Slate Money – The Spoiled Children Edition

Date: March 23, 2019
Host: Felix Salmon (Axios)
Co-hosts: Emily Peck (Huffington Post), Anna Shymansky

Overview

This episode of Slate Money dives into recent headline scandals, focusing particularly on privilege and the concentration of power and resources—both in higher education and the financial sector. The hosts discuss the Operation Varsity Blues college admissions scandal, analyze issues in the German banking system (Deutsche Bank and Commerzbank), and unpack the Boeing 737 Max crisis. They finish with their signature “numbers round” and consider the implications of “dirty money” in public philanthropy.

Key Discussion Points and Insights

1. Operation Varsity Blues: Privilege and Inequality in College Admissions

(00:27–13:22)

• Scandal Details:
  • College admissions bribery: Parents bribed coaches, falsified athletic records, and paid to have test scores faked.
  • Notable details: Use of Photoshop to depict fake student-athletes and payments disguised as charitable donations.
• Socioeconomic Inequities:
  • The story exposes how the system advantages wealthy families, not just illegally (bribes), but legally (test prep, access, pressure).
  • Quote: "The scandal isn't what's illegal, the scandal is what's legal." – Felix Salmon (04:09)
• Test Prep and Meritocracy:
  • Anna discloses her experience as a test prep tutor: Test prep access is a huge advantage, but disparities go deeper than that, including organizational support and cultural capital.
  • The concept of “meritocracy” is problematized, referencing Lord Young's original satirical framing (06:18–07:22).
  • Quote: "Rich kids, kids in the upper middle class... they're getting ready. Like, things are happening." – Emily Peck (07:00)
• Access, Race, and Class:
  • Case discussed: Low black enrollment at Stuyvesant High School in NYC; preparation differences are shaped by family resources and awareness (08:40–09:24).
  • Stat: Top 1% of children are 77 times more likely to get into elite universities than those from the bottom quintile (09:24).
• Proposed Solutions & Systemic Barriers:
  • Need for better state colleges and more equitable federal funding.
  • Past examples: Tuition-free city universities allowed real social mobility; reduced funding has ended this era (10:56–11:36).
• Cultural Critique:
  • USC's "swanky" facilities discussed as symbolic of privilege in higher education (12:47–13:19).
  • Quote: "If any of these kids do wind up getting a job in journalism, they're going to be so disappointed when they finally walk into real [newsrooms]." – Felix Salmon (13:08)

2. Deutsche Bank & Commerzbank: A 'Merger of Weak Wolves'

(13:22–24:06)

• Background:
  • Deutsche Bank and Commerzbank, Germany’s two largest banks, are considering a merger, though both are considered too big to fail and unprofitable.
  • German banking structure: Three tiers—public banks, cooperative banks, private banks—with many small, unstable entities.
• Reasons for Merger:
  • To build scale needed for profitability amid negative interest rates and high regulatory costs.
  • Desire for a powerful German investment bank to serve local industry and avoid reliance on foreign funding (18:56–19:56).
• Skepticism and Critique:
  • Boards and workers at both banks reportedly oppose the merger.
  • Systemic risk: Combining two unstable giants could amplify risk; size alone isn’t the banking sector’s core issue—risk models and capitalization are (22:56).
  • Quote: "The financial crisis was not caused because banks were big. The financial crisis was caused because of basically funding models that had to do with the fact that banks weren't well capitalized enough to account for the risk." – Anna Shymansky (22:56)
• Policy and Public Interest:
  • The merger is government-driven, motivated by nationalistic goals rather than market logic.

