Transcription
You know, everyone at Levi thought advertising was just it. Like an ad, the right ad campaign could change everything for them because they had an okay denim product and they wrapped it in amazing brand coats. It cost them eight bucks to produce these things and they sold them for 38 bucks at J. C. Penney's and 150 bucks in Germany. And I'm not exaggerating. I haven't seen an adman or an adwoman in a board meeting in 20 years. No one gives a [ __ ] what they think. Don Draper has been drawn and quartered.
And so the advice is kind of the following. Uh, these are just places to invest and work. In today's office hours, we speak about the future of marketing, life-changing financial choices, and parenting with generational wealth. Our first question comes from Michael on LinkedIn. Michael says, "AI is one of the key drivers behind the recent collapse and irrelevance of the advertising agency industry. What will happen to the whole marketing domain then?" Could you be a little broader in your questions? All right. What's happening in the agency world? WPP, uh, one of the world's largest holding companies, announced a major plan to cut a half a billion pounds in cost by 2028, driven by restructuring and integrating AI tools, uh, and is aiming to return the company to growth by 2027. The new center share price to its levels level since 1998. Think about that. 28 years later, Omnicom's $9 billion merger with Interpublic Group will result in about 4,000 job cuts. And then in 2025, total ad agency employment in the UK dropped over 14% with the under-25 workforce shrinking nearly 19%. Driven in part by AI automating roles and reducing demand for entry-level work.
So the industry's navigated platform transitions before: print, broadcast, digital, and mobile. All that changed with Google and that is all of a sudden your ability to find, uh, instead of deferring to the brand as a weapon of mass diligence, you could type using your social graph using Google and search. I always used to stay at the trip, uh, at the Four Seasons or the Ritz Carlton when I traveled. Why? Because someone else was paying. I was traveling for clients or speaking gigs and they always delivered an eight out of 10. And then once there was Trip Advisor and Instagram and Facebook and Google, I now found that, oh wait, when I'm in Berlin, I want to stay at the So House because it has the best gym. When I'm in London, I want to be at The Hoxton Shoreditch because it has the coolest bar with the hottest people. You know, I basically I want to be the Beverly Hills Hotel because it has the Polo Lounge where, you know, I can, uh, establish eye contact with a lovely Russian lady. That's not true. Anyways, I could find what worked for me and I no longer needed to defer to the institutional brand and that a series of smaller brands or that basically product innovation broke through that if you had an amazing product like a 10x better product, people would learn about it without the benefit of advertising. The majority of the companies have added tens of billions of dollars in shareholder value over the last 30 years have one thing in common and that is they spend a disproportionately low percentage of their gross proceeds on advertising because they just have they pour all their money into product innovation because digital kind of unlocked this incredible era of product innovation. Tesla spent no money on advertising because it had an individual who created a massive amount of awareness and you could tune up the car over the wirelessly. You know, Google, Instagram, they're 10x better products. So there has been an era moving from brand to innovation and it's mostly been driven by these direct response mediums that have incredible technology that are automated that don't require a person to show up and talk about brand codes wearing black and then enter into this exceptionally inefficient expensive ecosystem where they they take millions of photographs and pay leas a quarter of a million dollars for a shoot of Kate Moss to find a moment in time and then on an ad for Tom Ford and Vogue magazine that costs $180,000 that is relevant to 2% of the market. And Google basically said, "We can target people now to teenagers who just got, uh, driver's licenses in New York if you're GEICO in New York."
Anyways, these companies are now in just full-blown structural decline, which means they're going to have to cut costs and consolidate and merge. But you're going to see the next kind of step change down is going to be when these AI companies launch advertising. And they're already beginning to experiment with advertising formats. Conversational AI systems, including ChatGPT, have started introducing sponsored responses and paid placements in certain contexts. That's going to be really [ __ ] strange when your AI, which knows your history, starts serving you ads. And the best ads of the Super Bowl hands down I think were Anthropic mocking the idea of ChatGPT going into ads. Those ads were just, oh my god, they were they were outstanding. In some, I just want to relate this to, so AI is another tool that will continue to kick the [ __ ] out of traditional, uh, masters of the universe from the last century and that is the ad agency guys.
So let's bring this back to me. Best consulting gig I ever had was right out of business school. A guy named Warren Helman of Helman and Freeman. I met him, we hit it off and he said, "I've got a great assignment. I'm going to pay you for two years to come to the board meetings of Levi Strauss Company." At the time, it was the most valuable private company in the world. You know, everyone at Levi thought advertising was just it, like an the right ad campaign could change everything for them because they had an okay denim product and they wrapped it in amazing brand coats. It cost them eight bucks to produce these things and they sold them for 38 bucks at J. C. Penney's and 150 bucks in Germany. And I'm not exaggerating. I haven't seen an adman or an adwoman in a board meeting in 20 years. No one gives a [ __ ] what they think. Don Draper has been drawn and quartered.
