The Scary White People Edition

Summary

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)

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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.

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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).

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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.

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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.

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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]

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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)

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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.”

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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.

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Transcript

[A]

The following podcast contains explicit language.

[B]

Hello, and welcome to the Scary White People edition of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Fusion. I am joined as ever, by Jordan Weissman of Slate.

[A]

Hello, Felix.

[B]

Oh, my God, what a week it has been. We have the crazy budget from Donald Trump, which we are not going to talk about. We have the Fed hike, which we are not going to talk about. There's so many things we could talk about and we're not going to talk about because it's been a jam packed week. We are going to talk about this week, get out the Movie, which is a fascinating little economic thing and you're going to want to stick around for that. We are going to talk about my favorite country, which is Iceland. I went there once and it's my favorite country. But most excitingly, we have the one and only Anna Shymansky coming on the show for the first time.

[C]

Hello.

[B]

Hello, Anna. Anna is a refugee from various fee structures. Whether she was a hedge fund or a private equity shop. We can maybe describe, discuss at some future thing. But Anna knows everything there is to know about debt, basically, and international markets and pretty much everything in the world. And so the fact that Anna is on the show gives us all the excuse we need to talk about the big thing that we haven't talked about basically on the show for a while, which is like, oh, my God, is the euro going to survive?

[C]

Yes, and it turns out it probably is.

[B]

It is going to survive.

[C]

Turns out, spoiler alert.

[B]

Okay, so like, we need to get a feel for your reliability here. Did you think that Britain was gonna vote to leave the eu?

[C]

I did not.

[B]

Did you think that Donald Trump was going to become president?

[C]

I did not.

[B]

Okay, so given that, do you think that the euro is going to survive?

[C]

I in fact, do so do without what you may. But I would argue that these issues are slightly different in terms of an election, a single election versus, say in the case of France, an election that then has to be followed by a constitutional amendment, which then has to be followed by a referendum.

[B]

Okay, so let's rewind here a little bit. The French presidential election is coming up.

[C]

Yes.

[B]

One of the, the way that the French election works is that the top.

[C]

Two winners of the first round of.

[B]

The first round go off into the second round into a runoff. One of those top two is going to be Marine Le Pen.

[C]

Yes.

[B]

Marine Le Pen has promised. What?

[C]

Well, essentially, she's been running on a pretty familiar, at this point, populist Xenophobic, anti eu, with the idea that she would try to pull France, do a Frexit. Pull France out of the eu. This is what she's been campaigning on.

[B]

Not only out of the eu, but also out of the euro.

[C]

Of course.

[A]

Yeah, correct. And that's the big thing, is she just wants to go in and because.

[B]

Because in a way, for all that, Brexit is absolutely seismic and impossible and dreadful. It's possible for the EU to survive it, whereas were France to leave, there's no way it could survive. Right.

[C]

That is almost certainly true.

[B]

So this is a risk, but as you say, it's not a big risk, because, number one, it looks like the French are slightly more sensible than the Brits and the Americans and they're not going to vote her in.

[C]

Yes.

[B]

I mean, and number two, even if she does get voted in, it's not something like Theresa May triggering Article 50, which she can just do unilaterally.

[C]

Precisely. I mean, if you're looking what's been happening as the Conservative candidate Fallon has his campaign, because of a number of corruption scandals involving his wife and children and payments and jobs that appear not to have existed, has. He's fallen apart and kind of shifted down. He's polling around 20, Emmanuel Macron, who's the kind of centrist. He was the former, he was the finance minister under Holland, but he's much more of a centrist. And he's right now polling neck and neck with Le Pen. So they're around 25, 26, with the socialist Amman coming in much lower. So at this point it's even possible that Macron could technically come in first in the first round, which doesn't really matter, but symbolically it matters going. And people are thinking that in the second round at this point, because all of the centrists and left parties will coalesce around Macron, that then he could win by as much as 30 points in the second round.

[B]

So, okay, so this is fascinating, though, because if it's Macron and Le Pen, basically neither of them represent a traditional political party in France.

[C]

And this is actually what I think is the most important thing about the French election. I think a lot of people are reading this as an anti EU push. I actually think it's much more of an anti establishment, because if you look at what happened in the primaries where you had a number of ex presidents, ex PMs, nobody. No, they did not get voted in. And who are we getting two people from technically who are from new parties. And so I think that's actually the more significant shift that we're seeing in this election.

