Slate Money – "Burning Platforms"

Episode Date: January 7, 2023
Host: Felix Salmon (Axios)
Co-hosts: Emily Peck, Elizabeth Spiers

Episode Overview

This episode of "Slate Money" dives into three major stories at the intersection of business, finance, and regulation:

• The proposed FTC ban on non-compete agreements and its broad labor implications
• The near-bank run at Silvergate Bank and what it reveals about crypto, regulation, and risk
• Southwest Airlines’ holiday meltdown, technical debt, and why so many systems are still so broken

The hosts also discuss fines for Peloton's treadmill safety issues, zero bank robberies in Denmark, and the rise of minimum wage in Washington State. The episode is characterized by lively debate, sharp skepticism about regulatory frameworks, and the hosts’ trademark dry wit.

Key Discussion Points & Insights

1. FTC’s Proposed Ban on Non-Compete Agreements

[00:28–09:10]

• Context: On Jan 5, 2023, the Federal Trade Commission (FTC) proposed a sweeping ban on non-compete agreements nationwide.
• Shift in Use: Once reserved for executives, non-competes now ensnare workers from sandwich makers to hairdressers.
• Emily’s Take: “If this rule were enacted, it would affect a broad range of workers across a wide variety of industries at all different kinds of levels. It would be really far reaching.” (01:39, Emily Peck)

Legal and Political Hurdles

• Doubts about the FTC’s authority; any rule would prompt legal challenges likely to reach the Supreme Court.
• Real change would likely require Congressional action. Marco Rubio’s support of a bill banning non-competes is “surprising,” per Emily (04:40).
• “The TLDR here is that really, if we want to ban…non-competes, that needs to get done in Congress rather than by fiat from the FTC…” (04:15, Felix Salmon)

Corporate vs. Worker Dynamics

• Elizabeth: Corporate logic justifying non-competes is “pretty weak,” especially for low-skill roles with little proprietary training (05:20).
• Felix: Acknowledges corporate desire to reduce turnover—"there is a logic there... it's not illogical that these things exist"—but also probes the broader impact on labor and wages (06:03–07:00).
• Non-competes suppress wages and reduce competition, a point progressives tout but businesses avoid, per Emily (07:04).

California as a Case Study

• Hosts note California’s economic vibrancy without non-competes and suggest remote work realities are undermining state-by-state restrictions (08:59–09:10).

2. Silvergate and the Regulation of Crypto

[09:26–24:46]

• Silvergate, the US’s leading “crypto bank,” experienced a massive, FTX-fueled bank run: lost $8 billion in deposits (from $13B to $5B) in three months (09:26–10:59).

Regulatory Insights

• Silvergate survived thanks to robust, traditional banking regulation. “The one form of regulation that really seems to have ensured genuine safety is bank regulation. And Silvergate is alive.” (10:53, Felix)
• “Who regulates Silvergate?” — “The Fed.” (11:01, 11:02)

Crypto’s Isolation & Risks

• Crypto largely “cordoned off” from the real economy, preventing broader financial contagion (11:09–12:28).
• Silvergate handled withdrawals by borrowing $5.4B and selling assets, incurring a $718M loss (14:34), as Elizabeth points out: “They lost around 718 million…which is more than the entirety of profits that they've made over the last decade.”

Wider Lessons for Crypto

• Silvergate’s future depends on a crypto market rebound. “If crypto doesn't come back…these companies…have no one to provide services to anymore.” (13:58, Felix)
• Good banking practice: Silvergate placed deposits in safe instruments (Treasure Bills, not speculative investments), which proved wise amid the crash (16:00–16:26).

Fragmented US Financial Regulation

• New York state brings fraud suits (against Celsius, per Emily at 17:15), bypassing stricter federal hurdles. “If it was the SEC, they would also need to prove that…the things people were buying were securities, and that would be a harder hurdle to clear.” (18:31–19:09, Felix)
• Multi-regulator landscape (SEC, CFTC, FTC, etc.) causes compliance headaches and benefits large, incumbent banks due to the cost barriers for fintech upstarts (22:24–23:23, Felix).
• Felix argues for consolidation: “There is no good reason why the SEC and the CFTC should be two different organizations. It makes no sense at all…” (23:52–24:41)

3. Southwest Airlines’ Holiday Meltdown & Technical Debt

[24:59–32:15]

• What Happened: Winter weather, Boeing 737 issues, and a critically outdated crew scheduling system led to a disastrous wave of flight cancellations over Christmas.
• Elizabeth’s Summary: “Southwest has a fairly antiquated system for rescheduling where flights and crews are…Southwest forces crew members to ... call into headquarters and kind of manually tell them what's going on…So the whole reason this is happening is because their software system is hugely antiquated.” (25:23–26:22, Elizabeth)

Technical Debt/Burning Platform

• Companies defer costly but necessary software fixes (“technical debt”), creating “burning platforms” that only get addressed after disaster strikes (27:21–29:14).
• Integration costs, not mere software development, are the true blockers—especially when legacy and national systems must be connected (28:28–28:34, Elizabeth).

