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Slate Money
Planet Money In Book Form!
00:44:16
Alex Mayyasi gives us a peek into the new book from the team at Planet Money and talks Argentinian Blackberries, market design, credit card fees and more.
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- [00:00]
A
Foreign. Welcome to Slate 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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B
Hello.
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A
I'm here with Emily Peck of Axios Markets.
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B
Hello.
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A
Hello. And we have a very special, amazing crowd crossover event. We, Slate Money elite have decided to join forces with Planet Money and specifically with Alex Mayasi. Alex, welcome.
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C
Thank you so much, Felix. It's great to be here.
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A
Planet Money is not only popular podcast available through npr, it is also a book with your name on it.
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C
That's right. This is our first book, which I think will be familiar in terms of tone to many who know the podcast, but we've been working hard on it. This has been the last several years of my life. The subtitle of the book is A guide to the economic forces that shape your life. And so, as much as possible, we want to make this something that feels really comprehensive.
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A
This is the only book you ever need to read to understand the economic forces that shape your life. Read this book and you're done.
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C
You could listen to Planet Money still. You can listen to Slate Money on occasion still. But I do think something that's really special about this is since this was not just me on my own writing a book, this was me working with the incredibly talented Planet Money team that has been reporting on the economy, finding great stories to illustrate what's going on in the economy for more than 10 years. And so that, I think, allowed us to cover a lot of ground in a way that would have just been impossible if it was just me in a garret, maybe with some of the wine that Felix likes to drink.
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A
Are we going to talk about wine? I hope we get to talk about wine.
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C
There are a few mentions of wine, and I will happily spin that up into as much wine conversation as you want, Felix.
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D
Well, indulge that, Alex.
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A
Okay, we will try and squeeze some wine in here. We are going to talk a bit about protectionism and tariffs and that kind of stuff, specifically about Argentina and what the Latin Americans should be doing in terms of such things. We are going to talk about credit card interchange fees. We have a whole Slate plus segment on the cost of childcare and Balmol's cost disease. There's a whole bunch of wonderful little tributaries along the way that we will explore. But it's, what can I say? It's the perfect combination of Slate Money and Planet Money. Coming up on Slate Money.
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D
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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A
This message is a paid partnership with Apple Card, my favorite travel hack Easy. It's using Apple Card. It's great knowing that every time I 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 let's start with one of the great favorites of Slate Money. We've talked about her many times on this show. Christina Fernandez de Kirchner, the former president of Argentina, who you present in this book as being a kind of Donald Trump avant Lalette and I believe another friend of the show, Greg Makoff, has also said this quite a lot, that Donald Trump is in many ways a Peronist. So, so explain what she did and how it like is very similar to what Donald Trump is trying to do and whether it worked out.
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C
Yeah. So if you go back to, you know, roughly the early 2000s, she's elected in Argentina and her rhetoric is something that I think would sound very familiar to Americans today. She thinks it was a mistake to let so much manufacturing leave Argentina and for Argentina to be importing so many of these things. She is concerned about the manufacturing jobs that were lost due to globalization. And she says Argentina should be building things things again. Argentina should be making things again. And she uses tariffs and other regulations to essentially force companies to manufacture in Argentina. And so often that meant making renowned, well known international companies, whether that was a car company or a phone company, manufacture things in Argentina if they wanted to sell in Argentina. And so specifically our chapter in the book focuses on smartphones. This is, I want to say something like 2005, 2007, so the iPhone is out there. Apple decides not to manufacture within Argentina. So iPhones are effectively banned from Argentina. But this is back when people are talking about blackberries as a crackberry because people were so obsessed with them. Barack Obama is still famous for his use of a BlackBerry. It's a very popular phone. Argentina is an important market for them. So the company that makes BlackBerry, they decide, we will open a factory. And really for political reasons, the administration really pushes them to do it. Not in, say, the capital of Argentina or some, you know, area of the country that maybe had been known for manufacturing, but to do it in a very, very remote region that's closer to Antarctica than it is to Buenos Aires. It was a base of political sport for president, for Kirchner. So that's where she wants this factory to be. And so through, I believe, a mixture of carrot and stick, you end up with a company partnering with BlackBerry to produce what is then an extremely advanced piece of electronics in this island called the land of Fire, Tierra del Fuego, that really has very little infrastructure. And so this is rowing against the current of globalization. It is an absolutely monumental task for engineers to try and do advanced manufacturing on this island.
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A
But they succeed.
