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Favorite Number

Scott Galloway@profgalloway

Published on February 2, 2018

An excerpt from an upcoming feature in Esquire.

When the subject of monopolistic behavior comes up, Amazon is quick to cite its favorite number, 4%. It’s the share of US retail Amazon controls (online and offline), and only half of Walmart’s market share. It’s a powerful defense against calls to regulate the behemoth. But there are other numbers. Numbers you typically won’t see in an Amazon press release.

34% — Amazon’s share of the global cloud business
44% — Amazon’s share of US online commerce
64% — US households with Amazon Prime
71% — Amazon’s share of voice on home devices
$1.4 billion — amount of US corporate taxes paid by Amazon since 2008
$64 billion — amount of US corporate taxes paid by Walmart since 2008. Amazon has added the entire value of Walmart to its market cap in the past six months.

What about Facebook? Eighty-five percent of the time we spend on our phones is spent in an app. Four of the top five apps globally — WhatsApp, Messenger, Facebook, and Instagram — are owned by Facebook. And the top four have allied, under the command of the Zuck, to kill the fifth, Snap. What this means is that our phones are no longer communications vehicles; they are delivery devices for Facebook, Inc.

Facebook even has an internal database that tells it when a competitive app is gaining traction with its users, so the social network can either acquire the firm (as it did with Instagram and WhatsApp) or kill it by mimicking its features (as it’s trying to do with Stories and Bonfire, which are aimed at Snapchat and Houseparty).

Google, for its part, now commands a 92% share of a market, internet search, worth $92.4 billion worldwide. That’s more than the entire advertising market of any country except the US. Search is now a larger market than the following global industries:

— paper and forest products, $81 billion
— construction and engineering, $79 billion
— real estate management and development, $76 billion
— gas utilities, $58 billion

How would we feel if one company controlled 92% of the global construction and engineering trade? Or 92% of the world’s paper and forest products? Would we worry their power and influence had breached a reasonable threshold, or would we just think they were awesome innovators, as we do with Google?

And then there’s Apple, the only firm who is both the low-cost producer and the premium-priced product. The total material cost for the iPhone 8 is $288, a fraction of the $799 price tag. Put another way, Apple has the profit margins of Ferrari with the production volumes of Toyota. Apple’s users are also among the most loyal. Apple has a 92% retention rate among consumers, compared to just 77% for Samsung users. In February 2017, 79% of all active iOS users had updated to the most recent software, vs. just 1.2% of all active Android users.

Apple’s resonance with consumers has resulted in monopoly-like powers the firm is deploying to perform infanticide on a superior music offering, Spotify. In 2016, the firm denied an update to Spotify’s iOS app, blocking iPhone users’ access to the latest version of the music streaming service. While Spotify has double the subscribers as Apple music, Apple compensates by placing a 30% tax on the competition.

Apple isn’t shy leveraging their popularity among consumers. It was recently discovered they have been purposely impairing their products (reducing battery life on outdated iPhone models) to entice users to upgrade sooner than they would have otherwise. This is the confidence of a monopoly.

Read the full feature in the March issue of Esquire, on stands Tuesday, February 13th. For more on breaking up big tech, watch my DLD18 conference talk, with slides added in.

In Your Employ

employee
/emˈploiē/
A person hired to provide services to a company on a regular basis in exchange for compensation.

I’m now an employee of the firm that acquired L2. It’s been less painful, though still painful, than expected, as the people are smart and nice. The last time I was an employee was 25 years ago, first job after UCLA, at Morgan Stanley. I had dozens of part-time jobs, but nothing with health benefits nor the expectation of being an agent of the firm. Being an employee, and the wage for labor compact, is key to capitalism and something Americans are good at. Most Americans, that is.

The skills and attributes necessary to be an entrepreneur are celebrated in the media every day — vision, risk taking, grit. But few mention the skills needed to be a good employee. I possess almost none of them. People assume, because I’m an entrepreneur, I have extraordinary talents too big for a company. The truth, about 90+% of entrepreneurs, is we start companies, not because we’re so skilled, but because we don’t have the skills to be an effective employee. On a risk-adjusted basis, being an employee for a good/great firm is more rewarding than being an entrepreneur. Again, something not discussed in a media obsessed with “innovators.”

