Finders Keepers

Felix Salmon, Emily Peck, and Anna Szymanski discuss the finances of the USPS, the fate of brick-and-mortar retail after the pandemic, and Citigroup’s (C) $900 million payment to Revlon lenders…that they sent by accident.

And in the Plus segment: Productivity in lockdown.  For full transcript, see below.


S1: This ad free podcast is part of your Slate plus membership.

S2: Hello, welcome to the Finders Keepers episode of Sleep Money, Your Guide to the Business and Finance News of the Week.

S3: I’m Felix Salmon of Axios. I’m here with Emily Peck of Huff Post. Hello. I’m here with Anna Shamansky of Breakingviews. Hello. We are going to talk about the post office this week because honestly, who is not talking about the post office this week? We are going to talk about shopping and whether it’s all going online and what that means. We are going to talk about one of the craziest lawsuits that I have seen in a while involving Revlon of all people. We are even going to have a sleepless episode about productivity. But the one thing I want to ask you is to just stay tuned until the end or if you have to fast forward until the end, because I have a question for you all after the numbers round, which I want you to write in with your answer. That is coming up on sleep money. So let’s talk about the post office. There are big hearings going on right now and everyone thinks that it is facing existential threats and people are sending as many mail letters and it’s losing billions of dollars. And this is a problem. And Emily, bring me up to speed.

S4: Well, it’s kind of a mess, Felix. Basically, this new guy came to run the post office named Louis Dejoy. He is a Trump donor who used to work at this company called XPO Logistics and before that owned his own logistics company. Anyway, he is doing a lot of cost cutting stuff that people don’t like that was underway before he even started, which was only like 70 days ago. And the cost cutting stuff is reducing the amount of overtime post office workers can take and removing these mail sorting machines. And all this is happening as the president is out there decrying mail and voting and sort of making it look like the process of mailing in your ballot is shady and dicey at a time when more and more people are going to be voting by mail because of the pandemic. So this means that progressives and Democrats are essentially freaking out and saying, basically implying there’s some kind of conspiracy afoot where like a Trump donor and Trump are kind of working together to undermine the election. But that’s not really what’s going on. It’s really the post office has been going through a long period of transformation ever since the Internet became a thing where people, like you said, Felix, are sending fewer letters. So it’s got declining volumes. And then, like all businesses we can talk about, it’s the post offices, a business fest, a hit with a pandemic. A lot of postal workers have gotten sick at the same time they cut overtime. So there have been slowdowns in getting the mail out, which sort of like feeds the conspiracy theory at the same time.

S3: So I want to jump in here and and say, like, the big picture is bad and it has been bad for years and it is going to continue to be bad for years. And there are big structural problems in terms of the way that the Board of Governors is appointed by the government and various other problems involving health care benefits. But this short term problem is actually not as bad. There’s no immediate cash crunch. The post office has billions of dollars. If you ask for a ballot and your state is remotely competent, you should get your ballot in plenty of time. If you mail it back in plenty of time, you should be fine. You do not need to mail it back. You can just drop it off at the ballot box or drop off box or something like that. And the president has done a very good job of politicizing this whole thing. The Democrats honestly have also done a very good job of politicizing this whole thing and making it seem like the election is at stake. And I kind of don’t think it is. And people should just be aware of this. That post office is a big problem. I do agree that the optics of Louis Dejoy look terrible, but I don’t think that there’s some grand conspiracy to delegitimize the entire election. I do think that Trump is going to try and delegitimize entire election, whatever happens with the post office, and he’ll take any excuse whether it’s based in fact or not. But where where do you stand on this?

S1: Yeah, I think we’re probably all basically on the same page that the conspiracy is definitely massively overblown. The state of the post office is it’s a little complicated because obviously a lot of their losses are non-cash losses because as you alluded to, Felix, they have to account for all of these health care and retirement expenses, however it is. Yes, it is certainly true that as the economy changes, the post office has had trouble. They actually didn’t have a particularly horrible quarter, but that was mainly because of census ballots or census that more than anything else, if you kind of look at their financials and moving forward, they are definitely going to take a hit. I think what the post office, though, that I always find a little odd is that, you know, it’s not really a business. Like part of the reason we have a post office is because you have roots that will always be uneconomical for private enterprises. Like there’s a reason that FedEx isn’t going to want to go to like that random guy way the F out there. And that’s what we have a post office to make sure that everybody can get their medication, that they’re getting through the mail. By definition, that’s going to lose money. If it wasn’t losing money, that it would make sense for a private company to do it. So there’s a part of me that sometimes thinks the way we talk about the post office is a little odd.

