Audio Length: 00:45:13

Transcript:

S2: Hello and welcome to the checks and roadblocks episode of Slate Money, your guide to the business and finance angles of one of the craziest news weeks that I can remember. I’m Felix Salmon of Axios. I’m here with Anna Shamansky of Breakingviews. Hello. I’m here with Emily Peck of Huff Post. Hi. We, of course, are going to talk about the crazy that happened this week, the storming of the Capitol, and what the implications are for the stability of the United States as an economic power. We are going to talk about the Georgia election results, which kind of got knocked into second place, but huge in terms of what it means the Senate might be able to pass in terms of legislation. We are going to talk about Spanx and iPods and companies going public and what’s happening there. We are going to make sure that Emily explains to us what roadblocks is, in case you don’t know. We also have a Slate plus segment on the Google Unión. It’s all coming up on Slate Money. So, Anna, you have spent many years, like I have reading headlines from Latin America about chaos in state legislatures and mobs overrunning and disputed elections and disputed presidencies and various different people claiming to be the legitimate winner of the election. And how does it feel for all of that to be happening in your home country?

S1: Well, on the one hand, it’s shocking. But then on the other hand, I feel like the last five years since Trump first started running was very familiar for anyone who has covered elections and governments in emerging markets. But that doesn’t mean it still wasn’t truly, truly shocking to see what we witnessed this week. And the one thing I will say, though, in comparison to many other countries is that thus far, after everything that Trump has put this country through, our institutions have held. And I don’t think we should discount that which institutions do you have in mind here, the election system? Joe Biden’s election was certified. Our Supreme Court did not kowtow to Trump all of our courts throughout all of his lawsuits. While, yes, we have certainly had individual legislators who have completely just discounted their allegiance to the Constitution, overall, our system is continuing to function.

S2: And I think this is an important point. If you look at what happens in Latin America on a regular basis, one of the things that presidents do is they pack the judiciary with their loyalists and then the Supreme Court will just say, oh, yes, you’re the president. This was clearly something that Trump wanted to do and something that Trump tried to do and something that on some level he failed, that we do have an extremely conservative judiciary now at the appeals court and indeed at the Supreme Court level. But there’s a difference between extremely conservative and willing to support an illegitimate election.

S3: I think what the riots, the insurrection at the capital sort of showed this week or sort of capped off like a decade basically of increasing political instability in the United States were not at the point of like the kind of countries you guys are studying. But I mean, we’ve seen these government shutdowns, radical swings back and forth between who’s in control of the government. It’s someone like Trump who’s going out and canceling trade deals, renegotiating or pulling us out of things, weakening our standing on the world stage. Another government shutdown, you know, that we had the Bush administration kind of weakened it, weakening us on the world stage. Also, in a great recession, the country gets blamed for there’s like these wild swings back and forth making the climate. Broadly speaking, a little more unstable than it used to be, and I think long term that’s going to be a problem.

S2: I was on Twitter asking about this, like Joe Biden and Tony Blinken, the incoming secretary of state, and John Kerry, the incoming climate person. And basically their job is to go out to the world and say, hey, the last four years have been an aberration and you can trust us now. And America is still like the global heginbotham and we can lead the world. And the natural question is they’re going to be asked by all of the other world leaders that they’re talking to is, well, sure, you guys are going to be fine for the next two to four years, depending on what happens in the midterms. You’ll be able to do things legislatively. But you have a two party system and it is certain that at some point the Republican Party will take the White House again. We don’t know when, but they will. And when they do, is it not certain that we will have more isolationism, more crazy? You’ve seen what’s happened to the Republican Party. It’s moved more and more in the direction of crazy. They always seem to nominate like the craziest nominee they can find.

S1: Well, I mean, the last the last I don’t know, Mitt Romney, I would say, is like the craziest nominee they could follow.

S2: Well, Romney wasn’t. But if you look what happened last time around, it came down in the final analysis to Trump versus Cruz. And we’ve seen what Cruz has been up to. Right. And if you want to get nominated by the Republican base, you you tack to the right. And that seems to be built into the political system now. And I just don’t see how the US can take on any kind of real global leadership role or exercise any kind of soft power in the world, given the certainty that this broken Republican Party is going to regain power at some point.

S3: Right. Because it’s normal for a country to see a swing back and forth between parties. But the problem is there’s no shared reality between the two parties. It seems like there’s no shared notion of truth anymore. So it’s like you can have a rational Democrat in control for four years and then you swing back to someone who doesn’t believe in any of the foundational facts that are required to have a consistent international policy.

S1: I would probably argue that if we do recover from this and if we are able to move forward on better footing, it’s going to be because moderates work to move forward, because that is the whole idea that I think you see people on both parties now saying, which is that if the other party gains control, the world will end. And while obviously I think Trump is, this gives you some evidence for that. But I think that idea, that thinking is a problem. Our system does not work. Essentially, no democratic system works. If people believe that if the other party comes into power, the world will end, the republic will fall even when one party is at fault. The only way a country can remain a functioning democracy is if members of both parties do the difficult work of building consensus. I know that may sound like a fairy tale, but in a lot of developing countries where one party has gone completely off the rails, the country is not returned to stability because the other party simply took power forever, but because moderates of all stripes did this difficult work or one party just collapsed.