Some of those attributes:

1. Being a grownup. Yeah, it sucks to be a grownup and do things you may not want to do or may not make sense. Commuting to and from work at the exact apex of traffic congestion, and going to meetings that have no relevance to your job, makes no sense. But they’re paying you, and hopefully covering the cost to have that mole removed. Being an adult is about recognizing it’s not all about you.

Working for yourself, everything you do is mostly for you. At the time, your actions make sense, as you’re in charge. Yesterday, we came into the office to find corporate calendars on our desks with inspirational quotes for each month. In January, we’re to “Discover, Learn & Grow.” Good to know. I believe posting inspirational quotes in the workplace qualifies as employee abuse. Writing about it helps.

2. Civility. Because I’m an entrepreneur and usually the guy in charge, people have romanticized my candor as vision and leadership. However, this mix of anger, honesty, and feedback wouldn’t fly as an employee, since there’s a difference between being right and being effective. Employees must navigate the two and realize they are part of a team, and need to be supportive of one another. Show me an asshole in a small- to medium-sized firm — that’s usually the guy or gal who runs the place. As a firm gets bigger, the top person can’t be a jerk, as this “radical candor” doesn’t scale well. Small firms thrive on 6–12 A players working their asses off who are intolerably impatient. Big firms scale with hundreds or thousands of well-mannered B+ players.

3. Secure with yourself. Working for other people means living in the unknown. You often find yourself unable to interpret the verbal or nonverbal cues, or your review for that matter. You’re not sure what the people who can shape your economic well-being have planned, or not planned, for you. Right out of college, I was deeply insecure (now I’m just insecure), and every time people went into a conference room I assumed they were talking about me. It’s not vision, but insecurity that led me to entrepreneurship.

Technically, I was an employee of NYU for 15 years. I’m now classified as an adjunct, since my employer is weird about me working at two places (understandable). The coolest thing about my new adjunct status is I’m part of a union.

“Union gives strength to the humble.”
— Publilius Syrus

Being a card-carrying member of the ACT-UAW Local 7902 makes me feel more American, masculine, and less self-conscious when I whine about income inequality or the decline of the middle class. Union membership and minimum wage are decent proxies for the health of the middle class. All three have endured the mother of all shit-kickings the last 30 years. Of course, not all unions are noble. Tenure is a form of a union/guild that has institutionalized enormously expensive incompetence, whose cost is transferred to young people in the form of record levels of student debt. But that’s another post.

My relationship with NYU, generally speaking: I teach a mess/hundreds of kids and speak at events. In exchange they put up with me. Every 3–4 years a new department chair or administrator asks me to teach more, changes my status, or does something to piss me off. I threaten to go to Wharton or Cornell Tech, and I mostly get what I want. If I sound like a diva or a pain in the ass, trust your instincts. I don’t act like an employee at Stern, but a free agent, and it frustrates them. My star is burning bright right now — I’m good at teaching and strengthen the Stern brand, so they tolerate me. But when my value begins to wane (and it’s only a matter of time), they’ll drop me like second-period French. I would.

Now, as an employee of Gartner, I endure a fraction of the BS as most employees, and am more zen about it. I don’t know if they’re scared of me, have no idea what to do with me, or just don’t give a damn … but they generally leave me alone and are supportive. It’s strange being an employee, with no direct reports in the company you founded … discovering, like everyone else, via email what the firm has planned. I’m floating in space a bit. A nice shiny suit, people impressed, a nice view (i.e., success), but not tethered to the mother ship anymore. The insecurity setting in again. Do I add value? What am I doing here? Do they like me? Floating.

Namath

The most rewarding part of my job is when young people who trust me, seek counsel about their next move or other work matters. At this age, some of the kids, as I call them, become your adult kids, and you become concerned about their well-being. It’s rewarding, as it scratches a maternal/paternal itch we have as we get older.

I’m Joe Namath dropping in on the Jets practice. Everyone is respectful of what I’ve built and wants to meet or speak to me. However, worried I’ll soon be drunk Joe Namath, where everyone is trying to figure out a polite (least awkward) way of telling me to leave the building. It’s coming. Until then, I’m in their employ.

Life is so rich,

Comments

1 Comments

  1. Brian Reynolds says:

    Reading this on the occasion of the repost in Oct. ’21. Having only discovered you in the last year it’s fun to look into the past and see that the Galloway Brand has been consistent for a fairly long while. Keep up the good work.
    -B.

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