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- [00:00]
A
The following podcast contains explicit language. Hello and welcome to the Put a Fork in it edition of Slate Money, your guide to the business and finance news of the week. It's been a bit busy week. I'm Felix Salmon. I am joined not only by the amazing Anna Shymansky. Hello. And by the one and only Emily Peck of the Huffington Post.
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B
Hello.
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A
But by everyone's favorite slate money guest, Mr. Paul Ford. Welcome.
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B
Thank you.
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A
Paul Ford is the greatest person in the world and as you will remember from previous editions of Slate Money is awesome. But in previous editions of Slate Money, Paul, you were a lowly co founder of Post Light and now you are. You are much more exalted.
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B
That's right. As a co founder, myself and the other. First of all, actually, let me say it's good to be back here. Thank you. I'd like to do my part for the slave hierarchy. And I am now a CEO. That's right, that happened to me. I have a software firm with a co founder and we decided to promote me.
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A
And how does it feel to be a CEO?
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B
Slightly fraudulent to be frank.
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A
Do you have imposter syndrome?
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B
No, because I've met CEOs, I'm no worse. But no, my co founder is the president. I am the CEO. The company started to grow up and nobody knows what a co founder does all day, but a CEO, someone like me, who's out and about, talks about what it's doing, works with our clients, does all that stuff. I do CEOs.
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A
I feel like people know what a CEO does and absolutely no one knows what a president does. So what does a president do?
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B
I see the CEO as sort of of the long term strategic vision setter who then kind of delegates outward. The president has, I feel more still has ownership in connection to that, but has a lot more operational responsibilities. Okay, so they're really owning the operation.
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A
Okay, so next time you hear that someone calls themselves the president of a company, think of them as like a high level coo.
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B
Well, yeah, I mean, let's not talk about that. Let's move on from me and my software company that people should get in touch with.
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A
Yeah, totally. Hire Paul to do all of your software development needs. In the meantime, Paul is going to be telling us about the $7.5 billion acquisition of GitHub by Microsoft. He is also going to be telling us about what on earth happened inside Facebook after they bought WhatsApp and how those two pieces of Facebook didn't really work very well together.
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C
It's almost imaginary tale.
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A
Most interestingly Paul is going to give us an incredible disquisition on green shoe options and the IPO market in Australia, which, weirdly, Paul is an expert on.
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B
I love Australian economics, so.
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D
So better than Austrian economics.
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B
They are. They're a lot easier.
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A
Yeah.
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B
And they're just more casual. It's more fun.
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A
Is economics in flip flops?
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B
Yeah.
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A
Yeah.
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B
Come on, guys, let's. I don't know. What do economists do? Can someone tell me?
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A
Okay. If anyone knows what economists do? Just, you know, F train on Twitter, let Paul know, because none of us have a clue.
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B
Seriously. DMs are open.
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A
Okay, let's start with this GitHub deal, because it's huge and I feel like a good sort of few million people saw the words GitHub this week for the first time and sort of said, what is a GitHub? And Paul was like, but I've been living on GitHub for the past however many years. And how do you not know about this?
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B
That's right. I wrote a piece about this for Bloomberg Business Week, which. Hey, I need to say that that's important. Document things.
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A
It's a really good piece.
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B
Thank you. So I don't have any super secret inside information. I just am trying to explain to civilians what this thing is. So are you ready? Can I do this? It's going to take like a minute.
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A
Okay, okay.
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B
Just like. Everybody take a deep breath.
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A
Okay, you have one minute. Starting now.
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B
Okay. So programmers, they write things all day. They make software, and they make it out of code. Code is just a lot of words in a file and numbers and symbols. Don't worry about that specifically. But when you're programming, you write your program and you run it, and then usually it breaks, but sometimes it doesn't. And then sometimes there's a new thing you need to do. You need to change that file. Right. So what has evolved over the last 50 years is the idea that don't throw it away and start again, but continually and adaptively change your code. And you do that by having versions of your code. Everyone has used track changes in Microsoft Word. Right, right. Okay. All right. You're nodding for the podcast.
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C
Yes.
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D
Yes. Very useful on podcasting.
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C
We all used it.
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B
Okay. So that's version control. It lets you sort of go back and forwards in time. Git lets you do that with hundreds and hundreds of files. Git is a program, open source, written by Linus Torvald, same guy who made Linux. Making sense so far.
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A
Making sense so far.
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B
Okay. Git is really hard to use. Except in a very simple case like it's just sort of complicated, it's hard to share the files and know exactly what to do. You can, it's a great decentralized tool for keeping track of enormous sets of changes in, in giant code bases over time. Works beautifully, but it's abstract. And so GitHub came along around 2008, three years into Git's existence, and said this is a great free tool. People really like it. If we put a nice web interface on front of it and let people list the files, look at the code and then also collaborate, give them some tools so that if somebody changes a big code base and needs to get somebody else to accept that change and bring it back in and ship the nice new updated software, let's make that simple. And they did that. They did a very good job. So all of the programmers that you meet on a day to day basis probably are using a little bit of GitHub. Not all of them, but I mean lots, like millions, tens of millions, lots of companies and so on. And so they took this very complicated abstract thing that's key to how software gets made and they made it a.
