37.8% Scammier

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S1: Hello and welcome to the 37.8% scammy episode of Slate Money. Your Guide to the Business and Finance News of the Week. I’m Felix Salmon of Axios. Emily Peck is also from Axios. Hello. We’re here with Elizabeth Spiers. All. And we are going to talk about opacity in the auction market. Clearly the biggest and most important business and finance news of the week. But no, seriously, we. We are going to talk about that. But we are going to really talk about the Fed, the 50 basis point rate hike, the Roe v Wade decision, what it means for business. It’s the meaty one. And we also have, I’m sorry to say, a little bit more about Twitter in Slate first, because apparently we just can’t get away from it. I’m sorry. It’s all coming up on Slate. Money. So lots of news out of Washington this week seems to be the locus of everything going on. We should probably start with the Fed, which raised interest rates by 50 basis points for the first time in over 20 years. Like it’s quite common in an economic emergency for the Fed to cut by more than a quarter point, but to raise by more than a quarter point kind of makes it feel like we’re in an emergency situation and there is even talk that the next hike might be three quarters of a point and that would be, you know, mind blown, you know. So, Elizabeth, are we in an emergency? Is the Fed trying to put out a blazing six alarm fire right here? Is that the message that they’re sending? Yeah, I.

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S2: Think they’re they’re being more aggressive because they feel like, you know, the markets are responding. Stock market rallied a little bit after the announcement and it seems like it’s just validating. Jay Powell strategy.

S1: Unpack that a little bit. Explain. The stock market went up.

S2: I should say it also went down on the jobs report.

S1: The following day. So so we should also mention that the stock market has been all over the show this week. It went up a lot on. Wednesday. It went down on Thursday. Who knows what it did on Friday? There have been a lot of things driving the stock market this week. The Fed decision being one of them. But weirdly, the Fed decision itself didn’t move stocks. When the decision came out, the market didn’t move. The thing that moved the stocks was the press release, the press conference, which happened late half an hour later when Jay Powell seemed a little bit maybe a little bit more dovish than people had expected. And then on Thursday, we had another huge interest rate move, but this time from the Bank of England, which raised interest rates by 100 basis points, you thought 50 was big. The you know, the B B came out with 100. And then everyone said, wow, like, you know, if England is on fire and is having to raise rates by 100 basis points, then clearly, you know, the Americans are behind the curve and they’re going to have to get even more aggressive. And stocks went down. The jobs report came out on Friday. Yes, but a busy week man. And the jobs report showed that maybe there’s less inflationary pressure than we thought, like the wage growth is slowing. I think in general, if you want to understand what’s happening with the stock market, we are back in what you might call the normal mode of we like it when the Fed is a bit looser and we don’t like it when the Fed is a bit and when we think the Fed is going to be tight, we go down and we think the Fed is going to be loose. We go. Would you buy that, Emily?

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S3: Yeah. Even pulling back even more, I think we’re in a period of just extreme. I hate to say it. Uncertainty. We’re in uncharted territory. We’ve never really lived through inflation like this before. Or at least people our age and lower. And I think, yes, people are aren’t going to like the stock market’s not going to like when the Fed tightens. And that makes sense. And the stock market liked it when Jay Powell said we won’t do a 75 basis point increase. That’s like not in the cards. And everyone got excited about that, I guess. But I think the bigger picture is just like no one really knows if what the Fed is doing is going to work on inflation, like there are these little signs that it probably will, like the jobs report on Friday and the stock market kind of falling, but no one knows. No one’s lived through this before the playbook is.

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S1: So I think I think.

S3: That’s being written.

S1: Again, like zooming out even more. And I wrote about this a little bit on Thursday in my newsletter, zooming out. If you zoom out even more, I think there’s actually quite a lot of optimism in the market. And you can see that. You can see reasons for that optimism in the slow wage growth and the jobs report on Friday. But just the zoom way the hell out. And don’t look at how much the market is falling. They’ll look at the first derivative. Just look at the actual level of the stock market. The stock market is super high. It is trading at very, very healthy levels. And is pricing in basically a healthy economy with decent growth and not crazy inflation and good earnings and everything being relatively nice is trading on the price earnings ratio of about 17, which is pretty healthy. It’s way up from where it was before the pandemic. So, you know, if people were actually worried about late, you know, high inflation is going to force the Fed to cause a recession, then the economy is going to shrink and things are going to be really bad. I think stocks would be much lower than they are right now.

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S2: So you think we are going to have a soft landing then?

S1: I think the market thinks we’re going to have a soft landing.

S3: If you look at all the charts, it does kind of feel like and this is very basic, but like we had a healthy economy, then we had an insane pandemic that turned literally everything upside down, inside out and backwards. And literally I am backwards now. I am literally backwards and and everything went kind of bananas, including the stock market, including the economy. The chart went up and now it’s coming back down like, you know, things are getting back to normal.

