The Nvidia Honeypot Boils Over

0:09Hello 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.

0:21Felix Salmon: Hello, hello. And Elizabeth Spiers of New York Times. Hello. And we are going to talk about NVIDIA, the CEO and chairman of which Jensen Huang is now neither. He has resigned amid scandal. Stock is down. There is much to unpack. Howard Lutnick seems to be having a bad week. We're going to talk about that in depth. We are also going to talk about the state of the states. What's their fiscal situation looking like? And what is Washington state in particular going to do about it? we have a sleep plus segment about grand theft auto because this thing is going to enter the discourse one way or another god damn it it's all coming up on sleep money

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2:22Felix Salmon: Affairs takes a nonpartisan look at the stories that matter most to investors, including policy initiatives for retirement savings, taxes, and trade, inflation concerns, the Federal Reserve, and how regulatory developments can affect companies, sectors, and even the entire market. Mike and his guests offer their perspective on how policy changes could affect what you do with your portfolio. Download the latest episode and follow at schwab.com slash Washington Wise or wherever you listen. Okay, well, there's only one big business and finance story this week. Oh, my God. Jensen Wang, Emily, for anyone who's been under a rock, bring us up to speed here.

3:05Felix Salmon: Oh, my God. Are you serious? Okay, I will do my best to bring us up to speed here. So So for like more than a year, there's been this reporting of Jensen Huang having maybe a relationship with a Chinese woman that looked kind of suspicious. At the same time, there was also reporting that one of NVIDIA's clients called Megaspeed was maybe basically like a front for Chinese AI companies trying to get NVIDIA chips. So NVIDIA would sell Megaspeed the chips and then Megaspeed would get the chips into the hands of the Chinese companies that maybe were having a hard time getting the chips. And this seemed to sort of be happening at a low simmer for a while.

3:51Felix Salmon: There were reports in the New York Times, in Bloomberg, where you guys work. And no one seemed to care very much. Least of all Howard Lutnick. Least of all Howard Lutnick. Least of all Donald Trump, who was BFF with our bro Jensen flying to China, stopping in alaska to pick him up that was wild so basically there was this just like massive fight between marco rubio and howard lutnik and marco rubio is this big sort of china hawk he's like we can't allow jensen huang and nvidia to sell national security chips to china and howard lutnik is like we want exports all i care about it's a trade deficit if we can export chips to china that's great and marco rubio gets jensen like uninvited from the trip to china and then donald trump is like no i like this guy he has lots of affairs or something and so he literally stops air force one in alaska where it's like refueling it's like jensen come on so jensen flies up in his own private jet to alaska so he can then get onto air force one and join the trip to china there's so much drama in the trump white house about this there's a story in the times earlier about scott bess and howard letnick are fighting over this oh really you shock me this morning this morning where he said basically those of us who deal with the China issues of security said, you know, Treasury does, state does.

5:18And then he goes, but commerce really holds the pin and immediately pinned the whole thing on Litnik.

5:23Felix Salmon: So basically it comes out and then Jensen Huang is having this affair. There's like the reporting looks really good. The women from Megaspeed, Alice Huang also, same last name, but no relation. And this comes out in the New York times. And then what happens, and I think this is very important, Wong admits it. This was almost a week ago now, Sunday night. It took him like a week or two to admit it, but he admitted it in the end. He emails his whole company where his children work and says, I'm so sorry for letting you down. This was a Sunday night. By Thursday, four days later, he had resigned.

6:01Felix Salmon: It happened that fast. There's so much to unpack here, but let's just start with the fact that the final nail in the coffin with hindsight was the piece in the New York Times saying, yeah, he's been actually having an affair with Alice Wong. Who could be a spy. And that came from Jonathan Swan and Maggie Haven. It was a White House leak, basically. This was clearly Marco Rubio, who was known this for a year, finally managed to get this out into the public. And so it's interesting that basically he won. He'd been wanting this for a while and now he's got what he wanted. That is one interesting part of the story.

6:41I think he wrote a big memo when this first came out and circulated it, but it wasn't really intended for Trump. They thought they would just explain this to him and he would understand the significance of it. But that is sort of a wild misunderstanding of Donald Trump for two reasons. He doesn't want long out because he's very aware that NVIDIA stock could be affected by it. But also, he doesn't care if anybody has an affair. And I think that was the first thing that sort of he was like, well, I don't see why this is relevant to anything. On some level, I'm sympathetic. Like, I don't think it was that relevant.

7:15Like, if the idea behind the scandal is that Alice Wong sort of honeypotted her way into persuading Jensen to sell a bunch of chips to China, like, no, Jensen has always been pro-selling chips to China. He has been incredibly consistent about this. She was pushing at an open door there, you know? It is very easy to make the case that she didn't have any effect at all. And he would always have sold chips to Megaspeed or anyone else who wanted chips because that's what he's done always. But the reason why he's a security risk or the situation is a security risk is not really because of the chip sales.

