Zuckerberg does nothing about Trump, Google’s Incognito is not Incognito?, Amazon bonds and a prediction about 2020 IPOs

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Hi, everyone.

This is Pivot from the Vox Media Podcast Network.

I'm Kara Swisher.

And I'm Scott Galloway.

How you doing, Scott?

How's it going?

This has been quite a time.

I was thinking about it.

I'm learning.

I find that...

Yeah, I think.

Professor learns.

How nice.

Yeah, I'm trying to not immediately pick a position and dig in and just fight, fight, fight.

So I will start off with a couple of things that I've been illuminated to or how my thinking has changed.

I thought a lot about what was going on was largely driven by income inequality.

We had a peace.

I love military history.

Essentially, at the end of World War II, the Allies dropped two inches of incendiaries, basically powder, across Dresden.

And then we dropped these flammables, these sparks, and we set off a firestorm in Dresden, the firebombing of Dresden, and it killed more people

than the nuclear detonations over Japan.

And we don't talk about it because it's not as cool as the detonation of a nuclear bomb involving splitting the atoms.

The detonation of a bomb is never cool, but move on.

I'm going to talk about that.

Let me make a second point.

Actually, you know what?

I think, in the eyes of America, I think that set off this race towards the idolatry of technology.

I think we were fascinated by that.

I think it was the ultimate

America has the sack and the brain to detonate the most sophisticated technology in the world.

And actually, I think it set off this race towards in this very unhealthy idolatry of technology.

But anyways,

the technology around just laying the ground with two inches of gunpowder effectively and then lighting it on fire.

And most of the people didn't die in the fires.

They died of asphyxiation because the fire soaked up all the oxygen and people were in their homes and just were found asphyxiated.

But anyways, I was thinking, okay, the powder really that is the underlying and

flammable here is

was income inequality.

And what I have discovered is that income inequality is absolutely a big part of it.

It fuels the frustration, but it's really more about people of color feeling like, okay,

we have just had it.

And then I had Peter Henry on my

pod yesterday, who's a former dean of NYU Stern, youngest dean in the history of top 20 business school, you know, college athlete, road scholar, MIT, PhD, just like crazy, kind of unbelievable, impressive.

And this tall, handsome black man, and he was saying that essentially, it's just different for me.

He said, the place I feel most insecure is if I'm in an uncontrolled environment and run across a police officer.

And for him to express that kind of fear, and you could just hear it in his voice.

And this is a guy who, if Hillary had won, there was a shot he was going to be somewhere within, you know, one degree degree removed at the cabinet.

And for him to say that, it just kind of struck me that I really don't get it.

I really don't.

And let me ask you a question.

I'm glad you do get it, but it shouldn't just be for a guy who has all sorts of degrees.

But

had you missed it?

I'm just curious.

Really?

Well, no one is safe, but some people are more safe than others.

But I mean, I think the disagreement we had is I think racism is at the heart of almost every

of these issues you are also talking about.

Because it tends to like, like when we talked about,

you know, let's get to a tech thing is these gig workers.

It's hold on.

I'm not

done with my white guilt.

All right.

Hold on.

All right.

Almost got to wrap up your wet guilt.

And then also

he was talking, or he was talking about effectively that you have this situation.

And I said, look, I think systemic racism has gotten better in America.

And he said, the problem, Scott, is that

our DNA is about escaping one form of oppression such that we could come to America and enslave another people and commit genocide.

And effectively what this is, is the majority who are whites are about to come in the minority in 2040 and just don't want that to happen.

And this is sort of their last stand.

And I had never thought of it that way.

And he's actually spending time in Germany, and he gave me the impression that he and his four black sons just feel more comfortable in Germany than the the U.S.

And I've always kind of withdrawn to this place of comfort that, yeah, we're bad, but we're less bad than the rest of the world.

And his viewpoint is: no, actually, we may be worse than much of the world because our DNA sort of began with this kind of looting of Africa of their human capital.

And I never really thought about it that way.

I'd always had this sort of,

you know, like I said, cold comfort or this always withdrew to this place of safety of, yeah, but we're

more diverse.

We, you know, I started making excuses for America.

and he said, this is in our DNA.

This is in our DNA.

I'm sorry, go ahead.

I'm going to interrupt you now because I want you to listen more, but not to me.

But I'm glad that you're listening.

I'm a very good listener.

I'm glad that you're listening and you should listen more.

I think it's actually about seeing with your eyes.

You know what I mean?

I think a lot of people.

You should see more.

Well, there's an expression in journalism where you say,

believe what you see, don't see what you believe.

And so

action speak louder than words.

Is that your

way of seeing that?

No, no?

It's not live.

Oh, God, you're like, now you're tossing out ridiculous things.

There's please.

Well, you made me feel shamed.

You made me feel insecure.

Oh, well, too bad.

You should be.

You should be.

A little shaking of Scott is an important thing, but let's just be clear who this story is about, not you or I,

but you or I listening for sure.

