 Welcome to a very special post-Black Friday extravaganza edition of the FeeCast. I'm Richard Lawrence and we are here today with our fabulous panel, always fabulous, always wonderful, Anna Jane, Perle, Dan Sanchez, and Marianne March. I of course, and Richard Lawrence as I mentioned and we are here to deliver that weekly dose of economic thinking that our audience has grown so accustomed to hearing from us. And they had to do without us last week those poor things. We miss them but hopefully people were having a fun time without looking at screens last week. And by the way, our podcast is also available on Spotify, Apple, and Google. So if you don't want to look at a screen, you just want to listen to earbuds. It's available on those platforms too for your listening pleasure. So we are now post Thanksgiving, now in the full holiday swing of things. Is gift-giving season upon us? Well, we're filming this on a Wednesday and it's going out on a Friday, but it is still Cyber Monday according to all of my favorite brands. And I'm okay with that because they want to give me deals. And they were trying to really make me sweat too. They're like, it's only till midnight and I was like, oh, watch it. Okay, calm down. Yeah, the sales gonna continue. Yeah. Cyber Monday is continuing and I get an email pretty much every minute it seems like from every website that I've possibly visited over the past six months. It's pretty intense and there are some good deals to be had, but you got to make sure you watch out for just sort of the random, make it sound like a deal kind of stuff. Well, don't forget about Giving Tuesday. Giving Tuesday, as we were filming this, it was yesterday. How many times were you hit up for money for your favorite or not so favorite nonprofit organization donations? I stopped answering the phone. Yeah. Yeah, fair enough. And so as we are getting into the holiday spirit, it seems like there are many opportunities to buy things that we think people are going to like. And it seems like there's a burgeoning new industry around a couple of things, but one of them being makeup. And we have our two resident makeup experts here. Dan, it's not me and Dan. I was saying it. And it seems like the industry has really exploded over the past couple of years. And this season, it's probably got its greatest expression yet. Yeah, I definitely got got this Oh, yeah, absolutely. Black Friday season. Most of it for myself, I'll be honest, the gift part of it, I'm still gearing up for. But I know that I'm going to be happy come Christmas day. Is that everybody? Everybody does that? Like it seems like well, yeah, black Friday is just an excuse to me to buy the things I know I want, but at a discount. That's what it is to me. It's certainly not in preparation for gifts. So people who analyze such things say this year, that consumer spending in the holiday season is going to be up 5% to per person average of 1250 bucks, the vast majority of which is spending on oneself. Yes. Yes. So you are not booking those trends now. So what's happening in makeup? Because we hear about it quite a bit. There's celebrity makeup brands. There are different tutorials that are on YouTube. Yeah, I mean, one thing that is really cool that that recently happened was Kylie Cosmetics Kylie Jenner, one of the many Kardashians. And I think she's the youngest billionaire in history. I don't want to make it people make donations. She got up there. She finally did. Yes, she was at 999 million and she finally made it. We're also proud of her. We're all a big part of that donated to that, you know, that cause. What a charity like make someone a billionaire. I know. Well, it is. I mean, it is she represents I think she's a hero to young people too, just because she has I mean, self made in the sense that yes, she certainly has family support and she has name recognition. But she's she works very hard on Kylie Cosmetics. She owns 100% of her company, which is valued at $800 million by itself. That's not counting her own money that she receives as being part of keeping up with the Kardashians and the different television series that she's been a part of. Yeah, a lot of people have advantages like that who that don't become billionaires like it's really hard to become a billionaire. Well, something really cool that just happened. She recently very recently just started selling her products which were exclusively kind of on their own. You had to go. You couldn't pick them up at a Sephora, which is a cosmetics. I mean, you know, a beauty store. You couldn't pick them up at Walmart. Cosmetics Mecca. Oh, yeah. Yes. I mean, I love Sephora shop. I just kind of go in there for seeing what colors are in there. It's there is stuff from men moisturizer, whatever. Just yeah, hair care. Just a lot of yes, beard oil. Oh yeah. Yeah, there is beard oil. Yes. But what's really cool is that so she recently, I mean, up until recently, you had to kind of go to her to purchase those products. And she recently started selling in Ulta, which is essentially the Walmart of beauty products, which is really, really cool, I think, making her products, which represent again, which represent the six like youths and success and entrepreneurship. And to me kind of like disrupting the market when it comes to cosmetics, because you typically do go to a