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Di-SaaS-ter Market
00:45:05
The markets have suddenly turned on SaaS companies, Disney has chosen a new CEO, and Kalshi is fighting for its reputation.
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Foreign.
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Welcome to Sleep Money, your guide to the business and finance news of the week. I'm Felix Salmon of Bloomberg. I'm here with Elizabeth Spires of the New York Times.
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Hello.
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I'm here with Emily Peck of Axios Markets.
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D
Hello. Hello.
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And we are going to talk about markets this week. We're going to talk about the saaspocalypse and the way that all of these software stocks are imploding. We are going to talk about the new CEO at Disney and what that means. And it's the super bowl this week.
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And there's people betting on Kalshi and prediction markets.
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I'm going to talk about that and whether they're going to lose all their money. We have a Slate plus segment on luxury gifting.
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That's all coming up on Slate money.
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Slate Money is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. But what policy changes should investors be watching? Listen to Washington Wise, an original podcast for investors from Charles Schwab to hear the stories making news in Washington right now. Host Mike Townsend, Charles Schwab's managing director for legislative and regulatory affairs, takes a nonpartisan look at the stories that matter most to investors, including policy initiatives for retirement savings, taxes and trade, inflation concerns, the Federal Reserve, and how regulatory developments can affect companies, sectors and even the entire market. Mike and his guests offer their perspective on how policy changes could affect what you do with your portfolio. Download the latest episode and follow@schwab.com WashingtonWise or wherever you listen.
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It's great knowing that every time I.
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Dine out, buy souvenirs or pay my hotel bill using my Apple Card, I'm actually earning up to 3% daily cash back. So if you're like me and love to travel, then apply for Apple Card in the Wallet app today. Subject to credit approval. Apple Card issued by Goldman Sachs Bank USA Salt Lake City Branch terms and more@applecard.com all right, so sasspocalypse. I feel like this is a terrible word. Can we all agree on that?
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D
SaaS was always bad. Sasspocalypse is bad.
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Yeah, Sass was always bad.
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C
Sounds a little bit like asspocalypse.
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And plus sass, like it's S A A s but it's pronounced sass. I don't know. The whole thing is just terrible.
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D
I like it.
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A
Okay, Emily, as the person who likes it, before we get to the pocalypse bit. Tell us what the Sass bit is. What does Sass stand for?
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D
Isn't it obvious? It's Software as a Service. It's like when your company buys some kind of software that manages your expenses or your days off or your payroll or your travel, and you subscribe to the software. It is a service. And a company behind the scenes is, you know, servicing the software so it updates or whatever, and you use it, and your company pays for like 30 of these things. And it's kind of like a hellscape, honestly, for being truly honest about it. But that's what it is.
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A
So everything is software as a service these days. When I was, you know, in short pants, as they say, we used to install software on our computer, and you'd install things like Microsoft Word, and then you had Microsoft Word and it lived on your computer and it worked. No one does that anymore. If you want Microsoft Word now, you need to pay Microsoft every year some subscription fee. And this is true of, you know, all of the Adobe software. This is true of Slack, if you use Slack. This is true of basically every single piece of software that we use. We are recording this right now on a piece of software called Riverside. It lives in the cloud. You can't buy it. You just pay on a sort of per license basis. And the stock market worked out many years ago that on a net present value basis, selling software on an annual basis was much more profitable than just selling it once. So everyone in the software business moved to this model, and the software valuations went up through the roof. And that's why Microsoft became a $3 trillion company and all of these other companies. And you see this a lot in what they call B2B enterprise, which is a phrase that makes my brain want to melt into a puddle of mush. But it's basically just software that you and I don't use, but that people in companies use. And it turns out there are millions of people who work in companies who use this software and whose companies will pay large monthly or annual fees for the privilege of being able to use it. So, Elizabeth, Yes. These companies, which are doing so well for so many years and made so much money for so many private equity companies, there's one called, like, Thoma Bravo, which just, like, is insane. All they do is they make huge amounts of money by buying and selling SaaS companies. What has happened to these companies over the past week?
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C
Well, they're sort of anticipating areas where agentic AI might replace software that they're paying for on a recurring basis. And so Anthropic, which is one of the big AI players, just released a series of plugins that really help with workflow. And that's really the first big thing that they've done that's targeted the B2B market directly or explicitly.
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A
Okay, so you've just used a whole bunch of words there like workflow and agentic and targeting and okay, so I'll back up, try that again, but make it, because I'm a bear of very little brain, explain it in words I understand.
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C
So everybody who listens to this podcast has probably used ChatGPT or played at least with AIs that sort of respond to you. Agentic AIs are basically AIs that manage other AIs in order to usually do something work related. And that's really the future of what software looks like for businesses. So when Anthropic rolled out these new plugins, they basically foreshadow what maybe software development looks like for businesses way on down the road, when instead of having a whole team of software developers, you have have one person, kind of a handful of people managing a bunch of AI agents who are doing all the coding themselves and managing the project themselves.
