The Frack You Edition

Summary

Slate Money: "The Frack You Edition" (May 7, 2016)

Host: Felix Salmon (Fusion)
Co-Hosts: Cathy O’Neil, Jordan Weissmann
Guest: James Surowiecki (The New Yorker, Moneybox founding columnist)

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Episode Overview

This week's Slate Money brings a lively discussion on three main themes:

• The rise of non-voting shares at major tech companies—a debate over corporate control and the future structure of capitalism
• The wave of oil and gas bankruptcies following a collapse in oil prices, examining whether bubbles are helpful or harmful to the broader economy
• The Consumer Financial Protection Bureau’s (CFPB) new rule on mandatory arbitration clauses—what it means for consumers’ rights to sue banks and other corporations

The discussion features passionate disagreements, witty banter, and dives deep into the mechanisms and consequences behind each trend.

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Key Discussion Points & Insights

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1. Non-Voting Shares and Corporate Control (00:55–21:41)

Background (00:55–07:15)

• Facebook and Google’s New Share Structures: The episode opens with a debate on the newly proposed creation of non-voting shares by Facebook (and precedent from Google and Under Armour).
• Felix Salmon’s Anxiety: Felix expresses concern over Mark Zuckerberg’s ability to maintain absolute control over Facebook regardless of how much equity he sells.

Debate: Control vs. Shareholder Rights (04:09–13:10)

• James Surowiecki's Position: The main check on CEOs like Zuckerberg is for shareholders to sell their shares if they disapprove, emphasizing exit over “voice” as in democracy.

  • "The dominant mode of registering disapproval...in capitalism is you exit, you leave, you sell your shares." — Jim Surowiecki [04:09]

• Felix’s Counterpoint: There is a qualitative difference between dual class structures and non-voting shares—complete lack of shareholder oversight could empower radical or harmful decisions.

  • "At some point giving one man dictator-for-life powers...starts being scary." — Felix Salmon [13:32]

• Cathy O’Neil’s Concern: Worries what happens when things go wrong—whether share prices will become more volatile if there is no check on leadership.

Philosophical and Legal Angle (13:10–21:41)

• Democracy vs. Capitalism Metaphor: Surowiecki argues the analogy to democracy is misplaced—corporations can have varied governance models as long as the terms are clear to investors.
• Historical Context: Felix notes that non-voting shares were illegal between the 1920s and 1986, reading a poetic lament from the era.
  • "Shall it be said your heart's a stone, they are your brethren and they groan, oh, drop a tear for those who own non voting corporate stock." [18:50]
• Check on Power: The only “check” is the share price, which, as Google’s C shares illustrate, only trades at a slight discount.

Memorable Moment:
Felix imagines Zuckerberg using non-voting shares to buy every news outlet and control global media (13:32–15:52).

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2. Oil & Gas Bankruptcies: Bubble Burst or Capitalism at Work? (22:35–34:06)

Wave of Bankruptcies (22:35–23:28)

• Jordan Weissmann: 59 oil/gas bankruptcies and counting, comparable to the telecom bust of the early 2000s.
  • "There have now been 59 oil and gas bankruptcies during this oil rout...creeping up on the number of telecom bankruptcies." — Jordan Weissmann [22:40]

Role of Leverage (23:28–25:46)

• Felix Salmon: Bankruptcies are messy and result from companies being over-leveraged; considers it evidence capitalism isn’t working well.
• Cathy O’Neil: Argues these failures are actually capitalism at work—a consequence of too much debt.

Could There Have Been Another Path? (25:46–27:49)

• James Surowiecki: It would’ve been impossible to raise that much capital via equity, especially for small drillers; junk bond markets filled the gap.

Are Bubbles Ever Good? The Macro Perspective (27:49–34:06)

• Dan Gross’s “Yay Bubbles” Argument: Sometimes bubbles leave behind useful infrastructure (as in telecom). But the oil bubble’s legacy is more ambiguous.
• Jordan: The fracking revolution brought technological advances, reducing break-even costs—but at the cost of overproduction and environmental harm.
  • "These companies are learning how to drill for much cheaper prices than they were when they initially went into the shale belts." — Jordan Weissmann [30:21]
• Felix: Lower extraction costs mean higher profits, not lower oil prices for consumers.
• Climate Concern: Cathy and Jim highlight increased extraction has negative effects for climate change and public safety.

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3. Arbitration Clauses: CFPB Fights for Consumers (37:18–46:44)

What Are Arbitration Clauses? (37:18–39:12)

• Cathy O’Neil: CFPB’s proposal seeks to limit “forced arbitration” clauses that prevent consumers from bringing class action suits against banks and other companies.
  • "If you take out a payday loan...you're going to have to sign a contract called a forced arbitration contract." — Cathy O’Neil [37:23]
• Jim Surowiecki: These clauses have proliferated since the 1980s; often, affected consumers rarely enter arbitration due to cost, and arbitration typically favors corporate defendants.

Class Actions vs. Regulation (39:12–44:20)

• Felix (Devil’s Advocate): Argues this shift signals regulators aren’t effective enough, outsourcing enforcement to class action lawyers is an imperfect solution.
  • "Class action suits are kind of the worst conceivable way of doing regulation." — Felix Salmon [41:09]
• Jordan: Defends class actions as vital given regulatory understaffing—especially in complicated markets like consumer finance and student loans.
• Discussion: There is no perfect system; class actions are one imperfect but necessary check on corporate misbehavior. Arbitration isn’t a genuine alternative for most consumers.

Evolution & Constraints of Arbitration (44:20–46:44)

• Jim: Legitimacy of consumer/employment arbitration was cemented recently by Supreme Court decisions; the present move is seen as necessary pushback.
• Cathy/Jim: Explore what better dispute resolution could look like, but recognize administrative and practical hurdles.

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4. Numbers Round & Memorable Facts (46:44–End)

Referee Bias in Sports (50:01–54:21)

• Jim’s Number: 10%
  • Away teams in the NHL receive 10% more penalties than home teams—a measurable refereeing bias.
  • "In the NHL, the away teams received 10% more penalties than the home team did. That's outrageous." — Cathy O’Neil [50:01]
• Felix: Cites evidence that with no crowds, the bias disappears (as found during Italian soccer bans).

Venezuela’s Beer Crisis (54:25–55:00)

• Jordan’s Number: 80%
  • Empresas Polar makes 80% of Venezuela’s beer but can no longer import ingredients due to currency shortages; Venezuela has no beer.

Obama Campaign Spending vs. Trump’s Plans (55:54–57:55)

• Jim’s Number: $721 million
  • Obama’s 2012 campaign spending; Trump faces an uphill fundraising battle, challenging his outsider, self-funder narrative.

