Ted Audio Collective Hello, this is After Hours.
I'm Felix. Hi, me here.
I'm Sarah Green Carmichael from Bloomberg Opinion.
Yay! Sarah's back. It's so great to be back.
I've really enjoyed listening to your recent episodes.
I've sort of found myself talking back to no one as I walk around and listen with my headphones on.
Making brilliant points, I'm sure, that unfortunately we miss.
To the forest floor as I walk through the woods on my daily walks.
Yeah. How have you guys been?
Have you managed to get to the end of the year feeling like you set out to accomplish what you wanted to in 2022?
Ooh, that is a loaded question.
It will be the first time in about 50 plus years or so.
So I'd be super, super surprised.
There's always another project, always another idea.
I agree. I'm in, if anything, a little bit in that panic mode, Sarah, of, yikes, when 2022's running out.
But that's a perpetual state of affairs, so it's a different story, I think.
I am also in panic mode and just trying to survive through the triple demick of this winter with a young child.
Meir, I was thinking of something you said in a recent episode, actually, which is about a fresh start.
And how it's about wiping the slate clean.
And I was like, oh, I didn't even think about wiping the slate clean.
I'm just sort of like, you just pile new stuff on top of the old stuff.
You deserve it. Wipe that slate clean.
And then somehow miraculously, in the midst of all the chaos, we managed to come up with topics.
What do you have for us, Sarah?
Yes. I am really excited to hear you guys talk about Disney and the shake up there with one Bob leaving and another Bob coming back.
That sounds fabulous.
And Meir, what do you have?
Always a downer. I want to talk about regret.
You mean the regret of talking to us on a podcast?
You know, a new paper came out from the National Bureau of Economic Research about the degree to which people feel financial regret.
And the numbers are staggering.
So I wanted to talk to you about it and get your sense of why it is.
Interesting. Two great topics.
Let's do it. So Sarah, Disney, the story of the two Bobs.
Sounds like a new Pixar movie coming to theaters soon.
The story of the two Bobs.
There is a lot of drama here because just a few months ago, the previous Bob, Bob JPEG, had his contract renewed by Disney and now he's out and his predecessor Bob Iger is back.
And I have been very curious to know what this means for Disney.
So perhaps the first surprising thing is how Bob JPEG didn't really have a chance to do much of what he might have set out to do.
So he wasn't the job all that long.
For about 11 months after two years, he had Bob Iger as the executive chairman, which cannot have been easy to start as a CEO at a time when the legend is still in the house.
And then, of course, the pandemic hit and the core of his expertise and knowledge, which is in parks, didn't really play that much because the parks weren't open.
So I have to say, even though maybe you could be critical about some of the decisions that they made, I was actually not surprised to see the contract renewed.
And I interpreted it as saying, look, the macro environment is challenging.
COVID was challenging.
And now we probably get to see what kind of a CEO he really is and what he really wants to do because there's a little more wiggle room.
And then to see him gone basically at the time when he can do the things he wanted to do, I have to say, it's surprising and also a little disappointing.
Yeah, I'm kind of with you, Felix.
As you point out, he barely had a chance.
And oh, by the way, streaming landscape changes completely and the valuation of Netflix changes completely and the whole promise of what people thought Disney could be changes completely for reasons not really under his control.
But moreover, the reason I really hate this story, Sarah, is it's a reminder of the cult of the CEO.
The CEO is savior, Bob Iger is going to come back, everything gets better.
The stock pops 10%.
As you said, Felix, he stayed on as chairman and he kind of undercut the CEO, Chepec, pretty badly during that time.
By the way, the only way to really judge a CEO is by how their successor does and this is an Iger pick.
And moreover, the Iger mystique is completely a mystery to me.
He was CEO for 16 years.
For the last five or six years of that time, the stock was completely flat.
He massively overpaid for Fox and potentially Marvel.
He loaded up the company with $60 billion of debt, which meant that during the pandemic, they had to cut their dividend to zero.
And more generally, the problems they face are exactly the problems that he created.
So I know I'm being super harsh, but the point is to counter this notion that there are these CEO saviors, so -called boomerang CEOs, who come back and then want to save the company and he acts as if the problems were not his making and they were somehow Chepeks.
