B (3:12)

Some reporting last night just to cut you off.

A (3:14)

Okay.

B (3:15)

It wasn't that they were completely blindsided. They knew this was going on. Apparently Harry called his dad, Prince Charles, over their six week sabbatical in Canada and he said, look, this is what we wanna do. And Charles was like, you need to submit a written proposal to me. Which if you just step back for a second, this is a person calling his dad and saying, like, this is what I wanna do. And his dad is saying, you have to submit a written proposal.

A (3:38)

Well, I mean, it's not like he didn't have it all in right now.

B (3:40)

Hilarious.

C (3:40)

No, but he gets of his income from his daddy. So, yeah, if I was his dad too, I'd be like, put this in writing. Right, right.

B (3:47)

So what I'm saying is these people, the royals, they knew, they just weren't expecting an announcement yet because they were still ironing out the details.

A (3:53)

Well, they also hadn't agreed to anything. And it was kind of understood that as a member of the Royal family, you know, we're going to work with you to do what you want. But like, ultimately there's, you know, give me a thing that you want to do, put it in writing, I'll run it by my people and then we'll see if we can work something out and we'll put out a document which we can all get behind. But because Charles was like dragging his feet on this, and because the Queen was refusing to really talk about it unless Charles had signed off on it, they were like, fuck it, let's just short circuit the whole thing and put this thing out unilaterally. But because it's unilateral, they don't really know. Can they continue to live rent free in Frogmore Cottage, which is where they live? Can they? Will he continue to get his substantial income from the Duchy of Cornwall, which is basically Prince Charles? You know, all of these questions, which they are just going out and assuming that, you know, the Queen will let them continue to live there, that Prince Charles will continue to give him his income, but neither the Queen nor Prince Charles has agreed this. So, like, what they've announced can't be considered to be the final word on this.

B (5:05)

Right. And, I mean, the whole episode has given us the opportunity to think about the finances of the royals. And after reading about it, you know, all week, basically. Sorry, HuffPost, but you've been reading about.

A (5:19)

It largely on HuffPost. You've been giving HuffPost those precious page views.

B (5:23)

Yes, of course. And sharing all the pieces on Twitter and doing my best to promote them. There shouldn't be a monarchy.

A (5:31)

No.

C (5:31)

It's so ridiculous. This is like, my. I've gotten into so many fights with people about this, like, over the last, like, decade. Every time I'm like, the Royal Wedding heckler. I'm like, this is ridiculous. Like, I do not understand why, in this day and age, like, people still want to pay money to the government to support people who don't do anything, who think that they're better than everyone else, who support something that, if you think about what a monarchy actually represents, is really, really horrible.

B (5:59)

Right?

C (6:00)

It's.

B (6:00)

And that's what's so interesting about the Meghan Markle situation sort of more broadly, because if you think about it. And there. There was a good piece in the Times this morning about it. The British monarchy is basically this symbol of white privilege. Like the symbol.

C (6:14)

Oh, no, no, not white privilege. White supremacy. White supremacy, yes. Thank you.

B (6:18)

White supremacy. Much better. White supremacy. And then along comes this woman, Meghan Markle, who has, you know, black mother and white father and is, like, upended the whole thing. The British press cannot handle it at all and have just been ripping her apart from day one and sort of like, instead of an acquisition, like, if you think of, like, royal marriages as, like, an acquisition where they, like, acquire these new people and they get subsumed into the culture of royalty or whatever, of white supremacy, the acquisition just has utterly failed.

C (6:50)

The synergy didn't play out.

B (6:51)

There's no synergy. Like, she had to, whatever, leave. She had to tap out.

A (6:57)

She's the first person, really, to marry into the family, who had a career and an income and a life before marrying into the family and who was, like, her own person and actually, you know, kind of famous and well known. So she, I think, just has a much lower level of bullshit that she's willing to put up with compared to someone who's like, oh, I'm gonna be a princess, you know, and it's. Yeah.

C (7:25)

And I think it's interesting, too, because I know one of the criticisms I was hearing of people being like, oh, well, they're gonna try to make money off of this. Role. And I'm like, why shouldn't they like what their role is? Are weird, weird celebrities now. They will continue to be celebrities in a different way.

A (7:41)

So, so the making money bit is super interesting. And at some point, perhaps in 2020, I'm gonna find an excuse to get my cousin Thomas Harding on this show to talk about his book about the Salmon family, which is very. We had something very similar actually weirdly happen to us. And in the 1980s there was this deal in the Salmon family where you basically handed over all of your income to the family and then they would give you an allowance.

