How Amazon Apple Facebook and Google manipulate our emotions Scott Galloway
[This talk contains graphic language
Viewer discretion is advised]
So, this is the first and the last slide
each of my 6,400 students
over the last 15 years has seen.
I do not believe you can build
a multibillion-dollar organization
unless you are clear on which instinct
or organ you are targeting.
Our species has a need for a superbeing.
Our competitive advantage
as a species is our brain.
Our brain is robust enough to ask
these really difficult questions,
but, unfortunately, it doesn’t have
the processing power to answer them,
which creates a need for a superbeing
that we can pray to
and look to for answers.
What is prayer?
Sending a query into the universe,
and hopefully there’s some sort
of divine intervention –
we don’t need to understand
what’s going on –
from an all-knowing, all-seeing superbeing
that gives us authority
that this is the right answer.
“Will my kid be all right?”
You have your planet of stuff,
you have your planet of work,
you have your planet of friends.
If you have kids,
you know that once something
comes off the rails with your kids,
everything melts,
in your universe
to the Sun that is your kids.
“Will my kid be all right?”
“Symptoms and treatment of croup”
in the Google query box.
One in six queries presented to Google
have never been asked before
in the history of mankind.
What priest, teacher, rabbi, scholar,
mentor, boss has so much credibility
that one in six questions
posed to that person
have never been asked before?
Google is our modern man’s God.
Imagine your face and your name
above everything you’ve put into that box,
and you’re going to realize
you trust Google more than any entity
in your history.
(Laughter)
Let’s move further down the torso.
(Laughter)
One of the other wonderful things
about our species
is we not only need to be loved,
but we need to love others.
Children with poor nutrition
but a lot of affection
have better outcomes than children
with good nutrition and poor affection.
However, the best signal
that you might make it
to be part of the number-one fastest
growing demographic in the world –
centenarians, people
who live to triple digits –
there are three signals.
In reverse order: your genetics –
not as important as you’d like to think,
so you can continue to treat
your body like shit
and think, “Oh, Uncle Joe lived to 95,
the die have been cast.”
It’s less important than you think.
Number two is lifestyle.
Don’t smoke, don’t be obese,
and prescreen –
get rid of about two-thirds
of early cancers
and cardiovascular disease.
The number one indicator or signal
that you’ll make it to triple digits:
How many people do you love?
Caretaking is the security camera –
we call the low-resolution
security camera in our brain –
deciding whether or not
you are adding value.
Facebook taps into our instinctive need
not only to be loved,
but to love others,
mostly through pictures
that create empathy,
catalyze and reinforce our relationships.
Let’s continue our journey down the torso.
Amazon is our consumptive gut.
The instinct of more is hardwired into us.
The penalty for too little
is starvation and malnutrition.
Open your cupboards, open your closets,
you have 10 to 100x times what you need.
Why?
Because the penalty
for too little is much greater
than the penalty for too much.
So “more for less” is a business strategy
that never goes out of style.
It’s the strategy of China,
it’s a the strategy of Walmart,
and now it’s the strategy of the most
successful company in the world,
Amazon.
You get more for less into your gut;
digest, send it to your muscular
and skeletal system of consumption.
Moving further,
once we know we will survive,
the basic instinct,
we move to the second
most powerful instinct,
and that is to spread and select
the strongest, smartest and fastest seed
to the four corners of the earth,
or pick the best seed.
This is not a timepiece.
I haven’t wound it in five years.
It’s my vain attempt to say to people,
“If you mate with me,
your children are more likely to survive
than if you mate with someone
wearing a Swatch watch.”
(Laughter)
The key to business is tapping into
the irrational organs.
“Irrational” is Harvard Business School’s
and New York Business School’s term
for fat profit margins
and shareholder value.
“High-caloric paste for your children.”
No?
You love your choosy mom.
Why choosy moms choose Jif:
you love your kids more.
The greatest algorithm for shareholder
creation from World War II
to the advent of Google
was taking an average product
and appealing to people’s hearts.
You’re a better a mom,
a better person, a better patriot
if you buy this average soap
versus this average soap.
Now, the number one algorithm
for shareholder value isn’t technology.
