Speaker 1: Hello ablots listeners, we have something very special for you.
Speaker 1: Joe and I appeared on an episode of Bloomberg's latest podcast.
Speaker 1: It's called money Stuff, and it is hosted by two
Speaker 1: people that I think you will recognize from aud Blots,
Speaker 1: Matt Levine, the esteemed financial columnist and chronicler of capitalism,
Speaker 1: as well as Katie Greifeld, who knows all things ETFs
Speaker 1: and horses as well. And Joe and I were there
Speaker 1: to talk about chicken.
Speaker 2: That's right.
Speaker 3: So if you recall back in November, Tracy and I
Speaker 3: released a three part series called squawk Lots where we
Speaker 3: explained how the US economy can be understood through the
Speaker 3: lens of chicken, basically basically taking the entire industry from
Speaker 3: a egg to sandwich, so to speak. And so we
Speaker 3: were delighted to go on with Madd and Katie and
Speaker 3: talk about our work.
Speaker 1: Technically it was called beat Capitalism, but squawk Loots was
Speaker 1: our code name. It's for long time, all right, A
Speaker 1: long time, yes, it has okay, So we hope you
Speaker 1: enjoy this special episode of money Stuff and definitely give
Speaker 1: it a listen. Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 4: Hello and welcome to a very special crossover episode of
Speaker 4: The Money Stuff slash Odd Lots Podcasts. I'm Matt Levien
Speaker 4: and I write The Moneystuff Colm for Bloomberg Opinion.
Speaker 2: And I'm Katie Greefeld, a reporter for Bloomberg News and
Speaker 2: an anchor for Bloomberg Television.
Speaker 4: And we have two very special guests in the studio
Speaker 4: with us today, Katie.
Speaker 2: Their names are Joe Wisenthal and Tracy Alloway. Wow, this
Speaker 2: is very exciting.
Speaker 1: I like the pause to build suspense, Kate.
Speaker 2: I've been told to pause and then say names slowly
Speaker 2: for gravitas, so trying to working it worked.
Speaker 5: It worked, It worked, all right?
Speaker 4: We establishing gravitas.
Speaker 5: From what it's worth.
Speaker 3: Tracy and I like spent three years of Odd Lots
Speaker 3: workshopping ways to introduce guests. And I know we're early
Speaker 3: the second time you've had external guests. So don't feel any.
Speaker 2: My heart is calended.
Speaker 3: Don't feel any anxiety about the guest. Do you remember
Speaker 3: how we used to.
Speaker 4: Do it, Tracy?
Speaker 5: Yeah.
Speaker 1: We used to pretend that neither of us or one
Speaker 1: of us didn't know what we were going to talk about,
Speaker 1: and it was like, guess what we're going to talk about,
Speaker 1: but it didn't make any sense because, like we clearly
Speaker 1: knew what we were going to talk about.
Speaker 5: So it took us a while.
Speaker 2: And how are we doing so far? Because I feel
Speaker 2: like it's not going super well, it's going fine.
Speaker 4: What are we going to talk about?
Speaker 2: What someone should make a cluck?
Speaker 1: You brought us here.
Speaker 2: Let's talk about chickens. You guys obviously have a lot
Speaker 2: to say. You did a three part series on chickens recently,
Speaker 2: which was pretty cool because I feel like this was
Speaker 2: something different for you guys.
Speaker 1: Yeah, every once in a while we like to shake
Speaker 1: things up and do something slightly different. Last year, we
Speaker 1: actually did a three part series on the rollout of
Speaker 1: New York's legal marijuana ooh market called pot Lots. This
Speaker 1: one was a three part series about chicken, and the
Speaker 1: code name for it was squaw Clots, but the actual
Speaker 1: name was beat Capitalism, and the idea was you can
Speaker 1: actually explain a lot of really interesting themes in the
Speaker 1: American economy through the medium of chicken.
Speaker 3: Yeah, you just think from like egg to chicken sandwich,
Speaker 3: or egg to chicken tender, or egg to McNugget.
Speaker 2: And me speak for yourself.
Speaker 3: There are just so many interesting Like the sort of
Speaker 3: premise is there are just so many really interesting things
Speaker 3: that can be.
Speaker 5: Discussed along that entire supply chain.
Speaker 3: So whether it's avian flu and how to keep the
Speaker 3: flock of the birds, whether it's concentration in the poultry market,
Speaker 3: whether it's the nature of the labor market, how the
Speaker 3: big poultry companies contract with independent growers and so forth
Speaker 3: who raise the chickens themselves, which is interesting. Then there's
Speaker 3: questions about pricing and so forth, and then commodity prices,
Speaker 3: and then the chicken sandwich wars and the consumer experience
Speaker 3: of why Papa is versus Panda express first Whoever, there's
Speaker 3: a million different things even within all these things where
Speaker 3: it's like we can learn a little something about how
Speaker 3: the economy works through that trajectory.
Speaker 4: How did you decide on that? Was that like you're like,
Speaker 4: we want to talk about chicken first, and then later
Speaker 4: you realize there are a lot of rinses, or you're like,
Speaker 4: we need to talk about anti trust is chick.
Speaker 1: I actually I'm struggling to remember what the exact.
Speaker 4: That chickens in your backyard.
Speaker 1: Yeah, yeah, I have a long term love of chickens
Speaker 1: and my great ambition in life is to one day
Speaker 1: have backyard chickens. And I'm inching closer.
Speaker 4: Actually love of chickens a live chickens to hang out with,
Speaker 4: or dead chickens to eat, or totally different, both like
Speaker 4: one then the other.
Speaker 1: Well, I would raise chickens and I would have eggs,
Speaker 1: and that way I would be immune to egg inflation.
