They’re Big and They’re 99 Cents

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S1: Hello and welcome to their big and $0.99 episode of Late Money, Your Guide to the Business and Finance News of the Week. I’m Felix Salmon of experts. I’m here with Emily Peck of Axios.

S2: Hi.

S1: We’re also here with Elizabeth Spiers.

S3: Hello.

S1: Of Global Domination fame. We are going to talk about the man who really does seem to want global domination. Elon Musk. Of course we have to. I apologize if you’ve had too much of Elon Musk. With any luck, this will be one of the last times we talk about him for a while. We are going to talk about work, perks and swag and how and whether and why companies want people to come back into the office. We are going to talk about Amazon iced tea and how good value it is. Thank you. Everything nice to you for keeping your soft drink. Such good value. We have a sleepless all about the Kardashians wherein we wonder whether they are going to put in a bid for Twitter. I mean, this is new these days. It’s all coming up on Slate. Money. So the good news is that after last week, nothing happened in the world of Ellen and Twitter. So we don’t need to talk about, you know, oh, shit. I have to say, I woke up on Tuesday morning thinking that I had my news to put to bed, and then Ellen put in a $43 billion bid for Twitter. And I was like, Oh, dear, I will say pulling up the duvet comforter a little bit to reveal the inner workings of slay money there. All three of us were in the slate slack saying, Please God, let us not have to talk about Ellen. Can we just not talk about Ellen?

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S3: Also, by the time we record this and it comes out, something else will have happened. And whatever we we’re saying right now will be completely invalidated. So.

S2: Well, we can just put for the record an update for our listeners up to the point where taping this, which is Friday morning, April 15th. So we can tell you sort of what has happened, what we think could happen, which I feel like is almost anything except that Elon Musk will actually buy Twitter. And then if we have updates, you know, you could just follow us on.

S1: Yeah, he I, I can tell you with 100% certainty by the time you listen to this on Saturday morning, Elon Musk will not own Twitter. That’s like that’s 100% that. He doesn’t even have financing lined up. He appeared in Vancouver talking to Chris Anderson of Ted. And Chris Anderson was not the world’s greatest and most, you know, sharpest interviewer. But he did actually ask, like, do you have funding for this? And Elon said basically, no. He said, I’m very rich. So yeah, but that doesn’t mean you have funding. He famously doesn’t have a lot of cash. Elon Right. Because he all of his wealth is is tied up in Tesla stock and SpaceX.

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S2: Well, let’s back up a little bit from where we were last week and just lay out the fact pattern. Right. So everyone woke up on the East Coast Thursday morning to the news that Elon Musk had filed notice with the FCC and texted the chairman of the board at Twitter to say, I want to buy you guys for what is it something like we joke price 50.

S1: 54, 24.

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S2: 54, 20 and this is my best and final offer and I think I can really fix Twitter or whatever. So the whole financial press on the East Coast then rips up their newsletters and their morning updates and frantically starts typing because they have to type whatever Elon Musk says. And then just add to the drama after all that happens, which really is just an SEC filing of some I mean, really just a guy saying he’s going to buy a thing without any further information. Then Elon Musk goes on stage, as Felix is referring to at this TED conference and basically says he doesn’t know how exactly he’s going to pull off this purchase and he doesn’t really have a plan and he’s not in it for the money, which is unusual thing to say.

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S1: And he wants to improve freedom of speech and he wants to have lots of stuff that you don’t like seeing on Twitter. On Twitter, because that’s really important for society except for like all of the bots which are perfectly legal. But he wants to get rid of those. Like there’s a lot of internal contradictions in what he was saying. It’s not super thought through, obviously, when he first announced with an FCC filing that he had bought a 9.2% stake in Twitter, he’s like, I don’t have any strategic designs here. That’s straight out the window to the point at which he now says, If I can’t take over the company, then there’s no point in owning the stock at all. I mean, it’s been in in a spectacular U-turn in the space of about one week. And the fact that he can change his position so spectacularly in the space of one week, I think we all agree, means that he can change it back to whatever he likes in a week’s time. Like this is by no means the end of the saga. But maybe he’s put Twitter in play like it does seem there are people thinking about maybe trying to buy it. Apparently Thoma Bravo is looking at making a bid, but the big obvious acquire is Google, Facebook. You know, any big tech company, Microsoft, Salesforce, I feel like they’re all non-starters. Is that antitrust reasons?

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S2: Yes. It does seem like Matt Levine put out like a special emergency newsletter this morning.

S1: For.

S2: Sort of laying it out like.

S1: I meant to be on holiday. But God dammit, Elon.

S2: But it does seem that what he said was like, there’s no easy way out from all this. Like Elon has kind of like put it in play and now something kind of has to happen. Like he can’t just walk away and sell all his shares because then the share price would fall like a really lot.

S1: But he can and it would. And then like, that’s okay. I feel like that’s not such a bad outcome. The only people like, not that many people particularly care what the share price of Twitter is. A lot more people care about what happens to the product and what happens on Twitter than care about what the share price of the company is also.

