Episode 39, the number of signers to the United States Constitution, the atomic number of yttrium, my son was asked to write a thousand words on the periodic table.
I remember when I was asked to write a thousand words on acid and what happened. I tried, but my pen turned into a rainbow colored giraffe and then it melted. Let's make this podcast your melting giraffe. Go, go, go.
Welcome to the thirty ninth episode of the show and today's episode, we speak with Dambisa Moyo, a global economist and best selling author.
She's a baller, not only a great author, but also serves on several corporate boards and sort of a clear blue flame thinker and has an incredible personal story and talks about how the economy will shift and trends that will define the post pandemic global economy.
OK, what's happening? It's a big week and frankly, a big year for IPOs. Bloomberg data reflects that IPOs on U.S. exchanges have already raised a record 156 billion in 2020. And this week, both Jordache and Airbnb are expected to begin trading and both have increased their target share prices in some. Their boards have said we're sick of giving a POBRE on earned return to the institutional clients of Goldman and Morgan Stanley. And we want you to raise our ranges because all these IPOs have been going out and getting huge pops, which is nothing but a transfer of value from existing shareholders to new shareholders who, quite frankly, probably don't deserve it, as they have been investing in the company for very long.
By the way, what a victory for humanity. To a quick tangent, first vaccine given to a citizen, a nine year old woman in the United Kingdom.
Go humanity, go vaccines. Anyway, anyway.
Door dash, door dash, in my view, does not clear all of the hurdles. What are the hurdles? Tonight is my last class of my fall brand strategy course. 280 students paying seven thousand each one point ninety six million, or about one hundred sixty six thousand per class. Is a dog worth it? No, but is the certification they get and their ability to have that currency of an NYU Stern MBA stamp or tattoo on their forehead worth it over the course of their lifetime?
Yeah, still this. But anyway, anyway, it doesn't mean it's not morally corrupt. However, however, one of the gangster concepts we go through, and this is something I have held on to my entire business career, if you want to look at every strategy, every capital allocation decision, every company product or service through the lens of does it clear three hurdles, treys hurdles, mis amigos trace the first differentiation no to relevance or sustainability differentiation brand.
The term brand is synonymous with differentiation. Is your product a 10x product or service? Differentiation is the only business strategy at the end of the day that sustainable differentiation too. If you're fortunate enough to figure out a way to carve out something different, does anyone care? These two are in conflict with each other? OK, we're going to be the Internet Business School, Berkeley Business School. High School is actually contemplating this in the 90s. That would be highly differentiated.
But the problem is it probably wouldn't be that relevant to that many people. So the more differentiated, the less relevant and niche doesn't have that broad a distribution. So these two are in conflict with each other, I would argue. Want to go differentiated or you want to offer differentiation. You want to be really specialized, develop a very loyal following and grow from there. Is it relevant? OK, yes. Dauda, is it differentiated? I don't think it is.
We have GrubHub and Uber eats. I think these are substitutes. I don't think it's singular. I don't think it's that differentiated is irrelevant. Yes, it's relevant. Why more and more people having food delivered. Then finally, is it sustainable? I don't know. I don't know what modes you can put around this company other than so much capital that you buy out the competition and ultimately end up in a duopoly that's somewhat sustainable. Now, let's look at Airbnb.
Is it differentiated? Oh, my God.
Get out the painted giraffe or the acid induced business analysis there. This company is, in a word, singular. Nobody says, oh, I got a booking talk, Tom. No one says, oh, yeah, we got an Expedia. Everybody says, yeah, we're just going to get an Airbnb. This brand is singulars is irrelevant. Yes. Travel, renting apartments, short term stays all relevant. And then finally, let's look at the sustainability again.
I don't think there's any substitute here. I really don't. I think this company has built a moat the size of the Nile.
How have they done that? Think of all the other hotel brands they compete against. Four Seasons is globally relevant, but only relevant to a luxury consumer. Singapore Airlines is not relevant to that many people, and Marriott is relevant only to people in Europe and the United States. Airbnb is truly globally relevant, if you will. Well, what about Expedia or booking dotcom? Yes. Yes, they are relevant. But what does what does Airbnb have? It has supplied global supply and seven million properties across four million host.
You want to talk about Moat's you want to talk about differentiation, singular, relevant, increasing travel, people thinking about renting homes as opposed to hotel rooms, a better value per square foot. Oh and by the way, more covid free and and these ultimate network events. Moat's boom, boom, boom, hurdle's one, two and three. So so what are we going to see here? We're going to see big pops on day one. Even the increase ranges because everybody wants into the innovation economy and there's a ton of capital.
The market is awash in capital because investors have never had more Kabbage. And retail investors through the tail of the whip here have stimulus money saving. Rates have never been higher, that's going to pour into the market long term, long term, this is definitely Airbnb, in my view, over Jordache. Business Insider reported that equities analyst David Trayner believes door dashes IPO will be the most ridiculous IPO of twenty twenty. What does he mean by ridiculous? Holds no value beyond bailing out private investors before an unsuspecting public investors realize that business is not viable in its current form.
Hello Mr. Trayner. Don't hold back. What else is going on? What else is going on? Warner Media CEO, made the baller move last week that will shake up, shake up the film business and it's never going to be on.
Schook, we are taking this Etch a Sketch called Films where shaken that bitch. And we're going to have to draw new lines. Wonder Woman 1984, which, by the way, is getting great reviews and all twenty, twenty one Warner Media films are coming directly to our screens.
That includes Dune. I think it's top guns in there, a bunch of Boller movies. The company announced that all seventeen films will be released in theaters and on Miramax. The same dad, no extra cost. They're not pulling kind of the Disney moulin. Thirty bucks are saying boom. It's on HBO, Max. For the first month of each film's release, the company said in a statement that open, quote, The hybrid model was created as a strategic response to the impact of the ongoing global pandemic.