So I confess there's so many dimensions of the story, Sarah, that I find really annoying.
Well, I think that you're right.
When you say that a lot of these problems are of his own making, his biggest job in the end was to find someone to replace him successfully and he failed at that.
And that's why he's back.
And we've seen that at other companies, you know, Howard Schultz has returned to Starbucks twice.
Agee Laffley went back to P and G, Michael Dell went back to Dell.
Why is it so hard to replace these sort of iconic CEOs?
One of the things I found really interesting about the reception that he has gotten is that employees seem genuinely delighted to have Iger back.
There have been many people quoted in the press saying I had to read the email twice.
I couldn't believe it.
We got a standing ovation.
People are thrilled to have him back.
And so to me, I wonder if there is something about him interpersonally that is just a better manager, maybe a more charismatic leader.
Maybe he has the kind of interpersonal charisma needed to sort of mend some fences.
But I think that's exactly it.
What people are pricing are his charisma because when you look at these bigger bets that he made, they have turned out to be very problematic and the underlying business, let's just remember what the underlying business is for a second.
The revenues are theme parks.
A third of it is linear TV and a third of it is other stuff, including Disney Plus.
And the theme parks generate most of the operating income, but it's not clear how it grows.
They've done a lot on pricing which suggests that it's hard to grow that a ton more.
The linear stuff, which is ESPN and ABC, obviously is struggling.
That's the portfolio Iger built.
And he bought at the top of the market.
And so charisma ends up eclipsing.
I hate to put it this way, but like, you know, dad's back in the house and he's going to take care of everybody, but it's like this kind of weird paternal adoration that I find perplexing.
And I think it's at the root of a lot of CEO pathologies in a way.
There's sort of two things here.
There's one, this cult of charisma, which I like you find problematic to say the least, it papers, overall manner of sins.
On the other hand, though, are we talking about soft skills, people skills, skills that are important for senior managers to have because you can avoid things like really offending Scarlett Johansson when you put your movies straight to streaming.
You can avoid really offending both Governor Ron DeSantis of Florida and your employees when you make a cash of the Disney response to the don't say Gay Law.
I do think that there is some sense in which we need to maybe separate charisma from just soft skills because charisma is it's in the eye of the beholder, but soft skills are something everybody needs.
And in a sense, this is one of the most fascinating aspects of the change to me thinking forward this expectation that he's going to come back.
He's going to be super nice to people.
He's going to engage with everyone in particular creatives who sometimes felt less of a connection to JPEG.
I think are super super excited to have him back.
And then when I think what will it take say to fix Disney Plus?
There are 200 million plus subscribers across Disney Plus, Hulu, and ESPN now and what it will take to make that thing profitable is much more constrained on the content production side.
Netflix's early period in streaming when they didn't spend much on content.
So say maybe 2007 to 2011 or so where you see, oh look, they're making money.
They don't have huge numbers of subscribers at that point in time, but it was a profitable business.
And then during the pandemic when they couldn't spend money on production because everything was shut down.
Guess what? All of a sudden in 2021, they turn cash flow positive.
And so I think the streaming business is the kind of business where there are definitely multiple ways of doing it, but you have to find the sweet spot that combines the number of subscribers that you have with the content production budget that is implied by the size of that business.
And having started with really low prices, I think that's a tough sell for Disney Plus to find that spot.
But ultimately I would be so surprised if in particular the creative forces in Disney will be as enamored with Eiger.
If he does a good job fixing Disney Plus, it will entail cutting back some of those expenses.
Yeah. So first Sarah, to your point, I think you're absolutely right.
There's a lot of soft skills that I'm undercutting when I talk about charisma.
I think you're right.
He is gifted as a communicator and in many ways, but this strategic challenge, Felix, that you're pointing to, I think it's really interesting because one way to go is they have a lot of different assets they can bundle together.
Do you make the bundle bigger by maybe taking all of Hulu and doing Nat Geo and bundling with Disney Plus and then ESPN and you put it all in one big thing.
The consequence of that decision is then you have to produce lots of content.
You're basically aping Netflix.
Or do you not do that?
And do you go narrow?
And do you say, I'm Disney.
I like to have some amazing, basically family content that is great.