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A
I feel like this isn't really about software developers. I feel like this is about rank and file employees whose entire job these days is to sit in front of dashboards. And every single SaaS company is selling the thing they sell. Not every single one, but the vast majority of them. The thing they sell is a dashboard. And then a bunch of humans at various different companies around the world sit in front of these dashboards and look at their customers and their cash flows and their assets and their liabilities and all of this kind of stuff. And they use various services to stay on top of all of this stuff. And I think that what's happening is that all of these licenses are sold on a sort of per employee basis. If you have 10,000 employees who have one of these dashboards and you have to buy 10,000 licenses, and that's why the SaaS companies make so much money. And I think what the stock market is freaking out about is this idea that you don't need 10,000 employees to have this dashboard anymore. All you need is an AI agent and you can buy like one license for an AI agent and it can do all of that work. And probably you can fire all of those people who are sitting looking at dashboards all day, or a lot of them anyway.
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D
It's so interesting looking back along the past like quarter century in the software world that this is like the most disruptible industry, one of the most disruptible industries because I, I'm old enough to remember when the Internet was going to kill software because everyone no longer needed their CD ROMs. But obviously new companies were created, some companies faded out, new technologies and interfaces were born. Then mobile came along. And I was reading yesterday when I was preparing for this, like Paul Graham wrote a post in 2009 or 2007 and the title was Microsoft is dead because mobile was here and no one would need Microsoft anymore. It's so lame and Google was going to crush it, blah, blah, blah. But as you said earlier, Felix, we know what happened, which is the cloud software as a service. Microsoft figured it out. Undoubtedly these companies now will figure out new ways to monetize AI agents. Like, I find it hard to believe that a company is going to want to bring in house all the stuff that these agents can do. At least there'll just be different ways of doing it. It might cause a lot of destruction of value and it might cause a lot of companies to go under. But I just have a feeling that.
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A
Like, well, when you're talking about companies here, are you talking about the SaaS companies or you're talking about the enterprises that pay money to the SaaS companies?
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D
I'm talking about the SaaS companies. So before we came on, I was looking at some data from Pitchbook and there's a lot of distress in the medium sized software company world. A lot of these like SaaS companies, the kind that the private equity firms are invested in, they borrowed a lot of money really cheap and everyone thought the party would go on and the growth would be high. Now AI is here, rates are higher and there's like a lot of trouble in that world. So I think, to answer your question, I think it is the SaaS companies that we would be worrying about.
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C
Well, long term, the bigger deal is that the entire model for how you deal with your intelligence and stored is just changing. And so the appeal of, you know, AI versus traditional SaaS companies, part of it is just that if you think about all the information that you have to manage within an enterprise and where it lives, in a lot of cases, it lives in these, in software developed by these SaaS companies and they're very high switching costs because all these companies have proprietary systems that treat all of your information in a certain way. And if you can use AI to do some of the stuff that these companies do, the value in using AI instead is that it's portable, you know, you can Take all of your intelligence and data and just, you know, code your way into a new system that manages everything completely and is integrated with everything else.
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A
I'm not completely sure about that. I think that is a utopia that everyone has been selling for a long time and will never arrive.
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D
That's what I think.
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A
I do think that where we are right now is weirdly, not so far from that. Like, most enterprises really do just keep all of their data in what they call, like, data lakes, like one massive grid, like reservoir of data. And then they point all of the various different SaaS applications at that lake and say, like, find the data you need and pull it out and organize it and structure it and then show me a dashboard. But yeah, you're right, once you start getting used to dashboards and putting the outputs and PowerPoint decks and stuff, there are switching costs. But I think the idea of just keeping all of your data in one place is a place we've kind of got to already. What they're worried about, or what I think the stock market is worried about is just that the number of licenses that companies are going to have to buy in order to be able to pass that data and get useful information out of it is much lower than it is right now because they're going to be able to use AI agents to do a lot of the work, rather than humans. And it's the humans who are paying for the licenses, not the agents.
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D
The stock market reaction, I mean, so they reacted specifically to this plugin, like Elizabeth said, for legal work. So all these, like, legal software company stocks fell, like lexisnexis, I think, Thompson, Reuters, legalzoom.com but I was coincidentally reporting a story that I hope will come out this weekend on how AI is disrupting the legal industry, whatever. So I would like spoke to some of these lawyers and I was like, are you just freaking out about the new AI plugin? And like, what's going on? Is everyone using it? You know, and they were like, well, first of all, the plugin doesn't do like, some core things that lawyers need. Look at all the cases, like case law or doesn't, you know, it's not connected to that in any way, to case law, to cases. And it's not connected to statutes or laws or anything like that. It's more like a. Another like evolution in document management, you know, that which is important and, like, will be helpful, I think. But it wasn't like, oh, you know, burn down all the legal software. I mean, I guess the stock market is very Future looking. So it's thinking like 70 steps ahead.
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A
Let's be clear about this. This was not in any way, shape or form a major announcement from no Tropic. They didn't even announce it. This was just a tiny little plug in of the kind of thing that they roll out, you know, every so often with no fanfare. And everyone's like, oh, this does this, it does that. It's very much a sort of straw that broke the camel's back thing. We have seen in recent weeks, this massive plunge in silver, a massive plunge in crypto, a bunch of asset classes that looks kind of frothy and fragile, just like the floor disappeared out from under them. And once the selling starts spiraling, the catalyst for that selling, the spark that causes the selling, is kind of irrelevant at that point. Does anyone know why Silver started going down? No. No one has a clue why Silver started going down. But once it started going down, it just got this kind of downward momentum and no one knows where it's going to stop.
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D
Didn't they say it was Donald Trump?
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It's probably Donald Trump.