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C
Yeah, it's kind of incredible. There's this great anecdote of an engineer there saying that they're getting all this equipment showing up, they don't have places to put it, and they're jokingly asking people, can you put some in your house? Do you have anywhere to put this stuff? But they do, you know, create this factory that's so advanced, it's like tracking dust mites in the air. So that. That doesn't. I don't really understand how. But, like, mess up the creation of these smartphones, and they create smartphones, and there's this huge moment where Kirchner and basically every politician wants to be there when the first made in Argentina, blackberries come off the line, get a photo op holding one of them, and it seems to be going great. Like, Argentina is seeing economic growth as it's doing more manufacturing. You have job creation. The land of fire has this boom. You know, people are driving around in nice cars, and, you know, they're not just blackberries. They're making all sorts of things because this political pressure has pushed for manufacturing to go there, but it doesn't last. And one of the big problems, specifically with Argentinian blackberries, is that it took so long to set up this factory. It's just not as efficient and quick as factories elsewhere in the world where BlackBerry has specifically chosen sites where they can make phones. As cheap, as fast as possible. So the Argentinian BlackBerry is both more expensive and it's a little bit behind. It's almost like getting last year's model. I forget what iPhone we're up to, but it's like paying a higher price for an iPhone 15 when you could pay less for an iPhone 16. And so, you know, Argentinian consumers, they don't want to pay more for an inferior product. What they might like to do is get a black market BlackBerry that someone smuggles into the country, and it's cheaper and it's better. And so BlackBerry really struggled to sell their phones within Argentina. And this is kind of a microcosm of what was happening across the Argentinian economy. There's a reason a lot of these things were being produced elsewhere and then imported to Argentina. It was cheaper to do. So. That was the logic of comparative advantage. And so Argentina, like, prices just went up, inflation went up. There were all these jobs to manufacture things that weren't being bought. So obviously that was not sustainable. And a lot of these factories shut down, including the BlackBerry factory in Tierra de Fuego.
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A
I want to ask you a little bit about what the lessons of this are, because, number one, there was this quite surprising success story in terms of taking Argentina, which is, economically speaking, what Argentina does is it produces things like cows and commodities, basically.
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C
And wine. Felix, we didn't even have to stretch that hard to get the wine in. It was right there.
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A
It produces wine, it produces cows. And its name, Argentina, is called that because it back in the day used to produce silver. You know, commodities are at the very bottom of the value chain in America. When we're talking, when Trump talks about bringing back manufacturing, everyone kind of looks a bit weird at him because manufacturing is considered to be lower on the value chain than the services that America is good at. But here Argentina is doing the sensible thing, which is trying to work its way up the value chain. It does so successfully. And then from your story, the only reason it doesn't really work is because the black market that Argentina has a lot of borders. It borders on, like Paraguay, you can smuggle iPhones in or blackberries in, and they don't have the border controls necessary really, to enforce the law of you can't import these devices. And it was like a failure of law enforcement that basically meant that all of this didn't work.
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D
No.
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C
I would add to that, though, that I think Argentina's hope was that they would become a manufacturing country that is exporting to the world. Right. And clearly no one Wanted like the rest of the world did not want Argentina's blackberries because they were more expensive and they were not as advanced. Right. And I think you could see that with other goods you could pull in North Korea and have almost, Almost no trade with the outside world, and then you would have manufacturing because you need to manufacture everything that your country needs.
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A
But I don't think famously what Brazil did in the 1950s, it had this policy called import substitution. It's like, imports are bad. We're going to take whatever we import and we're going to substitute it with stuff that is manufactured domestically.
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D
If you're trying to build up manufacturing in your home country, the consumers you want to be targeting aren't simply your citizens, but the consumers of the world. And that's where Argentina runs into trouble, because it's manufacturing things inside Argentina at higher cost than is available globally. Like, even if they couldn't prevent competitive products from coming in through the black market, like, they're not going to compete globally because it costs more money to produce goods inside Argentina. That's why China is so good at manufacturing, because it produces goods that are cheaper than everyone else's goods that it then exports globally, even if it has, the government has to support those prices. It's going to do that to make sure that stuff is cheaper when it floods international markets. Right. And Argentina didn't do that. They didn't say, like, it's more expensive. Yes, to make these blackberries, but we're going to go sell them globally and we're going to make sure they're cheaper. They didn't take that step.
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B
Right.
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C
Yeah. It's both that, like, their goods were not competitive internationally, so they could not. I think they wanted this kind of export model of being a great manufacturing country that exports to the world, but really they could only force their own citizens to buy their subpar products. And I think another big piece of it, and Argentine economists made this point really well, is that because the government was putting its thumb on the scale and directing resources towards making blackberries, say, or making cars, things that Argentina was not particularly good at, that was a lot of money and skill, no longer going to things that Argentina was good at, whether that was cattle ranches, wine, or something else that maybe actually is kind of like higher on the value chain that Argentina does have a comparative advantage at. So could compete internationally, it would be able to sell to customers all around the world, but you just have an incredible amount of capital talent. I mean, they were paying engineers kind of three times, like 3x the normal salary so that they would move to this incredibly remote place and make blackberries. And you know, those engineers could have been working in other industries where they might have been able to create products, build businesses that would have been competitive, you know, at least elsewhere in South America, if not the entire world.
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B
Reading that chapter, it felt a lot of parallels to what Trump is doing on a protectionist basis. But how much of that do you think is just knee jerk anti anything foreign succeeding in American markets? And how much of it is Trump not really understanding what the US's comparative advantages are?
