The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google

How do you gain a career edge in a world dominated by Big Tech? “The Four,” namely Apple, Google, Facebook and Amazon, are worth over $5 trillion combined. What makes them so incredibly successful?

Scott Galloway, a serial entrepreneur and professor at New York University Stern School of Business, breaks down the winning strategies of “The Four” to offer critical lessons on business, career advancement and value creation in the digital age.

TOP 20 INSIGHTS

1. Amazon Marketplace was Jeff Bezos’s first step to retail dominance. Sellers flocked to the world’s largest marketplace with millions of products. This offered Amazon customers a vast selection, while Amazon gained valuable data on customer preferences. When the segment became lucrative, the company launched its own products with perfect market intelligence.
2. Amazon plans to eliminate friction in the purchase experience. Amazon Go stores use sensors to charge customer accounts directly. Amazon Wardrobe allows them to try on clothes at home before the purchase is made. And Alexa’s knowledge of customer desires will soon enable Amazon to send products that their customers need regularly, without a process of actual order.
3. Amazon’s quest for efficiency will result in a massive job loss in the retail sector. The company’s pursuit of automation in warehousing has eliminated the need for 3.4 million cashier jobs with Amazon Go.
4. Amazon’s core competence in storytelling brings cheap capital. Amazon has shown impressive progress towards the compelling vision of Earth’s Biggest Store, and thus, has trained the market to hold it to a different standard: higher growth but lower profits. Its stock trades at a multiple of profits times forty, unlike other retail stocks that trade at a multiple of eight.
5. Amazon deploys the cheap capital to make ambitious bets that may deliver 100X returns. As Jeff Bezos said, “Given a 10 percent chance of a hundred times payout, you should take that bet every time.” The company plows capital to build moats that competitors cannot match. Amazon lost five billion dollars in shipping charges in 2015 to offer single-day delivery.
6. Amazon has leveraged its brand to expand into more profitable sectors. Amazon Web Services, the world’s largest cloud services provider, accounted for 52% of total operating income in Q3 2015. Amazon Media Group, its advertising arm, made over $10 billion in revenue in 2018.
7. Apple is primarily a luxury brand which sells technology. Apple’s transformation began with the iPod and was complete when the iWatch launched with a 17-page spread in “Vogue” magazine of the rose-gold version, which sells for $12,000.
8. Scarcity is the key to Apple’s luxury marketing. Only the top one percent can own Apple products. The iPhone accounted for only 18.3% of smartphone sales worldwide and garnered 92% of industry profits. However, it was the iconic Apple Store that cemented Apple as a luxury brand by offering an immersive premium experience.
9. Apple is a phenomenon, as it is both a luxury product and a low-cost producer. Luxury products are usually expensive to produce, while low-cost products are harder to sell at premium prices. Apple has achieved this because it invested early in robotics and created a world-class supply chain.
10. Facebook taps into the core emotional need for connection and relationships. As a result, people spend 50 minutes a day on Facebook properties, including Instagram and WhatsApp. With years of user-created data and the world’s best talent, Facebook dominates the advertising industry. Facebook and Google together account for over 51% of the global mobile ad spend.
11. Facebook seeds desire and ideas. It creates user intent better than any other promotion or advertising channel. Once a user is interested, Google provides the how and Amazon delivers the product.
12. While ordinary products become less valuable over time, Facebook becomes more valuable with time because of network effect and personalization based on data. No company has the sheer reach and user data intelligence that Facebook possesses, which offers unparalleled opportunities for advertisers to micro-target users.
13. Unlike Netflix, which spends billions in original content, Facebook’s two billion users generate free content. But Facebook does not want to be called a media company as it brings lower valuations, regulation and substantial editorial responsibility. Facebook can avoid this, as long as it claims itself to be “a platform.”
14. Google earned unparalleled user trust and credibility because advertisers cannot influence search results. The clear separation of search and ads enables Google to enjoy both credibility and ad revenues.
15. Advertisers love Google because of its auction formula for advertising. In Q3 2016, Google improved its paid clicks by 42% and reduced costs for companies by 11% from the previous year, and still grows its revenues. This ability to push prices down has made it nearly impossible for competitors to keep up with.
16. Google has a far better profile of readers than any newspaper. Its targeted ads in search generate more revenue than publication ads. As a result, Google is more valuable than the next eight biggest media companies combined.
17. Product differentiation usually comes from removal, not addition. The value that technology companies bring stems not from what they add but what they remove from customers’ lives. Uber, for example, succeeded because it removed the friction associated with booking a taxi and reducing the time the process took.
18. The market rewards the company with cheap capital to invest in top-notch talent, place risky game-changing bets and build advantages that competitors simply cannot match.
19. A company’s brand equity among potential employees matters even more than its reputation among customers. A company attracts top-notch talent when it is seen as a career accelerant. A company with better talent innovates better, gets cheaper capital and moves ahead of the competition.
20. A move to a megacity gives a tremendous lift to career growth. Cities generate 80% of global GDP as they enable the concentration of wealth, information, power and opportunities. Out of the 100 largest economies worldwide, 36 were American Cities. These cities contributed to 89% of GDP growth and 92% of jobs created in 2012.