Audio Length: 00:58:43

Slate Money talks private retailer sanctions on Russia, the nickel market fiasco, and Gen-Zvs Millennials.

Transcript:

S1: Hello and welcome to the Lambos of food stamps episode of Late Money. Your guide to the business and finance news of the week Emily Peck of Axios this year. She hates this so much.

S2: I protest. I formally protest the title of this podcast. It’s offensive. It is offensive.

S1: We’re going to go dark in this show. I am Felix Salmon of Axios and we Gen-X Acciones are being joined this week by Ginevra Davis Ginevra. Welcome. Thank you so much for having me. Introduce yourself, Ginevra. What brings you to this show?

S3: I am a senior at Stanford studying symbolic systems, which is basically computer science, philosophy, linguistics where Major Stanford invented, and I write for Palladium magazine about crypto and culture, and I recently published an article called When the Stagnation Goes Virtual About Decadence in NFT Culture.

S1: So we are going to talk to you about that. We are going to talk to you about the darkness at the heart of Gen Z and how terrifyingly nihilistic the vision is these days. And it’s an amazing conversation which we’re going to actually continue in the sleep loss because that so much of it and it’s so rich. We are also, however, going to talk about the news. We are going to talk about the sanctions that companies are imposing on Russia and why they’re doing that and what they hope to achieve by it. And I am going to have a little rant as well about the London Metals Exchange and Nickel Market and whether the LME should have suspended trading in nickel. It is a packed show, and it’s all coming up on sleep money. OK. Emily, let’s start with sanctions. We haven’t really gone into a lot of detail on the astonishing degree of especially corporate sanctions that are being imposed on Russia right now. We’ve had a whole bunch of household brands Starbucks, McDonald’s, Nike, H&M, those kind of people pulling out of Russia and saying they’re not going to do business anymore. This isn’t because they have to right. This is because they want to.

S2: Yeah, it’s really been interesting to watch sanctions progress. The ones enacted by the EU and the U.S. are already unprecedented, fast moving. They cut off some banks from Swift. They don’t let financial transactions happen. Russia can’t really use the financial system globally. But then this other thing started happening, I guess really accelerated this week where, yeah, U.S. companies come. All kinds of companies McDonald’s, Pepsi, Facebook are like, we. We won’t operate in Russia anymore, and they’re essentially boycotting the country. They’re like going and doing their own sanctions. But I don’t see how they had much of a choice because this this war happened so quickly. It’s so universally condemned. There’s so much moral outrage. It feels like companies didn’t need to waffle. Someone called it a triumph was on the phone to me this week, a triumph of stakeholder capitalism, which we can talk.

S1: Oh my god, I hope that person who wasn’t with it. Jim VandeHei.

S2: No, no. It was a fellow at the conference board because I said, Is this ESG? Because Matt Levine has been calling this like an ESG that all these companies are bravely taking a stand against the Russia invasion of Ukraine. Like how hard is it to take a stand against something so terrible the triumph of stakeholder capitalism? McDonald’s temporarily closing its nine hundred and something, you know, fast food restaurants in Russia and really like cutting Russia out of the of the global financial system.

S1: So what’s the theory of the case here? I understand governments imposing sanctions on bad countries, whether it’s Venezuela or Iran or North Korea, something like that. And they’re like, We’re going to cut you off from the financial system is kind of punishment for being bad. And then if you’re good, you know, we have like a carrot, we can wave in front of you and say, like, we will reverse these sanctions and they can get imposed essentially by governments and they can get lifted centrally by governments. This is different. Governments have not been telling corporations to boycott Russia. In fact, weirdly, they’ve been going around telling certain corporations to not boycott Russia. Like Shell, for instance, bought a bunch of Russian oil. Everyone got up in arms and then the CEO of Shell was like, Oh, I apologized profusely. It’ll never happen again. I’m not going to buy any more Russian oil anymore. But the reason why he bought Russian oil is because, you know, Joe Biden and the EU and everyone was saying like, Please keep on buying Russian oil, we need the Russian oil. So there’s actually a bit of attention. What you have is this thing, and I love this term and I need to bring out called over compliance where where companies see sanctions and they kind of see where the puck is moving and they’re like, we’re going to get ahead of this and try and be ahead of the curve. And it doesn’t actually cost us anything because what are we going to do with a whole bunch of ruble revenues anyway? We can’t convert the rebels back into dollars. The rebels are worthless. We don’t know how to price anything in rubles. We can’t import things into Russia. It doesn’t hurt them too much to shut down in Russia. And it also gives them ESG brownie points, I guess, and it makes them look, you know, like they’re supporting Ukraine somehow. But but what does it serve any actual purpose in terms of like, you know, does anyone think that, like Putin is going to be upset that he can’t get his Big Mac tomorrow?

S3: No, I really think it’s about these brands. They want their like social media moment and then none of them, none of them want to be behind. And like you said, it doesn’t hurt them. And it and it helps. I feel like if you’re a brand that’s online, you kind of have to you have to play with it. You have to play with the discourse now. And so they want there. They want their big. They want their big moment in the stand and they want their big moral stand.

S1: I feel like on some level, this started with Sonnenfeld at Yale. I can’t remember. I think you’re somewhere at Yale. Put up a website basically saying these are the companies still operating in Russia, and the CEOs would like phone up Yale and say, No, we’re pulling out. Take us off the list because no one wants to be on that list of companies operating in Russia, and it is presumptively a bad look to be a company still operating in Russia. Ginevra, maybe you can explain like. Do you think it’s bad to continue operating in Russia, and if so, why?

