Good Riddance to Larry Summers

0:05Emily 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 Emily Peck of Axios.

0:16Felix Salmon: Hello, hello.

0:17Emily Peck: Elizabeth Spiers of the New York Times. Hello. Elizabeth, your New York Times contract ends at the end of the year, but it will probably be renewed. Yes, I hope.

0:30Elizabeth Spiers: I haven't done anything.

0:31Emily Peck: You haven't done anything, right, to cause them to not renew your contract.

0:36Elizabeth Spiers: My name is nowhere in the Epstein files.

0:38Emily Peck: And so we are going to talk about a man whose name is in the Epstein files, who did have a New York Times contract and who is not having it renewed because he is stepping back from public life. If you don't know who that is, congratulations on not knowing, but we're going to spend a lot of time talking about him. We are also going to talk about the antitrust fails whenever big tech is concerned and whether it is even possible to regulate big tech in the absence of the antitrust remedy. We are going to talk about AI and whether it's a bubble. We have a truly spectacular Sleep Plus segment with Jasmine Molly, all about Thanksgiving hot takes.

1:18Emily Peck: It's a great one this week, so stay tuned. It's all coming up on Sleep. Honey.

1:29Emily Peck: Okay, so I feel like we should talk about Larry Summers this week. One of my favorite subjects. But Emily, this was not actually my idea. This was your idea. Why do you want to talk about Larry Summers?

1:42Felix Salmon: Great question, Felix. Thank you so much. Happy to be here and happy to talk about this. The news of the past two weeks, past five years, has been Jeffrey Epstein, right? And who did he talk to? Who knew what? Who was sending the emails? Release the files. I think we're like at peak release the files time because Congress this week unanimously, except for one lawmaker, voted to release said files. But even before that, there were many files released. We talked about it last week in the Plus I Recommend segment where we discussed the grammar of the rich and powerful. So but then this week, Larry Summers, surprisingly, was sort of the first to take the fall from this recent round of Epstein mania because we read these emails between Epstein and Larry Summers in which Larry Summers really does not come off well.

2:33Felix Salmon: If you're only sort of tangentially following the story, you might think, oh, he emailed with Jeffrey Epstein, whatever. Who didn't? Who among us? But if you really go in and read the coverage, the Harvard Crimson, I think, had the best reporting and writing on this. You see that Larry Summers was messaging with Jeffrey Epstein after Julie Brown in Miami Herald really wrote this big feature story back in 2018 that really exposed in detail what had been going on with Epstein, you know, in his homes and how he'd been assaulting girls.

3:06Emily Peck: And of course, after he had gone to jail for sex crimes.

3:09Felix Salmon: After he had gone to jail for sex crimes, Larry Simmons was still talking to him. But to me, like, it kind of blew my mind that he was still talking to him after all that reporting came out. And he was literally emailing with him up until the day they put him in jail for the second time. And the emails, I mean, he was asking him for advice in what some of the mainstream media was describing as a potential romantic relationship. But if you read the emails in the Crimson reporting, he was asking him for advice because he had a mentee, a woman, academic, I believe, who was looking to Larry Summers, who, you know, has this.

3:46Felix Salmon: He was the president of Harvard. He was the treasury secretary, all these things. She was looking to him as like a mentor. And he was thinking, like, how can I get this woman into bed and messaging Jeffrey Epstein about it at the same time Jeffrey Epstein has been exposed in this horrible way? I mean, it's pretty astonishing. So he basically this week, Larry Summers stepped back from, I think, everything he does. He won't be teaching at Harvard. He won't be advising the Center for American Progress. He won't be writing for Bloomberg. He stepped down from the board of OpenAI. So that's why I want to talk about him this week.

4:19Elizabeth Spiers: Also, this Crimson story is really astonishing. This is, I encourage people to go read it, because if you have the sense that Summers is just kind of creeping on this woman, and that he's talking about it in this oblique sense with Epstein, you kind of really miss how bad and creepy it is, because he's asking Epstein for advice about how to manipulate her. In response to one of the exchanges, Epstein responds to him and says, she's already beginning to sound needy, nice. And this guy was, you know, he's been teaching women for God knows how long, and the whole thing is appalling. And when Summers apologized, he didn't really apologize for any of that.

4:58Elizabeth Spiers: His sort of blanket state was that he regretted his misguided decision to continue communicating with Mr. Epstein, as if the problem here is just that he was communicating with Jeffrey Epstein and not his own behavior and all of this other stuff.

5:13Felix Salmon: I think we should also, before we, I mean, we've laid out all the problems and how he's retreated. They've tried to cancel this man, whatever cancellation means at this point, twice before, because back when he was president of Harvard, he famously said that, what did he say? Women weren't good at science.

5:30Elizabeth Spiers: He thinks women have lower IQs and therefore are not as well equipped to be successful in STEM fields.

5:37Felix Salmon: Which he doubled down in his emails with Jeffrey Epstein as well. After having apologized for it.

5:42Elizabeth Spiers: Yeah.

5:42Felix Salmon: I also think it's interesting because Felix has this long history. I can't believe he hasn't spoken yet. Felix has this long history with Larry Summers that I feel like you've talked about, hinted at time and time again on the podcast. But I feel like this is the week where Felix can just tell us what happened with Larry Summers, how Larry Summers tried to get Felix canceled. Ooh, I don't know about that story.

6:04Emily Peck: I don't know if he tried to get me canceled, but he certainly got me fired.

6:06Felix Salmon: I mean, that's a type.

