Slate Money Podcast: The Scary White People Edition

Date: March 18, 2017
Host: Felix Salmon (Fusion)
Co-hosts: Jordan Weissmann (Slate), Anna Szymanski (debt markets expert; special guest)

Overview

This episode addresses key business and finance topics through the lens of recent political and economic events in Europe. It explores the threat posed by populism to the European Union (EU) and the Euro, delves into Iceland’s recovery from its banking crisis, and analyzes the economics of low-budget, high-impact movies like "Get Out." The hosts navigate the shifting sands of global economics, explore movie industry models, and provide lively, knowledgeable commentary throughout.

Key Discussion Points and Insights

1. Will the Euro Survive? (00:55 – 12:57)

French and Dutch Elections: Populism's Challenge

• French Election Deep-Dive (01:41):
  • Marine Le Pen's campaign on a “Frexit” (France leaving the EU and Euro); obstacles for such an exit.
  • Analysis of the likelihood of Le Pen winning ("not a big risk") and the procedural hurdles should she try to implement a withdrawal.
  • "The French are slightly more sensible than the Brits and the Americans and they're not going to vote her in." — Felix Salmon [03:40]
• Runoff System and Populist Trends (04:01):
  • Macron and Le Pen lead; collapse of establishment parties.
  • The shift is seen less as anti-EU and more as anti-establishment.
    • “I actually think it's much more of an anti-establishment [sentiment].” — Anna Szymanski [05:00]
• Long-Term Risks to EU and Euro (06:13):
  • Rise of populism (Italy’s 5-Star, Dutch elections).
  • Fragmented parliaments & weaker coalitions risks harder, slower reforms.

Fracturing of European Politics

• Netherlands Election Outcome (07:09):
  • Defeat of Geert Wilders; splintered politics weaken centrists and governing coalitions.
  • “Everyone's gonna become Italy.” — Felix Salmon [08:16]
• Losing EU's Foundational Glue (09:58):
  • The diminishing memory of WWII as a unifying force.
  • “There's that sort of incredibly important glue, which was...the whole reason for [the EU’s] existence in the first place, kind of just evaporates.” — Felix Salmon [09:58]

Regional Tensions and Fragmentation

• Independence Movements (11:07):
  • Scottish independence (Skoksit) and Catalonia, limitations posed by Spain and other EU members with separatist movements.
  • Persistent economic and political instability (Deutsche Bank, Italian NPLs).

2. Iceland: Post-Crisis Lessons and Capital Controls (12:57 – 24:40)

How Iceland Weathered Its Crisis

• Sovereign vs. Bank Failures (13:16):
  • "Iceland is your...sexy mistress off to the side. Iceland is the place... for the real connoisseurs of [sovereign debt]." — Felix Salmon [13:41]
  • Banks, not the sovereign, defaulted — banks’ assets were 14x GDP.
  • Iceland’s tiny population and high vulnerability to destabilizing capital flows.

The Carry Trade & Capital Controls

• “The carry trade is essentially when you borrow money in a country with a lower interest rate and then...invest in a country with a higher interest rate.” — Anna Szymanski [15:00]
• Iceland’s post-crisis capital controls: worked (keeping reserves, limiting depletion), now being lifted after resolving with foreign holders.
• The case for capital controls:
  • Keeps rates high, deters investment, inconveniences locals, but shields small economies from global shocks.
  • Iceland’s economic boom post-crisis was driven by tourism and, in part, a weaker krona.

Rethinking Economic Orthodoxy

• Debate over capital controls vs. “neoliberal consensus”; Iceland, Malaysia, and (to some extent) China as case studies.
• The orthodoxy that “capital controls are bad” is being revisited.
  • "Now that notion's actually kind of eroding...it's a part of this kind of reassessment of what used to be like the neoliberal consensus." — Jordan Weissmann [19:04]

Iceland’s Two Industries and A Specimen Economy

• Cheap energy leading to both aluminum smelting and an emerging data farm industry.
• Iceland as a "test-tube" economy, responding quickly to policy shifts.

