The Iberian Siestas Edition

Audio length: 00:43:15
 

On Slate Money this week we discuss:

• CEOs being fired for consensual relationships with subordinates, including, this week, Steve Easterbrook of McDonald’s, and Brian Krzanich of Intel last year.
• Austin Frakt’s New York Times story about sleep being good for your salary
• Felix’s Axios piece on the allure of private money.

And in the Slate Plus segment: Saudi Aramco’s plans to go public

TRANSCRIPT
S2: Hell. Hello. And welcome to the Iberian siesta episode of sleep money. Your Guide to the business and finance news of the week.

S3: I’m Felix Salmon of access. I’m joined by Emily Peck of Huff Post Hello. Formerly the Huffington Post which was run by the Sleep expert Arianna Huffington.

S4: I’m joined by Anish Minsky Hello. Do you get enough sleep. Not usually not usually. You see I’m.

S3: I’m beginning to put a theme together here. I’m going to talk about how I’m all jet lagged because I just got back from Portugal I’m going to tell you a little bit about what I got up to in Portugal and somehow Segway that into a piece about private markets. We are going to talk about the CEO of McDonald’s who had an affair with a subordinate and wound up losing his job as a result and various other people in similar situations. And yes we we’re going to talk about Liberians yesterday. We’re going to talk about sleepy time and we’re going to talk about whether naps make you richer. I think this would be the best world really is a world where people get rich by napping that’s a dream worlds that literally really we are also going to have a plus segment about Saudi Aramco. So all of that is coming up in sleep money. Let’s start with people losing their job for having consensual sex.

S5: Yes. Yes. The new thing this is the hot new thing. Most recently it’s the CEO of McDonald’s. Yes.

S6: This week McDonald’s said that Steven Easterbrook was going to step down because he had had a consensual they emphasize consensual relationship with an employee at the company and that violated McDonald’s policies. So he was out. This is despite Easterbrook presiding over a big increase in McDonald’s stock price over the past five years I think. And

S7: this was we saw something similar at Intel a few like a year ago I believe it was a year ago.

S6: And you’ll have to help me pronounce his name the sandwich. Sure. Brian Cruzan it’s from Intel also was stepped down because he had a consensual relationship with an employee. And one thing I thought of immediately was how can a CEO ever have a truly consensual relationship with an employee. And then I had a an internal fight with myself Emily. In which I was like C’mon CEOs need to have relationships too it’s possible you’re in the workplace all the time.

S8: You might fall in love with someone you work with is that so wrong. And I said Emily yes. The CEO simply cannot have a consensual relationship.

S5: I don’t want to I want this late Emily dialogue to continue. So where did you Emily. Did you. Did you reach some kind of alien synthesis. I

S8: yes. So OK CEO cannot have a consensual relationship with someone he or she works with. It’s not possible because they are the boss of everyone and there’s always going to be that little power dynamic there. And if you have a policy against such things then you’re violating the policy. However isn’t there a need to be fired for it.

S9: Well OK. So I have one question first. Isn’t there a power dynamic in every consensual relations. Yes.

S8: Yes. Yes that is another point I made to myself but you could should make it now because this is ridiculous.

S10: It’s just I was kind of laughing as you were saying that because when I described my thoughts on it I was also like there were like these two parts of me and mine I more started on the other side. I was like however consensual like that seems.

S11: But then I do think you’re right that if like if I were running a business I would just have a very strict policy because you know if you have someone who is in charge of people especially if they’re a CEO then you know even if it’s not their direct report. Like if you’re managing the girlfriend or boyfriend CEO like how do you do that. Right. It’s just too complicated. So you probably do need to just have. So what.

S12: So what’s the point it. No one no one is allowed to. What. Exactly.

S11: So I think that what would probably make sense is to say what I know a lot of like. I think financial firms have which is that almost any relationship between even co-workers. You have to disclose. OK. And so and I think that would be one thing you could say OK well at least if it’s public and disclosed. Now once you get into senior management I think it’s reasonable to say you are not allowed to have a relationship and if you do then you’re not allowed to be senior management anymore. Maybe you don’t have to be fired but you might have to leave.

S6: Yes. And I feel like like maybe Easterbrook was there are cases where you know a CEO or a leader can behave perfectly ethically in the relationship despite the power dynamic. They could see they could recognize internally themselves. Oh this is kind of a tricky little thing. And they could do everything they can in their power to make it fair. But then you see abuses of power. And so we’re going to talk about David Drummond right.

S4: But I’m still stuck on the principle.