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A
Lot simpler and they weren't making money, but they do have some kind of revenues.
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B
They used to be bootstrapped. They took some VC and they just grew and grew and grew. And so yeah, I mean it was, I don't think, I don't know what the financials were at the very end.
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C
They said, I think it was either the Times or the journal. 200 million a year towards the end. In revenue.
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A
In revenue, but no profits that anyone could see. Yeah, that, so we can see how this is an incredibly important part of the, you know, coding ecosystem. And we can see how it's a much loved product and we can see that, you know, it has revenues, the quest. And so the two big questions are why does it want to be part of Microsoft? Or why does Microsoft want it to be part of Microsoft? And what makes it worth seven and a half billion dollars?
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B
All right, so let's, first of all, does Microsoft's concept of money actually align with the concept of money that we have like in our wallet? Like I think, you know, Microsoft issued new stock and spent 7.5 billion Microsoft coins.
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A
It's actually, this is actually an incredibly good point. I did, I did the, I did the math. They issued 73 million new shares and the cost of issuing those new shares was negative because their stock went up after they, after they announced this deal. So really it didn't Cost them anything.
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D
And they're going to be buying back shares. Shares to offset the dilution.
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B
Right. So I mean this is just, it's an economy unto itself. So they were able to kind of mess with the, I don't know, insert an economics term here. I'm a software person but like yeah, so Microsoft, I don't know if they're like don't over index on the money, right, but what do they get? Well, first of all, Microsoft used to be really against open source software and only wanted people to use Microsoft products to do Microsoft things. But if you look at the CEO of Microsoft today, it's Satya Nadella came out of cloud services. Microsoft does lots of stuff with Linux and Open source and they're big on GitHub and they have their own open source repository tools and all this stuff. Like they've been playing in this world pretty seriously for five years. And the world, why play in this world? Well, because it used to be you would go get, I don't know, there's a, you know, let's say you set up Microsoft Dynamics, right, Which is their CRM. Nobody knows about it. I guess it competes with SAP, but it's like this really specific world and you're going to use their services and their documentation and their servers and their everything. But meanwhile you got Amazon over on the side with aws. Like it's the infrastructure that stuff like Netflix is built on. They're getting all that money. So if I'm Microsoft, what I see is like a big open source ecosystem with Linux and lots of other stuff is key to bootstrapping and building things in the big new world. I can't just assume everybody's going to run Windows.
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C
So this is their way of. It's almost like a branding move. It's like they can't be Microsoft from 1999 anymore. That ship has sailed. And if they want to still be relevant, they have to. This is their way of buying relevance really quickly. And then prove, didn't that guy say he was going to gain your trust? Because a lot of. I don't know how it still is, but people used to really hate Microsoft. I mean deeply, I recall.
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B
No, it's totally right. Most people, the instinct in general. There are a lot of people who have opinions on this deal and plenty of them are like, this is the worst thing that could happen. And most people as far as I can tell are just like, well, another big thing happened with enormous amount of money and it's going to. They're probably not going to screw it up. Like they're going to have this big thing that can live in Microsoft's world of code. They love developers, they've always been really developer focused and in some ways it is, it's like the huge signal that we're going to play with the rest of the world. We're not going to just be our little like our giant ecosystem of only Microsoft things. We're going to be part of the whole world of software.
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D
And I think when you're thinking about the valuation here, this isn't something that you'd use like an accretion dilution model or something and see if it works. It makes sense. This is a strategic acquisition where Microsoft is saying we have a hub of all of these developers who are also tied to larger businesses. We want to be able to be the place where they come so that then we can funnel them to our money making ventures. And it's like cloud and their productivity services. So it's not that they ever I think, expect that GitHub would be generating tremendous amounts of revenues or earnings. It's that it can strategically create earnings in other ways.
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B
Yeah, they can plug it in. No, exactly, they can plug it in anything. They have an open source code editing tool called Visual Studio Code and you could plug it in that way. You could also, you know, machine learning is getting big and let's say they decide to create a GitHub area for machine learning models that could be easily shared and then you could plug those into your enterprise, Microsoft World, your SQL Server and your Dynamics and so on. So it's just like we're going to help you improve your sales pipeline with these new open models that are available on GitHub. You can really see the Microsoft the stuff happening and then they just sort of jam this in the middle and are like, okay, cool, now we have a big software thing here.
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A
So the question I have is you don't just put code on GitHub, you can also put anything on GitHub. You can put, to take an example out of thin air, you can write a text page all about what happened in Tiananmen Square in 1989 and you can put that on GitHub and GitHub being a good HTTPs site, nice and secure site. If you want to block that page from China because you are, you know, firewalling the country, you have to basically block the entire site. And GitHub is too big and too important to block the entire site. Am I right? Am I right so far?
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B
I mean, sure. All this could Come down the pike. I don't think that the audience is big enough. Right.
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A
Is it not the case that GitHub is one of the very, very few sites in the world where you can publish stuff for Chinese people to read, which the Chinese government basically can't censor that because they can't take it down because it's too important?
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B
You know, I really don't know. I mean, you know, everybody's very smart these days. It's entirely. I mean, is what you're asking, could Microsoft start bending towards the sort of.
