The Preserving Optionality Edition

Summary

Slate Money: The Preserving Optionality Edition (September 3, 2016)

Host: Felix Salmon, with Cathy O'Neil and Jordan Weissmann
Main Theme:
A sharp, often irreverent exploration of current business and finance stories, this week focusing on “preserving optionality”—the investment banking tendency to advise doing nothing, big stories in corporate taxation (Apple, Ireland, and EU tax havens), the EpiPen controversy, the underrepresentation of women in computer science, and the changing fate of mall retailing in America.

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1. "Preserving Optionality”—A Financial In-Joke ([00:08])

• Explanation of Episode Title
  • Investment bankers often advise companies to "preserve optionality," a term that means "do nothing" after receiving hefty consulting fees.
  • Felix Salmon (host): "If you want to get paid lots of money for advising people to do absolutely nothing, you have to learn this phrase, 'preserve optionality.'" ([00:49])

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2. Apple, Ireland, and the EU: The Tax Haven Showdown ([03:13])

Context and Story ([03:13])

• EU Ruling: The European Commission ordered Apple to pay €13 billion in back taxes to Ireland, arguing that special deals constituted illegal state aid.
  • Jordan Weissmann: "The weird thing about this story is that Ireland isn't particularly happy about this. They don't really want those 13 billion euros in back taxes." ([03:16])
  • The Irish government is divided: some politicians welcome the windfall, others worry about damaging Ireland’s business-friendly reputation by "eating the seed potatoes." ([04:22])

How Apple’s Tax Avoidance Works ([05:36])

• Two Levels of Tax Avoidance:
  • Standard: Corporations book profits in low-tax countries (Ireland's 12.5% corporate rate).
  • Apple’s Extra Step: Profits are assigned to a “head office” that exists only on paper—located nowhere—so it's not taxed at the Irish rate or anywhere else.
    • Jordan Weissmann: "Our head office doesn't actually exist anywhere. It's not in a country. It's just sort of an on-paper office. It's an office in our imagination." ([06:31])

The U.S., Apple, and the Hypocrisy of Tax Politics ([08:07])

• After years criticizing Apple for not repatriating profits (thus avoiding U.S. taxes), U.S. politicians object when Europe tries to tax those profits.
  • Felix Salmon: "What you just want to scream at all of them was, well, yes, it probably should be paid in the U.S., but you haven't been paying it in the U.S., and you haven't repatriated it to pay it in the U.S., and it’s a bit late now to change your mind." ([08:07])

Does the EU Have the Right? ([09:31])

• The EU uses antitrust, not tax law, arguing special tax deals are illegal subsidies that unfairly favor multinationals.
• The team discusses how this move targets extreme versions of tax avoidance, not routine low-tax booking.

Financial Impact and Leverage ([12:07], [12:49])

• Apple’s Balance Sheet: The ruling doesn’t increase Apple’s global tax liability, as U.S.-Ireland treaties credit taxes paid to one against the other; Apple just loses leverage in U.S. tax negotiations.
  • Felix Salmon: "It raises Apple's total tax liability by zero. Because there's a dual taxation treaty between the U.S. and Ireland... It does not affect Apple's balance sheet at all." ([12:07])

Multinationals Cherry-Picking National Advantages ([15:10])

• The conversation draws an analogy to Mylan (EpiPen), noting how multinationals benefit from legal protections in one country and tax rates in another.
  • Cathy O’Neil: "It's like if I wanted the maternity leave in Scandinavia, but I wanted to be an entrepreneur in New York City. I can't do that as an individual, but these multinationals get the best of each world." ([15:39])

Memorable Quotes:

• Felix Salmon: "Preserve optionality. It comes in surprisingly handy in many different contexts." ([00:49])
• Felix Salmon on U.S. tactics: "I think this is the real reason why Tim Cook is angry...he was making noises he was gonna start repatriating, and if Ireland goes and snaffles all that money, then he loses that carrot in negotiations with the U.S." ([12:58])

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3. The EpiPen Pricing Mess—Why Does it Cost $600? ([15:47])

Device vs. Drug ([16:16])

• EpiPen’s drug (epinephrine) is off-patent and cheap; the expense is in the delivery device, and only Mylan’s device is FDA-approved.
  • Felix Salmon: "What you are paying for is not the drug. What you are paying for is the device." ([16:17])

Regulatory Monopoly and Delay ([17:20])

• Attempts at generic competition stymied by FDA, often on technical grounds, keeping monopolies intact and prices high.

Hope for Change ([19:23])

• Jordan: "All the commotion about what happened with the EpiPen will probably make them a little bit more likely to approve the next generic that comes out." ([19:23])
• Cathy O'Neil expresses skepticism the FDA will improve overnight.

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4. Increasing Women in Computer Science—Harvey Mudd's Success ([19:49])

The Gender Gap Problem ([19:52])

• Nationally, only 16–18% of CS undergraduates are women. The panel explores why.

Teaching Methods Matter ([20:22])

• Hypothesis: Poor teaching and intimidating “weed-out” courses drive women away.
  • Cathy O’Neil: "The universities are teaching [computer science] poorly." ([20:34])
  • Reports of professors saying on day one, “half of y’all won’t make it,” discourage newcomers, especially those with less prior experience ([24:10]).

Harvey Mudd’s Transformation ([21:12])

• From <10% to 55% women among CS graduates by:
  • Making intro CS courses required for all
  • Using Python as a gentle entry language
  • Providing beginner tracks that don't presuppose coding experience
  • Hiring more women faculty, including a woman president

The Broader Issue: Curriculum Design and Resources ([25:05], [26:03])

• Effective, inclusive teaching costs more and is more resource-intensive.
  • Cathy O'Neil: "The bad news about this new design is that it’s expensive, it takes more resources..." ([25:05])
• The irony that universities "weed out" students from their most in-demand (and lucrative) major, instead of expanding capacity.

