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The following podcast contains explicit language.
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Hello, and welcome to the House of Cards edition of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon. I am joined not only by. By Anna Shymansky.
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Hello.
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Not only by the Huffington Post's amazing Emily Begg. Hello. But also by best selling, internationally renowned investigative journalist and author, Mr. John Carreyrou.
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Hello.
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Welcome to Slate Money. I kind of feel like you don't need any introduction anymore because our entire audience has probably read your book at this point and heard you on a million podcasts and you are just the most celebrity journalist in America right now. So congratulations on the book, which is.
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Called Bad Secrets and Lies in a Silicon Valley Startup.
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And of course, you have written this entire book basically about Slate Money's favorite grifter, Ms. Elizabeth Holmes. So we are going to talk to you about that. We are also going to talk about Just capital and the Just 500, which is a new stock index. If you don't like the s and P500 because you think it's a bit evil, this is maybe a bit less evil. We are going to talk about Netflix because New York Magazine has a really kind of deep dive into what they're up to over there, which I learned quite a lot from. But of course, John, we are going to start with this book of yours, which is selling like hotcakes, I hear. Is this true?
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Oh, I mean, I guess it's been on the New York Times bestseller list for three weeks in a row now, albeit slipping each week from 6 to 9 to 15 this past week. But yeah, I mean, sales have been really not only good, but very consistent. And you know, judging from my email inbox and all the inmails I get over LinkedIn and the tweets, it really seems to be striking a chord and I'm getting a lot of great reactions. So it's been awesome.
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B
So what's the reason for that? I mean, aside from the fact that it's just like a page turner of a book and people just really want to read what happens next. But what chords do you think you struck?
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I think Silicon Valley, I mean, this book is really, it's about a company and what happened within a startup in Silicon Valley, but it's really also about the echo space system of Silicon Valley and what really goes on there. And I think Silicon Valley is an object of fascination in America and beyond. Not just America. I mean, there's been an HBO show about Silicon Valley for a couple years, and it's a part of the country that has become really important to the American economy. Some of the companies that have come out of Silicon Valley, like Facebook and Google, Amazon, if you stretch the definition of what Silicon Valley is, are some of the biggest. Apple, certainly the biggest companies today. Some call them even monopolies. And then there's been this new breed of startups that have grown quickly and become valued at more than a billion dollars. A term was coined in 2013 to describe them unicorns. There are now more than a hundred of them. So it's a part of the country that represents the tech industry, and the tech industry has become a huge part of our economy. But also, I think it's important culturally.
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B
So. Okay. I mean, I'm kind of with you so far, but I still don't think it explains. It's not like every Silicon Valley book flies off the shelves like yours does. There have been many Silicon Valley books.
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D
I have some theories because I thought the book was really good. Like I was saying before, like, Felix, like you said, it's an actual business book that is a page turner. You can't put it down. And that is rare. I mean, we've all read a lot of business books, and most of them are not page turners. They're kind of boring. Can we admit it? And I think part of the fascination with the Theranos story, which I guess our listeners pretty much know, but is with this woman, Elizabeth Holmes, who's, you know, this young woman drops out of Stanford and manages to just hoodwink all these, like, supposedly brilliant men. And it's all. It seems to be almost all men.
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That she hoodwinks and men certain.
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Henry Kissinger, George Schultz, these, like, VCs with all this money. Yes. Men of a certain age. And, you know, she's this. This blonde woman. She appears on the COVID of Fortune, on the COVID of Wired. I mean, everyone just seems to be totally taken in by her. And I think that's. That's got to be a half of the appeal of the story.
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Oh, for sure. I mean, she's. Yeah, no, she. There. There's a great character at the center of this scandal. And. And as you said, her name's Elizabeth Holmes, and she's a young, attractive woman with a char. She hoodwinked all these people. And I think that the enduring fascination with the Theranos story, I mean, I first broke it three and a half or three about three years ago, and actually a little less than about two and a half years ago, I think. And it's been three and a half years of my life because it took almost a year to publish the first story. But I think the enduring fascination is people are trying to figure out what was going on in her head. What was she thinking? Was she.
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Do you have clarity on that? Because I don't feel like having read your book. I still don't like I'm much further in working that one out.
