The Robopocalypse Edition

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S1: This ad free podcast is part of your Slate Plus membership.

S2: Welcome to the robot apocalypse edition of sleep money Your Guide to the business and finance news of the week.

S3: I’m Felix Salmon of axioms. I’m joined by Emily Peck of Huff Post though I am joined by Amish romance give a breaking view. So we are going to fight robots on this show. We are going to find identify and attack the robots. The Erin Burnett was talking about on CNN during the Democratic debate. And we’re going to work out whether they are taking our jobs. My job as host of Slate Money is not going to be replaced by a robot but yours if you’re in manufacturing maybe it will be. We will talk about that. We are going to talk about little baby robots called E minis and whether they are being controlled evenly by Donald Trump. That’s an amazing story which is probably absolutely nothing. Spoiler alert we’re going to talk about the robots that do your taxes and why they are so expensive and why they can’t be free and invisible. Because I like the idea of a free invisible go about doing my tax. And I have a suggestion at the end of that segment for exactly who should be building the free and invisible robot to do our taxes. And I like my suggestion and I think it should be adopted just based on free listening. We have a Slate Plus about D sure becoming an activist investor which is like a very D your is a robot basically but he’s becoming an emotional investor. So that’s interesting we have a packed episode this week so all of that coming up on Slate Money. Let’s start with robots. Start with robots. When will robots replace podcast hosts. I think podcast host has to be one of the last jobs to be replaced by a robot.

S4: It’s an art to an old job and it cannot be automated right guys.

S3: I mean it can be outsourced. This is yes. Let’s talk about robots because I think this is actually a serious point. People don’t know what they’re talking about when they’re talking about robots.

S5: And by people you mean Andrew Yang.

S6: Well not just Andrew Yang but look who’s who was the Erin Burnett. Well lots of people. OK so so let’s let’s start with let’s start with the debate news hook. What’s the debate news.

S7: So the debate news hook is. There is a Democratic debate this week all 3000 candidates are on the stage and Erin Burnett of CNN asked a question about what’s going to happen when the robots take over everyone’s jobs. What’s your plan.

S3: Right. And this is and this is a standard trope that a bunch of people have bought into and I want to say like Erik Brynjolfsson and people like that really love it. And the and it kind of makes a certain amount of intuitive sense that a bunch of stuff that used to be done by humans is now done by robots and this has been true for the past 200 hundred years. And if it’s been true with the past 200 years why wouldn’t it be true now.

S7: Right. So she has that she’s cited a stat that was like 25 percent of jobs. So then she asked what’s the plan and I’m unlike what kind of was going as expected. Bernie said the plan as a jobs guarantee. But then Andrew Yang who’s one of the 3000 candidates running for the Democratic nomination you know his plan is giving everyone a thousand dollars a month because robots. And then he had this like surprising little fight with Elizabeth Warren who said actually the reason manufacturing is jobs are going away has nothing to do with robots it’s all about trade bad trade deals and bad trade policy that allow the U.S. to that ship jobs overseas essentially and they got to a little back and forth and Andrew Yang started talking about like CBS checkout kiosks and how they’re going to take over the world or something.

S8: What frustrated me a little bit about this debate is that while many things frustrate me about the debate but is that both Elizabeth Warren Andrew Langer essentially right and wrong. Right. Is that it wasn’t as though one thing we have. There certainly is no settled consensus about why we’ve lost many many many manufacturing jobs we’ve also had manufacturing declining since about 1946.

S6: There are two issues here and it’s important to like take the big view and separate them. Number one is manufacturing employment employment.

S3: Number two is just jobs in general. Most Americans do not work in manufacturing industry and manufacturing industry has this kind of political resonance that no other employment with the possible exception of working on a farm has. So people care way more about manufacturing jobs near you about any other kind of job. And it is undeniable that American manufacturing has seen significant productivity gains due to automation which is basically what we’re talking about here that you know if you’re a factory making a million widgets you used to need a thousand people to make those million widgets. Now you only need 100 people to make one million widgets. And so in that sense all of the machines which are helping those hundred people make the widgets have taken the jobs of those nine hundred people. And that’s a productivity gain which is real. But Elizabeth Warren it’s also true that if that was the case you wouldn’t see a reduction in the number of factories you would see like the factory is getting bigger because they’re more productive and in fact what you’re seeing is no factory is going down because she is correct. A lot of those that manufacturing has gone to China.

S4: Right. And you see there’s like a steady decline in manufacturing jobs. If you look at the chart I think you said nineteen forty seven are something that charts my as gesturing down down down kind like a steady decline and then around 2000. China entered the WTO and also around NAFTA time there’s like a sharp drop there actually.

S9: You’re mixing up truth and charts now on a podcast. I want to talk about two different budgets. So one chart is what they’re talking about total number of people in manufacturing. And basically until 2000 that kind of like went over the place but was reasonably stable ish in terms of. However then in 2000 and then again in like 2008 2009 you saw significant declines. Now a few things jump out of you about that that obviously other things were going on around 2000 and 2008 2009. So it’s complicated to kind of say what exactly was happening. Now the other chart is the one that showing manufacturing as a percentage of our labor and that has been the one that’s just been a very steady decline.

