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- [00:11]
A
Hello. Welcome to the weirdo camp episode of Slate Money, your guide to the business and finance news of the week. I am Felix Salmon of Axios. I'm here with Emily Peck. Hello. I'm here with Stacey Marie Ishmael.
- [00:28]
B
Aloha.
- [00:29]
A
I am a weirdo, according to Emily.
- [00:33]
B
Also me.
- [00:34]
A
Very happy to admit this. Stacey, are you a weirdo?
- [00:37]
B
I agree with Emily that you are a weirdo.
- [00:39]
A
Right. Okay. So according to Stacey and Emily, I am a weirdo because I was a little bit maybe underwhelmed is the word about the massive ProPublica bombshell report on the tax returns of the 25 richest Americans. So we're going to talk about that, and you guys get to decide whether I'm weird or not. We. We are going to talk about Uber pricing and somehow segueing from that into, like, funding of MRNA vaccines. And I have no idea how we did that, but we're going to manage that somehow. And we are also going to talk about bitcoin in El Salvador, where it is now legal tender. There's a Slate plus about the insane amount of fraud that seems to have been going on in the unemployment insurance system. All of that coming up on Slate Money. So, Emily, There was a ProPublica bombshell this week. What was the bombshell and how much of an explosion did it make?
- [01:39]
C
The BombShell was that ProPublica got a hold of the tax returns of 25 billionaires. The richest guys in the world, including Warren. Do we even need to say their last names? Including Warren, Jeff and Elon, Mark, Rupert and surprise. They. They don't pay a lot in taxes relative to their wealth. And the story got a ton of attention. I thought Twitter was a buzz. Sort of. There were the two camps. There was a camp of people that were like, oh, my God, rich people. These billionaires aren't paying their fair share. This is awful. We need to do something big about this. And then another camp of who I.
- [02:22]
B
Wall street journalism.
- [02:25]
C
Yeah, fine. Wall Street Journal weirdos is what I call them, who are like, this is not a surprise. Rich people, of course, they don't pay a lot in taxes. Of course you don't pay a lot of taxes on stocks because you don't have the cash from them. And Felix, interestingly, he was not a weirdo, I'd say, on Twitter.
- [02:43]
A
But you had a. Oh, I was a weirdo. I'm 100% in the weirdo camp.
- [02:47]
C
Fine. Okay, great. Felix was in the weirdo camp. So maybe we can start with you because we all know what I'M probably going to say about all of this. So maybe you have the interesting things.
- [02:57]
A
So, so, okay, so what we found was a bunch of information. Well, there was the information in the report and then there was the report itself. And the report itself was a gazillion words long and went on and on about how these people had become a lot richer and the increase in their wealth had not been taxed. Which is true. And I guess you do need the tax returns to be absolutely certain of that. But this comes as absolutely zero surprise, because if you own a house, say, and it goes up in value, you don't pay tax on the increase in value of your house. If you own a company and it goes up in value, you don't pay tax on the increase in value of your company. You only pay income tax when you have income and owning something that goes up in value is not income. So that kind of shock finding that the ProPublica led with seemed to be not very shocking and not very finding, at least to me. And then if you looked at the actual the amount of tax they paid as a percentage of their adjusted gross income, those became relatively normal. Jeff Bezos was like 23%. And I did the math on like mine and mine is 15%. Like, he pays a higher tax rate than I do in terms of federal income tax divided by adjusted gross income.
- [04:15]
C
But in some years, Bezos, Musk, Carl Icahn, Icahn Icahn, and George Soros paid Nothing in taxes ProPublica reported, which is always shocking.
- [04:25]
A
And this is also, this is also a function of, like, how the income tax thing works and there are losses and there are charitable deductions and if you give away more money than you technically earned, blah, blah, blah. Like there is, I 100% agree with you that we should have a more progressive tax system where the 0.01% pay more tax. And the only thing which I push back against this idea of what ProPublica calls a true tax rate as the idea that the best way to measure whether the 0.01% are paying enough tax is by looking at the unrealized capital gains and then dividing that by providing their total taxes paid by the unrealized capital gains. Because if you do that, then you could have this multi gazillionaire like Jeff Bezos, if his stock went down one year, he'd be like, I had negative income this year, so I don't need to pay any income taxes. No, that's not how it works.
- [05:24]
C
One interesting thing I learned from the Story that I didn't know was that the way these guys get money is instead of selling stock and buying stuff, and tell me if I have this wrong, they borrow money, like, relatively low interest rates, especially now, and that's cheaper for them than selling stock. So that's how they sort of buy lots of fun stuff and have money. And I feel like there's a potential avenue of exploration for taxing somehow, like, if they're borrowing all this money as, like, a workaround, they're trying to avoid taxes by borrowing money at lower interest rates. So why not figure out a way to tax that behavior?
