ANT, Man

0:09Hello and welcome to Slate Money, your guide to the business and finance news of the week. Oh my God, what a week. I'm Felix Salmon of Bloomberg. I'm here with Elizabeth Spiers of New York Times and Emily Peck of Axios.

0:25Felix Salmon: Hello, hello. We have so many things we could have talked about. We certainly could have talked about Christine Lagarde stepping down from the ECB. We'll probably do that at some point. But we just don't have space because we have to talk about Ampropik, which filed to go public this week. We have to talk about Walgotchall, which is imploding. When was the last time a massive law firm did that? Probably the biggest and most important law firm this has ever happened to. This is even bigger than, like, Dewey LeBeouf. We are going to talk about the Binance hack,$6 billion. That's real money being stolen in crypto.

1:01We have a Slate Plus segment, which is obviously about the Cheesecake Factory, because when can you not talk about the Cheesecake Factory? It's jam-packed and full of cheesecake this week. All coming up on Slate Money.

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4:14It finally came out. It had been weirdly leaked, especially to the Wall Street Journal, but various other places had seen bits and pieces of it in the weeks coming up. But then the whole thing dropped and the sheer amount of money that Anthropik is making and the rate with which it is increasing its revenues, the revenues were up like, what was it, 1 ,600 % year on year in the latest quarter or half or something. This company is astonishing. All of the numbers are so high, including, by the way, the number of words in the risk factor section of the S1. But now, yeah, we get to buy Anthropic shares on the stock market under the ticker symbol ANT, which is a very interesting choice.

5:02Felix Salmon: Well, we don't get to yet, Felix. We will very soon. Yeah, it's interesting because the S1 came out, contained information much of was already known, and people seemed excited about it. And then the rest of the week has just been like a little bit devastating for AI. Like Anthropic, everyone was like, this is a test of the AI market and investor appetite for AI. And ever since that test came out, AI has been failing the test. Like Google saw a half trillion dollars in market cap evaporate this week because it's burning money to catch up. Well, I mean, I'm not sure that was a test of AI. I feel like the Google plunge was a function in large part of the fact that their AI search is doing such a good job of replacing its money-spinning regular search that it's making much less money on regular search.

5:56I'm not sure that AI isn't working. It's more a strategic thing. It could be an AI is working thing.

6:01Felix Salmon: They're cannibalizing their own revenue line. Yeah, well, AI is hurting their business more than it's helping their business at the moment. They're transitioning to it, but it's not. but it's diminishing their status as like a leading tech company. Whereas if you're a pure AI company like Anthropic, that's not going to be a problem. Yeah. I guess maybe then the frame is just like Anthropic rising, other tech companies falling. That's what happened this week, if you want to look at it that way.

6:26Elizabeth Spiers: One thing to consider though too is that Anthropic has a specific line of revenue. Google has multiple lines of revenue. So in a way, maybe longer term, Google's a little bit more hedged. And when you look at this one and how much Anthropic is scheduled to spend in already committed money, that's, I think, something that's giving some people pause because it implies that they're going to have to increase revenue at such an astounding rate. And we don't really yet know what the total demand is. We don't, but we do know that demand has been exceeding supply for as long as Anthropica has been around, basically.

7:03And so far, there's no sign of that stopping. At some point, it will. But one of the things that really jumped out at me is that Anthropic has, I think,$116 billion in cash. In the most recent quarter or half or something, I can never remember these things, it made over a billion dollars just in interest income. There's just the interest that its cash is throwing off.

7:26Felix Salmon: And it's not even trying that hard. The percentage return was like 1%. Yeah, the percentage return was just in like treasury bills. And then it's going to get another$100 billion in cash from the IPO proceeds. Like, yes, Elizabeth, you're absolutely right that it's going to spend even more than that on future compute. But its cash position is extremely strong. And it does look pretty well placed to remain the sort of dominant AI model company right now, which I think it is.

7:58Elizabeth Spiers: I agree with that. But just to put the numbers in perspective, they have$850 billion in commitments already, infrastructure commitments over the next 20 years. So$116 billion as an absolute number. It's a pretty good down payment for a 20-year obligation. Like, you know, what's your mortgage obligation over the next 20 years? Like, those numbers look really high if you add them all up. But we wind up making them.