B (8:07)

Just like the sovereign grant.

A (8:09)

Just like the sovereign grant. And. And then we had a couple of family members who were in high paying jobs and they were like, this is a bad deal for me because I'm handing over more than I'm receiving and I'm just going to like give up what I'm receiving from the family and make my own money instead. And on its face it seems logical, but it does. But doing that basically destroys the entire structure of the family. And that's, I think, why so many people are freaking out. If you are able to do this, especially these days with like, you know, multi million dollar Netflix deals and that kind of stuff floating around in Ethereum, there's a good chance that basically the whole structure of the royal family as a cohesive unit is going to fall apart. And if that happens, that's one more reason why the Royal family should just become disestablished, basically.

B (9:04)

And can we talk more about the sovereign grant? Because this is like a new thing and it's mind boggling to me. So there's something called the Crown Estate, which is all the holdings and landholdings of like Queen Elizabeth's fam.

A (9:17)

Yes.

B (9:18)

And it makes an income every year and instead of just taking the income, she turns it over to the government and they give her like 25% back.

A (9:27)

Yes.

B (9:28)

Now the income that she's making from the Crown Estate is that just like British real estate holdings that really shouldn't be owned by a person anyway.

A (9:37)

Well, I mean, yes. I mean she owns a bunch of stuff, but you're right, a bunch of it is real estate holdings. So one of these things, like when I was growing up, everyone would say, oh, the Queen, the richest woman in the world and then everyone go away. What does that mean? Yeah, like does she personally own like the Crown jewels?

B (9:54)

Right.

A (9:55)

You know?

B (9:55)

No.

A (9:56)

I mean, so.

C (9:58)

No.

A (9:59)

So so basically the understanding is that this thing called the Crown Estate is part of the British state And it generates income which goes to the British state. And it's not really the personal income of the Queen, but it's enough royal related that she feels that she should be able get at least some percentage of it back. And in that it's very different from the Duchy of Cornwall, which is where the Prince of Wales gets most of his income, which is generally understood to be a large chunk of Cornwall, basically, which is personally owned by the Prince of Wales and generates a whole bunch of income. And he can then pass on some of that income to his sons for them to live on. And there are two different types of holding, one of which is basically the state, one of which is basically personal. And I'm not entirely sure how they draw the line between the two or why one is one and why one is the other. But yeah, the Crown Estate has, you know, because it's real estate and real estate has been doing quite well. The income from the Crown estate is hitting record highs and she gets like a fixed percentage of that. So the royal income is hitting record highs. And so she gets to play around with quite a lot of cash. But even then Prince Harry is like, I don't really need that cash, mostly because I'm getting most of my money from my dad rather than from the Crown Estate. So why don't I just go off and do my Netflix deal? The, the, the danger here is that, like, every single royal who's entered, you know, the private money sector has made atrocious decisions. You know, they've all wound up doing deals with just like very, very shady characters in one way or another. And so the risk is that the people who are offering Harry and Meghan, like the most attractive financial office might not be entirely above board. And then that's going to be even worse for the Royal family.

C (11:52)

Well, I would say that if these people can't exist in the private sector like all the rest of us, then, well, sucks for them. Like that does not.

A (12:00)

No, no one, no one is. That's not the risk. The risk isn't that they can't exist in the private sector. The risk is that they can exist in the private sector, but in doing so, they are going to wind up financially entangled with a bunch of.

C (12:12)

Right, but what I'm saying that if they're so inept that they're going to get, you know, connected with the Jeffrey Epstein world, like, like, like, like, like Harry's uncle, then, I mean, like, well, then maybe that's just one more reason why you should not have government money being Used to support these people.

B (12:28)

I. Yeah. I just don't understand. Like, I guess every. Not every, but British people who pay taxes, it's like 1.24 pounds a year goes to the Royal Family.

C (12:37)

Like, but it's more than that.

B (12:38)

But it is more than that because they don't disclose security costs and Harry and Meghan will still have security.

A (12:44)

And probably according to them. Like, everything is according to them. Like, their, their statement is very much and very clearly, this is how we would like it to be. And this has not been negotiated. This is just a unilateral statement. And then no one is. No one has agreed to this. They've just decided that if they give up the 5% of their income that comes from the Crown estate, that frees them to live wherever they want in the world to make as much money privately as they want. They had this idea that the only reason they were not allowed to make money privately was because they got this 5% of the income from the Crown estate and often the sovereign grant, and that if they give up that 5%, then they're free to make as much money as they like. They have declared this unilaterally. Like, no one has agreed to this. So it's going to be super interesting to see how much of what they want they actually get. And this whole idea that you can resign from being a royal is kind of bizarre.

