Amazon pays taxes (and fights for JEDI), SoftBank gains on Sprint and what ClassPass tells us about the fitness economy

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Hi, everyone.

This is Pivot from the Vox Media Podcast Network.

I'm Kara Swisher.

And this is Scott Galloway.

Happy Valentine's Day, Scott.

I deeply.

I was wondering if you were going to remember.

I don't.

I was wondering if you're not going to be able to do it.

I bought you nothing.

I bought you nothing whatsoever.

Although my son did an amazing thing for his girlfriend.

I can't talk about it right now.

He's bringing bringing it to her.

Like my son is the best Valentine's Day for his girlfriend, but I did not.

I was thinking I made no effort for you.

But here we are.

Okay, so I bought you a Valentine's card, and the only problem was I ran out of space writing on the front and the back, and I had to buy another card.

One of those letters.

Yeah, that's right.

I just ran out of space.

Tiny little writing.

Articulating the ways that I appreciated and loved a jungle cat.

That's right.

I think this is literally one of the worst holidays in the world.

All this is is downside.

This is literally just a series of disappointments.

It's like, no, no, no, don't do anything.

We don't want to do anything.

It's not important.

And then you actually don't do anything.

Boy, are you in trouble?

I don't agree.

I think

it's a joke holiday.

I don't like the whole thing.

I don't think there was a devastating piece in the speaking of

sort of dating and stuff like that in the New York Times.

They did a video about a woman in China and who didn't want to get married.

And they're called leftover women.

I mean, the whole thing, all the little romance stuff is really disturbing to a lot of people.

Listen to me.

You were in New Orleans.

I was.

So I've officially become an old man.

I was speaking down there and I thought, you know, I'm going to take the day and I'm going to do a self-guided tour of the garden district, go see the World War II Museum.

I'm literally 105.

And I had a fantastic time.

It's a wonderful place.

And I've decided that Louis, your son, is going to go to Tulane.

And me, James Carvell and Louie are going to start the world's worst fraternity.

And people will come over.

People will come over.

Jim will be like, it's about private power.

We have a mom about it.

Professor Galloway is going to mix us all up some mint juleps.

I am not going to count it.

Let's not count the points before we'd have it on.

Either of you.

Actually, that would be funny.

That would be somewhat funny.

Louis would be good in.

There are so few people you can mock now.

He's a seven-year-old white man that went to LSU, so I can mock him.

I can absolutely mock him.

He's saying some things.

He's getting some notice.

Suddenly, he popped up like that.

Oh, that guy's a gangster.

That guy is a girl.

He is.

He doesn't give a shit.

He talks about not

Honey Badger.

Don't give a shit.

Oh, my God.

And his analogies make no sense, but they sound so powerful.

He's like, you don't know what a hush pup is at a waffle house?

And you're like, that makes no sense, but he sounds smart.

He sounds smart.

He's like, of course you don't.

Well, what the fuck does that mean?

Of course you don't.

We'll see.

We'll see where Louis is in his college decision.

But I like to, he is in Tulane.

Well, Tulane, okay, first off, your son is a wonderful cook, and he's into it.

I mean, New Orleans, great food city, right?

I know.

It's called Narlins.

Nolins.

Narlins.

Norlins.

And then

a fantastic.

Tulane is a great baseball team at a great medical school, which is kind of the one-two punch.

Yeah, neither of which is a good deal.

But okay.

Sure.

Yeah.

Yeah.

We'll see.

We'll see.

Louise makes his own decisions.

I like to call him sometimes.

Ooh, Louise in Louisiana.

Louis, Louis.

Listen.

Yeah.

We have to talk about Amazon is like all over the news.

I'm going to

recount a couple things.

But first of all, all, Jeff Bezos bought the most expensive house in Los Angeles, which is Jack Warner's former estate that was owned by David Geffen.

It's the Warner, the old Jack Warner estate.

Secondly, it announced it was finally owed some taxes.

It said it would pay over a million dollars in federal income taxes.

New tax rate of 0.011%.

All right.

And then, thirdly, you know, Jeff was all over the Oscars and is still making big, obviously going to be spending a lot of time in Los Angeles.

He owns many properties.

And then the Jedi decision, one of them, the stay, his fight with Trump over

the Defense Department contract that Amazon lost to Microsoft, which it had won, allegedly.

And Trump put his thumb on the thing.

That's coming down this week.

And then its PR person, Jake Harney, wrote a piece

in the New York Times op-ed page, which was sort of a PR ad for Amazon and what a good city.

You should take our goodness and shove it down your throat because we're so good.

And then he had a meltdown on Twitter, which was somewhat when Regerale was.

Why did he melt down?

What did he do?

What did he say?

Well, he had said that Bernie, he started with Bernie Sanders' call to thank Jeff Bezos for the $15.

And everyone was like, you might want to point out the $15 wage,

minimum wage increase.

And

everyone took exception with the fact that they thought that Bernie Sanders' pressure had been brought to bear there, and then he was denying it.

And then he started insulting reporters for being Brooklyn hipsters.

And then it just was, it was untoward for a PR person.

He should have put the Twitter down.

It was very late at night, so I'm not not sure what was going on, but he just couldn't stop and started really attacking people.

Well, we have experience with Aaron's tweets from the reporters at 11.30 p.m.

We know what that's like.

We know what that's like.

Text is what I do.

I do not tweet at you.

Listen to me.

So anyway, let's start with the Hollywood thing.

So he's bought this thing.

We don't usually talk to people's houses, but this is a big old, I'm staying here in L.A.

His girlfriend is from L.A.,

has a lot of businesses there.

You know, obviously he's moved his operations down there, it seems like.

And this purchase, which is a massive purchase.

Talk a little bit about streaming and

what do you think he's doing, even though his real business is retail

up in Seattle.

Trevor Burrus, Jr.: So this was the Jack Warner estate, the most powerful man in Hollywood, nine acres, nine acres in Beverly Hills.

And it is so metaphorically rich, it's literally falling off the tree here.