- [06:02]
B
So on that exact arbitrage point, that, to me, is the frustrating part of the series. Not that I'm frustrated by the series, but the thing that it revealed to me that was frustrating is, yes, we long know as a capitalist society that if you have money, you can make money. All of that is fine. But I think part of the pushback to this story, and this is where my particular disagreement with the weirdos is, well, yeah, that's how the system works at the tax level. But the system doesn't only work that way at the tax level. It also works that way. Emily, to your point of, like, personal finance, consumer finance, right? If you have all of these unrealized gains, you look really good as a credit risk. And so they're like, oh, yeah, you have a gabillion dollars in Amazon shares or whatever, we'll lend you money at nothing. So you get money on top of the unrealized gains that you have. You're not taxed on anything. And somebody who is trying to buy a house or lease a car, right, who is probably paying a higher real tax rate, whatever the nomenclature may be, and does not have access to just some assets chilling in a. In multiple bank accounts somewhere. And that, to me, is where, like, really the fundamental unfairness is. It's how it's structured from the tax level on down to ensure that the wealthier you are, the easier it is for you to generate and accrue more of that capital.
- [07:20]
A
So one of the. To change the subject slightly, but not entirely, one of the things that I've been seeing a lot of over the past few months is an analysis of the amount of interest and fees that people of color, and especially black Americans, pay on their mortgages versus white Americans. And interest rates are higher for black Americans than for white Americans, even for Americans with the same income, even adjusting for income. And the reason is exactly what Stacy is talking about, that the white Americans have more wealth and if you have more wealth at the. With the same amount of income, then your interest rate goes down because you're a better credit risk. And on a very fundamental basis, this does feel unfair, and it is unfair. And yet at the same time, if I was an underwriter at a bank issuing someone a mortgage, wondering about credit risk, I would care about wealth and I would give a lower interest rate to someone who I knew had the wealth collateral to back up what I was lending them.
- [08:28]
B
This is where everything gets back to kind of structural and systemic inequality, where you, as that underwriter, are making a perfectly rational decision based on your available inputs. That person is not in that situation because of perfectly rational forces. Right. And I think this is where the normative element of this argument often gets missed, where people are like, well, from a purely technocratic perspective, the system is working as design. And then a bunch of people are like, yeah, burn the system down. I am sometimes in that camp occasionally.
- [08:59]
C
Clearly something needs to be done. I think fundamentally, not only is it not fair that so much wealth has accumulated amongst so few guys, but we don't want a lot of wealth. High wealth inequality in the United States, it's bad. Like, along a number of. It's bad because I wrote a list. It hurts economic growth and there's links to crime, there's links to social cohesiveness. If things get super, super unfair and everybody thinks things are super unfair, remember the Great Recession, people get really, like, angry and upset and like, pull back a little bit, they form a tea party, they occupy Wall street, things get hairy and just generally it's no good. It's not even good for rich people, for rich people to have too much money, because who are they going to sell their stuff, stupid stuff to? Nobody has enough money to buy it.
- [09:53]
A
Other rich people, there's just not that.
- [09:55]
B
Many of them, but they do have significant buying power.
- [09:59]
A
But I am fascinated at the way that we have rapidly come, you know, to the conclusion that wealth inequality is bad. And I agree that wealth inequality is bad.
- [10:07]
B
Can we say just piketty?
- [10:08]
A
And if ProPublica tells me that wealth inequality is bad, then I will agree with ProPublica, but this really has effectively nothing to do with the tax returns of the 25 richest men in America. Right. So, like, we have. And this is what happened in the story as well. They lead with, we have this bombshell tax return information and they released a tiny fraction of it, like, there will be more stories coming. But then they immediately segued into wealth inequality is bad, basically. And that what that says to me is that the amount of, like, interesting new information in these tax returns was actually pretty low.
- [10:43]
C
Well, I am curious to learn more from the tax returns. The only real takeaway I had from reading the piece was that Jeff Bezos claimed the child tax credit, $4,000 tax credit of $4,000, which is just so egregious to me. Like, don't claim that if you're a billionaire. Come on. But I mean, it's illegal.
- [11:03]
A
It's a bad look. But also, let's put this in perspective. He claimed the $4,000 tax credit while also paying $973 million in taxes over five years. Right. If you're gonna pay 900, $173 million in taxes over five years, just federal income taxes, mine, never mind all of the other taxes, then, yeah, fine, take your $4,000 tax credit. If that's a universal thing, then that helps you in the tax code create a thing that winds up with you paying $1 billion in taxes. I'm not going to stress too much about that.
- [11:35]
B
It's interesting that we finally said the phrase tax code, because the tax code does entrench that kind of inequality. It's like, oh, homeowners here is mortgage relief, or people with children here is that kind of relief. And I do think if we zoom back out from wealth inequality as bad, there are elements of the tax code that can be addressed to start to change some of these, like systemic haves and have nots.
- [12:00]
A
And the biggest one of all is the step up in basis on death. Like that one alone would solve a massive amount of the problem here.
- [12:11]
C
Can you explain that?