Key Quotes:

• Cathy O’Neil: "It’s like if the academic world responded like a business responded—oh my God, we have all this demand, we should create more computer science graduates!" ([27:22])
• Felix Salmon: "Stop dissuading people and especially women from studying computer science and don't weed people out. And the more computer science graduates that America has, the better." ([28:15])

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5. Mall Retail’s Slow Demise—and Aeropostale's Rescue ([29:08])

The Mall Meltdown ([29:08])

• Malls are fading as a staple of American youth culture and retail, hurting chains like Wet Seal, Pacific Sunwear, and Aeropostale—all bankrupt.
  • Felix Salmon (tongue in cheek): "Do shopping malls still exist?" ([29:06])

Aeropostale's Bankruptcy Auction ([30:44])

• Aeropostale bought out of bankruptcy not by a retailer, but by its own landlords—Simon Property Group and General Growth.
  • Their motive: Keep anchor tenants open to preserve mall traffic— buying time (“foam on the runway”) until a new tenant can be found.
  • Panel equates the move to softening a slow-motion train crash, referencing Argentina’s sovereign debt collapse as an analogy ([32:35]-[34:20]).
  • Felix Salmon: "What they're doing is they're saying we can keep these stores open until we find a better tenant...rather than just having an empty store." ([34:40])

Retail Contagion ([35:22])

• Speculation that shuttered stores create negative feedback for neighboring stores, possibly spurring a domino effect (the "Cinnabon index": when the Cinnabon goes, so does the mall) ([35:56]).

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6. Numbers Round ([36:28])

• Jordan’s Number: 68 ([36:35])
  • 68% of Americans will at some point pay no federal income taxes during their lives, countering the "47% takers" political narrative.
• Felix’s Number: 515 Billion ([38:28])
  • Vanguard, the passive investment giant, is estimated to have saved Americans $515 billion in fees and trading costs since its founding 40 years ago.
• Cathy’s Number: 61 ([40:01])
  • 61% – The decline in U.S. teenage birth rate over 25 years, mainly due to better contraception.
• Bonus: Elimination of Tampon Taxes ([40:39])
  • 10: Zero—the amount of state tax now levied on tampons and maxi pads in New York, thanks in part to Cathy’s activism.

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Notable Quotes & Moments

• Felix Salmon: "If you want to get paid lots of money for advising people to do absolutely nothing, you have to learn this phrase, 'preserve optionality.'” ([00:49])
• Cathy O’Neil on CS instruction: "The most important aspect: there’s a track that doesn't require any prior computer science—and you can be a CS major even if you start there." ([22:32])
• Felix Salmon: "Foam on the Runway." (Explanation of why mall owners buy out failing stores to cushion the broader blow, [34:38])
• Cathy O’Neil ("Cinnabon Index"): "Cinnabon is the nexus, man. People get addicted...that’s why they go to the mall." ([36:00])
• Felix Salmon on Apple taxes: "It raises Apple’s total tax liability by zero...It is completely neutral to Apple’s balance sheet." ([12:07])

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Key Takeaways

• Corporate tax avoidance: Apple’s complex scheme drew ire from both Europe and America, but the real stakes are about global leverage, not bottom-line costs.
• Systemic inertia in education: Changing how computer science is taught (less "weeding out," more inclusivity) can radically shift gender representation, but requires resources—demonstrated by Harvey Mudd’s successes.
• Retail transformation and “Preserving Optionality”: Malls and their tenants’ fortunes are tightly linked; landlords buying failing stores can slow decline, but the underlying trend is inexorable without deeper change.
• Societal shifts reflected in numbers: Birth rates and financial costs highlight broader health and economic trends.

Episode Tone: Witty, skeptical, and probing—balancing humor with pointed analysis.

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Timestamps Referenced

• [00:08] Episode opening and "preserving optionality" explained
• [03:13] Start of Apple-Ireland-EU story
• [12:07] Apple’s tax position detail
• [16:16] EpiPen pricing driven by device, not drug
• [19:49] Beginning of segment on women in computer science
• [29:08] The mall and Aeropostale discussion
• [36:28] Numbers round

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For listeners new to these topics, this episode offers essential context, clear analogies, and plenty of irreverent banter—especially about the contradictions at the heart of modern business, policy, and tech.

Transcript

[A]

The following podcast contains explicit language.

[B]

Hello, and welcome to the Preserving Optionality edition of Slate Money, your guide to the business and finance news of the week. The title, by the way, is a financial in joke that it's all to do with investment bankers. And investment bankers charge enormous, enormous fees for providing advice to companies. And the thing that they often do when they provide advice to companies is they cash their enormous check and then they say, I think what you should do is preserve optionality. Which is basically a very fancy way of saying do nothing at all.

[A]

Yes.

[B]

And so if you want to get paid lots of money for advising people to do absolutely nothing, you have to learn this phrase, preserve optionality. It comes in surprisingly handy in many different contexts. I am Felix Ham on the Fusion. I am joined with the core Slate Money team. No last minute swap out.

[C]

So, Felix, I wanted to call this episode the Getting the Band back Together episode.

[B]

I think. Exactly. I can't remember the last time we were all in the Slate studios together. It feels cozy.

[C]

It is.

[B]

It feels cozy. Cathy o'. Neill.

[A]

Yeah.

[B]

You have a book coming out.

[C]

It's really exciting. It's four days from now. I'm just about to vomit with excitement.

[B]

I feel like next week that's the.

[A]

Best kind of assignment. The part that gives you queasy bile feeling in your stomach.

[C]

I alternate between like nausea and ecstasy.

[B]

So next week I think we're gonna just devote the entire episode to Kathy's book.

[C]

That's if Jordan can actually find time to read it.

[A]

I'm gonna read the book. Have I been introduced? No, this is how I'm being introduced. I'm gonna. The book.

