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- [00:11]
A
Hello and welcome to the Culpable edition of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Axios, which is Greek for please subscribe to my newsletter. It's Axios Edge. It's coming out on Sunday. Read it. I am joined by Anna Shymansky.
- [00:33]
B
Hello.
- [00:34]
A
I am joined by the Huffington Post's very own Emily Beck.
- [00:38]
C
Hello.
- [00:39]
A
And we have had a really tough job this week trying to work out what to talk about because there is so much to talk about. Amazingly, for all of the Elon crazy, we are not going to talk about Tesla, even though we could probably devote an entire episode to the latest stuff going on there. We are not going to talk about Unilever, but I'm really interested in that as well. I think this week we're going to talk about supply chains, international geopolitical hacking, the fall and fall of General Electric. Remember that used to be a big company which mattered something about that. We are going to talk. Let's start with Donald Trump because we haven't spoken too much about his taxes of late. And somewhere in the middle of this crazy news cycle, the New York Times drops 14,000 words of insane like 18 month long investigation of Fred Trump's tax returns, revealing that Donald Trump was like 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?
- [01:54]
C
Yeah, it was a half an hour where people seem to be excited about the New York Times story. I don't think that many people actually read the all 14,000 words that Susan Craig and John Barstow wrote.
- [02:04]
A
I didn't.
- [02:05]
B
Wow.
- [02:06]
C
And we're going to talk about it. But the New York Times did a great thing which is they packaged their.
- [02:10]
A
Story, they did the tldr. They had like a two and a half thousand word tldr.
- [02:14]
B
Yeah.
- [02:15]
C
And I guess the big conclusion in terms of what we learned about Trump is we learned what we sort of knew, which is of course his whole shtick about I just got a small million dollar loan from my father and I paid him back with interest was bullshit all along. And the Times actually put a number on how much he did get from his father and 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.
- [02:44]
B
Right. And well, we also learned that Donald Trump does not know what the time value of money is, which just like to Put that out there.
- [02:51]
A
Oh, yeah. He got really upset that the New York Times was adjusting numbers for inflation.
- [02:57]
C
Right.
- [02:59]
A
For the man who keeps on talking about how inflation is a big and important thing, suddenly when they adjust numbers for inflation and they make it clear just how enormous these amounts were in the 70s, he gets upset. But I feel like the thing that we knew was that Fred Trump was a very successful property developer and ultimately his money made its way to Donald and a lot of Donald's money was Fred's money. The thing that at least I didn't know was that that transfer was criminal.
- [03:35]
C
Yeah, there were some, I thought the most horrendous sort of criminal tax fraud described by the Times was the All County. Was it All County Building and Supply Maintenance, which is a shell company that the Trumps cooked up so that basically Fred Trump could give them his money without having to.
- [03:56]
B
Pay. And it's actually quite somewhat evil in terms of what he did because not, sorry to cut you off, but basically this, what happened with this company was that they would buy things for the different Trump properties and then they would vastly mark up what they had bought and then sell it to, to the Fred Trump's organization. And then that money would go to Trump's children who own this company. But then Fred Trump would use those padded receipts in order to increase the rents of the people who lived in his buildings.
- [04:27]
C
Right. And that's, I mean that's sort of like the bigger picture for me was just like this man, 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.
- [05:11]
B
Right.
- [05:11]
C
He's, he's really quite remarkable.
- [05:14]
B
Yeah, he's. You, you now have Trump basically out there saying, you know, we should be cutting Medicaid benefits, all of these things. Where his father was able to become as wealthy as he was because he was essentially getting almost interest free loans from the government. That is how he built his empire.
- [05:30]
C
These people, they take from the government and then they take again. Yeah, crazy.
- [05:35]
A
And what this all comes down to, or at least a huge part of this story is basically inheritance tax. Fred Trump should have paid 55% in inheritance tax when he died and in fact he paid 5%. You know, and inheritance tax has been a huge fight in Congress in a perennial fight in Congress along largely but not entirely partisan, diverse R lines, but.
- [06:09]
C
They'Ve rebranded it, they call it the death. And that has made people that really shouldn't have to care about inheritance taxes, middle class people somehow care about it.
