Unsexy Investments Outperform

Scott Galloway shares insights on how unsexy investments often yield better returns than trendy ones, based on his personal experience across various asset classes.

The Unsexy Investment Rule

• The less sexy or attractive an investment, the higher the returns tend to be
• "The sexier an investment, the lower the returns"
• Distressed investing has been Scott's best-performing asset class
• Unsexy businesses with less competition typically generate better financial returns

Examples of Successful Unsexy Investments

• FTX bankruptcy claims

  • Bought at 22 cents on the dollar when "the market is saying this might all be worth nothing"
  • Expected to turn $2-2.5 million into $15 million (6-7.5x return)

• Yellow Pages business

  • Invested $4 million in a declining industry that "reeks of death"
  • Bought companies trading at 2-3 times EBITDA
  • Strategy involved consolidation and cost-cutting
  • Successfully transitioned to a CRM software company
  • 4-5x return on investment

• Distressed consumer company

  • Partnered with Mudrick Capital on a bankruptcy investment
  • 30x return over six years despite being "a nightmare" that "almost went to zero two or three times"

Why Unsexy Investments Work Better

• Less competition in unattractive markets
• Lower valuations due to negative sentiment
• Opportunity to buy assets below intrinsic value
• "No one wants to hang out with bankrupt companies"
• "It's ugly, it's complicated, it reeks of death"

Investment Advice for Others

• For most people: index funds with geographic diversification
• Consider residential real estate for rental income
  • Can leverage 5:1
  • Can depreciate 2-3% annually
  • Not marked to market daily (better for mental health)
• For US investors: diversify internationally
  • US market potentially "flat for the next decade"
  • Look at lower P/E ratios in other markets (Germany: 22, Japan: 18, China: 14 vs US: 26)
  • Invest in companies with at least 50% of business abroad

Career Advice Extension of the Same Principle

• Unsexy careers often yield better financial returns than glamorous ones
• "If you're in the top 90% of tax lawyers, you can make a good living"
• "If you're in the top 10% of actors, you make $40-50,000 a year"
• "If you're in the top 10% of tax law, you fly private"
• Choose unsexy careers unless you get significant "psychic return" from the sexy ones