S2: Yeah. I also think we can’t really compare potential recession here to prior recessions because they’re not going through boom and bust cycles. It’s a, you know, just completely different scenario with variables that we’ve never really had, including the pandemic.

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S1: So yeah, there’s a bunch of there’s a bunch of huge unknowns, but in terms of things going up and then going down, the thing which we should mention is the tech stocks and especially like the pandemic stocks, there’s a bunch of sort of Peloton and Zoom and even. Alex. But what we saw on Thursday was, was big declines in the likes of Apple and Facebook and all of these tech stocks that had been the drivers of the market. And the reason why the American market had so outperformed all other markets was basically because we had these tech giants and the tech giants was doing really well. They are the ones falling the most. They’re falling much more than the market as a whole. They’re coming back down much more quickly. And I think that’s really just, you know, again, it’s not necessarily a bad sign. What it is, is the tech stocks are the stocks that everyone expects to have the highest earnings way, way out in the future. And when you have a normal interest rate environment, which we’re moving towards earnings way, way out in the future, adjust worth a lot less than they used to be. And so the stock price comes down. And it’s not just the stock price. It is. It’s the bond price. Okay. This is basic, you know, discounted cash flow stuff. You know, Elizabeth used to do this for a living, if you can explain it.

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S3: Can you explain it? Because Felix also explained this in a Slack channel at work. And I was also like, do I understand this? And I might not understand.

S2: It’s just sort of the way that you value the price of a company is looking at all the accumulated cash flows over a period of time and then discounting back to.

S1: The discount rate.

S2: Which, by the way, nobody uses this for valuation anymore.

S1: But basically, let’s say that you use a discount rate of 10%, right? Then, you know, you can a dollar today is worth a dollar a dollar in a year’s time. It’s worth $0.90 because you’re taking that dollar in a year’s time, you’re discounting it by 10%. A dollar in two years time will be worth like $0.80. So, you know, $0.81 or something, you know, something like that. And so the further you go out, the lower that the less that dollar is worth. If you are in a zero interest rate environment where, you know, interest rates are basically more or less at zero going out as far as the eye can see, then a dollar in 30 years time is still worth a dollar. And so you can just add up all of those dollars way out into the future for infinity and get any valuation you like. But the minute you have the reality of positive interest rates constraining you the valuations, I mean, look at the valuation of what happened to Rivian, right? Which is this electric truck company. The stock is down like 90%, something like that. Not because people are less excited about Rivian as a company necessarily, because, you know, it’s come out with this truck. Everyone likes the truck. It’s still think people still think they’re going to make lots of great trucks that people are going to want to buy. But that’s going to be far in the future. They’re not making a lot of trucks right now. And and the value of those future trucks is just right. Gone down quite a lot when you can turn around and just buy a ten year Treasury bond instead and get a risk free return and like, isn’t that a little bit more attractive?

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S3: Okay. Now, I understand when you say interest rates are higher, therefore that money is worth less. I get confused, but it’s because inflation is higher.

S1: No, it’s nothing to do with inflation. It’s just interest rates. It’s like interest rates of the cost of money. And so if money is is more expensive than. You have to pay more for that. And you’re basically, you know, the money in the future is worth less because you have to pay more for it now.

S3: That explanation explains why VCs are upset right now and startups are laying off workers, and that’s all kind of looking bad.

S1: What’s happening in the VC world is, yeah, this is hurting early stage valuations a lot, right? Because the idea of a young company, which is just on it’s seed round or a series or something, it’s not really expecting to make any profits for another five, ten years. And VCs used to not worry about that because profits in five or ten years were worth just as much as profits today, if not more. Because you had nothing to do with profits today, you’d be like, I’m in a negative interest rate environment where I’m into profits today. I should put it all into like loss making companies and hope to make profits in ten years. Now we’re in a positive interest rate environment. Those profits in five or ten years, which are uncertain, are just worth much less to people than they used to be. And so valuations for early stage companies are coming down. When valuations come down, they don’t want to do a down round because Silicon Valley is crazy. And so what that means is they have to lay off people instead because they’re suddenly like saying, oh, shit, we’re not going to be able to raise another round of money any time soon because we got such a high valuation last time. We’re going to have to make the money that we’ve already got in the bank last for much longer than we thought we would have to make it last. And so that would explain the layoffs. Again.

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S3: The one other thing I’ve been thinking about with the with the Fed and how everything has changed is we’re in a period now where there are all these real things happening that that monetary policy really can’t do anything about, like war, supply chain, stuff like that. That affects inflation and means monetary policy can’t solve all our problems like it kind of did for a long time. And that feels interesting.

