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[00:00:00]

All right, here we go. That's right, Neil Armstrong stepped onto the lunar surface, the Olympic flame is catalyses, lit, sparks up for the first Olympic Games. Christopher Columbus stumbles upon America or Florida or Cuba or wherever the hell it was. These are the initial moments and moments that have changed history. This is not one of those.

[00:00:39]

So what if you threw a podcast and the only person that showed up was a pandemic?

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My name is Scott Galloway, professor of marketing at NYU Stern School of Business. And this is the inaugural episode.

[00:00:54]

Podcast should show of Prof. G and what a difference seven days make. We had several podcasts in the can upbeat, irreverent, provocative, trying to taxonomies business concepts in today's news interviews Allgier of happiness. And to be blunt, we just didn't know what the fuck to do. This is unusual times. We have approximately two hundred and twelve thousand people have been infected with the new coronavirus. 9000 people have died. What's unusual here is the mortality rates that we're getting are somewhere between point two percent reported in Norway.

[00:01:32]

And for a brief time, the US had the highest, the highest mortality rate at six percent, mostly because we have demonstrated an extraordinary level of incompetence around testing. And the first, if you will, business issue. Taxonomies in the news is simple. You can't manage what you can't measure and that the notion that we're going to be able to attack this without being able to do it. South Korea has done testing 10000 people a day when total tests thus far are somewhere around, believe between 11 and 15000 in the U.S. drive through testing in Germany, which they've had for a while, although we now have drive through testing in Colorado and some parts of New York.

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But the reality is you can't you have to for any issue you want to measure professionally, personally, biologically, you have to be in a position to measure to what you're dealing with. And it's likely the fatality rate will go down substantially as we find, in fact, that the number of cases here in the US is a lot greater than what we think it is. This is going to be this is going to be an unbelievable case study in crisis management and one of my courses at NYU, I want to the sessions of my brand strategy class is all about crisis management.

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And simply put, there are only three things you have to remember in crisis management. One, the top guy or gal has to address the issue. And in this instance, the top guy or gal you would think would be the president. The president is handed off to Michael Pentz, vice president, to distinct of the constant sycophants. She has, I think, done a a decent job of trying to assure the nation that they're that they're doing their best.

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What is really unusual about this communication strategy is they're acting as if it's VE day, not D day. They're giving victory speeches instead of trying to rally us onto a war footing in a sober motivational communication strategy around what needs to be done and to rally us to face the issue. They're acting as if we've won the war and it's created a sense of panic, not only in the markets we're now back to twenty. Seventeen levels was down another week, another thirteen hundred points.

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Today, we're seeing stocks ranging from Simon Properties to Restoration Hardware to Boeing off 60, 70, 80 percent. Big tech holding at about 20 to 30 percent off. But we've seen essentially some of the greatest, the greatest stretches in the bull market over the last several years has wiped out in a matter of days. I do believe that the week in the old leadership of this administration is going to be a victim here. I think that the mortality rate on this administration is approaching 60, 70 percent, meaning the likelihood that this presidency comes to an end at the ballot box this November goes up every day with this poor crisis management.

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So the top guy or gal has to address the issue. That should be Dr. Anthony Fauci, not the vice president or the president. You need to acknowledge the issue. This administration has never acknowledged the issue, and that's a big part of the problem. They've never actually said this is what's going on and this is how serious it is. And that has created a great deal of panic and distress. And then finally and most importantly, you need to overcorrect, you need to overcorrect.

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Tylenol didn't say this is an isolated incident of cyanide being put in a Tylenol bottle. They said we are going to clear all the shelves of every bottle of Tylenol because consumer trust is our greatest and most important asset. The company came back stronger. It has a fantastic reputation. And as a result of that reputation, get some of the greatest margins in the health care and consumer products industry. And it's built a company that is one of the ten most valuable companies in America because they over correct it.

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And we are pretty, pretty fucking far from an overcorrection when it comes to this administration. I would argue that as a father, as a son, as a girlfriend, as a granddaughter, as a boss, as a manager, you want to be known right now is the guy or gal that over? Carax I think there's very little downside to overcorrecting here. Let's all be the person that when we look back on this, say we over overcorrected and overreacted, but that is a much, much better place to be than the boss, the boyfriend, the son, the spouse that under corrected.

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Hello, this is Frasier Crane, and I'm listening, Roz, let's take another listener call, just kidding, it's the dog office hour starts now. Griffin, first question.

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Hi, Professor Galloway. My name's Kyle. I'm a senior in college who's ready to graduate this spring and join the workforce, specifically investment banking. How will this covid-19 epidemic affect job markets, specifically for young workers like me? Well, companies put off hiring over fear of a recession. Thanks for your time. Hi, Kyle.

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Thanks for the question. So typically, investment banks, accounting firms, big consulting firms don't like to rescind offers. If you already have an offer, you don't need to be worried because large institutions don't want to tarnish their brand image by rescinding offers, because, quite frankly, college grads are inexpensive relative to some of the other people they have on payroll. And they want to maintain good relationships with their primary sources or their primary pools of talent, which are world class universities.

