Protection Money

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S1: This ad free podcast is part of your Slate plus membership. Hello, welcome to the protection money episode of Slate Money, Your Guide to the Business and Finance News of the Week. I’m Felix Salmon of Axios. I’m here with Emily Peck. Hello. And Emily, do you want to do the honors? Who are we introducing here?

S2: I’m so excited to introduce Stacey Marie Ishmail. Hello. Most recently, editor in chief of the Texas Tribune. And prior to that, a bunch of stuff and a bunch of stuff.

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S1: I’m going to do the deep cut and say F.T. Tilt, which was the greatest publication that the world has ever read.

S3: We were certainly under read for the time.

S1: It was so good. You’re there for a long time and then you embarked upon a long and illustrious career in a bunch of different places. And the highlight of your career, one hundred percent is now slate money. Congratulations for

S3: sure. You know the single best thing I’ve ever done.

S1: You’re not just here this week. You’re going to be here for a while.

S3: Yeah, I’m really excited.

S1: We have a Texas based co-host, so you can be a Texas correspondent.

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S3: I’m happy to be a Texas correspondent. This is a fascinating state.

S1: So welcome, Stacey. We are going to talk to you about the crazy tech earnings that we’ve seen this week and this quarter and what that means in terms of the great fight between Tim Apple and Mark Facebook over privacy and other things we’re going to talk about cause how much they cost and why they cost so much and how long that’s going to last. And we’re going to talk about base camp Patreon, the privilege of white founders, and whether they can understand what the hell the employees are talking about. It’s a great one. And I have to say, if you’re not a slate plus member, you probably want to become one, because Stacey is an expert on all things. Why I could and we talk a lot about why a cut in Germany and what’s been going on about short selling bans. It’s a fun, little sleepless segment. It’s all coming up in this week’s episode of Slate Money. So, Stacey, I have been watching the rise and rise of the big tech giants for a long time. And as often happens, their market capitalizations reached the roof a while ago. But now it seems that their earnings are sort of growing into their capitalizations and they are making profits, the likes of which just boggles my mind. I wrote about Google’s earnings this week, which were up like three billion dollars or something from the fourth quarter, like the first quarter never increases in the fourth quarter, but they did. And Apple just had record earnings. Facebook is up there. Can you explain to me like what is going on?

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S3: Yesterday I was reading a story from Schiro of The New York Times and it a word that she used, which I fundamentally agree with and which I think explains your head explode killing, which is like bonkers. And the kind of both the rate of growth that you’ve described, but also just the scale of these companies is hard to compare to anything else. Even aside from my usual complaints about comparing stocks and flows. I think one of the things that was interesting, particularly for Apple, is kind of the tripling or quadrupling down on services and the idea that they have fully embraced the complementarity of hardware and software, realizing that there are hard caps on the number of twelve hundred dollar phones that you can necessarily sell. But there’s almost an infinite number of games, books, movies, apps that folks all around the world are willing to engage with. And what I’m really interested in seeing, if I can imagine what the future would look like, is to what extent these numbers really represent the consumption shift that we’ve all had over the past 12 months where it’s like, OK, if you’re not going out, but you will rent or buy a movie or if you’re not going out, but you will rent or buy a game or you’re spending so much more time on Facebook and Instagram. You know, there’s at least in my friend circles, there’s been a lot of anecdotal. Yeah, I like Instagram Target to be really aggressively with this like really cool in an outfit. And I one hundred percent put it in a way that was was not a conversation.

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S1: Before I unpack this a little bit, as someone who has spent a large amount of money on movies, thanks largely to sleep, money goes to the movies, second season coming up soon. This all rings true to me. But are you saying that there is a real possibility that Apple’s what you call services revenue is things like movie rentals, App Store cut and that kind of thing could actually really genuinely start rivaling the amount of money that they are making from selling hardware.

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S3: That is certainly something that Apple would be interested in having be true. I don’t think it’s just not true. Yeah, right. I think that there is still a lot and it’s one of the reasons that I’ve been paying a lot of attention to their bundling strategy. Right. So if you have spent more than five. Second on Twitter, you’ve probably been targeted with Apple Fitness Plus or Apple TV plus no,

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S1: I’m like, no. I wonder if you

S3: really want psychographic profile and see why you think you should be targeted.

S1: I’ve given up on me, but

S3: you don’t spend as much money as they are spending on, like original Apple television, Apple TV plus content without having a grander ambition for, you know, what is often called inside the company, like the ecosystem. Right. It’s like you want somebody watching Apple TV plus on an Apple TV, second screening on an iPad, third scrimping on an iPhone where they might be playing kind of a game that they’ve downloaded. That’s kind of the dream of really holistic services and hardware integration in a way that I think even Microsoft would be envious of.

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S2: I do think, though, that their blockbuster bonkers revenue and profits for the first quarter was a lot to do with people, were home and needed more Apple products. A lot of people bought phones, a lot of people bought computers, especially in the education realm. Students needed new stuff. And I think that drove a lot of the money that Apple made, like the long term plan is to make more money from services. But right now, what happened just recently was people bought a lot of stuff, a lot of products from Apple.

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S3: You see that in the earnings breakdown, revenue from Mac, like straight hardware, was up 70 percent year over year and revenue from services was up like just under 30 percent year over year.

