Slate Money – "The Inspecting Our Own Meat Edition"

Date: April 20, 2019
Host: Felix Salmon (A)
Co-hosts: Emily Peck (B), Anna Shymansky (C)
Podcast Theme: A lively recap and analysis of the week's key business and finance stories, focusing this week on tech IPOs (Pinterest, Zoom, Lyft), the transformation of Blackstone, the dismantling of the Consumer Financial Protection Bureau, and the aftermath of the Notre Dame fire—all through the lens of market behavior, regulation, and the public/private balance in funding public goods.

Episode Overview

In this episode, the Slate Money team dissects the recent rush of high-profile tech IPOs (particularly Pinterest and Zoom), discusses Blackstone’s corporate restructuring (and what it signals about public markets), scrutinizes the evolution—some would say decimation—of the Consumer Financial Protection Bureau, and reflects on what the Notre Dame fire reveals about infrastructure funding and society’s approach to public goods. The conversation is candid, irreverent, and nuanced, with a focus on what these stories reveal about broader economic and political forces.

1. The IPO Boom: Pinterest, Zoom, and Market Sentiment

(00:10 – 15:56)

Key Points

• IPO landscape: Recent tech IPOs (Lyft, Pinterest, Zoom) have generated significant media and market excitement.
• Lyft: Initially hyped, but “fell off a cliff a little bit” post-IPO as investor optimism dissipated quickly (01:16).
• Zoom: CEO Eric Yuan’s honesty about the stock being overpriced was praised:
  • "The CEO actually went on Bloomberg Television, he said, the stock price is too high, which I loved. Which was like the most honest thing that anyone has ever said on IPO day." (Felix, 02:08)
• Zoom’s uniqueness:
  • First major U.S. IPO led by a Chinese CEO; rare path from engineering to CEO.
  • Zoom is profitable—a rarity among unicorn IPOs:
    • "It does something very controversial. It actually makes a profit." (Anna, 03:20)
    • "It made like the grand total of $7 million last year or something. But like it makes a profit. And that's important..." (Felix, 03:36)
  • Investors value profitability and a clear runway, a contrast with Lyft and Uber, which continue to lose money.
• Pinterest’s positioning:
  • Losses are shrinking; service is seen as a potential advertising powerhouse in the Instagram mold but is not quite a "sure thing" like Zoom.
  • Pinterest tries to distance itself from the toxicity of social networks:
    • "Pinterest has gone out of its way to say we are not a social network platform." (Emily, 06:19)
  • Users visit for high-ticket purchase planning (e.g. weddings, home renovations)—a key for long-term profitability.
• Transition to public markets:
  • Companies waited much longer to go public than in previous tech booms, enabled by abundant private capital.
  • The IPO's implicit promise: public markets represent a final, "grown-up" stage before reliance on additional equity rounds.

Notable Quotes & Moments

• On Zoom’s profit:
  "For all the investors seem to love all of these money-losing companies, they like money-making companies." (Felix, 03:26)
• On social media toxicity:
  "There’s a lot of doubt around social networking. It's really toxic. It's awful. And Pinterest… is not a sure thing." (Anna, 06:11)

2. Blackstone’s Corporate Restructuring: Public Market Signals

(08:20 – 15:55)

Key Points

• Blackstone’s move: Shifts from a Publicly Traded Partnership to a C-Corp, hoping to attract more big investors and index funds.
• Tax implications:
  • Now subject to higher taxes, but less so after the Trump tax cuts:
    "The fact is that the increase in its taxes is much lower than it would have been pre-Trump tax law." (Felix, 11:34)
  • The move is driven by a desire for better stock performance and index eligibility, not operational change.
• Market mechanics:
  • Stock price was held back because many big investors/institutions couldn’t or wouldn’t buy it due to the old structure (“pain in the ass to own...”).
• Larger context:
  • Contrasts the move with Lyft’s dual-class share structure, which excluded Lyft from S&P 500 inclusion.
  • Discusses the tension between private control and public market discipline—public markets now seem “back in fashion” but with lumpy transitions.

Notable Quotes & Moments

• "The implication is… that the stock price is not a function of any economics of the company and it's more a function of who's allowed to buy the stock, which is super interesting." (Felix, 09:22)
• "Astonishingly, Steve Schwarzman has made a whole bunch of money from the Trump tax changes. Like who, who could possibly have guessed?" (Felix, 11:52)

3. Private vs. Public: The Long Unicorn Era

(13:46 – 15:56)

Key Points

• Discussion on whether long-term private funding (‘unicorn’ era) will persist or whether there's a rush to public markets before "the money dries up."
• The private market allure: ongoing equity rounds possible, more flexibility for control and governance.
• Public market discipline means little appetite for big follow-on rounds and less willingness to accept extended unprofitability.

