Speaker · 30:45
He understands. Why has he invested in Restoration Hardware and most recently Kroger? Is physical retail making a comeback? Finally, what do you think about Buffett pledging to give away 99% of his fortune versus Jeff Bezos dropping a $165,000,000 on a house and Amazon donating less than $1,000,000 to fight the bushfires in Australia. Is Buffett a better type of billionaire? Thanks a lot.
Kara Swisher · 31:08
Alright. I'm gonna answer this from Scott to begin. It's... I I recently spent some time with Warren Buffett, in Omaha. Yes. He's a better billionaire. He is a better billionaire. One of the things... I've talked to him over the years at various times. He has great regard for Jeff Bezos as a, as an entrepreneur and a and a company. So he does... He's smart to invest in Apple and Amazon, which he's he's done lately and has done rather well doing it. One of the arguments we had many years ago, not really an argument because I just made the comment that he should have been investing in tech much earlier, and his answer at the time was, I don't know a lot about it, I don't understand it, so I'm not gonna invest in it. And I thought that was a perfectly decent response for why he doesn't do it. I think he likes to put his bets all over the table. Restoration Hardware looks like something that could recover. Kroger, same thing. He thinks that that some physical retail is here to stay. And, yes, he's a better billionaire in terms of philanthropy. He's an admirable person in that regard. It was a delight spending time with him. He is he is much less... He's much more humble, although he certainly has an ego. And he lives... Just having had dinner with him, he lives in literally... And been to his office in the most humble way for someone that wealthy. And even a normal person, he lives rather with a lot of... In very... Not very fancy backgrounds in in in in his community in Omaha. He can put away a lot of meat. We went to a steakhouse. Just a just a regular guy. So I think Bezos could learn a thing or two from him in terms of being a little more humble, but I also... That's the way Jeff wants to be these days, and that's the way he is. Scott, what do you think?
Scott Galloway · 32:46
So he... Farrin from London, by the way. That's an Yeah. That's a good rap. I'm Farrin from London. That's a good rap. Right? That's a rap.
Speaker · 32:54
Like that.
Kara Swisher · 32:54
British accent. Oh my god.
Scott Galloway · 32:56
100%. My dad's Scottish. For some reason, I didn't pick that up. Can you imagine? If I had my dad's accent and Shakira's ass, I would do so much damage in this world, so much damage in this Those are the two
Kara Swisher · 33:09
Let me hear your Scottish Let me hear your Scottish accent.
Scott Galloway · 33:12
No, it's I do it and it ends up sounding mildly racist like I'm trying to impersonate Let people who are right
Kara Swisher · 33:19
me just say that.
Scott Galloway · 33:20
You don't hurt him. Yeah, oatmeal savages. Anyway, so, okay, so Amazon and Apple. Look, the only... He doesn't... You don't need to understand investing. People ask me for investing advice all the time, and I say, only invest... I only have two criteria. A monopoly that's unregulated. Those are the only companies you need to invest in, and Amazon and Apple check both those boxes. Check out this stat. I love playing with market caps. In the last thirteen months, and I'm just fascinated by the notion that tech has now... The technology panzer tanks have rolled into Malibu and Santa Monica and Burbank and Studio City. They are taking over Hollywood. The invasion... To give you a sense of the invasion, in the last year, when you look at Amazon's flywheel around Amazon Prime Video, when you look at Apple getting in to Apple TV plus to create their own recurring revenue bundle or Rundle, this is what's happened in the last thirteen months. Even as they haven't increased their earnings tangibly, but they've been recast as companies that are becoming more unassailable. In the last thirteen months, Apple and Amazon have added, added Kara, the value of Verizon, AT and T, Walt Disney, Fox, Lionsgate, ViacomCBS, oh, and Comcast. They've basically added the value of Hollywood plus telecommunications in the last thirteen months. Mhmm. And there's nothing that that looks as if it's getting in the way. Look at all these supply chain coronavirus fears around Apple, and the stock keeps going up.
Kara Swisher · 34:50
So you think it's good that he's invested. What do think of Buffett? What what do you think of him besides the folks, the delightfulness of him?
Scott Galloway · 34:56
I think he's an incredibly impressive guy and a good person and represents a lot of what's great about America. I I I think he's... I think it's very hard to fault a guy like Warren Buffett. I also just don't like last night.
Kara Swisher · 35:07
Around his loan... Some of his companies around related to poor people. But, anyway... But go ahead. Sorry.
Scott Galloway · 35:14
No no one gets at it. No one gets off of this scrutiny alive. I mean, no no one... There is no there is no Mother Teresa that gets to be a billionaire.
Kara Swisher · 35:21
Yeah. Alright.