Speaker 1: But I know some people who raise meat chickens, and
Speaker 1: I don't think I would do that so hard. It's
Speaker 1: depressing because meat chickens are very different to egg laying chickens.
Speaker 1: They look different, they don't really do anything. They kind
Speaker 1: of just like waddle around and flop over there.
Speaker 5: One day you kill them.
Speaker 1: Yeah, it's sad.
Speaker 5: The other thing too.
Speaker 3: In additioned to Tracy's affinity for chickens, we've done a
Speaker 3: lot of chicken episodes in the past.
Speaker 5: So there's this.
Speaker 3: Guy, Glenn Hickman that we talked to. We've talked to
Speaker 3: him twice on the show. He has a big egg
Speaker 3: operation in Arizona, and so we talked about when egg
Speaker 3: prices were surging. We talked to him when Avian flew,
Speaker 3: which unfortunately, like is getting headlines again.
Speaker 5: We talked to him.
Speaker 3: We've talked to Samuel Ryans and analysts who thought that
Speaker 3: Wings stopped the country's biggest chicken chain and the biggest
Speaker 3: single buyer. And there are certain lessons about pricing power
Speaker 3: that we learned because you know, as wholesale Wings went up,
Speaker 3: they raised their prices aggressively. When wholesale Wing prices went down,
Speaker 3: they did not cut their prices. So we've done a
Speaker 3: lot of chicken related content in the past. It's like, oh,
Speaker 3: why don't we like put some of this together.
Speaker 1: This was the surprising thing when we were putting together
Speaker 1: you know, the list of people that we wanted to
Speaker 1: speak to for this series, like eighty percent of them
Speaker 1: had actually spoken to before, so unknowingly we were already
Speaker 1: a chicken podcast.
Speaker 2: Wow, it's like it found you guys.
Speaker 4: Yes, when you were putting together that list, where was
Speaker 4: Ray Dahali?
Speaker 1: Wait?
Speaker 4: Are you pretending to not know?
Speaker 5: Now? I feel really dumb because.
Speaker 1: It's like, does he have that huge chicken coop London guy?
Speaker 4: Oh?
Speaker 5: What?
Speaker 1: No?
Speaker 2: I feel like this is too good to be true.
Speaker 4: It's too good to be true.
Speaker 5: So what is what's the urban legend?
Speaker 4: This comes from Ray Dahalia, Like including on podcasts, and
Speaker 4: I think on like the Bridgewater website, when he was
Speaker 4: working on Wall Street before I started Bridgewater, he was
Speaker 4: like doing commodity stuff and one of his clients was McDonald's,
Speaker 4: and McDonald's were I think this is like according to
Speaker 4: your history, Like this is a few years after they
Speaker 4: had like introduced the chicken dugget, but before they rolled
Speaker 4: it out nashally, and they were worried apparently about volatile
Speaker 4: of chicken prices because they're like, wow, we can't put
Speaker 4: chicken nuggets on the menu if the price is going
Speaker 4: to go up and down because they have to pull
Speaker 4: it off the menu raise the prices. It would be terrible.
Speaker 4: We need to take the volatility out of chicken prices.
Speaker 4: And they came to Ray Dalio allegedly and they're like,
Speaker 4: can you sell us as And Ray Dalio is like, wow,
Speaker 4: there's not like a liquid chicken market at the time.
Speaker 4: This is I think from the Bridgewater website. You argued
Speaker 4: that since a full grown chicken was nothing more than
Speaker 4: a baby chick plus corn and soy mail, the price
Speaker 4: of the grains or the volatile costs, and they could
Speaker 4: hedge corn and soybean prices and they and so he
Speaker 4: sold McDonald's bunch of cord and s derivatives and they
Speaker 4: were able to roll out the chicken McNuggets.
Speaker 2: Yeah.
Speaker 1: First of all, I love that Ray Dalio's like chosen
Speaker 1: creationist story for himself. His background legend is I helped
Speaker 1: invent chicken McNuggets.
Speaker 4: That's a good one.
Speaker 1: Secondly, McDonald's did not invent chicken McNuggets, which is something
Speaker 1: that we learned from the podcast.
Speaker 4: McDonald's did not invent the chicken nugget, but Ray Dalio
Speaker 4: shepherded well chicken nugget as a menu adavan.
Speaker 1: Sure, okay, fine, we'll let him have that one. But
Speaker 1: the interesting thing is we did learn about volatility in pricing,
Speaker 1: because this is something that the Wingstop CEO actually brings up.
Speaker 1: One of the reasons we saw chicken wing prices specifically
Speaker 1: go up so much in the aftermath of the pandemic
Speaker 1: was that it turns out they're the most volatile like
Speaker 1: part of the chicken.
Speaker 3: Can I say I have a carcharian opinion. I think
Speaker 3: Ray Dalio did invent the chicken McNugget. Anyone could invent
Speaker 3: a fried lump of chicken. It takes a true genius
Speaker 3: to invent the financial hedging instruments that allows it to
Speaker 3: be commercialable. So I now accept the premise that actually
Speaker 3: he and not the person who like put the chicken
Speaker 3: meat in batter, should get actually be the true father.
Speaker 4: I think that financial engineering underrated moving forwards in like
Speaker 4: the real economy, like this he did the financial engineering
Speaker 4: behind the chicken. Tracey is shaking her head.
Speaker 1: Well, you're right. It gets to an interesting question about
Speaker 1: what drives progress. Is there underlying technology or is it.
Speaker 3: The first which came first, the nugget or the financial
Speaker 3: engineer and get to bad rap And it turns out
Speaker 3: if you need that.
Speaker 1: Commercials easy to consume proteins.
Speaker 3: Yeah, I take it. I I I now give the
Speaker 3: crown direct.
