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Intelligence Squared
Trump, Markets and The Greatest Crash in U.S. History, with Andrew Ross Sorkin (Part Two)
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- [00:04]
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- [02:29]
Andrew Ross Sorkin
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Andrew Ross Sorkin
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Mia Sorrenti
Welcome to Intelligence Squared, where great minds meet. I'm producer Mia Sorrenti for this episode, we're rejoining for part two of our live event with author, New York Times columnist and CNBC presenter Andrew Ross Sorkin. Ross Sorkin joined us recently at Conway hall to discuss the lessons of the 1929 financial crash and the parallels with today's political and economic turbulence. He was in conversation with Gillian Tett, columnist at the Financial Times. If you haven't heard part one, do just jump back an episode and get up to speed. Let's rejoin the conversation now live at Conway Hall.
- [03:37]
Gillian Tett
I'd say, you know, Silicon Valley, the people from Silicon Valley I speak to know the math doesn't work. I mean they're all spending hundreds of billions of dollars on this AI build out which can't possibly earn them back the kind of money, as you say, unless we all lose our jobs and AI runs everything. But they each think that they're going to be the one company that wins and everyone else will lose and lose the money and everyone else will crash, but they'll be the survivor. And that I think is a mentality. But the thing that makes me amazed is they're all betting on the same type of AI, which is large language models on the so called Transformers technology. And they all seem to assume that that's the only dominant system that's going to be there forever. And it's a bit like people betting on the wrong type of DVD early on or Betamax and then along camera, VHS or whatever it was. I mean you've got things like neuro symbolic AI which is coming up the tracks. You've got other types of AI which could end up leapfrogging what everyone's investing in right now.
- [04:37]
Andrew Ross Sorkin
Yes, but I also think. But then I think to myself not to bring us back to 1929, I think about RCA and RCA was like one of these stocks, a company that.
- [04:48]
Gillian Tett
No one in the room's ever heard of.
- [04:50]
Andrew Ross Sorkin
Well, except for the fact that RCA was a huge problem not just during 1929 and the Great Depression, but really through frankly the 70s. And so much technology ultimately emerged in so many other businesses, even in the 80s and afterwards. So it's not to say it's a little bit to me like the Internet. The Internet was here in the 90s and it's here in our lives even more. But there was a hiccup or more than a hiccup in 99, 2000 and it wouldn't shock me if a similar thing happened.
- [05:19]
Gillian Tett
Maybe it's like the railroads, you know, people built out all the railroad infrastructure in a Similar kind of market mania and frenzy. And then the market went pop. Lots of railroad investors lost money, but the railroad track was still there. And we still ride on railroads today, you know. But do you think in that analogy that Elon Musk is the equivalent of Charles Mitchell today?
- [05:42]
Andrew Ross Sorkin
Ooh. So I've always thought, I always tell people that Charles Mitchell was as famous. Charles Mitchell was like the Jamie Dimon of his time in terms of just pure fame. He was probably more akin in my mind to. I used to think about Michael Milken a lot, actually, because Michael Milken sort of revolutionized credit and debt around the world in terms of high yield bonds. This is in the 80s. And then ultimately went to jail for it and became the villain. And without giving away the story, Charlie Mitchell does get arrested eventually. And I don't want to tell you what happens after that.
- [06:17]
Gillian Tett
You have to read the book. Go find the book on the way out.
- [06:19]
Andrew Ross Sorkin
You got to read the book for that part. But in many ways, I don't know if he was Elon. I always think, I'll give you John Ratchet. The Elon of that era was John Rascob. I'll get back to him. But I would say he's more like Jensen, Jensen Huang of Nvidia. I mean, he has a smile on his face. He talks about the future. And the future is always bright. Always.
- [06:41]
Gillian Tett
Yes, absolutely. And in terms of the kind of aftermath, you know, when we had the crash, when we had the depression that then created the seeds for populism, protectionism, nationalism and all the ugly stuff we saw which led to World War II.
- [06:59]
Andrew Ross Sorkin
Yes.
