You'll hear about people who went, you know, all in on Nvidia. Good for them. But what you don't hear about is just the nightmare when you spend too much of your — you spend everything on tech because that's the future. And tech was the future. Amazon and Cisco lost 90-plus percent of their value from 1999 to 2001. Can you imagine the mental strain? 'Oh, Amazon's going to the moon. I'm putting in all $100,000 of my 401k in Amazon.' And you wake up and it's worth $7,000.
How do you talk to your son about fraternity life and peer pressure? And can we trust the government jobs numbers? Today we answer your questions about parenting, diversifying your investments, and more. Question number one. Question number one comes from Tim, who emailed us: 'Scott, I'm reaching out as a father trying to figure out how to have an important conversation with my 18-year-old son. He just joined a fraternity at Florida State last week. He's at an age where independence, belonging, and finding his place in the world are incredibly important. The recent situation at Cornell has me thinking about what it means to be a young man entering fraternity life today. You've spoken extensively about young men, masculinity, loneliness, and the importance of male relationships. I'd value your perspective on how to approach this. If you were me, what would you say to your son right now? More than anything, I want my son to become a man who has the confidence to do the right thing, even when doing so might cost him socially.' Oh god, this cannot be more relevant. I'm not exaggerating.
So, I have a freshman at UVA who likely will join a fraternity in the spring, something I think is smart that UVA does — they don't let you rush until spring. I rushed. I was 17 when I rushed a fraternity. I did it because I wanted to move out of my mom's, and I just went up and down fraternity row asking if they had live-ins, and that means you can live in the house. And I moved in — I got into UCLA seven days before school started. I got off, I got appealed and got in. And then two days after school started, I moved into the fraternity and lived in a room, you know, grown up as an only child and moved in with three other guys. And then over the course of the years, I became involved in the fraternity system and was actually IFC, or Inter-Fraternity Council, the governing body of the fraternities', president. And I absolutely love being in a fraternity. Some of my closest friends — yesterday I'm in LA, I hung out with a buddy of mine. I have probably eight really close friends from the fraternity, and I don't think I would have graduated from UCLA had it not been for the fraternity.
So let me start off with: I think that fraternities, or any group that shrinks a university down from the 20,000 undergrads that is UCLA and helps you find your people — whether it's the Asian society, Black Students Alliance, whatever it might be, dance club, choir, anything that finds you. You've got to find your people at a place like UCLA. Otherwise, it's just a sea of — you're just going to school in a city. You don't have any friends and you're young. And there's data to show that there are some very positives: you're more likely to graduate once you join a fraternity or sorority, you get higher grades or better grades, more likely to be involved in the school after you get out. There's some real big problems. I just read a study saying that men in fraternities are twice as likely to be the perpetrators of sexual violence. And then some of the data in the study shows that maybe that type of person is predisposed to joining a fraternity, but just some of it — they're entitled. I don't know. You also have, I think, probably more alcohol and substance abuse, although I haven't seen the studies there.
But I've been thinking a lot about Cornell and what to say to my son. When I was fraternity council president, I saw all of the kind of really bad stuff happen because you'd have to correspond with UCPD, the administration, and occasionally the parents, which was the most upsetting part of all of this. What I mostly saw — and I was thinking about this the other day — I saw deaths of despair: suicide and deaths of drunkenness. A kid fell off the balcony at the SAE rush party and, you know, crushed his head and died before presents. A woman ate rat poison. A guy who was my second vice president at the council asked a woman to marry him in his senior year. The word is she said no, and he went back to the fraternity and he hung himself. Another friend at the Phi Kappa Psi house was at a party, took out a jet ski at night, and washed up eight days later. Again, another death of drunkenness. I didn't hear a lot about sexual assault. And that's not to say that it wasn't happening, but it was either being dealt with in channels that I wasn't privy to or it was being swept under the rug, quite frankly.