7:54It's because of anything else that he might have told her that she would then relay to Chinese intelligence.

8:00Felix Salmon: Right. It's also interesting that it seems it's not obvious and we haven't you know, we will never see the minutes of the board meeting, which went on for many, many hours. But it does seem that the sort of proximate cause of Jensen Wang being fired by the board of NVIDIA was that he violated company policies about having an affair with direct report rather than anything to do with Alice Wang at all. Yeah, we should say after the Alice Wong reporting came out that in the New York Times, you know, said this is an affair, the NVIDIA board, I feel like maybe reluctantly, the reporting is a general counsel inside NVIDIA sort of pushed and pushed for this.

8:41Felix Salmon: The board was like, OK, and they hired Wachtel to like investigate what happened or whatever. And then three minutes later, yeah. Yeah, like three minutes later, another report drops that, no, Jensen Wong had also had a romantic relationship with an executive. I think she's in charge of like the health wing of NVIDIA or something like that. And then that was like a bridge too far. And then the reporting came out. Okay, the board is now meeting to plan for his ouster and replacement. So, yeah, it was that second report that seemed to really catalyze things. Without it, maybe we would, on this episode, be talking about the investigation and what comes next or whatever.

9:19Felix Salmon: But it was like, no. But statistically speaking, Emily, I just need to ask. If you have 60 direct reports, statistically speaking, you have to be having a affair with at least one of them, right? I mean, what are you going to do, right? I love there's an old Charlie Munger quote where he says there are three ways that smart men lose money. Ladies, liquor, and leverage. Jensen Wang is still an extraordinarily rich man. And actually, one of the interesting reasons why NVIDIA stock fell, part of it was this was the ultimate key man. He was so central to NVIDIA since its founding that no one can really imagine NVIDIA without him.

9:55And he kind of knows a bunch of stuff about how it works that no one else on the planet knows. And people are worried about, like, well, how is NVIDIA going to continue to be NVIDIA without the one guy who basically encapsulates everything that is NVIDIA? There is also, however, the question of like now that he has been pushed out of NVIDIA, is he going to pull a Steve Jobs and just sell all of his NVIDIA stock? That alone would be like a massive downward pressure on the stock, especially if at some point he winds up getting divorced because it really does seem as though he was not in some kind of an open marriage.

10:32He's not like some Eric Schmidt figure who's going around with multiple women in multiple countries.

10:37Felix Salmon: It's actually really sad. I was reading a good story. I think it was Bloomberg Friday morning. They met at school when they were just 17 years old. She was his first girlfriend, and it took him six months to work up, according to the reporting, six months to work up the courage to even ask her out. She gave up. She was an engineering student as well. Gave it up to, you know, raise the family and stuff. I mean, it sounds like things went to his head. I don't think he's going to begrudge her 50 % if they do end up getting divorced. She deserves, oh yeah. And he is still going to be worth like$80 bazillion even if she does get 50%.

11:16And I don't think that he thinks that he is a better steward of that money than she is. If he doesn't have control of the company, now they just both walk off into the sunset with billions but without their love.

11:27Felix Salmon: Yeah, they'll be fine. What I think is interesting, just to get back to the Rubio and Lutnik and Trump of it all, is this seems to be like a real crack in the corporate White House alliance that has ruled our time since Trump returned to office in 2025. And we all commented on the picture of all the tech executives at the inauguration. Wang wasn't there, but he quickly ingratiated himself with the White House, pledged the company, NVIDIA, pledged to invest a half a trillion dollars on, I don't know, stuff. Who knows what those pledges mean? Wang himself,$25 million to the ballroom. He's negotiating deals with the White House, talking to Trump about why he needs to sell his chips to China.

12:15Felix Salmon: And they did change the rules from whatever the Biden administration had wanted to do. They bent the rules and relaxed them for NVIDIA. It was like a very intertwined relationship and a very like maybe like one of the biggest examples of sort of like how this White House has kind of operated with big tech, you know. And the fact that Wong couldn't keep his job through this scandal, I think, tells you something about how the midterms kind of changed the power equations and the link ups between corporate America, big tech slash and the White House. There's a big schism in the White House over how we should interface with China, especially on a commercial basis.

12:56And this really kind of exposed the cracks. And on one side, you have Rubio and Besant who say this is obviously a horrible thing and we need to remedy it. And the sort of Peter Navarro types who are just hostile to China generally. And then Lutnik and Trump are really coming at it from, you know, a sort of markets and business perspective. And I don't think they've changed their position. And Trump called WAG on Tuesday and told him to fight for his job.