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D
I feel like you could always just be like, it's Trump. And everyone's like, yes, if in doubt, it's Trump.
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A
So I think what this is just telling us is that, you know, it turns out that a lot of these SaaS valuations were, you know, kind of crazy like that, you know, these SaaS companies were trading on like 60 times future earnings. And you're like, well, it's not obvious where that growth is going to come from in the world of, you know, AI. So maybe we should start trading these companies on a sensible P E ratio rather than a not sensible PE ratio. And this could just be a reversion to sensible.
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C
Part of what's happening is just that now the market sort of. There's a discourse around AI, specifically where the markets start developing a theory and as soon as there's an announcement that kind of confirms the theory, even if it's a minor one, it's sort of like, well, this is what we were talking about. Look, here's an example. And I think that's what the plugin kind of started, a cascade of confirmation bias.
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A
I disagree with that. I don't think the market has a theory. I don't think the market has a clue what's going on. I think we should announce, actually, we have a major announcement on Slate Money, which is that Emily Peck has a new job and is now the sole lead writer of Axios Markets, the newsletter. And when I was talking to Emily about this great new life that she's about to embark upon. One of the things that we have discussed many times is that most of the time most moves don't really have a reason. It's not one of these things where people have a theory and then they try and buy and sell in order to align their beliefs with their positions. It's stochastic, it's noise. Most market moves are noise. They're not signal zooming out.
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D
The bigger picture story of AI agents disrupting the business of the business of SaaS is an accurate story.
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Is it?
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D
And these companies are in trouble. Like we have the, the bond data to show that their levels of distressed debt are higher than other categories.
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A
Well, the reason why there's a lot of distressed debt in this sector is precisely because this is the sector that was most popular with the private equity companies. And as we all know, as we've discussed many times, the private equity companies, the way they make money is by leveraging up their portfolio companies way, way more than most normal listed stocks. So if you're looking for those places where you find excess leverage, it will obviously be in the most levered PE owned stocks. And those happen to be the SaaS companies or most levered PE owned companies I should say, because a lot of them aren't even public. This is an unwind of a trade. But I don't know if it's like a thesis coming true. I don't know that AI is going to kill SaaS. If you look at the SaaS earnings before you start worrying about where they hit the capital stack and the equity and the debt and all of that kind of stuff, so far the earnings are fine. They're still going up and to the right, they're not falling. What we are seeing here is a PE ratio compression rather than the earnings going down. But as Elizabeth says, a lot of people like to think of the stock market as a sort of prediction machine and the stock market is now predicting much lower future growth. I don't think that stock market is predicting negative growth though.
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C
Oh no, Well, I don't think that. I think also I don't think that it's an either or, you know, in some aspects it is an unwinding of a trade. But I do still think that there is an emerging consensus about how AI is going to affect corporate workflows. And that does get built into analyst estimates about where these companies are going to be because they're gauging workflow substitution risk. And that is exactly what the Claude Plugin kind of speaks to directly. It's how our workflow is going to change within the enterprise because of AI. So I think it could be both. I don't think it's an either or.
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A
It could be both. No, I think it could be both. I think it's one much more than the other. And you think it's the other much more than the one. And it's very hard to tell. I will say that when you're saying that there's a consensus. The loudest voice on the other side of that consensus is Jensen Huang, right. The founder of Nvidia. And he's like, this is the dumbest thing ever.
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C
Well, I think he has an incentive to say that, though.
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Why? What's his incentive to say that?
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Because if the SaaS market comes down, it could easily drag Nvidia's stock price with it.
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Go on.
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All these things are in an interrelated economy. If you're selling AI software, you know, the same SaaS companies that are getting hammered right now are also some of the biggest customers of Nvidia. And these AI companies, their, their fates are not totally decoupled.
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A
I'm not convinced. But, Emily, what do you think?
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D
I don't want to get involved in your squabbles. I think it's pretty clear, like, however you want to frame what happened in the stock market last week, it's pretty clear that there's a huge new technology on the scene in AI and it's going to change the way that people work with software. And it's probably going to create winners and losers and new players in the market that's been relatively stable for like the past 10 years, which is software as a service. Like all these companies are going to start putting, and have started putting AI into their software already. And then I think the question or the thing I'm kind of like watching is like, is it going to make any of the software better? Because the bottom line is most of these software programs are so bad. I was recently. I won't, I won't name the company, but I did a story and so I was talking to one of the providers. I've used their software as an employee at various companies and they were talking about AI and how they're incorporating it into the software and it's going to make it so great. And I was like, is it. Because I'm going to be honest with you, it's not great now. Like, it's really confusing. I don't know what this is.
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A
Yeah, I don't know what, what company you're talking about. But if it's Microsoft Copilot, I totally agree.
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D
Like, they're putting the plugins in Gmail now, where you search your Gmail.
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Google is.
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D
It's so bad. I could have done it myself the old way. Like, and everyone says when you say that, they go, it's getting better every day. But every day. And it's like, really isn't. It's super not. It doesn't do what I want it to do yet. You know what I mean?