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A
I mean, they already have started. They're a big corporation. All big corporations need to play nice with the Chinese.
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B
I mean, this is a tricky one. I remember once, just for kicks, I registered the username al Qaeda on GitHub and put a PGP encrypted version of the Constitution up, and then now I can't remember the password. It's a giant content platform where the core thing is code. I just don't feel like this is where people are going to be putting their energies. Like, it's just not. It'll find its audience. But, I mean, if I needed to do that and I wanted to distribute through GitHub, I could encrypt the files in other ways and sort of, you know, if people had the secret password on the other side, they could get them. Like, you could submit, you could transmit all sorts of stuff all sorts of ways through GitHub if you want to add something.
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C
Oh, earlier I was going to just mention that I haven't followed Microsoft very closely recently, but the last time I was following them closely. They seem to just screw things up a lot, you know, like, like.
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B
But what about LinkedIn?
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A
So, so the greatest Slate Money episode of all time.
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C
We all agree that LinkedIn is kind of bad.
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A
Well, this is the question, like, can we have just. I wanted to come to this, which was, where are we now? Like, two years later from LinkedIn. What. What is the verdict on that? Like, how has LinkedIn done as part of Microsoft?
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C
It hasn't changed, has it? I don't think it's changed.
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B
They've. They improved the design. It's a little. It's probably better overall. I still, I mean, it's like.
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D
And to say. And to say how it's doing for Microsoft is complicated because Microsoft itself is doing quite well. What part of that you can directly relate to LinkedIn is very hard. So a lot of these acquisitions, you're not just talking about literally how much money it's generating. It has to do with an entire Microsoft ecosystem.
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A
Okay, but can you just give me an example? Because this is something which I do find a bit confusing of how does the fact that LinkedIn is owned by Microsoft help the rest of the Microsoft ecosystem?
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D
I am not entirely sure how Microsoft uses LinkedIn, but I would imagine they're connecting with companies in some way or the way that combat.
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B
Oh, I can, I can help you out.
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D
How about you? This year?
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B
No. So when they announced it, There was a PowerPoint, of course, that got distributed. But I mean, no, I mean, you're talking about. Look, we've all had to make our peace with things changing and now this giant mega structure is now not as bad and we have to fear new things like Facebook. But even though Microsoft, who knows what they're doing with our private data right now for LinkedIn, could you have a resume that goes straight into Microsoft Word? Could you have.
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A
Isn't this what we talked about two years ago? Has anything actually happened yet?
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B
Oh, probably, man, you got to get into that enterprise world. I mean, it's just sort of maybe Microsoft 365 Dynamics employee finder has an instant LinkedIn socket that goes right into your Excel.
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D
Yeah. And I don't know what type of data they're generating that is useful in other ways. It's very hard to tell with that type of acquisition.
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B
Yeah, they're fine. Everything.
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D
Yeah, Microsoft's doing quite well and Santa Nadella is doing a good job.
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B
This is the thing they've gotten really good at. Not freaking you out anymore because it used to be like, oh no, Robo big mean robots are eating everything. And that was the form, you know, that was Steve Ballmer screaming until he.
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D
Turned developers, developers, developers.
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B
I mean, that was the portrait. But Nadella, in the piece for businessweek, I described him as kind of Obama esque. Right. He's just sort of like, oh, he's into poetry, he's thoughtful, he's a participant in culture. And he's just kind of got that slightly detached moat about him. The thing about, I mean, Microsoft culture was famously brutal forever. And it does seem like at some level he told everybody, you got to put your guns away because nobody cares about Windows.
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C
They've actually made a lot of internal HR changes to make the culture less brutal. Like performance reviews. They changed. They used to rank people.
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B
Oh, the stack ranking.
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C
Yeah, for stack ranking. And whoever was at the bottom got fired. So they changed that recently. It seems like that Microsoft at the bottom line is that they're less uncool than they used to Be.
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B
Well, I think they're becoming IBM. Right. There's a lot of services and it' just they've got all these different. And they're good at pulling stuff off now. Like the Surface is a good PC. You can get this very nice laptop. It works really well. It's comparable in a lot of ways to Apple's products.
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C
They've done. A lot of tech companies can't do it, which is mature to the next level. Like they're not the hot thing anymore. But this is managed to sort of.
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A
But this is the perfect segue actually. So let's. I feel like this is the subject of our next segment.
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C
Yeah, it's like Microsoft did this good acquisition, it seems like, and then Facebook and WhatsApp did this like master disaster for like three times as much money. With Facebook paid how many? A few years ago Facebook paid what, $22 billion for WhatsApp, the messaging service. Do I have that right?
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A
Yes. Which is about what Microsoft paid for LinkedIn.
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C
Yes, about. Yes, that's correct. And then the two founders of WhatsApp are famously anti advertisement. And Facebook's like. And they said, you know, this isn't. We're different. We're not going to do advertising and Facebook. Mark Zuckerberg, Sheryl, that's fine. This is fine. It's all going to be fine. And then was it this week? Well, and then basically that all falls apart. And then we learn this week that the co founders basically left the company.
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A
Ryan Acton left in April last year. Jan Koum left in what, September? Something like that.