Sephora or an Ulta. She represents that. But then we've also got now that she is working with Ulta, you've got people accessing her goods that couldn't have before she uses social media a lot. Yes. Yes. Yeah. That is really how she became famous. And I think it's especially when she has new stuff coming out. I don't know if you watch any of her stuff or her sister Kim Kim Kardashian also has a beauty line. Kim Kardashian. They post so much and it's very interactive. They post so much about their new product. So it's about that. And they did a collab, a Black Friday collab, between Kim Kardashian and Kylie. That's a fun thing for siblings. Yes, very exciting. But that's just, I think those two examples are really key in what the kind of makeup, makeup industry upsets we're seeing as celebrities who are carving a new path, who are going up against real juggernauts in the beauty community. I mean, the beauty, the beauty industry itself is worth $52 billion. So you have celebrities endorsing products and then you have collaborations like we're seeing with Kylie and Kim. What are some of the big names that they're upending? Well, so I mean, when you think, well, yeah, when you think to me, when you think about longstanding, successful cosmetics companies, we're talking about Lancome Clinique makeup forever. Yeah, makeup forever. Yeah. And then we've got more of your drugstore brands. Is that really true? Yeah, yeah, it's helped much. I know. I don't know if they're necessarily causing anyone to go out of business, but they're definitely being very influential. In 2017, we saw Rihanna's beauty company Fenty Beauty come out and it was immediately really, really huge for the industry because they launched with a foundation line containing 40 different shades, which is basically unheard of for a new brand to offer that many. And that wide of a selection, you would see companies from the 80s like makeup forever, who's owned by Louis Vuitton. They have 40, 40 shade foundation lines, but it took them decades to get. Yeah, absolutely. When you start a company, I usually start with here's my four products that I'm pushing, which is, you know, basic, because you want to get you want to build name recognition and things like that. But since we've seen the success of Rihanna's Fenty, you have color girl, you have cover girl and color pop and Maybelline coming out with much larger ranges as well to compete. So that's the way that I'm referring to upending is they're being very influential very fast. They're they're pushing. Yeah, they're pushing other companies that have been around a while to and challenging them to to innovate. And I think that specifically Fenty just provided a lot more makeup opportunities for lack of a better term for people that are for non white people, people of color, they had so many different shades made available. And that was one of the things that I heard so much about the conversation was constantly surrounding how amazing it was that now we can we can access high end beauty care. For somebody that's my skin tone, which was very exciting. That's so interesting for people with deeper skin tones, but also for people with albino skin, which which is a very unique. Can you imagine how underserved that? Well, I mean, that's the beautiful thing about the market is that like even those really small niches, like really small markets that that it can find its provision. Yeah, absolutely. I mean, I think that's one of the cool things that you see with the increase of I mean, you know, we are just such a wealthy country. And we I mean, with entrepreneurship with innovation and with wealth, we we increase people's access to very specified goods to them, right, specialized goods. It's all from the division of labor and specialization. Are people loyal to makeup brands or for a time? Big time. Well, yeah. And so our folks sort of jumping ship from the land comms of the world to these other brands, there's just so there's just so much. And if you are somebody who's interested in makeup, you have to know that there's new products coming out, new lines in some of our favorite and some new indie brands as well. So it's it's hard to keep up. And yeah, in some ways, that's that's a struggle for the modern consumer is drawing that line between everything is cool and awesome. And a lot of it's affordable versus, well, now I own 10 different foundations and they're all the same color. And Bernie Sanders says there should only be one brand of deodorant. Oh, yeah, absolutely. So that diversity is like just confusing. Like I just think that whole argument is. Well, yeah, I mean, we're confusing the fact that there is there's a diverse selection of products with, I guess, excess, right? And I think that that's not fair to look at it in that lens from the Bernie Sanders perspective, which is we should only always all be using one brand of deodorant. But what about people who are allergic to old spice, you know what I mean? Like that just don't like the smell of it. Yeah, you want to be able to serve as many people's needs as possible. And so diversity matters when it comes to products and there are real consequences. So people, women who wear makeup during job interviews, for example, are more likely to get that job. So if you have a low income woman who doesn't have great access to