Speaker 1: Pushkin too quick. No, it's perfect push kid stuff. You
Speaker 1: got it.
Speaker 2: You can take me back to the nineteen nineties, baby,
Speaker 2: and then.
Speaker 3: The seventies and then the nineties.
Speaker 2: Okay, Robert Smith.
Speaker 3: This is a story about some of the smartest people
Speaker 3: in the world, incredibly successful in their fields. They decide
Speaker 3: to come together start a new thing, and they are
Speaker 3: so successful they make billions of dollars. They win the
Speaker 3: Nobel Prize as they are making billions of dollars, and
Speaker 3: then the next year they get destroyed, and in fact,
Speaker 3: they get destroyed so hard that they almost take the
Speaker 3: global economy down with them.
Speaker 2: I'm Jacob Goldstein, I'm Robert Smith, and this is Business.
Speaker 3: Sure, the history of business today on the show, the
Speaker 3: story of long Term capital Management.
Speaker 2: Wooh, you are so amped for this.
Speaker 3: The mid nineties, the Cold War has just ended, free
Speaker 3: market capitalism is triumphant, and the.
Speaker 2: Economy was fantastic in the nineteen nineties, best economy, my
Speaker 2: favorite economy. And the people who started Long Term Capital
Speaker 2: Management looked at the economy not just in the US
Speaker 2: but around the world, and they said, yes.
Speaker 3: Yes, this is the moment we've been waiting for. We
Speaker 3: are going to ride this global capitalism wave, and they did.
Speaker 2: What they did not know was that that wave was
Speaker 2: about to crash. Let's start before the nineteen nineties. Let's
Speaker 2: let's let's start in the nineteen eighties, the early eighties,
Speaker 2: Go Go Go all the street with.
Speaker 3: A bond trader named John Merriweather. Meriweather had grown up
Speaker 3: working class South side of Chicago, worked as a golf
Speaker 3: caddy as a kid that was like his you know,
Speaker 3: path up old school, got his MBA at the University
Speaker 3: of Chicago, and in the mid seventies he went to
Speaker 3: work at Solomons and Solomon Brothers was about to become
Speaker 3: the heart of nineteen eighties Masters of the Universe. Wall
Speaker 3: Street Bonfire the Vanities was based on Solomon Brothers. Michael
Speaker 3: Lewis and Liar's Poker wrote about Solomon Brothers. It was
Speaker 3: where he worked right out of college in the eighties.
Speaker 3: And a key thing to know is at this time
Speaker 3: the kind of legendary traders at Solomon Brothers were like,
Speaker 3: very rough, They were street smart. They ate cheeseburgers for breakfast.
Speaker 3: They traded, you know, based on their cheeseburger filled guts.
Speaker 3: And Michael Lewis wrote beautifully about these guys in Liar's Poker,
Speaker 3: most famously about a trader named Louis Raniery. Louis Raniery
Speaker 3: started out in the mailroom. He was from Brooklyn. He
Speaker 3: worked his way up and Robert, I want you to
Speaker 3: read one sentence from Liar's Poker that describes the life
Speaker 3: of a guy who worked with Ranier and just captures
Speaker 3: this culture.
Speaker 2: At Solomon Brothers, he traded bonds while being hollered at
Speaker 2: by six salesman, eating a morning cheeseburger, and watching Ranieri
Speaker 2: hold a big lighter under the balls of a fellow trader.
Speaker 2: I wasn't prepared for that.
Speaker 3: This, this is Slivin Brothers. At this time, you don't
Speaker 3: see the lighter coming. John Merriweather was not this kind
Speaker 3: of guy. He was working class, but he was calm.
Speaker 3: He was even tempered. He didn't yell, didn't hold big
Speaker 3: lighters under his colleagues balls, but he did love to
Speaker 3: take risks. He was a trader at heart, and he
Speaker 3: was really good at it. And he got promoted and
Speaker 3: he started running a desk, which meant he had to
Speaker 3: hire people to come work with him. Higher traders. And
Speaker 3: this is when he has his big idea. For the
Speaker 3: past decade or so. By this point, this is the
Speaker 3: early eighties, professors at places like MIT and the University
Speaker 3: of Chicago had been developing these really mathematical theories of
Speaker 3: finance about prices.
Speaker 2: Right.
Speaker 3: Some of this had filtered into Wall Street, but not much.
Speaker 2: It was an academic endeavor. They had found data sets
Speaker 2: and they were tracking the stock market, and they knew
Speaker 2: there was money involved, but they were doing it to
Speaker 2: pass their dissertations, not necessarily to like blow up the market.
Speaker 3: Yeah, and still the culture on Wall Street was this
Speaker 3: very kind of cheeseburgers for breakfast culture, not an academic culture.
Speaker 3: But Merriweather's idea was basically, oh, maybe these nerds know
Speaker 3: what they're talking about, you know, like maybe they could
Speaker 3: actually come to Wall Street. We could do a bunch
Speaker 3: of math and make money. And so he decides to
Speaker 3: test this theory, starts hiring a bunch of you know,
Speaker 3: guys with PhDs from a MIT and they come work
Speaker 3: with him at Solomon Brothers.