So the events of Cornell and having a kid at college — most of my conversations to date have been: look, you need to modulate and understand that you're at an age where your body hasn't adapted to alcohol and you don't know your limits, and that there'll be peer pressure to drink. My pledge pinning — I tell them the story of my pledge pinning. You're so excited, I'm 17, you get into a fraternity, and all these cool older guys are saying, 'Drink, drink, drink.' And they gave us all a bottle of Andre pink champagne, and we downed this bottle, and then all of us were soon throwing up. And there was a kid next to me whose eyes were rolling back in his head. He was so drunk he was basically unconscious. And one guy said, 'Well, let's just let him sleep it off. Put him in, you know, one of these rooms.' And another guy stepped in and said, 'No, we need to take him to the emergency room.' When he got to the emergency room, he was breathing six times a minute. And they said, 'Had we put him to bed, he would have never woken up. He would have drawn his last breath.' So my first message to my son was: you know, you've just got to know your limits around alcohol, and when you feel you're drunk, you just got to stop and you got to move to water. And no one's, I don't believe, going to not let you into the fraternity because you refused to drink more and said, 'I don't feel well.'
I think my son has actually a really healthy relationship with alcohol. And in England, they're just a couple years behind. And that is — it's weird. While they can start drinking at 17 with a parent, I think it's a good idea because he just sort of has a beer every once in a while, doesn't really get drunk, doesn't, as far as I know, abuse alcohol. And I think he's sort of slowly but surely eased into alcohol and learned his limits sooner than maybe a lot of kids in America who aren't supposed to be drinking. Then the first time is away at college, or they turn 21 and they go crazy. So I've actually found that my boys so far, as far as I know, have a really healthy relationship, and that is they have eased into kind of social drinking. And I think that's healthy. And I have found that the approach to drinking in the UK, despite it starting earlier, I would describe as healthier because they kind of just ease into it. Whereas the notion that kids aren't going to drink under the age of 21 is ridiculous. And I find that kids have a tendency to go from 0 to 60 much faster in the US.
I had not drank in high school, and in a weird way, I think that was sort of bad. And that is, when I showed up with all this alcohol, I was in the emergency room — I think this is my second week at college. Not because I got too drunk, but I did get drunk, and I felt faint, and I ran outside, and I tripped, and I hit a wall, and they decided — you know, see above, someone almost died. So they immediately took me to the emergency room where I had two stitches. And the worst part about that experience is I had to send a $320 bill to my dad, who is not loose with the money, not splashing the cash around. And that was an uncomfortable conversation. But most of my conversations around knowing your limits and always being willing to say no under the notion of peer pressure and drinking — the events of Cornell have created a different conversation. I actually had this conversation yesterday.
And the first is — and I don't know if I get this right — there's nothing I'm more insecure about than parenting. On almost every domain, I think I have more confidence than I should, and I think I know most of the answers. And around parenting, I don't. I've never — I constantly am trying to figure out: is this the right way to approach this whole thing called being a dad? But what I've done is the following. I'm not saying it's the right way. It's my way. I bring up what happened at Cornell and I ask him what he thinks. And, you know, I think kids spend less time thinking about this stuff. The ones who do — there's the 1% we see on TikTok who are all over this. I think 99% of them are just kind of going about their life. And we talk about it, and then I give him my viewpoint, and I try to keep it fairly simple. And that is, the first is just, in a very broad way, empathy and future self. And that is, I say: when you're in a situation like that, imagine that's your sister at a campus across town — how would you want the men to behave? To your future self: try and put yourself in yourself five, ten years from now, when you have a job, a wife, kids, professional standing — how would your professional self want you to behave right now?