S3: And that is also the reason why you need to zoom back a bit and I think this is one of the other big things if you listen to Andrew Yang or the robots eating our jobs people and we had this conversation a little bit when we had any Lowry talking about his big thing which is universal basic income. They’re not actually mostly talking about manufacturing. The thing which they always talk about is truck drivers that really went into tractor truck drivers are to this debate what splitting the check is too late payments. You know it’s the one thing that always comes up. The idea behind truck drivers to be clear is that eventually there will be self-driving trucks and once trucks drive themselves then you won’t need truck drivers anymore. There is no evidence that this is true.

S9: Right. Exactly. And I think this is the key when you’re looking right now and for thinking about policies that you implemented right now we actually can’t find enough truck drivers like we can’t find enough employees and just just like intuitively like number one I don’t think anyone sees a future in the next decade where there’s gonna be a bunch of driverless trucks driving around the freeways.

S3: But even if there are there’s going to be a human being in that truck to do things like you know refuel and what happens when it breaks down and lovable and like the chances of ever being in a world where there won’t be a human who is doing productive work in that truck while it is moving from a to b seems very slim to me.

S9: Although I agree with you 100 percent. I though I do think this is there is one part of this though and you Yang has a little bit of a point. And of course it’s that reason people kind of fetishize manufacturing jobs is because for a period of time in America they were very well-paid for people who didn’t have like necessarily a college education. And so now obviously what we’ve seen as jobs have changed. You don’t necessarily have the same opportunities you had the past you could think with truckers right now you actually paid pretty darn well to be a long haul truck driver.

S3: That might not be the case if that changes and what we’re really seeing we see I don’t know if you become like basically a self-driving truck tech then that is a higher skilled job.

S9: And then we agree that you need more skills and that’s the issue is that we’re kind of getting this bifurcated labor market where we have we’re going to need people and even right now we need people with a lot of skills that many people are extremely kind of low skilled and a lot of that in the middle which is kind of what we used to associate with American middle class. We don’t necessarily need now and that is a concern and it almost certainly will be a concern moving forward. I just think that the Andrew Yanks of the world are overstating it a bit.

S5: And also I feel like I’ve made this argument before but this this nostalgia for the high paid manufacturing jobs often own overlooked the role the unions played in making those jobs high paying. I mean people went out on picket lines and went on strike and fought to have those higher wages.

S3: And so and unions are important and the other big thing which no one ever mentions about high paid manufacturing jobs is that almost everyone who had one of those jobs was a man. It was and often also that very often white man. What’s interesting about the productivity numbers and this is ultimately what we’re talking about here is productivity is that that kind of measure this great technological revolution of robots coming and doing amazing things where anecdotally we can see it all over the place and there’s like no shortage of sleep many advertisers who will tell you that that great robot you know products will save you time and make you more efficient but it doesn’t really show up in the macroeconomic data and unless and until U.S. productivity starts picking up. There’s like this whole thesis is something which is sci fi or something which is plausible in the future but does not exist in the present and in fact productivity has been going on productivity growth. I should say has been going down and it would be awesome if productivity growth went up it would make the United States more competitive. And the the point which I really wanted to make at the beginning is that it’s actually incredibly hard to the point of being impossible to disentangle the robots vs. the human beings in China and other countries who are doing reasonably skilled jobs just cheaper than Americans do it. And you know I was talking to a clothing manufacturer recently who was talking about how the most high end clothing factories in the world are in China. You can’t you know if you want to do like most clothes you can get them manufactured just about anywhere including the United States. If you want super sophisticated clothes you need to get them manufactured in China and you think to yourself Well that’s because the Chinese have these amazing robots which can do amazing things and they can afford those robots because they have such more scale anyone one else. It’s not that it’s that the Chinese have incredibly skilled and experienced so is like human beings who can sew items of clothing that no one else can sew.

S7: Yeah and I think that’s what Andrew Yang was trying to say wasn’t reality and what Elizabeth Warren was trying to say is reality which is that people used to make things in the U.S. and now a lot of those things get made in China or Mexico or other places it’s automation didn’t destroy those jobs you know now tragic death of them did I.

S9: Ms. I just I think that there are just too many competing.

S6: I do think there is a real question or a real concern underlying Erin Burnett question and the real concern is ultimately what ever the name whatever the demand is for sweatshirts in the world whether it’s higher than it is now whether it’s where it is now whether it’s going down there is going to be a finite number of sweatshirts made and those sweatshirts are going to get made by a combination of U.S. humans foreign humans and robots. And like where do U.S. humans stand in that world. Are they well-placed or badly place.

S5: I think also I mean the age old that the robots are taking our jobs technology is taking our jobs. This is not like a new thing.

S3: I mean we don’t know what the future will bring and what robots into the revolution over.