And that is the most powerful force now and the most powerful individual in Hollywood, seen as a place that had somewhat of a moat from zeros and ones and processing power because of the culture of creativity and kind of the unique secret sauce that's enabled a region, Los Angeles, to largely have a monopoly over a global industry unlike any region's ability to master monopoly over the world, maybe with the exception of San Francisco and processing power, which the entire world uses.

But you have now, Jeff Bezos is the most powerful man in Hollywood.

And if you look at Amazon Prime Video, which came out, I think in 2011, and until then, Netflix had had it all to themselves.

It's really paying off of them because it looks, on the face of it, like a $7 billion a year, kind of a rational purchase.

They haven't had a lot of Mmes.

A lot of people have sort of mocked the service.

But there's such genius in this move, Cara, because the NPS scores are the loyalty that people feel for e-commerce companies or internet services.

It's negative with internet services.

It's marginal with e-commerce companies.

But the NPS scores on streaming video services is really huge because because there's storytelling and it's emotional.

And you think, well, I love Homeland, so I like Showtime.

Well, I love Game of Thrones, so I like HBO.

And since they have launched Amazon Prime Video, the renewal rates or the retention rates on their satellite

Prime program has gone from 70 to 92 percent.

So if you look at it, it's very, it's I do it more for the delivery.

You know, it's a good deal.

It's a good deal in terms of what you're whatever you're doing with them.

What was interesting about this is, besides that, is there was a, we'll get to the taxes in a minute, but

there was a great piece about actual how many taxes they actually pay.

But one of the things that was most interesting in it was

the retail business is not very good, and they're not very good compared to other retail businesses.

They're fine.

They're like in the same margins.

But their AWS and some of their entertainment stuff is much more possibility of being a bigger margin business.

And

it was fascinating that this is where they've moved when actually their core business is one with very tight margins, with very tight margins and difficult, which they try to help out with technology, but it's still not, they aren't hanging the moon quite as much as people thought.

So this move is critically important, I think, for them.

Well, they're not.

My colleague at NYU Assault Demoter, and who's arguably the most impressive teacher in the world right now has always said that Amazon is an e-commerce company.

It's not a cloud company.

It's a disruption platform.

And that is through great execution, unparalleled access to capital, and very visionary,

disciplined strategy.

They find categories ripe for disruption and they use their flywheel effect to spin into that category.

And if you look at if you look at video, if they can get an incremental 14% renewal rate on the 70 million households that have them, that translates to another couple, just about $3 billion a year in incremental revenue with a SaaS-like multiple, that's $10 or $15 billion in market capitalization.

And then if you look at the fact that prime users spend an average of $800 more and you look

$12 million times $800, that's an incremental $10 billion.

You sign a lower multiple to that, two to three, you're looking at $40 to $50 billion in accretion before you take into effect the flywheel of Amazon Media Group and more vendors on the platform.

So it's just amazing this notion.

I just can't wrap my head around the notion that this entire industry of Hollywood and media and content, literally the pride and joy and the kind of running commercial and an unbelievable juggernaut of an industry, hundreds of billions of value, cultural influence like no other industry in the world, is being featurized as an accessory to sell more handsets and toilet paper.

It's just, I mean, just,

my mind is blown, Carol.

My mind is blown.

It is.

It is.

I told you about my conversation with Jill Salvi about this.

I'm like, you're selling toilet paper, just FYI.

It's like the old days when they would, the beginning of TV was that, though, right?

The sponsors were these toilet paper or whatever, whatever they were selling, palm olive or whatever.

What's interesting about this is Jeff's being in Hollywood.

He seems to be enjoying it personally.

I mean, there is this whole

fatal attraction to Hollywood.

You know what I mean?

Sony and others.

So could that be a problematic?

Like as he starts to like, this house is very metaphorical, but boy, you sort of worry a little bit for him because so many other big companies have gone there and gotten their, you know,

whether it was the Japanese in the 80s buying Columbia Pictures and losing 75 cents on the dollar, where there was half my single buddies.

And some of them recently divorced in the 90s who got lucky at AOL and thought they were geniuses and said, I know I'm going to move to LA, buy a Porsche, be a movie producer, and try and sleep with actresses who then realized it lost half their net worth in like five years and then left L.A.

L.A.

is the land of broken dreams for the most part.

You know, it's just not.

So what do you think about this?

What do you think?

Well,

he's got the money to break a lot of dreams.

I mean, basically, when you're a movie producer, it means one of two things.

You're Jeff Bezos or your father is Larry Ellison.

It's now become the playground.

for people who are willing to lose a ton of money.

Because other than the real pros at this, Disney, you know, there are some real pros at this.

It's a very difficult business.

It is overinvested.

It's like nightclubs or restaurants or any other passion business.

There's too much capital, which drives down returns.

So

all the good stuff is soaked up by a few players.

Speaking of money, Amazon is also caught in a war with the Trump administration when it lost the Jedi contract, which was a big, giant contract with the Defense Department for Advanced Technologies.

It was awarded to Microsoft, but Amazon is disputing that decision.

Amazon has many other contracts with the federal government, but this was a big one.

It was one with the CIA, AWS does.

So

what is this?

And like, this will be, they'll decide whether they're going to stay the deployment by Microsoft, which won the award.

But this, I think he's got a real up this week when Trump meddled in the Justice Department, because their whole narrative is Trump medals.

So he meddled in Ukraine, and now he meddled with

the Roger Stone case,

with his henchman, Igor, I mean, Bill Barr.

And so, you know, he's got a good narrative here of Middlesex.

And the government is trying to say it's because of national security they've got to rush.

When in fact, it was the government, especially Trump, who slowed down the whole process.

So it's an interesting thing.

I think he's being super aggressive with this lawsuit, and it's linked to the Washington Post and everything else.

So it's real money for Amazon if it starts to lose some of these contracts under Trump,

as opposed to what's going on here.

And then this taxes thing.

So talk a little bit about the taxes.

They made a blog post that

we pay taxes.

And Jay Carney's piece was presumably, we provide jobs.

Don't be mean to us.

We're a better corporate citizen than you think.

That was what that piece essentially said.

And this talking about $1 billion in federal income tax, more than $2.4 billion in other federal taxes, including payroll taxes and custom duties, which they have to pay.