S13: Like if you want to formalize some kind of a rule and you know breaking the rule means you get fired then I think the you know like what Matt Lauer did was definitely a firing offense. You know if he had sexual relationships and we can you know argue the toss even if they were consensual they were still a firing offense. So we didn’t even need to argue whether they were consensual because like either way those relationships were enough to get him fired. But then why. OK he gets fired. What about like Joe and Mike. Right.

S11: No it’s a good point and I mean this is where I then go back on the other side of where I started which is that humans are really complicated and I think you know again from an H.R. legal perspective you want to make things really clean and nice. Right. But then I think the problem is you’re always going to run into these issues because it’s always gonna be like well but who is this person slightly superior to this person. It’s it’s never gonna be easy but I think the fact that ME2 is making people have these conversations is ultimately good because I think what hopefully this would do is help at the actual lower levels at McDonald’s because to me that’s the real issue. Right. You don’t want women who are being paid minimum wage and working at McDonald’s franchises to have to worry about sexual harassment because they have some fuzzy policy so that the CEO can have relations with that branch manager. Yeah.

S14: And that’s the other thing that’s going on here which is that McDonald’s is facing about 50 harassment complaints from line workers at the EEOC and in the courts over sexual harassment discrimination pretty gross stuff. We’re like the manager of a local McDonald’s is doing all the bad stuff and I guess optically you can’t have the CEO do something. And I will I won’t say similar because no one’s saying there was actual misconduct here but you can’t have the CEO kind of like skirting the line and also defend yourself against these 50 complaints.

S11: And I think this maybe then should bring us we can just briefly talk about Google. Yes. Because Google has this really bad history frankly of. I mean if you look from the stories of their early founding just lots and lots of sexual harassment that has been reported and then and lots of having affairs with subordinate right.

S12: I think both of the co-founders did.

S9: Eric Schmidt is notorious for like going through a whole string of girlfriends often like simultaneously and turning up to you know like the whole Eric Schmidt thing is an entirely different conversation. But like yeah. There’s very little indication that Google has been good on this. I am the General Counsel David Drummond was one of those very powerful Google men who seem to think that it was fine for him to just take whatever he wanted from the employee pool.

S15: And it was a few months ago that a former a woman who worked in under Drummond in the legal office of Google wrote this post on Medium that people should go and read just documenting her relationship with Drummond.

S6: And it was horrifying like they were having a baby together and just go and read it. I mean she alleges some really horrific and horrendous behavior. And you know she’s retaliated against at work and then he went on to date someone else at work too. This is clearly a big problem there. And Google really didn’t respond to that until this week when the company said OK fine maybe we have a problem. We’re gonna hire crevasse know fancy law firm to investigate what’s going on here because there is also this story in The Times about how the company paid Android found there had been Andy Rubin like 80 million dollars even though he had the sexual harassment complaints against them they paid him 80 million to tweet to be fired. And Steve everyone gets paid millions of dollars in these cases it seems like to go away which is nice. I would like that.

S12: Don’t have as good as Adam Newman although he has the same. You know he has sexual.

S16: Yeah he has a lawsuit pending now a pregnancy discrimination against him.

S9: That was his chief of staff the woman who got pregnant and he was like he called it her holiday. I wish that everyone could see that. Emily I arose because the Emily I also kind of the best father circling fleet.

S6: Yeah. We should do it Jeff. But I mean I was saying to you guys before we started taping that a high up woman in the tech industry who was speaking off the record yesterday was saying to the group of us that corporate America is doing a better job handling ME2 or in the Postmedia area. And who better than she made the comparison to like health care workers working in homes stuff like that. Like workers who aren’t within like a big corporate umbrella.

S11: You know nurse you know I don’t know if that’s me but you could maybe make the argument that you know I think what everybody thinks of his Trump right. That you know we have this president you know who is clearly has all of these allegations against him and in government there historically are all these problems and although yes we’ve seen some men get tossed out and a woman get tossed out as a result of me too. It does seem like we’re seeing a much faster.

S14: OK so let’s talk briefly about this Kathy Hilton compared to politics corporate America is throwing out people for abusing power faster than in politics.

S7: I mean there was the comedian Senator Al Franken. Al Franken. I mean there does seem to be this weird sort of growing consensus that the Al Franken defenestration was too fast and a mistake.

S5: I mean that’s Al Franken is opinion but I’m seeing that more and more I think people change their mind on that one.