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B
Yeah.
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C
And they walked away from what is it, $1.3 billion. Thank you very much. $1.3 billion because they were just freaking fed up with Facebook, which a lot of people are.
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B
Let's just postscript that they'd already invested many billion.
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D
Yeah, let's be clear here.
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C
They're $9 billion richer now. They didn't need the money.
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A
Yeah, they didn't need the money. But to be clear, if they had stayed just until November of this year, not very far, if they just hung around, you know, playing solitaire on their computers until, until November of this year, Facebook would effectively have paid them both $60 million a month to do that. And they were like, eh, no, it's.
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B
A lot of air cooled Porsches.
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D
Yeah, exactly.
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A
You can buy a lot of air cooled Porsches for $60 million.
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C
Wait, say why you're talking about air cooled Porsches?
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B
Because I don't know how you pronounce his last name. I'm assuming my Thing. One of the co founders of WhatsApp, on leaving Facebook, put up, I guess an Instagram post or some kind of post using one of the many services that we use to communicate and said, you know, I really, I'm going to take some time for me and explore my love of air cooled Porsches and.
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A
Disc Golf and Ultimate Frisbee.
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D
Ultimate Frisbee, sorry.
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C
And working on cars. He said non tech pursuits. But then he mentioned air cooled Porsches and working on cars, which, I mean, they're technically tech things, of course, I'm just saying.
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A
But so the background to this is that he always had this incredibly privacy first sort of manifesto going back years. He actually started a blog post off once with a quote from. What's the name of that movie? Oh, Fight Club. He actually started a.
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B
What a surprise.
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D
Of course he did.
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A
He started a blog post, a quote from Fight Club saying like, advertising is the most evil thing in the world. It just makes you want to buy air cooled Porsches. And, and, and like. And so he was kind of, you know, pointing out in as sort of in an elliptical way how ridiculous this ostensible reason for leaving was. And it was clear that obviously he had no particular desire to tinker with air called Portia so much as he was just, he had reached the end of his rope with Mark Zuckerberg and Sheryl Sandberg, basically forcing him to do the thing that they promised him that they would never force him to do.
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D
Okay, I'm just like, I was reading this article and I know I'm supposed to be siding with these WhatsApp guys, but I feel like there are no good guys in this story.
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B
I mean, privacy plus capitalism equals comedy.
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A
Right?
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D
Like, it's just, yeah, it's like so it doesn't. They sold their company, they were made billionaires. They were then shocked, shocked to find out that the company they sold it to at some point wanted to make money off of that acquisition. I'm sorry. Like, I also have a very hard time imagining that when they were talking to VC funders initially and getting cash, that they were saying that we never want to be able to monetize this in any way.
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A
Well, I mean, it was interesting. WhatsApp only, I think took one round of funding, not a very big fund round at that.
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B
It's one of the most efficient products ever.
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A
They had like eight employees or something. It was insane.
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B
Zillions of people.
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A
And they, and one of the reasons, you know, that they did that was because they were very adamant about not maximizing profits and Revenues. And it's absolutely, abundantly clear that when Mark Zuckerberg was trying to persuade Yankoum to sell, he did make a bunch of promises. The only question is whether he knew when he made those promises that he was going to break them.
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D
Well, first of all, is Yankum a child? Look at how Facebook makes money. Also, it's also entirely possible that when they originally made the deal, the intent was to try to figure out if there was a way that they could keep it ad free. And then things changed. I don't know. I don't trust Facebook that much. But again, buyer beware. These are sophisticated people. I don't feel sorry for anyone here.
- [22:49]
A
I do, because, like, I feel sorry for the users of WhatsApp. WhatsApp was end to end encrypted. It was one of the strongest, most secure messaging systems. And then suddenly Facebook comes along and says, well, yeah, never mind that. What we need is not only advertising, but targeted advertising. And if you're going to target advertising, then you need to know a bunch about the people using it. The whole WhatsApp was built on the idea that we don't want to know anything about you. We kind of need to know what your phone number is so we can reach you. We don't need to know your name, your gender, your location, any of that. And Facebook, meanwhile, if it wants to target advertising, you needs to know all of these things. So it really does completely undermine everything that WhatsApp ever stood for.
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D
It was certainly built on that. It was not valued on that. It was obviously valued on its users and their data.
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A
Well, no, there was no data. There was no data.
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D
Clearly, the idea that you have a user base and at some point you want to generate data, I would imagine otherwise.
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A
What?
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D
Otherwise, how did that valuation make any sense?
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A
I mean, I could make an argument that it made sense, purely defensively, that, you know, I think that's it.
- [23:57]
B
I think that it's the same as Microsoft. Like, they had 19 billion Facebook coins, right? And they're like, this is an enormous thing that's happening, and we don't control it. And if we don't control it, Google or someone else will. Let's spend some coins. And then they got it and they're like, yeah, we got to get it. We got to get these guys in here. We got to get that WhatsApp under the umbrella. And, you know, probably. I mean, I could easily see Mark Zuckerberg going like, yeah, this is great. It is time for privacy. We got to get some privacy in here. What I Love in that story is Sheryl Sandberg just continually brings the hammer down, obviously, where she's just like, boys.
