The Bitcoin Simulation

Listen to this episode

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

S2: Hello and welcome to the Bitcoin simulation episode of Slate Money or Guide to the Business and Finance News of the Week.

S3: I’m Felix Salmon of Axios. I’m here with Emily Peck of Huff Post. Hello. I’m here with former journalist Anna Shamansky. Hello. Whose penultimate Slate money show this is. We will invite you to come up with some questions for her final show later in the show. But before we do that, we are going to talk about fast fashion and how it has done surprisingly well during the pandemic. We are going to talk about dating, which is a big business on the stock market. And we are going to talk about Tesla and why on earth it feels the need to be sitting on one point five billion dollars worth of Bitcoin. Fun conversations all coming up on slate money. So let’s start with Tesla buying one point five billion dollars of Bitcoin. Obviously, this is Elon Musk doing the thing he does best, which is jumping onto Meems, but beyond Elon Musk is meme Lord. And do you have a theory of the case like what the hell is going on here? And is this a sign of, like, extreme decay of late capitalism that you have companies doing crazy things like this?

Advertisement

S4: No, I think this is somewhat unique to Elon Musk. I think that this is likely as simple as the fact that Elon Musk has bought into the Bitcoin thesis or at least part of the Bitcoin thesis and believes that, hey, I’m going to take a percentage of my now relatively decent sized cash holdings and invest in this thing that I believe is going to go up significantly. And because it has gone up significantly in the past six months, he assumes it is just going to continue forever, just as Tesla stock has gone up during that exact same period of time and apparently forever.

Advertisement
Advertisement
Advertisement

S3: So let me unpack this a little bit. What we’re talking about is not where Elon Musk is investing his personal billion. Most of those are still in Tesla shares. And in SpaceX says, rather, we are talking about where Tesla is investing its cash. And there have been precedents in the past at places like Airbnb for companies to use their Treasury holdings, as they’re called, that cash holdings is a little bit of an internal hedge fund. Apple famously has a very secretive subsidiary in Nevada, somewhere that investors cash in credit instruments and it manages to eke out like zero point five percent on its cash holdings rather than zero percent. And you can see how a treasurer would want to maybe have a little bit of yield on this cash. But going from like I’m going to take a tiny bit of credit risk, too. I’m going to invest one point five dollars billion in Bitcoin. Seems to be a massive leap.

Advertisement

S4: Yeah, this is not cash management. This is speculation.

S3: And it’s something that companies do is speculate with their cash.

S4: No, no, not normally. Because, you know, again, this is not his cash. This is the company’s cash. This is fundamentally the shareholders cash. And the idea is that when necessary, you may also have to use that cash. And the other thing is this is kind of a wonky accounting thing. But if you invest in Bitcoin, then also if the value of Bitcoin goes down, you now have to mark down your cash. But at the value of Bitcoin then goes up. You don’t get to market back up. It’s it’s a very bizarre move.

Advertisement

S3: So the only other company that has really done this is this rather obscure shop called MicroStrategy. And they seem to have basically given up on being a company and they seem to have decided that what they want to do is just be a Bitcoin holding vehicle. And so they’ve bought a whole bunch of bitcoins. They put it on their balance sheet. And now if you want Bitcoin exposure by buying something on the stock exchange, you can just buy MicroStrategy stock. This is effectively an end run around the S.E.C. A lot of people have tried to create like exchange traded funds or French traded notes or something like that, which you can buy Bitcoin exposure on the stock exchange, the winkled. I have tried. Barry Silbert has tried. A bunch of people have tried. Everyone has failed. So my strategy is basically done. The Spack group here, he’s taken a listed vehicle which already reverse merger and reverse merged it into a bunch of Bitcoin. And now the MicroStrategy basically behaves like Bitcoin. So you can kind of see the logic there. Yeah, you know, I mean, if you want to buy Bitcoin on the futures, buy Bitcoin, then buy MicroStrategy. But for Tesla, there’s not even that logic. No one is. Buying Tesla is a way of getting exposure to Bitcoin.

Advertisement
Advertisement
Advertisement

S4: No, I agree, it makes very little sense and I think I would be really nervous about is that I think there is significant overlap between the significant amount of retail participation in Tesla and the significant amount of retail participation in Bitcoin. And the fear is that in the same way that they have recently gone up exponentially, both of them, I think they very easily could go down at exactly the same rates or very similar rates. The one nice thing about Bitcoin, if you were an asset manager, was that, well, you could say it’s not actually well correlated with other traditional assets. You think you could add it into your portfolio to reduce volatility overall because it’s not well correlated if you’re Tesla. That just makes no sense because it seems to be, especially recently, very well correlated.

Advertisement

S3: It’s my favorite chart. It’s not just highly correlated, but in fact, if you do that and I’ve done this three times now because I love this chart so much, if you chart the total market cap of Bitcoin against the total market cap of Tesla, the lines are directly on top of each other. It’s amazing how they are worth almost exactly the same amount and they have been for well over a year.