S4: Yeah. Had this good little video where people were complaining about you know when the turnstiles were put in at the subways. Oh my God. What about the ticket takers when cement mixers were invented. Oh my God. But we’re not going to use our hands to mix the cement anymore and it’s like you know elevator people used to open and shut the elevator doors for you. There was like stress over that you know car replaces horse that the number of jobs kind of hold steady. Yes. That the people who rode the horses and mix the cement by hand lost their jobs because of technology or whatever I don’t know. And but the number of jobs in the economy stays the same. People get different jobs sometimes people are displaced entirely which is what I guess Andrew Yang is worried about but it’s not really it’s probably not going to be that big of a deal except for those people who are displaced. And the question I guess is for that small slice of people like what do you do. Like what do you do when the huffy factory closes and the only jobs are at Wal-Mart. Well you just make the jobs at Wal-Mart pay more money.

S3: And I think this is the standard neo liberal answer which is basically we you know we want to maximize the total number of jobs and then to look after the people who have lost you know who are the losers and in the turmoil. But as I pointed out in his book we never look after we’ve done a very bad job of looking after the losers get nothing. The losers have you have got nothing. Yes. And in this in that sense it doesn’t like blaming trade for the fact that there are losers is kind of a bad idea because it’s trade that has helped to increase the total number of jobs.

S10: Exactly. There isn’t.

S5: Elizabeth Warren doesn’t blame trade. She blames trade policy. It’s the people who make the trade deals who don’t think or don’t take into account what’s going to happen to the razor a bit and understand the neo liberal responses.

S3: That’s kind of correct. They shouldn’t like when they’re when you’re designing the trade policy. You shouldn’t worry too much about the losers except for once you’ve decided that once you can see who the losers are then you look after them and that’s what we’ve done a bad job. If you try to prevent the losers from being losers in the first place and you also prevent the gains from trade.

S9: Yes. And it also suggests that if we hadn’t enacted these trade policies then manufacturing would have just continued exactly as it was and I think there is very very little evidence to suggest that that’s true.

S3: OK. Let’s talk about taxes. I think we’ve touched on this before but because there’s a I think it’s 18 million would be mass on Pro Publica where peace is always like 80 million Republican does not specialize in smart brevity. It’s smart. This is brief but there is a very big article in ProPublica which really does attempt and largely succeed to become the definitive story of how Turbo Tax has completely buggered the experience of filing taxes for all of us in America right.

S7: That’s a 20. It’s basically a 20 year history of how Intuit which owns Turbo Tax prevented the IRS from doing any kind of like free file system.

S11: So I mostly agree with this article but I feel like there are a few theories that number one. Currently there are multiple ways that you can file your federal taxes for free. Right. And that’s one thing they actually even state in the article that there was the kind of system that was designed with the government and companies like Turbo Tax and then to protect design their own free and then there are other places that designed free. So. It seemed like there was this idea that people are just getting screwed and if Turbo Tax hadn’t been there then the government would have just designed this fabulous program and maybe they would have. And that might be better.

S6: But but but that point is that is exactly how every other country in the world works. If you look at literally every other not just advanced economy but even like you know developing economies it’s you don’t even need to file anything. It just happens automatically. There isn’t the whole idea that you need to go through an annual process overlay adding up all of the income that you made over the year and deducting deductions and doing a mathematics and coming to a number and saying how much you owe and comparing it to how much you’ve repaid and all of that doesn’t happen in any efficient normal tax system a tax system which works well should not require that I completely agree with you.

S9: I mean I one of the few things I agree with Paul right about is that I think our taxes should be infinitely simpler and I think they should be like we do I think the country my issue is that this isn’t because Turbo Tax doesn’t want it to be that way it’s because so many different politicians want the tax code to be very complicated because it benefits them in one way or another.

S12: This isn’t just Turbo.

S13: No I see it’s very telling me that Grover Norquist is one of the big Turbo Tax. Yeah. He loves it now. Now this is but I think it’s because Grover Norquist hates taxes his whole thing is never pay taxes. So it’s in the interest of people who don’t want to raise taxes to make taxes seem extremely complicated and Turbo Tax is really it’s silly salience issue.

S3: Grover Norquist has said this explicitly that he wants the tax paying process to be as painful as possible. Because if tax paying is painful then people don’t like taxes and if people don’t like taxes and they don’t know then what they want to do is cut taxes. Now cutting taxes does not make him paying taxes less painful but he is right psychologically. If you associate taxes with like a complete amount of pain every April then that’s going to make you more well-disposed to people who say taxes are bad and Intuit according to this ProPublica piece basically exploits that pain.

S4: Right. They have all these these dark patterns that they use to give you uncertainty and doubt.

S13: Yeah. Yeah but they use FUD fear uncertainty and doubt to get you to pay to file your taxes they have all these little tricks like they do like a little animation of a timer like we are finding the best deductions for you right now. Because you’re.

S6: Yeah. But like who. Because everyone thinks that taxes are complicated. But I just want to push back a little bit on what Anna was saying about how politicians it’s all the politicians will because they want more complex taxes and the tax code is complicated. That bit I think is true of Grover Norquist but basically false of politicians. It is definitely true that there are many politicians who want very specific little stupid bits of the tax code and are pushing for it like incredibly complex fiscal policy. That is true in every country in the world that does not affect income tax. That does not affect the individual experience of paying individual income tax is true.