- [07:00]
Gillian Tett
Do you see parallels there again with the political climate today?
- [07:03]
Andrew Ross Sorkin
So, yes and no. Interestingly, after just now, we're going to fast forward and rewind. After 2008, we had this really sort. The backlash against Wall street and the world of finance was quick, it was swift. Occupy Wall street, real questions about capitalism almost emerged immediately in 1929. Oddly, it wasn't like that. In fact, there's a great story about Groucho Marx, who was an actor at the time, not famous yet, and he was like everybody else, playing the market. And unfortunately, he.
- [07:40]
Gillian Tett
Oh, Winston Churchill was playing the market, was he?
- [07:42]
Andrew Ross Sorkin
Well, Winston Churchill, we got to get to Winston because this is obviously we're in the town where, you know. But Groucho was playing the market. And in the end he had to mortgage his home. He had taken out so his loan. The loans were so big. And by the way, he was smart. At one, one point was asking his broker about rca Saying they don't issue dividends, isn't that a problem? As in, like, if they're profitable, shouldn't I be getting dividends? And the broker was saying, no, you don't understand, it's the future. Blah, blah, blah, blah, blah.
- [08:10]
Gillian Tett
Sounds familiar.
- [08:11]
Andrew Ross Sorkin
But what was so interesting was people back then, including Groucho, didn't blame the broker or blame Wall street per se. In fact, many of them blamed themselves, which is such a different approach than the sort of finger pointing that went on after 2008, by the way. Went on after 1999. Went after. I mean, we used to be a. We were not a finger pointing culture in the same way back then. I'm not sure why. It wasn't really until unemployment took a turn down to 25%, and things had gotten really off the rails that then the finger pointing truly began in a meaningful way. And there were some questions about capitalism, like, but not even in the US the whole sort of capitalism socialism question wasn't even a thing really until the 50s, frankly. This is post World War II, where that sort of emerged as a big part of the Congress. 50s, 60s, really, in America. So I don't know.
- [09:07]
Gillian Tett
So tell us about Winston Churchill. Why did he lose.
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Andrew Ross Sorkin
Oh, my goodness, this is my favorite part of the whole book.
- [09:12]
Gillian Tett
Yeah, yeah, yeah.
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Andrew Ross Sorkin
Well, so Winston Churchill shows up in New York. He's not the prime minister yet. Shows up in New York in the fall of 1929, actually, because he's in need of money. He's out of money. And he decides the best way to make some money is to go on a lecture series in the United States.
- [09:28]
Gillian Tett
This is not what they taught you in your history O level classes.
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Andrew Ross Sorkin
Okay? So he shows up in the United States. He. By the way, all of the wealthy New Yorkers and wealthy people in America somehow loved Winston Churchill. All they wanted to do is they still do, is have cocktails with him and have parties with him. They loved him. So he's going around the country giving his lectures, and he gets bitten by the bug like everybody else to buy stocks. And he's constantly writing his wife these notes, having her transfer money back to him. And he's got this broker at EF Hutton who's doing all the things for him and he's so excited and he's making a ton of money, actually. And then of course, like everybody else loses it. He happens to be on the floor of the New York Stock Exchange on Black Thursday. I mean, the whole thing was completely crazy. And on Black Tuesday or Black Monday, there was A party in his honor where actually all of the characters, the main characters in this book, happened to have a dinner with him. So as a storyteller, it was just fabulous. But when all of this ends and ends badly for him and he actually watches somebody from his hotel room in the Plaza jump out of the window, he writes after about not actually thinking that this American experiment has gone totally wrong and that the Americans have lost their mind. He actually writes in defense of this American experiment and suggests actually that the British should have a more speculative nature themselves. So I thought the whole thing was sort of remarkable.
- [10:59]
Gillian Tett
Yeah. He comes away and says Britain needs more risk taking.
- [11:03]
Andrew Ross Sorkin
More risk taking, that was his takeaway.
- [11:05]
Gillian Tett
Even as he watches the market collapse.
