Big Tech Earnings, College Admissions Controversies, and UFOs

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Hi, everyone.

This is Pivot from New York Magazine and the Vox Media Podcast Network.

I'm Kara Swisher.

And I'm Scott Galloway.

You're not sounding great this morning, Scott.

What's going on?

How's Aspen again?

Well, it sounds a little rough in Aspen today.

It's early.

I didn't even drink last night.

I was up late writing No Mercy, No Malice, because I'm taking, because i'm going to barbie tonight oh a win uh-huh i wanted to be totally focused on that and so i'm i'm running on just about four hours sleep right now but oh yeah

anyways i i feel fine how are you Good, good.

I'm also, I think in your time zone, I forget where Aspen is versus San Francisco, but I've used mountain.

Oh, then you're, then it's an hour later.

I, uh, I never sleep, so I'm good without sleep.

You're in, that's right.

I think you texted me last night, like four in the morning.

I was trying to figure out, I was trying to figure out what time zone you were in.

Yeah, San Francisco.

Still here.

So you're still out there.

Having a great time.

Yeah, I'm with Alex.

We're hanging out.

We rode into Waymo yesterday.

We're going to see Jeff up in Inverness today.

We're going to have some oysters.

It's a very nice, lovely time we're having together.

That's nice.

I'm glad.

In any case, there's lots to talk about.

We've got earnings season and what it's telling us about the AI race in big tech.

We'll also discuss the controversies over college admissions from affirmative actions to legacy admissions.

That's just in the news recently, and it's your area of expertise.

We're going to talk about it, but first, Scott, do you believe in aliens?

Did you see that shit?

Yeah, well, you know, it's apparently a security problem.

That's according to three retired military veterans who testified at a House hearing this week.

Among the most interesting takeaways, retired U.S.

Navy commander David Fraver said that technology of these UFOs was far superior to anything the U.S.

has, and also an allegation of non-human pilots.

Let's listen.

If you believe we have crashed craft, stated earlier, do we have the bodies of the pilots who piloted this craft?

As I've stated publicly already in my News Nation interview, biologics came with some of these recoveries.

Were they, I guess, human or non-human biologics?

Non-human, and that was the assessment of people with direct knowledge on the program I talked to that are currently still on the program.

That was David Grush, a former Air Force intelligence officer, a Pentagon spokesman, denied his claims to NBC.

You know, this is Republicans having a lot of fun, although lots of Democrats, John Podesta and many others, have been pushing on this.

It's not just Democrats.

And of course, we saw some of those naval aviators talking about it in stuff the Pentagon released, about things they don't know what they are.

What do you think?

I mean, the House really needs to work on other things, although I'm interested in this,

as are many.

What do you think?

I don't know.

They're talking about UFOs, and I think they just announced it's like National Cupcake Month.

I don't like,

I don't believe in UFOs.

I think if anyone was smart enough to get here from another galaxy, the space-time continuum would mean that they don't need to let us know they're here.

I don't know.

I think it's just about time for aliens to get here.

I would like that to happen and save us from ourselves or else eat us.

I don't care, either one.

Um, but uh, you know, I wonder if there were.

I was talking about this with Alex as we were wandering around San Francisco, and he and you really do think alike.

It's like spending the week with a young version of you with a lot more hair.

Wow, and And I know, well, he has a nice head of hair.

He was sort of saying exactly what you were saying.

And I said, well, you know, maybe

they see us like animals, like lions, and they're observing us.

Maybe, and you can see them every now and then, and we don't know what they are.

Like, maybe that's where we are on their continuum.

I got to say, enough people have talked about this and that stuff in the Pentagon was really compelling enough to want to figure out what's going on.

I think that's that's something that's worthwhile.

I know that seems crazy from me, but I think it's worthwhile.

Well, you know, I mean, my view is they don't visit Earth, aliens, that is, mostly because we have a one-star rating.

Oh, what a good Star Trek joke.

I know it's a conspiracy theory, but it's kind of an interesting one, I guess, if that makes sense.

I know that you can see aliens having sex.

All you need to do is go to Porn Hubble.

Go to Porn Hubble.

Oh, no matter how tired, the dog brings it.

The dog delivers.

Oh, I'm going to move on.

I'm going to move on.

Well, we'll see.

If aliens are here, I think you're an alien.

You could be an alien easily.

Easily.

Aliens throw the worst party, so there's no atmosphere.

Oh, okay.

We're getting out of this one fast.

All right.

The Fed has raised interest rates a quarter of a percentage point, again, marking a 22-year high.

In a news conference, Jerome Powell said there is still a quote long way to go to hit the Fed's 2% target and said it's certainly possible another raise will come in September if warranted.

Many people think a soft landing.

He was saying we're we're not in the recession.

Scott, any thoughts?

Despite criticism from the right that just hates the Biden administration and anything associated and was really, quite frankly, hoping for out-of-control inflation to get a Republican elected, despite calls from the far left, including Senator Warren, that

good Americans had to pay too much money on their credit card and their mortgage and railing against Jay Powell that he'd been too aggressive, he's put on an absolute masterclass.

We have,

and I want to be clear, some of this is not his fault.

When energy or food prices come down, it doesn't have a lot to do with the future.

Yeah, but he did start the party before that.

Bill Cohen talks about that, sort of letting it go on for too long.

But go ahead.

Well, I'm in the midst of compliment, which I think

you agree with.

We have in America what

I mean, other than the kingdom of Saudi Arabia that grew 8% last year,

we have essentially the Goldilocks economy here.

We have historically low unemployment.

Meanwhile, wages are rising.

Inflation is crashing as fast as it went up.

Our GDP growth is decent, if not remarkable.

It's consistent.

And housing prices have held up remarkably.

That's the strangest thing because of a series of unintended consequences where people can't move because they're trapped by their mortgage and there's no supply.

You really, the economy, it's such an incredible thing.

