Speaker 1: Hello, and welcome to Western SIP. Today we're going to
Speaker 1: be having a fun and really sort of different experience.
Speaker 1: I received an email from a publicist, as I often do,
Speaker 1: inquiring as to whether or I'd be interested in talking
Speaker 1: to Aman vergi amon Is. He's a lot of things.
Speaker 1: He's he's a lawyer, he's an economist, he is a
Speaker 1: brilliant guy, and he's and he has a book coming
Speaker 1: out and the link is available in the show notes,
Speaker 1: so if you want to pre order it, I already
Speaker 1: have mine. You can go ahead and click that link
Speaker 1: and take care of it. And we're going to talk
Speaker 1: about a lot of stuff, but really what the conversation
Speaker 1: is going to focus around is going to be bubbles
Speaker 1: and having a conversation about how how financial bubbles happen.
Speaker 2: What is a.
Speaker 1: Bubble and what should we be on the lookout for today,
Speaker 1: because a lot of you are thinking, oh my gosh,
Speaker 1: what was AI a bubble? This is a question that
Speaker 1: I asked him as well. And so we're going to
Speaker 1: have that conversation and I think it's a little bit
Speaker 1: of a different interview, but it's still very illustrative in
Speaker 1: our overall goal of increasing the importance of history and
Speaker 1: history education. So I hope you enjoy it. Without further ado.
Speaker 1: After a couple of quick messages, here's the interview. All right,
Speaker 1: welcome back, And as I said before in the introduction,
Speaker 1: I'm sitting down with somebody a little.
Speaker 2: Bit different today. This is Aman Virgie.
Speaker 1: We're going to talk about some of his experiences during
Speaker 1: the two thousand and eight recession, the crash that revolves
Speaker 1: around the Lehman Brothers, and really get into a little
Speaker 1: bit of economics, which, as you guys know from listening
Speaker 1: to the show, is some that's of intense interest to
Speaker 1: me and obviously of interest to you since you're listening
Speaker 1: to this right now. So I want to just kind
Speaker 1: of jump in and see if you can set the
Speaker 1: stage for us. You graduated from Harvard Law School, you're
Speaker 1: working at Lehman Brothers, and what position were you in
Speaker 1: when two thousand and eight starts to hit, Like, what kind.
Speaker 2: Of information do you have access to?
Speaker 1: What is your overall impression of what's starting to happen,
Speaker 1: as what we know is the recession is beginning to unfold,
Speaker 1: just beginning.
Speaker 3: Yeah, sure, let me give you just my background to
Speaker 3: make sure we got the timeline right. So I worked
Speaker 3: at Lehman Brothers in the late nineteen nineties, so this
Speaker 3: was probably ten years before the two thousand and eight crash,
Speaker 3: and then it went to law school at Harvard, and
Speaker 3: I was on my way back to Wald Street naturally
Speaker 3: got a job offer from Peter Teel, who I knew
Speaker 3: from I was an undergrad at Stanford when he was
Speaker 3: at the law school, so we didn't exactly overlap, but
Speaker 3: we ran in a lot of the same circles. So
Speaker 3: when he started PayPal, he offered me a job, and
Speaker 3: eventually I ended up at PayPal in two thousand and
Speaker 3: two and beyond. But I did stay very close to
Speaker 3: a lot of my colleagues and friends at Lehman Brothers
Speaker 3: who had worked there during those late during that period
Speaker 3: in the late nineteen nineties when I was there, and
Speaker 3: so I got a pretty good glimpse of what was
Speaker 3: going on between two thousand and two and two thousand
Speaker 3: and eight, And was also a finance lead at PayPal,
Speaker 3: so we were working in the capital markets and working
Speaker 3: with investment bankers all the time. PayPal went public in
Speaker 3: two thousand and two, got acquired by eBay, and I
Speaker 3: was on the finance team and was chief financial officer
Speaker 3: at eBay in the North America business when it all
Speaker 3: went down in two thousand and seven. In two thousand
Speaker 3: and eight, so I'd say I got a pretty good
Speaker 3: front row seat to the show and then a little
Speaker 3: bit of backchannel with just colleagues and friends of mine
Speaker 3: on the street.
Speaker 1: So, you know, for a lot of us who lived
Speaker 1: through two thousand and eight, I think there was it
Speaker 1: seemed like, you know, you're sort of classic Iceberg breaking
Speaker 1: scenario where it seems like everything's going to be okay,
Speaker 1: there's some tremors on on the horizon, and then all
Speaker 1: of a sudden things start to fall apart, very very quickly.
Speaker 1: But as someone who was more on the inside, did
Speaker 1: you have a sense that things were moving in a
Speaker 1: rapidly negative direction before maybe it was starting to hit
Speaker 1: the broad media or did it come as just as
Speaker 1: much of a surprise to you as to everybody else
Speaker 1: the way things started to all of a sudden, very
Speaker 1: quickly unravel.
Speaker 3: I would say there were warning signals probably in two
Speaker 3: thousand and five, two thousand and six. You kind of
Speaker 3: have to know what to look for and what to
Speaker 3: listen to. I had the benefit of working on the
Speaker 3: trading desk at Lehman Brothers, and so I was trained
Speaker 3: on the fixed income side and the bond side. And
Speaker 3: when you're in the fixed income side and you're valuing
Speaker 3: cash flows and understanding assets and how they trade, you
Speaker 3: pay attention to different things than you do on the equities.
Speaker 3: And I loved financial derivatives. I was actually a trader
Speaker 3: of financial derivatives and between nineteen ninety six and nineteen
Speaker 3: ninety eight, so that's where I got my training. And
Speaker 3: is I think as early as two thousand and six,
Speaker 3: you began to see things like spreads on some of
Speaker 3: the securities that were securitized by real estate bonds, by
Speaker 3: commercialized debt obligations, so very very difficult, very hard to
Speaker 3: understand things that you know, most people don't really pay
Speaker 3: attention to. But if you do look at securitized bonds
Speaker 3: and those trading spreads and how those how those CDO
Speaker 3: spreads were moving around, you could see as early as
Speaker 3: two thousand and six that there was a bit of
Speaker 3: a credit risk. And then it just accelerated and became
Speaker 3: it hit the popular imagination probably in two thousand and seven,
Speaker 3: when it began to defect equities and real estate prices,
Speaker 3: and it began to see the defaults coming. So I
Speaker 3: was probably about a year I had just in terms
Speaker 3: of my understanding of the market.
Speaker 1: So as the market information starts to come in and
Speaker 1: I have to imagine, you know, this was back you know,
Speaker 1: under the Bush administration and George W. Bush Right, I
Speaker 1: would have to imagine that he has intelligent people in
Speaker 1: his staff as well, who maybe can see some of
Speaker 1: these problems coming along, Like why wasn't there more of
Speaker 1: a reaction if you can speculate from the administration. I mean,
Speaker 1: it seemed to the average user, I think it seemed
Speaker 1: like they were caught a little bit flat footed by
Speaker 1: what happened.
Speaker 3: Yeah, I think they were. So this is a this
Speaker 3: is a great question. Why didn't the government see it coming?
