From Against the Rules: Michael Burry Speaks

Summary

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Unhedged Podcast - Special: Michael Burry Speaks

Date: December 25, 2025
Host: Michael Lewis (with Lydia Jean Cott)
Podcast: Unhedged (Financial Times & Pushkin Industries)
Guest: Michael Burry

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Episode Overview

This special episode, co-produced with Michael Lewis’s "Against the Rules," features a rare in-depth conversation with legendary hedge fund manager Michael Burry. Marking the 15th anniversary of "The Big Short," the discussion revisits the 2008 financial crisis, Burry’s pivotal role in anticipating the subprime collapse, his investment philosophy, and his recent high-profile short positions against AI giants like Palantir and Nvidia. The conversation provides a candid view of Burry's outlook on markets, investing, and broader economic concerns.

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Key Discussion Points & Insights

1. Michael Burry’s Reluctance and Public Profile

• Burry rarely gives interviews and is known for his reclusiveness.
• His recent investment disclosures (notably short positions on AI stocks) unexpectedly thrust him back into the media spotlight.
• "There's something also nice about subjects who aren't promiscuous, who don't just talk to everybody." – Michael Lewis (03:00)

2. Revisiting ‘The Big Short’ and Subprime Innovation

• Burry was one of the first to identify and bet against the subprime mortgage market.
• He worked with Wall Street to create credit default swaps on subprime mortgage bonds, effectively "inventing" a way to short the market.
• "What he did was basically invent, or have Wall Street firms invent for him the credit default swap on subprime mortgage bonds." – Michael Lewis (03:44)
• Burry stressed the importance of communicating transparently with investors, primarily through email, which provided him valuable documentation and clarity during turbulent times.
• "Those emails, I think, were the main reason I didn’t get sued by my investors." – Michael Burry (06:08)

3. Life After Fame: Investor Relations and Reputation

• Despite his massive win, Burry’s investors were often upset with him, leading him to close his fund shortly after the crisis.
• "My investors were generally mad at me, even when things went well... Even when we made the money, it was, 'whew, we don’t want to go through that again.'" – Michael Burry (10:53)
• After reopening in 2013, he purposely kept his operation small, choosing only trusted investors.

4. Media Misreporting of Burry’s Recent Trades

• His recent short positions on Palantir and Nvidia were widely mischaracterized in the media due to misunderstanding of SEC filings, particularly the notional value of options.
• "So I have a... less than $2 option and it was being priced as if I owned [Palantir at] $200. So it was two orders of magnitude off." – Michael Burry (14:48)

5. Current Market Strategy: AI Bubble and Passive Investing

• Burry explains his bearish positions on Palantir and Nvidia, arguing they are overvalued and have become "poster children for AI" without fundamental justification.
• He compares the current AI investment boom to the dot-com bubble, highlighting classic signs of mania.
• "What you can do is you can look at net investment—capital expenditures, less depreciation—over time... and you get these nice mounds of investment manias." – Michael Burry (25:07)
• On Nvidia: He praises their past but believes their AI narrative is overblown and likens it to previous tech hype cycles.
• On Palantir: He questions their value proposition, reliance on government contracts, and excessive stock-based compensation.
• "There are, I think, five billionaires that came out of Palantir because they own Palantir stock and the revenue was $4 billion or less. The billionaires-to-revenue ratio was greater than one. I’ve never seen that before." – Michael Burry (21:12)
• He points out that passive investing has shifted market dynamics, reducing the prevalence of active stock pickers and potentially increasing systemic market risk.

6. Broader Economic and Political Concerns

• Burry warns of an impending challenging period for U.S. stocks, suggesting a protracted bear market may be on the horizon.
• He expresses skepticism about U.S. government finances and doubts the ability to predict or bet against a so-called "debt crisis."
• "Predicting this stuff is the problem. I always kind of put it in terms of, you know, waiting for Castro to die. It's not a strategy." – Michael Burry (30:41)
• He is critical of the Federal Reserve, suggesting it should be abolished and its functions subsumed by the Treasury.
• "I think the Fed doesn’t do anything very helpful. I think it’s the easiest job in the world." – Michael Burry (33:23)

7. On Safe Havens: Gold & Bitcoin

• Burry dismisses Bitcoin as "the tulip bulb of our time," deriding its speculative and criminal associations; he prefers gold as a store of value.
• "Bitcoin at 100,000 is the most ridiculous thing... It's a tulip bulb of our time. It’s worse than a tulip bulb because this has enabled so much criminal activity to go deep under." – Michael Burry (33:52)
• "I've had gold since 2005." – Michael Burry (34:27)

8. Reflections on Lewis’s Portrayal and Personal Disclosure

• Burry was initially wary of Michael Lewis but chose transparency, sharing all emails and records to ensure an accurate portrayal in "The Big Short."
• "In a way, I was giving you all that stuff defensively... Because I thought I didn’t do anything wrong, and I wanted you to know that." – Michael Burry (35:34)
• Lewis credits Burry as a "fantastic teacher," highlighting his ability to hold and explain contrarian views.