S1: And I’m not sure that monetary policy solved all our problems. Like, I think if you look back at the pandemic and the way that we bounced back so strongly from the recession, from the deep recession of April 2020, the reason for that was fiscal policy. It was not monetary policy. And monetary and fiscal policy actually probably should shoulder more of the blame for inflation than monetary policy does. Really, the you know, it was the $5 trillion of fiscal stimulus that caused both the rebound and whatever inflation. We’re seeing much more than zero interest rates because interest rates have been more or less zero for 14 years now. So I’m not you know, the Fed is doing what it can and Jay Powell is doing a very good job of saying like, it’s my job to bring down inflation and I’m not going to count on the government. But yeah, I think I think there is a limit to how much the Fed can actually do and the government could help. You know, there are still a lot of Trump era tariffs out there which are making imports more expensive than they need to be. And if you lifted or got rid of a bunch of those tariffs, that would bring the price down. If a bunch of goods and lower prices means less inflation.

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S3: You could also do some more immigration and stop so we wouldn’t have such a labor shortage anymore. That seems that.

S1: Would be awesome. Let’s, let’s let’s import a few million Ukrainian refugees and put them to work.

S3: Yeah.

S1: But that’s not the only news coming out of Washington this week. We also had the leak of a major decision from the Supreme Court. Emily, this is your wheelhouse. Give us the lowdown.

S3: Well, I’m sure our listeners know what happened. Someone, a mysterious person. And, you know, I’ve read every article speculating on who the leaker is. Leaked a draft opinion in this Mississippi abortion case. The opinion was. TLDR Overturned Roe v Wade and it was written by Samuel Alito. And it’s really was the news of the week, if not the year, if not the past 50 years, if you ask me. We’re not here to talk about the politics, though. Probably we will a little because we have Elizabeth we can’t. But what I have what I was looking at this week for Axios was kind of the the company response because in in our year 2022, companies are kind of expected now to respond to social and political issues. And we saw with Russia, Ukraine, that company is kind of like hop to it and sort of maybe I’m not the kind of easy choice honestly to take a side in that issue. And abortion is not. Companies are not having it easy with this one or like there was a story out Friday morning that showed a PR firm advising companies to do absolutely nothing until something was decided because this is like a quote unquote 5050 issue. A few more like liberal companies put out statements like Levi’s, put out a statement and said, you know, we support reproductive rights and women and all this, but it’s become this very fraught issue. I was talking to a consultant yesterday who was saying, like all the companies are calling him and they want to know what to do. And they’re so very.

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S1: To be clear, the the PR company was very interesting. They didn’t actually tell the companies to do actually to do absolutely nothing. What they told the companies was to say absolutely nothing. And one of the things that companies have been doing is to say, you know, abortion is part of any normal, comprehensive health care plan. If you have comprehensive health care from us, then we will help you. Find an abortion if you need one. And if that involves having to cross state lines and travel to get it because you can’t get it in your home state, then we will help you with those travel costs. This is perfectly normal, you know, health care issue for many, many companies. But there is a very strong feeling among many companies that there’s really no upside in talking about it. You know, if one of their employees needs to travel across state lines to get an abortion, then they will do that. But coming out with a statement saying we will provide travel costs for anyone who wants to do that comes across as a way of deliberately trying to needle the Republicans. And the PR people are saying, listen, why even do that?

S3: Yeah, that makes me angry. But I want to hear from Elizabeth.

S2: Yeah. I mean, one of the things I was thinking about with this, you know, even those companies that are paying for employees union abortions to go to another state, you know, if you look at the Texas law, which is one of the more draconian ones, they offer bounties for anyone who, you know, aids and abets a woman getting an abortion. So does that include Citigroup or Levi’s? They help people leave the state to have abortions. You know, do they incur some liabilities there?

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S3: I think the it’s really unclear. I mean, this is still a draft opinion that we got this week. So nothing’s been actually decided yet.

S1: And this opinion doesn’t actually it has it has nothing to say about Texas law. Right. This is about the Mississippi law and the constitutionality. And the legality of the Texas law is yet to be decided.

S3: Although the court did let it stand, there was a challenge.

S1: A stay pending the appeal likely. They’re still going to address that. I mean, it is possible that, like, they will come out and basically say, look, if you want to make abortion illegal, just make abortion illegal. You’re allowed to do that. Now, you don’t need to do this weird circumventing thing that Texas is trying to do.

S3: Yeah, I guess I just I mean, there’s a lot to be upset about. I think if you think abortion is part of health care that women need and you support what has been a constitutional right for 50 years, but to stick, I guess, to the business piece of it, it’s a little frustrating to think that like women’s equal rights is something you don’t want to touch as a company. But, you know, you’re out there supporting Ukraine, you’re out there supporting LGBTQ rights also now.

