Can Capitalism Solve Climate Change? Plus, The Right Way to Diversify

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1:17Scott Galloway:Welcome to Office Hours of Prop G. This is the part of the show where we answer your questions about business, big tech, entrepreneurship, and whatever else is on your mind. If you'd like to submit a question for next time, you can send a voice recording to officehours at propgmedia.com. Again, that's officehours at propgmedia.com or post your question on the Scott Galloway subreddit and we just might feature it in our next episode. Let's bust into it. Question one. Our first question comes from Reddit, SaucyMan11, who says, Scott, I believe you once said that the world's first trillionaire would be an entrepreneur private sector company that helps the government address climate change.

1:53Scott Galloway:In fact, the world's first trillionaire is a walking, talking government subsidy who plans to make our species multi-planetary. It makes me wonder if capitalism and climate responsibility can truly coexist. What's your current prediction or feeling around climate mitigation, technology, and importantly, capitalism's relationship to it at all? It's an interesting question. So first off, with respect to the world's first trillionaire, I don't think he's going to be a trillionaire very long because I think that he's an amazing engineer and his greatest engineering feat was not landing a rocket on scissors, but working with Goldman, JP Morgan and AI to engineer an IPO that exploded this thing beyond all reasonable or sustainable valuation.

2:36I don't care if he's a meme stock or the cult of Elon, that thing is not going to survive at 100 times revenue or that valuation isn't going to survive. it now uh and also part of the shtick was something kind of related to sustainability and that is data centers in space which i think every piece of analysis i look at and every time i see the size of a data center and i remember the cost per kilogram to launch equipment and material into space i think that is nothing more than the rebovin or robots times a thousand or we're going to have a million autonomous taxis within 12 months said elon musk i think in 2016 or 2017.

3:15I think it's an absolute fever dream meant to see above, get the stock to 100 times valuation now. In terms of capitalism, climate change, I would argue in a weird way, the war in Iran is actually going to result in a more sustainable future with respect to climate change. Why? I think nations all over the world have fired up their windmills and their solar panels, and the economics are taking over here.

3:41Scott Galloway:In any given moment during the summer, during the day, 60 % of Texas's electricity is coming from wind power. That's right. Now, Texas isn't exactly Berkeley or sandaled Brooklynites looking to save the whales. It's because the economics of renewables are overtaking the economics or becoming more attractive than the economics of fossil fuels. And not only is there economic upside or incentives to invest in renewables, there is now a renewed sense of security needs that fall on renewables. And that is China wasn't really ever put in a corner by the blockage of the Strait of Hormuz because they had made such massive investments in renewables.

4:23Scott Galloway:They'd also stockpiled fossil fuels. But effectively, as the largest producer of solar panels and windmills and batteries, they weren't panicked. And I think every nation in the world after seeing what happens when a nation, a rogue nation inspired by a war from the guy we used to trust, Uncle Sam, creates new urgency to figure out diversification away from fossil fuels. So just as the UAE is building a pipeline that bypasses the Strait of Hormuz, everyone or every nation in the world is thinking about how they bypass the Strait of Hormuz with their own native renewable technology. I think you're about to see a firing up again or renewed focus on renewables, which I think is ultimately good for climate change and sustainability.

5:14And it's being inspired by what is effectively Iran putting its boot on the carotid artery of 20 percent of the global flow of oil. People have decided, nations have decided they don't want to be subject to the risk of the tumult in the Middle East, much less a sclerotic administration in the United States. So I think we're about to see an absolute tailwind or an afterburner around the investments required to create greater renewable technologies. In 2025, renewables represented 88 % of total new U.S. power capacity. So everything incremental from this point appears to be renewables. Renewables plus battery storage are projected to account for 99.2 % of new capacity and according to financial advisory firm Lazard, even without subsidies, renewable energy is the most competitive form of generation in the U.S.

6:06See above economics are taking over here. In the first half of 2025, sustainable funds outperformed traditional funds with a median return of 13 % compared to traditional funds at 9%. This May was the first month on record in which solar overtook coal and U.S. electricity generation. And we're not going back. That's a pretty big pivot point. According to Grandview Research, The global clean technology market size is currently estimated at$916 billion and projected to reach$1.84 trillion by 2030. Energy demands from AI growth are inadvertently driving climate mitigation investment in clean energy, right?

6:40It makes sense that it's one thing to have a data center that everyone hates. It's another thing to say it's going to be fueled by fossil fuels. After 15 years of nearly flat U.S. electricity consumption, demand increased 2.1 percent per year on average over the last five years and could increase up to 16 percent across the U.S. by 2030. The CEO of NextEra Energy, one of the largest utility companies in the U.S., cited renewables as the fastest way to add electricity to the grid. And Forbes projected that meeting new electricity demand via clean energy could save consumers$5 billion annually by 2030, compared to if that demand were met through coal and gas.

