D (2:58)

Yeah, I think there's a couple of things going on right now. So it's like we all know that, like, the prices of a lot of things are going up. And so when prices of things are going up, then we call that inflation. And people have been trained to think that's bad. And so there's all kinds of worries. So we all know that, you know, like certain areas of food and lumber and gasoline prices and semiconductors and various commodities are going up. And we, we also know Uber rides. And we. Which is the way that a lot of, you know, middle class yuppies in the city experience being a, an employer because for some moment that driver works for you in some way. But it's also like you're sort of in the same boat as maybe someone who owns a McDonald's or Chipotle looking to hire right now. So there's a bunch of things going on right now. And the mainstream debate, I would say, is, okay, there's inflation going on, but is it the start of something new or is it transitory and is it just related to the economic reopening and maybe in the fall when everything's reopened and our consumption patterns return to normal, will it balance out? So that's one discussion that's going on. But what I also think, like we're seeing is potentially a sort of reallocation of societal power and wealth and bargaining power. And so, you know, going back to this example of say, how much does it cost to get an Uber in New York City right now? Or how hard is it to hire if you're a McDonald's? People are like, oh, this is red hot is inflation. This is crazy. But maybe it's just a reallocation, maybe it's a wealth shift, maybe it's a power shift. And that could also be going on right now. And again, I think there's probably questions about how long that will last or how sustained that is. But there could be a situation in which, say, the upper middle class, the mass affluent, so forth, could experience some sort of degradation of their relative bargaining power in society, which happens from time to time, shifts occur. And while they might want to say, oh, this is inflation, the Fed should do something about this, or policy is broken, maybe it's just a power shift, in which case some people may lose out, but other people may gain from it, and that might be a desirable thing. So I think that in this conversation about inflation, we just have to think about who's really paying for what and who may be benefiting from these same trends.

B (5:20)

And I have this feeling that we have had inflation for decades. And you make this point as well. And it has been the kind of inflation that really entrenches the position of the upper middle class in terms of what, you know, finance people call asset price inflation. And what normal people say, the stock market going up or house price inflation for people who've owned houses for many decades, they've done very well. Or even just the inflation that we all see in terms of health care costs or college tuition and stuff like that, which is relatively easy for the rich to pay and almost impossible for the poor to pay. And what that all of those things do is they basically push the people who can't afford these things further and further away from that middle class dream. And if inflation basically means things are going up in price to a degree that you can increasingly not afford and cannot ever see yourself affording, the middle class dream, we've had that for a long time.

C (6:17)

In Joe's piece, he linked to a good piece that talked about sort of the distinction between inflation, quote unquote, and cost of living and, you know, how much money it takes to actually afford a middle class lifestyle. And while inflation maybe wasn't a big deal for the past 20 years or whatever, the cost of that middle class lifestyle has been skyrocketing and we all really feel it. So if inflation now just means wages are going to go up, it's like, okay, that's great. Like, what are we freaking out about?

D (6:46)

Yeah, and I think this is so people say, like, oh, you say there's no inflation, but my parents only had to work. You know, only one of my parents had to work. And we had a beach house and they had two cars and we regularly took long vacations. How could you say inflation hasn't gone up? And I think that, like, the idea is like, that could be very true. But maybe it's about the decline of unionization, maybe it's a decline of the welfare state, maybe it's about the power that has been vested in universities to raise prices or the decline of public university funding. And so by calling everything inflation, what we do is we gloss over other structural issues that might change in society. And by calling everything inflation, people talk about the Fed and money printing, but maybe it's something else. Maybe it's the undermining of union power that causes people to perceive, perhaps accurately, that their lifestyles are much costlier than that of their parents.

B (7:42)

Well, maybe it's actually deflation. This is the other thing. Right. I can't remember who was pointing out in the Washington Post that inflation is good for producers and bad for consumers. And if what you have is a world where China comes into the global economy and reduces the price of goods and the amount that you can fetch for producing goods, then what you get is producer price deflation. That if your one parent who was working was producing stuff, then the amount of money they can get for the stuff they're producing in America suddenly goes down because they're competing against China, and then it becomes harder for them. And that's a case of deflation causing things to become less affordable, rather than inflation.

D (8:22)

Yeah. And so what I would just say to that is probably these words inflation and deflation do make the conversation less clear than more clear. In other words, we could talk about globalization, we could talk about the status of labor in the United States, we could talk about unionization, we could talk about all kinds of things. And that the problem is by lumping all of these words into inflation, we end up not being able to have the conversation that we need to have about why X is going up and Y is getting less affordable and so forth. And that perhaps these terms obscure more than they illuminate.

C (8:59)

Also, it's become so political now. It's like Republicans are screaming about inflation in the 1970s just to really stop the White House from spending money. Not, I think, because of any real inflationy fears necessarily. Prices have gone up a little, but it's not enough to freak out about. We're not like lugging around paper bags filled with dollars to buy stuff right now. It's going to be okay.