S3: Like you said, I don’t think Putin cares. I don’t think he cares about his people. I think that’s been pretty clear. Probably like McDonald’s closing in Russia is going to have much more of an impact on the Russian people than anything that Putin or his nebulous affiliates care about. And so I do think like it’s not a commentary on the justness of the war in Russia, but in terms and maybe maybe you can make a larger point that having all of these companies that people have heard of pull out pulls out like underscores the seriousness of what’s going on. But I think it’s probably more of like, I think Nate Silver just tweeted about this yesterday that there was like a concert hall in Montreal that like Canada performance with a Russian piano soloist because they’d gotten some pushback just for having a Russian play piano, and they thought that the optics were bad. Even though the guy was like pro Ukraine, I think it falls more in that category of people just want to be extra sure that they’re on the right side, not going to have any blowback, don’t want to have any unnecessary issues from this, and they’re not really thinking about the impact on the actual war or the actual Ukrainians.

S1: Yeah, this this worries me, I have to say, like the animus towards all Russians. You know, I have. Russian friends who like literally every single one of them opposes the war, and if I was a Russian in New York or London or, you know, anywhere right now except for Russia, pretty much I would be. Kind of scared. You know, like you remember how there was that uptick in anti-Asian violence, just when people thought that COVID came from Cheyna, imagine like the kind of opprobrium and in violence even the Russians are going to start worrying about right now for something they have no control over and probably oppose.

S2: Yeah, I mean, this is the thing about about sanctions. They’re sort of they’re useful, useless tools of war. I mean, first of all, like you said, Felix, there should be some kind of carrot like sanctions are useful as as a as leverage, as a tool in negotiations. But there’s no negotiating right now right now with Vladimir Putin. And and typically, sanctions only work as a as a negotiating tactic if you’re offering to pull them back. If X happens like that’s what happened with Iran during the Obama administration, there were really tough sanctions and they said, we’ll pull these back if you talk to us, and that’s kind of how it played out. But that’s that’s not really the scenario now. And it seems like in some

S1: is I mean, I feel like with the government sanctions, that’s kind of the the long game here that like we imposed the sanctions as punishment for invading. And then if and when you ever want to start getting back in the good graces of the international community, we will be willing to negotiate and say, OK, you can have your central bank reserves back just so long as you do ABC and and probably there’s some kind of new president in Russia or something like that. I mean, it might take a long time, but it’s it’s something that governments can do. But what governments can’t do is say, like Matt Levine said, what governments can’t do is say, OK, bp by that 20 percent stake in Rosneft back, you know, once they sell their stake in Rosneft, it’s sold. It’s done, it’s over right?

S2: That’s what I was going to continue to say was the sanctions keep getting harsher and harsher. That sends a signal to other actors like private companies to jump on board the sanctions train and do these kinds of actions, which might not be reversible once these companies pull out. Getting them to go back isn’t isn’t going to be a thing. And like, there’s just fallout throughout the financial sector in the business sector. Now, like this morning, BlackRock announced it lost $17 billion on Russian securities like even if the U.S. undoes sanctions, undoes, undoes sanctions. I don’t know if these companies go back and, like Russia, becomes a hot emerging market again. Like that damages is permanent in a lot of ways, right? I mean, once the sanctions start rolling, you can’t just roll them back.

S1: One of the purposes of sanctions is to, you know, prevent Putin from invading in the first place because if he invades, then there’s going to be a bunch of permanent damage to his economy. Of course, like the idea is that it’s preventive. It didn’t work, but like. But but you have to, you know, be like on some level you have to make good on that threat. Otherwise no one’s going to believe you next time. But like so like, I can see why, you know, there was a case for causing this kind of damage to the Russian economy. But like the Russian economy, has been running a massive trade surplus for four years now, it doesn’t need a lot of foreign investment. What it does need is imports because its trade surplus, it’s all in the form of energy and wheat and stuff. And we can talk maybe about commodities in the next section, but like. But yeah, they need to import stuff. And then if you put sanctions on exporters to Russia, if people are exporting food and clothes to Russia and so like. You know, if those people start boycotting Russia, that really hurts the Russian population. And while I’m all in favor of boycotting oligarchs and I have no sympathy with the Chelsea Football Club fans who are like, we’re never going to be able to win another trophy so long as a football club is sanctioned. The late yet Crimea. But, you know, I do think that punishing ordinary Russians in this way by saying, like, we’re just not going to supply goods to Russia anymore serves very little actual purpose. And yet it does seem to be the the case that public opinion in the West really wants these companies to do. This is very supportive of these companies in doing this.

S2: The other thing about sanctions is that they often backfire, especially when they hurt citizens. So there’s the moral question of like you don’t want to hurt regular Russian citizens and cut off their access to things that they need. And then the second order thing is basically like leaders will then blame people’s hardship on the other country that you’re at war with. And instead of making people turn against Putin and Russia, they make them more resolve to be at war. So they kind of backfire in that regard as well.

S3: Most people feel pretty strongly that they don’t want to go in the war, but there’s a sense that they want to intervene somehow. And if so, if your best outlet of intervening is to campaign to McDonald’s, to have them imposed sanctions and you can tweet it on Twitter that makes you feel good. It makes you feel like you’re doing something, makes you feel involved. You can end up with a sort of a proxy war from the citizens who want to feel like, Oh, we’re we’re contributing. We’re doing something look like, you know, we’re we’re all we’re all pulling out, but it’s not really financially, financially sound.

