On its face, Scott Galloway’s latest book, “The Algebra of Wealth: A Simple Formula For Financial Security”, is a straightforward guide to maximizing your money in the face of great economic challenges, especially for young workers. But between the lines it is also an acknowledgment that the youngins are angry.

Enraged, actually. And rightfully so.

The economic system that made baby boomers wealthy now seems hellbent on yanking the rug out from beneath the up-and-comers. Today’s young workers face economic realities that their parents and grandparents simply did not: rising inflation, soaring housing prices, unbridled student debt, AI labor disruptions, and a climate crisis that could someday make all of it moot.

It’s almost inevitable that such anger will spill over, Galloway says: Just look at what’s happened on college campuses across the country since the October 7 Hamas attack on Israel.

YOUNG PEOPLE ‘DESERVE TO BE ANGRY’

“I think the protests on campus are more about America than they are about the Middle East,” Galloway tells Poets&Quants. “Go ask the majority of the protesters when they chant ‘from the river to the sea,’ what river and what sea they are referring to, and I bet the majority of them can’t name the Mediterranean or the Jordan River …

“The fact that young people aren’t doing as well as their elders, I think it just creates rage and incendiary that’s poured over every movement. I think with young people, we’re sitting on a tinderbox where every legitimate cut turns into an opportunistic infection and gangrene because young people are just angry. And I think they deserve to be angry.”

Galloway has been thinking about these issues for years. Though he is a prominent marketing professor at NYU’s Stern School of Business, an elite school to be sure, he notes that if were applying to his alma mater UCLA today, he wouldn’t get in. When he applied three decades ago, UCLA admitted nearly 76% of prospective students. (It took Galloway two tries to get accepted.) Today, UCLA admits fewer than 10% of applicants.

Q&A WITH SCOTT GALLOWAY

When Poets&Quants last spoke to Galloway in spring of 2022, he was launching Section, an online platform to deliver high-value business education at a fraction of the cost of elite MBA programs. The systematic disadvantages facing young workers haven’t improved, but have arguably gotten worse. His latest book, “The Algebra of Wealth,” released in April by Portfolio, doesn’t purport to address these disadvantages. Instead it deals with the realities as they are.

P&Q recently sat down with Galloway for a wide ranging discussion about the book and how economic anger is fueling everything from campus protests to DEI backlash. Our conversation has been edited for length and clarity.

Let’s begin with your book, “The Algebra of Wealth.” Who did you write it for, and why do you feel it is needed now?

For the first time in American history, a 30 year old isn’t doing as well economically as his or her parents were at 30. So, I think that young people need to gain more financial literacy and have more concerted, deliberate strategies around building wealth. In general, I think America becomes more like itself every day in that it becomes a generous, loving place if you have money, and a rapacious, violent place if you don’t. Having a financial strategy to develop economic security is really important.

The piece of research that inspired the book, and you’ve probably seen that research, is if you take your four closest friends, your peer group, you become the average of those five people. You have the same political views, support the same sports teams, live in the same neighborhood, and you make about the same amount of money. But one of those five will end up much better off economically despite not making much more money than the other four. And so really, the book is about the strategies for being that one person who ends up economically secure relative to people who make about the same amount of money.

For most young people, the general view is the way to get economic security is to make a shit ton of money. By all means, that helps. But there are obviously a ton of stories of basketball players, athletes, actors, and lottery winners that make millions and end up broke. What gets less press is there are hundreds of thousands of public service employees who – through discipline, matching programs, and slow but steady savings –retire multimillionaires, despite never having made more than $100,000. The key for punching above your weight class is to find your talent, not your passion.

If 30 year olds aren’t doing as well as their parents, what are the systematic things that are different now? We’ve previously talked, for example, how you wouldn’t have gotten into your alma mater of UCLA today because it has become so selective.

This isn’t a book about what should be, this is a book about what is. But young people face a variety of headwinds that we didn’t face when I was their age. I just did a TED Talk about how we should change that.

This book is about, given the state of the world, what you can do as a young person to become financially secure. There’s also a lot of people in their 40s and 50s who say to me, “Okay, what about me? I’m not financially secure. I’ve not saved as much money as I’d like. Is it just over for me?” What the human brain can’t wrap its head around is how long we’re living now. You have trouble believing when you’re 45 that there’s a good chance you’re gonna live another 50 years, and there’s a really good chance you’re gonna work for another 30. If you manage to save some money and invest regularly, every dollar you save right now, over the course of the next 30 years, will probably go up eight fold just by putting it in a low cost index fund.

