What Even Is Money?

0:11Emily Peck: Hello, welcome to Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Bloomberg. I'm here with Elizabeth Spiers of the New York Times. Hello. I'm here with Emily Peck of Axios.

0:25Felix Salmon: Hello, hello.

0:26Emily Peck: And we have a really interesting show that will make you question everything you thought you knew about money. I think this is the general gist of this show. We're going to start talking about gold, which is a barbarous relic, but it's somehow worth$4 ,000 an ounce. We're then going to talk about Polymarket, which is apparently worth$10 billion, even though it's just betting. We are then going to talk about Bob Ross paintings, which are spectacularly ugly. sorry Emily and are selling for$100 ,000 a piece we have a Slate Plus segment where Emily is going to finally explain 6-7 in a monologue the likes of which the world has never seen somewhere along the line and only if you're a Slate Plus subscriber you will listen to my own dulcet tones and I will sing Spandau Ballet it's one of those shows and it's worth sticking around So all of that is coming up on Slate Money.

1:33Emily Peck: Gold is not just a Spandau ballet song, but it is a good Spandau ballet song.

1:39Felix Salmon: Never heard it.

1:40Emily Peck: Emily, you don't know the song? Elizabeth knows the song, right?

1:42Elizabeth Spiers: I only know one song by Spandau Ballet. I don't think I know the song. Sing us a few birds, Felix. Yeah, could you sing it, Felix?

1:50Emily Peck: You know what? I will. For Slate Plus. If you are a Slate Plus subscriber, you get Felix singing Gold by Spandau Ballet. How about that?

2:00Elizabeth Spiers: A few bars of gold. Oh!

2:03Emily Peck: Oh! It is not just a Spandau Ballet song, it is also an investment. And I have to say that in 30 years of financial journalism, I have pretty consistently been rude about gold bugs and anyone who told me that... gold is a remotely sensible long-term investment. And maybe I was wrong. I mean, in the very, very long term, over like centuries or something, there's a limit to how much it can rise. But gold is, well, it's not quite, it's around$4 ,000 an ounce right now. It did break above$4 ,000 an ounce earlier this week. And that's why we're talking about it. But it has been on such an amazing run not just this year when it's up like more than 50 but over the past 25 years that if you put x dollars of money into gold like at the beginning of the millennium you would have more money now than if you put it into the s &p 500 substantially more money and the s &p 500 is a real asset that is cash flowing and giving you like claim on future cash flows that are worth a lot more now than they were 25 years ago and gold is to coin a phrase a barbarous relic it does nothing it just looks shiny basically it has a couple of minor uses in you know electronics or something but really it's just a shiny object this just fascinates me how can the ultimate shiny object that does nothing except for shine, outperform over decades, you know, this incredible bull market that we've seen in the United States.

3:46Elizabeth Spiers: Because we're a deeply irrational species. Also because central banks are now buying gold as a hedge against inflation, where they would normally buy things like US treasuries.

3:57Emily Peck: Well, let's do two different things here. There is a group of retail investors who buy gold as a hedge against inflation. And certainly back Back in the 70s, this was a thing that you would buy gold as a hedge against inflation when people were really worried about inflation and inflation was running very hot in much of the world. That is not the reason why central banks are buying it. Central banks are buying it as part of their foreign exchange reserves. Obviously, it's not foreign exchange. It's a shiny metal, but it serves the same purpose as something that you can convert back and forth into your own currency, you know, and have like a store of value outside your own currency.

4:36Emily Peck: But it is absolutely true that central banks in general and the Chinese central bank in particular have been buying a lot of gold and that has been driving up the price.

4:45Felix Salmon: That's where I come in here because when gold first crossed, I think, 2000 into 3000, we wrote about it at Axios and it was all about China wasn't doing well, its economy wasn't doing well, and it was buying more gold, pushing up the price of gold. Then reading about gold crossing 4 ,000 this past week, went in and read the coverage. As an aside, people would say China's buying gold. But the stories, I mean, Krugman had a sub stack, of course. All the usual people who write about this stuff had their columns. And the conventional wisdom was gold prices are increasing because there's de-dollarization going on.

5:29Felix Salmon: People don't like the dollar anymore. Some pieces were like there's a Chinese strategy and conspiracy to move away from the dollar and into gold. And this is what's happening now. And I am just not convinced by any of it.

5:44Emily Peck: Emily, are you saying that the rhetoric is different now? So my question is, what is the difference? Because both of these stories are basically saying China is moving its foreign exchange reserves out of dollar-denominated treasuries into gold. And that is causing the price of gold to go up. So what is the difference between the previous discourse and the current discourse?

6:11Felix Salmon: So in the previous discourse during the Biden administration, it was really like China's doing poorly, so it's doing this thing. It's buying gold.

6:20Emily Peck: Why would China doing poorly make it want to buy gold?

6:24Felix Salmon: I'm not sure. Honestly, I went back and read the coverage and I can't explain it fully. It was just like China's economy is doing poorly, so they're buying gold. But no one was like, this is Biden's fault. And no one really was saying, I don't think that the global economy is moving away from dollars all that much. But now in the current moment where a lot of people talk about Trump derangement syndrome, which I don't adhere to people saying that exactly, but there is a tendency to read everything that happens in markets as a reaction to Donald Trump. And that is the difference this time around.