S9: It can be incredibly simple and easy even when the broader tax code is incredibly complex part of the reason that our tax code is so complex is because historically we’ve had many many different groups that want to get deductions for their deductions for that. And one of the things as I’ve I didn’t like that Republican tax cut but I do think increasing the standard deduction so fewer people itemize and didn’t have to deal with all that I think is a good thing. I think that if you look at the history of the tax code it is very hard to make the argument that it isn’t. It is not complicated because of certain interests. I’m not saying.

S6: But my point is that the complexity of the tax code and the difficulty of filing taxes and the pain associated with filing taxes are two different things. And it is absolutely possible even with a complicated tax code to make filing your taxes incredibly easy and painless to the point at which you don’t even realize that you’re doing it and every other country has worked this out even ones with complicated tax codes. It’s the problem here is not the number of deductions or the complexity of the tax code. The problem here is I think ProPublica has this right that the not just Turbo Tax but even the IRS has explicitly said that they think that for some reason the tax preparation industry is an important industry which should exist and they are doing the things to to protect it.

S4: That’s really what comes across in the piece. I mean even both George Bush and Al Gore George W. Bush wanted to make free file easier and encourage the IRS to do something about it. And Intuit worked its ass off lobbied really hard to make sure that did not happen. And it seemed to have buy in at the IRS like they like Felix was saying are really committed to keeping the tax preparation industry alive and there’s a lot of you know a revolving door action going back and forth from the IRS to into it. It just seems like a whole rotten system. And then on top of that you have an IRS that’s like permanently underfunded has recently openly admitted to auditing poor people more than retrievable because it’s like cheaper easier. It just seems like the whole system is kind of rotten into it was able to really leverage that to make a lot of money and have Gene Simmons come to the Intuit party.

S9: So I agree that I think that we have a very problematic tax system. I think the way we file taxes is silly. I think that it would be wonderful if we went to a far more simpler system. I think all of that is true. My issue with this particular article is just that I think it is incredibly one sided and I think it acts as though you have this one company that has so much power and I think they’re overstating that tax preparation isn’t even like 50 percent of how Intuit makes its money. Like I’m not saying they didn’t play a role. I just think it little overstated.

S6: No I looked at their financial statements and I know what I’m saying is that what they do is cross-selling that the turbo tax might not directly account for the profits but Turbo Tax is how into it gets you into the into IT ecosystem.

S9: Now you want to use quick box that why no I’m sorry like this. I’m just saying I think they have I think ProPublica is right about certain things. I just simply think they’re overstating their case.

S13: Some of the things they found out are just that I know the gross Don’t get me wrong. I mean suppressing free file from Google search the dark patterns.

S12: I just want to say dark patterns over and there are lots of dark bad and they are deeply evil. And then these things I don’t think you can say that. Yeah. And one other thing. Just to be fair I like don’t get me wrong I think that a lot of the stuff they do is gross. So I’m not in any way justifying that. However I think suggesting that there’s something like if a company thinks that the government is going to put it out of business it’s not shocking that the company is going to start lobbying it gets like that. That’s not a company be evil that’s a company trying to stay in business. Why do you think it should or not. I just think there was no evil company. Well no.

S6: I mean no but let’s look at what into it did. Right. Back in 2000. You know they saw a massive opportunity and they lobbied hard to be able to maximize their returns on that opportunity. Whether or not into ever faced theoretical existential threat the fact remains that their profits have been skyrocketing. It’s not a case that like oh no we need to prevent profits going to zero. In fact their profits have not been going down their profits have been going up and that’s the bit which galls me about this story is that they claim to fear this like existential risk whereas in fact there’s no downward trend anywhere and the only trends seem to be up in a world of like software as a service and efficient competition and a tax code which is visible to everyone equally. The profits of the tax preparation industry should not be going up. They should be getting competed down to zero and that isn’t happening.

S8: Right and part of the reason that isn’t happening would be the last thing I say is part of the reason that I think the IRS does not want to put these companies out of business is we get the IRS does not want to do all of this themselves. They in fact want someone else to do it.

S12: So that’s that’s why they’re saying a lot of business. Well. Again that’s a straw man.

S6: No one’s talking about putting them out of business. We’re just talking about.

S11: That’s literally what was stated like the the ProPublica in their piece had PowerPoint like slides that said that the company was worried that they were gonna be playing like mad stocks.

S6: So I am 100 percent agreeing with you that that is what into it is talking about rhetorically. Like if we don’t fight this then we will go out of business. But no one outside Intuit thinks that they would go out of business if there were like three options. And the fact is there is no evidence to see them going out of business. What my point is that they’re not their business isn’t even declining. It’s not even threatening to decline. Far from going out of business their business has been doing better and better and better. So I understand that like you know them getting put out of business tomorrow would be bad for them in some like weird hypothetical world where that could happen but that is. But my point is that we’re not even close to that wall and we never were. And every time the government you know times tries to do anything that might bring us a little bit closer to that world like in 2005 when the free file system first came out a bunch of Americans started using the free file system like 5 million of them. And Intuit got very worried. But even in that year its profits still went up even when all of these millions of people started filing free Turbo Tax still made more money. No one is going out of business here.

