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Slate Money
The Shared Values Edition
00:42:39
Slate Money on the stock market, index composition, and Etsy
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The following podcast contains explicit language.
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Hello, and welcome to the Shared Values edition of Slate Money, your guide to the business and finance news of the week. I'm Felix Hammond of Fusion. I'm here to talk with Anna Shymansky.
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A
Hello.
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B
It says here you're a senior strategy officer at a political risk startup. This is something I've not seen on my piece of paper before for.
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C
It's been there for a while. Yes.
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B
Oh, my God, I never even noticed that. This is. This just goes to prove.
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A
Anna, did you get a job?
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C
It's a job.
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A
Yeah. They're big air quotes.
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B
Okay. So anyway, welcome Anna, who's a. Well, she's senior, which is good. And welcome to Jordan Wiseman, who's also senior. You're a senior something something at Slate.
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A
Yes. Ba, ba, ba, ba.
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B
And. And we are going to actually do something which we pride ourselves on generally not doing, which is talking about the stock market.
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A
We do it once in a while.
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B
We do it once in a while. And once in a while is more or less the correct frequency to check in on the stock market, especially the Dow.
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A
Yeah, it's like a pet. You don't have to mind too much. It's like a lizard of some sort or something.
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B
There are certain radio shows which pride themselves on doing the numbers every single day and telling you what the stock market did this day compared to where it closed the last, the previous day. That is stupid. Don't do that. Pay no attention to that.
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A
Do not subtweet. You know, I'm going to leave that alone.
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B
On the other hand, like, paying no attention to the stock market whatsoever is your. If you do that, then you are missing out on an important data point. So every so often it's worth checking in on how it's doing. We are now six months into the Trump presidency. We are hitting all time highs on virtually every index.
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Yup.
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And Trump, of course, is taking great credit for this, which I feel is unbelievably stupid, because when it falls, he's gonna have to own it.
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C
Also, during the campaign, he specifically called it a bubble.
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A
Did he? I forgot.
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C
Oh, yes. Yes, he did.
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A
That's right. Yeah. But now he wants to keep the interest rates low.
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C
Exactly. He's a low interest rate kind of guy.
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B
But both Trump and Mnuchin, his treasury secretary, are on the record saying, yes. The level of the stock market is basically.
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A
He called it a report card. Mnuchin. Yeah, yeah, he said. Which was just. I couldn't.
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C
Somebody else's report card.
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B
So. Yeah. So right now the stock market index that the press cares about more than any other is this ridiculous thing which isn't even an index, called the Dow.
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A
Okay, we've talked about it. It is an index. It's just not an index in the way that you.
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C
It is a price weighted index. And that is stupid.
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A
Yeah, okay.
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B
Yes, Average. It's an average, not an index index.
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A
It is. We all agree. We all agree it's stupid. I think you're. We can and it.
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C
Yes. And this is why when a stock like Boeing, which is expensive, has a movement, it is a disproportionate movement in the Dow.
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B
In any case, it doesn't really matter because whether you're looking at the Dow or whether you're looking at the s and P500 or whether you're looking at the Russell 5000, everything is hitting all time highs. And so the question, Anna Shymansky, is, does this mean that America is great again?
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C
No, I think this means that interest rates continue to be low.
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A
Yeah.
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C
And honestly, I think that, yes, it's also because earnings have been robust and especially if you look at how multinationals are doing and companies that make a lot of revenues overseas are doing disproportionately well and they also tend to have bigger weight in the different indices. So that's another big part of this.
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A
So, you know what's going on reminds me of is Britain right after Brexit.
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B
And you're absolutely right, that is a fascinating, fascinating comparison because everyone expected the stock market to fall and it didn't. And the reason in both cases of what the stock market has done in 2017 in the US and also what the stock market did after Brexit six months earlier in the UK is in both cases there's a very large component of currency weakness priced into the stocks.
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A
And I guess the key thing for listeners is the dollar's been crashing. The dollar's at a 15 month low. Right after Trump was elected, the dollar shot up. Because I think this is a case where the narrative was pretty clear, where people expected a lot of spending interest rates to rise. And when interest rates rise, the value of the dollar goes up because it attracts investment. Um, that didn't really happen. And now people are saying, oh shit, Donald Trump can't pass jack through Congress. And so they don't expect that kind of boost in spending. And they're not so sure the Fed's going to increase interest rates anymore because they've been a little bit more hesitant or they're not going to increase them at the Pace, at least that they expected. So the dollar's been crashing, and then that leads to, like Felix was saying, currency weakness. And so you get this effect where, you know, foreign multinationals that make profits abroad look great because the dollar's weaker.