S5: What to make of that? I mean, so on Thursday, Elon Musk, the MIM Lord, tweeted the following. I had it written down on a card, but I lost the card. But luckily I have the Internet to help me here. He tweeted, Frodo was the underdog. All thought he would fail himself most of all. Then a picture of a ring and under the picture of the ring with all different cryptocurrency is ticker symbols or whatever on it. And then under the ring it says one coin to rule them all. So he tweeted that and then, you know, the price of Bitcoin jumped seven percent. So none of this makes sense to me in any rational way. It seems truly insane. And when Felix asked, is this some sort of would you call it late, late capitalism frenzy or insanity or just the sign that everything’s going south? I kind of feel that way. This is Bitcoin is doesn’t have any value. And as Anna and says all the time as a currency, it’s insane because it jumps around.

Advertisement
Advertisement
Advertisement
Advertisement

S3: You don’t want to die. It doesn’t it’s not a currency, although nothing. The other thing we should mention is the Elon Musk has announced at the same time that he announced that he was buying one point five billion dollars of Bitcoin. He also announced that he would be accepting Bitcoin as payment for his cars. Now, thanks. No, no. Yeah, OK, so I’m going to push back a little bit on that. In any economically rational world, this makes no sense. If you have a bunch of Bitcoin and you want to buy a Tesla, then you can just sell your Bitcoin and buy it. That’s how people have done it for years and that’s how people can continue to do it. And it’s no easier to just transfer your Bitcoin than it is to Bitcoin and buy the. This is true. On the other hand, there is a psychology here and a little bit about this in my newsletter this week that what Elon has done and really he’s the only car manufacturer who’s capable of doing this, is that he has aligned Tesla with Bitcoin. There are a lot of Bitcoin faithful out there, the models. And when they want to buy a car, you know, most of them, because at some point when they want to buy a car, that is now very clearly the Bitcoin car, the car that is associated in the public mind with people who like Bitcoin. And it is also the case that people don’t think of Bitcoin wealth as being real wealth. It feels unreal. And people who might not spend forty thousand actual dollars on a car might actually spend one of their Bitcoin on a car because it just feels like it was never really forty thousand dollars in between. There’s a funny psychology there. It makes no sense on a sort of rational economic level, but I do think that at the margin he might get one or two people to buy Tesla who might otherwise have gone out and bought a Lamborghini or something. But now, like Tesla is the cool Bitcoin car. But that’s not enough to justify a move of this magnitude.

Advertisement
Advertisement
Advertisement

S6: It does seem like a branding exercise somewhat on Tesla’s part. That framing actually makes a little bit of sense to me, like Elon Musk is associating himself with this thing that a lot of people like and hold and the people that like and hold it have money. So why not? It’s like kind of like how Subaru associated itself with like the LGBTQ community, and that’s been really good for them.

S5: So Elon Musk is associating himself with the crypto community.

S3: So, I mean, OK, that partially because I like the idea that the Tesla is to crypto boys as lesbians.

S4: That is pretty great. That is pretty great. So I think from Tesla’s perspective and from Elon Musk perspective, I can understand why that makes sense, but. For the holder of Bitcoin, it makes no sense because if you’re holding Bitcoin because you believe not that it’s going to hold its value, but you’re holding it for the speculative increase, that’s why you’re holding it. You think it’s going to significantly increase in value. So why on earth would you exchange it essentially for a Tesla which is going to significantly depreciate in value?

Advertisement

S3: OK, two two answers to that. One is that, like, there’s no such thing as holding for like you have to one, there’s no such thing as holding forever. But to like it’s the idea of like I win a free car. I made this like smart investment, however, many years ago and now I get a free car. It kind of feels better than I convert it into money and put the money into some other asset. And then I can put it into my retirement fund and maybe I can have something to live on in 30 years time. It’s like I get a free car so I can see that. Look, are you logically correct? Yes, but this is not you know, if you try to unpack the logic of the hotlist like that way lies madness.

Advertisement
Advertisement
Advertisement
Advertisement

S4: Well, the other thing that is very true, the other thing, though, I will say is that this discussion we’re having and Elon Musk’s statements are all based on this idea that what we’ve seen in Bitcoin since Natur last March is going to continue forever, as though what we saw previously in Bitcoin, where it declined significantly from the heights it reached in twenty seventeen, as though that will not happen again. Now, I don’t necessarily think Bitcoin is ever going to go to like zero again. I think it seems to be establishing itself in some way, but it’s unlikely to just keep going up and all of these individual investors are just going to happen to buy it at the right time, that it’s going to increase in value at the point that then they can go and exchange it for their Tesla like you’re going to hold it and you’re like, well, it’s going to be super volatile. But I think in 10 years it’s going to be significantly higher than I was. OK, maybe I can buy that. But if it’s anything more short term than that, it makes no sense.

Advertisement

S3: Now, if you’re on the short term investments, then then clearly you have to buy dogecoin. Yes.

S7: Clearly the sensible option, the sensible option does feel like Elon Musk is at the top of some grand pyramid scheme, like he’s going to be fine. Oh, he’ll land on his feet or go to Mars one way or the other. Or I will like I’ll wake up in 10 years and we’ll just be like, what was that about? Like, people really thought he was smart. Like, look what he was tweeting. Like, the scales will be removed from people’s eyes and it’ll be obvious that this is a delusion that we’ve all participated in.

Advertisement
Advertisement
Advertisement

S4: This is the I hope you like the John law of this period of capitalism.

