Peak AI Frenzy
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Hello and welcome to Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon. I'm here with Elizabeth Spires, who has many jobs, at least one of which is New York Times related. Hello. Emily Peck of Axios. Hello. Hello. Hello. We are going to talk about the latest

M&A news out of the media world, which is Warner Brothers' discovery breaking up into two parts. Why it's doing that, what it all means, what it means for David Zaslav. We are going to talk about AI and the crazy valuations that are being raised right now or used or monetized or whatever you want to call it. We are going to talk about Donald Trump's immigration crackdown and whether and when it's going to have major impacts

economic consequences. We have a Slate Plus segment on going out for drinks after work, which is apparently something that doesn't happen anymore. It's all coming up on Slate Money.

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We get accused every so often of being navel gazers in the media who only like to talk about the media. So let's give those people, let's give those haters more ammunition, shall we? Emily, what's the latest media news? Warner Brothers Discovery announced that it will split into one part will house HBO, Warner Brothers, HBO Max, recently renamed from Max,

regular. And the other will house the cable TV business, CNN, TBS, TCM, and that side, which is called global. It's hard to keep track of the names because they're boring, generic. Well, the names are temporary. The names are placeholders. Just in terms of being able to talk about it, it becomes hard. So like the cable TV biz is called global networks and the other side is called streaming and studios. And the cable TV biz apparently has more of

the debt that was dragging down this company. But somehow, David, you can correct me later, I see him like chomping. But somehow, David Zaslav, who engineered this deal, is going with the more prestigious stuff, the HBO and the HBO Max and the movie business. Yeah, I mean, so much going on here. Let's start with the fact that global networks, is that what it's called? It's impossible. Let's go back to

what, two years ago? Yeah. When this weird animal of a company was created. It was created by Discovery, which was run by David Zaslav, buying Warner Brothers, basically, from AT&T. And what happens now that the two, like, get split up is that those two bits,

after being the architect that brought those two pieces together, he is now the architect of breaking those two pieces apart. And the glorious bit of it is that Zaslav came up in the world, became this sort of mini mogul,

by investing massively in cheap reality, unscripted content, all of which is getting spun off into the global network side of things, which is not global. It's just these are very American networks. There's really nothing global about it. It should just be called TV. It should just be called TV, exactly. The main thing that global networks is going to have that Discovery didn't have is CNN. And CNN is a big thing and it's an important thing

But like there was a lot of talk back in the AT&T days of like, are they going to sell CNN because CNN is a pain in the ass and it makes, you know, Trump hate them and all the rest of it. Basically, the effect is if AT&T had just sold CNN to Discovery, that's what global networks is.

And then Warner Communications is what it always used to be, which is the studio and HBO and the prestige stuff. Except for David Zaslav, who was always the king of the cheap unscripted stuff, is now going to be the king of the expensive scripted stuff. And his, you know, career...

consigliere gunner is going to run the cheap unscripted stuff as for the debt like it's the combination of the two that is responsible for the debt it's david zazlav borrowing a whole bunch of money so that he could buy warner brothers from at&t and now he's basically saying well

If we're going to split the company in two, we want to place most of the debt in the half of the company that has the most cash flows, which makes sense. But that's the half, which is the cheap unscripted stuff. So he will no longer be running. Which he will no longer be running.

He bought a bunch of money to buy all this stuff, and then he made it worse by all accounts. And then rewarded himself with the big prestige job. Then walked away with, yes, with the big prestige job and put the debt on the other side of the business. Now it's a getter's problem. As a piece of careerism by David Zaslav, it's quite amazing. Yeah. I mean, like the big winner here is clearly David Zaslav, who now gets to run a highly prestigious media company without a whole bunch of debt.

Which managed to succeed despite his work. Like by all accounts, like HBO is having a moment now. I think it's doing pretty well. It has some good shows that get a lot of attention. It has And Just Like That, which we will talk about on Money Talks at some point, which I'm excited about. It has White Lotus, Max.

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

Well, the optics of what he's doing are kind of astonishing, too. He has incredibly high compensation, and this has been a source of consternation within the company. But he did things like TNT no longer has the NBA. Now it's franchised by ESPN. And he was criticized heavily for that because he was on record saying, you know, we don't need the NBA. And then showing up courtside at big NBA games surrounded by fans.

other Hollywood moguls. And it's just the extent to which he's sort of gotten away with all this and he's coming out on top is surprising.

I will defend TNT giving up the NBA. Yeah.