13:20Felix Salmon: And it's interesting he didn't. Like, the typical Trump playbook is to fight for your job. Even if you have a bunch of affairs or do whatever, you usually can stick it out. But in this case, we should talk about why that didn't happen, because it actually feels surprising. Because he only had common stock and he didn't control the board. Elon Musk has weathered way worse scandals than this. But he controls the board and he can do what he likes. Mark Zuckerberg has dual-class stock and controls the company and can do what he'd like. Meaning he cannot be fired by the board because he controls the board.

13:53And I feel like Larry Ellison, I think, controls the board as well. Like, it's quite common among sort of founder billionaires to have a huge degree of control over the company, like, inside the governance of the company. And NVIDIA was really an outlier in that respect. Huang did not have dual-class stock. You know, they were founded in 1993. And I think at that stage, tech company founders were not building companies with that sort of equity structure.

14:21Felix Salmon: When did dual class become popular, Felix? Around the point of the Facebook IPO is, I think, where things really started changing. But this is why I say it reminds me much more of Apple. When Apple got rid of Steve Jobs the first time around, it reminds me a little bit of that. And honestly, to be, there is a little part of me that thinks that Jensen could pull a Steve Jobs and come back. It is not impossible. I mean, the company is twisting. I mean, it's only a few days, but I mean, the stock is down. I mean, surprisingly, not as much as you would think after the ouster. Like it fell like 14%, but then it came back.

15:00Felix Salmon: It was only down like 4 % for the day on Thursday. Exactly. Have you seen the, I mean, we'll see early next week when the earnings come out. But all of the expectations are that its earnings are going to be like up 100 % year on year. Yeah, of course. NVIDIA is making so much fucking money that it's impossible for it to trade down too much. Like it already is trading at one of the lowest PE multiples in the S &P 500. It's a good buy, right? I mean, I'm no Jim Cramer. NVIDIA is a value stock at these levels. And on some level, it kind of, to go back to the Apple analogy, this could be the perfect time for Jensen to leave, right?

15:38It is now this$4 trillion company. It's making more money than God. And it kind of needs a Tim Cook type person who can just run a massive money-making operation rather than some visionary founder who's fucking all of his underlings. You know? Cook is kind of being floated as a potential replacement. there's no way like i will eat my hat if tim cook comes into running video like that guy the last thing he needs is another like mega cap tech company to run plus he'd have to change his

16:12Felix Salmon: name from tim apple to tim nvidia it doesn't really doesn't doesn't roll off the tongue i do think there's a world in which they become a much more normal looking company with much less key man risk and much more succession planning and a chairman and a CEO who are two different people and all of the stuff that is not, you know, everyone claims to want in public companies. And that this is good for the stock rather than bad for the stock. It's entirely possible. That's possible. And I think I always want to come back to Microsoft because, you know, it was NVIDIA, Apple and Microsoft sort of vying for highest market cap for a while.

16:49Felix Salmon: NVIDIA was on top and now it's really come back down. The stock is down like 25 % in the past month or something and like Microsoft just stealthily staying up there with its boring boringness of you know and once upon a time it had a fiery founder CEO Bill Gates or whatever exactly like we remember Bill Gates you know he can't he's very aggressive he fights with his co-founders he's constantly playing the underdog the whole antitrust thing was about how he still thought that Microsoft was the underdog even when it was a world-beating monopoly and you know he did build a very big and very powerful and very valuable company.

17:26But then Satya Nadella comes in and oh my God, it turns out that you just put a decent manager in charge and it's amazing what you can do.

17:35Felix Salmon: We just black out on the Steve Ballmer years. Oh, we totally black out. Like Steve Ballmer was, you know, he was employee number five or something at Microsoft. He was still also in that early stage mindset. Founder vibes. Founder vibes, yeah. Well, also, you know, you look at the arc of NVIDIA and before the big AI boom, they were making GPUs and the sort of market logic was people will use this for VR. And so part of their incredible growth is just being one of the few players in the market when demand for GPUs went up so high. And so it's hard to kind of like point to the CEO and say, this is entirely about his genius.

18:11There's a little bit of a right place, right time element to this. Oh, certainly. Yeah. Jensen did a really good job of sort of pivoting first from just we make graphics chips for video gamers to, oh, these chips are really good for crypto mining and like getting a bunch of crypto mining. And then before the crypto bubble even peaks, he's like, wait, hang on. We can pivot from crypto mining to AI. and because he was running a large corporation with like real positive cash flows, he started investing in every single AI company that he could find very early on. There was an element of right place, right time, but there was also genuinely an element of, he was the visionary who saw where this AI drain was headed and really just bet everything on it to enormous success.

19:05Felix Salmon: And that's one of the big questions now, right? I mean, NVIDIA is the central bank of AI. They have investments and commitments to all the little and medium-sized and big companies in the AI orbits, your NeoClouds, your frontier model firms, all of that. like nvidia has its little money hooks into everything and then sort of the question now is like is the next ceo gonna pull back a little bit from all of that support and what's it gonna mean overall for all these little companies and some people are sort of saying and that will be the end of the ai boom but i think it's more like and that will be a huge win for your microsoft your meta like all the deep pocketed players that didn't need nvidia's support in the first place really come out looking great.

