Millennials & Money: A Global Outlook

Live From Oslo, Norway

Delivered to an audience of  powerful International financiers as part of his European 2017 tour , Matt delivered a talk to make the audience rethink their approach to investing and looking for broader industry undercurrents

Event Transcript

I've spent 15 years running a big ad agency, in New York City, helping big brands target youth and college students and I worked with half of the Fortune 500. One thing I saw over and over and over again, is these big corporate executives would talk about Mark Zuckerberg from Facebook, or Evan Spiegal, the founder of Snapchat as these sort of cultural gods and innovation gods, yet Evan Spiegal is 26 years old. Mark Zuckerberg's 31. These are young people and the people who are saying it are in their 50s and their 60s and the 20s and 30 year olds in the organization, they don't even know and they don't even talk to, yet those are the people who are living this new world. Those are the people who were born staring into a phone.

When we were born, we looked into our mother's loving eyes. That's what we saw, but now kids that are born, they're staring into their phone, because their mom wants to capture the video and she wants to share it on Instagram. By the time this generation is three years old, they're already learning how to be hipsters. They're wearing clothes that are worth more than your clothes and my clothes and they're understanding social media and they're so incredibly advanced and by the time they're 10, 11 and 12 years old, I'm sure a lot of you people in this audience have kids that are 10, 11, 12 years old, you guys could probably associate with this, or understand this, that they're having group status meetings all with their devices.

This young generation is so incredibly advanced. One thing I see, with the consumer in general, is that kids are growing up fast, but adults are growing old slow. You look at somebody like Eric Schmidt, who recently just left as the chairman of Google, who was once the CEO of Google. The reason Eric Schmidt was hired as CEO of Google is, he went to Burning Man, which is this huge festival, just outside of Las Vegas in the United States, where it's a very ... let's just say it's an incredible party and the founders, Larry and Sergei of Google hired him, because of how well he did and how well he fit in at Burning Man. Not exactly the business prototype that we had in the past.

We're dealing with a new consumer and I was asked here to talk about millennials, but the reality is, the new young consumer is Gen Z. In fact, the youngest millennial is actually 21 years old. Millennials really  aren't even that young anymore and what's coming in next is Gen Z. That's the new generation. This is the new young consumers, but the break from millennials to Gen Z is gonna be nowhere near as stark as the break from Gen X to millennials.

Millennials are unlike any other generation in the history and I'm often asked why. The reason why is, this is the first generation that grew up with the internet in the household. The access to information, rapid communication, ability to intuitively understand technology makes millennials and every generation born after it really a different species than myself and everyone else in this room besides one person, who's a millennial that was growing up with the internet in their household. Their brains are hardwired differently.

For them, they grew up and said, "Why would I need to call a car service, when I could just hit a button and have a car come to me?" That generation, it makes sense. That generation, it makes sense. That thinking is very intuitive. One thing that really fascinates me is, as the millennials get older, soon they're gonna enter the C Suite. The millennials now are 21 to 30, 33 years old. Soon, they're gonna be the new executives and when the millennials enter the C Suite, the things that they do are gonna be part of that intuitive thinking.

Then, you're gonna see big, bell weather companies, whether it be AT&T, or Microsoft, or Coca Cola, really make shifts, because the millennials are gonna come into the C Suite and say, "Why are we doing things this way? This is based on old world. We're gonna disrupt things." Today, I'm talking about lasting legacies and the millennial generation, because as Gen Z fades in, the millennials have left a footprint that's undeniable.

There are things that they have done to save the world that we aren't going back to. I often get asked by parents all the time, isn't it bad that kids are staring at their screens? Doesn't that make them not easy to communicate with one another? Yet, when those kids are in college, they're gonna have no problem with them staring at their screen to FaceTime with them, when they're a couple hundred miles away. When the airplane was invented, people said that it was a bad thing, because it was gonna take people away from their families. Well, it did, but it also makes it possible for me to be here today with you.

With every progression in society, there are negatives, but there's a ton of positives. What I'm gonna be talking about with these legacies today is the negatives and positives of these legacies, but more importantly, what are the business impacts, what are the sectors and business that are gonna thrive as a result of this new world and these legacies and what are the companies that are really in danger and what are the sectors that are really in danger.

We're gonna jump into it. If you haven't noticed already, I talk incredibly fast. My twitter handle @mattyb is almost on every screen, so if you use Twitter, which not as many people do as Twitter would hope right now, which I'll touch on. You can send me a tweet and I'll try to address it. Hopefully, we'll have time for Q&A and ill hang around afterwards, if you have questions, which I'm gonna cover a lot of stuff in the next 38 minutes. Let's kind of dive into it. I'm gonna take a sip of water, because as you'll see, you guys are about to be drinking from a fire hose, here.

