Michael Lewis on the Prof G Pod

Summary

Against the Rules with Michael Lewis: Episode Summary – "Michael Lewis on the Prof G Pod"

Release Date: December 24, 2024

In this compelling episode of Prof G Pod, bestselling author and journalist Michael Lewis joins Scott Galloway to delve into the burgeoning world of sports betting in the United States. The conversation explores the rapid legalization of sports gambling, its profound societal impacts, and broader implications for American life. Additionally, the episode touches upon the controversial collapse of FTX and draws parallels with historical financial scandals. Below is a detailed summary capturing the essence of their discussions, enriched with notable quotes and structured into clear sections for comprehensive understanding.

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1. Introduction to Sports Betting Legalization

Michael Lewis opens the discussion by outlining the recent surge in sports gambling legalization across the U.S. He highlights that since the Supreme Court's repeal of the federal sports betting ban in 2018, 39 states have embraced legalization, providing access to approximately two-thirds of the American population via mobile platforms.

Key Points:

• Historical Context: In 1992, Senator Bill Bradley instituted a federal ban on sports betting, exempting only Nevada. This stance remained until the Supreme Court's 2018 decision.
• Market Dominance: The industry is largely controlled by FanDuel and DraftKings, which collectively command about 70% of the market share. Originally daily fantasy sports companies, they seamlessly transitioned into the legalized betting landscape.

2. Societal Impacts and Risks

The conversation shifts to the alarming social costs associated with the rise of sports betting. Both Lewis and Galloway express deep concerns about the potential ramifications on individuals and communities.

Notable Quotes:

• Scott Galloway (07:04): "I think this is a fucking disaster. Your thoughts?"
• Michael Lewis (10:20): "It's almost like we're creating a pool of future gambling addicts."

Key Points:

• Financial Strain: There's a reported 20-30% increase in bankruptcies in states that have legalized sports betting.
• Addiction Risks: Studies indicate that 26% of young men exposed to gambling develop problems, raising fears of a generational crisis. Lewis mentions, "More than 60% of young men on college campuses are sports gambling."
• Mental Health Concerns: Following patterns seen in the UK and Australia, there's anticipation of rising suicide rates linked to gambling addiction.

3. The Dopamine Effect and Future Implications

Galloway introduces the concept of dopamine addiction, arguing that immediate gratification from sports betting could recalibrate the reward systems in young individuals, making them susceptible to various addictions.

Notable Quotes:

• Scott Galloway (10:20): "We are literally unleashing into the economy, into the world, millions of dopamine monsters."
• Michael Lewis (11:15): "It's like your whole life is in the casino kind of thing."

Key Points:

• Neurological Impact: The ease of placing bets via mobile devices may lead to an erosion of delayed gratification skills, traditionally fostered through sports.
• Behavioral Shifts: With constant access, individuals may engage in riskier and more impulsive behaviors, extending beyond gambling into areas like opiates, sex, and online shopping.

4. Targeting and Manipulation by Betting Companies

Lewis critiques the strategies employed by sports betting companies, emphasizing their sophisticated methods to identify and exploit vulnerable populations.

Notable Quotes:

• Michael Lewis (13:00): "They are mining the entire US population for people willing to make stupid sports bets."
• Scott Galloway (10:20): "If you can't get it from gambling because they run out of money, they're going to find it somewhere else."

Key Points:

• Customer Targeting: Betting companies leverage data analytics to pinpoint individuals who are less likely to recognize or act against their financial follies.
• Product Design: The transition from physical casinos to mobile platforms has intensified the manipulation, making gambling a pervasive aspect of daily life.

5. Comparing Sam Bankman-Fried’s FTX Collapse to Historical Financial Scandals

The discussion pivots to the infamous collapse of FTX and Sam Bankman-Fried’s role, drawing parallels with previous financial debacles to explore inconsistencies in legal repercussions.

Notable Quotes:

• Michael Lewis (19:15): "I do have a problem with 25 years in jail. I think like, okay, jail, that makes some sense. But like, I mean, I don't know."
• Scott Galloway (27:45): "The difference is brand management."

Key Points:

• Legal Disparities: Galloway contrasts Bankman-Fried’s severe sentencing with John Corzine’s lighter consequences for similar financial misconduct, highlighting a potential bias in the justice system.
• Investment Strategies: Galloway shares his successful investment in FTX's bankruptcy claims, illustrating strategies in distress investing.

