Billionaire Slap Fight

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S1: Hello and welcome to the billion slap fight episode of Sleep Money, your guide to the business and finance news of a packed week in business and finance. I am Felix Salmon of Axios. I’m here with Stacy-Marie Ishmael of Bloomberg. Hello. I’m here with Emily Peck of fundraise. Hi. Hello. Oh, my God. How much do we have to talk about today?

S2: So much, so much.

S1: We have Elon Musk, we have Rivian, we have iPods, we have capital gains taxes, we have inflation, we have people quitting their jobs, we have Johnson and Johnson, we have General Electric, we have the end of the conglomerate. We have so much that we have to take the whole bit about people going off the record and put it into sleep. Plus it is a jam packed show. We are going to somehow manage to squeeze Imogen Heap into there. Everything is in here. NFTs, you name it. Crypto. Stay tuned because this is the nucleus ultra of slate. Money is all coming up after this. I’m going to start with the conglomerates ization Emily.

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S3: All right. Very cool, sexy.

S1: It’s a it’s a cool and sexy word, but there are two of the biggest and most storied companies in America. If you grew up in, you know, when I grew up in financial journalism in like the 90s and 2000s and you had the Dow 30 and it was all about these big blue chip stocks that there is nothing more blue chip than General Electric and Johnson and Johnson. These these the the bluest of the blue chips. And they both do a huge number of different things, and both of them this week have announced that they are splitting up and becoming multiple different companies. So Johnson Johnson is splitting into two. It’s got the health care business, and it’s going to also split into its consumer business. General Electric is playing into three two, has a health care business. It’s also going to create a power business, which is basically lots of turbines. And then it’s also going to do its jet engine business. This is the end of GE. Basically, GE is just basically not going to really exist in any kind of recognizable form after this. And honestly, I kind of think it’s the end of Johnson and Johnson as well. You know, this idea that you can bring together companies in so many different industries and do a whole bunch of M&A and create this sort of world spanning giant seems to be on the outs. It’s almost impossible to think of basically any company in America that does that anymore, with the possible exception of Berkshire Hathaway, which is kind of its own sort of you.

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S2: What about 3m?

S1: Yeah, I feel like, yeah, maybe 3M. I mean, I feel again like I feel like it’s only a matter of time until 3m just kind of gets bought up by some massive private equity fund and spun out into a hundred different businesses. You know, like the the driving idea behind GE was always that there wasn’t really any synergy between these businesses. But the what we had was incredible management chops, right? And it had these amazing managers who would go to management school in like upstate New York. And once you were trained as a GM manager, you could manage anything and then suddenly you got parachuted into some business and because you were a manager, it would make lots of money. And then two things happened. Like one of those things was that it turned out the GE managers weren’t very good, after all, and they would do dumb things like buy Alstom, which was this French power company that was worth like a negative amount of money and spend like $20 billion on it. But the other thing that happened was that the sort of central core of GE that sort of coordinating function in upstate New York that didn’t really create anything and had no revenues, but was was, you know, the place where managers learned how to manage and that kind of thing just became bigger and bigger and bigger over time to the point at which it just became this massive like cost center. And now they’ve realized, like, there’s no point in having that and we’re just going to lose it.

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S3: It was unmanageable as it were. Wow.

S1: Sorry, big companies are often unmanageable, right? So like so like Facebook is unmanageable, but the reason why Facebook is valuable has nothing to do with the quality of its managers. Whereas like the reason why he was like so profitable for a long time, according to G.E., was the quality of its managers. In fact, it was all financial engineering which came unstuck during the financial crisis. But that’s a different story.

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S3: I was wanting to ask you to. I mean, what is the reason? Is there a reason more broadly that these kinds of organizations conglomerates have fallen out of favor? Is there like a trend here, something to watch? I know that in these times, in twenty twenty one, managers have actually fallen out of favor like companies want to be lean and they want to be flashy shots fired. I mean, it’s true, right? I mean, it’s not what it used to be to be a manager. There’s fewer managers now than there used to be. I believe the Harvard Business Review

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S1: right, Stacy. Think of a company which is famous for having really good management.

S2: Well, as you say, that was the claim to fame of Gee, I can’t think of a single tech company in which anybody would like, and you know what the reason to work there is you will be managed like you’ve never been managed before,

S1: like Steve Ballmer was famously, you know, it was a terrible manager. Like, Bill Gates was a terrible manager. Mark Zuckerberg is a terrible manager. Steve Jobs was a terrible manager. I think Tim Cook gets, you know, credit for being a decent manager. But like in general,

S2: he’s an incredible operator. That’s right, that’s for sure. And it’s weird because I was having a I was having breakfast with a source this morning and they’re trying to hire up. And one of the things that they were saying is they treat hiring like execution. But one of the most important things that they assess, whether somebody can execute, is how well they hire and how well they can manage. And I just feel like it’s such a refreshing slash old school perspective on on so many of what we’re dealing with these days. It seems really like something that’s fallen out of favor, partly because most people aren’t good at it. Right?

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S1: And even the people who are good at it sort of going out and trying to boast about how good they are at it.

S2: Right, exactly. It’s not like invest in us because we’re amazing. Well, it’s invest in us because we’re invest in us because our managers get shining reviews from their direct

S1: reports that they’re investing in us because we’ve done the pizza deal thing of creating a monopoly and rather than investing in us because we are just really good at making widgets.

