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- [00:11]
A
Hello and welcome to the Blame Iowa edition of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon, joined as ever by Anna Szymensky. Hello. And Emily Peck of the Huffington Post.
- [00:29]
B
Hello.
- [00:29]
A
And the business and finance news of the week this week. There is literally so much news of the week this week that we are doing something we have never done before and we're squeezing in a whole extra segment. We're going to have four segments rather than three because there's just too much news.
- [00:46]
C
It's true.
- [00:48]
A
We have to talk about the crazy agriculture tariff situation and $12 billion in farm aid and all of that. Obviously, we have to talk about por Sergio Maschiot or the man who turned around two different car companies. I don't think anyone else has really managed ever to do more than one. Even one's hard. We have to talk about 23andMe, because if we're talking about people invading privacy than on the kind of genetic level that's a whole new level. So we have to talk about what they're doing. They just got a massive investment. We're going to talk about that. But on top of all of that, we kind of have to talk about this Facebook earnings and Twitter earnings and what we have going on here in the markets. We don't talk about the markets all that much. We don't talk about the stock markets and movements in the stock market all that much. We are, we generally rise above such mundane considerations here on Slate money. But when $120 billion is wiped off the market cap of a single stock in a single day, which has never before happened in human history, like we should at least take notice of that. Facebook dropped by 20% after it released its earnings this week. And then on Friday, Twitter dropped by 20% or thereabouts after it released its earnings. And so my question for the avid market watches here at Slate Money, which would be neither of us, but we, we pay a little bit of attention, is, is this the beginning of the tech crash? We've had this huge run up in tech valuations in the past few years, and now this is a sign that fear has replaced greed and that bad news gets punished in a way that is very, very rarely punished so far up until now. And can we expect other similar like bottom falling out kind of moves in tech stocks going forward? Is this a harbinger?
- [02:56]
B
I don't think it's a crash. It's more of a. What are the markets? People say a correction. It's more of a I would say.
- [03:06]
A
In one day counts as crash.
- [03:08]
B
No, fine. But like it'll be fine. That's my prediction. It's going to be okay.
- [03:13]
C
Yeah. You have had a big run up. Facebook is still up for the year. To me, the big deal here with both Facebook and Twitter is it suggests that they're really not doing a good job of telegraphing to investors where they are.
- [03:26]
A
But I mean that's, that's actually really weird to me because if anyone's good at sort of dealing with the markets, it's Sheryl Sandberg. And you know, the Facebook investor relations team got off to a very rocky start when Facebook went public in 2012, but then has become pretty professional. And they have been saying forever that user growth is going to slow down. I mean obviously it is, especially in the US and Europe because basically everyone's on Facebook already. Like there are no more users to grow. And when user growth does slow down, suddenly the market says, this is shocking. You never told us this was going to happen. Of course they told them. They told them over and over again. The markets weren't listening. Somehow.
- [04:08]
C
I'm not sure if that's entirely true. I obviously was not in those meetings, so I've absolute no idea. But most other companies are pretty good about letting the market kind of get a basic sense of what's going on. Now it is also true that there has been such a run up in these stocks. Netflix is the one there's been most of the run up in, but they're still doing fine, at least as far as I know.
- [04:31]
A
Well, I mean Netflix had its own like stock crash, like mini stock crash a week or so ago and you know, it wasn't quite as headline grabbing as the Facebook one, but it was still pretty big.
- [04:44]
B
I mean, isn't this just more broadly just like the love affair with these companies has been coming to an end and really has just crashed. Like the, to be cliche about it, the bloom is off the rose. Like we saw what happened in the election. Mark Zuckerberg is continually saying really dumb things. Defense, like defending, like we talked about last week, defending Holocaust deniers or whatever he was doing. I mean it's just week after week of Twitter just a continuing scandal about Facebook and bad news. And at some point it sort of builds.
- [05:17]
A
I think this is absolutely a part of what happened in the market because for a long time, if you look at the history that Facebook has been public, which is about six years, for most of those six years, I think it's fair to say that the People who owned the stock and who were making money from the stock going up were doubly happy in that they felt that they were buying into like a wonderful new utopian tech story of, you know, communities coming together and all the rest of it. And they were making money. So like, boom, boom. And no. And then in the past couple of years, that narrative has changed and Facebook has become like a bad company rather than a good company. They were still making money. So they were still happy that they were making money, but they were less happy about the narrative and the underlying, like, fact of owning the stock. And you, you might be happy that you're making money from owning Facebook, but you're not proud to be a Facebook shareholder in the way that you might have been, say, four years, three or four years ago.