S7: Yeah but Emily just let us because we’re tying in every conceivable lead story here like the other big consensual sexual relationship which led to resignation this week was Katie Hill the Democratic congresswoman and the Democratic Congress and that was like a revenge porn state thing. Yeah very nasty. Yeah. And is that just a completely separate thing or is that what you like tech executive was comparing corporate America to.

S6: I think it’s similar to what’s happening in corporate America whereas the Congress passed new rules and you know congresswomen and men aren’t allowed to have relationships romantic relationships with staffers and it was alleged the Katie Hill had a relationship with a staffer though she denied it.

S15: She only she admitted to having a relationship with a campaign staffer which is technically OK but still wound up stepping down also because she didn’t want anymore you know revenge porn pictures coming to light I anymore I think as well but I think it’s along the spectrum of campaign if it is still a stuff. Yeah I mean I think it’s along the spectrum now that we’re living in a new kind of world where the rules are are tightened up and people like Steve Easterbrook you know have to step down our Brian her from Intel has to step down. You know I think things have changed a little bit.

S6: So we see these we do see these examples but things aren’t perfect because we still have you know Trump in the White House. We still have David Drummond at Google. I mean do we think that crevasse is going to succeed and getting him tossed out.

S11: I mean I mean obviously things are going to change super quickly but I at least we can say it there’s so many horrible things going on right now that to say like one thing is moving slightly in a better direction. OK I’ll take that.

S3: So so we’re applauding McDonald’s for this.

S8: That’s the thing we we really don’t know enough to have Lord like we don’t know the story it’s been covered up. Right. I mean they say it’s consensual.

S5: But like Matt Lauer also says everyone there was gentle on the woman says he raped her. So like everyone says it’s consensual like that that’s the thing about these delusional men.

S7: They’re all convinced that these women are desperately in love with them even just you know because that delusional and so you can’t necessarily take their word for it.

S15: Right. I would love some enterprising fast food reporter to give me the inside scoop because also I think the next day after Easterbrook resigned or was he was fired but without cause that allows him to get this like massive payout. But the day after the H.R. the guy in charge of H.R. also resigns. But we don’t know why but they they claim it’s not related. But again we really don’t know suspicious. We don’t know.

S7: OK. Let’s talk about sleep because I have had very little of it because I was in Lisbon and we’re going to talk a little bit about why I was in Lisbon. But before we talk about why I was in Lisbon can I just take the opportunity to do the classic first world problem thing of complaining about travelling east which is something which as I get old and decrepit I hate more and more and I cope with worse and worse. And it really does screw up your circadian cycles and it’s becoming more and more understood as Emily’s former boss Arianna Huffington would love to tell us about that. That is it’s deeply harmful in a bunch of ways. It’s not just doesn’t just hurt your cognition it hurts your health it makes you gain weight. And what’s the news here.

S6: The news hook is a story that Austin Frakt wrote in The New York Times where he writes about a study that showed better sleep equals higher pay. And this is really interesting piece about this study that was in the review of economics and statistics and what they did was compare cities that are in the same time zones but are so far apart that sunset is different. Right. So for example Boston in Ann Arbor Michigan are in the same time zone but the sun sets earlier in Boston. And when the sun sets earlier people get more sleep huh. So the economists that the study I believe its economist but you have to check. They concluded or the data showed that in the places where the sun sets earlier and people get more sleep they make more money and it’s everyone collectively making more money. So it’s not like if you Felix decide to finally stop being such a jet setter and travelling east and get more sleep you will make more money.

S5: Like it’s it’s like a it’s collect this is this is super interesting to me the idea is that if you’re on the western edge of a Times and The days stretch on much longer then that’s actually bad economically. Yeah. Bad fun activity.

S13: And the thing which I can’t stop thinking about here is basically Iberia not just Lisbon but the entire Iberian Peninsula for pretty good economic reasons it’s basically on the same time zone as the rest of Europe despite being way to the west of the rest of Europe and that is one of the reasons why they you know eat dinner at 10 o’clock and that kind of thing and they deal with it historically and they still but less so now but they still very much do deal with this by inventing the siesta.

S9: They have to catch up on sleep in the middle of the day is the only way they can do it and obviously that’s not great for economic productivity and they are poor compared to the rest of Europe. Maybe the time zone is passed and it looks so skeptical.

S10: I just don’t buy any of this. I at these studies I’m always just like there are so many other factors like I don’t know being in the state of Massachusetts San Diego State right. I mean like so it’s it’s an interesting intellectual exercise but I kind of don’t buy it at all.

S14: But there’s other stuff like We know that when kids start the school day later it’s it’s better for their learning and because they go to sleep more. It also also lets the car accidents.

