Kara Swisher · 50:22
Founder Jack Ma reappeared in China after nearly a year abroad. Ma's visit could signal an end to China's crackdown on big tech. That campaign started in November 2020 when the Chinese government canceled a $33,000,000,000 IPO for Ant Group, another Jack Ma company. Alibaba's stock is up on the news and more could be on the way. Five of the six future spin offs could IPO. I don't even know what's happening here. I don't know why Jack Ma went back to China. I think what they've done to him is really... To see a quiet Jack Ma is such a shock and an acquiescent Jack Ma, but, here we are. What do you think of this this spinning it off? I mean, could be a good thing instead of having one giant company that runs all. What do you... What do we think of this?
Scott Galloway · 51:02
It's a great idea for shareholders. If you think about what happens is the CEOs of companies wanna reduce their indigestion, and they buy... They make acquisitions. A, they wanna get paid more. And the way... The easiest way to get paid more is to make a bigger company because the compensation committee will base compensation based on the size of the company. So it's always tempting. And always the idea of a great acquisition is so tempting that CEOs constantly overpay. Two thirds of acquisitions end up destroying shareholder value. But what you end up with is these Frankensteins, these conglomerations. Yeah. And the issue is it's good for the CEO because the CEO is like, oh, my cloud division was down, but my ecommerce division or my payments division is up. And it smooths out their earnings, makes things easier for them. But here's the thing. You don't, as an investor, need the CEO to diversify for you. You can buy separate stocks. What you want point. What you want as an investor is you want a CEO and a management team focused on one type of business that they can be fully accountable and responsible for. And so one of the one of the easiest ways to unlock shareholder value, and it's kind of a kind of a go to in the activist playbook, is the deconglomeration or breakup of companies. Because what happens, Kara, is when you have a company that has so many different units that it's hard to suss out, and companies will start playing hide the ball in terms of reporting, and they'll they'll cherry pick which numbers they wanna report from which divisions. So the market gets frustrated, and what the market decides to do in these conglomerates that are impossible to value is they look... Find the shittiest business, and they assign that multiple to the entire business.
Kara Swisher · 52:37
Oh, interesting.
Scott Galloway · 52:38
So The New York Times company traded at a multiple on EBITDA of four or five because that's what newspapers should go for, even though it owned the seventh tallest building in America, its headquarters, even though it owned owned 17% of the Boston Red Sox, even though it owned about.com. Also, the moment you unlock value from a conglomerate that isn't getting any scale or real synergy here other than reducing the the headaches and the indigestion of the CEO, the disposition of assets is accretive for shareholders. This is a great idea.
Kara Swisher · 53:06
Yeah. Okay. I still think what they did to these executives is really unusual. Now he's sort of squashing them, but they
Scott Galloway · 53:11
were trying to take away power. I'm not saying a a breakup is is is is analogous to disappearing CEOs.
Kara Swisher · 53:17
Mhmm. No. No. Not at all. So it'll be interesting to see what happens to ByteDance and Tencents, and there's some really interesting signs China... They may be worried about the TikTok effect here. Other signs of a possible tech thought in China this month, Tim Cook and the CEO of Qualcomm both appeared in China in recent days. China's video game regulator approved a batch of foreign titles, and ride hailing app Didi announced plans for expansion. They could be like, We pushed it way too far. I don't know.
Scott Galloway · 53:43
That is exactly what it... This is the closest she will ever come to a charm tour. Yeah. He's basically wrapped the knuckles so hard he's cut off the fingers, a couple fingers of the Chinese Internet economy. Yeah. And his economists or whoever have sat him down and said, okay. If we're gonna continue to bring millions of people out of poverty, we gotta let our thoroughbreds run. Mhmm. They are on a charm tour right now. Hey, Jack. Come back. Yeah. You know, say hi. We're gonna we're gonna maybe maybe... You you watch. There's gonna be ribbon cuttings.
Kara Swisher · 54:16
There are a lot of photos of him. It was... I'm always fascinated by how they do their PR in China. You know? It's... Yeah. We'll see. But I think it's, you know, the same thing in Israel with Netanyahu. All these tech companies were like, see you later, sir.
Scott Galloway · 54:27
With American tech, it's gonna happen next. Gonna do a bunch of they're gonna do a bunch of photo ops and a bunch of ribbon cuttings with American tech companies because
Kara Swisher · 54:37
Who is? Oh, oh, in China.
Scott Galloway · 54:38
Because everyone says how how vulnerable Apple is to this tumult in China. They are its second biggest market. That's where they make their iPhones.
Kara Swisher · 54:47
Tesla.
Scott Galloway · 54:47
China is just as vulnerable. I mean, if if these companies pull out of China and tens of millions of people are out of work overnight Yeah. That For could be... Keep in mind, you can't vote the party out of office here. It's called revolution.
