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S1: This ad free podcast is part of your Slate Plus membership. Hello and welcome to the. Do you accept these cookies episode of Sleep Money or go to the business and finance news of the week? I’m Felix Salmon of Axios. I’m here with Emily Peck of fundraise.

S2: Hello.

S1: I’m here with Stacy-Marie Ishmael of Bloomberg. Hello. And we are going to basically talk about where the cookies are delicious or dangerous or both, and specifically not just about baked cookies, but about the ones that apps and computers put on your phone and follow you around the web. We’re going to talk about ad tracking and all such things. We are also going to talk about tuna bonds because who doesn’t want to know about tuna bonds? And we are going to talk about Zillow iBuying buying and the whole business of big companies buying up real estate and whether it’s a good thing or not. Spoiler alert It’s a totally good thing. I’m all in favor. No one, no one is going to agree with me. All of that and the slate, the plus on legacy admissions to universities is coming up on sleep money. Oh, and Stacy, you have an update on the T.H. Chan School of Something, something at Harvard.

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S3: Yes. And the episode in which you made it very clear why you hate surveys and polls. Felix. I described the Harvard T.H. Chan School as having an affiliation with Chan Zuckerberg. It does not.

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S1: Different Chan. Different Chan. OK, Stacey, there’s this thing that I’ve been peripherally reading about for, I guess, a couple of months now where Apple made a big change to the ad, something something and everyone is up in arms. And Apple said, don’t worry, it’ll all be fine. And then Facebook said, We’ve got this, but then they came out and said, Oh shit, actually, we kind of lost a lot of money because of this. And now Snap, which owns Snapchat, came out with earnings and said way our earnings were way lower than expected because of this and the share price went down. And literally that over 100 percent of what I understand about this story. And so I need you to explain to me, number one, what is going on the number two. Should anyone, anyone need to care about this?

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S3: Well, I think people who spend a bunch of money on ad campaigns care a lot about this. So the the Apple change is the iOS change that we actually talked about in the show a couple of months back around how Apple says it’s trying to protect privacy. And the big change is the and if you have used your iPhone from iOS 14, I was 15. You might have seen these messages saying, Hey, this app is trying to track information about you or it wants to like, use your location or et cetera, et cetera. And all of those prompts were the user facing version of Do you want this company associated with this app or do you want the advertisers and the ad tracking technology associated with this app to have a really good picture of what you’re doing, how you’re using this app, what how you are moving around the internet and generally like any information they can gather about you from your phone? And surprise, surprise. And I say this sincerely, because a lot of folks didn’t think this would matter more than a small number of people said, Actually, I don’t want to share my information with these companies. And what that has meant in terms of advertising is it’s now harder for people whose model is, we can tell you, person trying to sell shoes or glasses or whatever direct-to-consumer thing everyone’s buying. How effective your advertising with us is because we know what folks are doing on their devices after we’ve seen your ads and now they don’t know that with the same level of precision or granularity anymore.

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S1: And the result is that the advertising is selling shoes or glasses or widgets. Sports betting accounts or whatever it is, then saying, Well, if you can’t tell me how effective my ad is, I’m not going to spend as much money on it.

S3: Right? And in addition to that, you’ve also had this because everything comes back to supply chains in 2020. One reality that advertisers are pulling back anyway because they don’t want to try to sell things that folks can’t get right. So, you know, people are facing actual inventory in the not eyeballs, but actual stuff on shelves. Problem looks like we don’t want to show shoes to you that if you try to order them, they’ll be out of stock.

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S1: Right, there’s no point you’re not going to see a lot of ads for the Nissan Altima these days because this is selling all of the Altima is I just I know where that name might pop into my head from. But advertising? Yeah. Gotcha. Yeah. Nissan Altima, congratulations on being the first car brand to come into my head. So is Apple a winner here? And they like, is there a way in which Apple itself has like an unfair advantage now?

S3: Well, that was absolutely the criticism that folks who were not Apple were loving at the time, right that Apple would continue to know stuff that Apple is itself an advertiser or, you know, it facilitates advertising. There are people who buy ads on the App Store, for example. And you know, I have seen charts floating around that shows sort of like Apple’s, you know, percentage share of some of that advertising inventory has been going up as it’s been declining for other folks.

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S1: So the main shot that was going around some from the left, wasn’t it, who was basically saying that if you look at the searches that result in app downloads, the share of those ads, like when you do a search, you get search results, but you also get ads and then where you can basically say, look, someone searched for that download. And then they clicked on an ad and then they downloaded the app that used to be dominated by Google. And now, like half of it is Apple, which I don’t entirely understand. I guess what you’re saying is that it’s now search within the App Store that people that like searching in Google for an that is something that people aren’t doing so much anymore or that they’re not clicking on ads so much anymore because of these reasons. Well, I

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S3: haven’t. I have. I’ve actually not seen that chart, but the that kind of advertising is sort of distinct from the one that Snap is describing, right? Like for them, it’s we sold a set of impressions to somebody who was trying to sell, I guess, a Nissan Altima ad. And we used to be able to say, hey, for sure, at least with high intent x number of the you know of those impressions actually got to something approaching a conversion. The app out of the app advertising that you’re describing is like, Yes, exactly. Somebody goes into the App Store, they’re like, I want to download Nissan’s app. They type in a keyword. Nissan, and sometimes its competitors will bid to have an advertising search. Results appear at the top of those results. Mm-Hmm.

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S2: So I mean, who cares? Like, I mean, I guess marketers care because they like the precision of the advertising tools that Facebook and Snap could offer. But I mean, we lived a long time without those tools, so they won’t be as precise anymore. Why does it matter, do you think? Well, it

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S3: certainly matters to the people who’ve sold precision, right? If you’re in a situation where the feedback you’re getting from marketers is, Hey, we used to have a lot more accuracy or we used to have a lot more conversion or, you know, whatever the kind of the metric is that they care about at the time. Now coming to you and saying like, we’re not seeing the performance that we need to justify this ad spend like that’s potentially as opposing a revenue hit.

