Seamless Is a Verb

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

S2: Welcome to The Seemless is a verb edition of Slate Money, your guide to the business and Finance News of the Week.

S3: I’m Felix Salmon of Axios. I’m here with Anna SHYMANSKY of Breakingviews. Hello. I’m here with Emily Peck of Huff Post. Hello, Emily. Have you been seamless thing?

S4: Well, where I live, there are only two restaurants on seemless.

S3: So now Santa Anna. Have you been seamlessly. I have, yeah. There are more than two restaurants in Brooklyn. We’re going to be talking about seamless thing or as the rest of the world knows it, ordering food online for delivery, which is a big business these days for obvious reasons. And it could be consolidating. We are going to talk about short people and what to do with them when we go to work and the whole economics of childcare. We are going to answer even more questions. Some of you may know we did a Facebook glaive for Slate on Wednesday evening. It is still up on Facebook. And if you want to watch it, you can. And there’s a link in the notes where we answered a bunch of questions of people who were on Facebook, but there were other questions which we did not answer. So we will answer some of the other questions that people did ask, but that we did not answer. We love answering questions on this show. So send them in. If you have any questions, we will put a little bit of the Facebook Live show into Slate plus as our Slate plus segment this week, all but coming up on Slate Money. So let’s talk about Uber and GrubHub, Uber. We all know GrubHub. I think many of us have become much more familiar with over the course of this lockdown. And Anna, is Uber going to buy GrubHub?

S1: Well, in theory, they want to buy GrubHub. Whether or not this passes through the government’s different regulatory bodies is a very different question.

S3: So is this. Is this something? Tell me a little bit about where you see the US government on this kind of thing. Obviously, Uber and GrubHub are dominating that whole last mile service for restaurants who need to be delivering food these days because they can’t be serving them in situ if they merge. That’s basically the two biggest companies in this space merging right outside of door dash right there.

S4: So I looked at a couple of estimates. The Journal said the two combined would be 55 percent of food delivery. And then another asked Matt, had that percentage even higher. And yard door dash is the number one operator in this.

S1: And one of the interesting things is it’s kind of bifurcated depending on where you are in the country. So, like, if you’re in New York, we tend to always be using, like, seamless slash GrubHub.

S3: So it’s a little known fact for those of you in New York, like seamless is a verb in New York. Everyone just uses seamless. That’s seamless. Is GrubHub is the same thing. It’s just a Reist I can read. What’s the word rebadged version and GrubHub. So in any case, you know, we would wind up with monopoly power on the part of Uber GrubHub combo. They would have more than half the market, probably at the very best. We would be in a duopolies situation between them and Dorje Dash. So how is it even conceivable that regulators would allow this to happen?

S1: I mean, I think it’s incredibly unlikely, however. I mean, there might be some thought that, like, look, we’re going to be going through a really difficult period. Delivery is notoriously a business where you can not at this stage make money in all of these companies are losing money. So there maybe the thought of like, look, if we can at least have this one company take over the seven other company, then at least they have a better chance of actually being able to survive as opposed to just all of them going out of business that I’m sure that will be passed out and might make.

S3: So, okay, let me let let me impact that a little bit, because the reason why. You are more likely to be able to survive if you’re bigger is just that you have more pricing power and you can raise your prices and the restaurants don’t have a lot of choice about how much to pay you. So it certainly doesn’t benefit consumers and it certainly doesn’t benefit restaurants to give all of this pricing power to one or two companies. But you’re saying that on some level, like the competition, regulators might say that. It’s OK because that means that we have companies doing this at all.

S1: I mean, as I’ve said, I don’t think that is going to happen. But if I’m trying to make an argument of where I think, you know, you could get this through, it would probably be that idea of like, look, if you don’t allow these companies to merge, at least one of them is probably just going to, you know, potentially go under, not be able to survive a number of years, especially if their access to capital dries up. So let’s at least allow them to form a stronger unit and to be able to survive this.

S3: So we all agree that this is a very weak argument, even as I’m telling. So explain to me, given how weak this argument is, why did GrubHub share price rise so much? Isn’t the market on some level pricing in a successful acquisition of growth? Yes, it is.

S1: It hits. I would say it’s just it’s not entirely rational. Yes. I mean, I think, a everyone is just excited that there’s any type of deal because we’ve been in this kind of, you know, deal drought for so long. And, you know, I think people stepping away from the regulatory side of it will say, oh, well, this makes so much sense. They’ll be able to eliminate all of these, you know, customer acquisition costs. The logistics of Uber are so much better than that of GrubHub. So this will make, again, allow them to reduce costs. And look, maybe that’s the other argument you could make as say, you know, you know, yes, you are going to have more monopoly power. However, maybe it won’t hurt consumers. Again, I don’t this is a good argument, but maybe it won’t hurt consumers because you’ll be able to cut costs and all of these other ways. So consumers might actually get a better product by combining these two forces.

S4: I was going to make that argument because I saw a lot about Hubers amazing logistics, which at first I felt I intuitively understood and now think I don’t really know what that means, actually. But anyway, according to reports, Hubers logistics are so good that they would save like two to three dollars per order.

S3: Theoretically, that would go back to consumers, but unlikely because we know how these things kind of go to logistics being this the way that Uber has drivers driving around everywhere all times. So if a restaurant says like pings, presses a red button and says, I need someone to pick up an order, then there will be someone right next door to that restaurant who can pick it up and deliver it.

S4: Excellent logistic analysis.

S3: Do we have a feeling? I don’t have a feeling for this at all, but do we have a feeling for how many Uber drivers, Uber each drivers is basically exactly the same people.

S1: You know, I don’t have that number out of my head. I imagine that there’s a you know, I don’t imagine not all of them, but I imagine it’s less significant, a significant portion.

S3: I mean, it does strike me that during the pandemic. A bunch of drivers would be much happier to be purely uber eat right than to have human beings in their car.

