Felix Salmon (2:49)

Okay, so I want to start off by telling a little story. Once upon a time, there were these things called unicorns. You might remember unicorns. Unicorns were private companies that had a $1 billion valuation. And everyone's like, that's crazy, because normally, historically, companies like Amazon went public when it had a $400 million valuation. Often companies went public when they had a $40 million valuation or even a $4 million valuation. The idea is, it was amazing that companies to become worth a billion dollars and still be private. And so people started talking about these things called unicorns, and the number of unicorns started going up. And then people started talking about things called Decacorns, which were for private companies worth $10 billion. And then in my early years at Axios, I invented these things called Minotaurs, which was companies that not only had a billion dollar valuation, but had actually raised more than a billion dollars in equity capital over the course of their various rounds. And there weren't very many minotaurs. There were maybe like a dozen or so. But that was just the next step. Over the course of many years and many rounds of fundraising, you could raise up to a billion or more than a billion dollars. And so companies like WeWork or Uber were famous for having raised more than $1 billion before they went public. Now we have just obliterated this entire concept because OpenAI is a private company. In a single round, it has raised $122 billion, which is the largest single equity fundraising round in the history of humanity. It dwarfs the biggest ever ipo, which I think was Saudi Aramco, where they raised like 39 billion. And that was in the public markets. This is just in the private markets. And so my question to you, Emily, is, does this now mean that the private markets are weirdly somehow deeper and more liquid and there's more money there than in the public stock market?

Emily Peck (4:52)

No, I don't think that's what it means, actually, because even though OpenAI has raised this insane multi billion dollar round of funding, and as you pointed out, it's big and astounding in all of this, it's still planning on going public, maybe even as soon as this year. And that's. It needs even more money. And as my colleague Dan is reporting this morning as we're taping, it needs so much money that it's going to run out in the private sector, and it has to.

Felix Salmon (5:24)

$122 billion just doesn't last as long as it used to.

Emily Peck (5:27)

Yeah, it's going to run out of options in the private market and it has to go public because it needs. It's going to need a lot more money. It's looking at a valuation of trillions of dollars, according to his reporting. And it's not the only private company that needs that much money. There's also Anthropic, which is also planning on going public maybe as soon as this year.

Felix Salmon (5:48)

And there's also xai, which is also planning on going public this year, apparently at a $2 trillion valuation.

Emily Peck (5:57)

But I just wanted to finish my thought, which is I've been thinking about this a lot, and it seems the previous tech revolution was kind of cheap and could be scaled relatively cheaply. The current tech revolution, the AI one, is really, really expensive, and it has, in fact made the public markets perhaps relevant again. Now you may speak.

Felix Salmon (6:17)

So the idea here, and I think you're absolutely right, is if you look at, say, Amazon was the single biggest investor in this round, I think it put in $50 billion of the 122, and they. Or 35 billion, or some enormous amount of money anyway. But they specifically made that money contingent on OpenAI going public. If it doesn't go public, then they're not going to get the money. A little bit like in that Last Big Round OpenAI did, a lot of the money was contingent on them losing their nonprofit status, which they eventually wound up doing. So OpenAI has to go public now because this is kind of explicitly couched as a bridge to an ipo. But most bridge to IPO funding rounds are based on the idea that it's the last big round of funding and then you'll go public and then you'll have liquidity. But I think the difference with this one is that in Sam Altman's mind, that IPO is also going to raise an insane amount of money. Like the. As we were just mentioning, the Xai IPO, which is also the SpaceX IPO, is going to raise at least 75 billion if Elon has his way. And I wouldn't be surprised if it was closer to 100 billion. So, yeah, it's like you can have all of this money in the private markets, but you can also have this much money in the public markets. And this is a whole new order of magnitude of the amount of funding that the public markets are able to provide. And in a way, I'm like, wow, good for them. Because most of the time, public markets are just sort of price discovery and capital allocation mechanisms, but they don't provide a huge amount of direct capital to companies in this way in primary and secondary offerings. Now, the amount of capital being directed to companies the stock in the public markets this year it's going to be hundreds of billions of dollars just for a handful of companies between OpenAI and SpaceX and Anthropic.

Elizabeth Spiers (8:19)

Yeah, for OpenAI most of the spending too is just going to physical infrastructure. They're going to spend 1.4 trillion just on that, which is mind boggling. Another thing about the Amazon contingency though, it's either they go public or they reach AGI, which what does that even mean right now? Given that it keeps getting redefined by,

Felix Salmon (8:41)

you know, that's marketing is what it is.

Emily Peck (8:44)

What do you think it means for the stock market? I mean we know The S&P 500 is weighted according to company size and so if you move these three like multi trillion dollar companies into the indexes, should we worry about that for some reason in some way for about stock market concentration and things like that?

Elizabeth Spiers (9:04)

I think it's already a problem that the indexes are so top heavy. It basically means that there's a lot of risk concentrated in one sector. In theory you put money into indexes partly to diversify a portfolio.

