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0:10
Hello and welcome
0:14
to Slate Money, your guide to the business
0:16
and finance news of the week. I'm Felix
0:18
Hammond of Axios with Emily Peck of Axios.
0:21
Hello, hello. With Elizabeth Spires of the New
0:23
York Times. Hello.
0:25
We have all manner of court cases
0:27
to talk about this week. The Supreme
0:29
Court has been very busy and it's
0:31
been talking about Chevron this and Purdue
0:33
that and herring fishermen.
0:35
It's all up
0:37
for discussion. So that's exactly what we're going to do.
0:40
We're going to talk jurisprudence
0:43
this week. We are also going to talk
0:45
about stock market concentration and mega caps.
0:48
We have a Slate Plus segment
0:50
all about the humble spud, which
0:52
apparently has gained in humility over
0:54
recent years. No one loves that
0:56
anymore. Be sorry for your
0:58
potato. It's all
1:00
coming up on Slate
1:02
Money. Today's
1:13
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1:15
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confidence. this
4:00
Chevron, which basically says in
4:03
cases where the law is murky, defer to
4:05
the agency. That was
4:07
created during the Reagan administration. I guess
4:09
what I'm saying is, is
4:11
the assault against the executive branch going
4:13
to end when the partisan status of
4:15
the White House flips? But you also
4:18
have to consider, we have a conservative
4:20
majority on the Supreme Court, and most
4:23
of these people are not going to leave anytime soon.
4:25
So one of the significant
4:27
outcomes of this is that the judiciary would
4:29
have so much more power than it has
4:32
right now. So conservatives
4:34
would still dominate decision-making
4:37
on that front. If you look
4:39
at Kagan's dissent, she said the
4:42
majority basically disdains restraint
4:44
of any kind, and
4:46
they hate the administrative state. So
4:48
they're basically just giving themselves exclusive
4:50
power over every open issue, no
4:53
matter how expertise-driven or
4:55
policy-laden and turning itself
4:57
into the country's administrative czar. And
5:00
she sounds furious in this defense, but
5:02
it also sounds terrifying. You want Brett
5:05
Kavanaugh deciding complex
5:08
healthcare issues? It's
5:11
just mind-boggling. Even on
5:13
an ideological basis, it sounds dangerous,
5:15
and it's just going to create
5:18
large-scale disruption, I think. There
5:20
are two different types of
5:22
conservatism in America, and I
5:24
think that there's a significant
5:26
difference between magma-electoral, congressional
5:33
conservatism on the one hand, and
5:36
judicial conservatism on the other
5:38
hand. The Republican
5:40
Party, in its current incarnation,
5:42
is quite activist
5:44
and has a whole bunch of laws that
5:47
it wants to pass and things that it wants to
5:49
do, and is not
5:51
really a small
5:53
government party. Donald
5:56
Trump significantly expanded the size of
5:58
the government. And
6:00
the more sort of small c conservatism that
6:03
I see from people like, you know, I
6:05
mean, Sam Alito or someone like that is
6:07
much more in line with this Chevron ruling, which
6:10
is just basically saying like, we
6:12
don't want the executive branch just kind of
6:14
getting out of control. And I think they
6:16
would be okay, Emily, to your point, I
6:19
think they would be okay with a bargain,
6:21
which basically said, if we constrain the ability
6:23
of the executive branch
6:27
under a democratic president, then it will
6:29
also be constrained under a Republican president.
6:32
But Elizabeth's point is well taken
6:35
that they're
6:37
probably just going to uphold what the,
6:39
they're more likely just because
6:41
of their sort of inherent biases
6:44
to uphold whatever the Republican president
6:46
does. Although I'll argue with myself
6:48
because they don't even like
6:50
it when Republican presidents do anything because...
6:52
Exactly. Yeah. So
6:54
they overturned this regulation regarding
6:57
bump stocks on rifles. They
6:59
turned rifles into semi-automatics. And
7:01
it was a regulation from
7:04
the Trump administration that curbed the
7:06
use of those things and the
7:08
court overturned that. So
7:12
maybe Felix
7:14
was right all along, which pains me to
7:17
say, I guess. Well,
7:20
I think among the Republican party, there's a
7:22
kind of knee-jerk hatred of
7:24
any kind of administrative power that isn't concentrated
7:27
primarily in Congress,
7:30
but they're fine concentrating it
7:32
with a conservative oriented judiciary
7:35
too. But part of what
7:37
they're reflecting is what kind of baseline
7:39
Republicans believe, which is that the administrative
7:41
state is bloated. People
7:44
like their local politicians, but they hate politicians
7:46
in general. And the further up you get
7:48
in the government, the more people
7:51
have these ideas that the government
7:53
is bloated and corrupt. And
7:56
the final thing is just that most people
7:58
don't really understand what these agencies do. I
8:00
have mixed feelings about Michael Lewis, but I
8:02
think he wrote one of the best books
8:05
about the Trump administration that wasn't about the
8:07
Trump administration called The Fifth Risk, where I
8:09
think he went into these agencies thinking that
8:12
he was going to find a
8:14
lot of the stuff that Republicans complain
8:16
about, a lot of waste and corruption, blah,
8:19
blah, blah. He ended up
8:21
writing a book that basically defended the
8:23
administrative state because in
8:25
doing the reporting, he learned a lot about how
8:27
much expertise has to be built into these agencies
8:30
and also that they don't really turn
8:32
over as many people as people think
8:34
they do when the
8:36
president changes or Congress shifts. Yeah,
8:39
I'm reminded of Rick Perry. Remember him
8:42
when he ran for president and he
8:44
was like, I'm going to abolish the
8:46
Department of Energy. And then
8:48
he got put in charge of the Department of Energy. And
8:51
about a week and a half
8:53
after taking up that position, he was like, holy
8:55
shit, this is not only incredibly important, but we
8:57
do incredibly good work and we need more money
8:59
and we need to expand the Department of Energy.