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Notable Quotes & Memorable Moments

• On media attention:
  "This only happens to me... He can't lay low." – Michael Lewis (02:48)

• On "once-in-a-century" trades:
  "This is why this is the big short, is the once-in-a-century opportunity to actually say, I know when this is going to happen." – Michael Burry (07:06)

• On compliance and not speaking publicly:
  "My compliance... just keeps saying, don't talk to anybody. Don't respond to him. … And so I think since the movie came out and this really started happening, there was a frustration building in me to want to say something." – Michael Burry (15:39)

• On Google and the effect of AI:
  "The magic thing about Google search was how little it cost because most requests were not monetizable... LLMs, most people are getting what they want out of them right now on the free level. And they're massively penetrating. What more are they going to do for the average person? Not that much." – Michael Burry (27:22–30:00)

• On personal disposition:
  "Being on the spectrum, I'll just move back into my own head and move along." – Michael Burry (36:01)

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Timestamps for Important Segments

• 03:44 — Burry’s invention of credit default swaps on subprime
• 06:08 — Importance of email documentation with investors
• 07:59–09:44 — Life after "The Big Short," fund closure, investor fallout
• 14:07–15:30 — How media misreports the size of Burry’s positions
• 17:30–22:49 — Rationale for bearish bets on Palantir and Nvidia, explanation of AI bubble
• 25:07–26:45 — Comparison of AI investment boom to previous manias
• 30:41–33:43 — U.S. government debt, the Fed, and monetary policy
• 33:52–34:27 — Dismissal of Bitcoin, preference for gold
• 35:34–36:08 — On sharing all records with Lewis and his teaching style

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Conclusion

This episode provides a rare, candid window into Michael Burry’s thinking—from his now-legendary bet against subprime mortgages to his skepticism about today’s AI and passive investing manias. Listeners gain insight not only into his financial acumen but also his personal philosophy, risk aversion, and enduring vigilance against consensus thinking. His unwavering candor, skeptical worldview, and methodical explanations make this podcast an invaluable listen for anyone curious about the mindset behind some of the most consequential financial decisions of the 21st century.

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Transcript

[Lydia Jean Cott]

At pgm, expertise across public and private markets today helps build resilient portfolios tomorrow. With over $1.4 trillion in AUM, PGM has navigated over 30 market cycles with active investing and disciplined risk management. But it's not just about the numbers. Our combined global expertise and local insights give us these strategic perspectives we need to help you reach your long term goals. Pjum our investments shape tomorrow today. Hello, Katie and Rob here.

[Michael Lewis]

If you're a devoted unhedged listener, you may remember we talked recently about Michael Burry, an investor who's taken short positions in the AI giants Nvidia and Palantir. But Burry's history of shorting the market goes back even further to the subprime housing market crash, which Michael Lewis chronicles in his book the Big Short.

[Lydia Jean Cott]

Well, that book is now 15 years old and to mark the anniversary, Lewis is revisiting the 2008 financial crisis to understand its legacy for his podcast against the Rules. He sits down once again with Michael Burry. We hope you enjoy the conversation and if you do, you can find the Big Short companion series on the against.

[Michael Lewis]

The Rules podcast and get the new audiobook version of the Big Short on audible, Spotify, Pushkin FM, BigShort, or wherever you get your audiobooks.

[Lydia Jean Cott]

I'm Lydia Jean Cott.

[Michael Lewis]

I'm Michael Lewis.

[Lydia Jean Cott]

And surprise. We're here for an extra episode of the Big Short companion series.

[Michael Lewis]

One we weren't expecting. That's right.

[Lydia Jean Cott]

Yeah. Because we got the hedge fund manager Michael Burry to be on the podcast.

[Michael Lewis]

We didn't really get him to be on the podcast. It's funny. What happened?

[Lydia Jean Cott]

Well, first we should say who Michael Burry is.

[Michael Lewis]

Michael Burry is one of the three main characters in both the book and the movie of the Big Short. And he was a really important character to me.

[Lydia Jean Cott]

And in the movie he's played by.

[Michael Lewis]

Christian Bale, and in the movie he's played by Christian Bale.

[Lydia Jean Cott]

He doesn't do interviews and we've asked him to be on the podcast earlier and he said no. So yeah, so what happened?