S1: Yeah, there really is a feeling of something must be done. This is something. Therefore, this must be done about this whole thing. I don’t think it’s going to make a huge difference one way or the other, to be honest. You know, if Russians stopped drinking Pepsi for the next, however long, like, that’s OK, they can get by without Pepsi. I do think that if there was a way of banning cigarette imports into Russia, that would carry that massive price effects and would topple the government overnight. We will see whether the Chinese do that because a lot of the imports come from China. We will see whether that happens because the Chinese have started to stop buying certain Russian exports and has started to stop providing Russia with certain imports. And so like, I think that’s the big next shoe to drop in terms of sanctions is how China is going to how and whether China is going to ratchet things up.

S2: Can you talk more about that, actually? I don’t really understand what Cheyna is actually doing because some days I read statements that they’re kind of on the side of Russia on other days. No, I know that they need the U.S. and the EU markets to sell into. They can’t just like. Beyond Russia, so I just don’t really understand

S1: the the US and the EU are definitely never going to sanction China. Right. So like that’s that’s never going to happen,

S2: even if no matter what they do,

S1: even if they invade Taiwan, that’s not going to happen, right? Like, we need China too much. It’s just it’s to incorporate it into the global system. They’re not an aggressor here. They haven’t done anything wrong here. We’re not going to start punishing China for not punishing Russia. But it does look like China is beginning to punish Russia, not as harshly as the US and the EU, but they are moving in that direction. They are imposing certain sanctions of their own, while at the same time, you’re absolutely right. Really kind of massaging the news the ordinary Chinese people get to make it seem not that bad. What Russia is doing, that’s like a there’s like this weird sort of information slash censorship thing that the Chinese are doing, which I think you’re right is probably if you had to put it on the spectrum, say it would be pro-Russia. The the censorship is very similar to what the Russians are doing in terms of how they’re presenting the war and the sort of fake false things that they’re saying. I do think that ordinary Chinese people can get at the truth of the matter in the way that ordinary Russians increasingly cannot. But the main state media outlets in Russia do seem to be pro so that main state media outlets in China do seem to be pro-Russia, even as the state itself seems to be moving a little bit anti-China. So I think it is like very fluid right now. This is my favorite story of the week, and I want to know about this Emily. Give us the big tldr here.

S2: Earlier this week, something called the London Metal Exchange, where people exchange metals commodities. They halted trading in nickel, which until this week I did not realize is a very important commodity that goes in batteries for electric vehicles and is used to make stainless steel. And Russia makes a lot of lot of nickel. And because of the war, because of the sanctions, there’s less nickel in the world because Russia can’t sell the nickel. There was already apparently a shortage of nickel in December before all of this even started. Blah blah blah. This big Chinese nickel guy had a lot. What did he have? A futures contract? Write on nickel prices. Nickel prices started going up. There was a short squeeze, and instead of letting this kind of all happen and letting lots of people lose money and make money as as one is supposed to do in a market, the London Metal Exchange halted trading and let everything kind of get sorted out in the first metals trade freeze since the collapse of the International Tin Cartel in 1985, which I obviously knew all about already.

S3: What I was trying to learn about is, is it typical for a market to halt a short squeeze? I thought that it was more of like a like Robin Hood GameStop situation where they just like stepped in because it seemed too weird. But then I saw on a couple of places that they do have an obligation to stop a short squeeze. Was that just like an executive decision they made? The weird thing is also they cancel the trade, the trade before,

S2: oh yeah, they canceled all the trades that day.

S1: Yeah. So so there are two questions there and very simple answers to both questions. First, do exchanges have an obligation to step in and prevent short squeezes answer? Absolutely not. That is not an obligation whatsoever. It is something they can do, but is not something they are obliged to do. Second question is it remotely normal for exchanges to step in and just say that entire days trades are now cancelled? And you thought you made a bunch of money and you didn’t know that is very uncommon and rare and out of the usual. And again, it is something they can do, but they are not obliged to do so. What actually happened in this case was that a bunch of people who were on the long side of nickel for whatever reason, wound up thinking that they’d made a whole bunch of money on Tuesday because prices went up to a $100000 a ton and then those trades got cancelled. And they were told, actually, you didn’t make a whole bunch of money on Tuesday, and they got crushed and upset. And so there is a bunch of anger. And vitriol being directed at the Ele.me from people like cliffhangers, and this is a famous short seller, James Mackintosh has very, very clearly argued. Column in the Wall Street Journal this week, which will link to and I highly recommend that people read to understand this side basically saying these are markets you have to like that you have to let markets be markets, otherwise you’re defeating the whole purpose of them. And what LME did was incredibly wrong, and they should never have done it. And if you’ve made lots of money, you should have that money. You can’t just have that money confiscated by capricious exchange.

S2: And that is so convincing. Felix, that is a very convincing argument. I’m like, Yeah, you can’t just cancel. This is this is cancel culture run amok. You can’t just cancel the trades. This is it seems wrong. And though I cringe when someone writes moral hazard and anything, he seems to have a point. But your you say no, you say it’s all wrong.

