The Anatomy of Financial Bubbles | Lessons From 200 Years of Market Panic

Summary

Run the Numbers: "The Anatomy of Financial Bubbles | Lessons from 200 Years of Market Panic"

Host: CJ Gustafson
Guest: Aman Baerji (Financial Historian, Investor, early PayPal team)
Date: March 19, 2026

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Episode Overview

This episode dives deep into the anatomy of financial bubbles, exploring the psychological, social, and economic forces that have shaped bubbles over the past two centuries. CJ Gustafson interviews Aman Baerji, financial historian and author of the forthcoming A Brief History of Financial Bubbles, examining recurring patterns, cognitive biases, and what we can learn as operators and investors. They critically discuss whether the current AI market shows signs of a bubble, dissect historical cases such as the Dot Com boom, the UK Railway mania, and the 2008 subprime crisis, and touch on real-world implications for today’s finance leaders.

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Key Discussion Points & Insights

1. Defining a Financial Bubble

• Baerji's Definition:
  • A bubble consists of an asset price rising by 3x or more over a two-year period, followed by a rapid and symmetrical collapse in value within two years ([00:04]; [03:51]).
  • He distinguishes his approach from subjective “I think it’s a bubble” definitions, focusing instead on historical, empirical patterns of value creation and destruction ([05:46]).

2. Cognitive Biases that Fuel Bubbles

• Behavioral Patterns:
  • Cognitive biases such as the “representative heuristic” (extrapolating short-term trends into the future), overconfidence, herd mentality, FOMO (fear of missing out), and loss aversion were recurring in every major bubble ([06:09]).
  • Historical amnesia: New generations of investors often lack institutional memory from previous busts ([08:52]).
• Quote:
  • “People are taking short term trends and thinking, ‘Oh, this is going to be a long term trend,’ and they don't have enough memory that goes back... In 2020-21, people invested in tech, thinking, ‘this time is different.’” – Aman Baerji [06:41]

3. Positive vs. Negative Bubbles

• Dual Nature:
  • Not all bubbles are purely destructive; some act as accelerators for essential infrastructure and innovation ([14:10]).
  • Example: Dot Com Bubble – Massive investment loss, but enabled the Internet, tech giants (PayPal, Amazon, Nvidia, Salesforce, etc.), and the entrepreneurial ecosystem.
  • Example: UK Railway Mania (1840s) – 25% of GDP invested created excess capacity but enabled industrial and economic growth ([16:27]).
  • Quote:
    • “Great companies get created in these bubbles... a lot of the companies that got destroyed, the value that got destroyed—all the companies that got created in that bubble formed that bubble.” – Aman Baerji [14:52]

4. Hallmarks & Warning Signs of a Bubble

• Capital Intensity, Rapid Run-Up, Broad Participation:
  • Large influx of capital, sudden boom in valuations, and retail/”middle class” investor participation are recurring tells ([21:29]).
  • “Taxi cab drivers and, and you know, people we kind of meet in our daily walk of life...were jumping into the Latin American mines bubble and some of the subsequent bubbles. That's another tell.” – Aman Baerji [22:00]
• Cultural Markers:
  • Historical literature frequently references bubbles even as they happen, showing self-awareness among participants ([23:31]).

5. The Role of Grifters, Fraud, and Human Nature

• Inevitable Grifters:
  • Every bubble attracts fraudulent actors, exploiting exuberant environments and rapid wealth creation ([28:49]).
  • “They probably do. That just might be part of human nature when you have this rapid creation of wealth.” – Aman Baerji

6. Government, Religion, and Policy

• Monetary Policy:
  • Easy money and government incentives are critical drivers. Almost every historic bubble involved artificially low interest rates or direct stimulus ([31:10]; [35:37]).
  • Examples include the Bank of England cutting rates before the Railway mania and Alan Greenspan’s decisions around the Dot Com bubble ([35:37]).
• Religion’s Role:
  • Religious institutions, such as Dutch Puritans during the Tulip Mania, often played the role of skeptics, publishing moralistic anti-bubble tracts ([31:19]).

7. Pervasiveness, Duration, and Consequences

• Wider Participation, Deeper Damage:
  • The longer a bubble lasts and the deeper its origins (= more ordinary participants), the bigger the fallout ([36:06]).
  • The 2008 subprime crisis started with well-intentioned government policies in the early 1990s, leading to systemic risk ([37:06]).
  • “I think the most destructive ones... compromise the banking system. The ones that don't—the ones that are equity financed, private money—those usually turn out okay.” – Aman Baerji [39:05]

8. Are Bubbles Linked Across Time?

• Policy Recurrence:
  • Bubbles can feed each other, especially when policy missteps (such as keeping rates too low after a crash) spill into the next speculative cycle ([41:09]).

9. Are We in an AI Bubble Today?

• CJ & Aman's Analysis:
  • Not yet—valuations remain far below 1999 levels, the core businesses (Nvidia, hyperscalers) are profitable and cash-rich, and customers are financially sound ([43:38]).
  • However, warning signs such as "circular finance" (vendor financing between giants like Nvidia, OpenAI, Amazon, and Microsoft) merit caution ([47:15]).
  • “If I were a financial investor and the lead investors were Amazon, Google, Alphabet, and these strategics... I’m not sure my interests are aligned with theirs.” – Aman Baerji [49:06]

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Memorable Quotes & Moments

• On Forgetting History

  • “I teach kids at Harvard Business School today who aren’t even 26 years old. They have no idea...they never experienced [the Dot Com bust] for sure.” – Aman Baerji [08:52]

• On Bubbles as Growth Catalysts

  • “The [UK Railway] bubble burst...But by 1850, they’re growing again... actually the fastest period of UK growth in their long history.” – Aman Baerji [16:27]

• On Financial Discipline at PayPal

  • “There was an intolerance of waste I think every startup should have and a lot have lost in the era of free money... We were growing at 30% year over year, profitable every one of those years.” – Aman Baerji [49:32]

• On Dot Com Referral Schemes

  • “That’s where I began to learn how to do LTV at CAC. I learned to do that very quickly because my suspicion was, oh boy, we have six months.” – Aman Baerji [52:11]

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Timestamps for Important Segments

• Defining Bubbles: [00:04], [03:51]
• Behavioral Biases in Bubbles: [06:09]
• Positive vs. Negative Bubbles: [14:10]
• Capital Intensity & Retail Investors: [21:29]
• The Role of Grifters: [28:49]
• Government Policy & Monetary Stimulus: [31:10], [35:37]
• Bubbles’ Consequences and Systemic Risk: [36:06], [37:06]
• Historical Recurrence: [41:09]
• Are We in an AI Bubble?: [43:38]
• Circular Finance & Strategic Investment Risk: [47:15]
• PayPal Budgeting and Referral Campaigns: [49:32], [52:11]

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Practical Takeaways for Listeners

• Historic bubbles show us both eternal human bias and technological progress; they create fertile ground for innovation, but caution is always warranted.
• Bubbles are clearest in hindsight, but signs such as rapid, unsustainable value creation and widespread retail participation can serve as early warnings.
• Financial leaders, especially in tech/startup finance, should be wary of “easy money” cycles, focus on discipline, and learn from history to avoid repeating mistakes.
• Today's AI surge, while spectacular, still shows substantial differences from historic bubbles, but vigilance and critical analysis of investment incentives are essential.

