The Distinctly Nordic Edition

Summary

Slate Money – The Distinctly Nordic Edition (January 6, 2018)

Episode Overview

This episode of Slate Money, hosted by Felix Salmon, Anna Shymansky, and Jordan Weissmann, dives into several global stories with a strikingly Nordic flavor and a focus on key economic policy experiments, market innovations, and global political issues. The trio discusses Iceland’s bold gender pay equity law, Spotify’s unique approach to entering the US stock market, and the political economy behind the protests in Iran. The discussion flows with the hosts’ signature mix of deep analysis, playful debate, and candid skepticism.

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Key Discussion Points and Insights

1. Iceland’s Gender Pay Equity Law

Segment ~ [01:31 – 11:49]

• Law Overview: Iceland has introduced a law mandating that companies must certify, through external audits, that men and women are paid equally for similar work.
• Shift of Burden: Unlike in most countries, the onus is on companies to proactively prove compliance, not employees to complain (“…the burden of proof is on the company.” – Anna Shymansky [02:00]).
• Enforcement: Non-compliance results in daily fines, indicating serious intent from Icelandic authorities (Felix Salmon: “Yeah, they are not fucking around.” [02:16]).
• Potential Impact:
  • Quick Fix?: Jordan suggests the law could allow for rapid rectification simply by raising women’s pay, but Anna and Felix caution it’s more complex due to the need for job role valuation and documentation.
  • Unintended Consequences: Anna warns this could depress wages for everyone, as bureaucratic hurdles may make raises cumbersome ([04:12]).
  • Systemic Issue: Men are more likely to already occupy higher-paying roles, so part of the challenge is changing hiring and promotion practices as well ([06:26]).
  • Optimism vs. Skepticism: The group sees value in the experiment, noting similarities to pay transparency in the US public sector and the context of heavy unionization in Iceland.
• Key Quote:

  “If parity comes about by men’s wages falling to the level of women’s wages, that is less attractive of an outcome than if parity comes about by women’s raised wages rising to the level of men’s wages.”
  – Jordan Weissman [09:53]

• Comparative Context: Minnesota’s public sector is noted as an American example with some success ([10:34]).

2. Spotify’s Direct Listing and IPO Innovation

Segment ~ [11:57 – 27:45]

• Spotify as a Disruptive Export: The Swedish company is showcased not just for revolutionizing music, but for pioneering a direct listing method on the NYSE.
• How a Direct Listing Works:
  • No traditional underwritten IPO: Spotify won’t issue new shares or raise new capital at IPO, but simply enables existing shareholders (VCs, employees) to sell shares on the market directly ([13:14], [14:53]).
  • Cost Savings: Sidesteps the substantial fees (often 7% of proceeds) charged by investment banks ([18:28]).
  • No Lock-Up: Employees and early investors can sell immediately ([18:20]).
• Market Psychology:
  • The lack of a formal IPO price eliminates the “first day pop” narrative—the press can no longer focus on whether the stock soared or slumped from a set base ([20:09]).
  • There’s concern about price volatility: Anna flags the risk of a selling wave without an underwriter to stabilize prices ([21:08]), but Jordan maintains rational holders won’t sell at low prices, thus market forces will determine a fair price ([23:43]).
• Debate Over Market Effects:
  • Possible reduced “free float” could push prices artificially high due to limited shares trading hands ([27:24]).
  • Discussion of long-term investor relationships and the potential impact of skipping the traditional IPO roadshow ([25:50]).
• Notable Quotes:
  • “It’s a non-IPO IPO. It’s a fake IPO, but it’s a real IPO.”
    – Felix Salmon [13:39]
  • “Spotify is the Foucault of IPOs.”
    – Anna Shymansky [20:56]

3. Iran’s Protests and Economic Struggles

Segment ~ [27:45 – 38:40]

• Backdrop: Widespread protests erupt in Iran—unlike the politically-driven 2009 demonstrations, these are explicitly about the dire economy ([28:24]).
• Underlying Economic Problems:
  • Inflation has improved under President Rouhani, but deep structural and corruption issues persist ([29:09]).
  • One-third of the economy is run by the Revolutionary Guard and religious organizations, immune to regular taxation ([30:09]).
  • Sanctions lift anticipated foreign investment, but US dollar restrictions and political instability post-Trump stalled that inflow ([30:50]).
  • Costly reforms required (reduction of subsidies, privatization, increased taxation) are deeply unpopular but seen as necessary for long-term health ([32:11]).
• Political Complexity: Hardliners could use the protests to resist Rouhani’s reforms, potentially hampering future recovery ([36:42]).
• Protest Significance: For the first time, protestors are targeting not just the government, but the entire system as corrupt and unresponsive ([36:06]).
• Key Quote:

  “For the first time in a generation, you have a group…rebelling against not just the current government, but the entire system, the entire Iranian system saying, ‘This is all rotten.’”
  – Felix Salmon [34:28]

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Notable Quotes & Memorable Moments

• On Iceland’s commitment: “Icelanders. They're serious.” – Anna Shymansky [02:15]
• On Spotify’s market debut: “Words to make my heart flutter. I love direct listings so much.” – Jordan Weissman [13:34]
• Lit Theory Reference: “Spotify is problematizing the narrative.” – Felix Salmon [20:47]
• Sharp Nordic Humor:

  “Distinctly Nordic. That’s actually my new brand of seltzer…Because I feel. I feel distinctly Nordic.”
  – Felix Salmon [11:51]

• Iran’s Reality Check: “This is the wisdom you come to Slate money for, our listeners: Still pretty shitty.” – Felix Salmon [28:16]

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Timestamps for Important Segments

• [01:31] — Iceland’s pay equity law introduction
• [04:12] — Discussion of potential wage stagnation
• [09:53] — How wage parity is measured and desired outcomes
• [11:57] — Segue to Spotify and the concept of the direct listing
• [13:14] — How direct listing differs from traditional IPOs
• [20:09] — Media narrative problem with direct listings
• [27:45] — Iran’s protests and economic context
• [34:28] — The transformative nature of Iran’s current protests
• [36:42] — Potential political backlash to economic reform

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Numbers Round (Quick, Quirky Endings)

Segment ~ [38:54 – 48:56]

• Taiwanese Dentist Mom: $740,000 – a mother wins a court order for “upbringing” fees from her son ([38:54]).
• Gene Therapy Cost: $850,000 – Luxturna’s new gene therapy for a rare form of genetic blindness ([41:14])
• Apology & Museum Admission: Jordan and Felix clarify a previous error on German GDP per capita ([43:14]); the Met Museum introduces a $25 non-NY resident admission fee ([44:44]).
  • Debate over museum financial priorities and donor influence ([47:53]).

