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Go to Vanta.com slash com. Hi, everyone. This is Pivot from the Vox Media Podcast Network. I'm Kara Swisher.
And I'm Scott Galloway. Kara, we're at it again this week, live and in person, in New York City to talk about our favorite things to our favorite audience. Who's our New York's our favorite audience? They're all our favorite audience.
That's true. Every city we go to, we met up at the podcast up fronts to do a live episode of Pivot and hear about all the other amazing shows coming up for Vox this year, but really we were the show. Plus, look out. We also have our own special announcement in this episode.
Wait for it, Kara. Wait for it. Hey, New York City. We're happy to be at the podcast Upfronts.
Looks like we have to bring this show home and have a great podcast. We have lots of things to talk about. Scott, what are you most excited about? Most excited about Gen 1.
Podcasts and podcasts. In podcasting. Well, what podcasts do I like the most? Yeah.
What are you most excited about? It's the only ad-supported medium that's growing. Think about advertising for most of you who represent advertisers. Advertising, let's be honest, has become a tax that the poor and the technologically illiterate have to pay.
It's kind of shit we foist on people in order such that they can afford substandard media and anyone who has any options gets to watch media without being cursed by advertising. This is the only medium where people seem willing to endure advertising to have options. So podcasting is an exciting place to be. You know this is a room full of advertisers, right?
That's all right. I like you better than he does. He loves advertising. That's not true.
That's some advertisers. But it's true. Podcasts are really an interesting advertising medium. I think people have these relationships and they're much more creative than other advertising.
I'm enjoying actually reading so many of the things. But if you're going to start reading because we're going twice a week, correct? We have so much advertiser interest. That's real.
They cannot get enough of you and I together. Yeah, that's it. They're hoping someday we're going to marry, which will never happen. I was just on the Bill Simmons podcast, which I love.
That was huge. It has 200 million downloads. It was a really good discussion because what I really like about Bill Simmons is I think about what we have and what all the Vox Media ones have is a lot of substance. I can't stand the word stackable for millennials or the millennials like things in a twitchy way.
I think everybody likes substance. They like entertainment. They like something more. And I think the good thing that's happened with podcasts with us at least is that there's a lot.
There's more substance here than you think, even though we just banter and make bad jokes. We were talking about this offstage, but the medium really is the message. And I'm curious how people respond to you when they've read your articles. But if I get literally, I can tell if someone approaches me about something that I don't know, I know which medium that they're approaching me about.
If it's someone who high-fives me and it's sort of a bro romance, I know it's a video. If someone comes up and wants to share a moment and really look you in the eyes, it's something they read that you wrote. And if somebody comes up to you and speaks to you as if you're their friend and you don't know them, it's from a podcast. There's something.
The medium really is the message. And there's something about the intimacy of being in someone's ears where they feel as if they know you. And they're forced to listen to you because they don't have the distraction of visuals. Whereas the written word really seems to move people.
Right. And it is a different group of demographics. Usually on the streets of San Francisco, I get inundated by tech bros, essentially, who want to say hi. But with the podcast, I'm struck by how many different people from different walks of life do come up to me.
They're all asking me about you, which is disturbing on some level. Thanks for saying that. But it's really interesting how many different people do have like different demographics, different ages, different kinds of people, which I think is really interesting. So that's why we're going to go twice a week because people seem to love it.
It's growing like crazy and we have tons of advertiser interest. So we're very excited. So right now, let's get into the news. So I think I think we have to start with WeWork.
Yeah. Have we killed them yet or not? So it's pretty interesting today. I don't know what's going on here.
I actually have some friends here who know more about this than I do. But somebody is leaking that I think it's we. We is saying they are opting for or prefer a debt package from JPMorgan as opposed to an equity effectively cram down or total washout by SoftBank, their initial equity investor. And supposedly the terms of the financing deal of five billion dollars to keep them alive from JPMorgan like consortium would be a 15 percent interest rate, which would be seven hundred and fifty million dollars a year in interest.
So this is a company right now losing 60 million a week. And I like to put everything in terms of a private jet, which I don't own. So this company is losing a Gulfstream 650 extended range every week. And the interest on the debt it needs to stay alive would be one Bombardier Challenger 300 per week, 2010, 2011 to 2100, 2200 dollars watching succession.