S3: Oh, it’s really. And also that the post office is a natural monopoly. It’s one of those things which exists in basically every country in the world. It’s a monopoly in every country in the world for very good reasons, because it only makes sense to. One entity to do this, it is very rare for the post office to be particularly profitable in any country in the world, and the fact that the post office has been able to fund itself internally up until this point is a sort of American exceptionalism thing, which I think a lot of Americans don’t understand. Here’s my favorite data point. The US post office delivers 50 percent of all of the mail in the world. It’s like no one else is remotely as much mail as Americans do. And it’s only because Americans spend enormous amounts of mail. And we’ve talked about this in the past, that people literally send checks in the mail to each other, paper physical checks in the mail to each other and put them into their bank account in twenty twenty. This is a common thing that happens millions of times a week. And this kind of thing is embedded into the American culture in a way that it just isn’t anywhere else. And because of that, the post office has been able to be vaguely self-sufficient up until this point. I think it’s pretty obvious that it won’t be completely self-sufficient going forwards again, depending on how you look at the accounting. And so my point in my news earlier this week was we just need to get away from this convention to the federal government, pays no money to the post office. And the minute you get away from that convention, then the federal government can just fund the post office to the degree that it needs to be funded and problem solved.

S4: Yeah, it’s just this weird and to my mind, inexplicable rationale, mostly coming from Republicans and conservatives that the post office needs to be self-sufficient and needs to be a business and people want to privatize it, which again, I don’t really understand. It’s a service. If you look at the polling, a lot of people are writing stories about the post office right now, sharing the polling information. And it’s like 90 percent of Americans like the post office, like why? Why would anyone want to mess with that? Literally no other part of the government has that kind of numbers. I mean, it’s it’s really wild. And it and it is the one institution left that seems to connect everyone in the country. Like I live out kind of in the country, I guess. And like in some areas there’s like nothing else. But there’s a cute little post office where people can go and get help and talk to a human being and feel connected to the world. It’s like this is good stuff, people. And now we’re seeing with the pandemic how important it is for like actual democratic processes, like voting is the most visible sign of big government.

S3: It is everywhere. There is nowhere in America that you can’t find the post office and they are all wearing these uniforms and you have these government employees literally walking up to your front door and putting mail on your post box and all of this kind of stuff. And so on some level, I can kind of understand why the small government arm of the Republican Party would rail against it. It’s a little bit like gas prices. They’re not the most important thing that we spend money on, but they are the most salient thing that we spend money on because we see them in big glowing letters every time we drive down the road. And the post office is the most salient part of government that we see every day.

S1: I also wonder if it has to do a little bit with the Postal Workers Union. And I partly think of this because I was recently reading the last book and the the Robert Caro Linda Johnson series and this and in the 60s they were even talking about at the time when they were trying to like, get this tax cut through. And so they needed to get the senator on board. So they needed to get the budget down. And the hardest time they had with the postal union. And it does seem like this has been something that’s actually kind of been a long, long standing issue that a lot of small government types have had. So I do wonder if that’s been part of the push as well.

S4: I think we have seen a lot of information now. I think the postal union has been trying to get people to pay attention to the post office for a long time and the cuts that have legs that have been going on for a while and the companies, Donald Trump and the pandemic have allowed the postal union to finally, people are listening to these guys. You know, they’ve been raising the alarm for a while. And the other thing I wanted to say about the post office is in terms of thinking about wanting to cut it and all this, they have a huge workforce, right? It’s like six hundred and sixty thousand employees or more. And more than a quarter of them are African-American, which is just something to think about. It’s a post office job has been like a good entry way into the middle class, stable job, good benefits. So for the people who want to cut that workforce and to privatize it, it’s just interesting coincidence there.

S3: It’s not clear that privatizing the post office would actually involve cutting the workforce. I like I don’t think it’s a deeply inefficient organization. It is certainly a heavily unionized organization. You know, it is conceivable that if it was privatized, then the private sector owners would drive a hard bargain with the union, maybe they wouldn’t. But what you definitely see is this thing that you see with a lot of industries that have been unionized for decades, which is that there’s been years and decades of negotiations over pay, basically, which is the most important part of any worker’s job. And the way those negotiations invariably end is the unions want more money. The owners don’t want to pay more money. And so the way they fudge it is by improving the benefits, the pension benefits and the health benefits in retirement. And that means the owners don’t need to pay more money because that’s all 20, 30 years in the future. But it’s great for the workers because they get awesome retirement benefits and that’s fantastic as a short term Band-Aid. And it’s absolutely terrible as a long term solution. And one of the reasons why the post office has been running these enormous non-cash deficits is because those health and retirement benefits are coming home to roost at this point. And this is just the worst possible time for that to be happening. And those kind of deals work in a growing industry and they just completely kill any kind of shrinking industry. And that is just very broadly why you can’t fix this problem with a silver bullet like privatization or a one off appropriation from the government to the post office. It needs to be like an ongoing annual subsidy. Or the one thing we have talked about on this show in the past. I know still banking, you know, which would solve a bunch of problems, maybe we don’t know for sure, but I think I’m pretty sure.

S1: Yeah, like it. Like, OK, fine. The Post is sure about that.

S4: But if the business if the post office is a business or business adjacent, then what it needs to do in order to stay alive is to innovate. And one of the things they could do to innovate would be do new stuff, offer new services, really modernize. Right. And one way of doing that would be banking. I think it’s we should do it probably would maybe solve it all the problems and it looks like and highly skeptical we can have a whole nother segment another time.

S1: That’s one of my concerns about personal banking.

