A (3:03)

Exactly. Thinking about global supply chains is a bit like thinking about fiat currency. It's very complicated and it's this, it's turtles all the way down and the more you know about it, the less you understand it. And really you just want to be able to sleep well at night never thinking about it and being able to click things on Amazon and they turn up in like 24 hours max. Tell me how much we need to know about global supply chains because it seems that the ever given situation is really just a tiny part of a major global supply chain crisis that we're in the midd of right now.

B (3:41)

Yeah, I think it is really a small slice that is going to be. It's a great story. So of course the media wants to talk about it, but it really isn't actually reflective of the big waves that are happening that are much less graphically illustrated than a boat stuck in a canal. And I think that that's really. That there's this wild imbalance in supply and demand and everything has gone topsy turvy from COVID from stimulus, from changes in the job. People have been very unsuccessful at forecasting that demand and that has led to this kind of breakdown in between what the prices that consumers like to expect and trust and what we're actually able to offer.

A (4:26)

And what's fascinating to me is that the price mechanism doesn't seem to be working here. Normally if you have demand exceeding supply, that's fixed very quickly by prices going up and then the prices going up cause the demand to go down and they also cause the supply to go up to a certain degree and then that solves the problem. Explain to me why basic bog standard market price mechanisms don't solve this problem right now.

B (4:54)

I think the key is that there are categories of products that consumers are very tolerant of. Price fluctuation in the price of gas, the price of an airline ticket or a hotel. And then there's categories that people are very upset by. Everyone gets angry if Home Depot makes snow shovels $20 right before the snowstor and the Pandemic has really caused a flop in which the things that are now suddenly experiencing supply chain disruptions are the things that people have really come to expect extremely stable pricing for because demand for them has been so predictable. Toilet paper, for one, just a year ago was precisely that kind of problem. And you see that actually in more specific stories. Whenever we talk about supply chain issues, I really feel like we want to get very crystal clear on what precisely is being interrupted and how, you know, the mechanism of action of interruption. So for instance, there's been a lot of talk about the automotive supply chain disruptions and those people are getting conflated in this other story about graphics card and processor high end processor interruptions, which are really very different problems happening in different places in the supply chain and how the companies are running.

A (6:06)

I really want to ask you about this because this is fascinating. I think it's intuitively understandable to us that it's very difficult to create toilet paper and there's this fixed supply of toilet paper for households and it's very expensive to create more toilet paper. And the profit margins are what profit margins are. But even rising, the price of toilet paper wouldn't increase supply or even decreased demand. But explain to me like, for instance, these chips in cars, like a lot of automakers, all the major automakers in the world pretty much are slowing down their production for lack of ability to source these $2 chips that, you know, make the cars run. And TSMC, the big chip maker in Taiwan, is basically saying, yeah, we're too busy making other kind of chips or something like this to be able to supply you with these, what the world thought was commodity chips. Explain what's going on there.

B (7:06)

Yeah, so just to give a tiny bit of background for people unfamiliar with this, this is exactly what I mean by a conflation of issues in the sense that chips rely on a process called semiconductor lithography, in which you make extremely small etching on the order of 5, 7, 20 nanometer etchings on your silicon substrate so that you can make smaller, faster and more heat efficient processors. And the story with TSMC is actually completely different than the story with chip automaker problems because they're actually different suppliers at different process sizes and really fundamentally doing different problems. So what actually happened, as far as I understand it, this is not the industry I precisely work in, is that auto manufacturers responded to the pandemic by canceling orders with their providers, which are people like Infeon or Renaissance who are not really running cutting edge fab processes. They're running larger, older nanometer processes that are much more commodity. And those companies responded by selling that fab capacity to other places. However, as demand came roaring back and as the jobs recovery was faster and people had more money, you saw a sudden need for them to go back and restock. And different auto companies actually took different strategies there. Like I think Hyundai and Toyota actually were less affected because they purchased, maintained their chip orders. On the other and in the cutting edge side of things with tsmc, TSMC has really seen pressure in two different areas. The first is that the other only cutting edge producer of chips, intel, has really struggled. Intel's new process size lithography has failed for about the past three or four years. And the side effect of that is that TSMC is the only game in town. At the same time as that's happening, the price for Ethereum has really gone up. And it's actually at the point today where you will earn back the price of a graphics card on a cutting edge TSMC node in several months. And that means that supply and demand actually are never going to intersect. There's effectively infinite demand for a cutting edge Nvidia graphics card because the graphics.

A (9:15)

Card is what you use to mine Ethereum.

B (9:18)

Because Ethereum relies on a mining algorithm that is very amenable to graphics card designs. It's high memory access. And so that's why you don't see that with let's say Bitcoin, which has a much more straightforward algorithm that you can mine with Asics, which are a totally different kind of semiconductor.

C (9:34)

Wow, I got lost when you brought up Ethereum. So the car manufacturers stopped their orders of a certain kind of chips and then the chips got made and sent to other places and then blah, blah, blah, something about Ethereum.