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For More:
Preorder A Brief History of Financial Bubbles at bigbubbletrouble.com (Available late March 2026).
The podcast is hosted by CJ Gustafson and is part of the ‘Run the Numbers’ series.

Transcript

[A]

Hey, there's a bubble.

[B]

How do you know? What's your definition of a bubble?

[A]

A run up in some asset price over a short amount of time. If the prices go up by roughly 3x or more over two years and then all of that goes away in a symmetrical downturn, then that's a bubble. It usually came down to somebody saying, well, I don't agree with the prices being set by the market, therefore I think we're in a bubble. I think we're in a crypto bubble. I think bitcoin's a bubble, I think baseball cards are a bubble. And I try to get away from the. I think, I think, I think. And just stick to where did value get created and then destroyed in a very short amount of time?

[B]

Time.

[A]

And we've had decades, I would say the 1840s, 1880s, 1920s, they were all far more impactful in terms of technology affecting our lives than the last decade. Which is a debatable statement until you actually read history and see what people look like at the start. At the end of those decades, in a five year period, the amount of money going into UK railways was around 25% of GDP. Just for context, we're talking about the AI capex boom. Is that 2 to 3% of US GDP?

[B]

That's what I was going to compare it to. It's single digits, right? Not 25%. Do all bubbles attract grifters?

[A]

Yes, I think so. I think they probably do. That just might be part of human nature. It is important to distinguish between these positive and negative bubbles.

[B]

Well, if you're interested, I got some Florida swamp land I'd like to sell you.

[A]

Yeah, that sounds promising.

[B]

Are we in a bubble right now with AI?

[A]

I don't think so.

[B]

I actually feel pretty sick. Is this thing on?

[A]

Yesterday's price is not today's price.

[B]

Welcome back to Run the Numbers, the show where we talk with the world's top CFOs and finance leaders. I'm CJ, a tech CFO and my goal is to unpack the frameworks and operating principles that make you better at allocating capital and leading teams. On today's show, I'm speaking with Iman Bereji. Aman is a financial historian, investor and an early member of the PayPal mafia. And he spent years studying one of the most fascinating and recurring phenomenon in markets, economic bubbles. His upcoming book, A Brief History of Financial Bubbles examines the patterns behind some of history's most famous speculative booms. From the railway mania of the 1840s to the dot com bubble and Beyond. In this episode with Iman, we go deep on what actually defines a bubble, the cognitive biases that drive them, why investors get pulled in, and why periods of speculation often coincide with major waves of technological innovation. If you like the show, please remember to like and subscribe. It helps us with the algorithmic overlords. And if you're looking to hire the best finance and accounting talent, I'd love to help you. I run a recruiting service that pairs you with thoughtful, qualified candidates from our warm pool of finance leaders, people who voluntarily debate LTV to CAC on weekends. If that's of interest, shoot me an [e-mail] and we can talk on to today's episode with Iman Berjee. Iman, thank you so much for joining me on the podcast today.

[A]

Hey, you're welcome. Good to, good to see you, cj. Big fan of your, your pod and all your stuff.

[B]

Thank you so much. I appreciate that. It means a lot coming from you. And I feel like this is going to be a confluence of two things. I'm passionate in finance and history, so I actually double majored in finance and history undergrad. And when I heard you had this book coming out on the history of bubbles, I was like, it was like catnip for me.

[A]

Yeah, what a mix, right? I did the same. I majored in public policy. I studied, you know, the finance and the micro stuff is something you really focus on as a economist, as a cfo, you're always, you're wondering about companies and how you're operating, what your operating metrics are at the micro level. But as an investor, you know, you start to look at the macro patterns and how do these companies fit into a broader context. So I love that stuff too. It's unusual to be able to meld both together. So, you know, left to. Left to talk about this with you.

[B]

So let's, let's set the scene for people. You wrote a book on bubbles. What's your definition of a bubble?

[A]

Yeah. The name of the book is A Brief History of Financial Bubbles. It's going to come out next month, so March of 2026. It'll be available on Amazon and wherever you get your fine books, we'll make it available on our website as well. The premise behind the book was just to focus on the top 10 bubbles in history, the 10 biggest ones. It begins in Amsterdam in 1636. It nominally ends in 2021 with what I call the everything everywhere, all at once bubble. That's not the official name for it. It's, I'm a big movie fan and this is a multi asset, multi country bubble that emerged in 2020, 2021. Kind of the first real big correlated cross national bubble ever. And then the, the value was created and destroyed and then it does eight bubbles in, in between. And then I talk a bit about the AI bubble. Are we in one now? And if not, why not? And if so, why? What are the, you know, what are the patterns? What are some of the causes and consequences of the bubbles? Why do they repeat? If they repeat, do they do it exactly the same way? Or what are some of the differences? For purposes of defining the bubble, I really just stuck to a pretty straightforward definition of a run up in some asset price over a short amount of time. I picked 2 years. So if the prices go up by roughly 3x or more over 2 years and then all of that goes away in a symmetrical downturn, so two years or less, then that's a bubble. It's a little bit observational, it's a little bit, you know, empirical. It doesn't really get into other definitions of bubble. Like, you know, the, are the valuations of a certain asset class untethered from the fundamentals, because the fundamentals in crypto or in tulips, like what are, what are the fundamentals of a good crypto investment? You know, so I try to get away from that. And the more I thought about these other definitions of bubbles, it usually came down to somebody saying, well, I don't agree with the prices being set by the market, therefore I think we're in a bubble. I think we're in a crypto bubble. I think bitcoin's a bubble. I think baseball cards are a bubble. And I try to get away from the, I think, I think, I think. And just stick to where did, where did Valley get created and then destroyed in a very short amount of time?

[B]

The baseball card one was one that I lived through as a kid. I don't know if that one made it into your book as one of the top 10. But that was something that hit on a micro level for cj.

[A]

Yeah, I think me and my buddies had the same thing. I grew up in Canada, so we had hockey cards, we had baseball cards, and you know, it was too small to make the list, but a lot of the behaviors are, are the same.

[B]

Do you think we hold some cognitive biases that play into the formation of bubbles as humans?

