Slate Money – "The Ticking Time Bomb Edition"

Date: May 26, 2018
Host: Felix Salmon
Panelists: Anna Shymansky, Emily Peck

Main Theme

This episode delves into major recent developments in labor law, critiques of capitalism from unlikely sources like the Pope, the pitfalls of overly generous customer service policies, and the economics of "too good to be true" consumer products. With characteristic wit and skepticism, the Slate Money team unpacks the implications of these stories for markets, workers, and ordinary consumers.

Key Discussion Points & Insights

1. Supreme Court's Forced Arbitration Decision

(02:00–11:40)

• Background: The U.S. Supreme Court, in a 5–4 decision, upheld employers' rights to force workers into individual arbitration, thus barring class action lawsuits for work-related disputes, especially those over wage theft.
• Summary of Case: Three separate lawsuits accused employers of wage theft. Plaintiffs wished to bring these as class actions, but the Court ruled the federal arbitration law took precedence over labor laws, siding with employers.
• Implications:
  • Individual vs. Collective Action: Workers with small claims (e.g., $1,000 underpayment) are unlikely to pursue individual arbitration, making systemic abuse effectively invisible.
  • Confidentiality & Lack of Precedent: Even successful arbitrations result in non-public settlements, erasing potential for broader change or legal standards.
  • Lawyer Incentives: Arbitrators are dependent on repeat business from companies, creating an inherent bias.
  • Increasing Prevalence: Over 50% of employment contracts reportedly now include such waivers, up from 2%.
  • Legislation as Only Hope: Although Congress could outlaw forced arbitration, panelists are skeptical this will happen soon.

Notable Quotes:

• Emily Peck (04:13): "There's also one professor calls it the black hole of arbitration. ... It's just a pain in the ass and like, why would you even do it? ... I think it's a big blow to working people."
• Felix Salmon (09:08): "...the general counsel is going to say, listen, you have to do this. ... It would violate their fiduciary duty to their shareholders."

2. The Pope Critiques Capitalism

(11:40–21:24)

• The Papal Statement: The Pope released an encyclical strongly criticizing modern capitalism and financial instruments such as credit default swaps.
• Language & Tone: The encyclical's wording is described as convoluted, reminiscent of overly academic art criticism—“International Art English.”
• Content Analysis:
  • Real vs. Financial Economy: The document distinguishes between virtuous, productive enterprise and 'parasitic,' speculative finance.
  • Credit Default Swaps: The Pope’s critique is seen as coming a decade late and out of step with the present-day financial landscape.
• Panel Debate:
  • Anna Shymansky: Argues finance plays a critical role in enabling business and funding, cautioning against demonizing the sector.
  • Felix Salmon: Concedes some value but points out the “socially useless” growth of finance since 1980, echoing Adair Turner, and lauds the need for a smaller financial sector.
  • Emily Peck: Emphasizes the risks when unregulated finance becomes a “ticking time bomb,” with downstream harm to ordinary people.

Notable Quotes:

• Felix Salmon (15:24): "Most of what has happened to the world of finance has been, in Adair Turner's phrase, socially useless. It's financial people moving money between each other... not really making value."
• Anna Shymansky (18:15): "Anyone who has a 401k, people who have pensions...they make money through the market. ... Derivatives do serve a very real purpose, credit default swaps... allow risk to be spread around."
• Emily Peck (18:59): "When these markets aren't regulated and things are allowed ... to spiral out of control, there's real risk."

3. Customer Service & Return Policies: Amazon and Beyond

(21:24–29:54)

• Amazon Bans Serial Returners: Amazon is banning shoppers via algorithm if they return too many items. There's no clarity or transparency given to customers.
  • Emotional Impact: Being banned is frightening as Amazon is central to many people's lives (shopping, books, streaming).
  • Opacity: Buyers are offered liberal returns with no warning this could affect their standing.
  • Public Utility Argument: The hosts posit Amazon should be considered a regulated utility due to its market dominance.
• Retailers Tighten Return Policies: Best Buy, CVS, Sephora, and others are employing third-party analytics to police serial returners, with bans/temporary suspensions.
  • Changing Norms: The era of endless returns (e.g., L.L. Bean's now-ended lifetime guarantee) is closing as retailers battle abuse.
• Product Life Lessons: Felix shares the demise of his local refillable mustard shop, lamenting the fleeting nature of business promises and artisanal ventures.

