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S2: Hello and welcome to the Comfortable Pants auction edition of Slate Money, your guide to the business and finance news of the week.

S3: If you are in the market for sweatpants and frankly, who isn’t these days? Would you like a sophisticated auction mechanism to work out how much to pay? The fact is there probably is one. We are going to talk about that in this week’s Slate Money. We are also going to talk about tax evasion and private equity firm Vestor Equity Partners, or rather, its founder, Robert Smith, not to be confused with the lead singer of The Cure and his first big investor, Robert Brockmann. We are going to talk about performance reviews and whether they even make sense during a pandemic and in the slate. Plus, we are going to talk about what it makes sense to wake people up in the middle of the night to tell them so. One other note, the first segment about tax evasion is a little bit subpar in terms of my own personal audio quality. Oh, I should mention that I’m Felix Salmon of Axios and I’m here with Emily Peck of Huff Post. Hello. I’m here with Anna Shamansky of Breakingviews. Hello. I am not at Sea Planum, other studios in Brooklyn, so I don’t sound as good as they have done for the past few weeks. I am sitting at home in a pandemic addled fog and because of that I forgot to turn on my recorder for the first segment. So the first segment I don’t sound so great, but Jessamine rescued me at the end of the first segment and then for the rest of the show I should sound more like this. All of that is coming up on Slate Money.

S4: OK, so the big news of this week is tax crime.

S1: We have one hundred and forty million dollars of fines going to Robert Smith, who’s this big private equity honcho who founded Pista Equity Partners and whose first. Big investor with this guy, Bob Bruckman software, a guy who made all of his money making software for car dealerships. One of the classic ways that Americans become billionaires and the thing which I love about this is that Robert Smith is the richest black person in America. He’s this huge success story and he’s the small fry in this story, like he’s the guy who isn’t going to jail because he’s cooperating in the case against Gluckman, who’s a really big fish. And I’m like, wow, this is huge. So Brockmann is being charged with evading taxes on like two billion dollars of income. This is absolutely huge and crazy. And because it’s a very, very high profile private equity billionaire who’s in the middle of it all. We have to talk about this. Anna, what’s your what’s your take?

S5: I mean, I actually think in an odd way, it’s a it’s a good thing by which I mean the fact that they are they have been discovered that they are being forced to pay fines, that they’re some are being prosecuted. I think we often talk about the inability of the IRS to go after anyone with wealth.

S1: And I think this shows that actually they can, although the amount of time it took to do this is astonishing. If you read the statement of facts, there was this kind of amnesty that the IRS put forward in 2014 for people with Swiss bank accounts where they said, look, we know that there’s a bunch of Americans with Swiss bank Swiss bank accounts and they’ve been putting foreign income into Swiss bank accounts and not declaring it. And obviously, even if it’s foreign income, you still need to pay tax on it if you’re an American. So. We were about to do this deal with the Swiss banks where the Swiss banks are going to tell us about everyone who has all of the Americans who have Swiss bank accounts.

S4: And if you want to just come up to us voluntarily and admit that you’ve been doing this, we will maybe be a little bit more lenient unless we’ve already started investigating you and we already know that your tax criminal, in which case, sorry, no dice.

S1: Robert Smith, who had a Swiss bank account and was doing exactly that. Went along to the IRS in 2014 and tried to, like, turn himself in voluntarily and the IRS said, nope, sorry, you’re already under investigation, so no dice. This was 2014. So this settlement, it was just announced this week has been in the you know, in under investigation for six years at least. It’s amazing how long these things take.

S5: Yeah, but if you think about the amount of money that they will now get in fines, I would say that that still is definitely worth it.

S1: Oh, it’s totally worth it. And it should happen. And it should happen more often. But it does give you an idea, like when everyone’s talking about how much the IRS budget has been cut and how little they audit rich. You know, if you think about the resources that the IRS has certainly put into just this one case, like you have to wonder, like how many other cases they could even have the resources to prosecute.

S6: Yeah, and I was struck by how long this has been going on because Brockmann recruited Smith in the 90s to run this private equity fund, Vistar, of which Brackman was the only client. If I’m getting this right and then for the next 20 years, if you read the indictment, they just did all these schemes that I mean, maybe there could be a movie if someone could really make it more fun. But like, everyone had code names, you know, Bonefish Snapper, the IRS was called the house. At one point, they bought encryption software, literally called Evidence Eliminator.

S1: My favorite one was that Bruckman had a like a whole sort of filing system basically of computer printer paper that he had bought in certain years. So if he ever needed to create a fake document backdated to a certain time, he would print it on age appropriate paper so that if anyone, like, examined the paper to see whether it was correct, it would be correct.

S5: And he was clearly taking that as thinking.