[A]

So I think there are two ways to think about this issue. Right? The big question of whether or not the Euro survives in the context of this election, which is the short term and the long term. Right? There's the short term. Is Marine Le Pen going to win and take France out of the euro? And is the Euro going to survive this close brush with death? And it seems like probably like what you're saying is it's going to. Even if she were to win, it would be difficult to extricate France from the monetary union. But then there's this longer term issue of just creeping populism. And so I guess to what extent can we really be, even if Marine Le Pen only gets close this time around, the French populists, or even if she were to win but not be able to fully execute her vision, to what extent can, can the markets calm down? How do you price that in? How do you price in the long term possibility? Things are slowly falling apart.

[B]

The pricing in thing is a markets question which we can get to at some point. But the more interesting question just in terms of the economy of like how long can the Euro survive? How long can the EU survive? You're absolutely right. There are populists everywhere, including in Italy with this five star movement. And even without the populists, if we stay on Italy for a second, you know there is a massive banking crisis in Italy which everyone is doing their best to ignore and at some point it's going to really blow up and cause another major existential risk to the eu.

[C]

Yeah, both actually in Italy and in Portugal you have significant issues with non performing loans which you can bring in Greece obviously as well. But I really do think the point, Jordan, that you were making is significant though moving forward to say what are we seeing with this elections and what does that mean long term in Europe? Because like let's look even at the Dutch elections. So.

[B]

So that just happened.

[C]

Just happened.

[B]

And what was the result?

[C]

So the party of the another disturbing blond candidate, Geert Wilders, did not do as well as anticipated. Having said that, still didn't do that poorly. Still got 20 seats in 150 seats. The party of Margruta, the Freedom and Democracy Party, they although they lost seats, they still have the most seats. They'll be able to form a coalition of government with three other parties, two centrists, then the Greens, that actually let's.

[B]

Just stick on the results for a second. Again just like in France, it's The traditional parties, there was a reaction against them. The big winner was the Greens.

[C]

Yes, and that's. Well, that's actually, and that is an interesting part of the story, but I think, and again, because you are getting a pushback towards this anti EU populism. But, but you're also seeing, you had 28 parties running. And I think that's actually the biggest.

[B]

Story according to Belgium. Oh, wait, the Netherlands.

[C]

But yeah, no, this is the biggest story we're seeing is this splintering in this fracturing of the European electorate. And what that means is you're going to have weaker governing coalitions moving forward in a Europe.

[B]

Everyone's gonna become Italy.

[C]

Precisely. And part of the reason they wanted to get the electoral law, which they didn't get because of the failed referendum in Italy, was because they want to create stronger coalition governments. And again, what we're seeing here, we're seeing it in Germany, we're seeing it everywhere. It's not necessarily that these populist parties are going to win or that they're even, you know, that they're going to gain so much power, but they're going to weaken the establishment parties. That then makes the possibility of reforms that are still very necessary in Europe. I mean, Europe is still suffering with.

[B]

And Europe has, what you might call the EU is in itself a weak coalition government. It has 28 members and none of.

[C]

Them have, you know, still do.

[B]

Well, 27 soon, but still it has 28. But it's. Yeah, it's very hard to herd those cats at the best of times. And as the individual member members become more fractured and as you get places like Wallonia, which is sort of sub national regions within the EU having veto power over treaties and stuff like that, the chances of actually being able to achieve anything at the European level seem to have gone down to zero.

[A]

Just coming back to the economics of this, I mean, I guess the strategy for Europe for a while has been to kind of muddle through, Right. Like you were saying, like if we can just keep going, we'll survive this wave of populism and these waves of crisis. But you know, instead of muddling through, it seems like it's just getting progressively weaker. The foundation is eroding further and further over time. And without significant reforms, eventually the foundation, it seems like it just has to break eventually. And what you're saying about the fracturing of the political parties in each individual country, that contributes to that.

[B]

And I think the foundation, the real foundation of the EU was the living memory of World War II. And as the number of people who remember the war gets lower and lower and lower and they become less important electorally and politically. There's that sort of incredibly important glue which was keeping, which was not only keeping Europe together, but was like the whole reason for its existence in the first place kind of just evaporates.

