There Shouldn’t Be So Many Yachts

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Speaker 1: Hello and welcome to the. There shouldn’t be so many yachts. Episode of Slate Money. Your Guide to the Business and Finance News of the Week. I’m Felix Salmon of Axios. I’m here with Elizabeth Spiers.

Speaker 2: Hello.

Speaker 1: I’m also here with Emily Peck of Axios, who has the controversial opinion that there shouldn’t be so many us.

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Speaker 3: I’m just laying it all out there. Send me your hate mail, yacht lovers.

Speaker 1: Emily is going to come out in this episode and say that there shouldn’t be so many yachts in this segment that we’re going to have on yachts. She’s also going to come out and say that people should get paid more on the segment that we have on pay. So, you know, stay tuned for all of the hot takes. We also have a segment on Amazon which has made another big acquisition of one medical. I’m going to talk about what that means all coming up on sleep money. So let’s start with Amazon. Elizabeth, they made another $4 billion acquisition way more than that. I can’t remember. How much did they spend on one medical point?

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Speaker 2: Either six or nine. My brain on.

Speaker 1: Call it 4 billion ish.

Speaker 2: Yeah.

Speaker 1: Which is, you know, by Amazon’s standards, not that much. But people seem to be really treating this like it’s a big deal. So what happened? And is it a big deal?

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Speaker 2: Well, they bought a company called One Medical, which is a, I think, pretty popular millennial health care company, where you pay a subscription to have what’s essentially concierge medical services. You know, you’re guaranteed to see doctors same day or next day appointments. They have a 24 hour availability for telemedicine. So I will admit, I don’t really understand the strategic intent here by this company. I understand why the company is appealing. So what do you think is going on there?

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Speaker 1: So I think strategically, Amazon has been interested in health care for a while. They bought Pillpack, which was my favorite little piece of industrial design, and everyone was like, Oh my God, they’re going to revolutionize pharmaceutical delivery. And they didn’t. They famously came completely unstuck when they tried to team up with Jp morgan and Berkshire Hathaway to sort of revolutionize internal health care for the thousands of employees. They’re trying to make a push into another push into prescriptions.

Speaker 1: As far as I can make out, it’s not going that well. And this is yet another attempt to get into this absolutely enormous part of the economy. Right. It’s obvious why Amazon is interested in health care, because the amount of money that Americans spend on health care both personally and via their employers is absolutely enormous. And Amazon would love to get a chunk of that, but I’m skeptical that they’re going to succeed.

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Speaker 3: Yeah. So, Felix, to your point, I was reading this morning that health care is a $4 trillion market, which is big, and 20% of the U.S. economy is health care. So I get the bigness.

Speaker 1: It’s a much larger percentage than pretty much any other country in the world and worse health outcomes.

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Speaker 3: Yeah, right. And so it makes sense that Amazon would want to get into it. It doesn’t make sense that people are like Amazon spent $4 billion in a $4 trillion market and it’s going to be revolutionary. Like, No, this is nothing. This company is like a little nothing compared to the overall size and depth of the health care industry in the United States. But because it’s Amazon, we’re like, Oh my God, they’re going to change the world. They’re going to change health care. But health care in the United States is a massive, massive thing. And I don’t think.

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Speaker 1: I have literally the.

Speaker 3: Company.

Speaker 1: Track of the number of companies calling themselves tech companies that have come in and said like, we’re going to rationalize health care and revolutionize health care and disrupt health care. And none of them have succeeded because there’s a gazillion problems, both regulatory and just structural in terms of how it’s set up. And it’s really hard to deal. I mean, my favorite story about the joint venture between JPMorgan and Berkshire Hathaway and Amazon that ended up dissolving after blowing through God knows how many hundreds of millions of dollars is that.

Speaker 1: The main reason it ended up dissolving is the even though they all self-insured and so ultimately paid all of the health care costs for all of their employees directly well, indirectly, I should say. But they paid all of the health care costs of all of their employees. They could never even get data on what they were paying for. They couldn’t even get that. They couldn’t like if you’re a company self insuring, you can’t even get useful data, unlike what exactly did we pay for? And if you can’t get that, you can’t even get off the starting line.

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Speaker 3: Right. I just there’s this bigger picture issue where tech companies think they are disruptors and often they are. And of course, Amazon disrupted books and retail, but tech companies think they can disrupt any industry. And the health care industry in the US is too complicated and nonsensical, honestly, and inefficient and frustrating and cannot simply be revolutionized with a new app. You know what I mean? It’s it’s bigger than that.

Speaker 2: I can sort of get the Pillpack acquisition because it’s it’s a thing that’s contingent upon having supply chain logistics and delivery and that’s, you know, what Amazon does. But when medical is a services company, essentially it’s entirely off line. Like, I just don’t care if they want to be disruptive in health care. I don’t really get the the only tech aspect of one medical is that you just schedule things via an app and you can do telemedicine but otherwise.