Speaker 2: He's like, stay away from the guy with a big light.
Speaker 3: Yeah, and it's unsurprising now now, if you have a
Speaker 3: PhD from MIT, the easiest thing to do is not
Speaker 3: to be a professor, but to go work at Jane
Speaker 3: Street or some.
Speaker 2: Quant Yeah, they're actually recruiting at MIT in Stanford and Harvard.
Speaker 3: A banker who worked with Merriweather said, these guys that
Speaker 3: Merriweather is bringing in, these academics, were considered freaks. Here's
Speaker 3: a line, those.
Speaker 2: Guys would be playing with their slide rules at Bell
Speaker 2: Labs if it wasn't for John.
Speaker 3: Slide rules, slide rules. Three things about that quote. Those
Speaker 3: guys would be playing with their slide rules at Bell
Speaker 3: Labs if it wasn't for John. One, it comes from
Speaker 3: Roger Lowenstein's book When Genius Failed, excellent excellent nonfiction book
Speaker 3: about the rise and fall of long term capital management,
Speaker 3: the key source for today's show. Two, slide rules were
Speaker 3: what people used to do complicated math before graphic calculators
Speaker 3: came along. Scientific calculators I had.
Speaker 2: One, Yeah you would like actually move little little slides?
Speaker 2: And yeah in a little little clear window.
Speaker 3: I love that. And Three Importantly, this quote was an
Speaker 3: anachronism even in nineteen eighty three, because if they would
Speaker 3: not have been playing with slide rules, they would have
Speaker 3: been playing with computers. The rise of the computer is
Speaker 3: what empowers these people to do real work.
Speaker 2: I'm going to give you a number four too, because
Speaker 2: we're starting to see the shift in the economy. In
Speaker 2: this quote, they're not at Bell Labs anymore. They're not
Speaker 2: working for American manufacturing, an American invention, They're working for
Speaker 2: American finance. This is when we're seeing this big shift
Speaker 2: in the economy.
Speaker 3: Yes, financialization, financialization, the rise of Wall Street.
Speaker 2: Yes.
Speaker 3: And in fact, it's no coincidence that Jim Simons, who
Speaker 3: you did a show about.
Speaker 2: Who is a math PhD, who is a math PhD.
Speaker 3: Is starting his fund Renaissance Technologies right around the same time.
Speaker 3: So Meriweather brings the nerds to Wall Street and they
Speaker 3: work with him on what's called the arbitrage desk. Robert Smith,
Speaker 3: what's arbitrage? Sweet sweet free money?
Speaker 2: Arbitrage is this very specific idea in finance, and it's
Speaker 2: this very big idea and very simple idea I would say,
Speaker 2: which is is, if you can buy and sell the
Speaker 2: same thing at different prices, you can make money with
Speaker 2: almost no risk. So let's say silver is trading in
Speaker 2: New York at one hundred dollars and is trading in
Speaker 2: London at one hundred and one dollars.
Speaker 3: It's a very high price for silver. It's very exciting moment.
Speaker 2: Yes, you could buy the silver in New York for
Speaker 2: one hundred dollars and simultaneously sell it in London for
Speaker 2: one hundred and one dollars. You know, you don't have
Speaker 2: to ship it, and then you make a dollar profit. Yes,
Speaker 2: no work whatsoever.
Speaker 3: Yes, Now, arbitrage is like this tend to be hard
Speaker 3: to find because people arbitrage them away. When you buy
Speaker 3: the cheap one and sell the expensive one, you cause
Speaker 3: the prices to converge at.
Speaker 2: One hundred dollars and fifty cents.
Speaker 3: So the kinds of arbitrage is that Merriweather and his
Speaker 3: nerds are finding are a little more subtle, but they are.
Speaker 3: But they exist in the world. And these guys come
Speaker 3: in and indeed start making money, a lot of money.
Speaker 3: In some years, they account for most of Solomon's profits.
Speaker 3: And that might have been the end of the story.
Speaker 3: They might have just got rich on Wall Street, but
Speaker 3: for one thing in nineteen ninety one. So they've been
Speaker 3: at this for a while. They're doing well. Merriweather gets
Speaker 3: in trouble because a guy who worked for him rigged
Speaker 3: Treasury bond auctions and actually told Merriweather about it, and
Speaker 3: Merriweather told his boss, but they didn't do anything. They
Speaker 3: said on it. Sorry comes out, they lose their jobs.
Speaker 3: We talked about this.
Speaker 2: In the Warren Buffett Show because Warren Buffett was a
Speaker 2: huge investor in Salomon Brothers had to come in and
Speaker 2: run the company from Omaha.
Speaker 3: Yes, with all of these.
Speaker 2: New York traders, just to fix the reputation.
Speaker 3: Yes, so Merriweather, I think he resigned under pressure. I
Speaker 3: don't think Ashley got fired, but he's out. He's out.