Speaker 3: And was it a failure of regulation? And if so, why,
Speaker 3: And this is a topic I'd go into and great
Speaker 3: death and one I had a bit of a as
Speaker 3: I say, a front row seat, but also a little
Speaker 3: bit of backchannel sitting there. But in retrospect you get
Speaker 3: to you know, you get the benefit of being a
Speaker 3: Monday morning quarterback, so you can you can break down
Speaker 3: the video and look at all the things that could
Speaker 3: have should it would have happened. And I covered this
Speaker 3: in great detail in a chapter on my new book,
Speaker 3: which is called The History of Annational Bubbles, and it
Speaker 3: comes out in early next year, and one of the
Speaker 3: chapters was on the subprime bubble. I think it really
Speaker 3: started back in nineteen ninety two. There was a law
Speaker 3: passed by the federal government. This was passed by a
Speaker 3: Democratic Congress but signed by President Bush Senior, and it
Speaker 3: was called the Federal Housing Enterprises Financial Safety and Sound
Speaker 3: Is Act, and it began to for the first time,
Speaker 3: direct Fanny May and Freddie Mack to deploy money that
Speaker 3: they were spending to stabilize the mortgage market into LMIs
Speaker 3: or low and middle income households, which are basically households
Speaker 3: that are at or below the median income in the
Speaker 3: neighborhood that they're in. And these quotas began at thirty percent,
Speaker 3: and then Bill Clinton takes over, and then the quotas
Speaker 3: bidon't expand from thirty to forty to fifty percent. By
Speaker 3: two thousand and seven eight it was fifty six percent.
Speaker 3: So it was really the Clinton presidency the Bush presidency,
Speaker 3: both parties of Congress that were pushing these quotas, and
Speaker 3: Fanny and Freddie what they were doing was deploying capital
Speaker 3: into it became the subprime bond market. And that's I
Speaker 3: think something that took both parties by surprise. They didn't
Speaker 3: realize how quickly the subprime bond market was expanding. Between
Speaker 3: two thousand and one and two thousand and seven, there
Speaker 3: were there were not a lot of defaults in the
Speaker 3: subprime bond market, even though that that market was a
Speaker 3: little in niche industry when I was a bond trader
Speaker 3: in the nineteen nineties. It multiplies by ten x by
Speaker 3: the time it get to the middle of the two thousands,
Speaker 3: but it didn't. It didn't default because the quality the
Speaker 3: mortgages weren't high, but that wasn't immediately apparent. And then
Speaker 3: interest rates were held down by the FED between two
Speaker 3: thousand and two and two thousand and six at historically
Speaker 3: very low interest rates, so they kind of kicked the
Speaker 3: can down, you know, down the street a little bit,
Speaker 3: and eventually it metastasized in two thousand and seven, and
Speaker 3: I think it's fair to say took everybody by surprise.
Speaker 2: That's interesting.
Speaker 1: So the initial idea behind this policy seems to be
Speaker 1: from my perspective, you know, well intentioned. I guess I
Speaker 1: could say, you know, let's try to or individuals who
Speaker 1: you know might otherwise be able to get their mortgages serviced.
Speaker 1: To me, that makes sense. So from your perspective in
Speaker 1: the financial game, where does it go wrong? Like I'm
Speaker 1: always interested in, like why don't policies achieve what we
Speaker 1: want them to? And this seems to me to be
Speaker 1: almost a quintessential moment where a policy clearly just missed. Like,
Speaker 1: I know, I can see the goal, I understand the
Speaker 1: direction that it's supposed to go in, but it doesn't
Speaker 1: go that direction.
Speaker 2: Why do you think that was?
Speaker 3: Well, if you think about the as you said, the goal,
Speaker 3: if the goal is just simply to increase home ownership
Speaker 3: among middle class individuals, that is, that seems on the
Speaker 3: face of it to be an admirable goal and maybe
Speaker 3: something the government should be pushing. Now, there are different
Speaker 3: ways to do that. If you look at how the
Speaker 3: different countries in Europe have approached that problem, or Canada
Speaker 3: or Japan, they haven't subsidized loans to low come families.
Speaker 3: What they tended to do was either they built housing
Speaker 3: in Europe to something called social credit housing, where you
Speaker 3: basically build build housing and make it available to low
Speaker 3: LMI individuals or families in certain neighborhoods. You could also
Speaker 3: subsidize those individuals directly and give them a credit towards
Speaker 3: a purchase of a home. But only in really four
Speaker 3: countries did the policy become subsidized banks or direct financial
Speaker 3: institutions to give loans to people who wouldn't otherwise qualify
Speaker 3: for them very easily. And those four countries were the US,
Speaker 3: the UK, Spain, and Ireland. Canada didn't do it, Japan
Speaker 3: didn't do it, Germany didn't do it, France didn't do it.
Speaker 3: And so look at where the two thousand and eight
Speaker 3: bubble hit disproportionably, It was those four countries where the
Speaker 3: subprime bubble happened. You had a proliferation of lower quality loans,
Speaker 3: a massive increase in housing prices, followed by the collapse
Speaker 3: in housing prices and the compromised collateral that resulted. I
Speaker 3: was living in Canada, grew up in Canada, so I
Speaker 3: had a pretty good you know, my mom and dad
Speaker 3: own a house in Canada and they were looking at
Speaker 3: the US. I remember watching them and talking to them
Speaker 3: about the US housing bubble and Canada the housing prices
Speaker 3: went up a little bit, but not a lot, and
Speaker 3: it never had the same shakeout that the US did.
Speaker 3: So that's that's a pretty good clue as to how
Speaker 3: to do it. Like maybe Canada and Germany and France
Speaker 3: and Japan were onto something and in the US there
Speaker 3: were not. And I think what happened was in the
Speaker 3: US by the late nineteen nineties, Fanny and Freddy they
Speaker 3: became market leaders in mortgage lending, and they were telling
Speaker 3: originators that they wanted more of these loans from lower
Speaker 3: income households. And if you're a bank and you've got
Speaker 3: Fanny and Freddy that are your two biggest clients saying
Speaker 3: I want more of these loans from low income households, Well,
Speaker 3: what do you do? The banks had to lower their
Speaker 3: underwriting standards, and Fanny and Freddie were buying loans with
Speaker 3: a loan to value of ninety percent, ninety five percent,
Speaker 3: ninety seven. By the time you got to two thousand
Speaker 3: and seven, they were buying mortgages with zero down and
Speaker 3: all these unusual payment features like no down payment or
Speaker 3: teaser rates, negative amorization features that stuff just never happened
Speaker 3: in Canada where you didn't have players like Fanny and
Speaker 3: Freddie moving down credit. So it is it is, I think,
Speaker 3: just a matter of unintended consequences and not thinking through
Speaker 3: all the implications. And then once the policy gets rolling,
Speaker 3: it's really really difficult to roll it back because you
Speaker 3: have politically motivated interests that want to maintain the status quo.
Speaker 2: That's interesting.