8:21Felix Salmon: They have some concentration risks, like I think just five customers accounting for 25 % of their revenue seems sort of interesting, but maybe it's fine. But if you look at the number of customers like spending more than$100 ,000 a month on Claude, it's astonishing. It's true that like they have two customers who are just like massive. But that's just because those two customers are so absolutely massive. They kind of make the people spending a million dollars a year look small. But if you're a software company selling software for a million dollars a year, that's a good business to be in. I mean, they may be the, like you're saying, the dominant frontier AI model company.

9:01Felix Salmon: Like, there's a lot of talk right now about Anthropic and OpenAI facing competition from open source AI companies who can sell this computer, sell capabilities a lot cheaper. So a lot of people aren't going to pay the premium prices for Anthropic. They'll pay less for these other companies. but there needs to be one premium AI model company. And we know this because AI has created these huge cybersecurity risks and you need the best AI to combat the cybersecurity risks. Well, that's the argument from the AI companies. It's very mafia to me. It's like, you're basically like paying Anthropic for protection from Anthropic at this point.

9:40Felix Salmon: And that's like a really good business model, I think.

9:43Elizabeth Spiers: Well, they were also really smart in that they decided almost from the beginning that they were going to go after enterprise clients and that was going to be their top priority. So they didn't waste time on things like generative AI programs designed for consumers playing with images or things like that. They didn't license the Disney characters so that you can make yourself look like Mickey Mouse or whatever. And that turns out to have been pretty smart. And at the same time, I don't know about you guys, but just sort of anecdotally among my peer group, Everyone is just using clawed as a shorthand for AI in the way that they used to use ChatGPT.

10:21There has been a sort of change there.

10:23Felix Salmon: Yes. I heard people say they've been clawed, pilled, and things like that.

10:29Elizabeth Spiers: Well, it's also, it's less clunky to say that. It's like ChatGPT pilled. It's four syllables. I mean, people call ChatGPT chat. They do. But I have yet to find anyone say grok. I have a question for you, too. What was your favorite part of the risk disclosures? My favorite one was the fictional one that someone made up on the internet and was like, well, if you look at Rocco's Basilisk, like the risk is that we're all good, you know. Like the fact is when you have 94 pages of risk factors, it's mostly just the mother of all CYA exercises. It's not people saying these are all the things that really could go wrong and you should worry about them.

11:05It's just like we need to write all of these things down because like who knows what is going to happen to the world.

11:12Elizabeth Spiers: I liked that one of the potential impacts was impact on cognitive development for humanity. I mean, we're already seeing that.

11:19Felix Salmon: That should be in all the tech company disclosures, honestly. But that's the question, right? If there's a deleterious impact on human cognitive development, is that good or bad for anthropic stock? That's what I'm saying. It's good for them. They ruin things, and then you've got to pay them to fix the things. Yeah, once you get habituated into needing a crutch, that's really good for the crutch companies. Yeah, so wait, so Google had a bad week and Anthropic kind of had a good week. So is Anthropic just a new Google? I feel like Anthropic is looking good. And I mean, this is the first time that I've started to almost second guess the utility of index funds.

11:58Given how massive AI and the AI trade is to the stock market as a whole, and given that Anthropic and OpenAI between them are likely to be worth$4 trillion, and given that neither of them are public, and given that neither of them are going to be in the S &P 500 for quite some time, but they are going to be trading on the stock market and they are going to be driving the stock market. I feel like we are going to really reach the point very soon, certainly after OpenAI goes public, but probably even after Antropic goes public, where there has never been a bigger gap between what the stock market is doing and what the S &P 500 is doing.

12:45Felix Salmon: Maybe. I mean, tech stocks are doing very badly today as we record. So I'm feeling like, oh my gosh, is the whole house of AI trade cards tumbling down? Because it kind of feels like that a little bit.

12:57Elizabeth Spiers: I don't really think that's happening, at least not yet. The thing that has really jumped out to a lot of those of us certainly in the sort of philanthropy-ology space is the astonishing amount of wealth being created among Anthropik's employees. Anthropik has a much lower percentage of VC shareholders than most startups and a much higher percentage of employee shareholders than most startups. and it is creating like a thousand centimillionaires. Like you can be employee number 300 at Anthropic and still wind up with$100 million. All of the founders, there are seven founders and they're all going to be worth like something north of$20 billion.

13:41And the founders and a lot of the other employees because of the culture of Anthropic have all pledged to give 80 % of their wealth away to various charities, which being sort of San Francisco, anthropic types is likely to be some variation of trying to, I don't want to use the word effective altruism, but suddenly like we're going to care about the bang for the buck and we are going to, we're not just going to spend it on building an opera house somewhere.