A (9:51)

I wait, let me, let me try and do this in a kind of big picture thing. If you are making graphics cards, if you're TSMC and you're making graphics cards, you are the supply for the market. There's also demand for the market from like people who make computers because you put graphics cards in computers or in video game controllers or anywhere else you'd find a graphics card, then there's also demand from people mining Ethereum. They want graphics cards. And the fact is those graphics cards pay for themselves just in Ethereum. And so however much supply of graphics card TSMC makes, it can sell that times 10 just to Ethereum miners. Because however many it turns out, those graphics cards will continue to pay for themselves as long as the price of Ethereum is high and so that has just put the entire supply and demand dynamics completely out of whack.

B (10:44)

Correct.

C (10:45)

So the reason I might not be able to get a big car right away is because some people are mining Ethereum.

A (10:50)

No, no, no, no, no.

B (10:51)

That's precisely not the reason why you.

A (10:53)

Might be able to not get a five is because people are mining Ethereum. The reason you can't get your new Dodge Durango is related to an entirely separate bit of chips. I have just learned this from Max. I feel much more intelligent right now and is mostly just a function of Dodge cheaping out a year ago and saying, eek, we're not selling cars anymore, we're going to cancel all of our orders. And that turns out in hindsight, to have been a really bad thing for them to do.

C (11:23)

And then to go back to the boat stuck in the canal and the supply chain. My understanding is that consumer behavior is completely out of whack from a year ago because everyone is now buying stuff instead of services. Like instead of going out to the restaurant, we're staying home and just going on buying sprees from Amazon. I spoke to a mother recently that said ever since her kids have been home from school, she keeps buying these kits for them to play with. Grow your own butterflies, make your own slime, make your own Gummy Bear. She said she has like a stack of the kits in her house unopened. No one plays with the kits because no one really wants to play with those kits. No parent actually wants to do that with their children. Little known fact, but she's just one person. But basically that's all of the developed world. We're all sitting home buying kits that no one uses. And all this extra stuff going around the world in the ships has not led to this particular ship getting stuck, but has drawn attention to the whole rebalancing of the economy. And part of that rebalancing isn't just people buying new stuff, it's people mining Ethereum.

A (12:25)

Well, I mean, that's two different things. But the big picture is, you're absolutely right that there's an imbalance. And the way that trade works is bidirectional normally, right? China sends stuff to the United States, United States sends stuff to China. The way that trade has been working for the past year has basically been unidirectional. We've had a whole bunch of people in America clicking buttons on Amazon and basically trying to pull goods in from China. Goods leave China, they don't even come through the Suez Canal, but they go on container Ships, they arrive in Long beach, they get unloaded in Long beach, sent off on trucks to all of the Amazon customers. But there's such a crush of container ships at Long beach that ships just like in a holding pattern outside Long beach just waiting to unload. People can't. There's nothing that the Chinese want from America, but even the empty containers are hard to find to send back to China. The natural flow of containers back and forth between Shenzhen and Long beach has just completely. It's not flowing naturally. People aren't used to it. There was a big disruption a year ago. These things react very slowly to disruptions. It's still kind of broken. And this Suez thing just makes things a gazillion times worse because it's creating a whole bunch of other disruptions. The weird thing is, this is my favorite weird thing, precisely because ships wind up having to sit outside Rotterdam for like a week waiting to unload. That is making the Suez problem slightly less of a problem. Because if a ship has to go around the bottom of South Africa instead to get to where it's going, that might add an extra couple of weeks to its journey. But it would probably need a large chunk of that couple of weeks anyway just sitting around outside Rotterdam. So it doesn't make maybe as much of a difference. It's maybe not quite as disruptive now as it would be normally.

C (14:28)

And maybe Max can answer this. But what kind of disruption should I, Joe Consumer. What? Joanne Consumer I don't know, expect to see because of all this disruption, should I be hoarding toilet paper again? What's going to happen? Are prices going to go up? I mean, things are very cheap. So I kind of am skeptical. Like if the price of those kits doubles, I don't think the people who buy them would care.

B (14:51)

Yeah, I think price changes are the thing that we should be most attentive to right now, especially in the context of a lot of the concerns around inflation and how that will change as the job situation continues to develop. Exactly. As you said, we're going to see, you know, small percentage changes perhaps in some of the consumer goods that people are buying or whatever, but that actually isn't really a big deal for an American budget. But if we see other widespread inflation effects, especially because lower paid people did not seem to see the same income recovery, then I think you have a big concern where your relative purchasing power is shrinking.

C (15:36)

And I guess we're about to see demand go up even further because people are getting their $1,400 and more. I mean, for families of four, it's a lot of money checks and are starting to buy lots more stuff. I just spoke to a different mother who hadn't had, has been unemployed for a year, but just got her stimulus checks and went out and bought Nintendo switches for both of her kids. So I imagine that's happening in households around the country too. So that's going to kind of like amp up the problem.

B (16:00)

And you were actually not off the mark I think when you spoke about the price of Ethereum being related to a lot of people with access to a large amount of savings. And we know American household savings are really at an all time high in this respect are looking for places to dump that savings. And I think the story of Gamestop, I think the story of Ethereum pricing is vaguely related to that. You see these really small markets, remember Gamestop and Ethereum in market cap are quite small and retail investors can create outsized effects there.

