“The Four” Rating: 9/10
Summary
“For all that’s been written about the Four over the last two decades, no one has captured their power and staggering success as insightfully as Scott Galloway.
Instead of buying the myths these companies broadcast, Galloway asks fundamental questions: How did the Four infiltrate our lives so completely that they’re almost impossible to avoid (or boycott)? Why does the stock market forgive them for sins that would destroy other firms? And as they race to become the world’s first trillion-dollar company, can anyone challenge them?”
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Notes
Introduction
To grasp the choices that ushered in the Four is to understand business and value creation in the digital age. In the first half of this book we’ll examine each horseman and deconstruct their strategies and the lessons business leaders can draw from them. In the second part of the book, we’ll identify and set aside the mythology the Four allowed to flourish around the origins of their competitive advantage. Then we’ll explore a new model for understanding how these companies exploit our basest instincts for growth and profitability, and show how the Four defend their markets with analog moats: real-world infrastructure designed to blunt attacks from potential competitors.
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education. The pillars of a business school education—which (remarkably) does accelerate students’ average salaries from $70,000 (applicants) to $110,000 plus (graduates) in just twenty-four months—are Finance, Marketing, Operations, and Management. This curriculum takes up students’ entire first year, and the skills learned serve them well the rest of their professional lives. The second year of business school is mostly a waste: elective (that is, irrelevant) courses that fulfill the teaching requirements of tenured faculty and enable the kids to drink beer and travel to gain fascinating (worthless) insight into “Doing Business in Chile,” a real course at Stern that gives students credits toward graduation.
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I believe the business fundamentals of the first year need to be supplemented with similar insights into how these skills are applied in a modern economy. The pillars of the second year should be a study of the Four and the sectors they operate in (search, social, brand, and retail). To better understand these firms, the instincts they tap into, and their intersection between technology and stakeholder value is to gain insight into modern-day business, our world, and ourselves.
The Four – On Amazon
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FORTY-FOUR PERCENT OF U.S. HOUSEHOLDS have a gun, and 52 percent have Amazon Prime.1 Wealthy households are more likely to have Amazon Prime than a landline phone.2 Half of all online growth and 21 percent of retail growth in the United States in 2016 could be attributed to Amazon.3,4,5 When in a brick-and-mortar store, one in four consumers check user reviews on Amazon before purchasing.6
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Thus a country’s place in the world is correlated with its level of consumer demand and production. After 9/11, President George W. Bush’s advice to a grieving nation was to “go down to Disney World in Florida, take your families and enjoy life the way we want it to be enjoyed.”14 Consumption has taken the place of shared sacrifice during times of war and economic malaise. The nation needs you to keep buying more stuff.
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Few industries have created more wealth by tapping into our consuming selves than retail. Of the four hundred wealthiest people in the world (excluding those who inherited wealth or are in finance) more names on the list are in retail than even technology. Armancio Ortega, the scion of Zara, is the wealthiest man in Europe.15 Number three, Bernard Arnault of LVMH, who may be thought of as the father of modern luxury, owns and operates 3,300-plus stores—more than Home Depot.
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The retailer that truly defined the specialty retail era was The Gap. Rather than spending money on advertising, The Gap invested in store experience, becoming the first lifestyle brand. You felt cool shopping at The Gap, while buying a Pottery Barn couch gave a generation of Americans the sense that they had “arrived.” Specialty retailers recognized that even shopping bags offered a self-expressive benefit—if you carried Williams-Sonoma, you were cool, enjoyed the finer things in life, and had a passion for cooking.
Note: Evolution of RetailThe corner store (Mom and pops)The department store (Selfridges, Macy’s, Bloomingdales)The mall (Shorthills) The big box (Walmart, Kmart)The specialty store (Whole Foods, Gap)The ecommerce opportunity (Amazon)
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“internet” during the nineties and into the noughts was half that. E-commerce in 1995 needed to be prey you recognized easily and could kill and take back to the cave with little loss of value or risk that you accidently brought a plant back that would poison the clan. Bezos decided this animal was . . . books.
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showed up, willing to browse, weigh options, and take their time. Bezos knew he could migrate to things people weren’t used to buying online yet, like CDs and DVDs. Foreshadowing Amazon’s threat to all things good in our society, Susan Boyle’s CD I Dreamed a Dream set sales records on the platform.
