is particularly susceptible to. I mean, some people would say that we're being patronizing to retail investors, perhaps. But I mean, let's also consider the fact that 43 % of Tesla is owned by retail investors. Like, retail is the thing that is supporting that extraordinary valuation. And it does appear that they believe that that is what is going to support this valuation too. I'm maybe just cynical, but I view it as them sort of taking advantage of retail as opposed to offering them an opportunity.

40:51Scott Galloway:Probably the most, you would argue the most, innovative company in the last five or 10 years has been NVIDIA. And NVIDIA is trading at a forward PE of somewhere between 17 and 20. That's a price to earnings. I mean, you made the Google comparison earlier, which I think is a good one, because when Google IPO'd, the company was trading at 10 times trailing revenue, the revenue growth was 240%. You look at SpaceX, which is going public at more than 125 times trailing revenue, the growth is 20%. So when you think about it, SpaceX's revenue growth is 10 times lower than Google's was when Google IPO'd, and yet the valuation is more than 10 times higher than Google's was when Google went public.

41:36So the whole thing is kind of flipped on its head here. And the only thing that could justify the valuation is if you believe that there's this very, very special future of space and AI and data centers that all comes together in the perfect way. And it's all, I mean, you really, it's just hopium. You have to hope that this is going to be a massively successful business. Maybe it will be, but that's a lot of hope in there. You're putting a lot of faith in his ability to grow these revenues tremendously. $16 billion in revenue last year. That's not that big. That's not that impressive. $8 billion in profit.

42:12Okay, whatever. The valuation's just, it's just too high.

42:16Scott Galloway:When I hear that type of striking insight from you, the only thought that kind of runs through my mind is that it's hard to believe that I was nominated for three Webbys and you were nominated for zero. Hello, ladies. Watch your shoulders. Watch your shoulders. Hello. I'm sorry, Ed. Yeah, that's fascinating. Yeah, you're going to trigger me again, and then I'm going to start getting salty and upset. You still have time, my brother. When I was 27, I knew every line from the Planet of the Apes and could make a bong out of any household item. That was really my accomplishments to that point. You're doing just fine, Ed.

42:52But, you know, I'm getting to that age where you started actually to do some cool stuff. I mean, I'm 27 now. I'm pretty sure that's when you were starting your first company. We're rubbing up against your glow-up period here. So I take your point.

43:08Scott Galloway:Company's doing a lot of work there. It was me working out of a$280 apartment in Rockridge, Oakland, calling the alumni of Haas saying, I'm a brand strategist. Will you hire me? That's not what you told investors. They liked it. They liked you. The final angle here on this SpaceX point. If this goes public at$2 trillion, and it probably will, Elon will become a trillionaire. He owns more than 40 % of SpaceX. So this would make his stake worth roughly$860 billion. And now, if you look at the odds on Calci that Elon becomes a trillionaire this year, those odds have risen to 75%. That's this year.

43:53So basically, he's going to be a trillionaire. Some people will say, oh, well, you know, that's not a big deal because of inflation. Like, what's the inflation adjusted number? I'll just give you some context. During the Gilded Age, John Rockefeller was worth one and a half percent of US GDP as a share of GDP. If this goes, if this IPO goes as expected, Elon will be worth more than double that as a share of GDP. So Elon will be the richest guy in history by far on a relative basis, as well as being the world's first trillionaire. This is going to make him incredibly rich. What do you make of it?

44:33I think it's important that we have what feels like outrageous wealth in the United States.

44:39Scott Galloway:I think that one of the reasons people come here is that they think there's no ceiling on me. I can, in Germany, you're supposed to stay within your class. There's a certain sort of, what do they call it, trimming the daisies or whatever. in the U.S. the notion is that anyone can be magnificently wealthy and having you can be a billionaire in the United States. I think that's a wonderful thing and I don't believe in these kind of class wars of assuming that all billionaires are bad people. I think that's unhealthy. What's happened though is that because of a tax policy that's been weaponized by the incumbents billionaires have been able to pull away and garner a disproportionate amount so much of the proceeds and prosperity, that it's creating an anxious and depressed youth.

