← Slate Money
Slate Money
100 More Years of Google
00:41:59
Alphabet issues century bonds, the majority of Trump's tariffs were paid by US citizens, and Felix defends fakes.
Loading summary
Transcript170 lines
- [00:00]
A
Foreign. Welcome to Slate Money, your guide to the business and finance news of the week. My name is Felix Salmon. I work at Bloomberg. I am here with Elizabeth Spires of New York Times.
- [00:25]
B
Hello.
- [00:26]
A
I am here with Emily Peck Nave Friedlander of Axios.
- [00:30]
C
Hello. Hello.
- [00:31]
A
We are going to go down memory road, Emily, you and I.
- [00:35]
C
Memory road.
- [00:36]
A
Let's go and talk a little bit about back when you were Emily Friedlander and what we used to get up to back in the day. We are also going to talk about Bad Bunny. We are going to lead with a whole segment on the Google Century Bond and do nerdy bond math because we love doing that kind of thing. We're going to talk about tariffs. We have a fire take from Emily hot fire take from Emily explaining and by the way, she is right about this explaining why the Trump tariffs are oh Trump tariffs are good somehow. We have a Slate plus segment on Jony I've who apparently designed a Ferrari. It's a fun one this week. Well, it's a nerdy one this week and in this house, nerdy is fun. So stay tuned. It's all coming up on SLEEPD Money. This message is a paid partnership with Apple Card, my favorite travel hack Easy it's using Apple Card. It's great knowing that every time I dine out, buy souvenirs or pay my hotel bill using my Apple Card, I'm actually earning up to 3% daily cash back. So if you're like me and love to travel, then apply for Apple Card in the Wallet app today. Subject to credit approval. Apple Card issued by Goldman Sachs Bank USA, Salt Lake City branch terms and more at applecard.com slate money is brought.
- [02:04]
C
To you by Charles Schwab. Decisions made in Washington can affect your portfolio every day, but what policy changes should investors be watching? Listen to Washington Wise, an original podcast for investors from Charles Schwab to hear the stories making news in Washington right now. Host Mike Townsend, Charles Schwab's managing director for legislative and Regulatory affairs, takes a nonpartisan look at the stories that matter most to investors, including policy initiatives for retirement, savings, taxes and trade, inflation concerns, the Federal Reserve, and how regulatory developments can affect companies, sectors and even the entire market. Mike and his guests offer their perspective on how policy changes could affect what you do with your portfolio. Download the latest episode and follow@schwab.com WashingtonWise or wherever you listen.
- [02:59]
D
All right, so this is one of.
- [03:01]
A
The bits where I get to nerd out about the bond market. A million years ago, even before I started writing for Emily Friedlander at IP Law Business. I was a bond market reporter and and bonds have a price and they have a yield. And one of the things that you often read in the fixed income stories is the price and yield move in the opposite direction. So when price goes down, yield goes up. And then people read that and then they're like, oh, now I understand what a bond is. But let me tell you folks, you do not understand what a bond is. There is something else they have which is a maturity date which is not the same as duration, which is a very technical term which we were going to get into. And people don't really understand how maturity work on bonds. And Emily, oh, you have a news which allows us to dive into this Alphabet, AKA Google.
- [03:55]
C
They put out a big bond issuance this past week. They sold like $20 billion worth of US dollar denominated bonds. But in the UK they sold a 100 year bond denominated in gilts. In the UK currency denominated in pounds.
- [04:12]
A
The belief in UK currency is called the pound.
- [04:15]
C
Why do we say gilts? What's that about?
- [04:17]
A
So the way it is priced is that it is priced off gilts. And in America we have Treasuries which are the government debt gilts. Okay, England gilts are what's UK government debt is not fine. One thing we should mention, Google has a higher credit rating than the UK government does.
- [04:33]
C
Fascinating stuff.
- [04:34]
A
One of the first like curious quirks about this deal is that normally if you have a better credit, you can borrow at a cheaper rate. In this case the bond came quite wide made to gilts. It came like more than a percentage point higher than the UK government. Even though Google has a better credit than the UK government. So that tells you a bunch of interesting stuff. There's basically a couple of things going on here. One is that people trust the UK government to be around in 100 years in the way they don't necessarily trust that Google is going to be around in 100 years. And then the other thing is just that liquidity matters. Bond traders and bond investors, when they buy a bond, one of the great reasons why people buy a bond rather than just lending money directly is that you can sell the bond and you want to be able to trade the bond. And some obscure sterling denominated Google Century bond is always going to be much more illiquid and much harder to trade than a UK gilt. And so that explains why you need to pay. Why Google needs to basically pay a premium for being able to issue. This doesn't explain why Google issued this, but that explains why it's more expensive than gilts.
- [05:43]
C
So let's talk about why Google issued this and I'd like to hear your and Elizabeth's theory. I mean the bigger story that's been happening, and this started at the end of last year, is that these big tech companies started needing more cash than their businesses were throwing off or they wanted to use even more cash than they had or something. They wanted more money to do what everyone is now calling hyperscaling, which as far as I could tell just means really investing in data centers and AI infrastructure with like lots and lots and lots and lots of crazy amounts of money. So bonds, they, they started issuing these bonds at the end of last year, something like $90 billion worth from just the top five hyperscalers, Meta, Microsoft, Google, Oracle, and one other that I don't know off the top of my head. And that seems to be continuing now into 2026 and Alphabet's sort of like leading the charge. So there's this big push to get lots more money by issuing bonds rather than just using the cash that these companies throw off, which is a considerable amount of cash. I think that's sort of like the bigger picture. But even amid all that, I don't understand why you, the century bond specifically.
