We Can’t Quit Elon

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Speaker 1: This ad free podcast is part of your sleep plus membership.

Emily Peck: Hello and welcome to the We Can’t Quit Elon edition of Slate Money. Your Guide to the Business and Finance News of the Week. I am Emily Peck. I’ll be your host today and I am here with Elizabeth Spiers. Hello. No Felix This week he’s off gallivanting in Italy, but in his place we have the amazing Ed Lee.

Speaker 1: Hello. Hello. It’s fun to be back.

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Emily Peck: And Ed is.

Speaker 1: I’m an editor at the New York Times, of all places, so. Yeah, I know, but don’t hold it against me.

Emily Peck: No, we will hold nothing against you.

Speaker 1: I’m actually not a bad guy.

Emily Peck: Ed and Liz and I, we’re going to talk today about Nobel Prize winners. We are going to talk about Elon Musk again. I’m sorry, but it had to be done. And of course, we are going to start off by talking about my favorite word, the inflation. And that is all coming up on Slate. Money. So. The inflate, as I like to call it, it’s still inflating. And earlier this week, we got the September CPI report and learn that prices rose again at double the rate economists were predicting. And the core inflation measure, the one where you strip out food and energy prices are up 6.6% from last year, and that’s the highest in four decades. So, you know, we’re obviously well past the quote unquote transitory phase of bloviating and saying these numbers are going to get better.

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Emily Peck: And I feel like at this point, there are some big reasons why these inflation numbers matter and why we’re talking about them again. One, obviously, rising prices are painful for a lot of people, especially when pay isn’t keeping up, which it it really isn’t. And the second big thing that everyone seems to be watching and talking about right now is, you know, the Federal Reserve, which has said they’re going to keep hiking interest rates until the inflation is crushed and that action from the Federal Reserve is, you know, causing a lot of pain basically around the globe right now.

Emily Peck: And one reason I guess I wanted to talk about this is this the Federal Reserve usually is this like nerdy little world that no one cares about. Stacey Vanek-Smith This weekend, NPR had a column about how everyone’s now talking about Jerome Powell on the Federal Reserve and how that’s worrying. And so I’m wondering, Ed, are your friends talking about the Federal Reserve?

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Speaker 1: Yeah, I guess. I don’t know. My friends are not as economically aware. And that’s probably, you know, a sign of a certain kind of benefit. Right. If you’re if you’re not as concerned, everyone’s generally concerned. Of course, we still go to the grocery store and see like, oh, man, like this cost 50 bucks. Now you normally spend 20 or 30 or whatever it might be. So we all notice it. But I don’t think a lot of us are necessarily wondering exactly what Jerome Powell is going to do next. At least the normies among us. You mean as reporters? Of course. We’re like 75 basis points. 50. What’s the next, you know, like, let’s look at that dot plot again. For normal people, it’s not really a thing. I think that’s.

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Speaker 3: Funny. It’s a I feel like there’s a certain strain of conservative dialogue right now where it is a thing. I sort of use my hometown as a kind of baseline for determining whether that’s happening. And I had a conversation. I was in a I grew up in a rural area in Alabama, and I was back there a few weeks ago. And there’s a guy I know from, you know, my childhood who started complaining about the Fed. He was on the Senate, abolished the Fed kind of gig, and I was, you know, confused by what he was saying because he didn’t seem to understand entirely what the Fed does now. But it’s it’s sort of become a meme that the Fed is this shadowy central institution.

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Speaker 1: The deep state.

Speaker 3: Yeah. You know, they think it’s controlled by the deep state and that ironically, that Powell is a, you know, plant of the Democratic Party. And then you have to explain to them that Powell was the Trump appointee. And it’s it’s you know, but it’s sort of been memed into this weird piece of the conversation.

Speaker 1: I guess. I don’t know, like, is that I mean, of course, with the midterms coming up, right, that’s what the GOP wants. They want the debate to center on inflation and the economy.

Speaker 3: Yeah, and they want to be able to pin it on Democrats.

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Speaker 1: Exactly right. That and that’s the thing. The CPI numbers, you know, it’s not good for the Biden administration if you want to sort of just put a cold political calculus against it. Right. Which is like it’s not easing the way that you said it was supposed to. And so that the Republicans in the midterms are going to use this as a as a, you know, political sort of rallying point. Right. So, yeah, I get that part.

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Speaker 3: Do you think people are genuinely worried about a Volker scenario where the Fed just goes apeshit?

Speaker 1: And I think I think economists certainly are wondering about that, especially with, you know, how much more can you really, really do this sort of. You know. I’m going to call it quantitative to to a degree. Right. The sort of these quantitative measures. Ultimately, you know, it’s a little bit like trying to, you know, you know, hammer a nail with a feather. It’s like, is that really going to do anything or are you just going to cause more turmoil in the markets, the bond markets, which it does have a more direct effect on. But in terms of everyday people like your your friend back in Alabama, it’s like, yeah, like, do they really know what that’s going to mean for them? All they know is, yes, they might Grocery bills are higher, right? Like shit just cost more. So that definitely sucks. And I think we all feel it, but tie it to like exactly what the Fed is going to be doing. I don’t think anyone really knows.

