Audio Length: 00:49:52

This week, Felix Salmon and Emily Peck are joined by reporter for The Wall Street Journal, Vipal Monga. They discuss the implications of the continued pumping of oil at one of the world’s dirtiest oil patches, how Canada’s housing situation compares with the U.S. and why ‘old’ music is suddenly so popular now.

Transcript:

S1: Hello, and welcome to this sick of the Beatles episode of Sleep Money, your guide to the business and finance news of the week, I’m Felix Salmon of Axios here with Emily Peck, also of Axios.

S2: Hello.

S1: And I’m also here with Vipal Monga of The Wall Street Journal. Welcome, Vipal. Hi, guys. You have been crushing it. You are what the full time Canadian everything Canadian person at the Journal.

S3: Canada Correspondent Yes,

S1: the Canada Canada correspondent the Journal will put will have many people covering many things and it has let you covering Canada. That’s like, you know, we actually

S3: have three people here. So great, great colleagues of mine here, too.

S1: You wrote a great piece about oil sands in Canada. We’re going to talk about that. We’re going to talk about Canadian house prices, what’s going on there. But really, we brought you on to talk about the Beatles, which is your favorite band. Am I right?

S3: Yeah. Enough with that.

S1: Those guys enough with those guys that they’ve been around for too long and there’s got to be something better. Vipal controversial opinions on Get Back the documentary and The Beatles. Coming up on Slate Money. Oil prices are in the news. Oil leases are in the news. The big news is that oil prices are high because the entire world basically can’t produce enough of it to meet demand. The federal government, which came into office claiming that it would ban oil drilling on federal lands, ended up being forced by courts to allow drilling in federal seas. I guess I should say that’s now been put on hold by another court in and D.C. The one place the drilling is happening at stronger and bigger quantities than ever is Vipal. Alberta, Canada,

S3: Alberta, Canada. The oil sands.

S1: So tell me, and this is particularly filthy oil.

S3: It is been called a Dirtiest oil in the world. It releases more carbon is more carbon intensive than any other oil that’s pulled out of the ground.

S1: And another wonderful story, which we will link to in the show notes talks about Shell, which has operations up there, tried to do a carbon capture plant. But everyone’s kind of skeptical about that. Like when oil is this dirty, it’s hard to counteract or countermand or capture the emissions, right?

S3: Right. And it’s a question of what you’re releasing to the carbon versus methane and methane is the real problem.

S1: Not to mention just the physical environmental impact where you just destroy an entire landscape.

S3: Right about the oil sands. I talked to one environmentalist who called it the most visible scar on the surface of the Earth, which little bit of hyperbole, but it’s pretty ugly up there.

S1: This is one of those things which, like, you know, you can see from the Moon.

S2: Yeah, can you? When people say oil sands in my uneducated mind, I picture a beach that’s oily. Literally, what does the oil sands look like, right?

S3: You’re not too far from the truth. So the oil sand deposit in Alberta is basically made up of bitumen, which is like a thick. Really, this gives oil’s kind of like asphalt to make asphalt from it. There’s so much of it that it bubbles to the surface, so you do see it on the ground. You’ll see a lot of aerial shots of the region. The ground is black, where there’s puddles as black, oily puddles. That’s what it looks like.

S1: If like in a previous episode of Sleep Money goes to the movies we covered, there will be blood and that scene, and there will be blood where he goes out into the California desert and there’s like a puddle of oil, and it’s basically like that, right?

S3: Yeah, it’s there’s a lot of it and it’s always been there.

S2: And then bigger picture. What I thought was interesting about your piece is that the the bigger oil company is, the more established ones are sort of getting out of the oil sands of the business in Alberta because it’s so it’s considered so dirty and reputationally, it’s kind of bad, but that’s not stopping oil drilling like it’s still going on. And I feel like that’s what’s going to happen everywhere. Maybe I don’t know. What do you

S3: think? So when shale says they’re going to leave the oil sands or sell their assets in the oil sands, it’s not like they’re shutting off the spigot and walking away after closing down the plant. They’re selling them and selling them to Canadian companies who become by far the biggest owners in the region and their key. They keep drilling. I mean, they have every incentive because they make a lot of money doing it, and they’re drilling more than ever.

S1: So to ask like the basic question, let’s say that I am an environmentalist and I pressure Shell to get out of dirty oil sands production. And they do. And then they just end up selling that dirty oil sands production to someone else, like, is that in any way a victory for me?

S3: Well. I guess the question is short term versus long term. What’s been happening is investment in the oil sands has been dropping. So in the short term, drilling continues and they are pulling a lot of oil out of the ground more than ever before at 3.8 million barrels a day this year. But over the long term, because they’re not investing in it, they’re not creating new oil fields. They’re not drilling new wells. So we would expect we haven’t seen it yet, but what you would expect in the next 10, 20 years, some of these older wells will start to dry up and you won’t have new ones to replace them. So longer term, they should, you know, kind of go into runoff, which would be a victory if it happens, but I’m not sure it will.