[A]

Yeah, I think there are, there are a couple, you know, there's, there's some really good literature out in behavioral economics about these biases. I'm not a, I wouldn't say I'm an expert in behavioral economics. I do a guest lecture at Harvard Business School on the broader topic of economics and so. But I graduated from Stanford and econ in 2001 and a lot of the advances in behavioral economics have sort of happened since I graduated and I don't think I've followed in, you know, with most of them. There's some really good stuff from Amos Tversky and Daniel Kahneman, who I think won the Nobel Prize, at least Daniel did. I don't know if Amos might have passed away by then and. But there's some good literature out, you know, from them that I'd recommend. Some of the biases you definitely see are what they would call a representative heuristic where people are taking short term trends and then thinking, oh, this is going to be a long term trend and they don't have enough memory that goes back to educate them about how and when these things might implode. I think you've probably experienced this too. In 2020, 21, we had a lot of people investing in tech thinking these valuations are historically high. But this time is different. Covid the zoom generation technology is rapidly, you know, going to transform work and that's never happened before. And they didn't remember back to, you know, the 2008 or 9 bubble and maybe weren't old enough to live through the 2001 bubble when the Internet changed everything. Right? The Internet changed how we work and how we interact and created valuations and companies that people thought, well, that's different. And in 2001 they didn't maybe remember the computing revolution of the 1980s or the UK railway boom, the 1840s, when quite literally technology changed everything. And we've had decades, I would say the 1840s, 1880s, 1920s, they were all far more impactful in terms of technology affecting our lives than the last decade. Which is a debatable statement until you actually read history and see what people live like at the start. At the end of those decades, another one that kind of comes up is this, this overconfidence that people, you know, it's a bit of a herd mentality, people jumping in. I guess we call it inventure. Fomo, right. Fear of missing out, loss aversion becomes something that people kind of forget about and they're, they're afraid of, of missing out on the upside and then they want to pay any price to get into the latest, hottest AI company, Crypto company, Railway company dot com. So those are probably the top, you know, the top three or four that came up over and over again.

[B]

It's funny how far away 20, 20, 2021 now feels. And it's like it's five years ago, right?

[A]

Totally. Right. But a lot's happened the last five years.

[B]

I know, I know. And I remember during that period there were a couple of people saying, oh, well, I remember the dot com bust. And you're like, well, yeah, it wasn't that far back. But it's like we, we, we for some reason think this time is different. And we also think it's a further time apart than it actually is.

[A]

Yeah, I think that's right. Probably that's a big piece of that though, is, let's take that dot com bust as an example. The market really busted in or around March of 2000. And you have 26 years ago, I teach kids at Harvard Business School today who aren't even 26 years old. They have no idea when. I mean, they have an idea, but they don't really. They didn't live through it for sure. They never experienced it for sure. They've grown up in an era when, you know, the market that wasn't part of the institutional memory. And I think a lot of vice presidents at Goldman Sachs have. I mean, they're older than 26 years old, but they were probably in kindergarten or maybe as late as high school when that bust happened. So their formative memories as workers is definitely, you know, absent that experience from the bubble, at least, at least the dot com bubble. And I don't think we do a great job at teaching history in, in school, unfortunately these days. And so, you know, I guess every generation just has to relearn some of these patterns.

[B]

Yeah, I mean, even 2008. I graduated from high school in 2009, so I'm in my mid-30s, but I don't really remember the impact of the great financial crisis. Like, I remember a couple maybe people in my town, maybe their parents got laid off or something. But my parents were talking about it, reflecting back. I remember I was doing a fundraiser at the time. They said, well, this year is going to be different, C.J. than the fundraiser you ran last year. That's like the only thing I remember from it. But like, I don't remember the specifics or that it, until I saw the big short, you know, 10 years later, I didn't, I didn't, I didn't connect the dots.

[A]

Learning and reading history is important. And you can't. Because you can't live all these experiences, it's important to look around you and see what others have gone through. I think that just makes you a better investor in a business, a better business manager. That was part of the premise for writing the book, actually.

[B]

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[A]

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[B]

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[A]

Yeah, I think it depends a lot on the specifics of the bubble. So in the of the 10 that I looked at, there's two major ones that I would say were positive bubbles that actually brought a lot of investment into a new area, a new category. And if you look at the aftermath, it probably accelerated economic growth and the well being of the people in that time and place. A lot of winners and losers along the way, but. But a lot. But let's call it net positive. So the two that I would think of are the dot com bubble and primarily centered in the US between 1997 and 2000. And that one was it brought a lot of investment into the Internet, into the routers and the telecom assets that built the Internet, which then allowed all the connectivity to take place. And then a lot of companies, even though there was a big bust and a lot of companies got destroyed in that and a lot of value got destroyed, all the companies that got created in that, in that bubble and formed that bubble. So I worked at PayPal, that was one of them. We were founded in 1998, Nvidia was formed. In 1993, Amazon was 94, Yahoo and eBay were 95. Broadcom came out of a spinoff of HP and in 1999, Netflix, Cisco. Cisco had an accelerated business. Salesforce was 1999. And then even out of the detritus of the bubble, my two bosses at PayPal were Peter Thiel and Elon Musk. And they sold PayPal, went public in 2002. Not a huge IPO, one and a half billion dollar valuation at the time. But they made enough money where Peter became the principal institutional investor in Facebook and Peter went on to found Palantir with some of his winnings from that. So, you know, those are all kind of consequences of that. And then Elon created Tesla and SpaceX and the boring company and bought Twitter and all the rest of it. So great companies get created in these bubbles. A great technology gets left behind for humankind, it gets repriced, the owners change, but you know, the valuations are. The losers are more than offset by the winners. And the other One is the UK railway bubble. Between 1845 and 1849 there's a huge railway investment boom, far bigger on a proportionate basis than the Internet, the dot com bubble or what's going on in AI. Now, in a five year period, the amount of money going into UK railways was around 25% of GDP. Just for context, we're talking about the AI capex boom. Is that 2 to 3% of US GDP.

[B]

That's what I was going to compare it to. It's single digits, right? Not 25%.

[A]

No, low single digits for, you know, two years. And this UK railway boom went on for five years and was 25% at the end of it. And mostly private capital, almost all equity, which is, you know, which is better than debt or better than government. Where the negative bubbles usually happen is government funding or debt. And then if you ask people at the time in the UK, hey, how do you feel? You know, in 1849 or 50 people would have said, wow, this is a miserable time because the bubble burst. A lot of companies went out of business, they went through a recession, the panic of 1847. Now a lot of that wasn't directly related to the technology. As I've researched it, it looks to me like a lot of that was just poor harvests. In 1848 there was the Irish potato famine, you might have heard of that in history. By 1849 the economy in the UK is recovering. By 1850 they're growing again. And they went through a big something called the Great Victorian Boom. That's a term from historian Roy church. So from 1850 to 1873, the economy booms. It's growing by one and a, a half percent per capita GDP growth. That's faster than the UK economy was growing in the 1820s to 1850s. It's faster than the succeeding period that went through World War I. It's actually the fastest period of UK growth in their, in their long history during the, at the end of the industrial revolution. And UKs are leading, UK railways are leading the way and all that. So I think those booms, those, those economic booms and the fact that the UK and the US had have leadership positions throughout that period is largely attributable to the fact they went through those bubbles. They pulled in a lot of capital, accelerated investments in technology, and then kind of handled it the right way. And, and so it was a positive, not a negative.