- [11:07]
Andrew Ross Sorkin
And then he comes back to New York and gets hit by a car. Did you get to see that part?
- [11:11]
Gillian Tett
Yes, I did. With that. Yes, exactly. Which was, one might say, divine justice, but not quite. I mean, he obviously recovers from that. But it's an astonishing side of winchurchill's story that most people don't know about. Which, yeah, definitely should be in Horrible Histories all the way through. But so going back quickly to what's different about today and 1929, you point out that yes, the Fed or Bank of England can step in in a crisis and flood the system with money. And it's done that in 2008. It did it in Covid. But what happens if they do flood the system with money and people start to lose faith that central banks actually are as credible as they seem? Do you think that's a real risk? Because, you know, there's a real buzz in the markets now and particularly in people investing in cryptocurrencies and gold, that actually the really big bubble that's going to pop is not the equity market, it's not AI stocks, it's not even private credit. The really big bubble that's going to pop is faith in the dollar, just.
- [12:17]
Andrew Ross Sorkin
A full on devaluation of the currency.
- [12:20]
Gillian Tett
Exactly. And that's a bubble we're really living through.
- [12:23]
Andrew Ross Sorkin
Here's the catch. The catch is there's not a lot of places to go. So gold, you know, I think bitcoin or crypto total, what is it, $4 trillion total market gold is I think double or triple that now, but not much more than that. Yeah, but on a relative basis to the dollar, it's still a very tiny portion of it. So I think it's a little hard to move money out of the dollar so quickly. So I'm not totally in the camp, but I Recognize that it could be an issue. And I think it's one of the issues that if you were to compound all of these things together, meaning you have people raising the cost of buying bonds, you have more people buying gold in bitcoin, you have everybody that would unto itself create its own vicious cycle.
- [13:20]
Gillian Tett
Are you worried about the debt? Because debt to GDP in the US now is around 100%. Some of the projections suggest it's going to go up to 150, even higher in the coming years.
- [13:30]
Andrew Ross Sorkin
I worry about it more in the.
- [13:31]
Gillian Tett
Context, and the UK is pretty bad too.
- [13:33]
Andrew Ross Sorkin
So I worry about it more in the context. Neil Ferguson, who you know very well has something he calls the Ferguson Law. The Ferguson Law is that if the ratio of debt to GDP is more than your defense spending, that invariably over history. If you look at the UK you could look at Spain, you look at France, that that is the end of the empire. And at the. We are on course, the United States is, I think, to hit that in about 2049. So you can mark your end of the empire calendar now.
- [14:08]
Gillian Tett
Yes, well, but I mean, in terms of looking ahead, I mean, you know, because what happened after, in the 1930s was, as you say, the introduction of tariffs, the breakdown of a lot of the global order, you know, an explosion in protectionism and ultimately very, very ugly nationalism. Now we're seeing that happening already now, even before we have a bubble bursting. And of course, in the 1930s, the fact this happened actually contributed to the economic depression. Do you think that people have learned the lessons now from what happened in the 1930s in terms of the folly of turning back on globalization or introducing tariffs and things?
- [14:56]
Andrew Ross Sorkin
Well, clearly not, because I think right now we're living through a period where, where tariffs are being posited as part of a sort of national security resiliency strategy. And I think it's not just the U.S. i mean, I think it's being led by the U.S. in large part. But I feel like it's now become sort of a talking point for every country. And so I think it's going to be very hard to turn back the clock on the tariff story, even though, by the way, the Supreme Court's going to be ruling on whether tariffs are legal in the United States or at least, I don't know if they'll be ruling on it this way. Week they're going to be arguing about this week. So we'll see. It'll be very interesting to see what they say. But I think even with that, even if the Supreme Court says that tariffs are illegal, or at least the way they've been implemented. There are other ways for President Trump to do this. For some periods of time, it's hard to continue to extend them. But I actually think even if you were a politician in the future, it would be hard to raise your hand and say, I don't want tariffs, tariffs, because at least in the US right now, they're going to be bringing in 200 to 300 billion dollars a year. And so who's going to raise their hand and say, excuse me, I don't want that money? You'd have to effectively make the economic argument that you'd make that much more money on the other end of it. And that's going to be an uncertainty, too. So I think we are going to live with this in the world that we're living in today for at least another decade or two, irrespective of who is running these various countries.