14:10Elizabeth Spiers: There's also a, you know, the Ford Foundation bought a big chunk of FTX's anthropic holdings. So I think there are going to be some nonprofits who already have some of the stock and they're going to benefit directly from the IPO, not just people donating.

14:23Felix Salmon: Anthropic is a public benefit corporation, Felix. What does that mean ultimately? It's such a good question. So, like, we were talking last week, I think, about the Facebook Class C shares, which don't have any voting rights. Anthropic has the most convoluted governance structure you can possibly imagine. It has, like, a T share and an H share and an F share and an A share and a C share. Who knows? There's, like, a million different things. And there's like an overarching governing board with seven members on it, four members of them, just a kind of sort of self-perpetuating in there to represent humanity.

14:59And then another three are voted in by the founders. And it gets incredibly complicated. But the idea is that shareholders basically don't get a say. Shareholders don't, or common shareholders, if you buy stock, don't really get a say in the board structure or the governance of the company. And the company is being run for the benefit of humanity rather than for the benefit of shareholders, at least in terms of the governance structure. It's a very interesting structure. I think it's going to be very interesting to see how it works. The big question for me is the question that we already saw at OpenAI, where OpenAI had a similar governance structure where they had a board that was meant to be answerable to humanity rather than to shareholders.

15:46And then when the board actually tried to flex its muscles and do something about it by firing Sam Altman, basically the shareholders revolted and the shareholders didn't have any governance power, but they won anyway. and there is a very normal executive structure. I mean, not very normal, a relatively normal executive structure at Anthropic. It has a C-suite and it has a management structure. It's flatter than most, but it's still, you know where you are in the company. And the real question for me is how do the senior executives run the company and do they run the company in a meaningfully different way to how they would run the company if they had a board that was elected by shareholders.

16:30And what does the board do and what can the board do to really influence what the executives are doing? Right now, it's all kind of moot because the executives are all the founders who set up this system in the first place, so they're going to do whatever they want to do. But over the long term, it's kind of interesting to imagine a world where the board may or may not be able to steer anthropic in certain ways. I'm sorry, but we have a board

16:58Felix Salmon: that represents humanity is, come on.

17:00Elizabeth Spiers: I think of B Corp status as a kind of liability shield for companies that are interested in potentially doing things that don't immediately accrue value to shareholders. So the shareholders, if they're buying the stock, they understand that it's a PBC. They can't go after the company for making decisions that benefit the shareholders, but are also societally destructive because it's sort of built into the structure that the shareholders understand that they also have to weigh things like safety concerns. If what you're saying is that Anthropic doesn't face a risk of shareholder lawsuits saying, like, you should have done more for shareholders and less for the planet.

17:39Elizabeth Spiers: I think it's mitigating. Yes, that's true. But I think those lawsuits are very rare and very rarely win anything anyway. I feel like that's not a major, that's not a thing that happens very often.

17:51Felix Salmon: It's just so where we have a board that has humanity's interests at heart is it's giving monarchy to me. It's like we have a king that cares about everyone and they will do what is best for the people. And we invented new systems to sort of do better than that, where people had a say. And in the corporate world, we invented like shareholders who had a say in how things work. And now we're we have a company that's like, well, shareholders don't have a say, but we have these these group of rich people and smarty pants elites who will look out for humanity's best interest. It just feels like what we're like reinventing a wheel that was like kind of OK before.

18:35Elizabeth Spiers: That's kind of the rhetoric of the tech industry in general, though. All of them, whether they're PBCs or not, will make an argument that they exist to make the world better and that they're saving the world. And I think that sort of distinguishes the tech industry from, say, the finance industry. I've never met a private equity executive who suggested that they were in the industry because they thought that the future of humanity was riding on it. But that kind of thing. Have you met Ken Melman?

19:01Felix Salmon: it's like we want to do what's best for humanity but we're not going to pay taxes and we're going to fight tooth and nail against this tax to pay health care costs for this the residents of the state who can't afford emily i'm surprised to hear this coming from you i have to say because oh no because there has been a lot of wailing and gnashing of teeth and hand wringing about how shareholders are really not representative of stakeholders more broadly and that shareholder supremacy has caused a lot of damage and it ultimately ended up with a sort of Jack Welch era at GE and that there's got to be a better way.

19:37And we have seen other structures that do seem to represent stakeholders in a better way. For instance, the German system where unions have a stake on the board and that kind of thing.