[B]

I like how you explain that in my mind went to railroads, whether it was in the UK or even in the us We've had a couple periods of exuberance where we were laying track to literally nowhere and towns sprung up there. But at least you had the tracks after. Right. You could run something on that. Whereas maybe if you have something now around AI, these servers maybe only last, or these chips only last three to five years, they're melting off the wall. So what's left after? I don't know. So I think in each, each one of these bubbles you have to say like what can be repriced and then reused after.

[A]

And sometimes it's a skill set. So in the case of their UK railway, I think that was an example where they laid a lot of track in advance of the demand materializing the business cases. If you add them all up between the, in those 1840s it looked like what they were putting together was tracked for about 24,000 miles. Just for context, they had 1500 miles at the time, at 1845. So they were expecting, you know, like a 15x increase in railroad track being laid in like a five year period. And it turned out there was a lot of demand. So from 1845 to 1849 revenue from those railways doubled. And from 1849 to the late 1850s it doubled again. But even though there was real demand and real revenue happening, real businesses, the supply way outran demand and they didn't really need those 24,000 miles of track until the 1870s or 1880s.

[B]

Took that long.

[A]

Yeah. In fact, even as late as World War I, all the UK had like 25,000 miles of track. So it took like 40 years for the demand to eventually catch up in supply. And then, you know, then the airlines took over and then the, you know, their real railway capacity kind of maxed out. And similarly, I think in the US during that.com boom, they laid a lot of, uh, you might remember dark fiber. You might be a little bit too young to remember what dark fiber is, but they.

[B]

Is that what Mark Cuban was involved in?

[A]

He was, he was at, he was, he was, he was involved in a company that was, you know, laying track. Laying fiber. Yeah, in 99, 2000. And he sold it to Yahoo right at the top of the bubble, which is great timing for him. But the amount of dark fiber, the amount of fiber optic cable being laid by 99, 2000 was anticipating a demand for the Internet. And the Internet was growing and the demand was growing, but they laid so much fiber and capacity that 99% of it, between 97 and 99% of it was dark by 2000, 2001, meaning it wasn't being lit up, it wasn't being used. And then all of a sudden the investment went away and the market crashed. But, you know, you had a technology that then eventually got used. Up until 2008, 9, 10 and maybe more importantly, a skill set people had built. Now companies, right, they built Netscape. And even though Netscape didn't work out, that technology, that entrepreneurialist that, that wherewithal, the people who started those companies took that skill set and built new companies and those did work out and the entrepreneurial mindset was set. And all of a sudden, you know, the venture industry bloomed and so you built these. It wasn't just the technology itself, but the. Because the technology changes. You went from the Internet to, you know, to wireless, you went from the desktop to mobile. But the mentality, the, the spirit of it, the entrepreneurialism, just like it did in the uk, became part of our culture and that's really what took hold. There are very negative bubbles, a lot of land bubbles that I cover. The 2008 DOC, you know, subprime crisis is a perfect example. Australia in 1886 went through a land bubble. There was no technology, there was no entrepreneurial mindset, there was no lasting benefit to society and there was just a lot of damage. So it is important to distinguish between these positive and negative bubbles.

[B]

Well, if you're interested, I got some Florida swamp land I'd like to sell you.

[A]

Awesome. Yeah, that sounds promising.

[B]

Aman, what are some of the characteristics to say that we're in a bubble. It sounded like from those examples, capital intensity might be one of them.

[A]

Yeah, I think the amount of money going in was one of the factors. I would look at another one I think is just if there's a really quick run up and valuations that seems to be, you know, very sudden and all of a sudden starts to pull in a lot of different types of investors. That's usually another, another sign in a couple of the bubbles that I, that I looked at, you know, some of them were actually very destructive. But like in the South Sea bubble in the 1720s, which is a, probably my favorite bubble of all time.

[B]

Forgot about that one.

[A]

Yeah, yeah, you were a little bit, you might be a little bit too young to remember that.

[B]

Young to that one.

[A]

But it's a, it's a sensational story with villains and heroes and characters and then, you know, government policy and, and all these cognitive biases and all wrapped them into one. For the most part there was a, you know, they were limited to fairly wealthy people who could afford to lose money. But it was a, it was a big bubble and they, when it did blow up, it did have consequences that were economy wide. There are other bubbles that, you know, pull in a lot of middle class investors. There are stories told. The UK railway bubble, certainly if a Latin American minds bubble have kind of common, common folk, you know, getting wrapped into the bubble. We would say, you know, taxi cab drivers and, and you know, people we kind of meet in our, in our daily walk of life who are asking about crypto, for instance. Right. This, this is, this is one example of it. Back then it was the butcher, the baker, the candlestick maker. All these people were jumping into the Latin American, the Latin American minds bubble and, and some of the subsequent bubbles. So that's another tell. So if it's a lot of capital intensity, a lot of people jumping in, kind of retail investors following in, that's usually another tell. What also happens is in, in every single one of these is people are always talking about bubbles. There's literature at the top of the bubble. In 1720, in fact, the first person who used the word bubble in the context of a financial bubble was the Irish author Jonathan Swift in 1720 and he wrote a poem about bubbles. And the last stanza in that poem is what people now refer back to as the first time that was used in this context. And so top of the dot com bubble. I remember talking to Peter Thiel, who was my first boss at PayPal. We acknowledged that we were in a bubble. Peter thought PayPal would be different and it would survive the bubble and all the other companies would go away. Payments companies at least. And he was right. PayPal was one of the survivors of the dot com bubble. But I do remember distinctly he was talking about a bubble in 99, 2000 and how to navigate through. So funnily enough, at the top of every bubble there are a lot of people who are self aware or who understand what they're going through.

[B]

Didn't he also try to start a hedge fund around that time because he thought we were in a bubble?

[A]

He did. I don't know that he, he started Clarium Capital a few years before PayPal and Clarium was at like the mid-90s and Clarium did fine. And then PayPal became his big bet and I think he decided I'm going to leave Clarium, you know, on the side and jump into PayPal. Did that full time. And then after he sold PayPal, he went back to Clarium and then went on to do Founders Fund. So he is, he is again one of those guys who very elegantly combines micro and macro. Right. He understands macro trends very, very well. Sometimes sees an opportunity and just jumps into it because he just, you know, that's his passion, I guess. Yeah. Very few people can do that though with that. This, he's had a very unusual mind in that sense.

[B]

There's something to be said about identifying and having the self awareness that we're in a bubble and then also taking action on it. So if you watch the movie the Big Short. Yeah, the balls to try to outlast the market. What's this saying that the market can stay rational longer than you can stay solvent? Yes, the ability to do that. There's, there's something to be said about like the confidence in taking a bet.