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They will likely, I would imagine, coming through this scaled back hiring. There's just no getting around it. It looks like we're entering into a recession. There will be a reduction in hiring. There will be a reduction in competition. That's probably not a terrible thing in the long run, at least at NYU, kids are coming out of school with four or five and six offers investment banking. Just let me do a riff on this. My first and only real job was working for Morgan Stanley right out of UCLA.

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It's a fantastic training ground. I would argue that being investment banking is like being in the Marines in the sense that you're glad you did it in the past tense. Most jobs are usually one of two things, or either very interesting with a lot of stress placed on them, whether that's being an anesthesiologist or a air traffic control person or a litigator or they're somewhat relatively non stressful, but boring, monotonous. Think a security guard or think about a lifeguard who never gets to save anybody.

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But investment banking, I found, was this unique combination of incredibly boring material with a tremendous amount of stress placed on it. I did not like it. It's a great training. I think it's a terrible career, quite frankly, unless you're just fascinated by the markets. But it is a great thing to do right out of school and it makes for a good platform. They're generally good firms. They treat their people well. You're amongst the best and brightest of other 22 year olds who have no idea what they want to do with their lives.

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Why did I go into investment banking? Because my roommate, Gary Gold, wanted desperately to be an investment banker. And I was very competitive with Gary. And despite the fact I knew nothing about investment banking, I decided if he wanted it, I was going to do it. I lied about my grades and got a job with Morgan Stanley, went there, found out I hated it and that I was terrible at it. But that is part of being a young person.

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It's not only finding out what you want to do, but what you don't want to do and decided to go back to business school. But anyway, yes, hiring is going to be down. But if you already have an offer, sit tight. Don't worry, they're not going to rescind the offer. They might delay it. But what a great time to to be a senior in college. The job market's going to go down a bit, but it's wonderful to be twenty two and in the greatest country on earth.

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Congratulations. Next question.

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Hi, Scott. Thank you so much for taking questions. This is in Los Angeles. And my question for you is, for those of us that are currently in self quarantine but blessed to continue providing for our families by working remotely, what is your recommendation as far as structuring our days now with some extra time having to stay at home and not commute? Really appreciate your thoughts. Suggestions helpful as well.

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And stay safe with us. Thanks so much for the call in the thoughtful question. So, yeah, a lot of us, we're going through what, as I would argue, the greatest work from home experiment in the history of mankind. But I think you also want to make it a love from home experiment and a work out from home experiment in the sense that because of the social distancing, we're unable to be around the people we care about. We're unable to touch the people or many of the people we care about.

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But you need to take time to reach out to people digitally and just reinforce your relationships, maybe even spend a little bit more time thinking about the people who are alone and don't have the opportunity to socially distance with their family. So the first is I would make time, additional time for texting, phone calling, reaching out emails with the people in your life that you care about. You might not have as much opportunity to see, at least in the short term.

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I've worked from home a lot because I've always been an entrepreneur. And what I found is useful is, one, you have to create boundaries in the sense that it's very easy to sort of be working all the time. And what I found was more useful to have actual work hours and decide, OK, during work hours I am working and then I take regular breaks. And then at a certain time I close the laptop, I shut down the emails and I try and spend time on myself or with my family, what have you.

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I think it's important some just basic hygiene. Get up and shower, get up, get up and put on real work clothes. I'm not saying necessarily a suit, but get up and maintain a schedule. Also commit to getting outside. On a regular basis, I think one of the advantages of being at home is an opportunity to take walks, really enjoy nature. I would also I think this is true in general, but it's I think it's very important to get out of the house and exercise, because if you're both working, socialising, playing at home, it's the walls are going to close in on you pretty fast.

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I also think about a couple small indulgences and whether it's a cashmere blanket or a bigger TV or finally ordering that a sound system, something that makes the home seem a little bit brighter, lighter, more joyous in the short term.

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But regular work hours, knowing when to stop some hygiene around, showering, putting on clothes, brighten up the place a little bit and enjoy this opportunity to be at home with loved ones and also create a space that's just for work such that your kids don't bother you. I'm doing podcasting from our vacation villa right now and have found it exceptionally challenging. So I have cordoned off a nice, quiet place and have said, all right, this is what this is for, Dad.

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No one comes in here and no one bothers me. When the door is closed, the door is closed as if anyone listens to their dog.

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No, they don't. No, they don't. Next question, Griffin.

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Professor Galloway, this is Bobby from New Orleans, Louisiana. My question to you is, is Facebook's still salvageable? For instance, with the CDC's guidance of social distancing during the coronavirus crisis, couldn't the world's largest social network do something good and leverage its social graph to help inform people of their first, second, third order connections, et cetera, for those people that have tested positive for the virus? What are your thoughts? Thanks. Stay safe and healthy.

