00:00:00
Hey, Sorcin. I just went through the comments. The one question keeps coming up over again.
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Why the are you writing this book? Jesus Christ. What a party pooper. What a party pooper. I don't know, man.
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I don't think I think it's supposed to be the the book's supposed to be like a beach read. A beach read? Yes. Come on. Did you read it?
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My god. No. I saw the title. I was like, skip. All right, besties. I think that was
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another epic discussion. People love the interviews. I could hear him talk for hours. Absolutely.
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We crush your questions a minute. We are giving people ground truth data to underwrite your own opinion. What do
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you guys think? That was fun. Palimat, you you're going to love these
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characters. I kid you not. I kid you not. The people who do who are involved
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in this at that time like the the main character. I totally agree with you. I I am a huge to be honest. I've studied this period
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for a while actually. I think it's great that you wrote this book. I think it's incredibly fascinating. We're here with uh with Andrew Ross Sorcin Chimath and I
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with another all-in interview, riveting. Today we're going to talk about Andrew's new book 1929
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and specifically cover why Andrew got into it, what the history teaches us,
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and are we looking at another 1929 or something different this day and age as
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a lot of people may speculate. But Andrew, thanks for joining Chimath and I to talk about this. Thank you for having me and I love your
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uh your background there. a a a true image of what was actually
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happening in October of 1929, crazily enough. That's right. And it was colorized by
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some AI or something, I think. But, uh, yeah. Great. How and why did you get into this era of 1929, the great stock
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market crash of 1929. Like, you're a busy guy. You're on TV every day. We see
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you all over. You're at conferences. I saw you at a conference in Southern California this week. Then you're at another conference and you're back in
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New York. You're very busy. At what point did you say, "Hey, I want to sit down and write a book about this era."
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Okay, so here's what happened to me. So, I written that book, Too Big to Fail, about the 2008 financial crisis,
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right? And people used to always say to me after that, they'd get into these like very in-depth conversations about 1929
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or they'd want to know more about 1929. And most people know that something terrible happened in 1929. They know
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there was a crash in 1929. They oftenimes think it like is the great depression or leads to the great
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depression. But if you were to ever ask most people now Chimath and you are maybe in a different category and say
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well who were the people who actually were engaged in this what were they saying to each other who was sleeping with who? Who was trying to over who?
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What was actually happening here and what were the incentives and what were the motivations that led to what clearly
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were some poor decisions. I couldn't find that. So, I went on a vacation like 10 years ago with my wife,
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very nerdy, and I like downloaded all these books to my Kindle. And there's some great books, by the
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way, about this period, don't get me wrong, but they didn't have the sort of character driven story. Like, I loved
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Den of Thieves. I loved Barbarians of the Gate. I loved stories about people. Fabulous books. Fabulous books.
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What did your wife think when you ignored her the entire vacation you guys were on were just reading books on your Kindle? I mean, I think she thought I
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was out of my mind, but um No. So, I I read I I read these books and I was like, "Okay, where's the story? Where's
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the where are the people?" Before you get to the people, can you can you give people a concise
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t like I was going to ask you for a TikTok of the overarching economic issues before we
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get to the sort of the characters because I think Yeah. Because I think what to your point which is an important
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one, people think it was like a okay stocks went down, right? But the other things like the overp
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production of the economy, tightening interest rates, the war debt, like all of this stuff was just comingled and
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nobody fully understands that. Can you maybe give folks a precise representation of the setup? The
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setup. Okay. So, so let's just go back even let's go back to 1919 because actually I think that's a critical year.
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So prior to 1919 in America, people did not really borrow money. It was like a
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moral sin to to to get credit. Like people didn't do it. In 1919,
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General Motors says, "You know what? We're going to start lending people money so that you can buy a car." And that was
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actually like a major inflection point in America because then Sears Robuck clocks what's
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going on and says, "Okay, we're going to do this too for appliances." And then a guy named Charlie Mitchell who ran a
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bank called National City which becomes Cityroup says you know what we can do this for stocks. So, you know, and and
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all of a sudden brokerage houses are opening up, you know, on the corners of streets the way we see Starbucks today.
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It's like literally like that. And you could go into one of these places and you could put a buck down and they would
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literally loan you $10 off of your dollar. I mean, that's how insane things were. And at the
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ter there was no risk underwriting of any kind. Zero risk underwriting. But nobody understood what they were.
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By the way, there's no SEC. There's no regulations. Somebody who who who read this book early said, "Oh, in your
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research, did you get a chance to read any of the prospectuses for the companies?" I was like, "Perspectuses?
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Like if there was like a leaflet that they handed out on the street, you'd be lucky." So there's no there's nothing.
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And it's just like a complete go- go era. Forget about 1929. In 1928, the
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stock market went up 48%. So, people are just, there's just sort of like this, it's a little bit of the
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Chuck Prince when the music's playing, you're dancing, and everybody's dancing, and nobody's even thinking about the
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music stopping kind of like ever. Now, meanwhile, there's also these
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technological changes. I mean, huge generational technological changes. In the same way, I think we're probably talking about like AI today, radio. So
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RCA was like the Nvidia of its time. Everybody wanted into RCA. The stock
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ticker was radio because it was like the it was like going to change the world.
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And and the other big piece of this was also similar to today this idea of
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democratizing finance. It was like okay the elites have had their way. They've
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made all the money. We're now going to let everybody in on the action. Now, the
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difference between then and now though was there was also like crazy amounts of manipulation, insider trading. As I
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said, there were no rules. Like literally no rules. Nobody's going to jail for this stuff because it didn't there wasn't a rule against it.
