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Foreign. Hello and welcome to the Facebook Pandemic edition of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Axios. I'm here with Anna Shymansky of Breakingviews. Hello. I'm here with Emily Peck of HuffPost.
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B
Hello.
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We are going to have a special guest next week, Amanda Klayman, the financial therapist extraordinaire. I've known her for many years. She's amazing. So do send in all of your thoughts about the emotions about money. We have a Slate plus segment this week about Weight Watchers and how they fired people over Zoom and how the emotional consequences of that can be really quite nasty. There's a lot of anxiousness associated with money in general and associated with money specifically right now in the time of COVID And so Amanda Klayman is going to come on next week. Send us your emails, slatemoneylate.com and what we want to hear is what's on your mind? What are some of the places that you get stuck when it comes to a decision you need to make? Or what are the behaviors that you, you want to change but feel like you can't change? Or what's an argument that you're having over money that you feel you can't resolve? This is not going to be a financial advice thing. This is just going to be like an exploring the emotions around money thing. It should be really interesting. So that's happening next week, but this week we are going to talk about Facebook and how they are winning the pandemic. We are going to talk even more about working from home and whether people should get paid less if they work from home in places that are not as expensive as New York and Silicon Valley. And we are also going to talk about the markets and drugs and vaccines and how they all interact and whether vaccines even make sense as a for profit thing. All of that coming up on Slate Money. Okay, let's talk about vaccines. We haven't talked about vaccines for a while, but they were in the news this week in a couple of different ways. We had the US government paying AstraZeneca, which is a big global pharmaceutical company, $1 billion to basically get first dibs on any vaccine that they might produce. We also had Moderna, which is like this very Silicon Valley pharmaceutical company which has never produced anything, but it has this hot technology called mRNA, which apparently can produce anything. It just hasn't produced anything yet. And they reckon that they have tried to put together a vaccine and they tried it on eight people and Those eight people had some kind of an immune response. And on the basis of a press release about those eight people, the stock went through the roof and they immediately raised $1.3 billion. I love this story so much because, number one, it's real money. They're raising equity, they're raising money. It's not just stocks going up, stocks going down. And number two, it affected the entire stock market. Like trillions of dollars was added to the valuation of the stock market on Monday because of this press release that came out from Moderna about a trial about eight people. I believe the word that I want to use here is febrile. There's something very, like, feverish going on, not just in terms of, like, what people get when they get Covid, but also the way that the markets are reacting to any kind of hint of news about vaccines.
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C
It's not overly surprising in the sense that, you know, we all kind of know that the. Any type of recovery, anything we see moving forward in the future is going to be based on what happens with the virus, and it's going to be based on treatments or a vaccine for the virus. So whether or not this particular vaccine goes anywhere, I'm not overly surprised that any news that seems pretty darn positive is going to have a demonstrable effect on the market.
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B
And at the same time, no one, no one seems to know anything. There's so much uncertainty, and it does seem like the market's going up on some drug that there was a press release that eight people got a test. It's such a fantasy. It's like the ult. Like everyone just wants this miracle vaccine to appear, you know, But I think reality is so much more complicated than that. And I don't think. I think there's definitely a disconnect between what investors have done and what politicians are saying about vaccines to the reality of what it would take for such a miracle to sort of, like, drop itself on all of us. Like, the chances of that happening in the next year and a half, I just feel like, are actually quite, quite slim.
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One of the things which I'm very confused about is this question of what is and is not priced into the market. I think, actually, this is a kind of silly way to put it because as I wrote in my newsletter this week, I think the market has just basically become a casino flaw. You know, it's just purely gambling at this point. It's not really sort of pricing in things. But if you look at, say, what happened on Monday, the entire market went up on the strength of this very preliminary finding from Moderna. And like, let's say that that preliminary finding had like a tiny bit of reality to it and it increased the chances of getting a vaccine a little bit earlier by some small number of basis points or percentage points. And then you look at how much the market went up on that. That kind of implies that this huge rally in the market that we've seen over the past two months or so hasn't priced in a vaccine or something. There's a bunch of questions in my mind about what is expected. And if the vaccine did appear magically from on high and was here say this year and we had hundreds of millions of doses and all of these things which everyone knowledgeable seems to be in agreement is impossible, then what's the implication that the stock market would be higher than it was pre crisis? That like, you know, with a 20% unemployment rate and a massive national debt and all the rest of it, that we would be better off than we were pre crisis. This is the thing which I don't understand.
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C
Well, I mean stock markets, just by definition, right? It's forward looking. So I would say number one, the idea of saying like whether or not something is priced and especially something like is there a vaccine? Is so hard to say because there's no like input for there is a vaccine. Right. Every single investor, every single model is going to price that slightly differently in terms of what you're thinking. And when you get the vaccine that's going to affect how you see the recovery moving and it's going to affect different companies differently. So that in itself is complicated. You know, I agree with you that it is interesting to think about because you do hear people saying all the time that the market has already priced in a like V shaped recovery and that if we don't get that type of recovery then the market's going to come down. I actually don't necessarily think that's true. I actually think the market is kind of pricing in a decent amount of uncertainty. I think, as I've said, I think it probably went down a little bit too far and it's just come back. Especially because most of the market is just tech stocks. So that significant percentage of the market that's just tech stocks and those companies are going to do fine, are probably basically where they should be. If you get better news then they're going to do slightly better because they think the economy is going to do better.
