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- [00:00]
A
Foreign.
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B
Hello, and welcome to the bitcoin simulation episode of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Axios. I'm here with Emily Peck of HuffPost.
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C
Hello.
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B
I'm here with former journalist Anna Shymansky.
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A
Hello.
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B
Whose penultimate Slate Money show this is. We will invite you to come up with some questions for her final show later in the show. But before we do that, we are going to talk about fast fashion and how it has done surprisingly well during the pandemic. We are going to talk about dating, which is a big business on the stock market. And we are going to talk about Tesla and why on earth it feels the need to be sitting on $1.5 billion worth of Bitcoin. Fun conversations all coming up on Sleet Money. So let's start with Tesla buying $1.5 billion of Bitcoin. Obviously, this is Elon Musk doing the thing he does best, which is jumping onto memes. But beyond Elon Musk as meme Lord, Anna, do you have a theory of the case, like, what the hell is going on here? And is this a sign of, like, extreme decay of late capitalism that you have companies doing crazy things like this?
- [01:45]
A
No, I think this is somewhat unique to Elon Musk. I think that this is likely as simple as the fact that Elon Musk has bought into the bitcoin thesis, or at least part of the bitcoin thesis, and believes that, hey, I'm going to take a percentage of my now relatively decent size cash holdings and invest in this thing that I believe is going to go up significantly. And because it has gone up significantly in the past six months, he assumes it is just going to continue forever, just as Tesla stock has gone up during that exact same period of time and apparently forever.
- [02:20]
B
So let me unpack this a little bit. What we're talking about is not where Elon Musk is investing his personal billions. Most of those are still in Tesla shares and in SpaceX shares. Rather, we are talking about where Tesla is investing its cash. And there have been precedents in the past, places like Airbnb, for companies to use their treasury holdings, as they're called, their cash holdings, as a little bit of an internal hedge fund. Apple famously has a, you know, very secretive subsidiary in Nevada somewhere that invests its cash in credit instruments, and it manages to eke out like 0.5% on its cash holdings rather than 0%. And you can see how a treasurer would want to maybe have a little bit of yield on this cash. But going from like, I'm going to take a tiny bit of credit risk to I'm going to invest $1.5 billion in Bitcoin seems to be a massive leap.
- [03:21]
A
Yeah, this is not cash management, this is speculation.
- [03:25]
B
And is that something that companies do is speculate with their cash?
- [03:29]
A
No, no, not normally. Because again, this is not his cash. This is the company's cash. This is fundamentally the shareholder's cash. And the idea is that when necessary, you may also have to use that cash. And the other thing is this is kind of a wonky accounting thing. But if you invest in Bitcoin, then also if the value of Bitcoin goes down, you now have to mark down your cash. But if the value of Bitcoin then goes up, you don't get to market back up. It's a very bizarre move.
- [03:57]
B
So the only other company that has really done this is this rather obscure shop called MicroStrategy. And they seem to have basically given up on being a company. And they seem to have decided that what they want to do is just be a Bitcoin holding vehicle. And so they've bought a whole bunch of bitcoins, they put it on their balance sheet. And now if you want Bitcoin exposure by buying something on the stock exchange, you can just buy MicroStrategy stock. This is effectively an end run around the SEC. A lot of people have tried to create like exchange traded funds or exchange traded notes or something like that, which you can buy by bitcoin exposure on the stock exchange. The Winklevi have tried, Barry Silbert has tried, a bunch of people have tried. Everyone has failed. So MicroStrategy has basically done the SPAC route here. He's taken a listed vehicle which already exists and reverse merged it into a bunch of Bitcoin. And now the microstrategy basically behaves like Bitcoin. So you can kind of see the logic there. Even though, you know, I mean, if you want to buy Bitcoin, honestly, just buy bitcoin, don't buy MicroStrategy. But for Tesla, there's not even that logic. No one is buying Tesla as a way of getting exposure to Bitcoin.
- [05:11]
A
No, I agree, it makes very little sense. And the thing I would be really nervous about is that I think there is significant overlap between the significant amount of retail participation in Tesla and the significant amount of retail participation in Bitcoin. And the fear is that in the same way that they have recently gone up exponentially, both of them, I think they very easily could go down at exactly the same rates or very similar rates. The one nice thing about Bitcoin, if you were an asset manager, was that, well, you could say it's not actually well correlated with other traditional assets. You could say, okay, you could add it into your portfolio to reduce volatility overall, because it's not well correlated. If you're Tesla, that just makes no sense because it seems to be, especially recently, very well correlated.
