The Next Inflation Wave Is Already Here

22:35Scott Galloway:so i don't i'm not rooting for a recession but at some point we have to stop propping up the market with your credit card and if all of a sudden i would imagine you and claire neither of you are homeowners right no i would imagine both of you would like to be homeowners so if the market went sideways or down substantially and all of a sudden real estate in brooklyn was off 20 40 percent Is that bad? So I'm of two minds on this. I don't want to see there's a lot of pain in a recession, but it feels like we're due. And quite frankly, recessions and down cycles are a healthy part of a cycle. Otherwise, it's not a cycle.

23:18I'm not rooting for a recession, but if it's a choice between a recession and uncontrolled inflation, I'll take the recession every time. I mean, the inflation is what's going to hit young people and lower income people the hardest. That's just you losing your purchasing power. But I think the people in charge, specifically Trump, has decided he really likes when stocks go up. And I guess he doesn't really care that much if prices go up. He seems to pretend like he cares. He says that he, oh, I'm taking the affordability crisis seriously now. But then he does everything in his power to make it even worse.

23:50And then when it comes to housing, he says that he actually wants the price of housing to go up. That made no sense. So he spends all of this money to just, it was just ridiculous. So he doesn't actually care about affordability. He doesn't actually care about prices. And he's going to get absolutely clobbered for it.

24:04Scott Galloway:We have to figure out a way such that the average household income of$77 ,000 can afford a home. It shouldn't be drill, baby, drill, which the Trump administration proposed. It should be build, baby, build. We absolutely need housing prices through YIMBY legislation and through tax subsidies to developers to unleash the private sector. We need a massive amount of construction. And unfortunately, back to the original story, construction costs through tariffs, anti-immigration policy. I mean, you could almost argue if you were a Bonneville and saying, how do you take housing prices up even more after an unbelievable acceleration?

24:46Scott Galloway:okay let's make immigration nearly impossible for the people who are actually building the homes let's take the supplies of building a home way up right and let's take interest rates way up and then let's bomb the one place where all of the oil and gas is transported through throughout the world which is as we're learning literally the basis of the entire economy i mean that's what we're really learning is we we all need oil and gas a lot more than we would like it literally funnels through to everything, the transport to get the food from the farm to the grocery store, and then the fuel that goes into the airplane, and then the diesel that goes into the fertilizer, which is used to grow the food.

25:25I mean, we rely on this for literally everything. And so, yeah, we have figured out a way somehow, as you say, to snatch defeat from the jaws of victory. We had inflation going down. It was trending down. We figured it out. And now it's going way back up again. And it seems like that will continue.

25:41Scott Galloway:Just going to work ago, right? There is an argument, and it's not nearly the compensation for inflation and increased interest rates, but I wonder if this is going to put renewed winds in the sales of alternative energy. Yes. And someone absolutely, from a national security standpoint, right, just, okay, unless we start bombing our own windmills or the sun gets blocked, you know, it's much easier to block the Straits of Hormuz than the sun. And the one stat that just blew me away, my Kara Swisher's ex-wife, Megan, who's this incredibly smart person, chased me out of a session and said, I have data you're going to love.

26:20Scott Galloway:And she showed it to me. There's this incredible site that shows where at that moment where Texas is getting its electricity and the source of that electricity. Is it coal? Is it LNG? What is it? And at that moment, at 1 p.m. on a Friday, whatever it was, Texas was getting 60 % of its electricity from wind power and 18 % from solar. So the state that is, you know, the backdrop to Landman, and we always think of Exxon and oil and gas, is really leading the nation in alternatives. And I thought, okay, if there's, I'd like to think there's several, several linings here. I'd like to think what could go right.

27:00Scott Galloway:But one of them might be, okay, does this, A, get us thinking about more secure pipelines where we don't have vulnerable ships? And two, just organically built. I mean, if you're South Korea, I would imagine there's a lot of new solar startups being pitched right now, right? It shows countries just how vulnerable they are when they don't have their own sources of energy. 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 if you haven't already.

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31:15We're back with Prof G Market. A big criticism of OpenAI right now is that it's doing too much at once. The company is juggling a wide range of projects, from Sora, its video generator, to a new web browser, to hardware. According to the Wall Street Journal, employees say that this do-everything approach has created a lack of focus and made it harder to understand the company's strategy. That concern is now starting to surface among the leadership as well. The CEO of Applications recently told employees, quote, We cannot miss this moment because we are distracted by side quests. So all of this raises a broader question.

31:53How does a company decide when to double down on its core business or when to chase new opportunities? Scott, I was very interested to see this and I wanted to get your views on it because you've run multiple businesses in the past. Some have been very successful. Some have been less successful. You know what it takes to either win or fail. Um, what do you think of this dilemma? It's sort of a classic business strategy question that OpenAI, the number one AI company in the world right now is facing. And that is, do we focus on the core thing or do we go have fun in these side projects and see if if something good can happen?