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By the way, it wasn't just individuals that was investing and overextended with margin. But the banks would take
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depositors money and they were going long the stock market. The the the banks the banks were doing it. By the way, the bank not only the
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banks, regular old corporations. I mean, could you imagine could you imagine if it turned out that like JP Morgan and
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Goldman was going long in video with depositor funds? That's that's the effective equivalent of what was
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happening back then, too. You had you had corporations taking their balance sheet, right, and effectively then loaning it out so
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that people could go buy stocks. That was the other thing was happening. there's a sort of like just the the push
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towards investing and and overprouction and and all sorts of other things
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created this sort of frothy market. And you had a Fed. You mentioned the Fed, which is an interesting part of this.
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There was a Fed. It was new. Started in 1913. They knew this was a mess. Like they kept saying to themselves, you read
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all the diaries and notes that I was in for the last eight years. They knew there was a problem. But they were
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scared out of their mind about doing what they probably should have done, which was raise interest rates, but they
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couldn't pull off like a vulker kind of thing. Can you sorry, but can you double click into what you said about the fact that
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there was a social contagion around wealth creation that people felt like the elites had had their way and now it
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was everybody else's turn. Just describe that like what had caused that and what amplified that social cont and who and
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who was everyone else? Were these factory workers because we're kind of on the heels of a big industrial buildout.
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So like was it the FA folks were had savings for the first time like where's this coming from? Well, so what's really happening is you
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have a lot of folks who are coming from the from farms frankly and moving to the big cities for the first time. That's a
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huge part part of what's happening. So most of the trading I should say is happening in the big cities. It's not happening you know out out in small
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towns. It's happening in big cities for the most part. But but that whole sort of scenario
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once they're in the big city and they're seeing that there's sort of this wealthy group of people, talk about inequality,
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this wealthy group of people and they want in on the action. And also by the way the people at the top, meaning the
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bankers and investors and entrepreneurs are like, we think there's this big opportunity to open this up for the
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little guy or the ordinary investor. We think this is like a huge opportunity. There was a guy named John Rascco who's sort of like the Elon Musk of his era.
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Um he actually ran General Motors, created the credit program there, then becomes hugely wealthy, then gets into
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politics by the way, ends up building the Empire State Building. But he was trying to create almost like the first
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mutual fund because he thought that people should be able to get in on the action the way he
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did. That was like his whole conceit. And he talked about it pretty openly. There was a famous article called
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everyone ought to be rich. Uh that was his line. everyone ought to be rich. And
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it also was a time where sort of the American dream shifted a little bit, I think, from sort of a Horatio Alra story
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a little bit to like a lottery, can we get rich? Like can like the whole idea
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of capitalism is going to give us this great opportunity? And I, you know, obviously we're today. Do you think that
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radio played a role in that because it amplified these stories and made them go faster and people would just like start
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to tell these tales and folks started to forget the Horatio Alger part? Like I'm just still trying to understand like I
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you have you have folks on the farms, right? They're getting educated. The industrial revolution is happening. So they're moving to the city and the radio
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then is maybe what Instagram is like now. You're seeing people with wealth. You're seeing this wealth that you don't
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have. You aspire to that. Yes. and then something comes in and fills the void. Is that is that kind of
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the mechanic? I think something fills the void and all of a sudden you now have the opportunity because this the the bank or the
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brokerage houses are going to lend you all this money and it's not just radio being the communication device. It's
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really the media. So the other thing that was happening during this period so Time magazine starts in 1923, Forbes
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1917. All of a sudden, Charlie Mitchell, the CEOs, are now on the cover of magazines
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the way Babe Ruth and Charles Lindberg had been on the cover. So, sort of the the shift in how people even thought
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about business. Uh, none of these guys were, you know, famous before the 1920s, but
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they became famous and everybody wanted, everybody wanted to be them. This was what America was about was this
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industrialization, right? And this was kind of like, hey, we're pioneering an entirely new world and these are the
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leaders doing it and these are the rock stars that are transform transforming this country. I mean, was that kind of a
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big part of what was going on at the time? Totally. And everybody wanted to be everybody wanted to be a rockstar. By the way, it's the same way everybody
00:11:24
wants to be you David or everybody wants to be Chimatha or they all want to be Elon. Like I think there was a huge thing like okay and here's this
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opportunity and they were being sold the opportunity and given the opportunity not just to invest but again I think
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that the margin piece of it was such a crucial crucial element. Do you think it's a coincidence, Andrew, that now
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you're you're publishing this book in 2025, but like how does it feel like
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eerily similar to you? Like way too similar where you can almost map one to one those boundary conditions then in
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some version of that today like is that is that what like a little bit but not I will say that wasn't my intent like when I got
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involved in this I just wanted to retell the story and figure out who these guys were. I I
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ended up after that crazy vacation with my wife. I ended up going to the Baker Library. I happened to be giving a
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speech at Harvard and I walk in there and I had some time and I asked the librarian. I said, "Can I see these
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boxes?" This guy Thomas Lamont who ran JP Morgan at the time and I said, "Can I look inside these boxes?" And inside the
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boxes, his secretary is keeping transcripts of his phone calls with Hoover and Roosevelt.
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Like, by the way, same way like everybody's probably talking to Trump or Trump today. And I'm like, "Oh my god, I
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haven't seen it." And you're seeing the conversation. And I thought, "Okay, if you could use those transcripts in an
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actual story and then you could figure out I didn't know if other transcripts existed for all the other characters."
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Yeah. Wow. You could recreate this whole crazy situation, right? But I didn't go into it thinking, okay,
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this is all onetoone. And I don't think it is onetoone. I think there's a lot of leverage in the system today, but it's a
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different kind of leverage. I like to believe that there's now an SEC. There's other regulations.
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If you believe it, there is one. Paul's doing a good job. He's there. So, I'm not here to tell you that like
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we're going off a cliff tomorrow. I think there's probably some things that are happening our economy today that do
00:13:18
mirror that period. And I hope there's some lessons in here. But do you think do you think the regulations that have been in put in place over the past
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hundred years and there have been several cycles, one of which happened after '08, of trying to create new
00:13:31
protective provisions around how we operate in our financial markets, have they actually changed things enough or
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does the human element always find its way? It always finds its way to frothiness, to frenzies,
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to these kind of moments of exuberance, easy money. And this this like will
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there'll always be a path, you know, whether some people might argue crypto tokens, there was an NFT moment a few
00:13:54
years ago. Wherever the regulation kind of path of least resistance is, that's where everyone goes.