S3: And is there something else going on where conglomerates used to make sense and now they don’t make sense? In other words, you used to make sense for one company to do a bajillion different things, and now it doesn’t. And is there a reason for that or is this just one of those things that,

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S1: yeah, I have a theory about this, and my theory is that this is kind of related to the move away from dividends and towards stock buybacks, which is the big blue chip companies like JNJ or GE always used to and still do really, to this day, take great pride in maintaining that dividend. And they would pay they a reasonably hefty dividend every quarter, and the stock traded up on some level on the multiples of dividends, right? Like you had, you had a dividend yield. I can’t remember the last time I heard anyone talk like seriously about a dividend yield, but this was the case definitely in the 70s and that sort of heyday of the conglomerate that individuals would go out and they would buy their thousand dollars of GE stock or whatever. And then they would get dividend checks every quarter and they would live on those dividend checks. That was that check. That was the income they were getting from their stocks. You know, there were income stocks. And in a world where maintaining a dividend is incredibly important, having a diversified group of businesses is incredibly valuable because if one business does badly in a quarter, then that’s fine. Another business can do well and pick up the slack. And so you got like natural diversification within the business. Nowadays, everyone gets their diversification by buying an S&P 500 index fund, and companies have basically stopped paying dividends or if they do pay dividends, it’s like special dividends. The the fetishization. If like, we will pay this great dividend every quarter while it still exists is much less of a big deal than the ever used to be. And the main way that companies return money to shareholders is not by dividends anymore, but rather by stock buybacks, which happened in a very lumpy way. And everyone expects them to be lumpy. So you don’t need that diversification and even this anymore.

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S2: It’s like feels to me very related to that era of management, which is what a wild economy to live in, which you like. I hold G.E.. Therefore, I’m good because I’m going to live off dividend income. It’s just it’s such a novel. This is like me. Elder millennial can’t wrap my brain about this previous way in which people survived problem. But yeah, truly, truly. A comment on the financialization, the internalization and just the like, the dramatic shifts in income, distribution and wealth and how people get and don’t get it that we that we continue to see.

S3: Yeah. And also just it’s at home right now. We’re watching 30 Rock, and I don’t know if you guys remember 30 Rock, but the Alec Baldwin character is meant to be this GE executive, and he’s hilarious and worships Jack Welch. And it’s a total send up of that culture. And I feel like his

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S2: name is Jack. Yeah, it’s

S3: Jack Donaghy, actually.

S1: Jack Donaghy is the vice president of East Coast Television and microwave oven programming. Yep, which which is in total GE because GE made microwave ovens and television like, you know, it owned 30 Rock right now and NBC.

S3: Yes, exactly. Which now seems kind of absurd, I guess, but at the time kind of made sense because. That’s just that’s what you do, you buy you buy NBC, you’re the phone company, you buy HuffPost. Matt Levine also pointed out that investment bankers really did quite well thanks to GE is needed to make deals

S1: buying and selling because G has been selling for a while buying buying like, yeah, $7 billion or something is that the total amount of money that GE has paid in fees over the past 20 years, just buying and selling companies know $7 billion, like even by GE standards, is quite a lot. It’s a lot of money.

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S3: Yeah. I mean, what management prowess to give a bunch of money to a bunch of bankers? I don’t I don’t know. I think the emperor had no clothes there.

S2: I mean, if if you were the person buying infinity expensive watches on the other end of this, I feel like your clothes are probably pretty good.

S3: So the emperor has a lot of clothes and a big, big closet

S2: of clothes and a summer house.

S1: Meanwhile, the JNJ announcement is interesting. They claim this has nothing to do with their Texas Two-Step bankruptcy and and I am not sure I believe them.

S2: I don’t believe them at all.

S1: So what they have said is they’re basically willing to take all of the assets or up to all of the assets of the consumer business and use those assets to settle the claims of people who claim that they got cancer. From using Jangebe baby powder and spinning off the consumer arm into an entirely separate company makes it that much more difficult for the rest of JNJ. Like the really valuable bit of JNJ, the pharmaceutical bit of JNJ to to be held liable for any of that.

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S2: Well, I mean, they specifically said they’re insisting that these things are unrelated, and I’m sure that there is a way they’re going to convince various investors and themselves that this is true. But the timing is really interesting because, you know, I think to the point that Emily was making zero and then two in in a matter of a week, like what is what are the underlying things that are really driving this? Oh yeah, we don’t want to be a big conglomerates anymore.

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S1: So, yeah, this is my my big question is is given this long running trend, which has been going on for decades, there aren’t that many conglomerates anymore. Is there any way that Berkshire Hathaway stays together after Warren Buffett dies? It will clearly stay together until he dies. He’s not going to be the one to break it apart.

S3: I mean, I don’t I don’t think it stays together. What we’ve seen and correct me if I don’t have these numbers right, but I don’t have a number here. And what we’ve seen is when companies conglomerates break up, their pieces are more valuable. They become more valuable companies separate than together. Is that not true?

S1: Yes, sometimes. Sometimes not. It’s like it’s in general. The conventional wisdom is that mergers destroy value and mergers create value, but that’s not always true.

S3: All I can think of is eBay PayPal, which I’m sure is not the best example of that

S1: is a good example

S3: because PayPal is much more valuable without eBay,

S1: way more powerful than eBay ever was. Yeah.

S3: So by that logic, why wouldn’t? Why would Berkshire Hathaway stay together? Warren Buffett obviously provides value like inherently to that company, like there’s probably some kind of premium there because he is he’s basically like a, I don’t know, people worship that guy, right?

S1: So when he gets, he gets deal flow, right? So like, you know, in the financial crisis, when someone needs emergency money, they really want that emergency money from Warren Buffett because it’s like Warren’s vote of confidence. But once Warren not there, then that extra value you get from having Warren’s vote of confidence evaporates.

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S3: There you go. He’s the brand holding the whole thing together, and without him, it’s got a I would bet that it breaks up.

S2: Perhaps he’s also a good manager, you know?

S1: Emily, tell me about worker revenge.

S3: Oh, yeah, OK, so Felix and Stacey, I wrote about this for a fortune in my newsletter there this week.

S2: Her excellent newsletter, Love that!

S3: Yeah, retail and fast food workers, low wage workers are essentially they actually have some leverage right now because they companies cannot hire and find enough of them. And I’ve been noticing these stories cropping up and like, you just truly love to see it. So there’s a great story in The Washington Post of these workers at a McDonald’s in Bradford, Pennsylvania, where they’re making like nine twenty five an hour. And, you know, they just want to make a little bit more money. Their managers won’t, won’t give them raises. So they all walked out together and they put up a sign. They closed the store down, walked out, put up a sign that’s like due to lack of pay. We all quit and then they went and found new jobs. And this is like happening across the country. There are like literal signs popping up in places saying like, you know, we all we all quit. We’re not getting paid enough. And at the same time, we’re reading stories about retailers really scrambling to hire, offering huge bonuses, hiring bonuses at Amazon, at Macy’s, as we’re especially as we’re heading into the holiday season, it just seems like that or

S2: even changing requirements, right? Saying, Actually, we’re not going to ask for a completely useless degree or we’re not going to do drug tests or we’re not going to require a driver’s license like that. All of you know, various of the things that have been like a could grow mode of hiring in the U.S. are just falling by the wayside as people like, what if we just had people working instead of jumping through arbitrary hoops?