6. Character Analysis and Public Perception

Lewis offers a nuanced perspective on Sam Bankman-Fried’s character, distinguishing his actions from deliberate malfeasance and attributing his downfall to a series of poor decisions rather than inherent evil.

Notable Quotes:

• Michael Lewis (32:21): "He didn't actually probably completely grok the risk that he was foisting on others."
• Scott Galloway (33:32): "Caroline Ellison... the ultimate perfect example, quintessential government witness."

Key Points:

• Behavioral Patterns: Bankman-Fried’s repeated risk-taking without fully understanding the consequences is seen as a reflection of character flaws rather than intentional fraud.
• Witness Insight: Discussion about Caroline Ellison, a key figure in the collapse, highlights the complexities of legal testimonies and personal motivations within corporate scandals.

7. Advice for Aspiring Storytellers and Investors

In the closing segment, Michael Lewis imparts valuable advice to young listeners aspiring to emulate his success in storytelling and investing.

Notable Quotes:

• Michael Lewis (35:40): "Not trying to be someone else would be one of the first things I would say."
• Michael Lewis (35:40): "Go with that feeling. It's great for an investor, it's great for a writer."

Key Points:

• Authenticity: Emphasizes the importance of staying true to oneself and pursuing genuine interests, even if they are unconventional or lack mainstream appeal.
• Passion Over Popularity: Encourages listeners to focus on what truly excites them, advocating for deep engagement in niche areas as the foundation for success.

8. Conclusion

The episode wraps up with Scott Galloway lauding Michael Lewis for his exceptional storytelling and insightful discussions. Both hosts underscore the critical need for societal awareness and responsible regulation in the face of rapidly evolving industries like sports betting and cryptocurrency.

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Final Thoughts:

This episode serves as a crucial exploration of the intersection between emerging legalized industries and their broader societal impacts. Through Michael Lewis’s incisive analysis and Scott Galloway’s sharp insights, listeners gain a comprehensive understanding of the challenges and potential fallout associated with the normalization of sports betting in America. Moreover, the discussion on financial misconduct within the cryptocurrency sphere offers a sobering look at accountability and public perception in modern corporate failures.

For those seeking to understand the intricate dynamics of trust, regulation, and societal health in contemporary American life, this episode provides both depth and nuanced perspectives, making it an essential listen.

Transcript

[Malcolm Gladwell]

Foreign.

[Michael Lewis]

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[Scott Galloway]

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[Michael Lewis]

Hey there everyone, it's Michael Lewis. We're about to go on a brief holiday break at against the Rules, but we have some banger episodes in the works about the rise of sports gambling in the United States and the ride we might be about to go on. For instance, I Send LJ My producer, to Kansas where she meets up with college students, not only drinking while underaged, but possibly even gambling on sports. And we take a little tour of countries where gambling is even more entrenched than it is here, just to see how godforsaken things could get here if we really try. Then I try to redeem myself by learning a thing or two about how we can gird our brains to resist the onslaught of addictive temptations. But that's all to come. In the meantime, I can offer you a little treat. One of the great pleasures I've had while making this season is a chance to talk with other folks about our reporting. Just recently, I spoke with Scott Galloway on his podcast. Scott's a professor of marketing at the NYU Stern School of Business and a very smart guy. We talk about the sports gaming industry, of course, but also about a whole bunch of other things. Anyway, here's my conversation with Scott Galloway on his show. Prof. G.

[Scott Galloway]

Michael, where does this podcast find you?

[Malcolm Gladwell]

Smoke Tree Ranch off the side of Palm Springs, which is a gated community created by Walt Disney and some of his pals way back when.

[Scott Galloway]

Wow. Let's bust right into it. In the latest season of your podcast, against the Rules, you investigate sports betting, which we talk a lot about here on the pod, which you refer to as a great social experiment. Walk us through the state of play of this experience and where you think we're headed.