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Thank you. Bobby from Louisiana are the CEO of our company. Greg Show of his son Bobby Show is actually at Tulane. I wonder if this is a planted question, but I do know Bobby and that doesn't sound like him. But anyways, that's neither here nor there other Bobby from Louisiana. So first off, Facebook does not have a social companies or legal entities. They're not concerned with your well-being or the condition of your soul. They will not take care of you when you are older.

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It's about the management team. It's about the culture of an organization. And at Facebook, we have what is one of the worst cultures in the history of corporate America, which has resulted in arguably the most dangerous company in the history of all of business. This is a company whose culture is largely set, the DNA, which largely imprinted by a sociopath whose first professional endeavor was a website that evaluated women based on their physical appearance, who screwed over his close friends in college and then royally fucked over his best friend soon after college, and then has gone on to command the algorithms that decide the information and propaganda of a population greater than the Southern Hemisphere.

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Plus India, who denies Antibalas Holocaust deniers and gives platforms to white nationalist people, information to radicalize young men and quite frankly, just doesn't give a fuck.

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And as a result of a dual class structure, you have a board that has become totally neutered and ineffectual. And he has brilliantly engaged a two billion dollar beaird, a two billion dollar lipstick on cancer called Sheryl Sandberg, who runs around the world telling people to lean in as she has negligently allowed her platform to be weaponized by the foreign intelligence arm of a Russian government that paid for ads in rubles that suppress the turnout in key swing districts in Ohio and other swing states, resulting in an illegitimate president that has Putin that has placed people on the Supreme Court who are slowly but surely eroding a woman's right to choose.

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Lean in. This company does not have a soul. One of two things needs to happen. We need to either break this company up or senior executives or this organization need to show up in orange jumpsuits. This organization does not have a soul, nor does any other organization. What it has is a sociopath and his lipstick running around the world doing tremendous damage that results in self cutting depression among teens and a general danger and lack of concern for the Commonwealth.

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Oh, my God. That was a rant. That was a rant. We're out of oxygen. I'm about to have a stroke. So we love your questions. And obviously, office hours isn't going to go very far if you don't submit questions. So please submit your questions and voice memos to office hours at Section four. Again, that's office hours at Section four.

[00:15:14]

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[00:15:31]

That's right, Tommy. John feels different and I like it. It's got better. It feels better. Quality, more interesting design. They're also so confident in their underwear that if you don't love your first pair, you can get a full refund with their best pair you'll ever wear or it's free guarantee.

[00:15:50]

So refresh your drawers or Tommy John and put the spring back in your step this spring. What a lame piece of copy, Tommy John. No adjustment needed. Hurry to Tommy John Dotcom Proff for twenty percent off your first order. That's Tommy John Dotcom profit. Twenty percent of Tommy John Ashcroft here I Jay. We are only endorsing products. We use our love. Are there paying us a shit ton of money. I'm a whore but I'm an expensive whore and that's whore.

[00:16:20]

Where's Tommy John. So if we were to pick who we would want for our first interview, it would be our guests ask about the murder and ask about the motor, is a professor of finance at the NYU Stern School of Business. I was fortunate enough to be named alongside of Aswath, one of the 50 best business professors, and I'm boasting because I'm fundamentally an insecure person in 2012. And then Forbes did took that same ranking and said, who are the 10 best professors in the world of graduate business education?

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And one of us made the cut. The other did not. I asked about the matter and made the cut. And most most academics would argue or would agree that Professor Damodaran is one of the best teachers alive in graduate education. And every year he is recognized as one of the top professors in the world, literally as passionate about teaching. And even more impressive is that he is a very decent, generous man. Every time I've ever asked Aswat to do anything and it's not just me, it's anyone on the faculty at NYU, he says.

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Yeah. So in addition to being literally having written the textbook on valuation, being considered the Dean evaluation and being an exceptionally generous person, he is probably one of a half a dozen people in the world right now that can literally move markets. And I'm not exaggerating when the president says something ridiculously stupid, as he does on a regular basis in the markets, throw up a thousand or two thousand points. Or when Jay Powell says he's cutting interest rates, the markets may move.

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But another individual that can move markets is professor asked what the motor and who when he goes on CNBC and talks about a company being under overvalued, you see movement in that stock. So this is with great joy and pride that we present our first interview, and that is with Professor Aswath, the Motoring. Paswan, how are you? I'm doing well. How are you? Good year. This message finds you are the Sparkasse fans here in San Diego, right?

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Absolutely.

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Love the place at the beach in front of me. So no social distancing. It's a little more tolerable.

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That's good distance thing. So let's bust right into it. Give us give us the state of play. What's your sense of the markets right now? I guess we're down seventeen hundred points. It's March 18th, Wednesday, March 18th, at approximately thirteen hundred hours. Eastern Standard Time markets just dipped below twenty thousand points. So I guess that's the first time in a couple of years or so.

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Four years. It's not since in nineteen sixty. I'm sorry. Twenty sixteen. Wow.

