Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to a very special crossover episode of
Speaker 2: The Money Stuff slash Odd Lots Podcasts. I'm Matt Levien,
Speaker 2: and I write The Money Stuff com for Bloomberg Opinion.
Speaker 3: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 3: an anchor for Bloomberg Television.
Speaker 2: And we have two very special guests in the studio
Speaker 2: with us today, Katie.
Speaker 3: Their names are Joe Wisenthal and Tracy Alloway. Wow, this
Speaker 3: is very exciting.
Speaker 1: I like the pause to build suspense, Kate.
Speaker 3: I've been told to pause and then say names slowly
Speaker 3: for gravitas, so trying it's working.
Speaker 4: It worked, It worked, It worked all right.
Speaker 2: We established in gravitas.
Speaker 4: For what it's worth. Tracy and I like spent three
Speaker 4: years of Odd Lots workshopping ways to introduce guests. And
Speaker 4: I know we're early the second time you've had external guests,
Speaker 4: So don't feel any.
Speaker 3: My heart is counted.
Speaker 4: Don't feel any anxiety about the guest. Do you remember
Speaker 4: how we used to do it, Tracy?
Speaker 3: 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 4: So it took us a while.
Speaker 3: How are we doing so far? Because I feel like
Speaker 3: it's not going super well, it's going fine.
Speaker 2: What are we going to talk about?
Speaker 3: What someone should make it?
Speaker 1: Flu brought us here?
Speaker 3: Let's talk about chickens. You guys obviously have a lot
Speaker 3: to say. You did a three part series on chickens recently,
Speaker 3: which was pretty cool because I feel like this was
Speaker 3: 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 squawk Lots, but the actual
Speaker 1: name was capitalism, and the idea was you can actually
Speaker 1: explain a lot of really interesting themes in the American
Speaker 1: economy through the medium of chicken.
Speaker 4: Yeah, you just think from like egg to chicken sandwich,
Speaker 4: or egg to chicken tender, or egg to mc nugget.
Speaker 3: I mean speak for yourself.
Speaker 4: There are just so many interesting Like the sort of
Speaker 4: premise is, there are just so many really interesting things
Speaker 4: that can be discussed along that entire supply chain. So,
Speaker 4: whether it's avian flu and how to keep the flock
Speaker 4: of the birds, whether it's concentration in the poultry market,
Speaker 4: whether it's the nature of the labor market, how the
Speaker 4: big poultry companies contract with independent growers and so forth
Speaker 4: who out raise the chickens themselves, which is interesting. Then
Speaker 4: there's questions about pricing and so forth, and then commodity prices,
Speaker 4: and then the chicken sandwich wars and the consumer experience
Speaker 4: of why Papa is versus Panda express verse whoever, There's
Speaker 4: a million different things even within all these things where
Speaker 4: it's like we can learn a little something about how
Speaker 4: the economy works through that trajectory.
Speaker 2: How did you decide on that? Was that like you're like,
Speaker 2: we want to talk about chicken first, and then later
Speaker 2: you realize there are a lot of rinses, or you're like,
Speaker 2: we need to talk about anti trust.
Speaker 3: Chicken.
Speaker 1: I actually I'm struggling to remember what the exactmber chickens
Speaker 1: in your backyard. Yeah, I have a long term love
Speaker 1: of chickens, and my great ambition in life is to
Speaker 1: one day have backyard chickens. And I'm inching closer.
Speaker 2: To actually a love of chickens. Do you mean alive
Speaker 2: chickens to hang out with or dead chickens to eat
Speaker 2: or both totally different? Both like 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.
Speaker 4: The one day you kill them.
Speaker 1: Yeah, it's sad.
Speaker 4: The other thing too. In additioned to Tracy's affinity for chickens,
Speaker 4: we've done a lot of chicken episodes in the past.
Speaker 4: So there's this guy, Glenn Hickman, that we talked to.
Speaker 4: We've talked to him twice on the show. He has
Speaker 4: a big egg operation in Arizona, and so we talked
Speaker 4: about when egg prices were surging, we talked to him
Speaker 4: when Avian flew, which unfortunately like is getting headlines again,
Speaker 4: we talked to him. We've talked to Samuel Ryans and
Speaker 4: analysts who thought that Wings stopped the country's biggest chicken
Speaker 4: chain and the biggest single buyer. And there are certain
Speaker 4: lessons about pricing power that we learned because, you know,
Speaker 4: a wholesale Wings went up, they raised the prices aggressively.
Speaker 4: When wholesale Wing prices went down, they did not cut
Speaker 4: their prices. So we've done a lot of chicken related
Speaker 4: content in the past. It's like, oh, why don't we
Speaker 4: 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: we had actually spoken to before, so unknowingly we were
Speaker 1: already a chicken podcast.
