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S3: Welcome to the Y and F You edition of Slaked Money, your guide to the Business and Finance News of the Week. I’m Felix Salmon of Axios Capital, the rebranded newsletter formerly known as Axios Edge. I am here with Anna Shamansky of Breakingviews. Hello. I’m here with Emily Peck of Huff Post. Hello. And on a big week in media news, we are joined by Slate Money’s favorite media person in the world, Mr. Ed Lee of The New York Times. Welcome.
S1: Hello. Hello.
S3: You had a lot of words in The New York Times today. A lot of them were Sumner Redstone obit. And we are going to talk to you about Sumner Redstone and the degree to which he was the model for Logan Roy in succession and various other aspects of the Viacom CBS empire. We are going to talk about statistics which are more interesting than you might think, or certainly less reliable than you might think. We are going to talk about epic and fortnight and what the big anti monopolistic move is in terms of the app stores in Apple and Google. We are going to have a Slate plus segment on stock splits. This is a big fun show. And because it has Italy on it, it’s absolutely awesome. So stick around. It’s all coming up on sleep money. So let’s start with some breaking news from the Texas fire, which is the EPIC, which is a big video games company, has started the mother of all fights with the biggest monopolist in technology, Apple, and also, it seems, with Google, Apple and Google have both booted fortnight off the app stores.
S4: And if you don’t know what a fortnight is, Emily is here to tell you, because she’s the mom, mom, the big it’s a big video game that the kids play my kids these days, but isn’t as interested. It’s a multiple cut me off if I’m wrong because I have to ask my son. I should probably just get him in here. But you go into a world and you’re with like one hundred other avatars and you kind of have to fight your way to the top, kill everyone else. And whoever survives is the winner. And the kids love it. And they make money off of the adults.
S1: But the kids, they need stuff, right? They need to buy stuff to be better at the game inside the game. Right.
S3: That’s where the stuff you buy makes you better at the game. And it also just helps to show off that you’ve bought stuff. But the thing which fascinates me about fortnight is that it’s this thing called a battle royale where everyone is against everyone else. But much more than that, it’s the social network and everything, and it works across platforms. It’s a little bit like the zoom of video game. So it doesn’t matter if you’re on an iPhone on Android or a Mac or a PC or Xbox, it will work very well in your platform and you will have your headphones in and you will be talking to your friends and them and you will have a group of friends, you who might well be like fighting together. And it’s just a way of hanging out with your friends, especially during the pandemic when you can’t do that in person. The way that you just communicate with your friends is while playing fortnight.
S5: I and I think that’s the case with a number of video games, kind of modern video games that it does seem like at night kind of exemplifies that as with all social networks, there are network effects and the one you want to join is the one that everyone’s already on.
S3: And for GenZE, it seems to be for tonight and obviously for GenZE, one of the most likely places they’re going to want to play it is on their phones. And so having fought night in the App Store on the Google and Apple app stores is absolutely crucial for the success of the game, which is why it’s such a big deal. That epic who make fortnight basically just said they called this massive fight. And you’re going to give me a quick bring me up to speed on what just happened.
S1: So these in-game purchases where you buy virtual weapons and virtual goods and you can level up by paying more money, the way that works right now is that you as the consumer are paying the game developer. But Apple takes 30 percent of each transaction. That’s been the case since the beginning of the App Store. It specifically has to do with what they call these in app transactions. And game developers have griped about this for years and years and years. So what fortnight did what they did is they told all of their customers, look, for one time only, we’re going to do the special download where you can buy these special items, but not in the App Store. Go to the website, do it there. We’ll give you a 20 percent discount then what you would normally get. So, you know, they were doing the math in their head. We’re like, well, guess what? We’ll we’ll take an extra 10 percent. We’ll give the 20 percent savings on to customers and will cause this fight. So as soon as they did that, that was a violation of the App Store policy. And Apple basically banned them from they took them off their their system. So there’s like, what, one hundred million hundred and thirty million downloads of this stuff and on app, on Apple devices, all of a sudden they’re gone. They can’t play the game on, you know, whatever it is, half or a third of these these consumers just can’t play it now. So but it was a really specific tactic on the part of ADEC to cause this fight. So as soon as they were banned from the App Store, they filed a lawsuit basically claiming monopolistic practices. And so they were clearly looking to make this happen and cause, you know, bring the issue front and center and make it a legal thing.
S3: And then within hours, Google reacted by basically doing exactly the same thing that Apple had done.
S1: Right, because the Google Play store has the same terms, the same they take the same 30 percent cut. Remember, the 30 percent, as arbitrary as it is, is a sort of a standard that Apple set way back when and when Google created its own version of the App Store. They took the same kind of, you know, hey, we’ll take 30 percent as well. And that is become the industry standard. So there is this duopoly right, where between Android and iOS, they take you know, that’s just the way of things. There’s no other there’s no alternative. Right to this kind of transaction, this kind of practice, that that tax is going to happen regardless.
S3: And just to be clear, I just want to clear up one last thing, which is that if the app is removed from the App Store, that doesn’t just mean you can’t download it from the App Store. It also means that if you downloaded it from the App Store a year ago, it has now disappeared from your phone.
S1: Yes, I’m pretty sure that’s the case that there’s this big. I mean, here’s the thing, you can you can still play it on your laptop, on your Apple laptop, if you want it through the Web browser or through not through the app itself. Right. So there are other ways in so it doesn’t prevent you from necessarily playing. It just prevents you from playing in a specific way.
S5: Yeah, this is my question is because my understanding and granted this is of anecdotes of seeing young relatives that I have that play for at night. None of them play it on the phone. They all play it on like sitting in the night chair with their computer, other kind of TV that it’s connected to. So I just wonder if part of the reason that I can do this is a because they want to have this legal battle, but also because they know they’re still going to have people use it in these other means.