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A
I want to go back to this theory, though, that you have about AI is going to make a big difference. Because let's take a company I'm very familiar with because I worked there for many years, which is Thomson Reuters. Their share price was just a flat line forever and ever and ever. It just didn't move. And then starting a couple of years ago, it did skyrocketed. It took off like a rocket. And all of the people I know at Reuters who had stock in the company were like, holy shit, I'm rich now. Because the market was like, oh my God, you are an AI company now and you are going to make so much money from AI. And it was part of the AI trade. The idea was very much that Thomson Reuters, which is like, basically a legal services company, owns Westlaw and people like that. It was going to be able to do amazing things with AI for the legal community, for all of the law firms and everything. And this was going to bring in massive amounts of money at huge profit margins. And it was just going to be one of the big winners from AI. And then suddenly, like a few weeks ago, suddenly, then everyone's like, well, no, what if instead of being one of the big winners from AI, it could be one of the big losers from AI? And the stock market started plunging back down to earth. And yeah, we all know that AI is probably going to change shit, but it's so cloudy, the outlook is so impossible to see that, you know, the market can turn on a dime from you are the disruptor to you are the disrupted. What we thought was like a core moat of yours that was going to make you billions of dollars now just looks like a plug in that anthropic can release on a whim. And probably neither of those things are true. The truth of the matter is somewhere in the middle. But I do think that we are in this particularly sort of opaque and fuzzy moment right now where no one knows anything.
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D
It's exciting. It's a moment of true disruption when we don't know what the future will bring. And saying this as like an old person, like, this is the third time I'm seeing it and you can see it's very similar each time. Things are getting destroyed, but you don't know what gets built. It's very scary. But it'll just be interesting to see what gets invented and what changes and what things come about. I don't know. It's interesting. And, and maybe companies like Thomson Reuters that's been on the roller coaster, maybe they have to fire like a lot of people, but then they make more money so then their stock goes up. Maybe the Fed has to lower rates a lot. So we can see lots of new companies get founded and created and invent.
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New stuff like, it's cool. Foreign.
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Disney has a new CEO. His name is demaro, or tomorrow, depending on how you want to do it. He comes from Parks, which is where Disney makes most of its profits. Not just most of its profits, but an increasing proportion of its profits. The parks are doing great and up and to the right and everything else is, put it broadly not and is shrinking. So when the Disney board needed to choose, do we choose the parks person or do we choose the Hollywood person to run the company, they were like, well, let's put the guy who's actually making the money in charge rather than the woman who's losing money or the.
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D
Guy who dresses exactly like Bob Iger versus a woman.
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A
They are throwing like $24 million a year at the woman and making sure that she stays on.
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D
Yeah, we should unpack that because that's the whole James Gorman twist to the succession.
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A
Yeah. So James Gorman is the chairman of Disney long standing slate Money listeners will remember him as the former CEO of Morgan Stanley. And when he left Morgan Stanley, there was another one of these, like bake offs at Morgan Stanley who's gonna be the new CEO. And normally what happens in one of those bake offs, and we just saw it at Berkshire Hathaway, is that one of the guys becomes the CEO and the other guy leaves. And in Morgan Stanley, he managed to keep the other guy at Morgan Stanley. And in this case as well, he managed to keep the other guy, who's actually not a guy who's a woman, at Disney. So he's very chuffed with himself and taking a little bit of a victory lap.
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C
Also, Disney is very hierarchical. And so I think the reason why everybody thinks that this might actually work is Dana Walden, who's the new Chief Creative officer, which is a title that they created for her after she lost the make off, is reporting directly to Josh d'. Amaro. They're not trying to do some co CEO thing where inevitably there are going to be conflicts. You know, demaro does have this sort of final say in everything. And whether Dana Walden wants to work with him in that way, it seems like she does from all the reporting. Like, it seems like this structure makes sense.
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A
Yeah. And I think like on some level, she just gets to run Hollywood.
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C
Yeah. Which is the prestige.
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A
Which is the prestige job. And she's making a shit ton of money doing it. And she's a very important person. And she's just, she's actually becoming more important as a result of this. And 99% of the time, the buck is gonna stop with her.
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C
I like that. This parallels the arc of succession, the TV show where Tom Wamsgans, the theme park guy, ends up on top and then, you know, the kids get the prestige business.
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A
Although the big difference is that Tom Wambsgans is not competent in the way that demaro is. But I think in a weird way, I would rather have Walden's job than demaro's. Not just because it's more glamorous, because, like, you can be a loss center running the movies and the streaming platforms and all of that. Just so long as all of that IP that you're creating can then flow over to the parks and to the experiences and all of the rest of it that demaro is coming from. And he can monetize that in a much more effective way if a movie ticket costs 20 bucks and a ticket to Disney World costs 200 bucks. So as long as you're keeping the demand for tickets to Disney World, it doesn't matter so much if you're not selling the movie tickets.
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C
We should also mention that Walden was considered the front runner for a long time, and then it became clear that tomorrow's unit was so much more profitable than the rest of the company. But all the tea leave reading in the reporting is so fascinating. People are reading into the fact that at Disney's summer retreat, demaro lost at Pickleball, and they considered that a bad omen.
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A
Next time, it's going to be Curling. Bloomberg has this whole story about how Curling wants to be the new Pickleball.
- [31:06]
D
One of the quotes, I think it was Bloomberg somewhere, a Disney CEO, it said, is an instant celebrity. True. I feel. False. Maybe in the past, but not anymore.
- [31:17]
A
Michael Eisner was a celebrity.
- [31:19]
D
Yes.
