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- [00:10]
A
Hello, welcome to the not so Super League episode of Slate Money, your guide to the business and finance news of the week, which this week means football, real football, not American American football. I am Felix Salmon of Axios. I am joined by Emily Peck.
- [00:32]
B
Hello.
- [00:33]
A
And I'm also joined. I'm quite excited about this by Peter Thal Larson. Peter, introduce yourself. Who are you and what is your affiliation?
- [00:43]
B
So I'm Peter fellas. I'm the EMEA editor at Reuters Breaking Views, which is the commentary arm of the global news organization.
- [00:52]
A
And you are an Arsenal supporter?
- [00:54]
B
I am. For my sins, yes.
- [00:55]
A
I do not understand this, but we will talk about.
- [00:58]
C
Me neither.
- [00:59]
A
We will talk about soccer. Arsenal and the crazy plan they cooked up with 11 other teams to break off and form a Super League. Very abortive plan, we have to say. It didn't last very long. We're going to talk about that. We're going to talk about Lex Greensill, the financier who went spectacularly belly up in the UK and all across Europe and try and work out what the hell happened there. What we are going to talk about COVID in Europe and why and whether the European countries are going to be able to get it under control. We are going to talk about the most popular immersive experiential artist in the world in the Slate. Plus it's a lot coming up this week, all on Slate Money. Let's talk about the Super League. I love the Super League. It's super. It's the most super thing to happen in the history of soccer, which I have to call it because I'm now American and most of our listeners are American. And if I called it football, they would think I was talking about something with an oval ball.
- [02:03]
C
The Super League is not a Marvel movie, which is what I thought it was for several hours.
- [02:07]
A
That's actually true. When I was emailing Emily and Peter about this, she's like, what is this Super League? And I, she honestly, she'd just seen it passing by on Twitter and thought it was like some new comic universe.
- [02:21]
C
Exactly. I was like, what's Marvel got in store for me now? And actually it has some elements of a Marvel movie. It has like billionaire villains. Right. And has the heroes and it has.
- [02:33]
A
The entire planet coming together to defeat the billionaire villains. Right? Like it was like. And there was even an element, Peter, tell me if I'm right about this of self sacrifice, that the fans of the clubs involved, the Chelsea fans and the Liverpool fans all said, well, yeah, actually, you know, even would be kind of Cool. If we got to play Juventus and Barcelona all the time, we will fight against that for the glory of the greater good. Was there self sacrifice going on?
- [03:05]
B
Yeah, probably. I mean, I don't know if anybody actually thought of it that way, partly because nobody really has gone public and actually explained what they were trying to do yet. I mean, these billionaire villains that we keep talking about, and there's a dozen of them, right?
- [03:19]
A
It's such a comic universe number as well, the dozen billionaires.
- [03:22]
C
Before we dig in, let's just explain to other people who may be like me, didn't listen to the Daily on Friday or thought it was a Marvel movie and just ignored it. What the Super League was, what happened? Let's give the little summary.
- [03:36]
A
Peter, give us the TLDR. Can you do this in 90 seconds?
- [03:39]
B
So, very simply, there are a bunch of big soccer clubs in Europe, and at the moment they play each other in midweek, and then they play their national opponents during. At the weekend. And soccer is very expensive for the owners. They spend lots of money on players. And the real problem, if you think about it from an owner's point of view, is that the amount of money you get is not certain. It depends on how you perform, whether you qualify for these competitions. And so the thinking has been for a while, wouldn't it be great for us, the owners, if we could organize a closed cartel where we all just play each other every year and we all get to distribute the money to each other. It's basically an attempt to recreate in Europe what the National Football League is in the us. A group of people, the same people, play each other every year and the money gets distributed and everybody's happy.
- [04:33]
A
And this would be like in terms of the revealed preferences of what football matches people like to watch on the telly, this would be what people want. It's the big matches between Manchester United and Barcelona rather than the small matches at the bottom of La Liga or something like that. And so it would get more bigger audiences and there'd be more engaged audiences and the TV companies would pay more money. And the reason the TV companies would pay more money is because more of the world would be interested in it. And this is how capitalism works, is that it fulfills latent demand. What is not to like about this?
- [05:14]
B
Well, I think it depends. When you say people, you have to be clear about what kinds of people. And in the lingo that these soccer club owners use, they talk about new fans and legacy fans. And the legacy fans are the people in Britain and Spain And Italy, who like to grown up watching their clubs play other clubs in their country, occasionally playing other European, other European clubs, but who really care actually about whether Real Madrid beats Barcelona or about whether, you know, Manchester United beats Manchester City, or for my club, Arsenal, how do we do against Tottenham? That's what really matters. But obviously for the new audiences in China, in India, the idea is that actually these people, they have a choice of all kinds of sports. These clubs are all million miles away. Nobody's ever going to go and actually visit, see one of these games live. So they're interested in the spectacle. And the spectacle is when Juventus with Cristiano Ronaldo plays against Paris Saint Germain with Kylian Mbappe. That's what you want to see. And so you want to try to engineer more of those kind of competitions. And that will appeal to the new fans who are going to pay to watch for the rights and for the streaming and so forth, which will then bring in more money for these clubs.