Now, why was it created? Because AT&T has lost the narrative.
Stock prices used to be a function of two things, or they still are the narrative in the numbers, the numbers, EBITA growth, margins, the narrative. What is our vision for this company? What is the business model? Boom, kind of 70, 30 numbers. The narrative, it has flipped. It has flipped. It's now about the narrative. The narrative of Tesla is dramatically better than the narrative of Toyota, Daimler or Volkswagen. And by the way, and by the way, despite producing 400000 cars instead of twenty four million, is worth more than those three automobile companies combined.
It's now all about narrative. And AT&T, the one hundred and eighty billion dollar firm, has lost the narrative. Why? Because it has a great hundred and fifty billion dollar business called telecommunications that has been cleared by the 30 billion dollar Time Warner acquisition. And the narrative, quite frankly, right now is this acquisition didn't work and there is no synergy. That is the narrative. They are taking back the narrative. They are taking back the narrative and they are going to say, I know, I know we are going to become the largest subscription revenue company in the world.
They're absolutely going to have to renegotiate the contracts with all the talent that they promised a piece of the back end. But think about this. Think about this. One hundred and eighty dollars billion in revenue, approximately three hundred and sixty billion dollars in enterprise value. What does enterprise value is your market capitalization, plus your debt, minus your cash. AT&T is actually the most indebted company in the world with about 160 billion dollars in debt plus or two hundred billion market cap boom.
Three hundred and sixty billion dollars in enterprise value, 180 billion in revenue.
Meaning meaning they trade at two times revenue. Let's look at other great recurring revenue companies. Netflix, Apple, only twenty four percent recurring revenue, but it's moved from ten to twenty four, so it has been recast. And then Microsoft, the ultimate recurring revenue company B2B through Microsoft Office, also trades at approximately nine times revenue. So Netflix, Microsoft and Apple nine times revenue, AT&T two times revenue. If they can use that pulsing value and push Wonderwoman 1984 into the homes and take their HBO Macs, really anemic subscriptions and renew or catalyze growth and start to capture back the narrative.
Hi, I'm John Snacky. I am the CEO of the largest recurring revenue company in the world. I am the Boller subscription firm of all Boller subscription firms. There is huge headroom, huge headroom in between that two times multiple and the nine times multiple that the other subscription revenue bottlers are getting. And so, OK, they give up one point two billion dollars at the box office. That sounds like a lot of cabbage and it is, but it's currently worth about two point four dollars billion to the company.
And if they can just get that multiple up, that multiple up on their one hundred and eighty billion revenues, if they can just get it up one basis point for every one basis point, they get it, they get another one point eight dollars billion that they can go from two times revenue to two point one. If they can take back the narrative, they get another eighteen dollars billion and stakeholder value.
There's a lesson here. There's a lesson here. The most accretive actions of the last ten years. Accretive is an insecure academics way of saying basically how do they add or increase shareholder value? The most accretive actions have been a move from transactional to subscription business model.
And if AT&T can recapture, can take back, take back the narrative and say we are the largest subscription company in the world, not a company that made the dumbest acquisition of the last ten years since Time Warner acquired AOL. Funny that probably two to the 10 most most disastrous and. Positions both have the terms, Time Warner in them, but that's a different talk show, if they can recapture the narrative and say we are the Boller subscription company and just take their multiple from two to two point one, much less to nine.
This is an incredibly accretive prediction prediction. AT&T stock, which has been down every year for the last several years, hits 40 bucks in twenty twenty one. It has its best year in the last five years. We are not going back to the theater. We are not going back to the office. Will be a short term sugar high. The world has shifted. AT&T has done what any company needs to do to move to subscription. They have crossed the valley of death.
They have shown real leadership here and it is going to pay off in spades.
The baller move. There is no free lunch, a move to subscription, a move to recognizing dispersion. Any big change in your life? There is no getting lucky without taking a big risk and putting yourself in a position to be really like you. Stay with us. We'll be right back for our conversation with global economist Dr. Dambisa Moyo. You've had enough to deal with this year, so don't overthink your holiday gift since we've all been living in our sweatpants anyways, give your loved ones some pro level Tommy John loungewear I am lounging right now and Tommy John underwear.
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Tech entrepreneurs are in an all out race to cash in on our collective addiction to social media. It's a fight that started in Silicon Valley that's now gone global. In the newest series of Wonderings business wars, Tick-Tock versus Instagram, they tracked the war between the two social media giants. Within the last couple of years, Tic-Tac has become one of the most popular apps around the world. It's even garnered the power to completely reinvent the music industry. And despite political constraints, the app has recently faced Tick-Tock A still managed to pose a serious threat to its American counterpart, Instagram.
This season of Business Wars will touch on the history behind the founding of both apps and what they've done in recent years to become two of the largest social media platforms to exist.
Listen to the latest season of business Tick Tock versus Instagram on Apple podcast Spotify or listen ad free by joining hundred plus in the wandering app.
Welcome back. Here's our conversation with CompuServe Moyo, a global economist and best selling author. She's a huge influencer and key decision maker for strategic investments and public policy and serves on a bunch of very high profile boards.
Dr. Morrow, give us five things. Are some things that you think will kind of define the post pandemic economy. What are the enduring changes for our economy?
So from my vantage point and really based on looking back in history in particular to the Gilded Age and the years and decades after the period of eighteen seventy to nineteen hundred, the five things that are going to define the macro economy, I believe, are really characterized by the overarching view of a more progressive world and one in which the government is more important. So first of all, I think we will see bigger government and by that I mean larger debts and deficits.
