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Episode 25, there are 25 prophets, according to the Koran and official roster of a Major League Baseball team of 25 players.


Technically, you should be having a quarter life crisis if you want advice on how to have a full blown midlife crisis, which I am in the midst of. But the good news, it's going to end in about 50, 60 years.


My girlfriend keeps saying that my midlife crisis is getting in the way of our relationship.


What if she knows she's only 18? Make me feel 54 again.


Go, go, go. Welcome to the twenty fifth episode of The Prophet to show and today's episode, we speak with my colleague Arun Sundararajan. Arun is professor of entrepreneurship and technology operations and statistics at NYU Stern. He's also the award winning author of The Sharing Economy The End of Employment and the Rise of Cloud Based Capitalism. Aroon gives us the state of play of the sharing economy and gig workers. OK, what's happening? Startup in big tech are trying or are going to deep bundle education.


Google is entering higher ed by offering B.A. equivalent degrees Google career certificates, which is essentially micro certification for three hundred dollars over a six month period.


OK, this is just so excited.


I this is I can't tell you I'm excited. I'm about this and I don't like Google, so I try to kind of hey Google. But I'm very excited about this. Google offer its career certificate programs via Coursera for forty nine dollars a month. The courses include data analyst, project manager and UX designer. Will employers outside of Google take this type of certification seriously? Is Google better off partnering with the university? All good questions. All good questions.


But why is this so Breakthru? Why is this so gangster? Simply put, that unless organizations and corporations start validating or start or stop, I should say, using the traditional four year college degree as the entrance exam or as the requirement, the prerequisite for even being in the lobby.


Think about this. Think about this. Only 30 percent of Americans have a college degree, only 10 percent a graduate degree. And then think about business, think about economy, think about the government, think about culture, think about the media. Think of anyone over a certain level. What percentage do you think have college degrees? Ninety five. Ninety eight percent.


So we have decided a very early age. Whether or not you have access to the spoils and influence of the most productive, fruitful economy in history based on this four year litmus test. And it gets worse than that. It gets worse than that. The trajectory of that cannon that shoots you into the stratosphere or not of the greatest economic marketplace in history is based on where you go to college. Where does Google recruit, you guessed it, MIT, Stanford, Berkeley and probably five other schools they get a disproportionate number of their kids from.


And now that Google is saying Google is giving permission to corporate America and the technology companies, which every year grab a greater share of GDP, the best employers, someone at the age of twenty four at Google has the same life, literally compensation roll of a thirty two year old at the traditional masters of the universe, the communications conglomerates WPP, IPG, Puglisi and Omnicom, who, by the way, Google loses or gains the value of all of those companies, all of those companies.


In a single trading day when I was just out of business school, I met a guy named Warren Hellman who ended up becoming a mentor, is one of the kind of gangsters of modern day business. Warren was the co-founder of Hellman and Friedman, along with Friedman, and built what is still arguably probably the premier private equity firm in the world. And I got this dream assignment. I'd started a company called Profit Brand Strategy, and I met Warren and he asked me to come to two years of Levi Strauss and company board meetings, sit in the back.


He told me, don't make friends with anyone. Don't talk to anybody. Listen to the entire board meeting for a day. And then I want you to stand up for fifteen minutes and just give us your thoughts. And they invited two other individuals, Nigel Vogel of BBH, great agency, that I think at some point got sold. And then Lee Clough, remember him. He was sort of the Apple whisperer. He was Steve Jobs right hand man.


He was on the cover of Business Week. Basically, it was sort of I was the young crazy consultant. They brought in to speak young ish or speak Levi's, and they brought in these two masters of the universe. Well, guess what I go to about, I don't know, probably twenty or thirty board meetings a year. And I haven't seen an ad agency person individual in that room for ten or twenty years. The bottom line is the old masters of the universe.


No one gives a shit what they think. No one cares what the advertising community thinks. And the advertising entire traditional broadcast advertising industrial complex gets shed or created one day, one day by Google.


So Google is Google is the new aspirational employer globally.


And they've said and given permission to the rest of corporate America, the rest of the corporate world, it's OK to hire great kids with good training and micro certification without the Bachelor of Arts. This this might release. This might liberate us from the stranglehold that accreditation, which is nothing but a bunch of white people ensuring that there Joey Baghat doughnut's with graduate degrees, continue to have an artificially inflated compensation, decreased accountability, i.e. tenured faculty sets that we can continue this cartwell despair across middle class families where we say, OK, ninety five percent of you or ninety percent of you aren't going to get into the college of your choice, but will downshift.


Due to one hand, but will still charge you a Mercedes price, but no mass, perhaps no mass, perhaps, because when Google says we're unbundling and getting into micro certification, it might start something wonderful.