S2: It’s like, I think, back to what happened to the Conservative Party in Canada not so long ago, which used to be a very big party, and it just went to zero, basically, and it imploded. Right. But they’re not a two party system. Yeah. So that’s that’s the thing which I worry about. Like, I think the it’s hard to to look at the current state of the Republican Party and the current people who are getting elected every level of election from the local to the federal in Republican primaries and say, well, yeah, what we’re going to have is a swing back towards the center and a new moderation. I just don’t see that happening. We’re seeing like Kuhnen supporters getting elected. And that’s what worries me, is that we don’t have the Republicans moving back towards the center and we don’t have any replacement for the Republican Party. There is no third party that, like the never Trump has, can move towards beyond the Democratic Party. And like no one wants a one party system.

S3: Yeah. And I feel like it’s kind of a little both sides are prisms to say, oh, each party says if the other one takes over, it’s going to be the end of the world because like literally, Trump has been in charge for four years. And look, it’s the world isn’t literally ending. However, things are very, very bad. And the president incite an insurrection this week. And I don’t think Democrats are being overly dramatic when they say, if we are, we elect more Republicans, the world’s going to end.

S1: Because kind of is I’m in no way saying that somehow the Democrats are. As culpable as the Republicans, I’m certainly not saying that what I’m saying is in order to move forward, you can’t have a rhetoric where you say that the other side is the end of the republic, even if right now it seems that that might be the case. That’s my point.

S2: Well, I mean, obviously, like the rhetoric of the Democrats is not the problem here.

S1: I completely agree with you. But the problem is that that doesn’t matter if you want to move forward. Staying in this type of thinking is not going to make you move forward. Even if it’s not fair, it’s not fair. It’s been the Republicans who are doing this on most steps of the way.

S2: But I understand what you’re saying here. I just don’t think that the extreme polarization that has got worse and worse over recent decades and really reached its apotheosis in the past few years is something that the Democrats can really address. Every Democrat in living memory has come into office saying, look, I want to reach across the aisle and work with the Senate Republicans. And in the Senate, Republicans have just like thumb their noses at them and said no way. It would be great if we could go back to the days of bipartisan consensus on anything. I just don’t think that in reality that’s on the table.

S1: I agree with you that I think Democrats have been attempting to do this. So the reality is it is going to be up to the moderates in the Republican Party. To me, those are the people who are going to have to have the gumption and the leadership to basically be able to break away from what has been happening in this party. And if that doesn’t happen, then I don’t see how we move forward.

S3: One thing I wanted to maybe talk about a little bit is the business community really allowed Trump to flourish the past four years, I think. I mean, Facebook and Twitter gave him a platform, didn’t really rein him in at all until what this week other business leaders supported him, were excited about his tax cuts. And only this week did you know some of them say, oh, he needs to be removed from office. Maybe one way to reign in the Republican Party and make it more moderate, as ANA suggesting, would be. I mean, is the business community going to do anything here? Like are they scared straight? A little bit now?

S2: Really, really good question. And we had this week a meeting of CEOs that very big name CEOs who unanimously agreed. And now we don’t know how much this will hold, but they did seem to agree that they wouldn’t give any money to any of the elected who voted to overturn the Pennsylvania election results. So that’s one hundred and thirty six members of the House, seven senators. And that might make a difference. Your point about Facebook and Twitter was absolutely well taken. Facebook in particular seems to have been leaning towards the Republicans quite strongly over the past four years. I don’t think there’s any doubt about that. They’ve been trying to appease the right and that has done damage to the republic and leadership from the business class. In terms of I mean, the headline this week that jumped out at me was Gary Cohn, the great enabler of Donald Trump, who came in and orchestrated the tax cuts, just got appointed vice chairman of IBM. OK, so there’s no Trump teams, you know, in the business community, if you worked for Trump and if you supported Trump, IBM will happily come along and give you a multimillion dollar job.

S1: I think that that may have changed, though, I think after what happened this week, I think the people who were still around Trump to this point are not going to be able to just get on board as easily. I take your point that some of those early figures like Gary Cohn have clearly been able to to make that move. But I don’t know. I think the response we’ve seen immediately from the business community and the response we’ve even seen from some like conservative Republicans to what we saw, I think that a lot of companies are very concerned about reputation. They’re concerned about ESG issues because they don’t want to be shamed in social media.

S2: And so I don’t know if that if there isn’t a Trump team, you don’t think Hope Hicks will be able to get like a million dollar job at News Corp. And you then think Steve Mnuchin will be showered with offers the minute he leaves Treasury?

S1: I really think that it is possible that the revolving door will not be quite so revolving. Now, I could be wrong, but that’s what I think we did see this week.

S2: The National Association of Manufacturers calling for Trump’s removal from office, which I thought was like mind blowing, coming full circle here to the whole sort of experience that Andrew and I have with literally banana republics like Ecuador and Nicaragua is hilarious to me that like the great pressure group that is going to cause people to invoke the Article 25 of the Constitution is the National Association of Manufacturers, if you like. That’s something you find in Bulgaria, is it really?