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B
Okay, so let me just step in here and say this is making no sense to me. You can't say that the stock market in November and December, because the dollar is strong, and then it rises.
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C
In 2000, it didn't rise because the dollar was strong. No, no, no, no. The reason the stock market rose again, there are. There are multiple reasons why the stock market rose. I actually think ultimately expectation of low rates is continuing to be all the main story behind all of this. But, yes, there was probably a little bit after Donald Trump where there was an expectation of lower taxes, less regulation, increased deficit spending, which could, though, also in the short term lead to increased GDP growth. But I think ultimately it had to do with higher earnings. Again, it had to do. And then I think now that the expectation is that rates are going to stay lower for longer, that we're in this Goldilocks moment where we're growing fast enough that earnings are doing well, but we're not growing so. So fast that rates are going to increase at an increased pace.
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A
And when I'm saying that the dollar contributes, I was just sort of echoing your point, which is at this moment now, you have the weak dollars contributing to those profits.
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C
Especially you have companies that if potentially you're making a lot of your revenues in foreign currency and you're making a lot of your costs are potentially in dollars, then that relative value shift you're going to benefit from.
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A
I also, the other thing about this, that. And maybe Felix is going to roll his eyes after I make this point, but I'm going to risk it anyway. What I think we're seeing right now just kind of interesting is that the U.S. economy, which, I mean, job growth is going pretty well. GDP is okay. The stock market is, of course, booming. The economy, finance, the markets can kind of soldier on in a country, even if, like, civil society is, like, rapidly deteriorating. That's like, the fascinating thing to me about this is like, shit's actually really, really bad politically, and yet the country's kind of soldiering on, which I don't know if that's encouraging or discouraging.
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B
And certainly, if you look at the latest jobs report, we have unemployment at 4.3% now. Things are. Things are looking up. And. And the other thing is, to your point about. I mean, I wouldn't Say that the dollar has been crashing. I think the dollar is still plenty strong. I think it was extremely unsustainably strong.
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A
So it's coming to earth is more likely.
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B
And it's kind of weakened back a bit to a strong but not crazy strong level. Certainly it has room to continue to weaken. By historical standards it's looking very strong. But coming back to the original question, there are two metrics by which the market based individuals like to judge. Well, three metrics by which market based individuals love to judge how an economy is doing. One is long term interest rates, one is the level of the stock market, and one is the currency. Right now if you look at those three metrics in the US the stock market is doing great. The currencies you say is not doing as well. It's come down, but it's still doing reasonably well. It's still a reasonably strong currency. And if you listen to any treasury secretary over the past 50 years, they'll say a strong dollar is in the national interest, even though they no one really knows what that means. And then the last one is long term interest rates, which are now what, like low twos at like 2.2%? Something like that? Again, that looks pretty healthy to me. Like if you look at the report card across all three asset classes, US is doing okay.
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C
I'm going to push back a little bit though, that I think again, a lot of this right now is also, you just have a lot of money chasing returns when rates are very low. Rates on high grade bonds are also fairly low. You then have more and more people going into equities and just. And then we can get to this later when we talk more about index funds, but just pushing up values to, in my mind unsustainable levels and also paying more for risk at a period when the potential for return is the lowest it's ever been.
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A
I would also, I would also add to that the reason for the low rates, you have to keep in mind is that, you know, we can't seem to hit our inflation target. We can't, like no matter what, we are undershooting inflation. And that speaks to some sort of weakness somewhere, whether it's just the fact that we actually are not close to full employment, even though we have a low unemployment rate. There are just too many people sitting on the sidelines of the job market. Whatever it is. It's just like there, it seems like there is some fundamental fragility that's keeping us.
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B
So I want to just end here because Anna's talked about low Rates a long time. Like if you talk about. I just end here because Anna talks about low rates a few times here. When you're talking about stocks in particular, the discount rate you apply to stocks which are permanent capital is like a long term discount rate, not an overnight discount rate.
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C
No, no, I mean that's a, it's a very different. If your terms of your, like if you're discounting like cash flows to value equities, that's different. But if you're, again, it's all relative. So if you have a lot of money going into bonds to keep those rates lower, that's then going to keep all, again, essentially rates lower.