Look at the Forbes 400.
Take out inherited wealth,
take out finance.
The number one source of wealth creation:
appealing to your reproductive organs.
The Lauders; the number
one wealthiest man in Europe, LVMH.
Numbers two and three: H&M and Inditex.
You want to target the most
irrational organs for shareholder value.
As a result, these four companies –
Apple, Amazon, Facebook and Google –
have disarticulated who we are.
God, love, consumption, sex.
The proportion in your approach
to those things is who you are,
and they have reassembled who we are
in the form of for-profit companies.
At the end of the Great Recession,
the market capitalization
of these companies was equivalent
to the GDP of Niger.
Now it is equivalent to the GDP of India,
having blown past
Russia and Canada in ‘13 and ‘14.
There are only five nations
that have a GDP greater
than the combined market capitalization
of these four firms.
Something is happening, though.
The conversation just a year ago
was, which CEO was more Jesus-like?
Who was running for president?
Now the worm has turned.
Everything they’re doing is bothering us.
We’re worried they’re tax avoiders.
Walmart, since the Great Recession,
has paid 64 billion dollars
in corporate income tax;
Amazon has paid 1.4.
How do we pay our firefighters,
our soldiers and our social workers
if the most successful companies
in the world don’t pay their fair share?
Pretty easy.
That means the less successful
companies have to pay
more than their fair share.
Alexa, is this a good thing?
This is despite that fact –
(Laughter)
This is despite the fact
that Amazon has added the entire
market capitalization of Walmart
to its market cap in the last 19 months.
Whose fault is it? It’s our fault.
We’re electing regulators
who don’t have the backbone
to actually go after these companies.
Facebook lies to EU regulators
and says, “It would be impossible
for us to share the data
between our core platform
and our proposed acquisition of WhatsApp.
Approve the merger.”
They approve the merger and then –
spoiler alert! – they figure it out.
And the EU says, “I feel lied to.
We’re fining you 120 [million] dollars,”
about .6 percent of the acquisition price
of 19 billion dollars.
If Mark Zuckerberg could take out
an insurance policy
that the acquisition would
go through for .6 percent,
wouldn’t he do it?
Anticompetitive behavior.
A two-and-a-half-billion-dollar fine,
three billion of the cash flow,
three percent of the cash
on Google’s balance sheet.
We are telling these companies,
“The smart thing to do,
the shareholder-driven thing to do,
is to lie and to cheat.”
We are issuing 25-cent parking tickets
on a meter that costs 100 dollars an hour.
The smart thing to do is lie.
Job destruction!
Amazon only needs one person
for two at Macy’s.
If they grow their business 20 billion
dollars this year, which they will,
we will lose 53,000 cashiers and clerks.
This is nothing unusual;
this has happened all through our economy,
we’ve just never seen
companies this good at it.
That’s one Yankee Stadium of workers.
It’s even worse in media.
If Facebook and Google
grow their businesses
22 billion dollars this year,
which they will,
we’re going to lose approximately
150,000 creative directors,
planners and copywriters.
Or we can fill up two-and-a-half
Yankee Stadiums
and say, “You are out of work,
courtesy of Amazon.”
We now get the majority of our news
from our social media feeds,
and the majority of our news
coming off of social media feeds is …
fake news.
(Laughter)
I am not allowed to be political
or use curse words,
or talk about religion in class,
so I can definitely not say,
“Zuckerberg has become Putin’s bitch.”
I definitely cannot say that.
(Laughter)
Their defense:
“Facebook is not a media company;
it’s a technology company.”
You create original content,
you pay sports leagues
to give you original content,
you run advertising against it –
boom! – you’re a media company.
Just in the last few days,
Sheryl Sandberg has repeated this lie,
that “We are not a media company.”
Facebook has openly embraced
the margins of celebrity
and the influence of a media company
yet seems to be allergic
to the responsibilities
of a media company.
Imagine McDonald’s.
We find 80 percent of their beef is fake,
and it’s giving us encephalitis,
and we’re making terrible decisions.
And we say, “McDonald’s,
we’re pissed off!”
And they say, “Wait, wait –
we’re not a fast-food restaurant,
we’re a fast-food platform.”