S3: Like the thing about Elon is a he’s just you know, he’s smart in terms of like engineering smart like Tesla and SpaceX rockets and clever electric tunnel boring machines are clever on some level, you know, all the way back to the kind of work he did back on PayPal back in the day like it was clever. But beyond that, he is enjoying himself. And I remember a couple of years ago when he was clearly not enjoying himself and he was firing everyone at Tesla. And Tesla was three weeks away from running out of cash. And he was clearly extremely unhappy and. Now, you know, as often happens when you become the richest man in the world, like, you know, he’s a lot of those cares and worries have kind of melted away and he’s like. I’m going to have fun on Twitter. I’m going to have fun with my company. There’s lots of downsides to being a public company, like he wanted to take Tesla private and he wasn’t able to. And now he’s trying to find some kind of silver lining in having a public company. And this is one of the ways he can do that. And it’s kind of selfish and narcissistic on one level. But I think if you look at it as a guy who’s like I have a bunch of followers on Twitter and people who feel like they’re in on the joke in a kind of lull, nothing matters post-modern way, it starts to make a certain amount of sense.

S4: So I would just say, like, look historically at every single bubble and you always have these figures who are the ones kind of at the forefront. And at first everyone’s like, oh, I don’t know about this thing. And that is significant increases in value. And then because it’s increased in value, everybody convinces themself that there are some type of logic behind it and that this person knows what they’re doing and they like build statues.

Advertisement
Advertisement
Advertisement

S3: Yeah, I think I think that’s exactly the worry here, is that Elon isn’t taking this particularly seriously for all that he’s just invested one point five billion dollars in Bitcoin. Like certain things you take seriously, like weirdly like he takes the great technology thesis that we’re all living in a simulation, you know, quite seriously, that kind of thing. But while he’s treating it as a joke, and while I think most of his followers on some level are treating it as a bit of a joke, and we talked about this in the Wall Street best episode, like the way that a lot of people on Reddit, you know, just playing this is a game. They’re not really serious about it. I think you’re right that the danger here is that people really start to the not everyone who follows him is that easy come, easy go as he is.

S6: We should also mention the the bitcoin destroys the environment, conflict with Tesla. Good for the environment thing.

S3: We should totally mention that. It’s absolutely it’s so hypocritical that Elon has been if you know, if he stood for anything for many, many years, it was for creating a much more environmentally responsible auto industry and a bunch of very green ESG funds and all the rest of it started buying up Tesla and making a lot of money from owning Tesla and saying, hey, look, being green can be cool and profitable. And Tesla was the first electric car to go fast. And that was a big thing. Like electric cars didn’t need to be like, oh my God, I’m in some horrible battery operated vehicle which goes ten miles an hour. It was like Zoome, I can, you know, go faster than the Porsche. And Tesla was cool in that way. And then Tesla became cool in terms of being a profitable investment. And suddenly it was like, I can be environmentally responsible and make lots of money at the same time, which was great. And now he’s really kind of blown a hole in that argument because Bitcoin is just the carbon footprint of it is bigger than it uses more electricity than Norway.

Advertisement
Advertisement
Advertisement

S6: Actually, when you think about Tesla, it doesn’t have that kind of like hippie energy that you would expect from like an electric vehicle.

S4: And that’s by design. Yes. Yes. So I could it’s not a Prius.

S6: Right. And the brand is so not associated with that vibe that like doing this and hurting the environment by, you know, investing in Bitcoin. It’s a still a solid brand exercise simply because that’s just not how I think a lot of people think about Tesla, especially the people who buy it.

S4: Maybe here’s a question about the electricity use. And I don’t know this. I hope will you guys do once you’ve actually mined all the coins and all the coins are my mind and then you’re just exchanging? Does it still isn’t it the mining that actually uses all of the electricity?

S3: So, yes, and that point happens, I think around twenty one fifty that twenty one billion Bitcoin gets mined up until then. The mining is is really the. You’re right. The main part of what uses up energy, although there is also a huge amount of energy also being used on kind of ratifying the transactions that whenever you make a bitcoin transaction, a bunch of computing needs to happen and a bunch of computers need to agree that that transaction happened and that ratification. That’s what I was wondering. It involves electricity and in fact, that the average price of a Bitcoin transaction is over ten dollars. Now, this idea that it was like going to be free and it was going to be like this super cheap way of moving money around is is crazy. It’s like it’s become incredibly expensive.

Advertisement
Advertisement
Advertisement

S4: And that’s another reason why I will never be an actual currency, because it’s incredibly inefficient.

S3: Why don’t we talk about. Dating, which no one has done for the past year, apparently so I’m told that perhaps I’m misinformed on this, but it’s the area of the world that is clearly a little bit subdued in the in the age of social distancing. And like everything else that subdued in the age of social distancing seems to be in a stock market bubble that everyone’s like that the big stock market wins these days are all of the companies and industries that have been hardest hit by the pandemic. Emily, tell me what happened to Bumble this week?

S6: Bumble had an IPO this week. Bumble is the dating app founded by Whitney Wolfe. Heard she was actually one of the co-founders of Tinder, which is another dating app everyone’s heard of. And that ended really acrimoniously for Whitney Wolfe heard. And there was a lawsuit and sexual harassment allegations, blah, blah, blah. It was a whole blow up. And then she went on to found Bumble, which its whole conceit is that women are the ones who decide whether or not to make the match. I think this is right. I’ve actually never used it because married. But anyways, that’s the idea. And it’s relative. It’s pretty popular. And it was founded in twenty fourteen and it’s been a success. And then Whitney Wolfe had more drama because her investors at Baidu also had some like harassment allegations against them. And there was a whole blowup there. There were legal fights with Match.com, which is the big player in the space, blah blah blah IPO. Yesterday, Whitney Wolfe heard the stock popped. Seventy seven percent and Whitney Wolfe heard is now a newly minted billionaire at the age of thirty one, the youngest female billionaire around, I think, to IPO. So that’s kind of the bottom line there. Big dating company goes public, makes lots of money in pandemic.

