News Reel:

“Short seller Hindenburg Research has a new target, the company announcing a short position in the popular children’s video game roblox.”

“According to Hindenburg they are inflating some of those metrics to appease investors.”

“They allege inflated metrics, they question the platform’s safety, they say it compromises child safety.”

[Simone Del Rosario]

Last week short seller Hindenburg Research disclosed its position in Roblox, claiming the kid’s video game company is doctoring the numbers. But Hindenburg’s even more disturbing accusation is that the platform is an “X-rated pedophile hellscape.”

Edwin Dorsey:

It’s literally, to me, one of the most dangerous places on the internet for kids, and it’s advertised as one of the safest.

Simone Del Rosario:

This has long been a criticism of the game mostly played by people under age 17. Now a suicide prevention campaign is using the Hindenburg report to call on UK regulators to up their game on protecting kids from harmful online content.

Is the platform rampant with predators while at the same time, lying about its success? Let’s first look at the source.

Hindenburg Research is a short seller that publishes reports on companies that it thinks are overvalued or have bad business practices. When you publish bad news, share prices tend to fall. And who benefits when that happens? Hindenburg.

Like when Hindenburg called out electric trucking startup Nikola for using “lies and deceptions” to secure a partnership with General Motors.

The allegations included pretending a truck prototype was powered and fully functional while deceptively showing it rolling down a hill. Put this under times Hindenburg was right. Nikola’s founder Trevor Milton was sentenced to four years in prison for deceiving investors who lost hundreds of thousands of dollars.

On the day Hindenburg published its report, Roblox stock opened down 9% from the previous close. The share price bounced back by the next day.

Michael Pachter:
Hindenburg, who has had tremendous success and been right at least half a dozen times.

And I am not suggesting that they’re wrong

and I can just say Roblox is not a fraud.

Simone Del Rosario:

Roblox doesn’t fit into a normal video game bucket. It’s not a one-time purchase like a Triple-A game and it’s not a subscription for playtime like World of Warcraft.

Michael Pachter:
So they have a software platform. Think of it like iOS as a platform, and anybody can build a game for that platform.

I’m Michael Pachter, I’m a research analyst at wedbush securities, and I cover the broader media and entertainment space. So among my coverage is video games and movie streaming and some other interesting entertainment stuff.

Simone Del Rosario:

ROBLOX launched back in 2006 as a new type of educational software platform. Kids could make their own games using provided assets and even learn to code.

Michael Pachter:

And while you’re on the platform, you can wander from game to game. You can play the games. You can customize your appearance.

And you can interact with your friends. You can interact with brands, so you can go into the Nike portal or the Burberry portal, or you can play games.

Simone Del Rosario:

Roblox exploded in popularity during the COVID-19 pandemic and went public in 2021. The company boasts 79.5 million daily active users. And it’s available pretty much everywhere you play games, from consoles to mobile devices.

Here’s how they make money.

Michael Pachter:

the developers who build games for the Roblox experience publish their games on that platform. ROBLOX helps the developer to promote the game

And while in the experience, there’s stuff to spend money on. The currency in the game is called robux. So like B, U, C, K, s, but it’s B u x, you buy robux to buy stuff in the games.

you might like say, play the game, adopt me. If you want a leash, you have to buy it. You know, to take your pet out. Or if you need food to feed your pet, you’ll buy it with robux.

So the model for Roblox is we will allow you to put your game on the platform, and we will allow you to monetize. And if people spend robux in your game, you get your share of those dollars spent. We’ll collect the dollars and we’ll keep somewhere between 30 and 70% of the revenue generated goes to Roblox, depending on who drives traffic to the game.

Simone Del Rosario:

And it’s generated a lot of money. In 2023, Roblox reported $3.5 billion dollars in bookings. And in the first 6 months of this year, they’ve grown 20%, on track for $4.2 billion this year.

As we’ve said, more than half of Roblox users are under the age of 17. Kids under 13 account for 42% of the user base. That’s why the child safety part of Hindenburg’s report is so important. We’re going to get there.

But first, the numbers. Hindenburg claims Roblox is “lying to investors, regulators, and advertisers about the number of ‘people’ on its platform, inflating the key metric by 25-42%+.”

Not only that, they also say Roblox is lying about engagement. Roblox says the average player spends 2.4 hours on the platform each day. Hindenburg says “engagement hours, another key metric, is inflated by an estimated 100%+.” But Pachter says there’s a big flaw in Hindenburg’s calculations.

Michael Pachter:

Roblox says 60 billion hours, 68 million da use, 2.4 hours a day. So Hindenburg goes, we’re going to hire a technical consultant who’s going to test this. 30 million accounts, God bless them, like valid and they concluded that the game play is 22 minutes a day, and they tracked across all games. They did, they did it right? And so they went, 22 minutes is not 2.4 hours. 2.4 hours is 144 minutes, right, which is like six plus times as much. And then footnote, we did not track time spent in in other activities like customizing avatars or talking to friends.

It’s just idiotic, like when you’re in Roblox, the first thing that happens is your friends list loads, and you see all the messages from your friends, and they’re like, Hey, we’re playing this game. Come over and play with us or whatever, right? It’s idiotic not to measure that.

Simone Del Rosario:

They also get into the weeds on what a Daily Active User truly is, claiming they are measuring people simply visiting the platform, which could include alt accounts and dreaded bots.

Michael Pachter:

they never questioned bookings, which is cash, revenue, cash receipts. They’ve never questioned that. It was 2.8 billion, then 3.5 billion, and it’s tracking to 4.2 this year. So bookings are going up. Cash is going up. They did question the number of users. And if we were to restate what Roblox reported last year, 3.5 billion from 68 million users and used what Hindenburg says the right number is, then the average user, instead of generating $50 a year, generated 70 do we care?

So I think Hindenberg is making a mountain out of a molehill on users.

Simone Del Rosario:

In its defense, Roblox pointed to the elephant in the room when it comes to Hindenburg’s report.

In a statement, the company said, “The financial claims made by Hindenburg are misleading. The authors are short sellers and have an agenda irrespective of the substance of Roblox’s business model and results.”

Edwin Dorsey:

What matters to investors is revenue and cash flows and the revenue growth, and you know, whether or not you have as many users you claim, or 20% fewer is kind of, to me, a little bit of noise.

I’m Edwin Dorsey. I’m author of the bear cave newsletter, a newsletter focused on exposing corporate misconduct,

I have mixed feelings about the inflated metrics. I personally don’t feel it’s as big a deal as maybe some people in the market think. And I don’t think it’s as big of a deal for the business as the child safety.