S1: Yes, I think that’s exactly right. They’re aware that it’s not going to entirely kill them. It’s still a pretty big gamble. Right, because, look, there’s two ways to look at this, that they are being very sort of forthright and honest about this lawsuit where they want to change this practice altogether. The other way to look at it is to be more mercenaries said, well, you know what? I think they’re just trying to negotiate, right? They want to bring that 30 percent down to 10 percent or 15 percent or whatever, whatever number might ultimately suit them and not end up changing the structure of how this works, but just get a better term, get better deal out of it. So, you know, I think I don’t know what’s in their heads, but those are the two ends of how, you know, the machinations behind this. The big, big picture, though, is it’s not just in the EU, but here in the states. Of course, there’s been this big push from Congress in Washington all together into looking at the big tech companies. And are they monopolies? Are they too powerful? This is an example of that. Right. So I think EPIC is is really very astute about what they’re doing this now. Right. That it’s happening sort of, you know, right after all these congressional hearings, the putting, you know, bringing Hollington, Tim Cook and all the others in front of Congress, we assume, of course, to kind of answer these questions. But they’ve got politics on their side. To some degree.
S4: It does seem like 30 percent is too high and some. But you could understand why it’s so high because, you know, when Apple cooked up the App Store a million years ago, no one knew even what an app was. And this was the place where you promoted it. It was like live or die. You need you need to be on the App Store. But now companies like Fortnight are powerful in their own in their own right and don’t need the App Store in the way that, you know, these little apps needed it, you know, back when everything was getting started, like there’s just more power to leverage here than a long time ago when this maybe made sense, but now does not.
S3: Well, I mean, there were a couple a couple of things that maybe made sense back in the day when the App Store was small and no one really used it, then 30 percent of a very small number was a very small number. Now it’s big and it really does look like bullying on the part of Apple and quite possibly illegal bullying. If you listen to what the Europeans are saying or Elizabeth Warren. And then the other big thing that has changed is the. Everything is cross platform now, it used to be that if you built an offset, then that was an iOS app and if you wanted to use it, you needed to use the offset. Nowadays, you know, we can be using Zoom or Slack or fortnight or, hey, email or whatever you want to call it, and all of these things where you can access all of these things from any device. And so the idea that the App Store has some kind of a monopoly over it is an iOS app that you need to pay for. Everything through the iOS app is kind of ridiculous. And obviously when companies buy their Zoom licenses or ASLAK licenses, they’re not paying 30 percent to Apple, even if most of their employees are using Zoom or slack on their iPhones. And this was the point that the developer of email was saying, like, this is like a service which you pay for and then you access the service through the app. You shouldn’t need to pay a pay apple a 30 percent tax for being able to access the service. And Apple, at least in the case of hate, email was like, no, we are not going to let you on the App Store if that’s the way you’re going to feel.
S5: And I think it’s significant for Apple moving forward because they’ve made it very clear that they see their future in services. They just came out this week saying they were kind of doing this subscription bundling of services. They’ve every call. This is the kind of thing they say. And if you start to have some of these firms eating into that, if you actually did have any type of government action, that really would be a pretty significant negative for Apple moving forward.
S1: It would. And I think I think I agree with all the points here. There are some things that are kind of arbitrary about how the App Store works that’s worth pointing out. So, for example, like Netflix, not too long ago, they changed how you can purchase Netflix, whereby if you bought it through the app, through the iOS store, you know, they I think Apple is taking a 15 percent cut from that sale maybe about a year or so ago. I could be wrong on the timing. Netflix said enough. You can’t buy it now through the App Store, you can download the app, you can log into the app. But we’re going to kind of punt you over to our website to make the actual purchase or just to sign up. And then you can go back to the app and start watching it. So in other words, there is a way around that tax. If you do this weird, kind of circuitous, you know how you pay for it. But when it comes to Eknath purchases, there’s no there’s no way around it. Right. And that’s, I think, partly what Apple and others, especially game developers, where a lot in app purchases are really driving how games make revenue. I think that’s where, again, that’s where that there’s a sticking point there that they can’t get around. And you could they could argue that, look, it’s arbitrary, you’re taxing us, but you’re not taxing Netflix. Like, how come? Like, why can’t we have an ad around that? Right. So there’s enough examples of where you could argue that there’s something capricious about how this is being, how Apple is leveling. It’s it’s tax.
S3: A lot of people have made the argument. I think it is a compelling argument, but I think it’s not even the strongest argument. The capriciousness is true. But the fact is the. iOS and Android, the dominant platforms are the pipes, basically through which everything gets delivered, and when you are in charge of pipes through which everything gets delivered, whether you’re the water company or the electricity company or anything else, you you basically become a utility and you should be regulated as utility. And you can’t just abuse your monopoly position to charge however much you want.
S1: Yeah, and I think that’s the right argument. There’s another counterfactual or counterexample. I could be wrong about this, but if you think about like Uber, like Uber would not exist without smartphones, period, and arguably without Apple altogether. But every time you transact on Uber through the app, I don’t think Apple is taking a cut on that. Right. So that’s not a virtual in app purchase, but it’s an asset purchase. Right. So how does that work? Why is that not subject to the same kind of tax?
S3: So you have write that was part of the whole weird thing. I think at one point, you know, the ease of being able to upload your credit card from within the app gets easier and harder depending on the whims of whoever is, you know, running the App Store at the time. And it really is this ridiculous and extremely opaque system that Apple will just, you know, you’ll release an update to your app and app or just be like, nope, and you’ll be like, what’s wrong with this? Nobody like, it violates our policies and what policy? And they’ll go off and fix it. And you don’t even know what you’re trying to fix because they won’t tell you. It’s it’s the worst kind of opaque bureaucracy and it’s just not healthy for any kind of competitive ecosystem, which is ostensibly what they’re trying to encourage.
S1: So end of Apple, right where we’re done with Apple is this is it Ebix going to the end of Apple now.
S6: So Battle Royale. Yeah, I think they’re negotiating.