If you can imagine such a thing, given where debts and deficits are today, part of that is is really the government's role as a as a provider of welfare, I think will continue. The second point is that government will become bigger and much more important in terms of being an arbiter of capital and labor. We've already seen signs of this, and by that I mean much more important in terms of employment, much more important in terms of supporting businesses.
So, for example, the fact that the Fed in the United States have been buying some investment grade debt to support certain corporations. And also we've seen in the U.K. where there have been massive furlough schemes, which I think will be more needed over the long term. I think that's the second second thing that we'll continue to see. The third thing that I'm sure to see, which is a quandary of government getting bigger, is that I think the private sector will get smaller.
And in that respect, we've already seen some of these trends over the past decade. According to a wheelchair and other data sources, the number or the proportion of publicly traded companies in the markets has gone down by about 50 percent. And I think that is a trend will continue to see partly as this much more consolidation and M&A in the markets, but also as many companies shy away from the sort of heavy regulatory scrutiny and burden both from institutions and regulators, but also from society more generally.
The fourth area that I think is really important is that we're going to see more taxation and much more regulation. Again, this was very much thematic in the period post The Gilded Age, followed by the crash in nineteen twenty nine where you started to see much more antitrust legislation. We've started to see hallmarks of that, especially as many of the largest sectors banking, airlines, pharmaceuticals, technology, et cetera, are now dominated by just a handful of corporations globally.
So we've ended up with oligopolies in many of these key sectors, essentially organically. But I think there'll be a greater push from governments to to really be much more aggressive in the antitrust perspective. And the fifth one area of fifth area that I think is going to absolutely define the post pandemic era, which was actually something a trend that was happening before covid hit in earnest in the year. Twenty twenty is there will be greater globalization. And just as an umbrella concept, globalization is about trade.
It's about the movement of capital for investment. It's about the movement of people in terms of immigration. It's about the commonality around standards so such as intellectual property. And it's also very much about institutions that govern the global monetary and sort of trade and commerce environment such as the Bretton Woods institutions, which were established in nineteen forty four, such as the World Bank and the IMF. I think I know there was already trend lines showing that that the globalization reduction and trade in capital, a stronger and more aggressive anti-immigration policies, the risk of a splinter net that you will have a US led and a China led versus a China led type of intellectual property war in technology space and really the rise of alternative multilateralism.
I think all of these aspects of globalization will gather momentum in the period post the pandemic. So those are the five things that I would say would highlight the post pandemic era that a couple of these things when governments getting bigger, private sector getting smaller might.
Traditional capitalist DNA says that that results in lower levels of output and productivity and that is a bad thing. Where do I have that wrong? What are the good what are the upsides and the bad sides of a shift to more resources, the government coming out of the private sector?
Well, I think you're not wrong on the superficial level, but I think there's an important caveat and I should say an important assumption that you're making when you make that claim, which is to say that government is acting inefficiently or ineffectively. We have had periods and I should say I'm I'm like you. I'm very much a sort of red blooded capitalist. I really do believe that the private sector needs an important central role in driving innovation, growing the GDP pie, improving livelihoods and really driving human progress.
So I that is very much what I believe. But I also think that we often forget that when you look back in history and even recent history in the United States, for example, the government has been a key player in a whole host of areas that have helped to drive the success of the private sector, whether it's through the Manhattan Project or DARPA, Silicon Valley or even go back exactly to shale. But also going back further in history, the notion that somebody somewhere with the help of state and ultimately federal government thought about high schools developing a program or a template for for education that could be broad based.
I mean, these are elements and, of course, infrastructure and just a handful of elements of government which acts on the data driven, forward leaning, measured outcomes and in a non corrupt way can be incredibly catalytic for economic success.
When I hear so I'm going to use the s word socialism, but I also want to acknowledge it's not necessarily a bad word. Seven of the 10 countries that report the happiest citizenship are socialist. So I want to use it just as an economic construct. It's not an insult. It's not a a warning sign. I find a lot of people in the media are using socialism as some sort of cautionary tale like socialism. But when I think about socialism, I think it's OK when the state controls the means of production and how it spoils good divvied up.
And it sounds like what you're predicting in a post pandemic world is, roughly speaking, we're moving towards a more socialist construct.
Well, I think, again, really depends very crucially on how those governments operate. If you end up with the government that is not really interested in growing the pie, but is more interested in redistributive approaches, I think, yeah, that is an outcome that we ought to all be dissatisfied with. That is not to say that we should be blind to concerns around income inequality getting worse, social mobility down by 50 percent in the United States over the last several decades, et cetera, et cetera.
I mean, those are are we have to be led and policy should be driven and curated based on the facts, which is that there are certainly losers, winners and losers in a more globalized capitalistic world. But I don't have any objections to a socialist, quote unquote, states that where you see a bigger pie. And then again, I'm using your terminology that I know in this context the notion of socialism, meaning that government is much more involved as an arbiter of capital and labor, as opposed to one in which the spoils are just you know, they're just there to to redistribute.
I don't think that that is an environment that we should aspire to. And one one example of work that I've done, my first book, which is now over 10 years old, was really a critique of these large aid programs, which on paper seem very attractive. But we want to help the poor and the best way we should help them is through the aid transfers. But what I was arguing, though, that is not the best way. And you actually create dependencies that are longer term deleterious for economic progress and ultimately for human human progress as well.
So that's that's where I stand on this. I'm all for government providing public goods, such as infrastructure, providing public goods such as education and national security. I have deep, deep reservations around government that's only see themselves as essentially being short term in their thinking and very focused on redistribution and not much in terms of long term thinking. So the rescue package, the stimulus, the Kahrizak cheap loans grade our response so far, our economic or fiscal and monetary response to the crisis, what did we get right?