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S1: Wow. So the hardware was growing even faster than this, like supposedly fast growing software, although that the services stuff might be a bit more recurring. The other thing, of course, that’s happened, the big change in Apple is that they started making their own chips and that is fantastic for profits. The new and one chip, which everyone just adores and thinks is amazing, is much, much faster than anything they can buy from Intel or Motorola or anyone else. But more to the point, it’s also cheaper. So they can it helps them really increase their profit margins and become even more.

S2: But to Stacy’s point, we wanted to talk about this, too. I think the big rumble now between Tim Apple and Mark Facebook is to do with Estévez, with the O’Leary titles, her recent episode of What’s Next TBD. Their feud has to do with this push into services. I think Apple and we can go into this now if we like. Apple just released a new iOS update. And the big news is that now apps have to ask your permission to track you. And long term, it seems like part of the reason Apple is doing this, besides, it’s like stance on privacy, is that it’s going to try and this is what Facebook kind of is saying. It’s going to try to make more money from apps. So like if apps aren’t able to track you and make money and please stop me if this sounds insane, if apps aren’t able to track you and and advertisers can’t make money that way, then somehow the apps will now start charging you more money on the front end. And that benefits Apple. Is that why they’re doing this?

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S3: That is one of the more convoluted explanations that is floating around. I listen to Lizzie’s podcast and I thought that is one of the things that is true is this is also kind of a clash of world views. Right. And one of the things that I often have to remind myself about large tech companies is, you know, this is something that she emphasized in the podcast. It’s like they really do believe in the message. Right. And sometimes the message almost defines the strategy. And so Apple is absolutely militantly religiously committed to privacy and Facebook is absolutely militantly committed to scale. And those are and have been positioned as really fundamentally opposite worldviews. I do think that when Apple says we want people to be aware of the privacy tradeoffs that they’re making in as much as there are potential benefits to their own services ecosystem, that’s also really true. Right? It’s also very true that Apple’s privacy lawyers are not to be messed with, that there are entire teams of people who are always looking at things and saying, how are we making sure that this is good for the consumer? And there are absolutely legitimate criticisms about when and under what circumstances. You know, Apple is willing to make certain kinds of trade offs for whatever those things might be. But I do think that they have shown themselves much more than Facebook to have privacy as a value in in the way that Facebook has had connecting people and. Recently connecting people with advertisers as a value.

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S1: So I feel like this is absolutely true and no one’s really disputing that, but it does feel more than a little self-serving. Oh, cool. Like, people would take this privacy zealotry from Apple. I think there would be more there would be more admiration of it were it not for the 30 percent App Store take. So, Stacey, can you just bring us up to speed on why people like why that feels a little bit icky, the combination of that with the high minded devotion to privacy?

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S3: I want to go back to something that Emily said, which is the idea that there’s this tradeoff between privacy and the upfront cost. Right. In the phrase that everybody has been throwing around for years and years. It’s like you’re not paying for the product and you are the product. And one of the things that Apple has argued and that is very much kind of part of the internal discussion, is that the services fee, which they’re lawyers and testimony, will also say most developers on the App Store never pay because they’re not selling the kinds of things through the App Store that require you to pay 30 percent or they’re paying the lower rates of 15 percent. But that is very much kind of a reflection. This is the Apple perspective on this. It’s very much a reflection of we are keeping you safe

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S1: if protection money

S3: it. One of the things I’ve always found interesting is when you look at the Android store versus the Apple App Store is kind of like the Wild West versus very curated nature of the Apple App Store versus the Android App Store, to an extent that Apple will argue, well, one of the things that you can feel pretty confident, again, from a privacy perspective, that when you download the up or you buy it up or you sign up for a subscription, it’s less likely to be something that silently is stealing all of your information or that you’re going to end up with four hundred ninety nine dollars that you weren’t expecting on a credit card. And that’s the argument about the trade off. It’s like you trust us to provide you with a certain kind of protected ecosystem that has your privacy at heart. And that’s expensive. Whether it’s actually 30 percent expensive is what a lot of developers have a real hard time believing.

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S1: This reminds me a little bit of the interchange fee for American Express card where we will charge the merchants more because the people just trust using the Amex. And so they’re going to spend that happy to spend money in a way they’re not with. They’re just using a MasterCard.

S2: It’s also not clear to me that anyone cares that much about privacy.

S3: I mean, I disagree.

S1: No, I’m OK. I’m totally Emily on this one. Like there is there are journalists who one hundred percent there are like a bunch of sort of open sourced from places like that. But in the real world of normal people who are scrolling through their Instagram feeds, they are not sitting there going, oh no, every time I like an Instagram post, I’m giving up a quantum of privacy to Mark Zuckerberg.