S1: So I have a question about that, which is when you mentioned when you talk about investment, are you talking about external investment, where companies issue bonds or companies issue equity and they raise money and they use that money to drill new wells? Because it strikes me that if drilling oil in Alberta is as profitable as it seems, then you don’t need to raise money from banks or shareholders. You can just take your profits and use those to to drill new wells, and that wouldn’t show up in investment figures.

S3: Well, they do look at capital expenditure numbers in Alberta, and that’s kind of what we’re using to measure that, that investment. But what’s been happening is that the money that the oil companies are making and they’re making a lot of it, they’re just funding their back to shareholders dividends, special dividends, buybacks. There’s been a lot of that activity happening. So there’s so

S1: so the question is like if these small Canadian companies that most people have never heard of or smallish Canadian companies that never nobody’s ever heard of are doing so well in the oilsands. Why are they dividend doing their profits back to shareholders instead of plowing them back into this very profitable business that they’re quite good at?

S3: And this is where the environmentalists seem to be winning a little bit because the expectation is that producing oil is going to get more and more expensive over time because of the carbon tax that Canada’s instituted, which is going to be ratcheting up to something like $130 a ton. And because the oil companies are expecting demand to start decreasing over time. So because of that, and it takes five or six years to get a new oil field up and running, they don’t think it’s worth their while to put the new money in unless there’s some sense that demand is going to increase enough to justify the investment.

S2: So it seems like we’re in this very painful transition from to a more green world that’s less reliant on oil. But for right now, oil prices are really, really high, and that’s presenting all kinds of of problems like politically like you see the Biden administration struggling, like what Felix talked about in the introduction where Biden came in saying, like, we’re going to be more green and then oil prices going up and Biden being like, we’re going to make gas prices go down and it’s like, you can’t you can’t have it all on oil here. Like if we’re going to make this transition like prices are going to stay high because no one’s going to want to invest the money to make to get more oil out of the ground. And you know what I mean, like so the prices are going to stay elevated for a while and it’s going to really piss people off.

S3: So the real problem everyone’s having the world’s having is that they haven’t really or we haven’t really found source of energy that’s as efficient as oil. You can pull it out of the ground relatively easily. It gives you a lot of energy. It’s very dirty. Obviously, it’s really bad. But solar, wind or the other forms that we might have to replace them just aren’t as efficient. So how are you going to fuel that power needs? And people really haven’t been upfront or haven’t politically been able to make the case that in order to get to this net zero objective, you’re going have to sacrifice a lot of the stuff you take for granted. Are people willing to do that is a big question. And, you know, the real extremists, I guess, if you will, and radicals. Yeah, of course. I mean, we’re talking about the future of humanity here. We should give up, you know, your one day shipping from Amazon, but can you make that case to most people? And so far, the answer has been No, you can’t.

S1: So where does where does Canadian public opinion stand on this?

S3: I think it’s in line with what most of the world is. They agree that this is a bad thing that’s happening. Climate change needs to be stopped and there should be some curbs. But I don’t I haven’t seen much polling that suggests that they’re willing to. Reduce our standard of living in order to get there. And that’s really what what’s being asked for, people, if we’re going to be realistic about it. I mean, you know, we live pretty well. He says really comfortably. Are we willing to suffer a little bit to reduce greenhouse gas emissions?

S2: I mean, those are actions that have to be taken on like a policy level, like people aren’t going to be like, yeah, I’ll pay more for gas and give up one day shipping, but Amazon could say we’re not doing it anymore. Or the Biden administration could say, OK, the federal government’s going to eat the increased gas costs or something like there are things that could be done at the policy level to make it possible for this transition to be less painful, but seems like that’s not happening.

S3: Yeah, there’s a political will question. There doesn’t seem to be the political will really. And in places where there are, I mean, people are struggling. Look at what Europe is going through with their energy prices this winter and all the issues that occurred in Texas when the power grid almost went down. I mean, things like that really scare people. And there’s a lot of nuances to what actually is happening in those areas. But no one’s paying attention. And you know, all they see is green energy means more danger, more and more energy and security, and we don’t want that. So if you’re a politico, how do you make the clear, simple argument that you really need to sell these one tool that can be used as the carbon tax? And I think a lot of people are hoping that governments institute that to make it more economically painful for these companies to keep drilling. And so far, not many countries have really instituted a strong one. Canada is on its way, but

S1: so, so a carbon tax is coming. I mean, in Europe, carbon is what like 30 $40 a tonne right now. And you’re saying in Canada, it’s going to go up to like three or four times that.