It's such a random walk of the thousands of economists and thought leaders that were talking about or projecting or speculating what would happen to the economy.

The idea that the inverted yield curve always leads to a recession is no longer true.

That we could have GDP growth, that inflation would come down this fast, housing prices would stay robust in the face of 400 basis points of increases, 11 hikes over 12.

I mean, literally nobody, nobody predicted this.

I think what I would draw down on is that lots of people wanted it to happen.

You know, lots of people were hoping that the Biden administration administration would fall.

And I think it's not going to be able to be used by the Republicans in the race coming up.

I think there's not enough time.

And they certainly, there was a sort of glee at the possibility of people suffering.

It was kind of interesting to watch.

And they're completely wrong.

I'm thinking of a lot of, you know, pundits and podcasters and this and that were doing that.

And I agree.

I do think Jerome Powell, and I talked to Bill Cohen

many times about this, did start off the party, but he managed to clean up the party.

Oh, and oh, and I forgot to mention first half of the year, best first half of the NASDAQ in 40 years.

I mean,

what exactly were we hoping for that we didn't get?

Some people are saying it's the sign of a bad thing to come.

Anyway, we'll see where it goes.

But in any case, good job, Jerome Powell.

Well, if we wait long enough, we will, in fact, get a recession.

That is correct.

That is correct.

But we're not in that now.

I do sense sense a feeling that people are feeling a little more positive about things.

I'm not sure if that's the case, but we'll see.

The test will be in Q1 because right now we have about of the $6 trillion that we overdid and handed out in COVID, there's about somewhere between $700 billion and a trillion left.

And supposedly consumers and American households are ripping through about $100 billion a month.

So the beginning of 2024 will be supposedly when households basically run out of money.

So that'll be the true test.

Yeah, well, we'll see.

Anyway, another story in the news, new health concerns for Senate Minority Leader Mitch McConnell.

I think everybody saw the press conference where he froze,

was unable to speak, and he was escorted out.

I don't think people knew what to do.

After a few minutes, he came back and said he was fine.

An aide said he felt lightheaded.

One reporter asked whether he had seen a doctor, he didn't respond.

He said he was fine.

The New York Times spoke to two neurologists who only saw a video of the incident and did not treat McConnell.

They said it was that a mini-stroke or partial seizure could have caused it.

Let me just say, I had something like that.

And I had had one before I had my bigger stroke that I didn't realize what it was.

And that's exactly what it looked like.

I'll tell you, I had such, when I looked at it, I was like, memory bank dropped.

Because what happens is, what happened to me, I was putting a shirt on one of my kids.

I think it was Louis when he was younger.

And I froze and I couldn't, my hands were in the air and I literally couldn't command my hands to move.

And I was aware of it the whole time.

I wouldn't say I lost like cognizance in any way, but I froze like that.

And when he did that, I was like, oh, wow, wow, wow, wow.

And it happened when I had the stroke too, my mini stroke.

And so I'm not a doctor, but boy, did that, that was very familiar.

What happened to him?

So I don't know if it matters or not, but it's part of this sort of, you know, I was young when I had a stroke.

So I know you'll talk about aging, but he really seems to need help.

Well, he didn't.

Okay.

He may have had a stroke, but I know what's wrong.

I know what he suffers from.

He's too fucking old.

Well,

I mean, this has gotten so out of control.

He's 81.

Dianne Feinstein is,

it is insane that she is roaming around the halls of the Senate.

Joe Biden is running for president.

And

if he wins, which I believe he will, and I will vote for him and I will canvass for him.

He will be 86 when Maureen One leaves the West law.

Nancy Pelosi is 83.

The average age of an American is 35.

And what do you know?

Social Security gets a 9% cost of living adjustment.

Oh, but wait, the child tax credit doesn't get, oh, but wait, we send 0.6% of GDP on young people.

I get it.

Jesus Christ.

Have we gone insane?

No, we haven't.

Have we gone insane?

DC is a cross between the Walking Dead and the Golden Girls.

It's cute and it's funny.

I mean, enough already.

Jesus Christ.

I am going going to press back.

You're going to let me press back in your life.

If we age gate, Senate, you have to be 25 or 35.

What?

10 more seconds.

If we age gate on the bottom and 25 or 35, why wouldn't we just age gate and say, tell you what, at 80, at 80, we're sending you home?

No, no.

I'm going to put it in.

What?

Okay.

No.

What?

You're ranting and you're not letting me speak.

I get it.

I don't think you need to link a medical emergency because, you know, Fetterman had one, obviously,

had medical problems, and the Republicans were just evil talking to him.

Now, I have to say, I thought the Democrats had a lot of class in terms of not attacking him.

This was a medical incident, and you can be a very vibrant 80-year-old.

You know that.

You know a lot of 80-year-olds.

Not really, Kara.

Not really.

Okay, I do.

You said that, and it's actually not true.

It's true.

There aren't a ton of vibrant 80-plus-year-olds who can manage the responsibilities of the Senate.

Okay, that's fine.

But they're never going to do it.

So you can go on and on and rant all you want.

But we age gate on the lower end.

Why don't we age gate on the higher end?

We age gate pilots?

Because you don't give up power.

They don't give up power.

They don't, people don't easily give up power.

And the people that have to pass it are not going to give it up.

Now, I, what's incredible is that these people don't voluntarily or their families make it happen.

And as you know, dealing with elderly parents, both of us are dealing with it.

It's very, very hard to even get them to stop doing anything.

My mom's wandering around Europe right now,

not to my liking, but she's doing it.

And

I worry about her safety.

It's very hard to control people.

One, two, there's never going to be something past here.

I think he should take a retirement.

I think it looks like he had a very bad fall and he's past his prime.

He doesn't hear reporters.

He has an incredibly hard job.

It's fine if he just stays there and is not in this position.