- [06:19]
C
Yeah, I don't really think that's how most of the, especially institutional investors are thinking about their investments of whether or not they're proud to be a Facebook owner. I really think this is about users and revenue.
- [06:29]
B
I just think it's coming. It's coming at a time when Facebook is no longer, you know, we're gonna change the world. A great social network, I mean, that's always been in the air. Obviously there was a movie that made Mark Zuckerberg seem like an evil robot type of person. But I think in the past year, I think any, any notion that this was a good company that was gonna change the world in a positive way is sort of vanished.
- [06:55]
C
I think that that's true, but I think that if that were the case, but it wasn't hitting growth, nobody really care. Not that they wouldn't care at all. I don't think they care that much.
- [07:06]
B
So it's just a coincidence?
- [07:07]
C
Well, no. I mean, one definitely affects the other because part of the reason that they're missing earnings is because they're going to be spending a significant amount more on people because of the privacy concerns.
- [07:19]
B
Exactly. And they're under attack. They're getting called to Congress, they're under attack in the eu, and that's sort of all building.
- [07:25]
A
And I don't think that you can really explain the run up in Facebook stock by looking at discounted cash flows. I don't think that you can really understand the fall in Facebook stock by looking at discounted cash flows. I don't think it's all about earnings. I think there is a very large narrative part to this story and to the market action in Facebook. And the narrative, I think, has changed now. And I think the narrative before was Facebook really has the opportunity to become this globally dominating platform. If, you know, if it's not there yet, then it will be soon, especially in places like India. And people were pretty much convinced that if and when it really did dominate the entire planet, then you know, you would have to earn it, own it. It would be a trillion dollar company. And so they were betting on that kind of like future global domination. Now with the narrative changing, the future global domination looks a little bit less attractive. If they really do become that dominant, then maybe, you know, Europe is going to come in and ban all targeted advertising.
- [08:32]
B
Yeah, I mean, I heard there was a really great episode of Fresh Air with Terry Gross and this British journalist came on. She was the one who broke the Cambridge cadwallader. Yeah, she was amazing. And at one point she was talking about Facebook and she was talking about how Russians likely meddled in the Brexit vote, which I will be talking about on Slate Money at some point episode. And she just like casually just said something like, I think we should just ban something like we should get rid of Facebook in the uk like they're a foreign company that meddled, you know, in something in the Brexit vote and we should be heavily regulating them. Like, why do they get to come in here and do that? And I feel like that's a sentiment that's. She's not the only one feeling that. And I think that is weighing on people, the regulatory level, and just it's in the air.
- [09:19]
C
It's certainly that there is a tremendous amount of regulatory risk that a few years ago people didn't, weren't pricing in. And I also do agree with you that over the past few years, in a lot of equities, especially a lot of the tech equities, valuation seems to be a little bit of a lost start. This is just pure momentum for the most part. And there are a number of other reasons. But having said all of that though, I would still come back to the fact that if you're talking about regulatory risk, if you're talking about the fact that maybe Facebook is not going to be able to become the dominant thing that people thought it was a few years ago. That, though, all comes back to the fact you think you're going to be getting less revenue, it all comes back to that.
- [09:59]
A
Let's talk about some farm aid $12 billion bailout action, because we live in a socialist utopia where if farmers don't make money by selling their soybeans, then the government will give them $12 billion. And this is awesome, right?
- [10:19]
B
It's really incredible. The Trump administration puts tariffs on soybeans so the people, the farmers make less money. And then the Trump administration says, we'll make it okay. We'll give you billions and billions of dollars to make it okay.
- [10:34]
A
No one, let's be clear about this, it's the Mexicans and the Canadians who, who are putting the.
- [10:38]
B
Yes, I'm sorry, these are retaliatory. Retaliatory.
- [10:41]
A
Retaliating against Trump's tariffs by saying, if you're going to tariff off, if you're going to tariff us, we're going to tariff you. And that means that the farmers who used to be exporting such things, and now they can't get the same prices. Also, much more profoundly and importantly, they're finding it logistically much, much more difficult to sell to China. And China was the big export market, was the big great hope of the US agriculture industry. And even if they get written a $12 billion check to sort of smooth over earnings declines in 2018, those long term relationships with Chinese importers are going to disappear. And that's bad for US Agriculture because.