- [06:27]
A
But the problem is that France and the UK and everyone else is all run by Gen Xers like Emmanuel Macron and Boris Johnson, who are not new fans. They're stuck in the mud. Old fashioned folks who are like, take one look at this pan and say, oh, no. And not just them, all the existing fans and even the players and virtually everyone, as far as I can make out, who wasn't a club owner and even some of the club owners didn't seem to be very vocal in favor. This is the one of the weird things that I didn't understand about the Super League. It had a good name, super, that's good. But it didn't seem to have a great like PR rollout where they got a whole bunch of celebrities to come out and go Super League. And then it was like this new universe and everyone was excited about it. Like it just kind of dropped. There was a leak in the New York Times on Sunday night and then it kind of leaked out and no one was in favor of it.
- [07:22]
B
Even at the beginning as a corporate rollout, it's the most catastrophic product announcement I've ever seen. It's really quite extraordinary. I mean, you would think if you were going to do this, if you were going to upend generations of European soccer practice, you would think, well, you need to have a bunch of politicians on board. Some of them need to be sold on the idea. You need to have a bunch of people who are going to go out and sell this to the public and to the fans. You'd want to have some former players Some former managers, some big names from the sport coming out and saying, well, we've got to keep up with the times, or whatever. And there was nothing, literally nothing. The other thing you would do, presumably, is you'd say, well, here's some money that's going to go to grassroots football so that poor kids can get a better chance to practice the game, or something like that. Just something to give some sense that actually you're putting something back into the game. And there was absolutely nothing. The only person within the first 24 hours of this thing leaking out, the only person who actually went public to talk about it, was the Real Madrid president. And in his interview on Spanish television, he also introduced ideas like, well, maybe to appeal to the fans in China and India, we need to make the game shorter, and things like that. That was kind of how they were talking about it. So, yeah, everybody was united against it. Even Boris Johnson, who I'm pretty sure even admitted he couldn't remember the last time he'd been to see a live soccer game. He's not a big soccer fan, even. He was straight out against it. Emmanue Macron, again, not a natural lover of the sport, came straight out against it. It was just extraordinary, the opposition that lined up against it.
- [08:55]
C
It seems like one of the key issues in my understanding of what happened was just simple fairness, because the league would be close to the 12 teams and they would all be guaranteed a spot to play each other. There was no, like. Like with sports, it's fun to see people qualify for a championship or qualify for a.
- [09:15]
A
Well, there would be some. There were like. Was it five teams would be allowed to qual, but then there'd be 15 teams that would be like the permanent seats at the Security Council, who would basically govern the whole thing.
- [09:26]
C
Yeah, so that. That just comes across as fundamentally unfair. Like, you could see if there was more sophisticated rollout and PR and like, thought put into this by the millionaires, that they could have come up with a system that maybe could have worked.
- [09:40]
A
Remember that the millionaires are the players, right? Because.
- [09:43]
C
Well, yeah, that's you.
- [09:44]
A
They're the one. They're the ones who would actually lose because there was this wonderful clause in the leaked contract which basically said, we're going to create this cartel that caps the amount of money that the players get. So the players were not going to benefit from this at all. The only people who are going to benefit from this economically were the owners. And literally no one has a lot of sympathy for, you know, John Henry.
- [10:07]
C
As far as I Understand, it's not like soccer, football is that fair to begin with. There are all these billionaires that own teams that have made the sport or helped the sport go global and paid a certain cadre of certain players millions of dollars to play and are making all the money anyway. And they're. The system is already seems like it's pretty unfair. And it's not like the NFL in the United States where there's like a draft and like the worst team gets the first pick and la la la, like there's nothing. It's kind of a mess, right?
- [10:38]
B
It's a really good point, Emily. I think you're absolutely right. I mean the current system is not fair. The big clubs are the ones who get the most TV money, who compete in the big European competitions, who then sign the best players. And so, you know, and it's a self perpetuating. I mean it already is kind of a cartel. There was some discussion around the edges about should Arsenal be in this 12 and shouldn't Leicester City or something. But you can argue about which clubs should have been in it. But there is a sort of self selecting group and it's very hard for any smaller clubs to break into that. And you're right. In the US which is essentially what they were trying to recreate. They were trying to recreate something like the NFL, the money gets distributed more evenly. There's a draft system so the bad teams can pick the best players and so you know, they have a chance. You end up in a situation actually where the people who are in the closed cartel, it's a more even competition and actually there's a chance that the team that came bottom last year might win it this year. That's very unlikely to happen in European soccer as it's currently configured. What was unfair about it though was the idea that you were going to exclude all these other clubs who in theory have a chance of winning their national league, qualifying for the Champions League, getting through the various rounds and then playing Paris Saint Germain, Real Madrid at some stage and probably losing. But still it's the ide idea of that possibility. And the idea that possibility was going to be completely removed.
- [11:59]
A
Well, not completely, I keep on saying, but it was going to be massively reduced. They were still going to have a quarter of the spots for those, but the league was only going to be 20 teams as opposed to 36. And I think the big picture was really what is football going to be? Is football going to be like the English Premier League, La Liga, the Serie A, the Bundesliga or is it going to be, first and foremost the Super League and everything else is going to be second fiddle? Because right now, you know, if you talk to Americans about what sports they like, they generally don't say, I like baseball, I like basketball. What they say is, I like NFL, I like NBA. They mention the leagues rather than the sports. And if you talk to a football fan, what do you like? They'll say, premier League, Bundesliga, whatever. Almost no one. When you say what do you like? Is the first thing out of their mouth. It's Champions League. That's not where your heart lies. And I think the idea here was to really make turn the Champions League into something where, you know, the global love of football would reside in this new league.
