Peak AI Frenzy

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2:26Hello and welcome to Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon. I'm here with Elizabeth Spires, who has many jobs, at least one of which is New York Times related.

2:40Felix Salmon: Hello. Emily Peck of Axios. Hello. Hello. Hello. We are going to talk about the latest M &A news out of the media world, which is Warner Brothers Discovery breaking up into two parts. Why it's doing that, what it all means, what it means for David Zaslav. We are going to talk about AI and the crazy valuations that are being raised right now or used or monetized or whatever you want to call it. We are going to talk about Donald Trump's immigration crackdown and whether and when it's going to have major economic consequences. We have a Slate Plus segment on going out for drinks after work, which is apparently something that doesn't happen anymore.

3:24It's all coming up on Slate Money.

3:35We get accused every so often of being naval gazers in the media who only like to talk about the media. So let's give those people, let's give those haters more ammunition, shall we? Emily, what's the latest media news?

3:50Felix Salmon: Warner Brothers Discovery announced that it will split in two. One part will house HBO, Warner Brothers, HBO Max, recently renamed for Max, regular. And the other will house the cable TV business, CNN, TBS, TCM, and that side, which is called global. It's hard to keep track of the names because they're boring, generic. Well, the names are temporary. The names are placeholders. Just in terms of being able to talk about it, it becomes hard. So like the cable TV biz is called Global Networks and the other side is called Streaming and Studios. And the cable TV biz apparently has more of the debt that was dragging down this company.

4:31Felix Salmon: But somehow, David, you can correct me later. I see him like chomping. But somehow, David Zasloff, who engineered this deal, is going with the more prestigious stuff, the HBO and the HBO Max and the movie business. Yeah, I mean, so much going on here. Let's start with the fact that Global Networks, is that what it's called? It's impossible. Let's go back to, what, two years ago when this weird animal of a company was created. It was created by Discovery, which was run by David Zaslav, buying Warner Brothers, basically, from AT &T. And what happens now that the two, like, get split up is that those two bits, after being the architect that brought those two pieces together, he is now the architect of breaking those two pieces apart.

5:18And the glorious bit of it is that Zazlev came up in the world, became this sort of mini mogul by investing massively in cheap reality, unscripted content, all of which is getting spun off into the global network side of things, which is not global. It's just these are very American networks. There's really nothing global about it.

5:41Felix Salmon: TV. It should just be called TV. Exactly. the main thing that global networks is going to have that discovery didn't have is cnn and cnn is a big thing and it's an important thing but like there was a lot of talk back in the at &t days of like are they going to sell cnn because cnn is the pain in the ass and it makes you know trump hate them and all the rest of it basically the effect is if at &t had just sold cnn to discovery that's what global networks is and then warner communications is what it always used to be which which is the studio and HBO and the prestige stuff, except for David Zaslav, who was always the king of the cheap unscripted stuff, is now going to be the king of the expensive scripted stuff.

6:25And his, you know, consigliere gunner is going to run the cheap unscripted stuff. As for the debt, like it's the combination of the two that is responsible for the debt. It's David Zaslav borrowing a whole bunch of money so that he could buy Warner Brothers from AT &T. And now he's basically saying, well, if we're going to split the company in two, we want to place most of the debt in the half of the company that has the most cash flows, which makes sense. But that's the half, which is the cheap unscripted stuff.

6:57Felix Salmon: And he will no longer be running. Which he will no longer be running. He bought a bunch of money to buy all this stuff. And then he made it worse by all accounts.

7:06Elizabeth Spiers: And then rewarded himself with the big prestige job.

7:09Felix Salmon: Then walked away with, yes, with a big prestige job and put the debt on the other side of the business. Now it's Gunnar's problem. As a piece of careerism by David Zaslav, it's quite amazing. Yeah. I mean, like the big winner here is clearly David Zaslav, who now gets to run a highly prestigious media company without a whole bunch of debt. Which managed to succeed despite his work. Like, by all accounts, like HBO is having a moment now. I think it's doing pretty well. It has some good shows that get a lot of attention. It has And Just Like That, which we will talk about on Money Talks at some point, which I'm excited about.

7:43Felix Salmon: It has White Lotus. Max changed its name back to HBO Max. And every pundit looking at that was like, of course that happened. Of course it went back to HBO. That's what we all wanted, you know. It's like having this moment, despite David Zaslav, I think. Maybe you could argue because of him. I don't know how you could argue it. Maybe Elizabeth has.

8:02Elizabeth Spiers: Well, the optics of what he's doing are kind of astonishing, too. He has incredibly high compensation, and this has been a source of consternation within the company. But he did things like TNT no longer has the NBA. Now it's franchised by ESPN. And he was criticized heavily for that because he was on record saying, you know, we don't need the NBA. And then showing up courtside at big NBA games surrounded by other Hollywood moguls. And it's just the extent to which he's sort of gotten away with all this and he's coming out on top is surprising. I will defend TNT giving up the NBA. Yeah. Like TNT is a small, also ran network.