45:27Scott Galloway:And that is, we talked about this in the last episode, people's mood and feeling about their situation isn't about how they're doing relative to people 50 or 100 years ago. They do it relative to how they're doing to everybody else. So when you're not accelerating as quickly as the top 10%, you feel as if you're falling behind, even if you're doing better. And when your Instagram feed is just full of constant reminders of how the 0.1 % are doing or the 20 % with a ring light and how to use Instagram pretending to be the 0.1%, you just feel like you're not keeping up and you feel bad about yourself and you feel bad about the country as evidenced by only one in 10 young Americans feel good or very good about America, whereas it's one in two people my age.

46:09Scott Galloway:And part of that problem is that when you have 26 people who are worth more, no, I'm sorry, now it's six people who are worth more than the bottom half of America, and he may be close, worth more than the bottom 40 % of America, it creates a sense that the system is rigged. A vibe. A vibe, a certainty of an observable pattern. Also, the people in the Gilded Age, they couldn't turn off battlefield technology in Ukraine or on and switch the trajectory of a global conflict. They didn't have that sort of power and access to technology. And what's really frightening about this, quite frankly, is that we have essentially wars and the global order can be massively influenced.

46:54Scott Galloway:There's a decent argument that Musk with$250 million swung the presidential election. I actually think Trump would have won without him because we had a fairly mediocre candidate, but he definitely had a big impact with a quarter of a billion dollars. And with a quarter of a billion and weaponizing his platform. Now, what could he do in the next presidential election if he decides I want X or Y? And he said, I know I'm worth a trillion dollars. I'll take 2 % of my net worth, 2%. That's$20 billion. That's 80 times more than he spent in the last election. And with Citizens United,$2 billion surgically delivered over a platform that, you know, 40 % of America's or something like that, he could absolutely, and then targeted in the fact that our electoral system basically has made it such that there are a small number of counties and a small number of states that decide the election, he could just overwhelm them with messaging and money and swing the election.

47:58Scott Galloway:And so you have essentially the most powerful person in the world is decided by one man and battlefield technology can be decided by one man's blood sugar level and this individual while being a genius, is someone who is addicted to ketamine, according to the Wall Street Journal, sleeps with a loaded gun next to his bed, and is being sued concurrently by two women for sole custody of that child because he hasn't seen that child. And by the way, I just don't think any one person, regardless of how wonderful you may think they are, one of the universal axioms of our species is that power corrupts, and absolute power absolutely corrupts.

48:34Scott Galloway:And in a capitalist society, money translates to power in a connected global economy with connectivity through technology that's also controlled by this one person who is not subject to any regulation, is not bound by the law, but protected by it, can buy off any politician. If shit gets really real from here, can peace out to a country with no extradition treaties, but likely wouldn't even need to do that because he can buy so many politicians or delay and obfuscate any sort of civil or criminal prosecution, you effectively have the new leader of the world because presidents are term limited.

49:09Notice how Trump is such an asshole.

49:13Scott Galloway:It must said Trump is in the Epstein files before any of the files, before they came out. And Trump didn't say anything mean by that. Trump is so scared of this guy, and he should be because this is the individual now who has greater influence in the medium and the long term. President Trump, the president of the United States, has greater influence than anyone in the short run. He can deploy the most successful organization in history, and that is the organization that can provide or deliver more lethality globally than any organization in history, and that's U.S. military. But over the medium and the long term, it's a guy with no term limits who controls connectivity, who's worth the GDP of a small nation and can deploy it strategically for his own desires, blood sugar level, or ketamine hallucination.

49:59Scott Galloway:So at some point, as a total capitalist who believes in people should have the opportunity to get exceptionally wealthy, this level of income inequality really has become an existential threat, especially when a small group of people have this much power. We'll be right back. And for even more markets content, sign up for our newsletter at profgmarkets.com.

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53:46We're back with ProfG Markets. Two sneaker brands at opposite ends of the market are both running into trouble. Those brands are Nike and Allbirds. Nike's shares dropped 16 % after warning that sales will decline for the rest of the year, including an unexpected 20 % hit in China this quarter. And internally, the frustration is showing. CEO Elliot Hill told employees he's, quote, so tired of talking about fixing the business and wants to shift the focus to driving growth. Then there's Allbirds, the once buzzy shoe brand that peaked at a$4 billion valuation. Last week, it sold off its IP for$39 million after never turning a profit since going public in 2021.

54:29So it's got two different companies in the same space suffering different problems, but maybe also similar. Just to go through what happened with Nike here, Nike beat on earnings, stock plummeted 16%. The big problem was the guidance analysts were expecting that sales would grow next quarter. Nike said that sales would actually decline by up to 4%. And as I mentioned in that intro there, the big problem is China. They expect China sales are going to fall 20 % next quarter. And this has just been a horrible few years for Nike. The stock has fallen nearly 70 % since 2021. Revenue has fallen every quarter for more than a year.