Felix Salmon (9:16)

Right. So the mega caps are a very high percentage of the S&P 500 and if these three companies join the mega caps, then the mega caps collectively will be an even higher percentage of the S&P 500. So the S&P 500 won't look like a diversified set of stocks so much as it'll look like a bunch of tech stocks and a few other things. Had a tacked on. I do think that in terms of the capital allocation mechanisms, the fact that these companies are going public at such enormous valuations means that huge amounts of index fund money is going to have to start chasing them. Now the minute they go public, they are not in the index. S and P has to add them to the index at some point. And historically companies have had to be public funds for some amount of time before they get added to the index. I know that Elon is sort of negotiating with S and P right now about can we get Pre approval for SpaceX to be part of the index. My guess is that OpenAI and Anthropic would do the same thing. But if that's the case, then the book runners, the banks who are running the IPO basically don't need to do any work at all. They just need to go straight to all of the index funds and say well you need to own this. So put in your order right now, you don't have any choice. And then they just take all of the orders from the index funds and Bish Bosh, they raise all of this money, right? And so like getting, raising this money in the public markets has almost never been easier if you can have this kind of valuation and be straight into the s and P500.

Emily Peck (10:55)

It's interesting what Elizabeth was saying about risk because the index becomes more top heavy. There was some research I think I just read or someone I talked to who said the risk isn't as bad as you would think it is because bigger companies are inherently less risky than smaller ones. I wonder what you would think about that.

Elizabeth Spiers (11:16)

I think that's true over, you know, centuries, but I think so much of the top heaviness is really going to be AI focused. And I feel like that's a different risk profile than the index overall.

Emily Peck (11:29)

But I mean, the risk until, until the AI companies, it was tech companies and that was fine. And everyone became a tech company anyway because the.

Felix Salmon (11:38)

Yeah, and so I think this is a big important distinction, right, which is that it's not just mega cap tech companies right now, it's highly profitable mega cap tech companies. If you look at Nvidia's PE ratio, it's not particularly out of whack with the PE ratio of the market as a whole. Right? Some random waste management company could easily be trading on the same PE as Nvidia. But the reason why Nvidia is worth $4 trillion is because it just has such enormous earnings because everyone is buying its chips. And so in that sense, the stock market is doing what it should do, which is it's applying a multiple to earnings and it's trading at normal valuation that. I think you are right, Emily, that it's very rare for a company with hundreds of billions of dollars of earnings to suddenly see those earnings disappear. Elizabeth is also right that if and when these big AI companies join the index, they don't have earnings, they have losses. And so at that point, the valuations seem much fluffier and weirder because you're not buying a multiple of earnings. You're buying some kind of hopes and dreams that eventually you'll stop losing money and start making money.

Emily Peck (12:56)

Well, they have revenue though, right? Like OpenAI, they have revenue, yes.

Felix Salmon (12:59)

Is making not particularly enormous revenues.

Emily Peck (13:02)

$2 billion in revenue each month from OpenAI, according to the company.

Felix Salmon (13:06)

So that's $24 billion a year. Right. So like if you're going to put a trillion dollar valuation on that, that's a massive multiple of revenues. Okay, that's like 50x revenues with no profits at all.

Emily Peck (13:19)

Well, what was Amazon when Amazon went public and everyone was like, doesn't make a profit, right?

Felix Salmon (13:25)

And that's the. Was it similar when Amazon went public, it went public at a $0.5 billion valuation. Right. There's a big difference. Like the stock market can cope with a loss making company worth $0.5 billion because if it goes to zero, no harm, no foul. If you have a trillion dollar company going to zero, then that's a lot of money that's lost out of People's S&P 500.

Emily Peck (13:48)

Well then that's a good argument for not fast tracking these companies into the indexes. Like why do we think that's okay?

Felix Salmon (13:55)

Well, the idea is that the indexes are cap weighted, right? And so if, if the biggest companies, or many of the biggest companies aren't in the index, then you're not really buying the whole market.

Emily Peck (14:08)

Why does OpenAI think it's worth trillions of dollars when the math you just did made me think it's not?

Felix Salmon (14:15)

It's not even what OpenAI thinks. It's what OpenAI's investors are willing to invest at.

Elizabeth Spiers (14:21)

Right?

Felix Salmon (14:22)

This is like OpenAI is not in charge of OpenAI's valuation.

Emily Peck (14:27)

So investors think it's worth trillions even though the revenue suggests that it's not yet there. They just think it has a lot of potential.

Felix Salmon (14:34)

And it does look empirically that there's huge demand from investors to buy into this sector. Right. So the book runners for the SpaceX IPO have just upped its valuation from 1.75 trillion to 2 trillion. And 1.75 trillion seemed, you know, insanely huge. Or is it 1.25 trillion? Yeah, it was 1.25 trillion just a few months ago. Just a couple of months ago when they merged Xai into SpaceX. Now it's 2 trillion. All of these numbers are just invented. No one knows where these numbers are coming from, but it does does look like there is demand out there in the market at that kind of valuation. Now it's an interesting question, how much of it is forced demand from index funds that have to buy no matter what. But I do think there's real demand as well.

Emily Peck (15:22)

And what about this SpaceX situation? I mean, they're doing this to get more money into xai. Which of all the AI companies seems like the least sort of, I don't know, successful potential?