- [11:30]
B
The Chinese, they're not going to buy from US Farmers anymore. They're going elsewhere in the world to get their soybeans and those deals just will dry up and disappear and.
- [11:38]
A
Exactly. They're just going to move. They're going to get their soy from.
- [11:41]
B
Brazil or wherever, find somewhere else to buy their soy.
- [11:43]
C
And we're seeing that in the dairy industry as well, with tariffs with Mexico, where there was a tremendous amount of exporting to Mexico and now there's not. And so there's a fear that it's not just in the interim, it's that they're going to find other suppliers.
- [11:56]
B
Yeah. What it seems like is Trump, in starting these trade wars, sees trade in a very bilateral way, and US versus China, US versus Mexico. But trade is multilateral. There are many countries vying to sell stuff to each other and, you know, they don't always need the United States.
- [12:15]
C
Well, also, how. Where does he think they get the dollars to buy our soybeans? By selling us.
- [12:20]
A
So one of the things that people have been pointing out about these tariffs is that Trump seems to be very happy to spend $12 billion on farmers because farmers voted for him and they're his base and he doesn't care. But realistically, the overwhelming majority of those $12 billion are going to go to massive agribusiness. You know, Archer Daniels Midland and Cargill and places like that. Not to, you know, small farmers. There are very few small farmers left in the United States anymore.
- [12:56]
C
I mean, this is a problem. If you're talking about farm subsidies. It's always been a problem with farm subsidies is that they're the most inefficient subsidy in the world because they. It's something like two thirds of all the subsidy money goes to 10% of farmers. It goes to some of the wealthiest people there. It's also questionable. This isn't just us. This is globally. Everybody subsidizes their farmers, and there's a real question of why do they do that and should they continue to do that? Because often what it does is just disrupt markets and make it really hard for farmers in developing nations.
- [13:30]
B
Also, the subsidies, I mean, you can say that you have low tariffs, but if you're subsidizing your farmers, you're keeping prices artificially high. It's another form of tariff.
- [13:40]
A
It is definitely a hidden tariff. And the WTO spends years and years and years trying to get people to refuse subsidies because subsidies, as you say, are tariffs by another name. Yeah. And yet, as Anna says, these things are, in most countries around the world, politically untouchable. The weird thing is that for all that, the United States is perfectly happy to subsidize its farmers, and this latest 12 billion check is just the cherry on top of a massive pile of ongoing subsidies which have been in place for decades.
- [14:13]
B
9 billion this year so far in farm subsidies.
- [14:15]
A
And, you know, I mean, just look at the Florida orange industry or something. It's all, like, propped up by subsidies. The stated reason for Trump imposing tariffs on Canada, for instance, was, but Canada has these massive milk subsidies. And you're like, well, you can't have it both ways. If you oppose milk subsidies in Canada, you should presumably oppose subsidies domestically as well.
- [14:45]
B
I think that you're expecting too much in the realm of logic from the President. I mean, I think his logic is just, America first. We'll do whatever we can to make us sorry. Great. Again, again. Yes. And you know, it doesn't matter. The logical consistency isn't.
- [15:02]
C
Isn't the thing, though, just to be fair. This is unfortunately not just a Trump thing if you're talking about somewhat illogical approaches to farm subsidies. Because I know. I think Obama was very critical of Indian farm subsidies, and they do massively over subsidize their farmers, and it doesn't actually help their farmers. But we were doing the same things, like Dilma Rousseff in Brazil took us to the WTO because of our subsidies. So unfortunately, this has been something that's been going on a long time.
- [15:26]
B
And I think China, too, is a big culprit here because it's not just subsidies, but it's. It's state owned businesses that they're propping up.
- [15:34]
A
Yeah. You know what I blame, though? What I really blame is the US Primary system and the fact that Iowa is the first big state that votes in the primaries. And so everyone needs to win Iowa if they want to run for president. And if you want to win in Iowa, you need to be incredibly supportive of corn subsidies. And so that just sets the frame for all of national politics.
- [16:01]
B
It's a bitter pill to swallow to see an announcement about $12 billion in farm aid at the same time that Republicans in the United States have declared the war on poverty over and won and are cutting back on like SNAP or food stamp benefits or, you know, social welfare.