- [16:17]
Gillian Tett
And of course, one reason we are likely to live with it is because the Trump administration is absolutely convinced that they're not hurting the economy. And they've taken great pleasure in telling the Financial Times, you know, all of the gloomy predictions that the FT and others were making six months ago, they would say are completely wrong because the economy is still growing.
- [16:35]
Sponsor Voice
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- [16:36]
Andrew Ross Sorkin
But the part of that, and here's the myth of that, or the mistake in, I think, in thinking about that in that context, which is, again, this goes to the AI bubble. I think that so much of the US Economy, at the very minimum, is being driven so much by the AI economics. Jason Furman, who's a professor at Harvard, just did a paper that if you remove the spending that's taking place in the US for data centers and AI related, the GDP growth in America would only be up by 0.1%. It basically would be flat. And so I think what's happening is this AI economy is almost papering over or masking what is otherwise a flat economy at best.
- [17:22]
Gillian Tett
Yes. Yes. Well, I strongly agree with that. So that seems like a great moment to come back to you, the audience, and to find out whether or not you have been convinced by what we've been saying or not. And to ask you the same questions we had before. And by the way, before I ask you, do bear in mind, after this, we're going to have audience Q and A and you'll have a chance to ask other questions back at Andrew so you can get your revenge. But the question we're going to ask you now, the poll we're going to do again to see if it's changed is how likely is a global economic crisis like the Great Depression in the next 10 years? Is it likely, unlikely, or undecided? Hopefully you all had a dress rehearsal now with getting the QR code. So we'd love to see whether in any way your thoughts have or have not changed.
- [18:10]
Andrew Ross Sorkin
And just to be clear, we're both going with unlikely. So if we got to vote, we would go with unlikely because we think the Great Depression is not. We would go with crash, but not Great Depression.
- [18:19]
Gillian Tett
Totally with crash, but I think probably unlikely unless we have a complete crash in dollar and loss of fear faith in fiat currencies and bond markets.
- [18:27]
Andrew Ross Sorkin
Okay, but you can't. There's no way to do an asterisk with that there?
- [18:30]
Gillian Tett
No.
- [18:34]
Andrew Ross Sorkin
Okay, we'll see what happens then.
- [18:36]
Gillian Tett
Okay, well, Andrew, you have been persuasive. Likely is now only 40%, unlikely is 52% and undecided is 9%. So you have persuaded them that.
- [18:52]
Andrew Ross Sorkin
But the likelies. You know, there's a lot of Jesse Livermores in here.
- [18:55]
Gillian Tett
Yeah, Jesse Livermore is somebody who crops off in the book as well.
- [18:59]
Andrew Ross Sorkin
He's a short seller.
- [19:00]
Gillian Tett
He's a short seller. He does fantastically well for periods of time. He doesn't know when to stop.
- [19:06]
Andrew Ross Sorkin
He's an emotional wreck of a guy.
- [19:10]
Gillian Tett
Amazing character. I strongly, I mean, do read the book because it's a great story.
- [19:13]
Andrew Ross Sorkin
Not least because we won't tell you what happens at the end, but.
- [19:16]
Gillian Tett
Oh, we got to tell you what happens at the end.
- [19:17]
Advertiser
He.
- [19:18]
Gillian Tett
He's so. He's so undisciplined.
- [19:20]
Andrew Ross Sorkin
He's so unhinged that he kills himself.
- [19:23]
Gillian Tett
But after making a fortune from short selling and getting it right, and then he goes away and loses it all, and then he kills himself. So moral of the story is, if you've managed to play the markets right once. Stop.
- [19:39]
Andrew Ross Sorkin
Walk away from the table, folks.
- [19:41]
Gillian Tett
Exactly. So any of you got crypto Stop anyway. Or I should say even tech stocks, you know, but that's my own personal view.