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S1: And I think there’s there’s a couple of interesting consumer behavior, things going on here. Consumers in general like to preserve privacy, and they get squeezed out when it turns out that advertisers and marketers no way more about them and their habits than they thought they did. There was recently an investigation in the markup showing how it’s not just advertisers, how, like the Planned Parenthood website has a bunch not has like 35 different ad trackers on it. And even like keystroke loggers and stuff and you’re like, No, don’t do that. And it’s very natural for people. When asked by iOS, like, do you want these people to know about you? The answer is no, I don’t want these people to know about me. At the same time, I’m I’m reminded of like a bunch of stories about how everyone is seeing ads and offers the sports gambling these days. And I have literally never once in my life seen an ad went off of the sports gambling because apparently these ads are so incredibly well targeted that they they know they just avoid, you know, just they’re just going to avoid me completely. And I’m fine with that. To be honest,

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S2: I feel like, actually, I mean, you said people like to have their privacy. I think people probably aren’t thinking about it at all. And what Apple did is sort of like, make the what does it make the quiet loud or make the implicit explicit. Like, of course, if you’re specifically asked, Do you want this thing to track you all around, you’re going to say no, but I don’t know if that’s true if you kind of know that in your in the back of your head. It doesn’t it doesn’t really matter, like people know they shouldn’t have a password that’s like one two three four. But do it anyway. Passwords are still one way for Emily

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S3: to how often. So now, as a result of various other forms of legislation, you cannot go to a website without being asked 50 times Do you want to allow all these kinds of cookies to track you? And I am that person who will go. I mean, like, no, no, no, no. And it is meaningfully a pain in the ass. It is like genuinely made my entire web surfing experience worse across mobile and web, especially because increasingly folks are trying to like fight back by making certain types of things not possible. If you opt out of this ad tracking, but I did the thing that I do, which journals do all the time and I like I went and talked to some people. I was like, How often do you opt out? And they’re like, Oh, never, I never even noticed this anymore. So I do think that there something different about the iOS ecosystem to have such sort of higher rates of opting out relative to what has been true for advertising on the browser based web for a long time.

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S2: I think it’s the clarity of the opt out that Apple has written, because if you if you get the message, it’s very clearly written. It’s like, Do you want to be tracked? Yes, no. But those cookies notifications are very like when I look at them, my eyes like cross a little bit. I don’t understand them as much, and I feel like that actually probably plays a big role. It’s like clicking on terms of service. No one’s actually going and like digging in there and reading it and learning like you have no right to take this company to court course the details language.

S1: The language is so important. If it’s just like, do you accept cookies? It’s like fine cookies. Those are good. That tasty like, can I have chocolate chip cookies? Exactly, yes. Whereas it’s like, Do you want a robot following your every move? It’s like,

S2: No, no, no. Yeah. And I think Apple really wrote that very well and clearly and brilliantly. That makes a difference.

S1: So, Stacey, you had DuckDuckGo using.

S3: Yes. What I mean, if it’s possible is to be extra and more nerdy than is practical on the internet. I am probably engaging in that behavior.

S1: It’s true. And so the other question I have since you actually know about this stuff is all of these pop up banners that say, Do you accept cookies that we’re seeing on basically every website these days? Is that GDPR? Is that European regulations or is that something else?

S3: That’s a good question. It started off as a function of GDPR because folks were just like, it’s too hard to geo block and say, like, if somebody is subject to GDPR, we’ll show them this or not. But it’s also I’ve seen a much more of it in the aftermath of California passing various bits of privacy legislation that allow people who are domiciled in California to opt out of things you might see for certain types of newsletters or other signups, for example, that hey, if you have a California address, you have the right to request all of the information that we have about you. I don’t know how folks are thinking about it from like the technical underpinnings, if they’re doing some kind of magic that these buckets of opt outs apply to folks who are subject to GDPR, or if they’ve just said, like, fine, we’re going to be in compliance with everything and we’re just going to make it clear for everyone. But there are there are definitely multiple pieces of legislation around the world that is affecting this.

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S1: I have one last question, which is is it possible to opt out of tracking on TikTok? Like, I love TikTok, I’m ridiculously addicted to Tik Tok, but I see, like when I’m in, I’m in New York and I see a bunch of like, very downtown New York specific TikToks, which I assume is because they know where I am, but I don’t recall ever sort of agreeing to let them track me. I don’t know it, just I feel like first party cookies are still allowed or might have I got that wrong.

S3: First party cookies are in a very interesting gray area as it relates to Tik Tok. There was a lot of reporting, I think, in 2019 or 2020 about the ways in which Tik Tok, especially depending on how you’ve registered, will like triangulate you by your phone number, which they would have gotten from, you know, like your registration details, they will look at what they know about you from email addresses, so they’re not even always looking at what’s on your phone to figure out what’s going on there, like pinging your number across, you know, like T-Mobile, Cellular Towers, etc. there. I mean, the whole premise of TikTok is you don’t even have to watch a video for them to know whether you like it or you don’t like it. And so they are absolutely on the bleeding edge of figuring out how to give people stuff they think they’re going to like.

S2: I feel like every time we have a conversation about privacy, I come across as like someone who doesn’t care about privacy. So maybe that’s just that’s just who I am.

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S3: We have an anti private. A second campaigner on the pod.

S2: Yeah, but like all this stuff is free, and do people think there’s no price to be paid? I don’t like at some level, like I mean, I I could talk to you for an hour about how much I love Google Maps and how it’s changed my life for the better and multitude of ways. And I know that the trade off with Google Maps is zero privacy. They know everywhere I go. Every time I stop for gas, you can turn

S3: off your Google Maps history, by the way,

S2: but I won’t. I love Google Maps. It’s totally free. Like, what a miracle of technology like I’m an Felix. Let’s tick tock.