- [06:19]
A
But I feel that now, I don't know, I'm kind of smelling something in the air. Not in this Congress, obviously, but I think that now that people are much more aware of privilege and the effects of privilege and they see things like the Kavanaugh nominations and they see guys who, you know, grow up sort of rich and privileged just kind of like waltzing into positions they're unqualified to be in. Then they'll start understanding, I think, what a lot of people have been saying on a more theoretical level when it comes to inheritance tax, which is that this is just the easiest way to tax privilege and to try and make the playing field a little bit more even for everyone. Yeah.
- [07:06]
B
And I think pretty much everyone, most people would agree with that in principle. And I agree with that in principle. My concern with this in practice is always that as this article kind of shows, wealthy people will always find ways around these taxes. And so I'm not saying that that doesn't mean you should. I'm not saying you shouldn't have them. I'm not saying you shouldn't have higher rate. I'm just saying that people should be aware of the fact that you are never going to bring in the income you think you're going to bring in. I just don't think that's ever going to happen.
- [07:37]
A
Well, yeah, I'm going to. Emily, take this one.
- [07:40]
C
I have a few thoughts. First, you would think logically, like what you said, people are more aware of privilege now and would be more likely to support like inheritance taxes. But I think the emotional arguments that are made to argue against the inheritance tax, calling it a death tax, talking about like farmers who can't pass their farms onto their children, I think people get snookered by that kind of stuff and I think they really believe wealth should be passed on and it's not right to take it away from people in this.
- [08:10]
A
There is something in the opinion polls which is fascinating, which is that some crazy proportion of Americans like 40ish, I can't remember the exact number, think that they're going to have to pay inheritance tax when they die, when in fact the real number is like 0.5.
- [08:26]
C
So I think they're snookered. Sorry. And then the other thing I think is, I know it's, it seems true that like the wealthy are always going to find a way to dodge taxes, but that doesn't mean you stop trying to go after the wealthy to get them to pay taxes. When in fact that is actually what the US federal government has done, cutting off funding to the IRS. There was a good investigation in ProPublica recently that showed funding to the IRS is down, audits are down. It's like they're down by like enormous percentages. Three quarter, like 75% less than they used to be.
- [08:58]
B
I mean, you're right, you have to try. Yeah, and I'm not saying that we shouldn't try and I'm not saying we should.
- [09:05]
A
But this is, this is not rocket science. Like you know this from looking at Mexico in particular, right, which had, or Greece for instance, you know these countries which have like incredibly small tax bases. And the way that you get people to pay more taxes is just by beefing up their equivalent of the irs. It works. We know it works. And all you need to do, you don't even need to actually change inheritance taxes very much. All you need to do is just throw a bit more money at the IRS and get them to look a bit more closely at the large estates. And you know, they would pick up on this kind of thing. But for decades they've kind of either not had the manpower or not cared or somehow managed to miss.
- [09:49]
B
Well, I think part of the issue, and this is where when you talk about gift taxes, inheritance taxes, the notoriously these are never audited and part of the reason they're never audited is because it is incredibly expensive and time consuming and they know that the people on the other end are going to have the resources to make it even more expensive and more time consuming. And I agree with you. I'm not saying that we should not look into ways to better ways to collect taxes. My only concern is just that I think when we're structuring policy and when we're structuring policy with the idea of expecting a certain amount of revenue, we should do that with the reality of how the world actually works and just realize that some of that money is not going to come in.
- [10:27]
A
Sure. But I think that's, that's always baked in. Right. The point is that directionally you want higher inheritance taxes and you want much stricter enforce enforcement of those inherent taxes and basically you give the IRS as much money as it asks for because every dollar you spend on the IRS pays for itself 10 times over.
- [10:48]
B
Agreed with that. But you also have to make sure that money is spent. Well, I just say that because I think sometimes there's a 10 tendency to think that if you just put more money in something, it works better. And that is not the case. You have to make sure that there are also changes to how the IRS functions in order to make it more efficient. And so it targets who it should be targeting and not who it's targeting. Now, I think what makes you.
- [11:08]
A
What makes you think that it's inefficient rather than just underfunded?
- [11:12]
B
Because even when you had higher levels of funding, you were not cracking down on tax fraud in a way that you would expect.