[C]

Yeah, no, precisely. And you also have, I think when you're talking about populism and this fracturing, you also have to remember that you have competing populisms because you have the populism of Northern Europe, which tends to be again, this kind of xenophobic, you know, more, more conservative. And then you have the populism of Southern Europe, which is again, if you're talking about five star move, which is much more left wing. And the problem is these are actually directly in competition. And as you're saying as this memory of why the EU was started to begin with fades and fades, and as these domestic politics and these regional politics become more and more significant, we're not gonna see any move towards greater integration. I think that's thrown out the window at this point.

[B]

Well, let's just finish talking about the whole thing breaking apart with a brief mention of Skoksit, the best portmanteau Jesus. I mean, it's almost certainly not going to happen because, you know, Theresa May.

[A]

Although she's never say that anymore, Felix.

[B]

Kind of, kind of dreadful, is not as dreadful as David Cameron and she knows what his biggest mistake was, which was allowing Scotland to have a referendum. But the Scots have already started saying we want another referendum because, you know, and so Scotland could leave. There's a lot of these independence movements still which are kind of bubbling up around Catalonia and various other places and they're not going to go away.

[C]

No, this is true. Although interestingly, the separatist movement and the other 27 actually hurts the potential of Scotland actually being allowed to enter because. Exactly. Because they're not going to. Because they have to approve that and they're not going to prove that when they. Countries like Spain and Italy aren't going to do that when they have their own separatist movements that they're dealing with. But it does just speak to a greater instability. Again, I don't think the Scottish like to even hold a second referendum. Doesn't make any sense to do post Brexit, as she has said. She's not gonna allow them to do, to even hold a referendum until after they've already left. And that doesn't make any sense. But having said that, again, it just speaks to this larger Problem that as you said, like these problems aren't going away. The problem with Deutsche bank is not going away. The problem of NPLs Non performing loans in Italy is not going away. And so as we move forward, you know, Merkel came out, you know, she's very happy with, you know, obviously what happened yesterday in the Netherlands. But you know, what do we see 10, 15 years down the line?

[B]

On which note, I feel like I need to talk about my favorite country, which is Iceland.

[A]

That's, that's such, that's such bullshit. We know it's Argentina. You can't just go throwing around these. You're pretending you love Iceland.

[B]

So.

[A]

So with its emotions.

[B]

So if you're a sovereign debt geek and Anna and I are both sovereign debt geeks, if you're a sovereign debt geek, then Argentina is your life. It's what you live and breathe for a decade or more. And you like become obsessed with various oxygenarian jurists in New York.

[A]

But it's like litgeek and Ulysses or something.

[B]

But Iceland is your like sexy mistress off to the side. Iceland is the place where you have like the cool conferences and you know, it's a bit like Dominica or something. It's for the real connoisseurs of society.

[C]

Basically. Yes.

[B]

Partly because it was actually weirdly not a sovereign debt crisis. It was the banks which defaulted rather than the sovereign. The sovereign basically didn't have any debt.

[A]

Yeah, but the banks were so much bigger than the fucking sovereign.

[C]

So that was 10 times.

[A]

Ye.

[B]

Yeah, that was one of the more eye opening statistics was that if you took the three big banks in Iceland, all of which went bust, their assets in total were 14 times Icelandic GDP. Which sounds completely insane until you realize that Iceland has a population of 330,000 people, which is smaller than Staten Island.

[C]

That's exactly what I was gonna.

[B]

Roughly the same as Anchorage.

[A]

Jesus.

[B]

So it's a tiny little country which has its own currency. And this is a very dangerous situation to be in because you get what's known as the problem of small open economies. And if you live in New Zealand, you know this problem because there's also this thing called the carry trade. Anna, what's the carry trade?

[C]

So the carry trade is essentially when you borrow money in a country with a lower interest rate and then you take that money, you invest in a country with a higher interest rate, and then if based on interest rate parity, that the currency does not change in the way that in theory it should, based on arbitrage rules, you then can make a Profit.