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S1: So to, you know, bring it round to the other big news of the week. What’s happening is these people are going off to find higher paying jobs. The employers are paying them more money, and they’ve realized that prices on to sticky as they used to be. And so if you’re paying your labor force more money, you can actually do that and maintain your margins by the simple expedient of just raising your prices. And so this is how you get to 6.2 percent inflation.

S3: And that’s the big news of the week that I suppose we should. We should get

S1: inflation. Inflation is big. It is real. It is 6.2 percent. We can argue

S2: that transitory,

S1: whether or not it is fanciful or even what transitory means. I think most people have given up on even trying to unpack the meaning of that word. But it is definitely become a major political football at this point, and it is something that people really hate. And one of the things that fascinates me is that even if you have way more money than the increase in prices, so you know, if the amount of money you have to spend every week goes up by like seventy five dollars because, you know, the grocery bill goes up and the gas bill goes up and the restaurant check goes up and everything else. And meanwhile, you have like $300 extra in child support and a bunch of extra money in wages because you got a raise because you quit and got a better paying job, you know, and you can more than cover the rise in prices. You still feel really bad about inflation. You still think inflation is a bad thing. And that dynamic where especially among like the bottom two quintiles of the income distribution where we’ve seen very, very large increases in both wages and wealth, they are still deeply unhappy about inflation. And so like, this is a real problem politically. But yeah, it’s no one is coming out and saying, well, very few people are coming out and saying this kind of inflation is great because it’s just what happens when people pay me more.

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S3: First, I wanted to say that I feel like for months people have been talking about inflation. Republicans especially have been saying it’s it’s here and it’s really terrible and blah blah blah. And there’s been so much pushback from economists. And like, you can’t Twitter being like, No, no, nothing to worry about, just transitory. And I feel like when this number came out this week, that officially ended that kind of, no, no, don’t worry about it kind of rhetoric like no one is saying that anymore. That’s over. I think what you’re seeing now is a little bit of consensus that, OK, inflation is happening and it’s happening a lot more than we thought. And we actually don’t really understand what it’s like to live with inflation because that the last time it happened to

S2: be true for such a long

S3: time. Yeah, like the last image of the 70s, I read something today or yesterday that was like, don’t compare this inflation to the 70s, compare it to post-World War too. And I was like, Oh my God, we’re really like swimming in uncharted waters right now. I feel like anyone who tells you they know exactly what’s going on with inflation and with the economy is they don’t. I don’t think I think this is something new,

S1: but the 70s are really important because. And it’s not just because this is a country run by septuagenarians, you know who who do who do remember the 70s. But it’s also because the 70s were the point with a one point at which inflation was a genuinely damaging economic force. Inflation in general is not hugely damaging. Right? Like, there aren’t that many people who just have massive savings accounts or checking accounts of cash under their mattress or whatever, which just gets like eroded away in in value. But in the 70s, what you got was this self-fulfilling inflation, right? You had this what’s known as an inflationary spiral where workers demanded wages. Not so much to make up for the degree to which prices had gone up, but to make up for the degree to which prices were inevitably going to go up in the future. And that people started right raising their prices because they knew that, you know, consumer prices would get raised because the manufacturers knew that producer prices, the amount that they needed to pay to their suppliers were going to go up in the future. The people looked out a year and the head saw like the inevitability of inevitability, raise prices today as a result of future inflation. And that inflationary spiral where it becomes very self-fulfilling was a real problem in the 1970s. And one hundred percent does not exist right now, and it really didn’t ever exist before the 1970s, either. It was this very peculiar thing that started with like the oil shock and and but one of the problems is that whenever inflation looks like it’s spiking, and especially right now, the fears of inflation feel much more real because of the risk that that inflationary spiral might emerge. And I have to say that for the time being, at least, I’m pretty sanguine about this. I don’t think that inflationary spiral is going to emerge, but it does explain why people get so scared about it.

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S3: OK. And I think that fear one of the consequences is probably going to be the Biden administration’s build back better bill, which is the one point nine seven trillion dollar bill that has a lot of policies in it to combat climate change for universal pre-K. All this stuff, I think there’s a fear now that if they spend, if that bill gets passed and they spend that money, it’s going to be too stimulative and it’s going to make inflation worse, which probably isn’t true. But the fear of that happening right now, over many years, 10 years.

S1: Yeah. So it’s not like the problem paying $1.7 trillion into the economy tomorrow, which really would exacerbate inflation. The Biden administration keeps them wheeling out this talking point that a bunch of Nobel Prize winning economist says that the build back better bill will be disinflationary, which I’m not convinced about that either. But yeah, definitely. There’s this. You know, there’s this feeling that inflation has been caused by fiscal policy being too loose. There’s another feeling that it’s been caused by monetary policy being too loose. You know, ultimately, the proximate cause we can all agree was, you know, the pandemic, which caused both the fiscal and the monetary policy and also all of the supply chain disruptions, which of which have, you know, which are still reverberating and will do for a while.

S2: Which is maybe why the post-World War analogy is so interesting, right? Because that was also another massively disruptive event. Societally, economically infrastructure really and did come with a bunch of necessary infrastructure upgrades. And and to some extent, you know, more power back into the labor force than before.

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S1: Much more powerful for the labor force. Much more inflation and good inflation like good inflation that was accompanied by a healthy economic growth. And like that was like pre 70s inflation where people weren’t actually worried about it that much.

S2: The trick with inflation is not to worry about.

S1: Exactly.