B (9:24)

I think Robin Sloan, who was saying that, like, guys, the 70s were 50 years ago, and anyone who just reflexively wheels out the 1970s is basically not being serious here.

D (9:37)

Yeah. And I would just say two things. Like, one is that up until very recently, our mainstream economics thinkers, I would say, had their ideas forged in the early 80s when policy was perceived as having defeated that inflation. And that was perhaps for them, one of the main victories of economic thought was the reversal of the 70s inflation towards the less inflation of the 1980s. And so ever since then, we all do it, right? Like, it's hard. Like, you know, you remember, like, who is your favorite band in high school. That's probably like the pinnacle of music for you. What was the main battle of inflation versus deflation when you were in grad school is probably like the central economic question that you're going to be thinking about forever. And so for the rest of your life, you're doomed to think that the main project you need to work on is avoiding a Repeat of the 1970s.

B (10:26)

Which raises the question, Joe, you know, for decades now, the Fed has had an inflation mandate. That's the literal job of the Fed. They don't even have any choice about this is to keep consumer price inflation low. Should we be rethinking that?

D (10:40)

Well, the Fed is, I think that, like, there was this rethink at the Jackson Hole conference last year. And, you know, look, to be clear, the Fed is still very anti inflation. The Fed wants to keep it low. 2% is not high inflation. It's much lower than it was during many prosperous eras, including the 50s and 80s and the 90s or whatever. But what I think the Fed is rethinking is the premise that if the economy grows too fast, dangerous inflation must be right around the corner. And that's very powerful change. Because I think if you look through the 80s, 1980 through 2020, there is. This philosophy is deeply embedded, is like, okay, the main thing we want to avoid is inflation. The thing that causes bad inflation is fast growth. Therefore, if we ever get any fast growth, we have to start prematurely tightening. They've rethought that link. And so it's not that they're less worried about inflation per se, but they believe now that we can have growth without bad inflation. And they want to see the bad inflation happen before they get scared of their shadows, so to speak. And that is a powerful change.

C (11:39)

And how does this all tie in? I'm just gonna babble here to perceived labor shortages and this sort of tension right now with, oh, we have to pull back on unemployment benefits and shouldn't we want wage inflation? Shouldn't we want not to pull back on unemployment benefits? Like, isn't it time that wages went up?

D (12:00)

That's a funny thing because there are a lot of people in sort of like, left Democratic circles who are like, the April jobs report, it wasn't that great. Far fewer jobs were created. They're like, yeah, but don't blame generous Unemployment insurance. Like, it's not the fault of the UI expansion, but you kind of think like, is this a bit of an own goal on the part of the left or Democrats? So it's like maybe the argument should be, it's like, yeah, this is. UI is forcing companies to pay a lot more. We're kind of backdooring ourselves into the long sought $15 minimum wage, which was this huge rallying cry on a faction of the left for a long time. Let's celebrate the idea that the UI expansion is going to force fast food employers and other small businesses and other large businesses or people who run E commerce warehouses to pay more. And so you can kind of see like this sort of ambivalence where some are saying, like, don't blame the ui, there's something else going on. Maybe it's the virus, maybe it's schools being closed, but maybe there's a more robust sort of confident message that could be said. It's like, yes, UI is sitting a new floor under the labor market. It's a good thing. We should keep it permanent. And let's use this as an opportunity to tighten the labor market on a permanent basis. Shift wages higher at the low end, reallocate power within society and sort of champion the idea that we can do that by setting a kind of almost de facto basic income.

A (13:26)

Well, it does seem that politicians across the GOP spectrum and certainly the tech companies that have made a bunch of money creating the so called gig economy, recognize some of those tensions. Right? So Texas was one of the states that was like, nope, we do not want that extra $300 per week, thank you very much. They're also, you know, rolling back to kind of the pre coronavirus unemployment standard about you have to demonstrate that you are actively trying to look for work, et cetera, et cetera. All of this is coming at a time when the Texas Workforce Commission has been, you can't get through to them, right? Like the lines are jammed, the website keeps crashing. Like people who are unemployed in Texas aren't kind of sitting around not trying to get jobs or not trying to get the benefits that accrue to them. And so, you know, I want to go back to the thing that you touched on about sort of the perception of who has power, right? Because I think like so much of this argument is who gets to have the kind of life that some people got used to and at what cost. Right? So if people are able but complaining about having to pay $258 for an Uber to the Airport and forgetting that there's fixed pricing in taxis. You know, that is also a reflection of, I don't want to have to pay this much, but it's an unconscious. And I kind of expect the people providing this labor to not need to charge me this in order for them to have a comparable standard of living to me.