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Speaker 1: And also I just don’t think that they’re a particularly disruptive company. Right. I don’t think the Whole Foods acquisition disrupted groceries. I don’t think. Yeah, you remember that when like Kroger shares plunged by 8% upon Amazon’s acquisition of Whole Foods because everyone’s like, Well, this is going to disrupt groceries. Of course it’s not groceries and not going to get disrupted. And guess what? They weren’t disrupted. This is not going to disrupt healthcare. I would say they probably have it penciled out so that it kind of makes sense. And if it doesn’t, it’s only $4 billion and that’s pocket change for Amazon. And then if there’s a small probability that it makes a lot of money, that’s gravy and that’s all they need.

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Speaker 3: There’s one where I feel like I have an idea for how Amazon could help me personally and if it disrupts the health care industry.

Speaker 1: Andy Jassy If you’re listening and.

Speaker 3: It’s really easy and I think I could see it happening super simple, you go to the doctor and they give you a prescription and things have gotten better recently, right? Like you used to give your paper prescription and then you’d go to the drugstore and you wait and it’s like a whole thing, and you’re sick and you don’t want to be there. And now, like, the doctor sends your prescription digitally. So then you go to the pharmacy and you pick it up, right? But if it’s Amazon who’s got a piece of this doctor’s situation, you go to the doctor, the doctor gives you your prescription, and then it just shows up at your house.

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Speaker 1: Well, that they’ve already done that. They’d made the acquisition years ago.

Speaker 3: But are they aligns with all the doctors and the like? Do they have those relationships set up?

Speaker 1: This is the problem, right? Because it’s not the doctor who chooses where you pick up your prescription is you. You tell your doctor, I want my prescription. I want to pick it up between read on and pick it up at my local pharmacy or I want you to send it to Pillpack. And if you tell your doctor I want you to send it to Pillpack, then you’ll get it from Pillpack. It’s just no one does that.

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Speaker 3: Well, I don’t want to. I don’t know from Pillpack, as my grandmother might say, I know from Amazon. So if my doctor’s like, you want to just connect the prescription to your Amazon account, I’d be like, Yes, absolutely. And I know that like I would and maybe people will disagree, but I would trust then Amazon to like manage my monthly prescriptions, handle reordering. Like I feel like that logistics supply chain relationship would be amazing and I can’t believe it’s not already happening.

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Speaker 1: Yeah, I think again, this just goes to show how hard it is to get into this market because they’ve had this for years now. This product has existed and no one has really signed up for it. And the onus, if you’re saying like, I’m going to wait for my doctor to say, would you like Amazon to deliver your prescriptions? Then you’ll be waiting a long time because your doctor really has no incentive to say that.

Speaker 3: Or like could they? Amazon is. I just got a notification from Amazon as we were speaking. Whoa. And they notify me and be like, we see you went to the doctor. Do you want us to do that?

Speaker 1: That would be creepy as fuck.

Speaker 3: I don’t care. I think.

Speaker 2: That would be a violation like.

Speaker 3: That. Yeah, that would be a heck of a fine. It would be a violation. But I mean, it seems like I’m skeptical of this deal and I definitely am. But that is not to say there needs to be a lot of disruption in the health care industry.

Speaker 1: I mean, that the industry is broken. We can we can all agree on that. I mean, every single person in the health care industry can agree on that. There have been lots of attempts to fix it. Honestly, the only way it’s ever going to actually get fixed is via congressional legislation. It’s not going to happen via corporate M&A.

Speaker 1: Yeah, the one thing I will say about one medical that is the thing that jumps out at me about the one medical business model is that it’s kind of the same thing that we’ve been talking about in the real estate industry where residential real estate has been rising in value because it’s not just residential anymore. It’s also your office that a bunch of people are working from home and people are bringing into their like personal PMO a lot of the costs that were previously borne by employers. Right? I’ve been renting space for a desk and that kind of stuff.

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Speaker 1: And this is what’s happening with one medical as well. A lot of one medical business is direct to consumer. It’s individuals signing up for one medical in the same way that individuals are buying their own standing desks to put in their home office. Right. They’re also buying their own one medical subscriptions to get like better health care for themselves. And they’re not just accepting whatever they’re given by their employer.

Speaker 3: Is that right? Because I thought one medical had a lot of deals with employers, like they also deal with Google.

Speaker 1: They also have deals with employers. But I’m just saying that like it’s branded, you know, in a kind of in a way and they do have direct to consumer. And it’ll be interesting to me to see how big the direct to consumer business of one medical is.

Speaker 3: Google has a one medical office on one of its campuses, according to The New York Times. So now Amazon will own that office, which will be at Google, which is sort of fun, kind of maybe they can spy on them or something.

Speaker 1: They’ll find out when they’ll know. All of the medical history if.

Speaker 2: Google definite hit by violation Google.

Speaker 1: Employees. Yeah. If they’re trying to poach one of the Google employees, they’ll like quickly call up their health records and say, nope, you’re too expensive. Health care costs are too high.

Speaker 3: That’s like the privacy advocates nightmare. Oh, and we should say the antitrust there’s. And interest in this deal from an antitrust perspective. Right. A little bit of speculation as to whether or not it’ll be allowed to go through. Ultimately, I think it will be, though.