55:11And the stock is now sitting at a nine-year low. The valuation is also extremely low at this point, trading at 1.4 times sales. Compare that to our conversation about SpaceX, more than 100 times sales. That valuation on a price-to-sales multiple, it's the lowest we've seen for Nike since 2009. So really bad year, several years for Nike. And then also really bad for Allbirds, which everyone was very excited about back in 2021. Not everyone. You don't remember our CNN Plus show? Not everyone, not everyone. Yes, we'll get to that. Valuation hit$4 billion and the stock collapses. It's down 99%. And they sell basically what's left of the company, which is the IP, for$39 million.

55:56Literal peanuts compared to what people expected. So maybe we'll start with Allbirds because you mentioned not everyone was excited. And that's true. You were not excited. Let's start with your reactions to both of these companies.

56:10Scott Galloway:So just to walk down memory lane, Jeff Starker called me and said, would you like to do a show on, we're doing a subscription streaming platform, CNN Plus, would you like to do a show? And I said, yes. And he said, do you want to get our agents involved or do you just want to do the deal directly? And I said to him, I trust you. I think you're generous. You're obviously very good with talent. Just put an offer on the table and I'm not going to even respond. I'm just going to accept. So send me the paperwork. and he did that and he was generous and i've got a one-year contract i should have he offered me to you too but i you know i said no i don't want to commit to anything for longer than a year and i wish i had but anyways he gave me a one-year contract and we started what was it called again i don't remember what it was called was it called the prof g show i don't remember what it's called you worked on it do you remember what it was called i think it was called no mercy no malice oh no mercy no malice that's right and anyways we did it just a brief history we did it for five or six shows.

57:05Scott Galloway:And Monday night, my producer called me and said, good news. We're now the highest rated hourly show on CNN plus. We were beating out Jake Tapper's book club and Anderson's show on, you know, who's died in your life. Anyways, that's not funny. That's not funny. But high fives all around. Do you remember? I think I sent a message to everyone saying we're the number one hourly show on CNN Plus. Not sure how excited we all were about that. Yeah, which might've meant 14 people. We don't know what that meant. Anyways, and then I'm in San Diego. I went down to the bar, you know, as I often do. And I woke up the next morning not feeling great as I often do.

57:51Scott Galloway:And I get from Kara, I'm like, are you all right? And I'm like, what? I'm like, what's wrong? And she goes, oh, you know, and then she forwarded me the New York Times article, CNN Plus being unplugged. by the new owners who were angry, by Zaslav, who wanted to show Jeff he was on top. So anyways, but the first episode, we did a rundown of these consumer IPOs, and there were three. Warby Parker, Rent the Runway, and Allbirds. And I said the only one I liked was Warby Parker. I think Warby Parker is incredible. I think I'm wearing Warby Parker glasses right now. I think they are an absolute breakthrough unlock in terms of vertical integration, great stores, great manufacturing.

58:30Scott Galloway:And they took a category that was controlled by a monopoly. I forget what it's called. Lux, Luxottica. That was every year raising prices faster than inflation. And with guys like me who wear glasses, you end up getting a six or 700 pair of glasses. And this happened to me. And then right after you pick them up, leaving them in the cab on the way home. And Warby said, we can give you 80 or 90 percent of a Tom Ford or an Oliver Peoples class glasses, pair of glasses for 20 % of the price,$100. And so now I go to Warby Parker and I pick up three or four pairs. They're almost like disposable for me.

59:05Scott Galloway:It's been a huge game changer for me. I love what they do. I love the IPO. And by the way, it hasn't performed that well since the IPO. It's flat to down. It's probably been cut in half. Flat to down. Flat to down or cut in half. It's been cut in half. It's not been great. Hasn't been cut in half. But compared to the other two, it's Nvidia. Because Rent the Runway, I remember looking at that, Rent the Runway was a stupid business. A nice idea, but for every dress they rented, they were losing money. So it was kind of the we work of the dress or the clothing rental business. And I was on the board of Urban Outfitters, and we all sat in a board meeting.