- [11:22]
A
No, I think that the problem there is always too low. There was just never enough money. Right. But then the argument, the way that rich people manage to avoid taxes has always been to persuade their congresspeople to underfund the irs.
- [11:39]
B
I don't think it's quite that simple.
- [11:41]
C
Well, one point that was really interesting that I heard on the political gabfest was John Dickerson saying, like, maybe it's time to take a look at inheritance taxes more broadly. Like, maybe people aren't convinced, really, American people aren't convinced that inheritance taxes are a good thing. Most people think they're kind of a bad thing. So maybe figure out a way to get this money from these people when they're still alive.
- [12:01]
A
But the inheritance tax is like the perfect tax because you. You can't.
- [12:07]
C
It's clearly not the perfect tax.
- [12:08]
B
Yeah.
- [12:10]
A
You can't use the money when you're dead. Like, like, like taxing dead people. They're the last people who need money.
- [12:15]
B
So this would be the one thing I'll say. It's just. And I am. I'm actually. I don't believe this. Okay. I'm just saying that I know this is an argument that is made on the Right, and I know it was actually specifically made by Milton Friedman that when people said, well, I don't understand. How can you possibly be opposed to estate taxes? And his argument was, look, America is not actually a country of individuals. It's a country of families. That is how America is structured. People build wealth. People take risks. People do all of this with the idea that they're gonna be able to build something for your families. And so that is why America is traditionally been so opposed to these types of taxes. And while I don't agree with him in the sense that that means we shouldn't have higher state taxes, I think we should be aware of that, because I think there's some truth that that does reflect how a lot of Americans.
- [12:56]
C
Think it's very tribal. I think that, like Fred Trump making sure his. His wealth and everything he built would get passed on to his family and, like, working the whole family working to that end, doing their fraud schemes all together like a big happy family. 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 and none of his and it's all gone, and he just used it to aggrandize himself. President Trump did, and the whole empire.
- [13:28]
A
Is gone, but the tribal nature of it remains. Right. And I think that that explains, you know, the whole Pizar Ivanka phenomenon, which is otherwise largely inexplicable, not to mention the Jared phenomenon, who's equally tribal with regard to his own family, who are probably even richer than the Trumps. And it also explains just the behavior of incredibly rich heirs generally, that if you look at people who either have inherited or are in line to inherit hundreds of millions of dollars or billions of dollars, they are incredibly tribal. They mate off between each other at an astonishing degree. This assorted thing, you know, they like way more than you would possibly expect, because they're the only people who understand what it's like to be so rich.
- [14:21]
C
It's like American aristocracy. This is how it works.
- [14:25]
A
I will just say that as the English person around the table, we had an aristocracy up until about 20 years ago where the queen didn't pay taxes, but now she pays taxes, so it can be done.
- [14:38]
C
Oh, my God.
- [14:39]
A
So it's a big week for massive print media investigations because not only did we have the New York Times coming out strong on Fred Trump's taxes, but we also had Bloomberg coming out incredibly hot with the BusinessWeek cover story this week, which I honestly don't know a single person who know who has been able to work out whether they believe it or not. But it's an amazing story, I believe.
- [15:07]
C
Am I just a sucker? I mean, they said they had 17 sources, many from inside the government, some at the companies themselves. So to back up, a little itty bitty chip the size of the tip of a pencil was placed on some servers, made in China, and then infiltrated about 30 different tech companies and even federal agencies and allowed the Chinese government to hack stuff. Is that accurate?
- [15:34]
B
What is actually really significant is that it was placed on motherboards, motherboards that are used in everything. And although that at Least as the article suggests, right now There are only 30 companies that they've identified. This chip potentially could allow hackers, because what this chip does is it opens up the operating system to implement new code and it allows a remote computer to connect with whatever computer it's gone into. So if this is true, the ramifications are really scary.
- [16:03]
C
And all the companies involved, so Amazon and Apple and this company Super Micro, that we were just kind of making fun of its name earlier, say, totally didn't happen, guys, it's all a lie. But it just. I don't think Bloomberg Businessweek would publish a story if they actually believe those denials. And I do have some trust in them.
- [16:22]
A
Plus 17. I do know for a fact that they don't believe the denials. Yeah, I have never seen denials this vehement and this strong.