[B]

So the idea is basically if I borrow a bunch of dollars at 1% and invest them in Icelandic crowns at 10%, then I can make the difference of 9%. And that's a trade which, you know, works until it doesn't. But it also creates this like huge flow of unregulated money into Iceland which causes assets to rise and a whole bunch of problems to happen. And then when everyone needs their money back, when there's a global financial crisis, there's a huge sucking sound, the entire country collapses. And so what happens? We have seen this a couple of times. We've seen this in Iceland, we have seen this in Malaysia. The solution to this problem is this thing called capital controls, which basically says, I'm the government of this country and I know that the IMF and all of the economists think that free flow of capital is the be all and end all, but I don't quite understand why and I'm just going to prevent the free flow of capital. If you want to buy my currency, you can't. If you want to sell my currency, you can't. And honestly, China has had capital controls for decades and seems to be doing quite well. So, Anna, Iceland just got rid of its capital controls. Weren't they working quite well?

[C]

No, I mean, but part of the reason that they, I mean they've been slowly kind of weaning off and the biggest reason that they actually removed them now was because they finally reached an agreement with a big stock of foreign holders of krona to essentially give them, I believe, a 20% haircut.

[B]

Right.

[C]

Based on the exchange rate that they were buying. But that really resolved the balance of payments crisis in terms of the amount of foreign reserves that they had in Iceland. So at that point become. It's clear that you no longer really need to keep the capital controls. And there is a reason that people don't like capital controls is because they do tend to keep borrowing rates very high. They do tend to deter investment and.

[B]

The local population doesn't like them because it makes it much harder for them to leave the country to spend money abroad. And then the other wonderful weird thing is that Iceland is doing so well right now. It grew by 7.6% or 7.2% rather in 2016. It is doing so well that the currency was getting very expensive. And when they finally got rid of these capital controls, what happened was a bunch of money that had been wanting to leave the country for a while left and it weakened the currency a little bit, which the Icelandics liked.

[A]

Yeah, right.

[C]

No because they had actually benefited overall. I mean, part of it, I mean, tourism is obviously the reason that their economy has improved, but it's also because they, for a while they had a fairly weak krona, especially comparison to where they were pre crisis, where it was.

[B]

I mean, Iceland is still inflated currency. I think it's an extremely expensive country to visit. But I guess people just saw all of the headlines about the financial crisis and decided that it must be cheap.

[A]

Or something because the currency devalued significantly. Also, they're the northern lights.

[B]

So there was. One of the pieces of long form journalism I've read in a while is this piece on skift.com, which is this like business to business travel website where they did this massive deep dive into the tourism explosion in Iceland post crisis. And it's like absolutely astonishing how it's just like I went to Iceland pre crisis and it was beautiful and there were tourists, but now it's just every single home is an Airbnb. House prices are going through the roof. They're doing all of this construction. They had 2 million tourists last year, which, when you have a country of 330,000 people, is a lot of tourists.

[A]

Yeah, I mean, tourism's becoming a little bit of a social burden even. There's like a backlash. But I kind of want to take a step back on this whole issue of capital controls. Right. Because Iceland is now kind of an example of how they can work. I think, like Iceland is a model of a country that survived the financial crisis and came out like a whole lot better than a lot of the, you know, the EU nations that are now still floundering all these years later. And I think, you know, for a long time, like you said, Felix, economists and like the IMF were like, capital controls are this like horrible sin. And, you know, you always have to have free flow of capital. Now that notion's actually kind of eroding. It's this, this whole. It's a part of this kind of reassessment of what used to be like the neoliberal consensus. Right. This idea that money and trade and everything should just be able to flow freely and we shouldn't interfere. And Iceland, Malaysia before it were sort of cracking that. And I think that's, it's part of kind of how we're reassessing. People are beginning to reassess a lot of the kind of intellectual, you know, the conventional wisdom from the past 10, 15 years.

[C]

Yeah, I mean, I do think it's complicated by the fact, I mean, again, Iceland because you, because you have a country of 330,000 people, $20 billion GDP. They essentially have one industry.

[B]

What they have two industries.

[C]

That's true. They have fishing.