- [19:53]
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- [21:55]
Gillian Tett
This episode is brought to you by State Farm. Listening to this podcast Smart move Being financially savvy Smart move. Another smart move having State Farm help you create a competitive price when you choose to bundle home and auto bundling. Just another way to save with a personal price plan like a good neighbor. State Farm is there. Prices are based on rating plans that vary by state. Coverage options are selected by the customer. Availability, amount of discounts and savings and eligibility vary by state. Right? Okay, this is the chance for you to ask whatever you want of Andrew.
- [22:35]
Andrew Ross Sorkin
You can throw tomatoes.
- [22:36]
Gillian Tett
We have a couple of mics roving around, so please do raise your hands if you want to ask a question and we will take whoever is brave enough to chuck anything at Andrew. So we have a question over there to start with. Now it would be courteous but not compulsory to briefly identify yourself. And please keep your question short like.
- [22:59]
Andrew Ross Sorkin
Name and everything or you tell us who you are.
- [23:02]
Gillian Tett
Just tell us your name if you want.
- [23:04]
Advertiser
Janice.
- [23:04]
Andrew Ross Sorkin
I'm 20 years old. I'm into finance just like my mom. She's next to me right now filming me, which is weird. So my question for you guys is, especially for you, how screwed is my generation because I'm 20?
- [23:17]
Gillian Tett
That is a great question we're screwed. You know, this is why I wanted you to identify yourself because actually that question has a lot more punch coming from someone who's 20, I have a 20 year old myself than coming from someone who's my age.
- [23:32]
Andrew Ross Sorkin
So what do you think? What do you tell your 20 year old? I have two 15 year olds.
- [23:37]
Gillian Tett
You have 15 year olds. I have a 20 year old and a 22 year old. What do I tell them? I tell them they're going to have to be super flexible. The idea of a career ladder is probably over. It's going to be more like a jungle gym where they go up, down, swing around the sides and try and forage. I tell them to get as many passports as they can because. Because the world is so uncertain. And I tell them to try and learn a bit of coding, but not assume that coding is going to be the answer because all the coders are going to be replaced by AI. What do you tell your kids?
- [24:14]
Andrew Ross Sorkin
I tell my kids that the most successful people I know are the ones that genuinely, and this is hard to learn, but are genuinely the most curious people. And the most curious not just when they're young, but curious when they're very old and very successful. And so I would just, I would recommend as much as possible just to ask every question. But, you know, here I am, I'm a journalist, I get to ask questions for a living. But I also think, you know, and I know there's a bunch of people in here who have younger kids in our house we have a great debate around how much kids should be using AI. And I may be on the other side of this with my wife. I actually think you should use it all the time. Like all the time. I think you should become a ninja at it so that you know how to do it better than everybody else. Because the truth is that what I worry about is there's a lot of people who are saying right now you shouldn't be using it. And the folks who are going to win this game, whatever this game is called, Life, I think are going to know how to use it better than just about anybody. And so I would dive headfirst. Even if your teachers tell you not to write your papers with it.
- [25:27]
Gillian Tett
Well, I would actually agree because I actually think people keep writing that AI is going to take human jobs. It's more likely that a human who knows how to use AI well is going to take another human's job. And that's a bigger threat. The other thing I'd agree with you about by the way is being a journalist is the best job in the world because you get paid to be nosy and ask questions all the time. It's wonderful. So I'd agree with that.
- [25:50]
Andrew Ross Sorkin
And I think AI will have a struggle with that one for a while, being a journalist.
- [25:54]
Gillian Tett
Yeah, it will. And AI doesn't tend to ask questions on its own. On its own basis. It answers questions but doesn't ask them out of the blue. We have a question from the Livestream audience who I should have greeted before. So thank you for sending this high stream. Hi, live stream. Right. Claire from Livestream, you say you mentioned that unemployment was 25% during 1929. What do you think of the unemployment level now in the us Is it any sign of a possible financial crisis coming?
