Facebook's data breach, Elon vs. SEC and the Kavanaugh hearings

Every week on Pivot, we take a sharp, unfiltered look at the technology and media industries and highlight examples of winning leadership.

And when it comes to leading a successful business, time and again, entrepreneurs and executives from across industries share this incredibly simple secret.

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Hi, everyone.

This is Pivot from the Vox Media Podcast Network.

I'm Kara Swisher, editor-at-large of Recode.

And I'm Scott Galloway, professor of marketing at NYU Stern School of Business and founder of Gartner L2.

And also kind of the Elon to Cara's, no, no, I'm sorry.

I'm the Kimball.

You're the Elon.

I'm here because of the cowboy hat and because you like me, let's be honest.

Yes, that's it.

That's about it, except I am 100% less marijuana smoking.

But we were talking a little bit earlier this week than we usually do.

Things might change by the time everyone hears that.

But Scott, so wise predictor of outcomes, what's happening this week that's going to keep haunting the world of tech and business for months to come?

So let's start with the big topic.

Yeah, Facebook, the data breach.

What are you hearing?

What's the skinny?

Well, I think it's a lot worse than people, you know, it's really interesting.

Kavanaugh has sort of pushed everything off the front pages.

And if you can imagine a big data breach like this not being that big a deal, that people just

jump past it because of the news cycle is so crazy.

It's kind of fascinating.

I think it's a major thing.

And once again, Mark Zebri has apologized, said he's going to do better next time.

And I think it was problematic, as far as I can tell.

Yeah, the one thing you know about it is it's only going to get worse, right?

A couple of things these guys never say is one, your privacy standards were accidentally strengthened.

You never hear that.

And two, you never hear, oh, it wasn't as as bad as we'd originally reported.

My understanding is he's already come out a second time.

And on that call, he sounded tired.

And my sense is he shouldn't feel that way.

He should sound scared.

This is just getting, you know, I wrote a blog post on this.

I feel as if Facebook's turning into the information age KGB minus the charm.

You know, at least the KGB has a code.

They're loyal to their country.

They're loyal to each other.

As far as I can tell, the only glue here.

is boundless greed and a willingness to lie over and over.

Is that too much, Kara?

Is that too much?

Yeah, it is.

But here's the thing.

Last week you called it a great bot.

That's the sad part.

I still think it is.

Because why?

Explain a capitalist economy, and people would rather we now worship at the altar of innovators and billionaires.

People are going to be outraged by this.

There'll be some foot stamping in Congress.

Maybe something happened, maybe won't.

And they're going to announce the best numbers.

Ever.

They're going to continue to grow at 30% a year.

Despite this hacking, and then the phone number scandal, too.

Explain that.

Explain that

they use your two-party authentication.

I want additional additional security.

Facebook says fine.

Right.

Give us your phone number.

You give them your phone number.

And then we found out that Dunkin' Donuts was using those phone numbers to cross-reference and target us.

So if Dunkin' Donuts has your phone number, they can say, hey, we have Kara's phone number.

Can you, do you have it?

And they say, oh, yes, we did.

So these people, I mean, technically, you think, okay, this isn't that bad, but it reflects.

Oh, my God.

Are you kidding?

I didn't want to give them my phone number for that.

I gave them so I could have better security on this service that has data breaches.

General Gestalt, you know, they say the saying is, if you're not paying for something, you are the product.

And that's how they treat us.

They treat us like a product that's inanimate.

And I just, they aren't showing a certain level of respect, I think, for their consumers.

So from a, from a, look, hacks are part of this world.

There's nothing safe, really.

But the fact of the matter is, this is a company that has had so many failures this year that it's hard to count them at this point.

And so a hack is,

you know, before, when the people are online, they're like, oh, this is just like the Russians.

I'm like, no, the Russians wasn't a hack.

It was the way they were using the system the way it was used.

This is a hack.

What do you do from a marketing point of view inside of Facebook when this stuff is happening?

Well, the key to crisis, man, there's only three things you have to remember.

One, acknowledge the issue.

We haven't put in place the standards or the guardrails or the protections we should have.

Two, top guard gals take responsibility.