S1: Yeah, and I mean, an Uber ethos has been one of the few somewhat bright spots for Uber. Now, granted, they still lost a lot of money, but still they at least their revenues were up significantly. So, you know, I can understand maybe Uber try again, trying to make this argument about, you know, whether it will it will make these these companies stronger, more apt to survive this pandemic, more apt to survive this economic downturn. And on the other side. Well, look, as you said, like this might actually be better for consumers. Maybe they won’t see all these price increases.

S3: I’m conflicted about this just because GrubHub is kind of evil and a bunch of ways they’ve been doing all of these nasty things about setting up fake Web sites for restaurants and setting up fake phone numbers for restaurants that you think you’re calling the restaurant directly. And in fact, you’re calling GrubHub, which means the GrubHub gets to take a higher share of the order. And the amount of money that GrubHub charges restaurants is it’s just nosebleed. It’s like upwards of 30 percent. And while that can be considered, you know, well, at least it’s extra revenues during good times over and above all of the normal revenues that we make from eat in diners right now. That’s all. That’s the only game in town. And it just makes the economics of restaurant thing even more forbidding than they are already, which is obviously extremely forbidding.

S4: I mean, on the one hand, it’s kind of like. It’s good. It’s kind of like a backdoor bailout for Uber right now, if it gets more power in the food delivery space, because that’s the only space where in the foreseeable future it’s gonna have any ability to really do business. And we know eventually Uber will will come back. Right. I mean, people will eventually start doing ride sharing again. So it needs some kind of bailout. So it’s like, why not do it this way? Also, it seems like this is the food delivery, like none of these. I think Ana just said none of these companies make a profit anyway. So something has to happen in the industry to move it forward and there has to be some kind of innovation that takes place now, especially considering what you said, Felix, about, you know, running a restaurant right now isn’t like the thing to do that makes money really anymore. So there’s obviously going to have to be lots of innovation in the space, or maybe it’s a good thing if there’s a bigger company with more money that can do more of the innovating. Yeah, and I’m reaching here.

S1: No, but I mean, I do think it’s an interesting point as we think about restaurants moving forward, as we think about how people get food from outside their home was moving forward after this pandemic because, you know, this is an industry that fundamentally cannot survive with competition there. You just lose so much money in this delivery space. So it’s hard to imagine how you can just kind of continue doing that. Definitely. And then on the other side, if you have the restaurants themselves kind of getting harmed by this, again, it’s like, okay, well, then where are they getting their supplies? So it’s somewhat hard to imagine how this entire model moves forward without there being some dramatic change.

S3: One of the things which I don’t like about this idea of thinking of delivery as a space is a business in its own regard as opposed to just like another service that is offered by restaurants is the way the GrubHub in particular is almost blackmailing restaurants into using their service. So, you know, it wasn’t that restaurant late. There was a time before a restaurant delivery services. It wasn’t that long ago. And restaurants would still deliver food. And if you wanted to deliver food, you would find them up and they would deliver you the food. And yes, they would have to pay those people, but they would be late on the books of the restaurant. And then GrubHub comes along and says, listen, you don’t need to pay delivery people because we will give you the delivery people and we will do the delivery for you. And the restaurant goes, oh, that sounds good. Is it cheaper? And GrubHub? No, it’s actually more expensive and the restaurant gets old. Why would I sign up with you in that case? And GrubHub says, well, because we’re a discovery mechanism that people don’t just want to order from your restaurant. They’re just going to open up our app and type in Gaitonde car or whatever it is that they wanted to order. And if that’s what you think, that’s what you want. No, really. Gates Onchi is like a classic takeout or that I might be wrong about this, but like, you know. But if you’re a restaurant offering guy Tomka, then they will discover you. And that’s going to be extra business for you. And that will justify the fact that it costs more to use us to deliver your meals than it would be if you just did it yourself. But of course, this is a zero sum game, right? The total number of people ordering doesn’t go up significantly just because an app exists that the total order number of people ordering is just a function of how many people want to order in the first analysis. And so what you wind up with is a bunch of revenue ultimately just being siphoned off to the parasites rather than staying in the restaurant industry where it belongs.

S1: So I mostly agree with you, but I would say two things. One, the easier you make it for people to get delivery. The more people who are going to use delivery services like, you know, I wouldn’t say I think a lot of far more people are using delivery services now than they did back in the day when you had to find restaurants. And I do think that, like, look, you’re you’re not wrong. That’s not good for restaurants right now. But I also feel like we’re not going to go back in time. Like, you know, people want to use a single app where they can find restaurants. I think moving forward, there has to be some way to figure out a model that works so that restaurants and these intermediaries and consumers kind of works for everyone to a certain extent also.

S4: I would just say, like there was no, like, halcyon days for the people doing the delivering, like as though.

S3: Oh, yeah. Hasta La Salle, by the way. I did like the actual human beings doing the delivery. They’ve never been well treated by anyone. Blair.

S4: They would pay. You pay them. I remember when I worked in a restaurant, they were paid like TEPP minimum wage and they would go out in the hail and the snow and the rain, hoping for like five bucks on a delivery may or two. You know, like it’s not like they are the one great job before on this stuff.

S3: They are the one group of people who are actually winning here. People tips are up like 90 percent. Keep on keep on tipping well, people that, you know, these people are out there, frontline workers, they deserve all of the tips they’re getting. And then some.

S5: So if you do order for delivery, which is a perfectly reasonable thing to do, just make sure you tip. Emily. Hi. How are you?

S3: We’ve talked a bunch about restaurants on this show and how doomed they are. But it is not the only industry which looks like it could get completely decimated in a way that, like large chunks of it, might never come back. You have been looking at child care. I have, Felix. So tell me everything. It’s something I have not been looking at. Tell me tell me about how does the childcare industry work and what is in its future?