[Malcolm Gladwell]

So in 1992, Bill Bradley, then a senator, created essentially a federal ban on sports betting. It exempted Nevada, but basically it was against the law. And the Supreme Court repealed that in 2018. And the new law of the land is states can legalize it if they want to. And 39 states have. And about 2/3 of the American population has access to sports betting on their phones. About 1/3 still doesn't. And the industry here is dominated by two companies, FanDuel and DraftKings. They have a little hard to say exactly, but say roughly 70% of the market. And, and they were before they were sports gambling companies. They were daily fantasy sports companies which gave they actually was the perfect, the perfect thing to be before mobile sports gambling is legalized as a daily fantasy sports company. You know, all the customers, you have data on all the customers. Sports bets in America have skyrocketed. It's a little again, a little hard to say cause it's hard to know what numbers to trust because there was an illegal market that presumably is not quite as big as it used to be, but it's gone from the legal market has gone from a few billion to over a hundred billion a year. And there's just starting to be some academic research showing the social effects of this. I mean, it's kind of cool. This, the way it's rolled out has created these natural experiments that you have because you have states that are side by side. One has legalized it, one has not legalized it. So you can sort of tease out the effects of legalizing it. But bankruptcies are up, savings rates are down. If it follows the path that it followed in the United Kingdom and Australia, suicide rates will be up. So there's some social costs to it all. But I think like really early days, I mean, you know, it's only been legal for six years. There were companies that have really only been up and running in most states for just a few years. It's kind of not hard to make some predictions about where it's going. But it's not there yet.

[Scott Galloway]

So I'm a glass half empty kind of guy. But you cited some stats. I've seen 20 to 30% increase in bankruptcies and states illegalize it. I see young men with kind of less structure in their lives who are more prone to addiction. I think six out of seven gambling addicts are men. My understanding is gambling has the highest suicide rate because if you're addicted to meth, people figure it out and try and intervene. You can get in way over your skis with gambling and nobody knows. And you decide there's only one way out. I'll use an academic. I think this is a fucking disaster. Your thoughts?

[Malcolm Gladwell]

Yeah, I'm totally with you. This is why I was drunk in the subject I couldn't believe. Well, look, once it's legalized, I'm a little shocked by the insensitivity to the public health crisis it's gonna trigger because it's essentially wild west in how you can get to the customer. And they aren't, you know, the sports gambling companies, they were mistaken for casino companies. When the people kind of thought, oh, it's going to be like a casino business. So that they kind of vague what the house takes about roughly 5%. It's always been kind of 5% remain kind of 5%. This number keeps going up with these companies. They're like, it's like at 15% and effectively what they are doing is mining the entire US population for people willing to make stupid sports bets. And they have a finely honed ability to identify anybody who actually knows what they're doing. Like the sharp gambler Someone who actually might have some edge in a sport and toss them out or limit them to the point where they're effectively tossed out so that their business is built on people who don't know what they're doing. And it's further, in a way that casinos. When you're in a casino, of course it's manipulating you in all kinds of diabolical ways, but when the casino's in your pocket, it's like your whole life is in the casino kind of thing. And they have an ability to sort of like, nudge people into doing stuff that they just wouldn't think to do. It is. And it's making the dumber and dumber bets. When you kind of think about, okay, like, what's the disaster going to look like? It's not just men, it's young men. Young men. Young men are the real target. The Lancet, the medical, British medical publication, just came out with a study that said, I mean, this number is so high that I want to just pause before I say it, but the 26% of young men who are exposed to gambling develop some sort of gambling problem that seems very high. But even if it's half that, it's like the ncaa, whose new president, Charlie Baker, was just shocked by the gambling activity he was seeing on campuses, commissioned to study to see how many people were doing this. And more than 60% of young men on college campuses are sports gambling. So you do the math. It's just like you got. We're like. It's almost like we're creating a pool of future gambling addicts. And you're right. It's very interesting. You're right about, like, when you think about what's going to stop this train, if you compare it to, like, opioids, like, opioids was able to run for 20 years before anybody really put a stop to it. And 750,000 people die. And it was about as visible an epidemic as you can have. It's invisible. You don't see what's happening to people until. So you wonder, if it takes 20 years for the society to get its hands around the opioid industry, how long is it going to take it to get its hands around the gambling industry? So, yes, I agree with you. It's like, how on earth do we let this happen? But it's of a piece with other things we have let happen.