What did we get wrong? Well, it's very hard to say, I think, you know, one of the tendencies people have is to throw sort of peanut gallery commentating on things that we don't have a full understanding of. I happened to serve on the boards of a number of large global complex organizations. And one thing that I can assure you is that the optics from outside of when boys are dealing with certain issues is quite different from the reality.
And I'm often struck by something that President Obama said, which was by the time something hit his inbox, that means it was extremely difficult because if it were easy, somebody else would have solved it. And I think that if it were easy to resolve the pandemic, it's in no one's interests for us to be now, whatever it is, nine months. And sitting at home with the aggregate demand shock that has left the economies, a global economy, incredibly vulnerable.
Who's who's benefiting from that? I don't think anybody could be that short the market. But, you know, what we're learning is that this is a multidimensional problem and it's a multiple period problem. And I think just again, outsiders peering in. I think the original approach across the world was three things. I think it was one month. It was not multi-dimensional. I think everybody interpreted it as being a health care problem first and that all the advice came from health care experts.
It was very little sort of let's bring a bunch of experts around the table, whether they're economists or social anthropologists, et cetera, because I think that was one error. A second Theros. I think we didn't really view it as a long term problem. I think there was a lot of a sense that it would be quickly resolved that we couldn't imagine that we just on that. We just couldn't imagine we would not have not planned for something that could happen for another couple of years.
And even with the evidence that Spanish flu was from 18, 20. Excuse me, I beg your pardon, 19, 18 to 19, 20, we still assumed we know with technology and knowledge we'd be speedily out of this situation. And yet here we are now. We have to face all the distribution issues around the vaccine, et cetera. The third thing, which I think we could have done better is this is a global health care problem.
And yet we've all gone to our respective corners to solve it unilaterally. So I think there for me, especially somebody who is quite a globalist, I think that that's a failure in the lack of coordination, very emblematic of some of the globalization points that I raised earlier in a world where people think that the world should be more balkanized, we'll say more about that because you predict a globalization.
And to your point, Taiwan with the same population of New York that's had, I think, twenty eight thousand deaths, and then Taiwan has, I think, 60 infections and six deaths. And it seems seems that we've decided that our superiority or exceptionalism or we make excuses for why we can't learn from them, doesn't do globalization is not really a step backwards.
Oh, from my vantage point, absolutely. But I, I am very much a big believer of what's offered or been proffered in textbooks around globalization. I think we should all produce in the world what we're best equipped to produce. That's the fundamental comparative advantage, a competitive advantage, however you want to to describe it. And unfortunately for a whole host of reasons, we've ended up in a world where places that should be doing certain things and give an example of my home continent of origin, Africa, which is largely subsistence farmers, largely agricultural.
It has the largest proportion of untilled arable land left on the planet that the economy, those economies really should be at the forefront of feeding themselves as well as the world. But you have subsidy programs which are very rational in some respects, more political respects and economic respects, because politicians want to win the state of Iowa and Idaho, etc. So they've got to pander and protect the markets of their farmers and similarily through the Common Agricultural Policy in the European Union, they want to protect British farmers and French farmers.
And so they lock out African and South American food producers. And as a consequence, we move away from from globalization. So I understand the rationale on paper, but we all we're all poorer for it. I wish we'd been much more coordinated global world, but it's a far cry. The reality is a far cry. What I'd call realpolitik is a far cry from what is what is in textbooks.
When you look at our economy and our policies, if there were one or two structural changes you would like to see implemented, what would they be? It's a great question.
I actually published something on Lincoln recently. I won't go through all of them, but it was sort of three. Things we should start doing, things we should stop doing, and three things we should keep doing, and this is for the for the United States, I won't go through all of them. But it's certainly the case that for the United States, for me, the biggest vulnerability is the political environment. It's far too short term. President elect Biden is not even in office.
And yet we're worried he got to two years before the midterms, another two years before the next presidential election, as you know, takes two years of campaigning. So really, we're in a situation where the political infrastructure in democracies is misaligned from a lot of the long term problems of the global economy and the US economy faces, whether it's technology and the risk of a jobless underclass, demographic shifts that are leaving people unemployed, concerns about the environment, the all long term income inequalities.
These require deep thought and they require long term solutions. But our politicians are rewarded for short term thinking. The other thing, which is to me very obvious and it's been frustrating to see decade after decade not really resolved with any gusto is the is the sort of boosting the infrastructure. America's infrastructure is graded D plus by the American Civil Engineering Corps. You know, this is just not the the sort of backbone of a successful economy for the 21st century.
And similarily know education remains incredibly weak. Look at the OECD, PISA statistics in mathematics, reading, science, American students. And now they used to be in the top three. Now they're in the bottom third of the world in terms of rankings. And as you probably know, this generation of Americans for the first time in the history of the country since seventeen seventy six will be less educated than the preceding generation. I mean, this is just not a formula for success, no matter what caveats some people might attach to them.
I think we really have a lot of work to do.
Yeah, the short term thinking here, there's just so many examples, I think, of the H-1B visas, 50 percent of doctoral candidates are immigrants and we've decided to take our secret sauce and and and stop it at the border. Right. And then but the ultimate manifestation, and I would be curious to get your view here is mine. I'm a glass half empty kind of guy is is our our skyrocketing deficits. We show up and we say, I know we won't have to tax the rich more because they're my donors and we'll throw bread and circuses at the populace and we'll borrow money against future generations.