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companies, to resellers agreeing to run ads on their own websites. He drew more and more partners to Amazon. Bezos broke out of the narrow world of books and DVDs and into . . . everything. This kind of experimentation and aggression is what the military calls the OODA loop: “observe, orient, decide, and act.” By acting quickly and decisively, you force the enemy—in this case, other retailers—to respond to your last maneuver as you’re entering the next one. In Amazon’s case, this was done with a ruthless focus on the consumer.
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existence, traditional retail CEOs were apt to remind people that e-commerce only accounted for 1, 2, 3, 4, 5, 6 . . . percent of retail. There was never a concerted effort to respond to the threat until Amazon had enormous fangs and unlimited capital—it was too late.
Note: Yes, you have to protect your margin. But you also have to see where the biggest growth is as well.
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Fast-forward to 2016—U.S. retail grew 4 percent, and Amazon Prime grew 40 percent plus.32,33 The internet is the fastest-growing channel in the largest economy in the world, and Amazon is capturing the majority of that growth.34 In the all-important holiday season (November and December 2016), Amazon captured 38 percent of online sales. The next nine largest online players captured 20 percent combined.35 In 2016, Amazon was considered America’s most reputable firm.36
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Traditionally, stocks in the same sector trade sympathetically—in lockstep with one another. No more. The equity markets now believe that what’s good for Amazon is bad for retail, and vice versa.
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days, and then treat the whole disaster as a speed bump. Now that is patient capital. If any other Fortune 500 company—be it HP, Unilever, or Microsoft—launched a phone that proved DOA, their stock would be off 20 percent plus, as Amazon’s stock was in 2014.45 But as shareholders screamed, the CEOs of those other companies would blink and order a company-wide retreat and pull in its horns. Not Amazon. Why? Because if you have enough chips and can play until sunrise, you’ll eventually get blackjack. This cuts to Amazon’s core competence: storytelling.
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Amazon’s revolutionary timeline of capital allocation is what has been preached for generations in business school—total disregard for the short-term needs of investors in pursuit of long-term goals. A company that does this is as rare as a young adult who skips prom to study.
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Amazon business thinking: If we can borrow money at historically low rates, why don’t we invest that money in extraordinarily expensive control delivery systems? That way we secure an impregnable position in retail and asphyxiate our competitors. Then we can get really big, fast.
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Shrewdly and publicly, Mr. Bezos bifurcates Amazon’s risk taking into two types: 1) Those you can’t walk back from (“This is the future of the company”), and 2) Those you can (“This isn’t working, we’re out of here”).50 Bezos’s view is that it’s key to Amazon’s investment strategy to take on many Type 2 experiments—including a flying warehouse or systems that protect drones from bow and arrow. They’ve filed patents for both. Type 2 investments are cheap, because they likely will be killed before they waste too much money, and they pay big dividends in image building as a leading-edge company.
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Amazon demonstrates real discipline around not ramping investment until they know something is working. For all the hype over the last three years about Amazon’s entry into brick-and-mortar retail, the sum of their efforts is around two dozen stores. They haven’t found a format they feel they can scale.
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Bezos, like any great leader, has the ability to explain a crazy idea in a way that makes it seem less crazy but practical. Wait, that’s obvious—how did we not think of that? The really crazy shit isn’t stupid, it’s “bold.” Yeah, a floating warehouse sounds crazy the first time you hear of it. Now, ponder the cost of leasing and running a traditional terrestrial warehouse. What are its biggest expenses? Proximity and rent, respectively. Now, think again about a floating warehouse. Not so crazy, right?
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My nightmare job is the “invisible until you fuck up” position. These jobs are everywhere: IT, corporate treasurer, auditor, air traffic controller, nuclear power plant operator, county elevator inspector, TSA officer. You’ll never be famous, but you have a small, and terrifying, chance of being infamous. CEOs of successful old-economy firms have a similar bias—they are “rich until they fuck up.”