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S3: That seems like it’s that’s his entire goal. Aside from just gratuitously trolling the FCC, which is always a hobby of his. It’s not as if it’s plausible that he actually wants to own Twitter and be responsible for all that entails.

S1: So when he went up on stage and said, I want to own Twitter, do you think he was lying?

S3: I think that he is. He floats these things without really thinking them through that much just to gauge public interest in these things as an option. I don’t think that he actually has even given any thought to what it means when he says, you know, I don’t believe that the full potential of Twitter or the full value has been unlocked. You know, people haven’t really asked him in any granular way what he means by that.

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S1: So the main reason why the right wing generally embraced him and this sort of Silicon Valley libertarian types embraced this bid and seemed to support it on Twitter, which is how they support things these days is twofold. One is that they have a anti-woke ideology and they believe that Twitter has become woke and it has been gratuitously banning lots of people for being woke. And that’s not cool. And you shouldn’t ban people from being on woke. And then the second thing, which is related but definitely separate, is the musk came out and said very explicitly that he didn’t believe in bans really at all, maybe sort of timeouts, that you should be able to say anything you like on the platform as long as it’s legal or legally allowed to say it. And he said that multiple times in the interview, and that is a very unsubtle way of saying he wants Donald Trump back on the platform. So anyone who thinks that Twitter is a force for creating support for Donald Trump, which it clearly was and probably will be again, is going to be behind this bid just for that reason alone.

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S2: What was eerie to me about this news cycle where we all woke up and Elon Musk was driving the conversation about something that honestly isn’t real yet it isn’t a real thing yet. He has no plan. It really felt like a Trump news cycle of the old school. Like it had all the hallmarks of exactly his M.O.. Like you wake up. Trump has been tweeting at 530 in the morning or something. The whole news media is like, you know, like a car crash is all magnetically attracted to this moment. The whole conversation is directed towards this mess made early morning, and in the end, nothing happens. It is the same playbook. And and I don’t know what I’m supposed to make of that, but I didn’t care for it.

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S3: Well, Elon has a lot of Trump qualities. I mean, he thinks that rules and norms don’t apply to him. He enjoys the antigen. He is, you know, the gleeful troll. I think there’s a reason why it feels so familiar.

S1: And he has the personal exceptionalism. Like he said in the interview, he was like, I know more about manufacturing than anyone, any other human on the planet, which is a very Trumpy thing to say.

S2: So is it worth like walking through if Elon Musk really wants to buy Twitter, is it worth walking through how he would do that?

S1: Yeah, I think probably not. I mean, you know, as you say, it’s more performative than that. And it’s going to be very easy for Twitter’s board to say, where’s the money? We are not going to take this bit remotely seriously until you can show us the financing. He’s going to be like, But don’t you know, I’m very rich? And they’re like, That’s not good enough. We need to see the financing. And then he’s going to wave his hands in a kind of Trumpian way and say, I’m very rich. I can afford you. And they’re going to be like, Yeah, that’s not good enough, and they’re just going to reject the bid for that reason alone. Never mind the fact that the amount he’s offering is clearly lower than anyone would have to bid in order to, you know, affect a successful takeover bid for Twitter. You know, he’s offering 54 bucks. It was more than that in October.

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S2: But I actually think it is a little bit worth unpacking because to like the average person hears Elon Musk is on the top of the list of the richest people in the world. He is number one. So to a normal person, you’re like, yeah, okay. He has $240 billion according to this list in Forbes or whatever he’s bidding 43 billion. I can do math. 43 is less than 240. So why can’t the dude just, like, write a check?

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S3: Well, it’s funny. It’s technically there. There is a way that he could do it, but not without, I think, tanking Tesla’s stock because he’d have to sell off so much of it. And he’s already borrowed quite a bit against, you know, what he. Jones already. I don’t think he has a lot of credit capacity left. I don’t know how he would do it logistically without doing some combination of selling off Tesla stock, finding interesting equity partners who would be on board with him. And I don’t know. X, Y, Z, two or three other elements.

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S1: Yeah. He had this idea with the Tesla take private as well, which never happened. And he said it again on stage in Vancouver. He’s like, I don’t need to own all of it. Anyone else who’s the current shareholder and wants to stay a shareholder can also remain a shareholder, and that means I wouldn’t need to buy their shares. They could just keep on owning their shares, which A doesn’t work like that. It’s just not a thing in M&A. And B, he then, you know, three reps later said, I’m not interested in the economics, I’m not in it for the money. So like, why would anyone want to be a shareholder of an Elon Musk plaything, which is not being run for profit?

S2: Right. So in other words, his money is mostly tied up in stock, specifically Tesla stock. He’s limited and he can’t he can only sell like a quarter of the holdings he has or something by the bylaws of the company. Right. And but if he sells a big chunk.