Management Incentives & Public Infrastructure

• Both private and public organizations deprioritize upgrades in favor of flashier projects or short-term profitability, leading to systemic failures (31:24–32:06).

• Even unions were demanding a software overhaul, placing it above wage increases in negotiations (30:02–30:29).

• Elizabeth recounts a parallel at the Observer, arguing with Jared Kushner over outdated printing software, showing this logic is everywhere—even when the costs are obvious (30:29–31:24).

4. Numbers Round & Miscellaneous Highlights

Peloton Treadmill Fine

• $19 million civil penalty for failing to report safety issues. Noted as one of the largest ever under the Consumer Product Safety Act, but still “pretty small” in the context of total liability (32:19–33:47).

Zero Bank Robberies in Denmark

• “Zero, which is the number of bank robberies in Denmark in 2022, which includes people robbing cash machines." (33:56, Felix)
• Cashless Scandinavian banking cited as the driver; in the US, bank robberies are declining but remain at 1,724 in 2021 (35:17–35:34).

Washington State Minimum Wage

• Raised to $15.74/hr, affecting 356,000 workers. “If you'll remember, like 10 years ago, everyone was fighting for 15. Well, many states now have $15 an hour minimum wage, unfortunately inflation, it's a relatively big…” (36:06, Emily)

Notable Quotes & Memorable Moments

• On Non-Competes:

  • “Non competes are bad for labor and therefore at the margin good for capital.” (07:17, Felix Salmon)
  • “Even above wages, they're like, we just need you to fix the software. This is making our life a living hell.” (30:17, Felix Salmon)

• On Silvergate & Regulation:

  • “The one form of Regulation that really seems to have ensured genuine safety is bank regulation. And Silvergate is alive.” (10:53, Felix)
  • “If it was the sec, they would also need to prove that…the things that people were buying were securities. That would be a harder hurdle to clear.” (19:00, Felix)

• On Technical Debt:

  • “This is a problem that it hasn't been fixed…where you have what's called technical debt, where your system is outdated or there are problems with it…This also happens in startups because you ship software very quickly and it's not really ready for primetime. And then you just incur all these problems that pile up…” (26:22, Elizabeth Spiers)
  • “I learned today that that kind of technical debt is specifically referred to as a burning platform, which if you needed an urgent way to kind of frame what's happening, I think suggesting that the thing is on fire is a pretty good way to do it.” (27:14, Elizabeth Spiers)

• On Consolidation of Financial Regulators:

  • "There is no good reason why the SEC and the CFTC should be two different organizations. It makes no sense at all...The only reason for that is politics in the Senate..." (23:52, Felix Salmon)

Timestamps for Major Segments

• [00:28–09:10] FTC’s non-compete ban, political and legal outlook
• [09:26–24:46] Silvergate’s bank run, crisis management, crypto regulation, fragmented regulatory regime
• [24:59–32:15] Southwest Airlines meltdown, technical debt, management failures
• [32:19–37:26] Numbers round: Peloton fines, bank robberies, US minimum wage increases

Tone and Language

The hosts blend reporting and analysis with conversational banter and plenty of skepticism about American regulatory frameworks and corporate incentives. The tone is pragmatic, sometimes world-weary, but always sharp.

Summary for the Uninitiated

This episode is a tour of three major financial and regulatory stories:

• The FTC’s proposed blanket ban on non-competing agreements faces long odds in a divided government and an anti-regulation Supreme Court, but it illustrates the growing cracks in the "just-in-case" stranglehold employers have over workers—even baristas and hairdressers.
• Silvergate’s crypto bank run marks a rare regulatory success story, but exposes the patchwork chaos of US financial regulation—where multiple agencies overlap in confusing and sometimes self-serving ways.
• Southwest’s epic holiday crash is a case study in “burning platforms” and technical debt—where short-term penny pinching and lack of investment in critical infrastructure caused chaos for workers and customers alike.

The numbers round finishes with sobering figures on safety fines, crime, and wage growth, punctuating the episode’s main theme: when systems burn, it’s usually because they were built to catch fire.

For more, listen to the full episode or follow up on Slate Money’s back catalog.