[C]

I'm looking forward to it.

[B]

But what is the book? We need the official plug.

[C]

It's called Weapons of Math Destruction and.

[B]

You will hear all about it next week. And in case you hadn't noticed, there's a guy who's bad at reading books in the studio with us too. Mr. Jordan Wiseman.

[A]

I is good at read. I can read.

[B]

Jordan likes to read things on the Internet which are short. If you give him something which is bound, it starts becoming.

[C]

It's just that Jordan is like one of those like, I'll wait till it's urgent type of people.

[A]

That's. That's basically my life.

[B]

I am going to. We are going to talk this week about shopping malls and a chain called Aeropostale because I feel like we haven't done much tween fashion of late.

[A]

Felix is wearing their summer line right now.

[C]

Much needed Gap.

[B]

We are going to talk about the way in which it's actually possible to get more than half of your computer science class to be women.

[C]

Amazing.

[B]

Believe it or not. But. And this is the big financial news of the week. I think this is my favorite story of the week. We are going to start Jordan talking about tax havens and Ireland and Apple.

[A]

Yes.

[B]

So what is going on here?

[A]

So, yeah, the EU's competition regulators, basically they're antitrust regulators, came down with the ruling this week saying that Apple it needs to pay 13 billion euros in back taxes to Ireland. And the weird thing about this story is that Ireland isn't particularly happy about this. They don't really want those 13 billion euros back taxes.

[B]

Well, depending who you are, depending on who you talk to. This is the wonderful thing. So the Irish have made quite a cottage industry about in attracting companies like Apple with very low pipe by dangling the camera to very low tax rates in front of them. But now they're faced with this $14 billion windfall. They're like, really? I mean, this is a lot of money to just turn our nose up at.

[C]

So the idea is they want the money. I mean, there's still not really. Well, I mean, okay, individuals in Ireland.

[B]

And some of the government, some like.

[A]

The Sinn Fein people, were like, the.

[B]

Cabinet is split on this. But the people who promised Apple the low tax rate are doing the honorable thing and saying, no, no, no, we promised them a low tax rate. We have to be true to our.

[A]

There is a great quote where it's so Irish. One of the ministers says, we can't do this because it's going to give us a horrible reputation and companies are gonna be mad at us and we're gonna be this place that does funny business with taxes and we'll be, quote, eating the seed potatoes.

[C]

So Irish. So as an Irish person, I'm like, wow, that's Irish. I mean, all I meant to say is like, they want the money, but they also are afraid of what the consequences of taking the money are.

[A]

Yeah. So.

[B]

Well, well, but, but let's, let's go back first and talk about the details. Talk about like what this ruling is because it's fas. Fascinating. This is basically the EU competition commissioner, as you say, doing its job and saying we want a level playing field within Europe. And what you can't do is basically allow companies to pay 0.005% of their revenue in taxes because that means that you're just going to have this race to the bottom among companies just going to the lowest tax jurisdiction country rather than you know, going to where the labor is best or anything like that. So they're saying it's unfair competition between Ireland and the rest of Europe rather than its illegal taxation. The actual taxation was perfectly legal.

[A]

Well, so sort. Yeah. So there, I think there are two levels of what's kind of going on in Ireland and it helps to have some context. Right. So there's like normal tax avoidance, like everyday tax avoidance where you try to. Where this is what basically every company that is capable of doing it does, where you try to book your profits in a country where it just has a very low tax rate. Right. Ireland has a 12.5% corporate tax rate. That's pretty low.

[C]

It's pretty low.

[A]

And so if you're a tech company, the name of the game is figuring out a way that you can theoretically book your profits in Ireland. Maybe one way you do that is you hand over your intellectual property to an Irish subsidiary and then when you make money off that intellectual property, it gets booked in Ireland at a low rate.

[B]

Or, or the way that Apple did it is they created this company called Apple Sales International, which technically was the company which sold basically every Apple product sold not only in Europe, but all throughout the Middle east and North Africa.

[A]

Okay.

[C]

But 12.5 is a lot bigger than.

[A]

Well, so that's what we're getting. 0.000. So it's like you have this low tax rate. Right. So that's normal tax avoidance. That's, that's. And the EU isn't trying to regulate that. They're saying it's fine if you have a very low tax rate. But then there's this second level. What was going on with Ireland and basically what this company, Apple Sales International, the subsidiary was doing was it was booking all these profits. But then. And it was booking all the profits for Apple Sales in Europe. It's a lot of money. And then it was saying, well, actually those profits belong to something called our head office. And our head office doesn't actually exist anywhere. It's not in a country. It's just sort of an on paper office. It's an office in our imagination. And so it's. And that head office doesn't have to pay Ireland's tax rate. And so.

[B]

Ok, let's be clear about it. It wasn't just the fact that head office. Well, head office was a kind of imaginary thing.

[A]

Yeah.

[B]

The stated reason why it didn't need to pay Ireland's tax rate was not that it was resident in the cloud or anything like that. The stated reason was that ultimately Apple is an American company and that money was paying American taxes. And Apple is this American company, owns all of the intellectual property. And as Tim Cook said in his very angry letter about, we believe that taxes should be paid where the value is created. And quite obviously, the value was created in the US and not in Ireland, so we shouldn't be paying the taxes in Ireland.

[A]

So one way to describe this, this head office was a sort of a way station for this money that is theoretically going to go back to the US Maybe one day.

[B]

And this is the bit which really kind of annoys me.

[A]

Yeah.

[B]

Which is that what happened in the wake of this ruling is that you got a bunch of people, including Jack Lew, the Treasury Secretary, Chuck Schumer, and, you know, a bunch of people who been quite keen to bash Apple for keeping all of its profits offshore and not paying US taxes, complain about this ruling, saying that it deprives the US of its natural tax base. And Tim Cook is saying the same thing. He's like, no, no, no, this tax should be paid in the US which they aren't. This tax should not be paid in Ireland. And the thing which you just want to scream at all of them was, well, yes, it probably should be paid in the US but you haven't been paying it in the us you haven'. Repatriating it to pay it in the US and it's a bit late now to change your mind. Okay, this is the thing which I haven't said anything.