[Michael Lewis]

First he said, you know, I'd like to help. And then he said, I wouldn't like to help. And then what happened was his trading activity got released to the public, which it does. He has to file a 13F form with the SEC saying what his positions are and as though it's not a perfect picture of what he's doing. It did say that he had put on Big Short positions against Palantir and Nvidia. So he was Betting against the AI bubble. All he did was file what his positions were. He didn't go on. He doesn't do media, he doesn't do interviews. And it exploded like it was on Twitter, on cnbc. People were both attacking him and praising him. And his reasoning for not coming on the podcast was he wanted to lay low. And he was trending on Twitter for 48 hours. So it's like, what's the point? He can't lay low.

[Lydia Jean Cott]

Yeah.

[Michael Lewis]

And as he tells us, he says, like, this only happens to me. But I was really glad to have him on because I felt like we were missing somebody.

[Lydia Jean Cott]

Yeah, no, same. And also. Cause people were asking, I was getting messages being like, are you guys gonna have Michael Burry?

[Michael Lewis]

There's something also nice about subjects who aren't promiscuous, who don't just talk to everybody.

[Lydia Jean Cott]

Cause it makes you feel special.

[Michael Lewis]

It makes you feel special. It makes the audience feel special and the reader feels special. It's like nobody else has this.

[Lydia Jean Cott]

And one thing I wanted you to explain is he was one of the first people, one of the early people. Right. To bet on the subprime mortgage crisis. And when he was trying to do it, there weren't any financial instruments to do that. Right.

[Michael Lewis]

It was how to do it in a way where if the madness just kept going and going, you weren't going to be bankrupt quickly. So you could have done things like bet against mortgage companies in the stock market. You could have shorted their stock.

[Michael Burry]

But. But.

[Michael Lewis]

It'S a bet that's hard to hold for a long time. And so your timing has to be exquisite. What he did was basically invent, or have Wall street firms invent for him the credit default swap on subprime mortgage bonds, which is essentially an insurance policy on bonds backed by subprime loans. So if the loans go bad and the bonds go bad, you get paid off on this insurance policy. Think of it like I get to buy insurance on your house, and if it. Fire insurance, and if it burns down, I get paid. So there's something a little goofy about it. I mean, it used to be very oddly, it used to be that I could go buy life insurance on you, and if you died, I got paid a bunch of money. This obviously creates a very bad incentive.

[Lydia Jean Cott]

Murder.

[Michael Lewis]

Murder, yes, yes, exactly.

[Michael Burry]

But.

[Michael Lewis]

But you can do this in the financial markets. You can buy insurance policies on other people's bonds. And if it. If they. The bonds go bad, you get paid. You couldn't. When Michael Barry started to think about this situation, you Couldn't buy an insurance policy on a subprime mortgage bond, so he had to go help Wall street create it for him. And then all the other characters in the story are then using that thing he creates to make the same bet.

[Lydia Jean Cott]

Is there anything else you wanted to say related to Michael Berry?

[Michael Lewis]

I would say that the one other thing that's interesting about him is that he so let me into his life. He just doesn't really do that usually. It created an intimacy. Like I just really got to know him and really enjoyed like just hearing what he had to say. Like I just learned stuff from him. Even when he doesn't make money on what everybody's making, it's really interesting to hear what he's thinking and just like have that as part of the furniture in your mind.

[Lydia Jean Cott]

Michael Lewis conversation with Michael Berry is coming up. It really is a very fun listen.

[Michael Lewis]

I still remember you handing me your emails and like you had like thousands of. You had communicated with the world your whole trading life for years through email. And so it was a real time account of your thoughts of Wall Street's response to your thoughts of how the market moved. It was unbeliev, unbelievably valuable. It was so different from like everybody reminiscing. Do you remember that?

[Michael Burry]

I remember that. And those emails, I think were the main reason I didn't get sued by my investors. Because if I had been a skilled orator or somebody who loved giving conference calls, I would have done conference calls with my investors and then maybe they wouldn't have been recorded. And. But here I had emails with everybody on everything. And so it was very clear where we stood with everybody.

[Michael Lewis]

You were like, for me, you know, people came to the right answer in different ways. And you came to the right answer in such a satisfying way because not only did you see that the irresponsibilities in the subprime mortgage market, but you actually had a theory about the timing of it, when it was all going to come unraveled. And the problem with these positions, like with, oh, there's a lot of insanity in X or Y, is that, yeah, you can be right, but you can be wrong for long enough that the market just takes you out of your positions.

[Michael Burry]

I think that's right. This is why this is the big short, is the once in a century opportunity to actually say, I know when this is going to happen.

[Michael Lewis]

Right.

[Michael Burry]

You know, I've compared this to the 1990s bubble and the reality is there was no telling when that would end. Right. In most situations like this, you. There's no good way to time it and shorting it is just a high risk endeavor.