expensive beauty products, she can maybe have an easier time finding a job just by having access to some of these new things that are coming out. And I think just think it's so ironic that the same some of the same people who are, you know, extolling diversity in other contexts that when it comes to diversity of products for diverse audiences, often like racially diverse audiences, then they actually want to limit choice because because too much consumerism is just like bad for the soul or something. Well, to your previous point, Dan, the market is that beautiful mechanism through which if someone asks, it will deliver. And it's obviously delivering something in these diverse lines of tones and shades for makeup that people are actually buying. And these companies that offer these things survive or die on the merit of the quality of the product that they sell, which is an awesome thing. So it's so cool to see these startups coming up and challenging some of these older brands to the crowns that they used to have that they were the only people in town offering these things. So of course, Dan and I, aside from the economics side of it, have very little to offer when we're talking about makeup. But there are other things that he and I are keeping our eyes on this holiday season. And one of them, of course, is in the technology sector. Apple, of course, recently released their brand new MacBook Air. And it's the MacBook Air that I've been waiting for with a retina display. So it's got that super high density pixel display. So it looks like, you know, almost paper, like something printed out on paper when you're looking at the screen. They've had these screens in their other laptops for many years, but never in the MacBook Air. The other benefit of the MacBook Air is that it's just faster all across the board. And of course, many people are concerned now that it's replaced the traditional USB-A with USB-C, which is another reason to buy all kinds of adapters. So there's going to be that outcry, I'm sure. But I think less and less of it now that people are beginning to understand that as technology grows, different plugs are going to come about. They're going to be faster. They're going to be thinner. They're going to be waterproof in many ways. I don't think USB-C is, but that's one of the reasons that Apple got rid of the headphone jack on the iPhone a couple iterations ago. And so Apple is obviously trying to meet some level of consumer demand here by finally revising this beautiful laptop. So what does this beautiful laptop cost? Because this new iPhone, eyes glazed over not getting a new phone this year. Yeah, the new iPhone can cost up to maybe 1200 bucks. And then you can trick it out with new or expanded storage and it can go even higher than that. And it seems like Apple might be having a little trouble selling these new iPhones that are debuting at the $1,000 mark. Yeah, the sales are just lower than expected. And Apple stock has gone down as a result. And so much so that Microsoft is actually surpassing its rival for the first time in a long time. Well, little point of fact there. It was very close, but both days since they started saying that Apple was going to be surpassed by Microsoft, Apple ended up on top. But as an Apple fan, I've always been irritated. Let me let me get on my soapbox for a second here. Apple is always the person, the company that for some reason people love to hate. Like, you know, whenever there's an earnings call where Apple has record profits, there's always some comment out there about how, oh, it's the last time that's going to happen. This past earnings report that they issued, they said they're not going to announce iPhone unit sales anymore. They said that's the end of the iPhone. It's reached peak iPhone. So Apple's no longer going to report units anymore. But all that to me seems like a lot of malarkey simply because it is the company people love to dig on. Whether you're a Microsoft person or a Google person, whatever Apple does where they replace the USB A with the USB C or get rid of lightning or do whatever, it's always a punching bag. Yeah, I think it's in part, I mean, at least just from a social sociology perspective, it's I think it's the exclusivity or the insularity of the company. It represents like exclusivity, like I said, so it's luxury. It's this very nice item. And it is it's an insular culture in the sense that everyone's using Microsoft Excel. But if you have a MacBook, you have to get like the fake version of Excel, right? Numbers. Yes. And things like that, I think that people when you see a company that is and it is based a little bit on identity, right? An identity of exclusivity. Brand. Yeah. And I think that when people see that they they inherently, I think people just feel the need to push against it. And that's why an iPhone and Android aren't always a substitute good, right? I mean, because you would think a phone is a phone, right? Except it's all about the experience. It's all about the brand. Yeah. So I hate to be contributing to the punching on Apple. But I did recently read that they've done a second cutback in in their inventory that they did an order reduction in the production. Yeah. So we'll see. Here's the funny thing about that, I should say, because I follow Apple news very closely. There are