[A]

Yeah, that was a, you know, that was again a great story about there was a handful of people who sort of saw the dynamics on the real estate side and figured on how to make money on the, on the short. It turns out that none of them have really done very well after 2008. So sometimes, you know, you make the right call, but it doesn't make you a great investor. But, but you're able to see some of these patterns and then have to have the, you know, the courage or your convictions to be able to go after them. That was a, that was a, you know, a really good story about how, how to identify those dynamics now to recognize some dynamics at the top of the bubble.

[B]

Hey, thanks for Listening. We'll be right back after a word from our sponsors. We've all been burned. We've all bought that enterprise planning tool that promised the world, only to realize six months later that we've basically taken on a second full time job just to keep the software running. I want to talk about a company that was built specifically to kill that cycle, Abacum. I actually remember my very first conversation with their founder and CEO Julio Martin Martinez over three years ago. Back then they were just starting out in Spain. Fast forward to today. Julio moved the home base to NYC and they're the engine behind finance teams at Strava, Replit and JG Wentworth. ABCOM doesn't turn you into a software admin. The integrations are actually self service. You don't need a $300 an hour consultant to plug in your ERP or HRIs. And they're doing AI in a way that actually impacts the things FP and A teams are doing every day. Things like creating variance summaries, building formulas and modeling scenarios. If you're scaling fast and you're trying to avoid that legacy platform trap, Abacom is the move. They're building the future of our tech stack and they're doing it with a CFO's perspective. Go to Abacum AI to see it for yourself. That is Abacum AI. If you're paying for A level finance talent, they shouldn't be doing B level tasks. CFO time is expensive. Senior finance hires are wicked expensive. And yet in many companies, highly paid operators still spend hours reviewing expenses, chasing receipts and reconciling systems that should already be automated. That's where Brex comes in. Brex is an intelligent finance platform that combines corporate cards with built in expense management and AI agents that automate the repetitive work finance teams usually handle manually. Transactions are categorized automatically, receipts are matched, policies are enforced in real time. Reconciliation just runs in the background. So instead of adding admin as you grow, you increase output. Per finance hire. Rex is already automating hundreds of thousands of hours of manual finance work every month across 35,000 companies including Anthropic, Coinbase and DoorDash. If you want your finance team focused on performance and stuff instead of paperwork, check out brex.commetrics that is brex.commetrics. you just launched a new AI product. The new pricing page looks great. I'm talking crisp but behind it, last minute glued code, messy spreadsheets and running ad hoc queries to figure out what to bill. Customers get invoices they can't understand. Engineers are Chasing billing bugs. Finance can't close the books. Well, with Metronome you hand it all off to the real time billing infrastructure that just works. Reliable, flexible and built to grow with you. They turn raw usage events into accurate invoices, give customers bills they actually understand and keep every team in sync in real time. Whether you're launching usage based pricing, managing enterprise contracts or rolling out new AI services, Metronome does this heavy lifting so you can focus on your product, not your billing. That's why some of the fastest growing companies in the world, like OpenAI and Anthropic, run their billing on metronome. Visit metronome.com to learn more. That's metronome.com do all bubbles attract grifters?

[A]

Yes, I think, I think so. I think they probably do. That just might be part of human nature when you have this rapid creation of wealth, you know, I think that is probably what attracts these bad actors. One of the fascinating things about these bubbles too, I didn't really recognize it before I started writing the book was they all happen in the richest city in the world and typically in a period of rapid economic growth, really, whether it's Amsterdam in 1636, which at the time was the richest city in the world and the richest country in the world, and the global reserve currency, or it's the UK and Paris in the early 1720s, which at the time were emerging and challenging Amsterdam for dominance. New York in 1929, Tokyo in 1984. Back to, you know, I guess it's Silicon Valley, New York in 20, 20, 21. They're all times of like rapid economic growth. People are experiencing rising material wealth. And maybe it's that environment more than anything that attracts grifters. And you know, people let their, let their guard down. So if we are in a bubble today, one of the things you have to figure out is how do I, how do I catch out? How do I watch out for the fraud? Because in Silicon Valley that's, there's bound to be stories now that will be, they'll emerge later about, you know, AI

[B]

or crypto fraud and that, that's exactly I'm on. What I'm kicking at here, is there an archetype of the crypto, bro, or the one, you know, slinging the, the shitcoins Is, is that archetype, does that play through in the other eras as well? Like the railroad bubble, the, the tulip bubble, that, that type of Persona comparably to today?

[A]

Yeah, I, I think so. You know, the, the challenge you run into is Once when, when the value gets created and especially start pulling in less sophisticated investors, right, the middle class or retail investors who aren't practiced at analyzing the companies or the tulips or railway stocks, then inevitably you get these transactions where people start selling something and taking advantage of the biases we talk about and the general economic good times. And so, unfortunately, that's just a recurring theme, I think, in probably not just bubbles, but I think in all markets. And so a big question is, what is the role of government? And how do investors guard against that? When you, when you understand and you're aware of that euphoria, what does their diligence process need to look like as an investor in order to, in order to thwart that? And we can talk more about that if you'd like, but that's definitely something we'd have to guard. You have to guard against.

[B]

Can we talk about the role of government and religious institutions in either propping up a bubble or, I guess, encouraging it or, or playing into it?

[A]

