Slate Money – The Bad Deals Edition

Date: January 19, 2019
Hosts: Felix Salmon (Axios), Anna Szymanski, Emily Peck (Huffington Post)

Episode Overview

This episode focuses on the theme of “bad deals”—from the ongoing Brexit crisis in the UK, to President Trump’s approach to negotiation and dealmaking, and a tribute to Jack Bogle, the founder of Vanguard. The hosts dissect recent and historical financial debacles, delve into what makes a deal disastrous, and contrast them with rare examples of genuine innovation in finance.

Key Discussion Points & Insights

1. The Legacy of Jack Bogle (02:39–12:15)

• Jack Bogle’s Contribution:
  The hosts open with a discussion of Jack Bogle, who passed away at 89, praising him for fundamentally transforming investment via the championing of index funds and drastically lowering fees for investors.
  • Anna Szymanski: “He brought indexing to the masses. He allowed regular retail investors to take advantage of what some other institutional investors had known for a while. And it [...] made investing accessible, more accessible to a lot of people.” (02:47)
• Vanguard’s Unique Structure:
  Vanguard, which Bogle founded, has a mutualized structure—owned by its investors rather than external shareholders—enabling ultra-low fees.
  • Felix Salmon: “It was mutualized...company is owned by the people who invest in the funds...one of the main driving forces behind the ever lower fees.” (04:18)
• Impact on Industry Fees:
  The move to index funds has compressed fees industry-wide; some are now effectively zero.
  • Felix Salmon: “Fidelity actually came out with some funds which now charge zero fees. And that’s just amazing and wonderful.” (06:57)
• Index Funds, Passive vs Active:
  The rise of passive investing and its relation to market efficiency and price discovery; active investors still needed for price setting.
  • Felix Salmon: “You don’t actually need that many active investors for the price discovery. As long as they’re more than, I don’t know, 20%...they will be the marginal price setters.” (11:26)
• Memorable Bogle Anecdotes:
  Bogle’s personal thriftiness famously matched his professional ethos (sandwiches on the train, shunning hotels, etc.).

2. Brexit: The Mother of All Bad Deals (12:15–21:50)

• Unprecedented Parliamentary Defeat:
  The scale of Theresa May’s Brexit deal defeat is emphasized as historic in British politics.
  • Felix Salmon: “I’ve gone back to the 1840s and I cannot find a government defeat this big or this devastating.” (13:01)
• Universal Dislike for the Deal:
  Both ‘leavers’ and ‘remainers’ loathe May’s proposed deal for contradictory reasons; thus, no consensus.
  • Felix Salmon: “If you’re a leaver, her deal basically keeps you wedded to a bunch of EU institutions which you hate. And if you’re a remainer, her deal takes you out of the EU and so you hate it.” (13:55)
• No Majority for Next Steps:
  Parliament is united only by its desire to avoid a ‘no deal’ Brexit; no positive way forward.
• Second Referendum (“People’s Vote”):
  Discussion of the likelihood, justification, and political peril of running another referendum.
  • Anna Szymanski: “You could then make a lot of people in the UK really start to think, you know, democracy isn’t real, my vote doesn’t matter...” (17:46)
• Costs of Uncertainty:
  Brexit is draining national attention and economic resources, likened to the U.S. fixation with Trump.
  • Emily Peck: “It’s just a waste of everybody’s time, as you just said. And money.” (21:44)

3. Trump’s Deal-Making Deficiencies (21:50–32:14)

• Emily Peck’s Investigation:
  Emily discusses her article examining Trump’s self-professed deal-making prowess and how negotiation experts overwhelmingly regard him as a poor negotiator.
  • Emily Peck: “Trump sells himself as a deal maker, but he’s clearly terrible at it anyway.” (22:20)
• Failures in Negotiation Tactics:
  Trump’s approach is critiqued for being zero-sum, inflexible, lacking trust-building, and relying on single, non-negotiable demands.
  • Emily Peck: “His biggest fatal flaw is he sees everything as win, lose, zero sum.” (23:04)
  • Felix Salmon: “He just cuts off all of his negotiators at the legs whenever they agree to anything.” (24:42)
• Historical Context:
  Previously, Trump relied on hard-charging surrogates for actual negotiations (e.g., Roy Cohn).
• Lessons for Congressional Democrats:
  The challenge of negotiating with someone motivated more by saving face than outcome is discussed. The issue of not humiliating Trump in order to get any deal is raised.
  • Anna Szymanski: “We can’t humiliate him because he’s never going to agree to anything...” (26:36)
• Political Polarization and Negotiations:
  Media and party polarization, especially among the base, render deal-making less likely and more about zero-sum victories.
  • Felix Salmon: “The electorate has become polarized...the base is very, very supportive of him.” (30:16)
• Broader Trends:
  Modern negotiation theory, emerging post-WWII to avoid catastrophic outcomes, is being eroded as leaders revert to hardline, irrational tactics.

4. Numbers Round (33:56–37:54)

A light-hearted closure where each host brings a number to spark discussion:

• 3.7 million:
  The amount a Saudi man stole via ‘magical’ fake investment—an allusion to some money managers’ overpromises. (Anna, 33:56)
• 40:
  The number of free trade deals the UK was supposed to replicate after Brexit—actual number signed: zero. (Felix, 35:01)
• 1,500:
  The monthly rent a Bay Area man pays for a house for his two cats. (Emily, 36:13)
  Bonus: US FIFA rep’s $6,000/mo Trump Tower apartment for cats as an astounding comparison.

Notable Quotes & Moments

• “He was that rarest of beasts, which is someone who came up with a financial innovation that was actually good.”
  Felix Salmon on Jack Bogle (11:29)
• “You don’t actually need that many active investors for the price discovery. As long as they’re more than, I don’t know, 20% of the market, they will be the marginal price setters.”
  Felix Salmon (11:26)
• “If you’re a leaver, her deal keeps you wedded to a bunch of EU institutions which you hate. And if you’re a remainer, her deal takes you out of the EU and so you hate it.”
  Felix Salmon (13:37)
• “Trump sells himself as a deal maker, but he’s clearly terrible at it anyway.”
  Emily Peck (22:20)
• “And the stories were so brutal...they were bullies, they were really hard charging and it did work for them, but it wasn’t Trump really doing it, it was these other guys.”
  Emily Peck, on Roy Cohn’s negotiating style for Trump (25:39)
• “Taking Trump out of the equation...his biggest win so far since he’s been president hasn’t been a negotiation victory. It was Kavanaugh.”
  Emily Peck (28:09)
• “It’s a real tragedy. It’s a failure of democracy, really.”
  Emily Peck on Brexit (21:46)

Timestamps for Major Segments

• Jack Bogle & Index Funds: 02:39–12:15
• Brexit Crisis Discussion: 12:15–21:50
• Trump’s Negotiation Style: 21:50–32:14
• Negotiation, History & Tactics: 31:16–33:24
• Numbers Round (fun facts): 33:56–37:54

Tone & Style

The conversation flows conversationally, with a mix of admiration (for Bogle), exasperation (Brexit), and dry wit (Trump, cats in apartments). The hosts balance humor, rigorous analysis, and skepticism—often poking fun at themselves as well as the week’s headlines.

Summary for the Uninitiated

Slate Money’s “Bad Deals Edition” episode delivers a sharp, engaging analysis of how bad deals happen and what distinguishes the rare good ones—using timely cases from Brexit and the Trump presidency, as well as financial innovations that have benefitted everyday investors. The mix of topical breakdown, accessible explanations, and humor make this both a revealing and entertaining listen for anyone new to these economic headlines.