A (16:28)

One thing I think is worth thinking about in this context is the salience of prices. Max, you were talking about how people get very upset when certain things go up in price. And it seems to me that the things that people get most upset about are the things that people buy in physical stores, toilet paper, snow shuffles, that kind of thing. And one of the things that's happened with this big move from physical stores to Amazon is that prices have not been sticky for a long time. Prices on the Amazon change from minute to minute, an hour to hour and week to week all the time. When you go to Amazon to buy something you bought last week and the price is high or the price is lower, like that isn't as shocking to you because number one, you don't really remember what you paid last time. And number two, there's no sort of you haven't internalized some idea of, oh, this is how much this costs on Amazon. And I feel like if there is going to be consumer goods inflation and people have been worried about inflation for decades and it hasn't turned up. And I'm not going to start worrying about inflation quite yet. But if it does happen, I think that's going to be one of the ways that it happens without people noticing so much. Because the prices on Amazon by design are not nearly as salient as they are at Walmart.

B (17:49)

Yeah, I think that that's right. Also, for what it's worth, the pandemic has severely drawn down prices in a lot of really expensive segments. I'm sure if you've looked at the New York housing market in the past year, You've been like, what, inflation? And that's going to be a big, bigger driver than all the crap you could possibly buy on Amazon combined.

C (18:08)

One more thing I wanted to add about this. I don't know if we want to talk about it, but Peter Goodman has a piece out in the Times today talking about how the boat and the supply chain crises, multiple crises, the boat and the supply chain chaos of the past year has really shown how fragile this whole just in time global economy is. And kind of the dangers presented when companies are cutting so many corners, not letting goods pile up in warehouses and instead sort of waiting till the last minute to do their orders. And that all worked out really well for stockholders and shareholders and CEOs, but maybe not so well for regular type people. And I wondered what you two might think about that, because as soon as I hear, like, this was bad and was only good for CEOs, I'm like, yeah, but maybe that's. I think it's not the right way to look at it.

A (19:03)

Yeah, I'm going to push back on Peter on this one. I'm going to let Max bring the hammer onto Peter.

B (19:08)

It seems very misplaced in the sense that there are categories of just in time manufacturing, where you really do want to have kind of good, responsible designs here. And then there's a lot of categories where consumer demand wants to be very responsive to availability. And just in time manufacturing affords you that. Right. Otherwise, you're paying. You're paying every time that stuff is sitting in a warehouse. You're paying every time that someone mispredicts demand and consequently overbuys. And that, of course, gets passed on to you. So it's really better often for the consumer to have this deal. The exception to that rule that has been a recent story is, of course, Texas energy markets, where there really was a desire to price in excess capacity that was only used in the event of an emergency. And there was very real consumer harm due to whatever market failures and regulatory failures happened.

C (20:03)

So, in other words, some things shouldn't be just in time, such as electricity.

A (20:08)

You want the excess capacity in the electricity market. You want there to be like spare capacity. But like talking about, you know, Texas, like, the way that Michael Dell became a billionaire is because he saw the computer market was like, we make computers and then we sell them to people. And then Michael Dell said, I've got a great idea. Why don't we sell computers to people and then make them? And it sounds kind of crazy, but it makes a lot of sense because what you don't wind up doing is building a bunch of computers without knowing whether people want them or not and then hoping that people are going to buy them. Instead, what you do is you only build computers that you've already sold and you are directly responsive to consumer demand. And it's like intuitively a more sensible way to do it, especially if the consumers can get their computers just as quickly.

C (20:52)

I guess the one place that I might push back on the pushback would be thinking about labor. Because I think part of the story also is global companies looking around the world for the cheapest possible labor to make this all kind of work and keep those prices low and benefit consumers. So the benefit for the consumers, yeah, maybe in the low prices is good, but the benefit for labor is T.K. i mean, people wages are lower.

A (21:21)

It depends which labor you're talking about. Right. We've seen, for instance in the US We've seen like the cost of labor rising significantly in China and in many other countries as well. And one of the things that is worth thinking about in terms of these supply chains is you want a certain amount of robustness, right? What you, what we learned in the pandemic is that you don't want super supply chain fragility. What you don't want is a system where like, if one factory in one place suddenly gets shut down because of the pandemic, then you can't source that item from anyone else because you're just reliant on them. And if you want to be robust, if you want to have like redundancies in the system, it helps to be able to source from a bunch of different places, not just your owned and operated factory with your own employees. If you can actually have multiple different suppliers in multiple different countries who all have different shipping systems and forms of manufacture, then that makes you more robust to sharks. In that sense, I think that having a globalized labor market is probably good in terms of global supply chains.

B (22:32)

Dynamicism in the labor market also has two different sides of the coin in the sense that it's historically been said that we lose jobs very rapidly but then fail to rehire fast because of such timidity around. Is this person going to be hard to fire? Are we going to overextend our labor force? And I think that the fast jobs recovery has been in part related to more comfort with employers of being able to let people go again fast. But that's a tough issue, especially when we think about like getting economy situations where risk that used to be borne by the employer is now borne by the contractor.

C (23:12)

I feel like that's a good segue.