S4: I’ll tell you. So I have a piece hopefully coming out. It should be out right now. Basically, the childcare industry is on the brink of collapse and it’s this really interesting business sector of our economy. 90 percent of childcare operators are privately held. It’s mostly people running centers out of their homes, you know, on like razor thin margins. No one can pay very much for childcare. So, you know, they don’t have a lot in. It’s just like restaurants. They don’t have a lot of cash reserves or anything like that. And when the pandemic hit, like around 60 percent of centers closed down completely. So no more money coming in. And, yeah, some parents kept paying. But most parents didn’t. So they were there basically just like holding on by their fingernails. Meanwhile, there are these operators that are open now that are serving the children of essential workers. But they’re not they don’t have as many kids as they used to. It’s fewer kids coming in and costs are much higher now because they have to do all these like pandemic screening things and buying more supplies and more cleaning. They have to have lower child to adult ratio. So costs are up and revenues are down. And some estimates say, like it’s going to take like it’s going to it should cost like nine and a half billion a month to keep these the whole sector kind of alive during this. And Congress just is not giving them the money they need, which is very typical of this industry, which is it’s absolutely essential. Right, because parents need to as we’ve all learned, parents need childcare so they can do their jobs and work. But historically, it’s just been very underfunded. And if you think about it, like in contrast to K through 12, it’s it’s private and it’s just really operating by the skin of its teeth. And now, like so many things, you know, it’s very vulnerable to cost.

S3: So can you just play rewind a little bit and explain what exactly we’re talking about when we’re talking about childcare? Because obviously that the first main childcare service is school. Right? That’s where you drop off your kids in the morning and then the school kind of looks after them and then you get the kids back in the afternoon. Yes. Beyond schools, what are we talking about? We talk about the kids who are not old enough to go to school.

S4: Yes. Felix, we are talking about zero through five of those kids, kids that are babies. You can’t drop a baby off at school. You have to. These are debt. And they usually called daycare centers. Right. It’s places where you drop your kid off. And then you go to work and your kid is again, a baby or a toddler. That’s daycare. Right. A lot of countries have public daycare. And York City has public pre-K, which is four years old. So you can drop your kid off when they’re four. But before that, parents have to pay out of their own pockets to figure out what to do with their kids so that they can go to work every day.

S1: And it’s these kids should just be older now. So you should just leave them at the school.

S4: Yes. So it’s a big problem because there was like an effort decades and decades ago to make it all public. But that failed because conservatives were like, you know, women should do that work. So now we have this like mishmash, private industry, kind of chronically underfunded. Teachers make almost nothing. They make an average of like eleven dollars an hour. So it’s kind of a big mess. And this whole crisis has exacerbated the mess because it it’s only surviving because they have a constant flow of kids coming and paying tuition. And now that that’s stopped, it’s like like gasping for breath.

S1: Yeah. And I imagine you might have some of the like the pricier places actually stay in business. And I say this only frankly, anecdotally from like relatives who are paying can because they want to lose the spot for their child. So they’re all slightly right. You know, however, as you said, that that’s not a that’s not the majority the majority of just these kind of like tiny little places. But I imagine a few of those. So it’ll probably then kind of add one more thing that kind of exacerbates inequality, where people who are wealthier might still, once this is all done, have a place they can go that still is functioning, they can pay for. But then all of these the less expensive places might all go out of business.

S4: Yeah, like I spoke to one guy who operates a center in Bethesda, which is relatively upper middle class. Charges like a thousand ish a month to parents. And he’s. Going to be OK. A lot of them are still paying. Then I spoke to a woman who operates a center out of like her house in Alabama and all the parents that aren’t going there, like we’re not paying you. And could you hold our spot? So it’s just a nightmare.

S3: So restaurants have this problem that it costs a lot of money for them to reopen.

S6: You can’t just, like, wake up one morning and say I’m going to reopen. You need to really reinvest in reconnecting me.

S3: The restaurant, making it Kovik proof and buying all the new food and training up all of the people who you have to replace, the people who disappeared. Is day care the same way? Like, can you just like a clothes store can just unlock the front door and it’s basically back up and running. Is where the stakes fall on that spectrum? Does it? Is it hard to reopen or is it easy to reopen if you want to?

S4: I don’t think it’s as hard as a restaurant, but the people I’ve been speaking to say there’s going to have to be like a lot of retraining that happens. A lot of deep cleaning that happens and a lot of reconfiguring like class sizes. The new regulations make them smaller. So it’s on the spectrum. It’s not as easy as like reopening the Old Navy, but it’s not and not as hard as like reopening prune in the East Village, I guess. But, yeah, like, there’s a lot that has to happen before the some of these places can reopen and they have to find their workers again.

S1: Yeah, it does seem like the you know, you don’t think of this as like a capital intensive business. But like, it is interesting. I’m just thinking of, you know, there’s those videos kind of out of China of like this ten minute thing that these children had to go through of all these different cleaning machines to like, you know, that they were very adorable little children. But it was kind of terrifying. And I mean, I don’t know if we’d have that lovely United States. And obviously it probably depends on how long before there’s better either vaccines or treatment or whatever. But it does seem like, as you say, that for a significant period of time, potentially you’re going to spend a lot of money to be able to even open it. You know, so I wonder then, what are the options going to be for people who can’t afford these types of places that have the ability to pay for that? You know, what are going to what’s gonna be available?

S4: I mean, I think what you’re already seeing is like a lot of people aren’t going to be able to go back to work. Like a lot of particularly a lot of women know, they’re just not going to be able to work if these if these centers closed down.

S1: Right. And this is something that like it’s it’s like it’s really frustrates me because, you know, people on the right who, you know, are always talking about we want more GDP growth, blah, blah, blah. You talk to any economists, I’ll tell you, one of the best ways to do that is to get more women involved in the labor market. The easiest way is to kind of increase GDP growth. And yet, like, this is such an important part of that. It like every level, whether you’re talking from low income to high income and yet continues to, as you say, fall into like the same weird argument you got from like the 1970s of people being like, well, you know, that that’s that’s really either a private issue or, well, maybe women should just, you know, be doing that themselves.