Think about think about the Internet in the 90s specifically. Think now about one of the greatest monopolies in media history. What's a what's that dog? What's at your newspaper newspapers? It was essentially it was like college. There was one great one and one sort of great one. Right. There was a San Francisco Chronicle. And then there was the Examiner.


There was the Los Angeles Times and the other was the Herald or the Tribune.


The L.A. Tribune. I forgot to ask anyways. They had a monopoly. And then what happened? What happened? They got unbundled. First it was Craigslist that came in and went after the white meat of newspapers and destroyed the classifieds business, which, by the way, it kind of paid for newsrooms. Then they came into the entertainment section. Remember the L.A. Times calendar section? I used to sit around with my mom on a Sunday and we'd go to get bagels and nosh and we'd read the calendar section anyways.


Anyway, seventy seven, some film Fandango, they started unbundling or picking apart movies. Then Google and Twitter went after the front page news and slowly but surely these monopolies got picked apart.


Could the same thing, could the same thing be happening with universes where again, there's typically one amazing one in that city at NYU, a kind of a close second, a Columbia UCLA, No. One in Los Angeles, a distant number two USC, San Francisco, number one by far, Berkeley, a distant second, Stanford. You get the point. Could they be on the brink on the Mets, on the precipice of being unbundled by specific offerings, specific offerings to go after executive education?


There's an interesting company, I think it's called outlier, that is saying, all right, calculous hasn't been hasn't been taught any differently for a century yet. It's a nine billion dollar business.


Meaning, meaning, meaning that young people spend about nine billion dollars in tuition to take calculus, which has been taught the same way for a hundred years. So let's find the best calculus teacher in the world. Let's do an amazing job with sort of master class like production values, but with people who actually have domain expertise instead of people who vomit platitudes like, I don't know, Anna Winter and let's teach some calculus in a great way and let's charge them one hundred or two hundred bucks instead of seven thousand, which is what it cost to take calculus at Brown or Dartmouth or the University of Southern California USC fight on Trojans and keep ripping people off anyways.


Anyways, they could bundle certain core classes. They could bundle executive education. They could bundle Migros certification. Our universities, the newspapers of today, could they begin to get unbundled and thereby release Unleash the Kraken and take us back to where education is supposed to be and be the greatest upward lubricant of mobility and mobility and opportunity in the history of mankind.


There is an enormous opportunity here in terms of micro certification busting out of this this weird trope or dictum that you have to have a college degree to have access to a better life. This is so exciting. Well done, Google. Let's see a lot more innovation. Let's see Apple take over one of these abandoned campuses, of which there's going to be about three or four hundred over the next five years. Start with software instead of accreditation, which is nothing but a guild.


Start with technology instead of the classroom, start with the kids instead of the administrators and get rid of the administrative bloat. And let's see if we can return to this opportunity that that higher education has afforded. So many of us, so many of us, let's fall back in love with the unremarkable status of our society isn't what we do or the opportunities we give them. Remarkable is a test of our society in higher education is what we offer the unremarkably.


Let's go back. Let's give the unremarkably remarkable opportunities. Let's salute Google, let's invite Amazon, Apple, Facebook, Salesforce, which I think could do an incredible job here, some private funding. And let's start with the kids. Let's start with technology. Let's break the will of the caste system here. This is so exciting, so exciting.


I can't help myself. I can't help myself. I'm excited.


We'll be right back after this break with our conversation with Arun Sundararajan. Skillshare is an online learning community with thousands of inspiring classes for creative and curious people, they offer classes and workshops on just about everything from you, AQI, Web development, entrepreneurship and even lifestyle. We always talk about doubling down on what you're good at at the property show. And one way to do that is to improve your productivity. Ali Abdullah offers a productivity masterclass where you learn principles and pick up tools to boost your productivity.


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Welcome back. Here's our conversation with The Roots and Rajan, a professor of entrepreneurship and professor of technology operations and statistics at NYU Stern. I've known Professor Sundararajan for the better part of 20 years. He's a very thoughtful young man. He's sort of or was or I guess is one of the young premier scholars in the field of the sharing economy, kind of own the sharing economy for a while and has consistently been sort of one of the favorite professors among students at Stern.


Anyways, here's our conversation with Aroon. Professor Sundararajan, where does this podcast find you?


I'm sitting in my office at NYU in New York. Feels good to be back in my office. I never thought I'd miss my office, but here we are.


Here we are. So let's talk. Let's fast right into it. I think of you as the world's premier scholar on the sharing economy. You wrote a book called You Kind. Scott, go on. I know. And making you look good makes me look good. We're all members of the same brand here, the same community, the same tribe.


Look, sharing economy. How have things changed since the pandemic?