00:14:00
Totally. That's always going to be the case. That's the human condition. We all want more. You know, there's that great line
00:14:05
in um it's it's it's a Wall Street 2 uh where I think Michael Douglas says to Shai Labuff, I thought the second Wall
00:14:12
Street was not as good as the first one, by the way. Says says something like, "What's your number?" and he looks at
00:14:17
him and he goes, "More." Right? And and that's that's humans. That's humans. And that's humans. And more means we're
00:14:24
all trying to figure out how we're going to get to more. And I think that that was what was going on
00:14:30
then. To some degree, it's what's going on now. I think it's always going on. It never changes. It's not like there's some unique moment
00:14:36
today. Maybe there's technology that's kind of unlocked this kind of new cycle.
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Look, the other piece of this and it was actually a lesson for me that I still grapple with today. I think people think the word speculation is like a dirty
00:14:50
word. And the truth is, having now written this book and too big to fail and just spending, you know, all this
00:14:56
time reporting on all this, you need speculation. Speculation is the twin of
00:15:01
innovation. Putting your capital at risk. There is no it's price discovery. It's risk
00:15:08
discovery. It is the hard underbelly of innovation. I completely agree with there is no innovation without some
00:15:14
speculation. Elon Musk would not have created Tesla and said somebody speculated on him early when it all
00:15:19
seemed totally insane. No. And also he's probably speculated himself in 50 different ideas that never
00:15:25
saw the light of day. That's what it means. It's like you're investing risk capital. That capital is not always
00:15:30
money. It's a lot of time it's time and reputation as well. It's convincing other people to come work on something
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and you're doing it speculatively. That's what Silicon Valley does. Betting on the come.
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And so then the question becomes, how do you create an environment where you can
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have speculation? Not just have it, but encourage it, but not let it get out of
00:15:54
control, right? Like that is the sort of fundamental question. What ends up happening, Andrew, is like
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no one gives a when a big fund manager or a big bank or some kind of dark pool
00:16:06
of capital loses loses money. But when it hits the consumer, when it hits the individual, then there's this rush to
00:16:13
protection. It's like we need to protect the system. We need to kind of protect the consumer because they're always the
00:16:18
ones that get taken advantage of. Is that kind of fair? And if as you look at what happened coming out of
00:16:24
100% out of08, look, you can look at both of those things. You could look at, by the way, I think an interesting one because we're
00:16:29
now dealing with it now is the accredited investor rule. So, you know, by the way, that really goes back to the
00:16:35
19 late 1930s or 1940. You know, the idea was we only wanted the wealthy to
00:16:40
be able to have opportunities to invest in private companies because they were the only ones that we thought should be
00:16:47
prepared to lose the money and we didn't want the little guy to lose the money. Here we are now in uh you know 2025 and
00:16:55
there's a lot of folks saying you know I want I want the access. I want the
00:17:01
opportunity. And you know sometimes like I remember Chimath you and I probably talked about this years ago. I remember
00:17:08
I either talk about like GameStop or some of these other companies and tell people you know oh you got to be careful
00:17:14
guys this could go wrong. I said that a little bit some about spacky stuff and some other things and people like Sorcin
00:17:20
stop it you're not protecting me you're protecting the man. You're protecting the man and it was
00:17:26
sort of regulatory capture. It's a very interesting concept. So I anyway I haven't come up with a you know
00:17:32
a neat answer about that but I do think about it a lot. Well to your point I think the the 40s
00:17:37
act 1940 act I think it was it's been a very complicated piece of legislation because if you fast forward to today
00:17:45
we're still trying to unwind and fit a square peg into a round hole if you will. The entire crypto economy contorts
00:17:52
itself around the 40 act right? All these BDCs contort itself. private credit contorts itself and why? Well,
00:17:59
right now we don't have the regulatory will to just go and have a wholesale rip and replace of what is really old
00:18:06
legislation. I think Scott, do you want to talk about the Kimat? Do you want to just describe the 40s act? Like what's in it?
00:18:12
Well, it it was basically written as a way to sort of try to delineate what is
00:18:18
a security, what is allowed to be traded, what kind of businesses can be public. And at the time with the
00:18:25
understanding that they had of the economy, it all made sense. There was a pretty bright line of here's a
00:18:30
commodity, here's a security, and here's what is allowed. The problem is, as we've seen, is that businesses today in
00:18:38
2025 are way too dynamic, and they don't map to the brittle definitions of 80
00:18:44
years ago. The problem is that when you try to go and rewrite those rules, there
00:18:50
isn't the legislative will because what Andrew says comes up over and over again, which is the fear of what could
00:18:56
go wrong stops people from doing what I think could go right and that has pretty
00:19:02
profound consequences. I think I think in part when you look at what happened in GFC, you can pull the string back to
00:19:09
to the 1940s and the 40 act and people's reaction to to regulations. the savings and loan crisis. That's another one that
00:19:16
was absolutely unnecessary but happened because we tried to contort ourselves to
00:19:21
expand the economy in ways that were brittle. Andrew, I want to ask you a question, which is if we go back to the
00:19:26
29, so we we have a good sense of the the setup. Yeah. Can you explain the big characters and
00:19:33
who they were and the roles that they were playing? Okay. So there's there's there's two
00:19:39
there's a whole bunch of characters, but I'd say there's two main characters in this book that really drive the
00:19:45
storyline. One is Charlie Mitchell, this fellow who runs National City. He is the Jaime
00:19:52
Diamond of his time in terms of fame. He might actually be more like Michael Milin because he he really does develop sort of credit for the public. Michael
00:19:58
of course did it uh for businesses later but um he they used to call him Sunshine
00:20:04
Charlie and he was on the board of the New York Fed. He was constantly calling for lower
00:20:10
interest rates interestingly during all of this and he was the guy who was not just loaning to uh speculators and
00:20:17
stockholders. He was also uh loaning money to different brokerage houses across the country. On the other side of
00:20:24
the story in Washington is a guy who you probably heard of or know named Carter
00:20:29
Glass. Yeah. Carter Glass was the Elizabeth Warren of his time or maybe even like AOC.