D (14:47)

Yeah, I think you just nailed it. And that's spot on. And, you know, whether it's the people complaining about Ubers or, you know, there are numerous stories, we've all read them about restaurants having trouble hiring workers. And the question is not, to me, like, whether it's because of the unemployment insurance expansion, although that is a question. But it's like, how did we get to a society in which the assumption was that if you put up a Help Wanted site in the window, you'd be flooded with applicants automatically and that then it's like you would get your pick of hundreds of applications. And we just think like, this is normal, like, this is right. I wrote about this recently. The analogy I used was like, you know, you turn the faucet and you expect water to come out and you don't, like, think about that's just like, how faucets work. We expected that you put a Help wanted sign up and you get a flood of applicants, but that's not the same thing. There's no iron law that says, like, that is the normal state that that is. Well, that's just if that's not what's happening, some policy error must have been committed or something's broken. And so I do think, like, even prior to this whole discussion about ui, it's like, well, why do we have this assumption that X is available for Y price? And I think we're kind of in a state of rethinking all this. And I think, like, we're in a state of rethink, like, to some extent, it's all made up. And you use the word power, which I thought was spot on. It's like, that's what this is all about. It's like, it's the jostle for power. There's no steady state equilibrium where, okay, we found the right state of things. This is always a fight.

B (16:16)

And I'll point out, as you know, the host of Slate Money, you know, this assumption that if you put out a Help Wanted sign now you will get a bunch of, like, qualified applicants just beating down your door has not been true for years in the middle classes. Right. We have made lots of money here at Slate from the blessed advertisers ziprecruiter who keep on advertising on Slate Money saying it's really hard to find qualified applicants. Can you please use us to find qualified applicants? Because it has been hard for a large part of the workforce for a long time. What's new is that it's the low paid workforce and if they wind up with the same degree of power that people like us have been in for a while, that's awesome.

C (17:00)

Yeah. I mean, there's a lot of talk over the years about income inequality. Well, here's the way it's going to work. People who make more money might have to spend more on Ubers and restaurant meals and the people who make less money get to make more money. So that's a good thing. Like it might be a little painful that your Uber costs more, but it's okay because your waitress makes more, so works out.

D (17:22)

Yeah. And I also think that in like there's a certain amount of, I guess I would say Davos speak, where it's like, this is all costless and that everyone could say like, oh, let's have less inequality. And that just means that the bottom comes up. But no one at the, at the upper ends actually sacrifices any. And I think what we're realizing is that like, sure, you can do that monetarily, like people can have more money without the people who are at the upper classes like losing money. But, and there, you know, we can. There's no shortage of money to create print, but there is a shortage of cars, there is a shortage of space inside a restaurant. So there is a, at some level there is a pie. And if we're actually serious about shifting allocations, then that means at some level someone has to get less. Yeah. And I think we're going to run into this tension where a lot of people who like felt very like excited about fixing income inequality actually maybe start to understand what that means.

B (18:19)

Joe, you mentioned workers at E Commerce warehouses and how, you know, they're like, if you look at Amazon, they're paying $15 minimum wages and they just announced a big pay hike for their lowest paid workers last month between 50 cents and $3 an hour for like half a million workers, which is a big deal. And then this week they turn around and basically they seem to have made this, I don't know, is it a relative value play by saying. Right. You know, once we are paying our E Commerce warehouse workers $17 an hour, then it kind of becomes more justifiable to pay Daniel Craig like $30 million to play James Bond, like everything Starts becoming. What's the word? Like seems to make more sense. Like, this is one of the lenses through which I view the Amazon acquisition of mgm. Is that, like, it's a question of where do you put your marginal dollars? And they have a lot of marginal dollars. They have $72 billion of cash sitting in the bank. And they're like, it kind of makes sense to put eight and a half billion of those dollars and into mgm, because where else are we going to put them?

C (19:27)

Felix is talking about that. This week, Amazon bought MGM, a very old movie studio, for $8.5 billion, just to sum up what you just said.

B (19:37)

Which is an objectively insane price for the very sort of rundown studio that has already sold off most of its ip, that doesn't control James Bond. It just has the distribution rights and has very little else to be said for it. And especially when you consider that the buyer doesn't make any money from, you know, its video operations. You know, it's just like, it's a second order effect of like, well, maybe if people watch Amazon prime video, then they will be more likely to renew their prime subscription.

C (20:09)

What Amazon would say is, well, two things. It's an IP play, right? Everyone is streaming now. All the companies that own intellectual property and movies and TV are doing their own streaming. So it's harder to do what Amazon used to do, which is just like get all the old stuff or other people's movies and TV shows and stream them. And also streaming for Amazon, some people would say, is not like, they're not looking to make that much money there. They're just looking to have a value add for the prime service. And the prime service is huge. And Amazon streaming is also huge. It's the number two streamer behind Netflix in the country and actually does pretty well outside of the U.S. also, like, if you look at India, Netflix versus Amazon, Amazon is like killing it there. 64% of households in India with broadband do Amazon Prime. So, but here's the thing, right? It's the MGM deal.