News reel:

“The victim in this case, a 14 year old girl found crying, alone, in the bathroom of a Kroger. Allegedly picked up from her school in Ohio.”

“Police say this man used a popular gaming app to track her down and start an inappropriate relationship.”

“A clayton County man in custody tonight, accused of raping a child he met online. Police say Howard Graham traveled 800 miles to pick up the little girl.”

Simone Del Rosario:

Hindenburg’s report claims Roblox “is compromising child safety in order to report growth to investors.” Their research recounted 9 situations where predators were caught by police.

Edwin Dorsey:

In my own article, I highlight 14 cases. Hindenburg found nine in the US, so there’s been a few dozen where you can just find from the media.

My strong belief is, so much of this either is unreported in the media and it might be even unnoticed by the police, one reason, I believe that is there’s this vigilante group called predator poachers that effectively does sting operations to try to catch like sex offenders and engage people engaged in these inappropriate conversations with children, and they’ve repeatedly found that Roblox is a preferred way for predators and sex offenders to try to meet kids.

Simone Del Rosario:

The allegations of it being a playground for abusers of children are nothing new.

Michael Pachter:

They are right. Unfortunately, they’re right, and they’re late, and they didn’t say anything that hasn’t been reported before.

Simone Del Rosario:

In July of this year, Bloomberg published a lengthy feature with the headline “Roblox’s Pedophile Problem.” The piece detailed situations where prominent creators in the community used their influence to groom children.

Michael Pachter:

the Bloomberg article is thoughtful, well written, super well documented, so I used it as my source, and concludes that Roblox is spending of $878 million per year. 25% of their 3.5 billion in bookings last year is is generating 13,000 reported incidents in 2023 now that those numbers sound giant, right, 13,000 sexual predator incidents reported bad.

Most of those incidents, the predators who reported didn’t actually solicit sex or or pornography from the kid. They tried to get the kid to go over to discord or Snapchat, because those aren’t monitored as well.

Do you know what the Instagram number in ‘22 was? Because I went to the National Center for Missing exploded children website, and I found this, 3.5 million reports in 2022 5 million photographs on Instagram that were child pornography, self reported. So Instagram, 5 million. ROBLOX, 13,000 like, it’s crazy.

Simone Del Rosario:

Roblox says they’ve spent nearly two decades making it one of the safest online environments for its users, mostly kids. One mitigation technique Roblox uses is not allowing images in the chat feed. But a simple google search provides a lot of videos showing you how to make images into emojis that can be used in chat.

Roblox may be spending big money to protect children on the platform. But when Bloomberg spoke with current and former employees, they detailed the gargantuan task of trying to moderate such a massive space.

Edwin Dorsey:

It just seems repeatedly like if Roblox moderation takes a step, it’s always the bare minimum step. So before banning a game, they might just blur out the title. Before game banning an account posting inappropriate stuff, they’ll just take down the inappropriate items. I think if you had like, a stricter enforcer, enforcement mechanism against bad accounts and bad actors, that would help.

Simone Del Rosario:

Hindenburg detailed a number of its own concerns, writing:

“As a test, we attempted to set up an account under the name ‘Jeffrey Epstein’ . . . only to see the name was taken, along with 900+ variations.”

Michael Pachter:

Do you know how many Jeffrey Epstein’s I know? I know three.”

Simone Del Rosario:

Along with the financial claims, Roblox rejected these safety claims in the Hindenburg report, saying:

“Roblox takes any content or behavior on the platform that doesn’t abide by its standards extremely seriously, and Roblox has a robust set of proactive and preventative safety measures designed to catch and prevent malicious or harmful activity on the platform.”

In a world of user generated content, people will undoubtedly push past the boundary of what’s acceptable in society or good sense.

The Bear Cave has detailed inappropriate nonsexual content, including the reenactment of school shootings and the Holocaust. The Verge has also reported past reenactments of other mass shootings and Wired reported on Nazi roleplays on Roblox.

Dorsey thinks there are a lot of ways they can shore up these issues.

Edwin Dorsey:

unlike Instagram, Facebook and all these other social networks, you don’t need an email or phone number to sign up. You can just sign up with a username and password.

if you get banned, they have no way of, like enforcing that ban, because you can just make a new username and password.

I think the kind of big underlying issue here, is you can’t have it so eight year olds can Track, track freely with the rest of the internet. It’s fun. It’s cool, if you’re a young kid, to be able to chat with all the strangers in the world. But as long as you have that, that is just like an insurmountable to me, huge risk that is always going to pose issues.

Roblox shouldn’t allow you to even have an open chat if you’re under 13, if you kids can just claim they’re over 14. So to me, you need to do some sort of age verification.

Simone Del Rosario:

While the Hindenburg accusations are still subject to debate, the report is already being used by activists in the UK.

The Molly Rose Foundation was formed by the parents of British teenager Molly Russell, who took her life after viewing harmful online content. The foundation’s executive director says:

“This report underscores the growing evidence that child safety shortcomings aren’t a glitch but rather a systemic failure in how online platforms are designed and run.

“The Online Safety Act remains the most effective route to keep children safe, but such preventable safety lapses will only be addressed if Ofcom delivers a step-change in its ambition and determination to act.”

While the Online Safety Act passed in 2023, UK’s Office of Communications, or Ofcom, is tasked with creating codes to guide the law. That’s in the draft phase now.

A spokesperson for Ofcom told the Guardian:

“Platforms – such as Roblox – will be required to protect children from pornography and violence, take action to prevent grooming, remove child abuse images, and introduce robust age-checks. We have set out clear recommended measures for how they can comply with these requirements in our draft codes.”

In a statement to Straight Arrow News, Roblox says they fully intend on complying with the Act.

A similar “Kids Online Safety Act” in the US passed the Senate this summer. But free speech advocates worry it does too much to restrict legal speech. It’s a challenge the UK version also faced.

Recently, the U.S. and UK announced a joint working group to tackle child online safety.

Aside from some immediate fluctuation, the Hindenburg report has yet to have a longlasting impact on Roblox stock, which would be the goal for a short seller.

Michael Pachter:

Look, in fairness to them, there’s a case to be made that Roblox is overvalued. I don’t think so, but there’s a case to be made. I understand why someone would say it’s trading at 40. It should be trading at 30. And so they they thought, if we expose them, and people agree with us, then they’ll think it’s worth 30, it’ll go to 30, and we’ll make money on our short we’ll make $10

but they picked the wrong things to criticize it for.

Simone Del Rosario:

Still, Dorsey believes there are systemic problems that could affect Roblox’s bottom line in the future.

