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- [00:10]
A
Hello, and welcome to the Ban Facebook edition of Sleep Money, your guide to the business and finance news of the week. I'm Felix Salmon of Axios. I'm here with Emily Peck of HuffPost.
- [00:25]
B
Hello.
- [00:27]
A
I'm here with Anna Shymansky of Breaking Views.
- [00:30]
C
Hello.
- [00:32]
A
And we are going to talk about banning Facebook, which, Emily, you think is a good idea, right?
- [00:38]
B
Maybe. Maybe just temporarily, but, yeah, you know what? I do. I think it's a good idea. Hot take. There it is.
- [00:45]
A
We are going to have a whole segment on why it's a good idea to ban Facebook. We are going to have a whole segment on the Snowflake ipo, which was the biggest big IPO of the week. It raised more money than any software IPO in history. We are going to talk about the Nvidia attempt to buy arm, which might sound like it's a boring M and A deal, but in fact it winds up being all about regulation and the politicization of capitalism and Chinese regulations. And we have a whole sort of thread running through this show about TikTok, which of course is the big story that everyone's talking about this week. But we're not going to have a whole segment on TikTok, because we're going to wait until Donald Trump comes out and makes his decision on that before we have the whole segment. But that's a fascinating story. There's lots of stuff to talk about this week and we have a Slate plus about immigration and just how much of it we can have in this country and how else we might be able to increase the population. All that coming up on Slate Money. Emily, you can tell me what Snowflake does because you're recording on a microphone, which is called a snowball, therefore anything snow related you are an expert on.
- [02:04]
B
That's true. And Felix, I can tell you what Snowflake does because I read about it in your newsletter in which you said it was perfectly appropriate to mumble something about cloud data analytics. So I'm Mumble, mumble. It does something like cloud stuff that competes with Amazon Web Services, which also does cloud stuff and also competes with Oracle that does data stuff. How's that?
- [02:29]
A
I love the fact that Snowflake, it competes with Amazon by doing cloud stuff, but it is all built on Amazon. Like they built an Amazon. They're using Amazon to compete with Amazon, which is glorious.
- [02:41]
C
Well, no, what they're allowing people to do is not be locked into the Amazon ecosystem because they enable you to, to move data in between cloud servers and better analyze it.
- [02:50]
A
And yet Somehow, according to the Snowflake bulls in the stock market, because now Snowflake is a publicly listed company. One of the reasons why Snowflake is worth, and I believe the latest thing, if I call it up on my phone here, is 77 gajillion dollars, is because it's incredibly sticky. And once you sign your Snowflake contract, you never unsign it and you're going to be a customer for life. And in fact, you're going to. They have this customer churn thing where they, like every customer, just increases the amount of money they spend on Snowflake every year. And so people are extrapolating wildly. They're saying, well, if the number of customers grows as fast as it's been growing and each customer grows their total spend as fast as they have been growing it, then something, something, something, and the company should be worth 30 times as much as its revenues in 10 years time or some crazy multiple like that.
- [03:48]
B
But let's just back up to.
- [03:49]
C
Yeah, we should probably say what happened.
- [03:51]
B
And say that the reason we're talking about this company, that I now know what it does. Cause Anna said, and I won't repeat it, the reason we're talking about this company is because they went public this week and it was a blockbuster. They did amazing. The Snowflake was a snowball and a snowstorm. Whatever analogy you want to make about snow. This was a huge ipo. And it does seem a little puzzling. And yet we're going with it. We're going to explain why it was so big.
- [04:19]
C
Yeah, tech IPO.
- [04:21]
A
It's the largest software IPO of all time. They raised $3 billion. And they could have, like, if they'd sold the same amount of shares at like twice the price, which they could easily have done because that's where I opened that they could have raised $6 billion. It's amazing the amount of money we're talking about here.
- [04:40]
B
And the reason is because Warren Buffett is an investor and because these guys are from Oracle and Oracle is in the news right now. That's the reasons I came up with.
- [04:50]
A
Apparently Oracle is a little bit distracted with something called TikTok. This is going to be a theme in this week's episode of Slate Money. We're going to talk en passant in passing about TikTok, but we're not going to devote an entire segment to TikTok because we want to be able to do that once we know what the hell is going on with TikTok. But Oracle is bidding on TikTok we know that. And so apparently that means it's got its eye off the cloud, data analytics, something mumble, mumble ball. And therefore Snowflake can come in and steal a bunch of future market share from Oracle. I think.
- [05:24]
C
I think also it's. Snowflake is a horrible name, but it's a decent company. Like, its revenue has been growing fairly spectacularly and there is a lot of desire to buy growth and yield right now. So.
- [05:38]
A
So, well, it has no yield because it has no profit.
- [05:41]
C
No, but that's not what you mean by yield in terms of return.
- [05:44]
A
I thought you meant earnings yield.
- [05:46]
C
No, no, no, no. So with the idea that you're attempting to buy something that has a significant amount of growth, seems like there is a stable business there. Even though, yes, they like everything right now, are not actually profitable. The idea is because that customer base is sticky, that that should give them more pricing power moving forward.