Speaker 1: I mean, anybody who's a little bit older as I
Speaker 1: can remember, you know, purchasing a home before two thousand
Speaker 1: and eight, Yeah, one in two thousand and six, and
Speaker 1: it was kind of like, you know, write down what
Speaker 1: you think you weren't on a cocktail napkin, you know,
Speaker 1: and just we'll just kind of give you credit for that.
Speaker 1: I mean, not maybe not quite to that extent, but
Speaker 1: like I mean the standards where you could tell the
Speaker 1: market difference post two thousand and eight. You know, as
Speaker 1: you're talking, like part of me starts to think, you know,
Speaker 1: we're looking at these countries, looking at Canada, We're looking
Speaker 1: at you excuse me, the United Kingdom of Ireland, Spain,
Speaker 1: the United States, And then I'm thinking about this policy,
Speaker 1: and I'm thinking about things that work and part of
Speaker 1: me wonders, like, is it just that the government isn't
Speaker 1: willing to assume enough responsibility? You know, we have this
Speaker 1: weird partnership between you know, capitalism and private equably, you know,
Speaker 1: the private side and the government side, you know, and
Speaker 1: here we're trying to accomplish a policy objective which is
Speaker 1: laudable that maybe should have just been handled by the
Speaker 1: government itself, and instead what we're doing is we're kind
Speaker 1: of outsourcing it to private banks. And as you say,
Speaker 1: the clients are Freddie and Fanny saying, well, this is
Speaker 1: what we want, give us this, and it's just the
Speaker 1: outcome is adverse to what we're expecting. You know, what
Speaker 1: do you think is the problem that you know, the
Speaker 1: government just needed to be more involved. We just needed
Speaker 1: to build houses, We just needed to do what Canada did.
Speaker 1: I mean, why isn't that an appropriate answer to the
Speaker 1: problem we still find ourselves in.
Speaker 3: Yeah, I suppose it is. And it's a it's a
Speaker 3: debate to be had. It depends a little on what
Speaker 3: you think the role of markets are and what do
Speaker 3: you think the role of government ought to be. I'm
Speaker 3: on the free market libertarian side of this argument, and
Speaker 3: in all the bubbles that I will I look at
Speaker 3: recurring thing is easy money. Sometimes it's it's very obvious,
Speaker 3: like in twenty twenty twenty one, the Federal Reserve just
Speaker 3: cut interest rates to zero and held them there for
Speaker 3: two years, and that fiscal surplus, and that that fiscal
Speaker 3: deficit rather and that monetary stimulus created an excess of
Speaker 3: demand over supply. Sometimes it's a little trickier to understand,
Speaker 3: like the incentives created and something like Fanny May and
Speaker 3: Freddiemac and government direct lending. So you know, it's a
Speaker 3: little bit of a tricky balancing act sometimes that these
Speaker 3: governments try to try to try to try to manipulate.
Speaker 3: But ultimately the something like housing, the market works I
Speaker 3: think quite well to develop to do things like build
Speaker 3: housing where it's needed, to figure out how to underwrite
Speaker 3: loans and provide high quality loans. That the downside is
Speaker 3: if you're subsidizing or creating a negative incentive or incentive
Speaker 3: for banks to lend to people don't otherwise qualify, then
Speaker 3: then you start to distort the market. I think that's
Speaker 3: actually the worst. The worst outcome. The better would be
Speaker 3: to identified populations at need housing you can help them directly.
Speaker 3: You can, you know, you can sponsor projects or make
Speaker 3: it easier to build in certain areas where we have
Speaker 3: a need for low income housing, And that to me
Speaker 3: seems like a much more constructive role for government in housing,
Speaker 3: the subsidization of rents, try to medipulate prices, holding rents down,
Speaker 3: rent controls, that these things always have unintended consequences and
Speaker 3: never quite achieve the outcomes that you hope.
Speaker 1: Well, we get so hyper focused in the United States
Speaker 1: sometimes on domestically, you know, what we've done in the
Speaker 1: past and so on and so forth. But I think
Speaker 1: if you want a good example of what happens when
Speaker 1: the government puts its, you know, thomb on the scale
Speaker 1: of the real estate market and it goes awry, you
Speaker 1: don't have to look much further than China right now.
Speaker 2: I mean, they're a.
Speaker 1: Pretty unfortunate crisis on folding where it was subsidized far
Speaker 1: too much for far too long. But one of the
Speaker 1: things that I think I'm kind of interested in asking
Speaker 1: you about then is turning to your book for a moment,
Speaker 1: is what bubble that you've studied in the past, would
Speaker 1: you tell us in America readers right now?
Speaker 2: Study this one.
Speaker 1: This one's important right now, or this one is the
Speaker 1: most illustrative as to where we are because I'm going
Speaker 1: to ask you. I am going to ask you some
Speaker 1: questions about AYE in just a minute, because I think
Speaker 1: there might be a bubble there. But before we get there, like,
Speaker 1: what do you think we should be looking at if
Speaker 1: we're trying to learn from the past.
Speaker 3: Well, the best ones to look to. I do think
Speaker 3: two thousand and eight is as interesting and instructive as
Speaker 3: a really state bubble. It's also a destructive bubble where
Speaker 3: there wasn't a lot of economic value created and had
Speaker 3: hugely negative consequences. The other ones that are interesting are
Speaker 3: the positive bubble, so the ones that actually do bring
Speaker 3: investment into a new acid class and then that finance
Speaker 3: is a new technology, the ones that I covered in
Speaker 3: the book, or the nineteen ninety seven to two thousand
Speaker 3: telecom dot com bubble, which did create a lot of wealth,
Speaker 3: and then a lot of wealth was rapidly destroyed from
Speaker 3: top to bottom. The NASTAK went down by seventy eight percent,
Speaker 3: so there were a lot of people who were burned
Speaker 3: by that. But if you consider the lasting impact on
Speaker 3: the US, you had the emergence of many the tech
Speaker 3: companies that now dominate or landscape. You had Nvidia was
Speaker 3: founded at the start of that bubble period. You had Amazon,
Speaker 3: which was in ninety five. You had PayPal where I
Speaker 3: worked in ninety eight. eBay was ninety five. Yahoo was
Speaker 3: founded in nineteen ninety five. Google was founded in nineteen
Speaker 3: ninety eight. You also had Salesforce in nineteen ninety nine,
Speaker 3: and Broadcom came at the tail end of that and
Speaker 3: then even out of the detritus of that bubble. So
Speaker 3: the two founders of PayPal were Peter Teel and Elon Musk.
Speaker 3: Peter took his profits and then funded Facebook, which was
Speaker 3: founded a little bit later, but primarily with Peter's money,
Speaker 3: and Elon Musk of Force went on to fund SpaceX
Speaker 3: and Tesla, and you bought x, dot Com and Twitter
Speaker 3: and the Boring Company and everything else. So very in
Speaker 3: the long run, a very constructive, productive bubble which has
Speaker 3: created a lot more value than was destroyed. And the
Speaker 3: one that was interesting was the eighteen forty five eighteen
Speaker 3: forty nine UK railway boom, where again you had a
Speaker 3: lot of investment in a short amount of period and
Speaker 3: overbuild of a technology but ultimately the UK came out
Speaker 3: of that stronger then it went in, and then went
Speaker 3: on about a twenty five year run where their economy
Speaker 3: was expanding and they became the wealthiest country in the
Speaker 3: world and really led us into the Industrial Revolution that
Speaker 3: also came out of that bubble. So those to me
Speaker 3: were really interesting.