- [24:31]
C
No, it's not going to scale.
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D
Yeah.
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A
We're going to have.
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B
Look at the ground. That's the bottom line. I mean, it's just. It's so good. Like, everybody's like, privacy, privacy, privacy. She's like, how about all the zeros in your bank account and shut up.
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D
Right. Which is fair enough. Like, look, I'm not going to try to defend Facebook's actions because as we've seen in the last year, you know, they're pretty indefensible. My only point here is that these founders went in knowing everything that everybody else knows and significantly more. And so I don't feel sorry for them.
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C
But didn't it say in the Wall Street Journal piece, that's the one we're all talking about. I'm sure we'll put a link up somewhere that Acton, the co founder, that. That both of them, it said, had clauses somewhere in their contracts that said if. If advertising. If it started to be a thing.
- [25:18]
B
Yeah.
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A
If they started even trying to monetize things, then they could, like, vest immediately and leave.
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C
And then when he tried to do that, they were like, oh, I don't think you want to do that. And he just gave up.
- [25:30]
D
Yeah, well, he could have.
- [25:31]
C
Pretty sinister to me. It doesn't sound like it sounds like they had something.
- [25:34]
B
Nah.
- [25:35]
D
That just like, get a lawyer. You're a billionaire. Like, I'm sorry. Like, no, I just. I think that you can say that these founders had created this great product and that it was really great for its users. And I think many people would probably agree with that. And if they wanted to keep that as it was, then fine, then they should never have taken VC funding and then they shouldn't have sold it.
- [25:59]
B
I mean, what a tricky world. I don't know. This to me is just like, you.
- [26:02]
D
Can'T take other people's money and not expect that they're going to want something.
- [26:05]
B
This is just raw human comedy at this stage. Like, I mean, it's just like they had the thing. They knew what they were doing. That's why I like Sheryl Sandberg and the Wall Street Journal piece, because there's this element with her where she's just like, you boys, you knew what this was. You knew what this was. Don't pretend otherwise. You know.
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A
Okay, so. So this is the question. I mean, Anna is very clear that they should have known what this was. Sheryl Sandberg is, you know, that, you know, Cruella De Vil character saying, you know, you. You knew what this was. And of course, you know, because these guys are now multibillionaires because of all of this Facebook stock that they got handed. Everyone's like, not feeling sorry for them because they're billionaires, but they weren't billionaires when they sold the company. They only became billionaires when they sold the company. And I still have this feeling that actually weirdly, improbably, improbable though it might sound, they actually believed Mark Zuckerberg when he made that promise.
- [27:06]
D
Well, then they were stupid.
- [27:07]
A
Okay, but no, I'm just saying. I'm not saying, I'm not saying they were smart.
- [27:11]
B
I'm not saying they were stupid.
- [27:12]
A
I'm just saying they believed him.
- [27:14]
B
Felix, if somebody came to you and said, I need you to believe this for $19 billion, wouldn't you believe it? I would.
- [27:20]
A
Yeah.
- [27:21]
D
Anyone would.
- [27:23]
A
Okay, so wait, now you agree that.
- [27:24]
B
They believe what has more motives.
- [27:27]
D
And I'm saying that they may have been stupid to believe it. That's.
- [27:29]
B
Yeah.
- [27:29]
D
I just don't feel bad for them. Like, this is. They're adults. Everyone's an adult guy.
- [27:33]
A
I feel bad for stupid people.
- [27:35]
C
First of all, $9 million and a bunch of air cooled.
- [27:38]
B
Everyone should use Signal. You can download it on your phone. Don't use the desktop version.
- [27:42]
A
And just remember to delete the messages after you've been doing the messaging. Other if the FBI just takes your phone, they can still see you. That's right.
- [27:50]
B
You can set an expiration, which I love. With Signal.
- [27:53]
C
One of the co founders just invested a bunch of his.
- [27:55]
A
Ryan Acton put money in signal.
- [27:57]
B
He put 50 million in the signal, which is a good way to. I mean, if you're going to throw the middle finger up on the way out the door, that's pretty good. I don't know. I mean, just like this one sucks in that vulnerable people who are reliant on that service might be more vulnerable in ways that we don't fully understand. And it's not like Facebook is super transparent about this stuff, but in terms of just human beings wanting things and they getting into pickles, you know, it's pretty amazing.
- [28:26]
A
So the.
- [28:29]
B
We're glossing over the parts in the article where like WhatsApp asked for bathroom stalls that reached the floor and Facebook was. And the Facebook employees are like you.
- [28:37]
C
Princesses, they want privacy. It's very consistent.
- [28:41]
A
It's very consistent.
- [28:42]
C
I was amazed by that.
- [28:45]
A
But looping back, though, to what we were saying about Microsoft, it does seem to be an astonishing reversal from a few years ago when Microsoft was this big evil corporation and Facebook was this amazing fun place where college students would poke each other. And now it's the other way around. And Facebook is this big evil Panopticon and Microsoft is the friendly open source, they're the not bad tech giant.
