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- [00:00]
Public.com Announcer
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- [00:56]
Joe Weisenthal
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- [01:10]
Yegana Torbati
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Joe Weisenthal
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Yegana Torbati
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Joe Weisenthal
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Yegana Torbati
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Joe Weisenthal
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Public.com Announcer
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- [01:42]
Joe Weisenthal
Bloomberg Audio Studios Podcasts Radio News. Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.
- [02:03]
Tracy Alloway
And I'm Tracy Alloway.
- [02:04]
Joe Weisenthal
Tracy, it's now July 28, and the Iran war continues to go on. And it's sort of extraordinary the fact that, you know, in the beginning here was this thing that was gonna be if it persisted, sort of cataclysmic, perhaps for the global economy and particularly related to oil prices. And yet on a sort of day to day basis, it's not even necessarily the biggest headline news that most people are talking about.
- [02:30]
Tracy Alloway
People get used to a lot of things very quickly. I mean, it still has the potential to be catastrophic at some point in time. But you're absolutely right. We've gone months now since when did this start? In March, right?
- [02:40]
Joe Weisenthal
Yeah, the very beginning of March.
- [02:41]
Tracy Alloway
Yeah. Months now with a war which technically hasn't even been declared a war. It's an operation. Is that what they're Calling, I believe so military operation.
- [02:51]
Joe Weisenthal
I think it's been a long. People talk about, you know, the forever war, I think the last. It's been a long time since America actually ever acknowledged knowledge that it was in a capital W war.
- [03:01]
Tracy Alloway
Very true. But it does kind of beg the question about what happens when all of this is over.
- [03:07]
Joe Weisenthal
Right? Yeah, right. I mean, hopefully it ends one day. And I have to say so obviously we talk about oil a lot when we talk in terms of economics, I have to admit, you know, it's funny, we've done multiple episodes about the Iranian stock market, which is a fascinating topic. But other than the fact that that obviously Iran produces a lot of oil, I actually like basically know nothing about the Iranian economy. Like the day to day. What a typical middle class family.
- [03:34]
Tracy Alloway
There's some things I know. So there's oil.
- [03:36]
Joe Weisenthal
Yes.
- [03:36]
Tracy Alloway
There's Iranian cars, famously, which I would be interested in experiencing one day. Not necessarily buying but experiencing pistachios, I
- [03:45]
Joe Weisenthal
was going to say. So like pistachios, like nuts I imagine. But like what this sort of job market is what a day to day, what's out there and you know, whatever the Iranian equivalent of LinkedIn or Indeed.com is like what people do, what people want, career wise, all of these things. Because there's an Iranian stock market obviously. You know, presumably there are like startups and companies that one day want to list, but I don't know what any of them do. I have so many questions, I guess about like what a quote, normal Iranian. Let's imagine the war ends. And also there aren't sanctions. Right. What would an Iranian.
- [04:25]
Tracy Alloway
Well, this is my. Because at various points in time previously you have had these bursts of optimism about the opening up of the Iranian economy, the lifting of sanctions. It's one other thing I know again, not much, but one thing I know is it's a huge economy. Right. With our previous Iranian stock market guest, the size of Turkey. Right. Something like that.
- [04:44]
Joe Weisenthal
It's a really big economy.
- [04:45]
Tracy Alloway
It's a big economy. And so what happens if that starts to open up? Can it open up? Are we going to see what happened previously where it kind of starts to open up and then it shuts down again? I don't know.
- [04:56]
Joe Weisenthal
Several months ago, like there was like some random night where I was clicking on random Wikipedia links and I was like, I wonder what Ahmadinejad's economic policy platform was when he ran for president for the first time. I like started clicking on his campaign. I was like, I wonder. And it was like seemed kind of vague and he had some, I wish I could remember the slogan. It was really good. It was something like if we imagine it, we could do it. It was like, you know, the most inoffensive sort of like domestic policy agenda slogan and I couldn't really find that more specifics. But you know, you have elections, etc. What do they run on? What do they, you know, where do they stand on taxes? All these questions about sort of like quote, normal, unquote economic life in Iran.
- [05:36]
Tracy Alloway
Is that your way of saying that you want to talk about the political economy of Iran?
- [05:39]
Joe Weisenthal
I want to talk about the political economy and the even regular economy of Iran. Anyway, I'm very excited to say we do in fact have two perfect guests on who will teach us much more about this. We're going to be speaking with Yegana Torbati, Iran correspondent for the New York Times, as well as Bazorgomer Sheriffaddin, he's the head of digital at Iran International. So both of you, thank you so much for coming on Odd Lives.
- [06:01]
Yegana Torbati
Thank you so much for having me.
- [06:02]
Bazorgomer Sheriffaddin
Thanks for having us.
- [06:03]
Joe Weisenthal
Oh, and I should of course mention that they are the co authors of a brand new book, Stolen Betrayal and Hope in Modern Iran. So again, thank you both so much for coming out. Why don't we just start what is the premise of this book? Why was this an important book to write or what endeavored you to go on this project?
- [06:20]
Yegana Torbati
Yeah, well, thank you so much for having us. I mean, we started on this project around five and a half years ago, so late 2020. And I think our vision was at first we were very focused on kind of trying to explain, as you sort of mentioned, Iran's political economy and in particular sort of the roots of corruption and sort of state control and influence over the economy over the past 40, 50 years. And then of course as time went on and since 2020, a lot of things have happened in Iran and our focus both broadened and I think deepened. But sort of throughout our book is sort of this continuous thread of the promises that the current government, the Islamic government, came to power on in 1979, particularly around social justice and how it might redistribute Iran's really immense resources and sort of what that has actually led to in practice today, which is far from those promises.