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Since twenty sixteen. I was going to say let's hope it's not this bad since 1916 anyways. Give us give us your state of play regarding the markets right now.

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I think markets reflect the confusion. We all feel the uncertainty. So it's you know, investors are human beings. So whatever you're feeling in your in your regular life, you're taken out on markets. And I think if you add to that the economic shock that it's going to come out of this, you have tremendous worries about liquidity and what how much money you would need. Such a combination of panic. And I think it's also a need for liquidity, people recognizing that they might have to cash out not because they're scared, but because they will need the money.

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And what's your sense? It feels to me that stocks are kind of trafficking and that is just as the virus is going after the weak and the vulnerable in our species, if you will, the elderly or people with underlying health conditions, the virus is likely. The fatality rate in stocks here is going to be companies that underlying illnesses are weak to begin with. So there's will probably just are companies that will just will just be wiped out, not even Chapter 11, but Chapter seven.

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Here are some specialty retailers that were weak, some airlines, transportation companies. Then there's companies that are way off the present, a huge opportunity that are down 60 or 70 percent. And assuming they can survive, that's no reason to think they should resume to normal levels. And then there's other companies that are either down 20 to 30 percent like big tech or even up whether it's a company like Wal-Mart or the Zoom's. What how would you break down the market here?

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What are you seeing in terms of the reaction of individual sectors and stocks and broke in?

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A couple of days ago, I wrote a post breaking down by Dimension where I thought companies would be hurt or helped by this virus. And I look at six dimensions, three related to the business. The more discretionary the product, the service providers, the company, the more affected by the virus. So in a sense, luxury retail is going to be even within retail. Luxury goods are going to be affected far more than groceries and necessities. It's going to be broken down a bit.

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Travel related in any way could be a logistics company, transportation company, an airline, obviously, Boeing indirectly, more travel related to business. The more you're affected. Expedia is being taken down just as United Airlines is being taken down. And the more people centric your business is, the more trouble you are. I mean, if you're sad, you can run from behind a computer somewhere in Bangalore and stuff like Zoom. I mean, you don't need a whole lot of people running the business at any point in time.

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But if you ruber, you can call yourself a tech company, but you are very people centric. I mean, your drivers have to be out there. People have to be called improvers. And so those three are business related in the sense you don't control them. I don't feel and there I can feel sorry for companies that got caught in the world. There are two that are self-inflicted or at least partially self-inflicted, and that relates to leverage. One is how much fixed cost.

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You have a company as a company. We have lots of fixed costs, high operating leverage. You're far more exposed to this problem because small swings in revenues are going to create huge swings in your losses. The second is completely self-inflicted, which is how much debt have you chosen to take on let's face in the last decade? With low interest rates and good times? There are some companies that are overloaded. And this I mean, Warren Buffett is saying it's only when the tide goes out the good relations between without clothes on and said this is the tide going on.

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You're seeing companies with debt that are going to be exposed. Part of the reason Boeing is going is being punished so much is not so much that it's travel. That's part of the problem. That's precipitates a problem, but it has high operating leverage and high finance on average. So you you mentioned a key word that I think investors need to think about when the economy comes back. And maybe you believe that this is the apocalypse, in which case don't worry about your portfolio.

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What's the point right now? Food and get into wherever you need to go if you believe economies are going to come back. And I believe they will. Then you go to bed and comfortably survive and come back, which means there are some of these companies that look awfully cheap, that if you load up Honda right now, they might not be around when the comeback arrives. So that's what I'd be screening for, is who's got the biggest, Bufferin.

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One of the reasons the big tech companies are doing better is they have the biggest buffer. They have little debt that huge cash balances. And in a very perverse way, this is going to make big debt even more powerful because and because many of the smaller tech companies will run out of cash and they're going to have to be desperately looking for potential buyers. And you know what? The Apples, the Googles is loaded up with cash and they can go out and buy technologies that could not have touched a few months ago because the price they're going to be able to buy those technologies for pennies on the dollar.

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So in a in a weird way, in a perverse way, this is going to make the thankless Microsoft. If you were terrified of them before, you could be even more terrified of them coming out of this crisis, because they're going to be one of the one of the few groups of companies with money to throw around. It all comes back to biology and evolution.

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And when you think about the culling of the herd, once the herd is called and the rains return, there's fewer animals and more food and the species thrives that the species comes back. If you make it through the other end, the times have not been this good in a while. And I can't imagine that media companies, services companies, technology companies, all the few remaining ones that are competing with Apple, Amazon, Facebook, Google and Microsoft, they just come back with instead of sixty two percent combined Facebook and Google digital marketing, they popped a 70.

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Amazon doesn't go from seven percent of retail. It goes from nine percent. It goes from thirty three percent of online sales to 40 percent. So these companies feel like tell me if you disagree with a pretty safe way to make 20 or 30 percent over the next 12 to twenty four months, assuming that we don't, as you said, don't don't enter into an apocalypse and the economy does come back to the question I would have is, is the opportunity here to find companies that are hammered down 70 percent, whether it's a restoration hardware, all of the brick and mortar and all the retailers that have the Kevlar, they have the balance sheets to survive.