B (13:36)

Well, I mean, if you can resign from being a royal, it kind of undermines the whole operation. Right. Because isn't it an inherited familial thing? And if you can just resign like it's a job, then maybe it's all bs. Maybe. Maybe, just maybe. But also, I had heard that Prince Charles's grand plan was to have fewer people getting the sovereign grant. Like, he wanted to sort of whittle down the family so there wouldn't be these kind of like hangers on sucking, you know, like, not doing anything well. And you've seen that, like, Eugene. I don't know the other names, but.

C (14:08)

I mean, you've seen that in other countries that have kind of. They're whittle it down. Yeah. Like Sweden or whatever. Like, yeah, they have a much. I mean, the fact that they still have any real family is absurd, but.

A (14:16)

I mean, there's always a family. I remember this glorious Vanity Fair spread, which was like a million pages a few years back, where they just went through every single European country basically, and said, well, each one of them has some kind of royal family. Most of them are just private citizens, but they all Call themselves, you know, the Prince this and the Count of that.

B (14:32)

And it's, that's the key private cities.

A (14:35)

You know, they all just pay their taxes and they have some glorious title and everyone's sort of like, oh great. And the people who care about the titles care about the titles and the people who don't, don't. And that's fine. I think Britain is the only. Britain isn't the only one. Like Belgium still has like an established monarchy. You know, there is a King and Queen of Belgium, but they're, you know, who cares about the King and Queen of Belgium? Like basically no one. Right. You know, the world cares, as the, you know, page views at HuffPo will attest. The US cares about the, about the UK royal family.

B (15:05)

And that's kind of their argument. They argue that they bring in millions and billions of dollars in tourist money. I'm always very suspicious of those stats. They basically argue that they're kind of like IP slash brand assets for the country. And I just think that's kind of specious. People would still go to London if the Queen wasn't there or even if.

A (15:25)

Or more to the point, if she was there, but she wasn't receiving money from the government. Right.

B (15:30)

And apparently they don't. I went deep into this report from this group called Republic. They're like anti monarchist group in the UK and they argue that Queen Elizabeth, because she's famously neutral on everything, it's a missed opportunity. Other countries have presidents and heads of state that are actually active, play a.

A (15:48)

Real role, her role in the whole Brexit fiasco. I mean, in case we hadn't noticed, there was a genuine constitutional crisis in Britain over the past three years and she was entirely otios.

B (16:01)

Exactly. And she could have, I mean you could imagine like an alternate universe where she took a position and.

C (16:06)

Right, but should she be taking a position, this woman who has no reason.

B (16:10)

To whatso but like maybe there should.

C (16:12)

Be an outcome, a figurehood.

A (16:14)

There's always some kind of head of, like if you're gonna be the head of state, you should be empowered to take a position. And if you're not empowered to take a position, then you should be. You shouldn't be the head of state.

B (16:24)

Yeah, it's just like what is happening here? And I guess I was brainwashed slightly by the Crown, which I've watched, which makes this case that she somehow unifies the country every time she does anything or by not saying anything. It's very powerful. But I've come to realize that that's ridiculous. And I just don't see a case for why this country is paying to have these people do nothing but post to Instagram about, like, what they eat and their charities. They live off charity. Have a charity, like, you are a charity.

A (16:58)

My favorite thing about when. So it wasn't that long ago that Prince Andrew was fired from the Royal family again, like, what? You know, for basically giving the world's most disastrous television interview of all time. And when he was fired from the Royal Family, he had to give up his patronages. And everyone was like, well, all of these charities are going to need new patrons. And I was like, what? And I actually started looking into this. I was like, what does a patron actually do? Do they give money to the charity? Do they raise money for the charity? Apparently, no. They just sit there. A patron. And this is considered to be a good thing somehow. And he had so many charities. Most of them he probably had no contact with in any given year. But apparently it's very important for them to have a royal patron. And, like, it's ridiculous. The whole thing is unbelievably anachronistic.

B (17:48)

What a scam that they've perpetuated for so long. Just unbelievable.

A (17:52)

Could this be the end of the British monarchy?

B (17:55)

I don't think it could end until Queen Elizabeth, because I feel like Queen Elizabeth is quite beloved figure.

A (18:00)

And, yeah, I feel like quitting. We have this, like, non Nigerian queen. No one wants to kick her out of her job while she's alive, but.

B (18:07)

Like, once she's gone, like, Prince Charles is gonna be king.

