Sohn Investment Conference: Section 4’s Scott Galloway on how Covid-19 has changed the world

NYU Stern School of Business Professor, serial entrepreneur and business podcaster Scott Galloway has blasted “sociopathic” big tech and the US government, while outlining the profound implications of COVID-19 for the US economy and its big players.

At the Sohn Hearts & Minds Investment Leaders Conference 2020, Professor Galloway detailed his views on the biggest investment opportunities from the pandemic.

Some of the changes include the penetration of e-commerce and online grocery shopping, which saw a respective 10 and six years’ worth of growth in the US, he said.

Meanwhile, the number of people working from home or living with their parents have hit record highs, while the savings rate and retail trading levels hit record highs due to government stimulus and trading platforms like Robinhood “addicting young men.”

Professor Galloway said the rising level of inexperienced retail traders has a correlation with the market cap increases of “story stocks” like Tesla. Meanwhile, he added, the S&P500’s make-up is becoming “more like” its top seven companies as tech stocks including Google, Apple and Facebook represent a larger proportion of the market.

These larger companies also tell a tale of two economies: the largest 10 companies on the S&P500 have seen a median 9.6 per cent year-to-date return against a broader 11 per cent decline.

Professor Galloway said this is because the market likes companies that are “too big too fail” and would receive government stimulus if hit with a crisis. But with small companies creating two thirds of the jobs, the US is “effectively kneecapping” the biggest source of growth.

“Our government is no longer a countervailing force but rather a co-conspirator in what is the tyranny of big tech’s onward march,” he said.

Professor Galloway also said Mark Zuckerberg — the “biggest and most damaging sociopath” — alongside other big techs CEOs like Amazon’s Jeff Bezos — the “anti Christ of retail” — and Apple’s Tim Cook were engaging in anti-competitive behaviour to grow. The comments came after Amazon in the last year has added the equivalent of the entire value of all publicly traded European retailers to its market capitalisation.

Professor Galloway said Amazon was subsidising its retail operations with its web services businesses and compared its expansion in Australia to “dumping”. He predicted the company would move further into healthtech services, endorsing the investment in telehealth more broadly as a good strategy for equity investors.

He also said that Google and Facebook’s share of digital advertising revenue would go from 60c for every dollar spent to 80c, “sucking the oxygen out of the room for every other media firm”. It meant only those with strong subscriber bases would survive, with between 10-20 per cent of media companies set to fold in the near future.

On the topic of stock picks made last year, Professor Galloway acknowledged that he was wrong in a prediction for Tesla’s value to halve, with the stock having grown more than 500 per cent in the year to November 12.

He had also believed ASX darling Afterpay’s share price would halve because it would attract competitors that would pressure its margins, but said he was now glad to be wrong because it was a “great company.”

Professor Galloway predicted Twitter will become a $US50 to $US80 a share stock if chief executive Jack Dorsey is replaced, calling him a “part-time CEO”. Meanwhile Disney could double in value on the full rollout of its streaming service Disney+, he said.

Professor Galloway concluded by criticising the US social structure, saying that “in what is supposed to be the wealthiest nation in the world,” almost 20 per cent of adults could not afford adequate food for their children, while 24 per cent of families do not have $US400 saved.

“That is shameful. That is just shameful,” he said.

He also criticised an over-reliance on the performance of the NASDAQ, calling it the “worst metric in the world” nothing but a “proxy” for the rich, while COVID-19 hits the broader American economy hard, leading to a “K-shaped recovery.”

“America has lost a tone of credibility through our absolute incompetent and asinine handling of the coronavirus,” he said.

This article was originally posted on The Australian here.

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