Scott Galloway is a Professor of Marketing at NYU Stern School of Business where he teaches Brand Strategy and Digital Marketing to second-year MBA students and is the author of the Digital IQ Index ®, a global ranking of prestige brands’ digital competence. In 2012, Professor Galloway was named “One of the World’s 50 Best Business School Professors” (Poets & Quants). Professor Galloway is also the founder of several firms including: L2, a subscription business intelligence firm serving prestige brands; Red Envelope, an e-commerce firm (2007, $100mm revs.); and Prophet, a global brand strategy consultancy with 250+ professionals.
Professor Galloway was elected to the World Economic Forum’s “Global Leaders of Tomorrow,” which recognizes 100 individuals under the age of 40 “whose accomplishments have had impact on a global level.” His book – The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google is an instant classic.
What was your reaction to NIKE’s appointment of Colin Kaepernick as the face of their Just Do It anniversary campaign?
Colin Kaepernick. I think this was a genius move, regardless of what you think of the politics. NIKE just did the math. NIKE has a $35 billion-dollar business: $15 billion domestically and $20 billion abroad. Of the $15 billion, domestically, ten of it of it comes from people under the age of 35 who tend to skew urban, wealthy and progressive. So realistically, they probably only put 2-3 billion dollars at risk, that is, 20% of their domestic consumers might be offended. And if you look at the remaining $20 billion abroad, there’s very few people abroad who think that America’s got it right on race relations, or that we’re headed in the right direction.
So, the calculus here is that this is an opportunity to come across as a leader, to do something bold, and strengthen your relationship with 90-95% of your customer base at the risk of alienating 5-10% – a good trade.
How has Trump changed “Brand America”? How does his behavior cost business in the future?
Trump has a very strong brand in the red states. You had 30 years of resentment at political correctness building up in red states where they became enraged by the current political narrative. And he came in and played that perfectly; the Trump brand has resonated in the red states. The American brand via Trump has been strengthened in the middle of the United States at the expense of its brand equity on the coasts of the US and everywhere else.
Our alliances abroad have been weakened for political gain, and our enemies sense chaos. I don’t think our enemies think the President’s crazy, but they see the chaos, divisiveness, and weakness. In the past weeks, we’ve taken a real hit on moral leadership, where it has become obvious that the President would be happy to ignore murder as long it involved more tanks and more submarines being sold. I think the only person more upset than MbS as to how this has played out is the President.
We’re trading off long-term moral leadership in exchange for short-term profits.
What should brands be doing now to solve society’s biggest problems? Is this something they should pursue at all?
I’ll start with CSR. Corporate Social Responsibility has largely been a failure. It’s been vastly overestimated. Consumers today will largely buy the product that offers them the best value, the best trade-off. And the notion that consumers are so mindful…
There’s always this hope that the more recent generation is more “woke” than the last generation, and then we look at the purchase patterns and it just doesn’t bear out. They want Rolexes and BMWs regardless of those firms’ behavior. Now there’s probably a growing segment that pays more attention to this stuff, but I would argue that CSR, in the traditional sense, has not yielded the benefits that everyone thought it would.
Having said that, I will say this idea of corporations filling what we call the “moral void of capitalism” is not only an ideological or moral play, it’s an economic play. The reason why is the following: 30% of America will elect 70% of our representatives, so the red states are disproportionately represented, because they have no population – the cities have taken a ton of the population out of the ecosystem. In other words, people are moving from the farm to the city. You have this immense migration into the cities into the purple or blue states, so you have a funky dynamic. At the same time, 10% of the population is capturing 90 to 95% of the income gain. That 10% is neon blue.
When you’re NIKE or Dick’s Sporting Goods announcing that you’re not going to carry assault rifles, it may be the right thing to do, but it’s definitely the smart thing to do. Because educated, affluent moms and dads who have captured all of the incremental disposable income – they lean left.
So the risk you’re taking, traditionally, that if you enter the political fray you’re automatically alienating half the population – and that’s still true. Now you’re alienating 48%.
But you’re only alienating, in some instances, 10% of the income growth. Because the Trump supporters, who I affectionately call “white and ignored” because the economy has failed them – they are angry, hardened, and a political force, but economically, it’s never been better to be blue. The moment you look at income inequality – you see that the people making all the money, or incremental money, tend to be college-educated and tend to be in cities, which is Latin for Democrats. So a company entering the political fray and making moderate or progressive decisions or noises, no longer represents the dangerous calculus it used to. As a matter of fact, it may actually be the shareholder-driven thing to do. The people who burned their Nikes probably had to buy them on layaway. That population has been kicked in the nuts for the past 30 years. The reality is the political power has shifted right, while the economic power has shifted left.