Speaker 5: Wow.
Speaker 3: Yeah, it's like it found you guys.
Speaker 2: Yes, when you were putting together that list, where was
Speaker 2: Ray Dahalia? Are you pretending to not know?
Speaker 4: Now? I feel really dumb.
Speaker 1: Because it's like, does he have that huge chicken coop
Speaker 1: London guy? Oh?
Speaker 4: What?
Speaker 1: No?
Speaker 3: I feel like this is too good to be true.
Speaker 2: It's too good.
Speaker 4: To be true. So what's the urban legend.
Speaker 2: Of course, this comes from Ray Dalia, like including on
Speaker 2: podcasts and I think on like the Bridgewater website. When
Speaker 2: he was working on Wall Street before I started Bridgewater,
Speaker 2: he was like doing commodity stuff and one of his
Speaker 2: clients was McDonald's, and McDonald's were I think this is
Speaker 2: like according to your history, Like this is a few
Speaker 2: years after they had like introduced the chicken nugget, but
Speaker 2: before they rolled it out nashally, and they were worried
Speaker 2: apparently about volatility of chicken prices because they're like, wow,
Speaker 2: we can't put chicken nuggets on the menu if the
Speaker 2: price is going to go up and down because they
Speaker 2: have to it off the menu. Were raised the prices,
Speaker 2: it would be terrible. We need to take the volatility
Speaker 2: out of chicken prices. And they came to Ray Dalio
Speaker 2: allegedly and they're like, can you sell us as? And
Speaker 2: Ray Dalio is like, wow, there's not like a liquid
Speaker 2: chicken market at the time. This is I think from
Speaker 2: the Bridgewater website. He argued that since a full grown
Speaker 2: chicken was nothing more than a baby chick plus corn
Speaker 2: and soy mail, the price of the grains or the
Speaker 2: volatile costs and they could hedge corn and soybean prices
Speaker 2: and they could, And so he sold McDonald's a bunch
Speaker 2: of cord and saw derivatives and they were able to
Speaker 2: roll out the chicken McNugget.
Speaker 3: 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 2: 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 2: McDonald's did not invent the chicken nugget, but Ray Dalio
Speaker 2: shepherded well chicken McNugget as a menu ad of me.
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
Speaker 1: pricing because this is something that the Wingstop CEO actually
Speaker 1: brings up. One of the reasons we saw chicken wing
Speaker 1: prices specifically go up so much in the aftermath of
Speaker 1: the pandemic was that it turns out they're the most
Speaker 1: volatile like part.
Speaker 4: Of the chicken can I say, I have a carcharian opinion.
Speaker 4: I think Ray Dalio did invent the chicken McNugget. Anyone
Speaker 4: could invent a fried lump of chicken, it takes a
Speaker 4: true genius to invent the financial hedging instruments that allows
Speaker 4: it to be commercialable. So I now accept the premise
Speaker 4: that actually he and not the person who like put
Speaker 4: the chicken meat in batter should get actually be the
Speaker 4: true father.
Speaker 2: I think that financial engineering underrated. Is that moving forward
Speaker 2: in the real economy like this he did the financial
Speaker 2: engineering behind the chicken. Tracy is shaking her.
Speaker 1: Head, Well, you're right. It got to an interesting question
Speaker 1: about what drives progress. Is there underlying technology or is
Speaker 1: it the.
Speaker 5: Fan first, which came first? The nugget or the financial
Speaker 5: engineer and get to bad rap And it turns out
Speaker 5: if you need that.
Speaker 1: Commercials easy to consume proteins.
Speaker 4: Yeah, I take it. I now give the crown director.
Speaker 2: Do you think that right? Like every every like major innovation,
Speaker 2: like there's the step of physical invention, and then there's
Speaker 2: the step of like working out the financing, and like
Speaker 2: the financing people are generally unheralded but well paid.
Speaker 1: And I think Dahlia is managing. Yeah, but this is
Speaker 1: Joe's pitch to try to get right on the podcast,
Speaker 1: I think to talk about chicken, we.
Speaker 2: Should have him on our podcast to talk about you know,
Speaker 2: who is the New York Mets manager who claimed to
Speaker 2: invent the rap Do you remember that?
Speaker 4: Who is it? You know, the rap sandwich?
Speaker 3: I've heard of it.
Speaker 4: The New York Mets manager in the nineties claim to
Speaker 4: have invented the wrap sandwich. I can't remember his name
Speaker 4: right now. Anyway, it sort of reminds.