always sort of supply line reports from various places in China where the iPhone is produced. And it seems like whenever there's a report of a reduction in orders, which will happen, the stock dips, right? But then when the earnings report happens, they had their record quarter, their record third quarter. And so the reports of any reduced production, which, of course, are good indicators for what the company is going to report when they have their earnings call. It seems like there's not a very big connection between that. People love to say iPhone orders are down, yet they always come out with record earnings. And that's not to say that's always going to happen because, of course, like we're talking about with makeup, just because you're the incumbent in a market, you are the leading supplier of whatever good, in this case, let's call it smartphones, doesn't mean that you're always going to be there. And that's the beautiful thing about the market. And so I don't want to claim, you know, Apple's forever and always going to be that beautiful shining production company of smartphones, but they haven't yet stopped. I've never purchased an iPhone. I've been with Samsung Galaxy for a while now. And every time it's time for me to get a new phone. I think, oh, this is the year that I'll go for iPhone, especially years ago when the FBI was trying to break into Apple iPhones and Apple kind of stood strong against them. I was like, oh, well, that sounds good. It sounds like they're protective of customers. Maybe I'll go for them. But then I just I still never have because of the cost. Well, it's funny, you should mention that privacy issue because Apple CEO Tim Cook on November 18th, which was just last week, came out with interview on Axios. If you guys have seen this where he was talking about some of the privacy challenges that Silicon Valley has faced over the past few months, of course, you know, there was that privacy and data data leak out of Facebook with Cambridge Analytica, where they were getting all kinds of information from different profiles and friends of people through their system. And then, of course, there's the GDPR rules out of Europe, the general data protection rules, which basically put strict boundaries around what information companies can gather and distribute and store personal identifiable information. And so Tim Cook was interviewed on this because, of course, Apple is a huge player. And he said, generally speaking, I'm not a big fan of regulation. I'm a big believer in the free market. I wish you would have stopped there because there's a but. But we have to admit when the free market's not working and it hasn't worked here. And of course, here is speaking to privacy. What do you guys think about that? Obviously, the implication there is if the free market's not working, the government has to step in. Well, I think the government is one of the biggest abrogators of privacy that the government has done a lot to to make technology less secure. Like they're always looking to have their like their own back door into into devices and around security barriers. And and it doesn't just make it more accessible for them, but it also makes it more accessible for hackers and criminals in general. And so, yeah, I think it's not true. I think it's not true also. And especially because history is not going to end here, we're seeing already a lot of new platforms popping up that maybe aren't great competition for places like Facebook yet. But who knows what the future is going to bring. These these institutions may not be as big as they are now forever. Right. So Facebook could eventually be upended by some other website like Mines dot com. Well, and here's here's the other frustrating thing for me I think that when we talk about, you know, the government regulating something versus the market correcting for itself, I mean, he's saying the the free market has failed us in this context. And the frustrating thing for me is that, yeah, nobody ever said the free market doesn't experience failure. Part of the free market is that is the failure and then the the response to the failure. Right. So it is as as a profit seeking company, Facebook would be theoretically motivated to protect people's privacy going forward more or so than a government bureaucracy that doesn't have a horse in this race. Does that make sense? That's such an interesting point. And I think that's so important to consider that when there appears to be a failure, there are going to be actors that step in to try to fix it. Right. And so Apple historically has been, at least from our point of view, one of the better companies when it comes to protecting privacy. Right. Apparently they don't sell your information. You are not the product as you might be for Facebook. Right. Facebook actually uses your information to make money, but Apple claims that they don't. I also think there is a personal responsibility component to this where it shouldn't have been very surprising that Facebook was selling our information. I hate to dredge up the Cambridge Analytica for months ago, but it's true. We all accept that when we're on Facebook, that's that possibility. And we can as as free people choose to not yet have a Facebook platform delete. Oh my goodness. Yeah, go to somewhere like minds dot com slash fee