Slate Money – “Jack Jack” (March 7, 2020)

Hosts: Felix Salmon (Axios), Anna Shymansky (Breakingviews), Emily Peck (HuffPost)
Main Theme:
A lively breakdown of recent business and finance news, focusing on the impacts of the Fed’s emergency rate cut in response to coronavirus, the contrasting legacies of Jacks Dorsey (Twitter/Square) and Welch (GE), and the financial crisis in Lebanon.

Key Topics and Discussion Points

1. The Fed’s Emergency Rate Cut and the Coronavirus Crisis

[00:10 – 14:47]

• Background & Context:
  The Fed made an emergency rate cut (the first since 2008) in response to growing economic fears around the coronavirus outbreak.
• Unintended Signals:
  • Felix questions whether panicky rate cuts actually calm markets or increase anxiety.
    “If you want to really try and send a signal that don’t worry people, we have this under control and don’t panic, then a panicky rate cut in between meetings feels like the wrong message to send.” – Felix [01:32]
  • Anna agrees, criticizing the Fed’s communication:
    “It was just another example of this particular Fed’s poor communication skills.” – Anna [01:45]
• Limitations of Monetary Policy:
  • Emily: “We sort of hit the wall on monetary policy… this rate cut isn’t really going to do much. What we need to finally do and recognize is that fiscal policy has to happen.” [04:59]
  • The panel discusses the need for fiscal interventions, such as expanding unemployment insurance, beefing up food stamps, or direct payments for medical expenses.
• Supply and Demand Shocks:
  • Anna explains: supply chains disrupted by China’s factory shutdowns (supply shock), and expected reduced consumer spending (demand shock). [07:00]
  • Felix notes pre-pandemic strength in the US economy: “The economy is about as healthy as it’s ever been going into this shock.” [08:06]
• Interest Rate “Bullets” Debate:
  • Felix challenges the logic of “saving bullets” (keeping rates higher to have more room to cut in a crisis):
    “It’s like the Fed only has two bullets… and you should save bullets. And that’s just like a really bizarre analogy.” [08:55]
  • He argues for immediate action if lower rates are needed.
• Banking System and Fiscal Response:
  • Anna: Very low rates may hurt banks, but long-term solutions require more than monetary moves.
  • Emily calls for moving away from an era of austerity:
    “…Maybe the silver lining is we actually start doing more of that stuff and we solve some inequality issues that people were sort of unwilling to deal with.” [11:10]
• Public Health Trumps Economics:
  • Felix:
    “The economic problems facing America, although they are potentially significant… pale in significance to the virus and medical problems. So let’s concentrate on those.” [12:00]
• Semantic Differences:
  • The trio puzzle over the terminology of “fiscal stimulus” versus “public health policy,” agreeing that the point is to support health directly.

2. Corporate Leadership: Jack Welch vs. Jack Dorsey (“Jack Jack”)

[14:49–27:29]

• Two “Jacks”:
  Jack Welch (legendary former CEO of GE, recently deceased), compared to Jack Dorsey (current CEO of both Twitter and Square).
• Jack Welch & the Cult of the CEO:
  • Welch associated with the rise of “CEO as superstar,” prioritizing rising stock prices and shareholder value.
    “What he did was he was the guy who started the cult of the CEO and really made it the same as the cult of the rising stock price and shareholder value.” – Felix [16:33]
  • Welch’s approach:
    • Financial engineering, expectations and earnings management.
    • Using GE’s AAA rating to transform it into a quasi-bank, which proved disastrous during the 2008 crisis.
    • Ruthless management style: “rank and yank”—firing the lowest-performing 10% of staff annually, creating a culture of fear.
      “He got this Neutron Jack nickname… the buildings were still standing, but all of the people were vaporized.” – Felix [19:20]
• Is Laying Off the Bottom 10% Still Cool?
  • Emily: “A lot more companies now, I think, recognize that you don’t want to have a culture of fear and bullying.” [19:39]
  • Anna concedes Welch responded to serious 1970s problems but exceeded necessary reforms.
• Jack Dorsey’s Leadership & the Proxy Fight:
  • Dorsey’s lifestyle (walking, fasting, Buddhist retreat plans) and running two companies draws shareholder activism.
  • Elliot Associates is pushing to oust Dorsey from Twitter—not Square, since Square’s stock is soaring.
    “Because the square share price is doing just fine… no one cares.” – Felix [23:16]
• Twitter’s Future: Innovate or Coast?
  • Anna: “This company is not being run well. If you look at how the share price has performed…this company is not innovating. There is no stasis, you either grow or you decline.” [23:36]
  • Emily and Felix counter that maybe steady, low-drama Twitter is okay:
    “Why do we want a really high growth social network? …Let’s just let Twitter kind of be Twitter.” – Emily [24:19]
  • Felix maintains that profitability does NOT equal imminent death, even at zero growth.
  • Anna warns that without growth, Twitter loses its strategic options:
    “All of its competitors are going to be able to keep innovating, acquire, get better talent… its equity value will then decline significantly.” [26:25]
• CEO Attitudes:
  Emily: “I think all CEOs should work part time, honestly. We don’t need them obsessing about growth that much.” [27:21]