S3: Yeah, I mean, it’s going to ratchet up slowly and it will go up to triple what it is now basically quadruple. And then you know, what companies are trying to do is reduce the pain of that by investing in technologies which are sort of, you know, solve this whole issue like carbon capture, which, you know, there’s a lot of doubt about how efficient that actually is or whether it really works. You know, and it’s almost like we’re all scrambling looking for this magic bullet that will help solve all our greenhouse gas problems without forcing us to make painful decisions about the way we live. And maybe we’re in the denial phase at this point if we’re looking at.

S1: But but the big picture that I’m getting from you is that in terms of pollution, in terms of emissions, there’s a pretty good chance that we’re at the worst point right now in terms of the oilsands than it is going to get better over the next five, 10 years. And it looks really bad right now, but there is some kind of light at the end of the tunnel if you just look at things like capex.

S3: Yes, if you do and we’re talking 10, 15 years, not five, 10, so it’s a little bit of a longer timeframe. But yeah, that’s that’s a optimistic scenario. The cynics would say that things like carbon capture are going to be used to continue to allow the oilsands companies to drill even more because one of the ways people will be using the carbon will be to drill even more oil, and we might see that come up. And you know, if you look at companies like think it’s ConocoPhillips that I can’t remember which one, actually, that basically says two degree warming is a fool’s errand. We’re going to overshoot that, completely overshoot that. So we’re not even going to try to reduce our emissions because it’s, you know, it’s ridiculous what you’re asking people to do.

S1: I want to Segway here into a little discussion of the Canadian property market, which is actually related because Canada is one of those countries which kind of benefits from global warming, right? Like if you if you have property in Toronto or Vancouver, suddenly that looks kind of increasingly relatively attractive in a world that’s burning up. And Canadian property is mix my metaphors horribly on fire right now. Crazy, expensive. And the one thing that Canadians love to sort of moan about the most right.

S3: It is pretty much an affordable if you’re a first time home buyer to buy a home in Canada right now. I mean, home prices have basically risen without stopping for the past 20 years or so. There’s been nothing like the 2008 crash that we saw in the U.S. just sort of tamped down home prices. And yeah, I mean, there’s not enough supply in this market at all to feed the demand and demand keeps increasing. So you just looking at the basics there? Yeah, it’s crazy, crazy expensive.

S1: What talk about the supply? Supply and demand dynamics is a demand coming from people who are like running away from future global warming and wanting to get a safe space in Canada.

S3: Canada has really been emphasizing immigration as a way to sort of keep growing its economy. Last year, Canada welcomed 400000 immigrants or gave them permanent resident status, which is Canada’s version of the green card, which the most ever. The U.S., by contrast, not only has the 2019 numbers, only Gates gave out something like a million green cards in 2019. Remember, the U.S. has about 10 times the size of this of Canada. So, you know, per capita we’re going to see that relative basis. Canada is what comes a lot of immigrants, why they’re coming. We don’t know exactly, but all of them want houses. So that is a big portion of the demand. There’s also a lot of investment coming into Canada, just people buying into this crazy housing market. We’re going to flip them and make money.

S2: So is Canada having the same kind of demand issues in the real estate market as we’re having in the U.S., like the pandemic really pushed a lot of people to move, driving up prices kind of everywhere in weird places and driving down supply like to an insane degree. Or is it really more the immigration lever that’s pushing demand?

S3: So demand has been persistent in Canada, but we that we have seen people leaving places like Toronto. I think this was the first year that Toronto saw a net negative migration into the city. Places like Vancouver are losing people, too, so people are moving out and you are starting to see home prices rise in suburbs. You know, it’s an hour or two hours outside of Toronto, even in places like the Maritimes near Halifax. So this contagion, if you will, of rising home prices is increasing beyond the major urban centres. But again, there’s been sort of like if you look at the slope, there’s been like at unabated rise like Austin and slope is steepening in terms of house prices in Canada. So it’s really concerning for people who want to buy home.

S1: So I have two questions, but let me start with with the first big one, which is why is there seemingly no supply? What’s the supply problem? Is it the same as in California? It’s all NIMBYs or is it more structural?

S3: A lot of NIMBYism. It’s just a lot harder. I mean, the bureaucratic apparatus in Canada is much more unwieldy than it is in the U.S. So there’s provincial rules, municipal rules, just harder to get stuff built. In Canada, for example, they’ve built an area around the city called the green belt, which is kind of like a boundary meant to stop sprawl. A lot of buildings in Toronto are pretty short, like two or three stories. You don’t see a lot of mid-rise buildings, so there’s not very dense as a city. So things like that have limited growth and homebuilding. A lot of people like single family homes, and it’s harder to build those harder and more expensive now, especially if you look at things like lumber prices which have been going crazy.

S2: Because of Canadian problems, Vipal. Right. A lot of flooding and some Canadian problems.

S3: Well, they’ve limited. I mean, the whole timber thing is a whole different thing. But but yeah, Canada’s lot to do with why lumber so expensive?