However, the first time you are physically intimate with someone, I think it's a really good idea that it should only happen when you're both sober or near sober. You just don't want to — whether it's being tempted not to use protection, whether it's misunderstanding what is going on, whether it's doing something with someone you're going to regret in the morning. I'm not saying second, third, or fourth time, but especially on the first time, just as a general rule, you should be sober. It just reduces risks on both parties. The other is, and this is very tactical: I believe personally that multiple partners — specifically one woman and more than one man — I see that as violence. You know, 300 or 400 lb of man and 120 lb of woman. And I want to be clear: consenting adults have the right to do what they want to do. But I think multiple male partners with one woman — I think that's violence. A lot of young people are also into, from what I understand, choking. And I told my son: don't ever do that. That is violence. And porn alone starts to train men to engage or blur the line between sex and violence. And I think choking, I think multiple partners — I see that as violence, and you should just avoid it, full stop.
I'm not an expert on parenting, other than I keep doing it. I keep making mistakes and I try and learn from them, and I'm very close to my sons. I speak to them every day. But I think the first step is that dads need to talk to their sons about it. And generally speaking, I think the fastest blue-line path to a better world is for dads just to be more engaged with their sons. Speak to them every day. Bring up stuff. Have them roll their eyes. Have them pretend to not want to speak to you. But when I think about these young men at Cornell, what I think about, quite frankly — let everyone argue over the DA. Let everyone argue about Cornell's role. Everybody has a fucking opinion on this, on the entire spectrum. If we want better men, if we want fewer situations like this, we need to have more fathers more present in their sons' lives.
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Question number two comes from nomembership9365: 'Hi Scott, love the show. You've recommended diversification a few times to protect yourself in a bubble, but I'm hoping you'll be a little bit more specific. Are you talking about more diversification in your stock portfolio, or are you including other things like private equity, real estate, corporate, government bonds, etc.? Thank you.' Yeah. So, look, naturally as a younger person, there's a saying that you get wealthy through concentration and you stay wealthy through diversification. Most people who are wealthy get there — I mean, essentially, unfortunately there's a small number of ways to get really wealthy in the United States. One is through finance, one is tech, one is options in a company that's doing really well, and the other is entrepreneurship. And by virtue of doing that, you kind of have to concentrate early. And that is, you don't have a lot of financial capital early, so you're sort of going all in to get to a point in a company where you get awarded a lot of options on equity — generally means you're working very hard there and you're very good, and you get to a senior level fairly fast, and you aggregate options, and the market timing is good, and you make a bunch of money.
You know, if you joined Nike in 2010 and you invested a bunch of options and you were good and became a VP, and in 2022 you exercised your options and you sold them, you made a shit ton of money. If you joined in 2000 and you saw the stock go up — it's now, Nike's back to where it was in 2013. Can you imagine how disappointing that is? Anyway, a lot of that's luck in corporations. But generally speaking, early on you have to concentrate. You wildly concentrate on a house. If you have $50,000 in net worth and you buy a $400,000 home, you're highly concentrated in real estate. Once you have anything resembling an asset base — once you have anything, call it, you know, six figures and above — you want to think about starting to diversify. And there was a study done in the '80s that said you kind of get risk-free return if you can find a bunch of distinct cash flows. Ray Dalio says that at Bridgewater all they tried to do was find 12 unique good investments that were distinct cash flows that weren't correlated to each other. And that was the key to above-market returns in terms of it being risk-adjusted.
I really screwed up. Probably my biggest mistake in terms of wealth creation has been a lack of diversification. I was always raised to believe that I was a baller and individual performance could overcome anything. And the reality is market dynamics trump individual performance. And I've been rich three times, which means I've lost it twice. I lost it in the dot-com implosion because I was all tech, mostly in my startups. And I lost it again in 2008 after climbing back after seven years because, again, see above, I was mostly or all in tech. Now I try not to put more than 3% of my assets in any one stock. The place I've violated is I own a lot of real estate. But I own it in different regions. I don't have a lot of leverage on it. You can survive a lack of or less diversification without a lot of leverage. If you don't have leverage, it's the way you get caught. The way smart people go broke is through leverage. And that is, real estate goes up and down. And you may have had real estate in Florida, which ended up being an amazing investment, but in 2008, if you borrowed 80% against your condo and you weren't renting it out, you had to give it back to the bank because it declined — it got caught in value by half or 60%. Now it came ripping back and it's probably up three or five since then. But with leverage, you couldn't hold on. And without leverage, you can hold on.
