"All of our history, as well as our future, is ours. Our commonwealth didn't just happen, it was shaped. We chose this path - no trend is permanent and can't be made worse or corrected. America isn't "what it is," but what we make of it." -- Professor Scott Galloway, Post Corona
Scott Galloway is a professor of marketing at NYU's Stern School of Business and a serial entrepreneur. Galloway was named one of the world's best business professors by Poets & Quants. He has founded nine companies, including Prophet, Red Envelope, L2, and Section4. He is the bestselling author of The Four, The Algebra of Happiness, and Post Corona and has served on the board of directors of UC Berkley's Haas School of Business, The New York Times Company, and Urban Outfitters. His Prof G and Pivot podcasts, No Mercy/No Malice blog, and Prof G YouTube channel reach millions.
In 2020, Adweek named Pivot Business Podcast of the Year. In 2019, Galloway founded Section4, an online education platform for working professionals where he teaches business strategy.
In his latest book, Post Corona: From Crisis to Opportunities, Galloway begins by referencing MP George Galloway with the saying, "Nothing can happen in decades, and then decades can happen in weeks." He also references John F. Kennedy when he said: "In crisis, there is opportunity." Galloway argues that the has not been a change agent so much as an accelerant of trends already well underway. In Post Corona, he outlines the real threats and opportunities that lie ahead. The book identifies some businesses that will grow and thrive post-pandemic and others that are currently on a slow death spiral. One of the industries that will struggle in the new normal will be higher education, an industry that may not be able to maintain a value proposition that makes sense in a decentralized and digital economy, where scale, speed, and personalization are the new relevant currencies.
To learn more about how companies can shift from a crisis to opportunities, Ray Wang, CEO and founder of a Silicon Valley-based advisory firm Constellation Research, and I invited Scott Galloway to our weekly show DisrupTV. Here are the key takeaways from our conversation with Galloway.
The pandemic as an accelerant of trends
Galloway spoke about the accelerated digital and cultural transformation that we experienced in 2020. "E-commerce began taking root in 2000. Since then, e-commerce's share of retail has grown approximately 1% every year. At the beginning of 2020, approximately 18% of retail was transacted via digital channels. Eight weeks after the pandemic reached the US (March to mid-April), that number leaped to 28%. We saw a decade of e-commerce growth in eight weeks," said Galloway. He also referenced home delivery of groceries accelerating by six years.accelerated by 10 years in 2020. He shared some negative trends due to the pandemic, including one out of two young adults between the ages of 18 to 30 now living with their parents. Another negative trend in the pandemic is that one in five households with children in the US is now food insecure. Throughout our conversation with Galloway, he spoke about a number of opportunities for change that business and government leaders must consider.
Higher Education is ripe for disruption
In Post Corona, Galloway writes that few industries sit closer to the ground zero of COVID-19 acceleration than higher education. Even before the pandemic, the $700 billion business was ripe for disruption. Here's some data that Galloway shares in his book:
- In the past 40 years, college tuition has increased by 1,400%. As a comparison, healthcare spending has 'only' increased 600% in the same period. But unlike the education sector, the $4 trillion-a-year healthcare industry provides cutting-edge training and technology and there has been substantial innovation.
- Scarcity - Ivy leagues have acceptance rates of 4% to 10%. A university president bragging about rejecting 90% of applicants is tantamount to a homeless shelter taking pride in turning away 90% of the needy that arrive each night.
- Abundance - Student loan debt now totals $1.6 trillion, far more than credit-card debt or auto loans. The average graduate will carry nearly $30,000 in debt away from their virtual graduation.
- Ivy-Coated Caste System - Wealthy kids today are over twice as likely to go to college as poor kids, and over five times as likely to attend an elite school. At 38 of the top 100 colleges in America, including 5 of the Ivies, there are more students from the top 1% income than there are from the bottom 60%.
- Disruptive Forces - Technology improvements have brought distance learning to the threshold of market acceptance. Beginning in 2026, the number of graduating high school seniors is projected to decline by 9%. In 2013, renowned Harvard Business School professor Clay Christensen predicted that online education would eliminate 25% of colleges over the next 10-15 years. By 2018, he increased his college closure forecast to 50%. This was before the pandemic.
- In August 2020, one-third of college students said they were not planning on going back to campus. International students will have a big impact on the future of higher education. In aggregate, international students contribute nearly $40 billion annually to the US economy.
Galloway notes that understanding the pandemic's effect on higher education requires understanding higher education's value proposition. In exchange for time and tuition, colleges offer three components of value: a credential, an education, and an experience. Just as retail closures are accelerating from 9,500 stores in 2019 to 25,000 stores in 2020, Galloway predicts that hundreds of universities have begun their death march.
"The second greatest accretion of stakeholder value in business, behind Amazon's entry into healthcare, will be big (and some small) tech firms partnering with world-class universities to offer 80% of traditional four-year degrees for 50% of the price," said Galloway.