- [06:04]
A
So the interesting thing, as Emily says, one of the super interesting things about this deal is that Warren Buffett bought into it. And I wrote in my newsletter that it was the first time he's invested in an IPO since 1956, when he bought into Ford Motor Company, which IPO'd in 1956. I was then informed by the Wall Street Journal's Peter Rudiger that in fact there was another IPO, I think in the 80s of some Latin American finance company or something where Warren Buffett also participated. But in any case, Warren. Warren Buffett is on the record saying an IPO is the worst possible time to buy a stock, because it's when everyone is out hyping it. Warren Buffett loves to find the unloved companies. And the whole point about an IPO is you go public when everyone loves you the most. But he not only participated in the ipo, he also bought like half of the shares of one of the former CEOs, sold half of his stock to Warren Buffett in a private transaction at the IPO price. So that was super out of character for Buffett. But people think that maybe it wasn't actually Buffett Buffett, it was his new the two Todts who are kind of like going more and more in charge of investments these days, and they're showing that they are hip to this newfangled tech thing.
- [07:17]
C
Yeah, I think you always want to be careful about saying Warren Buffett did when you're talking about Berkshire Hathaway, because very often it's not necessarily him. However, when you're talking about an investment of this size, you are probably going to have some of Buffett's input in that. So I think it is indicative of the fact that there is a real company here, there is a real business model here. And while I think you're right, and I think that Warren Buffett in the past was right, that buying it at an IPO is not always the best time to buy, it's understandable why they would do that. If you're looking at Berkshire Hathaway's performance and what has actually done well that they've owned Apple, they're clearly seeing that a lot of the investments that they had, especially they were very bank heavy financials. Have you been doing horribly? So they're clearly shifting their strategy. They're not necessarily shifting how they analyze a company, but they are shifting what type of companies they look at.
- [08:08]
A
Well, one of my favorite data points is that Apple now accounts for 40% of the value of all of Berkshire Hathaway stocks. They're an incredibly undifferent mutual fund at this point.
- [08:19]
B
Just more evidence to me that this whole Warren Buffett thing is overblown. I'll say that every time we talk about him.
- [08:25]
A
I'm inclined to agree. And we have said that on the show in the past.
- [08:29]
B
I will say it again, but I.
- [08:30]
A
Want to get into this question of valuations, because in February, Snowflake did a Series G capital raising round. They raised a few hundred million dollars at a valuation of $37 per share. That was in February, which wasn't that long ago, while it was a million years ago. It was pre pandemic, but like it was in February. We are now in September. It's not that many months. Then later in the summer, Snowflake came out and said, well, we want to go public at like twice a week. Our last valuation, which was kind of crazy, but they thought they could do it. So they were like $75 a share, up from $37 a share. An amazing profit for people who bought in as as recently as February. And then there was so much demand. They raised that 75 to like 100 and then 110. And then they eventually went public at 120. And then when it started trading it was like 250. And on the first day it traded at 319. And I don't know where it is now, somewhere in the 200s. But as I say, like, yes, it has revenues. It has revenues of like $300 million. This thing is worth, you know, what, 75 billion or something. It's just like, it's so beyond any kind of actual revenues that the company has, that you have to start wondering like for all that, Ana is right, and there is a business here, like, is it remotely conceivable that someone could rationally assign valuation of $75 billion to a business that barely exists?
- [09:57]
C
Yeah, I mean, I agree that I think that the multiple being used here is slightly insane, but it just shows you that we're at a moment where the markets are so frothy and there's so much Appetite for these IPOs right now. And so you have a lot of firms where you have VCs they want to get out, they're all doing these IPOs. They see that people will just bid up these prices to crazy levels. So number one, it's not surprising why you're having all these IPOs right now. And when you have this much liquidity in the system, when you have all this money just flooding into these number of IPOs that are coming out, this is what happens. It's often what happens when you're potentially nearing a. I don't want necessarily say the top of the market, but a very frothy market.
- [10:42]
A
I want to say that this is also a failure on the part of Goldman Sachs and the book runners of this deal. For all that they raised $3 billion and that's a lot of money. I think they failed to place enough of the stock with people who are actually willing to trade it. Like if you sell a bunch of stock in an IPO to Berkshire Hathaway, you know what Berkshire Hathaway is going to do? It's going to sit on that stock and do nothing with it for years. That's what Warren Buffett has done his entire career. And in general with IPOs, that's what companies like to do. They like to allocate stock to long term buy and hold investors. The problem with that is that it makes price discovery basically impossible. Because if you give a bunch of stock to people who don't want to sell it, then there's no stock in the market to trade. And it's very hard to work out what the market clearing price is. And talking to people in the markets about Snowflake in particular, it seems that the number of shares which are actively being traded in the market is tiny. That there's like a bunch of Wall street bets, Robin Hood types who are desperate to get their hands on it. No one really wants to sell and that's artificially raising the price of the shares. And what's going to be fascinating to me is to see what is the share price six months from now when the lockup expires? And everyone who, all of the people who own shares, who are investors in the company and employees of the company are allowed to start selling those shares. What happens to the price then once there's actually supply of stock in the market? I think that Goldman Sachs, if they didn't want to look like such fools and leaving so much money on the table, should actually have allocated more stock to traders and less stock to buy and hold investors.