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Speaker 1: It’s pretty tiny. It’s going to be hard to make the cases anticompetitive.

Speaker 3: Oh, and also, I just wanted to say explicitly that when I think of tech companies disrupting health care, I automatically think of Theranos and what a disaster that was. That’s kind of like my entry point into this topic.

Speaker 1: No matter how bad this deal is, it will turn out better than Theranos.

Speaker 3: Yeah. Yeah. There you go.

Speaker 1: There you go. Look on the upside.

Speaker 1: Talking of tech companies, Emily, you’ve been looking into this whole options loan pricing liability thing. You can explain this.

Speaker 3: This is messed up because Slate Money listeners, I shared an article from the New York Times with Elizabeth and Felix, and I said, I’m not sure I understand this fully, but we should talk about it. And now Felix is like, Please explain exactly how this works. So I will try. There’s a piece from earlier this week in The Times by Erin Griffith about a problem in startup worlds that I think has existed for a long time, but only kind of gets talked about in downturns, which is that employees get stock options that are ostensibly worth a lot, a lot of money, but they can’t do anything with them. So companies, startups who want to keep these employees around, lend them money with the options as collateral and everything is groovy until the value of the options goes down.

Speaker 3: Or as in the case of Bolts, Financial, the payment startup who did this, they laid off a bunch of people who all of a sudden had to pay back those loans after getting fired within 90 days. So that seems pretty outrageous to me, and that’s why I wanted to talk about it with Elizabeth and Felix and get their thoughts.

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Speaker 2: Yeah. There’s also, you know, an aspect to this where there are some companies doing this where they offer non-recourse loans. So if the stock goes down, the employee doesn’t have to pay it back. But loan forgiveness is a taxable event. So in a lot of cases, these employees still have to pay taxes on the value of the loan. So you can get nothing and still have to pay taxes on it, which is astounding.

Speaker 3: Lately I’ve been really thinking about all these employers just need to pay people more money. That’s it. You don’t need to have them borrow money and do that kind of shenanigans. You don’t need to establish an emergency fund for your workers. You just have to pay them enough so that they can live and make some savings. And if you’re having to do all this fancy footwork to get them more money, I think something might be wrong.

Speaker 1: I half agree with you on that one, but then I half want to say, look, the way that people spend money is not even it’s very uneven, especially when people have like major life events of some description or another. You might need a lot of money quite quickly. And the way that startups in particular pay money is also uneven. The idea is that you earn like a okay salary and then at some unknown point, there’s some massive liquidity event and you become rich.

Speaker 1: Right. And often in startups, they achieve a very high valuation before the liquidity event. And when you have one of those situations where you’re working for a startup with a high valuation, your equity is worth a lot of money. You have an immediate need for money because you want to say a down payment on the house or something like that. Then some kind of bridging mechanism to basically sort of like tide you through from your paper wealth to the liquidity event makes a certain amount of sense.

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Speaker 1: Now, I’m not sure the employers are the best provider of that sort of bridging mechanism. But you know, when it comes to things like emergency funds and stuff, the whole point is that not everyone needs a large amount of money right now. And if you do need large amounts of money right now, then getting a 10% raise rather than the 5% raise is not actually going to help you. What you need is a large amount of money right now, so having mechanisms to be able to give access to a large amount of money to people who really need it, I think makes sense. But I agree with you that there are all manner of problems with employers loaning their employees money, even though back in the good old days and we’ve talked about this on state money in the past, the idea of going up to your employer and saying, listen, can I have an advance on my paycheck was a good thing that people could do that.

Speaker 2: I didn’t get the sense from the piece, though, that that was really the intention of why employers are offering this. It seems more like it’s an incentive for particularly early stage start ups where employees just don’t find stock options as attractive a benefit anymore like they I’ve seen. Too much to go wrong in the economy. And so it’s a way of saying, you know, if you’re worried that your options are going to be worthless or you don’t want to stick around at this company until we we have an IPO, there is some short term opportunity for you to make money from whatever you’re taking in stock options.

Speaker 1: Elizabeth, can you explain that? Because I kind of missed this in the article and maybe you can explain it. If I’m worried that my options are going to be worthless, then surely borrowing against them is a really bad idea. Right.

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Speaker 2: Options are like a lottery ticket. You know, if you’re the kind of person who’s going to your tech company, you sort of understand that now in a way that I think during the first dot com boom, people thought of it more as, you know, an anonymous guaranteed payday. Now, I think people are more skeptical. So I think it’s an incentive for recruitment.

Speaker 1: Slow down. I mean, I’m trying to you’ve got a bunch of different things going on here. I understand how options are, like an incentive for recruiting people. I have the opportunity, not necessarily a probability, but the opportunity. They could be worth a lot of money in the future. So that’s like a nice little sprinkling on top of the package. When I’m getting recruited, then I’m at the company. I have a bunch of the options and I think that there’s a pretty good chance. I’ve always thought there’s a pretty good chance they’re going to end up being worthless. I have not changed my mind on that. I still think there’s a pretty good chance that they’re going to end up being worthless. Explain to me how borrowing money against options that might end up being worthless makes sense at all.