- [26:25]
Andrew Ross Sorkin
Absolutely not. So we have what, about 4% unemployment in the United States? It's almost like Al in Wonderland in terms of unemployment. If you think about the highs in unemployment in America, we had 10 plus percent unemployment after the 2008 crisis. We touched briefly, it was a hot minute during the pandemic. I think about 14.7%. That was actually the second high. Interestingly, the lowest unemployment in America happened in 1954. It was 2.5%. So 4% I actually, actually don't think is a sign of just about anything, but 25% unemployment was pretty bad. And back then we had a six day work week, so you can think about that. Interesting. By the way, about six day work weeks. I don't know if we got to mention it.
- [27:14]
Gillian Tett
It comes up in the book.
- [27:15]
Andrew Ross Sorkin
Yes, I was going to say John Rascob, the guy who was working at General Motors, had this idea in 1929 that we should all, all work five days a week. And it wasn't because he was such a nice guy. He thought that if we had two days off on the weekends, it would actually spur economic growth because we'd have more time and that time we'd have to buy more cars because we'd go places and we would buy gardening equipment and we'd buy different kinds of outfits that we'd wear during the weekend. And that's in large part how the five day work week around the globe became a thing.
- [27:52]
Gillian Tett
It's a wonderful, wonderful little story. Yes. Well, the, I must say the online audience are hyperactive. So I'm going to ask another question from the Livestream audience. Okay, Matt from Livestream asks, many people are claiming that gold will once again replace the dollar as the Federal Reserve. What do you think of the gold standard now? Should we have a new gold standard.
- [28:17]
Andrew Ross Sorkin
I think the lesson of 1929 and everything that's happened since then is that the gold standard was one of the great mistakes of our time. In fact, that the US government sat on its hands for too long trying to hold on to the gold standard. And had they? Had they?
- [28:30]
Gillian Tett
And the British government too.
- [28:31]
Andrew Ross Sorkin
And the British government too. But had they actually eliminated the gold standard earlier, they could have flooded the system with money and perhaps prevented from the Depression from being as long as and as prolonged as it was. So I would say it would be very hard to go back to the gold standard. I'm not even sure how we would do that. I don't think there's enough gold to do that.
- [28:48]
Gillian Tett
Well, there are a few fairly libertarian voices out there, techno libertarians, who would like that. But if they can't do that, they go and buy crypto instead.
- [28:57]
Andrew Ross Sorkin
We have the bitcoin.
- [28:58]
Gillian Tett
Bitcoin, yes, the digital gold. Okay, one more question from Livestream. While the real life audience thinking about what they can ask, Sophie from Livestream says, I keep reading about private equity in the US and UK buying out companies. Is this going to contribute to the next financial crash?
- [29:20]
Andrew Ross Sorkin
I don't think so unto itself. I've always had questions. Look, I think the private equity is just another form of capital doing different things with businesses. I think the complicated part about private equity actually in this moment, uniquely, is two things. One is that the disclosures around what's going on in the private equity market, similarly to private credit, is we just don't know what the real valuations are. And oftentimes, and they would say it's a feature, not a bug, they're able to hold the value of certain assets at much higher prices than they really are for longer periods of time. I actually think that most of the private equity business today, even some of the venture capital portfolio companies, are probably being held at valuations that are higher than the current market. Now where this gets more complicated is at least in the United States and I think coming around the world as well, there's a real effort to start to effectively democratize finance. And by the way, which was a phrase used in the 1920s, which is to say to make private equity investments, venture capital investments, private credit investments, investment available to retail investors so that we all can just buy effectively public funds.
- [30:32]
Gillian Tett
And that's something that Donald Trump is very keen on doing.
- [30:34]
Andrew Ross Sorkin
Donald Trump is very keen on doing that, including in terms of retirement funds. Now, what's complicated about that is you're effectively taking what are private assets that don't have the kinds of disclosures public companies traditionally did? You're putting them into the public sphere without the similar kinds of auditing and other things. So you have no idea what's really going on inside. And the crazier part about all of this is if you really start to understand what these instruments look like and do. They're called semi liquid funds. So not to get too technical with you, but they look like a stock that you could buy on any day. However, you can't sell it on any day. If too many people try to sell it in any given quarter, they can actually put up gates and say, you cannot sell. You'll have to sell in the future. That, to me, seems like a lot of trouble.