S3: So I just want to add one thing to the competition point like why is there no competition Why is tax preparation not something that the private sector is competing down to zero cost. Well the which and my my answer is that the real way to make tax preparation easier and cheaper for Americans given the stranglehold that into its lobbyists seem to have over the IRS is wait for Amazon Prime. If Amazon Prime file your taxes for free. That would be a game changer.

S9: That’s that’s like I know it completely fair. Can I just say one last thing I’ve done.

S10: Is that a thing to be done. I know I’m not totally Hannah is that people want those.

S9: If you look at into its stock price I really actually think it started doing much movement at all until like 2014 2015.

S11: So I’m not talking about the stock price I’m talking about the profits right but I think all I’m saying is that from the ProPublica piece and what they stated the IRS was saying and why the IRS was saying they wanted to keep this. They wanted to keep the system they had with into it was because they were concerned about the long term effect it would have on the company. We agree though. Yeah. They want jobs there. Right. And they also don’t want to do it themselves. So all I’m saying. I’m not saying that anyone that they’re going to go out of business tomorrow. I’m just saying that there is a reason that the IRS went along with the system. And I think that it’s not just about like there’s an evil company I think that this is complicated like that’s just what I’m saying. I think that a lot of this is accurate. I just think it is overstating the case.

S13: I think if Intuit didn’t exist some other Intuit would have probably waited to come along and no advantage of this situation.

S3: Well no I I think I disagree deeply with Anna. But like the IRS has a natural institutional reason to want into its to exist because as I say in every other country on planet Earth the tax authorities don’t have that incentive and an America is not that different like it works so easily everywhere else. So invisibly everywhere else it’s entirely natural like. This is weird theme in the article of politicians saying I just don’t think that the institution that collects taxes should also be preparing the taxes. Of course they should be the same institution for the most obvious thing and that’s uniquely weirdly American. And if no one seems to be examining that I’ll agree with you on that.

S9: And I think that America is a bizarre place for many reasons. And I think that it’s a larger story than just Turbo Tax.

S3: OK. Now let’s talk about a story we can all agree is complete.

S12: There are be no arguments on this.

S5: The mystery of the Trump case traits is a story that appeared Wednesday night Wednesday night on the Vanity Fair Web site written by William Cohen and it is would you say bullshit Felix.

S3: I believe I might have used that word bougie Felix broke it down on the slate and I like soft pedaled the problem with that story.

S5: Basically it is a story that tries to insinuate that people are insider trading on not only things that Trump does but just other stuff going on.

S12: They apparently knew that Saudi oil fields are going to be bombed.

S5: Yeah. And so it has a few examples and it makes this insinuation. But even to the layperson like myself who doesn’t know what or didn’t know what an E Mini is which is the things that are allegedly being insider traded you read the story and you’re like. OK I don’t know. It doesn’t make sense.

S3: The story there’s a bunch of stuff about this story which doesn’t make sense but there’s a bunch of stuff about this story which like makes just enough sense for it to have completely exploded on late Wednesday night and into Thursday. And for it’s not just a former banker Bill Cohen is he a former banker himself and like other former bankers like Stephanie Ruhle MSNBC are jumping on this. And that’s an important point to be made here. Before we left and we can go into as much detail as we like about the problems with the story but there’s an important one to be made. We just saw this week Donald Trump announced that the G7 was going to be held at Raul Trump throw like he’s literally hosting an international summit at his personal hotel and that is that is a level of Lake self dealing with that has become we’re almost becoming accustomed to on the part of the president the idea that the president wouldn’t want to like incited trade his you know international actions is is weird like everyone believes the worst of Donald Trump for good reasons because he lives up to those bad expectations every day. And so it just seems plausible as a hypothesis that Trump might be incited or Trump might be like giving tips to people who can then insider trade his his actions.

S5: All right I asked my friend Mark at Bloomberg about this and he was like well given the Hall of Fame grifter team in the White House it is more plausible that they would do this than say like someone in the Bush administration. Right.

S12: However there is no evidence that it is you know like there are position limits. You can’t just trade an infinite number of contracts. I’m not an expert on trading in many years but I know they’re one of the most if not the most like widely traded future. We should explain exactly what he said.

S3: I mean these are so images the main tool that people use to trade expectations of where the stock market is going to be.

S14: So when the stock market goes up or down these images go up or down and the futures market there are position limits you can’t you can’t hold too many of those. Most of the trades that Bill Cohen was talking about were smaller than that position limits one of them was larger which was a little bit of a red flag and it’s like how can the trade be as big as he says it is. It’s like this trade made one point a billion dollars is how can and trade be that big given the existence of these position limits and then it turns out that he wasn’t actually looking at trades what he was looking at was total volume Ram. And he kind of assumed that like one person accounted for all of the volume in a certain slice of time and he was looking at like total volume at the end of the quarter saying it’s going to be higher. And he assumed it was all one trade and he assumed that people like would then unwind that trade on the other side of the event which there’s no evidence for.

S9: There’s no evidence that any of this yet to me it’s just indicative of a problem I have. I think that it’s completely correct that the Trump administration has just kind of at one time after another engaged in all of these appear apparently extremely corrupt actions so I get why people think that you know it’s anything but I think sometimes the media will jump on things that just makes absolutely no sense. And then I think that’s right. I don’t know if the media jumped me. I mean that’s one. One story in Vanity Fair. But I think I jumped on that. That’s a great yeah. I’ll agree with you on that. I just think that it is a little bit of this Trump insanity of kind of making a huge story out of everything.