I have a nice population for that.
And I just build that business and it's not the general interest.
I guess what I'm asking is in this streaming space, do you really want to become the broad player, which is going to require a ton of money and it's going to have to require you to think about Hulu and Nat Geo and ESPN and put it all together?
Or do you just have this lovely, but relatively little child centric family centric streaming business?
Do you guys have instincts on that choice?
Because I think that's got to be one of the hardest things he's got to figure out what to do about.
I do think it would be very wise to maybe prune some of the portfolio because if you're a nerd like me and you want to have some nerdy fun, you can just start googling does Disney own dot -dot -dot and you can see all the things that fill in, does Disney own Marvel, Lucasfilm, Pixar, ESPN, Hulu, 21st
Century Fox, ABC, National Geographic.
They own all these assets and I think that maybe some of them don't quite fit in.
Like ESPN seems like a weird outlier to me that's different from the other stuff because a lot of the other assets you could see how that bundles into family stuff or it bundles into a theme park or it bundles into merchandise.
So I do think that looking at the portfolio makes sense, but I also have to note that other companies have also consolidated and ended up with this crazy amalgam of different brands.
So you think about the Big Discovery merger and it combines HBO Max with the Magnolia network.
And my favorite show about kitchens for the love of kitchens with my other favorite show House of the Dragon and like yes, I guess that's good for me, I get both shows, but they couldn't be more different from each other.
So you do wonder why is one company owning both these assets?
My take is a little different Sarah.
So I would have said what's not sustainable is the Hulu kind of approach that you are fairly unrelated to the broader portfolio.
It's not clear how Hulu assets can play with theme parks and merch and all the rest of the Disney Empire and then to produce content and a lot of content that I think is mostly designed to please the critics in an environment where we're desperately trying to get economies of scale from streaming that I
think is unfeasible.
So if I were an Eicher's position, maybe the first thing I would seriously look at is, is there someone maybe an Apple maybe someone else is there someone who's ready to buy Hulu?
I think that's actually the part of the portfolio that I believe the least when I compared their scale in the rest of Disney Plus and maybe leaving sports aside for a moment.
If you think they're roughly approaching Netflix size, and I think Netflix if you now look at the latest data, they have found one of these spots.
So if they don't go back to dramatically increases the amount of money that they spend on content, they now generated a billion plus or so free cash flow, which I think is one of these combinations that can probably work.
But you almost have to think backwards from how big is my audience and then what are the prices that I can charge?
And I think Disney probably has some leeway there and then what's the implied budget for content and in some sense, I'm a little more optimistic for the reasons that you pointed out me here about Disney Plus than about Netflix because I think that Disney Plus content has a longer life in particular
to family entertainment.
It's much easier for me to think of that content spending as a real investment in the future.
And then I think the second big difference is Netflix is so ambivalent about theatrical releases.
Even if they have a hit that does really well, the glass onion is the latest example, they take it out for the theaters after a week because, you know, it's all about streaming and Disney doesn't really have these qualms.
And we know that theater, at least historically, is just a much more profitable business than than streaming.
Yes. Yeah. And I think relying on streaming, more households are going to be doing what my household has decided that we're going to do, which is you subscribe when you want to see the new season of Stranger Things and then you cut the cord.
And Hulu's a little smarter because some of their shows they drop once a week.
So you end up subscribing for two or three months just to see one show.
Yeah, but on the other hand, we don't all want to subscribe all the time every month to Netflix and Hulu and Discovery Plus and, and, and.
Yeah, that's exactly right.
I like the window down version of Disney Plus, which is more family -centric.
I think the issue is, and it goes to your point, Felix, which is then you better continue to produce great content in that vein.
And the other problem we haven't talked about is their recent releases, Lightyear and Stranger World have not done well.
And so you have to get that creative machinery going because when you create that franchise, and you don't need one every year, if you get that right once it's amazing.
But that's the other question that Iger has to face, which is, do they have the ability to replicate that and continue to do that?
What limits the profitability of entertainment much more generally that it just seems to be close to impossible or at least very difficult to predict what is going to fly.
Wakanda Forever is like this amazing success and it's probably the same people who looked at Wakanda Forever, looked at some of these shows that in the end flopped terribly.