S6: And then I don’t I guess my question maybe one of you could answer was, is did this to make seems to have made money legitimately and then the Brockmann and Smith just didn’t want to pay their taxes? It just seems so gross to me. Like it’s it’s it’s like you guys are doing fine. Just pay your taxes or am I exactly.

S1: Know you’re not missing anything. That’s exactly right. Vista Vista is genuinely an extremely successful private equity company. And while it’s true the Bruckman was the only investor in the first fund, now nowadays Vista raises 15 billion dollar funds and has sovereign wealth funds and big endowments. And, you know, has is a huge successful business. And Brockmann is like a small investor in Besta overall right now. The broken little guy who got it all started and one of his conditions for getting it all started was, look, you need to have it all offshore or at least my funds offshore for basically tax evasion reasons. And it’s like, oh, OK. And then. Even though Smith could have done that and just said, like, OK, if you want enough not a vehicle to invest in, I’ll create an office or a vehicle for you to invest in. But then I will pay taxes on my income because I am an American and I am law abiding. But he didn’t do that. He used Brockman’s accountant basically to avoid paying taxes on all of the income that he got, at least from Brockmann, just so immoral.

S6: And meanwhile, this guy and Smith, we talked about him last year because he showed up at Morehouse historically black college and gave a commencement speech. And spontaneously or maybe it was planned, announced that he would pay off the student loans of all the graduates. Remember that?

S7: And so that was a central part of the plan, right?

S1: Is that his whole argument when the IRS came after him was I didn’t need to pay any income on this money because it was all in the charitable trust. And you don’t need to pay money on money, which isn’t your own, because it belongs to the charitable trust and it has to go to charity. It wasn’t really my money. Now the IRS has chapter and verse explaining why it wasn’t really a charitable trust and that he had complete discretion over it and he could use that money to buy a house in Switzerland or whatever else he did with it. But the. But what’s pretty clear is that as the investigation was getting to the crunch point and hard core negotiations, what Smith did was he just gave all the money to charity genuinely, and he announced this big like I’m paying off all the student debt for everyone at Morehouse thing in order to say to the IRS, look, honestly, it was all for charity, but you can’t just expose give it to charity. You have to sort of make sure that it has to go to the xanthi. And he totally did not do that. And it really does look to me for the entire Morehouse announcement was in large part an attempt to get the IRS off his back.

S6: Wow. That’s and also what’s interesting is to compare this kind of blatant tax evasion to the Donald Trump story we talked about last week, because I feel like they’re of a different ilk. Right. Like Donald Trump is trying to avoid paying taxes he owes, just like these guys are. But I can’t believe I’m saying this, but I I think he’s doing it in a more upfront way.

S5: Yeah. This is this is ultimately the big the real problem is that there the line between tax avoidance and tax evasion can be very blurry. And this is in no way to justify anyone crossing it. But there are just enormous industries around reducing the tax bills of very, very wealthy people, which is why this is not surprising at all and obviously not the only instance where this is happening. And Felix, as you said, if you look at the amount of resources that had to go into prosecuting this one person, there obviously are going to be many, many, many, many who are not being prosecuted.

S1: Well, I mean, the other thing that came out in the news this week was that. Leon Black, who is another big private equity billionaire, was revealed to have spent somewhere between 50 and 75 million dollars on, quote unquote, tax avoidance or consultancy services from one Jeffrey Epstein. And that’s likely on the story. And he’s sticking to it. There’s no evidence whatsoever that Jeffrey Epstein was particularly good at helping people avoid taxes. But the fact that Leon Black can even say that with a straight face kind of implies that, yeah, like billionaires spend 50 million dollars, 50 million dollar checks to individuals just to help them pay less tax. And that’s normal.

S6: I just I guess I’m naive, but if you have two billion dollars, what is the worst tax bill you could possibly have? You’re still going to be left with so much money. I just yeah. I don’t understand why you need to avoid the like, just pay the taxes.

S7: You’re absolutely right. But that’s not how people think, because I’ll tell you why.

S1: It’s because of this whole thing about. Compounded returns. I talked to a couple of rich philanthropists who try to explain to me why they. Make pledges to give a lot of money in the future or give money in annual installments rather than just writing the check that they’ve said that they’re going to give. And they’re like, because I have to keep myself fully invested because I’m making all of these amazing annual returns. And so if I spend money now, I’m not just losing that money. I’m losing all of the money. But it will grow to become in the future. And I’m quite sure that’s a large part of how Smith was thinking. He was like, if I pay a million dollars of taxes today, it doesn’t just cost me a million dollars, it cost me ten million dollars, because that’s how much that one million dollars is going to wind up going to. No, this is not, you know, an entirely coherent or sensible way of thinking. But I’m sure that that was part of how he was thinking.