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Overall Tone

• Language: Conversational, lightly profane, and humorously self-aware.
• Style: Playful intellectual banter with a willingness to “nerd out” on economics, finance, and policy.

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Summary for New Listeners

Even if you’ve never heard an episode of Slate Money before, this installment provides a compelling look at ambitious policy experiments—like Iceland’s quest for pay equity and Spotify’s attempt to rewrite IPO conventions—while not shying away from the messier, more sobering economic realities in places like Iran. The hosts balance admiration for innovation with skepticism about unintended consequences, all while peppering the discussion with wit and cultural observations that make even complicated topics feel accessible and engaging.

Transcript

[Felix Salmon]

The following podcast contains explicit language.

[Jordan Weissman]

Hello, and welcome to 2018 and welcome back to Slate Money. And welcome to the distinctly Nordic edition of Slate Money, your guide to the business and finance news of the very first week of 2018. I'm Felix Salmon of Fusion. I'm here with Anna Shymansky and Jordan Weissman. Hello, guys.

[Anna Shymansky]

Hello.

[Felix Salmon]

Hello.

[Jordan Weissman]

And we are on a big global tour. I'm just off a big global tour. I had a 42 hour flight from Hong Kong straight to Brooklyn Metro Tech, which was amazing. But we are not going to talk about Hong Kong or New Zealand. We're going to talk about Iran. We're going to talk about Sweden's greatest musical export, which is not Max Martin. It's Spotify, which is doing amazingly, amazingly interesting things on the stock market. So if you're a finance nerd and you think Max Martin or Abbott or something like that is cool, just wait till you hear what Spotify is up to. But we are going to start with Anna. Iceland.

[Anna Shymansky]

Iceland.

[Jordan Weissman]

Iceland.

[Anna Shymansky]

Because there's a law, a law that's now taking effect.

[Jordan Weissman]

Okay, so walk us through it.

[Anna Shymansky]

Right, so Iceland now has a law that mandates that companies certify that they are paying men and women the same.

[Jordan Weissman]

And they need to get an outside auditor in to sort of tick the box and say, yep, we've looked at how much the men get paid and how much the women get paid and the men are not making any more than the women.

[Anna Shymansky]

Right. And unlike most other laws where the burden of proof is on the woman or the individual, it's now actually on the company.

[Jordan Weissman]

And what happens if they don't get this certification?

[Anna Shymansky]

There's actually a daily fine.

[Felix Salmon]

Yeah. Wow. Daily fines can stack up.

[Anna Shymansky]

Icelanders. They're serious.

[Felix Salmon]

Yeah, they are not fucking around.

[Jordan Weissman]

I mean, the good news about this is that you really can fix it overnight. You just take all of the women and you pay them a bit more and then it's fixed. So you can do that in the gender equality done. You can do that in the course of a couple days. It's not something which takes a long time.

[Felix Salmon]

Theoretically. Yeah, I think it's a little bit more complicated than that. The rule is this thing called the gender equity or gender equality standard. Pay equity standard. I'm blanking at the moment. But anyway, it's supposed to sort of be a system that you have in place for making sure your jobs are paid fairly and that essentially people are paid based on what their job is rather than who they are or their ability to negotiate per se. So I Don't think it's as simple as just like, okay, just make sure that I'm actually not really coming up with a good Icelandic name right now. I was going to try and name a random Icelandic worker, but all I'm thinking of is Bjork and that's really not going to fit here.

[Jordan Weissman]

But who's probably the highest paid Icelander in the world?

[Felix Salmon]

I have to assume most likely. Yeah, Ziggy.

[Anna Shymansky]

If Ziggy was.

[Felix Salmon]

She's definitely their best export right now. Talking about Swedish export exports, Icelandic exports, definitely Bjork.

[Jordan Weissman]

But. So anyway. But I guess what my point was is that however difficult it is to measure this.

[Felix Salmon]

Yeah.

[Jordan Weissman]

Once it's been measured, if your independent external auditor accountant person says, you know, these women are earning 5% less than their male peers, the way you fix it is by giving, giving them a 5% pay rise and then it's fixed.

[Anna Shymansky]

Maybe this could get somewhat complicated. And this is why I really want to like this. And I'm happy that people are trying these kinds of things. But I think this could have the potential maybe to actually depress wages for everyone if you make it incredibly complicated to give pay raises because essentially you have to assign a value to every task.

[Jordan Weissman]

But wait, isn't this like the great advantage of being a small open economy like Iceland in is that if everyone gets a pay cut, then no one gets a pay cut because everything is relative. And so it's just, okay, we can.

[Felix Salmon]

We can talk about, we can talk about exchange rate fluctuations to deal with this. But, and I want to hear you finish your point because I think you were going somewhere interesting with that.

[Anna Shymansky]

And then, so what I'm saying is most companies, if you're say someone seems to be adding value in their job and you potentially want, normally want to reward them with a pay raise, well, now in order to do that, a, it's going to involve a tremendous amount of paperwork. And also you then potentially are going to be having to give a pay raise to many, many people. And I think that could make a lot of employers very loath to raise people's salaries and give them a way to not raise people's salaries. People come to them and they say, well, I would like to increase your salary, but we can't actually afford it because it's this much bigger expense.

[Jordan Weissman]

So I'm not sure I really follow this. I think there are two different issues here. One is that there is a fixed sort of bureaucratic overhead cost of documenting the extra performance of the people who get paid more and of measuring whether or not the men and women are being paid the same amount and that kind of stuff. And that's the kind of deadweight loss to the company which could otherwise have been spent on wages. And so I'll grant you that half, the other half of anytime you want to give someone a raise, you then need to give everyone a raise. I'm not so convinced about.