A (23:13)

That's the perfect segue because we have to talk about tech billionaire EV Williams, the founder of Twitter and also the founder of Medium, doing the thing that tech billionaires do quite a lot, which is try things and see if they work and then scrap them if they fail and try something else. And he's done this. I can't count how many times that Medium. And every time he decides that it isn't working and he's going to scrap it and try something else. That process of scrapping things involves firing a bunch of journalists. And journalists hate that. You know, weird that journalists don't really enjoy being fired. It's actually something which I think is quite important in terms of the relationship between tech and media, is that journalists react much worse to being fired than software engineers do. A software engineer can basically get a job anywhere very easily. If they get fired from one place, they can get another job in another place. They don't worry that they won't be able to find a new job.

B (24:14)

I don't know, Felix. I was at Microsoft when they had the very large layoffs in 2013 or 2014, and I think many people reacted quite poorly.

A (24:22)

You may be wrong or maybe just late. I spent too much time on media Twitter.

B (24:27)

The software engineers just have less influential Twitter accounts than the journalists.

A (24:32)

That could be it. But. So we are now in iteration number 767 of EV firing all of the journalists or offering them all buyouts. He's trying to be not evil. I don't think anyone is being very sympathetic to him. But, Emily, what's your take on the latest sort of media implosions? It's not just a medium. Also, like Mel magazine had its own model, which was basically Unilever pays it lots of money to publish, and Unilever gets some weird, vague, warm fuzzies that no one could really quantify in return for doing so. And then one day Unilever woke up and said, why are we doing this? And fired everyone. Are we in another weird. I mean, obviously one of the hosts of Sleep Money just lost their media job. What is the.

C (25:20)

It's me.

A (25:20)

Where are we at right now in terms of the media job verse?

C (25:25)

Okay, so I mean, this is a personal issue in the moment, but I think I can have a broader perspective than making it all about me. So, I mean, this is just like the hell of working in Media Part 1000. The latest news, as you already said, is Ev Williams decided his strategy at Medium, after only two years, wasn't going the way he wanted it to. So he's disbanding.

A (25:48)

I feel like two years is longer than he. He, like, the previous cycles lasted even less than two years, but, yeah, yeah.

C (25:55)

And so his strategy was to create all these different online magazines under the Medium umbrella and make them big brands and then charge people money to pay for them. And I personally think that strategy was bad from the beginning. That is my take. Like, it takes a lot of effort and time and careful journalism work and a bit of luck and magic to build up one magazine brand. And to think that you can build, I think. How many? Was it, like, eight brands?

A (26:22)

Seven. Eight? Yeah.

C (26:23)

In two years. That's a bad strategy. And, like, I think it's reflective of, like, these tech companies think they can come in and, like, fix media at the same time, they're breaking it. Like, the reason media is having a big problem is because Facebook and Google exist, and they took away all the advertising from regular media outlets. At the same time, those outlets kind of flailed around and didn't know what to do about what was happening. And then at the same time, these tech people are, like, blowing up media. They're also thinking, like, they can do it better. And people like EV Williams come in and say, like, oh, I'm just gonna build a bunch of magazines in a year and a half. And they're gonna. That's gonna be the way we go, and it's gonna be amazing. And, like, I could have, if you had asked me two years ago, Emily, should we make eight new magazines and try to make them profitable in a year and a half? I'd be like, no, that's dumb. It wasn't a good strategy. That's kind of my take.

A (27:18)

We've seen this movie, not just at Medium, of course, but it reminds me so much of what Chris Hughes did at the New Republic. He buys this 150-year-old magazine, and he's like, I can turn it around and make it a digital powerhouse within a year and a half. And then a year and a half later, it wasn't a digital powerhouse. He gets bored of it, and he basically just throws it to one side and moves on to the next thing because he's a tech billionaire.

B (27:41)

But to offer the counterexample, I don't think that the people at the Washington Post feel like Bezos is doing that to them. So it's not, you know, every time, right?

C (27:50)

No, it's not every time. And not every tech billionaire is bad at journalism. But I think there is kind of this hubris where these tech billionaires think they understand journalism, but it's a really different business and product, in the words of tech, than tech is. Like journalism is. It takes time. You have to be careful. Journalists don't care about profits. They just want to do good work. Like, it's just very different. And you have to be kind of patient about what you're building. And now I guess EV Williams wants to pivot to something called Amplify, which sounds like a substack model built around individual journalist stars who are going to, like, make money for him. But again, that's not the same thing as building journalism, because an individual newsletter writer is not the same thing as an individual magazine. It's just very different. And I feel like in two years we can come back and talk about how Amplify didn't work out for EV Williams.

A (28:51)

So one of the things I've always said is that if you're a journalist, you really want to be owned by a news organization. And, you know, this has been true through many, many cycles. If you're owned by a technology company, things are going to end badly. If you're owned by a, you know, phone company, things are probably going to end.

B (29:18)

Point out Slate was started by Microsoft.