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Emily Peck: I think one thing I’ve been wondering about so that the Fed has a dual mandate, right? It has to keep inflation to target at 2% and it’s supposed to keep employment kind of full employment. Yeah, calibrated. And the last time, like Elizabeth mentioned, when we had high unemployment, when we had high inflation, Paul Volcker came in and raised rates famously and pushed the unemployment rate up over 10%. So people are, you know, wondering now or economists or I’m wondering, you know, what’s going to happen with unemployment. And right now it’s just extremely low.

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Emily Peck: And I wrote a piece this week about why this could be one reason that layoffs aren’t higher and unemployment hasn’t gone up yet, is that companies were so fast to lay people off in 2020, March and April that they’re now doing something called labor hoarding and holding on to their workers because they just don’t want to go through the stress and hassle of having to rehire everybody. And this brings me a lot of joy. But Elizabeth, what do you think? Do you think this is actually happening or it’s just sort of a calm before the storm?

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Speaker 3: I mean, I think it could be you know, it’s strange how much the dialogue is, you know, contradicts what’s actually happening. There’s there’s still I still hear strains of, you know, we have a problem because nobody in this country wants to work. But we’re we’re at full unemployment almost. So the labor hoarding thing kind of makes sense to me because I think the there are a lot of companies that were burned after they did layoffs. And then as the pandemic, you know, slowed down a little bit, they really struggled to get people back in the door. So intuitively, it makes sense.

Emily Peck: Yeah, and I’ve written about the railroad industry now a few times because they you know, they’re trying to negotiate or they’re trying to ratify a new contract. Now, the union is and one thing I learned last week was that, you know, when the pandemic first hit, the railroad companies like reflexively furloughed and laid off workers because that’s their go to playbook. And a lot of companies playbook now and then when all of a sudden, you know, by by June 2020, demand was crazy and they needed all those workers to come back. They called them back and they didn’t come. And they’ve been struggling ever since. And I think I just I just love to see it.

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Speaker 1: I think that makes complete sense as well. Like if you just sort of query any kind of small business owner, right. Like they’re going to tell you like, oh, just I can’t hire enough workers, I can’t find them. So they’re less likely to want to lay off whoever they have in if they start to see some kind of downturn or if they start to see higher, higher prices in the supply chain because like the pain of having the whole friction of like finding people to work to period. Right. It’s not even like you want the best person or the right person. You just need people. You just need bodies. They don’t want have to go through that. So I think labor hoarding is a real thing. I think that’s also part of the reason why we’re seeing the CPI number. And I think if now getting back to the Fed and Jay Powell and conspiracy theories, like if you were to press him like, you know, after a few drinks and like, come on, you really want unemployment to be higher, don’t you?

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Speaker 1: Right. He would probably say, you know, like he might not in a wink in that direction. It’s like, yeah, like just the math doesn’t work out right. Like there has to be a slightly higher level of unemployment in order for us to bring the prices down. Interest rates are only going to be so much around that. And you know, the whole point of interest rates is you’re you want to sort of tamp down the money supply and like have businesses sort of cool down their spending. And as but if they’re going to labor horde that defeats that right? So you’re just like, what do you do?

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Speaker 3: I also wonder, you know, we’ve talked a lot on the show about the way that everyday people think about inflation and what their metrics are, because the average person isn’t like, well, core CPI is blah, blah, blah. They’re not you know, they have like one variable they look, they look at. And for the last few months, it’s been gas prices.

Emily Peck: Yes.

Speaker 3: And gas prices are cranking down now. So what do you think public perception is of where we are inflation wise now?

Speaker 1: I think that’s a that’s a great question. I think it’s like we should go back to your friend in Alabama or just like people on the street. Really. It’s like, where are you really like, where is it hurting you? You know, what are you spending more on and yell at gas prices? Well, actually, they’re. Going down like. Yeah, yeah, my my tank’s still full. It’s okay. So I do think there is this dissonance, right, between what’s actually happened to two people in their pocketbooks versus what the political rhetoric has been. Right? So this idea of inflation, which it’s out there, brought all the big media, they’re writing stories about it, putting on the front page. It does affect everybody. But, you know, what is it? How does it really affect the person on the street? Where is it really hitting them? And I think, you know, also, if if labor with labor hoarding and unemployment being really low, it’s like, what are we complaining about exactly? You know, yes, things cost more.

Emily Peck: But wow, I really disagree. As someone who, you know, shops for food and things like that, I mean, you can’t not notice how high prices have become. That NPR piece I mentioned before, there’s a guy in there who had his like aha moment when he went to buy cinnamon rolls at the supermarket. You know, the ones in the can that you twist that makes that satisfying pop sound. And they cost, I don’t know what she said, like $5 for a carton or something. I feel like everyone has had that moment. For me, it was the summer buying the $2 and 50 cent cans of Pepsi, but it’s hard not to notice how how high prices have gone.

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Speaker 3: Yeah, I wonder too, you know, one area where prices have really skyrocketed is health care. You know, they’re up something like 24%. But do people notice that because so many people have employer provided health care that’s either subsidized by an employer or paid, you know, in some cases paid in full? Do you think that registers with people?

Emily Peck: That’s a really good question. Yeah, that’s kind of a hidden cost, though. You’d notice your paycheck isn’t going up as much as you think it should be or isn’t what you think it should be, because they’re taking more money out of it for health insurance.