- [16:32]
B
And isn't it possible the government could.
- [16:35]
A
Be recording those things and it's all anonymous sources? And then the other thing is that this is ultimately national security reporting. And national security reporting is always incredibly fraught and difficult. And if you get it right, you're, you know, lucky on some level.
- [16:53]
B
And I think it's important to say, like, okay, is it possible this happened? It's possible it didn't happen. That's true. But I think what's almost more important is that even if it didn't, this very likely could.
- [17:02]
A
Well, exactly. Well, I mean, so this is the interesting thing, right, is that there's this wonderful quote in the article, which is, I have to say, a much better written article than the New York Times investigation where they were saying, like, if China could do this, if they could put these tiny little chips on motherboards, send the motherboards to Supermicro in California, which would then send them onto Amazon and Apple and manage to infiltrate these chips into the most important and, you know, sensitive areas of American life. It would be, quote, like a uni, Like a rainbow. What was it? It would be, quote, like jumping over a rainbow. A unicorn jumping over a rainbow.
- [17:40]
C
That was the first thing I wrote down.
- [17:42]
A
It was a great quote. And so, on the one hand, it's incredibly terrifying and important to understand that the complexity of global supply chains really does mean that this kind of thing is possible. But what we don't yet have is a real understanding of just how possible and just how impossible it is. Like, I haven't seen a lot of unicorns jumping over rainbows in my time. And so in that sense, that's, that's actually, that quote is one of the reasons why I haven't completely bought into this story is that the story itself is saying, like, this is an extraordinary claim, and extraordinary claims require extraordinary evidence.
- [18:30]
C
One thing I thought was interesting was how well this story fits into the Trump administration's narrative about China and also its narrative about economic nationalism.
- [18:39]
A
Right?
- [18:39]
C
Like, if you want to protect your globe, if you want to protect your hardware and your software, you have to get out of the global supply chain. Like, that's the conclusion that you could draw. After reading this, you're like, well, we can't trust China to make our stuff anymore. Someone called it a Satan's bargain, which, wow, we can't trust them. We can't trust anyone. We can only trust ourselves.
- [19:00]
A
Can we even test ourselves?
- [19:01]
C
Not really. And, and so, you know, like, I guess, like, maybe people in the Trump administration who are trying to get tough with China, like, this is the perfect story for them.
- [19:11]
A
The interesting thing about Super Micro is that it's this huge company in California that no one's ever heard of, but who supplies just about everyone. And they make these very. They're super, super customized motherboards for, like, highly specialized applications. And they have a gazillion, like, PhD engineers on stuff, most of whom are Chinese.
- [19:30]
C
But did you catch that it went from being a $3.2 billion company to getting delisted from the NASDAQ when.
- [19:36]
B
And this is before that.
- [19:38]
C
I thought that was good evidence to the truth of the story.
- [19:40]
B
And some of these fears, they definitely. And the government actions against them predate the Trump administration. So I don't, I agree with you that this does relate to some of the, I think, rhetoric coming out of the Trump administration. But I don't think all of These fears are 100% unfounded.
- [19:57]
C
Right? No, I don't. I don't think so either.
- [19:59]
A
No. I mean, and we, we, we had a conversation in a previous episode about Huawei and how, like, you know, the US Government is very, very worried about Huawei phones, which are manufactured, where a lot more of the supply chain is in China, and they just don't know what's in those things. And they're saying, like, if we're building out our 5G telecommunications infrastructure in the US we just don't have enough oversight over that process to make sure that these kind of chips don't wind up in the entire 5G US infrastructure. And if that does wind up happening, then basically China has control over everything. And it's in a world where cyber attacks are arguably the single biggest risk to the global economy. What we're Doing is we're. There are attack vectors which we know exist in theory and no one knows whether they exist in practice.
- [20:57]
B
And that's why this article, I think is significant. Of course we don't know 100% but there have been a lot of these rumblings of fears about this. But there. You've never been able to put a specific company on it, a public kind of face of this. And this article has and said that, you know, we don't know the extent of this, but this does definitely seem like a possibility.
- [21:18]
C
It also made me think of when we talk about food and processed food and how we don't know where all the ingredients come from. It's kind of like true of everything these days. You just. Everything is made everywhere and it's all mixed up, you know what I'm saying? Like maybe there's an idea where we could have a slow technology movement just like.