Anyway, we're going to, that was heavy, Scott.

Thanks for bringing that in.

I was going to ask, talk about Snapchat no longer promoting Donald Trump's account.

No, no, no.

I'm just saying it's interesting because snow snapped.

We're going to get into, why don't we just get into the big story?

And let's get in the big story.

Facebook doubles down on the policy to keep Trump's racist and inflammatory remarks posted on the platform.

In a call with employees who protested Facebook's lack of response to Trump, Mark Zuckerberg said his decision was tough, but it was pretty thorough.

He said he did research, but he did not reveal what that research was.

Earlier this week, some Facebook employees participated in a virtual walkout.

They did not come to work and posted messages in solidarity of protesters asking Zuckerberg to take action on Trump's consistent posts that encourage violence and racism on the platform.

It was reported that Zuckerberg had a call, and then he actually said he had a call with the president last week after he decided the post would not be monitored.

And according to the New York Times, one black employee was consulted in this decision.

That employees, the company's

political speech policy wasn't working and needed to be changed.

I had wrote a pretty tough column today about that topic.

And a calling, I had called Mark the Susan Collins of the internet,

and then had noted that he was also the world's most expensive customer service rep by talking to Donald Trump Trump about explaining the policies of Facebook to him.

So,

and it was a pretty tough article about the difference between free speech and amplifying speech like this.

And of course, the same thing today happened at the New York Times with a Tom Cotton editorial

without taking into account that he had been tweeting that protesters should be

given no quarter or certain people should be shot with extrajudicial killings.

So it's complicated, Scott.

I don't think it's that complicated, but what do you think about this?

I certainly have a point of view that Mark Zuckerberg is not doing his job,

but others disagree with me.

So what do you think?

Yeah, I think you almost got it right.

I don't think he's the world's most expensive customer service agent.

He's arguably the least expensive whore in the world.

And that is anyone with a credit card

who will spend $2 or $3,

Mark Zuckerberg will do something.

He will put all,

he does it.

I think sex work should be legal, but he does these things.

He will do anything as long as there's a nickel at the end of it.

Well, do you think it's money?

I mean, it's really interesting

how much

every action, every decision he has ever made points to one place.

How do I get the stock up?

And that's why investors love him.

Yeah.

Every decision, every policy, every individual, every individual flying to Greece to give away $2 million and prostitute her engagement party for People magazine all points to one thing.

How do we cover up our activities such that no one gets in the way of the most profitable rage machine ever invented?

Every single decision.

All right.

Does it have an impact?

Does it, does it, I don't agree with you on this.

I think there's a lot more going on there.

He's been struggling with this.

I finally recalled a conversation.

Struggle.

He struggled to get away with it.

He's struggling to get away with it.

There was a post by a lot of the early Facebook people who I knew very well saying this is Mark is ridiculous.

It was then attacked by another Facebook executive

who was not one of my favorite Facebook executives, who was then attacked by Chama Palihapatiya, who was another Facebook executive.

What I came away with, which is what Casey Newton said to me, Facebook doesn't like other people policing Facebook.

You know what I mean?

They don't.

It was really interesting because it was all ex-Facebookers fighting ex-Facebookers.

about Facebook.

It was really, it's been really fascinating.

And I recall the conversation I had with this guy who posted this, it was the worst post ever, I think, that I've seen from a Facebook person where he said the people that are complaining just couldn't hack it, couldn't scale, probably got pushed out.

And that's where he started his discussion, which is like, that's a typical slag for so you can't scale.

So that's why

you don't get to have a say.

And it was astonishing.

It's the ultimate insight.

I know.

It is.

It is.

So Chamat Polyhapatiya was like,

this is dumb even for you.

Reed Hoffman's podcast, who, by the way,

we dropped that bitch podcast like Second Period French and the Web.

Masters of Scale.

Oh, it's the Masters of Scale.

You know what?

It's a pretty good podcast.

Listen to me.

I'm not going to insult Reid Hoffman right now, but the fact of the matter is, the fact of the matter is it was really interesting that there's this sort of internal war going on at Facebook, which you never saw before.

They were always sort of locked up.

It's really a war.

It's like a border skirmish.

Yeah, I guess.

Let me tell you.

Kombucha Coffee Cafe.

Listen to me.

It's really a war.

I'm wondering if it will have impact on this company.

When does it work?

And though Cheryl and Carolyn Everson are strangely quiet on that.

They're They're quiet.

They're silent.

They're silent.

Well, well, you know, we're going to let Mark take this one.

Yeah, yeah.

They're like, we're over here.

They should speak out.

Both of those people do.

Should be doing that.

It's a really interesting, it's an interesting conundrum.

The same thing happened over at the Times with this Tom Cotton piece.

A lot of people didn't feel like you could speak out.

I did.

Jamel Bowie did.

Charlie Wurzhall did.