S1: Well, so according according to the according to the Tesla laws, he can only borrow against a quarter is the Tesla bylaws. Yeah, he can only borrow against 25% of his Tesla shares, but he’s already blown through that. So like he controls the company could probably change those bylaws if he wanted to. But, you know, as Matt pointed out this morning, there aren’t that many banks who are going to lend significant amounts of money, more or less in perpetuity against Tesla at a $1 trillion valuation, because no one really believes that trillion dollar valuation of Tesla, the way that he could raise the money would be by literally selling a bunch of Tesla shares, which he is absolutely capable of doing and has done. That would have huge tax implications. So he would have to pay a huge amount of capital gains tax to do that, which he is probably willing to do. Maybe he would do that. Maybe that would have a negative effect on Tesla’s share price. Maybe he doesn’t care if Tesla’s share price goes down from $1,000,000,000,000 valuation to a, you know, $700 billion valuation. It’s like it’s still a crazily valued company. Like there’s a lot of ifs, ifs and hypotheticals and rabbit holes. We can go down. But the big thing is that he’s not going to have to because they’re not going to accept the bid. And he did this like really cutesy thing on stage where he kind of hinted that he might go hostile and bring out a tender offer. And I just don’t see that happening.

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S2: It seems difficult for the richest man in the world to like pull off this purchase, which I think is kind of interesting on its face. But maybe it’s not surprising to, like, finance wonks, but like, it’s not so easy.

S1: Well, the difference between like if you are a say, a private equity company with a $100 billion fund, that means you have $100 billion that you can just spend on whatever you like. If you are an individual who owns a bunch of Tesla stock that’s worth $100 billion, you don’t have $100 billion to spend on whatever you like. You don’t have cash. All you have is a bunch of stock. And then you need to do financial engineering to raise cash. So like having $100 billion means very, very different things depending on whether you are, you know, the founder of a valuable company versus whether you are an actual corporate investor with cash that you are being tasked with putting to work. Yeah.

S2: Worth noting the little asterisk on the richest people list.

S1: Yeah. Money isn’t. Money isn’t quite as fungible as you might think.

S2: Yeah. Also, I just want to make this point that. No, I don’t believe. And maybe you’ll disagree. I don’t believe any female human being could get up on stage, as Elon Musk did on Thursday and say, My strong intuitive sense is that having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization. Like, I just don’t think a woman leader could go up and be like, My intuition tells me that this is a good idea and that everyone in the media would write a story about it and be like, What’s going to happen? This is so brilliant. I think they would they would treat Elon Musk like Marianne Williamson, the woman who, you know, ran for president a few years ago on her intuition.

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S1: So this language, by the way, comes from the late night bull sessions that Ellen used to have with Peter Thiel. Right. This is the philosophy sense of the word intuition, where like philosophers like to talk about like what is your intuition about this or that? And then whether intuition is true or false. And yeah, Elon is taking that to the next level. But any time you wind up, you know, 1:00 in the morning. Having a pointlessly secular conversation about trolley problems. Basically what you’re doing is you’re interrogating your intuitions and that’s something that piece of deal is really into an Elon Musk is too.

S3: I think you also have to consider that he does this so much that it sort of set an expectation for everybody that he might not be serious about anything that he’s saying because this is part of his M.O.. If you just look at everything that he said so far, it just complete face value. He would sound unhinged because he you know, he does sound unhinged. I took his position two weeks ago and then now he’s insinuating again, if we’re taking what he’s saying at face value, that suddenly he has this new body of information where he is completely sure that he has no confidence in management. And the only way to fix the company is to take it private. And somehow he did not think that two weeks ago when he took the initial position. So there’s a lot of stuff that he says that I completely agree with. You know, female CEO could ever get up and say that. But a lot of just normal CEOs can’t get up and say the stuff that he does. Yeah. Yeah.

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S1: Like this is like Elon. Like, you know, it’s true. Most male CEOs could never say that either. But one of the things that did change between his initial FCC filing and his bid is that he went on a Twitter rampage and started tweeting a lot about, should we convert Twitter headquarters into a homeless shelter, should we delete the W from Twitter, you know, blah, blah, blah, blah, blah. And one of the things I’ve been thinking a little bit about is that Twitter influence, at least when you’re Ellen, runs by directionally, people definitely talk a lot about Ellen’s influence over the Ellen fanboys who are. Legion on Twitter. And he has a lot of followers. And like literally just in terms of the number of people who follow him on Twitter, it is 80 million, which is way more than Donald Trump ever had. And people think like Elon has influence over those people. And that is all true. But I think that uniquely among people with, you know, eight digit follow accounts, he actually listens to Twitter. He’s on Twitter a lot. And those followers and those fanboys and then Marc Andreessen and Keith Liebowitz of this world are influencing him via Twitter and that when he buys a stake in Twitter and then suddenly everyone is on the Twitter saying, Elon, you should buy Elon, you should do this, Elon, you should do that. You know, you should shake it up. You are the amazing Elon and you can do things to Twitter that no one else can do. That influences Elon.

S2: I buy that. He does seem to engage in the comments.

S1: Yeah, he replies, more than he is in the replies. More than like any other person with that kind of halo account. I want to talk about Elizabeth Cohen, because Elizabeth was back in the paper of record this week with a column about work perks. And Elizabeth, why don’t you just give us the the top line? What is a work perk? And is it good or is it bad?