19:50Felix Salmon: So put some workers on the board who cares about humanity. Right, okay, but they do. Okay, so actually this is interesting. The employees of Anthropic actually do have a vote and do have a say in terms of how the board is structured. They don't have a big say, but they have more of a say than the shareholders. That is actually built in. And I am actually really okay with one sort of weirdly outlier company trying something new and different and interesting and seeing how it works because it might work. And I think just saying, oh, well, what was wrong with the shareholder system? That seemed to work.

20:28It's like, well, no, it didn't.

20:30Felix Salmon: I didn't quite say what was wrong with the shareholder system. I'm saying it's like they're moving. The shareholder system obviously had imperfections and problems. And pursuing the interests of shareholders above everything else was always problematic. That said, the shareholder system is what sort of passes for democracy in public corporations, right? We've seen companies like Facebook or SpaceX that don't give shareholders a say are actually even more problematic. So why move away from that? If you're going to do something new, why not incorporate the shareholder voice as one of many voices?

21:11In Silicon Valley and in media and in various other places with dual share classes, the alternative to shareholder primacy has been founder primacy. where you give one individual billionaire, whether it's Mark Zuckerberg or Elon Musk or Rupert Murdoch or whoever, like outsized control over the company. And that one man can outvote all of the shareholders combined. And is that an improvement on shareholder democracy? No, I don't think it is. There was a time for a minute there where a bunch of VCs would preach that gospel and say, well, yes, this is what we want. But like, if you're saying that that isn't an improvement, I would agree with you.

21:59That is interestingly not what Anthropic is doing. Anthropic is doing something interestingly different from that. And I think it is worth giving them credit for coming up with something interestingly different from that. Plus, like shareholders, as we know, are just, you know, in this world where, you know, There are bondholders. Bondholders don't get a vote, but there are, you know, customers. Customers don't get a vote. There are, and especially in AI where there are negative or positive externalities sort of rippling around among even faster than they do with most other companies, the number of people with a stake in this in one form or another really is much greater than the number of people with a stake in a widget manufacturer.

22:42And so I kind of understand where they're coming from here, and I don't really see the harm. The alternative realistically was Dario Amade winds up controlling the company through a dual class shareholder structure. And like that would not be better.

22:57Elizabeth Spiers: I don't think anybody is arguing whether it would be better when they express skepticism that maybe this is not going to be as effective as they want it to be. The whole difference between Anthropic and OpenAI is that they're more responsible, more concerned with safety, and then they don't provide the sort of guardrails and safety considerations that they keep talking about. And they keep plowing forward because they have to spend money at this astonishing rate in order to make it back. Those are competing interests in some ways. OpenAI is not that different. OpenAI basically has not exactly the same structure, but it also has a non-profit top board that is technically in charge of the entire company that is not answerable to shareholders.

23:42That is different from most companies, and that is something that they have in common, and I think that is an interesting structure. And whether or not it turns out to make a meaningful difference is a hypothetical we'll never really be able to or a counterfactual we'll never really be able to answer. But I don't see it being worse than a classic Tesla style like one shareholder, one vote.

24:09Felix Salmon: That's fair enough. I don't disagree with what you're saying. I just am perhaps more skeptical or something. I don't know what's going on with me.

24:17Elizabeth Spiers: I think you can say that it's a better alternative and still say, well, but there's reasons to be skeptical.

24:23Felix Salmon: Yes, there are reasons to be skeptical. I'll ask Claude to list them for me.

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28:01Can we talk about corporate governance here for a minute? Didn't we just do that? Well, I want to talk about a different type of corporate governance, which is partnerships.

28:11Felix Salmon: Oh, yes, yes. One of the whole reasons why people set up all of these structures of CEOs being accountable to boards and boards being accountable to shareholders and all of these levels of accountability is because you have this principal agent problem in corporations. And one way to solve the principal agent problem is to not have it and to have the principals be the agents. And that is called a partnership. And so in a partnership, when you don't have that tension, there is like a blissfully almost Swiss democracy where everything just works beautifully. And if everyone's doing well, everyone's doing well.

28:49And that's why a partnership like Wild Gottschall and Manjis would never just simply implode overnight because they're, wait, hang on a sec. Like, Wild Got Shul and Manjis is a partnership that just imploded overnight. It is one of the biggest law firms in the world. It is highly respected. And like all major law firms, it's a partnership. And then the partners just, like, basically all woke up one morning and said, fuck this, we're a gamer soldiers, and ran off and joined other people. And now there's no Wild Got Shul and Manjis anymore. Holy shit.