19:53I don't think NVIDIA is going to pull back one bit from that. They are making so much money and their shareholders are not saying we want dividends. Their shareholders are saying, keep on investing this money in as many different parts of the ecosystem as you can in order to lock in as many different parts of the ecosystem as you can to the NVIDIA architecture and make it as hard as possible for other chip makers to be able to compete with you because everyone is just building their entire models and everything on nvidia

20:23Felix Salmon: architecture so so you're very like this is a blip like the stock will come back this will be fine they'll get a grown-up to come in i'm just saying that like it is absolutely true that jensen wang was the architect of the it's almost like a chai bowl style strategy of just invest in everything but it obviously worked you know it's one of the many things he did that worked really well. And if it is still working, and I think it obviously is still working, then why would they stop doing that? Well, this new lady, Colette Kress, who apparently had a little friction and beef with her and Jensen towards the end, she was a little bit more hesitant as the CFO.

21:05Felix Salmon: So I don't know if that lasts or if it matters. I mean, she is very important. She's the CEO. She has an incredibly big job ahead of her, but also no one expects her to be the CEO for the long term. Everyone expects that an engineer of some description is going to take over the company, and they just need to find that person. And the number of people on the shortlist is tiny, but it could be the woman who's running AMD, which is the other big GPU filmmaker.

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24:38Let's just talk a little bit about the way in which NVIDIA grew so fast that it became this$5 trillion company without having any real corporate governance at all. The concept of having a$5 trillion company where the CEO has 60 direct reports, it's like, what? And I think you only do that in the middle of a sort of AI bubble, or at least AI hyper growth. He also refused to hire a COO for principled reasons, but I don't know what they were.

25:07Felix Salmon: I was talking to someone, apparently he had a second in command back in 2023 who left, and then he offered the job to someone else who didn't take it. And then I guess either was like, I'll just do it. I'll just do it myself. Okay, I'll do it myself. Yeah, we'll do it live. No, he was just like, yeah, I'll do it myself. I can't find the person I want. And maybe part of that was like the, I mean, before 2022, 2023, it was just like a small company. It's grown an insane amount in a very short time. Like things got out of hand. I think part of it is the demand is so strong, even if he is not the best manager for this company at this stage.

25:49And, you know, he's apparently a little bit of a control freak. This is why he has 60 direct reports. And he can be very mercurial. And so I think part of what's happening is just the company might have outgrown him, but you wouldn't have any way of telling that because it's just it's doing so well. There's so much demand for the product. How do we know?

26:08Felix Salmon: Who cares it's not being run well when it's turning out these profits and this growth? Like, just let it go. We thought there was a Jensen Wang premium. Maybe there's a Jensen Wang discount. And like, it'll turn out that if you just put some halfway's normal professional management into this company, it would have done even better than it did. And it will turn out to do even better than it would have done with him running it. The one thing it doesn't have, as you say, is the BFF friendship between Wang and Trump. and it's probable that the new NVIDIA is not going to be able to make as much money as the old NVIDIA did by selling chips to China.

26:49I just don't think that was a meaningful amount of money. Yeah,$7 billion sounds like a lot of money to go through Megaspeed or something, but$7 billion in the context of NVIDIA's revenues is a rounding error.

26:59Felix Salmon: But let's unpack, I mean, Wang's argument was more like, we shouldn't restrict the export of our technology or our chips because it's to our advantage that China uses our stuff rather than get walled off and develop their own stuff that people start buying. And then America doesn't control the AI business anymore. What happens to that argument now if the Rubio and the China hawks rule the day? Does that mean actually, longer term, this is kind of like a loss for America's command of the AI sector and future. If you were sympathetic to that argument, if you're someone like Trump or Lutnik, who was sympathetic to that argument, then you are definitely feeling like this is a blow to your cause right now.

27:48It does remain to be seen just how much things are going to change. And I think it depends in a very large part on who they pick to run NVIDIA going forwards. There's going to be a really important strategic decision that that new CEO is going to make about do we continue to lobby Lutnik and Trump and try and continue with this Jensen Wang ideology of NVIDIA and America should control AI and the way we do that is by controlling the whole world rather than allowing China to build their own stack or do we concede the Chinese market completely and just become the sort of we're going to power Western AI and there's going to be this big power struggle between Western AI and Chinese AI and may the best man win.