- [21:38]
A
But you can't actually buy our motherboards.
- [21:42]
C
At the farmer's market.
- [21:42]
A
You cannot put this is it like everything is so complicated these days. There's literally nothing that is made anymore that we can sort of disassemble and understand how it's made of the. I think it was Matt Levine who was making this point about this story, which is just that like even Apple, 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, not only just no one individual, but no one company has the internal expertise to understand everything. And that's, you know, that's.
- [22:17]
C
It's like an apocalyptic fear that people have naturally, like one day the machines are going to take over and it's like this is kind of what they've already taken over.
- [22:25]
B
And also there is a difference between a potential hardware attack and a software attack. Because a software attack is what we tend to be prepared for and we have more weapons against that. 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. Even Amazon aws, which was allegedly though who found this, they had to send this out. They had to essentially outsource it to a third party to do due diligence because they didn't have the in source resources. Like, so there aren't a lot of real solutions to this because you're not just going to like completely say, okay, the entire supply chain, you know, like that's not going to happen.
- [23:06]
C
Right? There's no going Back to.
- [23:11]
A
So, yeah, I mean, I think right now we are still in the world of unicorns jumping over rainbows. And unicorns don't jump over rainbows very often. And so we shouldn't be walking around like terrified that unicorns are going to jump over rainbows. But we do know which direction technology is moving and things which were impossible five years ago are going to be commonplace in five years time. And I think the big lesson here is that we just don't have like an anti unicorn plan in place to make sure that unicorns don't regularly jump over rainbows in five years time. So there used to be this big company called General Electric. It was enormous and it was central to America. And then it became a bank. And then this crisis happened and then the bank imploded and then it became like a shell of its former self. And then they brought in a new CEO and then the new CEO didn't change very much, so they fired him and replaced him with an outsider, which just shows how desperate they are. And 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.
- [24:24]
B
Well, the stock went up. The stock went up because they fired Flannery and are bringing in Culp, who Larry Culp, who was formerly at Donahuer, who they believe will be able to change things more quickly. Although I think it's really important to note the stock might have gone up. The bonds did not. The bonds have been downgraded. If you look at where the yields on those bonds are from where they were at the beginning of the year, this is not a solid company.
- [24:51]
A
If you learn anything from listening to slate money for however long we've been producing slate money, never look at stock prices. Look at bond yields. The bond yields tell you everything. The stock price is noise.
- [25:03]
B
Yeah. And I think this is interesting. I want to go back a little bit to that goodwill write down because I actually think this is important because to me this exemplifies why GE partly is in the position it's in is that this to me is really a lot of Jeff Immelt. Because the reason they had that write down is almost entirely because of this acquisition of this turbine company called Alstrom. And that that acquisition cost $10 billion. And you may ask how can you possibly have. It was $17 billion of this full write down. How can you have a $17 billion write down on an acquisition that costs $10 billion?
- [25:38]
A
Question.
- [25:38]
B
Right. Well, the reason you can and just Shows you how bad this deal was. So the way you calculate goodwill is that you take the fair value of the company's assets, you subtract the fair value of their liabilities, and then you subtract that from whatever you paid, and then that's goodwill. When they actually determined, you know, when they bought this, what they were actually buying, turns out their liabilities were $7 billion more than their assets. So this was a deal that should have.
- [26:04]
A
So they were buying an insolvent company?
- [26:06]
B
Basically, yeah. Basically, yeah. And there were so many people along the way who were saying, don't go through with this acquisition. The French government was pushing back on it. So then GE had to make all these concessions. It was the worst deal possible. And to me, this is part of the reason GE is in the position of.
- [26:20]
A
Okay, so wait, so just to be clear, just to be clear, obviously Jack Welch was a disaster because what he did was he turned General Electric into a bank. And we know what happened to banks in 2008. Well, and then he gets replaced by Jeff Immelt, who proceeds to pay $10 billion for a company which is worth minus $7 billion. And then Jeff Immelt gets replaced by some guy called Flannery, who. Flannery's around and achieves basically nothing. And then now they're like, let's find someone who's never worked a day in General Electric in his life and this massive. And is single handedly going to be able to turn his company around.