I mean, at what point do my understanding is we have the budget this year that we were projected to have in 2040. Forty four, we've exploded our deficits. At what point do the deficits begin to register a toll on our our current abilities? We know that long term someone's got to have to pay this money back. But at what point does you know it's not a problem till it is a problem? When does it become a problem?
Yeah, well, frankly, it becomes a problem when the people who are holding your debt no longer want to lend to you. And, you know, China, if it's not number one, it's usually number one or two for the first and second position between China and Japan. China is the largest foreign lender to the US government. I mean, this is just a vulnerability that to me seems so stark. How can you have your biggest lender be in many, many respects your biggest rival?
I'm being very harsh in terms of trade, in terms of security, intellectual property, et cetera. But on the other hand, they're holding the largest amount of debt, which they can very easily put the squeeze on on the US. Now, some people say, well, we're a reserve currency. Well, you know, I really do think that the world is changing incredibly quickly and there needs to be a better recognition of what is at stake.
And I worry that that's not the case. Some of the other reference to your to your question is have a look at the book that was written, the number a couple of years ago, a few years ago by Ken Rogoff and Carmen Reinhart, two economists I really like a lot. They wrote a book called This Time It's Different. And they basically looked at nine hundred years of government debt and they concluded that when government debt to GDP ratio goes over 60 percent, it's becomes incredibly dangerous.
Precarious place, not only because of what I just said, who's who's lending to you, but also because your economic growth starts to slow considerably. And just as a way of thinking about growth, you need to be growing at three percent per year in order to double per capita incomes in one generation. That's a generation being about twenty five years. So if you're growing below three percent and four governments that have 60 percent debt to GDP ratios, you're really growing around two percent.
You have enormous vulnerabilities, which could be anything from income inequality. Problems, but can very quickly seep into civil unrest and more deep seated challenges to the sort of viability and stability of an economy. Perhaps the last thing I would just point out is, as you know, the US debt to GDP ratio is now one hundred percent debt to GDP globally. Debt to GDP is around three hundred and twenty percent. So, yes, to your question that, you know, where where are we on this?
I think it is a pretty precarious place, which is part of the reason I think, you know, I can see on the surface why the optics of a new president in the White House is appealing and attractive. But I think in terms of what can really be done, I think there are very few levers left, if any, for the United States, if they're not really sort of embarked upon in a very aggressive way.
Yeah, I think of Japan. I mean, I remember business school as the ultimate luxury item. And I remember the dominant cohort in my business school class in 1992 in Berkeley was Japanese kids because the economy was so strong there. And now I think about how their economy, it feels like it's just gone sideways for the last 20 years. And it's to your point, it has that incredible debt to GDP ratio that it seems to have hamstrung them.
What about so if you think about or gosh, are you even thinking about the Suez Canal? Didn't we didn't we force the British to do what we wanted because we held their debt? I mean, we are very vulnerable right now, aren't we?
Well, it would seem so to me. I mean, I was born and raised in Zambia, southern Africa, which is one of the poorest countries in the world, and you may have seen there. And they now have the somewhat non illustrious title of being the first country to default because of covid. And they've been basically under this is this happened in the last couple of weeks, but under immense pressure, enormous squeeze from China who bought them the government's debt in the secondary markets and were really reluctant to to engage or to to, you know, to do what generally happens when you need to restructure debt, you extend the maturity, you change coupons, and then they've just been reluctant to do that.
So forced the government to default. And so do I think that the United States is going to default? No, I don't think so. And that's certainly not in the next period. But there are a number of other vulnerabilities that are second order effects of having a government that is so vulnerable in terms of debts and deficits such as the cost of capital. You probably are aware that 20 percent of American companies are now considered zombies. By that, I mean, they don't even generate enough cash flow to pay the interest, just the interest of the debt that they hold.
There are other aspects. You start to see massive trade offs in how government allocate capital. We talked about some of the weaknesses that governments have certainly in the United States around a poor investment in education, lack of investments in infrastructure. Well, that's because something has to give. So they have to pay the debt back. Well, that means other areas that will suffer. So I think these things are already the dye is already cast. If I may use a cliche, I think we already are familiar with many, many of these tradeoffs.
Perhaps we haven't aligned them as being part of the debt problem, but I don't think they really are. And you serve on a bunch of corporate boards. I know you're interested or have written about corporate governance. What do you think are the one or two structural changes or what would how would you like to see boards of directors of public companies change?
So just to give some context, I do have a book coming out in the spring 2020, one called How Boards Work. I think that there is a lot of a sort of a blind spot by a number of people, even even our own employees, about what the mandate for the board is, what levers boards have to influence. Change boards have been around since around sixteen seventy four and by and large we haven't changed that much. I mean then the margin that they have been some changes, but really fundamental change hasn't really been the case.
I see that really with part to maturity, in part humility, because I think there's something to be said about a good governance structure. But on the other hand, I don't want to claim to assert that other boards didn't have challenges. I mean, try being a board member in the middle of World War One. World War Two must have been incredibly difficult. So know it is challenging. Yes. However, I do think there are some specific opportunities.
I think boards need to have more visibility around ethical issues as one area. So there are some companies that are going as far as thinking about having ethics committees on the board. And this is largely because we have a lot of ethical issues around data privacy, use of data privacy. We all want the vaccine. We all want to can secure yesterday. This can soon as possible. But, you know, what freedoms are we willing to sacrifice in order to to speed that up?
Do we want our pharmaceutical companies to do trials in a place like China where jurisdictions where the use of data is perhaps not as managed or policed as aggressively as the West? So that's a fundamental question. I mean, there are other questions such as ESG broadly defined and climate as one example. How do we think about climate and ESG compliance being? Is it is it comports with being an investor in China or is it against being an investor in China?
