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https://dcs.megaphone.fm/SLT7523272380.mp3

Transcript:

S2: Hello. Welcome to the IPO palooza edition of Slate Money, your guide to the business and finance news of a week in which we had monster IPO activity.

S3: I’m Felix Salmon of Axios. I’m here with Emily Peck of Huff Post. Hello. I’m here with Anna Shamansky of Breakingviews. Hello. All three of us were left out of the coveted IPO allocations for door Dash and Airbnb. And we feel sad about that because we would have made lots of money if we had managed to get some of those allegations. We are going to talk about whether we are sad about that and what should be done about it and whether it’s even a problem. We are also going to talk, of course, about the massive government antitrust suit against Facebook. And we are going to talk about the way that the covid vaccine is being distributed and whether it’s fair and or economically optimal. All of that coming up on Slate money. So the big news this week, and it was IPO frenzy, we had an amazing off the charts IPO door dash, which was then followed by an even more amazing, even more off the charts IPO for Airbnb. What is going on? Bring us up to speed.

S1: Yes. So this is part of the IPO palooza that we’ve seen this year, just a enormous record amount of issuance. And what was really notable about these was how much the stock popped on the first day in Airbnb case, you know, more than I believe, more than doubled and Dorda almost doubled.

S3: And what that means is that a whole bunch of like big institutional investors bought a whole bunch of stock, basically of the 50 percent discount to the market price. And when I say a whole bunch of stock, I mean three and a half billion dollars worth of stock in both cases. So if you are a big institution, if you’re a fidelity or something like that and you manage to get in on the IPO, then you are just sitting on literally probably hundreds of millions of dollars of free money for doing nothing except for saying, yeah, I’ll buy some of that.

S1: Yeah. I mean, actually, it’s interesting that you mentioned Fidelity, because I actually think part of the reason we’re seeing these huge pops, there are a lot of reasons, but partly is because you have now just these enormous firms. You have Fidelity and BlackRock that are taking up so much of like when they’re originally building the book for the IPO, they are taking up so much of that. So in the past, you obviously had lots of institutions that were getting in on these IPOs. Now, not as many of those 10. So consequently there.

S3: Why not? What’s the reason for that? Why why aren’t there so many institutions these days?

S1: Because you right now, if I may if I’m a company, that’s IPO ing. If I’m the investment bank that’s doing it, I can basically with essentially like two or maybe three firms almost entirely build most of my book. I don’t need to go out to a bunch of different firms.

S3: So the underpricing of IPOs, if that’s what we’re seeing right now, is basically investment bank laziness that they they can it’s not quite easily with two two phone calls and they don’t need to go to anyone else.

S1: It’s not laziness. It’s also just, you know, these firms have also taken in so much money. So it’s not laziness. It’s like, why would you and also like why would you screw over these firms who are these enormous firms that tell them they can’t have the allocation they want where it’s a kind of in the best interest of everyone to have that?

S3: OK, so I want to bring Emily in here, but it’s clearly not in the best interests of everyone is clearly that if you allocated the stock according to more or less how it’s allocated now in the market, you could have got twice as much money for it. So the company loses out on three and a half billion extra dollars that it could have got by allocating the stock more broadly. And in a sense, everyone who isn’t smart enough to be invested in the funds that BlackRock and Fidelity that managed to get this big pop they lose out to.

S1: No, I mean, I actually kind of disagree with the idea that, well, if you if this was done in a different way, then you would still have the same price. It just, you know, you wouldn’t have this kind of lower price and then a pop, you would just have that quote unquote, market price. And I don’t think that’s true because I think part of what we’re seeing is not something based on some fundamental reality. It’s you have a lot of demand, especially because we keep seeing these frothy IPOs. That means more and more people want to get in at the same time that when you’re talking about these, like when you’re initially floating, not a lot of shares are necessarily being traded. You have a lot of these firms that are holding that can’t sell yet. So you don’t have a lot of people that are excited to sell. You have a lot of people that want to buy. So consequently, you’re going to get an I would say probably an artificial pop that probably eventually will come down. So, yes, you can say, well, if I were Jordache or Airbnb, could I have priced higher? Yeah, you probably could have. I’m not saying you could price where it is now, but yeah, you probably could have priced a little bit higher. But I don’t think that narrative of like, oh, well, they could have priced exactly where the market is now and it would have been exactly the same. I don’t really buy that.

S3: Well, I think this is a little bit of a straw man. I don’t I wasn’t coming out and saying they could have to exactly where it is now. What I’m saying is that. There are clearly losers here as well as winners, and there are absolutely winners and the winners are the people who are lucky enough to get those IPO allocations. And they made an enormous amount of money on basically zero effort. And we are talking literally billions of dollars for each of these stocks, the amount of money that they made for zero effort. Why is that efficient? How does that make sense? Emily, does it make any sense to you?