Speaker 1: Yeah. And I also think it’s, you know, if you’re if you’re going a lot right to the doctor or you’ve got specialist you have to go to, I mean, yes, a lot of that is a fixed cost that is through your provider. So your employer may be maybe sort of feeling that more. Certainly, I don’t know, say know that you are, but. Yeah, you’re right. I mean, I, I love those cinnamon rolls, by the way. And like, I think we’ve all felt it for sure. I mean, for me, like I’m a big coffee drinker, so, you know, I would go get my pound of coffee beans and then grind them. And I’ve noticed, well, the price hadn’t really changed. But then I noticed that, like the actual amount of coffee in the bag had.

Speaker 3: There’s a word, there’s like a term for. Yes, there’s a term for that Shrinkflation.

Speaker 1: Right, exactly. So I’m just I’m paying the same amount, but I’m having to pay, you know, for more of these bags ultimately. Right. And, you know, they’re not lying. It says on the bag like what the actual I remember instead of it’s like something like instead of 16 ounces, it’s like 12 ounces, Right? I’m like, huh. And but they’re still charging the same. Right? So, you know, it’s a bit of sleight of hand. But yes, I’m ultimately spending more and I’m like, yeah, coffee’s expensive. I mean, it was already expensive before that, and then it’s like even more expensive now. So yeah, I think people are definite feeling it. But relative to are you able to keep your job, you know, yes. Your, your wages are not in line with the rate of inflation. So yeah, that also sucks. So in all kinds of ways you’re hurting. But you know, I think.

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Emily Peck: Um.

Speaker 1: There’s that give and take, right? Like, well. Employers are not laying people off as quickly or as readily as they had before. Yes, your paycheck sucks, but you have a paycheck. I mean, not that that should be the par things. So I think it’s like the economy is in a really, really tough spot that I that Jay Powell probably is. Just like, again, if you cornered him and asked him point blank, it’s like, can you figure this out? He’ll probably say, I can’t.

Speaker 3: Yeah. Do you think it would have been better if he’d started rate hikes earlier?

Speaker 1: Oh, yeah. I think. I think even he admitted that, too. It’s like in hindsight, right? That that whole thing, it’s like, Oh, yeah, we probably should have started that sooner and probably tempted inflation. But like all these, you know, this black swan event of of coronavirus and supply chain and like there’s still supply chain issues, right? So which is really keeping prices up so.

Speaker 1: Yes. Low unemployment, you know, there’s a lot of cash out there. Things are costing more, period, because of the CS up in the supply chain that’s still ongoing. So, yes, it’s just it’s I don’t know how you unstuck this. Right. That’s the problem. And I think, again, interest rates I don’t think is enough. Which I’m going to do this only now guys Right. So back in 0708 basically when the banks were failing because of the whole mortgage crisis. Ben Bernanke, who is, you know, fed at time, basically said, all right, I’m going to do this new thing, guys. This is called quantitative. He didn’t say this right, but it’s called quantitative easing. It’s basically like balance sheet economics. Right. I’m just going to make more money and it’s going to show up on a balance sheet and we’re going to use that money to bail out the banks. And everyone was like, Are you insane?

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Emily Peck: And we’re talking about this at is bringing it up right now because we are going to talk about the big news from earlier this week, which was that Ben Bernanke, who chaired the Federal Reserve from 26 to 2014 through the financial crisis, became the first policymaker to win an economics Nobel Prize.

Speaker 1: That’s a big deal. Yeah.

Emily Peck: Yeah. So since 1968, when they first started giving these things out to economists, no policymaker had ever won. Bernanke won alongside two other guys, Douglas Diamond and Phillip the big. And so that was sort of the big news. And it was a little bit controversial. But I’ll let Ed I’ll let you explain why they won.

Speaker 1: Look, I think it’s fascinating, a number a number of levels, Right. As you pointed out, it’s like first time a policymaker was granted the Nobel, but specifically because he was in a policymaking role. Right. That they cited the fact that. Based on a paper he wrote when he was at MIT, like talking about how banks, you know, are as much a factor, a function of a of a faltering or potentially faltering economy. In other words, economy fails, the banks fail. Right. His point was, well, banks can fail, which then could cause the economy to fail. And it seems straightforward. Right. But, you know, it was it was sort of a revelation in a way. And so he applied that theory to the crisis and said, we can’t let the banks fail. Right. They’re too big to fail.

Emily Peck: Yeah. Back in the in the 1980s, people didn’t think the financial system was an important part of the economy, which seems crazy now, especially for us. We’ve we lived through that 2008 crisis and we’re like, we know that’s not true because that that crisis came from the financial sector.

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Speaker 3: Yeah. And I think we had in the eighties less global interdependence. And so that might have been a factor too.

Speaker 1: I think you’re absolutely right. It’s huge. That’s a huge factor. And, you know, but and but there is something a little bit weird about this, like 0708 crisis, right? Which is that the crisis was a financial crisis to begin with, right? Yes. It was rooted in mortgages. Right. Which were then packaged and repackaged in such a way that, like there’s so much more money being bet bet on on these on these sort of on these mortgages. A lot of them which were not good mortgages, period, then collapsed.