I mean, this is the questions that I think ethics committees on a board on ethics lends and a board will have to consider the other one. Another example of something I think would need to change it is in some respects obvious, but in other ways not. And that is really we do need to have better understanding of tradeoffs. I fear that there's a lot of campaigning, a lot of very aggressive policing of 21st century capitalism boards specifically. I mean, there's a campaign to defend companies, but there's just a lack of understanding about the importance of corporations and their role in the world.
If I may give you a very quick example. On the one hand, we all I think there are very few people who are climate change deniers. I think the evidence is pretty clear that human beings are contributing to the heating of the world. But on the one hand, we have to do something about climate change. On the other hand, we can't be so reckless as to just turn the lights out when they're about one point five billion people on the planet who don't have access to energy in a COST-EFFECTIVE and sustainable sort of stable way.
This is a problem because we might solve one problem, i.e. we turn out the lights because we want a sort of more sustainable energy approach. But on the other hand, we leave a lot of people incredibly impoverished, no access to education. And you create another problem because then you have mass disorderly migration, like to encourage people to think about. Right now, we spend so much time on zun screens and really heavily dependent on the virtual and electronic says you and I are doing right now.
But the truth is, if you're sitting in a place like my home country of Zambia for 17, 18 hours a day, you don't have any electricity because of load shedding. And it's the same is true in places like South Africa. So if you have and I know this to be the case, that we have wonderful students from Africa who got into the best schools in the United States have to the Harvard and Yale is of this world into the Oxbridge bridges of of the United Kingdom.
And they went home in March because of the pandemic. And the classes have started on Zouma. They have no access to to because of unreliable energy, have no access to the classroom, and all of a sudden they're being left behind. So it's a very specific example, but it's a very generalised problem that we cannot and should not be in a place where they're being forced to answer questions without thinking more generally about trade offs and broader concerns for society.
So to wrap up two things, I want to do a lightning round with you, but I want to give you the ability to pass, because some of these questions, someone is thoughtful with your credentials, doesn't want to just want to give a three or five second answer in a decade global superpower, China or the U.S. or other. Could it be both of them or what does one does other mean somebody else? I was thinking somebody else would say more.
Now, Samaa, I think that will be finely tuned. I think that both economies will be important players in different in different areas and there's going to be forced cooperation. Fifty 50. Well, that's optimistic.
I think that's actually probably a decent for my portfolio sense. And do you stock market Nasdaq up or down next the next 24 months. Up, up, yeah, no. A number of households that are food insecure in the U.S. up or down over the next five years, I'd say up.
I think the number is one in seven in the US. I fear it's going to be higher. Yeah.
And do you think that we as a nation become less or more polarized?
I'm afraid it's probably going to be more polarized.
So let me just add to that. If there's more food insecurity, which sounds like more income inequality, if we become more polarized, is the risk of revolution much greater over the next five or seven years in the U.S.? Well, I would say in principle, risk of anything, yes, is rising, but I think at the same time the institutions in the United States are becoming more transparent, more inclusive. I think what needs to be done is, is greater conversation.
I've been reading this book. I'm actually reading a book called The Art of Thinking Clearly, which came out a number of years ago. But it's really interesting because we make so many fantasies and so many assumptions made about what quote unquote the other side think. And so I think we have the policies, Dudi, and the next certainly generation, but certainly the next five years or so is really to try and bring people together, having proper conversations about what America means, what it's supposed to be, and how it's going to get to that place as opposed to pointing fingers.
And I talked about this, I think one of the weaknesses in the country, which I really love living in America, but one of the challenges has been it's been too easy to blame someone else. It's always China's fault. It's globalizations fault. And there's no real acknowledgement that we've made some catastrophic errors that need to be rectified. So I'm optimistic about the US, but I think they're very quick to solve problems.
And last question, advice to your twenty five year old self or specifically, we have a very young viewership on the podcast here. What advice would you offer them? I would say two things, one is things take time, don't try and be clever, you know, with all the shortcuts, they don't exist. So you've got to do your time basically. And the other one is no doesn't mean no. It just means not now, which I think is really important.
And people get told no and they think it's the end of the world when actually it just might mean that you need to work a bit harder or differently. And so you shouldn't be discouraged. It just doesn't mean no. It just means not that.
Doctor Dambisa Moyo is a global economist and best selling author who influences key decision makers and strategic investment in public policy. A trusted advisor on macroeconomics, geopolitics and technology themes and serves on a number of global corporate boards, including 3M, Chevron and Condé Nast. She worked at the World Bank and Goldman Sachs for nearly a decade and joins us from her home. And where are you, Doctor? Where are you right now? York City and New York. Greatest city in the world.
Greatest city in the world. So nice. They had to name it twice. There you go.
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Welcome back. It's time for Office Hours, a part of the show where we answer your questions about the business world, big tech, higher education and whatever else is on your mind. If you'd like to submit a question, please email a voice recording to office hours at Section four. Dotcom question number one.
Hi, Scott Bean here from Colorado. You mentioned placing a recent investment across it. What do you think about then pivoting to more of a peloton type business model instead of just franchises? They could also sell a home gym in a box with a TV and livestream classes. They already have the celebrity trainers with massive social followings across love real time leaderboards. And it plays well with a home renovation wave and what is often the most overlooked room in the house, the garage.
Curious to hear your thoughts. Also, what do you think?
Thank you, Ben from Colorado. It's a really interesting question. I am an investor in Crosthwaite and I've had one conversation with the CEO and some of the board members, but I wouldn't say I'm really informed around their future strategy or what they're going to do. And the nice thing about it being a private company is that you can talk about it openly or I'm not on the board, so I don't have any risk of going to jail by disclosing secrets.