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B
Yeah, some of the biggest public companies are, are fine and gaining market share and doing pretty well. Actually, right, yeah. The other thing that, that Felix had in his newsletter, there's no sports right now. So there's more activity in the stock market purely because gamblers going to gamble, they need something to bet money on. I thought that was just fascinating. People are bored.
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There's no sports trading stocks and there's no casinos. Right. People aren't going to casinos, they aren't betting on sports. There is this natural, I have a long standing theory that it's good to play the lottery because if you spend like a buck or two a week buying lottery tickets, that's your crazy gamble got out of your system. And so then when you put money in the stock market, you can just put it all in boring index funds and do nothing, which is the right thing to do because you'll get rich quick. Dreams are taken care of with your lottery ticket. Whereas if you can't gamble, if you don't have that kind of dopamine rush of being able to gamble on sports or go to the casino or something like that, then you know, those kind of people who have that gamble in them wind up gambling on the stock market instead and losing much more money that way. And you see this with like, you know, that guy from barstool sports who's like got nothing to gamble on in sports and so he's just taking like millions of dollars and throwing it around day trading the stock market. And I think it's a natural thing that you want to get it out of your system somehow.
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C
Well, one thing I would say the Taiwanese and Korean baseball players would disagree with the argument that there is no sport, that there are no sports. Just saying. But I mean, it's an interesting idea. Although I would like to ask where all the data is to show that the, that the correlation between people not being able to bet on sports is shown in the stock market. I like the idea. I like that these, I mean it's.
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A
It, it does happen to have coincided with all of the major brokerages bringing the cost of trades down to zero. And that means that people think that trading is free, right? Trading like, you know, I'm going to give away a secret here. Trading is not free, people. Even if it costs zero, it's not free. You lose money on average basically every single trade you make, whether or not the sticker price is zero or not. But given that the sticker price is zero, people think of it as being cost free and they're just in and out. Especially right now when you have these crazy leaps in the stock market, both broadly like it's up, you know, 20% in a matter of weeks or individually, you look at individual stocks like I was looking at one. There's this special purpose acquisition company which is going to reverse into a truck maker called Nikola, which I love because like the car maker was called Tesla. So they're going to call the truck maker Nikola after Nikola Tesla. And like, that was like at one point worth $12 billion. Just because, you know, something, something electric, something. There's this amazing sort of fever dream thing that is going especially, as you say, among tech stocks. But you see it obviously in the pharmaceuticals as well. So that, you know, money just feels like it doesn't mean anything these days. The amounts of money that we're talking about, these trillions of dollars that are being borrowed, that are being spent, it's like money has lost all meaning. We may as well just throw it around in stocks, right?
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B
I mean, it does show the total disconnect between the stock market and the normals. I mean, to whom money means quite a lot. There's some preliminary data coming out about how people are spending their stimulus checks, for example, and they're spending it on, you know, food, rent, things for which you need money that don't cost zero in any way.
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C
Yeah, I'd also say that, I mean, you may see in some of these, like, tiny stocks that don't have a lot of, you know, there doesn't tend to be a lot of flow in them. Maybe you'll see day traders making a difference. If you're talking about large positions, like, I don't necessarily think, you know, big swings we're seeing are being based on day trading. I think it's being based on the fact that, you know, there is a tremendous amount of uncertainty. Small changes are going to have massive difference in a model. If, you know, it's the difference between people coming back to work in six months and people coming back to work in two years. So.
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But it is, I mean, to be clear, it. It's, you know, it's not day trading in this form of like individual retail investors going in and out of the market within a day necessarily, but it's definitely day trading in the form of like high frequency trading, which can go in and out within like milliseconds rather than just one day. One of the data points I had in my newsletter is I called in the total volume figures for the stock market in March was $14 trillion, which is an insane amount of money. And it's the first time it's come anywhere close. It was never in above like I think 8 billion before that. It's literally double. Well, that's not what it was in March 2019. The volume has doubled. And so, yeah, that might not be individual traders, but it's. Someone is doing all of that trading in and out every day.
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C
Well, yeah, because you march, I mean, you had tremendous amount of volatility. You have a, you know, tremendous.
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April was like 9 trillion. You know, we're talking crazy, crazy amounts of volume. Not just like you can have big swings in the market without big volume, but what we're seeing right now is big swings and big volume.
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C
Right. But I would just say that when you're talking about massive index funds and similarly, like a lot of the high frequency traders, I guess I would just caution a little bit about saying that that is some type of individuals. I would say it's still.
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Probably. No, no, no. I mean, these are institutions. Absolutely. We're talking trillions here. Only institutions have that kind of money.
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C
Yeah, that'll agree with you. Yeah.
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B
So this is what the market looks like when no one knows anything at all.
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C
Yeah, correct.
