In the book The Four: The Hidden DNA of Amazon, Apple, Facebook and Google, professor Scott Galloway goes into an in-depth analysis of for large US companies: Facebook, Google, Amazon, Apple. He is a professor of marketing at the New York University Stern School of Business and has founded past successful businesses that were acquired, including L2 Inc which was sold in 2017 to Gartner for $155 million USD.

-they have analog moats: real-world infrastructure to prevent attacks from competitors

-the four are so strong they now compete against each other

-it’s never been easier to be a billionaire, never been harder to become a millionaire

Amazon – the next Goliath

-64% of US households have amazon prime, vs 33% with guns

-human instinct to keep collecting stuff for survival (greed)

-Amazon killed not just retail but also other e-commerce sites, except those are nameless with just sites shutdown

-44% of value of US malls in just 100 places, sales per square foot down 24% in past decade

-6 evolutions of retail; corner stores, department stores, malls, big box (wholesale), speciality retail, e-commerce

-e-commerce; hype and build revenue potential first or market share, then net profit

-started niche in books and DVD’s, other retailers thought e-commerce was not a threat until it was too late. 2016, retail grew 4% sales, Amazon 40%. 40% of Amazon’s sales from amazon market place (3rd party sellers) of 100 billion revenue

-Alexa; zero click ordering, full spying on private conversation for more information, try at home before buy or even refund at home

-Amazon will never pay a dividend. Got 2 billion in capital while not making a profit. Takes cheap capital and invests for very long term with high gross margins, thereby lowering net profit, increasing revenue and market share. Very long-term focused company. Good at storytelling to get higher valuations. Floating warehouse patent pending.

-Bezos in 1997: “given a 10% chance to swing and get a hundred times return, I will take it each time”. E.g. amazon prime and AWS. Old companies rarely innovate, leaving amazon free to rule and shareholders all going for amazon.

2015; spent 7 billion on shipping fees, vs net profit of $2.4 billion

-Amazon constantly acts as a investment syndicate and invests in various things: prime, AWS, media group (advertising, 3rd largest in US behind Facebook and google). It uses e-commerce as low margin to get lots of demand first. Amazon sells the pick axes and owns the land for others to mine gold. Fulfillment by amazon (amazon now ships for others), to now do ocean shipping as well across pacific.

-the death of retail is also due to the quiet decline of the middle class. Not so in China – thus, Alibaba is going to be big.

-Amazon in everything now, whole foods. Walmart bought jet.com to try to compete, low success rate.

-consumers have high acquisition costs and low loyalty value for products now, no favourites, all mercenary capitalists.

-no company can survive as an e-commerce only company long term, something Shopify smartly avoids, by being a platform with recurring revenue.

-average person spends $150-$200 on amazon per MONTH

-Alexa will lead to death of brands even more

-Amazon robot factories. Jeff Bezos believes mass unemployment is coming

-Any industry Amazon wants to attack they will win. They stealing google searches, delivery, food, more. Now, being remarkable is even better than before and being unremarkable is even worse.

Apple

-The iPhone is worshipped

-Jobs innovated, but bullied people, no philanthropy, treated first wife and kids badly, control freak

-tax evasion from lobbying

-people are addicted to luxury, power status, sex, money, access to better resources. All of that is offered by the brand of Apple (Latin to steal). Branding is how Apple did it. Men’s desire is to procreate rapidly with many partners, so men want it more, and women want the money associated. But now, everyone uses a smartphone.

-in non-material objects, scarcity creates value. In networks, plentitude creates value. 20% of sales, 90% of phone profits.

-luxury brands have five key attributes: iconic founder, global reach, artisan ship, vertical integration, premium price.

1- iconic founder; you either die a hero (so that none can see your flaws from the past or when you get old), or you see yourself live long enough to become the villain (Tiger Woods). People should put a dent into their kids lives instead of their phones.

2- Artisanship – simple and attractive look

3- vertical integration. The gap via Drexler in the 2000s made the stores more expensive, and customer friendly. This allowed them to triple revenue in 8 years while taking out Levi Strauss (-50% revenue). Apple is iconic from its unique and nicely built stores that attract consumers to stay in them, influencing purchases and using Apple care

4- global; Apple builds its own premium brand and ecosystem instead of catering to each culture’s adjustments. Premium is the same in every country as opposed to middle class.