S3: But yeah. So that’s not going to happen anyway because the banking lobby is way too strong. Although the the one overriding reason why I believe that postal banking would be a good thing is precisely the fact that the banking lobby is so incredibly opposed to it, like they know how much competition it would it would provide, like they spend billions and billions of dollars on building branches, just on certain urban street corners. If every single post office in the country automatically became a bank branch, that would be the biggest bank in the country overnight and would have just incredible market penetration. So talking about physical retail, at some point in the future, we will all be walking around and entering our post offices and doing a physical, banking and fiscal post office. But right now, I just saw some numbers about how the surge in people actually bothering to pick up their phones to do their banking. It’s just like doubled basically that everyone has for obvious reasons. Anything that can be done online, they’re doing online rather than doing it in person, especially in New York State where we all live, but basically nationwide. And the equally obvious corollary to that is that if whatever you are now doing online that you used to do in person is something that you are no longer doing in person. And the implication of that is that anyone in the physical retail world is hurting badly.

S1: And this is one of these things that, like many things with covid, there was an underlying trend and covid has accelerated it. If bricks and mortar was obviously having issues before then, especially certain, like large department stores. And unsurprisingly, those are a lot of the names that we’ve seen now go into bankruptcy. I agree that, yes, we are clearly going through a massive transition that has been sped up. Personally, I think long term, this is not a bad thing.

S3: I’m inclined to agree. I think that, you know, stores play an important role. And one of the signs that they play an important role is the retail rents have been going up quite a lot. And what happens is the sort of big economy level is there. As stores make more and more money and become more and more productive, those profits get siphoned off literally in rents by landlords. And now as people spend less time in physical stores and more time ordering stuff online, those rents are going to come down. And that’s going to be bad for commercial real estate landlords. And no one is crying for them.

S4: Yeah, I mean, I think it’s I think it’s a really complicated situation. I mean, everyone spending money online and things like online grocery shopping has finally taken off. I think this has been in the works for like two decades. Everyone’s been saying we’re all going to buy our groceries online. Now, finally, people are doing it. But the question is like when this is over, if if this is over, assuming it ends up, I don’t know anymore, who wants to keep doing that? I just wonder, like at the end of it all, what is going to stick, I think, is a really big question. And some of the retailers that are surviving now, the brick and mortar stores like Home Depot and Lowe’s and things like that, where people are now spending all of their money instead of taking vacations, they’re just like building new bathrooms and stuff. The rich people anyway, like what’s going to happen there, I think is a big question. And I mean, ultimately, I think people will want to go back to in-person shopping again. And when they do like who is going to have the means to create those businesses and things, that seems like a lot of open questions.

S1: I really think a lot of this is going to stick. I could be one hundred percent wrong. And again, some of this is anecdotes from just speaking with people who have not done as much of this online shopping and then now have it are like actually this is way better. And there are there are many different iterations of so many different versions. You know, you have the pick up at the store. You have actually delivered you you have a lot of these things that are frankly just better because the shopping experience is not great for most people. Like going into a store and wandering around to find things is not something a lot of people necessarily enjoy. And one of the things you’ve heard, if you listen to like investor calls for so long with a lot of these places, they all talk about their needing to like build up this digital infrastructure and blah, blah, blah. And then a lot of them haven’t. And now they’ve seen that the ones who did that, like Target, have done significantly better. So now you’re seeing a lot of these places really speed this up. And this is the kind of thing that long term can be really good for economy, because this is the type of investment that can lead to productivity growth. I think that I will push back on that.

S3: The cost of one of the things that retail stores do is that they push the cost of last mile delivery onto the customer rather than from the store. The customer will typically drive to the store, pick up the goods in some kind of a bag, put the bag in their car, and then they will personally drive that car back to their home, which is no great hardship for the customer, but it saves the business a huge amount of money. If that if now the business starts doing a lot more online retail, then a huge proportion of that online retail and all of it. But a lot of it puts the those costs onto the consumer and forces them to become financially sized. You need to charge for those costs in some way. Also, if you look at the direct to consumer brands, the. Popping up all over the place, the reason why so many of them are opening up physical stores is because those physical stores weirdly wind up being more cost effective in terms of marketing than buying ads on Instagram like right now, because the digital world is dominated by the Facebook and Google duopoly, trying to get any kind of visibility for your retail brand online is ludicrously expensive, and it’s actually cheaper in most of the country to just open up a store to manage to sort of reach people than it is to buy ads online. And when you’re talking about retail, you are really talking about brands and branding, and that becomes incredibly important and so that it becomes extremely difficult for brands to break through. And that was really good news. That ad that came out this week talking about how basically, with the exception of raises, none of the big direct to consumer brands that have received a huge amount of venture capital money, have been able to have any kind of successful exit. So there’s a bunch of moving parts here. And I do think that the natural equilibrium is going to move more online from in person. I just don’t think that it’s necessarily obvious that online is more efficient or more productive. I do think if you one of my other favorite statistics is just looking at the just sheer square footage. A number of retail stores devoted to square footage devoted to retail in America per inhabitant. It’s like double what it is in any other country in the world, so that it’s natural for that to come down.