S1: Like, I think answer is the four decades like this. This is one of the things that has always led lives in the back of my head is that everyone who’s hand-wringing about the how addictive the internet is or Tik Tok is or anything like that never seems to care about how addictive good old old-fashioned broadcast television used to be, and people used to watch like eight hours a day of broadcast TV. That was a

S3: stock that never made sense.

S1: And the. And the sort of baseline decades old we’re all used to it, we’re swimming in this water that we never even notice it. State of the world is a state of the world where things like broadcast TV and daily newspaper, you know, free sheets or whatever makes sense that they’re free and ad supported. But there’s no privacy violation if you if you see an ad on the TV that you’re not giving up any information. And so that idea that every time that you’re being marketed to that there’s like a personal cost to you in terms of the information that you’re giving up about yourself is, I think, new and does make people uncomfortable, although obviously it doesn’t make you uncomfortable.

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S2: I mean, maybe I just don’t think about it deeply enough. But yeah, I would rather not be lost in the car, you know, then then been retain my dream.

S1: But but and also the other thing about privacy is that it makes people uncomfortable, kind of only when it’s visible. The thing that people always reacted the worst against was that one weird shoe ad that followed them around the internet. And then they saw like a billion times and I’ve already bought these shoes. Stop showing me the for. Then you just keep on seeing the ad for weeks. Like so long as the targeting isn’t quite that obvious, I think people are more OK with it. But when it comes like, annoyingly obvious, then people get really escaped out.

S2: Right? There’s a famous story. It was the New York Times story about Target, where Target knew that a woman was pregnant before she had told anyone because of what she had been buying, and they actually outed a specific like circular to the house and somehow that outed her. Stuff like that. When it’s clumsy, I guess. Yes, I object. I object to clumsy marketing

S3: was like as long as the robots they’re trying to kill you are really, really cool. So here’s here’s the other thing that I would say about the privacy thing. I would also say the intimacy of the data that folks are being asked to give up is very different from what it was before. We want to know exactly where you are at all times so that when you walk into a Sephora, we can target advertising to you based on your location, your Sephora browsing history and say this mascara that you looked at a week ago is 25 percent off, right? And so you’ve got the just the invasiveness of the kinds of requests that were previously invisible to folks that they’re now may as Felix, they’re not allowed as opposed to quiet those you. And then I think the second thing is, though, the protection of this information has been very inconsistent. You know, I got a notification from an identity fraud tracking service that I use just last week saying, hey, as a result of Mint.com, which sells stationery, getting hacked or whatever, a couple of years ago, two of my previous home addresses and my phone number are now, you know, sort of like tied together with my email and my identity and easily found on the internet. And that’s like really frustrating that, you know, that is this I explicitly give up because I’m like, Yes, please ship me new stationery because I love letters. But you know, when I think about how much additional metadata about me is collected by people, I have even less visibility into where I’m like, they know where I’m standing right now. They know every single thing that I’ve been looking at previously, and I think about the the risks and potential harms of having an extremely well. I’m a journalist that’s going to be misleading because I look for weird stuff on the internet. But a picture of what I’m up to at all times, you know, potentially leaked to the world is quite scary.

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S1: Let’s talk about my favorite subject, which is homeownership and how it is a terrible thing and no one should own their

S3: Felix, you own your own home.

S1: I do, as I say, not to say Stacey.

S3: OK, cool. Just just putting that out there. Carry on.

S1: So the US has a pretty high homeownership rate, and it is a kind of general truism in American politics that it is still too low and it is always too low and we should always want more people to buy their own homes. And I like the one outlier here saying, no, it’s actually too high and it won’t. It should be lower. And that for most people, it is both physical and financial tie. That is, it dominates your life in terms of you can’t move anywhere if you want to get a better job or you can spend money on other things because you’ve got to pay your mortgage, you can’t choose to, you know, move somewhere with lower rent very easily, that kind of thing. And the flexibility that comes with renting is massively undervalued. And if more people rent it with decent protections for renters to allow them to stay in their homes if they want to, we would be in a much better place. And the way you fix this problem is by like large permanent pools of capital like BlackRock, buying up huge amounts of housing, especially housing in neighborhoods that are historically occupied and then renting them out. And, you know, for like long term yield generation, you know, asset diversification reasons. And then you get a bunch of renters in so-called good neighborhoods and sending their kids to good schools and the world becomes a much better place. And the way that you get BlackRock to buy up all of these houses is they buy them in bulk from like I buy is from Zillow. Basically, people who want to sell their house easily, just press a button on Zillow and Zillow. It’s like we will pay you tomorrow. And they’re like that so much easier than listing my house and showing it. So they sell it to Zillow and then Zillow sells like a thousand houses at a time to BlackRock. And everyone wins. So that’s my that’s my utopian vision of the future where we all went from BlackRock. And I expect zero listeners to agree with me on this one, and probably neither of you do either.

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S2: Well, I mean, we should say we’re talking about this this week because Zillow stopped I buying it, stopped buying up individual who lost it, paused it paused the process because the company got in a little over its skiers and its reason was, you know, supply chain, blah blah blah. But there’s some convincing analysis out there that Zillow, in the end, was kind of overpaying people for their homes. And this isn’t the kind of business where you can make those kinds of you can’t overpay. The margins are low when you’re buying a used single-family homes used homes to resell them, used homes, existing homes, whatever

S3: pre-owned

S2: it is, it’s like a used car to use. It’s the same thing. So there are still these other I buyers out there who make it really easy and you can see the appeal. It’s such a pain. If you have a house to sell, a house is a total pain. You have to get this weird, strange real estate broker. Lady has to come over and tell you all the things that are wrong with your house and how you have to fix them. Paint this fix that it’s a whole process. You just want to get rid of this thing. This used home you’re living in

S1: and pay six percent for the privilege

S2: and pay six percent for the privilege. Yeah. They’re like, Well, you’ll get more money if you spend a bunch of money and you’re like, Does that even make what is the math that’s happening here? So I mean, there is this, I think, a real market need for I buyers, actually. But yeah, I know I know a lot of people don’t agree that Zillow should be buying houses and selling houses. For some reason, it’s bad because real estate brokers lose out.