S4: No, it doesn’t make any sense to me. I have a lot of questions. But the first one is, isn’t it just bottom line, good for Airbnb if its stock is worth a lot of money, more than they anticipated, even if they left that the three billion dollars on the table long term, everyone always wants a pop. Like if you don’t have the pop, people are like, oh, no, the IPO was kind of like a bust and it didn’t do that well, like, prices just kind of stayed where they were initially. People usually complain about that. You mean like Facebook?

S3: Yeah, people usually say, like, I didn’t go so well, it didn’t go so well, didn’t really cause it any kind of long term harm. But yeah, I mean, it is an interesting question as to the degree to which a high share price is good for the company. It’s obviously good for the company if they if they can issue more shares that, you know, if the cost of equity goes down. So it’s obviously good for Tesla. Tesla just announced that they were going to sell another five billion dollars worth of shares because their share prices so high, the dilution is low. Basically, it doesn’t cost it costs almost nothing to issue five billion dollars worth of shares for those companies who are still issuing new equity. Having a high share price is great. If you’re wanting to buy another company with an all stock deal or even the partially stock based deal. And having a high share price is great. Other than that. And what’s that? What’s the advantage of a high share price?

S1: Well, you certainly want your share price to to be increasing because it’s not just a matter of like when you’re going to the equity market, your IPO and you’re taking cash, it’s not like that’s the last time you’re going to need cash. Companies are constantly needing cash. Also, they’re constantly often borrowing at the same time that they may also have equity infusions. And what your stock is doing is going to affect your other borrowing costs. Companies are constantly rolling over the loans. They’re constantly shifting money around. And especially if you’re talking about a company like Dorda that just burns through cash, they definitely want their share price to be increasing. They definitely don’t want there to be a situation where there is a it’s massively overvalued and then it just collapses. And then all of a sudden they have a harder time. A year, obviously, then would be issuing for it’s going to be more expensive for them to issue equity. It also means is going to be more expensive for them to borrow. It also means they’re going to have to be more risk averse than some of their other competitors.

S3: It’s kind of intuitive and easy to understand why a company would want its share price to be going up. And I totally understand the idea that an increasing share price is is a good thing. But there’s a difference between the high share price and an increasing share price. And on some level, the intuition surely has to be if you start trading at a gazillion dollars at a crazy high share price, then it’s harder to have an increase.

S1: Oh, no, I agree with you. I actually think that’s why partly I would imagine some of these companies did, quote unquote, leave some cash on the table initially because I think they were also nervous about their share prices being too high. Now you want to pop, but if you have a pop that puts you in a place where you’re just simply not going to be able to increase after that. No, I agree with you. I actually don’t think that’s a good thing long term.

S4: That’s the first thing that’s made sense to me, actually, is that it’s too high and that sets up unrealistic expectations and kind of sets up a bubble essentially for these companies because they’re never going to meet the expectations, maybe especially a company like Dawidoff.

S3: I mean, that’s what Elon Musk has been saying, too. He came out, I think, last week and said, guys, we have a crazy high share price. And I’m not complaining about having a crazy high share price. And it’s good for us. And it does mean we get to issue new equity, very cheap, but it also means that we are priced for absolute perfection. And if we don’t hit incredible numbers and make lots of money, then our share price has a long, long way to fall. And no one wants to be working for a company where the share price has gone down a lot. So people are nervous. Brian Chesky, the CEO of Airbnb, there’s this wonderful clip on Twitter of him being told where the share price is indicated to open. And he kind of goes speechless for a while. And he’s like, oh, shit. Like on the one hand, he’s now worth 14 billion dollars. On the other hand, he’s like, now I really need to. Execute on expectations that are not anything that I have placed on myself. It’s not like the board has told me you need to make this enormous amount of money. You need to be successful. It’s not like that’s in my strategic plan that I need to be that successful. But somehow stock market investors are like, hey, you have to completely exceed whatever maybe the board has told you that you need to do. Otherwise, we’re going to punish you by selling your stock. And it, again, has a huge, huge amount to fall. It’s worth more than all the big hotel companies put together. Now with much less revenue, it has less revenue than they do like even in the pandemic.

S4: One thing that was interesting and maybe Anna can can talk about this some more, Bloomberg reported that one of the reasons the stock pop so much on Airbnb was retail investors and pandemic, you know, demand. People are at home with their Robinhood apps and they want to get it on like the latest IPO. And that’s part of the reason the stock went so high.