Let's get it going. Okay. The first legacy, the status update is the new status symbol. The status update is the new status symbol. In the 80s, 90s, early 2000s, consumers would define who they were by their cars, their house, their watches, their sneakers. It was the brands that they bought, Nike, Adidas, right? To show everybody what they were all about. That was the social badge. That brought in a whole world of consumerism. If somebody had a luxury car and they drove it around, it connotated status to their social symbols, but now, products don't do that anymore, experiences do.

If you think about it, before Instagram, if you went to an amazing concert and sat front row, or you met a celebrity, or you hiked to an incredibly high mountain, or you skied down an incredible slope, no one could see it, unless they were right in front of you and you could show them your photo album. Now, you can post instantly and have the world see it. Because that opportunity exists, experiences have now replaced product as the new social currency and because of it, it's changing the way that consumers spend their time and their money.

Today's presentation's not just about the millennials, because millennials have had a reverberating impact on the world. Think about it. Facebook started on college campuses now today, billions of people use it every single day. Nothing I'm talking about today is just limited to a younger generation. It's really reverberated across to everybody as evidence my Eric Schmidt. One of the first causes of the status update being used as the status symbol is something I coined in by book, YOUTHNATION, called DIFTI, which stands for did it for the Instagram.

What that means is, people are pursuing experiences now not so much to actually enjoy them, but to actually prove that they were there. How many of you go to your kid's piano recital, or see them on a play and actually stare through the phone, instead of with your own eyes in high definitely. That's DIFTI. You wanna capture that video and actually share it with people. When everyone's at a concert, instead of actually enjoying the music, everyone's holding up their phone.

In many ways, if it wasn't shared, it actually never happened and people now are pursuing experiences just to share them. In fact, over a dozen people died last year in the United States taking selfies, standing at the side of a cliff, or on a tall building and actually falling over, because they actually wanted to get that selfie. That's how important it is. Why? Because that's how people are being portrayed to society, like Nike shoes used to do it for them. The relationships they get into, the job opportunities they get, maybe the colleges they get into are defined by what's on their Instagram profile.

That's what people look at, when they're introduced to somebody. That's the new resume. It's the new way to show the world what you're actually about and because of it, a lot of crazy things are happening. In Russia, people are renting grounded private jets, so they can take pictures of them. Okay? They are paying to go into a private jet that actually never leaves the runway, so they can take a picture to make people think that they're wealthy, or affluent. Yes, this is actually happening in Russia.

There's this place in New York City called Black Tap that makes incredible sundaes, that are incredibly overpriced. They're sold for $22 to $24 a sundae, because they make incredible Instagram photos and lines are actually around the corner. My kids wanted to go. There was a two hour line. I wouldn't wait into it. I hired a Test Rabbit, which is basically paying somebody to wait in line for me. Then, I showed up when they got to the front, but they were super happy about it, because they got in there. They posted the picture of the sundae and everyone knew that they were at Black Tap and they actually got a picture of it. It was more fun than actually eating the sundae.

There's a museum in America that's taking off, that's about to go global called the Museum of Ice Cream. When people go to the Museum of Ice Cream, they do not learn about the pasteurization of ice cream, or actually how it's made. There are 12 different rooms, where people can take incredible selfies, like the sprinkle room, which you're looking at here. Okay? The Museum of Ice Cream has lines around the corner. It sells out instantly, because this is an experience that people are going to that they can take pictures of.

If you're a hotel, what can you put in your lobby, that's gonna wanna make people take a picture of it, because things are being learned about not through television ads, 'cause the younger generation isn't watching TV ads. They're streaming all the time, it's through other people posting about it on Instagram. The reason that the Museum of Ice Cream has lines around the corner is that everybody went there just to share it. Essentially, they have advertising built into the product and the best companies moving forward are gonna be able to do that.

The best hospitality companies are gonna build sharing into their product. When people come here to Oslo, they go on Instagram and they search Oslo and they see what are the best posts from Oslo and they go there and they take pictures. If you're a restaurant, or a hotel near there, or you are that place, your business is gonna be doing incredibly well. This drives so much time, so much attention, so much energy and it's creating a global hospitality renaissance. Companies that are in travel, whether they're an airline, or a hotel, or a music festival, or an event and every company a bi-product of it is really thriving as a result of it, because this is where dollars are being shifted.