[B]

Well no, they have. Well, fishing. Fishing is in long term secular decline but it's still a very important industry. The best industry in Iceland is they have basically unlimited, abundant free energy from all of their volcanoes. And historically what that has meant is aluminum smelting because aluminum is basically what you do when you take a bunch of bauxite and add huge amounts of energy to it. And so aluminum is just the price of aluminum is basically the price of energy. But the Icelanders have discovered that the other thing they can do with very cheap energy is data farms.

[A]

Oh, interesting.

[B]

Yeah. And so it's now they have all of these really fat data pipes and there's a bunch of like web hosting and stuff like that which is going on in Iceland because again that's just all you're consuming is energy really.

[A]

But you were saying.

[C]

I guess my point though is that it is a very specific example and in some sense because it is so small, it almost is like an economist's dream of like how you can say like they respond very quickly to stimuli in a way that a more complex economy might not necessarily.

[B]

So tell me about China.

[C]

No, I mean, but again China's also a bit complicated. I mean they actually recently instituted more capital controls because they've been reserve depleting their reserves last year in order to prop up the renminbi and it they this year it appeared that it was, they didn't want to continue to keep doing that. So they've now instituted capital controls and it actually appears to have worked because the renminbi has been supported. So in again it does raise the question of orthodox economics. If we have moved beyond that, if we, we can see it in some of these EM countries if you can in instances engage in kind of heterodox economic policies. And I do think there's an argument to be made, I just, I don't know if it's as simple as saying it's one or the other.

[A]

Well, I should say also it wasn't, you know, the orthodoxy wasn't always capital controls are bad like for the entire middle of the 20th century, like they were actually thought of as essential and a lot of developed nations like you know, Britain, France, Germany, like use them to some extent that it's sort of, they kind of come in and out of vogue. Right. And so things that we think of I think for like the last 30 years, sort of after we had like the Washington Consensus or whatever, which was sort of the IMF's prescription for how every country, especially emerging countries, should run, we thought of, okay, this is what economics says. This is how to run your country. We're actually learning. Oh, well, there are exceptions, and if we look back, it hasn't always been that clear cut. And maybe this stuff is more complicated and it's very situational and it's very contingent on different things.

[B]

And the idea, I mean, let's just. Even the United States, the idea behind abolishing capital controls is that, you know, a dollar is a dollar wherever it is in the world. And yet Anna and I grew up in this wonderful world of Euro bonds. And the reason they're called Euro bonds is precisely because a dollar in Europe was not the same as a dollar in the United States. And so I feel like you're absolutely right, Jordan, that we had this kind of deregulatory consensus which you can trace from, I don't know, Margaret Thatcher to Larry Summers. And then you have a bunch of other people around the outside who are a little bit more practical and who are saying, well, you know, in certain circumstances, certain policies should be on the table. And you can call those policies financial repression if you want, but they also work.

[A]

Yeah.

[C]

And I think also when you compare, like, what happened in Malaysia with what happened in Korea or Thailand almost around the same time, it's interesting to see, because although all of those economies eventually recovered from the 98 crisis, what we saw in Malaysia was actually kind of less pain for the populace.

[B]

Much less.

[C]

And so that. Because again, of course, if you look at what happened in Iceland compared to what happened in Ireland, it does raise these questions of whether it makes sense for the population to suffer so much of the burden. That often happens if you don't institute any of these policies like capital controls and you just engage in pure neurons.

[B]

And the Irish famously refused to ever consider such a thing and put a whole bunch of pain on their populous. Whereas there is one country in the Eurozone which has capital, that's Greece.

[A]

And that has.

[B]

No, no, that's Cyprus.

[A]

Oh, that too. Doesn't Greece still have.

[C]

They do.

[A]

Yeah. So it hasn't worked out well.

[B]

They both do. Yeah.

[A]

It hasn't worked out well for Greece, but nothing's working out well for Greece for, like, totally separate reasons.

[B]

Yeah. So. Yeah. Talking about things which don't work out well, Jordan.

[A]

Yeah.

[B]

Scary endings or scary things. Yeah. Tell me about the very first movie ever to be made by An African American director which has grossed more than $100 million.

[A]

Writer and director. Yeah. So like, the most interesting story in Hollywood right now is get out. It's, you know, if you're the sort of person who listens to podcasts, I would say the probability approaches one that you've heard about this movie. But it's a horror movie that was written and directed by Jordan Peele, Key and Peele, and comedy, you know, comedy sketch show for a long time at Comedy Central. And it's basically about this, you know, couple girls, white, and the boyfriend's black, and they go and visit the parents who are like, nice liberals.