S3: Sure. The column I read it was Paul Krugman who was talking about post-World War Two inflation. And one thing you pointed out was there was probably like bad monetary policy reaction to the inflation. But one thing that the federal government still managed to do was build infrastructure, including the the federal highways like Noem back then was like, if we build the highways, it’ll be too stimulative. No, they built the highways and it helped like. And you know, it helped unlock some like supply chain economic issues. More broadly, that kind of helped calm things down, actually. So I don’t know. Maybe that goes towards the Nobel prize-winning economists arguing that it would be disinflationary to do more stuff.

S1: The stuff the one thing which is very new about 2020 is inflation, which. Definitely didn’t exist in the 50s or even in the 70s is the in the 50s. In the 70s, you did not have crypto rose and you did have gold bugs, though, and the crypto rose. They cannot stop talking about inflation, like Jack Dorsey is out there on Twitter, like going hyper inflation. Look, it’s here. Inflation and. And suddenly, they’ve all rediscovered Satoshi Nakamoto 1.0, you know, Satoshi Nakamoto 1.0, where where he’s like fiat currency is bad because it gets inflated away and we need to replace it with something digitally perfect. And I kind of briefly thought that we’ve sort of moved on from that. And now, you know, everyone’s like into smart contracts and, you know, DeFi and all of this kind of stuff. But no, apparently there’s still this. There’s very like strong bitcoin maximalists strain of, you know, anti fiat. We need a whole new currency thing which will not go away. And there’s I think, Stacey correct me if I’m wrong about this, but like is having an effect on the discourse more broadly.

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S2: It’s certainly having an effect on the discourse. And I want to I was just looking up to make sure I got this correctly. So John Authors’, who’s my colleague here at Bloomberg and is not a crypto bro in the slightest, did a very interesting charts. You know, we love a good chart showing that I’ll read it out loud. Over the last 10 years, the headline CPI has risen 28 percent, which to the point is like a very low number over the course of 10 years. But if you had the nominees of that index and bitcoin, you would have had deflation of ninety nine point nine ninety six percent and

S1: deflation is terrible. The one thing we can all agree on is the deflation is much, much, much worse than inflation.

S3: I don’t think I understand that stuff.

S2: Well, essentially what they’re saying is the other sentence is if at what cost you one bitcoin at current prices 10 years ago would now cost point zero zero zero four. Satoshi, you I understand you would be in. You would not be worrying about how am I going to pay for milk if you if all of your holdings were in bitcoin? And this is this is very much too. I can’t believe I’m going to say this nonsense to the bitcoin maximalists. Credit is very much one of the biggest underlying premises of bitcoin that if you are worried about inflation, this is an asset that you should hold.

S1: But, but no, yet. But no, I’m going to like, No, no, can I just say this is a lot of time because I need to stop being angry and start trying to speak in full sentences? All right. Assets that are inflation hedges are all well and good, and we can all talk about like it’s golden inflation had equities and inflation had its hedges, bitcoin and inflation hedge. Like, if you’re worried about inflation, I mean, you know, can I just go out and buy tips? Inflation indexed treasury bonds? There are various different ways you can hedge against inflation. And if you know the bitcoin, people reckon that they found some clever asset class that hedges against inflation like all power to them, they can go out and buy that asset class and it goes up when there isn’t inflation and it goes up when there is inflation and it goes down in both situations as well. And it’s just like very volatile as a currency. However, the last thing you want as a currency is anything disinflationary. If you have deflation in the currency, that is terrible if the price of everything is going down, if especially if it’s going down fast, but even if it’s going down slowly, that is terrible because it is this constant significant incentive to not buy anything because it is going to be cheaper tomorrow. And so no one buys anything. It’s incredibly bad for growth. You need a little bit of inflation in order to keep growth going. If you have deflation, then the economy just kind of grinds slowly to a halt because no one wants to buy anything ever, because it’s just they’d be better off just waiting for it to get cheaper.

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S3: That really help you people think, like, why do people buy stuff before Christmas? Then you know, it’s going to be cheaper after, like when people

S1: to give Christmas presents?

S3: Yeah, and you need to buy milk. I mean, you, I’m sure you’re right. Felix, whatever. But like, people buy stuff for all kinds of wild reasons, and they’re not always going to do the logical thing. Like, I’m just logically going to sit back and not buy something. OK, but it’s like down

S1: to let me give you a real example, which is used cars. Everyone knows that we have like a very artificial situation right now going on in the used car market. The used cars, a crazy high. They’re certainly going to come down in price in the future. And if you ask anyone who knows anything about cars, should I buy a car right now? They are all going to give you the same answer, which is no, you should not buy a car right now. You should wait for prices to come down. If you know that prices are going to go down in the future and if you have the ability to wait, then you wait. And that’s what everyone in the car market is doing. But that’s broadly what everyone in the economy does in a deflationary environment. OK.

S3: But just to ask you one more thing. So if there’s inflation going on and I need to do something with my savings, so they’re not just it’s not just losing value, does it not? Makes sense to just buy some bitcoin or whatever, because we know that’s going to the price of that is going to go up lots and lots more than my savings account.

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S1: There you go. If you note that the price of bitcoin is going to go up. Lots and lots burned by bitcoin, like, you know, that’s the theory regardless. But you do that regardless of inflation rate, the price of bitcoin has gone up lots and lots over a decade in which there was no inflation, and it may or may not go up lots and lots in the decade when there is high inflation or there may not be high inflation. But like there is no correlation between bitcoin and inflation.

S3: Right. OK, yeah, there are.

S2: There are definitely spikes. I mean, the the one of the teams of Bloomberg Economics, I think they were they were saying something like 50 percent of Bloomberg’s risk of of bitcoin’s recent depreciation has to do with the in the in the inflation hedge dynamic. And then of course, there are. Other analysts were like, No. So that’s what’s fun about markets. You can find any explanation for anything that you were looking for at any time.

S3: I mean, it would make sense that people are trying to put their money places where they can still make a nice, make good interest rates and stuff, right?

S1: I had a I had a poll, I did a little poll on Twitter. I’m going to ask you to what you think the answer is, and I’m going to say what, like the Twitter hivemind said, I said inflation. Is it good for stocks or bad for stocks?

S2: Markets don’t care. That’s my that’s my response.

S1: So yeah, Stacy says, like basically neither Emily.