That I would, I would very much agree with, but that's up to the Republicans to pull them out, and they're not going to do it.

People get very uncomfortable pushing around seniors.

They do.

They just do.

You know that's the case.

I get it.

And my question would be this.

If you have to be 35, I mean,

what do we need more of here?

Young people.

We need more young people.

And also,

I think it would actually be, I don't want to say a relief for them, but the best thing for them would be these people worry that they're going to lose all relevance and they're going to start to die, which quite frankly does happen when a lot of people start working.

But there are a lot of professions where we have an age gate.

There are a lot of the reason why we have term limits for Supreme Court justices, for our elected representatives of federal office, I think, to say, look, at 80, it's time for us to throw you a dinner and for you to go home.

And you can run for Senate at 76, but it just means at 80, we're going to have a special election.

Okay.

Because we are really,

the country is really hurting from this stuff.

You know, Dianne Feinstein, our inability to

finally have some more progressive judges on the bench is being hampered by Dianne Feinstein's, Senator Feinstein's refusal.

Ruth Bader Ginsburg, do you know what that did to us?

Ruth Bader Ginsburg.

I appreciate your feelings, but I don't know how you get, how do you get them out?

Like, let's be practical.

You can't do it.

It doesn't work.

And people, watch those people in that meeting.

They didn't know what to do.

They didn't want to make him seem old.

They did their best.

That was a weird situation.

They did.

I'm just saying people don't know what to do, and they certainly aren't going to go at him.

That's the thing, is they're not going to go at him.

And

if he, they're not going to tell you that he had a mini stroke, just the way they kept information away about Dianne Feinstein.

But I'll tell you,

I agree.

He should step down as Senate majority leader.

He was elected by the people, so

he should make those decisions.

Do you think Biden should step down at the same age?

No, I don't.

I think this guy has a true medical, that was a true medical emergency.

You can't start cherry-picking, then

you got to have one age gate.

We have an age gate on the lower end.

Why don't we have it on the high end?

Well, then here I am.

He'll decide when he wants to, and that's what I'll do.

I think there's nothing going to happen here.

But it was very disturbing, and I cannot stand Mitch McConnell, but I felt for him when I watched that happen.

He was struggling quite a bit.

Anyway, let's get to our first big story.

It's earnings season with all eyes on big tech after first quarter largely defined by AI hype and we're still seeing the AI effect.

Let's start with Meta, which beat expectations, reporting $32 billion in revenue, up 11% over the same quarter last year.

Facebook's parent company, also most profitable quarter since 2021, reporting $7.8 billion in profit.

That's a 16% increase compared to last year.

AI targeting reportedly helped ad sales, which were up 12%.

That was interesting both together in the second quarter.

Looks like a year of efficiency is really working for them.

They've cut costs.

That's probably also in here too.

They've got threads, Lamba 2.

And Zuckerberg is promising more AI products, which will help.

This company will be much aided by AI.

And for the Metaverse, the Reality Labs, the division that makes Metaverse Tech, has lost more than $21 billion since the start of the year.

So there's lots of cutting he could do.

Moving on to Microsoft, which had a strong quarter with revenue increasing 8% and cloud revenue up 15%, but it slipped in after hours trading.

The company says capital costs for AI will keep going up as it invests in chip technology, which everybody has to do and builds out data centers.

So let's talk about these things.

You have to spend money to make money.

Investors are interested in seeing some returns.

What do you think?

I could add Google into this if you'd like, but talk about these two first.

Look, this was just an absolute blowout quarter.

Of course, let's try and, I think it's important we bring this back to me.

At the end of last year, every year I do my predictions.

And I said that while growth was going to decelerate across big tech, they were going to have their most profitable quarters in history towards the back end of 2023 because for the first time, they would get to enjoy the great taste of cost cutting, which they haven't done in 20 years.

And essentially, these companies have cut real costs and no one's noticed on the consumer side.

Their spending continues.

If you can grow while you're cutting costs, oh my God, champagne and cocaine on the earnings side.

And that's what we're saying.

And then you add in the chaser of AI and cloud growth and excitement that there's a new, you know, there's a new catalyst for growth in the space.

The only growth and cost savings too, not just cost savings.

That's right.

But between

Meta had, that was one of my stock picks last year.

It was at 90 bucks.

Now I think it's over 300.

It's just on fire.

And people do believe that Mark is slowly but surely trying to find a way to have peace with Honor and reduce spending around

the metaverse.

But look what happened with Microsoft.

The idea, they've launched

an AI feature that can be bundled into Office that they want to charge an additional $30

a month.

If there's a 50% take up just across some of the applications, you're going to see a substantial increase in high-margin revenue.

Alphabet, its cloud division, turned to profit for the first time.

It'll never look back at unprofitability.

It'll continue to be profitable.

It grew like crazy.

70%

of

unicorn generative AIs use Google Cloud.

I mean, it just was like one amazing thing after the other.

And the way to look at it, if you want to see the glasses half empty, is that the smaller guys, for example, Snap, Snap struggled.

Snap had bad earnings.

And the reality is that the big, the giants are just pulling away with it.

They're growing much faster than the economy.

They're growing much faster than the sector, which means that, quite frankly, it's a zero-sum game.

Everybody else is probably suffering.

Suffering.

You know,

Alphabet, you mentioned advertising.

Google search advertising sales grew better than expected, $42.6 billion.

So ChatGPT hasn't overtaken it as default search engine, as people have thought, but that doesn't mean it won't.

Quarterly sales are up 7%.

So again, cost cutting helped by an uptick and

a move to the stronger players.

You're right.

Does that mean the online ad market is bouncing back?

You know, obviously,

in the case of Netflix, the actors and writer strikes are having an effect on Netflix earnings.

The streaming giant said expects to have at least $5 billion in free cash flow in 2023 because of all Hollywood labor actions.

That's up from a previous $3.5 billion.

They're going to use some to buy back stock.