Elizabeth Spiers (15:35)

It's a weird company anyway because the part of the business that's the most successful right now is really starlink. And so when you think about it, it's a company that produces AI technology, sat phones, technology and rockets. How do you value that kind of company? And I think part of the logic behind the XAI acquisition was just to drive the valuations up because I think the, you know, the comparables for AI companies are just much higher than they would be for Starlink and SpaceX alone.

Felix Salmon (16:06)

I think it's also the fact that people are talking a lot about how Google is the natural winner in AI because it has a whole bunch of cash flows that it can use to invest in its AI projects in a way that OpenAI and Anthropic really don't. The only thing they can do is try and sell access to their chatbots and that will give them a couple billion dollars a month, but not sort of mega cap kind of cash flows. By merging Xai into SpaceX, what Elon Musk is doing is he's saying, well, now all of those starlink cash flows are going to be available to XAI to help pay for shit. And that is going to help XAI grow. And then he also, of course, as we have discussed on this show, has this whole idea that this is all connected because the future of this company is to put data centers in space.

Emily Peck (16:57)

Right. And then I did read also somewhere could have been on X.com, so. But I did read that maybe at some point Musk will merge all his companies into this space SpaceX thing. Like just keep rolling them all together,

Elizabeth Spiers (17:12)

rockets and AI and shitposting.

Felix Salmon (17:14)

Well, there's one other company that matters, right?

Emily Peck (17:17)

Tesla.

Felix Salmon (17:17)

Right, Tesla. And it would be very easy for Elon to make that argument because what he's doing at Tesla is he's very much pivoting from cars to robots. And his idea, again, like we can believe it or not, but I think it's probably true over like a 10 year time horizon is that in 10 years there are going to be a lot of robots doing stuff for us and those robots are going to have a bunch of AI chips in them. Because you kind of need, if you're like a humanoid robot doing things like, you know, doing someone's dishes or folding their clothes or doing healthcare stuff or whatever it is, do you want the robot to do like, there's a bunch of like kind of artificial intelligence things that you need the robot to be able to understand in order to be able to do that. Folding clothes is a notoriously difficult problem to solve for robots right now. So AI and robots are very closely interlinked. Tesla is basically a robot company. At this point rather than an AI company. So it kind of makes sense to fold the robot robot company into the AI company. I think the reason he hasn't done it is just because on a regulatory basis it's much harder for Tesla to buy one of Elon's companies because it's public than it is for him to just merge two private companies, which is what he did with SpaceX. Next, AI. You'll recall when Tesla bought SolarCity, there were millions of lawsuits saying this was an insider transaction and he screwed public shareholders and all of this kind of stuff because he does have those public shareholders. I think he would like to, and I think that now that he's incorporated in Texas, it's going to be easier for him to do that. So I wouldn't rule it out at all. I think it's. I think everyone kind of expects it to happen at some point, but I think he's going to take SpaceX public first. Have a share price of SpaceX, which is public, and everyone kind of understands is the valuation of SpaceX and then a valuation for Tesla and then you can just merge them. Whatever the public price is of those new companies, no one can really complain.

Emily Peck (19:22)

Well, it all seems very exciting, exciting moment for the public markets that I haven't seen in a very long time, like since Meta went public or something.

Elizabeth Spiers (19:31)

Numbers that no one can fathom are so big.

Felix Salmon (19:34)

They are insanely big. It is really, we have actually run up against the point at which $122 billion, say, or $2 trillion, like these numbers are so enormous that it is kind of beyond the ken of any normal human being, myself very much included, to understand just how big these numbers are. I cannot get my brain around the size of these numbers.

Emily Peck (19:57)

And they don't employ that many people, these companies.

Felix Salmon (20:00)

No, I mean they're quite the opposite, right? They're job destroyers rather than job creators. Foreign. Is sponsored this week by Vanguard to all the financial advisors out there whose job is to help your clients keep more of what they earn. Vanguard is here to help you with that. Vanguard is slashing fees again, this time for more than 50 of its funds. That's on top of big fee cuts they gave last year to investors in Atlanta, seven of their funds. In an increasingly high priced world, Vanguard is staying true to excellence without expense. Vanguard has a fixed income team that is obsessed with consistent outperformance. And their low fees give their skilled bond managers more freedom to maneuver as they pursue outperformance. They also of course, help you deliver greater value as an advisor, Top performers shouldn't come at a higher cost. Go see the record for yourself@vanguard.com impact. That's vanguard.com impact all investing is subject to risk. Vanguard Marketing Corporation distributor. Slate Money is sponsored this week by Upwork, which is a service that you can use to make your business grow. Scaling a business takes expertise and it takes expertise at the right time. Upwork makes it easy to hire specialized freelancers quickly so you can get that expertise you need. Right now, upwork is a one stop platform to find, hire and pay expert freelancers across web and software development, data and analytics, marketing, business operations, you name it. With Business Plan plus, you can access the top 1% of talent on Upwork. And with AI powered shortlisting, you'll get matched to the right freelancer in under six hours. No endless searching required. It's free to sign up and posting a job is easy, so visit Upwork.com right now and post your job for free. That is Upwork.com to connect with top talent ready to help your business grow. That's upwork.com upwork.com

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Felix Salmon (23:04)

All right, what's next?