S3: Well, I would want to agree with Stacy, but for the sake of controlling you, I’ll say it’s good. It’s good for stocks because you want to put your put your money.

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S1: There you are. You are in the majority. We had two thirds saying it was bullish to only one third saying it was bearish. I think I’m with you. I’m in the majority. If inflation is, you know, allowing you to raise prices and keep margins high and like you’re just selling goods for whatever they cost in real terms, which is what companies do if those real terms. Going up in nominal terms, then you have that level of tailwind in terms of increasing your profits and cash flows and everything, and I think it’s good for companies. The argument that it’s bad for companies is, you know, it basically relies on the central bank reaction function. And it’s like, well, the Fed is going to have to raise interest rates. And if interest rates go up, then discount rates go up. And if discount rates go up, then the net present value of future cash flows goes down. And so that you have like there is an argument that inflation is bad for stocks. But I think probably the wise mind here, as it is this season, it really doesn’t make any difference. What was the big Twitter poll of last weekend?

S2: I mean, basically Elon Musk asked the internet if he should sell a bunch of his Tesla

S1: shares 10 percent of his Tesla shares.

S2: Indeed. And he’s like an I will abide by the results of this Twitter poll. That’s what it was like. Bring it on. And they were like, Yes, Elon Musk. You should sell seven percent of your shares. And lo and behold, Elon Musk sold a bunch of shares.

S3: Should I have read it aloud?

S2: Yes, please read it aloud.

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S3: OK. Much is made lately of unrealized gains being a means of tax avoidance, so I proposed selling 10 percent of my Tesla stock. Do you support this? So he makes it into this thing about billionaire taxes and and then, yes, 50. Fifty eight percent of his followers do support him selling his stock.

S2: Fifty eight percent of people who voted in the poll because you don’t have right.

S3: I’m sorry. You’re right. Yes, 58 percent of people bought enough to vote in his poll, whereas

S1: the the overwhelming majority of the replies to the poll came from like Elon Musk Tesla stock holding fanboys who were like, No, don’t do it, it’s going to make my stock go down.

S3: And it did.

S1: I did. But I mean, the stock is still worth like, you know, a thousand, pretty much. I feel like that. All probably fine. There is a conspiracy theory, which I suppose we ought to entertain. Elon Musk knew that he had to sell a bunch of stock anyway for various tax reasons. Associates is not a conspiracy theory.

S2: That’s supposedly a fact.

S1: But, but no, the conspiracy theory comes in where, like, he kind of knew that he was, he knew what the result of the poll was going to be. And he did the poll to, like, cover up the fact that he would have to sell the stock because otherwise it would be a bad look to sell stock. But now it looks like a good look because he’s doing what Twitter says, and it just seems way too convoluted. And like, I don’t think he knew what the result was going to be, and I think that was just him having like a brainwave on the weekend. And it’s probably like smoking weed or something.

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S3: Yeah, Elon Musk just being Elon Musk and just having fun and tweeting. And even though the tweeting may have led the stock to drop a little bit and caused Elon Musk to lose like $80 million or something, it doesn’t. It doesn’t really matter. Like that’s just the price Elon Musk is paying to have fun on Twitter. I mean, we’re all paying a price, too.

S2: And when you’re when you’re the world’s richest person, what’s $80 million is among billionaires, you know, it’s just like, I like lulls. It’s like an expensive dinner.

S3: You had to sell the stock, right because he had stock options that were expiring, that he had gotten like ten years ago and he had to right?

S1: He. It’s not clear whether that was the stock that he was talking about selling right. The new stock that he acquires by exercising his options. That’s actually income. That’s not, you know, unrealized capital gains. And he needs to pay income tax and the only way you can ever pay the income tax on that. Well, I mean, most people sell a bunch of the stock they get when they exercise options in order to pay the income tax. Elon could probably borrow that much money if he needed to because he’s Elon. But, you know, I think people really did get caught up in unhelpful, not slights talking about that whole aspect of things. But yeah, he’s going to he’s sold like $5 billion of shares. He’s going to sell even more because $5 billion of shares is not even 10 percent of his holdings. Because he’s fat rich, he’s going to pay 23 percent capital gains tax on those sales. And that’s going to be a bunch of billions of dollars going to the federal government to spend on infrastructure. Yeah.

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S3: And California, too, I think I saw some estimates California’s getting a large chunk of Elon Musk taxes on this as well.

S2: You got it. I mean, 2022 is going to be Texas.

S1: Yeah, exactly. He’s left California. He’s moved to Texas. If he does, oh, income. If he does the options exercising in Texas rather than California, and he’s living in Texas. You know, I am not a tax lawyer. I don’t know. But like a lot of the talk about his effective tax rate being 50 percent or 54 percent and stuff like that is is predicated on him being a California resident, which he is certainly not anymore.

S3: And what is all this? What’s my what’s the takeaway here for the billionaire tax discourse? What am I learning? What did I learn from this?

S1: I don’t know. I feel like if you want to learn about. Taxes, wealth distribution, capital gains, unrealized, you know, wealth and all the rest of it. Looking at a meme or a meme Lord Edge case is just going to never shed light in any helpful way on anything like Elon is Elon, he’s going to Elon and the rest of the discourse can move on. But but yeah, I think there was talk, you know, when that was that like one day long proposal to tax unrealized capital gains that this would affect like 700 people. I think we can talk sensibly about proposals that affect 700 people. But Elon is a very unique one of those 700, and I don’t think he necessarily is a great way to sort of shed light on how the other 700 would best be taxed. We should also mention, though, the largest IPO of the decade. I mean, this is it’s amazing how much news there is this week because we had a $14 billion IPO. This company, Rivian. No company has raised this much money on the stock market since Alibaba went public in 2014. No American company has raised this much money on the stock market since Facebook went public in 2012. 14 billion is an insane amount of money to raise in an IPO. And what makes it completely insane is that it has zero revenues.

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S3: You’re talking about

S1: Rivian. This is a yeah, this is a pre-revenue company which raised $14 billion. It’s worth now it’s listed on the market is worth about 100 billion on the market. Make sense of this.

S2: This is like the platonic ideal of venture capital.

