Ted Audio Collective Hi, everyone.
You're listening to After Hours.
I'm Yang Mi, and I'm here tonight with my buddies, Felix and me here.
Hey, guys. Hey, Yang Mi.
Hey, Felix. I am Yang Mi.
So you know how we talk about technology a lot on this show?
So earlier today, I was looking at the new Samsung foldable phone.
Have you guys seen it?
Oh, yes. The $2 ,000 phone.
Yeah. Yeah. What did you think?
I'm trying to figure out if I like it or not.
I mean, to me, the idea that you have an opportunity to make the phone smaller, I think now that phones are really big and bulky.
I think it's a technological wonder, and I think it's super exciting.
Is it $2 ,000 worth exciting?
Yeah, not so sure. I'm going to wait.
I think this is the kind of thing which is just going to break, and I'm just going to wait a year, they'll get the kinks out, and then I might dive in.
I'm tempted because I want to play with it, but the minute I saw it, I thought, wow, this is one of those situations where it feels better to be a second mover rather than a first mover.
But the reason I brought it up is because I think one of you guys should get it and bring it to the next recording, so we can play with it.
Why am I not surprised?
Okay, anyway, so Mehere, you brought in a topic tonight.
I did. I want to talk about millennials and socialism.
So combining two favorite topics, millennials and socialism.
But in particular...
What is it about millennials?
First avocado toast, now socialism?
Yeah, exactly. The phrase millennial socialism, it's a thing now.
I think the economists did their cover story on millennial socialism.
Yeah, there you go.
And then I want to talk about Walmart.
I know it's not Amazon, but we sort of assume that Amazon is this retail juggernaut that cannot be stopped, and Walmart is aggressively trying to stand in the way of Amazon's dominance, and so I want to talk about it.
Great. That sounds perfect.
So Walmart, we don't pay a lot of attention to Walmart.
It's not the sexiest company to talk about, and I realize that, but just as a reminder, it is still by far the largest retailer in the world as well as being the largest employer in the world.
And so we should probably talk about Walmart.
They announced their results last week, beat expectations significantly, pushed the stock up, but I want to start out with a more general question, and that is as you look at Walmart and you can begin to see their counter strategy to Amazon unfold, as you look at what they're doing, are you bullish
on this company or are you bearish?
I mean, I was astounded to see the results.
You know, a $500 billion company that grows by 3%, 4%, that's just like really, really amazing, and then the core of their business grows.
And so part of the reason why I think they have actually a real chance to take on Amazon is because I think now we see the game plan.
We see what they're trying to do, and the game plan revolves, I think, around groceries.
Meir, are you bullish or are you bearish?
So, you know, I'm a little ambivalent, but I'm concerned, and this is like my natural state of being, right?
But I think, look, I think the new CEO is amazing.
I think he's doing some great stuff, but there's a big butt.
Yeah, there's a big butt.
I don't like some of the recent decisions, and we'll come back to it.
I'm going to go on record as being cautiously bullish.
So Felix, you were talking about grocery.
So the reason why I love the grocery play is that it's a repeat play for them when they first created the super centers.
Remember in the late 80s, early 90s, they rolled out the super center format where for the first time that Walmart was selling groceries, and you would think it's a terrible idea because groceries are low margin, but it just created these enormous economics of density.
It used to be that they needed 150 ,000 households to justify building a store.
After they had groceries, this shrank to roughly 75 ,000.
And I think now they're doing the exact same thing, except it's around grocery delivery.
And the intuition is really quite simple.
If I have two customers on a block, and I can stop twice that same block because they're both ordering groceries, which is more likely in groceries because you buy them much more often, my costs come down dramatically.
So the company will say that they triple two day delivery and their variable costs dropped by about 10%.
And so I think that's the backbone of really healthy economics and a really great business.
You know, it's not just the delivery piece that is impressive to me.
From the minute their new CEO came on board, he talked about how the brick and mortar stores were an asset, not a liability.
And at first, you listened to that and you thought, really?
You never know, right?
He's like, oh, okay.
You gotta prove it, and he's proving it.