32:33Scott Galloway:Well, the majority of my businesses have been advising CMOs and CEOs. And the real question every good CEO needs to ask or the gestalt he or she needs to, when you're a junior level or mid-level employee, you're trying to think about what could we do? What new markets? What new geographies? And you're trying to find areas of growth. How do I create more efficiency? How do I grow the company? What could we do? What should we do? When you become a CEO, the bigger question is not what to do, it's what not to do. Because every day you're going to be pitched on great ideas from vendors, investment bankers, and want you to make acquisitions, new employees trying to make a, or existing employees trying to make a name for themselves.

33:19Scott Galloway:Everyone has, everyone wants to be generous and visionary with your capital. And if you look at, this is a really good move on the part of Sam Altman and open AI because the specific crowds at the general focus is the key component of almost any strategy if it wants to work. I even think on a personal level, I hate side hustles. You want to be successful? Find something you're good at, go 110 % in. And the difference between being wealthy and being very wealthy is the last 10%. And that comes from extreme focus. And if you have side hustles, it means you haven't found the right main hustle. So if you have side hustles, it means of exploring something until it becomes a main hustle, fine.

33:56Scott Galloway:But if you look at Alphabet, or Google. They brought in Eric Schmidt, a fantastic manager to help scale the company. But then the adult in the room who actually ended up growing shareholder value a great amount and doesn't get the credit she deserves is Ruth Peratt, the CFO. They brought her in for Morgan Stanley. And the first thing she did was like, what the fuck is all this shit? What are all these pet projects from Sergey and Larry that nobody wants to say no to? They literally had a project whose mission was to cure death. And Ruth said, okay, do that with your own money and on your own time.

34:31Scott Galloway:And she killed a ton of projects and focused people on this unbelievable greatest cash machine toll booth in the history of mankind called Search. And then said, And, you know, another dollar in search creates a shit ton of money. So don't bring anything to me that you can't convince me isn't going to create a shit ton of money with some reasonable timeline. So they have gone, you know, way too in way too many directions. And it's a credit to Sam and their leadership that they're focusing. and also they have huge incentive to focus because in the enterprise market, which I think is the more important part of the market here, Anthropic is kicking the shit out of open AI.

35:20Scott Galloway:And so they are doing what they should be doing. They are focusing. So this is sort of a, I think this is a really smart move for open AI. I think it's absolutely the right thing to do. And speaking of distractions, can we talk a little bit about the metaverse, Ed? Can we talk a little bit about the Meta? I don't know if you saw this, but it ends up that the good people at Meta have decided they renamed the company incorrectly. And that this legless world is not the future. Claire, by chance, perchance, do we have a clip about my views on this? Well, before we play it, I just want to make sure everyone knows what we're talking about, which is that Meta's side project, I guess maybe they called it their main project, but the side project of the Metaverse, they invested$80 billion into creating this Metaverse platform called Horizon Worlds.

36:13People may remember from 2021 and 2022 when this is what all that Mark Zuckerberg was talking about. As of last week, they are shutting that platform down. Now let's cue the clip.

36:27Scott Galloway:What is probably the biggest strategic misstep of the last five years was Meta deciding that the new growth engine would be the metaverse. No, it's not. Doesn't matter what the name of your company is. This is not working. You got a guy who can't be controlled. He controls the company. He's all in on the metaverse. He's already rich. He doesn't care about money. So his attitude is, I'll show you. I'm going to prove everyone wrong and keep going all in and spending tens of billions of dollars on the metaverse. and shareholders are in the back seat, you know, buckled in and they can't get out. And the doors are locked on this, this crazy nauseating ride called the metaverse.

37:04Scott Galloway:As far as I can tell, the metaverse is just a bunch of incel panic rooms created online for people who have, it just isn't working. I mean, my favorite stat about Horizons World or whatever it is, is that MySpace currently gets more traffic than Facebook's version of the metaverse. So, look, this was the mother of all distractions and hallucinations, and it wasn't even consensual hallucination. This never made any sense. And it went back to just this basic anthropological truism, and that is throughout history, the things you could eat or could eat you don't come straight at you. They come at you from your side or behind you.

37:41Scott Galloway:And so you get uneasy and even nauseous if you can't, if your peripheral vision is moving too fast. And the idea that people were going to take their mixed reality headset with them and start watching. I mean, I remember Kara arguing with me about the future spatial computing. I put one of these things on for eight seconds and I'm like, this is so fucking stupid and so nihilistic that we want to go into another universe. our species is really used to and really fond of this universe and this notion that these weirdos want to take us into another universe okay i get immersive experiences i like imax as much as the next person it's a small business i enjoy the sphere but for only a couple hours and i feel like a piece of beaten flank steak by the time i live leave there in terms of sensory overload by the way imax really hasn't been a good business um the sphere is supposedly still losing money the way you want to live life is you want to have a series of experiences that are wonderful in this universe where you have control of your peripheral vision.