Speaker 3: So he decides not long after that he wants to
Speaker 3: get his band of nerds back together, but not working
Speaker 3: for somebody else, not at a Wall Street firm. He
Speaker 3: wants to start a hedge fine. Ooh, wasn't his reputation
Speaker 3: bat well? I will know he didn't get fired for
Speaker 3: losing money. Yes, that fired for unethical laps and making
Speaker 3: a lot of fun making a lot of money. So
Speaker 3: o contrare ethical laps plus making a lot of money.
Speaker 2: Perfect, And so he decided to start a hedge fund.
Speaker 2: In nineteen ninety three, hedge funds were not that popular,
Speaker 2: but there was this idea which was you could have
Speaker 2: a fund that was not correlated to the market, and
Speaker 2: this was very useful because you would make money on stocks,
Speaker 2: but you're worried about losing money, so you put a
Speaker 2: fraction of your wealth into a hedge fund and they
Speaker 2: would do sophisticated mathematical things to make sure that if
Speaker 2: the market were to crash, you wouldn't lose all your money.
Speaker 2: That was the hedge part. That's the hedge right.
Speaker 3: They make different kinds of bets, so it's not just
Speaker 3: market goes up, you make money. Market goes down, you
Speaker 3: lose money. This was the original idea. Hedge funds had
Speaker 3: been around for decades by this point. By the time
Speaker 3: Merriweather comes along and the Nine Days, not all hedge
Speaker 3: funds are even hedged. The main thing they are is
Speaker 3: special funds for rich people and institutions that charge high fees.
Speaker 3: And Meriweather decides he's going to launch the biggest hedge
Speaker 3: fund ever. And in order to launch the biggest hedge
Speaker 3: fund ever and to charge higher fees than usual, which
Speaker 3: is also part of his plan, he needs to nerd up.
Speaker 3: He needs to go even nerdier than before, and he
Speaker 3: goes and recruits two professors. Two super nerds who are
Speaker 3: going to make his dreams come true. They are Robert
Speaker 3: Merton and Myron Scholes. Merton was a Harvard professor who
Speaker 3: was sort of the father of the finance math nerds
Speaker 3: in Shoals. Scholes was at Stanford and hiring Shoals was like,
Speaker 3: I couldn't quite nail this one. It was like hiring
Speaker 3: doctor band aid for your hospital or I don't know it.
Speaker 3: Because Schole's name was on this famous equation that was
Speaker 3: widely used in finance. Shouls and another guy, Fisher Black
Speaker 3: had come up with Black Shoals, an equation that I
Speaker 3: know is dear to your heart.
Speaker 2: Yeah, if you know anything about finance, Matthew, you know
Speaker 2: the Black Shoals formula. And what they did was solve
Speaker 2: this classic problem in finance, which is how to price
Speaker 2: an option. So an option is a contract between two
Speaker 2: people that essentially says I have the right to buy
Speaker 2: something you own in the future at a certain price
Speaker 2: at a certain price. So Jacob's, you know, all in
Speaker 2: on SpaceX and I I'm a little bit wary, So
Speaker 2: I say to him, I want the right to buy
Speaker 2: SpaceX at two hundred dollars in six months. Okay, that's
Speaker 2: a normal contract. But how much should I pay Jacob
Speaker 2: for that right to buy it in the future, the right,
Speaker 2: but not the obligation right. And so people had used
Speaker 2: their guts, they essentially guessed what this was worth. And
Speaker 2: what Shoals and Black and Merton did was come up
Speaker 2: with this way to essentially price the future in the
Speaker 2: present by creating a little insurance portfolio. Theoretically, yeah, the
Speaker 2: way you predict future risk now is through essentially an
Speaker 2: insurance contract. So now Meriwether has Merton and Shoals. He
Speaker 2: also hires a guy who had worked at the FED.
Speaker 3: It's incredible team, and history, in a really profound way
Speaker 3: is on their side. Like, think about this moment. It's
Speaker 3: nineteen ninety three. Communism fell, you know, the Soviet Union
Speaker 3: just fell apart. The Cold War is over, and it's
Speaker 3: clear right free market capitalism one command and control communism lost.
Speaker 3: Even Russia at this point is becoming a market economy.
Speaker 3: And there's this famous, kind of controversial book that has
Speaker 3: just come out around this time that kind of nails
Speaker 3: this moment, a book with the title that people love
Speaker 3: to mock. The title was The End of History was
Speaker 3: by a professor named Francis Fukuyama, and let me just
Speaker 3: say he didn't actually mean the end of history the
Speaker 3: way people who mocket say.
Speaker 2: Things would still happen. Things would still happen.
Speaker 3: His argument was, there has been this long arc of
Speaker 3: humanity figuring out how to organized people in economies, you know,
Speaker 3: monarchical feudalism, and we had communist dictatorships, and now in
Speaker 3: the nineties we have arrived at a winner free market
Speaker 3: capitalism and liberal democracy.
Speaker 2: And if you think all the other countries in the
Speaker 2: world are going to become more like the US, more efficient,
Speaker 2: then you can make bets on that.
Speaker 3: This is the world that Merton and Shoals have been
Speaker 3: doing their math for the rational so called rational if
Speaker 3: you like, world where the market becomes more efficient, where
Speaker 3: prices more and more closely reflect fundamentals.