S3: That’s my other question. So for the countries that come back from this kind of thing, what what do they do? Is that what you were saying?

S2: Just often they come back with a new constitution. And I wrote about this on Axios this week, that America is by far the oldest presidential democracy in the world. Presidential democracies, by their nature, are fragile because no one really knows where the power lies. You have these checks and balances and they cause tensions. And, you know, France is on its fifth republic right now. Like, they don’t really know how to organize these things in the long term. Stable way with parliamentary systems, you get more sort of short term chaos, but you get more long term stability. And the US Constitution is very old, very creaky, very fragile. We have this ridiculous electoral college. We have this endless transition period. We have a lot of things that are built into the Constitution that just need updating. And, you know, we had Noah Feldman on the Axios podcast this week saying, you know, he’s he’s this Harvard constitutional law professor. And he was saying, like, yeah, I don’t call for constitutional amendments very much, but this is really the point at which we need to update the Constitution.

S1: I think constitutional amendments make sense, but I would caution the idea of saying, oh, well, having having new constitutions is a good thing, because if the more constitutions you had, the more democratic you had. Latin America would be the most democratic place in the world because they’ve had a lot of constitutions. And I think that that in itself is a problem. I think that one of the good things about the way the U.S. Constitution was initially set up was that it was flexible and that flexibility is a big part of the reason that it has existed as long as it has now. Obviously, for a number of reasons related to what we talked about, it has become harder to make those changes in the last 30 odd years. And so I do think that is another part of moving forward is figuring out what isn’t working and what can be changed.

S2: So let’s go from the very big picture to the other huge news of the week, which, you know, a couple of weeks ago, no one really expected this, but it turns out that the Senate is not going to be under the control of Mitch McConnell. The Democrats won Georgia. We have two Democratic senators from Georgia. And I don’t know anyone who thought that was a real possibility. And congratulations to all of the people who made that happen. This really changes everything. Emily, wouldn’t you say, in terms of like what Biden can effectively do in government?

S3: Well, it’s a very fragile majority. It’s not even a majority. It’s 50/50 with Kamala Harris as the tiebreaker. So, you know, it’s a slight advantage. But because of the filibuster, it’s going to be really hard for Democrats to get any real progressive legislation passed. There’s something called you can you can pass things with just a majority through some budget reconciliation process. So there’s talk of doing that. But like, I don’t know, I went through some stages when we learned it was a crazy day because the beginning of the day on Wednesday, it was like, oh, my gosh, Democrats are going to get the Senate. It’s a progressive dream, like, where’s my minimum wage hike? It’s finally time for the paid family leave that you guys know I’m like, obsessed with. And oh, my gosh, we can fix the climate. It’s all happening. But then kind of now because it’s only 50 50 and, you know, like we were just saying, very polarized environment. Republicans are going to want to block literally everything Democrats want to do. And just as you’re digesting this and I’m participating with like 10 Huff Post reporters, we’re doing a story that’s like progressive wish lists could come true. Then there’s like an insurrection at the Capitol and then I stop thinking about it.

S2: Yeah. And then you get. Yeah. And it’s definitely true that, like, Joe Manchin is going to block a lot of stuff and the right wing Democratic senators, if, like one Democratic senator, can basically have veto power over anything. So it is very fragile. That said, Mitch McConnell’s ability to just not bring legislation to the floor, which was his big superpower, has now gone away. It’s going to be much, much easier for Biden to get anyone he wants confirmed into cabinet positions. And it’s also the case that, you know, this legislation, which you can do through reconciliation and stuff you want to get some kind of big stimulus bill will get the two thousand dollar checks. That’s fine. But you want to do this thing that Biden ran on, which is cool, build back better. It’s the idea that you really use take advantage of low interest rates to do big fiscal investment in the future of the country, make it green and make it more sustainable. Put us on a great long term footing for the future. That was basically dead on arrival with McConnell running the Senate. It is still going to be a really, really heavy lift for Janet Yellen and Joe Biden and everyone who’s trying to deal with relations between the White House and Congress. But it’s within the realm of possibility now in the way that it wasn’t before.

S3: Yeah, and I think there are some popular things that they could do that would actually have bipartisan support, like maybe like one or two people from the Republican Party on their side. I mean, I think the chances we get another stimulus, like you were saying, Feliks, and more checks mailed out to Americans are quite high. I think they could hike the minimum wage. I don’t see how that’s not possible at this point. I feel like climate legislation is going to be really hard because of the Joe Manchin thing. But there’s a lot they can do with children and changing the child tax credit. They could do universal pre-K. I’ve heard a lot of talk about that. I mean, I think there are a lot of good things that they could do which would really reduce inequality kind of off the bat in the first two years if they were smart about it. So it’ll be interesting to see how it unfolds.