3. Movie Economics: “Get Out” and the Low-Budget Blockbuster (24:47 – 36:40)

The Rise of the Microbudget Hit

• “Get Out” (directed by Jordan Peele): $5M budget, >$100M gross; the first African American director to hit $100M with a debut.
• Comparative examples: “Moonlight” ($1.5M, >$50M global gross).

Hollywood’s Two-Track Model

• Blockbusters: $100M+ productions aimed at global audiences.
• Microbudget Indie: Cheaply produced, risk-capped, allowing more diverse storytelling.
  • “If you're capping your downside...it's very low. That allows you to take more risk in content.” — Anna Szymanski [27:11]

Blumhouse and the Evolving Indie Model

• Blumhouse Productions’ success with < $5M films (e.g., “Get Out”, “Whiplash”), but reluctance to do costlier projects like “La La Land” (ultimately priced out).
• “You will always wind up taking all of that money and spending it on...prestige movies which cost ten times as much. And it will always go that way.” — Felix Salmon [28:24]

The Distribution and Marketing Paradox

• Traditional marketing remains expensive (esp. TV advertising), potentially offsetting cost advantages of cheap production.
• However, companies like A24 (distributor of “Moonlight”, “Room”, “Spring Breakers”) are pioneers in alternative marketing via social media, reaching niche audiences.

Shifting Power and Globalization

• Movie stars no longer anchor domestic releases; now, global markets (esp. China) are driving blockbusters.
• Domestic tastes may splinter towards more indie films, while Hollywood blockbusters chase international appeal.
  • “We're gonna start to see this really shift to almost having like an international form of filmmaking and a domestic form of filmmaking.” — Anna Szymanski [35:46]
• Netflix and streaming platforms creating demand for non-US, non-blockbuster stories.

Notable Quotes & Memorable Moments

• “I actually think it's much more of an anti-establishment [sentiment].” — Anna Szymanski on French election [05:00]
• "Everyone's gonna become Italy." — Felix Salmon, on parliamentary fragmentation in Europe [08:16]
• "The real foundation of the EU was the living memory of World War II. And...that important glue...kind of just evaporates." — Felix Salmon [09:58]
• "Iceland is your...sexy mistress off to the side." — Felix Salmon, on sovereign debt crises [13:41]
• "It's a model of a country that survived the financial crisis and came out...a whole lot better than a lot of the EU nations." — Jordan Weissmann [19:04]
• “If you're capping your downside...it's very low. That allows you to take more risk in content.” — Anna Szymanski [27:11]
• “We're gonna start to see this really shift to almost having like an international form of filmmaking and a domestic form of filmmaking.” — Anna Szymanski [35:46]
• “Twitter is like so important to everything now.” — Jordan Weissmann, on Elon Musk/South Australia [39:30]

Timestamps for Important Segments

• Euro Fragility & French Election:

  • 00:55 – 08:58 (establishment collapse and populism)
  • 09:58 – 12:57 (EU’s founding glue and fragmentation)

• Iceland and Capital Controls:

  • 12:57 – 24:40 (crisis, recovery, industry focus, policy lessons)

• Movie Industry Economics:

  • 24:47 – 36:40 (low-budget hits, marketing, globalization, future of storytelling)

• Numbers Round:

  • 36:49 – 39:43 (Trump’s tax rate, Jio’s telecom takeover, Musk’s energy bet)

Numbers Round Highlights (36:49 – 39:43)

• Anna's number (3.5%): Trump's hypothetical 2005 tax rate if his preferred tax plan had been in place.
• Felix's number (100 million): Number of users signed up in 6 months for Jio, an Indian phone network launched by Mukesh Ambani.
• Jordan's number (100): Elon Musk’s Twitter promise to fix South Australia’s energy crisis with Tesla batteries in 100 days—“or it’s free.”

Conclusion

This episode offers a rich examination of Europe’s fragility amid political populism, presents Iceland as a laboratory for post-crisis economic policy, and provides a lively discussion of Hollywood’s evolving economics and diversity storytelling. Through sharp analysis and banter, the hosts underscore the unpredictable nature of global economics and culture—and tease apart the practical effects of big ideas, from the Euro’s fate to the disruptive power of low-budget movies.