What's happened here? Broadly, I think we've started to realize that we're going to be relying a lot more on platforms in the foreseeable future. You know, when the physical world channels got shut down, a lot of stuff shifted to platforms. And so there was a dramatic increase in rates. There was a dramatic increase in door dash that was sort of this shift to looking for ways to get to the stuff that we wanted without actually having to be there physically.


On the other hand, demand for Uber itself, the righteous of this drop dramatically. Demand for Airbnb dropped dramatically, although I think Airbnb is going to come back much stronger than the hotels over the next few years because travel is shifting in a way that is going to make people want greater control, greater trust, sort of smaller destinations. So the sharing economy in a nutshell, took a hit on some fronts, saw a big uptick on other fronts.


But, you know, overall will come out stronger.


So it feels like Uber making this extra pivot to food delivery. I agree Airbnb is going to come back stronger. Let's talk about gig workers and a B five where California has said you need to reclassify these contractors as workers. And Uber says this will put us out of business. And they now have Prop eight because of Prop twenty two where they've said we're going to create a new classification. Give us your sense. Do we need a new classification of workers?


Well, no, we don't.


We will. We we certainly don't want AB five. The problem is that all workers want a safety net. They want benefits, they want protections. They want a way to take a vacation. They want health insurance. They want funding for pensions. They want predictability in their income. They want workplace insurance. But over the 20th century, we constructed the social safety net so that only one kind of work, the full time employee, was able to get these benefits easily funded.


And so now we've got this broad spectrum of relationships between workers and institutions. You've got, you know, part time contractors on Uber, you've got hosts on Airbnb, you've got sellers on Etsy, you've got delivery people working for Doordarshan Post meets and greets. And, you know, there isn't a funding mechanism to give them the benefits that they need. So the actual the right solution would be to create this funding mechanism. But what California is doing is looking backwards and saying, well, we've got this funding mechanism for full time employees, so let's try and stuff them in that full time employee box.


And not surprisingly, Uber and Lyft and Kodesh and the others are really sort of pushing back. They've come up with their own proposal, which makes a lot of sense, which is for platforms to sort of share in the funding of the workers who work for them, proportional to how much time they spend on the platforms. But, you know, this is where we are.


So you're a favor Prop 22.


I'm in favor of Prop 22, largely because I see it as an important building block for the future. I may agree or disagree with some of the actual details or the actual funding levels, but creating something that funds benefits in a structured way for non employment work for people who are not full time employees, I think is critical for the future economy, because it's not just going to be Uber drivers or dash delivery people in 10 years, a significant fraction of the economy is going to have these non employment work arrangements.


I think this is going to be accelerated dramatically by covid. We've sort of wiped. The slate clean on employment and a number of different sectors, and so it's not just the platforms and the companies start to reconstruct their workforces, they're probably going to do it in a way that relies less on employees and more on other arrangements. And so the country desperately needs some sort of system that allows people who are not employees to get benefits without having to marry someone who is an employee, which seems to be like, you know, the favorite part today.


And I think Proposition 22, if passed, will be a critical building block on which we can then sort of start to develop things for other parts of the country and start to improve.


So and I always learn when I speak to you, let me give you what I would call and I'm guilty of this. I immediately decided something is red or blue. And if it feels reddish or it feels big tech ish, I have a bias against it. My bias against Prop 22 and I might be reading or seeing ghosts or seeing dead people or there aren't any here I want to basically outlaw's, as far as I can understand it, unions that it requires like a seven eight vote to unionize, meaning that unions just are have been eliminated from these workforces should Prop 20 to pass.


It says that you in fact are guaranteed one hundred and twenty percent of minimum wage, which they position is a feature and it is, but only during the time there's a ride. And that strike me as is tantamount to win at fast food restaurants that were clocking people out when it wasn't busy. That that doesn't really guarantee anyone dignity of work. It just says while you're making us money will ensure you're getting at least minimum wage, which I guess is some progress and is evidence that this isn't for workers, it's for corporations.


The no against Prop 22 is gone, I think one hundred and ten thousand eight hundred thousand dollars, mostly from unions and the yes on twenty two has raised one hundred and eleven million isn't.


Yes. I mean my sense is this is just more if Uber can't afford to guarantee some level of minimum wage or benefits when there's a bigger argument that government has to, you know, government really needs to step in and provide some sort of health care because it's become such an economic strain on companies and people. But if is there an argument that if Uber can't afford to operate its business, making these people who work more than 20, 30, 40 hours a week, employees, that that just means that this business isn't viable.


Isn't this you don't worry that Prop 22 is just sort of cementing this this caste system where there's an underclass of workers. Do you think it's a move in the right direction? I realize what a loaded question on is.


Well, I do think it's a move in the right direction, in part because it gives us a template for a broader safety net. I recognize some of the issues that you're raising on the valid issues. The reality of driving other people around for a living is that it's never been a tremendously lucrative profession.