online. No, that's the frustrating thing. I think so when my dad found out about the leaks, the Facebook, he sends me to the link. He's like, this is how you find out what information they have on you. I go and it's like, yeah, I know all of that. I know they have all this information on me. Like it was not anything that I didn't know I was sharing with Facebook, like my age, like my location. And I was like, this is such a silly like, yeah, I mean, I agree to be a part of this network. And I put in most of this stuff about me is not public, but at least shareable to my friends. That makes sense to me. And so I think you're right in saying that you're you as an individual have such a responsibility to understand the risks you're taking and not assume that some entity on high is going to protect you from that, right? Occasionally before all this privacy scandal emerged, there were calls to regulate Facebook like a public utility because people claimed that it's almost impossible to do anything or to have any kind of business relationships or know anything without Facebook. And so Facebook's a necessary thing. So we have to have the government come in to actually regulate it like they would the power company. It seems like calls for that have begun to get a bit muted in the wake of all these scandals. Well, and you have to imagine what if similar calls had gone out for nationalizing my space? You know, we'd all still have my space now because it would become like a monopoly. Yeah. Become a public monopoly. Mark my words, like Facebook will be over something something will come disrupt the market, right? The social network market. Something will change. I'm I already use Facebook so much less than when I originally acquired it 10 years ago. I think it's just I think it's going to die. And I think people are I actually weirdly like several of my friends very recently just completely deleted their Facebooks. And they're like my life is so much better now. You know, to your point, Dan, on Facebook not being and I think Anna Jane, you said the same thing, not always being there as the sole provider of social media. There's an interesting point coming back to Apple that our friend Nick Gillespie at Reason mentioned when he looked at this news from Tim Cook saying basically that the free market has failed us. And Nick said there's a clamp downcoming when the head of the world's most. He actually did right. Most biggest company starts complaining that markets aren't working. As with Facebook's calling for regulation in the spring and summer, this is a tell that the tech giants Facebook, Apple, Amazon, Netflix and Google are realizing they're almost certainly at the peak of market power and want to lock in their position. And that's similar to what you mentioned a minute ago about MySpace. If they had gone and regulated MySpace, then we'd all have MySpace now. These companies may be sensing that they are getting to the peak level of their demand and want to say, all right, let's put regulations in that freeze out our competitors essentially. Because when you put in regulations such as these stringent privacy rules that Europe has adopted, what you're basically saying is if you're big enough to adopt these, to take on the cost of being compliant with these rules, then you'll survive. But if you're a new startup that doesn't have a full legal department, it doesn't have a lobbying office in Washington, D.C., you're not going to be able to compete in this environment. Absolutely. I don't mean to pivot, but I was just this just I just thought of this speaking of like shopping in Black Friday. I was reading a really interesting article about a designer who designs children's clothes. And it was it focused so much on how incredibly difficult it is to break into the market of children's clothes specifically because it's so heavily regulated, which I found, of course, I found amusing. But it's just simple things like you can only have three pom-poms on a shirt. Otherwise, the kid will choke. Right? It's these safety and health components that are so that are apparently very heavily regulating this industry specifically. And that specifically affects one's ability to break into that industry. I had no idea that three pom-poms were something like that. Oh, yeah. And if they were little joggers, they're not actually allowed to have like pull strings because they could, I guess, hang themselves. It's just like the idea that we really, really have to protect our kids. And it's like instead of me as a parent just saying, yeah, don't put that in your mouth. Like I just don't understand. And all this shows how backward the narrative about we need government to make sure that these big companies don't have too much power and don't stay in power and are anti competitive and we need to make room for the little guy when it's just the opposite that it is government regulation often in the name of disrupting monopoly power that actually installs monopoly power by making it impossible for, like you said, for smaller upstarts to follow those onerous regulations. And it just also goes to show that if you don't have that regulation, that there is no safety. There is no safe throne that these big companies can just sit on forever because ultimately in the market, like Mises said, the consumer is king. He called it