Speaker 1: So would you say, let's just talk about nineteen ninety
Speaker 1: seven to two thousand for a moment. It sounds like
Speaker 1: I know the answer to this, But would you say
Speaker 1: net positive or net negative? If we have to consider
Speaker 1: all the implications of that, It sounds like you're saying
Speaker 1: net positive.
Speaker 3: I think so. I guess that is a scant assurance
Speaker 3: to the investor who jumped in nineteen ninety nine and
Speaker 3: then by two thousands had lost her life savings and
Speaker 3: her college fund and everything else. But if your question is, hey,
Speaker 3: did America benefit, then I would say the economy in
Speaker 3: the nineteen nineties was very strong for every single person
Speaker 3: who economy, but on average, and then we had a
Speaker 3: mini recession in two thousand and one. A lot of
Speaker 3: that was the result of the telecom part of that bubble,
Speaker 3: not the Internet bubble, and then became out of two
Speaker 3: thousand and one, growing and with market leadership and you know,
Speaker 3: new technologies that have made in America among the richest
Speaker 3: countries in the world today. So I'd say that's a
Speaker 3: net positive.
Speaker 1: So what's an example of a bubble then that was
Speaker 1: decidedly a net negative, Like, can you give me an
Speaker 1: example from your research about well, here here's a bubble
Speaker 1: that really had no discernible benefit at least to the
Speaker 1: majority of people in a society.
Speaker 3: Yeah, I can give you a couple. There were a
Speaker 3: couple that were very destructive. So eighteen eighty six to
Speaker 3: eighteen eighty nine there's an Australian land boom which which
Speaker 3: to them feels a lock like the two thousand and
Speaker 3: eight two thousand and nine bubble. That's another very negative.
Speaker 3: Tulips in Amsterdam was an exciting run sixteen thirty six
Speaker 3: and sixteen thirty seven. The tulip prices went from you know,
Speaker 3: they went from sixteen thirty six six into thirty seven.
Speaker 3: They went up by twenty times and at the peak
Speaker 3: of the bubble you could basically buy a house on
Speaker 3: the Amstell River with a single tulip, and that tulips
Speaker 3: were commanding prices that were three to six times the
Speaker 3: average salary of a merchant at the time. And then
Speaker 3: just as quickly as the excitement had built, the excitement
Speaker 3: went away, like the brittle fog in Amsterdam that sometimes
Speaker 3: rolls in over the river. If you ever experience the
Speaker 3: weather there, you'll see what February is like. And it
Speaker 3: was just like that, a chill rolled in and all
Speaker 3: of a sudden the market died, and the result of
Speaker 3: it was no economic value. I found. Actually, maybe that
Speaker 3: was interesting. One was in seventeen twenty there were two
Speaker 3: massive companies that were built side by side in London
Speaker 3: and in Paris, the south Sea Company in the Mississippi Company,
Speaker 3: and they were built as these massive trading enterprises with
Speaker 3: financial engineering, and they both got obliterated in seventeen twenty
Speaker 3: and seventeen twenty one, and at their peak they were
Speaker 3: both worth more than Nvidia is today, and like today's dollars,
Speaker 3: the south Sea Company was a maybe a six trillion
Speaker 3: dollar market cap company. The Mississippi Company was eight or
Speaker 3: nine trillion dollars in today's dollars. There were the second
Speaker 3: and third most valuable companies of all time, behind only
Speaker 3: the Dutch, East India company around the same time, and
Speaker 3: then you know, within within a year there were no
Speaker 3: more and it left a lot of damage in their wake.
Speaker 2: That's interesting.
Speaker 1: So what are the criteria then, So if we're trying
Speaker 1: to evaluate just kind of generally like this this boom
Speaker 1: and this bust is going to be when this bubble burst,
Speaker 1: this isn't that positive, This isn't that negative. Is it
Speaker 1: just I'm thinking to the railroad example you gave in
Speaker 1: Great Britain. Is it just okay, well enough infrastructure was
Speaker 1: built that we could use that for other things. Are
Speaker 1: those the sort of factors we're looking at, or is
Speaker 1: it just sort of an overall wealth creation plus minus?
Speaker 3: Yeah, I guess the economist in me would just say
Speaker 3: that it's it's wealth creation plus or minus to be
Speaker 3: create net surplus net, consumer surplus net, you know, value net,
Speaker 3: welfare net, productivity gains out of the bubble. If you
Speaker 3: look at that ninety six and nine nine period, I
Speaker 3: think it's fair to say there was, in the long run,
Speaker 3: a technology that changed the world, and it began with
Speaker 3: the Internet wasn't really a thing before nineteen ninety five.
Speaker 3: I mean, it was, but it was basically a bunch
Speaker 3: of networks built by a bunch of academics and government officials,
Speaker 3: and you couldn't make money on it, and it was
Speaker 3: sort of, I don't know, you know, kind of useless, frankly.
Speaker 3: But Netscape changed everything and there was a browser that
Speaker 3: was a consumer facing browser. People could now use the Internet.
Speaker 3: There was massive adoption of technology TDMA, and it rolled
Speaker 3: out a telecom network and fiber optic cables that have
Speaker 3: just connected the world in a way that hadn't been
Speaker 3: done before. And you could even argue that you needed
Speaker 3: the bubble, you needed the excitement of that mania to
Speaker 3: really make that investment happen, to catalyze investment in a
Speaker 3: new category. And without a little bit of irrational exuberance,
Speaker 3: it might not happened. And so there are losers along
Speaker 3: the way and people who jumped in and then lost money.
Speaker 3: But then the result was a technology that you and
Speaker 3: I and others are using and that were utility from
Speaker 3: even today.
Speaker 1: Yeah, I think that that's I tend to agree with
Speaker 1: that assessment a lot. It's whether or not we're still
Speaker 1: benefiting from the results today and the majority of people,
Speaker 1: certainly there's some people who are going to benefit from
Speaker 1: every bubble no matter what, because they get out and
Speaker 1: get in at the right times. But okay, so let's
Speaker 1: turn our attention then to what a lot of people
Speaker 1: think we're in right now, the AI bubble. Okay, there
Speaker 1: certainly there's been a lot of discussion on this topic,
Speaker 1: and I guess, well, let's just talk about the hallmarks
Speaker 1: of a bubble, and do you think we're in what
Speaker 1: at this point?
Speaker 3: Yeah, so let's talk about the things that would suggest
Speaker 3: that we are in a bubble. And let's just let
Speaker 3: me just let's just define a bubble to make sure
Speaker 3: we're on the same page. So I just define it
Speaker 3: as a very very rapid run up in valuations followed
Speaker 3: by a equal and upsetting symmetrical decline in valuations over
Speaker 3: a relatively short amount of time, so let's say two
Speaker 3: or three years. You could also argue the bubble is
Speaker 3: like it's just happens when the valuations become untethered from fundamentals,
Speaker 3: and some people would define it that way. I don't
Speaker 3: really know what that means. I don't really understand how
Speaker 3: you you know your opinion about fundamentals and valuations aside,
Speaker 3: I don't know how you decide based on that definition.