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There's a lot of people running around like headless chickens and hoping that somehow collectively they're going to be able to perform some kind of a price discovery mechanism, which, like, I think they're really not right now. But the one other thing I wanted to touch on, since we're talking a little bit about pharmaceutical companies, is the way that the US government paid a billion dollars to AstraZeneca basically to get first dibs on their vaccine. They're like, if we give you a billion dollars now to help develop this vaccine, then if the vaccine arrives, can we have the first 400 million doses? It's a way of getting the vaccine to the rich people first rather than the people who really need it the most first. And it seems like on the one way, it's a way for capitalism to funnel a billion dollars to a company that needs a billion dollars to develop a vaccine. But on. Okay, it's clearly not the optimal way to roll out the doses of the vaccine if and when that vaccine is developed.
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B
Yeah, yeah.
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C
I mean, I mean, I agree. I mean, I think having, I mean, this is the issue. I mean, vaccines are like kind of notoriously bad business. There's a reason that you had a lot of private companies like not spending a lot of money on vaccines because they're. You don't tend to make a lot of money off of them. So there's something that is always going to need government backing that is, you know, and in something like this, where this is a global pandemic, I mean, this is why you have had a lot of countries saying, you know, we need there to be a kind of global coordinated effort to get this vaccine and then to get it distributed. And then you see the US kind of somewhat unsurprisingly, going on its own. Now, this isn't the only time we've ever seen this. I mean, I think there were times in the past where, like, I don't know, like, Australia was also kind of putting money into some type of, like, vaccine and then trying to get it first. This isn't unheard of. It's just. It looks really bad when you have a global pandemic where you have a tremendous number of, you know, people dying across the world and you have one country trying to be like, oh, well, now we want to hoard it. Yeah.
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A
And it's not just the US to be clear. Like the UK is saying, well, there's this University of Oxford attempt to create a vaccine. And the most important thing is that if the University of Oxford creates a vaccine, then the UK will get the vaccine first. And you're like, yeah, what's going to happen with.
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B
If AstraZeneca, say, does come up with a vaccine, is it going to patent the vaccine? Because that just seems completely unethical to me. This is one of those situations where you just. It shouldn't.
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So Matt Levine has this, has this really interesting theory which I think is correct, that if a company finds a vaccine, then the best thing for the stock market as a whole and for investors in that company, because no one is wholly invested in that one company. Right? Everyone is invested in the stock market as a whole much more than they are invested in one individual stock, with the possible exception of, like, the CEO of the company. And that's about it. But for the vast majority of shareholders in that company would prefer that company to just give the vaccine away for free and for that company's stock to go to zero, because that would help all of the rest of their portfolio because, like, suddenly then the entire economy could come back and no one would worry about how are they going to have to pay this company for the drug. But the way that obviously, you know, capitalistic pharmaceuticals work is that these companies are going to try and price their vaccine in a way to maximize their own profits and revenues, which probably doesn't maximize the public health benefits.
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I actually don't think bad publicity coming from that would. The publicity from that would be so heinous that I think possibly these companies wouldn't do that.
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No, I'm not, I'm not saying, I'm.
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C
Not saying they're not going to price the vaccine. Right.
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I'm not saying they're going to price it at like the highest possible price. Because the highest possible price, like price gouging on the vaccine doesn't help them because, you know, what you want to do is sell billions of doses around the world. Right. So, so pricing it so that only like crazy rich American health insurers can, can afford it wouldn't maximize their own revenues. But they are going to price it at some delta above the marginal cost of manufacturing and they are going to control the manufacturing. Right. They're not just going to put the formula out into the public domain and say every country in the world just go ahead and make this vaccine and don't pay us anything.
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I think the US government, if it's a US company, should figure out a way to sort of common endear that, to force them, to force the pharmaceutical company to produce in the public interest instead of paying them. I don't know what the terms of that, that payment to AstraZeneca was, but if it were me, I would have put very harsh terms on them and said, you know, in this case, you can't, you can't have a patent. We're not going to do it. It's in the public interest. And the public interest says you can't have the IP on this one. You got to take one for the team here.
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A
And the fact is that realistically speaking, if and when a vaccine is developed, you know, countries like Brazil and China are going to just make their own copycat vaccines anyway if they can't license it on decent terms.
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B
I mean, it'd be truly criminal to not let everyone license it, you know, and bad for everyone, as Matt Levine pointed out.
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Yeah. Although, I mean, I mean, I agree with you. It's just one of these things where it's like, well, yes, but if you're the company, then why would you do it? And I know you. I mean, maybe, and granted, part of you will want to do it maybe because you want to help save people. But I'm just saying that, like.
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And also because you're getting like a billion dollars from the US government to develop it. Right. It's just, it's free money.
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Yeah, yeah.
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C
No, I mean, look, I don't disagree. I'm not trying to say that I think that we shouldn't have this vaccine be available to as many people as quickly as possible. I just think when you went the kind of Matt Levine argument makes sense if you're the investor. It may not make sense if you're the company who's producing it.