38:41Scott Galloway:And the reason why billboards are so incredibly still successful and get decent CPMs is despite the fact you're not reading a billboard on the side of the highway, you're very conscious of it because it's threats and opportunities. And just the most basic level of anthropological or behavioral research would have said that, okay, 40 % of the people putting this nonsense, this condom on their head, that they're getting nauseous within 20 minutes. And yet he kept pouring, he poured$70 billion of capital into this thing. And so I just think this was, if it hadn't been for the fact that the guy is a business genius and has added probably$2 trillion in shareholder value since they started this nonsense, this is an enormous thud it went way too long way too long when you're coming like meta and you have those cash flows you can take big swings 1 billion 5 billion 10 billion but to keep pouring money up to 70 billion and to rename the entire company this is what we all forget they renamed the whole thing they were so confident about this it's unbelievable

39:52Guys, breaking as we record this, Horizon Worlds is not shutting down after all, according to Meta.

39:59Scott Galloway:Bullshit. This is them trying to have peace with honor. This thing is dead. This thing is dead. They're going to try and make it happy and put it in hospice, whatever. You lost Pop Pop a year ago. Maybe he still has a catheter and there's brainwaves there. This thing's being done. This thing's being euthanized slowly. I don't care what their press release says. Let me just read you what I'm seeing on TechCrunch. Quote, we have decided just today, in fact, that we will keep Horizon Worlds working in VR, Bosworth said as part of an Instagram Stories Q &A after a fan of the app reached out to say they were, quote, heartbroken about the decision.

40:38Say goodbye to Nana, Ed. Say goodbye to Nana. The end is nigh. Yeah. It does bring up this question of what makes a good side project, because this one was Horizon Worlds, Meta's Metaverse, clearly a very bad side project. Did not work. Apple Vision Pro looks like it's going to be a very similar story. It's not really working. They're beginning to wind things down. Google Glass, I mean, we're seeing a theme here that wearables, or at least virtual reality wearables are not really great. Google Glass was a similar story. Didn't work. shut it down. Google Plus was another interesting side project.

41:18That was Google's social media competitor, which they shut down in 2019 after trying to get it off the ground for literally 10 years. There are many examples of side projects being total failures, and it doesn't work. At the same time, there are some side projects that have been really successful. For example, just to stick with Google, Waymo. Waymo started out as Google Project Chauffeur in 2009. I think the best example probably would be the best side project in history would have to be AWS.

41:51Scott Galloway:Great point. Which started out as this internal thing where Amazon realized, oh, it's kind of difficult to communicate across different teams. Let's build this digital infrastructure. They built it. And then Andy Jassy realizes, actually, let's turn this into a business. And so he started to sell it. And now it makes up more than half of the operating profit for the company. Jeff Bezos himself has called AWS, quote, the greatest piece of business luck in the history of business. That was a great side project. So I think that becomes this interesting question, like, what makes a good side project?

42:24When does it work? When does it not work? And how can managers and executives take a framework moving forward to understand which things to greenlight and which

42:35Scott Galloway:things to say no to it comes down to management and that is so one of my first clients was levi strauss and co and they launched um they launched dockers which was the fastest zero to billion garment industry garment brand in history and then they launched a new thing called slates and what happens is is that a very senior person says this is my vision this is my baby and the way you please that person and perhaps get promoted over two other people qualified is you tell them how amazing Slates is and what a visionary they are. And you start to ignore the actual data. And it comes down to doing something really difficult.

43:16Scott Galloway:Post-it notes from 3M was a side project, right? It comes down to holding yourself accountable and setting up reasonable metrics at the outset. that. We are launching new podcasts. We launched China Decode. And I said, okay, we launched Raging Moderates by X date within three months, six months, 12 months. These are the metrics that define success or not. And the problem is you talk yourself into believing that your ugly step-headed child is your child and it's beautiful. No, you have to be able to perform infanticide, Facebook had a phone. Amazon went into auctions and they did it the right way.

44:00Scott Galloway:And I think Bezos is a very disciplined operator and said, okay, Amazon had a phone. They said, yeah, they had a phone. I just remembered. They said, okay, if it doesn't get X pickup by Y date, we're pulling the plug. The key to successful side projects is not the ones that work. It's the ones you're willing to kill because you only have so much wood to put behind an arrow. so absolutely look for growth battle test the shit out of it but also you know we just launched a substack strategy subscription revenue we have realistic but yet at the same time aggressive benchmarks and if we don't hit them we're going to get together as a group and we're going to decide whether to pull the plug on it unfortunately it's very successful so far uh please visit us on substance.

44:45Scott Galloway:But a CEO's job is to have the stones to try new things and to have the backbone to kill them when they're not working and to say, okay, Slates, that was actually a third brand from Levi's. I think it was called Slates. Okay, Slates, this was the right idea. We made the right decision. It's important we take risks. It's not working. Kill it. And, you know, well, it just needs more time or it just needs more capital. Probably not. These things, the most of them that work, they may get out of the gate slowly, but usually there's a lot of blinking green lights on the shit that works. But again, what happens is a senior manager sees it at their legacy and really appreciates anyone who's willing to go on their ayahuasca trip with them.