S4: One thing that you said, Felix, you said earlier that the in-person retail stores, they’re paying all this an enormous amount of rent to landlords, and that’s not good. So going online is more efficient. But in the online sphere, you have these massive companies, Google (GOOG, GOOGL), Amazon (AMZN), Facebook (FB), kind of running the show. And the little online guys are facing big challenges.

S3: They’re they’re not these aren’t exactly the rent moves from physical rents to online rents. And one of the things in my newsletter this week, I had this chart which I put together showing the stock price this year of Shopify, Etsy, Amazon square ups, all of these companies to provide services and charge money for services to small merchants online. And literally, these companies have gone up by two or three times this year. If you look at Etsy and Shopify and people like that, those stocks have just been going through the roof. And the reason is obvious that they’re just charging rents that in previous decades landlords would charge and all of those rent rather than going to thousands of smaller landlords around the country and now just going to a handful of large digital platforms. And I’m not sure that is a positive development.

S4: And I also worry about the labor force with online face to face shopping going away, like you lose the connection to the people who sell stuff. And those people, the workforce becomes more desperate, more spread out, more hidden. And I kind of wonder about their rates, their pay. And I know it doesn’t seem necessarily I’m not saying it’s good or bad yet. The jury is still out. We’re in the middle of a crisis. I don’t know what’s happening anymore, but there are a lot of things to worry about.

S1: Now, I’m not saying that like, yes, everything is going to be perfect, but I do feel like we are in a transition. This transition has been accelerated. And I think that, yes, you are probably going to have a lot of shift from the people who worked in stores to people working in warehouses. And yes, there is certainly a call to have more rights for people who work in warehouses and decent pay for people who work in warehouses and deliver packages. But I don’t think we need to kind of cling to the idea of, oh, well, somebody worked at a store and you had this connection with someone at a store. I don’t know. Most people, they go to stores. I don’t really think they have much of a connection with the people who are selling them.

S4: Like, so going to study so much and are like we’re about to do back to school shopping here and I have to do it all online. And I would I think there are a lot of people out there like me who would love to go to a store and like try on some stuff, who don’t want to return a bunch of stuff. Finding stuff on Amazon. That’s not easy. You ever shop for clothes on Amazon?

S5: It’s kind of a 10 hour rule.

S3: And like buying clothes online, this whole buying shoes online is terrible. But a lot of. Yes, yeah, there’s a lot of stuff which people it really does make sense to do it in person working in a store when you’re, you know, 17 years old is like American Rite of passage.

S1: Going to one of those jobs are like a 17 year old high school students anymore. That’s like the rate of like teenagers. Employment has gone down massively, just so you know.

S3: I mean, there is going to be a big change. But I do think especially in apparel, it just. It’s it’s one of those industries that naturally exists on in person and virtually all luxury as well. It’s like that and there are hundreds of millions of Americans who actually like shopping. I am not one of them, but there are lots of people who do. And it’s it’s something which holds value for people. And busy urban professionals are the exception here. Most people actually kind of like going to the store. It’s something they enjoy.

S1: It’s our church in America. It’s our church shopping is our church.

S3: So let’s talk about the other kind of store that people really like to visit in person, which is cosmetics, people love to go in there. They like to have like free makeovers. They like to spend ludicrous amounts of money on a product. And then they go out and they look beautiful. And none of that is happening right now because they are not going into the stores. They are not buying the cosmetics. They are not putting on the cosmetics. They are not going out. They are not looking beautiful. We are all just stuck in homes. The obvious consequence of that is that the big cosmetics companies are Anna.

S1: Not doing overly well, we’re getting into Revilla, this is how we’re getting into.

S5: I was like, I think I know where you’re going. I think I know. I thought you were just bringing a new topic on us out of thin air.

S4: I was like, I’m here for it. I’m on the ride.

S5: And I am talking about Revlon, which at the height of the cosmetics boom, decided to spend untold billions of dollars to acquire Estée Lauder.

S3: And in order to acquire order, it needed to issue a bunch of debt and issued a bunch of debt in the form of a syndicated loan. And a bunch of hedge funds ended up owning that loan. And that loan is now trading at about 30 cents on the dollar because it’s never going to be able to pay back that money.

S1: And this is the world’s longest way of getting us to a story about how Citigroup sent nine hundred million dollars accidentally.

S3: This is my point. Revlon does not have nine hundred million dollars to pay back its loan. But you know who does have nine hundred million dollars? Just sitting around in corporate treasury because it has that much money is Citigroup. And what did they do by mistake? They sent the entire nine hundred million dollars to all of the creditors, which is that is a fat finger error to like and blame all.

S1: They were supposed to just be paying an interest payment and they accidentally said all of this money and having it be that much is bizarre like that. That is obviously not something that normally happens. This does give a little bit of a window into how creaky the back office of Finances had when I heard this. I’m like, I’m not shocked. I’m shocked at the amount. I’m not shocked that it happened. But what is really shocking about this is the fact that a number of the creditors are not giving the money back, that they are saying, no, this wasn’t an accident, we are due money.