Anyways, I do have a lot of real estate, but I do it in different regions. I do think diversification is really important. If you're kind of over the age of 40, have some assets, you do really want to think hard about diversifying. And it's not only just the S&P. You think, 'Well, I'm diversified, I'm in SPY.' Actually, 40% of the S&P is in just 10 stocks. So that's not diversification. So I suggest diversifying by asset type — real estate, bonds, stocks — and also where people miss is geography. Now, the last kind of 17, 18 years have been an American disco party, and that is nothing has performed like the US because of tech and AI. I still think you need to own some stocks in Asia or own some low-cost index funds in Asia and in Europe. That's how you stay rich, and that is, diversification is your Kevlar. You can get shot in the chest — and I've been shot in the chest a couple times with companies I started and went out of business, and it was fatal for me financially — whereas now, when the markets go down — the markets went down, I think, in 2022 pretty substantially, or 2023 — it hurts, but I get shot in the chest, but I'm wearing Kevlar, and I kind of am on the ground, and then I can get up again. That's your Kevlar, is diversification.
So again, the learning here is diversification not only across asset classes but also across geographies. You probably give up some upside. It's great to be lucky. You'll hear about people who went, you know, all in on Nvidia. Good for them. But what you don't hear about is just the nightmare when you spend too much of your — you spend everything on tech because that's the future. And tech was the future. But that doesn't mean it goes through. Amazon and Cisco lost 90-plus percent of their value from 1999 to 2001. Can you imagine the mental strain? 'Oh, Amazon's going to the moon. I'm putting in all $100,000 in my 401k in Amazon.' And you wake up and it's worth $7,000. So, low-cost index funds diversified across asset classes and across geographies. We'll be right back after a quick break.
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Welcome back. Question number three: 'Hi Scott, this is Ruth from Auckland, New Zealand. I've got a question about who wins the enterprise layer, and really a question about whether we should be discussing SaaS apocalypse again. With OpenAI's release of Dots, which can interact with, I think, 4,000 applications, it's clearly going after the enterprise market. With these LLMs heading towards enterprise, what's this going to mean for the incumbents? And thinking about the S&P 500, who are the incumbent technology companies that are most at risk as the LLMs look to control or dominate enterprise? Thanks.'
That's sort of the question in tech. So what Ruth is referring to: last week, OpenAI launched Dots, AI agents that run around the clock and can work on their own across more than 4,000 apps. OpenAI is piloting them inside companies for procurement, invoice processing, customer support, and contracts. What is the SaaS apocalypse? Just a brief refresher: the term SaaS apocalypse — SaaS meaning software as a service — refers to a major stock selloff earlier this year that erased nearly $1 trillion in software value by early February, and perhaps as much as $2 trillion in the weeks after. For context, Thomson Reuters fell 15%, LegalZoom nearly 20%, Salesforce, Adobe, and ServiceNow each fell 7%. That's an apocalypse, but anyways, the thesis behind the SaaS apocalypse can be explained in three parts.
The first is just basic replacement: AI agents can do the work directly, so companies will stop paying for the software built to help humans do it. The second is seats. Software companies charge per seat, meaning a recurring fee for every employee who logs in. If a company has a thousand salespeople on Salesforce, it pays for a thousand seats. When a handful of AI agents can do that work, the company needs fewer seats, and the vendor's revenue shrinks even if the customer never leaves. And the third is building versus buying. Coding agents have made software so cheap to create that customers can build their own CRM software, or at least threaten to, which pushes prices down at renewal and thereby puts pressure on margins. So was the fear justified? So far the numbers say no. Stripe's index of 72,000 SaaS businesses shows year-over-year growth above 30%, at or above its 2023 highs. The stocks have recovered too. The main software ETF rose 17% in the third quarter this year. Salesforce gained 46% and Workday gained 55%, according to CNBC's Jim Cramer.