45:31Scott Galloway:So it just comes down to leadership. And that's to say, okay, you know, HBO Go, HBO Now, HBO Joey bag of donuts. All right, folks, I get all the sub brands trying to address different audiences and different technology platforms. It's not working. Let's just go back to HBO. So it comes down to leadership because people you are paying, generally speaking, most of them will say whatever the fuck makes you feel good. Because if someone makes you feel good, you're more inclined to want to promote them. Well, that's not the litmus test. Is this person really good for shareholder value and setting up really tangible hard metrics and holding you and themselves accountable.

46:16Yeah, it's such a good point. We were discussing this as a team and there were some basic questions that we think are pretty crucial to if you're going to launch a side project, if it makes sense. Three questions that we think are relevant here. One, do you have the money to make the bet? And that's a very important fundamental question. Like, you need to have cash coming in the door. I mean, Amazon had figured that out before they launched AWS. They had significant cash flows at that point. And then they were able to make that bet. You could argue that Meta had that positioning as well. The second question is, is it leveraging existing infrastructure?

46:56Like, are you the right person to be doing it? If you're like a clothing brand, like, no, you shouldn't launch like a candy company just because you think it's a good idea. that's not your wheelhouse. So you shouldn't be getting into that. And then the third thing, and this is the thing that I think Meta didn't really, the question that Meta did not answer correctly, or perhaps never even asked themselves. And that is, is it actually a good idea? It's not that helpful, but maybe we could put it in terms of, is it actually solving a problem, a real problem that people have? And if the answer is no, you just can't do it.

47:35Because no amount of capital, as we saw, will turn a very stupid idea, a very bad idea, into a good idea. The money doesn't solve the problem if the idea is stupid. And that seems to be the mistake that Meta made, is they never really thought to ask themselves, is this even a good idea? Are we actually solving a problem here that people want to be solved? The answer was no. And then they invested so much money into it, probably so much pride and ego into it as well, victims of the sunk cost fallacy, to the point where they decided, like, we have to keep going because we've bet the ranch, we've bet the farm on it, we've literally bet the name of the company on this working out.

48:17And here we are in 2026, and it didn't work.

48:19Scott Galloway:The only answer I would add to that is that a good versus a bad idea, sometimes the best ideas are just fucking crazy and feel like a bad idea at the same time, and sometimes logical stuff just doesn't work out. I think that you need to veer away from the subjective and the qualitative towards the objective and the quantitative. And that is a good manager and a good CEO says, all right, what does success look like? And then put hard metrics around it and say in 90 days we're going to look at what we think success would look like and also what does failure look like. And constantly reevaluate whether we're – And also a basic economic term that management and CEOs understand, but they don't really live by is the notion of sunk costs.

49:08Scott Galloway:And that is we've put so much energy and so much capital into this thing. We love it. No, that's gone. From this point forward, if we were at a standing start, would we put more money into this? That's the only question that matters. That money's gone. It doesn't matter. That effort gone, the time spent on it, doesn't fucking matter. From a standing start here and now, where this project is, how it's going, how well or how not well it's going, would we continue to fund this if we were outside investors who had no legacy investment, no effort, no affinity, no affection for it? We'll be right back.

49:45And for even more markets content, sign up for our newsletter at ProfGMarkets.com.

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53:30We're back with Prof G Markets. Disney finally has a new CEO. Josh DeMauro officially took the helm on Wednesday, stepping in at a difficult time for the company. External risks, including the war in Iran, weigh on its tourism business, its studio business faces headwinds, and of course, its linear assets continue to decline. Just as an example, after four years of steady ratings gains, the Oscars stumbled last Sunday, with viewership on ABC falling 9 % from a year earlier. So Scott, Josh DeMauro has taken over as of last week. He has, you know, a steep road ahead. What would be your advice to the CEO?

54:15How would you get Disney back on track at this point?

54:18Scott Galloway:I think they should merge with Netflix. I think that this is a business that's consolidating, that requires so much heft. I don't think that's a good idea if I were the head of the FTC or the DOJ. But you're asking me for advice. The parks is just an unbelievable business. I build from the parks out, parks and the studios. They'll do what they need to do. They'll shed the declining cable assets so they can go good bank, bad bank. This should be an events experiential parks company with a really strong studio and a fantastic, really clear positioning around family, around streaming. I feel like Netflix and Disney Plus are kind of the only ones I think I know will be around in 10 years.

54:57Scott Galloway:It's an incredible company. It kind of identified, it's sort of a bit of a proxy for how Hollywood has done the last 10 years. And that is great content, products never been better, enormous disappointment from a shareholder perspective. Disney stock is lower than it was 10 years ago. What is the S &P? The S &P is what, I don't know, tripled since then or doubled and the NASDAQ's tripled. And meanwhile, if you invested in Disney or worked at Disney and have options, you know, a huge disappointment. And if Bob Iger, also, just to reverse engineer this to a learning for executives, you're always better off leaving too early than too late.