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B
It's my favorite chart. It's not just highly correlated, but in fact, if you do that, and I've done this three times now because I love this chart so much.
- [06:04]
A
Much.
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B
If you chart the total market cap of Bitcoin against the total market cap of Tesla, the lions are directly on top of each other. It's amazing how they are worth almost exactly the same amount and they have been for well over a year.
- [06:18]
C
What to make of that? I mean. So on Thursday, Elon Musk, the meme Lord, tweeted the following. I had it written down on a card, but I lost the card, but luckily I have the Internet to help me here. He tweeted, frodo was the underdoge all thought he would fail himself. Most of all. Then a picture of a ring, and under the picture of the ring with all different cryptocurrencies, ticker symbols or whatever on it. And then under the ring it says one coin to rule them all. So he tweeted that, and then, you know, the price of bitcoin jumped 7%. So none of this makes sense to me in any rational way. It seems truly insane. And when Felix asked, is this some sort of, would you call it late late capitalism frenzy or insanity or just the sign that everything's going south? I kind of feel that way. This is. Bitcoin doesn't have any value. And as Anna writes and says all the time as a currency, it's insane because it jumps around and you don't want a dollar.
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B
That's.
- [07:22]
A
No, it's not a currency.
- [07:24]
B
It's not a currency, although it's nothing. The other thing we should mention is that Elon Musk has announced, at the same time that he announced that he was buying $1.5 billion of Bitcoin, he also announced that he would be accepting bitcoin as payment for his cars. Now, you all know, okay, so I'm going to push back a little bit on that. In any economically rational world, this makes no sense. If you have a bunch of Bitcoin and you want to buy a Tesla, then you can just sell your bitcoin and buy a Tesla. That's how people have done it for years, and that's how people can continue to do it. And it's no easier to just transfer your bitcoin than it is to sell your bitcoin and buy the Tesla. This is true. On the other hand, there is a psychology here, and I wrote a little bit about this in my newsletter this week, that what Elon has done, and really he's the only car manufacturer who's capable of doing this, is that he has aligned Tesla with bitcoin. There are a lot of bitcoin faithful out there, the Hodlers. And when they want to buy a car, you know, most of them buy cars at some point. When they want to buy a car. There is now very clearly the bitcoin car, the car that is associated in the public mind with people who like bitcoin. And it is also the case that people don't think of their bitcoin wealth as being real wealth. It feels unreal. And people who might not spend 40,000 actual dollars on a car might actually spend one of their bitcoin on a car because it just feels like it was never really $40,000 in between. It. There's a funny psychology there. It makes no sense on a sort of rational, economic level. But I do think that at the margin, he might get one or two people to buy Teslas who might otherwise have gone out and bought a Lamborghini or something. But now Tesla is the cool bitcoin car. But that's not enough to justify a move of this magnitude.
- [09:24]
C
It does seem like a branding exercise, somewhat on Tesla's part, that framing actually makes a little bit of sense to me. Like, Elon Musk is associating himself with this thing that a lot of people like and hold, and the people that like and hold it have money, so why not? It's like, kind of like how Subaru associated itself with, like, the LGBTQ community, and that's been really good for them. So Elon Musk is associating himself with the crypto community. So, I mean, okay, that partially, I.
- [09:53]
B
Like the idea that Tesla is to crypto boys as Subaru is to lesbians.
- [09:59]
A
That is pretty great. That is pretty great. No. So I think from Tesla's perspective, and from Elon Musk's perspective, I can understand why that makes sense. But for the holder of bitcoin, it makes no sense, because if you're holding bitcoin because you believe not that it's just going to hold this value but you're holding it for the speculative increase. That's why you're holding it. You think it's going to significantly increase in value. So why on earth would you exchange it essentially for a Tesla which is going to significantly depreciate in value?
- [10:25]
B
Okay, two answers to that. One is that there's no such thing as holding forever. One, there's no such thing as holding forever. But two, it's the idea of I win a free car. I made this smart investment however many years ago, and now I get a free car. It kind of feels better than I convert it into money and put the money into some other asset and then I can put it into my retirement fund and maybe I can have something to live on in 30 years time. It's like I got a free car. So I can see that. Look. Are you logically correct, Anna? Yes, but this is not, you know, if you try to unpack the logic of the Hodlers, like that way lies madness.