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And there's no reason to think that if they survive, things wouldn't return to normalcy. People aren't going to stop shopping. People aren't going to stop flying. So if they survive, isn't there an opportunity with the right strategy to be fought to find four or five of these companies because of those companies might come back two or three hundred percent with the caveat, which is you need personal liquidity to be able to do this in a crisis like this, liquidity is king.

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So if you have cash in your portfolio, you're in good shape. So the first thing I would ask is, can you pass this test if you do this? I know in the abstract and rationally you can say what you take it cash and buy Boeing, it's cheaper. And the restoration hardware, it's cheap. But I tell people, if you do that, you're not able to sleep. And what have you gained? Right. So I think in a sense, you've got to get to a comfort level that you're okay investing that cash.

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And for a lot of people, that would be a different point in this crisis. My guess is you're going to feel less on the personal crisis to be able to make investment decisions like this. And right now, the problem you're facing across the world is people are so personally under they're afraid for their personal self, their families. They can't even think beyond that. So one reason they're not finding a bottom in this market is usually what stocks fall this month.

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The bargain hunters come out.

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You're not seeing that happen in this market. My guess is the bargain hunters are now at the grocery stores trying to get milk. You make it through the next week. They're not thinking about should I buy restoration hardware, stop by and for those people to feel more secure. And we all reach that point of security at different points in this crisis. I would make a list of stocks. You don't even have to act right now, make a list of stocks and the things you look for.

[00:27:06]

You look for companies that have solid balance sheets, that have lots of cash, relatively little debt that have margins that are that are high by by group standards. Let's face it, one of the reasons for getting us into trouble is that margins are already in the mid single digits.

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So unless you're a Wal-Mart or a Kroger, a grocery store and you're going to see revenues drop, your margins are already so low, you're going to get you're going to get whacked in the middle. But my suggestion to people is, even though you might not feel comfortable pulling the trigger right now, get a list of stocks together and track them. And when you feel comfortable, if you have the liquidity, go out and start investing. I think one size fits all and this market is terribly.

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Dangerous assumption to make, because I hear people saying, just hold on, nothing will happen, and what if you need liquidity? I, I think holding on nothing will happen is terrible advice to give to people who might need the liquidity to make it through the next six months or a year. So start with liquidity needs and then start thinking about what can I do with my foot.

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Yeah, I think that's great advice. The person I love the sleep to staright how much money do you need for the next 12 to 24 months. Make sure that that's, that's in cash and that if you're in a fortunate enough to play offense, think about on a risk adjusted basis the tech guys, or if you want to put together a basket of of riskier stuff, something you said about indebtedness and I think of a company like Boeing, it looks like Boeing is going to try and my guess is put together a proposal for a bailout.

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I can't even imagine, I think a bailout almost like reparations. And that is it's a good idea in theory. But where does it stop you? OK, Carnival Cruises, Boeing, I get it. But what about retailers? What about Russ? I mean, where do you bailout McDonald's? I mean, I think it's going to be a very interesting question where we stop. But let me go back to indebtedness. AT&T, the most indebted company in the world.

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Does a company like that is are they at risk?

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I think they will make it through simply. It's a combination of indebtedness and revenues collapse. The advantage with AT&T is so much of the revenues, a subscription base that people start to cancel subscriptions. They won't feel the pain. And what they're hoping for is if this passes in eight weeks or 12 weeks, they're OK. This takes six months and nine months. Then you're going to see the second level, the first level, what you're going to get other companies see the revenues collapse.

[00:29:38]

If I think the travel company think Expedia or United Airlines and for a simple reason, United, I worry about because when you get a bailout, you might survive as a company. But remember, your equity will not survive. I mean, GM got bailed out. Does not it survive as a company? But the people are GM's equity essentially got wiped out in that bear. So it's not just that the company needs to survive, but you as an equity investor need to be able to walk away with some of the upside and it survives.

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And frankly, if the government fails, why should the equity investors be able to walk away with lending? So I think you're looking for companies that have the capacity to survive, such as you looking through the debris.

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That's what I look for going about some of these. What about some of these unicorns, a company you talked about service companies like Lyft and Uber. Do you think these guys make it a company like Tesla, which is I just got off the phone with The Washington Post and they called me and said, Elon Musk is trying to keep the factories open. What do you think of this? I would argue that means there's absolutely no corporate governance there.

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But what do you think of what do you think of some of these will lift and Uber? Do they survive this?

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I think they will. And I think for luckily for them, it was timing. I mean, Uber two and a half billion at least a month to when I looked at the balance sheet. And my guess is they're going to go into complete savings mode. And because a lot of their spending, if you think about Uber and Lyft, was discretionary, adding city signing up drivers, my guess is a lot of that is just going to come to a stop and they're going to live off the couch for a little while.