S4: Yeah, I don’t think the industry gets a lot of respect. You know what I mean? Like, it’s a race to bail out the airlines, but not to bail out child care. They’re like they’re basically begging for money at this point. And if you think about it, like the industry itself, they lost like three hundred and thirty thousand jobs in April, which is a lot of jobs. Right. But like, if you think about each child care worker herself is supporting like five other people with jobs, you know, I mean, like without that one worker, those five kids can’t be cared for, which means that whole set of parents can’t go to work or at least half, you know. You know, I’m saying it’s like for every one child care worker, there’s like six other people standing on her shoulders.

S3: The other reason why restaurants are so endangered is that they generally like mom and pop businesses, that you, the owner, only owns one restaurant and therefore it’s small and has no access to capital markets. I’m assuming childcare is the same. There aren’t really big national giant childcare chains.

S4: Yeah, it’s it’s almost 90 percent like privately owned. And my mom, mom and mom’s. Usually there is this one public company called Bright Horizons. Have you heard of it, guys? They primarily handle childcare for companies like I work for a variety. And Verizon uses bright horizons. And if you have like an emergency, you can take your kid to a Bright Horizons Center. I spoke to their CEO. They’re doing OK. Like he took a pay cut because people metaphor’s, but they’ll probably be OK because they make their money from the companies that hire them. But they’re they’re not the norm. I also spoke to the why. They’re a nonprofit that’s very large and they’re really struggling now also because they’re mostly closed down. They’re just you know, they just have a few essential like half their centers have services open for, like essential workers, but they are losing billions. Also right now.

S5: Let some.

S3: Get to some of the questions that we weren’t able to answer on our Facebook live chat because that was fun and we should do it more often. But we definitely had questions on Twitter. And I feel like if you put up if you put a question on Twitter, you’re more likely to be listening to the podcast rather than the simultaneous listening to the chat. So maybe we should answer one of the Twitter questions that came in. So here we go. Cody Housemen wants to know why Anna SHYMANSKY thinks about ETF investing through platforms like Robin Hood, which is famously the Millennial fan friendly zero cost place to buy stocks and ETF.

S1: Well, I mean, I guess there are many ways to go with that question. You know, in general, I am a fan of ETF products that have also actually held up particularly well during this crisis more than some people thought they would. Which platform you buy them on? You know, that depends on a number of things. I mean, the thing I would say, though, is that, you know, a lot of these kind of challenger platforms like Robinhood have also made a lot of the more kind of traditional platforms just cut their fees to zero as well. So if you were looking at the place that, you know, you wanted to put your money, I would probably say, you know, look where you are getting the lowest fees, you know? But also make sure that it’s a, you know, platform that you can use. Make sure that you trust the platform. I mean, I know Robinhood itself got into some trouble, not just because they had the outages, but I think they also, you know, they had some issues where they were potentially moving trades where they weren’t actually getting the best price execution. They got fined for that. So, like, look at that kind of thing.

S3: Like, you know, when you’re Robert Rubin had this had a series of scandals. Do we all remember when they announced that they were going to open up a checking account and they had to change their mind away wildly, saying, no, you can’t do that, you’re not a bank, then pretend to be a bank when you’re not a bank? Yeah, I think and there’s a fee right there. If you’re looking at ETF, it’s the consensually. There were two layers of fees that you pay. One is the management fee and the ETF. And it’s always a good idea, especially if you’re buying an index fund to just pick the index fund with the lowest fee, pretty much because A, that’s likely to be the biggest fund. So you get a bunch of extra liquidity and a bit tight, a bit of a spread just because of that. And B, because obviously lower fees turn into more money if you less money for the manager. And so it’s a win win for you to pick the lower fee fund. And then the other layer of fees is, as a.. Says, like, which shopper are you going to go to to buy that fund? You’re going to go to Robin, you’re gonna go to Schwab, you’re going to go to Vanguard. You’re going to go to Fidelity. And again, like, just pick the one which is cheapest. Like, this is a commodity product. This is not like if you buy an S&P 500 index fund through Fidelity, it will give you any different returns from the same ETF. If you buy it through Robinhood. So while there are advantages to being able to do things easily through a pretty app on your phone, the main thing is fees. And honestly. There’s a part of me that wants to say, being able to trade easily through a pretty app on your phone is a bug, not a feature. You don’t want to be able to trade easily like stock trading is not something which you should be doing or thinking about or actively caring about ETF when they’re done well, when they’re done right is something which you buy once and then forget about the next 35 years and then they are worth more money in 35 years time. So having the ability to check on the value of your portfolio eight times a day by opening an app on your phone is actually something you kind of don’t want.

S1: Yeah, the one one last thing I will say also, just like if you’re looking at products that you’re buying, understand what you are buying. And, you know, if you’re if you’re buying, you know, a simple, you know, index fund of the S&P or one of the, you know, very broad bond funds. But, you know, we talked about a little bit, you know, a number of weeks ago, some of these, like commodity based ETP is or they have ETF ends and all these things. They call them all. Yes. But if you actually look at what they are, they’re not good. So just. Yeah.

S3: USO to lose out of buying. Oh, don’t buy you whatever you do, don’t buy USA. That’s that. That’s the oil thing which is very popular on Reddit. Just stay away from that.

S4: Didn’t Robin Hood also crash a little bit.

S1: Yeah. Oh yes. They did have a few outages. Yeah.

S3: I feel like I would major, major outages like all day outages. Major Davis of the stock market.

S1: That’s. Yeah. Look, man, not again. I I’m. That’s why I say you do want to make sure it’s also an organization you trust. You know, like that’s one other thing.