Speaker 3: Me have that like claiming to invent the apple pie.
Speaker 3: Like if you just say loudly enough, it's probably true.
Speaker 3: Can we talk about why wings are the most valutile
Speaker 3: part of the chicken? I did not know that. I
Speaker 3: would have thought it was, I guess any other part
Speaker 3: of the chicken.
Speaker 2: From your podcast. I thought it was that the supply
Speaker 2: of chickens is set by the demand for chicken breasts,
Speaker 2: and so for chicken breast goes down, the supply of
Speaker 2: chickens goes down, and wings do not drive the supply
Speaker 2: of chicken. So the wing price is just like thank
Speaker 2: you for listening.
Speaker 1: That's exactly it. You learn something the chicken.
Speaker 3: The chicken breast is like the benchmark from which all
Speaker 3: the other.
Speaker 2: Parts part, and it's like the thing that's most used
Speaker 2: and so like essentially if your wings not, you're buying
Speaker 2: like a sort of like, yeah.
Speaker 4: I like thie by the way, it's more than the breast.
Speaker 4: I think 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 skidcare purpose.
Speaker 3: Do you just sort of slather it on your face?
Speaker 1: No? No, you eat it, you like nibble on it.
Speaker 4: Oh man, you can get it at most dim some
Speaker 4: place Chinatown here, So if we ever want to take
Speaker 4: a trip and it's actually I really find them quite delicious.
Speaker 3: I would love to watch you guys eat that. I'm
Speaker 3: not very adventurous myself, but boy do I like being included.
Speaker 2: I have a new puppy, and I get served a
Speaker 2: lot of ads for a lot of food products, and
Speaker 2: there's definitely like an extremely foot looking chicken foot.
Speaker 3: My hat dried chicken hearts, Like that's a little crunch
Speaker 3: of snack.
Speaker 4: You've had some hearts, yeah, I have? Or chicken liver?
Speaker 4: Is that something? Yeah?
Speaker 1: Make a Thanksgiving stuffing out of chicken liver.
Speaker 3: It's really good timely.
Speaker 1: Yeah, we'll provide our recipe for chicken liver Thanksgiving stuffing
Speaker 1: after this podcast, can I say so?
Speaker 3: This is a three part series. The part that caught
Speaker 3: my ears the most was just like the physicality of
Speaker 3: the chicken and how it's changed that the idea that
Speaker 3: like a chicken in the nineteen twenties looks so much
Speaker 3: different than chicken in the twenty twenties. Like I feel
Speaker 3: like I knew that somewhere in the back of my mind,
Speaker 3: but this really brought it into stark focus for me,
Speaker 3: 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 real exotic.
Speaker 3: Chicken, eating them or just breeding.
Speaker 1: They were just breeding them, they were pat game selling
Speaker 1: them to other people. The bubble eventually burst, by the way,
Speaker 1: and the really interesting probably but the really interesting thing
Speaker 1: is because exotic chickens became cheap, Charles Darwin started doing
Speaker 1: research with all these different chickens from around the world
Speaker 1: on evolutions. So the Victorian chicken bubble indirectly influenced our
Speaker 1: understanding of evolution.
Speaker 4: This is like how the telecom bubble and then and
Speaker 4: then yeah, then because of the we had the evolutionary
Speaker 4: theories of Darwin. I didn't know that this didn't come
Speaker 4: 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. Periectically, 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: you would expect, like the south Sea expeditions and railway
Speaker 1: stocks and things like that, but then some of them
Speaker 1: 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 4: Pipe down, by the way, that was my favorite of
Speaker 4: the three. Like every really like the consumer angle. Obviously,
Speaker 4: it's fun to talk about the chicken sandwich warris it's interesting,
Speaker 4: like the market structure and some of the anti trust
Speaker 4: questions and the power. But like I do think like
Speaker 4: one of the great sources of wealth in modern society
Speaker 4: is abundant access to fairly and expensive protein. And the
Speaker 4: story of the chicken getting plumper and plumper, the antibiotics
Speaker 4: that are used to keep them alive and keep them
Speaker 4: growing and avoid sickness, the sort of feeding mechanisms and
Speaker 4: so forth that have turned the sort of scrawny bird
Speaker 4: the trace you was talking to in a sort of
Speaker 4: very tasty bird. Like to me, that's like, that's riveting,
Speaker 4: that's exciting. That's progress, right, futures to make it more yeah, right,
Speaker 4: and the soybet futures, which of course are crucial, which
Speaker 4: we really like. That's the thing we could have done, Like,
Speaker 4: because chicken is so good, we could have done episodes
Speaker 4: on feed futures. Because chicken is just so inherently connected
Speaker 4: to everything else.
