Episode 18 18, The Age of majority, the threshold of adulthood where you are supposed to take responsibility for your personal actions and decisions. I know a lot of people who are still 17 at the age of 48. When I was 18, I was at UCLA.
I was six foot three, one hundred and forty pounds with bad skin. I looked like Ichabod Crane, but actually I joined crew put on 40 pounds of muscle over twenty four months.
So let's put on 40 pounds of muscle this pod. Go, go, go.
Welcome to the 18th episode of The Pop to show and today's episode, we speak with health care expert Andy Slavitt, who was the head of health care during the last two years of the Obama administration. And since leaving, government has remained a critical voice in the battle for health care coverage. He joins us today to discuss the latest with covid-19 and where we go from here.
But first but first, let's catch up on the business wars. The streaming wars continue. Supposedly Weibe only converted about nine percent of its free trial membership to actual subscriptions. So Kibbee is and I predicted this would be dead on arrival. I also predicted that all of the entrants into the space, specifically the capital, flowing into the streaming video wars. We've had more incremental capital invested in the streaming wars than the defense budgets for Canada and Australia combined. And by the way, both those places have armies.
I would not want to meet an Australian on the battlefield, would you? I would like to meet a Canadian.
They'd probably say, hey, hey, no problem. Put your gun down and let's be friends anyway. That's probably racist. That's probably racist.
Anyways, anyways, I thought all the additional capital flowing into the streaming video arena would compress or hurt the margins of Netflix. And it's not anything but is a matter of fact, Netflix keeps making new highs. And I believe and I believe and predictions are dangerous, but they're fun because it doesn't matter whether you're right or wrong. It matters if you catalyze a conversation.
So let's catalyze a conversation with a prediction on Netflix, the 10 ton gorilla in the streaming space.
Netflix announces earnings on Thursday. They're going to blow away earnings and the stock is going to go above six hundred, making its valuation greater than Comcast or Disney. That's right. You heard it here first. We'll see. We'll check back. We'll hold ourselves accountable. This pod comes out on Thursday. So anyways, why do I believe that this is the mother of all good things for Netflix, but most people understand is with covid.
Nineteen people are at home consuming a lot of the tiger cam. But what they don't realize, what they don't realize or take into account is what happens.
I'm trying to give the where else this happens.
What happens when your business explodes? Supposedly viewership on Netflix is up thirty eight percent. It just explodes.
But at the same time, at the same time, your costs plummet. Why have their costs plummet? Because all production has ceased because of covid-19. So think about this. What if all of a sudden, what if all of a sudden you started selling more cards and you'd ever sold before, but your factories were closed, your manufacturing expenses went, it just plummeted.
But you still continue to produce cars because the digital library of Netflix and to a lesser extent Disney, show up with an advantage because it's all about the library you have as opposed to the films or the TV shows in production. So imagine this.
Can you ever think of a business that has had an explosion, an explosion in the consumption of its product?
Meanwhile, an absolute plummeting and the cost to deliver that?
Not I my mind is blown. My mind is blown. You're going to see earnings be frighteningly unsustainably high for Netflix, which has made the transition from growth to margins they used to use the word growth.
Nomenclature is important in earnings calls. And you watch they're going to talk a lot about margins in this call. And we're going to see Netflix over six hundred bucks a share.
That dog is howling at the moon with another prediction. OK, OK. The big news and streaming this week, Peacocke NBC Universal's new streaming service will join a very crowded field. Is it too little, too late?
They come out of the gates a little less with a little less how, if you will, little a little less boom. A little less.
Ben Johnson on steroids coming out of the gates like lightning, striking a small boat in the middle of the Atlantic on a breezy, stormy night.
Poetic from the dog, poetic from the dog, like one of those dogs that says can bark. I love you anyways. Anyways, why are they still getting out of the gates?
Because they were supposed to debut with the Summer Olympics in Tokyo, and that's not happening. So it won't be available also on the two largest streaming players in the US, Roku and Amazon. This is interesting. This is interesting. Why is that? Well, there's two ways to get distribution on Amazon Prime. One is your own app where you, in fact, own the data or one within Amazon Prime video. I mean, they presented as an offering of the Amazon Prime video.
What's the difference? What's the difference? The latter Amazon gets to keep all that gorgeous, delicious data and has control of the consumer in terms of recommendations and understanding consumer behavior. If you're a separate app, then you control the experience and get that all important data. And what does it come right down to? And what's so illuminating here? Disney plus and Netflix. We're in a position to negotiate coverage on Amazon Prime video as a standalone app because they have the leverage, whereas HBO Macs and so far Peacocke have not been able to come to terms with Amazon Prime video because Amazon Prime video and the folks in Amazon who control the rails, who are eighty three percent of U.S. households look at.
Max, look at Peacocke and go, sorry, we need Disney plus and we need Netflix more than they need us. But guys, HBO, Max and Peacocke, you need us more than we need you.
The distribution, owning the rails, the power dynamics here are illuminating in terms of who really controls power in the streaming video awards. But back to Peacocke Peacocke Premium will cost either five bucks a month with ads or ten bucks without more than twenty thousand hours of content, nearly double what was expected when it was announced in January. The free version offers about half the content. This is interesting because there is a market as evidenced by the fact that Android has billions of users, there is a market for free in exchange for advertising.