So where it was justified, the fear was right about where the new money is going among companies increasing their tech budgets. The share spending at least 5% of that budget on AI went from about 12% to more than 60%. So kind of the tech budgets — if it's not a zero-sum game, and it isn't yet, people are spending incremental money, but at some point that spending on AI tokens is going to eat into the amount of money they spend on software. What I think has happened is the numbers — if you just do the numbers, you wouldn't think there's an exogenous meteor called AI. I think the reason the stocks have gone down is around terminal value, and that is, the market basically takes the present value of cash flows, and there was a general feeling among SaaS that once you were integrated or embedded into a company's workflow, you were going to kind of be there forever. And they'd look at churn rates and say churn rates are 10%, meaning every dollar in new business is worth $9 because it's going to be in there for nine or 10 years. But I think the feeling is that with the impending meteor of AI, people are taking terminal value way down.
What do I mean by that? There's no longer the same certainty that that company will be as inextricably embedded or linked inside of the company — that there's more risk to it. So the cash flows — but that hasn't shown up in the cash flow so far. When you're talking about like Salesforce, you're talking about an interface people are comfortable with. You're talking about training. You're talking about debugging. You're talking about events they all want to go to. You're talking about customer relationships. You're talking about a certain level of security — if this thing blows up and gets hacked and shuts down your business, that there's someone you can sue, so it's less likely to happen. Will it probably put pressure on margins? Absolutely. But these companies aren't stupid. They're also using AI to make their products more competitive and more efficient, such that they can probably lower the price.
So what happens here? I mean, just to give you an example, these companies usually spend somewhere between 10 and 20% of their top line on technology. Meaning that arguably 80% of the value they add isn't in the tech itself. It's in things like client relationships, customer service, debugging, risk assessment, you know, all that stuff, events. So, will it put pressure on their margins as they either don't need to spend as much on technology or other AI companies can replace it more easily? Sure. But I can tell you my company uses Salesforce, and I can't imagine — I don't care if the next thing is free. We're just used to the user interface. We're used to the UI. So I doubt we'll — now we'll also add AI, we'll spend more on AI. So at some point we probably need to cut cost somewhere. But so far the market has said that the rumors of SaaS's death have been greatly exaggerated.
Does the fear still move stocks? Yeah, but it's been moving them up. When Meta announced its own enterprise AI platform on September 28th, Salesforce fell almost 5%, but Meta surged. OpenAI's Dots, however, got a different reaction. Two days after the launch, ServiceNow and Intuit were each up 4%, and Adobe was up 3%. One reason could have been that OpenAI launched a marketplace the same day with 32 software partners, including Salesforce, ServiceNow, and Adobe — meaning the companies Dots was supposed to kill, or the companies that are supposed to kill it, are actually its launch partners.
Who's winning at the enterprise level? OpenAI's recurring revenue is reportedly reaching $70 billion, and its enterprise sales have reportedly more than doubled since July. Anthropic has reportedly reached an annualized revenue run rate of approximately $65 billion. And the incumbents that recovered did it by selling agents themselves. Salesforce's agent product, Agentforce, is now $1.5 billion in annual recurring revenue. That's up 240% from a year ago. Who's most at risk here? Jeffries would tell you: information officers, whose budgets they would cut to pay for AI, at 71%; IT services and systems integrators, the consultants who install and customize software. After that came IT service management software at 41%, front office software like CRM at 35%, while cloud providers came in at 6% and cybersecurity at 0%. And I would imagine cybersecurity is going to be, you know, it's a booming market.
In the S&P 500, the clearest casualty is Intuit, the maker of TurboTax and QuickBooks. The stock is down about 55% this year, even though revenue grew 14%. Look, this is a tough one, and I think it goes back to diversification. Supposedly, the next big growth market in SaaS is not going to be SaaS itself. You're not going to buy software to do your taxes, but tax-enabled or AI-enabled services companies. So I do my taxes with a firm called Citroen because a woman I know, Lucy Lee — I think she's incredibly smart, and I just trust her opinion around taxation. I can see an AI company acquiring Citroen and then AI-enabling the company and saying, 'Okay, you can now cut your prices by 50%. We're going to go try and get 10,000 clients instead of 5,000.'