So they have some money.

Well, okay, Netflix.

The actors and the writers are trying to impart pain on Netflix such that it comes to the table, pays them more, and solves the writer's strike or gives them more compensation.

And what has happened to Netflix as a function of this,

you know, leverage that the creatives have over them?

They signed up, I think, five or six million new subscribers, and they have so much additional free cash flow, they're considering a stock buyback because they've been able to a multilateral cost reduction has been forced on the industry.

And when it's forced on the biggest spender, they end up with, oh, what do you know?

I mean, you want to talk about chocolate and peanut butter.

We're still growing our subscribers, but we have this amazing exogenous event forcing everyone multilaterally to reduce their spending.

And we have aggregated so much additional cash flow that we're going to do a stock buyback.

And the unions think that Netflix is going to do anything but show up to that room and come up with thoughtful reasons why the strike should continue.

Well, it's not going to continue on forever, but they can buy a lot of interesting stuff elsewhere.

So I think this has been a gift to them at this moment.

Not forever, but this moment for sure.

What about the online ad market?

You know, obviously Snap did not do well, but Google did.

We felt it at Vox.

There's definitely pressure, and there's two things going on.

I do think there is a bit of a slowdown, but the ad market, the advertising market is stronger than people thought.

But assume the market is growing 5%, when you have companies growing 8%, 10, and 12%,

that means the other players are getting oxygen sucked out of the room.

Because at some point, you know, if the market's growing 5% and you're growing 12% and

you're as big as Meta, That means there's a lot of digital marketing companies, whether it's Snap, which isn't little, or a company like Vox that has good people out there trying to sell ads to ZipRecruiter for Pivot.

Everyone feels it's getting harder for everyone.

These guys, their quarter, other than Snap, everyone who reported, it was phenomenal.

And the one I just couldn't get over was Netflix.

They,

you know, Kara, you just said something.

I'm not sure I agree with.

At some point, it'll start to

Netflix has people in Madrid producing content.

A lot of the content they produce domestically isn't subject to union, um, union impacts.

They, this is the fear, this is the existential threat.

Well, they've laid the groundwork.

This has been gone for years.

They've been doing that.

They, they sort of pioneered that with Hollywood.

Um, rather than Hollywood used to buy syndicated shows or copy them.

Now they're just making them there as opposed to what they did before.

The metaphor here really is the British coal miner strike.

And that is the strike went, they didn't have enough leverage to really force the government to do anything.

But at the same time, the strike went on long enough such that consumers and industry reshaped their energy needs around other things.

So even when they solved the strike, the industry came back smaller.

They are essentially taking the industry down such that it will have a structural shift such that late night TV just will not have nearly the amount of money to pay anybody, much less what the unions demand.

And Netflix, I actually think Netflix, if they could press a button and say, we want this strike to go on for two, three years, I think they'd press it.

Yeah, they have very different needs at the table.

It'll be interesting to see how

they deal with each other, which is, I keep saying that.

Netflix is a whole different country compared to Disney, compared to the tech companies.

Three different countries working here, and the tech companies can sit it out too and copy.

And they have the money also and the stock let's compare and contrast it to the ups strike the ups drivers what did they want okay so the the writers want the studios to not use ai and they want at least a certain number of riders in the room this is what the ups union asked for they asked for an additional two dollars and fifty cents per hour and air conditioning

okay

And the day UPS was going to go on strike, everyone that uses UPS was going to feel it, as was the general economy.

23% of packages and UPS, that day they went on strike, doesn't increase their cash hoard.

They literally started losing tens of millions of dollars a day.

Let me let me explain what happened there.

UPS and Teamsters have reached a preliminary deal.

It's narrowly avoiding a potential strike.

It still could happen.

The deal is worth $30 billion.

It includes raises for full and part-time workers, heat safety protections, which I think are critical, and ends mandatory overtime on days off for over 300,000 employees represented by the union.

Workers have to ratify the tentative deal in August.

And if the vote fails,

it could happen.

But they came to a conclusion rather quickly.

And it's because they had financial pressure EPS did.

And I think the teamsters probably knew a good deal when they saw it, you know, a decent deal for their membership.

I don't want to use the word that Bob Iger.

Bob Iger said they're being unrealistic or whatever, or unreasonable.

I would argue that the leadership

at the unions, and also to a certain extent, the studios, especially the ones that think they have a shared interest with Netflix and the negotiating table, but they're being naive.

If the UPS drivers, if the Teamsters had made the same demands or requests that the writers are making right now,

it would have been the following.

And this is how ridiculous it is, some of their requests.

They would have said, you can never use autonomous driving for our UPS trucks.

They never even

brought that up.

That's an existential threat to UPS or the Teamsters, but they didn't, they realized no one has ever been able to get that, so they didn't even ask for it.

And that's a really good point.

What if they had said, it sounds outrageous, but it's what the riders are asking for.

What if the Teamsters had said in every truck, there has to be two drivers?

That is literally what the riders are asking for.

They want a minimum number of riders in every rider's room.

Well, no, it would be more like there were two drivers and UPS wanted to cut one because the rooms have been fuller.

You know what I mean?

It's a little slightly shifted that they want to take away one driver.

The Teamsters wanted air conditioning and another $2.50 an hour.

That's what they, those were their demands.

And mandatory overtime.

And you know,

you're right.

That's a very good point of comparison.

Snap and Spotify, as you noted, Snap sales dropped for a second straight quarter, even though it rolled out its AI chat bot this quarter called My AI, and 150 million users have sent over 10 billion messages in it.

People are using it again.

It's, you know, they've, they had some problems, but they're working on them.

As for Spotify, it was the company's strongest ever quarter for user growth, but the streaming giant reported losses following podcast cuts and higher royalty payouts.

And a recent price hike didn't help the stock price, which I think they're adding a dollar to it, I think, which fell over 14% immediately following the news.