S1: I think they’re going to come back with they’re going to come away with like a 10 percent or 15 percent. And then, you know, it’ll settle this, this suit and then you’ll hear you’ll hear it. But that’s my prediction. Yeah.
S4: I guess I was just thinking of it like if I go into a store owner and I buy a thing in a store in the real world, remember, we used to do that. The store would take a big chunk of my money, which was fine. But there’s lots of different stores I could go to to buy stuff. But in the case of apps, there’s only two stores I can go to to buy stuff. So that’s clearly a monopoly.
S3: Or it would be a bit like if you went to a shopping mall and there were a bunch of clothing stores in the shopping mall, but there was only one shopping mall. And whichever clothing store you went into, the mall operator would take 30 percent of your purchase price.
S4: Yeah, not that’s not right.
S5: Yeah, I think this is just like one of ten million examples of how the economy has moved so much farther than our kind of laws and regulations have. And so the old ones we have don’t fit well with the new economy. You can’t regulate Apple like it’s Con Edison, but it still needs to be regulated in some way. And that’s the problem. And that’s a much harder thing to fix than just slapping on something else or just letting things go. Is there?
S3: So can I Segway from that into one of the big problems, we have a whole bunch of legal and other systems that are designed for the old economy and they’re just not working for the existing economy, because this is what I wrote about in my newsletter this week, is that back in nineteen ninety four, there was a huge revamp of the US statistical services and especially the labor statistics in America. It was the first big revamp since 1967 and they really modernized it, except for they didn’t realize in nineteen ninety four that they would, you know, timing it perfectly to miss the entire Internet revolution. And obviously since nineteen ninety four, the workforce and the labor force have become vastly more complicated. And the other thing that has happened since nineteen ninety four is that the Bureau of Labor Statistics has been perennially underfunded. And then the other thing that has happened since 1994, specifically since March, is we’ve been hit by this massive pandemic and all of these things put together have conspired to result in what I have called a statistics crisis. We have never had less reliable statistics than we do right now. And the implications of that are really bad.
S4: A couple of statistics that you pointed to that were really just not measuring the moment. One you you pointed to that I was kind of like blown away by was the home ownership rate.
S3: Yeah. If you look at the home ownership chart, which I put in my two weeks ago, going, oh my God, look at this. And then in the back of my head on this just a statistical artifact. If you look at the chart, it is it is spiked upwards at a rate that is so beyond any kind of historical precedent. How is that even possible? If you look at what the data, the data coming out from places like Zillow? Yeah, there might be a little bit of a move from the urban centers to suburbs. And sure, there’s anecdotally a bunch of people who are interested in buying a certain number of houses, but most of those people already own houses. And it’s just not clear how the homeownership rate could have risen that far and fast back near the all time highs officially. And so if you talk to the Census Bureau, which actually does that survey, they say, well, look, the way we judge the homeownership rate is we go out and we talk to a whole bunch of people and we say, do you own your home? And then we take the percentage of people who say yes, and that’s the homeownership rate. But the ratio of people who even respond to their questions has fallen off a cliff. It used to be like eighty seven percent. Now it’s like sixty four percent or something like that. And what happens if the people who aren’t responding are much more likely to be renters and the people who are responding are much more likely to be homeowners? Then the homeownership rate, as revealed in the statistics, goes up, even if the ratio, the real world ratio doesn’t change at all. And that’s just like one relatively small example. Major public policy decisions are not being made on the basis of the Census Bureau’s homeownership rate. But major public policy decisions are being made on the basis of the unemployment and employment statistics, and those suffer from very, very similar problems. They’re all based on surveys and survey response rates just have fallen dramatically during the pandemic. And they’ve been they were grinding lower for years and years and years. But then they just really started falling in March and April.
S1: Is that because, I mean, this pollsters face this crisis or are facing a crisis similar to this years and years ago and still kind of recently? It’s because of. You know, there are fewer landline phones, there are the surveys are designed around landline phones and then they start to make you switch to cell phones. They’ve gotten better at it, certainly, but maybe not as good as they once were. Is it what is the function of this? What’s the reason behind the lack of response or bad sampling as it is?
S3: Yeah, I mean, people people just don’t use phones in the way that they used to. People don’t answer their phone. If your phone rings and it’s some strange number that you don’t recognize, there’s a very large probability you just won’t answer the phone if you do answer the phone. And if someone saying, I’m from the government and I’m going to ask you a bunch of questions, then the whole mistrust in government and various other things just or just because you’re stressed out and in the middle of the pandemic or whatever, the reason you’re less likely to answer. The US government really does run the best polls in America, but they are polls. They are polls just like political opinion polls. And as political opinion polls become more and more common, people don’t like answering them as much. And then if you’re not answering political opinion polls as much, you’re probably not going to answer government polls as much. And one of the ways the government gets around this is that it doesn’t just phone people up. It goes door to door, knocks on people’s doors and says, can you answer a few questions? And you’re much less likely to say no to that. But obviously, they’re not doing that during a pandemic. So that doesn’t work either.
S5: And I totally agree that I think in the short term, this is really bad because we do make decisions. And right now we are definitely making policy decisions based on a lot of this data, which in itself is also wlad and problematic for a number of reasons. But there’s also a part of me that almost thinks there’s a good point here, which is that people are realizing that data is really, really problematic. That data that comes out of anything and data and government statistics have long been kind of not Nessus. I’m not saying they’re not reliable, but they don’t necessarily even tell you what they think they’re going to tell you from one month to another. There are always usually kind of massive changes. You always need to look over long term trend lines. The way these are reported has always been wrong. This is just exacerbating that and really kind of showing people maybe they should be a little bit more skeptical when they see a news headline that says x x statistic.
S3: But I think the headline unemployment rate is a really good example of that. The headline unemployment rate pre pandemic was three point seven percent. Does that mean that only three point seven percent of Americans were unemployed? Of course it doesn’t mean that. And if you are a statistical nerd, then you understand that’s not what it means. But if you are not a statistical nerd and you don’t have a job, you’re like, oh, my God, am I really one of only three point seven percent of Americans who doesn’t have a job right now?