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Yeah, well, I mean, as I've explained on various other podcasts and interviews, this wasn't a Madoff like fraud in the sense that Bernie Madoff in the late 80s, on a certain day decided, I'm not investing the money anymore and I'm doing a Ponzi scheme and I'm just going to return the money that comes in from new investors to old investors. And from there on. It was a fraud and it was cheating. Elizabeth Holmes didn't drop out of Stanford, I think, to create a Ponzi. To create a Ponzi or to do a long con. She dropped out wanting to build a company and to become a successful entrepreneur and to walk in the footsteps of Jobs and Larry Ellison and Gates. And she also had this vision, which was for a blood testing device that I think she truly thought if she could achieve, fulfill the vision would really be for the good of society. And the way this became a fraud is that along the way she ran into setbacks, as all entrepreneurs do. And rather than acknowledging the setbacks and then regrouping and fixing the problems and not continuing to over promise, she did the exact opposite. She continued to over promise and continued to pretend that she had achieved what she claimed to have achieved. And by the time she went live with the finger stick tests in Walgreens stores, the gap between her promises and the reality was enormous. And it was a tantamount to a fraud. So there's, there's that. I don't think.
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I mean, yeah, I was just gonna.
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Say it seems almost that she bought so into the Silicon Valley narrative that she felt that if she just kept moving forward, eventually it would work out. Because she seemed almost obsessed with Jobs and wanting to kind of follow in his footsteps and all of these other Silicon Valley entrepreneurs who often did put forward that may be 100% ready.
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When Steve Jobs announced the iPhone, it didn't work.
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C
No, no, I completely. Yeah, sorry.
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B
And, and, and this is a standard. And there are two sort of pushbacks, I guess, which I've been hearing from Silicon Valley types against your sort of scandalous narrative. And this is one of them, is the sort of everybody does it pushback, which is that Silicon Valley is based on this fake it till you make it paradigm. Everyone lies. And maybe this was worse in kind because she was lying in a way that actual human beings could have serious health consequences as a result. Rather than lying about software, which is like a whiter lie, it's a more victimless crime, as it were. But it's a pretty standard kind of thing for Silicon Valley entrepreneurs to. To do. Do you think that's true, or was she, like, just way more of a liar than like, what you find in the rest of Silicon Valley?
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I think there's a lot of both. I think she clearly channeled the Silicon Valley fake it until you make it ethos. I mean, one of the first advisors she had in the early years of the company was Larry Ellison. And Larry Ellison was famous for in the early years of Oracle, you know, promising things that, that he was years from achieving or that rather his software engineers were years making reality, and even shipping early versions of the Oracle database software that was crawling with bugs that barely worked, and using the early clients, among them government agencies, to basically help them debug the Oracle software. Again, it was frustrating for those early clients, but it was somewhat victimless in that beyond frustration of the user, lives weren't at stake. When you're dealing with a medical product, it's a completely different ballgame. Either lost sight of that or refused to. Part of her refused to acknowledge it, which is hypocritical because at the height of her fame, when she started being a fixture at tech conferences and healthcare conferences and gracing the covers of magazine, she would often appeal to people's empathy about what the Theranos technology could do and say it could help save lives and so on and so forth. So she was very willing to play that card when she was just becoming famous and she was still hoodwinking people. And then when I exposed the scandal and there began to be all this fallout and a million test results were voided or corrected, you haven't heard anything from her about apologizing to patients or anything like that.
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B
And there's no evidence that she actually is sorry for what she did.
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I've seen zero evidence of.
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Really. I thought it was amazing because so many Silicon Valley companies and CEOs talk about changing the world. And she was no different. She wanted to change the world. And she talked, you know, she tried to talk movingly about, like, saving lives and catching things earlier, but then you had that, like, heartbreaking anecdote in the book about that one man who was so wrought with Anxiety over faking. You'll. You'll tell the story and then he. He kills himself. And she didn't even respond.