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C
I mean, I think it is very tempting for any political leader to see, right, like globalization has helped economies around the world grow. It is absolutely the case that there are winners and losers within countries. It is not just the case that everyone benefited. And it's all great. And I think for any politician, it's very tempting to look at that and say, there are these people who have lost their jobs. There are people who are hurting. There may be towns or regions that are hurting. You know, in the us, this is talking about the Rust Belt. Can we undo that mistake? Or even if you don't think globalization was a mistake, can we help those people? It's very tempting to say, can I get the good parts of globalization? Can I sell to foreign markets but protect people in my country? Can I demand a better deal from globalization from the rest of the world? And I will say one thing that is different, of course, between the US and Argentina is that the US has a lot more market power. I mean, usually why this doesn't work is because you say you protect one industry of yours that you want to protect, but then other countries maybe. There's a famous example we put in the book of the US and Germany feuding over chicken sales and car sales. The US is selling all these cheap chickens to Germany. They get upset about that. They try to block US check ins from entering Germany. So the US retaliates and says, okay, you can't sell German trucks in the United States. So you just kind of end up in this tit for tat. But the US does have a lot more leverage than a country like Argentina. I'm not going to say this trade war has all been a grand success. But I do think something that is different here is the power of the American market. Where I think that is perhaps what's tempting to some people to say, well, maybe the United States is different. We can get the deal we want from the rest of the world because if we threaten to cut them off from the US market. That's so many customers. That's so much buying power. Maybe we can demand a better deal from the rest of the world.
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A
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D
Are you really buying a car online
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C
on autotrader right now?
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B
Really?
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D
I can get super specific with dealer listings and see cars based on my budget.
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B
You can really have it delivered or pick it up.
- [17:51]
D
I think Kid is walking up the slide, really. Autotrader, buy your car online. Really,
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A
Your take is very sort of mainstream comparative advantage, economics 101. And I am a good neoliberal. I basically agree with it. But at the same time, I really struggle to think of a single country in Latin America that has benefited from globalization. And specifically in the case of Argentina, if you look at where its comparative advantage lies, as you say, it's things like beef and wine and agriculture, what that means is that the people who benefit from that in Argentina are the big landowners. They're the billionaires with firms and the broad population of the country. Just if I'm in Tierra del Fuego or if I'm in Buenos Aires, I don't get a lot of benefit from. From beef exports. And this does lay the groundwork for populism and Kitchenerism. And you can absolutely see the attraction of someone like Kirchner coming in and saying, like, no, we want to build an economy that actually makes things and does something a little bit more sophisticated than just growing cows, even if that's not our comparative advantage, because our comparative advantage isn't helping the population. I think this is very different from what Trump is doing in the United States because the US Comparative advantage, it's already so much higher up the value chain. But tell me how, like, in a sort of very orthodox economic way, what should you do if you're in a country like Argentina and your comparative advantage is in areas that just don't really benefit most of the population?
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C
The chapter does talk, right, about the history of countries trying to pick winners, like trying to pick industries to develop so that they can move up that kind of value chain.
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A
So, like K pop in Korea.
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C
I don't know. I would love to read an economic paper about K Pop. I don't know if the government really did that.
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A
It really did.
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D
It really did.
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C
Okay, that's amazing. I love that. I want to read about that immediately. There are absolutely case studies of countries choosing to develop certain industries. Economists will yell at each other about this for sure. But I think the United States right after independence is an example of this, where there was this realization that the United States had won its independence, but it could absolutely remain economically just a producer of raw materials that go to Britain. And then the, you know, Americans have to spend all their money buying manufactured goods, clothes, furniture, everything else from Britain, and that's not a good place to be. And so there was absolutely, like, an early strategy led by Alexander Hamilton to strategically put tariffs on certain industries. And honestly also Encourage Europeans to arrive in America with trade secrets from Europe that would like help develop are more advanced manufacturing. A lot of economists are uncomfortable with the idea of the government trying to pick winners and say, okay, we're going to the government saying we want to have a great car industry. We're going to put money into the car industry, we're going to protect it from foreign competition. There's certainly a lot of criticism voiced vociferously by Milton Friedman, that when the government tries to champion a specific industry, they protect them, give them water wings and then that industry just becomes experts at getting the government to extend the protection forever and keep giving them money and they never take off the water wings and play in the deep end and compete with the best companies in the world at whatever they're doing. But I agree with you that just saying everyone should do their comparative advantage. Globalization is great. That can leave a lot of countries left in a niche that does not produce great jobs for the majority of the population.
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D
I think there are plenty of examples of countries that make an explicit choice to encourage the development of specific industries and have done it with great success. Taiwan and chips. And I think Asian countries are very good at that. I think the US probably is not as good.
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C
Yeah, I mean, I think also it was very interesting for me to read Apple in China, which I think a lot of your listeners probably are familiar with if they haven't read themselves, which is all about how Apple, by shifting its manufacturing to China, ended up really training a generation of Chinese engineers and really supercharging China's advanced manufacturing. And I think in our current political climate this is seen as like a huge, almost indictment of Apple or at least like this huge mistake that we just gifted a kind of foreign adversary. All this ability to compete with American manufacturing and to build up their own economy. I mean for years and years people have criticized America, American companies going abroad, setting up factories. It seemed as this very exploitative relationship. And you can kind of imagine that if the US and China were not locked in a kind of geopolitical tension that this would maybe be seen as much more of a happy story.
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A
That like I still think of it as a happy story.