S4: What I was thinking about after I read your piece, Felix, was this other piece I read a few years ago by David Leonhardt in The Times, which talked about kind of like the insufficiency of the statistics we pay attention to, like the unemployment rate that doesn’t actually reflect the real unemployment rate or the GDP. That doesn’t actually reflect all the stuff we’re doing all the time, which we’ve talked about before, or like looking at the stock market, which really doesn’t reflect actual wealth of most people in the United States. And he pointed out in that piece that the unemployment rate was an idea ginned up in the 19th century by someone who thought people were exaggerating about unemployment and that you should only look at the people who say they are looking for work and then measure, you know, how many of those, you know, and measure unemployment that way, like, are you actively looking for work? And so it was created with sort of the intention to be misleading in a way like from the beginning. And and now that’s part of the reason it’s kind of faulty and people try and react to that in different ways.
S3: One of the other examples I gave in my piece was the GDP statistics in the U.K. We did see the GDP, second quarter GDP in the UK fell by over 20 percent, which is like double what it fell in in the US. And is that because the, you know, pandemic was twice as bad in the U.K.? Probably not. And for instance, one of the interesting things that the UK does is it takes those criticisms to heart and it says, OK, how we measuring like kids education is part of GDP. You know, it’s impossible to measure how much smarter it gives getting. So you have to try and work out like some other proxy for like what the value of education is. And then a bunch of countries, including the US and the rest of Europe, the proxy is, well, just how much are we spending on schools? How much are we paying teachers and that kind of thing. And that that winds up being the. Education, part of GDP in the U.K., they try and be a little bit smarter than that and they’re like, well, are the kids going to school? If they’re not going to school, then the value of the education as far as GDP is concerned is is lower. And so in the pandemic, when the kids didn’t go to school, there was this big fall in the UK GDP, which wouldn’t have existed if they didn’t have that correction. So it might be a good way of doing things and it might be accurate, but it does make cross-country comparisons basically impossible.
S5: Yeah, I would also say, you know, looking at a lot of emerging markets, you can also get the problem that when when as a government, you’re incentivized to have certain numbers look good and you don’t potentially have good institutions around you. Well, guess what? People mess around with the data. And when everyone’s kind of used to saying, OK, well, this statistic came out. And yes, if this statistic is coming out and in certain countries, it’s probably relatively reliable, it might be somewhat off, but at least people aren’t trying to skew it. That is not always the case. I mean, like in Argentina, famously, Cristina Fernandez de Kirchner messed with the GDP. A lot of statistics, but partly with the GDP statistics, because you didn’t want warrants that were linked to GDP to pay out. Like these kind of things happen frequently and they happen in the United States.
S3: The president of the United States is on the record saying that he wants to mess with the covid statistics by basically reducing the number of tests that the Americans make in order to make the number of new cases look lower than next year.
S1: And that’s like right here in the U.S. That’s a more that’s a sharper, more immediate sort of issue problem with the numbers, of course, when someone’s liberty trying to mess with them. But aren’t you putting your finger on a deeper issue here, which is I agree with everyone in terms of the numbers that we’ve been using for four decades, actually are not great numbers to begin with. They don’t accurately measure the thing that they say that they’re measuring, but they were consistently bad quarter to quarter, year to year. So statisticians knew that. And so it was just a matter of understanding the rate of change from one period to the previous period that helped us get better idea of what unemployment really looks like or what sort of, you know, the GDP is where it’s trending. I think what’s happening now that you’re putting your finger on is the fundamental badness is worse than the fundamental badness from before. Right. And so that there is a more there’s a deeper kind of epistemological issue with the numbers themselves. Right. That now then screws up. However, you’re kind of gauging it to the previous badness. Right. So you have to now adjust. You have to create a different coefficient around these numbers to kind of get a better sense of how it’s really moving. And I don’t know. I think everyone I think there’s a deeper crisis around. It’s not just answering not answering your phones, but sort of I don’t know. I think people kind of get this feeling that, oh, so much of my data is out there. I don’t need to talk to anyone. Right. They just know it. Right. And so there’s kind of a deep irony to that. Right. Like for all the data that we’re awash in and more data than ever because of phones, it’s I think people are weirdly sort of less open to talking about themselves explicitly. Right. Because the idea is that implicitly, you just know everything. Right. So anyway, I don’t want to go.
S3: The other thing is that when people consume statistics, once the statistics come out, they are very bad at navigating an epistemic fog. What they want is a certain point is to not even point estimates. They just won’t point certainties. Yeah, so if the unemployment rate is ten point five percent, it’s ten point five percent and it’s not ten point six percent because it’s ten point five percent. And if you said the Hillary Clinton had a ninety five percent chance of winning the election and then Trump won the election, then you were wrong. And that and there’s a lot of black and white in the way that people interpret these numbers, which the statisticians will bend over backwards to try and say this is not black and white. This is an estimate that everybody’s rebels are quite large and everyone consistently ignores that. And it’s almost impossible. I think I think it is impossible to get people to start thinking in terms of probability distributions.
S5: Probabilistic thinking is not the way our brains are wired. And I think we can’t operate under the assumption that, well, if everybody just starts doing that this, then everything will work out well, because that will never happen.
S4: I think one of the things that scared me kind of thinking about how even the bad statistics are even better than you thought, the idea that you brought to our attention this week is like it just feels like another piece of a breakdown in shared norms and understanding about what is even the truth anymore. In twenty twenty. It’s like people don’t trust, you know, the news from mainstream media anymore. People don’t believe what politicians say and even these. Statistics that most people used to believe maybe aren’t even right anymore, and I mean Anna said just a few minutes ago, like these have always been kind of bad and shaky. And if everyone starts thinking that, then, like you see, it becomes harder to solve basic problems, especially thinking about the unemployment rate right now and our ability as a country to understand that there is an unemployment crisis is is really damaged by this.