So for example, all radiologists were supposed to be out of business by now because of AI. What it ends up is that an AI-enabled radiologist can do three times as many scans and then lower the prices. And it ends up then when scans get cheaper, people do more scans, and we need more radiologists who know how to use AI. That's called economic growth through innovation, right? So it feels like the new wave is going to be a combination of a SaaS company focused on a vertical that's AI-enabled, and then they offer the end service itself. They're not going to be selling software. They're going to be selling the service, which is they're going to go upstream and say, 'We'll actually do your taxes for you. We'll do your compliance for you. We're not going to just give you the software for you to do it more easily internally.'
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Welcome back. Question number four: 'Hey Scott, it is Ted from London. I have a question about statistics, more specifically statistics coming out of the White House. Last year, I think in August, he fired the head of the Bureau of Labor Statistics and put some of his own people in charge. So I'm wondering, can we trust all the jobs numbers coming out of this administration?'
Look, I have a bias here. I basically think you can't trust anything that's coming out of this administration. So, what happened at the BLS in August 2025: Trump fired BLS Commissioner Erica McEntarfer — I think that's how you say her name. Sorry, Erica. After a weak July jobs report, he accused her of bias against him without evidence. Experts rejected the charge, noting the commissioner didn't produce the monthly estimates. Trump then nominated EJ Antoni, a conservative firebrand with no government statistics experience. I'm mad at the public. I mean, don't voters realize that if you prioritize loyalty over competence, eventually, like, shit's not going to work? Anyways, according to the Wall Street Journal, who had suggested suspending the monthly jobs report, after major bipartisan backlash, the White House withdrew the pick. Finally, in August of this year, the Senate confirmed Brent Moulton as BLS commissioner. Moulton's a career BLS economist with 11 years of government, including a stint as senior economist at Trump's Council of Economic Advisers. Former BLS commissioners from both parties praised the pick. He's been hailed as a data nerd.
But here's why the numbers — you know, you can have your own opinions, but you can't have your own data. And here's why the numbers are hard to fake regardless of who's in charge. Economist and frequent Pivot markets guest Justin Wolfers says that the BLS survived intact. Career staff keep producing the data with the same processes and internal checks. Or put another way, Justin's saying you can trust these numbers. The jobs report draws on two separate surveys, one of households, one of employers. Outside researchers check the household data every month, and the employers' numbers are later checked against state unemployment insurance records. Private payroll data from companies like ADP, Bank of America paychecks would start to diverge if the official numbers were doctored. Wolfers tells us that real tampering would look like attacks on statisticians, unexplained changes in methods, and a switch from monthly to quarterly reports.
So where the numbers are actually weaker: fewer people answer BLS surveys, and the agency is short-staffed and underfunded. Response rates fell from 66% in 2016 to 35% last December. And I also wonder who's actually answering these things. And funding fell more than 22% between 2010 and 2025 after inflation. Fewer responses means bigger revisions. BLS later found that it overcounted job growth by roughly 860,000 jobs in the year ending March 2025. Why does this data matter? BLS produces the country's most important economic numbers, including inflation and unemployment, and its nonpartisan reputation is crucial to why global investors and policymakers rely on it so much. BLS staff have been saying a glass of water is never half full or half empty — it's 50% water and 50% air. In sum, these numbers matter. They're hard to mess with, but at some point when you just choke it of all oxygen and resources, it does become harder to produce reliable, robust data. So anyways, I would say the answer is mixed, but I appreciate the question.
That's all for this episode. If you'd like to submit a question for next time, email a voice recording to officehours.com. Again, that's officehours.com, or post it on the Scott Galloway subreddit.