S3: Well, I think we’re about to find out, right. Because one of the reasons you didn’t know that is because, one, there’s a bunch of research that shows that even since Instagram rebranded would be brought to you by Facebook, there’s a large number of people who don’t know that Instagram and WhatsApp or Facebook apps. If you recall, WhatsApp was trying to do an update and they had all of this messaging about like by opting into this update, certain elements of your data will be available to other people. And that’s when signal saw and a significant uptick from, quote unquote, normal non journalist types, not open source types switching to signal. And Facebook and WhatsApp were sufficiently aware of the move away from WhatsApp that they kind of one delayed the timing of the pregnancy updates. And then when they reintroduced it, if you use WhatsApp, you’d have seen some new messaging. They communicated a lot more explicitly and clearly what it was actually about. And I think with this Apple change and iOS and the latest iOS update, when people are going to be confronted with, hey, by the way, did you know this was happening kind of in the same way that in a previous update it was like this? You know, literally everyone is tracking your location at all times. I’ll be interested to see whether that increase of awareness also translates to more assertive prime desire for privacy as opposed to just the absence of awareness. You’re like,

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S2: I think there’s a difference, though, between I don’t want someone messing with my messages, like the aversion to WhatsApp, knowing what you’re typing to your friend versus I don’t want someone targeting ads at me because all my Instagram ads are for investing sites, which is my personal present day. Situation or I’m looking for snow boots and now there’s snow boots everywhere. I don’t think people care about that stuff that much.

S1: Well, I think actually, weirdly, that’s the one part of Internet privacy that people do care about the retargeting and the idea of like why is this pair of shoes following me around? This is so obviously creepy and it’s so obviously personalized and a really stupid way that people are like, I hate that. And there’s this massive ad tech ecosystem. There’s huge amounts of personal information that Facebook, Google and a bunch of other people you’ve never heard of will have about you. Your privacy is invaded in a million ways, as Stacey was saying, like these apps are literally following you geographically around the world. But the one time the one little glimpse of that we get is, you know, the pair of shoes that’s following us around the Web. And people hate that. People genuinely hate that they are creeped out by it. And I’m just I feel like everything else because it’s so theoretical and so, like, invisible people find it hard to get worked up about. And if you can just if you could snap your fingers and turn the retargeting off, then people just wouldn’t care at all because they wouldn’t even there would be no visibility to this to these privacy invasions. And I also

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S3: one of the things I really worry about has been the normalization of data breaches and the feeling this kind of resignation and despair that people have this. Oh, that was my Social Security number. That’s my home address. My credit card is out there. My entire address history is out there. There’s been both a like a fiduciary failure of a lot of the organizations that are nominally charged with securing your privacy and your data and kind of, well, nothing bad has happened to most people who have had their privacy invaded in this way. And it sort of leads to this idea of did it really matter anyway? So I do think that there is a kind of privacy cynicism, but I don’t know if it’s necessarily the same as people don’t care. I think there’s like a hopelessness or I have no way of opting out, OK?

S1: I mean, I think in a real way, the horse has bolted the stable years ago. Like my personal information is in so many databases belonging to so many companies, which has been obtained by either perfectly legitimate ways or through data breaches or any number of other ways that, you know, the entire world could crack down tomorrow and say, you know, you are now embraced in a cocoon and full privacy. And it wouldn’t make any difference because it’s all out that my entire phone book, my address book, my contacts, my social graph, everything. My friend Kashmir Hill has done amazing work showing that, like Facebook, if you’ve never signed up for Facebook, if you have never signed up for Instagram, Facebook still knows everything about you, who your friends, what your phone number is. It’s amazing. And it’s, you know, apparently entirely legal. And so at this point, what does it matter? Maybe it would have made sense to try and build more privacy 15, 20 years ago. But isn’t it too late now?

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S2: Probably. And that leads me to my other question and thinking about this targeted advertising situation, targeted advertising, is that even good? Like, why does it even matter?

S1: This is an unbelievably good question. I have done a bunch of really deep dives into this and really I actually know someone who can answer that question. So I’m going to try and get this person on the show and we can have a whole segment about that question because it is one of the most interesting questions on the Internet. So on the subject of corporate culture, Emily, we had this company base camp, which not a lot of people have heard of, partly because it doesn’t put its name on any of its products. They’re called things like hey and 37 signals. But this company base camp was all over Twitter this week because it basically said we have a product that we make, which is Aslak like product for chatting among ourselves and doing our work. And we have decided and by we I mean, the two co-founders have decided that there’s just altogether too much political discussion on this here platform. And while you guys are welcome to have political discussions on any platform you’d like, just not that one, please, can you please stop with the politics on our basic platform and Twitter when the zonk is and this happened in the wake of Coinbase making a similar proclamation like we are, we do what we do and you can be political in your own time, but not when you’re at work. Can you explain what the controversy is here?

S2: So, I mean, this is kind of I think boils down to what counts as political and who gets to talk about it. So the founders, the co CEOs of Base Camp, Jason Friede and David Hanson, these aren’t like guys that were holed up not talking about politics or social issues and then got really bothered because they’re employees. We’re talking about social issues. These two guys have been out there with books about management and they’ve taken stances before. But apparently what happened inside this company and we know what happened because of Casey Newton is that four years inside base camp workers there had been compiling lists of, quote unquote, funny names of customers. And a lot of times the funny names were ethnic names or, you know, not white guy names or whatever. They had kind of a reckoning over the list of names and realized, OK, well, this is kind of an offensive thing to do, veers into racism. And there was a whole internal discussion about it. And apparently the two CEOs, they agreed that this was kind of like a bad racist adjacent kind of thing to do and didn’t want to do it anymore. And the employees kind of wanted to keep talking about it. And these two guys were like, you know what, that’s enough talking about it. And then the next thing that happened was the CEO said, we’re not going to talk about politics anymore. Essentially, it seems to me having a little tantrum like we are the ones we founders’ get to decide what we talk about. And now we’re telling you you can’t talk about X, Y and Z, which is sort of. Reasserting the simple fact that, like, you can’t really bring your whole self to work, like tech companies have always told you you could. The founders are in charge. They get to tell you what you can talk about and control what counts as political. And in this case, that’s kind of what happened.