S3: But you see I think I’m going to push back a bit on that. I don’t think we made a huge story of it. We collectively in the media made it made a huge story. I think it trickled down a little bit to sort of talk radio and cable TV but it never really became a story because a bunch of people looked at and said This doesn’t make any sense. Where’s the evidence. Who are these people who are allegedly insider trading and going to someone and then like his. What was the quote in the headline did you not write an editor’s note made the quote there was a hanky panky.

S12: Exactly. Let me show you something else too hanky panky.

S3: And then it turns out if you look at where that quote comes from it’s some guy who believes in the theory that al-Qaida was front running the 9/11 attacks which was completely debunked. And so there’s there’s this conspiracy theory has been going on. But the fact that the conspiracy is even plausible in the first place that it touched a nerve with a bunch of people you know in the politically minded universe that everyone’s like Yeah Trump’s insider trading and wanted to believe that and could believe that and did believe that is indicative of the degree to which the entire civil society and government has become degraded because it’s like if it was true no one would be surprised.

S5: Right. I mean this is just how conspiracy theories work.

S3: Conspiracy theories are normally normally improbable and this one’s yes downright likely.

S5: So I mean because the financial markets are so complex and no one knows what it in many is or understands a lot of this. It’s like you think it is kind of Mr. Right and some of the examples Cohen cites in the piece were like when Trump lied about getting a call from China.

S13: You know I think there were two lies that allegedly he was allegedly able to insider trade on it was like some two lies about China or some he is 100 percent not capable of like getting his lies straight to make sure that his insider trading and the other thing like his Doral grafter is it’s right out in the open and it’s obvious and easy like oh we’re going to make a lot of. They need a hotel to stay at. I could make a lot of money let’s do my hotel it’s like very out there but like Trump is not a global markets mastermind. He doesn’t know what he’s doing I mean has one thing that he used to do back in the day he wouldn’t go and say like I’m going to invest in Pan Am or something. This is like a classic Trump thing. Right. It was amazing he would put out and he would.

S3: He would buy stock in the company put out a press release say that saying that he was interested in buying the company the stock of the company would go up and then he’d sell the stock. He’s like this is such a great graph. And he tried it like one too many times to the point at which everyone the minute the press release came out everyone was like yeah we see what game.

S13: But like that’s the level of sophistication and the market scam. I don’t think he’s capable of doing any of this.

S12: Maybe Steve I think literally no one is capable.

S3: I mean yes that’s a thing like predicting short term future movements in the stock market is the number one most reliable way to lose all of your money but you can’t even if you knew this is the crazy thing right. Even if you knew exactly what Donald Trump was going to say over you know in the next 12 to 24 hours and who he was going to say it to and then you had like perfect advance knowledge of that being able to trade that by like going long and short images these would be basically impossible. It’s super super hard. And the idea that people are making literally two billion dollar bets unlike what Trump is going to say in the Rose Garden impromptu press conference is like no one has that kind of risk appetite.

S12: And also these are all trying doesn’t know what he’s going to say exactly. Doesn’t Felix but you also mentioned Piers which I think was the first thing jumped out to me it’s like these are often used for hedging like it’s not usually like you’re just long you know it’s usually because specifically as you said because there is a decent amount of volatility and you’re using these to try to reduce some of your risk. So most people most people who invested one point eight billion someone. Well number one exactly by definition.

S14: These are two sided trades and and Cohen always implies that you know the insiders are always on the right side of the trade. If you look at people who’ve done insider trading and people who’s like who who have trading records that the S.E.C. has subpoenaed to prove that they were insider trading even they lose most of their not most is that they if if you win on your trades like 60 percent of the time then you can make lots of money but even they lose 40 percent of the time. And Cohen doesn’t seem to you know obviously he can’t find a losing 40 percent it’s what he did was he just looked that every time the stock market moved he went back to like the previous day’s futures activity and look to see whether there was a big trade somewhere and he said Look at that it must have been an insider.

S12: No. Yeah look at times when you had big trades where it didn’t move you know like.

S3: So. So the story doesn’t really hold up to scrutiny but the fact that you know Vanity Fair would publish this story is indicative of the degree to which people are willing to believe just about anything of this president and write just about anything.

S5: Right. I mean it’s just the bar is lower than it used to be I think for saying wild things. I guess that’s what is literally what you just said. But is it worth it’s worth repeating the seven numbers round.

S14: And what’s your number.

S11: So my number is nine hundred two million dollars. That is the amount of capital that has been pulled from Ken fishers investment fund. Now while this not this might not be a tremendously high percentage of his overall EU am I still think it says something that a number of pension funds pulled their money because he made some really gross sexist comments at a conference and allegedly allegedly which no one what he said no it seems to be able to quote him but he does have a long history of making lewd analogies.

S7: And it’s something about it.

S9: Yeah it was something about like getting client money like being getting into a girl’s pants or something like that. And and and also his response to the backlash was just like Well I’ve said stuff like this for years which is which is probably true.