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respectively. History favors the bold. Compensation favors the meek. As a Fortune 500 company CEO, you’re better off taking the path often traveled and staying the course. Big companies may have more assets to innovate with, but they rarely take big risks or innovate at the cost of cannibalizing a current business. Neither would they chance alienating suppliers or investors. They play not to lose, and shareholders reward them for it—until those shareholders walk and buy Amazon stock. Most boards ask management: “How can we build the greatest advantage for the least amount of capital/investment?” Amazon reverses the question: “What can we do that gives us an advantage that’s hugely expensive, and that no one else can afford?”
Note: How can we invest in capital to create a deep enough moat around our business.
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In 2015, Amazon spent $7 billion on shipping fees, a net shipping loss of $5 billion, and overall profits of $2.4 billion.52 Crazy, no? No. Amazon is going underwater with the world’s largest oxygen tank, forcing other retailers to follow it, match its prices, and deal with changed customer delivery expectations. The difference is other retailers have just the air in their lungs and are drowning. Amazon will surface and have the ocean of retail largely to itself.
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“Failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment.”53
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integrate both. Amazon aims to be that company. The next retail age will be coined the “multichannel era”—a time when integration across web, social, and brick and mortar is crucial to success. Everything points to Amazon dominating that era as well.
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in: diapers. In 2005, Lore started diapers.com and launched several other categories for parents under the corporate umbrella Quidsi.78 When Bezos toured the firm, he must have felt at home, recognizing the warehouses close to urban centers staffed by Kiva Robots standing behind a site run by algorithms. Bezos fell hard and in 2011 paid $545 million for Quidsi.79 For half a billion dollars Amazon bought momentum in key categories, got some great human capital, and took a competitor off the market. But Lore didn’t want to work for Jeff Bezos. He wanted to be Jeff Bezos. Twenty-four months later he bolted and, with his new wealth, started Jet.com. This must have felt like a half-a-billion-dollar divorce settlement to your husband, who then moves into the house next door and starts fucking your friends. The ex
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The consumer always wins, and she has a choice: Door 1, a great e-commerce experience; Door 2, a great in-store experience; or Door 3, a great site and store experience connected by her mobile phone. The ability to reserve something on her phone, pay later on mobile or desktop, pick it up in store, and never have to wait in a checkout line is damn near unbeatable. Sephora, Home Depot, and department stores already have this kind of multichannel integration.
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It’s clear that Amazon wants to drive commerce through Alexa, as they are offering a lower price, on many products, if ordered via voice vs. click. In key categories like batteries, Alexa will suggest Amazon Basics, their private label, and play dumb about other choices (“Sorry, that’s all I found!”) when there are several other brands on amazon.com. Though Amazon carries several brands of batteries, its private label, Amazon Basics, accounts for a third of all battery sales online.
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Amazon’s search franchise may rival Google’s in value someday, as the people looking to spend start their search at Amazon. But the real victim is traditional retail, whose only growth channel, online, is sunsetting at the hands of Amazon. Each year, Google and brand.coms lose product search volume to Amazon (6 to 12 percent for retailers for 2015 to 2016). Conventional thinking is that consumers are researching on brand sites, then going to Amazon to buy. In reality, 55 percent of product searches start on Amazon (vs. 28 percent on search engines such as Google).108 This shifts the power, and margin, from Google and retailers to Amazon.
The Four – On Apple
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They sided with Apple, as the firm embodies their own maverick, antiestablishment, progressive ideals—and conveniently ignored the fact that Steve Jobs gave nothing to charity, almost exclusively hired middle-aged white guys, and was an awful person. It didn’t matter, because Apple is cool. Even more, Apple is an innovator.
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Historically, the masses haven’t had access to luxury, so they journeyed to churches and saw chalices encrusted in jewels, gleaming chandeliers, the most beautiful art in the world. They started to associate the combined aesthetic overwhelm from superior artisanship with the presence of God. This is the cornerstone of luxury. Thanks to the Industrial Revolution and the rise of general prosperity, luxury, in the twentieth century, came within reach of hundreds of millions, even billions, of people.
Note: Luxury is getting closer to God. This is the root of luxury
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More writers have written more good articles on Apple than any other company, yet most fail to see it as a luxury brand. I’ve been advising luxury brands for twenty-five years and believe these firms, from Porsche to Prada, share five key attributes: an iconic founder, artisanship, vertical integration, global reach, and a premium price. Let’s dig into each of these more deeply.
