How did The Four infiltrate our lives so completely that they’re almost impossible to avoid? And what are the implications for credit unions?
A decade ago, the five largest companies in the world consisted of two industrial titans (ExxonMobil and GE), two banks (Citigroup and Bank of America) and Microsoft. The only one remaining on the top is Microsoft, still safely placed at third place, and now surrounded by other technology companies—companies author Scott Galloway has dubbed The Four Horsemen. Galloway, a successful entrepreneur and business school professor, has made it his job to teach the lessons of these four digital giants in his new book, “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google.” The lessons include business basics – finance, marketing, operations and management – but he also explains how these technology firms succeed by appealing to fundamental psychological desires deeply embedded in our evolutionary past.
Despite their brilliance, The Four have not achieved dominance by themselves. Driven by technology and capital, they have thrived within a hyper-consumer, de-regulated capitalist culture. Starting in America, then rapidly scaling throughout the world, The Four are the product of a odd bargain between weary institutions, an evaporating middle class, attention-seeking media and profit-hungry markets.
The three core ideas of the Four
A frictionless world
The Four have been so successful because they have used technology and strategy to understand and appeal to human basic desires. Interestingly, Galloway explains how each of The Four appeal to a specific human organ. Google targets the brain and our thirst for knowledge. Facebook is trained on the heart and our need to develop empathetic and meaningful relationships. Amazon targets the guts, satisfying our hunter-gatherer impulse to consume. And Apple, with its sleek, sensual products, has its focus firmly on our genitals.
Using human desires as their foundation, The Four have gone about declaring war on what entrepreneurs refer to as “friction.” It turns out that “friction” includes every obstacle in the way of satisfying a given desire. Everything from the synaptic connections in the brain responsible for decision-making processes to the rules issued by regulatory and tax authorities – all the way down the supply chain to those making products in the developing world. Galloway shows that The Four have been amazing at circumventing these barriers, making it as easy and rewarding as possible for people to engage with a platform, enter a search query and click for a product.
Insight: To be able to compete with The Four, you need to focus on reducing friction across your credit union.
New economic rules
The Four are also creating new economic rules. Take Amazon for example: This organization has marshalled more cheap capital than any firm in history and yet it only started turning a profit in 2002. Galloway argues convincingly that through simple and consistent storytelling, Jeff Bezos has reshaped investor expectations, providing Amazon with an ocean of long-term capital at the expense of the rest of the industry.
In creating their media duopoly, Google and Facebook have also rewritten economic models. By creating products and platforms that improve with use, Galloway describes how a “Benjamin Button Economy” is emerging in media. Network effects strengthen their targeting algorithms and drive down the cost of their advertising products. Unsurprisingly Google and Facebook now constitute 103 percent of all growth in digital media advertising revenues (meaning the rest of the industry is in structural decline).
Their success has come at the expense of entire industries. In the age of The Four, investors are rewarding a small band of companies and punishing the rest. Combine this with a committed drive towards automation and Galloway concludes that major job destruction is not just around the corner: It has already arrived.
Insight: Study the new economic rules and learn to take advantage of them.
The Four as public utilities
Not content with their position as major brands, The Four are attempting to cement their dominance by becoming providers of public infrastructure. In this regard, Amazon is leading the pack. It is marshalling a global logistics operation that is the envy of most nation-states, including a fleet of Boeing 767s, drones, thousands of tractor-trailers and Trans-Pacific shipping. Google has server farms and is launching blimps into the atmosphere that will beam broadband down to Earth. And whilst Apple and Facebook may lag behind, even the latter has announced that it will be laying cable across the floor of the Atlantic. These organizations are committed to becoming permanent fixtures of the future.
Insight: Credit unions rival the Big Four when it comes to being public utilities, but these firms are catching up fast. What are you doing to ensure you are considered a valuable addition to your members’ lives?
Understanding The Four is important to understanding our age and economy, to being in business and making a living in it. Galloway makes a strong argument that the lessons he teaches in the book part of the business school curriculum. This book is your alarm clock wrapped in a business lesson wrapped in an entertaining and often hilarious series of stories told with great writing. It keeps you entertained to make sure you’re informed.