[Scott Galloway]

I mean, when I think about it, it's not only my fear isn't only about gambling addiction, but when you put kind of an on demand dopa bag in young people's pockets just as they're kind of hardwiring their brain and learning about life and reward, that we're just setting them up to be just fucking dopam monsters. And if they can't get it from gambling because they run out of money, they're going to find it somewhere else. Have you seen any of. My thesis is we are literally unleashing into the economy, into the world, millions of dopa monsters that will are just going to find whatever way they can. Opiates, sex, porn, online shopping. They're just going to be so hungry for that rush because their brains will have been wired to expect that rush, that it's going to have all sorts of ramifications outside of gambling. Am I catastrophizing here?

[Malcolm Gladwell]

I mean, it doesn't sound unreasonable to me. My first thought when you started down that little path was it's interesting that sports used to be a place where you learned the slow rewards that come from hard gratification.

[Scott Galloway]

Yeah, yeah.

[Malcolm Gladwell]

You learned the opposite thing. And that we're turning this mechanism that used to take young men and teach them a certain lesson. Are you taking it to teach a different lesson? So it was disturbing enough to me that I have a 7, my youngest is a 17 year old son. Like I gave him some money and adult supervision so he could learn how to navigate this world because it does feel like you. Not only are we creating a world of, you know, dopamine addicts, but the signal you send, especially to young men because they're so susceptible to this is the world actually doesn't give a shit about you, that it's out to get you. When I got into this, when I started working on the story, what motivated me was the book I wrote about stuff I'd learned on the book I'd written about the pandemic. I got interested in it because the US response in the beginning was just so appalling. We had 20% of the world's deaths with 4% of the world's population in the first six months. And I learned in the process that this was, that in the few years leading up to the pandemic, we'd had experienced a decline of life expectancy in three straight years. And that had not happened since 1918. And I thought, well, the pandemic's happening in the context of a society that's already not taking care of its people, that some basic failure is occurring. And this feels like part of that, that it's like it's a public health problem. And that it's not that hard. Even if you can't do anything about legalizing sports gambling, it's not that hard to do some things to blunt its effects. So here's my solution. I'm trying to work within the constraints of the society. I don't think actually me going off about how diabolical it all is is going to help anything. They're doing something that I think is kind of interesting. The company, the sports gambling companies, they are because they're so good at chucking out of their businesses anybody who knows what they're doing. They're isolating people who don't know what they're doing. So by definition, if you have an account in good standing at FanDuel and DraftKings and you're doing a lot of sports betting, you have signaled to the world you don't know what you're doing. I think that if we get that message out and that if you say like if you're looking for someone to manage your money, the first question you should ask them is they have account in good standing at FanDuel and DraftKings. If they do, you should never give them your money to manage like that. If you make it, if you make it a point of shame that you're in good with the industry that you might stigmatize it in a way that makes it less dangerous.

[Scott Galloway]

We'll be right back.

T Mobile for Business recently teamed up with Malcolm Gladwell for a new episode of Revisionist History to talk about how 5G is enabling the use of AI to deliver transformative and sometimes life saving innovation.

[Michael Lewis]

Hello, Hello. Malcolm Gladwell here. Today I wanted to share a very special conversation I had recently hosted by my good friends AT T Mobile for Business about how AI is changing our world. Tell us about the problem you're trying to solve.

[Scott Galloway]

When we think about emergency events and really at the majority of the world, the primary tool set that firefighters use is a radio to communicate their status to the outside operation. Pretty reasonable to expect that people can become disoriented. So when I realized that technology was important was when I realized that many of the most vexing healthcare challenges that we saw in my own family, we realized that there was just significant lack of resources, you know, from a T Mobile for business perspective, like how can we take this incredible best in the nation 5G network and how can we harness some very specific capabilities? Listen to this episode of Revisionist history on the iHeartRadio app, available now.

[Michael Lewis]

Hello, hello there. This is Malcolm Gladwell from Revisionist History ready let's go. We're getting in the special car. This is the special car.

[Scott Galloway]

Look.

[Michael Lewis]

See the blue car?

[Speedy Gladwell]

Whoa.

[Michael Lewis]

So here we are. We're driving down a lovely winding country road in the Hudson Valley. I am here with my daughter, Speedy, and we are sampling one of the latest and greatest of BMW's creations. Makes 335 horsepower, range of over 300 miles. Riding in the BMW i4E40. You know how your toys have batteries? This car has a battery. How do you like this car so far?

[Speedy Gladwell]

Does it go fast?

[Michael Lewis]

Oh, it goes so fast.

[Speedy Gladwell]

Let's go.