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S3: Stacey, I mean, I just I just find this whole story so confusing. One, because, you know, shout out to the homeowners who got Zillow to overpay. Congratulations on once again making out like bandits in the housing market that is like biased against a lot of other people.

S1: But please tell me that somehow they wound up getting SoftBank money. All I want to hear and then and then it all becomes perfect.

S3: You know, I have not looked at who, whether SoftBank has participated in any Zillow rounds, but I shall do that. But I think for me, the thing that is also heroically confusing about this is you step all the way back. And part of the problem is there just aren’t enough houses for people in the places that they want to live at, prices that they can afford to pay in them. And I don’t see how the Zillow thing is going to solve that if they’re buying up single-family homes and then reselling single-family homes, unless there’s only like going to convince NIMBY, ask zoning folks to like, actually allow higher density housing in these places that Felix. Yeah, just having good.

S1: There’s no way that this solves this solves for like the broad underinvestment in housing and to low density like that’s that’s for sure.

S2: I buying all of this Blackstone buying up houses, it amounts to maybe one to four percent of of the single family home transactions in the country. I mean, it gets, I think, a little bit outsized attention because it sounds despite Felix cheerleading, most people are like, I don’t want private equity companies buying up the American dream, but it’s just this very, very tiny fraction of the market and only in specific markets like Phoenix and other places.

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S3: Isn’t Blackstone the biggest private landlord in New York, or at least in Manhattan?

S1: I think that’s mostly commercial,

S2: not single family.

S1: Yeah, yeah. There is no single family housing in Manhattan, but yeah, I think Gracie Mansion, and that’s about it. What we’re talking about in terms of the bigger picture, what you’re talking about, Stacy is like housing being unaffordable and there’s not, you know, enough new housing being built is totally true. The price mechanism is one of my favorite things in economics. It’s called the winner’s curse. The way the winner’s curse works is it’s an auction thing now houses when you sell a house, what you are doing is basically auctioning it. You, you put it up for sale. And especially these days when you can get like five office within a week or a day, you basically just end up selling to the highest bidder. There’s a series of bids and then whoever puts in the highest bid wins the house. So it’s it’s a good old fashioned English style auction and the way the English style auctions work is. Everyone always overpays to a festive proclamation, because what you have is you have a whole bunch of different people all judging how much they can afford and how much the the house is worth to them, and they don’t know for sure. So they all make mistakes, and some of them make a mistake on the downside and wind up, you know, bidding less than the House would actually be worth for them. And then some end up overbuilding and actually bidding too much compared to how much it’s worth to them. And by the nature of auctions, the people who overbid inevitably wind up winning the auction. So everyone always ends up paying too much for housing, and the housing becomes too expensive. And you get all of these people saying, like, you know, house house prices have become unaffordable and it’s all true. But that has absolutely nothing to do with Zillow or anyone else. But I will say to your point, Emily about like Zillow overpaying, like if Zillow is in the market, winning auctions, then by definition, overpaying if they’re like if people are putting their houses up for sale. And Zillow is coming in and saying, like, you’ve listed your house $300000, I will offer three hundred and twenty thousand dollars and they win that, then they almost by definition will have overpaid. But the idea behind the Zillow iBuying is that they do. They do not participate in those auctions. And instead of putting it up for auction, you just take the flat rate fixed offer from Zillow. And in that situation, it is possible for them to just say we will offer you two hundred ninety five thousand dollars, take it or leave it. And then if you want 325, you’re going to have to put it up for auction and go through all of the, you know, real estate agent crap.

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S2: Yeah, I mean, it’s interesting looking at a chart of how the median purchase price that Zillow paid in like Phoenix in 2021 compared to the other I buyers, and Zillow’s line is like straight up and to the right, while the other eye buyers are more leveled off. So it does seem like it was doing something wonky and weird in comparison to these other these other players, you know, paying a little bit a little bit too much. Like I said, getting in over your skier’s and

S1: what we what we don’t know, of course, is like who they’re selling to. There are three things you can do if you’re Zillow. One is you can have like a basic agreement with BlackRock that all of the houses you buy, they will pay you, you know, cost plus two percent or something. You just like, flip them to BlackRock and make it up and make lots of money on small margins with high volume. And then, you know, at that point, the algorithm you use to determine how much you’re willing to pay is just whatever BlackRock tells you to use. It’s a single. It’s the monopsony. The other thing is like, Zillow goes, we have huge amounts of data on how much houses are selling for what people are looking at, where the demand is going to be. And so we’re going to use our proprietary data to work out which which the hot neighborhoods and we can slightly overpay a little bit in the hot neighborhoods because we can make it up with data and then hold on to those houses for maybe, you know, a few weeks or whatever and then say, Hey, it’s hot, and then we can sell them at a profit and we can become house traders, basically. You know, we can we can be buying and selling houses and making money on like by selling them for more than we bought them for. And I suspect that that’s what Zillow was doing, that the other I buyers were just saying like, you know, Opendoor, whatever we’re just saying, we’re just going to sell it all to BlackRock and sell for whatever BlackRock wants to pay. And Zillow was like because we have a gazillion petabytes of data on what kind of houses people are interested in. We can get alpha from that we can make extra money by like seeing where the market is going, and that’s probably why they got unstuck.

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S2: I think also there is a limit, and I’m not the only person making this point. There is houses. Single-Family houses are very specific collections of data and there is a lot of variation from one house to the next. So like, even if you’re Zillow and you have all this information about home prices, et cetera, at the nitty gritty house by house level, there are so many variations and inputs that they still don’t have the data advantage that they think they have. You know, like like, the guy next to me has been trying to sell his house for the past three months. And you think it’s a hot market and and all the data points where I live would would would have suggested he would have sold it by now, but he’s not sold it by now. And I have a lot of theories as to why I did take a look around. He doesn’t like.