55:39Scott Galloway:And Bob Iger represents that in spades. Bob Iger came home from Vietnam eight years ago after a tour, medals pinned to his chest, total hero, one of the most respected people in media history. and then he got bored, started heckling from the cheap seats, performed a coup from outside of the palace and went back to Vietnam and is coming back with, you know, a massive injury. His reputation has really been diminished. If he had just stayed away, he would probably be one of the people everyone's talking about to run for the Democratic nomination for president. He had that kind of credibility. He had that kind of luster.

56:18Scott Galloway:And to be fair, he faced a lot of headwinds in the broadcast market and disney's at a good launch but there's just no getting around it the way you're evaluated as a ceo is on the shareholder price and the share and the shares have vastly underperformed you know in the last 10 years i think netflix is up four or five whole fold disney is flat so like this is a mixed legacy and i think at this point I called or I saw Ted Sarandos at one of these fancy award shows. I'm like, okay, you saved$120 billion by not buying Warner Brothers. Your stock's up 10, 15%. You've got another$60 billion. $120 billion plus$60 billion is$180 billion.

57:04Scott Galloway:I'm like, here's an idea. Disney's$178 billion. Why wouldn't you merge? I mean, while the FTC and the DOJ are asleep, why wouldn't you, which I think is a bad thing, why wouldn't you just... Can you imagine Netflix and Disney? Can you imagine Disney getting to incorporate the IP of Wednesdays and Stranger Things into their parks? Who in the world could not have a subscription that involves either Disney, Disney Plus or Netflix? they would just they would just kind of i mean in some that merger shouldn't shouldn't happen but i said to i said to ted and i don't know bob and he's probably sick of me shit posting him although he does love he does wear lovely cashmere sweaters um but i think that if i were him my ultimate swan song would have been merging with um netflix the new guy i think disney's a great buy right now because um i think the parks are arguably the largest the business with the largest moat i think disney has real pricing power and they're paying a conglomerate tax right now and that is because basically the earnings call goes like this streaming media platform finally paying off we're getting real operating leverage there the parks continue to be one of the most dominant dominant entertainment assets experiential assets in the history of the business you know you're you people call child services if you don't take your kid to disney and spend twelve hundred dollars for a shitty hotel room by the time they're five right and then and then it's like okay and then they go on to apologize for all of their broadcast shit espn abc disney etc as soon as they get rid of that shit they could sell all their broadcast and cable stuff for a dollar and the stock would be up 20 % the next year.

58:50Scott Galloway:Because what happens is you pay a conglomerate tax. And that is when you have a company with multiple entities, basically the market finds the shittiest asset and assigns that multiple to the whole business. And that's what's happening to Disney. If Disney were just parks streaming in the studio, you know, champagne, cocaine with an eight bottle of ketamine, that's a good time. That's a good time, Ed. Did I tell you i'm into loom did i tell you i'm into loom oh you wrap that up there um yeah look i mean disney's pollock's business is that's that's the crown jewel at this point and it is very really interesting how that has changed over the last few years where there is now a premium on these as as josh brown puts it heavy asset low obsolescence assets i mean things that are in the physical world people will pay a lot of money for that's the premium that investors are paying for.

59:46So they have that. And as we've talked before, like Netflix wants to get into in-person experiences too. And probably a year ago, maybe two years ago, we had a whole conversation when Netflix was trying to open up kind of like a Netflix park, some sort of experience. I'm not sure what's happened since then, but I know that it's something that they're interested in. And if they had a strategy on that front, it is something that investors would certainly reward them for. Plus, if you can have a duopoly, you might as well take it. And it seems that the FTC and the DOJ, at least under this administration, have no interest in actually regulating monopolies and duopolies.

1:00:21So if you can do it, you should do it. You should make it happen. So I would agree with that. I do find it really interesting what happened with Oscar's viewership, where it fell 9%. It was the lowest viewership since 2022. Among the key demographic, which is 18 to 49-year-olds, it fell even harder. it was down 14%. We saw the same thing with the Golden Globes this year. We saw the same thing with the Grammys. And as everyone knows, the Linear Network is just getting crushed at the moment. But just anecdotally, something that was really interesting, I wanted to watch the Oscars. And I had dinner with my girlfriend that night.

1:00:57I said, let's watch the Oscars tonight. And she said, really? And I was like, yeah, like you don't want to watch the Oscars? She said, no, I don't really want to watch. I was like, why? You love this stuff. This isn't someone she likes, she's interested in celebrity news. Like, she likes this stuff. Why don't you want to watch it?" And she said, "'Cause I'll just watch it tomorrow on TikTok. I'll just watch the clips. Because then I don't have to watch all the bullshit for three hours." And that was when I suddenly realized, like, I mean, this is a clip economy at this point. And that's the big problem, which is that these, I mean, maybe people didn't watch the Oscars on ABC, but I know that they watched it on TikTok.