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C
Yeah, like the U.S. like American consumers got cheaper phones. There was a lot of win win on both sides. But China wasn't exploited. Their engineers got trained, they got to a building where they could create their own great advanced manufacturing. I think in our current environment we see it as this huge mistake or
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A
speak for yourself, Alex.
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C
But in some ways I think that's A happy story of globalization. Apple benefited tremendously from its relationship from having factories and manufacturing in China, but the Chinese benefited tremendously as well. And I think that's probably a story we would be celebrating a lot more if it was with another country that America had friendlier relations with.
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D
I feel like a thread that connects the Argentina story with maybe the whole book, or at least some other chapters in the book that I think about a lot is like, how do you balance the need or the alleged need to have a free market with a country's specific interests? And how does the country sort of put limits on or shape the free market? I'm thinking of what Argentina did and sort of failed at, but what the New York City Marathon did to make its market, a free ish market, but put like limits and controls on. And we can talk about that by creating a lottery. So it's not just a supply and demand kind of thing. Or even the chapter on the book has this great chapter on food banks and how they decide what kinds of food different food banks get and how at first it was like a command market where the people at the top decided, Colorado gets X amount of peanut butter and California, California gets X amount of pickles. And it wasn't working. So they created a better market. And it feels like all of this stuff sort of comes down to creating. Maybe I'm just thinking about this because they put me back on Axios markets, but it all comes down to shaping the way you want your market to work. And governments have to do that. They have to decide how their markets work. And they have to do that within a context of their constituents at home. And they have to do it within the broader global context. And when it comes to what Argentina did, it just didn't. It just whiffed it.
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A
Well, I think this is a much bigger story than Argentina. I think this is pretty much every country in the world. There's this tension between the economists saying free markets are good and pretty much all of the voters and the vast majority of politicians who are going, well, no, they're not.
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B
Right.
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D
And they're not. They're actually not. Well, I mean, they are and they are not.
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A
What Alex will say, to paraphrase, is they're not, but they're probably better than any of the alternatives.
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D
Right.
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A
And that tension, I think, is the one that really does run through the book. And my question for Alex was, like, if you look at where Latin America is right now, I think it's a really good example of how many decades of free markets and what they call the Washington Consensus has really not helped the population of this continent to thrive. And yet, at the same time, I totally buy the argument that the alternative could be worse. And maybe there's just no good answer here. And we want there to be good answers. And it doesn't help to just say, well, I'm sorry, the entire sort of continent of Latin America, you're doomed.
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C
I think, to Emily's point, a current through this book is a branch of economics that I find incredibly compelling and important, called market design. And so market design really started with the cases of markets that were just for one reason or another, for two main reasons. You couldn't really say, oh, we'll just be like, laissez faire here. The market will do it. So there's two main cases. One is you have markets where there are no prices. So these are cases like organ transplants. Sorry, there's just a noise in my background.
- [26:12]
A
Alex just had one of his organs drop out of his toilet.
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C
So, you know, economists came across these kind of two types of markets where it was just impossible to say laissez faire the market. Just let the market run. One is when there are no prices. So that's something like organ donation. Iran does allow people to put a price on organs. There are organ sales, but it's the only country in the world that does that. So the question is, if there are organ donors and there are people who need an organ, how do you match them up? And so economists had to come up with ways to do that. And there's a great story of economists helping to create an algorithm to match up donors with people who need an organ and vastly increasing the number of successful matches. And then the other case is something where it's just a really unusual asset that needs to be bought or sold. So an example here is the spectrum, like the airwaves, like what radio uses,
- [27:02]
A
what TV uses, the electromagnetic spectrum, billions of dollars.
- [27:06]
C
And so it's something that the US government oversees because if you don't have any, you have to sign rights to different parts of the spectrum. It's almost like a highway and only so many be on it at once. Otherwise everyone using radios back in the day would have been trying to talk over each other. And it's also needed TV, WiFi, all these different uses. And the government had been doing things like just asking people to send in applications, giving it away for free. But then you were giving away this really valuable asset for free. And I don't know, everyone's going to put an application saying, I really need it and I'm going to do these great things with it and it's going to be great for the economy. But how do you know who's telling the truth or who's right? And so several economists ended up creating auctions, these really complex, intricate auctions to auction off the spectrum. So then companies had to pay for it. But ideally you're getting spectrum to whoever will put it to really great use. I think some was reserved for cases like emergency services, that sort of thing.
- [27:59]
A
One of my favorite stories about that is that one of the great innovations of the spectrum auctions was that it wasn't just a question of how much you were willing to pay, it was also a question of how much you were willing to receive. So what they did was they managed to get a whole bunch of local TV stations who had a bunch of spectrum to say, like, at some point there's a number you can pay me to give up this local spectrum that I have. And that really got a sort of two way market moving in interesting ways. And the government made the decision not to keep all of the spectrum sale money for itself and to give a whole bunch of it to these local TV stations, which I thought was super clever and weirdly was somehow managed to win a Grammy award for Paul Milgram, who invented this.