59:42Scott Galloway:And I don't think I'm—this isn't inside baseball. At some point, you know, everything gets sunshine. And our viewpoint was, wait till they go out of business and we're going to buy them for scrap. They just don't have the scale. They don't have the sourcing, the merchandising. They don't have the scale. and every member they signed up for whatever it was, 200 bucks a year was gonna cost them. If you signed up a member for, I forget what they were charging for X dollars, you were gonna lose two X. It was WeWork. It was negative gross margins that got no leverage on scale. And then finally, Allbirds was a stupid company.

1:00:17Scott Galloway:It was a very fashionable product, which meant it was like this kind of mohair kind of cool. and it had absolutely the worst spokespeople in the world. And that is the VC community embraced it. Oh, fuck. That's what I want to be. I want to be a 58-year-old guy that's slightly overweight who went to Stanford and is now washing out founders and thinks that his character and grit are responsible for the American success story. Yeah, that's who I want to be. And then they went out, they took their, I followed the company pretty closely. It was kind of like what Restoration Hardware did in the first version.

1:00:51Scott Galloway:And they went out and signed a bunch of expensive leases that they could never sustain on four-wall unit economics. And slowly but surely, it was pretty clear this thing was going to go to zero. It didn't go to zero as quickly as Rent the Runway. But there's no IP here. I'm shocked anyone paid anything for this. Maybe it's an e-commerce site from people who want to, I don't know, remember the good old days of, I don't know, investing, getting in the Series E of Tesla or whatever it is that people were wearing those shoes were doing five years ago. But I will say this. They have really good underwear.

1:01:21Scott Galloway:I do like their underwear. But it never, this company never made any sense. It never had the following and the depth of the following or the loyalty. It just was a shitty business, shitty idea. Should have never been public. Should have been way more measured. Should we talk about Nike? Yeah, but I just want to read you one quote from No Mercy, No Malice. This is from October of 2021. I'll also just note that I was your lead analyst on this article. So I'm going to pat myself on the back too. But here is the quote. It's very good. Our view, October 2021, our view quote. Allbirds' organic growth is sputtering and management is buying transitory growth to support the stock price until management can sell.

1:01:59That is essentially what happened here. We were not very excited about this company, especially compared to the other companies that were going public. And yeah, it has been a disaster and$39 million for the IP. I mean, they have essentially shut the business down. And perhaps there are some learnings there on what they got right, what they got wrong. I mean, as you point out, they invested pretty heavily in direct-to-consumer, which I think was kind of exciting at the time. People were kind of pro-direct-to-consumer. But then there was this shift where people realized we're kind of underrating wholesale and the value of wholesale.

1:02:34They didn't really invest anything into those wholesale relationships. They couldn't maintain these stores, and so they cut the number of storefronts in half. And it just ended up being a giant disaster, which is a good transition into what's happened with Nike. because obviously the Nike story, Elliot Hill's story, has been all about let's revive our wholesale business. Let's shift a little bit away from the D2C story, which we were really leaning into under the previous CEO, John Donahoe. But it appears even that isn't really working. So yeah, let's hear your views on what Nike is maybe getting right, but also what it's getting wrong.

1:03:12Scott Galloway:Look, this is arguably still one of the greatest consumer brands in the world. I don't care if you're watching a football game in Ghana or badminton in the UK. The Nike brand just has resonance. And it means American competitive. You didn't win silver. You lost gold. Like, win at any cost. It's just, it's incredible. They have great products. I think they have great distribution. When we sold L2, I gave a list of the top 12 people to Gartner and said, whatever you do, hold on to these people. within, I don't know, 24 months, all of them were gone. And three of the most talented people, Maureen Mullen, Ashley Tolbert, and Daniel Bailey, who was also my graduate student instructor way back when, went to Nike.

1:03:58Scott Galloway:And Nike was one of our biggest clients. And they went when I think the stock was at, I don't know, 80, and it went to 120, so good for them. And now it's back to, what, 45 or something. The stock is where it was, it's in 2014? Yeah, I think 2017. The stock has been decimated on any, and it looks cheap. I thought it looked cheap a month ago. What struck me as strange was Elliott Hill. I've only, I've been in a room, I know Elliott a little bit, not really. It strikes me as a very talented guy that I think he was good for morale to bring an insider back. John Donahoe will go down as one of the great disasters, bringing in a tech guy to run a brand-driven company.