9:03
And this kind of thing where you kind of, I
9:05
think you're absolutely right that, and Michael
9:07
Lewis saw this and lots of people have
9:09
seen this. And like those of us, I
9:11
was just on a call earlier with Emily
9:13
when she's like, oh, I love the Bureau
9:15
of Labor Statistics. They're great. Like there's a
9:17
lot of deep expertise and very, you
9:20
know, I don't know how to put this,
9:22
just incredibly professional people in the government and
9:24
this ideological mistrust of
9:26
anything administrative in the Anything
9:29
Executive branch. It really is
9:31
based in ideology rather than in any kind of
9:33
like empirical evidence of overreach.
9:36
And I think what we see in
9:38
the SEC case, which was narrower than
9:40
Chevron, but is kind of illuminating is
9:43
the SEC, you know, has a bunch
9:45
of good professionals in it and they
9:48
have their own little sort of administrative courts
9:50
which can administer fines and stuff when people
9:52
do fraud. And the
9:55
Supreme Court basically said, yeah, like you
9:57
guys know what you're doing, but You're
10:00
not part of the judicial branch you're part
10:02
of the executive branch and just for that
10:04
reason alone you shouldn't be allowed to do
10:07
that if you want to go ahead and
10:09
find someone you need to find a judge
10:11
to administer that finding that judge needs to
10:13
be in the judicial branch cannot be part
10:15
of the sec and this is all like
10:18
a high level ideological debate that. You
10:20
know might make sense in some kind
10:23
of a civics textbook but late given
10:25
where we're at you know these things always
10:28
path dependent is gonna just make it incredibly
10:30
hard for the government to do its job
10:32
in practice and i think maybe that's the
10:34
point if you're like child's coke or someone
10:36
that's what you want. Yeah also
10:39
between the chevron and the sec ruling
10:41
you know if the point of the
10:43
sec ruling is to argue that people
10:45
who get charged with fraud.
10:47
Is there a jury trial every
10:50
single time it's just gonna flood
10:52
the courts i mean they're creating
10:54
a sort of unsustainable situation where.
10:57
Yeah we already have a stress judicial
10:59
system but now that everything has to
11:02
be litigated through the courts and agencies
11:04
have no discretion it's just
11:06
gonna jam up the judiciary in a way
11:08
that i don't think we are really prepared
11:10
for well on the flip side i mean.
11:13
The court has basically been operating
11:15
as though chevron didn't exist for
11:17
a while now it's issued like
11:19
for example the biden minish knocking
11:21
back the biden administration student loan
11:23
rule. Was kind of like ignoring
11:25
chevron without ignoring chevron you know
11:28
and like in the case the sec case i
11:30
spoke to a former staff attorney. At the agency
11:32
and he said you know it's been clear for
11:35
a while that. The
11:37
court doesn't like these administrative
11:39
in-house sec courts they
11:41
don't like the administrative law judges so
11:43
the agency the sec has been taking any big
11:46
case. To court and
11:48
not using the in-house system
11:50
so i mean is this
11:53
gonna be a radical change with cases flooding the
11:55
courts and might not be so radical like with
11:57
so many. Supreme court rulings i
11:59
might be like. this like slow burn that
12:01
you know you don't realize that the soup
12:03
is really hot because you're sitting in it
12:05
kind of a thing. I'm reaching for an
12:07
analogy. I'm sorry. The thing that strikes me about
12:09
this, if you look at the cases that went
12:13
up to the Supreme Court which resulted in
12:15
this Chevron strike down, they
12:17
were, you're gonna love this, they were
12:19
about herring boats. This
12:22
is a classic little like corner of
12:24
the government that no one ever thinks
12:26
about, right? And there
12:28
are quotas on herring fishing. I'm
12:30
gonna get this wrong, but broadly
12:32
speaking, there are quotas on herring
12:34
fishing. And if you're
12:37
going out to fish for herring, then you
12:39
need a federal observer on your boat to
12:41
make sure that you're not fishing
12:44
too many herring.
12:46
And the agency
12:48
in charge of placing federal observers on boats
12:51
basically said, well, when we put a federal
12:53
observer on the boat, you need to pay
12:55
$700 a day for
12:58
that federal observer, you know, because they need
13:01
hotel rooms and transport, I don't know, whatever. And
13:04
the herring boat
13:06
lobby, you know, big herring boat decided
13:08
to sue and say like,
13:10
there's nothing in the law about $700 a
13:13
day. And in all of the courts
13:15
using Chevron, which has been the
13:18
lawyer of the land since 1983, basically
13:20
said, well, this is a reasonable thing for the
13:23
government to do is to like,
13:25
you know, recoup its costs by charging the herring
13:27
boats $700 a day. And
13:30
it made its way up to the Supreme Court. And the
13:32
Supreme Court basically said, well, it may or may not be
13:34
reasonable, but it's not in the law. And the only person
13:36
who can make the law is Congress. And
13:38
if Congress wants you to charge $700 a day,
13:41
then they need to pass a law saying
13:43
you can charge $700 a
13:45
day. And in a
13:47
world where Congress was capable of
13:50
passing laws, that
13:52
might make sense. But
13:55
we are not in that world. And
13:57
we instead we are in a world where I think
13:59
Congress Congress has passed fewer laws in the
14:01
past few years than at any point in
14:03
American history. There's something boring
14:07
and sensible that would probably
14:09
garner bipartisan support under any
14:12
normal Congress. The
14:14
herringboats have to pay $700 a day would
14:17
never pass because it's just so hard to
14:19
pass anything.