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B
So I just want to come back to these low interest rates because Anna's been talking about low interest rates a lot. Are they really that low? I mean, I was saying that, you know, the long rates, what 2.2 ish short rates, you know, as set by the Fed are coming up. They are low by historical standards, but they are definitely higher than they were. I mean, how low?
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C
We've had essentially practically zero, almost negative interest rates for close to 10 years. This is not normal. And this keeps all rates low because if you're thinking of like, how do you figure out your cost of equity? Well, that's going to be based essentially on the risk free rate and then you know, beta times your equity premium. So if the risk free rate, you're like 10 year is low, that's going to keep all.
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B
So I guess, I guess what I'm asking you is what do you consider to be low for the 10 year? What do you consider to be a reasonable normal long term rate for the 10 year? And what would you consider to be high for the 10 year?
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C
I mean, again, I would say like essentially where we are right now, if you figure where inflation is, you have rates again very close to zero. That's, that's a quite real rate.
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B
So basically real rates, the nominal rate, which we were saying was about 2.2 minus inflation, which is probably around what, 1.7. So that's like about half a percent in terms of a real rate on the 10 year. You're saying that's.
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C
Yeah. In terms of exactly where the rates should be. I don't know exactly what number you want to go for, but definitely if you look historically these rates are not normal.
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B
So, so at what point, I guess I'm asking like, at what point would real rates need to go to, for you to stop saying that?
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I mean, at least probably getting closer to what, between 3 to 5%. Like just something a little bit more normal.
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3 to 5%. Real rates.
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Yes. I'm not going to come down an exact number of exactly where rates should be, but I do think that rates need to be probably a few hundred basis points higher to really reflect, I think I would argue actual risk.
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B
So Instead of the 10 year treasury having an interest rate of 2%, it would be like 5 or 6%.
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C
Yeah.
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B
Okay. That's a rather terrifying prospect for anyone who owns bonds, but we will come to that probably at some point in the next decade or two. I do want to stick though with the stock market because something really interesting happened this week. We have talked over and over and over again on this show about the wonders of passive investing and how you shouldn't try to beat the market and it's a waste of time and you should just put your money in an index fund. But now, Anna, there seems to be a difference at least going forwards between what an index fund holds and what the market as a whole is.
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C
Yes. And also I'm just going to come out here as someone who does not actually believe that passive investment is all that it's cracked up to be and could potentially be a problem for the overall market, which we can get into. But yes. So S and P and Russell have both announced that most of their indexes will no longer include companies that have.
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Multiple share classes and then multiple share class companies. And we're used to this in the media world from places like News Corp. And in the technology world from places like Google.
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Doesn't the New York Times have.
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Most family owned companies or most companies where you have family control or founder control, but the founders have an economic interest of less than 50%, which is a lot of companies. You'll find these. Facebook has it, Google has it, you know, Viacom has it, you name it, they all have it. But now the indexes have come. The indexers, S and P, most prominent among them, have come out and said, buster, this is ridiculous. And if you come to market from this point forwards with multiple share classes where a handful of insiders control the company despite owning a minority of the stock, we are not going to include you in the index.
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C
Yeah. And I think we could ultimately call this like the snap decision. This is, I'm not saying it's just about snap, but clearly that's a big part of this.
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B
So what did Snap do?
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C
I mean, they issued shares that had zero voting rights.
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Yeah.
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And that is the, the fact that investors went along with that shows you how degraded investment standards have Become. Because it doesn't make any sense unless, frankly, you think you can just buy the share and flip it to an index fund. It doesn't make any sense. Why you are going to give money to a company and then have zero rights, that you are in a sense a partial owner but have zero rights.
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B
Well, maybe it's just because shareholders don't feel that they have much in the way of voting power anyway, or that the way to effect change at a company is not necessarily through formal voting, as we saw at Uber. You can defenestrate a CEO even if he has control.
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C
Right, but that's also they weren't publicly traded. I mean, I think it's still the idea that if you're talking about a publicly traded company, the best way to affect change is going to be having some type of, you know, proxy battle or, you know, putting pressure on the owners, the shareholders, holding them accountable.
