Di-SaaS-ter Market

0:10Emily Peck: Hello, and welcome to Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Bloomberg. I'm here with Elizabeth Spiers of The New York Times. Hello. I'm here with Emily Peck of Axios Markets.

0:25Felix Salmon: Hello, hello.

0:25Emily Peck: And we are going to talk about markets this week. We're going to talk about the SaaSpocalypse and the way that all of these software stocks are imploding. We are going to talk about the new CEO at Disney and what that means. And it's the Super Bowl this week. And there's people betting on Kaoshi and prediction markets. I'm going to talk about that and whether they're going to lose all their money. We have a Slate Plus segment on luxury gifting. It's all coming up on Slate Money.

1:07Emily Peck: All right, so Sasspocalypse. I feel like this is a terrible word. Can we all agree on that?

1:13Felix Salmon: Sass was always bad. Sasspocalypse is better?

1:17Emily Peck: Yeah, Sass was always bad. Sounds a little bit like Asspocalypse. And plus SaaS, it's S-A-A-S, but it's pronounced S-A-S-S. I don't know. The whole thing is just terrible.

1:27Felix Salmon: I like it.

1:28Emily Peck: Okay. Emily, as the person who likes it, before we get to the apocalypse bit, tell us what the SaaS bit is. What does SaaS stand for?

1:36Felix Salmon: Isn't it obvious? It's software as a service. this. It's like when your company buys some kind of software that manages your expenses or your days off or your payroll or your travel and you subscribe to the software, it is a service and a company behind the scenes is, you know, servicing the software. So it updates or whatever and you use it and your company pays for like 30 of these things. And it's kind of like a hellscape, honestly, for being truly honest about it. But that's what it is.

2:07Emily Peck: so everything is software as a service these days when i was you know in short pants as they say we used to install software on our computer and you'd install things like microsoft word and then you had microsoft word and it lived on your computer and it worked no one does that anymore if you want microsoft word now you need to pay microsoft every year some subscription fee and And this is true of, you know, all of the Adobe software. This is true of Slack. If you use Slack, this is true of basically every single piece of software that we use. We are recording this right now on a piece of software called Riverside.

2:44Emily Peck: It lives in the cloud. You can't buy it. You just pay on a sort of per license basis. And the stock market worked out many years ago that on a net present value basis, selling software on an annual basis was much more profitable than just selling it once. So everyone in the software business moved to this model, and the software valuations went up through the roof, and that's why Microsoft became a$3 trillion company and all of these other companies. And you see this a lot in what they call B2B enterprise, which is a phrase that makes my brain want to melt into a puddle of mush. But it's basically just software that you and I don't use, but that people in companies use.

3:28Emily Peck: And it turns out there are millions of people who work in companies who use this software and whose companies will pay large monthly or annual fees for the privilege of being able to use it. So, Elizabeth.

3:41Elizabeth Spiers: Yes.

3:42Emily Peck: These companies which were doing so well for so many years and made so much money for so many private equity companies. There's one called Tomo Bravo, which just like is insane. All they do is they make huge amounts of money by buying and selling SaaS companies. What has happened to these companies over the past week?

3:58Elizabeth Spiers: Well, they're sort of anticipating areas where agentic AI might replace software that they're paying for on a recurring basis. And so Anthropic, which is one of the big AI players, just released a series of plugins that really help with workflow. And that's really the first big thing that they've done that's targeted the B2B market directly or explicitly.

4:19Emily Peck: Okay, so you've just used a whole bunch of words there, like workflow and agentic and targeting.

4:26Elizabeth Spiers: Okay, so I'll back up.

4:27Emily Peck: Try that again, but make it because I'm a bearer of very little brain. Explain it in words I understand.

4:33Elizabeth Spiers: So everybody who listens to this podcast has probably used chat GPT or played at least with AIs that sort of respond to you. Agentic AIs are basically AIs that manage other AIs in order to usually do something work related. And that's really the future of what software looks like for businesses. So when Anthropic rolled out these new plugins, they basically foreshadow what maybe software development looks like for businesses way on down the road. When instead of having a whole team of software developers, you have one person kind of, you know, a handful of people managing a bunch of AI agents who are doing all the coding themselves and managing the project themselves.

5:13Emily Peck: I feel like this isn't really about software developers. I feel like this is about rank-and-file employees whose entire job these days is to sit in front of dashboards. You're right. Every single SaaS company is selling. The thing they sell, not every single one, but the vast majority of them, the thing they sell is a dashboard. And then a bunch of humans at various different companies around the world sit in front of these dashboards and look at their customers and their cash flows and their assets and their liabilities and all of this kind of stuff. and they use various services to stay on top of all of this stuff.

5:50Emily Peck: And I think that what's happening is that all of these licenses are sold on a sort of per-employee basis. If you have 10 ,000 employees who have one of these dashboards and you have to buy 10 ,000 licenses, and that's why the SaaS companies make so much money. And I think what the stock market is freaking out about is this idea that you don't need 10 ,000 employees to have this dashboard anymore. All you need is an AI agent. And you can buy like one license for an AI agent and they can do all of that work. And probably you can fire all of those people who are sitting looking at dashboards all day, or a lot of them anyway.