Speaker 2: This is their moment. The world is breaking their way.
Speaker 3: And so when Merton and Shoals and Meriwether go out
Speaker 3: to pitch their fund the world wants in. Italy's Central
Speaker 3: Bank invests, the biggest investment bank in Brazil invests. Money
Speaker 3: is coming in from Japan, from Taiwan, from Kuwait, from
Speaker 3: Wall Street. Phil Knight, founder of Nike invests Michael Ovitz.
Speaker 3: Avitz don't know Ovits Hollywood superagent invests. You know all
Speaker 3: Meriweather raises over a billion dollars, which was a hedge fund. Ever,
Speaker 3: and in February of nineteen ninety four they launch Long
Speaker 3: Term Capital Management becomes a thing. They got an office
Speaker 3: in Greenwich, Connecticut. Of course, they got like forty people,
Speaker 3: and they got a bunch of computers and they are
Speaker 3: ready to start making money. We're going to run an
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Speaker 4: We'll be back in a minute.
Speaker 3: The ads are over. We're going to talk about one
Speaker 3: of the first big trades they did at Long Term
Speaker 3: Capital because it explains the basic way that the firm worked.
Speaker 3: So the traders at the firm saw this gap, this
Speaker 3: price gap basically an arbitrage opportunity, and what it was
Speaker 3: was a gap in the price between newly issued thirty
Speaker 3: year treasury.
Speaker 2: Bonds fresh it could still smell the inc.
Speaker 3: Us government debt and thirty year treasury bonds that had
Speaker 3: been issued just a few months earlier. So this is
Speaker 3: basically the same thing. But there was an unusually large
Speaker 3: gap between the prices of the two of them for
Speaker 3: sort of kind of regulatory reasons about the way Wall
Speaker 3: Street had to work. The key thing is it was
Speaker 3: clear that this gap should close over time. It was
Speaker 3: bigger than made sense. So this is perfect for the nerds.
Speaker 3: It's an irrational gap on really safe assets. They don't
Speaker 3: have to bet on whether you know the treasury market
Speaker 3: is going to go up or down. They just have
Speaker 3: to bet that this irrational price gap is going to close,
Speaker 3: and it almost certainly will close.
Speaker 2: This is the age of rationality. Of course it's going
Speaker 2: to close, and they can help it do that.
Speaker 3: The only problem is that the gap between the prices
Speaker 3: was really small. It was like one and a half percent.
Speaker 3: So even if the gap closes entirely, and it might
Speaker 3: not do that, the most they could make is ish
Speaker 3: one and a half percent too low.
Speaker 2: That's too low.
Speaker 3: Yes, you're not starting this great hedgehunt with a billion
Speaker 3: dollars for a return like that. So you have an
Speaker 3: investment that you're very confident in, it's a smaller intern.
Speaker 3: What do you do.
Speaker 2: You lever up. You borrow money. You borrow massive amounts
Speaker 2: of money because when you borrow money, you can turn
Speaker 2: a tiny percentage increase into a large percentage increase. Yes,
Speaker 2: let's do the math. Okay, give it to me. Okay.
Speaker 2: So if I have a million dollars and it's going
Speaker 2: to return one percent, that's ten thousand dollars.
Speaker 4: Boom.
Speaker 2: No, that doesn't even buy me a Masarati.
Speaker 3: I want my Mazarin and buy you a bad car.
Speaker 2: So I take my one million dollars, I go to
Speaker 2: a bank and say give me nineteen million more dollars.
Speaker 2: Now I have twenty million dollars, same investment only. Now
Speaker 2: I make two hundred thousand dollars. I get my Masarati,
Speaker 2: and that's a twenty percent return. I pay back the
Speaker 2: nineteen million. Sure, and by borrowing that money, I can
Speaker 2: make myself rich even on tiny opportunities.
Speaker 3: This is the game.
Speaker 2: Still is the game. Still, this is not a historical thing.
Speaker 2: This is what happens today.
Speaker 3: So they do this, They borrow something like twenty five
Speaker 3: dollars for every dollar they have. Yes, and they make
Speaker 3: a billion dollar bet on this to treasury arbitrage play,
Speaker 3: and it works, and very quickly they make fifteen million
Speaker 3: dollars in profit, putting up very little of their own money.
Speaker 3: It's working. It's important to know that they're not the
Speaker 3: only ones who see this gap. You know, the quants
Speaker 3: are emerging by this point, there are lots of nerds
Speaker 3: following in their footsteps, and so as other traders are
Speaker 3: getting in on this kind of bet, the spreads are closing,
Speaker 3: and the traders at Long term Capital have to look
Speaker 3: farther out into the world and make bets that are
Speaker 3: a little bit more speculative. One big one they do
Speaker 3: early on is on Italian bonds.
Speaker 2: So I don't want to give a hard time to
Speaker 2: the Italian economy, but let's just say they've had a
Speaker 2: lot of problems, especially at this point, a lot of
Speaker 2: different governments, and so Italian bonds are a little bit
Speaker 2: riskier than the other countries of Europe or US bonds. Yes,
Speaker 2: and this is before the euro right, so even more so.