[C]

And by the way, I have like 85 comments to make. All right, so I agree with you, Felix. It seems extremely hypocritical of the United States because we've been doing all these things and we've talked about them on the show before to try to avoid these tax inversions. But now we're like, oh, if the European Commission is trying to, like, avoid that kind of tax unfair tax competition between countries, then that's not okay, because somehow that's our money. Yeah, I don't understand that, I guess. But going back to the very beginning for a second, does the European Commission actually have jurisdiction? Can they do this?

[A]

So, yeah, that's what's interesting here. I mean, Europe doesn't have one umbrella tax regulator, but it does have this, it does have an antitrust body. Right. And they're basically saying that this deal that, that Apple got this tax ruling Apple got, saying, yeah, this head office move is kosher, was an illegal subsidy. And typically the idea of stopping subsidies is you're supposed to not, you know, Give money to your, like your big national car company or something like that. You're not supposed to subsidize.

[C]

You're supposed to pick and choose.

[A]

Yeah. You're not supposed to, you know, but this time instead, what they're saying is, well, you're subsidizing these multinationals essentially. And that's unfair too, because other companies that don't get that subsidy aren't playing on an even, even field. You're seeing sort of similar stuff happening with companies like, like Starbucks and McDonald's and with things they do in Luxembourg. And there are actually thousands of smaller versions of these deals all across Europe. And that's what has a lot of people kind of worried, is that, you know, Apple is the biggest version of this and its deal is particularly, is a little bit different than some of the other ones. But there's the sense that, okay, Europe's going to try and crack down on these, these, these super sweetheart deals. The thing you have to remember is they're not cracking down on just the super low tax rates that encourage a lot of the, the garden variety tax avoidance that makes the corporate world. This is a, they are only dealing with one sort of extreme layer, one extreme version of this.

[B]

My, the, the angle which I'm fascinated by here though, is the unbelievable amount of anger that you're getting not only from us politicians, but also from Apple. Because to read Tim Cook's letter and to read his interviews on, you know, Irish television and that kind of thing, you would believe that Apple has been just dealt a body blow by the Europeans.

[A]

It's got 260 billion.

[B]

So it's much weirder than that. The first thing is that Apple changed its entire structure in 2015. So nothing changes going forwards or nothing. This doesn't affect Apple's taxation right now at all. The other thing, which is I don't think anyone's really picked up on, and it's just astonishing to me is that this $14 billion ruling from the EU saying, oh, oi, Apple, you need to pay the Irish government $14 billion in back taxes. How much do you think, Kathy, that that raises Apple's total tax liability?

[C]

I was just thinking like it's about 7% of the amount of money they have just literally lying around.

[B]

Well, the answer is that it raises Apple's total tax liability by zero. What? By absolutely zero. That because there's a dual taxation treaty between the US and Ireland, if Apple pays those taxes in Ireland, it does not need to pay those taxes in the U.S. now, it wasn't paying those taxes in the U.S. either, anyway. But right now on Apple's balance sheet, it has a $24 billion tax liability.

[C]

To the usual to it.

[B]

It is completely neutral to Apple's balance sheet. I mean, 100% neutral. It does not affect Apple's balance sheet at all.

[A]

Yeah. It does circle back, though, to the fact of the matter that they were never planning to repatriate this money. And I think.

[B]

I think they were. And I think this is the real reason why Tim Craig is angry, is that when you have $24 billion that you owe the US and you're not paying the US that is leverage. He had leverage over the US and he was making noises that he was gonna start repatriating these things and start paying a lot more tax in the US and he was sort of in quiet negotia with the Americans about starting to pay all of these billions of dollars in taxes that they haven't been paying until now. And if Ireland goes and snaffles all of that money, then he loses that carrot in negotiations with the U.S. that's the main thing that he's losing here.

[C]

The leverage is for the tax holiday.

[A]

Wait, when you say negotiations, are you talking. Yeah, Wait, are you talking about a temporary repatriation tax holiday? Is that what negotiations?

[B]

Who knows? Or it could just be like some other weird thing. Maybe he just wants the Justice Department to stop trying to break into iPhones. There's any number of things he could be asking for.

[C]

Here's why the US should welcome this. The US should welcome this because if Apple gets. Gets screwed by European taxes, even after the fact, then fewer people, fewer companies will pick up and move to Ireland in order to avoid taxes. And they're like, I don't understand what's gonna happen in the future, so I'll just stay here in the United States.

[A]

Isn't that the thing.

[C]

Thing that we want as Americans?

[A]

See, the reason I disagree with that is because you're still not addressing the fundamental issue with. It's still a really good deal to be in Ireland with that 12.5% tax rate. This was make. What they're saying is Apple can't get an even better deal than that. They can still. It's still worth most companies time to go and do the legal footwork you need to pay. You know, it makes it less attractive. Yeah, it does make it less attractive. And I don't think. I don't think the margin is enough to really make or break many.

[C]

The other thing I want to mention, which I know Felix is going to enjoy is. Is an analogy to the EpiPen situation. It's like, here's what Apple is really doing and like that imaginary thing that you were talking about, that imaginary home something. So Apple is basically like hiding behind having sort of patent protection going on in the United States and by the way, political protection, obviously in the United States. But it's getting its tax rates for Ireland.

[A]

Yeah.