- [06:49]
B
This is a little speculative, but I think a lot of these companies, the hyperscalers, have been funding data centers and buying chips out of free cash flow, but also using a lot of private credit on off balance sheet vehicles. And I think maybe they have gotten so accustomed to using credit to finance this stuff that they're just sort of exploring other places in the credit markets where they can raise money really quickly. So I think maybe this isn't a big kind of strategic move. It's more experimentation to see what the market will bear in terms of the them issuing public credit.
- [07:21]
A
So the private credit, to be clear, there's two different flavors of hyperscaler. There's a bunch of like data center companies and then there's the big public companies. And when Elizabeth is saying is talking about off balance sheet vehicles and private credit, she's talking about the data center companies who don't have trillion dollar market caps.
- [07:41]
B
Well, Google has done this too. The big hyperscalers have also used private credit in this way to, to get you know, stuff off their balance sheet.
- [07:48]
A
So what I'm trying to say is when Google uses private credit, what they do is they sign a contract with a private company, one of these data center companies, and then the private company which has A contractual has a piece of paper from Google saying, we promise to pay you this much money for compute in the future, can then take that piece of paper to a private credit company and borrow money against it in the private credit market. And so far as the lender is concerned, the borrower is not Google. Like it is sort of back to buy cash flows from Google, but it is not Google itself putting debt on its own balance sheet. That's why you refer to these things as off balance sheet vehicles. Google itself is not the borrower. Google is just promising to pay for compute, and then the person that's paying for the compute is the borrower.
- [08:34]
C
So those are the leases everyone talks about.
- [08:36]
A
Exactly.
- [08:37]
C
The Google and Meta, they're signing leases, which is basically giving cash flow to the smaller companies.
- [08:43]
A
Oh, that makes sense. Exactly. And now what Google is saying is like, this is kind of silly, you know, why don't we just use our incredibly strong credit rating to borrow unsecured money? Because ultimately it's cheaper for us to borrow in the bond markets directly than it is to go through all of these shenanigans of promising to pay money to people who then borrow against that.
- [09:04]
C
How is promising to pay money the same as borrowing money?
- [09:09]
A
So when I issue a bond, what I'm doing, let's just say I'm issuing a standard 20 year bond. I'm like, I will pay you a million dollars a year for 20 years and they'll pay the principal back, right?
- [09:20]
C
Yeah.
- [09:21]
A
And then that money that I'm promising to pay in the future is basically that is what the bond is. It's a promise to pay money in the future to bondholders.
- [09:30]
C
Okay.
- [09:30]
A
It has this family resemblance, let's say to if I sign a contract with the data center saying I promise to pay you $1 million a year for.
- [09:38]
C
Computer, so instead of compute, you're getting money.
- [09:41]
A
But in this case, instead of me getting compute for my promise, what I get is a whole bunch of cash from bond investors and then I can just put the cash on my balance sheet and then to what Elizabeth was saying, that becomes an on balance sheet borrowing. And so what Google has done is it has realized it is fine with having debt on its balance sheet. It is not a very levered company. We've talked a little bit on this show on the past about how really none of the big tech giants are particularly leveraged except for Oracle. And one of the things that people worry about with Oracle is that it already has a lot of debt, but the other ones don't. So There's a lot of Google has a lot of capacity to borrow. It has however many trillion dollar market cap and a very modest amount of debt. So it could borrow a bunch of money and the bond markets wouldn't blink.
- [10:29]
B
So what are the pros and cons of doing a century bond though, specifically?
- [10:34]
A
Right, so when you do a bond, what you are doing is you are selling your cash flows, that million dollars a year or whatever it is to bond investors. And at that point what you do is you phone up a bank and you're like, where are the bond investors? What kind of investors are there who really want cash flow and what kind of cash flow do they want? And as Emily said, like most bond investors are normal bond investors and they like buying normal bonds. And most of the bonds that Google issued are normal bonds. But there are always little outlier pockets here and there. And in this particular case it turned out that there was a bunch of like insurance companies in the UK who for various internal technical reasons of their own, wanted massive amounts of duration. And something else which we can talk about if you really want to get nerdy, called convexity. And remember, this is in the uk, they're borrowing in sterling, right? These are like pension funds in the UK who know what their liabilities are going to be in the future and they want to match their assets to their liabilities. And if they have long dated liabilities, then they want to match that to long dated assets. But they also have like trading desks and they feel that maybe long dated interest rates in the UK are quite high and that those interest rates might come down. And one of the interesting quirks about century bonds is they have very high duration, which is not the same as maturity, but it's related to. And so in the event that interest rates come down in the uk, they will be able to register a mark to market profit on these bonds that is much higher than they will be able to see on any other bonds. Basically, small movements in interest rates result in very large movements in price on century bonds in the way that they don't with normal bonds. There's a really good example of an Austrian Century bond that was issued at an interest rate of 1% back when interest rates were very low, issued at a price of 100 cents on the dollar. Now that interest rates are a bit higher, the price of that bond is 30 cents on the dollar. The Austrian credit hasn't changed. The money is still cash flowing. But because that price versus yield calculation is very, very sensitive when it comes to century bonds, what you wind up with is a very volatile price for these bonds. And for some investors who are making directional bets, a volatile price and the opportunity for large gains is a feature that they're willing to pay a little bit extra for. And then you swap it back into dollars and compared to the price of funding in dollars, it starts looking attractive.