Scott Galloway · 35:22
Yeah. But the other thing I didn't like about... Again, I don't mean to digress too much. But once you become a billionaire, you don't turn into a cartoonish bad person. That's just stupid. Yeah. That's a
Kara Swisher · 35:31
cool thing. Should billionaires survive? That was a rid... That was a ridiculous question from Tom Todd. Should billionaires exist? Like, I think I think Amy Klobuchar handled it well. Like, look. It's great for people to make money, but we shouldn't be watching for abuses. I think that's really pretty much the... I think she handled it
Scott Galloway · 35:48
right away. Amazon and Apple, they may be overvalued, but they're just... On a risk adjusted basis, unregulated monopolies are the best investments in the world. What's more interesting is this investment in Resto and Kroger. Resto has created a recurring revenue bundle with the restoration hardware membership program, a $100 a year, smooth promotionality, 20% off everything. So people are now buying restoration their sheets and their bedding, not only their couch. And they've also created, so they've got about a half a million members, 55,000,000 in free cash flow, probably costs 5,000,000 to administrate. So that's like another 500,000,000 to 1,000,000,000 just in value, much less the flywheel effect that they're creating. Also, Gary Friedman is to our age what Mickey Drexler was to the nineties and the odds. He's the best merchant in the world right now. Go into a Palazzo or whatever they call it, a grand Yep. Of Restoration Hardware. It's just... It's inspiring. You want inspiring retail?
Kara Swisher · 36:43
Yeah. Is. Go into I own much Restoration Hardware because of what is looked on the floor. No. It's merchandising. It's merchandising. It's what it is.
Scott Galloway · 36:49
And there's a certain level of genius. The line between crazy and genius, this is a guy, he kind of looks at the numbers, he kind of listens to the analysts and he says, you know what, I'm going to start a catalog that's the size of a phone book when everyone else is pulling away from catalogs and it's just going to be all about art. I'm not going to allow alcohol in our restaurants, hard alcohol in our restaurants at the top levels of Restoration Hardware Palazzos because I want women to feel like they have a safe place, and I don't want a bunch of hedge fund guys hitting on women during He just thinks differently, and the execution there, the just enough crazy to be genius, the membership program. Resto is arguably the most impressive, especially retailer, the most visionary. So I understand that bet. And by the way, the stock doesn't need to recover. The stock has been an outstanding performer in what is the Vietnam of retail. Kroger is more a value bet. That's like five to seven. I would bet Kroger is a value play. Largest consumer category in the world is is US grocery, about $800,000,000,000 a year. Kroger is the big player. Amazon's brick and mortar is actually underwhelmed, especially around grocery. The big competitor there is Walmart Click and Collect. Kroger is different. Kroger is kind of Lexus and Walmart is Toyota. Although a lot of people don't think of it as Kroger as aspirational relative to Walmart. Some people might think it is. Actually, you know what? I'm gonna take that bet. I I don't know what I'm talking about, the positioning around grocery there. But Kroger is partnering with Microsoft. It's actually a well run company. They're known for doing a good job of bringing their operational scale into regions and maintaining some
Kara Swisher · 38:21
kind regional merchandising. Given how close he is to Microsoft, Buffett may have some insight you may not have to that.
Scott Galloway · 38:27
So Kroger's considered a well run company. It's trading at five to seven times in an environment where everything's trading at 15 to 20 times.
Kara Swisher · 38:34
Yeah. He's smart. But there's a smart Yep. That's a smart move. So so I'm gonna move to something else. I I I agree. I think Buffett's much more admirable at being a billionaire than Bezos is, but Bezos made an attempt by contributing $10,000,000,000 towards the climate change. You know, the optics of this. Do you think it's a good thing or not a good thing? It's not clear what it is because he keeps... He's not being highly specific. Elon Musk and Bill Gates have been doing a lot of investing in this area. And obviously, Amazon is considered a major carbon footprint, not like methane gas or things like that, but still people have issues with their boxes and the... Their impact on the environment with their delivery trucks. Do you think this was a good move very briefly?
Scott Galloway · 39:18
It's hard to fault anybody for devoting $10,000,000,000 to the important important issue around climate change. What this reflects though is an underlying sickness in our society where when we... When Walmart pays 70,000,000,000 in corporate income taxes, the most successful company in the world, Amazon, pays 2,000,000,000. We become reliant on individuals to address the biggest issues of our time, whether it's income inequality or climate change or decaying infrastructure. And Kara, I want NASA to put me on fucking Mars, not not not Elon I want the Paris Accords to solve climate change, not to try and
Kara Swisher · 39:51
Yes.
Scott Galloway · 39:51
Lean and hope for the generosity of Jeff Bezos. $10,000,000,000 is a drop in the bucket bucket compared to what we are going to need to do on a nation state level to address. Trillions. Trillions. The notion and I'm worried it's going give us cold comfort that it's going to do anything. And two, we're moving to this very scary era. Pablo Escobar isn't that bad because he builds parks. Well, if on the way to getting there and I want to be clear, I'm not comparing Bezos to Pablo Escobar but governments are the gangsters here. Governments need tax revenues so that they can address and fight the biggest problems facing our society. They are the most noble organizations in the world. And the notion, we don't need Bezos to give $10,000,000,000. We need him to pay us goddamn taxes. We need senators Warren and senator Sanders to stop bragging on billionaires and create a tax code Yeah.