There's an app that's an upstart called GTFO, which stands for Get The Flight Out. Okay? What Get the Flight Out does, is allows you to search where's the furthest place that you can fly on a Friday afternoon, for the cheapest amount of money and all of a sudden, you're gonna go there. Bucket list. Right? DIFTI, take a picture of it, show everybody you were there, go home. It's not even actually explore the place so much, it's actually being able to go there. This is actually happening right now. It's happening everywhere.

Festivals are huge. The Glastonbury Music Festival that happens here in Europe. The festival business is really surging and there's no sign of it stopping. I spoke to a major beverage company last week and they told me, their number one channel is no longer the big retailers. It's not the Walmart's of the world. It's actually these events that people are going to, because it's so important for people to shift money there, actually the companies that sell beverages, whether it's a beer company, like ABM Bev, or a company like Coca Cola, or Pepsi, it's becoming a bigger and bigger channel for them.

Has anyone done Tough Mudder in the audience. All right. I got a couple people. Tough mudder costs $350 and it's essentially a race that people do, to make them feel like they're in the Army. They spend $350 to climb through dirty water and under barbed wire and I can tell you, not one person is doing this without bringing their phone with them. It shows people that they're rough and they're rugged. Maybe, they're an accountant, but once they get to Tough Mudder, they're a badass. Right? All of a sudden, these are people who could be in the Army and Tough Mudder is now a global phenomenon. Any company that's in the fitness space actually is going in this direction. They're creating these experiences.

There's something else called Color Run, which happens all throughout Europe, where people show up wearing white tee-shirts and the second they're there, they're doused with colorful powder, creating the perfect Instagram moment. The races are un-timed. There's no winners, or losers. At the end, there's a live DJ concert. People are spending money on that and not traditional gyms. Again, if it's not shared, it didn't happen.

One of next major trends of the millennial generation and we heard about it this morning, is how urbanization is gonna transform the global footprint. Since experiences are so important to building one's persona and since people have access to a phone in a 24-hour news cycle and see what's going on, they have no interest. Since they're growing up slower, they have no interest in leaving a city. Gen X would be age 25, 28, 29. Try to get married. Move out to the suburbs. Get a house with a two car garage, a white picket fence and a dog. Right? Now, people are getting married later than ever before and they have no intention of leaving the city.

This generation is driving a massive wave of urbanization. The American dream was this the American dream is now this and it's not just the American dream. It's a global dream. You're seeing it around the world. Real estate prices in cities are skyrocketing, while they're flattening out and going down in many suburban areas. We are seeing gentrification, where the livable boundaries of cities get pushed outward and outward and outward. In Brooklyn, where I live, there are $2 million townhouses being sold, where five years ago, you couldn't walk outside, because there were so many shootings that were actually happening right?

It's happening so quickly, because the millennials aren't leaving the city, the city just keeps expanding outward and outward. It can grow up and it can grow out. That's actually where it's going. That has reverberating impacts on so many different industries. The creative class is now taking over the middle of the city. This is Washington DC, the purple is primarily the creative class. The light blue is the working class. Well, the light blue is nowhere to be seen here. In the Gen X world, it was the inner-city blue collar worker. It was the rough and tumble inner-city.

Now, the blue collar worker is getting pushed out into the suburbs, because they can't afford to live in the major cities and the cities are becoming full of the creative class of the millennial generation, which is transforming a lot. It's creating pressures on mega consumer sectors. First of all, there's auto. For the first time in seven years, auto sales globally are down. They were down 1.7% last year. Why? Because when people live in cities, they do not need to own a car.

They're not getting in their SUV anymore and driving to a big store and throwing stuff in their SUV. They are pushing a button and a car is showing up for them and it's taking them wherever they need to go. Owning a car, combined with the cost of gas, tolls, parking, insurance, versus the ease and ubiquity of Uber, forget about it. Many major auto manufacturers are now trying to think, "How do I build a car that can actually be part of Uber's fleet?" That's actually the new channel. I am not long on automotive companies, based upon this new generation becoming urbanized.

Now, this is not binary. Of course there's gonna be some young people that move out to the suburbs and actually buy cars, but this trend is truly undeniable and I believe it's only gonna accelerate, as Gen Z actually comes into the picture. Second is housing. As young people stay in cities, many of them can't afford housing. Buying a house used to be a rite of passage and savings. You're gonna own your home.