6:24Felix Salmon: It's so interesting looking back along the past like quarter century in the software world that this is like the most disruptable industry. One of the most disruptable industries because I'm old enough to remember when the internet was going to kill software because everyone no longer needed their CD-ROMs. But obviously, new companies were created. Some companies faded out. New technologies and interfaces were born. Then mobile came along. And I was reading yesterday when I was preparing for this, like Paul Graham wrote a post in 2009 or 2007. And the title was Microsoft is dead because mobile was here and no one would need Microsoft anymore.

7:08Felix Salmon: It's so lame. And Google was going to crush it, blah, blah, blah. But as you said earlier, Felix, we know what happened, which is the cloud, software as a service. Microsoft figured it out. Undoubtedly, these companies now will figure out new ways to monetize AI agents. Like, I find it hard to believe that a company is going to want to bring in-house all the stuff that these agents can do. At least they'll just be different ways of doing it. It might cause a lot of destruction of value and it might cause a lot of companies to go under. but I just have a feeling that like...

7:44Emily Peck: When you're talking about companies here, are you talking about the SaaS companies or are you talking about the enterprises that pay money to the SaaS companies?

7:50Felix Salmon: I'm talking about the SaaS companies. So before we came on, I was looking at some data from PitchBook and there's a lot of distress in the medium-sized software company world. A lot of these like SaaS companies, the kind that the private equity firms are invested in, they borrowed a lot of money really cheap and everyone thought the party would go on and the growth would be high. Now AI is here, rates are higher, and there's like a lot of trouble in that world. So I think to answer your question, I think it is the SaaS companies that we would be worrying about.

8:20Elizabeth Spiers: Well, long term, the bigger deal is that the entire model for how you deal with your intelligence and store it is just changing. And so the appeal of, you know, AI versus traditional SaaS companies, part of it is just that if you think about all the information that you have to manage within an enterprise and where it lives. In a lot of cases, it lives in software developed by these SaaS companies, and they're very high switching costs because all these companies have proprietary systems that treat all of your information in a certain way. And if you can use AI to do some of the stuff that these companies do, the value in using AI instead is that it's portable.

8:58You know, you can take all of your intelligence and data and just, you know, code your way into a new system that manages everything completely and is integrated with everything else.

9:09Emily Peck: I'm not completely sure about that. I think that is a utopia that everyone has been selling for a long time and will never arrive.

9:16Felix Salmon: That's what I think.

9:16Emily Peck: I do think that where we are right now is weirdly not so far from that. Like most enterprises really do just keep all of their data in what they call like data lakes, like one massive, great reservoir of data. And then they point all of the various different SaaS applications at that lake and say, like, find the data you need and pull it out and organize it and structure it and then show me a dashboard. But yeah, you're right. Once you start getting used to dashboards and putting the outputs in PowerPoint decks and stuff, it is there are switching costs. But I think the idea of just keeping all of your data in one place is a place we've kind of got to already.

9:55Emily Peck: What they're worried about, or what I think the stock market is worried about, is just the number of licenses that companies are going to have to buy in order to be able to pass that data and get useful information out of it is much lower than it is right now because they're going to be able to use AI agents to do a lot of the work rather than humans. And it's the humans who are paying for the licenses, not the agent.

10:16Felix Salmon: The stock market reaction, I mean, so they reacted specifically to this plugin, like Elizabeth said, for legal work. So all these like legal software company stocks fell, like Lexis, Nexus, I think, Thompson Reuters, LegalZoom.com. But I was coincidentally reporting a story that I hope will come out this weekend on how AI is disrupting the legal industry, whatever. So I spoke to some of these lawyers and I was like, are you just freaking out about the new AI plugin? And what's going on? Is everyone using it? And they were like, well, first of all, the plugin doesn't do some core things that lawyers need.

10:54Felix Salmon: look at all the cases, like case law, or it's not connected to that in any way, to case law, to cases. And it's not connected to statutes or laws or anything like that. It's more like another evolution in document management, which is important and will be helpful, I think. But it wasn't like, oh, burn down all the legal software. I mean, I guess the stock market is very future looking. So it's thinking like 70 steps ahead.

11:21Emily Peck: Let's be clear about this. This was is not in any way, shape, or form a major announcement from Antropoc. They didn't even announce it. This was just a tiny little plug-in of the kind of thing that they roll out, you know, every so often with no fanfare, and everyone's like, oh, this does this, this does that. It's very much a sort of straw that broke the camel's back thing. We have seen in recent weeks this massive plunge in silver, a massive plunge in crypto, a bunch of asset classes that look kind of frothy and fragile, just like the floor disappeared out from under them. And once the selling starts spiraling, the catalyst for that selling, the spark that causes the selling is kind of irrelevant at that point.

12:05Emily Peck: Does anyone know why silver started going down? No, no one has a clue why silver started going down. But once it started going down, it just got this kind of downward momentum and no one knows where it's going to stop.

12:13Felix Salmon: Didn't they say it was Donald Trump?

12:15Emily Peck: It's probably Donald Trump.

12:16Felix Salmon: I feel like you could always just be like, it's Trump and everyone's like, yes.