28:40Felix Salmon: Seems like a mistake given how good China is at doing stuff and selling stuff around the world. Just looking at the, I don't know, electric vehicle market. I mean we just recorded an episode about coffee. NVIDIA can sell chips to China, just not their highest end one. So it's not like the Chinese market is entirely close to them. That's fair. That, I think, is probably the most likely outcome in the sort of next six months or so, while we have this interim CEO, is that she's just going to more or less continue, but without doing stupid fucking things with Megaspeed. And not having affairs. With any luck, she's not going to have affairs with subordinates.

29:21Yes, let's not have two successive CEOs. I mean, when was the last time that a female CEO got in trouble for having an affair? I feel like that just doesn't happen so much. Has that ever happened? Although it's funny because the whole history of honeypotting partly comes from the German Stasi. The honeypots were all men called Romeos and they would seduce the sort of like assistants and secretaries to get all the secrets. You know who the most famous honeypot in World War II was? Roald Dahl. What? Who went on to become Roald Dahl in the children's book author. But during World War II, he was like this dashing young man who lived in Washington, D.C.

29:58and seduced all of these powerful women in Washington and got them to sign on to the British interests in the war.

30:05Felix Salmon: What? Oh, yeah. But why? But that's what I don't understand. Like, the Americans were already down with the British in World War II. Like, what did they mean? Oh, they weren't. They really weren't. No? No. The Americans were kind of suspicious of the Brits all along. You know, it's a little bit like the Americans and the Ukrainians right now. Technically, they were allied, but like, eh. Interesting. Oh, my God. I wonder whether Ukraine has any male honeypots. Some of these honeypot relationships can go on for like a very long time. Like I was reading about decades-long relationships. Yeah, they're marriages.

30:38Felix Salmon: Like the Chinese spies really play a long game. I mean, this story is really broken through. Like all my culture podcasts are talking about it. All the politics podcasts are talking about it. it's really all the fashion podcasts because now leather jackets have some yeah leather jackets in the discourse again and yeah and i just want to stand up for leather jackets here i am i'm going to come out against the new york mag hot take saying that like everyone could tell that he was fucking around because he was wearing leather jackets no like leather jackets are just a thing that certain types of men like it does not mean you're having an event and he's been wearing them for 20 years.

31:16Felix Salmon: How about everyone could tell because he was signing women's breasts at press conferences? That's a more of a tell. A bigger tell. But Derek Guy, I think Elizabeth, you shared his post or Felix, I don't know. We have a very active Slack channel sometimes. And he was saying that the reason or an explanation for the leather jacket was like, in the tech industry, you cannot simply, if you're a CEO, you cannot simply wear a suit and tie. Like that went away by the 90s and there had to be the casual look. And then with Zuckerberg and all those bros, there was like more of that sweatshirt look. But not all men look good in sweatshirts and things like that.

31:54Felix Salmon: So Jensen Wang had to figure out another casual look that kind of works and looks pulled together. And where he landed was a leather jacket, which somehow can signal rebellion, even as it costs like$1 ,000 or more to do it, right? I think it's the black motorcycle-style jacket that people think of as being more punk rock. Like James Dean, Marlon Brando lineage. Arnold Schwarzenegger in the Terminator. Iconic leather jacket look right there. So let's talk very briefly about the stock market because people care about that. NVIDIA has been driving stock market gains, at least until this year. We've had this kind of K-shaped stock market for a while now where most stocks are kind of going sideways, but all of the gains are being driven by a handful of mega caps.

32:49If NVIDIA has lost all of its momentum, and it has for a little while, but now especially it's back down, is that going to have a broader effect? I feel like for a minute there this week, there was people going, this is going to burst the AI bubble and catastrophe is going to ensue. And I think the consensus is, you know. I think we've had a few little dips in the last few months. And invariably, they last for like a day. And then the market bounces back. Is this going to be like FTX collapsing in crypto? And then like it goes down and then it just bounces back up again?

33:23Felix Salmon: I mean, it does seem like the AI bubble, or if that's what we're calling it. And I don't know. We've talked about we don't like calling it a bubble or whatever. But it seems like it moves from sector to sector, company to company. Like for a while, it was like the memory chip makers, all the semiconductors went up a ton. And like for even before the NVIDIA thing, they were coming back down. Then there was like the SpaceX thing. Like it just kind of like moves around a lot, which kind of reminds me of like the internet cycle as well. So I don't know if like you're going to have a definitive. Everyone wants a definitive moment.

34:01Felix Salmon: like the bubble has burst but like that's not really like how it works in the modern stock market like there's a lot and we have this going on we have this anthropic ipo which is coming up what next week it's already 10 times oversubscribed or something it's going to blow through the original price guidance and price much higher they're going to raise more than 100 billion dollars you know i feel like this sector this news cycle is moving so fast that the idea that You can have NVIDIA CEO ousted one week and Antropic IPO-ing the next week. It's like, oh, yeah, that's normal. And the narrative driving the market, we're going to forget about Jensen Wang within about five days.

34:39I think that's right.