They've sort of done that.

And then the third thing is to over-correct.

And that is where they have really fallen down is there's nothing resembling an over-correction here because, I mean, even if they took a page out of Starbucks playbook, they would say, all right, we're closing the network down for a day and just trying to figure out what's going on.

They would never in a million years do that.

So,

this will go down.

Whatever happens to Facebook, it will ultimately go down as a textbook case study in the worst management of a crisis, I think, in modern history.

What do you think?

Do you think they're so?

I think they're not self-reflective in any way.

I think if I don't, I'm surprised that the mirrors in Facebook show their faces.

You know what I mean?

They're like vampires, they're so non-self-reflective.

And

I'm trying that one out on the road.

That's like they did you see that Twilight Zone when people would see the reflection knowing they're about to go.

Really?

No.

Yeah, start watching the Twilight Zone.

One A, I told you this last week, start drinking.

I'm not watching the Twilight Zone.

I don't want to be creeped out.

I have enough creepy things in my life.

So, in general, I think these people don't like, I know it feels like onkbang, but as usual, they feel like victims.

Like, they act like victims versus it's a little like the Kavanaugh people.

They're like, oh, we're being attacked, rather than the fact that they're going for a very important job.

And so, I think it's really disturbing that they have an attitude that they're being attacked.

And to your earlier point,

Mark was the gift that could

was really the heat shield for the rest of big tech because of his tone-deaf remarks when you could argue that Google is probably the biggest offender or the scariest one.

And now Kavanaugh is the heat shield for Zuckerberg because this would have been huge news at 20 million not.

you know, 20 million people not tuned in to find out how much Mark Kavanaugh likes.

Spear, he has sphere.

So it's it's

they are the luckiest people in the world right now i wonder if it'll split out i wonder if it'll be a lot better get exhausted by it now speaking of that speaking of sort of ceos losing their sheen because i think you think they worship the all their billionaires i think it's going the opposite direction you have uh elon musk settling with the sec yeah and what uh well i i i just have what i've read have you do you know anything here do you do you have any behind the scenes around what happened with the between the board elon what's going on here because initially they rejected the first settlement out they did they did and then they didn't didn't.

And then they didn't.

I think some of it was some of the terms were, some of the slight terms were more onerous, which was not being CEO and other things like that.

And I think that he wanted to remain CEO, and he certainly has been willing to accept someone above him because he really just runs the company anyway, right?

And I think he just, I think he probably realized what a mess it would be and what happened to the stock.

It went down.

And I think they're actually looking at some good numbers too.

Like things are starting to turn around for that company in terms of financials, even though they owe, like, I mean, there's been a number of really amazing amazing stories about the financial situation there, which is they really have a debt overhang and they have, they're using capital at

a billion dollars a month, something like that, some number, and they think they just have three billion left or whatever.

And so I think they, but they're showing some good signs that this is, this is starting to work and they're starting to make money on these cars.

And so I think they didn't, this idea of just rolling the dice at this point probably

was not a good one.

I think adding more people to the board will be interesting.

It's just, I never think boards are particularly effective around these charismatic CEOs anyway.

But I don't know.

I just, I think he's, I think he's sort of, I think he had a come to Jesus moment.

Yeah, this was a smart trade for him.

This was, this would have been a great settlement had the SEC done, they stripped him of the wrong title.

He should have been stripped of his CEO title, quite frankly.

No, he wouldn't have been.

This is an individual.

Well, then he doesn't put up.

What's he going?

I'm not sure that I agree with it.

What does he go?

Does he go CEO of Fiat Chrysler?

I think Musk needs Tesla almost as much as Tesla needs Musk.

And the bottom line is while we're a nation of innovators, we're also a nation of laws.

And this guy waved his middle finger in the face of us when he basically committed blatant market manipulation and then tried to enlicit the board to cover up his.

From what I understand, though, he doesn't think he did anything wrong.

People inside think he didn't do anything.

He thought he had met with the Saudis and the Saudis he was taking them at their word.

And that makes him kind of a little bit willfully naive, but he thought he had pretty much had a deal that they were interested.