Notable Quotes

• "It could be that what we're seeing is the race for unicorns to go public and raise that last chunk of equity capital before the money just dries up." (Felix, 13:59)

4. Consumer Financial Protection Bureau: From Champion to “Hollowed Out Vessel”

(15:58 – 24:54)

Key Points

• Origins:
  • CFPB emerged from the financial crisis as Elizabeth Warren’s brainchild to champion consumer rights in finance.
• Leadership changes:
  • After Warren was blocked from running it, Richard Cordray led and was effective—major fines against banks like Wells Fargo.
  • Trump’s administration replaced Cordray with Mick Mulvaney, who deliberately undercut the agency:
    • Halted enforcement, stopped key rules (notably for payday lenders).
• Bureaucratic sabotage:
  • Mulvaney even attempted to change its name, focusing on bureaucratic minutiae.
• Current state (Kathy Kraninger):
  • Shift from consumer focus to “stakeholder” focus, lumping payday lenders et al. into the protected circle.
  • Emphasis on consumer financial education over regulation, putting the onus on the public:
    • "She basically pins it all on us to protect ourselves from financial institutions. She tells us we're lazy and don't understand, you know, financial products. And that's the reason that people don't have savings, which is patently absurd." (Emily, 20:35)
  • Reluctance to ban “toxic” financial products; prioritizes “deliberative” (i.e. non-effective) approaches.

Notable Quotes & Memorable Moments

• “We don't ask people to inspect their own meat, you know…” (Anna, 21:05)
• "It does seem, reading between the lines of Kreininger’s speech, that she has no interest in banning harmful products, which was kind of the whole point of this agency in the first place." (Felix, 22:16)
• "If I structure an organization so that essentially it's beholden to almost no one, it's great when you're in charge. It's not great when you're not in charge." (Anna, 24:21)

5. Notre Dame Fire & Lessons in Public Goods and Infrastructure

(24:54 – 36:16)

Key Points

• Immediate fundraising response:
  • Billionaires quickly pledged a billion dollars to restore the cathedral—faster and in greater sums than for almost any other cause.
• Public vs. private funding for heritage:
  • Restoration plagued by underfunding until the disaster; routine maintenance is undervalued and invisible.
  • Philanthropy floods in when a cause is highly visible, architectural, and prestigious; invisible/repetitive maintenance can’t attract similar largesse.
• Tax context:
  • Debate over whether these donations should be tax deductible; contention around Macron’s removal of the French wealth tax.
  • “The wealthiest French businesses and families... have been doing that with other things as well.” (Anna, 29:02)
• Broader infrastructure issue:
  • Societal bias for “shiny new things” over maintenance, leading to a crisis in public infrastructure, especially in the U.S.:
    • “It's so much easier to build high-quality new infrastructure than it is to maintain or restore old infrastructure.” (Felix, 32:11)
• New York as microcosm:
  • Massive spending on new subway stations vs. decaying existing infrastructure, to locals’ frustration.
• Root cause: Human psychology and political incentives favor novelty and visibility, making necessary maintenance politically and philanthropically unappealing.
• Policy as a possible answer:
  • More than just “raising money,” legal and policy fixes may be necessary to institutionalize and prioritize maintenance.

Notable Quotes & Memorable Moments

• "Friends of Notre Dame... they always cobbling together a couple dollars here and there, and it was never going to be sufficient." (Felix, 28:21)
• "This is why you don't rely on philanthropy to fund, maintain, restore your public institutions." (Emily, 30:43)
• "Humans like new, shiny things. Humans do not like doing the work of maintenance." (Anna, 33:21)
• On campaign slogans:
  "Let's vote for the boring politician who says, I'm going to spend billions of dollars invisibly on stuff which already exists." (Felix, 35:25)

6. Numbers Round

(36:16 – 38:10)

Each host presents a striking number from the week:

• Emily:
  • "31,000" – Stop and Shop workers on strike—largest private sector work stoppage since 2016. Success partly due to low unemployment making replacement workers difficult to find. (36:21)
• Felix:
  • "2,100" – Zoom's price-to-earnings ratio, underscoring market exuberance. (36:52)
• Anna:
  • "54,000%" – Percent increase in the stock price of Zoom Technologies (an unrelated company whose ticker ‘ZOOM’ was mistaken for Zoom Video upon IPO). (37:15)
• Humorous observation:
  • "If you want to buy stock in Zoom... it is not traded under the ticker symbol Zoom." (Felix, 38:10)

7. Memorable, Characteristic Moments

• Banter about American vs. British pronunciation of "bologna/baloney" (00:48)
• Absurdity of private market conventions and the “Series [insert letter]” treadmill
• Sharp, skeptical takes on regulatory rollbacks and the real-world impact of “stakeholder” discourse
• Analogies between consumer protection, meat inspection, and financial literacy
• Personal as political: Emily likens infrastructure maintenance to the thankless but necessary process of replacing a hot water heater: "It was so unexciting..." (35:40)

8. Key Timestamps

• Tech IPO Introduction: 01:10
• Zoom’s business model and leadership: 02:29 – 04:11
• Pinterest vs. Zoom dynamics: 05:39 – 06:56
• Blackstone’s restructuring story: 08:20 – 11:19
• The state of the IPO market and unicorns: 13:46 – 15:56
• Consumer Financial Protection Bureau segment: 15:58 – 24:54
• Notre Dame and public goods/philanthropy/infrastructure: 24:54 – 36:16
• Numbers round: 36:16 – 38:10

Conclusion

This episode skillfully weaves together headline business stories to discuss deeper economic structures, incentives, and quirks of American political and corporate behavior. Hosts maintain a tone that is both analytical and irreverent, offering practical insights alongside pointed critiques and humor. The episode is essential listening for anyone who wants to understand current financial trends, the fate of consumer protection, and why society keeps neglecting the "invisible" but crucial foundations that hold it all together.

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