Slate Money: The Villains Edition (May 28, 2016)

Episode Overview

In this “Villains Edition” of Slate Money, Felix Salmon, Cathy O'Neil, and Jordan Weissmann dive into some of the week's most controversial stories in business and finance. The trio tackles billionaire Peter Thiel’s secret funding of lawsuits against Gawker, the shifting role and philosophy of the International Monetary Fund (IMF), and the troubling issues tied to using algorithms for predicting recidivism in the justice system.

1. Peter Thiel, Hulk Hogan, and the Weaponization of Lawsuits

Segment Start: [02:24]

Key Points

• Peter Thiel’s “villainy”:

  • Thiel was revealed as the funder behind Hulk Hogan's privacy lawsuit against Gawker, as well as other lawsuits.
  • The origin: Gawker threatened to out Thiel as gay in 2006, and Thiel reportedly swore revenge, ultimately launching a decade-long campaign to destroy Gawker Media.
  • Gawker published a heavily edited Hulk Hogan sex tape; Hogan sued for invasion of privacy and won a $140 million verdict.

• Litigation finance, but darker:

  • Thiel’s role went beyond traditional litigation finance—he funded multiple unrelated lawsuits with the clear aim to bankrupt Gawker.
  • Felix: “What I for one have not seen before is billionaires…funding multiple lawsuits which are unrelated to the original tort against that media organization.” [06:38]

• Legal and ethical implications:

  • Panelists debate the ethics versus legality of Thiel’s actions.
  • Jordan: “What Peter Thiel has done is completely ethical by legal standards....” [09:09]
  • Felix: “There are two things which worry me in terms of legal ethics, okay? One of them is the fact that he did the whole thing in secret...And then the other question ... is the question of the lawyer dropping the insurable count against Gawker that was not in his client's best interest.” [09:37]

• The precedent and threat to media:

  • Felix warns this creates a dangerous template: “He has created a blueprint which allows any billionaire to go against any news organization using the same strategy.” [10:26]
  • Cathy: “...it’s still a bad...it’s bad news for the media organizations which are poor.” [15:45]

• Possible solutions:

  • Jordan suggests strengthening federal anti-SLAPP (Strategic Lawsuit Against Public Participation) laws to deter abusive lawsuits by the wealthy. [13:58]
  • Cathy and Felix remain skeptical, arguing that deep pockets still tilt the system against cash-strapped media outlets.

Notable Quotes

• Cathy O’Neil: “Thank you, that’s exactly what worries me about this. And I don’t give a shit what lawyers think is ethical.” [10:49]
• Felix Salmon: “The strategy does not rely on the specifics of the Hogan case. The strategy is, I’m going to go out there with a team of lawyers and fund as many lawsuits as it takes...until you just go bust defending lawsuits.” [11:56]

2. The IMF’s About-Face on Neoliberalism

Segment Start: [18:10]

Key Points

• IMF’s evolving stance:
  • Recap of the IMF’s traditional role as a lender to troubled countries, with strict neoliberal “reform” conditions: deregulation, free trade, privatization, fiscal austerity. [18:28]
  • IMF’s recent report, “Liberalism Oversold?”, acknowledges the negative consequences of some of these reforms and the downsides of unrestrained capital mobility.
  • Cathy highlights the IMF's shift in negotiations with Greece, now pushing for debt reduction over harsh austerity. [20:28]
• What changed, and why:
  • The Asian financial crisis (1997-98) and the Latin American crisis (early 2000s) exposed the dangers of free capital inflows and outflows, causing the IMF to rethink its positions.
  • Felix notes: “After those two crises, I think the orthodoxy of capital account liberalization more or less went out the window.” [25:03]
• Types of capital:
  • IMF now distinguishes between “good” foreign direct investment (FDI) versus speculative capital flows, which are more volatile and destabilizing. [26:29]
  • Felix: “FDI is where you go in and you fund companies directly or you build factories ... Capital inflows are just fund managers buying stocks and bonds.” [27:13]
• Is this enough?
  • Cathy and Felix discuss whether these policy shifts are too little, too late for deeply indebted places like Greece or Puerto Rico.