Speaker 2: Because it’s a short term advantage that you have if you want to buy a house or something, you know, and you may not be eligible to do that through normal channels. So so.

Speaker 1: It is the.

Speaker 2: Short term games versus long term gains.

Speaker 1: But it’s not a gain, right? It’s a liability. You’re just borrowing money and not gaining anything in terms of your in terms of your net worth is going down.

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Speaker 2: Yeah, but I think it’s just not entirely about net worth. It’s also about whether you can buy a house in your twenties or buy one in your thirties and forties.

Speaker 1: Right. So, so basically it comes back to what I was talking about, which was those one off large purchases. Oh, yeah.

Speaker 2: But I thought you were sort of framing it as we’re doing this because we care about our employees and then if they have an emergency, they can borrow.

Speaker 1: It doesn’t need to be an emergency. I was just saying like a need for like a large amount of money.

Speaker 3: One thing that I think about with the stock options as part of your salary package is it leads to kind of discriminatory hiring for the startup because only certain kinds of people can take the trade off for a lower salary versus like the lotto ticket of the stock options. Right. Like maybe parents probably in older workers aren’t going to do it as much as younger workers who are like prepared to take that gamble. The other way, I think options can be discriminatory. And we’ve seen some of this and I think I’ve mentioned on the show before, is that men tend to get bigger option rewards than women for whatever reason. And it’s hard to rectify because it’s pretty black boxy. Is that a term people say black boxy? It’s problematic. I think we.

Speaker 2: All understand the meaning.

Speaker 2: So there’s it’s also I was thinking the history of stock options is that they came into vogue in the sixties and the idea was that you would align employee incentives with the incentives of the company. And my dad worked for Southern Company for close to 40 years, and so he had a lot of stock options there. And the company would match investments in corporate stock options like 3 to 1.

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Speaker 1: And options so into the stock, because I thought options were like, all right.

Speaker 2: Yeah, I think options became a thing in the late sixties. I could be wrong. Like, I think well, I’m sure plenty of readers will email us with deep context. But you know, one of the things that happened with my dad’s accounts, there was a period where energy companies, stock prices were just tanking and so many people who were employed by them had these matching funds where a lot of their wealth was tied up in the corporate stock. And then if the company performed badly, that would really affect people. And so the similar dynamic here, but the intent was always that you just are aligning incentives.

Speaker 1: Isn’t the whole point of matching the stock that you do that alignment of incentives and yeah, if the company does badly, then you do badly. And if the company does well, then you do well and you’re saying, well, then the company that was this point where the company was doing badly and they did badly. And you’re saying that’s a bug rather than the feature?

Speaker 2: I think it’s a bug for workers. The incentives. Yeah. I go back to what Emily said, which is just pay people more when you incentivize people who are here, first of all, most of the time not financially savvy enough to choose individual equities as a part of their overall wealth plan, and you incentivize them to triple down on the company’s stock specifically instead of putting that money elsewhere. I understand the intent of it, which I think is. Good. It is about instead of alignment, but you’re basically incentivizing your employees to put an disproportional amount of their wealth into one stock, which we all know. The basic personal finance advice is not a good idea.

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Speaker 1: To be clear, it’s the worst possible stock to put your wealth into. Like literally any stock would be better than your employer’s stock because you are already massively exposed to your employer. Right? If your employer does badly, then there’s a good chance you get laid off at exactly the same time that your stock goes down. You have way too much correlation there. So you want to diversify away from your employer’s stock as much as possible rather than into your employer’s stock.

Speaker 3: Yeah. You’re already taking a gamble by working for this company. You don’t need to double down on that. And I was going to say that the classic example of this strategy going horribly wrong was Enron in the early part of the century, right. Where employees had Enron stock in their retirement accounts. Their retirement accounts were company stock. And that is just. Do I need to explain why that’s a bad idea? I mean, so then when Enron collapsed, because it turned out to be a big scam, all these regular Janes and Joes lost their retirement accounts was terrible. That’s not really what’s happening with these stock options or loans. These employees probably have very different retirement accounts. So it is different.

Speaker 1: There’s a couple of other things going on in this particular case, though, which is that there was this move away from public company, share incentives to private company share incentives. And that was a really big move. And what we’re talking about in this case is people whose options are vested in a private company. And because it’s a private company, you can’t sell those options. And in general, equity in private companies is just however problematic it is in public companies.

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Speaker 1: It becomes even more problematic in private companies for exactly the reasons we’re talking about. For instance, when you leave a company, you can borrow money or you don’t even need to borrow money. You can just buy stock at whatever the option price is. You wind up having to pay a bunch of tax when you do that. On the difference between the option price and the sort of understood value of the stock. Often you wind up borrowing money to pay that. Thanks, Bill. And then if the stock goes down to zero, you wind up basically having borrowed money to pay taxes on the bonds, the stock that’s worth now worthless.

