Scott Galloway on Markets, Musk, and Trump’s “Weapons of Mass Distraction”

CHRISTIANE AMANPOUR, CHIEF INTERNATIONAL ANCHOR: Now, from a tariff war, as we discussed earlier in the program, to tax cuts for the rich, is there method in Trump’s MAGA-nomics? Our next
guest thinks so, and he’s calling it his, quote, “weapon of mass distraction.” NYU professor, entrepreneur, and podcast host Scott Galloway joins Hari Sreenivasan to break down what Trump’s head spinning, constantly shifting economic policies mean for the state of American finances.

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HARI SREENIVASAN, INTERNATIONAL CORRESPONDENT: Christiane, thanks. Scott Galloway, thanks for being back with us. Last time you and I spoke, we were talking about your book, “Adrift.” And at that time, you said, America as a country isn’t lost, but rather adrift and unmoored. And I wonder, since that time, has your assessment changed?

SCOTT GALLOWAY, HOST, “THE PROF G POD” AND “PIVOT” AND PROFESSOR OF MARKETING, NYU STERN SCHOOL OF BUSINESS: Well, you could argue that it’s found direction. Unfortunately, I think the direction is more a direction around a change towards a quarter of each party. Democrats are just as guilty of this as Republicans are in favor of an autocrat as long as that autocrat shares their views. And I think that’s sort of come to fruition here. I think the superseding of our checks and balances of different branches of government such that one political party that is in control can sort of bypass the traditional constitutional measures or safeguards reflects that America has become, if you will, more open or accepting to the notion of an autocracy. I think we are pretty much in a full kind of, call it, maybe most generously autocracy light and much of America voted for this.

SREENIVASAN: Do you think that, say, for example, what’s happening in the stock market is a reflection of people’s dissatisfaction with this direction that you’re talking about? I mean, I think the S&P’s had one of its worst weeks ever. All the gains that we had since the election have practically been wiped out.

GALLOWAY: I wouldn’t say it’s dissatisfaction because that implies that they’re upset about it. The market is pretty unemotional and is focused on increasing earnings and people will buy stocks regardless. Sentiment sort of takes a backseat to financial considerations. I think what’s happening in the market is, first off, you have to acknowledge that even with these drawdowns, the market is still substantially up from where it was just six months ago. It has come back from pre-election. The Trump bump has been wiped out. I think what you’re seeing, quite frankly, is a couple things. The market just may have gotten, quite frankly, overvalued. But I think the thing that kind of triggered the sell off, if you will, is what appears to be irrational, non-economic decisions around tariffs, where we’re basically ripping up these 80-year long alliances with trusted economic partners that engage in mutually beneficial trade, and that these are not only a bad idea in the specific agreements we’re trade — we’re ripping up, but America is losing a very important brand association for economic relationships or geopolitical negotiations, and that is one of consistency.

SREENIVASAN: You know, there was an estimate by the Yale budget lab that these tariffs are going to cost the average household somewhere between $1,600 and $2,000 every year. It’s also estimated to reduce our GDP as much as $110 billion a year. You know, one of the lines of thinking that I hear from members of the administration is, look, if these short-term hits can get us better leverage to try to negotiate longer-term prosperity for America, this will have been worth it. Does that make sense?

GALLOWAY: Well, to be fair tariffs aren’t all bad. Sometimes you need tariffs as a hammer to restore symmetry to an asymmetric trade relationship. Biden maintained the initial Trump tariffs. I think some of Trump’s initial instincts around the asymmetry of the trading relationship between China and the U.S. were accurate. What this is, though, is just plain non-economic. I was a graduate student instructor in microeconomics in graduate school. We used to talk about tariffs, I imagine, the same way that professors in medical school talk about leeches. Like, can you believe they were stupid enough to actually think this would work? And the notion that we’re putting on ourselves in a position to negotiate some big, beautiful deal, I don’t think it’s going to work because Trump tore up the Iran deal and now appears to want it again. The tariffs are off and on. I just don’t think we’re being — we’re seeing now as a reliable partner that can be counted on with the economic livelihood of your country. Think about Canada. We’re not even able to give Canada a good reason for why he’s doing this. The — kind of the stated reason from the administration for what is tariffs that will hurt our economy and dramatically hurt the Canadian economy is that the unchecked transfer of fentanyl across the Canadian border. You could take the amount of fentanyl that’s come across the U.S.-Canadian border and put it in a backpack. Estimates are that it’s less than 1 percent. And to alienate your closest allies — think about Canada, Hari, it’s the largest undefended border in the world. What does that tell you about our relationship to this point with Canada? They joined us in World War I. They were in World War II before us, training Allied pilots. They were side by side with us in Kosovo in our fights against the Taliban. Amazing economic prosperity. We have NBA and NHL teams in America and in Canada, respectively. And I love that question, Hari, that was presented by a Holocaust survivor around evaluating who are your real friends. And that is, it comes down to one question for her. Would they hide me? And that’s a really puncturing kind of rattling question to evaluate your friends by. But by that standard, Canada is one of our best friends. In the Iran hostage crisis, they hid American diplomats and under great personal risk made — ensured their safe escape from Iran. And they stayed behind. And had they been caught, there was a good chance they would have been hanged from crane. So, Canada has hid us. They are real friends. And for us to recklessly, irrationally, and inexplicably try to hurt them in exchange for what might be some big, beautiful deal, it’s — it — the damage here to unwind and repair will take the better part of the 80 years it took to make these amazing, prosperous relationships that, quite frankly, the administration, in my view, has irrationally taken for granted.