[Michael Lewis]

Well, we're gonna get to today, but I wanted to revisit the big short just a little bit. And I'm curious what effect it had on your life. I mean, there was the trade, there was the book, and then there was the movie. You did let Christian Bale come and hang with you for a day, but you were remarkably chill about the whole thing. And I don't think I've ever felt like I've really recapped with you, like what effect this thing had on you, if any.

[Michael Burry]

I think. I didn't know. I. You're right. I mean, I'm on the autism spectrum, so I'm pretty good in my own head and I'm pretty good at blocking out stuff. And so even this movie, I saw it at the premiere, I haven't watched it since the book. I read it when it came out and I haven't read it since. Sensed that's how I felt about it. I just move on and so kind of took it as it came. I went to the premiere because my whole, my family wanted to go to the premiere. And you know, as you know, I don't do interviews because I don't feel I'm good at this. And so I, you know, I haven't done one, I think, since, like, I haven't talked to anybody since I think.

[Michael Lewis]

The 60 Minutes interview about the big.

[Michael Burry]

Short, about this in an interview format. And now it's the 10th anniversary of the film. 15, 10th anniversary of the book. And yeah, I can't believe it's been that long. But, you know, I just kind of go on and do my thing and it doesn't really affect me too much.

[Michael Lewis]

Do you didn't feel it put you in the position of oracle that all of a sudden people are expecting you to predict the next thing?

[Michael Burry]

It was, as we mentioned, it is a very unique circumstance. It was a once in a century type trade. People say once in a century flood, once in a century this. And it's not really true, it happens every 10 years. But this, that opportunity was very unique. And I've basically told everybody I can ever since that that's not going to happen again anytime soon.

[Michael Lewis]

What made it unique?

[Michael Burry]

Well, I was basically permitted to buy insurance on these bonds that were incredibly illiquid. And I was permitted to basically buy insurance and then trade and profit off them without actually having the insured item. And it, this was not expensive. Nobody thought this could Happen.

[Michael Lewis]

Right.

[Michael Burry]

I had put on a lot of my position by late 2005, and I got a call from Goldman Sachs saying, what are you doing? You're the only person we know. You're not a mortgage fund. You're not hedging. You're doing something different. It's not something that people were generally aware of. And I was. And so I could kind of walk in and basically pull the caper off.

[Michael Lewis]

They're. There are three things I want to talk about at the back end of your story in the big short, and then I want to move on to the present. But the first is you have this terrific win. Your investors make a lot of money, and you end up closing your fund. Can you remind me why you closed your fund?

[Michael Burry]

My investors were generally mad at me, and they were generally mad at me even when things went well. And I didn't feel at the time I had goodwill with anybody. There was only one investor. I shouldn't say his name, but love him. He is the only guy that invested with me late that last year and a half or so. Nobody came to me. Nobody wanted to invest with me. And even when we made the money, it was, whew, we don't want to go through that again.

[Michael Lewis]

Did anybody ever call after the book, after the movie, after they got their money back and a lot more. Did anybody ever call you to apologize?

[Michael Burry]

No, no, no, no.

[Michael Lewis]

It's kind of an amazing.

[Michael Burry]

I didn't expect it at all.

[Michael Lewis]

I know you didn't expect it, but this sort of like, at some point when there was cooling off and they looked at. They looked at their winnings, I would have thought someone would have called and said, you know, sorry, I got so angry at you for doing this trade.

[Michael Burry]

No, nobody did. And I didn't expect it. It's Wall Street.

[Michael Lewis]

When did you reopen?

[Michael Burry]

2013.

[Michael Lewis]

And since then, how have you done.

[Michael Burry]

Done? All right. I think it's all been the same since, so. I remember when I opened again, I didn't want investors I didn't know.

[Michael Lewis]

Yeah.

[Michael Burry]

I didn't want to be above the SEC threshold for registering for as an investment advisor. I wanted to keep it small. So I just went to people I knew and some of my own money, and we created a fund. It was probably a situation where if I wanted to, I could have raised billions, but that wasn't my intention.

[Michael Lewis]

You didn't want to relive the experience you'd already had.

[Michael Burry]

I didn't want to deal with Wall Street. I didn't want to deal with those Kinds of investors. I knew who my good investors were from the prior time, and those are the only people I wanted to deal with.

[Michael Lewis]

Right.

[Michael Burry]

And so it was a, it just was a small operation and I kept trying to keep it small and I didn't really market it. I didn't market it at all other than just that first group. And what happens with that is that some of those people that were with me in 2000, individual doctors or whatever, they get old, they actually pass away. Ultimately, it just became a something. There was a natural attrition in the pool, and so it kept us small.

