Slate Money – The Culp-able Edition

Date: October 6, 2018
Host: Felix Salmon
Guests: Anna Shymansky and Emily Peck

Overview

In this lively edition of Slate Money, Felix Salmon, Anna Shymansky, and Emily Peck tackle a week overflowing with headline-grabbing business stories. Their deep dives focus on three main stories: the New York Times investigation into Fred Trump’s tax schemes, the Bloomberg exposé on alleged Chinese hardware hacking, and the dramatic decline of General Electric. Tangents range from inheritance tax and IRS underfunding, to the limitations of supply chain security and the pitfalls of corporate hubris.

Main Topics and Key Insights

1. The Trump Family’s Inheritance and Tax Evasion

[00:38–14:37]

• NYT Exposé on Trump Taxes

  • The New York Times published a massive 14,000-word investigation into Fred Trump’s tax returns, revealing decades-long tax evasion and Donald Trump benefiting immensely from his father’s wealth.
  • Felix: “Donald Trump was making a million dollars a year at the age of seven in all of these crazy ways that they used to get around inheritance tax. And like this was really big in the news cycle for what, like 20 minutes?” [01:40]

• Key Details from the Article

  • Trump received $413 million from his father, not just a “small $1 million loan.”
    Emily: “It was like $413 million–so that kind of gave lie or put more sort of juice behind what we all knew was total fiction.” [02:14]
  • The Trumps used a shell company (All County Building and Supply Maintenance) to transfer wealth tax-free and inflate costs for tenants.
    • Anna: “They would buy things... then vastly mark up what they had bought and then sell it to the Fred Trump’s organization. And then that money would go to Trump’s children...” [03:55]
    • Emily: “Fred Trump really took advantage of these post war federal housing policies… and then instead of being a patriot and paying his taxes, he built the federal government, the state government and the city government out of tax money and at the same time built the people living in the properties...” [04:27]

• The Debate over Inheritance Tax

  • Massive inheritance tax avoidance: Fred Trump should have paid 55%, but paid only 5%.
  • Political manipulation: Rebranding inheritance tax as "the death tax" made middle-class people oppose it, even though less than 1% pay it.
  • Poll confusion:
    • Felix: “Some crazy proportion of Americans, like 40ish, think that they’re going to have to pay inheritance tax when they die, when in fact the real number is like 0.5.” [08:09]

Enforcement and Policy Discussion

• IRS underfunding allows wealthy tax-evaders to avoid scrutiny:
  • Emily: “There was a good investigation in ProPublica recently that showed funding to the IRS is down, audits are down... like 75% less than they used to be.” [08:26]
• Felix and Anna go back and forth on whether simply “throwing money” at the IRS is the solution, with Anna expressing skepticism about the efficiency and scope of enforcement.
  • Anna: “My only concern is just that I think when we’re structuring policy and ... expecting a certain amount of revenue, we should do that with the reality of how the world actually works.” [09:49]
  • Felix: “Every dollar you spend on the IRS pays for itself 10 times over.” [10:27]

Cultural and Psychological Perspectives

• Family versus individual wealth:
  • Anna: “…America is not actually a country of individuals. It’s a country of families. That is how America is structured… That does reflect how a lot of Americans think.” [12:15]
  • Emily: “There’s something very tribal about, like, wanting to keep it all in the family. Which makes it all the more ironic that in 2004, they sold everything…” [12:55]
  • Felix: “The tribal nature of it remains… And that explains, you know, the whole Pizar Ivanka phenomenon…” [13:28]

Notable Quote
Emily [04:27]:
“Fred Trump really took advantage of these post war federal housing policies that enabled him to build virtually tax free and become a millionaire. And then instead of being a patriot and paying his taxes, he built the federal government, the state government and the city government out of tax money and at the same time built the people living in the properties that the federal housing policy created. Then begets a son whose whole thing is now in office to get rid of regulations and policies of the sort that only benefited his family.”

2. China’s Tiny Chip and Supply Chain Vulnerabilities

[14:38–23:10]

• Bloomberg Businessweek Exposé: ‘The Big Hack’

  • Story alleges a tiny chip, secretly installed on Chinese-made motherboards, enabled espionage on 30+ tech companies and federal agencies.

  • Emily: “They said they had 17 sources, many from inside the government, some at the companies themselves… a little itty bitty chip the size of the tip of a pencil was placed on some servers, made in China...” [15:07]

  • All the companies involved—Apple, Amazon, and Super Micro—issued emphatic denials.