S3: So so I want to jump in on this one, because this is I think it goes back to something that Anna was saying about the big institutions, the BlackRock and the Fidelities being like the players. And if you are an investment bank leading an IPO, it is very easy to call up BlackRock and Fidelity and say how much of an allocation do you want? How much are you willing to pay? It is very hard. It is basically impossible to phone up Robin Hood and say, can I give you an IPO allocation? Trying to reach individual retail investors used to be something that certain investment banks could do if they had a bunch of retail clients of their own. So if you had like, say, Dean Witter, for instance. Right. If you are an IPO bank, you would phone up Dean Witter. Dean Witter would have a sales force of individual stock brokers who would phone up their individual clients and say, do you want in on the Airbnb IPO? And this is a big thing back in like the dotcom bubble in 1999 and 2000, the individual stock brokers would get allocations of hot IPOs. And if you were a good client of the brokerage house, you would get an allocation of like 50 shares, 100 shares or whatever, and then you would make money yourself as an individual investor in the IPO. I can’t remember anyone sort of talking about individual investors investing in IPOs. In twenty twenty, in a way that was actually quite a big thing back in like nineteen ninety nine and that’s a big change and it does make it feel like there’s something incredibly sort of undemocratic about the IPO process now even more than it was in 1999, because at least 99, it was possible for some individuals to see this pop into in 2020 is basically impossible. Am I right. Anna.

S1: Yeah, I mean, I think for the most part, yes, exactly. I mean, it’s also just this is part of this larger shift, even though obviously now we’re seeing this kind of rise of essentially day trading on Robin Hood, the longer term, larger shifts are into more passive investing, into a concentration of these very, very, very large institutions.

S3: So the. Proposed solution to this problem like this, the way that individual investors who are doing like the quote unquote smart thing, which is just buy and hold indexes are missing out on this free money that is being given out by the IPO market. The solution to this problem is some form of direct listing is some like, for instance, know what? There was no money left on the table when Palantir went public, when Slack went public, when Spotify went public with direct listings. Those were very efficient. And the reason why more companies don’t do that is because right now, under FCC rules, you’re not allowed to raise money when you go public that way. And companies like to raise money when they IPO. If the SEC allows companies to raise money in that kind of direct listing, isn’t that the best of both worlds?

S1: Yeah, I mean, honestly, I in a perfect world, I mean, obviously we’ve we’ve talked a million times, but all of the other kind of relationship management things that go into the IPO process. But yes, in terms of kind of a more democratic markets than. Yeah. Not enabling certain institutions to have access that others simply can’t. Yeah, I completely agree with you. And also right now, a lot of what we’re seeing is just simply a supply demand mismatch. And if you kind of removed some of the current barriers and the structures we have around the IPO process, you probably wouldn’t have as much of that. You know, the share prices then might not be as high the first day. But as we discussed, they might not actually be that bad of a thing for the company long term.

S3: I do think that one of the things we’re seeing right now is a huge amount of demand for these new companies from retail, from individual investors. And that does help to explain the big first day pops. But by that token, if retail is where the demand is, then surely on some level retail is where the allocations should be able to go. When you’re doing your IPO, if the real demand is among individual investors, then you should have a mechanism which allows individual investors to take part in that IPO. And right now that mechanism just does not exist.

S1: Right. But the issue, I would say, is that part of the reason people want so to get into these IPOs and to get into these as soon as they can is because they see these significant increases. Frothy IPOs beget more frothy IPOs.

S3: Again, like I want to draw this distinction between an increase from the IPO price and an increase from like the first trade. No one wants to get in on Airbnb. Just because it’s trading much higher than its IPO price just means you’re paying more money than you would have done. It’s not like the pop from the IPO makes Airbnb more attractive to retail or saying that it does.

S1: It makes future IPOs more attractive is what people are seeing all this money being made on this first day and they want to get in?

S3: I totally don’t understand that. The logic that doesn’t make any sense.

S4: That’s because, you know, two people, the people and a normal person would see, oh, this company’s stock price just more than doubled. If only I had been able to more than double my money.

S1: I don’t think people are that stupid, I guess. And I mean, like, that’s how markets work. It’s because people are stupid. Part of the reason, again, you’re seeing these pops is because you have so much demand of people thinking, I want to get in. I think that I’m going to see significant share price increases. I want to get in as soon as I can. I’m not saying that’s reasonable or rational or the right thing to do, but I think that is why we are seeing some of what we are seeing.

S4: A separate thought is that Airbnb just a few months ago laid off 20 percent of its staff. And I just wonder how they were feeling yesterday and also maybe they could have avoided that, right. I mean, so we were like, what, 11 billion dollars now? I mean, it’s wild on paper.

S3: So Axios is Dan Primack actually talked to Brian Chesky on the IPO day and asked him about that. Yeah. And Chesky was very open about it. He was like, yeah, with hindsight, we didn’t need to do that. And I wish that we hadn’t. And they have hired back some of those people. And, yeah, they thought they were facing an existential crisis, like they could go out of business.

S1: They had to be fair. So did everyone.