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“Attractive things work better,” says Don Norman, vice president of advanced technology at Apple from 1993 to 1998. “When you wash and wax a car, it drives better, doesn’t it? Or at least it feels like it does.”24
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The store, Drexler decided, is where he would build brand equity. So, while Gap’s key rival, Levi’s, continued to create the best TV commercials, Drexler built the best stores. The result? From 1997 to 2005 The Gap more than tripled in revenue, from $6.5 billion to $16.0 billion, while Levi Strauss & Co. sank from $6.9 billion to $4.1 billion.26,27,28,29 Brand building moved from the airwaves to the physical world, and Levi’s got caught flat-footed. I believe the world would be a better place had LS&Co. registered Apple-like success, as the Haas family (who own LS&Co.) is what you hope all business owners would be: modest, committed to the community, and generous.
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Apple’s stores sell nearly $5,000 per square foot. Number 2 is a convenience store, which lags by 50 percent.32 It wasn’t the iPhone, but the Apple Store, that defined Apple’s success.
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won’t be spending on other things. The most likely to tank under the Apple onslaught are the mid-level luxury companies, the ones selling stuff for less than $1,000 (J.Crew, Michael Kors, Swatch, and others). Their customers count their money—and young consumers care more about their phones and coffee than clothes. So, where do limited discretionary dollars go? An old phone with a cracked spiderweb screen limits their options for mating far more than last year’s jacket or purse. They might scrimp on the $78 patterned Hedley Hoodie at Abercrombie & Fitch, the $298 quilted-leather shoulder bag at Michael Kors, or the Kate Spade Luna Drive Willow Satchel, which goes for $498.
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luxury brand that other tech firms cannot. As early as the Macintosh, Apple realized it wanted off the tech train and moved away from the ethos of offering more each year for less money (Moore’s Law). Apple’s business today is to sell to people goods, services, and emotions—being closer to God and being more attractive. Apple delivers those factors via semiconductor and display technology, powers them with electricity, and wraps them in luxury.
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So, Apple, recognizing that ladders will keep getting taller, opted for more analog (time/capital expensive) moats. Google and Samsung are both coming for Apple. But they are more likely to produce a better phone than to replicate the romance, connection, and general awesomeness of Apple’s stores.
The Four – On Facebook
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Powered by its mobile app, Facebook is now the world’s biggest seller of display advertising—an extraordinary achievement, given Google’s brilliant theft of advertising revenues from traditional media just a few years ago.
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Relationships make us happier. The legendary Grant Study at Harvard Medical School has borne this out. The study—the largest longitudinal study of human beings to date—began tracking 268 Harvard male sophomores between 1938 and 1944. In an effort to determine what factors contribute most strongly to “human flourishing,” the study followed these men for seventy-five years, measuring an astonishing range of psychological, anthropological, and physical traits—from personality type to IQ to drinking habits to family relationships to “hanging length of his scrotum.”10 The study found that the depth and meaningfulness of a person’s relationships is the strongest indicator of level of happiness. Seventy-five years and $20 million in research funds, to arrive at a three-word conclusion: “Happiness is love.” Love is a function of intimacy and the depth and number of interactions we have with people.
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Facebook analyzes any resulting behavioral changes on the network whenever a customer switches his or her relationship information. As the following graph shows, single people communicate more on Facebook. It’s part of the preening of courtship. But once they enter a relationship, communication plummets. The Facebook machine tracks this and runs it through a process called “sentiment analysis”—categorizing positive and negative opinions, in words and photos, of each person’s level of happiness. And as you might expect, coupling significantly increases happiness (though there appears to be a dip following the initial euphoria).13
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It’s easy to be skeptical about Facebook, especially with all of the self-promotion, fake news, and groupthink spread on the platform. But it’s also hard to deny it nurtures relationships, even love. And there is evidence that these connections make us happier.
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Newspapers can reach millions, and many more if you consider how their stories pop up on the three platforms. But they gain almost no intelligence from this contact. Thus, while the three dominant platforms—search, commerce, and social—know me upside down, the New York Times has only skeletal details, starting with my address and zip code. It might know I lived in California most of my life. But maybe not. It might try to keep track of my vacation schedule. It sees the stories I read and share, but it’s an algorithm targeting a cohort, not a feed-based platform designed specifically for me.