[Felix Salmon]

Well, if so, there's supposedly some headroom in this stand, in this new law that you can raise wages for people who add extra value to their job. Somehow there's supposed to be a little bit of space to do that. That said, it's difficult, I think is the idea it's meant to be difficult. And so the question is how, how often are companies really going to be able to do that? And if they are really easily able to then just kind of give big performers a raise, does that undermine the whole point of the thing? I mean, I think there, it's an open question.

[Jordan Weissman]

I mean, it's only difficult if the big performer is a man, right?

[Felix Salmon]

That's true. Yes, that's right. But that's part of the problem in Iceland right now is that men tend to be in higher paying industries and in higher paying jobs within those industries, they tend to be.

[Jordan Weissman]

Well, it's just Iceland.

[Felix Salmon]

Yeah, all over. Yeah, exactly. But so that's part of the issue they're trying to solve. The flip side is that some companies might look at their pay situation and decide, oh, we actually need to bring in more women into these higher paid positions just to kind of even things out. And some companies that actually adopted the standard voluntarily in sort of a trial run over the last few years have started doing that. Apparently there's, there's some, the Times wrote about this, that some companies took these artists as an opportunity to kind of assess things and say, okay, how can we make ourselves better? So I think that might be the best case situation.

[Anna Shymansky]

Agree. And I really do hope this works. And I could also potentially.

[Jordan Weissman]

What's your criteria for whether or not it works?

[Anna Shymansky]

Whether it actually reduces the pay gap without causing stagnated wages?

[Felix Salmon]

I think, I think that's a good standard. And I think there's also one other risk that you haven't even brought up for why this could push down wages a bit. Even though I am generally optimistic about this, which is that if you have to justify what a position is paid based on each and every single task and then you're just kind of given a little bit of headroom to pay high performers more, you're probably going, that's probably going to bias your initial wage down. You're going to say, okay, I have to decide what my salary is for this job ahead of time.

[Jordan Weissman]

Again, I feel like this is a straw man. I don't think that anyone is asking or acquiring that wages need to be set, like disaggregated and broken up into component tasks or that.

[Anna Shymansky]

No, that quite literally is what they're doing.

[Felix Salmon]

Yeah, that's part of it. That's the system. That's all part of the system.

[Jordan Weissman]

But no, but the point is, so long as you're paying the men and women doing the same jobs the same amount, all of that is moot. The only question, the only way that that starts coming in is when men start getting paid more than women. And you try and justify that as saying, well, because they're doing this task and that task and those are higher value tasks, therefore we can pay them more. If you don't pay them more, then you don't need to disaggregate.

[Felix Salmon]

So I'm actually not sure about that. I think that's probably going to. I'm guessing that will actually come up as a question as they try to implement this thing, because it's not just supposed to be looking at like a number, it's supposed to be looking at your pay structure and how you go about it. So I, I think that a company might make the argument you are currently making, Felix, and it'll be interesting to see if the government accepts that.

[Jordan Weissman]

And I think the big question for me to just respond to Anna and say, well, does it bring pay into parity without depressing wages is the second half of that is how do you measure the counterfactual? How do you measure whether or not it depressed wages? How do you know what wages would have been if you hadn't implemented this law? And that's the bit which I feel like no one's ever going to be super happy with.

[Felix Salmon]

True.

[Anna Shymansky]

Although right now, if you actually look at how the wage gap has closed in the us, it's mostly because of men's wages stagnating, not actually because of women's.

[Jordan Weissman]

Right.

[Anna Shymansky]

So social scientists are already doing some of that work. So I think moving forward they could also do that work in another way. It's not an easy metric because it's obviously based on estimates.

[Jordan Weissman]

But yeah, I think we can, I think we can say that if parity comes about by men's wages falling to the level of women's wages, that is less attractive of an outcome. Than if parity comes about by women's raised wages rising to the level of men's wages.

[Felix Salmon]

Yes, yes, I agree. I also, I should say I am a fan of this. I'm really happy that Iceland is taking it upon themselves to try this experiment. Like it's like small, you know, small quirky country that they are. I want to see the results of this. And if there's any way, if there's an inkling that this worked and did not cause wages to fall or to kind of stagnate, it could be something that a American state could try at some point.

[Anna Shymansky]

Completely agree. And actually I believe Minnesota in their public sector is already doing something like this. And it has actually. Yes, and it has actually been fairly successful.

[Felix Salmon]

I did not know that. I want to check that out.

[Jordan Weissman]

And public sector wages are wonderful in a bunch of different ways. In terms of price transparency, everyone knows what everyone else is being paid. And in a system where everyone knows what everyone else is being paid, it's much easier to get price parity, to get pay parity, because you can't. There's nowhere to hide.

[Felix Salmon]

Yeah.

[Anna Shymansky]

And I agree. And I think that's why I could certainly see something like this working even in the US in the public sector, where you already have pretty rigid pay structure.

[Felix Salmon]

Well, I was gonna say that's the other thing. Key thing to realize about this, which is that Iceland is heavily unionized. I saw it's like union Penetration is like 85% or something. It's nuts even by Nordic standards. But they are already used to having highly regulated, very restricted wage structures. So this kind of maps onto that. Whereas in a place like the US outside the public sector, it's just not. Just not what we're used to culturally. So it is something that may be distinctly Nordic.

[Jordan Weissman]

Did you say distinctly Nordic?

[Felix Salmon]

Distinctly Nordic. That's actually my new brand of seltzer of sparkling water. I'm going to be selling because I.

[Jordan Weissman]

Because I feel. I feel distinctly Nordic. Could be a wonderful segue, Mr. Weitzman, into Spotify. Spotify Now Spotify is the future of music. It has single handedly revolutionized the entire music industry and turned it from a withering husk of its former self into something which people are quite excited about and is a thriving multi billion dollar global media.

[Anna Shymansky]

Thriving, Thriving.

[Felix Salmon]

I don't know if that's the word.

[Anna Shymansky]

I looked at some of their financial set of leaks.

[Jordan Weissman]

No, no, no. The music industry. So this is, this is what. Yes, this is what I love about. One of the things I love about Spotify is that even if Spotify, after having lost money for however long it's been in existence, continues to lose money for another few decades, in doing so, it will have enabled billions and billions of dollars to go to artists and songwriters which would not otherwise have gone to those artists and songwriters and for this industry to grow up around it. And we are about to find out what the market valuation of Spotify is. And Jordan. No, actually, I don't want Jordan to explain.