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C
I didn't know about the Grammy, but
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A
yes, the Grammy, which is a whole interesting thing because that effectively freed up so much bandwidth for streaming that the music industry exploded in a way that it was never able to before. Sleep Money is sponsored this week by Lisa. I just was at the gym and I did something really stupid to my back and it hurt. And I was like, oh no, I'm gonna have to go to bed and sleep horizontally for eight hours. And when I get up I am going to be incredibly sore and uncomfortable. I was wrong. I forgot in my pain that in fact I had upgraded my mattress to leesa. And when I woke up in the morning, was I sore? Yes. But was it as bad as it was the last time I did this to my back? It was not. And I thank my Lisa mattress for that. Lisa had a a lineup of beautifully crafted mattresses and they're all tailored to how you sleep. Each mattress is designed with specific sleep positions and field preferences in mind, but all of them are just incredibly high quality. From night one, you will feel the difference. Premium materials that deliver serious comfort and full body support. Most importantly, your bag. No matter how you sleep on your front side, any of them go at least Lisa.com for the President's Day sale. That's a big sale they have going on right now. And get an extra $50 off with promo Code Money that's exclusively for you darling Slate Money listeners. That's L E-E-S a.com promo code money for 30% off mattresses plus an extra $50 off support our show and let them know we sent you after checkout. That's leesa.com promo code money for 30% off mattresses plus an extra $50 off support our show and let them know we sent you after checkout. Lisa.com promo code money. Slate Money is sponsored this week by Stash. Have you dabbled in investing here and there but haven't been happy with how things are going? Stash helps turn good intentions into consistent progress. Stash isn't just another investing app. It's a registered investment advisor that combines automated investing with expert personalized guidance so you don't have to worry about gambling or figuring out on your own. It's simple. It's smart. It's stress free. It has a smart portfolio that helps you invest in a diversified balanced portfolio and on a regular schedule which can help you build wealth over the long term. Join over 1,000,000 Active Stash subscribers and finally, let your money work as hard as you do. Don't let your money sit around. Put it to work with stash. Go to get.stash.commoney to see how you can receive $25 towards your first stock purchase and to view important disclosures that that's get.stash.commoney get.stash.commoney paid non client endorsement, not a guarantee nor representative of all clients. Smart portfolios are discretionary managed accounts and subject to additional fees. Citi Advisory Agreement and Deposit Account Agreement for details Investment advisory services offered by Stash Investments LLC and SEC Registered Investments Advisor. Investing involves Risk the thing I really want to talk to you about, Alex, is a different market which is laissez faire in the United States and much more regulated in Europe and is clearly and obviously better in Europe, which you have a whole chapter about which is interchange fees.
- [32:48]
B
I was thinking that could have been any one of five things.
- [32:52]
A
It could be, but this is a really interesting one because in most of the world credit cards are a thing that exist and are accepted and some people use them and some people don't and it's all fine. But the government says quite reasonably, like there is a limit to how high of a swipe fee you can have on a credit card in the US the government basically doesn't say that. It does put a limit. Ever since Dodd Frank, it does put a limit on how much of a swipe fee you can have on a debit card. But people don't use their debit cards nearly as much as they use their credit cards. And so you wind up with this insane sort of arms race of credit card companies inventing grander and grander rewards that they need to sort of kick back to customers, and the swipe fees just going higher and higher, and the people paying this being merchants. And as you explain in your book, the poor, basically, and just on a sort of very big picture level, explain to me how is it that letting the market determine these fees works out so badly in the United States when in general, like laissez faire, markets should be a little bit more efficient than that?
- [33:58]
C
I'd say one theme of this book is that every market has a designer. And you can pretend that it's just the laissez faire. The market is doing its thing, but there are always rules, regulations. Like, you can abdicate your responsibility, but there's no such thing as the market just doing its thing without any intervention. And you're right that credit cards is a very good example of this.
- [34:18]
B
Who would be the primary market designers in this scenario?
- [34:21]
C
I mean, I think in a lot of cases it's less centralized than the example we just gave about the Spectrum Auction. But it's lawmakers at both the national level and potentially at the state level is often the answer.
- [34:32]
A
But that's not the answer here. Right. There weren't a bunch of lawmakers saying, we are going to set the level of interchange on the Chase sapphire reserve at 3.1%. The whole point is, it's true that lawmakers who could have stepped in and done the European thing and kept interchange fees failed to do so. But I think on some level, it's a bit of a stretch to just say because Congress didn't pass a law. Congress's lack of passing a law was the designer.
- [34:57]
C
Yeah.
- [34:57]
D
No, the designer is MasterCard and Visa. They're the ones charging the interchange fees. And no one is stopping.
- [35:03]
C
Yeah. But I mean, you can also look at their countries where they have just decided to make it very easy to transfer money between banks. Like we are all used to. Venmo, you just, like, send money to your friend and it's instant. And, like, that's kind of abstracted away what's going on behind the scenes. Right. But like, today it's not. There's some Way where it should not be hard to just transfer money to a business that's selling you a coffee or to your landlord who you're paying rent to. It's basically just updating two spreadsheets. I'm sure it's more complicated and people in the industry could tell me that. Right. But like.
- [35:34]
A
Well, no, it exists. It does exist now. It's called Zelle.
- [35:37]
C
Yeah.