6:08Emily Peck: And I think he did try to get me fired more than once. He successfully tried to get me fired at my first blogging job. When I asked a question that Emily asked me a couple days ago, I was texting with Emily and Emily's like, listen, Felix, I hate to sound like, you know, basic, but is there any evidence that Larry Summers is actually as smart as everyone says that he is? Like the first thing you read in any profile of Summers is like, two of his uncles won the Nobel Prize in economics. makes he's unbelievably intelligent he's the smartest guy in every room he has maybe like he's a little bit not great on like emotional intelligence or managerial intelligence or putting up with fools or caring about journalists all the things you need to get on in the world but like really smart and this is the only thing that everyone always says on the one hand he's really smart but and then so what emily asked me was why does everyone say this what what is he

7:00Elizabeth Spiers: done how is he so consistently wrong about everything yeah i read so many stories and

7:06Felix Salmon: they all said he was smart. And there was never like an example. And I was just I wasn't saying I don't believe it. I'm just saying, like, tell me what he did. Like, what is the example?

7:17Emily Peck: So the oblique evidence of him being smart is that he won the John Bates Clark Medal, which is like this prize they give to economists under 40, which is harder to win than the Nobel Prize. And everyone who's won the John Bates Clark Medal is generally considered to be an extraordinary genius. But again, we're like, why? Like, what did he do to deserve this? And to be honest, I've looked into this a little bit. I'm just going to say that the paper he wrote about noise traders, which I have a copy of, he never actually published. And that's weirdly, like one of his unpublished papers is kind of one of the most famous things he's ever written.

7:58Emily Peck: And I wrote about it quite a bit in my book. It's very famous for its opening line. And the opening line is, there are idiots, look around. Which is such a Larry Summers line. In the mirror, if that's really good.

8:14Felix Salmon: All right, you got to hand it to him. That's great.

8:16Emily Peck: I like it. It's a good opening line. But that's not what made him famous. Like, when people say that he's smart, what they mostly mean is that if you're sitting around in an economic seminar or a National Economic Council meeting or the Oval Office or the the Harvard president's office or something, and you come in with an idea. He used to be a debater when he was undergrad. He would do like competitive debating. And he has this ability to shut down your idea and to just demolish it very quickly. And everyone's like, oh, wow, I just spent five years working on this thing and you just managed to tear apart in five seconds.

8:54Emily Peck: Wow, you're very clever.

8:55Elizabeth Spiers: The competitive debater types are so insufferable.

8:58Emily Peck: I think insufferable is definitely top of the list of words that people have used to describe Larry. But he also, like, he combines that with having a very thin skin. So I would be rude about him on the internet on a semi-regular basis. He would get very, like, annoyed at me. There was one time when he screamed at me, telling me that I was a disgrace to my profession because I'd written this blog post saying that he shouldn't be the president of the World Bank because, you know. And I also wrote blog posts saying he shouldn't be the chair of the Fed. Basically both for the same reason, which is that these are jobs that require building consensus.

9:34Emily Peck: And Larry has never been very good at building consensus. He's been much better at tearing it down than he is at building it. But anyway, I asked the same question that Emily asked. I'm going to read this out because it disappeared from the internet. But I was working for this company called Rubini Global Economics at the time. Larry, I'm not quite sure how aware I was that Larry was like on the board or on the advisory board or something like that. I knew that he was relatively close to my boss, Narelle Roubini. And anyway, I wrote a blog post and the headline, I think, is what got me fired. The headline of the blog post was, comment of the day, how Larry Summers is like Pig Shagger Jones.

10:17Elizabeth Spiers: Now you have to tell the joke because I did not get this reference at all. So, okay, so the joke goes, I mean, Emily, you've heard this joke, right?

10:30Felix Salmon: I read it this morning when you shared it in the Slack. Oh, okay.

10:33Emily Peck: I guess we do have to reference the joke in case you don't know the joke. The joke is about the guy in the pub, and he's on his third pint of beer, and he's like, you see this, Barb? I built this pub. Am I called Pub Builder Jones? No. I'm the local doctor. I saved Barman Jim's life once when he choked on a peanut. Am I called Lifesaver Jones? No. Every year I supply a huge Christmas tree for the village green. Am I called Christmas Tree Jones? No. But you shag one pig. And so the question that was left in the comments to a previous blog entry that I'd put up. This is back when, you know, blog comments were awesome.

11:14Emily Peck: And actually, Nouriel Roubini's blog comments or the comments on his website were famously awesome. Basically said that Summers' reputation for intelligence is like the reputation of Pig Shagger Jones. There was some incident in the far-off past, which is presumably the source, but he's actually done nothing to deserve it for years and years.

11:33Felix Salmon: That was a comment. You didn't write that.

11:34Emily Peck: That was a comment. I didn't write it, but I did put Pig Shagger Jones and Larry Summers in the headline together. You were then like, this is brilliant. This is brilliant. The comment also came with something called the Larry Summers is a really smart guy challenge, which is if you think Larry Summers is smart, then you name one clever thing that he's done and I'll name two stupid things that he's done and you will run out before I run out, basically. Because he has done an astonishing number of stupid things. Like he wrote the famous pollution memo when he was the chief economist at the World Bank, which is basically this memo where he said, if you just look at basic economic principles, what we should do is take all of the dirty pollution in the world and dump it on the poorest countries.

12:15Felix Salmon: Literally said that in a memo.

12:17Emily Peck: Yes, literally said that in a memo because that like maximizes economic utility. Okay.

12:25Felix Salmon: I mean, was the memo meant for the public to see?