In the history I studied, it isn't, it's not often that religious institutions have a role in this. In fact, if anything, they're on the other side. There's a lot of prominent literature I referred to before about how at every bubble, there's a lot of people talking about the bubble. And you might ask, well, why aren't, why don't people take Jonathan Swift more seriously? Why don't they take the, you know, the 2008 subprime bubble? How come people didn't listen to all the folks who were, like, shorting the bubble? You know, the, the Michael Burrys and the others who were trying to explain what was going on. And sometimes those people don't get taken seriously because, you know, they're, they're a bit out of the mainstream. They, they aren't investors, they aren't professional investors. Probably the biggest naysayers in 1636 was, was the church, the Puritans. They were, if you read the literature now, they were very much against the material wealth that was being created by the, by the tulips, by people transacting in tulips. The Puritan culture in particular in, in the Netherlands was very austere. There are stories that are told of people from London and Paris traveling to Amsterdam, coming back and saying, I couldn't tell the richest man in town from a peasant. They wore the same clothes. They all lived in fairly modest houses. They covered their hair. They wore the same long coats. They all worked six days a week. They all drink the same stuff. They all drink beer. It's like. It's very hard to tell the rich from the, you know, from the poor, because material wealth doesn't distinguish people in that society. Contrast that with Paris, where you could tell who the rich were. They were aristocrats, they were wearing silks, they were living in, you know, houses. Ostentatious displays of wealth were just part of the culture in the early 1700s, early 1600s, rather. So that's a big reason why the tulip bubble happened in Amsterdam, not in Paris, because the. There's only so many places you can spend your money in Amsterdam. It can't be on, you know, big flashy houses or carriages or clothing. So what do you buy? Well, maybe you buy a nice house by the river. You have a nice garden. That's acceptable. What do you put in the garden? Flowers. In Paris were a lot of other places where that money was going to. But the church and the Puritans at the time were very much against the tulip bubble. And there were a lot of moralistic tales and sermons that were chastising people for being engaged in that commercial activity. And when the bubble popped, a lot of the, A lot of the literature, a lot of the pamphlets came out after the fact, you know, that really exaggerated the consequences of the bubble. If you read some of the literature from, you know, the, the Madness of Crowds or other literature at the time, it really sounds like that society went through a cataclysm and that people were committing suicide and throwing themselves in the river. But, you know, when I, when I looked at the research and the data, it didn't look like the Netherlands really slowed down as a result of that bubble. It looked like the bubble came and went. There were very few, if any, bankruptcies. They were all settled in court. The economy kept chugging along. It continued to be the richest country in the world. The progress of the Dutch golden age continued. And so what was all the angst about? A lot of that is just propaganda and literature at a time when empirical economics wasn't really a thing. It wasn't a thing before Adam Smith and, you know, ricardo in the 1700s. So how did people make economic conclusions? Well, you know, they listened to the pamphlets. A lot of them were religious documents that were moralistic tales about people who lost their head during the. During the bubbles. So I don't find a lot of religious institutions that play the role. Political institutions, for sure. Government, easy money, for sure. Every single bubble has some element of easy money, and that's usually government policy, monetary policy, the Printing of money in 1720 from the, from the bank of France. The Bank Royale. The fact they gave the Central bank of France over to John Law who was the head of the Mississippi Company, created a massive bubble in 1720. Easy money, money being printed. Fun fact. The UK railway mania began in 1845. The bank of England cut interest rates in 1844 to the lowest level in 150 years. Oh, big driver of the, you know, of the railway bubble. You might be old enough to remember the, the 1997-2000.com bubble. Alan Greenspan talks about irrational exuberance in 1996. Head of the Federal Reserve in 1998. What does he do? He cuts interest rates three times. Not once, not twice, three times even having economy is booming, stock market is roaring. Why does he cut interest rates? Has a lot to do with Long Term Capital Management. Hedge fund that went on the ropes in 1998 in an Asian currency crisis. And he was trying to keep the economy from slipping into a recession.

[B]

An ironic name for the hedge fund.

[A]

Yeah, right. Long Term Capital management lasted about four years before they went bankrupt. And then similarly 20, 20, 21. You know, a lot of that bubble was caused by fiscal stimulus, monetary stimulus, a coordination that had never happened before between big governments and monetary institutions to create free money. And so all those political institutions are bad. Government policy is definitely a factor in all these bubbles.

[B]

In your research, Aman, is there a relationship between how long a bubble lasts and how big the blow up or aftermath is?

[A]

That's a good question. Well, let's see. I think some of the worst ones they probably had, they're probably what, the longer it is baking, probably the bigger the, you know, the, the, the fallout and the consequence, I think the ones that were the most destructive. So Australia between 1886 and 1889 was probably five to seven years in the making. Japan had a really, really rough one that was probably five to seven years in the making. And I think the 2008 subprime bubble, if you read the Big Short, you might just think this was greedy investment bankers. It was rating agencies that just lost their, lost their fiduciary duty and some kind of bad regulation, plus really complicated credit derivatives. If that's your explanation for Those, if those three or four things caused the 2008 crisis, which I challenge this assumption in the book, I go back and say it really began in 1992. I don't think it was just these greedy investment bankers, rating agencies. Why? Because we've had greedy investment bankers forever. Michael Lewis, who Writes the Big Short. Worked on Wall street in the 80s. Solomon Brothers.

[B]

It's not net new.

[A]

No. His first book was Lars Poker. It's about greedy investment bankers. It's great. It's a great book. I worked on Wall street in the mid-90s. I can tell you for sure we had greedy bankers in the 90s. We've had credit rating agencies in the US. John Moody put his first credit rating on a bond in 1909 after the financial panic in 1907. We've had bad regulators forever. Like why did all these things go wrong in 2008 all of a sudden? And what I concluded was, well, I think it has to do with government policies. The subprime bubble really only happened to four countries. Us, uk, Ireland and Spain. Didn't happen in Germany, didn't happen in France, didn't happen in Canada, where I grew up. Didn't happen in Japan, didn't happen in China. Why only those four countries? Well, those four countries did something similar. They encouraged lending into subprime categories, into LMIs, low and middle income households, basically people who are at or below the median income in the community in which they live. And they did this with government incentives. Fannie Mae and Freddie Mac were buying bonds. First they put a quota in 1992 on bonds they were buying that had to go to these LMIs. And for a few years, you know, the banks were like able to find LMIs that were credit worthy. And then by the late 1990s of credit worthy LMIs, and then you could tell that they were starting to make riskier and riskier loans. And then they began to modify payment terms so they'd say, hey CJ, I want 20% down and then I'll give you a loan. You can't do 20% down. I'll give it 10%, I'll give you 5% down. How about 3% down? How about 0% down? And I'm going to give you a 1.9% teaser interest rate and then after three years it'll go back to normal. Okay, so bit by bit this began to creep in and that was a good 10 to 15 years in building. So I think the most destructive ones probably do have these deep seated patterns that go back a few years maybe. More importantly though, they compromise the banking system. When you compromise the banking system, those are by and large the most destructive bubbles. The ones that don't do that, the ones that are equity financed, the ones that are private money, without banks, those usually turn out okay.

[B]

Something you also hit on is how Pervasive are the origins of the bubble. Like how deep does it go? If your Uber driver is telling you about something going on in crypto, you know that it, it's gotten to, it's, it's not just the elites of society who have discretionary money to put into it.

[A]

Yeah, I think once it goes, once it goes, you know, broadly viral, once it gets marketed in a, in a, in a broad way, that's usually a sign that the run ups and valuations happen faster. The level of diligence is, is a bit weaker and so maybe the guardrails are a bit, you know, are a bit different. The one where this really happened in the US for the first time was in 1929. The stock market crashed right after World War I. That was the first time that people, the middle class really had money and they had a certain financial sophistication. They were used to buying financial securities for the first time ever. The reason was the US did a. Government did a hell of a job marketing war bonds after World War I. Enlisted celebrities, they got banks involved, they made it a real patriotic thing to buy war bonds. And after the war bond demand went away around 1919, a lot of that shifted to stocks. And so a lot of that stock market run up in the 1920s was what we would call today unaccredited or non accredited investors. They were a lot of the money going into the 1920s and so the valuations probably ended up going up faster and came down harder as a result of that.

[B]

Do you think that bubbles are connected through time, that there's any linkages between them there?