So literally, in order to keep a co-sharing office concept alive in 2020, we need to throw the Turkish Air Force at WeWork. I mean, I don't understand how it is feasible. And I'm going to double down and come back to this. I don't understand how this company doesn't at some point in the next four to eight weeks do the calculus that the only way out of this inexorable downward spiral and everyone says, oh, you're a Debbie Downer.
You're dancing on the grave. No, I was dancing at the grave before anyone knew they were dead, so to speak. I don't see how this doesn't involve a bankruptcy offer. How do you bail yourself out with 15 percent payment in kind debt?
I think they're going to have layoffs as soon as this week. Substantively, that's a given this week. That's my prediction. And then how do they survive a bankruptcy?
Well, a bankruptcy actually bankruptcy. Think of this as a retail concept with 550 stores. Bankruptcy was kind of invented for retail concepts because what you get to do then is you get to go cherry pick the stores of the leases that are working. Whereas now they've got to try and go negotiate with four or 450, call it landlords or figure out a way to get out of these things early.
A bankruptcy really. I mean, people think of bankruptcy as the end. I don't know. Bankruptcy is a uniquely and wonderful American thing because in America we have this sort of cultural norm that we we don't embrace failure, but we tolerate it.
And we say there are assets here and we want to give this company an opportunity to survive. So under the auspices of the cloud cover of bankruptcy, we're going to let this company figure out a way to restructure and have a chance to move on. There is value here. Some of these, some of these co-working facilities likely on a unit economic basis makes sense and work well.
Probably two or 300 don't without the cloud cover of a bankruptcy where you send your landlord. All right, you work something else out or it's zero. I don't see any way out of this. How valuable is the brand itself?
This is it? Or it can just anybody just replicate a version of it. Oh, no. They've evolved the space.
We all know it. Even just general awareness. If you were all of a sudden to decide I need a co-working space, the first that you very rarely, 97 percent of all purchase dollars go to things you have initial awareness of, right? That's why the first page on Google is ninety nine point nine percent of value in the first listing is about 70 percent of all the value.
It's the same way in terms of your consideration set. So the fact that the first thing you think of if you think of shared workspace is we, that's enormously valuable. That can go down very quickly. No doubt.
But it's worth. But then again, it comes back to value. It's worth hundreds of millions, maybe even single digit billions. But it's not worth, according to Goldman Sachs, who estimated a company was worth somewhere between 60 and 90 billion about 45 days ago.
Oh, great fiduciary is for interview. Give me your money to them in terms of private wealth management. But by the way, the CEO is an awesome DJ. Just a fucking awesome DJ.
Look, there are real assets here on a unit level of the 550 locations. You got to imagine 150 to 250 work really well. I mean, I don't know how many of them work. They have evolved the concept.
Some of them are really cool. But the problem is, this needs to move from a growth story to a margin story. And I don't think you can physically. I think you're wrong.
I think these are just like shitty retailers that are trendy that aren't. And people are going to move on really quickly from And she said she's not accepting any money from them. She's going to give back money that she got from tech people. She is, of course, doing a lot of buying on Facebook and everything else, probably the most of any candidate.
But at the same time, she's sort of kicking him in the teeth any chance she gets. Well, so imagine that it had been discovered that Vox had not put in place the requisite safeguards to ensure that the intelligence arm of Russia had weaponized Vox and potentially suppressed the vote in key swing states. Something tells me Vox with a 99% likelihood, Vox would be out of business and there'd be 100% likelihood that if we were allowed to stay in business, we wouldn't be taking political advertising. We'd just say, let's just take this cycle off because we're not very good at that.
I think they should take it off. Well, OK, they're not right. And to their defense, the ads they accepted from the Trump campaign, a lot of broadcast networks accepted. But the notion that Facebook is taking political ads and has said there's already evidence of meddling is outrageous.
All right. But in terms of them hosting the dinners, do you think that's a smart move then for Facebook? And all of them are sort of visiting Trump and visiting the right wing. Not all of them, but they're all visited the White House.