- [07:15]
Tracy Alloway
Yeah. So you describe the Islamic Republic as evolving into this sort of mafia like state. And I guess there's a difference between an authoritarian government and a corrupt one, although they often go hand in hand. How did Iran kind of evolve from the authoritarian Islamic Republic to a place that, in terms of its economy, was actually extracting value from its people.
- [07:45]
Bazorgomer Sheriffaddin
Yeah, I think maybe it's good to define what do we mean by a mafia state. What's the difference between a mafia state and a normal totalitarian government? I think in a normal society, all citizens are equal and they benefit the same from the government and the wealth of a nation. But in a mafia state, you should imagine a layered society, and citizens are rewarded based on their loyalty to the system. So the more loyal you are to the government and the state, the more you will benefit from resources. So that's how the Islamic Republic was from the beginning. And it excluded its critics, and it rewarded people who were loyal. And it was an ideological government. So people who believed in the values of the Islamic Republic were rewarded. But as we move forward, we see that this trend was reflected more and more in the economy. You see that how Revolutionary guards and other religious foundations, they come and take over big chunks of the economy. And I can say that this mafia state and the layered society is even reflected in Iran's foreign policy. So in the eyes of Iranian state, maybe a Hezbollah member in Lebanon or a Houthi militia in Yemen, they are more loyal to the Islamic Republic than, let's say, a professor at Tehran University. So they should benefit more from the wealth of the nation. So that's why we have had all these discussions within the Islamic Republic that while the Iranian government can't afford to provide free milk at schools, it has the money to give to its proxies in the region to kind of reward their loyalty.
- [09:46]
Tracy Alloway
Right. Maybe I should back up even further at this point and ask the Iranian revolution how much of that was about economic grievances on the part of the people. The idea that, as so many revolutions are, you know, things need to get better versus just the. The clergy basically seizing power.
- [10:06]
Yegana Torbati
I think it was sort of a mix of a few different things. The working classes and sort of the lower socioeconomic classes did not really jump in to be part of the revolutionary coalition until quite late in the game when they really started to suffer from some of the Shah's economic policies. Kind of towards the very end, really at the beginning, it was more kind of like the middle classes and the intellectuals who were sort of forming this kind of revolutionary coalition from a bunch of different impulses. There were some who wanted kind of an Islamic government. There were others who were communists and were kind of more anti us, anti imperialist. And there were others who just wanted kind of a secular liberal democracy and felt that the Shah was trampling on people's rights. All of those people kind of joined in. But what we see especially kind of towards the end of the revolution as we're getting to 1979, is that the leader of the revolution, Ruhollah Khomeini, who then became the leader of the new government, he wanted to kind of co op some of the most effective sort of leftist arguments because he wanted kind of their young people, their supporters, to sort of also support him. And so these arguments of kind of the bourgeoisie versus the proletariat, Khomeini kind of adopted some of those terms with an Islamic tinge. And therefore sort of he promised. And then in the first few months, especially of the revolution, he also promised that, you know, we are going to provide for the poor, we're gonna provide free electricity, free buses for the poor, we're gonna build housing. And I think the government sort of wanted to present itself as being on behalf of some of those, the kind of lower classes of society and presented them kind of as its base. As time goes on, what we see especially kind of in the last 10 years, 10 to 15 years, it sort of turned its back on a lot of those promises to where it's not even really even pretending anymore that that is kind of what it's aimed at. And we can kind of talk about sort of some of the turning points there, but it really was kind of a gradual shift over time. And then especially since 2017, you really see this growing dissatisfaction amongst not just middle class Iranians, but also people who are poor and struggling against what this revolution has, has brought to them.
- [12:23]
Joe Weisenthal
Okay, everyone's ability to derive wealth or income or is somehow linked to where they stand in this hierarchy of supporting the government or supporting the state in some way or another. Let's talk about where the government gets its resources to make these allocations. Whether it's housing, whether it's electricity, whether it's obviously munitions for various groups, et cetera. Obviously, we know oil is a big part of it. But what are the main. How would you, big picture, decompose what the Iranian economy sort of basically looks like?
- [13:00]
Yegana Torbati
So I think, of course, yeah, oil's a big one. It has kind of this huge resource that's very valuable and that it can kind of use to fund itself. But also Iran has a pretty diversified economy in terms of its industrial base. And that is partially as a result of kind of the Shah's own policies, but then also sort of this idea that took root after the Revolution that we need to provide for ourselves, we need to be self sufficient. This was a very important kind of part of both the ideology of kind of present in that moment in general, this sort of like 20th century, 60s, 70s backlash against interference by world powers in the internal affairs of Iran and of other countries. So there was kind of this very strong idea, especially among Iranian leftists and including some of the clerical class, that we need to kind of establish our own industries and be independent. So Iran has a car industry. Iran has steel plants that were built after the Iran Iraq war, and it became operational sort of after the Iran Iraq war that produce huge amounts of steel. You know, kind of leading the Middle east in that industry. And these industries are maybe not necessarily the most efficient and they don't have a ton of foreign investment, but they provide employment. Iran has a huge agricultural sector, which is an enormous source of jobs in Iran, which has been very important as it's been under sanction. Of course, the agricultural sector has a lot of other costs, including overuse of water, which Iran has been facing. But it's an important, at least source of jobs in the economy. So these are all these major industries that kind of first start out after the revolution being very much under the purview of the formal states, kind of what we in the west would recognize as a government, including a ministry that is answerable to parliament, that oversees, for instance, the steel industry or the mines in Iran. Over time, we should kind of talk about this more. The control over those industries moves away from sort of the recognized parts of the state into kind of this shadow state, you know, which is sort of much more linked to the security forces and to these entities that are kind of controlled by the clerics, but aren't really accountable to the rest of the government.