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A
No, that's his whole point. That's the whole point that it doesn't make sense. And that's why the profit motive is exactly the wrong motive for developing vaccines. You want 12 different people trying to develop 12 different vaccines and you want them to be spending money on those vaccines in the absolute expectation that they will fail. And you want them to be spending billions of dollars trying to develop these vaccines in the absolute expectation that they will fail. And if you have like an 11 out of 12 chance of failing, then the return you need on that multibillion dollar investment is so enormous as to be completely insane. So the only way it makes sense to finance this stuff is to just throw philanthropic and government money at it. It just doesn't make sense on a capitalistic level at all.
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C
No, I agree with you on that. I mean, that's part of the reason that companies haven't put a lot of money in vaccines. It's not a particularly good business if you're a company that's trying to make money.
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B
That's why you should have a government run and owned pharmaceutical company. Am I right? I'm right. You should have government sponsored research into drugs for the public good so you don't have like a Pfizer who's wasting its time with, no offense, Viagra for a decade. You know, making that. It's like big profit maker when there are, you know, diseases to be researched and, and cured and vaccines to be created. The profit motive doesn't work for pharmaceuticals.
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A
The CDC has a multibillion dollar annual budget and they don't seem to worry too much about these IP issues. In fact, quite the opposite. They throw billions of dollars at the pharmaceutical industry every year while saying, yes, we'll give you this money and you get the ip. Maybe that will change.
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B
I don't like it.
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A
Let's talk about Facebook. Emily. Is this crisis going to consolidate power among the biggest and most digital companies? And specifically in Facebook, and specifically in Mark Zuckerberg? And is Mark Zuckerberg going to come out the other side of this crisis as the single most powerful person in the world? And should we all be terrified?
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B
Yes, I think so. I started thinking about this. Well, there was a piece in the Times over the weekend that was really good. Sort of deep dive into how Mark Zuckerberg has kind of taken over his own company, which is ridiculous when you first think about it. But the way it had had been going until 2016 was like, Mark was the product guy, really cared about the product, which, as a side note has always annoyed me when talking about tech things. Calling them products is. I don't know. They're not real. Anyway, so he was always the product guy, and Sheryl was. Sheryl Sandberg was, you know, out there doing the business y stuff that was like, not sexy or fun or whatever. But then 2016 happened. It was a total disaster. Facebook, which got blamed and criticized for everything, and Mark Zuckerberg embarked upon his apology tour. Blah, blah, blah. Ever since then, according to this Times piece, and just according to the evidence, some of which we've already discussed on the show, he has kind of like consolidated power around himself, like, for example, making WhatsApp and Instagram merge more closely with Facebook, causing those guys, the founders of those companies, to just leave the combination, leave the company totally with billions of dollars left on the table. Apparently. He's also sidelined Sheryl Sandberg. It's funny, the New York Times piece said something like, but she's still doing this $100 million small business grant thing. And I'm like, okay, that's the same as running Facebook's advertising.
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A
I mean, that's one of the fascinating things to me, right, Is. Is there's big business and small business. Facebook is clearly big business. Clearly digital small businesses aren't allowed to open up when they're in lockdown. The only real estate they can pay rent on really, is Instagram ads, which will help them sell any product. And I don't know about you, but I certainly have seen, like, more and more ads in my Instagram feed from more and more small companies. And this grant, which Sheryl Sandberg is in charge of handing out, is basically it's like crack cocaine for small businesses, right? It's like, we'll give you a little bit of money to put Instagram ads, and then you'll see some revenue in the. And you don't have any revenue from anywhere else. And so, you know, by the time this crisis is over, you'll be totally built, you know, locked into the Instagram ecosystem, and you'll only be able to sell on Instagram, and we'll be able to charge you whatever rents we want in order to put your ads on Instagram. And there's. There's this global domination thing going on by Facebook, which I don't know how to address it.
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B
I don't think it's Going to. On the small business front. Sorry. They're also, like, making more robust this initiative called Shops, which is essentially letting small. Letting small businesses sell their stuff on Facebook and they're doing it for free. But it's really, it sounds to me like it's a payments thing, because if you buy a thing from a small business on Facebook or wherever and you use Facebook's like, purchasing technology or app, then Facebook takes a cut. So it's like all these small businesses.
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A
It'S not even about that. They're doing the same thing here that they did with Snapchat. Right. So Snapchat became very popular and then Facebook completely copied it and created this thing called Instagram Stories just to kill Snapchat because they were worried that if they couldn't buy Snapchat, they, they would have to just copy them and make sure they weren't in competition. Now they're doing exactly the same thing with Shopify. So Shopify is this massive, you know, hugely successful Canadian company which allows people to make a lot of money by selling on Instagram. And Facebook is saying, well, if Shopify is effectively built on Instagram, which it is, then why don't we just do it natively ourselves? And there's, you know, tens of billions of dollars of value in Shopify if you look at the market cap, so we should capture that value. It's. It's this way of, like, anytime anyone does anything successful in the tech world, whether it's Snapchat or Spotify or anyone else, Facebook just goes, oh, we'll just copy it. They just copied all of. So Snapchat, of course, owns Bitmoji. We all know and love our Bitmojis. Facebook just copied Bitmoji like complete copy. They have so much power that they can be second movers in every market and still make a fortune.