14:21
And so that kind of thing, it
14:24
reminds me in a weird way of
14:26
how the MMT folks
14:28
are like, well, you know, if inflation
14:30
looks like it's ticking up, then Congress
14:32
should just cut spending. And you're like,
14:35
well, maybe Congress should cut spending, but
14:37
there's no way that they actually will.
14:39
That's just not how Congress works in
14:41
the 2020s. Or they should
14:44
just raise taxes a little and you're
14:46
like, have you heard about Congress? Do
14:48
you understand how things work here in
14:50
the United States? Well, also another thing
14:52
to consider is that the agencies exist
14:54
for a reason because something like a
14:56
$700 a day
14:59
fee for fishing boats is
15:02
a little bit small potatoes for
15:04
Congress, which already has a backlogged
15:06
agenda and bills that go nowhere.
15:09
It just doesn't have the capacity to interpret
15:12
in a way that actually
15:15
involves expertise and subject area
15:17
knowledge, every teeny tiny thing
15:19
that people are allowed to do
15:21
in a regulatory basis. That's part
15:23
of the reason why we have these specialized agencies that
15:26
can adjudicate smaller issues like that. Yeah,
15:28
we have Chevron because, you know, Congress
15:30
passes laws that are hundreds of pages
15:33
long and we need
15:35
an agency with expertise to interpret them. And you can't
15:37
go back to Congress on every little $700 fee
15:39
to pass a law. I
15:42
mean, that would freeze everything. So
15:45
I guess my question is, is
15:48
there a world in which Congress
15:51
can basically enact Chevron into law?
15:53
Is there a world in which
15:55
Congress can pass a law saying
15:57
it is our congressional
15:59
intention? that executive agencies
16:02
broadly have a certain amount
16:04
of discretion to interpret what
16:06
we write because we
16:08
don't know how these things are going to play
16:11
out in practice. And we have more important
16:13
things to worry about, like getting
16:15
reelected. So, yeah, is there
16:17
a, because the Supreme Court keeps
16:19
on deferring to what Congress
16:22
says, is there any way that Congress
16:24
could like effectively reinstate Chevron by passing
16:26
it? In theory, yeah. But what's the
16:28
likelihood that that would happen? Does
16:33
the Supreme Court even defer to Congress? I
16:35
mean, in the SEC decision, it was
16:37
over, you know, the SEC's ability
16:40
to hear these penalty
16:42
cases in-house, right? That was
16:44
a new ability passed as
16:47
part of Dodd-Frank. So, even
16:49
in a case where Congress explicitly said, this is
16:51
what I want the SEC to do, the Supreme
16:54
Court was like, no. That's a
16:56
good point. That's a very good point.
16:58
Yeah, like it seems that they're happy
17:00
to ignore congressional intent even when it's
17:03
quite clear if it doesn't align with
17:05
the ideology. Let me move
17:07
on while staying with the Supreme Court because
17:09
I think, and again, like I'm super interested
17:12
in what you two think, I think that
17:15
these Supreme Court decisions,
17:18
both in the Chevron case and
17:20
in the SEC case, can
17:22
broadly be construed
17:25
as being business-friendly in
17:27
a kind of laissez-faire sense insofar as
17:29
businesses can now go ahead and do
17:31
what they want without having to worry
17:33
about government agencies cracking
17:35
down on them so much because the
17:38
powers of government agencies have been constrained
17:40
by these rulings. And the reason I
17:42
bring this up is because friend of
17:44
the pod, Mitu Gulati, put out a
17:46
really great paper a couple of years
17:49
ago basically saying that we have an
17:51
incredibly business-friendly Supreme Court. We've talked about
17:53
this on the pod actually, and
17:55
whether they're Democrat appointees or Republican appointees,
17:58
they generally wind up.
18:00
Leaning in favor of business.
18:15
Before we get to the break, I want
18:17
to tell you about our Slate Plus segment
18:19
for this week because it's pretty hilarious. I
18:22
convinced Elizabeth and Felix to talk about potatoes
18:24
because there was an article in Wired about
18:27
the humble potato. We talk about why it's
18:29
not as popular
18:32
as it used to be and
18:35
about why potatoes are an economically
18:39
significant vegetable. Slate Plus
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members will get to hear that at the end
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19:00
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19:02
really important time, I think, to sign
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up and listen to them break down
19:06
all the chaos that's been unleashed in
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19:57
Today's episode is supported by, what should
19:59
I do with My Money, an original
20:01
podcast from Morgan Stanley. Smart
20:04
people often don't feel smart about money.
20:07
Fine, what should I do with
20:09
my money on your favorite podcast player to
20:11
hear from people just like you getting help
20:13
from experienced financial advisors? So
20:19
the other ruling that we should talk
20:21
about on the pod this week is
20:23
the Purdue Pharma SACRA family ruling about
20:25
the proposed bankruptcy settlement there. And
20:28
I guess the first question I want to ask, because
20:30
this was a very bipartisan ruling. It
20:33
was 5-4. It didn't seem to
20:35
split across any kind of Republican Democratic lines.