S2: And there will also be interesting to see whether it really is all 50 Republicans who suddenly got religion on deficits like it’s a standard thing. The Republicans happily run up deficits and the national debt when they’re in power and then they suddenly become fiscal hawks when they’re in opposition to the debt. And the deficit have been so big in the Trump years and there’s been so little opposition to it from the Republicans over the past four years, that it is conceivable that there might be one or two Republicans who are like, I actually there were bigger things to worry about.

S1: Right. And I also think that we are also still in the middle of a severe economic crisis. While, yes, things are far better than they were in April, as we saw with jobs numbers today, essentially jobs gains have stopped. We still have so many more people unemployed than we did in March. This is something that people in representatives in every state are going to have to deal with. A part of the reason I’m sure that the Democrats are able to take control in Georgia was because they were able to run saying we’re going to help you. And when people are suffering in a very, very real way, that’s a pretty strong message that even Republicans may say, I need to actually help my constituents and.

S2: I think on some level, they really did buy that election. I’m not talking about the campaign spending, I’m just saying the one message that really got through was if you vote in, what, knocking us off, you will get that two thousand dollar check and people like two thousand dollars. That sounds great. I’m going to vote for that. And it worked.

S3: So what’s going to happen now? First I read it’s it would only be a fourteen hundred dollar check because they’re getting.

S1: Exactly. Yeah. I mean, I’ll be perfectly honest, I don’t think the two thousand dollar tax is the best use of spending, like if we’re going increase spending and like really unemployment. And it’s is that there is literally no one.

S2: One, there is no one at all. And not a single person in America thinks the two thousand dollar checks is the best use of fiscal space. That’s going to be a whole bunch that’s going to give a whole bunch of money to a bunch of people who have record amounts of wealth, record amounts of income, like we’ve had huge government wealth transfers. And it’s going to go you’re going to be spending a lot of money on people who don’t need it, and you’re going to leave out a lot of people who do need it. And if you could spend that kind of money on unemployment assistance instead or any number of other things, including state and local government assistance, it would be much, much more effective. There is no doubt about that. I’m just saying that on an intellectual level, it was a winning message.

S1: Yes, I will give you money is often a winning message.

S3: Let’s talk a little bit more about the giving out of the money, because while we were on break in the quiet time between 2020 and 2021, Larry Summers got absolutely destroyed in the intro.

S2: My God, Larry, what were you saying? So. So this is the crazy thing, right? So the point that Anna and I were making that there are better things to do with four hundred billion dollars than just hand out drop it from helicopters on people who don’t really need the money is generally universally accepted. But Larry, being Larry decides to come out first in this video and then in an article for Bloomberg saying if we do this, it runs the risk of overheating the economy. And people are like, what the hell are you talking about? What do you even mean? Now he’s an economist. And if you want to translate from economist ese into English, overheating the economy means it runs the risk of inflation in a world where the Federal Reserve and everyone the thing they want more than anything else is inflation. Like the risk of inflation is like, please, God, let this cause inflation. Inflation is the one thing we’re trying to create here. And we’ve failed miserably to create it for a decade. And we are expecting interest rates to stay at zero indefinitely because we can’t create it. Like no one really thinks these checks are going to cause inflation. But even if they do cause inflation, that’s not a reason not to do them.

S1: Yeah, I mean, to be fair to be fair to him, I think that what he was trying to say there was not that it would cause inflation, is that it would cause a the type of significant amount of inflation that would then require action on the part of the Federal Reserve, which could then have. Was he really trying to say that it would cause that’s what he was say? It’s not a good argument. Don’t get me wrong, you don’t agree with him. But I think that that is I mean, that is what you mean when you say overheated. You don’t just mean I will have a little bit of inflation. It’s not really what overheating means. Well, I mean, but this is why we’re reading between the lines here, right?

S2: Because he never used the inflation. Would he only ever said overheating. So now we all just need to try and second guess what he meant. Oh, my God, that guy, he really annoys me. Sorry.

S3: He wrote a follow up piece in Bloomberg, which I read, and it just sort of reiterated the arguments that Felix just made. He was like, is it really the best thing to do? It’s a lot of money. We could spend it better. Like there was no like and if we do, this is how much inflation we’ll see. Like, it didn’t it didn’t make any sense if you target the money.

S2: Right. This is the other thing. If you target the money at the poorest people in America and the people who need it most, which is what I is saying would be more effective than just giving it to everyone. Those people will be more inclined to spend it rather than to throw it into Bitcoin and Tesla stock. And you will have more price inflation then if you don’t talk about it, like the more targeted the stimulus is, the more inflationary the stimulus is. So if you’re going to say that it should be more targeted, you can also say that the problem is inflation. Now, it’s true.

S3: Also, is the rhetoric different around giving people money versus giving people big tax cuts? Because isn’t it kind of the same thing in the same way? Yeah, yeah. But no one talks about tax cuts in this way. Well, well, yeah. I mean, I agree with me. Like leftists are like, well, you know, rich people actually don’t need tax cuts because they have a lot of money. Why are we giving rich people more money? Like that’s not how the rhetoric ever is around tax cuts, but it is from giving poor people money.

