Slate Money: The Codfather Edition (October 21, 2017)

Hosted by Felix Hammond, Felix Salmon, Anna Shymansky, and Jordan Weissman, with guest Robin Wigglesworth

Overview

This special "International Codfather" edition of Slate Money dives deep into Scandinavia’s unique economic and political models—especially Norway’s enormous $1 trillion sovereign wealth fund—with help from Norwegian journalist Robin Wigglesworth ("The Codfather"). The wide-ranging discussion explores the mechanisms behind the fund, contrasts Scandinavian governance with other countries, examines the 1987 Black Monday crash, and considers lessons for innovation, risk, and transparency.

Key Discussion Points & Insights

1. The Norwegian Sovereign Wealth Fund – World’s First Trillionaire?

[05:16-21:34]

• Background: Norway's sovereign wealth fund, now valued at over $1 trillion, is the largest in the world and is often highlighted for its transparency and governance.
• How It Works:
  • Fund built from oil revenues discovered in 1969.
  • Money is "stashed" and government only spends the returns (now capped around 3% annually).
  • Individual Norwegians technically "own" about $200,000 each, but benefit mostly through public services.
  • The fund is highly transparent: every asset, excluded company, and real-time fluctuations are publicly accessible.
• Uniqueness:
  • Unlike sovereign wealth funds in other nations (e.g., the opaque Middle East funds), Norway’s is fully open and regarded as a model of good governance.
  • "What is unique in the Norwegian, it's incredibly open. You can literally go to the website and see in real time the value of the fund go up and down." (Robin Wigglesworth, 08:34)
  • Emphasis on public and future generational benefit, not elite enrichment.
• Avoiding the Resource Curse:
  • Norway has dodged the "Dutch disease," unlike many petro states, through fiscal discipline and institutional transparency.
  • "Norway talks about the Dutch disease... when you have one industry that dominates everything else... it means the currency goes higher and you can't export anymore." (Robin Wigglesworth, 09:44)

2. Scandinavian Models of Government: Transparency, Social Safety, and Pragmatism

[12:16-29:44]

• Institutional Transparency:
  • Example of tax returns searchable online, illustrating Norwegian openness. "When I started going out with my wife, her friends checked out how much money I made." (Robin Wigglesworth, 12:57)
• Comparisons:
  • While all Scandinavians obsess over their differences, shared traits include robust welfare states, high taxation (especially on "sins" like alcohol and tobacco), and a pragmatic, non-ideological approach to policy.
  • Sweden's reforms in the 1990s reinvigorated growth by introducing more market-friendly policies.
• Consensus & Homogeneity:
  • National consensus and small, homogenous populations allow for sweeping policy changes, e.g., switching from left-side to right-side driving overnight.
  • "On a deep level, a broad national consensus on a lot of issues... It's easier to just, just come together as a community..." (Felix Hammond, 27:13)
• Pragmatism Over Ideology:
  • "... politicians on the left have done the biggest privatizations and politicians on the right have done the biggest welfare improvements ... Pragmatism is really the reigning ideology in Scandinavia." (Robin Wigglesworth, 25:27)

3. ESG Investing and the "Petro State” Paradox

[15:59-20:27]

• The Norwegian fund leads in environmental, social, and corporate governance (ESG) practices, excluding companies like Walmart, tobacco firms, and weapons manufacturers—even while built on oil money.
• "How do you get over the cognitive dissonance of being a petro state that then won’t invest in coal?" (Felix Salmon, 18:00)
  • Wigglesworth acknowledges it's hypocritical, but argues Norway uses its oil money to support sustainability at home and abroad, and does force cleaner standards on local oil companies (e.g., Statoil).
  • Norway’s domestic energy is 97–99% hydroelectric.

4. Entrepreneurship & Social Safety Nets

[30:31-36:31]

• The social safety net enables risk-taking by cushioning failures, leading to higher entrepreneurship rates by some measures, particularly in Sweden.
• "If you work at IBM and want to start a big company in the U.S. and you fail... your kids will not have health care ... In Norway ... you'll have everything." (Robin Wigglesworth, 32:18)
• Sweden is a top venture capital hub proportionate to its economy; Norway less so, due to its traditional economy and reliance on oil revenue.

5. The Swedish Banking Crisis and Black Monday

[23:01-38:15]

• Scandinavian banking crises of the late 1980s and early 90s linked to excess borrowing and market exposure, exacerbated by the Black Monday crash.
• Banks in Norway and Sweden were nationalized in a pragmatic, bipartisan move, contrasting with ideological gridlock elsewhere.
• "One of the things I feel is underrated ... is pragmatism." (Robin Wigglesworth, 25:27)

6. Black Monday Crash – Could It Happen Again?

[36:31-48:22]

• Mechanics of 1987 Crash:
  • Driven by portfolio insurance (selling futures as markets fell), nascent computer trading, and market structure weaknesses.
  • Global repercussions due to interconnectedness—shock in U.S. triggered collapses elsewhere (especially overleveraged Scandinavia).
• Modern Parallels:
  • Introduction of circuit breakers and greater awareness of systemic risk makes a repeat unlikely, but “volatility targeting” strategies may echo old risks.
  • "I don't think we'll ever have something like Black Monday again ... we have circuit breakers." (Robin Wigglesworth, 41:59)
• Potential Vulnerabilities:
  • Concern that technical failures, pro-cyclical strategies, or international crises (e.g., China, North Korea) could still trigger severe events.