[B]

No spoilers.

[A]

Horror ensues Horror. And so.

[B]

But the main thing is that like, A, everyone loves it. B, everyone's going to see it. C, it's making lots of money.

[A]

Yeah.

[B]

And so this is it cost what, $5 million?

[A]

And this is it. So it's a $5 million film that is, you know, gross well over 100 million worldwide. And it's not the only story sort of like that. Recently you've also, I mean, horror films, that's sort of almost the model. You shoot them cheap and you hope that something blows up. You release a lot of them into the world and something catches on. But, you know, recently, another story sort of similar to this is Moonlight, Moonlight 1 Best Picture. It was shot on a budget of 1.5 million for production and some amount for marketing afterwards, and it grossed more than 50 million worldwide, 25 million domestically. And so there's this thing that's happening in Hollywood where you have this bifurcation, right? You have the giant blockbusters, you have the Marvel movies, Transformers, things like that, that cost God knows how many hundreds of millions to make, and they're designed to gross over a billion. And then the other end, you have these microfilms that are sort of the only other thing that can get made right now, it seems. And you know, sometimes they blow up like this and that's what makes them profitable. And I kind of wonder if that's actually a really good thing for like, diversity and story making. If actually the way the Hollywood model has evolved at this moment is going to give us more interesting stories about things like, you know, race packed into horror movies and, you know, gay, black coming of age stories set in Florida, like.

[C]

Yeah, I mean, and I think it. Because again, when you're, if you're capping your downside, I mean, if you're looking for financing and you're essentially saying, you know, you're, you're the most you're going to lose is this amount of money and it's, it's very low. That allows you to take more risk and content.

[B]

So okay, let me take the other side of this because number one, as you say, horror movies have always been low budget and the best horror movies have always been low budget. That's like something weirdly unique to horror that there's something about being low budget and you can go back to like Blair Witch has done this and a whole bunch of others have done this that you can just shoot these things for like 10 bucks and it's more scary as a result. This doesn't really read over that easily to other genres. Although obviously moonlight and other movies like that have, have managed it. My Big Fat Greek Wedding, you know, it does happen. But there is a case to be made that outside the horror genre there is often more need for actual budget. And one of the other big Oscar movie this year was La La Land. La La Land was the second movie from the guy who made Whiplash. Whiplash was a Blumhouse production. Blumhouse is the production company which made Get Out get out and Split and has this business model where it basically doesn't pay more than 5 million to make a movie. And there by caps its downside and so forth. What's fascinating to me is that Jason Blum, the guy who runs Blumhouse was desperate to produce La La Land. La Land had like a $30 million budget. And what you invariably see in Hollywood is that no matter how much money you make on low budget horror movies, which the Weinstein's also famously did, you wind up taking all of that money and spending it on like prestige movies which cost ten times as much. And it will always go that way.

[A]

But he, he still managed to in the end he is still stuck to his sort of self imposed rules. And so Blumhouse has will not finance a original movie for more than 5 million. If it's sequel, they'll go up for 10.

[B]

But they wanted to do La La Land and the only reason they didn't do La La Land is because the director went with a different producer.

[C]

Right. But I mean, I guess saying that like this is what has been the case for a period of time, thus this will always be the case moving forward. It's a questionable because if you look at like the you know, way budgeting worked in the 30s in films where they were just producing, you know, cheap westerns, cheap dramas, cheap comedies, that was essentially the model was you just produced a ton of product Very cheaply because people went to the movies every day. And that existed for an extensive period of time, and then it shifted. And so I guess the question is, as we move into potentially more different distribution models, even though obviously marketing costs have been going up, but if potentially marketing costs could begin to start coming down, it just raises the question of.

[B]

You see, that's the other big elephant in the room, which no one ever mentions when they talk about this story, is marketing costs. That in fact there's zero evidence that marketing costs are going down and that the Blumhouse model is, we will make a bunch of movies for $5 million. We will then screen them for our distribution partners. They get a basically up or down vote on whether they want to pick them up or how they want to pick them up. If they want to just put them straight to video and sell some foreign rights and they can probably get their 5 million back. And it's like, you know, no one's taking much in the way of losses, but no one's making a lot of money. Or if they see the movie and they're like, this is a hit, then they will treat it like a blockbuster. And if you get a movie like get out or even moonlight for that matter, they spend the same amount of money marketing that movie as they would if it cost $50 million.