As we know, there was a huge amount of debt on this company once it was merged. And so there was just a lot of cost cutting. As you said, there were a bunch of layoffs. You know, there was a load of different ways that they tried to cut costs. And the NBA contract at TNT was very expensive and they couldn't afford to renew it. I think that was a perfectly reasonable decision to make.

Once they made that decision and the value of TNT plunged, we know this, but it's better having a low value TNT than a negative value TNT, which is probably what it would be worth if it had to pay a fortune for NBA rights. Yeah, but couldn't you have shuffled it somewhere else, like give it to HBO or something?

Make HBO even more premium. Yeah, I mean, I think that's right. I think that the dream, his ostensible dream beyond just like David Zaslav wanting to become powerful was always that there were some synergies here between the Discovery properties and the Warner Brothers properties. And I think the lesson of this spinoff or demerger or whatever you want to split up, whatever you want to call it, is that there weren't any synergies.

And that whole idea of, well, why don't we just take these NBA rights and give them to some other bit of the company that can better make them prestige or whatever? None of that was ever possible. And yeah, I think in a weird way, the unbundling here makes sense, precisely because the synergies weren't there. One of the ideas, one of his biggest ideas, really, Zaslav's biggest ideas, was that people would subscribe to Max.

not just for the white lotus but also for dr pimple popper and it turned out that like there were just as many people are going to subscribe to hbo max without dr pimple popper as subscribe to max with dr pimple popper and so adding dr pimple popper to the mix not only devalued the mix but was also didn't help in terms of adding subscriptions so that's why that's

Yeah, I mean, I think they wanted to be like another Netflix, a streaming network that had like just an abundance of content of all sorts, highbrow to low. But that's what Netflix already does. And YouTube even more so. YouTube is even more watched than Netflix, like on TVs right now. So there just wasn't a need for a third streaming service that did that. But there was and still is a need for like the prestige streamer of HBO. Yeah.

And one thing I will give him is that over its various iterations from HBO Max to Max to back to HBO Max, it has financially been doing pretty well. Its EBITDA has been growing substantially. Its number of subscribers has been going up. They're doing something right there.

And historically, it was kind of one of the also-ran streamers. You know, people were like, well, there's Netflix, which is the big one. And then there's Amazon and all of the other ones like Max and Apple and Peacock. It was always that sort of second tier. But it's becoming more of a sort of base tier thing that people just feel they need to have.

Well, unlike some of the other streamers, they never really abandoned their in-house studio stuff. And Netflix sort of transitioned over time to investing less into stuff that they were producing in-house and licensing foreign films and then just putting them on the service as Netflix productions. But HBO never really did that. They never moved into just becoming a syndicator for Netflix.

Films made out of house. They have always done prestige TV. They've been more about TV anyway. But yeah, they have that in-house studio, obviously, which is Warner Brothers, just like Disney has all of the Disney movies. And that's why Disney is really top tier, right? So Netflix, Disney, possibly Amazon, but Netflix and Disney are still top tier. Max isn't quite there yet. But Disney has a studio. I believe that if you look at the amount of money that Netflix spends on creating its own movies,

content, it's still vastly higher than Max does, you know, the Warner Brothers does, even if you include the cost of running the studio. If you look at how much Amazon spends, even after buying MGM, it's still much less than Netflix. Netflix is just this absolute giant. And then the interesting thing that you mentioned is YouTube, which is basically zero. Like YouTube basically spends nothing on content.

which is amazing and it still just dwarfs everyone else in terms of viewing minutes. Yeah, there's a great piece in, I think, Vulture this week that I was reading that I was considering for my number, but I found something else I liked that says, you know, YouTube now has 12.4% of all TV viewing, stuff people watch on TV, 12.4%. That's far ahead of Netflix, which is 7.5%. They're just a juggernaut right now. Like if you want to call them a streamer, YouTube is dominating.

Mm-hmm.

And so it just doesn't make sense. So you have a lot of people who are just watching stuff that the networks are producing and cable is producing on YouTube just because the cable subscription models are bad. Plus YouTube has, to Felix's point, they're not paying to create content. They have people creating content that becomes huge on YouTube and then Netflix buys them. Mr. Beast is a good example. YouTube didn't give Mr. Beast money and say, make something a

amazing about whatever chocolate bars and camping in a stadium musk did elon musk tried to give mr beast a bunch of money to make stuff for x and he tried like a couple times and he was like actually you know what i'm better off just sticking with youtube yeah but the content creators develop organically and then someone comes in and gives them money versus like on a netflix which they're just they start out by giving you the money and then you make

the thing. They're just making the thing. Yeah, exactly. Amazon does the kind of, like, if you're a small documentary filmmaker, you can probably find a way of getting your documentary onto Amazon and getting paid on a sort of per stream basis, which is a little bit similar to how the YouTube model works.