Billionaire Philanthropy & Ironies (58:01–59:35)

• Felix’s Number: $25 million
  • Billionaire couple Linda and Stuart Resnick pledging $25m to name a public health center—contrasted with $67m private jets on display at Milken Global Conference.
  • "Philanthropy money sloshing randomly from one billionaire to another." — Felix Salmon [58:01]

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Notable Quotes

• "The dominant mode of registering disapproval...in capitalism is you exit, you leave, you sell your shares." — Jim Surowiecki [04:09]
• "At some point giving one man dictator-for-life powers...starts being scary." — Felix Salmon [13:32]
• "What it actually speaks to is the problem that, you know, workers have no say in the way their enterprises run." — Jim Surowiecki [19:24]
• "There have now been 59 oil and gas bankruptcies during this oil rout...creeping up on the number of telecom bankruptcies." — Jordan Weissmann [22:40]
• "If you take out a payday loan...you're going to have to sign a contract called a forced arbitration contract." — Cathy O’Neil [37:23]
• "Class action suits are kind of the worst conceivable way of doing regulation." — Felix Salmon [41:09]
• "In the NHL, the away teams received 10% more penalties than the home team did. That's outrageous." — Cathy O’Neil [50:01]

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Timestamps for Important Segments

• Intro & Panel Introductions: 00:55–02:59
• Non-Voting Shares (Facebook/Google): 03:19–21:41
• Oil & Gas Bankruptcies: 22:35–34:06
• Arbitration Clauses/CFPB: 37:18–46:44
• Numbers Round (Bias in Sports, Venezuela, Presidential Funding): 46:44–59:35

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Overall Tone:
Lively, skeptical, and irreverent, with robust disagreements, data-driven arguments, and sharp wit. The panel balances deep-dive economics and policy analysis with easy rapport and humor—making even arcane debates about share classes or arbitration accessible and engaging.

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For First-Time Listeners

If you missed this episode, expect a smart, no-nonsense look at how finance, corporate structure, and regulation intersect with real lives. The sparring over Facebook’s share structure and arbitration clauses is especially thought-provoking, with each side getting a fair and spirited hearing.

Skip the ads, but not the Numbers Round—it’s packed with oddities and insights, from sports to presidential campaigns to Venezuela’s beer drought!

Transcript

[A]

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[B]

Hello and welcome to the you edition of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Fusion. I am joined as ever, by the one and only Cathy o', Neill, math babe extraordinaire, blogger, data scientist in general, all around hug provider.

[C]

It's true. It's true. Thank you. I'm. Well, I'm so glad to be here.

[B]

And I am joined by not one but two Slate Moneybox columnists. We have, of course, Jordan Weissman.

[A]

Hello.

[B]

But we also have the OG Moneybox, the man who created the storied franchise, the man who basically set the bar which no one has subsequently hurdled.

[A]

Thanks, Felix. Thanks.

[B]

The one and only Jim Surowiecki. Say hi.

[D]

Hello. Thanks for having me.

[B]

Now you are. Now you have managed to burrow away into a nice little cozy corner of the New. For how long now?

[D]

16 years, I guess. You know, I actually, I was thinking about it when we're going to be talking about oil and gas bankruptcies and they were comparing them to the telecom bubble bursting. And I actually started at the New Yorker in March of 2000, which was literally the month that the NASDAQ peaked. So Surwiecki gets hired at the New Yorker and the bubble just bursts, basically.

[A]

As we know, correlation is causation.

[D]

Yes, it is causation. It was a sign that, you know.

[B]

So basically it took about four months for Remnick to regret this hire probably.

[D]

But we got lucky with a Wilcom. Yeah. Stuck around ever since.

[B]

Stuck around ever since. So, yeah, Jim Zrowerki, who's managed to stay at the New Yorker for 16 years, which is probably about like your sort of kindergartner by New Yorker Stanislak, is going to help us talk about one of my favorite subjects, which we talked about very briefly last Week. But I then got into a fight with him about on Twitter. So we.

[C]

Oh, good fight.

[B]

We dragged him him in so that we could have this fight on air instead of just on Twitter. As he says. We're going to look at oil industry bankruptcies. We're also going to look at arbitration clauses and guess what, guys, you can sue your bank now. Which is. I don't know if this is something which anyone is actually excited about being able to do, but it's a good thing.

[C]

I'm very excited.

[B]

We're going to talk about suing banks. But first we are going to pick up where I left off last week, which was in the numbers round. I mentioned that very soon two thirds of Facebook shares are going to be non voting shares. They're going to have no voting rights whatsoever. And this is a new and rather worrying development. If you're me. I don't think that it bodes well for public companies if most of the shares carry no votes. And Jim came out on Twitter and said, don't be silly. The way capitalism works is you put out whatever securities you want with whatever fine print you want, and then if you don't like them, you can sell them. Is that more or less your view?

[D]

It's a little more complex than that. But the way I would think about it is that the dominant mode of registering disapproval, or well, let's say registering disapproval in capitalism is you exit, you leave, you sell your shares if you don't like what Zuckerberg is doing at Facebook or you don't buy the shares if you don't like what you think Facebook is going to become. That's very different from democracy where the main way we register discontent is by actually voting and by theoretically lobbying people, et cetera. That's usually called voice. And I just think in the case of Facebook. Well, do you want to explain any more about how it works or not?

[B]

Okay, so what we've had for a long time now is that certain companies very frequently in the media sector have dual share classes and they have one set of shares which has a lot of votes, normally like five or ten times as much voting power as another set of shares. So the Salzburgers, for instance, have powerful voting shares which allow them to control the New York Times even though they don't own the majority of the shares in the New York Times. Rupert Murdoch has control of News Corp and 21st Century Fox even though he doesn't own the majority of them, again thanks to these super voting shares. But what none of them had done was Create non voting shares. There was always like, you get fewer votes or you get more votes. But then Google came along a couple of years ago and said, we're going to go one further. We already have this dual class structure. They had the A shares and the B shares where the founders had way more control than their percentage ownership of the company would imply. But that wasn't enough for them. They then created this new class of C shares which they could literally print billions of without diluting their control at all. And everyone kind of looked at them puzzled as it said, and said, is this legal? And there was a court case and they won the court case. And now they can dilute their ownership as much as they like without diluting their control. And this was a weirdly idiosyncratic Google thing until Facebook came along. Well, there was one other company in between recently which I discovered did the same ABC thing, which is Under Armour. Under Armour CEO is this guy Mike Plank or something? Plank? Is it Mike?

[D]

Yeah, I think his name is Mike.

[B]

I think his name is Mike. He had this bright idea that he was going to pivot from being a shoe company or underwear company or whatever the hell he was into a technology company because every company is a technology company. So he spent a billion dollars on apps like My Fitness Pal. And so in order to be able to dilute his ownership share by spending that much money on apps without diluting his control of the company, he did this non voting seashare thing, which now Mark Zuckerberg was like, ooh, that looks good, I want that.

[A]

So, Felix, I took a look at the article you wrote about this and you actually sound a lot calmer right now in the studio than you did in print, in pixels. Because your anxieties about Zuckerberg. Zuckerberg didn't. Having basically total control over his company, no matter how much of his shares he sold, seemed to extend beyond just his ability to control Facebook. It was almost like you're talking about being a threat to the Republic in some sense.

[C]

Can I jump in here?

[A]

I almost expected Kanye's power to come on one man specifically. You talked about his ability to basically print money, as you put it, by issuing more stock. I just want a better sense of why that makes you so nervous. Why is his ability to issue stock and by other companies really make you so. Yeah, like why are you so. Anxiety. Revenue.

[C]

Can I, can I jump in and suggest a reason that I'm nervous?

[A]

Yeah, sure.

[C]

You know, it's, you know, we've talked, we talked about the Eurozone, a Couple of weeks ago. So we, we all know about the, the, the sort of setting up something that works really well in good times but then doesn't work so well in bad times. So my question about this C share situation is in the situation where like obviously if everyone loves Mark Zuckerberg and everyone loves Google and they think they make the people in charge and the people in good decisions, this is not a problem. And it looks like they're legally allowed to do this. But the question is, when they start making decisions that people don't like, how volatile does a stock get? Do people just totally jump off the wagon? Does the market move really quickly because Mark Zuckerberg made some weird mistakes?