S3: I mean, they lay this out and they clearly know that it was an accident, but they’re saying that it’s not. And this is so the biggest creditor or least the biggest creditor that didn’t pay the money back is this hedge fund called Brigade, which I’m sure you have come across many times in your in your career. It’s a big distressed debt hedge fund with like twenty five billion dollars of assets. And yeah, they’re sitting there, they have a hundred and seventy five dollars million of this debt, which is worth maybe one third of that. So call it, you know, 50, 60 million dollars. And that they’re saying how do we get value out of this 50 million dollar position? And then suddenly one day one hundred and seventy five million dollars lands in their bank account and they’re like, Kuching, we win. We’ve just hit the jackpot. This is the lottery win. And then Citibank phones them up and says, oh, poopsie, sorry, that was a mistake. That money didn’t come from Revlon, that million came from Citibank. Can you please give it back?

S1: And they’re like, fuck no. It is the investment strategy known as finders keepers.

S4: To me, it just shows that the finance industry lives in a completely different moral universe than everyone else. And like, they don’t have to play by any of the rules that normal people do, like we all can be shamed for. I don’t know, like getting a stimulus check we didn’t need or something. And like, that’s really bad. But like, hedge funds are like, fuck you, I’m keeping all this money. I know it was a mistake and I know it’s wrong and I don’t care. And everyone’s like, that’s really brave of them. It shows just how hard line and tough they are. I mean, nobody’s saying that. He said in his newsletter that the strategy was for this hedge fund to show, like, how tough it is basically or how hard it is.

S3: Right. That was my theory. And if you have a different theory, why are they doing this? Because they’re almost certainly going to get forced to give the money back at some point.

S1: Yeah, I mean, you’re probably right that like they or they just think, like, we have amazing lawyers, so we’re going to try to fight. But at the end of the day, the idea that they would possibly ever be able to take on all the lawyers that Citigroup could put up, I think is unlikely. It perhaps just maybe they’re just being dicks. I mean, like to a certain extent, which I I know may sound like not the most sophisticated answer, but look, in the distressed world in general, like a lot of people distressed, I happen to like a lot of people are distressed. I think there is there can be some real value in distressed investing. However, you also get people in distressed investing. And I feel like this is something you also indicated in your newsletter who frankly, like their strategy is often my guess. What we’re going to litigate longer than anybody else is going to litigate. We are just going to be completely unreasonable and we know that we can outlast other people. And perhaps this is indicative of that, although it does seem to be, frankly, just kind of stupid.

S3: But yeah, but there are two jobs. There are two jobs in a distressed investor has one of the jobs. The most obvious job is to make lots of money by buying distressed debt and getting a return on that investment. The other job, which is actually more important, is to maximize your assets under management and to get a bunch of. Pension funds, insurance companies and other limited partners to give you their money and so that you can make two and 20 on all of this money that you get given, and so you want to sort of maximize inflows into your hedge fund. And if you look at the kind of people who invest in distressed debt, a bunch of those people select for who are the biggest dicks because they think that being totally darkish is a way to maximize returns and is on some level a correlation between who are the most darkish hedge funds and which ones make the most money. And I kind of in the back of my head, think that this is a marketing attempt on the part of brigade to to basically they can go out to their potential clients and existing clients and say, look how much of a dick we were. That’s how that’s why you want to invest in this.

S1: I’m going to disagree with you on that, because I feel like it is true that the the thing of investing is that your returns are just an advertisement to get more money in, because that’s really the business is just getting more people to give you money ultimately. So, yes, that is true. But I’m just going to say that like, no, I mean, clients, especially because you are talking about a lot of state pension funds and sovereign wealth funds who don’t necessarily want horrible press. And they are the ones who like that. They often will give money to funds because these funds have a better reputation. But that reputation is earned or not. I don’t entirely agree that they’re like, well, you’re a bigger jerk now, the bigger jerk. You’re right, they have better returns. And so that same client may be like, we’re just going to pretend that we don’t see that they’re a jerk and we’re going to give them money because we need to make our seven percent. But I don’t think that actually helps them.

S3: Yeah, I don’t I don’t necessarily think that this move by brigade is sensible, but yeah, they’ve made it. And the other thing is, it’s not just them. People are talking about brigade because brigade is the one that is being sued in federal court by Citigroup. It’s pretty obvious that a bunch of other hedge funds are free riding on brigade and happy to hold onto their principal payments for as long as brigade manages to hold out and then IT brigade loses in court, then everyone else will just follow suit. But it looks like probably less than half of the people who got that nine hundred million have given it back.

S4: Would you guys give back a million dollars that accidentally got deposited in your bank account?

S3: Yes, because it’s illegal not to.

S5: You can actually do jail also just have something to back your mind.

S1: I feel like if, like, a cashier gives you like two extra dollars, I feel like most reasonable people would be like, I should probably give the two dollars back. But if you get this is why I’m no longer on mind.

S4: If you get home and you realize you got like five dollars extra, do you drive back to the store more moral questions?

