Scott Galloway: Why I'm selling my American stocks
Quick Read
Summary
Takeaways
- ❖Scott Galloway is selling down American stocks for diversification, citing 17 years of U.S. outperformance and current overvaluation compared to global markets.
- ❖He believes GLP-1 drugs are a more transformative technology than AI, proposing free national distribution to cut U.S. healthcare costs by half and solve the deficit.
- ❖Galloway defines economic security as having 25 times your annual 'burn rate' and advocates for spending surplus on experiences and giving away the rest.
- ❖His investment philosophy favors 'boring' industries, noting an inverse correlation between an investment's 'sexiness' and its return on capital.
- ❖He criticizes the generational wealth transfer, arguing that fiscal policies have enriched seniors at the expense of younger generations.
- ❖Galloway promotes the 'Resist and Unsubscribe' movement, encouraging consumers to cancel big tech subscriptions to impact market valuations and pressure political leaders.
- ❖He advises young men to focus on raising 'good men' as a life purpose, moving beyond early life goals of wealth and superficial attraction.
- ❖For relationships, he stresses authenticity, follow-up questions, and demonstrating 'valor' by paying for dates without expectation.
Insights
1Selling American Stocks for Diversification
Galloway is divesting from American stocks due to a belief that the U.S. market is currently overvalued and due for a correction. He notes that the U.S. has outperformed emerging markets for 17 years, significantly longer than the typical 8-year cycle, suggesting a market rotation is imminent. He points to the Buffett index (stock market valuation vs. GDP) being at 210% compared to a preferred 90%, and the S&P trading at historic highs relative to earnings.
U.S. outperforming emerging markets for 17 years; Buffett index at 210% vs. 90% preference; S&P trading at historic highs (97% of time at lower valuations).
2GLP-1 Drugs as a Transformative National Solution
Galloway asserts that GLP-1 drugs are the most transformative technology in decades, potentially more impactful than AI. He proposes that as a 'dictator for a day,' he would procure a billion doses of GLP-1s and distribute them free to every rural household in America. His rationale is that this would reduce national healthcare costs from $13,000 to $6,500 per person, effectively solving the national deficit and addressing obesity-related health issues, along with potential benefits for addiction.
GLP-1s' potential to halve healthcare costs and address addiction (gambling, porn, alcohol, nail-biting).
3Critique of Generational Wealth Transfer
Galloway argues that U.S. fiscal policy over the last 50 years has systematically transferred wealth from younger generations to older ones. He points to the elimination of capital gains tax deductions and mortgage interest rate deductions as policies that disproportionately benefit older, asset-owning individuals. He contrasts the 72% wealth increase for average 70-year-olds with the 42% wealth decrease for average 25-year-olds over the past 40 years, advocating for policies like a tax holiday for young people.
Average 70-year-old is 72% wealthier, average 25-year-old is 42% less wealthy over 40 years; $1.2 trillion transfer from young to old.
4The 'Resist and Unsubscribe' Movement
Galloway advocates for a movement where consumers strategically cancel subscriptions to large tech companies (e.g., Amazon, Apple, Microsoft platforms, OpenAI). He believes this collective action, targeting the 'soft tissue' of inflated tech valuations, can send a powerful message to markets and the administration, forcing political change. He cites the Q1 2020 GDP crash as evidence of market impact on political action.
Canceling a $20/month ChatGPT subscription removes $10,000 in market cap; Q1 2020 GDP crash (31%) as a political catalyst.
5Investment Philosophy: Embrace the 'Boring'
Galloway's core investment principle is that the sexier an industry or investment appears, the lower its return on invested capital. He advises investing in 'boring' sectors like healthcare maintenance scheduling software or retail shopping centers, which may lack glamour but offer consistent, high returns due to factors like supply constraints and essential services. Conversely, 'sexy' ventures are often better for consumption than investment.
Personal success with L2 (digital benchmarking) and investing in retail shopping centers (44% annual compounding) vs. venture investing with zero cash flow.
Bottom Line
The most profitable business opportunities around the 'male loneliness epidemic' are unfortunately those that exploit young men's worst instincts, such as speculative markets and gaming (e.g., Meta).
While public policy should address male loneliness through 'third places' (bars, sports leagues, experiential venues) and affordable housing, profit incentives currently align with platforms that exacerbate isolation.
Entrepreneurs and policymakers should focus on creating and subsidizing 'third places' and increasing housing supply (e.g., through 'build baby build' initiatives and overturning NIMBY laws) as a public good, even if immediate profit incentives are lower than exploitative models.
Opportunities
Develop and invest in 'third places' and experiential venues.
Create or invest in businesses that serve as community hubs, such as bars, sports leagues, mini-golf (Putt Shack), virtual golf (Topgolf), or trampoline parks. These address the male loneliness epidemic and cater to the consumer shift towards experiences over material goods.