A (18:10)

No one likes. Yeah, no one likes him. So it's possible. I have to say, I'm kind of impressed. This could be the first ever episode of Slate Money where we have an entire segment where we have three Republicans agreeing with each other. Wine.

B (18:30)

Oh, right. Obviously, Felix knows everything about wine and I know nothing, but I read in the Times that there's a big crisis going on with wine because of Donald Trump and tariffs. And it seemed overblown to me, but then Felix wrote all about it and made the same case, basically that there's a big crisis with wine. So what is going on?

A (18:51)

Okay, so I'm gonna give you the TL doctr and what is going on? And then you're gonna explain why you think it's overblown. Okay, the. The TLDR is that there are two different trade disputes between the US and Europe. One is about European subsidies to Airbus, and the other one is about France's tax on big Internet companies. And the US has decided that both of these are deeply unfair and that they are therefore willing and able to retaliate with trade measures. And the trade measures they want to retaliate with in both cases are wine tariffs. And they already started this in the Airbus thing. I mean, this is where things start getting completely ludicrous. They retaliated to European subsidies to Airbus by putting a 25% tariff on still wine from France, Spain, and Germany under 14% alcohol. It's like, what?

C (19:52)

Okay, that'll get them.

A (19:55)

And so this hit a bunch of wine importers in the United States, and they've managed to kind of try and, you know, eat that as best they can. But now they're threatening to raise the 25 to 100. And if you. And not just from those three countries, but all wine from all of Europe, including sparkling wine, including wine over 14% from anywhere in the EU. And this is in retaliation to, like, aircraft subsidies. You're like, what? And then separately, they're also threatening to impose a huge tariff on Champagne in retaliation for the French technology big tech tax that they're trying to implement. So there's all of these different threatened tariffs on the table. And maybe the champagne one would have some effect, because it hits Bernard Arnault, basically, who owns lvmh, and he owns all the big champagne houses, and he's influential in the French government. And maybe that would hit someone in France where it hurts, I don't know, because there's a lot of French exports of champagne to the United States, and those would go down. But the wine one makes very, very little sense, because what we're talking about here is European winemakers who can sell their wine anywhere and who will just wind up selling their wine to places that aren't America. And the people who lose are not the European winemakers who are just going to continue to sell their win, but rather, it's everyone in the American wine industry who has to buy or sell European wine, because they will basically not be able to do that anymore. And so the people you are hurting are not in Europe. The people you're hurting are all in the United States. So now tell me why it's overblown.

C (21:28)

Okay.

B (21:29)

I feel like I'm gonna get shot down pretty hard, but here I go. First of all, wine seems quite arbitrarily priced. Like, I go into the alcohol store, and there's like a $10 bottle, a $50 bottle, a 30. It doesn't matter. So if the price increases 100%, the prices double. So what?

A (21:50)

So answer to that question. Very good question, by the way. Genuinely good question. And a lot of the reason why people like wine is precisely because it's expensive. And as we have covered on slate, money in the past, the more money you pay for a bottle of the wine, the better that it tastes. So maybe, like, this would just make the wine taste better. The realistic effect of these tariffs is not going to be that the cost of European wine will double. The realistic effect of these tariffs is going to be that the European wines will just disappear from the US Market entirely, that they basically become unbiable. I am willing to spend $20 for a bottle of Berger. I'm not willing to spend $40 for a bottle of Berger. The Berger will just no longer get imported. The importers will no longer import it. The distributors will no longer distribute it, the retailers will no longer retail it, and it will not be on wine lists. It will not be on liquor store shelves, and the wine will just basically disappear. And all of the jobs and all of the economic activity in that sector will just disappear.

C (22:49)

And then this is kind of, I mean, this, I mean, yes, wine may seem like a relatively small thing, but like, as you just said, like, it does have these kind of large ramifications. And we're seeing that with all of the tariffs, and we're seeing that frequently with, with more, more and more reports coming out telling us what we already know, which is that the only people who are really being hurt by these tariffs are United States consumers. And that, you know, this is just one more example of a policy that in theory is designed to granted. Like, there are legit. I have very legitimate, you know, thoughts about a number of European trade practices, frankly, a lot more Germany than France, but still, like, there are legitimate concerns, but when you try to use these types of tools, they just don't have the benefit you want. And even though, yes, the trade deficit of the US has shrunk, but it's shrunk because imports have gone down, not because we're all of a sudden exporting more, because we're manufacturing more.