8:42And there's just no way that it could afford to pay for the NBA. And the NBA rights wound up going to television channels and streamers and whatnot that could better afford to pay for them. As we know, there was a huge amount of debt on this company once it was merged. And so there was just a lot of cost cutting. As you said, there were a bunch of layoffs. You know, there was a load of different ways that they tried to cut costs. And the NBA contract at TNT was very expensive and they couldn't afford to renew it. I think that was a perfectly reasonable decision to make. Once they made that decision and the value of TNT plunged, we know this.

9:21But, you know, it's better having a low value TNT than the negative value TNT, which is probably what it would be worth if it had to pay a fortune for NBA roads.

9:30Felix Salmon: Yeah, but couldn't you have shuffled it somewhere else? It's like, give it to HBO or something. Make HBO even more premium. Yeah, I mean, I think that's right. I think that the dream, his ostensible dream, beyond just like David Zaslav wanting to become powerful, was always that there were some synergies here between the Discovery and Properties and the Warner Brothers Properties. And I think the lesson of this spinoff or de-merger or whatever you want to split up, whatever you want to call it, is that there weren't any synergies. And that whole idea of, well, why don't we just take these NBA rights and give them to some other bit of the company that can better, you know, make them prestige or whatever.

10:08None of that was ever possible. And yeah, I think this in a weird way that the unbundling here makes sense precisely because the synergies weren't there. One of the ideas, one of his biggest ideas, really, Zazla's biggest ideas, was that people would subscribe to Max, not just for the White Lotus, but also for Dr. Pimple Popper. And it turned out that there were just as many people are going to subscribe to HBO Max without Dr. Pimple Popper as subscribe to Max with Dr. Pimple Popper. And so adding Dr. Pimple Popper to the mix not only devalued the mix, but also didn't help in terms of adding subscriptions.

10:48So that's why they're splitting up.

10:50Felix Salmon: Yeah, I mean, I think they wanted to be like another Netflix, a streaming network that had like just an abundance of content of all sorts highbrow to low. But that's what Netflix already does. And YouTube even more so. YouTube is even more watched than Netflix, like on TVs right now. So there just wasn't a need for a third streaming service that did that. But there was and still is a need for like the prestige streamer of HBO. And one thing I will give him is that over its various iterations from HBO Max to Max to back to HBO Max, it has financially been doing pretty well. Its EBITDA has been growing substantially.

11:27Its number of subscribers has been going up. Like, they're doing something right there. And historically, it was kind of one of the also-ran streamers. You know, people were like, well, there's Netflix, which is the big one. And then there's Amazon and all of the other ones like Max and Apple and Peacock. It was always that sort of second tier. But it's becoming more of a sort of base tier thing that people just feel they need to have.

11:53Elizabeth Spiers: Well, unlike some of the other streamers, you know, they didn't, they never really abandoned their in-house studio stuff. And, you know, Netflix sort of transitioned over time to investing less into stuff that they were producing in-house and licensing foreign films. and then just putting them on the service as Netflix productions. But HBO never really did that. They never moved into just becoming a syndicator for films made out of house. They have always done prestige TV. They've been more about TV anyway. But yeah, they have that in-house studio, obviously, which is Warner Brothers, just like Disney has all of the Disney movies.

12:26And that's why Disney is really top tier, right? So Netflix, Disney, possibly Amazon. But Netflix and Disney are still top tier. Max isn't quite there yet. But Disney has a studio. I believe that if you look at the amount of money that Netflix spends on creating its own content, it's still vastly higher than Max does, you know, the Warner Brothers does, even if you include the cost of running the studio. If you look at how much Amazon spends even after buying MGM, it's still much less than Netflix. Netflix is just this absolute giant. And then the interesting thing that you mentioned is YouTube, which is basically zero.

13:02Like YouTube basically spends nothing on content, which is amazing. And it's still just dwarfs everyone else in terms of viewing minutes.

13:09Felix Salmon: Yeah, there's a great piece in, I think, Vulture this week that I was reading that I was considering for my number, but I found something else I liked. That says, you know, YouTube now has 12.4 % of all TV viewing stuff. People watch on TV 12.4%. That's far ahead of Netflix, which is seven and a half percent. They're just a juggernaut right now. Like if you want to call them a streamer, YouTube is dominating.

13:32Elizabeth Spiers: Part of that is, I think, cable bundling. You know, we watch CNN on YouTube TV because in order to get CNN, our cable subscription allows for like Newsmax and Fox and that's it, unless you want to pay an additional like$20 a month just to get CNN. And so it just doesn't make sense. So you have a lot of people who are just watching stuff that the networks are producing and cable is producing on YouTube just because the cable subscription models are bad.