Speaker 3: What's a bubble? And what are the fundamentals with cryptocurrencies
Speaker 3: or you know, tulips I guess, like you know, it's
Speaker 3: hard to then it's hard to say that that is
Speaker 3: a bubble if you don't accept the premise that fundamentals
Speaker 3: and valuations and the relationship between them are something we
Speaker 3: can all agree on as a bond trader and as
Speaker 3: an investor, I don't think we can. So the hallmarks
Speaker 3: of the AI bubble, if you want to argue we're
Speaker 3: in one would be one a very rapid run up
Speaker 3: in valuations and a handful of companies that are AI
Speaker 3: native AI adjacent. I would say, you see a little
Speaker 3: bit of that in the public markets. I think in
Speaker 3: here in Silicon Valley you see a lot of it.
Speaker 3: There are a lot of young kids pitching companies that
Speaker 3: are AI native and getting twenty five to fifty million
Speaker 3: dollars valuations, whereas when we invest in companies with real businesses,
Speaker 3: we try to stick to five to ten million dollar valuations.
Speaker 3: The business models, you're not very clear. There's a lot
Speaker 3: of you know, which you might call what John Maynard
Speaker 3: Kains might call animal spirits, what Ellen Greenspan might call
Speaker 3: irrational exuberance. What my mother might just say is, these
Speaker 3: kids don't know what they're talking about. So three, compending
Speaker 3: on how you define this period of excitement, you know,
Speaker 3: it's some combination of excitement that just seems to exceed
Speaker 3: the fundamentals of the business. There's a lot of capital intensity.
Speaker 3: That's another hallmark of bubbles. The amount of money we're
Speaker 3: spending in an AI capex. If you look at the
Speaker 3: you know, the especially in the public companies and the hyperscalers,
Speaker 3: we're probably at about four to five hundred billion dollars
Speaker 3: in AI capex this year. That's one and a half
Speaker 3: to two percent of US GDP. At the peak of
Speaker 3: the telecom bubble in nine to nine two thousand, we're
Speaker 3: probably you know, five or six or maybe seven or
Speaker 3: eight percent of US GDP was in those investments. So
Speaker 3: or we're beginning to approach nineteen ninety nine levels of investment.
Speaker 3: The other side of the argument, though, which is kind
Speaker 3: of where I come out, as I think the businesses
Speaker 3: in the fundamentals around AI are a lot better than
Speaker 3: they were in say, nineteen ninety nine. In nineteen ninety nine,
Speaker 3: the NASTAQ one hundred peaked at seventy three times priced earnings.
Speaker 3: Today the mag Sabin is like twenty five to twenty
Speaker 3: nine times price earnings. In Vidias, the company at the
Speaker 3: middle of everything, they're trading at twenty four times fully
Speaker 3: taxed earnings for next year. In ninety nine, the company
Speaker 3: at the center of everything was Cisco, and they peaked
Speaker 3: at two hundred times earnings. And they were the ones
Speaker 3: that were like building routers and building the technology and
Speaker 3: the picks and shovels of the Internet. But they didn't
Speaker 3: make a lot of money. Their best year, they made money.
Speaker 3: They made two point seven billion in profit in two thousand.
Speaker 3: They lost money in two thousand and one. And Vidia
Speaker 3: is a very profitable company. Not only are they cash
Speaker 3: flow positive, but they're buying backstock. They spend one hundred
Speaker 3: and twelve billion dollars buying backstock over the past five years.
Speaker 3: Cisco didn't do that. All the customers that Cisco had,
Speaker 3: well not all of them, but half of them were telecoms,
Speaker 3: and some of these were Worldcomm and Global Crossing. Those
Speaker 3: were not profitable companies. They a lot of them. Those
Speaker 3: two bankruptcy in fact, and had accounting scandals and massive restatements.
Speaker 3: In two thousand and one and two thousand and two,
Speaker 3: a couple of their executives went to jail. The customers
Speaker 3: for today vidious customers are Meta and Microsoft and Alphabet
Speaker 3: and Amazon. They're all profitable companies, paying dividends, buying backstock,
Speaker 3: and cashlow positive. They don't have more cash than debt.
Speaker 3: Those the mag seven has three hundred billion dollars in
Speaker 3: cash more than debt right now, and that was the inverse.
Speaker 3: The telephon companies were massively indebted back in two thousand
Speaker 3: and Maybe the most important thing is all those companies
Speaker 3: back in two thousand were laying dark fiber like they
Speaker 3: were building fiber optic cable networks in advance of demand,
Speaker 3: but the supply where they'd built so much supply and
Speaker 3: capacity that the demand never caught up. So at the
Speaker 3: peak of the bubble, ninety seven percent of the global
Speaker 3: fiber optic cables were dark. They weren't being used. Every
Speaker 3: GPU that Nvidia rolls off of its assembly line lights up.
Speaker 3: There's demand for it right now, So the hyperscalers are
Speaker 3: buying all the gps that can yet they're they're letting
Speaker 3: them up, and they're actually not constrained by supply. It's
Speaker 3: more of a it's more of a demand problem, if so, meaning,
Speaker 3: and they could probably double the number of GPUs are
Speaker 3: selling tomorrow and still be sold out other inventory. So
Speaker 3: those are the reasons I don't think the AI bubble
Speaker 3: quite qualifies as you know, what you saw in nineteen
Speaker 3: ninety nine or eighteen forty five.
Speaker 1: Well, that's interesting. I mean, part of me wants to
Speaker 1: just question, you know, sort of devil's advocate. But you know,
Speaker 1: I think back to you know, Great Britain in the
Speaker 1: nineteenth century, Like trains run, they run on tracks, they're helpful. Okay,
Speaker 1: the Internet pretty obvious to see the direction that's going.
Speaker 1: What about AI, though, what if we you know, because
Speaker 1: everybody always talks about artificial general intelligence a GI, like, what.
Speaker 2: If we don't get there? What if this is it?
Speaker 1: Wouldn't that cause there to be some expectation that is unmet.
Speaker 1: To me, that sounds like that could cause a bubble?
Speaker 3: Yeah, I actually don't know that we'll ever get to
Speaker 3: what they call a GI. I'm not sure I even
Speaker 3: understand what a GI means. There are different definitions of it.
Speaker 3: There's some broadly accepted I guess, you know, opinion that
Speaker 3: that computers will become self aware is not quite the
Speaker 3: right word, but it does sort of capture what people think.
Speaker 3: It'll become a super intelligence that can do pretty much
Speaker 3: whatever whatever it wants to, and have initiative and the
Speaker 3: ability to, you know, to take control of different processes.
Speaker 3: I don't know that we'll frankly ever get there, or
Speaker 3: maybe that that is much further away than than people think.
