Office Hours: The Creator Economy, Planning Your Exit Strategy as a Business Owner, and Scott’s Sources of Inspiration

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1:06Welcome to the Prop G Pod's Office Hours. 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, please email a voice recording to officehours at propgmedia.com. Again, that's officehours at propgmedia.com. First question. Hi, Scott. This is Sakshi from India. I'm a big fan of you and I find your opinions very insightful. I want to know what you think will be the future of content creators economy. Now I see everyone is creating content. Everybody is making tons of money in reads and by making videos that are no value to anyone's life.

1:43Now finding relevant content has become more difficult than ever because now everyone is creating content. If I want to learn something new, I now prefer to go to older media, that is books, because writing books still require much more effort and seriousness than creating an hour video on YouTube and claiming that they know everything about something. What do you envision for the future of content creators and the economy surrounding them? I eagerly await your perspective. Thank you. Shakshi from India. Thanks for the thoughtful question. I have got to get into India. India is the most interesting, important geography or nation, I should say, that I haven't been to.

2:21And the majority of my good friends at the Stern School are from India. Some of my best friends are Indian. Anyways, but so I'm really fascinated by it and I want to go there. I don't know why I'm going there. I was in the Maldives, which is off, I believe, the southwest tip of India. But anyways, got to get to India. Thank you for the thoughtful question. So according to Goldman Sachs' research, the creator economy is expected to grow to$480 billion by 2027. That's nearly double what the sector is worth today,$250 billion. Goldman Sachs credits the expansion of the creator economy to the rise in digital media consumption and content creation's low barriers of entry.

2:56Analysts anticipate that the growth of the creator economy will be driven by increased investment in influencer marketing and payouts from platforms, which are supported by revenues generated from ads on short-form video platforms. So this is fascinating. It's growing. Goldman Sachs research forecasts that 50 million global creators will experience a compound annual growth rate of 10 to 20 percent over the next five years. Currently, only 4 percent of content creators globally make more than$100 ,000. dollars. So, okay, there's some really good things. One, the traditional gatekeepers aren't there.

3:26You can start making TikToks from your phone. And you do, I have discovered a ton of great content. I like watching Economist. The TikTok algorithm figures out that I'm into kind of wonky stuff around World War II history or, you know, basic or kind of economic trends. And it serves me up some really fascinating people that I wouldn't have found otherwise. I think that what's interesting you said you're more interested in books. The book business, which is, and this is kind of ironic given that it's where Amazon started, is actually doing quite well. And you do have a filtering that takes place with books.

4:01If a publisher thinks they're going to make money off a book, there's a certain amount of fixed cost. It does kind of sort out, I think, it is sort of a sorting mechanism. So the problem with these, I see a few problems. The first is that But the platforms, there's much fewer platforms than there are creators. And so the majority of the economic value is being garnered or captured by the platforms. And while there's some competition, I think arguably YouTube and Reels compete with TikTok, the vast majority of the revenues. If you look at the Hollywood ecosystem where there are creators, I would bet that, I don't know, 50, 70, 90 percent of the revenues go to the talent.

4:43The gaffers, the sound engineers, the actors, the writers, whereas I would bet it's 10%, maybe 20%. I bet it's sub-10 % of the revenues go to the actual creators. And that's the genius, if you will, of these platforms is they use technology to incentivize creators to basically do a lot of work and post their content for free. So one analogy, there are half a million people making a living from streaming, right? Streaming is the hot kind of old-ish media entertainment vehicle, right? Half a million people making good livings, good livings. There are 1.7 billion people on TikTok. Half of them are creators.

5:24850 million people are creators. Let's assume 1 % of them are really good because those half a million people that figure out a way to get to L.A. and get into a union or show that they really are fantastic editors or can write pithy comedy for a show. I mean, that shit's hard, right? They take a lot of risks. They're talented. There are huge screens there, right? They are really talented. So let's assume they're in the top 1 % of creators on TikTok. Well, if that's true, if that's true, that means there are eight and a half million creators on TikTok that are as good. So, okay, Scott, I don't buy that.

5:58It's not one in a hundred creators on TikTok. It's one in a thousand that are as good as Hollywood. Well, okay, even if it's one in a thousand of 850 million creators, that's 850 ,000 world-class creators that have all of a sudden entered the ecosystem and are competing with the traditional players. What does that mean? What does that mean? It means the thing kicking the shit out of Disney, Warner Brothers, Paramount, the traditional media companies, is not unions asking for more money. It's not each other. They're not competing against Apple TV or even Amazon. Who they're competing against is a 17-year-old who's decided that he or she is more entertained by one of those 850 ,000.1 % creators who, by the way, demand almost nothing to work.