A (29:22)

Well, exactly. I mean, and this is a very interesting example, Slate was started by Microsoft. And then Microsoft realized it didn't really want to own a news organization, sold it to the Washington Post, which is a news organization. They did really quite okay there. The Washington Post is not really a news organization anymore. It's now called Graham Holdings. And Slate is one of the few news organizations that it owns because it sold the Washington Post to Jeff Bezos. I don't entirely understand how Slate fits into the Graham holdings grand strategy, except for I think that it gives them good visibility into the media ecosystem. And so Graham holdings made a lot of money on Megaphone, which they understood because they own Slate. It also made money on Gimlet, which they understood because they own Slate. And so there are other reasons to own media organizations. But I think when billionaires who've made their money outside media, so, you know, Dr. Pat in LA owning the LA Times or Marc Benioff owning Time or something like that, when they come in and sort of buy a storied media brand as some kind of quasi philanthropic, you know, hobby, that's worrying. And sometimes it works out well. And Bezos at Washington Post seems to have worked out really well. But a lot of the time, you know, just look at Chris Hughes it works out badly.

B (30:52)

So I want to jump back, Emily, to your story here and kind of the Huffington Post situation and what happened there and hear your take both on that. Alongside the story of Substack offering authors very large amounts of money as advances on them directly owning this newsletter to the community kind of product.

C (31:17)

I think what I said earlier stands for what happened at HuffPost to an extent. I mean, HuffPost was a startup then it was bought by a tech company that pumped a lot of money into it and was excited about it, but ultimately didn't want to deal with it anymore and sold it to a phone company that was really pumped up about it and excited about it, put some money into it, quickly realized this was not something that was going to make as much money as just like selling phones and stuff, you know, selling Internet access, stopped putting money into it, didn't think about how to innovate it because it had better things to do. Like Verizon could make more money off lots of other stuff. It didn't really need a little tiny website.

B (31:57)

So why wouldn't ownership by buzzfeed make it, you know, return to its roots of I am a media company first?

C (32:04)

I mean, it very well might. I mean, I'm they had their business reasons for laying off a bunch of people. So a return to buzzfeed maybe is a good thing. Good for them. And as far as Substack goes, I've been thinking about this a lot just this morning. There's just a limit to the kind of work you can do as an individual with a newsletter. You can't do any big I don't think you can do real impact reporting as just a single journalist writing a newsletter. I was trying to think if I could have done the same work at a substack as I could have done at HuffPost. And there's just no way. I wrote stories criticizing really big companies that were vetted by legal team and backed by a giant corporation. So I would not, if I was writing a substack, I would not go after those companies with my reporting because I'd be scared that they would come after me. And I'm just a single person. And I guess Substack is trying to remedy this a bit by, you know, making lawyers available to journalists and Substack writers. But I still think like ambitious reporting. You can't do it without a team behind you, without an editor, without support. Also, if journalism just becomes a bunch of people writing newsletters, there's no mentoring mechanisms. There's no way to bring up new journalists. So it's not for the long term for journalism. It's not ideal.

A (33:27)

I think that's a way of extrapolating way too wildly. Right. I mean, I don't think anyone is suggesting that substack is going to replace journalism. And, you know, it's like, it's. It's an option for a small subset of. Mostly like the more opinionated end of the journalistic world, the people who do like less reporting more what some people like to call conceptual scoops. But yeah, so. And if it works for you, like Marcel, that's great. You know, I don't think that substack is a journalism killer or a journalism replacement. I don't think it wants to be. And I think that in terms of the journalism world, people are still looking for solutions and models. But it's worth noting that we have an interesting data point this week. The International Business Daily, which is a solid little business newspaper that still comes out in print and has a strong digital component and a strong data subscription component, just sold to News Corp. For $275 million, which is the same amount of money that the Washington Post sold for.

B (34:36)

You have to consider their price minus the price of the value of their domain name. Their domain name alone is 100 million.

A (34:45)

They have investors.com, don't they?

B (34:47)

That's it.

A (34:48)

But they have good SEO, but they have a solid business. And I was doing some back of the envelope math and I reckon their subscription revenues are more or less the same as mediums, maybe a little bit more. But clearly they're a more valuable company because they have pricing power. They have people who really want that data, who really value those subscriptions. They have strategic value to a company like Dow Jones. And someone like EV doesn't think that way. Right? He just wants scale. Let me scale. If it doesn't scale, it doesn't work. And he was like, the reason I'm going to fire all the journalists is not because people stopped reading them. It's just because the number of people reading them wasn't going up fast enough.

B (35:31)

You know, my favorite tidbit about IBD is that when they advertise to people buying advertising, one of the tidbits they share is that their readership rarely consumes CNBC. And they say that 2/3 of their readership never goes to CNBC, indicating they are a highly sophisticated audience. That's glorious.

A (35:54)

I love it.

B (35:55)

I think the IBD story is interesting because the IBD story to me reflects that. There are these weird pockets of paid News and people are willing to pay very high premiums for what they think is slightly more accurate information. Financial Times I think is also reasonably successful in their model. And there's this theory going around that one of the reasons why fake news has been so successful is because overall fewer and fewer people are willing to pay for news. And you see this separation in kind of public awareness and media between the clickbait basically that gets re syndicated and reshared and the stuff that people are willing to pay for accuracy for.

C (36:39)

I think that's a really, really good point.