A lot of consumers are probably looking at their cable bill and thinking coming out of it or into covid, I'm going to have less money. I need to cut costs. There is a market for ad supported media, even though I would go on and say advertising is the advertising industrial complex is waning, there still is a big market for it. And Peacocke is trying to have it both ways and want to offer a premium version saying if you love our great content, if you love friends, if you love the office, you get our content without ads or with some ads or with a lot of ads, kind of like the Goldilocks strategy.
I think this is a difficult strategy because I think consumers are so busy. They want to clear value proposition and then they don't have time to make subtle tradeoffs. So Netflix, I know exactly what it is. I know it's a great deal. I know it's no commercials and boom, I understand it. I think Peacocke is going to take a little bit of understanding, if you will, and a little bit of consumer learning.
The consumer is getting increasingly impatient. So my prediction on Peacocke is that it is a player.
They have deep pockets, they have great content, but that its launch is not anything like we saw with Disney Plus, which signed up tens of millions of households, mostly because of the content library. And also they have the key, and that is in the Mandalorian without the Tokyo Summer Olympics.
I don't know if the peacock has that hook. The dog needs a look.
What is also going on, what is also going on with this crazy world of the markets? The markets keep going up now. We also have some very unhealthy things.
One, we have a lot of young people taking their stimulus or unemployment checks and opening Robinhood accounts, doing crazy shit with options. And the importance of brand equity or storytelling has never been greater. If you're a kid in your parents basement because you can't return to Tulane and you're a sophomore and you got sixteen hundred bucks, what are you going to do? Are you going to buy Amazon or are you going to buy clothes? So brand equity, your reputation as an innovator, brand equity, your reputation as a leader or a disruptor, someone in ten years is going to own your category has become more and more important.
In addition, in addition to turning the markets into a giant casino, we have some additionally really unhealthy things. Specifically, the markets are now bifurcating the winners into basically two groups, and that is the disruptors, big tech, the future forward people who are pulling the future forward, whether it's big tech or whether it's the new innovators, be it zoom or lemonade. The second element, which is even unhealthier is we have a too big to fail environment.
And that is if you were to look at the S&P five hundred, if you were to take the ten biggest companies in the S&P, five hundred, what would you have since January one? You would have companies that are up on average, get this 10 percent. So post pandemic, the ten biggest companies in the S&P 500 by market capitalization are up 10 percent. Now, let's look at the companies right in the middle, right in the middle.
And midcaps, they're down as an aggregate 10 percent. So if you're big, you're up 10 percent. If you're sort of big or big as your average size, the S&P, five hundred, you're down 10 percent. And get this, if you're one of the smallest 50 companies in the S&P, five hundred, you're off. Thirty nine percent. So why all of a sudden does the market like Big Wheel likes big? If you're in big tech, it loves you and your way up.
I own the floor and those guys are up about 20 percent year today. If you're just big, though, there's a general consensus that the risk is asymmetrically rewarded to the investor. Why is that? Because big companies are too big to fail. Then if you're a little tropica Bahamas Airlines, you don't get a bailout. But if you're a United Airlines, you get a bailout. If you're a big enough company, you have lobbyists. And the risk to the downside are limited because the government will come in and bail you out, but they will get to privatize the gains.
So big tech monopoly, specifically Apple, Amazon, Facebook and Google and companies that are too big to fail, being fueled by a bunch of twenty two year olds who cannot go to Vegas, who are bored spending their stimulus check forewords.
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Welcome back. Here's our conversation with health care icon and leader Andy Slavitt. Andy, where does this podcast find you? My dining room and dining.
Minnesota, great city, Minneapolis. Great music, Sanjay. So let's bust into covid-19 America politics, our economy. Give us the state of play. I realize that's a big question.
Yeah, I mean, the state of play is first of all, we have to recognize that for all the places we look and want to point fingers and, you know, the angst, the masks, the political side and all the other stuff and basic level, it's just about it's about the virus we're covering with all kinds of things. But this is a new virus. It's a novel virus that none of us had immunity to and none of us understood how it works.
And so under any circumstances, once we didn't contain the virus, that became the situation and the viruses do what they do, they're going to spread to places where they haven't been. They're generally going to go from larger cities to smaller cities. That's happening. This virus happens to spread through the respiratory system, although it turns out it may not be just a respiratory virus. And that means that places where people are forced to spend time indoors or in close quarters or where people are talking loud are going to get it.
So we're currently going through what I call the wave one stage, two states, which are the states where people have to be indoors because it's one hundred and fifteen degrees outside. So that's the second thing. The third thing is that the virus has a confusing impact on the human body. We know it travels from host to host, sometimes unknowingly, and it winds up taking root in folks that by virtue of their age, their health, their gender, their race, their prolonged exposure, because their job can be quite a bit of damage, but in a way that we still don't understand.