They were initially very against and very complained about immigration and stuff like that. They've quieted down quite a bit. They're worried about making Bill Rahim at the Justice Department. They're worried about the FTC.
They're worried about and they're trying to influence it now, presumably. Yeah, I think it's going to backfire. And I think the breakup has begun. I think they're going to be broken up.
We've talked about this. I think it's happening. It's probably gonna happen at the state level, not the federal level. And all we need is kind of if things get scary again around our elections.
I just can't imagine. I can't imagine why they would decide to take that sort of risk because I think they under the impression they're totally immune. So, for example, remember two years ago, there was a bunch of news in the advertising business at my old firm L2. We used video as top of the funnel to drive inbound inquiries and then we'd sell into large corporations.
And so we were constantly trying to figure out how to get videos of our crazy founder to get more reach, more penetration, more place. And YouTube, we were getting at somewhere between three and five cents of view. And then all of a sudden everyone was talking about Facebook video. Yeah.
And people invested in it. People invested. Vox did the same thing. So we got feedback that we were getting views on Facebook at a half a penny.
So we took pretty much our entire budget and we switched to Facebook and we were told that we were getting views at a fraction of the cost of YouTube or other vehicles for customer acquisition. And then we have since found out they lied that that was total bullshit. They lied. And there's absolutely no recourse.
The only recourse is $40 million to whatever ad agencies were so pissed off and had enough money to actually be a thorn in their side that they cut a check for $40 million, which I think is about, I don't know, 11 hours of cash flow. So the notion that this company has any concern or regard for a good faith with partners. Think about how many companies, I don't know how many people in the room, literally pivoted their media budgets. How many companies went in and out of business based on totally false metrics.
A lot of people would say, well, shame on you for allocating your spend without third party verifiable metrics. Right, we screwed up. We trusted them. But what seems to be weird is we keep screwing up and we keep trusting.
No, I think media companies have moved on, moved on to other places. And I think they're still trying to figure out where it works, where, where they're Media companies have moved on from Facebook. No, they've moved on, but they understand that those, the Facebook video and all the, all the focus. And they moved far away from it.
That was interesting. They came to me actually early on when they were doing that and said they would like you to, you know, they offered all those different things. They want you to do it. And I was like, where's the money?
Where's the actual money and the actual numbers? And they were like, you know, you'll get more famous. You'll get, they had all kinds of things and I didn't do it because I thought it was a waste of time at the time. But what's interesting is that I think most publishers know this and but don't know where to go.
Like I think YouTube still remains the best option, correct? That's what, and I don't have, my data is anecdotal on this, but I found in terms of small and medium sized business to find actionable funnel, you know, hard metrics around video and targeting that YouTube is far and away. YouTube and Twitter for marketing. That's pretty much.
I think it's still, we're still not reached that moment where anything really works well. Well, the reality is Facebook and Google. TikTok. You guys on TikTok?
Can you do dance videos on TikTok? God, that's an awful thought. Yes. We should do a TikTok video.
What works? Facebook and Google work. Facebook and Google, but not Facebook video, correct? No, Facebook video doesn't work.
Facebook and Google is a whole work. I mean, unfortunately, we've entered the experimentation phase and to a certain extent Snap, Snap and Pinterest have carved out little niches. My theory is, is that Facebook and Google keep them alive and don't put them out of business, which they could do with a Jedi mind trick in about three minutes just so they can say they have competition. Twitter is more dependent upon Trump's reelection than any individual in the world.
Jack Dorsey will benefit economically more from Trump's reelection than any individual on the planet. If you look at their stock price, it's down 50%. Trump gets elected. It's doubled since then.
So he's not going to be thrown off that meeting. Well, that's, I mean, if we were making 110% of the profit at Vox, we could get up here and do pretty terrible things and they would tolerate us. So times out by 10, there is no individual that is more important to the economic wellbeing of Twitter employees than the Trump reelection. All right.
Okay. All right. Last big story breakdown, the tough one. Bill Gates met with Jeffrey Epstein many times after his convictions in 2008.