34:40Felix Salmon: It feels like I'm drinking the Kool-Aid of all the research notes that I have to read for my job. So I'm not sure that's right. But it might be right. This thing is really big. And you can let a little bit of air out. And it's OK. But that also seems counter. I don't know. I don't know, you guys. It's almost as though no one knows what's going to happen to the stock market. It's like you can't predict the future. No one knows anything. Well, I'm going to predict an IPO for Anthropik in the future. We'll see. I'm pretty confident in that prediction. Yeah, we know what we're talking about next week.

35:14Felix Salmon: Anthropik IPO, NVIDIA earnings maybe will come up and this whole thing rolls on. Exactly. And something else crazy will happen. There's always more crazy, which is why this show has been going for 12 years. Will Lutnik retire or be forced out? Who can say? We don't know. I do think that Elizabeth is right and that ultimately Trump's... Wow, can we replay that? Yeah, I think Trump's intuitions are aligned with Lutnik's. And it does seem that Rubio has won the battle, but I'm not sure he's going to win the war. I mean, there's just one guy in that in that Oval Office with all the golds. It's not Marco Rubio.

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37:41Let's move on and talk about something completely different, which is a fun fact I learned this week. Somewhere in the 1930s, Washington state passed a state constitution saying that it was not allowed to levy an income tax. And that is why, to this day, Washington, which is like this liberal enclave on the West Coast, has been like Florida or North Dakota or somewhere, one of those libertarian places that doesn't charge an income tax. There's this weird sort of constitutional reason why they don't have one. And they're like, this is stupid. We should have an income tax. But, of course, you want to gradate these things.

38:21You don't want to just come in and impose a massive income tax on everyone overnight. Right. So what they've decided to do is start with, you've got to love this, start with the millionaires and not the millionaires as in people who are worth more than a million dollars. But the millionaires were in the contemporary meaning of the word, which is people who earn more than a million dollars a year. Emily, you've actually been reporting this. So how's that going?

38:46Felix Salmon: I mean, not bad, honestly. I mean, so earlier this year, the Washington state legislature passed this millionaire's tax 9.9%. If your income is over a million dollars, the first dollar over that gets taxed 9.9%. Okay, not so bad. Don't freak out. Do you pay 9.9 cents of your million and first dollar? If you earn a million and one dollars a year, your tax bill is 9.9 cents. Well, there's other taxes too. They also passed a capital gains tax, but I don't want to talk about that because it's harder to talk about. So they passed it and then, you know, millionaires got upset and the election's coming up.

39:27Felix Salmon: So they did a ballot initiative. Of course, of course, everyone loves a ballot initiative on the West Coast, it feels like. And it was like, basically, let's get rid of the millionaires tax. We should ban it. And Washington voters were like, yeah, no. They said, well, we're going to keep the millionaires tax. And I was really interested to hear about it because I don't really follow Washington state politics, you might be surprised to know. But for some reason, I read a report from the ITEP, which I can't remember what it stands for. But they said, you know, Washington state has this millionaires tax.

39:58Felix Salmon: Voters supported it. Colorado, they had a flat tax. So everyone paid the same tax rate, which obviously is regressive, not very progressive. So they voted to do something more gradual, which will mean that for a lot of people get a tax cut, but rich people get a tax increase. And so I was just interested because, you know, we have mentioned a few times now in Slate Money that this wealth tax in California got voted down. So I was kind of like, I guess people don't want to tax the rich. But then it turns out, actually, if you structure it in a different way, some voters do want to tax the rich.

40:34Felix Salmon: And these proposals are getting through. In California, people do still want to tax the rich, but there's a super majority requirement in the state legislature that makes it the sort of interest of billionaires a little skewed. Yeah. And also, California had a different ballot proposition that wasn't as sexy, which was just like, are we going to keep our tax brackets for higher earners? Or are we going to get rid of them and give the higher earners a tax break? and voters in California were like, let's keep taxing the higher earners. So I was thinking, and maybe Felix wants to talk about this, there is maybe a distinction between income taxes and wealth taxes or something.

41:12Felix Salmon: Like maybe the California wealth tax was just like a little, the way it was structured, people just didn't like it as much. Some Democrats opposed it. It was a dog's breakfast of a proposal. I mean, the only good thing about it was that it was a wealth tax. And I think wealth tax is in a world where it is more and more easy to make all of your money in the form of capital gains rather than income. And there is a sort of clear need for some kind of a wealth tax if we're going to be able to tax all of this wealth creation at all. But the way that the Californian wealth tax was structured was just terrible.