You're right.

Things are sorting themselves out.

Both very good products, by the way.

Both fantastic.

It seems to me that they're going to be bought.

I don't know.

Maybe I just thought, I thought about that when I watched this.

Because excellent products,

both.

Both companies have excellent products.

Look, revenue declined 4%,

where everyone else is growing their revenue.

Their losses did decline.

So the U.S.

advertising market is expected to grow 6%, which is actually pretty good versus a 9% growth seen in 2022.

And highlights from the call, daily of active users reached 400 million, which is up 14%, which is pretty impressive, which means they're getting lower ad rates.

The stock's down.

Well, the stock was way down today, but it's about 10 bucks.

By the way, we're launching ProfG AI, you know, my own, my own bot.

So people can ask my bot questions.

I'm sure, like you, I get questions every day, really thoughtful, long emails that I can't respond to.

So we're trying to create a bot and we've been experimenting with ChatGPT and Llama to see the differences between it between the two and it's been really fascinating.

Anyways,

look, I think Snap is a great company.

It's the only company that's not

or only kind of company that's sort of grouped in with these folks that quite frankly, just no matter how much young people love it,

it is kind of the communications vehicle of choice among young people, which arguably are some of the most valuable people to advertisers.

They consistently innovate.

I think they're sub-scale, and I'm wondering if we could come up with a very interesting tie-up between Snap and Disney.

And Disney could do a few things.

One, it could use that, use Snap as a distribution channel for their content into those 400 million users, or they could take, as they said, they wanted to spin off FX and ABC

and I forget who the other network is they own.

ESPN, they want an investor.

Well, what if they really started shoving content through?

What if they made Snap kind of the premier distribution vehicle as opposed to control?

Well, they did try that.

Snap did try to do that discovery, if you remember it, didn't they?

Maybe it was just too cowardly.

Maybe it's just too early.

Or if they just, what if they ran original characters and snippets before all their movies came out on Snap?

I think, and not only that, Snap has the nicest brand and social.

It's the least toxic.

And who does Disney appeal to?

It appeals to young people.

Young people.

Yeah, it's interesting.

What about Spotify?

What about Spotify?

The tie-up of Spotify, I always thought about, but they're not going to do it.

And I've actually talked to some people at Netflix about it.

Is that

if you had Netflix and Spotify, you'd have the largest subscription media company in the world.

That is correct.

That's always been my thought.

But the problem is Spotify isn't profitable and Netflix has hit profitability.

And I don't think they'd want to take that dent.

I don't think it's going to happen.

Snap is $17 billion.

Disney is $157.

So call it about a 10% dilution, maybe 15%.

Bob Barger's not in the buying mood right now.

He's got too many other things on his plan.

They're shedding.

Well, they have 10 billion in cat.

He needs to do something.

Yeah, he's shedding.

You're right.

But people are still giving a hard time overpaying for Fox.

But yeah, I agree.

Let's go on a quick break when we come back.

College admission standards are under the microscope.

We'll take a listener mail question about the future of EV charging and what that has to do with Elon Musk's X.

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Welcome back, Scott.

I want to let everyone know that we are all over social media now.

You can follow us on Instagram, threads, and yes, even the dreaded TikTok.

You can find us at Pivot Podcast Official, all one word.

Check it out from your burner phone, though, for TikTok, but whatever you want.

We have some nice little videos going on.

We're starting, we're

dipping our big toes.

You look good.

You look better than me, despite being much, much older.

Okay, Eric, I'm not much older than you.

I'm not much older than you.

It's like, what, a three-year age difference?

How old are you?

Anyway, on to our next big story.

The Education Department is conducting a civil rights investigation into Harvard's legacy admissions policy.

This comes on the heels of the Supreme Court decision last month that effectively ended affirmative action.

A new study out earlier this week from a group of economists at Harvard found that being rich on its own is its own form of affirmative action, which, you know, thank you.

We knew that.

And by rich, I specifically mean applicants whose parents earn more than $611,000 a year.

Essentially, if you had to choose between poor people and rich people, rich people, legacy people got in.

This isn't just about Harvard, obviously.

Let's read some quick figures from Court Papersmith's case.

Harvard gave preference, recruited athletes, legacies, relatives of donors, and children of faculty and staff.

They got preference.

Those applicants make up less than 5% of the total pool, but around 30% of admissions.

Huh?

Interesting.

Guess what else?

About 68% of those applicants are white.

What do you think about that?

And Harvard and other universities defend legacy admissions as creating a sense of community.

Yeah, rich people like to hang out with rich people, and more importantly, ensuring donations.

That's really where the money is.

The endowment of Harvard is now the biggest endowment in the country, hovering around $50 billion.

That's a big deal for legacy, getting legacy admissions.

Two Democrats, Senator Jeff Markley and Congressman Jamal Bowman, said they plan to introduce, reintroduce legislation to bar preferential treatment for legacy applicants.

Harvard says it's reviewing aspects of the Supreme Court decision.

But other schools are joining the bandwagon of ending legacy admissions.

Wesleyan joined Amherst, MIT, Johns Hopkins, and the University of California.

Ohio universities are taking a look at their admissions policies as black student enrollment has dropped or remained flat at most of the 13 public universities there.

So there's a lot happening, but let's discuss legacy.

It's so gamed.

I don't don't know what else to say, just so they can get money for their big giant endowments.

That's my feeling.

Go ahead, Scott.

You know more about this than I do.

So I've been thinking a lot about this, and there's a bunch of things here, and they're all sort of related.

The first is the Supreme Court's decision to make race-based affirmative action illegal.

And I got a lot of pushback for this.

I agree with that.

And today, the academic achievement gap is double between rich and poor as it is between black and white.

This year at Harvard, the freshman class is 51% non-white.

And here's the bottom line.

A poor white kid has a tougher time getting into college than a rich non-white.