12:28Emily Peck: It was not meant for the public to see. Also, Larry then came out and said, obviously, I was joking. Because, you know, obviously, everyone thought this was incredibly funny. And this is a great thing to joke about when you're the chief economist of the World Bank dealing with trying to help the world's poorest countries. But like, the logic of the memo was actually relatively self contained, you know, like, so anyway, like, this is the kind of thing that he does on a regular basis. It's also, and this is my favorite Larry story, he is so convinced of his own genius. And he is so convinced that he is smarter than anyone else that he is very bad at listening to other people who might be able to stop him, prevent him from doing really stupid things.

13:14Emily Peck: I'm sure that he had people telling him, you know, don't be emailing Jeffrey Epstein. That's a bad idea. But he would just go ahead and do it anyway because he has that kind of hubris, right? he did one of the world's worst ever fixed income trades when he was president of harvard where he decided that he was going to build a massive new campus across the river and he knew that this massive new campus was going to cost a lot of money and he was also convinced that interest rates were very low and they wouldn't go down any further and in fact they were going to go up further. And so he reckoned that when Harvard in the future was going to borrow money to build the campus, he wanted Harvard to be able to borrow the money in the future at the interest rates today.

14:01Emily Peck: So he entered into this incredibly complex sort of future forward swap thingy. And then, of course, interest rates went down rather than up. He had to unwind the swap because they never built the campus. And he cost the university about a billion dollars.

14:16Felix Salmon: Whoops.

14:17Elizabeth Spiers: This is just an astonishing example of someone failing up in a way that's just happening in public in a very high profile way. And just nobody does anything. But I think it has really given Summers a epic and broad coalition of haters. And, you know, it was a big enough deal when his this stuff came out of the Epstein files that The Onion immediately did a headline that said, no, not Larry Summers, Wales devastated nation. And I think you really have to, you have to be wrong a lot of times to be an academic who's on the radar of regular people who read The Onion.

14:50Emily Peck: One of the funniest things about this whole bit is like the Republicans are like gleefully pointing at Larry Summers and going, look, famous Democrat Larry Summers is being counseled and losing his career as a result of Epstein and they're sort of chortling. And meanwhile, Oh, the Democrats are saying the exact same thing.

15:08Felix Salmon: Okay, there were two other things. I feel like I'm being mean. I mean...

15:12Emily Peck: It's okay. This is a safe space, Emily.

15:15Felix Salmon: First, I just looked up all the winners of the John Bates-Clark medal. And, like, I could tell you so many things about so many of these people that are brilliant papers. Like, Raj Shetty is on the list. Stephanie Stancheva is on the list as the most recent winner. She's very brilliant on inflation lately. I've read some of her work. So I feel like, okay, that's interesting that I don't know Summers' work. But just on the other side of the ledger, he was on the OpenAI board. OpenAI did say nice things. They were like, he's been great on our board. I don't know if that's true or not, but they are worth a lot of money now.

15:47Felix Salmon: And they did successfully become a for-profit company. They said he helped with that. I don't know if that's true.

15:52Emily Peck: So, yeah. So this is something that he's good with, is helping Silicon Valley people get extremely rich.

15:59Felix Salmon: Great. Right.

16:00Emily Peck: And broadly speaking, helping like private sector, very rich people become much, much richer. So probably the thing that he will go down in history for the most is that in the 2000s, when he was working for Bill Clinton, first as undersecretary and then as secretary of the treasury, he basically took the lead on deregulating the financial sector. and he fought with people like paul volcker and what's her face who used to run the fdic sheila bear like sheila bear was like on the other side larry was on the deregulation side and he he wound up pushing through this bill called gram leach bliley and doing various other things that you know basically created the preconditions for the financial crisis and one of the things that annoys me there are many things that annoy me about Larry but one of the things that really annoys me about Larry is that he has very very consistently dodged any kind of questions or accountability for this there was one interview on Channel 4 News the great Channel 4 News presenter Krishnan Gurumurthy sat down with Larry Summers a few years after the financial crisis.

17:13Emily Peck: And Larry was like passing through England on his way to Davos or something like that. And Krishnan started the interview asking exactly the questions that Larry was expecting, which is like, what do you think about the state of the UK economy? You know, what should the government be doing? Oh, wise man, help us. Can you please drop some wisdom here? And he would like intone some like, you know, standard Larry answers like, well, I think there's a 33 % chance it'll do well, and a 33 % chance it'll do badly, you know. And then Krishnan sort of pivoted. And he was like, so anyway, I wanted also to ask you about, to paraphrase, did you single-handedly cause the financial crisis?

17:53Emily Peck: And these questions were quite specific. You know, and also things like, were you adamantly opposed to the United States signing on to the Kyoto Protocol, which he was, right? There was a lot of people in the Clinton administration who said, we should sign on to this. Larry's like, we should not sign on to this. And all of these kind of questions.

18:11Elizabeth Spiers: And so finally, and this is the only time I've ever seen it, Larry gets asked,

18:16Emily Peck: you know, these things that you were famous for doing, like, do you regret doing these? Did you make mistakes? In hindsight, like, why did you do them? And he just gets angrier and angrier, and he starts, like, stopping to even attempt to answer the questions. And he just starts attacking Christian. He's like, you're just being handed these questions by your assistants. You don't know what you're talking about and this kind of stuff. And you're like, wow.

18:40Felix Salmon: His famous strategy for demolishing the argument right there.

18:44Emily Peck: So like on a very sort of profoundly public sector basis, you know, what has he done for America? I think there was a very strong case to be made that absent Larry, America would be in a much better place today, that we would have had a less bad financial crisis. We would have had a better environmental record. We would have spent more money on the Obama stimulus. The economy would be bigger, you know, all of these things. And while it is definitely true that he has made money for, you know, D.E. Shaw, this famous hedge fund, or Andreessen Horowitz, where he was like an advisor, or Block, you know, which used to be called Square, where he's on the board, and all of these kind of places, and now OpenAI.