Speaker 1: This could have been like a twelve part series easily.
Speaker 3: I think I was gonna say, you've got to get
Speaker 3: Raydally on.
Speaker 1: Yeah, well in a book more Victorian chicken bubble, the
Speaker 1: grain market that underpins chicken nuggets.
Speaker 2: Wait, I one time with the market structure. Yeah, there's
Speaker 2: an episode and essentially like how chicken is like uber
Speaker 2: where yeah, like the farmers who farm the chickens don't
Speaker 2: own the chickens. They're outsourced from like these big they
Speaker 2: call them integrators, like Tyson and Perdue, where they like
Speaker 2: the integrators deliver hours old chicks to the farmers. The
Speaker 2: farmers take care of them for a couple of weeks,
Speaker 2: and then the integrators take them back and turn them
Speaker 2: into chicken nuggets.
Speaker 1: Why is it like that, That's a really good question.
Speaker 1: I think it's just like an outcrop of the way
Speaker 1: the chicken industry evolved. By the way, I have an
Speaker 1: interesting fact if you don't know, chickens can still be
Speaker 1: sent live through the US mail, So you can live
Speaker 1: order baby chikes. No, but I don't really want to.
Speaker 1: I would rather go to like a local agriculture tractor
Speaker 1: and get yeah, exactly. But anyway, so the way it
Speaker 1: worked is in the sort of nineteen twenties nineteen thirties,
Speaker 1: we started getting these big broiler houses. So people discovered
Speaker 1: this is actually one of Joe's favorite stories. The woman
Speaker 1: in Delaware.
Speaker 4: Well, yeah, there was a woman in Delaware who had
Speaker 4: a great names to Seal Long Steal, and she ordered
Speaker 4: what she ordered one hundred chickens.
Speaker 1: And ever it was like ten chicks.
Speaker 4: She ordered like ten chicks in the mail and accidentally
Speaker 4: ordered a thousand. So she's like, all right, I guess
Speaker 4: I'm gonna become.
Speaker 3: A farm that never happens to me.
Speaker 4: No, it doesn't happen to me either. The point about
Speaker 4: uber and so then people get into the farming, they're like, oh,
Speaker 4: I like the idea of farming, and it doesn't seem
Speaker 4: that bad to be a chicken farmer. But like they're
Speaker 4: extremely highly constrained. The integrators they deliver them the chickens,
Speaker 4: They tell them the exact specifications of the barn, the temperature,
Speaker 4: the feed, how much feed, and so forth, and then
Speaker 4: they compete 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 what medicines to use, what
Speaker 1: kind of food, and so in the eyes of the farmers,
Speaker 1: they feel like they are absorbing a lot of the
Speaker 1: big risks here while not really having a lot of
Speaker 1: control over stuff that ultimately affects the end product.
Speaker 4: And then the tournament is you have this pool of
Speaker 4: farmers in an area, and your pay for some period
Speaker 4: is how far above or below the average of that pool.
Speaker 1: Yeah, you're pitted against each other.
Speaker 4: You pitted against each other. There's like a fixed pot
Speaker 4: and then each round, you know, some people had the
Speaker 4: best chick OUs or the heaviest chickens or whatever it is,
Speaker 4: and some had the worst and so forth. And so
Speaker 4: it's very constrained type of farming. If you imagine farming
Speaker 4: in Iowa in some idyllic sense, which I think some
Speaker 4: people still do, but I think we also know it's
Speaker 4: big in dushow business, it's not that vision.
Speaker 2: Yeah, it's sort of like retailers like not there, they're
Speaker 2: real estate. It's like it's like weird that like the
Speaker 2: capital requirement comes from the you know, individual small farmers
Speaker 2: 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 that 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 2: Right, It's not like uber, it's not like literally they're
Speaker 2: just like you know, like a matching app like they
Speaker 2: have a lot of.
Speaker 4: Yeah, that's right, that's right. But you know sometimes like
Speaker 4: when Uber is like you could like be an entrepreneur,
Speaker 4: you know, like they pitch it that, but in the end,
Speaker 4: the rules of the business are heavily constrained and it's
Speaker 4: all within the context of Uber and policy changes that
Speaker 4: Uber can make, et cetera. It's similar to that in
Speaker 4: that there's a cap on one's ability to be sort
Speaker 4: of like actually a business owner. The sentence like even
Speaker 4: how constrained.
Speaker 2: It is, Oh, you can be a farmer, you can like, yeah, farm,
Speaker 2: 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.
Speaker 4: And there's the role of the pricing algorithm setting oh yeah, pitty.