[C]

And I agree, but I think if you look at actually where marketing costs are, it's almost all TV ads. It's like 70% TV ads. And, and my, my question is, again, moving forward, is that still going to be the case?

[B]

It is. The only way to reach a mass audience is tv. And that is why the marketing cost for these movies that even if you made get out for $5 million, you're still spending like $35 million marketing.

[A]

Well, so that's. I think Moonlight's actually kind of a decent counterexample here, though, because. So, you know, Blumhouse has become famous in the industry for being the. The kind of, you know, the horror movie moneyball studio, for lack for a slightly cringeworthy phrase there. But I'm going to go with it. You know, moonlight came from a distributor named A24. And distributors don't become famous too often in, in film industry. But this is, this one is an exception because they've started. They've sort of become a. Almost a consumer brand. And the thing they've done is kind of veer away from these traditional marketing pushes with TV and lots of expensive ad buys and said they've focused very heavily on things like Social media, Facebook, et cetera. And it's worked shockingly well. I mean, you know, moonlight is an example. They also are responsible for movies like Room, Spring breakers, there's a long list of the Lobsters, another one. Again, like, these are not giant hits, but they definitely play to a particular audience, you know, as I was joking, sort of NPR earlier, like kind of NPR listeners essentially. But it still can be extremely profitable. And these people still go to the movies, I guess. So I, I do think maybe the distribution model is also changing to some degree, not just the production model model, and that does open this up. What I guess just to play devil's advocate with myself, the one question, the question is how many studios and distributors can really function like this because there's only so much attention out there, right?

[B]

And plus, let's be clear about this, the NPR audience, they might go and see the Lobster and, or moonlight and, or I am not your negro or something like this, but they're not the core movie going audience. The core movie going audience remains, you know, the teenage boys and then the teenage girls and they're the ones you need to reach. And yeah, increasingly those people are not watching TV either. And so at some point you don't get any bang for your television marketing buck. But I do think that the big story here is just cyclical, right? We had a boom of what was known as indie movies back in like the 80s and early 90s, and everyone was like, oh my God, Sundance, this and independent movies. And then it all kind of withered away at some point. And then like the Duplass Brothers came along and suddenly like there's a new sort of flavor of indie movie, but the big beating heart of Hollywood has just kept on beating in the same way that it's always been beating. And it's not really changing that much.

[C]

Right. But I also, and I agree with you, but I just wonder as more and more of that beating heart is not beating in the United States and is shifting towards a global audience and this idea like that, that is where you're targeting, how do you then serve? I guess my question is in a way as that if you move in that direction on one hand, could that create more and more space? So we just will see this hollowed out middle and we will continue to see these two tracks and whether they'll both continue to.

[B]

That's a really good question. As Hollywood increasingly makes movies for China rather than domestically. It used to be that you would make Star wars for a domestic audience. It's a western and Then the rest of the world goes, ooh, Star Wars. But you're not thinking about the rest of the world when you're making Star Wars. Now when you're making a superhero movie, you are completely thinking about the rest of the world from day one. And if. And so the domestic audience isn't served in the same way that it was served and it does open up a little bit of a gap.

[A]

Yeah, I could totally see them trying to take like the Blumhouse approach to like teen movies. Like, you know, you don't, you know, you don't need quite as established a star. I mean, like, maybe you could experiment with different genres and see that have been sort of underserved or. And try to. Rom coms are another one that maybe you try to see if you can, you know, eke out profits in a smaller genre.

[B]

And the other thing which I should mention is that when you have post Star universe like we do right now, like individual movie stars don't open movies in the way that they used to 20 or 30 years ago, and they don't get paid as much as they used to with a couple of tiny, you know, just like a handful of exceptions. A huge amount of those massive Hollywood budgets is just payroll for the big movie stars. And if you can open a movie, like get out with a bunch of actors who no one's ever heard of and it can make lots of money, then a huge part of your budget just goes, evaporates again and you can make movies for less money.

