Slate Money: "Pancake Brains" (October 26, 2019)

Main Theme and Purpose

In this episode, hosts Felix Salmon (Axios), Emily Peck (HuffPost), and Anna Szymanski (Breaking Views) dissect the implosion of WeWork and its SoftBank rescue, the fallout for employees and investors, gender dynamics in corporate training (the infamous "pancake brains" episode at EY), and Felix’s review of "Darkness by Design," which posits that the modern stock market has become fundamentally broken. The conversation is engaging, candid, and laced with sharp wit and lively breakfast metaphors.

1. WeWork’s Meltdown and SoftBank’s Bailout

[00:46 – 14:49]

• What Happened to WeWork?

  • The panel sets the stage: WeWork’s valuation collapsed from $47B to $8B almost overnight, causing shockwaves through the business world.
  • SoftBank, already WeWork's largest backer, engineered a rescue, taking its stake to 80% but structuring the deal to avoid consolidating WeWork’s liabilities on its own balance sheet.

• Deal Structure & Adam Neumann’s Payout

  • Felix and Anna break down the numbers: SoftBank injects $5B (mostly debt), spends $3B buying out equity (much of it Adam Neumann’s), including:
    • $970M for Neumann’s shares
    • $185M "consulting contract" for reducing his voting power
    • Neumann must also use $500M to pay off loans, but still emerges a billionaire.
  • Employees face mass layoffs (about 4,000), while Neumann exits extravagantly.
  • Quote (Felix, 05:07): “Those people are understandably quite angry that Adam Neumann’s walking away with about 2. I mean, it’s like, what, $2 billion?”

• Who are the Real Losers?

  • Felix: “The losers here are the Saudi royal family, who plowed a whole bunch of money into the SoftBank Vision Fund... The real losers are things like the janitors in WeWork locations who... are all gonna be fired and replaced by some, like, subcontracting nightmare, right?” [06:26–07:14]

• Market Sentiment and the End of the ‘Unicorn’ Era

  • IPO investors lost faith in unprofitable, fast-growing businesses.
  • Anna: “The markets are not as willing to believe these stories about these firms that do not create profits, that have no real path to profitability. And I think WeWork is just this kind of extreme example.” [08:31]

• Vision Fund 2 and SoftBank’s Future

  • Questions about whether SoftBank’s next massive fund will repeat the mistakes of Vision Fund 1, or pivot to "making money."
  • Felix: “When Mahafsa goes to Riyadh… is he going to say, well, Vision Fund 2 is going to have the same structure... or are we going to do what Emily said and... pivot to trying to make money?” [09:29]

• Ponzi-ness of WeWork

  • Felix on the broken logic: “The Adam Neumann sales pitch was: I can just keep this rocket ship growing by losing more and more money. So the more money you give me to lose, the more money you will make. It's a Ponzi scheme...” [12:18]

• Societal Factors and Wealth Inequality

  • Anna links capital gluts and income inequality to such irrational investments.
  • Joking policy suggestion: wealth tax and ban on private jets. Felix: “I do have a thing that I put in my newsletter… which is: ban private jets. And I do think that the WeWork private jet was really the sign that this thing was out of control.” [13:54]

2. “Pancake Brains” at Ernst & Young: Gender Stereotypes in Corporate Training

[14:49 – 26:53]

• The EY Incident

  • Emily details her report on Ernst & Young’s 2018 women’s leadership seminar—"Power, Presence, and Purpose"—that included blatantly sexist, pseudoscientific advice.

  • Notable elements:

    • Women told their brains were 6–11% smaller than men’s, with no explanation.
    • “Women’s brains are like pancakes”—they absorb information “flat,” while men’s “waffle” brains compartmentalize.
    • Women told to avoid “bottle blonde” hair, shrill voices, or short skirts for fear it would “scramble” men’s brains.

  • Quote (Emily, 15:05): “They were told, women's brains are like pancakes. When you pour the syrup, the syrup is the information... But men's brains are like waffle brains.”

  • Quote (Emily, 16:49): “If you show too much skin as a woman, it would scramble the brains of the men who… It would scramble their waffle brains.”

  • Emily’s view: “The reason you tell women their brains are small is to make them feel stupid. That’s all.” [16:01]

• Broader Women’s Empowerment Industry

  • The panel debates whether “empowerment” training is at all useful, or if it just feeds into “fix the women” narratives.