S1: It’s absolute. It is. It’s V-C gone public markets at a scale that no one could ever dream of. It’s absolutely bizarre anchors, and the only reason I think I’m I feel comfortable saying that the only reason that Rivian is worth 100 billion is like a relative value trade with with Tesla, right? It’s like if Tesla is worth a trillion, then Rivian probably worth, yeah, zero point one Tesla’s.

S3: So we should say that Rivian is I think it’s a 12 year old EVA electric vehicle company that I think specializes in electric trucks. It has backers like it, has Amazon backing it. And I think the idea ultimately is to build some kind of like electric and Ford.

S1: Ford has a big shareholding

S3: to build some kind of like electric delivery vans, which does have some potential. But the difference and Dan Primack had a good piece this morning. The difference between Rivian and Tesla and why that comparison may not be correct is because when Tesla iPod it was, it was less far less mature than Rivian is right now. So it had more like runway to get big. It didn’t have as much VC backing like Rivian already had a billion dollar plus valuation. And you know, it was just has more money, but it has less room to grow now because it’s so valuable and it’s a different situation than Tesla. And it seems kind of doomed to me, actually, like you might have made money this week on the IPO, but like going forward, I don’t know, where are you going to go from here?

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S1: Well, I mean, I feel like again, we are living in this bizarre world where we’re conflating the company and the stock right. The Rivian has a truck that people are very excited about. They have an SUV that they haven’t even started making yet, but the people are very excited about. They have a van that Amazon has already committed to buy $100000 EV and will almost certainly buy more than that. They have good design. It’s real like ground up EV stuff. And as a business, I think there is a strong reason to believe that Rivian will have a good business. It will be profitable, it will make money and and there is a relatively bright future for Rivian and people. You’re going to see a lot of Rivian’s on the streets, and that’s going to be a successful business thing. Yeah. Now, you know, that is an entirely separate question from like, will the stock go up or down? And the stock can go down by 90 percent and it’s still a $10 billion company, which is like out there making trucks that people like to drive. And so I’d be interested to see if Rivian becomes a really successful company and sells a lot of trucks and the stock comes down to planet Earth. Like, would that be considered a success or failure like a people, really these days, just judging companies on their share price rather than what they do and how much money they make?

S2: Well, we just said that nobody cares about management, Felix, so

S3: I was wondering when Felix was saying that I was like, That’s an oxymoron. You can’t be a successful company of your stock prices going down. Like, that’s not the story anyone’s going to tell about you. It doesn’t matter. It doesn’t matter how good your product is, how many deals you have with Amazon, blah blah blah. If the stock’s going down, the story about your company is You’re a loser, you’re you’re not doing well. Like, I just don’t see that happening unless it has, and I can’t think of an example.

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S1: All right, folks, this is this is where you write in Slate Money at Slate.com and tell us, give us some examples of successful companies that have done very well as their share price was declining. I’m sure there are examples. I’m a bit like you. It’s like it’s not easy to think of that, but I’m sure it’s happened.

S3: I feel like Vanna was here. She’d be like, You have to have growth if you don’t have growth in the stock price, like, what are you doing?

S2: What are you doing? So because we started this by talking about Twitter, Elon Musk and Michael Burry of the Big Short fame have been in a sort of a billionaire slap fight for a little while. And this one is about Rivian. And so Musk was saying in response to somebody else, I hope they’re able to achieve high production and break even cash flow, you know, and then he’s like Tesla’s the only American carmaker to reach high volume production and positive cash flow in the past 100 years. And then Berry is like the true test is achieving that without massive government and electricity subsidies on the backs of taxpayers who don’t own your cars. You’re just like, Oh, snap! Fair points were made, but the point that Emily was making earlier about infrastructure, so much of this conversation about Tesla, about Rivian and about the relative antipathy of this phase of the economy to like government subsidy is bizarre to me because government subsidy and infrastructure are things that these companies are not just relying on, but like massively benefiting from to to get to the scale and the interest and the enthusiasm that they have like. It wouldn’t make sense to bet on electric vehicles if you didn’t think that the Biden administration and future ones had some kind of plan to continue subsidizing these sorts of transactions. But anyway, that is that is my I don’t understand how billionaires think digression of the day the auto

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S3: industry wouldn’t even exist if like to go back further, like we didn’t build the highways.

S1: Yeah, here we are. We three having a numbers round.

S3: We’re not going to split up this conglomerate, folks

S1: with no thinking. We’re sticking together people, at least for the time being. My number this week is 3.4 percent, which is the new quits rate, a new damage Felix in the race. Did I steal your number?

S2: Goddammit, fine final. Find another. Carry on.

S1: I think basically 3.4 percent of the entire American workforce. Sorry, that’s not true. Three percent of the entire American workforce and 3.4 percent of privately employed Americans quit their jobs in one month.

S3: Go workers,

S1: go the month of. I think that was October was September around September, right? But yeah, that’s an absolutely insane. Like, if you multiply that by 12, you basically get getting on for 40 percent of the entire workforce just quitting their jobs any given year. So the quits rate is good CRS.

S3: It’s 4.4 million Americans, right? 4.4 million. And it’s up and down the food chain of workers, right? Because it’s like those McDonald’s workers. I was telling you guys about walking out, putting up their signs. But Bloomberg had a piece about finance workers quitting their jobs and getting like eight figure salary figure figures. I was like, what? At four in their new jobs and and and it, but it’s all the same kind of thing. It’s people that are like, there’s more opportunity is there to put up with this crap anymore. And the Bloomberg story, it was the bankers that, you know, didn’t get any sleep over the past year. And then, you know, the McDonald’s workers are like, haven’t had a raise in forever and ever, and everyone’s mean to them. So like, of course, they’re going to quit. Like for so long, workers in this country up and down everywhere have been treated mostly like crap. I think we can all agree. So I just I love to see it cut away.

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S1: Everyone keep going, quit away and go, go work in crypto. This is

S3: enormous. Like the mayor of New York, get paid in crypto.

S1: Emily What’s your what’s your number? I’m going to give I guess this that gives Stacey a little bit more time to found another one. You found another one.