It's too bad.

Everybody gets to pay them.

And then more than $1.6 billion in state and local taxes, including payroll taxes, property taxes, state income taxes, and gross tax receipts.

Tell me what you think about what they're doing here.

I bet Target, and I'm almost positive of this on this, I bet Target, FedEx, William Sonoma, a smaller retailer, and most definitely Walmart.

I bet Walmart has paid, I know Walmart has paid over $70 billion in federal income tax in the last 10 years, and I bet Amazon has paid somewhere between one and three.

I mean, and this is despite the fact that Amazon will add the value or has added the value, the entire value of any of those retailers I just mentioned in a three-month period, in a specific three-month period over the last five years.

Amazon and big tech has overrun

Washington.

The IRS is overrun, and their tax lawyers are smarter than our tax authorities.

And we now have small and medium-sized business paying a disproportionate share of taxes to fund our Navy and our parks, such that Amazon, Apple, Facebook, and Google don't have to pay taxes.

I mean, I really are.

Our tax system, you could argue taxes are too high.

You could argue they're too low.

I think there was a solid argument for why corporate tax rates should be brought down such that we didn't have these inversions where corporations were leaving the U.S.

I think there was a solid argument there.

But when they said that corporations were paying 35 percent, no, they were, big tech was paying 21 percent.

And now the average tax rate on big tech is 12 percent.

So,

why are they doing this?

They're trying to push back these narratives of being a bad employer and being a bad taxpayer, essentially.

Because it's the same people that defended Bill Clinton.

The other guy that was defending Bill Clinton is working for Goldman Sachs.

So, you go to Washington, you are under attack, you develop unbelievable skill set at taking incoming and then returning fire, and you go to work for the organizations that

need the most Kevlar because they're the most aggressive or they're the most hated.

So the entire administration ends up at Facebook, Google, or Goldman Sachs.

Tell me, it's like, show me where Sarah Huckabee Sanders ends up, and I'll show you a company that's probably bad for the world because that's who needs them.

These people have figured out what they do.

Probably the state house of her state.

Oh, is that right?

She's running for governor.

Is that what you're saying?

Possibly, yeah.

But you talked about Jedi.

I mean, a couple of things.

You talked about Jedi, and then I'm going to go back, just touch on the media.

And

I don't, I don't like, as you know, I'm a pretty big critic of Amazon, and I think Microsoft

has become a little bit more cuddly and fair.

And I don't know if that's fair to say they're more fair and cuddly, but because they're effectively a monopoly too.

But Amazon really gets me going.

I actually hope Amazon, the courts decide this, because if the courts don't in some way decide this, basically Donald Trump and Bill Barr have co-opted the law of the land.

And

if that's happening,

that's just Wednesday.

I mean,

essentially, kind of what America is about and why we elect people and go through this process.

I mean, the whole reason we go through this process is to elect people who are supposed to make laws.

And if they make laws and then they're not willing to enforce them,

it's a big answer.

I mean, this is really frightening.

It's kind of the most underreported story right now.

No one's talking about Bill Barr meddling with Roger Stone.

But this is another example.

If all of a sudden.

I'll be writing a column on it in the the New York Times on you.

This is where I am on Amazon's side on this one.

100%.

And you know, I can't believe I'm backing this billionaire who I have lots of issues with.

But in this case, it feels like

cooked.

But it is interesting.

It's an interesting face-off that Amazon is sort of trying to navigate right now in that we pay taxes, we're not a bad person, don't attack us.

And at the same time, they are getting unfairly attacked by the Trump administration, what it seems like.

So it's kind of an it's an interesting, it's an interesting face-off between him and Trump, and an interesting face-off face-off between Bezos and sort of the media in terms of, and not just the media, but everybody in terms of their corporate hegemony, essentially.

So

it's a fascinating moment for this company, for sure.

But just circling back a little bit to put a bow on the media side, just to give you, I mean, just to, I love that saying, it's surprising how long things take and then shocking how fast they happen.

In the streaming video wars, the last 24 months, we've been at the shocking phase.

And if you think about, just, if you think about how much the landscape has changed just in the last 24 months, 24 months ago,

it was not only Netflix, but there was this new entrant that everyone was excited about.

And they came to South by Southwest, and it was Meg Whitman, probably one of the most accomplished and talented tech executives in history.

Jeffrey Katzenberg, the iconic storyteller.

And they raised, get this, a staggering $1 billion.

Whitman Katzenberg, a billion form video, disruptive.

This thing is dead on arrival because in the two years they've been trying to figure it out and explain the non-strategy strategy they have.

Everyone has come in and said, oh, well, that's cute, but we're spending $8 billion and we're preloading it on your phone.

Oh, that's nice, but we're in the business of content and we just started Apple TV Plus.

And, oh, you can go to Galaxy's Edge.

I mean, Quibi is literally dead before it's stillborn.

It's literally dead on arrival.

I never thought much of it.

I'll be honest with you.

I didn't know why these two knew a lot about young people.

I'm sorry.

I just was always like,

it got a lot of attention, though.

It got a lot of attention.

I know, but

I was always like, ugh, not so much.

It is literally going to be a fly hitting the windshield of Apple, Amazon, and Disney, who are able to have the distribution or able to monetize through flyways.

We've got to move fast in this world, Scott.

Speaking of which, speaking of which of a couple more things very quickly, I want very quick reactions to this, very quick reactions to each of these.

I'm going to do quick ones because then we've got to get to some other stuff.

One is SoftBank lost a lot of money off the Vision Fund and had a big multi-billion dollar quarterly loss because of it, but had a huge win this week after Sprint has approved the merger with T-Mobile.

SoftBank made about $12 billion this week courtesy of Sprint's surging stock price.

So very quickly, you're going to have short answers here.

What do you think?

Is this a big deal for them?

Because they're losing everywhere else.

And there was a devastating story about one of its investors at Piff in Saudi Arabia in the Wall Street Journal about what an idiot investor he is, essentially, especially sort of getting played by Mas Hassan in the Vision Fund, but having lots of trouble there.

So what do you think?