Speaker 4: Do you think that right? Like every every like major innovation,
Speaker 4: like there's the stepe of physical intention, and then there's
Speaker 4: the stepe of like working out the financing, and like
Speaker 4: the financing people are generally unheralded but well paid.
Speaker 2: And.
Speaker 1: I think Dahlia is managing. Yeah, but this is Joe's
Speaker 1: pitch to try to get right on the podcast. I
Speaker 1: think to talk about chicken, you.
Speaker 3: Should have on our podcast to talk about you know
Speaker 3: who is the New York Mets manager who claimed to
Speaker 3: invent the rap Do you remember that?
Speaker 5: Who is it? You know, the rap sandwich?
Speaker 2: I've heard of it.
Speaker 3: The New York Mets manager in the nineties claim to
Speaker 3: have invented the wrap sandwich. I can't remember his name
Speaker 3: right now. Anyway, it sort of reminds.
Speaker 2: Me of that, like claiming to invent the apple pie. Like,
Speaker 2: if you just say it loudly enough, it's probably true.
Speaker 2: Can we talk about why wings are the most futile
Speaker 2: part of the chicken? I did not know that. I
Speaker 2: would have thought it was, I guess any other part
Speaker 2: of the chicken from your podcast.
Speaker 4: I thought it was that the supply of chickens is
Speaker 4: set by the demand for chicken breasts, and so for
Speaker 4: chicken breast goes down, the supply of chickens goes down,
Speaker 4: and wings do not drive the supply of chicken. So
Speaker 4: the wing price is just like thank.
Speaker 5: You for listening.
Speaker 1: That's exactly it. You learn something the chicken.
Speaker 2: The chicken breast is like the benchmark from which all
Speaker 2: the other.
Speaker 4: Parts part, and it's like the thing that's most used,
Speaker 4: and so like, essentially, if your wings not you're buying
Speaker 4: like a sort of.
Speaker 5: Like, yeah, I like thie.
Speaker 3: By the way, it's more than the breast. I think
Speaker 3: it's like a better it's like the best cut.
Speaker 1: Have you guys had chicken feet? They're really good and
Speaker 1: in Asia people always say they're a really good source
Speaker 1: of collagen. So like a lot of young women or
Speaker 1: women will eat them for skiitcare purposes.
Speaker 2: You didn't do you just sort of slather it on
Speaker 2: your face.
Speaker 1: No, no, you eat it, you like nibble on it.
Speaker 2: Oh man, you can.
Speaker 3: Get it at most dim some places in Chinatown here,
Speaker 3: So if we ever want to take a trip and
Speaker 3: it's actually I really find them delius.
Speaker 2: I would love to watch you guys eat that. I'm
Speaker 2: not very adventurous myself, but boy do I like being included.
Speaker 4: Have a new puppy, and I get served a lot
Speaker 4: of ads for a lot of food products. And there's
Speaker 4: definitely like an extremely foot looking chicken foot.
Speaker 2: My hat dried chicken hearts, Like that's a little crunch.
Speaker 2: I figured you've had some.
Speaker 5: Yeah I have? Or chicken liver? Is that something?
Speaker 4: Yeah?
Speaker 1: Make a Thanksgiving stuffing out of chicken liver.
Speaker 5: It's really good.
Speaker 2: Timely.
Speaker 1: Yeah, we'll provide our recipe for chicken liver Thanksgiving stuffing
Speaker 1: after this podcast, can I say so?
Speaker 2: This is a three part series. The part that caught
Speaker 2: my ears the most was just like the physicality of
Speaker 2: the chicken and how it changed that the idea that
Speaker 2: like a chicken in the nineteen twenties, yeah, looks so
Speaker 2: much different than a chicken in the twenty twenties. Like
Speaker 2: I feel like I knew that somewhere in the back
Speaker 2: of my mind, but this really brought it into stark
Speaker 2: focus for me, just how much we've changed chickens.
Speaker 1: Yeah. So chickens, like a lot of domesticated animals, are
Speaker 1: like the products of you know, centuries and certainly decades
Speaker 1: of evolution. Chickens, in case you're wondering, I think they
Speaker 1: originally came from forests of Indonesia, and back then they
Speaker 1: were like skinny little jungle birds, and I think they
Speaker 1: were mostly like black. Anyway, they spread around the world.
Speaker 1: It turns out everyone loves chicken. One of the most
Speaker 1: fascinating parts of chicken history and I don't know why
Speaker 1: I know this, but for some reason I do, is
Speaker 1: in the eighteen fifties there was a chicken bubble. So
Speaker 1: what happened was Queen Victoria got really into chickens, like
Speaker 1: breeding chickens, exotic chickens, and because she was the queen,
Speaker 1: a bunch of other people got into it, and it
Speaker 1: sort of became this fad where people were paying like
Speaker 1: lots and lots of money to get really exotic chicken,
Speaker 1: eating them or just breeding. They were just breeding them,
Speaker 1: they were game selling them to other people. The bubble
Speaker 1: eventually burst, by the way, and the really interesting probably
Speaker 1: but the really interesting thing is because exotic chickens became cheap,
Speaker 1: Charles Darwin started doing research with all these different chickens
Speaker 1: from around the world on evolutions. So the Victorian chicken
Speaker 1: bubble indirectly influenced our understanding of evolution.
Speaker 5: This is like how the telecom bubble and then.
Speaker 3: And then yeah, then because of the we had the
Speaker 3: evolutionary theories of Darwin. I didn't know that this didn't
Speaker 3: come up to it on the podcast.
Speaker 1: No, I kind of figure out where to put it.