SREENIVASAN: So, how does the world deal with this kind of uncertainty?

GALLOWAY: So, the VIX, which measures volatility, as evidenced by trading and options, has spiked. And the Atlanta Fed has a metric, we’re trying to project what GDP growth might look like in the coming year. In the last 45 days, it’s gone from a projected growth of GDP of 4 percent, which is really robust growth to negative 2.8. The economy is contracting faster than it has since the COVID lockdown. Obviously, the markets are chilled. I think the silver lining here — I always like to ask myself, what could go right? Because over the medium and the long-term, the majority of the metrics in the world do get better, and it’s easy for someone like me to try and sound smarter than they are by always being negative. So, I think it’s an important question to say, what could go right? And I think the silver lining here is that Europe is in fact becoming a union because they realize they can no longer count on the military economic umbrella or the geopolitical consistency of America. America spends about $800 billion. NATO and all E.U. nations spend about $430 billion on the military. And quite frankly, they have gotten, I would call, lazy and expectant around the military umbrella being provided by the U.S. They now are convinced they can no longer count on the U.S. to be pro-democracy and make what are rational decisions in honor of this kind of post-World War II order. They realize they can no longer count on or expect the military umbrella of the U.S. They will dramatically increase their spending on military, which I think will have stimulative and spillover effects. I think the silver lining here is that Europe is going to begin to command the space it occupies. Keep in mind the total GDP of European nations is 19 trillion. The GDP of Russia is 2 trillion. So, there’s no reason why Europe, if it gets its act together, shouldn’t be able to push back and be a credible opposing threat to an economy that is, again, smaller than the size of Canada, Russia.

SREENIVASAN: You’ve been pointedly critical of Elon Musk in the past several months and really even a couple of years. But in light of the Department of Government Efficiency, I think there is a consensus that people on both sides of the aisle are interested in making government function better, making it more responsive and efficient. But what have you seen over the past couple of months that give you pause on whether this is going to have longer-term effects and perhaps unintended consequences?

GALLOWAY: Well, every administration from Clinton-Gore has had some sort of task force to try and root out inefficiency, fraud, and waste. So, far, if DOGE is an audit of the U.S. government, then the U.S. government has been issued a clean bill of health. Because this wall of receipts is surprisingly scant. The first one said they were — claimed they were saving $8 billion. It ended up to be $8 million of spending that had already been spent. And then numbers two, three, and four on the list of DOGE receipts that have since been taken down were just blatantly false. The Wall Street Journal reports that so far DOGE has found 2.6 billion in cost savings. You could 6X the savings from DOGE to date by cutting off all subsidies to Tesla, which has cost taxpayers $15 billion. But I think it’s more mendacious than that, Hari. I mean, yes, we all like the idea of cutting waste. But I believe it’s a misdirect, and that is, while we’re all kind of have our hair on fire and looking over here, at DOGE, 2.6 billion, the indignance, the emotional upset of firing good people doing good work, or just the general incompetence of laying off air traffic controllers, or firing people overseeing our nuclear stockpile and then trying to hire them back, I believe for the most part it’s a strategic weapon of mass distraction to get you to look over here, as the Trump administration is planning to increase our deficit by $800 billion a year with tax cuts to the wealthy. All of this is a misdirect. It’s sad. It’s unfortunate. It’s incompetent. It’s an — these savings are illusory, right? But at the end of the day, I think it’s a purposeful distraction from the tax cuts they are trying to put forward at the expense of future generations.

SREENIVASAN: Do you think that Elon is getting a net positive benefit from this? Because on the one hand, he has gained incredible proximity to power and in fact power for his $250 million contribution to the campaign. On the other hand, the value from Tesla shares have been evaporating because he seems to have alienated a huge chunk of the people that used to buy his cars.