13:58Felix Salmon: Plus, YouTube has, to Felix's point, they're not paying to create content. They have people creating content that becomes huge on YouTube. And then like Netflix buys them. Like Mr. Beast is a good example. Like YouTube didn't give Mr. Beast money and say like, make something amazing about whatever, chocolate bars and camping in a stadium. Elon Musk did. Elon Musk tried to give Mr. Beast a bunch of money to make stuff for X. And he tried like a couple of times. And he was like, actually, you know what? I'm better off just sticking with YouTube. Yeah, but the content creators develop organically and then someone comes in and gives them money versus like on a Netflix, which they start out by giving you the money and then you make the thing.

14:36Felix Salmon: They're just making the thing. Yeah, exactly. Amazon does the kind of, if you're a small documentary filmmaker, you can probably find a way of getting your documentary onto Amazon and getting paid on a sort of per stream basis, which is a little bit similar to how the YouTube model works. Netflix doesn't do that at all Netflix will either buy your documentary and put it on Netflix or it won't but there's none of this put it up and see if people like it and if people like it you'll get paid that is not the Netflix model that is not the Max model and it's not the Disney model right but it's doing really well for YouTube and is sort of the future or the present I guess of TV versus what is it called versus the global content company or whatever what is it?

15:15Felix Salmon: Global Networks Global Networks yeah Global Networks so Global Networks everyone understands And this is one of these, like, we talked many times over the past decade of Slate Money about how when banks break up into a good bank and a bad bank. This is clearly one of these, right? There's the growth, sexy growth media company with streaming and streaming is growing. And that's going to be the future. And that's where David Zaslav wants to be. And then there's the bad bank, which is global networks, which is all of these things like TBS and TNT and CNN and all of these things, which are throwing off enormous amounts of cash because of the cable TV business model, but decreasing amounts of cash.

15:54They have like negative EBITDA growth. They have negative revenue growth. And the idea is that you can make a lot of money by just collecting those profits for as long as those things exist and then just packing it all up and going home at the end. But it's a miserable business to be in, right? Just managing decline to zero is something that private equity companies might want to do. And frankly, the unspoken between the lines of all of this is that both of these two entities are for sale. If someone comes along, probably sooner or later, both of them will wind up getting bought. I wouldn't be at all surprised if it was some kind of private equity shop who wound up buying the global network side of things because it's the kind of thing that private equity is good at.

16:40right? It's just maximizing a finite set of cash flows until it dies.

16:45Felix Salmon: That reminds me of when I used to work at AOL. You remember that? I used to... We remember that. Remember that, guys? Because AOL owns Tough Post. Oath? Did you used to work at Oath? Yes. But even before that, everyone there would just be like, all the money comes from people who still pay for dial-up. And we'd all be like, this can't be good. But then you'd go on about your day and there'd be like free lunch, free dinner, free snacks, on and on. And you're like, this isn't going to last, you know, I remember whispering it. But you were right. Well, yeah.

17:12Elizabeth Spiers: I feel like there's also like a little bit of a succession dynamic here where Zaslav, his right-hand man is a guy named Gutter Wiedenfels, who's also like the big cost cutter who came in and did all the layoffs and everything. And now that guy is in charge of global networks. So he's doing sort of all the dirty work over here and Zaslav is running the prestige business

17:32Felix Salmon: and taking all the credit and just, I'm more interested in that guy almost. But Zaslav got his start. I mean, he was a Jack Welcher, former GE CEO, rest in peace, who's known for firing people all the time. And he got his start by firing a bunch of people at Discovery, apparently like cutting staff by 20%. So if I were the people at streaming and studios, streaming ampersand studios, I would not be excited about him. Although he's already cut a bunch of those jobs. Maybe he's done the cutting. Maybe the cutting is in the past. Now, if he doesn't give himself an overwhelming amount of the debt, then maybe he doesn't need to cut so much.

18:09Felix Salmon: I feel like Cutter's going to cut. They never stop, right? And that's not good for a company like an HBO or a company that is in the business of being creative and creating really good content. Or maybe it is a good thing. Maybe it keeps you sharp to always have the threat breathing down your neck that you're going to get cut. Is fear a good motivator, Emily? Some say. Could be. I don't know. Who can say?

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22:14I feel like this is a good segue to the AI news of the week. We had a viral blog post from Sam Altman of OpenAI this week where he was like, don't worry about the singularity. Don't worry about superintelligence. It's all going to be fine because suddenly anyone with a good idea is going to become successful because the cost of implementing that idea is going to go to zero. It wasn't entirely coherent. But in any case, there's a lot of excitement about AI, which is now getting eye-popping valuations. And I'm just going to throw out three data points here. The first one is OpenAI buying IO, which was Johnny Ives' one-year-old company where he's like, I think I want to do something with AI.