Edwin Dorsey:

I think the cutting corners goes to every aspect of the business. So it’s not just child safety, it’s not just inflating user metrics. It is billing. It is buying items. It’s the type of games you allow. It is the internal culture and how you treat people. It’s suppressing criticism by suing your critics.

Simone Del Rosario:

Meanwhile, Dorsey’s The Bear Cave is fleshing out some beef with Hindenburg. On Monday, he published a post saying they pretty much plagiarized his work without credit, using a lot of the details he himself has presented since getting on Roblox’s trail in February 2022.

IN VIRGINIA, A PAIR OF REPUBLICAN ELECTION OFFICIALS ARE THREATENING NOT TO CERTIFY THE NOVEMBER FIFTH ELECTION RESULTS – CLAIMING THE PROCESS GOES AGAINST THE STATE’S CONSTITUTION.

TWO MEMBERS OF WAYNESBORO’S BOARD OF ELECTIONS FILED A LAWSUIT – ALLEGING THE MACHINE THAT TALLIES BALLOTS DOES SO IN “SECRET” WHICH THEY ARGUE IS PROHIBITED BY VIRGINIA’S CONSTITUTION.

WAYNESBORO CITY BOARD OF ELECTIONS CHAIR CURTIS LILLY AND VICE CHAIR SCOTT MARES ARE SUING VIRGINIA ELECTIONS COMMISSIONER SUSAN BEALS AND STATE BOARD OF ELECTIONS CHAIR JOHN O’BANNON.

LILLY AND MARES SAY THEY CANNOT VERIFY:

1. THE VOTING MACHINE PROGRAM BEING USED TO COUNT THE BALLOTS IS KEEPING A TRUE AND ACCURATE COUNT.
2. OR THAT THE VOTING MACHINE PROGRAM BEING USED TO COUNT THE BALLOTS IS RECORDING THE TRUE AND ACCURATE COUNT.
3. OR THAT THE VOTING MACHINE RECORD TAPE ACCURATELY REPRESENTS THE BALLOTS CAST.

THEY ARGUE BECAUSE NEITHER THE PROGRAM COUNTING THE VOTES NOR THE BALLOTS CAN BE EXAMINED, THE COUNT IS BEING DONE IN SECRET. WHICH THEY SAY VIOLATES  THE STATE CONSTITUTION.

ARTICLE TWO, SECTION THREE OF VIRGINIA’S CONSTITUTION STATES: “SECRECY IN CASTING VOTES SHALL BE MAINTAINED, EXCEPT AS PROVISION MAY BE MADE FOR ASSISTANCE TO HANDICAPPED VOTERS, BUT THE BALLOT BOX OR VOTING MACHINE SHALL BE KEPT IN PUBLIC VIEW AND SHALL NOT BE OPENED, NOR THE BALLOTS CANVASSED NOR THE VOTES COUNTED, IN SECRET.”

LILLY AND MARES ALSO ALLEGE THAT BECAUSE THEY ARE PROHIBITED FROM EVALUATING THE VOTING MACHINES, THERE’S NO WAY TO ENSURE IT’S NOT HOOKED UP TO THE INTERNET WHICH COULD ALLOW SOMEONE TO ALTER THE RESULTS.

THEY SAY IN THEIR SUIT  CERTIFYING THE ELECTION “UNDER THE CURRENT LEGAL AND ADMINISTRATIVE REGIME, THEREFORE, WOULD BE A VIOLATION OF THEIR OATHS OF OFFICE, AND, ABSENT COURT INTERVENTION, SHALL REFUSE TO CERTIFY THE 2024 ELECTION.”

WE HAVE REACHED OUT TO VIRGINIA’S DEPARTMENT OF ELECTIONS FOR COMMENT ON THE LAWSUIT.

Simone Del Rosario: It was meant to be the insurance of last resort. But along the way, Florida’s government-backed Citizens Property Insurance Corporation became the largest insurance provider in the state.

Ron DeSantis: Citizen’s property insurance, which was created decades ago, it is not solvent, and we can’t have millions of people on that, because if a storm hits, it’s going to cause problems for the state.

Simone Del Rosario: Then came two storms back to back. Together, Hurricanes Helene and Milton caused tens of billions of dollars in insured losses. Is Citizens up to the task?

Chuck Nyce: They are actually very financially secure this year. I believe what Governor DeSantis was trying to say is that, you know, we don’t want Citizens having this type of exposure and having the need to do assessments.

Simone Del Rosario: Assessments happen when Citizens doesn’t have enough money to pay its claims. First, it applies a surcharge to its own policyholders. But if that’s not enough, the state requires Citizens to charge a premium to insurance holders statewide, whether with Citizens or not. And it does this for as many years as it takes to plug the deficit.

Citizens told Straight Arrow News it “has the financial capability to handle a 1-in-82-year storm without having to levy assessments on non-Citizens policyholders.” For context, Citizens says 1992’s Hurricane Andrew was a 1-in-43-year event.

Chuck Nyce: Hurricane Andrew is what we kind of describe as a wake-up call. It was really the first experience for the insurance industry of what a large-scale catastrophe could look like in the United States. My name is Chuck Nyce. I am a full professor at Florida State University. My expertise is catastrophic risk financing. I started graduate school the year after Hurricane Andrew. So my entire academic career has been trying to figure out how to pay for catastrophes that can occur.

Simone Del Rosario: Hurricane Andrew bankrupted several insurance companies, leaving hundreds of thousands without insurance. Other major insurance providers…

Chuck Nyce: I’m not going to mention company names, but these are the companies that advertised during the Super Bowl

Simone Del Rosario: …dramatically mitigated their risk in the state by shifting their focus more inland.

Chuck Nyce: Now the problem is, for the state of Florida, we have a lot of coastal exposure, so we had to find a way to still insure those properties that were out there.

Simone Del Rosario: Local companies popped up to fill the gaps, while the state created two insurers of last resort that later merged in 2002 to become Citizens Property Insurance Corporation.

Chuck Nyce: That worked for a number of years, up until 2004, 2005, when we had, again, a combined, at the time, $35 billion in losses.

Simone Del Rosario: For Florida’s insurance landscape, it was Groundhog Day. Insurance companies dried up, more left the state, but this time, they had a backstop, and Citizens’ policies ballooned.

Chuck Nyce: They were designed to be the market of last resort. By 2010, 2011, there were 1.4 million policyholders in Citizens. The good news for the state is from 2005 through 2016 we didn’t have any landfalling storms.

Simone Del Rosario: Citizens successfully shed policies back into the private market until it was down to around 400,000 by 2019. But more storms and litigation costs again broke the private market.