S5: I’m sure that’s part of it. And there is some some logic to that now, not in terms of wanting taxes, but just in the terms of that. Obviously, you do want to remain invested. But I also think partly it’s because a lot of these men and they’re almost always men who get to these positions, they think about everything in terms of winning and losing and paying taxes and having to pay more taxes than you want can often be conceived of as losing. So even if you end up giving this money to other areas, that’s something you’re doing yourself. You’re not being forced to do that. So I really do think it’s also just you have some of these men who fundamentally don’t think they should have to pay this amount. They think that that is something that’s being done to them.

S6: And again, this man, Brockmann, his company, which is software for auto dealerships, which is so boring that makes money. This is a legitimate company that’s now tainted by what this guy has done. I mean, he’s facing possibly prison time for this, right?

S1: He is going to wind up going to prison. I suspect that he might well have made more money from investing in this defense than he did from software for car dealerships. But the more interesting one to me is what happens to Vista. Right? Because if you look at the statement of fact, the guy who founded the CEO and founder, the equity partners. Is a criminal and engaged in criminal activity for many, many years, and do you really want the guy who’s in charge of running your money if you’re like a big endowment or foundation or just a normal person or sovereign wealth fund or whoever, to be a criminal like that? Like it looks like maybe his investors are OK with it, although he seems to have downplayed it. And one of the things that seems to be happening is that his co-founder, Brian Schiff, this has been like the last straw for him and he’s leaving. So this could be genuinely damaging for Vista, but it’s kind of bad enough that it’s not obviously damaging for Vista, just like the relationship between Leon Black and Jeffrey Epstein isn’t obviously damaging for Apollo.

S6: Well, it’s like the difference between like Madoff and what’s his name, Steve. Steve Cohen, if you’re a criminal running an investment firm and the crimes are like I evaded taxes, like, I feel like you’re going to get forgiven for that rather than if you’re like a criminal running an investment firm. And the crime is like I was running a massive Ponzi scheme and ripping all you off like he wasn’t and say everything.

S1: Actually, the Madoff thing is a very good point because he was making these impossible returns for many, many years and Wall Street was investing in him largely because Wall Street thought he was a criminal who was front running and they thought he had some clever little front running algorithm which was making lots of money. And they’re like, as long as it makes money, we’re fine with it. If they’d known it was a Ponzi, they wouldn’t have invested. But if they thought it was just like a different type of crime, apparently it seems they would have been fine with it.

S6: Yeah, there there’s some crime that’s fine in the investing world and expected. And if it makes money, everyone’s OK. And if, you know, if it’s the crime that doesn’t make money, then that’s bad.

S1: Or like Jeffrey Essien went to jail for a year and everyone was like, yeah, it wasn’t that bad of a crime. So people hang out with you.

S5: One thing to be fair, Stephen Cohen was never actually convicted of any crime.

S1: His he is neither UNIDO and neither will Robert Smith be convicted of a crime because he’s managed to do this settlement where he turns in. Brockmann basically pays one hundred and forty million dollars, which I believe is probably quite a lot of money, even if that’s a lot of money and manages to avoid jail time. So good for him I guess.

S3: OK, so, Emily, you picked up on something amazing in the Brockmann indictment, which was that he was giving performance bonuses to his co-conspirators.

S6: Yeah, yeah, they were doing crimes, but sort of the most corporate nature that Brockmann. Yes. Was doing performance reviews of the crime doing. He was like, are you doing the encryption really well? Is Evidence Eliminator the best software program we could have gotten? Are you productive? It just was such a great example. Actually, I don’t know what it was a great example of, but performance reviews are rather the bane of corporate life. And even when corporate life involves crimes, you still cling to the processes you’re used to in corporate life.

S3: It did remind me of that of that wonderful scene in in the Wild West ring a bell goes up to a guy and say, it’s like a you taking minutes of a criminal conspiracy.

S6: Yeah. And I mean, it goes to show, I guess, how ethically neutral the performance review is. And then I just went down a rabbit hole of just thinking about performance reviews. And apparently there are a lot of people thinking about them right now because everyone’s working from home and trying to figure out, can we judge you right now, the same way we judged you before, now that we’re working in a pandemic from home with our children around us all the time, and you can’t possibly be as productive as you were. So how can we adjust? The performance review to these circumstances is a question that people are can you adjust it?

S3: I mean, look, the whole there’s been a long literature for many years that performance reviews in general are terrible things that had no value, and especially right now in a situation where you just basically have no idea what kind of chaos people are trying to live with, how or how their mental health is given the pandemic and so on and so forth. It seems that if it was even close before, whether you should or should not be like running your company on the basis of performance reviews for this year, at least you shouldn’t. And yet companies around the country are still doing him and they’re still like doing performance reviews and saying you’re doing bad and you’re getting promoted and you’re getting a pay rise and you’re getting a pay cut and all the rest. Well, and it’s happening.