20:39
Would you consider that, Emily,
20:41
to be a pro-business ruling?
20:45
That's a really good question. And
20:48
I don't think the Purdue decision
20:50
is a pro-business ruling.
20:52
So it was a 5-4 ruling
20:54
with Justice Jackson joining the
20:56
majority, which was some of
20:59
the other conservatives. And exactly
21:02
what Felix said, they curbed the power of
21:04
bankruptcy court to shield
21:06
debtors from immunity. And
21:09
companies have been using, and some
21:11
would say abusing, the bankruptcy court
21:13
for years, dating back to asbestos
21:16
claims, using bankruptcy as a
21:18
way to shield themselves from dealing
21:22
with the consequences of their
21:24
actions, essentially, you
21:26
could see that in the Purdue case. And
21:29
this was a case, yeah, where the Supreme
21:31
Court was like, no, you're
21:33
going a step too far here. And they
21:35
did curb the power of the bankruptcy
21:37
court and limit what companies
21:39
can use those courts for. The
21:42
way I read it, and I might be wrong about this,
21:44
but the way I read it is that they
21:47
are OK with the bankruptcy
21:49
court giving debtors
21:52
broad immunities. They're just not OK
21:54
with the bankruptcy court giving non-debtors
21:56
broad immunity. Right, yes. But
21:59
that has well. But the bankruptcy courts
22:01
have been doing that for years since asbestos.
22:04
We read that really good op-ed
22:06
from Melissa Jacobi, a law professor at UNC,
22:08
and she sort of laid out the history
22:11
here going back to the asbestos claims. There
22:13
was a company that filed for
22:15
bankruptcy to shield itself from all the victims
22:17
going after it. And
22:20
not all the victims signed on to
22:22
that because they didn't know who all
22:24
the victims were at the time. What
22:26
they did was come up with this
22:28
work-around where they created a fund, like
22:30
a victims fund where future people
22:33
who had been harmed could go and get
22:35
payouts. The funds
22:37
ran out of money and it didn't
22:40
pay out very much. It wasn't very
22:42
successful yet. That's how a lot of
22:44
these deals got structured going forward. It
22:48
seems like the Supreme Court in this case
22:50
was like, that's not the way we
22:53
want to do it anymore. I'm not
22:55
sure I agree with that. I
22:57
think the Supreme Court would still have been
22:59
okay with that because that's the debt, that's
23:01
not a non-deter. And the
23:03
way that bankruptcy works is that when a
23:05
company has a whole bunch of liabilities, it
23:08
can basically say, I don't have enough money
23:10
to cover all of these current and future
23:13
liabilities. So here's a bunch of
23:15
money to cover them and then I'm just going
23:17
to continue as a going concern free of those
23:19
liabilities. And I think that's still allowed. The
23:22
big question in the Purdue Pharma case is
23:25
Purdue Pharma is the debtor. It
23:28
has a bunch of
23:30
current and future liabilities which are basically
23:32
all taught liabilities in terms
23:34
of claims they have to pay to people who
23:36
died of opioids. There is
23:38
also a non-deter in that case, which is
23:40
the Sanktler family. And
23:43
as part of the proposed settlement in
23:45
that case, the Sanktler family would voluntarily
23:48
give up $6 billion of their
23:50
own money and say, we're going to throw
23:52
this into that kind of fund that Emily
23:54
was just talking about, which will
23:56
then pay out to the victims
23:58
of opioid abuse. and whatnot. But
24:01
in return for paying in that $6
24:03
billion, we will get
24:05
immunity and we will be protected
24:07
from future lawsuits against us from
24:09
people who died of opioids. And
24:12
the Supreme Court basically said, well, you
24:15
can't do that because you're not the debtor,
24:17
you're a non-deter. So that's
24:19
like a stretch too far for a
24:21
bankruptcy court. And I can
24:23
kind of see why they said that,
24:25
but if they don't have that immunity,
24:28
then they have no incentive to put
24:30
any money at all into the fund.
24:32
And this is why the vast majority
24:34
of opioid victims
24:38
were in favor of the settlement and wanted
24:40
to give the settlers that immunity. I
24:43
guess the broader thing I was thinking about last
24:45
night is just like, and everyone
24:47
should go read this Melissa Jacobi op-ed,
24:50
but the bankruptcy system, the bankruptcy courts,
24:52
this is not a place for the opioid
24:55
litigation really to wind up. And maybe Felix,
24:57
you'll disagree with me because Purdue
24:59
was never going to have all the money to pay
25:02
back all these victims. I mean, they
25:04
caused thousands of deaths, sparked a
25:07
nationwide drug crisis, I mean,
25:09
caused untold pain.
25:11
And for some reason in the
25:13
United States, we're set
25:15
up where companies and
25:17
wrongdoers get punished in
25:20
the courts. It doesn't seem like bankruptcy
25:23
court is the right place to
25:25
work out these issues that are
25:27
complicated and deal with human lives
25:29
and are different from like
25:32
the credit stack of the creditors.
25:34
Well, the thing is, it violates the
25:37
intent of the bankruptcy process itself, which
25:39
is to restructure companies so that they
25:41
can continue to survive. And Purdue
25:44
was not, I think, suffering
25:46
financially. It's not like they would have
25:48
gone into bankruptcy were it not for
25:52
all of these lawsuits. And they had
25:54
to argue that the potential liability was
25:56
enough to justify the bankruptcy.