[C]

Similar to the way that my land, which is, you know, makes the EpiPen which gets patent protection from the US but it's actually tax base is in the Netherlands. Like, these multinational corporations are picking and choosing what they want from each country. I mean, it's like, really good point. It's like if I wanted to. If it's like I wanted like the maternity leave in Scandinavia, but I wanted to have, like to be an entrepreneur in New York City. Like, I can't do that as an individual. I have to choose a country to live in. But these multinationals get to literally get the best of each world.

[B]

Okay, so, Kathy, since you've gone and done it, I did it. You've gone and brought up that word epiphany.

[C]

I know you wanted to talk about it.

[B]

Are we doing part two? So I'm now on the spur of the moment, unilaterally expanding this podcast from three topics to three and a half.

[A]

All right.

[B]

Because I just want. Because we did get a bit of feedback on the. On last week, someone referring to it as a drug, as opposed to when we talked about Epiben and we talked about lots of interesting things about EpiPen. But there is one big thing about EpiPen which we didn't talk about, and I think it's. Since we have Kathy here and she loves to talk about EpiPen.

[C]

I do.

[B]

The one thing which I. Which we should just very briefly talk about is this thing, which is that, yes, the EpiPen is a $600 device, but what you are paying for is not the drug. What you are paying for is the device. The drug is out of patent, out of copyright, anyone. You can buy it actually in any drugstore for like a buck fifty. And you can, you know, if you want to. If you go into an anaphylactic shock and you have the drug which you picked up at the drugstore, you can, you know, put it into a syringe, inject it in yourself, and it does exactly the same thing that a Nepipen would do. The only thing that. The amazing thing is that Mylan has managed to patent a Delivery device, not even a drug. And that somehow the FDA has managed to give Mylan monopoly on epithrane, you know, delivery devices rather than on the drug itself. And that every time someone else tries to come out into the market with a new delivery device, somehow they get shot down.

[A]

Well, there is. I mean, there's. I wouldn't say every time. I mean, the device itself is off patent. The. There was one particularly important instance. Teva Pharmaceuticals was going to come out with a generic EpiPen, essentially. And then for whatever reason, it's not clear their device didn't work well enough. And the FDA said, no dice, and they can retry in 2017. Basically, the reason.

[B]

I thought. The stated reason. I thought honestly the stated reason was that people are going to try to use this thing exactly the same way as you would an EpiPen. And in fact, you need to use it a slightly different way. And people might get confused and get it wrong because they're used to EpiPens.

[A]

I haven't read the FDA, which, by.

[C]

The way, they had to make it slightly different from the EpiPen or else it would break patterns. This whole thing is a disgusting mess. And everyone's going to be heaving a sigh of relief when the EpiPen device finally leaves patent because it's something that we all need. We shouldn't all be trained in using syringes. That's the point.

[A]

The device itself is, I'm pretty sure, off patent.

[B]

Jordan's right. I don't think the device is patented. I think that just what's happening is that my LAN is getting astonishingly lucky, you might say, or else it just has extremely good lobbyists at the fda in that whenever anyone tries to bring a competitor to the market, the FDA says, not good enough. And in fact, one of the reasons why Mylan raised the price so much in the first place was precisely because they expected all of these competitors to be coming around the corner. So they're like, we're going to try and get as much money as we can out of this market before this whole market dries up. And then, amazingly wonderfully for them, the market hasn't dried up because none of these competitors have been allowed. And so there is underneath everything, this isn't really about drug patenting. It's not really about drugs at all. There does seem to be a story about the FDA's kind of cravenness and inability to allow new technology into the drug.

[A]

One upside is that all the commotion about what happened with the EpiPen will probably make them a Little bit more likely to approve the next generic that comes out. Aside from, I keep on thinking the.

[C]

FDA is going to improve overnight because of all these horrible things.

[B]

Well, the FDA never does anything overnight. Anyway, we only have half a segment for EpiPen, so we're going to end EpiPen there. And now, Kathy, you have some good news for us?

[C]

I do. I'm going to be upbeat today, guys. Is that okay with everyone?

[B]

Yeah.

[C]

So here's the bad news. The bad news is the undergraduates who are getting degrees in computer science in the United States are almost all men. There's like 16, maybe 18% women. And it's been really, really flat for the last few decades. I mean, in fact, it's gone down a little bit and then it went up a little bit, but it's really quite flat. It's always been less than 20%. So the question is, why is that?

[B]

Why is that, Kathy?

[C]

Well, you know, there's a bunch of different theories, and one of the newest theories is that it's just because they're teaching it badly.

[B]

The universities.

[C]

The universities are teaching poorly.

[B]

And then somehow the women who are applying or not applying for computer science degrees can sense that on their tour of campus and they, they kind of can smell the bad teaching. And so they don't even apply for the program to begin with.

[C]

Well, I mean, possibly, but I mean, that's actually, you know, let me put it this way, like there's 49% of the MIT undergraduates are now women. It's not like that women aren't going to technical universities. Right. It's just that they're avoiding the computer science major. And so the question, and Harvey Mudd is, is, was in the news this.

[B]

Week is are you finally getting to the good news?

[C]

I am. The good news is great. It's really, really exciting. I'm. I have to tell you, this is something that's been bothering me my entire life as a math nerd woman, because it's the same, same situation in math. And I still. Anyway, here's the good news. Harvey Mudd, which, which had less than 10%, like lower than the national average in 2007, now has, now has 55% female computer science majors. They've like absolutely turned the ship around and they are super friendly to women. And those women are going on to getting really good technical technology.

[B]

So tell us, what, what does a female friendly computer science department look like?

[C]

Okay, so what they've done is they hired a lot more women throughout the entire university. The president is a Woman that might help. I'm not sure what exactly helps. I'm going to tell you what they've done, what they've talked about. I think the most important thing probably is the way they start the undergraduate curriculum. They have a required programming course. This is Harvey Mudd. It's very nerdy.

[B]

So this is, so this is for every single undergraduate in the entire university has to take a programming course.