Speaker 4: So this is really interesting because we talked to all
Speaker 4: these like anti trust experts, et cetera, and they are
Speaker 4: like various targets for the integrators themselves, whether they're uncompetitive things.
Speaker 4: And this has come up over the years. But another
Speaker 4: thing that's come up across a range of industries, again
Speaker 4: chicken as the lens to uncover other aspects of the economy,
Speaker 4: is can you have tacit price setting systems not via
Speaker 4: people getting in a smoke filled room and doing nefarious things,
Speaker 4: but via a third party pricing entity that everyone uses
Speaker 4: as some agreed upon oracle. And people make this claim
Speaker 4: and all kinds of different industries these days. And again
Speaker 4: I'm not an anti trust lawyer expert. I don't have
Speaker 4: a view on this, but it is certainly one area
Speaker 4: that the anti trust focused people are like eager to
Speaker 4: sink their chief into.
Speaker 2: We talked about this on our podcast about farmers markets,
Speaker 2: because there's like a Cornell project that like gives basically
Speaker 2: like market price information to people running stalls at farmers markets.
Speaker 2: And I sort of jokingly suggest that that that is
Speaker 2: analogous to like, you know, the dj I brought a
Speaker 2: case against the real page in the rental business, and
Speaker 2: then you talk about they brought a case against acrostats
Speaker 2: and 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 it's just
Speaker 1: good business.
Speaker 2: Right. It's wild because it's like, you know, in the
Speaker 2: olden days, like you'd get together in a room and
Speaker 2: you'd be like, ah, these are our prices, these are
Speaker 2: our prices, and you'd like wink or whatever, and yeah,
Speaker 2: we've agreed to set prices here. There's no like explicit agreement.
Speaker 2: But it's just like if everyone has each other's prices, Yeah,
Speaker 2: then there is an argument that I'm not really sure
Speaker 2: it's true. It seems to be true. Yeah, there's an
Speaker 2: argument that that like allows them all creating mechanism. Yeah,
Speaker 2: it's a coordinating mechanism. If I know everyone's prices, I
Speaker 2: can undercut everyone by a penny and I can gain
Speaker 2: market share. And that doesn't seem to be I know.
Speaker 4: The question is in some of these instances, whether you
Speaker 4: get penalized or whether Now I don't have any idea.
Speaker 4: I do not know whether this ever came up in
Speaker 4: the Agristats claim in some of the interests in Agristats.
Speaker 4: But isn't one of the arguments, at least in real
Speaker 4: page that some of the allegations or that there was
Speaker 4: some penalty to landlords who deviated, or that there was
Speaker 4: some right.
Speaker 2: I don't think it's quite that, But I think that
Speaker 2: that real page is both like providing the information and
Speaker 2: also providing a prising recommendation, and so real page pushes
Speaker 2: those Okay, let's say, but if you're providing pure information,
Speaker 2: I think if I have.
Speaker 4: An s P y E. T. If I'm gonna look
Speaker 4: at the ticker on the Bloomberg terminal first before I
Speaker 4: sell it, right, you'll.
Speaker 1: Do market research?
Speaker 2: Yeah?
Speaker 4: Yeah, did that actually happen in the old day? Like
Speaker 4: people like a smoke filled room?
Speaker 2: Wink?
Speaker 4: Like did that really happen? Or is that just a
Speaker 4: metaphor that we use to describe coordinators?
Speaker 1: Are you asking that if you miss there?
Speaker 2: As a lawyer, the most famous cartel is Opek where
Speaker 2: they meet in the room, right, And there have been
Speaker 2: recent cases, you know, like the FTC is a little
Speaker 2: concerned about some like us shell producers go into those
Speaker 2: meetings and like there's like a dinner, and like was
Speaker 2: the dinner to discuss raising prices or not? Like the
Speaker 2: people say no, the SEC says yes. It's like a
Speaker 2: little there was definitely a dinner. What did they talk
Speaker 2: about at the dinner? There's a famous story and I'm
Speaker 2: not forgetting on where it was. There's a famous story
Speaker 2: of a company like there was a formal policy that
Speaker 2: they would say, we are not going to collude to
Speaker 2: the competitors, and then they'd wink say they were, and
Speaker 2: then like they sent out a memo or like there's
Speaker 2: like a recording of someone saying I didn't wink. Like
Speaker 2: it's like it's like a famous story an antidress enforcement.