- [12:12]
A
Basically, I will happily explain that. So when Jeff Bezos dies with a gazillion dollars of Amazon stock in his pocket, he has never paid tax on the increase in value of that Amazon stock. Right? He's never sold it. He's never had a taxable event. He's just been sitting on it and it's gone up in value. And as we were saying, like, just sitting on something which goes up in value does not generate a taxable event. So then he dies and he gives the stock to his kids and they inherit the stock. And let's say the Stock is worth $1,000 a share when they inherit it. And let's say they need some money like a year later and it's worth eleven hundred dollars a share, it's gone up 10%. Then the amount of tax they pay is taxed on the $100 gain between where they inherited it and how much they sold it for. And no one ever pays the tax on that massive gain from zero to 1,000. So that whole amount of wealth that has been earned, which is earnings or wealth increase of individuals, never, ever gets taxed as income by anyone, ever. And that's crazy. So what should happen is that the heirs, the estate, the Jeff Bezos estate, Jeff Bezos, basically, when he's dead and he doesn't need the money anymore because he's dead, should pay tax on net wealth increase when he dies. So he's made all of this money when he dies and then you pay tax on it. That's how it should work.
- [13:43]
C
I like that.
- [13:43]
A
And then like whatever's left over after taxes goes to your kids.
- [13:47]
C
I like that. But you know that if that were to happen and they tweaked the tax code to make that the law, that rich people would find a way. They always find a way around it. That's what lawyers are for. Sneak around, work around. Right. That's what's sometimes frustrating about all of this.
- [14:02]
A
I think it's easy to be defeatist about this. Right? There are actually. These things do make a difference. Do they work perfectly? No. There are always text workarounds. I was originally going to say Rupert Murdoch when I gave this example, but then I changed my example from Rupert Murdoch to Jeff Bezos because I know that Rupert Murdoch has already given most of his wealth to his kids and there are lots of trusts and systems where none of this really applies to him. So obviously there are workarounds and nothing is perfect. But this would make a really big, big dent. As would, by the way, just the very, very simple act of giving the IRS more money to audit rich people. And we had a big op ed this week signed by Hank Paulson, Tim Geithner, Larry Summers, Jack Lew, like a whole bunch of former treasury secretaries saying we really need to be spending more money on the IRS because this is money that pays for itself 10 times over. It's just, it's just like the easiest low hanging fruit in the New York Times.
- [15:00]
C
And the other frustrating thing about that is that because the IRS is strapped for cash, they wind up auditing poor people more than rich people. And that's just upsetting, obviously.
- [15:12]
A
So congratulations to Joe Biden for actually doing something about this and really bumping up the amount of money that he's giving to the irs. I think that's awesome. All right, Stacy Marie.
- [15:22]
B
Hello.
- [15:23]
A
You live in a city with terrible public transportation facts. Does this mean that a you wind up taking Ubers More than most of us. And B that you have have seen an increase in their price.
- [15:34]
B
I took a ride hail vehicle for the first time in more than a year to go to the airport recently and it was definitely more expensive than what I had paid previously. If it were not the airport, I would have probably ridden my bike. And it was interesting to note and I did ask the driver when I was going to the airport, I was like, have you seen a lot more customers? Are they wearing their masks kind of thing? And the answer was like, I'm, I am definitely driving more. There are more people taking, taking Lyfts, taking Ubers. The number of people who have been ordering from doordash has not gone down as things have opened back up. But I think a much more interesting question is like, is this benefiting drivers in any way as it relates to their take home pay and is it probably not? One of the things that you found out, Felix, because you called somebody or was it an email, is that across the US Uber drivers are back to a system of getting paid based on time and distance, with some, in some states like California, a minimum base rate and then occasional bonuses and incentives and whatever things Uber wants to hang in front of drivers. But just because you might be paying $200 to go to the airport does not mean that driver is making more money than they were a year ago. And I think that was genuinely news to me.
- [16:57]
A
We have been sharing between the three of us article after article about Uber and Uber drivers and how much they're making and how much Uber is making. And a lot of them just tend to be frustratingly unclear about what exactly is going on. But the very big picture is, and I swear to God, I actually did some reporting for Slate Money for probably the first time in my life. The big picture is we have much less supply of drivers than there used to be. A lot of drivers just are not interested in having a bunch of strangers who might have Covid get in the back of their cars and breathe on them. I can't imagine why that would be the case. And so supply of drivers has gone down. Demand for drivers is back up, if not all the way back up to pre pandemic levels. I think it probably has reached that in some places, but certainly it's up a lot. People for whatever reason often feel safer in an Uber than they do on public transportation. And so demand is back up to where it was. Supply of drivers is way down. And Uber and Lyft and all of these companies have this very sophisticated algorithmic Pricing algorithm, that's the thing which matches supply and demand and comes up with a price. And when you have a lot of demand and low supply, the price goes up. And people can be incredibly shocked by the amount of price they pay. Now, as you know, when you open your app, the way it works these days, it's not how it used to work in the early days where they're like, order an Uber and then you take the Uber and then according to miles and minutes, you find out after the trip how much you have paid. It all works on upfront pricing, which means that the algorithm determining the price is incredibly opaque. And Uber and Lyft can basically charge whatever they want for that ride. Meanwhile, while that price is going up, the amount of money they pay drivers outside special bonuses and surges has basically stayed constant. It hasn't gone up. And those drivers keep on making the same amount of money per mile a minute, which can actually weirdly work out as less money than they were making before per hour, because there are so few drivers now that you have much less, what's known as liquidity in the system. And that can mean that they wind up having to drive longer distances and more minutes to pick up fares. And when that happens, they're not paid. You don't get paid for mile a minute for the amount of time you're driving to the fares, only when you're driving with the passenger. Which is a very long winded way of saying that, hey, guess what? It looks like for the first time ever, Uber and Lyft are actually making money because they found a business model where, like, the percentage of the total fares they paid to drivers has gone down, the total amount of money they're making has gone up. And so they're profitable, but it's not very happy drivers.