S2: Blame Canada.

S1: The bigger question I had is about the worries here because and I’ve seen this in California, I’ve seen this in New Zealand, I’ve seen this in Canada. I’ve seen this in London. Wherever you see how house prices go up, on the one hand, people are saying this is really bad. Everything has become unaffordable. No one can afford to live here anymore. It destroys communities. It destroys the soul of neighborhoods. But on the other hand, people become incredibly fearful of. House prices going down like it’s unclear whether they actually want house prices to go down because people are so invested in their homes, they have so much equity in their homes, especially if they’ve bought recently. They certainly don’t want to be underwater on their mortgages. And so it is seems that people like the police, the population as a whole can’t decide whether it wants prices to come down or not.

S3: It goes back to that thing we’re talking about in energy house prices coming down would be broadly good for young people who want to, you know, sort of create wealth, have a home to live in. But in order to get there, some people won’t have to absorb some pain. You know, and it’s in Canada, for example, a lot of the home buying is coming from what they call investors. So it’s not just the black stones and the private equity firm snapping up whole neighborhoods and renting them out. It’s also people baby boomers who already own a home and are buying another house or a condo to rent it out and make money. In fact, there’s a lot of those people are they willing to absorb the shock? And no, they’re not. I mean, so that there’s a lot of fear about plunge.

S1: Have rents been going up as fast as prices, or is it still possible to find affordable rents?

S3: Rents are. They are going up quite a bit. Toronto is very it’s insanely expensive to live here. Rentals are comparable to New York without all the benefits of being a New Yorker, frankly. But so, yeah, I mean, there’s a housing crisis, you know, they keep hitting home the fact that there’s a crisis Canada wide in terms of housing.

S2: My colleague at at Axios and I were talking about this the lament of there are no homes to buy like you can’t get a house anymore argument. And he was saying, and I’m going to float this here right now. Debut it. People are too picky. Like you can’t find a house in park slope. Homes are not affordable anymore. And it’s like, Well, actually, Park Slope is quite expensive. Like, you could find a house if you go farther out into Brooklyn or farther out into queens like, yeah, you might not be able to live in the most desirable neighborhood anymore because it’s extremely expensive. But homebuyers need to sort of like chill and buy houses they can afford and neighborhoods maybe they don’t, but maybe they believe aren’t as desirable. But if more people move to them, it all works out anyway. So instead of forcing people to eat a lower home value, you just force people into homes with lower values. You know what I mean? Like, there is a sort of like mindset.

S1: So there is there is a ratchet. There is a ratchet effect here. I think if you look at the United States in particular and this goes for everywhere, whether it’s out in the middle of nowhere or like in the middle of city centres, the number of square feet per person has been going up steadily for decades. And it can, and there’s no sign of that changing that. Yeah, people want more space. And I think this is one of the big effects of the pandemic is that people want much more space post-pandemic because work because home isn’t just somewhere you live, it’s also somewhere you work. And that desire for more space like, you know, sure, that like the price per square foot will go down in less convenient neighborhoods or whatever. But if the number of square feet per person goes up, you don’t need any immigration at all for demand to start exceeding supply because the supply is measured in square feet, right? Add in a little bit of immigration on natural population growth, and just the entire market starts becoming very, very, let’s just say, bullish for the people who like property prices going up. It just becomes structurally very hard to avoid prices going up.

S3: That is not the dynamic that we’re seeing in Toronto, in Toronto. House prices are, I think the technical term is cuckoo bananas. They’re there. You can look at homes that are in dire need of renovation. Basically, gut renovation homes are selling for multiples of asking price. I mean, we’re you know, there are constantly stories of people in lines around the corner for homes, you know, people standing around in the dead of winter to buy homes, which you know, are not particularly desirable. And we’re not talking about like, you know, Rexdale or other neighborhoods that are maybe quote unquote less desirable. It’s I say it’s hysterical. I think, is there the behavior we’re seeing of buyers here because. There is nothing else to buy.

S1: And there was definitely that kind of hysteria in the United States last year. It seems to have maybe anecdotally died down a little bit like a lot of the people who are desperate to buy probably ended up buying one somehow. And maybe it’s less hysterical right now about house prices are still going up. House price inflation is still going up and it all comes down on some level, I think, to to this very American thing and I’m interested in whether it’s a Canadian thing. I think it is that like homeownership is considered the necessity, the like people really, really need to own their homes and they’re like, I need to move somewhere. I need to buy some ways the same thing. And and that is complicating matters. It’s, you know, it’s the opposite of somewhere like Germany, where homeownership is kind of weird and like, why would you want to own the place?

S3: The head of the Canadian Mortgage Housing Corporation, which is a government backed home insurer, Evan Siddall, former head, made that very argument. He said, Why do people need to buy? What’s wrong with renting? I mean, renting might be a better use of your money than paying a mortgage and all the rest that entails. So there’s a pretty significant section of the population that’s starting to buy into that a little bit. But of course, rents are also increasing, so it’s getting tougher on both ends.