[C]

Agreed. Because again, the only place where you're really still seeing the power of movie stars is overseas. You know, there's a reason why like in 2015, Arnold Schwarzenegger's in a movie here that no one's heard of, but it's a massive global hit because people globally will go see a film because Arnold Schwarzenegger's in it in the same, but they won't do that in the United States. So I just wonder if we're gonna start to see this really shift to almost having like an international form of filmmaking and a domestic form of filmmaking.

[B]

And we don't know what that looks like. And ideally that domestic form of filmmaking will be not just American, but will come from a bunch of different countries. And what we are seeing on Netflix especially is a huge appetite for foreign made movies and foreign made TV shows.

[A]

The Brits, it's just been a bonanza for them. Every British person with a detective story they've had in their drawer for the past six years of their life is Just my moment. Anyway, brilliant.

[B]

So that is it for this week's episode of Splate Money. But we do need a numbers round.

[A]

I'm like, I'm looking at Felix in horror at his numbers.

[B]

Yes, yes, we have a numbers round. What's your number, Jordan?

[A]

My number is 100.

[B]

Well, my number is 100 million. What's your number, Anna?

[C]

I think I'm going to do 3.5%.

[B]

Ooh, what's that?

[C]

It is what Trump's tax rate would have been in 2005 if his tax plan had been in place.

[B]

Oh. So if you abolish the alternative minimum tax, he would have. He would have paid 3.5%. Not bad on $138 million of income or whatever.

[A]

You know, the thing about Trump's. The Trump tax story that struck me more than anything was just like, you know, he ended up paying about a 25% effective rate after the EMT, which, as people point out, is more than Romney did, more than, you know, more than what Warren Buffett does. Which just goes to show that for all of his talk about how he's a goddamn genius about doing taxes.

[C]

Not so much.

[A]

No, he's not.

[B]

He does not.

[A]

Apparently his. His accountants even suck bigly.

[B]

Bigly. My number is 100 million. Jordan. Do you know what Jio is? J I O?

[A]

No.

[B]

It's a service which launched six months ago in September 2016 and already has 100 million users. And going from 0 to 100 million in six months is kind of amazing. And it's. What's more, it's not just some little app you can download, but it's a entire phone network. This is the Mukesh Ambani phone network in India, which has gone from 0 to 100 million in literally no time, because he promised everyone in India free phone calls for life and also, like, free data for an introductory period, which we don't know how long it's going to last for. He has spent $25 billion building out this thing and I've never seen a take up like. It's amazing. So 100 million users. That's my number.

[A]

That's remarkable. So mine is 100. So there's this energy crisis in South Australia, and Elon Musk just went on Twitter and said, okay, Tesla can fix it. In fact, we'll install 100 megawatts of our batteries for energy capture, for green energy. And in fact, we'll do it in 100 days or less, or it's free to Australia. We will do this in 100 days and then Australian politician was like, all right, cool, I just got to work out the politics back home. Like responded on Twitter and then they had a phone call and now this seems to be in the works. Like literally there is Elon Musk's hundred day money back guarantee on Twitter has resulted in some sort of like, like possibly very important advance in Australian energy policy which is just. Twitter is like so important to everything now.

[C]

Continued rise of public policy by Twitter.

[A]

Yes.

[B]

Which is mostly a bad thing, but every so often is glorious. Yes.

[A]

This is the counterpoint to Trump ranting and ranting about having his wires tapped with two ps.

[B]

Yeah, but that. Okay, so that really is it. That's the end of the show, folks. Thank you for listening to Slate Money. Thank you ever so much to Anna Shymansky who knows things. This is why we, we like having non journalists on the show because it's very useful to actually have people who know what they're talking about do subscribe to the show, leave us a review on the itunes store and write to us the email address as ever, isslatemoney.com and with that it is just left to me to thank Zach Dynestein, the producer and the various executive producers around here who have names like Steve Lichti and Andy Bowers and June Thomas and I'm sure there are more. Check out all of the Panoply shows at Panoply FM and we will talk to you next week on Slate Money.

[A]

You know it's gonna save you from the beast about to strike.

[B]

You know it's real life thrill align. You're fighting for your life. Killer thriller tonight.