Notable Quotes:

• Anna Shymansky (22:29): “There are a few things that really, truly terrify me, but this truly terrified me, the idea of being banned from Amazon.”
• Felix Salmon (24:28): "They're a public utility, exactly. They need to be regulated..."
• Emily Peck (28:34): "...social media ... making people take advantage of the system. ... There's some kind of, like, amplification effect..."

4. MoviePass: Too Good to Last?

(30:04–32:59)

• MoviePass Model: For $10/month, users can watch unlimited movies—unsustainable as MoviePass pays full price to theaters.
• Comparison: Linked to the early "ClassPass" fitness model, which eventually imposed limits as use outpaced profit projections.
• Business Dynamics: Movie theaters benefit from increased snack sales but refuse to share ticket revenue or reduce fees.
• Sustainability Doubts: ClassPass only survived due to negotiated lower rates; MoviePass, meanwhile, faces a much larger burn rate and skeptical investors.

Notable Quotes:

• Felix Salmon (30:10): "People are using Movie Pass right now ... because they have this feeling that this is too good to be true and it's clearly going to go bust."
• Emily Peck (31:22): “...It could work because ... ClassPass ... still gets money ... The MoviePass strategy ... it's not a bad [idea].”
• Anna Shymansky (31:59): “The burn rate for ClassPass was never the burn rate for exactly. The MoviePass.”

5. Numbers Round

(33:04–36:41)

• Anna: 16.5% — New central interest rate in Turkey; a major hike to stabilize the lira—signals growing turmoil in emerging markets. (33:04)
• Felix: 25,000 — Rupees (≈$350) paid to Indian fishermen to save whale sharks, illustrating how positive incentives plus public education can alter behavior, even without fully offsetting economic loss. (33:46)
• Emily: $22,179,961 — Walmart CEO Doug McMillan’s salary; reveals a pay ratio of over 1,100:1 compared to the median worker’s $19,000 annual wage, highlighting vast disparities and "celebration" of $11 minimum wage raises. (35:35)

Timestamps & Memorable Moments

• Arbitration "black hole": Emily Peck explains how arbitration makes many small claims disappear (04:13)
• Ginsburg’s Dissent: Emily summarizes Ruth Bader Ginsburg’s warning about lack of precedent in arbitration (06:14)
• Pope’s critique compared to “International Art English”: Felix and Anna joke about the Pope’s impenetrable economic language (12:08)
• Finance's real-world value: Anna passionately defends the financial sector and credit default swaps (18:15)
• “Too big to ban”: Emily points out Amazon’s scale means bans are “almost like they're a public utility” (24:10)
• Amazon as utility: Felix says “They need to be regulated” (24:28)
• L.L. Bean guarantees: Panel recalls how lax return policies were once supported by social norms—modern dynamics amplify abuse (28:02)
• MoviePass’s fate: Felix and Emily compare the “too good to last” feeling to early days of ClassPass (31:22)
• Felix’s mustard store anecdote: A whimsical illustration of the limits of lifetime promises in business (29:01–29:54)

Overall Tone & Style

The episode is sharp, irreverent, and conversational, with hosts openly debating, making wry asides, and illustrating complex business issues with stories both macroeconomic and deeply personal (e.g., Felix’s mustard pot). Argument and camaraderie blend seamlessly, offering listeners both insight and entertainment.

For Listeners Who Missed the Episode

You’ll be caught up on:

• The erosion of class action and employee power in U.S. workplaces
• Why the Pope cares about credit default swaps (and why the Slate Money crew doesn't fully agree)
• How and why customer-friendly policies are disappearing from giant retailers
• Whether MoviePass is the next ClassPass or next epic business flop
• The current situation in Turkey’s economy, Indian whale shark conservation, and Walmart’s wage gap—all in three numbers

Notable Quotes are time-stamped in MM:SS format for reference to the transcript. All segments focus exclusively on content, omitting ads, intro/outro, or promotional material.