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She basically didn't bat an eye. And, you know, this is. Ian Gibbons was essentially the first real biochemist that she hired in 2005. So about 18 months into the life of the company, or less. And then he led or co led the chemistry efforts to create the blood tests known as assays that would be put on the device and eventually complained that Channing Robertson, who was Elizabeth Stanford Engineering School professor who backed her when she dropped out and was a member of her board, and Ian had been friends with him, and he complained to him about the way Elizabeth was managing the company in 2010. And Channing Robertson proceeded to stab him in the back and to tell Elizabeth exactly what Ian had confided in him. And she then fired him. And colleagues interceded on his behalf. So she agreed to rehire him. But then he was demoted. And that was sort of the beginning of a long spiral in which he became clinically depressed. And part of what was going on is he became depressed that she was misrepresenting the technology to outsiders and to board members. And he was also depressed that his exacting standards for accuracy, when they moved the assays from the bench to the devices that they were trying to develop, that. That the engineers weren't reproducing the accuracy. And that drove him crazy.
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And this was not just him. You have story after story after story in this book of people with, like, biomathematics degrees or chemistry degrees or, you know, people who have grown up in the medical system and with Hippocratic oaths and all of this kind of thing, sort of looking at what's going on, seeing some very bad science going on and saying this is just wrong, and either complaining about it or trying to complain and getting fired or quitting or this, this is a narrative which happens over and over again in the book. And it raised a couple of questions for me. I mean, one big question which is basically like, how did she hire these people? At the beginning of the book you mentioned, like, the very first head of R and D, didn't think that you could do blood tests on such small samples, but she still somehow managed to hire him as her very first head of R and D. Like, what was it about these very noble and ethical scientists that they went to work for something which seemed too good to be true?
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Well, I mean, I think a lot of them joined with the idea that they were going to work on trying to make her vision feasible, or some version of her vision feasible. What I learned in reporting the book especially is that most Theranos employees were actually smart, had good educations, were accomplished and ethical, and that really where the company went off the rails was with its leadership. The two people at the top, the founder and CEO and her boyfriend, Sunny Balwani, who was the COO and president. And really, aside from a few exceptions, most of the people. And I talked to upwards of 60, almost 70 former Theranos employees. These were all really nice, smart, upstanding people, some of whom were scientists and were real scientists. And it was a case where these well meaning people joined the company and then were quickly sort of. Well, first they were silenced because whenever they emitted doubts or objections, it became very clear and it was told to them explicitly that Elizabeth and Sonny didn't want to hear it. And often if they persisted, they were either marginalized or fired. And so it was a culture in which dissent or productive debate was not accepted. And that's how you had real scientists involved in the company who sort of passively became a party. They didn't become a party of the fraud because they didn't actively participate, but their reputations and their careers became tainted by it because the two people at the top were running the company.
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And this is the.
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C
I was gonna say. And it also seemed as though the management issues actually made it impossible to ever achieve anything because they kept everyone so siloed.
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A
That's a great insight. Yeah, no, that's a very good insight. I mean, the silos made it very hard for the chemists and the engineers. I mean, basically, when you're trying to build a blood testing machine, you need two types of people. You need biochemists and you need engineers. The engineers work on the hardware and the biochemists work on the assays that will then be transferred to the hardware. And to create an environment in which you make communications between those two groups difficult is completely shooting yourself in the foot.
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So this is the other bit of pushback which you hear, which is that this is the point at which Theranos really does depart from the Silicon Valley playbook, that Silicon Valley startups try and do not generally operate with this kind of degree of internal secrecy. They don't have these kind of crazy management created silos. This is where it all starts getting very odd and very weird and unusual. And the weird fact about Theranos is it only had one VC investment, right? Like, this was not an old fashioned VC funded company, and it had many more individual investments from Old white guys who didn't really understand what they were getting into.
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Yeah, no, that's true for sure. In the last funding rounds, the ones that started in late 2013 and ended in early 2015. And that's when Theranos raised the lion's share of the nearly billion dollars it raised over 12 years. It was during that period that more than 700 million came, as you say, from billionaires in their family offices. Not sophisticated Silicon Valley venture capitalists and certainly not ones who had experience investing in med tech. However, there were VCs early on. People like Don Lucas was a well known vent capitalist who had groomed Larry Ellison and helped him take Oracle public in the mid-80s. He became taken with her vision. Larry Ellison himself invested a firm called ATA Ventures, which is not very well known. VC firm in Silicon Valley also invested, but back then they were investing in a company that was brand new. A young founder who was trying to achieve something but hadn't yet achieved it. It was more of a traditional situation where when you're a venture capitalist, you know that most of your bets are going to fail. A couple may survive and then one might become, if you're lucky, Facebook. I would argue that those early investors and VC firms were not defrauded. They knew what they were getting into, which were long odds of success. The people who were defrauded were the billionaires and the family offices of those billionaires.