12:19Emily Peck: If in doubt, it's Trump. So I think what this is just telling us is that, you know, it turns out that a lot of these SaaS valuations were, you know, kind of crazy. Like, you know, these SaaS companies were trading on like 60 times future earnings. And you're like, well, it's not obvious where that growth is going to come from in the world of, you know, AI. So maybe we should start trading these companies on a sensible PE ratio rather than a not sensible PE ratio. And this could just be a reversion to sensible.

12:48Elizabeth Spiers: Part of what's happening is just that now the market sort of, there's a discourse around AI specifically, where the markets start developing a theory. And as soon as there's an announcement that kind of confirms the theory, even if it's a minor one, it's sort of like, well, this is what we were talking about. Look, here's an example. And I think that's what the plugin kind of started a cascade of confirmation bias.

13:10Emily Peck: I disagree with that. I don't think the market has a theory. I don't think the market has a clear what's going on. I think we should announce, actually, we have a major announcement on Slate Money, which is that Emily Peck has a new job and is now the sole lead writer of Axios Markets, the newsletter. and when I was talking to Emily about this great new life that she is about to embark upon, one of the things that we have discussed many times is that most of the time, most moves don't really have a reason. It's not one of these things where people have a theory and then they try and buy and sell in order to align their beliefs with their positions.

13:50Emily Peck: It's stochastic. It's noise. Most market moves are noise. They're not signal.

13:54Felix Salmon: Zooming out the bigger picture story of AI agents disrupting the business of SaaS is an accurate story. And these companies are in trouble. Like we have the bond data to show that their levels of distressed debt are higher than other categories.

14:13Emily Peck: Well, the reason why there's a lot of distressed debt in this sector is precisely because this is the sector that was most popular with the private equity companies. And as we all know, as we've discussed many times, the private equity companies, the way they make money is by leveraging up their portfolio companies way, way more than most normal listed stocks. So if you're looking for those places where you find excess leverage, it will obviously be in the most levered PE-owned stocks. And those happen to be the SaaS companies or most levered PE-owned companies, I should say, because a lot of them aren't even public.

14:47Emily Peck: This is an unwind of a trade, but I don't know if it's like a thesis coming true. I don't know that AI is going to kill SaaS. If you look at the SaaS earnings, before you start worrying about where they hit the capital stack and the equity and the debt and all of that kind of stuff, so far the earnings are fine. They're still going up and to the right. They're not falling. What we are seeing here is a PE ratio compression rather than the earnings going down. But as Elizabeth says, a lot of people like to think of the stock market as a sort of prediction machine and the stock market is now predicting much lower future growth.

15:24Emily Peck: I don't think the stock market is predicting negative growth, though.

15:29Elizabeth Spiers: Oh, no. Well, I don't think that. I think also I don't think that it's an either or. You know, for some in some aspects, it is an unwinding of a trade. But I do still think that there is an emerging consensus about how AI is going to affect corporate workflows. and that does get built into analyst estimates about where these companies are going to be because they're gauging workflow substitution risk. And that is exactly what the Cloud plug-in kind of speaks to directly. It's how our workflow is going to change within the enterprise because of AI. So I think it could be both. I don't think it's an either or.

16:04Emily Peck: It could be both. I think it could be both. I think it's one much more than the other and you think it's the other much more than the one. And it's very hard to tell. I will say that when you're saying that there's a consensus, the loudest voice on the other side of that consensus is Jensen Huang, the founder of NVIDIA. And he's like, this is the dumbest thing ever.

16:21Elizabeth Spiers: Well, I think he has an incentive to say that, though.

16:23Emily Peck: Why? What's his incentive to say that?

16:25Elizabeth Spiers: Because if the SaaS market comes down, it could easily drag NVIDIA's stock price with it. Go on. All these things are in an interrelated economy. If you're selling AI software, you know, the same SaaS companies that are getting hammered right now are also some of the biggest customers of NVIDIA and these AI companies. Their fates are not totally decoupled.

16:46Emily Peck: I'm not convinced, but Emily, what do you think?

16:49Felix Salmon: I don't want to get involved in your squabbles. I think it's pretty clear, like however you want to frame what happened in the stock market. Last week, it's pretty clear that there's a huge new technology on the scene in AI and it's going to change the way that people work with software. And it's probably going to create winners and losers and new players in the market that's been relatively stable for like the past 10 years, which is software as a service. All these companies are going to start putting and have started putting AI into their software already. And then I think the question or the thing I'm kind of watching is, is it going to make any of the software better?

17:29Felix Salmon: Because the bottom line is most of these software programs are so bad. I was recently, I won't name the company, but I did a story. And so I was talking to one of the providers. I've used their software as an employee at various companies. and they were talking about AI and how they're incorporating it into the software and it's going to make it so great. And I was like, is it? Because I'm going to be honest with you, it's not great now. Like, it's really confusing. I don't know what this is.

17:54Emily Peck: Yeah, I don't know what company you're talking about, but if it's Microsoft Copilot, I totally agree.

17:59Felix Salmon: Like they're putting the plugins in Gmail now where you can search your Gmail.

18:03Emily Peck: Google is.

18:04Felix Salmon: It's so bad. I could have done it myself the old way. Like, and everyone says, when you say that, they go, it's getting better every day, every day. And it's like, it's super not. It doesn't do what I want it to do yet. You know what I mean?