[Michael Lewis]

I have not paid that close attention. All I see is every now and then there's some explosion on Twitter about.

[Michael Burry]

You and it's wrong. They're all wrong.

[Michael Lewis]

We're going to take a quick break and when we return, I asked Michael Burry about why he placed bets recently against two large tech stocks, Palantir and Nvidia. So let's talk about this. Explain to me, you have this very small operation with just a handful of investors. What are the filing requirements? What do you have to hand in so that people can see what you're doing?

[Michael Burry]

They get to see US securities traded in the US that are stocks. They get to see stocks and they get an incredibly bastardized version of options.

[Michael Lewis]

Okay, how is it, how is it bastardized?

[Michael Burry]

Because say I buy 50,000 put options on Palantir and that's 50,000 times 100. And so I'm short strike 50 way out of the money. It's like it's $200 stock now, but I think it's worth 30 or less. So I buy them way out of the money. Two years out.

[Michael Lewis]

You're betting the Pontia is going to.

[Michael Burry]

Drop by a lot, a lot in.

[Michael Lewis]

Two years, but over a long period of time.

[Michael Burry]

Right. And the press I'm working out and I see on cnbc, I have a billion dollar short position against Palantir. It's $10 million.

[Michael Lewis]

I saw this too. I couldn't believe it.

[Michael Burry]

So what they do is they take the underlying shares under those options contracts and they, they multiply it out by the current stock price. So we're, So I have a, I have a, actually it was less than $2 option and it was being priced as if I owned the 200. So it was two orders of magnitude off.

[Michael Lewis]

Right.

[Michael Burry]

And that happens also with index. So I would take hedges on my portfolio and people would say, oh my gosh, he's shorting a billion and a half of the S&P 500 or he's shorting and there'd be these explosions. And it's just wrong. It's notional. What's interesting is that they don't do this for anybody else.

[Michael Lewis]

So maybe you should give more interviews. I asked you what effect the big short had on your life. This is an effect the big short had on your life.

[Michael Burry]

And compliance. And my compliance. Since the financial crisis, everything changed in compliance. We have a compliance officer inside the firm, and he just keeps saying, don't talk to anybody. Don't talk to anybody. Don't respond to him. Don't respond to anybody. And so I think since the movie came out and this really started happening, there was a frustration building in me to want to say something.

[Michael Lewis]

Yeah.

[Michael Burry]

And I couldn't. And so when Covid came about, I had some strong feelings on that. So I went on Twitter, but I was only allowed to talk about things that weren't stocks. And so that's fine. I mean, but I had to talk about social things. And I got in trouble with that because everybody gets in trouble with that. So I got off Twitter.

[Michael Lewis]

But you got back on.

[Michael Burry]

I got back on recently because we de registered. I don't run that pool of money anymore. I'm just going to run my own money. Got you.

[Michael Lewis]

So it's just your money now?

[Michael Burry]

Mostly, yeah.

[Michael Lewis]

Why did you decide to do that?

[Michael Burry]

I think that we're in a bad situation in the stock market. I think the stock market could be in for a. A number of bad years, and I think it could be a longer bear market more akin to 2000. But the structure of the industry has changed. Back then it was hedge funds, mutual funds, separate accounts, businesses. But there were people running pools of money and thinking about stocks and investing in stocks. And so I felt. I didn't know I was on the autism spectrum. I felt, though, that I had an edge there. I could. I'm kind of sit outside of all these human psyches and like and figure things out. And it worked well. Today it's all passive money. And it's a lot. It's over 50% passive money. There's index funds less than 10% of monies, some say is actively managed by managers who actually thinking about the stocks. And in any kind of way that's long term. And so the problem is in the United States, I think when the market goes down, it's not like in 2000 where there was this other bunch of stocks that were being ignored and they'll come up even if the NASDAQ crashes. Now, I think the Whole thing's just going to come down. And it would be very hard to be in a long stocks in the United States and protect yourself. And so that's why I decided to get out of it.

[Michael Lewis]

Because the fund had to be long in some way.

[Michael Burry]

Well, I didn't want to go through that with investors again.

[Michael Lewis]

I see. And that makes sense.

[Michael Burry]

Of course, I closed the fund and I got. I put on all the positions for myself right away. The same position.

[Michael Lewis]

So you're still in the position. So I want to talk about this position. I found it again. I was watching it from a distance, but tell me what I missed. Someone CNBC or whoever gets a hold of your 13F on this 13F, it says Palantir position is especially big. It looks big because it looks big because they're the put options. They're way, way out of the money. They were struck at 50. So, okay, you had to release this information about your fund. You weren't advertising it to the world in any unusual way. You weren't going out and talking trash about Palantir. This position gets released.