19:28Emily Peck: I'm sure he, you know, was very helpful in terms of helping them navigate the weird road to becoming a for-profit. In terms of the country as a whole, I think it's very easy to say that he, you know, if he hadn't been around, things would be better.

19:42Elizabeth Spiers: I would love to see some policy analysts do a formal cost-benefit analysis of Larry Summers being involved in anything, if for no other reason than it will prevent him from, in 10 years, popping up again. And I don't think any of these cancellations are permanent. There's almost nobody who fully disappears in his position.

20:01Felix Salmon: I mean, he has reemerged before, so.

20:04Emily Peck: I think if you get cancelled when you're 70, like, at that point, you just kind of retire.

20:23Emily Peck: What's next on the agenda, Emily?

20:26Felix Salmon: Felix. Yes. Is big tech ungovernable?

20:30Emily Peck: Ah, is big tech ungovernable? This is a question we're asking because, well, Elizabeth, why don't you run us through the latest antitrust news?

20:39Elizabeth Spiers: So basically, Meta won their big antitrust case, and they don't really have to do anything. And this seems to be a pattern for all the big antitrust cases that were initiated during the Biden administration by, among other people, Alina Khan. These cases are just dropping like flies. And so now I think people are worried that antitrust enforcement is just done. I think that's right.

21:02Emily Peck: And we should mention that this antitrust case that Meta just won was not brought by Lena Kahn. It was brought by the first Trump administration. And the Trump administration has historically not been particularly big tech friendly, although it is more sort of AI friendly and it is more crypto friendly this time around. But the big picture here is that, you know, back a million years ago, there was a massive antitrust case against Microsoft, which Microsoft won. Google recently won a big antitrust case. Meta just won a big antitrust case. And what we seem to be learning here is that insofar as big tech is something that can and should be regulated, antitrust is just not the tool to do it.

21:46Emily Peck: and for better or for worse the u.s government seems to be incredibly bad at regulating anyone using anything that isn't antitrust it's like everything has to be a nail because the only hammer that the government has is antitrust and if you look to europe you know they are doing i think a better job legislating regulation for companies that is beyond just this is anti-competitive therefore it's illegal, you know. But the Americans, for whatever reason, don't seem to be able to do that. And the general consensus, you know, in the M &A world these days is, well, now these companies can go off to the races.

22:29Emily Peck: Like, for instance, the classic example is that last year, Meta wanted to buy a company called Scale AI. And all of the lawyers at Meta were like, you can't do this. It will never pass antitrust scrutiny. You'll never be allowed to do it. And so instead, they wound up doing this incredibly complex transaction where they basically, you know, hired the CEO of Scale AI for billions of dollars salary and hired all of his employees and like made them all employees of Meta. And the shareholders of Scale AI got paid out a little bit, but not as much as they probably would have done and all of this kind of stuff.

23:03Emily Peck: And the whole thing was awkward and convoluted just to get around potential antitrust. And everyone's like, well, yeah, we're not going to even bother with that anymore. From this point onwards, just expect more big acquisitions. And it is important to remember that the antitrust case against these companies is relatively strong because many of them, not all of them, but certainly Google has expanded massively through acquisition. It bought YouTube. It bought DoubleClick. A lot of Google's core business, it acquired. Meta's sexiest part is Instagram, which it acquired. They bought WhatsApp, you know, so like expanding via acquisition is definitely part of the big tech playbook.

23:47Emily Peck: And now they're like, yeah, we weren't doing that for a while and now we can do it. But that to one side, I think the answer to the question of whether it can be regulated is, well, it can be regulated, but it's not going to be regulated because, you know, the regulation in the United States is all done by the executive branch. And, you know, rather than by Congress, Congress just doesn't seem to have any appetite to do any regulation.

24:09Elizabeth Spiers: That's true. And I think we should talk about why big tech monopolies are different from monopolies in other industries. And one of the things, especially with the companies that are dominating the S &P right now, is that in a lot of cases, founders have a different class of stock. They have more voting power. And so you have this power concentrated not just among a handful of companies, but a handful of individuals. And that sort of creates a situation where you have a sort of oligarchy and you really have to trust that they're going to police themselves, which they've sort of demonstrated that they have no desire to do.

24:43Emily Peck: Yeah, I mean, it's interesting. Like, Facebook and Google both have dual-class share structures. Microsoft doesn't. NVIDIA doesn't. Amazon doesn't. Tesla doesn't. And even at Google, I don't really see a problem. Yeah, I'm not a big fan of dual-class share structures, and I'd love it if it went away in Google. But I don't see any real evidence of Larry and Sergey having outsized control over Google. They seem to be pretty hands-off these days. The real problem is Mark Zuckerberg, who has total control over Meta with his minority shareholding. And that one is problematic.

25:18Elizabeth Spiers: And he's a good example. I have a friend who sold a company to Meta years ago. And this was when there were rumors going around that Zuckerberg might run for office. And I asked him if he thought that was possible. And he laughed and said, no, Mark already thinks Facebook is its own nation state. And this is when they were also working on a cryptocurrency. So I think that's another concern is that, you know, there's this sort of streak of neo-reactionary thought in Silicon Valley now that you can just sort of work around the government and by virtue of doing that, create a kind of oligarchic state.

25:50Emily Peck: We are definitely living in a world where the biggest companies in the world are multinational companies. This has been true for a while. But, you know, if 20 % of your business is in the United States, then it's actually sort of intuitive that it's going to be hard for the United States to really get a grip on what you're doing. If you look at the big meta scandals, you know, the biggest scandals of all have been in places like Myanmar, you know. And, like, whose job is it to regulate that? It's hard to answer that question.