S5: Yeah. I mean, look, everybody hates performance reviews, but two things. One, as a company, you need to be able to cover why you are promoting or firing someone. You need to have a record of that. So that is part of it. And then there has to be some metric to measure people’s performance. The problem, I would say, is not with the idea of a performance review, it’s that the way performance reviews are currently done is not particularly helpful.

S6: Yeah, and I mean, there’s been innovation in the performance review space. As we all know, Microsoft used to do performance reviews so badly that they wound up pitting co-workers against each other because they would only stack ranking.

S7: Yeah, yeah.

S6: So only like a few people could be really rated. Excellent. So what we wound up happening was people were like backstabbing each other and like undermining each other’s work. So they had to revamp that. So there has been innovation in the space. We could we could say, because I think you’re right, people have to be you have to know where you stand and how you’re doing right from your boss. We can do that right now.

S5: You can’t improve if you have no idea how you’re doing.

S3: I think I think the best way to do performance reviews always, and this is, I think relatively accepted is for bosses to have regular conversations with their direct reports and to just talk on a regular basis, whether it’s every week or two weeks or a month or however often it is just say, yeah, this is great. You know, that wasn’t so great. You’re doing this is you’re knocking out of the park. Wait, hang on a sec. What’s up with you right now? Like, I’m seeing problems and to catch everything and stay on top of everything in real time and then like all of that goes into if you need to, like, roll it all up into a kind of like are you getting a pay rise at the end of the year? You can do that. But that like final are you getting a pay rise at the end of the year should be like much more of a formality and much less of this nightmarish performance review thing. Of course, the number of managers who actually do that is tiny and they are too busy doing the actual jobs to get around to it. And so then what happens is at least the way I see it, performance reviews are basically what happens when you procrastinate on all of that. And then at the end of the year, you’re like, oh, shit, I need to get performance reviews, all my stuff. And then you go back and say, wait, you should have been doing this all along and you weren’t. And I never told you so now you’re being demoted or something and like what you know, and it’s and it’s terrible.

S5: The problem with that, though, is that it can also lead to more discrimination, because if you have no metric that’s being used for everyone, what can often happen is that the manager will give better rankings to people they like. If all they’re doing is having conversations with people and they have nothing that they have to essentially fill out, then the people they like, the people who are similar to them, often in gender, race and the other things are going to probably be the people they are going to promote. And. Well, I’m not saying.

S3: But that’s that’s that’s always the case. I mean, unless you’re like in, you know, a business where you’re producing revenue every week, like we’re journalists, you know, it’s very hard to sort of say to to quantify the performance of a Breakingviews column and say like, oh, this one was is like 10 percent better than that one, you know. So, yeah, there’s always a huge amount of subjectivity in these things, of course.

S5: But you if you at least have some set standard that you use for every person that you have to hopefully not just be doing once a year, but actually be doing somewhat consistently throughout the year, then that can hopefully counter some of the just personal bias that does inevitably come into all of these decisions.

S6: But I think there’s a good amount of research that showed even the formal process driven performance reviews are biased against women and minorities. People are rated differently, like someone a woman might be called aggressive, where a man might be called like confident and ambitious. You know, the same behavior and characteristics are viewed positively and negatively depending on who you are. And I think there’s now a consulting firms that will come in and like rate your performance review system for biases and stuff like that. It gets really, really crazy.

S5: Yeah. One thing, I have a relative who recently a female relative who was told in a performance review that she was too competent by more than one person was told she was too competent. She was like, I have no idea what to do with that is supposed to.

S6: Yeah, there’s I mean, there’s no system that you can have bias free in a review process or maybe I don’t I don’t know.

S3: I think you’re right. I think it’s I mean, there are ways you can try to minimize it, but you always have to be aware that the bias almost certainly exists somewhere. But I want to come back to this question of like given how flawed performance reviews are in general, what the hell you meant to do in the pandemic? There was a an article in Slate basically saying, you know what, companies should just basically write off this whole year and just try and get through to the end of the year and then they can go back to what they were doing before, which I totally understand. That is the principle. Is that what they should be doing? Like, should companies still be trying to cobble together performance reviews in the midst of a pandemic? Or is it best to just, like, write 20, 20 off altogether and do what Facebook did, which is just like you all did great.

S6: Absolutely, write it off, I mean, there’s no you have no metric here to compare it to, and I think people are under really stressful circumstances and the humane thing to do would be to write it off. And I don’t understand what the value maybe Anna, we’ll explain it to me, but what the value to the business is of doing performance reviews in the middle of a pandemic when everything is is topsy turvy, like why would you need to do that as a business? Just hold on, like Dan said, and get to the finish line or get to the end of the year at least. But why add that stress to your employees lives would seem to be a productivity dampener anyway.

S5: Yeah, I mostly agree. I think with you both at this year, it does seem like they probably are going to add very little value. I think that obviously in you may still have really egregious examples of where people are massively underperforming or massively over performing or something that you will want to take into account. But yeah, I think overall it probably does make sense to let this year mostly go. I’m sure companies will still want to have some record again so that moving forward they can justify their decisions one way or the other. But I do agree with you that probably makes more sense to just write it off.