[Michael Burry]

Right.

[Michael Lewis]

And then the next thing I do, I see Alex Karp, who runs Palantir, going after you for owning, puts on his stock. And I don't think. I mean, during the financial crisis, you will remember that the head of Morgan Stanley at the time, John Max, he blamed short sellers for what was happening to him. And they banned short selling of the stocks very. I think briefly.

[Michael Burry]

Right.

[Michael Lewis]

But it's always a really bad sign when people start going after the short sellers.

[Michael Burry]

It's like in the United States.

[Michael Lewis]

In the United States. And I was thinking, oh, my God, I just wouldn't want to be in your shoes. Like, you didn't. You just. You just made a trade. But he's provoked me. I want to understand your trade. It's a bet that Palantir goes way.

[Michael Burry]

Way down, way, way down in two years.

[Michael Lewis]

What do you understand about their business that the market doesn't.

[Michael Burry]

Huh? So my belief is that this is a company that had a set of applications that were very expensive to install because you had to hire their consultants, like after you bought the software, just to install it and learn it. Right. And Palantir had this reputation in government. Government contracts is a nasty business. And I think they figured out how to do it and get some contracts.

[Michael Lewis]

How much of their revenue is government contracts?

[Michael Burry]

It's fallen off a lot. It was almost. It was a majority, and now it's like more even.

[Michael Lewis]

Okay.

[Michael Burry]

Because during the AI build out, they've Basically marketed themselves to corporations. Well, corporations have come to them. C suites of every public corporation have board members, CEOs who feel under the gun to AI something. And so there's this scramble. And now they're not the only one. I keep saying they're the only ones. But IBM does basically the same thing. Their business is actually bigger than Palantirs and they are not really all government, government contracts are not generally that profitable. And so, you know, IBM's got a really good business inside it, but it doesn't get the credit for a Palantir valuation on that business. Even though it is growing fast too. It's growing about as fast as Palantir or was. And so let me put it this way. There are I think five billionaires that came out of Palantir because they own Palantir stock and the revenue was 4 billion or less, basically 4 billion. So the billionaires to revenue ratio was greater than one. And I'd never seen that before.

[Michael Lewis]

Was that what attracted your attention in the first place?

[Michael Burry]

Well, that's a cute little thing. I was like, wow, how did they get five billionaires out of that group? And so out of a company that has 4 billion in revenue. And actually stock based compensation basically would weighs almost all their income. They have to pay their people who are doing all this consulting so much in stock that they just use stock based compensation. Then what they do is they buy that back and the company would like you to just give them credit for. What Wall street generally does is they take the earnings per share and then they add back the stock based compensation because it's non cash and they add it back to the earnings. And I think actually the way GAAP accounts for stock based compensation is skews low versus what it actually costs, the real cost. You can look at how much are companies buying back to offset that dilution and you can just take that amount and deduct it from cash flow. If you do that with Palantir, historically they don't make anything. So I basically looked at the company and said you're worth this much and you really don't make anything of its tiny little bit of revenue. And you have all these billionaires.

[Michael Lewis]

You had an argument back in 2008 for when the subprime mortgage bond market was going to start to unravel, when people are going to start to default. Do you have a timing argument for now with Palantir?

[Michael Burry]

Well, I think this is the AI consulting thing. So Palantir and Nvidia are the two luckiest companies on the planet. And neither produced a product for AI. No, I know, but they're the two poster children for AI.

[Michael Lewis]

Yes, Nvidia was a good computer graphics chip company.

[Michael Burry]

Nvidia was a computer graphics chip. I actually knew the CFO. We talked in 2015 or 16. I went long the stock and I, and I said hey, you're doing a great job. I love how you're buying back stock. Her kids was on my kids basketball team. I think I bought the stock like a year or two later. The stock was up to like it went from 20 to 90 at the time, which is like 40 cents now. But after the splits, Nvidia was lucky. They got lucky once with the crypto mining because crypto mining needed GPU. GPUs were the, they weren't custom for, for crypto mining. They were just the thing that was there that could be used. And then AI came along and it's the same deal about a year and a half ago, a year and a half to two years ago. Palantir was not an AI company. Basically when ChatGPT came out, they basically put an AI cover on applications that they were selling and then selling all this consulting on. And they call it AI. But that's what every company is doing now.

[Michael Lewis]

But is there a timing argument for AI then?