[Michael Lewis]

Are you ready?

[Speedy Gladwell]

Yeah.

[Michael Lewis]

Are you sure?

[Speedy Gladwell]

Yeah. Whoa.

[Michael Lewis]

Spadey, was that fast again. Oh, yeah. Okay. In a world full of ordinary, there's a brand that dares to be different. Feel the rush of precision engineering as power meets sophistication with every turn. It's not just a drive, it's an experience. So buckle up and embrace the extraordinary, because when the road calls, only one answer will do. BMW, the ultimate driving machine. Shall we see what happens if we push the accelerator all the way to the floor? Are you ready?

[Speedy Gladwell]

Yeah.

[Michael Lewis]

Are you sure?

[Speedy Gladwell]

Yeah.

[Michael Lewis]

One, two, three.

[Scott Galloway]

Whoa.

[Speedy Gladwell]

Elevator. That isn't the elevator.

[Michael Lewis]

Going up, up a hill in this BMW is just like an elevator. That's exactly right. You know what this car is? This is your first BMW. Learn more at BMW USA.com.

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[Scott Galloway]

Your book going Infinite. You fell under some of what I call the same texture of criticism as Walter Isaacson's biography on Elon Musk. And that it was you were kind of Seen loosely as having a front row seat but not seeing what was going on. Do you think that's a fair criticism?

[Malcolm Gladwell]

I didn't write it until after it all collapsed. When I sat down to write the first words, there wasn't much I didn't know had happened. I mean very little happened came out in the trial that wasn't already kind of known. But it is true that I was there, a fly on the wall from kind of end of 2021 through the collapse of 2000 in November of 2022. And if you'd have said he has the money, the customer's money in Alameda, I would have said, you're insane. There's no way that would be so dumb. So I did poke everybody did this. Everybody who saw the structure of the business. He's got his own private hedge fund on the our trading firm on the side of an exchange and he owns them both. I did ask lots of questions about conflicts of interest. But what I imagined would be the problem wasn't the problem. I imagine the problem was that his trading firm would have the same sort of privileged access to the exchange that high frequency traders get on the New York Stock Exchange and privileged access to data and so on. So front running, whatever. And that wasn't the case. I did not see that like, oh yeah, the money's in the wrong place, so that's true. Did I in retrospect think I should have seen it? Not really. No one else saw it either. There wasn't the interesting thing. There are many interesting things about the story, but one interesting thing is yeah, a lot of people said I wonder if they're shady like ftx. But that's the, in crypto that's easy. Like as a heuristic, if you're, if you're a successful crypto business, you're, you know, you're largely unregulated and you're 26 years old and no one's paying that much attention. The specific criticism, oh, he's got the customer's money in his hedge fund. No one said zero. People said so. Not even any. And he had whatever a hundred and something professional investors who owned a piece of him and they didn't say it. So I don't know. I don't know. That would have been very hard to. I don't know how you would have detected that.

[Scott Galloway]

Well, a couple follow up questions there. So when I'm sort of follow the story a little bit from an adjacent. I actually bought claims against it.

[Malcolm Gladwell]

I know this. You bought the claims and if I could have, I would have.

[Scott Galloway]

Oh, really?

[Malcolm Gladwell]

Oh, my God. I mean, it just seemed pretty obvious that they weren't worth 10 cents on the dollar.

[Scott Galloway]

Well, I wasn't that smart. I bought them for 23 cents. But because it's better to be lucky than good, because of the surge in crypto, they're now probably your. The payout's going to be somewhere between 120 cents on the dollar. 150 cents. And other than. Other than patting myself on the back for one of the few good investment decisions I've made in the last year, if everyone gets their money back. Now, granted, he committed fraud. He. He took customer accounts from people who thought they were investing, you know, putting their money in a deposit, not even investing. And then he used it to take risks they had not signed up for. So that's illegal. But one, given that everyone's giving their money back, I don't understand the difference between what Sam Bankman Fried did and what Jon Corzine did at MF Global, I think it was called.

[Malcolm Gladwell]

You're taxing my memory there. But yes, remember that. Yeah, yeah, do remember it.

[Scott Galloway]

Did the same thing.