- [12:30]
C
I think you're right in terms of what we're seeing, partly is because there's not a lot of people that are actually selling the stock that retail investors are more apt to sometimes buy into these bubbles. But I don't necessarily know if I would say that that means Goldman didn't do what they want to do. Goldman wants to create strong relationships with its institutional clients. This was an incredible day for those who were able to buy into that stock at $120.
- [13:01]
A
Well, maybe, except for if it just goes down for the next six months.
- [13:06]
C
I mean, do you think it's going to go down for the next six months?
- [13:09]
A
It was a good day. You're right. It was a very good day for the people who bought in at $120 and they can sell whenever they like. They're not locked up. And that is one of my big problems with IPOs in general is that Goldman Sachs gets paid by Snowflake. You know, whatever it is, probably the standard 7% of the IPO price goes to Goldman Sachs and the other banks are organizing the deal. And that is how people think that banks make money from IPOs. But there's this whole other area and this whole other way that banks get paid for IPOs, which is actually they get paid much more, which is they allocate hot IPOs like Snowflake to their favored clients. The favored clients make billions of dollars in profits in one day when the stock opens at twice the IPO price. And then the favored clients wind up in one way or another thanking Goldman Sachs for that allocation by feeding various, you know, stock trading mandates and other kind of mandates to Goldman Sachs. You know, soft dollar commissions, all manner of stuff. Goldman Sachs winds up being paid by the people who bought the IPO as well as the people who sold as well as the company. I wrote about this a while back in relation to a notorious IPO called eToys back during the dot com bubble, which wound up in litigation. And Goldman Sachs was clearly in the wrong then. And probably these things aren't as explicit today as they were back in the etoys day, but it still happens.
- [14:37]
B
And what's the why is it. Why is it bad, Felix?
- [14:40]
A
It's bad because it creates a conflict of interest for the bank running the ipo. The company wants to raise as much money as possible, which means they want the highest IPO price possible. The investors want the lowest IPO price possible because that creates the biggest one day pot for them. If Goldman Sachs is making more money from the investors than it is in the company, then it's actually working against the interests of the company rather than for the interests of the company, even though officially its client is the company.
- [15:10]
B
So in this case, since the Snowflake snowballed into such a bigger price, that that's an indicator that in this case specifically, Goldman really was working more for investors than for this company.
- [15:21]
A
Kind of looks.
- [15:24]
C
You always want there to be a one day pop.
- [15:26]
A
Yeah, a one day pop of maybe 10% but not like 100%.
- [15:30]
C
Yeah, no, I agree with you. I mean this is fairly crazy, but I would probably say that there is no type of valuation work that any bookrunner is going to do that's going to get you to that price of $240.
- [15:42]
A
That's actually not true. Goldman Sachs itself had an IPO on Friday. I think it's called Unity, where they're doing a Dutch auction or some kind of an auction mechanism to find out what the IPO price rather than just like pulling a number out of thin air and doing it. The snowball, Snowflake, I don't know. So you can do it by auction.
- [16:02]
C
But that Dutch auction is with institutional investors. So you're going to get the exact same. You're not getting retail investors in there, which are the ones that are pushing up these prices. So I actually think that Dutch auction is probably going to end up with a very similar multiple that you're using as you would have gotten if you had just had Goldman working with these institutional investors. I actually doubt it's going to be that different.
- [16:21]
A
I wish we were recording a little bit later on Friday because we could see where Unity opened and whether the pop on Unity is as big as the pop on Snowflake. I suspect it's going to be a lot lower.
- [16:32]
C
Well, okay, to be fair, the pop on Snowflake is a little insane. But I'm just saying that I actually think when people are talking about that Dutch auction mechanism, when you're only using institutional investors, I don't know if you're going to be really making that big of a difference.
- [16:47]
A
Okay, let's talk about Facebook, because it's a day of the week that ends in y. So there's another Facebook scandal. But this week's Facebook scandal, or Facebook scandals, I should probably say, seem to be even bigger than normal. People are realizing that the kind of interference that Russia had in the 2016 election and the way that Russia abused Facebook in the United States in 2016 is one thing which we've litigated a million times. We don't need to go back to that. But governments, you know, for all that they like interfering around the world, really like to interfere domestically with their own electorate, and they have enormous power to be able to do so. And what we discovered this week was that governments around the world really have been doing that a lot, have been abusing Facebook to basically, you know, bamboozle their own electorates. And that Facebook has been absolutely atrocious at reacting to that and has kind of ignored it because they're not America. So it doesn't matter.
- [17:55]
B
Yes, that's what we learned this week, but we already should have known that. So BuzzFeed published a story about a memo that a former Facebook employee wrote, basically saying she saw all this unrest in all these different countries, and when she alerted superiors, they didn't seem that concerned. And she seemed to be worried that she had blood on her hands, essentially in many different countries around the world. And Facebook, she said, and this has been reported in so many stories. Facebook only really cares about these issues if there's a news story about it or if, you know, they're brought to light in some way. They'll go wherever the sunshine is, but they're not proactively fixing their network. And we already knew this because, I mean, in 2018, it was revealed that in Myanmar, there was genocide because people were posting stuff on Facebook that was inciting violence against the Rohingya there. And we know that even still in the United States, postings on Facebook lead to killing. We saw that in Kenosha, right, when Facebook failed to take down posts from a militia group. Then eventually, yada, yada, yada led to three people dying in protest. And I've just been thinking a lot this week, like, it's been four years since the Russian propaganda stuff Felix mentioned. It's 2020. We're heading into an election. There's very little evidence that Facebook has gotten that much better at this stuff. These stories come out every week now, it seems like. And I just feel like maybe it's time, and this is maybe Crazy. But maybe it's time to shut down Facebook until we can figure out what's going on. To kind of borrow the words of the president, it's ruining democracies around the world.