S1: Well, we talked about that. What was it last week with Disney? And how about yeah, I’m in trouble, too.

S3: Yeah. And a lot of companies are and apparently a lot of companies are really freaked out by what happened to Disney in Florida. So I think that is playing into what’s happening now with with this and why they’re more hesitant to speak up. But we saw like in 2020, it seemed like every company in the Fortune 500 had a statement about Black Lives Matter. And you could make the same dumb argument that that’s political, too, to say that Black Lives Matter or black people should have equal rights. It’s frustrating that it’s seen as political to me, but I guess it is, yeah.

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S2: And especially when, you know, a huge portion of the workforce is affected by the issue directly because they’re women of childbearing age. And I think it’s going to create complications. You know, when when companies want to go into these super red states with draconian abortion laws, it’s, you know, what’s the advantage of doing that? And actually probably hurts their ability to recruit people or do, you know, do business in the state? Because I think, you know, if people are really afraid of the Disney situation, it’s just going to get replicated here.

S1: Expand on that. What’s the fear here? Well, you’re saying the companies might not want to be in Mississippi because. Why?

S2: Because they have women who work for them, you know, people who are buoyed by these companies, of women in their lives who are affected by the issue and they don’t want to locate their families to states where you, you know, have no reproductive rights.

S1: You wouldn’t want to relocate people to a state with these laws and.

S2: They don’t want people leaving, you know. So I think what it what it would take is just another company like Disney, where the employees make it an issue whether, you know, corporate wants to talk about it or not.

S1: When you say leaving, what what what are you saying? I’m not I’m not quite I’m not entirely following you. Are you saying that like the employees in those states would want the company to shut down in that state and they would all just move somewhere else?

S2: No, I think I think you would see exactly what happened with Disney employees and and the don’t tell Gabriel. It’s they they were the people who put it on the agenda of Disney leadership because, you know, Disney leadership didn’t want to talk about it. They didn’t want to acknowledge that it was really happening. And then, you know, because there was internal dissent around it, it became, you know, a more public issue and they had to deal with it. So I don’t think these companies that are saying we just won’t talk about it are really going to have that option if this goes through.

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S3: Yeah, especially now in the tight labor market. A lot of people I was speaking to are saying like employers are putting the the issue on the agenda of companies and companies are kind of like scared of their workers now and they’ll wind up having to take a stand because of that. But I feel like that’s a very small slice of companies like and at the end of the day, I don’t feel like it kind of matters at all what what business thinks about any of this, because it’s so highly. It it is, I’m sorry to say, very political. And. Like, what can companies really do even if every every company in the Fortune 500 or whatever paid for abortion, travel, like that’s not going to solve this. You know, like no press release is going to like fix this.

S1: So the question I have for Elizabeth is it goes back to what I was saying at the beginning. It’s like, is you really just talking about what companies say or are you talking about what companies do? Are you saying that the employees are going to want them to say stuff and they’re going to not want to say stuff? And there’s going to be this tension about whether they say stuff or are you saying that there’s actually like real questions about should they open offices in certain states, should they close offices in certain states? Should they conduct business in certain states that actually actual business decisions beyond just what they say?

S2: No, are they? I think it will affect actual business decisions. I mean, you know, I don’t know how you get around the fact that a huge portion of the workforce consists of women. You know, it’s it’s not like you can sort of point to it and be like, well, this, you know, doesn’t really affect how we do business or how we operate, you know, especially when, you know, you’re putting your employees at risk by forcing them to work in these states. Or, you know, I just don’t see how there are not longer knock on effects that are real.

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S1: Give me an example of what you’re talking about here, that, you know, I’m a company who, you know, let’s say has an operation in Mississippi or.

S2: Yeah, I mean I mean, think about, you know, there are aerospace companies in Huntsville, Alabama, that opened up there and they would recruit engineers from all over the country. You know, they were not just recruiting from the labor base in that part of Alabama. So if you you know, if you imagine a similar scenario where a company wants to open, you know, new headquarters in a state like that because it’s cheap, you know, and it really affects their ability to recruit.

S1: Right. I can definitely see like if you’re if you’re making a decision about like creating a new headquarters, founding a new company, moving, you know, moving your tech headquarters to Austin or something like that, then, you know, that would involve presumptively trying to persuade people to move from out of state to that. And that would be hard to to ask people to do if you know, if you’re talking about a state with that kind of law in place, although, you know, Texas has had this law in place for a little while now, and it doesn’t seem to have stopped the number of people opening up in Austin. But that’s that’s a minority of what actually happens in in business. Right. Is trying to recruit from out of state. The vast majority of hiring is just hiring people who live in the city to work, you know, at the office in that city. And in terms of that, do you think that that’s going to be affected?