S1: Is it something to do with wall to wall carpeting?

S2: I mean, I think I think there needs to be some updating that goes on like you have to. Anyway, the point is

S3: that open plans, it’s

S2: it’s not like it’s not like used cars, actually, even though I call them use houses, existing homes are super specific and like, very like. Facing them is difficult, and you can’t just do it in aggregate, I don’t think with big data sometimes.

S1: All right. I’m not sure whether we’ve talked, I think actually a while back when we had me too Gulati and Lee book8 on the show, we mentioned tuna bonds. But for those of you who either didn’t listen to that show or have forgotten it, or maybe I’ve forgotten that we didn’t talk about doing the bonds. The most notorious sovereign debt deal of in living memory was a bond issued by the country of Mozambique. And this was Mozambique’s first ever bond issue. You know, international bond issue. This is their debut in the euro markets, as those of us who used to work for Euro Money magazine would like to say. And so this is like Mozambique’s coming out to the world, and it turns out to have been just covered in lies and fraud and bribery and theft and all the rest of it. The long story short is that the state owned enterprise decided to borrow a bunch of money to buy tuna fishing boats because the idea was that you would build up a tuna fishing fleet and then the fleet would go out and fish for tuna and the tuna would be expensive and they would make money. And that would be a profitable enterprise, which would redound to the benefit of the population of Mozambique. They issue these bonds and then immediately gets stolen, basically by various Mozambican government officials. There are some vague walk on part by Abu Dhabi for reasons that I don’t entirely understand. And of course, there are even bribes to the bookrunners of the deal, which was credit Suisse those. This guy called Andrew Pesce, who basically run the man in the deal court for Credit Suisse, and he wound up getting bribed a mere 45 million dollars to get this deal done. So, yeah, there was a lot of crappy theft and whatnot all around the bonds rapidly. It rapidly became obvious that these tuna fishing bonds were never going to get repaid because there weren’t even any boats. They never went out, even even bought the boats. They just stole the money instead of buying boats. When this became obvious, the finance minister of Mozambique at the time, who you know, seems to have been reasonably corrupt himself, decided that what he was going to do was and was instead of just let these bonds default, he was going to swap them all into sovereign bonds. And this was what the big Mozambique sovereign bond was. His big coming out into international markets was basically a way to allow all of the people who bought bonds that were backed by tuna fishing boats that didn’t exist to instead have Mozambique sovereign debt. And so the country wound up going billions of dollars into debt in order to effectively bail out a bunch of investors in crappy tuna backed bonds. And the whole thing was a disaster. If there have been criminal prosecutions, there have been criminal convictions. There is no extradition attempt for Mozambique for Andrew Pass. This story is going to run and run. Russian bank called VTB was involved, and whenever Russian banks get involved, you know no good can come of this. But the biggest bank involved in all of this was Credit Suisse, who was the bookrunner on the deal, and it just agreed. This is the news hook to pay $475 million in fines to the U.K. Financial Conduct Authority and the US Department of Justice and SEC. And also to forgive $200 million of Mozambican debt that it was holding on its books. That’s my that’s my attempt to sum up the tuna bond story.

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S2: So what so,

S3: so five minutes later, Emily asks.

S1: Wait, what?

S2: So there was a bunch of bonds backed by tuna fishing boats that were missed? Yes. And then the govt, instead of just like letting that that loss, just wash over. What happened was Mozambique then took on the debt of the tuna fishing bans itself.

S1: And yeah, it may or may not have had some kind of a government guarantee that may or may not have been enforceable. But instead of like making these bonds government guaranteed bonds, it actually just swap them into government debt. And the thing it really reminds me of is when the government of Ireland bailed out all of the Irish banks in 2008 and took on, you know, tens of billions of euros of debt, you know, instead of just allowing the banks to, you know, have that issue, they’re like, No, we will make this a sovereign debt problem. And Ireland Ireland became like this massively indebted sovereign when it had up until that point. Been incredibly like fiscally

S3: responsible, yeah, OK,

S2: so, OK, so that seems like an OK thing to do. Other countries have done it.

S1: So then it was a very bad idea for the country of Ireland, and it was an equally bad idea for the country of Mozambique. If you have companies in your country that have borrowed money with like credit spreads and credit risk and then they go bust, the way that capitalism works is that the lenders to those companies wind up taking losses. It’s not that the country bails them out,

S2: but OK, you’re going to make me feel dumb again. But don’t countries bailout lenders all the time? Like, didn’t? Didn’t the US do that like a whole big lot back in the day? Too big to fail? Am I missing something?

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S1: We’ve done it. You’re not missing anything a little bit with with with with Citi, Citibank in Mexico, it has been done. Creditors tend to be very powerful and they tend to have, you know, very good relations with people in government and they tend to go up to government. And so you can’t let this company go bust because and then they, you know, some parade of terrible’s and then the government goes, Oh, we don’t want that parade of horribles, so we’d better bail out, quote unquote, the company, which inevitably means the company’s creditors. So is it is it true that other countries have bailed out creditors of that country’s companies? And that is, yes, it is definitely happened in the past, never happened in Ireland. That happened in Mozambique and has happened in the United States. But the difference, I think in this case is that Mozambique, Mozambique really didn’t have the money to do that, and the impoverishment of an extremely poor population in Mozambique was entirely unnecessary.

S3: This was the thing that triggered the currency crisis. And what was that 17 or 18? Yes.

S1: And this yeah, this this this deal was, I think, 2013, 2012, 2013 and around then. Yeah, this has been going on for a decade and that has been like Mozambique has now got like a junk credit rating. It’s not in a good place.

S2: And how does the US Department of Justice become involved?