[Michael Burry]

Yeah. So this gets to what does this bubble look like? This bubble looks an awful lot like the dot com bubble, which is not really a dot com bubble. It was a data transmission bubble. It was a huge build out of fiber and a huge fiber needed routers and routers needed fiber and it just blew up. So the market peak was in March 10th of 2000. Cisco grew 55% that year revenues in 2000 and it grew 17% in 2001 because the investment continued. It actually peaked for about a year after the top in the market. And so what you can do is you can look at net investment, which is capital expenditures, less depreciation, all right. Over time and you can put it against GDP to kind of a nominal GDP to compare it across eras. And you get these nice mounds of, of investment manias. And what you see in every prior one was the relevant stock market peak was before you were even halfway done with the capital expenditure. In the majority of cases the capital expenditure hadn't even peaked yet. And so right now we're ramping up for capital expenditure. And what's happened is we've gotten into this part of the phase where if you announce a dollar of capex on AI, your market cap will go up $3 for every dollar you add Oracle, we saw that with Oracle giant company was up 40% like incredible. Larry Ellison was briefly the richest man because they announced this massive multi hundred billion S of dollars of basically spending that they would have to. Well they announced bookings but they would have to spend. They're still building it out.

[Michael Lewis]

Where are we then?

[Michael Burry]

I can't say because it hasn't happened fully yet. We are at levels of prior peaks. We're at the level of the shale revolution relative to gp. We're at the level near the level of the dot com where when the dot com the Nasdaq peaked.

[Michael Lewis]

So you felt two year, two year puts were enough.

[Michael Burry]

I thought two years would be enough, yes. I think two years would be enough. I think if you're going to buy something now, buy health care stocks, they're really out of favor. If you own something that has been gone up a lot, you've done really, really well in it. It's shooting straight up and you know it's think it's kind of overvalued. You should, I think that's something you should sell.

[Michael Lewis]

I want to ask you one weird question more question about the stock market and that is you own Berkshire Hathaway and Berkshire just announced, we just was revealed that it bought a big chunk of Google stock. Did that disappoint you or do you.

[Michael Burry]

See how they're thinking we don't know that that is Buffett that bought it. 1, 2. Google is the value investors favorite in that group. It's the one that everybody said well it's cheaper than all the others, it's got relative value and it is Google. But I know that Since I got ChatGPT and Claude, I don't use Google right And Google search. The magic thing about Google search was how little it cost because most requests were not monetizable. So for the 85% of searches they get that are not nobody's gonna buy even looking to buy anything or think it's not product related. It's it's history. You know what did Columbus really do, you know it's not monetizable. And so they better not lose a lot of money on that AI changes that AI is expensive. I run queries regularly that I know cost tens of dollars just for my inquiry. Inquiry 1 inquiry. Google had had those searches down to infinitesimal fractions of a cent. So that business is the golden goose and it's really basically all their cash flow. So the other thing about LLMs is that look back to the dot com boom. That was an amazing telecommunications revolution. If you were alive in the 80s and then you were alive in the 2000s, it's nothing the same. It changed everybody's life in a dramatic way. And still AOL just disconnected its last dial up just like a year ago or earlier this year. I mean, the penetration was very slow in the United States. It was pretty lightning fast in places like in Singapore, Seoul, these one city countries type thing, or dense urban areas. But it was, it was a long time by the financial crisis. But even after the financial crisis, there was a lot of people in the United States who were not online or were on, you know, were in not really doing it. So back then, as that connectivity came up, there was a lot of things people want to sell. People wanted to sell goods online, they wanted, Amazon grew on that, they wanted to socialize online, they want to do these things with LLMs. Most people are getting what they want out of them right now on the free level. And they're massively penetrating. What more are they going to do for the average person? Not that much. The money is going to be in the, in the developer space and there's a lot of money in that space. But this idea that, I mean, a very small percentage of people want to pay for their LLM and they won't ever have to because they're going to be. So this is going to be commoditized.

[Michael Lewis]

So I think you're getting a sense of how Michael Burry's mind works. When we come back from the break, I finally find out why he decided to talk to me for the big short. All right, so I'm going to let you go in a minute, but there are a couple of other things I want to ask you about because I just want to pick your brain on them. What triggers a debt crisis in this country? Are you paying much attention to our government's finances and how do you feel about them and where do you think it's headed?

[Michael Burry]

So predicting this stuff is the problem. I always kind of put it in terms of, you know, waiting for Castro to die. It's not a strategy. The people live a long time, countries are very powerful and they can do a lot. The United States has the reserve currency. Obviously, Trump is bullying around the world right now. So the United States is still a very primary country. And betting that they can't find a way is not something I'd want to do anytime soon. I do think it's ridiculous. I mean, we have what, 4.5 trillion in taxes from individuals. We have about 400 billion from corporations. I mean, you could double the taxes on corporations. That's 400 billion. What does that do for you? We have a trillion dollars in interest payments on our debt every year. So when you get that trillion, that interest expense is getting up there, and then you have all the entitlements. We do not have the social cushion that a lot of other developed countries have, but we can't really afford doing much more than we're doing.