You shouldn't think of entertainment in the end as an incredibly profitable business because the creative process is just too unpredictable to produce really great financial results all the time.
Yeah, but there's never any shortage of people willing to fund it.
Okay, let's talk about regret.
Regret is one of those feelings that I think is really problematic.
I really want to try to avoid it in my life and I think it's a very toxic feeling and I was just really struck by this recent paper that came out that measured regret about financial issues in people's lives and I thought the numbers were staggering.
So I just wanted to share a couple of them with you.
This is a survey of Americans who are slightly older, like 50 plus, so we know that 57 % of people responding regret not having saved more.
40 % regret not actually getting long -term care insurance.
23 % regret their decisions about Social Security, which is about when you take your benefits.
33 % regret not having purchased an annuity, which is basically taking your wealth and making it into a lifetime income stream.
10 % regret that they depend on others and a whopping 37 % regret not working longer.
By the way, you might say to yourself, well, regret is common and it is but it isn't.
So just as one reflection point on children, it's about 8 or 10 % of people who regret their decisions about children.
I'm curious what you make of these numbers.
Why is there so much regret about financial decisions?
When I read this paper, I just thought, wow, those researchers made people feel really bad.
But they felt bad already, Sarah.
They pulled about regret before and then they made them feel worse by telling them their mortality rate.
You're going to live 20 years longer and so you should have saved even more.
I think that for me, on the one hand, yes, some regret makes rational sense because we know that for example, half of Americans have saved nothing for retirement.
So to the extent that they could have saved and didn't, they should regret that.
I think though many people haven't saved because they felt like they couldn't afford to.
It was too hard to put money aside for the long -term because they're just living paycheck to paycheck.
So I don't know. I feel like regret as a feeling, the implication is that we could have taken an action and we didn't when I sort of hear about these sorts of financial regrets.
I think, well, how much was that under your control anyway?
I had similar feelings, Sarah.
I was wondering about when you're older and you say, oh, I wish I would have saved more.
Is that something that mostly has to do with the moment when we ask people?
So they're thinking about, would it be nice to have more money?
And I think probably the answer for many people is, yeah, it would actually be nice.
But the consequence might have been that for most of your life you would have driven a car that is five years older than the car that you actually drove.
Or you would have had one bedroom less than you actually had.
And somehow what I'm just not really sure about is people when they say, I wish I would have saved more.
Are they really thinking about in retrospect, I wish I didn't have that second bedroom.
I wish I didn't have a car that had a little screen that showed me what it looks like when I back up, like all those kinds of things.
Is that really what we're seeing here or is it more what we're seeing is sort of an expression of wishful thinking?
I think it's a novel finding and the numbers are kind of staggering and maybe also because it confirms with some of my biases, which is A, I think there is an information problem, which I think people just dramatically underestimate what their needs are over time.
That's the information problem highlighted in the paper.
Do you really know how long you're going to live?
And thinking about that problem is hard and nobody wants to do it.
So they avoid doing it.
And then the second thing that I think people don't understand that going down in consumption is damn painful.
So when they think about retirement, they don't really get the whole idea of consumption smoothing.
That you really want to smooth consumption.
Meaning sort of consume always the same.
Consume roughly the same and have it rise over time and then save when you're young so you can do that when you're old.
I think what ends up happening to a lot of people is they end up at the last 20 years of their lives and they're anxious, at least judging by this data.
And they're struggling with the fact that their consumption levels have gone down and that is a hard thing to do.
And I think that is what is underneath all these numbers, which is people underestimating that once you consume at a level, it is so hard to go down from that consumption level and it hurts and it's painful.
And the implication of that, of course, is that you should consume less when you're younger and always consume in a sustainable way.
What makes me a little skeptical about the information explanation is, say you're close to retirement and you know you don't have a ton of savings.
And so your expectation is I'm probably going to live mostly off Social Security for the rest of my life, which is the one thing that many Americans have guaranteed.
When I look at my Social Security statement, it does such a great job explaining that trade -off, that little graph that they have where you literally see if I retire with 62, I get a particular amount and if I wait until 72, I get twice that amount.
And they even have it in graphical form.