Well, it touches on a few things.

When the FTC and the DOJ have decided to finally look at smaller acquisitions, because the consolidation that I constantly harp on across big tech is happening across every industry, whether it's anti-plagiarizing software or food, it's just happening or syndicated research.

You see a consolidation of power that is bad for private business, the economy, and job creation.

And again, we have now four telcos going to three.

So that's one externality of what's happening here.

As it relates to SoftBank, I would argue SoftBank is a pretty good investment right now.

If you're looking for something with more...

kind of modest upside.

I'm not talking the kind of gains that we expect from venture-backed companies, but if you're looking at a 10 to 30% gainer over the next 12 to 24 months with limited downside, SoftBank is actually a pretty good stock to own because the headline news there, the headline risk is so dramatic because Vision One Fund is just such a a spectacle.

But the core business of SoftBank is actually pretty strong.

And even if they lose all

$60 billion that they've invested in, or excuse me, all $40 billion that they've invested in Vision Fund One, they're still fine.

It's such a big company.

It has so much, they still own a large portion of Alibaba.

They own a big portion of Sprint, which is now their third largest telco.

So if you're looking for a company that

qualifies.

You're a counterthinker.

All right, let me give you another or thinker.

Very quick.

Brandless, Folded.

This was a company that was direct to consumer goods, labeless products.

A lot of people who use the products didn't think they were very good.

That was one issue.

But, you know, most of these branded products are just made in the same factory, essentially.

So what does it tell us about this?

What do you think about brandless itself just closing?

It just doesn't work.

People don't want to buy that way.

Well,

so

some of the most underrated companies in the world, I've worked very closely with PNG and Unilever.

These are extraordinarily innovative companies.

I mean,

people don't understand how difficult it is to manufacture a good razor, a good diaper, or a Tide Pod.

And their ability to balance capital allocation across media, packaging, retailer relationships.

I mean,

this shit is hard.

And they do a fantastic job.

And they're also amazing at retaining or attracting and retaining some of the best human capital in the world.

They just get, they get very talented people.

And the notion that it was kind of a cute idea where, oh, we don't need a brand.

We'll focus on the product.

But you're right.

It's like, okay, we have a marginal product, but a mediocre brand.

That just doesn't cut it, right?

And then you have...

No, it wasn't.

It wasn't so much better.

It wasn't like, oh, my God, these chips are so good.

Yeah.

And I don't think people think that way.

You're right.

I agree.

And by the way, let me just say I had an experience with that with Namisco, a division of Mondelez, which they have like a 14-stuff Oreo that my son and I bought.

And then there was a great Tic Tac on it.

But these Oreos had like so much stuff inside, like whatever that white stuff is.

And I have to say, I was like, this is so innovative.

We had to buy it and we had to eat it.

And then we had to regret it.

It was fascinating.

It was a fascinating moment.

The CPG guys are strikingly innovative.

They just don't attract cheap capital.

And obviously, it's a difficult business to, you can only scale that business six, eight percent.

But PNG has actually been a pretty good performer over the last 24 months.

Agreed.

Agreed.

I think it's harder than you think.

And this break, I thought it was a cute idea, but it wasn't going to go anywhere too.

So last one, another exited Google.

Eileen Naughton, the longtime head of Google's HR.

She used to work at Time magazine, by the way, Time Inc., stepped down this week.

She was a key figure at the company during Google Walkouts, another internal strategy at the company.

He'd have been there a long time.

She was in advertising.

I met her a long million years ago.

She's the fourth big player to exit Google in the last few months.

Larry and Sergei left Alphabet in December.

The founders, David Drummond, the legal officer, left in January.

I had talked about some of these exits in a recent episode of Pivot about this cleanup.

Let's roll take.

You know, I think what's happening is Sundar Pichai, who has been the one to move in and clean some of this up, you can see his sort of invisible hand everywhere.

What he's trying to do is clean it up quietly because he's a good guy and he's actually, you know, and move it away and move Google into the next era.

All right.

So what do you think about this?

Hold on, hold on.

We're now playing old clips of Pivot on Pivot.

Yes, we do that all the time.

We will do, we do.

Oh, my God.

Talk about shavings of shit on a shit salad.

Oh, my God.

Listen to me.

Don't get jealous.

Don't get jealous because I'm a brilliant person.

Oh, my God.

I want you to talk about it.

I'm just eating the the few things you got right.

Are you going there?

Are you going there?

Originally?

You've come there.

That's how desperate we've become for affirmation.

No.

No, no, we have not.

Oh, my God.

Move along.

Remember when I said this smart thing two years ago?

Let's play that.

No, it wasn't two years ago.

That was recently.

Anyway, could you please comment on this?

Don't be trying to attack.

What do we talk about again?

We're talking about Google, what's going on there, the executives.

These are a lot of people.

Oh, you know, you're going to forget more about this than I'm ever going to know.

I don't know these people.

I don't know what it means.

I don't know who she is.

What are your thoughts on it?

I think

I think it's fascinating.

These are major figures that have been moved out of Google.

The old Google is going.

And so it's interesting to see who he puts in place and what's going to run.

They face a lot of challenges.

You know, they had this penalty.

Google's in the EU for a three-day hearing.

They're fighting a penalty they got.

They've got all kinds of issues that they need to battle at the same time.

They've been doing a really interesting job on marketing and trying to sort of, as opposed to Facebook, which is coming at things really hard, they're coming at things in a softer way, which is interesting.

Then they face these antitrust issues, the FTC ordering these special orders for these companies for Google, Amazon, Apple, and Microsoft, which you referred to, which is looking at the small mergers.

So I think they really need a better team there to face what are some real big problems coming up.

Aaron Powell, Jr.: Well, it goes back to what we just referenced, and that is kind of the algorithm.

And DC is go there, work your ass off, and try and leave with your reputation somewhat intact, and then go monetize the influence and contacts you have.

And I don't, it's not, it sounds gross.

That's the way the game is played.

And I don't resent their ability.

Everyone deserves to make a living.

They work really hard.

I think it's a good thing they go on to make a, now, should it be a revolving door into lobbyists?

Probably not.