Speaker 2: But a trader at Long.
Speaker 3: Term Capital is convinced that the market is overestimating a
Speaker 3: particular risk. And again this isn't like some wild speculation.
Speaker 3: He thinks the market is overestimating the risk that Italian
Speaker 3: companies will default on their bonds relative to the risk
Speaker 3: that the Italian government will default. Right, So it's still
Speaker 3: a spread trade, right, a convergence trade.
Speaker 2: But you know, it's interesting that there is this principle
Speaker 2: in behavioral economics that says that people overestimate the odds
Speaker 2: that bad things will happen.
Speaker 3: Uh huh.
Speaker 2: So in the stock market, you hear news about all
Speaker 2: time highs or the stock market crashing. Most days, the
Speaker 2: stock market is boring. You know, the price at the
Speaker 2: end of the day is very similar to the price
Speaker 2: at the beginning of the day. You know, we worry
Speaker 2: about Italian bonds or Italian company bonds. Oh no, they're
Speaker 2: going to default, but most of the time they don't.
Speaker 2: But weirdly, as humans, we think about the bad thing
Speaker 2: that can happen, and that's the price we put on it.
Speaker 3: So Long Term Capital decides to take the other side
Speaker 3: of that bet to decide, no, the world is going
Speaker 3: to continue to just be faught. Yeah, to be boring.
Speaker 3: They make this bet. Italy in fact did not default,
Speaker 3: and Long Term Capital made something like six hundred million
Speaker 3: dollars in two years on that trade. So the firm
Speaker 3: is doing the thing that they said they would do.
Speaker 3: They're making these trades that profit, you know, whether or
Speaker 3: not the market goes up or down, that things will
Speaker 3: tend to converge over time. They're borrowing a lot of
Speaker 3: money to do it, and it works so well. It works,
Speaker 3: in fact, better than they thought it would. In nineteen
Speaker 3: ninety five, long Term Capital made a fifty nine percent return.
Speaker 3: They took a bunch of fees out of that, and
Speaker 3: they returned to their investors forty three percent in one year.
Speaker 3: Take all my money, Take all my money, acts, Yeah, yeah, please.
Speaker 3: And one interesting thing about this moment is the people
Speaker 3: running the firm, Merton and Cholls and the rest of them,
Speaker 3: they knew that this was extraordinary. This was more than
Speaker 3: they expected. And I don't just mean that in a
Speaker 3: kind of hand wavy way. They weren't like, oh, that's
Speaker 3: more and we expected. It was more than their math
Speaker 3: told them was likely.
Speaker 2: And at this point there are traders who are not
Speaker 2: PhDs in the firm, who are, you know, popping the
Speaker 2: champagne and saying we're geniuses. They're you know, they're like,
Speaker 2: we're we're going to do this again and again and again.
Speaker 2: But the math guys in the room are looking at
Speaker 2: this saying, this is off our calculations, this is better
Speaker 2: than we thought, which is just as bad as worse
Speaker 2: than we thought.
Speaker 3: It's not. It's not actually no mathematical perspective. So they
Speaker 3: they have done all them me And in fact, you know,
Speaker 3: all firms tell their their investors we might lose money, right,
Speaker 3: your lawyers make you say we might lose money. But
Speaker 3: there is this amazing investor letter. It's actually an addendum
Speaker 3: to the investor letter that the firm sends out. The
Speaker 3: addendum is written by Merton and Shoals. Lowenstein talks about
Speaker 3: this in his book. And they don't just say yes,
Speaker 3: our firm might lose money. They put numbers on how
Speaker 3: much they might lose. So, for example, they say, yes,
Speaker 3: there is a twelve percent ants that the fund will
Speaker 3: lose at least five percent of its money in any
Speaker 3: given year. This is their worldview that outcomes are mathematically
Speaker 3: knowable in a probabilistic way. And this is the worldview
Speaker 3: that is spreading. You know, this is kind of the
Speaker 3: end of history worldview, the triumph of free market capitalism.
Speaker 3: And in nineteen ninety seven, this worldview is validated in
Speaker 3: the most validating way possible when Merton and Shoals win
Speaker 3: the Nobel Prize.
Speaker 2: Very rare for an investment trader to win the Nobel prize.
Speaker 3: Yes, like they're making billions of dollars for their firm
Speaker 3: and many millions of dollars for themselves. Like, oh, by
Speaker 3: the way, you're a genius. The way here you go,
Speaker 3: and you know the prize is specifically for that work
Speaker 3: figuring out how to price options. But the committee, there's
Speaker 3: this phrase from the committee that is important here. The committee,
Speaker 3: the Nobel Committee says their work facilitated more efficient risk
Speaker 3: management in society.
Speaker 2: Which is a beneficial thing for the world. You know,
Speaker 2: there's a lot of risk out there, and if you
Speaker 2: don't know how to price that risk, that's concerning things
Speaker 2: can blow up all the time. But if you have
Speaker 2: formulas that allow us to figure out exactly how much
Speaker 2: risk something is taking and how to price that risk,
Speaker 2: everyone can calm down. Part of the calm nineties we're talking.