Supporting some of the African-American staff at the New York Times who started

a thing saying this is dangerous.

You're posting a very dangerous point of view, a person who's called for shooting of protesters.

In any case,

it's an interesting thing going on,

these fights going on.

And one of the things that I found interesting was that it sort of degenerates into a free speech and these companies

argument when it's really about what do we amplify.

I think Jay Rosen said that.

I thought it was pretty smart by Jay.

But it's interesting, what will they do next?

Like, hope it'll go away.

I assume that's and then just

history shows it most of the time.

Yeah.

And I look, let's be honest.

This has nothing to do with First Amendment.

It's about second Gulf Stream, specifically all of their pursuit of their second Gulf Stream.

This isn't a First Amendment issue.

It's a second Gulfstream issue.

And that is, they throw out First Amendment as if any of them give a good goddamn about the First Amendment, as if any of them understand it.

Private companies aren't subject to the First Amendment.

It's just that I'm sick of it.

We shouldn't even be talking about First Amendment.

That's a distraction.

That's a distraction.

The key is,

is your profit machine, does the externality

wreak so much havoc on the Commonwealth that it requires regulation?

And for about 10 years, we have seen that the externality of a business model that is fueled on rage

creates enormous externality around teen depression, around perversion of our democracy, around not putting in place the requisite safeguards to ensure bad actors don't weaponize your platform, and now around pouring fuel on the flames of incredible, like, incredible civil unrest in our society.

And yet they're going to distract us.

They're going to wait.

They're going to delay.

And we're likely not going to do anything until

either there's someone else in the White House or the DOJ or the FTC get the funding they deserve.

Or, and I still don't think this is going to happen.

It's just so ridiculous.

What we're doing with Facebook right now is where does everyone communicate their outrage at Facebook?

On Instagram.

It's as if we were to say, we're so angry at Donald Trump that we're going to vote for him such that he has to listen to us for four more years.

Yeah.

Until advertisers, until customers or consumers.

And they won't.

You're right.

They won't.

They won't.

No, it is the, I said in the column that Mark has been playing the long game long enough to know he never pays for anything.

He's a business.

He never pays for anything.

And advertisers will continue to go where the only, it's the only casino.

And so it's really hard to be a marketer and not be present on one of his platforms.

It's a really, and it'll be interesting to see if the Biden, if Biden wins, if they have the set to do it.

Because I think think Market will play the long game with them and sidle up, you know, sending instead of Joel Kaplan.

She's the only one with the brains and the balls to go after big tech right now.

She is.

I was on a book party with her.

She was speaking for Simone Sanders, who works for Joe Biden last night.

It was a virtual book party.

And she was just so impressive.

Again, I was sort of, she really was.

I'd forgotten.

I hadn't seen her publicly.

And it was really interesting.

And

she jumped off before I could ask her a question about tech, but

I do agree with you.

I I think she is probably the single person who would change this in a significant way.

I do think there's a business lesson in here, a brand strategy lesson in here.

And I also

try to taxonomize business concepts in the news because I think there's a lot to be learned here.

And I realize it's maybe cheapening what's going on.

But in terms of big tech,

one of the things I try and encourage my kids to do is to understand the concept of laddering, and that is saying, okay, how do you deposition the competition by saying, we're this, they're this, we're this, they're this.

And what feature could you or what action could you undertake or communicate that effectively is not as much about enhancing your own image as it is about really going after the competition.

The ultimate laddering or depositioning took place two years ago or 18 months ago when in an interview with you on MSNBC, Tim Cook

said privacy is a,

what was the term you used?

Privacy is a

profound right.

He basically wasn't talking about Apple's privacy.

He was talking about Facebook Facebook and Google.

He was depositioning them.

And I think Snap's move and what Twitter is contemplating doing with Snap deciding no longer to give free organic promotion on their discovery channel to Trump, I think they're basically saying, okay, this isn't as much about Snap as it is going after going after Facebook.

And basically everyone now is going to see a profit incentive and it will create tremendous progress.

And I think Twitter's going to get there to say, okay, we need to be the anti-Facebook.

And Facebook has a tough time because they're still trying to appeal to everybody.

Yeah, I think that's right.

I think you're right.

I think it was the right move by Smap.

It's the right business move by Snapchat.

It's the right, and it is actually also keeping in line with Evan Spiegel, who has largely created a service that is more pleasant to use and doesn't have the same problems because of the architecture of it.

It's an interesting, it's an interesting thing.

So here's the problem.

Coming out of this

coming out of this, that's exactly right.

Coming out of this pandemic, there's going to be the mother of all consolidation.

And everyone from Twitter to Snap to Pinterest, they're in trouble because what typically happens coming out of these kind of economic shocks is everyone, all the advertisers, A advertising takes a dramatic step down.

I think there's so many things going on that show that advertising is the era of brand, the sun has past midday.

You're going to see big advertisers not come back to broadcast advertising.