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S3: So the thrust of the column is that a lot of people don’t want to come back to physical offices now for good reason. They spent two years working from home and they see the advantages of it. So employers are having to roll out office toys and perks to sort of try to draw people back in. But some of them, I think, in the post-pandemic environment, just seem paltry and maybe even infantilizing. You know, if you’ve gotten used to not having to commute for 2 hours, having your employer say you should come back in because we’re going to have a pizza party on Friday, or we’ll give you a pair of company branded office slippers is just insulting. And I sort of I wrote a little bit about, if you haven’t seen it, there’s an Apple plus show called Severance that’s a kind of dystopian thriller about office life. And one of the punch lines in it is a recurring gag where the workers get really just meaningless gifts or sort of depressing, existentially depressing rewards for performance in the company. They get, you know, at a party or a bar full of melon balls or Chinese finger traps or, you know, when you see them rolled out on the show. You feel a palpable sense of depression. And it’s just a really good, I think, expression of the malaise that I think people are feeling about coming back.

S1: One of the things that I definitely noticed about Silicon Valley startups, in contrast distinction to every other company I’ve ever been in, is that if you walk into the office of some startup, there is an extremely high probability that an extremely high proportion of the people you see in that office, and I’m talking pre-pandemic here, are going to be wearing company branded swag. They’re wearing like the company t shirts, the company vests, the company baseball caps, the company gives out all of the t shirts and something. And then that is that becomes like the expected thing that everyone wears into the office. And I saw that a lot when I used to walk into companies and have meetings, and it just felt like a weird Silicon Valley thing. But now I’m sort of reexamining it in the light of what you’re talking about. And it seems creepier now.

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S3: Yeah, it’s a little like, you know, wearing the band t shirt if you’re in the band, right.

S2: I was reading that company swag. I always call it Schwag and everyone makes fun of me. Company swag stuff we all get is increasingly popular now as a way H.R. departments are trying to like, engender, you know, team feeling between coworkers when we’re all kind of like everywhere hybrid. And another reason companies are more into the swag now, especially like the performance wear, the sweatshirts and whatnot is because people don’t know how to dress for the office anymore. So like, they’re like you’re just wear this.

S3: Company branded blazer. I don’t.

S2: Know. But it’s usually like a like I have two new jobs in the past, like eight months. It’s always like a sweatshirt or something in a mug, travel mug. So, like, you could show up with your sweatshirt on and your your hat.

S1: I was on Twitter this week going back and forth with Chris Hayes, who was mentioning that he was sending up to 30 Rock, now in full sweats, like head to toe, like sweatshirt, sweatpants, like even do not give a fuck mode like before he changes into his work suit that he keeps in the closet before he goes on.

S2: But, Elizabeth, you compared the the perks and the giveaways to like going to the carnival and getting the cheap the cheap toys only worse. And I thought that was really good because it’s always less fun. It’s like Post-it notes or something. Yeah.

S3: I mean, some of the swag is so just bad and cheap and meaningless to adult human beings who have to come into the office and do real work. So I thought of it as, you know, you go to an arcade and you spend a lot of money and you get cheap little toys and you don’t mind that they’re cheap little toys because the experience of being in the arcade is fun. That is not work. That’s not the office. So sometimes these bribes just are sad and depressing.

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S1: One thing I have noticed is that it is much more natural and fun and even desire. Like I kind of like. And I see a lot of people doing this, people wearing and using the swag from previous employers. I have I have like this wonderful old Reuters ski jacket that I love and I wear. All the time. And I’m like, This is fine. As long as I don’t work for Reuters, it’s fine. You don’t feel like you’re weirdly being forced to shell for your employer. You know, I know a bunch of people who used to work for Fusion who still use a bunch of, you know, fusion mugs and things that they have lying around. If you don’t actually work for the employer, then sometimes the I can be fine. But wearing your own employer’s swag. Yeah, it does feel a little bit like you’re buying into something cold.

S2: Well, what are companies supposed to do to entice you back to the office? Just give you a big break. Yeah. Oh, it comes down to that. Just give you a big raise. That is always the answer, actually.

S1: Well, no, but then, like. Well, okay, well, let’s stick on that. Like, Elizabeth, do you think it is feasible, a good idea for companies to pay more money to people who go back into the office?

S3: Yeah, I mean, and I said this in my column, I think part of people’s frustration with these, you know, dumb perks is that they feel like they’re being shortchanged in terms of overall benefits or the pay is too low, or they feel like they should be compensated for having to do something like, again, commute 2 hours to get to an office when they can do their job perfectly well from home.

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S1: But if they can do their job perfectly well from home, doesn’t that effectively penalize the people who do do their job perfectly well from home and aren’t getting that extra pay?

S3: Yeah, but presumably there are the reasons why people want their workers back into the office. Don’t always make sense anyway. It’s it’s usually it seems like a lot of it’s really a control issue. It’s it’s managers not fully trusting their employees to be productive at home, wanting to keep tabs on them. So, you know, I think a well-designed benefits system would compensate both parties for people who want to come back into the office and have good reason to do it. You know, they would get some kind of trade there and people would want to stay home. You know, that kind of flexibility, is it sort of a perk by itself?

S2: Yeah, that’s true. I I want to point out that a lot of people have just been at work this whole time because I wrote about it recently in my newsletter at Axios and people emailed to be like, Hello, we go in every day and we always have been like, Shut up! And I was like, Yeah, we do.