S1: Who? I love this question.

S3: No, but I wish you all could have seen Felix face it, just like radiation glee. And this question from Emily?

S1: No, it’s a really good question. And it’s and it’s easy to see how the UK Financial Conduct Authority gets involved because the bonds were issued under London law in London and that it was a fraudulent bond issue in the UK. FCA is like, Don’t do that. How does how is this a problem for the SEC and the especially the DOJ? I feel like this honestly is a little bit of a stretch. And but, you know, this is all part of the way the the US exerts power globally and because it has this kind of hegemonic status as the primary primary regulator of every global bank. And if a global bank does something bad anywhere in the world, the DOJ is going to want a piece of that.

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S2: So the repercussions of the tuna situation fall upon poor people in Mozambique and Credit Suisse. Those are the losers here.

S1: Yeah. So if you if you read Matt Levine on, this

S3: one should always read Matt Levine on everything.

S1: I think Matt Levine is far too sympathetic to Credit Suisse. Well, no, I wouldn’t say that. But he mildly like he. He hints at the idea that Credit Suisse is actually a victim here, rather than the perpetrator that, you know, there’s a bunch of Credit Suisse bankers who are doing crimes and basically stealing from Credit Suisse, and the Credit Suisse is being punished for the crime of being stolen from. And is that really fair? And the answer is, well, yes, it is really fair because if you are a bank with halfway decent compliance, then you basically make sure that you don’t get stolen from and it was your job to not get stolen from. And if you had done that job correctly, then you wouldn’t have had all of those impoverished Mozambicans. And so it’s it’s probably a good idea to find credit Suisse in this situation.

S3: I mean, I feel like Credit Suisse has had quite a run of challenging compliance questions recently to say that it should. So this does seem to me more than I mean, there have been too many one offs for an outlet for it to be like one offs anymore. We’re past the point of three makes a trend Emily

S1: on a scale from one to 10. How much do you feel that you now understand Mozambican tuna bonds

S2: with 10 being perfect understanding

S3: 10 being like a Felix level fifty one explainer

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S1: understanding.

S2: I’m just being honest. I think I’m at like a four and a half to five.

S3: I feel like I went from a far to a seven.

S1: We brought you up from like one, so we, you know, we’re getting somewhere. Let’s have a numbers round. Why not? Stacey, I’m going to begin with you because you were very keen that I not steal your. Is this

S3: correct? Because I feel like we might have the same number. My number is 13 percent. Oh, OK. And that is how much shares of digital world acquisition acquisition. That was my

S2: number

S3: have gone up this week because this is the SPAC that’s, you know, supposedly going to merge with Trump media and technology in the name of truth and etc. And I have just been like watching real time data of this thing. You know, we’re recording on Friday, so like on Friday morning and just losing my mind at both the volume and the intensity of the moves in the SPAC today and this week.

S1: So we are recording on it is right now 11:24 a.m. on Friday morning and I’m looking at Yahoo quotes and it’s saying the day’s range for Digital World Acquisition Corp. is sixty nine, seventy two to one hundred and seventy five. That’s the range that it’s. That’s the range that is traded in within less than two hours on Friday morning. And I’ll hesitate. I’ll I’ll hurry to add that the sixty nine 72 at the bottom end of the range is where it’s trading right now. It’s gone down a lot from its highs. But to be clear, yes, this is a SPAC, which means the value of its assets is exactly ten dollars. If it’s trading at $70, that’s crazy. If it’s trading at one hundred and seventy five dollars. That’s crazy. But everything is crazy in a world of if you if you take two crazy things, which is SPACs and meme stocks, and then you multiply them both by the power of Trump, we have things are going to happen.

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S3: Yeah, I mean, the charts is amazing. It just like goes up like, it’s wild.

S1: I think goes down well.

S3: I’m looking at a longer range than intraday, but Emily.

S2: I was just going to say, I mean, just to emphasize the bingo card aspect of all this Trump and SPAC together, could it be more clear? We know Trump is the biggest scammer of all time who scammed his way into the White House, and he is now behind a SPAC. It’s like it’s too perfect. Like you don’t. I’m speechless. I can’t believe this is happening.

S1: It’s a great way for him to become like a paper billionaire because he puts no money in. And then they give him a bunch of shares in this company, which is based on complete thin air. And the deck is wonderful. It’s like we will compete with Stripe and Amazon Web Services, and you’re like, Yeah, of course you will.

S2: It’s like, we’re watching succession at it, really. It has echoes of of this fictional HBO story as well. Just this completely.

S1: Tune in on Monday for a recap of episode two.

S2: Trump thinks he can take on Amazon and Facebook with Truth Social. It’s absurd.

S1: Yeah, you don’t post tweets, you post truths and then you can read through someone else’s truths. I’m not even making this up,

S2: but it’s all lies.

S3: Well, the thing about that time is it competes with AWB and payments is this has very much been a kind of a cornerstone of the arguments of like the techno right wing, where their concern is that tech is too lefty, by which they mean whenever we host, you know, white supremacist Nazi content, we got like kicked off and banned. And there are and have been for a while very real attempts to rebuild an infrastructure like an infrastructure for the internet, for web, for digital, for payments that does want to compete with those folks, like whether it is possible to go from zero to MasterCard. Hmm. But the the the spirit and the intent is very real.

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S1: Yeah. And it’s absolutely obvious that as you know, my colleague Mike Allen has been reporting Trump is running for president. He will be the Republican nominee unless he’s in jail or dead, basically. And he is hyper aware of the incredible tailwind that he got from Twitter. The last time he ran for president. Well, I know both times he ran for president, I guess. And he’s not going to have that tailwind this time. And so he’s thinking, like, maybe if he doesn’t have three tweets, he can have truths and they will serve the same purposes, the tweets. There’s clearly the, you know, the non-financial reason for him to do this

S3: since I stole Emily’s number Emily Watson, you know?