[B]

I mean, depending on who you ask, this is a feature rather than a bug. The whole point of being able to retain control is, is so that you can make long term decisions without worrying about the short term effect on the share price and so you can withstand the kind of volatility. And both Google and Facebook in the wake of their IPOs, kind of went in the wrong direction. And it took them a while to become the sort of market darlings that they did become. But you're absolutely right. There is one thing which Google and Facebook and Under Armour have in common, which is that all three of them waited until they had enormous tailwinds before they tried this stunt. All three of them, like Google and Facebook, are part of the famous Fang stocks which have been outperforming massively and everyone loves and so they can get away with just about anything. Right now, Under Armour waited until like the height of the Steph Curry craze. Under Armour, the single most crazy lucky fortunate thing in the history of that company was that Nike dropped the ball on Steph Curry. Under Armour comes in as second choice and picks him up and now they have the greatest basketball player of all time or something.

[C]

I think Bryce Harper is also a big fan of Under Armour.

[B]

Yeah, but you're absolutely right. The main thing that's happening here is that these companies are doing something in good times which people would be tearing their hair out if anyone tried to do this in bad times. I mean, if Rupert Murdoch tried to create a new class of non voting shares right now, or if the Salzburgers tried to create a class of non voting shares right now, I don't think people would be quite as sanguine.

[D]

I mean, I think there are a few things here. One is, I think you're exaggerating the difference between the new plan and the dual class share structure that already existed. Zuckerberg already had total control in some sense over Facebook. This allows him to sell off his shares theoretically. And theoretically, he wants to do it in order to be able to fund these philanthropic endeavors without losing control. But in terms of his ability or not ability to deal with Facebook, that hasn't changed at the moment. Now, the broader question you're trying to raise is, is it fair for someone who only owns 5% of the company to have 100% or 1% or 0.5%?

[B]

Because with zero vote, like that's the difference between non voting shares and, you know, super voting shares is like you can multiply non voting shares by a million and they still have zero votes.

[D]

Sure. So my answer to that question is that there are two ways to think about it. One is, is it bad for Facebook?

[A]

Right.

[D]

Is it bad for the company? And that we can argue about, is it bad for Zuckerberg not to have any checks? I think you could argue that it's bad for CEOs to have no checks at all. But the people I think who are best qualified to make that decision are Facebook shareholders. If they think it's a terrible decision, they can just dump their shares. You don't have a legal right to own Facebook shares and to have them always be there the way you wanted them to be. So if you're not happy, there's nothing keeping you from selling your shares. The second question, though, which is what I think Jordan was saying, is that you also make it sound like it's bad for the economy generally. And I would argue that actually what we want is you want corporations to be. It's fine to have corporations have different structures, as long as they're straightforward about it. So the way I think about this, and the reason why I think it's actually not a bad thing that Facebook is doing this, is that it opens the door or makes it allows. It makes it easier for companies to adopt different goals, right? So if a company says, you know what, we're just gonna. We're going to, you know, we want to make money, but a big part of our business is also doing good. If you follow the shareholder value maximization thing, that company maybe is not able to do that, basically, right? Because shareholders are going to say, no, wait a second, we're not happy with that. But if instead you say the company was upfront about it when you bought the shares, you knew when you became a shareholder what the rules were, so you don't have a legal case, then companies can do lots of different things, and that's What I think the idea here is, I think when you buy into the myth that shareholders are owners, then you end up with a situation where maximizing shareholder value is the only goal.

[A]

I was gonna say to me, Facebook just looks like a hybrid of a private and public company. It looks like a hybrid of a close. It's like it functions like a closely held company, but other people can buy into it if they think that Facebook's going to take off and continue to dominate the world. Why that is necessarily terrible for anyone else is again, it might have bought into Facebook previously.

[B]

I can tell you quality, qualitatively it's different. I mean, Mark Zuckerberg had control of Facebook when it was 2 years old and he only owned 25% of the company even then. And they got a billion dollar acquisition offer from Yahoo and he said, I control the company. I'm saying no. And that kind of long term thinking was good back then. And what I'm saying is there's a qualitative difference between running having 25% of a $1 billion company and having 5% of a $350 billion company. And at some point giving one man dictator for life powers over what's probably going to be 4 or 500 billion dollar company starts being scary. One of the things that he can do now is that he can print as much stock as he likes to buy as many companies as he likes, which can be worth even more than Facebook. He could go out and buy a trillion dollars worth of other companies and still retain control over all of them and pay for them all in this non voting stock and he could buy. Let me just take this to its logical conclusion. Every single publicly listed news organization in the world which would be willing to sell to him and if he just prints enough stock, eventually they will be because it's money and they have a fiduciary obligation. He can control all of the media in the world himself and no one can vote him out. I'm not saying he's going to do this, but take this to its logical conclusion. And this is not good.

[A]

So I do want to bring up one technical point there and I just.

[C]

Want to throw in that I love Felix right now.

[D]

Well, no.

[A]

So correct me if I'm wrong. My understanding is actually companies do have a limited number of shares. They can actually sell that when you register your company, there are only so many.

[B]

Yes. And then what Facebook just did in its latest proxy was multiply that number by about 20 and Facebook can continue to multiply that number as many Times as it likes.

[A]

Oh, it can continue to increase.

[C]

I just want to also, there's no.

[A]

Point where it gets diluted the value.

[B]

That like the value gets diluted every single time, but the control does not. That's my point.

[A]

Okay, so he can. But so at some point he could theoretically in this world where he's buying everything, like the stock would drop.

[D]

Of course, the stock is plummeting as this happening.

[A]

Yeah, that's what I'm saying.

[B]

The stock is going down in price, the shareholders are miserable, but they can't do anything about it.

[D]

But he also, his wealth is also being radically diminished in this model already.

[B]

Demonstrated that he doesn't care about his wealth because he's giving it 99% of it away.

[A]

What about, what about all the companies is buying with the stock that's suddenly worthless? I'm just saying. Yeah, we've entered sci fi, guys.

[C]

Can we imagine a world where we don't have maximized shareholder value as the only goal, but we do have stock like shareholders influence in some measured way on what companies do.

[A]

Get there.

[D]

But we do have it. I mean companies that register as benefit corporations. So in principle, you know, if you want to go public, you can register as a benefit corporation. And in theory, it's in your charter that some part of your corporate mission.

[C]

There's plenty of companies that just don't care that much.

[B]

Quarterly results, you're going the other way. Like the whole point about registering as a benefit corporation is you say we, it's in our charter that we have to act in the interests of this interest group and that interest group and the other interest group. What Facebook is doing is it's going entirely the other way and saying we don't have to act in the interest of absolutely anyone except for the whims of one man.

[D]

But that was very clear. I mean, this is the thing I was saying about contracts. I mean, both Facebook and Google were very clear. I mean they were set up as dual class structures. They were set up from the start so that the founders were going to be able to keep control of the company. So I don't feel like there's been any bad faith here between the companies and things.

[B]

Well, I mean, they created a whole new class of shares which was not in how they were set up. So that's bad faith for starters.

[D]

But see, I guess to me, I think your entire frame for thinking about this is wrong. Which is you're thinking about shareholders as the equivalent of citizens in a democracy.