S14: And you know the world and in Fisher and like Warren Buffett is the same like that there’s a lot of like weird sexual analogies that these be these Jerry Julian they like to make.

S12: Yeah they’re like open kimono. I hate the term open. You know it’s both racist and sexist.

S3: This and and there’s been this culture of making these like sexual analogies for decades and they’ve been making these sexual analogies for decades and then eventually some new generation of fund managers comes along and says no you shouldn’t do that. And I’m offended and they go away you like. What changed. It’s like well things change. This could totally I mean I feel like it couldn’t happen to Warren Buffet because he’s Warren Buffett.

S9: But on in terms of what he says it tells me something a few years ago that was about it if he he had a joke about like not being a lady if you’re saying yes or something that something like. I remember it bothering me and. But yeah.

S4: And I think I think that was a little bit untouchable because he’s so like one Coca-Cola.

S6: But the big pension funds who have removed money which by the way I did the craziest thing of all include Fidelity where you give fidelity a bunch of your money to invest on your behalf.

S3: It turns out that after giving fidelity a bunch of money to invest on your behalf. Fidelity just turns around it gives a chunk of that to Ken Fisher. Well why why am I even giving this to fidelity if they’re just gonna give it to confession. But these companies I think the there’s been a point the Fisher Investments has 112 million dollars under investment and no one entirely. No one really believes that it’s because it’s a great fund manager. And I have spoken to Ken Fisher multiple times and he is the first to admit that he does not pump his returns his marketing has never been. We gave you we get you excess returns. We’re incredibly smart investors. He has always just been about like sales and marketing but mostly sales this is bad marketing. Well this is bad. Well I mean this is it was good until it was bad like it worked until it didn’t. But like you know a whole bunch of people who are competing to you know gain assets in the asset management space do it a certain way which is like talking about that performance and how smart they are investing. And Ken Fisher does it a different way which is just finding rich people and saying Give me your money and I’ll make your life easier. And he does a very different kind of sales technique and he is the first to admit that the way he’s became a billionaire is because he’s a good salesman not because he’s a good investor. And so in that sense it’s quite easy to change your mind when you’ve invested with him. Why am I invested with him anyway. Would you like to know my number. I would love to know your number.

S5: My number is three three pounds.

S4: That is the weight of one roll of Sherman Excel forever all the weight of a shaman Excel forever role which is a massively roll of toilet paper that Procter and Gamble has cooked up and there is a whole article out in the Wall Street Journal that I really enjoyed. It’s meant to last for a month and comes with its own stand because it wouldn’t fit in a regular toilet paper stand and its PMG solution to apparently a very common problem which is that people don’t change the role in their bathroom and Andrew solution is giant toilet paper roll that almost never needs to be changed only once a month apparently that contains the will of 36 rolls of toilet paper and you can you can buy it two rolls of it with the dispenser and it costs twenty nine dollars and ninety seven cents. And that is all. I mean that’s floating and I did tweet about it. I tweeted a picture from the story of this massive it’s like the size of the rolls.

S3: Basically I’m pretty I’m pretty sure it would not fit.

S7: Probably not and maybe not smart enough to go with your smart toilet.

S3: Yes I do know I have a smart toilet. I deny all knowledge even if it does have a warm seat. My number is 425 million dollars which is my favorite story of the week is this story of Deutsche Bank which was trying to basically securitize Helvetica. Like there’s this company called monetize the mezz tranche exactly. There’s this company called mono type which is you know the 64 pound gorilla of the fund world it owns Helvetica owns times new roman it owns like the biggest font in the world.

S14: And there’s obviously some kind of crazy PE backed by our situation and Deutsche Bank was like we will organize a 425 million dollar loan which will be secured against your fonts. And they went out into the market and tried to market it and no one wanted to touch it. And Deutsche Bank had to wind up like taking the entire thing onto its own books because no one no one wanted a little piece of Helvetica bank debt which I found so sad.

S7: Why is that. Markets just aren’t what they used to be.

S3: Well maybe maybe I am maybe. I mean the fund privacy is a major problem. People just use funds without having the fund licensing on privacy funds appearing in places where like they don’t have they haven’t paid. Right. But when you use it when you use a fund you’re putting together a you know a design piece. That’s a very good chance that you don’t actually have all of the licenses that you need in order to use that fund. But I do think that funds in general is still pretty profitable. If you if you ever if you have a successful foundry you can make money but mono type you know can’t borrow five 425 million dollars without running into difficulty or maybe that’s just Deutsche Bank and about syndicator seems more likely. So you know monitor you should’ve just gone to JP Morgan which fund Tisch. No I think we will wrap up this episode of Slate Money. We will have a slate plus about David Shaw’s latest misadventures. And for everyone else.

S2: Thank you for listening. Thank you. Just me Mollie for producing to keep us informed about everything you have questions about. Speak Money. And we will talk to you next week. Sleep.

S6: Alice Minsky yes. What is David Shore up to.