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S1: I think that’s exactly correct. I think they have basically drawn lines. Yes. Themselves. They like certain types of political expression, the kind of political expression that we’ve been doing all along and that we would encourage you to do because we’re comfortable with it. Other types of political expression we’re not comfortable with. And so therefore we’re not going to let you do it. And it’s part of I wrote about this a little bit in those markets on Friday, the what I call the monarchical nature of modern tech companies. We had this guy, Jack Contee, who’s the CEO of Patreon, came out with an absolutely astonishing YouTube video this week where he said, we’re doing great. We just raised one hundred and fifty five million dollars. We’re zooming ahead. We’re great, but we’re firing thirty six people. And in the context of this YouTube video, which is about six minutes long, he used the words I or me or my. I counted it 31 separate times. It’s like once every 12 seconds on average. He’s the CEO, he’s the founder, and he basically considers himself to be the company. The base camp guys are basically the same. They famously don’t give any equity to their employees. So like we own the company, it’s our company. We can do what we like. And they made that very clear this week. And this goes all the way back to Mark Zuckerberg when Facebook went public. And it’s like, I’m going to set this up in a way that I control the whole company and not just me, like my heirs and successors. And the signs like it could be his daughter winds up having the exact same degree of control that he does. And it does feel very much like old school and prison monarchs, does it not?

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S3: Stacy, not only does it feel very much like old school emperors and monarchs, but the people who are in charge then are very similar to the people who are in charge now.

S1: Do you think the Illinois is the latter day Napoleon?

S3: Oh, certainly something interesting. I go back to kind of what Emily was saying about, you know, when you think about who was being made fun of and the demographics of the people making the fun. Right. It’s very much the same split in how you saw people respond to the we are no longer political post where a bunch of people who are like, well, I as a black person, my identity is politicized by default, regardless of what I do about it. And one of the things I didn’t see discussed yesterday, because, you know, time on Twitter is meaningless, but each one of the founders is also one of the people who got a lot of attention by calling out Apple’s Apple card algorithm as being sexist because his wife was offered a lower credit limit and he was. This is the same.

S2: And we talked about this.

S3: Yeah. And he was able to identify ways in which, you know, non identity based decisions have meaningful consequences for people who are from backgrounds that are often like marginalized or excluded in some way. And so, you know, this is not a person who is operating without the understanding and context of how identity and politics are often intertwined in ways that are more complex than we’re just not going to talk about this because this is not material to the work, because sometimes that is the work. Right. He sparks a whole resurgence of discussion. And frankly, his wife’s extremely well written blog post sparked a resurgence of discussion about algorithmic sexism. And, you know, the fact that, like embedded biases manifest in products. And so now to have a blog post is essentially arguing those kinds of things aren’t work, just strikes me as really self-aware.

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S2: Yeah, he doesn’t realize how much privilege his identity affords him and what counts as political. He can separate political in a way that a black person coming to work can’t. Or even there was a quote in Casey Newton’s piece from a parent who was like, can I not talk about school stuff? Is that political? If I talk about public school issues, like there are so many issues that are actually political that some people don’t ever have legal answers. Yeah, yeah.

S1: I think like to take his side of it. Like his his blog post as opposed to Jayson’s was slightly more thoughtful about this. What he would say is, look, you know, if you want to talk about scheduling issues that are part of the work from home pandemic, home schooling nexus, like, of course, that is something that can and should happen in base camp. And even if you want to talk about, you know, black lives matter as much as of anything. It’s not like we are creating some kind of a firing offense. But what he was basically saying was the there was a feeling and this is where things get a little bit sketchy and I don’t know, he was like there has been the feeling that what happens is that these conversations go on too long. They escalate to a point of people starting talking about genocide and whatnot. And there are certain like white folks who maybe feel a little bit uncomfortable about, like not saying anything in these discussions in case for fear that they’re going to be perceived as being a bad ally in your world’s smallest violin comes. They don’t say anything. But that’s the whole point. They’re saying if I don’t say anything, then that’s that’s maybe bad. But the point is and this is the big question, which I don’t think anyone has been able to answer, is like the people being made to feel uncomfortable here, the people who felt uncomfortable when people started talking about like this is how totalitarians companies began or the people who felt uncomfortable about what happens if I don’t participate in this conversation, will people think I’m a bad ally? All of those people who ostensibly being protected by that rule is that set of people larger than just the two co-founders? Or was it really just the two co-founders who felt uncomfortable in the saying, yeah, we don’t like being uncomfortable, so we’re going to do this and claim that it’s for the greater good of everyone?