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global mobile ad spend, and their share grows every day. In 2016, the two firms accounted for 103 percent of all digital media revenue growth.27 This means that, sans Facebook and Google, digital media now joins newspapers, radio, and broadcast TV as sectors that are in decline. Head Fake
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Virtual reality is the mother of all head fakes. The most powerful force in the universe is regression to the mean. Everyone dies, and gets it wrong along the way. Mark Zuckerberg has been (very) right about a lot of things and was due to make an enormously bad call. And he has. Technology firms do not (yet) have the skills to shape people’s decisions on what to wear in public. People care (a lot) about their looks. Most don’t want to look like they’ve never kissed a girl. Remember Google Glass? It got people beaten up. The bottom line is everyone wearing a VR headset looks ridiculous. VR will be to Zuck what Gallipoli was to Churchill, a huge failure that shows he can
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Facebook will raise its hand and say, “No more hate postings!” This way, similar to the rest of the Four, company executives can wrap themselves in a progressive blanket to mask rapacious, conservative, tax-avoiding, and job-destroying behavior that feels more Darwin than (Elizabeth) Warren.
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Fake news stories are a far greater threat to our democracy than a few whack jobs wearing white hoods. But fake stories are part of a thriving business. Getting rid of them would force Facebook to accept responsibility as the editor of the world’s most (or second most) influential media company.
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A Facebook spokesperson, in the face of the controversy, said, “We cannot become arbiters of truth ourselves.”35 Well, you sure as hell can try. If Facebook is by far the largest social networking site, reaching 67 percent of U.S. adults,36 and if more us, each day, are getting our news from it, then Facebook has become, de facto, the largest news media firm in the world. The question is, does news media have a greater responsibility to pursue, and police, the truth? Isn’t that the point of news media?
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We tend to think of social media as neutral—they’re just serving us stuff. We are autonomous, thinking individuals and can discern truth from falsehood. We can choose what to believe or not. We can choose how to interact. But research shows that what we click is driven by deeply subconscious processes. Physiologist Benjamin Libet used EEG to show that activity in the brain’s motor cortex can be detected 300 milliseconds before a person feels they have decided to move.38 We click on impulse rather than forethought.
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The greatest threats to modern civilization have come from people and movements who had one thing in common: controlling and perverting the media to their own devices in the absence of a fourth estate that was protected from intimidation and expected to pursue the truth. A disturbing aspect of today’s media duopoly, Facebook and Google, is their “Don’t call us media, we’re a platform” stance. This abdication from social responsibility, enabling authoritarians and hostile actors to deftly use fake news, risks that the next big medium may, again, be cave walls.
The Four – On Google
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Religion has brought, and still brings, psychological benefits if you’re the right candidate. Church, mosque, and temple-goers score higher on optimism and cooperation with one another, which are key paths to prosperity.1 Believers are more likely to survive than their atheist friends.2 However, religion in mature economies is dying. Over the last twenty years in the United States, the number of people who claim no religious affiliation has increased by 25 million. The strongest signal for disbelief is internet usage, accounting for more than a quarter of America’s drift from religion.3 Access to information and education has done a number on belief. People with graduate degrees are less likely to turn to religion than high school graduates.4,5
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at Google the defining factors were the elegantly simple homepage and the fact that advertisers weren’t allowed to influence search results (organic search). Neither feature may seem important two decades later, but at the time, they were a revelation. They’ve gone a long way to creating trust. Google’s colorful, uncluttered home page said to even the most neophyte web surfer: “Go for it. Type in anything you want to know. There’s no trick involved and no expertise required. We’ll take care of everything.”
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If you want regular coverage in Vogue, then you need to advertise. It’s no accident Marissa Mayer got a feature in the magazine, photographed by a top fashion photographer, the same year Yahoo sponsored Vogue’s Met Ball. Yahoo shareholders paid $3 million so Ms. Mayer could appear in Vogue.14 Google, in contrast, keeps that homepage inviolate: it’s reserved for search alone, plus the public-service animation of the logo, the Google Doodles. No amount of advertiser money can buy space on the Google homepage.