- [15:25]
Bazorgomer Sheriffaddin
If I add a bit to that, because if you look at the history of the Islamic Republic, of course the revolution started with this massive wave of nationalization. The state took control of the major industries, shipping, mining, banking, and many more. But gradually, as we come forward, after a decade or two, the Iranian state decided the privatization of these major industries. But I think the main problem was the corruption. We didn't see real privatization. So usually people who were close to centers of power, they came and took over these industries, and they took them over with a very low price. Like imagine factories that were owned by the government, they were taken over by elements very close to the security forces. And so after that, many of these factories, they didn't come back to production. The machinery was sold and the land was turned into maybe a residential place to build apartments in. So we saw that level. But still, as Yegan mentioned, we have private sector in Iran. The problem with private sector is that if a business becomes successful and it passes a certain threshold, you will see the security forces coming and knocking on your door and they want their share. And that's again, it's like a mafia state. If you can imagine if you have a restaurant, I don't know in mafia movies, if you have a successful restaurant, they would come and they want their share from these businesses. And as we showed in the book, one of the major new sectors was the startup sector. Of course this sector was started by many Iranians who came back from abroad to launch this sector, but they saw that how the security forces came and forced them to give up these firms.
- [17:47]
Public.com Announcer
Support for this show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on public. You can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English like if the Vix hits 25, buy a put option on the S&P 500 or if my cash balance goes above $20,000, buy move the excess into my direct index. You approve the workflow and your agent handles the risk, monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public
- [18:43]
Joe Weisenthal
Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by
- [18:49]
Yegana Torbati
Public Advisors LLC SEC registered advisor complete
- [18:53]
Joe Weisenthal
disclosures available@public.com disclosures AI is entering its
- [18:58]
Yegana Torbati
most consequential phase where scale, safety and sovereignty will determine who leads and who lags. Join Bloomberg Tech in London on November 2nd and 3rd as global leaders across business, finance and policy examined the defining trade offs shaping the future of AI. Thank you to our presenting sponsor Salesforce and supporting sponsors Ida Ireland and Schneider Electric. Learn more@bloomberglive.com TechLondon
- [19:27]
Tracy Alloway
Just in terms of the state like becoming more intertwined with the private sector. I learned two new words or I guess terms from your book and I'm going to mispronounce the first one because I've only ever read it. I've never said it aloud but bonyads Is that right? Okay, Bunyads and then invisible ports. Can you talk a little bit more about those two things as sort of examples of how the state becomes intertwined with the private sector or the general economy.
- [19:59]
Bazorgomer Sheriffaddin
Okay, so again, these religious foundations, they were launched at the beginning of the revolution and they're very interesting. So like, one of them was this massive foundation that was established to distribute the wealth among the poor. And it seemed quite a noble cause. And of course, we had other foundations to look after families of martyrs of Iran, Iraq War and the veterans of the war. So these massive foundations, they were established by the order of the founder of the revolution, Ayatollah Khomeini. And the heads of those foundations, they had massive power. So we show in the book, for example, that how the head of one of these foundations, he wanted to import some wheelchairs into the country to give it to the veterans of war. But at that time, the Minister of Industries, he was against the import because he believed that the imports of German wheelchairs will be undermining the domestic production. But the head of foundation, he was an MP at that time, member of the Parliament. So he went to the Parliament and passed the bill to allow the foundation to import anything they want without any government supervision. And he wanted to do that to maintain the revolutionary nature of the foundation. And he didn't want to be constrained by bureaucracy and red tapes. It's interesting that the same person, decades later, he becomes the speaker of the parliament during the reform movement, and he founds these invisible ports or invisible jetties. How is that? So we see that these foundations and the Revolutionary Guards, they had massive power to import anything they wanted without audit and without taxation. And this character of the book, decades later, he goes to southern ports of Iran and he saw a dedicated port that belonged to the Revolutionary Guards and they could import anything they wanted without any supervision of the government. So in a way, you see how this mafia state was formed gradually, how the revolutionary nature of the foundation forced them into creating a system which was not transparent from the start. And later on, the same system turned into a mafia state.
- [22:39]
Yegana Torbati
And you sort of see how there is some good intentions, right? Like the idea of importing higher quality wheelchairs from abroad to help veterans of the war who had been injured. You know that that is a laudable intention. But you know, this character, this person that we're talking about, Mehti Karubi, he sort of, in that decision in the 1980s, establishes this idea that these foundations, and it wasn't just him, but this was Just one example, these foundations are above the law and they get special dispensations and special privileges because they're kind of associated with the revolutionary state. Private companies don't get those rights, entities that are disconnected from the government don't get those rights. But he establishes that. And that same thinking, as it continues and is not challenged over the years, sort of grows into eventually these invisible ports and many other abuses.
- [23:31]
Joe Weisenthal
It's so striking, like listening to this because you, I mean on the one hand obviously Iran, very distinct story, but on the other hand, you know, so many of these themes we've already discussed, you see like echoes of them or versions of them in all sorts of developing states or whatever. You know, obviously when you talk about, oh, here is a still factory or some industrial facility and then it's been re proposed in some way for some non vital thing, you sort of think about late era Soviet Union, for example. It's like, here's the company that wants to make bread, but they just sell all their parts abroad for hard cash and then don't actually serve their purpose. Were there ever any forces in government that tried to keep some of these entities in line? I assume there must be like some conflict or effort to sort of maintain this thing where you have something that resembles industry has some perverse incentives to maybe like take some shortcut for the personal gain of whoever is the controlling entity. Were there ever attempts to build in mechanisms such that these perhaps public resources couldn't be expropriated in some way?
