Slate Money: ‘Good News is Good News’ Territory

Episode Date: July 4, 2020
Host: Felix Salmon (Axios)
Co-hosts: Anna Szymanski (Breakingviews), Emily Peck (HuffPost)

Episode Overview

In this week’s episode, the Slate Money team discusses some of the most pressing stories in business and finance, with a focus on what constitutes "good news" during turbulent times. The hosts cover:

• The Facebook advertising boycott and its broader implications
• The Trump Administration’s move against ESG investing
• The recent U.S. jobs report amid the COVID-19 pandemic
• Diversity and discrimination issues in tech companies like Facebook

The conversations weave together corporate responsibility, the structure of the online advertising business, government policy on social investing, and the economic reality for workers during the pandemic.

1. The Facebook Advertising Boycott

(Starts ~00:27)

Key Points & Insights

• Background: Over 400 major corporate advertisers boycotted Facebook (and Instagram) for July 2020, in protest of the platform’s handling of hate speech and misinformation—specifically, its policy of not fact-checking political ads and allowing inflammatory content from figures like Donald Trump.

  • “It’s a pretty big deal just on corporations making a stand, not just in a vague way… but saying, you, Facebook, you are doing something wrong and we are going to try and punish you for it.” - Felix [01:15]

• Economic Impact:

  • Facebook claims top 100 advertisers only account for about 6% of ad revenue; the bulk comes from small businesses. The direct financial impact of the boycott may therefore be limited.
  • “These are big companies, but Facebook is saying that most of their advertising comes from smaller businesses, which is sort of interesting.” - Emily [03:29]

• PR and Optics:

  • Many brands see the boycott as a PR win, coinciding with the pandemic-driven decline in ad spending.
    • “They probably wanted to cut back on ad spending anyway because of the pandemic... this enables them to do that while also getting a PR win.” - Anna [04:33]

• Facebook’s Response:

  • Banning some white supremacist groups, but gestures seen as inadequate compared to the scale of public criticism.
    • “Think how small that gesture is compared to all the pressure on them. It just again, indicates to me that... nothing major is going to change from this. I’m sorry, we need regulation.” - Emily [05:22]

• Host Analysis:

  • The boycott might signal a shift away from social media for brand advertising, but doesn’t threaten Facebook’s core business (SME ads).
    • “I don’t think this is a big story in terms of the economics of Facebook, but I do think this is a big story in terms of it could mark an inflection point in terms of how brand advertisers advertise.” - Felix [09:02]

• Brand Boycott Dynamics:

  • The pressure for brands to participate is coming not from social media consumers but from advocacy groups (like Color of Change, ADL, Sleeping Giants), who worked behind the scenes with ad agencies.
    • “It was a very behind-the-scenes... not in public, not on social media, and persuading them privately. I honestly don’t think this boycott was driven by social at all.” - Felix [16:27]

• Misinformation and Political Extremism:

  • Facebook surfaces a disproportionate amount of right-wing and fringe content due to its engagement-focused algorithms.
    • “It’s just the top 10 is just a list of like the most right wing conservative crap out there.” - Emily [13:30]
    • “YouTube and Facebook both optimize for engagement... the extremes of like, political discourse, anti vax discourse... are exactly the kind of conversations that elicit the most engagement.” - Felix [14:36]

2. The Trump Administration and ESG Investing

(Starts ~17:56)

Key Points & Insights

• Department of Labor’s Move:

  • Proposed rule would make it harder for pension funds to offer ESG (Environmental, Social, Governance) investment options unless justified strictly by expected financial returns.
  • Contrasts sharply with EU, which mandates factoring ESG into investment decisions.
    • “The rule basically says you are not allowed to put anything ESG as the default option... And if you can’t [prove it’s pecuniary], basically don’t invest in ESG.” - Felix [18:21]

• Host Opinions:

  • Seen as a ‘lame duck hippie punching’ move—ideologically driven rather than practical.

    • “The move was lame duck hippie punching from a beleaguered administration looking to throw a bone to climate change deniers.” - (Emily quoting Felix) [19:54]

  • Anna clarifies that while ESG standards can be inconsistent, pension funds should have the choice.

    • “It’s still nascent in a lot of ways... but that doesn’t mean that you shouldn’t have, or a pension fund shouldn’t have the option of choosing an ESG fund.” - Anna [20:30]

  • Discussion on whether “investing itself is political.”