The advantage young people have, despite all of the disadvantages facing them, is they have probably 50 years of work and time ahead of them. I’m not suggesting people in their 20s should not spend money. That’s a magic decade. You want to spend some money, you want to have some fun, and you’re also in your mating years. I understand wanting to buy a pair of ergonomically impractical shoes or a car that might signal you’re a worthy mate. I get it.

But at least start developing a savings muscle. At least figure out a way to put 100 or 200 bucks aside no matter what. Hopefully, when you enter your prime earning years, you really know how to flex that muscle. If you save 200 bucks a month as a young person, it’s just staggering how fast time goes and how powerful compound interest is.

So, what is the algebra of wealth? What is the formula?

It’s focus – which is essentially find your talent, not your passion. Find something you’re good at that you could invest the time to become amazing at it. Then, you multiply that by stoicism, time, and diversification.

There’s a certain level of stoicism to just recognizing there are things you can control, things you can’t. One thing you can control is your spending. It’s hard and there’s people trying to convince you to spend; there’s that perfectly timed upgrade deal from United Airlines at your weakest moment. These things are psychologically tested thousands of times a second by AI and it is very difficult to resist these offers. But you can, in fact, control your spending.

Some of your earnings are out of your control. You’re gonna face a series of injustices throughout your work career. You’re gonna face a series of unexpected shocks. It’s trying to live a little bit like a stoic and find reward from relationships, from physical health, from nature, and not from the trappings of a materialistic society.

Then, there’s time. This is basically the power of compound interest. I’ve been thinking a lot about private schools. So I wanted to send my kids to Grace Church or First Presbyterian which are two very tony private schools in Manhattan, and I thought, “Well, why is that?” One, I wanted the best for them, but a close second is that it’s a vanity metric for me. I want to meet the other rich parents there. It makes me feel important. There’s a lot of evidence showing that the best place you can send your kids to school is the school closest to your house and to invest that time and sleep and play and homework into your kids.

I do want my kids to have every opportunity to be successful. What do I mean by success? Well, the opportunity to do whatever they want and develop economic security. So maybe they can buy a house, not have that stress when having kids or entering into a long term relationship. If I took that $62,000 in tuition at a private school and put it in a Vanguard low cost index fund from the age of four to 18, by the time they’re 35 that would be $5 million.

The last factor in the formula is diversification. We’re taught that you should be Mark Zuckerberg and put all of your money and effort into one thing. We see people taking pictures of Solana going up 600%. The most powerful concept that’s underappreciated is how powerful diversification is. It is your Kevlar. But, nobody knows that Amazon lost 90% of its value between 1999 and 2001. Everybody was putting their money into Cisco, the most valuable company in the world in 1999. It also lost 90% of its value. It’s very easy to become enamored with your own great ideas and to go all in. While you may have to go all in on a house when you’re young or your own business, but as soon as we have the opportunity, get risk free return by diversification. Last week, I had one of my investments go to zero, but I don’t put more than 3% of my net worth in any one thing.

The mistake I made up until the age of 45 was I was constantly going all in on my own businesses and my own ideas because I thought I was awesome. And the reality is market dynamics will always trump individual performance, outside of your control.

Has the formula changed since you were 30?

There’s a couple of things that have changed. One, young people just aren’t doing as well. Our generation, on an inflation adjusted basis, earned an average of $85,000 a year when we were 25. Twenty years ago the average was $62,000. Now these kids are averaging $52,000. So they’re just making less money. At the same time, while they’re making less money, housing and education costs have exploded. That means the quality of their life has gone down.

And then what speedballs that anger and turns it into rage is that they get 210 notifications a day on their phone, and probably 100 of those notifications are basically saying, “you’re failing.” It’s someone else vomiting up their fake success. So not only are they not doing as well as their parents’ generation, but they are under the illusion that they’re doing really poorly compared to everybody else. Then they see that Pop Pop and Nana are upgrading from Carnival to the Crystal Cruise. The average 70 year old is 72% wealthier than they were 40 years ago while the average person under the age of 40 is 24% less wealthy.

They hear that the economy is stronger than it’s ever been, markets are touching new highs, America has never been stronger. There are seven companies who have added $3.5 trillion in market cap in the last 11 weeks, but their life is much worse. They’re entitled to be enraged.

Is this true for Stern students? Or are they insulated somewhat from these realities, just on the virtue that they’ve been admitted to a school like Stern?