Or my cousin hears me on this podcast and starts trading the stock anyways. Connected fitness, whether it was Lululemon 550 million dollar purchase mirror or Teletón skyrocketing stock price. Absolutely. It's a trend. Crossfade has the brand equity. They have the trainers, they have the dispersed workforce. The issue is, is it a connected device is no easy task. I would imagine that Peloton has spent several hundred million dollars and probably a couple of years and probably has several dozen patents on their bike.
A piece of hardware like that that is connected, that it's durable is no small feat. This is this requires a certain level of industrial engineering, technology and software talent that, quite frankly, I don't think Crosthwaite has right now. So the question is, do they build it? Let's assume you're right. It's about connected fitness and something in the home or specifically in the garage. Yeah, absolutely. It's a good idea. I wonder if they'd be better off partnering and being the operating system or a branded content provider or if they, in fact took advantage of their human capital.
And that is probably the 10000 plus Crossfade coaches or trainers they have and figured out a way to get that person in your garage or helping you or doing group workouts in your backyard. I have my crosthwaite trainer personal anecdote. I work out of the Crossfade in Delray Beach, covid hit, and I hired the guy who owns the gym. He decided to sell his stake in the cross for Del Ray because it is challenged in an era of covid. And now he comes to my house four times a week and he trains me in my backyard.
If that sounds like white privilege, trust your instincts. I'm blessed. I have the resources to have this wonderful trainer, Sean, the flock of the Flock Fitness come to my house and train me in the backyard or in the garage.
As you pointed out, there's got to be a way to distribute that type of expertise, whether it's through an app, whether it's through YouTube videos. But you're absolutely going to see a dispersion. I just don't know if it involves hardware. What can I bench? I'm scared to do, Max, now because I'm all about injury prevention. When I was young and crazy and on creatine and thought that lifting weights was a sign of your masculinity, at one point I could bench about three hundred and fifty pounds and I weighed one hundred and eighty.
Things have changed dramatically since then. I weigh the same amount, but the weight has been redistributed. Isn't that odd? Anyways, thank you for the question, Ben from Colorado, question number two.
Hi, Professor Galloway. My name is Heather and I live in New York City. I have been following you for a while and I love your work and light of your new podcast. I wanted to ask you about your thoughts on the podcast industry. It seems like podcasts are now competitive territory for original content. I'm curious about your thoughts on what the future of the industry looks like, especially for small, independent producers. What seems like the current primary ways to directly monetize with podcasts are through sponsorships and subscriptions with a partner like Patreon.
Since podcasting has a low barrier to entry, there are tons of independent producers out there trying to release new shows. My question for you is where do you see room within the industry for innovation and perhaps new ways to monetize?
Heather, thank you for the thoughtful question in the kind words. So I'm not here with a message of hope. I think almost every industry, including podcasting, I mean, so there's some wonderful things about it. There's a dispersion of creativity and you get to bypass the kind of the old guard. So it's no longer about trying to impress a creative executive who works with Jeffrey Katzenberg. Such a you can get budget to be on quippy. Fuck that.
You got an iPhone, you're creative, you do a video and boom, you're on Tick-Tock. And ideally, there's a way to monetize it. However, however, most of these. Platforms do a really good job of ultimately stretching out all of the margin and then only the biggest players really make a lot of money and there's just an incredible crowding of the majority of spoils to fewer and fewer players. That's just a function of our network economy, whatever you want to call that.
And at the same is happening in podcasts. There are now over a million podcasts. I would bet less than two or three hundred are self-sustaining, maybe a thousand, maybe a thousand podcasts. So you're talking about kind of essentially a ninety nine point nine nine percent unemployment rate if employment is defined by making your soul living from that endeavor. The ecosystem, though, is pretty productive. And that is I think there's a better future in the technology and the engineering in the production of podcasts, because a lot of podcasts are being used.
They're being used to market another business which is more easily monetized. So McKinsey and Harvard will have great podcasts to promote other products. Andreessen Horowitz has a bunch of podcasts to raise our awareness and increase their deal flow. Salesforce will have a bunch of podcasts that say, Hey, we get IP, hey, small businesses love us, touch us more so we can sell you cloud based CRM software. These are difficult businesses to run a standalone businesses. Is there a silver bullet?
Now it's just really hard work. It's hiring really smart people. Greatness is in the agency of others. If you have the resources. There's a reason I thank Carolina Drew at the end of every show, mostly because it's written in the script. But beyond that, I recognize that they they are the ones who make this make this happen. A platform or distribution partner is really helps because you need marketing, you need awareness. But more than anything else, it's about trying to do great work and have an original distinct voice.
And even then even then, it's pretty much a shitty business economically, however. However, this is what's going to happen with podcasts.
Podcasts have an asset and the asset is when somebody comes up to me and high fives me and says, You're the man I know. They've seen one of my videos where I'm sort of outrageous when someone comes up to me and grabs my hands and wants to have a long conversation with me about their mom or something that's happened to them or being a dad. I know that they've read one of my blog posts on numerous, numerous. When someone comes up to me and starts talking to me as if they know me, I know they've listen to one of my podcasts.
Being in people's ears creates a relationship and an intimacy and a level of goodwill that translates to something in the business world called NRPs. And basically deeper pocketed companies that can better monetize apps are going through industries and buying high end apps products. So think about this. Think about this. Hollywood has a very loyal following the content makers. At the same time, cable companies have really low NPS. So what did Netflix do? It started creating a lot of content that had high ups and bypassing the low end gatekeepers.