B (21:02)

It's not actually the number two streamer, right? The number two streamer is Disney by far, in terms of what people watch, how much they want to watch it, how much they are paying for it. You know, all of these, any kind of metric you want to use beyond, like, do you have free shipping? Oh, and therefore you're a streamer. No, like, that's not how it works in India. This was the big part of the 20th Century Fox acquisition that Disney made that people weren't talking about. Is that they also bought Sky TV in India. What's it called? You know the name. Anyway, it's this huge Indian streamer with cricket and whatnot.

A (21:34)

Tata Sky.

B (21:35)

Yeah. And that has created a massive franchise for Disney streaming in India. I just don't buy this idea that Amazon is actually the number two or arguably even the number three streamer in the United States. I would put it at number four in terms of where people actually value it.

C (21:55)

Are you saying because no one actually subscribes to Amazon prime for the video, it's just an add on so it doesn't get to count as number two because it looks like number two?

B (22:04)

No, I'm saying, like, don't look at number of subscribers, look at number of hours streamed.

C (22:09)

Ah, okay. But what's the difference? It still has. It's still number two. You know, it still has this huge. There's only upside potential because it has this audience, it has these built in subscribers. So it could just make itself extra sticky by getting more content to shove in front of them. And you just need like one hit show one must watch to get more people there, you know?

A (22:30)

Or the entire James Bond catalog.

C (22:33)

Yeah, or the entire James. Although, like, I don't understand, like, who really cares about. Do people really care about that? Like, are people like, oh, my God, Amazon has James Bond. I'm there. I don't believe that. Unless it's Daniel Craig. I guess I'm just.

A (22:46)

I'm holding out for Idris Elba.

B (22:48)

He's too old, okay? Idris Elba, he should have been James Bond 15 years ago.

A (22:56)

This is why everybody on the Friends reunion has had work done. Because we think that, like, folks are too old immediately.

B (23:01)

So, Joe, the real reason we wanted you on the show this week, for all of your insights into inflation, the real reason was we want to know who you think should be the next James Bond.

D (23:09)

I don't understand. So was the Idris Elba thing, is that just like an Internet thing or is that like, going to happen? Because it always seemed to make a lot of sense.

A (23:19)

Everything is an Internet thing.

B (23:20)

Right?

D (23:21)

But was there actually any substance behind it, like, as a real thing, or was it just like people's like, why hasn't he been picked yet?

A (23:26)

I would say that it was one of those things, Felix is right, some years prior, where he was on kind of a hot streak in terms of seriousness. Action heroes, smoldering good looks, GQ covers, et cetera. And the idea was like, why can't this dude play James Bond? But I am unaware of Any actual studio interest in.

D (23:45)

It's weird. I mean it seems pretty obvious that he would be a good choice. It seems like a no brainer to me.

B (23:49)

It does actually point out that if you want to know like how old is Idris Elbow? Or look into like what kind of action films does he ever made? The place you go is IMDb, which is owned by Amazon, of course. And there is a case, and I've heard someone, I can't remember who make the case that the MGM acquisition, while it's most obviously connected to Amazon streaming, is also connected to IMDb. And IMDb has been really beefing up not only its premium membership services but also its advertising. It has a bunch of trailers which the studios pay for and other kinds of advertising. And there's this idea that somehow there are synergies between owning MGM and owning IMDb, which I am not smart enough to entirely understand. But I have heard this, that Amazon, like insofar as Amazon has media ambitions, a lot of those media ambitions are really too compete with Facebook and Google on the advertising front. And they certainly make a lot of money by selling ad space on their website on Amazon.com and as part of growing out their advertising fueled media ambitions, which includes Amazon.com and IMDb, that somehow MGM can help with that. I'm not entirely clear how that works.

C (25:05)

It is really remarkable that we think of Amazon, I guess as a retailer and online retailer, but it is an advertising company, is a media company. Their advertising revenue is like shockingly big.

D (25:16)

But it's like a different concept of advertising than Facebook and Google because it's essentially, it's more like advertising on Amazon is kind of like a grocery store charging for premium shelf space. Right?

C (25:31)

Yeah.

D (25:31)

Which we don't really think of as advertising per se. So if like, you know, Coca Cola wants really good position, I don't know, some grocery store, they pay for it. We don't really think about that as advertising, but that's kind of what it is. So on some level, like I'm aware that like they are the third biggest online ad player after Facebook and Google, but it's a little bit like conceptually.

B (25:54)

Different than for me though it's conceptually the same if you think of them as competing against Instagram for, you know, that sort of bottom of the funnel, I see an item on my device and then I click on it and then I buy it. Right. Instagram has this incredible ad product which really converts at an astonishing rate. And Amazon is creating a rival ad product to Instagram in that front they will, you know, if you're scrolling through the Amazon app, which God knows who even does that.