S2: Yeah. In terms of the inflation and. Locations, exactly the same mechanism applies right there, if you give tax cuts to the rich, the extra money they get from that is less likely to be spent and therefore it is less inflationary in terms of price inflation. You do see it in what we call asset price inflation, which is the stock market going up.

S3: OK. Also, I mean, the six hundred dollar checks that just went out, they only went out to people, individuals making 75000 or less, which is not giving people who don’t need it money, because last I checked, that’s not a lot of money.

S2: It’s not there. So one thing that’s happened over the past few weeks is that no one seems to know how to go public anymore. We have so far the big lender out in San Francisco looks like it might go public via a spec. We have two big IPOs were scheduled for December roadblocks and a firm. And both of them got pooled because they were like, I don’t know about this. Roadblocks is now doing a very weird sort of hybrid thing where it’s raising a bunch of money privately and then it’s going to go public and a direct listing, which is what companies like Slackens Modified did before the New York Stock Exchange has recently approved this idea of you can do a direct listing while also raising money at the same time. Basically, what we have is this world where the old way of going public, which is you do an IPO and everyone knows how an IPO works. The kind of thing that happened back in the dotcom boom of ninety nine and two thousand has now been replaced by this huge long menu of options. And it’s definitely more confusing for companies who want to go public. And there’s a lot of different options and it’s really hard to choose between them.

S1: Yeah, I mean, I think that if you don’t need to raise money publicly because you’ve been able to raise money privately, then obviously a direct listing can make sense. And I think also from obviously what we’ve seen recently in terms of what has happened with IPOs, especially the kind of first date, pop, where you may have some of these companies being a little nervous that their insiders are going to get a little angry if they go public and you do have some of these massive pops up, then they would rather just if they don’t need to raise money publicly, I would rather not go through that route because you now have these other means available.

S3: So is this like a sign that IPOs were sort of broken and these alternative methods are popping up because of various problems with the traditional way? Or is there something else?

S2: Yes, that’s a really good question. And the answer is yes. There are two big problems with IPOs the people are trying to solve. One is the one that Anna was just talking about, which is the first day pop, right, that you underprice the IPO. You leave a lot of money on the table. You give like hundreds of millions or sometimes tens of billions of dollars. If you add it all up, like I did to people who just flip the stock and hold it for a fraction of a minute and you’re like, why is that efficient? Why should all of these investors be making so much money for they were at work? That just seems deeply unfair. And then the other problem with IPOs is that there is huge amount of work to put an S-1 together and to get FCC approval and to go through the whole process. And it’s very hard to do that quickly. And so now what you have is these banks coming along and they’re saying, like, we will make this so much easier for you. We will let you go public very quickly, very easily with a guaranteed amount of money. And it’s just a lot easier for you to go public that way than it is with an IPO. So those are the two big problem problems that people are trying to solve, the degree to which either of those problems is actually being solved is open to a huge amount of debate. But certainly there’s a lot of people who are unhappy with the existing IPO system.

S1: It’s just also another sign that you have an enormous amount of capital trying to find a home, which no one means that companies can raise money privately, easily, as we’ve seen in the last decade, in a way that was not possible necessarily beforehand. And it also means you can have these vehicles like sparks that will have. People will be willing to give money to a spack, despite the fact that Spaatz historically don’t have the world’s greatest reputation. But again, we’re at a moment where as a combination of all the central bank activity, as a combination of. Income inequality, as well as other policies that mean you have all of this capital that needs to find a home, you can’t earn rates anywhere, it pushes people farther out in the risk curve. This is just a symptom of that.

S2: And the other thing that is happening is that there’s an increasing gulf between the amount the institutional investors are willing to pay for stocks and the retail investors willing to pay for stocks. And we don’t seem to have the ability anymore to distribute IPOs and to retail. 20 years ago, this is how companies went public because they would phone up Dean Witter and say, here we have an IPO allocation, give it to your retail clients. And Dean Witter would allocate IPOs three times. That doesn’t happen anymore. Although I did see a headline saying that Robinhood is thinking of going public in an allocation to Robinhood investors, which is like wonderfully circular, which is not dissimilar actually to the way that Group Nine Media is thinking of going public by setting up a group nine media spec designed to buy Group nine media and take Group nine media public. It’s like these things are so gloriously circular. I love them so much. But the point is that if you say Virgin Galactic, which was one of the early specs. Right. And you went up to a normal underwriter of an IPO and said, can you find institutional investors willing to value Virgin Galactic billions of dollars, they would be like, no, because you have never made money and there’s no indication you ever will make money and no one wants to buy that. And so instead, they do the spec thing and a bunch of Robinhood types like, hey, it’s got the word galactic in the name and it’s space and we love space and we’ll buy it. And then it gets this amazing valuation.

S1: Although to be fair, a lot of companies that don’t earn any money are also going public valuations. Snowflake by concern.

S3: Question with the specs then is I mean, it’s nice all the work that these companies have to or used to have to do to go public is a good thing because you learn lots and lots about the company and sometimes you learn so much that the company kind of falls apart like like. Oh, like we work, right. So when you go around that mechanism and you do a SPAC because you’re a dodgy company to begin with, we probably can’t go public the normal way. That seems like, well, that seems bad. I’m thinking about this today because of Group nine and there’s reporting that my soon to be parent company is considering us back up as well. So now I’m even more interested in specs than I was last week.