[Felix Salmon]

I'm so befuddled by this one.

[Jordan Weissman]

Anna, how are we going? Because the way we are going to find out what the market valuation of Spotify is is just the most beautiful thing that anyone is going to see in 2018.

[Anna Shymansky]

Yes. The direct listing.

[Jordan Weissman]

Oh my God.

[Anna Shymansky]

Stock exchange.

[Jordan Weissman]

It's words to make my heart flutter. I love direct listings so much.

[Felix Salmon]

It's a non ipo. Ipo. It's a fake ipo, but it's a real ipo. It's not a f. It's a. What the hell is this thing?

[Jordan Weissman]

Yes. And so there's this idea out there that public, that the private is the new public, that basically, if you want to raise equity capital in these weird times that we live in, the best way to do that is not to go out into the stock market and ask the public to buy shares. And it is rather to go around to a bunch of venture capitalists and ask them to buy shares. And that seems to be a lot easier and a lot more effective a bunch of different ways. And you don't need to go through the crap of going public. And so that's what people do. And so half of the reason why companies that went public in the first place, which is to raise money, has now kind of disappeared. They don't need to raise money on the public markets anymore. On the other hand, once you've raised money, those shareholders really like the idea of at some point being able to sell their shares. And so at some point you need a stock market listing to allow people to sell their shares. So how do you get a stock market listing without ever raising any money on the stock market?

[Felix Salmon]

And this. And explain like is going to be.

[Anna Shymansky]

A direct listing where in normal ipo you go through an investment bank, they're your underwriters, they buy your shares, they sell them to institution, they. Well, they sell them to institutional investors at a price that they have determined using many, many spreadsheets. And. And then at that point, the shares are traded on the market.

[Jordan Weissman]

And the idea is that normally if everything goes according to plan at the End of the first day's trading, the shares will be maybe 10% higher than the IPO price, which you can think of as being money left on the table, or you can think of as a bunch of different things. But the idea is that the end of the first day's trading will give you an actual market valuation of the company. That's the market.

[Anna Shymansky]

This is actually important because, and I think this will be something that we may all somewhat agree on, is that the current structure of the IPO essentially is made not really for the benefit of the companies, but for the benefit of strengthening relationships between investment banks and institutional investors because of the way IPO pricing works.

[Jordan Weissman]

Right. And Goldman Sachs and Credit Suisse and Deutsche bank and all of these big banks will, you know, have big desks devoted to allocating equities and buttering up clients by giving them access to IPOs, and then the clients will make money on the first day. But Spotify is just doing an end run around all of this.

[Felix Salmon]

It's eschewing all of that, although it.

[Jordan Weissman]

Is still having investment banks involved because you still want the institutional investors to want to buy the stock. But. But instead of doing it in an IPO process where the company is raising money and issuing new stock, the company's already issued new stock. They did a big transaction with Tencent. They have billions of dollars in the bank. They don't need more capital, certainly not in any rush to raise more capital. So what they're doing is they're just saying, okay, everyone who owns stock, it doesn't matter when you bought it. You could have bought it yesterday, or you could have been given it 10 years ago when we were founded. You're free to sell it on the stock market. And anyone who wants to buy stock on the stock market, you're free to buy it. And you guys just go out there and have a market on the New York Stock Exchange, and we'll see where the.

[Anna Shymansky]

We'll see where it lies.

[Jordan Weissman]

We'll see. We'll see where it ends.

[Felix Salmon]

So how, like, how do you determine the hell the price is going to be on day one? Just.

[Jordan Weissman]

Just like the same way that you determine the price on day one in an ipo, you have a. You have buyers and you have sellers, and you see where the clearing is.

[Felix Salmon]

Okay, so there's.

[Anna Shymansky]

Yeah, and there's actually is. In order to be able to do a direct listing on the New York Stock Exchange, they have rule that you have to prove that your market value is above a certain amount by a third party. Stating that. So I imagine that that also somewhat factors in.

[Jordan Weissman]

People aren't going to be doing direct listings for small companies. No, it has to be for like.

[Anna Shymansky]

Billion dollar companies or 250 million is the.

[Felix Salmon]

So I like this, this insight though. Essentially the people are realizing that IPOs are about buttering up institutional investors. It's more for Goldman Sachs and their clients than it is for Spotify.

[Jordan Weissman]

I mean, people realized that a long time. That wasn't the impetus to do the direct list.

[Felix Salmon]

No. Well, so I was gonna say how so aside from that is the other impetus. Just like we don't want to dilute the people who already have shares or. What are the other reasons to do this?

[Anna Shymansky]

Well, mainly also to allow people to cash out.

[Felix Salmon]

Okay, yeah, but I mean, so people can cash out if you do any kind of.

[Anna Shymansky]

But there's a lockup period. There's a 180 day lockup period. So if you were a current holder, you could not sell.

[Jordan Weissman]

And then the other thing beyond that is simply that when you have an investment bank, they take a gazillion dollars in fees as this 7% underwriting fee. And no one understands how banks get away with that, but they always. And so they, they make an enormous amount of money in fees for work, which doesn't seem to be particularly onerous or necessary. It is onerous, but it's not that onerous. Oh, I mean, compared to, compared to like bond.

[Anna Shymansky]

I will tell you, I mean, I'm not, I've did not. I've never worked in investment banking, but many, many of my friends have. I'm just saying that lots and lots of hours making lots and lots of decks. It is not easy work.

[Jordan Weissman]

No, no, I'm not saying it's easy, but look at the difference between equity underwriting and bond underwriting, right? Where equity underwriting you're making 7% and bond under trading you're making 7 basis points. It's literally a hundredfold difference.

[Felix Salmon]

Is equity underwriting, does that involve a lot more like salesmanship and convincing people to buy stuff? Is there, is there a, is there a difference in the amount of labor that goes?

[Jordan Weissman]

I mean, it's probably more, but it's at 100 times more.

[Anna Shymansky]

Right? It's. Yeah, I agree. That I'll agree with.

[Felix Salmon]

So by doing this, they're saving themselves a bunch of money and they're allowing their current shareholders or investors to cash out a lot quicker.