But anyways, that's the algorithm there.

The algorithm in big tech, quite frankly, is now just try and save your reputation and get out with your money, right?

Because they make a ton of money while they're there.

I mean, as an example, what would David Drummond give?

Would he give up $50 $50 million to have left 24 months ago?

I mean, most of these guys,

they're doing the math.

They're like, okay, I'm starting to take heat in incoming, and some of it is warranted.

I'm just going to get out of Dodge because there are a ton of tech executives who think, you know what?

I wished I'd left 12 or 24 months ago before the New York Times, someone started deciding, I know, Pulitzer slash ruin this person's life slash dig deeper and I keep finding more ugly shit.

So I think you're going to see a lot of these guys say, you know, I have 30, 50, 80 million dollars.

Peace the fuck out.

The algorithm for happiness, Kara, is to be anonymous and rich.

That's what I was saying.

This is your new thing.

Your new thing.

And now we will announce Scott will be leaving, quietly spending his money in the peace out.

Word.

Drop the mic.

That dog is leaving the building.

This is your thematic thing.

This is your thematic thing.

There's a dignity to leaving the stage when people are clapping.

Oh, that's true.

That's a fair point.

Well, I wonder who's going to be out next to Google.

It's interesting.

I think you're going to see, you're absolutely right.

You are going to see a lot of departures at some of these companies.

Do you think Jeffrey is

leaving?

Maybe not.

I don't know.

Maybe not as much at Amazon.

And I was just going to say Facebook is going to be less leaving because look, Jeff's had those executives in there for 17, 20 years, whatever.

They don't leave, those top executives.

And Facebook has an unusual amount of people who are there from the early days, except for the companies they bought.

And so, you know, it'll be interesting.

And Apple, Apple, the same executives.

So, and why?

There's a difference, though, because

Amazon and to a similar extent, Apple, they don't appear to have the kind of fraternity culture they had at Google, which is rearing its ugly head.

They don't have, they're not, you know, Prime isn't depressing teens.

Apple, Apple has not been weaponized by the GRU.

I mean, it's just an entirely different level of scandal waiting to blow up in your face at Google and Facebook.

And also, the value accretion there has been so dramatic that a lot of these guys are like, okay, I'm the VP of communications for Facebook, and I've made 20 million bucks, and people are starting to recognize that me roaming the world saying we want to give voice to the unheard when there's absolutely nothing in my background that would in any way indicate I give a flying fuck about the First Amendment.

And I'm using this as cloud cover such that we continue to have technology where Indians are pulled out of their cars and hanged because of a rumor spread on WhatsApp.

And our response is to refuse to hand over information.

We're just going to run some newspaper ads.

You know, there might be some bad press on me.

And I have a bunch of money.

I like it when I drop off my kids at school and people don't point at me and refuse to have dinner with me.

I'd like to keep it that way.

So these people are smart.

They're getting it.

They're peacing out.

They're peacing out.

And you know what they're going to do then?

They're going to take their money and go to Hollywood and have it stolen from them.

100%.

That's going to happen.

100%.

we're going to take see see how i brought that around see what a brilliant person i am let's play it again on the next pivot oh you know what you know what oh my god you take so many friggin laps around the around the the dog does like to scratch himself the dog does like to put his legs not even begin to dignify your the dog does like to put his leg back and lick himself no way morning arguing about laundry with my two sons i'm not going to put up with it from you no no i already handled the swisher boys this morning you are going to be handled anyway we're going to have a quick break we'll be right back with with listener mail and wins and fails and predictions.

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Scott,

listen to me.

Okay.

We need to see a therapist together, a couple of therapists.

Listen to me.

Listener mail.

Let's dig into the listener mail bag.

Okay.

Go ahead, tape.

You've got, you've got.

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

You, you've got mail.

Hey, Kara and Scott.

This is Usme from New York City.

I'm a part-time yoga teacher and have first-hand knowledge of yoga studio economics.

Last month, ClassPass hit the $1 billion valuation mark, making it the first unicorn of the new decade.

I've heard studio owners complain that ClassPass doesn't pay enough per student, which they don't understand since it's a billion-dollar company.

Does ClassPass have a sustainable business model?

Do you think the bubble is ready to burst?

And what does this tell us about the fitness industry disruptors in general?

Thanks.

So Scott, what do you think about this?

I've heard a lot about that.

I've gotten a lot of emails about ClassPass.

This reminds me a little bit of Groupon and some others, like

what the valuation people are getting out of it.

But there is a lot of disruption in the fitness industry.

There's, you know, not just ClassPass, but Peloton, Mirror, Rumble, Orange Theory.

What do you think about this whole fitness space?

Well, first of all, it's always been individualized before.

ClassPass is really interesting.

I wouldn't have bet on ClassPass, but if you look at the dynamics of the industry, There's a ton of suppliers that are very fragmented and are so desperate for new customers that if you can create a middleman platform, if you can become the app store, if you can become the search engine that basically influences where people go, you're just going to have a lot of power.

Now, I don't know what's sustainable about ClassPass.

I don't understand the business that well, but a billion-dollar market cap for ClassPass.

And also, I think I need to disclose, I think it's backed by my backers, General Catalyst.

I think that's one of our winners.

So I bet it seems like an industry where someone could insert themselves and take advantage of the fragmentation and what I'll loosely call the artisanal sweating industry, where there's a lot of individual players that are probably not great at using technology to acquire customers.

What are your thoughts?

Yeah, there was a really good piece in Vice this last week by

Maxwell, I think, Strachan.

The headline is, ClassPass is squeezing studios to the point of death.

The first billion-dollar unicorn of the decade says it's saving the fitness industry.

Some of its own studio partners insist is doing the exact opposite.

So I think you're going to get a push-pull here because you're right.

These are usually individual operators.

And

there's now a lot of more chains.

There always were chains, but with Rumble, Orange Theory, Soul Cycle, et cetera.

So there's more of this chain thing where people, it's almost like the McDonald's method of fitness.

So you're going to see that happening.

And then this at-home stuff that's going on with Peloton, Mirror, and others.