- [19:49]
C
Yeah. And I think part of what's happening too is that in the beginning, Uber really wanted people to take Ubers and they subsidized every ride. They subsidized what you paid and what the drivers got paid. And that was to everyone's benefit. Like back in the early days, you would take an Uber and it would be like $4 and you'd be like, wow, this is the best thing ever. And they were able to get millions of people hooked on the service. And now they're finally not paying people to take rides, they're actually trying to make money. And it's sort of not the greatest service anymore. Like, it was a great service when Uber was paying us to take Ubers, and now it's Kind of a bad service.
- [20:29]
B
It was a great service when they were exploiting drivers.
- [20:32]
C
Drivers have been exploited all along. And my second thing that I've been wondering about is like driving for Uber. These gig jobs, there are always bad jobs and they worked because the economy was bad for workers. Stagnant. A lot of Uber drivers, this is their side gig, this is their second job. They had to take it because their primary job maybe didn't pay enough. Now we're in this whole new hopefully world where workers at the bottom of the income scale have leverage and can get paid more. And like these Uber jobs are bad. And that's part of what's going on right now. There's no, not a lot of Uber drivers because the jobs aren't that good.
- [21:11]
A
Yeah, no, that's exactly right. It's not just that people don't want to drive during a pandemic and they're worried about COVID It's also that they can actually get good full time jobs with benefits somewhere else. And they're like, hey, I'll do that instead. And the entire gig economy, I mean, this isn't just Uber and Lyft, right? This is the entire gig economy is now, I think, facing a real existential labor shortage. And that's got to be good, right? Like they're going to have to face up to the fact that there isn't just an unlimited amount of free labor sitting out there willing to perform services for people anymore or quasi or very close to free labor. Now they're going to have to try and make things a lot better for their workers. Because if you have to wait half an hour for an Uber to turn up because no one's driving for Uber anymore, then that's not a great business for Uber to be in either.
- [22:02]
B
I think the thing I'm frustrated by a lot of frustration this episode is that Uber, Lyft and other similar services all across the gig economy spent billions of dollars, or at the very least high hundreds of millions of dollars lobbying all across the world, right. U.S. cities internationally. There was big fights in London with the taxi drivers. And one of the consequences of that is over the years and years that they've been in place, cities and states had incentives to under invest in public transportation. They had incentives to optimize things around the expectation that these companies would solve a market failure or at least a missing element of the market. And so now you have the worst of all possible worlds where not only is it significantly more expensive to attempt to rely on these services, there are fewer and fewer alternatives than would have been possible had cities and states not bought into the idea that this was a form of public transportation in some weird definition thereof.
- [23:05]
C
I had a note about that, but in my, through my lens I was like, this is hopeful that cities and countries will realize, like, they can't rely on private companies to do the public work of transportation. But yeah, it's like a decade lost.
- [23:19]
A
Yeah, everyone wants public private partnerships. I live in New York City, as you all know, and my primary form of transportation in New York City is Citibike, which I love and it's my favorite thing in the world. But it is a private company and in fact it is a subsidiary of Lyft.
- [23:36]
B
Okay, can we just talk about that for one second? Because I was one of the. I like. One of the reason I will not cancel my city bike membership even when I don't live in New York is because I have one of those like light blue founder badges. And it is entirely because I want to keep that. But when Citi Bike started, you could call a human being. There you go, Felix. I see yours. You could call a human being.
- [23:57]
A
Mine is gold. No one has a gold one.
- [24:00]
B
Oh, excuse me. We, the non gold plated city bike riders still used to be able to call a human being and get service. And then now that they are entirely owned by Lyft, it's just, they're like, well, send us a message through the app and maybe two weeks later we'll get back to you. And I think this is one of the other challenges of the constant move to privatize this kind of infrastructure is that customers at the other end get worse service on every metric because the incentive structure is skewed towards margins.
- [24:32]
A
Okay, but let's be real talk here. Number one, Citibike was always a private company. It was never like run by.
- [24:38]
B
It was just like a less bad company.
- [24:40]
A
I think it was like a Canadian company called Motivate or something. And it was motivated in the beginning. And I have to say it is much better now owned by Lyft, even though it might be harder to get someone on the phone. They have electric bikes now. It's amazing, right?
- [24:55]
B
But we still criminalize people for riding electric bikes in New York other than Citibike riders, which is one of my other beefs.
- [25:00]
A
Yes, we should make that legal. There are so many things, there are so many ways in which we can and should improve mobility in New York, but that is a different segment.