    • Felix: “I do know for a fact that they don’t believe the denials. I have never seen denials this vehement and this strong.” [16:22]

• National Security Ramifications

  • Even the mere plausibility of this attack vector is frightening.
    • Anna: “A software attack is what we tend to be prepared for… Whereas no company has the internal resources to really go through hardware in the way you would have to if we were constantly under threat from hardware attacks. That’s why this is really significant.” [22:25]

• Memorable Metaphor

  • Felix: “If China could do this… It would be, quote, like jumping over a rainbow. A unicorn jumping over a rainbow.” [17:32]

• Broader Context: Trump Administration and Economic Nationalism

  • Fits the narrative of distrust with China and moves toward economic nationalism.
    • Emily: “If you want to protect your hardware and your software, you have to get out of the global supply chain… someone called it a Satan’s bargain, which—wow—we can’t trust them. We can’t trust anyone.” [18:39]

• Complexity and Insecurity of Global Supply Chains

  • Apple’s own engineers (and most companies) can’t fully inspect or understand their own products.
    • Felix: “Even Apple’s own engineers don’t fully understand what is going on in the technology within Apple. Everything is so complex these days that… no one company has the internal expertise to understand everything.” [21:42]
    • Discussion about the impossibility of a “slow technology movement” or local manufacturing in tech, unlike the food industry.

• Lesson/Looming Fear

  • Felix: “We just don’t have like an anti-unicorn plan... to make sure that unicorns don’t regularly jump over rainbows in five years’ time.” [23:10]

Notable Quote:
Felix [17:32]:
“If China could do this… It would be, quote, like jumping over a rainbow. A unicorn jumping over a rainbow.”

3. The Fall and Fall of General Electric

[23:10–32:27]

• What Happened to GE?

  • Recap: GE transformed from industrial behemoth to bank, collapsed in financial crisis, flailed through new CEOs, and is now in disarray.
    • Felix: “They wrote off $23 billion of goodwill in the power department and the whole thing is falling apart. But the stock went up, so everything’s fine.” [24:10]
  • Firing of CEO Flannery, hiring of Larry Culp (formerly of Danaher).
    • Anna: “The stock might have gone up. The bonds did not… This is not a solid company.” [24:50]
    • Felix: “Never look at stock prices. Look at bond yields. The bond yields tell you everything. The stock price is noise.” [25:02]

• The Acquisitions Debacle

  • Immelt’s terrible purchase of Alstom (a French turbine company) is blamed for much of the current woes.
    • Anna: “They were so many people along the way who were saying, don’t go through with this acquisition… It was the worst deal possible. And to me, this is part of the reason GE is in the position of…” [26:05]

• Culture and Managerial Hubris

  • Emily: “The fall of GE is like the decline of the patriarchy…They said he [Immelt] was always the smartest man in the room. And you never want to be the smartest man in the room…” [27:36, 28:41]
  • Felix connects this to private equity’s mistaken belief in “management’s magic touch.”

• Disagreement over Jack Welch’s Legacy

  • Anna briefly defends Welch’s performance (increasing share price, value), but Felix argues Welch’s financial engineering led to GE’s demise:
    • Felix: “That was the core of the death of GE right there.” [30:36]
    • Emily: “Their whole thing was ‘we’re the best managers,’ which to me is perfect [irony].” [32:20]

4. Numbers Round & Quick Hits

[32:27–35:05]

• Emily: $15 — Amazon’s new minimum wage, but many workers will lose bonuses and stock awards, undercutting the positive headline.
• Felix: $76,100 — Median net worth of millennial households in 2016; $123,000 for Gen Xers at the same stage, showing a significant generational decline.
• Anna: $500 million — The sum in an attempted scam against the Angolan government, foiled by an alert HSBC bank teller in the UK.

Notable Quotes & Memorable Moments

• Emily [04:27] (on Fred Trump): “He built the federal government, the state government and the city government out of tax money and at the same time billed the people living in the properties…”
• Felix [17:32]: “If China could do this… It would be, quote, like jumping over a rainbow. A unicorn jumping over a rainbow.”
• Anna [25:38] (on GE): “So they were buying an insolvent company? Basically, yeah.”
• Felix [25:02]: “Never look at stock prices. Look at bond yields.”
• Emily [27:36]: “The fall of GE is like the decline of the patriarchy.”
• Anna [32:44]: “My number is $15. That is the amount per hour that Amazon will now pay its workers.”

Timestamps for Important Segments

• Trump Taxes and Inheritance Tax Debate: [00:38–14:37]
• Bloomberg ‘Chip Hack’ and Supply Chain Fears: [14:38–23:10]
• General Electric’s Decline: [23:10–32:27]
• Numbers Round (Amazon wages, Millennial Wealth, $500m Scam): [32:27–35:05]

Tone and Style

The episode blends investigative seriousness with humor and sharp skepticism, peppering deep dives into serious topics (e.g., tax justice, global cyber risk, the failures of leadership) with playful asides. Anna and Emily bring incisive, at times wry commentary, while Felix keeps the conversation brisk, probing, and enjoyably digressive.

Listen to this episode for:

• A breakdown of how the wealthy evade taxes and why inheritance tax debates are so persistent
• Supply chain nightmares and why tech security is nearly impossible in a globalized system
• A post-mortem on one of America’s corporate giants and what it says about management culture and ego
• Brief but sharp commentary on Amazon’s wage news and the economic struggles of young Americans

Recommended Reading from the Hosts:

• NYT on Fred Trump’s taxes
• Bloomberg Businessweek on hardware hacking
• Wall Street Journal on the Angolan $500m scam
• Axios Edge newsletter

For feedback or topics, email slatemoney@slate.com. Next week: A look at California’s new corporate board mandate (in Slate Plus).