D (26:28)

But people use the point. That's the point who. That's not a thing like that. The Amazon app is not like a scrolling thing. And the thing about Instagram is like, yeah, it's like a brand thing. And so like brand advertising works on Instagram in a way that it hasn't worked on other platforms in part because people like, depict a certain aspect of lifestyle and aesthetics on Instagram that's sort of different than other places. So, like, brands fit in there.

B (26:56)

I half buy that though, Joe. But like, don't you think that honestly that's, you know, that Instagram would love to think of itself as a place of brand advertising, but in reality it has become a place for much lower down the funnel net for just like the final push to get people to maybe.

D (27:13)

You know, I think also, like, if you look at like Google Ads, going back to the AdWords and AdSense and stuff like, that's called online advertising. But if you actually, again, it's actually more like lead gen, which was like kind of its own separate conceptual thing, lead generation. And so, you know, you like have some company and they want to sell sprinklers, but the first thing they need to know is like, who's interested in sprinklers? And so they'll pay like thousands of dollars to get a list of people who are interested in sprinklers. And they hope that one of them, like, you know, a handful, then they.

A (27:44)

Retarget them and hopefully sell them a sprinkler.

D (27:47)

So it's kind of like less what we think of as advertising traditionally like in magazines or tv and more like lead gen. And the leads are fulfilled because people just tell. The genius of Google advertising is people just tell you what you just write in the box, what you're interested in. They just, people just give it away for free. You don't have to find them out, they just write it in the box.

C (28:07)

That's how Amazon is comparable. Because you're going to Amazon to buy a thing. You search for the thing as you would in Google, but it's even more guaranteed that the thing you search for will be there and you know you're going to buy it. It's like, if I'm a company that makes stuff and I want to sell this stuff, that's where I'm going to spend my money, advertising. Because I know that the people who search for my thing are probably going to buy it, like even more than on Google and definitely more than on Instagram.

D (28:32)

So maybe Facebook and Instagram are the only true online advertising in the sense that it's comparable to magazines and TV in which people went there, but not for the purpose of finding one specific thing, but that people, that advertisers wanted to get in front of those people for whatever reason. I don't know.

B (28:51)

This also explains why TV ad rates on a sort of CPM basis have been going through the roof. Right. TV ratings have been going down, but the amount of money you need to pay for 30 seconds of TV has been basically flat or even going up. And that's because there's no other way of putting brand image in front of a broad audience. Like, if you sell laundry detergent, how do you create that brand image just through online ad buys? It's basically impossible.

A (29:21)

I think that the rising cost of those kinds of ads on TV is also why going back to Amazon, Apple, et cetera, like all of their shows, where possible, are like incredibly aggressive product placement. How many times per episode is Ted Lasso whip out his iPhone and do something on it? It's just the kind of wild integration of all of these different parts of this ecosystem is I think, one of the things that is both so interesting and so scary from how do you analyze the individual parts? Perspective.

D (29:52)

Yeah, it's kind of funny. I remember when we were younger, obvious brand advertising was like super cringe.

A (29:57)

And why is that in the scene?

B (30:00)

Yeah.

D (30:00)

But now it's so pervasive that you never think about it at all. It's just everywhere because you just accept it. But I will say it's funny thinking about like phones and TV shows because the reality of most TV shows is that they're not looking at their phones enough. Because in real life we're like always looking at our phones. And in TV shows they just occasionally whip out their phones. But that wouldn't make for very good TV if people on TV were looking at phones as much as we do.

A (30:24)

In real life, I'm just going to text while talking. Yeah.

D (30:27)

In real life, it's like the moment we're done here, I'm just going to walk back to my desk and look at my phone. I mean, terrible tv.

C (30:32)

But to wrap up, like, I don't understand how anything we just talked about, about advertising relates back to Amazon.

D (30:37)

No, I don't either.

C (30:38)

So that's right. You probably convinced me of. I don't understand anything.

A (30:43)

I mean, Daniel Craig sells things. He's a spokesperson.

B (30:48)

James Bond was always and remains the absolute Pinnacle of product placement dollars, you know, especially for the cars.

A (30:56)

Cars, yes.

B (30:57)

The car manufacturers would pay like 20, 30, $40 million to have James Bond drive their car.

C (31:03)

There you go. That's what it is.

B (31:04)

I think it was. Ford doesn't like Ford own Aston Martin and they paid like some.

A (31:07)

The Aston Martin Vanquish was like, all.

B (31:11)

Right, let's talk about the very bad week for oil companies or very good week.

D (31:16)

Good week for the environment.

B (31:18)

Good week for the environment. So the question, so the news, the big news of the week and there's lots of other news about Shell and Chevron and other places, but the big news was about Exxon, which lost two and possibly even three board seats to an activist investor that said, we want you guys to take climate change a lot more seriously. And this was the, you know, the big passive investors of the world, the blackrocks, the state streets, they said, yeah, we want Exxon to take climate change a lot more seriously. These people are just living in some alternate universe where climate change doesn't matter, important, we don't need to worry about it. And we're going to vote for the proxy saying we want people who know what they're talking about on the board of Exxon. Exxon fought this. Exxon lost. So normally when the company loses, the frame here is like, this is bad for the company they lost. But Joe, would you say what happened to Exxon this week was bad for Exxon or good for Exxon?