[B]

No, I am not. Well, you are no Jim, I have never once said that the shareholders own the company. I don't know why you think that I'm saying that, but I have never.

[D]

Said that because I keep talking about things being anti democratic and dictatorship and all this kind of stuff. Premise, it's all premised on some analogy between the running of a corporation and the running.

[B]

Right. What I'm saying is that there is always somewhat. There are always checks and balances in terms of who controls the corporation. There's the CEO who's answerable to someone, the chairman. The chairman is answerable to someone, the shareholders. Like there's some, there's some kind of way in which the person running the company is answering. Like either you control the, either you control the shares or, or like the shareholders control you in some sense. And Facebook is now an almost unique exception to that rule. There are no checks and balances. It is a dictatorship of one man. And it is very rare, if not unprecedented, except for the single president of Under Armour to find that. Now let me just. We're running a little bit out of time here. This was, this was illegal between the mid-20s and 1986 when for some reason it became legal again. But back in the 20s we went through this. Now this wonderful poem which I have to dig up from one. A New York newspaper, New York World wrote this excellent poem. Then you who drive the fractious nail and you who lay the heavy rail and all who bear the dinner pail and daily punch the clock, shall it be said your heart's a stone, they are your brethren and they groan, oh, drop a tear for those who own non voting corporate stock.

[D]

So that is actually. But that's actually a good point. Right? That's actually, I think that's actually a great point because what it actually speaks to is the problem that, you know, workers have no say in the way their enterprises run.

[B]

What they do in Germany. We talked about that a lot.

[D]

Exactly. So what I would say is actually that again, I think that the problem is you're thinking, you know, if I own a, let's say I run a closely held corporation, right, And I take on investors, if I say to them, you're going to be a silent partner, literally, you're not going to have any say in how I run this company. No one has any problem with that. You understand? You're investing in the company because you're betting on the company. That's basically all these. You don't have to buy non voting stock. The current Facebook shareholders don't have to keep their Stock, they can sell it if they want. That's the check. And it's the same check as I mentioned this when we hit our Twitter.

[B]

Thing, but it's a check which has no practical impact on the dictator for life. We have actually seen this in the case of Google, which issued its C shares, which in terms of cash flow identically valued to the A shares and the B shares, but they have been trading since issue at a significant discount because.

[D]

Significant, I mean, 0.2%.

[B]

Well.

[D]

It'S not significant.

[C]

Maybe it's statistically significant, but it's not very large.

[D]

And I mean, I also, as I said in my, when we had the Twitter discussion, I don't really understand, you know, no one has any. Well, most people don't have any problems that with a mutual fund or a hedge fund, you give the guy your money and the hedge fund manager can do whatever he wants with it. There's no check on him except for, you know, he has a board, I guess. But there's no check on what Bill Atkins can do.

[B]

I saw the big. Sure, there's definitely people like twisting the arms of hedge fund managers, telling them that they're doing it right.

[D]

Sure they can. But the same would be true in Zuckerberg. But the check is if you don't do the right thing, I'm going to pull my money and that's the exact same check that there's going to be on Zuckerberg. I don't know. It's not clear to me why it's different with a corporation than it has.

[B]

It's different with Zuckerberg because he has already made it clear that he doesn't care about the money.

[D]

Well, that seems kind of like a concrete critique of an abstract.

[B]

What is he on Twitter?

[C]

It's only 140 characters, but this is much longer than that.

[B]

All right, we must, we must, we must wrap this one up. I'm going to be fighting with Jim for years about this one, I'm sure. So we're going to move on to oil bankruptcies. Before we move on to oil bankruptcies, I'm going to tell you that you do not want to be buying Facebook stock because that only what does it do? Encourages the dictator for life, Mr. Mark Zuckerberg. And, and I'm sure the same thing goes for Under Armour as well. I have another investment for you. It's called Wonder, which is solar panels, basically. And you can get up to 11% returns if you lend money to people who invest in large scale solar projects across the US it's green and it's Wonder Capital with a U W u n D E R. And if you go to wondercapital.com money, you will learn all manner of wonderful things about solar panels. This is not an endorsement, but you should check it out anyway. Jordan, I've noticed in the past few years that the oil price has been.

[A]

Declining slightly, just a little bit.

[B]

Has there been any consequences of this in the corporate world?

[A]

There have been some consequences of this in the corporate world, Felix, namely a whole bunch of bankruptcies. This was easily foreseen. There have now been 59 oil and gas bankruptcies during this oil route, which is, as Reuters noted, creeping up on the number of telecom bankruptcies. That happened in the early 2000s when that industry kind of exploded it after a period of irrational exuberance. So it gives you a sense of, you know, that the punch bowl's gone, the party's over, people are turning off the lights and there are technical things. I think this tells us about the oil and gas industry that we can get into. But you know, what I would like to discuss more broadly is does anyone, is anyone actually worried about this? Because I, for one, actually, I'm not. If anything, I think this is part of a natural process that might be good for the economy overall.

[B]

So I look at waves of bankruptcies and what I see is capitalism basically not working because bankruptcy is a messy and time consuming and expensive way of changing ownership. Basically, the companies don't disappear when they go bankrupt, or the assets of the companies don't disappear. The oil rigs still exist, the refineries still exist, but what happens is that the shareholders no longer own them. I know that Jim is going to start telling me that they never owned them in the first place. They just had a residual claim on cash flows, but the shareholders no longer own them. The shareholders get wiped out and then what happens is the bondholders have the mother of all fights about who gets to do a dip finance and who win. You know, you do some kind of debt for equity swap and then the bond, some class of bondholders becomes the new class of equity holders. And all of this happens in protracted and expensive litigation during which time the actual operations of the company and the workers of the company, often the workers are often treated very badly in these periods that you often have a much higher chance of layoffs. And if you didn't have that much leverage to begin with and bankruptcies are entirely a function of leverage, basically, if there's no debt, then you never go bankrupt. If you're Just funded by equity. You never go bankrupt. And you only go bankrupt when you have more and more debt and less and less equity. What we've seen happen here was greedy commodities people loading up their companies with way too much debt, wiping out that thin sliver of equity and then causing a bunch of chaos across the oil belt, which does no good to anyone.

[C]

Can. I mean, I agree with everything you just said, but I still kind of think that that means that capitalism is working. I mean, given the greed and all the debt, which I agree with, what are the alternatives at this moment? I guess the alternative is extend and pretend.

[B]

No, no, no. If you have that much leverage, then it's inevitable in the event of an oil price crash that you're going to get bankruptcies. What I'm saying is you don't start with given insane amounts of leverage. You start with, you should never have levered these companies up that much to be done.

[C]

Okay, we're on the same page.

[D]

But I mean, I think. But if they hadn't. I mean, one of the issues is if they hadn't been able to borrow all that money, then they would never have been able to drill. I mean, they were never going to be able to fund the massive expansion we saw in the oil belt via. Via equity, I think. Yeah. Now the interesting question, can you expand on that? Well, I just think that, I mean, they raised. Was it like 350 billion or.

[A]

There is an enormous amount of debt to get that from the equity markets, considering especially how many of these are small companies. We're talking wildcat drillers. These are not companies that are going to easily raise equity as easily as they are going to raise debt.

[B]

So let me just again ask you to expand on this because it's not obvious to me. If I'm a small wildcat driller, why is it easier for me to raise debt than to raise equity?