18:16Emily Peck: I want to go back to this theory, though, that you have about AI is going to make a big difference. Because let's take a company I'm very familiar with because I worked there for many years, which is Thomson Reuters. Their share price was just a flat line forever and ever and ever. It just didn't move. And then starting a couple of years ago, it skyrocketed. It took off like a rocket. And all of the people I know at Reuters who had stock in the company were like, holy shit, I'm rich now. Because the market was like, oh, my God, you are an AI company now. And you are going to make so much money from AI.

18:51Emily Peck: And it was part of the AI trade. The idea was very much that Reuters, Thomson Reuters, which is like basically a legal services company, Westlaw and people like that, it was going to be able to do amazing things with AI for the legal community for all of the law firms and everything. and this was going to bring in massive amounts of money at huge profit margins. And it was just going to be one of the big winners from AI. And then suddenly, like a few weeks ago, it suddenly then everyone's like, well, no, what if instead of being one of the big winners from AI, it could be one of the big losers from AI.

19:22Emily Peck: And the stock market started plunging back down to earth. And yeah, we all know that AI is probably going to change shit, but it's so cloudy. The outlook is so impossible to see that, you know, the market can turn on a dime from you are the disruptor to you are the disrupted. What we thought was like a core moat of yours that was going to make you billions of dollars now just looks like a plugin that Anthropic can release on a whim. And probably neither of those things are true. You know, the truth of the matter is somewhere in the middle. But I do think that we are in this particularly sort of opaque and fuzzy moment right now, when no one knows anything.

20:03Felix Salmon: It's exciting. It's a moment of true disruption when we don't know what the future will bring. And saying this as like an old person, like this is the third time I'm seeing it. And you can see like it's very similar each time. Things are getting destroyed, but you don't know what gets built. It's very scary, but it'll just be interesting to see like what gets invented and what changes and what things come about. I don't know. It's interesting. And maybe companies like Thomson Reuters that's been on the roller coaster, Maybe they have to fire like a lot of people, but then they make more money.

20:35Felix Salmon: So then their stock goes up. Maybe the Fed has to lower rates a lot so we can see lots of new companies get founded and created and invent new stuff. Like, it's cool.

21:00Emily Peck: Disney has a new CEO. His name is Damaro or Tomorrow, depending on how you want to do it. He comes from parks, which is where Disney makes most of its profits, not just most of its profits, but an increasing proportion of its profits, The parks are doing great and up and to the right, and everything else is, put it broadly, not and is shrinking. So when the Disney board needed to choose, do we choose the parks person or do we choose the Hollywood person to run the company? They were like, well, let's put the guy who's actually making the money in charge rather than the woman who's losing money.

21:32Felix Salmon: The guy who dresses exactly like Bob Iger versus a woman.

21:38Emily Peck: They are throwing like$24 million a year at the woman and making sure that she stays on.

21:42Felix Salmon: Yeah, we should unpack that because that's the whole James Gorman twist to the succession.

21:47Emily Peck: Yeah, so James Gorman is the chairman of Disney. Longstanding Slate Money listeners will remember him as the former CEO of Morgan Stanley. And when he left Morgan Stanley, there was another one of these like bake-offs at Morgan Stanley, who's going to be the new CEO. And normally what happens in one of those bake-offs, and we just saw it at Berkshire Hathaway, is that one of the guys becomes the CEO and the other guy leaves. And in Morgan Stanley, he managed to keep the other guy at Morgan Stanley. And in this case as well, he managed to keep the other guy, who's actually not a guy, who's a woman, at Disney.

22:18Emily Peck: So he's very chuffed with himself and taking a little bit of a victory lap.

22:22Elizabeth Spiers: Also, Disney is very hierarchical. And so I think the reason why everybody thinks that this might actually work is Dana Walden, who's the new chief creative officer, which is a title that they created for her after she lost the make-off, is reporting directly to Josh DeMauro. They're not trying to do some co-CEO thing where inevitably there are going to be conflicts. You know, DeMauro does have this sort of final say in everything. And whether Dana Walden wants to work with him in that way, it seems like she does from all the reporting. Like, it seems like this structure makes sense.

22:57Emily Peck: Yeah, and I think, like, on some level, she just gets to run Hollywood.

23:02Elizabeth Spiers: Yeah, which is the prestige. Which is the prestige job, and she's making a shit ton of money doing it.

23:07Emily Peck: and she's a very important person and she's just if she's actually becoming more important as a result of this and 99 of the time the buck is going to stop with her i like that this parallels

23:20Elizabeth Spiers: the arc of succession the tv show where the tom whamsgans the theme park guy ends up on top and then you know the kids get the prestige business although although the big difference is that tom

23:31Emily Peck: Wham Scans is not competent in the way that DeMaro is. But I think in a weird way, I would rather have Walden's job than DeMaro's, not just because it's more glamorous, because like you can be a loss center running the movies and the streaming platforms and all of that, just so long as all of that IP that you're creating can then flow over to the parks and to the experiences and all of the rest of it that DeMauro is coming from. And he can monetize that in a much more effective way. If a movie ticket costs 20 bucks and a ticket to Disney World costs 200 bucks, so as long as you're keeping the demand for tickets to Disney World, it doesn't matter so much if you're not selling the movie tickets.