- [16:17]
C
This is actually important because part of the reason that. The part of the reason the farm subsidies have been able to stay for so long is because their lobbyists have been really smart and they've actually often connected farm subsidies with food stamps and with conservation efforts as a way to get support from a broader number of states.
- [16:35]
A
This is actually the, yeah, the stated kind of we get to kill two birds with one stone thing is that the farm subsidies, you know, you basically spend all of these billions of dollars to buy a bunch of cheese, and then you give the cheese to people who don't have cheese and then they get to eat. And so therefore you are supporting the poor and supporting farmers at the same time. What's not to love?
- [17:01]
B
Well, great, then I stand corrected. Perhaps this 12 billion in aid will then go to increase SNAP benefits.
- [17:08]
A
No, but I mean, but as Annie Lowery said on this show a couple of weeks ago, like the way that you help you stop poor people from being poor, it's not to give them cheese, it's to give them money so.
- [17:20]
B
They could pick the cheese that they want.
- [17:22]
A
Yes, we don't often have sort of obituary centered segments on this show, but I think for Sergio Marchione, we should, we should have a little segment because this guy really did something which virtually everyone thought was impossible and that he came in to Fiat and turn this. I mean, you know, what kind of reputation Italian cars have? You know, they're just incredibly unreliable and no one wanted them. And in a European car market which is dominated by Germany and by highly reliable German cars, like why on earth, if you could buy a Volkswagen, would you buy a Fiat? Sergio Marchion comes in and turns Fiat into a Genuinely profitable, really good car company. He then finds the worst of the big three car makers in the U.S. chrysler. He comes in, merges it with Fiat, which everyone was like, what on earth? That makes no sense. Fiat makes these tiny little Cinquecentos and Chrysler makes Ram trucks. These things have nothing in common. Merges these two companies and it works again. Chrysler starts becoming profitable. This is a significant achievement in an important part of the global economy. And much as I hate the kind of heroic, it's all because of one man kind of narrative, you have to say that at some level, it really was this one guy.
- [18:50]
B
Yeah. I mean, the obituaries, the pieces about him were just glowing. Even from the union members in Detroit thanking him for saving them, saving their jobs, saving their factories, reviving Chrysler. It seems he's a really smart CEO, which is rare when you think about it. That's really crazy because there aren't that many CEOs. There aren't that many giant Fortune 500 companies. You think they do a better job? You think there'd be more CEOs like this guy?
- [19:20]
C
Well, one of the nice things about him was that he didn't seem to really care about being popular. He was notoriously very blunt. He would fire executives. He took on unions in Italy. He dealt with unions in, in Detroit and ultimately ended up creating a lot of jobs, created a much more profitable company.
- [19:39]
A
And yeah, I think. I think he was mostly popular. And if you come into a company which is falling apart, then people are going to give you more ability to shake things up. I think he also got credit for when he did fire people. The brunt of the firings were generally borne by middle management rather than by actual factory workers. And he was really good at taking out, like, entire layers of management and just saying, like, what are these people doing? What we need to do is be concentrating all of our efforts on making cars and selling cars rather than sitting in offices moving emails around.
- [20:21]
B
Yeah. And he slimmed down. Chrysler, I guess, was making a lot of midsize vehicles that were just terrible and no one wanted. And he was like, why? Why are we doing that? Cut it out. And he just slimmed down the number of cars they were making and focused on the good stuff, focused on Jeep brands, people like. And it worked. It just seemed smart about what he was doing.
- [20:38]
A
He didn't do that from the beginning. His grand idea when he merged the two companies was like, we're going to take the Fiat platform and Chrysler's going to create a bunch of small, sporty European Cars and high gas prices are going to mean that Americans are all going to want small cars. And he released this thing called the Dodge something Dart or something and it was a disaster. Like, it's not like he never made any mistakes, but he was capable of saying, oh, whoops, I got that one wrong. And you know, turning around and saying, let's just make enormous monster trucks instead.
- [21:09]
C
And that's the key is that he, he took risks and sometimes they work, sometimes they didn't. But he did appear to learn from them. And he really did push back on some of the, you know, standard procedures in the auto industry and has been very successful.
- [21:23]
B
He seems like he was a human, genuine human. As opposed to some of the robot men.
- [21:29]
A
Yeah, when you see interviews. No, when you see interviews with him, he would talk in a very kind of disarmingly blunt manner. And what he wouldn't talk would be about, you know, vague hand waving, strategic imperatives and stuff. He'd just be like, I want to make better cars, you know.