S3: Right. They were struggling to raise money at thirty dollars a share. And now it’s, what, one hundred and fifty or something. So it was a very different world back then. You have to make decisions just on the information you have rather than like you don’t you don’t have the hindsight from the future. But absolutely, with hindsight, those layoffs turn out to have been unnecessary.

S4: It’s just a wild, crazy world, guys. I mean, the pop of the Airbnb stock compared to like the fortunes of this company are so great now and wonderful. And I’m glad. Happy for everyone. Great job, everyone. But there is something going very wrong right now with like Congress can. Come with any relief package, people’s unemployment benefits are running out, food benefits are running out, like the Post had a story about people stealing, you know, diapers and like beans from the supermarket. And then I’m reading about Brian Chesky being surprised on air about his multibillion dollar windfall. It just seems like something is way broken.

S1: And as I will be a broken record and say this is why having global monetary policy like in order to stimulate economies is a bad idea, because what it does is exactly what we’re saying.

S3: There was another huge piece of news this week which was maybe overshadowed a bit by the financial stock market bonanza, and that was that the FTC brought this massive antitrust case against Facebook and then simultaneously. Forty six different states and territories also brought an even bigger antitrust case against Facebook. And by the way, when I say even bigger, I am judging by the only metric that counts, which is the number of pages in the complaint, which is like two hundred and fifty pages on this one compared to a mere 50 pages on the FTC one. But yeah, there’s two enormous cases both released on the same day, both of which accused Facebook of being an anti-competitive monopoly, both of which are saying that they want Facebook to be broken up, that they want it to be forced to sell Instagram and WhatsApp. And I’m looking at the IPO market right now and I’m saying, wow, if Facebook IPO, the Instagram right now, can you even imagine how much money they would make?

S1: Facebook should just do it?

S4: No, I agree. I think they should they should absolutely spin off those two companies. Like what is the only person who loses? No one loses. I don’t think Mark Zuckerberg would make a ton of money. Like what? Why does he have to hold on to these companies? He got what he wanted, really crushed the competition. He bought up the competition so that they weren’t a threat to him anymore. And now he could, you know, amicably profit from them and just break up the companies. Like, really, why does he have to make a fight over it?

S1: Because, of course, he’s going to say that there’s now this competitor also, I imagine there has probably been some integration between these companies, as I’m sure there’s actually definitely been, I’m sure, integration on the back end, partly because he doesn’t want them to be broken up. And the harder you make it to break them up, you know, I imagine that that’s partly what they’re doing.

S3: So Facebook has been very explicit about this, that it bought Instagram and WhatsApp and basically ran them at arm’s length as self-contained, let’s say, spinoff able franchises for many, many years until basically about a year ago when the antitrust rumblings first started. That was when you started noticing when you opened up Instagram or what on your phone it would say, what do you buy Facebook at the bottom of the little screen, the first screen that you see? And that was when they started integrating a lot of the technology. And that is also when the founders of Instagram and WhatsApp all left Facebook because they weren’t actually running those companies anymore. They were just like, you know, it was all just being integrated into the Borg. And they left on bad terms and they left lots of money on the table because they were like, I can’t live like this. This is terrible. And Mark Zuckerberg clearly broke his promises to those founders to leave them basically alone and to allow them to run those units as they saw fit. And he did all of that. He did all of those all of that promise breaking and he did all of that integration for one reason only, which is exactly what you said, which is because he saw this antitrust case coming down the pike and he wanted to make it as difficult as possible to break Facebook up. And that just seems pretty evil.

S4: The FTC case in the state’s case is that this is a company that didn’t just want to compete in a healthy way with other social media companies. It wanted to destroy them or co-opt them. And it did that. It didn’t destroy Instagram or WhatsApp. It bought them and neutralized the competition. And it’s now way too big and it is anti-competitive. And so it must be corrected.

S1: I mostly agree there are aspects of the way that this has occurred from when these mergers were originally approved to where we are now. That does feel a little capricious, kind of like, well, political winds change. And so now something that was seen as fine is not seen as fine. And look, I understand that you can make the argument of right. But Facebook has just gotten bigger and not saying that’s an unreasonable argument. But these weren’t mergers that happened, you know, twenty five years ago for obvious reasons, based on what Facebook was created. So I don’t know. It just it worries me a little bit. I do think that we obviously are in a new economy where we have these enormous companies that clearly different new regulations are going to need to be created moving forward. They’re going to have to be a lot more scrutiny about mergers. I’m a little iffy about administrations, kind of to a certain extent, it seems political, which concerns me a little bit.

S3: Can you just explain what you mean when you say it seems political and why? What does political mean?

S1: And why is it that it seems like in the kind of Obama era, he was much more friendly and excited about Silicon Valley? And consequently, I would say it’s not surprising that his party there. Just wasn’t as much concerned about these companies getting bigger, partly because that was just not how the administration and the Democratic policy has changed and both Democrats and Republicans are much more concerned about that.