26:20Felix Salmon: One thing, I mean, we talked about this a little when we talked about the Google winning its antitrust case. case. And this kind of goes back to what Felix was saying, too, which is just that antitrust law, these companies are big and powerful. Whether they're monopolies in the classic sense of what you think a monopoly is, is debatable still.

26:38Emily Peck: I think they are, but that's, you know, you don't need that.

26:41Felix Salmon: I'm convinced because like Judge Boesberg in his decision, you know, he was like, you know, since this case got brought, the technology has changed and the competition, like the market that you'd have to examine has changed. And TikTok sort of came out.

26:54Emily Peck: Oh my God, TikTok was just the gift for meta. Like it's amazing how much Mark Zuckerberg is thankful for TikTok right now for just being this like, he can just point to TikTok and go, well, obviously it's winning, therefore I'm not a monopoly.

27:08Felix Salmon: But the point remains that this stuff, this technology, social media, it all moves really fast. And today's big tech company doesn't have to be tomorrow's big tech company. Now I can undercut that argument pretty instantly by just pointing to like a Microsoft who we all thought was cooked and is still a huge multi-trillion dollar company. So I don't know.

27:28Elizabeth Spiers: I think what's confusing here to maybe even, you know, the legal experts who are looking at it is that one of the conditions of monopoly historically is low rate of innovation. And that's definitely not what's happening here. You could argue that, you know, their sort of amount of market share makes them a monopoly just by default. And also that they have pricing power that maybe potential competitors don't. But the fact that they can sort of innovate at the size, either by acquisition or their own R &D efforts, I think it makes it much harder to make that antitrust case.

27:59Emily Peck: Yeah, and remember that, you know, if you're looking at the big advertising duopoly of Google and Facebook, do they really have pricing power? I think the jury is out on that. Are they charging more for ads than in a more competitive market they would? I'm not sure.

28:15Elizabeth Spiers: There are not really alternatives if you want to do targeted, like highly targeted advertising.

28:20Emily Peck: It's true, but both of them run on auction mechanisms, right? Both of them are just like they set all of the people who want to buy ads and run real-time auctions.

28:28Elizabeth Spiers: I mean, they can modify the auction results, too, if they think that the auction process is not doing its job.

28:35Emily Peck: I mean, yeah, but I just think that in general, I'm not convinced that people are paying vastly more money for ads on Google and Facebook than those ads are worth. I think they wouldn't do that if they weren't making money from them. But, yeah, they are monopolies. The interesting counterexample, you're absolutely right, Emily, that Microsoft is still a multi-trillion dollar company. The one that isn't is Intel. Remember like the big Wintel duopoly of the 90s where you had Microsoft and Intel like joined at the hip. Microsoft has continued to do well. Yeah, Intel, not so much. It's just kind of disappeared.

29:08Felix Salmon: Yeah, you can't just coast on this stuff. And, you know, like if we think about the big monopolies, you know, that started antitrust law, like eventually they would have run out of steam. literally these were railroad companies. Eventually, innovation came and eclipsed them. So if one were like a free market type of person, you could argue that it's going to be fine because something new is always going to come along and knock a monopoly off its tracks, rails. In the Google case, you know, AI, ChatGPT, etc.

29:35Emily Peck: The question which then arises is that even if the monopoly is here today, gone tomorrow kind of thing, which we can sort of grant X hypothesis, say, does that mean that these companies shouldn't be regulated? I feel like these companies are incredibly powerful and have tentacles that reach around the world and into our very souls. And it's a good idea that they are answerable to someone other than just shareholders.

30:02Felix Salmon: Yes, I agree with that. I think antitrust just doesn't, it's not the right thing. It's not the right hammer. You got to come up with a new hammer. We have policymakers and lawmakers now who have zero appetite to invent a new hammer. And I don't know if they have the brains. Look around.

30:19Emily Peck: There are idiots. Do we really want Marjorie Taylor Greene legislating big tech?

30:24Felix Salmon: I mean, I don't know. It doesn't seem like there's a good idea out there for how to do it. And there's so much pushback on any kind of regulation all the time. There's like no space for it to flourish, it seems like.

30:34Elizabeth Spiers: There was a little bit of Republican appetite for a while for antitrust stuff. And then I think part of what happened was, all the big tech CEOs beelined to Washington and sucked up to Trump. And then that just sort of changed the political winds. But one of the things that I think would have to happen here is that there has to be more of a public backlash to the fact that these organizations are unregulated. That's part of what happened with Europe and data privacy, which has been very effective in curbing some of the worst aspects of what Meta does. But here, there's no appetite for it.

31:07Emily Peck: I think very effective is putting it a bit strong. It has made a little bit of change, maybe at the margin, and it has created the world's most annoying GDP pop-ups on every single website that everyone loads and do absolutely nothing.

31:20Felix Salmon: I accept the cookies.

31:23Emily Peck: But I want to ask Emily a question because there's one multi-trillion dollar mega cap company that we haven't mentioned yet, which is your favorite company, which is Apple.

31:32Elizabeth Spiers: Love Apple.

31:33Felix Salmon: Although I actually have a story, maybe I'll share another time, about why Apple might be falling off my tree.

31:38Emily Peck: I think the way in which people really genuinely like Instagram, they like Apple, they like Gmail, you know, they like Google Maps, like the products, the consumer facing products that these companies ship are good products. And as a result of that, there isn't a huge amount of public anger at these companies. You know, there can be books by Jonathan Haidt about how, like, our children's brains are rotting. But ultimately, people are really upset about grocery prices. People are not really upset about their Gmail storage is running out.