[Jordan Weissman]

And there's another wonderful bit of this as well, which I just really love, is that they're doing an end Run around the whole narrative of the first day's trading. Yeah. So when you ipo, the whole financial press really cares, for reasons which I've never entirely understood, whether you rise on the first day or fall on the first day from your IPO price, how much you rise, how much you fall.

[Felix Salmon]

They want to see the pop.

[Jordan Weissman]

Yes. And it goes. That's the narrative. And if there is no IPO price, then you can't have that narrative. You can't say the stock went up, closed 8% higher than the IPO price when there's no IPO price to close higher than. And so this, in fact, I read this piece about the Spotify listing saying people have been reluctant to go this route because they thought that without an underwriter, there would be nothing to prevent the stock from falling on the first day. It's like. Falling from what? There's no baseline. It's beautiful.

[Felix Salmon]

I love that this is very lit theory. It's like Spotify is problematizing the narrative. The first day, a day of trading.

[Anna Shymansky]

Spotify is the Foucault.

[Felix Salmon]

This. So you're saying.

[Anna Shymansky]

So look, I. I do actually think this is interesting. I think this will be a very interesting experiment to see a company of this size doing this, but it's not without some risks.

[Jordan Weissman]

Okay, what's the risk?

[Anna Shymansky]

So if you already know that, part of the reason you're setting this up is because you have a lot of people who potentially want to cash out, want to sell. You also don't have an underwriter, you know, with a, you know, green shoe option that can support the price of the, of the stock. You know, there's a strong potential that that stock could really decline. I mean, I understand what you're saying in terms of declining from where, but there's a point it's going to start at and a point at the end of the day it's going to end at.

[Jordan Weissman]

So you mean like literally an intraday move, like the price at the end of the day would be lower than the price at the beginning of the day?

[Felix Salmon]

Right.

[Anna Shymansky]

Which, that in itself, I agree with you that for one day, like, is that a huge deal, even potentially for a few weeks, is that. Who knows? But if you start out and there's just a lot of negative press about how much this stock is declining.

[Jordan Weissman]

So you're, again, you're literally just talking about the, the stock chart of, like, what is the price of that stock doing over the first few days?

[Felix Salmon]

Well, I want to say. What are you concerned about that I.

[Anna Shymansky]

Want, again, I'M not saying I'm not. I'm probably not as concerned as others might be about this. But. But as a company that wants to list partly because people own shares and they want to be able to sell those shares, if the price of that share or the value of that share appears to be declining, those people who own those shares aren't going to be very happy.

[Jordan Weissman]

I can't see this. I really can't see this because there are two different things going on here. One is the thing you really care about if you own the shares is how much your shares are worth is the level, not the direction. I'm much happier with shares which have fallen from $45 to $40 than I am with shares which have risen from $20 to $25. If I have, like, X shares, right? All I want is a higher share price. And so, again, because you don't have that IPO price as a kind of base point, you don't really know what's high or low, but you can see what the valuation of the company is. And if the company comes out at a $20 billion valuation, you're like, oh, my God, I have shares in this $20 billion company. And that makes me sense.

[Felix Salmon]

So I wonder if, at least in the early going, the fact that there's no lockup, period, everyone's just kind of free to sell immediately, could lead kind of create a stampede to the bottom. I mean, probably not, though. People are going to hold onto their shares.

[Jordan Weissman]

That's the whole point. People aren't going to sell shares at a price they think is unfair. And I think this is the real key, right, is that actually what we have seen in a whole bunch of recent IPOs is that the VCs who funded that company did not cash out and they kept hold of their stakes for months and sometimes years after the IPO. And what the VCs are going to do in the case of Spotify is exactly the same thing. They know exactly what valuation they want to get for their shares, and they are perfectly happy to wait for Spotify to reach that valuation. And if the valuation is not high enough on the market, they won't sell. And similarly for employees, you know, if they can get rich by selling shares, they'll sell shares. If the price is so low that they aren't interested in selling, they won't sell shares. That is how markets work. And I think the idea that the method by which you go public is going to make a substantial difference to the actual share price or to the direction of the shares, I don't see it. And plus I don't think the direction of shares actually matters that much. But what we have seen in very big cases like Google and Facebook is that if you have a kind of sluggish, crappy open to the stock, stock, it doesn't matter. And the early shareholders and the employees just hold onto their stock and then eventually it goes up and then they sell.

[Anna Shymansky]

I don't entirely disagree, but I also think it's important to remember, like in the case of Facebook where initially part of the support for the stock was coming from the investment bankers like one.

[Jordan Weissman]

And a half days.

[Anna Shymansky]

But the other thing I do think it's important to remember is that part of the underwriting process is also connecting the company with these institutional investors, solidifying relationships. And there is also a concern if you're not really engaging in that process, if you're going to have the same relationship with your investors, with large institutional investors who are more likely to hold long term.

[Jordan Weissman]

Yeah, we'll see whether there's a roadshow how big it is, but I suspect there will be one. I suspect the bankers will get paid to take Spotify on the road. The big institutional investors will be entirely familiar with it. On top of that, there's going to be a large retail base of people who love the story. I, you know, we can have a whole separate conversation about whether there's a, you know, whether the story is genuinely attractive or whether all of the rents will go to the music publishers. But the, I don't think the problem is going to be, oh, there was never enough of a big ipo, so people never heard of Spotify. Like that's not going to be a problem.

[Anna Shymansky]

No, I'm not talking about that. I'm more talking about having relationships with these investors who are your initial investors who are buying big chunks. And when you're not going through this process.

[Jordan Weissman]

Big chunks though, because that's the whole beauty of this. You have long term investors who have big chunks. They are the people who did your ABC VC rounds and they will or won't want to be selling. And so the fact is that the only problem I really see with this is that the free float could be much lower than in most companies, which is kind of the opposite problem to what you're talking about, that there are going to be many fewer shares actively trading hands on the market because there isn't going to be a big clump of shares being issued by the company in the first place. And because there are fewer shares being traded in the market that might make the price artificially high.

[Anna Shymansky]

It could go either direction.

[Jordan Weissman]

It could go either way.

[Felix Salmon]

I still am just. Yeah, I'm still curious when Spotify is ever going to make money.