S2: I can’t imagine a scenario where there are not bigger macro effects and, you know, a law that potentially makes certain parts of the country really hostile for women to live in so that it has to absolutely affect. Where people want to work and how companies can recruit. What kind of decisions people make about where they’re going to live? You know, and I don’t think it would be instantaneous by any stretch, but I think that if, you know, abortion does become impossible in certain states, then that will affect how people think about long term planning and where they want to put their families.

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S1: Do you buy that?

S3: I also think well, I’m not sure. I feel like maybe at the margins that would be true. But the kind of people we’re talking about, engineers and higher income workers are the ones least affected by the Roe v Wade overturn. You know, they they’ll still probably those women will still be able to get abortion care if they need it in reproductive care if they need it. I have been thinking about the longer term, like macroeconomic effects. If if Roe v Wade is overturned and more women are unable or are forced to carry pregnancies to term, I feel like that would maybe ultimately lower like female labor force participation and and wages over the long term and poverty for single mothers, which already is, you know, higher than for men, I believe. I think all of that is going to get worse, all those kinds of numbers and indicators. Because if you go back and look at when abortion was legalized, it did raise women’s labor force participation. So it just stands to reason that a lot of that would get unwound, despite the weird arguments of some of the anti-abortion folks who say things like, well, women have equal rights now, so it’s not as necessary to have abortion care, which is bananas, I think. I guess it’s a political opinion, but it’s it’s the right opinion.

S2: Yeah. We already know in this environment that, you know, pregnancy knocks a lot of women out of the labor force. It can stymie their careers because they have to spend time out of the labor force to have a baby. And so it just sort of naturally follows that if you’re forcing a lot of women to do that, it’s definitely going to reshape the labor market.

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S3: Yeah, it will definitely reshape the labor market to the worse. At a time when the labor market needs more people in the labor market, it’s kind of, again, so dumb. It’s just so dumb. It’s upsetting to me. Happy Mother’s Day, everyone.

S2: Dumb and cruel. I think that Republicans have overshot on this, but maybe in the minority on that.

S1: Yeah, politically, I don’t know. I think economically the ramifications are going to be, as you say, they’re going to play out over many, many years and they might not be visible like it’s we have been living for a long time in an economy where the economy really isn’t driven by the poor. You know, they’ve kind of been forgotten about and been increasingly irrelevant for a long time. And that’s begun to change during the pandemic. You know, we’ve started to see wage rises for the bottom. Quintile of the population. And, you know, I would love that to continue. And I can easily see how this is going to. Put a damper on that, you know, but if we go back to the economy, if the 2000s or something where those people mattered less and we go away from the post-pandemic economy where those people matter more, it’s going to be an unpleasant change. It’s going to be a change in the wrong direction. You know, I completely agree that it’s not a good idea economically, but I don’t know if it’s going to if it’s going to make a massive difference to to the broader economy, as Emily says, a lot of the. People who have a choice about these kind of things. You know, people can choose which state they want to live in, can choose whether they want to move somewhere for a job. Precisely. The people who are least affected by it.

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S2: Yeah, I think it actually presents a risk even for those people. I think there’s a sort of refrain right now that, you know, wealthy women can just go to a different state if they need an abortion. But a lot of times, abortion care is a sort of emergency life lifesaving thing. And, you know, if you have a topic pregnancy and you’re in danger of hemorrhaging, you might not even if you’re wealthy, you might not be able to get to a blue state in time. Like I think there are going to be sort of horror stories around that sort of thing, and I think that’s really going to affect people.

S1: Oh, yeah, the human toll here is going to be significant and large. And, you know, I think we can all agree on that one.

S3: Yeah. At the end of the day, like you can complain businesses aren’t doing or saying this or that, but like I don’t think they matter that much in this conversation.

S1: Right. Yeah. Just because people are having a terrible time of it doesn’t mean the businesses are having a terrible day. We would love it to be the case that, oh, well, businesses, you know, are reliant on their employees. And if their employees are having a terrible time, then that’s going to be bad for the business. It’s like, you know, always. Let’s do something later and completely less important, which is art auctions. There were a lot of complaints about auction houses over the years, and those complaints were addressed by New York State because the auction houses in America were all based in New York and New York State and specifically New York City put in a bunch of rules governing what the auction houses could do, what they needed to disclose, what kind of transparency they needed. And now kind of out of the blue and rather unexpectedly, all of those rules have been repealed. And this creates a super interesting question, which is what happens now? Right. Because the auction houses took the New York rules and they more or less applied them globally. They’re like, well, if we’re going to do this in New York, we may as well just do it everywhere, because having different rules in different countries is just confusing to everyone. If the New York rules no longer apply, this is weird idea that like the global norms about auction house transparency could be severely weakened. You know, this is a bit like when California changes its emissions tailpipe emissions laws and it feels like, well, that’s going to affect the entire country, because if you’re making cars for California, you’re not going to make different cars in California and New York for everybody else when they wind up basically, basically effectively setting the laws for everyone. I think that could be happening in New York. But the thing I don’t understand or I don’t know and no one really knows is is whether things are going to change, whether the auction houses are going to go back to a more opaque model, or whether this current level of transparency has actually been quite good for them. And they’re like, Well, even if you don’t force us to do it, we’re going to do it anyway.