S1: So, no, I agree with you. I think that that’s a good point and that I do think there are serious regulatory concerns. There are reasons we have the IPO system set up as we do. And also it is just to me, all of these things we’re talking about should ring alarm bell. Is that like any normal functioning system, it shouldn’t be quite this easy for companies that don’t earn any money and have no chance to ever earn the money to be able to go public with these things that people are just throwing. Don’t talk about basically that way. And, you know, everyone points to Amazon forever. No, but this is the thing is like the way bubbles work is that bubbles can serve a really good purpose. I mean, bubbles are a very important part of capitalism. Speculation is a very important part of capitalism. You can throw money and resources towards a nascent part of the economy that may otherwise, in a more efficient system, not have been able to get all that capital. While a lot of people may lose money, you will have some companies that are good and it will also set the groundwork for industries moving forward. This happened with railroad bubbles that happened with the tech bubble. This is something you’ve seen repeated historically. This is why I don’t think the Tesla bubble is a bad thing, because I think it pushes more money towards EV. However, that doesn’t mean that it’s still not a bubble and it doesn’t mean that all of these other companies that don’t have any chance of surviving won’t all eventually just go to zero.

S3: Great. I forgot to tell everyone what roadblocks is because I did spend like an hour and a half trying to figure out yesterday.

S2: One last coda to this IPO discussion. I need to ask Emily Peck, the parent of the sleep money team. What is the roadblocks?

S3: Roadblocks is a gaming platform. OK, this is the reporting I did on this was that I asked my 12 year old son to show ROBLOX to me, and it took me like at least half the time of the reporting to just get the name to be able to say the name. Right, because to me it sounds like something you put on a bagel, but it’s, it’s a gaming platform where you can go and you create an avatar for yourself and you can make games and you can play games. Some of the games cost money, which isn’t money, it’s called Roebuck’s. So you can pay money to play some of the games. Some of the games are free and ROBLOX is really big in the ticktock world. If you go on tick tock, you can search and find all kinds of like little videos of Roebuck’s see that it saying it roblox games a few months ago. Little X. You remember him.

S2: We love him. We love him. He had a concert watch his Christmas special with Miley Cyrus it.

S3: Yes. OK, so he was sponsored by ROBLOX for a while and its valuation is insane, I think I wrote it down somewhere.

S2: Well, we don’t know yet because it hasn’t gone public, but it has been a lot of money.

S3: Oh, no. Well, yeah. Billions of dollars, 30 billion. The children of America, all they do is play video games. Now, like all bets are off on the kids because they’re all home and they’re all playing video games a lot. So usage of this site is like Skype.

S2: We should mention the other piece of news that jumped out at me this week. Roadblocks is going public at the 30 billion valuation or whatever. The other one is epic games, which owns fortnight, which is still going strong, has bought a new headquarters. Their new headquarters is an old shopping mall. They literally took an entire shopping mall and said this entire shopping mall is going to be our new HQ, which I think is everything you need to know about like the twenty, twenty one economy right there.

S3: Wow. But I have a theory. If a company buys or builds, especially builds and shiny new headquarters, death knell never works out. Company always fails after that. Remember the AOL Time Warner deal like the worst deal of the 20th century or whatever. They built a headquarters and then it all came falling apart. And I think you can find more examples of that.

S1: So we’ll just watch this like the Empire State Building, the Empire State Building.

S3: So I don’t think that’s a good sign for a fortnight.

S2: Well, I don’t know if 49 is going to be shiny new. They’re just like adaptive reuse of shopping malls. Well, I’m worried about is J.P. Morgan, who’s destroying this very handsome building at 270 Park Avenue and replacing it with the shiny new headquarters, even though they still have the pretty shiny, pretty new headquarters that Bear Stearns built shortly shortly before it went bankrupt. Like, are they not going to learn from Bear Stearns?

S3: No. No one ever learns about the headquarters thing. They always think it’s going to be fine. But it’s not numbers around people. I want to start off because I just refreshed my Web browser. And so my number as of 11, 20 pm on Friday morning is eight hundred and thirty one point five billion dollars, which is the market capitalization of Tesla. Eight hundred and thirty one billion dollars. It’s added another like item that was 70 billion dollars. Just like this morning. It’s gone parabolic and no one knows why. Although can it really be those six hundred dollar stimulus checks arriving in Robinhood accounts? I don’t think so. I don’t think physical growth is the investing brose is investing growth.

S2: Like what happened is I’ve been following the Tesla versus Bitcoin market cap chart. I put that in my newsletter this week. Tesla overtook the value of all the bitcoins in the world sometime in early June, and it is stayed ahead of Bitcoin, even though Bitcoin is now. Forty thousand dollars are going well, that makes sense.

S3: Tesla should be worth more than Bitcoin.