Speaker 3: About the world is better when when prices more accurately
Speaker 3: reflect fundamentals. I should mention, by the way, Blackfish or
Speaker 3: black of Black Shoals would have won as well, but
Speaker 3: he had died by this point and you can't win
Speaker 3: the Nobel posthumously. So now long term capital has extraordinary returns,
Speaker 3: and on top of that, they just won the Nobel Prize.
Speaker 2: The line forms to the right. Just be calm all
Speaker 2: the way around their building in grengeng Connecticut. People want
Speaker 2: to give them money, clearly, but they can't take more
Speaker 2: money at this point. This is a problem.
Speaker 3: It's a classic hedge fund problem, where you know they're
Speaker 3: not just putting money into the stock market and these
Speaker 3: giant liquid markets. They're making these weird arbitrage bets on
Speaker 3: bonds in Italy, and there's only so much money you
Speaker 3: can put into those bets before it starts to move markets.
Speaker 3: Or at least this is what they tell their investors
Speaker 3: in the fall of nineteen ninety seven, around the time
Speaker 3: that Mertin Inchuls win the Nobel Price. Here Robert read
Speaker 3: from this letter that merriweather sends to investors around this time.
Speaker 2: The fund has excess capital. This has occurred primarily because
Speaker 2: of a substantial increase in the capital base from the
Speaker 2: larger than expected past realized rates of return and high
Speaker 2: reinvestment rates elected by the funds investors. Oh we're too good,
Speaker 2: We're too good at our jobs. We just made too
Speaker 2: much money, is what they're saying.
Speaker 3: They're saying that, and what they decide to do is
Speaker 3: force the investors to take back their money. And a
Speaker 3: lot of the investors are like, no, don't give us
Speaker 3: our money back. Keep it. And of course the partners
Speaker 3: keep their own money in crucially, but in late nineteen
Speaker 3: ninety seven, Long Term Capital does in fact payout two
Speaker 3: point seven billion dollars to its investors. Now, the next
Speaker 3: thing that happens is amazing. The fund does not trim
Speaker 3: its bets, does not say, oh, now that we've given
Speaker 3: this money back, we're gonna, you know, be a little
Speaker 3: bit more modest. What they do is they borrow more money,
Speaker 3: They increase their leverage and keep the same bets going.
Speaker 2: It works, so well, why not double down?
Speaker 3: Why not double down? So now a bigger share of
Speaker 3: the fund is the partner's own money. It's levered up
Speaker 3: even more so if it works, if they keep making money,
Speaker 3: the partners will go from really really rich to really
Speaker 3: really really really rich. By the way, we haven't mentioned
Speaker 3: the other side of leverage, which is the market goes
Speaker 3: against you. Instead of losing a little, you lose a lot.
Speaker 3: What is going to happen after the ad break?
Speaker 2: They're Nobel Prize winning geniuses. They are going to be
Speaker 2: rich forever. Willsone, and we're back on the roller coaster.
Speaker 2: The cars have just gone up the hill at the
Speaker 2: beginning of the roller coaster. It's to the very very top.
Speaker 5: And do you know we're going to talk about now
Speaker 5: bond spreads. Okay, let's do bond spreads. If you have
Speaker 5: two different bonds, they may pay different interest rates. If
Speaker 5: you have a very safe bond, like US government bond,
Speaker 5: it may pay four percent. If you have a risky.
Speaker 2: Bond, it may pay eighteen percent to compensate for the risk.
Speaker 3: Eight ten percent is crazy, I know.
Speaker 2: So the spread risky bond, the spread is the gap
Speaker 2: between them, so in this case, fourteen percent eighteen minus four.
Speaker 2: The key thing to know is the magnitude of the
Speaker 2: spread is a measure of fear. Really, the wider the spread,
Speaker 2: the more worried investors are.
Speaker 3: When they're really confident about the economy, the spread will
Speaker 3: be narrower.
Speaker 2: Because they think everyone's going to pay out their bonds.
Speaker 3: The risk bond isn't that risky.
Speaker 2: But if the economic conditions start to get worse, you
Speaker 2: start to worry about your higher risk bonds, you demand
Speaker 2: a higher interest rate, and the gap wid.
Speaker 3: Widens and people flee to the safe bond, which makes
Speaker 3: that interest rate even lower.
Speaker 2: Yung.
Speaker 3: So it's the beginning of nineteen ninety eight, and in
Speaker 3: a lot of parts of the world, bond spreads are
Speaker 3: wider than usual. They're not insanely wide. It's not like
Speaker 3: financial crisis wide, but they're wide. You know, there are
Speaker 3: reasons for this. In nineteen ninety seven there was the
Speaker 3: Asian financial crisis that flowed through Thailand, Indonesia, South Korea.