[Anna Shymansky]

Chances almost never.

[Felix Salmon]

Yeah, I still think of this as a company that would just be better off owned as like a cooperative by all the music publishers and labels. But that's another, that's a story for another day.

[Jordan Weissman]

Why, if they're making money off it, why would they want to have, why would they want to like subsidize a money losing company? Anyway, yes, we will talk about the business of Spotify some. Probably when it IPOs, probably when it fake IPOs. But let's talk about Iran. Yes, yes. Because there are riots in the streets and the riots in the streets are a function of the fact that it has a shitty economy.

[Anna Shymansky]

Well, it has a less shitty economy than it used to.

[Jordan Weissman]

So why are there riots?

[Felix Salmon]

Still pretty shitty. Still pretty shitty. This is the wisdom you come to Slate money for our listeners.

[Jordan Weissman]

I mean, I feel like this is, I mean we've seen a few riots in the streets in Iran over the past few decades and these are the first ones which are explicitly we are rioting because the economy is shitty riots.

[Anna Shymansky]

Well, I do think it's important to remember that these protests, although very important, they're not anywhere close so far to what we saw in 2009. There, there's much smaller in scale and you also aren't involving as much of the kind of educated middle class at.

[Jordan Weissman]

This point because the educated middle class are not the people who are really being shafted by.

[Anna Shymansky]

No, that's not entirely true. So part of the reason that Hassan Rouhani was able to be elected and then reelected as president of Iran was because he was promising economic reforms that would better the at the time, very, very shitty economy of Iran. And if you actually look at numbers in terms of inflation has come down significantly. They've moved out of recession. But the problem is that he's trying to undo decades of endemic corruption, bad populist policies. And at the same time, the he's also working within a system where Khamenei has more power than he does. So his degrees of freedom of what he can do are limited.

[Jordan Weissman]

So I feel like there are two big problems facing Rouhani or anyone wanting to do economic reforms in Iran. One is the mullahs call it basically the religious state. And I can't remember some massive percentage of the Iranian economy is controlled by people who just don't pay tax at all.

[Anna Shymansky]

Yeah, it's a third of the economy is controlled by the Revolutionary Guard.

[Jordan Weissman]

And so there's just like this massive sort of weirdly religious, tax exempt part of the economy, which is quite petro based in many ways and is untouchable and just skews everything. And then the other part of it is because the wonderful deal which John Kerry managed to finally sign and everyone got excited about was meant to unleash a whole bunch of foreign investment. And then Trump happened and so now there's a. The foreign investment has not materialized. No one really wants to invest in Iran and that kind of thing.

[Anna Shymansky]

Yeah, I mean, it's a little. I agree with you to the most. I agree with you. Mostly it's a little bit more complicated in terms of why we haven't quite seen the investment in Iran that was being promised. So part of it. Yes, is that there was a lot of uncertainty once the election started moving. Part of it also has to do that. When sanctions were lifted, US and foreign banks were still forbidden from doing any type of US dollar payments with Iran and the vast majority, majority of international trade is in US dollars. That was a big problem that they probably should have thought of beforehand. So that was one thing. And later they were able to kind of amend that a little bit. But at that point Trump happened. So that is one major issue. Agreed. But I also think what we're seeing in Iran is also something that we frequently see. When you have a reformer come in, when you have someone who's trying to liberalize the economy, they have to engage in measures that are not popular. They have to reduce subsidies, they have to increase fuel prices, they have to increase taxation, they have to privatize things, they have to sell assets because they need a functioning economy that foreigners will invest in. Those types of actions are not popular, although they are usually necessary now.

[Jordan Weissman]

But they're also kind of, I think in Iran's case, impossible on a bunch of different levels. Not least that it's really hard to think of many foreigners who particularly want to invest in Iran.

[Anna Shymansky]

I don't know if that's entirely true. If Iran could really. This is part of the problem. Iran's infrastructure is just completely shot and that's part of the problem. They're both their actual, like physical infrastructure, roads, bridges, also their payment systems, their energy sector, everything. They, they need a lot of work and that's part of the reason that they need a stronger budget. So.

[Felix Salmon]

Agreed.

[Anna Shymansky]

That part of the way that they need to get foreign investment in is.

[Jordan Weissman]

To build the infrastructure.

[Anna Shymansky]

Exactly. Now so this is part of the reason that they are trying to push forward these reforms now.

[Jordan Weissman]

So wait, I mean, but again, is that investment? Because it seems to me that if you get in some huge European construction agency to revamp the oil pipes and build new roads and put in a payment system and do all of that, that's actually, you're paying those people. That's like the opposite of investment.

[Felix Salmon]

That's where the money comes from.

[Anna Shymansky]

Yeah, that actually, if we were seeing that, that would be great for Ron. We are not seeing that partly.

[Jordan Weissman]

Right. Because they don't have the money to. Right.

[Anna Shymansky]

And that's part of what I'm trying to say is that when you are an economy coming out of years and years of mismanagement, you go usually through a period that's very painful. And as a leader, you have to have a lot of political capital in order to weather that. We're seeing that in Argentina with Macri, who's done a pretty good job of it right now. Rouhani is, I think, struggling slightly. Part of the reason that this actually happened is because he released their budget and he released parts of their budget that are normally not released which show the amount of money that is spent to a lot of religious organizations, to the Revolutionary Guard, to this like librarian who was making like $30,000 a month. So he did that because he wanted people to see the mismanagement of the hardliners. But I think he misplayed that because instead people were like, well, dude, you're. You're asking, you're taking away my subsidy and you're showing me that you're giving thousands and thousands of dollars to these other people. So I. So this is, as I'm saying, this is a bit of a political as well as an economic issue.

[Felix Salmon]

So this is what's interesting about these protests to me, which is that it seems like for the first time in a generation, you have a group of largely young men out in sort of the further provinces of the country rebelling against not just the current government, but the entire system, the entire Iranian system saying, this is all rotten. Where we can't afford food, we can't afford basic necessities. And I mean, and it is bad. I was looking at the stats for like what's happened to Iranian diets over the last few years. Like the amount of it's stuff like the amount of meat that people are buying has fallen by half. They can't afford that.

[Jordan Weissman]

The thing that's over, and that's my point, right, is that it's not just not getting better, it is actually getting.