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So I think that gained in a strange way. This might actually be what allows Uber and Lyft eventually see the right side of the profit margin, because you know what I mean. If you're worried about startups kind of eating into their base, those startups are going to essentially get wiped out. So when you look at this, this is going to be a crisis that pits in favor of bigger companies that have had the capacity already to raise capital. Luckily for Tesla, there is at two billion dollars.

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It's three months ago. In fact, I've been pushing for them to raise cash when the times I said, what the heck are you guys doing? Borrowing money? But Tesla and I describe it as my corporate nature. It's a company that wakes up every day and asks, what can I do today to screw it all up? And the put times that's exactly the way they behave made me think about it. There's so much they could have done to solidify their balance sheet, get the capacity.

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When they had access to capital, they chose not to do it because Elon Musk was so caught up in showing it, showing the rest of the world that he was positive earnings and positive cash flow, as if anybody really cares about that. But the young company that's growing and in the process, he's put the company at risk. I mean, I I had a ride on the Tesla train when I bought in June of last year and it sold last month.

[00:32:27]

But it was a ride where I constantly worried about what they would do going forward. So I think in a sense, you're going to see those companies that were full. I mean, people forget that Amazon came really close to going under two thousand and one. What saved them was the fact that Jeff Bezos started the year before the collapse actually raise one point six billion dollars in cash and kept it as cash. And that allowed them to kind of survive those six or nine months right after the dot com bust and allowed them to come out strong.

[00:33:02]

So you're going to see companies that were forward looking enough that were prudent enough. It doesn't mean that we're forward looking prudent enough to recognize that this to the good times will pass and you need to be able to go through the bad times. I don't think any of them are prepared for that answer. I think so quickly and so precipitously. But no, I think you're going to get a sense prudent management principles. Peagram, I mean, we're reminded again of the importance of prudence.

[00:33:27]

It's interesting. So a year ago, TESO was a three hundred bucks, then it went to nine hundred. Now it's back to three hundred. It does. Yeah. I'm sure they're wishing they'd done about two or three secondaries in the last 12 months. But does that that strikes me as a company that survives. I don't know, Tommy. I think so too. I think in a in a strange way, this has shaken up the status quo so much that everything is up for grabs, in a sense, right after this crisis.

[00:34:00]

And I have the sense that you're going to see companies that were left for dead coming back because there are aspects of this crisis reminded you that these companies are still going to be around the craft. Times of the world might be back again as investments because, you know, people are turning their attention away from those of the stars and we're giving them 50 percent return, saying maybe we need to go back to safety. So in a sense, this is sort of rewinding of things that have been going on for a decade.

[00:34:29]

And some of that is going to mean that companies that were left for dead might come back. And companies that you thought were there's no chance of them failing, I don't know, might add a few roadblocks, but obviously I agree with Tesla is going to survive, but only Elon Musk lets it survive.

[00:34:46]

And you brought up something interesting and considered, and that is with a company like Uber and Lyft. One of the advantages they have, if you if you were to put together a screens to try to identify where you want to play offense, if you're in a position, you have the liquidity to do that eventually and start buying. The first is cash and balance its balance sheet strength. Another one that's interesting that both Uber and Lyft have thought about. It was an ability to variabilities your cost.

[00:35:10]

Exactly.

[00:35:11]

They can and they can scale down the scale. And in fact, some companies can get it down to essentially go almost. It's like one of those superheroes, right? You go you can get really small really quickly. And the scaling effect, I think, is something I would look for in companies because some of the older legacy companies, that's a problem. Their margins are not designed for scaling done quickly. And in fact, Tesla might have that advantage over a GM Ford or to not taking advantage of now is they should be able to scale down quickly because they want they've got only two big plants, the Shanghai plant and the free market.

[00:35:48]

So it's not like they have 50 plants around the world and all these different mechanisms that mean they should be able to scale down and scale up faster than that competition. But they just don't seem to be using. So construct a portfolio for me and I'll give you a scenario. Let's assume that your table stakes are that you have to be fairly certain that between your job and cash at hand that you can go for 12 to twenty four months. So you have that kind of short to medium term liquidity.

[00:36:15]

Let's assume that's table stakes and that might mean you're just not in a position to be thinking about buying anything. That's the first thing you got to you got to take care of yourself on your own. But let's assume you're twenty five and you have ten thousand dollars. Talk to me about putting your toes back in the water for a twenty five and a forty five year old and what that portfolio might look like. And when would you begin. What signs would you look for about when to re-enter the market?

[00:36:44]

I think the signs have to be personal. I think, as I said, if you're looking for market signs, you're going to be waiting a long time because I think this market are going to get waves of people get comfortable at different points in time. I tell people, you know, when you wake up when you wake up in the morning, if you're not watching the index consistently through the rest of the day, that's a healthy sign. That's a sign that you're kind of disassociating from the day to day panic.