6:58Emily Peck: I think that is exactly right. That, you know, under Biden, this was China doing some grand geostrategic something, something, and buying gold for whatever reasons. Like, I think Poland was buying gold as well. Like, every so often a central bank here or a central bank there decides that they want more gold. I mean, it works the other way too. I remember when the UK central bank sold a bunch of gold, I think the IMF maybe sold a bunch of gold at one point. Yeah, so like whatever, sometimes they buy, sometimes they sell. At the moment, we seem to be in a period where central banks are buying. But China is just so big, the Chinese central bank buying really does move the price of gold in a way that most central banks can't, because it is a very big and liquid market.

7:43Emily Peck: It's like$27 trillion, I think. It's much, much bigger than all the crypto in the world combined. So you really need massive amounts of buying to move the price and to quadruple the price or to 10x the price from where it was a couple of decades ago. That's kind of wild. And yeah, part of this is just to try and reduce reliance on the dollar. But I think the difference differences the in one of these cases what you're doing is you're saying like we are living in a dollarized world and that makes us feel you know unsafe and not really in control of our own destinies as china you know and so therefore we want to find other assets that are not dollars that we can invest in and that's like the biden discourse and then under trump it's like no we actually want to move the world away from the dollar we think that the dollar is losing its status as the global reserve currency and so there's something wrong with the dollar and therefore we all need to pile into gold which is a slightly different sort of angle to it and while i totally can buy into the first even now under trump i don't really buy into the second Gold is never going to replace the dollar.

9:03Emily Peck: Bitcoin is never going to replace the dollar. The euro is never going to replace the dollar. God knows the remnant B is never going to replace the dollar. The dollar is the global reserve currency. It will be for the foreseeable future. It might not be as secure in that status as it was 10 years ago, but there's nothing else that's even close. And I don't think that that slight diminution in reserve currency status really explains what we're seeing in the gold price.

9:32Elizabeth Spiers: So what's driving the retail market then? Because there was a quote in the prep from Ray Dalio, of all people, saying that it will be reasonable to have 15 % of your portfolio in gold right now, which strikes me as insane.

9:45Emily Peck: Insane. So Ray Dalio, first and foremost, is not retail. Ray Dalio is the ultimate non-retail investor. He is out there doing all manner of complicated mathematics at some hedge fund that Rob Copeland is written about at length. No one really understands what he's doing or why he's doing it. What he was saying in that quote was not, and I really, really want to underline this, was not, if you are Joe Q public, you should have 15 % of your assets in gold. Absolutely not. What he was saying is that if you look at gold's risk-adjusted return, and you start trying to put together some kind of a CAPM shop ratio optimized asset allocation model, then the weight of gold in that model, if you kind of optimize it according to whatever algorithm Ray Dalio has up his sleeve this week, comes out way, way higher than you would normally imagine and could be as high as 15%.

10:49Emily Peck: I don't think any institutional investor has a 15 % asset allocation. to gold. That's not something people do. But what he's saying is that the reason people don't do it is not because they're slavishly following a CAPM model. It's because they're taking a look at what gets spit out of these models. And they're like, well, that's insane. I'm not going to do that. You know, there's like a common sense reason why people are not allegating 15 % to gold, much more than the sort of weird mathematical reason.

11:18Elizabeth Spiers: I think generally that's true. But I I also think the retail market does pay attention to what institutional investors are doing with their own money, and they chase a lot of the same trends. And so Dalio says something like that publicly. And it's not just him. You know, I think there's a lot of retail buying happening right now. And it's not just by the conspiracy theory driven gold bucks that you would have derided a few years ago.

11:41Emily Peck: So again, let's unpack this a little bit. I think that's right. I think the number one biggest change over the past 25 years that really genuinely does explain a decent chunk of the run-up, not all of it by any means, but a good chunk of it, is the fact that it is now way, way easier to buy gold as an investment than it ever was in the past. it used to be you know when i was a when i was a lad and you wanted to invest in gold you would go out and you would buy like krugerrands or something you would buy physical coins and then you would put them in a safe and the coins are heavy and expensive and you need to look after the safe and remember the combination and probably pay for it if it's in the safety deposit box in the bank and all of this stuff and it feels kind of prepper like in its own way you know there is something a little bit paranoid about like i'm buying these kruger amps because they are a store of value when everything else goes to shit now you know with a couple of taps on your computer you can enter your you know charles schwab account and buy etfs and there are a million gold etfs including one i think it's xau that has 175 billion dollars under management or something huge like that they're very liquid and it basically you can just buy a stock on the stock market and it's gold and you are directly you know exposed to the gold price that way and it becomes just another financial instrument and that rise of etfs which has really happened over the past you know 10-15 years has made it a lot easier for retail investors to buy gold and that has helped you know provide a tailwind to the gold market and that is much much more important and i cannot emphasize this enough this is dwarfs by like three orders of magnitude all of the dumb you know lifestyle pieces that we read about like people going to costco and buying gold bars of gold.

13:51Emily Peck: Ignore that.

13:52Elizabeth Spiers: I need you to know that I just Googled because I thought, surely there's a Trump gold coin somewhere that's taking advantage of this. And you can buy a one ounce, 24 karat gold coin called the deplorables of their time is what the coin is titled for$14 ,999 if you really just want to lose money.

14:12Emily Peck: If you don't want to spend$4 ,000 an ounce for gold, you can spend$14 ,000 an ounce for gold. That sounds like a great trade.

14:18Felix Salmon: So, Felix, you said when Elizabeth mentioned Ray Dalio saying you put 15 % of your whatever investments into gold, you said, that's crazy. But also you said, I was wrong. Gold prices have increased more than the S &P 500 over the past two decades. So if I, 20 years ago, had taken this Ray Dalio advice, non-advice. Well, he didn't advise that.