[Felix Salmon]

Worse in some respects for these people. I mean, the thing that precipitated these protests initially, a lot of people kind of seized on was the price of eggs rose 50% because of some weird case of avian flu and expensive feed. Things that in most parts of the world would not cause the price of a carton of eggs to jump by half. So people have a sense that their lives are getting worse under this system. And you just think back to 1979 when you had lots of young men essentially gravitating to the Islamic card liners because that was their out. And now you see the reverse process. It seems like you have the angry, angry young, kind of more rural or small town Iranians saying this is screwing us over. And I just, I wonder if maybe even though these protests are small, they're significant about, for the long term trajectory of the country.

[Anna Shymansky]

I am also very curious about what is going to happen because I agree with you that even in 2009 you never saw people saying like death to Khomeini, like death to the. So that is not something you heard. And, and I also think that is something that even Rouhani would not want because Rouhani may be a pragmatist, but he's still very much a part of this theocratic system. My concern is that these protests could also be used by hardline MPs to block a lot of the reforms that Rouhani is trying to push through that are really going to be necessary to get foreign investment.

[Felix Salmon]

Can be some specific. I'm curious because the only reforms that I think of immediately are the stuff like ending cash payments for food and, and, and fuel. Like that's something that.

[Anna Shymansky]

Well, it's more just reducing subsidies and decreasing the level at which you have to earn in order to get certain subsidies. Also increasing taxation.

[Jordan Weissman]

Why would the hardline mps, they, oh.

[Anna Shymansky]

They want, they want subsidies.

[Jordan Weissman]

They.

[Anna Shymansky]

This is how hardliners, this is how fundamentalists, this is how authoritarians often rule, is that they are also populists and they.

[Felix Salmon]

I have another question. So when we talk about like subsidies, right. In Iran, is that just sort of like the equivalent of food stamps? Like.

[Anna Shymansky]

No, I mean it also you have to do it. Talking about like you sometimes.

[Jordan Weissman]

Yeah. Who's being subsidized?

[Felix Salmon]

Like what are we talking about when we say food subsidies? Like what are they? Exactly.

[Anna Shymansky]

So sometimes you are actually talking about cash payments that people are being given. Sometimes you're also talking about the price that people can actually charge for things like fuel. So you're talking about normalizing prices.

[Felix Salmon]

See, that makes sense to me. Saying we have to have some semblance of a market economy. I could see why that's a big deal. And if that can't happen, it's going to stunt Iran's growth long term. Cutting people's equivalent of food stamps, on the other hand, seems less essential to me. But that's just. Again, as sort of a naive observer.

[Anna Shymansky]

I can potentially agree with that. But I do think that. But there are a lot of reforms that need to be made as well in terms of reducing local content requirements so that if foreign companies come in, they can own more. Certain businesses. They don't have to align themselves with Iranian businesses, those types of things. Also increasing tax collection, because that's a big issue in Iran. I've seen estimates of something like $20 billion a year are lost through tax evasion and administrative corruption.

[Jordan Weissman]

So.

[Anna Shymansky]

These are measures that, again, are not popular, but are necessary.

[Felix Salmon]

And these protests could actually weirdly end up scuttling them.

[Anna Shymansky]

That's my concern. I hope they don't, but that's my concern.

[Jordan Weissman]

Okay, let's have a numbers round. Anna, what's your number?

[Anna Shymansky]

My number is $740,000.

[Jordan Weissman]

Okay.

[Anna Shymansky]

That is the upbringing fee that a dentist in Taiwan has been told that he has to pay his mother.

[Felix Salmon]

So, wait, wait. This is like some horrible Jewish nightmare come to life, except it's Taiwan. Okay, wait. Yeah.

[Anna Shymansky]

So this mother, she made her sons, when they were 20, sign a contract that said she would pay for their education to become dentists, but they had to pay her 60% of their net profits. I like that she specified net, not gross.

[Jordan Weissman]

And so this is a contract. She ended with adult sons.

[Anna Shymansky]

Yes. They were 20 years old. So they are. They were adults when they signed this. And it was. So the one. The son who is being told that he has to pay this, he has said he already paid her a million. About a million dollars. And he's like, I signed this when I was 20. You know, I was just a kid.

[Jordan Weissman]

But she wants this, like, in perpetuity, this sort of thing?

[Anna Shymansky]

Well, no, no. It's actually only up until about 1.7 million, I believe.

[Jordan Weissman]

Wow.

[Felix Salmon]

That's. I just think about, like, every time my mother's been like, I carried you for, like, you know, 12. Not 12, nine months. I'm just glad that this kind of.

[Jordan Weissman]

Is an ex. Is an expert on the gestation period. Anyway, I'm like, good on you, woman. I think you should absolutely get your extra Dentist profits. My number is $850,000, which is lux Turner, one of these wonderful new biotech companies sort of put its finger in the air and decided that the amount it was going to charge for this new gene therapy that it has managed to develop to cure a rare form of genetic blindness is. And then they just kind of like roll the dice and out came $850,000. My favorite thing about this is they've decided to do it. They've decided to split it in half and say, well, the left eye is 425,000 and then the right eye is 425,000. I mean, shouldn't the second eye be less? Shouldn't the first eye be like, buy one, get whatever? And in any case, in any case, if it's a gene therapy won't, like, if you fix your genes, won't that fix both eyes? I don't know how you can just do the genes on the left eye anyway. 850,000.

[Felix Salmon]

So my favorite thing about this is that they haven't figured out how insurers are going to pay for it, because typically, if you're like Aetna or someone, you might be okay paying for an outrageously expensive treatment of some kind because it's going to save money down the line. Like you, you fix the person you get, you pay for their surgery so that they don't up your costs in, you know, years and years from now. But if you just pay like 825,000 in one pop, that problem, that person is probably not going to be your client long enough to justify that cost savings.

[Jordan Weissman]

And plus, being blind is. Isn't all that expensive.

[Felix Salmon]

I'm sure there are all sorts of costs associated with that. I'm not an expert on it, but I just. It's gotta raise your health costs in some ways. Actually, I know we have some optometrists listening to us after our, after our discussion of contact lenses, all of whom reached out to us. And at some point, I should probably read some of your letters because you had rave concerns.