S1: I think he’s totally wrong about this. And I think the LME made exactly the right decision here. And there’s a bunch of different moving parts here, and I don’t know how many of them I’m going to get to because it’s complex. But the first thing we have to understand here is that markets exist for a reason, and the first most important purpose of markets is the single price discovery. Basically, we don’t know how much something is worth unless you have a whole bunch of people buying and selling it and finding and clearing a market clearing price. And when you do have a market clearing price, that is the world’s the best mechanism that we have in the world, there’s not a very good mechanism. But it’s the best that we have for working out objectively how much something is really worth, whether it’s a stock or a bond or a future or anything like that. And mostly what markets do is they act as price discovery mechanisms. What happened this week in the nickel market was that price discovery went completely haywire and the price of nickels futures contracts, which is the standard thing that people quote when they’re talking about the price of nickel went through the roof that was unprecedented daily rise in in the in the price of that contract. And what that then created was a bunch of reporters. Coming out and saying, like Nicole is worth $100000 a turn like, you know, the nickel in your nickel, your five cent coin. If it’s worth more than a nickel and all of this kind of stuff, because like as though like this principle of price discovery where all you need to do is take the last, you know, most recent trade on the LME, and that is the objectively true price and value of Nickel Lite. Even though that trade is clearly the result of a completely bizarre short squeeze and doesn’t really doesn’t reflect any kind of fundamentals. That is the price of nickel, and we all have to just respect that as the price. Of course, it’s not right. That’s not like the LME is a place for. Two different things to happen. One is it’s a place to speculators to speculate you got a bunch of traders who understand the market and the constantly positioning themselves and trying to make money, and sometimes they may win and sometimes they lose. And that is what, you know, Dad Turner calls a socially useless activity that really doesn’t help anyone do anything. That’s a bunch of hedge funds that we have no real particular sympathy for. The other thing it is is a genuinely important way for nickel producers and metal producers to be able to get some predictability in what they do. Commodities prices are notoriously volatile. You are mining a bunch of nickel today and you want to make sure that you know that you can pay your payroll tomorrow. And so what you do is you lock in a future price for your nickel steel. I am a Chinese nickel producer. I am producing, you know, a million tonnes of nickel. So I’m going to enter into a contract to provide that million tonnes of nickel at a certain price in like a few months time. And that means I’ve locked it and I can be sure I’m getting that price. The problem is that the way you do that is effectively by going short nickel in the futures market, your long nickel in like the real world because you were a nickel miner and you hedge that long by going short in the futures market. In the you know, when everything balances out. You’re flat. It’s fine. But because of the way the market mechanisms work, that short you have in the market is subject to margin calls. And if the price in the market goes up a lot, then you can wind up being asked for massive margin calls, which means you need a huge amount of liquidity and you can wind up going bankrupt before you can actually deliver the nickel. And that is a bug, not a feature that is a problem with this market. And that’s basically exactly what happened in the LME this week is that the people who are using the LME for the purpose for which it was really intended, which is being able to make their businesses more efficient, wound up suddenly being faced with these massive margin calls, which they couldn’t be because they didn’t have the liquidity. And those margin calls were not just socially useless, they were socially harmful. They had they ran the risk of completely blowing up a whole bunch of not only like brokers, but even like nickel producers and making the world worse in terms of like its ability to produce nickel for every bad reason, stainless steel and everything else. And at that point, you’re like, fuck the hedge funds like, OK, fine. The hedge funds wanted to make money and they thought they made money and they didn’t, you know, we tore up their trades. But the point is that the LME had failed at both of its main purposes. It had failed at price discovery because no one thought that this was the real price of nickel and it had failed at effectively allowing nickel producers to be able to hedge their production once it failed at both of those things. Yes, suspend trading, tear things up, try and get things back to normal because it is at that point not doing any good at all, and in fact, it’s doing harm.

S3: All the articles that I read were making so much hay out of Oh, why was Tangshan taking nickel shorts there? A nickel producer, but they were taking nickel shorts. I don’t know. Something’s going on here, and it sounds pretty basic, but I think that it’s easy to take these events and try to fit them into some larger narrative.

S2: Why would hedge funds? I mean, there’s a piece in in Bloomberg and the hedge fund people are like, we’re never going back to LME, and I’m kind of like, Yeah, that makes sense because they’re in there to do their socially useless speculating. And if they can’t do that or they know now that there are limits to that activity, why would they come back and does need them?

S1: Really good questions. I would say, first of all, like, I’ll believe it when I see it like they can, they can say, I’m never going back to the LME. Yeah, you are. Yeah, you are. You know, you are. You’re just you’re just like, you know, you’re just saying that there was this one guy who I’m going to stop trading copper on the LME. It’s like they’re not going to suspend copper contracts. Of course, you’re going to continue trading copper on the LME. That’s how you make your money. But if he is literally not trading copper on the LME in a year’s time, I will totally eat my hat. Of course he is. Does the LME need them? Maybe all exchanges need liquidity providers, right? You need market makers to have a bid and an offer in whatever contract you’re dealing in so that people like a Chinese nickel producer can come in and hedge their production. It is very difficult to have a market which is purely made up of real world and uses the intermediaries and the speculators and the hedge funds and the market makers and the brokers. They do serve a purpose. So yes, I mean, does the LME need all of them? No could. In fact, a bunch of these little small brokers have gone bust. If they couldn’t make their margin calls, then it would have been kind of OK. Yes. But in the grand scheme of things, as I was trying to say, like these market makers, these hedge funds have to understand the the liquidity providing that they’re doing the service that they’re providing. They’re doing it for a reason. And when that reason goes away, then it makes sense for people to like temporarily stop it and. I’m sorry, but brokers and hedge funds. This is what they do, is manage risk right there. They are constantly obsessed with every single conceivable risk that they are facing, including counterparty risk, including central counterparty exchange risk. They have known all along that there is a risk that contracts can get suspended. The trades can be reversed. This is 100 percent a known risk in the market. Anyone who’s suddenly acting or naive and saying I had no idea they could do this is completely bullshitting. It was unlikely, but you knew it was possible. OK, Ginevra, we needed to we need to talk to you about like generational things, if that’s OK, because Emily and I have successfully, in my own view, turned slate money into a safe space for Gen X. This is very much a Gen X podcast just, you know, cards on the table here and we’ve had a lot of millennials on. We’re going to say anything what we think about them. But like, I want to know I want I want to phrase this actually in the context of what we were just talking about in terms of these like Five Sigma events and crazy, unexpected things that happen in the world, which the past 20 years has seen a lot of right. We’ve seen, you know, like as a financial journalist, I can remember, like the crazy late 1998 emerging market crisis. Then there was nine eleven, and then there was like the tequila crisis. Then there was the financial crisis of 2008, which was all around the world. There was COVID, you know, happening, which just came out of nowhere and brought the entire planet to a stop. And I look back on, you know, the past is basically what you call it, 21 years and see just crazy after crazy. And I can basically, because I’m an old, I can say, wow. The past 20 years have been crazy and not normal. But like, if that is your entire life. How does that feel, do you feel like you’re living in the crazy world or do you feel like this is just what life is?