23:03And saying, okay, we'll pay you$6 billion for that. And that was very much a kind of acquihire of Johnny Ives, who's clearly worth billions of dollars as an employee. We had another acquihire of Alexander Wang, who is this chap who founded Scale AI. basically what seems to be happening it's a bit complicated but meta mark zuckerberg's shop is buying 49 of scale ai for 15 billion dollars which is just a massive amount of money what scale ai does is it just gets humans in poor countries to sit at computers and click on things and train the robots but apparently that is now worth 30 billion dollars except for it isn't because really they're not buying the 49 % of scale AI so much as they're buying Alexander Wang, who is coming to Meta to lead something or other and leaving scale AI behind basically to be run by his number two or something like that.

24:04And we are seeing and apparently, you know, Meta is offering nine figure packages to other AI scientists. Yeah, that's like 100 million dollars a year. We saw like previous acquihires like the inflection one and the complicity one top ai scientists you know when they get acquihired can be worth literally billions of dollars and the valuations of ai companies and this is the third data point i'm going to throw out here is x ai which is elon musk's ai company which owns x that used to be called twitter it's apparently trying to raise equity at a valuation of somewhere in the range of 135 billion to 200 billion dollars which when he merged the two companies when he merged xai and x he said well this values x at 33 billion dollars or something and everyone was like no it doesn't you're just swapping paper for paper and it's like there's no valuation there at all but if he manages to do this and raises this equity then it really does ratify that valuation.

25:09And again, you're like, how is a company that does nothing but lose money and has as far as they can make out almost no revenues beyond like the trickle of revenues that still come into Twitter? Like, how is that worth$200 billion? But there's just insane quantities of like valuation crazy going on.

25:28Elizabeth Spiers: Yeah, I think, you know, some of it's the market, but how much of this is still people betting on Elon? The logic behind putting that much money into Twitter originally was just like, well, we're not betting on Twitter as a business model. We're just looking at the overall value of putting Musk into Twitter. So does he still have that? It's not just Elon. That's my point. It's Elon and it's Johnny Ive and it's Alexander Wang. And it's like all of these guys seem to, I don't know, like, is it AI? Is it like the people? What is it?

25:57Felix Salmon: Yeah, it's AI. AI has got everyone in this frenzy of delusion, I think. Like, yes, AI is important. And Axios, we ran a chart showing the adoption of ChatGPT over the past, whatever, two years since it was first released to the public. And lots of people use ChatGPT. And you could see in the future, it overtakes Google. And that's like a very big deal. That would be enormously lucrative for that company. And it would be a big win for AI. But there seems to be this just like mass hysteria in the tech world over artificial intelligence. Just like the hype machine around it is like on, it's like off the scale.

26:36Felix Salmon: It's like up to 11 in the Spinal Tap lingo. Like it's driving insane valuations. I mean, we all live through the dot-com boom. It really feels the same to me. And like the dot-com boom wasn't wrong. Like in the end, Google emerged, Amazon emerged, really big lucrative companies emerged out of that. But there was a lot of rubble and a lot of lost money and a lot of, in hindsight, what were we thinking putting so much money into the company with the hand puppet? And I feel like we'll have that same cycle probably play out here, too.

27:05Elizabeth Spiers: If you remember, I worked for a dot-com during dot-com boom 1.0. And there was a phase where you could just take any business and append dot-com to it. And it was considered a separate company and also valued like a tech company, even if it wasn't. And it seems like that's what's happening here because Scale AI doesn't have some great AI model or anything. It's literally a data labeling service. It's not really a tech company in any meaningful sense, but because it's Scale AI and it's adjacent to companies that do produce AI, it's being valued the way that it is. To be fair, they claim to be an AI company as well as a data labeling company, but the revenues are overwhelmingly data labeling.

27:47Felix Salmon: They just rely, like you said, on cheap labor around the world to clean up AI. That's the data labeling part of it. But that's where they make their money, right? That's where they make their money. Exploiting cheap labor and then being like, isn't AI amazing? But like, is that not a little bit better than being grok and just not making any money at all and being worth$200 billion? No, they both seem like that. How is that going to last? But, you know, we've come here to Slate Money for many years saying, how is that going to last about many things? Right? I'm thinking of cryptocurrency specifically.

28:19I'm old enough to remember when we had conversations with Anna Shemansky about how Netflix had an unsustainable business model and was bound to implode at some point. Wrong.

28:28Felix Salmon: They had a couple of rough quarters where I was like, maybe Anna was right. And then they got it back. Well, no, I mean, for years and years and years, they spent more money on creating content than they received in subscription revenues. And if you lose money every year, eventually you go bust. But unless you're Netflix, apparently. Right. Right. Well, they just finally were like, oh, what if we raised prices? What if we doubled our prices and sold ads? Oops, now we're making so much money. We like they did it. I mean, that's the big question, you know, which is apropos the Axios chart about the growth of ChatGPT is does ChatGPT eventually become a media company?