More and more consumers, instead of being tied down to one location, when they wanna travel a lot, are not actually being tied down by a mortgage, or a car payment. They're renting. When they actually travel, they're renting out their apartment on platforms like Airbnb, which is a multi-billion dollar company that should IPO either this year, or next year. Okay?

You travel. You rent out your apartment on Airbnb and you rent out other people's apartments while you're traveling. Cars and housing, the two amount of places where consumers used to spend the most amount of the discretionary expenditures are really being put in the back seat. No pun intended. Instead, consumers are spending more and more dollars on experiences. Experiences over stuff is a major trend.

Retail. We all know about retail. This is a shopping mall in the middle of America, which is now shut down and there are trees that are starting to grow in and make themselves at home here in this shopping mall. Why do malls need to exist, if the shopper isn't going there? If they don't have a car to put stuff in? Just like the ease and ubiquity of Uber is impacting cars, the ease and ubiquity of Amazon, which I'll talk a lot about in a minute, is actually impacting big retailers and big malls.

Retail is a tremendous amount of pressure, in almost every major category, even cars. You look at cars, Tesla actually has the new model for auto dealerships, which is a 2,500 small square foot showroom in affluent urban areas. You walk in. There's one care there and it's a showcase, versus going out to this huge complex with a million cars in a big parking lot, Tesla has reinvented how automotive companies retail their products. I think you're gonna see Volvo, Ford, all the big companies, Toyota, all kind of mimic that model and not having the traditional automotive retail model.

At the same time, this is generating massive opportunity for the service sector. This is something called Glam Squad, which is exploding. What Glam Squad is, is a bunch of women wanna go out for a nice night, they used to go to the salon, to get their makeup and hair done, et cetera. Well, Glam Squad's actually a service where you hit a button and a team comes to your apartment and they'll do your hair and actually makeup for you. Glam Squad doesn't have to pay Main Street real estate prices. Right?

They don't have that cost infrastructure of having a physical location. 'Cause as the price of real estate goes up on Main Street, salons actually can't afford to be in business anymore. This is a service. They're capturing data from every person who are going into and if I were a company like L'Oreal, that made hair product, I would buy Glam Squad, 'cause that's a much better distribution channel to get your products in people's hands and actually being sold at a retail outlet, which less and less people are going into.

This is Rent the Runway, which is now going global. It's an incredible phenomenon. It's essentially rental of high-end clothing. Instead of a woman spending $1,500 on a dress, which she's gonna wear one night and put in a closet, she can rent it for $75 and take an Instagram of it. No one's gonna know that she actually doesn't even own it. Right? The thing about Instagram with women and clothing that I found over time is, if you take a picture in that dress, you can't wear it again, because the next week, even if those people weren't there, they saw it on Instagram.

Clothing actually gets recycled a lot more quickly, through people's wardrobes. Rent the Runway is exploding for that reason. These are marketplaces. Rent the Runway has a physical retail location, but think about the margins they're making off that one dress. They're not buying it for retail prices. They're probably buying that $1,500 dress for $500 and they rent it out five times and they're breaking even and then, it's 100% margin on the dress, that they actually get back. They deliver it to you. They actually have a digital model and they have a physical retail model. If you want, you can actually buy it.

To me, marketplaces and delivery services are actually the new way that retail's gonna be done. While urbanization has created issues for auto and while it's created issues for the housing sector. The housing sector's doing fine, because people need to live somewhere and they're gonna rent. It's created a tremendous opportunity for companies in the service sector. Urbanization's also transformed the fabric of the global workforce. When we were growing up, it was, get a job at a good company and stay there for 20 to 30 years and move your way up, into the C Suite.

Now, the average age of a company of the Fortune 500 is less than 10 years old, where it used to be 30 years old. Companies are not staying around very long much longer, Disruption, MNA, so many outside factors means that you don't even know if that company's actually gonna exist. With all this digital disruption that's going on, people aren't sure if they should invest things in a full-time job.

Instead of getting a job, they're getting gigs. They're becoming freelancers. I often get asked by parents, "What should I have my kid do in this crazy world?" I say, "Teach them a specialized skillset, either deep in to an art, or deep into a science." Deep into an art, become a designer. Become a copywriter. Do something that the machines can't, or go deep into a science. Learn to operate the machines, but if you're in the middle, if you want a job in middle management, that job's gonna be outsourced, or off-shored. Right?

If you actually have a job, that's either deep into an art, or deep into a science, you have a specialized skillset, where you can offer those services on free agent marketplaces, or freelancer marketplaces, where companies can actually come in and hire you for a job. There's more and more people every day now, that are becoming freelancers, or free agents, which has caused a huge rise in a whole new industry, called the Collaborative Workforce, or workspace.