S3: And so in that sense, you can say the politics of this has changed, which I would totally agree with. But when you say it seems political, there was definitely a subtext there, like an undertone of saying, like, if it’s political, that’s bad. It shouldn’t be. Yes. So explain. I agree with the why it’s bad. Why would it be bad for it to be political?

S1: Now, to a certain extent, I know the argument could be, well, it’s always political and statistics. And obviously that’s true. The government is involved. It’s political, but, you know, market based economy, it’s concerning for companies and how companies view their future. If they have to be extraordinarily concerned that this administration likes them, well, then something will be allowed. And then five years later, a different registration. But that’s not allowed. And it can be because, well, this administration likes one company. The administration doesn’t like another company. What we’re seeing now, I’m not saying that this necessarily is the best example of that, but I do think there are aspects of that are concerning. And I think from what we saw during the Trump administration, where we frequently were criticizing when the Trump administration seemed to be doing things against one company or another because of these political reasons. And we said we don’t like this. So I think you just have to be a little bit worried about the government to a certain extent, starting to be able to potentially pick winners and losers a little bit more.

S4: I actually don’t agree. I think there have been examples with the Trump administration going after specific companies in ways that are nakedly political and don’t seem to have, for instance, like Tic TAC, for instance. I think in this case, you know, Facebook has tried to say, well, you guys let the mergers happen and now you’re trying to like, take it back. And that’s just like a false argument. Tim Wu was on the political gabfest talking about this a little bit. It’s not like the FTC approved these deals when they happened. It just didn’t do anything when they happened a B at the time, Facebook was pretty disingenuous about the anti-competitive aspects of what it was doing. Facebook wasn’t openly saying, like, we’re buying these companies to squash the competition to regulators or in the press. And the press wasn’t really seeing it. I don’t think very accurately at the time. People were saying Google Plus was going to be the competition of Facebook. It wasn’t clear yet how it was going to survive the mobile era. And so at the time these deals went through, I don’t think people understood the implications of how they’re anti-competitive, in part because they just didn’t understand. And hindsight is 20/20 and in part because Facebook was completely disingenuous about it behind the scenes. We now know because Congress got a hold of the email, Zuckerberg was saying, like, we have to crush the competition, we buy them or we bury them. Like this is existential for us, you know? So the way that I think you could tell it’s not really political in the way that Tic-Tac deal was, is because forty six AGs have joined the suit, Republican and Democrat a b like, yeah, this company is an existential threat to all of us and it’s really too big. And I feel like this is the rare example of like government finally taking action to do something about a business that really is operating against, like, democratic interests at this point.

S3: So I want to jump in here and say the bigger picture is exactly what you just said, Emily, that Facebook is too big, Facebook is too powerful. It needs to be broken up somehow. It is very, very easy to get caught up in sort of. What should have been done back when Facebook bought Instagram and WhatsApp and whether that should have been allowed or not and probably with hindsight, it probably shouldn’t have been allowed. But what we’ve seen with the Facebook and the Google case, because Google has also been sued for being a monopoly, is at the heart of those cases, is you are too big, you are too powerful, you are a monopoly. And that is bad for the economy. That is bad for our democracy. That is bad for a lot of things. And so we need some kind of a remedy here. And the remedy is probably that you should be broken up in some way. And what I want to say is that that would have probably been the case if Facebook had its existing degree of monopoly without having done any mergers, without having bought Instagram or WhatsApp, if it somehow managed to like home, grow Instagram and WhatsApp. And there was no point in time at which they bought these companies and became a monopoly like it would still be too big right now. It would still be a monopoly right now. It would still be anti-competitive right now, and it would still need to be broken up in some way. That’s what happened with the big Microsoft antitrust case. The Department of Justice came out and said, you are a monopoly and we’re going to say we want you to maybe split off of some windows. And, you know, that didn’t happen in the end. But it wasn’t because Microsoft had bought office in an anti-competitive merger. It was just that they grew too big. And I think the real heart of these cases, and especially the Facebook case, is never mind the actual merger agreements. Facebook is now too big and it needs to be broken up.

S4: Yeah, I think that’s that’s a really good point. And I kept weirdly thinking about we just read Jacob Goldstein’s money book, and part of it has this detail about like back in the day, like in the sixteen hundreds companies served at the pleasure of the government, you had an agreement. You could only exist for 20 years if you’re a company. And then you had to go back to the government and they would say whether you could keep existing. And I’m not suggesting we go back to like the sixteen hundreds or anything. But I mean, if a company is too big, like something does need to be done, because then it does become anti-democratic and it is bad for everyone. And this is a case where regulators should step in. Yeah. So I agree. Like, even if they hadn’t bought Instagram or WhatsApp, if you get too big, something has to happen. That’s why we have antitrust laws on it.