- [13:10]
C
Can you explain how that works actually? So like I buy a century bond at 100 cents on the dollar or whatever, 100 British things on a pound at par and it's paying a little bit above whatever the government rate. The government rate is, then the government rate falls. And what happens to me, let's say.
- [13:30]
A
The spread between Google and the UK government stays the same. Nothing changes on that. Right. And let's say the, you know, UK government rate falls from, I don't know, 4% to 3%. Right. Then if it's a hundred basis point credit spread, then the yield on the Google century bond will fall from 5% to 4%.
- [13:51]
B
Okay.
- [13:52]
A
And the point here is that the price of the bond, if the price was issued at par at 5% and then the yield goes to 4%, the price will go way up to like 120, 130, something like that. Right. I don't have a bond calculator in front of me.
- [14:07]
C
And then you can sell it.
- [14:07]
A
Yeah, as you say at that point, if you wanted to, you can sell it for a big profit within just a couple of years. Perhaps you don't need to hold it for 100 years to make a lot of money on it.
- [14:15]
C
So you're betting that the price of your bond will go up and then you'll sell it to someone who wants it for some reason.
- [14:21]
A
And well, well, so the point is, if you're an insurance company or a pension fund, it's like, it's a free option. You have a bunch of long dated liabilities that you need to fund with your assets. And so in principle you are happy holding this to maturity. On the other hand, if you wind up one morning waking up with a massive mark to market profit on your century bond, you have the option to take profits on that bond and then reinvest the proceeds into something a little bit more sensible and normal. So it's like if it goes down in price, you're like, this is an investment and if it goes up in price, it's, this is a trade and you're actually structurally capable of doing that.
- [15:03]
C
Okay, that actually makes sense to me. And Google is, is issuing it just simply because there's some demand for that. Right now, exactly that one particular market. But it's very rare. There hasn't been demand like that according to all the reporting I'm reading, since like 1997 or something.
- [15:18]
A
Yeah, it comes and goes. Like we did mention that Austria did this a few years ago when interest rates were very low. There are lots of weird technical things within various different bond markets which create and destroy demand for century bonds. And it's not a coincidence that this bond was done in the uk, which is kind of a backwater when it comes to the bond markets because obviously they just found this weird technical pocket of demand in the uk. They did a little weird thing in Swiss francs as well. Not because they need pounds or need Swiss francs, but just because that's where, you know, the bond investors were who were willing to desire this.
- [15:52]
C
I feel like some people, they look at the stock market to decide how the AI boom is going or whatever. And like in the past few weeks or so, these hyperscalers haven't been doing as well and everyone's like, oh, it's not going well. But then when you look at the bond market and you see Google do something like this, you think, oh, it is going well.
- [16:09]
B
Bond market is always more sophisticated about these things. And so I don't think they're looking at the, you know, immediate week to week movements in AI. And this really isn't even necessarily a long term bet on AI, as Felix said, you know, there's a demand for a product that looks like this, a financial product. And so the underlying business, unless they believed that, you know, Google is not a particularly stable business, I don't think they really have to make big directional bets on AI to decide that this is an attractive product for them.
- [16:39]
A
On the other hand, the amount of debt that is being issued to fund data centers and AI is really increasing the total amount of debt being issued. And one of the interesting things is that this debt you like, quite unlike technology stocks in general and you know, speculative Silicon Valley stuff in general, this debt is actually safer than most of the corporate credit that is out there. And one of the funny little consequences of this is my colleague Matt Levine had a wonderful little column about this this week, is that credit is beginning to look a lot more like rates, right? Rates is just interest rates. It's like what happens to interest rates, it's what happens to government bonds. And then the idea behind credit is that you take credits and you layer on top of it this credit risk. And the credit risk that you layer on top is just this thing that you can be incredibly sophisticated about and calculate and all the rest of it. In this case, as Elizabeth says, the bond investors aren't actually particularly worried about the credit risk that is implicated in the AI revolution, yada yada, because they're like, it's Google. It's enormous. It has massive amounts of free cash flow. That's all the analysis I need to do. I'm perfectly happy with the credit.
- [17:53]
C
What could go wrong?
- [17:54]
A
And so what happens is the, the bond funds who invest in the credit markets wind up buying a bunch of paper that isn't particularly information sensitive, right? If, if Google has a good month or a bad quarter or something like, they don't particularly care because Google is a safe credit either way. And all of that credit analysis that used to go into credit markets has become less important than it used to be because really, the only way you make money in this market is by making the right bet on rates.
- [18:27]
B
Wow.
- [18:28]
C
So it's all about rates. It's not about AI?