If you're thinking about retiring and say you're 59 or 58 and you look at your Social Security statement, you have a pretty good sense of what it's going to be like for you.
If I was in charge of the Social Security Administration, they would tell me, figure out a better way to provide information.
I think I will come up completely blank.
They're doing a fabulous job.
Well, so if that's not the case, then what do you think is going on?
Because I think my story is that they're going to consume less than they used to.
That ends up being very painful.
If it's not information, what do you think it is?
Well, I think there's a couple of things going on here.
I think you said something like 37 % of people regret when they retired.
Yes. But half of people in America don't get to choose when they retire.
They have an illness or they get fired and they can't find another job.
And so that to me goes back to the illusion of control saying, oh, I should have made a better choice.
I should have somehow not had that illness.
I should have somehow overcome age discrimination to get a new job.
I think that it's tricky to talk about the choices that people made when sometimes those choices don't really feel like you're actually in control of them at the time that they're happening.
That's such a good point, Sarah.
Thank you. I feel like the other piece here about information is like some of the information provided by the researchers doesn't really match what personal finance experts might say.
So many personal finance experts would say that annuities are bad investments.
You should not buy an annuity.
So to have a large chunk of people regretting that they didn't buy one seems odd to me.
So I completely believe the story that you're telling Sarah.
This is mostly about figuring out a way not to worry about financial aspects in your life and maybe going back to your point about information me here in that respect.
I do think that's the kind of information that is really hard to know and maybe I'll point to two things.
One is there's a general expectation that you're probably going to spend a little less in retirement than when you're younger.
So for instance, you might travel less many professional expenses just go away and I have seen estimates that are all over the place.
Everything from people saying no actually your expenditures go up to people saying no the general wisdom that your expenditures go down is actually true.
So anticipating how much you would like to spend I think is the first difficulty and then suppose magically we could figure out that number then to ask how much do I have to save in order to not have to worry about basically maintaining my lifestyle?
That's a super complicated question also.
I mean you have the 4 % withdrawal rule that financial consultants seem to like but there's a million things to think about and worry about the idea that you can safely withdraw 4 % of your savings with that idea is actually true or not.
The issues are first for you Sarah look we have a crisis in labor force participation in that age group and we have a very tight labor market and we can't seem to figure that problem out.
And so I take your point that there are illnesses and disabilities which give rise to sudden retirement decisions but 37 % of people regret retiring too early and by the way we're living in a culture which valorizes a life without work and retirement but this data suggests the opposite.
So I think there's a fundamental confusion as opposed to a sense in which well the choice isn't really mine and then I think to your point Felix about it being hard and complicated.
I think that's exactly right.
For me this makes me appreciate thinking through time and thinking intertemporally is really hard.
Mm -hmm. I think the main thing that's hard is this issue of you don't know how hard it is to go down.
Yeah, maybe that's just been a mantra in my life that to me is the problem that this is all about.
I've had a few instances in my life when we moved from a larger apartment to a much smaller place and in the beginning it seems just totally impossible.
I remember there was this one place where literally we couldn't figure out where we will put the boxes that we had like the basically the boxes filled one of the rooms and we only had these two small rooms and it was pretty terrible for a month and then it was totally okay.
So I think that's also probably true about adjustments in consumption that it's really hard to go through that process and I remember we were thinking what on earth did we do?
Why did we decide what we spend on apartments was too much and we needed to live in a smaller place?
So perhaps one of the lessons is also that unlike what economists would tell you that you should aim to have a completely smooth consumption path all your life maybe practicing what's life like if you didn't have a second car.
What's life like if you ate out half as often as you currently do and maybe this is a skill that you can build up over time.
Maybe that's a skill you can build up like you can build up other skills.
I find this study also really poignant because it's painful to think about so many people filled with regrets.
So part of what I find myself doing here is trying to somehow tell those people like maybe it's not your fault.
To some degree we can probably all think of things that we spent money on that we shouldn't have or short -term gratification that we prioritized instead of our long -term plans.
I remember a few years ago one financial institution actually would let you upload a photo of yourself that they would age so that you could see yourself looking elderly to help you make better decisions and it's surprisingly effective.