And not only that, they're going to decide playtime is over and they're going to only go with the online guys that scale.

And that's Google and Facebook.

And their experiments with Pinterest, Twitter, Snap.

They're not going to have the V-shaped recovery snapback that Facebook and Google will have.

They have 120th to 140th of the market cap.

So they're in a position, quite frankly, to start taking bigger cuts at the ball because they have to.

They have got to figure out something.

They've either got to merge with each other or they have to start carving out new niches.

They have to go on offense because they are not going to recover the same way these other guys are.

And if you look at their market caps as a multiple of revenues, as a multiple of earnings, they look expensive relative to Google and Facebook.

And there was always this notion that they would grow into these valuations, that they were the little guys.

And right, they were the little guys.

They were the little engines that could.

And now they're beginning to look like just the little engines.

And they're going to, if they're not careful, their stocks are going to collapse to just a multiple of EBITDA.

So they have to start taking some risks.

Yeah, that's been your theme with the media companies, too.

I actually haranged Jim Bank off of Vox Media to ask him what he was up to because you had talked about that, you know, the idea of the consolidation of these smaller players compared to the big ones.

And you're right.

I think Google and Facebook have it wrapped up with themselves.

But that doesn't mean, that doesn't mean things can't change, Scott.

If they can wake up Scott Galloway, this can happen.

All right, we're going to take a quick break.

I feel ashamed.

I feel embarrassed.

You should feel embarrassed.

Anyway, I should feel embarrassed.

That's just common sense.

That's just common sense.

But what's really important is that...

Like when I look in the mirror with my shirt off, I'm like, really?

Really?

I said that?

I look that way?

I look that way.

You're going to get woke and then you're going to keep talking about getting woke.

Anyway,

take me to the woke bro.

No, no, no, please.

Let's go to the woke spot.

Hushes should be your new theme.

Hush, Scott.

All right.

let's go.

That's my nice way of saying shut up.

Anyway, Scott, let's go to a quick break and come back to talk about a new lawsuit against Google and also a listener mail.

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All right, welcome back in the break, Scott and I had a little to-do.

I called him a big fucking baby.

Joking about how ridiculously lame I am.

Yes, it's true.

It's funny because it's true.

Yeah, I know it's true.

All right, we're not going to talk about you anymore.

All All right.

A new lawsuit against Google has been filed.

The plaintiffs are alleging the company collects user information that violates federal wiretap laws.

Potential class action suit was filed in the district court for Northern California.

It alleges that Google tracked and collected consumer browsing history.

Even if users took steps to maintain their privacy, Google is disputing the claims.

In a response, a Google spokesman said, as we clearly say it, each time you open a new incognito tab, websites might be able to collect information about your browsing activity during your session.

I don't know what the point of incognito is if it's not incognito, but and that's another question.

But I do think this brings into,

you know, DOJ is working on an antitrust suit.

We'll see where that goes.

But it does bring a question that the real game here with these companies as they sort of fiddle around with the First Amendment, which I think is the noisy part of the discussion, is, and I did say this to a lot of people, I said, the real story is privacy and data protection.

And that's where they're, it doesn't matter what, the reason they're so strong to be able to make pronouncements on First Amendment is because they have all the data and they have all the power there.

And so I think the real legislation that will get them right where it hurts, I think I know where that is on someone like you, Scott, is

in this area.

So it's an interesting that the focus is not on regulating this.

Instead of it's all on Section 230, it's all on liability and stuff like that.

To me, this is the heart of their, it's the spot in Star Wars where they have to hit that tiny little hole and that will blow them apart.

Thank you very much.

Yeah,

I'm beginning to think that

the real arbiter of all of this, and it impacts CNN, Fox, all the way down to Facebook and Google aren't doing anything that CNN and Fox aren't doing.

They're just doing it much, much better.

And that is,

you know, social media and media is nicotine in that it's addictive and it's not great for you.

But the cancer, the tobacco, is the ad model.

I just think that if the best legislation right now or the most elegant legislation would be to start taxing revenues on advertising.

And I don't know if you could legally do that, but

the reason why CNN and Fox divide us is because they're just going to show over and over and over that police car driving, accelerating into a crowd, and they have no

or Fox will show you something else.

Yeah, or Antifa.

These ridiculous claims that it's Antifa at these protests causing trouble.

And they won't show you

the peaceful protests of hundreds of thousands of young men and women peacefully protesting, walking across the Manhattan Bridge.

That just doesn't sound more Chobani.

And so, and then you go to Facebook and Google.

At the end of the day, it's just, it's the ad model.

And so

I wonder if, and I wonder if Elizabeth Warren, I'd love to speak to someone in her office.

I wonder if there's a way, sort of remember back when Bill Gates said the way to get rid of spam would be just to charge everyone one penny for every email they sent out?

And that way all the spammers would have to go away?