Speaker 3: But at the same time, there are a lot of
Speaker 3: AI applications that will emerge over the next five years
Speaker 3: that I think will make life significantly different for most
Speaker 3: people without I'll get without getting all the way to
Speaker 3: you know, sky in It or Cybernigne systems and having
Speaker 3: something to run your run your defense and plan your
Speaker 3: day and tell you what to do and cook your
Speaker 3: food and everything else, and you know, maybe order you
Speaker 3: around or make to the human battery if you go
Speaker 3: down the matrix, the matrix, you know, pessimistic view of
Speaker 3: the world, I guess there are optimistic versions of a
Speaker 3: utopia where that where it could all be run by
Speaker 3: computers and happy. But it does seem like AI is
Speaker 3: going to, you know, within five years, they will be
Speaker 3: legally they'll be they'll be drafting legal agreements and creating contracts,
Speaker 3: and they will be driving cars, and they will displace
Speaker 3: a lot of human activity right now that we are
Speaker 3: doing that you know, we don't really need to be
Speaker 3: doing and so that will have a life changing set
Speaker 3: of impacts on what we do and how we work
Speaker 3: workflows for companies. I think it'll remake education. I've got
Speaker 3: two daughters from school who are eleven and fifteen, so
Speaker 3: that's top of mind right now. I think that's another
Speaker 3: area where we are still teaching people, you know, how
Speaker 3: to work and how to live in a way that
Speaker 3: reflects in a lot of ways in industrial society from the
Speaker 3: nineteen twenties and having education hasn't really caught up, but
Speaker 3: it will. And then healthcare, the diagnostic outcomes from you know,
Speaker 3: better analysis of medical data will be quite literally life changing.
Speaker 3: And so I think those are all things that you
Speaker 3: can get to without getting to AGI.
Speaker 2: Yeah, I think that's interesting.
Speaker 1: I mean, you know, as someone who works in the
Speaker 1: field of education, you know, I find it interesting how
Speaker 1: we still sort of the metrics for success where you know,
Speaker 1: how is the school day measured? Well, it's measured in
Speaker 1: blocks of time, right, whether or not you can prove
Speaker 1: mastery of a particular formula in five minutes or in
Speaker 1: fifty five minutes. It doesn't change the amount of time
Speaker 1: that you have to sit there.
Speaker 2: You know.
Speaker 1: That's always struck me as rather silly, but that is
Speaker 1: that's that's how we do it. And so, as you're talking, though,
Speaker 1: part of me just can't help but wonder, like, what
Speaker 1: would be worse economically in this situation?
Speaker 2: What would be worse. Would it be worse for it
Speaker 2: to be a.
Speaker 1: Bubble and oh gosh, we never got you know, an
Speaker 1: autonomous assistant. Sorry, that just didn't didn't happen. A bunch
Speaker 1: of people lost their shirts, oh well, or it would
Speaker 1: be worse if we got them, and then that causes
Speaker 1: massive unemployment and a total reshuffling of society that we
Speaker 1: just can't handle. I don't know, I'm very torn on it.
Speaker 1: What do you think which which would be worse in
Speaker 1: this case?
Speaker 3: Yeah, I tend to be much more on the optimistic
Speaker 3: side about how this will change workflows. I understand the
Speaker 3: argument that this will displace people, put them out of work.
Speaker 3: It'll you know, let's take the example of the driver
Speaker 3: list car that I just mentioned. So what happens to
Speaker 3: all these How many people are driving cars in the
Speaker 3: US or make a living on uber or driving taxis
Speaker 3: it's you know, between one and one and two million
Speaker 3: or whatever it is. What do? What are they all?
Speaker 3: What are they all going to do? You know what?
Speaker 3: And how do we find jobs for them? This has
Speaker 3: been the same argument that effort about every technology. I
Speaker 3: remember hearing it back in the nineteen nineties about the
Speaker 3: Internet and computing and that was going to, you know,
Speaker 3: put a lot of people out of work, and it
Speaker 3: was going to have this big productivity bump and then
Speaker 3: people will wouldn't have work to do. Accountants and lawyer
Speaker 3: were kind of, you know, front and center at the time.
Speaker 3: I remember thinking about what profession do I want to
Speaker 3: go into? And I was the bond traders, hosting a
Speaker 3: lot of you know, manual work like you settle trades
Speaker 3: at Lehman Brothers. You actually have to write out what
Speaker 3: your purchase of, what your sale was, and your file
Speaker 3: paperwork at the end of the day. And now a
Speaker 3: lot of that stuff is just automated, right The Nastak
Speaker 3: and all these exchanges could entirely run on computers. The
Speaker 3: trading floors if you go to a big investment of
Speaker 3: make today it's comparatively quiet. It's not the trading floor
Speaker 3: that I grew up on, or it's not the trading
Speaker 3: floor of trading places the Eddie Murphy dan Akroyd movie
Speaker 3: where there's like the yelling buy and sell orders. So
Speaker 3: what do all those you know, what are all those
Speaker 3: couriers do? Well? They all found new jobs. We have
Speaker 3: a four point six percent unemployment rate today in the US.
Speaker 3: If you go back even further, at the end of
Speaker 3: World War One, World War in the in the nineteen twenties,
Speaker 3: forty percent of Americans lived on farms worked on farms.
Speaker 3: And if you go back to eighteen hundred, eighty percent
Speaker 3: of Americans lived on farms. But then the agricultural tech
Speaker 3: logical revolution happened. You had the spinning, the spinning Jenny,
Speaker 3: and the textile you know, manufacturing technology that just automated
Speaker 3: all that stuff. And now we have two percent people
Speaker 3: living on farms, maybe down to one percent now, and
Speaker 3: they're producing all the food that we need and then
Speaker 3: some and we don't have an eighty percent unemployment rate.
Speaker 3: So all these technologies, you know, created as much work
Speaker 3: as they displaced and productivity has gone up and people
Speaker 3: have found new things to do in the Internet. We
Speaker 3: didn't know it at the time, but it's created a
Speaker 3: whole new digital economy. So for every job that the
Speaker 3: Internet obliterated, you've now got YouTube influencers and people making
Speaker 3: money in media, and people are in the computer science field,
Speaker 3: you know, generating incomes off of these off of these
Speaker 3: new business models. They just just weren't therefore before PayPal
Speaker 3: and before eBay, and before Amazon and Google and YouTube
Speaker 3: and everything else. So I don't really know where these
Speaker 3: jobs get created. I would probably tell my daughters to
Speaker 3: study AI and get comfortable with robotics because I think
Speaker 3: that will have something to do with the future, and
Speaker 3: I might I might guide them away from being a
Speaker 3: driver as a profession or a you know, a call
Speaker 3: center operator. So a little bit of this is free
Speaker 3: career advice, but you know, this is also the belief
Speaker 3: that these technologies are net positive and if you embrace
Speaker 3: them and retrain with the right mindset and skill set,
Speaker 3: then that's what you have to do to benefit from
Speaker 3: the new world.