- [29:16]
B
Well, it's more tricky than that. Microsoft had like a 30 year run of being extraordinarily predatory and very smart and very competitive and a little or a lot destructive. And they managed to do some amazing things too, right? I mean, it wasn't all bad and it wasn't all good. Facebook, I just see consistently it seems to be a disaster right now. It doesn't know what it is and everyone seems to be really, really angry with it. But it expanded. There's never been anything that's just expanded like that, that quickly. And so I think that they just don't know what they have half the time. How could you wrap your head around that rate of change?
- [29:57]
D
And they have no ability to control it or no desire to control it currently.
- [30:00]
B
It's not like the leadership of Facebook are excellent ethical systematizers. This is really hard. I don't know who is. I don't know. Ethics don't scale that well. And so it's like, what the hell do you do? And so I have empathy for them in that they're riding this tiger. The empathy starts to fade away after you watch the congressional testimony and you're just sort of like, oh boy, we're in a pickle again. This is like, you know, there doesn't seem to be this collective sense of what would be the right solution to the right way out.
- [30:31]
A
And if you look at, you know, I mean, Google has just put out a set of principles governing its AI, which I have issues with, but they're clearly grappling with these issues. Microsoft, as we've said, has like basically stopped being evil at this point.
- [30:49]
B
But remember, the reality came home for Microsoft 20 years ago. That's when they got.
- [30:54]
A
Microsoft is still bigger than Facebook. And you know, Amazon knows everything about everyone and somehow has managed to avoid being tarred with this. Your incredibly evil rush to the same.
- [31:09]
D
Yeah, there have been books and articles that have portrayed Amazon as being pretty evil too.
- [31:13]
A
I mean, they're bad to their workers. But I feel like in terms of like the privacy stuff that like people worry about Alexa listening to everything. Exactly.
- [31:23]
B
No, but they're good to their users and bad to their workers.
- [31:26]
A
Right?
- [31:26]
B
That's Right. Facebook is the opposite.
- [31:30]
C
Because their users are not their customers.
- [31:32]
B
No, I know. This is the thing. It's all coming home, right? Like that's. Microsoft dealt with this a while ago and they went before the judge and that felt bad. And then Steve Ballmer, they started to, to suffer in the marketplace and then suddenly they're like, maybe we're a kinder, gentler Microsoft. Right. Like, we're probably 15 years away from this with the other giants.
- [31:51]
C
I think it's just a natural tech company progression. Like when you're young, it's like life. When you're young, you're arrogant and then you join a frat and you're a real bro and you're a jerk. Right. Then you finally, you reach middle age, you get older and you mellow. Right. You become IBM, you become Microsoft. Facebook is in like the frat bro stage.
- [32:11]
D
Then you have a midlife crisis and I'll help you.
- [32:13]
C
Exactly. Of a midlife crisis. And then, yeah, you either flame out or you, you know, silver haired.
- [32:18]
A
Yeah.
- [32:19]
B
I mean, I, Dudes have daughters and suddenly they're feminists. Like that's, that's what we're waiting for.
- [32:23]
A
I mean, IBM has this female CEO, you know, which, like, I mean, I'm not, she's not exactly gentle.
- [32:29]
B
Well, this is the thing. We're on the other side with IBM now where it's like, what the hell is that?
- [32:33]
C
Things are going bad for them. Yeah, maybe they're not a great example. The progression. I stand by that.
- [32:39]
B
Well, they're 120 years old at this point. Right. I mean, there, there are these sort of parts of the life cycle. Like, you know, maybe Satya Nadella is the enlightened humanist leader for Microsoft. And then, you know, maybe the next one will be like really technical and be like, no, we're going all drones.
- [32:54]
A
Well, I'm going to plug my, my Wired article where I said that Mark Zuckerberg should resign and that he should be replaced by Catherine Mayer of the Wikimedia foundation, who would be like exactly the leader that, that Facebook needs right now. Let's, let's talk briefly about Paul's favorite subject, which is IPOs. And especially IPOs of. Well, not. It's not even an IPO. It's a secondary offering. Secondary offerings of Australian banks.
- [33:22]
B
Oh my God, this is great. I read so many Wikipedia pages about this.
- [33:29]
A
This is, this is a fun. Well, it's not a fun story. It's a, it's a notable story because a whole bunch of very senior bankers in Australia from Deutsche bank and Citibank are facing criminal prosecution. They could go to jail. And these are not, you know, the equity capital market desk monkeys who are, you know, low down on the totem pole. These are very senior, like, you know, C suite level bankers are facing jail for basically being part of a cartel in Australia. And no one knows entirely what they're being charged with because in Australia it's not like in the US where the, where the charges become public immediately. So it's a little bit vague. But the fact is the bottom line is that we have a major criminal prosecution of bankers going on in Australia. And I think a lot of people are like, wow, is that possible?
- [34:25]
C
It looks like Australia is going, undergoing some kind of reckoning with the finance industry. There's been some other scandals this year. There was like a Wells Fargo like scandal in Australia or something where banks were selling financial advice but not giving any, which to my mind is fine.
- [34:40]
A
But the best advice, the best, that's the best financial advice. We'll just like take your money and tell you nothing.
- [34:46]
C
We'll tell you nothing was better. The advice that they would have been giving anyway. But anyway, there's like a big. Please stop me if I use the wrong terms because I'm not familiar with Australian banking very much. But there's a big commission, a big hearing on finance right now and people are mad and it's like they're doing all the, they're like the exact opposite of the United States right now, which is like quickly rolling back every regulation.