And he had several more meetings than had been talked about and he thought it was further down the line than it was and obviously uh he misunderstood or people you know i that's what i understand from inside is that he thought he had a deal so he didn't think he did anything wrong he was just wanted to tell his all of investors when he was telling the bigger investors and so that's his that's their story and they're sticking to it kind of stuff

Yeah, I would agree.

That's their story.

Well, I wouldn't, it's not out of the realm of possibility that he thought he had a deal.

I have to say,

I think he hears what, you know, these people hear what they want to hear.

And I think he just assumed he would be able to get the Saudis to to cough up the dough.

And it doesn't matter.

He paid $20 million for a tweet.

That's pretty much it.

Which is an enormous amount.

Who says Twitter can't make money?

I mean,

it's all relative, right?

This is $20 million from a guy who got weepy about being almost late for his brother's wedding because his Gulfstream 650 ER didn't get him there in time.

This is a guy worth $20 million.

So imagine you getting a fine.

Well, I'll do

1,000th of my total net worth is not a big fine.

So this is all relative.

20 million to the company.

Okay, big deal.

The most important thing here is the one you mentioned, two new independent directors, because this is not only a personal failure, this is a failure of governance.

A board's job is to hire and fire the CEO, but until they fire the CEO, they're supposed to be there to support and protect him.

And the fact that no individual on this board could get through to him to say, hey, shithead, stop tweeting, or that he would listen to means he has an enormously weak board.

And I don't know if you saw the non-charm tour that his brother Timbal went on.

But it literally validated your worst fears about the board of Tesla.

I mean, this is a guy who showed up to CNBC in a cowboy hat.

He made no sense.

He's like, okay, there literally is no adult supervision at this company.

My brother's doing great, and he just brought on Durham as his president of Automotive Operations.

I mean, he's doing a great job structuring the company.

Mostly right now, the focus is deliveries.

We are trying to get great,

very happy customers with Model 3s in their hands,

and that's the total focus.

focus.

And it's going to be an exciting month for us.

I think the question is who they're going to pick and who they're going to pick as chairman, which will be interesting.

I have some ideas.

Who are your ideas?

I have some ideas too.

Indra Newey would be interesting.

I think Gary Cohn is a little bit more than a fan.

Gary Cohn from Colepsych.

That's a great one.

That was on my list.

Oh, sorry.

Gary Cohn.

Boom.

Gary Cohn from Goldman.

Gary Cohn from Goldman?

Yeah, I like it.

I just think about it.

Basically, the guy on the Trump administration who couldn't handle people who could handle white nationalists but couldn't handle tariffs.

Well, he didn't do it.

That's it.

Tariffs, I'm out of here.

No.

Anyway, he would be, I think he would be an interesting choice.

I think he would, that's one of the names.

What are your names?

Well, I liked your, you know, the Pepsi CEO.

I think Jeffrey Sonnenfeld from the Yale School of Management.

I think Jeffrey is turning into the con kind of the conscience of capitalism, and he would be a great individual.

No way, right?

Someone else?

What about Mark Field, CEO Ford?

No, former CFO.

Okay, there you go.

I'm out.

I'm done.

I tried Alan Malelli, but I think they thought he was too old school, who ran Ford and then was over at Boeing.

He'd certainly have the chops, but they think he's too old school.

I was thinking.

But I like Alan Malelli.

He's a very funny.

Anyway, all right.

So, but essentially, Elon's gone through the, he's going to be just fine.

Well, that's the problem.

Literally, you can imagine a scenario where in six months, absolutely nothing has changed.

Nothing has changed.

All right, we're going to take a quick break and we'll get back.

We'll be talking about the wins and the shake-ups of the week.

Every week on Pivot, we take a sharp, unfiltered look at the technology and media industries and highlight examples of winning leadership.

And when it comes to leading a successful business, time and time again, entrepreneurs and executives from across industries share this incredibly simple secret.

Turn to the experts for help.

That's why small and medium-sized businesses rely on TriNet for human resource solutions.

No matter what industry you're in, TriNet tailors strategies for your organization to grow with confidence.