- [31:20]
A
Bob Iger definitely became a celebrity. Definitely. In the corporate world. He did a couple of massive deals that transformed the universe.
- [31:29]
D
He was a corporate celebrity. But I don't think it translated out bigger picture, like Steve Jobs level.
- [31:34]
A
Yeah, he's not a Steve Jobs level celebrity. Well, I mean, Steve Jobs also, you know, is in the Disney verse. He sold Pixar to Iger.
- [31:42]
D
Yes.
- [31:43]
A
But I think that that little one we had in the middle who was slightly disastrous, Bob Chapek, like he was, certainly failed to become a celebrity. And I do get the feeling that d' Mauro has no particular need to step into that part Veigar's job and is happy to let Walden be the sort of face of Disney in Hollywood.
- [32:02]
C
He is. But what's interesting about him is that he seems like a true Disney believer in a sort of little kid way. Like he slept overnight in the princess cap. You know, he gets really excited about stuff.
- [32:13]
A
Yeah. And that's good. Sure.
- [32:14]
C
And so I think he could become, if he's more public about that or he's more public facing. He could become a sort of CEO celebrity just because he's so enmeshed in the brand 100%.
- [32:24]
A
If his comms team decides that he's gonna be like a thought leader going out, you being interviewed by David Rubenstein and appear and doing TED talks about the magic of Pixar and all of this kind of stuff. He has a lot of very expensive people who can write him really inspiring speeches. I just don't think he has any desire to do that.
- [32:44]
D
The idea that a CEO can become an instant celebrity is over. I don't think first of all that CEOs want to be celebrities like you're saying. I don't think Josh d' Amaro wants to be a celebrity. I don't think there's appetite for that. Because being a celebrity CEO just makes you too high profile. Especially right now with the occupant of the White House. Because if he has like a very visible target of the company, it just makes things worse for the company. So it's better not to be that kind of like old fashioned Steve Jobs Eichner kind of celebrity CEO. I think the era of the celebrity CEO, this is my hot take is over. Andy Jassy. Does anyone know they still think Jeff Bezos is the CEO?
- [33:22]
A
I was just thinking about that. Everyone thinks that Jeff Bezos runs Amazon and I'm sure Andy Jassy is very happy for everyone.
- [33:29]
C
Right.
- [33:30]
A
Davis runs Amazon. Yeah. Even at Microsoft. I don't think Satya Nadella is like a celebrity.
- [33:35]
D
He's just a Google CEO. No one knows.
- [33:37]
A
Yeah. Who is the Google CEO?
- [33:38]
D
It's that guy.
- [33:39]
C
What about Elon though?
- [33:41]
D
He is the exception.
- [33:42]
A
Well, no, but Elon is a founder. He likes to think of himself as a founder. He's not a hired manager. No one in the history of the world would ever hire Elon to be a manager.
- [33:51]
E
No.
- [33:54]
D
Super no.
- [33:56]
A
And that's the difference. Like the CEOs that we're talking about. If you are at a big public company and the board of the company is picking the next CEO, that kind of CEO who's been picked by a board who's come up through the ranks or has been a manager somewhere else and is now going to be a manager here, that kind of CEO celebrity. I think. Yeah. I agree with Emily. There were a few of them along the way.
- [34:17]
E
Jack Welch, who we've talked a lot.
- [34:20]
A
In the past, possibly still.
- [34:21]
C
Tim Cook would count Gates, obviously.
- [34:24]
D
Although he's a founder.
- [34:24]
A
No, Gates is a founder. Yeah, I think I agree And Disney has always had this kind of aura around it because it's Disney. But now, you know, now all of the aura is moving over to, I don't know, OpenAI. And Sam Altman is the celebrity founder.
- [34:38]
D
Founder, like you said. Yeah. And for better or for worse, This.
- [34:58]
F
Is an ad by BetterHelp.
- [34:59]
D
Did I talk too much?
- [35:01]
A
Can't I just let it go?
- [35:09]
F
Take a breath. You're not alone. Let's talk about what's going on. Counseling helps you sort through the noise with qualified professionals, and online therapy makes it convenient. See if it's for you. Visit betterhelp.com randompodcast for 10% off your first month of online therapy and let life feel better.
- [35:30]
G
Hi, I'm Mark Bittman from the podcast Food with Mark Bittman. I am not a sentimental person, but I am a romantic. And my plan is to cook my beloved a beautiful meal on Valentine's Day. If you're doing the same, let me recommend Whole Foods Market as the place to plan the perfectly indulgent and romantic evening at home. And don't forget flowers. Taste the love all month at Whole Foods Market.
- [36:00]
A
I have a bet on Kalshee about the Oscars.
- [36:04]
D
You do?
- [36:05]
A
I do.
- [36:06]
D
What is it?
- [36:07]
A
I bought Sinners to win best production design. That's very niche at $0.07 on the basis that, like, I think because it had 16 nominations, there's going to be like a point in time where there's a feeling that cynicism might just run away with it. And so that could start trading up to, you know, like 20 cents or something and I can double my money and then get out before the actual result. That's. This is a trade, not an investment. This is not necessarily a hold to maturity trade. I don't think it's necessarily going to win, but I do think that the probability is going to rise from where I bought it.
- [36:42]
D
Are you allowed to do that as a Bloomberg worker?
- [36:44]
C
Is you talking about this going to change other people's bets?