S3: Yeah. Like why would you buy. Why would you trade with an organization which is run by a couple of tech pros when you could, you know, maybe find something a little bit more boring? Boring is good. Yeah. Really has released. Anna, your dad has a question. It does have a question. Can we answer your heads? Yes. Your dad was very good and he he logged into Facebook and he dropped in the question. I didn’t notice it with your dad. But, like, yeah, it’s your dad. We should answer that question.

S1: Yes. So, yeah, my dad, who as I am looking at these questions, like Michael SHYMANSKY, like I’m pretty sure that’s my dad. I know there are other Michael SHYMANSKY, but. So my dad asked about high rise parking structures in New York City, which is also a particularly my dad question, considering how much time he spends whenever he comes to visit me trying to find parking because I will not fly. They always just drive from Michigan. Don’t ask me. That’s another question. How long is that drive? It’s like 12 hours. I’ve definitely done it multiple times. It’s a really long drive by.

S3: Just to be clear on our definitions here. High rise here means like five stories, right? It doesn’t mean sort of like fifteen stories.

S1: Yeah. Well, the point he was making I didn’t fact talk to him afterwards was that you. Was this idea that, OK, if all of a sudden you have a lot of New Yorkers who are buying more cars and if they’re not the New Yorkers who leaving. But the New Yorkers were actually staying here. I mean, everyone who lives in New York knows it is very expensive to have a car. It is very hard to find a place to have a car. So then does that raise the question, then evolves and people are scared to use public transport or they want an ability to be able to leave the city and they dubi are more apt to buy cars. There needs to be a place to put them. And, you know, I do think that’s it’s interesting because, you know, one of the things we had seen in the last 10, 15 years was kind of the opposite. When I think like gas stations that used to be back in the day in New York on these corners, you’d have gas stations and then so many of them went away. And then I’ll become became all these other buildings. As you know, people don’t have fewer cars. So it is interesting.

S3: I don’t think that was a few occurs thing. I think the gas station thing was just like what is the highest value use of that little thing that when, you know, when and where rents were low, you could make a lot of money with a gas station. But when rents are high. You could make even more money by putting a condo there. So people put a condo.

S1: No, that’s true. And especially as a lot of these tended to be corners. So. So. Yeah. No, I think I mean, I think you’re right about that. But it is interesting to think one of, you know, one more step, like, you know, if all of a sudden we have everybody working from home, you know, you don’t have as many people using commercial real estate. You know, if people are buying more cars, would then potentially you see certain buildings, you know, be destroyed to become parking lots. I don’t know. I think that’s probably unlikely.

S4: But if more people are working from home, then overall you’ll have fewer people driving into the city because there’s in New York, there are like a big contingent of people that do drive in for work. So probably, like, balance each other out.

S1: Now, it’s probably true.

S3: I mean, I but the mathematics is is interesting because I think Anna’s right that there’s not a lot of economics. In fact, there’s zero economics and spending a bunch of money to sort of tear down a building and build a car park in its place. Meanwhile, if you set certain in cities like London and Milan, but even to some extent in New York, you’re going to have to see a significant reduction in on street parking. Just because the demand for bike lanes and space on sidewalks is going to be much greater. A bunch of that space for bikes and for pedestrians is going to have to come from the space which is currently given to on street parking. So all of that cost storage, which. Was on the street is now going to have to move off the street into car parks and the supply and demand dynamics are pretty simple there, that, you know, the supply is not changing and the demand is probably going up at the margin. There is going to be a bunch of people who would like people. Nevitt The number of people who drove into Manhattan in the past is always relatively low and that number is going to go up. I don’t know. I mean, Emily is looking at me and the various sort of befuddled way and saying, what are you talking about? Loads of people drove into Manhattan. It’s actually not true. The overwhelming majority of people who came into Manhattan would do so on some kind of public transit. And people outside Manhattan have cars, but they overwhelmingly use those cars to drive around outside Manhattan. There’s so much traffic feeling. There’s so much commercial traffic coming in. Yeah, a lot of it wasn’t it wasn’t mostly private cars. It’s a lot of goobers. It’s a lot of taxis. It’s a lot of trucks. It’s a lot of deliveries. Yeah, it’s a lot of people are ordering things online because they think that that’s it will just automatically appear at your door. But it doesn’t automatically appear the way it comes on some kind of motorized vehicle.

S4: I’m not saying you’re wrong because I don’t have the the statistics. So probably you’re right. But just as someone who sat in rush hour traffic coming into the city approximately one million times over her life, I cannot believe that a lot of people drive into the city. Regular people, not just Yashar.

S3: I’m sorry, may or May. It may or may not go up, but I do think that demand for parking is is is going to be around for a while. I don’t know whether that makes car parks a good investment.

S1: Is your dad gonna invest in car? No. Let’s let’s get out here. Think about exactly like Bourbaki to.

S3: OK. Let’s have a numbers round. I’m going to start with one from yesterday morning, which is sixteen point four percent. That’s the decline in retail sales in April. Apparently, the market was expecting a decline of about half that. But in fact, the amount we spent went down sixteen point four percent in April. And can I just come out and say that it doesn’t seem that much to me, like given how late the entire country was locked down for the entire month that we wound up spending, you know, 85 percent of what we did in March and probably 80 percent of what we normally would. That’s. Almost an optimistic sign for the economy.

S4: Maybe you can’t keep Americans from shopping.

S1: We love it. It’s true. It’s true.

S4: But everyone I every model that was bought, new stuff like it has not stopped.

S3: It’s amazing how much you made these days without losing your house. Don’t have to leave. Emily, what’s your number?

S4: So that was my number.

S1: The retail really has decided that I’m getting the first.

S4: Here’s my number. Here it is. My number is 10. That is the number of episodes in ESPN. The last down.

S1: Oh, God. So good. Oh, my God.