- [31:28]
Gillian Tett
Absolutely. It's like that hotel where you can check in but you can't check out.
- [31:34]
Mia Sorrenti
Again.
- [31:35]
Gillian Tett
That's going to be part of your next movie, right? Okay, we've got a question at the front here and then a question behind.
- [31:41]
Andrew Ross Sorkin
You got a good seat there.
- [31:43]
Gillian Tett
Exactly, Andrew.
- [31:44]
Audience Member
Actually, Gillian, you've both established there's an amazing market for stories about financial disasters. What is it about the cast and the set and the storyline in Billions that's made that so popular?
- [31:56]
Gillian Tett
Yeah. Who in the audience has seen Billions? It's. Yeah. Okay. Wow, you have a fan base here, Andrew.
- [32:02]
Andrew Ross Sorkin
What made it popular?
- [32:03]
Audience Member
Yeah, what was. I mean, people love reading about financial disasters, but Billions was obviously much more diverse.
- [32:09]
Andrew Ross Sorkin
Billions was a little bit different. So the truth is that when I was first starting to think about creating this show, I originally wanted to create a show around hedge funds. And I remember going to see the agents in Los Angeles with this idea about a hedge fund and the family of the hedge fund. And they said, andrew, this is a terrible idea. People hate Wall street people. All they do is look at computer screens all day. This is going to be terribly boring. Nobody likes. And I remember being very sad and going home and thinking, oh, this isn't going to work. And my wife happened to be watching a rerun of Law and Order, you know, the show Law and Order? And I said to her, why is it that procedurals, legal shows, people love a legal show? I don't know why people are obsessed with them. And that's actually. That was the eureka moment for me when I thought, okay, what happens if I. It was like a Trojan horse if I could pit the legal world against the hedge fund guy. But maybe you'd actually fall in love with the hedge fund guy. Because even though you'd think that he was doing bad things. He was sort of like a Tony Soprano kind of character. And maybe the prosecutor who you think is supposed to be doing everything in the name of right really isn't. I think that people. It's not that you have to love or hate a character. You just have to be fascinated by them. And I think, for me, as a storyteller, I love characters that are gray. Really, really gray. I don't like when they're black and white. And the truth is that I love when people read a book like this and they come up to me and they say, I love Charlie Mitchell. And somebody else says, I hated Charlie Mitchell. He's a criminal. That, to me, is the goal. Quentin Tarantino, the filmmaker, used to say that when a film was over and the lights came up in the theater, he always wanted everyone in the theater to think they saw a different movie. And I've always thought that that's. I don't like being too prescriptive. I think that, you know, there's some books, obviously, and authors who write and tell you what you're supposed to think. My view is to tell you what happened and then hopefully to make you think so.
- [34:10]
Gillian Tett
And it's something that comes up very clearly in your portrait of 1929. Because the characters you describe, you know, they are. You don't make them villains and heroes in a very easy way. I mean, Charlie Mitchell, Sunshine Charlie comes across as quite human, misguided, over optimistic, caused enormous damage, but actually was doing what many people in finance today do, which is selling a good story and trying to convince their clients. Livermore, who ends up shooting himself, he was a scumbag of a short seller, but was passionate about that and was actually right.