Speaker 1: I saved it for this podcast specifically. There's a really
Speaker 1: funny book that was written sort of contemporaneously with the
Speaker 1: eighteen fifties, all about It's called hen Fever, and it's
Speaker 1: about the chicken bubble, and it has the most amazing illustrations,
Speaker 1: including it has this picture of a guy blowing a
Speaker 1: bunch of different bubbles, and some of them are like
Speaker 1: what you would expect, like the south Sea expeditions and
Speaker 1: railway stocks and things like that. But then some of
Speaker 1: them are shang his and coachins, which are types of chickens.
Speaker 1: And then there's one that's labeled female novelists. So I
Speaker 1: guess in the eighteen fifties they thought female novelists were
Speaker 1: fat too many.
Speaker 3: Pipe down, by the way, that was my favorite of
Speaker 3: the three. Like, I really like the consumer angle. Obviously,
Speaker 3: it's fun to talk about the chicken sandwich wars. It's interesting,
Speaker 3: like the market structure and some of the anti trust
Speaker 3: questions and the power. But like I do think like
Speaker 3: one of the great sources of wealth in modern society
Speaker 3: is abundant access to fairly and expensive protein. Yeah, And
Speaker 3: the story of the chicken getting plumper and plumper, the
Speaker 3: antibiotics that are used to keep them alive and keep
Speaker 3: them growing and avoid sickness, the sort of feeding mechanisms
Speaker 3: and so forth that have turned the sort of scrawny
Speaker 3: bird the trace he was talking to and very tasty
Speaker 3: bird like to me, that's like, that's riveting, that's exciting,
Speaker 3: that's progress.
Speaker 4: Right, futures to make it more.
Speaker 3: Yeah, right, and the soybet futures, which of course are crucial,
Speaker 3: which we really like. That's the thing we could have done, Like,
Speaker 3: because chicken is so good, we could have done episodes
Speaker 3: on feed futures. Because chicken is just so inherently connected
Speaker 3: to everything else, this.
Speaker 1: Could have been like a twelve part series easily.
Speaker 2: I think I was gonna say, you've got to get
Speaker 2: raydally on.
Speaker 4: But yeah, well.
Speaker 1: Victorian chicken bubble, the grain market that underpins chicken nuggets.
Speaker 4: Wait that one time in the market structure. Yeah, there's
Speaker 4: an episode and essentially like how chicken is like uber
Speaker 4: where Yeah, like the farmers who farm the chickens don't
Speaker 4: own the chickens. They're outsourced from like the big they
Speaker 4: call them integrators like Tyson and Perdue, where they like
Speaker 4: the integrators deliver hours old chicks to the farmers. The
Speaker 4: farmers take care of them for a couple of weeks,
Speaker 4: and then the integrators take them back and turn them
Speaker 4: into chicken nuggets. Why is it like that?
Speaker 1: That's a really good question. I think it's just like
Speaker 1: an outcrop of the way the chicken industry evolved. By
Speaker 1: the way, I have an interesting fact if you don't know,
Speaker 1: chickens can still be sent live through the US mail,
Speaker 1: so you can live order baby chige on that. No,
Speaker 1: but I don't really want to. I would rather go
Speaker 1: to like a local agriculture tractor. Yeah, exactly. But anyway,
Speaker 1: so the way it worked is in the sort of
Speaker 1: nineteen twenties nineteen thirties, we started getting these big broiler houses.
Speaker 1: So people discovered. This is actually one of Joe's favorite stories,
Speaker 1: the woman in Delaware.
Speaker 3: Well, yeah, there was a woman in Delaware who had
Speaker 3: a great name, it's to Seal Long Steel. And she
Speaker 3: ordered what she ordered one hundred chickens in it.
Speaker 1: It was like ten chicks, like.
Speaker 3: Ten chicks in the mail, and accidentally ordered a thousand.
Speaker 3: So she's like, all right, I guess I'm gonna become a.
Speaker 2: Farm what it never happens to me.
Speaker 5: No, it doesn't happen to me either.
Speaker 3: The point about uber and so then people get into
Speaker 3: the farming pit is they're like, oh, I like the
Speaker 3: idea of farming, and it doesn't seem that bad to
Speaker 3: be a chicken farmer, but like they're extremely highly constrained.
Speaker 3: The integrators they deliver them the chickens, They tell them
Speaker 3: the exact specifications of the barn, the temperature, the feed,
Speaker 3: how much feed, and so forth, and then they compete
Speaker 3: against each other in what's called the tournament system.
Speaker 1: Yeah, so you as the farmer, are actually responsible for
Speaker 1: a lot of the capital investments that are needed to
Speaker 1: raise chickens. Meanwhile, the big integrators like a Tyson or Purdue,
Speaker 1: they provide a lot of the inputs. So the baby
Speaker 1: chicks themselves. They'll tell you like what medicines to use,
Speaker 1: what kind of food, and so in the eyes of
Speaker 1: the farmers, they feel like they are absorbing a lot
Speaker 1: of the big risks here while not really having a
Speaker 1: lot of control over stuff that ultimately affects the end product.
Speaker 3: And then the tournament is you have this pool of
Speaker 3: farmers in an area, and your pay for some period
Speaker 3: is how far above or below the average of that pool.
Speaker 1: Yeah, you're pitted against each other.
Speaker 3: You're pitted against each other. There's like a fixed pot.
Speaker 3: And then each round, you know, some people had the
Speaker 3: best chickens or the heaviest chickens or whatever it is,
Speaker 3: and some had the worst and so forth, and so
Speaker 3: it's very constrained type of farming. If you imagine farming
Speaker 3: in Iowa in some idyllic sense, which I think some
Speaker 3: people still do, but I think we also know it's
Speaker 3: big in dust show business, it's not that vision.
Speaker 4: Yeah, it's sort of like retailers like not owning they're
Speaker 4: real estate. It's like it's like weird that, like the
Speaker 4: capital requirement comes from the you know, individual small farmers
Speaker 4: and like these big companies are making the capital investments.