D (32:16)

I don't know. I guess it's like obviously Exxon is a wide range. There are shareholders of Exxon, there's the management of Exxon. I guess if you're the existing management of Exxon, you probably are not thrilled to have these activist shareholders on your board who are going to be asking annoying questions and sort of have a distinct agenda that may be different from the other board members. So they're probably not thrilled about it. There's probably an argument that, you know, from a long term sustainability for shareholders perspective that this is a good thing maybe. But you know, it's pretty remarkable. I mean these kind of things like never work. It seems the only time activist investor ever makes any progress is if they have like some specific monetary agenda. But almost any time there's some sort of like ideological agenda or political agenda or social agenda, it usually flops. But we know that like, you know, blackrock, Larry Fink, climate change is a very big deal to him. Blackrock is a huge shareholder in everyone. And so this is like the first time or one of the first Times, maybe, or the first time that perhaps some of the power that's been consolidated with these huge institutional shareholders seems to have been used towards something that's, you know, beyond, just beyond talk.

C (33:31)

It's not like they did some big brave thing like Exxon has been doing pretty badly for a pretty long time. Like, this isn't a company that's like gangbuster profits or anything. Like, I think if you would put $100 in Exxon stock 10 years ago, you would have like, $80 today or something like that. It's like, yes, these are noble reasons to shake up the board. Sustainability and climate is obviously very important. But you think if Exxon was actually turning a profit, doing really well, if BlackRock would have supported this and been as brave?

B (34:02)

And I think possibly, arguably, yes. The idea is that BlackRock owns literally thousands of companies. They have thousands and thousands, probably tens of thousands of companies that they invest in. They're a big passive investor. And the one thing that you can say that all of those companies have in common, really, is that they face this major existential risk in terms of global climate change. And what BlackRock wants is for its overall portfolio to do well. And that's what most big investors want, is for all of their investments in aggregate to do well. And if they see Exxon fucking it all up for everyone else by doing all of these carbon emissions, they're like, no, that's not just. That's arguably bad for Exxon, but it's certainly bad for everyone else. And so they're going to come in and say, like, get your carbon act in order. Partly because we hope that it will turn your own financials around, but mainly because it will prevent this absolute crisis from happening for the rest of our portfolio.

D (35:01)

Yeah, no, it's a. I hadn't really, like, heard it quite articulated like that, but that makes a lot of sense. And that is sort of. You know, I know there's been a lot of talk about, well, what happens when the same company owns everyone? Or, like, what happens to airlines when they all have the shareholder base. And, like, I think there have been a hundred Matt Levine columns on that exact topic. But framing it within the climate context like that is interesting.

A (35:23)

I also wonder about the groundwork laid by, like, the sunrise movement for this kind of, to use your phrase here, like ideological, environmental, shareholder activism. They have been, particularly as it relates to BlackRock, like, they have gone hard on BlackRock for a not trivial amount of time. And I think particularly for generations younger than everybody on this podcast, they've had quite an influence on the folks who are sort of coming up and becoming politically active and thinking about things and paying attention to different kinds of companies. And I'm always just really interested in how the loop between the sunrise movement and in gin number one is certainly not a straightforward one. But I wouldn't be surprised if there has been some effect on the context of the conversations that are happening right now, just demographically.

B (36:17)

Would it be fair to say that we are finally reaching the time at which millennials are running hedge funds and are making decisions at ISS and blackrock and places like that, and they're being able to directly influence outcomes and being.

A (36:33)

Held accountable by pissed off Gen Zs who are like, we are trying to still have oceans in 20 years. So can you all please get your act together?

C (36:39)

I just wonder like, can a big oil company become not a climate bad guy? Like, is there a real end game here? Is big oil going to either innovate its way into a new era or is it just going to be like kind of go the same way Big Tobacco? Like it still exists. It makes stuff that everyone agrees is bad and it makes money and it's kind of like whatever just goes on in its own way.

B (37:04)

That brings us to the other big news of the week, which was the Dutch ruling against Shell. The Dutch government basically said, look Shell, you have been making lots of happy noises about becoming an energy company, not an oil company, and trying to stay ahead of the climate transition and all of this kind of stuff, but it's not enough. And we need you to do your part in terms of reaching the Paris climate goals. And that's going to involve even more cuts to oil production than you have already announced. And they're being really pushed not just by shareholders but also by governments to cut more and more.