- [18:31]
A
Well, I mean, it's weird, right? Because rates are relatively high compared to the kind of world that we used to live in. And now is the point at which these companies are borrowing money. And so these companies are borrowing money at real numbers, not at zero. And that's going to be an obligation on them for centuries. I mean, the one other thing I just need to add very quickly is one of the things I got very annoyed about was that there was a bunch of talk about, look at all the companies that issued Century bonds in the past and how few of them even exist anymore. And this shows that companies can rise and fall in the space of much less than 100 years. And lending money to a company for 100 years is a dangerous thing to do. No. Just because a company gets bought or merged or goes through some corporate restructuring or delists from the stock exchange does not mean that the bond investors lose money. The bond investors always get paid back unless there is an actual bankruptcy proceeding. And in 100 cases out of 100, I have yet to find a Century bond that has ever actually gone through bankruptcy and default.
- [19:36]
C
Wonderful.
- [19:37]
A
And as we've said, the risk on a Century bond is not default and bankruptcy. It's not credit risk. The risk on the Century bond is interest rate risk, which is the interest rates go up and your bond is worth 30 cents on the dollar, not because of any credit reasons, but just because of rate.
- [20:07]
D
Slate Money is sponsored this week by Monarch. I have been traveling quite a lot. I also have financial goals, and traveling can be expensive. And I genuinely don't know how much it costs. I know how much a plane ticket costs, I know how much a hotel room costs per night, I know how much is specific meal out when I'm in Japan costs, but I don't know in aggregate how much it costs. And if you don't know how much you're spending on something like travel, then putting together any kind of a form of a personal budget or a plan becomes pretty much impossible. So set yourself up for financial success this year. Monarch is the all in one personal finance tool that is designed to make make your life easier. It brings your entire financial life, budgeting, accounts, investments, net worth, future planning together in one dashboard on your phone or laptop. Feel aware and in control of your finances this year and get 50% off your monarch subscription with Code Slate. All I need to do with Monarch is type in restaurants say and then I get to see all of the restaurants money that I spent on restaurants every month. And I can see that the month that I was in Japan I spent way more money on restaurants than I did any other month once. I know that I can make informed decisions about where I travel and most importantly how long I travel for. So set yourself up for financial success in 2026 with Monarch, the all in one tool that makes proactive money management simple all year long. Use code slateonark.com for half off your first year. That's 50% off your first year@monarch.com with code slate. Slate Money is sponsored this week by upwork. Scaling a business takes the right expertise at the right time. Upwork helps growing teams quickly bring in specialized freelancers so you can move faster and take your business to the next level. Hiring help shouldn't be a headache and it shouldn't be a drain on your budget. Upwork makes it easy to hire specialized freelancers quickly so you get the expertise you need now. Upwork is a one stop platform that allows you to find, hire and pay expert freelancers across web and software development, data and analytics, marketing, business operations and and more. With Business plus, you can access the top 1% of talent on Upwork and with AI powered shortlisting, you'll get matched to the right freelancer in under six hours. Thousands of growing businesses already trust upwork to hire flexible, high quality freelance talent for everything from one off projects to ongoing support. It's free to sign up and posting a job is easy. Visit Upwork.com right now and post your job for free. That is Upwork.com to connect with top talent ready to help your business grow. That's upwor.com upwork.com Today's show is brought to you by Vanguard. As we step into a new year, it's the perfect time for all the advisors listening to think about how to set your clients up for success. One way to do that is to level up your fixed income strategy. But bonds are tricky. The market is huge, rates shift and risks hide in plain sight. That's why having a partner with scale and expertise matters. Vanguard brings both. Vanguard bonds are institutional equality. That isn't a tagline, it's a commitment to your clients. It means top grade products across the board. The Lineup includes over 80 bond funds which are actively managed by a 200 person global squad of sector specialists, analysts and traders. Vanguard doesn't have one brilliant mind making all of the magic happen. Vanguard's philosophy is different. They believe the best active strategies shouldn't be locked away with one person. They should be shared across the team. That way, every client benefits from the collective brain power, not just one individual's take. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself@vanguard.com audio. That's vanguard.com audio all investing is subject to risk. Vanguard Marketing Corporation Distributed.
- [24:56]
A
Let's move on quickly to tariffs because there's a little bit of news. The big news on tariffs we're still waiting for, which is the Supreme Court and whether they're legal or not. But there's like academic news on tariffs, which says, Elizabeth, that they're basically a tax hike.
- [25:13]
B
Yes, they are a tax hike on consumers and American businesses, which is the opposite of what the administration says. But it sort of works out to about a thousand K per household in 25, and it's projected to be around 1300 dollars per household in 26. These numbers are coming from the Fed.
- [25:31]
A
So the New York Fed. Yes, to be clear, and there's a few different people who have run this analysis in a few different ways and they all come to pretty much the same conclusion, which is, yes, the impact of tariffs is borne mostly by the importers, that is the people paying the tariffs, that is Americans, rather than the, the foreigners who Donald Trump likes to think are paying the tariffs.
- [25:52]
B
As it turns out, the economists are perfectly right about how tariffs work.
- [25:57]
A
Have we therefore found for the first time in my living memory a form of broad taxation that is politically acceptable to Republicans?
- [26:09]
C
Yes. No, I have, I have a hot take.
- [26:13]
A
Okay, what's your hot take?