S1: So there’s actually like a thing there. Also, Anna just said she thinks the Tesla thing is OK. Again, like I’m not saying that it’s an appropriate valuation. I’m saying that I think that a Tesla does have a future. And I think that it’s actually a good thing that you have this insane bubble because it will push more and more money into eBay. I think that that’s good. People will lose money, but I don’t care. People lose money because they bought Tesla too high valuation like sucks to be them.

S2: But but a lot of people have been forced to buy it at a too high valuation. Right. That’s the whole point about it. Joining the S&P. Five hundred. True. If you have an S&P 500 index fund, you have no choice but to buy Tesla at eight hundred billion dollar valuation, which is a weird situation to be in.

S3: And Elon Musk is now technically the richest guy in the United States or in the world.

S2: In the world. In the world. He’s the richest person in the world.

S1: Funding was secured.

S2: I mean, it’s amazing, so the share price is eight hundred and seventy nine dollars, which is clearly above the four hundred and twenty dollars that he said funding secured. What you don’t realize he was like, I can take tests the public at four hundred and twenty dollars a share funding secured four hundred twenty dollars was way higher than the actual share price back then. And 420. That’s crazy. We’ll never get that high. It is now eight hundred eighty one is just going up as we speak after a five for one share split. So like if you’re using the four hundred and twenty dollar thing that he had funding secured for, it’s like what’s 420? Twenty times five. It is now almost like four thousand dollars a share. It’s like ten times higher than that crazy price that no one thought it was worth. That’s fine. That seems fine. That seems fine. Emily, what’s your what’s your number?

S3: My number is thirty two thousand dollars because I read this interesting story on Reuters that Alison Frankel, an old old colleague of mine from the American lawyer, wrote up this really interesting case. There was this high school teacher in Indiana, a woman, and she was applying for a job at like a kind of elite high school. She already had a masters degree and a decade of experience teaching college. And she was offered the pay for the job she was offered was thirty two thousand dollars a year. And she was like, well, that seems low. And the guy offering her the job was like, Yeah, but your husband is a professor at Ball State, so you don’t really need the money. Come on. And so this was 2006 and she took the job and worked there and worked there and worked there and got, you know, a bunch of raises. But still, by the end of it was making like forty two thousand dollars and found out that all the male teachers are making lots more money. So she sued and initially a judge said, well, that conversation initially, you know, where the guy said, your husband makes money, don’t worry about it. That was too long ago and it didn’t matter. It’s not discrimination, which is like, well, of course it is. So the news this week was the case was appealed and the appellate court understood the law better than that judge a guy. And she has won her case and it was pay discrimination. And this is thanks to a law that Obama passed in his first term, the Lilly Ledbetter Act, which lets people file pay discrimination claims when they find out they’re being discriminated against. Because in the olden times, if the discriminating event happened too long ago and the statute of limitations would run out and you could never sue, which is demonstrably unfair. So I thought it was a nice example of a first term piece of legislation that the last Democratic president was able to pass, actually working out for someone. And also, I cannot believe that in this day and age, someone said to some lady, while your husband makes money, so you’ll be fine. Like, don’t don’t say that.

S2: You can believe that.

S3: I can’t believe no, I refuse to believe it.

S2: I feel like you’ve been reporting this beat for long enough that you can believe that.

S3: No, I still maintain my innocence and shock every time. I can’t believe it. Don’t they read my story?

S2: And what’s your number?

S1: My number is barely fitting with our last topic. It’s 36 percent. That is the average one day part for IPOs in twenty twenty, which is the largest since 1999 2000. And it is more than double the post 2000 record.

S2: So if you’re one of those people who gets IPO allocations, then you’re you’ve made lots of money. Unfortunately, you’re not one of those people who gets IPO allocations. Oh, OK. I think I think that’s it for us this week. Thanks so much for continuing to listen to sleep money in twenty twenty one. We’re super happy that you’re still here. We have a sleep class coming up on the Google Union, which is a very interesting union. Employees got all the details on that.

S4: Many thanks to Jessamine, Molly, for producing. Many thanks for keeping the emails coming to speak money at Slate dot com. And we will see you again next week on Slate Money.

S2: Emily, Felix, this Google unión, we need to talk about it for Slate plus because it’s the craziest thing, it’s just a bunch of people who have got together and said we’re going to take one percent of our salaries and pool them and create this union. But we’re not going to ask for certification. We’re not going to ask Google to like, make everyone in the company be part of the union. We’re not even going to have a vote in the company about whether the company should unionize. We’re just going to form an internal pressure group and call it a union. Is that if I got that right?

S3: Yeah, pretty much. I mean, it’s called the Alphabet Workers Union, and it’s a so-called minority union, which, like you just said, doesn’t have a lot of the rights that normal regular old union would have. But it still can do some things so it can publicly lobby on behalf of Google workers so they can have a voice to voice their issues. And lately they’ve had a lot of issues. And I think a key thing is that they can represent and have as members contractors, which make up like half of Google’s workforce and don’t get everyone thinks of Google workers as, you know, this very privileged, well paid group of people, but half of them are contractors making relatively low wages and are mostly people of color as well. So I feel like that is a good thing, too. So, yeah, it’s not like a full blown union. It’s like union lite.