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B
So there are two different possible outcomes here. As you know, the parade of unicorns waits to go public, and some of them at some point surely will. One possible outcome is that these unicorns are going to take one look at this determination by S and P and say, okay, I mean, part of going public is to become part of the index. And so we are going to have to make sure we only have one share class when we go public. The other possible outcome is that the unicorns are going to continue to have multiple share classes and there will be an increasing divergence between what the indexes contain and what the, the stock market as a whole contains.
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C
Right. And I think that is. Well, that, that's important for a few reasons. A, because I think sometimes people think an index is the market and an index is almost never the market. These are two different things. The S and P has always had restrictions on what it includes.
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B
My favorite example today is Tesla. Tesla is one of those stocks which has been going through the roof. And one would think that if you had an s and P500 index fund, given how much Tesla is worth, then some maybe like 1-500th or so of index fund would be in Tesla and you would be getting the benefit of that share price appreciation. Not.
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A
So why is it not?
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B
Tesla is not in the s and P500 because it basically doesn't make money.
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A
Ah. So my question is, why is S and P, Why do they care so much?
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C
Why is there a big deal in terms of shareholders not having rights? Yes, it is. This is a big corporate governance issue. And if you start to have more and more companies issuing shares where you don't have like that's, that is I would argue leading to the road to disaster where founders and owners are not being held.
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A
Is that, is that S&P's job really to be like the corporate governance enforcers?
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C
And the answer if investors aren't.
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B
Yeah, well the answer is yes. I think the interesting. And it's interesting why the answer is yes. The answer is yes for two reasons. One is the rise of passive investing means that ultimately these decisions have to be made by the indexers because no one else is making them. And as I say, the indexers have always made these decisions. Making these decisions is nothing new. S&P's put in these rules about profitability which excluded Tesla. Those have been there for a while. The very, almost papal secrecy surrounding which companies wind up in the DAO is, you know, a very fraught and highly political decision. I remember when, you know, the Dow expanded to include companies which were listed on the NASDAQ and on the nyse. It was like a huge thing, right?
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A
Yeah.
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B
And so, and, and you know, one of the reasons that Apple finally split its shares was so that it could enter the Dow. There are all manner of, you know, decision making about what goes into indexes and what doesn't and the indexers have always made these decisions. And as Anna says, what we saw with Snap was not just, I mean we saw with Google and C shares and with Under Armour earlier companies which had gone public with a dual class share system, then issuing a new class of non voting shares with zero votes which a lot of people were up in arms about and said you can't do that. But it was kind of ex post, it was too late to do anything about it. At that point Snap actually went public with this and everyone was like this is just beyond the pale. We have to draw the line somewhere. And this is where we're drawing the line. The interesting thing is going to be that and what I'm unclear about, and maybe you can help clear this up, is will S and P evict existing companies?
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C
They're grandfathering.
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B
Well, I mean they're grandfathered in if they have dual share classes right now. But if they create a new share class going forwards, is that enough to get kicked out?
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C
I haven't heard but my guess is yes, especially because I know Russell has been allowing like companies that already have certain that are included but have those additional share classes they within five years have to essentially change that in order to remain included. So my guess is again I don't know exactly but I think that they could potentially be kicked out.
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B
So this is actually a perfect segue.
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A
Okay, here we go.
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B
This is, this is, this is a great segue to the question of whether a public company can be a B corporation, can be a benefit corporation, or.
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A
Should it just be a crunchy ass co op and, you know, feed its soul that way?
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B
Anyway, so, yeah, we're going to spend a little bit of time here talking about one of my favorite, most interesting companies, which is Etsy. Yes, Etsy is, you know, it's a genuine unicorn which went public on the stock market and it was valued at $3 billion. And I, I should imagine, given the demographics of podcasting, that many of our listeners have bought something from Etsy at some point. I become, I never have. I have become something of an Etsy aficionado. You know, I have these, I have weird idiosyncrasies, among them, a taste for 100% cotton socks. And it turns out to be basically impossible to get 100% cotton socks in the United States. And there's this very friendly chap in Turkey called all socks seller in turkey who sells 100% cotton socks. And that's where I get my socks now. Lovely. Yeah. And he's on Etsy.
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A
Lovely.
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C
I bought some lovely mittens on Etsy.
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A
I feel like everything you buy on Etsy can be described as lovely.
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B
So, yeah, I like Etsy. I've bought some wonderful, funny needle points on Etsy, which I love. And I have some bedside lights.
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C
We're just learning more and more.