S3: The one thing I will say is that this is the main reason why Bitcoin is terrible. People in the Bitcoin world talk about how the irreversible nature of Bitcoin transactions is a feature. In fact, it is a bug like people like mistakes all the time, and transactions need to be able to be reversed. And there’s basically no way in the Bitcoin world that you can do that.

S1: Oh, I completely agree with you on this. This goes back to my whole life when you see the bizarrely creaky world that’s the back office of Finance. And I know the Bitcoin people will be like, well, but if we made it all in the block chain, none of it would be creaking. It’s like, no, no, I’m sorry. As long as any human being is involved, you will make mistakes. When you’re making mistakes with large amounts of money, you’re going to need to be able to undo them. Let’s have a numbers round, and if you have a number, I do so my number is thirteen point six percent. So that is the positivity rate for covid testing at the University of North Carolina, which is an increase from two point eight percent, which was before there were many students on campus. The reason I bring this up is just because of this thing I’m obsessed with. I’m a person obsessed with this on this podcast right now, which is the bizarre state of college football. And so USC is now not having students on campus because they have had this kind of outbreak, yet they’re still playing football or they’re still planning to play football because bizarrely, the SEC and ask are still saying that they are going to play, even though the big time the PAC 12 have been like, no, they’re not really students, they’re just now football players. What’s my thing like at this stage? Or like, you’ve got to be kidding me. Like, it’s a complete joke. It also shows you to me just like the complete uselessness of the NCAA, because you have all these conferences. We’re just like like everybody’s disagreeing with everyone, like players want to transfer. It’s just complete chaos and the NCAA can do nothing. And you’re like, why do you even exist? So it’s all happening or not happening? Well, in theory, it depends on where you live. So the Big Ten in the PAC 12 came out and they said, we’re not having seasons. We may have spring football, but everybody thinks that’s nonsense. But in theory, they’re not playing. However, you have the other conferences and SCC, which, frankly, in college football is the most important conference saying, no, we’re playing. So they say they have come out with their schedules, they’re planning on playing, which makes absolutely no sense and almost certainly will not happen. However, they still think it’s going to happen. And there’s no one to organize everyone, because the way college football works, it’s just the conferences kind of organize themselves.

S3: One thing I will say is we just talk a lot about in journalistic back channels, about style guides and Oxford commas and really boring things that no one else cares about. But the Daily Tar Heel, which is the newspaper of you’re going to tell me which university in North Carolina came out with an editorial saying that they will no longer use the term student athlete. That’s a complete misnomer and complete bullshit. And this is a prime example of why that term just should be barred from or so to be fair, like the vast majority of.

S1: Student athletes, the vast majority of athletes on a college campus are student athletes. I mean, there are very, very small number of sports and in those sports, a very, very small number of programs that actually are the big moneymakers that we think of. But I agree with you in this moment when you’re seeing this year, like, you’ve got to be kidding me.

S3: I have a number to it is four point four million, which is the number of phantom people who have applied for unemployment benefits since the week of March 21st when the pandemic started. And I’m not talking about people who don’t exist. I’m talking about is a statistical artifact from the seasonal adjustments that the Bureau of Labor Statistics does to the initial unemployment claims numbers. The initial unemployment claims numbers have been much higher, significantly higher every single week than the actual number of people claiming unemployment because they do this thing called seasonal adjustment. And in the first couple of weeks, they multiplied by a certain factor, which was completely insane. And they’ve now moved to adding a certain number up and multiplying, which is slightly less insane. But the fact is that if you add up all of the seasonal adjustments, it comes to four and a half million people a year. And it just doesn’t make any sense that four and a half million people applied for unemployment on a kind of seasonally adjusted, seasonally adjusted basis that wouldn’t have done normally. Is this weird, weird thing that people don’t know which one of these two times there is to use the seasonally adjusted one or the non seasonally adjusted one. But the main thing that’s reported is always the seasonally adjusted number.

S1: No, it’s just goes back a little bit of what we were talking about last week about how at this moment, statistics are like kind of pointless because like normally obviously you want seasonally adjusted and you want to be able to compare based on because there are seasonal factors that affect things. But in this moment where everything is just nuts, so much of the data we get just people draw conclusions from data that may be completely ridiculous because the data itself isn’t necessarily that useful or accurate.

S4: I don’t maybe I lost the thread here, but what are you saying? These are the unemployment numbers, right or wrong?

S3: So the non seasonally adjusted numbers are released and those are right. Those are the number of people who are applying for unemployment. But the headline numbers that we read at a seasonally adjusted numbers, and those are overstated because the seasonal adjustments aren’t relevant right now because things are weird.

S4: Exactly. OK, so we shouldn’t pay attention to the seasonally adjusted numbers right now or they should figure out how to seasonally adjust the numbers to account for the weirdness of now?

S3: Both Yeah, exactly. More the former than the latter. They’ve tried to seasonally adjust, but no one really believes in that. It’s a it’s a hard statistical job you can’t really do on the fly. Emily, what’s your number?