Speaker 1: It seems to be a super beneficial way of structuring
Speaker 1: their business for the big companies, right, you could see
Speaker 1: why they like it. And by the way, like light, yeah,
Speaker 1: that's exactly it. And they will argue that like actually
Speaker 1: providing the initial round of chicks and the food and
Speaker 1: the medicine is like a big cost center and they
Speaker 1: are taking that on. But again, like all the farmers
Speaker 1: we spoke to had pretty similar complaints.
Speaker 4: It's not like Uber. It's not like literally they're just
Speaker 4: like you know, like a matching app, like they have
Speaker 4: a lot of.
Speaker 5: Yeah, that's right, that's right.
Speaker 3: But you know, sometimes like when Uber is like you
Speaker 3: could like be an entrepreneur, you know, like they pitch
Speaker 3: it that, but in the end, the rules of the
Speaker 3: business are heavily constrained, and it's all within the context
Speaker 3: of Uber and policy changes that Uber can make.
Speaker 5: Et cetera.
Speaker 3: It's similar to that in that there is a cap
Speaker 3: on one's ability to be sort of like actually a
Speaker 3: business owner.
Speaker 5: The sentence like even how constrained it is.
Speaker 4: Oh, you can be a farmer. You can like, yeah, farm,
Speaker 4: but it's like no, really, you're just like following their orders.
Speaker 1: Speaking of Uber, it also gets to something else in
Speaker 1: the modern US economy, which is sort of the prevalence
Speaker 1: of the middleman and the power that they wield over
Speaker 1: the economy. So Uber basically matches passengers with drivers, and
Speaker 1: it makes a lot of money from doing that. If
Speaker 1: you look at the farming industry, for every dollar that
Speaker 1: comes out of agriculture, farmers get like twenty cents, the
Speaker 1: other eighty cents is going to someone else, and a
Speaker 1: lot of the someone else turns out to be middleman,
Speaker 1: like the you know, the distribution networks, the integrators in
Speaker 1: some respect, the packaging things like that, And.
Speaker 5: There's the role of the pricing algorithm setting. Oh yeahity,
Speaker 5: So this.
Speaker 3: Is really interesting because we talked to all these like
Speaker 3: antitrust experts, et cetera, and they are like various targets
Speaker 3: for the integrators themselves, whether they're uncompetitive things.
Speaker 5: And this has come up over the years.
Speaker 3: But another thing that's come up across a range of industries,
Speaker 3: again Chicken as the lens to uncover other aspects of
Speaker 3: the economy, is can you have tacit price setting systems
Speaker 3: not via people getting in a smoke filled room and
Speaker 3: doing nefarious things, but via a third party pricing entity
Speaker 3: everyone uses as some agreed upon oracle. And people make
Speaker 3: this claim and all kinds of different industries these days.
Speaker 3: And again I'm not an anti trust lawyer expert. I
Speaker 3: don't have a view on this, but it is certainly
Speaker 3: one area that the anti trust focused people are like
Speaker 3: eager to sink their teeth into.
Speaker 4: We talked about this on our podcast about farmer's markets,
Speaker 4: because there's like a Cornell project that like gives basically
Speaker 4: like market price information to people running stalls at farmers markets.
Speaker 4: And I sort of jokingly suggest that that that is
Speaker 4: analogous to like, you know, the dj I brought a
Speaker 4: case against Real Page in the rental business, and then
Speaker 4: you talk about they brought a case against Acrostats and
Speaker 4: the sort of big agriculture.
Speaker 1: Business working Beneath every antitrust case is a discussion over
Speaker 1: whether you're actually breaking the law or it's, uh, it's
Speaker 1: just good business.
Speaker 2: Right.
Speaker 4: It's wild because it's like you know, the olden days,
Speaker 4: like you'd get together in a room and you'd be like, ah,
Speaker 4: these are our prices, these are our prices, and you'd
Speaker 4: like wink or whatever, and yeah, yeah, we've agreed to
Speaker 4: prices here. There's no like explicit agreement. But it's just
Speaker 4: like if everyone has each other's prices, then there is
Speaker 4: an argument that I'm not really sure it's true. It
Speaker 4: seems to be true. Yeah, there's an argument that that
Speaker 4: allows them a creating mechanism. Yeah, it's a coordinating mechanism.
Speaker 4: If I know everyone's prices, I can undercut everyone by
Speaker 4: a penny and I can gain market share. And that
Speaker 4: doesn't seem to be I know.
Speaker 3: The question is in some of these instances, whether you
Speaker 3: get penalized or whether now I don't have any I
Speaker 3: do not know whether this ever came up in the
Speaker 3: Agristats claim in some of the interests in agristats. But
Speaker 3: isn't one of the arguments, at least in real page
Speaker 3: that some of the allegations or that there was some
Speaker 3: penalty to landlords who deviated, or that there was some right.
Speaker 4: I don't think it's quite that, but I think that's
Speaker 4: that real page is both like providing the information and
Speaker 4: also providing a prising recommendation, and so real page pushes
Speaker 4: those pop Let's say, but if you're providing pure information,
Speaker 4: I think if you have.
Speaker 3: Literal if I have an s P Y E TF,
Speaker 3: I'm gonna look at the ticker on the Bloomberg terminal
Speaker 3: first before I sell it.
Speaker 5: Right market research?
Speaker 3: Yeah, yeah, did that actually happen in the old day?
Speaker 3: Like people like smoke field room wink, Like did that
Speaker 3: really happen? Or is that just a metaphor that we
Speaker 3: use to describe coordinator?
Speaker 1: Are you asking that if.