It's a great point. It's you know, it's not as if the taxi drivers were like, you know, rolling in wealth. And then Uber came along and took that all away. Yeah. If anything, they've expanded the market and perhaps expanded opportunities and made life better. You know, if I compare the life of a, you know, a hack in New York City who would rent a medallion for one hundred and thirty dollars for a 12 hour shift and then have to drive continuously for those 12 hour shift to try and make up that hundred and thirty dollars and then keep whatever they could earn over that.


I mean, Uber certainly offering something better. I agree that, you know, the reality of how much money Uber drivers earn on average doesn't give them like, you know, a very good life. And I don't have a solution to that. I don't think EB five is going to be a solution to that either. Just sort of making them full time employees and suddenly going to magically solve things. But, you know, on the minimum wage issue, I am a strong proponent of having a floor on earnings.


I've looked at all the arguments against minimum wage and none of them hold water. But the the trouble with minimum wage for people who don't have one employer is that you can sometimes have unintended consequences. I mean, if you look at what's happening in New York, where we got a minimum wage of sorts for Uber and Lyft drivers, it's designed in a way that will eventually favor Uber over Lyft because it's based on how much time are you actually driving?


So you sort of have to pay more per hour of driving the platform has to pay more per minute of driving if you're driving less frequently. And so that sort of overtime naturally ends up favoring the larger player and it could have sort of unintended other consequences like leading to monopoly and therefore reducing driver bargaining power in the long run.


And let's talk about let's move away for maybe five and 20 to.


So when we think about the sharing economy, we immediately go to Uber and ride hailing and Airbnb and apartment sharing or call that part time rentals.


What are the other sectors where you think the sharing economy is going to create tremendous value or disruption?


Well, there are a few others in the longer term. I use the term sharing economy very broadly for any way of organizing economic activity that uses a platform to connect to a crowd of suppliers. And so Uber and Airbnb certainly fit, but so does Etsy, so do a lot of other platform based businesses in the long, long term. I certainly see energy and health care having, you know, moving in different ways to a platform based model. At some point we will have cheap enough batteries and widespread enough or low cost enough solar panels to make viable the idea that, like, you know, a few people in the neighborhood can redistribute power to others instead of feeding it back into the grid.


And I think this won't emerge first in the United States, where we've got a pretty reliable power system will emerge in countries where like, you know, the grid is not quite as reliable as it is here. The sector that I'm watching most closely now is, in fact, food. You know, as you pointed out, UBA was fortunate to have Traves sort of with, you know, this unlimited allowance, delving into all these different businesses, overeats, flying cars, autonomous vehicles, trucks, because when the pandemic hit, it certainly helped UBA that they had Uber rights.


But if you look at the restaurant sector in just the United States, it's almost a trillion dollar business. It's about half the size of the transportation sector and only a tiny fraction is online right now. And I think a very big fraction is going to be going through the front door dash and possibly me through Uber and GrubHub and the other players. In the next five years. A lot of the supply is going to move away from restaurants that are small and have store fronts to larger sort of bulk supply through cloud kitchens.


And so in terms of like, you know, where is there a lot of corporate value that is going to be created and where are we going to see a platform really absorb a physical world industry? I think food is really where we're going to see a lot of action in the near term. Health care and energy are probably going to take a little bit longer. Do you think I mean, if you had to guess you follow pretty closely, do you think Uber ends up I mean, it looks like they've literally become a food delivery company.


Can you see any other businesses that ride hailing with their infrastructure, with their automobiles, kind of this last mile? Do you think they'll get into last mile delivery? Do you think they'll get into freight? Where does ride hailing go next with this cheap capital in this huge infrastructure and software in this unbelievable label, labor forces? I think it's like five million people domestically. Yeah, and it's five million now and it's bound to grow over the recession. I mean, more and more people are going to be looking for ways to make ends meet.


As you know, the economy recovers a lot slower than we expect. I think that Cuba was very fortunate to have entered EADS and to have that been seventy five percent of its revenue. Yeah, it's certainly a cousin of ride hailing, but in many ways it's also sort of a fairly different business. The Uber pizza delivery guys and the Uber drivers have tended historically to be distinct groups. And so it's not as if, like, you know, you're repurposing one labor force for another business.


I think what's being repurposed is the logistics expertise, the data science that allows them to operate what is sort of a fairly complex business. This isn't the kind of technological expertise that is going to erect big barriers to entry and sort of a Microsoft Facebook kind of way. But it's non-trivial and it's certainly something that they could put over to last mile delivery. I don't think they're going to go there because Amazon has a huge presence there and Amazon has as good or better capabilities on a lot of these things.


That could be an advantage to Uber free. It might be one direction in which they go. I mean, Travis Kalanick certainly wanted to go in that direction. But I think the long game for them really is to work on convincing investors that they can play the Jeff Bezos game of saying, well, we can be profitable if we want to, but we're going to lose money in order to grow our market share and expand our business, because eventually ride hailing starts to work really at population scale when you have fully autonomous vehicles.