- [24:42]
Yegana Torbati
For sure. I mean there were definitely people who maybe too late sort of saw the errors of some of the ways that the government had acted, including people who had been part of the problem, you know, earlier on in their career. So like for example, Mehdi Karubi, who we mentioned, who was a cleric, an mp, he led one of these bonyads, but then later on becomes part of the reform movement and rises to great power and tries when he's in parliament to establish some standards of transparency for these entities, these bonyads and other institutions that answer directly to Iran's Supreme Leader. And he's unsuccessful by that point, which was the late 90s, early 2000s. These entities and the Supreme Leader himself were just far too powerful for the elected government to really put a check on. There's another anecdote that we talk about at length in the book, which was in 2004 when Iran was opening a new airport. And this is, you know, a big moment for Iran. It had been planning this airport actually since before the revolution, of course it was delayed because of that and because of the war. But this was going to be kind of this big moment when Iran was going to have an airport to kind of rival Dubai and Istanbul. On the day that it's being opened, the Revolutionary Guards drive armored Land Cruisers onto the Runway and prevent the first plane from landing. They have to be begged by the Transport Minister before they allow it to land. When the second plane wants to come in, they scramble a fighter jet and threaten it and it has to divert south to Isfahan. And why did this happen? The Transport Minister later revealed in a series of interviews, because the guards had wanted the contract to operate that airport, but they hadn't provided the best price. And so the government had given it to a Turkish, Austrian firm and the airport was shut down. It was basically a no fly zone for months. And it was reopened with state firms running the airport rather than this foreign contract. And so you know our character Mehdi Karubi, he's a speaker of Parliament. His MPs write a report about what happened. But ultimately there's no accountability for that action. And as we go on, in time, we get to a point where the guards don't even really have to take such a dramatic step. Their dominance and contract and in different parts of Iran's economy sort of goes unquestioned. And I think the element of Iran's government that is somewhat unique, at least in its specifics from a place like the Soviet Union or other places, is that because all of these institutions answer to someone who's sort of seen as a holy figure and whose power comes from God, effectively, it's much more difficult to question both his authority and to establish any accountability over institutions that only report to him, which is how Iran's government is structured. Both the military and these big bonyads only report to him. And how can you question someone who's effectively God's representative?
- [27:53]
Tracy Alloway
I mean, the extraction from the private sector, how much of that is about consolidating political power and how much of it is about being worried about, I guess, foreign threats that might come in through additional capital in the country. Can you kind of decompose or try to maybe psychoanalyze the motivations for, for instance, the Iranian guards wanting to stop a new airport from operating?
- [28:24]
Bazorgomer Sheriffaddin
I think the way I see it is the competition of different factions within the same system. Yeah, it's not that one faction wants to have all the money and the other faction is promoting transparency and is fighting corruption. Usually you see within, with a change of government, you see that. How the new government tries to empower people and elements close to that. And we explain that in the book and how, for example, Ahmadinejad, when he came to power, he tried to empower people close to him. But when next presidents, when they come, including Hassan Rouhani, we see that he also tried to somehow make sure that people close to him can benefit from such resources. So I think there is this infighting that you see that sometimes the Revolutionary Guards, they need to use their military and intelligence power, and sometimes the other faction can take control. But overall, I think there are many elements that have added to this competition. Of course, the sanctions are one of those decades of sanctions they have created this lack of transparency within the state. And each faction, they come and they try to take a part of the business, trying to show themselves essential for the everyday affairs of the country to be handled. For example, before that, Iranian Oil Ministry has been in charge of selling oils. That's been the case for decades. But when the sanctions increased in recent decades and the government couldn't pay its debts to, let's say, Iran's police and their military forces, it gave them access to oil. So a big part of Iranian oil export has been done by the Revolutionary Guards. At this stage, some estimate that half of the Iranian oil is sold by the Revolutionary Guards. So I think the way I see it is just these different factions, they are constantly fighting with one another, trying to have a bigger share of the economy.
- [30:40]
Yegana Torbati
Tracey, I think your question, there's one anecdote that exactly answers it. So I think it's both. I think they came by their suspicion of foreign intervention in Iran's economy. Honestly, I mean, if you look at the 20th century history of Iran, it is one of economic exploitation of the country by world powers, us, the British, the Russians, et cetera. And also they have used that ideology in a way that has benefited themselves. So the one anecdote that kind of gets at this point is in 2020, 2021, when Covid is hitting Iran is one of the worst affected countries. By Covid, the Supreme Leader decides to bar the import of many Western doses of the COVID vaccine. And kind of almost simultaneously, the Iranian government decides to launch on a project to make its own COVID vaccine. But what's the entity that's given that contract? It's the conglomerate controlled by the Supreme Leader, Ali Khamenei. So he's both deciding a policy that. And I think if we. He's no longer with us, but if we had given him truth serum, I think he actually was suspicious of the motivations of the US and the British in making these Covid vaccines. I think that was probably genuine. But also with that decision, he creates a shortage and then his conglomerate that would profit from a government contract like this is able to step in and kind of save the day and also make these vaccine doses. So you kind of see in that one example both the ideology and the self interest kind of really melding seamlessly in a way that it's just kind of remarkable to me. So I think Bozrah's answer stands, but I also think that it's sort of both of those factors that you, you identified acting at once.
- [32:31]
Tracy Alloway
Yeah. And Joe, I should just say the one other thing I know about Iran's economy is that it has been the subject of interest, to put it mildly, to many foreign governments over time. And of course, famously bp, you know this, right? BP has its origins as the Iranian Anglo Iranian oil company.