- [19:39]
A
Exactly. Donald Trump has been talking about shutting down TikTok, which has no real damage to any democracy anywhere, whereas Facebook is doing a lot of damage to democracies everywhere. And I just want to pick up on what you were saying about, like, the way that Facebook only seems to respond to press rather than to activity. The important thing here is that really they only respond to American press. Right. So when the American press started talking about Myanmar, Facebook did something in Myanmar. But if you are in Guatemala and you know the government is abusing Facebook and then maybe a Guatemalan journalist finds out about this and writes something about it, Facebook doesn't care because it doesn't affect their business because the US Congress doesn't look at that or care about that. You know, if you read the big Sarah Fryer piece in Business Week this week, it seems obvious that Facebook really does let its policies on this kind of thing be driven by US Congress and US Press coverage.
- [20:39]
C
So I think that there is a lot of valid criticism of Facebook. I agree with you that what happened to Myanmar was horrible. Number one, I don't think this is an issue of Facebook not caring. I think it's. They do not have the capacity to be reading the news in every single country every day.
- [20:56]
A
No, they shouldn't be reading the news. They should be reading their own internal logs of activity in those countries to be able to catch what's going on there. And the whole point about this internal memo was that they had like one person doing that in her spare time rather than a major team devoted to that.
- [21:12]
C
Well, I'm a little wary about giving too much credence to this memo because I found this memo actually to be super overwrought and had a lot of errors in it.
- [21:19]
A
Well, I haven't read it. Have you read it?
- [21:21]
C
Well, I should say the parts that were quoted in the buzzfeed article were super overwrought and self important. And also the person who wrote it seemed to not actually know a lot about the situation she was describing. So I think that clearly, yes, there's an issue where Facebook has become so enormous and there is just so much volume that it is gonna be very hard for any company to accurately monitor all of that. And I'm not saying that means that we should say, okay, well, whatever, but I don't think this is about saying bad Facebook. Oh, those people, they're just bad. It's saying like, okay, well, what mechanisms can you try to figure out to make the process work better?
- [21:57]
A
No, they're OTOs. They're worse than bad. What you're saying actually supports what Emily is saying. On the one hand, Facebook is a gazillion trillion dollar company, which is global, and it really does have the resources to do much more about this than it currently is doing. I don't think anyone is really denying that. Yes, it's hard to do that, but Facebook does hard things every day. And it's a question of how much you care and how much priority you put on this. The reason they don't care is because it doesn't create press in the United States and because it doesn't create revenues and it doesn't and it doesn't create growth, which are the things they care about. So they deprioritize these things, which are deeply important for democracy around the world. And if you look at everything that Facebook has done about keeping up posts from Donald Trump, which are direct attacks on democracy and not just Donald Trump leaders around the world, Facebook is responsible for an erosion of democratic norms. And that is bad. And I honestly don't care whether that means that Facebook itself is bad or whether that just means the effects of Facebook are bad. The ultimate end in both cases is the same, which is that, you know, this is unacceptable. And if Facebook won't fix it, then I think Emily's onto something. We have to step in and fix it for them, basically.
- [23:16]
B
Yeah. And I think one thing was clear to me reading the stories this week first sort of what Anna was saying was like, Facebook isn't devoting resources to to keeping posts in check around the world that foment political unrest because maybe they don't care to devote the resources. And yeah, one thing was clear to me reading the stories this week first sort of what Anna was saying was like, Facebook isn't devoting resources to keeping posts in check around the world that foment political unrest, because maybe they don't care to devote the resources. And when Facebook is aware of politicians and governments posting under fake names or using bots or whatever to foment unrest. It can be swayed by political pressure of whoever is in power in that country, whether it's the United States and leaving up Donald Trump's posts that are, you know, lies and trying to sow unrest about voting or violence, they're prone because they want to please whoever's in power. They're kind of prone to not doing the right thing, depending on who's in charge. And I think it was Business Week also had an example in India where, you know, they were going to take down posts from an Indian politician who was saying really hateful things about Muslims in that country. And they didn't take down those posts either because they wanted to please the people in power. So it's this weird, dangerous combination of kind of neglect and not caring and then kind of like bowing to political pressure of whoever's in charge. And right now in the United States, the person in charge happens to be an anti Democratic figure. So that means Facebook has become anti Democratic.
- [25:13]
C
I don't think Facebook is trying to please Donald Trump.
- [25:17]
A
Of course.
- [25:17]
C
I'm sorry.