3. Lebanon’s Financial Crisis: Ponzi Schemes and Street Protests

[27:29–39:15]

• Backdrop:
  Lebanon faces a critical banking and sovereign debt crisis, with deep underlying structural and political issues.
• The “Ponzi” Model:
  • Anna describes the Lebanese system: extremely high government debts funded by local banks, which were in turn funded by steady inflows of foreign deposits (mainly from Lebanese diaspora and Gulf countries).
    “This is why I described it as a Ponzi scheme, because so much of Lebanon’s economy is their banking sector and just like ginning up growth through loans for the construction and real estate.” – Anna [30:32]
  • The scheme worked as long as foreign dollar inflows continued—now those inflows are drying up, due to growing Hezbollah influence (scaring off Gulf depositors), political instability, and global context.
• Financial Engineering & Pegged Currency:
  • Lebanon’s banks and central bank used “financial engineering” (swaps, debt games) to pretend to greater dollar reserves.
  • Pegged currency. Felix compares to UK’s pound collapse (“Black Wednesday”):
    “Pegged currencies have a tendency to crash when a lot of people are betting against them. And this is basically exactly the same thing.” [32:16]
  • Two looming inevitabilities: government default; devaluation of the Lebanese pound.
• Default & Banking Crisis Roll Together:
  • Government default hurts domestic banks most, since they are the main bondholders, which in turn risks a full-blown banking crisis.
  • Anna: “The country doesn’t have enough dollars to fund all of those deposits.” [34:30]
  • Banks already limiting withdrawals; effective capital controls in place to prevent a bank run.
• Protests on the Streets:
  • The “WhatsApp tax” (charging for messages) triggered protests but is just the spark for years of corruption, lack of services, and banker enrichment.
    “This is decades and decades of misrule… the population is going to end up screwed.” – Anna [37:00]
• Hezbollah, the IMF, and No Solutions:
  • IMF seems unlikely to bail Lebanon out, given Hezbollah’s power and public resistance to austerity.
  • “There are simply no good options. What will probably happen is this delaying, which will only make things worse.” – Anna [38:01]

4. Numbers Round

[39:49–45:50]

• Felix:
  £1.4 million — What the UK government paid to “Quintessentially” (a connections company) to set up meetings with foreign investors, highlighting Britain’s desperate post-Brexit search for cash. [40:49]
• Emily:
  9 states — The number of US states that have passed measures to stay on daylight savings time. She passionately objects to switching the clocks, citing studies on health effects. [41:32]
• Anna:
  9 inches — The (allegedly) “small” handspan of Joe Burrow, top NFL quarterback prospect, and the absurd fixation on hand size at the NFL Combine.
  Quoting Burrow’s tweet:
  “Considering retirement after I was informed the football will be slipping out of my tiny hands. Keep me in your thoughts.” – Joe Burrow (read by Anna) [45:34]

Notable Quotes & Memorable Moments

• On the futility of monetary policy against public health threats:
  “The crisis is an epidemiological public health crisis… tools that you use to fight a financial crisis… have really relatively limited utility.” – Felix [03:37]
• On Jack Welch’s severance:
  “Jack Welch got a severance package of $417 million… in comparison to Jack Dorsey, the guy was a pauper.” – Felix [16:21]
• On CEO culture:
  “In this enlightened fist, passive meditation, goopy, you know, 21st century era… Jack Dorsey… manages to run two companies essentially in his spare time while trying to become, you know, achieve some kind of nirvana.” – Felix [21:53]
• On Lebanon’s system:
  “So much of Lebanon’s economy is their banking sector and just like ginning up growth through loans for the construction and real estate… It only works because you have these dollar inflows coming in.” – Anna [30:32]
• Burrow’s joke tweet about his “tiny” hands:
  “Considering retirement after I was informed the football will be slipping out of my tiny hands. Keep me in your thoughts.” – Joe Burrow (quoted by Anna) [45:34]

Timestamps for Important Segments

• **[00:10] Introduction and top stories preview
• [01:20] Discussion on the Fed’s emergency rate cut and market reactions
• [04:47] Why monetary policy may be the “wrong tool” for the coronavirus crisis; push for fiscal policy
• [07:00] Explaining supply vs. demand shocks
• [14:49] Transition to “Jack Jack” — comparing Welch and Dorsey
• [15:12] Welch’s legacy, management style, and the birth of CEO culture
• [21:53] Jack Dorsey’s laid-back multi-CEO persona and current challenges
• [23:36] Twitter under Dorsey: growth, innovation, and boardroom battles
• [27:29] Lebanon’s imminent crisis, Ponzi mechanics, and public protests
• [32:16] Currency peg explainer and analogies to UK’s Black Wednesday
• [39:49] Numbers round: Quintessentially, daylight savings, NFL hand size

Tone & Style

Conversational, witty, irreverent, but always grounded in expertise and lively debate. The hosts challenge each other, mix skepticism with humor, and delve deeply while keeping topics accessible.