41:48It was like this one-off thing, and it all went to healthcare workers for some reason. It was all backed by the healthcare workers, and the teachers were like, why don't we get any? and like, no, you want it to be part of the fiscal policy of the state. You know, you want it to be like built into the tax revenues of the state and then the state has spending and you fund the spending through the tax revenues. None of this like bullshit sort of like, let's have a one-off wealth tax and give it to nurses. No, that's stupid. But partly because it was so stupid, it was quite easy to defeat. There was another, I think it was like Proposition 42 or something that made it harder to implement a new wealth tax, which I think was that one passed.

42:29And so it's going to be interesting to see whether California can do it. And then, as we have discussed many times on this show, in California, the problem is not the state constitution, it's the federal constitution. And just getting any kind of wealth tax passed the Supreme Court, especially the current Supreme Court, will be very difficult.

42:45Felix Salmon: Federal wealth tax. Oh, no, no. Even the state wealth tax can violate the federal constitution. That's why there aren't any state wealth taxes right now. So, like, we don't know. The Supreme Court has not ruled on this. But if this were to happen in any state, then it would certainly get appealed to the Supreme Court. And I think the Supreme Court, knowing who's on it, would probably find that the state tax was unconstitutional, even though, in principle, they like to defer to the states and they believe in the states' rights and all the rest of it. We don't know. There's lots of moving parts here.

43:17The interesting thing to me is the way in which Washington is basically saying that they're not trying to amend the Constitution, right? They're trying to just push this through somehow in the face of the Constitution. and they're hoping that the state Supreme Court, when it finally winds up in front of the state Supreme Court, which it inevitably will, is going to find that 1930s constitutional ban on income tax was like badly drafted or illegal or something and strike it down. But we will see. There's a lot of ways that this could yet die. And it could yet die in practice, if not in reality, just if the seven-figure earners in Washington state manage to find various tax loopholes that effectively converts their earnings above a million dollars into capital gains rather than income, which if you're at that level of wealth, it's not rocket science.

44:17Like, it's quite easy to do that.

44:19Felix Salmon: Another reason I've been interested is just that states are, there's like a little bit of a fiscal squeeze going on with states right now. And it's like kind of like nerdily becoming increasingly interesting to me because of a lot of road construction where I live. But because apparently after the financial crisis in 2008, a lot of states had like these budget crises. A lot of states had a lot less money and they stopped spending a lot of money on their infrastructure. And they just sort of like muddled along for a long time. And then just as like things were coming to a head and everything was kind of falling apart, the pandemic hit and the federal government was like, states, would you like a lot, a lot, a lot of money and like have fun with it.

45:00Felix Salmon: And the states were like, oh, thank God. And like had tons of money to spend. Now that money is kind of like going away. And the federal government meanwhile is like, do states really need money? Who can say? Like maybe the red states do, but not the blue states. And there's all this climate change happening, which is like speeding up the destruction of roads, bridges, means like you have to protect against floods, all this like bad weather and stuff. And states are like, well, shit, we need a lot of money. But they've spent the past 15 years cutting taxes for everybody and like taking in less money.

45:32Felix Salmon: So they're kind of like in a real jam. And apparently municipal bond issuance is up because they're borrowing money to do like one off stuff. But you can't use municipal bonds to do like the regular stuff. They need more money. They're going to need to do something. And it seems like at least in like Washington State, Colorado, they're like, what if we tax people who make a lot of money? Like that just seems like it makes kind of sense. But then you have these other states, like you have Florida that just passed this like bananas property tax cut that they're like, even some diehard, no tax conservatives are like, I don't see how Florida can do this.

46:10Felix Salmon: And they're not going to have like firefighters anymore. Like it's going to get kind of crazy. And it all comes in the, I'm sorry, I'm really going off, but I'm like obsessed with this lately. And it all comes in this context where conservatives have spent the past, like, I don't know, 50 years, 60 years convincing Americans that, like, taxes are un-American instead of, like, patriotic things that we do to, like, live in a society together. Something probably needs to give around the issue of tax. And it seems to me if people don't want their own taxes to go up, then it makes sense that, like, tax the rich is the thing that's coming up because they are still a minority, the rich people.

46:47Felix Salmon: So it would make sense that that's who gets taxed. I do think that there's been a lot of talk about the sort of fiscal reckoning in the United States. The fiscal reckoning. And the way in which the budget deficit is unsustainable and the United States is going to have to start getting its tax revenues much closer to its expenditure because we can't go on like this. Everyone and their mother has been talking about this for a few years now. But the federal government does still have the ability to borrow effectively unlimited amounts of money on the bond market in the way that the states do not.

47:23And so, yeah, I think what you're talking about at the state level is an interesting sort of trial run for what is inevitably going to happen at the federal level. But it will happen at the state level first.

47:33Felix Salmon: Can I quote you? You can totally quote me. I have to say, when I was like doing the reading and reporting on this a little bit, at the same time, I was like, yeah, and taxes have to go up. and like rich people should pay their fair share, whatever. I like came across an article about where I live and someone was like, my town is planning on raising property taxes by 28%. And I was like, oh, hell no. I should also mention that fiscally speaking, we are way past the, there is this sort of liberal fantasy that it is possible to raise taxes on the rich and not on the middle classes and like even out the fiscal math that way.

