Slate Money: "The Cash Offer Edition"
Host: Felix Salmon
Co-hosts: Anna Shymansky, Jordan Weissman
Date: July 15, 2017
Overview
This episode of Slate Money covers three key topics in the week’s business and finance news: the growing push towards a cashless society (and the role of Visa), the business and cultural demise of coding bootcamps such as Dev Boot Camp, and an inside look into Warren Buffett’s $9 billion cash bid for a Texas utility company—and his “boring” but successful investment strategies. The show is fast-paced and laced with sharp, personal insights and dynamic banter among the hosts.
Segment 1: The War on Cash and Visa’s Push to Go Cashless
[00:42–19:22]
Visa’s Anti-Cash Publicity Stunt
- Visa has launched a new promotion encouraging vendors to stop accepting cash:
“They have decided to pick 50 vendors and tell them that what they need to do in order to get...some new equipment, a bunch of cash from Visa is to say we're not taking cash.” – Felix Salmon [03:02] - The hosts explain how this is akin to payment method exclusivity deals in the restaurant industry, only now targeted towards undermining cash rather than card networks.
How Cashless Societies Succeed (or Don’t)
- Comparison between different countries’ cashless transitions:
- Sweden: “The big cashless society is actually Sweden ... a very deliberate decision by the Swedish government and the Swedish Central bank ... and it worked.” – Felix Salmon [03:19]
- Kenya: M-Pesa’s mobile payments system overtook cash, enabled by “a major monopoly which was trusted more than the government in the form of Safaricom ... everyone just does it.” – Felix Salmon [04:15]
- U.S.: “Visa... they are not a big overarching institution which everyone trusts, but they hate cash.” – Felix Salmon [04:39]
The Economics & Policymaking of Cashless Moves
- Visa’s motives are self-interested: “They want to just see cash rid from the world ... they make more money if people are using cards.” – Anna Shymansky [04:47]
- The discussion highlights the economics of interchange and “swipe fees,” including merchants' costs and the lack of competitive pressure on Visa and MasterCard.
- Debate on the need for regulation:
- “If you are moving away from cash sort of in this unintentional gradual way ... you're eventually potentially left with an oligopoly of companies that run the interchange market.” – Anna Shymansky [09:11]
- “The natural regulator for this is the Federal Reserve ... but ... no one feels empowered to go out there and say the entire system nationwide should be frictionless.” – Felix Salmon [10:18]
Societal Effects and Digital Payment Innovation
- Advantages of moving from cash to digital: “Cash breeds all manner of inefficiencies and tax evasion and illegal activity, and the more that we can digitize transactions, the better off we'll all be.” – Felix Salmon, citing Ken Rogoff’s book [11:29]
- Credit given to Apple for payments innovation rather than Visa or MasterCard: “That was innovation from Apple, that was not innovation from Visa and MasterCard. Who should have been innovating that?” – Felix Salmon [12:54]
- Distinction between “cashless” and “digital” — highlighting the growth of PayTM in India compared to M-Pesa in Kenya [13:45–16:29]
- Skepticism about a fully cashless U.S. due to unbanked populations and privacy concerns [14:50]
- Cultural habits (“path dependence”) make the U.S. a patchwork: “What’s not efficient is when you try and mix the two. And that’s actually what we have in America right now.” – Felix Salmon [18:32]
Notable Moment
- Lighthearted banter about Venmo as a vehicle for paying for “drugs and drinks,” pointing at the broader cultural integration of digital payments [15:15].
Segment 2: Coding Boot Camps and the Death of Dev Boot Camp
[19:38–27:44]
The Rise and Fall of Coding Bootcamps
- Dev Boot Camp, one of the first code academies and acquired by Kaplan, is closing.
- What are coding bootcamps? “Usually a short term, you know, few weeks...ranging from $10,000 to $20,000 to teach people coding skills so that they can get entry level jobs in Silicon Valley companies.” – Jordan Weissman [20:32]
- They provided education outside traditional accreditation systems, filled skill gaps, and were initially highly regarded.
Market Saturation and Business Models
- Overexpansion led to “fly by night” bootcamps and unreliable results statistics.
