Slate Money – The Down to Earth Edition

Date: October 1, 2016
Host: Felix Salmon
Guests: Cathy O’Neil (author, "Weapons of Math Destruction"); Miriam Gottfried (Wall Street Journal, “Heard on the Street”)

Overview

This episode of Slate Money, dubbed "The Down to Earth Edition," tackles three central topics at the intersection of business, finance, and society:

• The launch and merits of new college rankings co-produced by the Wall Street Journal and THE (Times Higher Education)
• The precarious situation at Deutsche Bank and the broader stresses in European banking
• Elon Musk’s latest Mars colonization vision—and the economic feasibility and psychology behind interplanetary travel

Throughout, the conversation is lively, skeptical, and critical, with the hosts mixing insight, humor, and some friendly teasing.

1. New College Rankings: Do We Need Another List?

(00:54 – 14:46)

Main Discussion Points

• The New Rankings:
  Miriam Gottfried introduces the Wall Street Journal/THE college rankings, highlighting their focus on tailoring results based on different factors such as resources, student outcomes, and—importantly—cost, which is often ignored by legacy lists like U.S. News & World Report.

  “The good thing about our rankings, I think, is there is some ability to tailor them because you can rank by different factors... including, I think resources was one of the factors. Outcomes like how much money do students make after they leave..."
  — Miriam Gottfried (04:22)

• Survey-Based Engagement:
  A key innovation is the inclusion of a massive student survey (over 100,000 responses) assessing engagement: are students challenged, meeting faculty, having fun?

  “You send out a survey to 100,000 students around the country and you say, are you challenged? Are you having fun? Are you meeting with your teachers? These kind of questions and that then becomes part of the rankings.”
  — Felix Salmon (05:02)

• Critique of Traditional Rankings:
  Cathy O’Neil and Felix Salmon critique the flaws of existing rankings:

  • Overemphasis on selectivity and endowments
  • Lack of cost consideration (fueling an “arms race” in tuition)
  • Metrics that privilege certain institutions (e.g., those with large grad programs)

  “The biggest complaint I have about the U.S. news and world Report's ranking is that they do not consider cost.”
  — Cathy O’Neil (03:51)

• Gaming the Rankings:
  Discuss how previous rankings have been “gamed” by colleges chasing higher scores, but note the new model bakes in metrics (like “value added” and diversity) that are a bit harder—or at least less damaging—to optimize for.

  “…what we should do is love any ranking which isn't gamed.”
  — Felix Salmon (13:14)

• Caveats & Downsides:

  • Research is weighted, favoring universities over liberal arts colleges
  • Salary outcomes privilege STEM-heavy and elite institutions (Brown, for example, suffers because many grads go into non-profits)
  • “Value added” algorithms remain tricky and sometimes controversial

  “There's this idea that, you know, it's value added. It's the value added algorithm, which of course there's a whole other chapter of Kathy's book saying how crap value added algorithms are in the educational system.”
  — Felix Salmon (12:39)

Notable Quotes

• “I think cost is a hugely important factor. That's way more important than all of those things.” — Miriam Gottfried (05:29)
• “If you don't agree with the way the world rewards people for being STEM graduates, … it's hard to know exactly how to look at this list.” — Cathy O’Neil (10:18)
• “One of the reasons that US News and World Report is so bad is because that is the specific one that is being gamed.” — Felix Salmon (13:41)

2. The Deutsche Bank Crisis and the State of European Banking

(14:54 – 27:17)

Main Discussion Points

• Backdrop & Scale:
  Deutsche Bank is “one of the biggest banks in the world” (1.6 trillion euros in assets), but its market capitalization has plunged to about $14 billion, signaling deep troubles.

  “Deutsche bank is just this huge behemoth of the financial industry ... it is connected to everyone. There's literally no financial institution on the planet which doesn't have Deutsche bank counterparty risk.”
  — Felix Salmon (15:14)

• Triggers: Regulatory Fines & Fragility:
  A $14 billion U.S. Department of Justice proposed fine for mortgage misdeeds from the financial crisis pushes Deutsche’s already thin capital into the danger zone.

  “The DOJ wants $14 billion from Deutsche Bank. Now let's be absolutely clear about this. The amount that Deutsche bank pays in a fine is not something which just magically gets removed from market capitalization. ... Deutsche bank is not going to pay $14 billion in this fine. Like this is all part of a complex negotiation.”
  — Felix Salmon (17:02)

• Why Deutsche, and Why Now?

  • European banks generally struggle under new capital regulations, weak profitability, and a loss of investor confidence.
  • Deutsche has especially high “operational risk weighted assets” because of its history of fines and infractions.

  “Operational risk weighted assets have more to do with your performance as a management ... So Deutsche bank has the problem of having paid all of these fines in the past, which suggests that they'll have to pay more fines in the future...”
  — Miriam Gottfried (20:43)

• The Core Problem:
  Deutsche must raise capital, but with a weak share price, doing so would dilute existing shareholders, and the timing may affect the size of regulatory penalties (a "game of chicken").

  “If the current market capitalization is $14 billion and they raise another $14 billion in common stock, then basically at the current price, then what that means is that your share of the company gets cut in half.”
  — Felix Salmon (23:05)

• Liquidity vs. Capital:
  The group stresses that Deutsche is not at risk of a fatal liquidity crisis; it can always borrow from the ECB. The big question is capital, not funding.