- [25:18]
A
Of course they are. I mean, look at the way. Look at, you know, Mark Zuckerberg having dinner with Donald Trump and telling him that he's number one on Facebook. I mean, I think this is actually absolutely right. The Businessweek cover showing Mark Zuckerberg in a maga hat. There's absolutely no evidence that Facebook has done anything against him. Facebook is really bending over backwards to try and mollify the criticism it's getting from Republicans. Zuckerberg is not meeting with Democrats. He doesn't care about them. They don't have any power. And Zuckerberg himself, remember Peter Thiel, who's a huge Trump supporter, is on the board of Facebook. There's no evidence, I know that everyone thinks and just kind of assumes that California Bay area is all very liberal and certainly a lot of the employees of Facebook are liberal. But at the top levels of Facebook, I think there's a very strong libertarian Republican, maybe just cynical, we will do whatever the party in power wants us to do tendency.
- [26:27]
C
I think that they probably don't want to be in the crosshairs of the government. Yes. I mean, I think that's probably the case with almost any company. But I just think it's overstated to say that they're making all of these decisions based on whether or not it is or is not going to please the President.
- [26:44]
B
I don't think they're making all their decisions, but certainly some of their decisions. And I think, I mean, there's just no question that Facebook has become an anti democratic force in the United States and around the world and when.
- [27:00]
A
Also, it doesn't matter why they're making these decisions. The fact is they have made these decisions. It's clear that they have left the Trump post up. You know, they have allowed these governments around the world to subvert their own democracies. Like that's just how it is. And you can, you know, try and look into Mark Zuckerberg's soul if you want, and try and work out whether he's doing it because he's a Republican and like Trump, or whether he's just doing it because he doesn't care. But either way, the result is the same.
- [27:28]
B
And we haven't even talked about like the QAnon conspiracy theorists who flourish and thrive on the platform. I mean, Facebook has become a place where conspiracy theorists thrive. And Facebook hasn't done enough to shut this stuff down and it is poisoning democracy. And we're six weeks away from an election. And I really am afraid for the future of the country right now, actually. And I just think it's become a dangerous place.
- [27:58]
A
We should also mention as well that whatever the reason, whether it's neglectful or deliberate, the top posts on Facebook are overwhelmingly right wing and have been for years. Kevin Roose at the New York Times has been doing this thing where almost every day he posts like, these are the top 10 posts on Facebook today. And it's Breitbart, it's Daily Wire, it's Ben Shapiro. It's really hard, right? Kind of like make Fox News look like liberals kind of posts are the ones which have just like getting millions and millions of engagements every single day.
- [28:35]
C
I mean, look, I not a particular fan of the platform at Facebook. I don't really use it because I do find it to be kind of a cesspool of old people complaining about things. But I guess you do get into some difficult territory. And while yes, there are certain things that I think we can probably all agree are hate speech or should be taken down. I think you do get into complicated territory when you start to get into what is a allowable political opinion and a non allowable political opinion, because you could have some very, very hard left things. If those were polling very well, would we also say, well, yes, we agree with you, Anna.
- [29:12]
A
Anna, the point is we all agree that these things are difficult. We all agree that it's very hard for a tech company to start having the responsibility to make decisions that can affect the future of entire democracies. These things are hard. It's not like there's an easy answer to these questions. But Facebook is so big and in many ways it's bigger and more powerful than almost any government in the world, with the possible exception of the US Government and maybe China. It is so big and it's so powerful that, well, that's really difficult You've got to feel sorry for these hard things that it's doing. Like that just doesn't hold water anymore.
- [29:53]
C
No, I'm not saying you should just feel sorry. What I'm saying is if you want to actually say, okay, well what is the outcome that we want? Well, we want an outcome where we can potentially have a platform that people can use to do what they want with trying to eliminate some of the most extreme things. So then think, okay, well, what are the steps one would go to achieve that? Is this something that's being done through government? Is this something that's done internally? My point is that I think the discussion around it tends to become this very emotional. Facebook is evil. These companies are evil. As opposed to like, okay, well what could we actually do to try to achieve change?
- [30:31]
A
Well, I mean, Emily has a proposal, right. Which is shut down Facebook.
- [30:34]
B
Yeah. Until we can clean it up. I think it needs to be shut down, if not forever, then temporarily. Because they've been promising for four years to fix the stuff that we all know is wrong. And, and I'm not talking about borderline cases, you know, where we could have an argument about free speech versus, you know, inciting violence. Edge cases. I'm talking about militants in the Midwest using the platform to organize, which results in a 17 year old boy killing people with a gun. And stuff like that was flagged 200 times and nothing happened. Or the New Jersey attorney general apparently alerted Facebook because there was a group saying things like we need to get rid of orthodox Jews, like Hitler did and complain to Facebook and took 10 months for the company to get rid of those. That group. I mean, I just think, I'm not. No one's talking about edge cases anymore. This is a company that is allowing governments and troll farms and militants to use its platform to organize, to incite hate and actually is getting people killed. And why on earth would we let that continue? I don't, I honestly don't understand. And we let this like young man, Mark Zuckerberg, we let him say things like, we're working on it. We care about democracy. Instead of fixing the problems. He's just like, we're going to give you a center where you can get more information about voting. It's like, dude, no one stop. Like other people do that work. You don't need to do that work. All you need is to clean this up. Like that should, that. It should just be. It could be government regulations or it could be that a government saying, enough already. Like, I don't understand why the Trump. Well, I do understand, but like, the Trump administration's focusing on TikTok when, like, they have this like time bomb in our own country right now. I feel like everything else is inconsequential to talk about.