S2: Wow. OK. Manu No. Had a backup number. I.

S3: You are so prepared, I respect that.

S2: My new number is 15 million. That is the number of doses of vaccine that the federal government is prepping to ship to pediatricians and other smaller sites once the Pfizer vaccine is approved for five to 11 year olds people, which is the most exciting thing that is going to happen in the next few weeks. God willing, let us all pray. We want the five to 11 year olds to be vaccinated before the holidays. I feel like not enough people are worried about this, but they should be, and it would be very exciting if all these kids could could get vaccinated. And there’s a nice piece in the times about how the Biden administration is thinking about vaccination for this cohort because they don’t want a bunch of little kids like standing in line at mass vaccination sites. That would be kind of a disaster, right? The propensity for children to not want to stand in line for a long time or like cry and stuff like that. So it’s a whole different kind of plan for them.

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S3: I feel like there’s that same propensity in adults to I’m trying to get home. So, you know, I don’t want to like shade the children, given what we’ve seen from the grown ups.

S1: I can tell you when I when I received my my first jab, I was on the verge of tears at Lincoln Hospital in the Bronx. It was not the most efficient system. My my number is 70 cents, which is the value of a physical menu per average check, according to BJ’s restaurant. They are moving back from QR codes to physical menus, and all of this wonderful techno utopian idea that QR codes would make things much easier and seamless and and more profitable and wonderful for restaurants. Like, everyone hates them and they do, and they’ve just BJ’s Restaurant has just has discovered using their sort of back of the envelope calculations and empirical data that if you give people physical menus versus asking them to order from QR codes, the average check goes up by 70 cents.

S3: Well, I think it would be just I don’t know if you all have been in one of those recently, but at a place that I once worked in California, it was like literally the only food and in a reasonable distance. And so we were there all the time. Those menus are gigantic. They’re one of those like your 15 pages of flipping past whatever exorbitant amounts of pasta you could, you could possibly imagine. So I would see for them how giving people that idea of, Oh, but did you want the extra extra could work in their favor? But I would love to see this for places where you know, their menus were like three things their rules and chalk on a tweet little board in the spirit of kitchen or whatever, and how it’s how it’s shaping up for them.

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S1: The thing I really like QR codes for is not ordering, but paying. The thing which makes me happy and anything else is if I go to, you know, my favorite soup dumpling place in New York, and the check comes with the QR code on it. And all you need to do is scan a QR code and like Apple Pay comes up and you go quickly and you’ve paid the check and you can leave. I am so happy with that. That makes me so incredibly happy. But yeah, I’ve never enjoyed trying to scroll through a menu on my iPhone, especially especially when it’s a small restaurant. And all they’re doing is they’re like, Here’s a crapola. You scanned PDAF of a piece of paper and you have two and you come with 50

S3: ad trackers associated with it, and please give us your email. The payments thing is so interesting because I remember when I moved to the US being really confused that you would like pay in a restaurant and they would take your card away and like, go somewhere else and then swipe it. And I was like, What is happening right now?

S1: And so it is a terrible system we need to get away from.

S3: So confusing, is it?

S2: So do you spend less money because like the whole thing with ordering in restaurants and money is like, you don’t think about how much anything costs, then the bill comes and you’re like, Oh shit, you know, like you’re just ordering like a bottle of wine. Yeah, but is it more explicit or more? Does it hit you harder and the QR code world?

S1: I think I think it’s I think you just get exhausted trying to scroll through the options and say, You just can’t. Yeah, I can’t be.

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S3: But I also think that ordering a burger in a lot of these places has is a fundamentally social experience in a way that as soon as you know, the four people around the table go into their phones and like half of them, immediately switch to Twitter is not the same. I am in the.

S2: Oh, and you can’t upsell the the server count up. So I remember when I was a waitress there, I was like, Make sure you ask about appetizers. You want the apps do. Would you like the nachos?

S1: You can’t. And then and then they’re like, Wait, let me pull out my phone again and try and work out with you. Yeah.

S2: No breaks breaks apart.

S1: All right, I think that’s it for us this week. Thanks, guys. This was fun. We will be back this coming Monday with the one and only Kurt Anderson talking about Succession season three, episode two. If you are not a succession veteran, we will be back next Saturday with another amazing slate money. But yeah, thanks for listening. Thanks for ranking the show on the App Store, and especially thanks to Shane and Ruff for producing his hit show in the face of incredible last minute changes. In any case, we’ll be back next week with even more sleep money. OK. How many of us here in this here show went to an American university, I think maybe zero.

S3: I didn’t Emily, did you?

S2: I went to American universities. Yes.

S3: That is one of three.

S1: You’re one of three. So Emily, you’re the one we need to talk to in this here sleepless segment. Did you go to an American university that had this thing called legacy admissions?

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S2: I went to a state University of New York, Albany that does not have legacy admissions. I had to fill out Scantron sheet when I was a senior. Like with the bubbles, I remember clearly and I had to rank my choice of what public university I went to. And then I got into Albany, and that is where I went and we had no legacy admissions that I am aware of. Public universities, mostly not all. Mostly don’t have legacy,

S1: but some of them do, including UC Berkeley. But other universities are getting rid of it. Johns Hopkins did it with great fanfare at MIT, and Caltech did it with much less fanfare. And then this week, this is the news that Amherst did it. You can tell me a bit more about Amherst and legacy admissions and why they’re getting rid of them.

S2: Amherst is a small, liberal arts school in Massachusetts, has less than 2000 students. It has a huge endowment of three point eight billion dollars. And and this. Yeah, and this week it said it will not do legacy admissions anymore. That’s like giving preference to the children of people who went there in the past. I guess that was like 11 percent of their admissions or something like that.

S1: 11 percent. Wow. But I guess that’s the idea, right? You said you go to Amherst, you have a good time. You think that was great and then your kid says, Where should I go to school? And you say, I think you should go to

S3: Amherst, where I put my name on a library?