And so the advice is kind of the following. Uh, these are just shitty places to invest in work. Now, having said that, if you're over say the age of 40, 45 and you already have good momentum there and you have clients that like you, you are always going to need people to interpret changes in marketing and advertising and AI for clients who are willing to spend their company's money to help them navigate an ecosystem which is increasingly complex. But every year, their business gets smaller and smaller and shittier and shittier. So, you're over the age of 40 or 45 and you're doing well, fine. But if you are under the age of 40 and you have a chance to get off out of the [ __ ], get on the helicopter out of Saigon because traditional kind of image-based broadcast driven advertising, oh my god, that's a shitty business and go it's like going to work in cable news right now. So what happens to the whole domain of traditional marketing? Pain.
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Question number two also comes from LinkedIn. Noah Frank asks, "What is the most underrated financial decision you made that had nothing to do with investing?" Easy. I married a competent partner. I married someone who's a decent person who's competent. Uh, I have a lot of friends who are men and women who don't have a competent partner and it means they have two jobs. Don't half-ass two things, whole-ass one thing. You end up half-assing two things. If your partner, if your husband or your wife isn't competent, you're managing the relationship, you're managing the household. Building something with someone who's competent and loving and understanding and makes you feel good about yourself. Uh, and manages the parts of your life well or the home well, who brings in their own money and is smart. I mean, 1 plus 1 equals three. The majority of very, very wealthy people are married and have a competent partner. My dad always made good money. He was talented. He ended up at the age of 60 ended up broke without a pot to piss in because he got married and divorced four times, which, so it goes both ways. One, you the most important decision you will make financially and in terms of your own psychological well-being, hands down, is finding the right partner. And what I don't like is all this [ __ ] that's especially on TikTok telling women that, you know, if he doesn't open your door, he's out of there. Like find red flags and everything. Well, that's not helpful either. But the question is, all right, how do you select a good partner if that's the most important thing? And I think most people would probably say, "Okay, that makes sense." Uh, one, it's sex and affection. You're saying, "I choose you." I think it's really important. And I think you constantly need to reaffirm that and work on it and express physical desire. I think, uh, let me say it. I think women want to be wanted. And I think sex, uh, it brings peace and harmony to a relationship and says, "I choose you." Two, values. I think it's important that you're generous and very open with each other about things like religion as it relates to your kids, how close you want to live to your family, and that you're generous with each other around those things. And then the third is, I was joking, they say, never let a woman be cold or hungry. Peshmos, and power bars at all times. The biggest blow-offs I've had in my relationships have been when someone didn't have lunch. They skipped lunch. Watch out.
So, how do you pick the right partner? Volume. What do I mean by that? Get out. Yeah, it's great to sit at home and eat an edible and hang out with your dog and watch Netflix. No. [ __ ] get out. Find friends. Go out. Be friendly. Somebody asks you out for a coffee and it's not like sparks right away. Okay. Go to a second coffee. You might find that you over time you're really into start to get more into him or into her. Get out, meet friends, express romantic interest, be bold, approach strangers, put yourself in in situations where the serendipity of, you know, meeting somebody. Be bold. Be brave. How did I find the mother of my children? I saw a woman I was attracted to at the hotel pool, the Raleigh Hotel. I went out to get my I promised myself I was going to speak to her before I left. I didn't. I went out to get my car and I'm like, "Fuck." And I grabbed a I told the valet guy to hold on to my car and I went back in and I rolled up and said, "Hi, my name's Scott. Where are you guys from?" And I don't know, 18 months later, our first son's middle name is Raleigh. Oh, where am I going with this? Most important decision, financial, emotionally, psychologically, who you decide to build a life with. How do you find the right partner? You get out, you level up yourself, you make yourself more attractive, you develop resilience, and you put yourself in a ton of situations where you could meet somebody.
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Welcome back. Question number three. >> Hey Scott, my wife and I both inherited reasonable amounts of money from our families. We worked our asses off, managed it well, and now we're sitting on significant wealth that we need to tell our 21 and 24-year-old kids about. Our goal is to give them the freedom to do the work that they love without financial pressure. But our fear is that we don't want to create spoiled brats who think that finding themselves is a career. How do my wife and I thread this needle? And what's the script for "You never have to worry about money, but if you stop working, I will haunt you from the grave." I need the Galloway playbook here on how to avoid raising waiters, you know, people who just wait around for their inheritance instead of building something with their lives. Looking forward to your advice.
