Slate Money: "The Well-Endowed Edition" (November 11, 2017)

Main Theme & Purpose

This episode of Slate Money, hosted by Felix Salmon with Anna Szymanski and Jordan Weissmann, delivers a lively, in-depth roundup of the week’s most pressing business and finance stories. The main topics include the massive political purge and consolidation of power by Saudi Arabia's Prince Mohammed bin Salman (MBS), the financial scandals surrounding U.S. Commerce Secretary Wilbur Ross (with revelations from the Paradise Papers), and a featured debate on the purpose—and social value—of massive university endowments.

Key Discussion Points & Insights

1. The Saudi Arabian Purge & Crown Prince MBS’s Power Grab

[00:32–12:25]

• Overview:
  The panel discusses the dramatic wave of arrests orchestrated by 32-year-old Crown Prince Mohammed bin Salman—described as a “purge”—targeting dozens of wealthy individuals, princes (e.g., Prince Alwaleed bin Talal), and influential figures under the guise of anti-corruption.

• Key Insights:

  • The Saudi royal family and state are deeply intertwined, making the idea of “corruption” somewhat moot (“The idea that, like, the king or a prince can steal from the state is a little bit weird when the Saudi royal family is the state.” – Felix, [03:23]).
  • The move is described as both a consolidation of power and a calculated effort to sideline potential opponents, including powerful figures in the military, media, and business.
  • Foreign investors now face uncertainty; capricious power plays and asset seizures make Saudi Arabia less appealing for long-term investments.
  • The population enjoys extensive state subsidies and near-absent taxation, but reforms threaten this social contract, risking unrest.

• Notable Quotes:

  • “What they’re doing is herding anyone with power into the Ritz Carlton in Riyadh and forcing them to subsist on room service for the foreseeable future.” – Felix, [05:48]
  • “He’s essentially trying to, like, overnight reform the country in a way that I see no path where... this leads to a good result.” – Anna, [09:26]

• Lebanon and Regional Dimensions:

  • The mysterious resignation of Lebanon’s Prime Minister (broadcast from Saudi Arabia) is tied to Saudi-Iran rivalry and regional power plays.

2. Wilbur Ross, the Paradise Papers, and the Myth of the Billionaire Commerce Secretary

[12:30–24:59]

• Overview:
  The team delves into the scandals enveloping Wilbur Ross—his questionable international business ties (notably to Russian and Chinese interests), misleading representations of his wealth, and the structural conflict of interest in his role.

• Key Insights:

  • Many of Ross’s supposed billions were the result of an old Forbes error; in fact, his fortune is much smaller than reported.
  • Ross failed to fully divest from shipping companies with direct links to Russian oligarchs and Chinese trade—raising major ethical concerns for his post.
  • Disclosure shortcomings are highlighted: “If you disclose ‘I own a company with the word holdings in the name,’ then the first obvious question is, well, what does it hold?” – Felix, [17:40]
  • His entire image as a billionaire may be the result of self-serving PR and inattentive reporting.

• Notable Quotes:

  • “[Wilbur Ross’s] reputation was almost all based on an error by a Forbes reporter years and years ago.” – Anna, [13:57]
  • “He also had this second shipping company... that has a lot of interests in Chinese trade— talk about another hot button topic.” – Anna, [18:58]
  • “I think if anything, the reason he might get kicked out of the Trump administration is because he’s not really a billionaire. He might just lose Donald’s respect.” – Jordan, [20:07]

3. The Paradise Papers & University Endowment Tax Avoidance

[25:31–30:51]

• Overview:
  Following the Paradise Papers leak, the hosts examine how major university endowments use offshore structures to minimize U.S. taxes—even though they already benefit from tax-exempt status.

• Key Insights:

  • Many investment returns are tax-exempt, but private equity and debt-financed income can be taxable, leading endowments to use “blocker corporations” offshore to further lower their tax bill.
  • The scale is significant: “53% of the assets in big endowments are in what you call ‘alternatives’” (i.e., hedge funds and private equity) – Anna, [28:02].
  • The practice is legal and common knowledge among tax and finance professionals, but it highlights the strange realities of tax law and nonprofit finance.