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B
Etsy is a great company. But here's the thing about Etsy. It was always, it was always founded with this idea that it was going to be a B corporation and a B corp, A benefit corp is one which doesn't only answer to its shareholders.
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A
The dual bottom line, right?
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B
Or as many different, as many different bottom lines as you want. Basically, it's accountable to its employees, to its various stakeholders, to its customers, to the planet. You know, it tries to, it tries to.
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C
Gaia.
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A
Sorry. Anyway, go on, Felix.
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B
And this is, and this actually works in a practical sense. There are lots of companies which do this. Patagonia has been around for a long time.
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C
Private companies that do this.
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B
Right. And Etsy was obviously, before it went public, it was private and it was a successful private B corp. And what everyone always wanted to know was, okay, like, if you own your own family owned company or, you know, tightly held company and you want to run it however you want to run it, you can run it any way you like, does that Work in the world of, you know, cut throat public stocks. And Etsy basically said, you know what it can. And B Lab, which is the official organization which basically says, yes, you qualify to be a B corp or not, was also very keen on the idea that yes, you can. And Etsy was the test case. And the way it works is, and there is actually a legal way of doing this and under Delaware law, is that you register under Delaware law as being a public benefit corporation. And what B Lab says is that, you know, it has a whole bunch of criteria which you need to meet to be a B corp, but you.
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C
Register in Delaware so you don't have to pay taxes.
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A
Well, yeah, well, no, I mean, you're accountable to Gaia, but not to the irs.
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B
No, no, this is not true at all. This is absolutely not true. Because one of the big fights over Etsy was about how it pays taxes.
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A
Oh, interesting.
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B
And Etsy and B Lab had big fights with Etsy about saying, like, you are doing a bunch of stuff which looks like tax avoidance to us, and tax avoidance is not cool. And Etsy actually changed the way it paid taxes and is now paying more taxes. And it managed to raise its score from B lab from 80, which was just the minimum needed to be a B corp, up to like 120 because it's paying more taxes.
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A
Nice.
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B
Okay, so like, taxes is definitely part of this. And there's a bunch of different, you know, ingredients to this pie. But one of the most crucial thing, once you're a public company, you do need to become a public benefit corporation. That's a necessary condition. And Etsy did not meet that necessary condition when it went public. And it was never entirely obvious when or whether it would become a public benefit corporation. And it kept on saying, yeah, kind of like, you know, we'd like to probably in the future perhaps. And B Lab, which really wants public B corps out there, you know this, it'll be great if you could have public B Corps kept on like pushing back the deadline and saying, yeah, yeah, honestly, like, we'll give you a little bit more time if you need it, but we, we want you to go there. And then in May, there was this boardroom coup. So Chad, Chad Dickson, who was the founder and CEO, got kicked out. He was the, you know, the big evangelist for benefit corporations. This new guy, Josh Silverman, comes. It becomes more and more obvious that Etsy is not going to become a public benefit corporation. And guess what? The share price starts going up. This is the problem. Like, I feel like, so what happened.
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A
There's also talk about possibly selling the company too.
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C
Let's talk about a number of things.
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B
So basically what has happened since May.
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A
Yeah.
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B
Is that all of the crunchiness of Etsy has pretty much gone out the window.
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A
Yeah.
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C
They've still pretty crunchy.
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A
They've brushed away most of the granola.
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B
They've brushed away a lot. Managed to fire like 22% of their staff. They. They have started talking very openly about selling to strategic acquirers. They have, get this, they started making money. They just released second quarter earnings where they actually made a profit of $11 million. And that sent their stock up another 10%. So the stock is probably a good, like it's gone up from like 11 bucks to 15 bucks since the CEO came in in just a few months. That's like 40%. That's impressive.
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A
Yeah. And.
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B
And now they're looking and feeling like an. A retailer. Like they used to hand crunch their own code or.
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C
They were very proud, which was a horrible idea.
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B
They were very proud of the fact that all of their technology was developed in house. And then the new CEO comes and goes, like, why are we developing all of this technology in house? We're selling knitted hats on the Internet. We can just buy technology off the shelf, which will work better.
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A
Well, doesn't that come back to the whole song and dance you have to do in Silicon Valley, which is you have to be a tech company, you can't be a retailer, which is what they are. You can't be a juice maker, you have to be a. You have to have some sort of technological component. So I'm sure that helped them early on in terms of just, you know, attracting investment and then it outlived its usefulness. Right.