This is, WeWork. WeWork had a value at $12 billion. They had a number one tenants commercial real estate in places like Tel Aviv and New York City and San Francisco and London and what they do is, they rent huge warehouses in affluent millennial urban areas and they rent out desks. I can rent a desk for $150, sitting across from that guy in the snazzy blue shirt and he may be a designer and the guy next to me might be a coder. Right?

I have a culture that rivals Google. We all share a receptionist. I can rent out conference rooms. They have massage therapists come in for you. It really is like working at a very cool company, except you're working for yourself. These companies cannot fill their places up fast enough. The company is exploding, because people do not want to take full-time jobs. They wanna become free agents and that's why WeWork, started by two guys in their late 20s, now has a $12 billon evaluation.

Because of it, companies are actually following suite and they are moving from these huge suburban enclaves and moving their headquarters back into cities, where they can recruit the millennial talent. When they're doing so, they're contracting their workforces and they're using freelancers to keep up with the fluctuations that are going on in their business.

Next, the barbell economy is here to stay. The barbell economy means that, there's the haves and the have nots, right now. The middle class, on a global basis, is rapidly withering away. We're seeing it in America like never before. There's tremendous wealth on the coasts, but if you get into Middle America, where the traditional manufacturing jobs used to be, they no longer exist. They're all in China, right now.

That's happening all over the world, where there's no middle class. There are people who understand digital and they're thriving because of it and there's people who are left out for a variety of different reasons and they are really struggling and there's not many people in between. The fact that eight people control as much wealth as the poorest 50% of the world is just a staggering, staggering statistic.

Just think about that. Enough people to fill this table have more wealth, or as much wealth as 4 billion people. That is shocking right now. It's not just on the very edges of the eight richest people in the world. Actually, over two thirds of the world makes under $10,000 a year. Where's the middle gonna be, when two thirds of the world makes less than $10,000 a year?

What that's doing, it's creating tremendous opportunity to companies that are either going very luxury or very value. Those are the companies that are gonna win, super luxury or super value. This is Mini So. It's a value store that sells products for as cheap as possible in China. In the US, there's Dollar Tree, Dollar Store, Dollar General. Right? They are basically providing the best possible product for the cheapest possible price, buyig from China and winning on supply chain innovation.

Catering to the value side of the equation, there's Wish, which is a tremendously popular e-commerce sites, which can't sell things quickly enough. You buy stuff from China, you get it in two to three weeks, but you can get stuff for $1 that Amazon would sell for $10. These are companies that are doing incredibly well. There's Jet Smarter in the US, a private jet rental club. These jets actually take off, off the runway. People spend $12,000 a year to basically become part of this private jet rental club and they can charter private jets everywhere. They're doing incredibly well. Right?

Value, luxury, but who's not doing well? Companies in the middle. This is the GAP. The GAP used to be one of the biggest retailers in the world, but now the GAP is closing more and more stores each year. Why? The value side cannot afford to shop at the GAP. The luxury side would never shop at the GAP. Right? They're buying boutique jeans for AG and because of that, the GAP doesn't have many shoppers anymore.

Whether you're in automotive, or airlines, or any product that's selling and if I was investing, I'd look at, "Who are the luxury brands?" Those are brands that are gonna win, because Prada and Louis Vuitton are not having many problems, right now. Right? Neither is Walmart. If you actually look at the world and companies through that lens, I think you'll start to see why companies are successful and why they're not.

Next. Amazon may be ... I'm saying, "May." Don't call me in December if I'm wrong, but I believe Amazon could be closer to $2 trillion in value than $1 trillion by the end of 2018, which would essentially mean, their stock would go up about 60% this year. You see it. I was in Australia over the Summer and they cannot wait for Amazon to arrive in Australia. There are many major markets around the world, that Amazon hasn't even launched in yet.

If you look where Amazon's done in America, where now, it's a defacto way, where people are buying anything, I do not see this happening, in a world of urbanization and mobile ubiquity everywhere. E-commerce is now the defacto way to purchase things. Amazon bought a company called Whole Foods for a couple billion dollars this year, which is one of the number one groceries. Now, they're getting in the groceries and loan involvement categories. Basically, anywhere that consumers are, they're going.