  “Not only is it not going to be allowed to fail, there is literally zero, zero chance of it failing because it has more than enough in assets. ... It just doesn't have the capital.”
  — Felix Salmon (24:41)

• Market Psychology:
  Fear and speculation among hedge funds and investors compound the trouble, making the situation “Lehman-like” even if fundamentals are different.

  “People are getting afraid and that fear is sort of driving things and making it feel a little Lehman like.”
  — Miriam Gottfried (23:40)

Notable Quotes

• “The Deutsche bank price to book ratio... is 0.21. ... On the other hand, the Commerz bank price to book ratio is 0.25, so it's not much better.” — Felix Salmon (19:15)
• “The share price is at a 33 year low right now.” — Felix Salmon (23:34)
• “If we raise more capital, then that's just going to embolden the Department of Justice to ask for a bigger fine.” — Felix Salmon (25:17)
• “There's no quick fix for Deutsche bank to make it into a trimmed down bank. You can't just start selling assets to solve the problem.” — Miriam Gottfried (27:02)

3. Elon Musk’s Mars Missions: Fantasy, Economics, and Human Nature

(27:17 – 35:43)

Main Discussion Points

• The Big Vision:
  Elon Musk proposes sending a million people to Mars via affordable tickets (~$200k each), emphasizing that it would be a high-risk, one-way trip—but one that some people (including co-host Cathy’s husband) would be eager to take.

  “Elon Musk has been very clear that he's not gonna do it. He's like, that's a very high risk of death. It's a one way ticket. You've gotta be insane to do this. But he also knows that there's a very, very large number of people out there... who are willing and indeed eager to do this.”
  — Felix Salmon (28:10)

• Economic Analysis:
  Is colonizing Mars economically rational? No. Resource extraction or trade is not feasible. It would be a gigantic money pit with no real return.

  “There's no way that there's no like Unobtainium on Mars that we can mine and bring back to Earth... There's nothing that Mars can do that we can't do better.”
  — Felix Salmon (29:44)

• Science, Psychology, and Government:

  • Discussion of the personal drive—often a “boyhood fantasy” fueled by science fiction.
  • Debate over whether tax dollars should fund Mars efforts, with hosts generally favoring big science but questioning human Mars missions specifically.

  “The question is whether manned space exploration counts as big science and something that we should be investing in...”
  — Felix Salmon (33:21)

  “I agree, actually that manned missions to Mars are pretty dumb. I mean, there's no particular reason for the taxpayer to pay for it.”
  — Cathy O’Neil (33:30)

• Risk, Funding, and the Outer Space Treaty:

  • SpaceX can take risks NASA can’t, but failures (like recent rocket explosions) are frequent
  • Outer Space Treaty (1967) supposedly bans “terraforming” Mars
  • Conversation returns repeatedly to the high personal cost (“one kid’s college tuition”)

Notable & Memorable Moments

• “My husband actually, when I first got married to him, told me that if he was ever given the opportunity to go to Mars in a one way ship, he would take it.” — Cathy O’Neil (27:24)
• “I do think the $200,000 ... sum is, is low enough and achievable enough that it's within the reach of a large proportion of the people who really, really want to do this.” — Felix Salmon (35:11)
• “You have to sell a lot of books for that. It’s basically one kid's college. Let's be clear.” — Cathy O’Neil (34:30)

4. Numbers Round

(36:01 – 40:46)

Miriam Gottfried: "500 million"

(36:13)
The estimated annual savings in dollars if Viacom and CBS re-merge, per Barclays. Most of this is due to the elimination of one of the highest-paid CEOs in the S&P 500.

• “If you just eliminate one of them, that's huge.” — Miriam Gottfried

Felix Salmon: "4,899,000,000"

(37:49)
The number of euros by which rogue trader Jerome Kerviel’s fine was reduced (from nearly €5 billion to €1 million). Once the "poorest man on earth," Kerviel is now only liable for a sum he might actually pay.

• “French court just cut that $4.9 billion fine to 1 million euros, which is something he could actually pay.” — Felix Salmon

Cathy O’Neil: "0.9 (or 90%)"

(38:59)
A new personality test claims to identify, with 90% accuracy, children likely to develop drug addictions, and interventions apparently help reduce risk. Cathy remains wary about the ethical and privacy implications.

• “I'm hoping that that data, by the way, doesn't get leaked out into their public profiles.” — Cathy O’Neil

Key Takeaways & Tone

• The show underscores the importance of critical thinking—whether evaluating new college rankings, reacting to market panic in banking, or being skeptical about new utopian visions from Silicon Valley.
• While lighthearted and wry, the hosts consistently dig for underlying incentives, structures, and unintended consequences—especially who benefits, who’s at risk, and the practical realities masked by hype.
• The interplay between personal stories (e.g., Cathy’s Mars-obsessed husband) and hard-nosed financial analysis helps make complex topics both relatable and illuminating.

Suggested Listen Timestamps

• Introduction & College Rankings: 00:54 – 14:46
• Deutsche Bank Crisis: 14:54 – 27:17
• Musk & Mars: 27:17 – 35:43
• Numbers Round: 36:01 – 40:46

Memorable Quotes

• “College admissions are stupid. They're going to remain stupid. You have one more tool if you're in that stupid world. Go check it out.” — Felix Salmon (14:53)
• "People have spent half a million on far less interesting things." — Miriam Gottfried (35:37)
• “Seriously, that's a great point. Like, you know, a third graduate degree.” — Felix Salmon (35:43)

If you missed the episode, this summary gives you all the key insights and character of the conversation, with timestamps for deeper exploration of what most piqued your interest.