- [13:08]
B
Yeah, I think that's probably right, but it was just incredibly badly conceived and designed. But I think the other thing to bear in mind is that the financial imperative to do this is still very much there. Because clearly at the moment, we talk about these big clubs as if they're successful, but actually they are. And some of them are. Financially, they are, but they're still quite precarious in terms of their finances. And they spend an awful lot of money every year buying and compensating the players. Manchester United pays, I think roughly 3/4 of its revenue goes out the door to the players. And so if you can design a league that says, let's reduce that number to 55%, that makes a huge difference to the Glazer family who own Manchester United. That's a big increase in their bottom line. And so there's still this sense, and it's become particularly pronounced with the pandemic, because obviously they're not selling any tickets. They haven't sold any tickets for a year. But there is this sense that somehow they need to put it on a more stable financial footing. And whether they can still find a way to do that.
- [14:12]
A
Do they? That's my question for you, Peter. In my head, there are two reasons why you buy a football team if you're a billionaire. One is because you think that the sport is going global and the value of your team will go up over time. And in 10 or 20 or 30 years time, you'll be able to sell it for a hell of a lot more than you bought it for. And that historically, has been a pretty strong investment thesis. The value of the teams, when they change hands really has been going up quite strikingly. But the second one, and probably the more important one, is just what, you know, my old friend Ryan McCarthy would call billionaire whimsy you know, it's an amazing toy to have, and there are not that many top teams. And you want to own a football team and you get to own a football team. And, you know, if anyone's ever heard of Roman Abramovich, it's not really because of however he made his money, it's because he owns Chelsea and you get a certain amount of cache and status for that. And so I feel like the discounted cash flow, like, is my team going to make a profit this year or not? Is like a distant third. Is that becoming more important?
- [15:15]
B
I think it's changed. I think you're right. I mean, I think the old line was, it used to be that you'd make a load of money selling used cars or whatever, and then you'd buy your local team and that was your sort of like, retirement hobby that you did if you were a successful businessman. And then the game professionalized quite a lot and you got a load of basically corporate owners that came in. Do you remember Rupert Murdoch tried to buy Manchester United back in the day, and there were various media companies that bought sports franchises and stuff like that. But what really happened in Europe was that, and particularly in the uk, was you had a load of these sort of foreign owners who were basically laundering their reputations. Roman Abramovich is a great example of Chelsea. Sheikh Mansour of Abu Dhabi in Manchester City is another example. It's really just like a. It's a sort of a thing to do that kind of gets you a name and means that you're less associated with whatever slightly unsavoury sort of thing you used to do back at home. But then you had these American sports owners that came in, and so the Glazers were the first, and then John Henry bought Liverpool and Stan Kroenke eventually wrestled control of Arsenal and there's a few others. And they are in it to make a return on their investment and they're trying to increase the equity value of these franchises, which is what they call them. And then, you know, and John Henry's talking about doing a SPAC deal with his company, which also owns the Red Sox, and they're trying to, you know, they're trying to increase the equity value of their investment. And. And the only way you're going to do that with European soccer is if you get a load more fans to watch it, and you get them to pay to watch it on their phones or on TV or whatever, because basically the media rights in the countries are kind of maxed out. And so you need to kind of attract a whole load more eyeballs, sell them a load more sort of streaming product of some form, and then you can get more income. And then also if you can cap the cost of the players, then you have something that's valuable. And that's what they were trying to do.
- [17:02]
C
Just so sloppy and embarrassing, their execution.
- [17:05]
A
They're sloppy. But what struck me in particular was like this super league didn't come together in like a drunken, you know, overnight meeting. It's been years in the making. You would think that if they spent this many years trying to put it together, it would have been less sloppy. But what really struck me was that, you know, about 24 hours in, not quite, you know, about halfway to the 48 hours point when it all just completely fell apart. There was a statement from Amazon, which was like the obvious media company that was just gonna buy up the global rates and stream football globally to everyone in the world, saying, heck no, we are not gonna touch this with a 10 foot pole. And you were like, huh? If you've been trying to put this together for however many years, you'd think that the first thing you would do would lock down a big deal with some kind of trillion dollar US media company that would give you all of the money you could ever dream of. And instead they had to cobble together some kind of bridge loan from JP Morgan. And no one even knew what it was a bridge to, but they kind of assumed that somehow they would be able to sell some TV rights somehow. And you're like, wow, this was so far from being fully baked. It was kind of ridiculous.
- [18:19]
B
And I think that seems to be part of the problem, is that actually there are so many different interests at stake. There are the national leagues, all the different clubs and their owners, the fans, the politicians, the umbrella organizations like UEFA in Europe and FIFA, who amazingly, out of all of this have sort of emerged as kind of the good guys, you know, the defenders of football tradition, which is extraordinary. If you fought a battle and FIFA are the good guys, then you know, you've really screwed it up. But they all have their interests and then there are the meteorites. And if you think about Amazon, yeah, well, Amazon already has a deal to stream some Premier League games in the uk and there are legal contracts around that and stuff. So it's a bit difficult for them to just kind of like say, we're going to jump over here because then they get in trouble with the Premier League. So everybody has different interests that they need to keep happy and plates, they need to keep spinning. And it makes it very hard to just create something like this from scratch.