A (23:36)

But the big point here is that while other tariffs have hurt US Consumers, really, it's not, on some level, it's not the consumers who are going to be hurt. Like, Americans are going to drink less European wine because there won't be any European wine on the shelves anymore, and they're going to wind up drinking whiskey or beer or there'll be some, and it'll be more expensive and there'll be a little European wine left, a lot more Expensive.

B (23:59)

You can get wine from other places.

A (24:00)

Yeah, and. And we will get wine from other places. So it's not. So it doesn't hurt. It doesn't hurt the consumer. This is what I'm saying. The people it hurts are the importers, the distributors, the wholesalers. There's a whole industry of wine industry people who literally could go out of business as a result of this, won't they?

B (24:22)

I mean, they can't shift their businesses to start importing wines from other countries.

A (24:26)

No. These kind of relationships take decades to build up. Like, these people have been traveling to France and Spain and Italy and Germany for decades and getting to know winemakers and getting them to trust them and getting allocations and all of that. That kind of stuff. You can't just wake up in the morning and say, ah, you know what? I'm going to start importing, you know, Australian wine instead.

C (24:46)

And it's really.

B (24:47)

It's really quite decentralized business. It's not like I can't buy Coors anymore, so I'm going to buy Budweiser.

A (24:53)

Like, yeah, if you want to buy Berjolis, it has to come from France. If you want to buy Burgundy, it has to come from France. If you want to buy Rioja, it has to come from Spain. It's not like you can buy an Australian Burgundy. There was no such thing.

C (25:06)

Well, I mean, but what do you think is the likelihood that this is actually gonna happen? Because I do feel like we continue to keep having these kind of. These threats of these very significant tariffs, and then they don't actually play out. And it does seem like this perhaps may be one more example of that.

A (25:20)

I hope that it won't happen. I think most people hope that won't happen. Donald Trump, in one of his recent press conferences or random blurtations, did say something about how he hoped that it wouldn't happen. So I don't know. I mean, there does seem to be a pretty intense desire on the part of Robert Lighthizer, the US Trade rep, to do this. And the thing which I don't understand is why he's so keen on this and why he thinks this is a good idea. I have yet to find a coherent explanation of how hurting a bunch of, like, American wine importers is going to pressure the Europeans to do anything. As I say, the Europeans aren't really going to get hurt by this.

C (26:09)

Well, and with Lighthizer, I mean, like, because if you think about, like, with China, Lighthizer has been obsessed with trade with China since, like, I Feel like he was born, you know, he's written books on it, Death by China, this whole thing. And yet the US Is going to sign this phase one trade deal, which is really gives very little to the US but it's just because they want to make it appear that they have a win. So they're not going to push for any of the real changes that are needed. They're simply going to say, like, oh, you're all of a sudden going to buy all these more agricultural products, even though there's no way that China's even going to buy all those agriculture products, because the numbers don't make any sense. So if he's willing to do that on China, which is what he really cares about, I just have a hard time believing that going into an election year that Trump is going to allow, you know, Lighthizer to push so much on these tariffs to Europe that could potentially hurt Americans. You know, like, I just feel like.

A (26:58)

On some level that's. That's the point. On some level, they're owning the libs, that on some level, the wine drinkers, the Californians and the New Yorkers, the people who drink French wine are the Californians and the New Yorkers who they hate, and they're just, like, doing this to hurt them.

B (27:13)

Yes. One of my questions on my little index card was, do you think this would be happening if Trump weren't a teetotaler? Cause he famously does not drink at all. So that was one, he doesn't care about people who drink wine at all or in the wine business. And then two, except for he is.

A (27:27)

In the wine business. He owns wine.

B (27:28)

Oh, right, I forgot. But anyway, and two, like, none of the people that this hurts would ever vote for Donald Trump. Like, I cannot believe that European wine importers are red state.

A (27:41)

I know. I know a bunch of wine importers.

B (27:44)

Yes.

A (27:45)

And I would agree with you on that.

B (27:47)

Yeah, yeah, that was my theory. Like, this is like their, like, like owning the lid.

A (27:51)

He's like, he's lost Zev Rovine, who I talked to for my story, who's this very good wine importer. And I can guarantee you that Zev Rovine is not going to be voting for Trump whether or not these tariffs happen.

B (28:01)

Okay? So, yeah, they don't care about the people they're hurting here. Make no difference to them. They're not gonna do, like, what they did with the farmers, which was like, give them money. You know, give the wine subsidies. Well, but give them wine subsidies.

C (28:12)

Right. And the reality is, I'd be curious to See what the numbers are in terms of, like, what the actual economic impact could be. Because if it's very, very small, I.