S3: I think I think with I’ll just like, start with the financial crisis. For me, 1998, I wasn’t alive then. Not super relevant 911. That was my I do actually remember 911 because it was my preschool open house visit. And so I remember the day and I later learned that that day was 911. So I think there are some there’s some split like, you’re a millennial. If you remember 911 and you’re like Gen Z, if you if you don’t. And so I always say, I’m really, really in this in-between group because I remember 911, but I didn’t realize that it was 911. So. So like to me, it’s not. It’s it was a of and gave her another for other reasons that I learned, like four years after, when I was like, it was

S1: really important to you because it was what chose your preschool.

S3: It was my preschool. And then I learned later, Oh yeah, by the way, all those people came to your house. They didn’t know it was 911. My mom did. She was freaking out the whole thing. I think my big, my first big financial or financial global event that I suppose she was really the financial crisis. I think that shaped particularly my little micro of like kind of pre like Peak Gen Z, but also definitely not millennial a lot because we were really brought up with this narrative of like the stupid millennials, it’s the stupid millennial, the entitled millennials. They kind of got what was coming for them. They were taking selfies. They were, you know, studying the humanities. They were taking out all this crazy debt. They were so spoiled they were eating their avocado toast. And now look what happened to them. They can’t afford a house. They’re becoming dog moms. They’re not serious adults. They can’t. They’re not adult in my gut. And so I was like, constantly raised in this background backdrop of impulse. Not explicitly, but implicitly. Don’t be like these people. Don’t be irresponsible. Don’t. And I, you know, it’s it’s really I actually wait, wait. And this time these

S1: attitudes you inherited from your like Gen-X parents.

S3: Not as much from my parents, but like my my dad was, my dad’s a really big really, really, really into politics really is in the news and I used to figure skate and so we would drive like an hour there and an hour back every day, and he would have the news on the entire time, like NPR constantly. And so I was just like, really raised with this ambience of the economy, the economy, the economy, jobs and then the backdrop to this was this this failed generation, not the news at the time was very even even in like even given the economic context, I at least came across to me as like, very harsh on these kids. It was not. The narrative wasn’t Oh, I’m so sorry. You graduated into a recession. It was the peak of the kind of annoying millennial discourse of that sort of combined. And there are a lot of you watch like girls that kind of like, I watch girls when I was younger, like Lena Dunham’s show, a sort of annoying entitled failure to launch not fully an adult adult millennial. And I think partially it’s my personality, but also pretty, pretty common really. With kids my age are very, very like hyper practical, hyper focused and really just obsessed with. And I kind of get into this in a little bit in the article obsessed with jobs and this idea of getting a job and getting a real job and getting a serious job like I might be a little bit biased coming out of Stanford. But like the sort of day one pressure people talking about salaries and consulting and investment banking and private equity and hedge funds really, really kind of like abstract technical jobs that like no kind of self, no normal 18 year old to be like, Yeah, I want to be like a Deloitte consultant when I grow up like, but this is not like a normal thing to be excited about, but I went to

S2: college people like that.

S3: You do it. Yeah, you do. It is now. I feel like like in the trickling down to high school to just like the insane college admissions pressure, it’s just very, very normal to like just build your entire life essentially on like this on on trying to trying to not be poor, essentially. And there and then there’s this. Even with inflation now and people’s hearts, people are starting to talk about it now. But it’s really felt like this for a while that there’s this constant sense that like, no matter what you do, it’s not going to be enough unless you have some sort of crazy, crazy, crazy financial outcome in which case you’re going to be doing great. And I think this is part of the reason why we’re seeing so many young people put their money in crypto is because if you’re making like even a really good sort of six figure salary out of college, the the message that you’re getting and then the reality of the market is that it’s not going to be enough to buy like a nice apartment in a place that a young person might want to live. And like, you know, don’t forget about, like, forget about a family or like, you know, going out to eat with your friends. And so I think you’re seeing people who are willing to. There’s a sort of like little phrase in crypto or, I don’t know, a couple of meme accounts involves sort of like Lambos or food stamps, like they’re willing to take these crazy, crazy backs with their money because the message they’re getting is that they’re stable, dependable salary that they’ve worked so hard for through high school through college isn’t going to be enough. And so I think that’s why you’re seeing some of the sort of odd financial behavior from. And I would put like in this sense, I would put kind of millennials and Gen Z, young young young Gen Z, the ones who have the money to be investing in crypto kind of in the same category where there is this, there is this sense that following the normal path isn’t going to be. It’s just it’s not good enough and that the things that your parents talk about like, Oh, we, I got it. I got a job. And then suddenly I had a house and a wife and a family like, that’s it doesn’t. It doesn’t feel realistic anymore. I think for a lot of Gen Z is also that’s really frustrating because like I said, like in my generation, we sort of thought we were smarter than the millennials. Like we thought that when it was our time we would, we would figure it out and we would major in computer science and we would like do everything right. And just with the with with inflation, now that’s not really how it feels anymore.