- [26:14]
C
The answer to your question, Felix, is kind of maybe because this past week there was some revolts. A few. Six Republicans in the House voted to get rid of Trump's Canada tariffs. And everyone was like, oh, the GOP is. They're anti tariff now or whatever, but who knows where that goes? But anyway, this is my hot take. The US Needs to raise tax revenue. We need more money. And it's very difficult to do that in the Congress. You can try. Republicans aren't going to do it. There was no other feasible, politically feasible way to do it, except for the wild way that President Trump did it or the way President Biden did it, which targeted tariffs on certain industries. The way President Trump did it. Last year, he raised close to $200 billion in tariff revenue. It's not a lot. If you had raised.
- [27:03]
A
Not nothing.
- [27:04]
C
It's not nothing. It's pretty decent. It's pretty decent. It's not what you would have gotten by, like, taxing the rich, et cetera. But that is not politically feasible. Debt in the US right now is 100% of GDP and is projected to get a lot, a lot higher. We need this money. On Friday, as we're heading into tape, we got inflation numbers that were, as the kids say, benign. 2.4% inflation year over year. Yes, in pockets, it was some astonishing numbers, like beef, coffee, et cetera, blah, blah. Electricity all went up quite a lot, but overall, not a lot. And tariffs, as we've said repeatedly, they're on goods, but goods are only a small part of the consumer basket overall, so maybe, maybe it's fine.
- [27:49]
B
I have two objections to this. First of all, because I was thinking about this this morning. When you say, you know, we need more taxes. Yeah, that is true. But, you know, why do we need more taxes? What do we use taxes to fund?
- [28:01]
C
Yeah.
- [28:01]
B
So this is a regressive tax, and the people it affects the most are, you know, lower income people, people who are more price sensitive around the clear.
- [28:11]
A
It is basically a consumption tax. So the more goods you buy, the.
- [28:16]
B
More it doesn't, it doesn't matter. Stay with me, stay with me. So I, you know, if we're thinking about it, you know, we need to raise more taxes. That's kind of like saying, okay, I need some surgery, and then somebody amputates my arm. It's like, yes, I did need surgery, but not just any surgery. So this is. When you're talking about this being a tax that's productive in the sense that, you know, we need higher taxes. It's like, well, yes, but to what end? And, you know, is this the appropriate way to do it.
- [28:40]
C
We need more tax revenue.
- [28:42]
A
Let me answer that objection first because I feel like the first and most obvious thing we need more tax revenue for is to start attacking this unsustainably massive budget deficit that we have. And yes, it works on that. Like, if we get $200 billion of revenue from taxes, that reduces the budget deficit by $200 billion. Right. That's not knees and arms. That is perfectly fungible cash, which does exactly what it's designed to do, which is raise money for the public fisc.
- [29:07]
B
Yes. But it also puts more pressure on the other stuff that we pay for, the health care system, things like that, because people are, you know, they need more assistance for the government whenever you take money away from them. And the other thing is Trump is doing tax cuts, and these tariffs are not going to come anywhere near compensating for the cuts he's making that are benefiting wealthy people and corporations.
- [29:29]
A
Right. So what you are doing, Elizabeth, is that you are talking about, how would you, Elizabeth Spires, design optimal fiscal policy in terms of. Of like a tax revenue system that is perfectly designed to fund all of the things that the government needs to do? And this is a conversation we can have anytime, and it's a perfectly rational conversation to have. What Emily is saying, and I think this is really interesting, is like, what if you don't ask that question? What if you don't ask that question and instead you ask a different but equally important question, which is if you start with the premise that we need to raise taxes, which I think we all agree with, and then you also add in the premise that the government is controlled by Republicans, and then you. So you ask yourself, like, what is the only way that Republicans will ever vote for a tax hike? This seems to be the answer to that question. Is it like, perfect? No. But is it better than no taxes?
- [30:24]
B
I see no point in. First of all, Republicans are pushing back. They mostly don't like the tariffs. They just don't want to run afoul of Trump. I think if they had more backbone to stand up for Trump. The free market types don't like tariffs. They never wanted the tariffs to happen. And so I think we shouldn't conflate the outcomes that we're seeing right now with where the political will is on the Republican side. Because first of all, I think they never really wanted those tariffs in the first place. And now they're sort of building some momentum toward pushing back on them. So I understand the logic of your argument, but I'm not sure your assumptions are correct.
- [30:57]
A
Well, so, I mean, the deeper logic of my argument is that.
- [31:01]
C
It's my argument.
- [31:02]
A
Okay, so the deeper logic of Emily's argument, which I agree with, is that we have a mildly dysfunctional Congress that is very bad at passing anything, let alone the tax hike. And that maybe the solution to this problem in a world where the Congress has the power of the purse and only Congress can raise taxes, is to find a quasi tax that can be imposed unilaterally by the President and that does not need Congress to pass anything in order to be imposed. Bing. It's tariffs.
- [31:33]
C
Of course it's probably unconstitutional. As you just laid out, it's explicitly unconstitutional for the President to unilaterally raise taxes on Americans. But he's done it. And you can tell by the Supreme Court not weighing in week after week after week that they don't know what to do about that. But, yeah, I think there was no other politically feasible way to raise taxes. So this is where we are. And yes, it's really regressive. Hurts poor people more than everyone else. And I think Elizabeth's right that in the end that will mean that poor people and lower income people will need more help and resources from the government. But again, we have a Republican government. They're not going to help them either way. So their literal policy is tax the poor.
- [32:17]
B
They are sensitive, though, to their own constituencies, are they? Particularly around the issue of inflation. And right now it's. The reason why you are seeing some movement is that at least in polls, voters, Republican voters, feel like things are more expensive now.