- [36:48]
A
Oh, I hope so. I want. I want all of the Slate money listeners to join me in this trade, pump up the price, and then of course, I'll be first to dump and take profits. I'll rug pull a lot of you.
- [37:00]
D
How much money will you make? How much did you bet?
- [37:02]
A
I bet $15.
- [37:03]
C
Whoa.
- [37:04]
D
There's a lot on the line.
- [37:05]
A
There's a lot on the line here.
- [37:07]
C
Two coffees in New York City.
- [37:08]
D
Exactly how much do you make? Like, how does that. I'm not good at this, so I.
- [37:13]
A
Stand to make so If I hold to maturity and sinners wins, then I get like over 100 bucks. But if I, you know, if I just sell it at twice what I paid for it, then I make 15 bucks.
- [37:24]
D
And you want to make 15 rather than gamble on making.
- [37:28]
A
If it just kind of stays at its current level, I think I'm up like three bucks or something right now. If it just kind of stays where it is, then maybe I'll just gamble the 15 and they'll hold to majority. And if it comes, if it surprises everyone and they win, then I make lots of money. I'm okay with losing the 15 bucks.
- [37:44]
C
Felix, you are in the sophisticated pot of gamblers in Kalshi.
- [37:48]
A
Absolutely not.
- [37:49]
D
Is that true?
- [37:50]
C
Where are we going with this kind of. Is that this report came out that says that people who are sort of less sophisticated on Kalshi are losing more money than people who are using sports books. So I think you have to explain.
- [38:02]
A
So, okay, so, yeah, so the way that Kalshi makes money is very similar to how stock exchanges work. It's got a make or take, a system where if you, you can see a bid office bread and if you just hit that bid office read if you like, I will buy at the offer, I will sell at the bid. Then you're what's known as a taker. But the people who are offering the contracts at the bid and the offer, they're called the makers. They're the market makers who are setting the price. And Kalshi takes a commission from the taker. Who's me just buying this thing on Kalshi. If I was out there like setting a pricing, I'm willing to buy at this level and then wait for someone to hit that, then I would be a maker and then I would not be paying commission. And anyway, just because in this case, I was a taker and not a maker, like, I am basically the dumb money here, the smart money is the market makers and the people who are like, trading much more frequently and much more in a much more sophisticated manner.
- [38:54]
D
Wait, I'm sorry. So Kalshi isn't the one making those different markets. It's individual people on Kalshi, they sign.
- [39:01]
A
On and they say, like, there is no sportsbook. So Kalshi and Polymarket both work.
- [39:06]
D
So I'm sorry. So I could go on to Kalshee and. And I could say, felix will interrupt Emily and Elizabeth 15 times. And I could sell that as a market on Kalshi.
- [39:17]
C
Yes, I could. Me.
- [39:19]
A
Well, I mean, they would need to set up the market. But once they set up the market, then it's up to the users of the site to start making prizes on it. When Kalshi sets up the market, all it does is it sets up the market and then there's price discovery from the users.
- [39:34]
D
That's so cool.
- [39:35]
A
Kalshi has the marketplace and then the market maker is the one who's setting the bid and offer. Or often there's two different people. One has got the highest bid, one has got the lowest offer, and then that spread is the bid offer spread, which the takers can either hit or they can just try and put in their own bids and offers inside that spread.
- [39:54]
C
This is in contrast to the way the sports books work, where the company is making the market and Kalshee is arguing that their businesses fairer because they're not on the other side of the trade.
- [40:06]
F
Right.
- [40:07]
A
Not just fairer, but in aggregate, bettors lose less money on Kalshi than they do in sportsbooks because the sportsbooks are taking a higher percentage of bets than Kalshi is or than Polymarket is. So if you just look at the entire aggregate of all of the activity on these sites, then the people playing on Kalshi, and this is just a game, it's not an investment, are losing less money than the people playing on sportsbooks in Vegas or anywhere else. But, and this is the interesting thing that we're talking about, what was reported this week is that the median gambler on Kalshi actually loses more money more quickly than the median gambler on sportsbooks, partly because Kalshi encourages a much faster pace of gambling. If I were to go to a sports book and bet on sinners winning best production design at the Oscars, then I basically have to hold that to maturity. There's no way that as the odds change, I can then go back to the sportsbook and say, I'd like to unwind this bet at a profit. So there's much more velocity on these prediction market sites. And if I'm losing a little bit of money much more frequently, that adds up to greater losses than if I just lose $15 every time I bet on sinners with a sportsbook because I'm trading in and out. And then the other thing is that because most of the players on Kalshi are takers rather than makers, they are taking all of the losses. Basically, the makers are making money. Kalshi is profitable for some people. And so the median amount that you lose is much, much higher than the average amount that is lost.
- [41:49]
D
Sorry, I Got. I was getting bored. The median amount that you lose. What?
- [41:53]
A
The difference between mean and median is very important here. The mean losses on Kalshi are low, but the median losses on Kalshi are high.
- [42:00]
D
Okay. Oh, that was interesting. I caught that in the article on Bloomberg, actually, because the article says median losses are high. And then Kalshi's response was, average losses are low. And I was like, bro, exactly.
- [42:13]
A
So just beware these prediction markets because you are not as smart as you think you are, I think is the lesson here.
- [42:18]
D
And then there was a fun little backstory in the Bloomberg piece where this data comes out, published by Citizens Bank.