- [32:52]
Joe Weisenthal
So here's one question I have just again, from a sort of pure economic developmentalist question. Many of the things that you describe, they would call like import substitution in developing economies, et cetera. It's like, okay, like we don't want to import too much of X because then our sort of nascent company can't compete, et cetera. And in many cases there could be logic. Have there ever been a figure in modern Iranian history who's sort of like the sort of the Export Oriented Development. Let's build an industry that, that can compete is what we always talk about with the, you know, the East Asian countries. Let's build an industry, set aside oil that competes and that we want to thrive, et cetera. And the export market will be the test of whether this is a successful company or not. Has anyone like tried this sort of popular idea?
- [33:44]
Bazorgomer Sheriffaddin
I think the closest that comes to my mind was Hashemir of Sanjani, President Hashimir of Sanjani, who was saying that he wants to turn Iran into an Islamic Japan. So he was very fascinated by metro system in Western societies and he wanted to create the same system. But at the end, I think he failed to do that. What do you think?
- [34:11]
Yegana Torbati
Yeah, I mean, I think, you know, I don't know that I would, if anyone should cite me on this, but I, you know, when I'm kind of looking at sort of how Iranian companies kind of compete, I mean, given the fact that the way, the direction, the direction the economy has gone in is favoring these entities, these companies that are linked to powerful people in the state, and that's sort of poisonous to competition. And so the idea that even within Iran's domestic economy, the truly most talented and meritorious companies are not the ones that, that rise to the top or the most successful or get the most market share. It's the ones that are smart enough or able enough to sell enough of their shares to some powerful entity that at least they're then protected from being perhaps raided or shut down. Or maybe they get some sort of special dispensation from the government. And then the idea that those companies that are themselves maybe not the best are then going to compete externally with like the Siemens of the world or Georgia just seems a bit, even if we set aside sanctions being a huge barrier, which they are, it seems a bit unrealistic to me that Iran would, would succeed in that kind of market. Although, you know, Iranian steel has, you know, they, they, they get, they used to get a lot of foreign, foreign revenue, foreign currency from exporting steel to various countries. So they are, there is a market for some Iranian goods, but it's, you know, I don't know that they would kind of be at the top of any sort of world list.
- [35:57]
Public.com Announcer
Support for this show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on public. You can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English, like if the Vix hits 25, buy a put option on the S&P 500. Or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk. Monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public
- [36:53]
Joe Weisenthal
Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC advisory services by Public Advisors LLC.
- [37:01]
Yegana Torbati
SEC registered advisor.
- [37:03]
Joe Weisenthal
Complete disclosures available@public.com disclosures the Bloomberg this
- [37:08]
Tracy Alloway
Weekend podcast News, politics and the lighter side of Bloomberg. Forget health span.
- [37:14]
Yegana Torbati
Midlife men face pressure to extend hot span.
- [37:17]
Public.com Announcer
Hot span.
- [37:18]
Yegana Torbati
Span.
- [37:19]
Bazorgomer Sheriffaddin
Yes.
- [37:19]
Yegana Torbati
So millennial men. You have to stay hot for like several more decades.
- [37:23]
Tracy Alloway
David.
- [37:24]
Joe Weisenthal
Okay, so you need to work on this. I gotta work on this is like
- [37:27]
Public.com Announcer
this is a really good.
- [37:27]
Joe Weisenthal
Not so telling me that the Bloomberg this weekend podcast. Subscribe today on Apple, Spotify or wherever you listen.
- [37:37]
Tracy Alloway
Can we talk about the tech sector specifically? Because again, this was surprising to learn that at one point Iran had a vibrant startup scene. But on the other hand, it kind of makes sense. If you think about a place where, because of sanctions, you don't have a lot of Amazons or Ubers around, then maybe that's the perfect.
- [37:56]
Joe Weisenthal
You know, I also just associate Iran with having a lot of young, bright, young, educated, young, educated people.
- [38:03]
Tracy Alloway
Yeah, absolutely. So what did Iran's tech startup scene actually look like?
- [38:08]
Yegana Torbati
Yeah, I mean, this is a fascinating chapter and one that we really dug into. So Iran was the second country in the Middle east after Israel to get access to the Internet. So it's a very kind of like tech forward pioneering country in that way. And towards the end, towards the early 2000 and tens more and more young people are starting to get online. The Rouhani government, kind of this more moderate government coming in, they enabled access to 3G and 4G Internet. So there's suddenly this access to mobile data and to the ability to kind of have apps and stream video, all those sort of things. So it really took off. And Iranian users wanted content, they wanted apps, they wanted. And as you mentioned, the sanctions meant that even with a nuclear deal, because the nuclear deal, if you remember, did not allow American companies to go into Iran. So the leading tech companies in the world, Amazon, Uber, Lyft, they could not operate. So there's this sort of protected ecosystem of 80 million at that time, 85 million or so population that needed apps. And Iranian businesses could suddenly launch and serve those people. And so that's really what happened. So, you know, you kind of start to see the first inklings of this sort of tech industry forming in the early 2010s. You get some very early foreign investment even before the nuclear deal happening, and some Iranian expats moving back and sort of seeing what's happening and starting venture capital funds. And this really then takes off after the nuclear deal is signed in 2015 and goes into effect in early 2016. And foreign investors are just really intrigued by this idea that we finally have like the last sort of green field opportunity is in Iran and maybe it could be the next Russia, maybe it could be the next China. And we could really get in early on this and so that we kind of trace what happens after that.
- [40:05]
Joe Weisenthal
You know, it's great. If you go to the website of the University of Tehran, where I am right now, it's all the cliches of every university. They have a picture of a bunch of happy grads. They have the required photo of a multiracial classroom, which every university has on their website. All these people learning. But let's talk a little bit more about, okay, you mentioned, like, the Ubers and Lyfts, et cetera. Like, what else were people trying to build? Like, how far did this ecosystem push? And then you mentioned, okay, eventually a company gets to a point, it reached some threshold in which, like, it is no longer really able to, like, operate as like a private entity that pursue shareholder value as its mission. What's the second after all this excitement? Like, where does it go?