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Boss, Mr. Rupert Murdoch.
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That's right. To the tune of $125 million. They were defrauded and you could say they weren't the smart money. They were. I mean, in a way you could call them the dumb money.
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Betsy DeVos especially, I feel, I feel confident saying that.
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So in Slate plus, we're going to talk a little bit more about like the governance and the board because that is a really fascinating whole aspect of this whole story. Let's talk about Netflix because we have a bunch more information now thanks to New York magazine about how this company runs itself internally and the metrics they use for determining, you know, what they're going to fund. And they're spending people say $8 billion this year on content. But if you actually look at the cash flow statement, it's more like 11 billion. I think it's absolutely insane amounts of money. And they're greenlighting. They have a system where like two or three levels below Ted Sarandos is in charge of content, is allowed to just spend millions of dollars to greenlight shows.
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Yeah, so we're talking about this Netflix story that ran in New York magazine that really dove deeply into how they make their decisions. And basically, I feel confident that we could all make the same decisions because they just say yes to almost everything. And their whole goal is to scale. Right. To get more, use, more content. There's a Sarah Dose quote in the piece that was like, more users. No, more content, more users, more revenue. More content, more users, more revenue.
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And they're just throwing money at essentially any project. And they're also really, I would argue, overpaying for some, for people like Shonda Rhimes, who might be great, but the amount of money they're paying is just insane. And one has to question whether this type of spending on this type of content, Content is ultimately going to pay off.
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So how would you value, you know, a piece of Shonda Rhimes content on Netflix? This is. This is like the big question. The thing which I learned from the piece, which I never really appreciated before, was that Netflix has basically got four or five times as many subscribers now as it did when it first launched House of Cards. You know, when it first launched House of Cards, I'm like, oh, they need to have a few homegrown shows, so they're not totally at the mercy of the movie studios. But now it's become. It's not a question of being at the mercy of the movie studios, because everyone is watching it for these homegrown shows. And so the question which I have for you is if you're saying, like, it's not worth what they're paying, how do you judge what's worth it? Because they have managed to get, like, 100 million subscribers.
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Yeah. So I would say it makes total sense for them to switch to more original content, because as we're seeing with all of these now mergers between content and telecom companies, they're going to have a lot of competition, and a lot of the content that they had put on is going to be taken off of their service. So it makes total sense. However, if you look at the amount of money that they're spending, and then you kind of think moving forward, they've already got a lot of the. They've already earned a lot of the easy money, if you're thinking about domestic subscribers to. To Netflix. So now moving forward, they're expanding internationally, and that's going to be much more difficult. So I just wonder if spending this type of money without seemingly a lot of analysis going into how they're spending it will ultimately bear fruit.
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I. I'm not convinced that it's harder to expand internationally than it is domestically. Because I know that the Spanish speaking population in America is much more likely to statistically to subscribe to Netflix than the English speaking population is. And the English language entertainment industry is highly competitive and people have a huge amount of choice in terms of what they watch, unlike most other languages. And I feel like in many ways if you can win in English language, you can win in just about any other language using the same playbook.
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The question is, when exactly do they plan on trying to make a profit? I think that the negative cash flow for this year is projected to be about $3 billion and they have 6 billion in debt. But I'm not sure that includes the off balance sheet liabilities. And this is a model that unquestionably has worked for them over the decade and it's been enabled by the bull run. We've had this easy money environment and markets have been going up, but eventually history tells us there will be a downdraft in the markets and the environment will change. The way it changed in 2008. Suddenly a company like GE, people were wondering whether GE was going to go under. I would never have thought in a million years that GE would be on the cusp of going under. But that's what happened in 2008.
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B
They had crazy leverage, though. I don't think Netflix is near leverage.