24:14Elizabeth Spiers: We should also mention that Walden was considered the front runner for a long time. And then it became clear that DeMauro's unit was so much more profitable than the rest of the company. But all the tea leave reading and the reporting is so fascinating. Like people are reading into the fact that at Disney's summer retreat, DeMauro lost at pickleball and they considered that a bad omen.

24:35Emily Peck: Next time it's going to be curling. Bloomberg has this whole story about how curling wants to be the new pickleball.

24:40Felix Salmon: One of the quotes, I think it was Bloomberg somewhere, a Disney CEO, it said, is an instant celebrity. True? I feel false. Maybe in the past, but not anymore.

24:52Emily Peck: Michael Eisner was a celebrity.

24:53Felix Salmon: Yes.

24:54Emily Peck: Bob Iger definitely became a celebrity, definitely in the corporate world. He did a couple of massive deals that transformed the universe.

25:03Felix Salmon: He was a corporate celebrity, but I don't think it translated out bigger picture like Steve Jobs level.

25:09Emily Peck: Yeah, he's not a Steve Jobs level celebrity. Well, I mean, Steve Jobs also, you know, is in the Disneyverse. He sold Pixar to Iger.

25:17Felix Salmon: Yes.

25:17Emily Peck: But I think that that little one we had in the middle who was slightly disastrous, Bob Chapek. Like he was certainly failed to become a celebrity. And I do get the feeling that DeMaro has no particular need to step into that part of Iger's job and is happy to let Walden be the sort of face of Disney in Hollywood.

25:36Elizabeth Spiers: He is. But what's interesting about him is that he seems like a true Disney believer in a sort of little kid way. Like he slept overnight in the princess cap. Yeah. He gets really excited about stuff. Yeah. And that's good. Sure. And so I think he could become, if he's more public about that or he's more public facing, he could become a sort of CEO celebrity just because he's so enmeshed in the brand. 100%.

25:58Emily Peck: If his comms team decides that he's going to be like a thought leader going out, you know, being interviewed by David Rubenstein and doing TED Talks about the magic of Pixar and all of this kind of stuff. He has a lot of very expensive people who can write him really inspiring speeches. I just don't think he has any desire to do that.

26:18Felix Salmon: The idea that a CEO can become an instant celebrity is over. I don't think, first of all, that CEOs want to be celebrities, like you're saying. I don't think Josh DeMauro wants to be a celebrity. I don't think there's appetite for that because being a celebrity CEO just makes you too high profile, especially right now with the occupant of the White House. Because if he has a very visible target of the company, it just makes things worse for the company. So it's better not to be that kind of like old fashioned Steve Jobs, Eichner kind of celebrity CEO. I think the era of the celebrity CEO, this is my hot take, is over.

26:53Felix Salmon: Andy Jassy, does anyone know? They still think Jeff Bezos is the CEO. I was just thinking about that.

26:58Emily Peck: Everyone thinks that Jeff Bezos runs Amazon. And I'm sure Andy Jassy is very happy for everyone to think that Jeff Bezos runs Amazon. Even at Microsoft, I don't think Sartre Nadella is like a celebrity. He's just a Google CEO. No one knows. Yeah, who is the Google CEO?

27:13Felix Salmon: It's that guy.

27:14Emily Peck: What about Elon, though?

27:15Felix Salmon: He is the exception.

27:16Emily Peck: No, but Elon is a founder. He likes to think of himself as a founder. He's not a hired manager. No one in the history of the world would ever hire Elon to be a manager.

27:26Felix Salmon: No. Super no.

27:30Emily Peck: And that's the difference. Like the CEOs that we're talking about, like if you are at a big public company and the board of the company is picking the next CEO, that kind of CEO who's been picked by a board, who's come up through the ranks or has been a manager somewhere else and is now going to be a manager here. That kind of CEO celebrity, I think, yeah, I agree with Emily. There were a few of them along the way. Jack Welch. Jack Welch. Who we've talked about a lot in the past. Possibly still Tim Cook would count.

27:57Felix Salmon: Gates, obviously, although he's a founder.

27:59Emily Peck: Gates is a founder. Yeah, I think I agree. And Disney has always had this kind of aura around it because it's Disney. But now, you know, now all of the aura is moving over to open AI and Sam Altman is the celebrity.

28:12Felix Salmon: Founder.

28:12Emily Peck: Founder.

28:13Felix Salmon: Like you said. Yeah. And for better or for worse.

28:31I have a bet on Kalshi about the Oscars.

28:36Felix Salmon: You do?

28:36Emily Peck: I do.

28:37Felix Salmon: What is it?

28:38Emily Peck: I bought Sinners to win best production design.

28:42Elizabeth Spiers: That's very neat.

28:43Emily Peck: At seven cents on the basis that like, I think because it had 16 nominations, there's going to be like a point in time where there's a feeling that Sinners might just run away with it. And so that could start trading up to, you know, like 20 cents or something and I can double my money and then get out before the actual result. This is a trade, not an investment. This is not necessarily a hold to maturity trade. I don't think it's necessarily going to win. But I do think that the probability is going to rise from where I bought it.