So there's a lot of gaps in our knowledge. And then finally, our response in the US hasn't been great. I mean, if you compare it to the rest of the world, countries from New Zealand to Greece to Vietnam to South Korea to Germany, South Korea, Germany, they figure it out. That you can have an adjusted kind of existence as you fight this virus, we haven't for a variety of reasons we can get into if you choose.
And then finally, I think we're doing a pretty good job on the science front. So I think there is reason to be optimistic that there are a batch of therapies, convalescent plasma TVs, vaccines that will help and try to something.
So I want to circle back to therapies and, you know, attacking this from the front end on the notion of a vaccine and then on the back end with therapies that reduce the harm. But first, so we think, OK, we think of America. We like to think we're the most innovative country in the world, or else we'd like to think that we spend more on health care than anyone in the world. We like to think we're a responsive, agile economy.
And yet five percent of the world's population, 25 percent of the infections and deaths have more time to prepare for this. You mentioned the countries that are doing this well, I think would be hard to argue that we aren't towards the bottom of the list and that we don't come out of this with an entirely new brand Association of America. And that is incompetence. And just I don't know that exceptionalism, our exceptionalism is in fact morphed into dangerous arrogance.
And what what went wrong here first time? Do you agree with that? And if so, what went wrong?
So I think there's three principal failures that I think we need to focus on and understand and figure out how to improve. These are three tests we're currently not failing. The first is a test of simply of leadership. We need leaders who care who are willing to look at the news in a in the data in a really analytical way. And be very honest, I think the public can handle bad news. The public knows when it's getting a straight story and we need leadership.
Who's going to be accountable. And I'm not trying to be cute. I'm talking about the president. He needs to be feel accountable for delivering us through this as opposed to feeling like he can dodge his way around it. So that's one place where we failed. And probably the most important the second failure in my mind is our failure to adapt. These things are new and every other country has figured out how to learn from the virus. So something happens in one part of the country and they quickly all adapt here.
We're not learning the lessons quickly enough. The virus is giving us clues on how to prevent the spread and we're choosing to ignore them. And then third is what I might politely and delicately call a failure of imagination, although you might even call it a failure of empathy, which is to say not only are we adapting, but the more we feel safe, either because we're younger or because we're hearing that it's black and brown communities and you may not be black or brown or you're not an essential worker.
And this is really taking a toll on essential workers or you're not a health care worker or a doctor or nurse. So you you just are taking less care. And because we can all be carriers, that's a problem. And that's an issue of, I think, societal cohesion as much as anything else. If you spent time in Japan and other parts of the world, this failure of imagination doesn't exist to quite the same degree. We have other virtues.
We value other things that are virtuous, like freedom and independence and consumerism and getting what we want. And those things are great. They're just not great characteristics. We're dealing with a global pandemic.
It feels as if our superpower as a species is cooperation and our superpower as a country is optimism. But in this instance, optimism is a bug, not a feature that we assume our exceptionalism and our Americanism is going to somehow be an immunity and that the virus didn't get the memo regarding our optimism and exceptionalism. It's also struck me. And tell me if you think this is better or worse than it would have been had this happened three or four years ago.
But it feels like we're living in a disunited states. I'm in Florida, thousands of infections and very few people masking. I go to Montana. Twenty one infections across the entire state and I'm out on a hike and you pass someone in there in a mask outdoors where they may not see anybody. That just feels as if there's 50 different responses to this pandemic. Is that a function of a lack of leadership, or is it that as a nation we continue to fray?
It's a function of two things, I mean, one one is certainly what you say, which is, you know, we're not being experiencing this together and we have not as much cohesion. But there's another factor, too, which is where we are a big country from a geographical standpoint. And if you live in New York or Florida or some other places, you very likely know people who have died from 12, 19. You certainly know people have been sick from it.
But if you live in Iowa, you may not know anybody who died in 19, but you may know three people who've lost their jobs or are furloughed. You may know somebody who built a restaurant up over 15 years and lost it. So that might be covid-19 to you. And so to some extent, this is where I think our empathy skills could get better, is rather than villainize in people who don't share our experience or share our point of view, you know, we have to try a little bit harder, in my view, to understand that this is hitting people differently, that we can be just as empathetic for the person who's lost their job or their business as we can.
For the person who's been sick or who's lost a loved one. We need to try to do a little bit better at telling the common story. I think the media could do a better job of showing scenes inside of hospitals so that people understand that this is real. But there's been very little of that imagery. And so there are people in parts of the country who just don't see the virus the way other people do.
Yeah, it's very it's it's goes back to this notion that we're more charity. And empathy is to a certain extent a function of proximity. We wouldn't we wouldn't tolerate I don't know.
I guess we are becoming more tolerant of non potable drinking water, but that's a huge problem in Africa. But we don't have as much empathy. I mean, empathy is inversely correlated to distance. Right. And it just feels as if we are having to pandemics. One brought to you by Fox and red states and another brought to you by The New York Times and Blue States. It just seems like it's two totally different pandemics. What were there two or three moments looking back and I realize we're Monday morning quarterbacking, but we're there to it, whether a number of moments where we made just incredibly bad calls that potentially could have changed the course of this thing.