Speaker 1: So private company stock is just a super risky thing. And people didn’t used to worry about it as much as they do now because companies went public relatively quickly. But now we’re in this world where private companies and VC backed companies can stay private for ten, 15, 20 years. You know, you look at a company like no stripe, they’re in no hurry to go public. Everyone has stock options and like, what are we going to do with this? And it becomes a real problem that no one’s really solved.

Speaker 3: Just pay them more.

Speaker 3: And I think maybe there’s also unrealistic expectations for people who take those jobs, too, because they saw like, I don’t know what happened to Facebook employees or or Google or, you know, there’s like legendary stories of people becoming overnight millionaires. Right. So is there a little bit of that, too, going on with Facebook?

Speaker 1: It actually works pretty well. Facebook was the last company where there was actually a relatively liquid secondary market in pre-IPO stock. And if you’re a Facebook employee, there were regular auctions of stock where you could sell your vested stock to people who wanted to buy it and or you wanted to sell it. And that was like baring prices. You know, there was this whole company called Second Market, which made a lot of money from conducting these auctions and in Facebook stock. But then after Facebook companies stopped giving out equity to their employees like Facebook did, and started giving like non-equity equity to their employees that either refused restricted share units or options. And when you have these rescues and these options, these auctions become much more difficult. The company has much more control over who can buy and sell and how they can buy and sell.

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Speaker 1: And basically, since Facebook, we’ve not really seen anyone conduct these auction, these kind of auctions very often. And it just becomes much, much harder to get liquidity for employees. And I would love to see many more of those like internal stock auctions, because I think they’re super helpful.

Speaker 3: Can you explain the difference between the Facebook employee shares and options and rescues in a way that is fast and makes sense? Because I don’t I feel like I don’t understand what the difference is, actually.

Speaker 1: So if you buy shares on the stock market, if you fire up your Charles Schwab account and buy a share of Google, and that’s one common stock of Google. That is a stock, you own it. You can do what you like with it. If you ever want to sell it, you can just fire up Charles Schwab account and sell it. Right? If Google. Gave stock to its employees. It would be like that. They would just get Google stock. And then when the when they wanted money, they could just sell the stock. And there’s any number of people out there willing to buy the stock.

Speaker 1: If you’re the private company and you have stock, it’s a little bit harder. You can’t just sell the stock on the stock exchange because it’s not listed on the stock exchange. But you can create like a mini parallel stock exchange which only operates one day a quarter or something like that. And there’s an auction one day a quarter, and then on that one day you can decide to sell a bunch of stock. And whatever the clearing price is in the auction, you can sell for that price. And that’s stock which you can do that with. The problem with like was I stock shadow stock restricted stock units, stock options, all of that kind of thing is that it’s it doesn’t work that way. It’s like an obligation of the company to give you stock at some point in the future, but it’s not actually stock in your pocket today.

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Speaker 3: So with our restricted stock units, that’s like a promise to give you a certain amount of stock in the future. And with options, it’s like you have an option to buy the stock if you want to sell at this specific, ideally cheaper price than it will be worth in the future.

Speaker 1: Exactly.

Speaker 3: That’s all so annoying. Just, again, just pay people more. Come on.

Speaker 1: Elizabeth, let’s talk about yours. You’re reading The New Yorker this week and read a long article about yachts.

Speaker 2: Yes, I love this story. This is a piece of The New Yorker by Evan Osnos titled The Yachts and the Have Yachts.

Speaker 1: That haven’t have yachts.

Speaker 3: That haven’t having the have yachts, the haves and the have yachts.

Speaker 1: The haves and the have nots. Yeah, we are we are the haves. We are not the have yachts. None of us have a yacht.

Speaker 2: I have to tell you this one little story. I met one of my best friends close to 20 years ago because we were at a book party and we were sitting across from Candace Bushnell, the author of Sex and the City. And she started giving us a little bit of a speech about why, you know, it’s important for women to be financially independent even if they don’t work, which I completely agree with. But she sort of went on a tangent about building wealth generally. By the time I left, she had my friend Sloan by the shoulders and she was saying, You want a yacht, don’t you just admit it. You want a yacht? And I’m just like, Well, I don’t really like boating. And we became friends after we emailed each other about that the next day.

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Speaker 1: So after having read this article, have you changed your mind about whether the desire for yachts has anything to do with boating?

Speaker 2: Well, I sort of understand the appeal now. Like I always thought, you know, I’m not into boating. To me, it seems slightly ridiculous that extremely wealthy people would pay absurd amounts of money for what’s essentially confinement at sea. But they do it in part because they’re sovereignty issues. They like the idea of being able to live anywhere.

Speaker 2: And I think that the article really makes clear is that it’s partly about the ostentatious level of service that you can get on a yacht. You can have 50 staffers taking care of five people. And it doesn’t seem weird on a yacht in the way that it would seem weird if you were doing it in your house. That’s the thing. The article keeps driving home. And so it it had incredible examples of this, you know, yachts that are big enough that they have a submarine bay in the bottom and double decker cinema and people who are just there to meet any conceivable, not even need but desire you have. So it sort of allows for a level of conspicuous consumption that apparently you can’t have on land.