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No, especially if you look at enterprise value. They're not, however. So people often talk about the fact that Netflix is primarily like moving forward. They say they're going to be debt financed. If you look at their financial statements, if you look at the transcript of the conference call, they have no plan on being cash flow positive anytime soon. And as you said, in a low rate environment, that's not actually a bad idea because even though they do have $6.5 billion of debt, that debt is actually, they have a pretty smooth maturity profile. I'll give them credit for that. So it's not like all their debts do at one time and they don't have a maturity until 2021. So this could work for a while. However, one point you brought up, and I think this is important, is that they have a lot of content liabilities that do not show up on their balance sheet. Billions of dollars of content liabilities that don't show up on their balance sheet because they don't have to because of where the show is in process. They don't have to account it yet for it yet.
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So they're making promises to studios and to producers saying, we will pay you this much in the Future. And that's not. That doesn't count as a liab.
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This is what I will say about. So right now, Netflix membership is $10.99 a month. Average cable bill is like $100 a month. If you just have Netflix, which at points over the past few years I have, that's almost as good right now with all the content on there as a cable bill. 1099 versus $100. That means there's so much room for Netflix to raise prices. Everyone uses it, Everyone is watching. Everyone in this room uses Netflix.
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C
Right?
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And HBO is what, 1599 has so.
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Much more content than HBO and it.
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Has room to raise price.
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So I want so much room to raise prices.
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C
I actually do. I question how much room they have to raise prices because they've been operating in an environment where they've been the king of streaming. And moving forward, there are now going to be a lot of players with a lot of different revenue sources that are getting into streaming. And I don't think any more competitive environment. They're going to have the ability to raise prices significantly.
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D
I think that they are. I mean, I use HBO now. I use Amazon Prime. I use a lot of these services, and Netflix is the best one. They're just, their, their technology is extremely good. I think they say in the piece they, they say every Netflix user isn't. Is an individual. In other words, the homepage is different for everyone who comes because they're like so precisely targeting you and it's kind of like a black magic voodoo. But like in the case of entertainment.
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In terms of personalized home screens, no one else is using, I just think.
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They have a very, very good game going. And you use the other services, they just, they don't compare.
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Right.
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D
But Netflix, such an advantage has one.
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Essentially one revenue stream as opposed to they're going to be competing with much larger conglomerates who have a tremendous number of revenue streams, which means they can lose money. They can lose a tremendous amount of money, more money than Netflix loses on their streaming content. So we're.
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Amazon has been doing and has been losing.
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Right. But let's, let's put talking about debt, finance, crazy, like vertically integrated, you know, deals. This is the week where number one AT&T won its court case against the Trump administration and was given permission to buy Time Warner, which I think it's going to do this week or maybe. Yeah. And that's going to create exactly this kind of combination of pipe and content that Netflix has shown is incredibly powerful. They're going to do that, that largely by issuing what Paul Ford last week called magic coins, as in stock. So that you can kind of understand. But at the same time, we saw a $65 billion cash bid by Comcast for the 21st Century Fox assets that Rupert Murdoch has agreed to sell to Disney. And that's cash. That means they're going to have to raise $65 billion of debt. There has never been a bigger cash deal like in the history of the. Far as I know. And if you're worried about Netflix in terms of cash flow and debt service and that kind of thing, just imagine what the Comcast balance sheet looks like.
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C
No, this is actually a little different because from what I've heard, the assets that they're trying to purchase are, they generate a lot of free cash flow. So the idea is, yes, they're obviously taking on debt to finance this, but they're going to be able to pay down that debt pretty reasonably. And these 21st Century Fox assets and the sky assets that they're looking at, we're not going to see assets like this coming up to be sold anytime soon, any other of this level of assets. So it makes perfect sense to me why we're seeing this from Comcast.
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A
And it's also totally in response to Netflix and Amazon and also the other players, Apple and Facebook and Google, who are increasingly getting into the game, too. Those deals are entirely in response to that, and they probably are smart. You need to prepare for. I mean, in some ways, Netflix and Amazon already have taken over. I cut the cord two years ago and I watch three things. I watch HBO only because I now get it through. I learned recently, I get it through our AT&T family plan and Netflix and Amazon. And that's all we need in our household. We don't need anything that cable has to offer anymore.