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S3: What I can say, having been involved in so many of these discussions in both tech and media companies, is most people and specifically most white people who’ve been in powerful positions in either of those organizations have been so far removed from the reality of being uncomfortable for such a long time that to them it really feels to use, you know, our favorite word on Twitter, like some kind of aggression or some kind of violence. Right. That the mere fact of someone saying, you know, othering other people through their names is kind of a slippery slope, a long slope, but still a slippery slope to totalitarianism makes them feel bad. And that is worse to them than the conversation about like why this is challenging. And I have been so struck that this when they talk about the escalation and the discomfort, that these are the same conversations that are happening about like moderation on social media platforms is very similar to the conversations about what kind of speech, at what level and what threshold and what intensity is allowed or allowable. You know, like what the story the other day about Facebook removing posts about the houses that were recently bought by Black Lives Matter founder, but leaving upstairs and other kinds of things. And this is all of this is the same conversation. It’s the same conversation about do we accept that? Actually, the status quo in and of itself is an encapsulation of certain kinds of political and identity based standards that we consider to be uncontroversial and therefore comfortable? Or do we start to say, why do those things get to be the default rate? Like, why is it that this discussion, this particular slice of discussion is not political, but the second you start to say, hey, maybe it’s not OK to laugh at people with Chinese or Indian surnames, that becomes political, whereas jokes are like, why do we have more Brads than women are more on the acceptable end of the discourse threshold? And it’s so much of it has to do with a lot of the people who have been in charge, have been surrounded for a long time by people for whom all of the frames of reference were the same. And you just have not had your world view challenged by people you trust to challenge you. And now you’re having your will be challenged by subordinates and you’re like, no, this is not your place and we are in charge here.

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S1: So, Stacey, I have a question for you, which is we are definitely seeing this take place in companies with white male co-founders, with names like David and Jason and Jack. Then at some point, companies, when they get bigger, they go public, they have boards of directors, and the boards are often more diverse. And just like the white co-founders, sometimes they bring in professional CEOs with names like Sunde or Satya. And when that happens to things actually get better.

S3: Folks are familiar, I hope, with the phenomenon of what is called the glass cliff, which is like you bring a woman in to try to clean things up and then when it inevitably doesn’t work, you push her out and you’re like, let’s go back to the male CEOs. And there is a very similar phenomenon being researched. I can’t remember the name of it, but there I’m sure there’s like a pithy slogan of the idea of you bring in the brown and black people to try to really fundamentally change a lot of the way that the company has been going. And but what often does not happen is the recognition that those folks come with, like less political and social capital out of the gate. And so every change that they make, every suggestion that they make is received fundamentally differently, even if it would have been the exact same thing, the exact same strategic plan, that magic or a mark or a Tim or Steve might have suggested. And I think one of the biggest institutional failings of corporations, large and small, is bringing people in at the top and not understanding that the challenge is often your middle management layer who are both optimizing from managing up. So they do want to keep the people that they’re reporting to happy, but also for keeping themselves safe and comfy and in kind of relatively cushy positions and don’t necessarily want to do things that will be perceived as unpopular. Right. Don’t necessarily want to do things that they might feel uncomfortable with, don’t necessarily want to push through changes that will be hard or will make them seem like they’re on the side of the new folks who are trying to drive all of these changes through and know that I will ever write a management book. But I do think that if there were more studies of of both tech companies and media companies, you would find that a lot of this institutional dissatisfaction is actually the dissatisfaction with the people who employees report to, who are taking their cues, certainly from leaders on one end of the spectrum or the other who lack either the skill, the interest or the cultural competency to translate those things in ways that can move forward. Like they might be really good at product vision. They might be really good at sales and advertising. They’re less good at, hey, here is how we take a message that we should not make fun of people with last names that are different from ours and not turn that into something that is going to be received as like an attack on other people’s identity.

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S1: So let’s talk about cause I found this amazing data point this week from a company called Manheim, which looks at used car sales and has literally millions and millions of data points. And they’ve managed to create this algorithm, which basically adjusts for what the car is and just says, what is the median used car worth these days? And it normally for the past few years has been floating around seven, eight, nine, ten thousand dollars. It’s now like seventeen thousand dollars. It’s basically doubled. Used cars have gone through the roof, especially pickup trucks. Everyone wants to use pickup trucks. Some of them are worth substantially more now than they cost when they were new. And this job was just like an incredibly striking data point to me. It has a bunch of implications for like used car dealerships for mobility in general. But I guess my first question for you, Emily, is do you think this is sustainable or is this just a weird artifact of this chip shortage? And these prices are going to crash down the minute that we start getting more chips for cars?

S2: Yeah, I mean, I think we’re in a very unique moment for cars besides used cars costing lots more than they’re supposed to cost. It’s hard to get a new car right now because of the the chip shortage. Meanwhile, a lot of people are buying cars. Demand is really high and supply is really constrained. So I think at some point this all does resolve and the price of the used car does, yeah. Does come back to Earth. But right now it’s pretty wild. Like there used to be this thing people would say, like if you buy a new car, as soon as you drive it off the lot, it’s worth half as much, you know, blah, blah, blah. And now that’s just not it’s not true. There’s all these cars you buy used cars that are worth almost close to what you originally paid for them are more like Felic said. They retain like seventy nine percent of value.