- [19:10]
C
It's also such a great example of sort of the competing forces in the world right now, like globalization versus populism and nationalism. And it all seemed to come to a head in this fight over football that I didn't even know what it was on Monday and now feel like I'm super familiar with.
- [19:27]
B
You're even saying football. There you go.
- [19:29]
C
I'm even saying football. I learned, actually, I learned on the Daily Today that in Europe, this is what they said. Okay? So I don't know if it's true. I haven't fact checked it, but it used to be called soccer, like in the 1970s, even over there. And then it changed. Peter, can you say that as someone.
- [19:44]
A
Who grew up in England in the 1970s? I'm gonna say verdict false. Peter is shaking his head. Peter is not. But he is shaking his head as well, and I trust him on this one.
- [19:54]
C
All right, fine. And fair enough. But anyway, yeah, I think this is a great example of globalization may be inevitable, but there's a lot of people standing in its way. Real, actual people that are upset about their little football teams or big ones. Sorry, Felix, what's your. Do you have a team? Everyone seems to have a team that they're into.
- [20:14]
A
So I posted my vaccine selfie on Wednesday, which was my second shot, and I was very happy. And I was wearing the shirt of my beloved football club. And so I'm out on Twitter as representing, as being a big fan of Dulwich Hamlet Football Club.
- [20:29]
B
Huh?
- [20:30]
C
What was that?
- [20:33]
A
Explain, Peter, explain.
- [20:36]
B
Huh? It's the sort of South London hipster football club of choice.
- [20:43]
C
Is it owned by a billionaire?
- [20:44]
A
It's financially extremely struggling. The players barely get paid. We're always on the verge of going bust or losing a football ground or something. But we do have a great pink and purple stripey kit, and we have great songs as well.
- [20:57]
C
Do you have, like, a Ted Lasso vibe then?
- [20:59]
A
No one knows us. We don't care. So, Peter, I need to switch gears to something which actually matters. Apropos me getting my Covid shot. I walked out of my front door, literally outside my front door on Thursday, there was a big tent of people just saying, come in and get a vaccine. Anyone who was 16 years or older could just get vaccinated on the spot. They were trying to grab people off the street to get vaccinated. Seemingly having a lot of luck. But we are now at the point in certainly in New York City, but more or less in most of America that we're struggling to find people to vaccinate as opposed to struggling to find vaccine to go into arms. This, I feel safe in saying, is not the case where you live.
- [21:53]
B
I'm in London, so it is the case where I live.
- [21:55]
A
So anyone in London can get vaccinated?
- [21:57]
B
I wouldn't say we're quite at that point yet, but we're definitely, I think the UK is at London, like 50% of the population has received at least one dose. So it's pretty good. Basically, they've been through all the old people, they've worked their way down to the sort of the 50 pluses. They're now working their way through the 40 somethings. And I think they reckon they're going to be doing teenagers by August. So it's going very quickly, but it's very different here than it is really anywhere in the EU. Most EU countries, Germany, Italy, France, Spain are at about 20% with one dose and in terms of being fully vaccinated, it's 7, 8%.
- [22:35]
A
So why is that?
- [22:37]
B
Well, there's two big reasons, I think, really. One is that the EU was slow to jump on the vaccine bandwagon. They basically, I think, viewed it rather cautiously and approached it rather cautiously and viewed it as a sort of process of approving vaccines and making sure that they worked and all this kind of stuff and doing things properly. And it's been the EU, even without the UK, 27 countries trying to get them all to agree to work together, it takes time. So it took them longer to approve vaccines and it took them longer to sign up the supply deals that they needed. And to the extent they tried, they also failed to produce any vaccines domestically, unless you count the Pfizer Biontech vaccine, which was developed obviously with technology from a biotech company in Germany. So that was already a bad start. And then they got themselves in a real mess, actually, with the AstraZeneca vaccine, which was partly AstraZeneca's fault, because the way they, as we all know, the way that they announced the results of their trials was a bit confusing and they fiddled around with some numbers and people were a bit suspicious. And so a number of politicians in the eu, not the European Commission, which was organizing this process, but some of the EU leaders, like Angela Merkel and Manuel Macron, made various statements where they were saying, we're a bit skeptical of AstraZeneca, we're not sure it works, we don't think we should use it in old people. Et Cetera. And so that also slowed things down and also just made people a bit skeptical about this AstraZeneca vaccine, which for a while was the main one that they had. So it's been a process where everything has just gone slower than it should have done. And it's getting going now. But they are, I don't know, they're probably at least a couple of months behind, I would say, the US and.
- [24:23]
C
The uk, There was something with the contract negotiations with the eu.
- [24:28]
A
Yeah, they tried to save money on the vaccines.
- [24:30]
C
Yeah, they tried to save money. They're not used to these kinds of. They're more good at trade deals and less good at strong arming pharmaceutical companies into giving first shot at the shots.