S1: We do have like sometimes we do fall into this hole of like looking around us at New York City and thinking that everything is knowledge workers in New York. But it’s like most countries just just kept on going into the office the whole time.

S2: Yeah.

S3: Yeah. I think one thing I didn’t get into here in the column is, you know, and this sort of bounces off of what Felix was saying earlier, the sort of company branded swag that’s designed to, you know, increase loyalty. That’s not new and early mid-aughts I remember and this may still be the case, you know, first year analysts at investment banks would always get issued the company tote bag with grosgrain straps and it would say Goldman Sachs or whatever. And people would walk around with those like they were, you know, $10,000 luxury bags because it was a status symbol. But I think a lot of what we’re dealing with now isn’t so much that it’s that some of it it’s the idea that, you know, you come back into the office and there’s this kind of employer mandated fund. But I have always been opposed to.

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S1: The famous foosball table that sits unused in the middle of the office to make it seem like you’re a fun office, even though you’re actually not.

S3: Yes, it’s performing fun without actually having any.

S1: But like Google was really famous for having a campus which would provide free food 24 seven with like pick up your dry cleaning for you. Like anything you could possibly think to yourself, I need to go home now in order to x with the possible exception of literally sleeping, they’ll be like, No, you don’t need to go home to do that. You can do that from here. And they would just keep you in the office that way. I think largely on the assumption that if you’re at home, you’re not going to be working as hard or as much or as effectively. I think what the pandemic has done is it has changed that assumption that the likes of Google don’t feel insofar as they want people in the office. It’s not because they feel that when people are at home, they aren’t working. I think that used to be the assumption, but that’s now gone.

S2: I think the reason or one of the big reasons companies want people to come back to the office is because these social interactions, though Elizabeth might argue they aren’t fun at all. They serve the purpose of making you want to stay at the company. If you have those social ties, you won’t quit. And there’s been a lot more quitting, as we know in the past year. I’m not saying it’s because people don’t go to the office necessarily, but like that lack of social connection at work is definitely it makes retention harder, 100% for sure.

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S1: But the social yeah, the social ties are very real and people want to work with cool people, you know. And I remember that when we were hiring you at Axios, you were like, Oh my God, do I get to work with Neil Irwin and Matt Philip? That would be amazing. And that’s definitely a perk. And if you get to like physically be with people like. It is qualitatively different and often better than just working with them in the form of squares on a computer screen.

S3: Yeah, the one counterpoint to that there is that there have been surveys of black workers in particular, where they say they prefer work from home because they’re less likely to face direct discrimination. They feel like people are treating them better.

S2: Yeah, for sure. It’s so complicated. You don’t have to code switch as much if you’re working from home.

S1: But doesn’t that just create a sort of effective discrimination thing where, like the black workers stay at home and the white workers will come into the office and bond and wind up like chasing each other up the ladder?

S2: Yeah. That’s also think.

S3: It could if if I think everybody is allowed to choose which one they want to do.

S1: Which is kind of what you’re suggesting they should be. Right?

S3: I think that’s generally the best option. But it’s you know, there are tradeoffs either way.

S2: There’s also I’ve been thinking a lot because there’s all these articles and tweets about, you know, people don’t want to go back because it’s so much better at home. I wonder what percentage of the reluctance to go back is just social anxiety. Like people who have been at home, you really get used to not talking to people and it’s kind of like spirals on itself and you just don’t want to do it. You’re honestly afraid and anxious. And I think a lot of the conversation is like just people feeling anxious about it.

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S1: And I’ve been thinking about this a lot. There’s this yeah. There’s this concept that my wife came up with called hibernation. That basically what we all did during the pandemic, a lot of people did during the pandemic, is they went into a sort of hibernation mode. They were they just stayed in their apartments or their houses and they cut themselves off. And the kind of external stimuli that used to be normal and that felt very cosy and comfortable. And then going back to that status quo ante is stressful. Going back is stressful and even just contemplating going back is stressful. And navigating that change from hibernation mode to city dweller is something that people don’t often do. I’m kind of doing it right now after spending three months in Ireland, more or less on my own, in full on hibernation mode. And now, like finding myself in midtown Manhattan is a bit freaky, I will attest.

S2: Were you nervous about going back? You’ve been in the office a bunch of times, Felix.

S1: Yeah, I wouldn’t actually have gone into the office as much were it not for, you know, a spouse kicking me out of the apartment.

S3: I think also, you know, it just it just affects people if they’re introverts, you know, if you get used to having this sort of regenerative alone time and then you have to go back and be around people all the time, you may feel like it’s it’s going to hurt your productivity or make you feel worse. So I don’t even think it necessarily is is the pandemic or having done this for two years, it’s for some people, this is just a better way of working and they don’t want to abandon it.