Amazon Prime, which caters towards the luxury consumer, gets about $1,500 a year from the average Amazon Prime consumer. I believe, they're gonna try to push that to about $7,000 a year. One thing Amazon's gonna start doing is predictive shopping, sending you things that it thinks you wanna buy before you even buy them, based upon your buying history. You buy diapers every six weeks. Six weeks from now, you're gonna have diapers arrive. They're gonna look for ways where they can actually extract more dollars from consumers. Apartment buildings are starting to look like this, where 80% of apartment buildings and lobbies are filled with boxes from Amazon in an urban world.

Amazon Basics, which is their private label brand, is really starting to pressure low-involvement categories. It used to be, if you sold detergent, or soap, or toothpaste, that your brand actually mattered and as long as you can get Walmart, or a big mass retailer to buy your stuff, you'd be fine, but in the world of Amazon, that model actually doesn't exist anymore. What Walmart's starting to do is create its own brands. They're starting to create their own private label brands, like Great Value.

If you're a consumer, what are you gonna spend more money on? Great Value, the Walmart brand, or French's mustard, when you don't really care about the brand of the mustard. Right? You're not gonna put that on your Instagram. In these low-involvement categories, where brand actually matter less and Amazon now, is creating its own private label brand, called Amazon Basics and they're going into low-involvement categories and I think they're really gonna start to wipe out a lot of these CPGs.

Now, it doesn't mean that Coca Cola's going out of business tomorrow, but the best be looking to involve their model, because one day, Amazon Basics soda is gonna be much cheaper to consumers and it's not gonna taste much different. Then, what actually happens when those brands matter less? Because again, those brands are not part of somebody's personal brand. In fact, if you look at the most 10 valuable brands of 2017, you don't see any Coca Cola, or Procter and Gamble brands, or any consumables. These are all utilities.

People love brands that are utilities, that help them in some way, shape, or form. You don't actually see Hershey's, Nestle, brands that people used to love. Where are they all? They used to be part of this list. They are no longer here, because they don't matter as much to consumers anymore. These low-involvement categories have a tremendous amount of work ahead of them, which is gonna force a new wave of innovation in package goods. Some companies are saying, "I'm gonna leverage a platform like Shopify." Shopify just went public. That allows anybody to go on e-commerce very easily and sell directly.

There's a billion dollar private company in the US, called Warby Parker, that sells eyewear that took on a global behemoth called Luxottica, that sells glasses for a lot cheaper. They started off online. Now, they have a tremendous retail platform. They allow you to actually try on your glasses virtually with your phone. Who needs to actually go into a store and actually get them shipped to you? If you don't like them, you send them back. These are the brands that matter, because they have direct relationships with consumers.

There's a company that just got funded in Silicon Valley called Brandless. They raised $50 million. They are trying to provide products with the best ingredients for the cheapest price. Again, the value side of the equation, no brand. Just the best ingredients, $3. We're not gonna charge you $3.50 anymore, so you can pay for our advertising in your brand, because consumers don't care about the brand of their maple syrup. They're just gonna spend $3 on a brand at Brandless and this company's doing very well.

A suitcase company called Away, that has an iPhone charger built into the suitcase. They sell this for $200, only selling direct. They're not selling at big retailers. You're not gonna see them at the big department store. This is the new model of brands, building direct relationships and going direct and aren't selling on Amazon. It's really the only way some of these companies are going to be able to survive.

If I'm Tide, a company that makes laundry detergent, you know what I'm doing? I'm buying a company that makes washing machines. I'm buying the hardware. What I'm gonna do is, I'm gonna make small washing machines and my focus is gonna on companies that are making bug apartment buildings and I'm gonna install those washing machines in every apartment building. Those washing machines are only gonna take very patented products packaging of Tide, that only fits in those washing machines.

When it runs out of detergent, it's gonna automatically order more Tide. That's a distribution model that works a lot better than hoping somebody's gonna go back to a big store and buy your products. This is how these companies needed to disrupt, just how Apple won at the very beginning, when they were a hardware and software company, versus Microsoft, that was just software. Right? Apple had both the software and the hardware. I believe that packaged goods companies need to do the same thing. Otherwise, I think they have a long road ahead of them.

Alexa is soon gonna cause typing to go the way of hieroglyphics. Voice is this new way, where consumers are entering copy our thoughts into a mobile device. I believe in three to five years, we will no longer be typing whatsoever, because voice recognition with Siri and Alexa is getting so good, you're gonna talk into your phone and we'll try and scribe it with 99.9% accuracy. I believe typing will go away.