Kara Swisher · 40:43
That ensures
Scott Galloway · 40:44
they pay their fair share such that we can put men on Mars, such that we can fight climate change instead of having to hope that Jeff Bezos wakes up one morning, has breakfast with Leo DiCaprio, and says, I'm a climate warrior now. Is not
Kara Swisher · 40:56
That's gonna get us perfect. Perfect analysis, Scott Gallie. And may I just say, were we discussing this morning that you have a word in urban dictionary, Yoga Babble.
Scott Galloway · 41:05
Oh my god. Back to me. Back to my favorite topic.
Kara Swisher · 41:07
Yes. It's... You... Coined by Scott Galloway in his piece Yoga Babble on his no
Scott Galloway · 41:12
Urban dictionary. Officially in the urban dictionary, Yoga Babble's in there, and they credit me.
Kara Swisher · 41:17
I know that. But is there two b's or not? Because your piece had two b's or it looks like it's... They have a misspelling on the page in urban dictionary, just so you know.
Scott Galloway · 41:24
Well, I don't know. You're the journalist major. What should it be?
Kara Swisher · 41:27
Two b's. Two b's. Yeah.
Scott Galloway · 41:28
Two b's. Yeah. Thought it was two b's too. But by the way, just such I want to give credit where it's I stole the term. Remember watching thing called the circus, and I just want to give credit where it's And John Hallumann, is that his name?
Kara Swisher · 41:41
John Hallumann, uh-huh.
Scott Galloway · 41:43
John Hallumann was at a rally for, who is the Ohio governor that ran for president and was likable but never really made a whole lot of sense
Kara Swisher · 41:50
for
Scott Galloway · 41:50
Not his Chad Brown. Ohio governor. Oh, come He was a... He's the likable Republican who came out against Kasich. Kasich. Yeah. Kasich. John Hileman described Kasic speech as yoga babble, and I grabbed that word and I ran with it. I'm now... I'm using it.
Kara Swisher · 42:07
He's gonna come at you.
Scott Galloway · 42:07
I'm using it as a term to describe it.
Kara Swisher · 42:09
Could come at you. You know that.
Scott Galloway · 42:11
I'm happy. Whoever runs Urban Dictionary, I I... You know, you Alright. Okay. Good. I assigned a new meaning to it. It's it's basically fraudsplaining by Uber and other companies, and I'm writing my post on it, to wallpaper over a shitty business with new financial terms and flowery language Yes. Called Yoga Babble. Anyways, it's in the Urban Dictionary.
Kara Swisher · 42:30
Well, how
Scott Galloway · 42:31
it's I'm immortal.
Kara Swisher · 42:32
You're immortal.
Scott Galloway · 42:32
The dog is immortal. I'm Rin Tin Tin and Lassie. I am immortal.
— Predictions segment begins —
Kara Swisher · 42:37
Alright. We want more terms from you. So predictions, it's Friday in February. What do we have to look forward to? Give me one prediction, and then we gotta get out because we were political today, and you cannot do a political prediction. Another prediction.
Scott Galloway · 42:49
You're about to see you're about to see video footage of Bernie Sanders Mhmm. Talking about how much he loves Russia and very very sketchy socialist leaders in Latin America. All the scrutiny that everyone has been scared of around Bernie is about to come full force at him in the next in the next seven days. And I had a stock prediction, but I made it last week and I didn't get it on the air. I think the one company that gets the most out of this coronavirus scare is we're in the midst of the largest work from home experiment in the history of modern business. And 11% of Stern students are Chinese nationals and they're... You go on you go on Stern's campus, Kara, and people are wearing masks.
Kara Swisher · 43:33
Yeah.
Scott Galloway · 43:34
And I think Zoom, which is already up 20% in the last nine days Oh, is what's probably... It's at a 107. I think it goes to one forty or one fifty.
Kara Swisher · 43:43
Okay. We're gonna talk about coronavirus on Monday, so that'll be interesting. Okay. Alright. That's a really good one. We have to end now. But remember to our listeners, we love your questions. If you have a question about a story you're hearing in the news, email us at pivot@voxmedia.com to be featured on the show. Scott, please read us out with the credits.
— Predictions segment ends —
Scott Galloway · 43:58
I've I've sucked all the oxygen out of the room, Kara. You you do this. People are sick of my voice.
Kara Swisher · 44:03
No. No. Not at all. You know, when you talk a lot, I look more smart. You you don't understand my ploy here is what's going on is I, like, I, like, control your your dialogue. I think people accept that on on the thing. So I'm fine.
Scott Galloway · 44:14
You're little control freak is what you
Kara Swisher · 44:16
is what I am. Anyway, today's show is produced by Rebecca Sinanis. Eric Anderson is Pivot's executive producer. Thanks also to Rebecca Castro and Drew Burrows. Make sure you subscribe to the show on Apple Podcasts. If you're an Android user, check us out on Spotify or, frankly, wherever you listen to podcasts. If you liked our show, please recommend it to a friend. Thanks for listening to Pivot from Vox Media. We'll be back next week for another breakdown of all things tech and business.
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Scott Galloway · 45:44
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