Speaker 3: So investors are still worried about this, and this is
Speaker 3: reflected in wide bond spreads. And the partners at Long
Speaker 3: Term Capital, and more importantly they're financial models, thought global
Speaker 3: bond investors were too worried about this. They thought bond
Speaker 3: prices would converge, spreads would fall, things would go back
Speaker 3: to historic norms. And if you zoom out to that
Speaker 3: broader historic arc we were talking about earlier, this makes sense.
Speaker 3: You know, fall of the Soviet Union, triumph of the
Speaker 3: free market, progress of rational economic actors. All of this
Speaker 3: points in the direction of a smoother, less volatile, calmer
Speaker 3: market and lower bond spreads.
Speaker 2: And the economy in the US is doing tremendously. Well,
Speaker 2: we have the Internet. Finally, there's all these dot com stocks.
Speaker 2: It looks like a new age and economy.
Speaker 3: Around the time we balance the budgets running a surplus
Speaker 3: somewhere around here. Yeah, so long term capital puts on
Speaker 3: debts all over the world, that volatility will go down,
Speaker 3: that spreads will converge in Europe and in Latin America.
Speaker 3: And they're also putting on bets in Russia in the
Speaker 3: new capitalist frontier, and the Russian economy was kind of
Speaker 3: a mess by this point. People were starting to worry
Speaker 3: that Russia might default on its debts. But there was
Speaker 3: this thing people said at the time, which was, no
Speaker 3: nuclear power has ever defaulted, meaning no, you know, big
Speaker 3: serious country has ever defaulted. Just kind of a nuclear
Speaker 3: power is kind of weird, but it was a thing
Speaker 3: people said. And you know, the International Monetary Fund, the
Speaker 3: IMF had been really active in countries around the world
Speaker 3: helping them stave off defaults. And so the traders at
Speaker 3: long term capital look at Russia and they think, no,
Speaker 3: these fears are you know, one more example of irrational fears.
Speaker 3: They figure Russia is going to pay its debts, spreads
Speaker 3: will converge, and also they do hedge some of their
Speaker 3: bets for additional safety.
Speaker 2: I do love, though, that they're kind of optimists. I
Speaker 2: know it's the data and it's backed by the computers,
Speaker 2: but what they are saying is that the world is
Speaker 2: going to be a calmer, better place. It's kind of
Speaker 2: a beautiful thought. I wouldn't borrow a bunch of money
Speaker 2: and put billions of dollars on it.
Speaker 3: But yes, yes, I mean in a certain way, not exactly,
Speaker 3: but kind of like you and I both just do
Speaker 3: the boring retirement thing of just buy index funds mostly
Speaker 3: of stocks, and that's a version of that. Right, We're
Speaker 3: just going to ride a growing economy because that's what
Speaker 3: has happened, but we don't borrow a bunch of money
Speaker 3: to do it.
Speaker 2: We don't.
Speaker 3: So Long Term Capital is betting that around the world
Speaker 3: spreads are going to converge. This is not what happens.
Speaker 3: In the spring and early summer of nineteen ninety eight,
Speaker 3: spreads start to get a little bit wider, and in
Speaker 3: June of nineteen ninety eight, long Term Capital loses ten percent,
Speaker 3: biggest ever one month loss. Not disastrous, but big. In July,
Speaker 3: their return stabilize and then comes August, and on August seventeenth,
Speaker 3: the thing happened that was not supposed to happen. Russia defaulted.
Speaker 3: Russia said we are not going to pay some of
Speaker 3: our debts. And also the Russian banks where Long Term
Speaker 3: Capital had put their hedges, like we're not going to
Speaker 3: pay those foreign investors going to pay out on those
Speaker 3: on those contracts.
Speaker 2: Who would have thought, you can't trust the Russians.
Speaker 3: Kind of surprisingly, it actually takes a few days for
Speaker 3: it to hit global markets. Robert Smith, I have I've
Speaker 3: pasted here a paragraph from a nineteen ninety eight Wall
Speaker 3: Street Journal story for you to read.
Speaker 2: It was August twenty first, a sultry Friday, and nearly
Speaker 2: half the partners at Long Term Capital Management LP were
Speaker 2: out of the office. Outside the funds glass and granite headquarters,
Speaker 2: a fountain languidly streamed over a copper osprey clawing its prey.
Speaker 3: I said this to you. I said this to you,
Speaker 3: and I have like a running thing about newspaper stories
Speaker 3: with like gratuitous descriptions of place number one.
Speaker 2: It means that the reporter did not get inside the building.
Speaker 2: So the reporters describing whatever they can. But number two.
Speaker 2: It means settle in for a long story of hubris. Yes.
Speaker 3: I mean, if you are a financial firm and the
Speaker 3: Wall Street Journal is describing the fountain outside your office,
Speaker 3: you are in terrible trouble. Something very wrong has happened.
Speaker 3: In this case, what has happened on this sultry August
Speaker 3: day is that investors all around the world, all around
Speaker 3: the world are terrified by what has happened in Russia,
Speaker 3: and they are reacting by selling risky bonds and buying
Speaker 3: safe bonds.