29:18Felix Salmon: I started reading about this in the prep and read the first story. And I was like, oh, I see. It was like a bank run, but lawyers. I was like, I'm so clever. I read like then three more stories and they all were like, it was like a bank run with lawyers. Basically, a law firm is just a collection of brains, lawyer brains, all together making the money. There's not much else going on there. And once the lawyers start leaving to go to other firms to make even more money in this new world of where law firms are run like businesses and partners are paid insane amounts of money based on their clients or whatever.

29:53Felix Salmon: Once one partner leaves and takes his business or her business with him or her, then the other partner's like, maybe I should leave too. The next thing you know, you've got a bank run. You've got a lawyer run. They're all out of there. And the whole thing collapses. It's kind of wild. One of the cliches is that if your assets just take the elevator out of the building and don't come back, then there's nothing left.

30:16Elizabeth Spiers: Well, there's another thing about the sort of culture of Wile that differs from some of the larger, bigger law firms now, which is that a lot of the bigger firms have been growing just because they now sort of rely on a star system where they go out and they find the biggest rainmakers at the other companies and raid them. And because historically, law firms don't have non-competes and the things that, for example, if you were working in investment banking might prevent your talent from running out the door. They were more sort of the old patrician model where it's about loyalty and you advance based on seniority in the firm.

30:50Elizabeth Spiers: But if you're Weil and your top 10 rainmakers just walk out the door because they got a better package from some other law firm, then even if you're profitable, that's a downhill spiral for you. I think Weil is exceptional in its pretty sort of mercenary culture. I was talking to a lawyer friend of mine about this, and the image that came to mind was Dick Fold at Lehman Brothers. It's very hard charging. It's very mercenary. It's very like, I want the bag. And no one was very surprised that a big wild rainmaker would move somewhere else if he was offered even more money. That would actually be surprising if it was a big rainmaker at somewhere like Cravath or Wachtel.

31:39Like the cultures are different in different law firms. And I think that the more sort of mercenary the culture is, the more prone you are to this kind of thing happening. And I do think that some law firms do have more sort of institutional loyalty to the firm among senior partners than Wilde did.

31:58Elizabeth Spiers: We also should mention the two things that contributed to it. Besides that, there was a failed merger with Wilkie Farr, and there was no clear plan for succession. And I think both of those things. Well, there was a clear plan for succession, but then she decided she didn't want to take over and she was going to go somewhere else. That's not really planned. But yeah, no. And then a couple of other things also happened. Number one, there was something of a tussle because there were two big things that Wild did. One was M &A, and the other one was private equity, basically, bankruptcy. And there was a bit of a fight about which one would have supremacy.

32:33And then also just in terms of what you're saying about the business growing, Weil made its name and made its fortune as a bankruptcy shop. And I don't know if you've noticed, but bankruptcy has not been the most lucrative business to be in in recent years. You know, like it's just, you know, we've been in this glorious period of number go up. and bankruptcy has not been the hotness for a while.

32:59Felix Salmon: But they're a very profitable firm. I think everything I read, they're in the top 20 most profitable. Yeah, yeah, they're still making plenty of money. And profits per partner were like, what,$5 million or something. They were doing just fine. But they weren't growing. Like profits per partner went up 4 % last year and everyone else it went up by 15 % or something. So the partner's like, why can't I go somewhere else? I guess they don't do like the kind of like business restructuring that like your Kirkland and Ellis, which I think is like, if not the top firm right now, one of the top firms does more aggressive sort of business stuff is my understanding of my high level analysis than Weil has done.

33:38Felix Salmon: Like they didn't grow the business the way they maybe should have, especially even coming out of the 08 crisis because they did the Lehman bankruptcy, right? And they made like a ton of money from that. But then the knock was like, they didn't really do much with that money. They to grow it.

33:52Elizabeth Spiers: I think maybe Matt Levine pointed this out. The comp packages were structured differently. So if Kirkland wanted to rate somebody from Weil, what they would do is they'd have one of the bigger rainmakers get, let's say, a percentage of whatever they're bringing in, and they just sort of doubled the percentage. So if you were taking a 15 % cut off of$50 million, Kirkland would come in and say, we'll give you 30. And there was just sort of, the numbers were so big that there wasn't any big incentive for the Weil partners to stay. One of the interesting things here is that Weil collapsed arguably because rather than despite the fact that it didn't have any debt.