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B
Okay, finally, let's talk about this new alternative to the s and P500. I wrote a piece about this on Slate. It's called the just 500, or that's what people are trying to call it. And it seems almost designed to make people roll their eyes. It's like, like Deepak Chopra and Arianna Huffington and Paul Tudor Jones saying, like, we've got, like, a more ethical version of the S&P 500. And Emily Peck is shaking her head.
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D
Here I'm rolling my eyes, shaking my head. I mean, this is just. It's just a, to my mind, a blatant PR move by Goldman Sachs and Paul Tudor Jones, who recently famously sent a note to his friend Harvey Weinstein saying, love you and this will all blow over soon. So that's him, that's Paul Tudor Jones. And he likes to talk about reforming capitalism and making capitalism better and more moral and more just. And I guess Goldman Sachs wants to do that also. But. And a lot of other, there are a lot of other indexes I know like this that claim to be, you know, more ethical and more just and you can buy your way into moral superiority but still make money. And it's just ridiculous. To my mind, these companies and these investors, they need to look inside themselves and try to make their companies more just, their banks more just. This is just. I think it's just PR tomfoolery.
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B
Okay, I'm going to take the other side of this and there is no one more cynical than me when it comes to, to Goldman Sachs and Paul Tudor Jones. And I spent a lot of time on the Just Capital website and I was convinced I actually buy this product. And I understand all the reasons why you would be cynical, but it turns out that firstly, the criteria they are using is not, you know, whatever Deepak Chopra and Paul Tudor Jones dreamed up in some board meeting sometime. They had have done extensive surveys of 72,000Americans. This is like large n. And it turns out that regardless of your political affiliation and for all that we believe that we're living in a very sort of bifurcated society right now. Americans all believe more or less the same things about how companies should treat their workers, how they should treat the supplier, their suppliers, the environment, corporate governance, these kind of things. And then you can quantify, if you try hard enough, most of those things to a greater or lesser extent, and they've spent a huge amount of effort. And I really do give them credit for this, for building this very transparent and also quite complicated algorithm basically, which takes the thousand companies in the Russell 1000, basically the biggest thousand companies in America and picking the top 500 of them and saying these are just as diversified, they're just as diversified by industry. You basically get the same exposure to the stock market that you would if you were investing in the s and P500, but you're avoiding the crappiest companies. And that's good.
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C
Yeah, and I think that that is true, that that is essentially what they're doing because it's weighted exactly the same as the Russell 1000. So it's not as though it's. It's entirely in one industry, not in another. It is just that there are certain companies that people may not want to put their money towards. And that's fine. Now I would argue that my guess is this is going to be very, very similar. The actual stocks in it are going to be very, very similar to any regular index. I would question whether there's going to be that big of differences.
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B
Well, no, there is a difference because in any given industry they only have 50% of the stocks. So you know, of the Russell 1000.
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C
But if you're looking at it, yeah, if you had an index that also had 500 companies, my guess is it's going to be pretty similar companies.
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B
No, because they're only picking the top 50% of the company. So half of the, like, you know, it's. You can't say this exactly, but to a first approximation, half of the companies in the s and P500 are not in the just 500. It's like, you know, know. But it's a. And it's not a random sort of half that they're taking. It's a very un. Random half. But net, net chances are that if you aggregate the whole thing, the performance is going to be pretty similar. And they haven't backtested it very far and for very good reasons. They're not trying to pretend that they can backtest this thing. But I very much doubt that the performance of the just 500 is going to be plus or minus more than about three or four points from.
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C
Yeah, it'll be essentially the same thing.
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D
And the one other thing I'll say is that if you actually care about how companies treat their workers or about the environment, then if you're a responsible super rich person like Paul Tudor Jones, you would work with the government, work with Goldman Sachs to like say improve regulations or to give the Consumer Finance Protection Bureau more power. Like know you, you wouldn't be at cross currents with all the efforts countrywide nationally to actually improve conditions for workers instead of this like honestly bullshit that's not gonna do anything for any of the people that they presume to care.
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B
About or the environment.
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D
Like it's just, it's just a meaningless gesture.