- [35:37]
A
It still is struggling to compete with Venmo for reasons that I do not entirely understand, except for just like the product isn't that great. But yeah, the thing that we now consider to be Zelle in the United States is a thing that has existed in most of the rest of the world for years without anyone being excited about it at all. It's just normal.
- [35:55]
C
Yeah, but you tell me, I mean, maybe it's helpful to back up and talk about what's going on with credit cards a little bit more and then why we don't see that everywhere in the world, like in Europe, as you brought up.
- [36:03]
A
Well, I guess my question really is just you explain quite well in your book that the equilibrium state for credit cards in the United States is suboptimal and there are like individual things that we can do, which is like maybe just only have no fee credit cards and just get cash back credit cards and try not to play the points maxing game. But ultimately this is not a problem that can be solved bottom up by people doing this thing rather than that thing. It has to be solved top down by someone capping interchange fees. And it just comes down, as Emily says, to the fact that Visa and MasterCard are worth so much money and they have lobbying power and they've managed to persuade Congress not to do that.
- [36:47]
D
Also, it's an invisible fee to consumers. Like even the poor people that are paying more money for stuff because they don't use credit cards and get cash back. It's an invisible thing to rail against. And that's why you see the President suggesting we cap interest rates on credit card debt instead of capping interchange fees. Because if that was like your policy platform as a politician, I think people would be like, like, you know what I mean? It's just not. It's not gonna resonate at all. So it's this very smart way to make money because no one can really see it or feel it.
- [37:19]
C
Yeah, I remember this moment, and maybe you do too, when like the Chase Sapphire Reserve credit card came out. And like, I remember driving somewhere with friends for New Year's Eve and everyone was talking about how to like get as many points as possible from Chase Sapphire Reserve credit card and it's signup bonus and you could get flights and hotels. I just remember sitting there and thinking like, something is rot. Because to Emily's point, like, it's not obvious, like, credit cards are actively taking money from poor people and redistributing them to rich people. Not in such great amounts that, like people will get out the guillotine, but in meaningful amounts. And the sad thing is that it's much more meaningful for poor people who are losing money because they're paying in cash, because they don't have the Chase Sapphire reserve card or another fancy cash rewards credit card versus the wealthy people.
- [38:04]
A
So, Alex, I disagree with it. I do think that credit cards are taking money from poor people and you can see that in the interest rate. And credit card interest rates are too high. I don't. Whether or not we should cap them is a separate question. But 100% poor people pay a huge amount in credit card interest and it is deleterious on a bunch of different levels. Rich people also pay for credit cards. They are not net gainers, they are net losers.
- [38:28]
C
But I'm not talking about interest. Right. If every.
- [38:30]
A
No, no. Even the revolvers, even the people like me who pay off their credit card every month, we still pay for credit cards. This is the genius of the Chase Sapphire Reserve. And all of the other ones is they have these annual fees.
- [38:44]
D
I don't pay an annual.
- [38:45]
A
And we wind up paying so much money as a class. Emily is smart. She doesn't pay annual fees for credit cards.
- [38:51]
D
I'm sure Elizabeth doesn't.
- [38:52]
A
Wait, wait, wait.
- [38:52]
C
But you're telling me that you have not done some of this math and figured out that you are getting enough rewards that it is worth the annual fee on your credit card?
- [39:00]
A
That is exactly what I'm saying. I'm saying that I am paying an annual fee for my credit card and I don't get anything near that much value back from it.
- [39:08]
B
Well, do you think your annual fees are greater than the additional interest rates that poor people pay over the course of like a year?
- [39:14]
A
No, I am saying that the credit card company makes money from the poor people and the credit card company makes money from me. I'm not saying that it makes more money from me. I'm just saying that it makes money from me as well. The money is not being redistributed from the poor to me. It's being distributed from the poor to the credit card companies and from me to the credit card Companies. The credit card companies are not in the business of subsidizing me. They're in the business of making money for themselves.
- [39:40]
D
I get cash back on all my purchases. 1%, 2%, whatever. But that percentage is less than the credit card companies are getting through interchange fees. So every time I get my little bit back, they're also getting money too. Is that what you mean?
- [39:52]
C
I mean, I think the biggest redistribution is from every store in America, every place that accepts our credit cards. The redistribution is mostly from them to the credit card companies. That is the biggest one. You go ask, like, your local coffee shop. I would willing to wager you're like, how do you feel about credit card companies? Be like. Like, they will probably say words that I should not say on this podcast. Those fees that are charged by credit card companies, charging, you know, let's say 2.5% interchange fee, every time you buy a coffee, there's a 2.5% of that is going to the credit card company. Like, that can be almost the entire profit margin for a lot of businesses. But what's really tough is that you can go find people who, like, own a small business and the credit card company makes more from their business than they do in terms of profit. But then the key point there too, is that fee that's that merchants have to pay stores have to pay to the credit card company in exchange for them accepting credit cards. Someone with a really nice rewards card, they get that feedback. In some ways, the store maybe increases their prices because of these credit card fees. But then someone with a really nice rewards credit card, they get compensated for that in the form of free flights, hotel stays, or maybe cash back. Someone who's paying with a debit card and gets no rewards, they're just paying those higher prices. They don't get anything back. So that's the reverse Robinhood logic of credit cards.