S3: Okay, well, I’ll go. OK, so my number is two dollars and 99 cents. That is, I think, the monthly fee for Twitter Blue, which is Twitter’s new subscription product that I’m weirdly excited about. I don’t know what that says about you’re going to pay. I was trying.

S1: I think I don’t understand what you get for it.

S3: OK, so no ads to me. You get content without ads that you can read and you get some money.

S1: There are no ads in the stream. I thought the words in the stream still, do they take out the ads?

S3: Let’s not talk about that. I don’t know. Do you know, Stacey? I only know you get some coffee.

S2: The is the only thing that would make me pay know is if I no longer have Rondo promoted tweets, but you in my stream, I would pay two 99 a month.

S3: You also get which I think I’m kind of excited about an undue an undo button. So like you write your tweets, you hit tweet and you have 30 seconds in which you can click Undo to take the tweet back. And I feel like I isn’t

S1: that just the same as delete?

S2: Button, no delete.

S3: You always have everyone knows that you delete it, right, because you click on the old, how do they to because you click on the link for the for the tweet and it says this tweet as well.

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S1: If you click on the link for one that was undone,

S3: it’s gone, baby. It’s gone undone. Time has been reversed and I feel like I’m

S1: not worth thirty six dollars a year. I think

S3: it is. I think also, Kara Swisher pointed out, like this is just their first try at subscription at a subscription product like Amazon Prime in the early days wasn’t so great, but now Amazon Prime is like, why would you buy anything on Amazon if you’re not a Prime member? I mean, that’s just my opinion, but it’s true. I think it’s going to be my favorite thing.

S1: My favorite tweeter is Stacy-Marie Ishmael. Stacey, you have a you have a little tip jar on your on your Twitter. Has anyone left you a tip yet?

S2: Yeah. Well, so I was I was in the bazaar and I thought the switch that off literally never. I received like, you know, I have some amount of followers and not a single person has ever been moved to be like, Here’s a dollar for you or your tweets are so good to see you an hour after giving me a dollar Emily. So it’s OK. I, you know, I’m very fortunate to have a full time job. I’m good. But you know, if I were sort of a creative professional who was like, Great, I can, you know, I can try something with tip jars or I can try something that’s super follows. I would have a lot of questions about what my expected earnings would be on a monthly basis.

S1: Well, no, you wouldn’t really. You’d know your expected earnings this year.

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S2: You should quit in the sustainability. Right? Indeed. And get an eight figure job working on Wall Street. Exactly. Eight figures, huh? Eight figures. Eight figures is a lot of figures.

S3: It’s just a lot of figures. I mean, depends on inflation, right?

S1: No. I mean, if you make if you make like a hundred and thirteen thousand dollars and forty eight cents, that’s eight figures.

S2: Felix. All right. So my number, my number is four, which is the number of virtual apes. Yes. Yes. Stay with me.

S1: Are they bathing? They bought apes.

S2: Three are bored. One’s a mutant. Oh, OK. In a super group that’s been put together by Universal Music Group, which reps, you know, T. Swift and Drake, among others, into an NFT band called Kingship. And I feel like there’s 17 different concepts that I have to explain in that sentence right now.

S1: But is this is this the new I feel like they used to be? Oh, really? It’s slightly ironic. Not really. Supergroup called Gorillaz, where it was all animated by Jamie. Great music and it had like Damon Albarn.

S3: Mm hmm.

S1: And it was like. And it was the first like, animated, legitimately good music group. And now we’re going to have NFTs who are correct making the music. But it’s Damon. It’s Damon Albarn involved. Like, who’s making it? Taylor? Tell me it’s Taylor Swift.

S2: Trust me, I would have led with if it were, if it were Taylor Swift. So just so everybody knows like these are for illustrations of apes, you know, mostly from a company called Bored Ape Yacht Club, which has made tons of money convincing mostly very wealthy people that they should change their Twitter avatar to a simian of some kind. And you know, one of the guys who owned a lot of these apes was like talent. Agencies have been reaching out to him and been like, Yo, you seem like really hip to whatever this NFT thing is, we want to work with you.

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S1: I one talented, can we get some of your most talented apes?

S2: Well, now I think it’s going to be a fun challenge to see whether they can turn these apes into talented apes, right? So, you know, I haven’t yet seen. And of course, this is going to be a big reveal who the musicians will be, who are going to be behind these apes, what the musical style will be. There’s a lot of questions about the actual creative attached to this, but this very much reminds me of, you know, a couple of years ago. Well, actually, there’s they’re still out there. We have like virtual influencers, which were like I and created virtual avatars on Instagram and people like they would model clothes for real black, real bands, real brands. So, you know, this is this to me, is where the line between the crypto and what folks are calling the metaverse gets weird and blurry and profitable for some companies and highly confusing for most other people, which is here’s a crypto concept. Here’s a thing in which you can own the rights to like a piece of digital art. And then these very traditional major companies are coming in and saying, We want to do something interesting with that. We have no idea what the use cases. But it seems show

S1: I feel like just musically, it’s going to be really interesting because. Is because we are not in the age of Blur and Oasis anymore. There’s something about the age of Blur and Oasis where that kind of music lends itself to animated simians in a way that I feel like these days where you have like K-pop and hip hop like

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S2: doesn’t K-pop hip hop and T Swift are the three genres of music?

S3: I purely don’t understand today what a music NFT is, isn’t how I see it.

S1: It’s a great question and one of the interesting things about this. I mean, this is this is actually and we are this is the lightning numbers round. It’s becoming very less like lightning by the minute, but they are. One of the fascinating things is that music has been very slow to get NFT. So I do think that if I had to guess the person I would say like would somehow wind up getting involved in an NFT music project would be someone like Grimes or Imogen Heap

S2: because she’s been Imogen Heap.

S1: Imogen Heap has been into the news for a long time and I feel like she’s going to try and get involved in this. I hope she does because I love her. She’s awesome.

S2: Bjork did in 2017 have an album that came with its own tokens. It was her Utopia album. And when you bought it, you got an audio coin.

S1: And what’s happened to the value of the Bjork coins?

S2: The latest number that I can find in that was earlier this year that they were trading at around four pence and they were worth around 15 pence at the time.