Speaker 1: Yeah, Well, as somebody who spent one summer working in
Speaker 1: a call center, I can just definitively tell the audience
Speaker 1: please don't go into that line of work. It's not
Speaker 1: overwhelmingly fulfilling. I'll just be honest with you. There there's
Speaker 1: a lot of this. You'd be much happier as a bartender.
Speaker 1: I'm just going to tell you that right now. But
Speaker 1: having done both at various times in my life, you know,
Speaker 1: sometimes I wonder about this, and as someone in education,
Speaker 1: you know, I sometimes look at the way we do
Speaker 1: things and think, like, I mean, it's not nineteen twenty, Like,
Speaker 1: why are we.
Speaker 2: Still doing things in this way?
Speaker 1: Like is it just we're such a creative species, But
Speaker 1: yet it seems like sometimes we have such a lack
Speaker 1: of creative in how we think about problems, in the
Speaker 1: way that things are going to change going forward.
Speaker 2: I mean, you have people who are.
Speaker 1: Really upset about the idea of the changes that are
Speaker 1: going to bring, even though historically anybody who studied things
Speaker 1: knows that there will be more jobs created at some point.
Speaker 1: I mean, is there a point where we just need
Speaker 1: a leader or someone to say like, just it's gonna
Speaker 1: be okay, Like, guys, calm down.
Speaker 3: What do you think I think that's a healthy attitude.
Speaker 3: I don't know that most people have studied history. Maybe
Speaker 3: your biased because of your podcast, but a lot of
Speaker 3: people I talked to do you think that there's going
Speaker 3: to be a net job loss? And they do think
Speaker 3: that technology creates jobs and it's the same. But it's
Speaker 3: the same argument you heard from the Luddites, and you
Speaker 3: know the people in nineteen twenties who resist at look
Speaker 3: at you don't have to go back to the nineteen twenties.
Speaker 3: Look at Hollywood today. There was a big writers and
Speaker 3: actors strike earlier this year and the number one issue
Speaker 3: was we don't want not Maybe not the number one issue,
Speaker 3: it was one of several issues how AI works with artists.
Speaker 3: And you know, I can point back the nineteen twenties
Speaker 3: as being another example of a technology that that disrupted
Speaker 3: the film industry, the talkie. If you look at the
Speaker 3: early nineteen twenties, you had black and white films and
Speaker 3: there were there were I was gonna say silent, They
Speaker 3: weren't really silent people. Did you know? There was music
Speaker 3: but it was like a live organists right in a
Speaker 3: theater who gave it a sound. And you had wonderful
Speaker 3: actors like Charlie Chaplin and Clara Bow who could express
Speaker 3: more with her eyes to beautiful actress, you can express.
Speaker 3: She could express more with her eyes than most actresses
Speaker 3: can with the you know, the full benefit of visuals
Speaker 3: and sound and voice. Douglas Fairbanks and they didn't, they
Speaker 3: didn't embrace the talkie. And if you look at the
Speaker 3: early talkies, the Jazz Singer's the first one in nineteen
Speaker 3: twenty seven, you look at it now, it's like, huh,
Speaker 3: that's not great. They're they're out of sync. It's awkward.
Speaker 3: It just feels like a little bit underwhelming. But that's
Speaker 3: that was technology in nineteen twenty seven. That was life changing.
Speaker 3: That was that was like special effects. It was like
Speaker 3: a light bulb went off, you know, for viewers. And
Speaker 3: after nineteen twenty seven the sound gets better and then,
Speaker 3: you know, slowly and surely a few of those actors
Speaker 3: never made it right. Douglas Fairbanks and Mary Pickford and
Speaker 3: Clara Bow never made a talkie and their careers ended
Speaker 3: in the nineteen thirties. Charlie Chaplin held out. He did
Speaker 3: his first hoke in nineteen thirty nine and was wonderful
Speaker 3: in it. But some you know, some actors had weird accents,
Speaker 3: I guess and speech impediments and thought it would compromise
Speaker 3: the art, and they thought that this technology will be destructive,
Speaker 3: and that people like Walt Disney with this animation and
Speaker 3: the talkies and these musicals, you know that there would
Speaker 3: be the death of Hollywood. And you get to the
Speaker 3: nineteen forties and fifties and Hollywood's never never been stronger. Right,
Speaker 3: there's the golden ear of Hollywood because they ended up
Speaker 3: embracing the technology. And I guess it is leaders like
Speaker 3: Walt Disney and others who who said, you know, here's
Speaker 3: how to make this work. And then when you actually
Speaker 3: show people the impact of animation and sound and music
Speaker 3: and you can see Fred Astaire and Ginger Rogers dancing
Speaker 3: in the movies like he couldn't before, then you know,
Speaker 3: then people feel like, oh, maybe it will be better.
Speaker 3: But it takes that, It takes those examples of innovation,
Speaker 3: and I think that's success to inspire people to be
Speaker 3: happy with the technology and then embrace it. And until then,
Speaker 3: you know, fear, fear and fear mongering often wins out.
Speaker 1: Yeah, Sometimes when I look back in history, I think
Speaker 1: to myself, like, you know, and I've studied hundreds of years,
Speaker 1: is just maybe you don't necessarily need every single person
Speaker 1: to be able to see what's over the next hill.
Speaker 1: You just need a couple in every society. And as
Speaker 1: long as you foster those people and give those people
Speaker 1: the tools that they need to be successful, you know,
Speaker 1: it generally.
Speaker 2: Works out for a culture in the long run.
Speaker 1: Right.
Speaker 2: It's when you totally put the brakes on.
Speaker 1: This and and here I'm thinking particularly of some of
Speaker 1: the medieval caliphates of the Middle East, in the in
Speaker 1: the Eras, right after the Mongol invasions, when they really
Speaker 1: just turn their backs on science, and that was just
Speaker 1: an o that was just an overarching negative. Like if
Speaker 1: you don't do that, things probably work out better for you.
Speaker 1: But when you close the doors, it's very rare that
Speaker 1: good things happen, at least in my experience. Well, we're
Speaker 1: getting close to time, but I wanted to ask you.
Speaker 1: I wanted you to talk about the book a little bit.
Speaker 1: First of all, when can we get it? What's the
Speaker 1: exact title. Let's get the folks the information that they need.
Speaker 1: And then what are you going to talk We've talked
Speaker 1: about some of it, but you know, what's the thesis
Speaker 1: of the book, Like, what are we going to understand
Speaker 1: by looking at it.
Speaker 3: Yes, well maybe we should have started here out of
Speaker 3: in a self serving Waale too enjoyed this conversation. The
Speaker 3: name of the book is A Brief History of Financial Bubbles.