- [35:09]
D
Well, I would just like to be. Just, just. Australia is actually somewhat known as being a little lacks in terms of securities regulations and also in terms of compliance because like in the us, in the uk, especially in the US after the financial crisis, I think they, the number of compliance officers doubled. You did not see that happen in Australia. So I'm just saying that if anything you could maybe argue, I mean I, in this particular case I'm not going to say anything because I don't think we know anything. But you could argue that Australia, in terms of perhaps altering some of the regulations, would actually just be catching up to the rest of the world.
- [35:41]
C
Yeah, I did read one piece that said like, we can only hope to catch up to the United States. And then I got super confused because I was like, wait, we're talking about jailing bankers? The US doesn't jail bankers.
- [35:50]
A
Felix can enlighten us so I can make an educated guess about what happened here. And it's one of those things a little bit like when there was the big Elliot Spitzer scandal about in house sell side research and everyone knew that it was happening for years. And then Elliot Spitzer said, you do what? This is scandalous. And everyone said, wow, this is scandalous. And sometimes it helps to have like a fresh pair of eyes to kind of point at something and say, this is pretty scandalous. And I think that what happened here, if you look at what happened, as I say, this is an educated guess. I don't know this for sure was that ANZ is this big Australian bank and it did a secondary offering, which means it offered a bunch of shares to institutional investors at a certain price. And that offering was underwritten by JP Morgan and Citi and Deutsche, which meant that if they couldn't find the institutional buyers out there, then they would buy the shares themselves. And it turns out, and all so far, so unexceptional. This is, this happens all the time. It turns out that they couldn't find enough buyers for the shares at that price and they got stuck with like 25 million shares. And this is where the problem comes in. It looks very much like they didn't tell anyone that they were stuck with these 25 million shares. And then they got all got into a room together and started colluding with each other to say, how on earth are we going to dump these shares into the market without completely destroying the share price? It turns out they dumped the shares into the market with completely destroying the share price. And the share price kind of fell off a cliff because, because there was this big dumping of shares.
- [37:41]
D
Well, there are a lot of reasons why the share price declined at that period.
- [37:45]
A
But the thing was that the markets didn't know that there were three enormous banks trying to dump 25 million shares. And the markets should have known that. That's a material piece of information. And it looks like the bankers were colluding to try and keep this secret and try and sell the shares secretly.
- [38:04]
B
But it's all great. But I just keep imagining it in Australia with great accents and then it feels less like it's just, you know, they're such a friendly people.
- [38:14]
C
So it's just a casual collusion.
- [38:16]
B
Yeah, it's just casual collusion.
- [38:18]
A
Just imagine them wearing, wearing like, wearing very short shorts and throwing like balls at each other.
- [38:23]
B
No, I'm sorry. The Australian economy is serious and the problem, you know, bankers in Australia should not collude. I don't want to give the wrong.
- [38:31]
A
Impression, but it, but I. So this is, this is something which you look at it and you're like, actually, I can make the case that this was collusion and possibly even criminal. But then to make the next step, which is like we're going to take very senior bankers and try and throw them in jail for this, is something which I haven't seen. I mean, you've kind of seen it in Spain, but that was much more obvious fraud and this seems less obvious fraud.
- [38:58]
D
Yeah. I mean, as I've said, I'm really loath to make a strong statement either way because I just don't think very much information has been released. And it's entirely possible that more evidence will come out and it'll make more sense why they're going forward with this. Or it's possible that it's regulatory overreach, I don't know, because just there hasn't been a lot of information released. It does seem odd, based on the information that has been released, that this would lead to this type of prosecution. But as I said, I just don't know.
- [39:26]
A
The one thing we do know is that JP Morgan is not being charged because they seem to be the people who went to the regulators and said, we just discovered this and maybe we did something bad. And apparently if you're the one who puts your hand up, then that means you don't get thrown in jail.
- [39:43]
B
Sure. It's like turning state's witness. I mean, it's fun to see bankers scared a little bit. That's interesting. They don't often get scared. It is.
- [39:55]
C
I mean, the threat of jail to bankers must be a big deterrent to them, I would imagine.
- [40:00]
A
And it's one which does not exist in the U.S. exactly.
- [40:03]
C
So you just have to do this once you throw one banker in jail and the rest will go running scared, perhaps.
- [40:08]
D
Well, I would say that if they committed a crime, that then. Yes. But I just feel as though you should have to actually commit a crime and be. Well, that's why they found guilty of that crime. Yeah. And I agree. I'm just saying that.
- [40:21]
C
Beyond a reasonable doubt, of course.
- [40:22]
D
I'm just saying that I think the.
- [40:23]
B
Idea that it's not very revolutionary.
- [40:27]
D
I'm very much not. Yeah.
- [40:28]
C
I'm not saying throw an innocent banker in jail.
- [40:31]
A
No. But throw a guilty banker in the list.
- [40:32]
B
But are there innocent bankers? Yes, yes. There are so many good bankers.