[Jordan Weissman]

We'll have a talk. Okay, well, let's actually just segue very quickly into contact lenses. Actually, let's not.

[Felix Salmon]

Yeah, it's just maybe that's a bonus segment at some point. But anyway, so insurers are sort of saying like, well, if we pay for this now, we're probably not going to reap much of the benefit. So there's talk about insurers somehow maybe working together with each other to pay these costs over time.

[Jordan Weissman]

It's whole new territory Lux Turner is being quite happy in terms of saying you want a payment plan, no problem. You know, we will be. We don't need cash on the barrel head here. We will work something out with you because, you know, they want to get a lot of money anyway. Jordan, what's your number?

[Felix Salmon]

So I have two apologies. First, before. First I should probably say my mother does not actually sound like Kyle's mom from South Park. That's just my automatic impression, but love you, Mom. Second, a couple weeks ago, Anna brought a number about Germany's per capita gdp. And I'm going to emphasize per capita because it seems that in the course of that conversation, both Felix and I missed the words per capita and thus were completely befuddled and just kind of spouted off saying that how can this doesn't sound. Yeah, basically Anna told us about how Berlin brought down Germany's per capita GDP because it's so inefficient, which makes total sense if you hear the words per capita. However, we thought she just said GDP and so we were not listening carefully enough and sounded like jerks. As a result, many of you emailed us and I want you to make sure that you all realize, like we are quite penitent for that, for that incident.

[Anna Shymansky]

Yeah, and I should have at the time, I just, I'll be perfectly honest, was just assume that I must have been missing something.

[Felix Salmon]

Yeah, it was, it was just a total. It was an omnishambles, I think as Felix. Okay. And so now that I'm done apologizing, finally my number, which is $25. $25 is the typical. Well, it used to be the suggested admission fee at the Metropolitan Museum of Art, my favorite museum in the world here in New York. However, now going forward is going to be a required admission fee for people who live outside of New York State. For out of towners or for anyone.

[Jordan Weissman]

Who lives in New York State but who doesn't have, you know, documentary proof.

[Felix Salmon]

That they do so and so. I mean, I think like anybody who loves a Met hates this. Like it just, you know, it just, it seems so counter to the entire spirit of the place that anybody could walk in and see some of the world's treasures for literally nothing.

[Jordan Weissman]

And yet if you look at all of the other great museums in the world, they all have compulsory entrance fees commensurate with this. It's like this is a wonderful thing that the Met has going here. But even the great, you know, socialist paradises of Europe have eye watering entrance fees these days.

[Felix Salmon]

But it just sucks that they're giving it up. Right. It was something that made it special, and they're giving it up. And I think the thing that really gets to me about this situation is that the Met is just so incompetently run in a lot of ways, just on business level. And the biggest symbol that, to me, really is the fact that they lose money on their museum store every year. Like, they still lose millions of dollars selling tchotchkas.

[Jordan Weissman]

Okay. And I'm gonna push back on this because the Met's finances are very complicated. And frankly, the thing. The reason why I don't think this is a good idea, it won't really fix them. The size of the budget is so enormous relative to the increase in admission revenues that they're going to get is way too much downside for a small upside. But with specific respect to the museum store, yes, the whole reason why the Met is in financial difficulties right now is precisely the fact that they had this cash cow for many years, which was the museum stores in malls across America. And then the retail apocalypse happened. And suddenly those stores went from being cash cows to being actually losing money. And that meant that they had to rejigger their whole budget. And it's a problem. And no, you can't take that huge. You know, trying to turn that around is hard, just like it is for many, many other retailers.

[Felix Salmon]

Okay, I'm going to push back on this, though, because number one, first off, I'll let you guys go if you go. I mean. I mean, the retail apocalypse is. It's been going on for a while, but they were losing money, like in 2010 on their. On their museum store like this is. And I think they also lose money on their restaurants, too. I was just looking at their statement. I mean, they're, you know, like, yes, it sucks that they lost the Met stores across the country. On the other hand, the Museum of Modern Art manages to turn a few million dollars in profit on its what they call their auxiliary services, which includes, I'm assuming, well, definitely retail. And I'm assuming also their restaurants.

[Anna Shymansky]

So their restaurants are way better.

[Felix Salmon]

It's true. But it can be done. You can. As a museum. And. And why am I harping on this? Well, you know, if you're a few million dollars in the red, instead of making a few million dollars on this stuff, that's like a $6 million swing. Right? They're only expected to raise about six to $8 million by getting rid. Or six to $12 million by getting rid of one of the. One of the things that makes the Met special. So with just a slightly better run business, they could make up what they, they could make the money that instead they're, they're going to try and milk from out of towners.

[Jordan Weissman]

I feel like that's in a weird way, like the wrong comparison. The real comparison is to say what weirdly fucked up priorities do you have when you have to implement a $25 admission fee on people just to see art, when at the same time you're taking 65 million or so of Koch brother money and spending it on fountains, stupid fountains, which no one likes. And that's the bit like, like the thing which really annoys me, but which is endemic to many cultural nonprofits, is that they are at the mercy of their donors and their boards. And for reasons which we can argue about on the future podcast, but which are just stupid people like Bill Koch seem to be so much happier funding architecture and stupid fountains than they ever are. Using the same amount of money to just, just improve public access by making the admission price lower.

[Anna Shymansky]

Well, that doesn't surprise me though. It's the same reason why politicians usually want to build a new bridge as opposed to fixing all of the other bridges.

[Jordan Weissman]

Yes. Or even spent $18 billion on a wall of some description. We will see what happens with that. Maybe we'll have a Trumponomics issue of Slate Money at some point in 2018.

[Felix Salmon]

The wall defies economic reason, but, but.

[Jordan Weissman]

It doesn't defy budgeting. They have, they have some kind of a number on it now. But I think that's it for us this week. Thank you for listening to Slate Money. Write to us on slate moneylate.com Listen to if Then, which is a weekly podcast which comes out every Wednesday and does for technology. What Slate money does for money, I think is we'll just, we'll just leave it there. Thanks again, Schrader, for producing and we will talk to you next week. Week on Slate.

[Felix Salmon]

All the things I could do if I had a little money. It's a rich man's world. It's a rich man's world.