S6: I think you do need to figure out a way to have to reward the people who went above and beyond during this time, just not to punish the ones who didn’t. You know what I mean? Like, because the people working harder than everyone else tend to not acknowledge that in some way is probably not a great idea for morale. Right.

S3: Although those people are also just lucky. You know, the ones who don’t have small children at home, they’re the ones who didn’t get covid like a lot of that, like being able to outperform. It’s just circumstance. And I’m not sure that that’s really worth the right thing to be rewarding, really.

S7: So I’m sorry.

S6: I don’t agree with that. Seems yeah. I think you should reward it. Of course, it’s partly luck, but still, I think it would foster resentment if you didn’t acknowledge, you know, people everything is partly luck.

S5: And if you have been working above and beyond and then nobody says anything, everything knowledge is going to it doesn’t mean that you fire someone else or it just means that you let that person know that you appreciate what they’ve done because they didn’t have to do it even if they were a single person sitting at home.

S6: But don’t do. I spoke to one man a couple of weeks ago because I’ve been hearing from women who are mothers who feel like a lot of pressure at work to just keep going the same way they always have. Like and if they’re not, then they’re failing, which is kind of a crazy thing to ask women with kids at home doing virtual school. And a lot of them aren’t being asked. There are companies being very patient like Facebook or I guess is being patient. We don’t really know. But then I heard from some men with children at home who have are facing the same expectations as before and aren’t getting any slack because everyone assumes they have a wife that’s actually doing all the work. And one guy I spoke to said he had a performance review and was told, like, you’re just not as productive as you need to be and as you were before, are you OK? What’s wrong? And he’s like pandemic. And that wasn’t an acceptable excuse. So, yeah, employers need to do a lot better at this stuff.

S3: Let’s talk about auctions, the Nobel Prize or Nobel Prize in economics came out, went to auction design for not the first time. William Vickrey won it in 96. Vernon Smith won it a few years ago. So like auctions have been like in the Nobel Sfeir for a while. But this year kind of feels to me to be the one where, like the whole modern auction, the new fangled auction really got its due, which is never mind the theory of how auctions work, what the old Sotheby’s auctions or something like that, or the kind of auctions that we are familiar with on eBay. Let’s see if we can really just redesign the entire structure of auctions so as to maximize societally important things like the allocation of electromagnetic spectrum or carbon emission permits or landing slots at airports or that kind of stuff. And I’m I came out in my news earlier this week and said this is the one bit of economics which is actually good, you know, created obvious positive externalities in the world and made the world a better place. And it’s rare you can say that about anything in economics. And so I was like, let’s give credit where it’s due. For once.

S5: I agree with that. I think it’s been interesting looking at recent winners, it does seem like the Nobel committee is focusing a little bit more on practical application as opposed to pure theory. And that was even something they noted, that these two men didn’t just advance the theory of auctions, but did, as you said, actually improve the real world.

S3: I remember back in I think it was 2000 when the UK government did its 3G auction using the Paul Milgrom designed multiple simultaneously round auction. It was expected that these 3G licenses would go for like maybe a billion pounds or two and it wound up going for like 30. It raised so much more money than people thought to the point at which people were worried, oh, my God, all of these telecommunications companies have spent so much money on their 3G licenses, they’re not going to have any money left over to build out the 3G network, which, of course, turned out to be of course, they had enough money to or they wouldn’t have bid that. But it’s just like, you know, the government got a fair price for a valuable piece of spectrum, which is like awesome that they managed to work out how to do that.

S6: And this was how exactly. So when you say auction, like you mentioned before, Felix, I picture people with the paddle sitting in at Sotheby’s bidding on stuff or eBay. But what exactly is the difference in what Milgrom and Wilson came up with? Like, how does it work? Is it because they were able to use computers or algorithms or something? Or what is the theory behind the research that enabled them to sell the a little a little bit of theory here.