14:47Emily Peck: He's not advising that now. And he certainly didn't advise that 20 years ago.

14:51Felix Salmon: If I had gone with this rule of thumb that you explained isn't a rule of thumb and also is crazy, if I had done that, I would have more in my 401k right now than I currently do. So it seems good to me. Now it seems too late. Now it seems like we're at the top.

15:07Emily Peck: The reason why there's this crazy 15 % number that gets spit out of Ray Dalio's algorithms is only because gold has done so well over the past 20 years. right and so because the returns are so high you know over time the algorithms slowly like wind up allocating more and more to gold because it has a stronger and stronger historical record that historical record didn't exist 20 years ago 20 years ago gold had been going sideways for decades and so or even down since like the 70s and 80s and so there's no model in the world that would have recommended a 15 % allocation 20 years ago. You only get that recommendation at the top of the bull market, not at the bottom of it.

15:49Emily Peck: So it's a very bad sort of, at the point at which your models are saying allocate 15 % to gold, that's probably the time to sell rather than buy.

15:57Felix Salmon: Although, I mean, gold just hit 3 ,000 in March, and now it's 4 ,000. That's crazy. We could have talked about this in March, and you would have said the same thing, and then, you know, missed out on a lot.

16:11Emily Peck: Yeah, I mean, like the market can stay irrational longer than you can stay solvent. I mean, that's also interesting, right? Because the thing that this isn't is a short squeeze. It's not like gold went to 3 ,000. A bunch of people said that's massively overvalued according to my fundamental valuations analysis. So I'm going to short gold. And then they've all needed to cover their shorts as they've been getting margin calls as it's been going up. Like that is not what happened. Are there people in Chicago who short gold on futures? Absolutely. Can it be done? Yes. Is it an important part of the price mechanism which drives prices upwards over years or months?

16:50Emily Peck: No.

16:51Felix Salmon: So gold isn't memeing out?

16:53Emily Peck: You see, this one I struggle with. I mean, gold in many ways is the ultimate meme. It is the meme to end all memes. It is a meme that has been around for 4 ,000 years. in that sense as you know as elizabeth says it's almost embedded in our genetic code you know we just as humans there's something about who shiny object and gold in particular that is amazingly sort of meme-ish unlike silver and i have to say like the other thing that is going on right now is silver just hit 50 an ounce which is also crazy because you know again not that long ago it was five and that one you can't explain away with the chinese central bank buying the chinese central bank isn't buying silver i covered a company a million years ago that did a precious metals refinery and they would balance in quotes their portfolio based on how the metals

17:50Elizabeth Spiers: were performing against each other so i imagine that that's just a sort of category yeah yeah i

17:55Emily Peck: mean that's part of it there's a lot of people who who do that like relative value trade they're Like if the ratio of gold to silver gets too high, then you buy silver. And if it gets too low, then you buy gold. But again, like there's no fundamental analysis you can do here, right? There's no kind of, well, let's go back to first principles and, you know, one ounce of gold should be worth a hundred times more than one ounce of silver. There's no there there. There's nothing underlying it. The thing you can say with absolute certainty is that neither of them are equal to the present value of their future cash flows in the way that you could say about a stock or a bond or even a piece of real estate.

18:35Elizabeth Spiers: How much of this overall is just a de-dollarization trade? And how much of it might be driven by other factors?

18:41Emily Peck: I think a little bit of what's happened over the past couple of months might plausibly be attributable to the dollar something something. But one of the main things that I fall back on when talking about financial markets, and I have said this a million times, I'm sure I've said this on the show a million times, is that whenever something startling happens, in a market when you have a line that goes sharply up and to the right. There's this deeply human impulse, especially if you're a journalist, to ask why. And you look for causal factors that caused this line to go up and to the right. And there are two things that are often true.

19:32Emily Peck: In fact, two things that are usually true. One is we don't know why. It's really hard to have some kind of knowledge of why. But then the second thing is even more profound than that is that sometimes there just is no reason. Even if you had omniscient insight into all of the things in the world, if you were like a super powerful AI or something, there still is no causal reason why. Sometimes things just go up.

20:02Felix Salmon: What's the adage? Narrative follows price. Something happens in the market, and then we all race to make a story about it. And it's not just the markets, it's really anything.

20:11Emily Peck: Nathem Taleb wrote a whole book called Fooled by Randomness, which is a really good book, which is basically all about this, right? You know, we see something big happen to the price of gold and we spend an entire podcast segment, you know, trying to talk about why this might be. Maybe there is no reason.

20:26Felix Salmon: But it's probably because China's buying a lot of gold.

20:48Emily Peck: but i want to move on talk about another very weird price change in august this company called polymarket accepted investment and raised around at a billion dollar valuation which is like wow wow, that's a lot of money for a company that isn't really making much money. And so you think to yourself, well, in August, if they're raising at a billion-dollar valuation, possibly they would be interested in selling at a$2 billion valuation. So here we are in October, and Intercontinental Exchange, which is this massive company that owns the New York Stock Exchange, is throwing$2 billion at Polymarket, which on some weird level a couple of months ago would have been enough to buy it twice over.

21:31Emily Peck: And in return, they're getting like a 25 % stake or less, maybe a 20 % stake. And you're like, what? And so suddenly this thing has gone from being worth$1 billion to being worth$10 billion in the space of two months. And what? Isn't this partly just a sort of bet that the market is becoming more amenable to companies

21:53Elizabeth Spiers: like Polymarket because of the political situation? The guy who runs the Intercontinental Exchange is the husband of Kelly Loeffler, who's a Trump administration official. Donald Trump Jr. is an investor in Polymarket. This just seems like a let's take this opportunity now that Polymarket is probably going to be, well, it is legal now. It wasn't for a while. And they bought an exchange that allows them to do business in the U.S.