- [25:10]
C
I think the other thing, Kevin Roose had a piece he's got these pieces lately that are just delicious to talk about, but his piece was about how Uber and Lyft have gotten more expensive and how the subsidy for the millennial lifestyle has gone away. Like, used to be cheap Ubers. There used to be like services where some basically those mom replacements. Someone does your laundry, someone cleans your house, da da, da. I don't really do those things, but a little bit I do them. Anyway, the mom subsidies for the millennials are going away and I guess the story was bummed out about it, but I feel like it's fine. There's no societal loss. Except for what Stacy pointed out that public transportation has been underinvested in for a decade.
- [25:54]
A
But besides, honestly, I feel like public transportation would have been underinvested in any way even if there had been Uber and Lyft.
- [26:00]
C
Right? So it's fine that like this millennial subsidy is going away and single people living in San Francisco can't get their laundry done for really cheap anymore or get a scooter.
- [26:10]
A
The millennials are turning 40 now. Like, come on, stop reminding us. Start living without a subsidy once you're 40. Come on, people.
- [26:19]
C
Yes, right. So it seems like a fine trend.
- [26:22]
B
The thing about that piece that was interesting is that subsidy was entirely like venture capitalists just burning through money, right? Just an absurd amount of, oh yeah, people are willing to give us money, we'll throw it back at you. And so yeah, it was absolutely a subsidy. But I always have a question of what else could that money have been spent on, which is of course a historical counterfactual and impossible. But it is, to use the public transportation analogy, like how many will pick your laundry up services did we truly need relative to various of the other kinds of problems we could have solved?
- [26:56]
A
I would love someone to do the math on how much money Masa Son has personally given every American, but in a very sort of non evenly distributed way. But just the SoftBank Investments, WeWork and Uber. How much do they. And the one which I wrote about this week was Katera, which was this, we can prefabricate buildings and it'll be amazing. He invested like over $1 billion in that and it just completely collapsed. You're right. Like surely there would have been a way. But he seems to have done very well for himself. Like he invested a bunch of money into coupang and that thing went up like 100 times.
- [27:32]
C
Well, I had the thought about like, money, how money doesn't get spent on the things we need. The daily podcast did an episode on Cataline Carricko, who's one of the inventors behind the COVID vaccine. And she has been working on this MRNA technology that's like that, that can clone DNA, basically. I think I said that right. She's been working on this since the 80s and has been absolutely obsessed with it and had no luck getting any funding. She wasn't able to get a single grant for her work. She kind of like labored in obscurity for like years and years and years and years and just stuck it out. There were no VCs throwing money at this woman. She was just laboring away in obscurity. And now her technology is like, blah, blah, blah, saving the country, saving the world and everything. And it's just. It's interesting to think about how hard that was for her versus the number of services that will, you know, find a pizza for you or get you a scooter really cheap. It's interesting how those incentives work.
- [28:30]
A
Yeah. She had a terribly difficult time getting funding. That is 100% true. And the way that medical research and pharmaceutical research is funded is probably bad and can certainly be improved. I have no idea how. I am not an expert on research funding mechanisms, but clearly, like you, you don't want to incentivize people to be spending all of their time writing grant applications rather than doing research, which seems to be the case right now. The one thing I'll say is that it's not a lack of money. If you look at the amount of money that the CDC and the NIH spend on grants, it's way up there with the amount of money that VCs are spending on companies, probably even higher. Right. It's not that we don't have the money. It's that we're having difficulty making sure that money is going to where it can be best used in terms of saving the planet.
- [29:18]
B
One of my more sarcastic friends who still lives in San Francisco, which is not good for their level of sarcasm, said that probably the best way to find a cure for some kind of rare disease is to have it affect a venture capitalist. And I think that it's just this weird indictment of, again, the incentive structure. Right. Every now and then you'll see these stories about this person was an ultra marathoner who successfully ran a company and then gave it all up to devote a million hours a week to researching this one cell. That was the reason why their daughter was X, Y and Z. And yes, but that is the opposite of scalable, which is supposed to be the thing that VCs are so invested in.
- [30:00]
A
Yeah. But also, Stacy, I think that's wrong. I know that's the cynical take, but I spent a bunch of time looking at single disease charity when I did a big series for Slate a couple years ago. And single disease charities all basically start the same way. It's like, you know, someone has a disease or someone's kid has a disease, and then they're like, there's not enough research being done about this. And I'm going to start up a charity to research this. And, you know, sometimes the person starting up the charity is incredibly rich. So Mike Milken had a certain type of cancer and he's a billionaire. And so he starts up, you know, a large chunk of his foundation is now devoted to trying to find a cure for that certain type of cancer. And what happens is actually not what you're saying. Like, those well funded single diseases, as it were, like, which have all of that philanthropic support, don't seem to get cured at a higher rate than any other diseases. It's actually a deeply inefficient way of trying to cure these diseases because there's no coordination. And you have 87 different cancer charities all not talking to each other and not coordinating and doing their own research and getting nowhere. And really the way to cure disease is to just make sure all of that money goes to the CDC and the NIH and they can coordinate it and make sure that everyone is pulling together in the same direction in a way that helps each other and that all of the research is public. And I love the idea in theory, that, like, all you need to do to solve to cure a disease is to throw money at it. But.