(Laughter)
These companies and CEOs wrap themselves
in a neon-blue pink rainbow
and blue blanket
to create an illusionist trick
from their behavior each day,
which is more indicative
of the spawn of Darth Vader and Ayn Rand.
Why? Because we as progressives
are seen as nice but weak.
If Sheryl Sandberg had written
a book on gun rights
or on the pro-life movement,
would they be flying Sheryl to Cannes?
No.
And I’m not doubting
their progressive values,
but it foots to shareholder value,
because we as progressives
are seen as weak.
They’re so nice – remember Microsoft?
They didn’t seem as nice,
and regulators stepped in much earlier
than the regulators now,
who would never step in
on those nice, nice people.
I’m about to get on a plane tonight,
and I’m going to have a guy
named Roy from TSA molest me.
If I am suspected of a DUI
on the way home,
I can have blood taken from my person.
But wait! Don’t tap into the iPhone –
it’s sacred.
This is our new cross.
It shouldn’t be the iPhone X,
it should be called the “iPhone Cross.”
We have our religion; it’s Apple.
Our Jesus Christ is Steve Jobs,
and we’ve decided this is holier
than our person, our house
or our computer.
We have become totally out of control
with the gross idolatry
of innovation and of youth.
We no longer worship
at the altar of character,
of kindness,
but of innovation and people
who create shareholder value.
Amazon has become so powerful
in the marketplace,
it can conduct Jedi mind tricks.
It can begin damaging other industries
just by looking at them.
Nike announces they’re distributing
on Amazon, their stock goes up,
every other footwear stock goes down.
When Amazon stock goes up,
the rest of retail stocks go down,
because they assume what’s good
for Amazon is bad for everybody else.
They cut the cost on salmon 33 percent
when they acquired Whole Foods.
In between the time they announced
the acquisition of Whole Foods
and when it closed,
Kroger, the largest
pure-play grocer in America,
shed a third of its value,
because Amazon purchased a grocer
one-eleventh the size of Kroger.
I got very lucky.
I predicted the acquisition
of Whole Foods by Amazon
the week before it happened.
This is me boasting; I said
this publicly in the media.
This was the largest
acquisition in their history,
they’d never made
an acquisition over a billion,
and people asked, “How did you know this?”
So I’m letting this very impressive
audience in on the secret.
How did I know this?
I’m going to tell you how I knew.
I bark at Alexa all day long
and try to figure out what’s going on.
(Scott Galloway) Alexa, buy whole milk.
(Alexa) I couldn’t find
anything for whole milk,
so I’ve added whole milk
to your shopping list.
SG: Then I asked,
(SG) Alexa, buy organic foods.
(Alexa) The top search result
for organic food
is Plum Organics baby food,
banana and pumpkin,
12-pack of four ounces each.
It’s 15 dollars total.
Would you like to buy it?
SG: And then, as often happens at my age,
I got confused.
(SG) Alexa, buy whole foods.
(Alexa) I have purchased the outstanding
stock of Whole Foods Incorporated
at 42 dollars per share.
I have charged 13.7 billion
to your American Express card.
(Laughter)
SG: I thought that’d be funnier.
(Laughter)
We’ve personified these companies,
and just as when you’re really angry
over every little thing someone does
in your life and relationships,
you’ve got to ask yourself,
“What’s going on here?
Why are we so disappointed in technology?”
I believe it’s because the ratio
of one-percent pursuit
of shareholder value
and 99 percent the betterment of humanity
that technology used to play
has been flipped,
and now we’re totally focused
on shareholder value instead of humanity.
One hundred thousand people came together
for the Manhattan Project
and literally saved the world.
Technology saved the world.
My mother was a four-year-old Jew
living in London at the outset of the war.
If we had not won the footrace
towards splitting the atom,
would she have survived?
It’s unlikely.
Twenty-five years later,
the most impressive accomplishment,
arguably, ever in all of humankind:
put a man on the moon.
Four hundred thirty thousand Canadians,
British and Americans came together,
again, with very basic technology,
and put a man on the moon.
Now we have the 700,000
best and brightest,
and these are the best and brightest
from the four corners of the earth.