S1: And then they apply. And then in the application form, the like. Has any anyone in your family gone to Amazon you like? Actually, both of my parents did. And they’re like, Oh, we link to your parents. They were great, will admit you as well. And plus, your efforts were amazing because obviously you are the child of Amherst grads and the sort of mating and yadda yadda. So presumably the problem with legacy admissions is just white supremacy.

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S2: Yeah, it’s really it’s really not fair. It is white supremacy. There was a stat in the Times piece about Amherst. There’s a lawsuit against Harvard right now over admissions, and as part of that, you know, some data came out about Harvard’s legacy admissions rate. Harvard admits legacy students at a rate five times the acceptance rate for four applicants with no family connections to the school. So people in the United States love to complain about affirmative action. I had I remember talking to a relative a few years ago who was complaining there. Someone didn’t get into brown because, you know, African-American people got admitted or something terrible like that. And I’m thinking, like, no one ever. You don’t. You never hear the same kind of complaints about legacy admissions, but it’s a it’s a far bigger, far bigger issue. It’s like 40 percent of private schools use legacy admissions.

S1: I would like to take this opportunity to. Up from the dusty archives, a transcript of a Wall Street Journal conference which featured Larry Summers when he was the president of Harvard and he was up on stage and the question which I can find out who it was. I don’t have it on me right now. Said Quote, If your goal is increasing economic diversity, wouldn’t it be logical to reduce admissions preference for alumni children who generally come from affluent families? Larry Summers then responds by saying. Legacy admissions are integral to the kind of community that any private educational institution is, said Larry Summers. So I think that’s basically the beginning and end of it. If Larry Summers is in favor of it, it has to be a terrible idea.

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S3: The community thing comes up very often, and I think about when people say that I think about it in the way that they’re like, Oh, we just don’t want to spoil the character of the neighborhood when it’s very nimble, when talking about, you know, allowing literally anybody else in. But what I think you know, the thing that I’ve always been fascinated by with the legacy admissions is how come everyone’s been chill with it this whole time? Like this is it’s always been my question. Like, You’re like, Oh, that’s warming saying, Oh yeah, dad, uncle, siblings, step neighbor in law. And that’s just been like, Yep, that’s just part of the application, Marla.

S2: Yeah. Why have people been OK with it? It’s really wild. It’s completely unfair. Every other argument about admissions in the United States is always about fair, and you can’t give special consideration. And na na na na na yeah. For all these years, it’s been like, Wow, if your grandfather went to Harvard, then obviously you’re going to be Harvard up there. It doesn’t make any sense, it suppose anyway. So but

S1: the the. Generally accepted reason why it still exists is this belief which might not be a true belief, and there’s evidence that it’s actually a false belief, but it is a deeply held belief that legacy admissions. Are an incredibly effective way of increasing alumni donations that people give more to this alumni, to that to the college that they went to. If they think that that college is in is more likely to smile upon their own children when they apply, there is a little bit of research on this and on the face of it, it doesn’t seem to hold. But that’s certainly why a huge part of the reason why colleges do it.

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S3: I wanted the kind of school which I’m not sure it’s so much legacy admissions. It’s just like, How wealthy are you? And then a bunch of scholarship students. But I’m truly always fascinated by the dynamics of higher ed. And this idea that you know, you see higher ED is either a bastion of like liberal teens complaining about yoga or something. And the equally countervailing idea that, you know, all of us higher ED is just a system of reinforcing the status quo. These these, these very polar opposites fascinate me.

S1: The other thing we have to talk about here is this feeling among middle-class parents and the children of middle class parents that where you go to university really matters and that, you know there is massive value to going to Harvard rather than going to say, you know, Albany. And I felt this growing up right. I didn’t get into Oxford and I went to the University of Glasgow. Now, with hindsight, that was brilliant, and I’m extremely happy about that and the fact that it was a lot easier to get into the University of Glasgow than it was to get into the University of Oxford is a feature rather than a bug. And it surrounded me with like a very broad range of like, fabulously interesting and smart people, most of whom, for whatever reason, it wasn’t to do with, like native intelligence, probably couldn’t have gotten into Oxford. But even if they could have, they wound up somewhere better. So if ending legacy admissions helps in a tiny bit to end this idea that, like the place you go to university is the only thing that matters, then I’ll be incredibly happy.

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S2: Or if it successfully diversify as these elite institutions a bit more, that would also be a reason to celebrate it, right?

S1: I think elite institutions really do matter in terms of being elite. You know they are, but they are clearly better when it comes to like postdoctoral research. But I’m just not convinced at all when it comes to undergrad.

S2: I think for I mean, we we talked about this when Ron Lieber came on, you know, for certain kinds of jobs and things, the elite universities, that pedigree you need it like, say, if you want to be on the Supreme Court or something. But like, you know, that’s not for a lot of people. So it doesn’t doesn’t matter. Right? Typically, it’s just in certain kinds of jobs.

S3: But how much of that is because all those other people in the Supreme Court went to that same school. Like the thing for me is I’ve never been able to satisfactorily explain how much of this is actual. The credential endowed upon you by the school is because of certain types of skills, or it’s just pattern matching straight up like a person who sits on the Supreme Court has historically had this kind of profile. Therefore, this kind of profile makes it possible for you to sit on the Supreme Court and like a never ending loop of self-reinforcing tendencies.

S1: Yeah, and it certainly certainly happens in the UK. You know, if you don’t study PPE at Oxford, then you’ll never become an important person in the UK. But if you look at CEOs in the US, they have an incredibly diverse range of educational backgrounds. And there’s really little, if any, indication that, you know, Harvard and Princeton and Yale outperforming.

S2: Yeah. And my the people I graduated from Albany with are all doing very well and have no never had that any student debt. I mean, it’s really a good deal.

S1: No debt. Always a good thing. Thank you for listening to sleepless and I hope you go to an excellent college or went to one or happier not having gone to one.