6:48They don't get healthcare. They're not part of a union. They don't need to support a family or their apartment in West Hollywood. So it is absolutely sucking down all the economics. Essentially, the entertainment industry has been globalized. So a few things are going to happen here. There's going to be huge stress on the traditional creator economy that is old media. You're going to see a tremendous boon and super talented people who otherwise wouldn't have had access. And that's a wonderful thing. But unfortunately, as with most digital things, it's a winner-take-most environment. And that is not even the 0.1%, but the 0.01 % will take 95 % of the revenues here, the Mr.

7:28Beasts of the world. What are you going to have? You're going to need filtering mechanisms right now. Your filtering mechanism is a published book. My filtering mechanism right now actually is a TikTok algorithm. I hate to admit it, but I'm getting more and more of my information from TikTok. What's to be done about it? You know, what's a girl to do? Should there be legislation? I don't know. Oh, that's a whole, that's a whole ballywick. What I find is that communications in these platforms should be used as a weapon to market your brand and your expertise that you monetize elsewhere. I use TikTok.

8:04I use Instagram Reels, Instagram. I'm no longer on X, but I use all of these things. I do a lot on LinkedIn. I have a very talented woman working with us who focuses on primarily on just social media, clipping stuff and then distributing on social media. and it's a means of marketing and establishing our presence, our awareness, and our domain expertise around several issues. And then I monetize it elsewhere, books, speaking gigs. The podcast actually makes a decent amount of money, actually makes really good money once you get to a certain level. But trying, I can't even imagine how difficult it would be to try and make a living getting enough views on these platforms, given that the take to the house is 90 plus percent.

8:48It's near impossible. And you'll hear stories about people making a ton of money. But I just think I'm just discouraged when I hear that in China, kids report astronaut is the number one most aspirational career. And in the U.S., it's influencer. Just be clear. If you want to be an influencer, you might as well open a nightclub or try and go for the NBA. Your odds are about as good as making a living there. It is very difficult. However, it is a powerful tool to be a creator and a storyteller to establish domain expertise and awareness around the things you are doing professionally off platform.

9:25Anyways, thanks for the question and hopefully I will see you in India soon. Question number two. Hey, Scott, I am a 52-year-old single mom. My daughter is a high school senior and she will attend Boston University in the fall. About 14 years ago, my business partner, another single mom, and I started a niche consulting company providing federal grant writing administration to local governments in Alabama. It has been meaningful work helping rural poor communities repair infrastructure. In 2023, we had 900 ,000 in gross revenue and we have three employees, including ourselves. And this year we hope to hit a million.

10:02We both want out of the business and are ready for change. We love working for ourselves and the freedom, but the stress, long hours, pressure, and exposure are wearing us down as we get older. I would also want to get out of Alabama and build a community for my last third of life. No explanation needed why. How do we get out? Can you help us schedule a three to five year exit strategy? I know there are business brokers, but would they be interested in what we do? Sometimes the business, because it provides a high quality of life, seems like it shackles me into a stressed out, unfulfilled life.

10:33Do we just get jobs somewhere and take one third salary pay cuts and give up our freedom and our ability to travel? We have some funds saved in the business and 401ks, roughly about a million and no debt. Not enough to retire, but a bit of a cushion. I admire you. Love your humility and self-reflection. My daughter and I also will be in London for a week in April. Any suggestions on must-do activities? Thank you so much. What a lovely question, Anonymous from Alabama. So first off, you're doing God's work. Single mothers, you know, they're the secret sauce or the source of, you know, my mom. I was raised by a single mother a lot of my life.

11:14And what's interesting about single mothers raising daughters is daughters in single mother households and single parent households. And we say single parent, it's really single mother because 92 % of single parent households, it's the mom. But they have similar outcomes. It doesn't appear to diminish their likelihood of going to college or increase incidents of depression or self-harm. It's boys that really struggle in single parent households. Anyways, first off, congratulations. It sounds like your daughter is tracking. That's what we all want as parents is we all want a kid who's a senior in high school going to a good school.

11:46So well done. Also, you're a fucking gangster. You're making a million bucks a year in Alabama consulting to local governments, doing federal grant writing, and you have three employees. I mean, that's, you're getting sort of top line revenue per employee of a consulting firm and an urban center that would be working for four, I mean, you are doing so well. And I have just some initial thoughts here. First off, be clear, your economic vitality and stress, I have found, are correlated. When there are periods in my life where I have balance, really good health, I can focus on my relationships. Those are usually the periods when I'm not making any money.