29:06Because that's what Google is, right? And does it start, you know, selling ads against queries? And if so, what kind of form do those ads take? And I don't know where they are in terms of like thinking through that kind of possible revenue model. And I don't know how the governance structure would impact that. But I do think that it's easier to change AIs than it is to change search engines. You know, if you just get an iPhone and you type a search query into Safari and you haven't been fiddling around in your settings deep in there somewhere, you know, you're going to do a Google search. You're going to get a bunch of Google results and you'll be perfectly happy with that.

29:45and it'll be fine. I think it's unlikely that Apple is going to do a similar deal with OpenAI because Apple has its own ambitions in AI.

29:53Felix Salmon: Also because it got in trouble for its Google deal just a few weeks ago in court. Exactly. And given how many people are like, oh, I'd love to use Claude for this and I'd love to use Gemini for that and I'll have to use Grok for this and I'll have to use ChatGPT for that. I think the kind of monopoly that Google has, we're not going to see a similar monopoly with ChatGPT. I don't know, Felix. I was at Family PC Magazine in the late 90s and personally wrote a roundup that was a guide to all the different search engines you could use to search the internet. And it was like, maybe you could use this Yahoo one or maybe you could ask Jeeves a question.

30:26Felix Salmon: And it was like, who knows how this will play out? And then Google came along and it was all over. Like they just were the dominant player. And they did it best, obviously. I don't know. I haven't tried all the different ones. So I don't know if ChatGPT is just the same as all of them. But this is America, and in the end, one company typically tends to dominate the space.

30:45Elizabeth Spiers: Well, there are different models for different things that are really specialized, but I think if we're just talking about search, there probably will be a dominant... Well, search is an interesting concept. Search was never really a thing until search engines came along. And then search engines came along and people were like, well, when you use a search engine, what you're doing is you're doing this thing called search. And so search became defined as basically whatever people do when they type a query into Google. People just want to know things, is I think what people mostly mean by search.

31:17But with ChatGPT, yeah, you can ask ChatGPT a question and it will give you an answer. And that feels search-ish, just as like if you type a question into the search bar in Google now, like you will get an answer, a Gemini answer at the top of the results, which either will or won't be reliable. but that is clearly a search-ish kind of thing. You know, write me a term paper is not search. Create a video of a deepfake of Andrew Cuomo saying that he wants the buses to be free. Like that's not search. There are lots of things that AI does that are not search. But I can definitely see the case for AI being a superset of search.

31:56Felix Salmon: There are so many uses for AI and that's what the excitement is. What will AI be able to do and how will you be able to profit off of it? And I don't think anyone quite knows yet, but there's so much hype that, you know, AI is going to replace workers. AI is going to, you know, lawyers will use it and we only need one lawyer instead of 20 lawyers and, you know, like on and on. Yeah. And maybe, and maybe if the AI companies collectively are worth 1 % of GDP and GDP is a hundred trillion dollars or whatever, and then they're worth a trillion dollars, you know, like you can kind of back into the valuations that way.

32:30Felix Salmon: Yeah. Yeah. You could kind Kind of. But here's the question, guys. We've now had 11 years of Slate Money. You train an AI on 11 years of Slate Money. It looks at what's in the news this week. Couldn't it come up with a relatively plausible Slate Money on its own without the need for any of us? I think we should try to do this and release it on the feed. I do too. And just to see. I think it would be amazing. Can we do that? Why not? I think the technology exists. hosted by Felix Bot. Felix Bot. Yeah, I would love that. I can just get my bot to host.

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35:10All right, let's talk about immigration because this is the big headlines of the week. there have been massive headlines to do with ICE arrests at Home Depots, to do with big demonstrations in California and elsewhere. Clearly, the administration is making a concerted effort to be very visible in terms of trying to arrest as many undocumented workers as it can find and trying to be a sort of visibly anti, how to put this? Fascist. Well, not anti-fascist, quite the opposite.

35:50Elizabeth Spiers: Visibly fascist. Anti-protester, anti-anyone who's sympathetic to protesters. And Jessamine, thank you, Jessamine, found a great little piece in Vox that basically said what's happened is that back in the days when Barack Obama was the deporter-in-chief, it was quite easy to deport hundreds of thousands of people because you'd have hundreds of thousands of people pouring across the southern border. And then you just take them all and deport them all. And bish bosh, there's your hundreds of thousands of deportations. Now there's almost no one crossing over the border. And they're wanting to keep up that pace of deportations.

36:22And so they have to sort of go into the heartland and find people one at a time, ideally with deportation orders against them. And that's really hard and really expensive. And you have this situation where you have a dozen highly paid ice officers and state department officials and fbi people trying to find a single alien with a deportation order and that's just incredible it's hard to scale it very noisy it's very disruptive and it makes a lot of people scared and it's not very effective and it's extremely expensive i think i said that already and so we're in this kind of zone of fear and noise right now that is, Emily, you found this story about how it's like affecting sales of Coca-Cola.