He really is. And a lot of their e -commerce consists of in -store pickup.
And in order to do that, you really need to have a very particular kind of asset.
So you need to have a store with a huge parking lot and a lot of space for easy in and out.
I mean, I know that Amazon made a big move to buy whole foods, but they're parts of the country.
Not whole foods country.
This is Walmart country.
So, Yungmi, why are you excited about in -store pickup?
I understand the delivery business to have these economies of density, but do you think that's also true for pickup?
Oh, I think so. Last Mile delivery continues to be super expensive and you can begin to squeeze some of the inefficiencies out of Last Mile delivery, but you can eliminate them altogether.
The second thing I'll say is there are towns across America where Walmart is the town center.
It's where people get their prescriptions filled and their vision checked and they buy everything from sneakers to groceries.
And Walmart really wants to keep it that way.
And so getting people in the habit of just stopping by that store all the time is really important.
And one of the reasons why I think there's real validity now when they talk about their brick and mortar stores being an asset as opposed to a liability.
So let me be a little bit more of a curmudgeon on this, which is my normal disposition.
So, first the caveats, which is I really do believe the new CEO Doug McMillan is special for all kinds of reasons.
I think he's authentic in the way he speaks about the business.
I think he's really smart and he's young.
And I think that's terrific.
And I like the pickup thing.
The more difficult part for me is this last year, the biggest thing they did was a very big acquisition in India.
And from a finance perspective, you kind of look at that big capital allocation decision and you say to yourself, what?
This doesn't make any sense.
So you might say, well, why is that a big deal?
It's like a $15 billion acquisition in the context of, you know, the $300 billion market cap.
And the answer is when these things go wrong, they go horribly wrong and that thing could become an albatross.
And then the final thing I'll say is the reason people usually get excited about Walmart is they kind of do this following calculation.
They say, well, look at this.
They have like twice as much revenues as Amazon and yet they're valued as like one third of what Amazon is.
And so then they kind of say, well, then it's gotta change.
And the answer is, yeah, not really.
You know, not necessarily.
In part because Amazon has a totally different economic model, is growing at a different rate, is profitable in a different way.
And there are other companies who are not Amazon that are hitting it out of the park and are growing not at two to 3 % but higher.
So I agree with you that one of the biggest vulnerabilities is the lack of diversification in their business model.
So Amazon has AWS. Increasingly they have their advertising business to basically subsidize their retail operation.
And it creates a very different economic base for them.
But imagine if you woke up tomorrow and you open the paper and you saw that Walmart just struck a deal with Humana, which is something that's been rumored, right?
Would that change how you thought about it?
Well, yeah, I mean, that's exciting.
I mean, that's like the opposite of the Flipkart thing.
Like that's US -based core kind of adjacency, super interesting kind of expansion into healthcare.
That I would love to see.
It's this other stuff that I'm not sure I really like.
What I find really fascinating is this connection between corporate reputations and the ability to expand scope.
So historically, of course, Walmart used to be the villain.
Every labor union in the country wanted to figure out how to slow their growth and how to make expansions into different businesses much more difficult.
Now, I think it's almost the roles have reversed and it seems the new villain in town is really Amazon.
So it's funny how the reputation and how we think about the companies then say something about, can you actually be in healthcare?
Can you be in financial services and what can you do in these businesses?
The other striking part about that is not just as Amazon and the villain, but it feels like the new CEO, Doug McMillan, I guess he's not that new anymore, but he is kind of going the other direction, right?
I mean, he's really pushing to become perceived as a really valued corporate citizen.
So let's take a look what he's done.
So he came on board and one of the first things he did is he raised the company's minimum wage to $9 and then he raised it to $11.
He expanded maternity and parental leave benefits.
He started tuition assistance for their employees.
They've come out in support of gay rights.
After the Parkland shooting, they raise their gun buying age 21.
He's done stuff on the sustainability front to reduce their environmental footprint.
I mean, these are things you're not used to seeing come out of Walmart.
Now they still have many problems.
And they'll be a little more skeptical.
I mean, they're raising wages in the context of a super tight labor market where they have 1 .4 million employees in the US alone.