S2: So do you just your generation just go ahead and speak for the whole, the whole generation.

S3: But OK, yeah, yeah. Also, just like this is also my perspective coming from like a lot of lot of my friends were, you know, coming from Stanford, a lot of my friends are in tech or VC or are sort of selected as a motivated group. But I think you can also sort of like an induction element where it’s like if even this group is having a hard time or feels like they’re having a hard time, it’s kind of scary to think about the non, the people who don’t have all those advantages or having sort of structured, structured their life this way. If even I have friends who are worried about, you know, if you feel very financially. Secure.

S2: And do you think it’s like a trauma response, so the Great Recession? I mean, you you must have been like 10 years old or something?

S3: Yeah, I have this really funny memory of my my dad asking me, like, what do you think is? I was like 11. He was like, What do you think is like the biggest problem facing the country? Because he was like, he was like disagreeing with someone on the radio? And then he sort of I was like, Oh, I think that guy sounds good. And he was like, What do you think it is? And I was like the economy. And he was like, what? And I was like, Yeah, the economy. People are talking about the economy. It’s a really big problem. He’s it’s not like, you’re like, Well, the economy will get better. Like, they’re a really big problem is that climate change, that’s a real problem. And I guess I’ve always sort of been waiting to be proved wrong on the economy being the biggest problem. I don’t think I do think climate change is the bigger problem. But I think there’s an element of the trauma response. But I also think there’s an element of a lot of these jobs you get now just what you’re like. Even if you do like investment banking, right? It’s like the salaries are way, way, way lower than they used to be really for the amount of work. It’s it’s true. Like if you’re look, if you’re like, Yeah, yeah, I mean, know, if you’re looking at that, yeah, I have friends whose parents are bankers and then, you know, it’s like Goldman Sachs. Like, I don’t know, nineteen, sixty or something with how the investment analyst class of 10. Now it’s like five hundred. Where do you think that’s going? It’s it’s it’s different. It’s harder to get these sort of jobs that will, like,

S1: hang you

S3: up through

S1: the finish. That thought the the are you saying that the 500 people who go into Goldman Sachs now? Are getting paid less than the 10 people who went into Goldman Sachs in the 1960s. Because I definitely don’t

S3: think that’s true. Yes. No, it’s I mean, it’s it’s because I mean, they’re younger, but there’s the if you if you stick or if you stick around, it’s still pretty good. But the early the earlier, the earlier round, it’s not. It’s not. It’s mean, it’s not. It’s not that it’s not that much if you’re not. I mean, I just this is my experience from my friends. I mean, I’ve seen their I’ve seen their I’ve seen their offer letters and then I’ve heard their parents talk about what it was like when they did the same thing. And they’re like, This is really, really different. And I think and that’s at the top end. So you work down and then there’s this. I think there’s another element where the the jobs now are less. They have less of this. Like, it’s like no one’s going to no one’s no one’s sort of big, amorphous firm. They tend to bottom. They tend to. There’s not as much of a culture. It’s harder to find a mentor. It’s harder to find someone who’s going to support you. I think it’s gotten worse with remote work.

S1: So tell me later. Yeah. If you look back over the past, say, five years, which most of us you know, economic journalists think that most of the past five years have been. Really healthy in terms of the economy, we’ve had a very good, healthy, strong economy. You look at the past five years and like, you know, take out the spring of 2020 for obvious reasons. But like when you look back upon those past five years, would you say no, actually, the economy has been bad the whole time.

S3: I don’t think it’s been bad if you were in tech. It’s been incredible if you were in tech, if you’re doing anything that’s touching tech like it was. So it’s still so easy to raise money. Like, I think like three raccoons in a Stanford sweatshirt could raise like five million dollars right now and still like this. And it’s it’s insane. And I think if you’re I think if you’re not in tech. No, I don’t think the just I don’t think the economy is. There’s not a lot of options. I guess this is how it is, how it feels. I think if you are in tech and there’s a lot of these like downstream tech jobs that you can be a product manager or you can be like a designer or if you’re working, working, working B.S., I actually wrote it, wrote an article in my sophomore year at Stanford about how everyone wants to be in these like tech adjacent jobs that basically don’t require you to do the risk of starting a startup or like the difficulty of coding. But there’s a sort of little cottage industry of tech jobs. So like, that’s that’s fine and that’s that’s real growth and that’s good. But I feel like. This story has been this sort of shift away from everything non-tech and tech. And then you look at where tech is right now, it seems to be like the VCs are really turning a lot of their attention to crypto. And my my read of that is been just like coming from VC and then moving a little bit more into crypto, a little bit running out of ideas in the hard tech and trying to find something new that’s going to produce that crazy, crazy growth that they got used to in the past, you know, 20, 30 years. Yeah, if you are in tech, it’s really smooth sailing. But I think if you’re not, it’s really

S2: tough out there. Not to say that I’m I’m surprised that people blame millennials for the financial crisis because they were like not old enough to be blamed, I can.