[C]

And Harvey Mudd is like the MIT of the Claremont Colleges, you know, down in Southern California. It's not Cal Tech, but it's, you know, it's like that. What they do is they have.

[B]

So it's not a liberal arts college?

[C]

Not at all.

[A]

No. They come, they do very well on salary surveys because they have so many engineering grads.

[C]

They're basically an engineering school.

[A]

Yeah.

[C]

So what they've done is they've, they've required everyone to take a computer class. But not just any computer class. It's a Python class. Python is my favorite language. It's a very, very friendly language. It's almost like pseudocode. If you read it, it's like very friendly. And they have three tracks. And I think this is the most important aspect of it, three tracks. So you get to choose which, which track to go into. But the, the most important one is the one that doesn't require any prior computer science and you can be a CS major even if you start there. So the reason I mentioned this as important is that I actually, I've been talking to this group at Columbia called Color Code, which is like a, a group of undergrad CS majors who are concerned that the computer science major at Columbia, you know, is sort of unfairly discri. Against minorities and women. And you know, and I live near Columbia, so I don't want to like rule it as, I don't want to like point it out as like the worst performing in any sense of the word. But they do things in the computer science major at Columbia that are really not helpful for people. And the number one complaint is that, you know, it's a wider course. Like the first undergraduate CS major course is a wider course that very much appeals to people who've already been programming for like 10 years.

[B]

So when you say a WEEDA course, what you mean is a lot of people take it and not. Most people don't even finish it.

[A]

It sounds like the equivalent of organic chemistry or something to weed out pre med majors.

[C]

So the quote I was told by.

[B]

One of the first of all, can you just tell me what is a weeded.

[C]

Yeah, somebody yes, but the quote I was told was the very first day the professor, who's actually a nice guy, said to the class, half of y' all won't make it. Yeah, literally, like we are intending to get rid of half of you. And the point is, if you say that to people, the people that feel like they're the least prepared are going to be like they have a sign on their face like, I will not succeed. And it really, it really happens.

[B]

So what happens to those people who drop out of the class? They just wind up with a second rate, you know, pure mathematics degree?

[A]

Not necessarily. So there's actually been some research on this. And what happens to the women and minorities who get weeded out? And a lot of them go into like liberal arts and just easier majors. Yeah, yeah. A lot of them get discouraged from the idea of doing science at all because they are a little bit more sensitive to failure than dudes. Dudes, definitely.

[C]

Absolutely a sensitivity to failure. And it's not just women that are sensitive to. Some men are too. But the point is that it's statistically much harsher for the people who haven't and had a lot of success already. So there is one class at Columbia, as I understand it, that you can take if you have no experience in computer science, but you can't then go on to be a computer science major because there's just not enough time. So it's. All I'm saying is a design. There's a designed curriculum. It happens at Harvey Mudd, they're expanding it to other colleges. That really works. Now the bad news about this new design is that it's expensive, it takes more resources. And I know people at MIT doing this as well in mathematics and statistics. They flip the course, the classro. They have more teachers, they have group work. It's very interactive. It takes more resources. So that's going to be a problem for places that aren't, you know, small. Really, really expensive. Schools like Harvey Mudd cost $72,000. How much? 72,000 a year.

[B]

Wow.

[A]

Yeah.

[C]

And MIT is expensive too, so you.

[A]

Probably make it back. I mean, you know, they probably also give some decent financial aid. I mean, Harvey Mudd grads. Harvey Mudd grads make bank. That's. That's one thing.

[B]

$72,000 a year for four years is, I believe the technical term is a shit ton of money.

[A]

That's true. I don't think many people, I would assume a good percentage of people are not actually paying that sticker price. But nonetheless, it is expensive when I say 72,000.

[C]

I should mention that that's like tuition plus everything else, like living there.

[A]

Still a lot of money.

[C]

It's a lot of money.

[A]

But I do think 72 is the.

[C]

One I worry about as a parent.

[A]

I do wonder though, like, what the marginal cost to tuition overall, how bad that could really be for implementing something like this in what is one of the most essential majors for any thing.

[C]

And not to. Again, not to rag on Columbia too much, but like, the thing about Columbia is that it's their most popular major. And nyu.

[A]

Is it really now?

[C]

Yes.

[A]

I didn't realize that.

[C]

And nyu, it's like one of the top three majors. And like.

[B]

And Stanford is definitely.

[C]

Absolutely. And Stanford, by the way, is doing quite well with women too. They have 30% women. I mean, that's better than average. So they have all these people that want to be CS majors and you're weeding them out. Like, why? You'd think that they would if. And this is like something I complain about a lot, but if you think if the, if the academic world responded like a business responded, oh my God.

[B]

We have all of this demand, we should create more computer science graduates.

[C]

Exactly. Why not? Why don't we expand the computer science department so that it has all kinds of different.

[B]

It's not like teaching computer science is vastly more expensive than teaching anything else.

[A]

That's true. And actually, I want to, I want to jump on this too. Just elaborating on why it makes no sense, because the idea of a wider course really very much comes from pre med. I mean, that's a, That's a huge part of it. And it makes sense in pre med because there are only so many spots in medical school. Not everyone who finishes pre med will even get accepted.

[C]

Exactly.

[A]

You need to weed kids out of that because otherwise you're just gonna have a lot of people who are suddenly faced with. You don't have to. But at least there's a rationale. Computer science. There is. You know, there is no surplus of computer science grads from top universities right now.

[C]

Right.

[A]

If you can produce more of those, that's good for everybody. There's no, there's no, there's no need.

[C]

There's no natural limit to the number of CS majors we want to see.

[B]

So. So all you schools out there teaching computer science, which is probably every school out there, I mean, realistically, stop dissuading people, and especially women from studying computer science and don't weed people out. And the more computer science graduates that America has, the Better we will be at making America Great Again.

[A]

The better we will be at wow.