S2: I mean, in a high inflation environment, it’s better to own a home than to rent. Rents are going up like crazy. There’s lots of inflation. My mortgage payment is the same every month. You know, it’s only going down, basically.

S1: I want to move on to the music industry because Vipal, you are my my favorite music nerd in the world, and I want to ask you about a statistic that came across desks this week saying that 70 percent of all music being played right now is old, where old is defined as more than 18 months old. But that counts as old in the hot pop music world. And I’ve been talking to a few friends about this, and it does seem to be like anecdotally, that music, fresh music, new music. Isn’t this cultural force that it used to be while old music from like, even like 30, 40 years ago? Genesis just announced the tour and it’s selling out and they’re like number four on the Bloomberg Top Artists chart. Old music is doing well. All of the septuagenarians, like Bruce Springsteen and Bob Dylan, are selling their catalogs for a gazillion dollars because old music seems to be this perfect. This license to print money, which is going to last forever. What is going on?

S3: Everyone’s competing with the Beatles or the police. If you’re a new band, getting people to listen to your fresh sounds just getting harder and harder because the old guys are not going away. They live in perpetuity. Have you been granted immortality through the streaming services, which wasn’t the case a few years ago, when you would go into the record store to buy music or depend on the radio playing it to get access? You know, the new bands would push out the old guys and it’s I think it’s terrible for new music. What’s happening?

S1: But was it ever this late when when we had physical media, when people used to buy LPs and CDs, did they used to actually listen to that old, you know, Genesis and police CDs all the time. But that wouldn’t show up in the statistics because they weren’t buying those CDs knew they’d owned those CDs for years, and they just kept on listening to them. But now, with streaming, we’re beginning to realize just how much people are listening to old music in the way that we never realized before. Maybe it. Maybe it isn’t that newer phenomenon.

S3: It’s not, but the economic model is relatively new. It used to be that people would listen to their white album, CD or physical graffiti or whatever 100 times or whatever. But then they would still go out and buy new CDs, which would create a revenue stream, a pretty strong revenue stream for new artists that is drying up. And I think that’s the real problem for the industry.

S2: I think Felix has it has a good point. I hadn’t thought about it like this, but like I remember when CDs first came out and everyone had to convert from tapes to CDs and everyone re bought all the same old music they already had. And that drove a lot of CD sales. And it’s kind of like if you think about that, it’s not then surprising that old music drives streaming. Of course, people aren’t going to just stop listening to old stuff because new stuff came out. And then you combine that with pandemic trends like I. I emailed with the people who did this survey or compiled this, this number that Felix was talking about, the 70 percent and the pandemic drove a lot of this as well, like more old people started doing streaming in that during, you know, when we were all stuck at home, there was like a big migration of boomers and Gen-X to streaming in a way that hadn’t quite gotten there before. So they pushed up the numbers. And then the other thing that was sort of interesting is a lot of concerts didn’t happen in 2021 because of pandemic, so some new releases got pushed back. And then that also tipped the scales in favor of the old of the old stuff. So I broke the rule and I made like three points in talking.

S1: So they got me where you might. You’re allowed to. You can break the rule as as much as you like Emily.

S3: Well, to look at it this way. Look, once you bought a CD or a record, you had it forever and you could listen to it for ultimate infinite time. Basically paid money for the right to listen to it forever. The record company had an incentive to have you buy new physical media because that’s how they made music so they would promote new artists. You would hear prints even though you’ve been listening to Marvin Gaye for years. All of a sudden there’s new guy Prince who should listen to him by his records. So they had an incentive to promote the new flavor. Now, all that incentive is gone. They have contracts with Spotify, where they will get paid, I guess, depending on on the nature of the contract by streams. And it doesn’t matter whether people are listening to the Beatles or Kanye or, you know, Frank Ocean or what have you there. They don’t really have much incentive to push new artists or put the capital expenditure, if you will, into new. Because they have made just as much money with people listening to things they already know.

S1: So I think that is 100 percent compelling as as an argument and the reason that, you know, it’s up to the record labels and the record labels make just as much money from Genesis as they do from Dua Lipa. So why would you prefer one to the other? But I do need to ask you, Vipal, because you are, you know, the music that. Is it the case that there has been a fracturing of pop music and that there is just it’s not culturally relevant in the way that it used to be? No one cares that the Grammys got pushed back. I, you know, no one really knows even who the top artists like. I pulled the Billboard Top 10 for this week from this week and 10 years ago and 20 years ago and 30 years ago. And this week, you know, we have some. We had Lin-Manuel Miranda song from an animated movie, and we have glass animals who I have to admit I’ve never heard of, and Garner and Gayle and Jessica Darrow and who are these people? And then you go back 10 years and it’s like, OK, then you start thinking, Oh, there you have people. I, you know, who are real pop stars as Rihanna as Adele. There’s Bruno Mars, there’s Katy Perry, there’s Jay-Z. Go back 20 years and you know, it’s Mary J. Blige, it’s Alicia Keys. Go back 30 years and get this pop chart from this week that two years ago, it’s like George Michael, Prince, Mariah Carey, Nirvana, Michael Jackson, U2, right? It’s a whole. It’s like, is it just because I’m old or is it or is there something much more lasting about those artists? You kind of feel like U2 is going to last much longer than flow with it, right?