S3: Let’s say that you are bid on. Electromagnetic spectrum and the way that these things work is that by its nature, nature, it has to be regional, certainly in the United States, its regional. And let’s say that you had an old fashioned English style is called Sotheby’s style auction with bidders putting up paddles and it just goes to the highest bidder. That would be an incredibly inefficient way of auctioning off Spamhaus because you want contiguous parcels. So what you want is to build is to build together a network and having like one little bit of spectrum in the middle of North Dakota is kind of worthless to you, except for you can sell it to someone who has spectrum next door. And it’s valuable to that. And that’s the only thing you can really do with it. So what you want to do is create an auction that winds up selling that spectrum to the person who’s going to be using it and making best and highest use of it, which is probably going to be someone who’s also buying a bunch of other parcels next to it. And the way you do that is by going through multiple rounds. And some of these auctions of spectrum have like literally hundreds of round like three or four hundred rounds of bidding that people are putting in new bids hundreds and hundreds of times to you know, and the way they do that and the way they recalibrate their bids over and over again over hundreds of different rounds is all a way of trying to really optimize the ultimate allocation within the constraints that can be set by the government. The government isn’t just trying to maximize the amount of revenue it’s getting. It’s also trying to make sure there aren’t any monopolies and that has various other things that it wants to try and get at the same time. And you can build all of that into the auction design so you can build things like no one bidder can bid on more than X percent of the network because that would be a monopoly. You can build that into the auction design rather than having to impose it exposed after, you know, there’s an English style auction, then someone winds up with all of that puzzles me like, wait, hang on a sec. You’ve got to do that now. We need to break you up in it.

S6: And someone mentioned that the efficiency of something like that, where you were just describing something worth comparing to, was in the early stages of the pandemic when states were betting against each other for ventilators. And that was like that of how a good auction design would work because they were bidding up the prices for things that everyone needed that had to be allocated based on like needs. And not just, you know, how much you could spend on ventilators and you wanted them to go to where they were needed the most. And then I was thinking for all those people who argue that free markets are a thing, something like this, where you have to is so complex to find the right price, but not just the right price, but like to allocate it to the people who who need it most to make the most efficient market. Like the idea that that there’s just a free market is kind of nuts, right? Because you have to design the market itself.

S3: Right, exactly. Market design is the same as auction design. Market design is basically a subset of auction design because all market auctions in some way or another. And yeah. And and the way that you design that auction is a really important part of how the market works and how free the market is. And if you look at the stock market with is we know is rife with high frequency traders and algorithms and bots and that kind of thing. And that is a function of the way that it’s designed. And it’s definitely there are other ways you could design it to make that much less of an issue. You could have a stock market where instead of having continuous trading, you had a series of auctions which settled once every second say. And if you did that, a huge amount of the high frequency trading would just go away. And the high frequency traders dominate the stock market and they would lose money if that happened. And so that isn’t happening. But that kind of discontinuous trading actually, I think makes a lot more sense in terms of market design than what we have right now.

S6: Well, I never considered that you could redesign the stock market, but of course you could. And we could have more efficient markets are ones that actually made more sense.

S3: This continuous trading is super interesting, and most auctions of the newest and the most common form of auction in the world is basically every time you visit a Web page, there’s this thing called real time bidding. You visit the Web page and that triggers an auction after you’ve already visited the Web page to see who’s going to win the auction to show you. And at those auctions are unbelievably sophisticated. And, you know, they’re like second prize auctions, first prize auctions. I guess it gets very I went down the whole rabbit hole with this. It was fascinating. But like the way the way those auctions are designed and especially the way those auctions are designed to balance the interests of what’s known as the programmatic advertisers versus the brand advertisers is actually not that different from the way that the auctions in the stock market designed to. Balance the interests of the high frequency traders versus the long term investors.

S6: Why don’t when I go to Old Navy to buy my comfortable pants, why can’t there be an auction to figure out the price of the comfortable pants?

S3: Oh, there is. I mean, wait, don’t don’t kid yourself that there isn’t. This is why when you visit Amazon to buy a widget, whatever it is you’re buying on Amazon, that price changes every time you visit it. And it changes according to a bunch of variables that you have no idea what they are. It’s not that Amazon has a price for each of the goods that it sells that has a highly variable price. And that algorithm is itself a kind of form of auction design.

S5: Yeah, that that’s why the movement from bricks and mortar, which is normally what I think you’re describing, if you like, into the Old Navy store versus if you’re going to Old Navy online, it’s going to be very different. And obviously, as more and more commerce, more and more activity is slowly down in the digital realm, auction design is going to become more and more and more and more important. So that’s why this prize was not just something theoretical, but very practical.

S3: And so so, Emily, I don’t know how your supermarkets are set up where you are in Westchester, but it is very, very common now for the little things. I don’t know what they’re called on the shelves, which show what the prices of each good to be like, know the things we’re saying, like, you know, this package of spaghetti costs, you know, four dollars and fifty cents for those you should ever cost that much money.

S7: Yeah. How much is a nice shopping? I shop at very expensive stores, but.

S3: But the little thing that says this, how much the package of spaghetti costs always used to be on paper and increasingly it is now in like eating or LCD or something like that because it’s changing. The supermarkets like the central office in the supermarkets, is changing those prices way, way more frequently than they ever used to. And again, that is a form of auction to say, OK, well, I don’t like that.

S7: And that strikes me is why not? You can buy a bridge too far. Individuals do or maybe well, maybe you get worse frozen, I don’t know, maybe get worse prices, but it’s probably more efficient. It seems less transparent, which I think is not good when it comes to consumers buying things. It’s definitely less trendy.