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C
Yeah. And I mean, I think that's concerning for more than one reason. I mean, it's concerning one because it's kind of similar to the ye olde days of before antitrust, where you own the railroads and you own the this and, you know, you own every single part of it. And that's not good for capitalism. And I think, you know, this is another example of this. You know, there's a reason we have patents. And I think it is concerning because I don't think that there's going to be any pushback to Facebook for a very long time. I think before the crisis happened, you did see this kind of, kind of growing discontent on both sides of the aisle with some of the larger tech companies. But I think that's going to completely go away with this crisis, especially if they're going to be the only companies that are going to be doing well. And also, as you have this kind of growing cold war with China, Chinese tech companies are going to be getting bigger and stronger. I just have a very hard time believing there's going to be any antitrust push against any of these firms.
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B
And Facebook has really capitalized on this idea that we must compete with the Chinese tech companies in a lot of their talking points. It's one of their big talking points. When you ask them about antitrust, they're like, well, we gotta compete with China. We gotta get China.
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A
And I've been hearing this from Mark Cuban has been beating this drum in terms of artificial intelligence for a long time. He's like, you're worried about AI and monopolies. Well, if we don't invest in AI and create our own monopolies, then we're just gonna have to make do with Chinese monopolies. And who wants that? We just saw this week, for those of us who are deeply embedded in media gossip, this is huge news. Kevin Meyer, the guy who didn't become Disney CEO and everyone expected to become Disney's CEO when Bob Iger stepped down, left Disney, which I think was probably not unexpected given that he didn't get the CEO job and he became the CEO of TikTok, which is Chinese owned. And this is all part of the great game. And I do think that Facebook is best place to really, when all of the markets that it enters, much more than Amazon. Like, people get really, really worried whenever Amazon moves into a new business line and they're like, Amazon is this big, enormous, scary thing and everyone else in that industry is going to die because Amazon is now in it and they buy. Like I know some company selling out, sending pill prescriptions to your home or something. And all of the pharmacies are on the stock market, Their stocks plunge overnight. None of it ever comes true. Like, Amazon is incredibly dominant in books, but beyond books, it hasn't really disrupted industries and killed competitors in the way that Facebook does over and over again.
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B
There was this really, to that point, there was this really interesting piece in BusinessWeek about Instacart. Maybe like one or two weeks ago, which, when Amazon bought Whole Foods, everyone who wasn't Amazon or Whole Foods in groceries was like, oh my God, Amazon bought Whole Foods. Grocery delivery is going to explode and they're going to take it over. So what? Everyone, all these supermarket Companies did was like, make deals with Instacart right away. And all of a sudden Instacart became like, actually more viable as a company, which I thought was really interesting.
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A
And Whole Foods does not seem to have disrupted anyone or anything. If anything, like, all the people I know who shop at Whole Foods are like, y got worse since Amazon bought them.
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B
Yeah, I mean, I think it got worse for the employees, but maybe it's probably okay.
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A
Yeah.
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B
Facebook, they are winning this pandemic, right? I mean, that's the bottom line here. All these small businesses are falling apart. Everyone is flocking online to use all this stuff. Like, Zoom got really big. But Facebook has already, like, copied Zoom and copied that other place where people go to hang out online. Now I forget what it's called. Someone will. Someone will tell me.
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A
House Party.
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B
Yes, they copied House Party.
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A
There you go.
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B
And. And they copied Zoom. And they're winning the pandemic. Their traffic is up. They're doing just fine. It's like, really obnoxious.
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C
I mean, they did obviously have a hit to their advertising. I mean, it wasn't as though that they haven't had. I mean, don't get me wrong, I don't disagree that I think that Facebook is going to come out of this probably in a pretty good position, but it's not as though they have had no impact whatsoever.
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B
I don't know. I watched the last dance, like we talked about last week on espn, and all the commercials when we watched were Facebook commercials.
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A
And, oh, they're advertising on tv.
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B
Oh, my God.
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A
Saying, go to Facebook.
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B
They advertise, I don't watch tv.
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A
I never see TV ads.
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B
There are these Facebook ads and they basically capitalize on the pandemic. Like, it's like a shot of people at 7 o' clock applauding the first responders, and then like a shot of like a mom teaching her kids, you know, at home. And like, they're like, you're working on so hard, but everyone looks like they're actually, like, having a good time. And watching the commercials makes you feel like you're losing. Like you're bad at the pandemic. You're just like, I'm not doing any of these nice things or bringing my. My world together. It's just that plus how they're winning this whole situation and like, sucking up more market share is just. This isn't astute business analysis, but it's just, like, aggravating to see, isn't it?
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A
Although I would.
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C
I would say that they're not exactly the only company who's trying to like take advantage of the pandemic in their advertising.
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B
That is.
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A
So, so I had, I had a, a little piece in my newsletter about how the only thing which thrives in the pandemic is cockroaches and co brand opportunities which if you link, if you click on that link in the newsletter, you find this amazing COVID 19 testing station sponsored and brought to you by Walmart and Pepsi.
- [32:09]
C
Yes.