- [11:06]
A
Well, the other thing though, that is very true. The other thing though I will say is that this discussion we're having and Elon Musk's statements are all based on this idea that what we've seen in bitcoin since Nader last March is going to continue forever. As though what we saw previously in bitcoin, where it declined significantly from the heights it reached in 2017, as though that will not happen again. Now I don't necessarily think bitcoin is ever going to go to like zero again. I think it seems to be establishing itself in some way, but it's unlikely to just keep going up and all of these individual investors are just going to happen to buy it at the right time, that it's going to increase in value at the point that then they can go and exchange it for their Tesla. Like if you're going to hold it and you're like, well it's going to be super volatile, but I think in 10 years it's going to be significantly higher. Then you say, okay, maybe I can buy that. But if it's anything more short term than that, it makes no sense.
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B
Now if you want short term investments, then, then clearly you have to buy Dogecoin.
- [12:06]
A
Yes, yeah, clearly. The sensible option.
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C
The sensible option does feel like Elon Musk is at the top of some like grand pyramid scheme. Like he's going to be fine.
- [12:15]
A
Oh yeah, he'll land on his feet or go to Mars one way or the other.
- [12:18]
C
Or we'll like all wake up in 10 years and we'll Just be like, what was that about? Like, people really thought he was smart. Like, look what he was tweeting. Like, the scales will be removed from people's eyes and it'll be obvious that this is a delusion that we've all participated in.
- [12:35]
A
This is the. He'll be like the John Law of this period of capitalism.
- [12:39]
B
Like, the thing about Elon is a. He's just, you know, he's smart in terms of, like, engineering smart. Like Tesla's and SpaceX rockets and clever electric tunnel boring machines are clever on some level. You know, all the way back to, like, what the kind of work he did back on PayPal back in the day, like, it was clever. But beyond that, he is enjoying himself. And I remember a couple of years ago when he was clearly not enjoying himself and he was firing everyone at Tesla and Tesla was three weeks away from running out of cash, and he was clearly extremely unhappy. And now, you know, as often happens when you become the richest man in the world, like, you know, he's. A lot of those cares and worries have kind of melted away and he's like, I'm going to have fun on Twitter. I'm going to have fun with my companies. There's lots of downsides to being a public company. Like, he wanted to take Tesla private and he wasn't able to. And now he's trying to find some kind of silver lining in having a public company. And this is one of the ways he can do that. And, and it's kind of selfish and narcissistic on one level, but I think if you look at it as like a guy who's like, I have a bunch of followers on Twitter and people who feel like they're in on the joke in a kind of lol, nothing matters postmodern way. It starts to make a certain amount of sense, though.
- [14:14]
A
I would just say, like, look historically at every single bubble and you always have these figures who are the ones kind of at the forefront. And at first everyone's like, oh, I don't know about this thing. And then it significantly increases in value. And then because it's increased in value, everybody convinces themselves that there's some type of logic behind it and that this person knows what they're doing and they, like, build statues to them.
- [14:36]
B
I think that's exactly the worry here, is that Elon isn't taking this particularly seriously for all that he's just invested $1.5 billion in Bitcoin. Like, certain things he takes seriously. Like, weirdly, like, he. He takes the Battery technology thesis that we're all living in a simulation, you know, quite seriously, you know, that kind of thing. But while he's treating it as a joke, and while I think most of his followers on some level are treating it as a bit of a joke, and we talked about this in the WallStreetBets episode, like the way that a lot of people on Reddit are, you know, just playing this as a game. They're not really serious about it. I think you're right that the danger here is that people really start to. That not everyone who follows him is. Is that easy come, easy go as he is.
- [15:23]
C
We should also mention the. The bitcoin destroys the environment conflict with Tesla. Good for the environment thing.
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B
We should totally mention that. It's absolutely. It's so hypocritical that Elon has been, if, you know, if he stood for anything for many, many years, it was for creating a much more environmentally responsible auto industry and a bunch of very green ESG funds and all the rest of it. Started buying up Tesla and making a lot of money from owning Tesla and saying like, hey, look, being green can be cool and profitable. And Tesla was the first electric car to go fast, you know, and that was a big thing. Like, electric cars didn't need to be like, oh my God, I'm in some horrible battery operated vehicle which goes 10 miles an hour. It was like, zoom, I can go faster than the Porsche. And like, Tesla was cool in that way. And then Tesla became cool in terms of being a profitable investment. And suddenly it was like, I can be environmentally responsible and make lots of money at the same time, which was great. And now he's really kind of blown a hole in that argument because bitcoin is just the carbon footprint of. It is bigger than. It uses more electricity than Norway.
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C
Actually, when you think about Tesla, it doesn't have that kind of like hippie energy that you would expect from like an electric vehicle by design.
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A
That's. Yes.