I think the first big leverage point opportunity was whether you're playing containment or whether you're chasing a community spread outbreak. And, you know, we've gotten lucky or good or some combination and that every time there's been an infectious disease in the last number of years of this year in the US, we've been able to contain it and contain it means you can literally count the number of people who have had it. You can count all the people that they've connected with.
You can isolate them until the disease goes away. We had that chance when the boat came into dock. Perhaps we had the chance in January and February when when we knew what was going on in China and we did know what was going on and what would have required of us was to have the ability to immediately test people who were getting the virus so that we could prevent them from exposing other people. We instead are in a spot today where we have the president says we're testing too much.
And so we have unlimited number of people with out symptoms who are out spreading the virus because they don't know they had it. And that can be tested. They're not able to test it. So that's the first one. Second second is if we if we missed that opportunity and look, there are countries around the world that miss that opportunity to contain it. Once we've had an opportunity to put it back in the box, instead of doing what I think countries would call A and the countries in Europe did, which is a more severe but shorter shutdown.
And we did all kinds of things to suboptimized the shutdown. And we decided that we absolutely needed to have our plans open. We decided we needed to have people delivering food. We decided to 20 percent of people. It was essential for them to serve us. And so our inability to take short term pain for long term gain, which I think is a feature of our society today, uniquely, perhaps not the only ones, but maybe more so than most countries, if we had taken the short term pain and we could have taken in a number of different ways, by the way, we could have taken it by all wearing masks for three weeks.
We could have taken it by shutting down, with much fewer exceptions for three weeks. We could have taken it by investing in the testing and contact tracing infrastructure we needed. We could have done it a number of ways because there are there hasn't been one formula to effectively deal with the virus. We just chose not. Do it at all. Yeah, it's it's I would I think you're being generous. My sense of America where we are now is that we have absolutely no tolerance for any type of short, medium or long term pain, that we would rather pull prosperity forward from our children and grandchildren with massive debt fuelled bailout packages that largely benefit our flattening curve for rich people.
I was watching last night. I don't know if you've seen it on Apple TV Greyhound, which is a story of an armada heading across the North Atlantic. Tom Hanks, who I think is 60 to playing a Navy captain, which is unrealistic.
But yeah, they were 30. They were kids on these boats. Anyways, it strikes me that in World War Two, immediately your life was a lot less nice economically and you dug into your pocket to buy war bonds. And we spent the majority of money on weapons to fight the enemy. And then if you think of the analogy now is we're in a war against an enemy. This virus did. The majority of the money is spent on tools to fight the enemy itself.
It's not on funding the CDC or enlisting a half a million freshmen who aren't returning to campus to become contact tracers. It's not around putting 14 days of food in every household and saying, everybody, you are going to severely distance for 14 days and we are going to stop this here and now we're going to cauterize this thing. But we spend the majority of our resources on ensuring that people aren't hit hard economically. And it's like if we wanted a world war to instead of building a destroyers and be twenty four flying super fortresses, we said, OK, we're going to just give everyone money such that the economic hardship of war doesn't impact you economically.
It feels like we have just become so fucking selfish in the short run anyways.
Thoughts we need to do both. I mean because if we're going to shut down bars and restaurants and small businesses, we need to and people are going to do it. I think we need to tell people. We need to tell people not to worry. We got. Yep, yep. Through all this stuff, I don't think it's I don't think it was a choice. I think I mean, literally I mean, I've had dozens, if not hundreds of conversations with congressmen and senators and my senators.
And my general point is, it's like a.. Should we protect people from getting evicted? Should we should we give money to contact tracers? Should we invest it unemployment insurance? Should we make sure that health care system and Medicare do it? Fucking all? Yeah, do it all. The consequences of doing the nine things and not the tenth that doesn't get us back is catastrophic. And you are picking between things that are a fundamental commitment. I believe we have as a country to get people through tough times.
Yeah. And be their investments that we have so much deferred maintenance, as you point out, that we're going to rush to spend ten times more in an emergency and spend it with a tenth the efficiency. But now we have to do it. And as soon as it's done, we're we're going to hear calls to say we need to now pay that down and therefore we can't and we can't invest. So we don't invest in things that don't have near-term benefit, that the climate scientists are having the time of their lives because they're sitting here saying, what do epidemiologists are going through is exactly what we've been living through.
You're getting you're being discredited. You're talking about things that you haven't even nearer term benefit than we do. And nobody will nobody will possibly, you know, sacrifice for us. We're fear mongers. So we get angry. I mean, people getting angry because they can't have what they want. And I think we've conditioned ourselves to that. We haven't conditioned ourselves to any amount of sacrifice.
So let's let's talk a little bit about how we might be deceiving the wrong word, but contain or let's ignore how we got here. Let's just say we're here other than what we can learn, talk a little bit about attacking it from one end where the state of play around a potential vaccine and then from the other end therapies. Yeah, so.
It is clear we're going to need an arsenal of answers to win. We are not going to there's not. I wish I could say otherwise, but it's very unlikely that we're going to have a vaccine or a therapy that's all over. Game over. And so for all of us who have kind of thoughts on our head that. The sentences that begin with what we're going to have to do, Excellency, until there's a vaccine or we will be able to do this once there's a vaccine, it's not going to be as clean and as simple as that.