And I think, is there an elegant solution here to figure out a tax on communications or advertising such that this massive,

these trolls, these bots, these organizations that use thousands of bots to get across a message, usually a message that is really uncomfortable or really unpleasant or just wrong, begin, in other words, price advertising to its externality the same way we try to price.

You know, I agree.

That's an interesting idea.

I do think the idea of what they collect and the inability to collect is really at the heart of it because no matter what you do, the ability for them to collect and confuse you and confuse legislators and everything else is really how it works for them.

They get, this is how they get away with it because you don't understand it.

It's confusing.

They flood the zone with lobbyists.

And so it's, it just creates a situation where I don't think it's about the money with Mark Zuckerberg.

I think you are wrong in that.

I think that it's not necessarily, but why not that, why not anyway hit all these companies where it hurts, which is in the money, right?

This is, this is where they, This is how you restrict them, which is to

give them less ability to monetize people.

And it's sort of like they're, I think a bit more, I was thinking the other day, you're saying cigarettes, but I actually think it's more like

food.

They are allowed to flood the zone with shitty food and then we eat it, right?

And it's not, they're not, they're not regulated.

It could be tainted.

It could be bad for you.

It could be full of sugar, whatever.

And tainted is a lot of it, like makes you sick.

And nobody's watching that.

And we like it, and it's hard to get away from.

It's a little bit different than cigarettes, which I think are adjacent, I guess.

And so I think getting them not to be able to do that,

get them in their money-making machine is where we will.

we will be able to have the impact.

And then all this other stuff goes away.

We don't have an argument about their ridiculous, nonsensical arguments about the First Amendment.

We don't have any of this if they clean up the platform, take away their money.

I don't know.

Food, tobacco, you say adoption, I say abortion.

Let's call the whole thing off.

Oh, God, Scott, really.

In any case, I think it'll be interesting to see as these things discover, but it does, it's going to take, it's not going to be these lawsuits.

It's going to be legislators actually doing substantive data protection and privacy protection with teeth.

I just, I think that is at the heart of it.

And that's what they fear most.

But I feel hopeful around, or more hopeful than I felt in a while.

I feel like the worm has turned against the president and Republicans.

And when you have Republicans, you know,

the way you defeat an enemy is you atomize it.

And they've done a much better job, they being Republicans, and Russians and the Chinese have done a much better job of atomizing the Democratic Party in the U.S.

to make more progress against us or gain ground.

And the Republican Party has held pretty firm.

And when you have Republicans, including...

the Secretary of Defense, it just feels like they're being atomized.

I feel as if people now believe all of a sudden they're finding their backbone.

Just as Republicans tend to find their backbone about the time they announce they're no longer going to pursue reelection, you're seeing a lot of people find their backbone against Trump because I think people are starting to believe chances are that in six months he's gone.

Yeah.

And

they want to be seen as having gone on the record.

Well, the defense secretary, who was a Quizling, then said no, but then became a Quizling again.

He seems to be.

Yeah, but that's something, right?

That is something.

Well, it's an indication, I guess.

Yeah, it's a signal.

And you know,

you should quit.

That's more than most, most of them, most have done.

Anyways, I think that it feels as if the tide has turned and that the president is definitely on the defensive now and holding up Bibles upside down.

And, you know, just it just,

the other thing that was, the frightening thing this week, and I apologize, I'm jumping all over the place, is I've always compared, I used to compare Donald Trump to Hitler.

I found the demonization of immigrants.

Which James Mattis did, but go ahead.

The demonization of immigrants, the call to arms around

restoring our greatness, a refusal to condemn violence against one's perceived enemies.

I just, a lot of the themes, I think Donald Trump, we don't want to give him this credit.

I think he's a fantastic orator, and no one can rally a crowd like him.

And I think that he shared that competence with Adolf Hitler.

And my dad used to get very upset whenever I compared Trump to Hitler.

And he said, look, you got to keep in mind, you got to remember, Hitler had his own police force.

And now it appears that Donald Trump has his own police force, that he has these unmarked, unregulated militias.

And that takes us to a very, again, a very dark part in history.

And I've always thought that American exceptionalism, that we've always had this strange,

unearned cold comfort that somehow we're better than that.

And I'm guilty of some of that, but I think we saw some of that come do in a very ugly way around the virus.

There was a general feeling, and I think I was guilty of it, that for some reason, our exceptionalism, our innovation was going to protect or turn away the virus at the borders for some reason.

And that was just so arrogant and stupid.

And I also believe that the notion that, oh, that, what happened in Europe in the middle of the 20th century, couldn't happen here.

I don't believe that.

I think it could happen here.

We put Japanese people behind barbed wire when our parents were.

We have a memory.

This country has a memory drop, the biggest memory drop any group of people.

And now we have militias, unregulated militias, taking orders from a guy who demonizes immigrants.

So I just,

I think we have to be, I think there's a lot of lessons.

And I'm back to comparing the orange man to Hitler again.

And I don't care how offensive it is.