Speaker 1: Right. And so it was of its own making. It wasn’t like something happened in the managed manufacturing sector that all of a sudden it’s like they can pay their loans. It was sort of a very kind of almost insular, financially derived crisis. Now there are arguments for and against that idea, But, you know, it’s almost like there was something self-fulfilling about that. And so then Bernanke came in and said, Hey, I know how to handle this. I’ve studied this very closely. We can’t let the banking sector fail. I don’t think anyone disagrees with that. I think, you know, yes, you can’t let it because it’s so much a part of the guts of the economy, Right. The way money flows, the way you can’t, you know, as happened in the Great Depression, right, when the banks failed, like it just prolonged the Depression just because of things couldn’t start up again. Right. It took that much longer. And so that was his his great sort of insight and more importantly, like he applied it in real world terms and basically bailed out the banks. Right. And people were still up in arms about that. Right.

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Speaker 3: I think it’s because it’s more like when people understand the credit crisis from a 30,000 foot perspective, you know, the only thing they see is we bailed out all these banks and we created a maybe moral hazard that gives them some incentive to continue securitizing these crazy products. And I’m not sure that’s really true. I think I think it’s a function of the fact that the credit crisis was complex and there are a lot of underlying factors and people don’t really understand that. So they just see the policy result.

Speaker 1: Right. It’s just like you bail out the banks. Right. And like, I think you’re right. I think there’s such a complexity to it. But this is sort of what I want to try to get at. Is there such a complexity to it, like this weird thing that Bernanke did, this quantitative easing where you’re basically putting more money on the balance sheet by just stating it practically, right? Like, it was really clever and creative, but it’s also like. What did that really do? Like, is that is was it even enough? In other words, like, could he have gotten farther?

Speaker 1: Right. Like, one of the criticisms of Bernanke is that he didn’t bail out Lehman. Right. If you’re going to bail out all these others, but not this one, like, well, they were in much worse shape. Okay. So you’re drawing a line somewhere. I get that. But like, you know, you had you applied that principle, like in the principled way, like you would have bailed out Lehman, too, right? Because one bank versus another, they all kind of screwed up. And so, you know, that is still a criticism. Another criticism is that, hey, man, like, didn’t you foresee this mortgage crisis, like the ridiculousness of the securitized loan, things that, like, they kept repackaging over and over again, Like it was just bizarre that this was even happening. How did you not regulate that? How did you not see that coming forward? And maybe maybe it’s not a central bank solution. Maybe it needed to be legislated in some way or regulated in it through other agencies as well. It just didn’t happen.

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Speaker 3: The bit about regulation I think is really key because I think there was some expectation that, you know, the FCC would come in and regulate these products and it it just didn’t happen. So you ended up with, you know, crazy CDOs squared kind of, you know, were the underlying assets just completely decoupled from what the the end product looks like.

Emily Peck: To interesting criticisms? I thought this week of Bernanke, one was sort of in line with what you were saying. And basically he was slow to act because before he was Federal Reserve chair, he was at the Federal Reserve and Greenspan was in charge. And that’s, you know, when the run up to the housing bubble was really getting underway. And Bernanke apparently had said at the time like he didn’t see the issues yet. So that’s one criticism.

Emily Peck: And the other one that’s sort of interesting for the present moment that I was reading about this week was that the quantitative easing that Bernanke, you know, did during the crisis, which was obviously successful in shoring up the financial system when it really needed it, that Powell took that playbook, you know, in 2020, which we’ve talked about on the show with Nick Tim Ross from the Journal, and, you know, put it on hyperdrive basically, and didn’t stop when he should have stopped, as we said in the previous segment, leading to, you know, a bunch of inflation, like basically the that pioneering innovation that Bernanke kind of kicked into gear was taken too far possibly by Powell and and get us and got us to our present moment. And I kind of feel that’s like a little unfair. But I wonder what you guys think.

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Speaker 1: I think that’s kind of right, though. I’m going to be harsh. I’m going to be harsh on the Fed, not for conspiracy reasons and not for GOP talking points. I just think. I think there are a few things. I think it’s unfair in the sense that we might I think we rely on the Fed to solve too many things. I think more needs to be legislated. I think more needs to be regulated. These are democratic, you know, viewpoints, certainly.

Speaker 1: But I do think it’s so complex and it’s such a Wild West thing that, you know, everyday people ultimately get screwed. You know, when you don’t sort of really handle this. And I think that’s the problem, is that it’s you know, America is still unlike Europe, Right. Is still sort of this free market, Wild West that like that’s why that a lot of money still flows flows in to this country. Right. And that’s not a bad thing at all. But, you know, it’s not. There needs to be more guardrails. There need to be more. There’s just needs to be more regulation. And that’s just my stance on that.

Speaker 3: Yeah, I agree with that. I think another thing is, you know, everybody is very aware of interest rate hikes because that’s something that I think, you know, everyday people understand. But what do you think about Powell strategy with regard to the Fed’s balance sheet? I mean, they’re supposed to be tapering.

Emily Peck: Yeah, right. That’s what I’m kind of saying. Like they they took that too far. And now the unwind of that is causing a lot of problems throughout the throughout the economy, throughout the world, basically.