Kara Swisher · 55:01
Right.
Scott Galloway · 55:01
So in some ways, they are very receptive to, you know, the goings on of the of the people, if you will. But this is this is a charm tour. This is a charm offensive.
Kara Swisher · 55:11
China, you're in it with us whether you like it or not. Fighting with this is probably not a great idea. One person who's in big trouble for... In China is Sam Bankman Fried. Remember him? The FTX founder is charged with bribing Chinese officials to unfreeze trading accounts held by Alameda Research. Prosecutors say SPF first tried to hire lawyers to lobby Chinese officials and made fake accounts to trick them. That didn't work. They claim he greased some palms. This guy's gonna jail forever. Yeah. Yeah. I mean, you know, well, what do we say about this? Nothing.
Scott Galloway · 55:41
Yeah. There there... I mean, the judge is just gonna... The sentencing hearing here is gonna be really ugly.
Kara Swisher · 55:47
Yeah. Yeah. Just Pile it on. Put it on the top.
Scott Galloway · 55:51
Gosh.
Kara Swisher · 55:51
Yeah. Honestly, he's gonna pay for all the sins of crypto. They're they're looking at other companies. Binance is also being scrutinized. Anyway, okay, Scott. Let's pivot to a listener question.
Scott Galloway · 56:02
You've got you've got I can't believe I'm gonna be a mailman. You've got mail.
Kara Swisher · 56:06
This question comes in via email. I'll read it. Dear Scott, it's only to you. I thought you did a great job on real time Friday night. However, I disagree with your statement that senior poverty has been eliminated. I see stories on news about seniors having to make choices to get their meds or food. My own mother has worked for over thirty five years on her feet to raise me, has never struggled more than in her retirement. My mother's debt has increased exponentially as she's tried to pay for her meds, keep a roof over her head, food on her table. At 92 years old, the last thing my mother should have to worry about is staying afloat. I think as a country, we're a long way from seniors feeling socially secure. A dedicated Pivot listener, Sid, please address. Let me just give you a couple of statistics. In 2021, the national poverty rate for people 65 was more than 10. That's lower than the national rate for all age groups, which is 12.8%. But 2,300,000 older adults on supplemental security income, SSI, received less than $600 a month on average. Scott?
Scott Galloway · 57:04
So I want to acknowledge the point. You know? And, on television, and I realize this sound defensive, you have to be a bit reductive. But I stand by the general statement. In 1960, people over the age of 65, over a third of them lived in poverty. It was 35%. And because of Social Security, it's been reduced to 10%. So the reduction in poverty has been greatest among seniors largely because of what many people argue is the most successful social program in history across every geography, and that's Social Security. Senior poverty used to be a real scourge, and it's now more the exception than the rule. So I've learned a lot about Social Security because I find the transfer of money from young people to old people. It doesn't make any sense to me that the wealthiest generation in history gets a transfer payment of a trillion dollars from younger people. But having said that, when I did the real homework on it, it is a very successful program. And I wanna acknowledge that there are seniors who are struggling. I didn't mean to be that reductive. But but senior poverty has been reduced from 35% to 10%.
Kara Swisher · 58:10
Yeah. Yeah. It's interesting. You know, I just got my, notice of when I can take Social Security. It was funny because I'm just turned 60.
Scott Galloway · 58:18
Yeah. Because... Yeah. You're getting up there.
Kara Swisher · 58:20
I know. I know.
Scott Galloway · 58:21
It was If I were you, I wouldn't even buy green bananas.
Kara Swisher · 58:24
It's interesting, though, when you take the Social Security, how much more you get if you keep working until 70 or something.
Scott Galloway · 58:31
67, whatever it is. Yeah.
Kara Swisher · 58:32
It's really... I was... I had never seen the numbers. It also showed how much money I had put in, which is interesting. And then I was like, do I... Should I take this out? Because I don't need it necessarily. But then again, put it in. You know what I mean? Like, it was my money.
Scott Galloway · 58:44
Went Well, and also, if if you wanna secure Social Security... And let's let's go to it's a great program. Let's secure it. In 2033, it's out of money. Yeah. If you wanna secure it... So someone making $150,000 a year pays 6% or approximately $10,000 in the Social Security fund. Someone making a million and $0.5 a year pays $10,000 because the cap on it is, I think, $147,000 So if you lifted the cap and you stopped Social Security tax being a regressive tax, just made it a flat tax, not even progressive, but not regressive, then where someone like me pays point 6% versus everyone else who pays 6%, it would be it would be solidified and funded forever.
