Slate Money: "The Unhealthy Markets Edition"

Date: December 17, 2016
Host: Felix Salmon
Co-hosts: Cathy O'Neil, Jordan Weissmann

Main Theme

This episode of Slate Money, titled “The Unhealthy Markets Edition,” dives into two big stories from the realms of business and finance:

1. The complicated realities behind corporate wellness programs, and
2. Collusion and price fixing in generic drug markets.
   The hosts also break down the recent decision by the Federal Reserve to raise interest rates, the ripple effects in financial markets, and end with their trademark “numbers round”—sharing surprising numerical facts from the week.

Key Discussion Points & Insights

1. Corporate Wellness Programs: Promise and Peril

(02:21 – 11:57)

• Good Intentions?
  Companies like IBM and Johnson & Johnson are considering reporting the health of their workforce to shareholders, suggesting employee wellness as a company health metric.

  • “Isn't this a great idea, guys?” – Cathy O'Neil, [02:30]

• Carrots vs. Sticks
  Wellness initiatives can be positive ("carrots": gym discounts, free yoga) but may turn invasive or coercive ("sticks": mandatory annual physicals, sharing health data, insurance penalties).

  • “So carrots are good. What are the sticks? What are the bad?” – Felix Salmon, [06:05]

• Data Reporting Risks
  There’s concern that as companies report more health data, pressure will mount to minimize healthcare costs, ultimately leading to discrimination against “unhealthy” employees. This could entail higher premiums or job discrimination for smokers, those with chronic diseases, or higher BMIs.

  • “The more important this kind of thing becomes to shareholders, the more danger there is about discrimination against the sick.” – Jordan Weissmann, [11:24]

  • Cathy notices a worrisome trend:

    • “We're going to have pressure on companies to never hire sick people in the first place.” – Cathy O'Neil, [10:21]

• Legal Protections & Discrimination
  The panel notes that U.S. protections mostly cover distinct disabilities (ADA), not lifestyle factors like smoking or obesity. This gap could make many workers newly vulnerable.

• Summary Insight: What sounds like progressive corporate policy can mask harmful discrimination, especially against the vulnerable or chronically ill.

2. The Federal Reserve Raises Interest Rates

(12:34 – 23:16)

• The Fed’s Move
  Janet Yellen and the Fed raised interest rates to 0.5–0.75%, a significant event after years near zero.

  • “Janet did what she probably would have done six weeks ago and raised rates to the lofty heights of half a percent to three quarters of a percent.” – Felix Salmon, [13:17]

• Historical Context
  Interest rates are still at historic lows, and the movement is more about trajectory than actual impact.

  • Context stats:
    • 8% in 1990, 6% in 1998, ~0% since 2008. – Cathy O'Neil, [14:37]

• Market & Political Implications
  Debate over whether the Fed is pulling back in expectation of potential fiscal stimulus from a new administration or simply keeping “dry powder” in case of future problems.

  • Felix argues:
    • “They're giving themselves some ammunition. ... You can’t cut rates if they’re at zero.” – Felix Salmon, [17:03]

• Predictions

  • Cathy: 1% at end of 2017
  • Jordan: 1.25%
  • Felix: 1.5% ([22:37])

• Speculative Theories
  Cathy posits undocumented immigrants leaving the workforce could drive up wages (and thus inflation).

  • “My theory is that inflation is going to rise because of the immigrant problem, not because of stimulus.” – Cathy O'Neil, [20:02]

• Inflation Targeting
  The Fed's “asymmetric” attitude: comfortable with slightly low inflation, hair-on-fire if it rises above 2%.

  • “It seems to have a rather asymmetric 2% inflation target ... much happier with 1% inflation than 3%...” – Felix Salmon, [21:00]

3. Price-Fixing in the Generic Drug Industry

(23:16 – 31:35)

• Sudden Price Hikes
  The show covered disturbing hikes in generic drug prices—supposedly due to normal market forces—but new legal developments indicate actual price fixing.

  • “Department of Justice ... charged two drug executives ... in a criminal antitrust conspiracy to fix the prices of some of these generic drugs.” – Jordan Weissmann, [24:23]

• Mechanics of Collusion
  Drug makers allegedly coordinated to hike prices, sometimes splitting geographic markets:

  • “You take the western U.S., we’ll take the eastern U.S.—and we won’t compete on price.” – Felix Salmon, [25:17]

• Civil and Criminal Fallout
  Not only criminal charges (Heritage Pharmaceuticals execs pled guilty), but 20 states launched a civil antitrust lawsuit involving big names like Mylan & Teva. ([25:43])

• Everyday Cartels
  Felix points out collusion isn’t unique to pharma: similar behavior is seen in airlines, art auctions, IPO fees, and even real estate brokerages. Sometimes it’s explicit, other times more tacit—but the broader point is that markets often lack true price competition.

  • “Sometimes when it looks like a whole industry is a cartel ... maybe they are just a cartel and they're colluding...where there's smoke, there's fire.” – Jordan Weissmann, [29:30]

4. The Numbers Round

(32:06 – 36:46)

• 757: The actual model of Trump’s jet (not 747; listener correction).

• $1 million: Difference between mean and median apartment price in NYC.

  • Mean: $2.2 million, Median: $1.2 million. [33:19]
    • “If you want to buy the median apartment in New York City, you’re going to have to pay $1.2 million...compared to the mean apartment, it’s downright cheap.” – Felix Salmon, [34:19]

• $7.5 billion: Projected size of the cybersecurity insurance market in 2020 (up from $3 billion today).

  • Cathy raises questions about how risk and insurance in cyber markets are calculated. [34:30]

• Zero: (Speculative) Number of PhD economists in the incoming Trump administration if Larry Kudlow heads Council of Economic Advisers. [35:33]

Notable Quotes & Memorable Moments

• “These things which sound nice in theory ... are a sort of thin veneer hiding a bunch of discrimination.” – Felix Salmon, [11:30]

• “If you go to the little corporate milling-around area which used to be called a water cooler ... is it full of M&Ms, or is it full of carrots?” – Felix Salmon, [05:31]

• “We're going to have pressure on companies to never hire sick people in the first place...and that is just a shit show if you think about what that means.” – Cathy O'Neil, [10:33]

• “You have to understand the economics of prescription drugs ... it's really just like, yeah, it was a conspiracy.” – Jordan Weissmann, [25:25]

Timestamps for Key Segments

• Introduction & Topic Tease: [00:08 – 02:21]
• Corporate Wellness Programs: [02:21 – 11:57]
• Fed Rate Hike Discussion: [12:34 – 23:16]
• Generic Drug Price Fixing: [23:16 – 31:35]
• Numbers Round: [32:06 – 36:46]

Overall Tone & Takeaways

Engaged, irreverent, and deeply skeptical of conventional wisdom, the discussion style mixes data with sarcasm and humor. The hosts demystify the optimism around health initiatives while warning of hidden dangers, dig into economic policy with political and historical context, and highlight the pervasiveness of collusion—both legal and illegal—in mature markets.
Those who missed the episode will come away informed on the economic, social, and regulatory angles of the week’s biggest business stories.