consumer sovereignty that even these high and mighty entrepreneurs, it seems like they have all the power. But in reality, they are servants serving at the whim of the customers that they're serving. And if customer tastes shift, then all their market power just disappears and we see that with a makeup case that the incumbents in makeup and even in technology that it can happen, like with Facebook and Apple. So yeah, consumer sovereignty. Look it up. I love the term consumer sovereignty. It's not something that we really hear very often. It reminds me of something that Mises' student Hayek said, the Nobel Laureate, F.A. Hayek, he said, profit is a signal that we're serving well people who we don't know. And if you're not doing that, if you're not generating a profit and hopefully you're doing that without any kind of intervention such as subsidy or special favorite favoritism. If you're not generating a profit, then you're not serving people. So why should you exist as a company? Consumer sovereignty is a very cool concept and it goes hand in hand with profit. So when I was looking at some of these Apple factoids that we were talking about a moment ago, I found something funny. Of course, you know, we're in the midst of a trade war. We hear about it all the time. Mostly on Twitter. And there's an interesting thing happening because Apple, for a time, thought that they were protected by having a close relationship with the current presidential administration where they ended up securing exemptions from the import bans from China, right? So some of these, most of their items are made in China, but they ended up securing a special exemption on the Apple Watch so that there were no tariffs placed on imports of the Apple Watch. The Apple Watch could stay at its price that consumers were used to paying. Well, now of course, we're seeing as iPhones continue to rise in price. We kind of begin to wonder, all right, how much of that might be due to something like tariffs? How much is the price actually, are tariffs baked into the price, right? And so just yesterday, we're hearing from President Trump where he says that tariffs could be placed on Apple laptops and phones. And I have a quote for you because I think this is really interesting. He says, you know, maybe we'll put tariffs on Apple devices. It depends on what the rate is. I mean, I can make it 10% and people can stand that very easily. Isn't that such an audacious thing for someone to say that people can stand any amount of price increase? And this is an arbitrary one, so arbitrary, 10%. People could stand that very easily. Who is he to say that? Right. And that's not counting inflation. I mean, we're looking at 2.5% inflation right now, which is up almost 20% from last year. I wonder how much that factors then. And of course, you know, that is scrambling to raise interest rates, to control that and cool it down. But, you know, eventually it'll get to a point where it is beyond what they desire. But isn't that such an interesting thing? Maybe people can stand 10%. How would he know? Yeah, and now that is arbitrary authority. That is arbitrary power. That just for one person, just based on grudges often. Yeah. That towards specific CEOs, maybe. And just like the collective impact of that, it's like 10% on a product that so many people buy, it's like you're just adjusting a lever and decreasing the living standard of all these thousands of people. It's like that is irresponsible power. And 10% on a $1,000 phone is another $100. I don't wanna throw away another $100 because he just thinks it's okay. Or he wants them manufactured here and he wants them to be $5,000 instead of $1,000. But I think, what you exactly what you're saying is that you're really just the only people you're hurting, if you think about it from a consumer sovereignty standpoint, the only people you're hurting are the consumer, ultimately. Because it is, you're not allowing that 10% of people, you know, if there's some sort of direct correlation to have access to something that makes their lives easier. Right. Yeah. It's an amazing concept that I think most people who are kind of playing econometrics and economics from the top of a government bureau don't really tend to understand how it affects people on the ground. It's not just academic. These are actually real people making real choices and they're prohibited from making those real choices after all. And affecting Americans and affecting Chinese people. I mean, that the globalization and integrating China into the global division of labor, that is what made all these wonderful gadgets that we enjoy possible. But it's also what lifted just untold numbers of Chinese people out of the most desperate poverty. And let's not forget what trade does to foster peace and understanding between nations. That's, I think, a big part of the message that we talk about here at FI through various pieces, including the famous essay, I Pencil, which is going to be 60 years old next month, actually. And so everyone should be sure to look up I Pencil on FI.org to read a brilliant parable about how the trade mechanism works globally and ends up bringing people more closely together. Well, I'm sorry to say that we're out of time, but we look forward to seeing everyone next week on the FIcast. Have a great weekend, everybody.