Chuck Nyce: For 2021, 2022, 2023, Citizens was becoming the option of first resort. There was a number of areas where insurance was not available and not available at a fair price. So Citizens became the option.

Simone Del Rosario: Policies swelled back to over a million and now sit at more than one and a quarter.

In order to get customers off the state-backed Citizens and back into the private market, a private insurance provider must be willing to underwrite the client at a price that is no more than 20% higher than what they pay at Citizens. At that point, Citizens can “depopulate” that customer.

Chuck Nyce: Trying to push citizens back to a market of last resort rather than a first choice.

Ron DeSantis: I think it’s more attractive today to offer policies than it was over the last 20 years. But, you know, Rome wasn’t built in a day.

Simone Del Rosario: Citizens told SAN that before Hurricanes Helene and Milton, it expected to dip below 1 million policies by the end of 2024. These storms could put that goal in jeopardy.

Chuck Nyce: When losses get really bad, that’s when the state should come in. When they get really, really bad, that’s when the federal government should come in. But for the storms like Helene, that should be private market stuff that’s handling those types of things. But it’s an issue we have, yeah.

Simone Del Rosario: Nyce says from an insurance perspective, homeowner policies used to be considered low-risk and relatively stable. But that’s no longer the case in much of the United States. And that’s when we see the private market disintegrate.

Chuck Nyce: If we can solve it in Florida, it’ll be a great lesson to take to other states.

Simone Del Rosario: Because it’s not just hurricanes in Florida and Louisiana. It’s wildfires in California. It’s tornadoes in the Midwest. It’s severe convective storms hitting everywhere in between. Florida may be the tip of the spear for storm exposure, but it doesn’t stand alone.

Simone Del Rosario: The state of Florida is bracing for Hurricane Milton’s wrath less than two weeks after Hurricane Helene battered the Gulf Coast. 

The back-to-back hurricane attacks are a devastating reminder that one in three Florida homes is susceptible to storm surge flooding from hurricanes, according to Guidewire. 

As homeowners pick up the pieces of their lives, another storm rears its head, one that is set to ravage a much larger portion of the state. 

Because of storms like these, Florida is the most expensive state in the country for home insurance. 

Chuck Nyce: We’ve always pitched ourselves as an affordable place to live, and from a tax perspective, it is. But I would argue today in Florida that this is something that people need to be aware of: insurance costs are high.

Simone Del Rosario: The average annual cost of home insurance in Florida neared $11,000 in 2023, and Insurify projects this year’s average will get closer to $12,000. 

That doesn’t include flood insurance, which typically requires a separate policy. 

Chuck Nyce: When you’re talking about spending $10[,000] or $15,000 a year for homeowners insurance coverage, $1,000 a month or more, that is part of your mortgage payment. And that has to be a cost that’s factored in to the cost of living here.

Simone Del Rosario: While property insurance’s share of the average mortgage payment is going up nationwide, in places like Miami, that burden is twice as big.

Shan Ge: A lot of research is suggesting that both the risk and the rising insurance premiums are depressing home prices compared to what it would be. My name is Shang Ge I am an assistant professor of finance at NYU Stern School of Business. I’ve been researching the insurance industry for a few years.

Simone Del Rosario: Ge’s research shows when insurance rates go up, two things happen: Homeowners buy less coverage and home values go down. 

Shan Ge: And this, this drop of home values is pretty dramatic. Buyers are going to be willing to pay less for property compared to a world where Florida does not face climate risk, does not face all these disasters, and does not face these increasing insurance premiums.

Simone Del Rosario: Ge says she hopes developers will take her research into account, in Florida and elsewhere. 

Shan Ge: When they see these prices not as high as they would be in this counterfactual world, we’re hoping that that will kind of slow down the development and deter discourage more people from moving into risky places.

Simone Del Rosario: In August, the median sales price of a single family home in Florida dropped for the first time in at least five years, according to data from Florida Realtors. 

For condos, which face not only higher insurance costs but mandatory maintenance needs, August marked the second month of annual price declines. 

So far, insurance premiums at a premium have not deterred the rampant migration to the sunshine state. 

But it may influence who can afford to come in and who may be forced to leave. 

Chuck Nyce: Insurance prices risk, and if you can’t afford to live there, you shouldn’t move there. So it’s a really difficult problem. I always tell people like, I can’t afford to live in Monaco and I can’t afford to drive a Bugatti. But I know that. It’s much more difficult to tell someone who’s maybe lived somewhere for generations that you can’t afford to live there anymore.

SIMONE DEL ROSARIO:

Are we headed toward a recession or already in one? Well, there are a lot of ways to tell…

Traditionally two consecutive quarters of negative growth say we’re in it.

You can look at unemployment. The Sahm Rule triggers when the three-month moving average of the unemployment rate is half a percentage point above the 12-month low. Or the McKelvey Rule, which says basically the same thing but with 0.3 percentage points.

There’s also the dreaded inverted yield curve when short-term Treasury yields exceed long-term Treasury yields.

Still with me?

Here’s where it gets interesting. The less scientific indicators.

Like when the vibes are all wrong even though economic indicators are doing alright. That’s what Kyla Scanlon calls a Vibecession.

Slowing men’s underwear sales can also point to economic concerns, apparently, you guys wear tattered boxers when times are tough? And, more morbidly, the number of unclaimed corpses at morgues goes up in tough times.

I promise, I’m not going to count that today. We’re going to go in a more “lively” direction.

JOE E FOSTER:

“A wise man once told me that two signs that we are headed into financial ruin is No. 1, all of the strip clubs are empty No. 2, the pop music is brilliant.”

SIMONE DEL ROSARIO:

So, we should start getting familiar with the Perry rule, the Gaga rule or even the Peas rule?

BLACK EYED PEAS:

“Gotta get that-that-that-that boom boom boom.”

SIMONE DEL ROSARIO:

This is where “recession pop” comes in. Can music tell us where the country’s economy is headed?

CHARLIE HARDING:

I would define recession pop probably from, like, the years just leading up to the recession. So, like, you know, end of 2007 probably at least through 2012

JOE BENNETT:
so it’s a retrospective label that we’re using today in 2024 to apply to a particular body of work, which I would broadly describe as super cheerful dance floor bangers that came out some time between 2008 and 2011.

CHARLIE HARDING:
if not all the way to like 2014 because I think of the euro crisis that was happening in 2012 as part of that recession era, and lots of people were still really feeling that recession well into the early 2010s.

SIMONE DEL ROSARIO:

OK so in short, “recession pop” is Top 40 bangers that come out during an economic downturn. The most clear example happened leading into the Great Recession: a pop music soundtrack that stands out above the rest.