- [32:24]
A
My favorite bit about that weird Facebook initiative of like, we're going to give you information on how to vote, which came out in the Sarah Fryer story, is that apparently a bunch of Republican congressmen complained to Facebook about, like, it giving information on how to vote. And so then Facebook, in response to those complaints, pulled back on that and said, oh, well, maybe we won't give you quite as much information on how to vote after all. They were like, we were going to do it on Instagram, but now we're just going to do it on Facebook and we're not going to keep it off the gram because, you know, the gram is where the young people are. We don't want them to know how to vote.
- [33:00]
B
It's malignant.
- [33:04]
A
Let's talk about big deals. We have a big semiconductor deal this week where Nvidia, which is the chip maker that makes a lot of the graphics chips that are probably in your computer, has announced that it's going to buy ARM, which is a chip designer in the UK from SoftBank, which is Japanese. This is a classic bit of global capitalism going on right here. It's interesting on a bunch of levels. But the thing which was most interesting about it, to me at least, was that the Chinese came out and said we might want to block this deal. And we've talked a lot about the antitrust process in the United States and how it works and how it should work. We've talked a lot about the antitrust process in Europe and how it works and whether it works. And now I'm beginning to think, wait, should we start be looking, should we start looking at China and Chinese regulators as a potential obstacle to big M and A transactions as well?
- [34:13]
C
Well, I mean, this isn't the first time this has happened. You had like Qualcomm and nxp. I mean, what China tends to do is they just, they don't necessarily come out and say, you cannot do this. They just have never ending delays that become very costly and then things just fall through.
- [34:28]
A
Well, I mean, they did come out and say to ByteDance, you can't give any control of your algorithm to Microsoft. And the result of that was Microsoft pulled its bid for TikTok. And that was a very clear decision which had a very clear consequence.
- [34:42]
C
Yeah, I mean, I would say that ByteDance is probably. And the TikTok deal is a special case because it is this incredibly political issue in the United States that is specifically targeted at China. And you're right that I do think that as this kind of tech cold war builds between the US And China, I do think we're probably going to see a more potentially publicly aggressive Chinese opposition to some of these deals. But I'm just saying this isn't the first time China has potentially blocked a deal.
- [35:16]
B
Is the blocking related to the TikTok situation? Is this just like one upsmanship in the, in the. Is the trade war spilling over into a deal?
- [35:25]
A
I think it's related to the Huawei situation. Remember how we've been talking about Huawei quite a lot and the United States is doing, you know, trying very hard to prevent American companies from dealing with Huawei, and the United Kingdom quite famously didn't do that. And the US Was very pissed off at the Boris Johnson administration for not being quite as tough on Huawei as the Americans wanted him to be being a UK company. But what the Chinese are saying is basically, if Nvidia winds up buying arm, ARM will become a US Company, and then Nvidia will stop Huawei from being able to use any ARM designed chips, and that will hurt Huawei. So it does have a direct effect on Chinese companies.
- [36:13]
C
Yeah, I mean, the army architecture is in everything. It's in, like, every smartphone. So this could potentially be a very large deal if Nvidia were to say that other countries couldn't license this. Now, to be fair, at this stage, there was actually no indication from Nvidia that they would do that, especially because the arms business in China is so large and Nvidia's business in China is very large. It seems unlikely that they would really try to piss them off just because they now happen to be a U.S. company.
- [36:45]
A
But they have to, right? If the Commerce Department tells them that they can sell technology to Huawei, that's the end of it? They have to.
- [36:53]
C
Yes. And I was going to say, yes, that is the other side of it. Yes, of course, if you continue to have a Trump administration after January that continues to engage in this type of very, very political action related to companies related to China, then, yes, I could see that that is a legitimate concern the Chinese might have.
- [37:10]
B
So in other words, the Trump administration has so politicized deal making and companies and businesses that now it's hurting US Companies because they're essentially being prevented from doing deals because of the worry that they will become politicized because of the worry that Trump will step in and say, xyz, Nvidia, you have to do. You can't work with these Chinese companies anymore. You can't use this Chinese tech anymore. So it's like the politician politicization of deal making is kind of infecting everything, basically, that.
- [37:45]
A
Absolutely. And this is what Trump. I mean, weirdly, this is what Trump ran on, right? He was like, I'm going to politicize all of the deal. And every. Every time that an American company makes a deal, I'm going to take credit for it if I think it's a good deal. And famously, he wanted a cut of the TikTok proceeds. He's like, China has to sell TikTok, and I want to get some of the money because I'm forcing them to do it. And then the Treasury Department came up to him and said, Mr. President, you're not allowed to do that. And he went on the record and said at a press conference, he was like, and I'm very disappointed to hear that I can't get a cut of this. And. And you're like, what? Yeah. And again with the TikTok thing, we are just all waiting right now. As I say, we're recording on Friday, and we are just waiting for him to come out probably this evening sometime. And whoever. The last person who spoke to him or whatever he happens to, you know, read on Twitter or whatever it is about TikTok is probably gonna be the decision he makes. And it's one person making a deeply uninformed decision. He just came out on Thursday saying that Microsoft was still in the running for TikTok, which they are not. You know, he's just. He doesn't know what's going on. He's not informed, but he's making these deeply uninformed decisions anyway. And, yeah, like, dealmaking has become politicized to a degree that I would not have thought possible, you know, in 2016.