[00:37:08]

If you're not thinking about personal safety for the next hour, then I think you're starting to get to a point where you can start thinking about investment safety. If I were constructing a portfolio, I'd split it half and half between stocks that have been relatively insulated from this crisis. The big tech stocks, I would say we have never been in Facebook, alphabet, Netflix, Google. I mean, this is perhaps the time to start thinking about adding those.

[00:37:35]

I also think that I would stay away from the from the resumes of the world, not because I don't think Xoom is a great technology, but I think it's been pushed up so much. There are so few places to go that I think people are flocking into these individual stocks. I think Cisco presumed to be quite honest, because Cisco is done a terrible job pushing WebEx as an alternative. They've led some kind of the ground from under them. But I think that I would pick Cisco, but I would also look at the debris.

[00:38:06]

I would look at adding an ExxonMobil to my portfolio. I know oil is just so beaten up, but ExxonMobil is going nowhere. We still have the need for oil when we come out of this. And twenty eight dollar oil prices are just not steady state. I mean that only around people can make money at twenty dollars a barrel. You cannot have an Aramco is not going to produce enough oil for everybody in the world. So I would not I would look at an Exxon Mobil apartment because it's it's safe.

[00:38:35]

It has no debt. It has huge amounts of cash. You might even be able to collect a dividend because they have the cash paying dividends for the next two years. Even if oil prices did twenty eight dollars a barrel, I would look at the private sector. I would look at it for looking at airlines. I would say I would because Southwest over many of the other airlines, because this is an airline that's been built. You talk about scaling up, it's getting done.

[00:38:59]

It's very difficult to have a scaling down structure in Minnesota, but Southwest, through its entire lifetime, has built a business model that that can scale up a little faster and scale down a little faster than the rest of the competition. So, you know, you look at Southwest, look at Ryanair in Europe because it has less debt than the typical European airline, partly because it's Ireland based on the tax benefits. You can as much of been borrow as much Singapore Air.

[00:39:25]

I think these are airline you have to think about if we come out of this and when we come out of this, if this today is a word, I don't want to use it. When we come out of this, people are going to get back on planes in my fly as much, but they're still going to be need for now. So I think in a sense, you want to go you want to pick those survivors. And but I would make it happen because when you pick all survive, it's you're betting on the virus ending and coming back to steady state pretty quickly.

[00:39:58]

And that might not be a perfect assumption. It might take a while for us to come back. So I would split it half and half between safety and going for bargains and try to spread it across the world. Don't make it all US stocks or all European stocks, because I think, again, that would be regional differences in how we come out of this crisis.

[00:40:20]

So ask what the reason your class is consistently, I think for twenty years been the most popular class at NYU, is that you're not always seen as a domain expert, but you're a software guy who has a lot of great perspective. Do you have any advice for our listeners? Our listeners tend to skew young. What what what words or thoughts would you would you want to share with them?

[00:40:45]

I'm going to go biblical on this too. Shall pass. I mean, that is always on. It's always been my perspective in crisis, because when you're in the heart of a crisis, it looks like it will never end. I remember in November of 2008 that. And I tell people would be OK with the fact that you would figure it out, that you would feel scared. It's natural, in fact, if you don't get probably some kind of a psychopath.

[00:41:09]

I mean, this is the kind of environment where you have to you shouldn't feel nervous. But again, you kind of step back and keep perspective of when one of the reasons I go what the ocean is, the tides come in and the tides go up. And they've been doing this before and they walk, they would continue to do it. And you've got to think of this as the tide going out to come back and again. And you just have to kind of back in the hatches, do whatever you need to do to kind of stay as comfortable as you can with this environment and then be ready when it does come back to do whatever it takes to take advantage of the new world that you be in, because this is going to change the way people behave and that the new businesses that pop up take advantage of it.

[00:41:51]

And maybe you can start one of those businesses as Hatamoto and as a professor of finance at NYU Stern School of Business and a colleague. Aswath, appreciate your time. Stay well.

[00:42:02]

Thank you. You too, Scott. So on the property podcast finished every week with an algebra of happiness, what is Algebra of Happiness? It's a book I wrote about a year ago, are published about a year ago based on my Friday post, numerous anomalies that are more personal in nature and focus on relationships. It's based on the last session of every class I teach attempt to distill best practices and research and personal experiences around how to live a more rewarding life down to a series of algebraic equations that help inform the kids around.

[00:42:44]

How do you make the nice moments in your life burn a little bit brighter? And how do you recover from the lower moments a little bit faster? And how did I stumble into this art of happiness, if you will? The science? Two years ago, my sister, while on the phone I speak to her almost every Sunday night, reminded me that I had less right to be pissed off than anyone else and that I was just pissed off too much.

[00:43:05]

She bluntly said, Why are you so angry all the time? And I do suffer from a certain, I would say, mild clinical depression or mild depression, largely fueled by anger. I think it's just the way I'm hardwired. I think I got it from my dad. But happiness is not just a sensation that you can expect to show up. I think you need to develop it. It's a skill creating behavioral modification, understanding input's, understand what puts you in a good place in a bad place.