Netflix doesn't do that at all. Netflix will either buy your documentary and put it on Netflix or it won't. But there's none of this. Put it up and see if people like it. And if people like it, you'll get paid. That is not the Netflix model. That is not the Max model. And it's not the Disney model. Right. But it's doing really well for YouTube and is sort of the future or the present, I guess, of TV versus what is it called? Versus the global content company or whatever. What is it?

Global networks. Global networks. Yeah, global networks. So global networks, everyone understands. And this is one of these, like we talked many times over the past decade of Slate Money about how when banks break up into a good bank and a bad bank, this is clearly one of these, right? There's the growth cycle.

growth media company with streaming and streaming is growing and that's going to be the future and that's where David Zaslav wants to be. And then there's the bad bank, which is global networks, which is all of these things like TBS and TNT and CNN and all of these things which are

throwing off enormous amounts of cash because of the cable TV business model, but decreasing amounts of cash. They have like negative EBITDA growth. They have negative revenue growth. And the idea is that you can make a lot of money by just collecting those profits for as long as those things exist and then just packing it all up and going home at the end. But

it's a miserable business to be in, right? Just managing decline to zero is something that like private equity companies might want to do. And frankly, the unspoken sort of between the lines of all of this is that both of these two entities

If someone comes along, probably sooner or later, both of them will wind up getting bought. I wouldn't be at all surprised if it was some kind of private equity shop who wound up buying the global network side of things, because it's the kind of thing that private equity is good at. It's just maximizing a finite set of cash flows until it dies.

That reminds me of when I used to work at AOL. Do you remember that? I used to... We remember that. Remember that, guys? Because AOL owned a post. Oath? You used to work at Oath? Yes. But even before that, everyone there would just be like, all the money comes from people who still pay for dial-up. And we'd all be like, this can't be good. Yeah.

But then you'd go on about your day and there'd be like free lunch, free dinner, free snacks, on and on. And you're like, this isn't going to last. You know, everyone would be whispering it. But you were right. Well, yeah. I feel like there's also like a little bit of a succession dynamic here where Zaslav is...

Right-hand man is a guy named Gutter Wiedenfels, who's also like the big cost cutter who came in and did all the layoffs and everything. And now that guy is in charge of global networks. So he's doing sort of all the dirty work over here. And Zaslav is running the prestige business and taking all the credit. I'm more interested in that guy, almost. Yeah.

But Zaslav got his start. I mean, he was a Jack Welcher, former GE CEO, rest in peace, who's known for firing people all the time. And he got his start by firing a bunch of people at Discovery, apparently like cutting staff by 20%. So if I were the people at Streaming N Studios, Streaming Ampersand,

I would not be excited about him. Although he's already cut a bunch of those jobs. Maybe, maybe he's done the cutting. Maybe the cutting is in the past. Now, if he doesn't give himself an overwhelming amount of the debt, then maybe he doesn't need to cut so much. I feel like,

feel like cutters gonna cut like they never stop right and and that's not good for a company like like an hbo or a company that is in the business of being creative and creating really good content or maybe it is a good thing maybe it keeps you sharp to always have the threat breathing down your neck that you're gonna get cut is fear a good motivator emily some say could be i don't know i can say

Okay, this is a money show. And Elizabeth, I have to ask you because you have a long and

career as a personal finance columnist. Do you actually have a personal finance strategy? Do you have a thing, an organization, something that

you fit your life into and that makes you financially healthier? I have some very minor strategies. And one is just anything that I can set and forget where I budget. And then I know how much is coming out of my account. I know kind of what's going toward what savings plan. And I don't have to think about it. If it's not taking up room in my brain, I cannot make bad decisions around it, is my theory.

So that's the big thing that works for me. How about you, Emily? Well, my strategy for healthy financial lifestyle is to have money. I like it. I find that compared to when I made very little money, things don't go as wrong in my financial life anymore. Like when I was 25 and I only made, I think it was like $300 a week.

I was always running out of money and I never had it for food or to pay the bills. But now I make more money and lo and behold, I can buy food and pay the bills. So that's my number one strategy.