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In Q3 2016 results, Google had a 42 percent increase in paid clicks. However, the revenue captured (cost per click) declined 11 percent. Analysts mistook this as a negative. Declining prices are typically a reflection of loss of power in the marketplace, as no firm ever willingly drops prices. However, what we missed is that Google was able to grow revenues 23 percent that year and—here’s the key part—lower cost to advertisers by 11 percent.15 Whether you’re the New York Times or Clear Channel Outdoor, a competitor lowered its prices 11 percent. And word is it’s great at what it does and isn’t desperate at all. What if BMW was able to improve their cars dramatically each year while lowering prices 11 percent annually? The rest of the auto industry would have trouble keeping up. And, yes, the rest of the media industry, sans Facebook, is having trouble keeping up with Google.
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Bezos turned the Post toward the web with a vengeance. Its online traffic doubled in three years, leapfrogging the Times. And the Post developed a content management system that it’s now leasing to other news outlets. According to the Columbia Journalism Review, this CMS could generate $100 million a year.24 WaPo is benefitting from the same blessing as Amazon: cheap capital and the confidence to invest it aggressively, and deftly, for the long term, as if they were eighteen again. My fellow directors at the Times Company had no stomach for this type of agita. It was a lot easier, they concluded long before I came, to confront the online challenge by acquiring an online player and extending its model to the web.
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Our sales team was average, and the business model was dying. The one thing we still had of value was our content—and the professionals who generate it. Yet, instead of making that content scarce—shutting off and suing any digital platform that repurposed our content—we decided that we should try to drive more traffic by prostituting our content . . . everywhere.
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This was the equivalent of Hermès deciding to distribute Birkin bags through walmart.com so hermes.com could get more traffic. We committed one of the great missteps in modern business history. Overnight we took a luxury brand, spread it through sewer-like distribution, and let the sewer owner charge less for it than we were charging in our own store, through subscriptions.
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It took a while, but in February 2011, Google finally tired of the antics of content farms, including About.com, and it swatted them away. The search giant performed a “Panda algorithm update,” which exiled much of the content farm traffic, and business, into Outer Oblivion. With just one tweak, Google pummeled the Times, diverting millions in online revenue to other sites and cutting About’s value dramatically. It appears that, unlike us, Google was making business decisions based on the long-term value of the company, unafraid of our reaction. About was worth $1 billion before the update, and less than half of that the next day. A year later, the Times unloaded the content farm for $300 million, 25 percent less than what it had paid for it. I’d venture that “angering” About.com’s parent, the Times Company, wasn’t a factor in Google’s decision to do what was best for Google shareholders long term.
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the Treasury Alexander Hamilton issued a report calling for the procurement of European industrial technology through “proper provision and due pains”—even as it blithely acknowledged that British law prohibited such export.1 The Treasury offered bounties to European artisans willing to come to the United States, in direct violation of emigration laws in their home countries. U.S. patent law was modified in 1793 to limit patent protection to U.S. citizens, thus depriving European owners of this intellectual property any legal recourse against this theft.
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behemoth, with its own technological advantages and markets to protect. And while we celebrate Alexander Hamilton on Broadway, our laws repudiate his casual attitude toward intellectual property. The United States is now the great proponent of patent and trademark protections, and you can’t go wrong, as a U.S. politician, criticizing China for stealing U.S. technology. And not without cause, as China, eager to achieve horseman status on the world stage, is sending its own Francis Lowells over, in person and through cyberspace, to grab whatever can shorten the path to prosperity. Meanwhile, after decades of stealing the world’s patents, China now feels strong enough in IP that it now has seen the light and is becoming a vocal advocate of patent law.