29:14Elizabeth Spiers: Are you allowed to do that as a Bloomberg worker? Is you talking about this going to change other people's bets?

29:20Emily Peck: Oh, I hope so. I want all of the Slate Money listeners to join me in this trade, pump up the price. And then, of course, I'll be first to dump and take profits. And I'll rug pull a lot of you.

29:31Felix Salmon: How much money will you make? How much did you bet?

29:33Emily Peck: I bet$15.

29:35Felix Salmon: Whoa. Yeah. There's a lot on the line.

29:37Emily Peck: There's a lot on the line here.

29:38Felix Salmon: Two coffees in New York City.

29:40Emily Peck: Exactly.

29:40Felix Salmon: How much do you make? Like, how does that, I'm not good at this.

29:44Emily Peck: So I stand to make, so if I hold to maturity and sinners wins, then I get like over a hundred bucks. But if I, you know, if I just sell it at twice what I paid for it, then I make 15 bucks.

29:56Felix Salmon: And you're want to make 15 rather than gamble on making.

29:59Emily Peck: If it just kind of stays at its current level, I think I'm up like three bucks or something right now. Now, if it just kind of stays where it is, then maybe I'll just gamble the 15 and I'll hold to maturity. And if it comes, if it surprises everyone and they win, then I make lots of money. I'm okay with losing the 15 bucks.

30:15Elizabeth Spiers: Felix, you are in the sophisticated pot of gamblers in Calci.

30:20Emily Peck: Absolutely not. Is that true?

30:21Elizabeth Spiers: Where we're going with this kind of is that this report came out that says that people who are sort of less sophisticated on Calci are losing more money than people who are using sportsbooks. So I think you have to explain. So, okay. So yeah.

30:35Emily Peck: So the way that Cauchy makes money is very similar to how stock exchanges work. It's got a maker-taker system where if you can see a bid-offer spread, and if you just hit that bid-offer spread, if you're like, I will buy at the offer, I will sell at the bid, then you're what's known as a taker. But the people who are offering the contracts at the bid and the offer, they're called the makers. They're the market makers who are setting the price. And Cauchy takes a commission from the taker who's me just buying this thing on Kalshi if I was out there like setting a pricing I'm willing to buy at this level and then wait for someone to hit that then I would be a maker and then I would not be paying commission and anyway just because in this case I was a taker and not a maker like I am basically the dumb money here the smart money is the market makers and the people who are like trading much more frequently and much more in a much more sophisticated manner.

31:25Felix Salmon: Wait, I'm sorry. So Calci isn't the one making those different markets. It's individual people on Calci. They sign on and they say like...

31:34Emily Peck: Correct. There is no sportsbook. So Calci and Polymarket both work the same way. I'm sorry.

31:38Felix Salmon: So I could go on to Calci and I could say, Felix will interrupt Emily and Elizabeth 15 times. And I could sell that as a market on Calci.

31:48Emily Peck: Yes. I could, me. Well, I mean, they would need to set up the market. But once they set up the market, then it's up to the users of the site to start making prices on it. When Cauchy sets up the market, all it does is it sets up the market and then there's price discovery from the users.

32:06Felix Salmon: That's so cool.

32:07Emily Peck: Cauchy is the marketplace. And then the market maker is the one who's setting the bid and offer. Or often there's two different people. One has got the highest bid, one has got the lowest offer. And then that spread is the bid offer spread, which the takers can either hit or they can just trying, you know, put in their own bids and offers inside that spread.

32:25Elizabeth Spiers: This is in contrast to the way the sportsbooks work, where the company is making the market. And Calci is arguing that their business is fairer because they're not on the other side of the trade, right?

32:38Emily Peck: Not just fairer, but in aggregate, bettors lose less money on Calci than they do in sportsbooks because the sportsbooks are taking a higher percentage of bets than Calci is or than Polymarket is. So if you just look at the entire aggregate of all of the activity on these sites, then the people playing on Kaoshi, and this is just a game, it's not an investment, are losing less money than the people playing on sportsbooks in Vegas or anywhere else. but and this is the interesting thing that we're talking about what was reported this week is that the median gambler on kaoshi actually loses more money more quickly than the median gambler on sports books partly because kaoshi encourages a much faster pace of gambling if i were to go to a sports book and bet on sinners winning best production design at the oscars then i basically have to hold that to maturity.

33:38Emily Peck: There's no way that as the odds change, I can then go back to the sportsbook and say, I'd like to unwind this bet at a profit. So there's much more velocity on these prediction market sites. And if I'm losing a little bit of money much more frequently, that adds up to greater losses. And if I just lose a$15 every time I bet on centers with a sportsbook, because I'm trading in and out. And then the other thing is that because most of the players on Kaoshi are takers rather than makers. They are taking all of the losses, basically. The makers are making money. Kaoshi is profitable for some people.

34:13Emily Peck: And so the median amount that you lose is much, much higher than the average amount that is lost.

34:19Felix Salmon: Sorry, I got, I was getting bored. The median amount that you lose, what?

34:24Emily Peck: The difference between mean and median is very important here. The mean losses on Kaoshi are low, but the median losses on Kaoshi are high. Okay.