32:15Elizabeth Spiers: People are not really upset because they're also sort of not terribly aware of the extent to which, you know, surveillance capitalism is happening. and they're being exploited in some ways by these companies. But since you mentioned Waze, I want to go back to the Google Maps Waze merger, which was, in one case, the sort of death knell of antitrust and big tech. When Google acquired Waze, there was a lot of concern internally that the merger was going to be blocked because it seemed like a slam dunk antitrust case. But the reason why it wasn't was that the court had trouble sort of distinguishing between Google Maps and Waze.

32:51Elizabeth Spiers: And what they came up with ultimately was that Google Maps tells you where you are and Waze tells you where you're going, which doesn't make any sense to me. But if you want to read more about this, I had just interviewed Tim Wu about his new book, and he was part of the Biden era antitrust efforts. And he pointed to that as the really like, oh, this isn't going to work.

33:11Emily Peck: For me, it wasn't Waze. For me, it was double click. You know, there was this really big Google competitor online in terms of selling ads on the Internet. You know, Facebook was good at selling ads on Facebook properties. Google had its business selling ads on like Google search results. But then there was the entire rest of the internet where you would go to slate.com and see an ad. And who was selling that ad? And there was this other company called DoubleClick that was selling that ad. And Google bought DoubleClick. And then there was no one to compete anymore. You know, if you wanted to buy an ad on Google, if you wanted to buy an ad off Google, you needed to buy it from Google.

33:50Emily Peck: That was when Google really consolidated the monopoly.

33:54Felix Salmon: I guess to go back to what you were talking about, how people like these big companies and like these monopolies, it's like going after businesses because they're too big. It's just not the right frame because being too big isn't necessarily bad in most consumers' eyes. Like, we like too big. We like the iPhone because everyone uses the iPhone. If it wasn't too big, we would have a bunch of different phones and it wouldn't be good. Like, it's not, you have to be more drilled down. like maybe Europe isn't doing it right with its cookies agenda, but like at least they have a specific criticism. You know, your privacy is at risk and they regulate that.

34:29Felix Salmon: Or like environmental regulation, they're not like companies are too big. They're like companies emit stinky smoke and it's bad for you. And like, we'll go after that. So I don't feel like big tech critics have really well articulated what is wrong with having big tech companies beyond like your privacy is at risk, which we've talked about so many times on the show. And we've all said, like, do people care about that? Unclear.

34:52Emily Peck: They haven't articulated it, mostly because it's difficult to articulate. And also because, yeah, it's hard to argue people into an attitude or an opinion that they don't already have, right? If you're a member of Congress, what you want to do is you want to sort of reflect what your constituents think. And if your constituents are not coming up to you going like, you need to do something about this massive problem that is Google. Why would you bend over backwards to try to persuade them that they should care about this?

35:20Elizabeth Spiers: It's not just that, but it is job of politicians sometimes to sell a policy, especially if they think it affects voters and voters don't understand it yet.

35:28Felix Salmon: And they're good at doing that. Like, think about the death tax. We had a whole slate money talks on how they sold people on believing something about inheritance taxes that didn't matter at all.

35:38Elizabeth Spiers: But the biggest thing is that the voters have to be convinced that there's a real cost to them. And the cost to them of data privacy is not always apparent. So I think you would have to have a more obvious consequence for letting these companies get big. It would have to be something like if these AI companies keep getting their way, your electricity bill is going to go up 10 times what it already is. Which it won't.

35:59Felix Salmon: But it is. Yeah, I mean, okay, maybe it will.

36:02Emily Peck: We will talk about AI and bubbles and electricity bills in the next segment.

36:18Emily Peck: So, yeah, that's the perfect segue to the AI bubble debate. And I think I want to try and frame this question thusly, which is we all remember the dot-com bubble. There was a bunch of speculation in the stock market and a bunch of stocks that were worth nothing wound up trading at crazy levels and everyone thought they were getting rich. And then the stock market plunged and everyone lost all their money. And that was bad. And people said, well, that was a classic bubble and bust dynamic. And people started talking a lot about tulips. And now we are in a world where the amount of money pouring into AI dwarfs the amount of money that was pouring into dot-com stocks in 1999.

37:07Emily Peck: And so people are naturally using this bubble word. and my feeling about this is that there is something worth talking about in terms of the sheer amount of money that is going into ai and that is on some level therefore preventing investment in the entire rest of the economy because there is a finite amount of money on some level i mean we can argue about that but there is this giant sucking sound for ai it is actually quite hard to get investment if you're not an AI company these days. And there are dislocations in the economy that are being caused. We were just talking about like this is increasing the cost of energy for normal Americans because there's so much demand for energy from data centers.

37:50Emily Peck: And so AI is so heavy, economically heavy, that it is changing the dynamics of not only the economy, but also the stock market. You look at NVIDIA as the most valuable company in the world. And I think that's an interesting dynamic. But at the same time, I just really get irked every time someone uses the word bubble to describe it, because it's definitely not a speculative bubble. Most of these AI companies and most of the money going into AI is like it's like hard investment in actual data centers and chips and stuff. It's not like I'm buying an H100 chip today because I think I can sell it at a profit tomorrow.

38:32Emily Peck: You know, it's not like the greater fool theory. There's not a lot of like get rich quick. It's actually get rich slow. You know, open AI is saying like, we're not going to make money until 2030.

38:41Elizabeth Spiers: I think that's that's pretty standard for early stage tech, though, that sort of timeline.