22:17Emily Peck: I think they did that in August. I think that was part of the billion dollar investment, right? Like when it was worth a billion dollars, it was worth a billion dollars because it had become legal. And yes, you're right. Like Polymarket was illegal for a long time. It was doing a whole bunch of gambly things, which were definitely illegal, and a whole bunch of crypto-y things, which were definitely illegal. And you would talk to former SEC chair Gary Gensler, you know, and he'd be like, yeah, this is completely illegal and we need to, you know. And technically speaking, that massive growth that we saw in polymarket over the past few years all happened with non-US bettors because Americans weren't allowed to use it.

22:57Emily Peck: You know, wink, wink, nudge, nudge. But now it's legal.

23:00Felix Salmon: So polymarket, I didn't even realize, and we've talked about it a few times, and we should say, if we haven't already clearly said, it's where you can go and bet on the outcomes of things, whether it's political races or political news or sports, which is becoming a bigger and bigger piece of it.

23:17Emily Peck: by far the biggest piece of it like it was built as a prediction market for non-sports events and then it started doing sports just like its rival koushi is also doing sports and the minute you start doing sports it turns out the people are much more interested in betting on sports and they aren't interested in betting on you know who's going to win the next election right and so now it has basically become the bet with polymarket it is less like prediction markets are a really smart way of forcing people to put their own money on the line and getting a valuable prediction about probabilities of future events.

23:52Emily Peck: And they've started becoming, this is where you bet on sports.

23:55Felix Salmon: Right. So, but what I didn't know is that it was founded during the pandemic by an NYU dropout named Shane, who just made an app. And now he is a billionaire at the age of 27, like the youngest self-made billionaire in the Bloomberg index, which I'm just saying, I didn't know that. The feds raided his New York City townhouse a few years ago back in the Gensler days before the Trump administration had a stake in betting markets. So I just wanted to put that information out there because it's interesting. And I hope my children found apps that make a billion dollars someday.

24:29Elizabeth Spiers: Yeah, I think some of this too is just consumers, you know, being educated a little bit about the fact that you can bet on these things. You know, it's with the growth of sports betting, people are looking for other things to kind of bet on.

24:42Emily Peck: Well, so again, I think this is exactly the other way around, to be honest. It's not that people are used to sports betting and now they're learning that they can bet on the outcome of the election. It's the other way around. It's that when Polymarket was just event contracts, everyone was like, that's the nerdiest, most boring thing in the world. and then once it started accepting sports betting it became an incredibly obvious place to do all of your sports betting because all of the alternative places to do sports betting are worse they're worse for two really big enormous reasons number one you are betting against a sports book who is very worried that you have information that you don't so if you're any good at betting, then the sports book will basically prevent you from betting.

25:34Emily Peck: And there's a whole chunk of Nate Silver's latest book about this, which is basically like the minute you get any good at betting, the problem then becomes you can't find anyone to take your bets. Polymarket solves this problem by making it a peer-to-peer market rather than you against the sports book. and then the cherry on top is basically it's a tax thing that if you make money betting on sports in vegas with a sports book then you have to pay taxes on all of your winnings but you can't offset your losses or you can't offset all of your losses whereas if you trade sports events on polymarket then you only need to pay taxes on the amount you actually earn or make rather than on the winnings without taking into account the losses.

26:24Emily Peck: So for tax reasons, it just makes all the sense in the world for sports betting to move from sports books to prediction markets. And so with those two things, I think the bet here that Intercontinental Exchange and people are making is that Calci and Polymarket and probably a couple of others will effectively eat the entire sports betting industry what this does to fan jewel and people like that i don't know and if that's the case is that worth 10 billion dollars i don't know maybe probably the other thing and i don't really

26:57Elizabeth Spiers: buy this but the intercontinental exchange rationale for investing in polymarket is that they want to access to you and the ability to sell the data as proprietary data i gotta know how much that's worth. But, you know.

27:09Emily Peck: If you are betting on Polymarket, if you're a remotely serious bettor on Polymarket, you're on the site, you're looking at charts of where everything has been trading over time. You're like, you're saying, oh, that's gone down to a place where I want to buy. This has gone up to a place where I want to sell. You need that data. Everyone who is on Polymarket is, like, they don't bet if they don't have the data at their fingertips. The idea that Intercontinental Exchange change is going to be like you need to buy a bloomberg subscription before you can like find out the price history of the probability of kamala harris becoming president yeah like i don't think it's worth that much honestly and most of it is just of historical value now it's not that valuable it's like it's of interest to historians but the people who are actually betting and who are putting real money on the line.

28:01They need that data right now.

28:04Emily Peck: And if they don't have it, they just won't bet. And so you kind of have to give it away. I'm not sure this is a massive income stream for them, but maybe.

28:14Felix Salmon: This whole thing got me thinking, well, plus you guys talked to Andrew Ross Sorkin about his new book, 1929, for the Money Talks offshoot pod that we do.

28:23Emily Peck: Which is coming out on Tuesday.

28:25Felix Salmon: And reading it, I learned something that I didn't know, which was at the turn of the 20th century. So in the 1900s through the Great Depression, there used to be a thing called bucket shops where people would go and they would bet on whether stocks would go up or down. This wasn't investing in the stock market. It was just betting like the U.S. deals going up, U.S. deals going down. And there was like a house involved in the house. Like Felix was saying about sports betting, the house always kind of won. And they were pretty corrupt and people, you know, just lost a lot of money and they eventually got outlawed.