- [40:52]
Yegana Torbati
Yeah. So, I mean, I will say a lot of the startups were kind of familiar. They were sort of like versions of things that we'd be familiar with in the West. So there's the Amazon of Iran called Digicolor, there's the Uber of Iran called Snap. There's food delivery apps, there's all sorts of things. There's also things that are kind of more unique, but those. The most successful companies, the ones like kind of right out the gate, are the ones that are sort of taking business models that have been tried and true in the rest of the world and localizing them for Iran, so they start to really grow. And this kind of takes everyone by surprise, including the government. I think from interviews I've done, it seemed like the government really thought this stuff was whatever. I think they didn't quite realize how quickly this field would grow. And our character that we kind of follow in the book starts his own venture capital fund, first with domestic funding, and then brings in a lot of external funding funding as well, from Europe and Russian investors. This sort of, I think, takes a lot of the conservative kind of established forces by surprise. And what we very quickly see is a backlash. And first it kind of takes the form of sort of hidden kind of whispers. There's like a mysterious telegram channel that forms that starts making accusations against some of the startup founders and, and sort of people around that sector. The startups are very much associated. In some cases they did not mean to be, but in some cases they did sort of form an alliance. They're associated with the elected government of Hassan Rouhani. And there were already these factions kind of developing that were very against Rouhani, particularly in the Revolutionary Guards, and sort of saw him and his diplomats as being too conciliatory towards the US So this backlash from the security state is kind of forming. People are being interrogated, they're being Sometimes arrested, even their offices are being raided. And at the same time what we document is that people, kind of middlemen with a foot in the security state and a foot in the private sector, people who had been Ministry of Defense officials or who had served on the boards of some of these Bunyads, et cetera, they start to make an offer to some of the startups and basically the offer is Give us like 5% of your shares and we will help protect you from these accusations and from the risks that you're facing. And some of the startup founders take that deal. You know, we really try to get into their mindset and we interviewed over 70 people for this section of the book and I think they, some of them didn't understand really what was happening. They felt beleaguered and they felt quite at risk and they wanted to save their companies. They wanted to do what they felt like was good work employing people, providing middle class jobs. And so some of them took that deal. And we see for instance the Uber of Iran, Snap sold a large portion of its shares to one of the Bunyad's, there's another kind of rideshare company that launches with Revolutionary Guard financing. And then ultimately just a couple of years ago we sort of trace the specifics of this and how much the company tried to resist. But ultimately the Amazon of Iran Digicolor did sell 40% of its shares to a telecom that is part owned by one of these Bunyans as well. So we really kind of see this, this exciting, vibrant, thriving industry that was not deeply connected to the government over time then kind of is subdued by those government forces.
- [44:29]
Joe Weisenthal
By the way Tracy, I just found this very interesting article from 2020 that company Snap, in order to get onto the There's a story from rest of world they got on the Apple app store by disguising the app as a music streaming app and then only upon a user logging in with an Iranian IP address would its full capabilities does a ride hailing app emerge. And then I guess Apple has since banned that, but some clever ingenuity there.
- [44:56]
Tracy Alloway
Yeah, very smart. So one thing I'm wondering is at the time of this tech boom, such as it was, there were some Iranian officials that seemed to be supportive of it. I can't remember his exact name, but there was someone in the ministry who was like actually actively promoting tech at the same time that you had other actors in the government who are starting like disinformation campaigns to smear these companies and making you know, not so subtle threats and things like that. Again, I'm fascinated by the coordination problem or lack of coordination here because it really seems like people are like off doing different things. And if you're a business owner, how are you supposed to respond to all these competing interests? Yeah, it's not a question, I guess it's a statement.
- [45:47]
Yegana Torbati
I can add a little bit to this. I think that that is the huge challenge that like Iran's not just for instance, a corrupt state or just an authoritarian state. It's also sort of chaotic. And I think that is what is poisonous to business almost more than any other part of it. You know, I'm not a China expert, but my sense is that, you know, when it comes to China, if you have an understanding with the Communist Party, then you're good to go in Iran, even if you do end up making a deal with some bonyad, selling your shares, whatever it might be, it's a mafia structure. But there's also all these underbosses and they all kind of compete with each other and their power sways from day to day. So yes, one entity within the government was really supporting these startups and wanted them to succeed. And his administration was sort of hated by the more powerful security forces. So for the startup guys, a lot of whom were coming, you know, they were expats, they were kind of coming back to Iran, they were bewildered by this. And as you both know, I mean, business requires certainty. And that has been, I think, more detrimental. The uncertainty in Iran, the instability of the actual government structure and figuring out what it wants from day to day, that's been more poisonous almost than the actual fact of like, okay, I got to make a deal with like, such and such entire and be able to continue my work safely.
- [47:09]
Bazorgomer Sheriffaddin
The closest comparison that comes to my mind is Greek mythology. I'm reading Odysseus and I realized that Zeus doesn't have the absolute power, so Iran's supreme leader didn't have the absolute power he needs to manage between all different gods and goddesses. And in the case of Odysseus, you see that he is supported by some gods to go back home, but some angry gods are trying to block his return to back home. So yeah, I think a businessman in Iran is just like, it's a real Odyssey.