- [41:05]
A
So you get some of it back. I think to Emily's point, most of it you don't get back. We had Ron Lieber on this show who's a big points maxer. And like, there is a small subset of credit card people who do get more value out of their cards than they spend in terms of fees and stuff. But they're the minority. I've mentioned this on the past many times. I'm just someone who accumulates vast amounts of air max points and never does anything with them, and it's just a waste of money.
- [41:30]
D
It's just unbelievable.
- [41:31]
C
But I do think probably the best way to conceptualize what's like Credit cards when they were new and growing, it was amazing. They offered this amazing service to stores. You don't have to write down each person who owes you five doll, bank of America or Visa or what have you will take care of that for you for a small fee. But now, years and years later, when the technology has become much, much easier to keep track of who owes money to whom, the fees are, if anything, going up to fund even greater and greater rewards to attract wealthy spenders. So I think probably the better way to think about this is credit cards as a tax on every transaction, that every transaction is a little higher than it needs to be.
- [42:09]
A
There are tax on every transaction. And the thing that annoys me the most about interchange fees is that the interchange fee that the merchant pays depends on the credit card, right? So if I walk in with a MasterCard, my local supermarket, the supermarket will pay an interchange maybe one and a half percent, maybe two and a half, maybe 3%, depending on what flavor of MasterCard I have. And it makes no difference to them what flavor of MasterCard I have. There's no reason why they should be willing to to pay more in interchange for someone paying with a Chase Sapphire Reserve than just with the bog standard Citibank MasterCard. But they do. And the ability of MasterCard to create these tiers and to say, well, some cards you need to pay more for is just unspeakable to me.
- [43:00]
C
Right? And I think a lot of people are familiar with seeing signs at stores that say they don't accept American Express. Right? And that's because American Express charges this very high fee so that they can and fund these very generous rewards to
- [43:11]
D
their members that Felix doesn't even take advantage of.
- [43:14]
C
But to your point, with Visa, there are lots of credit cards that use the Visa or MasterCard system and they are also charged a very high fee to fund very high rewards for their members. But to your point, a supermarket, coffee shop, whatever, an online store, they can't refuse to accept those very fancy rewards cards from Visa or MasterCard or charge a higher fee.
- [43:36]
A
They should be able to.
- [43:37]
C
There has been a lawsuit over this and like recently there was a settlement and I think we are all waiting to see what it means. Like possibly this settlement could mean that stores will gain the right to charge a higher fee if you use one of those credit cards with a higher fee. But I think there's also a lot of skepticism that stores will be able to do this in practice, that they'll be able to risk a substantial amount of their customers who are used to just using their Chase Sapphire reserve card or their other Fancy Visa or MasterCard being told, oh, you have to pay a higher fee. Fee. Will that be able to happen in practice? That's still tbd. And I think there's a lot of skepticism that this, the legal action in progress, will really change things.
- [44:27]
A
Because this is slate money. We're going to have a numbers round, mainly because I'm just really interested to know what numbers. Alex comes up with huge amounts of advance notice that we're going to have a numbers round of this later. So, Elizabeth, Yes. Off the top of your head, what is your number?
- [44:42]
B
My number is 20. And that's the number of pounds a content creator named Patrick Kong lost by eating what he refers to as boy kibble, which is the answer to girl dinner. It's just more boycotted, I guess.
- [44:55]
D
What is it?
- [44:55]
A
So, wait, what is. First of all, what is girl dinner?
- [44:58]
D
Oh, Felix, come on.
- [44:59]
B
Girl dinner is where you put together a bunch of snacks. It's basically like everyday charcuterie, like a little cheese, a little meat, some vegetables. Not like a full dinner. So the idea is that it's like little nibbles. You don't have to cook anything, and it's ostensibly healthier.
- [45:14]
A
And I'm assuming here that the pounds are weight and not sterling. Yes, weight. Okay.
- [45:19]
B
So boy dinner is basically more concentrated on the overall nutritional composition. So the boys will apparently just toss a bunch of food in together, like some ground beef and some veg and some rice. And then in total, this is just considered boy kibble. Although technically, girls can eat it, too.
- [45:37]
A
Emily has the most puzzled look on her face I've ever seen. Emily's like, what are you talking about?
- [45:42]
D
No, I think I get it. It's like the boys just want to eat a bunch of protein stuff and they don't care about it.
- [45:48]
A
You eat it with a spoon. Yeah.
- [45:50]
B
They just make a bowl of slop. And if it's nutritionally valuable, that's all they care about.
- [45:54]
A
About.
- [45:54]
B
This is the market for Soylent.
- [45:56]
A
Yeah, this is Soylent, right?
- [45:57]
B
Yeah. It's like homemade Soylent.
- [45:59]
A
So if you eat less, you lose weight.
- [46:01]
B
Yes, that is how it works.
- [46:02]
A
Amazing.
- [46:03]
B
Eat fewer calories, lose weight.
- [46:05]
A
Genius.
- [46:05]
D
I don't think girl dinner is a health thing at all. I think it's more like delicious snacking. Right. One of the girl dinners I've seen is Caesar salad and French fries, which is not healthy, I don't think. I mean, a little bit healthy, I
- [46:17]
C
guess, but it sounds good. Yeah.