A (28:19)

Can give you the numbers. I actually have the numbers. Total US wine imports from Europe are about four and a half, $5 billion a year, which by the time it trickles down through the three tier system and ends up in wine stores and restaurants, probably translates to about $20 billion that US consumers spend on European wine each year.

C (28:43)

Right. So it's not nothing, but it's also not, you know, I guess I say this because if it's the kind of thing where it could actually affect growth numbers in any way. Right. Or employment, then that's the kind of thing where I think going into an election year, like, why would you do that? But if it's simply going to annoy people who wouldn't vote for Trump anyway, then I can see more arguments on the other side.

B (29:04)

Also, I just want to repeat the point that I think this is going to make European wine. I'm just going to go for it more desirable. I think if you raise the price of Burgundy or whatever, people that covet these kinds of people who are already spending money, that's unnecessary, too much money on wine, even though everyone knows that cost isn't a factor in how the wine tastes. Right.

A (29:27)

It's the primary factor in how the wine tastes.

B (29:29)

Well, whatever. So if it's. Again, yes, if it's the primary factor in how the wine tastes and the price is going up, all the people who spend lots of money on wine will spend more money on wine. I'll be even more coveted. It'll be like Cuban cigars, right. Harder to get, more coveted. The price goes up, perhaps everyone wins.

C (29:51)

I think that is unlikely.

B (29:53)

Come on. I think it's likely. I don't think it matters how much wine costs at all, as long as it keeps costing more. Except that wine at Trader Joe's that everyone talks about.

A (30:03)

Index funds.

C (30:03)

Index funds.

A (30:04)

Index funds. We like to talk about index funds on this here show and we try not to repeat ourselves too much. So this time I think we're going to take the of voting angle because we have now reached the point that index funds control $10 trillion of more than $10 trillion of equities. And that's a very large amount of equities. And put aside for the time being, because we've covered this before, all the questions about what that means for market dynamics and price discovery and all of that kind of thing, and just ask yourself, if you have essentially three companies which own $10 trillion of stocks, then those companies have enormous power in terms of being able to vote those stocks, and specifically they have enormous power in terms of being able to vote in favor of climate related resolutions which shareholders put forward and say, like, we want you, these companies to do this and that for, you know, the sake of the planet. And BlackRock, which is one of those three companies, is the biggest of those three companies. This week it joined a group called Climate Action, which exists to do exactly that, to pressure companies to take action. And if BlackRock is a member of Climate Action, that at least raises the possibility that it might get off its ass, pull its finger out and actually start voting its trillions and trillions of dollars of shares in favor of these climate resolutions, which it hasn't been doing up until now. And if it does that, that could actually really make a difference in terms of corporate governance and whether or not these companies really do something in terms of abating global climate change. Now, now I don't think that's going to happen. I don't think that BlackRock is going to actually vote all of its trillions of dollars of shares as a big green block. And I'm not quite sure why it doesn't because Larry Fink, who runs BlackRock, loves to talk about corporate responsibility and climate change and that kind of stuff. So if he actually does what he says he believes in, he would. But, but Anna, I'm very interested in hearing what you think about whether he should vote these shares as a bloc and if not, why not?

C (32:20)

Yeah, so, I mean, look, if you're thinking about this for like, what an important problem climate change is, I can of course understand what you'd want to say. Well, like, ethically he should, and I can agree with that. However, like, is that really the role of these people who are running index funds? Like, is it really their role to be making these political decisions? Because although we may agree with this one, you could make the argument that, well, what if the person who is running these index funds has very different politics? Should then he be able to vote the, you know, everyone who's owning these index funds, he should be able to vote their shares in whatever way he or the people around him. Like, like, is that really the role?

B (32:56)

But it's so interesting and it makes me think of Queen Elizabeth who is, you know, sits back and is neutral in British politics. And it's almost like the people who could have this major voice in the markets, the people running these index funds are basically sitting back and saying nothing, just like Just like the Queen. And it's weird to think that, you know, these such powerful voting interests in the markets are not doing anything.

A (33:23)

And I do think that the way that public companies work is that the companies do need to be answerable to shareholders. And if the shareholders are just sitting there saying nothing and not voting, that's an abdication of their responsibility as shareholders.

C (33:38)

Yeah, I mean, I think that this is where it gets into the question of. I mean, look, at the end of the day, index funds are still a relatively new invention. And in terms of their power, we've never obviously had a period of time where they've had this much power. So I think the reality is the structure that we currently have in place is not well designed to make companies be held accountable. And so I think the question then.