48:13And it just is not. The budget deficit is so enormous that you are going to need a middle class tax hike. It's not enough. The rich are rich. They do have a bunch of money, but they don't have enough money to be able to do it all themselves. Really? What about Elon if we just had a liquidate Elon? They would. I mean, they're just – No, they would not. Really? Really. I think the math would math there. I know you think that, but I think you're wrong. I hope you're right. Yeah. Everyone would love it if you were right. I just – I think that train of sails. They used to be the case, but not with deficits and debt levels where they are, and not with interest rates where they are, which, of course, massively increases debt service costs and all the rest of it.

48:52Felix Salmon: That's the problem with the borrowing of the unlimited money, is the stupid interest rates that keep going up.

49:09Talking of numbers, should we have a numbers round? My number is 721 ,000, which is the number of BMW cars that now need to park outdoors because they have a defect that might cause a fire. And so the National Highway Traffic Safety Administration has said that until they're fixed, you have to park them outdoors because you don't want them like exploding indoors and, you know, causing your building to collapse. But you don't want them exploding outdoors. Yeah, I feel like also BMW owners are just going to ignore it. There's a consumer alert that went out Friday. It says, if you have one of these vehicles, you should park your vehicle outside and away from buildings and other vehicles until the vehicle is repaired.

49:58Felix Salmon: Oh, my God. What are they going to do in Greenwich with all the leaves on the ground right now? Or in Brooklyn where you can't really move your car to an outdoor location. Away from other vehicles. Yeah, there is no away from other vehicles. I think if you have a BMW in Brooklyn, you just need to drive it to Staten Island.

50:19Elizabeth, do you have a number? My number is 4.3 million. And that's the number of followers for the Peanuts Instagram account, Snoopygrams. And this was part of a story about how Peanuts worldwide has just been licensing Snoopy and Charlie Brown stuff like crazy. Because Sony apparently bought, basically bought them in March. and I had noticed this a few months ago because I'm a pen nerd and the Esther Brook pen company which is the kind of pen that Charles Schultz used to draw Snoopy came out with like a limited edition peanut set that is completely sold out and I see it like Gen Z TikToks about it and now I just can't and see it it feels like Snoopy and Charlie Brown are everywhere and this is so strange to me is you know I've been a geneticist or I feel like I'm too young to really be into Snoopy but Yeah.

51:07I'm glad that Snoopy is coming back. I remember when Jeffrey Katzenberg bought Felix the Cat, and I was like, is Felix the Cat going to come back? And then it kind of didn't, appeared on, like, some dumb watch somewhere, and I'm like, yeah, no. If Sony knows how to do this and bring the Snoopy IP back where it belongs, I'm all in favor. Also, the word Snoopy and the word Sony, like, they're not so far apart.

51:32Felix Salmon: That's the kind of analysis you come to Slate for, you guys. um emily my number is 27.5 that's billion that is total minutes streamed of the show the big bang theory this year so far through october 27.5 billion that is the most streamed show on streaming of any show it's an old show it's not on the air anymore and i came across this statistic in one of my favorite newsletters, which is called Stat Significant, on a post called TV's biggest show is a sitcom. And the reason I find this interesting is because there is a sitcom paradox, you see. No one makes sitcoms anymore. Only 1.4 % of the shows, new shows coming out now on TV streaming landscape are situational comedies.

52:30Felix Salmon: Yet people love situational comedies. this is the top show for adults. It beats out Grey's Anatomy, The Pit, all these other things that aren't comedies. And in the stat significant substack, he sort of lays out the reasons people like sitcoms, which basically boils down to people like laughing and they like comfort shows. And so it hits both at once. It starts very comforting. The other top shows are like Your Friends, The Office, things like that. So my question is, if they're so popular and comforting why has hollywood stopped making them and shouldn't they make more and i have an answer to that which is that the thing that people like is old sitcoms that they are already familiar with the familiarity is as important as the humor and yeah with the new sitcom and and also just the idea that it's a sort of cultural touchstone and you can you can dip back into it without having to do any work watching any new show involves like oh let's watch the new something which is intentional i think most of those 27.5 billion minutes are just it's on in the background you're not even really watching it yeah i guess you people don't have the energy to learn a new thing that would ultimately become a comfort watch my thing though is just like bring back golden girls comfort watching it's much better than big bang period come on or i love lucy i love lucy was so good.

53:57Felix Salmon: It was very good. Anyway, I think that's it for us this week. Thank you so much for listening. Thank you for emailing us on slatemoneyatslate.com. Thank you to Jessamyn Molly of Seaplane Armada for producing. And we will be back next week with more Slate Money.

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