Hashtag pro tip. So pro tip, make more money. And then my second tip, I guess, is kind of following on what Elizabeth said, is to have some kind of budget. So you sort of like set aside money. Do you have some kind of budget? Yeah, we have a budget. And we have like, you know, buckets devoted to certain things. So when something goes wrong, when you own a home, something's always going wrong, you can at least say like, okay, we're going to pay for this out of the amount of money we have set aside to pay for when something goes wrong.

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I feel like this is a good segue to the AI news of the week. We had a viral blog post from Sam Altman of OpenAI this week where he was like, don't worry about the singularity. Don't worry about superintelligence. It's all going to be fine because suddenly anyone with a good idea is going to become successful because

the cost of implementing that idea is going to go to zero. It wasn't entirely coherent. But in any case, there's a lot of excitement about AI, which is now getting...

eye-popping valuations. And I'm just going to throw out three data points here. The first one is OpenAI buying IO, which was Johnny Ives' one-year-old company where he's like, I think I want to do something with AI and saying, okay, we'll pay you $6 billion for that. And

And that was very much a kind of acquihire of Johnny Ive, who's clearly worth billions of dollars as an employee. We had another acquihire of Alexander Wang, who is this chap who founded Scale AI. Basically, what seems to be happening, it's a bit complicated, but Meta, Mark Zuckerberg's shop, is buying 49% of Scale AI for $15 billion, which is just

A massive amount of money. What scale AI does is it just gets humans in poor countries to sit at computers and click on things and train the robots. But apparently that is now worth $30 billion, except for it isn't. Because really, they're not buying the 49% of scale AI so much as they're buying Alexander Wang, who is coming to Meta to lead something or other and leaving scale AI behind, basically, to be run by robots.

I don't know, his number two or something like that. And we are seeing, and apparently, you know, Meta is offering nine figure packages to other AI scientists. Yeah, that's like a hundred million dollars a year. We saw like previous acquihires, like the inflection one and the complicity one. Top AI scientists, you know, when they get acquihired can be worth literally billions of dollars.

And the valuations of AI companies, and this is the third data point I'm going to throw out here, is XAI, which is Elon Musk's AI company, which owns X, that used to be called Twitter. It's apparently trying to raise equity at a valuation of,

somewhere in the range of 135 billion to 200 billion dollars which when he merged the two companies when he merged xai and x he said well this values x at 33 billion dollars or something and everyone was like no it doesn't you're just swapping paper for paper and it's like there's no valuation there at all but if he manages to do this and raises this equity then it really does you

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

Yeah, I think some of it's the market, but how much of this is still people betting on Elon? The logic behind putting that much money into Twitter originally was just like, well, we're not betting on Twitter as a business model. We're just looking at the overall value of

putting Musk into Twitter. So does he still have that? It's not just Elon. That's my point. It's Elon and it's Johnny Ive and it's Alexander Wang. And it's like all of these guys seem to, I don't know, like, is it AI? Is it like the people? What is it? Yeah, it's AI. AI has got everyone in this fucking

frenzy of delusion, I think. Yes, AI is important. And Axios, we ran a chart showing the adoption of ChatGPT over the past, whatever, two years since it was first released to the public. And lots of people use ChatGPT and you could see in the future it overtakes Google and that's a very big deal that would be enormously lucrative for that company and it would be a big win for AI.

but there seems to be this just like mass hysteria in the tech world over artificial intelligence. Just like the hype machine around it is like on, it's like off the scale. It's like up to 11 in the Spinal Tap lingo. Like it's driving insane valuations. I mean, we all live through the dot-com boom. It really feels the same to me. And like the dot-com boom

wasn't wrong. Like in the end, Google emerged, Amazon emerged, really big lucrative companies emerged out of that. But there was a lot of rubble and a lot of lost money and a lot of like, in hindsight, what were we thinking putting so much money into the company with the hand puppet? And I feel like we'll have that same cycle probably play out here too.

If you remember, I worked for a dot-com during dot-com boom 1.0. And there was a phase where you could just take any business and append dot-com to it. And it was considered a separate company and also valued like a tech company, even if it wasn't.

And it seems like that's what's happening here because Scale AI doesn't have some great AI model or anything. It's literally a data labeling service. It's not really a tech company in any meaningful sense, but because it's Scale AI and it's sort of adjacent to companies that do produce AI, it's being valued the way that it is. To be fair, they claim to be an AI company as well as a data labeling company, but the revenues are overwhelmingly different.

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

Right? I'm thinking of cryptocurrency specifically. I'm old enough to remember when we had conversations with Anna Shemansky about how Netflix had an unsustainable business model and was bound to implode at some point. Wrong. They had a couple of rough quarters where I was like, maybe Anna was right. And then they got it back.