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S1: Definitely. Let’s talk about Arizona iced tea and apologies to L.A. Times, people who I didn’t say L.A. Times in my piece, although I did link to it. The L.A. Times is the outlet that went viral this week by talking about Arizona iced tea, which comes in 23 ounce cans. I did the math for those of us who only speak metric that 680 millilitres or more than 90% of a bottle of wine, you get a lot of iced tea in these cans and that can stand out a for being big and B for having a whopping great big thing on them saying $0.99. And they have been big and they have been $0.99 for 30 years. And if you go back to 1990 $2, the current value of a 99 cent Arizona iced tea kind is $0.48. So they’ve just been getting cheaper and cheaper in real terms and they are not going up in price. So if you’re looking for a place that is not seeing any inflation, Arizona iced tea is the place and I have a theory for why this is the case. But Elizabeth, what’s your take on this?

S3: Well, I think, you know, the interviews with the family around it, they say we don’t want to pass inflation cost under our customers and we want to be very open about the fact that that’s what we’re doing. And it sort of reinforces, I think, you know, one sort of not conspiratorial, but the thought that people have about inflation, which is that is occurring, but also corporations are deciding that they can just charge higher prices and then blame it on inflation.

S1: And that is literally what inflation is. You know, that when companies take advantage of their pricing power, that is inflation. And when companies don’t take advantage of pricing power, then you don’t have inflation. And if you look back at the history of Arizona. Iced tea, there was this very key moment. The ill stretched on the wild, actually obsession for like seven years between 2008 and 2015, where the big question was like, are they going to be a company that sells out to Nestlé or Coca-Cola or Tattoo or someone who will then maximize revenues, maximize profits, take advantage of whatever pricing power they have? Or are they just going to stay a family owned business making more than enough money for the family and that’s good enough. And what happened was there was a big fight between the two co-founders and the co-founder who wanted to sell out to the profit maximizers effectively lost and he had to sell his 50% stake for a mere billion dollars. The poor guy is, you know.

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S2: Hope he’s okay.

S1: I hope he’s okay. And the other guy wound up basically controlling the company and is very explicitly saying, like, this is my main priority is just keeping this thing at $0.99. I will cut costs as much as I can. I will use less aluminium in the cans. I will squeeze margins if I need to. And I’m just going to keep this at $0.99. I will spend little, if any, money on marketing because the cans just market themselves by saying $0.99 on them. And is this optimal from a maximizing profit perspective? No. If I had a fiduciary duty to shareholders to maximize profits, would I be able to get away with this? Probably not, but I don’t. I’m the only shareholder I can do what I like. I’m a billionaire. I’m a multibillionaire. So do I need the extra money? No. I can just keep it at $0.99.

S3: Also, they have higher margin products here.

S1: There’s they do?

S3: Yeah. They have a few other products that are higher end. They have a part seltzer product. And and I’m not sure that they’re keeping the prices down on those. So it could be that they just think of the 99 cent can as their marketing secret weapon.

S2: Are they definitely think of it as a marketing weapon with the big 99 cent sign on it. I think Felix was like, it’s kind of like a gas station or was the L.A. Times piece who said like how the gas station says how much gas costs? Arizona iced tea says how much Arizona iced tea costs. And it’s a big marketing boon for the car. Yeah.

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S1: I feel like when I was growing up you used to see that much more often, which was objects like marketing themselves as great value and being cheap and specifically saying how much they cost. Like to this end and now the things that advertise themselves on actual literal prices to the Senate and many fewer. It’s hard to think of many beyond the dollar stores, which are no longer dollar stores and are now selling things to about 99 and about 25 and that kind of stuff. And Arizona Iced Tea.

S3: There’s also a psychological effect with any price that ends in a nine. Just that keeping it below a dollar is, you know, makes people think that it’s cheaper than it is. Like if you went just up $0.02 or something, you know, people perceive the difference to be much larger than it is just because it’s it’s a weird cognitive thing that we have.

S2: So my question is then if well, I mean, Felix answered it, but just as a thought experiment, couldn’t U.S. companies do the patriotic thing to fight inflation and stop raising prices and break the back of inflation without the Fed having to drive us into a recession? Can’t they just like take the hit.

S1: Emily Peck is channeling in inner Jimmy Carter?

S2: Well, come.

S1: On. Companies just like. No, don’t.

S2: It’s ESG. Good ESG. You have to think of all the stakeholders we don’t want. No one really wants inflation. No. Certainly no one wants a recession or unemployment. Right. Right. CEOs that are listening. So stop raising prices just like chill out a little. Profit margins are fat and healthy.

S3: Yeah, they don’t want shareholder lawsuits either, though. That’s the.

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S2: Don’t shareholders want less inflation, too? Don’t we all not want to see 8.5% inflation anymore? It’s interesting that, like, companies have the power to stop it. Like. Right. Like, I don’t have I can’t do anything. But if I’m the CEO of like Amazon or something, I could put a dent.

S1: One of the most invidious forms of inflation that happened this week was Peloton.

S2: It raised its monthly fee to $44 from $39 and decreased the price of a peloton bike. The new price of the peloton bike is $1,445.

S1: But that’s the whole point, is that like everyone who already has a peloton bike, they’re not selling many peloton bikes at the moment. So it’s not like they’re making much revenue from selling bikes where they’re making their revenues from these monthly fees. And if you’re locked into the Peloton ecosystem by owning a peloton, you really have no choice but to just suck up this 20% hike in monthly fees. And presumably they will just. Continue to raise the price over and over again because you don’t have much alternative. Having bought the bike. That’s pricing power, people.