37:05Felix Salmon: Yes. Right. Exactly. Felix. You say the Trump administration's actions aren't effective, but I mean, it depends what you're measuring in terms of effective. Well, I mean, by Stephen Miller's yardstick of like, can we get to 3 ,000 deportations a day? Like they seem to be running at about 800. Yeah. Yeah. So, but that, I mean, that is driving fear into the hearts of immigrants all around the country, undocumented or otherwise. And the Wall Street Journal reported this week that it is reducing sales at companies that have a lot of Hispanic or Latino consumers, including Coca-Cola, which saw its sales fall by 3 % and attribute some of that.

37:45Felix Salmon: Now, companies are always trying to blame something on their falling sales. And sometimes it's true, sometimes it's not. But my friend at AlphaSense, which tracks earnings calls and things like that has seen like an increase in consumer companies talking about Hispanic people, Hispanic consumers, and talking about immigration crackdowns because they're leading people to like hide, to not go out as much, to not spend as much money. First, because they're scared. Second, because they're just worried about even having money because they're worried about getting deported and arrested at work. So, I mean, it's not good for the economy to have a significant share of the population afraid.

38:21Felix Salmon: And it's not just undocumented people are afraid. It's like people who are here legally, who are maybe related to someone who is undocumented, people who are here legally, who look a certain way, that's going to attract interest from ICE. ICE is moving really fast. They're going to make more mistakes also. So that it just. Yeah, all of these stories of them arresting US citizens. Yes. And plus, the number that really jumped out at me from your story was like the share of Hispanic shoppers at Walgreens had gone, or was it Walmart, somewhere like that, had gone down by like 10 percentage points.

38:50Felix Salmon: Yeah. And you're like, wow. you know obviously most hispanics in this country are american citizens you know they ostensibly have nothing to worry about at all and so there is this like insane chilling effect people are wanting to save money either because they're not going into work anymore because they want to save up should they eventually wind up in legal trouble is this gonna have macroeconomic consequences like we've talked so much on this show about the way in which so many sectors of the economy obviously agriculture and hospitality, but many others as well, are reliant on immigrant labor and often illegal immigrant labor.

39:26And Donald Trump came out this week and basically admitted this. He's like, yeah, we can't be just rounding up the people who've been hard workers for 25 years on farms and in hotels. That's not fair. Something's going to change. Not clear what's going to change. Maybe we're at some kind of an inflection point here.

39:43Elizabeth Spiers: I've said before that I think Trump does listen to money in certain cases. So his sort of reversal and his recent statement saying that, you know, well, we're going to carve out exceptions for farm workers and hospitality and whatever, although none of that's happened yet. I think that is coming from pressure from red states where these industries are really important. And I think he always thought about immigration and deportation as an optics issue, whereas Stephen Miller and some of the people executing this really think about it very literally. You know, they want to get rid of immigrants, just period.

40:14Elizabeth Spiers: And I think Trump never really thought that this sort of large scale deportation was really going to happen. He just wanted the optics of it happening. And now that there's some actual backlash. Another thing is that, you know, you were talking about macro factors. There was a big labor force decline since March that people are attributing to immigration problems. But it's not because we're deporting so many people. It's because what you alluded to earlier, people have stopped coming in. And we're very reliant on new immigrants to, you know, staff these industries. Right, because like so many of these jobs are very high turnover jobs.

40:46People don't stay in these jobs for 25 years, actually. I mean, maybe there are a few who do, but most don't. And especially the seasonal jobs, by definition, they don't. You know, if it's a seasonal hospitality job, it'll last for the summer and then it'll come to an end. And so you need to find a new person to fill that job next year. And if no one's crossing the border, if there is no immigration, then it's going to become much harder to fill those jobs and the number of jobs is going to go down. And so, yeah, that's 100 % happening.

41:13Felix Salmon: I mean, I don't know if this is a macro effect necessarily, but something I was doing some reporting on and hoped to write about today is the effect of the crackdown on white collar and professional workplaces. Because those workplaces are now kind of afraid also. And there are all these, I think, millions of people here on sort of temporary status, temporary protected status, a lot from Venezuela and Haiti, who the Trump administration is now trying to get to kick out of the country. and a lot of these people have white collar professional jobs and their employers are like, what do we do? Do we just wait and see how this works out in the courts?

41:48Felix Salmon: Do we, do we tell people, do we fire people? And then at the same time in the white collar professional space, there are people here who came in through student visas who have temporary status and are able to work on some other, there's all kinds of classifications. Felix probably knows better than I do for different foreign born workers. These student workers are also in like a sort of a limbo and employers don't know what to do about them. And these are people who have, you know, research and development kind of jobs, engineering jobs, tech jobs, like, and who provide like real brain capital to the economy overall.