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S1: If you’re lucky enough to get a Ford Bronco at retail price, if you can turn around and sell it for like a ten thousand dollar premium the following year,

S2: or if you’re driving like a Toyota in Tacoma. Yeah, yeah. No, they’re I mean, it’s just ah, it’s a unique time. It’s it’s just like another pandemic weirdness. I think it

S1: well it is a pandemic weirdness because this is something that Max mentioned in an earlier episode that a lot of this is just when the pandemic hit. There was this massive sort of sucking sound of every single company in the world retrenching. And what that manifested itself in was all of these car companies around the world basically massively slashing their orders for these chips because they thought that everyone was going to, you know, lose money and be in a massive recession, basically. And so when it turned out that actually demand for cars was. Rising, all the chip manufacturers were like, wait, no, you said you didn’t want these chips, we’re going to make chips or something else. Thank you very much. And it’s going to take us a while to start making them again and feel like shit. And the upshot is literally that Ford has just announced that its car production in Q2 is going to be 50 percent of what it normally is.

S2: It’s a real contrast, actually. The cars versus what we started talking about at the top of this Slate money episode, which is the tech companies. Seems like demand went up for tech companies, either Apple’s products or Facebook

S1: and

S2: Instagram, and they rose to the occasion. They quickly scan services are rival, right.

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S3: You can download infinite apps.

S1: Elon Musk came out this week and said, I think the model Y is going to be the best selling car in the world. And you’re like No. One. Yeah, probably not. But number two, if that is true, like it’s only because everyone else is playing with one hand tied behind their back. Right. Because they just can’t produce as many cars as they want to be able to.

S2: But I mean, if that happens, then he’s the car maker that wins the pandemic, right? I mean, those kinds of games stay once you buy the first Tesla you’re going to buy.

S1: In terms of car makers, one hundred percent, Tesla is one of the pandemic. They were the one who didn’t scale back a year ago. They just made well, according to general accounting principles, they made record profits in the last quarter. If you actually look at the profits, this is one of the more interesting things about Tesla. More than 100 percent of the profits from the combination of a selling electric vehicle credits to other companies, and B, selling Bitcoin. If you strip out the Bitcoin profits and the EV credits, they are actually losing money on every car that they sell. But hey, that’s over 700 billion dollars.

S3: Everything is financial engineering. I as a person who is a. Committed by user experience, a version of this with bike shortages, all that was used in the case

S1: a year ago from their

S3: internal problem. Yeah, yeah, it’s still a problem. And I was reading the one of my favorite things to look forward to every year and which is always expensive is like Bicycling magazine does the like here are the best bikes that you should get. And there’s an editor’s notes at the beginning of that where they say we could not get any bikes that were, you know, quote unquote cost effective because there was just no supply. And so, like the overwhelming majority of the bikes they’re reviewing are like five thousand eight thousand dollars. Fourteen thousand dollars, because that was like those were the bikes that they were able to get in hand. And I remember when the kind of the car shortage and the car rental shortage discussion was happening, some of my city urban planner friends were like, this is another good reason why we need to be investing in infrastructure that allows for cyclists and pedestrians and cyclists like Kombai Bike is supposed to be doing here. But truly, one of the fascinating bits of the pandemic has been revealing supply chains to people who had just never had to think about those things before, like a not even just like, you know, a normal person who doesn’t work in journalism or in finance or whatever. It’s just like people in different industries being like, wow, I have to care about the Suez Canal. What is this, the 20s?

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S1: Emily, you made that point when we talked about every given. Right. Was like the minute you start thinking about supply chains, like the whole system is broken, it should be something that is completely invisible.

S2: You shouldn’t have to think about the chips in the car and that’s why you can’t get a car.

S1: But literally everyone who’s trying to buy a car right now is acutely conscious of supply chains and the curious importance of these tiny little five dollar chips.

S2: Amazon pulled off the supply chain thing. Also like at the beginning of the pandemic, if you ordered something on Amazon, it would take forever. And now they’re pretty much back to where it was. I mean, it’s not perfect, but they also scaled up and got things moving. And that wasn’t just online. I mean, they hired, what, like hundreds of thousands of people.

S1: So much of this is expectations management now as well. I ordered my air tags from Apple because I was cheap and they were like, they’ll arrive on like maybe eight. Well, actually, they’re going to arrive on April 30th, but we just didn’t want to put it back.

S2: Wait, I’m going to say, I don’t know what what are your tags that what?

S3: I don’t know. Do you know tile, though, like the little Bluetooth trackers

S1: that basically like this company is devoted to privacy, is allowing you to track yourself and all of your things wherever you go?

S2: Oh, I saw this. Yes, yes. OK.

S1: And as someone who loses things on a regular basis, I’m hopeful that this is going to be a good thing for me. We will find out. I will report back anyway. I think we should have a numbers round. I think I’m going to kick off this one by saying my number is eight billion dollars, which was my favorite bit of the latest Joe Biden fiscal proposals. He wants to throw 80 billion dollars at the IRS over the next ten years for them to just go ahead and do their job and catch tax evaders, which he reckons will bring in about seven hundred billion dollars in extra taxes that we’re not being able to collect right now. I like taxes that people should be paying, but aren’t I reckon that’s a bit like the one hundred million doses in one hundred days thing. A massive underestimate. And if you throw eight billion dollars at the IRS, they could possibly conceivably get seven hundred billion dollars in one year, let alone in ten. I think this is the most obvious low hanging fruit of fiscal policy you can possibly imagine is just giving the IRS more money because those dollars pay for themselves ten times over easily.