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S2: What are the ramifications of the art market becomes 38.9% more scammy? Like what is what are the business benefits for the auction houses there?

S1: So so this is a really interesting question, right, which is that the the auction houses have always positioned themselves and honestly have always been the least scammy and least opaque part of the art world. The currency of the art world is secrets. If you know information that no one else knows, that’s how you make money. If you know who owns certain paintings, how much they pay for certain paintings, what they want to buy, how much they’re willing to spend this kind of stuff. That’s how you make money as an art dealer. And if you know, you know, if you’re brokering those private deals and you know what the market is in the private market, then that gives you a huge amount of information that no one else has. Whereas if a painting sells at auction, the amount that it sells for is very public. And so the auction houses are like we bring like in transparency into the auction market. On Monday, for instance, this major Andy Warhol painting of Marilyn Monroe is coming up for auction at Christie’s. And it has been reported that one of the other five paintings in that series was sold privately a few years ago for $240 million. But we don’t really know the amount of money that this particular one also sells. So it’s going to be a very public number. It’s going to be the highest, is almost certainly going to be the highest price that any painting has ever received at auction. If you put to one side the weird fake Leonardo thing, because that was just weird.

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S3: What a what? I don’t know what you’re talking about. What’s the thing?

S1: You remember the we had fake Leonardo, the Salvador mundi which sold for $450 million to Muhammad Bill Salman. And no one quite knew why. And the whole thing was just very, very odd. You don’t remember that?

S3: No, but I don’t. But now we’ll all be talking about it.

S1: But, yeah, that. That weird thing, which wasn’t really a Leonardo for a minute. People who thought it might be was very expensive, but mainly it was expensive because there’s this one Middle Eastern potentate who everyone wanted to buy the painting for. And there were these two bidders, both of whom wanted to buy the painting for the same guy, and they were bidding against each other to buy the painting for the same guy. And so it was the guy who bought it effectively wound up bidding against himself unnecessarily and paying like roughly $300 million too much to buy this painting. It was hilarious.

S3: So what kind of rules is New York City getting rid of for auctions? Like what were the transparency rules that were so, I guess, unnecessary or great or I don’t know if they were good or bad or what were they?

S1: So the main ones are around guarantees. So when an auction house promises the seller. So there’s going to receive a certain amount for a painting. And whether that guarantee is provided by the auction house or whether it’s provided by a third party that the existence of that guarantee has to be. Disclosed to everyone in the auction room. And so that is something that the auction houses have increasingly been doing in recent years. Basically, they’ve all been doing it because they have to. They haven’t been doing it super transparently. It all seems to happen with little notes in the auction catalog in the room, and it’s not necessarily disclosed on the website or anywhere that you might want to really see it. But that disclosure is being made to the people who care about such things. When the guarantor buys it and gets a fee for guaranteeing the reported price of the guarantor pays is net of the fee. So you kind of you realize that the fee has been paid. That fee winds up getting deducted from the final price. There’s also like other rules, like, for instance, the auction houses very regularly most of the time give estimates for how much a painting is likely to sell for. And under current New York rules, which are now being abolished, the low estimate cannot be lower than the reserve price. You can’t give an estimate that the painting isn’t allowed to sell for. And now you’re allowed to do that. Why someone would want to do that, I’m not entirely sure whether that’s still going to start happening. I don’t know. There’s other rules about what’s known as chandelier bidding, where you kind of where the auctioneer pretends to take bids from the audience, even though they’re not real bids in an attempt to sort of scare up a bidding war, but try and persuade the audience that there is more interest in the work than there actually is. That was outlawed and now is apparently legit. So there’s yeah, it becomes, as Elizabeth says, is becoming 37.8%. If anything changes, which, by the way, we don’t know that anything is going to change.

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S2: Why do you think they decided to do this? Like what made New York City’s a you know, you never really needs the financial help right now, Sotheby’s. Like, what was it? What was the driving force behind it?