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C
So I could see that it's not a Prius, right? And the brand is so not associated with that vibe that like doing this and hurting the environment by, you know, investing in bitcoin. It's a still a solid brand exercise simply because that's just not how I think a lot of people think about Tesla, especially the people who buy it.
- [17:06]
A
Maybe here's a question about the electricity use. And I don't know this. I. Hopefully you guys do. Once you've actually mined all the coins and all the coins are mine mined, and then you're just exchanging does it still, isn't it the mining that actually uses all of the electricity?
- [17:23]
B
So, yes. And that point happens. I think around 2150, the 21 millionth Bitcoin gets mined up. Until then, mining is really the. You're right. The main part of what uses up energy, although there is also a huge amount of energy also being used on kind of ratifying the transactions. That whenever you make a bitcoin transaction, a bunch of computing needs to happen and a bunch of computers need to agree that that transaction happened and that ratification.
- [17:57]
A
That's what I was wondering.
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B
It involves electricity. And in fact the average price of a bitcoin transaction is like over $10. Now this idea that it was like going to be free and it was going to be like this super cheap way of moving money around is crazy. It's like it's become incredibly expensive.
- [18:15]
A
Yeah. And that's another reason why we'll never be an actual currency, because it's incredibly inefficient.
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B
Why don't we talk about dating? Which no one has done for the past year, apparently. So I'm. So I'm told, perhaps I'm misinformed on this, but it's an area of the world that is clearly a little bit subdued in the age of social distancing. And like everything else that's subdued in the age of social distancing, it seems to be in a stock market bubble. Everyone's like that the big stock market wins these days are all of the companies and industries that have been hardest hit by the pandemic. Emily, tell me what happened to Bumble this week.
- [19:01]
C
Bumble had an IPO this week. Bumble is the dating app founded by Whitney Wolfe Heard. She was actually one of the co founders of Tinder, which is another dating app everyone's heard of. And that ended really acrimoniously for Whitney Wolfe Heard. And there was a lawsuit and sexual harassment allegations, blah, blah, blah. It was a whole blow up. And then she went on to found Bumble, which its whole conceit is that women are the ones who decide whether or not to make the match. I think this is right. I've actually never used it because married. But anyways, that's the idea and it's relatively. It's pretty popular and it was founded in 2014 and it's been a success. And then Whitney Wolfe Heard had more drama because her investors at BADU also had some like harassment allegations against them. And there was a whole blow up there. There were legal fights with Match.com, which is the big player in the space, blah, blah, blah. IPO. Yesterday Whitney Wolfe heard the stock popped 77%. And Whitney Wolf Hurd is now a newly minted billionaire at the age of 31. The youngest female billionaire around I think to IPO. So that's kind of the bottom line there. Big dating company goes public, makes lots of money in Pandemic.
- [20:20]
A
Yeah, and I don't think that dating companies are necessarily doing horribly. People are still chatting and talking online and some are still meeting in person. I do think that the main reason that this had such a big pop was probably just because it is a somewhat well known company. Like this is a very frothy market, there's a tremendous amount of appetite and this is a well known company and.
- [20:43]
C
There'S room in the space. I think most people, again I'm speaking anecdotally as someone who reads about this stuff and stop me if I'm wrong, but most people use more than one dating app. So there's Bumble, there's Match.com, there's Tinder. Like everyone's dabbling in everything. And really the space has only gotten more popular because I remember like when online dating was more nascent, people wouldn't talk about like using these things and now it's totally understood that everyone is on dating apps using them. I think it's pretty, it's just a huge space. Like I don't, the Pandemic might have like dampened some dating activity but like come on, like it's still going on. And I don't think anyone thinks these apps are going away or anything like that.
- [21:25]
A
This is true. And even though I believe that they actually had a loss last year, Bumble did. I think that actually had to do somewhat with some non recurring charges overall they're still, you know, like they're not a horribly unprofitable company. And I do think you're right that A, everybody uses multiple apps to date and B, I don't think anybody thinks that in person dating is going to go away. You know, people are going to continue to date. My biggest concern for this is number one, that as we've talked in the past, that this is coming in at a very frothy point in the market. So it's going to get a price that probably isn't sustainable. And then on top of that, Bumble has a smaller market because dating companies, men are the primary users of dating apps. If you just look at the Tinder, I think it's like 70% male and anyone who's ever been on a dating site, knows that you go on the site, you get 37,000 messages because most of the people on the site are men. And so when you're marketing primarily to women, that is probably going to somewhat limit how much you can grow. And if you were a private company, you could say, okay, well, maybe that's fine if you can still get funding. If you're a publicly traded company, I think that could be a bigger problem.