What is going to happen with podcasts you're seeing and now wonder is being acquired wondering which kind is the HBO? Podcasting is being acquired by Amazon? Not for three hundred million. Joe Rogan goes to Spotify. Why? Because podcasts have very high and very high loyalty, not great monetization. But if Joe Rogan can sell a few million more subscriptions to Spotify, that is worth hundreds of millions of dollars and makes acquiring him for 100 million bucks an incredible value of mandery can make Amazon music more interesting and more differentiated with original vertical content than Amazon only needs to go up 0.01 percent and boom, the acquisition was wildly accretive.
So what are you going to see? Take the top 100 podcasts or better yet, take the top 10 podcasts and every category. Look at the ones that are still independent and a third of those are going to be acquired over the next 12 months by bigger players who can monetize it by selling paper towels or handsets. What does this all mean? Podcasting, I think, is like acting. I think the unemployment rate is really high and I want to discourage you, but it typically needs to start out as a side hustle that is difficult to make a standalone living in podcasting.
And you're going to see a flurry of acquisitions in the podcast from over the next 12 months. Thank you for that question, Heather, from New York City.
So this is a 39th episode, and whenever I hear the number 39, I think of when I was 39 because I am a narcissist would be it was a pretty important year in my life. Specifically, it was the year I lost my mother. I am a only child and I was raised by a single parent. And I had, like most only children of single parents, a very strong bond with my mom. I didn't have a family. I wasn't even in a relationship.
So it was basically me and my mom against the world. My mom was diagnosed with late stage stomach cancer, metastasized from breast cancer, which she had survived twice, and she was basically given three months to live and asked me to help her die at home. And I get a lot of letters. I write a lot about my mom. I get a lot of email from people asking about advice for end of life or giving care. And so I just wanted to spend a moment providing some advice.
Roughly speaking, I hear from people who are grappling with how to best balance work life with taking care of a sick parent. And there is no script here. There is no user's manual. A lot of it comes down to is situational or the relationship you have with that parent, the resources you have, whether you work for an organization that will give you time off or flexibility.
But a few of the things I learned and I would advise anyone who is in the position of taking care of a parent or a loved one towards the end of her life, one of the learnings was to care for the caregivers.
There were my mom, you know, there were just certain things I couldn't help her with. And so her sisters, four of them, took shifts and came from Britain to help take care of her. Her best friend helped take care of her. And I used to spend a lot of time not just taking care of my mom, but taking care of the caregivers and the people that are taking care of that person, make sure that they have some time off and some enjoyment.
Really try and embrace the media that your parent is into, whether it's music, whether it's photographs, whether it's watching. I used to watch Jeopardy and old episodes of Frasier and Everyone Loves Raymond with my mother. But that was it sounds kind of, you know, boring or passive, but it was really enjoyable for us. Spent a lot of time going through pictures, let him or her relive their life again. Also learning for me is to have your own boundaries.
There were three or four times where I would hear from either my mom, sister or the woman handling her hospice care. And they'd say, it looks like this is it. That happened about four times. And when I say this is it, this was supposed to be the weekend where my mom was going to pass. And what I had decided was that I would spend Monday through Thursday living with my mom and helping manage her health care. But every Thursday afternoon, I would go back home to try and maintain some semblance of a life.
And I pretty much stuck to that schedule even when there was some difficult times or moments to leave. And I'm glad I did leave nothing. Another learning leave nothing unsaid. I think that it is impossible to tell your mom or dad how much you admire them or how much you love them.
It just it feels good. There's no regrets. Death is final. So find that courage. Try and cut through the bullshit of whatever is getting in the way of that and leave nothing unsaid. I used to sit next to my mom. I remember this very vividly and I would hold her hand and sometimes I would just sit there and tell her how upset I was that she was sick. I know how ridiculous that sounds, but I think she enjoyed hearing it.
Another learning is it a lot of people in your life will surprise and disappoint you. It was strange. It was as if some people in my mom's life thought that her cancer was contagious and she had who had been very close friends, just not call her, much less. Come see her. At the same time, her boss from ten years a decade earlier, who is twenty years younger than her, used to get on a plane once a month, come to Las Vegas, rent a car, drive to our house and sit with her and talk to her for an hour as she sat there on a couch every ten minutes throwing up into a bucket.
Basically, stomach cancer is a very is a is just an awful illness. And he would ignore it and talk to my mom for an hour and then come back the next month. His name is I was like to say his name. His name is Bob Perkowitz. He's a very successful businessman and a very decent man. Now they're learning is that sometimes it's the illness speaking. My mom was remarkably generous and loving through her final months, but occasionally would get mean, not not terribly mean.
And it was it was easy for me to handle because I'm thirty nine and and I'm pretty thick skinned. But this does happen a lot at end of life, and that is people can lash out and they can be mean and just try to if you can ignore it and try and remember that is the illness. Speaking again, all of this is very much. Although the one thing I do know, the one thing I do know is that where you die or where you spend your last moments is really the most one of the most important things.
And that is most people do not want to die under bright lights surrounded by strangers. So if you're in a position to help your mom or dad die at home and around loved ones, that is an enormous victory. And that's obviously one of the most tragic things about some of the death that's taking place across America with covid-19 is that many can't be around their loved ones. I think at the end, I would like to think or my experiences at the end of their life, parents want to want to do things.
They want to know that their parenting resulted in a loving, responsible and productive son or daughter. And they want to know that their loved immensely and your ability to participate be a competent provider of care at the end of their life and just providing that care checks both boxes for them and makes their exit much easier. So circling back, as we discussed, I ended up on one of those weekends when I came back home, I ended up meeting someone and having children of them two sons.
And my one of my son's middle name is Sylvia, named after my mom. And he absolutely has her laugh. She would have just she would have just loved that. Our producers are Caroline, Chagrinned and Tuberose, 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 show from Section four and the Westwood One podcast network.