So how can we fix this polarization? How do we bring people back together?
Mathematically, the biggest the space should be in the middle, but in terms of our political dialogue we have a coarseness, led by the President, where people now identify their friendships and relationships based on their political views. So I go on FOX once a week, because I want to get out of my echo chamber, at CNN we’re in violent agreement, and when I’m at FOX, I like to think we learn from each other and have a little empathy for one another.
So the problem is there is no co-mingling – the rich kids go to private schools, so they have no empathy for the poor kids. Gerrymandering has caused our elected officials to be hard right or hard left, no middle ground.
And this is barely talked about, but we now spend more time on the phone screen than a TV screen, other than sleeping and working. The American public spends a majority of their time on algorithmically-controlled screens, more than any other activity except for sleep. That’s a ten or twenty-year-old phenomenon.
The problem is that the content they are served is algorithmically driven, and the algorithm has been informed to maximize engagement – to drive as many clicks as possible – so that more Nissan ads can be served, and the owner of that algorithm can make more money and grow their shareholder earnings.
We bought into this false notion that connecting the world would be a good thing. Unfortunately, it’s not. We, as a species, are tribal. And we immediately find people like us and enter into these hermetically sealed cohorts, where we don’t pursue information like a judge trying to get to the truth, but instead we behave like lawyers, cherry-picking things that support our initial intuition or bias.
The result is that algorithms have figured out that the way to create more engagement and more clicks is to foment rage, embarrass the other side or point out the shortcomings of the other side.
If you look at the right rail on your YouTube channel, if you look at the Tweets that are served by the Twitter algorithm, or your newsfeed on Facebook, the moment they figure out you’re a progressive, they’ll show you video of a Senate intelligence panel making a fool of Betsy DeVos. If you’re hard right, they’ll immediately start serving you videos of Hillary Clinton saying stupid things.
The algorithm has figured out that the way to make more money is to drive us to a pole. We overlook the fact that these algorithms that determine the content in our lives have a profit incentive to create rage.
The monetization of rage? Wow.
You’ve written about the power of the four horsemen– Amazon, Apple, Facebook Google. Can you explain how they threaten our Democracy, and what you feel should be done?
I think we need to break them up. We’re going to need DOJ action to break them up. We have to redefine anti-trust law. For the last 20-30 years, it’s been all about whether a product is good for the consumer, and when a product is free, it’s hard not to make that claim. What we need now is to look at anti-trust law and channel power – so if one company controls 93% share, is it creating an environment where small companies are having a hard time getting out of the crib? Are they stifling larger companies and euthanizing them prematurely?
So we’re going to have to go to a new definition of anti-trust, something called Brandeisian anti-trust– and once we have that, and I think we can have that, then we break these guys up.
The fastest way to curb Google’s monopoly is to create a second search engine, and we have one, the second-best search engine in the world is YouTube. But right now YouTube and Google collaborate and coordinate instead of compete with each other.
Facebook, Instagram, WhatsApp, and Messenger, can all shrug their shoulders and say “you know there will always be bad actors, we can’t guarantee the platform won’t be weaponized,” but if they were four separate companies, one of them would raise their hands in the effort to attract more advertisers, and say: “we’re going to screen all our content, and guarantee that Russians aren’t going to weaponize the platform.”
I think the answer is competition. The answer is Capitalism. That for me is the key step because you want to thread the needle between curbing their power but at the same time maintain their stakeholder growth. You don’t want to kneecap innovation and economic growth.
The danger is that for some reason we have decided that this is Capitalism. So people on the Left, like me, run to socialism, the attitude being “if this is Capitalism, I want out.” But this is not Capitalism – this is surveillance Capitalism, an autocratic economy, that is totally fine-tuned to transfer wealth from the bottom 90% to the top 10% and that’s not Capitalism.
Capitalism only works when you have a vibrant middle class. Capitalism that works has guardrails. It has regulations. It’s thoughtful about how the engine of growth and the middle class thrive. So what I argue is that we don’t have Capitalism – we need to restore Capitalism. This authoritarian economic rule must end.
Thanks so much.
INTERVIEW by Christian Sarkar