- [42:24]
A
I think, or Jelly Roll or something. And then Citizens use the data from Jelly Roll.
- [42:30]
E
Was it Jelly Roll?
- [42:31]
D
Should we actually make an effort to get it right?
- [42:34]
E
Perhaps Juice Real.
- [42:35]
A
Juice Real.
- [42:38]
D
So then the Bloomberg reporter reaches out to Kelshi to be like, what do you think of this report? And they're like, it's wrong. And also, this is extortion. The Juice reel is trying to get us to pay it to not release the data or something like that. But then Kelsey called the reporter back and was like, actually, it's probably not extortion, but it's still wrong. And then they did the whole average to the median thing, which what she.
- [42:59]
C
Said, the comms person said that Juicerial had approached them about an investment or something. And the Juice Real CEO was like, I didn't do that. They called me and asked me if I would get rid of this data.
- [43:10]
D
Yeah. Doesn't make sense. Kalshi look very good, I don't think.
- [43:13]
A
But I mean, they're up and to the right. They're going to be making lots of money on the superb owl and all of that.
- [43:19]
D
But one thing, when you say that the median loss on Kalshi is greater than what people lose on the sports betting sites, it's as a percentage of what they're putting down. So it's not as like, like people could be betting lots, lots, lots, lots more money on the sports site. We don't know.
- [43:38]
A
Yeah, exactly. Just on a percentage basis, Kalshi seems to be quite good at getting people to trade more frequently. And just in general, if you trade more frequently, then you're going to lose more.
- [43:50]
D
But it could be like smaller amounts for the people, which seems like, not as bad as like trading less frequently for bigger amounts. But I don't know. That's just. That's not the math.
- [43:59]
A
Yeah. You can't do this as a percentage of like, net worth because we just don't know what people's net worth are. If this is just like fun and games on Kalshi and they're saving their big bets for the sports books, maybe, yeah, maybe that's where they lose the big money. We don't know.
- [44:13]
D
And finally, what is a sophisticated Kalshi investor versus an unsophisticated Kalshi investor?
- [44:19]
A
The sophisticated Kalshi investors are the ones who are constantly arbitraging with polymarket who are really looking at this like a very illiquid trading market where there's lots of short term trading opportunities and who often either work at or would want to work at somewhere, Citadel or Jane street or something like that. And then not sitting there just going, I think the Patriots are going to win, so I'm going to bet on the Patriots.
- [44:43]
D
Wait, I would just say that now that I'm back on Axios Markets full time, if a sophisticated Kalshi investor is listening, that they should get in touch with me because I think that's interesting and I haven't read very much about the sophisticated Kalshi investor types.
- [44:56]
A
I agree. I would love to read about that on Axios Markets. Numbers round. Emily, what's your number?
- [45:21]
D
My number is 2000.
- [45:22]
A
Is that a year?
- [45:24]
D
Well, yes, but not in the context of my number 2000.
- [45:27]
A
I thought we were talking about stock market crashes and we're going to have another stock market crash number.
- [45:31]
D
But no, no, 2000 is the number of cold, stunned iguanas.
- [45:37]
A
Oh my God.
- [45:38]
D
Collected. Collected by Florida's wildlife agency last week after a two day cold snap in Florida.
- [45:46]
A
Oh my God. The poor iguanas.
- [45:48]
D
Oh my God. So I read the story. I heard about it in Axios because our Florida, our Miami newsletter reported on it and I was like, oh yeah, whatever. Iguana is stunned. I don't know. Then I went and looked at the video. These iguanas are like at least like a foot, two feet. They're really long, big animals and I guess when it gets really cold they just freeze up. So it's a good opportunity for homeowners or locals to just scoop up the iguanas and bring them to collection sites. And the video is just like all these people holding these big iguanas, like dragging them around and piling them up. I mean just wild stuff. Like it made me put my spider problem in context.
- [46:27]
A
So they're like, are they pests?
- [46:28]
D
Yes, they're considered pests. They're an invasive.
- [46:31]
A
When they turn into iguana skicools, that's a great opportunity for you to just take them to the local iguana drop off site where what happens to them at the drop off after they defrost?
- [46:43]
D
I think they're killed. I think, I think so, yeah.
- [46:49]
B
Oh my God.
- [46:50]
C
I saw a video of a guy who just had an armful knocked out iguanas and he laid on the ground and stacked them all on top of himself.
- [46:58]
D
It's just so wild to me. Like I can't think of anything comparable that occurs where I live. We have so many like invasive this or thats, but nothing that gigantic. Except the deer, which we've discussed a lot on Sleep Money.
- [47:11]
B
Yeah, but they don't freeze.
- [47:13]
D
No, it's like as if the deer froze and you'd go out onto your lawn and there'd be like a bunch of frozen deer and then you just picked them up willy nilly, put them in a satchel, took them to the.
- [47:22]
A
I'm perfectly in favor of killing deer. I'm not in favor of killing iguanas.
- [47:26]
D
Felix, you don't want to go down that road. We're going to get hate mail on that again.
- [47:30]
C
Again.
- [47:31]
A
I think that was my least popular opinion ever on Slate Money when I was like rats with legs.
- [47:36]
D
Anyway, people were big mad.
- [47:38]
A
Elizabeth, what is your number?