S3: And we’re seeing this not just in groceries, but obviously with airline seats. The idea that there’s a price for an airline seat has not been the case for years. We’re seeing it with remember when we used to have Broadway shows that was like my favorite part of the world was Broadway shows. But Broadway shows like everyone in that Broadway theater was paying a different amount of money for that ticket. Like the face value of the ticket was something that only like five percent of the audience actually paid. And and this this kind of variable pricing and trying to charge different prices according to when you buy it and how you buy it is everywhere now.

S6: Yeah, I don’t think the is actually depending on what time I go to the store to buy them like some things.

S5: Why not. Because I’m not. That could ultimately make the market more efficient so more people will be able to actually access milk at a better price. I disagree. I don’t. Look, I’m not a absolutist here, but I don’t think there’s necessarily anything horribly wrong with that, really.

S6: I mean, I think people should know how much, especially when you’re talking about staples like food. You should have a general sense of how much things cost. And you shouldn’t be surprised if they’re there more than you think they’re going to be paid.

S5: How much things cost? It is always changing. It’s just that our traditional ways of pricing things didn’t acknowledge that change, but it was always changing. It did, in fact, cost a different amount. What to wear, how you’re buying it, what does actually reflect that?

S3: What it does and is it makes it much harder to comparison shop. And that is a little bit of a problem because one of the driving forces in pricing goods is the idea that if you lower your price, people will come to your store rather than the rival store because you have a better price. And that’s a good form of consumer friendly competition. But if the prices are changing all the time, no one really knows which store has the better price.

S5: I feel like we all know that you go to certain grocery stores and they can have the exact same goods at certain grocery stores will charge slightly more than this other grocery store charge. If not, you’re not looking at each individual good. It’s just overall, you can be like, you know, my final amount tends to be higher at this one versus this one. And I don’t necessarily think that would probably be that different, because I don’t think most people are literally going, oh, well, I’m going to look at six different stores to figure out where I’m going, buy my milk.

S6: That’s true. I don’t know. Maybe it’s just an illogical part of me that says you should have more stable prices for groceries and also for my soft pants.

S3: So let’s have a numbers round. Emily, what’s your number?

S6: My number is nineteen sixty three, which is the year Coke unveiled tab. It’s diet soda, which today news reports say that Coke will no longer be selling tab. It’s diet soda. So our IP to TAB, which is a terrible tasting diet soda, but had a cult following. There are people who really, really, really, really loved it. But I guess the pandemic has forced a lot of companies to narrow the amount of a variety of products that they sell. So Tabb had to go. They don’t sell a lot of tab anymore. It’s mostly Diet Coke now and something called Coke Zero.

S3: So TAB is out OPIS tab. My number is six billion dollars, which is the market cap last time I checked, which is about ten seconds ago. I’m sure it’s changed by now of Big Hit, which is a Korean record label. And the interesting thing about Big Hit the green record label is it basically only has one act which is of course beats and 90 percent of big hits. Revenues come from beats and beats, a very popular. But they’re getting a little bit long in the tooth. I don’t know how long. Boy bands ever last for. And a lot of the Beats members are going to have to start doing their compulsory military service at some point. And yet in the face of all of that big hit is worth six billion dollars for basically one band.

S5: I was almost going to say we should talk about that in our segment today. And then it’s like, no, it’s probably not quite enough to talk about, but the share price did like double the first day, so. And what’s your number? My number is 70 percent. So that’s the amount that single family home sales in Greenwich increased in the third quarter versus the previous year. Unsurprisingly, in the same quarter, co-op and condo sales in Manhattan declined by about 50 percent. So it’s probably a fairly obvious thing, but it is just interesting that you are, in fact, actually seeing this this flight back to the suburbs. And I also thought it was slightly funny because I remember like a year ago having a conversation with someone where they were like, no one will ever be able to sell a home in Greenwich again. Nobody wants to live in Greenwich.

S7: Yeah, it took a pandemic, which just shows how the only time you ever sell homes in Greenwich is during a pandemic.

S3: If you buy right now, just being just, you know, in your heart of hearts that you’re not going to be able to sell that thing unless and until there’s another pandemic.

S8: Wow. Yeah. You’re anything in the Times reports that are like the suburbs buying frenzy is over. People are now moving back to the city. That was like last weekend’s headlines in the real estate section.

S5: Yes, that was quick. It would almost be fitting if it was because I feel like everything in this crisis has been like this is really quick except how we’re all still or I am anyway.

S3: Except that except that I am still home, which again, is why I apologize for having bad sound in the first segment, because, you know, things go bad when they’re done at home. I’m blaming the pandemic. If you give me a performance review, be forgiving for that. But otherwise, thanks for listening. Thanks for writing us on the App Store on Apple podcast and thanks for writing in on Slate Money Slate Dotcom.