Speaker 4: As a lawyer, the most famous cartel is OPAK where
Speaker 4: they meet in a room, right, And there have been
Speaker 4: recent cases, you know, like the FEC is a little
Speaker 4: concerned about some like US shell producers going to those
Speaker 4: meetings and like there's like a dinner and like was
Speaker 4: the dinner to discuss raising prices or not. Like the
Speaker 4: people say no, the SEC says yes. It's like a
Speaker 4: little there was definitely a dinner. What did they tell
Speaker 4: you about at the dinner. There's a famous story, and
Speaker 4: I'm not forgetting on where it was. There's a famous
Speaker 4: story of a company like there was a formal policy
Speaker 4: that they would say we are not going to colude
Speaker 4: with the competitors, and then they'd wink say they were,
Speaker 4: and then like they sent out a memo or like
Speaker 4: there's like a recording of someone saying I didn't wink.
Speaker 4: Like it's like it's like a famous story an anti
Speaker 4: dress enforcement, but not to your point.
Speaker 1: Your point earlier about like, okay, if you could see
Speaker 1: everyone's prices or you have like a rough guideline about
Speaker 1: what's going on with prices, why don't you just undercut
Speaker 1: your competitors. This is something that we talk about in
Speaker 1: the first episode when we're talking about the consumer experience
Speaker 1: and inflation, and the answer is, well, if you only
Speaker 1: have a handful of big companies that are doing this,
Speaker 1: you know, first of all, the incentive is not necessarily
Speaker 1: necessarily there to try to get into a price war.
Speaker 1: This is the classic like antitrust argument, if you consolidate companies,
Speaker 1: then they raise their prices, they have more market power.
Speaker 1: But there's another aspect going on in the past few years,
Speaker 1: which is we had the big pandemic, we had avian flu,
Speaker 1: we had labor shortages, we had all these massive, one
Speaker 1: off specific events. And when that happens, you know, consumers
Speaker 1: hear about them. And so if companies say, well, we
Speaker 1: have to raise our prices because of avian flu or
Speaker 1: because of the pandemic, consumers are more willing to kind
Speaker 1: of accept that and they have fewer alternatives. Right, everyone
Speaker 1: is doing it at the same time because of these
Speaker 1: same like exogenous shocks. Then where are you going to
Speaker 1: go to get cheap eggs or chickens?
Speaker 4: Check out beak Capitalism on the odd Lots podcast feed
Speaker 4: wherever you get your podcasts. Do you guys know about
Speaker 4: the Georgia doc?
Speaker 1: No like doc like dck This rings a bell? Actually
Speaker 1: I wrote it.
Speaker 4: It was years ago, and I don't know if it's
Speaker 4: still a thing. There have been like periodic waves of
Speaker 4: antitrust interest in the chicken industry, and there is one
Speaker 4: in like twenty seventeen twenty eighteen that I used to
Speaker 4: refer to as chicken libor here's a thing, an index
Speaker 4: called the Georgia doc Index, which was set by a guy.
Speaker 4: His name was Ardie Schwantz. He worked for the like
Speaker 4: Georgia Agriculture or whatever, and he would call chicken producers
Speaker 4: every day, every week or whatever and say, what price
Speaker 4: are you getting for like two and a half pound chickens, which,
Speaker 4: as I learned from your podcast, no one produces two
Speaker 4: and a half pound chickens anymore. So the people would
Speaker 4: like make up a number and they'd tell him the
Speaker 4: number and he'd write it down and that would go
Speaker 4: into the Georgia doc Index. And then a lot of
Speaker 4: like chicken supply contracts were set as like.
Speaker 5: A pinion, they were pushing it up so like there.
Speaker 4: Were allegations that they were, you know, reporting two high
Speaker 4: prices to.
Speaker 1: Have another episode for our twelve part series.
Speaker 3: Interesting over the years, you learn like how many indices
Speaker 3: that exist that you can find a chart of are
Speaker 3: essentially put together like this years ago, probably about like
Speaker 3: nine years ago, I remember talking to someone who's working
Speaker 3: at Bloomberg actually, and there was like some scrap metal
Speaker 3: index and it was just like you called there were
Speaker 3: like a handful of junk metal yards that you call
Speaker 3: up and.
Speaker 5: Then you get the price.
Speaker 3: Actually, you know, speaking of another one is lumber, and
Speaker 3: what's really interest seeing so the company that creates the
Speaker 3: lumber index, I think it's called Random Lengths actually, and
Speaker 3: they're the ones who create the benchmark futures. They also
Speaker 3: have a very interesting thing. So they do this, they.
Speaker 5: Call various places how much did you sell a piece
Speaker 5: of lumber? Four each day?
Speaker 3: And then what's actually cool is you can read the
Speaker 3: contract and they talk about all of the ethical things
Speaker 3: that like the rules of the question, because they are
Speaker 3: aware that all indices such as these create situations potentially
Speaker 3: like Georgia docks or libor, and so they actually have
Speaker 3: a whole set of rules about the collection process. The
Speaker 3: address is basically exactly this question.
Speaker 2: I thought you were going to bring up the dog
Speaker 2: kill index.
Speaker 5: That's Tracy's obsession.
Speaker 2: But I don't think anyone is pushing up the price
Speaker 2: of that benchmark.
Speaker 1: Part this was this was one of our questions at
Speaker 1: a recent m quiz, was like, which of these indexes
Speaker 1: is actually real? Which of these terminal indexes? And the
Speaker 1: one that was real was the dog kill index. Almost
Speaker 1: no one got that right, Yeah, that's no one believes
Speaker 1: that that actually exists. You know, used to have a
Speaker 1: Columbia Oh yeah, so it's basically the number of dogs
Speaker 1: that die in the possession of airplanes when they're in
Speaker 1: air transit. I know. But speaking the cob indexes, we
Speaker 1: used to have a Columbia kidnapping index too, but I
Speaker 1: think they discontinued that died down.