38:45Emily Peck: No, it is. But like what I'm saying, but like open AI isn't even a public company, right? Like there's no there's no speculative bubble in there in open AI stock, because even if there was a greatest fool you could sell it to, you're not allowed to because it's not listed. And then, you know, there's a bunch of teeth sucking about, well, a lot of this is debt financed. And what happens if these people who are borrowing money to build data centers wind up defaulting on their debts, then that could hurt the banks. And then the banks, we could have a financial... No, come on, people. You know, like, OpenAI is not borrowing money.

39:18Emily Peck: The companies that are borrowing money tend to be extremely creditworthy. Like, Amazon is out there borrowing$15 billion. Like, Amazon It's going to be able to pay back its money. Oracle is the interesting one. But Oracle is actually paying real credit risk money to parts of the credit world that are willing to take that risk, right? This is not what we saw in the 2000s where a bunch of people thought they were making risk-free AAA investments and they turned out to be super risky, right? Everyone lending into the data center slash AI world is lending with their eyes open. And lending with your eyes open generally does not cause systemic problems.

39:55Elizabeth Spiers: Well, but the number of AI companies that their fates are a little bit intertwined, I think, makes this a little bit different. So Oracle has just an extraordinary amount of debt, even for a tech company that finances itself via debt. And as a result, people are buying more Oracle credit default swaps because there's a little bit of head scratching about how this is all going to work if they can't.

40:21Felix Salmon: Meaning people are betting that Oracle will default on its debt?

40:24Elizabeth Spiers: Yeah, or they're hedging against it. So I don't think it's totally not a concern. But the other thing is that you can have bubbles just because the equity markets are misallocating funds. When VCs are throwing money at anything that has AI in it, you could end up with a bubble just that way.

40:41Felix Salmon: So are there two kinds of bubbles then? Because when I was listening to Felix talk and say, like, these companies are investing in real things. It's not like greater fools. It's not like tulips. Tulips are real, I think, unless birds aren't real. Anyway, but now I'm thinking about the dot-com bubble. Maybe that wasn't a bubble because some of the dumb companies people were throwing money at then were Amazon.

41:02Elizabeth Spiers: Well, that's a misallocation again. I do think that there are types of bubbles. The one that I think people think AI is is speculative because they They sort of use bubble as synonymous with overhyped. Yes. And they don't really think about any technical definition of bubble. And in that case, if that was happening, you would have just a lot of speculative investors coming in without really understanding what they're putting money into. But with misallocation, that doesn't have to happen. It's just the investors are putting money into companies that are shitty companies just because they manage to crowbar AI into the definition of what they do, regardless of whether it's central to the product.

41:42Emily Peck: And that was exactly what I was talking about when I was talking about the weight of AI in the economy. Like, it does have this kind of sucking sound, and there probably are, like, objectively good investments that are struggling to raise money because so much money is going to AI instead. But I just thought I'd look this up because I work at Bloomberg now, and I have all these numbers at my fingertip. Total debt at Oracle is$105 billion, dollars, which is a lot of money. But the market cap is$565 billion, right? It's five times as much. So you can say that Oracle is overvalued, but you would need to wipe out more than half a trillion dollars of equity before that debt became really at risk of defaulting.

42:29Elizabeth Spiers: Is there a risk of default there? Yes.

42:32Emily Peck: Are people paying for it? Yes. Are people hedging against it? Yes. But when people are worried about that, you know, when people are buying these hedges and buying these credit default swaps to hedge the risk that half a trillion dollars of equity is going to get wiped out and go to zero, then that is a sign to me that people are super aware of the risks.

42:51Felix Salmon: And this crowding out thing that you guys are talking about, like people are investing in AI, then they're not investing in other things. I feel like what I've been hearing lately and seen argued more lately is just that, thank goodness for AI, because people are investing in it at a time when the whole rest of the economy is like a stinker. Like AI, the argument goes is like

43:11Emily Peck: holding the economy. If the thing that we need to keep the economy growing is banks lending money, basically, that is the thing that creates money and causes the economy to grow if you're a monetarist, then yeah, it's really good that the banks are lending money to AI because they're or to data centers because they're suddenly not lending money to Argentina.

43:31Felix Salmon: But is it crowding out or is it just like the only place anyone is willing to go? It's not like there's other good stuff happening necessarily.

43:41Emily Peck: Exactly. The rest of the economy is kind of looking a bit meh. So it's kind of understandable that people aren't wanting to invest in it.

43:47Felix Salmon: So is it a bubble? And I'm so confused. I feel like I'm more confused than ever.

43:50Emily Peck: I'm going to come out and say it's not.

43:52Felix Salmon: Not. And Elizabeth?

43:53Elizabeth Spiers: I don't think it is yet, but I think it's creeping in that direction. Emily?

43:57Felix Salmon: I think bubbles are fine. That's my third way. Dotcom was very formative, you know, for me. And it was fine.

44:06Emily Peck: My favorite ever DM was instant messaging. I think back on like AOL instant messenger back in the 1990s. And when I was in New York and I had a colleague in London named Aditya Chakraborty. And I'm like, this is a bubble. I'm like, and you know what happens to bubbles, don't you? And he replies back immediately, they float?

44:26Elizabeth Spiers: They delight small children.

44:27Emily Peck: They delight small children. Yeah, exactly. Nothing wrong with the bubble buds.

44:43Emily Peck: Let's have a numbers round. Emily, do you have a number?

44:46Felix Salmon: Uh-huh. Yeah.

44:47Emily Peck: What is it? What is it, Emily? What is your number?

44:49Felix Salmon: Great question.

44:50Emily Peck: I'm trying to be meaner to Emily this week because we're worried that we're too female heavy on this show and we don't have enough male energy.