Post-Analysis
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Facebook built its foundation on a second lie, repeated thousands of times in early meetings between Facebook’s army of sales reps and the world’s largest consumer brands: “Build big communities and you will own them.” Hundreds of brands invested hundreds of millions on Facebook to aggregate enormous branded communities hosted by Facebook. And by urging consumers to “like” their brands, they gave Facebook an inordinate amount of free advertising. After brands built this expensive house, and were ready to move in, Facebook barked, “Just kidding, those fans aren’t really yours; you need to rent them.” The organic reach of a brand’s content—percentage of posts from a brand received in a fan’s feed—fell from 100 percent to single digits. Now, if a brand wants to reach its community, it must advertise on—that is, pay—Facebook. This is similar to building a house and having the county inspector show up as you’re putting on the finishing touches. As she changes the locks she informs you, “You have to rent this from us.” A mess of big companies thought they were going to be Facebook owners and ended up Facebook renters. Nike paid Facebook to build its community, but now less than 2 percent of Nike’s posts reach that community—unless, that is, they advertise on Facebook.11 If Nike doesn’t like it, tough shit, they can go cry to the community on the world’s other two-billion-member social network . . . oh wait. Similar to someone dating a person much hotter than them, brands complained and took the abuse.
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As Paul Newman explained in The Sting, the key to a great con is that the victim never realizes he was conned—indeed, he believes he is about to be a big winner right up until the last moment. Newspapers still feel that the future happened to them versus what really happened: they were Googled, hard. And where Google didn’t molest them, their own stupidity—not buying eBay when it was offered to them on a silver platter, not snapping up Craigslist when it was still a start-up, and keeping their top talent on the print side instead of moving them to the web—doomed them. Had they made the right decision on just half of the opportunities presented to them by cyberspace, most would still be around.
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The Four Horsemen are vertical. Few brands have been able to maintain an aspirational positioning without controlling a large portion of their distribution. Samsung is never going to be that cool, not if it continues to depend on AT&T, Verizon, and Best Buy stores. Remember where you used to go get your Apple computer fixed fifteen years ago? There was a guy who looked like he’d never kissed a girl but was a pro at fantasy adventure games. He stood at a counter in front of piles of gutted computer parts, next to stacks of Macworld magazine. Apple sensed the shift and put people in blue shirts, titled them “genius,” and set them in places that brought Apple products to life—spaces whose materials reinforced how special and elegant Apple products are. Apple stores today are intentionally beautiful; they remind you that Apple, and those who purchase its products, “get it.”
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The seventh factor in the T Algorithm is a company’s ability to attract top talent. This requires being perceived by likely job candidates as a career accelerant. The war for tech-enabled talent has reached a fever pitch. A horseman’s ability to attract and retain the best employees is the number one issue for all four firms. Their ability to manage their reputations, not only among young consumers, but also among
Note: True and overlooked for any company. What work do you have to do to attract top talent?
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The professional counterpart to Facebook, LinkedIn has some important and tangible advantages compared with its big social counterpart. Facebook gets the bulk of its revenues from one source: advertising. By comparison, LinkedIn has three distinct sources of revenues: it sells advertising on its site; charges recruiters for upgraded access to candidates; and sells users premium subscriptions with benefits for job hunting and business development. That’s balance. These subscription revenue sources make LinkedIn unique not only with respect to Facebook, but every other major social media player.
On How To Be Successful
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careers. Be the gal who comes up with practical and bat-shit crazy ideas worth discussing and trying. Play offense: for every four things you’re asked to do, offer one deliverable or idea that was not asked for.
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Another standout skill is ownership. Be more obsessed with the details than anybody on your team and what needs to get done, if, when, and how. Assume nothing will happen unless you are all over everybody and everything, as it likely won’t. Be an owner, in every sense of the word—your task, your project, your business. You own it.
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Go to College Yeah, I know . . . no shit. Still, it bears repeating. If you want to be a white-collar success in the digital age, the clearest signal is attendance at a prestigious undergraduate school. And the distinction matters.
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You need a medium to spread your awesomeness, as the path to under-compensation is doing good work that never gets explicitly pimped or attached to you. Yes, it’s unseemly, and your work and achievements should speak for themselves. They don’t. Figure out how you are going to reach 10, 1,000, 10,000 people who otherwise wouldn’t have been exposed to your work and awesomeness. The good news: social media was built for this. The bad news: it’s hand-to-hand combat. I have 58,000 Twitter followers, which is good but not great, and it’s taken me six years, fifteen minutes a day, to get there. Our weekly “Winners & Losers” videos now get 400,000-plus views a week. Our first, 138 weeks ago, got 785 views. Btw, it’s not me and my nine-year-old in the kitchen with a camcorder. Animators, editors, researchers, a studio, and substantial media (that is, we buy distribution/views) have been constant investments over the last 2.5 years so we could become an overnight success.