1:04:42Scott Galloway:But Elliot told employees, and you said this, he's, quote, so tired of talking about fixing the business. I feel like that's when, with my ex-wife, if I would have said to her, I'm so sick of talking about valid reasons for my shortcomings as a man and a husband. It's like, well, okay, bitch. Yeah, I bet your board is sick of you talking about it, fixing the business, and wants to see some. because he's now been there. It's a little unfair. He's only been there, I think, 15 or 16 months. He should be given three years. This is, you know, you're not turning around a speedboat. You're turning around a tanker here.

1:05:13Scott Galloway:But I think he's got the wrong strategy. I think that... I saw Atomodaran said something that always struck me, and that is we're obsessed with youth. And growth companies never want to accept that they're aging and they're now mature companies. And really talented CFOs will say, this is a low-growth, mature company. We need to start returning money to shareholders and managing the cost side more effectively. And Nike is still pumping Botox and fillers into its face trying to be young again and not recognizing it's a mature, low-growth company. And the data that struck me was their employment is actually up since 2020.

1:05:54Scott Galloway:I, quite frankly, if I were on this board, I'd be saying, okay, Elliot, I get the rah-rah speech for the all hands, but the reality is we need to cut costs by 20 % over the next three years here because this is a low growth business. We need to obviously reinvigorate the product, try and find pockets of growth, but be clear, we are now a mature company. We are wearing diapers on the wrong end of the age spectrum. We're not a growth company. We are a mature company that needs to manage this company more responsibly. What do I mean by that? And no one likes to say this. I think there's going to be five to 20 ,000 layoffs in the next 24 months because I believe an activist is going to come in here and say great brand.

1:06:36Scott Galloway:Still amazing sales. I mean, the last time their stock was trading at this level, they were doing 25 or 30 billion in sales. Now they're doing 45 billion in sales. But they have margin compression and they aren't growing. And the market hates that. So bottom line, they need to be who they are. They need to acknowledge. they need to do away with the trucker hat and the bell-bottom jeans and trying to pretend they're younger than they are, as I sit here dressed like an aging skateboarder, and acknowledge they're a mature, low-growth company and cut costs. And for Elliott to pretend that this is a growth company and they need to reinvigorate growth, okay, shore up the business, shore up the brand, fine.

1:07:15Scott Galloway:But this is now a business about operations and discipline and being the adult in the room and cutting costs dramatically. It's so interesting you say this isn't a growth company. One thing that has always struck me, on Nike's investor relations homepage, the first thing you see, and this has been the case for years and I just checked and it still is the case, the first thing you see on the investor relations homepage is giant letters, Nike is a growth company. That's like their main pitch to investors. We're saying we're a growth company And to your point, it's like, well, definitionally, you're not because your revenue has fallen every quarter for more than a year at this point.

1:07:58So definitely, you are not a growth company. But it is an interesting thing. And I've always wondered what companies are really supposed to do about this because Aswath's point about the corporate lifecycle is a very good one, which is, you know, companies age over time. And as you age, you need to try to figure out how to act more your age. and you don't want to try to pretend that you're a young company like Nike seems to be doing, saying we're a growth company. But at the same time, it's like, well, you also want to grow. And you also want, especially in a consumer-driven business like Nike, you want to look young, you want to look cool, you want to look like the next big thing.

1:08:37And so it's a very difficult thing to balance. And I guess as the brand strategy professor, how would you be balancing that? Like maybe on the corporate level, it's a different thing, but like they still need to look cool.

1:08:50Scott Galloway:This isn't about brand strategy. I think Elliot and his team are outstanding of brand. And I think that I assume they're still working with Wyden Kennedy. They have some of the brightest brand builders in the world. Their direct-to-consumer strategy may need a refresh, but I know some of the people running their DTC and they're incredibly talented. This is about, okay, they lost touch with the quote-unquote street community. The product needs an upgrade. This is a business issue. This is going through the company and unfortunately saying, all right, we have, I think it's 55 ,000 employees. We need to do 90 % of the revenue with 30 ,000.

1:09:27Scott Galloway:And I think they could get there. I think there's probably, this is what happens when you're a growth company. You keep eating, you keep eating, and you build up fatty cells all around the company, all around the corpus. And I think that's what's happened here. And it's not romantic, but I think what they should be telling investors is we're going to grow EBITDA 12 % to 15 % a year for the next five years. And this is how we're going to do it, through a combination of efficiencies, which is Latin for cost cutting, which is Latin for layoffs, and having solid, if unremarkable, growth. growth and that would be quite frankly that's going to be i mean the good news is that's going to be easier than trying to find new pockets of growth for a company that doesn't have the same cachet as some of these smaller niche brands like a hoka or a or a or an on running so this is entirely the wrong strategy from a shareholder standpoint i'll use tom sellick as an example do you know who tom sellick is no this is one of the most handsome men of the last millennium tom Tom Selleck, Magnum PI.