[Malcolm Gladwell]

Can I back you up a sec? Because I really wanted to ask you about this. I took a keen interest in the market in claims on ftx because it seemed really clear to me that what the bankruptcy people were saying are signaling that it's like it's this dumpster fire and there's nothing there and boy, just be incinerated all this money. That that wasn't true. And it was amazing to me how cheaply these things traded at first. How did you even think to buy claims?

[Scott Galloway]

I'm fascinated by. I've invested across every asset class from angel to venture to growth to public. By far the best asset class is distress because similar to biology, people don't want to hang around old people. So the best businesses are businesses dealing with old people. And the best asset class is distress. So I look at bankruptcy filings and I was fascinated by this. I got the bankruptcy filing from the court, I read through it, and in the bankruptcy claim, it listed all their assets, cash, some bitcoin, et cetera. And one of the assets that just popped out to me is they had invested $500 million in Anthropic. Anthropic is the number two AI company, LLM. And I couldn't find for the life of me what the valuation was that they invested at, but I figured it was somewhere between 3 and 5 billion. So I took the most conservative number which meant that one of the things that the, that ftx, the bankrupt FTX had, that would ultimately be distributed to the claimants was 10%, I assumed, of anthropic. I valued anthropic at 4, at approximately, approximately 40 billion. So I thought the stake is worth 4 billion claimants, total claimants, 9 billion. So just a stake in Anthropic I valued at $0.44 on the dollar. Claims were selling for $0.22. To me, this was the easiest trade I ever made.

[Malcolm Gladwell]

And why do you think other people didn't make that trade?

[Scott Galloway]

Occasionally you find something. I don't know, this doesn't happen to me very long. I'm like, oh my God, they've missed it. And that is, people didn't see the $500 million number. They could see the $500 million, but they couldn't see the, was the numerator, the denominator. And that was the valuation that they invested at. And I thought, there's no way they don't own at least 10% of this thing. And then you have to value another unknown. And that is, what is that 10% now? But I thought it's worth probably 40 cents. A minimum 23 cents. So all the crypto, all the cash, everything else was just going to be gravy.

[Malcolm Gladwell]

To my bewilderment. People weren't paying attention. There was, I mean, what he did, he didn't take whatever it was $11 billion of customer assets and spend it on, you know, blow and hookers and private jets. He put 5 billion of it into, into venture capital investments. And this was just one of them. And yet there was this, there was this pile of stuff and I keep waiting for someone to come and ask the question, how good a VC was Sam Bankman Fried? He was doing it. He was, you know, like, how, how well did he perform compared to his peer group? Because it wasn't. He has a piece, you may not even know this. He has a piece of SpaceX in there. He has it through Michael Kivis, but. So you don't see it, but he's got, he's got pieces of some really valuable stuff, even if crypto goes to zero. And never mind all the crypto businesses he bought. So one last question on this, because I'm curious, because I haven't. Because I knew you made this trade. Someone told me about you being in the market and I thought, well, that's kind of cool. Did you worry at all that the bankruptcy process itself was going to incinerate your profits? That it was so expensive. It would be so expensive that you just. You wouldn't end up. See, you should have seen the money. But in the end, it would go in the pockets of Sullivan and Cromwell lawyers.

[Scott Galloway]

That's a great question, but part of the analysis I did when I put together the spreadsheet was it's the same administrator that handled Enron, and I estimated the cost at about a billion dollars. And. And I thought, okay, if. If just the anthropic stake is worth 4 billion, the coins are worth 3. I saw 70 cents on the dollar and then take out a billion. So 60 cents on the dollar and then what it ends up. It looks like the payout and a lot of the stakes we're talking about have already been sold. But it looks to me what they're saying. The court administrator is saying that they now think they're going to get somewhere between 120 and 160 cents on the dollar. A lot of that because crypto has surged. But the lesson I take away from all of this, and this is a larger lesson about investing in life, is the greatest return on invested capital is inversely correlated to how sexy something is. This isn't true of sports, which you know better than me because there's no shortage of billionaires with midlife crises and it's a regulated monopoly to control supply. But generally speaking, outside of sports, the best asset classes are the least sexy. And this was a really unsexy investment. Everybody thought this thing, it had fraud, it had crypto, which was out of vogue. This thing was supposedly going to zero. And any reasonable diligence said, no, this is all upside.