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B
So Bumble, it did merge. It's actually got two big apps, right? One is Bumble, and the other one, it also begins with B and it's named like, Buddy. Yeah, something like. So this is not a case of Whitney Wolfhard founding this company, growing it organically to, you know, with a series of venture capital investments to the point where she finally takes it public and becomes a billionaire. Like, the company itself was always owned by someone else. It's had a sequence of owners. Blackstone basically has most of it right now.
- [23:08]
A
They did well.
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B
They did well. And in fact, in that way, it's very similar to Tinder, which, you know, again, was never really an independent company. It was always part of iac. And it's fascinating to me that the way this sector is structured is basically always been, well, Barry Diller owns it. And then there's this other one that's Bumble, which is owned by someone else and they're competing. And it is a very, very difficult sector to break into because by definition, it's all about network effects. The place that you want to go is the place where everyone is and the place where you're most likely to find your match. And if no one's at some tiny little place, then that's going to get you nowhere. So all power to her for managing to break through those network effects and build something from scratch, but she did that with a lot of backing from actual owners. And, yeah, I think one of the reasons why Bumble has such a high valuation is precisely because there's such a big moat there that people know who the competitors are and they're not worried about new competitors coming in. There was that point, what was it, a couple of years ago that Facebook decided it was going to try and get into the dating space. And it just. I don't know, I feel like it happened for, like, one second and then they just gave up on it completely. It's really hard. If Facebook can't do it, then, like, no one can. Right?
- [24:32]
C
It is surprising, I 100% agree with.
- [24:35]
A
You that something like this, the network effects are what really create a lot of the value. So, yes, it is not going to be simple for another company to be created. However, I'm not going to go out here and say, like, yep, we have all the dating companies we're going to have and we're done. Like, I think that that is unlikely. Seems like new ones come up. And granted all the new ones seem to be owned by Match. But still, as someone who has used essentially all of these dating services over the past 10 years, I can tell you that it always seems like, oh, there's this new one. I haven't tried this one yet.
- [25:04]
B
Is there much to choose between them?
- [25:06]
A
Yes. Okay, lay it out, Anna. So, number one, Tinder is the gateway to hell. Like Tinder, I think is primarily targeted to sociopaths, or I only attract sociopaths. One or the other. Horrible. Bumble. I think is a lovely idea in theory. In practice, I feel like no one likes making the first move. Whether you're a man, you're a woman, making the first move is horrible. So as a woman, I'm like, I don't want to make the first move. I like the idea that you have to confirm that you like someone before they can contact you. But I don't want to have to reach out to them. And also the problem is the number of guys on that site is limited. And you notice that because you start to cycle through the same guys. Then you have Hinge, which I will say is also owned by Match, which is. Which is like, I think it's called Hinge because it's somehow supposed to be like, you're somehow connected with them through social media. I don't know. We also haven't talked about Grindr, which is the most popular site in terms of frequency abuse, but that's for gay men.
- [26:00]
B
Is that still Chinese?
- [26:03]
A
I'm not sure. I remember there was the controversy.
- [26:06]
B
I remember like, some Chinese company bought Grindr and then like CFIUS got involved and started wondering that it was a national security problem.
- [26:14]
A
I do not know what exactly happened with that side of the story, but it is a very, very popular dating app that when talking about dating apps, people should. Should reference.
- [26:22]
C
According to TechCrunch, because I just googled, Grindr was owned by a Chinese company, but it sold its stake to a US Based company called San Vicente Acquisition Partners last March. So there's your update on that.
- [26:37]
B
There you go, folks. Don't worry if you're on Grindr, that your information is being processed in Beijing.
- [26:44]
C
I think there's just a lot of room for like innovators to break into the space. Because like Anna was saying, like you cycle through the same people, you want to try something new. And it does seem like, like I just remember when Tinder happened, it was like a big deal. It was an explosive new way of doing a dating app and everyone got very excited about it. And I don't see why there wouldn't be another one of those again. Like, it just seems like unlike Facebook or Twitter or other social networks where you kind of like stay put because you have the same relationships and you want to keep them on dating app, you don't want to keep the same relationships, you want new ones. So there's more like willingness to experiment with different ones and float from platform to platform. It's like a different, it's a whole different kind of thing. Yeah.