- [24:44]
B
I think, yes, they probably were a little hesitant in terms of how aggressive they were about trying to sign up some of these deals. And so basically what happened was, when it came to the crunch, AstraZeneca gave priority to the UK, who they had signed the deal with first over supplying the eu. So they were then, having signed a deal with the eu, they were then slow on the deal. And actually we're getting to a point now where there's a story out this afternoon, Friday afternoon, saying the EU is about to sign a deal with Pfizer for 1.8 billion doses. And when they do that, they will basically, I think, phase out the AstraZeneca vaccine entirely. And Johnson and Johnson has also been paused, I think, as it has in the US, because of some of these concerns.
- [25:26]
A
So 1.8 billion, like, just doing the math for a block of what, like 400 million people, they're counting on a lot of booster shots in the future.
- [25:36]
B
Well, I guess it's two doses per person. Right. But yeah, it's more than they need, clearly, to do. Everybody wants, I would say, are they.
- [25:42]
A
Going to export the stuff they don't need? Because, I mean, clearly the rest of the world needs vaccine too.
- [25:47]
B
This is the debate. I know it's the debate in the US and in other places as well. I don't think there's really much discussion. I mean, some vaccines have been exported from the eu, but there is not a huge amount of discussion about exporting from the eu because the pressure is such to vaccinate the population first. And it's particularly for some of these politicians. For Emmanuel Macron, who's facing an election next year, getting people in France vaccinated by the summer is really quite important for him because everything is going through the European Commission, through the eu, he's having to rely on the commission to deliver that for him.
- [26:19]
C
It's interesting to think about this conversation in light of the last one we had about the Super League and thinking about fairness and nationalism, because probably One reason the EU is behind the UK is the EU, like you said, Peter had to negotiate for 27 countries. It's far more complex and maybe more fair because, you know, if Germany went it alone, maybe Germany would be moving much faster on vaccination. But instead of doing that, you know, it's one of many countries all kind of trying to work together and do something more for the greater good and then. But then pulling back even more. And you look at what's happened with the AstraZeneca vaccine and how the public now kind of has so many doubts about it, and how that has ripple effects beyond the EU into like South Africa, which is like desperate to vaccinate its residents. And Europe has made them think, well, I don't want the AstraZeneca, that's just like garbage that they're trying to sell to us. Again, like, you know, that the rich countries are trying to pass off onto the poor countries. And just so much about the vaccination efforts. It's like it's nationalism and globalization. Sort of intention makes it sort of interesting.
- [27:30]
A
The nationalities of these things is fascinating. AstraZeneca, you know, it used to be known as the Oxford Vaccine because it was, you know, associated with Oxford University, which then licensed it to AstraZeneca, partly because of the Oxford connection. The UK got a good deal, but they also licensed it to the Serum Institute of India, which is trying to produce a lot of vaccine. But like, if you look at the numbers in India, it's, you know, that's really the big hotspot, worst place in the world right now. And then, you know, if you look at what happened in Chile, they managed to vaccinate everyone pretty much with, I think, the sinovac vaccine from China, which it turns out just isn't as good. And it really is the kind of second best vaccine. And they still have quite a lot of COVID because the vaccine just isn't as good. And everyone's like. There was a wonderful piece actually in Slate about how Pfizer is like the gold medal vaccine. Everyone wants Pfizer.
- [28:24]
B
That's a gold vaccine. Yeah. And the Europeans are sort of confirming that again. But there's also, there's been this sort of weird double play where. Where at the European level, they've essentially been locked in this commercial battle with AstraZeneca because AstraZeneca wasn't delivering what they had contracted to deliver, and all these threats about stopping exports and so forth. But then at the national level, you have countries off their own bat basically saying, well, some people have had blood clots, so we're not sure about this. We're just going to stop the rollout of the AstraZeneca vaccine altogether. And I think in Germany, where they initially, having said, we're not going to give it to old people because it hasn't been tested on them, they've now given. They'll give it to old people, but they're going to stop giving it to the young people because they're more likely to have blood clots relative to the dangers of dying from COVID So there's been all these different things pulling in different directions. But as you said, Emily, the end result has been that loads of people are just like, I'm not sure about this, I don't want that in my arm. I'll wait for something else.
- [29:22]
A
Especially in Germany, which really loves being all, like, crunchy granola and B.O. and they're like, seriously, the number of Germans I know who are just like, you know, whack a doodle about this kind of stuff is intense.
- [29:38]
B
Those are not the words I would have used, I guess, but. Whack a doodle, Yeah. I don't know. I mean, I think there are certain admirable qualities. There's sort of a sense of doing things by the book, doing properly, making sure, you know, applying the precautionary principle, not giving things to people if you're not 100% sure that they're going to work properly and so forth. But in a pandemic, where actually the alternative is more people dying of COVID then you just have to kind of get a move on. There's something sort of to be said, I think, about the US and the UK kind of getting that right, and countries in Europe, for example, not getting that right.
- [30:11]
C
I wanted to ask Felix this. I feel like it's just going to make him mad. But the fact that the UK has done a pretty good job with vaccines versus the eu, is this a win for Brexit?
- [30:22]
A
Don't say it. Don't say it. Don't say it.
- [30:25]
C
But I mean, but, I mean, don't say it, Emily. Felix, don't say it. But you have to think about it, don't you? Think about. I think about it. The UK comes off looking pretty good. Oh, well, maybe they made the right choice after all. Right, Felix.