- [47:44]
Joe Weisenthal
I love this analogy because it's like what was the breakthrough of monotheism was in part to solve this problem of different people petitioning different gods, et cetera. So you want to establish. No, there's like one set of rules. So I think that sad, but also that sort of Actually brings me to another question which came up a little bit earlier. But, you know, when we. When we talk about some of these things, we can draw these analogies. Oh, there's maybe comparisons to late Soviet Union. There may be comparisons to the oligarchs extracting the resources after the collapse of the Soviet Union. There may be analogies to a country like Venezuela, which, of course, people have also likened to a mafia state. There are analogies to China, with the difference between the CCP and the government itself. The thing that feels a little distinct here is the role of religion, which you meant, and the idea that there's maybe this other, higher thing that people are told to strive towards. Can you talk a little bit more about, like, teasing out the effect that that sort of, like, spiritual element plays in some of this, which I could imagine a creates yet another difficult dimension for businesses to operate in. But then also when I. Especially when I think of the tech sector, like, tech fries people's brains. And if I wanted to have a more spiritual society, I don't know how much I want the public to be looking at their phones all day.
- [49:09]
Bazorgomer Sheriffaddin
Yeah, I think that's a good point, because I think that's been one of the core problems when Western societies have been trying to tackle the Islamic Republic. Look, Obama tried to have a nuclear deal with Iran, and Trump is trying to do that. I think one of the reasons that the US and many Western countries tried to do that was their deep belief in free market economy and capitalism. I think the underlying assumption was that given a choice between isolations and sanctions and prosperity, of course every country will choose the latter. In a way, they believe that by integrating the Iranian economy into the world, they will create some political liberalization and some form of democratization. But I think Trump also believes that if you look at Trump's speeches in 2025, he says, oh, I want to make Iran a great nation. I see a bright future for the country. But you see, surprisingly, that Iran doesn't take that offer, the Islamic Republic. I think that's when this ideological component comes in that is somehow difficult to explain for the Western societies that you see that the country is much focused on the ideological aspects of it. And even after the nuclear deal that Obama managed to sign in 2015 and the lifting of sanctions in 2016, the money that came to Iran, the incentives that the Western societies offered, it was spent on military development. So the Iranian state has different priorities when it comes to development. They prefer to put the money on military development rather than on tackling unemployment Inflation and things like that. So that's been a challenge. And I think the challenge exists at the moment as well. Now, the deal, the MoU that was signed between Trump and the Islamic Republic, they offered billions of dollars, even hundreds of billions of dollars. But it seems that some elements, some hardline elements within the Islamic Republic, they didn't want that.
- [51:30]
Joe Weisenthal
Tracy, I think from the perspective of the west, most people, if they're being honest, cannot believe that some people aren't just motivated by money. Like, they hear, like, people say, oh, we believe in some higher power or some vision, but I think, like, deep down, we all believe that everyone has a price and that everyone actually just wants, like, no, they're really. They're saying this, but what they really want is wealth. And so I do think, like, there is this disconnect when we encounter, when we have relationships with people who actually may believe in something that is not just accumulating wealth and comfort.
- [52:08]
Tracy Alloway
Some people in the West.
- [52:09]
Joe Weisenthal
I think most people in the West.
- [52:11]
Tracy Alloway
Well, okay, but on this note, what is Iran's political economy? You know, the story we just heard about chaos and competing factions and all of that suggest for the future of the Iran US Conflict.
- [52:25]
Yegana Torbati
I mean, we see this. We see this right now, right? There's multiple factions inside Iran. There's kind of this hardline faction that is really harshly attacking the president and the foreign minister for even having the temerity to sort of negotiate this memorandum of understanding. There are people who kind of still want inside Iran for this war to continue because they really believe that Iran kind of had the US on the back, on the back foot, foot. And so I think in terms of how Iran's political economy looks going forward, I think it's still quite early to say at this point, just because they're still sort of in the midst of this war, really. And I think no one in Iran right now is looking that far ahead. To the extent that they are, it's very much towards China as the future. Mohamed Baghr Khaliba of the speaker of Parliament, the guy who's been kind of negotiating with JD Vance, he basically said that as well. He said that we want investment, but they want it from China.
- [53:23]
Bazorgomer Sheriffaddin
Yeah, I agree. I think one thing that I want to add is that, again, the different nature of these states, Trump is fighting, at best, for his legacy, but the Islamic Republic is fighting for its survival. I think that creates different pain tolerance and pain thresholds among these two nations. For the US Administration, the main problem is now if the Fed would increase the interest rate by 0.25% and the impacts of that on mortgage rates and other things. And of course, people are unhappy with the rise of gasoline prices by a dollar or so. But when you look at the Islamic Republic, you see that the inflation is almost three figures and they're not that much affected by that. The unemployment rate is very high. And even when you compare the casualties, for the US administration, the death of 18 soldiers is a lot, is significant, while for the Islamic Republic, the death of hundreds or thousands of soldiers is something that can easily absorb. So I think that is the nature of the conflict at this stage. And I think the reason that the Islamic Republic has survived the war so far is that its pain threshold is much higher. And I think if it continues like that, I think the US Administration, I don't think they will continue the war because of the long term impacts it will have on the economy. Of course, Trump is trying to keep the price of oil under $100 per barrel anytime that it touches 100. There is some talks for negotiations and some positive through social posts, but I think they can manage to do that for a bit. But I don't think it can continue for a long time.
- [55:30]
Yegana Torbati
I think the pattern that we saw kind of throughout reporting this book and that we really see now is that for the Islamic Republic, the economy has never been an end goal in and of itself. It's focused on it to the extent that it's a means to a broader end goal of self sufficiency or, you know, some kind of like drawing some sort of ideological strength from it. But in terms of actually focusing on the economy at the expense of, for instance, instance some of its ideological goals, that has never been in its pattern of behavior. And there are former officials like don't. You don't have to take it from us. There are former officials who have said it's time to set aside our ideology and our foreign policy and focus on the economy, which would mean bringing in foreign investment, which would mean coming to some final accord with the US that would really lift sanctions, that we can actually move on and grow the economy. And whoever's been in power at any point, mostly ali Khamenei for 37 years, but before that, Khomeini, of course, has not taken that bet. For them, the important thing has always been Iran's ideology. And I think unless there's some drastic change, I don't necessarily expect that to change. I would need to see a lot more evidence of that actually shifting before I would kind of change my assessment on that.