- [32:10]
B
Oh, what is the little table at the bottom of the Pepsi of the Pepsi COVID testing thing? It's like, love the taste or something really? Like, oh no, no Pepsi.
- [32:20]
A
Why?
- [32:21]
C
Well, it's okay, it's true. But like, what would be the alternative? Like you're not going to have a bunch of companies that are going to have advertising that just like pretending that the pandemic's not happening or like you don't necessarily not want companies to be sponsoring testing. I mean there's no great, like there's no really way to win there.
- [32:39]
A
Yeah, the only way to win is not to play.
- [32:42]
C
No, but even then, then they get criticized for not playing. Right.
- [32:45]
B
Then you tank more journalist jobs by not spending any money on advertising. It's really a lose, lose, lose.
- [32:52]
C
Unless you're Facebook.
- [32:53]
A
Welcome to the pandemic economics. Lose, lose, lose. Talking about pandemic economics, let's talk about working from home and, and a little announcement that we saw from Facebook this week saying, yeah, we are going to lean in or lean forward. I think they said lean forward. They've moved on from leaning in and now they're leaning forward. She's lean forward into this working from home thing, which Mark Zuckerberg said that they're going to do it at scale more than any company has ever done ever in the history of the world. And then there was a kind of asterisk and a P.S. and they said, well, of course, if you used to work at Facebook in Silicon Valley and now you're working from home, and if your home isn't in Silicon Valley, then we won't pay you a Silicon Valley salary. And there's definitely a statement there that people will earn less if they work from home and their home is not in Palo Alto or wherever Facebook is. What do we think of this?
- [33:59]
B
So did he actually, he didn't actually say he was. He said the salaries would be commensurate with where people live. But I don't think he was saying he was going to lower anyone's salary for moving.
- [34:10]
A
Well, that's exactly what that means. Right? If you if you were in the most expensive place in the world to live, which is Mountain View, and then you move to, I don't know, Boulder, Colorado or something, then that your, your salary will have to go down. If it's going to be commensurate with.
- [34:28]
B
Where you live, that's probably fine, isn't it? I mean, Silicon Valley is so much more expensive than Boulder, Colorado that. Yeah, you wouldn't even feel it if you're, if your salary went down that much.
- [34:42]
C
Yeah, I've kind of mixed it.
- [34:43]
A
But then this raises an interesting question, right, which is that you, you know, if this becomes a standard way of doing things and you do live in San Francisco and you apply for a job and they're like, here we'll pay you X. And you say, but I can't possibly live in San Francisco on a salary of X. And they say, well, that's okay, you don't even need to live in San Francisco. You can just leave.
- [35:08]
B
I don't think that would happen.
- [35:09]
C
No, I don't think so either. Honestly. Like, I, I, like, I just think that like in the grand scheme of things this could be the one good thing that comes out of this. Like, I, I just, I think that the idea of allowing more flexibility of, you know, of making that the norm, not just this kind of thing that mostly women have to do when they have kids because they don't have other options. Like, I just think this could be a good thing. I'm not saying there aren't going to be some downsides. I'm not saying that it won't, you know, change things for the good of the bad. But I don't know. I see mostly positives from this.
- [35:39]
B
Maybe it would lead to like a stealth decrease in inequality if more of these super well paying jobs become slightly less well paying and more spread out across the country to smaller cities and stuff. Felix looks like he's looking at me.
- [35:53]
A
Like all I'm thinking. Emily, I believe you might have once or twice examined the whole concept of equal pay for equal work and how it's like a good thing.
- [36:06]
B
I've heard of that.
- [36:07]
A
And this seems to be a direct move in the opposite direction. Right. It's unequal pay for equal work. The amount you get paid is not a function of what work you're doing, but a function of where you live.
- [36:17]
B
But companies have always priced in location to salary. Like I think if you look at any like really large company, the salaries differ depending on where you work and if you relocate.
- [36:27]
A
Why do you think that all the banks have their back offices in Tampa and Salt Lake City. It's because the labor costs are lower.
- [36:33]
B
Yeah. I did a story on Ernst and Young recently and I realized that their receptionist staff, their executive assistants, like they're all in like Austin and like these mid tier cities, even though they're supporting executives who work in New York and other places.
- [36:48]
A
Wow. They don't work in the same offices.
- [36:51]
B
That's right.
- [36:51]
A
That's amazing.
- [36:52]
C
I know the argument you could probably make is that like, look, if I'm, if I'm paying you a certain amount in Austin versus I'm paying you that amount in, you know, Palo Alto. Like those are not the. Paying you a dollar in one of those places is not the same as paying you a dollar in that other place. So I mean, I can kind of see it from the company saying that like those are from like the person's ability to spend that dollar. Like those are, that's different. So I could understand paying somebody less if their money in fact goes farther. That money is to a certain extent worth more there. But I do think that, I mean, you could make an argument that the bonuses, the moving bonuses, that's the kind of thing that you could very easily say, well, I'm obviously not going to pay you this extra money to move here, as often happens in Silicon Valley that obviously you can easily cut. But I do think that if you can start to get more people spread out across the country who are making reasonable salaries. I don't really think people at Facebook are overpaid. I don't think people in tech are overpaid. I think people in other industries are underpaid. Underpaid. I do not think our issue with inequality is tech workers. Our issue with inequality is people who like, don't pay taxes on their capital gains.