- [21:44]
C
No, he said, like, we need to make cars people want and actually make a profit.
- [21:47]
B
Yeah, I mean, what else there to do?
- [21:50]
A
But like, it's amazing how few CEOs actually talk like that. So one of the things which jumped out at me from the news this week was this company called Fiscal Note has bought CQ Roll Call, otherwise known as Congressional Quarterly, which is this long standing publication in D.C. for beltway types. And the CEO of Fiscal Note put out this statement saying, quote, by acquiring CQ Roll Call. And this is. These are journalistic outlets. These are publications. By acquiring CQ Roll Call, Fiscal Note will be positioned to provide best in class solutions in the issues management space.
- [22:34]
B
This is for a journalistic enterprise. People read this and they're supposed to understand and they're like, what it says.
- [22:41]
A
Why do you buy cq? Oh, it's because what I want to do is find best in class solutions in the issues management space. This is how CEOs talk in the real world. And then Sergio comes in and he doesn't talk like that. What I don't understand is why do CEOs talk like this?
- [22:56]
B
I think there's a fear of being misunderstood or misrepresented or attacked if they're too blunt or specific. I think they get media trained and this is how they think they're supposed to talk.
- [23:12]
C
And it depends on the industry. It depends on the amount of regulation and yeah, it also depends on the, the structure of the organization and how much involvement there is from compliance and all these things. In terms of looking at every single.
- [23:24]
B
Thing that is said, we should say that sometime. That's to the good. When you think of a CEO like say, oh, I don't know, Elon Musk who's out there on Twitter saying blunt things and they're bad, he's, you know, out there insulting journalists and investors and you know, sometimes a little tact is necessary. But Sergio seems to have mastered the art of speaking bluntly without going off the rails.
- [23:48]
A
I also think there was just a long time secular move which coincides with the rise of business schools and management consultancies and also just, you know, books about leadership and stuff like that. The all of this stuff, these skills which are ostensibly being learned and transferred in these shops are none of them are industry specific. And so everything just needs to be vague and people start talking about platforms and solutions and leadership and all of these like stupid buzzwords which don't mean anything just because it's the only way that they can keep their message broadly applicable to any industry.
- [24:38]
C
To a certain extent, yeah, I think a lot of comes down to like a risk management I. But to a certain extent I think you're right.
- [24:46]
A
I mean one of the fun things to do is to get out like your Google Ngram viewer and look at the rise and rise and rise and rise of the phrase business model, which literally 20 years ago no one used it, we all use it all the time. Now we don't even realize that we're using it. This was never a thing.
- [25:05]
B
I also think it's like a smarty pants factor where in finance especially, especially, but also among CEOs, where they think if they talk and use jargon and lingo then they automatically appear to be very intelligent people. And I think this infects entire industries and it seems particularly noxious, especially around things that should be easy to understand. Like cars are easy to understand. Like I get it, you drive the car, everyone knows about cars and also money should be pretty easy to understand. But there's a whole language developed in the finance industry to make it seem harder to understand. I think you had someone, an author on here once that talked about this.
- [25:43]
C
But yeah, to a certain extent I do think that a lot of things in finance, you can boil them down.
- [25:49]
B
Are far simpler than most things you can boil down.
- [25:52]
A
But also like most business is not finance. This is the other thing that people forget. Like making cars. Yeah, there's a financial aspect to it, but mostly it's an industrial business where you're making cars and corporate finance is.
- [26:06]
C
Still A pretty big part of that.
- [26:07]
A
Though, the thing that I always come back to is basically, I think it's generational. Look at the difference between Rupert Murdoch and James Murdoch. That Rupert, you know, is just a blunt CEO who says what he thinks about the industry that he operates in. And James is this, you know, jargon spouting management guy who, like you can never understand a word he says. And I think we are clearly moving in the wrong direction. And I think that much of the love that people genuinely did have for Sergio Marchion was this feeling of like he's the last of the CEOs who actually just comes out and says what he thinks.
- [26:48]
B
I buy that. And I think there's a trend now where people are more wanting that kind of authenticity. And it can often get us in trouble, as we've seen in the Oval Office, but not always.
- [27:02]
A
Emily, have you taken a gene test from 23andMe or any of those companies?
- [27:09]
B
I really haven't. I don't want to know. I just don't want to know.