28:59And then I was thinking, hang on, are we going back to that?

29:03Felix Salmon: And there's another piece I was reading just before we started taping on Friday from Bloomberg about the difference between gambling and investing or betting and trading. And there is a difference. like one of the points the author made was that bets are not supposed to affect outcomes. But when you're trading in the stock market, like you look at, or you used to look at stocks and, you know, whether or not people were investing or how much they're investing would tell us something about the worth of the underlying thingamabob. But bets are a little different and there's cross-pollination and all of that.

29:38Emily Peck: The whole point of prediction markets is that you can read into the market and we can learn something from where the price is. Like that's why people think that prediction markets are valuable is because you get price discovery and you can see like this is the most objective number there is about what is the probability that Harris is going to win the election.

29:57Felix Salmon: But is it objective or is it just like vibes? Like we're looking at prediction markets about politics or something. It's like bettors are trying to figure out what other people think about a thing. There is no thing. That's stocks.

30:09Emily Peck: That's canes, right? That's what Cain said about the stock market, is that it's a beauty contest where you're trying to judge not how beautiful the contestants are, but how beautiful the other people think the contestants are. I don't think there's that much of a difference between bets and investments, to be honest. right now and we did talk about this with Andrew a bit like we are definitely in a world where all of the guardrails that were put in place in the wake of the stock market crash of 1929 and the great depression are now being dismantled and that kind of paternalist thing about the SEC saying oh you know you can only invest in things that are safe and we aren't going to let you just do speculative gambling like now everyone's like just go ahead do speculative gambling buy crypto So bet on the New York Yankees.

30:58Emily Peck: Do whatever you want. It's all investment. It's all YOLO. It's all memes. Just knock yourself out.

31:04Elizabeth Spiers: I think these things are cyclical, though. I think there is a kind of regulatory backlash when speculation hits a frenzy and people start losing their shirts.

31:12Emily Peck: That happened once in 1933. I don't think it has happened again.

31:16Elizabeth Spiers: I think it has. There have been regulatory tightening around certain types of assets. I think this is more akin to sentiment analysis right now because there's not really, there aren't enough people on polymarket to give you the same signal that you would get from a much larger market, like the stock market, for example.

31:35Emily Peck: Yes, you're right. The stock market gives you a better price signal than polymarket. But polymarket is not small. You know, Polymarket has real volumes and you don't need massive volumes to get price signals. You only need relatively modest volumes to get valuable price signals. And I think Polymarket is big enough now that there is value to the numbers that have spit out of it.

32:03Felix Salmon: But you don't think there's a difference between betting and investing?

32:07Emily Peck: I'm saying that where we're at right now in terms of the regulatory treatment of the two, there basically isn't.

32:18Felix Salmon: But that's not what I'm asking. I'm asking, is there a difference between betting that the price of Tesla goes up and investing your money in Tesla stock? Like, is there a difference between gambling and investing?

32:31Emily Peck: And what I would say is, please refer back to the previous segment about gold. because you know either buying gold is a bet or it's an investment there is no intrinsic value to gold there is no future cash flows to gold there's nothing that it does that has value it's pure meme and if gold is an investment and frankly on in one way or another it has been an investment for thousands of years, then yeah, I find it really difficult to draw any kind of hard and fast line between betting and investment.

33:07Felix Salmon: But okay, betting on gold, if there was a company and the company produced gold bars and you invested in the company based on its future revenue, what's happening? That's an investment, even though it's working in a material that is nonsense-ish.

33:27Emily Peck: Well, there are. There's a whole bunch of publicly listed gold miners, right? And you can buy stocks in gold miners. And that was always one of the big interesting questions of what's better value, buying stock in gold miners or buying gold? And turns out buying gold is a better investment than buying stock in gold miners.

33:44Elizabeth Spiers: What about meme stocks? Because you're definitely betting, but are you ever really investing? Exactly.

33:51Emily Peck: So when a stock can be a bet, and when a bet on gold can be an investment, then the distinction between the two is, I think, impossible.

34:11Emily Peck: i love the way that we're moving in this conversation today because i want to end with another like fine line which is the one that you see in charity auctions which is the distinction between purchasing something for money because you value it to a certain degree which is what you see you know at most like if there's a Sotheby's auction of paintings then people will say like you know this isn't as much as I'm willing to pay for this painting and that gives you an idea of the value of the painting versus charity auctions where you're basically giving money to charity and that's the reason why you're writing the check and then there's this object that kind of ratifies the donation and then the person who writes the biggest check gets the object gets the painting gets the prize and the value of the painting is not necessarily equal to the amount of money that was donated to charity in return for the person getting the painting so again like where there's this fine line between betting and investing i think that's an interesting fine line between like can you back out the value of a painting from the amount that it sold for at the charity auction.

35:28Felix Salmon: You buried the lead. I'm sorry. You buried the happy little lead. You're missing the fun part. Yeah, we're talking about this because Bob Ross, who for years hosted a show on PBS called The Joy of Painting. And, you know, we're Gen X, so we all probably watched it where he, for like 25 minutes, he got up in front of a canvas and he painted a landscape using his famous, I guess, I didn't know it was famous wet on wet technique apparent i don't understand why this is a big deal but it's spoiler alert it's not but yeah go on okay um and then he painted these delightful little paintings

36:05Emily Peck: yeah which things are ugly they're not delightful they are the ugliest things in the world if i

36:11Felix Salmon: could paint something like that in 26 minutes i would be really proud the backstory to this is

36:16Elizabeth Spiers: that oil painting you know the reason why this is a you know proprietary technique is that normally it takes forever to do an oil painting because you have to do it in layers and it has to dry and it takes forever to dry. And his whole shtick was, I will show you how to do a full landscape in like 25 minutes. And it's all just a matter of putting happy little clouds here and happy little trees here and so on. So it is a democratizing oil painting.