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B
Well, okay, so is this gonna make the world a better place? No, no, no. But I am not saying that it will.
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A
Will.
- [35:30]
B
And it's very easy when someone attempts to change something to say, well, you shouldn't have attempted to change this, you should have attempted to change that. And so you're saying, why are you putting effort into this when you could have done that? I don't know that Paul Tudor Jones actually has any ability to strengthen the Consumer Financial Protection Bureau, but he does have. Neither does Goldman Sachs. And the one thing they do have the ability to do is to. For the first time. And this is, this is actually the thing which you said, which I would disagree with factually. You say that there are lots of indexes like this. There aren't. No. There are ethical investing.
- [36:07]
D
I Googled, Felix.
- [36:09]
B
There are ethical investment funds. There are funds which try and use various screens to sort of like say we won't invest in guns and tobacco and these kind of things. Those funds tend to be. Relatively expensive and also much narrower. And they tend to work on a sort of negative basis of like, we won't invest in this and we won't invest in that. They're not trying to reward good behavior in the same way. And I think if you just want a kind of passive investment. If I want to invest in the stock market, the broad stock market, but just not have investments in the worst companies in the stock market, this is a relatively new. Like you haven't been able to do that before in this way.
- [36:54]
A
Is anyone going to profit from this index, namely the people who came up with it?
- [37:00]
B
So the two entities which are putting the fund together are Goldman Sachs, which is not doing this for free. And I'm sure it will make some money on it. I doubt it'll make very much money by Goldman Sachs handlers, but it will make some money. And Just Capital, which is A. The 501 is a nonprofit and the fees are 0.2%, which is higher than the cheapest S and P funds for sure, which now you can get for like three or four basis points if you look hard enough. But it's still not expensive. I think that it will help to pay some of the expenses of Just Capital, but not all of them. What Just Capital is doing is incredibly expensive and labor intensive, which is one of the reasons this hasn't been done. Because before.
- [37:50]
D
Yeah.
- [37:50]
C
And I don't think there's anything wrong with putting out a product and making money out of it. They're not saying this is a work of philanthropy.
- [37:56]
B
Well, they are. It's a 501C3.
- [37:58]
C
Well, they're. No, just capital is. But this ETF is not right. You know what I'm saying? It is a product. And the product they can make money off and they're not pretending they're not. So I don't think there's anything wrong with that.
- [38:11]
D
It's also a PR play.
- [38:13]
C
Of course it is.
- [38:14]
D
The profit to Goldman is just the halo. Right, Right.
- [38:17]
B
And, and, and Goldman could. Could use a Halo. Occasionally.
- [38:20]
D
Always could use a halo.
- [38:24]
B
Okay, let's, let's have a numbers round. Mr. John. Carrie, did you bring a number?
- [38:31]
A
I need a, a couple minutes to think about that one.
- [38:34]
B
Let's. Okay, so in that case, I'll start with $80 million, which is the price that Singapore Airlines was trying to sell a couple of secondhand A380s for. The. You might remember the A380, it's like the big airliner in the world. It's the massive, like double decker one. And it got launched a few years ago with great fanfare, but it needs. There aren't that many airports in the world which can even encompass such a monstrous beast. And so Singapore Airlines, for whatever reason, decided it didn't want a couple of its early a380s anymore, put them on the market. Emirates airlines recently ordered 20 new A380s, brand new. The list price is $445 million each. They're not paying that much. They might be paying as little as half that if you put in a big order. But that gives you an idea of like how much airlines are in principle willing to pay for these things. No one wanted the Singapore Airlines A380, even at the ultra discounted rate of 80 million. So they're selling them off for scrap, basically because the scrap value is 80 million. And that's aircraft economics. You know, it's very bizarre how the value of a secondhand plane, especially the early ones, which weren't quite as, you know, technologically advanced as the slightly second generation ones, like, people just don't want those planes sometimes. And also the scrap value of those planes is $80 million.
- [40:07]
C
That's a lot of scrap.
- [40:08]
A
The A380 program has basically been a bust.