Elizabeth Spiers (23:05)

Spices. Oh, space and spices.

Felix Salmon (23:09)

From space to spice. I believe that was a big science fiction novel about space called Dune. Is that what we're talking about?

Emily Peck (23:16)

Ugh. I saw the Dune 3 preview and I haven't seen the other Dunes, but it looked so amazing. It has this great soundtrack. I was just like captivated. Just.

Felix Salmon (23:24)

Neil Villeneuve is a great visual storyteller.

Emily Peck (23:28)

Have you seen the other Dunes?

Felix Salmon (23:29)

I have. I definitely saw the first one. I think I saw the second one.

Emily Peck (23:33)

I might want to watch them all and then go to the IMAX Dune 3. But we should talk about spices. The real spices.

Felix Salmon (23:38)

Elizabeth, what's happening with real spices.

Elizabeth Spiers (23:41)

So McCormick is buying Unilever's food business. And McCormick is, of course, the giant spice company that's based in Maryland. They own Frenches and stubs and most importantly, Old Bay. And they are buying Unilever's business, which includes Hellman's and Knorr.

Felix Salmon (23:59)

They're paying like, $45 billion, right?

Elizabeth Spiers (24:01)

Yeah, yeah. In what the McCormick CEO says will be a global flavor powerhouse.

Felix Salmon (24:08)

And what's the combined value of the company? It's like 69 billion.

Elizabeth Spiers (24:12)

Yes.

Felix Salmon (24:14)

Yeah. Nice, as they say. But the point here is that the Unilever part of the combined company is much bigger than the McCormick part of the combined company. And in fact, McCormick is paying in equity. It's not paying in cash because he doesn't have $45 billion of cash. And so most of the new company, the new McCormick is going to be owned by existing Unilever shareholders. This is massively dilutive to existing McCormick shareholders. And so I think of this as a. Take under. I think of this as like a winnow eating a whale. Can I just repeat that? A minnow eating a whale. There we go. And we saw this quite recently when Discovery, which was this tiny little cable company, bought Warner Brothers, which was a massive studio, which is worth much more than Discovery. And it's kind of interesting to me that the markets are like, well, yeah, you do this thing right. Unilever does a lot of different things, most of which aren't food. And it makes sense to spin off its food division into a company that does food. And not a whole bunch of different things. A bit like, you know, Comcast did a whole bunch of different things, most of which aren't content creation. It's like a cable company, basically. And so it spun off Warner Brothers into Discovery, which does one thing which is streaming and TV and stuff, which, like, just do that one thing, even if you wind up selling a big subsidiary to something which is much smaller than that subsidiary.

Emily Peck (25:53)

So.

Elizabeth Spiers (25:53)

But the markets don't like this at all. Unilever's stock dropped 24% on the news. Why do they hate it? Do we understand?

Felix Salmon (26:00)

Unilever stock did not drop 24% after the announcement, but it has dropped that much over the past few months.

Emily Peck (26:06)

I think there's just worry over Unilever more broadly. And investors are sort of like, well, you're not going to do food anymore. You've done food for, like, 100 years. What are you doing? Like, I just think maybe there's not a lot of faith in Unilever.

Felix Salmon (26:20)

It's more to the point that they don't have faith in McCormick. Right. Because what they're getting, what that Unilever share price today is pricing in, is a bunch of future McCormick shares that they're going to wind up receiving. And they're saying, we don't really have faith that those future McCormick shares are going to be worth as much as you think they're worth.

Emily Peck (26:40)

That's a shame. The piece that we read in the prep did say that spices had been doing well up until recently. And now people are cutting back the

Felix Salmon (26:48)

OP1s, man, people are just eating less. But if you make less food, you will need less spices to make less food.

Elizabeth Spiers (26:55)

I think it's also just food is expensive now, and spices are not cheap. So I think when people cut out things that they don't really consider necessities, spices and condiments go out the door.

Emily Peck (27:05)

So a friend of ours, I was told eliminated, winnowed, not minnowed. Winnowed his spices down to just 10 spices. And I thought that was sort of interesting because we have a messy spice cabinet. There's, like, too many spices, and then you wind up buying the same spice, more than one. I wonder if this drives McCormick revenues, actually, as people who are making recipes and they're like, I don't know, do we have time at home? I don't know, just buy it again. And then they have, like, four times. So maybe that's, you know, part of what's going on.

Elizabeth Spiers (27:38)

I finally alphabetized my spices for that precise reason as I kept buying the same ones over and over again.

Emily Peck (27:45)

Do you think you could only live with 10 spices?

Elizabeth Spiers (27:48)

No. No.

Emily Peck (27:49)

Are you sure?

Felix Salmon (27:50)

I think it is possible to live with a mere 10 spices.

Emily Peck (27:55)

I mean, metaphorically.