A (33:54)

Becomes, so explain that. Why? I think it's perfectly well designed. I think that it is, in theory, incredibly easy for blackrock and State street and Vanguard to go ahead and start flexing their muscles and voting aggressively in favor of resolutions.

C (34:11)

Money. It's money they're managing. And like.

A (34:13)

But that's always. But that. Now, that has always been the case.

C (34:16)

It's.

A (34:16)

That has like all of the mutual funds, all of the insurance companies, every. All of the pension funds, they're all managing money on behalf of other people.

C (34:23)

But my thought. But so here's the thing, and this is where it gets a little complicated. When you're a money manager and you are voting in these things, you have to go through all of these votes and you have to say, is this in the best interest of my clients? And you, if you're running index funds that you have a swath of, you know, the entire population, United States, they may have very different ideas about what is in their best interest.

A (34:44)

No, but, but that's the case. Whether you're a passive investor or an active investor, it is true. There's no difference.

C (34:49)

That's. That's true. But it's just that now that there is so much control by essentially three different companies, I think it becomes a bigger issue. I think that, I mean, there, there's long been a question of. Is part of the reason that companies are being able to pay their CEOs whatever they want or being able to kind of do a lot of things that perhaps aren't in the best interest of all stakeholders is because you don't have a lot of, kind of aggressive ownership of the people who actually own stocks in these companies.

A (35:13)

Right, exactly. Not voting, stepping back from that responsibility that shareholders have to vote is Itself a political act and essentially hands over an untoward amount of power to management which they neither deserve nor should have.

B (35:30)

And they need more oversight. Right? Like setting aside the climate change issue for a second, like there needs to be more oversight over exorbitant CEO pay, over fraud, wrongdoing. Like, could one of these funds have stepped up and said something to Boeing? I mean, right, like they needed.

C (35:46)

And look, if you like, right.

A (35:49)

It took over a year for the CEO of Boeing to resign. And I'm sure part of the reason for that is that shareholders were not pressuring the board to kick him out. Right.

B (35:58)

So it does seem like there's a real problem here. And there is.

C (36:02)

And it's, and it's bigger than, I mean it's bigger than just the index funds. I mean it's part of just the issue that, you know, there is just not an aggressive bloc of people for the most part who are interested enough in these corporate governance issues that are putting pressure on management.

A (36:16)

I can tell you why. I mean, it's quite obvious to me why what you have seen in the world of index funds is, is an understandable and entirely rational, highly competitive race to zero fees. Like zero management fees is now the new normal. And more and more index funds are going to charge either 0 or very, very low, like 0, like 4 basis points or something like that for running these funds. And when you are cutting your fees that aggressively, you don't have a whole bunch of slack in the system to research shareholder proposals and work out which ones you want to vote for and which ones you want to vote against and decide on a company by company level how you want to vote and how you want to pressure the management. And especially with an index fund, if you say have a Russell 3000 index fund and you own 3000 stocks and you barely know what their names are, you just have a computer buying them according to an algorithm. The extra amount of work it takes to start meeting with the management, pressuring them to do things, voting your proxies and all of that is, is a non negligible expense in a world where everyone is really focused on expenses.

C (37:26)

Yeah, I mean I will say this because I had a job or one part of my job was I had to do a deal with all the stupid proxy votes and we didn't even have an enormous equities portfolio. And it was my least favorite thing in the world to do because it was awful. Because it was just like it was a pain in the ass because every company has 8 million measures and then you have to like go through and justify why you are saying that you're voting in the best interest of your clients for each measure. And so at the end of the day, are you mostly going to simply vote with management? Yes, you are.

A (37:52)

But this is also why I'm mildly, and with a very strong emphasis on mildly, what's even less than mildly, tiny, minisculely optimistic about blackrock joining Climate Action. Because what they're effectively being able to do in doing so is to outsource a whole bunch of that work to Climate Action. And then Climate Action can say these are the proxy votes that we think is really important that you vote for. And then having now that they're part of that group and aligned with that group, they'll be like, oh, okay, you've done your homework, we'll make that vote. Now do I think that's going to happen? I'm not optimistic, but it could happen.

B (38:34)

We should say that the reason we're talking about this is because of BusinessWeek's cover story, which was all about the power of index funds and also featured a great quote from Al Gore.

C (38:43)

Yes.

B (38:43)

Did you guys catch the quote from Al Gore who said, I think the large passive managers have a real difficult decision to make. Do they want to continue to finance the destruction of human civilization or not?

