Slate Money – "The Silicon Bubble Edition" (August 4, 2018)

Episode Overview

In this episode, host Felix Salmon, joined by Anna Szymanski and Emily Peck, dissect Silicon Valley’s unique—and sometimes troubling—corporate culture. They delve into topics including controversial second acts for disgraced tech executives, Uber’s board shift to an ex-arms dealer, San Francisco’s pushback on tech perks like free lunches, and the macroeconomic effects of corporate stock buybacks on the American workforce. The mood is both critical and irreverent, reflecting a mix of financial savvy and social skepticism.

Key Discussion Points & Insights

1. Silicon Valley’s "Forgiveness Culture": Mike Cagney’s Rapid Comeback

• Context (02:26–04:54): Mike Cagney, the ousted SoFi CEO, returns with a new blockchain lending startup just months after leaving under a cloud of sexual harassment scandals.
• Investor Mentality (06:39–08:53): Investors seem inexorably willing to back Cagney anew, focusing solely on potential returns and dismissing systemic cultural harm in startups.
• Double Standards for Women (05:48–06:24): The panel highlights the injustice that, unlike Cagney, women harmed by such scandals rarely get a "second act," often forced out of industries entirely.
• Cultural Reflection:

  “There’s this happens to so many women and they don’t actually usually get a second chance.” – Anna Szymanski (06:10) “He poisoned the culture of his entire company … and the fact that these Silicon Valley investors are just there ready to give him millions more dollars … repulses me.” – Emily Peck (04:54)

2. Uber’s Board Drama: Hiring the "Arms Dealer" (08:53–12:28)

• New Independent Chair: Uber appoints a former CEO of Northrop Grumman as board chair—a role unusual for private companies and loaded with social symbolism.
• Perception & PR:

  “The main criterion you need to be able to be a successful CEO of an arms dealer is you need to be able to divorce the sort of social and societal effects of your company from the financial results.” – Felix Salmon (09:55)

• Board Diversity Lament: Despite several high-profile departures of women, Uber did not select a woman or a person of color for the new chair, missing a chance at real reputation repair.
• Organizational Dysfunction: Uber’s revolving door at the senior level hints at deep-rooted cultural and governance challenges.

3. San Francisco vs. Free Tech Lunches – The Anti-Cafeteria Proposal (13:46–18:46)

• Policy Proposal: San Francisco officials propose banning free food in tech company cafeterias to push well-paid tech workers out into the city’s economy.
• Arguments For (14:55–15:51):
  • Boost local businesses by ensuring tech money circulates in the community.
  • Break the “hermetic” tech bubbles and spur more urban engagement.

  “I think the idea of getting tech workers out onto the street and supporting local businesses and, and having a little bit of trickle down and also being forced to actually engage with the city that they're working in is brilliant.” – Felix Salmon (14:55)

  • Facebook in Mountain View already agreed to similar cafeteria restrictions.
• Arguments Against (15:08–19:52):
  • Smacks of scapegoating tech workers, who are not universally "evil."
  • Tech companies offer better pay and benefits to cafeteria staff (recent unionization, wage gains).
  • Could harm unionized food service workers inside companies if cafeterias close.

4. Corporate Stock Buybacks and Wage Stagnation (20:18–35:12)

• Backdrop: A new report shows public companies like McDonald’s, Starbucks, Lowe’s, and Home Depot spend staggering amounts on buybacks—more than enough to grant multi-thousand dollar raises to every worker.
• Analytical Debate:
  • Anna Szymanski’s defense: Buybacks are a neutral tool for returning excess capital to shareholders when no better investment exists; they are not inherently detrimental to wages or R&D (21:26–24:22).
  • Felix Salmon & Emily Peck’s challenge: Buybacks mostly benefit executives and wealthy shareholders, not frontline workers; used as backdoor executive raises (26:04–27:22).

    “These stock buybacks are spending on wages…they go right to the executives and CEOs.” – Emily Peck (26:20) “Stock buybacks are basically backdoor raises to executives at the expense of regular employees.” – Emily Peck (26:54)

  • Tax Avoidance Tactic: Debt-financed buybacks help companies avoid taxes—equity isn’t deductible, debt is, and capital gains (from buybacks) are taxed lower than dividends.

    “The scandal isn't what's illegal, the scandal is what's legal.” – Felix Salmon (30:06)

  • Market Impact: Panel explores—albeit with disagreement—whether raising employee pay has broader competitive ramifications, referencing Walmart and Target wage hikes as precedents.

5. Numbers Round (35:31–38:55)

The hosts close with a rapid-fire stats segment:

• $20: What a parent paid for a Fortnite tutor for their child, representing the contemporary market for digital coaching. (35:32)
• 79%: The rate at which Chinese students studying abroad return to China after graduation—a dramatic reversal from decades past (36:52).
• 56%: The proportion of college-educated Brazilians expressing desire to leave Brazil amid economic and political woes (37:56).

Notable Quotes & Moments

• On Cagney’s return:

  “It was just four months after he left SoFi, where he started fundraising again … it’s just such a shocking and short timeline.” – Emily Peck (04:01)

• On Uber’s board appointment:

  “I just don’t see that that is a good look for Uber.” – Felix Salmon (10:10) “It’s really surprising, you would think … they would have put a woman on the board or a person of color or your average, not your same old, same old.” – Emily Peck (11:39)

• On anti-cafeteria ordinance:

  “Of course they should go out and buy their own goddamn goods.” – Emily Peck (15:51)

• On stock buybacks:

  “Buybacks are simply a way to return money to shareholders that cannot be used more productively.” – Anna Szymanski (22:13) “Maybe he didn’t have much soul to search. So it didn’t take him very long.” – Felix Salmon, joking about Cagney’s “soul-searching” (03:58)

Timestamps for Key Segments

• Intro & Episode Theme: 00:10–01:01
• Mike Cagney and Second Chances: 02:24–08:53
• Uber Board Appointment: 08:53–12:28
• San Francisco Anti-Cafeteria Proposal: 13:46–19:52
• Stock Buybacks Debate: 20:18–35:12
• Numbers Round: 35:31–38:55

Summing Up

This episode provides a sharp, at times sardonic look at the ways Silicon Valley perpetuates its own power dynamics, at the expense of both internal and societal equity. The hosts challenge the assumptions behind how capital and culture are wielded in tech, and why it matters for everyday workers and city-dwellers alike. The back-and-forth offers robust, sometimes contentious, perspectives—it’s both a master class in financial skepticism and a snapshot of the Valley’s latest soap operas.