    • “Investing in stocks is by its nature sort of putting your hands on the scale of the haves against the have nots...” - Felix [23:44]

• ESG Effectiveness:

  • ESG funds often don’t deliver significantly different outcomes, but provide ethical options for investors.
    • “Most of them are not [that good]. And we can have a, we can have a whole conversation about that on some other episode. It’s very, very marginal what kind of effect they have...” - Felix [25:11]

3. The U.S. Jobs Report and Economic Outlook

(Starts ~26:07)

Key Points & Insights

• Recent Data:

  • June saw about 4.5 million jobs added, but the metric reflects data from mid-month—a possible false positive given more recent virus surges.
    • “Four and a half million people got jobs in June, which is great, but it wasn’t really in June. It was looking at one week... which happened to be the absolute low point of the coronavirus curve.” - Felix [26:07]

• Long-Term Concern:

  • Permanent unemployment is rising; many lost jobs won’t return after the pandemic.
    • “The number of permanently unemployed people is going up even as the number of temporarily unemployed people is going down.” - Felix [27:29]

• Fed’s Role:

  • The Federal Reserve is pessimistic and emphasizes the need for further government stimulus; monetary policy is nearing its limit of effectiveness.
    • “Honestly, I think those [virus metrics] are probably going to drive what happens on the ground more than one month or... noisy data.” - Anna [26:46]
    • “The Fed can do essentially nothing. In order to really help at this stage, it has to come from Treasury.” - Anna [28:13]

• Stimulus Politics:

  • Congressional Republicans increasingly argue that economic improvement means less need for stimulus, which could badly undermine recovery.
    • “Every good jobs report makes it less likely we’re going to have sufficiently large fourth round of stimulus. And that should be bad news for stocks.” - Felix [29:16]

• Education and Stimulus:

  • Upcoming school year hinges not just on funding, but on logistics and infrastructure; state/local government aid may provide marginal relief.
    • “This is one of those areas where a bunch of federal cash has limited utility. The one place where absence of cash is a problem is in state and local governments.” - Felix [31:16]

• Unequal Recovery—Race and Unemployment:

  • Unemployment dropped for every demographic except Black men, highlighting structural racism embedded even in seemingly ‘neutral’ policy responses.

    • “Unemployment for black men actually went up, which is awful... you can really see in real time how structural racism kind of reinforces itself in so called race neutral policies.” - Emily [33:26]

    • “One of the proposals I’ve seen... is to specifically tie fiscal policy and... unemployment benefits... to what’s best for black women. And if you do that... it helps everyone.” - Felix [34:50]

4. Numbers Round

(Starts ~35:52)

• Felix: 1.6%

  • The percentage of small-cap fund managers who’ve remained in the top quartile over two consecutive three-year periods, arguing against persistence in fund outperformance. [35:52]
  • “There is absolutely no persistence in outperformance whatsoever... This is an argument against active fund managing.” - Felix [36:01]

• Anna: $700 Million

  • The amount allocated to bail out YRC Worldwide, a trucking company primarily serving the Department of Defense.
  • Bailout questioned, as YRC is under legal scrutiny and has weak financials.
  • “They’re already getting sued for overcharging the government... the interest rate... the US Government’s kind of getting screwed in this particular loan.” - Anna [37:35]
  • In exchange, Treasury gets a ~30% equity stake. [38:24]

• Emily: 3.8%

  • The percentage of Facebook employees who are Black, according to an EEOC complaint.
  • The complaint alleges that Facebook is a difficult environment for Black workers, especially in hiring and culture fit.
  • Arbitration clauses suppress public scrutiny of race discrimination cases.
  • “Companies can still, you know, shut up employees and send them to secret arbitration for race discrimination. Just something... that I think is going to come up more in the coming year.” - Emily [41:19]

Notable Quotes & Memorable Moments

• On Facebook’s Brand Advertisers:

  • “They moved away from print en masse, they moved toward Instagram en masse. And now they might be thinking to themselves, well, is this actually working for us?... maybe we can keep on doing this.” - Felix [09:02]

• On Social Media’s Double-Edged Sword:

  • “You can’t discount the power of social media, like over the past... decade... in pushing actual progressive causes, like look at MeToo for example, or... the George Floyd protests...” - Emily [17:12]

• On the Paradox of ‘Race Neutral’ Policy:

  • “You’re seeing the federal government pull the rug out from unemployment benefits at the same time... you can really see in real time how structural racism kind of reinforces itself in so called race neutral policies.” - Emily [33:26]

Important Timestamps

• Facebook Boycott: 00:27 – 17:56
• ESG Investing and Department of Labor: 17:56 – 26:07
• Jobs Report & Economy: 26:07 – 35:52
• Numbers Round: 35:52 – End

This summary presents the heart of the episode’s conversations, with a focus on actionable insight, direct quotes, and attribution for easy follow-up. Those looking for business, regulatory, and economic context—spiced with the panel’s signature wit—will find the key themes well represented above.