And affirmative action is hugely important.

And we need to talk about where Americans can come together.

And that is, you need to acknowledge that there is still systemic racism in the United States.

But the question is, how do you best address, how do you best accomplish what most Americans believe?

And that is a lot of kids through no fault of their own face additional obstacles and government is here to give them a hand up.

It's through affirmative action that is based on money, that is based on economics.

And quite frankly, again, my alma mater is leading the way.

The University of California did away with race-based affirmative action in 1997 and they went to what was called an adversity score.

And that is, they recognize a lot of people, a lot of non-whites, face adversity.

And they talk about it in their applications and they give them an adversity score, but they don't allow legacy admissions.

Do you know they don't even allow letters of recommendation anymore?

But here is the bigger, even bigger problem, the even bigger problem.

All of these arguments that divide us and anger us are a giant misdirect.

And the reason why you have such emotional arguments is because college is still a fantastic ticket to a better life, especially an elite college degree.

And it is the premier luxury brand globally.

And me and my colleagues are so drunk on arrogance and self-aggrandizement that we have decided, despite sitting on the endowments that are the size of a Latin American GDP, to not not expand freshman seats.

The solution here is simple.

We need more white kids.

We need more non-white kids.

We need more trans kids.

We need more women.

We definitely need a lot more young men.

And it should be because

if a school has a $52 billion endowment and isn't growing its freshman class faster than population growth, it is no longer a nonprofit.

It is no longer a public servant, and it should be taxed as such.

And let me tie this into Biden's student debt relief program, which I think was terrible legislation.

It was attacking the tumor, but it wasn't attacking the underlying cancer, and that is exponentially increasing college costs.

If they'd taken 500 billion of that and said to our 500 greatest public universities, we'll give you on average, size adjusted, a billion dollars a year in exchange for three things.

One, You're going to grow your freshman seats 6% a year for the next 10 years, and we'll pay for the infrastructure and technology such that you can accomplish that.

And all this bullshit about space constraint with online learning, the fact that there's no students during the summer on these campuses at night, they could easily expand 6% a year and we, the government, will pay for it too.

You're going to reduce your costs through that additional scale 2% a year.

That's not a lot, 2% a year.

And you're going to have 20% of your graduates and your students be pursuing non-traditional four-year liberal arts, vocational certificates, specialty construction, cybersecurity.

Where does that get us in 10 years with that $500 billion?

It gets dramatically more apprentices and

certificates, vocational certificates, such that there's more and broader on-ramps to a great middle-class lifestyle.

I think you're going to run for Senate from Florida.

I think we need to do this, Scott.

This would be a good platform.

We have more kids who aren't cut out for the traditional four-year degree who have an on-ramp into the middle class.

So in addition to more vocational certification, what do we have?

We have a net doubling of freshman seats in 10 years and we have a net halving of cost.

This is where we need to go.

And it stops these arguments where we hate each other and start accusing each other of being racist.

I agree.

I agree with this.

Everything you said is actually shockingly intelligent.

But

because I'm young.

That's the young brain.

That's the 50-year-old brain.

Not in 10 years.

What do you do about legacy admissions?

The people, just before you talk, the people that pushed the affirmative action thing are also now going after legacy.

That guy, that guy is now doing cases around, he doesn't like legacy either they're going to have to get rid of legacy admissions correct it seems like that's this is what no one wants to talk about because it's politically incorrect legacy admissions legacy admissions should

should actually help non-legacies why is that when i was in business school there immediately was someone in our cohort i went to the smallest business school the hot school of business only had like 200 students we all knew each other right away and 80 of them were japanese students and just kept to themselves it was really strange they just didn't hang out with with us or anything.

And that was back when Japan was like the economy that had beaten the world.

And the way you can tell the ultimate signal of an economy booming is all of their kids end up in elite colleges.

That is the ultimate luxury item.

So it was a small group of people.

We all knew each other.

And there was one person who clearly wasn't qualified, clearly wasn't qualified to be there.

And we were all tutoring this individual.

It ends up this individual's parent, we figured this out fast, was a billionaire.

And we said to the admissions director at dinner one day, we said, so-and-so is clearly not qualified.

And the admissions director was, yeah, but this person's father is a billionaire and they're going to give a lot of money.

And that will expand seats and give us the opportunity to let in more qualified kids.

There's too many of them, though.

Legacy admissions create community, create goodwill, and result in more resources.

The problem is these universities have not been using those resources to expand freshmen's seats.

So there is no way, in my view, that you can say, all right, we're no longer going to help people based on race, but we're going to continue to let in legacy that are predominantly white because of a history of systemic racism that infected our schools.

So you again have to go to where the University of California has gone and said, sorry, guys, unless you can show that that additional goodwill that results in additional funds that translates to more seats for everybody, including non-whites, no legacy admissions.

Legacy admissions actually, if handled correctly,

would be good for everybody because they create more community and more money.

But the problem is they're not using that more money for more seats.

They hoard it.

Yeah, I like your first idea better, the government using that money to do that rather than for loan forgiveness or whatever.

Well, how can you tell the two-thirds of Americans that didn't go to college to bail out student loans?

The only way you can, under executive action, require $500 billion is if it's an investment.

And the other thing I hate about the student loan thing is it lets universities off the hook.

The other thing we need, Kara, is that 10, 20, 50% of bad student debt has to be assigned to the university that issued it.

And what does that do?

That says to a financial aid department at NYU or at SMU, says, you know what, we apologize, but we're not going to loan you $200,000 to get a philosophy degree because we're worried you're not going to be able to pay it back.

And you want to talk about a war on the young?

A war on the young?

You don't believe that we in the U.S.

do everything we can to fuck young people?

What is the only debt that is not dischargeable in bankruptcy?

Student loan debt.

One of the wonderful things about America is we're about a second chance.

We're about, you get to start over, head west young man or young woman.