- [39:15]
C
And just the idea that you would have a US president basically, you know, engaging in such overt crony capitalism. And crony capitalism is definitely something that has existed for a very long time, but this is the kind of thing you see in countries that have very, very weak institutions. This is not normally something you think of as existing in the United States.
- [39:39]
B
And I would like to just remind people that Donald Trump is a member of the Republican Party. And I had been told my whole life that these people, these Republicans, are into the free market. And this is not anything like what.
- [39:56]
C
I'd been led to believe.
- [39:57]
A
A free market he has never been a free market Republican. Nope. He ran. And that was actually kind of how he won the Republican nomination. Right. Was that he. That was his one sort of inadvertent insight, really, was that the free market Republicans were a tiny minority of the Republican Party in blue states, and that the actual Republican base is the opposite of free market. They don't want free trade deals. They want the trade deals ripped up. They don't believe in free markets. They want the President to come in and just mandate thousands of more coal mining jobs or whatever it was that he promised and didn't deliver on. And that's how he won, by basically saying, yeah, you thought the Republican Party was about free markets. No, it's not. I'm going to really politicize markets to a degree that they've never been politicized before.
- [40:51]
B
And now I feel I'm on the side of free markets somehow.
- [40:54]
C
Number one, this shows you that at this stage, the Republican Party is functioning much more like a personality cult than a party that has an actual platform. Whatever Donald Trump says on that day is what he believes.
- [41:04]
A
That is literally what the Republican Party platform. They didn't come out with a platform at the convention this week, this year, and they literally just said, yeah, whatever. He says, yeah, exactly.
- [41:14]
B
But that's not good for business.
- [41:16]
C
No. And I think this is. And it's funny to me, because this is. When you're someone who doesn't always love to have so much government involvement in business, this is one of the things you say, because you don't want corrupt politicians to pick winners and losers. And this is something that traditionally Republicans say. And so it is very ironic that we are seeing this so blatantly.
- [41:40]
A
Okay, I think it's time for a numbers round. Emily, do you have a number?
- [41:45]
B
I really. It has so many different numbers that I wanted to.
- [41:48]
A
You have many numbers?
- [41:49]
B
I mean, I'm just gonna go with a fun one, I guess. Yes, that's what I will do. Not a bummer.
- [41:54]
A
I'll go with a fun one. Yeah.
- [41:56]
B
Seven billion. Seven billion. That is the number of excess paper prize tickets from Chuck E. Cheese that they are going to or that they are seeking to have destroyed because Chuck E. Cheese is in bankruptcy because it is cheaper to destroy 7 billion excess paper prize tickets from Chuck E. Cheese than it is to have them, like, go through the supply chain. It's like a million dollars cheaper. And they're phasing out the paper prize tickets in Chuck E. Cheese right now because of the pandemic. They're going to E. Tickets or something. And I think that's a little sad because paper prize tickets are super fun. You know, you go and you. Felix probably doesn't know about this, but you go on.
- [42:35]
A
I have no idea what you're talking about.
- [42:37]
B
Oh, okay. So you go to Chuck E. Cheese and you play, like, dumb games or fun games, I should say. And then when fun games and dumb.
- [42:45]
A
Games are more or less the same thing.
- [42:47]
B
Yeah. You get a bunch of these, like, little paper tickets. They look like the tickets you get at a raffle, and they come out of a machine. And if you win a lot, it's, like, exciting. It's like, tick, tick, tick, tick, tick, tick, ticks. And then you hand in the tickets at the counter and you. Like, for 500 tickets, you can get a tiny stuffed animal or something else that breaks almost immediately. But it's very exciting for children. And, like, it's just fun because you get all the tickets and you're like, I have so many.
- [43:11]
A
And now the kids need to do this all on their smartphones, I guess.
- [43:14]
B
Or maybe on a card or something. Like, you get. You know, those.
- [43:18]
A
Yeah, I'm with you. Let's keep. I'm gonna channel my inner boomer here and say, oh, yeah, in my day, when you had tickets. Yeah, I think you're right. Anna, what's your number?
- [43:28]
C
My number is $3,000 a month. That is what a Citigroup director of it was pulling in for running a QAnon website.
- [43:43]
A
He claimed it was just to cover the costs of hosting it. Yeah. This is the craziest story.
- [43:49]
B
Same move.
- [43:51]
C
Yeah. And so my favorite detail of this, that when he was put on leave, he was put on leave not because he was running a QAnon website that was saying there was this child sex ring, but because he didn't get approval from compliance for outside business activities.
- [44:10]
A
If you want to be a QAnon crazy, that's fine. Just don't ask your QAnon.
- [44:16]
C
Go to compliance first. Exactly.
- [44:19]
A
Got to go through Compliance.