S3: I think it’s a lot of it has to do with how we listen to music. Frankly, I avoid streaming services. I still buy music. Bit of a dinosaur. But I do it specifically because I think that if you’re engaged in what you’re putting on, if you’re making the choice yourself, there’s more of an emotional investment. And there was a time when music was like, he defined you who you were. Now the algorithm plays in the background without you really engaging with it physically at all. Just playing music, a lot of it just becomes background noise. And I think a lot of the music reflects that, and our attachment to the music is as part of that or it lesson because of it.

S1: Not to mention, the album covers like when you, when you when you physically take out album covers and you’re looking at them and you’re you’re physically handling an artist in a way that, like the the brand recognition for artists, is just not the same these days.

S3: I mean, it’s change, and I don’t think that I don’t think it’s good or bad. It’s just the way things work. The technology kind of has moved things in that direction. It makes you a little sad. I mean, I can remember the last song that everyone was talking about that changed things. I was watching. A documentary recently about Prince and people’s reaction, like when Doves Cry came out and how that was like an explosion just because people hadn’t really heard sounds like that before, and it just changed the way people reacted to music or what they expected from music. And you don’t see much of that these days, and I don’t know if the environment is conducive to that or if it can happen.

S2: Is it just because there’s like more old music than there was 30 years ago, like when I was growing up? Rock and roll is still kind of not new, but like there’s just more old stuff that people listen to than like, maybe in the 80s you only went back 20 30 years. Now we’re in the 20, 20 years, and there’s just like many more years of good music. That still sounds pretty good. And I wondered, maybe this is a leap and so Felix can answer, but like old art is, like, really valuable. So why would an old music still be really valuable and cherished and listened to in the same kind of way?

S1: It’s a really good question. And like when I was growing up in a very weird sort of family, the overwhelming majority of music I listened to was like, really old. It was Bach and Mozart, you know? And and yeah, when you grow up in a classical music household like the idea that there would be any kind of recency bias in what you listen to and you’re like, Oh no, let’s put something on by Harrison Birtwhistle, you know, like, no, because I know that people are biased against new music. And yeah, for most of human history, it has been the case that people revered the stuff that has stood the test of time more than the stuff that is fresh and new. And it’s always been like it really dates back to kind of, I guess, like Elvis and then the Beatles that created these these popular culture phenomena where suddenly they like what was fresh and new became the thing that everyone cared about. And maybe you’re right, maybe the people are going back to like, we now have so many decades of amazing music to listen to. Why would we listen to some? Why would we invest in learning about know Olivia Rodrigo when you can listen to Nirvana? It’s it’s a it’s a good question, although I will say that in the fine art market, I’ve just I just saw a statistic that saying at auction, the total auction sales of artists under the age of 40 have now exceeded in dollar value. The total auction sales of old masters from like over a period of like six hundred years.

S3: Well, if you think about it 50 years ago, the Beatles had just broken up. So if you go back 50 years, we’re talking about the end of the era of the Beatles. If if you were in 1969 listening to music and you went back 50 years, you’d be going back to 1990. Yes, I mean, that is what I’m saying. That’s exactly

S2: perfect.

S3: But, but god damn it, I’m sick of the Beatles. Tired of hearing about this band that is really no longer relevant to what’s going on right now. I mean, they make great music. Yes. But do we need to watch 100 hour documentary about them doodling in the studio? We don’t.

S1: Did you watch it Vipal?

S3: I watched the one clip of Get Back and Paul McCartney, and I watched a little bit of the Billy Preston stuff because he’s awesome. But, but really, I don’t. I listen to Beatles song and it says nothing to me right now. It’s like. The analogy I use is like, they’re like water. Water is great, you need it to live also, but let’s stop talking about water because it’s boring. I rather like some flavor in my drink, and I’m much more intrigued or interested by what Megan Thee Stallion is doing than what The Beatles did 50 years ago, or what salt a band is doing because they’re talking about things that are happening today and now, and it’s just much more relevant to you. I guess our common experience, and I think that that’s a part of what music used to bring and did bring to people in the 60s that maybe we’re missing now. Just hear stuff that talks about what’s going on today and how we relate to this moment. And, you know, Eleanor Rigby, I’m sure it will always be remembered as a great tune, but I’m not sure. It deserves to crowd out everything else that’s going on, and it is that it’s terrible

S1: on which, no, we will get a million emails of people writing in Slate Money at Slate.com saying, How can you possibly compare Megan Thee Stallion to The Beatles? We will forward them all to you, and you can answer this.