[00:43:32]

And that is not to avoid down moments, but recognize them and understand when you deserve to be down and when you don't deserve to. And oftentimes I find that my mood does not foot to my blessings. And so this has been a great personal journey, trying to figure out how to get those to more congruent with one another as I am truly blessed. So with that, with that in this time of incredible mix of panic, paralysis and paranoia, what has given me real comfort is the notion that nothing is ever as good or as bad as it seems.

[00:44:02]

And that is in the moment we have a tendency to inflate our response to things. And when you talk to people at the end of their lives, what they are most upset about in terms of their behavior is that they overreacted to things. And what they have found is that life is not about what happens to you. It's more about how you react, what has happened to you, and that they wish they hadn't been so hard on themselves. They wish they hadn't been as upset about what had happened, that the real damage in their life was a function of how they reacted to things as opposed to the actual event itself.

[00:44:34]

Or put another way, this too shall pass. I have found that getting off of texting, not listening to my friends circulate other panic memes and what have you has been helpful and also to recognize that our grandparents were called the war and we have been called to basically sit on a couch and that we have this. I think about my grandfather, Norman Levin, who used to shepherd his five kids, four daughters and one son to the Windley tube station.

[00:45:02]

That was a makeshift bomb shelter as their home had been destroyed during the blitzkrieg by a Stuka. And they had to sleep in the subway, which had become again a makeshift bomb shelter. They would pass out gas masks in the form of Mickey Mouse characters such that the kids wouldn't be scared to put them on. They were gas masks in the shape of Donald Duck and Goofy and Mickey Mouse and on the way to the bomb shelter one night during an air raid, there was a panic.

[00:45:27]

And my nine year old, I guess she would be my aunt, was run over by an army lorry, which is a truck. So I am sitting in Mexico worried about my wealth and the stock market declining and then getting occasionally paranoid about the virus. And my grandfather's daughter was run over by a fucking truck. So this is a fraction of the adversity, a fraction of the disaster that people faced before us. And there is absolutely no reason that we can summon the dignity and the courage to face this.

[00:46:03]

And a true test of anyone's mettle is how they behave under stress. And who do you want to be? Who do you want to be coming out of this? The reason we don't talk about the Spanish flu is that we are ashamed of how we behaved as a nation. And that is we panicked. We became feral, we became hoarders. We're seeing some of that now. And you don't hear about it much because it was a dark moment in our history, not because of the deaths, but because of how we responded.

[00:46:29]

We were not heroic. We were cowardly. And there's an opportunity here, I think, about wanting to go down to the pile after 9/11 and what did I do? I didn't do fucking anything, I think about Hurricane Katrina and thinking I should just rent a couple of Winnebago's, preload some credit cards or charge cards and go down there and pass them out. And what did I do? Again, I did nothing and not this time. And I want to encourage all of us to, at a minimum, reach out to people who we can't touch physically and check in on them, whether it's checking in on your dad, checking in on neighbors, checking in on friends that are feeling especially stressed or reaching out and helping people either economically or just emotionally.

[00:47:06]

This is our chance. To show the type of courage and heroism that we like to think we all have inside of each of us, this crisis and the terrible thing about crises is they always happen. The wonderful thing about them is that they always end. As I mentioned, I'm in the Riviera, Maya, out of place at a resort down here doing my social distancing, which is either a very good or a very bad idea. We'll see.

[00:47:32]

And I ran into Troy Aikman. Troy Aikman won four Super Bowls. And also Troy and I graduated from UCLA in nineteen eighty seven. We are both exactly the same age. He looks like he's from a different species than me. But anyways, we are exactly the same age. He was the best athlete, arguably in all of college athletics and one of the best athletes in history. I was arguably the worst athlete at UCLA or the worst farse athlete.

[00:47:55]

I was on the crew team, which was sort of where everyone ended up. If you couldn't if you got cut from every other sport. And I was by far the worst person in my boat, I am six to one hundred and eighty seven pounds. The majority of my colleagues were about six five, one hundred and ninety five pounds, much more disciplined, much stronger than me. Troy Aikman, best athletes, Scott Galloway, worst athlete. But we both ended up at the same place.

[00:48:16]

We got there different ways, but it made me feel good and gave me some perspective that I was fortunate enough to be ended up in the same place as Troy Aikman. And if you are in a position now where you are healthy, even if you catch the virus, it's likely you're going to be just fine. If you're in a position to help other people. If you are with loved ones, then you are blessed. Or put another way, you are on the same beach as Troy Aikman.

[00:48:42]

We'll see you next week. Our producers are Griffin Karlberg and Drew Burrow's. If you like what you heard, please follow, download and subscribe. Thanks for listening.

[00:48:52]

We'll catch next week with another episode of the show from S. four in the Westwood One podcast network.