[D]

Because I think it's easier. I mean, first of all, because I think the markets are better set up like the junk bond market, which is what I think was responsible for. 50% is in a way set up to fund that kind of stuff. And I think if you think about all the regulatory requirements which you still have to go through to become a public company, et cetera, et cetera, or.

[B]

To issue junk bonds, they're not that dissimilar.

[D]

I just think if you have public.

[B]

It'S about having publicly listed securities and junk bonds are publicly listed securities just like stocks are.

[D]

But isn't the amount of work it requires to become a public company and then report quarterly earnings, et cetera, et cetera, just much higher. Although, I mean, how many of these companies were public?

[B]

I'm going to give you an example. I work for a company called Univision, which has publicly listed securities, which are debt securities, and it has no publicly listed equity. They're talking about maybe doing an IPO at some point, but for the time being, they still have quarterly earnings, they still have quarterly conference calls, they still have to report everything because as soon as you issue public securities, then you become a public company, basically.

[D]

I just find it very difficult to believe they would have been able to raise 350 billion in the equity markets at least. And maybe this is the bigger issue is that they would have been able to raise it at the cost of capital. They were able to raise it at. Now the truth is the cost of capital was relatively high in a lot of these cases. I don't know what the junk bond ratings were, but I think the more interesting question is, was the build out good or bad?

[A]

So that's actually what I wanted to get to.

[B]

And can I channel the ghost of the money box in between you guys? Because Dan Gross wrote a book called Pop about like why bubbles are good things. And he's like a bunch of people with money lose money, but in return for that, you get a bunch of real world investment into things which makes the world better. And so he was saying, yay, bubbles. I'm finding it hard, I have to admit, to try and make this case in the case of the oil and gas industry.

[C]

Let me jump in just for a second. Let me just jump in for a second. To what extent? And I'm just going to. This is going to add to the answer you have. To what extent is this just a feature of the gas drilling industry, that it takes a lot of investment and a lot of lag time?

[A]

Well, no. So actually in the American oil belt now it doesn't. It used to, but the nature of fracking is it takes much less time to do this. And that I think has been facilitated somewhat by the debt markets. But anyway, one, I mean, there are a couple of ways you can approach us. First off, there's the question that I think is really interesting. Can we get meaningful advancements in our economy without bubbles? This is something that Larry Sanders has talked about. There's this whole idea of secular very.

[D]

Summer I saw path. He just died. He just died.

[A]

That's how. Jesus Christ. Combining him with Bernie Sanders as well. No. So this is something that Larry Summers has talked about. Larry, our favorite on this show. And he has this idea that essentially without, I mean, it's part of his whole sec. Secular stagnation theory. And without bubbles you're not going to get essentially to full employment in the economy. That's where his thinking goes with this. So I think there's this kind of cool macro aspect to this. But, but beyond that, wait, how is.

[B]

It cool to create a bubble? Create a bunch of jobs in Oklahoma and then see the bubble burst and then everyone winds up in Oklahoma.

[A]

The idea is that essentially without some degree of irrational exuberance, the amount the returns on investment are low enough that people are just gonna let their money sit on the sidelines. And so you need people to kind of make bad decisions and pile into a new industry in order to get some sort of large scale growth in the economy. Again, this is theoretical, but it's interesting beyond that.

[D]

But he says that's a bad thing, right?

[A]

Well, it's not good that we're in that situation, but the bubble itself is, is a necessary evil, but it's a.

[D]

Sign of the underlying structural weakness in the economy.

[A]

So in a way the bubble might be the best thing we have going for us. Which is for what? You know, good or bad? That might be the case.

[B]

But bursting bubbles is never good for you.

[A]

Well, you. But the bubble bubbles are always going to burst at some point. So we need the bubble in order to get some sort of advancement. But the other thing that I think specific to the oil and gas industry here is that. But we've seen this drive into it and it's actually created. And even the process of the bubble bursting has in some ways I think been good for the industry. These companies are learning how to drill for much cheaper prices than they were when they initially went into the shale belts. They're better at drilling.

[B]

Oh my God. Fracking has got even cheaper. That's awesome news.

[A]

Well, if you're going to bring global. If, if you're upset about extracting any kind of fossil fuels, then yeah, you don't think that's good. But if you think fossil fuels are a necessary evil for at least 50 more years, then it actually is a good thing that these companies have learned to produce at fairly low prices. And frankly, it's not as if oil wasn't going to come out of the ground anyway. It would have been coming from more expensive sources.

[B]

I disagree. I think that there's the price of oil and you're absolutely right, there's going to be demand for oil for the next 50 years. The price of oil is set by global supply and demand considerations, which are pretty much unrelated to the cost of extracting the oil. So the amount you pay for the oil is, to a first approximation, not going to change. If the companies drilling it become more efficient, what changes is they make more money. And it is not obviously a good thing for the companies drilling the oil to make more money and for the people being made to extract oil to make less money.

[A]

That is an inaccurate description of the oil market works. Right now, the break even price matters a whole lot for what, you know, how much oil comes out of the ground and where the oil comes from and the eventual price it's sold at. If a lot of companies can make continue making money at a fairly low price, you're going to have more oil coming out of the ground, even if prices fall. And that's going to keep a level that's going to keep prices from spiking.

[D]

But I mean, to me that's the interesting question because, you know, so Dan Gross has this theory, I mean, it's a familiar theory that the bubbles have been good for the economy and the past. And I think you can certainly make that case about the telecom bubble, which is the analogy that a lot of people are drawing here. So in the late 90s and early, well really just 2000, there was this huge build out in telecom and then there was a massive bust. So hundreds of billions of dollars lost, close to a trillion dollars lost in equity value, massive amounts lost in the debt markets. But as a result we got huge amounts of dark fiber, which at the time was totally unprofitable, but has been crucial to the build out of the US economy. The housing market bubble was clearly terrible. It left us with massive amounts of homes that are never gonna be occupied or at best are, you know, essentially useless. And I think the oil and gas bubble is complicated because it was very good for the U.S. economy. I mean, I can't remember what the numbers are, but in the last two years before the bubble burst, oil and gas accounted for some ridiculously high percentage of total private investment in the United States.

[A]

It was more than half.

[D]

Yeah, yeah. I mean, it was an absurd amount. So it was good for the US economy in that sense. But on the other hand, the obvious consequence of it is that there was a lot more oil on the market. And if you assume that oil demand is somewhat sensitive to supply, that meant people use more oil than they might have otherwise, which is bad for climate change. Thank you.

[C]

Thank you.

[B]

Also bad just for the number of people who die in car crashes every year.

[C]

Can I just jump in as a climate someone who worries about climate change? Like, like, can someone please tell me that part of the reason that the price of oil is low is because alternative energy is becoming viable?

[A]

No, no, probably not, no.

[D]

It's just oversupply, I think.

[A]

Yeah.

[B]

All right. I think that's probably all we have time for on oil and gas bubbles bursting. You have to have a little bit of schadenfreude though, right? For all of these people who piled in there with their hundreds of billions of dollars and are losing money, like no one's heart is bleeding for that.

[D]

Thing I'd say is I'm not upset for them.

[A]

Like I said, I think the bubble bursting is good.