- [27:14]
A
But here's the question. Apparently, according to 23andMe, 80% of the people who have had their genes tested have opted in or ticked some kind of box which allows their personal genetic information to be shared with pharmaceutical giants like GlaxoSmithKline. I really wonder how active that opting in is. But we are about to find out.
- [27:38]
C
Because Anna, GlaxoSmithKline has made a.
- [27:43]
A
What is it, 300 million?
- [27:44]
C
300 has a $300 million investment in 23andMe, so that for, I think, about four years, they're gonna have access to 23andMe's DNA data that they will be able to use to create new drugs.
- [27:58]
A
And specifically, they have a drug which they have already developed for Parkinson's, which only works on people with a certain gene mutation. And so they're like, great, we have this drug, we want to use it on people who have this gene mutation. But the question is, how do you find the people who have that gene mutation? Answer, you go along to 23andMe and say, can you just give us the email address of everyone with this gene mutation? And then we can just email them and say, do you want our Parkinson's drug? It's just for you. You have exactly the right gene mutation. And on the one hand, this is creepy as fuck, and on the other hand, you can see how it's actually quite useful.
- [28:39]
C
I actually think this is a fantastic thing. I think that if you're looking and you're saying, okay, well, we have the ability to more quickly and more inexpensively create drugs that can markedly improve people's lives. And on the other side, there are privacy concerns. I think the former is much more important.
- [28:58]
B
What I thought was interesting also was that people Pay to use 23andMe, and then they give them, in addition to money, the right to look at all their genetic information. Then 23andMe uses that to make a multimillion dollar deal with, with a big pharmaceutical company. So you're. We're essentially letting ourselves. Not me, because I don't do 23andMe, but we're essentially letting ourselves be these guinea pigs for free. We're.
- [29:26]
A
No, no, we're like, we're monetized.
- [29:28]
B
Yes, exactly.
- [29:28]
A
Paying for the privilege of being monetized.
- [29:30]
C
Yes.
- [29:30]
B
And you're like, wow, that doesn't seem, that doesn't ring fair to me. It seems exploitative.
- [29:37]
C
I think that you're saying that people are adults. I mean, even human beings with. They are given and they have a product. And as there's an opt in, it's not an opt out, it's an opt in. And if you opt in.
- [29:49]
A
Yeah, but when 80% of people opt in, you kind of wonder how, how opt in it is.
- [29:54]
B
It's like Uber saying, I agreed to arbitration when I downloaded Uber. It's like, no, I just wanted to get a car really fast. No one reads any of this stuff. I. Who knows? We don't know. As Felix said, we don't know how much work people are doing on the opt in. Like, you would never say to someone, like, when companies test drugs or they do trials, they, they pay people. You pay people.
- [30:14]
A
This is, I think this is a really important point is that like some, like, tick the box that you do when you buy a test shouldn't be, you shouldn't be able to give up super valuable data in that way. Like, I don't think people are realizing how valuable that data is. And if 23andMe turned around and said, we're going to sell this for, you know, 300 bucks to Glaxo, Smith Klein, and we're going to keep the 300 bucks for yourself and you're not going to get any of it, people will be like, huh, no, actually this is my genetic information. If my genetic information is going to be sold for 300 bucks, I want the 300 bucks.
- [30:52]
C
So I agree with you that I think in health data and in data in general, I think as we move forward, there's going to be more questions about people owning their own data and people being able to make. Make money off of their data. And I agree with that. And I think that that is the.
- [31:05]
A
And therefore, you shouldn't be able to give it up as easily as people seem to be able to give it up right now.
- [31:10]
C
I also think that people are adults, and I think that if. Well, if you agree to do something, I. There's a little part of me that feels like, why aren't we willing to hold people accountable? And saying, you agreed to do something. And now also I would just like to go back to the fact that, like, we're talking about the ability to create drugs that can markedly improve people's lives.
- [31:30]
A
No one saves is like, I feel like that's a straw man. No one is saying that we shouldn't be creating those drugs. We're just saying that there's the GlaxoSmithKline is willing to spend hundreds of millions of dollars to have access to individuals genetic data. And the question then becomes, who gets those hundreds of millions of dollars? Is it the individuals or is it some intermediary who has sort of bait and switched those people into giving away that data for nothing? Are they adults? Yes, they're adults, but I don't think you can use that.