Speaker 1: But Matt, to your point your point earlier about like, Okay,
Speaker 1: if you could see everyone's prices, or you have like
Speaker 1: a rough guideline about what's going on with prices, why
Speaker 1: don't you just undercut your competitors. This is something that
Speaker 1: we talk about in the first episode when we're talking
Speaker 1: about the consumer experience and inflation, and the answer is, well,
Speaker 1: if you only have a handful of big companies that
Speaker 1: are doing this. You know, first of all, the incentive
Speaker 1: is not necessarily necessarily there to try to get into
Speaker 1: a price war. This is the classic like antitrust argument.
Speaker 1: If you consolidate companies, then they raise their prices they
Speaker 1: have more market power. But there's another aspect going on
Speaker 1: in the past few years, which is, we had the
Speaker 1: big pandemic, we had avian flu, we had labor shortages,
Speaker 1: we had all these massive, one off specific events. And
Speaker 1: when that happens, you know, consumers hear about them. And
Speaker 1: so if companies say, well, we have to raise our
Speaker 1: prices because of avian flu or because of the pandemic,
Speaker 1: consumers are more willing to kind of accept that, and
Speaker 1: they have fewer alternatives. Right, if everyone is doing it
Speaker 1: at the same time because of these same like exogenous shocks,
Speaker 1: then where are you going to go to get cheap
Speaker 1: eggs or chickens.
Speaker 2: Check out Beak Capitalism on the Odd Lots podcast feed
Speaker 2: wherever you get your podcasts. Do you guys know about
Speaker 2: the Georgia dock?
Speaker 1: No like doc like dck. This rings a bell. Actually
Speaker 1: I wrote it.
Speaker 2: It was years ago, and I don't know if it's
Speaker 2: still a thing. There have been like periodic waves of
Speaker 2: antitrust interest in the chicken industry, And there was one
Speaker 2: in like twenty seventeen, twenty eighteen that I used to
Speaker 2: refer to as chicken libor. There's a thing an index
Speaker 2: called the Georgia doc Index, which was set by a
Speaker 2: guy his name was Ardie Schwantz. He worked for the
Speaker 2: like Georgia Department of Agriculture or whatever, and he would
Speaker 2: call chicken producers every day, every week or whatever and say,
Speaker 2: what price you're getting for like two and a half
Speaker 2: pound chickens, which, as I learned from your podcast, no
Speaker 2: one produces two and a half pound chickens anymore. So
Speaker 2: the people would like make up a number and they'd
Speaker 2: tell him the number and he'd write it down and
Speaker 2: that would go into the Georgia doc Index. And then
Speaker 2: a lot of like chicken supply contracts were set as
Speaker 2: like a you.
Speaker 4: Know opinion, they were pushing it up so like.
Speaker 2: There were allegations that they were, you know, reporting two
Speaker 2: high prices to.
Speaker 1: Have another episode for our twelve part series.
Speaker 4: Interesting over the years, you learn like how many indices
Speaker 4: that exist that you can find a chart of are
Speaker 4: essentially put together like this years ago, probably about like
Speaker 4: nine years ago. I remember talking to someone who's working
Speaker 4: at Bloomberg actually, and there was like some scrap metal
Speaker 4: interdex and it was just like you called there were
Speaker 4: like a handful of junk metal yards that you call
Speaker 4: up and then you get the price. Actually, you know
Speaker 4: speaking of Another one is lumber. And what's really interesting,
Speaker 4: so the company that creates the lumber index, I think
Speaker 4: it's called Random Lengths actually, and they're the ones you
Speaker 4: the benchmark futures. They also have a very interesting thing.
Speaker 4: So they do this they call various places how much
Speaker 4: did you sell a piece of lumber for each day?
Speaker 4: And then what's actually cool is you can read the
Speaker 4: contract and they talk about all of the ethical things
Speaker 4: that like the rules of the question, because they are
Speaker 4: aware that all indices such as these create situations potentially
Speaker 4: like Georgia docks or libar, and so they actually have
Speaker 4: a whole set of rules about the collection process. The
Speaker 4: addresses basically exactly this question.
Speaker 3: I thought you were going to bring up the dog
Speaker 3: kill index.
Speaker 4: That's obsession.
Speaker 3: But I don't think anyone is pushing up the price
Speaker 3: of that benchmarkard.
Speaker 1: This this is one of our questions at a recent
Speaker 1: quiz was like, which of these indexes is actually real?
Speaker 1: Which of these terminal indexes? And the one that was
Speaker 1: real was the dog kill index. Almost no one got that, right, Yeah,
Speaker 1: that's no one believes that that actually exists. You know,
Speaker 1: we used to have a Columbia Oh yeah, so it's
Speaker 1: basically the number of dogs that die in the possession
Speaker 1: of airplanes when they're in air transit. I know. But
Speaker 1: speaking of the cob indexes, we used to have a
Speaker 1: Columbia kidnapping index too, but I think they discontinued that
Speaker 1: once died down a bit some deep lore.