So is it really a thing? And more importantly, do today’s hits slap enough that you have to worry about another financial crisis?

To dig into whether there is any credence to the phenomenon, we didn’t interview some economists, we went to the real experts.

CHARLIE HARDING:
I’m Charlie Harding. I’m the co-host of the podcast, switched on pop and a professor of music at NYU.

JOE BENNETT:
My name is Joe Bennett. I’m a forensic musicologist and a professor at Berklee College of Music, and my particular area of specialism is popular song analysis.

SIMONE DEL ROSARIO:

Every music fan can identify the songs that scored their core memories.

I can feel it. Summer of ‘07, windows down, diesel truck purring, open road, and RiRi on the radio.

RIHANNA:

“You can stand under my Umbrella. Ella Ella eh eh.”

CHARLIE HARDING:
The recession affected different people very differently, like if you lost your home, you’re gonna remember what that song is on the radio when you had to pack up and leave is really different than maybe someone for whom their family got through it okay, and they’re just like, I just love my recession pop bops.

JOE BENNETT:
You can find what we might say are reflective songs where the dark times people are experiencing are indeed dealt within the song lyric. And we might also find what you might call escapist songs. What the heck, let’s party.

SHOP BOYZ:
“Party like a rock, party like a rockstar”

SIMONE DEL ROSARIO:

While recession pop is generally seen as exclusive to the Great Recession, music often reflects the times.

JOE BENNETT:
Bing Crosby’s brother. Can you spare a dime? It was a big hit in the early 30s, and that’s a song about a returning war veteran who’s homeless and looking for money.

In 1933 Ginger Rogers has a hit with we’re in the money. Is that a sort of an ironic title?

It’s certainly a very cheerful lyric. Maybe it’s a fantasy about having money, because a lot of people wouldn’t have in the US in the early 30s.

SIMONE DEL ROSARIO:

So, there could be something here…

CHARLIE HARDING:
If recession Pop is a nostalgic way of looking back and trying to make sense of this period of total dislocation and fragmentation, like all the power to listeners to call this stuff recession pop, even if it just happened to be the upbeat, fun thing that was occurring at that time.

LADY GAGA:
“Can’t read my… Can’t read my, no you can’t read my Poker Face.”

CHARLIE HARDING:
People are trying to make this connection to music that happened 10 to 15 years ago as a almost like detective with their red wire behind the board. And they’re trying to, like, make all of these connections that are probably a little bit forced, right?

SIMONE DEL ROSARIO:

And you know what… There are a lot of good reasons the term recession pop is resonating with 30-somethings today that may have less to do with the quality of the music or economic conditions.

JOE BENNETT:
it fits with the general cycle of popular music, nostalgia. A lot of the psychology research into nostalgia suggests that it works on something like a 15-year cycle.

there’s a phenomenon in pop music that suggests that all the best pop music was released in the same year, and it was the year you were 17.

SIMONE DEL ROSARIO:

It’s not just Bennett’s opinion. There is a ton of research on nostalgia and when it really kicks in. Some say it takes 12-15 years, others suggest it is a 20-year cycle. Some call it the golden 40-year rule.

The only thing you can be sure of is that eventually, at some point, you will think fondly of your younger days. Did we really know at the time how good the pop was in 2007?

CHARLIE HARDING:
It’s more of an after-the-fact analysis, which is a fun and useful way of creating playlists, being nostalgic, digging into our memory, perhaps making sense of an era that was really dark and challenging for people, and making light of it after the fact.

JOE BENNETT:
So songwriters are not necessarily social commenters, but like all of us, everyone who creates popular culture, they are living in that culture at the time they are making the object and the market that is the pop music fans who are buying or streaming the single are also in that social context and liking what they like in the context that they’re in.

CHARLIE HARDING:
As much intention as a songwriter might have, whatever they might intend the listener is going to take it and do what they want with it.
Like, a great example of listeners completely misusing a song would be like, hey, ya, by OutKast,

OUTKAST:
“Thank god for mom and dad for sticking two together cause we don’t know how. Hey ya!”

CHARLIE HARDING:
which is one of the most requested songs at weddings, and yet the song is about relationships that never last.

SIMONE DEL ROSARIO:

In many ways, the look back at so-called recession pop allows us to look at what makes a great pop song and why it sticks with us.

JOE BENNETT:
I think what makes a great pop song is accessibility. You know, particularly if you’re releasing a single, you want it to appeal to millions of people.

CHARLIE HARDING:
Well, It has to have an amazing concept. Has to have a memorable hook, and it has to capture the zeitgeist.

CARLY RAE JEPSEN:
“Hey, I just met you. And this is crazy. But here’s my number. Call me maybe.

JOE BENNETT:
people talk about songs, as, you know, being instantly exciting.

Immediacy in a song is one of the most important characteristics.

CHARLIE HARDING:
A pop song, [a] great pop song is elusive, right? It’s like trying to play the Powerball

SIMONE DEL ROSARIO:

And what makes a great song has changed over the years. Today, more and more tracks are being discovered on short-form video apps like TikTok and Instagram.

JOE BENNETT:
TikTok is a much faster-moving medium, so people need to grab their audience’s attention to stop them from vertically scrolling onto the next thing.

LIL NAS X:
“I’m gonna take my horse to the old town road. I’m gonna ride (Kio, Kio) ’til I can’t no more. I got the horses in the back. Horse tack is attached.”

JOE BENNETT:
As we know from TikTok, that sort of meme community will often seize on a particular part of the song, a particular audio excerpt, and use that to make its meme, its dance routine, whatever it did, whatever it is.

SIMONE DEL ROSARIO:

While TikTok users need musicians to get to the meat early, pop songs have more to say in 2024 than ever before.

CHARLIE HARDING:
there is this expectation that we are more giving of ourselves in our lyrics today. And so I think of an artist like Charlie XCX, who, on brat, talked about how she wanted to write lyrics that were as if she was just texting a friend

CHARLIE XCX:
Yeah, 360. When you’re in the mirror, do you like what you see? When you’re in the mirror, you’re just looking at me.

CHARLIE HARDING:
and this is the album that has broken through for her. Because some of these lyrics, they don’t have these perfect rhymes. They have the perfect imperfections.

JOE BENNETT:
So it’s an introspective form a lot of the time, but still, a lot of singer-songwriter material deals with the classic themes of songwriting that is romantic relationships and dancing. Most pop songs are about one of those two things.

ED SHEERAN:
Well, come on now, follow my lead. Come, come on now, follow my lead, mm. I’m in love with the shape of you

[JOE BENNETT:
Singer-songwriters in contemporary pop are having big mainstream hits, often with similar themes. You know, a lot of Ed Sheeran song themes are simply about getting together romantically or dancing.