GALLOWAY: I think the political calculus here was miscalculated on his part. We were talking about Nike off mic. When Nike embraced Colin Kaepernick, which was a political position, they had done the math, and that is two-thirds of their revenue comes from people outside of the U.S. or people under the age of 30, none of whom thought the U.S. had it right on race relations. So, they purposely tickled the censors or cemented their kind of progressive ideology among a customer base that they knew would appreciate that. Musk has made exactly the wrong calculation, and that is three quarters of Republicans would never consider buying an EV anyway. His largest market is California and sales are down 11 percent. In Europe, sales are off 75 percent, in Germany in between 20 and 30 and other big E.U. markets. So, essentially, Tesla has shed a third of its value in the last month. It’s given back all of its gain since the Trump election. What is really going to hurt his pocketbook is that it has now jumped the lab and is now starting to affect SpaceX, specifically Starlink, who is
seeing contracts being canceled by people ranging from Canada to Poland is saying, we can’t count on you for something as important as communications and battlefield communications technology. So, they’re reconsidering their Starlink contract. So, I would argue the political calculus here from Mr. Musk was wildly inaccurate, and he is seeing a lot of his wealth evaporate because the negative associations of Musk have — are starting to infect not only the Tesla brand, but also the SpaceX brand. So, I think it was an irrational decision from a purely economic standpoint.

SREENIVASAN: Here we were at the inauguration and we saw lined up next to the president, literally the who’s who of technology and billionaires standing next to him. And I wonder, is this just business as usual or was it — you know, is this different than what the Carnegies or the Rockefellers might have done a hundred years ago? Is it just the optics that are different now or is there something more structurally more destructive?

GALLOWAY: It’s a fair question because I think a lot of people on the right would maybe fairly say, look, we may be more transparent and brazen about it, but it’s nothing that lobbyists and lawyers and the media haven’t been doing for the left. They’ve just done it more quietly and elegantly. When the most powerful or wealthy tech executives in the world are all willing to be intimidated into donating to inaugural campaign, which they did do in 2020 despite publicly stating their politics more in line with Biden than Trump, when they’re willing to be paraded around for the benefit of the Trump administration, you have what I call a domino of cowardice. And that is, they text my “Pivot” co-hosts that they hate themselves and, you know, that they hate showing up in the inauguration, and then they show up. And then, that leads — gives Linda Iaccarino, the CEO of X, the confidence to demand that an ad agency advertise on their platform or they risk having their merger blocked by her buddy who has proximity to the president. What we don’t want to acknowledge in America is that rights and democracy are now a function of how much money you have full stop. The wealthy technocrats and the 0.1 percent feel as if, and quite frankly, it may be true, that they are protected by the law, but not bound by it. Whereas the rest of the 99 percent are bound by the law, but not protected by it.

SREENIVASAN: I wonder — getting back to those CEOs for a second. I wonder if they now or will always have a shield that says, hey, listen, I’m just doing what’s right for my shareholders. This is my fiduciary responsibility. So, I give a million dollars to the campaign or to the inauguration. You know what, it could help our stock down the line, or if I don’t give the million dollars, it could certainly hurt my stock down the line. And that’s as CEO. That’s who I’m supposed to, you know, be loyal to.

GALLOWAY: I think that’s a fair argument, Hari. But what I would ask is they don’t ever use the term stakeholders again. Remember all this BS over the last 10 years where they start talking about stakeholders? Well, all right. The country, democracy, poor people, people who aren’t politically connected, people who don’t have stock options in Apple, the 99 percent that only own 10 percent of stocks, are you supposed to be also be representing them? Are you supposed to have some fidelity to the values, the rule of law, democracy, checks and balances that helped get you so rich in the first place? Because let me list all of the CEOs who have filled this leadership void and have said, I am more concerned about the long-term health of America and what it means for private and public companies, and I’m not going to engage in this sort of this kleptocracy. I’m not going to be an agent. So, here are some of the CEOs who have filled this leadership void. OK. List over. At some point, these people, many of whom talk about running for president, many of whom claim to be great Americans, many of whom constantly voice their gratitude for what is the best experiment and the best platform in the world for establishing economic security and rights, at some point, you’d like to think they’re going to show some fidelity to the democracy and principles and rule of law and checks and balances that played a huge role in their wealth. But instead, they default to this, quite frankly, cold comfort of, well, I’m a fiduciary for shareholders. Let’s be honest, just kiss his ass, give him a million bucks, and stay out of the crosshairs. Yes, it’s probably good in the short-term. The question is, at what point does someone stand up and say, OK, I’m representing the bottom 99 percent, I’m representing democracy, and I’m representing what America is supposed to stand for. And paying it forward based on the incredible rule of law, democracy, fair competition that got me here in the first place. So, I think that the domino of cowardice here in the private sector is not only shocking, it’s just very disappointing.

SREENIVASAN: Author and professor and podcast host of both “Prof G” and “Pivot,” Scott Galloway. Thanks so much for your time.

GALLOWAY: Thank you, Hari. Always good to see you.