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Speaker 1: Yeah. And I think you both bring up great points. And I think, you know, I think what’s interesting and I will give Powell credit for being more transparent in his language, which I think a lot of people have given him credit for. But I also think it speaks to sort of his thinking as well in terms of he is much more market sensitive than other features that I’ve seen. Not that I’m a huge expert in this area, but I think he’s very market sensitive. Not a bad thing. It’s a good signal to take in. And of course, he takes in all these other signals as well that aren’t specifically about the markets. But, you know, I feel like he’s sort of like always playing catch up to the markets in that way.

Speaker 3: That’s also, you know, that’s structural to the Fed, too. It’s supposed to be an organization and or an institution that’s slow to act by design.

Speaker 1: Exactly. And I think the the whole like when, you know, previous Fed chairs like Bernanke and Green’s Greenspan, it’s like I think they were kind of elliptical on purpose. Right. Their statements were purposely elliptical to prevent too much of an interpretation by the markets and that the markets had to sort of you’re on your own, right. You have to figure it out. That’s the whole point. And if there’s too much of a feedback mechanism between these two entities, you end up with, like, I think you get this weird, like white noise that happens, right? And no one really knows how to, like, react to the other. It gets too close at some point, you know.

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Speaker 3: But I also think it can sometimes move in the other direction too much. You know, the chairs are a little too cryptic about things and people make assumptions and market reacts to that.

Speaker 1: Exactly. Exactly.

Emily Peck: Yeah.

Emily Peck: So speaking of people that communicate a lot on to the markets, should we talk about Elon Musk?

Speaker 3: I feel like we should issue an apology to listeners before we even start the segment.

Speaker 1: This this is just a general disclaimer.

Speaker 3: Yeah, we were really hoping that we could we could ban Iran from as a topic generally, and we can’t apparently.

Speaker 1: You can’t quit Elon. You can’t quit.

Emily Peck: Elon. We can’t quit on Elizabeth. Will you catch us up?

Speaker 3: Yeah. So the sort of high level version of what’s happening is a continuation of Iran’s behavior so far with regard to purchasing Twitter, which is that he’s sort of been just a chaos monkey in the system.

Emily Peck: So let’s back up. So back in April, Elon Musk said he wanted to buy Twitter 50 for 20 a share, get it for 20 hahaha. And everyone was shocked and we talked about it on Slate Money. Then he backed out and said he didn’t want to buy Twitter because something, something spam and bots. But everyone sort of understood. He just maybe got cold feet and the markets turned. Then Twitter took him to court in Delaware to sue him to go through with the deal. And that was kind of moving forward. The suit was kind of moving forward.

Emily Peck: And then at the end of September, we got a peek inside of Elon Musk’s text messages, and they were just a total embarrassment to him. And then and I’m not saying a led to be, but right after the public read Elon Musk’s private and embarrassing text messages, he then said, You know what, I’ll do it. I’ll just I’ll buy Twitter. Never mind, it’s fine, I’ll do it.

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Speaker 3: Yeah, well, they didn’t want more stuff to come out. I think the the thing about the text messages that is really significant here is that they just. Illustrate how little real strategic thinking went into Elon deciding that he wanted to be paid by Twitter. And that sort of comports with my not very flattering view of him, which is that he does things impulsively and as a, you know, super rich guy surrounded by. Yes, yes. Men who if he throws out like any kind of idea, they just nod and tell me is genius. And so and it just went too far this time.

Speaker 1: That the texts reveal that people who who that billionaires essentially surround themselves with incredibly unimaginative, craven individuals who will just Yes, yes, yes. The whole thing and not really help the guy.

Speaker 3: Well, also, you know, when they put themselves in environments like that, they’re not forced to do any critical thinking and they don’t realize it because they’re they’re sort of in a bubble. And I also think anyone’s case, he’s so accustomed to publicly communicating what he wants to do and then just expecting that it’s going to be a self-fulfilling prophecy. And he gets off antagonizing the FCC, which I think Matt Levine jokes as an entire department. It’s just the Elon Musk department.

Speaker 1: I actually think that’s probably real, too. Like, there’s there’s got to be there’s no way they could have.

Speaker 3: At least ten guys.

Speaker 1: Easily.

Speaker 3: Allocated to it. Right.

Emily Peck: I’m curious, Ed, I mean, you’ve been watching media deals for a long, long, long, long time. Is there anything comparable to what we’ve seen in this sort of back and forth? I want I want to buy you I don’t want to buy you. I’ll buy you kind of.

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Speaker 1: I mean, the closest closest would be Sumner Redstone. Right. Like Sumner was a brash, bold, you know, dealmaker where he would borrow tons of cash to do these massive deals that he had no business doing. Right. And he actually ended up on top. He made a success out of most of these deals. And so but like, it was clear, it was very much through his gut. Right. He didn’t he’s not a he’s not a balance sheet guy. He’s not a financial wizard type person. He’s a smart guy or he was a smart guy. But, you know, it was very much a gut thing that he went with. And so but a lot of guys back then, a lot of and they’re really mostly guys, right? Especially in media. It’s very much a fly by the seat of your pants. My gut tells me this and yeah, let the lawyers figure out the specifics. But I.