S4: My number is thirty one percent. I wrote this week. Thirty one percent is the percentage of women with children in the home from age 25 to 44 who aren’t working right now because of covid-19 reasons. So it’s about thirty one percent compared to about 11 percent of men. And it’s a no. The the Census Bureau has been doing surveys of people’s covid experiences. So and it’s been doing it for several weeks. So basically for the better. Since the crisis started about three times the number of women than men have have been unable to work because of covid. And I think this is just the latest indicator that kind of shows how imbalance is. Just the effect of this pandemic on women has been really horrendous and kind of shows the imbalance in our economic policy and in our other kinds of policies that don’t really account for women’s work in the way that they should, which means that when a crisis like this happens and the school system shuts down, there’s no policies in place that can kind of help the people who take care of the children adjust in a way that could help them still do their jobs. There is no leave policy in place that makes any sense. There’s very little planning and attention paid to the education system. Should a crisis like this emerge. There’s just like no backstop in the economy for caregivers except like literally women’s unpaid labor. And you see it in the numbers. Sort of interesting to me.

S1: It’s actually interesting going back to I know it’s a very long numbers, going back to what you know, that this idea of statistics because, you know, obviously one of the problems of GDP will always be from a GDP, obviously doesn’t account for work that isn’t generating. People are paying for that. That is not what GDP covers. But as you say, like this kind of shows us that like, yes, GDP doesn’t account for this. However, it still exists. There is still a value here.

S4: Yeah. And it’s like all this unpaid labor. Underpinning the paid economy, because all these jobs that can’t literally go in and do their jobs because they have to do all this other stuff, and that’s never been accounted for in policy because policymakers don’t think about it because they’re mostly people that don’t do this kind of unpaid labor or don’t give it much thought. And I feel like it’s all coming home to roost now, but I am not hopeful that it will change in any meaningful way.

S5: I think.

S3: On which note, I think we will wrap up this episode, this late money, but not before I ask you all the question that I was promising that I would ask you in the intro. This is something which I’ve been thinking about a lot and I haven’t quite been able to come up with my own answer. But I know that I’m going to ask Emily and Anna to come up with answers. And there’s a huge number of interesting implications to this one. Here’s the thing. I have a good old fashioned, six sided die, and I will roll it as many times as you like. You just need to give me a number. It can be one, two, three, four, five. It can be one hundred. If you want any number, I will call it that many times and then I will. I almost like a multibillionaire. I have no counterparty risk. So if I promise to give you money, I will give you that money. You give me a stake. It can be ten dollars, it can be ten million dollars. Just give me the money and then I will roll that die as many times as you specified. Every time it comes up one, two, three or four or five, I will double your stake. So if you start with one dollar and let’s say you say roll it three times, I roll it and it comes up to you’ve got two dollars. Well, it comes up in five, you get four dollars. I roll it. You come up three, you got eight dollars. The only thing is if it comes up to six, it will get zeroed out. So you if it comes up at six, you get it all goes to zero. And then obviously, if I keep on rolling, it doesn’t matter because twice zero zero. So the question is, how many times do you want me to roll this day and how much money do you want to stake? This is obviously a positive sum game. You have a five six chance of doubling your money, which is a great bet. So please write in to Slate Money and Slate Dotcom and tell me how many times are you going to ask me to roll the dice and how much money are you going to put up? And you can either do that in a dollar amount or you can do it as a percentage of your annual income. So let’s say you earn one hundred thousand dollars and you want to put up one hundred dollars, that would be zero point one percent. I’m super interested in how people answer this question and I will talk about some of the different ways you can think about it and what it means coming up on some future episode of Slate Money, which was, as ever produced by the Great Jessamine.

S2: Molly, thank you for producing this. And we will talk to you next week on sleep money.

S3: Productivity, is it going up or is it going down? I have a basic theory, which is that if you look at official statistics, it might might be going up. But as we all kind of intuitively grok, it is basically going down that if you can’t go into offices like offices were clear, revealed preference of companies for a reason. And if you can’t go into offices, that just does hurt long term, your ability to be productive, to communicate with your colleagues, to be creative and innovative. And it’s all going to wind up hurting. Not to mention the clear productivity hits of things like the mental health crisis that is happening right now is the result of covid and the health crisis that is happening right now as a result of covid. And none of this is going to help the United States in terms of its overall productivity. And that is what makes this recession different from previous recessions, because previous recessions basically saw nothing happened to productivity, that if companies were making less money, they would lay off people and the overall productivity per person would stay the same.

S1: I’m maybe going to be a little bit of like the covid optimist, but I feel like even though I agree that in the short term, I think it is definitely likely that you’ll see a hit to productivity, as you said, because of both the kind of the health and mental health issues. I really do feel like if you kind of look historically at the kind of things that tend to lead to significant productivity gains, it often is advancements in technology and then people figuring out ways to use those to create more output per hour. And to me, what’s happened in this period is that companies and workers have been forced to make changes that they’ve been talking about making for years is kind of what I talked about in retail. And it’s accelerated. And I kind of wonder if moving forward will find that. No, actually, a lot of the ways we did things before were not the most efficient in terms of creating the most output per hour. And we weren’t using technology in the way we the best way we could. And now we figured out actually we can do this. So I don’t know. I’m more optimistic long term, I think.