S2: Thank you very much, gentlemen. Molly, who wasn’t there to make sure that she was recording everything at her studios in Brooklyn. But other than that, we will talk to you next week on Slate Money.

S3: Now that we’re in a safe space, which is also known as sleep class, we can talk about getting woken up in the middle of the night.

S8: Yes, Felix, I wanted to talk about this first because the Nobel Prize winner was Milgrom was woken up in the middle of the night by Robert Wilson, his co winner, and Robert Wilson’s wife. They rang the doorbell. There’s a cute little video that you can watch online. And that got me thinking I really like to sleep. Like I don’t ever want to be woken up, like ever, especially after I had kids and I had to be woken up in the middle of the night. Like now it’s like I never want to be woken up in the middle of the night unless literally like someone I know something really, really bad has happened. Like, so I was thinking if I was Paul Milgrom, would I want to be woken up in the middle of the night even to win a Nobel Prize? And I thought to myself.

S3: Now, I don’t want to be, but it’s definitely it’s definitely a power move to say I don’t care about the Nobel Prize, it’s going to be there when I wake up. I don’t need to know in the middle of the night.

S8: They’ll tell me in the morning. And the same thing happens two weeks ago when the news broke that Donald Trump had covid-19.

S4: And my husband did wake me up.

S3: And apparently a lot of other people’s partners also wake them up, leading Slate to publish an article that was like you need to establish like like a living well for being woken up in the middle out when you would like to be woken up and when, not so that it could all be agreed upon in case the news breaks like Trump having covid-19. So that made me curious. Felix, Anna. So the last time I can remember being woken up was when my friend Stephanie called me in the morning and I was sleeping in because I was not very employed at the time. And my phone went off and I’m like, what is it? And he’s like, Felix, you have to go up to your roof. Her plane has flown into the World Trade Center. And I felt that was justified and I went up to my roof and then in hindsight, maybe going up to my roof wasn’t such a good idea because I then saw the second plane flying. But the night it was, I think that is the kind of level of importance that the bar should be set at. Yes. Yeah.

S6: Because you were in physical danger, theoretically, because you live downtown, right?

S5: Yeah, I mostly agree that there’s no reason to wake me up unless no one I can do something about what it is that has happened. It’s not just something that has happened, but I can actually affect a change in some way or if it’s something. Extraordinarily important about someone very, very close to me. Mostly I’m thinking of like a death. Because even though, yes, I obviously can’t do anything about that, I still think I probably would not be angry at someone if they woke me up in the middle of the night to say that someone I.

S3: But would you be angry at them for not waking you up if they didn’t?

S5: Good question, because I feel like one of the only times I can actually remember ever being waking up in the middle of the night was in fact because someone had died, I don’t think I would have been upset. I don’t know. I feel like I wanted I I wanted to know.

S6: So I think it does matter, like like Felix being woken up at I think was after 9:00 and it was before 9:00.

S7: Yeah.

S6: I think I think it matters like if it’s if it’s after the sun’s come up, like I think you can relax some of the rules and regulations.

S7: Depends, it depends on your last night when the sun comes up very early and um.

S6: But yeah, I think the key is like personal relevance because what am I supposed to do if Trump has covid like although winning the Nobel Prize definitely have special relevance.

S3: And I think they do a press conference, like right away, so maybe, yeah, there’s a whole there’s a whole thing where the Nobel Prize committee, of course, keeps the prize winners and even the short list very secret. And they have this incredibly elaborate network of informants that they basically use to get people’s phone numbers so that they can wake them up in the middle of the night and let them know that they’ve won the Nobel Prize.

S7: Yeah, why can’t they do it? It’s like I know for some reason, they always they always release the name in the morning Swedish time. I like who’s you know, who’s awake in the morning in Sweden.

S6: I’m Paul Milgrim, he must have known he was considered for the Nobel Prize, but he still put his do not disturb on his apartment.

S3: I mean, yeah, you have your do not disturb on your cell phone. It just sits there. You don’t think about it. You don’t take it off because like, oh, I might win the Nobel Prize.

S6: You would Felix. You would take off your note. Do not disturb.

S5: I say at the University of Chicago around Nobel time, everybody starts getting haircuts just in case.

S3: Just in case I do remember I do remember a wonderful story about Ursula. Look, when being incredibly sanguine about the Nobel Prize, I think that’s the power move, really. It’s just a not just to say this is a wonderful but no need to get woken up in the middle of the night.

S6: I think Bob Dylan also didn’t care about his Nobel Prize. Right. He was like a whatever you didn’t go get do a speech because it was stupid that he got that Nobel Prize.

S5: Wow. Wow. I was just opening up at the end of the slate glass.

S3: Do send in more emails, late money like a dotcom.

S9: All of you don’t stand there. And let me send you six thousand words on Bob Dylan and how important is.