[Michael Lewis]

So you think the debt's just going to keep growing and growing and growing, but you wouldn't want to bet when it breaks?

[Michael Burry]

No, you can't, because it's the United States.

[Michael Lewis]

How do you feel about Fed independence? Do you care?

[Michael Burry]

I think I have a kind of a sick view on this. I think when Trump starts running the Fed, it might become the end of the Fed, because if he's running the Fed, then everybody's going to hate it, not just me. So we'll see. I think the Fed has done a lot of damage over the last hundred years or since its inception in 1914. And I feel we don't need the Fed. We don't need it. Unless the Fed is going to say, look like, why are they going to drop rates? There's no reason to drop rates now. Inflation's starting to come up a little bit. The economy is muddling along. But our neutral rate is not 1% or 0% or where Trump wants it. Our neutral rate is probably around 4% or it's probably around where we are now. And think about, when you drop rates, you kill all the savers, all the fixed income people. They suffered for so long, they're actually finally getting a rhythm to their lives again. None of this is costless. And you think you're going to just drop rates. Be careful what you wish for. You might drop rates. And because of the debt situation, the curve can steepen.

[Michael Lewis]

Did you just say you want to get rid of the Fed?

[Michael Burry]

Yeah, I think the Fed doesn't do anything very helpful. I think it's the easiest job in the world.

[Michael Lewis]

What do you replace it with?

[Michael Burry]

I think the US treasury could have a department that just makes these decisions. I mean, the Fed already is monetizing treasury debt, whatever. I mean, they're almost the same department already.

[Michael Lewis]

Your institutional pessimism, does it lead you to, like, I don't know, bitcoin or gold or one of these refuges that.

[Michael Burry]

I think that Bitcoin at 100,000 is the most ridiculous thing that same people are sitting on TV talking about Bitcoin, they're just casually. It's 100,000 down. Now it's 98,000. It's not worth anything. Everybody's accepted it. It's a tulip bulb of our time. It's worse than a tulip bulb because this has enabled so much criminal activity to go deep under.

[Michael Lewis]

So where do you hide with your. Do you have gold?

[Michael Burry]

I've had gold since 2005.

[Michael Lewis]

I'm gonna let you go, but the last question I have, did you. I never asked you this question. You let me into your kitchen in a really. You made yourself very vulnerable, and you let me tell your story. Do you regret it?

[Michael Burry]

When you showed up, I knew you from Liars Poker, and I didn't know what you were going to write about me because you're a great author. I knew you from Moneyball and Blindside, but when you deal with Wall street, you tend to be very fairly critical. And so I'm a big hedge fund manager. Just shorted your house. You approached me. Actually, I got a call from a friend you talked to Think, One of my friends in New York. And he called me and he said, I just talked with Michael Lewis. Congratulations. You're going to be one of the heroes in his new book. And that was when I really realized, oh, this is going to go okay. So, in a way, I was giving you all that stuff defensively. I didn't want you having a. I wanted to make sure you had everything. Full disclosure. Because I thought I didn't do anything wrong, and I wanted you to know that. Yeah.

[Michael Lewis]

And your appeal to me was you were and are a fantastic teacher, like, a really good explainer of your own thoughts. And your own thoughts can sometimes be peculiar, like just different than what other people are thinking. And you don't mind holding them. You know, you don't mind having views that just would embarrass people who are less sure of themselves to articulate.

[Michael Burry]

Well, being on the spectrum, I'll just move back into my own head and move along, so.

[Michael Lewis]

It was great seeing you. I'm sorry you're not out here more. And if you were out here, I wish you just let me know because I am down in your old neck of the woods some, and it'd be fun to go grab dinner.

[Michael Burry]

We're still out there a lot, so I'll look forward to seeing you. All right. Miss you.

[Michael Lewis]

Yeah, miss you, too. Thank you, Michael.

[Lydia Jean Cott]

Against the Rules, the Big Short Companion is hosted by Michael Lewis. It's produced by me, Ludie Jean Kot and Kathryn Girardot. Our editor is Julia Barton, our theme was composed by Nick Bertell, and our engineer is Hans Dael Schi. Special thanks to Nicole Opton Bosch, Jasmine Faustino, Pamela Lawrence, and the rest of the Pushkin Audiobooks team. Against the Rules is a production of Pushkin Industries. To find more Pushkin Podcasts, listen on the iHeartRadio app, Apple Podcasts or wherever you listen to podcasts. And if you'd like to listen ad free and learn about other exclusive offerings, don't forget to sign up for a Pushkin subscription at Pushkin FM plus or on our Apple show page. And you can get the Big Short now at Pushkin FM Audiobooks or wherever audiobooks are sold.