And if you really fuck up and you get divorced and

you're crushed by debt, you can declare bankruptcy.

Companies can declare bankruptcy.

It's a wonderful attribute of America.

Except the people who deserve a second chance more than anyone in our nation, young people, don't get it.

They can't discharge student debt.

We need to make universities put them on the hook for bad students.

Put them on the hook.

Yep.

Then they'd be better at giving them out.

Yep.

You're right.

All right.

This is a lot.

Everybody, we'll see what's happening.

Just give me a very quick, and I mean pithy, prediction on whether legacy admissions will be overturned across the country.

I don't know if it'll legally be overturned because I don't know if you can.

I don't know if you can legislate that.

I don't know the legal ins and outs, but unless a university can show they're using that goodwill and that additional revenues to dramatically expand seats for everybody.

And I have a bias here.

I am a product of affirmative action.

I applied to UCLA when it had a 76% admissions rate, and I didn't get in.

I was one of the 24% that got rejected.

Wow.

I had mediocre grades.

Wow.

I'm being very honest here.

I had mediocre grades and I'm getting about to virtue signal in a second and flex.

I had mediocre grades, but I didn't test well.

And I was installing shelving and I came home and I'm like, this is it.

I said to my mom, I was leaving my mom.

She's like, well, can we do something?

Can we appeal?

And I found out there was an appeal process.

And my appeal process was pretty straightforward.

It was, and the truth has a nice ring to it.

I said, I'm installing shelving.

I'm going to be installing shelving the rest of my life.

UCLA is the only option for me because I don't have the money to live on campus anywhere.

My mom is a secretary.

We make $40,000.

Like, this is it for me.

I was just very transparent.

And I remember that the.

the director of admissions or one of the directors called me and said, you're not qualified, but you're a son of California and you face some tough times.

We're going to let you in and change my life.

And guess what?

This year, and this is the flex, I'm giving $14 million to the University of California.

No organization can predict greatness at the age of 18.

So

here's what government's supposed to do.

It's supposed to give as many 18-year-olds as possible a shot.

Anyway, that's the tale.

I didn't know that.

What?

Hello?

We need to have a party at University of California.

Adversity-based affirmative action is a great thing.

It should be based on income.

And UC is doing it exactly right.

They don't give a shit if a senator writes you a letter of rec.

They don't give a shit.

They want to know your household income.

They give favor to people with low income.

They know letters of rec.

They've been to that game and they're not doing race-based affirmative action.

They're getting there through other ways.

They're looking at adversity.

Interesting.

Interesting.

Anyway, Scott, I didn't know that about you.

I find things new every day.

That's very generous of you, but at the the same time, they deserve it because they gave you.

Although I have some shelves I need hanging, if you don't mind, come over.

My point here is letting it at that point, what seems like mediocre 17-year-olds, making a bunch of bets across what seem like mediocre 17-year-olds, you never know.

You never know.

I wouldn't have guessed it.

Anyway, let's give it to a listener question.

You've got, you've got.

I can't believe I'm going to be a mailman.

You've got mail.

This question comes in via email.

It came in right as the news broke that seven automakers are banding together to build a charging network to rival Tesla's now.

BMW, GM, Honda, and Mercedes are among them.

Here's what Amish asked.

Tesla's sudden proposal to share its charging infrastructure in self-driving tech raises concerns for me.

It seems plausible may soon be charged via the X app.

Had car manufacturers collectively invested in alternatives like Electrify America, could they have maintained independence and avoided potential curveballs from Elon Musk in the future?

Love to hear your thoughts.

Amish, first time, long time from Oklahoma.

I'm going to take this because I was charging my car last night.

Here, I have an electric car here in California as a rental.

And I was thinking, why are we going to let Elon run the friggin' electric system?

He's going to have us by the balls just like he did with Starlink.

Like, why aren't these car makers doing something?

And of course,

I don't know if there needs to be two competing types of car networks, but there needs to be, like, it should be like a gas pump.

It should work on every car, whatever, if you're using Exxon or whoever.

And

I do not want to be forced to use the X app to pay for charging.

And that would be terrible if he dominated that.

So I think this is a good thing.

And I was literally thinking about it because this was not, this was Eevee Go, I think, and it had all the chargers on it.

It had the Tesla charger, it had a fast charger, had a number two and a number one charger.

It was interesting.

And it was a very small amount of money to do it.

And it took me 20 minutes.

I went into the supermarket and shopped.

And by the time I got back, I was 80% charged, which was great.

30 minutes, maybe.

But I was shopping.

I was doing something else while I was doing it.

This has to happen.

There has to be a competition to test those chargers.

And he was way ahead of the game by doing it.

I give him that credit for that.

But boy, does

there need to be an alternative.

Scott?

Yeah, I think you're exactly right.

Competition is an amazing thing.

We're building this bot.

And we're using, we're testing both ChatGPT and we're testing llama.

And you can tell, you you know, that both of them are going to have to keep their costs low and keep adding more and more features.

One charging station brought to you by Elon Musk, that just does not have a good ring to it.

Yep.

I think

this is exactly what has to happen.

And they have to compete and they have to do it right because, I mean, I don't think he would

hold on to that for very long, for a long, long time, especially because he might become abusive.

But what happened with Starlink is a very good example.

This stuff is not as expensive as all that.

And these car makers should absolutely, this is a critical investment, not just for the car makers, but for the government to help them do it.

It's like building gas stations.

Gas stations should be converted into charging.

And there should be innovation in charging so that it's fast.

So that you go to a movie and you charge your car.

Or there's a lot of time the cars are sitting.

I'm thinking a lot about it this week because I have this electric car.

And at home, I have a charger, as you do, I think, at your house in Florida, at least.

And it's really important to be able to not worry about distance.

And as batteries get better, certainly it'll get to 500 miles, et cetera.

So you don't even think about it very much for most car, most trips you have.