S4: Those are coming Sunday night. And if you aren’t watching it, you have to watch it. It is like the most delightful content of the lockdown, right, Anna?

S1: It is absolutely wonderful. So ESPN, ESPN, two documentaries are just absolutely amazing. Like the O.J. Simpson documentary is just like full on one of the better documentaries.

S3: I’ve seen it. I know nothing about sports school. It’s this. Some watch I’ll enjoy.

S1: Yes. It is enjoyable. So fascinating. I mean, the personalities are fascinating. And one of the things ESPN does is that they really are good about putting things in like the cultural context. And in this particular, it’s so interesting because it’s like also like the kind of the financial dynamics of basketball as it was developed as an especially as like the kind of sports merchandise industry which Michael Jordan kind of, you know, probation. I’d read it. I mean, it’s all fascinating. And it’s soccer.

S4: They we had this quote when we talked about, as Phyllis calls it, sports ball a while back. And there’s that quote from Michael Jordan. We we used that was like Republicans buy shoes, too, or something. And they kind of like explain the whole story behind that quote and is so interesting. And there’s no way he would have said that now. Right. This era, it’s just it’s so interesting to think about now versus then and like how sports figures were viewed. And like, Michael Jordan wouldn’t have been Michael Jordan if he if if he had played in these times. It’s just it’s so good. Felix, you should watch it. Plus, the 90s music is really, really good. It really is.

S1: All right. And what’s your number? So my number is 70. So that is how old my dad is today. My birthday. Michael Tomasky. My father’s birthday. So is she. My dad. A very happy birthday. We are having a little Zoome party this evening and his wishing you lots of multistorey car parks, better access to parking when he comes to visit me. I bought him. I actually bought him bread. My dad loves bread. And there’s this wonderful place in Ann Arbor called Zingerman’s that has like some of the back of Ms. It’s wonderful. And they have the greatest bread gifts. So it’s like, oh, my God. Yes, I’m writing that down.

S3: What? One day, Michael SHYMANSKY, you’ll be able to go to Miami where my favorite multistorey car park lives. It’s designed by Hertz looking to Marilinda. You know, it’s looking to Valan made in Miami. I did not know that. It’s check it out on the Internet. You the letter. I think it probably will. Yes. I have a building of the week. And when you. Let’s turn to maybe maybe this week I’ll put the silicon down parking lot just for Michael SHYMANSKY. So I think that’s it for us this week. Thank you so much for listening to Slaten, honey.

S2: Thanks for keeping the e-mails coming in. We do answer questions even when they’re not called Facebook lives. So keep the questions coming in. Sleep money and sleep dot com. Many thanks to just me, Molly, for producing the show. We will talk to you next week on sleep.

S6: Let’s get straight into it and answer some questions, and we’ll start with John O’Malley, who wants to know what we think about the next stimulus round, because as this is, there’s always gonna be another round, apparently isn’t going to happen. Well, how big will it be? What do we think about it?

S4: I wrote a little bit about it yesterday. It’s this new act. It’s called the Heroes Act. It’s like it’s a three trillion dollar bill. This time. It’s chances of actually making it through and getting signed are pretty poor, I think. So that’s where I don’t I don’t know. Some of it might get through. I mean, some of it you would expect to come through honestly, like the extension of pandemic unemployment insurance, which I’m sure Republicans will make a fuss about. But I don’t see how you cut off unemployment insurance in at a time when unemployment is, what, 20 percent or something right now?

S6: Relo. I do. You I mean. I mean, yeah, I really do, because one of the great talking points among employers has been I can’t find to come anyone to come. I can’t find anyone to come into work, which is partly a function of these people that, you know, obviously a lot of them are parents need to be looking after kids who are stuck at home. And B, they’re just scared about getting the virus and they don’t want to expose themselves to the virus. But then there’s also C, which is between your state unemployment checks and your six hundred dollar federal check, you are often making more money than you would be making if you went back to work. You have no incentive to go back to work. This is this violates every tenet of Republicanism. And it’s very easy to see whether Republicans don’t want that and would vote against that.

S1: Right now, there’s one Republican. There is one tenant a Republican does not violate. And that is getting a Republican re-elected. I just feel like in an election year, you are not going to want to just have massive amounts of people unemployed and not and just have seen massive demand destruction because people aren’t getting re employed in a lot of these jobs part.

S3: But he is paying people to stay home and not work is not it does not help the unemployment figures.

S1: Well, OK, fair enough. That’s true. But I buy more. I’m talking about the idea of like if you have a massive number of people unemployed. However, if you’re at least filling in that kind of demand destruction while you’re starting to open up the economy and kind of slowly start to get more people employed, that reduces the hit to households. That makes people slightly more apt to spend it kind of. When you’re thinking about the long term implications of this, obviously you don’t want a bunch of people going bankrupt, you know, want a bunch of companies going bankrupt. So you do want to fill in that gap. Now, will the Republicans do it or not? I mean, it’s a question, but I think I think it’s a I think it’s a very live question.

S6: I have to say that there’s it’s not obvious to me that the Republicans are just going to say, oh, yeah, on the sort of grand macro level, we need to make up for lost demand by spending money at the government fiscal, blah, blah, blah, like debts. That sounds very Keynesian to me. And the Republican Party doesn’t strike me as a very Keynesian party. And we have been hearing pretty consistent messages from the White House in particular saying, you know, from Larry Kudlow and people like that saying we are not going to even entertain another significant stimulus in May, like, come back to me in June, perhaps. But let’s at least wait and see what the effects of the first massive casette stimulus is before we rush out with another one.

S1: Well, what I would say Nixon called himself a Keynesian at one point. That’s because everyone is the point when Nixon was to the left of Obama. We have to remember this. But no, I. I think we’re probably not this I don’t think this is going to pass as easily as the other ones did. Like, I think this will take a little bit longer. I’m sure it won’t pass in its exact form. And I’m sure that the Democrats are also going to have to make some concessions, but potentially like liabilities of companies and that kind of thing. But I find it impossible to leave or believe we’re not going to get a number of stimulus bills passed in the next, you know, six months.