S3: There’s this famous slogan that everyone is entitled to their own opinions, but they’re not entitled to their own facts. And there’s this kind of assumption underlying the slogan that we can know what the facts are and then we draw our opinions from the facts. And the problem with this crisis is that we can’t know what the facts are and. You know, maybe on some weird sort of. Ontological level, that means the fact kind of disappear.
S5: Yeah, yeah, I think this is a I think that’s a really good point, though.
S7: Emily, what you’re saying, like, I just I agree. Like when I was even speaking before and talking about it, I was almost trying to caveat it because I didn’t want to suggest that I was saying, like, you shouldn’t trust government statistics. But the problem is like, yeah, like people there have always been problems with them. And anyone who’s ever worked with numbers knows that, like, numbers are not perfect. It’s very easy to miss large numbers. It’s very easy to interpret numbers in certain ways, but it’s very hard to have those two narratives that, yes, you should trust what the government is telling you.
S5: However, there are also problems with these numbers, though.
S3: The one thing I will say is that the government really, honestly, genuinely does have the best statistics out there and the most reliable statistics out that there are a million private sector data providers and they all collaborate against the government statistics. This is one of the reasons why it’s so important for government statistics to be reliable. But there is absolutely no sense whatsoever in trusting a private data provided more than the government. There was no private data provider who is more accurate than the government just does not exist.
S1: But I think that the issue after that or the the bigger issue is how we live now in a world of amateurs. Right. The Internet allows the amateurs to supersede the professionals. And so I think a lot of what we’re talking about are things that statisticians and pollsters and government bureaucrats are well aware of and have been well aware for a while and trying to do their best to figure out how to calibrate. But forget that. Right, because now the Internet allows everyone to see everything. And so a million, a million amateur interpretations sort of take hold and win. Right. And it’s that perception that supersedes everything else. And so therefore, a fact is never a fact. It’s just the swarm. So let’s blame the Internet again, please. I blame Trump. Well, he’s born of the Internet like that. That’s the funny thing about him is, you know, he won big yesterday.
S4: I don’t know if you fellows saw it, but it was a chart that purported to show we just gained it was a badge.
S7: Oh. So we didn’t see what he was trying to say that like they created more jobs in the past two months than the Obama administration created nearly five million jobs. Yes, it’s like I burned down this house and then I partially rebuilt it.
S4: And the other chart that was just like manufacturing. And they were just like numbers on the axis. And no, like No Labels numbers were no labels and just like upward as the representative here echoes.
S3: The classic example was the random piece of paper that the president gave to Jonathan Swan during that interview. And he’s like, look, we have the best hope in the world.
S1: And you’re like, yeah, just bars on a page is just astounding.
S7: As long as they’re going up our gas covid maybe down, but.
S3: Sadly, yes, we actually we actually invited you on this show not to talk about EPIK and not to talk about it, wasn’t it so much to talk about? It was all really fun. But we invited you on this show because there’s a some guy died at the age of 97. What happened?
S1: No, my goodness. Sumner Redstone finally died. The thing that he said would never happen happened, right?
S3: I did say that. He did say that he would live forever. You will live forever, even if the only way that he communicated was via an iPad, which had three buttons on them saying Herman Cain is still tweeting.
S1: So from beyond the grave. No. So but I think Sumner Redstone was arguably one of the most foundational. Executives, entrepreneurs in the media world, he helped to sort of formulate this idea of a media conglomerate like media conglomerates didn’t really exist up until like the 80s and 90s, right. Where you had like Sumner and Rupert Murdoch and Barry Diller and John Malone sort of pull everything together into these big mega corporations and pieces that lived under other big companies for different periods of time. But, you know, when Sumner came on the scene, he was relatively old. He was in his 60s, really, when he became like a big media mogul. He bought his family, owned this string of drive in movie theaters, and he turned it into a big business. And based on the strength of that and the ability to kind of borrow ungodly sums of money, he he bought Viacom, which was this sort of up and coming. He was MTV. That’s where really what it was. They were like the original disruptors in the media business. Right. Cable came along and said, screw this broadcast thing. You’ll pay us money and you’ll watch commercials. And people are like, this is crazy. And it just it became huge. And so that he did that, he bought Paramount. That was probably the biggest, I would argue, the biggest media deal. A biggest merger deal, really, in the media world. You have to sort of look at it in context, right? The size of that deal is only about ten dollars billion. But when it was happening, he was up against John Malone and Barry Diller, these two guys who are actually bigger than him and had more clout in Hollywood, and somehow he wrested it away from them. And Paramount at the time wasn’t just a studio. It had Simon and Schuster and all these other things associated with it. So just the most brazen executive, probably the world has that this industry has ever created finally died. And so, you know, that was that was the big thing.
S3: Now, of course, how does he compared to Logan Roy?
S1: So I did talk to Jesse Armstrong for a bit about how he formulated succession, our favorite show. Right, guys. And so it started out as a play that was focused on Rupert Murdoch. And then when he was being turned into the show for HBO, he like sort of recast that character, the the main the patriarch character, Logan Roy character, to be more of a 50 50 between Rupert and Sumner. Right. And the way we know that every time you see Logan yelling and screaming that Sumner. Right. That he took that from Sumner Summer was known as a yeller and a screamer and sort of made people shake in their boots just by the sound of his voice. Rupert was not that Rupert is not a yeller and a screamer. He’s a much more quiet, subdued, no less ruthless. But he doesn’t his his whole his whole affect is just much more quiet.
S3: Right. Which brings me back to the Sumner Redstone iPad when in his mid 90s, when he’s still improbably alive and the only way he can communicate is by he has an iPad with three buttons on it. And the first button is yes, in the second button is no.
S6: And the third button is fuck you, which the did not print, which we would not print. Yes. No, we mourn.