Emily Peck: Want. Right.

Speaker 1: Right. The difference in this. So Ellen has definitely a flavor that the difference, though, is that he also thinks, you know, that he’s this brilliant technocrat, that he’s figured out all the puzzle pieces and that not just the product, but the the finances and everything. And clearly he hasn’t. Right. So that’s where it really falls apart, is that it’s one thing to have a gut reaction to something. My instinct tells me this is what I should do. And then you have people around you sort of like temper that a little bit with like, well, it’s not worth this much is worth that much. We have to do this versus that and like, all right, fine. Whereas he’s just like he thinks he’s figure to the whole thing up by himself.

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Speaker 3: There’s also, you know, there’s nobody who would suggest that Redstone didn’t understand media and how it works. Right. And you know, another thing that stands out about the texts and the stuff that Ellen said publicly on Twitter is that he doesn’t necessarily understand it, but he assumes that his expertise in other areas is transitive, which is a thing that I think is really endemic to tech billionaires.

Speaker 1: Oh, absolutely. Absolutely. They think tech people think they can algorithm the world. And I think it’s sort of like having worked with people out there a lot and I’ve seen this firsthand where they think any kind of social problem, any kind of sort of even artistic problem is ultimately solvable through code. And, you know, in some some cases, they’re they’re right about a lot of that. But there’s so much of it that they’re wrong about.

Speaker 3: There’s there’s a lot more like, well, we’ll solve poverty via the blockchain.

Speaker 1: Right. Exactly. Or it’s like, huh. And that that’s what like guys like Andrew Yang sort of had that kind of appeal to a lot of these sort of like techno libertarian types. And I think, you know, Elon is very much of that ilk and he has this very kind of like elementary sense of like free speech, right? He just thinks like, yes, anyone should be able to say anything all the time. You know, that’s the whole point of free speech. And yes, as long as you don’t harm other people and then like, okay, great, who gets to decide that, You know, where do you draw those lines? Who makes those assessments? Right.

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Speaker 3: Also, he’s gone after critics legally. So it’s sort of, you know, the disingenuousness of it is astounding.

Speaker 1: He’s had employees sign and NDAs like, you know, about like, you know, potentially what, you know, alleged sexual harassment claims for one and or just sort of. The company that they work for, you know, So he he typifies exactly every nightmare that people have about the richest person in the world. Right. That they can do anything they want. Mostly. And, you know, he he’s the living embodiment of that nightmare, right. And unchecked entity.

Emily Peck: The other thing I wondered about what you guys thought. Because he hasn’t really said much about what he would do to change Twitter, you know, except for like unleash Trump back on the worlds, which no one really wants, I don’t think, for him. But then I think last week or the week before, he said he wanted it Twitter to be an Everything app, which I guess is the thing in in China where, you know, you have one app you used to like hail a car, order groceries, text your friend and do your banking. And that’s what he saw as Twitter’s future.

Speaker 3: Which is a wild misunderstanding of what you can and can’t do with Twitter.

Emily Peck: I think so. And and really, any app in the United States at this point, it just seems like and maybe I’m too shortsighted, I’m not a billionaire, so I don’t know. But it seems like that ship has sailed. Like, the time to do that would have been, I don’t know, like ten years ago. Right.

Speaker 3: Well, also, after he said that a bunch of people who do know what they’re talking about, you know, have worked on apps like Twitter pointed out that it would be better if you on if you wanted to build everything app just build it from scratch instead of paying this much for Twitter. And he kept just sort of insisting that no this is this will accelerate development but then he couldn’t explain how.

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Emily Peck: Yeah right and like my phone is my everything app like I don’t need it to be more drilled down. You know I pick up my phone, I can do all the things he said you could do with the one app just on different ones. It’s and it’s totally fine. Like I don’t need my toaster to also be my microwave.

Speaker 1: Also, I don’t know that even if he had done this ten or 15 years ago, that that would have like I wonder if there’s as much a cultural aspect to this, like why you can’t have a one app, at least not in this country. Right. Mm hmm. I mean, first of all, ultimately, you would get into these antitrust concerns for one. Yeah.

Speaker 3: And data privacy concerns.

Speaker 1: Yes. And there’s just like, this great competition in the app space period. I mean. Maybe it’s not great, but there is competition is the point. Right. And so, you know, I we like the idea that not all my eggs are in this one basket, you know, and just it’s again, culturally. No, it’s just we don’t like that idea. You know, I want to have I want to have some of this choice. Right. And then some of these other apps are better than others. And that’s that’s the whole point of the app economy in general. And so that flies in the face of that idea, too. So I just where he’s coming up with this again, it’s like he’s still living in the PayPal days maybe. Mhm.

Emily Peck: So I mean do you think we’re going to talk about him again, you guys.

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Speaker 3: I have, I have a bad feeling. Yeah. I don’t think he’s going away any time soon.

Emily Peck: All right. Oh let’s just, let’s do the numbers, shall we? Shall we do the numbers? Elizabeth, do you have a number? Yeah.

Speaker 3: So my number is 20%, and that’s the amount of traffic increases you have to malls. Now, if you stuck a grocery store in one.

Speaker 1: Ooh, that’s a good one.

Emily Peck: Oh, who’s that from?