Elizabeth Spiers (27:56)

I couldn't live happily with 10 spices. I feel like I need 400 kinds of chili pepper.

Emily Peck (28:01)

No. Are you sure? I don't know. I'm very inspired by the just have 10 spices. I feel like that's a good way to live.

Felix Salmon (28:08)

I do think that a lot of the reason why people have so many spices is cookbooks. And the recipe will be like. And then add these four different spices, and you're like, well, I guess I need those four different spices. And so you go out and buy them because it's in the recipe even, you know, if you maybe don't and you can use one of the other ten instead.

Emily Peck (28:27)

Yes, exactly. You don't need to go buy whatever they tell you to get the cumin. I think I have, like, five cumins.

Felix Salmon (28:33)

You know who I Blame for the explosion of spice cabinets is Yotam Ottolenghi. Like, the number of fucking spices that he puts in all of his recipes. Do you really need all of those different spices? Maybe you don't. Maybe you can just make do a

Emily Peck (28:47)

10, just put salt.

Elizabeth Spiers (28:48)

He's a recipe maximalist in every sense. Every single recipe that he has is delicious. But it's like, this will take you 10 hours and you need to go get three obscure ingredients and caramelize some onions for 58 minutes.

Emily Peck (29:03)

Just to talk more a little bit about McCormick with my random musings on this story. It's nice that it's a local Maryland company. Producer Jessamine was talking about how excited they get in Maryland about Old Bay. And it's nice in these times that it's not some, like, multinational, you know, giant or something. It's like a very local firm.

Felix Salmon (29:26)

I don't know. So do we. I think maybe that's what the Unilever shareholders are worried about. Right. Because Unilever is headquartered in. It used to have dual headquarters in Amsterdam and London. And then they've got rid of one and I can't remember which one they got rid of. It's a very European company.

Emily Peck (29:43)

Yes.

Felix Salmon (29:43)

And so most of its shareholders, or a huge chunk of its shareholders are Europeans. Right. And they're. And they're a big part of the UK Stock exchange and you. Big part of the Amsterdam Stock Exchange. And now they're like, oh, we're going to wind up owning a bunch of shares in this random spice company in Maryland, America. Who or what is that? That's not what we do. We are European shareholders. We're not U.S. shareholders. And maybe, Elizabeth, that's the answer to your question. It's that all of those European index funds who own a bunch of Unilever shares are going to have to sell because Unilever is going to be much smaller. And they don't really have a mandate to own shares in a Maryland spice company.

Emily Peck (30:24)

Well, that's too bad, because it seems lovely.

Felix Salmon (30:26)

And remember also that just in general, the US Stock market trades at much higher valuations than the European stock market. So if you start applying those European PE ratios to McCormick and all of that, then maybe it looks less attractive.

Emily Peck (30:43)

Does that mean that Unilever shouldn't have done this deal? Or is it just, like, fine because the stock price went down like that? Does that mean, like, they made a bad choice?

Felix Salmon (30:52)

First of all, it's Lever, named after Lord Lever.

Emily Peck (30:55)

Thank you so much.

Felix Salmon (30:57)

The guy who invented soap. And do we Believe in efficient markets and that any deal which makes your stock price go up is automatically good. And any deal that makes your stock price go down is automatically bad.

Emily Peck (31:08)

No, I don't think so. Because the short term you got to look over the long term to really understand.

Felix Salmon (31:12)

I do think that the whole unilever moving into food thing, I can see the argument that maybe it wasn't such a good idea after all and they should stick to their knitting and you know, be good at soap.

Emily Peck (31:25)

Didn't the story say they were in food for like 100 years or something?

Felix Salmon (31:28)

Yeah, I mean it's just like a century long detour.

Emily Peck (31:33)

Food is kind of out. I think processed food people aren't into it anymore. So all the processed food companies are kind of like flailing about trying to figure out this new world. We've talked about Kraft Macaroni and cheese before, right?

Felix Salmon (31:44)

I will say that GLP1s pose very little threat to soap.

Emily Peck (31:49)

Also, we should mention that Slate's Dan Kois has some like 8,000 word story on soap that I keep meaning to, but I probably won't read, but I want to about why bar soap is amazing, but no one's using it anymore.

Felix Salmon (32:00)

Bar soap is amazing. Hard. Agree.

Emily Peck (32:02)

Yes, but no one uses it anymore. Just like olds. I use it well, you heard what I said.

Elizabeth Spiers (32:07)

The olds.

Emily Peck (32:08)

Only the olds are using bar soap.

Felix Salmon (32:10)

Okay, you've outed me as an old.

Emily Peck (32:11)

But bar soap is apparently much better. It's self cleaning and there's no waste. It just goes away.

Felix Salmon (32:17)

Yeah. We should also just mention since we're not going to have the opportunity to talk about this again, there are certain things that are just where the biggest and most mass market thing is also the defining and the best version of the thing. And I feel like Heinz ketchup is one of those things. And Gillette razors is one of those things. And Hellman's mayonnaise is one of those things. Hellman's mayonnaise is part of you and leave it. And it's just like every time you buy a store bought mayonnaise that isn't Hellman's, you regret it. You're like why didn't I just buy the Hellman's?