S3: Yeah, she’s awesome. I love her. Yeah.

S1: Let’s let’s have a numbers round Emily. Did you did you have a number this week?

S2: Yeah, I have a number. My number is 54 percent. That is the increase in hot sauce sales globally since 2015 to five billion dollars. I read a great story in Bloomberg Businessweek about the spice company McCormick and Hot Sauce and all the ways the business is kind of changing and how the pandemic fueled McCormick space business and their supply chain woes. They sauce their spices in 80 countries. And there’s also a whole thing about McCormick buying the number three hot sauce maker in the U.S., which is a hot sauce called Tallulah, which has this like cute little wooden top and a lady on it, but was owned by a private equity company in Connecticut, which I think is funny.

S1: And, of course, was, oh my god, like the fact that she Lulu was owned by a private equity company in Connecticut is like, That is the most sweet money thing I’ve heard all week.

S2: There you go. But now it’s owned by McCormick.

S3: Have you watched those videos where people sit around and try out different hot sauces and see what their hot sauce tolerances?

S1: Yeah, there’s a wings guy.

S2: So good and weird. So strange. Brilliant marketing. Very deadpan. And he makes the the celebrity eat the hot sauce and then ask these like very whatever questions while the celebrity kind of just sweats. Yeah, it’s good stuff we should do. Slate money like that.

S1: My my number is a hundred and fifty two point five billion dollars, which is a profits number. It’s the total profits of the Big Six American banks in 2021. It is by far a record high. It’s double what they made in 2020. It’s just an absolutely astonishing amount of money for that would be the two big investment banks Goldman Sachs and Morgan Stanley and four big commercial banks JP Morgan, Wells Fargo, Bank of America and Citibank between them. I think every single one of them made record profits last year. And I’ll just throw in the sort of extra number in here, which is $100 billion. It looks like Apple made $100 billion give or take a few cents in 2021. This was an absolutely astonishing year for profits.

S3: My number is 9.2 trillion, which is how much McKinsey expects the world will have to spend every year between now and 2050 for us to hit the net zero 2050 target. That’s on things like infrastructure reducing emissions. That’s approximately a tenth more than a tenth of global GDP.

S1: And what are we spending right now?

S3: We are spending about six and a half trillion sounds about a third less.

S1: So we need to up that by about 50 percent.

S3: Yeah, yeah.

S1: All right. To put some

S2: of those bank profits to build, build,

S1: build, build nuclear power plants. I want I want to see more nukes. New York state became very, very dirty overnight in terms of its energy mix. The minute that they closed down the Indian Point power station.

S3: There was a lovely moment here last year when the Pickering Power Plant nuclear power plant outside of Toronto sent out an emergency alert by mistake, saying that there was basically implying that there was a meltdown happening at Pickering power plant. Oh God! Great to get first thing in the morning on a Saturday. Yeah.

S1: What? What did you do? How did you react?

S3: I I kind of just shrug my shoulders and said, Oh, well, here comes

S2: turned up the music.

S1: There what? There was no airborne toxic event.

S3: No, no.

S1: All right. I think that’s it for us this week. We are going to have a sleepless segment about Fintech because there’s been a bunch of news about Wealthfront and Robinhood and those kinds of folks. So we’re going to talk about that in Slate Plus. But other than that, thanks for listening to my Vipal Monga. Thank you so much for coming on the show. Thank you. And yeah, thanks to Shane O for managing to once again put this show together. We will be back next week on sleep money. OK, so for Slate, plus, what happened to Robin Hood, they lost like a gazillion dollars this quarter. I think it was, yeah, they $460 million or something they contrived to lose in a single quarter. You know, this is despite the fact that they have this license to print money in terms of making money from options trading and crypto trading. But I guess options and crypto trading aren’t what they used to be. This time last year during the meme stock rally. So Robinhood shares are way down from where they used to be. The other big headline this week was that Wealthfront, which is the big robo advisor

S2: their users are down. Oh yeah,

S1: and the users are down. Wealthfront decided to sell out to UBS, which is this massive Swiss financial services behemoth. Wealthfront was meant to be this disruptive technology that would that would basically end up killing all of those old school wealth advisors like UBS. And now it’s just being bought by them instead. Is this is this all a sign that Fintech is maybe not all that we’ve, you know, spun up to be, and that the old ways of doing things seem to be apropos? My number this week doing much better than the disruptive young Fintech, which came and went without leaving much of a trace.