1:01:37I know that they watched it on Instagram. I know that they watched it on YouTube. Those are the platforms where people are consuming this information and consuming the content. And in a lot of ways, the live Oscars on ABC, that's just sort of a Trojan horse. That is a Trojan horse. That is a vehicle for the clips that get put out on social media the day after and the day after that. And that's where people are consuming all of this content. And so we've been looking into this, and it is becoming a lot more of a thing. I mean, you look at sports as an example, which is all about live. It's about watching the match.

1:02:12Only 31 % of young sports fans today say they watch full-length live matches. 74 % of them say that they get most of their sports content from social media platforms. I look at my own behavior, I suddenly realize I'm watching the Premier League basically on YouTube because I'm just watching the highlights. And so I think if I had to give advice to Disney, if you want to fix this Oscars problem, you need to start investing in the clip economy. You need to start figuring out, OK, yes, we've got this live thing called the Oscars, but that doesn't really matter. what matters most is clipping it up and packaging it and spraying it all across social media the day after.

1:02:51That's where we're going to try to make the money. And that's where we should try to sell the ads to. We need to develop a very real ad strategy around social media that isn't so dependent on beaming this onto the linear networks. That would be my advice.

1:03:05Scott Galloway:I did a meeting with the Academy or the Board of Governors for the Academy, and they asked for advice. Everything you're saying makes sense. But unfortunately, Certainly, Alphabet has other ideas, and that is if you want to display their stuff on YouTube, they'll give you just enough money to kind of make it worth your while, but not enough money to anywhere justify the amount of money that ABC used to play to broadcast the Academy Awards. First off, movie theaters, and it's anathema to say this, and all these producers and directors talk about the collective of going to the movies. I think movie attendance is down 40 % since COVID.

1:03:39Scott Galloway:My kids don't go to movies. I mean, we used to go when they were little for kids' movies. I've been to two movies this year. I went and saw Roof Man because my friend produced it and I'm a huge Channing Tatum fan and it was great and I love the paternal theme in it. And I went and saw One Battle After the Other, which is a good film, but it's sort of like $350 million artistic masturbation. It won everything. Okay, I'd be shocked if that movie gets its money back. And what a shocker. People don't want to watch a three-hour show interrupted by commercials of a bunch of high school graduates lecturing us on geopolitics.

1:04:11Scott Galloway:it's just what a shocker that's not exciting at the vanity fair oscars party i tracked down the you know i'm i'm good at running other people's businesses i'm even better at running other people's lives i can't help but give advice to people i tracked them down i'm like dude let's be honest the magazine business was dead 10 years ago you just didn't realize it what you should be doing that party that experience they should be running live oscar viewing parties all over the world with an aspirational guest list where they get influencers and brands to party similar similar to what bustle does charge them a shit ton of money hey you're patron and you want to sponsor russell crowe who's in sydney he can't be in la whatever or up-and-coming australian actors whoever they are and we're just going to print money there they could make so vanity fair could have and maybe they did this but i didn't see many brands they could make 10 million bucks off that party and they could make two or three million bucks easy at different experiential events all over the world for viewing parties of the Oscars or different things.

1:05:17Scott Galloway:But the actual business of airing the Oscars for three hours, if you're watching the Oscars on ABC, it means you're also at that point where you need opioid-induced constipation medication. It's not a good reflection on where you are in life. And the only reason you want to watch it, Ed, is because you're in this business. So it's not, and by the way, they don't want to invest in it right now because where is it going? It's going to YouTube. So that's where the world's going. You know, Conan O 'Brien, one of the most talented people in the world summarized it perfectly that the next host is going to be Mr.

1:05:52Scott Galloway:Beast. And he was joking, but it's kind of true. So this, the future for award ceremonies broadcast is going to decline. The future for experiential events, I mean, even just at a demographic level, the top 10 % of all the money, I don't want to go, I don't want to watch the Oscars. I don't even want to go to the Oscars. I'd love to go to a, going to a great viewing party and meeting interesting people and having an excuse to get dressed up and feeling interesting and fabulous, you pay a lot of money for that. And why wouldn't the Disney parks have like a big viewing party? Anyways, I think there's a healthy willingness to spend real money.

1:06:42Scott Galloway:You know, my son was super excited and I was super excited to do this. He and his other buddies who are seniors in high school went to Universal for their Halloween night and they went for a full weekend. they did Halloween for a weekend and I'm sure they spent a lot of money but I love that as opposed to watching you know going to a you know a movie and watching Halloween 11 uh with Jamie Lee Curtis the absolute hottest woman of the 80s Ed I'm sad you're not older that you missed out on that um anyways uh yeah the Oscars uh like it's it's a dying thing and you're right it'll be clipped up. But the company that can make money on those clips is the new host of the Oscars, and that's YouTube.