34:32Felix Salmon: Oh, that was interesting. I caught that in the article on Bloomberg, actually, because the article says median losses are high. And then Kelsey's response was average losses are low. And I was like, bro.

34:43Emily Peck: Exactly. So just beware these prediction markets, because you are not as smart as you think you are. I think it's the lesson here.

34:50Felix Salmon: And then there was a fun little backstory in the Bloomberg piece where this data comes out published by Citizens Bank, I think.

34:56Emily Peck: Or Jelly Roll or something. And then Citizens used the data from Jelly Roll.

35:01Felix Salmon: Was it jelly roll? Should we actually make an effort to get it right, perhaps? Juice reel. Juice reel. So then the Bloomberg reporter reaches out to Kalshi to be like, what do you think of this report? And they're like, it's wrong. And also, this is extortion. The juice reel is trying to get us to pay it to not release the data or something like that. But then Kalshi called the reporter back and was like, actually, it's probably not extortion, but it's still wrong. And then they did the whole average to the median thing, which... What she said, the comms person said that a juice reel had approached them about an investment or something.

35:36Elizabeth Spiers: And the juice reel CEO was like, I didn't do that. They called me and asked me if I would get rid of this data.

35:41Felix Salmon: Yeah. Doesn't make Calci look very good, I don't think.

35:44Emily Peck: But, I mean, they're up and to the right. They're going to be making lots of money on the superb owl and all of that.

35:50Felix Salmon: But one thing, when you say that the median loss on Calci is greater than what people lose on the sports betting sites, it's as a percentage of what they're putting down. So it's not as like, like people could be betting lots, lots, lots, lots more money on the sports sites. We don't know.

36:10Emily Peck: Yeah, exactly. Just on a percentage basis. Right. Kaoshi seems to be quite good at getting people to trade more frequently. And just in general, if you trade more frequently, then you're going to lose more.

36:21Felix Salmon: But it could be like smaller amounts for the people, which seems like not as bad as like trading less frequently for bigger amounts. But I don't know. That's just that's not math.

36:31Emily Peck: Yeah. You can't do this as a percentage of like net worth because we just don't know what people's net worth. So if this is just like fun and games on Kaoshi and they're saving their big bets for the sports books, Maybe that's where they lose the big money. We don't know.

36:44Felix Salmon: And finally, what is a sophisticated Calci investor versus an unsophisticated Calci investor?

36:50Emily Peck: The sophisticated Calci investors are the ones who are constantly arbitraging with Polymarket, who are really looking at this like a very illiquid trading market, where there's lots of short-term trading opportunities, and who often either work at or would want to work at somewhere as Itadell or Jane Street or something like that. and then not sitting there just going, I think the Patriots are going to win, so I'm going to bet on the Patriots.

37:15Felix Salmon: Wait, I would just say that now that I'm back on Axios Markets full time, if a sophisticated Calci investor is listening, that they should get in touch with me because I think that's interesting and I haven't read very much about the sophisticated Calci investor types.

37:28Emily Peck: I agree. I would love to read about that on Axios Markets.

37:49Felix Salmon: numbers round emily what's your number my number is 2000 is that a year well yes but not in the context of my number i thought we were talking about stock market crashes and we're going to have another stock market crash number but no no 2000 is the number of cold stunned iguanas collected by Florida's wildlife agency last week after a two-day cold snap in Florida. Oh my God, the poor iguanas. Oh my God. So I read the story. I heard about it in Axios because our Miami newsletter reported on it. And I was like, oh yeah, whatever. Iguanas, stunned. I don't know. Then I went and looked at the video.

38:32These iguanas are at least a foot, two feet.

38:36Felix Salmon: They're really long, big animals. And I guess when it gets really cold, they just freeze up. So it's a good opportunity for homeowners or locals to just scoop up the iguanas and bring them to collection sites. And the video is just like all these people holding these big iguanas, like dragging them around and piling them up. I mean, just wild stuff. Like it made me put my spider problem in context.

38:58Emily Peck: So they're like, are they pests?

39:00Felix Salmon: Yes, they're considered pests. They're an invasive.

39:02Emily Peck: When they turn into iguana skickles, that's a great opportunity for you to just take them to the local iguana drop-off site. Yes. Where what happens to them at the drop-off do they defrost? I think they're killed.

39:17Felix Salmon: I'm sorry. I think so.

39:20Elizabeth Spiers: Oh, my God. I'm so sorry. I saw a video of a guy who just had an armful of knocked out iguanas. It's crazy. And he laid on the ground and stacked them all on top of himself.

39:29Felix Salmon: It's just so wild to me. Like, I can't think of anything comparable that occurs where I live. We have so many, like, invasive this or that's, but nothing that gigantic, except the deer, which we've discussed a lot on Sleep Money.

39:42Emily Peck: Yeah, but they don't freeze.

39:44Felix Salmon: No, it's like as if the deer froze and you'd go out onto your lawn and there'd be like a bunch of frozen deer and then you just picked them up willy-nilly, put them in a satchel, took them to the...

39:53Emily Peck: I'm perfectly in favor of killing deer. I'm not in favor of killing iguanas.