Advertisement
Advertisement
Advertisement

S4: Yeah. And I don’t think that dating companies are necessarily doing horribly. People are still chatting and talking online and some are still meeting in person. I do think that the main reason that this had such a big pop was probably just because it is a somewhat well-known company. Like this is a very frothy market. There’s a tremendous amount of appetite and this is a well known company and there’s room in the space.

S6: I think most people again, I’m speaking anecdotally as someone who reads about this stuff and stop me if I’m wrong. But most people use more than one dating app, so there’s no Match.com. There’s Tinder, like everyone’s dabbling in everything. And really, the space has only gotten more popular because I remember, like when online dating was more nascent, people wouldn’t talk about, like, using these things. And now it’s totally understood that everyone is on dating apps using them. That I think it’s pretty. It’s just a huge space. Like I don’t the pandemic might have, like, dampened some dating activity, like, come on, like it’s still going on. And I don’t think anyone thinks these apps are going away or anything like that.

S4: This is true. And even though I believe that they actually had a loss last year, I think that actually had to do somewhat with some nonrecurring charges. Overall, they’re still like they’re not a horribly unprofitable company. And I do think you’re right that, A, everybody uses multiple apps to date. And B, I don’t think anybody thinks that in-person dating is going to go away. You know, people are going to continue to date. My biggest concern for this is, number one, that as we’ve talked in the past, that this is coming in at a very frothy point in the market. So it’s going to get a price that probably isn’t sustainable. And then on top of that, Bumble has a smaller market because dating companies, men are the primary users of dating apps. If you just look at the Tinder, I think it’s like 70 percent male. And anyone who’s ever been on a dating site knows that you go on the site, you get thirty seven thousand messages because most of the people on the site are men. And so when you’re marketing primarily to women, that is probably going to somewhat limit how much you can grow. And if you are a private company, you could say, OK, well, maybe that’s fine. If you can still get funding a publicly traded company, I think that could be a bigger problem.

Advertisement
Advertisement
Advertisement

S3: So it did merge. It’s actually got two big apps, right? One is Tumblr and the other one it also begins with B in its name. But yeah, something like. So this is not a case of Whitney Wolfe, her founding this company, growing it organically to with a series of venture capital investments to the point where she finally takes it public and becomes a billionaire like the company itself was always owned by someone else. It’s had a sequence of owners. Blackstone basically has most of it right now. They did well, they did well. And in fact, in that way, it’s very similar to Tinder, which, again, was never really an independent company. It was always part of IAC. And it’s fascinating to me that the way this sector. Is structured, is basically always been, well, Barry Diller owns it, and then there’s this other one that’s Bumba, which is owned by someone else and they’re competing and it is a very, very difficult sector to break into because by definition, it’s all about network effects. The place that you want to go is a place where everyone is and you know, the place where you’re most likely to find your match. And if no one’s that some tiny little place, then that’s going to get you nowhere. So all power to her for managing to break through those network effects and build something from scratch. But she did that with a lot of backing from actual owners. And yeah, I think one of the reasons why. Bumble has such a high valuation is precisely because they’re such a big moat there that people know who the competitors are and they’re not worried about new competitors coming in, there was that point, what was it, a couple of years ago that Facebook decided it was going to try and get into the dating space and it just didn’t feel like it happened for like one second and then they just gave up on it completely. It’s really hard if Facebook can’t do it, then like no one can.

Advertisement
Advertisement
Advertisement

S4: It is surprising. I 100 percent agree with you that something like this, the network effects are what really create a lot of the value. So, yes, it is not going to be simple for another company to be created. However, I’m not going to go out here and say, like, yeah, we have all the data companies we’re going to have and we’re done. Like, I think that that is unlikely. They seems like new ones come up and granted, all the new ones seem to be owned by match. But still, as someone who has used essentially all of these dating services over the past 10 years, I can tell you that it always seems like, oh, there’s this new one. I haven’t tried this one yet. Is there much to choose between them? Yes. OK, lay it out. And so, number one, the tinder is the gateway to hell like Tinder. I think it’s primarily targeted to sociopaths or I only attract sociopaths. One of the other horrible Bumble, I think is a lovely idea in theory. In practice, I feel like no one likes making the first move, whether you’re a man or a woman making the first moves. Horrible. So as a woman, I’m like, I don’t want to make the first move. Like, I like the idea that you have to, like, confirm that you like someone before they can contact you. But I don’t want to have to reach out to them. And also the problem is the number of guys on that site is limited. And you notice that because you start to cycle through the same guys, then you have Hinche, which I will say is also owned by match, which is like I think it’s called hidden because it’s somehow supposed to be like you’re somehow connected with them through social media. I don’t know. We also haven’t talked about Grindr, which is the most popular site in terms of frequency of use. But that’s for for gay men. It’s still Chinese. I’m not sure. I remember there was the controversy.