00:20:35
AOC. Yeah. And he would, by the way, uh he was like a a racist Elizabeth Warren,
00:20:41
interestingly, uh given the weird things going on down there at the time. Anyway, he would rail for years about this thing
00:20:49
that he described as mitchellism. He believed that Charlie Mitchell and what Charlie Mitchell was doing was going to
00:20:55
upend the economy effectively. And as the story plays out, they are sort of
00:21:01
pitted against each other. One of the things that Charlie does is he defies or at least appears at one point to defy
00:21:07
the Federal Reserve, which is trying to clamp down on speculation. They don't try to raise interest rates. What they weirdly do is they send a letter to all
00:21:14
the banks saying, "Please stop lending to speculators." And the banks don't know what that even means. So they stop
00:21:19
lending basically to everybody. And Charlie says, "We're not going to have that. So we're going to start lending
00:21:25
ourselves." And that sort of creates this whole other dynamic which leads him to end up being in front of Congress.
00:21:30
And I don't want to give away the story, but he does get arrested on the steps of his own home for doing some crazy things
00:21:38
later in the story. But those two sort of play a big role. Then you get to see how Glass Stebo came about, which by the
00:21:45
way is shocking because it is not what you would think at all. It almost has
00:21:50
nothing to do I don't want to say it has nothing to do with breaking the banks apart for like political reasons, but it
00:21:55
actually has to do with uh business reasons, meaning there was like some major bank money and lobbying going on
00:22:02
behind the scenes to f over JP Morgan by the guys who were running Chase and the
00:22:08
Rockefellers. So, it's it's wild. The story is wild. Okay. So, just the summary, but the glass deagle I think as
00:22:14
I understand it, but tell me basically separates commercial banks and investment banks.
00:22:19
Separate separates commercial banks and investment banks and then sets up the FDI basically and sets up the FDI,
00:22:25
right? Again, when you see how that all came together, the FDI piece of it, it the
00:22:31
the backstory of like these laws. It's not It's not coming from consumer protection as much as you're saying
00:22:36
lobbying to try to basically like marginalize the 800 pound gorilla.
00:22:42
Exactly. Exactly. And and you'll see it. You will be in the room with these people literally going in there sitting
00:22:48
in the White House begging Roosevelt to do this. And and by the way, Carter
00:22:54
Glass is actually unhappy about it. I found letters where Carter Glass is like this bill is getting taken away from me
00:23:00
and is basically being taken over by the bankers which is almost hilarious because Elizabeth Warren loves to cite
00:23:06
this bill as sort of some panacea. Andrew as you look at markets today just
00:23:11
to come back to the modern era I don't want to ask you the the simple like draw the parallels but are are we in and and
00:23:18
I've heard you ask this question a lot lately like are we in a monetary bubble? Are we in
00:23:25
an inflationary bubble? Are we in a speculative bubble? Are we in no bubble?
00:23:32
So, I'm assuming we're in some bubble and we just don't know when it's going to pop of some sort. And by the way, we
00:23:38
don't know how big it's going to pop either. You don't It doesn't have to be 1929. It could be 1999, could be 2008,
00:23:45
could be smaller than that. I I don't know. Do I think that there's leverage? I mean, you guys talk about this AI
00:23:52
investment phenomenon that's taking place right now. And for the most part, the big corporations are spending real
00:23:58
cash. So, it's not that's not leverage. But you look at a lot of the real estate plays, the energy plays that sort of on
00:24:05
the periphery of this, there's a lot of leverage there. I think the the private credit world, we don't really know where
00:24:10
all the leverage lies right now. Now, I don't think that any of that is as leveraged as what we were talking about
00:24:17
this like 10 to one situation in 1929 or maybe or even like the subprime situation in 2008. But I don't know, at
00:24:25
some point you start to look at some of these, you know, like the Nvidia OpenAI deal or the AMD deal and there is a
00:24:30
little bit of a circular kind of thing going on there uh for now. And I
00:24:36
just don't know where but that could be we could still be years we could still be years away from this and by the way
00:24:41
it could work out on the other end. But what about like government monetary fiscal issues? the central bank monetary
00:24:47
policy interest rates and then the fiscal issue, the government spending right
00:24:53
now. Ultimately, if you have a devaluation of the dollar, we're seeing gold at 4,000
00:24:58
bucks an ounce. We're seeing the dollar basket trade down. I think one of the worst years we've ever seen this year.
00:25:04
Uh does that ultimately translate into a higher index on the stock market because the dollar is worth less? I mean should
00:25:10
you know could this actually be more of a monetary or fiscal kind of problem than it is a speculative kind of
00:25:15
problem? Well so you would think it would be but then explain. So yes I think like the
00:25:21
traditional the classic economist would say this you know these things should not be happening at the same time
00:25:26
meaning look at the price of equities look at the price of gold look at the price of you know US treasuries right now. It doesn't at least classically it
00:25:34
shouldn't shouldn't line up the way it's lining up right now. So I I just don't know. I would have thought that the
00:25:39
investor class would have wanted to charge us a higher premium for our bonds
00:25:45
these days for a whole bunch of reasons, but they don't. Uh maybe that's just like life is relative and other
00:25:51
countries are, you know, not doing as well and so we're still the the prettiest girl at the dance.
00:25:57
I think that's exactly right. But we've never seen so much capital so so much printing happening as we see
00:26:02
today. I mean the 7% debt to GDP in peace time with an expanding economy. Never seen that before.