Speaker 3: It was from a Bloomberg story. And this is particularly true for Class B malls, which are the kind that, you know, the normies go to class at. Malls are just all luxury stores and stuff.

Emily Peck: That’s interesting. This week, Kroger and Albertson’s are trying to merge and sort of gives you a sense of why it’s a big deal.

Speaker 1: Yeah, no, that’s massive. That’s a huge Wow. That’s a great number. I love that number.

Emily Peck: Well, Ed, can you beat it? Can you beat this number?

Speaker 1: No, I definitely can. My number is pretty pedestrian. I’m going with $6.99. What’s that? That is the price of Netflix’s new ad tier service.

Emily Peck: Dun dun.

Speaker 1: Which tells us a whole lot of things. If you really want to like, kind of geek out for a second, their basic plan costs ten bucks. Right. So this is seven bucks. What they’re telling you is we think there’s at least $3 in a penny worth of ads that we can stuff into this tier. Chances are it’s actually going to be much higher than that. In fact, based on what I know about how Hulu operates.

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Speaker 1: Right, Because Hulu has had an ad tier since essentially the beginning. Hulu’s most profitable tier is their ad tier. It’s their best performing tier. Yeah, it generates more money per user than the non ads one. So it’s I think the non ads one is like 16 or 17 bucks. The ads one from my reporting, I remember and this is a little while ago and it’s pretty much held up is closer to 18 or 19 something like that. So it generates more revenue and it generates more profit and it’s also the most widely used tier.

Speaker 1: So Netflix is essentially tiptoeing into this. You know, there’s be four or 5 minutes of ads per hour of viewing. Not everything that’s going to be on there. Unfortunate, but we’re working on that because they don’t have rights to everything that have ads against it. But I think Netflix will be surprised by how many people will pay for that version, will watch the ads, because fine. And especially with inflation. Right. And so and then they will start to realize, oh, crap, we should have done this like a long time ago.

Emily Peck: But Netflix, I mean, as a user, the best part of Netflix is the no ads. Like they have the best use, I think of all the streaming services and I I’m curious if they can do ads better for streaming than Hulu because Hulu and streaming ads are usually super repetitive. You wind up watching the same ones over and over. So could Netflix could do it better? That would be interesting.

Speaker 1: The problem is that that’s something they can’t control. They can’t control the the the ad market place is the problem. Right. And so that’s why on Hulu, you’re seeing the same ads over and over again, because not enough advertisers are actually buying enough of the inventory for there to be enough competition for there to be enough variety in the ads, Right?

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Emily Peck: Yeah. Yeah. And that kind of destroys their I think their advantage of having the good you.

Speaker 1: It right there their ad their ad load their ad sort of experience won’t be that different from like a Hulu ultimately. So in that sense like it’s a more of a head to head competition there. Disney Plus is going to have an ad I think they already have one right now. Right. Or they plan to launch it soon. So anyway, I think that’s going to be like they’re all going to end up in the place of like basic cable. They’re like, oh, ads plus fees is actually the most lucrative way to go. We’re never going to go back. And then you’re just going to feel like it’s cable TV.

Emily Peck: No. Well, that was a good number. So my number is 8.7 or 8.7%. That is the cost of living adjustment for people who get Social Security. That was announced this week. It’s the biggest one. Since 1981. And I think it’s really cool that Social Security payments get adjusted for inflation. Not everything does. Like my page, for example, just saying. Yeah, it’s very meaningful for a lot of people. It’s like.

Speaker 1: I think it’s a great number. That’s an awesome number.

Emily Peck: Maybe feeling inflation or thinking about it or whatever. But this is one place where everyone really, really cares about this stuff.

Speaker 1: Well, that only goes back to that. What that’s going to mean for inflation and consumer prices again. Right. So you can totally see how Biden is probably like, oh, man, now we’re going to do this. It’s like so. But at the same time, it’s like, you know, yes, there’s more money. Right.

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Emily Peck: Yeah. All right. Well, that’s it for this week. Thanks to Anna Phillips for producing. Thanks to Ed for coming. Elizabeth, thanks to move back with you next week on Slate Money.

Emily Peck: Elizabeth, We are going to talk about the Anti-woke Bank. Can you tell us all about the Anti-woke Bank, please?

Speaker 3: I love this story, and partly because it’s just a Will Ferrell movie waiting to happen. I can imagine Danny McBride as one of the principals. So here’s what’s happening with a company called Glorify, which is supposed to be an anti woke bank because it’s the company that answers the question that no one is asking, which is why is Wall Street so liberal?

Speaker 3: So these two guys, Toby Neugebauer and Nick Ayers, he’s a former Mike Pence staffer, started this bank. And it’s essentially it’s supposed to be a consumer bank that also, in theory, offers mortgages and insurance. And it’s sort of what I could only describe as a vice signaling company does a lot of the things that are built into the products really have to do with the politics of the owners. So, for example, they were trying to develop a credit card made out of shell casings from bullets, but discovered that that wasn’t going to work because the shell casings screw up or they interfere with the security chips.

Speaker 1: Here because it’s full of metal.

Emily Peck: They were very gun focused. Being anti-woke, by their definition, is all about the guns, like they’re an insurance for people who fire their guns and accidentally kill people.