S1: Union, very light. Like so it’s it’s like four hundred people out of one hundred and twenty six thousand people I guess. Like I just don’t quite understand what, how this really benefits anyone in terms of it seems like all of the things that this quote unquote union can do, many other types of groups could do without having to pay one percent of their salary, it seems like, OK, you’re taking one percent of their salary to do what exactly?

S3: I mean, I think it’s a good thing Google is so large and so influential. It’s almost like a government body. And I think Google workers should have maybe more speech rights than like normal private employees.

S1: So that’s what this does this give them that? That’s it. Like it’s for four hundred.

S3: You know, we saw so far. So, for example, the roots of this union go back to twenty eighteen. When The Times reported that Andy Rubin was going to be allowed to leave Google, even though he’d been accused of like pretty heinous sexual harassment, he was in get millions and millions of dollars on the way out.

S2: Seventy million dollars.

S3: Seventy million. Thank you. And so that’s where this all starts, which I’d like to underscore how important me to reporting is not just for that stuff, but for anyway. So once that happened, workers started speaking up and like one of the things they did right off the bat was speak up about arbitration agreements. And they got that policy changed. And Anna would say, well, they did that without having to pay one percent of their salary.

S1: Did they need that union to do that?

S3: But I think it’s good to have that consistent organization because the momentum couldn’t dissipate the same way because you have more skin in the game.

S2: This way, I will say the big advantage of having this group is that it allows people to speak up and especially contractors like, you know, no one really has the right to keep their job in this company. And Google can fire anyone for any reason. But contractors are even more precarious. And it’s just really, really hard for employees to vocally speak out against management because they get fired. And we just saw this with Tim Ibru in Google. Right. Who got fired because she wrote a paper critical of Google oversimplifying massively. And the function of a union is to just create a little bit more of a safe space for people to be able to say, hey, we disagree with what you’re doing and be able to be vocal about it without thinking. If I say this, they’re going to just fire me now. You could still get fired. There’s no doubt about that. But it does make it slightly less likely because the senior management will know that even if they do fire you, the union is still going to exist and it’s still going to be saying these kind of things.

S3: Yeah, it’s not a perfect counterweight. It’s not even a counterweight, but it’s some kind of weight that allows this very important work force to speak up more safely. And that’s that’s important. And I was making so many faces, if that actually does that.

S1: I mean, I’m not saying that. I don’t think that what like the goals behind it are admirable. I just to me, this seems performative. It seems like, OK, we’re going to get a report that says, oh, we have this union and we’re probably not going to actually be able to achieve anything. And I’m like, I it just doesn’t seem to make a tremendous amount of sense to me.

S2: But they’ve already achieved things, right? They’ve achieved like The New York Times op ed. They’re going to be setting the agenda for the questions that are going to be asked of senior management in a bunch of different from interviews to annual meetings to Congress. Right. People want to know what the employees think. It’s very easy for people to say, oh, Silicon Valley tech journalists, they’re all anti tech and the companies should just be allowed to go out and make lots of money and that journalists don’t represent what the employees think. If you have a union saying, wait, no, we actually. Think, too, and we’re employees, then that actually does resonate a little bit more, so it remains to be seen how effective this union is. Obviously it could wind up being ineffective, but I think there is a non-zero chance that it will be able to make a difference. And and it’s such a big and important company. The anything that can make a difference, that is going to be good.

S3: One thing that I was thinking about around this is these tech companies now are so big. People talk about monopsony is a lot, but like employees are Google employees at Facebook, they don’t really have as many places to go for new jobs as you would think. So I think you’re going to see you see more activism inside these companies because employees are hesitant to leave.

S1: The skills you have at Facebook and Google are going to be transferable to a lot of companies. You can be well paid. I don’t know if I entirely agree with that because it’s bad, because a lot of those skills are things that we actually don’t have a tremendous amount of in this country. So I I’m not entirely sure if I agree with that.

S3: I wouldn’t be surprised if in a few years, maybe maybe you see something like this, Facebook or Twitter, people are speaking up a lot more and they don’t need everything that a traditional union offers. Like some guy at Facebook making two hundred thousand dollars a year doesn’t necessarily need a union to negotiate a raise for him. He’s fine, but he does maybe need a safe way to express his opinions about how his company is destroying democracy or whatever.

S2: So, yeah, this week actually had a prime example of that. Right. Which was that a huge number of Facebook employees were saying we need to take down the Donald Trump page. We need to stop him from being able to spew his lies all over Facebook. This is extremely dangerous to democracy. And the response of senior management was to shut down all of those conversations and say, like, you can’t even talk about this anymore. And then two days later, Mark Zuckerberg comes out and says, oh, we’re going to shut down the Donald Trump page. He eventually did the right thing four years too late. But the ability of workers to have a voice rather than just waiting for Mark Zuckerberg to wake up in the morning and suddenly have the right idea come into his head is, I think, crucially important at these companies. Kevin Roose put out a tweet saying, like Mark Zuckerberg and Jack Dorsey are the most powerful people in America right now. And he’s not wrong.