Does this matter? The New York times reports that Gates had visited Epstein's house numerous times. He flew on his plane, um, which brings the question around judgment and his email to colleagues that went for one of these visits in 2011. He said his lifestyle is very different and kind of intriguing, although it would not work for me.
That is not a great email. I think in general, um, is this a big deal or how big, you know, tech ties to this. There's a lot of tech links with Jeffrey Epstein. There were, um, this one is obviously problematic for Gates.
Yeah, well, I'll ask you. I mean, why do we care? Why, why do adjacencies to people create guilt? That's a fair question.
I think the question is, what was he, after knowing a lot of these people had done after a conviction, you think an adjacency is okay after a conviction? Well, supposedly in our society, with most people, we say if they have been convicted of something and they've served their time, supposedly it's a progressive ideology. I mean, in the fullness of knowledge now, none of us would have anything to do with them. But in America, we like to think that when someone's convicted and they serve their time, they've made their payment to society.
And to be on their plane or to be associated with them, are we guilty if we hire an ex-con? Is that a bad thing? You're affiliating with a criminal, a former criminal. Why is this any different except that we know what we know now?
I think if you're, these people do not live like you and I. And I think if you're Bill Gates, you need to vet people you're hanging out with. You just can't, like, because of what could happen later. And when there's, there was a whisper network about Epstein, I think among the very wealthy people, and they understood what was happening with him.
And I think that they, I don't think they understood the extent of it or, or how, how bad it was. And maybe some of them did, by the way. And then that's the bigger worry, I think, is, is more revelations coming out. But I do think if you're the world's one among the world, just people you have to be careful about the company you keep or else it's going to come back to.
And it's amazing that nobody vetted this or gave him any kind of advice of not, because what you're going to be in a room with. Or we as a society need to get out of the shaming culture where we look for reasons to embarrass rich and famous people. Okay. It was on a chat.
Who gives a fuck? I mean, that's okay. I don't know. I think I don't know what all of you have done.
And if you offer me a ride on your jet somewhere, I'm probably going to say yes. And I'm not going to vet you. I mean, it's just kind of enough already. It's a shaming industrial complex.
No, I'm going to disagree with you. I think the leaders have to like show a little bit more judgment. It shows really bad judgment. I think having that dinner, but Joey, you know, you thought that was fine I've been inspired by some companies called Pepper, which is direct-to-consumer undergarments.
Rally Road is this great startup that mutualizes classic cars as an asset class. A bigger startup I'm pulling from Rent the Runway. I think they kind of define that category. I love that they handled the crisis, and they were very transparent about it.
There's a ton of inspiring startups. Unfortunately, there aren't enough, but I think there's a ton of inspiring, interesting. Do you see this as a period of time when SoftBank is pulling back all this money of startups coming back? Because startups have sort of been on the ropes a little bit.
Yeah, but SoftBank right now doesn't look to be pulling back. I mean, where we are, the market's going to correct SoftBank, because we're in this very strange situation where 76% of companies filing for IPOs in 2019 were not public. And in 2009, 1 in 10 were not public, or 9 in 10, excuse me, were not profitable, or 9 in 10. So it's very easy.
By the way, the last time we hit this ratio of non-profitable companies, 3 and 4, filing for public offerings, when was that? What year was that? I'll give you one guess. 2001.
1999. Right before you. So it's very difficult to time the markets, but the notion that it's not different this time, oh my God, history may not repeat itself, but it is rhyming like you cannot believe right now. It was literally about 75% in 1999 of companies filing that weren't profitable.
We've hit that number again. For the first time since, 1999, private equity valuations are greater as multiples of earnings in the private market than companies are in the public markets. We are literally breaching, if you will, the same dams that happened in 1999. These valuations are just out of line.
These valuations are ridiculous. But I don't see innovation in advertising. I don't see any new innovation because of these two big companies that sort of control everything. I don't see a lot of innovation in consumer.
Anything really fascinating. There's some DTX. There's some fun DTX. Sort of, sort of.
It's a lot of more innovation in commerce. There's a little more innovation in commerce. What's the ARV? I'm looking at things like AgTech, like cow sensors and things.
What? You put things on cows. You put like little Fitbits on cows. They put Fitbits on cows, and then you find out what they're hanging, doing.