- [27:25]
A
And I think that Tinder really, it created the swipe right, swipe left. Like that was kind of the thing it created because the reality is when you had like OkCupid, which still exists, but it's like the back in the day one where you'd spend all this time creating this profile, but no one read the profile. People look at the photos, no one ever does anything but look at the photos and maybe says like, where do you go to college? Where do you want work? Nobody cares about anything else. And that's clearly what Tinder realized. And they also gamified it to a certain extent because you can just sit there while you're waiting in the grocery line swiping right and left on human beings. And that has been what basically every other site has somewhat done. And so I do think that we are due for some innovation in the dating space. So maybe people will figure out a way to move beyond the swipe right, swipe left.
- [28:06]
B
I have a plan for a dating site where it is compulsory for every man to pose with a fish because then you can't laugh at the men for posing with a fish because they all have to do it.
- [28:18]
C
Maybe a bait shop needs to diversify and get into dating apps.
- [28:22]
A
Exactly, exactly.
- [28:24]
B
Anna. There was an amazing, really long, super detailed article in the Atlantic this month about the rise of fast fashion and especially how the sort of super cheap, super first Instagram based fashion brands have done astonishingly, surprisingly well during the pandemic. I guess I just assumed that if you were in clothes, you had a terrible pandemic. And for most clothes outlets that was true. Basically anyone who sold clothes out of stores, they saw their business fall off a cliff. But for certain very influencer centric Instagram centric brands. That wasn't the case.
- [29:14]
A
Yeah. So I think when us olds think about fast fashion, we probably think of like H and M and Zara. But it has moved on from that to these companies, like pretty little things. And Shane, I'm probably mispronouncing that. Where it is really primarily driven through outlets like Instagram and you're purchasing online and because of the way the model works and it's designed to just be putting out new items over and over, it means it can actually very quickly adapt. And that seemed to help it significantly during the pandemic. It's not like they had purchased all of this inventory and then now this inventory couldn't be sold because no one could go into the stores because they were all closed. You know, and also when everyone went from wearing, like clothes that actually had zippers to, you know, athleisure, they could very quickly say, okay, now we're going to flip to that. Yeah.
- [30:05]
C
And one thing that was really interesting, there's a lot that was really interesting about this piece in the Atlantic. But one thing I finally understood, you know how when you online shop and you click on something, you almost buy it, or even if you do buy it, it then chases you around the Internet wherever you go. You see the boots, you see the retargeting. Oh my God, now I'm being chased by beds because I've been looking at beds. But this is actually a really good strategy for these little fast fashion companies that aren't really that big of companies. But it's like they start to chase you around the Internet and show you the sweaters or the leggings or whatever that you want. And in your brain, unconsciously, consciously, you start thinking like, oh, this brand is like legit. It's for real, it's ubiquitous, it's everywhere. And all of a sudden, like this little company that has this little bit of inventory has taken on this, like, big presence in your mind. And that's why, you know, the sweatpants are chasing you around the Internet. I never, like, quite clicked.
- [31:03]
B
And it's not, it's not even the Internet in general so much as it's Instagram in particular. The Instagram ads are the most amazing level in terms of brand value. It used to be that if you saw some crappy banner ad on, you know, the hill.com you would be like, that's a crappy banner ad. And then if you saw like a full page spread in Vogue, you're like, that is a legitimate brand. And you would understand the difference. But when you're scrolling through Instagram, that distinction between, like the fly by night brand that you've never heard of versus Balenciaga is completely squished. And it's almost impossible to convey. You know, we are a big established fashion house versus we were founded six seconds ago in Shanghai. And so it has really leveled the playing field. And I think that one of the lessons I took away from this piece was that brands, like retail brands, are much less important than they ever used to be. What matters is what Anna was talking about, which is business model and agility and the ability to just create thousands and thousands of items of clothing of SKUs, put them all out there, a, B, test them, and then whichever ones catch on, just make more of those and scrap the rest. And you only made 30 of them anyway, so it doesn't matter. And that business model of just being super agile and just going to wherever the customer base wants you to go turns out to be incredibly powerful during a pandemic, even if it's is unworkable in a world of retail supply chains where you have to stock stores and put clothes in stores which live there for months.
- [32:50]
C
And it doesn't seem like we're going back to that world. That world was already in trouble before the pandemic. A lot of traditional retailers weren't doing very well, and now it's all accelerated. There's been bankruptcies. I think this model fast fashion that just keeps getting faster and faster and faster to the point where, like Anna was saying, the old fast fashion brands are now considered slow. Like, there was one example where Zara used to be thought of as fast fashion for having hundreds of items in a week. But like ASOS, this other brand will have 7,000 items in a week. It's just that much faster. And it doesn't seem like we're going back. There was also that New York Times magazine piece over the summer that talked about the, like, upscale brands and designers are really struggling too, to adapt to this world because it just moves too fast to do anything kind of sustainable and real.