S1: And I agree with that.

S3: We’ve reached. Yes, yes. Yes, I think. I think yes, yes, yes. And that’s the best place to end that segment. But it’s very rare for us to agree on everything. Let’s talk about the vaccine then. The reason we’re talking about the vaccine is because I wrote about it this week in my newsletter that you should sign up for it for years to come. I was really fascinated when I was looking at the various very, very nerdy fights about who should get priority. And what struck me is how much agreement there was. There’s a tiny little bit of disagreement at the margin about like should we vaccinate the people who are most at risk versus should we vaccinate more or less health care workers? But the big picture, if you look at the UK, if you look at the US, if you look at all the various different bioethicists who are weighing in on this is one hundred percent agreement on basically exactly what everyone is doing, which is and we all know this, that go to the nursing homes first to the essential health care workers first and then go down the list from there. And no one, absolutely no one is saying we should use a market mechanism to determine how to distribute the vaccine. We should try and maximise global economic growth like all of these kind of things. No one is saying that there are obviously very, very different ways of vaccinating the country in the world that would maximise wealth, that would maximize economic growth, that would prioritise the rich and the people who are willing to pay the most money. No one is proposing that. So, Anna, explain to me how in this world of market fundamentalists, why is no one proposing that?

S1: Well, number one, I feel like what we saw with PPE clearly shows that using a market to distribute these things in a crisis is a really bad idea. And I also think the fact that it is a crisis is why that traditionally in wars is what we often think of. All of a sudden, market mechanisms tend not to work so well and also governments are much more apt to say, no, we’re stepping in because it’s a crisis. So I think that’s the primary reason.

S3: So what you’re saying is not so much that a market mechanism is inherently bad, but more that if we tried it, it wouldn’t work.

S1: I mean, I even though obviously I in general, I’m a fan of market mechanisms, I don’t think it would work well in this situation because I think the people who would get the vaccine would probably both not be the people who most needed it. It also. Might not be the people who are most apt to spread. It just seems like it would be a bad idea. I mean, it probably also argue be unethical, but also just probably not very efficient.

S3: It would not be efficient at preventing the spread of the disease. I think what is clear is that the current set of priorities is definitely designed to save lives and prevent the spread of the disease. But my point is that there is actually a tradeoff here that for the first time we’ve been talking for most of this year about whether or not there’s a tradeoff between economic activity and controlling the virus. And for most of this year, we’ve basically come down on the side of, look, the way you maximize economic activity is to control the virus. There’s no trade off. This is the first time that there actually is a trade off. There is a way of increasing economic activity by getting high value office workers back into offices, by vaccinating them first. And they can get be slightly more productive and make two hundred thousand dollars a year instead of one hundred fifty thousand dollars a year. And I mean, I can see or get the people on airplanes to start doing all of their work that they used to do on airplanes. They all of that kind of very, very financial stuff. I want to bring in Emily here because I can see her wrinkled nose. But there is some kind of a tradeoff here between broad economic health and broad health health. And I’m super happy that we’re coming down on the side of world health health, at least internationally, if not internationally anyway.

S4: Well, I guess I was going to say a few things. First, I’m not sure this isn’t the most market efficient way of distributing the vaccine. I mean, the the basic reasoning is, a, protect those at highest risk and B, reduce the spread. Like that’s the the framework, I think, that public health officials are using and reducing the spread. There’s nothing more important, as we’ve said a million times, like you just said, to improving the economy, then reducing the spread. I don’t think like getting an office worker back to work in an office is going to help the economy as much as like reducing the spread and making it safer to go out in public to restaurants and things like that. Right. And then I guess the second thing I wanted to say was, like, rich people have already been vaccinated. They’re all working from home. Greenwich real estate is thriving. They’re sitting in their mansions. They’re making tons of money. They’re cashing in billions on IPOs like we’ve already done, kind of like a market efficient covid strategy here, like the people who are dying are poor people and essential workers. Those are the ones that are getting sick. So it makes sense to have a public health response ethically to vaccinate those people first. And also, I think economically, too, because at higher income levels, like I said, people are OK, that that aspect of the economy is is fine.

S1: I tend to agree. I think that ultimately what will most help the economy is getting the virus under control. And part of the reason you want to get the virus under control is because it kills people. So it’s not like we could have a system where you’re like, well, let’s just let those people die and let’s because the whole reason we’re doing this is because we don’t want people to die. So we obviously need to reduce the overall death rate, which you do, by ensuring that those people who are most apt to die from this get the vaccine first and then you kind of work out from there. And then that makes it far more likely that we’re actually going to be able to move forward if we had a pure market mechanism. Because what you were describing to me is not a market mechanism. That would be the government deciding, like I like these workers. I think they will be more productive. Thus I will give them the vaccine. If you just said, here you go, anybody can buy it, who wants it? Well, then, you know, you’d have stockpiling of certain. It would not be, I don’t think would be efficient at all. I mean, yes. Are we going have a system right now where the wealthiest will still be able to get the vaccine if they want? Of course, like that is just going to happen, like how much they’re going to be cheap.