A (36:43)

You think it's a good point? I think that's right. I think the number of people who is willing to pay for news has never been higher and in fact it's on the order of an order of magnitude higher now than it was 10 years ago. Look at the subscription base of even IBD has 100,000 subscribers when it was a print product. It has nowhere near 100,000 subscribers. The new York Times is on track for like 10 million subscribers or whatever. Like we have subscription the number of places the Washington Post slate surcharges for news. Everyone has a paywall now and a lot of people are subscribing to those paywalls. And the number of people paying for news is higher now than it ever was. And not just a little bit higher, it's a lot higher.

C (37:30)

That might be true, but it's still less than it was say 20 years ago when most of America would tune into the news every day on their TVs and we would all have a broad shared sense of understanding based on the free news that everyone consumed. And I think that's the difference now. And I think there is that differentiation between the legitimate large number of people that are paying for news and then the other people who are like just on Facebook, the people that used to get pretty reliable fact based news from TV really are going to Facebook and getting fake news and they're not paying for the Times or the Journal. And there are lots and lots of people like that and there is this kind of bifurcation now that exists.

A (38:13)

I would agree that the quality of free news in terms of where it is at the point of consumption is lower that if you have a system that you had 20 years ago that to a first approximation all of the free news that people got was extremely high quality because it came from CBS News or some other copper bottomed news organization, then that was great. When you have a situation where a large chunk of the free news that people get comes from board teams In Macedonia, then that's problematic.

C (38:44)

Yeah.

B (38:45)

Just to wrap this up, Emily, the overwhelming thread with regards to tech people entering a business is actually, I think, the core identity of tech, which is when companies like WeWork or DoorDash say that they're tech companies, what they really mean is they have the hubris to enter into a market in which they have no particular knowledge and then believe that they can succeed. That is the defining thread across time for tech as an identity.

C (39:12)

Yes. Yes, that's so right. It's not a tech company. It's just tech invading whatever industry they decide to invade, blowing it up and then being like, we're so smart.

A (39:23)

Max, you are the king of the segues. Because we have to talk about WeWork. WeWork is back, people. WeWork turns out not to have a negative valuation. WeWork apparently now has a $9 billion valuation, and it has a bunch of pretty well respected pipe investors, as they're known, private investment in public equity, putting in hundreds of millions of dollars, I think $800 million at a $9 billion valuation to basically say, yeah, we believe in this company, we believe in WeWork. We want to buy common stock in WeWork, and we're going to do that as part of a SPAC deal, and WeWork is going to go public as part of a SPAC, and the valuation it has is higher than the last valuation that SoftBank recapitalized it at. So my simple question for you, Max, is what the fuck?

B (40:22)

I think that it's people who are genuinely bullish on the cult of WeWork as a thing that will succeed in the return to office atmosphere. I think you've seen a lot of articles that are very speculative about how Covid is changing the world for forever and remote. Work is here to stay and cities are dead. And if I were to take a bet on this, I would say the best bet is usually that things go back to the way that they were or stay the same. I think that the WeWork investors are seeing the same thing where there is actually going to be increased demand for flexible office situations. As companies try to navigate this complicated change in which companies are laying out lines, they're saying things like hybrid workforce flex schedules, blah, blah, blah. Every time you hear that, you should think to yourself, cha Ching in WeWork's pocketbook, because they're really hungry for that kind of. We don't know how many people are showing up at our office every Monday through Friday.

A (41:23)

So I like this in three theory. In theory, I understand the the thesis, which is that Companies want flexibility in terms of office spaces. They don't want to be signing 20 year leases. And WeWork is exactly the place where they can get that kind of flexibility. That companies are good at doing whatever their company does. And they're bad at doing things like making sure that people have good coffee. And so they outsource the providing good coffee and making sure that everyone has a fun place to work and light filled spaces and that kind of stuff to WeWork. And the great thing about it is that they can change. If they're growing fast, they can just go up to WeWork and say, hey, we're growing fast. We need an extra 100 desks. And WeWork, it's like, dude, where we work, we can give you anything you want and you get an extra 100 desks. Or if they then suddenly discover that half of their team wants to move to Vermont, they say, hey, we don't need so much space and WeWork. Fine. You can downsize. In practice though, we saw what happened with WeWork, and that's not how WeWork worked. It's how WeWork sold itself. But it's not what WeWork did. What WeWork did was it spent an absolute fortune giving people incentives and spending money on marketing and spending money on salespeople to try and get businesses in to relatively long term leases. And then if and when the businesses left, they would then have to spend a huge amount of other money to get new businesses in. And that kind of flexibility never manifested itself or suddenly didn't manifest itself in like high occupancy rates and high profits. Like WeWork has never been profitable.

B (43:10)

Yeah, I agree about the lack of profitability, but with regard to, is the strategy working? WeWork's occupancy rates are down hugely from 70% to some high 40s percentage point in the past year. And that suggests to me that actually there was a lot of flexibility. People did pull the option of leaving their leases with WeWork. And in a more dynamic kind of workplace where you don't know how many people are showing up each day, the premium, the value that you're willing to assign as a company to flexibility, there is higher. And it stands to reason to me that perhaps WeWork's sales and marketing pitches are actually part of the core value proposition of the company in that they can convince companies and the company's workplace, like the employees, to be happy with this kind of really every day is a new day, who knows what will happen kind of model.