- [27:00]
B
Well, he did a good job with Danaher. I mean, I think that's. That's the big part of it. Now, granted, that was a very different thing because that was building up a company that was taking a smaller company and making a kind of more modern conglomerate, which is understandable. Why if they want GE to be a modern conglomerate, why they would want him. But this is a very different problem. You're talking about having to sell off massive portions of this company in order to service their debt. They have like $77 billion in debt. Their debt service costs are going to be going up, so they are going to need to generate cash. And a lot of their businesses that they currently have are not generating enough cash.
- [27:33]
C
Can I give you my, like, feminist view? My feminist take on.
- [27:37]
A
I want the feminist take on.
- [27:38]
C
I think this is the fall of GE is like the decline of the patriarchy. Because. Because Jack Welch and really the culture before it, it was all like, man in the gray flannel suit. GE's whole thing was like, we are the management experts. We Are. And Jack Welch embraced this theory of the Six Sigma thing, and, you know, he did the annual culling of the bad performers, and it's all about, I know more than you are, I know more than you do, and we can manage anything. Like, Jeff Immelt went out. I mean, he acquired this terrible French Alstom company, and he acquired like, a bunch of other companies. And the whole thing, they were like, well, we're GE managers, we can manage anything. And that is just the definition of unearned hubris.
- [28:22]
A
And just it sounds to me like the definition of private equity, basically, which is this idea that, like, what we do is we buy companies and then we apply our advanced management technology to make them more efficient, and then they become more valuable.
- [28:36]
B
Actually, in theory, in private equity, you're going to buy cheap so you can sell expensive at a higher multiple.
- [28:41]
C
And apparently there was this great feature in Fortune that was like. There was feature in every business publication ran like, what the hell happened to GE features? And Fortune's I thought was really good because it really sort of dug into the fact that, like, Jeff Immelt was always. They said he was always the smartest man in the room. And you never want to be the smartest man in the room because you want to be able to smartest. Exactly. No one could give him any feedback, so he wound up doing all this dumb stuff. And it's just sort of like what happens when you surround yourself with people that you think are just like you, who sort of reflect you, you know, back to you, and you're just in an echo chamber. There's no diversity. There's no diversity of thought. There's tons of arrogance, and you wind up like ge. That's my theory.
- [29:20]
B
Although. Can I just say one thing? I'm only going to say a little because I don't want to go off on a whole other side of the argument. But I think to say that Jack Welch was completely a failure, I'm going to push back a little bit on that. Just that's the only thing I'll say.
- [29:35]
C
Well, don't leave us hanging.
- [29:36]
A
Yeah, I mean, like, if you look.
- [29:38]
B
At how like the. What GE was when he got it and what she was when he left, now I completely understand in terms of GE capital and how that blew up. And granted, yes, he definitely can be held accountable for that. But if you go and if you dig into the data and even just like basic, like stock for share price, and you look at what Jack Welch did in terms of the value of that company, I think it is very hard to make the argument that everything he did was bad.
- [30:01]
C
I think.
- [30:02]
A
No, I think. I think that's exactly how you make the argument, because all he was doing was he was hollowing out the actual manufacturing, making things profitably part of the company, and putting it all into leverage and finance and stuff, which was great for the share price and which ultimately brought the company to the brink of bankruptcy.
- [30:23]
B
Right. But right now you also have the problem of they're looking to say, okay, we're going to focus more back on power. Right. But the problem is power is not a very lucrative business right now. And moving forward, it looks like it may continue to not be a very lucrative business. So.
- [30:36]
A
So, yeah, which is. Which I totally understand, but that doesn't justify hollowing out your power expertise to become a financial services company, because, you know, I think with hindsight, that was the number one huge mistake that, that Jack Welch made, that he was so obsessed by the share price and he discovered that the way you goose the share price is with financial engineering rather than actual management. And that was. That was the core of the death of GE right there.
- [31:09]
C
Well, I'm going to question that just for a second, based on not that much knowledge. And I'm going to say that during the financial crisis, most banks, you know, did real bad. They got rescued and bailed out just like GE did, and now they're fine. So who's to blame for GE not being fined? Seems like Jeff Elmo screwed up because they had to.