Advertisement
Advertisement
Advertisement

S3: I remember like some like some Chinese company bought Grindr and then, like syphilis got involved and started wondering. But it was a national security problem.

S4: I do not know what exactly happened with that side of the story, but it is a very, very popular dating app that when talking about dating apps, people should should reference, according to TechCrunch, because I just Googled.

S5: Grindr was owned by a Chinese company, but it’s sold its stake to a US based company called San Resende Acquisition Partners last March. So there’s your update on that.

S3: There you go, folks. Don’t worry, if you’re on Grindr, the information is being processed in Beijing.

S6: I think there’s just a lot of room for, like innovators to break into the space because like China was saying, like, you cycle through the same people. You want to try something new. And it does seem like like I just remember when Tinder happened, it was like a big deal. It was an explosive new way of doing a dating app. And everyone got very excited about it. And I don’t see why there wouldn’t be another one of those. Again, like, it just seems like unlike Facebook or Twitter or other social networks where you kind of like stay put because you have the same relationships and you want to keep them on dating app. You don’t want to keep the same relationships. You want new ones. So there’s more like willingness to experiment with different ones and float from platform to platform. It’s like a different it’s a whole different kind of thing.

S4: Yeah. And I think that Tinder really created the swipe right swipe left like that was kind of the thing it created, because the reality is when you had like, OK, Cupid, which still exists, but like the back in the day one where you spend all this time creating this profile, but no one read the profile. People look at the photos, no one ever does anything but look at the photos and maybe says, like, where do you go to college? Where do you work? Nobody cares about anything else. And that’s clearly what Tinder realized. And they also a to a certain extent, because you can just sit there while you’re like waiting in the grocery line, swiping right and left on human beings. And that has been what basically every other site has somewhat done. And so I do think that we are due for some innovation in the dating space. So maybe people will figure out a way to move beyond the swipe right swipe left.

Advertisement
Advertisement
Advertisement

S3: I have a plan for a dating site where it is compulsory for every man to pose with a fish because then you come in for posing with the fish because they all have to do maybe a bait shop needs to diversify and get into dating apps.

S4: Exactly. Exactly.

S3: Anna, there was an amazing, really long, super detailed article in the Atlantic this month about the rise of fast fashion and especially how the sort of super cheap, super fast Instagram based fashion brands have done astonishingly, surprisingly well during the pandemic. I guess I just assumed that if you were in clothes, you had a terrible pandemic. And for most clothes outlets, that was true. Basically, anyone who sold clothes out of stores, they saw that business fall off a cliff. But for certain very influenza centric, Instagram centric brands, that wasn’t the case.

S4: Yeah. So I think when US olds think about fast fashion, we probably think of like HSM and Zara, but it has moved on from that to these companies like pretty little things and chain. I’m probably mispronouncing that where it is really primarily driven through outlets like Instagram and your purchasing online and because of the way the model works and it’s designed to just be putting out new items over and over, it means it can be actually very quickly adapt. And that seemed to help it significantly during the pandemic. It’s not like they had purchased all of this inventory and then now this inventory couldn’t be sold because no one could go into the stores because they were all closed. And also, when everyone went from wearing like clothes that actually had zippers to athleisure, they could very quickly say, OK, now we’re going to flip to that. Yeah.

Advertisement
Advertisement
Advertisement

S6: And one thing that was really interesting, there’s a lot that was really interesting about this piece in the Atlantic. But one thing I finally understood, you know, how when you online shop and you click on something, you almost buy it, or even if you do buy it and then chases you around the Internet wherever you go, you see the boots, you see the retargeted.

S5: Oh, my God. Now I’m being chased by beds because I’ve been looking at beds. But this is actually a really good strategy for this little fast fashion companies that aren’t really that big of companies. But it’s like they start to chase you around the Internet and show you the sweaters of the leggings or whatever that you want. And in your brain, unconsciously, consciously, you you you start thinking like, oh, this brand is like legit. It’s for real. It’s it’s ubiquitous. It’s everywhere. And all of a sudden, like, this little company that has a little bit of inventory has taken on this, like, big presence in your mind. And that’s why, you know, the sweatpants are chasing you around the Internet. I never quite clicked.

S3: And it’s not it’s not even the Internet in general so much as it’s Instagram in particular. The Instagram ads are the most amazing leveler in terms of brand value. It used to be that if you saw some crappy banner ad on the Hill dot com, you would be like, that’s the crappy banner ad. And then if you saw like a full page spread in vogue, you’re like, that is a legitimate brand and you would understand the difference. But when you’re scrolling through Instagram, that distinction between, like the Fly-By-Night brand that you’ve never heard of versus Balenciaga is completely. Squished and it’s almost impossible to convey, you know, we are a big established fashion house that is we were founded six seconds ago in Shanghai, and so it has really leveled the playing field. And I think that one of the lessons I took away from this piece was that brands like retail brands are much less important than they ever used to be. What matters is what Anna was talking about, which is business model and agility and the ability to just create thousands and thousands of items of clothing excuse put them all out there, ab test them and then whichever ones, John, just make more of those and scrap the rest. And you only made 30 of them anyway, so it doesn’t matter. And that business model of just being super agile and just going to wherever the customer base wants you to go turns out to be incredibly powerful during a pandemic, even if it is unworkable in a world of retail supply chains where you have to stock stores and put clothes in stores which live there for months.