Well, no, I mean, for years and years and years, they spent more money on creating content than they received in subscription revenues. And like, if you lose money every year, eventually you go bust. But unless you're Netflix, apparently. Right. Well, they just finally were like, oh, what if we raised prices? What if we doubled our prices and sold ads? Oops. Now we're making so much money. We like they did it. They pulled it off. And

And I mean, that's the big question, you know, which is, you know, apropos the Axios chart about the growth of ChatGPT is, does ChatGPT eventually become a media company? Because that's what Google is, right? And does it start, you know, selling ads against

queries? And if so, what kind of form do those ads take? And I don't know where they are in terms of like thinking through that kind of possible revenue model. And I don't know how the governance structure would impact that. But I do think that it's easier to change AIs than it is to change search engines.

You know, if you just get an iPhone and you type a search query into Safari and you haven't been fiddling around in your settings deep in there somewhere, you know, you're going to do a Google search. You're going to get a bunch of Google results and you'll be perfectly happy with that and it'll be fine. I think it's unlikely that Apple is going to do a similar deal with OpenAI.

because Apple has its own ambitions in AI. Also because it got in trouble for its Google deal just a few weeks ago in court. Exactly. And given how many people are like, oh, I love to use Claude for this and I love to use Gemini for that and I'll have to use Grok for this and I'll have to use ChatGPT for that. I think the kind of monopoly that Google has, we're not going to see a similar monopoly with ChatGPT. I don't know, Felix.

I was at Family PC Magazine in the late 90s and personally wrote a roundup that was a guide to all the different search engines you could use to search the internet. And it was like, maybe you could use this Yahoo one or maybe you could ask Jeeves a question. And it was like, who?

Who knows how this will play out? And then Google came along and it was all over. Like they just were the dominant player and that was the, I mean, they did it best, obviously. I don't know. I haven't tried all the different ones. So I don't know if ChatGPT is just the same as all them or that, but this is America. And like in the end, one company typically tends to dominate.

the space. Well, there are different models for different things that are really specialized, but I think if we're just talking about search, there probably will be a dominant. Well, search is an interesting concept. Search was never really a thing until search engines came along.

And then search engines came along and people were like, well, when you use a search engine, what you're doing is you're doing this thing called search. And so search became defined as basically whatever people do when they type a query into Google. People just want to know things is, I think, what people mostly mean by search.

But with ChatGPT, yeah, you can ask ChatGPT a question and it will give you an answer. And that feels search-ish, just as like if you type a question into the search bar in Google now, like you will get an answer, a Gemini answer at the top of the results, which either will or won't be reliable. But that is clearly a search-ish kind of thing.

You know, write me a term paper is not search. Create a video of a deepfake of Andrew Cuomo saying that he wants the buses to be free. Like, that's not search. There are lots of things that AI does that are not search. But I can definitely see the case for AI being a superset of search.

There are so many uses for AI and that's what the excitement is. What will AI be able to do and how will we be able to profit off of it? And I don't think anyone quite knows yet, but there's so much hype that, you know, AI is going to replace workers. AI is going to, you know, lawyers will use it and we only need one lawyer instead of 20 lawyers, you know, like on and on. Yeah, and maybe if the AI companies collectively are worth 1% of GDP and GDP is...

a hundred trillion dollars or whatever, and then they're worth a trillion dollars. You know, like you can kind of back into the valuations that way. Yeah. Yeah. You could kind of. But here's the question guys. Like we've now had 11 years of slate money. You train an AI on 11 years of slate money. It looks at what's in the news this week.

Couldn't it come up with a relatively plausible slate money on its own without the need for any of us? I think we should try to do this and release it on the feed. I do too. And just to see. I think it would be amazing. Can we do that? Why not? I think the technology exists. Hosted by Felix Bott. Felix Bott. Yeah, I would love that. I can just get my bot to host. I want it.

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All right, let's talk about immigration because this is the big headlines of the week. There have been massive headlines to do with ICE arrests at Home Depots, to do with big demonstrations in California and elsewhere. Clearly, the administration is making a concerted effort to be very visible in terms of

trying to arrest as many undocumented workers as it can find, and trying to be as sort of visibly anti... How to put this? Fascist.