I mean, you and I know that that's not going to happen in the next two to five years. But Amazon took 20 years to get to where they are today. Right. And for those 20 years, they convinced investors that it was what the investor's while to allow Amazon to lose money as they expanded into more and more categories. And what Cuba should have been doing and what I think Lyft should be doing is convincing their investors that, yes, we can be profitable in New York City if we want to, but allow us to expand into the suburbs, allow us to sort of grow our wallet, share, because that's what's going to make us a trillion dollar company in the long run.


And about 18 months ago, Elon Musk predicted there would be a million self-driving Teslas on the road, or which I guess is technically I don't know if that's if that's considered the sharing economy.


Do you think Tesla could be a player in ride hailing?


Absolutely. I think that, you know, whoever gets to having society be comfortable with their cars being on the road without a person behind the wheel is going to have a huge leg up on the others. So if Tesla gets there first, they partner with one of the platforms like Uber and Lyft, because wheelbarrow lift sort of has like, you know, the user base. And, you know, they've worked out the maps and the logistics and the local regulations.


Google could be a player if their cars get sort of like, you know, into self-driving mode or sort of like, you know, personalized self-driving mode before Tesla's. But these are certainly two very viable players. And, you know, it's still very early days. I wouldn't be surprised if GM suddenly jumps into the fray and sort of demonstrates that they have leadership and some on some dimension of self-driving cars. And where Uber and Lyft are going to have the advantage at that point is if they have gotten like tens of millions of people to start to rely on them for transportation, then they'll sort of plug out the cars that are driven and plug in the driverless cars and they'll be able to capture some of the value that's being created.


We have a tendency to always think about US companies. We immediately go to Uber and Lyft, Airbnb.


What are the most impressive companies in the sharing economy outside of the U.S.?


Certainly top of the list is in China. You know, they are probably the largest ride hailing company in the world. And, you know, they use of technology to solve problems that have come up in China with navigation, with traffic management, with, you know, they can't use surge pricing. And so they have to come up with some other way of balancing supply and demand have consistently impressed me over the last five years. And so I would say that they are certainly top of the list.


So your domain expertise is how digital technologies transform business, government and civil society, make some prediction, bring us home with some predictions.


Give us a prediction around the prospects of Uber, Airbnb and just more broadly, the U.S. economy.


Well, let's start with Airbnb. That's the easy one. I see Airbnb as dominating the travel sector in the years to come. There's a wide variety of reasons why the Airbnb model is going to work better in a post pandemic era. We have to rebuild trust with travelers. Airbnb knows how to do that. The hotels don't. We have to adapt to the fact that people are going to be traveling to smaller destinations are not big cities. Airbnb is better suited for that.


We have to wrap our heads around lower occupancy Airbnb as model works better. Local occupancy hotels are capital intensive, and so Airbnb will be far and away the largest company in its sector in five years, probably bigger than the three or four hotel chains behind it, combined with the Uber and Lyft. I think the next five years are going to depend very heavily on leadership. I can certainly see Uber continuing or becoming and remaining a multi hundred billion dollar company in five years.


If they can convince the market that growth is more important than short term earnings, the US economy as a whole, I think the recovery from the pandemic is going to be slower than we expect, and I don't expect us to get back up to 2019 GDP for the next three years at least.


And if you had to guess where the markets are in two or three years, every company you've talked about is skyrocketed in value. Actually, that's not true. Uber is sort of flat. Airbnb has gone up in the private markets, gone down and then come back up. Where do you think you follow the markets? You're a private market investor. What do you make of this market?


The tech VC market has certainly it certainly surprised me at first because when the pandemic hit, I knew a lot of startups who were worried that they weren't going to be raise money. I think the investors have realized that the share of the economy that is going to be digital is going to suddenly be a lot bigger. And so making investments in the companies that are going to control the digital channels for all these new things makes sense, because there's only so much of the economy that Apple and Google and Facebook and Amazon and Microsoft can own.


Aronsson Erosion is the Harold Price, professor of entrepreneurship and Professor of Technology, Operations and statistics at NYU Stern School of Business, who's also the author of The Sharing Economy The End of Employment and the Rise of Cloud Based Capitalism. He joins us from his office on NYU Stern's campus. Brother, I will see you. Actually, I will not see you back on campus. I'm not going back on campus until there's a vaccine. But I will be thinking of you and we will get together for a either a distance drink or once the vaccine is out.


Absolutely. I look forward to. It's good. Thanks, Professor Puno. We'll be right back.


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OK, it's time for office hours, if you'd like to submit a question, please email a voice recording to office hours, Section four dotcom question number one.