12:36The marketplace is competitive and it has this sixth sense for who's willing to put up with the bullshit you are putting up with. You're essentially in a consulting business, which means managing clients, managing people, managing deadlines, pitching business, getting the business done. Before the business is done, pitching more business such that you can feed your employees, managing people who are awful, they're complex, they're needy, they want to be paid, they want healthcare, and then clients. Jesus Christ, Don't get me started on clients. Anyways, the market stresses not only the skills that you have to bring to bear, but the stress you need to endure.

13:09And it's paying you for Alabama what is a lot of money. So, OK, that doesn't help. But the realization is if you think you're going to shoot off to another city and have the same quality of life with lower stress, yeah, I just don't think that's going to happen. I just don't think that's going to happen. So you're rounding second, if not rounding third. You've built a nice little business. The question is, how do you turn it into enterprise value that you can then monetize such that you can start to scale down and maybe lower your stress levels in Alabama or somewhere else? It sounds like you're tracking.

13:42I'd be very remiss to give this business up right now. It sounds like you're doing really well. What you could do is the following. Identify someone in the business or get someone into the business who has the same sort of leadership skills that you have demonstrated. And over time, you could sell the business to. and you're going to finance their acquisition of the business. What does that mean? You have Susan. Susan is your most talented employee and Bob is the second most talented. And you say, Susan and Bob, this business is gonna be yours and it's gonna be yours in three to five years. And what we're gonna do is I'm gonna sell it to you.

14:19Now, how am I gonna sell it to you? Slowly but surely, I need you to take over the business and show you can run the business. And I want you to take me from 50 hours a week to 40 hours to 30 hours. I want you to take me down 10 hours per year over the next four to five years, you and your partner. And you guys either step up and show us the ability to do that, or we bring in new people. By the way, if the business is totally dependent upon you, then just run it for another few years, milk it for as much cash as possible, and then shut it down. A better way to do, to create long-term wealth, if you can, if you can, and this isn't easy, is to find people to take over the business that are likely, hopefully already in the business or bring in someone else and train them.

14:56And then you say to them, hey, every year I'm going to give you 20 % of the business and I'm going to finance it. You don't have to pay me a dime. What you do have to do is pay me 10 % of the top line and then 5 % after years, 3, 4, 5, and 6. So maybe you get somewhere between 45 and 90 grand a year for the next three, five, 10 years. And hopefully you find something else that's not as stressful that supplants or supplements that income. So one, you have an income stream, which is effectively selling your business, right? You take a fee, you take some top line revenue. They're running the business in exchange for you handing over the reins in a thoughtful way.

15:35And they didn't have to pay you cash. they just pay you 5-10 % of the top line each year for a predetermined number of years. And after that sunsets, after 5 or 7 or 10 years, they own the business free and clear. And that way you're rooting for them. You're going to help them. Are you especially good at new business? Can you edit these proposals? Like what is your superpower? And continue to do that. Just don't do it 40 or 50 hours a week and hope that they can maintain and or ideally grow the business and you effectively get a low stress income stream over the medium term. Now, the important part when you come to London.

16:12So I trust or hope your daughter is into sports. I would take her to a Premier League game. There's just nothing like it. I'm not in sports at all. But going to going to a league in the prem is just so unique. It's so uniquely, I don't know, British. Absolutely check out a pub. There's just there's fantastic restaurants. There's fun stuff to do. I wish I had stuff that was more uniquely Britain for you to do. Walk around High Street and Marlebone, take the tube, go see a show. You know, all the kind of quote unquote British stuff. You know, be a tourist, have a great time, walk around. There's a ton of neighborhoods to just walk around.

16:49There's a bunch of good food. Ping me and maybe we can all grab coffee. You sound like such a thoughtful, impressive woman. I would enjoy the chance to meet you and your daughter. Anyways, congratulations on building what sounds like a fantastic business and having a really successful parent-daughter relationship and a daughter that's tracking and have a great time in London. The people here are really nice. It's a wonderful city, second best city in the world, second best city in the world, and you're going to have a great time. Thanks so much for the question. We have one quick break before our final question.

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19:07From backyard jams to sold-out arenas. There's a song in every toast. Please drink responsibly. Responsibility.org. Jack Daniels and Old No. 7 are registered trademarks. Tennessee Whiskey. 40 % alcohol by volume. Jack Daniel Distillery. Lynchburg, Tennessee. Welcome back. Question number three. Hey, Prof. G. This is Morgan, originally from New York, but I reside in Hong Kong, which I would argue is easily one of the best cities in the world. I'm a huge fan, love your sense of humor, your insights and lessons, and I think you're an inspiration and a great role model. So thank you. My question was around what you do to continue learning and growing and specifically whether you're a disciplined reader.