Notable Quotes

• Jordan Weissmann: “...the IMF has sort of started backing off from all this....Now they’ve suddenly published this report.... ‘Yes, yes, we oversold neoliberalism.’” [19:23]
• Felix Salmon: “The reason why you impose austerity is...because you have no choice because you can’t raise taxes anymore and you can’t borrow money.” [29:04]

3. Algorithms and Bias in Predicting Recidivism

Segment Start: [32:36]

Key Points

• The ProPublica investigation:
  • Journalists Julia Angwin and Jeff Larson examined the proprietary "COMPAS" algorithm used in Florida courts to predict if a defendant is likely to re-offend.
  • Their analysis found COMPAS was twice as likely to label black defendants as high risk (when they did not re-offend) and twice as likely to label white defendants low risk (when they did re-offend).
  • Cathy: “You’d never expect anything like this to be perfectly accurate. It’s statistical. ... But you do want the errors to be consistent across races. And you don’t.” [35:03]
• Does math trump human bias?
  • Jordan raises whether even flawed algorithms are better than biased human judges, though admits, “our current justice system is already super racist.” [36:17]
• Iterating and auditing the tools:
  • Felix is baffled that the algorithm wasn’t subjected to ongoing audit and improvement: “It seems that what ProPublica has done is what the model makers should have been doing in real time all along.” [37:05]
  • Cathy calls for ongoing, transparent audits as standard judicial practice: “Why is the justice system itself not taking this on as something they need to audit on a continual basis?” [37:36]
• Transparency and privatization:
  • The panel is disturbed that a proprietary, black-box algorithm is being used in the public justice system.
  • Felix: “Is there any Good reason why this algorithm shouldn’t be public?” [42:03]
  • Cathy: “There’s no good reason...there is absolutely no reason for it not to be public. If it were public, then people ... could audit it more directly.” [42:11]

Notable Quotes

• Cathy O’Neil: “These models aren’t that inaccurate...their reasons … are mostly because they pick up sort of uneven policing practices. ... We sometimes confuse accuracy with justice.” [40:18]
• Jordan Weissmann: “It is that this was a proprietary algorithm ... being used in the ... public criminal justice system. ... It was essentially a black box.” [41:08]

4. Numbers Round and Memorable Anecdotes

Segment Start: [45:34]

Notable Numbers

• Cathy O’Neil – “1.4 billion [yen]”: Amount stolen from Japanese ATMs in 3 hours by a coordinated heist (about $12.7 million). [45:34]
• Felix Salmon – “13,317,980”: Broadway tickets sold last year, an all-time high. [45:57]
• Jordan Weissmann – “19,657”: Student borrowers petitioning the US Department of Education to cancel loans due to fraud. [47:30]

5. Memorable Quotes & Moments

• Cathy O’Neil (re: Peter Thiel): “What I worry about is ... what percentage of Peter Thiel’s fortune was actually used? Almost none.” [11:00]
• Felix Salmon (on Thiel’s strategy): “The specifics of the Hogan case are especially beside the point. The strategy does not rely on the specifics...” [11:56]
• Cathy O’Neil (on recidivism algorithms): “Why is the immediate reaction of a judge to say, ‘okay, you’re going to be in jail longer because you’re a higher risk’ instead of ... help you find a job after you leave?” [37:36]
• Jordan Weissmann (on algorithmic transparency): “The lack of transparency ... when people’s freedom is at stake is just a little bit appalling.” [41:34]

6. Episode Takeaways

• Money can buy legal outcomes: Peter Thiel’s campaign against Gawker reveals how billionaires can threaten press freedom by financing waves of lawsuits, raising serious concerns about fairness and access to justice.
• Powerful institutions can change... slowly: The IMF’s public criticism of its old playbook highlights that even the most orthodox guardians of global finance can admit fault—eventually.
• Algorithms aren’t neutral: Predictive tools in the criminal justice system can encode and amplify societal bias, especially if they remain closed to public scrutiny and improvement.

For listeners who missed it: This episode is a sharp—and often funny—examination of what “villainy” looks like across tech, finance, and the law, leavened by the hosts’ skepticism, expertise, and quotable banter.