00:26:09
Totally. But then if that's the case, you'd think that we'd all have our money in Bitcoin and or gold, but but we
00:26:18
don't. Why is that? I don't know. How do you invest? Anyone ever ask you
00:26:23
that? Most people don't ask me that. And the truth is I'm not allowed to invest in
00:26:28
individual stocks. It's actually given what I do for a living. That's part of the part of the deal part of the the
00:26:36
nunnery that I have to live in. You're long the index. I'm long the index. I am long Bitcoin. Bitcoin gold.
00:26:42
I'm I'm long the indexes. And uh no, I I I by the way, I wish I could. I thought
00:26:47
for many many years, it's probably shifted now, but for years upon years, I was always I think Chimath and I have
00:26:52
talked about this. I was always worried about buying Bitcoin because I didn't know I I didn't want to be on TV or in
00:27:00
the papers. Oh, I I would do it. I came on CNBC and I would tell Sorcin to buy it
00:27:05
100 a coin, 200 coin. Sorcin would show me a clip of Charlie Munger telling me that it was poison and he would say,
00:27:11
"Mon, what do you think?" And I said, "I have tremendous respect for Charlie and Warren, but they're
00:27:16
wrong." I remember those moments fondly and sadly because I should have I should have listened. I should have listened.
00:27:24
But so, okay, so you have a very balanced kind of portfolio. Pretty vanilla down the middle. super I'm not
00:27:30
going to get index funds I'm not going to get rich unfortunately uh on being a journalist that restricts you from
00:27:36
access to the markets I mean you you seem to have a good pulse on what's going on but really what matters in
00:27:41
markets is having a pulse on what the actors in the markets are doing right and you're not able to to act on it
00:27:48
I have misgivings about it how about that you're you're the character in your show
00:27:54
acts where you have all the inside info but you can't do anything about it can't do anything about Yeah, exactly. But that's the point. I get it.
00:27:59
I I knew that's what I was signing up for, so I'm I'm I'm cool with it. I mean, do you like do you like being a
00:28:04
journalist? I mean, do you like sitting as a speculator or an observer versus being an actor? I mean, have you ever
00:28:09
thought like, man, I really understand markets. I really understand the parallels to history. I've got a good
00:28:15
sense of this. I I feel like I should play a role. I want to play a role. I can make money. I think about that. I've thought about
00:28:21
that for years to totally uh about, you know, could I
00:28:26
could I be an actor? could I play a role? And I often go back to the idea and may and look, maybe this is not the
00:28:32
right way to think about it, but I feel like I've managed to have hopefully some semblance of credibility with some
00:28:38
people by doing it this way. And I'm and I've been able to be hopefully a a good
00:28:43
part of the conversation and be engaged in a lot of things. Maybe I could do that as as as a sort of a direct actor,
00:28:49
too. I don't know. I also think, by the way, journalism seems to be changing. MSM, legacy media. I mean, by the way,
00:28:55
there's a lot of people or you could start a podcast and you could just do whatever you want to do. So, I don't know. I don't know what the
00:29:01
right answer is. Tell us who are the characters in the play today. Who are who are the actors? Who are the main actors that you see in
00:29:07
That's a good question. Yeah. Uh, the main actors, well, I think you'd
00:29:13
probably think about them in a couple different ways. You sort of think about on the financial side and probably the tech side and where they sort of come
00:29:19
together. So, I think obviously and then the government piece. So obviously the president, Scott, Howard on on the sort
00:29:28
of business end of things inside the inside the government. And then I think in the banking or classic banking world,
00:29:35
you'd say that probably Jamie Diamond and Larry Frink are probably the most sort of powerful players in the sort of
00:29:42
traditional legacy piece, but then you'd probably give a nod to Brian Armstrong
00:29:47
at Coinbase as sort of being one of the sort of OGs in sort of wherever you think crypto goes. By the way, I'd
00:29:53
probably hats off to uh to Vlad Tennov who I think's been sort of very outspoken sort of talk about
00:29:58
democratizing finance, right? Like he's sort of represents that. But then you tell me I mean I think Sam Alman and
00:30:05
Elon and wherever you think AI is headed next and the Google guys. But it's interesting because you're
00:30:10
playing you're saying that technology particularly AI is playing a key role in
00:30:15
Yes. fundamentally. It seems like it is. Do you think you think that's true? Well, I'm asking
00:30:21
because you also I mean the capital that's moving through banks. The there's there's a whole another set of industries that generate trillions of
00:30:28
dollars of revenue that seem to be largely ignored in the conversation about where the economy where the global
00:30:33
economy is, where it's headed, where markets are headed. It's all about AI, right? I mean, and I I think that's like
00:30:38
but that's because and I guess the question is like is that a media thing or is that like a real economy thing? I
00:30:45
think it's a real economy thing because I think if you if you x out the mag 7
00:30:50
Yeah. all of a sudden the economy does not look nearly the same. I mean I don't
00:30:56
want to say we're levitating but you know we're either I saw a data point yesterday that said the GDP quarterly GDP was like flat
00:31:04
excluding data center spending. Does that sound right to you? Did you see that? It's definitely 100 to 200 basis points of GDP.
00:31:09
Yeah. So sure. So, so let's say if you if you X out it if you X out the AI boom where
00:31:17
you know where do you really stand? I think that's a real real life question. I think the reason why no one's focused on the rest of the economy first of all
00:31:23
the AI story I think is the more exciting part but it is what I think is I don't want to say propping up the
00:31:29
economy but it's keeping the economy well I would I would flip it on its ear. I don't I think that those comparisons
00:31:35
are kind of dumb because at every point in the economy there are these dynamic reallocation of resources and assets.
00:31:42
Things are important at different times. I think the thing with the AI thing is like what is every company doing to
00:31:48
figure out what they look like in a world of AI and if they're not going to spend that amount of time, their
00:31:54
productivity is probably going to on the margin shrink to a net new company that just does what they do just efficiently
00:32:01
and better. That's just the cycle of creative destruction we've seen at every point of every meaningful technology.