Emily Peck (32:51)

I agree. I think Hellman's is the best mayonnaise. Although you can get store brand I think is the same as Hellman's. Like I get the Wegmans store brand. It tastes exactly like Hellman's.

Elizabeth Spiers (33:00)

I hate mayonnaise, so I have no opinion on this.

Emily Peck (33:03)

People have strong opinions.

Felix Salmon (33:04)

I am a big fan of like just making your own mayonnaise at home, but that's just a whole other that

Emily Peck (33:09)

seems really hard because don't you have to use eggs and the eggs break and like it always seems sort of intimidating to me. But do you need any spices? Because I don't want to buy any spices to make it.

Felix Salmon (33:20)

Now if it's nioli, then you need spices and you need garlic. Is garlic a spice?

Emily Peck (33:25)

I consider it one of the core 10 spices powder. It's very important.

Felix Salmon (33:29)

Oh, garlic powder.

Emily Peck (33:31)

Yeah. Do you not use it?

Felix Salmon (33:32)

I never use garlic powder.

Emily Peck (33:33)

What I even use it. When I use fresh garlic I use a little extra. Gives it a little more oomph.

Felix Salmon (33:38)

I'll look into this. Sleep Money is sponsored this week by Samsara. If a driver in your fleet got in an accident tomorrow, could you prove what actually happened? Without footage it's much harder. So your insurance rates spike and you're stuck paying for it. That's why so many folks fleets choose Samsara's AI powered dash cams, clear video evidence, real time alerts and coaching tools that help prevent accidents before they happen. Samsara is more than just a dash cam. It's a complete connected operations platform with GPS tracking, asset visibility, maintenance insights, safety analytics, compliance tools all in one place. So protect your drivers, cut costs and operate smarter with Samsara. Samsara AI helps reduced crash rates by nearly 75%. If you look at what happened in the city and county of Denver, they saw a 50% reduction in false claims against them and a 94% reduction in safety events overall. 94% reduction. Or look at what happened with DHL. With their focus on safety and more effective coaching, they lowered driver turnover by 50%. Samsara is rated number one by G2 for fleet management, as asset tracking, fleet maintenance and more. And I just like the idea that when very large and dangerous heavy vehicles are being driven around the roads of my neighborhood and my country, that these are being driven in the safest possible way. That helps me sleep at night and makes me more comfortable that when people drive to me they won't get into an accident. In any case, you don't wait for the next accident to take action. Head to samsara.com sleep money to request a free demo and see how Samsara brings visibility and safety to your operations. That's samsara.com sleep money samsara operate Smarter this episode of Sleep Money is sponsored by Drive with Jim Farley, which is a podcast with the CEO of Ford. It has a brand new new season, Season four, which is coming out later this month. And for anyone who'd like to get behind the scenes with the CEO of Ford, Jim Farley, this is the best possible podcast for you. Every season he talks to some of his favorite people about what they drive and what drives them. Like Sir Chris Hoy, who's not only a British racing driver, but he's also one of the most successful Olympic cyclists of all time. He talked to Jim about his career as an athlete, being knighted and his cancer diagnosis. I checked out a couple of episodes of Drive with Jim Farley, including a very fun one with Matthew McConaughey from a couple of seasons ago. Holds up incredibly well. He's one of life's great raconteurs. You'll almost certainly find something you love across the the seasons. He has a very broad range of guests and you'll find a few that you recognize and probably some that you don't and you would want to hear from anyway. So to listen to Drive with Jim Farley, just search for Drive with Jim Farley in your podcast app. That's Drive with Jim Farley. What's next guys?

Elizabeth Spiers (37:12)

WNBA.

Felix Salmon (37:13)

Oh yeah, the women have got a 400% pay hike thanks to Claudia Goldin. This is awesome. Emily, this is your wheelhouse.

Emily Peck (37:21)

Talk to me, Claudia Goldin, the Nobel prize winning economist. She has helped the women's basketball players negotiate a 400% raise in their latest contract. And it's awesome. And she's amazing. And I found out about this like everyone else by reading the Wall Street Journal. And apparently she, everyone was very stressed out about this, but golden was like, just focus on one number. Don't get all bogged down. This is just math. And in the end, she basically negotiated a higher percentage of league revenue that would go to the players. They're all getting a lot more money.

Felix Salmon (37:57)

Yeah. The idea being that the men NBA mnba, which we have to start calling, I want to call them the MNBA from now on. They have their players get a much higher percentage of revenues than the WNBA does. And the reason given by the WNBA team owners why this was the case was basically, well, that's because the MNBA teams make money and the WNBA teams don't. Right. And so they're like, we can share profits more easily than we can share revenues because if we share revenues while we're losing money, we just have no more money to lose. But this argument evidently didn't work very well. And so now the players are getting more money and Somehow I don't think that this is going to cause some sort of plunge in investment in WNBA and all of the capitalists retreating and the sport disappearing. I feel like the sport is really here now.