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C
And also because they used to have higher revenue growth and now they don't. And I. If you're looking at how you value a stock, you're going to be looking at future cash flows. And if you're looking at this type of company that has a niche market. I know that the new CEO said yesterday, like, we're special, but the market for special is huge. And I'm like, no, the market for normal is huge. The market for special by definition is small.
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A
But the long tail, Anna, the long tail, sorry.
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C
So I think that this company, I don't think their original stock price was ever fully justified because I don't see how you project that type of growth. They were spending like a tech company. They were, in some sense, at a certain point being valued like a tech company, but they don't have the growth potential of a tech company.
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A
So is this like, is this the story of a failure of like the B Corp idea or is this just the story of like the failure of old, of crunchy Etsy? Like what is it? Or is it both?
- [28:24]
C
I think it's both. Although I really don't think the B Corp model is ever going to work for publicly traded companies. I think B corpse for private companies is. It's a nice marketing tool. I think that it's, it's great to call attention to things. I think if you're talking about a publicly traded company, you are going to be less profitable almost certainly by doing this. Now, does that mean that we shouldn't encourage companies to engage in more environmentally sustainable practices, better labor practices? Yes. That is the role of government. That is not the role of companies to in some sense have to govern like themselves. And the reality is.
- [29:01]
B
But why can't they?
- [29:02]
C
I mean, because you're not gonna be more profitable. You're just not.
- [29:04]
B
No, but Anna, that's okay. If I come out as a B corp and I say I am not mainly interested in profits, I'm interested in many things of which profits are just one. And I go public on that understanding and I'm gonna say that at the margin, yes, I am going to care about making sure that all of my employees have health insurance. Rather than maximizing profits. I'm gonna care about the, rather than maximizing profits that I can be a publicly traded company and you can discount my cash flows on the basis that I might be less profitable, but you can still trade my stock. There's no reason why I can't issue stock on that basis. Why does a public company always need to be maximizing profits?
- [29:47]
C
Because you are taking shareholder money.
- [29:49]
B
Yeah.
- [29:50]
C
And so I would argue that the role of a CEO, I think when people talk about shareholder value, it is often the term is misused. And actually I think a lot of CEOs misuse it and they think it's this idea of maximizing short term profits to try to get like a boost in your share price, which is not what shareholder value means. It means allocating capital efficiently with an eye towards long term growth, long term objectives and long term future cash flows. Because here's my argument, like if you're like, what are the components of a DCF model? Your, your future cash flows and that is what is going into in theory, what your share price should be. Now if your future cash flows are in theory going to be getting smaller and smaller, how your value of your share price is going to be quite low. And also you have taken money from the public. So now you, I think do have a, in some sense duty to give them a certain return. And if you want to engage in some of these practices, that's great. But then I don't know if you should be a public.
- [30:52]
B
I just deeply, deeply disagree with this because if I take money from the public while explicitly saying that I am not going to be trying to maximize profits at every available expense and they give me money on those terms with their eyes open, then that's a transaction between consenting adults.
- [31:17]
C
Totally, that's fine. And then the other reality is what's going to happen is then the value of your share price is going to decline and decline and decline.
- [31:24]
A
Okay, I guess, I guess I kind of.
- [31:26]
C
Because then the value of your company is declining.
- [31:28]
B
And what's wrong with that?
- [31:28]
A
I want to.
- [31:29]
C
Because then you're going to go out of business.
- [31:31]
A
That doesn't mean that I want to split the baby here or attempt to. First off, I guess one of the issues here again is like you said, Felix, is Etsy failed to go public as a public benefit corporation. That, that is one of the issues is that they, they didn't do this properly. But I wonder if there's sort of an inevitability to how this, these kind of failures might unfold. Right? Like if you do go public as a benefit corporation and you do, your stock does trade at that discount, I have to think there will just be someone out there, some activist investors looking at your stock and licking their chops and saying, you know, if we get them to be a little less good, we could make, get them to make profits. If we could like buy their stock and just push them to be a little bit more ruthless capitalists, they can event we could make a mint here. And I just wonder if that's sort of.