Right now, anybody have Amazon Alexa in their home right now? Wow that is shocking, because in the US, it probably has about 20 to 25% penetration right now. Here, it looks like it's 1%. I guarantee you next year, it's gonna be 15%, because they're pricing it lower and lower. What Alexa does, it allows people to speak into this device and order food, or tell them the news, or turn their lights on and they're selling them for $50 and it's going down to $25. People are putting them into every room.

If I've given you one piece of advice, it's $25 to $30 right now, order it and check this thing out, because it'll show you a lot about what the future of the connect at home's gonna be. What's really interesting about Amazon Alexa, if I say, "Alexa, buy batteries." I will send you Amazon Basics batteries. Next you say, "Alexa, no. I want Duracell batteries." Do you know what Alexa says, "I will send you Amazon basics batteries." What Amazon is doing, is betting that the ease and ubiquity of Alexa will trump the power of a multi-billion dollar brand. Again, showing the pressure that they're gonna put on these low-involvement categories.

My next legacy is that Apple is gonna permanently transform the very nature of mobile devices. In the next five to seven years, I believe the phone's gonna look a lot like this. The air pods are the future of the phone. I don't think we're gonna be staring, because we can type things in by talking. Instead of Googling something, we're just gonna talk. It's gonna give us the feedback. Where's the nearest pizza place? It'll tell you where the nearest pizza place is.

If anyone here's seen the movie Her. It's an incredible movie. It's about this person falling in love with his phone and it's an amazing movie and you could see what's in his ears. I think this is really predictive of what the future of the phone's gonna look like. I think it's a tremendous pressure on Google's core search business, because if I'm speaking into my phone and asking where the nearest pizza place is, guess what? Apple can decide who's gonna be delivering that search.

They have all the power, 'cause they have the last model of the consumer. Maybe they'll deliver Google search results, or maybe they won't. Maybe they'll create their own search engine. I actually think Google, out of the big four companies, Facebook, Apple, Amazon and Google, I think Google actually has the most trouble ahead of it because of this. I think in a world of voice, Google really has to reinvent themselves.

Apple's also gonna be turning the TV into a giant iPad hanging on your wall. The future of the TV's gonna look a lot like this. Kids go up to TVs and they try to wipe the TV. They think you should be able to swipe it and one day, you're gonna be able to. The TV and the computer, very soon, Apple just announced they're selling TVs, actual physical TVs, as did Amazon. Those TVs are gonna be connected to devices. When the TV and the computer are one, TV networks are gonna no longer exist.

While Apple TV actually looks like this today, where you can actually go to a network, like Showtime, or HBO, or MTV, tomorrow, it's gonna look like this. The networks are gonna be people, because people actually have all the power, right now. Celebrities have followers in the tens of millions. They are networks on their own.

These people are getting the money, 'cause they have the eyeballs. TV networks don't anymore and they're building it over platforms like YouTube, with the exception of live sports, which really is controlling the future of television, it's FIFA here, in Europe. It's the NFL in the United States. It's really the individuals that are actually having the power in media. If you think about all these big TV networks, whether it's Viacom, or News Corp, or Time Warner, these companies are in a lot of trouble moving forward, because distribution now is at their fingertips.

Now, in a world where companies are paying these big networks billions of dollars a year to advertise, now they can pick and choose and say, "I want to target this woman, who lives within 10 miles of this store." TV is also gonna become what's called programmatic, or addressable, where you no longer have to market to an 18 to 34 demographic. You can market to an individual, because the TV's gonna know who you are.

The reason why the TV knows who you are is because of Facebook. Because when the TV and the computer combined, you're gonna be in a logged in Facebook state and your TV's gonna know who you are, because Facebook has logged nearly 3 trillion pieces of information about consumers around the world. Now, they touch 1.8 billion people on Facebook alone, not to mention a billion on What's App and a billion on messenger and half a billion on Instagram.

Their power and the data is gonna allow Facebook to power every single ad that happens around the world on television. If you're an advertiser and you wanna target consumers who own a Ford, or own a Volvo, you'll be able to only target those consumers, or who have a car lease that's running out, or a target woman who just had a baby. You'll be able to target those consumers directly. Where right now, you just have to target consumers age 18 to 34. The reason why is because Facebook has the data and that's why I think Facebook's on it's way to becoming a trillion dollar company.

Yesterday, I did an interview with a reporter. He showed 22 brands. He said, "If you had $1 million, where would you invest?" I circled Amazon. I circled Facebook and that's because Apple wasn't on the sheet. I say you put 50% there and put 50% there and I wouldn't invest a dollar anywhere else. It's just where we are right now. The only thing that's really gonna stop it is regulation. There is a risk or regulation from these companies. Microsoft as we all know, had a lot of legal issues and regulation issues, where they got broken apart in the 90s and early 2000. There's a chance to happen.