Elizabeth Spiers (38:54)

Yeah, the sport is also just growing really fast. You know, TV viewership is up 23% year over year and merch is up 40%. I mean, so they're building those things into the negotiation. But, you know, it's interesting to me to look at what that means for salaries, because the average salary before the negotiations was around 118k and now it's 580k. But still, compared to the men ba where the average player makes 12 million, it's, you know, still, there's still a giant disparity.

Emily Peck (39:22)

What I learned in reading the prep was that. What are we calling it? The MBA? The Men BA the Men's Basketball association didn't become profitable until the 1980s. So 40 years into its existence.

Felix Salmon (39:33)

Yeah, it took them really long time.

Emily Peck (39:35)

And I'm sure they were paying players pretty well in the 80s and the. Right.

Felix Salmon (39:40)

I think they were. I think like back then, players were making relatively little precisely because they weren't the profits. But we would need to pay now.

Emily Peck (39:47)

I want to know. But fine. But still, because everyone's saying, oh, they're not profitable yet. And it's like, well, neither was the NBA, you know, the Men's Basketball Association. So just chill.

Elizabeth Spiers (39:59)

One of the best things that I caught on to is that when Claudia Goldin won the Nobel, she only said yes to three requests. One was that she would negotiate this deal for the wnba. The other two were that she would go and. Wait, wait, don't tell me. And that she would throw a baseball out for the opening pitch for a Red Sox game.

Emily Peck (40:17)

I mean, no lies. I mean, that's a legend.

Felix Salmon (40:21)

And she threw a strike if.

Emily Peck (40:22)

Wait, wait, don't tell me ever calls, I am there. Like, I will drop it all for that. What a great show, don't you think? I love a quiz show.

Felix Salmon (40:31)

I do think that this all feeds on some level into the question of why the people own sports teams. Because obviously now if you buy a WNBA team, then you're going to have to lose more money because you're going to be paying the players more, at least in the short term. And yeah, the idea is that the valuation will go up and so you will make money on higher valuations and eventually there'll be growth and maybe eventually there will even be profits. But I do think that a huge amount of sports team buying over the past 30 or 40 years has been people buying sports teams that lose money. And they're okay with that because they are already rich and they don't mind losing money. And they are ultimately making money over the long term because the value of the team goes up. I feel like that's the big dynamic that everyone is kind of looking for in the WNBA as well. It's like we need a bunch of investors to come in and start buying these WNBA teams at ever spiraling valuations. And if that happens, no one cares if there are annual losses.

Elizabeth Spiers (41:35)

I feel like buying a sports team is a sort of luxury vanity investment, like buying, you know, small, unprofitable prestige magazine or a giant yacht.

Felix Salmon (41:45)

So I think it used to be right. And then more recently in, especially in football, American football, and the big profitable sports, we've seen private equity come in and institutional investors. And once these things actually become profitable, then you can start valuing them on PE ratios and all of that kind of stuff, and it becomes less of a vanity play. But yeah, that was historically what it always was. It was always just, hey, you own a Picasso. I own a WNBA team also.

Emily Peck (42:14)

I just wanted to say that this negotiation for the WNBA was sort of. The groundwork was laid like 10 years ago when the US women's soccer team filed a lawsuit for equal pay. And I think that sort of changed the conversation around women's sports. And so over the past decade, we've really seen more a bigger push for getting women higher pay in sports to the point where people are showing up to WNBA games with like, enchanting, like, pay them and stuff like that. There's like big support for this that is important to mention.

Felix Salmon (42:42)

Yeah, no one's, no one feels sympathy for the owners. Yeah, I do think the more interesting question for me is the relative pay of the soccer players rather than the basketball players. Because in basketball you can say, well, the revenues are so much higher in the men's game that, you know, there's just so much more money to slosh around. It kind of stands to reason that more of it will go to, you know, even with a lower percentage of revenues, the men would still wind up with much higher pay in soccer. Like men's soccer in the United States, I don't think has a lot more in the way of revenues than women's soccer. And so, like, it's a much cleaner place where you can see pay disparities.

Emily Peck (43:23)

And you could also see the women were doing so much better, like on the world stage, winning the World cup and all of this. And like, the men's team wasn't so. It was even more, like, on its face, unequal.

Felix Salmon (43:34)

I like the way that the men's team qualified for the World cup this year, which is just by hosting it. Like, the host country always qualifies. Meanwhile, Italy, like the three World Cups running, has failed to qualify. No one believes that the US Team is better than the Italian team.

Emily Peck (43:50)

I don't believe it, and I don't even know anything about it.

Felix Salmon (44:06)

We should have a numbers round. Emily, what's your number?

Emily Peck (44:09)

My number is 90. $90. That is how much you would have to pay if you want to buy a knitting kit in order to make the sweater that Ryan Gosling's character wore in Project Hail Mary. It's this, like, cardigan with these wolves on it. But the wolves look kind of like, nice. And apparently it was hand knit for Gosling. He saw it on set and he was like, I love this sweater. And they were like, well, those wolves look too mean. Let's get this knitted. And then there was like a race to knit the sweater. They only had, like two to three days to knit at least four sweaters because you need one plus backups. And then the movie has been a huge hit. Everyone should go see it. It's so good. I really enjoyed it. Ryan Gosling looks great. He's got the sweater. He's got these T shirts with his funny science puns on them that I'm sure will also sell out. But the Wall Street Journal focused on on the sweater, which you cannot buy. You have to buy the knitting kit to make the sweater. And it's produced by some company called Mary Maxim, a family owned knitting and crochet supply company. And they are scrambling to fulfill the orders for the knitting kit. That is my number.