Invest in or develop retail shopping centers.
Despite common perception, retail shopping centers can be highly profitable due to supply constraints (nobody builds anymore) and a shift towards experiential tenants. Replace struggling traditional stores (e.g., Macy's) with trampoline parks, Topgolf, or other experience-based businesses.
Create SaaS platforms for 'boring' but essential services.
Focus on unsexy but critical business needs, like healthcare maintenance scheduling. These types of platforms often have recurring revenue models and can achieve high valuations (e.g., L2's 8x revenue sale) because they solve real problems without the 'sex appeal' that attracts excessive competition.
Key Concepts
Economic Security Formula
To achieve economic security, calculate your desired annual 'burn rate' (what you need to be happy) and multiply it by 25. This total represents the capital needed, assuming a 4% post-tax return, to eliminate the 'should bucket' of obligations and live life on your own terms.
Boring Investment Principle
The return on invested capital is inversely correlated to how 'sexy' or 'cool' an industry sounds. Invest in unglamorous, essential businesses (e.g., healthcare maintenance software, retail shopping centers) rather than hyped, 'sexy' ventures, which are better for consumption than investment.
The 'Should' Bucket Elimination
Once economic security is achieved, the goal is to eliminate activities from the 'should bucket' (things you feel obligated to do) and focus solely on the 'have to' (essential responsibilities) and 'want to' (personally fulfilling desires) buckets. This allows for greater autonomy and purpose-driven living.
The Code of Living
Everyone needs a personal 'code' or operating philosophy to navigate life's decisions. An imperfect code is better than no code at all, as it provides a consistent framework for values, actions, and responses, preventing extemporaneous and potentially inconsistent behavior.
Lessons
- Redefine your 'economic security' number by multiplying your desired annual spending (burn rate) by 25, then spend or give away any surplus above that threshold.
- Prioritize spending on experiences (e.g., travel with family, college tours with kids) over material possessions, as research shows experiences yield greater long-term happiness.
- Cultivate genuine relationships by being your authentic self, showing interest through follow-up questions, and demonstrating 'valor' by proactively helping friends and partners without being asked.
The 'Should Bucket' Elimination Strategy
Define your 'economic security' number: Calculate your annual desired spending and multiply it by 25 (assuming a 4% post-tax return).
Work relentlessly until you reach that number: Focus on wealth accumulation in your younger years, even if it means sacrificing other aspects of life temporarily.
Once economically secure, eliminate the 'should bucket': Actively identify and stop doing things you feel obligated to do, focusing only on 'have to' (responsibilities) and 'want to' (personal desires).
Spend and give away the surplus: Allocate incremental wealth above your security number to experiences you desire and philanthropic giving, rather than hoarding or endlessly accumulating.
Notable Moments
Galloway's return to Davos after 27 years, observing the shift from e-commerce and 'capitalism, consumption, and Bill Clinton' to AI and 'chaos, coercion, and non-compliance' as the American brand.
Highlights a significant change in global perception of the U.S. and its economic focus, reflecting broader geopolitical and technological shifts.
Galloway's personal pivot in purpose, driven by his mother's illness and the birth of his sons, shifting from seeking wealth and superficial attraction to raising 'good men' and achieving 'surplus value'.
Illustrates a profound shift in personal values and purpose often experienced later in life, emphasizing the protective power of money and the impact of life-altering events.
Galloway's 'dictator for a day' policy proposals, including mandatory national service, a $25/hour minimum wage, and free national GLP-1 distribution.
Showcases his bold, unconventional thinking on societal and economic issues, offering radical solutions to complex problems like healthcare costs and social division.
Galloway's candid discussion on the challenges of living in expensive cities like Manhattan, even with high incomes, and his decision to move to Florida to reduce his 'burn rate' and accelerate wealth accumulation.
Provides a practical example of making strategic lifestyle choices to achieve financial goals, challenging the assumption that one must live in a high-cost area to be successful.
Quotes
"Old people have basically raping our economy for the last 30 or 40 years. It needs to stop."
"I spend money like a 50s gangster just diagnosed with ass cancer."
"The key to being really successful is to create allies along the way such that you're put in a room of opportunities when you're not physically there."
"Money is a means of protecting people, not of having an awesome life."
"People overestimate the amount of happiness they'll get from things and they underestimate the amount of happiness they'll get from experiences."
"The more boring and less sexy an investment is, that's where you invest. The other you consume, but you don't invest in it."
"The person you want to end up with is the person where you get to be you and they like you despite the real you."
"The ultimate aphrodisiac for young men to give to women is this strange thing called follow-up questions."
"An imperfect code is better than no code at all."
Q&A
Recent Questions
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