And so can you imagine like churn if you fall behind in wages?
Oh my God, I think that's being uncharitable.
On the wage side, yes, like tight labor market, but stagnant wages for a long time.
And you know, 20 % increases in the wage rates is not small.
That's like the real deal.
But this is what's interesting about him is he's not like trying to say I have some social mission and I got to go build some low income housing.
He's saying like, look, the core way for a corporation to do better is to take its basic functions and operations and think more broadly about the constituencies.
That is such a more true version of being cognizant of social responsibilities than some philanthropic thing or some CSR thing.
And you know, I don't know, sometimes maybe I have drank the Kool -Aid.
I'm skeptical about the stock, but I think there's something about him that is, also he's young.
Here to be clear, he's young in the way that we're young.
Yes, well, he's also kind of boyish.
Like he looks young, he feels young and he's kind of got that thing going for him.
And, you know, by CEO standards, you really fell for him.
Oh my God. If he asked me on the wage front, say we'll have a really big recession tomorrow.
Our wages going to continue to increase at Walmart because we think that's the right thing to do.
I don't think so. I would be very surprised if that was true.
Listen, all I can tell you is that this is a company that has very little wiggle room.
It just does, this is not an Amazon.
I mean, this company has so little wiggle room.
And so when you raise the minimum wage at a company like this, it is very different than for an Amazon to raise wages.
The other thing I will say is that I think about his tenure as a CEO, everything he's done is he's sort of building a new foundation for Walmart.
You know, he's remodeled the stores, he's played catch up with their e -commerce capabilities, and he's really made the company relevant again.
And so then you think, okay, what's the next phase of his CEO tenure gonna be?
You would like to think that the next phase is looking across the landscape, recognizing what the vulnerability is and the lack of diversification in the business model and looking for something that's gonna really create kind of a step function increase in value, which he's not gonna get out of his traditional
retail business. But this is precisely why, young me, I hated the Flipkart thing.
Yeah, because it's like doing something big but the wrong thing.
Exactly, and that worries me so much, because it just feels like everything you said makes sense, and then you go spend $20 billion on Flipkart.
I'm like, what the heck are you doing?
Super interesting. Yeah, well, we'll check back in.
Okay, Mehere, you wanna talk about two of Felix's favorite subjects, millennials and socialism.
Love the combo. So here's some basic facts, which is increasingly socialism has become a way to identify yourself, and we now have a significant presidential candidate who's identified as a socialist.
We know that socialism pulls extremely well amongst millennials, and that has just been skyrocketing up over the last kind of decade.
And I guess I wonder, what do you make of this, which is do you make of this as, well, that's good.
We're gonna get a little bit more ideological diversity, we've had like reckless market capitalism, and this is like a natural thing to see come back from that, or is this a really dangerous kind of step that we're taking where generations says, yeah, socialism is just fine.
And by the way, one of the questions, of course, is what the heck do people mean when they say socialism?
For some people, it's a very shifty idea, which is part of it is, oh, we should tax the rich more.
Part of it is we should have universal coverage in health insurance.
Part of it is Green New Deal.
Part of it is the ownership of enterprise should be much more oriented towards workers.
So I'm curious, what do you make of that?
So I find the distinction that you just made me hear, I find actually super, super useful.
So one is sort of at the level of the label, so the label socialism, which was political suicide not so long ago, now all of a sudden seems to be acceptable.
And I think that to me is not problematic.
And the reason why I don't think that's particularly problematic is because it expresses an unease with the direction of the economy.
It expresses concerns about the direction in politics.
And I think making these kinds of concerns part of the national conversation is super, super important.
So I think that many more people now say they're socialists.
I think I'm totally okay.
And then of course what really matters is now what exactly does this mean?
And there I think the ideas are really a mixed bag.
I mean, the idea of government provided healthcare is a reality around rich nations everywhere except in America.
And then they're really terrible ideas.
So on the climate front, we know what works.
We know cap and trade is the way to go.
We have everything in place.
All you need to do is you need to push through the policy.
And of course there is like one idea crazier and more expensive than the next.