S1: You know what the way to get words like that through require, I don’t know, like three or four levels of kind of star chamber vetting that like you know what, let’s just I feel like for Sumner Redstone though, like, you know, you must have been sitting on this obit for the past 20 years.
S7: If you have enough time to get the facts, you. That’s a good point.
S6: You know what? How do you respond? You would think.
S1: But the funny thing is, is that, you know, like I had a version of this in the file for like two years. It’s just been sitting there and like, you know, yeah, we’re going to get to it. We’re going to get to it. And of course, when it finally happened, it’s like, oh, where’s that file again? And like, no one had seen it. Right. So basically, it’s being edited as it’s happening. And, you know, we get the story out in some shortened form and we’re still going through it. And, you know, the the funny part is that, you know, as the story went out, like I got this great Barry Diller emailed me. He gave me this great quote because they were like longtime rivals, longtime nemesis. And I’d always ask Barry, hey, if I’m going to say about so-and-so, please let me know. And he sent me this great quote. Right. And I’m like, I started on it all. Let’s drop this in. And, you know, he’s like, oh, we got to we kind of vet this. I’m like, what are you talking about? This is an on the record quote. And, you know, here’s how we do things at the Times. The quote goes like this. Sumner Redstone was for all his business thuggery, one of the last truly great and visionary players and media. It’s such a great quote. Right? It’s sort of in keeping with that world where these guys would do, like knows what business thuggery is.
S6: I mean, that’s because he knows it.
S1: He knows it firsthand and he’s saying it with affection. Right. As well as a bit of a you know, he’s sort of a left handed compliment and like, you know, they’re like, well, he’s dead. So we don’t want to just look like we’re just letting him say whatever he wants to say. Like, you know, in the Times I’m like, oh, my God, this is exactly like how these guys are with each other. This is a reality we should put in there. So it eventually went it it just took a while. Right. So anyway, it’s we want to make sure things are are vetted properly. That’s how we do things at the times for better and for worse.
S4: Can we talk about Shary and his ship with you to talk about very Shakespearean and succession to mine, that is.
S1: Yeah. And I would argue that’s more successfully than even Rupert and his kids. Right. Which yeah. You know, James actually stepped off the board of News Corp a few weeks ago. So that was a moment that was sort of like a a sort of Kendall Roy moment, like the end right away. But his relationship with Sherry is incredibly contentious for years and years and years. So much so that at one point, like Sherry sort of in an email to her son, this was sort of when they were having a succession battle even just a few years ago, where they were sort of there were lawsuits back and forth over who owned what of which part of the business. And Sherry emailed her son saying, you know, your grandfather says I’ll I’ll succeed him over his dead body. Well, yeah. Well, here’s the thing, though. She did already. To succeed him. A few years ago when he was in this iPad state, right when he’s in the yes no fuck you state where he couldn’t talk very well, she you know, she they finally reconciled and, you know, she took care of him. And she’s the one who managed the business. Right. And so Sumner has a controlling stake in the parent company of Viacom, CBS, and he is the only one. But when he sort of lost his speech and couldn’t, you know, couldn’t communicate the way he normally does, she sort of was his effective proxy. Right. So even after death, you know, that doesn’t really change because though that ownership stake goes into a trust that she is on along with her son, along with, you know, family members and friends, basically. So she had she has had effective control and she continues to have effective control. So she won just two years ago, even before he died.
S3: So. Yeah. Exactly what kind of a media mogul is Shari Redstone and Viacom? CBS. So people talk about Sumner Redstone then these kind of world historical terms. But you look at what she’s running now and it looks like the sixth largest streaming company like of the size that it’s a it’s a great point.
S1: So I think at its height, Viacom, CBS, like, even though they were separate for time and together for a time, they’re both controlled by the Redstone family at its height is worth over 80 billion dollars today. It’s worth seventeen and a half billion dollars. Right. It’s actually, I think, still worth less than it was when the two were separate businesses just a year plus ago. So what who is Shari Redstone? She is not her father. She is a much more she’s, I think, just as ruthless, but not her whole aesthetic is different. Right. She is much more considerate in terms of what she wants to do. A, B, C, D, she’s much more orderly. She’s a lawyer just like her dad. But her approach is different where it’s just more methodical. The difference, though, is that she’s coming into a little late. And what sources have told me is that when she finally sort of had control of the business and this had to do with when Les Moonves was at CBS and he was it was a crazy moment where he and other board members at CBS were trying to outmaneuver her with sort of a weird proxy vote. And she eventually won that one. You know, there was a moment where she was thinking, like, finally, I got this. I don’t really want it, but it’s like she finally got the keys to the car. She just wants to take it out for a spin. And I think that’s what she’s doing. She just wants to be the mogul for the next year or two. And then but I think her endgame here is to just sell it. And I don’t think she’s she’s in it for the long haul at all. Who buys it? Well, if I were advising her, I would tell her to go gift Jeff Bezos or call and say, hey, I know you have a piece of this Yankees. Yes. Network. I know sports is important to you. You think it’s a big deal. And I agree with you. You can’t get sports without a broadcast network. No. One, NFL, MLB, these guys are not really going to do serious business with you if you don’t have broadcast. And so we’ve got it. And I think that’s part of her way. And I think he would be the best buyer. Just in terms of what? Amazon already has and what it’s trying to be, and he’s sort of dipping his toes in that direction, short of that, I mean, I think. I actually think it’s harder to sell it to another media business just because it’s already broadcast come to can’t own broadcast stations. So I think it’s going to be a tech business. Anything that’s tech, it’s got to be Amazon.
S3: Let’s have a numbers round and that you have.
S5: No, I do. My number is two and seven eighths. That is the coupon on one point three billion dollar issuance from this high yield US company, Ball Corp. It was the for a 10 year issuance, the lowest ever for a junk rated company that just came out this past week. And I realize this is kind of an ongoing thing, but it’s just kind of another example of what a bizarro world we’re end of, how spreads have declined, that we’re in the middle of this massive crisis. Get a high yield. A high yield company is issuing at lower than three percent.