S2: It’s a good idea though, I think, because that’s where their their revenue long term is going to be coming from anyway. The bikes should have always been cheaper because it’s a lost fleet. It’s it’s just how you get people subscribed. It’s like my printer. I mean.

S1: On the one hand, yeah. Like the sell the raises for cheap and then make lots of money on the blades model makes perfect sense. On the other hand, at some level, people are just going to be like, okay, $44 a month is a lot of money to pay in perpetuity per month for Peloton. But what’s even scarier than the prospect of spending $44 per month in perpetuity is the prospect of Peloton being able to raise that number whenever it likes for any or no reason. And it could be $150 a month next year, and there’s nothing I’m going to be able to do about it. And that is going to make people reluctant to buy a peloton in the first place. So my number in the numbers round is 6.7%, which is an inflation rate in America. As we all know, inflation is 8.5%. In Argentina, inflation is 6.7%. So. Wait, hang on a sec. No, that’s how much Argentina inflation was in March. Month on month, inflation.

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S2: Was.

S1: Actually inflation, if you annualize it, is about 55% in Argentina. And as a result, the central bank has raised its interest rate to 47%. Is the overnight interest rate in Argentina now. But then and this is glorious, the overnight interest rate is so high that what you need to do to effectively annualize it is to take into account the fact that you get interest. You can reinvest that overnight interest and get interest on your interest when you include the interest on your interest. The effective annual base rate from the central bank is 59%. While there’s this IMF rule, basically under the current IMF regime, the central bank has to keep interest rates higher than inflation. So if inflation is at 55%, then they have to have interest rates of 59%, which is just.

S2: Wow, why is it like that there? What’s going on?

S1: Can I just answer with one word, which is Argentina? Sure. You know, like there is there is a point at which Argentina is just going to Argentina, but we can go into detail about what’s going on in Argentina in the future episode if there is demand for that. Elizabeth, do you have a number?

S3: Yeah, my number is $735 million, which is the Treasury Department estimate for the value of the world’s largest super yacht, which has now been seized by German authorities because it has connections to a Russian business tycoon.

S1: But that’s not Roman Abramovich, right? Is that a different yacht?

S3: No, it’s a let me see. It’s Alisher Usmanov.

S1: Yeah. Alisher Usmanov. Yeah. Good for him. And losing it. $735 million. Yeah, like, you know, like. Do you think he misses it?

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S3: I feel like this is just a game of global battleship at this point. We’re just knocking all of the super yachts off the board.

S1: The Moskva is on the bell is in the bottom of the sea. The moskva was was sunk. That was the big new. The big like non-financial news of the week. The fuck you Russian battleship ship is now been sunk.

S2: I read that now all these governments that are seizing these yachts now have to pay for the upkeep of the arts, which is kind of.

S1: Which is a non-trivial amount of money. And at some point, they’re going to have to work out what what to do with the yachts. But the governments can afford it.

S2: I think they can afford it and they probably make money off it in the end because they can do some cool auction or something right now. Auction off yachts.

S1: Maybe. Or if you’re Elon, you would turn them into homeless shelters, right?

S2: God, I have a number. My number is 10.3%. That is the percent of workers in the U.S. that are in unions. And it’s half what it was when the BLS started tracking this particular number in this particular way in 1983. And I use this number for a story I wrote this week on how the big labor unions are so unaccustomed to excitement around unionizing. They’ve just been managing this decline that they’re having a hard time adjusting to what appears to be a new kind of landscape where there’s actual interest in the private sector, in unionization. And there’s a lot of people inside big labor that are like, you need to stop focusing on the politics stuff and actually organize workers. And it’s getting the ship turned around is pretty hard. Some almost like in the private sector, if you’re a company, all of a sudden you’ve been selling like widgets. No one ever wanted the widgets, and then all of a sudden everyone wants your widgets. You would start making more of those widgets. But big labor is hasn’t yet started making the widgets in any appreciable way, if that makes sense. They haven’t responded to the demand yet.

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S1: There isn’t like the chart that you ran with your story is astonishingly down and to the right. Given how many headlines we have all been seeing over the past few years about union, this union that these people have voted to join the union, these people have created a union. You would think there would be at least a little bit of an uptick at the end of the line saying, look, it’s going up finally for the first time. Nope, it’s not still going to go.

S2: Yeah, it’s pretty steady. And it’s it’s not it’s not really unions fault. I mean, there has been a very, very strong campaign and big business and the politics to destroy unions and it’s been extremely successful. So that’s been happening. Lots of laws passed.

S1: But like if you look at what’s amazing is if you look at, say, the Starbucks that are unionizing, you know, there’s one store with 17 workers that’s like 17 new people in the union and then there’s another 20 workers and that’s you people in you. But you are never going to move the needle by unionizing at like 17 people at the time.

S2: No, you’re really not. If you got all the Amazon workers, that would help.