S1: As you would expect. Like when when a law like this happens, what you would expect to see is like a bunch of behind the scenes lobbying from the auction houses who felt humbled by the existing laws, and then them coming out and saying, yeah, now the laws are gone and we can behave more freely and have more optionality. And that doesn’t seem to be the case here. The auction house is really, genuinely don’t seem to have been lobbying for the repeal of this law, and it’s not clear that they’re going to actually change their behavior. So they might continue to act as though the law was still in place and still continue with the degree of transparency that they’ve had for the past few years, just because people kind of like it. And the law, you know, the stated reason why they repeal the law is just we haven’t been getting complaints about the auction houses, so why try and fix something that isn’t broken? It doesn’t make a huge amount. It doesn’t make a huge amount of sense to me. But I think what was happening was that a few other smaller businesses that aren’t the big auction houses were also being caught up in these laws and they were like, This is unnecessary regulation. And so if we deregulate the big auction houses, that will have the effect of deregulating a bunch of smaller businesses who might actually benefit from the deregulation.

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S2: So basically it was these policies are working, let’s just get rid of them.

S3: But no one’s doing any murder. So let’s make murder illegal.

S1: It’s it’s definitely is definitely odd. And auctions are just very this very recondite part of the well I think maybe honestly part of it is just everyone look to what’s going on with nfts and crypto and the crazy amounts of insider dealing and opacity and scariness and everything that people seem to be perfectly happy with in the crypto world and the pouring billions of dollars into and they’re like, well, fine. If you guys are all grown adults and perfectly happy to throw away your money on crypto scams, then why are we trying to even regulate the auction houses? Like, you know, no one cares about the opacity surrounding some Etruscan vase if they don’t care about the opacity surrounding the body.

S3: That’s a spicy take.

S1: We have a numbers range. Emily was nodding. Emily was like, Yeah, I think we should have another round.

S3: Yeah, we usually do. I mean, that’s what the listeners expect.

S1: Well, listeners, we are here for you.

S3: Did you guys see that amazing listener email? One of our our listeners analyzed all the numbers going back a few years.

S2: Yes.

S1: Oh, my God. She is an absolute star. I tweeted out the chart. Like, apparently when we have a guest, there is a very strong correlation between my number and the guests number. But there was no correlation between Emily’s number and the guest’s number. So far, Elisabeth has always had the biggest number in every episode that she’s been on.

S2: And I’m very seduced by big numbers. I can’t help it. And I was trying to decide whether I should double down on that and just come up with something insanely large for this week. But I decided to break my heart.

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S1: Well, let’s see, because we might. We might still be able to undercut you. What is your number?

S2: It’s winner ratio. It’s a 3 to 2.

S1: Way, if 1.5 number. That’s a really low number.

S2: True for me. 1.5.

S1: That’s like way out of whack for Elizabeth Spiers. What’s what is 1.5?

S2: So it’s the number of women students, men, students that enroll in college. Now the largest gender gap in history. And relatedly, among all OECD nations, women are more likely than men to have a tertiary degree in all 38 countries. So, you know, back to Roe, that might change if if projects overturn.

S1: Emily?

S3: Yes.

S1: Do you have a number that is larger than 1.5? Um.

S3: It’s a percent.

S1: Oh, maybe. No. Maybe. Maybe Elizabeth can still win.

S3: Smaller, I guess. Yeah. And it’s also a woman’s number. It’s 45%. That’s the percentage of new Fortune 500 board appointees who are women in 2021, which is a record high. So that’s 45%, almost half. Which woo I guess is exciting. I don’t know.

S1: It should be like significantly above half if we’re ever going to get to parity. Right? We need to be like, yeah.

S2: Yeah.

S3: Yeah. But I mean and so in 2009 it was 18%. So things have really increased and you could see if you look at the chart of new board appointees, it really increased for women in 2017, which was like the MeToo year. That was like a big shot up. And then if you look at the chart for black appointees to boards of directors that also shot up in 2020 after George Floyd and I couldn’t help but hashtags like.

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S1: Hashtags make a difference.

S3: Like for all these social movements and we’re talking about like this very critical half century, right. Going away. Meanwhile, in corporate boardrooms, they’re benefiting from all the social movements of the past ten years. Like that’s where all the equality is happening amongst these very high paid, very elite corporate board members. And I just take of that what you will.

S1: So congratulations on managing to undercut Elizabeth, even though she was one and a half you a 0.45, which is lower. But people I’m going to come in hot here. I’m going to beat Elizabeth for the first time ever. My number is 107, which is the number of pounds that you need to pay in Islington if you want to be able to use one of the if you’re a resident of Islington, which is a London borough and you want to be able to use the Islington bike hangers to store your bicycle, your permit for doing so is going to cost you £107 a year. This compares to the cost for an electric vehicle. If you have an electric car, your permit is £25 a year. So it is more expensive to get a permit to park a bike than it is to get a permit to park an EV, which seems a little bit skewed. But get this the demand for these bike parking permits is so high, there’s a waiting list of 7000 people who want one and don’t have one. So that’s the problem they have like. A supply constraint. They don’t have enough of these hangars. So they. Even at £100,000, there’s more than enough demand. With the permits. They just give out the permit and they let you find a parking spot. If you can’t, that’s on you.