Speaker 3: I do want to talk about the price of eggs more, because, yeah,
Speaker 3: well it's sort of become one of, at least in
Speaker 3: my circles, one of the most watched indexes, because you
Speaker 3: talk about inflation, and the thing that people complain about
Speaker 3: is gas and eggs. And I mean, Tracy, you were
Speaker 3: mentioning that there's well explained reasons why the price of
Speaker 3: eggs has been so volatile, bird flu being one of them,
Speaker 3: and I'm never quite sure we are in the cycle
Speaker 3: of bird flu because it's an issue, and then it
Speaker 3: feels like it died down again. Now we're talking about
Speaker 3: bird flu again, and I just don't know where we
Speaker 3: are in terms of how worried I should be about
Speaker 3: bird flu.
Speaker 1: Uh So when we started the series, we did not
Speaker 1: really expect eggs to become this huge political talking point,
Speaker 1: but they did during the election, and where we are
Speaker 1: with bird flu. Okay, So we had a really big
Speaker 1: spike in twenty twenty two and we saw the price
Speaker 1: of eggs shoot up. That since died down. But if
Speaker 1: you look at the egg price index on the Bloomberg,
Speaker 1: there's more than one. By the way, we have a
Speaker 1: bunch of different ones. You can see they're starting to
Speaker 1: go back up again, and that's because we are getting
Speaker 1: more bird flu reported. The interesting thing is we're starting
Speaker 1: to get it in other animals too. Yeah, 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. That was my prey.
Speaker 3: Question, like, at what point personally I need to be
Speaker 3: concerned about contracting bird flu.
Speaker 1: In some way When more pigs start getting bird flu
Speaker 1: and when it starts mutating.
Speaker 4: Some smart people I know are like anxious.
Speaker 1: Yeah, you need a pig mutation index on the Bloomberg terminal.
Speaker 1: That would be really worrying.
Speaker 3: Gotta get our best and brightest on us. That's worrisome. Well,
Speaker 3: before I spiral, let's just keep it to like the
Speaker 3: chicken industry, because I do wonder. I mean, how does
Speaker 3: it spread. One of the parts that was a hard
Speaker 3: listen when it came to this episode was listening to
Speaker 3: I think it was Craig Watts describing how he had
Speaker 3: like thirty thousand chickens in twenty thousand square feet. It
Speaker 3: sounds like these birds are just on top of each other.
Speaker 3: So I mean, how quickly does bird flu spread? And
Speaker 3: 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. So, yeah, this is the issue. So
Speaker 1: you have crowded conditions. It's very difficult to segregate farm
Speaker 1: chickens from the wild bird population. Like wild birds that
Speaker 1: have avian flu can still get in. They can eat
Speaker 1: the grain infect it that way, and so that's one
Speaker 1: reason why it's been really hard to stamp out.
Speaker 4: Speaking on this point, you know, another interesting angle here
Speaker 4: is the sort of externalities of industrial what's his name,
Speaker 4: Austin Frerik, Yeah, one of the guys, and talk about
Speaker 4: the waste water runoff, et cetera, and so like, Like
Speaker 4: I said, I am an optimist about the existence of
Speaker 4: cheap protein, and I think it's a marker of a
Speaker 4: wealthy society. But there are some interesting costs that we
Speaker 4: have to take seriously, and one of them is environmental
Speaker 4: and what it does to sort of the various water
Speaker 4: streams in some of these areas where there is a
Speaker 4: lot of industrial farming and excrement gets in the water,
Speaker 4: which is really bad obviously, and so there are you know,
Speaker 4: obviously bird flu itself and the potential for that to
Speaker 4: move into other animals is scary. But then they're also
Speaker 4: the sort of like slower burn issues and why in
Speaker 4: some farming communities there's been like a pushback about like
Speaker 4: how much more of this do we want and how
Speaker 4: much everyone else's cheap chicken is sort of slow degradation
Speaker 4: of the environment around it.
Speaker 1: So depressing we've left these speechless.
Speaker 2: Is there like an artistical chicken farming oh ecosystem whereas.
Speaker 1: Well, I mean backyard chickens would be one way.
Speaker 2: If you go to a started by like the fanciest
Speaker 2: chicken you can find, as it's still from a giant
Speaker 2: warehouse or that's actually.
Speaker 1: A good question. I know of one. Again, I'm slightly
Speaker 1: obsessed with chickens. I know of one Avian geneticist in
Speaker 1: the Northeast who breeds really interesting chickens, and he's sort
Speaker 1: of like on a small scale, so maybe they do
Speaker 1: except well.