Advertisement
Advertisement
Advertisement

S5: And it doesn’t seem like we’re going back to that world like that world was already in trouble before the pandemic. A lot of additional retailers weren’t doing very well. And now it’s all accelerated. There’s been bankruptcy is, I think, this model fast fashion that just keeps getting faster and faster and faster to the point where, like Anna was saying, the old fast fashion brands are now considered slow. Like there was one example where Zara used to be thought of as fast fashion for having hundreds of items in a week. But like Assoc., this other brand will have 7000 items in a week. It’s just that much faster and it doesn’t seem like we’re going back. There was also that New York Times magazine piece over the summer that talked about the like upscale brands and designers are really struggling to to adapt to this world because it just moves too fast to do anything kind of sustainable and real.

S3: And talking of sustainability, like the other thing that the article really goes into is how deeply unsustainable this is on the kind of ecological planetary level. And even during the pandemic, this was a statistic that really jumped out at me even during the pandemic. We’re throwing away seventy five pounds of clothes per person per year.

S4: That’s insane. Although people do have more time to clean out their closets.

S7: Just it is surprising how I mean, have you guys bought new clothes during the pandemic? I feel like everyone has. And even though we’re home all the time, it’s like you still can’t help it. You just want something. Something new, I guess is privileged of me to say. But I put masks. Does that come?

Advertisement
Advertisement
Advertisement

S1: No, I’m not a big clothing shopper. Like for what? Ever since I was like when I was like a teenager I did. But like as an adult I tend to not buy a ton of clothing. But I bought clothing during the pandemic, partly just in the same way that I bought a lot of, like, random stuff during the pandemic because I’m a very privileged person who you have money and you’re not spending on anything else and you’re sitting around all the time and you’re scrolling through Instagram and you’re like, oh, that looks cute. OK, I’ll buy it. It’s not very expensive. And then you get it and you’re like, this is made out of paper like this.

S5: The other thing that was fun to read about was the influencers who get tons of clothes from these brands to the point where the one she featured, well, the one she featured in the piece was maybe 14 years old or something and was already making thousands of dollars, just like posing or doing YouTube videos, unboxing the clothes, and then she’s got in her closet. All the stuff she doesn’t wear. She has to give it away to friends. It just sounds just wild to me.

S1: Yeah.

S8: This is one part of the article that kind of rubs me the wrong way a little bit like I almost wish it would have spent a little bit more time talking about, like, well, what are some possible solutions to this in terms of legislative changes, in terms of different taxes on clothing or issues related to labor rights, like how can we actually fix what is the problem with this, which is the environmental and labor part of it? Instead, it seems to be a lot of this like mythologising young female behavior.

Advertisement
Advertisement
Advertisement

S5: This is something I find in a lot of these articles about fast fashion, this idea that there’s something wrong with these girls or, oh, they’re they’re so materialistic and superficial because they want to buy all this new stuff. And it’s like, no, no, that’s not the problem. The problem is not that these young girls want to have fun and do this. It’s that there are these other problems. So let’s speak about those not pretend that there’s something really wrong here with these young girls. Oh, yeah, absolutely. You’re so right. And the labor problems and the environmental problems are the issues. Like I’m not particularly worried about like high end fashion designers that much I don’t know. And I’m not worried about, you know, J.Crew going out of business or anything. But I am worried about people making less than minimum wage in factories in the United States. But, you know, and covid-19 breaking out in these places. And, yeah, the environmental impacts and it all seems to be like on steroids. For lack of a better metaphor, it just keeps getting faster and faster and faster.

S3: I think it’s time for a numbers round. Emily, do you have a number?

S7: Yes, I was going to go with some, like, policy number about the minimum wage, but then I decided not to because just enough already. But these are serious subjects, right? So my number is ninety four point nine million, ninety four point nine million.

S5: That’s the number of subscribers to Disney plus. And I would just like to say that I was wrong and I thought Disney was going to be like kind of like mad. But Disney plus is doing really well. It’s like already had its subscriber goal for your subscriber goal because the pandemic and because it has content that everyone is talking about all the time and it seems to be winning like the streaming war. I mean, it has nowhere near Netflix numbers yet, but it’s getting there first.

Advertisement
Advertisement
Advertisement

S7: It’s getting there really fast and I think it’s the winner. And that was driven home to me watching the Super Bowl because it had all these commercials for Paramount Plus. And I was like, OK, I know I was wrong about Disney plans to make a prediction, but I feel really confident that Paramount Plus is not going to win the war like it’s over. No one cares about Paramount.

S3: Paramount Plus is the rebranded. It used to be up until about a week ago. It was known as CBS All Access and like no one with no one would ever use CBS all access and like that. I really like CBS unless you unless you are tricky.

S1: I say this because I was signing up for literally the night of the Super Bowl and obviously it kept crashing because everyone else in America was doing the exact same thing. I’m signing up for CBS just for that night.

S3: Interesting. My number is nine point nine percent, which is the amount that the U.K. economy shrank in twenty twenty, which is insane. And never in living memory has the UK that much. In one year we just got the GDP figures out for the fourth quarter there was a very small one percent growth in the fourth quarter. But overall, it’s this just unprecedented falling off a cliff thing, which is obviously pandemic related, but also Brexit related. The population of the UK shrank by about two percent, thanks mostly to Brexit. And it’s not going to be that bad in twenty twenty one. I mean, it’s very hard to get back to back nine point nine percent shrinkage, but the UK is in a terrible place and no one has a clue when or how it’s going to get back to it’s twenty, nineteen levels. It’s, it’s bad.