Last year I talked to Dan Pink about his book on regret where he surveyed like 16 ,000 people about what they regret while there were many people who had financial regrets.
He said the vast majority of career regrets were from people who did not pursue their dream.
There was no one saying I really regret trying to be a painter and a fine artist.
People weren't saying that even if they were expressing regret that I wish I had saved more money or I wish I hadn't gone into debt.
So I think that sometimes we want contradictory things and the result is regret.
Yeah, I think that's a wonderful way to think about it.
When I read this paper, it was really sad.
Yeah, there's real poignancy to this.
I too agree that for folks who might feel themselves filled with regret.
I think some self forgiveness and not feeling that regret is a good idea.
At the same time, I think there's a cautionary tale in the numbers too.
Regret is not a great thing to feel and you probably shouldn't feel it if you feel it.
But if you're anticipating that state of the world in the future, there may be some lessons there.
The great thing about recommendations, especially Felix's recommendations is I never regret pursuing them.
Ooh, that is so nice of you to say.
I have a recommendation that's related to our first topic today.
There are a number of financial analysts that cover the entertainment industry that are just really excellent.
Like dig in the numbers, find out the patterns that many people have a hard time seeing.
But one of my favorite sources of information is a website called the entertainment strategy guy.
He only tells us that he's working for a major streaming company, but we don't know which one.
Oh, I love it. And I think this person, like many of the great analysts, is really fabulous at taking the numbers at face value and then just trying to make sense of what you see in the numbers.
And he's completely undeterred by what does the market think?
Did the stock go up?
Did the stock go down?
In fact, often he would argue why the wisdom of the market is maybe not always quite as wise as we might think.
And it's written in a light and entertaining way.
You would love it to be here because sometimes there's a little finance lesson in there somewhere, which is really excellent.
So if you're interested in entertainment, if you're looking for an easily accessible source of information, the entertainment strategy guy is your website.
And as always, we will post links to all our recommendation on our website, Harvard After Hours dot com.
So if you ever miss a recommendation or you want more detail, everything that we have ever recommended in the life of the show, you can find it easily on our website.
Great. Mir, what do you have for us, a drink?
Yeah, I wish. After that discussion about financial regret, we all need a drink.
I know you both well enough to know you both love business in part because the stories in business are so captivating some time and in a way underserved in the market.
Those narratives sometimes would be really amazing.
So there's a little startup called Project Brazan, which is founded by two guys, Tom Wright and Bradley Hope, who wrote the book on Joe Lowe.
I don't know if you know Joe Lowe, but it's the Malaysian scandal, the MDB one Goldman Sachs scandal.
And that book is spectacular.
And now they've gone out on their own and they're creating a multimedia company based on investigative journalism.
And they're using their Project Brazan to create books, podcasts, movies.
It's not all business related, but it's always investigative.
They're doing this really interesting creative thing at the intersection of business and narrative that I think is really wonderful.
And it's only the two of them.
They got a little embargo and now Bloomberg better watch out.
They might tire Sarah away from her current job.
Yeah, exactly. Sarah, what do you have?
Well, mine is a little piece of fluff and delight.
So I just ripped through a new mystery novel.
As you guys know, I have a real thing for mystery novels, especially British ones.
Anthony Horowitz has two series going right now.
One called Magpie murders that has two books out and one called the Hawthorne series.
The fourth book just came out.
They're both great, but the one I just read was in the Hawthorne series.
It is a book in which Anthony Horowitz, who is himself a very successful author and screenwriter writes himself into the story as a kind of bumbling Watson figure and follows this fictional detective named Hawthorne as he solves these crimes.
They're funny. They're suspenseful.
There's something really innovative about writing a first -person real story of yourself as yourself, but with your sort of imaginary friend, the murder mystery solving guy.
The latest is called The Twist of the Knife and it just came out.
But anyone who's just starting definitely wants to start with the first one, which is called The Word is Murder.
They're very like witty, highbrow, fun murder mysteries.
And if you are looking forward to maybe putting your feet up at the end of this year with a stack of books, I think that is a great one.
That sounds wonderful.
Now I need Project Brazen to adapt that into like a British cop show and I'll be like that.
And this is it for today.
Thank you everyone for listening.
This was After Hours from the TED Audio Collective.