1:07:24I think this is where media companies need to get a lot more aggressive, though, in their social media strategy, because it's true. It's like you're playing on YouTube's terms. And we have this in our own business. We make way less money from the automatic ads that YouTube feeds the viewer when they watch one of our videos, which is why we have decided to do something a little different, which is that we own the relationship with the advertiser ourselves, and we place the ads that we want directly into the video. And maybe the YouTube audience will say that's annoying, to which I would say just skip past it, so whatever.

1:08:01But the point is, because we own that relationship, that's allowing us to negotiate the price for ourselves, which means that we're not having to throw money away to the big tech overlords over at YouTube, or at Instagram or any of these other sort of social media, neo-media platforms. And that's what all of these companies need to do. Without the Oscars, without Timothee Chalamet, without all of these superstars, Michael B. Jordan, no one's going to watch anything. You need these people and you need the Oscars and you need Vanity Fair to get them together and get the cameras out and put it on the platforms.

1:08:37And then the question is, how do you monetize that? You're not going to make a lot of money if you just post the Instagram clips and you just get the money from Instagram and Instagram's in control of the relationship with the advertiser, which is why, unfortunately, you're going to need to get a lot more aggressive on negotiating and owning the relationship with the advertiser and placing the advertisements directly into your videos. The audience isn't going to like it very much. That's on you to figure out how to make the audience okay with it. But that's what you have to do if you want to stop getting crushed by these social media companies.

1:09:11Because this is the future of media. It's all on these platforms. It's all in the clips. And that's where you have to make the money.

1:09:19Scott Galloway:I like your vision. I think it's optimistic. This is unfortunately what I think the reality is. And that is, so we're on YouTube. We're getting 100 ,000 to 200 ,000 views per episode. AdSense, we make almost no money from. It's$3 CPMs. It's a shitty business unless you have the scale of tens of billions of people watching videos every day. which Alphabet does. I think they split the revenue with you. I think it's 50-50. If you're in the podcast business, you get 70 % by having an ad distribution network or a partner like Vox. So already Alphabet is flexing their muscles. But here's what I have seen every time when you partner with a big tech platform, and it's the following.

1:09:59Scott Galloway:They fuck you. And that is you build a business, you're getting revenue, and then Alphabet, and what you say makes all the sense in the world. Bake the ads into the actual video itself. my prediction and Neil Mohan has been more generous to the creative community or not generous, but he realizes in order to inspire more and more content, we need to give more and more revenue to the creators. Eventually, eventually the history of big tech, give them enough money such that they will devote resources. And then overnight they do a Panda, they do away with brand pages and they fuck you. Well, what are we going to do?

1:10:35Are you just going to sit here and get fucked? or are we going to do something about it? I mean, I am advocating for do something about it. We sell ads. Right.

1:10:43Scott Galloway:We sell ads directly to the advertiser. We insert them to our audio product, of which there's no monopoly platform that can get in the way, right? The distribution here is not controlled across this monopoly. We have Substack, and there's several competitors to Substack where we get a subscription strategy, which is already creating real revenue. Newsletters, getting people to pull out their credit card and pay, whatever it might be. There are means of making money in the media ecosystem. What I'm suggesting is the moment you have meta, I was on the board of the New York Times and we were making a shit ton of money on something called about.com.

1:11:19Scott Galloway:We did all this. We get creators to do something on Southern cooking, optimize it for Google. Google would send a ton of traffic and send a ton of traffic to us. And we'd have links to buy stuff. And we made my overnight. Alphabet does a Panda release. and we wake up the next morning and our revenue is down 40 to 60%. I love Jessica Yellen at News Not Noise. I think it's a really important organization. I think she does incredible work. And I'm an informal advisor to her and I'm like, you're too dependent on Instagram. And this is what Mark Zuckerberg, the moment you have any margin, he will come for your margin.

1:11:54Scott Galloway:And this would be my prediction on Alphabet. Neil has a different vision so far and I respect and appreciate it. We love being on YouTube and it's been great for us. At some point, If the same behavior continues to cycle through the DNA of big tech, they'll go, oh, you're baking videos into your thing? No, fuck you. We have technology to start those out or you have to pay us 90 % of that revenue. Eventually, they come for you. Eventually, they fuck you. And that has happened to almost every brand. Facebook used to have brand pages and they encouraged Adidas. You have to have a bigger brand page than Nike.

1:12:32Scott Galloway:So they spent all this money. A company like Buddy, there was all sorts of ecosystems around it. And as soon as your ecosystem gets big enough that it's real margin, they come for you. So I think they've got to establish direct relationships, as you said, with the consumer. They do that in streaming media. No monopoly controls their access, if you will. There's still a lot of bidders for their content. If I were, so let's, I apologize for the word salad. it. If I were on the board of Disney or if I were running Disney, we need something called Disney plus plus. What does that mean? 50 bucks a month, a hundred bucks, a hundred bucks a month.