Learn more about TriNet's industry-tailored HR and how they can work with your business at TriNet.com.

At Trinet.com.

That's T-R-I-N-E-T.com.

Incredible starts here.

Okay, we're back.

Okay, Scott, the Supreme Court and women at large, not having a great week.

But tell me, who is your win of the week?

I want something positive.

I want something positive.

Who is having a good week?

I think that the individual who basically became a viable candidate for president last week was Senator Jeffrey Flake.

Flake?

What?

Really?

I thought Amy Klobuchar.

I thought Amy Klobuchar would come out of your mouth versus Jeffrey Flobich.

Yeah, but no one expected Jeffrey.

I think he showed real leadership here.

I think the image of him sitting in the elevator and just listening to those women, I mean, that's an he was in.

Well, he looked scared.

Come on.

Scott, he looked like he was terrified by like a tiny little woman.

And I like that.

He was just yelling at him.

I like that.

Yeah.

He didn't say, what's he going to do?

Push the clothes button.

He didn't say, this is an improper way to handle this.

Let's go into my office.

He sat there and he took it and then he listened.

I think he was generally moved.

And then he's the guy that hopefully has brought something that these guys are supposed to do, and that's create some sort of bipartisan consensus and deal with each other and have respect for one another.

Unless it's a feint.

Everyone says he's done them a favor by letting them lead the investigation.

Yeah, there's a bunch of,

obviously, there's concerns that this is just kind of a ruse and it's not really an investigation.

Ruse.

It's a ruse, yes.

I think Jeffrey Floyd basically had the best week of any individual I can think of, other than Elon Musk, who basically dodged not even a bullet.

He dodged a mortar.

Yeah, I think Jeff Flake is, his name is perfectly chosen.

I disagree with you completely.

I think he's been nothing but weak most of the time.

And I'm glad that he did this, but it's as if he should get a medal for doing his job.

You know what I mean?

He's the only non-crazy Republican who wants to show like Lindsey Graham and his giant hissy fits.

That was crazy.

That was actually, I thought that was kind of fun.

By the way, you forget, Flake really has a number one criteria for any president.

He has really good hair.

Oh, he does have good hair.

He's a very handsome man.

But here's the thing.

He's dreaming.

I don't want to hear about your hands.

You're back.

I'll raise money for him, and I'm a hardcore commie.

Not that there's anything wrong with that, but that's enough.

I think that I think Amy Klobuchar was the one.

I'm going to give another win of the week, but Amy Klobuchar, I thought, handled herself really well.

He attacked her ridiculously, and she didn't throw a shoe at his head.

But you're saying there's never been a case where you drank so much that you didn't remember what happened the night before or part of what happened.

That's what you are asking about, yeah, blackout.

I don't know.

Have you?

Could you answer the question, Judge?

So

that's not happened.

Is that your answer?

Yeah, and I'm curious if you have.

I have no drinking problem, Judge.

Nor do I.

I thought she handled it with class, and then she went on and talked about it.

And I think she has got the kind of even-handed mentality that you kind of want in you know in a legislator.

The question is, can she go up against someone like Trump who will scream at her?

I don't think the Democrats are going to put another woman forward.

I think they're worried that I think they're going to end up, I don't think they have the backbone to push a woman to the front.

I think it's too bad.

We'll see.

We'll see.

She's a different kind.

She's a different.

She's very strong.

She feels like VP.

She feels like she has got vice president running all over her.

I don't know.

I like her for press.

I like her for press.

Okay, my win of the week is Jeff Bezos with the $15 thing.

He just dropped that one down.

Like, you know, I know you are all over him, but that was a a nice move by him.

I thought it was, I call them the mogul genius.

He always manages to do that, like, always do something.

And it's like, how can you argue with it?

You got Bernie Sanders tweeting for him, which was sort of a surprise.

I know there was a lot of pressure on them on those prices, but it does lead the way for everybody else to, he'll have the best employees.

And, you know, some people think the minimum wage should go up even higher than $15, but it's a pretty bold move.

It's a great move.

And not only that, it's a shareholder-driven move because it's going to force their competitors to match him.

And

who can afford $15 an hour better than Amazon?