Speaker 3: On a slightly bigger scale. I interviewed the Sea of
Speaker 3: Vital Farms last week, and one of their advertising points
Speaker 3: is that it's like one hundred and seven square feet
Speaker 3: per chicken, so that was really interesting. He also said
Speaker 3: I thought this was interesting too on his most recent
Speaker 3: earnings call. Our challenge right now, as always is that
Speaker 3: I can't get the chickens to lay more eggs in
Speaker 3: the short run, so a lot of demand and not
Speaker 3: a lot of eggs. But I mean, that's interesting again
Speaker 3: that they're advertising on that point that we give these
Speaker 3: chickens all this space.
Speaker 4: Are brown eggs just like better than white eggs? I
Speaker 4: feel like we have they don't look as nice though.
Speaker 4: I think people just assume they must be either better
Speaker 4: for the environment or healthier. Is there anythink 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, white and brown.
Speaker 3: You my stupid cush you get them related them different?
Speaker 1: No? No, they just do it. The one thing I
Speaker 1: don't know is like whether one Easter Egger produces like
Speaker 1: only green eggs and then another Easter Egger will produce
Speaker 1: like only pink ones.
Speaker 3: I thought that the bunny rabbits laid the easter eggs.
Speaker 1: Yeah, that's right, Katie, thinking that.
Speaker 3: Chickenization, I said that, right. Do other animal industries look
Speaker 3: like this? Does the pork industry look like this? What
Speaker 3: does the cow industry look like? 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 Iowa. And
Speaker 1: it gets to interesting questions in business about who should
Speaker 1: bear the ultimate costs of 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 4: Can I just say, like, after having done this series,
Speaker 4: I don't really view it as depressing I don't want
Speaker 4: this to be seen as like, you know, some sort
Speaker 4: of Jeremiah against.
Speaker 1: The chicken ustry.
Speaker 4: I just think there's a lot of interesting tensions, right,
Speaker 4: Like there's benefits to industrial scale chicken farming. There's complicated
Speaker 4: market aspects of industrial chicken scale farming. There's amazing consumer
Speaker 4: outcomes like the chicken sandwich wars, and like those are
Speaker 4: very delicious and are costs, whether it is the risk
Speaker 4: borne by the farmers, the risk of disease, and the
Speaker 4: risk of environment. It's a mix, right, Like I don't
Speaker 4: but I don't pursue the whole project to be like
Speaker 4: an anti chicken thing 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 3: That's like I can't as an animal freak, can't get
Speaker 3: past the chickens and like, you know, them falling over
Speaker 3: because like they've been yeah to this point where you
Speaker 3: know they can't stand up straight. I don't know if
Speaker 3: this came up in any of your discussions, but like,
Speaker 3: where are we on lab grown chicken? Because I have
Speaker 3: another episode that like cheap protein is great for a society,
Speaker 3: it's the marker of a successful society. But surely there's
Speaker 3: a way to achieve that without what's happening to these animals.
Speaker 3: Really showing my true colors on this podcast. No, it
Speaker 3: was for several years, and then you know.
Speaker 1: I lovets vegetarians.
Speaker 3: I was.
Speaker 4: I was raised vegetarian. I had my first week when
Speaker 4: I was age twenty four, when I moved to New York.
Speaker 4: I was like, all right, and there's just too much
Speaker 4: good for I didn't and I like went straight. I
Speaker 4: was like, I tried, uh wait, what was it?
Speaker 1: Do you remember?
Speaker 4: So I ate a piece of sushi, which is a
Speaker 4: little weird, just people like I was raw, but it
Speaker 4: looked at it peel like. And then a week later
Speaker 4: I was like eating steaks a hard launch. Yeah, it's
Speaker 4: a hard hard launch. Yeahs were hippo. And so I
Speaker 4: was raised vegetarian.
Speaker 3: Yeah, I was a vegetarian for like ages eleven to fourteen.
Speaker 3: I feel like I stunned my growth. I'm shorter than
Speaker 3: both my parents, but anyway, it doesn't matter your podcast, Thanks.
Speaker 2: For coming on, guys, Thanks.
Speaker 4: For having us. That was black.
Speaker 1: Yeah, thank you for letting us talk about chicken.
Speaker 3: No one made a chicken sound or a pun yeah.
Speaker 1: No, you made one, pun I did.
Speaker 3: Yeah.
Speaker 1: I was very proud of me.
Speaker 4: What did I say?
Speaker 1: I can't remember, but you did make one?
Speaker 2: And that was the Money Stuff Podcast.
Speaker 3: I'm Matlvi and I'm Katie Greifeld.
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