The conversation that is most interesting to me is what happened with business that so many young people look at the state of affairs and business and politics and they feel they lost control.
But think about the experience that they've grown up with, right?
So they enter adulthood and what's happening, the global financial crisis, and then rising inequality.
And they see a concentration not just of wealth, but of power.
It's hard to walk away from what they've experienced and not have a sense that this is deeply unfair.
The game is rigged.
And so it would almost be surprising if there wasn't some kind of reaction against that.
But the thing that worries me is that I feel in general, like we've lost track of the narrative, right?
The narrative should be, market economies have pulled 2 billion people out of poverty in the last 30 years.
The rise in income inequality has largely been arrested over the last decade.
And it largely happened during the 1990s.
We have like these tremendous accomplishments that are coming out of the market economies and we just refuse to acknowledge them.
But I think it's possible to think both these things are true.
I think it's possible to think, well, so much of human progress can be attributed to a particular economic system that is capitalism.
And I think it's also possible to say that there are - There are significant problems, yeah.
I just don't think most people keep those two ideas in their mind at the same time.
For the vast majority of people, the overwhelming narrative is income inequality is skyrocketing.
There's a huge problem and market capitalism is not working.
That is the dominant narrative out there.
And as a consequence of that, they're gonna be much more predisposed to more kind of pie in the sky ideas and maybe even worse, they're gonna fall prey to being labeled as socialists as the president has already labeled the left in the US as basically being socialists.
That's what he did in the State of the Union.
And man, that is gonna alienate a lot of people in the middle and then it becomes kind of self -defeating.
Whatever good ideas they have are kind of gonna get lumped into this kind of broader thing that a lot of people will still reject.
I don't know if you've seen these but the New York Times has published over time a series of maps that show the fraction of income from government sources, county by county.
You look at the latest map that they have is from 2016.
You look at that map and it's dark red.
It's almost 20 % on average and there are many, many counties in which more than 50 % of income comes from government sources.
And I think what that says is we've actually had a very big political response to the observation that there was income inequality.
And we made many, many people much better off and that did absolutely nothing to buttress the idea that markets are a force for good.
To me, that is maybe one of the most profound lessons here.
Yeah, that's interesting.
I think the big revelation here is that the traditional response to income inequality, let's distribute more income has not worked politically, has not saved the idea that markets are a force for good.
But that's what's concerning, right?
I mean, so where do we go from there?
What's like, why isn't the narrative working?
So my hypothesis would be the narrative is not working because income given by the government does not give you a sense of control.
And what people lack, what people find hard about the current situation is that they don't feel like they're in control.
They're not in control of politics.
They're not in control of their working lives.
That's the key issue.
And the increasing redistribution is not going to change that.
So we need new models to give people a sense that they have a say in politics.
And I think increasingly, probably also in business.
I agree with that point.
But the one thing I would say, and Meher, this is really in response to your concern, okay?
Is that you wanna separate what feels like the dominant narrative versus where the actual consensus is, okay?
One of the things that I find both impressive and uncomfortable about this entire movement is how unbelievably good they are at branding.
And what's happening right now is in our political conversation, you get politicking through sloganeering.
So Green New Deal is a beautiful brand, slogan, Medicare for all, free college for everyone.
That's a great one, right?
These sort of branded policies that are out there that end up, because they're so powerful in their simplicity, end up dominating the conversation.
And yet, what they do is they prevent us from being able to have any kind of nuanced conversation about what those words actually mean and what the trade -offs might be.
And I see this among young people all the time.
I see young people whose instincts are to be somewhere more in the middle.
And yet they don't have the language and they don't have the policy knowledge, to be quite honest, to be able to counter why exactly they might not be for free.
Like, how can you not be for free college for everyone?
That's like being against motherhood and apple pie.
And so I do think what you're kind of seeing here is you're seeing at least a temporary triumph of a particular kind of politicking informed by modern marketing and branding and it's not necessarily reflected the consensus.
I continue to believe that the consensus is somewhere in the middle.
For example, if you polled millennials today and you asked them, hey, what do you think of universal basic income?
I think you'd get a very mixed response.
But this is what really worries me about this young me.