S4: What about a new one of the things in the Heroes Act is another round of the checks of the stimulus checks with even more money going to children instead of 500 to each kid. It’s another it’s 12 hundred to each kid in there and their bill. What are the odds of that happening again? People are very excited about these checks. I cannot emphasize enough having a bird’s eye view of the traffic numbers that Huff Post.

S6: So people are glad. Is that like search people is hoping in?

S3: Oh my God, I got twelve hundred dollars any time. I never have.

S4: Yeah. I mean, I don’t know if I’m a loud I’m not going to give any numbers, but anytime there’s a story about like stimulus checks, people are like they’re clicking on the stories. They’re very interested. The traffic to those stories is really high because people want I’m in DA. People want free money. It’s not even free money. People want checks to come because they need money.

S3: It is free money. It’s here. You need it. It’s free money. You pay tax.

S6: It’s all being borrowed. It’s not coming out of tax revenue. It’s all it’s all just getting printed by the Fed. Lend to the lend to the government. The government is giving the Fed a bunch of bonds. It’s all like it’s basically free money.

S1: OK, well, people like free how? Oh, you guys. Well, I think this goes back again. I think that Trump like signing checks. You like saying I’m giving you. Free trade, giving everything you really. I think that’s another question.

S3: Let’s let’s let’s turn to David Reese, who says, given the contraction of the economy and we know that we’re in the worst. You know, economic recession, basically since the 1930s, just in general, would you say that the US stock market is overpriced?

S6: I mean, I would say that the US stock market been overpriced for like, what, 90 percent of the time? I’ve been a financial journalist. The US stock market being overpriced seems to be a sort of base case scenario for me.

S3: And sure, it’s overpriced now, but that’s that’s hardly unusual. What would what would use it?

S6: And it certainly doesn’t mean that the US stock market is going down. Like most of the time when the US stock market is overpriced, that it winds up going up rather than down. But you tell me what you think.

S1: I mean, I think it’s hard to look at the fundamentals right now and not suggest that perhaps a lot of this is just essentially stimulus from the Fed. That’s kind of flowing through and increasing asset prices. And, you know, honestly, like we saw this last year before all this happened. You had something like 30 percent growth in the S&P. You had no earnings growth. You know, in much of the past 10 years, you’ve had outflows from equities. However, you’ve had a lot of corporate purchases and you’ve had all this Fed stimulus, which kind of threw multiple expansion. You know, it it tends to increase the value of equities. So I don’t I might disagree a little bit when you say that. There’s no like, it won’t possibly go down. Now, I don’t know. I don’t put words in my mouth. I think their ability that it will go down.

S6: I just see a bunch of people, including myself, like I totally believe that the stock market could go down quite a lot from here. The one thing I think is unlikely is that we will see a precipitous crash like we saw in March. I think that if we if it does go down and it really could go down, we could go all the way back down to S&P. Two thousand or even less. I feel that that is much more likely to be a long, slow, painful grind down bear market than it is to be like a stomach churning plunge.

S1: I agree with that. I mean, I think a lot of what we saw was clearly just kind of technical sell off, essentially. You know, people basically had to sell. So it really wasn’t based on almost anything. So you could argue that it became oversold and then it’s kind of gone up to a more reasonable level. But I think you could also argue that as more and more really negative economic information comes in, it’s also likely that you will see that slow grind down and we may even, you know, revisit the levels we saw before. But, yeah, I agree. I don’t think it’s gonna be like one week. All of a sudden we lose 30 percent.

S6: It is clear to me that the thing that caused the stock market to go down, like with the benefit of hindsight and looking at what happened when it went down and when it went up is when the number of cases was rising at a terrifyingly exponential rate. And we had no idea where it would stop and you would just extrapolate that exponential rate. And since you had let millions of deaths. That was terrifying in a way that caused people to sell and. I don’t think this is going to happen, but if you see some other major outbreak somewhere in the US where there is like another big exponential rise in cases, I think that could cause some serious, nasty plunges.

S1: Yeah, I mean, I guess one of the things I would say is that. You know. When you’re kind of looking at where like what happened with the equities market, you also really have to look at the short term funding market and you have to look at the bond market and you have to look at, you know, what was happening in credit markets at that time, because I would also argue that a lot of what happened was just that when people when that started to crunch up, I mean, that’s, you know, shades of 2008, you know, that both really scared people. And it also meant people then were pulling money out of many, many different places. There was no rush for cash. So as long as people have faith in what the Fed is doing and as long as the Fed continues to do it, which if there’s basically no sense of the Fed is not going to continue to do that, then I yeah, I don’t think we’re gonna have that massive sell off. Yeah, I agree. However, one thing I would say one more thing. Yes. Because it can kind of switch to another question that we have a little bit here and talk talking about inflation, because I would argue that, you know, there’s there tends to be this idea that, you know, what the Fed is doing has no potentially negative consequences. While I agree with what the Fed is doing, know, we are seeing asset price inflation. We’ve seen asset price inflation for the last 10 years. And historically, when you have tremendous amount of asset price inflation, you tend to at a certain point have a bubble being burst. So I do think that is something people should keep in the back of their mind when they’re thinking about inflation. It’s not just the cost of goods. It is also assets. We don’t think about it in that way as often. But you should.

S3: So when you say assets, you mean stock market. Stock market buying bonds as well.

S6: Right. OK. So the question you have is from David Dupo and he’s like everyone’s talking about inflation. What everyone thinking about the risk of deflation. And this is a very timely question because we just had the CPI number, which came in at minus zero point eight percent. CPI is inflation, the core number, which people look at a bit more core CPI, which is excluding food and energy, which bounce around all over the place. Obviously, you know, gas prices are really low right now, but it’s stripped that out, stripped out gas prices, strip strip out food prices and core CPI came in at minus zero point four percent, which is basically never, ever been that low. This is a record setting.