SIMONE DEL ROSARIO:

Look… I know you didn’t see a story about recession indicators turning into a commentary on the state of pop music but here we are. And we can’t end the conversation without the biggest name in music, let alone pop culture today.

JOE BENNETT:
Of course, even the great Taylor Swift was not immune to the cheerfulness of recession pop. Her two significant albums at that time would have been Fearless, which came out in 2008 and then Speak Now, which originally came out in 2010 and of course, both of those contain a whole bunch of songs in that vein, Love Story, you belong with me, white horse, the story of us.

TAYLOR SWIFT:
“You’ll be the prince and I’ll be the princess. It’s a love story, baby, just say, “Yes”

CHARLIE HARDING:
I think on a lot of metrics, Taylor Swift is the biggest artist to have ever lived, in terms of the longevity of her career, the fact that she is what should be a late-stage career artist, and yet she is at her peak. She has had multiple peaks that just keep getting bigger and bigger and bigger.

SIMONE DEL ROSARIO:

Will we look back on The Tortured Poets Department as a recession anthem?

TAYLOR SWIFT:
“I’m so depressed I act like it’s my birthday every day.”

SIMONE DEL ROSARIO:

For Straight Arrow News, I’m Simone Del Rosario. If you liked this story, search the Straight Arrow News app for our story on the death of music journalism.

Simone Del Rosario

It’s a page straight out of Saudi Arabia’s playbook. 

Both President Biden and former President Trump are piqued by the idea of a sovereign wealth fund for the United States. 

It may seem like an odd proposition for a country with more than $35 trillion in national debt, a trade deficit, and Social Security deficits. 

Donald Trump: This wealth fund will return a gigantic profit, which will help pay down national debt. We’re going to work on national debt very strongly, by the way. We’re going to have so much money coming in. We’re going to work on national debt.

Simone Del Rosario: Trump first proposed the idea last Thursday during an economic policy speech in New York. The next day, Bloomberg reported that top aides to Biden have been crafting a similar proposal. 

Donald Trump: We will be so successful, we’ll create America’s own sovereign wealth fund to invest in great national endeavors for the benefit of all of the American people. Why don’t we have a wealth fund? Other countries have wealth funds. We have nothing. We have nothing. 

Simone Del Rosario: Sovereign wealth funds are investment funds owned and controlled by governments. These funds manage more than $12 trillion in assets worldwide, and the vast majority comes from oil-rich nations. Countries like Saudi Arabia use surpluses from oil revenues to fund projects that play to a national strategy. Saudi’s Public Investment Fund manages nearly a trillion dollars in assets. And a big part of their “Saudi Vision 2030” plan is investing in sports to play on a global stage.

Jon Wertheim: They won’t cop to sports washing, but they will admit that sports is of great appeal. It’s really where they want to park a lot of this discretionary Saudi sovereign wealth fund money. It’s part of this Vision 2030. They own an EPL team. They’ve owned, I mean, the WWE and the soccer and the golf, and becoming this real kind of this pillar of their economy. 

Simone Del Rosario: But Saudi Arabia has money to play. Its sovereign wealth fund is worth more than three times what it owes in national debt.

Not every country that has a sovereign wealth fund is in the black. Perhaps these are best called “sovereign leveraged funds,” as Zongyuan Zoe Liu coined in her book, Sovereign Funds: How the Communist Party of China finances its global ambitions.

So what do Trump and Biden have in mind for America’s global ambitions? Trump offered some thoughts during his speech last week.

Donald Trump: We will build extraordinary national development projects and everything from highways to airports and to transportation infrastructure, all of the future we’ll be able to invest in state-of-the-art manufacturing hubs, advanced defense capabilities, cutting-edge medical research, and help save billions of dollars in preventing disease in the first place.

Simone Del Rosario: While Bloomberg reports that proponents believe the fund could be used to support emerging technologies where there are high barriers of entry, like shipbuilding, geothermal and nuclear fusion projects, and more. 

These proposed investments do not sound much different from what the U.S. already does; think about the infrastructure bill, the CHIPS Act, solar subsidies and more. 

And of course, there’s the question of how this fund will be funded. Trump says his tariffs will pay for it, though tariffs are also supposed to offset his tax cuts. It isn’t clear where funds would come from with the White House plan. 

While the idea of a U.S. sovereign wealth fund is new, state funds are not. The Alaska Permanent Fund is the largest and best known, managing $78 billion. It takes state proceeds from oil sales and invests in income-producing financial assets. 

To learn more about other economic policies proposed by former President Trump, search “Trump admin” for this story at SAN.com or the Straight Arrow News app. 

Simone Del Rosario: Jackson Hole, Wyoming, is known for its temperate summers, but Federal Reserve Chair Jerome Powell is probably feeling the heat turn up a bit ahead of his most-anticipated speech of the year. 

Powell will speak Friday at the Kansas City Fed’s annual economic symposium at Grand Teton National Park. 

Central bankers, policymakers, and investors around the world will be glued in for Powell to signal he thinks inflation has come down enough for a rate cut next month.

The elusive soft landing is on the line, especially in light of news the labor market is taking a turn. 

Kathleen Hays: This is his opportunity to send us a clear message on some aspect of what the Fed is thinking about. He doesn’t have to do that. I don’t think it’s going to be just looking at the economy and inflation. He’ll probably put this in a bigger context. At the same time I think people are going to be waiting for him to just give us a little more guidance on where you’re leaning now.

Simone Del Rosario: On Wednesday, we did get the minutes from the Fed’s last meeting in July, where the Fed decided to keep rates the same two days before a disappointing jobs report rocked people’s views of the labor market. 

The vast majority of people in that meeting expressed that it would likely be appropriate to cut rates in September. That said, several made comments that they could have also gotten behind a cut in July, which didn’t happen.

And here’s the kicker: Many participants noted that reported payroll gains might be overstated, and some noted the easing labor market faced a higher risk of more serious deterioration. 

And here’s what happened after that meeting: Two days later, the latest jobs report showed the unemployment rate spiked up to 4.3% from 4.1%. Stock markets around the world had a bit of a field day with that one. A recession indicator called the Sahm Rule triggered. Some people called for the Fed to step in and make an emergency rate cut, an idea that others smacked down as ridiculous. 

And then, this week, we got confirmation that payroll gains have been drastically overstated, just as many of those Fed members suspected. 

Danielle DiMartino Booth: Since January of 2023, we’ve seen one downward revision after another to the data. It’s become systematic. 