- [40:11]
B
It has not. Yeah, and that's one of the other things going on here, is that when Emirates is putting in this order for 20 planes, part of it is because they want the 20 planes, but part of it is that's the only way they can ensure that the A380 still keeps on getting made. And, and this is very good for like the ultra long haul flights, which makes it attractive to a handful of airlines in places like Singapore and Australia and, and the Middle East. But yeah, you're not going to see these things flying across the Americas anytime soon.
- [40:41]
C
Additional numbers, more numbers.
- [40:43]
B
Yeah. What's your number, Emily?
- [40:44]
D
My number is $350,000. That is the amount of money awarded to a guy named Eric Abramovitz. He is a clarinet player in Canada and in 2013, he applied for a very prestigious clarinet scholarship in Los Angeles. Only two clarinet players are awarded this very prestigious, prestigious scholarship. So he applies, he goes down to la, he auditions, he gets in an email, they say you got the scholarship worth $50,000 a year. But Eric Abramovitz never saw that email because his girlfriend got to it first, deleted it, created a dummy account from the guy in charge of the program and told him he was rejected. So he never went and blah blah, blah, he sued. And you can read the whole story.
- [41:30]
B
In the Montreal Gazette that it's an astonishing story. If you love someone very much, do not delete their emails. And she's just like, I want you to stay in Montreal, I don't want you to move to LA. And so she's ah.
- [41:43]
D
And P.S. they broke up anyway, shockingly, seems like.
- [41:47]
C
Such a reasonable person.
- [41:48]
B
It took him two years before. It took him two years before he discovered what she'd done.
- [41:53]
D
Yes. Sleuth into the email account and everything. It's sounds, it's very fascinating read, John.
- [42:01]
B
Carrie, you're an expert in deleted emails. You spent a long time trying to find emails that people deleted by looking for forwards and stuff. What's your number anyway?
- [42:14]
A
So the number that comes to mind is 2026, which is eight years from now. And it was announced this week that the World cup cup will be held in the U.S. canada and Mexico. I think that makes sense after holding the current World cup in Russia and the next one in Qatar. I'm not sure what the World cup will represent then and what even it represents now in terms of economic benefits to the hosts. But as an American citizen and resident, I, I'm happy that we'll be hosting the World cup in eight years.
- [42:54]
B
I just wonder, does this mean that Canada will automatically get to play in the World cup as a host nation?
- [43:01]
A
I think usually host nations are going to.
- [43:03]
B
The host nation is always guaranteed if you have three host nations. Has Canada ever played in the World Cup?
- [43:08]
A
I don't know. I think Canada has played at least once in the World Cup.
- [43:12]
B
I'm not sure that'll be a sight to behold.
- [43:16]
C
So my number is 0.8%. So last month's lorry driver strike in Brazil cost the country 0.8% of GDP at 10 day strike, which is pretty massive. And it's. Right now there's a lot going on in Latin America. There's a lot going on in emerging markets in general.
- [43:39]
B
What's going on in Argentina? Argentina is falling off.
- [43:42]
C
They are falling off right now. Yeah. Well, now and more news that maybe the central bank will continue to perhaps not be independent. So it's a whole separate issue. But in Brazil as well, you're having just a tremendous number of economic issues. You have an upcoming election, and it's really scary what could happen with that election because the guy who's leading right now, Bolsonaro, is like Trump, but times 10 in terms of worse. He's horrible, horrible human being. And that is a large economy. And so this is an area that I think people should be focusing on a little bit more.
- [44:15]
B
Okay, The Americas will have the World cup in 2026, but only if it still exists as a concept.
- [44:25]
D
If the Canadian American war isn't going.
- [44:27]
B
On, I would urge those of you who have a little bit of time to read the speech that my former boss, Christia Freeland, who's currently the Canadian foreign minister, gave at Foreign Policy this week, which was an amazing speech. And I think that the Canadians are really doing their level best to try and stand up for the principles of liberal democracy that seem to have disappeared in every other part of the planet. But that may or may not be available in podcast form somewhere. If you need everything in podcast form, then keep on subscribing to Slate Money. Thank you for subscribing. Leave us a little review on the itunes store. So come back next week where we will still be produced by Dan Schrader, I believe. And so thank you to Dan. Keep the emails coming slatemoneylate.com and we will talk to you next week on Slate Money. That.