Felix Salmon (45:14)

And it's only 90 bucks.

Emily Peck (45:15)

It's only $90. And you know, they had a picture in the Journal of the sweater on someone that wasn't playing like a middle school teacher sent to space to save the universe or whatever. And, you know, it looked okay.

Elizabeth Spiers (45:28)

It's a sweater.

Emily Peck (45:29)

It's just a sweater, guys.

Felix Salmon (45:30)

Elizabeth, what's your number?

Elizabeth Spiers (45:32)

My number is 750, and that's Icelandic krone. That is how much a hot dog costs. About $6 in American money. And this is a big deal because hot dogs are 5.2% more expensive than they were last year. And apparently for Icelandic people, hot dogs are the equivalent of the New York pizza slice. They're the sort of like, baseline indicator. It's like the Affordable food that everybody e. So the Icelander people are upset because their hot dogs are more expensive. But there was somebody quoted in this time story. It said, well, it's very classic to get a hot dog and then complain about the price. So complaining about the price of hot dogs is also apparently built into the culture.

Emily Peck (46:13)

So $6 is the average hot dog price in Iceland.

Elizabeth Spiers (46:16)

Yep.

Emily Peck (46:17)

Food is expensive there. Right. Because it's hard to.

Elizabeth Spiers (46:19)

It is because they have to import a lot of it. Bill Clinton went to the most famous hot dog stand in Iceland a few years ago. And normally, whenever you go to this specific hot dog stand, you ask for the everything, which is, like, fried onions and a bunch of other stuff. And Clinton asked for his with just mustard. And all of the. All of Iceland was horrified. But now the hot dog stand sells a hot dog called the Clinton, and it's just a hot dog with mustard.

Felix Salmon (46:46)

I mean, I approve.

Emily Peck (46:47)

That's like when politicians eat pizza in New York City, and everyone gets upset about it. They're like, you ate it with a fork and knife, and it's like, what do you expect?

Felix Salmon (46:54)

These men, Will de Blasio, had no idea how to eat pizza. Do you remember that?

Emily Peck (46:57)

But what do you expect? You're being filmed eating pizza. Like, it's just not gonna work out any way you do it. Like, just be. Take it easy.

Felix Salmon (47:04)

Hasn't Bill Clinton been vegan for decades? Yes, I guess it was a long time ago. He went to Iceland.

Elizabeth Spiers (47:10)

Yeah.

Felix Salmon (47:11)

All right, guys, I have a by the numbers section in my newsletter, and it has four numbers this week. So you get to choose. Do you want the sports number? Do you want the cooking number? Do you want the travel number? Or do you want the wine number?

Emily Peck (47:27)

I want the cooking number. I feel like we've done a lot with food this episode. Let's, like, let's keep going.

Felix Salmon (47:33)

Okay, so the cooking number is 600, which is the number of dollars that the new KitchenAid stand mixer costs.

Emily Peck (47:44)

The one with the light.

Felix Salmon (47:45)

It has a light. Emily knows about this because this is the biggest advance in KitchenAid stand mixers for 75 years.

Elizabeth Spiers (47:53)

Yes.

Felix Salmon (47:53)

They have put a light in it.

Elizabeth Spiers (47:55)

You can bake in the dark.

Felix Salmon (47:56)

There are two big changes to this. Number one is it has a light, a little LED light, so you can see what's in the bowl, which I think this is a great idea. And number two, it has on the speed settings, it doesn't just go, 1, 2, 3, 4, 5. It goes, 1, 2, 3, four, five. And it also has a half. If you want it to be

Emily Peck (48:13)

okay, but the light thing seems bad because it's like if it burns out or something, then you have to replace it. I don't like.

Felix Salmon (48:19)

That's the whole point. LEDs don't burn out.

Emily Peck (48:21)

They never burn out.

Elizabeth Spiers (48:22)

Right.

Emily Peck (48:22)

I knew that. Are you sure it's not going to have any problems? Also, I think they should put a camera in there so you could do like cool viral videos of making cookies and stuff.

Elizabeth Spiers (48:31)

The Influencer Edition.

Felix Salmon (48:33)

Yeah, after I got married, we did that thing that married couples do, which is get a KitchenAid stand mixer wedding present and we managed to break our KitchenAid stand mixer within a few months.

Emily Peck (48:45)

What? Who does that?

Felix Salmon (48:46)

I know. They're meant to last forever and we used the sausage making attachment and tried to make sausages and we just totally blew out the engine. Okay, I think that's it for us this week. Thanks so much for listening. Thanks so much for emailing us on slatemoneyleep.com thanks to Jessamyn Molly for producing and we'll be back next week with more Slate money.

Emily Peck (49:16)

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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