S3: My number is 17 cents, which is a stock trading number. Back when all of the stock trading companies, first Robin Hood and then all the rest of them made themselves commission free the cognoscente, let’s say we’ll be like, oh, you’re charging zero commissions. You’re not you’re not charging seven dollars or five dollars or whatever it would be per stock trade in commission. But, you know, you’re still making money other ways through this thing called payment for order flow. And I’m not going to go into the what payment for all the flowers we’ve talked about a little bit before on the show. But now, thanks to an FCC rule six 06, we actually know how much Robin Hood makes. And the answer is 17 cents for every hundred shares you trade. And I can tell you that on one hundred shares, it’s a big trade for a Robin Hood customer. So, yeah, it might not be completely free in terms of Robin Hood revenues, but it’s certainly a hell of a lot lower than seven dollars.
S1: So it’s based on volume and not not on it’s not it’s not a commission against.
S3: A stock price, it’s a bit complicated in the different brokers work in different ways for the average, but the way that you can make comparisons between Robinhood, E-Trade, Ameritrade and all of Schwab and people like that is by looking at this thing called basically payment for the flow per one hundred shares traded. And although it’s 17 cents per one hundred shares traded, that’s very much weighted towards non S&P 500 shares, which generally traded much wider bid offer spreads because you wind up paying that full spread. Basically, when you’re a retail investor, if you just trade S&P 500 stocks, it’s much, much lower even than that.
S4: My numbers also in the sense realm, Felix. Oh, what’s your number? My number is 15 cents.
S3: You’ve undercut me.
S4: Yes. That is the amount that AMC will charge for a movie ticket when they open back up on August 20th, 20, 20 movies at 19, 20 braises. Yes, exactly. And I think it’s probably still too high. I mean, everyone that I saw talking about this was like, why would I pay 15 cents to get the covid? Not that bad. Why would anyone do this? And I think it just goes to show, like, there’s still this drumbeat or this notion out there that you can, like, reopen the economy or something and everything will be fine. But like AMC, you can’t even sell a movie ticket.
S3: So I like this idea. I have to say, I like this idea. There are two different ways that you can go if your AMC. One is that you can take out three quarters of the seats in the theater and try and sell seats for four times what you assign them for before. And by doing so, you basically strengthen all of the players the people have about. It is not safe to be in the movie theater and I have to stay far away from people and all of this kind of feeling. And then the other way is to is to really bring the price of movie tickets down to 15 cents. And people might feel a bit awkward the first time. But, you know, if the movie is big enough and they want to see it enough, maybe they do it. And if the price is low enough and then if if people do go and see the movies at 15 cents and they get used to it, then they’ll do it. They’ll be like, oh, that wasn’t too bad. And they’ll do it again. And I think in that sense, it’s a little bit like my favorite subject in the world, which, as you know, is elevators, that people people who live in the elevator buildings are much, much more likely to be comfortable taking an elevator to work than people who don’t live in the elevator buildings is what it’s basically just a function of what you’re used to. And the big problem that AMC has is that no one’s going to the movies since March and people aren’t used to it. So you have to make people comfortable with it somehow. And this is one way of trying to get there. Whether it will work, I don’t know. But it’s definitely I can see what they’re doing.
S5: The only problem with that, though, is that it is, in fact unsafe to be in a movie theater for an extended for like two and a half hours with other human beings close to them. So I hear what you’re saying. If, like, we actually were past the pandemic and it was just a matter of getting people feeling comfortable again. But I guess my concern would be it is about actually unsafe in the environment after a few weeks, after a few weeks of feeling comfortable going to a theater like when the Kobe case is Spike.
S1: That’s right. About it’s just going to be over to shut it back down. I think you’re right. I think that’s the idea that I mean, just sort of the bigger, bigger issue with AMC theaters in general is just that whole media industrial complex is, you know, the smart the smart person would have figured out, you know, maybe no one’s that smart but would have figured out some years ago, like distributions and streaming or distribution in some online thing. So we need to invest in that instead of this physical apparatus. I mean, one of the theaters I used to go to, Drafthouse, which is based in Texas, but we have one here in Brooklyn. You know, I’ve been getting emails from them like, oh, you can stream you know, they have these sort of older films that you can stream off their service, that you can pay a few bucks and start watching at home. And that’s actually kind of smart. I don’t know that it’s changing their economics in any significant way, but it was one of those moments where like, yes, theaters are just distribution. I know they’re making their margin off the popcorn, but still, it’s like, you know, that’s where I just don’t think this is going to last. I think theaters ultimately die not because of not just because of covid, though it hastens it, but they just didn’t realize that distribution had changed.
S4: Also, the movies they’re showing are Ghostbusters, Grease and Black Panther. And if you look at like what’s been selling at the box office and the pandemic, it’s these old movies like from the 80s nostalgia. Yeah. Yeah. I just they’re I’m not going to go off like some like back in my day we had good movies, but I feel like it’s a it’s a sign that like. Movies is just it’s over.
S3: Back when back when I was working at Reuters in Times Square, the only time I’ve ever been to a Time Square movie theater was there’s this big multiplex on four U.S. street which decided it was going to show The Princess Bride, which is, of course, the greatest movie ever made on the big screen. And I went there with my wife and it was magnificent. I’d never seen it in the theater before. And I’m telling you, it’s much better should if you ever get the opportunity to see the Princess Bride on the big screen, do it for fifth time.
S6: I was I have one.
S1: I had I had a number that, you know, I’m going to adjust based on what you guys have been doing. I have also a sense number. OK, thirty nine sets. What’s that is the split adjusted basis IPO share price of Apple when it went IPO on December 12th, 1980. In other words, it had split four times since its IPO and it sort of IPO share price was effectively thirty nine cents. It is now trading at four fifty four, four hundred fifty four dollars and ninety eight cents. I mean it was a way of getting to this point about, you know, Apple announced a four four one split July 30th. I mean, what is that?