5- price premium; this leads to higher perceived value. Galloway thinks Apple could survive into the 22nd century due to all thing’s Apple being worshipped

-you cannot be king for too long before being dethroned. The transition from innovation to operator under Cook is smart as they are now enjoying the fruits of their labor and milking that instead of potentially failing at other high-risk plays. Allowing people in the stores to try products and let other people outside the store see that is a powerful way to use people’s envy. High price and low-cost producer, very rare.

-like David and Goliath, don’t fight on other people’s terms, but on your own terms. Build a moat then dig it deeper. Then, make long term investments that revolutionize old economy things, that have low margins, and dominate those too. I.e. retail stores, grocery, delivery, farms. Things that are not easy to make money. Due to Apple, Nokia’s share of Finland’s stock market went from 70 to 13 percent. Education will be an area for disruption as prices have gone up faster than inflation ($500/minute for top US schools) creating a decreased middle class as less education for lower classes and less intelligent. Creativity is the key to the future as now that has become a blue ocean. Where everyone is competing, that is difficult. Go where no one is competing and excel in that area to win easier. Same for buying stocks, buy the ones no one knows about, greeted by yawns, as Buffett would say.

Facebook

-2.2 billion users spend on average 1 hour per day on Facebook related products

-Facebooks targeted advertising based on years of private data, based more on clicks than the highlight reel posts themselves

-“happiness is love”. Those who are happiest have the best relationships, which is why Facebook is so addicting and will never go away, and has entrenched a moat now with over 2 billion daily active users (not counting being excluded from China). Facebooks sentiment analysis – in the short term, those who get into relationships are happier than single and post less, and communicate less as well with others (since they already happy with “the one”)

-in order for companies to succeed now, in the new Benjamin button economy, they need the new algorithm of value. On the y axis of receptor or reach, x axis of intelligence of users, need both. FAANG has both, Facebook (1), google (2), amazon (3). Advertising here has the best bang for the buck. Twitter has high reach, but low intelligence of users. Traditional tv, newspapers, have even lower intelligence. Books and magazines are low in both.

-brains, brawn and blood of WWII; British, American, Russian. Consumers of social media are the blood. Mark Zuckerberg moat protection and building: acquiring Instagram for $1 billion in 2012 (best acquisition of 21st century, I think worth 50-100 times that) $19 billion for what’s app in 2015. Copying Snapchat with Instagram in every feature with more money to remove a competitor. Facebook and Alibaba and amazon are the three best well-known brands with the best risk reward proposition for large cap new economy companies. Good companies use network effect to take advantage of envy (once greater than 20% of capturing population, it will scale into a trending moat)

-Instagram doesn’t have too many posts, yet has high user engagement. A picture is worth a thousand words, and combats people’s short attention span.

-Facebook has no content costs as the users create the content. Will likely become the worlds largest media company.

-in the Information Age, Facebook is controlling and using and selling users information efficiently to get more advertising. 43% advertising growth in 2016, 60% for google, and -3% for other digital companies. Its goal is to increase your time on Facebook.

-Facebook and google will eat the digital media world.

-Facebook targets the 20% for 80% of revenue, the extremes, and uses the most extreme news out there that generate negative emotions easily (anger and outrage) to create more polarized people. So, people fall deeper into close mindedness as they only see and only want to see things related to them. Own silos – us vs them animal impulse; algorithm driven.

-Facebook exists to make money, not attempt responsibility. Captures our instinct to belong, intimacy, attention, respect. Likes and notifications are actually equivalent to slot machines. Facebook does not govern things to save money under the guise of “free speech”

-Facebook is now used as a Trojan horse

Google

-religion is dying because of google, as it provides answers way better than religion. With more education, and internet usage and IQ, more people in the west don’t believe in God anymore. Religion increases people’s social trust, social ability, cooperation, etc. Coincidentally or not, so too has people’s moral compass for anything, especially in mature economies. Knowledge is cash and helps us survive. Google knows even more about us than those closest to us. We turn to googles, fair and impartial answers, with deep trust and see it as a prayer to our answers. That trust, combined with its colourful and simple, uncluttered home page (user friendly, just like Apple) is what led to google taking out even other search engines.

-Google drives prices down in marketing as its COGS is zero for a click. This forces competitors to do that too. Though it looks like a disadvantage with lowered revenue per click charge, it’s an advantage as it can price out competitors and gain even more market share. Alphabet is the holding company for google ventures, google X, google capital. No one understands the holding company alphabet.