- [32:17]
B
So this is my view. I think that the, there is this obsession in the public stock markets with growth. If you look at the longest lived companies in the world, the ones which have lasted for hundreds of years or in some cases in Japan and Italy over a thousand years, all of them without exception, are private. Everything from the vineyards in Italy to hotels in Japan and Kikkoman soy sauce and all of these different companies. And the reason that they, that private companies can last so long and do very well by their employees and by their owners who are generally families for many, many centuries is precisely that they don't feel the need to grow the whole time. And people like Anna, come along at public and look at public stocks and say, well, where's your revenue growth? Why weren't you growing? If you're not growing then my DCF model doesn't work. And well, it quite literally doesn't. And, and that doesn't mean that a company can't work without growing. It really can work without growing. But the stock market, it doesn't like companies which don't grow well.
- [33:28]
A
Exactly. And so that's why I wonder if this is sort of inevitable. It's like once you've decided to go public, even if you do have multiple bottom lines and you try to set up this kind of legal apparatus to protect the heart and soul of your company, I wonder if just eventually some Carl Icahn is going to come along essentially and turn you. And turn, turn you evil.
- [33:48]
C
Two things. Yeah, I mean like okay A, I still am going to push back on the idea that you can just not grow as a company and you're still going to be long term profitability in the modern market. I just think that that's very difficult unless you're a small company that doesn't have a lot of scale.
- [34:01]
B
Then okay, Kikoman soy sauce. I bring it back up. It doesn't grow a lot.
- [34:05]
C
Okay.
- [34:05]
A
This is a kickerman's and they're everywhere. They are everywhere.
- [34:09]
C
It's also one company and I not looked at that company's financials. I so I can't make it like financials because the financials are not there. Yes, I realize this. So but I would also like going back a little bit. This is also when we're talking about the standards that companies have to abide by. And again I would argue that part of the reason that you are going to essentially be hampering yourself by being a B corp on the public markets. Now this is why I think that these standards are not things that should be set by this kind of somewhat arbitrary designation. These are issues that are like this is the role of government. The government is supposed to set regulations. That is what government is supposed to do. Companies are supposed to make money. That's what they're supposed to do.
- [34:50]
B
That's not true.
- [34:51]
C
Yes. My point is that when you say like okay, we're going to have a certain amount of ethical companies and they're by being ethical going to probably be less profitable. We're not going to put pressure on government to set regulations. So we have a noble plan.
- [35:05]
B
That's a straw man. And no one's saying that we're not putting pressure on government.
- [35:08]
C
But my point is by saying that we need to make like we should focus more on the B Corp model, which is essentially companies having to set these regulations for themselves as opposed to trying to create a more level playing field, I just think that I don't see the one model ever working.
- [35:26]
B
All right, we will leave it there and move on to a numbers round. Why not?
- [35:31]
A
Yeah, sure. I've got a number.
- [35:32]
B
What's your number?
- [35:33]
A
100,000, roughly. A little bit under. That was how it was reported. Apparently Columbia Journalism School is starting a data journalism degree, a master's in data journalism. And the tuition is going to be $100,000. And I just want to say, because I think there's an off chance. Kathy o' Neill used to obviously be part of Columbia and she taught the sort of, I think the predecessor to this program that they're now creating. As I say, in case anybody at Columbia Journalism School is listening right now, that's fucking unconscionable. And it is absolutely grotesque that you are actually creating a $100,000 master's degrees for anybody going into journalism, you can.
- [36:10]
B
Let alone the poor data. I have worked with many great data journalists and they're awesome people, but I can tell you this is not a lucrative profession.
- [36:20]
A
No, it is not. And it's also a very. It's a profession. It's totally in flux. So I mean, maybe you're teaching long term skills that are going to be useful in five to 10 years, maybe you're not, I really don't know. But either way it's just. No, no. What are you. Where. How did this decision get made? It's just grotesque. And I said this on Twitter and I'll say it again. I sincerely hope that cuny, which I think is very good about charging very little for its grad programs, comes in, replicates your program and charges maybe one fifth to one sixth of the price because that's what they already do with journalism.
- [36:51]
C
I agree. The CUNY system is wonderful.
- [36:53]
B
My number is 81 million. Because in this wonderful frothy world of low discount rates and high asset prices, I feel like the counterexample is always a good one. 81 million is the discount that Howard Lutnick got when he bought his new condo in the Pierre Hotel. Actually, I think it's a co op. And he bought a new apartment, the penthouse of the Pierre Hotel on Central park with amazing views over Central park. He paid $44 million for this penthouse, which is undoubtedly a lot of money.