I had added just an episode on our in the podcast Monday where we had two of the experts on vaccines. And the good news is every scientist I know is incredibly optimistic about the progress we've made towards a vaccine and towards getting vaccines early. The problem is the definition of a vaccine, because there are influenza vaccines. They work on 40 to 50 percent of the public and need to be boosted frequently and adapted frequently. And then there are things like the MMR vaccine or the tetanus shot get when you're a kid, which lasts for a long, long time and works.
Ninety seven percent of the people, we're much more likely to have a vaccine that works like the influenza vaccine. But we're also going to need to keep making vaccines until we get better and better and better ones. And that could take some amount of time. We're likely to have some very good therapies over time. Therapies are easier to develop. They're either easier to do in trials. And so I think we're chasing something that's growing exponentially. The only thing that can catch up to something growing exponentially science.
Now, in the meantime, we have a whole bunch of things that people classify. If we ever heard the expression NPIs Steenstra non pharmaceutical intervention, which is a fancy way of saying that if our own human behaviors and it turns out that the world, until such time as we have science as one tool that is actually can be quite effective. And that's our own behavior. It is done pharmaceutical interventions. It's what people call social distancing. It stay out of crowds.
It's wearing masks indoors. It's not. And unfortunately, it means that there are a set of activities that under almost no conditions are safe, like going to a bar or church or a sporting event attended by a lot of people. Those are not going to be safe activities for quite a while. If we kind of get in our mind that there are just a small number of things we won't be able to think about, this is deprivation because it's harder.
But a small number of things we won't be able to do. Most things we will be able to do some of them in a modified form, but that we are going to have to use these interventions until such time as the science makes two things happen. One, and it's a combination of one or the other or both. One is it makes it less contagious. And two is it makes it less deadly because it's quite possible that we end up with therapies where covid-19 is just as contagious, but the consequences of getting it are much, much, much lower.
And so we are going to be having a race between science, human behavior and political leadership to see how we can put forward a combination of pieces like. What's your prediction around this? Do you think we are getting a handle on this or do you think we end up we're halfway to the number of lost souls that we lost in World War Two. We're approaching World War One. More lost souls than Korea and Vietnam combined is missing a forest fire that is going to just get worse.
Or do you feel as if America is waking up to the threat and taking it more seriously across the board here? What give us here give us the overunder on where you think this where we go from here.
Well, the first question is how many times do you have to touch the hot stove before you stop touching it? And so in our own mind, if we go away and nothing changes, the virus is still spreading. And we look at the stove again. Will we understand that it's hot? And that is dependent upon another factor, which I talk about this way. And I don't know if this analogy is going to work for you, but it's whether or not this epidemic ends up feeling like the crack epidemic epidemic of the 90s or the obesity epidemic of the twenty 18 to twenty twenty.
All I mean by that, it's not a perfect analogy, but I mean something very specific. The crack epidemic with the drug epidemic that happened to other people and our policy response reflected that to other people. It was largely criminalization, no empathy, no fear or concern other than to keep those people away from everybody else. And it ends along racial lines. I mean, if I mean just to be direct, the opiate epidemic is one that felt like it was happening to us, to all of us politicians, children, nieces, nephews, uncles, fathers, people in rural areas, people in urban areas, poor people, middle class people, wealthy people.
And so our policy response has been drug treatment plans and programs and empathy and understanding and a little more funding. Now, look, I'm not going to tell you that we did a good job with the appropriate response because we've not. But I will tell you that the character of the of the response, the people who care the amount of airtime we get on the floor, the Enlightenment have been totally different. And so my answer to the question is a large part.
Will we all know somebody? Your point about proximity. We all know somebody close to us with this hit and therefore, oh, this is our problem and we have to solve it. Or will it be there are people in nursing homes and in black communities and in jails and in distant meat factories or Hispanic communities that are living three generations to an apartment. Those people are getting infected. And my strategy is guarded gate. Just to wrap up in any message, a message to young people, what is your message around their behaviors and kind of this MPI non non pharmaceutical intervention with respect to covid-19?
OK. All right, so young people, here's my message for you. I know we screwed up. I know you have every right to be mad at us. It's going to be environment for you. Now we're making you change your lifestyle for us. Get it. Get it. But you're going to be running this place someday and you're going to have to do a better job than we did, and unfortunately, you're going to have to be a Dolz earlier than you want to be.
And being an adult, unfortunately, means doing stuff that isn't benefiting you directly. It's benefiting society as a whole. And the buyers need to be closed. We just do the buyers need to be close because if they're open, you know, people are going to think they can go there. It's not forever. It's short term pain, and if in return for having the virus closed, your younger siblings or your younger kids. You can go to school because we can reduce community spread.
I think that's a good trade. Go back to something we were saying earlier. No one promised us something for nothing. No one promises we can have everything we want. Only thing we're promised is an opportunity if we can work together on this thing to beat it. And so it feels unfair. But I would say one thing. That is a difference between these kinds of disappointments and what the people who are getting up every day, checking the Senate at the E.R., checking on our relatives in the ICU and dealing with all this crap are going through.