S12: Apparently that leads to a yeah reduce car crashes if you start the school and just changing the clocks twice a year causes a whole bunch of deaths and car crashes because you get that little baby one hour jet lag and one hour of jet lag it’s not a lot of jet lag but it’s still jet lag and you get jet lag without even getting on the plane that’s the worst of all worlds. I

S6: mean I have no doubt that sleep and productivity are linked.

S11: I’m sure they’re linked. I just think that it’s probably small. I think if you’re thinking of all the guys reading this this article and if you’re thinking of the major health issues that are facing Americans it’s like sleep is the actual impact is kind of marginal well compared to a lot of other things.

S13: I don’t think this is I don’t think this is something which is the major health issue facing Americans so much as it’s a huge understudied health issue facing basically everyone in the urban world since the invention of the light bulb. You know it’s like it’s a big thing. And as we as we now carry light bulbs in our pockets and stare at them until one 30 in the morning going down ticktock coals. Not that I’ve ever done that or anything like it. It gets worse and worse and I think that it’s very easy to underestimate the deleterious effects of this just because it is so omnipresent.

S11: I mean I agree with you that I think a lot of people don’t get enough sleep. I think that the amount of television and now the amount of just overall screen time I think is almost certainly making that worse. I just think that some of the grand conclusions from some of these studies I don’t really buy because I think there’s kind of again there are just so many different factors you’d have to work at right.

S14: You’d saying it’s hard to isolate. I mean the authors of the study say more sleep can increase earnings by one point one percent which isn’t actually quite very drastic.

S11: Also what is odd kind of interesting to you because one of the things you often hear is that people who are higher paid or people who have you know kind of the quote unquote more demanding jobs tend to sleep less.

S14: You do hear that argument and he mentions that in the piece. Yeah but I mean I wonder if if that’s true and I feel like there’s a lot of like like bragging. Yeah from like high powered kind of executives that they wake up at 430 in the morning and stuff like that I just yeah I mean I don’t know actually.

S5: Yeah exactly. There’s that legendary business insider listed which people love to hate on every every time it comes round it’s like that 10 things that successful people do before breakfast and you know like there’s no one who doesn’t think Oh yeah I’d have post we we made fun of that years ago by doing like 10 things successful people did before they were born and like.

S14: Parents anyway. But what I was gonna say is the real people that aren’t getting enough sleep are like lower income workers who have like crazy schedules inconsistent schedules that can’t have consistent sleep.

S10: I think if working parents. Yeah. It’s the statistics are weird on this. And I guess this is why I just come to hours like I think you could. We can play like my white paper versus white paper here. I just think. But I think overall it’s good to say that sleep is something that we should focus on and sleep is something we should encourage. I just don’t think it’s responsible for the lack of productivity in Iberia.

S3: But I do think that there’s on some level I don’t know. Certain jobs which were require long hours. Why end up selecting for the people who can perform at a high level without without with very little sleep.

S7: There is I think it’s about 5 4 5 percent of the population who really genuinely only need like four or 5 hours a night and those four or five percent of the population you know might not be any smarter but because they have this weird genetic disease or an abnormality let’s call it they get to be overrepresented in executive ranks for precisely this reason and I think certainly you know the kind of international jet setting management consultant types. I think it’s really hard to do those jobs well unless you have that abnormality.

S14: I don’t know. Again I question there was a study recently where it was like it was a study of consultants who were saying they worked 80 hours a week but were just lying right. So I think that happens more than you would think where people claim to be working.

S9: The question is if you’re if you’re travelling and you know I just did this you know I was in Portugal for a week and it was I quote unquote working the whole time. No no but you’re out you’re on the road you’re always in that kind of working context you always have stuff you’re trying to catch up on you or you will always feel like you’re in this kind of weird fog and you know it wasn’t like I was on holiday you know.

S6: Oh and another thing I would say like doctors I think the medical profession has really learned over the past decade or so that you have to have more sleep because doctors used to it was punishing residents for me to work 24 hour shifts and they find that sleepy sleep different doctors make more mistakes like vines out turns out bad idea like.

S8: So I think sleep. I don’t know.

S6: I think I by this study that places that people get more sleep have higher productivity.

S13: Just yeah even. Even if you can quibble with any one paper or the methodology thereof I think the intuition is is absolutely correct and there’s evidence from doctors and students test scores are lower when they get less sleep.

S6: And personally I know like when I came back to work from maternity leave my baby wasn’t sleeping like I was not a coherent person back then like you’re barely like holding it together when you don’t get enough sleep. So I don’t know it’s that intuitive. I think it’s real it’s real.