[D]

I mean, the other thing to say is this isn't exactly new. I mean, if you go back to the early 1980s in Houston and Texas, you had the exact same thing. You had this huge bubble in investment in oil and then in 86 price collapse and then you basically had, you know, this. But the thing that's interesting in terms of schadenfreude is of course in the early 80s, the rest of the US economy was terrible. But if you were in Texas, you thought you were on top of the world. So when that bubble burst, people were really happy because it was like they got their okay.

[B]

So I'm going to talk about another piece of price deflation, which is because this is Ned Razors. You used to pay through the nose for your razors, did you not, Jordan Weissman?

[A]

Well, I saved by just going out.

[C]

As you can see, Jordan is sporting a scruffy look today.

[B]

Yeah, it's good because Jordan hasn't really become part of the, you know, the people using Harry's razors every day. He is being forced to walk around with a small furry animal on his face.

[A]

That's true.

[D]

He looks very. Brooklyn looks very.

[B]

If Jordan were using Harry's razors every day, he would be beautifully clean shaven and he would be looking handsome and well scrubbed and he would not be spending as much money as one might think it would cost to do that. Because Harry's razors are much, much cheaper than the kind of razors which you spend $35 on in the corner store. So the way you get your Harry's razors is you go to harry's.com h a r r y dash s dot com and what you get is these amazing German made razors with five blades which shave really well. And if you sign up for a subscription package. They just arrive automatically on your door. And that just gives you an incentive, Jordan, to shave a little bit more often, which, you know, you might be able to feel your chin occasionally. It would be amazing.

[A]

So Harry's razors look good for cheap, right?

[B]

Look.

[C]

Don't look like Jordan.

[B]

Don't look like Jordan. Look good for cheap. Go to Harry's.com and then enter the coupon code MONEY. And you'll get $5 off the starter set, which is not just the razors but this incredible handle which doesn't slip when it gets wet and the shave gel and or the shave cream. It's a great little starter set. It's only $15, but if you get $5 off, it's only $10. So that's a kind of no brainer. Go to Harry's.com, put money in at checkout, get the starter set and be smooth and beautiful.

[A]

Like Felix.

[B]

Like Felix. Okay. Cathy?

[C]

Yes, that's me.

[B]

Have you been itching to sue your bank?

[C]

I have for all sorts of reasons. And I'm really excited about the Consumer Financial Protection Bureau, what they did this week, because that's the kind of nerd I am. Listen, if you take out a payday loan, which you probably would have tried to avoid doing, but if you're desperate for cash and you take out a payday loan 99% of the time, you're going to have to sign a contract called a forced arbitration contract. Jim, what's that?

[D]

Essentially, you give up your right to actually sue the bank or the institution. And it's not just banks, it's also cell phone companies, et cetera. You give up the right to sue them in a class action fashion.

[B]

And let's be clear, banks don't generally offer payday loans, but they do offer a bunch of other financial products which may or may not be illegal. And one way of telling whether they're on they are or are not illegal is to take it to court and ask a judge or jury to decide.

[C]

Right. And so 53% of credit card issuers do this as well. 44% of checking accounts. It's really a big deal. And it's new. It's like since the 1980s, basically.

[B]

Oh, just like non voting stock.

[D]

Exactly.

[C]

So the cfpb, the Consumer Financial Protection Bureau just this week has decided like this is not OK because it's just too biased against the consumer. It's really exciting news. The New York Times did this study and found that for people who were borrowing money and were subject to these forced arbitration clauses, they basically never actually went to arbitration. It was too expensive, it wasn't worth it for them. And they were only doing it for themselves. They weren't doing it for the class of people like them. In fact, they found only 505 consumers even bothered to go to arbitration from 2010 to 2014, which is ridiculous. And moreover, I just, I looked this up a little bit. The way this arbitration stuff works, it's super biased against the consumer, even if they do bring it it to arbitration.

[B]

Because the arbitrators are paid by the banks.

[C]

Yes.

[B]

And the banks. Well, I mean, it's simple. The banks are going to pick the arbitrator who ruled in favor of them last time. And so if you want to make money as an arbitrator, you learn very quickly that ruling against the banks is going to get you not chosen and you're not going to make any money.

[C]

And you're in a room with your lawyer who's probably not an expert on this stuff, and a bunch of corporate lawyers. It's just, just totally stacked against you.

[D]

Well, there's that great quote from the judge in one of these cases who said something like, only someone who is insane and obsessed would actually bring a suit of this kind. Basically because in most cases the amount of money that any one individual is losing is relatively small. It's just that for the class as a whole, if you could sue as a class, it amounts to a huge amount of money that banks or other institutions are basically taking home by dubious behavior.

[C]

So one of the examples that I, you know, just to see what kind of class action suits aren't being brought, one of the examples, a Citibank was duping its credit card customers into buying insurance they were never eligible to use and nobody could get back at them for it.

[B]

Well, that's not entirely true. The regulators could get back at them for it. The cfpb, if it actually bothered to regulate these banks itself, rather than outsourcing the regulation to the New York Bar and to taught lawyers and to class action ambulance chasers, could do it. What, what the effect of this is going to be, and I'm kind of playing devil's advocate here, but I kind of believe this as well, is that the CFPB is saying we are not good enough at regulating the banks and stopping them from doing evil things. And so we need to create a bunch of class action suits to do sort of regulation by proxy. And it strikes me that class action suits are kind of the worst conceivable way of doing regulation.

[A]

Disagree thoroughly I mean, first off, the CFPB is a single agency with a $600 million budget. If we talk about how under resourced the SEC is, they get $1 billion a year. Right. I mean, the CFPB can only.

[B]

I mean, the SEC can regulate the banks too, as can any number of other institutions. But the point is, have a gazillion regulations.

[A]

Yeah, but specifically on this front, when it comes to consumer affairs, when it comes to protecting consumers, the CFPB only has so much rehabilitation. And it does a lot. It does, especially in the area of student loans. It's been incredibly, incredibly active and going after lenders for profit colleges, things along those lines. It's played a crucial role in regulating that sector. But there just is only so much manpower and there's only so many of these cases that are going to show up at their door. Having a active class action bar has classically been one way that corporate America has been kept in check to some degree.

[C]

It's one of many, many routes. I do want to mention that this does not apply. All kinds of forced arbitration clauses in particular, nursing home contracts have them and a lot of employment contracts. If you work at Hooters, the Waffle House or the Olive Garden, then you are signing. When you sign up for the job, you're signing this forced arbitration clause, which you're not reading probably. And if you are reading, you're thinking, oh, it's all good, they trust me and I trust them and I'll do this. And it protects the company from things like discriminatory practices. It's really kind of arbitration.

[A]

Also, our arbitration clauses in the original idea behind, behind arbitration clauses was essentially an agreement between equals. You had two corporations that were going into a deal and they wanted to keep their business out of the courts if possible, because it was more efficient. And it would be two sides with highly paid lawyers going toe to toe, which may. And they would agree on the arbitrators in a lot of cases, not always, but a lot. And it would make sense. This extending that to the consumer realm and to the employment realm was not the original idea. And this notion that lobbyists had put forward that somehow this is a benefit to consumers is absurd. It has never been a benefit to consumers. It was never designed as a benefit to consumers.