Here are some of Galloway's recommendations to higher education leaders:
- The US needs a Marshal Plan to partner with states to dramatically increase the number of seats at state schools while decreasing the cost for four-year universities and junior colleges.
- Tax private K-12 schools to supplement public K-12 education.
- Endowments over $1 billion should be taxed if the university doesn't grow freshman seats at 1.5 times the rate of population growth.
- A dean of a top 10 school needs to be a class traitor and re-evaluate tenure so as to limit it to cases where it's truly needed to secure academic freedom, rather than the expensive and innovation-killing employment perk it has become.
- A need for technology firms to seize the greatest business opportunity in decades and open tuition-free universities that leverage their brand and their tech expertise to create certificate programs. My company Salesforce launched a free online certificate-based training program called Trailhead. Today, we have over three million active learners on our Trailhead platform around the globe.
- Gap years should be the norm, not the exception. 90% of kids who defer and take a gap year return to college and are more likely to graduate, with better grades.
- Expand the variety and efficiency of certificate programs to retain workers in dying industries and position young professionals for a rewarding entrepreneurial career.
Galloway does not support free college because he believes that it is a further transfer of wealth from the poor to the rich. "Only 32% of Americans go to college, and the cost is not what keeps the most exceptional kids of any income level from getting to college. College needs to be more affordable, but we don't need to subsidize the wealthiest households in America, who send 88% of their children to college," writes Galloway.
"This is personal for me. The generosity and vision of California taxpayers allowed me to get a great education for a grand total of $7,000 -- a degree from UCLA and Berkley. Higher education in the US has unfortunately devolved from being the great upward lubricant of unremarkable kids to an enforcer of a caste system, where we have decided to increase tuition by 1,400%, let's not expand freshman seats, and brag about sending away 90% of applicants," said Galloway.
Galloway believes that the goal should not be about taking the 1% and turning them into billionaires. Instead, our collective goal should be taking the bottom 90% and giving them a shot to be at the top 10%. We need to dramatically increase admittance rates and dramatically reduce tuition costs. He also believes that college is still a great plan-B. According to Galloway, parents should still support and encourage their kids to attend college. He notes that college graduates earn 2-3X more income in their lifetime as compared to non-college graduates. What needs to be done is to ensure everyone, including the unremarkable people, has the opportunity for higher education. Galloway said that he was an unremarkable candidate that was given a great and affordable education.
"America needs to fall back in love with the unremarkables." -- Scott Galloway
Galloway founded Section4 in 1999 and so far, he has raised $37 million in funding. The Section4 platform was created to offer millions versus thousands of aspiring professionals the opportunity to learn from the world's premier business school instructors at a fraction of the cost and friction of the traditional MBA. Today, 88% of Section4 students have applied what they've learned within their organizations within three months of completing their Section4 course. In the past twelve months, Section4 has enrolled more than 10,000 students in 97 countries worldwide. The students and alumni enrolled represent over 4,000 businesses including more than half of Fortune 100 companies. More than 33% of students taking Section4 classes are c-level executives. Corporate education is key to business success. The technology sector is very serious about leadership and professional training. I can see how Galloway and Section4 are positioning themselves to disrupt the higher education sector.
Where to invest in the future
There have been three huge global shits in our economy in the past 50 years. The first was globalization, the second was digitization and the third according to Galloway is dispersion -- the core central value of from a producer/supplier is skipping the traditional supply chain and either removing friction, reducing cost, or increasing value. An example is new movies skipping theaters and streaming directly to your living room.
"The pandemic's most enduring feature will be as an accelerant of existing trends. The trend that encapsulates the greatest reshuffling of stakeholder value in recent history is … the Great Dispersion. Similar to prior macro trends like globalization and digitization, it offers enormous opportunity, but also real threats. Amazon dispersed retail to desktop, to mobile, to voice. Netflix dispersed DVDs to our mailbox, then to every screen. The pandemic is causing dispersion in even larger industries — the greatest opportunity for wealth creation in decades. Work from home, telemedicine, and remote learning represent an impending disruption of over 25% of the U.S. economy. The largest sectors are about to leapfrog HQ, doctor's offices, hospitals, and campuses." -- Professor Galloway
There will be enormous dispersion across three sectors -- healthcare, education, and the dispersion of company headquarters. In healthcare, the worst retail in America, every year the cost increases, and the outcomes go down. Remote healthcare and telemedicine will boom. Galloway predicts that Amazon will be the fastest-growing company in healthcare -- a prediction he made 3 years ago. Education and education technology-related innovation will see enormous dispersion in the next decade. Lastly, spending from company HQ and commercial real-estate to homes will be significant -- anything that improves activities in the home.
I highly encourage you to watch our entire conversation with Scott Galloway. I also give my highest book recommendation of 2021 to Post Corona: From Crisis to Opportunities. Every business leader should read this book from cover to cover. Lastly, I encourage you to follow Prof G on Twitter at @profgalloway -- he regularly posts incredibly insightful content including links to his articles, podcasts, media interviews, and keynotes.