S9: So yeah I was in Lisbon for this thing called Web Summit which has been going on for quite a while now. I started in Dublin and then moved to Lisbon and it just gets bigger and bigger. It’s this big European tech business conference. And it was quite terrifying. I try to avoid big conferences as much as I can. I on some level I kind of in the back of my head knew that it was big but there’s a big difference between knowing where the conference is big and then stepping out on stage in front of a literal like the largest indoor arena in Portugal which pits 20000 people and do a panel discussion with like Neo banks. And it was is something I’ve never done before.

S13: But what you realize when you’re in that context you see these enormous crowds like literally tens of thousands of people I think the total attendance was over 70000. What I realized was that basically every one there was either trying to raise money in the private markets or was in the business of handing out money in the private markets. They they were like G.P.S. or LP user flight. Venture capitalists and that kind of thing. So that the whole thing. And partly because it kind of made sense to me when I thought about it that way because private markets are more opaque than public markets and they rely more on who you know and personal connections in the way that all opaque markets do. And so the need for conferences like this goes up because that’s how private market markets work. And if you hang out backstage at this kind of conference and I mean literally the backstage of this conference was an order of magnitude bigger than most companies I go to you hang out backstage at this conference and it’s it’s people saying Oh do you know this person you know. Oh yeah I used to work with this personally. Why would I. Everyone knows everyone. It’s the only other place that I have experienced that is in the art world which is an equally opaque market. And that was super interesting to me.

S6: So you and you wrote a piece in axioms basically saying that private markets are the new thing and public markets are the bad and they’re dying.

S5: I mean I mean no not the not quite public markets doing great.

S13: You know with the U.S. stock market is an all time high. The European stock market is very close all time highs. It’s been surging. It’s been very good this year. We’ve had a whole bunch of IPO. It’s very easy to lose perspective here like people were over awed by the amount of quote unquote dry powder in the venture capital industry it’s like over 100 billion dollars right now the amount of cash that’s just waiting to be put to work and the like this is amazing just look at all of the companies that can be funded with 100 billion dollars. I mean 100 billion dollars that’s how much cash Apple has. Right. Right. You know so like public markets are still so much bigger and so much more important. No one is going to replace them but private markets are becoming more liquid. They’re becoming more transparent they’re still opaque but they’re less opaque than they used to be and they are beginning to come around to light. I think what I think the big change which I’ve got my head around is that it used to be like rich people high net worth individuals would put a bunch of money into a venture capital fund and say look I hope I make lots of money this way and that’s much less common. Suddenly in terms of like just sheer weight of money now then much more permanent capital from pension funds which don’t need to start paying out for another 30 years or sovereign wealth funds. So that kind of stuff. Who and the rich people wanted their money back in five to 10 years and the permanent Kapor Capital people like they don’t actually want their money back. If you can keep the returns going at double digit rates for 30 or 40 years they they would love that. So what you’re seeing is these stakes starting to change hands and you know someone will invest for an early stage stake in the private company and then they’ll sell that stake to a late stage fund and then that late stage fund bill will sell that stake to Softbank or the whole thing will get taken over by a private equity fund and private equity of course is 10 times bigger than the venture capital. So this idea that companies can just stay private more or less indefinitely without you know even when they’re funded by people who need an exit like it’s now becoming possible in the way that I didn’t think was possible in the past.

S11: A lot of what we’ve seen in the growth of this like this period of growth in the private markets which has been enormous it hasn’t yet gone through a crisis. Right. And I think that that’s always something to consider because everything always looks great until everyone thinks it’s fine until it’s not. And we don’t know what private markets of this size how they react in a crisis.

S6: I guess that’s what is seems troubling is there is lots of benefits to having public companies because you have a little more insight like you say there’s more transparency you kind of know what they’re doing can see results. And

S12: and when companies go public as we saw with we work of course but with the other IPO is right over the past year is that like private markets are they might have got ahead of them doesn’t seem like if you look at the share price I mean the share price of Uber is now significantly below where it was five years ago like free funding rounds before it went public or a lot of other big unicorn share prices are going down into the right including you know slack and Lyft and a whole bunch of others.

S3: We work of course never went public at all. So it does look like the public market price discovery is better it’s at least let’s just say conflicting with public with private markets right. Whether that’s better or not I don’t know. Is it good for Bluebird to have a low share price. Probably not. Like if it had stayed private. On the one hand it wouldn’t have been able to raise a billion dollars in equity capital by going public. But on the other hand it could have just waited until it found people who were willing to pay more money per share and then only sold at that rate.

