INSIGHTS

Scott Galloway's: The Four

In Scott Galloway’s book, The Four, he sets out the commonalities of the four.

1. These companies have figured out a way to suspend the natural order of economics.


2. They have a Benjamin Button network effect. Their products get better every year and they cut their costs every year (bucking the usual indicator of your strength being your ability to raise prices faster than inflation)


3. With the exception of Apple, they do not turn a profit. Investments in these companies are not about short term profits or dividends but capital appreciation of the shares. An investment in these multi-sided platform (MSP) companies creates more shareholder value than traditional firms.

The chasm between The Four valuations and earnings is gigantic. While “$2.4 trillion, or about 13% of the size of the US economy, their combined earnings were just $77 billion last year — with more than half that coming from Apple, the world’s richest company.” Amazon’s 2016 market capitalization of $483 billion was 210 times its $2.3 billion in earnings. The hope is that “long term, earnings growth will catch up with sales expansion as well as heavy investment spending designed to put competitors out of business.”
(excerpt from Thomas Jr., Landon, ”5 big tech stocks build market euphoria, and jitters”, New York Times, 7 June, 2017)

 

In Scott Galloway's bestseller The Four: The Hidden DNA of Amazon, Apple, Facebook and Google), he sets out the path of these companies to phenomenal, world-changing success. In answering the question, "How do you build a meaningful relationship with a billion people?", he says the four most powerful companies in the world tap into a primal instinct.


BRAIN – GOOGLE
(the higher power, a need for answers. God) As societies get more educated, their belief in God declines but the need for answers remains.


HEART – FACEBOOK
(the act of caring for others, tap into the need to love others, expand the circle of love) Facebook helps us love at scale.


STOMACH – AMAZON
(the consumptive self)
It is baked into us to always need more. The notion of having more is much safer than having less. Amazon hits that.


GROIN – APPLE
(survival in a modern economy)
For most people the threat of survival is not immediate so we shift to the second most – procreation, Apple says “you are part of the creative class and you have good genes. This is your new signal of your worthiness, luxury”.