- Debate on the potential shakeout:
- “The hope is now that we’re going to see sort of a shakeout right in the market, that the ones that are really producing results are going to thrive.” – Anna Shymansky [22:56]
- Felix doubts this, believing quality schools like Dev Boot Camp are collapsing because they “weren’t willing to compromise on cost.” [23:12]
Alternatives and Consumer Protection
- Community colleges now offer coding instruction cheaply—possibly a better choice for many.
- New business model: taking a percentage of a student’s future salary. Seen as a positive innovation but still carries risks.
- Cautious optimism for the sector’s future, rooted in its educated customer base and the possibility of beneficial private sector-driven innovation.
Segment 3: Warren Buffett’s Big Cash Offer for Encore
[27:45–39:39]
Buffett vs. Paul Singer — The Encore Bidding War
- Warren Buffett’s Berkshire Hathaway has made a $9 billion cash offer for Encore, a regulated Texas energy utility company.
- Paul Singer, notorious “vulture investor” (Elliott Associates), holds Encore’s debt and is contemplating a counter-bid.
- The roots: “So Texas Pacific Group and a few other private equity companies bid...to buy this thing, which is now worth $9 billion.” – Felix Salmon [28:32]
Deal Dynamics and Regulatory Hurdles
- Singer’s bid is partly a negotiation tactic: “He doesn’t actually have the money to do it himself...he is simply putting in a counter bid to try to increase the Berkshire Hathaway [offer].” – Jordan Weissman [31:13]
- Regulators in Texas favor Buffett:
“Warren Buffet, he knows electricity...he walks in...the Warren fucking Buffett effect is really important...he is America’s billionaire grandpa.” – Anna Shymansky [33:29] - Singer, by contrast, is seen as an outsider with a predatory reputation, with few friends among regulators or Encore’s advisors.
- Regulatory and financial logic both point toward Buffett, with Singer’s presence serving primarily to enhance the sale price rather than secure the asset.
Buffett’s Strategy: From Value Stocks to Boring Monopolies
- Buffett’s shift from picking stocks to buying “boring but profitable” regulated assets (utilities, railroads), leveraging access to gigantic pools of insurance float:
“Incredibly regulated industries, not only energy, but also the big one being in railroads.” – Felix Salmon [37:04] - Utilities fit Buffett’s need for stable, cash-flowing investments—“the utility company almost serves as a bond proxy because you’re getting these consistent, predictable income-generating returns.” – Jordan Weissman [38:12]
Notable Quotes & Moments
- “Elliot loves litigation. There’s nothing in the world he loves more than litigation...$300 million may sound like a lot...We’re talking about a $9 billion bid.” – Jordan Weissman [34:17]
- “That’s like the most wonderful summary of ... finances’ conception of human beings: your whole company is a bond.” – Anna Shymansky [39:15]
Segment 4: Numbers Round
[39:39–45:51]
- Jordan’s Number: 1.6%
“That is how much the Bovespa, the Brazilian stock exchange...went up [after Lula’s jailing].” [39:48] - Felix’s Number: 8 billion
“Which is the debt in dollars of Air India, everybody's least favorite airline.” [41:02] - Anna’s Number: 11
“That's the number of countries that now seem like they're going to try and negotiate TPP, the Trans Pacific Partnership.” [42:37]
Memorable Quotes & Moments
- On Visa’s campaign: “Visa...they hate cash.” – Felix Salmon [04:39]
- On private innovation vs. regulation: “If you want your form of payment to be universal...you really should have basically zero cost or at the very least a lower cost than cash.” – Felix Salmon [05:50]
- On Buffett’s reputation: “He is America's billionaire grandpa.” – Anna Shymansky [33:29]
- Buffett and boring companies: “Fans of this podcast know, Warren Buffett's attempt to be boring has actually become very exciting.” – Anna Shymansky [01:16]
Tone & Style
The discussion is vivid, often irreverent, and highly informed but accessible. The hosts balance skepticism and humor while offering clear explanations of sometimes highly technical financial topics. The episode is peppered with cultural asides and playful banter, making even dense material engaging.
[End Summary]