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S3: That sounds great.

S2: I’m all for every proposal that’s tax the rich a little bit more. And then I love to read every Bloomberg story that’s like rich people are freaking out.

S1: That’s the whole thing. You don’t even need to tax them more, right?

S2: Yes. Yes, you don’t.

S1: There was this Gabriel Zuckermann Paperwhite. He was like, even when you audit the rich, you miss the taxes they’re evading. Yeah. Oh, yeah.

S2: You had that data point in your newsletter and it was a little shocking.

S1: Emily, what’s your number? Well, I

S2: had Abidin number two, but now I’m on the Internet now because I’ll do a different number. I don’t want to be like a good how are

S3: you going to do

S1: GDP number and.

S3: No. Oh, no, that’s fine. Don’t do that.

S2: Here is my number. My number is five. Twenty nine. No, it’s not the college savings plan.

S1: It is a savings plan.

S2: It’s not back end of a Instagram handle. Jack Mason, five twenty nine. Who’s Jack Mason. Five twenty nine.

S1: Well, ladies, I know this Jack Mason 529. I know. I’m going to say Jamie Dimon.

S2: Correct. That is. Meantime, a secret Instagram account, Jamie

S3: has a food star

S2: discovered by the one and only Ashley Fineberg, who has a really great newsletter.

S3: Unbelievable.

S1: She Finback, formerly of this parish now of doing her own thing, which is trash. Go subscribe. We like Ashley. She’s really

S2: great. Yeah. So Jamie Dimon in an interview, I think, with Business Insider mentioned that he was on Instagram just to mention and Feinberg is just on it and he says something like, you’ll never be able to find it, which is like just cap on facial eyeliner. So she dug

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S3: deep, challenge accepted, and

S2: it didn’t seem like it took her that long. She found his secret Instagram account and she always Twitter. He has a secret Twitter as well. And she does make it seem easy. She is dogged.

S3: Incredible, incredible.

S1: All right, Stacey, what’s your number?

S3: Zero point six percent in honor of Felix’s European ancestry? I wanted to talk about the this is the contraction in the eurozone economy in Q1 and the kind of the contrast between the expansion that we’re seeing in the U.S. and the relative contraction that we’re seeing in Europe and how it is. You know, if you think back to the early days of lockdown when there was so much concern about whether the European model would be economically positive or negative for the US model would be economically positive or negative and where you should do stimulus and how you should do stimulus and just seeing the sort of the divergent paths of the eurozone economy versus the U.S. economy and how it’s really surprised some people. Actually, I’m really fascinated to kind of be paying attention to, again, like macro in a way that feels new and interesting. And just to be kind of like back in the vibe of trying to understand what different central banks are up to. Like, I have been paying so much attention to Italy because their turnaround story has just been incredible, not enough to help with overall European economic growth.

S1: Well, they do have a central banker as prime minister now.

S3: They have a central banker in charge and who knew that not having a Berlusconi or affiliate would have a significant effect? I definitely think that, you know, in the same way that we are now more aware of supply chains, like one of the things I’ve really been doing during the pandemic is just kind of like getting back into really paying attention to kind of macroeconomic factors and trying to understand different parts in different ways.

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S1: OK, Stacey, I feel like this is what we’re going to talk about next week now because. Oh, no, OK, maybe not next week, but at some point maybe we should get like Adam to or someone on and really try and understand this. You’re absolutely right. What is it that explains how the US economy grew at a six point four percent pace in the first quarter while the European economy shrank? Is it fiscal stimulus? Is it different attitudes towards lockdown’s and coronavirus deaths and willingness to accept them? Is it actually not the case that you need to get the coronavirus under control in order for the economy to start growing again, which everyone thought was the case this time last year? And did Europe do something wrong? And if so, what did it do wrong and how could it have done it better? These are really interesting questions and I definitely want to have a segment about them, but we’re not going to have it this week because we’re done with the show this week. Thanks very much for listening for writing in on Slate Money and Slate Dotcom. Thanks to Jessamine Molly for producing from her amazing seaplane Narmada Studios in deepest Brooklyn. We will be back next week with even more late money.

S2: Hey, it’s Emily. So after we recorded today, we learned that base camp employees are so disgusted by this new policy that we discussed on the podcast today that they are voluntarily leaving the company as I’m recording this at about four o’clock Friday afternoon. Casey Newton, who’s been all over this story, tweeted that about a third of base camp employees accepted buyouts today after a contentious meeting about the policy. And the people leaving are longtime employees, some who’ve been there for 10 years. Important people at this company. I mean, it’s a small 60 person company. So this is a significant chunk of people. Felix and Stacey couldn’t come and record this with me. But I can tell you that Felix and Stacey were both very surprised by this news. It’s pretty astonishing. And as Felix said, it proves that it’s not just Twitter that had a problem with the new policies when a third of your employees look at a new policy and quit, that’s probably not a good policy. So as I’m recording this, one third of base camp employees are leaving the company. They’re so upset about these new changes and there might be more to come. And if there is more to come, we will. It next week on Slate, many thanks for listening. Bye bye.