25:59
And that's not... you know, the point of
26:01
bankruptcy law. Yeah, exactly. Okay, so I'm happy
26:03
to take the other side of this one,
26:05
because I think that exactly is the point
26:07
of bankruptcy law, right? The point
26:10
of bankruptcy is that when
26:12
your liabilities exceed your assets,
26:15
then the, you know,
26:17
not everyone with a claim on the company will
26:19
be able to be paid out on that claim.
26:22
And because the claims in
26:25
the US judicial system on
26:27
Purdue are basically unlimited, because
26:30
we have these, you know, juries who
26:32
will award hundreds of
26:34
millions of dollars to like individuals, and
26:36
then we have millions of individuals who
26:38
are affected. The
26:41
size of the claims against Purdue
26:43
is unlimited. And you know, just
26:46
mathematically speaking, if you have unlimited
26:48
claims against a company, the company
26:51
cannot pay all of those claims. So you
26:53
need some kind of a mechanism to
26:55
divvy up those claims fairly and to basically
26:58
say like it's not just a rush to
27:00
the courthouse, and whoever gets their claim in
27:02
first gets paid out in full, and then
27:04
everyone who's at the end and there's no
27:06
company left anymore gets nothing. That's
27:09
not fair. And so
27:11
the fair thing to do over
27:13
the course of the jurisprudence of
27:15
the past few decades has been
27:17
to use the bankruptcy courts to
27:19
create a much more equitable distribution
27:21
of claims. And I think
27:23
they've done a pretty good job. Well,
27:25
the thing is, though, you're talking about, you know,
27:28
there's a difference between liabilities that the company
27:30
currently has and then theoretical possible liabilities.
27:32
And this is where I think, you
27:35
know, the case is a
27:37
little bit less straightforward, because Purdue
27:40
was arguing that, you know, their theoretical
27:42
liabilities, not what they've already been sued
27:45
for, what they already owe, were
27:47
going to be so big that they should be
27:49
allowed to use bankruptcy to
27:51
shield them from liability. But
27:54
if that's, you know, if you only
27:56
need to have theoretical liabilities or possible
27:59
additional. abilities to qualify
28:01
for bankruptcy, I think that goes against the
28:04
intention of law too. Then
28:06
you wind up with companies just running to
28:08
the bankruptcy court instead of paying victims and
28:12
making things right. They are preemptively going
28:15
to the bankruptcy court to hide out,
28:18
basically, and save
28:20
their asses. You see, this
28:22
is something which I feel is
28:24
over-egged a little bit. Filing
28:27
for bankruptcy is not a
28:29
clever little Texas
28:32
two-step shuffle
28:34
that cunning companies do
28:37
to save money. Filing for
28:39
bankruptcy is a really
28:42
big step that no company particularly wants to
28:44
do and only does it when it feels
28:46
it has no other option.
28:48
The first thing you have to know about companies
28:52
filing for bankruptcy is that 99 times
28:54
out of 100, all
28:57
of the shareholders in that company are wiped out. They
28:59
all get zero. They are the
29:02
first people to lose all of their money. Companies
29:07
are run by their shareholders. The boards
29:09
of directors are elected by the shareholders.
29:11
The chief executive reports to the shareholders
29:13
and is tasked with maximizing shareholder value.
29:15
If this idea that the
29:19
company is just protecting itself and
29:21
being selfish by declaring bankruptcy and wiping
29:23
out its own shareholders, it's like, well,
29:26
that's a good indication that they're
29:28
taking this really seriously. Even
29:32
so, in looking at Purdue, what
29:34
do we make of the Sackler
29:36
family? They themselves have been filed
29:38
for bankruptcy. They thought they could
29:40
use the Purdue
29:42
bankruptcy to shield themselves from
29:45
liability. As far as I
29:48
know, and correct me if I'm wrong, and hold on to
29:51
quite a lot of money. Correct. The
29:53
Sackler family is a
29:56
super interesting case. This is a hard case. And
30:01
one of the reasons why the
30:03
court split in an unpredictable way,
30:06
and is also not a great
30:09
case to be setting a major precedent,
30:11
to be honest, if you're the Supreme
30:13
Court. What happened with the Sacklers is
30:15
that their shareholding in Purdue did go
30:17
to zero. Purdue did file for bankruptcy,
30:20
and the equity holders, the shareholders,
30:22
the Sacklers were zeroed out. But
30:25
before Purdue filed for
30:27
bankruptcy, it paid like
30:29
$11 billion of dividends
30:33
to the Sackler family. So now the Sackler
30:35
family is plenty rich. Even if
30:37
its shares in Purdue are worth zero,
30:39
they have $11 billion of cash sitting
30:41
in their bank account, right? And
30:44
so what the opioid
30:47
victims are quite reasonably saying is,
30:50
you wound up dividending out a whole
30:53
bunch of profits to the Sacklers when
30:55
in fact, that money
30:57
rightfully belonged to us because we are victims
30:59
and we have more claim on that money
31:01
than the Sacklers do. So they want to
31:03
be able to sue the Sacklers for a
31:05
bunch of that $11 billion. And
31:10
for that reason, you're absolutely right. The Sacklers
31:12
were like, well, how about we basically give
31:15
you back half of the money, or
31:17
give back $6 billion. And
31:21
you can use that as
31:23
the vast majority of the pool of money that
31:25
would then be used to pay out. But in
31:28
return, you give us the immunity and allow us
31:30
to sit on the other $5 billion and be
31:33
dynastically wealthy for the rest of our lives. And
31:35
you can see how that leaves a bad taste
31:37
in the mouth of a bunch of people. But
31:40
yeah, the alternative is that the
31:42
Sacklers put in nothing. They
31:45
open themselves up to future
31:47
litigation. But so far, they
31:50
haven't lost a case as far as I know. Like
31:53
so far, no one has found the
31:55
Sacklers personally liable for any opioid
31:58
victims. I might be wrong about that. But
32:01
even if they have, they have
32:03
more money than the victims do. It's hard
32:05
to create a class action against them. I'm
32:07
sure the sacraments would love to just put
32:09
this behind them at a cost
32:12
of $6 billion, but they certainly
32:14
don't want to live
32:16
in a world where they pay $6 billion into
32:19
a big settlement fund and also are
32:21
liable for the rest of their lives.