And I think there's a lot of parallels here that are very, very dangerous.

I will allow it.

I will allow it since James Mattis did it.

I will allow it.

Oh my God.

I interviewed General Mattis in front of the NASDAQ.

That guy is such an impressive man.

And I immediately, you know, he kind of.

Trump called him a loser.

Oh, yeah.

What a loser.

A guy who puts on uniform, Mad Doug Madison, devotes his life.

The guy who's called, what was he called?

The monk warrior because he's so thoughtful.

And, anyways, that guy, wow, I wish he had run for president.

He should have done it sooner, but you know, a lot of people are complaining he didn't do this.

I don't care.

Better late than never.

Most of them, most of them are in the network.

He has it baked into him not to say a word as a military person.

I have a lot of military relationships.

He resigned.

He did what you suggested he did.

He resigned.

He got out of it.

He has a big gentleman to say anything.

But boy, was that a corker of an interview.

I'll tell you, everybody should go and read that.

And he's certainly not a loser.

It's in the Atlantic, right?

Yeah.

Yeah.

It's all over the place, though.

It is something else.

I'll tell you that.

Anyway, we've got a listener mail.

It's a good book too, by the way.

Yes, it is.

All signed chaos.

It's a good book.

Excellent.

Okay, Scott, pivot.

Listener question.

Roll tape, Rebecca.

You've got mail.

Hi, Karen, Scott.

My name is Bobby, and I'm from Philadelphia.

This week, it was announced Amazon raised $10 billion in corporate bonds, including $1 billion in debt at a U.S.

record low interest rate of just 0.4%.

Is this just a crazy gangster move by Amazon to raise capital at extremely low cost?

I don't have a deep background in corporate finance, so can you explain why only very few companies have access to cheap capital like Amazon does?

How does this strategy play into their continuing dominance?

Thanks.

Love the show.

Oh, that's a good question.

I'm going to start with this.

Of course, they get better rates.

They're bigger.

You always get better rates if you don't need money.

And so

this interest rate

is amazing.

It's an amazing interest rate.

And why shouldn't they take free money?

Scott,

why do you think they're boring money?

Why not?

Like, right?

Yeah.

So every company...

They're going to buy something.

They did it last time, then they bought whole foods.

So what do you think?

Well, every company has a cost of capital.

And Amazon still needs to fund projects.

And they're still at a point, unlike any other company in the world, where they

invest more or they're not cash flow positive sometimes.

They could be cash flow deposit anytime, but they make these big staggering bets.

So even if they don't use the cash, they can use it to buy back stock.

But your cost of capital and your CFO's ability to manage your cost of capital is an incredibly important feature of your business.

So in your household, the way I would equate it to a household is if you have

credit card debt at 13 percent and then you go to your and then you also have stock holdings and you go to your uh your your the institution that holds your stocks and says, can I borrow money against my stocks at 2% or 3%?

Which at Interactive Brokers, you can borrow money against your stocks at 2% to lower the cost of capital funding the debt to keep your house going.

So this is just nothing but trying to lower the cost of capital.

It's a great move.

And interest rates are at historic lows.

So the ability to fund projects at a low cost of capital, or even some companies are taking out debt to buy back to buy back stock

if they feel really confident in their stock.

I think that's a bit of of a dangerous move because all you're doing is substituting equity.

But at this point, issuing equity, they think that's more expensive than issuing debt.

I'll give you an example, and it's not just big companies.

When I started L2 and we took venture capital money, there are banks that follow tier one venture capital firms.

And if they invest $15 million, the bank shows up and says, we'll give you $5 million of what's called venture debt.

And the attribute of debt is it sits on top of

the cap structure, meaning that if the company goes over, they're first in line to get the assets.

So technically, it's the most secure thing.

Debt is the most secure.

It gets a lot, feasibly, it gets a lower return.

But these companies, in this case, I think it was Co-America, came in and said, we'll give you venture debt.

And I said, I don't need any more money.

And there's something about most of us.

We're a little bit weary or wary of debt.

And debt is a fantastic tool that you get at a low cost.

And they said to me, I said, just for fun, what are the terms?

And they said, no covenants, no warrants, and 3.25% five-year term.

And so if you can borrow money money.

If you literally, if you can borrow money as an entrepreneur for what was, you know, at the time a great company, but still risky, at three and a quarter percent, I said send it over and I'll sign and tax it back today.

Even though I didn't need the money, because I thought having that cash on the balance sheet, even if I didn't use it, the cost of the money.

You have the ability.

You have the ability.

Like in that case, in case it's more bulletproof.

And also people will find it a good investment too.

So this is the historic.

And then

this has so many opportunities for us and so many dangers.

Interest rates are so historically low, but if interest rates spike, the amount of money we have to spend on our interest, which is now greater than the national, what we spend on national defense, despite record low interest rates, at the same time, should municipalities or even the federal government think about taking on borrowing.

Yeah, to build infrastructure, right?