S3: They’re going to be sheepish about it. Like if wealthy people do manage to get vaccinated, they might not seeing it from the rooftops because there will be a big backlash against those people. But they will ask that question. Yes, I’m talking I think they will. I mean, for instance, I was just reading a story about this company in India that is giving a whole bunch of doses of the vaccine to the Indian government for three dollars per dose. But it’s also keeping a bunch of doses for itself, which it will sell eight dollars per dose to anyone who wants to buy it. So I can easily see that there will be a whole bunch of rich people just flying to India to get vaccinated like this is going to start happening and. This does raise the other question, which is if market mechanisms are clearly bad in this case, which I think we all agree that they are, isn’t it bad that that is exactly the mechanism that we have used to distribute the vaccine internationally, that it’s the rich countries who’ve been able to buy up all of the vaccine and the poor countries basically haven’t been able to get their foot in the door?

S1: Yeah, that’s probably true. But I think politically, you’re not going to get any government that’s going to be like, you know what, I’m not I’m going to allow my population to die because I think another country who ethically probably might deserve it more like I will give it to no government is ever going to do that in a million years.

S4: I mean, even in the United States. And Felix, you wrote about it in your newsletter, the the federal government’s going to distribute the vaccine to the states and then they’ll determine how much or how it’s distributed within the states. And each state has different needs. So, like, it’s not a perfect distribution mechanism because like some states have lower percentage of at risk people.

S3: If you distribute the vaccine according to population, which is what the US government, the current U.S. government has said it’s going to do, then that is not. Efficient or fair, because that, you know, if you want it to go to like old people first, for instance, then you would want Maine to get a lot more doses than Utah because, you know. Twenty six percent of Maine is over the age of 65, whereas only 11 percent of Utah is over the age of 65. So that kind of entra US distribution, I think you should distribute the vaccine according to where the at risk populations are rather than according to just where the population as a whole is.

S4: So we’ll see whether that distribution algorithm changes under Biden, but is really important that whatever distribution mechanism is chosen and that its message really well. So people understand why it’s being done the way it’s being done. Otherwise, I think they’ll be a lot of, like cries of unfairness or, you know, that’s not right and stuff like that. I think it could be it could get kind of ugly, I would assume, anyway.

S3: Yeah. And the one thing you want to avoid is vaccine tourism. You want to avoid people moving from one state to another state because they will be able to get the vaccine in that other state, right?

S4: Yeah. And another thing to pay attention to is the people we want to get vaccinated might not get vaccinated. Like I was reading a journal article on flu vaccination rates, and they’ve never been more than 50 percent nationwide. A lot of people just don’t do it. Old people do. Old people have like the highest vaccination rates for flu, but like African-Americans and Latinos have really low vaccination rates. So actually getting people to take this is going to be harder, I think, than we think.

S3: Yeah, in the immediate future, demand is going to exceed supply and all of these populations. Right. For the next couple of months at least, there’s going to be so much demand for the vaccine that the people who don’t want it, it’s like never mind the people who don’t want it. We don’t even have enough vaccine for the people who do want it. But you’re absolutely right that at some point in twenty, twenty one we are going to reach the point at which we have so much vaccine that there are like at risk people who really need to get vaccinated, who are refusing to get vaccinated. And that could be a public health problem.

S1: I don’t know if you can 100 percent extrapolate. I’m not saying you’re saying a hundred percent, but extrapolating from the flu and how most people think of an experience, the flu for a global pandemic that has stopped the world, I do think that people probably respond slightly differently.

S4: I don’t know. I was going to ask you and ah, Felix, one of you to answer, if someone called you up tomorrow was like, I can hook you up and get you vaccinated and no one’s going to know. Are you doing it?

S1: No, I plead the fifth. But it’s such a good question.

S3: It’s just, you know, it’s like, oh, it’s such an ethical it’s like a party dilemma. What’s your answer, Emily?

S4: I wouldn’t do it because if I got it and like, if my husband and kids didn’t get it, like, it doesn’t seem that beneficial. Plus, I’m still working from home and like, it’s it’s totally fine. Like, I don’t I really don’t need it in the way that I’d be desperate enough to to, like, pull that off, you know, like because then I would have to go out back out into the world vaccinated and people be like, what are you doing? And I would have to I just I don’t my need isn’t great enough where I would I would want to pull that scam.

S3: Yeah, I’m basically with you, but there is a part of me which is like, oh my God, I could get on planes again.