S9: So a hedge fund DE Shaw was in the news this week because they released this letter that they had sent to Emerson Electric which is this enormous conglomerate that makes like valves and heating and cooling equipment to make a whole bunch of industrial stuff and a few things that are kind of interesting here one when people think of these shot usually activist investment is not the first thing they think of. CUOMO Right. Now granted that this they’ve done a few deals and some of those deals were big but this they’re still fairly new in the game. So there are a few things that are interesting here.

S11: One thing was about Emmerson itself the company where I kind of feel like these shorts point to a certain extent is that you know so this company has eight private jets and a helicopter that are staffed by 40 people within just Houston. I think they have like 14 or no at 18. I think different like offices and factories. I mean there is clearly a tremendous amount of bloat in this company and also they have a staggered board and almost no Fortune 500 companies anymore have a staggered board because that basically protects you from activist investors because you can’t you’re not just electing people every year. So there definitely has some like legitimate I think criticisms here. However it’s like it’s interesting because usually if if an activist comes in and they have are making a really good case you’ll see some significant movement in the stock price. But we didn’t really see that there was a little bit of movement but not very much. And then if you kind of talked to a lot of look through a lot of sell side research it’s like everyone’s just kind of like. Not really sure you know like if they’re quite making their case you know now the other thing though that I think was also slightly funny about this letter and this is you sometimes get in these like poison pen letters is like it was very emotional like it seemed to be suggesting that like they were really upset you know they were really upset that ever said had not responded to them and they were really upset that Amazon hadn’t corrected like that new what a certain news articles had said and it was just kind of these things or was like you might be trying a little too. Like I don’t know if so it was and it was an interesting story of like when a fund is you know still kind of making their way in a new part of investment. And I feel like maybe they’re getting a little bit of head of themselves.

S3: One of the things that you nearly always find with activists investors is that they are very good at convincing themselves that they are occupying the moral high ground. This is almost every single time that no one is they could easily just come in and say you know like Stewie in succession. Listen we think we can make a little bit more money for shareholders than they’re currently making so you should vote with us rather than the incumbent management because we’ll make you an extra couple bucks. But in reality they never do that. In reality they always dress up in a sort of grand in grand moral terms and say like you are running this company badly in your and your betraying your shareholders and you should and those shareholders should vote with us because we are the great and the good. And I don’t understand why all activists feel this necessity. But clearly when you’re new to the game you can get the tone even more curiously wrong.

S9: And it’s Don’t get me. Like I think it’s it’s entirely possible that they are also seeing something that other people aren’t seeing because they did do a very different type of analysis that was much more bottoms up as opposed to kind of the way a lot of sell side firms look at this company. And so you know it’s possible that they’re they’re correct that there is just a lot of things that should be changed here. But I think you’re right Felix that it’s just this kind of like emotional way that this is put out there just then. Honestly like then makes me less like it makes me believe them less. But don’t they all do that.

S3: Isn’t that true of literally every single activist investor. Yeah I mean like Dan Loeb is legendary for his emotional appeals.

S11: It was really sad. I mean you’re right. You know I think in this instance it’s just interesting because if this if this does happen it might be a good thing for it to happen.

S8: It would be I believe like one of the biggest firms in in recent memory to big conglomerate to actually potentially breakup which is one of the things that they’re pushing for.

S5: Mike did you say this really does Emmerson is it making money.

S11: Yeah yeah. That’s the thing. And this is why it’s complicated because honestly this is why I think the story is also just kind of bizarre and kind of fascinating is that like it really depends on how you look at it because in a lot of ways you can say like their margins are really good. If you look at you know but it depends on what the cops are and it’s like they are certainly making money. It’s just they are a very old fashioned type of business in the sense of it’s kind of a clunky structure of your kind of putting two things together that really have no business being together and are really creating any synergies. So heaven forfend I know you want to look look look and.

S12: I’ll defend your show here as well in the sense of like look I mean if you want a capitalist economy to run well you need corporations to be run well you do not sure but that’s me. I mean yeah.

S6: But it’s not just about money it’s about you or it’s like conglomerates come and go they go into fashion and out of fashion. There’s not like a rule of capitalism that conglomerate should not exist. There are lots of conglomerates and many Catholics systems including the American system right now they’re a little bit less in favor than they sometimes are. But that doesn’t mean they shouldn’t exist at all.

S9: But no one saying they shouldn’t exist at all. They’re saying if you have a conglomerate which seems to you if you do what’s simple some of the parts analysis is less valuable by being together than it would be if you split it apart.

S3: It only took her like two weeks of being at breaking she started doing some of the parts. Well Rick Lloyd’s is breaking news just a little bit of history here and grew out of the FTE Lex column and there’s this long history of the entire history of breaking views. And then before that decades and decades of Lex which is you look at a company determine whether it should break up who is undervalued based on this thing called the sum of the parts analysis and it is glorious. And people love it.

S4: And I have no military with it from Richard gear’s take on it and pretty woman he describes his work to the Julia Roberts character which is he breaks up the companies and sells the parts which are worth more sold separately. So that’s where I learned about it.

S12: And they’d also never get sold. Yeah I don’t know. To be fair like no one looks at this company and does not within like an hour do a sum of the parts because it just like is calling for it.

S3: And yet somehow you know and then and then you every so often you get breakups and sometimes the pope’s worth more than the. So you know capitalism will always find a way.