Well, not anti-fascist, quite the opposite. Visibly fascist. Anti-protester, anti-anyone who's sympathetic to protesters. And Jessamine, thank you, Jessamine, found a great little piece in Vox that basically said what's happened is that back in the days when Barack Obama was the deporter-in-chief, it was quite easy to deport hundreds of thousands of people because you'd have hundreds of thousands of people pouring across the southern border. And then you just take them all and deport them all. And Bishop

there's your hundreds of thousands of deportations. Now there's almost no one crossing over the border and they're wanting to keep up that pace of deportations. And so they have to sort of go into the heartland and find people one at a time, ideally with deportation orders against them. And that's really hard and really expensive. And you have this situation where you have a dozen highly paid ICE officers and State Department officials and FBI people trying to find a single alien with a deportation order.

And that's just incredible. It's hard to scale. It's very noisy. It's very disruptive. And it makes a lot of people scared. And it's not very effective. And it's extremely expensive. I think I said that already. And so we're in this kind of zone of fear and noise right now. Emily, you found this story about how it's affecting sales of Coca-Cola? Yes. Right. Exactly, Felix.

You say the Trump administration's actions aren't effective, but I mean, it depends what you're measuring in terms of effective. Well, I mean, by Stephen Miller's yardstick of like, can we get to 3,000 deportations a day? Like they seem to be running at about 800.

Yeah. Yeah. So but that I mean, that is driving fear into the hearts of immigrants all around the country, undocumented or otherwise. And The Wall Street Journal reported this week that it is reducing sales at companies that have a lot of Hispanic or Latino consumers, including Coca-Cola, which saw sales fall.

fall by 3% and attribute some of that. Now, companies are always trying to blame something on their falling sales. And sometimes it's true, sometimes it's not. But my friend at AlphaSense, which tracks earnings calls and things like that, has seen an increase in consumer companies talking about Hispanic sales.

people, Hispanic consumers, and talking about immigration crackdowns because they're leading people to hide, to not go out as much, to not spend as much money. First, because they're scared. Second, because they're just worried about even having money because they're worried about getting deportations.

So, I mean, it's not good for the economy to have a significant share of the population afraid. And it's not just undocumented people are afraid. It's like people who are here legally who are maybe related to someone who is undocumented, people who are here legally who look a certain way that's going to attract interest from ICE.

ice is moving really fast they're going to make more mistakes also so that it just yeah that all of these stories of them arresting u.s citizens and plus the number that really jumped out at me from your story was like the share of hispanic shoppers at walgreens had gone or was it walmart somewhere like that had gone down by like 10 percentage points and you're like wow you know obviously most hispanics in this country are american citizens you know they

ostensibly have nothing to worry about at all. And so there is this like insane chilling effect. People are wanting to save money either because they're not going into work anymore because they want to save up should they eventually wind up in legal trouble. Is this going to have...

macroeconomic consequences, like we've talked so much on this show about the way in which so many sectors of the economy, obviously agriculture and hospitality, but many others as well, are reliant on immigrant labor and often illegal immigrant labor.

And Donald Trump came out this week and basically admitted this. He's like, yeah, we can't be just rounding up the people who've been hard workers for 25 years on farms and in hotels. That's not fair. Something's going to change. It's not clear what's going to change.

Maybe we're at some kind of an inflection point here. I've said before that I think Trump does listen to money in certain cases. So his sort of reversal and his recent statement saying that, you know, well, we're going to carve out exceptions for farm workers and hospitality and whatever, although none of that's happened yet. I think that is coming from pressure from red states where these industries are really important.

And I think he always thought about immigration and deportation as an optics issue, whereas Stephen Miller and some of the people executing this really think about it very literally. You know, they want to get rid of immigrants, just period. And I think Trump never really thought that this sort of large scale deportation was really going to happen. He just wanted the optics of it happening. And now that there's some actual backlash there.

Another thing is that, you know, you were talking about macro factors. There was a big labor force decline since March that people are attributing to immigration problems. But it's not because we're deporting so many people. It's because what you alluded to earlier, people have stopped coming in and we're very reliant on new immigrants to, you know, staff these industries. Right. Because like so many of these jobs are very high turnover jobs.

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

I mean, I don't know if this is a macro effect necessarily, but something I was doing some reporting on and hope to write about today is the effect of the crackdown on white collar and professional workplaces, because those workplaces are now kind of afraid also. And there are all these, I think,

millions of people here on sort of temporary status, temporary protected status, a lot from Venezuela and Haiti, who the Trump administration is now trying to get to kick out of the country. And a lot of these people have white collar professional jobs and their employers are like,

What do we do? Do we just wait and see how this works out in the courts? Do we fire people? And then at the same time, in the white collar professional space, there are people here who came in through student visas who have temporary status and are able to work on some other... There's all kinds of classifications. Felix probably knows better than I do for different foreign born workers. These student workers are also in...

sort of a limbo and employers don't know what to do about them. And these are people who have, you know, research and development kind of jobs, engineering jobs, tech jobs, like, and who provide like real brain capital to the economy overall. I should mention, because we talked about her earlier, the Russian scientist who came in with the frog embryos and got thrown into a Louisiana jail from Harvard. She finally got released from jail this week. Yay.