- [33:40]
B
And talking of sustainability, like, the other thing that the article really goes into is how deeply unsustainable this is on a kind of ecological, planetary level. And even during the pandemic, this was a statistic that really jumped out at me. Even during the pandemic, we're throwing away £75 of clothes per person per year. That's insane.
- [34:07]
A
People do have more time to clean out their closets. Just.
- [34:11]
C
It is surprising how, I mean, have you guys bought new clothes during the pandemic? I feel like everyone has, and even though we're home all the time, it's like, you still can't help it. You just want something. Something new. I guess this is very privileged of me to say, but I bought masks.
- [34:25]
B
Does that count?
- [34:26]
C
No.
- [34:28]
A
I'm not a big clothing shopper, like, for whatever. Since I was, like, when I was, like, a teenager, I did. But, like, as an adult, like, I tend to not buy a ton of clothing, but I bought clothing during pandemic, partly just in the same way that I bought a lot of, like, random stuff during the pandemic, because I'm a very privileged person who. You have money and you're not spending on anything else, and you're sitting around all the time and you're scrolling through Instagram and you're like, oh, that looks cute. Okay, I'll buy it. It's not very expensive. And then you get it and you're like, this is made out of paper. Why did I buy this?
- [34:57]
C
The other thing that was fun to read about was the influencers who get tons of clothes from these brands to the point where the one she featured. Well, the one she featured in the piece was maybe 14 years old or something and was already making thousands of dollars just, like, posing or doing YouTube videos, unboxing the clothes. And then she's got in her closet all the stuff she doesn't wear. She has to give it away to friends. It just sounds just wild to me.
- [35:24]
A
Yeah. This was one part of the article that kind of rubbed me the wrong way a little bit. Like, I almost wish it would have spent a little bit more time talking about, like, well, what are some possible solutions to this in terms of legislative changes, in terms of different taxes on clothing or issues related to labor rights? Like, how can we actually fix what is the problem with this, which is the environmental and labor part of it. Instead, it seemed to be a lot of this, like, pathologizing young female behavior. This is something I find in a lot of these articles about fast fashion. This idea that there's something, like, wrong with these girls, or, oh, they're so materialistic and superficial because they want to buy all this new stuff. And it's like, no, no, that's not the problem. The problem is not that these young girls want to have fun and do this. It's that there are these other problems. So let's speak about those, not pretend that there's something really wrong here with these young girls.
- [36:12]
C
Oh, yeah, absolutely. You're so, Right. Anna, the labor problems and the environmental problems are the issues. Like, I'm not particularly worried about, like, high end fashion designers. That much I don't know. And I'm not worried about, you know, J. Crew going out of business or anything, but I am worried about people making less than minimum wage in factories in the United States, you know, and COVID 19 breaking out in these places. And yeah, the environmental impacts. And it all seems to be, like, on steroids, for lack of a better metaphor. It just keeps getting faster and faster and faster.
- [36:46]
B
I think it's time for a numbers round. Emily, do you have a number?
- [36:50]
C
Yes. I was gonna go with some, like, policy number about the minimum wage, but then I decided not to because just enough already with these serious subjects. Right? So My number is 94.9 million. 94.9 million. That's the number of subscribers to Disney Plus. And I would just like to say that I was wrong and I thought Disney was going to be like, kind of like, meh. But Disney is doing really well. It's like, already hit its Subscriber Goal. 4 year Subscriber Goal. Because the pandemic and because it has content that everyone is talking about all the time. And it seems to be winning, like, the streaming war. I mean, it has nowhere near Netflix.
- [37:30]
B
Numbers yet, but it's getting there first.
- [37:33]
C
It's getting there really fast. And I think it's the winner. And that was driven home to me watching the super bowl because it had all these commercials for Paramount Plus. And I was like, okay, I know I was wrong about Disney to make a prediction, but I feel really confident that Paramount plus is not going to win the war. Like, it's over. No one cares about Paramount.
- [37:53]
B
Paramount plus is the rebranded. It used to be up until about a week ago, it was known as CBS All Access. And, like, no one would ever use CBS All Access. And like, when you realize that you're like, oh, CBS All Access. Unless you're a Trekkie.
- [38:10]
A
I say this because I was signing up for literally the night of the super bowl. And obviously it kept crashing because everyone else in America was doing the exact same thing. I'm signing up for CBS just for that night.
- [38:21]
C
Interesting.