Simone Del Rosario: The latest Labor Department revision shows the U.S. economy added 818,000 fewer jobs than previously reported over 12 months ending March 2024. 

That’s about a 30% hit to what we thought the economy added. It doesn’t mean those jobs were lost, it means they were never there in the first place. Therefore, while the labor market was still strong over those 12 months, it wasn’t on quite the tear we were told it was.

It’s worth noting, these estimates will not be finalized until February 2025. 

Danielle DiMartino Booth: And it takes a lot of time for the Bureau of Labor Statistics data to work its way into subsequent revisions for the Bureau of Economic Analysis data for GDP.

Simone Del Rosario: All of these moving parts are putting the Fed’s soft landing scenario at risk. A soft landing is being able to come down from too-high inflation without triggering a recession. 

Inflation has come down quite a bit. The Fed’s preferred inflation measurement is at 2.6%, pretty close to its 2% target. And the softening labor market is all the more reason to act.

In Powell’s speech Friday, listeners will hope to hear from him that a soft landing is still in sight. 

Kathleen Hays: We know the Fed’s going to be cutting rates. We know they’re going to normalize. So it’s more of a question of when and how much and how fast.

Simone Del Rosario: Complicating matters is the upcoming election. The Federal Reserve is a politically independent body and they would never want to be seen as carrying water for one party or another. 

There is only one meeting before the election, that’s the September meeting. Taking politics out of it, most economic signs point to the need to cut rates in September. But that will likely give the economy a boost, and that’s why in an interview with Bloomberg, Donald Trump says cutting before the election is “something that they know they shouldn’t be doing.”

The next Fed meeting starts the day after Election Day, but don’t expect the Fed to wait that long with the labor market showing these cracks. 

We’ll bring you the biggest takeaways from Powell’s speech Friday, so download the Straight Arrow News app and enable notifications so you don’t miss it.

Simone Del Rosario: Mortgage rates hit their lowest level in more than a year, which is a little like putting the cart before the horse but we know the horse is coming. 

That horse is the Federal Reserve cutting interest rates. What will all this mean for housing affordability? We’re going to tell you the story in five charts. 

Mortgage rates are falling in anticipation the Fed will lower the fed funds rate, the interest rate banks are charged for overnight lending. It basically acts like a benchmark for all other consumer borrowing. 

When the Fed went on this rate hike campaign to make borrowing more expensive and slow down inflation, mortgage rates jacked up and the dream of buying a home quickly got out of reach for many Americans.  

We’re coming off the cliff now but don’t expect those historically low interest rates from pandemic past. 

And when you really zoom out, mortgage rates aren’t that high compared to decades past. Before 2000, these rates would have been a steal. Today, they’re uncomfortably high thanks to another factor: Home prices. 

If only we’d all had the foresight and means to buy a home when it felt like the world was coming to an end the spring of 2020. 

After setting record highs in 2022, home prices are going back down, but “affordable?” It depends on how short your memory is. 

The median sales price is nearly $100,000 more than 5 years ago, and it’s double what it was 15 years ago, during the depths of the Great Recession. 

Since there are no credible signs the housing market is about to crash, lowering interest rates and lowering prices are a good enough sign for more movement in the housing market, and we’re seeing that with rising inventory. 

The active listings are back up to levels not seen since early COVID days. More houses on the market means more competition on the selling side, which could be the first win for buyers in a while. But experts don’t expect prices to decrease all that much, because inventory is still so much lower than what’s needed. 

That brings us to housing affordability, and whether the typical family earns enough to qualify for a mortgage on a typical loan. For most of the past year, that answer has been no. 

The National Association of Realtors measures this using price, income and mortgage data, assuming a 20% down payment. Anything above 100 means the typical family can do it! Everything below 100 means they won’t qualify. 

The Midwest is the only place in the country today where the typical family can afford the typical home. In the Midwest, the qualifying income is around $84,000. In the West, it’s nearly double. 

But the secret is getting out! Realtor.com says Columbus, Ohio, is the most popular housing market in the country this year. And there’s not a single housing market on this list west of the Mississippi. 

To stay up on what’s happening with the housing market and all things economy, download the Straight Arrow News app and enable notifications. Be sure to click business to get stories like this. 

Simone Del Rosario:

How much is a piece of history worth? A lot, right?

What if that piece of history is a piece of one of the greatest legends in sports?

The jersey worn by Babe Ruth when he “called his shot” in the 1932 World Series is expected to fetch $30 Million when it the gavel pounds at Heritage Auctions the end of August.

Joe Maddalena:

“Babe Ruth is bigger than baseball. Babe Ruth was a cultural phenomenon, the way he lived his life, he died young.”

“My name is Joe Maddalena. I’m an executive vice president at heritage auctions here in Dallas. I’ve been doing this for 40 years.”

Simone Del Rosario:

The “called shot” happened in the fifth inning of Game 3 against the Chicago Cubs at Wrigley Field. While every kid has recreated the moment on the diamond, baseball historians are unclear whether he was pointing at the opposing pitcher, the Cubs’ dugout, or the fence.

Joe Maddalena:

“But I think, because he is baseball and whether this call shot is a myth or it actually was him pointing at the fence [where] he hit home run, [it] doesn’t matter. It’s the fact that you have probably the most important image in sports, in baseball history, for sure, of Ruth calling that shot. You have that tunic that you can match to that moment in time. It’s priceless.$10 million, $100 million.”

Simone Del Rosario:

The jersey last sold in 2005 for a paltry $940,000, by comparison.

Memorabilia and collectibles have been coveted items for decades, but it hit a fever pitch during the COVID-19 Pandemic.

Prices soared so much at the time, the “King of Collectibles” himself, Ken Goldin, called the rapid price increase an “irrational, unsustainable spike.”

He would know. Since then, we’ve seen those record values fall for collectibles like trading cards, watches, and even rare whiskeys and wines. But fall by how much?

Joe Maddalena:

“So pre-COVID, a Charizard, which is the greatest Pokemon card, let’s just say you had a PSA 10 Charizard. Perfect card, first Edition, that card, pre covid, was $15,000 to $18,000. [At] the height of covid, it was $400,000 now the card is about $250,000. If you compare $250,000 to pre-COVID, it’s still really, really good.”

“Actually trading cards is an area that I oversee, and we’re up 25% from last year. So I think it was just a Bounce for trading cards.”

Simone Del Rosario:

The overall collectibles market is still growing, according to research firm Market Decipher. They say it will cross $600 billion this year, gaining more than 9% over last year. They project the overall collectibles market will eclipse $1 trillion in the next decade.

Joe Maddalena:

“So many sports collectors are like, ‘gee, I’d like to diversify.’”