But she's out on bail. She's still officially being charged with smuggling frog embryos or something insane. But yeah, it was clearly part of the immigration crackdown. You know, the immigration authorities took one look at her and said, you're foreign and you also you're Harvard affiliated. And we don't like either of those things. We're going to throw you in jail.

And it is true, it was very hard to find a public statement from Harvard defending her because people are worried about what to say in public, whether the public statements will backfire. I'm not saying Harvard didn't do anything, but I am saying that Harvard was careful about what it was doing behind the scenes versus what it was doing in public.

And employers are in a tough situation. But I do think that so long as they are following the law, you know, as long as it is legal to employ people on under TPS or on J1 visas or, you know, whatever, whatever it is, as long as they are legally employing these people, I don't think it's that hard for them. There's no reason for them to fire those people.

Yeah, I just think it's just creating stress and would decrease the number of people that they hire going forward also. It would lower demand for foreign-born workers. It's because they don't want to become targets. I think they become more conservative in terms of taking any risk of hiring people that are... But that won't have a macro...

It's not even becoming a target. It's the risk of losing the employee, right? If your employee doesn't turn up for work one day because they've been arrested, that's not good for you as the employer. You kind of needed that person to turn up for work. Yeah. So...

Yeah, I do think that the big picture macro effects, I think Elizabeth is right that we're beginning to see them. I think that Emily, you're right that a lot of it is the lack of immigration more than it is the arrests and deportations, but both of them are pushing in the same direction. Whether it's going to be big enough to...

to make a visible dent in sort of GDP growth. I think it will be, but it won't be a huge one. I'm thinking like less than half a percentage point, but who knows? Everyone points to like the shutdown of immigration during 2020, which certainly contributed to the labor shortages we had in 2021. Yes, yes, for sure. But again, it's like making those comparisons to 2020, I think never, nothing can be as extreme as that, you know? 2021 in hindsight feels like

a halcyon era of like low unemployment booming stock market power shifting from capital to labor all of these wonderful things like if the worst that happens is we wind up in another 2021 and i think we're doing okay

I don't think so. I actually think the numbers Elizabeth was pointing to in the labor force, fewer people are coming here, is actually at this point keeping the unemployment rate low somehow, right? Because the economy is slowing. We don't need all those workers like we did in 2021. So in terms of macro effects, we might never see them. In fact, it might make the macro economy look good.

That's the Bannonite argument all along, right? Is that if you deport the extra workers, then that increases employment among the native born. That's not what I'm saying. I'm saying employment isn't increasing at all. So you don't need those extra workers as much. And keeping the extra workers out doesn't

I'm going to stop talking. I think he's wrong in the way he frames it, but right now with labor demand low and hiring demand low, not having these people, workers come in from outside the country is not having the effect of creating shortages. Yeah, I don't know if that's true though because these...

Workers are really concentrated in very specific sectors. And so they're not necessarily going to be replaced by domestic workers. It's not a really one for one thing. But think about the sectors, not agriculture, not meatpacking, but hospitality, tourism, that falls when the economy slows, right? And construction also falls right now. Home prices are still really high and the market's really slow and stagnating. There's not as much need for those workers as there was in 2021, 2022.

There's a lot of need for new construction. There's need for new construction, but it's not happening because interest rates are high in the residential sector. And also because building costs are high because you can't find any labor. Yeah, I guess. Anyway, we should have a numbers round. Emily, you mentioned that you had a number. What is it?

I already said that number that I was going to use, but I have a different number. The number is five, as in five things, as in tell me five things you did last week. The famous quest. Oh, the Doge request. Yeah, you wrote about that this week. Yes, I did. I still read Axios, even if I don't write it. Interesting.

Yes. The five things email is like this zombie that cannot be killed. As soon as it happened, apparently Elon Musk in February tweeted he wanted all the federal workers to email what they did last week. Otherwise, you might be fired. He threatened. Apparently, no one in the White House knew about it. It surprised them. Everyone was like, ugh.