Stern kids are remarkable kids. If they got into Stern, it means they’re talented, but they’re also likely pretty privileged. They are kind of tracking towards what I call the “winner take most economy” and these kids are probably already the winners. The average salary coming out of Stern is $212,000. But I do think they’re pretty socially conscious. I’d like to think most of them really do understand their good blessings. They’re hard working. They’re getting elite certification. They’re going to slipstream into the information economy. I mean, some of them will struggle, but most of them are going to do just fine.

The elite universities have adopted a rejectionist strategy where they artificially constrain supply. People who already have a degree love hearing that UCLA submissions rate has gone from 76% to 9% since I went there because it means the value of their degree has exploded. People who own homes all of a sudden become very concerned with traffic and show up to the local review board to squash any new permits for new housing because that makes the value of their house go up. All of these things are essentially, including higher education, nothing but a transfer of wealth from the entrants to the incumbents.

Speaking of the rage of young people, how do you think that factors into the protests we’re seeing on many college campuses this spring, including NYU? Is there a difference in protests we’re seeing now from previous protests movements on campuses?

There really is a big difference. The scale of it has been vastly inflated by a media that’s desperate for clicks. There’s been 2,300 arrests total, and they estimated somewhere between 40 and 60% of those arrests aren’t even students. There’s 2,500 degree granting institutions, there’s 17 million students. You’re talking about 0.06% of the students who were actually protesting.

In the case of the Vietnam War protests, you’re talking about thousands of campuses and 1.8 million kids who had already been drafted, 30,000 who had already been killed. It was much more widespread. That movement produced a series of leaders that were very articulate. So far, the only person that’s gone viral who represents this current community is a woman demanding that the revolution be catered.

This stuff has been vastly exaggerated by the media. Now, that’s not to say it’s not really shocking. The way I would describe these students is a zombie apocalypse of useful idiots who are advocating for an ideology that would likely see the majority of their friends either thrown off a roof or executed. I would just love some of these groups to invite a representative from Hamas to come meet with them, and they should kick off the meeting with a discussion on their preferred pronouns and just see how that goes.

It’s the inability to articulate a position other than, “Oh, it’s genocide.” Well, that means you understand the word genocide. Israel could conduct genocide on Palestine, but they don’t. Hamas would but can’t. So whose side should we be on?

What I would say is the scale has been vastly inflated. But when I see, at my alma mater, students passing out bands to non Jewish students and not letting Jewish students access a library, that is exceptionally disappointing. One because I think it represents a level of bigotry I’d never thought I would see again, and two, I find there’s a certain level of inconsistency. If we were to sequester black people from access to the library, Royce Hall, UCLA, I think they’d call in the National Guard. I don’t think there’d be a lot of need for words like nuance or context.

What I find very disappointing here is that it’s not an argument over free speech. It’s an argument over where’s the line for free speech as it relates to different special interest groups. My observation is that free speech is never freer than when it’s hate speech against Jews.

So, in sum, the scale has been exaggerated, but that doesn’t make it any less ugly or any less shocking or any less dangerous. And what it highlights is that the same people who were putting out memos – and I got some of these – saying that words around pronouns, or describing anything about someone’s physical appearance, or in anyway alluding to their gender, that those words were dangerous, and sometimes those words were even described as violence, those same people have decided that saying “from the river to the sea” is free speech.

There’s a more interesting discussion around, well I’ll give an example. I think we should cut a really wide berth around students who say really stupid things. I’m glad a camera wasn’t following me around when I was 19. I think we give those students a wide berth and I think they deserve a learning experience. Maybe get suspended.

But a professor who’s protesting, empathizing with an ideology that calls for two third of the student body to be summarily executed, as a private employer, we respect your rights to free speech. We also have the right to fire you. I think it’s insane that we have not fired faculty who have engaged in any way, support for this depraved ideology. My personal view is there should be sharp relief between a 19 year old at Cornell pushing the limits of their behavior which is part of youth, and quite frankly, someone we are paying who just should know better and lacks that kind of critical thinking. Again, if I showed up in the lobby of Stern in a white hood and started saying burn the gays or lynch the Blacks, I would never work in academia again.

Columbia Business School professor Shai Davidai has been outspoken and critical of Columbia University and business school colleagues in general for not speaking out more forcefully against protests he says are pro Hamas. He told P&Q that b-school professors in particular profess leadership and DEI, but have been pretty silent on the anti semitism he has seen. Do you agree?