- [30:39]
A
Peter, tell me. Actually, I mean, it is an interesting question. If the UK had not left the eu, could they have done the deals that they did with Oxford and AstraZeneca and, and Pfizer and everyone else?
- [30:52]
B
I think there's a long answer to that, but I think the short answer is no. Obviously they could have encouraged Oxford to develop a vaccine and all that kind of stuff, but all the sort of, the contractual stuff would have got the approvals, would have gone through the European Medicines Agency, which is an EU wide body, and I think the contractual negotiations would have gone through the European Commission. And there was a discussion at the beginning about the possibility of the UK still being part of that process, even though it had left the eu and they decided to go their own way. And that bit of not being part of the eu, I will admit, has worked out for them.
- [31:24]
C
If you look at the charts too, right now, the little Covid charts on the New York Times site, the UK is doing amazing. It's like very, you know, it's shrinking.
- [31:33]
A
Down, down and to the right.
- [31:35]
C
Yeah, the German chart, the Spain, the Italy, it's all going up, looks bad.
- [31:39]
B
I think the question I have with this is, in the grand scheme of things, how big a difference is this? Clearly there is a human cost to this. No question. If the EU is vaccinating at the same speed as the US and uk, things would be a lot better in the eu. But it feels like we're probably talking about a question of a few months and I suspect by the end of this year everyone will pretty much be in the same place.
- [32:00]
A
All right, Peter, this is where your expertise as a financial journalist is going to really come in, because I'm going to start asking you some questions now about Greensill, which is this huge story which, as far as I can make out, no one really understands. I have tried to understand it many times and just thrown up my hands. And I'm not going to try and get you to explain the whole thing, but what we do know is that a bunch of banks, foremost among them Credit Suisse, lost a bunch of money in debt products at a time when no one's defaulting on anything. So debt products should be doing really well and credit spreads are really low. There's no debt crisis going. There was a lender called Greensill which went bankrupt. And again, like, why are lenders going bankrupt in this, you know, bubblicious economy right now when no one is going bust? And put to one side, you know, all of the weirdness about David Cameron and lobbying and all of that kind of stuff. Was this what happened? Was it just pure fraud or is there actually a legitimate reason why a lender might go bust?
- [33:06]
C
Right now I think I know the answer, but I want to see what Peter Emily, I'm going to guess just a guess, but I think it's because Greensville, their insurers, stopped insuring them and then everything fell apart because once there was no insurance, then the banks were like, ah, and then everything tumbled from that. Is that right, Peter? Tell us.
- [33:27]
B
You're right. That was the trigger that brought down the whole house of cards. But there is behind that there is a more complex question which, which Felix kind of got to. And I think all we can really say is the many legal investigations and regulatory investigations are ongoing and it will become clear at some point whether there was any real substance to this lending. But the story about Greensill really I think is a story about shadow banking after 2008. And so as you know, there was a big financial crisis. The banks all got bailed out and reregulated and a load of activity that had previously taken place in banks shifted into non bank instit institutions. And Greensill in a very small way is kind of part of that development because what they were essentially doing was giving a whole load of loans to companies supposedly to finance their supply chains. And there's various reasons about why you might do that which are now coming up for question. But then rather than doing it off their own balance sheet like a bank would do, they were taking these loans and repackaging them into funds which were then being sold to investors. And obviously the biggest supplier of those funds was Credit Suisse. And then the insurance kicks in because in order to reassure those investors at Credit Suisse that this supply chain stuff that they couldn't really tell what it was that they were buying, they basically went and got an insurance company to say, we will insure all of these loans, all these supply chain loans which are short term and supposedly safe, we will assure them against default.
- [34:56]
A
But if they were insured, Peter, until the insurance went away, how on earth did credit Suisse lose $4 billion on this? Wouldn't the insurance kick in?
- [35:06]
B
Well, I think that's going to be something that's going to get litigated for a long time. We don't know that Credit Suisse has lost $4 billion. I mean, it might have lost $4 billion, it might have lost two, it might have lost one. There's a portion of what the funds that weren't insured, they're on the hook for that. And again, these are Credit Suisse's clients, right? These are investors in funds run by Credit Suisse. But there's also a question about whether Credit Suisse should be compensating its investors for some of these losses or whether they should say to their clients, you are the clients in the funds, you take the loss. So that's, that's another thing where the lawyers are going to have a field day. But really the point is kind of you have these loans, they're insured, and you sell them to investors. And then when it all falls apart, the insurers say, we're actually not going to insure this anymore and we may not even pay out on the insurance that you're going to come to us for on some of these loans because we think they were fraudulent or we misled or something like that. But the minute that happens, of course a business like Greensill stops because the minute they can't get any funding from this side, then they can't do their lending on the other side and it's all over.
- [36:07]
C
Can you explain more about what a supply chain loan is? I felt like I understood it for a minute and then it slipped out of my brain. It has to do with temporary amounts of money so companies can.
- [36:19]
A
Emily, think about it this way. Now that you're a freelancer, when you write an article for someone and you send in your invoice for $1,000, you, this being the media world, have no idea when you know Hearst or whoever is going to pay you that thousand dollars. But if I'm Lex Greensill, I will pay you like $990 right now, just as long as you give me the thousand dollars when it comes in.
- [36:42]
C
Got it. And why is that risky or dodgy? I mean, that seems pretty chill.