And then

most of these studios, I've noticed a lot of the bike studios, they've closed.

You know, I bought a pair of shoes off of a bike studio that was closing.

in New York at one point because

you can't attract enough, you can't do enough marketing to get people to come.

and so people if they can rely on a soul cycle or a what orange theory or whatever they kind of do it right and so you do have this idea of this this class pass is going to save me by helping with marketing or getting me customers regularly but then they're going to get squosen no matter how you you know what I mean like that's the problem is

there's There's bigger things happening here in the industry where there's consolidation among people wanting to get in 35 minutes and that's it, right?

You know what I mean?

I want to do my 35 minute work.

When they want to do it,

when they want to do it in this past, and also go into these classes, which are super organized.

I find them like Orange Theory, I go to now, it's like easy and it's regular and it makes sense.

And I don't, I could probably do it.

I mean, I have been going to the Y2, but it's really, it's a real problematic for all these companies.

I think it's very good.

It's interesting you've gone to Orange Theory now.

I like Orange Theory too, because I find CrossFits too intense for me.

So I've downgraded to like the non-carbonated CrossFit, which is Orange Theory.

But the metaphor here is movie theaters, and that is the home experience.

So, they did some innovation, but the majority of gyms really haven't changed that much.

New York Sports Club or LA Fitness or whatever you want to call it, the majority of workout establishments have not really innovated.

Meanwhile, the home, the home fitness industry has innovated dramatically, similar to the way your TV viewing experience has just exploded in value, but movie theaters really haven't innovated.

And as a result, fewer people are going to the movies and more people are watching Game of Thrones at home.

And the sad part about it is that slowly but surely, all the places we went and occasionally saw someone from a different income level or a different ethnicity or a different age, we're slowly but surely casting, segmenting, and segregating ourselves out of community places like movie theater,

like gyms.

That's a big theme.

And it creates a lack of empathy.

It creates fear to be around people who don't have the same background as you.

And

it's an unhealthy tragedy.

Writing about this, there was a great place we shouldn't get our avocados delivered to us.

You know, there was a negative control.

Yeah.

Go to the store.

This was, there's this big theme.

I think it's, I think it could be your next book, Scott Galloway.

I know algorithms have me, I think, just focusing on this community aspect of that.

And, you know, David Brooks, who's, I'm not always the hugest fan of him, did write a very good story in The Atlantic about, I think it's probably his next book, about

people, the nuclear family, the loneliness, essentially, the nuclear family, and how it's fallen apart.

Same themes.

But in terms of ClassPath, the story in Vice, which I urge you to read, one of the owners of a yoga student and Pilates studio in San Francisco called the Pad said, ClassPass continually tries to take more and more control of our business.

What their latest iteration is, now Crystal Clear is no longer financially viable for us to continue the partnership.

So they pulled themselves.

And so I think that's this,

as I said, the squosiness of it is really hard for these partner studios

because ClassPass wants to get these discounts.

And at the same time, these businesses need to stay in business.

And

the rates don't work.

And so

you take away the relationship with the customer that these small studios have and hand it over to someone like ClassPass.

But it's inevitable.

What's happened with ClassPass is whether it's you go to Orange Theory or Rumble, I think people find it much easier and it's the way they want to work out.

So that unfortunately for these small studios, I think there's no winning in general.

It's a very difficult industry where we let the bigger players have access to cheaper capital, figure out a way to pay lower taxes, and there's an accretion to scale such that the little guys who traditionally have been the biggest job, you know, job creators have just a tough time.

It used to be 15% of all businesses were less than a year old.

The yoga studio across from me, Y7, which is this wonderful little studio.

They have three locations.

What happens when Class Pass raises 30, 40, 50 million bucks and starts finding all the yoga enthusiasts and slowly but surely starches all the margin in exchange for a short-term sugar high of sending some people to your 4 o'clock class?

It's no different than Google getting in between manufacturers, brand.

I mean, it's fine if there's a bunch of them such that there's competition on all sides.

A place that hasn't worked is the tech guys tried to roll up and SoftBank tried to roll up food delivery, right?

And there's so many players in there and there's so few,

there's so

few barriers of entry that the suppliers, the end suppliers have all the power.

And so they've not only not seen margin compression, they've seen margin expansion because Uber shows up or some of them show up, actually not Uber, but a couple of them showed up and said, we'll pay you.

We'll give you more to deliver your $11 burrito in an attempt to steal market share.

So the dynamics, it's all about, I mean, it's kind of like,

it takes me back to Christina Romer when I was a graduate student instructor for her class in business school around economics.

By the way, I just dropped that to try and signal that I'm smarter than I am.

Yeah.

Oh, you know, you know who I have now?

I'm sorry to go off on a tangent.

Finish your point.

So, Kiera, I had a chance to meet with a hero of mine, Chancellor Carol Christ, who is a warrior.

for lower-income households, where she will graduate more kids from lower-income households, the entire Ivy League combined.

And you meet with the Chancellor and she does exactly what she's supposed to do.

You're so inspired by her substance and her commitment to young people that you want to get involved and look back and nod to the University of California taxpayers.

But I'm just inspired by the Chancellor and just feels

so fortunate.

Any graduate of the University of California feels so...

so fortunate to have a warrior like that looking out for the interests of future our future University of California graduates.

So that was a real thrill for me.

I should have her to code.

I may invite her to code.

She is so

impressive woman.

We are so fortunate.

All of us at the University of California and generally.

Back to class pass.

Anyway, so you were saying.

Chancellor Christ.

Back to class pass.

We'll see.

So

I do think there's secular trends in how people like to work out.

They didn't like, you know, going to gyms and wandering around is not what people like.

And so a lot of those businesses fell apart.

You paid your $40.

Now, if you go to the bottom of the business, I don't wander at equinox, but people there are so ridiculously hot.

I'm like, oh, my God, look how hot that guy is.

But money people just want to get in, get out.

And that's why those other companies, and so it's very difficult for these small businesses to keep competing and hold on to the relationship with the customer.

Anyway, wins and fails.

Would you like to go first?

You go first.