- [32:09]
B
And this is all private players. It's not like the federal government's coming in and saying, we're gonna do. We're gonna make a real push into genetic drugs and genetic research, and we're gonna ask all Americans to chip in and volunteer to give their genetic information this database. Then we're gonna create. Create a drug in the public interest. This is not being done for charity. Like, these drugs aren't being made simply to help people. They're being also made because Glaxo needs to make money 23andMe needs to make money. And it's a lot to ask people to give up something of value, their own private information, ask for and get nothing for it, and contribute to the bottom lines of these essentially private companies. It seems to be a subversion of things that should be in the public interest all into the.
- [32:59]
A
And interestingly, there was another investment this week by Andreessen Horowitz in a company called Citizen, which is pretty much the same thing that the job of Citizen, which is now receiving all of this venture capital influx, is to aggregate individuals personal medical histories and information and monetize it. And I'm kind of with Jerome Lanier on this one. That at some point you can't just sort of rely on screens that people have ticked and terms and conditions that people have agreed to and said, well, you're a grown up, you agreed to this thing. When you swipe something on his phone, personal information has to be more personal than that.
- [33:45]
C
Okay, so I'm a little bit with Adam Smith on this, which I think that if you're looking about ways to improve society and create better drugs, this, I'm sorry, I don't think this is going to be done through federal government programs. I think this is going to be done in the private sphere. I think this is going to be done through the profit motive. And that is how historically we create drugs.
- [34:04]
A
That's true. We have the nih, we have the.
- [34:06]
C
Cdc, these things, they are certainly involved. But if you're looking at a lot of the big drug developments and saying that that's not. That would have happened if you didn't have private companies working, I'm not saying.
- [34:16]
B
It totally, I'm not saying totally without private companies, but you need some kind of buy in. And I think with many of the really great breakthrough drugs in the past, that's what's happened. Why haven't you leave it to the. If you leave it to the private sector, you're gonna get like 35 versions of Viagra and you're gonna get, you know, these incremental kind of little drugs that are just put out to, you know, because the patent's running out and they need to do.
- [34:39]
C
It's actually not true. It's actually harder to get those Me too. Drugs approved. And just to be clear, there are many valid criticisms of the pharmaceutical industry. No doubt. Having said that, the pharmaceutical industry is dealing with the fact that it is much more expensive to get drugs through clinical trials now like 90% of drugs fail. It's much more expensive to get them through. And they do have to keep producing new drugs because obviously, but Anna.
- [35:03]
A
But this is. And there's a different way of looking at exactly what you're saying, which is that the pharmaceutical companies used to be good at creating new drugs and the trials used to be. Have a much higher success rate and nowadays they're spending more and more money in producing fewer and fewer drugs and they're becoming increasingly desperate to make as much money as they can from those very, very rare drugs that they do manage to find because they are less efficient. And in fact, the idea that the private sector is in any way doing better at creating new drugs, it's just belied by the data that the number of drugs that the private sector is creating has been going down steadily. For decades.
- [35:41]
C
The reason it's partly been going down is the fact that the restrictions you have to go through in order to get a drug approved are much higher now. Penicillin would never be approved now. Aspirin would never be approved now. Because if you look at deaths from allergies to penicillin or gastrointestinal bleeding from aspirin, they're much higher than say, the deaths that you had from Vioxx. So this isn't just a matter of inefficiency. I don't disagree with you that I do think there is a lot of R and D money that isn't particularly well spent. Totally. Having said that, that's actually why I think something like this is really positive. And I don't think this just would have emerged from a government program. I think this is emerging because they are trying to find a way to more inexpensively create drugs by being able to target people so that they can create things like helping people.
- [36:28]
B
It's not a good deal. The thing is it's, it's a total private deal and it takes advantage of consumers who probably didn't realize what may or may not have realized what they were getting themselves into. And there's no public buy in when something that's clearly for the public good, using people's most private information and doing creepy drug targeting to them. It's a little creepy. If Felix example is true, to get an email that's like, we know you have a secret, you have a genetic mutation and we want to sell you a drug that's creepy. It would be nice. No one's saying this should be a government program, but there should be some kind of like public buy in to big programs like this. When you're talking about people's genetic information and drugs that may be good for the public. Like, I don't know how much these drugs are gonna cost. Like, I gave up my genetic information for free and now you're gonna sell back to me a drug based on that information for God knows how much money. That doesn't seem right.