- [46:19]
D
So good. I'm so hungry right now.
- [46:20]
A
It does sound better than Soylent. Emily, what's your number?
- [46:23]
D
That was a good number, Elizabeth. My number is 26.24. That is $26.24. That is the per hour cost of babysitting one child on average, nationwide in January 2026, according to data from Urban Sitter, which is a place where you can go find babysitting, I believe. And that price is up 5% from the year before, which is higher than the rate of inflation. And if you want to understand why the price of babysitting is higher than the rate of inflation, you should read Alex's book where he explains.
- [46:53]
C
You made the plug for me, Emily. I didn'. I was waiting to jump in. That's amazing.
- [46:58]
A
I'm waiting to jump in and talk about Baumol's cost disease.
- [47:01]
C
Yes. Which is like truly one of my favorite chapters for just the way that it feels like, oh, it can help you understand the cost of childcare and babysitting, but also so many other things across the economy.
- [47:11]
D
Exactly.
- [47:12]
A
This is the perfect segue to my number, which is 2,160. But before I tell you what the 2,160 is, I need to explain that one of the greatest victims of Baumol's cost disease is the Metropolitan Opera in New York. The cost of putting on the operas every year at the Metropolitan opera is about $300 million a year. They have a lot of philanthropists who they have cultivated over the years, and they manage to persuade those civic minded individuals to donate to them on the order of $150 million a year of just charitable donations, which covers about half of their costs. They also, of course, sell tickets to the opera, and that gets them another hundred million dollars or so. But Alex, as a sophisticated mathematician, you will be able to work out that that still leaves them with a $50 million deficit. And so Peter Gelb, the general manager of the Met, is like, how are we gonna be able to fill this deficit and try and balance the books? And there are various things he's doing, including firing people, of course, but one, one of the things he's doing is he has put up two Chagall paintings for sale. And 2160 is the square footage of the two Chagall murals at the Metropolitan Opera. These are enormous. They're 36 by 30ft each. And apparently Sotheby's has valued these murals at $55 million for the pair. Now, the interesting asterisk is if you buy them, it's not A charitable donation. It is a commercial transaction. But if you buy them, you need to sign a piece of paper saying they have to stay where they are. You can't move them because, I mean, honestly, why would you want to? Because they were purpose built for this location and they're 36ft high.
- [48:59]
C
Yeah, but this is like a real in real life NFT that like you will own it, but it will not move.
- [49:06]
A
Yes, I like this. I wish I had thought of that metaphor when I was writing about this. It's a. It's an IRL nft. Only instead of using your like Twitter avatar as putting a monkey JPEG there and saying like, I own this, what you get is a little plaque next to the mural saying, this mural is owned by Alex Mayasi. But in any case, it is obviously always a good season to be giving awesome gifts to your billionaire friends who have everything. So if you want to give them a couple of murals, this is a good thing. It's unique.
- [49:35]
D
It's definitely unique.
- [49:36]
A
But anyway, Alex, what is your number?
- [49:39]
C
So I'm going to bring a number in from the book which is seven out of roughly 450,000. So we have not talked about the investing chapters of the book today, but this will be a little amuse bouche from those chapters. So that number comes from a number of years ago, a company called Kaching hosted a kind of American Idol for investing contest where you would get fake money, invest in stocks, see how you did. And the idea was to identify very successful, successful investors. There were a few different games competitions like this at the time. And the people behind this competition later shared that out of the roughly 450,000 people who signed up, seven of them performed well enough that they beat the market or otherwise showed signs of investing prowess. So I think that is a cautionary tale about if you are not investing professional but decide that you want to, you think you have some good ideas about buy this stock or do X, Y or Z in the stock market. Just remember that number 7 out of 450,000 was roughly the level of success that was seen among general populace who signed up for the competition.
- [50:46]
D
Yikes.
- [50:47]
B
This is why I'm a former equity analyst and I tell my relatives, you should not be picking your own stocks unless you're prepared to quit your job and do it full time.
- [50:55]
A
But even if you are prepared to quit your job, you still shouldn't do it. Like most people who quit who do it full time and even get paid for it, do not outperform the most.
- [51:04]
D
It is you gotta get those fees.
- [51:06]
A
You gotta get those. Exactly. No, it's. Don't do it, people. Don't be a market timer, as Emily I'm sure will remind us.
- [51:13]
D
Unless you get fees from it.
- [51:15]
A
Exactly. Alex, it has been so much fun having on the show. Thank you for coming on. It's been a pleasure. Thank you as well to Micah Phillips and Jessamyn Molly of Seaplane Armada and Shadow Shayna Roth and the whole Slate crew for putting this show together. And thank you all for listening and for sending us your emails on slatemoneyleep.com it's been fun and we will have a slate plus segment with Alex on a different chapter of his book. But other than that, thanks for listening and we'll be back next week with more Slate money. You've made it on time for the McDonald's breakfast menu. You think to yourself, finally I can start my day. But what if breakfast could be even more perfect with the hot honey sausage egg biscuit? It finally is. Go to McDonald's and get it while you can.