- [56:47]
Bazorgomer Sheriffaddin
Right.
- [56:47]
Joe Weisenthal
Yegan and Borzog, thank you both so much for coming on the podcast. Absolutely fascinating discussion. Yeah. Really appreciate you taking your time.
- [56:55]
Bazorgomer Sheriffaddin
Thank you. I really enjoyed it.
- [56:57]
Yegana Torbati
Thank you both so much.
- [57:10]
Joe Weisenthal
Tracy, I really enjoyed that conversation. I learned a lot. I really did mean what I said in the conversation, which is that I do think a lot of American or Western, like, negotiators and thinkers just sort of, like, constitutionally find it hard to believe that people in much of the world actually believe in things and aren't just, like, going to be transactional at
- [57:34]
Bazorgomer Sheriffaddin
the end of the day.
- [57:35]
Tracy Alloway
That's why my first question was about how much of the Iranian revolution was driven by economic interests versus economic actual ideology. But, yeah, I totally take the point. I also thought it was interesting, you know, when we think about emerging markets, there's plenty of investment that goes into emerging markets. Right. But it feels like the stability point definitely stands out. You know, you can invest in an authoritarian regime totally if you know that you're bribing the right person and you're not going to have all your assets seized in, like, two weeks or something by a competing faction. But when it comes to Iran, it does seem that factional element, that chaos, as they described it, has been an issue.
- [58:15]
Joe Weisenthal
Yeah. I thought the point about this sort of like, you know, in China, there's the Chinese government and then there's the party, right. And they're not the same thing, but they're closely linked. But the idea that, like, okay, what if you have, like, a more multiplayer element where it's like, okay, you have some entities that are like, truly, like, this is the state, and this. There are state interests, and then you have IRGC interests, and then you have religious interests, et cetera. And then you really do get this sort of, like, potential misalignment. I love the analogy of, like, the sort of, like, petitioning the various Greek gods as, like, a way to think about a sort of, like, problem of establishing that stability. It's almost like, okay, like, a gangster state might not be the worst thing in the world. You. If there were just one gang. Right. But. Right.
- [59:03]
Tracy Alloway
If there was just one producers clip that.
- [59:05]
Joe Weisenthal
No. Yeah, like, if there's just one gang. Think about, like, think of, like a mafia story. Right. Part of the pro. It's like, okay, I'm going to pay this. This mafia. I don't really need the protection from my store. This come. This guy comes and said, I'll protect your store from damages for some insane amount. It's like, I don't need it, but whatever, I'm going to pay it, you know? But then the moment there's three gangs, you and each of them wants that cut, then it becomes like a seriously insane no.
- [59:32]
Tracy Alloway
And also they get mad at you for paying one of them. That's what I'm saying.
- [59:35]
Joe Weisenthal
Yeah.
- [59:35]
Tracy Alloway
So like I prayed at the temple of Zeus and because I sacrificed a goat to Zeus, Poseidon is now upset at me. And now I have to appease Poseidon and then I'm going to appease Poseidon and then, I don't know, Aphrodite or whoever is going to get mad. It just goes on and on.
- [59:48]
Joe Weisenthal
Right. If your only issue was the sacrifice that Zeus demanded, you might not like it, but you could form a business with those expectations and that would probably be you find a way to survive. But then you have this multi level thing and you can't form that expectation.
- [60:03]
Tracy Alloway
Did I ever tell you about in Tokyo, friend of mine had a bar, tiny bar, 10 seats at the bar.
- [60:10]
Joe Weisenthal
Okay.
- [60:11]
Tracy Alloway
And he got extorted by the Yakuza.
- [60:13]
Joe Weisenthal
Really?
- [60:13]
Tracy Alloway
Yeah. And so what happened is There were only 10 seats at the bar. He noticed, first of all, he got a request for money, for protection money from the Yakuza. And he said, no, I'm not going to pay it. I'm a foreigner, I don't have to. Blah, blah, blah. Next night, a single Japanese man comes into the bar, orders one beer, sits at the bar all night, taking up that seat. Not a big deal. Plenty of other people around. Next night, two people come in, two Japanese salarymen sit there, order one beer, don't leave the entire night. You can see where this is going.
- [60:45]
Public.com Announcer
Yeah.
- [60:46]
Joe Weisenthal
Wow.
- [60:46]
Tracy Alloway
Within 10 days, all of his seats were being taken up by single customers ordering single beers. And it didn't happen anymore after that. So, you know, I will say, infer
- [61:00]
Joe Weisenthal
how the problem was avoided going forward.
- [61:02]
Tracy Alloway
Exactly, exactly.
- [61:03]
Joe Weisenthal
That's a good story. Anyway, I'm really glad we did that episode. I learned quite a bit.
- [61:07]
Tracy Alloway
Absolutely. All right, shall we leave it there?
- [61:08]
Joe Weisenthal
Let's leave it there.
- [61:09]
Tracy Alloway
This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
- [61:14]
Joe Weisenthal
And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers, Carmen Rodriguez, Armenarman dashiell Bennett at Dashbot, Kale Brooks at Kale Brooks and Kevin Lozano Evanloydlozano. And for more Odd Lots content, go to bloomberg.comoddlots where you have a daily newsletter and all of our episodes and you can chat about all of these topics 24. 7 in our Discord, Discord, GG Oddlots
- [61:36]
Tracy Alloway
and if you enjoy odd lots, if you like it when we talk about the Iranian economy, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there. Thanks for listening.
- [62:05]
Joe Weisenthal
Sam.