And there's also facial recognition for cows. I think that's really interesting. Like where they are in the field, how much they ate, that kind of stuff. I think it's just interesting.
I think it's like nobody's doing it. So I think it's really... I do. AgTech is a big thing.
I'm just telling you, like how we do, how we do crops, how we figure out what to plant, what's thriving. You should be a partner at SoftBank. You sound like you're right in there. I'm just telling you, I'm fascinated by this stuff.
Cow tech. Cow tech. I'm just telling you, cow tech. You wait and see how we're going to figure out food and things in the next.
That is a big area. Climate change tech. I think that is a thing that I'm going to spend a lot of time being focused on. Climate change.
And I've said this over and over again. The next, the world's first trillionaire will be the person who solves our climate change, which is so this week alone, like in Montana, in Tokyo, and then just the news that's coming. It's just going to start logging another forest that we haven't done forever. I mean, it's just, there's so much opportunity for someone to come in here and find solutions to these problems.
Yeah, the problem is the solutions are boring and don't create trillionaires. If we planted another trillion trees. I just feel like, and then space tech. I think space tech is really interesting.
I do. I'm very, it's a longer term thing. Same thing with urban mobility. And you don't agree with my transportation, but you're completely wrong.
I just think that that kind of stuff, the big thoughts, I'm a big thinker now, Scott. You're Meyer in the tiny, dwarfed along a giant. Predictions. My prediction, we will have massive layoffs very soon.
Well, that's not a prediction. That's already happening. All right. Okay.
Yeah. So I'm doubling down. Somebody leaked today, either JP Morgan or Adam Neumann or somebody at WeWork is trying to position to get a better deal from SoftBank in terms of equity terms. But I just don't see how this thing doesn't involve a bankruptcy.
I don't see how you cut costs this fast. And the other prediction is there's just going to be such a reevaluation of venture growth. I mean, the data, SoftBank literally violated every basic norm of good venture financing. One is distance from where you invest is inversely correlated to returns.
So if you're an investor and you live in Chicago, you want to invest in Illinois. It's literally the drive test. And if you look at their investments, they're literally the returns are inversely correlated to distance. The further they got away from Tokyo, they made a ton of money in Alibaba.
They got smoked when they went nine time zones to New York. Anyway, thank you so much for being here. We've got to get out. We will be back.
We will be back with Pivot Live twice a week very soon. I think super soon. And then we were going to Stanford University next week for a live Pivot. Neither of us got into Stanford.
So fuck that. We're coming back. Go Bears. Go Bears.
And we expect swag from them. And we are going to show them that we would have been good Stanford people. Tripled the number of applicants. We tripled their endowment, but haven't increased their freshman seats one seat.
Not good for society. Go Cardinals. All right. Anyway, thank you very much.
This is live Pivot from New York. This is Scott Galloway and I am Kara Swisher. Thank you. Thank you.
That's our show. Lovely to see you as usual, Scott. Great to see you in the greatest city in the world, Kara. That's right.
New York City. We've made it here. We can make it everywhere. That's the song I'm singing.
Don't start singing, please. Don't, don't, don't. Start spreading the Kara. No, no.
Stop. She's with the dogs. Oh, God. Scott's singing.
So I guess I'm going to move on very quickly. By the way, if you're interested in learning more about the media and entertainment businesses, there's another podcast from Recode that covers just that. It's called Recode Media with Peter Kafka. Every week, Peter interviews the smartest people in tech, media, and the entertainment field to find out what happens when those things collide.
Subscribe to Recode Media for free right now in Apple Podcasts or your favorite podcast app. Anyway, today's show was produced by Rebecca Sinanis and Eric Johnson. Erica Anderson is Pivot's executive producer. Thanks also to Rebecca Castro, Drew Burrows, and Ashad Karwa.
Make sure you subscribe to the show on Apple Podcasts if you like this week's episode. Leave us a review. Thanks for listening. Full apologies for Scott singing.
We'll be back next week for another breakdown of all things tech and business. Don, don, don, don. Come on. Come on.
Someone get him out of here. Come to the door. Rebecca, get in here.