S6: So it’s like. Which is the fantasy is the fantasy that the company that stays private and doesn’t have to deal with the reality of like making a profit. Or is the fantasy.

S3: Well I mean they only have to worry. I mean like one of the interesting things to me is that private companies which aren’t profitable. And on you know they don’t need to go public because they don’t need new capital. Right. And so I was talking to one guy who’s invested in a fortnight in a game maker. That’s just a cash cow. And on some level like you can just exit from that by receiving the dividends from the profits why even go public at that point.

S6: Right. So I guess where you have to worry is the companies like Uber or we work that weren’t profitable that are just sucking up all this private investment money but are kind of phony baloney.

S11: Yeah I mean. Yeah it’s a coin. Yeah exactly. Yeah. And also because you know you do have a you have more competition and you know in private equity is what you do. You have all of these all of these firms. And so what we’ve seen is that as you know kind of volumes of private equity deals have risen. And part of the reason they’ve risen is because when there’s competition people often then pay more for the deals. Right.

S12: So then as luck like that multiple increases you just end up people paying more and more and more and then I see that in public markets as well where people putting more more money into stocks and therefore the stock market rise rises. It’s just the same thing that we often see with you know quote unquote flows.

S11: It’s just it’s true it’s just that when you’re talking about private markets there is a lot less transparency and that when the markets are super super super tiny you know who really cares as they start to become a little bigger.

S6: It’s just a concern and there’s a value in for for the public and having public companies because you can kind of you. Like Steve Easterbrook at McDonald’s if McDonald’s was in public would they have taken a step to get rid of him like it is almost companies are held more accountable in their public.

S3: We just had a few months ago the last the five hundredth company in the S&P 500 basically the last company in the S&P 500 with an all male board appointed a woman to the board. Like now every single S&P 500 company has at least one woman on board. You know we are getting to board equality far too slowly our gender equality on boards far too slowly but we are getting there. We are moving in that direction in private companies. It is the norm to have all male boards that I work for a private company which has an all male board. Most private companies certainly most private tech companies have all male boards and there is much less pressure on them to change that.

S14: Yeah. Sunshine is the best disinfectant as they say. I mean it really is a benefit to us human people to everyone for companies to be public I think.

S5: I think and also just the fact that it’s public that anyone can invest in it is democratic on some level. Yeah. Democratic. So I don’t I go democratic trends. I don’t believe that access to venture capital is the reason why rich people get richer. You know I think that honestly if they just invested in an S&P index fund they would do just as well. But there is this belief and it is certainly true that some rich people have got very rich doing that.

S10: And I would actually probably that I agree with you and I think it’s probably almost the opposite which is that the reason there is so much money going into all of these funds is because of frankly better quality and a lot of other things right there’s so much capital trying to find a home. So I think it’s it’s almost the reverse.

S16: John talk about the Kingdom me. I really thought Anna would bring it about the king no. Emily tell us about the queen. My God.

S6: OK. Apologies to the listeners but Aramco which is Saudi Arabia’s oil company state owns. They have announced that they want to kind of go public.

S15: I mean they do want to go public.

S13: They want to go public and put a black 1 to 5 percent of the company on the public markets and in Saudi Arabia mostly selling to Saudis like an arm twisty valuation where they can persuade other Saudis to pay that much even if they believe that they want to the valuation is estimated to be between one and two trillion dollars which is like a.

S14: Right. I mean trillion.

S6: And I guess people in the United States investors are excited about this. But to me it seems deeply sinister that anyone would want to buy a stake or any one even one share into the state run oil company in Saudi Arabia. I mean you’re basically investing in the government there and I mean we know what that government is. But nevertheless there is excitement about this.

S13: I mean that the Clintons are excited because they get to make 50 million dollars in fees.

S4: But.

S12: Let’s assume for the time being that normal American investors are not going to be like making the trek to the Riyadh stock exchange to buy shares in Aramco. That that you have to be like hedge funds to do those kind of deals. But it is quite explicit. The Aramco wants a listing in New York or London or somewhere a little bit more legit. And

S4: if and when that happens where does that leave normal people if there’s a new company with a trillion dollar market cap on that index. Do people like me who just say oh you should but just buy the index should we just wind up buying a large chunk of that company because that’s what you do.