42:19I should mention, because we talked about her earlier, the Russian scientist who came in with the frog embryos and got thrown into a Louisiana jail from Harvard. She finally got released from jail this week. Yay. But she's out on bail. She's still officially being charged with smuggling frog embryos or something insane. But yeah, it was clearly part of the immigration crackdown. You know, the immigration authorities took one look at her and said, you're foreign and you also you're Harvard affiliated. And we don't like either of those things. We're going to throw you in jail. And it is true. It was very hard to find a public statement from sort of Harvard sort of defending her because people are worried about what to say in public, whether the public statements will backfire.

43:01I'm not saying Harvard didn't do anything, but I'm saying that Harvard was careful about what it was doing behind the scenes, as it's what it was doing in public. And employers are in a tough situation, but I do think that so long as they are following the law, you know, as long as it is legal to employ people on under TPS or on J1 visas or, you know, whatever, whatever it is, so long as they are legally employing these people, I don't think it's that hard for them. There's no reason for them to fire those people.

43:31Felix Salmon: Yeah, I just think it's just creating stress and would decrease the number of people that they hire going forward. Also, it would lower demand for foreign born workers.

43:39Elizabeth Spiers: It's because they don't want to become targets. I think they become more conservative in terms of taking any risk of hiring people that are...

43:47Felix Salmon: But that won't have a macro. It's not even becoming a target. It's the risk of like losing the employee, right? If your employee doesn't turn up for work one day because they've been arrested, that's not good for you as the employer. You kind of needed that person to turn up for work. So yeah, I do think that the big picture macro effects, I think Elizabeth is right that we're beginning to see them. I think that Emily, you're right that a lot of it is the lack of immigration more than it is the arrests and deportations, but both of them are pushing in the same direction. Whether it's going to be big enough to make a visible dent in sort of GDP growth, I think it will be, but it won't be a huge one.

44:29I'm thinking like less than half a percentage point, but who knows?

44:32Felix Salmon: Everyone points to like the shutdown of immigration during 2020, which certainly contributed to the labor shortages we had in 2021. Yes, yes, for sure. But again, it's like making those comparisons to 2020, I think never, nothing can be as extreme as that, you know? 2021 in hindsight feels like a halcyon era of like low unemployment, booming stock market, power shifting from capital to labor, all of these wonderful things. Like if the worst that happens is we wind up in another 2021, and I think we're doing okay. I don't think so. I actually think the numbers Elizabeth was pointing to in the labor force, fewer people are coming here is actually at this point keeping the unemployment rate low somehow, right?

45:14Felix Salmon: Because the economy is slowing, we don't need all those workers like we did in 2021. So in terms of macro effects, we might never see them. In fact, it might make the macro economy look good. That's the Bannonite argument all along, right? Is that if you deport the extra workers, then that increases employment among the native born. That's not what I'm saying. I'm saying employment isn't increasing at all. So you don't need those extra workers as much. And keeping the extra workers out doesn't... I'm going to stop talking. I think he's wrong in the way he frames it. But right now with labor demand low and hiring demand low, not having these people, workers come in from outside the country is not having the effect of creating shortages.

45:57Elizabeth Spiers: Yeah. I don't know if that's true though, because these workers are really concentrated in very specific sectors. And so they're not necessarily going to be replaced by domestic workers. It's not a really one for one thing.

46:07Felix Salmon: But think about the sectors, not agriculture, not meatpacking, but hospitality, tourism, that falls when the economy slows, right? And construction also falls right now. Home prices are still really high and the market's really slow and stagnating. There's not as much need for those workers as there was in 2021, 2022. There's a lot of need for new construction. There's need for new construction, but it's not happening because interest rates are high in the residential sector. And also because building costs are high because you can't find any labor. Yeah, I guess.

46:50anyway we should have a numbers round emily you mentioned that you had a number what is it

46:55Felix Salmon: i already said that number that i was going to use but i have a different number the number is five as in five things as in tell me five things you did last week the famous quest oh the doge request Yeah, you wrote about that this week. Yes, I did. I still read Axios, even if I don't write it. Interesting. Yes, the five things email is like this zombie that cannot be killed. As soon as it happened, apparently, Elon Musk in February tweeted he wanted all the federal workers to email what they did last week. Otherwise, you might be fired. He threatened. Apparently, no one in the White House knew about it.

47:27Felix Salmon: It surprised them. Everyone was like, ugh. It was like maybe the first time everyone was on not liking the Elon Musk way. Nevertheless, they put it in place for like a brief period, but then everyone decided, we don't want to do this. This is bad. OPM, the White House, HR people said, agencies, it's up to you whether or not you do this. Plenty of agencies stopped doing this. But still today in June, there are still workers in the federal government that every week go in, they write down the five things they do. This week, I spoke to someone at Social Security who was like, Elon, everyone criticizes us and says we're lazy bureaucrats who do nothing and do meaningless tasks.