Speaker 5: A bit some deep lore.
Speaker 2: I do want to talk about the price of eggs more,
Speaker 2: because yeah, well it's sort of become one of, at
Speaker 2: least in my circles, one of the most watched indexes,
Speaker 2: because you talk about inflation and the thing that people
Speaker 2: complain about is gas and eggs. And I mean, Tracy,
Speaker 2: you were mentioning that there's well explained reasons why the
Speaker 2: price of eggs has been so volatile, bird flu being
Speaker 2: one of them. And I'm never quite sure we are
Speaker 2: in the cycle of bird flu because it's an issue,
Speaker 2: and then it feels like it died down again. Now
Speaker 2: we're talking about bird flu again, and I just don't
Speaker 2: know where we are in terms of how worried I
Speaker 2: should be about bird flu.
Speaker 1: So when we started the series, we did not really
Speaker 1: expect eggs to become this huge political talking point, but
Speaker 1: they did during the election. And where we are with
Speaker 1: bird flu. Okay, so we had a really big spike
Speaker 1: in twenty twenty two and we saw the price of
Speaker 1: eggs shoot up. That since died down. But if you
Speaker 1: look at the egg price index on the Bloomberg, there's
Speaker 1: more than one. By the way, we have a bunch
Speaker 1: of different ones. You can see they're starting to go
Speaker 1: back up again, and that's because we are getting more
Speaker 1: bird flu reported. The interesting thing is we're starting to
Speaker 1: get it in other animals too, So you know, cows,
Speaker 1: pigs are the really worrying one because pigs have like
Speaker 1: a genome that is very similar to humans, and so
Speaker 1: the concern is that if it gets into pigs, it'll
Speaker 1: mutate into something.
Speaker 2: That was my question, like, at what point personally I
Speaker 2: need to be concerned about contracting bird flu in some way.
Speaker 1: When more pigs start getting bird flu and when it
Speaker 1: starts it's mutating.
Speaker 5: Some smart people I know are like anxious.
Speaker 1: Ye heah, you need a pig mutation index on the
Speaker 1: Bloomberg terminal that would be really worrying.
Speaker 2: Got to get our best and brightest on us, that's worrisome. Well,
Speaker 2: before I spiral, let's just keep it to like the
Speaker 2: chicken industry, because I do wonder. I mean, how does
Speaker 2: it spread. One of the parts that was a hard
Speaker 2: listen when it came to this episode was listening to
Speaker 2: I think it was Craig Watts describing how he had
Speaker 2: like thirty thousand chickens in twenty thousand square feet. It
Speaker 2: sounds like these birds are just on top of each other.
Speaker 2: So I mean, how quickly does bird flu spread? And
Speaker 2: what does that mean for the industry?
Speaker 1: So you're right, this is one of the downsides of
Speaker 1: industrial scale chicken farming, which is you have a lot
Speaker 1: of birds and you have them in a relatively crowded space.
Speaker 1: Joe has heard me tell this story before. Not many
Speaker 1: people know that I was born in Arkansas, and so
Speaker 1: I spent time there with my grandma and she used
Speaker 1: to take me to like chicken farms for fun or something.
Speaker 1: I don't know why, but I would walk into these
Speaker 1: like giant warehouses thinking like, Oh, this is gonna be fun.
Speaker 1: I'm going to play with like fluffy baby chicks and
Speaker 1: I love chickens, blah blah blah. And you'd walk in
Speaker 1: and you'd be like looking around and there are a
Speaker 1: lot of dead chickens. They're just like lying there. You know,
Speaker 1: they get cleaned up once a day or so, but
Speaker 1: there's a lot mm. So, yeah, this is the issue.
Speaker 1: So you have crowded conditions, it's very difficult to segregate
Speaker 1: farm chickens from the wild bird population. Like wild birds
Speaker 1: that have avian flu can still get in. They can
Speaker 1: eat the grain infect it that way, and so that's
Speaker 1: one reason why it's been really hard to stamp out.
Speaker 3: Speaking on this point, you know, another interesting angle here
Speaker 3: is the sort of externalities of industrial what was the
Speaker 3: name Austin Frerik, Yeah, one of the guys, and talk
Speaker 3: about the waste water runoff, et cetera, and so like,
Speaker 3: like I said, I am an optimist about the existence
Speaker 3: of cheap protein, and I think it's some more of
Speaker 3: a wealthy society. But there are some interesting costs that
Speaker 3: we have to take seriously, and one of them is
Speaker 3: environmental and what it does to sort of the various
Speaker 3: water streams in some of these areas where there is
Speaker 3: a lot of industrial farming and excrement gets in the water,
Speaker 3: which is really bad obviously, and so there are. You know,
Speaker 3: obviously bird flu itself and the potential for that to
Speaker 3: move into other animals is scary. But then they're also
Speaker 3: the sort of like slower burn issues and why in
Speaker 3: some farming communities there's been like a pushback about like
Speaker 3: how much more of this do we want? And how
Speaker 3: much everyone else's cheap chicken is sort of slow degradation
Speaker 3: of the environment around.
Speaker 2: It, so depressing.
Speaker 1: We've left these speechless.
Speaker 4: Is there like an artistical chicken farming ecosystem.
Speaker 1: Where well, I mean backyard chickens would be one way.
Speaker 4: If you go to a start of buy like the
Speaker 4: fanciest chicken you can find as it's still from a
Speaker 4: giant warehouse.
Speaker 1: Or that's actually a good question. I know of one. Again,
Speaker 1: I'm slightly obsessed with chickens. I know of one like
Speaker 1: avian geneticist in the Northeast who breeds really interesting chickens,
Speaker 1: and he's sort of like on a small scale, so
Speaker 1: maybe they do except well.