But this is critical that they don't, they're not at Elon's Beck and call on this.

And again, I give him credit for being out early.

So we'll see.

We'll see.

Again, I will not download.

I not pay $8

in order to charge my car.

And I don't want that to be the situation that happens.

So we'll see.

If you've got a question of your own or would like it answered, send it our way.

Go to nymag.com/slash pivot to submit a question for the show or call 855-51-PIVOT.

All right, Scott, one more quick break.

We'll be back for predictions.

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Okay, Scott, let's hear a prediction.

Let's hear prediction.

I referenced it early in the show.

I think something happens with Snap.

I think it's such a great product.

It has the least awful brand in social, even the, even the nicest brand.

It has 400 million of what are some of the most attractive consumers to advertisers in the world, and that is young people who probably

over-index a little bit wealthier, who brands love because young people are stupid and they'll spend six bucks on coffee and 160 bucks on tennis shoes.

They love high margin products and signaling because they're about to enter their mating years.

But

the company's subscale and its ad tech has never been able to compete.

And as a result, it has a $17 billion market cap, which is obviously real, but it's nothing in that world.

And I think you have a set of players that would love to have those 400 million users.

and then you have a set of legacy players and the one that strikes me disney from a brand fit need after they get through the cost cutting need something to inspire growth and as more people don't access disney content through traditional cable this would give them a new channel of what would probably by then be about a half a billion people of the most attractive consumers to advertising and disney's unique ip plus that new distribution channel to me it just feels right as rain yeah i like it i have another purchaser tell me what you think.

Apple.

They would love to be.

Let me just say, Snap would love to be bought by Apple.

Love it.

That would be their number one choice.

The problem is of all of them, Apple is the least acquisitive.

I know, but young executive for Apple that they would like, who is classy and has that Steve Jobsian kind of, well, he has the style and creativity.

He would fit with them and be part of it.

It would signal young, speaking of older people, most of the executives of Apple have been there for 109 years and they're great, but they're older.

And it would bring in a young person who has the same qualities, I guess, of Steve Jobs.

Yeah,

I'm super impressed with Snap, and this is why I don't like to meet with people because I end up liking them, but I like him a lot.

I like Evan a lot.

This is, it's a super impressive company.

Right now,

it's it's sub scale.

The thing about Apple, though, is that Apple really doesn't like to make acquisitions.

They've decided their culture is the most important component.

They just, they're the least acquisitive of all of them.

But from a brand fit standpoint, and does Apple, I don't know.

I think Disney, I think Disney is probably a more likely bet than Apple.

But just to give you a sense of the numbers here, say that Apple paid 100% premium.

And by the way, Evan Spiegel gets to decide all of this because he has a dual class shareholder.

He controls it.

He owns 51% of the voting stock.

So he gets to decide.

But say Tim Cook called him, and he wouldn't have to pay 100% premium, but Tim Cook could pay 100% premium.

And this is how out of control the valuations are.

It would be a 1% dilution because that would be a $34 billion acquisition.

And Apple is now worth over $3 trillion.

So literally,

Apple could buy Snap and in two years decide we were wrong, shut it down, and it would have no impact on the stock price.

I like that you like my idea.

I just feel like Apple's the right place for it.

But

Disney would be interesting.

Another elegant solution there.

And bringing in an executive like Evan and his team, which would be interesting, would invigorate both those companies if they were allowed to do what they need to do, right?

If they were allowed given, and I think a place like Apple,

they'd have more landscape.

That's all,

to operate.

Anyway, well, SATE would be interesting.

And Spotify, no, no,

you don't think they're going to get bought.

He's so stubborn.

I can't imagine him ever admitting that he needs help.

I absolutely love Spotify.

There is no other company that has been able to distill an entire medium down to one searchable app.

I mean, what they've done is incredible.

They've raised prices.

They do have pricing power.

They're taking the charges for their, for their adventures and podcasting where they were overpaying, which didn't work out.

The problem is the studios, the only way this, they've basically become almost a co-op for this, for the music labels.

And that is they have to give most of their money away to the music labels.

So I don't, Spotify probably ideally they need to do something, but here's the problem with dual-class shareholder companies.

Daniel Eck is a billionaire.

Evan Spiegel is a billionaire.

Why do they need to do anything?

Control is an addictive substance.

And if you're already worth billions, whether you're worth $1.8 billion or 3.6,

you don't care.

You're like, the control is more important to you.

Well, in Evan's case, I think he would.

I think he very much would.

So

I don't think he's got the same.

I like Daniel, but he's got an ego on him much higher.

He seemed very humble to me.

I had dinner or I he likes being the CEO of Spotify.

He likes it.

He likes, you know, it puts him on a level of all the other moguls.

And so just being an executive at whatever Netflix is not the same thing.

I think Evan would relish being owned by Apple or Disney.

I think he would relish that.

So if in the middle of dinner or in the middle of

Daniel introducing everyone at Can, he just stopped for 15 seconds because he had some sort of cognitive problem.

They wouldn't allow him to run a music service, but we allow these people to make law.

Oh, stop it.

You're terrible.

Terrible.

You're terrible.

Just say nothing nice.

Don't do not like dance on someone's grave.

We need age limits.

We need more young people in leadership positions.

More young people, more women.

Yes, I agree.

Anyway, that's the show.

We'll be back on Tuesday with more Pivot.

When Scott

turns 70, I'm going to have to put him on an ice flow and send him out.

Anyway, read us out, Scott Galloway.

Today's show was produced by Lara Naiman and Taylor Griffin.

Ernie Intertot engineered this episode.

Thanks also to Drew Burroughs, Meal Severio, and Gaddy McBain.

Make sure you're subscribed to the show wherever you listen to podcasts.

Thank you for listening to Pivot from New York Magazine and Vox Media.

We'll be back next week for another breakdown of all things tech and business.

Kara, have a great weekend.

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