48:05Felix Salmon: Well, here is the meaningless task we do. And it was initiated by the guy who was supposed to have us stop doing the meaningless tasks. And it's just like, ah, why? And then I spoke to someone at the Consumer Financial Protection Bureau, which has been like... Wait, does that still exist? Well, there are still people working there, but they're not given work to do right now. And there's like a court fight over whether or not the agency can exist in Congress. House Republicans, Senate Republicans are trying to get rid of it altogether. But anyway, while they're still there, they were never told to stop doing it.

48:34Felix Salmon: But I did speak to one person there who was like, I have stopped doing it because every week I would just write, I didn't do anything this past week because I wasn't given any work.

48:45Elizabeth Spiers: Well, also people who think that this is a good management practice. And so there's a kid at Brown who runs the Young Republican Club who apparently emailed all of the administrative staffers and demanded that they tell him what justifies their salary and their jobs. Oh, bless. He was like, my tuition is paying your salary. It's like, it felt very Stephen Millery.

49:07Felix Salmon: Yeah. I wrote about it that it was, I think I did anyway, or I pitched it. I don't even remember, but it's not a good management tactic. There are better ways to figure out what your staff is doing every week than forcing them to email about it. You could ask them, you could use AI. There's just a lot of other ways to go about doing that. You can measure results somehow. Good luck with that. My number is 257 million, which is an arts funding number. And let me just ask you two, Emily Elizabeth, did you think that under Donald Trump, arts funding would go up? No. Well, 257 million is the number of dollars that the House of Representatives, a committee in the house has proposed that should be allocated to the Kennedy Center this year, which is more than five times what it has ever received in previous years.

50:02Its entire operating budget last year was 269 million. So basically, its entire operating budget, minus like a sliver, they're saying we should just get from the federal government. Historically, the federal government provides about 16 % of the funding for the Kennedy Center. But yeah, basically what happened is that Donald Trump came in and fired the entire board. He appointed himself chairman. He got rid of all of the woke programming. He turned up for a big fundraiser-y Les Mis thing this week, last week, something like that. And so historically, most of the revenues of the Kennedy Center have come from either donations or ticket sales.

50:38And because there's no programming anymore, there aren't any ticket sales. So what programming that is tends to be free. So there's no revenue from that. And the donations of all of the people who wanted to support the woke programming, obviously those have gone to zero because there is no woke programming anymore. And so, yeah, guess what? Now the Republicans are stepping in and saying, let's provide federal funding for the Kennedy Center.

51:00Elizabeth Spiers: Well, this is, conservatives are always willing to fund the arts as long as you're not talking about the kind of art that's created by liberal commie hippies. Which is all art, really. Yes. Texas was trying to pass a tax exemption for movie studios to move to Texas, but their restraints were the stuff these Hollywood studios were going to make. It had to be not Christian in nature, but there was a sort of like G-rated gloss to all of it. It was like, you know, no profanity, no. And it's like, well, that's 90 % of Hollywood. So you're saying that like, no country for old men would not have got funding?

51:33Elizabeth Spiers: No. No. Oh, well. Elizabeth, what's your number? My number is nine, and that's euros. And that's how much you can pay a one-time fee to use browser dating, which is a dating service that matches you based on your browser history and your last 5 ,000 searches. What?

51:53Felix Salmon: That's not real. It is real.

51:55Elizabeth Spiers: The developer is a guy named Dries de Porter. He's Belgian. And so far, fewer than 1 ,000 people have signed up for this.

52:02Felix Salmon: Wait, that's amazing because your browsing history is like the real you. Yeah.

52:06Elizabeth Spiers: Well, that's his theory. It's like, they're matching like the real you. The person you match with presumably doesn't get to see your grouser history. They just know there's some algorithm. The algorithm just determines that this person is just as twisted as you are, and so you might be a good match. I mean, it's kind of genius. And it's not like nine euros a week that it would be if it was American. It's a one-time nine-year fee, and then like, yeah. Go Belgian guy. I love it. It's terrifying and dystopian, but also amazing.

52:36Felix Salmon: Wait, what's the name of the service? Browser Dating. Browser Dating. Okay. That could do a better name probably. I'll allow it. We should ask ChatGPT for a better name. On it. That's it, I think, for us this week. Thank you so much to Jessamyn Molly for producing. Thanks to all of you guys for sending in your emails, slatemoneyatslate.com. Thank you, especially to all of the people who messaged me privately on, on learned league. You guys are amazing. I love you guys. And thanks for the email saying that you love the conversation with Barry Lamb, which we had last Tuesday about philosophy where I nerded out and I had so much fun on that one.

53:17But yeah, we will be back next week with yet more slate money.

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