7. Plausible Catalysts for the Next Crash – A Lightning Round

[48:22-54:00]

• Robin Wigglesworth: Sudden Fed rate hikes under a new Chair (John Taylor), panicked selling triggered by volatility strategies, and feedback loops affecting real economy.
• Felix Salmon: Potential for U.S. political gridlock or NAFTA withdrawal to evaporate market optimism.
• Anna Shymansky: Financial instability in China, given its highly leveraged, opaque banking system.
• Felix reflects: Possible lack of international savvy in future U.S. financial leadership could compound global crises.

Notable Quotes & Memorable Moments

• On Norway’s Transparency:
  “You can literally go to the website and see in real time the value of the fund go up and down. You can see every single stock it owns, every single real estate deal it's ever done.”
  —Robin Wigglesworth [08:34]

• On Scandinavian Pragmatism:
  “Pragmatism is really the reigning ideology in Scandinavia. It gets cloaked in ideological language sometimes, but fundamentally people sit down and work out, well, this is probably a sensible thing to do and let's do that then.”
  —Robin Wigglesworth [25:27]

• On Social Safety Nets & Risk:
  “If you work at IBM and want to start a big company in the U.S. and you fail, your kids will not have health care ... In Norway ... you'll have everything.”
  —Robin Wigglesworth [32:18]

• On Petrostates and Green Policy:
  “This is the central conflict of Norway and oil. Norway is incredibly green in a lot of things ... But there's large swaths of northern Norway that are now banned. There is no oil exploration, going to protect the ecosystem up there.”
  —Robin Wigglesworth [18:19]

• On the Black Monday Crash:
  “I’d argue that 1987, the Black Monday crash, is probably the first modern market crash in that it happened partially because of computers ... and it was very quick. And then of course economically it proved to be fairly shallow in the U.S.”
  —Robin Wigglesworth [37:31]

• On Political Consensus:
  “On a deep level ... you don't have a deeply divided country like you do in the U.S. ... everyone’s kind of related to each other. They're racially very homogenous. And it seems to be easier to just, just come together as a community.”
  —Felix Hammond [27:13]

Timestamps for Key Segments

• 00:14–04:39 – Icebreaker: The Norwegian Central Bank Cod Rap & introduction.
• 04:42–12:57 – The Norwegian Sovereign Wealth Fund: history, setup, comparison with other countries.
• 12:57–15:06 – Social and institutional transparency in Norway and Scandinavia.
• 15:06–20:27 – ESG investing: exclusions, ideology versus practicality.
• 20:27–29:44 – Expanding to “the Scandinavian model,” pragmatism, consensus, and social policies.
• 29:44–36:31 – Entrepreneurship, social safety nets, and innovation across Scandinavia.
• 36:31–48:22 – 1987 Black Monday: causes, portfolio insurance, market structure, global impact.
• 48:22–54:00 – Fantasy “Doomsday scenarios” for future crashes (lightning round).
• 54:00–58:52 – Numbers round: quirky economic stats and CEO tangents.

Tone & Style

The episode maintains a smart, playful, globally curious tone, often self-deprecating and always conversational. Panelists riff on each other’s points, frequently veering into humorous asides (including the eponymous “Codfather” rap video), and openly grapple with economic paradoxes and political realities—a hallmark of the Slate Money style.

Additional Memorable Moments

• Cod Rap Video – An example of Norwegian institutional whimsy:
  “There’s cod being thrown into a spin right now ... That’s the Norwegian Central bank. How they turn the cod into money.” (Felix Salmon & Robin Wigglesworth, 03:15–03:18)

• Americans and Norwegian Tax Returns:
  “This always freaks people out in the US ... In Norway, you can check everybody's tax returns online ... newspapers built tools around this so you could literally check who's the richest guy on my street.” (Robin Wigglesworth, 12:57, 13:50)

• Entrepreneurship and the Welfare State:
  “When you look at desire for entrepreneurship, how many people dream of working for their own company? The US is in the top of the world. Scandinavia is pretty high as well. But if you look at the percentages of people who work for a business they start themselves, those rates are far higher in Scandinavia than they are in the US.” (Robin Wigglesworth, 32:18)

For Listeners in a Hurry

• Norway’s oil money management is a rare global success story of institutional transparency and long-term social benefit.
• The so-called “Scandinavian model” is less about ideology, more about pragmatism and consensus.
• Social safety nets may promote entrepreneurship by reducing personal risk.
• The dangers of portfolio-driven, technical market failure remain, though circuit breakers and better-regulated strategies offer some protection.
• If a global crash were to happen today, it would likely result from a combination of technical triggers, political missteps (especially in the U.S. or China), and risk pile-ups in financial products.

This summary captures the conversation’s nuanced analysis, playful tangents, and practical comparisons. For anyone seeking an engaging exploration of Norwegian finance, Scandinavian models, and market risk, this Codfather Edition delivers!