1:13:12Scott Galloway:You get all the Disney properties, ESPN, everything, all the streaming media, and you have access to Disneyland for free on certain days when it's only Disney plus plus members. And you don't have to wait in line three fucking hours for the avatar ride and you get special you get special products special merch but you are a disney plus plus household because people think wow we go to disney once a year we should do this it's a great no no you don't you go once every three years you just feels like once every month because it's a seventh circle of hell but they could wrap all of that special access to one-of-a-kind merch days at disney that aren't a fucking nightmare where It's like a reasonable crowd, special birthday celebrations for your kid maybe at Disney, that princess experience.

1:14:03Scott Galloway:And so many households would sign up for that. Instead, they have the seven dwarves of businesses all competing with each other. They should have – Disney is in a position to have the ultimate family loyalty program. And the market loves recurring revenue. The money you give up at the till at the entrance gate at Disney, the money you give up from merchandise, the money you give up in the theaters were paying 12 bucks. That revenue is valued at whatever, one to three times revenues. The recurring revenues you would get from a loyalty program would be valued at five times revenues. So you could lose 10 or 20 percent of your ad revenue from those shitty businesses at ABC or ESPN or even at the turnstile.

1:14:41Scott Galloway:And you can increase shareholder value 40 to 70 percent by moving everything into the mother of all loyalty programs. I think that's a good idea. And I'll just end with my advice to them, which is you should never post a clip on social media ever again unless an advertiser is directly paying you for it. You should have a relationship with an advertiser, get it in the clip somehow, negotiate a deal, get paid for it. Because the current system is that we just do it for free. We do it for free. We think that it's marketing, but ultimately we realize, actually, no, this isn't marketing. This is the content.

1:15:13This is where all the money is being made. And yet we're not seeing any of it. because it's all going to Instagram or it's going to YouTube, it's going to a tech platform. Own the relationship with the advertiser and get paid for every single clip you put out would be my advice. And then my final thing I'm going to disagree with you on, Scott, is that one battle after another was autistic masturbation. That was an incredible movie. I loved every minute of it.

1:15:40Scott Galloway:A third of a billion dollars. Expensive. If it didn't have Leo DiCaprio and Benicio Del Toro and that one woman who's literally the hottest woman in the world right now, I would say that thing cost$3 million to make. I mean, yeah, good film. Fair. Good film. Cost$330 million. I wouldn't invest in it, but I would watch it several times. In fact, I have. I've watched it again. I loved that movie. All you need to do to be in the movie business is marry a rich man and be a documentary filmmaker. Whenever anyone comes up to me and says, oh, I'm a documentary filmmaker, I'm like, oh, okay, so you married a rich husband in a boring business.

1:16:17Scott Galloway:And they're offended. I'm like, okay. Let me guess. Are they offended by that? How? You married a guy 30 years older than you that made his billions in iron ore smelting, and now you're changing the world with documentaries. That's me. A little cynical. That's my next life. 27. That's what I'm doing in 27. I'm just angry because I have been so unsuccessful in Hollywood. That probably makes sense, too. All right, let's take a look at the week ahead. We will see consumer sentiment tumult. We'll also see earnings from GameStop and Carnival, and earnings season will wind down. Scott, any predictions?

1:16:49Scott Galloway:OpenAI's Sora social media app is going to be shut down soon. So Sora is the kind of OpenAI TikTok version, kind of the social media platform of AI-generated content where users upload video on models generated from Sora. It's short-form content, and you can share it with your friends. And when it came out, it was number one in the App Store, and it garnered 1 million downloads, actually faster than ChatGPT. In the beginning, it was growing faster than ChatGPT. But the party's over. Downloads fell 22 % month over month in December and another 49 % in January. Downloads are collapsing. and effectively i think what you have here again it goes to the notion of knowing when to shut something down and with the renewed focus on focus uh you're going to see this thing uh be shut down users are dropping like flies um open ai spent an extreme amount of time and money to keep the lights on here estimates are that it costs 15 million dollars a day to run sora or five billion a year and that it's only bringing in less than half a million dollars per month.

1:17:59Scott Galloway:So essentially, the app is a venture that is not central to open AI's core competencies. It's not attracting users or revenue. It's generating massive losses and it's a distraction. So in addition, it's kind of bad for the brand. Two-thirds of Americans disapprove of online videos as created by AI. It's the definition of AI slot.

1:18:24Scott Galloway:And about three quarters of users say they would be uncomfortable consuming fully AI-generated creative content. In sum, the correct strategy of focus, the first victim of that is going to be OpenAI's Sora app, which is going to be shut down. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carty. Our research team is Dan Chalon. Isabella Kissel, Chris Nodonoghue, and Mia Silverio. Jake McPherson is our social producer. Drew Burrows is our technical director. And Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from Prof G Media.

1:19:01If you liked what you heard, give us a follow and tune in tomorrow for a fresh take on the markets.

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