39:58Felix Salmon: Felix, you don't want to go down that road. We're going to get hate mail on that again. Again.

40:02Emily Peck: I think that was my least popular opinion ever on Slate Money when I was like, rats with legs. Anyway.

40:08Felix Salmon: People were big mad.

40:09Emily Peck: Elizabeth, what is your number?

40:12Elizabeth Spiers: My number is 116 ,000. And that's the number of Instagram followers a guy named Mr. Flower Fantastic has. And this guy is a floral artist. He's self-taught. He's from Jamaica. And he's doing a show at the Brooklyn Botanic Gardens right now called Concrete Jungle. That's an orchid show that's New York City themed. But the best detail about this guy is he's anonymous and he wears a big respirator gas mask and gloves. So nobody knows his identity. But he also does this because it turns out he's allergic to flowers. And he's a florist who has worked with LVMH and, you know, all these big brands to do installations.

40:48Elizabeth Spiers: But I also have a related but not coda. I feel like Slate Money, largely via Emily, has become the explainer for Gen A slang. and there's one that I just read about in the Times and I asked my 10-year-old if he'd heard of it and he was like, no. But do you know what a choppleganger is?

41:05Felix Salmon: Yes. Emily knows.

41:06Elizabeth Spiers: Yes, I know what a choppleganger is. Because you read the Times or had you heard it before?

41:09Felix Salmon: Because I read the Times and I know what chopped means.

41:12Emily Peck: I got choppleganger from like one of my slacks that I'm in. I think I am a choppleganger. I'm just like the guy that people look at and they're like, yeah, he's an uglier version of me.

41:21Elizabeth Spiers: Yeah, so chopped is slang for ugly and then your chopelganger is somebody who looks like you but is uglier. I'm like a chopelganger of Hugh Grant.

41:31Felix Salmon: I've been told if the slang appears in the times, though, it is over. It's over. It's over. It's over. My number, moving swiftly on, my number is 22 billion,

41:44Emily Peck: which is the number of euros that Stellantis is taking as a charge because it is pulling the same stunt that Ford pulled and is basically saying EVs? You know how we were saying we're only going to sell EVs in Europe and half of our cars in the US are going to be EVs? We're making this big investment in EVs. Well, never mind. We're just doing a complete 180 on that. So their charge, which is$26 billion, is even bigger than Ford's charge.

42:13Felix Salmon: Wait, is it 22 or 26?

42:15Emily Peck: 22 billion euros,$26 billion.

42:17Felix Salmon: Oh, got it.

42:18Emily Peck: And this is interesting to me because it shows that, you know, first, Ford is not alone in doing this massive sort of strategic U-turn. But number two, we spent a whole bunch of time on Slate Money talking about what happened at Ford and thinking of Ford as having their sort of legs cut out from under them by the Trump administration. And thinking if this is like terrible for the American car industry. But, you know, Stellantis has a big American component to it, but it is a European company. And this is a European decision made out of Stellantis headquarters in Italy. And their U-turn is just as big and in terms of dollars even bigger.

42:53Felix Salmon: We talk a lot about the Chinese EVs and I had a hard time sort of thinking about them. But then I read Joanna Stern, the Wall Street Journal's personal.

43:01Emily Peck: Oh, she had a Xiaomi and she loved it.

43:03Felix Salmon: She, yeah, she wrote, everyone should read it. She wrote about it. She loved it so much. She describes it so nicely. And like, it reminded me of the old Walt Mossberg columns in the journal where like he tries a technology and you finally understand what the hell it does. It was like that. I was like, oh, I want one of these Chinese EVs. She made it sound so amazing.

43:20Emily Peck: Oh, you know what Walt Mossberg did as he quit the Wall Street Journal to start his own company called Recode. Joanna Stern has just done the same thing.

43:29Felix Salmon: Yeah, it's kind of a glut of tech writers starting their own Substack. So the Washington Post just let go a lot of tech writers. They all I saw like, we're like, follow me on Substack. I have a Substack.

43:39Emily Peck: I think Joanna Stern is going to be more YouTube and Substack, but we'll see.

43:42Felix Salmon: I'm excited about it. I hope I hope it does well because we need more normal people explaining technology and not using jargon or saying SaaS.

43:50Emily Peck: Joanna, come on this show and plug your product when you have one. We like independent media creators here at Slate Money.

43:56Felix Salmon: Soon that's all there will be.

43:59Emily Peck: I think that's it for us this week. Thank you for listening. Thank you for staying invested in hodling the Slate Money RSS feed in your RSS podcast listening app thing, which I guess is software as a service. It all comes into one big, you know, glue ball of tech. But we appreciate you. Thanks for being a Slate Plus subscriber. If you are a Slate Plus subscriber, we have a Slate Plus segment this week on...

44:25Elizabeth Spiers: Luxury gifting.

44:26Emily Peck: Gifting. Luxury gifting. What rich people give each other when they give each other gifts.

44:30Felix Salmon: Sex offenders give each other rich people.

44:33Emily Peck: And that too. And mostly thanks to Micah Phillips and Shayna Roth and Jessamyn Molly and Seaplane Armada and all of the people behind the scenes who make this show possible. We love you, and we'll be back next week with more Slate Money.