C (38:54)

Although I do think like that's a little bit like what are they, they can't divest their frickin index fund. Like that's kind of what seems to be what he's suggesting.

A (39:01)

Al Gore we should like the one thing I'll say is much as I respect a whole bunch of stuff that Al Gore has done, do not listen to Al Gore on this one because Al Gore runs a multi billion dollar active management company. Al Gore called Generation. And yeah, we can have a whole other segment one day on Generation and their business model. But like he is not an impartial observer here. Okay, numbers round. Emily, you look sick.

B (39:31)

I had two numbers but I think they're boring. So on my way in I read this amazing my number is 73 because on my way in I read this amazing story about a woman called Faith Hope Consolo who was the real estate person, a real estate person in New York City, famous real estate person, did big commercial real estate deals and she recently died. And the reporter at the Times who wrote her obituary, wrote the obituary and felt uneasy throughout because there were lots of stuff she couldn't confirm and she found out, for example, 73 is how old Faith Hope Consola was when she Died. But she had been telling people she was in her 60s. And this apparently was just the tip of the lie of the iceberg that this woman was walking around telling about herself. She told people that she went to fancy prep school in Connecticut and was raised very wealthy again in Connecticut. But it turns out she just grew up in Sheepshead Bay in Brooklyn and had, you know, her mother died when she was young and her father was in jail for a time and she just had this whole other life story. And it was a very interesting read. So that's my number.

A (40:32)

Check it out.

B (40:33)

Check it out, Anna.

C (40:35)

So My number is 87%. So for the Fortune 1000 companies, those that have defined benefit pension plans, that's the ratio of their assets to liabilities after last year's returns. The reason I'm bringing this up is because that only improved by 1 percentage point. It had been 86%. So they're still underfunded even though the.

A (40:55)

Equity market went up 30%.

C (40:57)

This is my point, is that like, even though the returns they had, like one of the best years of returns, they've had these funds since 2003, however, because of rate cuts, because rates are so low, they still ended up only improving this ratio by 1 percentage point. And it's just one more example of why there are a number of.

A (41:16)

Is that because lower interest rates mean a lower rate at which you're discounting future obligations? Yeah, so, okay, so we're not going to get too much into the effective discounted cash flow analysis. But.

C (41:29)

Right, but yeah, exactly. It's like if you're dividing a divide benefit pension plan, yet you have to need to explain. Exactly. You have your.

A (41:35)

But the good news is that if rates go up, then, you know, even if stocks go down, that number could improve. Well, who knows? My number is 12. I had a piece in Axios Age this week about the proportion of full time employees who work remotely from home. And it's three, or at least it was three in 2017, which is up from 0.7 in the, in the 80s. So it's rising super fast. It's going up and to the right at an astonishing level. And one of the reasons I know it's going up and to the right is because I asked my employer, Axios, like how many of our employees work remotely? The answer was 12%. And that actually undercounts the total because there's a large number of employees who live and work in New York and Washington and San Francisco where we have offices. And technically they go into the office to work. But in reality, a lot of us who live in these cities don't go into the office to work, and that's also fine. And no one cares, right? It's like if you can work better at home, work at home. And many of us, like, you know, especially if we've got to do sort of heads down coding and writing and that kind of thing, we, we do that. And, and the ability of, to work from wherever you like has massively altered the corporate landscape in super interesting ways. And one of the interesting ways that it's done that is by massively reducing the number of times that people move. People are moving between houses and between cities much less than they ever used to, partly because you don't need to for work anymore.

B (43:05)

Is that because of remote work?

A (43:07)

I mean, that's one tiny part of the reason. But I will say just like a little glimpse into how the journalism sausage is made. I had a line in my email saying that 12% of Axios employees work remotely from home. And my copy editor deleted the from home bit and said, well, we don't know that they're working from home. They might be working from Starbucks. And I'm like, yeah, that counts. If you're looking at the 3% number, like, working from Starbucks counts. It's kind of interesting to me though, that like, that somehow Starbucks has become an extension of the home.

C (43:47)

It's the third space, right?

A (43:49)

It's the third space. I think that's it. I think that is it for Slate money this week. Thank you, Emily, for coming in. You're welcome. Thank you, Anna, for fighting your cold.

C (43:58)

Thank you.

A (43:58)

And coming in, Anna will be a little bit less congested next week because we're on the, we're on the upswing here. Thank you, Jessamine, Molly, for producing this. Thank you, all of you guys for listening. Do keep the emails coming. The address, as ever, is slatemoneylate.com and we will talk to you next week on Slate. Bunny, Sam.