- [47:41]
C
My number is 116,000 and that's the number of Instagram followers a guy named Mr. Flower Fantastic has. And this guy is a floral artist, he's self taught, he is from Jamaica and he's doing a show at the Brooklyn Botanic Gardens right now called Concrete Jungle. That's an orchid show that's New York City themed. But the best detail about this guy is he's anonymous and he wears a big respirator gas mask and gloves so nobody knows his identity. But he also does this because it turns out he's allergic to flowers and he's a florist who has worked with LVMH and you know all these big brands to do installations. But I also have a related, but not coda. I feel like Slate Money, largely via Emily, has become the explainer for Gen A slang. And there's one that I just read about in the Times and I asked my 10 year old if he'd heard of it and he was like no, but do you know what a chapel ganger is? Yes, Emily knows.
- [48:35]
A
I know what a chapel ganger is.
- [48:36]
C
Because you read the Times or had you heard it before?
- [48:38]
D
Because I read the Times and I.
- [48:39]
E
Know what chopped means.
- [48:41]
A
I got chapel ganger from like one of my slacks that I'm in. I think I am a chapel ganger. I'm just like the guy that people look at and they're like, yeah, he's an uglier version of me.
- [48:50]
C
Yeah. So. So chopped is slang for ugly. And then your chapel ganger is somebody who looks like you but is uglier.
- [48:57]
A
I'm like a chapel ganger of Hugh Grant.
- [49:00]
D
I've been told if the slang appears in the Times, though, it is over.
- [49:04]
C
It's over.
- [49:04]
A
Yeah, it's over. It's over. My number moving swiftly on My number is 22 billion, which is the number of euros that Stellantis is taking as a charge because it is pulling the same stunt that Ford pulled and is basically saying EVs. You know how we were saying, like, we are only going to sell EVs in Europe and half of our cars in the US are going to be EVs. We're making this big investment in EVs. Well, never mind. We're just doing a complete 180 on that. So their charge, which is $26 billion, is even bigger than Ford's church.
- [49:41]
D
Wait, is it 22 or 26?
- [49:43]
A
22 billion euros. $26 billion.
- [49:46]
D
Got it.
- [49:47]
A
And this is interesting to me because it shows that, you know, first, Ford is not alone in doing this massive sort of strategic U turn. But number two, we spent a whole bunch of time on Slate money talking about what happened at Ford and thinking of Ford as having their sort of legs cut out from under them by the Trump administration and thinking, if this is, like, terrible for the American car industry, but, you know, Stellantis has a big American component to it, but it is a European company, and this is a European decision made out of Stellantis headquarters in Italy. And their U turn is just as big and in terms of dollars, even bigger.
- [50:21]
D
We talk a lot about the Chinese EVs, and I had a hard time sort of thinking about them. But then I read Joanna Stern, the Wall Street Journal's personal.
- [50:30]
A
Oh, she had a Xiaomi and she loved it.
- [50:32]
D
She. Yeah, she wrote. Everyone should read it. She wrote about it. She loved it so much. She describes it so nicely. And, like, it reminded me of the old Walt Mossberg columns in the Journal where, like, he tries a technology and you finally understand what the hell it does. It was like that. I was like, oh, I want one of these ch. She made it sound so amazing.
- [50:49]
A
Oh, you know what Walt Mossberg did is he quit the Wall Street Journal to start his own company called Recode. Joanna Stern has just done the same thing.
- [50:57]
D
Yeah, it's kind of a glut of tech writers starting their own substacks, though. The Washington Post just let go a lot of tech writers. They all I saw like, were like, follow me on Substack. I have a substack.
- [51:08]
A
I think Joannerstone is going to be more YouTube than substack, but we will see.
- [51:11]
D
I am excited about it. I hope it does well because we need more normal people explaining technology and not using jargon or saying sass.
- [51:19]
A
Joanna, come on this show and plug your product when you have one. We like independent media creators here at Slate Money.
- [51:25]
D
Soon that's all there will be.
- [51:28]
A
I think that's it for us this week.
- [51:30]
B
Thank you for listening.
- [51:32]
A
Thank you for staying invested in hodling the Slate Money RSS feed in your RSS podcast listening app thing, which I guess is software as a service. It all comes into one, one big, you know, glue ball of tech. But we appreciate you. Thanks for being a Slate plus subscriber. If you are a Slate plus subscriber, we have a Slate plus segment this.
- [51:53]
C
Week on luxury gifting.
- [51:55]
A
Gifting, Luxury gifting. What rich people give each other when.
- [51:58]
D
They give each other gifts sex offenders give each people.
- [52:02]
A
And that too.
- [52:03]
B
And mostly thanks to Micah Phillips and Shayna Roth and Jessamyn Molly and Seaplane Armada and all of the people behind.
- [52:10]
A
The scenes who make this show possible. We love you and we'll be back.
- [52:15]
B
Next week with more Slate Money.
- [52:36]
H
AI is transforming customer service. It's real and it works. And with fin, we've built the number one AI agent for customer service. We're seeing lots of cases where it's solving up to 90% of real queries for real businesses. This includes the real world, complex stuff like issuing a refund or canceling an order. And we also see it when FIN goes up against competitors. It's top of all the performance benchmarks, top of the G2 leaderboard. And if you're not happy, we'll refund you up to a million dollars, which I think says it all. Check it out for yourself at fin.AI.
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I
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