36:40Emily Peck: The idea that in like 1500 years of oil painting, people haven't realized that you can use different colors of paint at the same time. You don't need to wait for a layer to dry. I mean, come on people.

36:50Felix Salmon: Anyways, his work is owned by his estate, and they had had some success auctioning off his paintings.

36:59Emily Peck: Okay, so a quick fact check on this, and this is confusing. I don't think these works are being sold by his estate. I did think that for a minute, and now I think they're not. I think they're being sold by a public television station, which owns 30 of them.

37:14Elizabeth Spiers: But what precipitated this, which is I think where Emily's going, is that Bonhams, the auction house, had two of his paintings. And they expected them to sell for between$30 ,000 and$50 ,000. And they sold for$114 ,800 and$95 ,750, respectively. And that surprised the woman who runs the Bob Ross estate. And so she thought, well, now's a good time to sell a bunch of these paintings and help out public radio.

37:42Felix Salmon: Because they already had value on the auction market, to Felix's initial point.

37:46Emily Peck: All right. So many things to... We got there.

37:49Felix Salmon: I tried to get out an intro, and he tried, and together...

37:53Emily Peck: We haven't quite got there yet, Emily, because you still haven't got to the best bit. Which is, all of this was precipitated by a lovely email from Marshall. And he said, Hi, Slate Money. I read that Bob Ross paintings are going to be auctioned off to raise money for public TV stations. I recently listened to the episode about Basquiat, and I was curious about the market for Bob Ross paintings. Specifically, is there one? And if so, what does it look like? What kind of investor would buy a Bob Ross painting at an auction as an investment? Such a good question, right? Such a good question. So there's so much to unpack here.

38:29Emily Peck: Let's just start with Marshall's question. The really easy answer is no. If you go back a couple of years, I did a show with Julia Halperin about paintings as an investment, investment grade paintings, that kind of thing. And I asked her, how much money do you need to spend on a painting before it becomes investment grade? If you spend $1 ,000 on a painting, it's a consumption good and you're spending$1 ,000 to put something up on your wall. If you spend$5 million on a painting, you kind of expect that that painting is going to hold some kind of value and might go up in value. And it's, you can think of it as an investment.

39:02Emily Peck: Where is the dividing line? And what she said was, and this is, if anything, it's gone up since then, But what she said was$500 ,000. So Bob Ross paintings, if they're selling for$95 ,000 slash$114 ,000, that is expensive, but it is not investment grade. And I would highly, highly expect that whoever it was who spent that much money on those paintings did not think of it as an investment and did think of it as a consumption good.

39:29Elizabeth Spiers: Maybe that's a category error because I don't think anybody who buys a Bob Ross painting is thinking of it as investment grade art. It strikes me as something more akin to buying an antique that has collector value because of some nostalgia reason. Right.

39:44Emily Peck: I mean, there is investment-grade antiques as well. And the bar for investment-grade antiques is lower than the bar for investment-grade paintings. But no, it's not an investment-grade antique. It's not an investment-grade anything. It is not going, like, as I say, no one is spending$100 ,000 on a Bob Ross painting because they think it's going to go up in value. Because, I mean, just look at it.

40:03Elizabeth Spiers: I love your disgust at the utterly cringy.

40:06Felix Salmon: I fully get it. I feel like when I was reading about this last night, I was like, I get it. I would buy one of these. It's fun. Like Bob Ross did this on PBS. He had his big hair. His voice was chill. This is fun. If you have it on your wall, you can be like, Bob Ross, you know? And if your house guest is over 40, they will know what that means. And if they're not, they won't. But it's, you know, it's fun to buy collectibles, all kinds of different stuff, like you're saying. Not an investment, really, but just a fun, happy little painting to buy to get people chatting.

40:39Emily Peck: Yeah. If you have$100 ,000 at the bottom of your loose change drawer, then why not? It's a fun little thing.

40:47Felix Salmon: And in this case, the auction, the money goes to PBS, which is nice.

40:52Emily Peck: So now what's happening is that the Bob Ross market, that was always a very thin market, because there weren't a lot of them in private hands, is now kind of being flooded. This is very interesting. If you look at the history of Bob Ross paintings at auction, there is a history of it. There have been 13 paintings. I looked this up on Artnet. There have been 13 paintings by Bob Ross that have sold at auction since 2009. And, you know, they've generally gone for five-figure sums, as Elizabeth says. We recently had one that went for very, very low, six figures. 13 over the past, you know, 16, 17 years.

41:32Emily Peck: Now, this public TV station is like, we can sell off our Bob Ross paintings for charity and people who are buying it will know that they're not just buying a Bob Ross painting, but they're also supporting public TV. Great, awesome. But they're selling 30 of them. That is a lot of Bob Ross paintings to drop onto the market. The person who spent$114 ,000 on that Bob Ross painting is kicking themselves right now because they're like, they've spent that money because they thought that Bob Ross paintings were very rare and very rarely hit the market. Now we're having 30 of them hit the market at once.