S6: Can somebody tell me what is the point of this? What is the point of this split? I am going to I am going to answer that question. Yeah, please. I want to yes.
S3: I’m going to answer why why you might want to do a share split coming up if you are a sleepless subscriber. Thank you very much. And you get to hear the answer. If you’re not subscribe to Slate person, you get the answer.
S6: Otherwise, thank you very much for listening to at least they you OK there anything you I’m getting you.
S2: This is this is a paywall for stock. Thank you. It’s been awesome having you on this show as ever. We should just have you heard from the. Because it’s great. Thank you all for listening. Thank you to just me and Molly for producing. And we will talk to you next week on Sleep Money.
S5: OK, and do you have any good reasons why companies should split their stock, because I have to, I think well, I mean, there are the old fashioned reasons that I guess the reasons I mean, back in the day when you, like, didn’t you would be hurt if you bought an odd lots you wanted to buy and round lots and you couldn’t do fractional share purchases. Then, of course, it made sense to do share splits, because if I’m a retail investor and I can only buy one share and my share price is five hundred dollars, then obviously that’s going to limit the number of people who can buy. So that would both increase. The amount people could buy would increase liquidity.
S3: And it worked the other way as well. Of course, back when Berkshire Hathaway was one hundred thousand dollars a share or something, this was a way that Warren Buffett tried to ensure that people would buy and hold his stock because you’re not going to be trading in and out of one hundred thousand dollar shares.
S1: Well, also that a certain type of investor that you had that kind of capital to begin with. And so you you couldn’t just be some bloke off the street. You’d have to be someone with some knowledge. It’s now trading at three hundred and seventeen thousand, by the way.
S5: So, yeah, now and then the reality is like part of the reason I think this was also bigger news is because stock splits aren’t as common for the obvious reasons that the justification for them is not necessarily there. However, there are still reasons you might want to do it. One is frankly just psychological that there’s even if you can buy a fractional share price, it seems to be that if the share price is lower, that does actually kind of can sometimes actually increase retail buying.
S4: I thought my completely ignorant feeling about this was you just did it like, you know, when you cut a plant and then you grow a new plant from the old plant and then you have two growing plants and there’s like more plants. I thought, that’s what.
S6: Yeah, why you do stock splits to make the stock price. But now the plants are still volume wise the same. Right. You know, there’s a plant. I mean, you have like they’re smaller, right. So even if you were to sort of liquefy them, you get the same volume of plant in either case, I don’t know. I’d have to do an experiment. Please.
S5: Can the fact that discussion. Yeah. It doesn’t affect the value, although it does affect the position in the Dow because the Dow is.
S6: So that’s one reason he should be eliminated. The Dow, which really should be abolished, period.
S1: And we should never talk about ever, ever, ever, ever.
S3: But but but the fact is that one of the main reasons why Apple. Wasn’t in the Dow for so long is precisely that it dragged its heels on splitting its shares and there was no way it could enter the Dow until it spread its shares because its nominal share price was so high and the Dow is based on the nominal share price. OK, the Dow is a dumb index, but people do look at it. And so that’s one reason to split your shares. One other reason to split your shares is. There’s something else which is based on nominal share price, which is. That if you if you’re a nominal share price falls below one dollar, then you can be delisted. This is a technical thing on the New York Stock Exchange and the Nasdaq there. Like we don’t want these things called penny stocks on the stock exchange. And and the one dollar share price is a very, very important level below which companies don’t want to trade. And if you’re trading at a thousand dollars a share that. Is meaningless in order for that to actually be a meaningful thing, you want the historical idea that most stocks would trade around 20 bucks to become actually the norm, because that’s why they’ve put that one dollar thing, that if you fall by ninety five percent, then we have to start talking about delisting right now. If you a thousand dollars and you fall by 95 percent, you’re still nowhere near one dollar and you don’t need to worry about that. So it’s good to have that norm in place for so long as that one dollar rule I think is in place. And then finally, I think options trading because options.
S6: Well, you can’t well, your trades fractional shares of stocks, you can’t you can’t change options.
S1: So I think that is the one I agree with that. That will be the one reason I don’t think that’s necessarily the reason why Apple did it. I think Apple did it for the psychological PR effect. But the real world effect of options, trading your apps, you’re right.
S5: That is a real, real thing, although we don’t want a lot of retail investors doing options trading.
S1: But look, I mean, PR effect, like the idea that like, you know, insider trading at four hundred dollars a share trades at one hundred dollars a share. Right. So it’s more sort of an of the people stock. Right. That there is kind of a that any Joe blow off the streak and can own a piece of apple, you know, one hundred bucks is more doable. 400, 500 bucks is hard for a lot of people. Even a hundred dollars is hard for a lot of people. So.
S3: Right. And that’s interesting that we have seen a few of these stock splits, but when they split, they split down to, you know, the hundreds. Still, we don’t see so many stock splits back down to twenty or fifteen. You do find that when companies IPO, they generally IPO at around twenty bucks. Yeah, that’s normal. But when they if they then rise up to five hundred and split, they don’t split back down to 20, they split right down to one hundred.
S5: Right. Yeah. Well again I think it’s psychological. It’s like you don’t want it to look like it’s so low but it’s all B.S. because at the end of the day there’s nothing to change about the value. It’s you know.
S1: But but to your other point, feelings about the penny rule. I mean, I do. I think that’s correct. I like that point. I do think that penny rule should be revised. I don’t think a dollar cut. I mean, it should be ten dollars or something.
S5: You know, I think anything trading below maybe five dollars or maybe just do in terms of market cap or in terms of the cap, you know, no, I agree with you because even though I think what you’re saying makes sense, the fact that almost no one splits their stock anymore then suggests that that rule is useless.