3. Boeing 737 Max: Corporate Failure and Regulatory Capture

(24:06–33:19)

• Crash Details:
  • Two 737 Max crashes: Lion Air (October) and Ethiopian Airlines (March), resulting in global groundings.
  • Boeing and the FAA insisted the planes were safe even after the second disaster.
• Design Failures:
  • The new model (Max) had substantial differences from prior 737s but was marketed as requiring no new pilot certification, prioritizing cost savings for airlines over safety.
  • Quote: "Boeing wanted to build a new airplane... and say that pilots don't need to be trained up from scratch... that makes airlines much more likely to want to buy it... It turns out that the 737 Max is so different... you really do and really should have to retrain the pilots." – Felix Salmon (26:12)
• Regulatory Issues:
  • The FAA’s close ties to Boeing (regulatory capture) and reduced regulatory vigor under Trump/Chao cited as enablers of risk (27:18–28:32).
  • Evidence: FAA fines against airlines fell sharply under Trump.
• Broader Industry Changes:
  • Automation and technology change the way humans operate complex vehicles ("semi-autonomous"), possibly leading to over-reliance on "smart" systems and reduced readiness for emergencies.
  • Quote: "Safety has become like a behavioral thing. And you need to be super aware of how does a pilot or car driver behave differently in a situation where the plane or the car is more or less driving itself?" – Felix Salmon (31:18)
• Public/Policy Takeaway:
  • The delicate balance between technological innovation, safety, and the role of government oversight.

4. Numbers Round & Philanthropic “Dirty Money”

(33:19–39:12)

• Brexit:
  • 14 days — The extension granted for the UK to decide its Brexit strategy.
• Female-Founded Unicorns:
  • $1 Billion — Rent the Runway’s new valuation, one of only 16 woman-founded companies to reach “unicorn” status.
  • Commentary on the persistent gender gap in venture funding.
  • Quote: "Sometimes they would say things like, well, let me ask my wife what she thinks." – Emily Peck (36:03)
• Sackler Donations Refused:
  • £1.3 Million — The value of a donation refused by the National Portrait Gallery from the Sackler Foundation (linked to the opioid crisis).
  • The Tate also announces it will refuse further Sackler donations.
  • Conversation about “reputation laundering” and the ethics of taking money from tainted sources.
  • Quote: "If [the Sacklers] want public thanks and public recognition for it, that’s the kind of reputation laundering that probably museums should not be part of." – Felix Salmon (38:09)
  • Discussion broadens to question other controversial donors, like the Koch brothers.

Notable Quotes & Memorable Moments (with Timestamps)

• On legality vs. morality in college admissions:
  • "The scandal isn't what's illegal, the scandal is what's legal." – Felix Salmon [04:09]
• On manufactured meritocracy:
  • "We think [meritocracy] means this great [system]." – Emily Peck (06:18)
  • "It was just sort of a veneer, a cover for the aristocracy..." – Felix Salmon [06:30]
• On structural inequality in schools:
  • "The top 1%...is 77 times more likely to get in [to elite colleges] than the child from the bottom quintile." – Felix Salmon [09:24]
• On Boeing and regulatory failure:
  • "Safety features should not be optional?" – Felix Salmon [27:16]
  • "If you're a good Bayesian, you understand there is something wrong with these planes and you ground them until you work out what that thing is." – Felix Salmon [28:43]
• On technology and pilot behavior:
  • "Safety has become like a behavioral thing..." – Felix Salmon [31:18]
• On Sackler philanthropy:
  • "If they want public thanks and public recognition for it, that's the kind of reputation laundering that probably museums should not be part of." – Felix Salmon [38:09]

Tone, Style & Flow

The hosts maintain a lively, sometimes irreverent tone, blending deep policy analysis, personal anecdotes, and occasional dry humor ("They call it the University of Spoiled Children"). Discussion is brisk and interactive; frequent jokes and candid criticisms keep the conversation accessible. The episode leans heavily into sharp critiques of systemic injustice—be that in education, banking, or corporate oversight.

Key Timestamps

• Operation Varsity Blues: 01:21–13:22
• Banks (Deutsche/Commerzbank): 13:22–24:06
• Boeing 737 Max: 24:06–33:19
• Numbers Round & Sackler/Koch discussion: 33:19–39:12

This summary preserves the spirit, insights, and language of the discussion, offering both a detailed overview and highlight moments for those who missed the episode.