42:06Emily Peck: Three of them are being auctioned on November the 11th at a Bonhams auction in California. And people are going to be like, yeah, let's bet on Bob Ross. And yay, it's going to a good cause so I can spend a bit more. But on the other hand, they're also thinking to themselves, if I don't get one of these three, there's going to be another 27 chances to buy a Bob Ross painting coming up very soon.

42:27Elizabeth Spiers: Well, but there, there is a finite number of Bob Ross paintings. So is there a possible scenario? He was painting these things.

42:35Emily Peck: There were 400 episodes. He was painting these things in 15 minutes. I think there's a lot of Bob Ross painting somewhere.

42:41Elizabeth Spiers: But is there a possible scenario where it becomes more of a scarcity to have a Bob Ross painting than say that be the 5 millionth person to own a Damien Hearst dot print and then the value relatively is higher or it becomes an investment grade?

42:56Felix Salmon: I think Felix is making a gold mistake with Bob Ross paintings. I think he's got that name recognition and it's fun and that this isn't a flood. It's just like meeting the demand. And I think I would bet, but I don't want to bet a real bet because I'm cheap, that the prices that these paintings will garner at these auctions will be similarly high.

43:20Elizabeth Spiers: Should we go open a polymarket bet?

43:22Emily Peck: Exactly. We should have a polymarket bet on how much the Bob Ross. I mean, there is one in particular, which I need to talk about. One of these three paintings is this like seascape of a wave crashing against rocks, which I honestly think is the single ugliest painting I have ever seen in my entire life. It is so unbelievably bad.

43:43Elizabeth Spiers: Are you talking about Cliffside?

43:45Emily Peck: Cliffside.

43:46Elizabeth Spiers: When I was 10, I would have thought this painting was gorgeous.

43:49Felix Salmon: Again, if I painted it cliffside, I would be like, look what I made because I can't even draw a house. So it depends how you're looking at it.

43:59Emily Peck: But yeah, so I think this is interesting, right? When we're sort of handicapping how much cliffside is going to sell for when it goes on the auction block in November in Los Angeles, we are looking at three different things. One is, is this painting any good? I think the obvious answer to that is no, but maybe Emily would disagree. The second one is like, does it have cultural cachet and value by dint of being painted by this guy with big hair who was on the telly? Clearly it does. And there are people who are willing to pay for that. And then the third thing, which is super hard to handicap, is the people who are bidding on this painting, are they going to be willing to spend a lot more just because they know that their money will be going to a good course and will be supporting public television?

44:48Felix Salmon: Yeah, definitely. Yeah, it's like I wouldn't pay$50 for a tote bag, but if it's a$50 tote bag plus it goes to PBS or whatever, then okay, sure.

44:57Emily Peck: So then that raises an interesting question, right? that this is going to be a public auction at Bonhams. The result will find its way into the ARCnet database, just like all of the other paintings in that auction. And let's say it goes for like a million dollars because someone wants to give a million dollars to public TV. Like at that point, the auction record for Bob Ross is a million dollars. And everyone's like, oh, wow, Bob Ross paintings are going for a million dollars. But then really not, because that's mainly a charitable donation. It's not really the painting. It becomes impossible to sort of disentangle these two things.

45:29Elizabeth Spiers: I get that. See, a year ago, we would have asked, what if somebody turned it into an NFT and put it on the blockchain? Would it be worth more?

45:36Emily Peck: I mean, it's not even a year ago. Like the NFT for comedian, the banana taped to the wall. I remember that. Yeah, that banana, everyone was shocked at the sale for$6 million. The market cap of the NFT is still more than$6 million, even today. Yeah, NFT is weird.

45:51Felix Salmon: What even is money, you guys?

45:57Emily Peck: i i feel like we all started this podcast with this vague intuitive concept of what money was and by the time we reach the end here none of us has a clue we have done the opposite of being an informative podcast we have actually just made everyone dumb and no one knows anything at the end of this podcast i apologize to you all we will do better next week

46:29Emily Peck: But we will finish with the numbers round because we do stick to tradition on this show. We don't just throw it together, you know. Emily, what's your number?

46:37Felix Salmon: My number is$115 million. That's dollars. Those are the legal fees incurred by Charlie Javis. Her legal fees and another executive were convicted of defrauding J.P. Morgan because they had the student loan company. And they said they had so many users, but it turns out they had very few users. But what's interesting about the legal fees, it's a big high number. But what's interesting about it is that guess who is paying the legal fees? Is it Charlie? Javis? No. Guess who?

47:09Emily Peck: It's JP Morgan. It's JP Morgan.

47:13Felix Salmon: Who she defrauded is on the hook for her legal fees because of the contract they signed when JP Morgan bought her fraudulent company. And so that is funny. And I don't know why, but apparently these are very high legal fees even in this world. I think -

47:31Emily Peck: Yeah, it is not easy to rack up$115 million in legal fees. We have to -

47:35Felix Salmon: Wait, they put it in perspective in the article I read. A high-priced lawyer billing$2 ,000 an hour would have to bill eight hours every day, including weekends and holidays for 20 years to reach$115 million, according to the nice article that I read about.

47:49Emily Peck: A couple of quick things to know. And first of all, curse you, Emily, because that was going to be my number. Second of all, Charlie Javis, having lost this case, is now technically on the hook for this. Like she now owes$115 million to J.P. Morgan because she lost. No one expects J.P. Morgan to be able to recover this because she doesn't have any money. But J.P. Morgan had to pay the fees. Charlie Javis is now not only going to prison for seven years, but is also in debt. to the tune of$150 million. The third thing that I do need to just shout out to Alex Spiro here, it's that man again. You know, he's everyone's lawyer, including Elon Musk.