- [31:31]
B
Well, this is what makes it even more frustrating. Right? Because if it's not working, it's an even bigger waste of everyone's time.
- [31:38]
A
It's a total waste in terms of charities, and this is one of my hobby horses, is the whole philanthropy thing. But if you're giving money to charity, giving money to a single disease, charity is like one of the least effective things you can possibly do.
- [31:51]
C
Well, that's what's so interesting too, about the just the Kariko story is that it all worked out. We had a pandemic and they had vaccines up and running. I think it was less than a year. It's amazing, like, all the lucky breaks that had to happen for that vaccine to be invented and for everything to work. It's almost a miracle considering all the challenges that she faced and that vaccine research faces. And I guess it was the clarifying event of a pandemic enabled everything, all these like kind of half broken systems to actually work and for an invention to happen.
- [32:27]
A
Yeah, and you're absolutely right. If you look at like the, the two MRNA big success stories, Biontech and Moderna, no one had heard of either of them before the pandemic. They were both like pretty underfunded and small and obscure pharmaceutical companies. And now they're both like massive and hugely successful. And it just goes to prove that sometimes you just need to get the science right and you don't need a huge amount of money to make something like this happen.
- [32:54]
C
How this relates to Uber, I'm no longer sure. But there was never a clarifying event that made us all really need Ubers. I think maybe, or washing clothes service.
- [33:06]
A
I have no idea how it relates to Uber, but I think that's probably our cue to move on to Bitcoin, baby. Oh, bitcoin baby. Hi, folks. I just wanted to pop in here to say that after we recorded this show on Friday evening, when most of us were drinking, the CEO of Uber, Dara Khosrowshahi, came out on Twitter and gave a whole bunch of numbers which have not been released before. He said that between January and May, the amount of money spent by Uber riders went up by 1.7x and that fares increased by 27%. But he also said that over the same period, the amount of money paid to drivers went up 1.8x and driver pay went up 37% per trip. So according to him, at least between January and May, more money has been going to drivers, drivers are getting paid more and they're getting a higher percentage of fares than they were before. And he also says that the Uber take rate, the percentage of the fare that's going to Uber is going to go down in the second quarter. Now maybe he's picking the base of January. He's sort of cherry picking that to make the numbers look good. I don't know. I've asked him for the full data series and maybe he'll reply. I don't know. He could be someone who replies on Twitter, but that's what we know now that we didn't know when we recorded the show.
- [34:35]
B
Felix, please explain what's happening in El Salvador.
- [34:37]
C
Yeah, Felix, you just talked.
- [34:40]
A
I think that people are taking this too lightly, to be honest. It's a big deal that El Salvador has now officially signed into law, a law saying that bitcoin is legal tender in El Salvador and that all big businesses should accept bitcoin as payment that anyone who, any El Salvador resident who makes lots of money in bitcoin doesn't need to pay any taxes on that because it's legal tender and you don't need to pay money on like your money. It's a clear attempt to and quite explicit attempt by the president of El Salvador to get a bunch of bitcoin crypto bros to relocate to El Salvador and move all of their companies down there and hopefully bring some money into the economy that way. He has said that the way this is going to work is that the central bank of El Salvador or some similar institution is going to become a major dollar to bitcoin exchange because El Salvador is dollarized. I should mention this. El Salvador does not have its own currency anymore. The cologne has not been a currency for 20 years. It just has the dollar. And so everyone's got dollars in El Salvador. And the idea is that in order to be able to go back and forth easily between dollars and bitcoin, the Salvadoran government is just going to be this bitcoin exchange and will convert very freely back and forth between dollars and bitcoin. And as we know, the dollar to bitcoin exchange is the, the nexus of money laundering in the world these days. Right. And there's basically two different types of exchange in the world. There's the ones that are very closely regulated by the US government like Coinbase where you need to upload your passport and your driver's license and they go through very, very long and painful know your customer and anti money laundering controls before they'll let you take any money out in dollars. And then there's like very shady companies in non US Jurisdictions that regulators are trying to crack down on. But there's no way that a regulator can crack down on the Salvadoran government. And this really worries me that El Salvador is just going to become overnight basically the global hub for criminal money laundering. And it's not like El Salvador isn't run basically by, I'm not going to say it's run by criminals. I'm not going to accuse the president of El Salvador of being a criminal, although he does have reportedly close connections with the MS.13 gang. But there are three big criminal gangs who basically have had this reign of terror over El Salvador for many years now. And that is why it is the most violent country in the world and it's got the highest crime rate of any country in the world. And you don't want that country to be the one saying like we are going to be the future of bitcoin.
- [37:41]
C
So in other words, it's not a validating moment for bitcoin, as some might argue, but instead, it is definitely a.
- [37:49]
A
Validating moment for bitcoin. Like, this is a huge moment in the history of bitcoin. The idea that it has now become legal tender in an actual sovereign country is a very big deal. I'm just saying it's not something that we should be happy about.
- [38:01]
B
I'm never happy about bitcoin.