32:23
There's no reason for them to do
32:26
that. Well, now that's the world they
32:28
are potentially faced with. Now they're open
32:30
to lawsuits. Yeah. So now they're open
32:32
to lawsuits, but they have $11 billion
32:35
to fight those lawsuits. Well,
32:38
another factor is that a lot
32:40
of the plaintiffs are actually governments
32:42
that are suing Purdue. So they
32:44
object on the basis that that's
32:46
different from an individual suing Purdue,
32:49
where they don't believe that the Sackler's
32:51
then should be shielded from liability if
32:54
the plaintiff is the government. So the
32:56
states are also, several of
32:58
the states are suing Purdue. But
33:00
no, as I understood it,
33:03
the states were overwhelmingly on the
33:05
side of the plaintiffs here
33:07
and it was the states who wanted this
33:09
settlement. Yeah, they were part of it. And
33:12
the Supreme Court basically went along to the states and
33:14
all of those 48 attorney generals or
33:16
whatever it is and said, well, we know you
33:19
want this, but fuck off. You could kind of
33:21
see both sides of it, why you would want
33:23
it to happen and for victims to get some
33:25
money and to put this in
33:27
the rear view. And at least like we have
33:29
a concrete agreement, half the Sackler's
33:32
money, et cetera. And then you
33:34
could see it from the other side where
33:36
it doesn't seem fair that this family gets
33:38
to hang on and be dynastically wealthy.
33:41
And there are these victims that haven't
33:43
come forward yet. They've
33:45
done so much harm. It doesn't seem fair. The
33:48
victims who haven't come forward yet are also
33:50
covered in this settlement. Not all of the
33:52
$6 billion gets paid out
33:54
to existing claimants. There is money left over
33:56
for future claim. But if you wonder if
33:58
it's like the same. thing with the asbestos
34:01
where the fund runs out of money. By
34:03
definition, the fund will run out of money. We
34:05
know there isn't enough money to go around. That
34:08
is why there's a bankruptcy case in the first
34:10
place. If it doesn't run out
34:12
of money, then that's stupid because you just have money sitting
34:14
in a fund in perpetuity. More of that sweet, sweet, Sackler
34:16
money. But can
34:18
we at least agree that this is a
34:21
gnarly enough case, and a
34:23
weirdly unique enough case, that it's a
34:25
bad case to use to set a
34:27
broad precedent about the power of bankruptcy
34:29
courts? I think bankruptcy courts in general
34:32
have shown that they are quite
34:34
wise when it comes to divvying
34:37
up a set of assets.
34:39
And they've done a quite good job of
34:41
it. And what the Supreme Court has done
34:43
here is basically tied one hand behind their
34:45
backs and made it much harder for them
34:48
to do their jobs. This
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notch, but small. How can
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finance and AI, and the possibilities
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can help your finance team analyze
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massive amounts of financial data faster.
40:00
there is this very sort of top heavy stock
40:02
market that we have right now. And I don't
40:04
think there's a consensus on whether that's good or
40:06
bad. Emily thinks it's bad, right? I
40:08
mean, it just in a gut
40:10
at a gut level, I feel yes,
40:12
that it might be bad, in part
40:14
because so many fewer companies
40:17
go public now, it seems
40:19
like maybe just
40:21
like the political sector, the
40:23
stock market is stagnant, dominated
40:25
by these big elephants, and
40:27
there's no young babies
40:30
coming in to grow. And that
40:32
might not be good for like
40:34
growth and dynamism. Except,
40:37
I feel like Nvidia is a really good count, for
40:39
example, to that. It grew into an elephant.
40:43
And three, four years ago, it was
40:45
not an elephant. I also think that
40:47
in the market, sometimes we use potential
40:49
growth by how much these companies
40:52
are really putting into R&D or cutting
40:54
edge technologies. And I think the AI
40:56
hype is part of what's driving it.