“Collecting movie props in a serious way, started in about 1970 and it’s been a pretty steady ride. We haven’t had a giant escalation in price. It’s been pretty healthy.”

Simone Del Rosario:

Heritage had a prototype of Princess Leia’s iconic gold bikini worn in Jabba the Hutt’s palace in 1983’s Return of the Jedi.

They just sold the piece for $175,000 at auction last week.

Joe Maddalena:

“Film is a cultural currency. You can go anywhere in the world and they know who Harry Potter is. You can go anywhere in the world and you can say ‘hasta la vista, baby.’ And they know that’s Arnold [Schwarzenegger]. Mickey Mantle, Joe DiMaggio, these are American pastime. It’s different. It’s not that one’s better than the other.”

The bikini is nothing short of iconic, continuing pop culture relevance throughout the past 40 years.

“OK, Here we go, I’m Jabba’s prisoner, and you…”

Simone Del Rosario:

Costume designers made a different version of the bikini for screen to make it more comfortable for Carrie Fisher.

But still, they didn’t do enough as she told NPR in November of 2016.

Carrie Fisher:

“It wasn’t my choice. When he showed me the outfit, I didn’t – I thought he was kidding, and it made me very nervous. And, you know, they wouldn’t let me – I had to sit very straight ’cause I couldn’t have lines in the side of – on my sides, you know, like a little crease. No creases were allowed. So I had to sit very, very rigid straight.”

Simone Del Rosario:

While the bikini may have demanded the most attention, it wasn’t even the Star Wars item that brought in the most dough during last week’s auction…

That honor goes to a Y-wing fighter model that was part of the trench run that eventually blew up the Death Star in A New Hope. It fetched $1.55 million.

The model sold was one used for close up shots, meaning it’s incredibly detailed.

Joe Maddalena:

“It’s another cultural phenomenon. Because these movies and TV shows use practical effects, not CGI, they actually use miniatures. They’re so coveted, because look at what we can do with CGI. But why do the movies with practical effects look so much better?”

Simone Del Rosario:

While Maddalena has had the pleasure of listing items from Star Wars to Dorothy’s Ruby Slippers from the Wizard of Oz – those go up in December – there are still items out there he’d love to get his hands on.

Joe Maddalena:

“The only thing I’ve never seen is Maria, the robot from Metropolis.If that exists, it’s possible. So in the movie, it gets destroyed in the fire. But I’m sure they made more than one. So that would be like to me, if that existed, that God knows what that would be worth.”

Simone Del Rosario:

Some collectors are going to try and squeeze all the money they can out of these items. Investing in collectibles can draw in greater returns than some of the best bull markets. But Maddalena says what makes the collectibles market is community.

Joe Maddalena:

“Search out people who are knowledgeable. Learn,and then the fun part about it is, no matter what you spend, the joy you get from it… That’s what this is all about. This is your hobby. Hobbies are healthy. They give you personal enjoyment, and sometimes they make money.”

“You meet amazing people you would never meet anywhere else. You form lifelong friendships with people who are so unlike you because you have something in common. And I think that’s the value of collecting.”

Years ago, the founder of ChatGPT set out to discover what would happen if you give people cash every month, no strings attached.

The results are in from the largest Universal Basic Income study in the U.S., though how it went depends on how one interprets the findings.

Right-leaning Reason writes: Bad News for Universal Basic Income: Researchers found that giving people $1,000 every month for three years resulted in decreased productivity and earnings, and more leisure time.

While center-rated The Register writes: Sam Altman’s basic income experiment finds that money can indeed buy happiness: But not necessarily health.

Keeping in tune with Straight Arrow News’ mission of unbiased, straight facts, let’s look at the facts from the research paper itself.

First, the ground rules. Researchers randomly selected 1,000 low-income people to receive $1,000 a month, no conditions, for three years. A separate control group of 2,000 people received $50 a month to participate in the research.

The people in this study had an average household income of $29,900 in 2019, so $1,000 a month translated to a 40% increase in household income.

In 2016, Sam Altman wrote about launching the Basic Income Project and his desire to answer some theoretical questions about it.

“Do people sit around and play video games, or do they create new things? Are people happy and fulfilled? Do people, without the fear of not being able to eat, accomplish far more and benefit society far more? And do recipients, on the whole, create more economic value than they receive?”

So now that you know the rules and the lens of focused intention, here are the results.

Excluding the free money received, individual income fell by about $1,500 a year, or 5%.

It led to a 2 percentage point decrease in labor market participation.

And people worked roughly 80 fewer minutes per week.

So what did they do with that extra time? Researchers saw the largest increase in leisure time, followed by smaller increases in transportation – people are driving around doing more – and time spent on finances.

They found no impact on quality of employment. They did see hints that people were thinking about entrepreneurial endeavors, and there were some signs younger participants were investing more in education.

Researcher Eva Vivalt wrote: Overall, the negative effects on labor supply do not appear to be offset by other productive activities, and we do not observe people getting better jobs over the 3-year duration of the program.

But the study concludes: While decreased labor market participation is generally characterized negatively, policymakers should take into account the fact that recipients have demonstrated–by their own choices–that time away from work is something they prize highly.

Universal Basic Income, or UBI, is a hot topic in Silicon Valley. That’s because the tech world is actively developing AI that could make people’s jobs obsolete.

“There will be fewer and fewer jobs that a robot cannot do better. What to do about massive unemployment. This is gonna be a massive social challenge. And I think, ultimately, we will have to have some kind of universal basic income. I don’t think we’re gonna have a choice.”
“These are not things I wish would happen. These are simply things that probably will happen.”

OpenAI’s Sam Altman, who was behind this study, said that while UBI is not a full solution, it’s a component that should be pursued in the face of AI advancement.

“As cushion through a dramatic transition and just as like the world should eliminate poverty if able to do so. I think it’s a great thing to do as a small part of the bucket of solutions.”

Of course, the idea of paying people with no conditions is incredibly expensive – the Tax Foundation said Andrew Yang’s $1,000 per month proposal would cost $2.8 trillion per year. And many believe its an affront to capitalism.

“This is straight out of the Karl Marx playbook. This is not out of the Adam Smith playbook. Let me help you with that. Karl Marx, Father of Communism. Adam Smith wrote the Tome that we were all required to read on capitalism if we took Economics. So, my friend Art Laffer, one of the leading economists in the world says, ‘if you pay people not to work, please expect them to not work.”

Again, the people from this study did still work – try living off $12k a year – but they did take off a little more than an hour per week.

For unbiased straight facts, download the straight arrow news app for stories like this.