Advertisement
Advertisement
Advertisement

S7: It played itself. It did this to itself. It’s so crazy. Yeah. It’s all found itself in the foot and then shot itself on the other foot. Yeah.

S1: So my number is two billion dollars. General Motors said that this year it might take a two billion dollar hit to its earnings because of the semiconductor shortage. So there is a major issue, especially for auto companies with the shortage in semiconductors. And partly it has to do with everybody buying consumer electronics during the pandemic. And consumer electronics are the semiconductor companies to make more money by giving it to the consumer electronics people than the auto people. So they’ve been doing that. And then also the Trump administration put sanctions on a Chinese semiconductor company. So because of a lot of these different forces, there is this significant shortage. And to the point that actually the Biden administration is looking into it, there may be an executive order about trying to get more on shoring of semiconductor production. But I think this is actually going to be a story that will continue and be a very, very significant story as semiconductors become even more central to the economy.

S3: Right. So cars used to be cars and now the computers on wheels and the computers need surprisingly powerful and sophisticated silicon these days. And that’s expensive. And it all needs to get sourced in Taiwan because that’s where all the fabs and there’s a handful of fabs in the United States. But they aren’t that good and they don’t make super high end stuff. And yeah, that’s a huge geopolitical question over the entire semiconductor industry. Given what China happily did to Hong Kong. Everyone is worried about what it might do to Taiwan. And if it does that to Taiwan, like what happens to like all of the electronics in all of the world? I mean, presumably China doesn’t want those factories to close down, but things could get really gnarly for a while.

Advertisement
Advertisement
Advertisement

S7: Are you saying China closed down factories and Hong Kong, isn’t this?

S3: No, they didn’t. I mean, Hong Kong, actually, it’s kind of interesting that the Hong Kong economy seems to be doing surprisingly well, given how how bad shape it’s in. China has no particular interest in destroying anyone’s economies. But you’ve got to think that in the event of China trying to take over Taiwan, that would be a lot of disruption involved in that event.

S7: I see. How much is the semiconductor cost anyway?

S3: Hundreds. Did you see the story about the Catala, the. That is getting stolen across the country and especially in California. That’s the other thing that the price of palladium and platinum and rhodium and all of these metals, oh, I did see that the catalytic converters has gone through the roof to the point at which, if you like Simmy underneath a Prius and swore off the catalytic converter from underneath that, you can take it to your local scrap metal dealer and they’ll give you five hundred bucks. And so people are getting into their cars in the morning and suddenly it makes the most godawful noise and they realize that someone is still in their car and it cost two thousand dollars to replace it.

S7: That’s Wild’s. You have to worry about your car being stolen, but you have to worry about the Palladium being sucked out of it. That’s what a world.

S3: OK. Email, OK? Oh, yeah, if you if your catalytic converter has been stolen, don’t email us. We can’t help you. We’ve been invested in ROADM over the course of this pandemic. And congratulations on being rich. I think that’s done even better than Bitcoin. And it’s real and it’s real. So, yeah, that’s the official state money investment recommendation, long rhodium, short bitcoin. And what could possibly go wrong? Yeah, I think that’s it for us this week. Thanks so much for listening. We’re going to have a Slate plus segment about Birkenstocks not to be confused with Birkenstocks. Thanks for emailing us. Do email us any requests you have for the final and Shamansky episode, which is coming up next week. Emily’s about to burst into tears.

Advertisement
Advertisement
Advertisement

S7: Yeah, it’s just really upsetting. Yeah. Send us your ideas. What is the hottest and Shamansky tech that you crave? We could maybe do it next week.

S3: Next week will be the Shamansky Hot Takes episode takes you on. Just, just send us your requests slate money and we will put them all together with the unerring and wonderful help as ever of Jasmine Molly, the producer of this hit show.

S2: So we will be back with Alicia Manski next week on Slate Money.

S3: OK, we talked about. Fast fashion, Emily, on the main show, so I think in the Slate plus show, we should talk about the fastest fashion of all, by which I mean the slowest fashionable, which is people spending seventy six thousand dollars on a pair of Birkenstocks that were made out of a repurposed and destroyed Birkin handbag from Mars.

S5: You love to see it. It’s a very clever gimmick. That is a very expensive gimmick where these aren’t official Birkenstocks as you know them, but they look exactly like Birkenstocks. And instead of an E, there’s an AI to signify the Birkin bag. And Felix brought this up with the group because as people might not know, I used to report on intellectual property all the time for a small trade magazine. And so he asked, like, of course, you should have an opinion about this. And I’m here to say I don’t have much of an opinion about this.

S3: I’m not going to ask you for your opinion. I’m just going to ask you to tell me two things. Number one, if your MS is this a trademark infringement? And number two, if your MS. Is this a copyright infringement, a number three, I to make it three things like what’s the difference?

Advertisement
Advertisement
Advertisement

S5: Oh, we’ll trademark is it’s oh God. I hope I get this right. OK, it’s been 20 years. Trademark is when you go to the PTO, the Patent and Trademark Office and you register a word as your trademark, including like any kind of like signifying design with it. And you have that forever. Unless it becomes so generic, you lose it, which is a possibility as well. And a copyright is more time delineated exclusivity. Right, that you can get for any kind of creative work or like a book or movie or something like that. Though in recent years, the term of copyright has gotten longer and longer. It used to be like the life of the person who created the work. And now it’s I don’t I haven’t checked again in twenty years, but now it’s longer than that.