Hi, Professor. My name is Blake and I'm from Irvine, California. I have a question regarding a prediction you made on Netflix in twenty seventeen. You state that Netflix could be worth three hundred billion dollars and become the operating system for joy, much like Amazon is the operating system for consumption. You have stated before that Netflix needs control over their distribution and faces an uphill battle against all Four Horsemen as they all compete in some way for our attention on a screen.


Can you elaborate on how Netflix could accomplish this, such as buying Roku or creating something themselves? How do you balance your 2017 prediction of Netflix becoming a part of the Big Four against your view that they need to have control over their distribution as well as their flywheel in order to be a Titan? Thanks, Blake, from Irvine.


A thoughtful question I picked. So once we are used to call the fourth horseman, I would pick a stock that I thought was going to accelerate. And I did it while I was still a gardener. And then they, amongst other things, told me I couldn't make stock picks. But the three stocks I picked for 17, 18 and 19, I think were Netflix, then Spotify, then Disney and Netflix.


I think it's triple or quadruple since then. Disney went up and came back down and Spotify went sideways and then finally doubled. So we've done OK there.


So Netflix, I think it is difficult and vertical distribution. It is difficult to find a company that's over two or three hundred billion dollars in market cap. And right now you have Netflix at 230 billion in market valuation. That doesn't control its distribution. And when you don't control your distribution, you are vulnerable to Apple deciding that your app needs to pay them. Or if you want to be on their rails and you want access to iOS or Android. And right now the phone only has two rails.


It has iOS and Android that you have to go through the duopoly of Apple and Google and they extract a toll. As a matter of fact, Apple wins across every streaming video platform, every streaming video platform, whether it's Netflix, Disney plus Apple TV plus who pays between two and 12 percent of their total revenues to Apple, who takes 30 percent of the fee, I think the first year. And then after that, I forget what it is, 10 or 15 percent.


But they basically on the rails and also over time, it's very difficult to maintain a leadership position or build a ton of value when you don't control the end distribution. And you think about all the companies that do have created gotten above a trillion dollars, whether it's Amazon, whether it's Google, whether it's Apple, they control their distribution and primarily the greatest unlock probably in business history of shareholder value. Some would argue it's prime. I would argue that it was a direct to consumer distribution play where Apple decided to open 550 temples to the brand.


So not only do they control the rails by having whatever it is, you know, a billion of the wealthiest people on their device, the iPhone, they also control the rails in the direct to consumer distribution with Apple dotcom and their five hundred and fifty stores.


OK, Netflix, Netflix, I believe, is vulnerable because if they don't own the end product, if they have to go through it negotiated or a cable company through Amazon Prime video, through iOS or Android, I think they're vulnerable. And with a 230 billion dollar market cap, they have the firepower to create their own distribution. It could be Roku, it could be buying. I don't know. I think Netflix. So let me back up. What should they do?


Netflix should acquire and we talk about this. They should acquire Spotify and then they should acquire Sonos and start building direct distribution any way they can. There's probably a variety of ways they can do it. But at this point, Netflix is only Achilles heel, only Achilles heel. They have the content, they have the culture, they have the brand. They have the direct to consumer relationship in terms of payments.


Their only vulnerability right now, if someone gets in between them and the consumer with the distribution and starts exacting a toll or getting in the way, this is traditionally, if you think about this, the tension between a manufacturer's brand, EPNG and distribution, Wal-Mart or Kroger's or what have you.


And there's always a tension, there's always a tension between ABC studios or who creates and produces TV and then the distribution, the cable companies and people will argue what content is king and then distribution is king and it goes back and forth. But I think you would probably argue the distribution in the world of tech and big game hunting. Well, you don't even need to choose these guys, do all of it.


These guys, whether it's Apple, Amazon, Facebook or Google, they produce, distribute and support their own content.


Anyways, long winded way of saying that. I think that Netflix has the firepower to start thinking about establishing direct to consumer channels on their own.


Thank you, Blake from Irvine. Question. Hey, this Judy from San Francisco. Big fan of yours since you're out two days from my e-commerce and marketing background. My question is regarding the debate, whether brand can be invoked when fellow founders and I discuss sometimes pretty tough conversations with investors, those that are especially obsessed with the investment thesis around AEI or crypto always want the complex tech and will throw in your face. That brand isn't defensible or it's not about and we simply don't agree, given the successes of Warby Parker or other DDE brands that have great products, but definitely do build something really special around a brand.


So we just don't agree that brand isn't defensible. What are your thoughts on this, especially for founders not looking to invent new tech, but making tech actually speak to valuable and targeted demos?