1:10:28Scott Galloway:This guy, and by the way, a quick fact, I'm the exact same height and weight as Tom Selleck, except at his prime, except he looks much better in shorts than I do. How do you know his weight? I was obsessed with Tom Selleck. This guy is the baller dude. He was the honorary captain of the U.S. volleyball team in like 1988 or 92. Great actor, handsome, nice man. I think married once. I think this guy's a great role model for masculinity. Anyway, drove a Ferrari around Hawaii as a private detective. Not a great TV show, but... Okay, okay. Anyways, at some point... You like him. At some point, even Tom Selleck has to stop wearing shorts.

1:11:15Scott Galloway:At some point, Nike, you have to stop wearing shorts. You're not a growth company. You aren't. And if you keep, take your lips off the fucking crack pipe, Elliot, you are a fiduciary for shareholders and for your employees. And 10 or 20 ,000 people at Nike have been laid off. They just don't know it yet. So what you want to do is figure out where there are efficiencies in this company, be as generous as possible with those people who probably don't need to work at a company that's going to go sideways for the next 10 fucking years, pretending to pump a bunch of Botox in its face and pretend we're young again, and start cutting costs and rationalizing this business and waking up to the notion that you are a now, you are no longer a teenager, you are a baby boomer.

1:12:05Scott Galloway:and this can be a great investment. And whether you wanna do that or not, someone's gonna force you to do it because this thing is becoming obviously overweight and needs to cut costs and look in the mirror and go, oh wait, I'm not 18 any longer. So I have, Elliot is the right guy, I think for probably the brand and product. someone on the board and Elliot need to get together and say, we're paid to be adults. It is time to, we should be, the front of our investor page should say, growing EBITDA, growing earnings, growing shareholder value. And in about, fuck, in about four hours with AI and some information, I could put together an investment deck that would take this stock up 10 % by talking about how we're going to increase EBIT to 10 % to 15 % a year for the next three to five years through by keeping revenues flat, but dramatically cutting expenses.

1:13:10Scott Galloway:And by the way, for every dollar in expenses you cut, it's kind of the same as getting$6 or$7 in incremental revenue. Because if you have operating margins or say you have operating margins of 15 % or 20%, cutting expenses by a dollar has the same impact on the bottom line as$5 in incremental growth. Which do you think is easier in a company like this? I bet there is fat fucking everywhere at Nike right now. They may not feel like it. They've gone through some layoffs and they feel like it's hard. They have no idea, the employees in Portland, what's coming because an activist is going to show up and say, I can get this thing to 70 bucks by just telling the CEO, if he doesn't start acting like a fucking grown-up.

1:13:54Scott Galloway:I'm going to boot him and the board. I'm going to come after him and the board. I haven't looked at the class structure of the shares yet. I don't know if it's a two-class share company or if Phil Knight still controls it. But this is a$70 to$80 stock if there's just an adult in the room. Time to get our activist hats on. Time to launch a takeover, a hostile takeover. Gateway computer. That's what I'll say to you as we end this. Gateway, my weakest flex in history. Well, I was on the board of Gateway Computer. And you were the number one show on CNN Plus for the few weeks that it existed. So that's the other.

1:14:32That's right. That's the other brag. OK, let's take a look at the week ahead. We will see the minutes from the Federal Reserve's last meeting. We'll also see inflation data from the Personal Consumption Expenditures Index for February and also the Consumer Price Index for March. Scott, any predictions?

1:14:48Scott Galloway:I've already made it and I've made it over and over. Activist, Nike, adult in the room. 80 bucks. We're at 45. What do you say? 70, 80? What's your target? It depends if, you know, when they put the crack pipe down and acknowledge and they look in the mirror and go, oh, wow, sucks to be a grownup. I need to be a grownup. I'm going to keep revenues flat. I'm going to cut costs four to six percent a year for the next three years. I'm going to increase a bit easy, low double digits every year.

1:15:44tomorrow for a fresh take on markets.

1:15:51Lifetimes

1:15:57You have me In kind reunion As the world turns

1:16:14And the dark flies In love