- [40:39]
A
I will. There's actually, if you have. I'm talking about tech giants. If you have a Netflix account, there's a wonderful documentary on Netflix about Abacus bank in my neighborhood of Chinatown. And that was definitely A case of regulatory overreach where Saivants started trying to charge them for stuff, which was what they again, they were the people who put their hands up and said we found something dubious happening in our bank. And he started, you know, charging the CEO.
- [41:09]
B
How's it going to turn out? What's going to happen now?
- [41:14]
A
Well, the Mick Mulvaney. I will tell you this. Mick Mulvaney, the head of the Consumer Financial Protection Bureau has officially disbanded the one advisory board that is enshrined in law that he has to meet with twice a year. So yeah, we can see where that one's going. Okay, let's have a numbers round. Paul, did you bring a number?
- [41:37]
B
Sure. 80 million.
- [41:39]
A
What's that?
- [41:40]
B
Number of code repositories on GitHub. Okay, so 80 million software projects.
- [41:46]
A
And how many of those were like an inspirational idea on a weekend which got dropped on a Monday?
- [41:52]
B
So many. So about 79 million of them are mine. So there you go, it's 80 million different pieces of code that you could be messing with right now instead of like, you know, just checking your phone idly and looking at Twitter, I should.
- [42:06]
A
Be spending much more time on GitHub. There's just inspiration there for the finding.
- [42:11]
B
Well, you just should because when they, when the machines eventually take over, you want to be able to speak their language, just like economics.
- [42:19]
D
Anna, my number, sorry, My number is 395 million. So those are the number of trades that JP Morgan looked through in this study. They did about what happened in the FX market after big market shocks like the Trump election or Brexit or the Swissy being depegged. And what they actually found was that the market players who actually stabilized markets and were actually hedge funds, that, that it was actually the short term traders, which shouldn't be overly surprising, but what seems to have happened is that all of the like long term investors, none of them would step in until after the hedge funds had actually stabilized everything, which I thought was interesting. So who was it was that immediately after there was obviously a shock. So people don't know what to think. So there's lots of trading going in every direction. But because there was so much trading by these funds and some other market makers, they were able to come to an equilibrium price, they were able to engage in price discovery. You weren't having long term investors doing any of that price discovery until after an equilibrium had pretty much already been set. There are some logistical reasons for that as well, but this is not always what everyone would think about when they're Thinking about hedge funds, because this is actually, you could argue, is like a service they're providing to the market.
- [43:39]
A
Thanks, hedge funds. I guess, talking of major events which destabilize the market, My number is £350 million, which is like the price of an artwork. That's a lot of money for an artwork. Every year in London, there's this thing called the summer exhibition at the Royal Academy and it's this institution and what happens is a bunch of famous artists and a bunch of really unknown artists all get their work into the Royal Academy. And it's an exhibition, but it's a weird exhibition in that everything in the work is for sale and 30% of the proceeds go to the Royal Academy. And that's basically how it funds itself. And so you get famous artists, you get unknowns. And then this year, one of the pieces is this Vote to Leave placard from the Brexit referendum, which Banksy has painted like a big heart shaped balloon over the E and the A of Leave. So it now says Vote to love. Isn't that sweet? And the price of that work, if you want to buy it, is £350 million, which I don't think anyone's going to actually pay, but is obviously symbolic because that is the amount of money that the Brexit campaign claimed would be saved by leaving, which turned out to be the biggest lie in politics. So that's my little Banksy story for the week. Emily, do you have a number?
- [45:20]
C
I have a number.
- [45:20]
A
What's your number?
- [45:21]
C
My number is $935,000. That is the average amount invested in startups founded or co founded by women, according to an analysis from BCG and a startup accelerator called Mass Challenge. So that was again, $935,000. And the average amount for startups founded or co founded by Men is $2.12 million. So that's a bit more. And then they also looked at revenues and apparently the women founded startups generate higher revenue.
- [45:52]
A
Interesting, because they have to because they don't have the VC money.
- [45:57]
C
Fine, but for every dollar in funding that goes to a women founded startup, it's $0.78 revenue back. And for every dollar to the male ones, it's $0.31 back. Just little fun facts there. Everyone knows that female founded companies don't get a lot of VC money and it's not because they're not good companies. It has to do with a lot of, I believe, and there's studies that show this, a lot of gender bias out there that makes VCs see women a little bit it differently. It's a bummer. I'm sorry to bring the house down.
- [46:28]
A
Yeah. Emily, can you have a better number next week, a less depressing number next week please?
- [46:36]
C
Maybe I just say VCs do better so that I can have better numbers.
- [46:40]
A
To share next time. So VCs between now and next week, could you throw a few billion dollars into women founded companies so that we can have some good news?
- [46:49]
C
Yeah. Less Facebook debacles and more. You know, I'll just keep talking about hedge funds.
- [46:56]
B
I think that's it.
- [46:57]
A
Thank you Paul Ford for being on Slate Money this week. It was awesome to have you.
- [47:01]
B
Thank you.
- [47:02]
A
And if you're a Slate plus member, stay tuned because we're going to talk about Howard Schultz. And thank you guys all out there for listening. Keep the emails coming. Slate moneyleight.com thanks to Dan Schrader for producing and we will talk to you next week on Slate Money.