40:59
It sort of makes a large company
41:01
like Microsoft seem like it
41:03
has the dynamics of a smaller
41:05
startup. Yeah, in AI
41:07
in particular, the amount
41:09
of growth, the
41:12
capital cost of investing in AI is
41:14
absolutely enormous, which is why when Elon
41:16
Musk starts up his own in-house AI
41:20
company, he raises $6 billion for it,
41:22
because that's how much it costs to
41:24
start up an AI company that
41:27
actually goes to my point. Because it's like
41:29
usually when you have a new technology, you
41:32
have a lot of new startups and companies
41:34
and a lot of dynamism. I don't know
41:36
why I keep using that word dynamism of
41:38
the startups and the new companies and they
41:40
go public and it's like, we, it's a
41:42
whole new thing. It's very exciting. There's all
41:45
kinds of growth. But with AI, it's just
41:47
like these big honking elephant
41:49
companies. Yeah, they're doing something new
41:51
and it feels fresh, but it's
41:53
still like the old guard just
41:56
gobbling up the startups and whatnot. Who's
42:00
the avatar of AI? It's Sam
42:02
Altman who has this startup called
42:04
OpenAI. It's heavily
42:06
backed by this old company called
42:09
Microsoft. So it is a startup,
42:11
but it's not like the kind
42:13
of startup that we once saw
42:15
back in the 90s. That being developed
42:18
in a garage somewhere. I
42:20
can see the concern, but
42:22
broadly speaking, I think that
42:25
I'm quite sanguine about the rise in
42:27
concentration in the stock market for a
42:30
couple of reasons. The first
42:32
is that in
42:34
video to one side, all of these other companies
42:36
that are being sort of rerated
42:39
and adding trillions of dollars to their market
42:41
cap on the basis of AI are not
42:44
adding that market cap because AI
42:47
has made them more profitable. They're adding
42:49
that market cap because something's
42:51
on something, AI hype something. And
42:54
they're spending a lot of money
42:56
on AI and all of the
42:58
money that they're spending is going
43:00
to help companies broadly. It's going
43:03
to improve productivity broadly
43:05
if it works and the
43:07
consensus in the stock
43:09
market seems to be that it will work. I
43:13
just don't believe that these
43:15
big companies like Apple
43:18
and Amazon and Google
43:20
and Microsoft have the
43:22
ability to really collect rents on
43:24
AI to the degree that they
43:26
wind up getting most of the
43:29
benefit from it. If
43:31
you think of the benefit
43:34
that corporate America, say, got
43:36
from Microsoft Windows
43:38
or Microsoft Office, that's three,
43:41
four, five orders of magnitude greater
43:43
than the amount
43:46
that Microsoft could charge for
43:48
those products. AI is similar.
43:52
If this works, then sure, they
43:54
will get some profits from it,
43:57
but corporate America broadly
44:00
will see the
44:02
benefits. This is
44:04
why I think that we're just
44:06
in stage one here of
44:08
the stock market AI boom, which is
44:11
the tech stocks get the first lift.
44:13
Then if and when AI turns
44:16
out to be something really real, then
44:19
it starts lifting up everyone else and
44:21
everyone else becomes more productive and everyone
44:23
else's stocks will rise. We
44:27
just started seeing that with Apple.
44:30
Apple is not really an AI company, but
44:33
it announced a couple of weeks ago that it was going
44:35
to start putting AI stuff into its iPhones.
44:38
It got a $300 billion boost in the
44:40
stock market as a result. Obviously
44:44
Apple will be one of the first companies to
44:46
do it because it's a tech company, but eventually
44:48
Nike will do it and Walmart will do it.
44:52
Target just came out and said, we're going to AI
44:54
this and AI that. For
44:56
the time being, it's hard to separate
44:58
the hype, but eventually when it starts
45:00
showing up in the bottom line, then
45:03
the concentration of the stock
45:05
market will decline because everyone else will
45:07
go up, assuming that
45:09
this AI hype actually turns out to
45:11
be based in reality. I
45:14
guess on the flip side of your Felix
45:16
optimism is if it is in fact just
45:18
hype, then the bottom falls
45:21
out and these
45:24
companies lead the
45:26
stock market down. Correct.
45:28
If the AI bubble bursts and it
45:30
turns out to be a nothing burger,
45:33
then yeah, Microsoft
45:36
goes down in value, OpenAI goes
45:38
down in value, Nvidia goes down
45:40
in value, and you get the
45:43
mega caps will go from being worth $3
45:45
trillion to being worth $1 trillion. That
45:49
is fine. That
45:52
is the kind of losses that capitalism
45:54
is good at taking. Those
45:57
are high risk investments. This
46:00
is a really good example. Just
46:02
this week, just over the past seven days
46:04
or so, Nvidia lost like $300 or
46:06
$400 billion of
46:09
market cap. And it's
46:11
a volatile stock. This happens.
46:14
It's no big deal. But that's the whole point.
46:16
It's no big deal. And as it was losing
46:18
all of that valuation, the stock market was going
46:20
up. It didn't actually seem to visibly hurt the
46:22
stock market at all. I
46:24
guess when I hear the word concentration
46:26
company, corporate concentration, I am newly
46:30
trained courtesy of all
46:32
the people and good thinkers on
46:34
antitrust now to think about all
46:36
the ways in which corporate concentration
46:38
sector concentration is damaging to the
46:40
economy. But this is a
46:42
reminder once again that the stock market is
46:44
not the economy. And I don't know if
46:46
I agree with you for sure. Maybe
46:49
concentration isn't a bad
46:51
thing in this case. Because it's
46:53
really just concentration of market
46:55
cap rather than concentration of
46:57
profits or concentration of employees.
47:00
It's not like they're dominating the
47:02
economy. They're just well dominating the
47:04
market. Yes. Right. And
47:07
like you said, it could once everyone else catches up,
47:09
it's just like they have a head start. And then
47:11
once everyone else gets on that ground too, then it
47:14
maybe evaporates. A rising stonk lifts
47:16
all boats. Should we have a
47:18
numbers round? Let's do it. Why not?
