Slate Money: The Limited Means Edition

Date: June 4, 2016
Hosts: Felix Salmon (Fusion), Kathy O’Neill (mathbabe.org), Jordan Weissman (Slate)

Overview:

This episode, "The Limited Means Edition," explores the blurred boundaries of wealth measurement (prompted by the Theranos/Elizabeth Holmes saga), delves deep into the history and consequences of U.S. welfare reform, and wraps up with a rare union win at Verizon. The tone is lively, cheeky, and unsparingly analytical, with regular dives into economic nitty-gritty and social nuance.

Key Discussion Points & Insights

1. What Does It Mean to Be Worth Billions?

Topic: The valuation collapse of Elizabeth Holmes’ Theranos stake (from $4.5 billion to $0)

Segment: [00:54–14:12]

• Felix is skeptical about the Forbes’ power to so authoritatively write down Holmes’ net worth from $4.5 billion to zero, pondering the ontological meaning of “worth.”
• Kathy O’Neill deconstructs the philosophy:

  “Can we actually scrutinize the concept of someone being worth [something]?” (04:20)
  People have value outside of their cash, but financial net worth is treated like a markets-based probability.

• On net worth as probability:
  Described as “a function of a probability distribution” – it represented the slim chance Theranos would be huge, therefore Holmes’ ‘worth’ was never tangible money, but an expectation (05:53).
• Jordan Weissman’s practical view:

  “You kind of want to be discussing it in terms of...if this person had to liquidate everything right now, sell off their basically illiquid assets...how much cash?” (06:52)

• Illiquidity, market valuation, and fire sales:
  The team compares this to how banks were valued during the financial crisis—valuations can be highly theoretical, especially for big, private businesses.
• “Billionaire status” as a social threshold:
  Felix says:

  “Billionaire is a certain status of having so much money that you will never be able to spend it all in your lifetime. And Elizabeth Holmes certainly never had that much money.” (11:40)

• Notable anecdote:
  Jordan:

  “Once upon a time, if you were a millionaire Wall Streeter and you walked into a club, you'd get all sorts of attention...now it has to be a straight B, otherwise you're just another guy in the club.” (13:04)

2. Welfare Reform: From Safety Net to Deep Poverty

Topic: The 20-year legacy of welfare reform and what’s left of the social safety net

Segment: [16:43–30:24]

• Historical origins:
  • Welfare as understood in the U.S. was created after the Great Depression and always oriented toward families (children), not childless individuals.
  • Felix:

    “This welfare as we're talking about it here was never a social safety net for Americans...this is just for short people, basically [meaning children].” (18:33)

• Clinton-era reform context:
  • Welfare peaked in the early ‘90s, with significant racial undertones fueling debate and backlash.
  • Kathy:

    “There was just enormous undercurrent of racism...moralistic, oh, you know, we're breeding dependency, we're ruining the family structure.” (20:17)

  • Jordan outlines two lines of critique: one overtly racialized, the other a “progressive reform” lament about long-term dependence and generational poverty.
• The Earned Income Tax Credit (EITC):
  • Clinton’s signature expansion of the EITC shifted the program’s focus, supplementing low wages for workers but not helping those without jobs.
  • Felix clarifies:

    “Refundable tax credit...means you just get a check whether you pay tax.” (23:28)

• Block granting and the rise of deep poverty:
  • The 1996 reform (TANF) handed lump sums to states ("block grants"), removing the entitlement guarantee, leading many states to divert funds away from direct cash assistance.
  • Result: Growth in “deep poverty.”
    • Kathy: “Almost tripling of the growth in children who live on less than $2 a day since that bill.” (26:41)
  • Jordan’s assessment:

    “Most economists have looked at it [and] think actually poverty did decrease...but the problem...is this issue of deep poverty.” (26:54)

• Could welfare have been reformed without deepening poverty?
  • Jordan:

    “There were certainly ways you could have done welfare reform that ensured states actually spent the money on the people and the projects it was supposed to be spent on, and that didn't really happen.” (28:32)

  • Critique: The legislation allowed states too much discretion, undermined rigorous evaluation, and, as Jordan notes:

    “...the execution is just really terrible in a lot of ways.” (30:24)