Speaker 1: Or more to the point, inconspicuous consumption. Right. Because as Oprah says, whatever happens on the yacht stays on the line. There’s a lot of this kind of thing that we only find out by reading New Yorker articles. I think owning some big mansion at the top of a hill is much more conspicuous than owning a yacht that very few people will ever see.

Speaker 2: That can be true. I mean, but one other thing that the peace talks about is how adamantly the yacht owners want the other young owners to see them. Like there’s a big if you go to Monaco and you need a berth in one of the popular areas for docking your yacht. Osnos interviewed a woman who is responsible for deciding who gets to be placed where, and he talks to her about the extent to which she’s been screamed at by billionaires, about which berth they get and how the yachts are actually displayed. And apparently, if you have a secret, you want the art to be displayed in a way so that you can see it from the side and you understand how big it is.

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Speaker 1: I feel like Monaco is possibly exceptional when it comes to this because Monaco is basically just home for Russians these days, and the Russians like to show off probably more than most yacht owners. But yeah, I think that’s definitely true. And in Monaco, the thing that struck me about this article was the idea that if you have $550 Million on some weird level makes sense to spend $500 million on a yacht and $50 million on a house, whereas spending $500 million on the house just doesn’t make sense because you just wind up in this enormous palace. And what are you going to do with all of that square footage that you can somehow get value out of your marginal extra dollar in yachts? You can get that extra ten feet of yacht that somehow serves you because you get that cinema or submarine or whatever it is in a way that the 200,000,000th dollar doesn’t really get you any extra value in the house.

Speaker 3: Well, that’s that’s important, I guess, to think about.

Speaker 2: Yeah. It’s also with the Russians, apparently it’s a status anxiety thing, like there’s a yacht maker who’s interviewed in the piece and they say that with the Russian buyers, it became fashionable to have very small yachts for way more money. They would do.

Speaker 1: That. Well, that’s the sailing yachts, right? If you want like a smaller, very expensive yacht, then you got a sailing yacht, which is the super weird corner of the whole world.

Speaker 3: The staffing thing that Elizabeth was talking about that really struck me because apparently there’s regulations around how many passengers you can have on a yacht, but then the limits don’t apply to crew. So this one fellow says in the story, you know, you might have like 12 guests and then 50 crew members looking after them or level of service you cannot contemplate until you’ve been fortunate enough to experience it. So that’s like four service. Per person, I guess. And then this guy says later, boats are the last place you can get away with that kind of ratio. And it did kind of strike me as very like.

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Speaker 1: So Emily as is the most sort of anthropologically minded of the three of us. Can you explain this to me? What is it about a very high staff to billionaire ratio that makes it weirdly unacceptable or unthinkable on land? How is it like when billionaires are perfectly happy to spend insane amounts of money on paintings or on yachts or on private islands or on Twitter or whatever they happen to come up with this week that they want to spend billions of dollars on. Like spending all of that money on having 47 servants in their house is like beyond the pale. And they wouldn’t do it.

Speaker 3: It just reeks of I mean, there’s no way you’re paying them fairly. That would be like the first thing I’m assuming if you have 50 servants on a boat, like how much are they making? They’re not all making like the median wage or something.

Speaker 1: Why is it different if they’re on a boat?

Speaker 3: I think you can get away with it on the boat for the reasons you were saying before, because no one can see what you’re doing on the water.

Speaker 2: There’s a thing that’s kind of alluded to in the piece is that when people are on the boat, they think they’re in some kind of alternate universe where behavior is like it’s just somehow acceptable in a way it’s not when you’re running around in real life with you’re, by the way, already gargantuan house, but you can do things that would seem excessive because somehow like.

Speaker 3: Putting doesn’t count in.

Speaker 2: A different environment. Like it’s like.

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Speaker 1: A floating Las Vegas. Like money stops having any immediate meaning. Also, I think there’s a couple of other things going on. One is the boats, by their nature, require a bunch of stuffing, you know, just in order to make sure they go forwards and backwards and can dock in the right place at the right time. You need a bunch of stuff just to maintain the boat. So there’s a minimum level of stuffing you need anyway. And once you have that relatively large minimum level of stuffing, then at that point, the marginal extra cost of having a bunch of extra partners seems relatively small.

Speaker 2: Yeah, this is also, by the way, an issue for the super yachts that have been seized because they’re Russian. Now the US is having to pay for maintenance of those boats until, you know, decide what to do with them. And it costs approximately $171,000 a day to maintain most of those yachts that we have and that we’ve detained.

Speaker 1: Yeah. So one of the fascinating things about this is that if you own a yacht, then obviously while you’re on it, you’re paying that whole payroll, but you’re not really paying that whole payroll 52 weeks a year because you’re not on the yacht 52 weeks a year. And one of two things happens that the majority of the year that you’re not actually on the yacht, which is either those stuff is basically get furloughed and are being paid by you or more likely you rent out the yacht and someone else pays for those stuffies and you actually make a little bit of a profit on it. So you can almost start considering your yacht to be a profit center on some weird fucked up level.