[A]

There can be, yeah. Some of the factors stick around. Most of them are kind of independent or semi generous. And I found a lot of the villains and heroes in each of the bubbles were, were doing their own, their own thing. I think one example was after.com bubble blew up. There was a period of a lot of wealth got created. In 2000 the bubble pops. The economy goes into a very small recession. In 2001 it seems like it might, you know, it all might be okay. But then from 2000, 2001 I should give the Fed a lot of credit. Under Greenspan they were holding interest rates at six and a half percent. And today we, we about the Fed having rates at 3.75% and that's buying a house.

[B]

Back then or in the 80s your

[A]

mortgage rate was exactly, exactly. For Most of the 80s the fed funds rate was 8 to 10%. It came down to, you know, 6, 5, 6% in the 1990s, which was a, I think a reasonable rate. And historically those are reasonable interest rates. And then Greenspan raised the rate to six and a half in 2000 and let it sit there for most of 2000 and up into late 2000. And then that bubble kind of popped and began to resolve itself. And then he cut interest rates really after 9 11, and the rates came all the way down to 2%, less than 2%. That.com bubble, rather than working all the way out, it kind of fed the housing bubble, which happened in 2008 with super low interest rates and feel the next bubble. And so there are some recurring patterns like that where if the government doesn't properly handle these bubbles, if they try to suppress interest rates, try to bail people out, inadvertently make things worse, which either could be in the second bubble, like in 2008 in the US or in the case of Japan coming out of the 1980s, the government did everything to try to cushion the downside and they've ended up. They didn't have a second bubble exactly, but they've had 31st five years now, I guess almost 40 years. Wow. Of basically 0% GDP growth per capita.

[B]

Whoa.

[A]

And if you ever go to Japan, you know, you know, interest rates are super low. They're sub 1%. It's really easy to get a loan. If you're a big company, you can get a loan at sub 1%. Try, try being a startup in Japan where you're competing against, you know, incumbents who have a lot of market share, who have free capital like that, and where disruption and especially the, the social vibe of like, you know, being a startup and disrupting is, is very negative. People don't look, you know, socially, they don't look on those things very favorably. Like if I try to, if my daughter came home in here in America and said, hey, hey, daddy, I want to marry the CEO of an AI startup. I'd be like, okay, that's. I want to meet the kid. But let's. Sounds good.

[B]

Yeah.

[A]

In Japan, if you bring a, you know, if you bring someone home to your father and you say, hey, dad, good news, I want to marry the CEO of some, you know, some startup, the general bias to be like, no chance. Can't you meet and marry some banker or some regulator, like, sounds like he's

[B]

in a biker gang or something when you say that.

[A]

Exactly, exactly. So, yeah, those are the things that I think happen that can feed one bubble kind of plays into another. And it's a result of just the continuity of policies, I think I want

[B]

to tie this all back to today with all this historical precedent. Are we in a bubble right now with AI?

[A]

I don't think so. I think there's a lot of real value in businesses being created in AI that it's very different from the dot com bubble. I guess let's just define bubble again, right? If it's a big value creation that then gets taken away over a short amount of time. So the dot com bubble or something like, you know, the UK railway boom, I don't think this looks like that. That doesn't mean that they can't be a 20, 30, 40% drawdown in valuations, you know, in the next 12 months, let's say. But I think if that happens, that would be a buying opportunity, not a, you know, not wealth being permanently destroyed. Here are a couple of reasons, you know, just a couple of comparisons back to 1999, just so we can put some numbers around this. So the NASDAQ 1000 was at about a 70 times price earnings ratio in 2000. Today it's about 25 to 27 times earnings. So the valuation environment is very different. Now the NASDAQ 1000 today, about 55% of it ish is the MAG7 and if I include Broadcom, it's maybe 60% is, is those companies. So it is a lot more concentrated and maybe that's a downside. But the valuations seem like we're nowhere near where we were in 2000 or in prior bubbles. So that's one. Another is the company at the center of everything today is Nvidia. They're the primary owners of the GPUs and the AI infrastructure layer that's being built, which is the AI capex boom and what is essentially AI today they're trading at 24, 25 times next year's earnings. Fully taxed, fully loaded. Cisco was the company at the center of everything back in 2000. They were, they were building the Internet, they were the ones building the, the routers and the switches and they were the ones building that technology. They were at 200 times price earnings ratio versus Nvidia 25. So you know, and, and Cisco, by the way, never they were profitable. They generated maybe 1.8 billion in profit in 2000 and then lost money in 2001. Nvidia is profitable. They've spent $112 billion buying back stock in the last five years. The cash flow positive. They're kicking off dividends, cash flows, buying back stock. It's a real business. They're in a tenuous financial enterprise. Their biggest customers of Cisco back in the day were telecoms. They were corporates and they were telecoms. Telecoms were maybe half their business. The telecoms were not making money in 2000. We thought they were, but most of them ended up restating their financials in 2000, 2001. Back to your point about the grifters. WorldCom Restated, Global Crossing restated earnings, went bankrupt. Windstar restated earnings and went bankrupt. Quest Communications restated, didn't go bankrupt. Almost did, had a workout and then I think eventually got taken out after the 2008 recession in kind of a quasi bankruptcy. So all these telecoms were, you know, were basically, you know, a kind of a deck of cards. They have 300 billion in net telecom debt in two in 2000, 2001, the take the Nvidia example. Nvidia is a profitable company, real business. Most of their customers are the hyperscalers. So Microsoft, Meta, Amazon, Alphabet, those four companies have $260 billion in cash right now. So it seems like they have the financial wherewithal to, you know, to build the capex. You can quibble with the valuations, but I don't think the valuations are that unreasonable given the growth and the reality of the businesses. And we're certainly nowhere where we were in 1999.

[B]

Is there any evidence of circular finance and what I mean by that, in the bubbles that you looked at one company lending money to another company so they can buy stuff from the same company that lent it or giving some sort of payment in kind with equity. Because if you could map out on a whiteboard who Nvidia is in bed with and who is in and who they're transacting with. A lot of this seems to all go around.

[A]

There is a lot of that. So the recent deal, was it OpenAI is talking about $100 billion raise?

[B]

Yeah.