• Notable Quotes:

  • “So we have a whole bunch of tax avoidance by tax-exempt organizations, which I just find hilarious.” – Felix, [27:17]
  • “Either tax all of their investment income or don’t tax their investment income. I actually think this is a stupid rule.” – Anna, [29:06]

4. The Great Endowment Debate: Are Massive College Endowments Good?

[31:05–44:53]

• Debate Structure:
  Anna mounts the defense of endowments; Felix critiques their structure and public value, with Jordan moderating and offering his own policy and philosophical concerns.

• Key Arguments (Anna):

  • Endowments are designed for perpetuity, to ensure stable, long-term funding even as economic tides shift. Many funds have specific donor restrictions and legal requirements to maintain purchasing power.
  • They enable universities to weather recessions, fund research, and offer substantial student aid.

• Key Arguments (Felix):

  • Endowments have ballooned far beyond necessity, driven in part by financialization and the rise of the “endowment manager” class.
  • They distort city finances (e.g., NYU’s tax-exempt land grabbing in NYC) and divert tax expenditures to the wealthiest institutions—exacerbating inequality in higher education.

• Key Arguments (Jordan):

  • Questions why tax benefits accrue disproportionately to wealthy private universities, leaving public institutions underfunded.
  • Notes that in precarious political times, independently wealthy educational institutions may be among the last durable sources of objective research and learning.

• Notable Quotes:

  • “Harvard was the best university in the world and was in great financial shape when it had $10 billion... Now [it’s] $40 billion, and you still have someone like Anna saying, well, it can only go up, it can never go down!” – Felix, [40:38]
  • “I think there’s something to be said for having extremely wealthy, self-sustaining institutions that— in the end—are a net good for society, even if they create their own problems.” – Jordan, [38:26]
  • “You shouldn't get special favor for being a perpetuity because perpetuities are actually bad things to begin with.” – Felix, [44:09]
  • “I think your concerns are a little bit 2013.” – Anna, [44:58]

5. Numbers Round

[45:07–48:58]

• Anna: "969 micrograms per cubic meter" – Measurement of dangerously high air pollution (particulate matter) in Delhi, massively exceeding WHO limits ([45:13]).
• Felix: "30" – Number of years in prison that Wall Street bankers could theoretically face if they renegotiate Venezuelan debt with blacklisted officials ([47:07]).
• Jordan: "64%" – How much less Donald Trump would pay in taxes under the proposed tax plan, based on his 2005 tax return (largely due to the elimination of the AMT) ([48:01]).

Memorable Moments & Quotes

• On Saudi foreign investment risk:
  “Foreign investors are going to be very frightened when you have someone... just expropriating money from people... now to people who probably did get the money through embezzlement. But what’s going to stop him in 10 years from... saying, ‘I’m taking all your assets’?” – Anna, [07:19]

• On Wilbur Ross’s Billionaire Myth:
  “It turns out that Wilbur Ross was not as rich as everybody thought... he’d been sort of living a lie, essentially, it seems like.” – Jordan, [24:33]

• On the Purpose of Endowments:
  “Endowments are long term funds set up to fund institutions in perpetuity. That is why they are set up. They have worked very well at doing [that]…” – Anna, [31:05]

Timestamps for Key Segments

| Segment | Timestamp | |------------------------------------------------------ |---------------| | Saudi Arabia (MBS, Purge, Regional conflict) | 00:32–12:25 | | Wilbur Ross & Paradise Papers | 12:30–24:59 | | Paradise Papers & University Endowment Structures | 25:31–30:51 | | Endowment Debate | 31:05–44:53 | | Numbers Round (Delhi Air, Venezuela, Trump's Taxes) | 45:07–48:58 |

Tone & Style

The episode is conversational, sharp, and occasionally irreverent—full of knowledgeable back-and-forth, dry wit, and pointed debate. The hosts blend technical financial insight with accessible language, making complex topics engaging for non-experts.

For Further Listening

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This summary provides a comprehensive yet accessible guide to "The Well-Endowed Edition" for those who want the key themes, arguments, and memorable moments without the need to listen to the full episode.