- [38:03]
C
It was interesting to think about the validating moment of bitcoin as currency and then read. Friend of the podcast, Joe Wiesenthal had a really long piece about how people are thinking about bitcoin now. And it's sort of the opposite. Like, when it first started, everyone was like, this is the new bitcoin is a currency and it's going to be the new currency and blah, blah, blah. But now in 2021, when people talk about bitcoin, it's as a store of value more than anything else, not a currency. That seems to be an old idea.
- [38:31]
A
About bitcoin, except in El Salvador, apparently.
- [38:33]
C
Yeah, yeah. So it's like, which is it going to be?
- [38:37]
A
Actually, I will be shocked if you were to visit El Salvador in a year or two and walk around a bunch of supermarkets and see people paying for their items with bitcoin. I don't think that's going to happen. It is clearly like the dream of a bunch of bitcoin true believers. And I might be wrong about that. But I agree with Joe that the reason that people hold bitcoin is not because they want an easy payments mechanism. The reason that people hold bitcoin is because they hope and expect that it's going to go up in value.
- [39:11]
C
Yeah, it doesn't work as a currency. You don't want your money to the value of your money to be changing day to day. That would be absolute insanity. That's the opposite of what you want in a currency.
- [39:21]
B
So one of the folks that you would perhaps expect to be hedging that kind of volatility more in a more sophisticated way is 401k funds and retirement funds. And I was reading in the Wall Street Journal that Coinbase, who we just mentioned, has teamed up with a 401k provider to allow workers to invest up to 5% of their 401k contributions in Bitcoin. And that sort of blew my mind for the reasons that you're describing, Emily, which is that your 401k is supposed to be the place that you can reliably be like, it's set, forget, move on, it's going to cover my retirement. And this is not one of the world's largest 401 providers. To be clear, this is a relatively small slice of of that market. But it does seem to be another step in that normalization of something or treating it as if it's something that's like a normal asset when it has none of the underlying characteristics of normal assets.
- [40:18]
A
So I find this one fascinating. We have well over a trillion dollars now in what's known as coin market cap. And this is a number that you can't really take at face value. But it is clear that a lot of people have a lot of paper wealth in Bitcoin, just like a lot of people have a lot of paper wealth in stocks and bonds and other securities. And if you look at stocks or bonds, you would be completely unsurprised to see that a bunch of it was held in 401s. That's where people have their wealth is they generally put their wealth in retirement accounts first. It's like the tax advantaged place to do it with cryptocurrencies. Basically, to a first approximation, 0% of all of that wealth is held in 401ks. This is because 401ks have very specific rules about custodianship. And there's this very small number of custodians who will custody crypto assets. And so this is, Stacey, what you're talking about. Like we are now beginning to see a couple of very small custodians beginning to say, okay, we will start custodying crypto. And so this is going to allow people to use 401ks as a vehicle for their crypto investments. I would actually say that if you are going to be investing in crypto anyway, and there's clearly a lot of people who are investing in crypto, then it kind of makes sense to do it within a 401k because you want your 401k to be the vehicle for your highest risk, highest return investments because it's tax free. That's the place where if you're investing in like municipal bonds, there's no reason to put Those in a 401k tax advantaged vehicle because they're tax free anyway. If you're investing in something where you have the potential to make like a gazillion dollars, having that gain be tax free is much more attractive to you. So I can see why people would want to do it. But I do agree in general that cryptocurrency as a long term investment is something which definitely has worked out pretty well over the past 10 years, but it has no certainty of working out pretty well over the next 20 years or whatever your retirement time horizon is.
- [42:29]
C
And if it's just 5% of your 401k, that should be devastating to you. Ultimately you're taking a risk by investing in crypto, but you're spreading it out. It's just a little, a little teeny risk over a long, long, long time horizon. So that doesn't seem as bad. Also, can I ask, potentially, I thought you pay taxes on the 401k money. Eventually, yeah.
- [42:50]
A
I mean, this is the other thing. Like if you're trading, it's not tax free.
- [42:53]
C
Technically, no.
- [42:54]
A
But the point is, if you're trading crypto, right, and you're like jumping nimbly from bitcoin to ether to dogecoin to, you know, all the rest of it, and you're getting gains along the way and reinvesting those gains in some other cryptocurrency, that kind of activity generates massive tax bills. Whereas if you do all of that within a retirement account, you don't pay taxes on any of that. Eventually when you take the money out and you spend the money in retirement, then yeah, that's income and you pay tax on it. But that's in 20 years time.
- [43:23]
B
This is all assuming you have a 401k.
- [43:25]
A
Yes, yes. For rich people with 401ks. Let's have a numbers round. Stacy, do you have a number?
- [43:33]
B
I have a number. It is 71,403. And this number comes to me from my friend Ed, who gets very excited about things like reservation wages. So the reservation wage is defined according to the New York Fed as the lowest wage somebody would be willing to accept for a new job. And the New York Fed every four months does this big labor market survey. And 71,403 is currently the median wage that respondents to this labor market survey would accept for a new job. And it contrasts pretty surprisingly with March 2020 in which it was $61,737. And I just thought it was a good concrete way of thinking about and looking at all the discussions we've had about people saying, like, actually this minimum wage thing that you're trying to pull on me right now is, is not attractive. And you're starting to see that tick up in some of this labor market data.