It was like maybe the first time everyone was on not liking the Elon Musk way. Nevertheless, they put it in place for like a brief period, but then everyone decided we don't want to do this. This is bad. OPM, the White House HR people said, agencies, it's up to you whether or not you do this. Plenty of agencies stopped doing this. But still today in June, there are still workers in the federal government that every week go in and

They write down the five things they do. This week, I spoke to someone at Social Security who was like, everyone criticizes us and says we're lazy bureaucrats who do nothing and do meaningless tasks. Well, here is the meaningless task we do. And it was initiated by the guy who was supposed to have us stop doing the meaningless tasks. And it's just like, ah.

Why? And then I spoke to someone at the Consumer Financial Protection Bureau, which has been like, wait, does that still exist? Well, there are still people working there, but they've, they're not given work to do right now. And there's like a court fight over whether or not the agency can exist in Congress, House Republicans, Senate Republicans are trying to get rid of it altogether. But anyway, while they're still there, they were never told to stop doing it. But I did speak to one person there who was like, I have stopped doing it because every week I would just write, I didn't do anything this past week because I wasn't given any work. Yeah.

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

Yeah. I wrote about it that it was, I think I did anyway, or I pitched it. I don't even remember, but it's not a good management tactic. There are better ways to figure out what your staff is doing every week than forcing them to email about it. You could ask them, you could use AI. There's just a lot of other ways to go about doing that. You can measure results somehow. You could work with that. Yeah.

My number is 257 million, which is an arts funding number. And let me just ask you two, Emily Elizabeth, did you think that under Donald Trump, arts funding would go up?

No. Well, $257 million is the number of dollars that the House of Representatives, a committee in the House, has proposed that should be allocated to the Kennedy Center this year, which is more than five times what it has ever received in previous years. Its entire operating budget last year was $269 million. So basically, its entire operating budget

minus like a sliver, they're saying we should just get from the federal government. Historically, the federal government provides about 16% of the funding for the Kennedy Center. But yeah, basically what happened is that Donald Trump came in and fired the entire board

He appointed himself chairman. He got rid of all of the woke programming. He turned up for a big like fundraiser-y like Les Mis thing this week, last week, something like that. And so historically, most of the revenues of the Kennedy Center have come from either donations or ticket sales. And because there's no programming anymore, like there aren't any ticket sales. So what programming there is tends to be free. So there's no revenue from that.

And the donations of all of the people who wanted to support the woke programming, obviously those have gone to zero because there is no woke programming anymore. And so, yeah, guess what? Now the Republicans are stepping in and saying, let's provide federal funding for the Kennedy Center. Well, this is conservatives are always willing to fund the arts as long as you're not talking about the kind of art that's created by liberal commie hippies.

Which is all art, really. Yes. Texas was trying to pass a tax exemption for movie studios to move to Texas, but their restraints were the stuff these Hollywood studios were going to make. It had to be not Christian in nature, but there was a sort of like G-rated gloss to all of it. It was like, you know, no profanity, no... And it's like, well, that's 90% of Hollywood. So you're saying that like

no country for old men would not have got funding. No. No. Oh, well. Elizabeth, what's your number? My number is nine and that's euros. And that's how much you can pay a one-time fee for

to use browser dating, which is a dating service that matches you based on your browser history and your last 5,000 searches. What? That's not real. It is real. The developer is a guy named Dries de Porter. He's Belgian. And so far, fewer than 1,000 people have signed up for this. Wait, that's amazing because your browsing history is like...

The real you. Yeah. Well, that's his theory. It's like, there's matching like the real you. But the person you match with presumably doesn't get to see your browser history. They just know that there's some algorithm. The algorithm just determines that this person is just as twisted as you are and so you might be a good match. I mean, it's kind of genius. And,

And it's not like nine euros a week that it would be if it was American. It's a one-time nine-euro fee. And then like, yeah, go Belgian guy. I love it. It's terrifying and dystopian, but also amazing. Wait, what's the name of the service? Browser dating. Browser dating. Okay. That could do a better name probably. I'll allow it. We should off-chat GPT for a better name. On it.

That's it, I think, for us this week. Thank you so much to Jessamyn Molly for producing. Thanks to all of you guys for sending in your emails, slate money at slate.com. Thank you especially to all of the people who messaged me privately on Learned League. You guys are amazing. I love you guys.

And thanks for the email saying that you loved the conversation with Barry Lamb, which we had last Tuesday about philosophy where I nerded out and I had so much fun on that one. But yeah, we will be back next week with yet more Slate Money.