3. A Rare Union Victory: Verizon Strike Settled

Topic: Verizon strike and cautious optimism for labor organizing

Segment: [34:13–40:51]

• Background:
  • Massive strike by 39,000 workers—affected telecommunications and retail sides of the business.
  • Visible, impactful, and even affected national job numbers.
• Settlement:
  • The union won guarantees, especially against offshoring call center jobs and for adding more union jobs in the cable/internet part of the business.
  • Some retail workers (traditionally much harder to unionize) got their first union contract—a significant symbolic win.
  • Jordan notes:

    “This is a signal that this is possible...there's this big question hanging over the labor movement over whether you even really can unionize retail workers.” (36:31)

• Labor, offshoring, and politics:
  • Unions extract guarantees to keep jobs stateside—a significant campaign talking point in 2016.
  • Jordan:

    “A few years...the United Auto Workers did something similar... it's a very popular move by unions. They know it's a really good PR move.” (39:05)

• Stock market reaction:
  • Contrary to expectations, Verizon’s stock recovered after the deal—suggesting the market can live with labor victories.
  • Jordan:

    “By striking, they brought down the stock price and then by relenting and signing a deal, the stock price went back up. And so that's kind of the pattern you want to see if you are the communications workers.” (40:22)

4. Numbers Round: Stats and Anecdotes

Segment: [41:32–49:23]

• Kathy: “7”
  • Urban kids in China are 7x more likely to get into college than rural kids, 11x more into elite schools, showing inequality despite the hyper-standardization of the Gaokao. (42:18–43:04)
  • Jordan remarks: Standardized test results from “China” often come from the urban elite. (42:31)
• Jordan: “116,000”
  • The average monthly U.S. job creation over the past three months—significantly down from the prior 224,000, suggesting an economic slowdown and policymakers should beware of blunt monetary tightening. (44:02–45:26)
• Felix: “2,520”
  • The median size (in square feet) of a new single-family house in the U.S. in 2015, a number that's continued to rise while income hasn't, reflecting shifting construction trends and perhaps catering only to wealthier buyers (46:02–47:34).
  • Snarky banter about huge houses, private schools, and rich-people “hate-reads” in the media (47:34–49:23).

Notable Quotes & Memorable Moments

• On “billionaire” meaning:
  Felix:

  “If billionaire means I can fund whimsical experiments into artificial intelligence and space travel or decide to bankrupt Gawker Media because I feel like it on a whim, then Elizabeth Holmes was never even close to being a billionaire.” (11:40)

• On the effects of welfare reform:
  Kathy:

  “The people who didn't make it back to work went into deep poverty. That's basically understanding now. So we have almost tripling of the growth in children who live on less than $2 a day since that bill.” (26:17)

• On labor wins and Wall Street:
  Jordan:

  “By striking, they brought down the stock price and then by relenting and signing a deal, the stock price went back up. And so that’s kind of the pattern you want to see if you are the communications workers.” (40:22)

• On signals from demographic test-taking in China:
  Jordan:

  “Those [international] tests are typically based on students in places like Shanghai or even Hong Kong...urban centers, which are extremely rich, basically first world standards...the kids are test prepped to die.” (42:31, 43:06)

Timestamps for Key Segments

• Theranos and Wealth Ontology: 00:54–14:12
• Welfare Reform Deep Dive: 16:43–30:24
• Verizon Strike/Union Organizing: 34:13–40:51
• Numbers Round: 41:32–49:23

Tone and Approach:
Wry, skeptical, and deeply engaged with economic nuance; the hosts play off each other's expertise and snarky humor. While critical of policy failures, they admit shades of complexity. Even somber news is balanced by irreverence and entertaining asides.

Summary Takeaway:
The episode traces the uncertain reality behind headline “net worth” numbers, exposes the real (and ongoing) costs of welfare reform—particularly “deep poverty”—and, in a rare upbeat turn, spotlights a labor victory at Verizon, suggesting that pro-worker advances are still possible with enough collective effort. Listeners receive an engaging education on why numbers aren't always as solid as they appear, and why money, poverty, and labor in America are loaded with caveats both statistical and philosophical.