- [44:29]
A
And I really love this number.
- [44:30]
C
People don't want to be Uber drivers.
- [44:32]
A
Exactly. And this really does Explain the Uber thing as well. If you look just at the survey responses from people who don't have a college degree, that's also gone up by $10,000. It's gone up by about 51,000 to 61,000. And, like, that's a massive increase in, like, the minimum wage that people, on average are willing to work for. And that totally, like, on its own, explains the decrease in availability of Uber drivers. Yeah, I'm going to say that My number is $11.75 million. And I'm going to say this because I've always wanted to say the word silly tuna on this show, and now I get to say the word silly tuna. $11.75 million is the amount of money that Silly Tuna sold his cryptopunk for at Sotheby's this week back in 2016. I think something like that. The crypto. 10,000 different CryptoPunks were released to anyone with an ether wallet, and they were given away for free. And since then, they have become crypto collectibles. And One of the 10,000 CryptoPunks just sold to this guy who sold his company to DraftKings for 11.75 million. What I love about this story is not just that the name of the person is Silly Tuna. I think his real name is Aaron, but Silly Tuna is awesome. But also that literally 10 minutes later, after just making all of this money on his cryptopunk, he then turned around and bought the first ever NFT by Kevin McCoy, who I have known for many years. For how much was it, like 1.4 million? It was about 12% of what he got for his cryptopunk he spent on the OG NFT from Kevin McCoy. And I will tell you, being very biased about these things, that I'm happy that Kevin McQuay made a million dollars. That's awesome.
- [46:23]
B
Look, I love when artists make money.
- [46:25]
A
Yeah.
- [46:25]
C
And see, this is Ethereum. This is part of Joe's piece was Ethereum has a use case. And it's this. It's what sillytuna is doing. Because all the exchanges for the NFTs are taking CryptoPunks.
- [46:36]
A
There's a. There's a real use case. Right.
- [46:38]
C
There you go.
- [46:39]
A
Trade crypto. It's real. What's your number, Emily?
- [46:43]
C
Well, I debated about this number because I listened to the political gabfest like, an hour ago, and David Platz talked about this. But I'm plowing ahead. I'm plowing ahead with my number.
- [46:52]
A
I never listened to the political gabfest, so I need this Information from you.
- [46:56]
C
I listen every week. It's one of my favorites.
- [46:58]
A
The shock on the faces of my co hosts. I work for Axios. I have way too much political news in my bead. I can't even with more politics.
- [47:11]
C
Okay, so My number is 438. That is the number of days an apple was left on the desk of one Rachel Gutman at the Atlantic. Since the pandemic started. There was an apple on her desk. It remained on her desk for lo these 438 days. And she went back and got the apple. It was not rotten to the eye. She said the apple had not oozed. It did not stink. It was still firm to the touch and sported no visible mold. It appeared to have undergone an absolutely immaculate desiccation.
- [47:48]
A
But it was desiccated.
- [47:49]
C
Yeah, it was like. It looked like a giant oversized date. She said it just sort of shrunken head of a fruit.
- [47:56]
A
Wow.
- [47:56]
C
Yes. So the whole piece is an exploration of the 438 day old more than that, actually apple. And I won't spoil it too much, but the apple does wind up cut in half or in thirds. And they do taste. She and some friends, I believe. Taste.
- [48:14]
B
Absolutely not.
- [48:15]
A
So I remembered this somewhere in the back of my head. I have a factoid that like the median apple, that's median apple eaten in America is five months old or something. Yeah. Apples last much, much, much longer than you think they do. My sister Once spent 18 months in Antarctica, which does not have a lot of supply of fresh fruit. But their supply of apples and oranges lasted for almost a year. I think fruit lasts much longer than you think it does.
- [48:51]
C
Yeah.
- [48:52]
A
And it doesn't get any better with age. It does. It does noticeably get worse. But like it gets worse. Very sl. Yes.
- [48:59]
C
And she explains, she. It's a deep dive really into all of that. She deeply explains why apples are one of the more longer lasting fruits. I do recommend the piece.
- [49:08]
B
Did you take a picture and turn it into an nft?
- [49:10]
C
She. You know what? She should if she hasn't. Although the picture is. It's not pretty.
- [49:15]
B
Have you seen some of the nft? They're not pretty.
- [49:20]
A
Yeah. Look at that crypto punk, man. It's not a thing of beauty. It's wearing a mask. It's an alien wearing a mask. What?
- [49:27]
C
I'm done looking at people and things with masks. I have to say.
- [49:30]
A
Wow. Okay. On which note, I think that's it for this week. We are going to have a Slate plus segment on my story this week. About the absolutely astonishing amount of fraud in the unemployment insurance system. But other than that, thanks for listening to Slate Money and thanks to Jessamine Molly for producing. And thanks for sending in your emails to sleepmoneyleep.com and we will be back next week with even more Slate Money.