- [37:54]
A
Well, talking of capital gains, how do you think this should play out when it comes to stock options? So let's say that your salary or monthly paycheck in cash goes down because rents are lower, cost of living is lower, but you're still a vice president of something, something, something, something. Should you get the same number of stock options as vice president in Palo Alto or should your stock options go down as well?
- [38:22]
C
I mean, it's an interesting point because the reality is already right now, the higher up you are in the company, the more flexibility to a certain extent you have to choose where you live. So I mean, it's a reasonable question and I do think it's something that we'll have to kind of struggle with as you can hear me in my own voice right now struggling with how to come up with a good answer to this because I can also see it from the other side. You could say like, you know, if you're being paid based on your productivity, based on what value you are generating for the company, well then we don't want a situation where the company's just keeping even more of the profits by pushing everybody to live in really low cost cities.
- [39:04]
A
I don't think the one thing which I can't stop thinking about is like the super high end, super rich people. Like remember when Bob Ben Mache was running AIG from his villa in Croatia or like Eddie Lampert running Sears from his private island off the coast of Florida. And when that kind of thing happens, there's this sort of sense of weird disgust that people have. I remember the New York Post had this big expose of this like 70something guy who was running a New York City hospital and he was doing it from home in Florida. And the New York Post says, how dare you be at home in Florida when all of your employees are on the front lines in New York. And on the one hand you can totally see where that sentiment is coming from. And on the other hand you can totally see why he'd be like, but it would just make things worse if I, you know, was on the front lines and got sick of COVID and like I'm helping everyone by staying at home in Florida. There is this weird emotional aspect to this where when you are very rich and you are running the company and you have luxuries at home of like a lovely home in a lovely sunny place on the water, that it doesn't. People like resent that. And I think that's that that feeling of resentment is going to become stronger if people wind up working from home more.
- [40:27]
B
And related to that. It's interesting because in an interview with Zuckerberg that I read, I think that Casey Newton did, he was saying that the work from home thing isn't going to be something given to everyone in the company. And probably at first, definitely at first at least will the people who get the option to work at home will be the more experienced, older, presumably more well paid people. So it kind of would amplify what you were just talking about. Whereas like the entry level people, they're still going to have to come in to get like acclimated to the drudgery of corporate life or something.
- [41:01]
C
It's interesting. I mean there's some justification. I mean on the one hand you could say there's some justification for that. Right. Because if you're a just graduated college, you have no idea how to be an employee. It can make sense that you in fact actually have to go into work and kind of see how the business runs, see how this all works. Whether if you've been there for 10 years, it just makes far less sense for you to have to do that. However, the other argument could be if work really starts to change and more and more people do start to work from home and what it means to be an employee, what it means to be a good employee, what it means to be productive, all that changes. Well then maybe you don't have to have as many of those entry level people work from home.
- [41:38]
A
It's not that long. I mean it's like basically only a few years since Marissa Mayer came into Yahoo and one of the first things she did was say I'm ending working from home. It was IBM forced everyone to go back to the office just a couple of years ago. They were like, no offices are valuable and we're going to put a lot of money into making great offices and we're going to force you to go into, to the office. This is a big potential move in exactly the opposite direction and no one's done it yet and so no one knows whether it's going to work or not.
- [42:09]
B
Sorry. A lot of the ways they got you to come back to the office. I'm thinking of Yahoo now because I actually work with, I mean they're my Verizon owns us both. So. But like one way Yahoo got people to come back was like the free food and the free snacks and all the perks and like in this Covid world, like I'm not going to go up to the, the snack trough anymore and like get a bunch of M&M's. Like I don't want to touch any of that stuff nor do I want to be served any of the food for lunch anymore. Like all of the, all of the incentives for going to the office are just totally obliterated right now. Right. So there has to be a new way.
- [42:47]
C
Yeah. And I think it's, I mean you're right. We don't know exactly what's going to happen in the next. Obviously we don't know anything, but it's entirely possible that it'll turn out that working, working from home doesn't work as well as we think. And then everyone will go back to the office, I get a vaccine and I'll go back to normal. That is possible. But I would Also say that like the kind of Marissa Mayer example. Like, although that was only, like, what, six or seven years ago in, like, tech years, in how advanced, like, zoom and all these things have become. Like, that's a really long time. Like, it is, in fact, a lot easier to be productive now and be connected with your co workers than it was even, you know, five, six years ago. So I also. I'm just, like, always very critical of this idea that, like, oh, well, you know, it's those meetings on the way to the bathroom. That is what creates all these great ideas. Like, no, it's not. Like, we all know that. That's not true.
- [43:33]
B
It's true. I've had so many experiences of serendipity at work and story ideas and things that have come from just talking to people or like, someone overhearing my conversation with someone else who's like, you definitely have to do that story. You know, my editor being like, oh, fine, maybe.