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Speaker 2: With that undermined the status of it that your air being being out your yacht like.

Speaker 1: Not know it is generally understood if you’re renting a yacht you get all of the status that is associated with that yacht.

Speaker 3: I feel like in a more democratic world there would be far fewer yachts. The fact that. The story. The story.

Speaker 1: Thank you, Emily, for that insight.

Speaker 3: That’s what they pay me the big bucks for. Yeah, no. The fact that the story has a start on the explosion in yachts is a it’s like a sign of the end times a little bit. There shouldn’t be so many yachts or billionaires.

Speaker 2: There is one yacht maker said something like, If people understood the level of service that you get on these things, they’d bring back the guillotine.

Speaker 3: Yeah, that’s why people love. I mean, I think there’s been a lot of gleeful reporting on the yacht seizures. Right? I mean, I feel like I get a newsletter about yacht seizures. People like this very much that I’m.

Speaker 2: Going to feel about it. I’ll admit it.

Speaker 1: Numbers round. Emily, do you have a number?

Speaker 3: Hmm. Yes, my number is $4.49. That is the average price of a gallon of gas this week, down from the highs of $5 last month where everyone lost their minds and had a conniption. Gas prices have come back down and I don’t know what to say about it. Oh, I’ll say this. I’ll say that I’m relatively still a new driver. I know I talked about my heated car seat thing last week, but I’m still relatively new to the driving life. And it is kind of remarkable how the gas prices going down this month have been really noticeable. And it is a kind of calming thing when you see the price come down. I do feel a little better when I see it, when I go to fill up my car and it’s below five again. Mentally, it’s good.

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Speaker 1: My number is 270 million, which is the number of dollars that Twitter contrived to lose in the second quarter. Yet Twitter came out with its quarterly earnings on Friday, and it was a loss, and it wasn’t a small loss either. It was a pretty substantial loss of $270 million. We had snap earnings this week and they were also terrible. And SNAP is now trading well below its IPO price. I think it’s $12 a share and change something like that right now.

Speaker 1: My rule of thumb is that the Twitter share price and the snap share price have been following each other almost exactly before the Elon Musk takeover came in. And the if there was no takeover bid, then the Twitter share price would probably be expected to be roughly where the Snapchat prices and this earnings report from Twitter certainly would seem to indicate that the share price has a lot further to fall if the takeover bid, for whatever reason, goes away. Twitter is not in good shape right now.

Speaker 3: What? Felix, I think you lost me. Are you saying Twitter lost $270 million, but it would have lost more?

Speaker 1: I’m saying Twitter lost $220 million. And if it was trading on the basis of its quarterly earnings, its share price would be like half what it is right now.

Speaker 3: So would have been even worse.

Speaker 1: No, no, the earnings would have been the same. I’m saying keep the earnings constant. The share price would be much worse.

Speaker 3: Okay.

Speaker 2: Elizabeth, main numbers, two numbers, 19% and 35%. And this comes from a New York Times story about women cashing out their IRAs and their retirement funds, basically for emergency reasons or to help people in their families. So as a function of that, women are less secure retirement wise. What are the numbers? Yeah. So I’m sorry, 19% of women think that they have enough money to retire and 35% of men do. And that’s a function of women being more expected to cash out their retirement funds if there’s an emergency or somebody needs help or more willing to do it. The article really wasn’t clear about which one it was, but I.

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Speaker 1: Feel like that’s two different things that insofar as women don’t have enough money to retire, it’s not really because they’ve cashed out retirement funds. It’s because their time and funds were never sufficient in the first place. And I think that’s the same for men. The cashing out thing might be true, but it’s a little bit well, they’re going to like I feel like if women cashed out exactly 0% of that retirement funds, that number wouldn’t be very different.

Speaker 2: Yeah, it could be that. I think the article definitely implies that there’s a correlation, but that’s probably true as well.

Speaker 3: That’s definitely true. I mean, if you look at the Social Security numbers, when women retire, their Social Security payments monthly are lower overall than men’s because women take longer breaks from the workforce over the lifetime of their careers and are paid less. So both combined means that overall they have lower retirement savings. And then it sounds like there’s this new complication where they’re taking from that money as well, which would totally make sense. And it’s yeah, that would make it worse.

Speaker 2: Yeah. The way that the article framed it was women’s retirement funds are often considered discretionary funds, especially if they’re partnered up. So when an emergency happens, women are more expected to draw down from their retirement funds than men.

Speaker 3: Oh. Oh, I make like you don’t need this, honey. It’s just your it’s just your play money. You don’t really need it, right? We can take it.

Speaker 2: You don’t really earn it or work for it. It’s fine.

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Speaker 1: We’re going to have to have some happier numbers next week.

Speaker 3: The gas numbers, there’s good news. I don’t know how long it will last.