Thanks so much for the generous words, Judy. So the brand era is over and Professor Brand strategy. I've made a really nice living, kind of espousing the following. That product has now been commodity's or quality has been commodity's, that all cars are largely the same. Albion's have kind of the same taste. It is very easy to reverse engineer any product feature and that the only sustainable advantage is brand, meaning the intangible associations. You can wrap around a set of products or services which are easily replicated, very difficult to maintain any competitive advantage around that.


A long term association around America, youth, European elegance, whatever it might be. Maternal instincts, choosy moms choose gipped. Here's a 30 cent, here's a 16 ounce glass container of peanut butter paste that costs 30 cents to produce. But if we convince you that hurting around this brand, you're a better mother. Why? Because choosing moms choose, Jeff, that we can print money. And if you look at the icons of yesteryear, whether it's General Motors, whether it's PMG, whether it's WPP, they were front and center of the brand age, taking mediocre products and wrapping around these intangibles called brand associations in the primary weapons for brand associations or the tools of Lariam.


Still, the Valerian still was this incredibly cheap and efficient vehicle called broadcast advertising. Then what happened? Over time, two things really happened. Those vehicles for cementing or creating these intangible associations got worse, but more expensive. So the number of people watching the Academy Awards got cut by 80 percent.


But the price to advertise on the Academy Awards went up five fold, meaning the brand building had just become almost uneconomical and then entered digital, which gave us the opportunity to radically innovate around product, no longer going to the card catalog, no longer going to the Yellow Pages, no longer going to the Encyclopedia Britannica or your mom or dad, but typing into Google. Any question in the world that is a 10x better product, your ability to get information on health, your ability to communicate with people, your ability to consume media on your own terms.


Digital has literally unlocked this next wave of product innovation. Just about the time we thought we were no longer able to create product differentiation. As a result, we had branding becoming more expensive and less effective, and we had product differentiation entering a new age.


And what's happened, people such as myself that have been espousing this brand era, the sun has passed midday on our rap and that is brand is still important. But the way you produce or the way you submit brand is through product differentiation, better distribution, better customer support, more unique means of developing awareness. And the traditional icons of yesteryear want to hold on to the brand era. What do almost all of these companies have in common that have built tens, if not hundreds of billions of dollars in value?


What do they have in common? One of the things, at least they hardly ever advertise.


They hardly ever advertise, at least not through traditional means.


So brand Waze is an amazing brand, has nothing to do with their imagery, their brand identity, their logo or their advertising. But it is literally a 10x better product in some.


When someone talks about brand, ask them what do they mean by that? And it's usually someone trying to hold on to the days of the 90s when people cool people wearing blackberries and smoking clothes could show up and talk. A big game about intangible associations charge twelve percent of all media spend and have absolutely almost no definable metrics to define what success looks like. The brand era is over. Don Draper has been drawn and quartered. Thanks for the question, Judy.


Next question.


Hey, Scott Ross coming to you here from downtown Memphis, Tennessee.


Love the show, loved the television show and everything that you do. Keep it up. My question is around teaching versus doing. I've been asked to add junk in the spring while I run two businesses. Jim Collins once said, you have to choose between teaching and doing. You seem to have been in both worlds. Do you feel like you're able to balance out business and teaching, or is it something you have to choose one or the other?


Hey, Ross from Memphis. Now, you can absolutely teach or be an adjunct. And the industrial education process has this system where they bring in adjunct lectures, clinical calls who carry more water and get paid nothing. So it's a tenured faculty can consistently reduce their accountability and increase their compensation. But there is psychic reward. I started as an adjunct and at different times during my tenure, I've been an adjunct and a clinical and a lecturer based on a you know, whoever was the faculty chair, you know, whatever.


Don't don't ask questions. Just accept whatever title they give you. I think it's wonderful. But ask yourself, are you doing it because you really understand teaching?


Are you doing it because you want to be the campus environment?


Are you doing it because it'll be an interesting challenge for you if you're doing it just because you think you're fucking fascinating and you want to tell your stories, don't do it because it's a lot of work.


What I hate, what I hate are these friends of classes where someone who's very successful comes in and spends the first two classes talking about how awesome they are and then brings in all the rich and famous friends. That's not education. That's a luncheon series. And at many universities, we still do that and charge the kids for it. And it's total bullshit. It is real work.


It is real work to do this well and decide if you really love teaching and you want to be in it long term or if it's a vanity project. And I know that sounds that sounds a little bit harsh, but I find 50 percent of adjuncts didn't really want to teach. They were just under the impression that they're shit in their life and their careers, which was fascinating and it's not. But you can absolutely do it while you're working. I've always worked while I was teaching.


I've taught sometimes five classes and 700 students in a given year. And other times I've scaled back to one class and one hundred and sixty students. I'm doing one class kicking up in three weeks this fall. Two hundred and eighty students. I find teaching exceptionally rewarding. It's a fantastic platform in general. And while I criticize them, a lot of my colleagues are an incredibly impressive group of people. I've made really close friendships and it's just nice and inspiring to be around young people trying to better themselves so.