[B]

Okay. It's fashion time here on Slate Money.

[C]

It's always fashion time with you, Felix.

[B]

It's always fashion time with me. I'm literally wearing my father in law's shirt right now.

[C]

It's nice.

[A]

It's a very tiki bar. There's like some multicolored palm fronds in blue, purple and green. There's a lot going on here.

[B]

I did not buy it at a shopping mall. And in this I am.

[C]

Do shopping malls still exist?

[B]

This is a very good question. It turns out that shopping mall do still exist. But you know, the modern people, we try not to use the M word on this show, the snake people, they have more or less given up on going to shopping malls because it's a miserable experience. Who wants to, you know, walk around an antiseptic, air conditioned bunch of shops for hours on end? I've never understood the appeal of this, but now it turns out there's a whole generation of Americans who don't understand the appeal of this. And what they're doing is they're not going to the mall.

[C]

I used to have this thing when I went to malls because that was what people did when I was a teenager where like, if like 20 minutes in I had some kind of like, feeling of. I called it the mall coma. Like, I just. I couldn't breathe, I couldn't think. I just ended up at Friendly's eating like peppermint stick ice cream.

[A]

I used to spend a ton of time at malls when I was a kid. I'd go to the arcades and anyway, this is tangential to. I just say there is. There. There is a certain appeal to just being inundated with retail and things.

[C]

And now people just go on the Internet.

[A]

Also, if you have to have a car to get places, it's a central meeting place where everyone can just kind of hang out and do whatever. There's a logic to it. But now it's lost its appeal and.

[B]

Has lost its appeal partly because the kids these days are less likely to have cars. The result of this is that a bunch of companies which were built on having hundreds, or in some cases over a thousand different outlets in malls across the country are doing quite badly. This company called Wet Seal went bust. This company called Pacific Sunwear went bust. And then this company called Aeropostale went bust.

[C]

Is anyone crying for that? Any of them?

[B]

No, no. Really, no one is crying. I feel like the bankruptcy of Aeropostale is probably Bad for the equity holders of Aeropostale. But, you know, you can. We. We. I'm sure they'll be fine in the grand scheme of things. So what's interesting to me about this story is that there was a bankruptcy auction for the assets of Aeropostale, and it was won with a bid of 243 point million by a consortium which is led by, get this, Simon Property Group and General Growth, which are the two biggest mall operators, basically. So what happened is that these mall operators looked at Aeropostale and said, you have 800 stores open. We're going to buy you. We're going to actually keep open, I think, 229 of those stores, which is. Okay, a good outcome, as well as doing the E Commerce and the brand licensing and all of that kind of stuff. And those 229 stores are going to keep on paying rent and they. And because they're in the mall, they're going to attract people who want to shop at Aeropostale and they get a bunch of benefit from having those stores open, which is above and beyond what any other owner of Aeroplane could have. And so what you have is the landlord basically buying the business in order to keep the business open. And I find that a fascinating story.

[C]

Isn't that just sad?

[A]

Yeah, I was gonna say that's how desperate they are. The entire point of operating a mall is that you do not have to own the stores. Yeah. It's like. It's the entire. That is why you started a mall.

[C]

It's like a free market opening on tenants.

[B]

Yeah. Okay. But now, because I'm Felix Hammond, I'm going to tie this into sovereign debt.

[A]

I thought we were gonna talk about optionality, but let's hear about Argentina. Okay, let's do it.

[B]

This is. This is. This is so Aeropostale, in this metaphor, is Argentina.

[C]

Okay.

[B]

So you will remember vividly, as I do, the sovereign debt crisis of 1998. And what happened was that Russia defaulted on its debt. There was a massive repercussion around the world markets crashed in every single market around the world for weeks and weeks. It was devastating. Spreads on emerging market debt around the world gapped out. And this is on a relatively small default of not very many, just domestic bonds, not even the international bonds by Russia in 98. And then what happened a few years later in 2002 is that Argentina had a much, much larger default on its debt. It was like over $100 billion. It was enormous. And Argentina was much more connected to Wall street and to the markets and to Latin America and to the emerging markets than Russia ever was was. It had a much bigger GDP and so on and so forth. And the repercussions of the Argentine default were basically bupkis. Nothing happened. There was no crash. There was no contagion. I mean, there was a little bit of contagion before the default in Brazil, but then after default, nothing happened.

[C]

So who are the landlords here?

[B]

I'm not lost. The metaphor, which I'm painfully drawing here is that, well, Argentina was described as the slowest train crash in history. Like everyone saw it coming. What I'm trying to say here is that slow moving train crashes are much less harmful.

[A]

So what I'm saying, less collateral damage.

[B]

What I'm saying is that what Simon Property and general growth, they're not in Aeropostale for the long haul. They're not buying the equity because they want to own it in 50 years. And they think it's some wonderful, great long term investment. What they're doing is they're softening the blow. They're putting foam on the Runway.

[C]

I was going to say foam on the Runway.

[B]

Foam on the Runway. And what they're, what they're doing is they're saying we can keep these stores open until the point at which we can find a better tenant to take over that store. And then we can just, you know, close down that store, replace it with a better tenant, rather than just having an empty store and have to scramble around to try and find a tenant for the empty store.

[C]

Or until like malls die officially.

[B]

Until malls die officially. So. So it makes them better in the short term and it makes their cash flow a little bit more certain. They get to continue getting the rents and they slow down the train crash. And if you slow down the train crash, that's good not only for the mall operators, but it's actually good for all the people who work at Aeropostale as well.

[A]

This also makes me think about this issue of keeping storefronts full. That being necessary, just avoiding blight in a mall. It makes me think that there's probably some contagion amongst all these companies that rely on mall sales. Right? Like if one goes out of business and the storefronts start going empty, like, you know, strawberry down the BL or like Forever 21 a few doors down is also going to be a hot topic, is going to be in trouble. And so I wonder if there's like an index that you could, like you could create an index, you could short then of all these mall companies as one goes the others are going to fall.