S11: Yeah I mean it’s a good question. I mean on the one hand I am very skeptical about Aramco ever listening in outside of Saudi. I’m honestly still skeptical that they’re actually going to listen in Saudi Arabia. In fact I would not be surprised if this coupled. You know it really does raise a lot of questions because this is just such an enormous company right. And yet I mean when you’re talking about you know ESG concerns my boss wrote a piece on those roads everything Robert like. I mean this is like what I think it’s an ESG concern. Oh so sorry. Like environmental social governance. Right. So you know you know you hear this with you know a normal oil company but normal oil companies aren’t owned by governments that regularly behead people. Right. And yes you know what I mean. So I wouldn’t be surprised if you saw pushback from large institutional investors.

S3: I think it’s sad that we’re we’re very very very long way from Aramco making it into any of the major.

S11: And that’s what I mean like I think that this is never really going to become a question I just would be very surprised because because of a number of reasons one obviously Mohammed bin Salman wants to get a ridiculous valuation that it’s going to be very hard to get. And also as we were talking about with public companies like the more public you become and the more open you have to be and that is clearly not something that this government wants to do. And then on the other side of that on the investor side of that you know you have Aramco right now like offering you know really high dividends you know to try to get more interest. But at the end of the day this is this is a company which the government you know two weeks from now can be like guess what. We’re gonna have 100 percent taxes paid to us. You’re not getting anything. I mean they’re saying they’re not going to do that. But it’s a dictatorship. Right. So I think that the enthusiasm for it that you might hear from a book writer is a little overstated.

S15: I thought about there there’s an op ed that I sent to guys in the Times about why it’s crazy that Aramco you know is just a state owned instrument and the kingdom and MVS has total control over this company. And I thought it sounded like I don’t know if anyone seen Goodfellas but there’s one point in Goodfellas where Henry.

S14: Henry Hill Henry Hill is describing how the mafia you know once he gets it hooks into a business that comes every week. And it’s like Fuck you pay me. He had a bad week Fuck you pay me didn’t make any profits Fuck you pay me and it seems like that’s the kingdom’s relationship to Aramco like they have to pay no matter why have come out and said very explicitly that for the purposes of dividends the outside investors will actually come first and then what they say.

S3: And if if there aren’t enough dividends to go around then they will be like Okay just give it to the investors and we’ll take less. They have said that obviously this has not happened yet. They haven’t gone public yet but this is what they have tried to do in order to make Aramco look more attractive and get that multi trillion dollar valuation. I am I’m just gonna come out and say I have zero surprise that they’re skeptical on this one because as we know from many episodes of Slate money over the over the you know however long and that’s been on the show and it believes that all public companies need to show growth and that’s the one thing that Aramco basically is never going to be able to do.

S13: Why. Because it has like set stock of oil but it’s sitting on.

S9: It’s just going to pump out as much as it pumps out.

S12: It’s not a growing company there’s no growth story that it’s just like do you want to make the profits from the oil that I’m sitting on or do you know it’s up to you.

S10: Well I mean there will be some growth in what I mean spending and CapEx.

S4: Yeah I mean like I don’t I don’t think I mean I I don’t buy the global peak oil thesis by Dubai the Saudi’s peak royalties. I don’t think that Saudi Arabia is going to pump more oil in the future than it has in the past.

S11: That’s probably true. But also in terms of how Aramco is positioning itself. There are other growth opportunities like I. I agree with driving cars or something. No I mean like there are you know when you have different types of companies there are different levels of growth you have to expect more in certain types than you do in another right. But I don’t think it would be zero growth in the company. I think I think there’s going to be negative growth. Well I actually think there could be negative growth but but not because it’s just doing the normal thing but because I think historically you had this guy whose last name was Naimi who was the head of Aramco for a long time and he was very very well regarded. And then this guy off Ali came in and he was kind of like his protege. So he’s also fairly well regarded. And then he recently got clearly got kicked out so that this guy who’s the head of the PFA the investment fund in Saudi Arabia who’s clearly buddy buddy with IBS is now in charge of this. I think that this is going to be the buckle. I think that when if you have an instant because if you start to see oil prices another big decline you know something like this on 2014. And obviously Saudi Arabia’s related to that. But if you see some type of big oil decline and all of a sudden Saudi Arabia has to be concerned about paying things out to its citizens or paying things out too like the dividend holders like they can tell you now that oh no we’re going to prioritize that but I just don’t buy and don’t get in bed with the Mafia or Saudi Arabia.

S15: No.

S3: Well Harry Hill Henry Henry Hill Henry Hill. Let’s have a numbers round. Emily do you have a number. I do. What’s your number.

S6: Point Four four. OK.