D (37:39)

And I think, you know, we actually on odd lots recently we talked with Daniela Gabor, who is a great economist and talks a lot about private sector ESG, which is now this $30 trillion industry of money making opportunities within green. And I kind of think that like there is, this is right at like as like the blackrocks of the world make a lot of money and flex their power. There is this other trend which is that maybe governments are not going to continue to be so friendly towards private sector green initiatives and to just start putting more aggressive rules themselves and spending money themselves. And not everything is like you can be green and make money. It's like, no, you're just going to be green and you're going to make less Money. And I think that like, that could be like a future. And I sort of think that like if you think about the sort of like Larry Fink thought versus like Greta Thunberg thought or like Green New Deal, it's sort of this vision of, you know what, enough of like carbon taxes, enough of market solutions, enough of carbon trading, we're just going to tell you to make less money and emit less greenhouse gases and so forth. And that could be a shift in where this is all going. I think about it a lot with like the shift between monetary policy and fiscal policy, the shift between technocrats to elected officials. Maybe less sort of like market stuff, maybe less money making opportunities and just more government setting the rules, government spending the money. And this is how it's going to be.

C (39:09)

That's like what you were saying in the inflation conversation.

D (39:12)

Yeah, it's all the same conversation, all the same trend. It's all the same trend.

C (39:15)

Yeah, yeah.

B (39:16)

Although I think capitalism is platean enough that it can cope with these kind of rules and make money from them. You know, if California comes out with really strong emissions standards or you know, the EPA comes out with really strong standards about carbon emissions or anything else, then capitalism will find a way to make money from that.

D (39:37)

There's always going to be people finding a way to make money. And I don't think that's going away anytime soon. But I think that there has been this sort of like very, I don't know what the word is, but this sort of like very optimistic view. It's like, and I'd say it's like going green. It's not only sustainable, it's good business or it's not only good for the earth, it's also good for the bottom line. And you hear this with like a lot of like, like ESG stuff where it's like gender equality, it's not only the right thing to do, it's good for the bottom line and stuff like that. And that's great if true, and I hope so, I guess. But on the other hand, it may just be that we have to like in order to achieve certain social goals. Some things won't be good for the bottom line. And that's not the end of the world either because the bottom line of corporate profit is not the end of the world.

B (40:18)

My favorite example of that is, is meditation. Do you remember like when everyone started coming out and saying like meditation will make you more productive and make you earn more money.

D (40:26)

Right? Yeah, yeah. You know, I'm sure like saying his name is like some sort of, like, bad karma. But I think there is like, some Nassim Taleb line where it's like, if someone gives you two reasons to do something, there's actually no reason to do it. And I think that's like, kind of like that's not always true, but it's like a good thing. Like, it's like, do this and also this. But maybe it's like, be suspicious if there's two reasons to do something.

C (40:49)

It's like the fallacy of the win. Win.

D (40:51)

Yeah, right. Not everything. Sometimes it's a win lose.

B (40:55)

Let's have a numbers round. Stacey, did you bring a number this week?

A (40:58)

I did bring a number. My number is very Sad. It is 702. And that is what BuzzFeed News estimated is the actual number of deaths attributable to the winter storm in Texas that swept the state in February, which is, you know, significantly higher than the official toll of about 151. And the team did a bunch of very interesting work looking at the heuristic often used with natural disasters of this kind. Like, what is sort of the average expected deaths, what actually happened. After they looked into death certificates in the following months, they found lots of instances of hypothermia. The Texas Tribune had also been previously reporting that carbon monoxide poisoning killed a tremendous number of people in Texas due to poor communication from elected officials about, I know you're freezing, but please don't try to warm up using your stove or your car. This story really struck me for a couple of reasons, including that the Texas legislature is still in session, has a couple of days left, and one of the big things that they are working through is what, if anything, will they do about weatherizing the power grid? What, if anything, will they do about corporate accountability when there are disasters of this kind? What, if anything, will they do to prevent future situations like that? And, you know, shout out to Aaron Douglas and Mitchell Fuhrman, who are two reporters at Texas Tribune who've been all over this story, and to the team at BuzzFeed News for some really important legwork.

B (42:29)

Two great former employers of Stacey Marie.

A (42:32)

Ishmael, also true, full disclosure, have worked at both those places.

C (42:35)

Emily, my number is cheerful. I think it's 37 million. And that is the number of people expected to Travel more than 50 miles this weekend because it's Memorial Day.

B (42:46)

Woo.

C (42:47)

Write in and tell us where you're going. Maybe you're listening in the car right now. I don't know. It's very exciting. The number is up 60% from last year when we were all super depressed and just sitting in our houses baking bread and stuff. But it's still fewer people than in 2019. And also, speaking of inflation, gas prices are much higher than they were a year ago when they were $1.97 a gallon, which was incredible. And now they're back to, like, $3.

B (43:12)

But are they higher than they were in 2019?

C (43:14)

I didn't check that, Felix.

A (43:16)

I don't think Shout out to ransomware and its effects on the gas supply chain.

B (43:19)

This is another part of the inflation thing, is that everyone's just comparing to pandemic era prices and, like, come on, that's not normal.

C (43:28)

No.