S3: Negative print for inflation. So this looks far from worrying about inflation that we should be worried about deflation and deflation is in many ways more painful and more harmful than inflation. Yeah, very much. I mean, deeply.

S1: I mean it and it’s I mean, it’s not.

S4: Is this because people aren’t buying stuff, so.

S6: Exactly. So the thing about inflation is that, you know, that that loaf of bread is going to cost a hundred dollars next week. So you buy it now because there’s no way you’re gonna be able to afford it next week. Inflation causes you to spend money today if you know that loaf of bread is going to be 10 cents next week. You wait until next week to buy that loaf of bread because it’s just getting cheaper and cheaper. So deflation causes people to spend less and to defer consumption. And that just really hits economic activity very rapidly.

S4: And you saw the savings rate, the number that came out last week. It’s like double what it usually is. People, as much as we’ve talked about unemployment and people losing their jobs and everything and all this. People aren’t spending any money. And actually those who can are saving up a lot of cash. Sort of interesting you pointed that out, saving.

S6: And partly because because they want to save. Because when it’s when there’s a crisis happening, you become more risk averse and you’re like, I need to protect myself. And you naturally kind of turtle in financially and save money.

S1: But also you save because everything’s closed. If you can’t spend the money, there’s nothing even money. Well, I mean, that’s that’s true. But I really have lots of views, although I do think I’ll go back to what we’re talking about earlier a little bit with kind of fiscal policy. And why that’s so important is because of this is because you you you do not want to have a deflationary spiral. You need to make people feel comfortable. Not only that they will have money this month that moving forward, they will continue to have some money coming in so that they will be able to spend. Because if you get into some type of cycle where people just simply will not spend, then that is very hard to get out of there.

S4: I don’t know the answer to this, but there are some historical precedent you can point to, Anna, of the deflationary spiral that was scary in some other country that I’m not a let me well, not mean here.

S1: I mean, you can look at the Great Depression and then also it’s actually really unheard of. Balga would have. Yeah. For every dollar. And it’s really interesting to look at what happened in Japan, because basically what happened in Japan was that the federal government essentially kind of aligned with with the Bank of Japan, just filled in for this profound demand destruction, both from household and corporates. And they think because they would have so easily, because you just had demanders went away, you had everybody paying down debt. No one was spending. The only reason that that economy didn’t completely tank the way you would have expected, based on the amount of loss of value in the when the Japanese kind of bubble burst was because the federal government went in, stepped in.

S6: So this is the question we just have from David Hudson. Isn’t deflation more difficult to combat than inflation? How do you fight deflation? And the answer is yes, it’s much harder. I mean, we know how to combat inflation. It’s painful. You do what Paul Volcker did. And you raise interest rates and you sit you send unemployment soaring and everyone hates you. But if you want to kill inflation, that’s how you kill inflation. We have a playbook for that killing deflation way, way harder. It’s like you can pour money into a hole, but as long as no one in that hole, like, really wants to spend the money, it’s hard to see why why prices go up. If you have a world where everyone is still trying to save money by buying at the cheapest possible price and they can find that cheapest possible price on Amazon or Wal-Mart or wherever they are. You know, and if someone raises their prices, then people stop shopping in that place because they’re trying to save money, which is. Normal human behavior, then, is really hard to get people to pay more money for stuff and it’s hard to create inflation.

S4: I actually have faith in Americans that once this is is up a little bit more, that they’ll spend money as usual, which is to say, a lot of money is spent on ridiculous items all the time. And I don’t know. Is it.

S1: Right. Any where it really spends money. No, it’s true.

S6: It is true. I mean, do you need a swimming pool? Right.

S4: You. New swimming pool. Yeah, I’ve friends in the city. They all want to buy cars. I’ve been telling them not to talk to wait, you know.

S6: But you think the price of cars is going to go down. We’re going to have car price deflation.

S4: I don’t it just seems like a bad time to make a big spending decision, doesn’t it?

S3: It seems to me that right now and right now is not a bad time to buy a car. There’s like zero percent financing for seven years. If you want to buy a car, that’s just like knock yourself out. Don’t do it, though, because it’s bad for the environment and bad. You know, let let’s let’s have a lighter one, because this has been a bit too macro. How many countries have we had a haircut in? I’m going to.

S1: That was a really interesting question for you. That’s that’s to claim to know. So.

S6: I don’t think it is. I don’t think it is. Well, obviously, I’ve had my haircut in the U.K. I don’t know whether, like England and Scotland countersue different countries or not. What do you think?

S4: I’ll give it to you differently now.

S3: Let’s let let’s let’s say that’s let’s say that’s one for the time being, because right now they’re still the same country.

S6: I lived in South Africa as a kid. So that was the worst haircut I ever had. I had a really nasty bowl haircut in South Africa, which was really, really terrible. So that’s to Berlin would be three. Obviously, USA would be four.

S3: And then I’m going to say Australia probably. I don’t know, five or six ish. I don’t know. What about you guys?

S1: And somehow you thought we were going to have more than that. This is so embarrassed. I’m one one only had my hair. Well, I mean, I’m the only immigrant on this show. Fair.

S4: Fair. But you’re very well traveled, like, generally speaking, we could say. Right. I don’t even know if I’ve had my hair cut outside New York. Is that right?

S3: Wow. That’s because you told me that. Right. Right. Yeah, I know that I have had a haircut in Michigan. How many states you had your haircut and.

S1: Well, I think cut probably only two. But I’m thinking of, like going to weddings and so they, like, do a lot with your hair. Not sure if it’s actually been cut, but if I had, like, things done to my hair in a salon, then I would before.

S3: OK. Well, my state’s still New York.

S1: I’m still never left the state ever.