S9: That is the percentage point difference zero point four four percent of 44 percent point four four percentage point zero point four percentage point zero point four four percentage points.

S6: OK. This is from a piece I read in the Atlantic by friend of the part Annie Lowrey about inflation and how low income Americans face a higher rate of inflation on consumer goods than high income Americans I thought it was so interesting. So low income families experience an annual rate of inflation that is point four four points higher than high income families. And part of the reason is because there is because we are such an unequal society at this point that there is more going on in terms of price competition for goods at the higher end. So the example she used in the piece was beer like because there’s been this explosion in my craft brews and like delicious beers there’s more price competition up there versus down at the bottom where things have kind of stagnated. Like no one’s making like the new low in brow or whatever the new Coors Light. So and that’s just like one example. And of course it’s more expensive to buy the craft beer stuff than the cheap beer stuff. But the rate of inflation for the products that rich people buy is lower than the products that poor people buy and it’s just sort of like this like stealth way of looking at things that I never really thought about that much before. It was really interesting.

S3: My I have a I have a number which is 60 percent which is related to our private market discussion.

S13: I was saying how you want liquidity and one of the things you want in a public market or even a private market is you get liquidity if lots of bidders 60 percent is the value of the sub the bids evening sale this month which is backed by guarantees guarantees basically a way for what looks like a public auction where everyone is fighting against each other to make sure that the work of art goes to the highest bidder and basically turn that ostensibly public auction into a private sale where one person just sells a work of art to another sale and no one no one else even bids. And it’s more more common in the auction world to the point where now now 60 percent of the value of the evening sale is guaranteed and it will probably be higher than that by the time the sale actually happens.

S9: So that’s an example of a private market which is actually becoming less liquid rather than more liquid.

S11: So my number is six point five billion and that is soft banks operating loss but that was smaller than its operating profit a quarter earlier.

S10: I don’t really care. There are two reasons that I brought up a one because if you have not seen Softbank slide deck you need to google it immediately because it’s amazing. It includes the hypothetical orbiter which is Mike my personal favorite and you should not just stop there. You should look at soft things past slide decks. They’re absolutely amazing. Like there’s one where there’s a pie chart that part of it just is loneliness. What I’m not I’m not joking I’m not making this up. We are we long loneliness short. I think it’s supposed to be that like there is so much loneliness in Japan. Softbank will stop this.

S7: Well that was part of Adam Newman’s thing right.

S9: That was how Adam Newman and Massa’s son like bonded was because he was like we are living in these bubbles of loneliness and then everyone’s going to go into we work and make friends and they’re going to live in we lives and no one who lives we live will ever be lonely and muscle is like wow you’re a visionary here have four billion dollars.

S11: Yes. And so this is the other reason I brought this up because I can I do a correction from something for two weeks ago. OK. Because this has been eating me up inside for two weeks that so I don’t know how I managed to like just say it was completely wrong. So when we were talking about the consolidated balance sheets between SoftBank and we work if we work had become a subsidiary of Softbank what I was trying to say was that when you become a city three things become much more complicated legally and there is the possibility that the liabilities could be of we work could be considered part of soft banks liabilities not a legal guarantee but it becomes a lot more complicated. And also there actually can be legal issues. It’s not always likely but it’s possible. And then specifically in the case of we work it’s really complicated because Softbank is already bailed them out. So then there’s this concern that if they’d actually been brought onto the balance sheet creditors were in credit ratings agencies would have kind of viewed those as soft banks liabilities. So this is what I was trying to say and I don’t know how I said what I did but I sound like an idiot and I’m not even joking. I was like the next day in tears or my friends like everybody is going to be close. So just wanted to make that clear OK.

S16: No one thinks we we don’t think I was stupid but Dan for you. They send in emails all the time. It’s true except for the people who say I should be fired. Yeah but everyone else is like Szymanski is so amazing.

S17: I see those all the time. It’s true. We get the emails. Do do keep them coming. If if Anna makes a mistake. Be nice to her because we don’t want her to end up in tears. The email is Slate Money at Slate dot com.

S18: I end up in tears on a regular basis but mostly when I’m sleep deprived so my my resolution is to try and sleep more. I think this is this is going to be good.

S17: Our producer this week is the whole circuit. According to June Thomas who looks like my producer this week it’s actually not June Thomas it’s Phil’s work.

S18: So many thanks to Phil circuits and June Thomas for helping to throw this show together in the absence of jasmine Molly who’s in Nairobi I believe. So welcome her back next week from Nairobi and we will talk to you next week on sleep money.