- [44:20]
B
Well, he was making $3,000 a month running a QAnon website.
- [44:25]
A
Just to be clear, he was bringing in $3,000 a month. That's.
- [44:29]
C
To be fair. Yes. I don't know what his margins were.
- [44:31]
A
Like to cover the costs of running the website, a big website which had costs. So whether he was making any money is not clear.
- [44:39]
B
Who knew?
- [44:40]
A
But you can be assured that his salary was extremely in excess of $3,000 a month.
- [44:46]
C
I imagine.
- [44:47]
B
I imagine he should have gone to Compliance.
- [44:50]
C
Exactly. That's what I'm saying.
- [44:52]
A
I would love to have a number about Travis Scott and McDonald's to rhyme with Emily's Chuck E. Cheese number, but I don't because I am too old to understand why what is going on with Travis Scott and McDonald's. So if any of you guys who are listening today can explain the whole Travis Scott McDonald's phenomenon to me, do write into slatemoneylate.com and explain it to me. In the meantime, My number is 3.7%, which is the amount that the Federal Reserve now says that the US economy is going to shrink in 2020. And a 3.7% decline in US GDP in one year is enormous, and it is bad and it is a terrible recession. But the last time the Fed had a forecast, the forecast was that it would shrink by 6.5%. And that was back in June. So somehow between June and now, expectations for the economy have really improved substantially. There's been a 3 percentage point improvement, effectively in expectations for total GDP in America this year, which is a huge difference. That's, you know, the difference between a crappy 1% growth and a really healthy 4% growth. That's the kind of difference that we're talking about here. And I don't think people really appreciate how much better the economy is doing right now than we thought it would be doing just a couple of months ago.
- [46:25]
C
I mean, I think partly there was this belief that even if you had this initial surge in economic activity when people started reopening, that then everything was going to start closing again, and so then that wasn't going to continue. And that's just not really what we've seen. We continue to see numbers, for the most part, continue to get better much faster than most people thought, except for.
- [46:51]
A
The only numbers which matter, which are the COVID numbers, which continue to get worse. And we're closing in on 200,000 COVID deaths now. And the one thing we all agreed on early on in the pandemic, if you'll recall, was that so long as the COVID pandemic is raging in the country, the economy is going to be in the shitter. And that doesn't actually seem to be the case.
- [47:10]
C
Yeah, I mean, I think this is something you're seeing globally, though, that I'm not saying it's a good thing or bad thing, but it just is that I think people don't have the appetite for the severe lockdowns anymore. Now we are seeing, I think Israel was going back into a lockdown. I know the UK was potentially talking about it, but it just seems like people are probably going to be leaning on prioritizing economic activity over potentially health and safety. I'm not saying that's a good thing, but it does seem to be what we're seeing.
- [47:42]
A
But what you are saying is that it's an either or choice because again, like back in the early days of the pandemic, it was very much painted. And even today I hear people say this the whole time. I mean, Jay Powell, the Fed chair, said this in his press conference this week. He's like, the future of the economy is going to be determined by the future of the pandemic. So long as the pandemic is bad, the economy is going to be bad. If the pandemic clears up and goes away, that is going to be good for the economy. We all understand understand that. But you're saying that while that is true, there's also this idea of the trade off, which Donald Trump was very early on, he's like, don't shut down, get the economy moving again, open up. And the idea that you can have more deaths and more economic activity is actually true on some level?
- [48:32]
C
Yeah, I mean, I think that, yes, it is probably almost certainly true that if everyone were to do what they needed to do, which is wear masks, stay away from other people, we probably could actually have both. We could in fact have fewer deaths and we could have more economic activity. But if people aren't necessarily doing that, we are still finding that you probably can have a bit more economic activity if you're willing to accept these deaths. And yes, that's not the ideal solution, but that does seem to be what we're seeing.
- [49:02]
B
I'm not sure where this is going, but I have this thought that there's like, there's a racial component here that is over. It's discussed. But like, for example, my other option for a number today was the black unemployment rate, which is 13%, which is only 1 percentage point lower than when the shutdown first started for everyone. It was like 14.6 or something. The black unemployment rate is 13% and the white unemployment rate is 7.3%. And black people and brown people are disproportionately dying of COVID and black people and brown people are disproportionately starving. And as the states start to run out of money, they'll see more death, they'll see more illness and they'll see more unemployment. And I kind of feel like the resurgence in the economy is super racialized. I guess that's just the point I wanted to make. I think there's something weird going on with inequality. I think there's like a lot of people have to recover.
- [49:59]
C
I think that's a good point.
- [49:59]
B
The expense of a lot of people that are not going to recover for a long, long, long time.
- [50:06]
A
Right?
- [50:07]
C
Yeah. No, that's an important point.
- [50:08]
A
It's the K shaped recovery.
- [50:11]
C
Sorry. On that very sad note, we could cut it.
- [50:14]
A
On that very sad note. We will. We will. It's a good point. We will keep it, we'll keep it in because who, who needs to end podcasts on an upbeat note? We will end this podcast. Thank you for listening. Thank you for Jessamyn and Molly for producing at Seaplane Armada Studios in Brooklyn. Thank you for writing in slatemoneylate.com and we will talk to you next week on Slate Money.