-Listing content on google for free, as an old newspaper or media, actually is not mutual but parasitic. Google gets all the traffic and most of the ad revenue, while preventing innovation on your one part, eventually dying out, to let google and Facebook become the main news source. Get them to pay for access to New York Times articles licensed, else they go to your site individually. Otherwise, it’s selling dollars for dimes. However most old people, regardless of demographic, are close minded and won’t change, and eventually end up killing themselves; old companies typically don’t adjust to the present. New York Times got pummeled and its family shareholders all lose massive value. Scott Galloway and his firebrand fund started with 600 million and turned into 350 million over many years, and he got options worth $10,000. Killed by google; you can admire gods, but you shouldn’t sleep with them, once googles algorithm attacked NYT and about.com

-google will continue to be the library of the world, with it hiring, in their eyes, the smartest people in the world

Chapter 6 – lie to me

-it is often the second company who comes in, stealing ideas from the first and doing it better, and analyzing the first’s mistakes.

-Con 1; steal and protect. The US stole from the British, just like how Facebook stole from Snapchat to upgrade Instagram

-Con 2: not stealing, only borrowing. Google takes data for free then sells it. Easy money.

-Facebook does it better – they spend no time creating content, take your content and sell ads curated based per person

-Tesla is smart as they get the government to help fund and assist in selling electric cars and solar panels

-the key to a great con is to have the victim believe they will win until the very last moment

-the four horsemen tricked old companies badly. Amazon can sell its own brand via amazon basics; Facebook can charge companies creating ecosystems. If you don’t own the space, you are at mercy, I.e. a renter to a landlord.

Chapter 7 – business and the body

-brain: google, lowest cost. Very difficult to make money here, as brain is cold and calculating. That’s what’s stopping love from happening.

-heart: easier to appeal to than the brain. Love is, apparently, the strongest emotion in history. We will sacrifice for love, so make our products and brand sentimental (Facebook)

-sex: the easiest way to trick consumers to pay top dollar is to associate your brand with better mating desirability. That’s how these luxury brands with massive margins survive and thrive; Apple.

-Amazon meets our needs to gather more stuff

We typically have one mate (2 people), people who will help you move a body (6 people), people who you can work together with (12 people), 150 connections, and 1500 people you recognize

-so far, all private corporations eventually go bankrupt. The big four eventually will too. The question is how and by who? The big four got there with: insurgency (Apple PC through consumers not corporations first), false humility (Facebook and google quietly moving along), security and simplicity

-Chapter 8: The T Algorithm (8 factors)

1- product differentiation; Apple is brand, amazon delivery. Removal is key – removing nuisances of life; Tesla will with auto driving

2- visionary capital – a company with a strong vision and access to cheap capital, whether debt or secondary equity offerings

3- global – a company that goes global, preferably within 5 years

4- likeability – a good company has likeability and therefore avoids regulatory scrutiny and gets tax breaks

5- vertical integration; own the entire process. The store, the factory, the retail, distribution, wholesale, advertising, spaces, everything. Have control and not dependent on others

6- AI, artificial intelligence. Those who can use AI to master data will win. Behavioural marketing; market per user based on their searches. E.g. if someone searches for wedding rings offer them those targeted ads, as well as ads for things related to marriage. CEOs always have to be careful with what they say to avoid non disclosure problems, they are holding data, the equivalent of oil now.

7- accelerant; place must be viewed by young people as having potential to make money. Attract the best talent

8- geography; have workplace close to good places, universities. Go to young people and the wealth, not away from them.

Chapter 9 – the fifth horseman

-the current four will probably be around at least a generation, if not longer

-54% of packages in Chinese post are from an Alibaba business. They also have 54% of China’s e-commerce market share.

-Alibaba has no competition, but ultimately, struggles to go global, at least outside of Asia right now. Its other challenge is entering the US, visionary capital, transparency of share structure, data privacy concerns, government involvement curtailing competitors and support, so not entirely a free market

-Tesla meets every definition; is it now just about execution and to increase gross margins. They have massive data on users from FSD and free capital (1.5 billion in secondary offerings since 2010) so they can keep going, even if they lose money.

Uber

-lacks vertical integration (ownership of cars) and likeability from 2017. But has everything else. Only 8000 employees, and 2 million drivers making an average of $7.75 per hour. It’s a cash burner for the employees and investors; the customer benefits from Uber ultimately with lower prices. Likeability won’t be a problem as consumers choose with dollars not about rights. However, no differentiator as Lyft can copy Uber

-Microsoft is B2B, appealing to our rational side. Doesn’t appeal to us emotionally or increase our sexual mating desirability. They focus on the enterprise side as opposed to consumer side of the four. They are no longer the same accelerant, but have innovation

Airbnb

-has a moat: established liquidity of both supply and demand, and first to market and good reputation. Additionally, they have every trait except for vertical integration, which can be figured out by owning places or tours or experiences. Most likely of the sharing unicorns to become the fifth horseman

-Success breeds complacency

-everything seems impossible or stupid until it isn’t

Chapter 10- four horsemen and you; what I should do

-most people are average; “it’s never been better to be exceptional, or a worse time to be average”. Those who are great get way more money and attention, even if just marginally better. E.g. LinkedIn only works for the top, everyone else it’s a waste to have a profile.