C (44:01)

Yeah, I mean, I think there's some truth to that if wework could actually capture this sort of change where companies are willing to be more flexible in whether or not they require you to come in. I mean, Microsoft had a blog post about having its employees come back, and the blog post is kind of insane. It's like, there's a wheel, and it's like there are phases on the wheel of, like, don't come in at all. Maybe come in. We're not saying you shouldn't come in, but we're not saying you should. These are the categories on the wheel and so on. I mean, and an acknowledgement in the blog post that employees want flexibility. And I have to say, like, as I've been job hunting these past couple of weeks, speaking to employers, like, they don't even ask where you live anymore. They're just like, yeah, I asked one employer, like, I'm in New York. You realize that, right? And they're, oh, we don't care. And others are saying, like, we used to come in every day, but now we don't care. Like, it's probably fine if it's one day a week. I don't think everything's gonna go back to the way it was. I think there will be a little more flexibility. And it seems like wework could theoretically capitalize on this because it's something to watch. I don't think workplaces are gonna go back exactly the way it was, at least for the kinds of jobs that you can do from home. Obviously, you're still going into Kroger every day if you're a cashier at Kroger. But for people at the high end, I think flexibility is probably here to stay and then here to stay and then. And how that shakes out. Is the big question, like, who's it going to benefit? Who's it. Maybe wework. Who is it not going to benefit? Maybe caregivers who can't ever come in and kind of get sidelined. Actually, I don't know.

A (45:41)

I think the winners are possibly the established Gen Xers who have enough professional expertise to be able to do their jobs from anywhere. The losers are people trying to enter the workforce right now and, like, you know, who need to absorb institutional knowledge just by kind of going into an office every day and understanding how it works.

B (46:04)

Is this a David Solomon joke? I feel like you're baiting me into telling the story of David Solomon dining at a fancy place in the.

A (46:13)

In the Hamptons.

B (46:14)

And then a junior analyst comes up to him and sees him at lunch and introduces himself. And Solomon reaction is what the fuck? Why are you not at your desk?

A (46:22)

Exactly. Solomon, the CEO of Goldman Sachs, is famously a big fan of people coming into the office, as is Jamie Dimon at JP Morgan. Banks, I think, are going to go back. I can tell you that the fabulous Jessamyn Molly cannot wait for slate money to start recording in the studio again because it's going to sound much better. We're going to be able to have eye contact. There are things that you can do during a pandemic that like make do and make it good enough, but at some point you want to be able to bring people back together again and, and I do think, you know, to use the, the max choke heuristic of like, you know, just assume things are going to go back to how they were. That is going to happen to a surprisingly large extent. People are going to, once they start going back to the office, are going to be like, oh yeah, like this is actually a lot better. I don't need to have 28 like weird painful slack messages and text messages and emails with my boss. I can just have a quick random conversation bumping into her in the corridor and that solves a bunch of problems and it's just much easier and I can get back to doing my job rather than random management stuff.

B (47:38)

When you look at the survey data, I think many tech employees say they strongly prefer work from home, which is why you're seeing all of these executives being reluctant to take strong stances against it and saying things like hybrid model flexibility, changing workplace. Also, it serves their bottom line and they're selling products that solve things that are related to remote work. But when you think about how tech companies actually pitch themselves to employees, before the pandemic, often it was about the workplace perks. Stay here light hours, work flexibly, Food, laundry, massage, childcare. And those products, it turned out, were more value to the employees than just paying them more money. So I think it's perfectly reasonable that in the future you'll see people offered higher pay, remote jobs, especially after cost of living adjustments being declined over these kinds of jobs. And I get 60 minutes of free massage every year. Kind of cheap perk for the workplace to offer that makes people feel a great community and culture.

C (48:38)

It would be interesting if the pandemic kind of puts a stop to the Google perk workplace and all the free snacks because we're like, eh, we could stay home, decide what snacks we want anyway. Like, you can't con us anymore with that. Like just give us the money.

A (48:52)

Well Emily, do you not miss the free Lunch at Verizon?

C (48:55)

No, I desperately miss the free lunch at Verizon. It was incredible. My kids still talk about it, but you know what? I can live without free lunch forever.

B (49:03)

At the same time as this is going on, of course, you have the poor Goldman analysts talking about how they're just drowning in work and never been less happy in their lives. And I think at the beginning of this segment Felix just said there's this decrease in camaraderie and the slower learning curve happening. That means that people are working harder. And I worry about that across the board. That isn't just banking, that's every sector. It should be concerned about that.

A (49:33)

I think it's time for a numbers round. Emily, do you have a number this week?

C (49:36)

Yes, I have a number. It is 91,500. No, no one knows what it is. Well, that is the number of oil coated pennies that were dumped in the driveway of a Georgia man who quit his job at a OK Walker Luxury Autos. He quit his job and he had the nerve to ask for his last paycheck, which was $915. And his boss was like not giving him the paycheck, but finally his boss sent someone over to his house and dumped a bunch of not only pennies, but oil coated pennies. They think it's like some kind of motor oil or some other kind of, I don't know, auto oil.