- [37:33]
A
That is a lot of Money.
- [37:34]
B
But this is down $81 million from the original $125 million asking price.
- [37:42]
C
This is a theme you have on some of these numbers.
- [37:44]
B
It's true.
- [37:45]
C
The high end New York real estate market. Yeah.
- [37:48]
A
Why did the asking price come down so much? Like what was wrong with this penthouse?
- [37:52]
B
And the penthouse is a very nice penthouse.
- [37:54]
A
Did it need like a revamp, like a, like a gut reno?
- [37:57]
B
But the ultra luxury end of the market has been flooded.
- [38:00]
A
Interesting. And yet it's going to be flooded more because they're rezoning large sections of midtown to, to build more of this shit.
- [38:09]
C
Although I actually think that's not a bad idea. But we can, we can go into that later.
- [38:13]
B
Yeah, more, more density is good. Anna, what's your number?
- [38:16]
C
So My number is 12%. I have a kind of complicated number. So I thought this was going to be a very simple, nice feminist story, but it turns out it's, it's more complicated. So a few weeks ago I'd mentioned that in India they've implemented this goods and services tax, which is a big deal. Now there's been a bit of a row because sanitary napkins are being taxed at 12% and there are a lot of other pro products like condoms that are being taxed at lower rates. So people were saying this seems like a simple story of, you know, women are being taxed for being women. Then I did a little bit more research into it and it turns out that part of the reason for that is because a lot of the inputs that go into this product are being taxed at a higher rate. And because this is a goods and services tax, I won't go into all the details of it. Although goods and services tax are actually fascinating. So I highly recommend looking into them. But suffice it to say, if you are a domestic manufacturer, you are going to be at a significant disadvantage to foreign manufacturers. So again, it's a, it's a much more complicated issue. And even though I still very much support the women, I very much support them bringing interest to this issue. It's one of these instances where I think it's very important to look at all of the economics of any issue if you're trying to create change.
- [39:31]
B
On which note, I think we're going to bring this edition of Slate Money to a close. Let us know if you think that B Corps are wonderful things and that you will happily spend more to support them because they're crunchy and delicious. Email us on slatemoneylate.com let us know if you Made the tartar de Santiago.
- [39:53]
A
Yeah. I just want to say props to. I forget who it was who actually made the tort or made the tarta and then emblazoned the Slate Money logo on the top of it. But you get, like serious fan points for that.
- [40:06]
B
Yep, it's the cake which has made its way around the world. You can still get the recipe by emailing us or I also threw it up on felix.kinja.com if you want to see it there.
- [40:19]
A
I'm also fairly sure that every one of our listeners has already emailed asking for the recipe. You may have all done it. Our inbox has been flooded.
- [40:27]
B
It's amazing.
- [40:28]
A
It is just one. Like, there have been points where my entire Gmail screen was just tortoise, tortoise, tortoise, tortoise, tortoise.
- [40:34]
C
Yes.
- [40:34]
B
And one. Delete my account.
- [40:36]
A
Yeah, okay. I don't think we were coming out as anti vegan in that way.
- [40:40]
C
I want to say, like I was specifically saying alpha male vegans. The specific type vegan. My best vegan.
- [40:48]
B
But this show should be a safe space for all vegans.
- [40:52]
A
No, it's true. So one listener got very upset and thought that we were coming out as anti vegans and asked to cancel their Slate plus account. And we do want to emphasize we are fine with veganism. Like I said, I tried.
- [41:04]
B
You're fine with it. I'm not coming out on this fine with veganism.
- [41:09]
A
I think it is a wonderful moral stand to take. I am personally incapable of doing it, as I learned during my abortive effort at trying it for a month. However, we don't want to chase you away. We love what you're doing for the.
- [41:22]
B
World, but we're sad that you won't get to experience the deliciousness that is tarted to Santiago. In any case, once you. If you want something to listen to while eating your tata de Santiago, then listen to Hit Parade, which is hosted by Chris Melanfi. This is a new panoply podcast about what makes a song a smash. Chris is a really interesting guy who probably has listened to more top hit singles than anyone else in the United States. And I'm really kind of excited that this has finally become a podcast of its own. So check that out wherever you get your podcasts or@slate.com hit parade. Many thanks to Dan Schrader. And I think that's it. We will talk to you next week on Slate Money.