S4: I think it’s the societal it’s that it’s the pressure because there is a lot of community pressure and to behaving a certain way, like if you go somewhere now without a mask, I actually will feel not just anxious or you feel bad, like people look at you funny, you know, like outcasts.

S3: I don’t think you should stop. I don’t want to be an outcast. You know, even if you’re vaccinated, you shouldn’t stop wearing a mask.

S4: No, especially if you have to keep it secret because it was a shady vaccination.

S3: But we don’t know. Like, let’s be very clear about this. This is something we should mention. It is not proven that vaccinated individuals are no longer infectious. It is actually still possible, unlikely, but possible that if you get the vaccine, then you don’t get the disease. But you could still be a vector for transmission of the disease. And for that reason alone, until that’s proven, even with a vaccine, you should still be wearing a mask.

S4: It’s really exciting that there’s a vaccine.

S1: It is expandable. Yes, it’s amazing.

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

S4: My number is sixteen point one percent. That is the percent of Americans who eat ninety six or more cookies per month, according to a cookie survey that was shared in a Bloomberg story on a potential cookie shortage that Pepperidge Farm claims to be facing right now. They say that their cookie demand has been up twenty five percent in the Soviet era and that there are running short on cookies. To make their cookies and then they’re accompanying the story, was this alarming chart or alarming to me anyway? That said, 16 percent of Americans eat ninety six or more cookies a month and 40 percent of Americans eat 48 or more cookies a month. And I I don’t know, I’m clearly doing something wrong because I don’t think I eat forty cookies a month. But maybe I should maybe should be importing cookies.

S1: Oh I definitely only a to wait really especially. Well during the Cold War I’ve been baking like many people. Yeah. I mean but to be fair, it’s the size of the cookie because I’m not making very large cookies. I’m making usually like they’re homemade, they’re not particularly large. So I’m going to eat probably like maybe two or even three of them at a time because they’re small. If I had an enormous cookie, I’d probably only need one. So that’s why I’m saying, like, depends on the size of cookie.

S4: Like you’re not going to be eating three giant black and white.

S1: That’s what they look like. Ginger snaps that I just made, like, yeah, I made three of those because they’re small.

S4: OK, all right. Yeah. I’m curious how many cookies people really eat a month. I mean, I guess it’s believable because the forty eight cookies is like what. I like to break it down by day. Yeah. That’s not, it’s not even two cookies a day so. Right. I got there soon.

S3: I should, I should definitely be eating more curfews. I’m a great believer in eating cookies. Cookies make people happy. Yeah. Yeah. My number is zero point nine percent which is a number I think we’ve mentioned deaths on this show before, which is donor advised fund. These are these places where you can place a bunch of money and then, you know, it’s all a big donation to charity up front. And then over the course of subsequent years, you dole out that money to different charities. The people who run the big daffs will tell you that more than 20 percent of the money in the desk, it’s given out to charity each year. If you actually do the math in a rigorous way, it looks like that number is massively overstated and it’s probably below 15 percent. But the number that I’m saying is zero point nine percent, which is the staff in Fort Worth, Texas, called the Jasper Ridge Charitable Fund and the Jasper Ridge Charitable Fund has a payout rate of zero point nine percent. And it’s not a small fund. It has assets of about seven hundred million dollars. This is a huge amount of money and it seems to be quite bad at giving away its money to actual charities. So this is my my job I’m giving myself for the next week or so is to try and track down the Jasper Ridge charitable fund and say, like, what’s up? Because if they were a foundation, they would have to give away at least five percent by law and that well below that.

S4: Do you know anything else about them, like who runs it or who puts their money into it or anything?

S3: Yeah, I’ll follow up next week on sleep money. OK, that’s exciting.

S1: Anna, my number is one hundred and ninety two thousand dollars. So there is a high school basketball jersey auctioned and it was the most expensive ever. One hundred ninety two thousand dollars. Whose jersey do you think it was? Michael Jordan’s. Was it Barack Obama? Yes, it’s Barack Obama. Oh, wow. Good job, Felix. You got a sports question. He did. It’s impressive.

S3: Wow. I can’t believe I got that one right. I genuinely didn’t know that one.

S1: But Michael Jordan, he did have the same number as Michael Jordan. Who bought it? Who won it?

S3: I don’t know who bought it, who sold it. I actually don’t recall it either. It would be interesting to know if this was just someone cashing in on this like Jersey that they had or whether it was some kind of charity auction.

S1: That’s actually kind of my question of like high schools keep their old jerseys because like, how does that still exist? I will look into it and also have more information. OK, everyone has work to do homework for the week.

S3: If you have any answers for us to do, let us know what you know. Email is sleep money and sleep dot com. We love getting emails from you.

S2: Other than that, thanks for tuning in to Slate money this week. It’s been a fun one.