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S3: Huh? I’m thinking a lot about parking spot economics lately because I used to buy my annual parking spot and my commuter train station. Right, for several hundred a year. And I don’t do that anymore, and neither does anyone else, because when I go to my local lot that the permit spots are always empty and the spots that you pay for daily use are always full. Now it’s very interesting and interesting.

S1: I remember when I moved to the Hudson Valley, there were like waiting lists for those permits, but they were.

S3: Yeah, yeah. It was very it’s it’s completely changed dynamic. But the empty spots are just sitting there and I’m like, Come on, let’s get a change. Got to change it up. Planner people. Train planner, people.

S1: All right. I think that’s it for us this week. Thanks for listening. We’re about to have a sleepless on something fascinating, but we have yet to work out what otherwise many thanks to the whole Slate crew for producing this show, which was put together under extreme pandemic conditions. So if it doesn’t sound perfect, it’s mostly my fault for sitting in a wooden box in Union Square somewhere. I apologize. Things are going to sound better next week because I believe we might be back in the studio. I’m not sure that could be awesome. In any case, please send us all the lovely emails. We love them, especially if they involve statistical analyses of numbers, realms. And yeah, we’ll be back next week with more sleep money. Just to punish Emily. The Slate Plus is going to be now that the kingdom of Saudi Arabia has an economic stake in the proposed takeover of Twitter. Is this going to be a way to prevent the takeover from happening under CFIUS and foreign investment rules? Is Twitter going to become like Tik Tok, one of those things that gets regulated as a foreign investment in the U.S.?

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S3: Is TikTok suffering from that?

S1: Well, TikTok turned out to be fine, but it went through a long period of time when people thought they would have to wind up getting spun off from Bytedance and become an American company and so on and so forth.

S3: Felix is mentioning this because earlier this week Elon Musk got funding more secured from his friends pretty much right in the VC industry. Friend of the pod Ben Horowitz invested and is investing in Twitter. PE Marka is investing in Saudi Arabia is investing investing into it.

S1: This is interesting. Like, you know, when when Twitter shares are trading in the public markets, everyone’s like, this is a shit company and not worth it. But when they get the opportunity to invest, to invest in a much higher valuation, they’re like, Yeah, let’s do it because Elon Musk is in charge. That’s going to make all the difference.

S3: Yeah, I don’t I don’t understand the math. The math doesn’t. I mean, you wrote about this, Felix. The math doesn’t really.

S2: The math is all bad. It’s not really rooted in anything.

S1: The math is all vibes. I think that is VC in a nutshell. And although we should mention talking about the math is all vibes, the classic math is all vibes, investor is Tiger global and they are selling, they are having a terrible time and apparently that’s a bunch of margin calls and they’re having to dump all of their stock. And this is one of the reasons why stocks apparently fell so much on Thursday. Yeah, Tiger Global, which has the big £800 gorilla, is buying up everything at crazy valuations. Looks like it is completely coming apart right now.

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S3: Which makes sense given what we said in the main show that these investments aren’t worth what they used to be. And they made a lot of them, I guess. And they were known for just like investing in stuff without doing any due diligence.

S1: Right, that. Well, they invested fast. They did, they would do the diligence like internally and then they would just turn up one day with this term sheet and say like, we will give you more money as a higher valuation than anyone else. Just take it all from us. And the entrepreneurs were like, Okay.

S3: I can’t believe it didn’t work out. But back to the Saudi Arabia question. Do you do you think that’s going to be an issue for Twitter?

S1: I don’t doubt that there are going to be people who tried to make it an issue. But whether it’s going they will even come to that like my big thing is that even with all of this co-investment, Elon has barely decrease the amount of money he needs to put in himself. The co-investment is replacing debt that he was going to take on. It’s not replacing equity that he was going to put in. He still needs to put in $20 billion of his own money, and I have no idea where he’s going to find that 20 billion because he’s come out in public on Twitter and saying he’s not going to sell any more Tesla stock. So if he’s not going to get that 20 billion from selling more Tesla stock, where’s he going to get it? Is he going? Is he really going to sell like most of his stake in space X just to buy Twitter?

S3: We’ll see if he does take over Twitter. My only prediction, our theory is that he’s going to lay off a lot of people.

S1: That’s almost.

S3: It. That’s all I got. Yeah.

S1: Yeah. All right. We found this late this afternoon, and unfortunately, we talked about Elon, which means that Emily is going to be annoyed at me for the rest of the month.

S3: I’m sorry, listeners. Thank you for listening, though.