Speaker 1: So let’s just take a moment to reflect on the downward move of gas prices and how much happier Emily is when she fills up a tank. These days, it doesn’t cost as much as it did a month ago. Well done, Emily.

Speaker 3: Thank you.

Speaker 1: I wonder how much gasoline you burn just heating your car seat on which. No, I think we’ll wrap it up for this week. Thanks so much for listening to Silly Money. Thanks so much for Jessamine Molli and Keeping Them Honest and producing and keep the emails coming. We are on slate money and slate dot com. We will be back next week with even more slate money.

Speaker 1: Emily, you had an idea for a sleep last segment.

Speaker 3: Yeah. Lots of it.

Speaker 1: What was it?

Speaker 3: My idea was that we would take this time in sleep, sleepless to complain about how Instagram and Facebook are the worst now and how Facebook now meta has ruined these platforms by trying to make them more like TikTok. We already know that was happening with Instagram. And just this week Meta announced that it was going to tweak the Facebook app. So it looks again more like Tik Tok. So fewer updates from friends and family and more like random short videos. They call them reels from people you don’t know saying crazy.

Speaker 1: This is this is the thing that makes me feel very old. Yeah, I am clearly not the target audience for Facebook. Well, I’m not because I haven’t opened it in years. But in my mind, there were always different social networks for different purposes. You’d use Twitter, for one thing, you’d use Instagram for something completely different. You’ve used Tik Tok for something completely different, and Facebook seems to be just steamrolling all of this shit. Like, you know, you do Snapchat for something completely different and they had their own distinct identities. And what Facebook is doing is it’s just trying to be all of those things at once.

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Speaker 1: I don’t think this makes a lot of strategic sense, but then again, I am old, so maybe it does younger people, but at least for me, Facebook has never been and should never be a place where you are scrolling through vertical format videos that make noise, right? That like Snapchat and Tik Tok are the social networks that make noise like Twitter and Instagram shouldn’t make noise, and you can scroll through them in contexts where you don’t have headphones on and don’t want to be making noise. And if suddenly everything is making noise, if Twitter is full of noise, making videos and Instagram is full of noise, making videos and Facebook is full of noise making videos, I feel there’s a gap in the market to that point. For a social network, you can just scroll through and read things or look at, Yeah.

Speaker 2: I think Facebook historically is actually kind of bad at innovation. You know, their business strategy seems to be copycatting everything that competitors do. And right now they’re in a hard place where the younger people are kind of fleeing Facebook for these other platforms. I began to think of Facebook in my other job we’ve done targeting for political candidates, and the sort of feedback you get from their data system is that most of the people looking at ads are Gen-Xers and Baby Boomers. And so I think part of their anxiety around this is just they don’t know how to make a product that works for the younger people now. And all the Youngs are on TikTok.

Speaker 1: But as a Gen Xer, there is no one interested in making a social network for me. Or is that just Twitter?

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Speaker 2: I think that’s just Twitter. That’s great. I think that’s great.

Speaker 1: But Ellen, as my fellow Gen Xer, if you wind up buying Twitter, just remember you’re doing it for us. It’s the only social network we have left.

Speaker 3: But yeah, marketers really don’t like old people that much. That’s my understanding. They want the young people, like young being under 35.

Speaker 1: I think the lifetime value of a 50 year old has to be lower than the lifetime value of a 20 year old. Now, not any company will ever last that long these days anyway.

Speaker 3: But can we just talk for another just half second about Instagram becoming just an it just.

Speaker 1: So is there any difference now between Facebook and Instagram once these changes are made? I don’t think it’s even a difference.

Speaker 3: I don’t think there will be much of a difference because because.

Speaker 1: All of the reels in the stories and stuff are being imported into Facebook from Instagram. So yeah. Yeah. Well, I will say that this is actually you know what I think this is I think this is an anti antitrust move that they are integrating Instagram and Facebook to the point at which they cannot divest Instagram anymore, even if Lina Khan comes along and tells, I.

Speaker 3: Don’t understand because I thought Instagram was like their cash cow. Like those ads on Instagram were so appealing and they did really well. And now when you go and when you go on Instagram now and this sounds like a crazy complaint, but it’s like, I don’t even know where the ads are anymore. I can’t even look at the ads. It’s just like moms with really nice kitchens from the Midwest, like giving me diet tips and stuff. Like, I don’t want that. And from what I’ve read and I don’t cover this company very closely that every article be like, and that’s been a great strategy for them. But I don’t actually understand how moving to the reels and to Tic TAC is a better strategy than showing people ads that get clicked on a lot.

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Speaker 1: I think marketers pay more for moving ads with sound, so if you can persuade, if you can get people into the habit of watching videos with sound, then that makes it more likely they’re going to watch an ad that’s a video with sound and that gets the big bucks.

Speaker 3: So it’s commercials. They’ve invented TV commercials.

Speaker 1: They’ve invented TV commercials, but they’ve invented TV. Commercials that are very low budget and designed to look like a selfie reel.

Speaker 3: Okay.

Speaker 1: Yeah. Innovation, baby. All right. That’s Facebook for you.