34:37Normally, when you have a company collapse, it's because it's massively overleveraged and it has too much debt. All of these other big law firms, well, not all of them, a lot of these other big law firms that are making these big packages can afford to make these big packages because they're just borrowing the money and they're saying like, yeah, you want the money here, we'll borrow the money and shove it in your pocket. That seems more dangerous than the wild model of you eat what you kill. And if we make money, we will share it around. And that's the end of it. But yeah, while one of the reasons it's not going into bankruptcy is because it has very little in the way of liabilities.

35:10But the reason it has very little in the way of liabilities is that it wasn't willing to borrow money to guarantee big payouts to big brain makers.

35:18Felix Salmon: Maybe being a firm that does bankruptcies made it more reluctant to do stuff like that. It just like knows how badly it could go or something. Like they could stay in business and just be a smaller firm, right?

35:31Elizabeth Spiers: They didn't form these kind of niche specialties that a lot of smaller firms have used to stay afloat. They kind of stayed in bankruptcy. It's really hard to shrink. It's easy to be a small firm, but it's really hard to be a big firm that then becomes a small firm. They have 380 ,000 square feet in the GM building above the Apple store in New York. That is extremely expensive real estate. And unless you have a bunch of partners bringing in a bunch of money, how are you going to pay for that? They have thousands of associates and interns and support staff and all of the rest of them, all of whom need to be paid for.

36:04And in the way that all law firms work, there's really just a handful of big name partners who bring in the big contracts that end up paying for all of that stuff. And if those partners go, then you just don't have the revenue to support anything, really.

36:20Felix Salmon: You know what I thought also was striking is like we're in the AI era and AI is disrupting law firms, the billable hour, da-da-da-da-da. It's why every white collar worker in the world in America is nervous about AI is going to take my job, whatever. But like at that, as this story shows, elite brains still are very important. Like, AI cannot do, cannot be wild gotcha. Like, they didn't lose their top private equity and bankruptcy partners and say, like, we'll put Claude on the case. Like, no, AI cannot do that. Revenue at these law firms is going up, not down. AI, like, everyone thinks that AI is going to disrupt big law, but it hasn't done it yet.

37:01And of all of the possible, of all of the reasons why wild collapsed, AI disruption, I think a lot of people would be patting themselves on the back if it was. But it wasn't. It just simply wasn't.

37:11Felix Salmon: Yeah, I mean, companies do a good job disrupting themselves in the unquenchable thirst for profits that drives capitalism. That's what happened to big law. Like everyone got super greedy. Firms were like, we can make more money, more money, more money. We're not going to be collegial. Partners aren't going to stay here forever and be like buds and family together. We're going to jump ship if we see more money. That is the way it goes.

37:35Elizabeth Spiers: The kind of law that Claude can do or any LLM can do right now is really just sort of elementary stuff. When people have tried to use it in litigation, it will manufacture court cases that don't exist. You know, it can't really structure an argument, especially a novel argument. But even aside from that, when you look at what these rainmakers are hired for, why they're retained, it really is just a relationship building business. And Claude's not going to take your potential client out for a three martini lunch and get them comfortable with trusting the firm. Yeah. And the reason they're called rainmakers is because they bring in the liquidity, the rain, the money.

38:13Right. And Claude can't do that. Like, yeah, you can replace a first year associate with an LLM. But the first year associate has no revenue. The number of people who actually bring in revenue at a law firm is a tiny proportion of the total employee base. And they're the ones who matter. And they're the ones who get the$40 million contract.

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40:07Felix Salmon: 98 of the top 100 U.S. accounting firms trust Bill to handle BillPay processes. Why? Because our tools are built on over a trillion dollars of secure payments. We're not just moving money. We're powering financial workflows for half a million customers. That's a level of expertise you just can't fake. Ready to talk with an expert? Visit bill.com slash proven to get started and grab a$150 gift card as a thank you. Terms and conditions apply. See offer page for details. We should move on and talk about Binance, the largest crypto hack in the history of crypto. Now, stipulated, this is in dollar terms, not in Bitcoin terms.