Nobody is the answer.

Even Walmart, that's averaging about, I think, about $11.50 for some of their warehouse workers.

So basically, just what Amazon has done with fulfillment, where they've gone underwater with the largest oxygen tank of free capital and forced everyone to follow them, and then everyone else is drowning.

On everything.

They potentially could do the same thing here, and that is...

put pressure on every retailer to raise their minimum wage to 15 bucks an hour.

So

this was not only the right thing to do, it was the smart thing to do.

It was.

And it was interesting, what Amazon does, which I think people don't realize is they put moats around everything.

They're always been building moats that people cannot cross.

And this is another one.

It's a really,

people can match it, but they're out there first.

They get credit for it.

And then just one thing, a data moat.

It's a customer service moat.

It's a speed thing.

I just, I just gotten a second home in D.C.

and I'm living here.

I have to tell you, I've tried to shop retail.

I've tried to shop in stores.

And there's some great stores in the neighborhood I'm in, but Amazon is so easy and so good.

The other night I was trying to find a clothes rack for my son and I could not find, I went to like six stores.

It was so frustrating.

And then I looked on Prime.

I was standing there in the bus stop and Prime Now could have it to me in two hours and I had it.

That's what I had.

It was 30 bucks and it was like a, it was shocking how easy it was to do that.

And it was exactly what I wanted, which was really like, I almost, I'm thinking of writing a column about it because like literally everything in my house I could get from Amazon.

I stopped listening.

And I hated myself.

I stopped listening when you said second home in DC.

I just can't imagine imagine you in D.C.

I just don't see it.

I love it here.

I go to dinner.

Speaking of which, I had a dinner sitting next to the head of Walmart, and he certainly is worried about, I can't say it was an off-the-record dinner at the business roundtable, but I think he's got some concerns about Amazon, too.

And they're trying very hard to

step it up, and they have done in a lot of times.

This is Doug McMillan.

Yes, Doug McMillan.

Very smart guy.

By the way.

He's an impressive guy.

By the way, Walmart is probably the one company that's landing counterblows on Amazon.

Click and collect is probably,

if you think about the ability to pick up great, it's genius from Walmart because what's the best thing about Walmart?

Is there groceries?

What's the worst thing about it?

Their in-store experience.

So, click and collect the groceries, boom, great experience.

Yeah, yeah, he's doing a lot of stuff, but I still think it's going to be hard.

I think he was, in fact, you know, I think they were speculating on the cost the employee, how much employees are going to cost.

And this is going to put them in, they're going to have to do something around their associates, which, you know,

they all have varying degrees of success with this, but it's certainly, but having been in a lot of these stores this week, it's really astonishing how valuable customer service in stores are.

I was in Target.

It was in Best Buy.

Best Buy is pretty good with the blue shirts.

Best Buy was great.

I was just going to say that.

It was really great customer service.

And actually, Home Depot does a great job with their golden aprons.

And, you know, as everyone's rushing to move, invest in artificial intelligence, I think the gangster move in retail is to invest in organic intelligence, as evidenced by what Amazon is doing.

People no longer go to stores for product.

They go for people.

And, you know, whether it's Sephora or CAST or what have you.

But, you know what, this is really a hopeful moment because if you look at the tension between capital or the owners and labor, the workers, there's always a tension and it's been a healthy tension since World War II.

In the last 30 years, labor's gotten the shit kicked out of it.

So let's hope this is the start of something where we start to see some of that unbelievable increase in productivity, those trillions of dollars in wealth creation begin to finally move into the middle class and workers.

I think this is, you know, I really let's hope, Carol, this is a hopeful moment and this starts to infect So you like Bezos now after you eviscerated him?

Well, you know, man, a man, a man worth more than the GDP of Denmark raising minimum wage to 15 bucks an hour.

Yeah, let's throw him a fucking party.

Anyway, so but look, I do hope, give credit where it's due.

And not only that, he was big about it.

Did you see you retweeted his tweet saying thank you, Senator Sanders?

Why wouldn't he say thank you, Senator Sanders?

I think

President Bezos is

President Bezos.

I'm starting it right now.