[Malcolm Gladwell]

I didn't really answer your question about what was different from between what he did and what John Corzine did. And you've taxed my memory about what Jon Corzine did. But I do think. What do I think? I think that there's a kind of misapprehension in the general tenor of the response to Sam Bankman Fried that the it people still talk about it as if what he did was intentionally set up a business to steal customer money. Stole the customer money, and the customers don't have any money now. And what he actually did was set up a business that was. I mean, it was jankily set up in the first place, but it was clearly not start. Didn't start as a fraud, was in and of itself a successful business if he'd just not done the idiot things he'd done with his hedge fund and then got himself in a pickle In June of 2022, when crypto lenders asked for the $10 billion they'd lend him back. And instead of just telling them, I don't have it, I put it in VC investments. Use the customer money to fill the hole. And that was a really stupid thing to do. It is fraud, but it's different than evil person sets out to do evil. So how I feel about it, I feel sad about him mainly. And I think that what his like the vice, the character flaw, if you will, or the pattern, it's more the pattern in his character that leads to this behavior that was visible in every other aspect of his life. And it was a pattern of foisting risk upon other people without their permission. And he did it over and over. He did it in his romantic life, he did it in his friendships. And he comes by this vice honestly, I think he himself is sort of numb to risk and kind of thinks he's right all the time anyway. So he didn't actually probably completely grok the risk that he was foisting on others. I thought, this is all going to work out. That was stupid and a crime. But I can understand how he got there. And I do have a problem with 25 years in jail. I think like, okay, jail, that makes some sense. But like, I mean, I don't know. I don't know how you even measure these things, but it's like 25 years.

[Scott Galloway]

For a guy like that is almost a death sentence.

[Malcolm Gladwell]

Yeah. So I just don't. I think that's excessive and I don't get it. But people will argue with me.

[Scott Galloway]

But I want to put forward a thesis because you're a storyteller and just love the way you think through stuff. I would argue, and I want you to respond to this thesis that the difference between playing golf at Centennial and going to Wimbledon, which I imagine I would be doing if I were Jon Corzine right now, I don't see a lot of difference in the criminal behavior here. The difference is brand management. And that is what you have with Sam Bankman. Fried is a guy who had this kind of floppy, I just rolled out of bed crypto thing. He purposely set up this organization in the Bahamas which felt sketchy. He was sleeping with and doing drugs with his co workers. He decided to go on the most ridiculously ill advised apology tour, which entirely backfired. Whereas Corzon listened to very smart people who said, shut the fuck up. Nobody speaks to anybody but your lawyers. Go quiet, act like the victim. You didn't know what was going On Act Contrite, you were a terrible fiduciary. You had no idea. As opposed to going and speaking to Andrew Ross Sorkin in cargo shorts. The difference between Corzine again going to Wimbledon and Bankman Fried with a life sentence is poor communications and brand strategy. Your thoughts?

[Malcolm Gladwell]

Well, you're absolutely right. That. That the way he handled it from the minute it all fell apart was catastrophic. You got to remind me what Jon Corzine actually did, because I don't remember.

[Scott Galloway]

MF Global customer deposits, it ends up, were being used to make speculative investments in the market. John Corzine, my understanding, is, thought interest rates were going to head one way. And he claims he didn't know these deposits were being commingled. It was pretty much the exact same crime and Corzine got banned from the industry or paid a fee. MF Global, I think, went away. But these things, tomato, tomato, as far as I can tell. And one guy's got a life sentence and the other's at Wimbledon. I don't even know if he watches tennis. But to me, it speaks to the notion of public perception.

[Malcolm Gladwell]

It also speaks to the moment that there's a frustration with the ability to get our hands around the necks of rich people who do bad things. And when you get a live one now, the. The sort of. The speed with which the justice system leaps into action is incredible. Sam was really easy to prosecute. You know, he was just like, gave him everything. He gave him everything. So this is. So think about this. I always stop myself just short of thinking he has a death wish, because his behavior kind of suggests it. And he. Even when things were good, he was always extremely vulnerable. Like, no bodyguards. No. You know, you could sneak into his office any hour of the day. You could. He really was. He was. He has this sense that, like, he doesn't protect himself almost willfully. And so that just extended into what happened in the legal process.

[Scott Galloway]

So, Michael, I love this. And you're a fascinating storyteller. Just a couple questions to wrap up here. I find one of the most fascinating characters in all of us was. Is it Caroline Ellison? Caroline Ellison.