S3: It’s like the death of the person plus seventy years I think something like that.

S5: So, so that’s kind of the difference. And I imagine and I don’t know this, but I imagine with Burkin bags, I mean. Big companies like EPOP, so like it probably has their trademark issues and probably copyright issues as well, so they probably have options when it comes to these things. I mean, if I’m Remez, I would just let it. I don’t know. I mean, they could definitely I think Sue, because obviously Birkenstock with an eye is an infringement of Birkenstock with an E like I think that’s like a slam dunk case.

S3: But it seems like that would be Birkenstock with an E swing. That wouldn’t be as suing. Right. As is suing because suing because they they have played on the as logo. They ship it in the M as orange box, which came with the bag. They make it feel like an MF product, they price it like an M as product. And yes, you know, and it’s very associated with M.S., although like I don’t think anyone is going to be kidded. Like there’s no actual consumer confusion here.

Advertisement
Advertisement
Advertisement

S5: No, I think the confusion is Birkenstock. I think Birkenstock has the solid case because they do like they are constantly making new kinds of Birkenstocks with different designers. So, like, if you if you don’t look too closely, you would think Birkenstock teamed up with Ermes to make the sandals. And that’s who I think has the strong IP.

S3: But that wouldn’t be harmful to Birkenstock, right? If people think the Birkenstock have teamed up with them, is that hardly is hard to find the taught there, right?

S7: Yeah. Who cares? So probably they should just do nothing and just like, go with it. Right. Because this maybe call or mess and be like this seems like a good idea.

S1: Let’s do something like something that there are mass producing and they’re going to be doing this forever. Isn’t this essentially like a one time gimmick where they’re making a small number of these?

S3: Yeah, they bought four bags. Each bag creates two pairs of shoes or possibly three if the shoes for people with small feet.

S6: And I think there’s like you can have an exception for art and stuff, like when we do illustrations at work in journalism, you can like riff on someone’s trademark or whatever and do an illustration. And it’s like for create it’s called the creative use or whatever. I think creative use again, twenty years and it’s fine. So part of me is like maybe you could make that case, except that cases much weakened because of the seventy six thousand dollar price tag. So probably can’t make that case. But like the sort of like creative cases is also there for you, for I think it would be extremely petty for anyone to sue. That’s my opinion. Well, because everybody wants to sue over this, to sue would be so much more than what you’d lose.

Advertisement
Advertisement
Advertisement

S1: If anything, this is just advertising for the two companies. It gets them in the news. People are talking about them.

S6: I guess the one risk is, like I was saying before, trademark dilution. If if everyone’s out there like making clever sandals, calling them Birkenstocks, the risk is like you lose control of it.

S3: I don’t think I don’t think that’s a risk. I think the risk to MS is that they really, really take the Birkin bag seriously. This is the flagship product of the entire company, and people put their names down on waiting lists for years to get it back in bag. And it takes years to construct one. And it’s like this amazing piece of artisanship. And it within the company really does feel sacrilegious to cut it up and make it into a pair of sandals like it’s just the thing that you you can’t do you shouldn’t do like this is literally they spent forty six thousand dollars on one of these handbags. These are not cheap handbags. And to just take a pair of scissors to it, apparently, according to Mischief, which is the company that pulled this stunt, they were turned down by two different leather cutters before they finally found someone who would do it. Because the first dualeh I would never do that. I would never destroy a bag and bag. Oh, well.

S1: And I can say it. It’s less because I think the reason that a Birkin bag has so much value is not because of the amazing craftsmanship. A lot of bags are great and craftsmanship. It’s because we as a society have decided that this particular bag has a certain value because it’s a status symbol and it suggests certain things.

Advertisement
Advertisement
Advertisement

S3: And if you have companies playing around with that and really mocking that, I could see that maybe you would have an argument that that could then lead to worse consequences for as I only have one more question, which was like, was Jane Birkin a meme Lord of Unlove that like she let the Elon Musk give her time because like, how did she managed to become the name of this incredible status symbol doesn’t have to do with Grace Kelly having the bag or something.

S6: And then everyone was like, oh, my God, I have to have it. And it just it just exploded and took on a life of its own.

S1: Yeah. And then there was also the Sex and the City episode, A Sex and the City episode about Birken bag there is that was literally the first time I ever heard of it by middlebrow sensibility. It’s going to be honest.

S7: There was also an Schitt’s Creek. I think that the mother has a Birkin bag and she said it’s been handed down by her mother and it’s in case she has to leave her husband quickly. That’s what the bag. So that’s kind of the health they do hold their value, unlike Bitcoin, they have a use as a badge.

S3: So it’s a better investment than Dogecoin. Yeah, yeah, yeah.

S6: The interesting that that’s not become some kind of currency. Well, it has.

S3: I guess it has. There’s a vibrant secondary market in Burkin bags, which is exactly where mischief bought is.

S7: Yeah. It’s probably destroys its value to turn them into sandals because sandals don’t last very long. No Birkenstocks are good, but they wear out pretty quick.

S3: It depends whether you wear them or not. That’s brilliant.