Speaker 2: On a slightly bigger scale. I interviewed the Sea of
Speaker 2: Vital Farms last week and one of their advertising points
Speaker 2: is that it's like one hundred and seven square feet
Speaker 2: per chicken, So that was really interesting. He also said
Speaker 2: I thought this was interesting too on his most recent
Speaker 2: earnings call. Our challenge right now, as always is that
Speaker 2: I can't get the chickens to lay more eggs in
Speaker 2: the short run, so a lot of demand and not
Speaker 2: a lot of eggs. But I mean, that's interesting again
Speaker 2: that they're advertising on that point that we give these
Speaker 2: chickens all this space.
Speaker 3: Are brown eggs just like better than white eggs? I
Speaker 3: feel like they don't look as nice though. I think
Speaker 3: people just assume they must be either better for the
Speaker 3: environment or healthier or starting to think through that.
Speaker 1: Have you seen the Easter egger chickens. No, these are
Speaker 1: the ones that lay eggs in all different colors, so
Speaker 1: like blue and green and white and brown.
Speaker 2: Do you my stupid cushions told them different?
Speaker 1: No, No, they just do it.
Speaker 2: I don't know.
Speaker 1: The one thing I don't know is like whether one
Speaker 1: Easter egger produces like only green eggs and then another
Speaker 1: Easter egger will produce like only pink ones.
Speaker 2: I thought that the bunny rabbits laid the Easter eggs. Yeah,
Speaker 2: that's right, Katie, thinking that chickenization, I said that, right.
Speaker 2: Do other animal industries look like this? Does the pork
Speaker 2: industry look like this, what does the cow industry look like?
Speaker 2: Is it as depressing?
Speaker 1: Yeah? So this is another talking point from the podcast,
Speaker 1: which is this very you know, up until now unique
Speaker 1: model of producing chickens where the big integrators are outsourcing
Speaker 1: a lot of those big capital risks is becoming more
Speaker 1: common in agriculture itself. So the big example Joe brought
Speaker 1: this up earlier would be pig farming in and it
Speaker 1: gets to interesting questions in business about who should bear
Speaker 1: the ultimate costs of a business. We kind of talked
Speaker 1: about that earlier, but again to Joe's point earlier, it
Speaker 1: gets to interesting questions about who should bear the environmental costs.
Speaker 1: So maybe all of America is okay with Iowa like
Speaker 1: being responsible for raising our pigs and having to deal
Speaker 1: with like manure runoff and stuff like that and spoiling
Speaker 1: its water systems, but probably Iowa is not.
Speaker 3: Can I just say, like, after having done this series,
Speaker 3: I don't really view it as depressing. I don't want
Speaker 3: this to be seen as like, you know, some sort
Speaker 3: of Jeremiah against the chicken industry. I think just think
Speaker 3: there's a lot of interesting tensions, right, Like, there's benefits
Speaker 3: to industrial scale chicken farming. There's complicated market aspects of
Speaker 3: industrial chicken scale farming. There's amazing consumer outcomes like the
Speaker 3: chicken sandwich wars, and like those are very delicious, and
Speaker 3: there are costs, whether it is the risk war and
Speaker 3: by the farmers, the risk of disease and the risk
Speaker 3: of environment. Right, Like I don't, but I don't perceive
Speaker 3: the whole project to be like an anti chicken thing
Speaker 3: at all.
Speaker 1: No, I want both the people and the chickens to
Speaker 1: be happy. That's my version of an ideal culture.
Speaker 2: That's like I can't as an animal freak, can't get
Speaker 2: past the chickens and like, you know, them falling over
Speaker 2: because like they've been to this point where you know,
Speaker 2: they can't stand up straight. I don't know if this
Speaker 2: came up in any of your discussions, but like, where
Speaker 2: are we on lab grown chicken? Because I have another
Speaker 2: episode that like, cheap protein is great for a society,
Speaker 2: it's the marker of a successful society. But surely there's
Speaker 2: a way to achieve that without what's happening to these animals.
Speaker 2: Really showing my true colors on this podcast No Judgments
Speaker 2: for several years and then know I lost, but yeah.
Speaker 1: Joe's vegetarian. I was.
Speaker 3: I was raised vegetarian. I had my first week when
Speaker 3: I was age twenty four. Wow. Yeah, when I moved
Speaker 3: to New York, I was like, all right, and there's
Speaker 3: just too much good for I didn't and I like
Speaker 3: went straight.
Speaker 4: I was like, I.
Speaker 5: Tried, Uh wait, what was it?
Speaker 1: Do you remember?
Speaker 3: So I ate a piece of sushi, which is a
Speaker 3: little weird because people like I was raw but it
Speaker 3: looked at peel like. And then a week later I
Speaker 3: was like eating steaks a hard launch.
Speaker 5: Yeah, it's a hard hard launch.
Speaker 4: Yeah.
Speaker 5: My parents were hippie, so I was raised vegetarian.
Speaker 2: Yeah, I was a vegetarian for like ages eleven to fourteen.
Speaker 2: I feel like I stunned in my growth. I'm shorter
Speaker 2: than both my parents. But anyway, it doesn't matter.
Speaker 5: Your podcast, I think, thanks for coming on guys, thanks
Speaker 5: for having us. That was black.
Speaker 1: Yeah, thank you for letting us talk about chicken.
Speaker 2: No one made a chicken sound or a pun.
Speaker 1: Yeah, no, you made one pun I did.
Speaker 4: Yeah.
Speaker 1: I was very proud of me.
Speaker 5: What do I say?
Speaker 1: I can't remember, but you did make one.
Speaker 4: And that was the Money Stuff podcast.
Speaker 2: I'm that movie and I'm Katie Greifeld.
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Speaker 4: The Money Stuff Podcast is produced by Anna Maserakus and
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