- [37:23]
A
Let's have a numbers round. I have a weird, you know, kind of related number if we're going to talk about medical interventions and the wonders of the public sector. 11%. This is a big new meta study that just came out. 11% is the amount that your later life income increases if you're exposed to iodized salt when you are in utero. If like, basically if the public comes in and says everyone needs to put iodine in the Nestle, we Know that there are lots of positive effects of this. And this was done now long enough ago that you can follow individuals and how much they're earning in their adulthood compared to individuals who were not exposed to iodized salt when they were in the womb. And it turns out the people who were exposed to iodized salt when they were in the womb wind up earning 11% more than if they hadn't been. There's a public health intervention for you which, you know, talk about return on investment.
- [38:31]
B
Iodized salt is very cheap too, in the United States.
- [38:34]
A
Like there's no reason, like, this is one of the great public health interventions on planet Earth. That and putting fluoride in water, it's just a no brainer.
- [38:44]
B
No, Alex Jones says that's a conspiracy. Felix, I think we have to do some research on that.
- [38:50]
A
What's your number?
- [38:52]
B
My number is really insane. I don't know what I was thinking, but here it is. It's 29,000. That's the number of Hungarian pigs that were exchanged for 20,000 wagons of Czech wooden fuel in 1932 because there was a global trade crisis and war going on and no one wanted to use actual currency anymore because some people were on the gold standard standard, some people off the gold standard. Anyways, they were reduced. Countries were reduced to bartering with each other. So, so wait, a warning to us in 2018. It's Hungarian pigs for Czech wooden fuel. Wagons of Czech wooden fuel. Now, I don't know what that means. I learned about it on this amazing podcast called Trade. It's from the Economist. It's called Trade Talk. I think it's a fabulous podcast if you want to learn about trade. And someone on there, a guy named Douglas Irwin of Dartmouth, was talking about what happened back in 1932. And that's where I learned about this. And I don't know what a wagon of Czech wouldn't fuel.
- [39:55]
A
Actually, I can tell you my favorite version of this is something I saw with my own eyes when I was holidaying in western Nepal many, many years ago. And up in this region called Dolpa. And there's this group of people on the basically on the Tibetan plateau in western Nepal who heard yaks and mine salt. And that's basically all they have is yaks and salt. And they mine a whole bunch of salt. They put the salt into big burlap sacks, put the sacks on the back of the yaks, take the yaks over the mountain pass to, like, Nepal proper trade the salt basically pound for pound, one pound of salt gets them one pound of dal of lentils. They then bring the lentils back over the past, spend the next six months eating those lentils and mining more salt. Rinse and repeat. And that's how they have lived for hundreds of years. It's amazing.
- [40:52]
B
Soon that could be the United States.
- [40:54]
C
Exactly.
- [40:55]
A
Yeah. The big Slate money investment recommendation here is go long yaks.
- [41:03]
C
My number is probably somewhat repetitive, but it's a million, as in a million percent. So there, there was a announcement this week that the IMF is saying at year end the inflation rate in Venezuela is going to be a million percent. Now that is obviously not real in the sense that what they mean by that is just that it's, the currency essentially has no value. I mean, that's really what they're trying to get at at this point. When you start throwing around numbers like that. It's, it's just to point out the fact that this economy is really on.
- [41:34]
A
Its last legs and the inflation rate for coffee has actually reached a million percent. Coffee is now doubling in price in Venezuela every 20 days or so, which is significantly more than a million percent if you do the math. But you know, it's not the kind of hyperinflation where prices double, you know, intraday, which is, you know, like every, every time you think it can't get any worse in Venezuela, it can get worse.
- [41:59]
C
Yeah. And there was also an article that mentioned that compared this obviously to Germany and then also to Zimbabwe, but then said actually Zimbabwe was better off because they had a more diversified economy, which is true.
- [42:12]
A
So we are going to have a really awesome Slate plus segment on the subject of Kit Kats and I promise that I'm going to bring up Toblerones because I mean chocolate. But so if you are a Slate plus subscriber, enjoy a chocolate flavored subscription. I mean, if you're a Slate Glass subscriber, enjoy a chocolate flavored segment of Slate Plus. Otherwise, thank you for listening. Keep the emails coming. Slatemoneylate.com Many thanks to June Thomas and Max Jacobs who threw this show together and we will talk to you next week on Slate Money.