- [36:47]
B
Hang on, there's a bit of a wrinkle on that. That's a very good way of describing it, Felix. So old fashioned supply chain finance, is that right? It's like I'm owed $1,000 by Hearst. I need the money now. They're going to pay me in three months. I'll go to a bank, they'll give me some of the money now and they'll take my invoice and then they'll go and get it off Hearst and they think that's a good risk for us because Hurst is a big company and they'll pay their bills eventually. That's as old as the hills that goes on all the time. That's not quite what was happening here. What was happening here Was Hurst in this particular example was going to a business like Greensill or Greensill was going to Hurst and saying, you know what you currently pay Emily after three months we can do you a deal where we will pay Emily $990 of the 1,000 after a month. So she gets her money even faster than she does at the moment with a bit of a discount. And then you don't have to pay us back until six months. So we're basically going to kind of, we're going to stretch out your payables and your receivables so that you have less working capital and we're going to basically replace it with this debt. And the way we will charge for the debt is we will take a little bit off the amount that goes to the suppliers, but they'll be happy because they get the money earlier. And the aha moment I think that I arrived at with this with someone when I basically said to someone, well hang on, but that's just a loan. Why would you do that? And the answer was it's not accounted for as a loan. So Hurst in this example, obviously hypothetical example, Hurst is borrowing money from Greensill, Greensill is paying its suppliers. Hearst essentially has a load more debt, but it's not on its balance sheet. It's debt, it's on its balance sheet as old fashioned receivables and payables. And so when the credit rating agencies or the investors or whoever it is or the other banks look at hers, they say, well they've got this much debt and they don't count that as debt. And so it's a way of borrowing money that is not disclosed as borrowing.
- [38:36]
C
And that's where the dodgy comes in.
- [38:38]
B
So this is a big business and lots of banks do it and lots of companies do it. And the disclosure is very limited. In some companies in the footnotes of their accounts you'll find they say, well we use supply chain financing and we had outstanding balances of X, but it's, it doesn't appear in the debt line on their balance sheet. The people I've spoken to about this say if you ever got to a point where the rating agencies and the accountants and the regulators all got together and said we're just going to call this debt and it's going to appear on your balance sheet as debt, then I think this whole business goes away. Because at that point it doesn't make sense for Hurst to do this anymore. Hirsch just goes to its banks and says, can you lend us a bit more money?
- [39:14]
C
And now, do we talk about David Cameron? Because somehow he's in the middle of all this and is so, I mean.
- [39:21]
A
The word politician in the history of Britain, who was single handedly responsible for destroying an entire country, somehow managed to get himself in the middle of this. And he was like texting the Chancellor saying, can you please, please help me help your old mate Dave?
- [39:38]
B
It goes back a bit further actually, because the thing about Lex Greensill is when he, Lex Greensill used to work for a couple of banks, Morgan Stanley and then Citigroup. And then when he said it by himself, one of the first things he did, kind of amazing was he was also given this sort of quasi official role within the government to help them with their supply chain finance.
- [39:57]
A
Yeah, he had a number10.gov.uk email address.
- [40:01]
B
And a business card. And we're going around telling these civil servants, well, I can arrange for nurses to get paid faster. And the civil servants all basically said, this doesn't make any sense. If we want to pay the nurses faster, we're the government, we can just pay them faster. But he had some powerful backers and obviously came into contact with Cameron. So then when Cameron left office and obviously with his reputation somewhat damaged, was looking for something to do, seems like Lex Greenstale got hold of him and said, we'll make you an advisor and I'll give you a load of share options. The number exactly is in dispute, but it does seem like David Cameron in March and April last year when the financial world was melting down and the country was in crisis and all these officials at the treasury and the bank of England were desperately trying to save the economy, economy. We're now learning that a lot of them spent quite a lot of time dealing with calls and emails from David Cameron, basically pleading the case for them to provide some loans to this company that he was advising.
- [40:57]
C
Covid Relief Loans. Right.
- [40:59]
B
It was special financing from the bank of England. I mean they were trying all kinds of stuff.
- [41:03]
C
But was that like. That's what I couldn't understand just reading about this the past couple of days. Was he doing something illegal or is it just, just a bad look for him? Yet another bad look for David Cameron.
- [41:13]
B
I think it's not illegal. So ironically, David Cameron actually changed the rules on lobbying when he was in government in an attempt to clean up the government. But the way those rules were designed was sort of on the assumption that only lobbyists do lobbying. And so you had to be, if you're registered as a lobbyist, then you have to disclose who you're lobbying for and departments have to disclose the meetings they have with you and stuff. But if you're just an ex Prime Minister who happens to be on the payroll of this company and is sort of texting his old friends in government, it's not illegal. And as long as the ministers who he's getting into contact with disclose these contacts to their civil servants, then again, they don't break any rules. And I think the other thing, as far as we know so far, and it's like every day there's a new data dump, so who knows what we're going to find out over the weekend. But as far as we know so far, it seems that the heroes of this are the officials at the treasury and the bank of England who basically listened politely to David Cameron and Lex Greens and then told them to go away. So at least that bit worked.