[C]

The Cinnabon index.

[A]

Yeah, Cinnabon would totally be on there.

[C]

Totally. Cinnabon is the nexus, man.

[A]

People.

[C]

People get addicted to Cinnabons and that's why they go to the mall. I lied when I said I didn't know what malls are for.

[B]

So anyway, if you have ever been to a mall, do write to [e-mail] because we have no idea what we're talking about. I feel that it's time for a numbers round because we need to. You know, we've already squeezed three and a half topics.

[A]

Yeah.

[C]

It's time. Let's do it.

[B]

Okay. So. So, Jordan, what's your number?

[A]

You're looking at me like you're expecting a number.

[B]

I am expecting a number, not Jordan. I hope you have a number.

[A]

Yeah, so My number is 68, which is the percentage of Americans who at some point in their lives won't pay any federal income taxes. There is a, you know, there's the famous 47% number. Right. During the 2012, we all learned there were 47% of Americans who don't pay federal income taxes. And those were the takers. And Paul Ryan and Mitt Romney are running for the makers. The thing about those sorts of stats, and it's useful to think about this with, like, poverty statistics, too. Anything that tells you about how many rich or poor people are in this country is that they don't really give you the full picture because people's incomes change over their lifetime. Some people are gonna be poor forever. Some people will be poor for a month. People go in and out of it. Same with this tax status. It turns out that over the course of lifetime, more than 2/3 of Americans will at some point be among the, quote, takers after their kids.

[B]

Yeah. Does this include, like, when you're in college?

[A]

Yeah, I mean, it's in lifetime. At some point I have to double check about that.

[C]

I mean, no child pays taxes and.

[B]

College students tend not to pay taxes. And when you're in jail, you don't pay taxes. And there's lots of reasons why when you're retired, let's just say when you.

[C]

Otherwise might be paying taxes. Yeah, two thirds of the.

[B]

But it is true that these things are highly variable. And. But, you know, the other thing is that you can afford to not pay taxes if you have wealth. Like, if you have a wealth cushion and you have a year of very low income, you're like, okay, I'll just spend down my wealth. It's less harmful to you than if you don't have any wealth. So, you know, just because you're not paying taxes doesn't mean you're poor necessarily.

[A]

That is true.

[B]

Ask Donald Trump.

[A]

Yes.

[B]

Sorry, we're not allowed to use that word.

[A]

I was gonna say I broke my rule. If I had done that, I'd be getting.

[B]

I would be.

[C]

Jordan. Did you notice that I broke that rule last time?

[A]

Did you? You were away.

[C]

You didn't listen.

[A]

Yeah, I'd be getting reamed right now anyways.

[B]

Okay, so I. I have a number which is a birthday number. I would like to take this opportunity to Wish A happy 40th birthday to Vanguard. They're 40 years old this week. And Happy birthday, Vanguard. And there was this attempt to try and work out how much money Vanguard had saved people over the years. And so that's my number. It's $515 billion, which is made up of $175 billion in fees. That is, the Vanguard fees are much lower than you would otherwise have paid. So that Savings is about 175 billion. It's. And then there's another $140 billion in trading costs because Vanguard doesn't trade as often as most other.

[C]

They're passive investors.

[B]

Money.

[C]

Isn't it kind of Marxist of you to see. Talk about.

[B]

I'm totally Marxist on this. And then they've added on another $200 billion in lower fees from everyone else because they're having to compete with Vanguard, and that adds up to 515 billion. And then, of course, you can sort of extrapolate it forwards and say that in a few years time, it's probably going to reach a trillion. Vanguard has saved Americans an absolutely astonishing amount of money. And you can quibble with. With whether that is actually true because it does look like Wall Street. And the buy side seems to be doing quite okay for itself these days. And that, you know, it's not exactly in the poor house, but it is clearly a force for good in the world. So happy birthday, Vanguard.

[C]

All right. My number is 61. It's a really good number. As I said I was going to be positive today. In the United States, in the past 25 years, the teen birth rate has declined by 61% nationwide. That's astounding and wonderful.

[B]

And no one knows why.

[C]

No, everybody knows why. The answer is they're having just as much sex. God bless their hearts, but they're using contraception. Thank you. Thank you, contraception people.

[A]

Yep, that's. There was this used to be more of a debate. There were like people saying, oh, it's like a cultural thing. But there were some studies recently that finally are just like, no, it's contraception.

[C]

Could I just add in like another number?

[B]

Yeah, why not have it. We're having an extra. If we can have three and a half segments, we can have three and a half numbers.

[C]

Yeah, half number.

[B]

That's 10 ounces of her, which is.

[C]

How much tax there are. How much taxes there are on tampons and maxi pads in New York state now.

[B]

Woo hoo.

[A]

You did it.

[C]

You did it.

[B]

You did it. We can so write in to slatemoneylate.com and say thank you, Kathy, for the fact that I no longer need to pay tax on tampons in New York State.

[C]

If you do get charged taxes, please take a picture of your bill. Hashtag tweeterceip to.

[B]

What's the hashtag?

[C]

Hashtag tweet the receipt.

[B]

Okay.

[A]

Kathy o', Neill, change maker.

[B]

Okay, so on which happy note, we will wrap up this edition of Slate Money. We will come back next week talking all about weapons of math destruction, because I can attest that McCathy has written a fantastic book. Jordan may or may not be able to have an opinion on the book.

[A]

But it's gonna be read. It's gonna. The book will have been read by me by the time we record.

[B]

So yeah, it just falls to me to thank Zach Dynastein for producing this show and Steve Lichti and Andy Bowers, the executive producers, and to point you to iTunes.com Panoply where you can find all of the Panoply podcasts. And we will talk to you next week on Sleep. Sam.