  • Anna: “Once more women are in power, both men and women—their understanding of what it means to be a leader changes.” [25:07]

  • Key finding: In workplaces with more women in leadership, stereotypes are less prevalent. Emily: “Instead of doing the training, just hire more women. It’s so much easier.” [26:16]

  • Anna: “They often show that… men might have to go through [these trainings], it makes them more sexist…” [26:34]

3. The Death of the Well-Policed Stock Market: “Darkness by Design”

[26:53 – 43:16]

• Felix’s Review of ‘Darkness by Design’

  • A shift from the Michael Lewis-style “high frequency trading is evil” to a more nuanced criticism: fragmentation and deregulation after 2005 destroyed the NYSE’s regulatory culture.
  • Rich anecdote: NYSE market maker fined $50,000 for a 7-minute lapse (to pee), reflecting a rigorous regulatory regime.
    • Quote (Felix, 29:16): “When he came back after peeing... he got this fifty thousand dollar fine because he didn’t keep the stock trading smoothly.”

• The Modern Stock Market: Flash Crashes and HFTs

  • Mini flash crashes occur daily in liquid stocks; the market is tailored to benefit high-frequency traders (HFTs), not investors.
  • HFTs pay exchanges for co-location and arbitrage opportunities; exchanges, in turn, compete for their business.
  • Felix: “It’s the algobots and the HFTs… who are making the money. It’s not real money investors…” [34:13]

• Impact on Investors

  • Institutional investors (e.g., pension funds) are getting “picked off” by HFTs, costing billions. Ordinary investors (via pensions and index funds) are ultimately affected.
  • Quote (Anna): “What is the actual dollar impact of the potentially having HFTs like front running?...” [37:14]
  • Felix: “The profits [of HFTs] are coming from somewhere, and they’re coming from mostly from big institutional investors...” [37:32]

• Liquidity, Price Discovery, and Market Quality

  • Complicated: while bid/ask spreads narrowed post-decimalization, market fragmentation post-2005 hasn’t improved them further. Liquidity quality has declined for big trades; “noise trading” and “stuffing” by HFTs has made order books less informative.
  • Anna: “You meet a lot of people who work at some of these shops and they’re brilliant... but is this really the best use of all of this brain power?” [42:34]

• Concluding Thoughts (Felix):

  • “The only real positive externality from all this is slightly faster telecommunications. And that’s about it.” [43:00]

4. Numbers Round

[43:18 – 49:47]

• Brazilian Pension Reform:

  • Anna: “800 billion Brazilian reai” in savings over a decade after pension reform—meaning later retirement ages, higher contributions, but also avoiding economic collapse. [43:22]

• Heathrow Express Competition:

  • Felix: “£5.50” is the new cheapest fare for Heathrow Express, down from £25—thanks to competition from London's Crossrail. [45:02]

• The 5-Hour Workday:

  • Emily: “Five hours” is the workday at a small German tech firm—less time in the office but the same productivity. [46:23]
  • Debate about the value of wasted office time versus focused hours.
  • Felix: “I’m in favor of 5-hour workdays, but I am against 5-hour workdays starting at 8 o'clock in the morning.” [49:11]

5. Notable Quotes and Moments

• On Neumann’s Windfall: “My favorite detail is the bit where they couldn’t afford to fire people because they didn’t have any money to pay them.” (Felix, 04:52)
• On EY’s Seminar: “Women are told that women’s brains are 6 to 11% smaller than men’s brains... And it’s not clear why they were told this.” (Emily, 15:05)
• On Private Jets: “Any startup, any pre-IPO company with a private jet—just short all of them.” (Felix, 14:42)
• On HFTS’ Value: “The HFTs are just these socially useless monsters that run everything.” (Emily, 38:53)
• On Fixing Gender Inequity: “Instead of doing the training, just hire more women. It's so much easier.” (Emily, 26:16)

Timestamps for Key Segments

• WeWork & SoftBank: 00:46–14:49
• EY "Pancake Brains" Stereotype: 14:49–26:53
• Stock Market Deregulation & HFTs: 26:53–43:16
• Numbers Round: 43:18–49:47

Tone and Style

The episode maintains Slate Money's signature style: sharp, informed, irreverent, and humorous. The hosts interweave serious analysis with dry wit and pop-culture references (notably, the “pancake and waffle brains” metaphor). Their rapport ensures topics remain accessible yet nuanced, offering listeners both actionable insights and memorable moments to share.

For New Listeners:

If you missed “Pancake Brains,” you’re now up to speed on WeWork’s fall, corporate gender training cringe, and why the stock market isn’t what it used to be—all with pancakes, waffles, and jetlag for flavor.