Personal success factors; emotional maturity, emotional intelligence, adaption to change (rate of change now keeps getting quicker), curiosity, ownership (own things). These traits show however that the future is women. Suggest different things at work that also can be viable.

-Go to college: college grads make ten times more than those with just a high school degree. College is also where you can make deep friendships that will last a lifetime and offer great things to come.

-get certification of particularly good skills

-accomplishment habit; compete and persevere. Those who succeed in one area tend to succeed in other areas.

-move to big cities

-pimp your career by using social media in a self positive manner to get job offers and whatnot. Good work does not stand out, you have to promote it or else you will be unnoticed and underpaid.

-The fifty-five-year-old who proudly says they don’t use social media has either given up or is afraid. Embrace the new trends and know and be in them, even if you disagree with them (Facebook, LinkedIn, YouTube, Instagram)

-build equity in companies (own, work, or through stocks), not income. Spend less than you make, except in university. Save and invest and plan as time to no retirement savings can come fast.

-serial monogamy; is the best strategy. Every 3-5 years consider a new option. Find companies with people you respect, good organization/management policies, someone in senior level position that will fight for you (my manager), get equity or forced savings, can learn new skills. Only go if a situation is confirmed awful by other people alike. Avoid appearance of actively looking, but always open to a conversation. Familiarity breeds contempt as new hires can get paid up to 20% more.

-stay loyal to people, NOT organizations. Church’s, countries, corporations tout loyalty to trick people to do brave and foolish things such as go to war.

-if you don’t have a boss fighting for you at work, then:

1. A) they are a bad boss
2. B) you are a bad employee
3. C) both

I.e. time to go or time to change

-follow your energy and talent and cultivate it, not your passion (those who say follow your passion are already rich)

-you won’t find justice in the corporate world

-The best revenge is living better than, or at least never thinking about, the person who made you miserable.

-nothing is as good as it seems or as bad as it seems

-Go where your skill is valued in a company or for skills that will be valuable

-the sexy job is harder to pay bills; the boring job is more likely to get paid

-Stay physically healthy

-A decent proxy for success: time spent working on your own success vs watching others success. More working on yourself is better.

-Ask for and give help. Most help you give to people will not be reciprocated. A few seeds may turn out where you least expect it. Plus, it is the right thing to do.

-Most successful people’s goals involve helping others

-People who envy high paid corporate executive positions don’t know what they are talking about, or are sociopaths

-where in a company’s lifecycle am I a best fit for?

-people who receive a great deal of attention for their looks at a young age (or lack thereof) are more likely to get cosmetic procedures when older

-go with the winners or in their ecosystem

-myth of balance; you can’t have balance and be successful. If you have balance when young, you don’t have it when old.

-trajectory for a career is usually set in the first five years of post graduation

-on average, smart people who work hard and treat people well do better than those who have muddled thinking, are lazy, or are unpleasant to colleagues

-entrepreneurs need skill and personality. And, some of those personality skills are detrimental to other aspects of life

-entrepreneurs have to sell, be good at selling, and be persistent.

-Thus, 99% of people aren’t fit to be an entrepreneur

-failures are privatized: law school isn’t for me (failed LSAT), spend more time with kids (got fired), working on projects (can’t get a job)

-the four create increasingly a few lords and many serfs

Chapter 11 – now what? Break up the big four? Chang up the tax system? Change up the capitalist and incentive system?

-they employ way less people based on market cap compared to other companies. And also, Uber is the worst for this.

-the big tech companies don’t let their kids near tech, interestingly and not surprisingly. Additionally, the variable surprise reward of social media, like slot machines, is akin to gambling dopamine shots, where kids are particularly at risk.

-winner take all economy, weakening middle class

-technology companies with less workers get easy capital; no chance for old economy firms or startups

-the four have somehow made themselves to be viewed good instead of bad

-in 2018, there are only half as many publicly traded US firms as there were 22 years ago in 1996

Disclaimer

This is not Financial Advice. This article is meant only for educational and perhaps entertainment purposes.