- [42:10]
A
I can tell you from every single remotely intelligent English person I've ever talked to would have at least that reaction to David Cameron, if not worse. The idea that, like David Cameron, by dint of being David Cameron, would somehow be persuasive and people would go, oh, you're David Cameron. I'm gonna listen to you. You're like, wait, what? Don't you remember what this guy just did? Let's have a numbers round. I think it's time for some numbers. Emily, what number did you bring this week?
- [42:36]
C
I brought the following number. 5, 2, 3, 1.
- [42:42]
A
Is that your PIN code for your phone?
- [42:45]
C
Yes, it's my debit card, ATM number. Enjoy. No, this is the secret code, formerly secret code, used to hack the ice cream machine at McDonald's, which is owned by a company called Taylor and is at the center of a very sweet, if I may say that, controversy that I read about in Wired magazine.
- [43:07]
A
I see what you did there, Emily.
- [43:09]
C
Thank you. And basically, McDonald's ice cream machines, they also make shakes, are terrible. The technology hasn't been updated for decades and decades. This wonderful couple figured out a way to make them better and created this little device that could be used to sort of like hack in and figure out if a machine is broken or not and troubleshoot. Da, da, da, da, da. And people liked it. But then McDonald's big ice cream, big burger, they're now, like, fighting with this couple over the machine and over this innovation. And the whole story is there. I'll put a link in the show notes, as they say, and everyone could read it. The story is called they hacked McDonald's ice cream machines and started a cold war. Get it? Cold war.
- [43:50]
A
But If I had that code, could I just go into a McDonald's ice cream machine and get myself free ice cream? That's what I want you to say.
- [43:56]
C
I don't think so, Felix. Cause first I think they must have changed it because the story's out and now everyone knows the code, so it's a moot code. But apparently, like, the McDonald's ice cream machines are always broken. And if you search on Twitter for, like, McDonald's ice cream machine broken, there, you get, like, all these people complaining about it. Some guy tracks it on a map I was Googling earlier. Like, it's called McBroken. And you can see on a map, like, which franchises have working machines versus not. So there you go.
- [44:23]
A
All right, Peter, what's your number?
- [44:26]
B
So My number is -45, which is the price in pounds per megawatt hour of UK electricity. Last Easter Monday, it was a sunny day, unusually sunny day in the uk, and it was also quite windy. So we were producing unusually a lot of wind power and a lot of solar power. And so supply exceeded demand and the producers of that electricity were literally paying to offload the surplus.
- [44:53]
A
That's a big number as well. It's not just a little bit negative. It's highly negative.
- [44:58]
B
Yeah. I mean, it wasn't like that for the whole day. But, I mean. But there were points. There was a point during the day where the price was minus 45 pounds.
- [45:04]
A
So this is why you need more electric cars in England. Right. So you can take advantage of the negative things and use that to power up your car.
- [45:10]
B
Exactly. If we all had batteries and we could take the extra capacity from the grid and store it. Actually, this is from a Breaking Views piece by my colleague Ed Cropley. Came because. It's also one of the reasons that people say, actually what you need to do is create more hydrogen power because you can use the electricity at moments like this to essentially create hydrogen, which you can then turn back into electricity when you need it.
- [45:32]
A
Hydrogen is a battery, basically.
- [45:33]
B
Essentially. Yeah, yeah. I mean, there's all kinds of theories.
- [45:36]
A
Interesting.
- [45:37]
B
The other interesting thing about this is that apparently in 2018 in the UK, this negative electric price was. The spot price went negative 18 times last year. It happened 362 times. So, you know, we just. We're getting a lot more renewable electricity and there are points of the day where we don't know what to do with it.
- [45:56]
A
Wow. Happy Earth Day.
- [45:57]
B
Yeah.
- [45:58]
C
I want to make a joke about, like, wind and David Cameron and, like, wind that's good. And wind that's just bad. But I didn't have it.
- [46:06]
A
Hot air. Yeah.
- [46:07]
B
Yeah.
- [46:08]
A
My number is $99.99, which is. Let's just say it's a preview of the Slate plus segment this week. This is the. The amount of money that New Yorkers are paying and literally are paying and this thing is selling out to visit an exhibit in New York. Normal tickets are $40, but if you pay $100 on your Amex card, then you get like a wider range of times you can turn up and you get to jump the queue to get in. And this amazing exhibit is this immersive experiential art exhibit by the hottest, trendiest artist of the moment. And in fact, part of the reason why we invited Peter tower Larson on slate money this week is because he is Dutch and this artist happens to be Dutch and because Peter is the only person who can pronounce it. Who am I talking about? Peter.
- [47:02]
B
But I want you to hear you say it first, Felix.
- [47:05]
A
So I'm English. So this is the thing. I have this theory that, like, the Americans get it completely wrong. The Americans call it van Gogh. The English kind of like get halfway there and they say van Gogh. And then the Dutch do a kind of just. They just kind of expect van Gogh or something like that.
- [47:21]
B
That's pretty good, actually. Yeah. You know, you don't have to actually clear your throat, but I mean, sort of it does help.
- [47:31]
A
So we're going to talk about van hoch. Von Hoch. Okay. We're going to talk about Vincent in Slate plus. But other than that, thanks for listening to this week's show. I hope you learned something about football or greensville or something. We are always here on Slate money@slate.com Many thanks to Justin Molly for producing and hosting me this week at seaplane Armada in sunny Brooklyn. And we will be with you again next week on slate money. Sam.