I would say,

I was going to say Jay Carney's meltdown on Twitter was that, but I do think the win for the FTC in terms of doing these,

I have a column coming out in the Times about this, but in terms of, I don't know if they can pull it off, but studying the small companies where you don't know about what they're doing, I think is critical.

What they're doing, this sort of block and tackle investigation is they're calling out a study and a review into these small companies.

And I like that it was zero to five, I mean five to zero, excuse me, it was unanimous by the Commission.

And they do understand, they're starting to understand the insidious nature of these big companies buying up all these small companies that you don't know about for feature set and things like that.

And sort of, I talk about this something called killer acquisition, which is they do it sometimes for talent.

They do it sometimes because they need a feature help, but in a lot of cases they do it so they don't have a competitor.

And so I like that the FCC, I think it's a win for the FTC.

I don't think they're well funded.

They just have $330 million and they have 1,100 people fighting all these people, including the other things they have to cover.

So

I was very much

happy that they did this.

And then

a fail, I think, is

Bill Barr again.

Once again, already low standards for an attorney general and he's managed to go below them.

And this is problematic and has repercussions.

And I know everyone says they never have repercussions, but I think the karma is just building here

with all of them.

They're just overreaching in every single way, including, I'm sorry Rush Limbaugh has the cancer, but I'm not sorry he's still a fucking asshole.

He attacked Pete Boutigej in a really repulsive, homophobic way.

And him getting the Medal of Freedom at the same week when he's just making these just horrible comments I haven't heard since the 1980s.

I didn't hear those.

Can you repeat those just so we can shame?

I don't want to repeat them.

That he can, he's the man Donald Trump will take care of him, the gay, essentially.

It was just gross.

And he calls him boot, booty, booty geege.

He's gross.

He is a gross man, and his legacy is grossness.

And again, sorry his cancer, but man, is he just an awful human being?

Just an awful human being.

So

along the lines of your win,

I couldn't

word my sister because if we wanted the best investment we could make on our economy over the next 10 to 30 years, I mean, to

get staggering return on investment, would be to take the FDC and the DOJ and triple their budget and say, your job is to go across the most productive parts of our economy.

And I'm not just talking about big tech, I'm talking about hundreds, hundreds of seconds.

Consolidation.

And go in there and oxygenate it.

And go in there and say, what companies have flown under the radar, whether it's in textiles, whether it's

rolling up rubber placemats, and say, what industries have used a series of

size, scale, and what's called killer acquisitions where you acquire a company and if it does great on its own, fine, but if it goes out of business, you cauterize

that competitor.

You make all the executives who are the most talented, upstart, risk-taking human capital in that sector sign onerous, non-competes, and non-solicites, thereby

not only ensuring that company won't survive, but basically you take all the players out of that industry.

It's like if the NFL, if a team said, okay, if you leave us, you can't play for anybody else.

And one team would just emerge and soak up everything.

So the most oxygenating, longest-term job creation thing we could do right now would be to overfund the FTC, DOJ,

and literally let them go unchained.

Anyway, my win is India and the United Kingdom respectively have, looks like they're going to pass legislation where India is going to demand that Facebook

cooperate with the government, which means that they're saying you can't encrypt your backbone.

And I recognize there's a downside and there's some risks here.

And unfortunately, we're not playing this clip.

But remember when I predicted several months ago that Facebook would be banned from a country?

I think Facebook is going to be banned from India because I think Facebook is going to say, look, our primary, we're a gangster.

Mark Zuckerberg has struck a very brazen posture.

WhatsApp is huge over there, but doesn't produce any revenue.

He's just not going to make an exception and start handing over information such that when those 11 men were pulled out of cars and hanged because of false rumors that had gone like wildfire on WhatsApp, Facebook refused to hand over the identities or the sources of those rumors.

They refused to cooperate.

Instead, they ran some newspaper ads saying, don't pull people out of cars and hang them, which I'm sure solved the problem.

But anyways, he said the person against him, Modi, is really an autocrat.

Come on, and he's pulling all kinds of racial problems in India, pushing them up for his own political gain.

So it's a complicated situation.

No doubt.

And I think there's a real downside.

But

I'm just saying, I think India has had, I think India and the UK, and the UK has announced now that the senior level executives for Facebook are like going to, of any other company, going to start to be liable for the damage they cause.

In other words,

England is more interesting, I find, because I think they've been very thoughtful, I think, in Europe and much more so, though Facebook.

But I think the brazen word you just used is absolutely true.

I just, I'm about to interview Stephen Levy.

He's written, he had inside access to Facebook.

They cooperated with him on his book called Inside Facebook or Facebook, The Inside Story.

It's an interesting read.

I think it's slightly too kind, quite a lot too kind.

But

what does come through, whether Stephen means it or not, is this brazenness throughout his career, throughout his career, since the beginning.

And it wasn't that he was young and arrogant.

It is a hallmark of I had forgotten so much about the early history of Facebook.

But the brazen is exactly the right word, I think.

You've chosen well, Scott.

I think there's a reason he and Trump get along.

I think they both respect each other as autocrats and people who never give up and, quite frankly, have this kind of, I want to call it

sociopathic element, but they really don't care what other people think of them.

They don't care about their place in the world.

They look outside the window and they see themselves.

And

there was a scene in this book, which, again, I don't think it's even meant to show this through, but he was walking across the street and this guy, Joe Green, who was one of his roommates or in his, whatever, his house at Harvard.

And he was walking across the street and he just walked, even if he got hit.

And someone was like, he feels his confident, even then, his confidence shield will protect him.

Like, you know what I mean?

Like, he didn't, and it was a small little moment.

I was like, oh, yes, I've seen that.

And it's really, it's a,

I think people should be confident, but it was really, the entire book so far is all about fuck you.

Like it's all about fuck you.

And so I agree with you.

It's really, he's really, he's going to brazen it out.

It works for a lot of people.

I'll tell you that.

You also had my, or tangential, you had my laws.

I don't understand how, I just don't understand how people work so hard, make so many personal sacrifices, including oftentimes their own kind of integrity, such they can get elected to office.

And what do these people do in elected office for the most part?

If they go to DC, they're there to make laws.