- [32:32]
C
Right.
- [32:32]
B
If they can tie that to tariffs, then they can absolutely have the political will to push back on tariffs. Doesn't mean that they're going to, you know, tax the rich. Of course they're not.
- [32:42]
A
But I feel like, like the Republican vote, like trying to persuade Republican voters that tariffs are the reason why people, why things are more expensive, even though to a large degree it's true, is not easy. And as we have mentioned many times on this show, poor people don't vote. So do we like anyway, small business owners do. Small business owners do, and most of those are in the service industry. But the point is we have a tax hike. Congratulations, Mr. Trump. It'll all be found unconstitutional in about a week. So well done.
- [33:13]
C
Time will tell.
- [33:14]
A
February 23rd, the Supreme Court is going to strike down the tariffs. I'm coming out and saying it right now.
- [33:19]
C
Did you put that on poly?
- [33:20]
B
You have a polymarket, but.
- [33:23]
C
I'm putting that on my calendar.
- [33:36]
A
This message is a paid partnership with Apple Card. My favorite travel hack. Easy. It's using Apple Card. It's great knowing that every time I dine out, buy souvenirs or pay my hotel bill using my Apple Card, I'm actually earning up to 3% daily cash back. So if you're like me and love to travel, then apply for Apple Card in the Wallet app today. Subject to credit approval. Apple Card issued by Goldman Sachs Bank USA, Salt Lake City branch terms and more@applecard.com hi, this is Jonathan Fields from Good Life Project. If you're not using Ironclad for contracts.
- [34:15]
C
You could be leaving millions on the table without knowing it. Every contract holds renewal dates, pricing terms.
- [34:21]
A
And obligations you can't afford to miss.
- [34:23]
C
But good luck finding them when it matters.
- [34:25]
B
Ironclad's AI instantly surfaces what matters so.
- [34:29]
A
You can act before opportunities slip away.
- [34:31]
C
That's why they're trusted by OpenAI, L' Oreal and Salesforce. Find the savings hiding in your contracts@ironcladapp.com podcast that's ironcladapp.com podcast.
- [34:47]
A
Guys, since we're nerding out about tax incidents and century bonds and currency swaps and all the rest of the nerdy ness, why don't we just lean into the nerd and talk about fakes and counterfeits? Because, Emily, explain our history on this.
- [35:05]
C
This is so fun. 20 years ago, I was.
- [35:09]
A
21 years ago.
- [35:10]
C
Oh my God. 21 years ago, I was in charge of a magazine called IP Worldwide. It was about intellectual property. I think at the time, Elizabeth was still at Gawker doing the most cool thing you could do in business. I was at this magazine doing the least cool thing you could do in journalism, by contrast. And while I was doing my least cool job, we got a lot of contributions, columns and things typically from IP lawyers. And we covered copyright. And typically IP lawyers writing about copyright were like figuring out new and better ways to defend the rights of companies to protect their copyrights. And along the transom comes this piece that was like, copyright. You can back me up and correct me later. It was like, copyright's kind of bullshit. Selling fakes is fine. On Canal street they sell fake handbags. It's not a big deal. Don't even worry about it. Everything you think you know about this is completely wrong. And it was all written in plain English, pretty clear. And I was like, oh my God, what is this? And the author was Felix Salmon, the.
- [36:11]
A
Latin America editor at Euromoney magazine, who somehow had managed to find Emily Friedlander's email address.
- [36:18]
C
Yes. And I was like, we gotta run this.
- [36:22]
A
And you did. And you paid me $1,000 for it.
- [36:24]
B
Yes.
- [36:25]
C
And so this week I got an alert to my new name and email address, Emily Peck. And it was another article from Felix Salmon. And once again, he's writing in defense of fakes and phonies and copyright infringement. Twenty years later, can't stop thinking about it, can't stop writing about it.
- [36:42]
A
Copyright infringement. And just like remixes and reboots and replicas and forgeries and pastiches and all of these things, they're what drives the culture. I love them. There aren't enough of them. I have a piece in the newsletter this week about, like, the new Wuthering Heights, which they've had to put in quotation marks because it's so unlike the original. But have you seen how many movie adaptations of Wuthering Heights there have been? Like, the list is as long as your arm. Why? Because it's out of copyright and anyone can have at it. And that's awesome. And we love it. And if you want to see, you know, Margot Robbie and Jacob Elordi going at it like hammer and tongs, like, we are happy that Wuthering Heights is out.
- [37:28]
B
What do you say to people who are like, well, if we don't have copyright, then what happens to all the artists? What happens to journalistic publications? If anybody can rip off your stuff, what's your counterargument to that?
- [37:41]
A
So I'm not saying that copyright is terrible in all cases, in all situations. I am saying that the way that copyright has been extended over the years and strengthened over the years is bad. Like, we could have a pretty weak form of copyright, which basically says, you know, if I write something for Bloomberg, you can't just copy and paste it onto some other website for free. And that would solve 90% of the kind of things that you're talking about, while also allowing for the kind of creativity that we saw, like, from Walt Disney. Like, one of the great ironies of copyright is that the things that Walt Disney. Disney did when Disney started back in, you know, the 30s and 40s, would be illegal now under the current copyright regime that has been put in place as a result of lobbying from Disney that wants to make sure that Mickey Mouse remains in copyright in perpetuity, basically.