>> Uh, so this is what you call a good problem, and but it's going to be a problem because there's going to be a ton of generational wealth transfer over the next 10, 20, 30, 50 years. So I love these member clubs because my Arrested Adolescence tour continues unfettered. I'm in the midst of a midlife crisis. That's the bad news. The good news is I think I'm going to get through it in about 30 or 40 years. But part of that manifestation is I join all these member clubs, u mostly in New York, but there's some here in London, and London actually invented them, but it's been infected in New York. And I like going to a place where I know I'm going to get in. It's going to have like a curated group of people. Hello, douchebag. That's right. Daddy, first word, douche, second word, bag. Whatever. I'm just leaning into it. And one of the member clubs I go to is Casa Cipriani downtown in New York. And I went there with some friends, three of us, couple mostly appetizers, a few drinks, $700 bucks. And I met the GM and I said, I said, "Who could I, I see all these young people here, people in their 20s and 30s. Who can afford this?" And he said, "Well, one, none of the women are paying for anything. And two, most of the men here, it's not their credit card, it's their parents' credit card, and it's a lot of trust fund kids from New Jersey." And it just struck me that I wonder if about a third of the people in New York, their parents are putting them through Manhattan. There's just going to be so much inherited wealth. Now, this is a good problem. I technically share this problem. Uh, I have some economic security that I hope and trust at some point my kids will have access to. The way I think about it is the following. One, we like to think as parents that we are engineers, that all of our behavior will mold this this block of clay into a wonderful person and if we're not careful and we chisel off the arm that we raise [ __ ]. Yeah, some of that I can see that. But what we don't recognize is that a lot of it is in the batter. I have one kid who I bought a cashmere hoodie for that was 240 pounds and he, he liked it and then he saw the price tag and said, "This is too expensive." And I said, "Well, I bought it. I can afford it. Don't worry about it." Went, returned it and credited my credit card because he just was uncomfortable with me spending that much money on him on a a cashmere hoodie. Whereas I have another, another one of my kids is, you know, we just found out is spending 100 pounds a day on Deliveroo and Uber. So a lot of it is in the batter.
Now, having said that, my approach, I think about this a lot and that is how do you not raise [ __ ] or spoiled kids? And the Warren Buffett adage is really a good one and that is you want to give your kids enough money so they can do anything but not enough money so they can do nothing. The way I approach it is the following and I learned this from Morgan Housel and I like this a lot. I am going to scale up or scale down, uh, my kids' life with my money or lack thereof. What do I mean by that? If my kid goes to college and wants to be a high school math teacher, I'm going to scale his life up. If he gets up every morning and decides he wants to teach math to high school kids and he lives a good, honorable life, I'm going to give him enough money to buy a house and have a nice life and I'm going to make sure that he doesn't have the economic stress of most teachers. Is that total, you know, nice to have moment of privilege? Yeah. And I've worked hard and that's one of the things I will do for my kids. If they're doing something worthwhile, that's good for society and they're trying hard and they're good citizens and they don't have the money to live the kind of life, you know, live in a city. I'm, I'm, I want them to live nice lives. I, I deserve that. I've worked for it. I want it for them. If my kid is rolling around in a Range Rover and not doing a whole lot and starting and stopping [ __ ] and constantly and maybe still living at home or just spending more than he's making and not doing much of anything, I am going to try and cut them off. So, I'm going to scale up or scale down based on their activities. So, in terms of what I leave my kids, I'm probably going to leave them enough money to make sure that they have a home and can afford education. But I'm not, you know, I'm hoping to be around a while. But basically, my attitude is if you have the benefit of money, scale up or scale down. I don't think letting them know they have money means they're going to wait around for you to die. I just don't, I don't, I don't think that's going to happen. But this is again the mother of all good problems, you know. They also, they, it's not what you tell them, it's what you show them. I don't know if I send a good or bad message to my, I spend a [ __ ] ton of money, but at the same time, I don't have a car. I give a lot of money away. I think I model good financial behavior on a lot of levels and probably not on other levels. I do.
Anyways, enough of that. My kind of only and I have not figured this out. My sort of, uh, lesson here advice would be scale up or scale down based on their behavior and, uh, the way they equip themselves in terms of their the professional commitment and the lives that they lead. That's all for this episode. If you'd like to submit a question, please email a voice recording to officehours.com. Again, that's officehours.com. Or if you prefer to ask on Reddit, just post your question on the Scott Galloway subreddit and we just might feature it in an upcoming episode.