19:43I used to read a lot, but I have a business and a family and I exercise and I'm busy and I find it very hard to consistently read books these days. All told, and to be honest, I rarely intentionally dedicate time to personal and professional growth. What about you? Do you find the time to read? And if not, aside from writing, what do you do to keep learning and growing and coming up with all your amazing insights? Whatever you do, you're doing something right. Keep up the great work. And if you ever come to Hong Kong and gave me the chance, I'd love for the opportunity to hang out with the dog and show you around in style.

20:16Thanks, Prof G. Morgan from Hong Kong. Congratulations on building what sounds like a really fun life. Every time I went to Hong Kong, I felt like I was in this really cool Bruce Lee or James Bond. It's just so I find it just such an incredibly one of the most impressive cities in the world. OK, so I get asked this question a lot. I don't have a lot of good answers. This is where I get my source of information from a few places. I get it from, if I find, I used to get a lot of great information from Twitter before it became just a cesspool of desperation or a sewage system on a sewage system. I now get a lot of great information from TikTok, from threads.

20:56Specifically, I follow a bunch of people that I find interesting, and they have a, you know, the algorithms do a great job of bubbling up really interesting articles. I don't, I'm reading all day. I read very few books. I read maybe two or three books a year, and I'm not proud of that. And it sounds, I'm self-conscious saying that, because I think to be an educated, learned person, you probably need to read more than that. But I'm reading all day, so I don't feel a need. I don't know. It's just not how I relax. What I try and do is not, for me, it's not quantity, and it's not even, well, I guess it's quality, but more than that, it's trying to cement certain ideas.

21:32So whenever I hear something interesting, I immediately kind of rewind it, watch it, read it over, and try and cement it in my wet matter. And I'll give you an example. Last night, when did I hear this? Oh, I was watching congressional testimony. And this person said when talking about technology and its impact on society, he said, we have paleolithic instincts, medieval institutions, and godlike technology. And I thought that was so interesting, the way he put that. And so what I do is across my media sources, when I find something that I think is really interesting, I either write it down or I watch it over and over.

22:14I read it over and over until, you know, until it becomes part of my, you know, static memory or knowledge system. Also, also, what really is the source of my inspiration is young people. Specifically, we do an editorial call every week here at Prop G. And the young people, I say the young people, let's say just, you know, they're young, whatever, average. I think the, not the average age, because me and my, the president runs this company, bring it up dramatically. but the median, I think it's probably 25 or 26. It's a bunch of overeducated, super impressive, super smart young people. And they pitch me and the whole team.

22:52There's about 12 or 14 of us. I guess I should probably know how many people actually work there on ideas. And these kids, they're so inspiring and they'll find a twist on something and they say something and their view on things. And they're sort of my muses, if you will. Is it muses or musei? And that's a key thing is that do your best to find a group of people who you find inspiring. But I bet if you started calling people about questions about the market, questions around, or just having people you can have conversations with around this stuff, create a circle of people who you think are just incredibly bright and blue flame thinkers that you can have dinner with, call on the phone, and work through ideas on.

23:35I find that that's a great way to really bang on issues and discover insights. Sometimes on these editorial calls, We'll go for an hour, hour and a half, but we don't come up with jack shit. And other times someone will say something and I'll think that's it. That's it. Someone was talking about on our last editorial call that Klarna is laying off 700 people or that AI is using chatbots in place of 700 customer service engines. And I thought, oh, my God, this AI is corporate Ozempic. And we wrote a whole thing on it. I also think it's really powerful. If you really want to understand a domain, if you really want to understand a domain, it's not about reading about it.

24:10It's about writing about it because then it forces you to read about it and organize your thoughts. Anyways, really appreciate the question. It's something I'm thinking about a lot. I'm trying to be more engaged. I'm trying to get out more. As I get older, I'm becoming more of a recluse. I can stay two, three days and not leave my house. And that's bad for me. I know that. But I'm sort of finding myself withdrawing from the world a little bit. It's a little bit scary and I realize it's bad, but I'm just getting so comfortable not being around people. and especially like people, but you have to bounce off of other people such that your ideas can have sex and come up with better ideas.

24:48So I don't know. Let me just end by saying, if you want to learn more, if you want to have more source of information, you know, get out more. And it sounds like you're doing that. Anyways, Morgan in Hong Kong, if I'm there, I will absolutely look you up. I love Hong Kong. That's all for this episode. Again, if you'd like to submit a question, please email a voice recording to officehours at propgmedia.com.