The really problematic part is it's gonna become a platform for policies that actually don't advance the interests of the people who they say they're advancing.
And that's like the real crime here, right?
But let me give you a different way of thinking about it.
By sticking out such a far left position, it suddenly makes the somewhat left position seem completely reasonable.
So for example, Felix, you stated this earlier, there are laws we could pass today that would significantly cut down this country's carbon footprint.
Like today, we could do it.
I mean, there are things we could do today to rein in drug pricing.
There are things we could do today to rein in corporate executive pay.
But we don't, because all of that stuff seemed a little radical.
Now, that stuff seems completely on the table.
My intuition is a little different, young me.
So I think your diagnosis is exactly right.
If you have these far left suggestions and then that opens up the space of possibilities.
And many things that used to look radical now don't look so radical.
But I think the policy response is not that we're going back to the old good policies and we can now do more things than we could before.
The compromise is going to be that we'll do half of the radical proposals that don't make sense in the first place.
Or alternatively, that by expanding the space, the dialogue gets more polarized and then nothing gets done because no one's sitting in the middle, right?
And then that's even worse.
So let me ask you this question, which is we all interact with millennials all the time.
And if somebody comes up to you and you have a serious conversation with them and they say, I really believe in socialism and I don't believe in markets, nearly as much, what do you say to them?
So I take it very serious in the sense that I do think people need to have the feeling that they're in control of their lives.
I think the sense of insecurity that you have right now, both financially speaking, health wise, if you just look at the fraction of Americans who think their kids are going to be worse off than they are, all of that I think is super serious.
And so if the label that they want to slap on, if that label is socialism, fine by me.
I don't really care what the label is, as long as we can have this conversation.
And then I think my experience speaking with millennials is very similar to young me's.
Then when you drill down and you say, okay, so free college, nice idea, but shouldn't we maybe exclude the people whose parents are billionaires?
Yeah, of course, that makes sense.
And so then it becomes more a conversation about where exactly is that dividing line?
Who should benefit, who should not benefit?
Well, what do you say, young me?
I start from a place of, I think there is a lot of truth in the critique to the extent that they feel that capitalism has failed them.
I think listening hard and paying attention to what they're trying to communicate.
I think that's really important.
The second thing I'll say is I do think what will ultimately destroy us as a country is if our young people stop being engaged.
I also think it's the job of younger generations to force us to defend our institutions.
And if we can't, we need to change them.
And so right now we're in a position where there's a segment of the population that is forcing us to defend our institutions.
And I think that's not a bad thing.
I'm not completely sanguine about it, but I can't say that I'm alarmed.
Okay, well then I feel better too.
No, no, no, no, what do you say?
No, I mean I think, I don't know, I think it's alarming in the sense that, you know where this conversation is not happening?
Is in Asia. Yeah. You know, this conversation is not happening in Asia, where they have come out from decades of a much more of an experimentation with a third way, and where it didn't work in India as one example.
Yeah. And so I'm kind of scarred by that history and that memory.
And so I want to be open -minded about all kinds of new things, but God, I look at the UK and I look at people who are searching for control and in the process they're gonna cause economic chaos via some version of Brexit, all because they want control of their lives or perceived control of their lives.
And I think that is gonna scar a generation and it's gonna hurt precisely the people who they think they're gonna try to help.
And I think that could entirely happen in the US.
I want to be as sanguine as you guys are, but in part, I think these ideas are not, we don't know how good we've had it in a way.
And we've talked ourselves into a state of frenzy about how terrible the world is.
And there's nothing observable out there that conforms to that.
If anything, we have like a tight labor market, we are now finally seeing rising wages and we're gonna end up fighting the battle from 20 years ago when income inequality shot through the roof and we're gonna hurt ourselves.
Yeah, that's I think a very good point, both on the left, but also in the President's rhetoric, you're now addressed as being a victim.
Longer term for the performance of the US economy and I think the performance of the political system, having a system where people are constantly told that they're victims, that cannot possibly be good.
I completely agree.
I think that's a great point Felix, that's exactly how I feel.