I’ll go more broadly than that. I’m exceptionally disappointed that more Jews haven’t spoken out. There’s a general vibe across Jews that you should keep your success to yourself and try to fly below the radar. Be successful, but anonymous. You know, there’s Debra Messing and Jessica Seinfeld, but who else is speaking out? My attitude is we were way too quiet 90 years ago. So it’s not just faculty not speaking out.

In my opinion, there’s some very successful Jews with big platforms. The majority of big Hollywood executives are Jewish, but they’re worried that young people have different views on Israel than them. So their attitude is, “well I don’t want to threaten the opening of ‘Barbie.’” So, you know, I think a lot of Jews have to decide whether this is an opinion or a principle, and a principle is something you’re willing to make sacrifices for.

And what about in terms of DEI?

DEI, leadership, ethics, sustainability – all of this is nothing but formerly important people wanting to pay themselves a lot of money with no accountability. We’ve morphed from centers of excellence to centers of orthodoxy and believing we’re social engineers. I can’t get my 13 year old to make his bed but I’m supposed to teach a 28 year old how to be more ethical?

And these apparatuses are expensive. You can never question their value or you’re called a racist or some sort of “ist,” or you have no empathy for the environment. The level of arrogance that a bunch of non-elected people are going to somehow, you know, train all of our youth to bark at the same progressive tree.

There’s a huge DEI department at Harvard while 98% of the faculty are Democrats. Does that mean the DEI is trying to recruit more Republican professors? The DEI conversation is a misdirect, because Harvard’s problem has nothing to do with diversity. Harvard’s problem is it’s decided not to take any of their $54 billion endowment, which is the GDP of Costa Rica, and expand our freshman class.

The answer to all of this is take some of the hundreds of billions of dollars in endowments and give up on this rejectionist, exclusionary BS strategy, and dramatically expand your freshman seats. Guess what? You won’t have this problem. It’s not about who gets in; the real question should be how many? We need to expand freshman class sizes so we can have more trans kids, more black kids, more Jewish kids, more white Republican kids from red states. You don’t have DEI fights at community colleges because what they say is, “We’re here to serve you. Show up, pay a reasonable fee, and we’ll give you an education.”

We needed this conversation 60 years ago because then there were 12 blacks at Princeton, Yale and Harvard combined. That’s outrageous. 51% of this year’s freshman class at Harvard is non white. But here’s the problem: 70% of their parents are upper income, dual income households. So all we’ve done is we shuffled the elites: Letting in the daughter of a Taiwanese private equity billionaire, it’s not diversity. We need affirmative action based on color, but that color should be green.

One of the wonderful things about our nation, and it’s a real sign of our progress, is that in today’s America, you’d rather be born nonwhite or gay than poor. Most Republicans and all Democrats can come together and agree that there are certain people who are born with winds in their face at no fault of their own. The question is: What is the criteria for who we extend a hand to? Where DEI has lost the script is, one, it’s an apparatus for just people paying themselves money and having no accountability. And, two, we have now a system that creates more agita than it solves.

DEI has led to the notion that if you’re going to tell 75% of your population – all nonwhites, all women, all gay people – that you have been oppressed, then how could they not blame the 25% that are not part of the oppressed group? Then a subset of the oppressors of the oppressed, from a perception standpoint, is who’s the whitest and who is the richest? Fairly or unfairly, those individuals have been targeted or labeled as Jews.

So, do you think this is all connected? The economic insecurity, the rage you were talking about in students and young adults, the campus protests, (misguided or not), conversations around DEI?

One hundred percent. I think the protests on campus are more about America than they are about the Middle East. Go ask the majority of the protesters when they chant ‘from the river to the sea,’ what river and what sea are they referring to, and I bet the majority of them can’t name the Mediterranean and the Jordan River. The fact that young people aren’t doing as well as their elders, I think it just creates rage and incendiary that’s poured over every movement. I’m not suggesting those movements don’t have their own validity. But it’s like when you’re in a relationship and someone blows up at you over not closing the garage door. It’s usually not about the garage door.

I think with young people, we’re sitting on a tinderbox where every legitimate cut turns into an opportunistic infection and gangrene because young people just are angry. And I think they deserve to be angry.

Is there anything universities and/or B-schools like Stern should be doing differently in how they’re educating these young people who, you say, deserve to be angry?

Dismantle the DEI, ethics, leadership, sustainability apparatus, pour all of that money back into technology so that they can lower costs and expand the freshman class. More access at a lower cost, and reject the rejectionist strategy that they’ve adopted. We’re public servants not Chanel bags.

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