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It Sucks to Be a Grownup

Scott Galloway@profgalloway

Published on May 4, 2018

This past week saw a slew of earnings and more evidence that the Four are increasing their influence, and have become toxic for our economy and the commonwealth.

Amazon crushed earnings, and the stock hit an all-time high. We’ve said, for two years now, that Amazon would be the first $1T firm. Look for this by EOY. Amazon earnings per share were expected to be $1.26 and came in at $3.27. Uhhh, ok. As discussed on Fox, the president’s clumsy assault on the Seattle firm was a buying opportunity.

The cloud and “other” segments (e.g., Amazon Media Group) grew 49% and 132%, respectively. These businesses, unlike the core retail business, have huge operating margins and subsidize the core retail business, making it unassailable. So, every time a small business contracts with AWS, a merchant at Chico’s loses her job. When the Chinese sold steel into the US at prices below cost, we called it dumping and moved in on them. When Amazon dumps in retail, ravaging a sector that’s the third-largest employer in America, we call it innovation.

Merc for the Price of a Camry

And get this, when you order online for home delivery, Amazon / Whole Foods is now less expensive than groceries ordered from Kroger. What would happen to the auto industry if all of a sudden Mercedes began selling S-Class sedans for the price of a Camry? Well, that’s what’s unfolding in US grocery. Other than education, hard to identify an industry that had stuck out their chin farther than grocery.

I’m Taking My Building and Going Home

Amazon announced they were halting work on a tower they’re building as the Seattle City Council nears a vote on a new tax targeting large employers to address homelessness and housing affordability. This is called throwing your weight around. And why wouldn’t you? Chicago has already offered, if Amazon chooses the Windy City for HQ2, to cede taxation authority to the Seattle firm. Seattle’s City Council is contemplating a tax on large firms in an effort to raise $75M to help address the homeless problem. But Amazon is playing hardball, unwilling to pay for a problem they helped create.

Really, Amazon? Really?

Prediction: Jeff Bezos throws out the first pitch at an upcoming Washington Nationals game, as he will soon be the local boy — HQ2 will be in the DC metro.


The social media giant has come under intense scrutiny as the Cambridge Analytica scandal shed the firm in an unflattering light. It’s clear the company did little to safeguard the platform from weaponization by bad actors intent on sowing chaos in the US and undermining our elections. This will likely go down as one of the great scandals in modern business, and the textbook case study in how not to handle crisis.

And … nobody cares. At least nobody who matters — users and advertisers. A conservative talk show host mocks a 17-year-old, and a third of her advertisers bolt in seven days. Facebook endangers the commonwealth, and seven of their top 1,000 ad spenders announce they’ve “had enough.” It appears Pep Boys, Playboy, and Commerzbank’s noble stand against the firm hasn’t had much of an impact.

Again, Facebook crushed … even slaughtered expectations. MAUs were up 13% YOY, and revenues were up 49%. If we didn’t know about Cambridge Analytica, we wouldn’t know about Cambridge Analytica. The platform continues to offer an unrivaled combination of scale and targeting.

Prediction: Facebook will be up 30–50% from April’s lows within 12 months as the multiple contraction, due to threat of regulation, has created a tightly wound spring that will explode. The 600 communications/PR execs that work at Facebook have recovered the Zuck and Sheryl’s fumble. Their burn-the-clock strategy in front of Congress was brilliant, and their delay and obfuscation strategy will get cloud cover from the never-ending shitshow that is our White House. Europe will go gangster on FB. However, similar to eating at an Italian restaurant or ordering cable for your London flat, it’s going to take … a … while.

Finally, in another example of how the markets are failing, IAC and Match shed a fifth of their market caps on Wednesday when Zuck announced Facebook was getting into dating. Facebook now joins Amazon as a Sith Lord that can perform Jedi mind tricks and take the value of large firms down dramatically, just with a press release.


Snap missed on revenues and user growth, and the stock puked 20%. Snap is a great product, and we needed a third player in the ecosystem. Imagine if the four largest retailers (Walmart, Kroger, Costco, and Home Depot) met every morning and strategized how they could use all their assets to put #5 (Walgreens) out of business. What would happen to Walgreens? Well, we’re seeing what happens as the four biggest apps, all owned by Facebook, execute a coordinated attack on #5, Snap. In Q3 2017, Snap was the #5 most downloaded app after the four owned by Facebook. In Q4 2017, it was down to #7. Facebook has stolen so much IP from Snap they should name the next version of Instagram Stories (wait for it) … Snap.

The X factor here is Evan Spiegel. The firm, even after shedding a fifth of its value, is worth more than News Corp and The New York Times Company, combined. The governing body that decides what 162 million young people see is a 27-year-old who can’t be removed from his post #3classshares. When I was 27 I had a bong on my nightstand, rented porn on LaserDisc, and had a pony tail. But I’m sure Evan will make really good decisions.

Prediction: The walking dead, Snap melts to single digits and is acquired in the next 12 months.


The auto firm beat earnings; however, emotion, or more specifically Elon’s lack of control of his emotions, took the stock down 7%. In response to questions about the possible need for a capital infusion, the Thomas Edison of our generation responded, “Boring, bonehead questions are not cool. Next.”

He then spent most of the remainder of the call responding to multiple questions from a YouTube fanboy. This was eerily reminiscent of the CEO of Enron calling a fund manager an “asshole” in an earnings call. (Note: I’m not suggesting Tesla has done anything illegal.) Tesla shareholders yesterday were hit with a $3.5B business immaturity tax. Bottom line: everyone has a boss; Elon’s are his investors, and he needs to put on his best dress and answer the question.

This is supposed to be the part of the movie where the chair of the board calls Elon and tells him to get his shit together. However, Elon, in addition to putting a man on Mars, is also the chairman of Tesla. Maybe we can get his brother, who serves on the board, to sit him down.

Tesla has an amazing product, but has been mistaken by investors as an internet firm. Tesla lacks the frictionless networking effects of a Google or Facebook and doesn’t have the Hermés-like margins of an Apple. Yet, it’s trading at a valuation more reflective of a firm that can scale like a Facebook or generate the profits of an Apple.

In addition, Main Street and Madison Avenue both had it coming. Mercedes and Ford? Not so much. This is a hugely competitive, relatively efficient sector that has kept prices in check with inflation. An auto manufacturer should have approximately 20% of production volume ($25B for Tesla) in cash on hand (so $5B). Tesla has $2.7B. This means by the end of the year Tesla analysts will begin wringing their hands over liquidity concerns and dilution. This fear, coupled with rising interest rates, could spook bondholders and result in the equity being the tail of the whip as enterprise value drops.

Prediction: Tesla stock drops 30–50% in the next 12 months as markets realize it’s a great auto company, not a tech firm.

Municipalities asking you to pay for the externalities you helped create, governments demanding you testify and splain the whole assault on democracy thing, boring investors asking about liquidity. It sucks to be a grownup.

Life is so rich,



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