I just feel like this politics of victimization is very complicated and not entirely consistent with reality and politicians are catering to it.
Well, because there is so much money in politics now that just even small things, moderate things that would have prevented us from bouncing from one ideological extreme to another, we can't get done.
We can't get anything done on climate change.
We just can't get it done and we can't get anything done to create a slightly more fair playing field when it comes to the distribution of corporate proceeds, for example.
I mean, we just can't get small things done and because we can't get small things done, now people are clamoring for big things.
Okay, so we'll see how this takes out.
I knew Felix would like this topic more than he complained about it.
He was like millennials and socialism.
He talks a big talk, but he loves this.
I do, I do. Okay guys, do you have a pic for me?
Yes, I think I got one.
This book has already gotten some love, but I'm gonna give it some more love, which is Dryer's English is a fantastic new style guide that has just come out from the guy who runs.
Did you say style guide?
It's not just a style guide.
It's not a style. You gotta be kidding me.
Okay, hold on, hold on, hold on.
It's way more than - Even for you to be here, that's a little extreme.
It's not just a style guide.
Wait, I have to explain for our listeners, a style guide is a book that tells you when to use a colon or a semicolon, where to put your commas.
No, no, no, a style guide is a way of life.
I go back to talk about socialism.
A style guide is a way of thinking about life.
It's like a deep philosophical tract.
And so this guy, Benjamin Dryer, has written the fantastic style guide.
It's perfect for the modern age.
He talks about modern usages and it's amazing.
And it's really funny.
And so I recommend it highly.
It's funny. Don't listen to Young Me and Felix.
Dryer's English, it's a great book.
How can it be funny if it's a style guide?
That's the accomplishment.
That's what makes it amazing.
But does he talk about commas or no?
Yes, of course he does.
But it's about kind of why you would do it and how you would do it and what it means.
He finds the humor in a comma.
Okay, okay. Trust me, trust me.
We're not judging. Okay, now you can tell.
I have a much more mainstream recommendation, okay.
So the other night, my husband was watching a documentary called Free Solo.
And I kept walking by and thinking, it didn't honestly seem that interesting.
And then I walked in near the end.
And so my recommendation is to watch not the entire documentary, but to watch the last 20 minutes of a documentary called Free Solo, which is amazing.
So it's the story of this guy.
He's a rock climber and he decides he wants to conquer this famous climb El Capitan.
I don't know. It's this iconic rock face in Yosemite.
But the thing is, is the way he climbs, he frees solos, which means he doesn't use any ropes.
He doesn't use any safety equipment at all.
And so the last 20 minutes is just him climbing, make actually doing the climb.
Everything after that is just, I don't know, preparation, whatever.
But when he starts the climb, I got to tell you, it's unbelievable.
You have to check it out.
So my recommendation, the last 20 minutes of Free Solo.
Sounds almost as exciting as Benjamin Dreyer's discussion of the Oxford comma.
All right, Felix, what do you got?
To provide a little balance to me here, I'm going to go lowbrow today.
You spend a lot of time on Reddit.
So for our listeners who don't know, Reddit is an older social network.
There are these categories of content that are offered, and the content boxes are called subreddits.
And there's a subreddit that I think is the perfect way to waste time on the internet.
Unfortunately, the name is not all that fantastic.
The subreddit is called Interesting As F***.
Okay, we'll bleep that out.
You need a style guide, Felix.
But what people upload is just incredibly interesting.
Mola Mola, the world's largest bony fish.
You want to see an anti -vaccine movement, a cartoon from the anti -vaccine movement in the late 1930s.
You want to see a house that can be folded in a few seconds.
You want to see what an eclipse looks like if you watch the earth from space.
I mean, it's image after image after image, after story after story, just really, I mean, you got to say, Interesting As F***.
Right? And so you can waste away a day basically.
Yes, oh, hours go by.
It'll feel like minutes.
Okay, so our recommendations this week.
We have a dorky style guide.
We have 20 minutes of a documentary, and we have the Interesting As F*** subreddit.
That's what we got.
There you go. Okay, only on after hours.
Thanks everyone for listening.
And I'll see you guys next week.