Smart.

There's going to be a big bromance between him and Senator Sand.

It's just going to be, it's going to be so uncomfortable and gross.

Def, I really like Prime Now.

I think it's really good.

I didn't know you did impersonations.

I could do anything.

It's pretty good.

Ariana Hoffman.

Hello there, Scott.

I'm sorry.

Who is that?

Ariana.

Ariana.

I don't know.

I could do,

I could do a lot of people, but I'm not going to do them right now.

I'm going to roll them out slowly for you.

Good.

All right, Scott, it's always a pleasure for the most part, but I have to get out of here.

I've got to go to, you know, I've got to go.

order things on Amazon and then do soul cycle or something like that.

Actually, I have to go meet myself.

You do Soul Cycle?

You pay $35 for Soul Cycle?

Yes.

And I love millennials giving me life advice.

That is why I go because I love when young people tell me, you know what?

If you just pedal harder, you can change your life.

You can change your life.

Whatever.

They have all kinds of crazy like, like advice from 22-year-olds, and it's my favorite thing because they're all wrong.

So I'm thinking of doing my own soul cycle class where I just, I put Madonna on endless loop and then, or, or, you know, Barry Mantalo, someone that something that will just make them sicken.

And then I'm going to go like, okay, everyone you know that relationship you know you can change not really probably not and your job it's probably a dead end like you will find out in 30 years when they replace you with someone younger like stuff like that yeah you should you should call the studio half empty no i'm going to call it soul sapping cycle and it'll be it'll be the most popular the most popular thing anyway uh so what are you doing this week um so more importantly you didn't ask me about my trip to harry potter once a year oh how was it it was it was you know that is probably the best amusement experience of its kind And it was absolutely awful.

But what I decided is I'm giving in completely to love in terms of loving my kids.

And that's what my eight-year-old wanted.

So I put up with something.

I put up with nausea, heat exhaustion, and some of the worst food that I've ever eaten.

But I've decided, you know, it wasn't that bad because I was with my eight-year-old, and he was just so happy.

So it was awful and wonderful at the same time, Carol.

Yep.

I love it there.

I think it's a really incredible market.

They do a good job.

For what it is, they do a really good job.

It does.

It does.

It does.

And I had a rather busy week.

I was interviewing Samantha B.

b'd go what's she like did she ask about me uh no did she ask does she know you brought me up right no okay no thanks thanks for that what's she like she's lovely she's very

it's a very sobering it was a very sober talk actually it was about a lot about refugees it was about the things that happened with her i'm not going to repeat the word because i don't like it myself but uh she uh she when she called ivanka the c word and uh it was good it was really good It was a very good talk.

It was quite an excellent talk.

And I've got some upcoming talks in New York, which I might invite you to.

I'm interviewing Hillary Clinton.

You're interviewing Hillary Clinton.

Again, for the second time or third.

I don't know.

I've interviewed her a lot.

And what's the venue and why?

In 92nd Street, why in New York?

Because I'm going to let her talk.

Two years ago, she made all these allegations about Russia, and they all came true.

And so I'm going to let her take a little lap and talk about that.

And then I'm interviewing Eric Garcetti, who's supposedly running for mayor, and Sean Hayes from Will and Grace.

I got a lot of interviews coming up.

Oh, my God.

I am so Kimball Musk.

I'm going to cross it.

That's what I'm doing this week.

All right.

Anyway,

thanks for listening to Pivot from Vox Media.

Join us next week for more breakdown of all things tech and business.

If you like what you heard, please subscribe on Apple Podcast or wherever you're listening.

Every week on Pivot, we take a sharp, unfiltered look at the technology and and media industries and highlight examples of winning leadership.

When it comes to leading a successful business, time and again, entrepreneurs and executives from across industries share this incredibly simple secret.

Turn to the experts for help.

That's why small and medium-sized businesses rely on TriNet for human resource solutions.

No matter what industry you're in, TriNet tailors strategies for your organization to grow with confidence.

Learn more about how TriNet's industry-tailored HR can work with your business at TriNet.com.

That's T-R-I-N-E-T.com.

Incredible starts here.

TriNet.