It's a whole other level. We don't get to see it. Most of us will have to experience it. But for their sake, because they don't have any choice for their sake, we need to have our shit together because we can control making the problem worse for them. Thank you, people. Thank you. Thanks.
Since the outbreak of covid-19, Andy Slavitt has been on the front lines working to acquire health care supplies from medical workers, helping to popularize hashtag stay home. He's the co-host of the podcast with his 18 year old son in the bubble and joins us from Minneapolis. Andy, safe.
Hey, thanks. Will you come on in the bubble? Of course. Are you kidding? I'm a media whore. I'm super easy. I'm super rich. Do you have more than a dozen people that listen to it? It's about another.
OK, I'm in. You had me a podcast. Anyways, thanks again, Andy. Thanks for your good work to have you on.
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We're back, what a thrill it's time for office hours. We're here to answer your questions on trends, big tech, career advice and more. If you'd like to submit a question, please email a voice. According to office hours at Section four dotcom. First question, Rolet Drew. Hey, Scott.
This is Alex from Edmonton, Canada. You said previously that Shopify should acquire Macy's or more broadly, a retailer. In my opinion, Shopify has no need to own a physical location nor retailer. But I think you need is to expand their customer base, which Pinterest and perhaps Etsy can do. Etsy and Shopify offers store front for every Pinterest project and search and a way to purchase what people are looking for, but also in a blender. And you have a challenger to not only Amazon, but also Google.
Any thoughts, Alex from Edmonton?
What is it with Canada that Canadians love the dog? Why? Because the dog loves the Canadians. By the way, there is a personal anecdote in here.
The easiest way to get someone to like you, the easiest way to get someone to like you is to like them. So if you feel good about someone, if you feel a sense of goodwill toward someone, let them know and they're going to like you back.
There's nothing more rewarding. There's nothing more reaffirming than an impressive good person who likes you and that makes you like them back. And I like Canada. And I talk a lot about how much I like the people, the economy, the country, the brand, the leadership. Montreal during Formula One, Toronto for business, Vancouver with my dad when we were younger and he was thinking about retiring there. I just think Canada is the best neighbor any country could ask for, whereas they probably look at us and feel like they're an apartment above a meth lab.
But anyways, and I've used that joke before, but it never gets old and never gets old. Back to your question, Alex. I don't think I ever said Shopify should acquire Macy's, but if I did, I don't think that's a great idea.
I think Shopify should merge with Federal Express.
And that is if you think about the real core advantage and what has become increasingly profound and it sounds obvious now, but it wasn't is fulfillment and delivery. Williams-Sonoma used to make tens of millions of dollars on fulfillment. You would spend three hundred dollars on calphalon pans and then spend another 90 to have it delivered to you in two weeks. And they would make money.
And then all of a sudden Amazon said, well, the key that the delta between the in-store experience and the online experience is fulfillment, the immediacy, gratification.
And so they created an unparalleled opportunity or or value proposition with Amazon Prime free delivery within 48 hours and started shrinking that window or that delta between ordering and the gratification to sometimes forty seven minutes with Amazon now in certain urban centers and all of a sudden fulfillment became the core competence, the point of differentiation in the world of retail. So what does Shopify do now that they have tens of thousands of merchants on their platform who want to maintain their own brand identity, maintain their own data, maintain their own packaging and truly have a partner as opposed to a relationship that's more parasitic, i.e. being on Amazon's third party marketplace anyway?
Anyway, what should they do? I think Shopify hold your horses should merge with Federal Express. Federal Express is infrastructure delivery capabilities, logistics data combined with Shopify front end in relationships with tens of thousands of small merchants who don't who don't want to have a relationship with Amazon and who are going to be booming in an era of covid where e-commerce is accelerated ten years. Let's talk about logistics. Shopify has over get this one hundred billion dollar market cap right now.
I mean, that's just crazy, right? Ten to be exact. That's inflated. They should be thinking about acquisitions. And FedEx has a forty two billion dollar market cap. So get those. Shopify is worth almost three times as much as Federal Express.
My mind blown again. My mind is blown again. It's been blown twice the same. Anyways, this would be a great move for Shopify. I think their stock is inflated. I think FedEx and I would say it's deflated, but people see one. Is the new economy pulling the future for ten years overinflate and they look at FedEx and think, OK, FedEx, all we know is you're not Amazon. You don't have a front end, so you're not vertical.
And they've been punishing the stock relative to its performance. So a combined company think about this, Shopify would own somewhere between sixty between two thirds and three quarters of a combined Shopify FedEx, and you would have an absolute e-commerce juggernaut. You heard it here, Alex. You heard it here. And I made a prediction about a year ago that FedEx would do a deal or be acquired or the stock would get severely hammered. covid has pushed the stock.
I think it's actually it's been level. But anyways, I think Shopify should acquire a backend fulfillment logistics company. The other really interesting thing would be, is if they got in bed with what is probably the most well run in America and that is Prologis that builds the warehouses and does the back and logistics and distribution centers. Run by one of the smartest people in the field of business, if not if not at least real estate, a gentleman named Hamid Moghadam, who's actually also a very decent man anyways.
More than you wanted, Alex, but thanks. Love Canada, which means you love me back. You love me back, don't you, Alex?