- [31:27]
A
They had to sell off GE Capital. That was the thing. Like, they became, what was it? Ally or something.
- [31:31]
B
And so GE's also not a bank, just to be clear.
- [31:34]
A
Well, it was a shadow bank. Yeah. And then. And then they had to spin that bit off. And so while the banks are doing fine, GE doesn't have that shadow bank.
- [31:42]
C
Well, maybe their bailout was bad then.
- [31:44]
A
Now the bailout was fine.
- [31:45]
C
But why didn't they say, like, they didn't survive like the other banks did? Do you know what I mean? The other financial institutions, they crashed and now they're back and it's fine. Why isn't. Why didn't that happen with ge?
- [31:56]
B
I think it's also important.
- [31:57]
A
It happened in the same way that happened with, like, Washington Mutual or something like that.
- [32:00]
C
Right.
- [32:01]
A
You rescue it, but it doesn't really exist anymore.
- [32:04]
B
Okay, Just, if you look at a lot of GE's current businesses, they're. All of them essentially are not doing well. Like, even in comparison to other people working in the same industry. Industry, it's not just a matter of industrial decline. It's also particularly GE management.
- [32:21]
C
Yeah, they're bad managers, but their whole thing was we're the best managers, which to me is perfect.
- [32:27]
A
Let's have a numbers round. Yes. Emily, what's your number?
- [32:33]
C
Well, you said you didn't want to talk about this, but I don't care. My number is $15. That is the amount per hour that Amazon will now pay its workers. They had much publicized raise for everybody.
- [32:45]
A
Well, it's not for everyone. It's just for the people making less than $15.
- [32:48]
B
Yeah.
- [32:48]
C
And then the people making 15 are getting a dollar raise. So at first, everyone was like, Amazon's so great. Yay, Jeff Bezos. And praising Bernie Sanders for pushing them to do this thing.
- [32:58]
A
And then Bernie Sanders came out and said, Amazon's so great. And they're like, wait, what?
- [33:01]
C
And then, like, hours later, Amazon workers came out and they were like, well, actually, we're getting this raise, but they're getting rid of our business bonus and our stock share plan. And a lot of longtime Amazon workers will not be getting a raise and in fact, losing money because they were making these bonuses and getting these. They would get one share of Amazon stock every year, which is worth a lot of money.
- [33:23]
A
My number is $76,100, which is the net worth of millennial households in 2016, which is the last year we have Data for in 2001, 15 years earlier, we Gen Xs had. When we were the same age, our net worth in the same Constant dollars was $123,000. So it's come down a lot. That's my number.
- [34:00]
C
Yep.
- [34:00]
B
The financial crisis and 10 years of bad account or not. Fantastic economy.
- [34:06]
A
And student loans.
- [34:06]
B
And student loans. Yeah, it's true. So my number is $500 million. So I'm not going to go into this entire story, but the Wall Street Journal printed this just kind of amazing story about how the Angolan government was almost scammed out of $500 million. And one of the main reasons that it didn't work, a bank teller at HHSBC in the UK.
- [34:34]
A
Just like a suburban brunch, you know, just like someone. Like, the guy was like, can I transfer $2 million to this other account? And the guy was like. He calls up the account woman. Oh, there was a woman. The woman calls up the account and she sees a balance of $500 million. And she's like, that is not what I normally see when I look at. She's like, used to seeing, like, you are £12 overdrawn.
- [34:59]
B
Exactly.
- [35:00]
C
She's a hero, basically.
- [35:02]
B
So everyone can read the story. It's a pretty fascinating story.
- [35:05]
A
Yeah. So we have a lot of reading for you this week. There's the Wall Street Journal article about Angol and central banks. There's the BusinessWeek article about chips from China. There's the New York Times article about Fred Trump's tax returns. There's of course the Axios Edge newsletter which you have to subscribe to. And if there's anything else you want us to read and to talk about, send us an email and let us know what it is. The email address is slatemoneylate.com and we will give you a whole segment on it and even more reading for next week so that you get to not only listen to your financial news but get it the old fashioned way as well by reading about it. Anyway, on which note, many thanks to Max Jacobs for producing. We are going to stick around and have a Slate plus segment about California and their new mandate for corporate boards. And we will talk to you next week on Slate Money.