40:53I think if you measure in like the number of Bitcoins stolen, then the Mt. Gox hack a million years ago was still much bigger. But in terms of dollars, a bunch of North Korean hackers wound up hacking into Binance, which is overwhelmingly the biggest crypto company on the planet. And there's not even anyone who's close second. and managed to steal$6.3 billion or thereabouts, of which, thanks to AI and the speed with which counterattacks happened, about half, about$3 billion was immediately frozen and they assume they're going to wind up being able to get back. But that was still over$3 billion that wound up getting stolen from the gold standard, for better or for worse, of global crypto companies, the place that the global crypto community basically trusted more than anywhere else.

41:47This seems bad if you're a crypto person.

41:50Elizabeth Spiers: Also, the hack took less than 20 minutes to get the majority of the crypto out.

41:55Felix Salmon: Did you guys know it's Black October right now in the cybersecurity world? Everyone who works on cybersecurity, they're not sleeping. They're barely eating. I read this in Axios. Barely had we recovered from the PHP hack when we suddenly had to deal with the Binance hack. There was the Binance hack. There was also a hack of the world's biggest fan fiction site. I think it's called AO3. And that site says it's going to be down for the next two to four weeks to deal with the hack. I mean, things are, it's rough out there. Like AI is having an impact on cybersecurity. And I'd be interested to see.

42:28Felix Salmon: The details are kind of murky on this Binance hack, as far as I could tell when we're talking on Friday morning. But I think, is my understanding that Binance has frozen activity on its platform until Monday? to deal with this? Until Sunday. Until Sunday. They've frozen withdrawals. You can still deposit. You can still move things around between your Binance wallets or whatnot. You just can't take money out of Binance until Sunday. So things could get worse after that because it could restart allowing withdrawals and people could be freaked out and like run on Binance. That's like a risk that's ahead of us.

43:03Felix Salmon: Am I correct? That's a risk if there was anywhere that they could realistically run to. when FTX ran into trouble. Everyone was like, I'm going to take all my money and move it to Binance. It's just not clear where you move your money from. We just had, not so long ago, we had a hack of like ledger cold storage keys. Those are like air-gapped keys that are meant to be the most secure form of storing crypto on the planet. And they got hacked. One of the weird things about crypto is that there just doesn't seem to be a safe way of storing crypto ever anywhere. I was trying to, if this happened to a bank, if someone stole$6 billion from JP Morgan and JP Morgan was like, you can't take money out of the bank until Sunday night, that's unimaginable to me.

43:53Elizabeth Spiers: They're trying really hard to coordinate with other crypto companies to sort of make sure that doesn't happen as you make the market a little bit more confident that this is being remedied. The hackers had moved some of the crypto into other companies. Those companies are cooperating with Binance to try to get back. Oh, the frozen stuff. Yeah, the frozen stuff is going back to Binance.

44:14Felix Salmon: Weather and Circle and whatnot. The hackers tried to take the stablecoins, but they all have unique identifiers because it's crypto. And so the stablecoin companies were just like, nope, we're freezing those. You can't translate. You can't do anything. We're going to move them back to Binance. And so Binance is getting that. That's the$3 billion that it's getting back. The one thing they said from the get-go, and I totally believe them, is that if you're a customer of Binance itself, the company will make sure that you are made whole and whatever balance you have remains your balance if okay so there was this big heist the price of bitcoin has gone down so if you're made whole are you made whole at the new lower bitcoin price or the price yeah yeah if you if you had if you had 10 bitcoins and two of them were stolen you don't have eight bitcoins you still have 10 bitcoins two bitcoins went to north korea and binance will go out and buy or find in its own reserves or whatever the other two bitcoin that were stolen and put them in your account and be like you still have 10 bitcoins but the the value of those bitcoin has gone down because of the hype like you're still out money theoretically like if i have a hundred dollars stolen and my bank makes me whole and gives me back a hundred dollars i still have a hundred dollars but if i have a hundred dollars worth of bitcoin stolen and the whole thievery means my bitcoin is now worth $80, that still sucks.

45:32My favorite subplot of all of this is basically the way in which Binance has this billion dollar-ish fund that is precisely there in order to make people whole if and when there's some kind of a hack. And so that's a billion dollars that they know can be used to make people whole. The amount that they're out is about$3 billion just over. So Binance is going going to have to find another two point something billion dollars to make everyone whole and elon musk went on twitter and like trolled cz the founder of bitcoin basically saying you say you're going to make everyone whole that's what sam bankman freed said when ftx imploded and cc was like fuck you motherfucker and he was like no this is not the same thing i have plenty of money i can make people hold this is not a worry you know where i have money i have about a billion dollars of spacex stock lying around big from like from when i had shares in twitter back in the day so um i think maybe i might just sell all of my spacex stock in order to make the people how about that bitch oh billionaires

46:54Shall we have a numbers round? Why don't I start just because there was so much news this week with$17 billion that DoorDash is paying for Instacart? Seems like a lot, but it turns out that the burrito taxi business is a great business to be in.