S3: They really do. They really do or I think it’s also like, it’s not quite like it’s not quite like they will say, like, Oh, it was there. If you if you talk to someone in a more like, you know, it once said, Oh, it was their fault. But what I there were a lot of at least when I was growing up these sort of like millennial take down think pieces that were really pointing at things that were just financial. So be like they’re not having kids. They’re, you know, they’re unsettled. They keep switching from job to job. They only want to do internships. They’re entitled. And it makes sense that if you grew up in like a booming economy where everyone tells you that no matter what you study, you, no matter what you do, you’re going to have this great job and you’re going to have this great life. And then the economy crashes. You enter the workforce and you get completely screwed. And suddenly people are like, Ha, you got like a creative writing degree. Like, Good luck that you would have a class of people who basically felt like they were entitled to more than they thought and kind of hadn’t prepared mentally to struggle in that way. Do you think that I do think that Gen Z is more like again, they’re more they’re more resigned to this, to the situation. That’s my like, very intuitive cultural read on like Gen Z versus millennials. I think millennials were, like, really thought that they were going to have these like incredible careers handed to them had that taken away and had a really hard time adjusting versus Gen Z is more like. Yeah. No, I’m never going to have a house, hahaha. And, you know, hour or so they had that attitude, or then they cry and go into something weird like crypto or start ups or like have a much higher bar for what they feel like. Is it appropriate career because they just sort of implicitly understand that that’s what that’s what it’s going to take to get the maybe the lifestyle that their parents had? All right.

S1: So let’s have a numbers round Emily. What’s your number?

S2: My number is nine point three percent. I know you love surveys so much. Felix. This is a survey conducted by the freelance company Upwork. Nine point three percent of respondents said they thought they plan to move because they can now work from home, which is like a lot of people. If you if you work it out. What percentage of the population? It’s quite a lot. Of course, people say they’re going to move. Who knows if they actually will move. But what we’re seeing in real estate markets is a lot of people have moved into a lot of places that normally don’t see a lot of people moving into those places. I spoke to a broker near where I live in Westchester, and she said there’s like no houses for sale right now, so something is happening.

S1: It’s Westchester. A good place to work from home from.

S2: Yeah. Well, it’s like if you believe in the world of hybrid is the future, then you who live where I live because it’s like a far it’s pretty far commute from New York City. But if you only have to do it like two or three times a week, it makes perfect sense, you know, and you get like kind of a country vibe whilst being near the city, sort of. But other smaller cities are also seeing people move there.

S3: I was going to say a lot of that sort of tech people. I know they don’t really live anywhere anymore, like it can be really cool because you can just sort of go, you know, they’ll be like, Oh yeah, I split L.A. off Miami or I just split like New York, London, Austin or whatever. But it’s also, I think as a young person can be a little hard because there’s no no more like hubs like used to be. You just kind of like live in Silicon Valley or live in New York and kind of you can expect everyone to be there. And now it’s more. It’s also more weirdly more expensive because you have to support this. Lifestyles being being everywhere. And you can’t just kind of stay in one place and expect that to be your social life,

S2: that is unmoored,

S1: unmoored, I’m telling you it’s the unmoored generation. My number is 97 percent, which I don’t know, like in the middle of the all of the crazy. I kind of miss this story, but alliance global investors, we remember them. They had this thing called Structured Alpha, a fund called Structured Alpha, which kind of imploded, and they’ve earmarked $4.8 billion to settle with investigators and regulators about what went on there. But we’re finally getting a little bit of visibility into what went on. There’s a lawsuit against them from the Getty Trust, you know, the foundation that runs the Getty Museum. They put $60 million into this structured alpha fund in 2016. And then three years later, in 2019, it was 73 million. And this is like a fixed income fund. It’s a bond fund. It’s not a high risk stock fund. It had risen to 73 million, so that’s a decent return for a bond fund. And the idea is that a used like this option, the strategy to like boost the bonds coupons a little bit and then the pandemic hit in 2020 and very quickly the amount of money they have in this fund, it’s two million. It had gone down 97 percent a bond. Yikes.

S2: Oh my

S1: God. And they the whole point about this fund is they were like, We do this hedging strategy like we are going to protect you in the event of market dislocations. And then, yeah, not so much.

S2: Oh my goodness.

S1: Ginevra was a number.

S3: Twenty eight percent, which is that percent of men who say that they’re not having sex, which is up three times since 2008. Men under 30. I thought that was like, pretty weird.

S1: That’s yeah, that. And women, that’s going up a lot as well, right?

S3: Women, it’s gone up. But it used to be and I blanking on the exact numbers. It used to be like equal men and women. And then since 2008, there was a big spike. Men outpaced women by like 10 percent. I think it’s like now, like 20 percent men, 17 percent women from this little graphic.

S2: OK. What? Why do you think? Because, because of the social.

S1: Because we’re also socially alienated and interacting with each other only through screens. Yeah.

S3: Yeah, right. Yeah. You had a

S2: lot of that’s what I think. Yeah.

S1: Yeah. Why, why have sex when you can have a digital monkey? Exactly.

S3: The digital monkey should fulfill all of your emotional needs because it’s so cute, obviously.

S2: Well, I mean, if this continues, people have less babies, there’ll be more jobs for everyone to choose from and some of those problems.

S1: Well, that was that was why we did so well in genetics. We were the smallest generation ever and that’s why we got jobs. Emily.

S3: One of my friends actually tell me a story which I thought was, I thought was pretty sound. He was like, All these, all these like Gen Z kids, they’re like saving and saving and saving because they think there’s they’re not going be able to buy a house. But someday, when when all the when all the boomers die, there’s going to be way too many of these massive, these massive, massive empty houses and then the prices will go down. So he was like, Yeah, I’m not buying this robot because like, I think it’s going to think it’s going to go down. So I was like, I thought that was pretty good logic, but then they’ll have like, then they’ll have like, put off, you know, their their careers and their childhoods to, you know, make money to buy some house they didn’t really need to work for.

S2: The whole house thing is pretty overrated, but don’t get me started

S1: on the house. Yeah, I’m with you on like, I’m sure houses don’t do houses.