00:32:07
So you think we need to be talking about this much more outside of the sort of like tech and data centers and I made
00:32:12
this Yeah, I made this comment. All the private equity wives got their husbands to come in and rail at me in the
00:32:18
comments and I said, you know, the the least success I've had at this software
00:32:24
company I started has been selling into private equity. It's like I have Fortune 500 and Fortune 1000 customers lining
00:32:30
out the door. I couldn't sell to one single private equity company what is effectively a platform that uses AI to
00:32:37
rewrite all your software. And I'm like, but this is the first company that should be in line. And what it goes to
00:32:43
is that their heads are firmly in the sand. And I think that's not a a decision on technology. It's a
00:32:49
psychological decision. So I think the weird thing with AI is that it pushes
00:32:54
people to a place of psychological insecurity. And I think that they think I don't want this to be my problem. I
00:33:01
need to just wait this out and somebody else will deal with it in the future. That's very different than other
00:33:06
technology arcs like you know in the dot bubble. That's not what we live through. In the social bubble or the mobile
00:33:13
bubble it was always like okay this seems interesting. Let's figure out how to embrace it take advantage of it. This is
00:33:19
the one where many people are like nope I'm just nope.
00:33:24
All right but here's the question. So, you know, 1932 comes around and we had unemployment in this country at 25%.
00:33:31
25%. Yeah. It was pretty crazy. Yeah. If the AI boom is as successful as I
00:33:37
think we're all excited it could be and it affects every industry in every way and all the things we're we're
00:33:42
discussing here, there need to be massive productivity gains. Like massive, like crazy. And invariably,
00:33:49
productivity gains are sort of a euphemism for cutting costs in some other way. And that ultimately probably
00:33:55
is going to have an impact on employment in this country and do more things or do more things. And the question is
00:34:01
which one is it? Or by the way, is it a combination of both? I would I would probably it's a combo. You highra people so that
00:34:08
they spend less time doing drudgery and you allow them to work on more important
00:34:13
things. Like I'll give you an example. My wife runs a life sciences business and what's funny is when she looks at
00:34:19
AI, she's like, "All of this stuff is trying to sell me speed." And she's like, "I don't want speed. I want
00:34:26
quality." She's like, "I'm not trying to make 500 molecules tomorrow. I'm trying
00:34:32
to make the right molecule for the right disease, and I'm happy to take five or six years to do it." And right now I think we're
00:34:39
still in the novelty slopware phase of AI where most of it is about speed and
00:34:46
you know you're spending a lot of money to try to get crappy outcomes out faster. Eventually we'll replace that
00:34:52
with quality outcomes and they'll take a lot more time and I think that that's when you'll have the real productivity
00:34:57
improvements. Back to life sciences like these guys want to get drugs for every person, right? That's not a tomorrow
00:35:04
thing. That's not like type it in in English and all of a sudden pops out the other end. And so I think we're going to
00:35:10
have to take a lot more time. That's when this stuff becomes really real and that's going to be very exciting.
00:35:16
Andrew, did we see coming out of the crash of 1929 a big move towards socialism in this
00:35:23
country saying, "Hey, capitalism has failed us." And you know, how do you kind of speak to the rise of socialism
00:35:29
today and the argument that capitalism's failed most Americans? Well, so yes, sorry. And to add on to that, do you think the New Deal would
00:35:35
have looked the same or would there have even been a New Deal if there hadn't
00:35:40
been a crash in 2019? Okay, so two quick answers. U yes, that
00:35:46
conversation happened, but not nearly as quickly as it happened, for example, after GFC of 2008. So I remember being
00:35:53
down at like Zucati Park, Wall Street, Occupy Wall Street, all of this conversation we're having now about
00:35:59
socialism versus capitalism. Like that happened immediately. In 1929, that
00:36:04
conversation did not happen immediately. Part of the reason it didn't happen um is because there was sort of like a slow
00:36:11
roll on the economy and even the market. So there was sort of a disconnect between the economy and the market.
00:36:17
People forget at the end of 29 the stock market actually was down only 17% by the
00:36:24
end and so people thought it was actually going to come back. There were times when it actually seemed to be coming back and and Hoover had this idea
00:36:30
that he could it was almost like a psychological problem and that the market and the economy were detached
00:36:36
from each other. He then starts making all of these sort of frankly mistakes. Obviously the Fed doesn't uh flood the
00:36:42
system. Hoover decides he wants to raise taxes. He does smooth Smoot Holly with
00:36:47
tariffs. That's something he had pledged to do to try to get farmers to actually vote for him. And he thought that was like a pledge that he had to keep. And
00:36:54
so there's a whole sort of set of policies that came into play. And the Hoovervilles don't show up in these sort
00:37:00
of like tented camps, sort of think Zucati Park. That doesn't happen really till 1932.
00:37:07
And when you go back and look at why Roosevelt won, it wasn't actually on the
00:37:12
economy. If you go and look at the polls, it was over prohibition
00:37:18
crazily enough. And so it didn't have that sort of social effect. Having said
00:37:23
that, you know, famously Roosevelt, you know, on his inauguration day goes after the bankers in the inaugural address.