47:14Felix Salmon: You shared a really good tweet in the Slate Money Slack, Felix. What did it say? It was so funny. Can we share it? Wait, let me call up the Slate Money Slack. Yeah, oh, I found it. Okay. Okay, you can read it. Yeah. DoorDash needs to be careful here. That$17 billion acquisition can easily become$33.25 billion after the delivery fee, platform fee taxes, and Dasher tip. That's all going to get more expensive now, right? These two companies have teamed up. These are like the fee companies extraordinaire. They're like, you buy$5 worth of bananas, but it costs you$30 kind of companies. and I can only imagine them teaming up means it's all going to get more expensive.

47:53I doubt they did it in order to make it cheaper, but maybe they will. Sometimes monopolies are just... We just have to look at their governance structure and see what the board wants. Maybe if the board is made up of people who want to run burrito taxis for the good of humanity, they would just close the whole bloody thing down because all it does is cause massive negative externalities in traffic. But Emily, what's your number?

48:19Felix Salmon: My number is 0.77%. That is the share of average household expenditures taken up by alcoholic beverages, 0.77%. It is a series low going back to 1985 when it was about double that, 1.3%. And this is because people drink less nowadays. I don't think it's because people spend less on alcohol because I read Felix Salmon in Bloomberg and he wrote about some like crazy expensive scotch or something. So yeah, maybe that's good news. Maybe it's bad news. It depends. I think it's the youth not drinking anymore.

48:53Elizabeth Spiers: The youth. The kids aren't drinking. It's the GLP ones. Our generation is propping up the booze industry. You're welcome. I am pretty sure that I am above average. I think my alcohol expenditure is above 0.77%. But you know, you're welcome, alcohol companies. Elizabeth, what's your number? My number is 511, and that's the number of jobs a 22-year-old biology major who graduated in May has applied to and not found a job. The last of which you had rejected for a job at Whole Foods after being interviewed by an AI spot named Sage. So I think a lot of the discourse around entry-level jobs and AI is that these jobs don't need to exist anymore because we have AI now.

49:39Elizabeth Spiers: But the bigger problem, I think, for recent grads is just that they can't get a human to interview them directly. Close to 90 % of companies, or this is a stat from the Times, are using AI in some part of the screening and especially for lower level jobs. So one frustration that a lot of people have reported is just that they'll work really hard on an application and they'll get a rejection two minutes later because it's just a robot doing it or they end up being interviewed by chatbots. chatbots, and there's no clear way for them to reach a human in any capacity without going through this AI screening.

50:16Elizabeth Spiers: But I've also seen this with people I know who are looking for jobs, and it's completely frustrating because you just end up sending resumes out into the void. And I have to imagine that if you're a recent college grad, this is your first experience of trying to get a job in the adult labor market. It must be incredibly frustrating.

50:35Felix Salmon: There was also one in the journal that was very similar. It was like, I applied to 2 ,000 jobs. It was a, I think he was a Princeton graduate or something. I feel like there should be a follow-up article where anyone who's featured in one of the stories about I applied to X number of jobs but didn't get a job stories, like we'd come back in six months and see if being in the article helped them actually land a job because I bet it does. Don't you think? I feel like if you have enough wherewithal to be able to get yourself the lead spot in the opening anecdote in the Times or the journal, yeah, you're going to wind up with a job somewhere.

51:09Felix Salmon: I feel hopeful for these kids. The kids are fine. Okay, on that note, I think that is it for the main show this week. We do have a Slate Plus segment on Emily's favorite restaurant. Emily is shaking her head. Emily, is it not your favorite restaurant? It's not my favorite restaurant. How could Cheesecake Factory not be your favorite restaurant? We will talk about this in the Slate Plus. But if you're not a Slate Plus subscriber, then, well, number one, go ahead and subscribe to Slate Plus. It's a great way of supporting Slate and independent journalism. Thank you for listening to this here free show.

51:47We appreciate you. We read all of your emails that you send to slatemoneyatslate.com. and many thanks above all to the one and only jasmine molly of seaplane armada for producing we will be back next week with more as ever on slate money

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