S2: I think, look, Fintech is not doing as well as people wanted, or obviously Robin is Robin Hood is not doing as well as it should be doing. But the fact that UBS bought Wealthfront doesn’t mean that, like the promise of Fintech is over. It just means like while Front had customers that the big banks really want to capture and the big banks can’t do it on their own. So they’re like absorbing Fintech, which I don’t necessarily think that means the disruption is over. I think it’s like there’s a disruption is happening just because, like a company like Wealthfront can’t do it on its own doesn’t mean that the innovations of robo advisors are going away. It’s like getting absorbed into the Borg kind of makes sense to me.

S1: But being absorbed into the Borg is precisely what Wealthfront was was fighting against. So this is this is what’s interesting about robo advisors, is that they came out to say, like, we are the alternative to the Borg and then a bunch of like hybrids came along and they are the only ones you’re still left standing is betterment, and betterment has is still going strong and is still surviving precisely because it embraced the Borg. And it was like, Yeah, we’re going to make a bunch of money from financial advisors, from humans using our software. That seems to be what’s going to be happening with UBS and Wealthfront as well. The the promise of like just having a robot look after your money was something which, you know, half a million people who like Wealthfront had about half a million customers. And so half a million people really liked that idea. But the overwhelming majority of people, it turns out, actually kind of like talking to a human. So the the real disruption, the idea that you could come in and say it’s just going to be pure robot and no human and people are going to embrace that? No, they really didn’t. People people are happy to have a little bit of robot, just long as there’s a little bit of human as well. I mean,

S3: the question is, how much is it for low fees to the higher fees that are needed? If you’re going to pay real humans to give you advice, that might be a factor in all this. One of the interesting things I was thinking about was how the bigger firms have done such an awful job of talking to the younger investors that they need to cultivate at some point millennial. So I guess we’re coming into their highest earning years at this point, so it makes sense that they’d be snapping up the fintech companies that were tailored for them. They’ve got all the capital. It’s like the big fish eating the little ones. How that changes the bigger firms, I guess, will be the question that hasn’t been answered yet. Already, we’re seeing signs of bigger, stodgy financial firms embracing kind of a different ethos. My colleagues at the Journal wrote a great story about how Fidelity has embraced meme stocks in a way that they never had before, or, you know, starting to look at Reddit as a model in terms of how they advise people. So I think disruption is happening, but it’s going to happen potentially within the walls of of the old guys.

S2: It reminds me a little bit of what happened with digital media where like, there were a lot of disrupters in the space like Huffington Post and BuzzFeed and so on. They all struggled. And what we have now is the New York Times does a lot of stuff it wouldn’t have it didn’t do in the past because it’s updated the way it presents its content to to, like, absorb the lessons of the digital upstarts. You know, that happens a lot like there’s disruption and innovation, and sometimes the companies that do the disrupting and the innovating don’t last. And the big established players kind of absorb the lessons, right?

S1: But I feel like for me, that’s the opposite of disruption that, like you show, there’s innovation and there’s no doubt that well-funded was innovative. And there’s no doubt that what having been posted was innovative, but they didn’t actually disrupt anyone like no one. No one was damaged by the rise. And in fact, they just got, you know, incorporated into the book. And I feel like I feel like calling that disruption does disruption like a bad name, like it’s it really isn’t. I feel like if if the old incumbents don’t fall and the new, you know, disruptors rise, then it’s not really disruption at all.

S2: Oh, you’re right. That’s right.

S3: He’s right. I hate to look at media. The ones who did get disrupted were the small community papers that are getting massacred to continue. Now, Jay, I don’t know if there’s one in Fintech at the small brokerage, family run, wealth advisor or what have you. They’re the ones that are getting disrupted, if you will.

S1: I just don’t think they are. And I think to answer your question about fees, Vipal is there. There are, definitely. People who care a lot about fees. You know, there’s a bunch of like Gen-Xers in particular seem to care a lot about fees, but. That idea of like, I’m going to go to the lowest cost solution because I believe in the mathematics of, you know, just saving on peace is the one thing I have control over is is not nearly as powerful as I think people thought it would be in in this particular space. It has driven Vanguard to an absolute dominant amazing position has been huge for Vanguard. And in a way, maybe Vanguard is the original robo right? The original robot that they’re just like, We’re going to invest in indexes and our robot is going to be a really dumb robot that just buys the index and does nothing. And a really dumb robot with a four basis point fee is all you need. And if you want a smart robot with a slightly higher fee, no one’s interested.

S3: Did you guys look at the Robinhood earnings? One thing I noted was that the revenue from stock market was down, but revenue from options trading was up. So which I find interesting given how crazy things have been. It’s the riskier parts of their business model that seem to be winning the day, while the more stodgy parts are what’s kind of crushing their the numbers.

S1: Yeah, they’ve never been able to make much money on the stocks. Nasdaq for a loss leader for the options in the crypto market. OK. Well, I think that’s a good sleepless and Vipal thanks again.

S3: Thank you.

S2: By sleepless.