Next question. Hi, Professor Galloway. My name is John Bartal and I'm calling from Henderson, Nevada. I recently read the book That Will Never Work by Mark Randolph, who is the co-founder of Netflix and the company's first CEO. The book reviews the founding of Netflix and goes into details on the beginning of the organization as a startup. In the book, the author states that it is common for startups to initially hire a small group of generalist employees who can work across departments and across roles to get the company up and running.
Then, once the organization has been successful and growing for a year or two, specialists are hired from outside the organization to focus on specific roles in the process. The initial hires are frequently laid off or passed over as the specialists are brought into the organization. I wanted to get your thoughts on this and see if this is as common in the startup culture as the author states. If so, would you recommend someone to work at a startup if they don't have an equity stake in the company?
I love to hear your thoughts. I'm a big fan of your podcasts and books and newsletters and your Twitter feed as well. Thank you by Henderson, Nevada.
Whenever I think of Nevada, I think of my mom. I'm a 55 year old. It's still not over the passing of his mother. She lived in Semmerling, Nevada, at the Del Webb senior active community. And whenever I think of Nevada passing in my mom and then I think of Vegas, but that is neither here nor there. All right. So let's talk about the evolution of a company and the type of human capital that would best to the stage of that company and a startup.
I don't know if it's as much around generalists and then it goes to specific people or people who have specific domain expertise. I think at the beginning of the of a company, as you need to find five to seven people that are what I would call just incredibly invested and engaged in the company's success. And they have to be great. But it's more important. That's not true. They have to be good. What's more important is they act like owners.
And the only way to get people to act like owners is to give them big stakes in the company. We have this hallmark vision of startups or it's about bring your dogs to work and coffee and take eight weeks paternity leave because we're a progressive company.
Startups are fucking Vietnam, and that is every person who walks into the company, when I start up a company, they have two bubbles above their head.
One is how much I'm paying them, and the other bubble is how much value they're added. And the moment the first bubble gets out of whack or bigger than the second bubble, I fire them and replace them.
I don't do that when a company hits 50 or 60 people because you need to scale. And quite frankly, you start a company with eight players and you scale would be plus and no one likes to think of themselves as a B plus.
But the key to a successful business or one of them start at least start startups is you have a core group of people who love this business more than the kids they don't have yet because it's usually young people and as a result have not collected kids and dogs and work.
Twenty four by seven. When I started to I used to go in most of the day on Saturday and I would stop by on Sunday just to lift the spirits of the people who are in there on Sunday and half the firm. No joke, no joke. When we were 12 or 15 people, there'd be half a dozen people in there on Sunday and their big treat on Sunday was there were only going to work for hours because we were all incredibly invested in the startup.
Now, once the company hit about 50 people, that's not sustainable. You're never going to have all a players. You bring in people that are good managers that work 50 hours a week versus 80. They don't have as big an equity stake because they didn't take the risk. And that's how you scale and you bring in what I call managers is to pose to these what I call kind of this insane, irrationally passionate about an inanimate thing called a business.
So in some I think in the beginning, it's getting to a group of six or eight, eight players who are irrationally passionate about the business. That's not fun and involves probably cycling through twenty or thirty people. It was a lot of hiring and firing the first couple of years at L2 and people don't like to talk about the ugly and the dark side of that. And there is an ugly and dark side of that. But once you get to your core base of irrationally passionate owners, then you can scale with people who are what I would call B plus or minus, not meaning they're not good at what they do.
They look at the company as more of a job, which is probably more rational way to look at it, thanks to a question.
Next question. Hi, Professor Galloway. This is how are you from Madrid having following you for quite some time. And I find your insights very, very useful. I am also a professor and I teach corporate valuation. My background is research and institutional sales. My question is I completely understand the opportunity of online education, but I find one big limitation human interaction. Now, I have had to teach the Microsoft teams and I miss seeing the real time reaction of my students, their body language, etc.
Plus my students also miss the commonality of being together, hanging out between classes. How would you bridge that gap? Thanks for taking my question, Javier from Madrid.
I taught at Instituto and Pressor for a semester in Madrid. Spain is a wonderful country. It's sort of a grittier Italy with the right analogy. I don't think they'll probably be appreciate being compared to Italy, but I think Spain would be a fantastic place if you were just coming out of college to go spend several years anyway. Having said that, I don't think you can bridge the gap between the electricity, the interaction, the camaraderie of in-person instruction. But I think you can narrow the gap.
I'm teaching 400 kids all online in the fall because of covid-19 versus in person. And there's certain tricks of the trade you call on. The more you try and use technology such that that you can see the reaction using big screens and big boards, kind of immersive learning and demanding they turn their camera on, quite frankly, over animation. One of the tricks of the trade I find that I coach instructors regarding the transition to online is pretend you're reading a book to an eight year old and that is you have to massively differentiate your inflection.
I mean, you are really trying to keep these kids awake. You want to take advantage of the medium and elegantly incorporate video and cool sounds and special effects. I also believe you need to have a weapons officer, and that is you get to focus on teaching. And my weapons officer is a guy named Drew and obviously our producer Caroline that helped me focus on the content so they can fire missiles at not the enemy, but the consumer base student and keep them sharp and on their toes.