[D]

I. That I think is really the backdrop to this is that it was really only in the last, as you said, let's say 30 years that this started. And it was only legitimized really in the last five years because it was really legitimized by the two big Supreme Court decisions, one that dealt with employment contracts, and then Concepcion, which dealt with AT&T and consumers. And that's really what I think this decision, this new rule emerges out of, is a recognition that it's straight kind of Chicago school economics, right? This sort of imaginary idea that when you sign a contract, even though you've never read it and you're just some random consumer, you're agreeing to forced arbitration, it's totally divorcing that relationship from power, from reality, all of these things. And so, I mean, I understand the limits of class action, but I actually, to me, this is. I mean, I'm maybe one of the few people who thinks Dodd Frank has actually accomplished an enormous amount. And I think the CFPB is really, has done just a great job. And this is like another example of it. I mean, I think this is a potentially. I mean, the rule still has to go into effect. It has not gone into effect yet, but I think this is potentially just a great decision.

[C]

If I might take Devil's Advocate again, though, with, like Felix did, class action isn't a great system either. I mean, it's theoretically possible to have good arbitrators. So, like, reforming the arbitration system is another possibility. Although what would that look like? I have no idea.

[D]

Well, I think the problem. But the problem with the arbitration system is not so much. I mean, the biased arbitration is part of it. The bigger issue is that even if you have good arbitrators, it's almost never going to be worth it for an ordinary person to go through all that hassle to get back 30 bucks.

[C]

Why can't we have a system where you go and make your complaint and you get your money back? And then the judge, if the judge is saying, wait, does this happen systemically? Like, hey, company, you have to stop.

[A]

I mean, I know I'm not a.

[C]

Lawyer, but, like, why can't that happen?

[A]

I mean. Well, but you can tell that would almost be like an administrative law judge almost. And like, you probably that would just.

[B]

Be like an arbitrator who lives inside the cfpb. Say, who, like. Because the cfpb, I mean, believe it or not, does have a lot of people who are receiving consumer complaints. And maybe they could arbitrate those consumer complaints. And maybe if they saw a bunch of complaints, which are very similar, they could, because they were right inside the cfpb, go, hmm, this is something which we ought to do something.

[C]

So it becomes a Republican, like, hating on the CFPB issue.

[D]

Well, that's Already happened. But you, but the other thing is, but let's, we, we don't, you don't just want them to stop, although you do want that. You also want them to pay for what they've done.

[B]

And the CFPB can fine and make them pay the benefits, restitution, but in principle.

[D]

Well, they can't make them do restitution to individuals.

[B]

Yes, they can and they have done.

[A]

Yeah, some of the student loan stuff. They've actually, they've said this money is going back to.

[D]

Well, then, I mean, I think the virtue of the class action is also, just take your example of the Citibank thing. It's possible that the CFPB would find that on its own. But I do think that the class action provides an incentive, a financial incentive for people to go out and dig up examples of bad behavior.

[A]

It, it does. I mean, class action lawyers are entrepreneurial. They, they, they run their own businesses. That's, that's what they do. And you know, if you want to talk about the market working, actually this is, it is a market mechanism for regulation in a way. I mean, it's, it's. I, I think there's a lot of virtue to it. It's not perfect. There are scummy class action lawyers out.

[D]

There and it's inefficient too.

[A]

Yeah, ever. But the threat of $100 million lawsuit coming out of a collection of small claims is something that companies take seriously.

[B]

Okay, so we're going to move on to the numbers round just after I tell you about Casper.

[C]

This is my favorite ad for Felix.

[A]

I'm so into it.

[D]

I actually want to know what Casper is because I keep seeing these ads and I want to know what it is.

[B]

One of the reasons, reasons I sound a little bit frazzled today, if I feel a little bit frazzled today is because I came straight from the airport. I flew in on the red eye. I got, according to my watch, which measures such things, I got three hours and 22 minutes of sleep on the plane, which is, you know, in more than I ever heard. It was, it was not the world's greatest sleep. And this is not going to set me up well for the days to come. I'm going to be a little bit tweaked. I'm not going to think as clearly as I normally do. I'm not going to be as mindful as I normally am.

[D]

You're going to think non voting shares are terrible.

[B]

I'm going to, I'm basically not, I'm, I'm not going to be my best self. And in order to be my best self, what I need is eight or possibly eight and a half hours of really good sleep every night. And I'm completely 100% with Arianna Huffington on this one. You need, need your sleep. Don't be taking red eyes. They're horrible things.

[C]

I'm with you.

[A]

I'm doing that in two weeks.

[B]

So the number one rule of getting great sleep is don't try and sleep in a coach class seat on an airplane. The number two rule of getting great sleep is go out and get yourself a brand new Casper mattress which is made of latex foam and memory foam and is pretty much the best mattress you can get and is super cheap because you know when you walk into those mattress stores, they charge you thousands of dollars for a bun, mumbo jumbo and retail markups. And with Casper you get neither the mumbo jumbo nor the retail market markup. You just get a fantastic mattress for as little as 500 bucks or less. Because if you go to Casper.com slatemoney you get $50 off any mattress purchase. And then once you've bought it, you get to sleep on it. You get to sleep. You get beautiful sleep, sleep lovely sleep, sleep of fluffy pink clouds and dreams and wonderful things. And when you have been sleeping on your Casper mattress for 99 days, you know what you can do? You can send it back for free and not pay a penny. It arrives for free. No shipping. You can send it back for free. No shipping. This is a 100 day free trial. But you're not going to because you're going to be sleeping so well. You're going to be just happy. So Casper.com Jordan, did you want to add something?

[A]

Fluffy pink clouds.

[C]

Jordan is doodling Casper.com slatemoney I feel like he's like, I can't wait to.

[A]

Get to a picture. I'm in the market for a new mattress. There you go. And I'm contemplating memory foam.

[B]

So Casper, I feel like Casper will get you a memory foam mattress for less.

[A]

I might become a client soon. Quite possibly.

[B]

Okay, numbers round.

[C]

I've got a number.

[B]

What's your number, Kathy?

[C]

10%. This is something I want Jim to riff on. He wrote a column about biased referees. And my son who is who calls all games sports balls came in the other day.

[D]

Cruz the basketball ring.

[C]

This is like a ridiculous story. But he's 16 so we're letting him drink beer with us. As long as he hangs out with us. It's the sweet thing. We Do. And we were watching baseball and he was like, okay, tell me the rules. You know, he's 16. He wants to know the rules. And he said, well, it seems to me that the referee could just be really biased about balls and strikes. And I was like, yeah, but that doesn't happen. And then I read your article. You said that in the 2007, 2008 season, the NHL, the hockey, Major League Hockey, the away teams received 10% more penalties than the home team did. That's outrageous. Could you say more about that?

[D]

Yeah. So there's this sort of pretty clear. The reason I wrote the piece was the New York Islanders, our own Brooklyn team, advanced from the first round of the playoffs to the second round in a game that at the very end of the game, as they were, they were up. They were up by one goal. And I'm sorry, that's not true. They were down by one goal and they had pulled their goalie out of the net. And so the opposing team was about to fire the puck into the net and one of the Islanders dived and basically just tripped the guy. Blatant trip.

[B]

That's not allowed.

[D]

That is not allowed. That is illegal. And the penalty, though, was not called. The Islanders got the puck back and almost literally went down the ice and scored. Tied the game.

[C]

Oh, my God.

[D]

And then won it in overtime. So what was interesting, though, it's a non call, right? It was a non call. And what was interesting about it was it was totally unsurprising for two reasons. One is that in the NHL, in the playoffs, especially in close important games, at the end of series, the number of penalties calls totally plummets. So referees just basically what they say, they swallow the whistle. But the second aspect of it was that the game took place right here in Brooklyn and you had 15,000 or whatever it was Islander fans who would have. I can't even imagine how they would have reacted if that call had been made. And I'm sure it was not necessarily a rational thing on the part of the referee, but we know in the NHL that referees are much more likely to call penalties on away teams than they are on home teams. It's a pretty consistent bias, and it's actually a bias that extends across all professional sports.