Kara Swisher · 59:27
That's how it should happen. I would agree with you, Scott Galloway. Rich people shave more in depending on income. But we're not gonna do that,
Scott Galloway · 59:33
are we? You know what? It it it... When you just think it's speaking of money and being frugal as you get older, as I've gotten older, I've decided, like, I I actually don't really love strip clubs, but I go because sometimes they have the best deals on breakfast buffets, Kara. It's just the responsible thing to do to
Speaker · 59:50
Are you frugal?
Kara Swisher · 59:51
I wouldn't say you're frugal. To Let's not get into this one.
Scott Galloway · 59:54
To swing by, glory girls at eleven in the morning. Oh. It's just... It's the smart thing to do.
Kara Swisher · 1:00:00
Yeah. Yeah. On this argument, I am much frugular than you in general. I'm a frugal person.
Scott Galloway · 1:00:06
I think spending money is wonderful. Yeah. As long as it's not BNPL.
Kara Swisher · 1:00:11
Okay. Okay. Because god can pay up front.
Scott Galloway · 1:00:15
Buy now. Pay now. Buy now. BNPL. Buy now. Pay now.
Kara Swisher · 1:00:18
Why don't we suggest that to the seniors? Anyway, Sid, thank you for your note. It was very thoughtful, you're right. TV is productive, and I think Scott was... Is making a larger point, which he's also correct on. I can't believe I'm saying that. Anyway, if you've got a question of your own you'd like answered, send it our way. Go to nymag.com/pivot to submit a question for the show, or call 85551 Alright, Scott. One more break, and we'll be back for predictions.
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— Predictions segment begins —
Kara Swisher · 1:01:33
Okay, Scott. Let's hear a prediction. I have one very quick one. Our blue checks are getting taken away, and there's, there's also a very special group of people on Twitter that get to... We learned they had a secret list of VIPs whose tweets are boosted. Some names, LeBron James, AOC, and Elon Musk. So, anyway, our blue checks are getting taken away.
Scott Galloway · 1:01:54
So I had my first bug on Twitter. You've been saying it's buggy. I have been locked out of Twitter for two days. I can't
Kara Swisher · 1:02:00
log Yeah. It's been doing that. That's a new bug. Yeah. A lot of people.
Scott Galloway · 1:02:03
I might requested a new password, and I just couldn't log on. It just kept giving me these error messages.
Kara Swisher · 1:02:08
So Yeah. That's a good thing.
Scott Galloway · 1:02:09
It's happening. So I have two predictions. My first is that Chelsea will beat Austin Via on Sunday. I'm going to the game with my 12 year old. We're super excited. And that's going to be very exciting. But look, I made this prediction last year, and it was wrong because the stocks have got on Alibaba, it's gotten cut in half. But Alibaba and Chinese internet stocks are going to continue their tear because the chill the chill has been lifted. And Aswath Damodaranova says that when you're making an investment in a Chinese stock, you have the CCP in the room with you. And for the last two to three years, the CCP has been a wind in the face of private Internet companies or publicly traded Internet companies, it's about to become a wind at their back. And with COVID, over the lockdowns, with China opening up again, I think you're gonna see a mini boom. The Nasdaq is up in The US. It hasn't recovered as much in China. Well, actually, last three months has been pretty strong. But this breakup, you're gonna see some IPOs over there. We're about to see a regression to the mean for Chinese Internet stocks, a continued regression of the mean where they accelerate, and Alibaba will probably lead the pack.
Kara Swisher · 1:03:30
Yeah. Oh, interesting. Okay.
Scott Galloway · 1:03:31
Yeah. I just think... I think the government, I think these companies have been beaten down so badly even with bounce back from November of last year. These companies, Chinese internet companies, are still cheap compared to their peers in other mature markets. And the unknown here, the reason they've been battered so hard was the wind in their face of the CCP, and the CCP has clearly decided, okay. They've learned. Jack Ma's in line. Everyone's fallen in line.
Kara Swisher · 1:03:57
The US is pissed about TikTok. We're not gonna
Scott Galloway · 1:03:59
stop you. Let's turn the wind machine on.
Kara Swisher · 1:04:02
Yeah. Probably a good idea Should be doing the same thing in Israel, as I was saying. Anyway, that's a very good prediction. That's an excellent prediction, and that's the show. We'll be back on Tuesday with more pivot. Scott, please read us out.
— Predictions segment ends —
Scott Galloway · 1:04:16
Today's show is produced by Lara Naaman, Evan Engel, and Taylor Griffin. Ernie Intertaut engineered this episode. Thanks also to Drew Burrows and Mussaverio. Make sure you subscribe to the show wherever you listen to podcasts. Thanks for listening to Pivot from New York Magazine and Vox Media. We'll be back next week for another breakdown of all things tech and business. Kara, have a great weekend.
Kara Swisher · 1:04:33
Thanks. You too.
Speaker · 1:04:42
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