00:37:29
And then, of course, the New Deal shuts down the banks, has what was equivalent of national holiday. 9,000 banks go out
00:37:35
of business, right? and and then that's sort of when the conversation about
00:37:40
capitalism and socialism starts to rear its head. I think it's because at that point in
00:37:45
American history, we had not yet made the promise to the average American that they have the right or the opportunity
00:37:52
to buy a home, to get a a college education, to have progressive income every year. As you point out, most folks
00:37:59
were transitioning from an agrarian to an industrial economy. And so the big transition in life had been, "Wow, I can
00:38:05
get an apartment. I don't have to work 12 hours a day grueling physical labor in the fields. I can actually live and
00:38:11
walk to a grocery store and get amazing food and meet people and socialize and live in this amazing city. And it was
00:38:16
before we had made all of these promises that I think led to these expectations that folks then end up feeling disappointed by and they blame it all on
00:38:24
the failure of capitalism. My personal opinion as you know is that it's fundamentally a function of overspending
00:38:29
by the government and overpromising rather than allowing natural market forces to bring everyone up which um
00:38:35
fundamentally I think created and creates a lot of the the distrust and the the issues we face. Can I just add
00:38:41
on top of that because you know you're describing what I always think of as sort of the Leave it to Beaver American
00:38:48
dream that people sort of have in their mind which is really more of like a 1950s style dream and actually was a
00:38:54
function I think of a postworld war situation where where the where the country was we were
00:39:01
monopoly power everybody else was out of business. This is also the time like the reason why unions even worked I would
00:39:06
argue for in large part was because there was this period of time where we were the only players in town and so we
00:39:13
could we could charge monopoly rents for a lot of things and people could buy a house with a white fence and have two
00:39:19
kids and and have an ed all of those things that we uh now say are the dream.
00:39:25
I'm look there's some people who think that was an aberration in history. I I hope it wasn't, but I'm saying there were a lot of forces at play that
00:39:32
created that dream, but I don't think that was the dream in 1929. Yeah. Do you buy into Ray Ray Dalio's
00:39:38
points of view that we're at the end of an empire, end of a cycle? I hope we're not. I hope we're not. I
00:39:45
you you look I think I think you look at a lot of the things going on right now just with how much debt we have. I I
00:39:52
sort of look at the Neil Ferguson view of the world which maybe lines up pretty directly with uh with Gallia which is
00:39:58
that when you get uh you know GDP you start to look at like defense spending
00:40:04
as a percentage of GDP there is this point at which at least historically you have like a real problem um and that
00:40:11
sort of has set it created the end of the empire. I think that happens in his view of the world in like 19 in 2040 so
00:40:18
maybe there's still time to turn it around. I don't know what you What about you? It's a very exact forecast 2040.
00:40:25
You ever read that um what's that series the Asimov series on uh where they've got this like social forecasting
00:40:31
capability? Sorry, totally forgot. Sorin, do you think that if you look at GDP going through the crash, it
00:40:38
basically like cratered and then I mean what whatever we think of the New Deal, I think the the reality is that it
00:40:46
it just created an enormous amount of investment that then just turned GDP
00:40:51
around. Is there a version of the New Deal that America needs to do today? Is
00:40:56
there a new compact we need to have with our citizenry today? Well, but so there's two things that
00:41:01
happened though. there's the New Deal and then World War II. I mean, so yeah, I think you have to sort of lump them in
00:41:07
a way together in terms of the spending profile and why we were spending and and well, even I think even in the mid-30s
00:41:13
though, like really before we were engulfed in it, we were we were cranking like 8 n 10% GDP. My my my point is just
00:41:19
more just that idea of a new social compact, a new set of like
00:41:26
agreements. I I I don't know like is is we at a point maybe maybe we do but what does that
00:41:32
look like and and where are we going to get the money to to spend it that's the real question and how can we
00:41:37
I think Freeberg would say well I'm not going to put words in Freeberg's mouth is that the agreement is actually not about spending more but actually less
00:41:44
and getting folks to understand that these trade-offs need to happen
00:41:49
so I I agree with you and I agree with David on that like I think we have to cut spending in a big way but this goes
00:41:55
back to the more issue which Everybody everybody wants more. The irony sorcen and I've shared this
00:42:01
point of view many many times but I think when we made the promise when the federal government and uh people who got
00:42:06
elected to represent the population and the federal government got elected they said we're going to give you an
00:42:12
education and then we're going to use federal spending to do that. We're going to give you access to a home. We're going to create this federal home loan
00:42:19
program. And in all these cases when there was a promise made on giving you the more it was all about increasing
00:42:25
government spending. we're going to give you access to healthcare. And then Medicare became kind of this ballooning spending line because in
00:42:32
every case because it's not actually a free market, the government doing the spending gets taken advantage of and all
00:42:39
the costs underlying that spending line get inflated because there's no natural market force of buy and sell. There's
00:42:45
only a market force of buy. And that's why education costs have ballooned. That's why housing has ballooned. That's why medical expenses, pharmaceutical
00:42:52
drugs have all ballooned. Because as soon as the government provides that as a service, it completely distorts the
00:42:57
market and you can never get out of that freefall. So the fundamental challenge is you have to have the more difficult
00:43:02
conversation to your point of it's not more, it's less and we're all going to have to kind of deal with that or you're
00:43:08
going to do the same thing that everyone's done historically which is wealth taxes and you know growth slow
00:43:13
all the stuff that kind of we've seen many times before. So, but this is now you're talking about like a political
00:43:18
it's almost a paradox or a challenge which is how do you get the public to buy into the idea of less, right? That
00:43:25
is the fundamental question. We all know that we have to spend less. I I'm I agree with that. I'm and I and
00:43:32
by the way, I feel blessed that I could probably afford afford it but to take less. But the question is, you know, if
00:43:39
you don't have it, taking less Yeah. They'll they'll say, "Yeah, rich like you guys can say that.
00:43:44
Good for you." like that's not fair to me. And I think that's the big issue is the people who would proclaim
00:43:49
that would be immediately attacked like you live with less tax the rich and that becomes where
00:43:55
Dalio and others have argued historically. You see these notions of civil unrest of civic splits that that
00:44:01
that happen. By the way, the book is foundation the foundation series. I don't know why it didn't come to my mind. The idea is called psycho history
00:44:08
where the guy can actually predict all of these social trends because they're all predictable and they all happen in in cycles.