[C]

Fascinating.

[D]

And the thing about it is that it's actually incredibly consequential. In the NHL, penalty means you get a power play. You score on roughly 20% of your power play. So it has a big impact. In Premier League Soccer, it actually. Away teams end up getting many fewer penalty shots.

[B]

But doesn't it all even out? Like. Like for every time you play an away team game, you're going to play their home game. And then in, in the much in overall, you, whatever you lose in one game, you gain in another. Even playoffs, you go back and forth.

[D]

No, they go. The home team always has one more game, always have an odd number of games. So it actually. So it actually doesn't. And it also, I think.

[B]

But it's a 50, 50 chance whether or not you are the home team and have that advantage. It's all.

[C]

It's rigged if the person has home field advantage.

[D]

Yeah, yeah. Which in the playoffs matters quite a.

[A]

Bit actually, because you get more games at home.

[C]

But I think you're right that like, if you like the integral over all seasons of all sports, that it kind of evens out.

[D]

But the mystery is. But what's interesting about it is that it persists because it doesn't really seem to be a conscious thing. It's things they've talked about and it actually just does seem to be largely the result of. Of referees being influenced by the crowds around them. And the other thing that's interesting is.

[B]

And you say that like it's a bad thing, I feel like crowds, that's the whole point of screaming when you're in the crowd.

[A]

So I wonder, have they ever looked at this? I wonder if anyone's looked at this at stadiums or where they have really crappy attendance. Is anyone tracked?

[D]

Yeah. So one of the reasons we know this is that. So in Italy there was a period where teams where some teams were forced to play in front of empty stadiums because of hooliganism and essentially the fans lost the right to go. And when they did that, what they found was that in the games that were played in the empty stadiums, the home team received no advantage at all.

[A]

That's awesome.

[D]

So the other thing, one last thing I'll say is that.

[B]

Welcome to the lightning numbers round.

[D]

The other thing I'll say is that the home. The fact that home teams win more games than away teams, that's a pretty consistent thing. Is almost entirely due to the refereeing bias. So anyway.

[B]

All right, so next up in the lightning numbers round.

[A]

Mine is lightning. Mine's quick.

[B]

What's yours?

[A]

Mine is 80%, which is the amount of Venezuela's beer that a company called Empressas Polar was responsible for producing. Unfortunately, they can't get the foreign currency they need from the government anymore to actually import the ingredients necessary to brew said beer. And so Venezuela basically doesn't have Beer has no beer.

[C]

Venezuela and this is emergency.

[D]

They can't even drink to keep themselves happy.

[A]

This is especially stinging because recently, recently the government mandated a two day work week. So a five day weekend for government employees. They can't even enjoy their days off.

[B]

Venezuela is such a basket case right now that it doesn't even have the money to pay to print the money. Yeah, that is the most amazing thing. Even Zimbabwe always managed to find the money to print a new new 80, quadrillion Zimbabwean dollar note. The Venezuelans outsource their money printing to a company in Brazil and the company in Brazil is just refusing to print any more money because the Venezuelans have no money to pay for the money. Venezuela is the real life, genuine sort of oil industry bankruptcy which is causing massive, massive hardship for millions and millions of people. And we feel for them much more than we feel for the people of in North Dakota. Jim, what's your number?

[D]

721 million which is the amount that Barack Obama spent personally. Not I don't mean himself personally, but the Barack Obama campaign spent on the presidential election campaign of 2012. And the reason I mention that is because Donald Trump is now having to figure out how he is going to fund his presidential campaign. And his self funding of his primary campaign was a huge selling point. It was something he talked about all the time and he has come to terms I think with the fact that he's not going to be able to do that because even Trump, or maybe especially Trump can't come up with that amount of money. And the interesting question I think is how that's going to affect his selling point. Now I'm sure Trump will find some way to spin it so that it doesn't actually seem like he's doing what he's doing. But it was actually amazing how many of Trump's supporters mentioned the fact during the primary that he was self funding as a very positive thing.

[B]

And what's more like it's far from clear that he's gonna be able to raise anything like $700 million.

[D]

Now Romney only raised 450 million but of course Romney lost and I was assuming Trump would want to go for the winning number.

[A]

Yeah. Also there was a lot of super PAC money that compensated for what Romney didn't get. Trump's way back.

[C]

Trump gets free press.

[D]

Of course he does. I just don't know. I just don't think he can get free press on that level.

[A]

I have a theoretical question that this is something cuz I've argued several times there's no way Trump could have ever self funded even if he had wanted to. What some people have said is that he could have maybe taken out debts against his illiquid properties and use that to self fund. Does that strike anyone else as realistic? Other than the fact that he probably just wouldn't do it? Could he do you think anyone would actually give him a loan against like Trump Enterprises presidential campaign Trump's entire career.

[B]

Has been based on getting large loans from banks before presidential campaign it doesn't matter. Like it's money is fungible. You know, if you're borrowing against an asset, then you know, this is just like the housing bubble. The lenders are lending against the asset, not lending against the use of funds.

[D]

As long as the collateral is reasonable. But I mean, it's hard to imagine Trump doing that, I would think.

[B]

Lightning round, lightning round Slowest lightning, slowest.

[D]

Lightning round, slow times.

[B]

I like slow lightning, slow thunder, slow lightning. Comment on your number with $25 million, which is my. I just got back from the Milken Institute's global conference in Los Angeles where it was announced with great fair, with great fanfare that Linda and Stuart Resnick. Now this is, this is actually the, the headline on the press release. I'm going to read this verbatim. Resnick foundation pledges $25 million to the Linda and Stewart resident Resnick center for Public Health. This is what I call billionaire philanthropimsy. Which is, which is where the billionaire couple, Linda and Stuart resnick have given $25 million basically to the billionaire Mike Milken so that he doesn't need to fund the Milken Institute for Public Health to quite the same degree that he had been up until. Thereon too. It's just philanthropy money sloshing randomly from one billionaire to another. And this all takes place in the background of a conference where I swear to God, the hotel parking lot had a $67 million private jet parked in it. The parking lot. Bombardier had like, created this private jet in the parking lot so that all of the potential buyers of the private jet could come in and have a look around and go, this looks n. I'll order one of these.

[D]

Rather than give $67 million to the cause of public health, I'll buy a Bombardier jet.

[B]

Exactly. It was, it was, it was a sight to behold. It was great fun. Anyway, that is it for us this week. Thank you so much. Jim Soake.

[C]

Thank you.

[B]

I feel like.

[A]

Thanks for having me.

[B]

All Moneybox columnists are awesome, and this is the first and last time I'LL say anything nice about Jordan? Truly, no. This, this has been, this has been amazing. Thanks to Audrey Quinn for managing to navigate the brand new Slate podcasting studios in downtown Brooklyn. Thank you to Steve Lichti and Andy Bowers who are in charge of building out these podcasting studios in downtown Brooklyn and where the entire Panoply network is based, basically, which can be [e-mail] panoply so we will talk to you next week on Slate Money. Do email us and tell us what you think of this new sound. Slatemoneylate.com thank you.