- [34:49]
Andrew Ross Sorkin
Well, the hard part, I am always trying to put myself in the shoes of the people I'm writing about, whether they're alive today in my daily reporting, or back in 1929. I often think back then, there were no rules. I mean, there was no insider trading rules. There was no sec. There was no nothing. I mean, really. So then it's just a question about morality and what's immoral, what's moral. And it's an interesting thing, the markets, because the markets are really a contest of wits. Everybody thinks that they're smarter than the other person. That is the business, right? Whoever's buying a stock thinks invariably that they're smarter than the person selling a stock. And whoever's selling a stock thinks that they're smarter than the person buying the stock. And so when you see people do these Things and there's all sorts of efforts to do manipulation things where people are creating little groups to try to run stocks up and then pull the rug at all. This part of me thinks that they thought in the moment when there were no rules around these things, that that was just another way of outwitting the other side, if you will. And so it's very interesting to try to look back 100 years right now. Later you look and you say, oh, this is disgusting. These people are crazy. But if you think then what did they really think in that moment? I don't know. I think it's much more complicated.
- [36:03]
Gillian Tett
Well, I think even the 2008 crisis was no different. But anyway, got a question back there.
- [36:11]
Audience Member
Thank you, Andrew. My name's Stephen Mitchell. I've been an equity fund manager for 44 years.
- [36:17]
Andrew Ross Sorkin
My apologies.
- [36:20]
Audience Member
Thank you. I was going to try and get you to come off the fence a little bit just in terms of you've written about 1929 and stuff it. We've obviously got something pretty extreme going on in the United States at the moment. What is it? The red flags that you see. Because I invested in Japan through 1989 when the crash and Taiwan. And two things bothered me now that I see from there. One is the behavior of retail investors, which you've just mentioned. And the other thing is leverage, which was present in both markets. In Japan, we had a warrant market that went bananas. And I actually asked Grok about hidden leverage in the US Market the other night, and it came up with a figure of 11 to 15% hidden leverage in the US which astonished me. It's very high. So what do you see?
- [37:19]
Andrew Ross Sorkin
I'm throwing the same red flags you are. And those are really the only flags, meaning those are the significant flags. But then there's all these flags we don't know about. I mean, that's the. By the way, we haven't talked about the politics in the United States. Could some geopolitical event happen? I mean, I think there's a hundred things that put us on the knife's edge. What I just don't know is whether we go off the edge or not. And I don't know what that looks like. I don't think any of us do. And I don't know if those are even considered black swan events anymore, or maybe they're almost routine.
- [37:47]
Gillian Tett
Well, having watched the Japanese crash and then having watched 2008, I think there's a lot of parallels. And one of the best guides to what happened in 2008 for me was what happened in Japan, because I lived through both, but there's a lady in the back raising hand. We've talked about the AI bubble, but.
- [38:04]
Mia Sorrenti
I was just wondering about other growth.
- [38:06]
Gillian Tett
Areas such as blockchain robotics, space infrastructure.
- [38:12]
Mia Sorrenti
Quantum computing, and. And just wondered whether those would replace.
- [38:16]
Andrew Ross Sorkin
Any AI bubble, whether they replace the AI bubble. I don't know what's going to replace the AI bubble next. I don't. Robotics are sort of, to me, the next sort of churn in whatever the AI story is going to be. See, I think so many of those things as being connected. I mean, I think quantum ultimately is connected to AI. By the way, even crypto to some degree is related to all. It's sort of. It's all one of a piece. I can even argue to you that health care, depending on how you consider sort of what the future looks like, is related to AI. That is, by the way, maybe the exciting part about AI, which is to say that if it works, it will touch every part of our lives. It will touch education, it will touch healthcare, it'll touch everything.
- [39:01]
Gillian Tett
Yeah, I would say that one of the things that frustrates me is people don't realize that you. In between all this geopolitical and political craziness and dark stories linked to that, and in between all this financial market mania, we're also living through a golden age of science of the sort that none of us have actually seen so much extraordinary scientific innovation as is happening now. And that tends to get overlooked. But then again, that's one reason why we have this mania, because the same thing happened in 1920s.
- [39:31]
Mia Sorrenti
Thanks for listening to Intelligence Squared. This episode was produced by Margarita Valparto and it was edited by Mark Roberts for ad free episodes and full length recordings. Become a member@intelligencesquared.com membership and to join us at future events. Head to intelligencesquared.com attend to see our full programme. You've been listening to Intelligence Squared. Thanks for joining us.
- [40:13]
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