But do you ever replace the unperson. No, just a zoom doesn't replace in-person meetings. But if you can do five meetings instead of one, instead of flying to Houston to look across the desk. Eighty percent of that meeting done five times in a day versus one, you get to see where the value is and when you can teach one hundred kids as I am, versus one hundred and sixty because the room only holds one hundred and sixty. Even if I only get to eighty percent over time, you'd like to think that we'd be able to reduce costs and the benefits of online learning would compensate for the drawbacks.
Having said that, and I did a call with Chancellor Gene Block, who's kind of a hero of mine, who is the chancellor of the universe. That receives the most applications of any university in the world. Who is that? That's right. University of California, Los Angeles. I've been talking to Chancellor Bloch about how we could use technology for a hybrid model. And this is where I think it goes. I don't think we'll ever move to fully online learning with campuses or at least degrees or credential programs, undergrad, four year programs.
But if we were to go to 50 percent for the learning, that didn't require much we didn't require much interaction.
Wouldn't overnight you double the resource, double the supply, double the capacity of what has been the constraining factor of freshmen seats at world class universities, and that is the size of the campus. So UCLA could go from thirty thousand students to 60 by just taking 50 percent of the most appropriate learning online.
I think it's a huge opportunity. Congratulations on your good judgment to live in Spain. Thank you for the question. Habia keep sending in your questions again. If you'd like to submit a question, please email us a voice recording at office hours at Section four Dotcom.
Algebra of happiness, so I am the officer or we are the opposite of storm chasers right now, and that is I am I always say freaked out by covid-19, but sort of sleepwalking through this in ninety five.
Ninety eight percent of the time I'm aware of my blessings because I make a good living, because I'm in the business of information, I'm able to work from home.
And while I'm self-conscious saying this out loud, the reality is my life is on many levels better than it was pre pandemic. Specifically, everyone has come to accept that you should work or can if you can work from home. They're more forgiving. And so I'm not on planes. That was the only thing that really wasn't ideal in my professional life was I spent two days a week traveling and the food or the bad food, the alcohol.
I drink a lot when I'm on the road because I'm bored. The bad sleep, everything about it being away from my boys just took a toll. And so not having to travel has been just such, so incredibly rewarding in my career, quite frankly, hasn't slowed down. And I realized how privileged I am. But about two or three percent of the time, the gravity of what's taking place in the world and the notion that something that's one four hundredth the width of a human hair could damage your health and that you could potentially pass it to someone in your life who's vulnerable to me is terrifying.
And I have those moments of terror, if you will.
So one of the things I've been doing to try and avoid that terror is and I'm fortunate enough to do this as I've been planning logistically how to move my family around the nation. And I want to be clear. I realize I'm in a position to do this and most aren't, but I am in a position to do it. So I've been doing it. I'm the opposite of a storm chaser right now. And that is wherever there's a storm of covid-19 infections, I leave.
I left New York March six as it started spiking in Florida. I got out of Florida. I went to the Rockies. Now, back in New York, where you effectively have fewer infections and people are masking, which I think is is actually quite inspiring.
Anyways, when I was in Colorado, I invited my friend Lee, my closest friend from from college. We've stayed together, been close friends for about, gosh, I guess about 30 years. Right now. His husband is the godfather to my oldest son, by the way. He's his husband. Tim is a shitty godfather, but I forgive him because he's a nice guy and he makes my best friend very happy and that's enough.
So Lee has had a big impact on my life and a lot of levels. He's a very thoughtful, funny guy who doesn't it doesn't get has just great perspective and is really influenced me as a person. One of the more tangible ways he's really impacted me, though, is I remember Lee's father showing up, wearing in college to visit Lee and Lee's father is this sort of Burt Reynolds lookalike, this handsome guy with a mustache on the furniture store, kind of a man's man, and they're an Italian family.
And when Lee Senior would show up, he would kiss Lee on the lips. And I remember it was shocking.
I remember thinking, wow, that's strange. And as I got older, I remembered that and I thought I would like my sons to kiss me as long as they're willing.
And so one of the nicest things in my life is I bend over naturally when I'm leaving to go on a trip or when my kids get up from the dinner table and just naturally, instinctively they kiss me. And when we were in together in Colorado this weekend, one of my boys got up from the dinner table to go to the bathroom and instinctively just leaned over and kissed me.
And Lee just lit up and said, oh, my gosh, they they kiss you. And I said, Yeah, you realize that was I got that from you and your father.
And it it struck me later on that the people who are most important to you, what you want to show them about your life, is a life where other people love you.
But more than anything, more than anything, the way you reflect that your life has worked out, the way you demonstrate that you are leading a life worth living isn't that you built a life where others love you, but that you've built a life where you love others. That is the key here, to build a life where you have the security, where you have the generosity, where you have the good fortune to have a lot of people in your life that you love.
Our producers are Caroline, Chagrinned and Drew, if you like what you heard, please follow, download and subscribe. Thank you for listening. We'll catch you next week with another episode of the produce show from Section four and the Westwood One podcast network.