7:17Let's talk about nuclear. According to the U.S. Department of Energy, nuclear power is the most reliable energy source in the country, running at full power more than 92 percent of the time. And U.S. nuclear power plants avoid CO2 emissions by over 430 million metric tons annually. I think about brands that have taken a hit, Ferrari with their electric car, AI with just the worst spokesperson in the world, Kevin O 'Leary for a data center and income inequality. the brand that has really had a renaissance is in fact nuclear or really bounced off a bottom. In addition, there's incentive on the back end as climate change is pushing up insurance rates, and that is the severity of climate-driven natural disasters result in greater premiums.

7:57From 2017 to 2022, home insurance premiums rose 40 % faster than inflation. I think that's largely regulatory capture. We need a regulated insurance industry where beyond certain EBITDA margins, They have to rebate to their customers. Different nations do this successfully. In 2024, extreme climate events cost the U.S. $183 billion in sum. I actually think the market is doing what it's supposed to be doing here. And I think we're going to see, I think we're experiencing it. And it's a good thing. And that is a massive resurgence in investments in renewables because of not only economic upside, but because of a reduction or abatement in geopolitical risk.

8:38Question number two comes from a listener who emailed us. Hi, Scott. I'm a 33-year-old male and I work at a company that has gotten an extreme amount of business hype related to AI. I'm a manager there, and as a result, RSUs have been part of my compensation for the last seven years or so. The stock price has 10xed in the past year, and my stock sits between$1.1 and$1.4 million, depending on the day. Almost all of that will vest over the next two and a half years. The outlook is very positive for that time period, but who knows how long the good times will last. All of my basic needs are met and then some.

9:10I have solid long-term savings, so this money is looking more like a vacation home or early retirement rather than catching up to my peers. So the question is, how should a younger professional treat outlier compensation in years like this? Do you recommend hiring wealth managers? And what would you prioritize in terms of how money is used? Well, this is the mother of all good problems. Okay, so it sounds like you have your base, which immediately goes to, well, take a risk.

9:35Scott Galloway:If your stock is 10x in the last year, I would argue that that stock is likely fully valued or potentially even overvalued. I would look at its multiple on revenues and earnings relative to your peer group. And the natural inclination around selling a business or selling a stock is when you're worried about the future and it feels shaky. And then to hold on to it when things are good. I find in general the time to sell a business or an asset is when the future looks brightest because that will be reflected in the stock. More than that, typically the way to build real wealth is to just let things compound.

10:09Because if you sell it now, you're going to incur a tax it, hopefully a long-term capital gain. And it doesn't sound like you need the money for consumption now. Having said that, if this, whatever it is,$1.4 million represents more than 50 % of your net worth, I'm a big believer in diversification.

10:26Scott Galloway:And there's a middle ground here. You could sell a quarter or half of it and hope that I'm wrong and then it goes up another 10x. But I think when you've experienced a 10x-like gain, and it represents more than 50 % of your overall net worth, and I don't know if it does, if it's only 10 % of your net worth and you're there, then you may want to ride it out. Having said that, you're already very invested in this company from a human capital standpoint. You're working there. So I would argue that at a 10x valuation, you may want to think about diversifying and selling a quarter of it or a half of it, and then call me and tell me I'm wrong when it 10Xs again, and then that's a win for everybody.

11:05Scott Galloway:But you get wealthy through concentrated bets of your own human capital and financial capital when you're younger. But the moment you have an asset base, don't make the mistake I've made. The mistake I've made is that I've been rich three times. What does that mean? It means I've gone broke twice. And why did I go broke twice? Because I made stupid investments or I wasn't good at what I did? No, because I was way too concentrated. always in tech, always into my own companies, believing that I was bigger than the markets. And what I didn't realize is that market dynamics trump individual performance of you and or your company.

11:38And if we go into some sort of scary recession in the next 12 months, if whatever sector you're in becomes less hot than it clearly is now, there's nothing the company and or you can do. It also hurts to be sitting on a$1.4 million gain that turns into 140 ,000. You're gonna anchor off those highs.

11:56Scott Galloway:So I think in sum, with the little context I have here, I would say sell a decent amount of it and diversify into asset classes that are totally or nearly uncorrelated to where you're investing a great deal of your time. And it sounds like you have a great deal of wealth. And that is this current company. It's not all or nothing. It's not sell all of it or don't sell a share. I would take a little bit off the table. And if it keeps going up or I take 25 to 50 percent off the table. And if it keeps going up, I would continue to sell more. The key to wealth creation is making a big bet on a singular investment and focus in terms of your own human capital when you're young.

12:34But the moment you have assets, be smarter than I was.

12:38Scott Galloway:Start diversifying and hope you're wrong. Hope it goes up another 10x. But in the meantime, create distinct asset classes that are your Kevlar, such that when shit gets real, and it always does, what is a recession? something that typically happens every seven years. We haven't had one in 16 years. Is that right? No, it's more than that. 08? Wow. 17 years. I can't do math. 18 years. You want to be the one that diversified and can take a bullet, right? Kevlar or diversification is your Kevlar. And then as the markets can throw up, you can take a bullet to the chest. It'll still hurt, but you'll survive it because you have your Kevlar, which is diversification.

13:16Scott Galloway:Thanks and congratulations on your good fortune. We'll be right back after a quick break.