47:21
Let's do it. Elizabeth, you have a number? I do.
47:24
My number is 29 and that's percent. That's
47:26
the percentage of the population
47:28
that has something called money
47:31
dysmorphia where you become irrationally
47:33
terrified of financial insecurity or
47:35
you think you're far
47:37
more insecure than you are. And
47:40
that number is the highest for Gen Zers,
47:42
43% of whom have money dysmorphia. And
47:47
the older generations have far less of it.
47:50
25% of Gen Xers have it. 14%
47:52
of people, 59 and over have it. I
47:55
am not going to ask how they're
47:58
measuring it, but this so totally jibes
48:00
with a... million surveys that I've been
48:02
receiving over the past few weeks, showing
48:05
like different attitudes to money.
48:07
Gen Z overwhelmingly comes
48:09
across as like the most financially sophisticated
48:11
generation in the history of the world.
48:13
Like, and you can call it this
48:15
Morphia, but like if you're a financial
48:17
services company that manifests
48:20
as sophistication, weirdly, like it
48:22
manifests as a high savings
48:24
rate, a high propensity to
48:26
hire a financial advisor, a
48:29
relatively high confidence that you're going to have a
48:31
safe retirement, a relatively high level
48:34
of financial literacy, and so on and
48:36
so forth. All of these things, Gen
48:38
Z is massively outperforming both the Gen
48:40
Xs and the Millennials. And
48:42
maybe it's because they're driven by this
48:45
sort of deep seated insecurity and fear,
48:47
but like, yeah, maybe
48:49
it rhymes. Yeah,
48:51
definitely deep seated insecurity and fear. And
48:54
there's not that thing of when it,
48:57
we're all Gen X here, right? Like
48:59
when I was growing up, like making
49:01
money was like, like
49:03
you were going to be an artist, like, you
49:06
know, you weren't going to sell out, like, no
49:09
one talks about stuff like that anymore. It's like,
49:11
God bless you, if you could sell out, like
49:13
Gen Z is just like waiting to sell out.
49:15
They want to make money. There's no ethic
49:18
or ethos of like living for
49:20
art or anything like that. I live
49:22
in Manhattan and I'm surrounded by like
49:24
Gen Z investment bankers and it's mildly
49:27
depressing. Because you're Gen X and you
49:29
refuse to sell out. Well,
49:36
I'm Gen X and I feel a
49:38
little bit guilty when I sell out. Let's put it that
49:40
way. My number
49:42
is 7,500, which
49:45
is the number of dollars that
49:48
Ferrari owners have
49:50
the option of paying to Ferrari
49:52
every year just as a subscription.
49:55
So if you buy
49:57
a Ferrari and then you pay Ferrari
49:59
an extra $7,500 a year, then Ferrari will replace
50:01
your battery in your car after eight years and then
50:09
after 16 years. If your
50:11
battery runs down or
50:13
needs replacement before that, then they'll replace it before
50:16
that. It's basically this thing
50:18
that Ferrari has of addressing the
50:20
big worry that people have about
50:22
EVs, which is like what happens
50:24
when the battery runs out. There's
50:27
a certain number of recharges, it stops being
50:29
as powerful anymore. I think they're supposed to
50:32
last 12 years. If
50:34
you have a Tesla, it's going to die at some
50:36
point. How long do people hold onto
50:38
their Ferraris? No, but that's the whole point. If
50:41
you have a 50-year-old Ferrari, that Ferrari is
50:43
probably worth $20 million now. The
50:45
idea is that these things are assets and
50:47
people buy them partly because they expect them
50:50
to rise in value over many decades. If
50:53
you have a 50-year-old EV Ferrari that the battery
50:55
died 35 years ago, then that is worthless.
51:01
It makes sense to pay them money to replace
51:04
the battery. Great income stream
51:06
for the company. It's a nice, reliable income
51:08
stream for the company. Exactly. Emily,
51:10
what's your number? My number is 2.7. That's
51:14
hours. That is the
51:16
amount of time Americans age
51:18
15 and overspend watching television
51:21
every day. Is that
51:23
an all-time low? Well,
51:25
I'm not sure if it's an all-time low. It's
51:28
about half the time Americans spend on leisure, half
51:30
leisure time per day. And
51:32
actually, yes, people are less
51:34
likely now, the Labor Department said in
51:36
their American Time Use Survey release, they're
51:39
less likely to spend time
51:41
watching TV now on an average day
51:44
than they were 10 years ago. But it's not
51:46
a huge difference. It was 79% 10 years ago and now it's 74%. But
51:50
10 years ago, they were probably watching like five hours a
51:53
day and now it's 2.9 hours a day.
51:55
It's just like, they're still watching, they're just watching the lights.
51:58
Yeah, but it's not like they're going
52:00
to... Video games, things like that. It's not,
52:02
I wouldn't get to. They're still looking at
52:04
screens. It's just different screens. Different screens. Yeah.
52:07
I hope you guys are not looking
52:09
at screens right now. This is the
52:11
wonders of podcasts, is you get to
52:14
look out at nature or the
52:16
road ahead or something that isn't a screen.
52:19
But even if you are, thank you for
52:21
listening. Stay tuned if you're a Slate Plus
52:23
subscriber because we're gonna talk about potatoes and
52:25
you know you wanna learn about potatoes. Otherwise,
52:27
thanks to Jared Downing and Chena
52:29
Roth for producing and we'll be
52:31
back next week with more Slate
52:34
money. ["Sleet Money"]
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