Speaker 3: You can get it. I'll send a link to you
Speaker 3: for the show notes, but it's www dot Big Bubble
Speaker 3: trouble dot com. You can get it there. The book
Speaker 3: goes through ten bubbles in financial history. It starts with
Speaker 3: Amsterdam in sixteen thirty six, the Tulip Bubble. It then
Speaker 3: goes to the seventeen twenties and the south Sea, Mississippi Company,
Speaker 3: and then it ends in twenty twenty twenty one, which
Speaker 3: I call the everything Everywhere, all at Once bubble, which
Speaker 3: was a very unique, multi asset, multi country bubble that
Speaker 3: was created. And then I kind of do the epilogue
Speaker 3: on AI and is AI a bubble? And you know
Speaker 3: you've already hehard what I think about that. When the
Speaker 3: reason I really did the book was, you know, one
Speaker 3: part it was just education. I lecture guest lecture economics
Speaker 3: at Harvard Business School, and I found those students who
Speaker 3: are in their mid twenties and even a lot of
Speaker 3: entrepreneurs who in the valley. They just don't. They don't
Speaker 3: have a very short memory. The average lifespan, I guess
Speaker 3: of a money manager, even on Law Street today is
Speaker 3: about eight or nine years, like the only managed money
Speaker 3: have been managed money for the last nine eight or
Speaker 3: nine years. So they don't remember two thousand and eight.
Speaker 3: They don't remember two thousand and one. They haven't read
Speaker 3: about Japan in nineteen eighty four. They always think these
Speaker 3: new investments and you know, these technologies are different, the
Speaker 3: opportunities we should be investing in certain technologies, you know,
Speaker 3: at ridiculous evaluations, and they don't know or remember what
Speaker 3: happened in the last bubble or how to navigate them.
Speaker 3: So one part of this was just to do a
Speaker 3: research project on historical bubbles, how they come together, what happens,
Speaker 3: and then how do you navigate them once they're here.
Speaker 3: And there's some lessons for policymakers on you know, recurring
Speaker 3: patterns with bubbles that that that that repeat, and how
Speaker 3: not to make those repetitive mistakes. And then in part
Speaker 3: it's it's part economics, but there's also a lot of
Speaker 3: history and social context behind each of this bubbles. So
Speaker 3: if you're interested in history if you're interested in in politics,
Speaker 3: or why did the bubble in Amsterdam happen in sixteen
Speaker 3: thirty six and you know not sixteen twenty six? How
Speaker 3: come it didn't happen in Paris? How come it didn't
Speaker 3: happen in London? How come it was tulips? Why wasn't
Speaker 3: it I don't know, sugar or tobacco or land. I
Speaker 3: go into all these different you know, backgrounds and aspects
Speaker 3: just to be just to be educational. So I hope
Speaker 3: it's going to be fun, entertaining and educational read for
Speaker 3: for your listeners and others.
Speaker 2: Why don't you think more.
Speaker 1: Traders, people in finance markets, why don't they read more history?
Speaker 1: I mean, like to me, it's kind of like a
Speaker 1: no brainer. It's like, well, I think I want to
Speaker 1: understand you know the world that came because I agree.
Speaker 2: You know, I teach you know, younger.
Speaker 1: Students, but you know they don't have any recollection of
Speaker 1: two thousand and eight. You know, they look into the
Speaker 1: markets and you know, I'll talk about bubbles and I'll
Speaker 1: talk about AI and they'll just say, like I when
Speaker 1: to shut up, old man, Like this is like this
Speaker 1: is never, This is never going to happen like everything,
Speaker 1: everything's always just going to go up forever because they
Speaker 1: don't have any understanding of that. And to me, that's
Speaker 1: that's a frightening prospect.
Speaker 2: I don't know why.
Speaker 3: Why not?
Speaker 1: Come on, guys, why aren't you read more history? Why
Speaker 1: aren't people who do what you do? Aren't they read
Speaker 1: more history?
Speaker 3: I don't know why they. I don't know why they don't.
Speaker 3: Some of the best investors I know do. And it's
Speaker 3: a competitive advantage. It's an education question. It's a question
Speaker 3: for an educator, not a not an economist, I think,
Speaker 3: but I am an educator, except I'm I'm a father
Speaker 3: of two kids twelve and fourteen, and I think history
Speaker 3: is just you know a lot of what you learn
Speaker 3: in history. When I learned it, it was great, It
Speaker 3: was fun. It was a narrative. You know, you talked
Speaker 3: about things like I talk about my class evaluations in
Speaker 3: nineteen twenty nine versus today? Are we higher than in
Speaker 3: nineteen twenty nine? And what happened historically? When valuations are
Speaker 3: training at mid twenties pe multiples? What is their forward
Speaker 3: looking returns just based on historical data and analysis. When
Speaker 3: my daughter learns history and her last school. There was
Speaker 3: a lot of facts and figures and you know, memorize
Speaker 3: this guy and this battle on this date. And I
Speaker 3: think she, you know, she didn't get as much out
Speaker 3: of it, probably as as she might have, because I
Speaker 3: don't think it was taught in a way that was
Speaker 3: very compelling or that speaks to the student. And unfortunately
Speaker 3: that you know that a lot of that's just on
Speaker 3: the teacher, right making it, making something that's going to
Speaker 3: be relevant to your student and to capture their imagination.
Speaker 3: Is he says, you got to be you got to
Speaker 3: be a good teacher. And maybe that's where you know,
Speaker 3: maybe that's where the opportunity is. Maybe that's where AI
Speaker 3: or just you know, these technologies can help to make
Speaker 3: in podcasts like yours, they make history irrelevant and entertaining
Speaker 3: and something you can really get into because talk, right,
Speaker 3: it is fascinating stuff and very valuable to an investor.
Speaker 2: Well obviously I think so.
Speaker 1: But this is a is a captive audience right here,
Speaker 1: and I'm assuming if you're listening to this you probably
Speaker 1: think so as well. So good news for everyone listening.
Speaker 1: You have a competitive vantage.
Speaker 2: You just heard this.
Speaker 1: Over a variety of different people now there maybe other impediments,
Speaker 1: but you have a competitive advantage. So congratulations. But yeah,
Speaker 1: I'm very pleased with this. This was a great discussion.
Speaker 1: I really had fun talking. I think it's going to
Speaker 1: be you know, if the book is anywhere as an
Speaker 1: entertaining is this conversation, we're going to be. You're going
Speaker 1: to do very well and I'll be excitedly picking up
Speaker 1: a copy as soon.
Speaker 2: What's the date that is available.
Speaker 3: By the way, I haven't landed that with my publisher.
Speaker 3: We're going back and forth. It's a you know, it's
Speaker 3: a bit of it's my fault. The book was going
Speaker 3: to be a two hundred page literally, a brief history
Speaker 3: of financial bubbles, and I just got into it, and
Speaker 3: I got into it's now about eight hundred pages, and
Speaker 3: so it's much longer than what I intended, but that
Speaker 3: means more editing, copy editing and back and forth of
Speaker 3: the editor. It should be end of January. If you
Speaker 3: go to Big Bubble Trouble dot com, you can do
Speaker 3: you can get in the pre order list right now.
Speaker 3: It should hit Amazon and all the fine bookstores in
Speaker 3: January of twenty twenty six.
Speaker 2: All right, well you heard them, ladies, and gentlemen, let's
Speaker 2: get to that website. Let's get a pre order in there.
Speaker 3: Come on.
Speaker 2: Thank you so much. It was a wonderful conversation.
Speaker 3: Thank you, Adam. I really enjoyed it, appreciate it. M