S1: So they they went down from 15p to four p to four p. I’m I’m long Bjork coins. I’m like. Never mind the theory. I’m in bitcoin. I’m just going to like, load up on Bjork coins because she was clearly, you know, she was

S2: always ahead of

S1: the game. She was the first mover and like eventually the first movers will get rewarded. So I think that’s it for us this week, unless you’re a slate plus lesson at which you should be, because we will talk on the record about off the record, on background, on back. No comment. You can talk all about like how to understand news articles when PR people insist on being on background the whole time, that’s coming up in Slate first, but otherwise. Thanks for listening to this, Joe, on this very busy Newsweek. We will be back on Monday with Ed Lee talking about episode five and succession in a show that is produced by Shane about his amazing. He produced this dude. Thank you very much.

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S3: Nice.

S2: Oh my god.

S1: OK, Stacey, as an editor. At a major news organization, how much time do you spend having conversations on background with PR people

S2: as little as possible? And and for for for all our listeners, when we talk about having conversations on background, what that means is you are talking to a person, you know who that person is. This is not a dark, disembodied voice in a garage. This is a, well, a person who’s well known to you and the reporter and the person on the other end will say, I can tell you on background, which can mean everything from not for attribution directly to me, not for attribution at all. Or, you know, I’m right, I’m going to write this down and piece of paper, and you’re going to eat it. You know, it was like, there’s. And I think that’s that’s part of the problem in that companies are increasingly trying to strong arm journalists into agreeing to terms that are frankly really bad for the people reading that story because we’re insufficiently explicit about the negotiations that are happening and that are also often, like not even necessary. You know, my

S1: apps are never necessarily on background. We have no comment, right?

S2: Like the number of times when I was a finance reporter covering, you know, investment banks that I would chase down some flack for hours and then all they would be like is, you know, off the record. No comment like I would just want to scream, which is like, why can’t you deny or what?

S3: So the reason we’re talking about this right now is because Nilay Patel, who’s editor in chief, I believe of The Verge, the tech site, put out a new policy on on background at the Verge. I guess they had to sort of rein in the behavior, and it had some wonderful examples of companies taking the on background privilege a little too far. My favorite is a food delivery company that insisted on discussing the popularity of chicken wings on background like come on!

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S1: My favorite was Volkswagen, which said, Oh yeah, we really on background. We really are changing our name to Volkswagen.

S3: I wondered it did they report that

S1: it’s not Naples? Honestly, we are. And then everyone went, Oh my God, I guess you are. It’s not Naples Postal. And then, like on the record, the company said, no, it was just Naperville, and everyone’s like, But you told us on background that it wasn’t.

S3: I think that’s funny, honestly.

S2: Totally, totally bonkers. Totally.

S3: But this is a huge problem when you’re a business reporter trying to report on companies accurately, accurately and they won’t tell you any. Apparently on wreck on record, I have so many conversations with company PR people where they’re like, We’re going to answer your question, but first, can we talk on background? And it’s like. But why, though? Or they won’t let you even use their name when they’re a company spokesperson?

S1: Yeah, especially when it’s like an outsourced PR company, and it’s not like an in-house PR person that like you can never use my name. But The Verge just done the right thing here and they said, No, no, mas. Basically, if if the PR person comes up to us and says, like, can I talk to you on background? Can I say something off the record? The answer is nearly always 99 percent of the time. It’s just going to be no. On background is an agreement between the PR person and the journalist, and it’s normally an agreement made in order to protect the source. You are an official spokesman. We do not need to protect you. So you are not going to get the protection of that agreement. If you talk to us, it is on the record. And I really like this, and it’s going to be super interesting to see whether other organizations follow suit.

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S2: I think it’s great. I mean, there’s a similar I would like to fight a similar fight on this information is embargoed. You know, people will just like send you a press release and in big text of the front, it’ll be like, this information is embargoed until blah. And I’m like, That is not how embargoes work. Like, you don’t get to send me something and then decide that you think I’m only allowed to report it at a date and time that is convenient and convenient, amenable to you. And you know, I know we talked about corporations, but governments, you know, especially in the U.S., are getting worse and worse at this, where they will make a spokesperson available for, you know, a major units of the of the government to be like, please attributes of this to a like an unnamed official like they are literally federal employees.

S1: Right? And yeah, and you have actual press conferences with, you know, senior government officials and everyone’s like, you can attribute this to a senior government official. It’s like it’s the fucking Treasury secretary. All right. Like, it’s like, this is, you know,

S2: yeah, it’s a race to the bottom.

S3: It’s important to reporting that you’re able to say where you got different information from and it obscures the meaning of your story if you cannot. And that and that’s really the goal of the of the company PR and a lot of cases, it’s to sort of pass information to you. They want you to use it, but they don’t want their fingerprints on it like a company or or fans, maybe some damaging old coverage of a. Person that you’re writing about or another company that you’re writing about and call it and say it’s on background, but I think it’s material to say like, Oh, Facebook’s at me, these like mean, you know, damaging articles about this, about their employee or whatever. Like, it’s not it’s not right to not be able to say that because it changes the angle of the story. The narrative?

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S1: Yeah, totally. My favorite workaround for this was the UK press, which had this convention where like, if someone talked to them off the record, they would always be sources close to that person. Oh, sources close to the prime minister always means the prime minister. And if you know, you know, but the idea is that most readers don’t know it like the people who matter do know.

S2: When I was a baby journalist, I witnessed just an egregious example of this where literally a person is like standing up, talking to a person and then they’re like, will attribute this as a person familiar with so-and-so’s thinking. And I was like, Excuse me, should the person familiar with the thinking is the person who’s having the thoughts right now? Like what? It’s just wild. So yes, I’m more powers of the Verge and to everyone else in media fighting this fight.

S1: Stacey, are you familiar with your thinking? I feel it. I’m familiar with your thinking. But there’s this interesting philosophical questions. Are you a source close to Stacy-Marie Ishmael?

S2: You know, I do feel sometimes like I’m floating above my body looking down, so maybe it’s not existential notes.

S1: This is this is why we are. This is the value we provide to sleepless subscribers.

S3: Thank you for listening.

S2: Thank you for your subscriptions to all.