So that is a powerful tool.

And I've always had a natural thing.

Debt used well is a powerful tool.

You're 100% right.

And, you know, interestingly, Silicon Valley doesn't like to use it that much.

But, you know, Brian Chesky just did it.

A lot of them are doing it now.

Airbnb just, yeah, Airbnb.

Yeah, Airbnb just did it.

It just, a lot of them don't.

I think he had tougher trends.

It was expensive.

It was 900 points above LIBOR.

It's a great piece of paper for the ambassadors.

Yeah.

So I think it's really,

it's something Silicon Valley doesn't think about a lot, but it certainly is a good idea for companies to consider.

And I think you'll see a lot more of it, especially right.

In any case, we have to take a quick break now and we'll be back with predictions.

We predicted AMC would be in trouble and it is.

We'll be back after this.

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Okay, Scott, as I said, we predicted AMC would be in trouble.

Good job.

Good job.

All around.

That was a pretty weird flex.

I know.

AMC will be in trouble.

I know.

It's like saying, it's like

days are number.

I think MySpace is days are number.

And not only that,

Kara, I think Ask Jeeves is in real trouble.

I think Ask Jeeves is automatic.

Didn't you like that butler?

That was one sexy butler.

That was an IHC property.

I know.

Powered by Google.

Let's have the metaphor of a butler on top of google i know but you know google was a little little baby then let me just tell you you didn't know it was going to turn into time more like chucky than a baby you know what i told you that story of larry page when i'm like do they know what you're doing he's like no like he was always like he knew what he was doing uh same thing with yahoo no they he's like don't tell them and you know what i mean like it was he's a he was a he's a very savvy customer i'll tell you that um

he's gone has disappeared off the face of the earth by the way uh i don't know what he's up to he's probably moved to to another dimension, is my guess.

So, what is your prediction, Scott?

We need a prediction from you.

A good pretty, you know,

we've been doing a lot of political stuff.

I'd love you to do a business prediction.

Well, I have a business prediction.

I have a communications prediction.

I think the most interesting statement.

I think there's been a couple just fantastic.

In retrospect, I'm trying to think, what are really the seminal moments or the people who showed tremendous leadership here?

And I think Killer Mike's statement in Atlanta talking about his background,

his family, he has a lot of family in law enforcement.

And

I just thought he struck just such a fantastic tone.

And I think that statement is going to age really well.

The other statement that I think is going to age really well, and that I think a lot of, I'll call it young men should take pause and really learn from, I thought one of the more interesting statements of this entire crisis.

was the 21 seconds of silence from Justin Shuba.

Wow, that was fantastic.

I thought that was so powerful.

Thrill.

And as a young man, and again, and I'm turning this back to myself.

Especially with the beard.

I recognize that.

Oh, he's just so fucking dreamy.

That guy is like, Jesus Christ.

Not many people can afford a beard.

Yeah, go ahead.

Anyways, he's got his issues.

And by the way, he had his issues with black faces, if you recall, and everything else.

So, but keep going.

Keep going.

Okay.

By the way, does Canada likely think it's in an apartment above a meth lab right now?

Canada definitely thinks that.

I think he kind of said that.

The apartment above.

I think he kind of was like, what the fuck?

Okay, what's going on down there?

I literally was like, Amanda, pack up your things or move to Vancouver.

But there is, I think there's a lesson here.

I don't think that was planned.

And I think young men need to need to really register the importance of

thinking about a question and being silent before you respond and choosing your words carefully because

I knew as a younger man up until about six months ago,

I had a position.

And as soon as someone disagreed or asked me with a question, I thought it was leadership and showed strength and masculinity to immediately respond forcefully and have an answer.

And I think there's a real grace and a leadership ability in having the confidence to just sit there and think before you speak.

And I thought that was really, anyways, my...

My, we're not doing wins, but I think one of the things.

I just want to talk about dreamy Justin Trudeau, but go ahead.

Wasn't that a gangster move, though?

It was.

It was.

Prediction, please.

We got to get out of here.

I have a date with andrew ross sorkin and you're trying to keep me from it don't rub that in my face don't rub that in my face by the way i am pissed off at that canadian spy andrew ross he's not canadian and he's not a spy

spy that guy would be the most effective spy in the world because he's so likable anyways i texted him and said call me i have an idea i want to match i have not heard from him i have not heard from him andrew maybe he gave you the wrong you know like how women can give men the wrong self oh i'm used to that i trust me i am used to that

canadian spies are supposed to call me back

Anyways, who asked for a prediction?

Yes, prediction.

The IPO class of the last half of 2020 and the first quarter of 2021 will be the best performing IPO class of the last decade.

You're going to have, we have this anomaly right now in the markets where the markets have totally disconnected from Main Street.

And that is the economy has taken a huge hit.

You have 40 million unemployed.

You're going to have discretionary spending go down once the helicoptering

goes away.