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Equity and the Plan Try to get equity as part of compensation (if you don’t think equity in your employer is going to be valuable, find a new employer), and increase that ratio (ideally) to 10 percent and 20 percent plus of your compensation by the time you are thirty and forty, respectively. If there are no equity opportunities at your company, you need to create your own by maxing out all tax-advantaged accounts (401k and others) and charting a path to $1–3–5 million, based on your income and spend levels. Time goes strangely slow, and fast.
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The happiest people I know are ones who live beneath their means, as they don’t have the constant ringing in their ears of economic anxiety. Note: I recognize that for many or most middle-class families this may just not be feasible. Nobody becomes superwealthy through paychecks—it takes equity in growing assets to create real wealth. Just compare the net worth of CEOs to the founders of their companies. Cash compensation will improve your lifestyle, but not your wealth—it isn’t enough, and saving is counterintuitive and just plain hard. High-income individuals tend to flock together, and what we see, we covet. It’s
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The definition of rich is when your passive income exceeds your nut (what you need to live). My dad, collecting $45,000 in social security and cash flow from investments, is rich, as he spends $40,000/year. I have several friends in finance who make seven figures who are not rich, as the moment they stop working, they are shit out of luck. The path to rich(es) is a path of living below your means and investing in income-producing assets. Rich is more a function of discipline than how much you make.
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The strategy is serial monogamy. Find a good employer where you can learn new skills, garner senior-level sponsorship (somebody who will fight for you), get equity/forced savings, and fully dedicate yourself to that company for three to five years. Don’t burn mental energy on your external options unless your current situation is awful. Btw, make sure your definition of awful is shared by trusted mentors after describing the “injustices” you are enduring. You should avoid the appearance of actively looking, but be always open to a conversation. At a sensible juncture (don’t start looking when you’ve just started a demanding new position at your current employer, for example) return headhunter calls, go on some interviews, ask others for help or introductions. Consider if you would benefit from additional training.
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The most impressive students in my class are the young men and women who have served their country. We benefit (hugely) from their loyalty to our country, but I don’t think we (the United States) pay them their due. I believe it’s a bad trade for them. Be loyal to people. People transcend corporations, and people, unlike corporations, value loyalty. Good leaders know they are only as good as the team standing behind them—and once they have forged a bond of trust with someone, will do whatever it takes to keep that person happy and on their team. If
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Take responsibility for your own career, and manage it. People will tell you to “follow your passion.” This, again, is bullshit. I would like to be quarterback for the New York Jets. I’m tall, have a good arm, decent leadership skills, and would enjoy owning car dealerships after my knees go. However, I have marginal athletic ability—learned this fast at UCLA. People who tell you to follow your passion are already rich. Don’t follow your passion, follow your talent. Determine what you are good at (early), and commit to becoming great at it. You don’t have to love it, just don’t hate it. If practice takes you from good to great, the recognition and compensation you will command will make you start to love it. And, ultimately, you will be able to shape your career and your specialty to focus on the aspects you enjoy the most.
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If you leave, keep in mind people remember more about how you leave than what you did while there. No matter the situation, be gracious.
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People who complain about others and how they got screwed are, well, losers.
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When you have a big victory, pull in your horns and be risk avoidant for a period. Regression to the mean is a powerful force, and the good luck (and a lot of it is luck) will cut the other way at some point. So, many entrepreneurs who make a lot of money on one venture turn around and lose a lot of it because they believe the victory was due to their genius and they should go bigger. At the same time, when beaten down, realize you are not as stupid as the world, at that moment, seems to think you are. When beaned in the face, the key is to get up, dust off, and swing harder. I’ve been hit in the face several times, and kept getting up. Also, a couple times, I was looking at private jets (during economic booms/bubbles), only to have the universe remind me I wasn’t that smart. However, I’ve achieved Mosaic status on JetBlue.
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Look at the resumes of the senior executives—if they mostly came from sales, then the company values sales. If they are operational people, that’s the heart of the firm, whatever it says in the ads.
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