- [43:48]
C
I mean, like, from talking with people, but not from, like, being in the. I mean, like, you can still.
- [43:53]
A
But that's. But that's the same thing. You don't talk to people in the same way. You don't overhear people the same way. The amount of intention that you need in order to pick up the phone and talk to someone or even to DM them on slack is much greater than if you just turn to the person sitting next to you and say, wait, what's that word? Which means this. You're right that slack and zoom and all of these things have made it easier to work together. But there's absolutely no doubt that it's qualitatively different. And to, you know, Emily's point, it privileges people who have the kind of comfortable setups at home that probably people on lower salaries won't have.
- [44:39]
B
Yeah, for sure.
- [44:41]
C
That's certainly true.
- [44:44]
A
Let's have a numbers round. Anna, what's your number?
- [44:47]
C
My number is 5.4 million euros. And that was the amount of money that was carved out for this German company called Schenck Process in what is being called ibitac, which is the earnings before interest, tax, depreciation, amortization, and Covid.
- [45:09]
A
Wow.
- [45:12]
C
Which is just absolutely insane because it's basically like in this parallel universe where there's no coronavirus. These are our earnings. We should be able to borrow money based on this completely imaginary universe that doesn't actually exist.
- [45:27]
B
We should all use that metric. I love it.
- [45:29]
C
Exactly.
- [45:30]
A
Although it's actually interesting. I think it's Michael Bennett, the Democratic senator, but he has A bipartisan bill which he's trying to push through for small businesses to try and help them out a bit more than the PPP has helped. And it's kind of based on Ebitac. He's basically saying we're going to give you the amount of Ebitac that you had pre crisis and like insofar as it's fallen thanks to the crisis, will make up the difference. Yeah, I can see it from a public policy perspective. I'm not sure it's that useful from a public markets perspective.
- [46:02]
B
I like it.
- [46:03]
A
My number is 15%, which is an LA number. The LA City Council wants to draft an ordinance which I kind of like this, which would prevent food delivery apps from charging restaurants more than 15% of the price of an order. So you can charge the customer as much as you like, visibly over and above the cost of the food. But if you're going to charge the restaurant, you can't charge the restaurant more than 15%. And I think this is a great idea and if it works in la, maybe get rolled out elsewhere. Emily, what's your number?
- [46:42]
B
Okay, this number comes from Mr. Peck and it is 180, 180 days. If schools open on time this September here in New York, it will be 180 days. My kids, our kids in New York have gone without going to school. So that's a lot of days to be with your kids all the time. And it's a big loss for the children who are getting educated at home through remote learning, which is not remotely like school in any way and takes my kids like maybe two hours a day versus the six hours that they're typically in school. And if you think about all the working parents, something like a thousand hours of work that we're basically kind of missing because the kids are, you know, at home all the time. They're all the time they're at home. I don't know if that's clear to people. So that, that is my number. And then we get emails from our school. Now they've given us a five day weekend which I guess is supposed to mean something to us, but I don't know, they realize we're like home all the time. And like that has weekend means nothing anymore really. Except that's when like slate money comes out anyway. So they send out, the principal sends out an email that's like, and enjoy your long weekend. And we're all like, like what, what are you talking about? Do you, what are you like.
- [48:03]
C
Anyway, does that also suggest that perhaps there's some wasted time at school. If ever I see this with every parent I know, they're like, yeah, the kid gets the work done in 30 minutes.
- [48:12]
A
You're like, there is, there is time. Like, this comes back to the conversation we had last week about child care. And one of the things that Emily said that I was like, what? And she was. You were talking about how much it costs to send a preschooler to childcare. And the term you used was tuition. And this is what they call it. I looked into this and like, you put your toddler into preschool and they call it tuition as though they're learning something. No, tuition is just a euphemism for childcare. And this goes all the way through age 18.
- [48:51]
B
I mean, they're always learning things, even if it's not an official thing that they're learning. And I agree. I think it does expose school as kind of like a scam. It's honestly, it's just like going to the office. Like, how long are you really sitting at the desk? Exactly. Versus, like chit chatting. But the chit chatting, as we just said in the last segment, is actually productive. And I would argue the same at school. The chit chatting in between. The learning piece is.
- [49:16]
A
It's how you socialize. That's the first social, first and most important thing you learn at school. Of health socialists.
- [49:21]
C
I agree with that. I agree with that. I just think that perhaps it will maybe have some positive benefits of like, suggesting that maybe school needs to be modified slightly to make it. You know, kids are such sponges that are.
- [49:31]
A
We're on a zoom call here as we're recording this. And the expression on Emily's face as she is shaking her head in a look of utter horror is something I wish that you all could see, but you can't because this is a podcast. We will work out how to do a video podcast at some point in the future, I believe.
- [49:49]
C
No, we won't.
- [49:50]
A
Joe Rogan has worked out how to do that with Spotify with his 200 million dollar deal with it. We'll let them work it out first. Maybe next week we will talk about the economics of podcast, but for the time being, that is it for us this week on Slate Money. Thank you so much for listening. Thank you to Jasmine Molly for producing, and we will talk to you next week with a Amanda Kleeman on Sleep Money.