S4: And I think you have a point. I was just listening. I have so many thoughts about this. I was just listening to Slate’s Culture Gabfest, and they’re talking about the pandemic book that everyone’s reading now that the what is the great influenza? And I guess in that book, one of the things to come out, one of the I guess good things to come out of that flu pandemic one hundred years ago was innovations in medical science like huge leaps and bounds discoveries. And so from great unproductivity can come great productivity. And like in other words, we can learn a lot of lessons now that pay off for us years down the road in terms of productivity and technological advancement and all this. At the same time, it has been interesting to sort of see like the rise and fall of the productive at home worker, like in the beginning of the pandemic. I think most people are at home like fueled by some kind of like existential fear and panic and just like working as hard as they possibly could. And there were like many articles about people are working more hours now at home. And I feel like I might have made us talk about that. I don’t remember probably. But now the articles are like people are losing their minds at home. And I think Ben Wyatt in Politico had a newsletter that said something along those lines are some like iconic quote in it.

S3: Rolling mental breakdowns.

S4: Yes, rolling mental breakdowns. And I was like, that feels right now. Yes. And so in the short term, it does seem believable that productivity is taking it. I mean, look at the post office. Part of the reason and I don’t know what to believe anymore from this Dejoy guy, but one of the reasons he said the mail service was taking a hit was because, like a lot of the postal workers are getting sick and like there are issues and we’ve never talked about the coin shortage. But we could and I mean, isn’t part of the reason there’s a coin shortage also like the pandemic just does make it harder to produce stuff and do work. So it makes sense intuitively in the short term that that, yeah, productivity would be down.

S3: One other reason that I’m worried about productivity now in the way that I haven’t been in previous recessions is that while it’s possible to see places where productivity is going up and you can definitely look at it, think about what we were just talking about on this episode of Shopify and ETSI, they get great economies of scale and they’re making more money and they’re clearly more productive on the per employee basis. And they were precrisis. You can also see obvious places where productivity has fallen off a cliff like the restaurant industry and retail, like we also talking about on this episode. And one of the things that you see is that you see a large number of relatively low productivity industries really doing badly and a small number of relatively high productivity industries is doing much better and. When you aggregate that out, it is conceivable that you wind up with a positive number at the end of it, but that’s not a good positive number. That’s a bad positive number, because what it reflects is a huge number of industries just going out of business and losing a lot of jobs. And in an ideal economy, all of those jobs which would be lost in the low productivity sectors, would migrate over to high productivity sectors. But it’s just simply not the case that, you know, sous chefs losing their job in restaurants are now going to start working. Is back end engineers for Shopify?

S6: Yeah, I mean, look, I you know, look, there is a part of that, the creative destruction that there’s part of that that is real. But, yeah, I, I agree with you. Like on the stage of what we’re seeing now. Yes. We are seeing some industries that are very weak, can continue to be good industries that are going to really suffer right now. But look, I do think there are elements of what we are seeing right now where you probably will have some industries and some parts of those industries that are not particularly productive, that are not particularly efficient, that make a lot of business. And I don’t necessarily believe that we will ever create any more jobs for people. I don’t think that it will just magically happen. But historically, that can often be the case. And so, again, I just think that, yes, it is possible that this will only lead to bad things. But if you look back historically, that just often hasn’t been the case. When you have crises, it forces people to.

S3: And I agree that historically it has sometimes been good. I’m much more hesitant than you are to extrapolate that out to the current crisis. And the other thing that, you know, we have learned in this crisis is the interconnections in efficiency can be bad. And one of the things the first thing that we did in this crisis, which we started social distancing to try and make the society less efficient, because if you made society less efficient, that was the way that you killed the credit, the virus. And that’s worked in basically every country that’s done it. And we have learned the sometimes what you want is more redundancy and robustness rather than efficiency. And I can definitely see a future world which starts valuing robustness over efficiency more. And that, by definition, means less product, less productivity.

S4: Yeah, one thing I was going to ask we’ve seen in the past years and years and years, tremendous gains in productivity. Right.

S1: But there’s like a famous epic chart where you see productivity at the productivity up. The productivity rate of growth has not as fast as it used to be. So productivity continues to go up, but the rate of growth has not been as robust.

S3: OK, but if the much vaunted gains to productivity from the Internet have been much more theoretical than actual, OK, but even still, productivity has gone up.

S4: A bit, we can say, but workers wages have not kept pace with productivity gains, so I say why should I care about productivity all that much anyway if I’m not going to get paid more for doing more productive work?

S1: Because productivity is significantly important to increasing the overall level of economic growth and not just economic growth like sustainable economic growth, that you can see this on the Zuba Emily’s List.

S3: You just pay me, just pay me more.

S5: I don’t care if I do it. Why should I work harder?

S1: I’m not getting more. Yeah, boy, it is a fair point that the fact that workers have a labor has getting a smaller percentage of productivity is a problem. I definitely agree with you on that. But I don’t think that maybe we should be like activist productivity. That’s not the lesson to be learned and says it’s fine.

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