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S1: So plus, folks, in case your European fraud appetite was not completely tainted by the conversation about green, so we’re now going to talk about why I got Stacey. This is a huge story about this fraudulent German payments company which completely imploded. What’s your favorite angle? Because we’re not going to go into all of the angles. We’re just going to pick one. Is it something uniquely German?

S3: My favorite angle, and this was the argument that the former CEO tried to make that the you know, the one point eight billion euro was in an escrow account for refunds. This is, you know, just like very early on when they’re like when KPMG was like, hey, where’s the money? And one of the claims was, well, we put the previous two decades worth of profits. Maybe it’s in an escrow account somewhere in case we had to refund basically every single person who has ever had a payment process with us. And people seemed to be fine with that as an explanation for a moment.

S1: It reminds me a bit of you remember that tether, the stable coin, but like we’re all backed by US dollars, which were in an escrow account in the Bahamas somewhere. And yeah, no, we’re not going to tell you all bank, but trust us.

S3: Yeah. That kind of set the tone for me that there’s this kind of surrealistic feeling to some of the conversation about what they were up to and how come nobody raised a single eyebrow. Well, a couple of auditors did try, but the story that they were telling was a little bit thin. And yet that’s 30, baby.

S1: So, yeah, the big question which I had, which is also the question that Adrian Dad was raising in the New Republic, is like, why is it that the eyebrows were basically raised by non German short sellers, by non German journalists at the Financial Times? And like somehow the German government, the German auditors, the German stock market regulator, eyebrows remained resolutely ungrazed for years.

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S2: What was interesting to me was just in that piece, how the German government is so rah rah about German businesses that it doesn’t regulate them and that when there was this big scandal with wire card and all these short sellers were set, were bringing the alarm bells, the Germans banned short selling on my record like they rallied to the fraudulent company. And the argument that Dow made in that piece was basically like, this is how Germans do nationalism, post-World War Two, because that nationalism thing didn’t work out, as everyone knows. And so this is the realm. The economy is the realm in which they can take pride in in Germany and then that that can go really sideways and belly up, basically, because all these smart people like Angela Merkel are coming to wire cards, defense, when it was so obvious to everyone outside of Germany that this company was sham. That was interesting.

S3: I do think, you know, credit to the FTSE London based reporting bureau for this. It really reminded me of when there was a through line, particularly on the Alphaville, around the fact that, like Porsche and Volkswagen were basically like hedge funds pretending to be car companies and that there was a degree of financial complexity and again, financial engineering that sort of the German regulatory framework was ill equipped to even begin to understand and unwind. And, you know, kind of Feliks, to your point, I do wonder about the fact that similar to wire card complexity seems to not be something for which there are mechanisms to really examine and analyze and that so much of the like the wire card story. To your point, Emily, was just like this boosterism, right? Like, this is good. This is great. And when folks started asking, well, how do you explain to, you know, using the case of the short sellers that if the US is cracking down on gambling, which you seem totally unfazed, even in your US operation, like what’s going on with that and waving of hands was sufficient to get people to look the other way?

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S1: Again, the idea being that wild card was ostensibly making a lot of money from online gambling, which was which was being cracked down in America, but that didn’t seem to have any effect on their reported revenue stream.

S2: And there was this other line in that piece where Germany wants to have they kept saying Germany wants to have its own Uber and they want to have a cool startup, too. And I was like, does America want to have Uber? It’s sort of funny to me because I don’t get the sense over here that we know that the government really is so excited about some of the startups that Germany seems to be stalagmite to have.

S1: I feel like the Americans kind of take for granted that what we were talking about in terms of the tech giants, the companies that have come along and dominate the world, whether it’s Facebook, Google, Uber, Amazon, they’re all American. And then now, like suddenly people are beginning to freak out that maybe there might be some that are Chinese, which is not American and it’s also Chinese. So that’s bad. But it’s really quite hard to think of it sort of really sort of transformational company that is not either American or Chinese. And certainly the Germans would love to have one of those and done.

S3: Why not? To mention, we should also have Adam. And that’s my question, Adam, if you’re listening, come back. I do really worry about regulatory capture, which is one of the things I said today. I’m aware. And, you know, I think a lot to when you talk about banning short selling during the financial crisis, banning short selling was also one of the moves that US regulators engaged in. So we have to protect these companies from unhelpful speculation. And there was all of these congressional conversations about naked shorts. And so much of that is, again, a form of regulatory capture that your first instinct is to defend rather than to evaluate and analyze and try to understand what will actually be going on.

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S1: To America’s credit, someone here when that rule came out, like the universal reaction to it was this is really dumb.

S3: There was. Oh, yeah.

S1: The Americans like, what the fuck do you think you’re doing banning short selling? This is the dumbest thing I’ve ever heard, whereas the German reaction to banning short selling didn’t seem to be that.

S3: I mean, I can’t read German blogs. I have my German word for them. Maybe there were some people for.

S1: All right. Thank you all sleepless folks. You are awesome and we love you.