- [38:23]
B
My number is 9.9%, which is the amount that the UK economy shrank in 2020, which is insane. And never in, like, living memory has the UK shrunk that much in one year. We just got the GDP figures out for the fourth quarter. There was a very small, like, 1% growth in the fourth quarter, but overall, it's this just unprecedented falling off a cliff thing, which is obviously pandemic related, but also Brexit related. The population of the UK shrank by about 2%, thanks mostly to Brexit. And it's not going to be that bad in 2021. I mean, it's very hard to get back to back 9.9% shrinkages. But the UK is in a terrible place and no one has a clue when or how it's going to get back to its, you know, 2019 levels. It's bad.
- [39:21]
C
It played itself. It did this to itself. It's so crazy.
- [39:24]
A
Yeah. Shot itself in the foot and then shot itself in the other foot.
- [39:28]
B
Yeah.
- [39:29]
A
So My number is $2 billion. General Motors said that this year it might take a $2 billion hit to its earnings because of the semiconductor shortage. So there is a major issue, especially for auto companies, with this shortage in semiconductors, and partly it has to do with everybody buying consumer electronics during the pandemic. And consumer electronics are. The semiconductor companies can make more money by giving it to the consumer electronics people than the auto people. So they've been doing that. And then also the Trump administration put sanctions on a Chinese semiconductor company. So because of a lot of these different forces, there is this significant shortage and to the point that actually the Biden administration is looking into it. There may be an executive order about trying to get more on shoring of semiconductor production. But I think this is actually going to be a story that will continue and be a very, very significant story as semiconductors become even more central to the economy. Right.
- [40:25]
B
So cars used to be cars and now they're computers on wheels. And the computers need surprisingly powerful and sophisticated silicon these days, and that's expensive. And it all needs to get sourced in Taiwan because that's where all the fabs are. And there's a handful of fabs in the United States, but they aren't that good and they don't make super high end stuff. And yeah, there's a huge geopolitical question over the entire semiconductor industry. You know, given what China happily did to Hong Kong, everyone is worried about what it might do to Taiwan. And if it does that to Taiwan, like what happens to all of the electronics in all of the world? I mean, presumably China doesn't want those factories to close down, but things could get really gnarly for a while.
- [41:10]
C
Are you saying China closed down factories in Hong Kong? Isn't this.
- [41:13]
B
No, they didn't. I mean, Hong Kong's actually, it's kind of interesting that the Hong Kong Economy seems to be doing surprisingly well given how, how bad shape it's in. Like, China has no particular interest in destroying anyone's economies. But you've got to think that in the event of China trying to take over Taiwan, there would be a lot of disruption involved in that event.
- [41:37]
C
I see. How much does a semiconductor cost anyway?
- [41:41]
B
Hundreds only. Did you see the story about the catalytic converters getting stolen across the country and especially in California? That's the other thing. The price of palladium and platinum and rhodium and all of these metals.
- [41:55]
C
Oh, I did see that.
- [41:57]
B
Catalytic converters has gone through the roof to the point at which if you shimmy underneath a Prius and saw off the catalytic converter from underneath it, you can take it to your local scrap metal dealer and they'll give you 500 bucks. And so people are getting into their cars in the morning and suddenly it makes the most God awful noise and they realize that someone's stolen their cat and it cost $2,000 to replace it.
- [42:20]
C
That's wild. You don't have to worry about your car being stolen, but you have to worry about the palladium being sucked out of it. That's what a world. Okay, email us.
- [42:30]
B
Okay, yeah, if your catalytic converter has been stolen, don't email us. We can't help you. You've been invested in rhodium over the course of this pandemic, then congratulations on being rich. I think that's done even better than bitcoin.
- [42:44]
C
And it's real.
- [42:45]
B
And it's real. So yeah, that's the official slate money investment recommendation. Long rhodium, short bitcoin. What could possibly go wrong? Yeah, I think that's it for us this week. Thanks so much for listening. We're going to have a slate plus segment about Birkinstogs, not to be confused with Birkenstocks. Thanks for emailing us. Do email us any requests you have for the final Anna Shymansky episode which is coming up next week. Emily's about to burst into tears here.
- [43:16]
C
It's just really upsetting. Yeah, send us your ideas. What is the hottest Anna Shymansky take that you crave? We could maybe do it next week.
- [43:25]
B
Next week will be the Anna Shymansky Hot takes episode. Any Anna Shymansky Hot takes you on. Just, just send us your requests slatemoneylate.com and we will put them all together with the unerring and wonderful help as ever of Jessamyn Molly, the producer of this here show. So we will be back with Anna Shymansky Next week on Slate Money. It.