And so if you have one branch of government, the executive branch, has decided these laws are just convenient when they work for them or they don't work for them, and they're starting to interfere in sentencing, then why the fuck do we have senators?

And so I don't understand the tautology of a Republican senator, the thought process who's going to put up with that.

I would have thought this would be the red line.

They've said nothing.

Well, not the Democrats.

Not the Democrats.

But not a single Republican.

They've all said there's the same three or four people who have moderate voters who are so horny.

They're disappointed in him.

Yeah, they want to get credit.

They won't actually do anything, but they want to be seen as thoughtful and say, oh, I think he's learned from his impeachment.

Yeah, Senator Collins, he's definitely learned.

He's a change man.

Anyways,

I think that is really

Attorney General Barr deciding that he is no longer Attorney General.

Republican senators deciding that the laws they made are not really laws.

It's very, it's really chilling.

And we keep saying that.

It's culpability.

I mean, in everyone, and you know, look, Larry Elson is about to throw a big fundraiser for Trump and

I disagree with that.

Why is that?

Yeah, I know.

I get it.

I'm just telling you, people just move along.

They just literally, I got mine.

I'm talking about a larger thing.

And they give lip service to this

everyone's great, but

it's very disappointing.

Leaders don't actually say leadership things.

They just really just.

Oh, by the way, you know, who's number three in the latest Quinnipac poll?

Is that now at 15%?

Amy Klopichar.

Nope.

My man.

Oh, Bloomberg.

Bloomberg.

Oh, your man.

Yeah, he's moving up.

And by the way, let's just finish.

But he did an excellent job on the memes thing.

Another great digital move by them.

They're very,

you know, the whole top and frisk thing was not great,

what happened, him trying to explain it.

And, you know, he's quite conservative in many ways.

And that was the top and frisk was, he's got to answer better.

He just has to.

But

they're inadequate answers.

But you're right.

He's this money is working and he's spending it and it seems to be having an impact.

And

as the parties bifarcate in terms of left and center, essentially,

it's going to be something to watch.

He might come right up the middle.

I'm telling you, I mean, we talked about this.

This thing about predictions is when you get them right, they don't seem that impressive because a series of events between the prediction and how it plays out make it more and more obvious.

But it is all falling into place for him because Bernie is way ahead in the Democratic and the poll.

And Democrats are going to realize that if we were to end up being Sanders versus Trump, effectively the entire election would be cast by the Republicans, effectively, as socialism versus capitalism and capitalism would win.

And then you have Clovishar is probably, she's got the most momentum right now.

And Biden and Elizabeth Warren have the most negative momentum.

And you're going to see Elizabeth Warren radically go on the attack against Trump personally, which is her raising her hand to be the vice president, the attack dog for whatever she does becomes the president.

She just did

impeachment.

You're right.

That is absolutely what she did.

She's now running for vice president because the vice president's role is to be the attack dog, and she is an outstanding

outstanding attack dog.

Except for you, Scott Galloway, who has not been as nice as you could be to me this week.

When I make a good prediction, you should give me a pat on the head.

Now I'm going to bite you because I'm a cat.

Are you upset?

I am here for you.

I am here for you.

I need my ears rubbed.

I feel like I need my ears rubbed.

That got so much play.

That got so much play, the whole Bankoff coming over geography questions.

Even Bancoff texted me.

I like this.

So few of us are in touch with our emotions, Kara, like you and me.

So few of us.

Yeah.

I will be temporarily hurt and then I will plot revenge.

That's really how I work.

Anyway, Scott.

We're not for anyone not producing a bi-weekly news podcast.

It's a three-day weekend.

What are you doing this weekend?

And by the way, we will be back Monday.

So just forget it for you.

What are you doing?

What do you think?

I'm excited.

I have this this wonderful Argentinian friend, and he's celebrating their wonderful story.

They're immigrants, came from Argentina, and

they are wonderful people with wonderful kids.

And he has an entire, he's built, and this is what Argentinians do, I guess.

He bought a house and immediately set about building not a garage, but basically what is a meat cave where he makes meat.

And he invites people over to make, to eat his incredible Argentinian beef in his beef cave.

I'm doing that tonight.

You're going to a beef cave?

I'm going to a beef cave tonight.

I need a photo from the beef cave.

Oh, my gosh.

It's

the Argentinian beef cave.

And then I have, unfortunately, I have a soccer tournament.

It's really terrible.

My son is upticked in his athletic ability.

It's just the worst thing.

Yeah.

Palm Beach Gardens.

Lacross season starts.

Here I come.

My friend, lacrosse season starts.

It is my, I literally, and I'm not allowed to look at my phone during the entire process, and it's just agonizing.

I know.

It's rough.

Anyway,

I will be doing my children's laundry all weekend.

Anyway, code's coming up, Kara.

Codes coming up.

We got a lot of things, a lot of stuff.

You're going to be a big part of it, Scott Galloway.

Are you saying, are you just teasing me?

When you say big, how big?

No, you are.

I have some more big names coming.

More big names.

I cannot say who I'm talking to, but there's some ones that you will like quite a bit besides the ones I already got that were quite good.

I like it.

All right.

I like it.

It's going to be good.

I actually like that.

Oh, God, the woman, if I have another space, I don't have space.

But

the woman from Berkeley is a great idea.

That's a great idea.

Anyway, Counselor Chris.

Thank you so much.

Good.

Thank you, Carol.

Have a great weekend.

All right.

Remember, we love your questions.

If you have a question about a story you're hearing in the news, email us at pivot at boxmedia.com to be featured on the show.

Scott, please read the credits.

Today's episode was produced by Rebecca Sonanis.

Our executive producer is Erica Anderson.

And special thanks to Drew Burroughs and Rebecca Castro.

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This month on Explain It to Me, we're talking about all things wellness.

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Why do we want that so badly?

And is all this money really making us healthier and happier?

That's this month on Explain It to Me, presented by Pureleaf.

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Plus, get advice and more comprehensive wealth solutions to help meet your unique needs.

With award-winning service, low costs, and transparent advice, you can manage your wealth your way at Schwab.

Visit schwab.com to learn more.