They are literally playing with lasers
relative to slingshots,
relative to the squirt gun.
They have the GDP of India to work at.
And after studying
these companies for 10 years,
I know what their mission is.
Is it to organize the world’s information?
Is it to connect us?
Is it to create greater comity of man?
It isn’t.
I know why we have brought together –
I know that the greatest collection
of IQ capital and creativity,
that their sole mission is:
to sell another fucking Nissan.
My name is Scott Galloway, I teach at NYU,
and I appreciate your time.
(Applause)
Chris Anderson: Not planned,
but you prompted
some questions in me, Scott.
(Laughter)
That was a spectacular rant.
SG: Is this like Letterman?
When you do well,
he calls you onto the couch?
CA: No, no, you’re going to the heart
of the conversation right now.
Everyone’s aware that after years
of worshipping Silicon Valley,
suddenly the worm has turned
and in such a big way.
To some people here, it will just feel
like you’re piling on,
you’re kicking the kids who’ve already
been kicked to pieces anyway.
Don’t you feel any empathy
for them at all?
SG: None whatsoever.
Look, this is the issue:
it’s not their fault, it’s our fault.
They’re for-profit companies.
They’re not concerned
with the condition of our souls.
They’re not going to take care of us
when we get older.
We have set up a society that values
shareholder value over everything,
and they’re doing what
they’re supposed to be doing.
But we need to elect people,
and we need to force
ourselves to force them
to be subject to the same scrutiny
that the rest of business
endures, full stop.
CA: There’s another narrative
that is arguably equally
consistent with the facts,
which is that there actually is good
intent in much of the leadership –
I won’t say everyone, necessarily –
many of the employees.
We all know people who work
in those companies,
and they still are pretty convincing
that their mission is to –
so, the alternative narrative
is that there have been
unintended consequences here,
that the technologies
that we’re unleashing,
the algorithms, that we’re attempting
to personalize the internet, for example,
have A, resulted in weird effects
like filter bubbles
that we weren’t expecting;
and B, made themselves vulnerable
to weird things like –
oh, I don’t know, Russian
hackers creating accounts
and doing things that we didn’t expect.
Isn’t the unintended consequence
a possibility here?
SG: I don’t think –
I’m pretty sure, statistically,
they’re no less or better people
than any other organization
that has 100,000 or more people.
I don’t think they’re bad people.
As a matter of fact, I would argue
that there’s a lot of very
civic-minded, decent leadership.
But this is the issue:
when you control 90 percent
points of share in a market, search,
that is now bigger than the entire
advertising market of any nation,
and you’re primarily compensated
and trying to develop economic security
for you and the families
of your employees,
to increase that market share,
you can’t help but leverage
all the power at your disposal.
And that is the basis for regulation,
and it’s the basis for the truism
throughout history
that power corrupts.
They’re not bad people;
we’ve just let them get out of control.
CA: So maybe the case
is slightly overstated?
I know at least a bit –
Larry Page, for example, Jeff Bezos –
I don’t actually believe
they wake up thinking,
“I’ve got to sell a fucking Nissan.”
I don’t think they think that.
I think they are trying to build
something cool, and are probably,
in moments of reflection,
as horrified that some of the things
that have happened as we might be.
So is there a different way
of framing this,
to say that when your model
is advertising,
that there are dangers there
that you have to take on more explicitly?
SG: I think it’s very difficult
to set an organization up as we do,
to pursue shareholder value
above all else.
They’re not non-profits.
The reason people go to work there
is they want to create economic security
for them and their families,
mostly first and foremost.
And when you get to a point where
you control so much economic power,
you use all the weapons at your disposal.
I don’t think they’re bad people,
but I think the role of government
and the role of us as consumers
and people who elect our officials
is to ensure that there
are some checks here.
And we have given
them the mother of all hall passes
because we find them just so fascinating.
CA: Scott, eloquently put,
spectacularly put.
Mark Zuckerberg, Jeff Bezos,
Larry Page, Tim Cook, if you’re watching,
you’re welcome to come and make
the counterargument as well.
Scott, thank you so much.
SG: Thanks very much.
(Applause)