The Not-So-Fab Four

Paul Nolan

You certainly can’t judge a book by its cover. On the bookstore shelf, NYU business professor Scott Galloway’s “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google” appears to offer a reverent look at the giants of the tech industry. However, on the pages inside, he rants about how these behemoths avoid taxes, invade privacy and destroy jobs to increase profits. Then, Galloway explains how to apply the lessons of their ascent to your own business or career. As he states on the dust jacket flap, “Whether you want to compete with them, do business with them, or simply live in the world they dominate, you need to understand the Four.”

SMM: You state that, “It’s never been easier to be a billionaire, but it’s never been harder to be a millionaire.” Can you explain what you mean?

Galloway: The system is breaking down. Twenty to 30 years ago, the deal was that you went to school, studied hard and got a job. You could then go to graduate school, be a good citizen and ideally, find a partner who you could share economic growth with. It wasn’t unreasonable to think that you could save over 20/30/40 years and retire a millionaire. But that’s getting harder than ever. We have a perception that large companies like Amazon, Apple, Facebook and Google must be creating a lot of jobs, but in fact they have a small number of high-paying jobs and everybody else is fighting over the scraps.

On the flipside, it’s never been a better time to be remarkable. When I got out of business school, we all made around $85,000. Some made $70,000, some made $90,000, but we were all playing in the same ballpark. Now, with access to global markets, the ability to scale your intellectual property and, whether it’s through LinkedIn, Facebook or consumer discover, the ability for good products and good people to get out there, everyone has a shot at becoming part of something groundbreaking. I teach 120 kids each year and at least one of them will become a billionaire.

We’re in a winner-take-all economy that’s destroying the middle class. We’re killing jobs faster than we can create them and we’re looking more and more like an economy with three million lords, and 350 million serfs.

SMM: You say that stealing is a core competence of high-growth tech firms like the Four. Innovation doesn’t pay off as well as smart stealing and borrowing of ideas. Is that a whole new skill for business leaders – identifying what should be taken from innovators?

Galloway: Innovation is just a nicer word for elegant theft. A way to leverage other people’s ideas, other people’s capital expenditure, data, etc. Elegant theft has been the strategy of business leaders and nations for decades.

Put more broadly, high-growth tech firms are run by very smart people who are able to see untapped potential in somebody else’s idea. Apple wasn’t the first to make a cellphone, Google wasn’t the first to create a search engine, they just did it better. The best example of this is Facebook. For the past 16 months, Facebook has been taking Snapchat’s features, cloning them, adding a Zuckerberg twist, and repurposing them in their own products. We used to think that Snapchat would be the Facebook of video. But guess what? The Facebook of video has become Facebook’s Instagram.

SMM: In one chapter, you identify the three parts of the body that all successful businesses appeal to – the brain, the heart or the genitals (sex appeal). Is this true for B2B or mainly a consumer marketing tenet?

Galloway: There’s also Amazon, our digestive track. Amazon appeals to the consumptive self, offering us more for less. More has always been the better strategy because historically, having too little (starvation) meant death. B2B and B2C firms are similar in the sense that they are both forms of commercial transactions. Each requires a sales process, marketing and excellent customer service. However, B2B companies tend to lean to the rational side, including meticulous planning, contracts, and long-term investments. Each of the Four have B2B divisions (Amazon AWS, Apple technology at work, Facebook advertising and Google’s Adwords), but what fuels their mass adoption (and why consumers and legislators have been so lenient toward them) is their appeal to our irrational, curious, emotive and addictive selves.

SMM: In your chapter on Facebook, you state “VR will be to [Mark Zuckerberg] what Gallipoli was to Churchill, a huge failure.” Are you calling the collapse of virtual reality? That’s pretty bold when most marketers are still convinced it will have significant impacts on how businesses go to market.

Galloway: The reality of VR is that we are officially at the beginning of the end. Mark Zuckerberg said VR would “unlock new worlds,” but he got this one wrong. Facebook bought Oculus for $2B in 2014 but have since closed over 200 of its 500 Oculus pop-ups at Best Buy due to poor performance, some days going without a single demonstration.

Virtual reality, along with mass customization and 3D printing (weren’t we all supposed to be 3D printing our own shoes at home by now?) fall into a category I call “technology head fakes” and the biggest losers will be the companies and investors who bet on technologies that never get out of niche markets. One thing is for certain: you look ridiculous with an Oculus around your neck. It’s not a wearable, it’s a prophylactic.

As a side note, the most valuable unicorn in my home state, Florida, is Magic Leap – a firm founded in 2010 that has raised $1.4 billion to design and manufacture head-mounted virtual retinal displays. The firm hasn’t released a product yet, and is valued more than AMC, the world’s largest movie theater company. What could go wrong?

SMM: Product differentiation is one of eight factors that are common threads among the four behemoths you write about, and you clarify that product differentiation “doesn’t have to be about the widget you’re selling.” It can be about how a product is marketed, purchased or delivered. Do you feel this is true in the B2B world, or strictly consumer oriented?

Galloway: At the core of every successful firm is a great product/service. What makes a firm last is the ecosystem of support built around it. This is especially true in the B2B space, where sales are reliant on not only an exceptional offering but an exceptional sales force and building relationships and brand awareness with your target market. Recently, the Four have begun to watch B2B companies and are taking note of who’s doing what differently and well. For example, it’s been speculated that Amazon could acquire the cloud-based internal communication system Slack for $9 billion in 2018.

SMM: You talk about the importance of controlling your distribution – “Successful brands are forward integrating – owning their own stores or shopper marketing.” I hate to keep asking the same question, but does this apply in the B2B world?

Galloway: The principles remain the same but the execution is different. Companies that have the capital to control their experiences, be it B2B or B2C, have an advantage. Rather than stores, B2B companies are investing in their sales force, portals and other digital technologies that make their relationships stickier with consumers. The most successful B2B companies, whether its Microsoft or Oracle, have made big investments in the way they connect with consumers and vice versa.

SMM: You have a chapter on how to apply the lessons learned from the rise and dominance of the Four in our own personal careers. It should be must reading for everyone in their 20s. One thing you say is not to buy into the myth of work-life balance, at least not early in your career. Now more than ever, does it take commitment to work to be successful? Can managers expect that from their workers?

Galloway: Your job, as a recent graduate or at any stage in your career, is to find something that you're good at and work to become great at it. I worked hard and had very little free time in my 20s and 30s. It cost me several relationships, including a marriage, and my hair. And you know what? It was worth it. I’ve since founded nine companies, some very successful, some not so much. It is your trajectory in your 20s and 30s that largely sets the trajectory for the rest of your life. It’s a winner-take-all economy that demands grit, strength and emotional intelligence.