- [38:36]
C
But, Felix, as the former editor of IP Worldwide, I'd be remiss in not bringing up the distinction between copyright and trademark, because you're also, I think, in big favor of trademark infringement and fake handbags. And fake Labubus and all, all of this. And you seem to think that everyone selling fake handbags isn't a big deal. That the brands that are copied, your Fendi's, your. I don't. Louis Vuittons, whatever, they shouldn't even care about that stuff because it's fine. And that's different from like me copying a Bloomberg article. Right?
- [39:05]
A
That is. And, and, and trademark infringement is actually even less damaging than copyright infringement. And, and there's this wonderful piece by a couple of Italian professors of marketing that I linked to in the piece which basically says that all of those fakes, they act as basically free advertising for the real thing and they create demand rather than destroy demand for the real thing. And the way that we can see that this is true is that Louis Vuitton or LVMH spends $11 billion a year on advertising and spends $40 million a year on chasing down fakers. They know that the existence of the fakes, it like ratifies the desirability of these objects. They would be very worried if these fakes went away.
- [39:54]
B
It's kind of like fan culture, right?
- [39:56]
A
Yeah, exactly.
- [39:57]
C
Yes. But what about the non LVMHs of the world? What about. One thing coming to mind is the rise of dupe culture. I'm thinking specifically now about Lululemon, which was making coveted leggings with the little Lululemon logo on the back. You know, everyone knows how that looks. But now everyone knows you don't need to buy $90 leggings from Lululemon. You can just go on Amazon and buy $20 ones. And Lululemon is not doing very well. Like I think sometimes that dupe culture does cut into a trademark's worth and value.
- [40:28]
A
So again, there are two different things that we're talking about here. One is that Lululemon, as we have seen a couple times over the past couple years, makes see through pants. And people don't like it very much. And like a lot of the damage that is happening to Lululemon that is self inflicted.
- [40:44]
C
Well, they do have that issue.
- [40:46]
A
Yeah. Another thing is that if all you're making is a stretchy piece of nylon, it's not actually that difficult to make it. And people have realized that they can go on Amazon and find a stretchy piece of lemon for nylon for less than it costs from Lululemon and it's just as good and they can go and buy it. That's good. That's. That's the consumer surplus right there. The third thing is.
- [41:05]
C
Sucker.
- [41:05]
A
Is there anyone Going on Amazon, buying something that actually has a Lululemon, branding a name on it and paying less because it's a fake.
- [41:15]
C
No, no, I don't think so.
- [41:16]
A
They are not.
- [41:17]
B
What about things where, you know, you have indie designers who come up with like something that really works for them and then they get ripped off by like a giant retail behemoth that makes the same thing. It's, you know, then it's not really benefiting the indie designer.
- [41:30]
A
Yeah, correct. And that is the one example of trademark and IP law failing to be enforced or enforceable for all that we have the strongest copyright and trademark protections the world has ever seen. That one example, which is the one example where the big business gets to make all of the money, is the one example where no one ever seems to be able to sue and stop it from happening.
- [41:57]
C
Because our IP laws really just benefit big deep pocketed businesses who can file lawsuits and not like the little. Typically, not the little guys.
- [42:05]
A
Right.
- [42:05]
C
I just read this whole book about Mattel and Bratz and how Mattel came after the Bratz dolls and we did a whole podcast episode on it. Money talks. And really destroyed that brand as far as I could tell.
- [42:17]
A
So, yeah, so like, don't worry about buying fakes, people, because everything is fakes. Everything is remixes.
- [42:22]
C
Feels wrong.
- [42:23]
A
You know, I think a lot about how wonderful, you know, Paul's Boutique was the most iconic album of the 1990s and how we could have had hundreds more of those, except for that the music industry freaked out and basically made it impossible and there will never be another album like it again. And that's sad.
- [42:41]
B
I have a related story. I was at a restaurant in the West Village and two of the Beastie Boys walked in. And I was sitting with the guy who knew them and I was wearing a bracelet that said, no sleep till Brooklyn, just totally coincidentally. And I looked down at it and started sort of laughing and my friend said, what's so funny? And I showed him the bracelet and he turned around and tapped Mike D on the shoulder and said, have you seen this? And he's holding my bracelet. And Mike D looks at it in disguise. It was a Kate Spade bracelet. Looks at it in disgust. Awkin Kate Spade. He's like, I'm calling her fucking lawyers.
- [43:18]
A
Even Elizabeth Spires was happy to by IP infringing objects from Kate Spade when the spirit moved her.
- [43:26]
C
But you still think some IP is good, right? Or no, just get rid of it all.
- [43:32]
A
Look, I'm not making a policy recommendation here.
- [43:35]
C
Oh, boring.
- [43:35]
A
I'm just Saying like, vibes can't take.
- [43:39]
C
Your hot take all the way. What's the point?
- [43:41]
A
Well, I will, but you know, this is a will I need to come back to.
- [43:45]
C
No, clearly it's not going away for you.
- [43:48]
A
Yeah, Maybe in another 21 years I'll come up with a policy recommendation.