[A]

Which would be the biggest private or public raised of all time? Right. The biggest IPO is what? 26 billion from Saudi Aramco. So this is four times the biggest IPO of all time. And who are the big investors? It's Amazon putting in 50 billion, Nvidia putting in 30 billion and then I guess Microsoft and a few others, SoftBank. But to your point about circularity. So Nvidia is putting 30 billion into OpenAI. They're going to get that 30 billion right back by selling them GPUs real quick. So it's like vendor financing, right? It's what it is. Is it vendor financing? Yes. Is it circular? I suppose. Is A closed ecosystem of people who are spending money and you know, circling that money between customer and then vendor and then, you know, using that for, for trade credit, but taking equity instead of, you know, instead of these trade liabilities. Nothing illegal about it, you know, as long as they're properly disclosed. It's a little bit unusual. It is not like the Enron off balance sheet financing that, you know, it's not a, it's not this stuff the scandals of the 2000, 2001 period were made up of. So I want to distinguish that. But it is, it is a little bit odd and a little bit of a funky thing. And it does seem like a sign that the money going into these companies is not straight financial investors. It's strategic. It's people with other ulterior motives, you know, customers and vendors. So yeah, that, that is a, that's a little bit of a yellow flag I would say as far as are we the, are we in a bubble now? Conversation. And if I knew I was an investor and just a purely financial investor and I'm like, I can invest in a company where the lead investor is Amazon and Google and you know, Alphabet and some of these strategics. I'm not sure my interests are aligned with theirs. So I'd be very careful of investing into those companies if, you know, just, just as an investor.

[B]

Aman, if you'll humor me, a lot of the listeners of our podcast and either our FPA leaders or have come up that route to become CFOs. And you were an FPA leader, if I have it right, at PayPal and eBay. And your bosses were Peter Thiel and Elon Musk. You got to give it to us straight. I can't imagine either of those guys gave, gave too much credence to what their budget envelope was.

[A]

At the point that we were in, they were moving very quickly and they were, the budgets were like a quarter ahead. So you know, when I was there in 2000, 2001, the, the planning was basically let's, let's figure out the next three months and go from there. And then if they have to make moves, you know, they were very good actually at figuring out how to make moves and doing that in a, in a disciplined, cash sensitive way. They didn't blow through budgets, they didn't spend stupidly. In fact, I'll say at PayPal from 2001 to 2008, when I was leading FP&A, I think every year there we were cutting 5 to 10% of the workforce. Every year we were growing at 30% year over year. We were profitable every one of those years. It wasn't like we needed to cut people to make money. But a lot of it was just a performance culture. There was a intolerance of waste that I think every startup should have and a lot of them have lost. In the era of free money, which kind of began around 2008, 9, 10, when interest rates went super low and there was a lot of capital coming in, I think a lot of startups kind of lost that discipline. So I give both Peter and Elon very high marks for, you know, for financial discipline. Doesn't always mean they had the best. You know, the budgeting process was volatile enough that there were, you know, there were sometimes decisions had to be made, but really no surprises. You know, we never went over budget. We, we made every number. I think we ever, we ever put out there up until 2008. But then I moved to eBay, from PayPal to eBay and subsequently missed three quarters in a row where I put out the number. And we ended up under on the profit number and finally stopped giving guidance. But those guys were very, very smart at spending money. And I guess I'll wrap up with this. Whenever you miss a number, it does feel bad. And if there's a budget miss, it's terrible. But you really want to understand why it happened. And with enough forewarning from the CEO, like, hey, something's going on and we need to adapt. And so let's do it in a way that, where there's transparency and communication. Peter in particular, and Elon too, they were great a at communicating with their teams and making sure everyone knew what they were doing and why and what the consequences would be so that I could go out and message to investors, hey, guys, here's what's going to happen. Just so you know, it's all part of the plan. I'm not, I'm never going to surprise you and let you down, but, you know, we're not going to be on the same plan that we said before. It's changing. Here's why it's changing, and if you need to talk about it, call me, call Elon, call Peter. They're available 24 7. Very, very big difference than, you know, missing a number and then having to reset on a guidance call.

[B]

That's a great way to look at it. Well, one more, maybe more technical question. On that time period, you were there for one of the most incredible referral campaigns of all time. Where was it that if you get someone to Sign up, they get $10 and then you also get $10. You had to budget for that, didn't you?

[A]

Yeah, we did. We had to raise a lot of money to finance that. I think the, that was going on in like 99 up until maybe early 2000. Then we had to scale it back. But the core belief there was that this is a network effects business and if we get to more users than BuildPoint and C2IT and a few of the other competitors at the time, the value of that network will pay off. And we don't know exactly how, but we'll be able to monetize. And so the referral plan, I think it began with $20. So you get 20 and then if you refer somebody, they'll get 20. Then we went to 10, 10 and then we began to dial it back like, okay, then you only get the 10 bucks if you verify your bank account and if your buddy verifies his or her bank account. And we had done the LTV analysis and the CAC analysis to know that if somebody goes through the process of verifying a bank account and adding all the financials in, they're going to be worth a lot more than 10 bucks. We began to make that shift probably in early 2000 and maybe, you know, after we raised a lot of money from Sequoia In March of 2000, that gave us like a six to nine month Runway to do that. So that's where I began to learn how to do LTV at a cac. I learned to do that very quickly because my suspicion was, oh boy, we have six months and we better not, you know, we better not, we better have enough value at the end of that rainbow that it works off. And it turned out that it did.

[B]

That's amazing. And it, and it's cool to hear that you manage through times where you were just planning by three months at a time, right. It was moving so fast. And then you also had to steer the company from a time of hyper growth to now we need to be profitable. Which I think has a lot of reflections to the companies that you look at today.

[A]

That's right, yeah, that, that was, that was a shift we made from, you know, from money losing startup. And by the time ebay acquired us in 2002, we were already profitable, growing and doing well and I think profitable every year from 2002 to 2010 when I left. And then every company I've been at since has, you know, has generally been at a later stage. So a little bit easier to plan but, but it's very exciting to be in that three month, you know, that three month, quarter to quarter, you know, kind of business. And it just, it really matters who you're in that boat with. Like the people, the managers in that, in that business and the decisions they have to make. Luckily we have people like David Sachs and Roloff. Boda was the cfo. He was the, he's now Wes. Until recently we had a Sequoia. Keith Rabboy was there, Reid Hoffman was there. Peter and Elon were there. You know, the board is incredible. So very, very tightly aligned team. It never felt out of control. I think as a result of just having the team around you, this has

[B]

been an absolute blast. Aman, can you just plug one more time where and when people can get the book?

[A]

Yes. The title of the book is A Brief History of Financial Bubbles. It's coming out from Bright Ray Publishing. It's available right now for pre [e-mail] you can go in there, you can learn all about the book, you can read some excerpts and some blurbs. You can find out, put yourself on the pre order list and it should be available from Amazon and others in probably late March. So about a month from now.

[B]

Awesome. Pumped to read it. Thanks for spending time with us.

[A]

Thanks cj. Really appreciate it.

[B]

Ear on the Numbers is a mostly media production. Yelling an intro by Fat Joe. Artwork by Meg delesandro. Show is executive produced by Ben Hillman. Nothing said on this podcast is intended to be business or investment advice. It's the sole opinion of me. A guy who feeds his dog way too much ice cream and has a history of net operating losses. Lol. If you like this podcast, hit subscribe and give us five stars. It will take like two seconds and our algorithm overlords love it. Drink water, call your mom and have a great day.

[A]

Peace.