B (43:28)

My number is $50 million, which is the amount of money that was made by Adam Newman's lawyers.

D (43:38)

Oh, my God.

B (43:40)

We work.

C (43:41)

I knew you were going to a rework number. I knew it. Oh, man.

B (43:45)

This is the story that never dies. There's been yet another round of renegotiations of Adam Newman's contract and what he's owed and stock here and money there and consulting contracts, and it's been going back and forth, and he winds up seemingly making an extra few hundred million dollars every round, every time. But my favorite aside from this week's story was the line saying, like, of which $50 million will go to his lawyers. I'm like, well, I guess they earned it.

C (44:13)

Good job.

B (44:14)

Yeah.

D (44:15)

Yeah, they earned it.

A (44:16)

When companies fight, Lawyers win.

C (44:18)

And WeWork is about to shine again. I think.

B (44:21)

Yeah, they're like, they're backing as far as I could make out. And it was an incredibly complicated story which I didn't read in detail. But as far as I can make out, Adam Neumann stands to make hundreds of millions of dollars if and only if the SPAC goes public at above $10. Like, once it starts trading, it's above $10, and if it's below $10, then anything. So I think this is the first thing we should look at. When the WeWork spec starts trading, is it above $10 or not?

C (44:48)

I think it will be because companies now are doing, like, this hybrid stuff where they're telling people like, you can work from home, and if you don't live near the home office, you can go to a co working space. So I think there's going to be increasing demand for we work, and co working is going to be more popular. So I think Adam Newman is just winning. He's constantly.

A (45:06)

Adam Newman is at the top of my list of people who have destroyed shareholder value, or in this case, Venture capital reputations.

B (45:15)

Is he being played by Joseph Gordon Levitt in an upcoming movie? I think so.

A (45:20)

Sorry, what is that movie going to be on Amazon Prime?

B (45:23)

Joe Wise, until Joe's number. What's your number?

D (45:25)

Oh, My number is 100 billion. And that is how much money is under assets of stablecoins, which is like this sort of like fascinating area of the cryptocurrency market. They're used primarily to move money between one exchange to the other, but it's a area that's just grown absolutely massively. And now because of their size and because of how they work, they hold like commercial paper and making them among the biggest de facto money market mutual funds in the world, except they're not, don't seem to be regulated in quite the same way as them. So that is a very interesting area. It is a lot of money. It's growing extremely fast. And I think in the short term, before too long, we're going to see more scrutiny of how they operate and what they hold.

B (46:05)

This is a fascinating topic which is well worth diving into. But just tldr here, Joe, as those of us with memories Remember, back in 2008, the money market fund industry really showed up as a major systemic risk to the American economy.

A (46:23)

Super sibs, baby.

B (46:24)

Is there a world in which USDC and Tether and these other stablecoins, if they do suddenly collapse, that there's like huge negative ripple effects through the commercial paper market and stuff like that? Do you think there is a potential systemic risk there?

D (46:41)

I would say probably currently no. And I don't necessarily know how they would collapse. And I don't think there's like tons of insight into what they have. So I think at 100 billion, probably not. I think a bunch of people would get hurt, particularly cryptocurrency traders. But overall that entire space is worth about 2 trillion, which is a lot. But the entire crypto world is like smaller than the size of Apple. So it's like big, but in context with all the assets and the financial system remains small nonetheless. Right now, JP Morgan put out a note about a week ago saying that Tether alone would be one of the biggest holders of commercial paper of any entity in the world. There's only like five entities that hold more and therefore at the speed with which these are growing, the reason for regulators to take them more seriously increases very rapidly.

A (47:29)

Man, commercial paper, truly a throwback to 2000.

D (47:32)

Yeah, real throwback.

B (47:33)

Yeah. I'm old enough to remember when they, you know, when they just claimed to be holding dollars. But like they did actually come out, tether did actually come out and say, well, we do have dollars. They make up, what was it, like 3% of their total.

D (47:46)

Yeah, it's like, yeah, not very much. I think, you know, they have treasury type assets. They say they have treasury type assets which are just as good as dollars. But what everyone wants to know is what do they mean when they say they have commercial paper? Because if they hold short term Apple and Amazon debt, then that's fine. No one's going to worry about that. But if they hold like IOUs from other cryptocurrency exchanges, people want to know where it was bought and who the dealers are. And these are probably things that more light should be shown on.

B (48:16)

I just can't stop thinking about my favorite financial story of all time, which was the Argentine currency board and Steve Hanke and Domingo Cavallo. Everything old is new again, but I think that's it for us this week. Joe, thank you so much.

D (48:33)

This was a blast. Thank you guys so much for having me. This is really fun.

B (48:36)

It's been one of the best shows of Slate Money ever. Thank you to just Molly for producing. Thank you to all of you guys for listening on your Memorial Day weekend or indeed whenever you listen to this show. We'll be back next week with even more Slate money. Sam.