Speaker 3: Yeah, you get a 10% there. They’re making a product where you get a 10% discount on your home insurance if you’re a gun owner.

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Emily Peck: Where could that be?

Speaker 3: It should probably be the other way around.

Emily Peck: Wow.

Speaker 3: But also, the company has just been completely dysfunctional from the start. They raised around $50 million from people like and I guess this is unsurprising. But Peter Thiel, but also Diane Griffith, and they’ve missed product launches. The company has run out of Neugebauer House in Dallas, which is this palatial 16,000 foot place that’s modeled off the White House. And they’ve had regulators have to explain to them that you can’t run a bank out of your house. And he apparently has problems with, you know, drinking on the job.

Speaker 3: And in at least one case, there is an instance of a conference call with a vendor where somebody at the company thought that they were off the resume and ended up, I think the way the court documents describe it as in a state of undress on the zoom. And of course, predictably, they haven’t paid a lot of their vendors. So they’re still around and they are planning on doing a SPAC, which I guess that’s, you know, that’s par for the course, but it hasn’t happened yet. And their last investor call was in September, where the wife of this year read a Bible verse about adversity. And they all expressed extreme confidence that this is still going to work.

Emily Peck: You know, I was I was thinking about like the idea of an Anti-woke bank. And even though banks aren’t really woke, like you were saying, Elizabeth no one’s they’re not too liberal, but they profess to be, you know, or they profess to, you know, adhere to some like ESG or whatever. I think I prefer that even if it’s a little bit hypocritical, I prefer my financial institution to at least say that they care about social issues or moral issues or ethics, because when they profess to not care about it at all, like you get you get this weird mansion bank in Texas.

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Speaker 3: Yeah, I, I agree. But, you know, the funny thing is this bank is being started by two people who know nothing about starting a bank. You know, the Neugebauer runs a private equity firm that invests in oil and gas and IRAs, has no finance experience, whatever, whatsoever. So even if you strip the politics out of this situation, it’s really hard to start a consumer. Yeah, And you presumably need some actual expertise in the topic.

Speaker 1: Area that is the American way. That right. Anyone can be anything at any time.

Speaker 1: You know, I love this story because, I mean, it hits on a lot of themes, right? I mean, I’m reminded of a few things regard this. And Emily, you brought this up about like ESG. Right. I think there is a definite like GOP backlash to ESG investing, which is astounding to me. Like we Governor DeSantis from Florida is going after BlackRock of all things for like investing in s you’re having an ESG investment fund. I’m like, I can’t believe this is really insane. They’re actually saying that, like, you’re hurting your clients by investing in ESG. And, you know, I think I mean. Is disingenuous as that is, and it is disingenuous as this anti-woke prank effort is.

Speaker 1: There is a definite kind of fracturing of. Investment of money, of the idea that like, you know, oh, politics is now going to be a part of every aspect of everything. Used to be that money was sort of like like an equalizer, a leveler. It’s like it either makes money or it doesn’t. No, no, no. That’s the wrong kind of money that you made. There can only be make money this way. Right.

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Speaker 3: Yeah. But, you know, I think markets have never been value neutral. I think now it’s just people are much more out in the open about what the issues are and partly because consumers are asking for it. You know, they they want to know where these companies stand. And then you see your politicians kind of weaponizing little instances of a company, you know, displaying some empathy for the wrong customer that they hate. And and then that sets off a need for these companies to develop policies and articulate what their politics are.

Speaker 1: Well, and so you’re you’re actually right it’s never been value neutral. But now it is much more out in the open, much more stated. And that’s ultimately what politics is, right? It’s just the statement of your values. Right. Turning that into a thing and now it’s sort of like you can’t buy this stick a gun because it’s too woke or it’s too conservative, maybe. Right. And so, you know, ultimately, I don’t think anyone wants to live like that, but it’s certainly turning into that.

Speaker 1: Again, I’m astounded by this whole movement from the far right to basically go after Wall Street, of all things. Yeah. I mean, come on. This is how you got to be in your position in the first place. You know, Wall Street was sort of, you know.

Speaker 3: The idea that BlackRock is to.

Speaker 1: Somehow to work again. It’s just that it’s crazy So as. As backwards and as sort of incompetent as this effort was, I wouldn’t be surprised if there were more of these kinds of things in the future or happening now even that might actually work, you know, for whatever reason, because maybe it would be started by someone who actually knows how to run a bank and or just ultimately more competent in business. So, yeah, unfortunately, I kind of feel like that is the direction.

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Speaker 3: Yeah, I think you’re right. And you could consolidate some smaller consumer banks in conservative areas and probably achieve the same thing, which I don’t want to give the Fed people ideas but don’t.

Speaker 1: But like, I mean, I can totally envision a certain kind of redlining happening, you know, with this kind of a sort of movement. And, you know, that would really be a bad story, that would be bad state of affairs if it came to something like that.

Emily Peck: Well, you heard it here first, folks. There is a business opportunity out there for competent bankers to start an Anti-woke bank in in the in the red states. I don’t know. So if anyone wants to do that, he brought us a letter.

Speaker 1: Yeah. Let us know.

Emily Peck: He’s going right now and sleep. All right. I think that’s it. By Sleepless.