48:30Emily Peck: He is the guy who's getting the$115 million. And he is the guy who is billing out at$2 ,100 an hour. And not just for him, but for his associates as well. And you're like, Alex Spiro, man, like that is a good business to be in.

48:44Felix Salmon: What firm is he at? Is he a Quinn Emanuel?

48:46Emily Peck: No, I think he has his own shop.

48:48Felix Salmon: Oh, good for him. Good job. And he represented Elizabeth Holmes too, right? They were saying Elizabeth Holmes' legal fees were less than Charlie Javis's, which I was sort of surprised by because her case seemed more complicated.

49:00Emily Peck: According to Wikipedia, he has represented multiple celebrity clients, including Elon Musk, Jay-Z, Mr. Beast, Eric Adams, and Alec Baldwin. Kind of amazing.

49:12Elizabeth Spiers: That is a murderer's row of celebrities.

49:15Felix Salmon: Is Eric Adams a celebrity?

49:16Elizabeth Spiers: Oh, I think he is. I think there's nobody who doesn't. He's too much of a personality.

49:22Emily Peck: Was Eric Adams New York's first celebrity mayor? Discussed.

49:26Felix Salmon: Oh, no. New York always has a celebrity. Not always, but often has a celebrity.

49:30Emily Peck: Was Rudy Giuliani a celebrity mayor?

49:33Felix Salmon: Yes, absolutely. Yeah.

49:35Emily Peck: All right.

49:35Elizabeth Spiers: He was America's mayor, Felix. Do you not remember that for five minutes?

49:39Emily Peck: I don't remember that. Hang on. In that case, I'm going to have to come up with, what's the word? A non$150 million number. So therefore, Elizabeth, while I'm doing that, what is your number?

49:53Elizabeth Spiers: My number is 1 million and that's dollars. And that's the amount of money a company called Friend AI paid for a Subway ad takeover. It's about their product, which is$129.

50:05Emily Peck: I see these ads every day.

50:08Elizabeth Spiers: Dependent is supposed to be, you know, an AI companion for you. And because these things are all over New York City, which is probably the city in America least likely to be receptive to this sort of thing because it's kind of cringy and New Yorkers don't like cringe. So the idea of being receptive to an ad for an imaginary friend for an adult that's powered by environmental destruction is not great. So all of them have been vandalized. And now there's a whole website dedicated to the creative vandalism of these ads. But the entrepreneur is, of course, a 22-year-old who lives in Silicon Valley.

50:44Elizabeth Spiers: And he was super excited about this ad launch. And so I have a quote from him. It says, in preparation for the campaign's August 25th launch in New York, Mr. Shiffman headed to Burning Man without an internet connection. The overlap was intentional. I wanted to do the coolest thing I could possibly do. And the biggest thing I could possibly do at the same time, he said, in the spirit of life maxing.

51:05Felix Salmon: And I just think this is just the wrong city. It doesn't work. What do you mean? He's getting free publicity right now on this podcast. Like this is great.

51:15Elizabeth Spiers: I guess in the sense of, yeah,

51:17Emily Peck: our press is good for us. People are definitely talking about it and vandalizing it. But one of the interesting parts of the discourse is that no one is actually receiving these things. The company has covered New York City in ads, but there is no product. I think 300 people have managed to receive one. And if you sign up for one, you'll get one maybe eventually, perhaps. But everyone's complaining that, I tried to buy a friend and where's my friend?

51:44Elizabeth Spiers: as of this rating that they've sold 3100 pendants that's pretty good that's less than

51:49Emily Peck: one pendant per subway ad i'll tell you that these things are everywhere my my number is 1400 which is a number of dollars 1400 is the amount in dollars that mikhail paid for two tickets to see Waiting for Godot on Broadway. And Mikhail did not like it. Mikhail then went on the internet and wrote a review, and it's the best review ever of Waiting for Godot. I'm a longtime admirer of Broadway productions and even hold a season pass for Shave's Performing Arts Theatre, right, Mikhail. So I came in with genuine enthusiasm and high expectations. Unfortunately, this show was unlike anything I have ever experienced, and not in a good way.

52:36Emily Peck: What I encountered was not the artistry, music, or emotional storytelling I usually associate with Broadway, but instead what felt like an endless cycle of nonsensical conversation between characters who seemed trapped in their own madness. I stayed through the first half, hoping the second would offer clarity, but by intermission it was clear. This was a waste of both time and money. Keanu Reeves is an actor I respect greatly, but I cannot fathom why he would agree to participate in such a disjointed, inaccessible production.

53:08Elizabeth Spiers: Samuel Beckett would love this, by the way.

53:10Emily Peck: He really would. It's quite glorious, and it's almost enough to make me want to see the show, but I am not going to spend$1 ,400 to see Bill and Ted do Godot. I'm sorry. I think that's it for us this week. Thank you so much for sticking with us through this show. So thank you for subscribing to Slate Plus. If you do, we will have a Slate Plus on... Emily, what are we talking about at Slate Plus? Six, seven. Six, seven.

53:40Felix Salmon: Two numbers. Felix wouldn't let me do it for my number because it's two numbers.

53:44Emily Peck: It's two numbers. That's not... Six, seven is not a number. It's two numbers. We're going to talk about six, seven. We have, as discussed on Tuesday, a show with Andrew Ross Sorkin. He's going to talk about 1929 and all of the echoes with the present day. And other than that, it just falls to me to say thank you for listening. Thank you to Shana Roth and Justin Molly for producing. And we will be back next week with more Sleet Money.