But at the same time, you have a ton of institutional capital because their stocks have not gone down.

Even if they're in the NASDAQ, if they have a tech-heavy portfolio, they're actually up for the year.

And as a result of the

real economy getting hit hard, there are a lot of companies that were kind of lining up for direct listings or IPOs that aren't going to get out.

And the companies that do get out are really the best of breed disruptors, the Airbnbs, the lemonades of the world.

And I think these guys are going to just go crazy.

Are you investing?

Are you going to be investing?

Yeah, I'm actually contemplating, and I want to do a longer show on this, but I'm actually, for the first time in a long time, contemplating getting out of big tech, not because they're not great on a risk-adjusted basis, but because the numbers have just gotten so big.

And I'm thinking about getting into what I'll loosely call the disruptor class, and that is the Airbnbs

and the Airbnbs and the lemonades, because what you're going to see coming out of this recession is a lot of old industries weakened.

The insurance industry is going to be weakened.

Yeah.

Right.

The hotel and hospitality industry is going to be weakened.

And here come these fists of stone called Airbnb and Lemonade and other disruptors.

I think there's an interesting company that I'm contemplating getting involved in called Public, which is sort of the more woke,

more kind of interesting Robin Hood investing app.

Anyways, I think the IPO class of the next 12 months is going to be the best performing IPO class of the last record.

I like it.

I think that's a really smart thing.

I think you've mentioned it before, but it's absolutely true.

I do, I think Airbnb is in a much better position than hotels.

They're going to go through a rough period.

But as, and I would recommend the interview I did with Brian Chesky last week.

It really is a, it's not about tech.

It's not, it's about how to manage your way through a crisis and the insecurity and difficulty of doing so.

And I thought he did it with a lot of humility, a lot of honesty.

I thought it was a really interesting thing, but I really agree with you.

My question is: what interviews have you done would you recommend we skip?

I didn't think my Sam Harris.

Come on, that's good.

No, that's true.

I thought my skin.

What should we ignore?

Sam Harris, the Sam Harris one.

I know you're.

Oh, my God.

Are you nuts?

That hurts.

Sam Harris is a gangster.

That guy is so thoughtful.

Just because he doesn't like hold hands with you on the way to the woke spa.

No, no, listen to me.

Listen, woke man.

Don't even start.

You started off this thing saying, I just realized that people of color have a problem in this country.

But listen,

the

one on YouTube, little gun show in town.

Little gun show.

Okay, listen to me.

I thought I did a bad job.

I thought I did a bad job.

I think I did a bad job.

With Sam Harris?

I think I did.

I thought it could have been a better conversation.

I think I should have.

I think he's one of the more interesting thinkers of our age, and I think he's fearless.

Interesting thinker.

Interesting is the only word I would use.

But I would agree.

I think I didn't do it.

I am blaming myself in that one.

I think that almost all of them are pretty good.

That's the best interview I've ever done on the Prop G podcast.

All right, okay, there we go.

Or the best interview I've ever done.

It's a really good one.

I'm interviewing a lot of people in the next month because Rico Decote is coming to an end.

I have some really amazing.

What's he like?

What's Brian Chesky like?

I don't really know him.

He's lovely.

He's lovely.

I have to say, I wish he was running Facebook.

I don't know how else to put it.

I wish he was running Facebook.

He's really an interesting,

he struggles with things.

I know there's all kinds of controversy around, but he addresses it.

He doesn't shirk it and he doesn't do mumbo-jumbo intellectual nonsense that others do.

So anyway, the last round private.

Talk about learning.

There's someone who learns.

There's someone who really does try to learn.

Last round private valuation was $40 billion.

And most recently, there's a secondary sale.

Oh, no, you can now pick up shares in the secondary market for $19 billion.

I think it got public at $40 to $60 billion.

And

$10 billion in three years.

He talks about that whole debt thing and what he had to do.

So I would listen to it.

It's really interesting.

All right.

You got to read us out.

Scott, that was really great.

Don't forget, if there's a story in the news that you're curious about and want to hear our opinion on, email us at pivot at boxmedia.com to be featured on the show.

Scott, read us out.

Today's show was produced by Rebecca Sinanis.

Fernando Finette engineered this episode.

Erica Anderson is Pivot's executive producer.

Thanks also to Drew Burroughs.

What a fantastic team we have.

What a fantastic team.

Thank you.

I want to, just a quick out, thank you for saving me for myself often.

They're really, they take, you know, I think they take both of our voices and give them flight, if you will.

So thanks to the team.

Make sure you subscribe to the show on Apple Podcasts.

If you're an Android user, check us out on Spotify or wherever you listen to podcasts.

If you liked our show, please recommend it to a friend.

Thanks for listening to Pivot from Box Media.

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

Have a great rest of the week.

The Canadian spy needs to call me back, Tara.

He will not.

I will never call the dog back.

I don't think he knows who you are.

Oh, that hurts.

That hurts.