S3: I think some of it is we we have this sort of perception that this is happening more than it is because the places that are unionizing that have it before are somehow white collar media people adjacent. It’s either media company or the Starbucks they go to or, you know, and so it just creates this distortion field in terms of what we understand to be happening.

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S2: Yeah, it’s so rare that it gets covered a lot. It’s kind of like crime, right? Everyone’s like, there’s so much crime. And if you look at the chart, it’s much less than it used to be. But it gets a lot of attention too.

S1: Talking of which, a minor erratum I think I should throw in here from last week. Many thanks to someone coming over here who wrote in and please keep the emails coming. Slate Money at Slate.com with a very good point. When I mentioned last week that the. Most powerful unions that I could think of were the big sports unions, the players unions in football and baseball and basketball. And those guys were making millions of dollars and they had huge amounts of power. Of course, the thing I forgot was the police unions and the police unions are for real. See the most powerful unions in America for really? But yeah, I think that’s it for us this week. Unless you are lovely and beautiful enough to be asleep. Class Member. And if you have the requisite degree of beauty and loveliness to be a sleepless member, your prize is to listen to a Sleep Love segment on the Kardashians. Otherwise, thanks for listening. Thanks to everyone this late who produced This is a whole team effort and we will be back next week with even more sleep money. Okay. The Kardashians are back. They had their final show on E! And they were like, this is the end of an era. We are not doing a reality TV show anymore. And then they managed to not do a reality TV show for like one year. And then they changed their mind. And now they’re doing a reality TV show again. And it’s not called Keeping Up with the Kardashians anymore. It’s now just called the Kardashians, and it is streaming on Hulu. And Hulu apparently paid them $100 million for this one season, which is I feel like they would have done it for free given how much money they make from all of their ancillary businesses. But they got paid 100 million to do it. And this strikes me. Hulu, of course, being part of Disney and Disney being this company that ever since the Bob Iger years basically stopped doing anything that wasn’t related to massive IP franchises. And you can see what they’re trying here. They’re trying to turn the Kardashians into a massive IP franchise. They’re making a massive bet on the Kardashians. No idea whether it’ll work or not.

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S2: Okay. First of all, have either of you ever watched an episode of Keeping Up with the Kardashians to Save Space Sleepless?

S1: No view, Elizabeth.

S2: No.

S1: You did okay with this.

S2: Now you’re an experienced room. I mean, it’s a massively influential. It’s massively influential, right? I mean, James created.

S1: An entire family of billionaires.

S2: Changed how we think about influencers and influencing.

S1: It’s changed how we think about, like, you know, major famous families who are now racially diverse in a way that never used to be.

S3: A part of the value of picking up the show, too, is that each one of them individually is kind of a self-perpetuating marketing machine. They have so many other ancillary businesses. You’re not just buying the show. You’re buying this kind of incredible reach that goes so, so much further beyond whatever they’re getting out of just the show.

S1: So I understand from the point of view of like Kylie Jenner that this show will help drive more sales for Kylie Cosmetics in some way. What I don’t understand is from the point of view of Disney, in what way does Disney benefit if Kylie gets more sales in her cosmetics line?

S2: Well, didn’t you say in your piece the the hope is that Hulu just gets more people signing up for Hulu to see the show because it had such a big audience.

S1: Right. So so the. Yeah. For Disney, for Hulu, what they want is a bunch of people signing up for Hulu just to watch the show. It doesn’t need to be like a broad pop culture phenomenon in the way that it was 20 years ago. It just needs to reach the massive Kylie Stans who are going to be signing up for Hulu just for that one reason. So yeah, that is clearly part of the calculus because Hulu needs must watch TV in order to compete with all of the other streamers. I just don’t think that it gets a huge amount of ancillary benefit when Kylie’s cosmetics line as well.

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S2: Right. Yeah. That that’s not why they’re doing it.

S3: Right. Yeah. I just think of it as ancillary marketing, though. It’s you know, there are some people who are sort of pathway into understanding the Kardashians is maybe one of the peripheral things and not the show itself.

S1: Right. So I think that’s actually true. Like, if you wind up, you know, buying a lot of the cosmetics, you’ll probably follow Kylie on Instagram. If you follow Kylie on Instagram, she’ll be like referencing the show. If she’s referencing the show and you want to know more about her crazy rich life when you sign up for Hulu. And on spins the flywheel.

S2: Yeah. Yeah. It’s just a massive marketing operation for everyone involved. Everyone who’s involved touches this in any way, is doing it just to get more attention and sell more stuff, whether it’s subscriptions or cosmetics or, I don’t know, shapewear.

S1: Yay, capitalism.

S2: Maybe they should buy Twitter.

S1: That would be awesome that we could all just be watching the Kardashians on Hulu to see the behind the scenes of them putting together a bid for Twitter. That would be amazing.

S3: I would personally be a lot more comfortable with a Kris Jenner run Twitter than an Elon Musk on Twitter.

S2: Yeah, she does some good, doesn’t she? Get people off death row and stuff. What is it you want done?

S1: She kept on trying to pass the bar exam and I don’t know whether she has yet. She passed the baby eventually on like, the fourth.

S2: Great. Good for her by Sleepless.