[Malcolm Gladwell]

Caroline Ellison.

[Michael Lewis]

Any.

[Scott Galloway]

Any insight? A lot of people didn't think she. She ended up being what my description, or I think the Southern District called her. The. The ultimate perfect example, quintessential government witness. But they put her in prison. We know a little bit about Sam. We know almost nothing about her. What were your impressions or what. What was. Can you provide us some texture on Ellison?

[Malcolm Gladwell]

She was a math kid who thought of herself I think she's kind of. There was a bit of a split personality thing going on with her. She had a lust for a stable and normal life and at the same time thought of herself as someone who would do radical and crazy things. And she, in college, joined the effective altruist movement and seemed to be kind of all in on that. And I tell you, she was very susceptible to the charms of Sam Bankman. Fried, here's the texture for you. She told a colleague. This didn't even make the book, but she told a colleague that even after she and Sam had broke off their relationship, it was worth her having sex with Sam because it made Sam more efficient. And making Sam more efficient was the best thing she could do for mankind because Sam was the person most likely to save humanity. So that gives you an idea of how she is.

[Scott Galloway]

I'm gonna try that in a bar. Just this. You owe this to. The world will be a better place if I'm more relaxed tonight. So this will be the last question I promise you have. I look at. I mean, granted, you know, my idols are different than most people's, but I look at you and I think, I want to be this guy. You're just doing cool shit, telling great stories, writing interesting books, going to movie premieres. I think you make an exceptional living. But by all, at least from an exterior perspective, you're in a great seat. We have a lot of young men and women who listen to this podcast. Can you give us any one or two pieces of advice for someone who looks at you and thinks, you know, I'd like to be in that seat? Were there any things that you wish you'd done more of or less of? What advice would you have to your younger self?

[Malcolm Gladwell]

Well, first off, I never thought that way about what seat I wanted to be in. I never thought I want to be that person. I always just wanted to be me. It's like the best me. And. And there were things that made me feel the best me and I could. And writing was. Writing was one of them. Writing was the big one. And I just thought, I've got to do this. So not trying to be someone else would be the. Would be one of the first things I would say. Another thing that led me to, like, lots of the good things that have happened in my life, it's related. It's like not paying attention to what you're supposed to be paying attention to. Like what everybody else is paying attention to. If everybody else is paying attention to it. It doesn't need your attention. Kind of thing. What needs your attention is the thing that you're interested in that no one's paying attention to and no one encourages you to pay attention to like your FTX investment. That it's like, oh, there's something here and I really care about it. And if you can find that and nobody else is there, that seems like a lonely place, but it's the golden place. And you gotta like lean into that rather than lean out of it. Like learn to recognize that moment where, God, I love doing this thing. No one is saying I should be doing this thing. No one else is doing this thing. But I love it. Go with it. Go with that feeling. It's great for an investor, it's great for a writer, but I think it's great beyond that. It's sort of like you're arbitraging your personality against the world that you are finding where you are special in the level of interest you have in something. And that's when I find my subject matters are the most exciting to me. The thing that troubled me most about Sam Bankman Fried as a subject is, is I was genuinely interested in him right from the moment I met him. But it worried me that so many other people were. And the only thing that kept me going was that I had this privileged view of it. But what I really like with the subject is like the Oakland A's, where nobody gives a shit about them, but I see there's something great there. And that's the stuff. It's like that's when you know you're in the right place. It's like you're there for some genuine reasons because there's no ingenuine reasons to be there.

[Scott Galloway]

Arbitraging your personality against the rest of the world. I love that. Michael Lewis is the host of the podcast against the Rules. He's also a New York Times bestselling author of several books including the Fifth Risk, Flash Boys and the Big Short. In addition, some of these have been made into great movies. The Big Short, Moneyball and the Blind side. All nominated for Academy Awards. Grew up in New Orleans and remains deeply interested and involved in the city, but now lives in Berkeley, California, Alma mater Go Bears with his wife Tabitha, Soren and their children. If I could give my kids any skill, Michael, it would be your skill. And that is, you are a fantastic storyteller. Really appreciate your time.

[Malcolm Gladwell]

Thanks for having me, Scott.

[Michael Lewis]

Thank you so much to Scott Galloway for having me on his show. You can go and subscribe to the Prof. G Pod wherever you get your podcasts.

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