A (50:14)

It took him what, like 2 hours to clean $5 worth of them?

C (50:18)

Yes. He has to clean the pennies individually to get them to go into the machine where you can get actual money from the pennies. And the New York Times, apparently he's.

A (50:28)

Talking to a lawyer about like, you know, suing the company for like toxic dumping or something like that. Yes.

C (50:34)

And the New York Times went and asked someone at the Department of Labor like, is this illegal? And they were like, no. I mean everyone's just like, probably not, it's probably not illegal, but like it's not cool. It's definitely not cool.

B (50:48)

How is that not illegal? That's clearly breaking the line in which civil and criminal.

C (50:52)

I mean it's, it's wrong. It's obviously wrong. Right. Also I want to point out.

A (50:57)

So can I, can I just say, like, there is a public policy response to this which we should have done years ago, but can we please just do this?

C (51:05)

I know what you're going to say.

A (51:06)

Which is abolish the penny.

C (51:08)

Right?

A (51:08)

Abolish the penny. There is no need for pennies. Everything can be done in increments of 5 cents. We do not need pennies.

C (51:14)

Yeah, but if it was a bunch of nickels on his driveway, it's not. The story doesn't get much better.

A (51:19)

Right?

C (51:19)

I mean, and the reason he quit his job, by the way, is because he had to pick up his child from. From childcare every day. And his boss was like a jerk about it. And it was harder in the pandemic, which I think is the bigger story.

B (51:33)

That's heartbreaking.

C (51:34)

Heartbreaking.

A (51:35)

My number is $2.9 million, which is the amount that Jack Dorsey's first tweet sold for as an nft, which happened like the day after a Beeple charity auction. Sold for $6 million, which happened the day before New York Times charity auction of a Kevin Roose column sold for half a million dollars. And the thing that all of these things have in common is it's the Buy NFTs for Charity stage of the NFT bubble that we've kind of moved on from people speculating on cryptopunks and top shots. And now we are doing the let's performatively spend a ridiculous amount of money in a way that makes it go to a good cause. And I'm okay with that.

B (52:27)

You know, I always wondered, Felix, what it would be like to live during the Tulip Bubble. And I'm glad that we get to enjoy these times.

C (52:35)

Yeah, it doesn't seem like it's harming anyone.

A (52:37)

Max, what's your number?

B (52:38)

My number comes as a pair, and you might be able to guess it if you follow New York News. It's 2 billion and 46. Specifically, $2 billion is the estimated price tag for the LaGuardia AirTrain.

A (52:52)

Oh, my God.

B (52:53)

And there were 46 alternative routes considered by the FAA, all of which were miraculously deemed impermissible under their selection criteria. And only the Governor Cuomo selected route which goes backwards. For anyone familiar with Manhattan geography relative to laguardia, was selected. And you might ask, what were the criteria that all of those other routes failed to succeed on? One of the criteria was that the route needed to be able to be implemented without any material effect to other transportation infrastructure, facilities or utilities. And of course, if you build a big transit project, you tend to make changes to those sorts of things.

A (53:35)

It's the most ridiculous boondoggle. It's a little bit like the JFK airtrain. It's like this weird futuristic monorail type thing which will take you zooming in great comfort and luxury from LaGuardia Airport to some, like, random subway stop in Queens. You're like now I've made it. I'm at a random subway stop in Queens. It will carve a massive like minus 20 minutes off the current journey time or something. It doesn't even make getting out of LaGuardia and into Manhattan any quicker. It solves no problems. It's ludicrously expensive. And wait, Emily, has Andrew Cuomo resigned yet? Please say he's resigned.

C (54:15)

He has not resigned and he just legalized marijuana. So I feel like it's going to be okay for him, honestly.

B (54:23)

Don't worry. The next, the next time that a sexual harasser comes forward, you're going to see the vaccine date availability, just move forward corresponding. That's just a one to one relationship.

C (54:32)

Yes. And the free marijuana or something. The marijuana legalization date gets moved up a little bit. A little bit more too. So it all works out okay. And he can, he is free to harass the women or whoever he wants to bully.

A (54:45)

He is a bully. On which note, that is it for us this week. Thank you so much to all of you for listening to Slate Money, sending in your emails to slatemoneylate.com thank you very much to just Molly for producing as ever. And we have a special show, very special show with none other than Ed Lee of the New York Times coming up on Tuesday talking about the Devil Wears Prada. Emily, do you think we should have another season of Slate Money Goes to the Movies this time with you?

C (55:17)

Uh, yes, 100% definitely do that. I mean, I can't believe I was left out of the first season, but it's fine. I'm not bitter. And I think there are more movies we could watch. In fact, we can ask listeners to send in suggestions.

A (55:31)

So folks, send in suggestions not only of which movies we should do for season two of Slate Money Goes to the Movies, but also the guests. You would dearly love to talk about them. We have a couple of ideas already. We'll put a season together. We'll try and make that happen sometime this summer. We have that to look forward to and otherwise we'll be back the following week, next Saturday with more sleep money.