You probably know what happened in the United States with the election and the alleged Russian meddling in the election, Facebook is at the center of that. Facebook is now the eye of government around the world. Privacy, data, power. These companies may get deregulated. I think if any of them does first, it's probably Facebook and Amazon maybe is a close second. That's the only risk I see in the way of these companies continuing their march.

However, in financial services, the Trump administration is creating massive de-regulation in almost every other area. While he might look, the Trump administration that is, to kind of come in and intervene in technology, because of the fear of media and free press. In other areas, like financial services, the red tape is being cut dramatically. Because of that, I believe that FinTech adoption could impact the financial services area dramatically. In places like wealth management, there's companies like Well Front, where young people, who don't have as much money and can't afford a wealth manager, they're gonna upload all their money here and be able to track it on an everyday basis, how they're doing.

I think companies that are in wealth management are gonna need to acquire technology. The big banks, Bank of America, Citibank, Chase, you name it, the biggest banks in the world, they're gonna have to very quickly ... Barclay's are gonna have to quickly start acquiring FinTech. That wasn't possible a couple of years ago, because these were so heavily regulated. Now, the de-regulation's happening, especially with the big banks in America, which is gonna really make FinTech take off and it's gonna take off everywhere.

I believe that peer-to-peer payment adoption's gonna start to eliminate cash. Young people, the millennial generation very rarely pull cash out of their pocket. Really? Everything's peer-to-peer, if you wanna split a taxi, or split a dinner bill, people are using Venmo and now, Apple just announced that they're integrating peer-to-peer payments into iMessage. You wanna pay somebody? It's as easy as sending a text message.

That's gonna start to eliminate cash, because usually cash is used for very small denominations. It's used in QSR and convenience stores. Certainly not used for things like clothing, or higher-end items, but now this last bastion of the use of cash, I think is gonna be eliminated. I don't think we're gonna be seeing cash for much longer. I think our children are gonna tell their children, "My parents actually used to use this thing called cash. We actually could hold it." I don't think it's gonna be here for much longer.

Speaking of cash, now we have the Blockchain and we have Bitcoin. I've already been asked about that probably 12 to 15 times since I've been here and I understand why. First, my take on Bitcoin is, I think there's gonna be a shakeout. If you look at 2000, there's a dot company shake out. There was so many companies advertising and 90% of them went out of business, but then, there was still an Ebay, an Amazon, that came out of it. I think crypto currency's gonna be the same thing.

What's should be driving our prices right now is scarcity. There needs to be scarcity. If there's endless supply, because there's new ICOs coming out every day, then how can the prices keep going up? It would go up with scarcity. I think there's gonna be some core brands, which will become the new crypto currencies. I think one of the issues again, is gonna be government in the intervention, because the thing about money is the government likes to know who has it and how it's being used. I think where you about China starting to shut down Bitcoin mining. I think that's big risk that's gonna start to happen.

There was a huge scandal with something called Silk Road, which was an elicit marketplace, where Bitcoin was being used. I do think Bitcoin and crypto currency's gonna be there. I think the underlying technology behind Blockchain though, which is really an authentication measure, it's gonna be used to authenticate and tackle things like counterfeiting or artwork. I think you're gonna start to see the Blockchain technology. There are a lot of startups. There's gonna be a ton of MNA with big companies, with the Blockchain technology going to this year.

Lastly, I think the big four, these big four companies, assuming that they don't get broken apart by governments are gonna enter the way into the banking ecosystem. If you think about financial services companies, they have the lowest amount of trust amongst consumers. That really happened because of the big financial collapse of 2008. Consumers inherently don't trust big banks, but look who they do trust. They trust technology companies and the funny thing about technology companies is, they're the ones that are capitalized right now.

Look at 2007, the four biggest capitalized companies were Citibank, Bank of America, ICBC and JP Morgan Chase. Well, guess who the biggest four, most capitalized companies are today. What's the number one rule for being a financial services company? Be capitalized. I think these companies are gonna start to enter banking. Amazon's already making small business loans. Right?

Apple through Apple Pay and now, their peer-to-peer payments, they're getting heavily into the space, same with Facebook. Banking is gonna be one of the next places these companies are gonna enter and there's gonna be a ton of pressure on traditional banks, because they lack the trust and they lack the capital and if you don't trust them and they don't have the money, well then, are they really a great bank? I think that's gonna be really fascinating, going into this year.