- [43:51]
C
Wait, can I just interject and say it's not just it's been 21 years. Like, there was the piece in IP worldwide, then there was like follow up pieces on wherever you were writing in your blog. There was another piece in 2009 that just goes on and on about how all counterfeit statistics are bullshit, which honestly, I feel like we need many more articles like that. Like, what are you doing? Like, snap to it. Like, we need so many more. We need an article like that about shop lifting statistics, which probably are also bullshit.
- [44:18]
B
Well, now you know, we can get a Felix a fake Louis Vuitton something for Christmas and he won't mind.
- [44:23]
A
I won't mind because it's faked. I'm just not sure that like, you know, Louis Vuitton is my brand of choice.
- [44:30]
B
Fair.
- [44:47]
A
But we should have a numbers round. Why don't I start this week? 90 is the percentage of cities in America that have less annoying people than New York. Per ChatGPT. There's this wonderful.
- [45:09]
B
But chat GBT is annoying. That's just a very bad source of judgment.
- [45:13]
A
There's this wonderful experiment that these guys did where you basically go into ChatGPT and you say, like, which of these two cities are people more annoying? Which of these two cities do people do this and that? And you can basically find out where ChatGPT thinks the most annoying people are. And the answer is, unsurprisingly, basically, New York. I will say that San Francisco is only 73% on the more annoying scale, but it does score 89% on people use more drugs.
- [45:43]
C
Wow, AI is changing the world.
- [45:45]
A
This is not ChatGPT looking at the statistics. This is just ChatGPT getting the vibes from Reddit. Elizabeth, what's your number?
- [45:54]
B
My number is 7 million. And that's the number of Ray Ban Meta sunglasses that luxottica sold last year. And this number came up because there was a story in the Times this morning about Meta wanted to add facial recognition to the glasses. And they were under a project called Nametag. And in a memo, the internal memo last year, they said that they thought that we were now in an environment that was conducive to doing this because the civil society groups that we would expect to attack US would have their resources focused on other concerns, like the downfall of democracy.
- [46:29]
A
This is the time to just good job. Build AI face recognition into everyone's glasses. What could I mean, as a consumer product, I can see the attraction of it, but we do need to get Kashmir Hill back on this show to explain why it's a very bad idea. Emily, what's your number?
- [46:46]
C
My number is 761,719. In the 15 minutes after bad Bunny's halftime show ended, there was a spike in water usage in New York city, equivalent to 761,719 toilets flushing across the city. At the same time, it was a spike. 1983, when the TV series MASH ended, there was a similar kind of toilet flush heard round the world in New York City, even bigger. But this is pretty big for our time.
- [47:15]
A
This reminds me of the way that the UK National Grid, the kettle thing, everyone puts their kettles on when EastEnders ends. It's like a Pavlovian reform. When EastEnders is over, you put on the kettle and so everyone, like the amount of electricity surges after we send us. But the other thing it reminds me of is the fact that everyone talks about how, like, the 93 of the top 100 TV shows in America each year are NFL games, but the number one most popular TV show in America each year is not an NFL game. The number one most popular TV show in America each year is the super bowl halftime show, which is a music show and has nothing to do with football or very little to do with football. And more people watch the halftime show, the more watch any of the football in the Super Bowl. And so well done to Bad Bunny for, I believe, being like the most viewed TV show in years, not just of the year, but in many years. Like, he just crushed it. He's bigger than football.
- [48:16]
B
My favorite aspect of that show, though, was that all the cane stocks were people.
- [48:20]
C
Yes.
- [48:20]
B
And there were like 17,000 people wearing cane stocks. And there was one guy who tracked his run around the stadium on his Strava so you could see the gangster.
- [48:31]
C
That's great.
- [48:32]
B
It was great.
- [48:33]
A
Well done, Bad Bunny.
- [48:34]
C
And good job to the New York City sewer system for holding up.
- [48:38]
A
And well done to all of you listeners who held it in through the halftime show. We appreciate you. Thanks for listening to Slate Money. Thanks for emailing us on slatemoneylate.com thanks to Jessamyn Molly of Seaplane Armada and Shayna Ross and Micah Phillips for producing this show. And we have a Slate plus segment.
- [49:00]
B
On Elizabeth Ferrari and Jony I've.
- [49:04]
A
Ferrari and Jony I've. Which is gonna be fun. And otherwise we'll be back next week with more sleep money.
- [49:29]
C
Are you really buying a car online.
- [49:30]
B
On Autotrader right now? Really?
- [49:32]
C
At a playground? Yeah, really. Look at these listings from dealers. Wow, your search can really get that specific.
- [49:38]
B
Really?
- [49:39]
C
And you just put in your info and boom, Cars in your budget. Mom needs a second.
- [49:43]
B
Honey, you can really have it delivered. Really?
- [49:46]
C
Or I can pick it up at the dealership. One sec, sweetie. Mommy's buying a car. I think your kid is walking up the slide, Kyle.
- [49:54]
B
Again?
- [49:55]
C
Really, Auto trader? Buy your car online. Really? If you're not using Ironclad for contracts, you could be leaving millions on the table without knowing it. Every contract holds renewal dates, pricing terms and obligations you can't afford to miss. But good luck finding them when it matters. Ironclad's AI instantly surfaces. What matters. So you can act before opportunities slip away. That's why they're trusted by OpenAI, L' Oreal and Salesforce. Find the savings hiding in your contracts@ironcladapp.com podcast. That's ironcladapp.com podcast.