00:44:13
Okay. Can I just throw one other thing in this because I'm so curious about it and I spent a lot of time thinking about Smoot Holly in terms of tariffs. So
00:44:21
there's an AR there's a there's a I think a fair argument that tariffs were now t tying to national security
00:44:27
resilience today and like we may decide philosophically you want to have an automobile industry in the United States
00:44:34
because if you let BYD sell cars in this country we would not sell cars in this country and we wouldn't make cars in
00:44:40
this country ever again. And you may think that that's a bad idea and you want that to be here. Having said that,
00:44:46
if we do this, which we are, we will probably spend more to buy less
00:44:53
technologically capable cars 10 years from now than the next time we all, you
00:44:59
know, if you go on vacation to Europe or Asia and get in the back of one of these other cars. And how should we think
00:45:04
about that? That to me is like a real fundamental question about capitalism
00:45:10
and also about resilience and national security. What I would offer to you is the way that we should think about this is how
00:45:16
do Americans and American society preserve maximum optionality in the face
00:45:23
of very difficult decisions in the future. So if geopolitically
00:45:28
we are induced into a war, all wars have tremendously bad consequences.
00:45:34
How would we have the wherewithal to not have to be a part of it? If you look at
00:45:40
the last number of wars, these are all ultimately over resources. Right. Right. And if you think about resource
00:45:47
independence, there are many, many things today where America is just fundamentally instable
00:45:52
because we don't have resource independence. But if we were to get that and then we had the building blocks,
00:45:59
we wouldn't actually have to fight a war. Now, there may be other reasons and people may pull us into wars and I I get
00:46:04
all of that, but I think that that's a really big question. Would I be okay with a less better car, but having a
00:46:12
national transportation infrastructure that we control and cannot be turned off by somebody else? On the margins, I
00:46:18
would say yeah, I'd be okay with that. And and the interesting part though is there's going to be a premium on that, right? Like we're going to pay more for
00:46:23
that. And that may be that may just be the cost of doing business. Sure. And that may that's that may be the cost of strategic flexibility and
00:46:30
optionality. And I think if you just think about what the downstream consequences of not having that are
00:46:36
and maybe and by the way maybe those costs are even higher and and we and those costs don't get added and they don't get added into the model. Right.
00:46:43
You're absolutely right. They're they're always higher because they're measured in human lives. It's always higher. It's always more
00:46:49
costly. Andrew, who do you sell the uh movie rights to of your book and when's the
00:46:56
movie coming out? Uh haven't sold them yet. We're talking to a couple people. Hopefully, we'll have some news on that sometime soon
00:47:03
because it sounds like it's a very peopledriven story. So, it should make for kind of great drama, right?
00:47:09
Oh, totally. I mean, I tried to write it I didn't try to write it uh for film per se, but I tried to write it in as
00:47:14
cinematic a way as humanly possible given that I was also constrained by,
00:47:20
you know, I had to have archives and notes and diaries. You know, it looks like a long book. By the way, folks,
00:47:25
it's a little bit shorter because there's a hundred some odd pages of endotes at the end uh for those who want
00:47:31
to uh and by the way, some of the endotes are kind of fun. Andrew, when you write these things, do you and then when you license it, for
00:47:37
example, like when they started to make billions? Yeah. Do you take a strong point of view and how the scripts in that case or the
00:47:44
screenplay in this case will be written or do you kind of say, "Okay, here's my source material. You guys do the best
00:47:50
you can and you kind of do you care who the actors are. Do you care about any of that stuff or do you think it's like, okay, they're licensing it off off on
00:47:57
your merry way. Do the best you can? You know, I think actually in this day and age just
00:48:02
because it's probably in your mind, right? You have a vision of what this whole thing looks like visually. You probably have faces, right? You probably
00:48:09
you probably have all of this. So, how do you do you let go of that or Well, I think you first of all, I think you have to let go a little bit at some
00:48:16
level because that's just the nature of the business for better or worse. I think right now in this streaming
00:48:22
environment, you know, there's sort of two ways you can go sell projects like this. One is you go sell it to a streamer and they go off and they try to
00:48:30
develop it. They go find the team that does it. The other approach is, you know, find the actor, maybe a director,
00:48:36
maybe the writer all at one time and then walk in with it. So in that context, you probably have more of a say
00:48:42
in the future of it. you know, right now just the way the business is, you know,
00:48:47
the Hollywood's buying a lot less stuff and I think is more interested in sort of the former version where you show up
00:48:54
with the whole thing sort of prepackaged, pre-planned, but you know, it almost changes, you know, by the
00:48:59
month in terms of what they want. Are you uh doing the audio book yourself? Were you reading the
00:49:06
I read it. You guys are in the audio business yourselves. So I will tell you I went in it's 13 hours the the book in
00:49:14
total. You do it on you know double time and you you'll be done in uh you know six and a half hours. But uh it probably
00:49:22
took me like 30 hours. It takes a while and they do it. I did do it. Yeah. I did it. It was fun.
00:49:27
It was like your first time. Was it your first time reading the audio book? I've never read it before. When when Too Big to Fil came out, we had a British
00:49:34
actor do it and I enjoyed read I enjoyed listening to him. He added some gravitas to the to the project because that you
00:49:40
know the Brits always sound smarter than us. British. Pretty much pretty much pretty much.
00:49:47
Okay. Sounds smarter. Sounds smarter. I was going for sounder than us. They do. They do.
00:49:53
Well, Andrew, thanks for joining us. This has been awesome. Congrats on the release of your book. Thanks for chatting. Good broad range of topics.
00:49:59
I'm buying it. I'm buying it. Yeah, I appreciate guys. Uh, you know, I I enjoy this so much and I listen to you guys so
00:50:05
religiously. So, uh, this is a You're the best, bro. Thanks for doing it. I mean, it's it's an incredible
00:50:10
period of of American history that, to your point, not enough people really understand. I'm glad you so I find it so
00:50:16
interesting. That 20 year period, I would say 28 to 48.
00:50:22
Well, thank you. Wow. It's got everything. Thank you guys. I appreciate it. All right. We'll talk soon. Thanks, man. See you. Thanks, man.
00:50:44
I'm going all in.