Two questions, why are you doing it, why are you doing it? I forget the second question, so I'll just say, go on, do it, do it.


Professor Ross from Memphis, there's so many things I want to see you. Just go, please keep sending in your questions, if you'd like to submit a question, please email a voice recording to officers at Section four Dotcom.


Algebra of happiness, my father just went through his fourth divorce. That's right, at the age of 89, he decided he'd had enough and has shed the last vestige of commitment that I think he will ever have in his life. Him and his wife each have been divorced four times. I think that adds up to a tremendous lack of character. But that's not what this algebra of happiness is about. When you are the son of his second marriage and there's more to come, you ultimately end up with different sort of semi family in your life or better known stepmothers.


And my stepmother, Linda, is staying with us in Nantucket, and I refer to her as Linda, my evil stepmother.


So when my dad began his third marriage in the midst of his second marriage to my mom, it obviously created a lot of distress and agita in my household. Ultimately, my parents split. It was a difficult time, especially, I think for my mom, a difficult time for me and less difficult for my father. I think in the 70s it was just easier for a guy to recover from divorce than a woman. Both my parents left school at the age of about 13.


My father, a charming and handsome, my mother smart and hard working. And so that meant my mother could be a travel agent or a secretary or a flight attendant. My father went on to be an executive at it and we just had our lives is sort of diverged. But anyways, beyond the sob story, I was set up to really hate Linda. My mom used to refer to Linda is that bitch. And so I was really set and ready and teed up to not like my dad's third wife, my stepmother, Linda.


But here's the problem. Linda is wonderful and she was wonderful to me. Linda had been told at a young age that she couldn't have kids. So when a nine year old and coteries and an ocean Pacific shared missing, his two front teeth showed up, she was instantly in love and couldn't help but spoil me. And I had never been spoiled. I didn't have grandparents in my life, European parents. It just wasn't. It was an entirely different ecosystem around the relationship between parents and children in the 70s.


And I think most most parents, most American parents, the approach, they have a kid.


So anyways, Linda used to bake these things called Buckeye's, these cookies that were peanut butter wrapped in chocolate. And because I'd be away for two weeks, she would wrap them individually in foil and drop them in my house, literally drive forty five minutes and dropped in for me. She would take me to Toys R US and had just this incredible sense for what a little boy wanted. And when I walked up the aisle, I was too embarrassed to say I wanted a remote control plane because they cost eighteen dollars.


You saw or sense in my eyes would go to them and would stop me and say, would you do you want a remote control plane? You know, every kid deserves and needs to be spoiled by someone in the first person that spoils you. You will kind of love the rest of your life. And that for me was Linda. And there are a lot of stepparents and my friends lives. My closest friend Adam, his stepfather, Paul, was this tall, handsome figure that never said a word who would mostly my only interaction with him growing up was he would remind me when it was time for me to go home, but he stepped in and was a wonderful role model for Adam.


And even just recently, I have a good friend and Bobby who has sort of slipped into the role of father for his to call them two new daughters, technically his stepchildren. But I remember being out with Bobby and having beers and him saying he needed to get home because he and his 14 year old daughter loved watching this reality TV show about fishing called Big Tuna. And they loved bonding over it.


And I think about not only how wonderful it is to be a good step parent, but how unusual it is, quite frankly, because I can't stand my own kids and they look, smell and feel like me. I can't imagine how much I would hate other kids, actually. I can't imagine how much I hate them. I'm pretty much not interested in anyone else's kids but my own. And I realize how terrible that sounds.


But people who show an irrational passion, who step into the shoes of a parent and agree to love irrationally and show an irrational concern for the well-being of someone else's biological children are a key component to what makes the world go round.


It's the it's the Lindas. It's the Bobbi's. It's the palls of this world that demonstrate the grace that not only make the parenting relationship more giving, but make it more generous, because to slip into that role and demonstrate that sort of generosity and to be, you know, to be that loving is really exceptional. So this week we're hosting Linda, my dad's third wife, and my not so evil stepmother. Our producers are Caroline Chagrinned and Drew Burrow's, if you like what you heard, please follow, download and subscribe.


Thanks for listening. We'll catch you next week with another episode of the Proview show from Section four in the Westwood One podcast network.


Remerge story is not nearly as exciting, Amazon's entered the wearables market with its new health product, Halo, an app and fitness band that uses high powered health tools. By the way, what isn't a high powered it's literally going to be getting your coffee at some points. Going to be a part. I still don't know what that means.


But anyways, it has a high powered health tools to track things, including your body fat percentage and tone of voice, which was my tone.


I just I'm not entirely sure what that means. And it's a little creepy. And it's a young man.


Don't use that tone with me, said your Amazon halo.