44:59Elizabeth Spiers: Are you trying to prevent us from ruining our workplace? Exactly.

45:02Emily Peck: Because there's two of us and one of you. Exactly. It doesn't look good for you.

45:05Felix Salmon: Well, people will have to just figure out what we're talking about. My number is... Slate money. It's an hour long and later you have to Google to understand what we talked about. My number is 25. It's a percent. It's the percent of CEOs at S &P 500 firms who are receiving personal, home, and security benefits. And that's up seven points from last year. This is numbers from the conference board and ESS gauge. They looked at, you know, public filings. The thing is that the CEOs are very scared right now, and they're spending a lot of money. Is this a Luigi Mangioni effect?

45:43Emily Peck: What's it up from?

45:44Felix Salmon: Up from 18%.

45:46Emily Peck: And this is security benefits, and what was the other thing?

45:48Felix Salmon: It's personal and home security benefits. So it's like a security detail. It's like a home security system. It's like paying for bodyguards, protection for your family, just to keep you safe in public. And the spending, interestingly, the data covers a period mostly before the UnitedHealthcare CEO was shot dead in Midtown Manhattan. Like CEOs were already getting afraid before that. So this number is only going to go up. And anecdotally, I'm hearing colleagues say, yeah, the CEOs are showing up to meetings with bodyguards now. They're all very scared. So that's pretty interesting.

46:21Emily Peck: Elizabeth, what's your number?

46:22Elizabeth Spiers: My number is 64, and that's also a percentage. And that's the percentage of people who believe that their workload has increased in the last year. And this is according to an Ernst & Young survey of 15 ,000 workers. And it's attributed partly to AI because there's been a lot of poor integration and training around AI. And so people are ending up spending more time trying to figure out how to apply AI to stuff. And they are using it to be more productive. And they're also just producing more stuff to do that I think everyone's sort of calling work slop now.

46:54Emily Peck: So I'm going to ask you the same question I asked Emily. And Emily knows the same question that I would ask everyone when I had the percentage of Axios.

47:01Felix Salmon: What's the time series?

47:03Emily Peck: What's the time series? Is that higher than normal? Is that lower than normal? Yeah, it doesn't have a baseline. We will go back to these people next year and be like, how many people think their workload has increased? And if it's lower than 64, we'll know this was a meaningful number.

47:16Felix Salmon: Do you guys think your workload has increased this year?

47:18Emily Peck: I've only been at this job for like a month and a half, so don't ask me.

47:21Felix Salmon: Right. Okay. I feel like mine's the same.

47:24Emily Peck: My number is 236 ,360 ,000, which is the number of dollars that was spent on a painting at Sotheby's on Tuesday. Oh, I got an alert about it. The Portrait of Elizabeth Lederer. It's by Gustav Klimt. And it's the most expensive work of art ever and the first work of art ever to sell for more than$200 million. And I am going to die on this hill. And if anyone starts talking to me about Salvador Mundi, I will kill them.

47:56Felix Salmon: Oh, thank God I didn't say anything about Salvador Mundi. Elizabeth, we dodged a bullet. it.

48:04Emily Peck: There is another painting that was allegedly by Leonardo and the MBS bid against himself in a fit of complete idiocy and wound up paying more than that for. But like in terms of actual money spent on a painting by people who are bidding against each other, the most expensive work of our ever at auction was this Klimt portrait, which is very pretty, but it's not very important.

48:26Felix Salmon: Is that number adjusted for inflation?

48:27Emily Peck: No, that's nominal. Adjusted for inflation is probably also still the most expensive, but I haven't done the math on that.

48:35Elizabeth Spiers: I have to point out, that was not the most important art sale, in my opinion. We've talked about the... Let's go.

48:42Emily Peck: The fucking toilet.

48:43Elizabeth Spiers: Yes, Maurizio Catalan's toilet, which sold to Ripley's Believe It or Not. Unbelievable.

48:49Emily Peck: On a single bid. There was no bidding more. The Sotheby's conceit was the opening bid is going to be the value of the gold in the toilet, and then we'll get a bidding war going from there. Well, Ripley's bid the value of the gold in the toilet and there was no further bid. Now, they did actually pay about$2 million more than the value of the gold in the toilet because of the buyer's premium that you need to pay when you buy at auction. So they wound up spending about$12 million on this toilet. But yeah, this was a little bit underwhelming. I'm sure Sotheby's wasn't super happy about that result.

49:23Emily Peck: and poor Stevie Cohen is just basically, all he's getting is like the value of the gold. He could have melted it down and probably made just as much money.

49:32Felix Salmon: I'm trying to come up with a gold toilet joke, but I'm burnt out, guys.

49:36Emily Peck: I don't have one.

49:37Felix Salmon: Something about flushing the money. I don't know. I don't know. But maybe it wasn't good art. Maybe it was just a gold toilet.

49:43Emily Peck: It's not as good as the banana.

49:48Emily Peck: On which note, I think that is it for us this week. Many thanks to all of you guys for writing in. SlateMoneyAtSlate.com. Many thanks to Jessamyn Molly and Shana Roth for producing. Many thanks to Micah Phillips for making sure that the right button was pressed and we are actually having video on YouTube. And stick around for a Slate Plus, which this week, Elizabeth, is on Thanksgiving, I think.

50:13Felix Salmon: Yes, it is.

50:14Emily Peck: Some Thanksgiving hot takes.

50:15Felix Salmon: You've got to listen.

50:17Emily Peck: Yeah, and then we'll be back next week with Austin Goolsbee, which is going to be lots of time for our Thanksgiving special. See you then.