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15:57Scott Galloway:Welcome back. Question number three also comes from email. Prof G, seems like you have a lot of successes, but have often talked about some of your failures, including while having young kids. What helped you get back up again? What helped your confidence in doing something again after your failures? and how did you avoid falling into the mindset of giving up and getting beyond those failures? Really appreciate what you do. I think this is one of my superpowers. At the end of the day, I'm a storyteller. I'm a good communicator and I have the ability to attract and retain talented people because I like to think I treat people well, I compensate them well, and I make them owners.

16:33I give away, I think, my goal is to give two to three X the equity that most people would give to similar positions at other firms. Anyways, whenever I meet with an entrepreneur that has a great small services company and they're having trouble scaling, I'm like, just show me our cap table. And what you're gonna find is the most talented people leave because the senior people are under the impression that they're the magic sauce

16:50Scott Galloway:and the young people are just excited to work there and make decent livings. No, young people wanna be you. They wanna be owners. They wanna make real money. They wanna make outsized compensations. Anyways, the third superpower I have is rejection. And that is I'm willing to endure rejection. And that sounds like easy to say, but I'm not exaggerating. I have a large group of friends who were hugely successful, mostly in the financial services industry and hedge funds. Like I said to the previous question, the industry was bigger. Industry dynamics were bigger than their individual performance.

17:21Scott Galloway:And essentially, there's only two types of alternative investment managers surviving right now. The enormous mega cap TPG, Elliott, Apollo firms that just are so diversified and have such access to such incredible deal flow that they're winning. and incredible relationships with investors, and then hyper-focused outperformers in like, you know, they only invest in biotech in Spain, or they've discovered this one methodology around quant trading. Everyone in the middle, which is probably 80 % of funds, is just getting crushed, just crushed. And I had a lot of friends that were, you know, quite frankly, in the kill zone there.

18:04Scott Galloway:And that's not the hard part. The hard part is that these were individuals who knew nothing but success their whole life or making millions of dollars by the time they were 30, 35, and then things get hard for them and they literally get stuck. They can't get past it. Or the same thing happens with, I know, a few friends who never really got over their divorce or personal tragedy. How have I been able, I've been shot in the face. I think I'm generously sort of three or four, three and two. I've had as many business failures as successes. And one of the wonderful things about America, and if you don't take a lot of risk in America, you're not taking advantage of one of the core points of differentiation of the context and the environment you're in.

18:43And that is we forgive failure more than any other nation.

18:47Scott Galloway:Even our bankruptcy laws let you start over. The reason I've been able to endure rejection is because I have a lot of experience. And I'm not trying to be cute here. I ran for 10th grade president, 11th grade president, 12th grade president, lost all three times. And based on my track record, decided to run for, wait for it, student body president, where I went on to hold your disbelief, lose. I was never afraid to lose and then get up and try again. I can't tell you how many jobs I've applied for. I can't tell me how many sources of capital I have pitched. I probably raised, I don't know, in various formats, a billion dollars from 10 or 15 different investors, maybe 20 or 30 different investors.

19:26I wouldn't be surprised if I have pitched over a thousand investors and have a one to 2 % hit rate. And I am very good at raising money. God, the amount of rejection I've endured from women. And what has that done? It's not made me numb to rejection, but it's made me try to figure out the market and how to increase the likelihood of avoiding rejection the next time I tried to raise capital or start a business. But I started an e-commerce incubator in 99 that was like done in six months after the dot-com implosion. I interviewed with Procter & Gamble and the

19:58Scott Galloway:Central Intelligence Agency. I applied to Indiana, Penn, Northwestern, Stanford, Duke business schools, rejected by all of them. But all you need is one. All you need is one company to hit. All you need is one wonderful person to get to know you and find that you're a good person. They want to spend more time with you. When you find people who have outside success relative to what you think they would have, either professionally or romantically. It's because they're not afraid of rejection. So what's the key to it? Enduring it, putting yourself in positions of risk. That's why I think sports are so important is they teach people how to lose.

20:43Scott Galloway:And then finding a means of recovery. Now, I've never really figured out what that is, but figure out, there's a couple of things that really helped me endure rejection or embarrassment because what you're talking about with rejection, what you're really afraid of is public failure. When you start a business, you're risking public failure. When I started an e-commerce incubator in New York backed by Goldman Sachs, Howard Schultz, JP Morgan, there was no reason for it to fail. And when it did fail, it was embarrassing for me. But what's helped me is the following, my atheism. And that is a belief that at some point soon, I'm gonna look into my son's eyes and know our relationship is coming to an end and that it's over.

21:22And it's gonna happen really soon. And no one you're worried about what they think of you is going to be alive in 100 years and nor are you. It just doesn't fucking matter. When people see you fail or they see you say something stupid or they see you hear about you not getting into Stanford or whatever it is, realize they think about, oh, he or she didn't get in or her business failed, you know, oh, you know, whatever. And then they go back to thinking about themselves. In addition, nothing is ever as good as bad as it seems. Hands down. You might just feel so rejected by a company, a bad investment, an individual who doesn't return your affection, and recognize that in that moment, the pain, the half-life on it is much shorter than you think.