S2: It’s a lie.

S1: Live your amazing, cool techie, peripatetic life. I split my time between Singapore and the Maldives.

S2: Why not?

S3: Yeah, why not? No, literally. And I think like I think also there’s been it’s like Re, which is good. It’s sort of like recertification of not having a house where now that you have this generation of people who like don’t have houses, they’re like making not having a house cool now. It’s kind of like boring, you know, like

S1: Elon Musk sold all of his houses. He’s like, Yeah,

S2: he has more babies than houses.

S1: Ginevra Davis, thanks so much for being with us. This has been absolutely illuminating.

S3: Thank you so much for having me. You guys are my first podcast.

S1: It’s amazing. If you can, you can take that one off your list. Thanks everyone for listening. We have a sleep list, which is going to be more of Gen Z and Ginevra. And thanks to Jane Arraf for producing the show between Ireland, New York and Paris, it’s amazing what modern technology can do. We will be back next week with even more sleep money. So Emily, I want to do a sleep plus. I don’t want to start a generational war, but

S2: yes, that sounds extremely entitled and privileged to get to Stanford and be surrounded by so much money and have the opportunity to get six-figure job right out of college and say, like, this sucks. My parents had it easier because no, they didn’t know parents had it easier. Every generation has hardships. It seems like the past 20 years Felix were worse than the first 20 years we had. Probably not. I mean, especially for if you think about like people earning like very low wages, people who aren’t White Lake things kind of were pretty, really awful and have actually gotten a little bit better in recent years. There’s been some really good younger generation movements around Black Lives Matter and other areas that are impressive and interesting to be like, Well, I can’t get as good of a job as as my parents. I don’t know. It just seems so privileged and entitled to me.

S3: Yeah, maybe, maybe it is. I guess the way I think about it is more like the people that I know are fine by virtue of them being incredibly intelligent and incredibly forward-thinking and incredibly hard working to get themselves into Stanford. Get there on day one, angle themselves into like the right careers within Stanford. And then, yeah, you’ll be. You’ll be good. And and even then, like, it’s kind of one phenomenon I really knows and Typekit just like how many kids are still just like buying things with their parents money that you wouldn’t think would be like things that you would need to buy with that kind of job, but they’re still really pretty supported. And so if you’re working back from there, that if that’s the level of dedication you need to get what my mom describes coming out of college with an art history degree and not thinking too much about, Oh, I want to get a job, I want to get a job just kind of like gets three job offers day. She graduates and picks one and it’s good and she gets an apartment in the city. And it’s that’s not possible anymore. And I think another thing that does really frustrate people is it’s not that it’s not possible to get a good job. It’s like the amount of almost like pre working, constant focus and constant competition that’s required something I want to capture in the metaverse pieces how much people kind of want to. They’re just like frustrated and they want to opt out of that and and kind of get into something that feels like like, like, like a higher purpose, which is an interesting I think there’s almost a lot you can you could pitch. It’s almost like a like a religious angle, like if you’ve been spending your tire your entire life focusing on like job money, job money, job money, these kids are they’re also they’re they’re they’re very worn down. They’re they’re they’re anxious at really on the kind of they’re depressed and anxious, really unprecedented rates and you can see it. We had just had just another suicide at Stanford like a week ago. The transport numbers are up like crazy, like my my year. I think there were like four transports, which was still a lot. And then the transit, the transport. Oh yeah, a transport is when someone drinks, drink so much that they have to like, cart them off campus, bring them to the hospital. So that was is like a very modern phenomenon and started like kind of like this again, didn’t really didn’t really happen in the 60s, 70s. Now, like my first third of my Stanford this year, they had 19 transports, and these are usually kids just kind of like drinking themselves into oblivion. And so I think it’s maybe you can’t get a job and maybe it’s fine. But the amount of effort required to get and kind of just a constant drain required to get into these procrastinating kids are really beaten down. And there’s also not there’s not as much self, there’s not as much social infrastructure like I talk about in the Article 10. Have you know, fewer friends? They’re less healthy, they’re doing way fewer activities outside of school or spending far less time with the friends. They do have their online all the time and then professional lives aren’t can’t make up for that. So they’re looking for looking for something else.

S1: I would highly recommend anyone who hasn’t listened to it or even those of you who have it repays the release and the episode we did with Daniel Moskovitz, who has written about this at great length, is just amazing. But this is an incredible insight and angle that it’s really super interesting to to hear. And I’m reminded of like a friend of mine who teaches at Stanford and had a freshman come up to him and be like, Hey, there’s an idea I have had, which I want to talk to you about. And he’s like, Yeah, what is it? And he’s like, Well, first, can you sign this NDA?

S2: Yes. No.

S3: No, no, no. No. Literally. Literally, you have. You have these kids. I mean, to Stanford, they’re like 18. They’ll have like a like a Colin Li, like you want to meet with them and they’re like, put time in my Calland league and I’m like, You’re a child, please stop. This is so and it’s funny because I totally participated in this. When I first got there, I was like, Oh my god, I’m but I’m behind. You know, my friends were doing computer science. They’re going to the career fair. There’s no career fair for me yet. I’m not at the career fair. And now that I’m like, you know, almost graduating, I see the freshmen come in and they’re like, You see this, I don’t know, nice normal kids with like interests and hobbies. And they’re like, Oh, I need to get into consulting because it’s good for my optionality. I’m like, What? But what does that mean?

S2: Gen X Gen X ruin the children.

S1: It’s your fault. Emily as the as the Gen X parent, it’s all your fault. I’m not a Gen X guarantee that right.

S2: You get to just be a bystander just watching it all go down.