Speaker 2: But not just in Russia. They're afraid of risky bonds
Speaker 2: around the world, any country that could conceivably be related
Speaker 2: to Russia in some way. They're like, we got to
Speaker 2: get out of there. We got to get out of there.
Speaker 3: And you will recall, yes, that when this happens, it
Speaker 3: makes bond spreads get wider. And this is the opposite
Speaker 3: of the bet that long term capital has made all
Speaker 3: around the world, and they're widening in a more correlated
Speaker 3: way than long term capitals models would have predicted, right like, sure, okay,
Speaker 3: maybe they'll widen in Russia, but they hadn't guessed that
Speaker 3: they would widen everywhere all at the same time.
Speaker 2: In this way, which is why they spread their bets
Speaker 2: around the world, because you're thinking, Okay, one country, this
Speaker 2: could go wrong, two countries it could go wrong, but
Speaker 2: other countries halfway around the world would not react the
Speaker 2: same way.
Speaker 3: Wouldn't be rational. And so because the world is reacting
Speaker 3: in this way, because these things are happening, long term
Speaker 3: capital is getting destroyed. Their models had predicted that the
Speaker 3: most they could lose in a single day was thirty
Speaker 3: five million dollars. On that sultry Friday, they lost more
Speaker 3: than five hundred million dollars. Time to reboot the computer.
Speaker 3: Something's wrong here, unplugging, unplugged it turn off, turn thosees
Speaker 3: back on. So it's late August in Connecticut, so of
Speaker 3: course all the rich guys, the partners are off on vacation,
Speaker 3: and the traders at the office are picking up the
Speaker 3: phones and calling them because that's what you had to
Speaker 3: do in the nineties.
Speaker 2: And their giant cell phones.
Speaker 3: Yes, they get Merryweather at a dinner in Beijing. Some
Speaker 3: other guy was in Sun Valley, Idaho, another one was
Speaker 3: in Italy. They they were on top by Sunday morning.
Speaker 3: Two days later, they are all back in the office
Speaker 3: in Connecticut. Trying to figure out what to do, and
Speaker 3: they think, Okay, this is going to fix itself. Like
Speaker 3: there's no fundamental reason why spreads are doing what they're doing.
Speaker 3: It's not like there's a war and economies have been
Speaker 3: blown up and destroyed. Things are going to go back
Speaker 3: to normal, and when that happens, we'll make more money.
Speaker 3: So all we need is some cash, some capital to
Speaker 3: ride this out, because remember, when you've borrowed a lot
Speaker 3: of money against a little capital, people are going to
Speaker 3: start asking for the money back. You're going to need
Speaker 3: some money essentially in the bank to ride out the storm.
Speaker 2: But if you have a pile of money that you
Speaker 2: can pay that back, that's fine. You can keep going
Speaker 2: and keep going and eventually make untold billions.
Speaker 3: Yeah, you can make your money back in more. This
Speaker 3: is their plan. And around this time Merriweather calls this
Speaker 3: old Wall Street friend of his for advice, maybe some
Speaker 3: contacts for raising money. The guy's name is Vinnie Matone.
Speaker 3: Vinni is the old school stuff trader, you know, that
Speaker 3: cheeseburger for breakfast kind of guy. And Lowenstein in When
Speaker 3: Genius Sailed has a beautiful description of this scene of
Speaker 3: a Vinnie coming to talk to Merriweather.
Speaker 2: Oh, this is going to be good. Vinnie wore a
Speaker 2: gold chain and a pinky ring, and he showed up
Speaker 2: at Long Term in a black silk shirt, open at
Speaker 2: the chest. Where are you? Matone asked bluntly. We're down
Speaker 2: by half. Merriweather said, you're finished. Matone replied for the
Speaker 2: first time. Merriweather sounded worried. What are you talking about.
Speaker 2: We still have two billion dollars we have half, Matone
Speaker 2: smiled sadly. When you're down by half, people figure you
Speaker 2: can go down all the way. They're going to push
Speaker 2: the market against you. You're finished.
Speaker 3: I like to think of Vinnie Matone as this street
Speaker 3: smart Yoda telling Merriwether that the force is not with him.
Speaker 2: It's beautiful because long term capital management was depending on
Speaker 2: computers and logic and this optimistic view of the world,
Speaker 2: and Vinnie, the street smart guy is like, what you
Speaker 2: didn't factor in is the fact that this is a
Speaker 2: competitive game, and much like the osprey in the fountain
Speaker 2: outside of your office, other investment firms are going to
Speaker 2: grab you out of the water and consume you. And
Speaker 2: so it's just such a beautiful moment that Vinnie knows
Speaker 2: the way the world really works outside computers.
Speaker 3: Meriweather isn't ready to give up, though. On September second,
Speaker 3: he sends this letter to Long Term Capital's investors, tells
Speaker 3: them that the fund was down forty four percent in
Speaker 3: August one month month. That's a very bad month. But
Speaker 3: he says, you know, spreads are going to close again.
Speaker 3: Our strategies are sound. This is, in fact a good
Speaker 3: time to invest. And he makes this move in this
Speaker 3: letter that at a certain level I am just in
Speaker 3: awe of I can't believe he did it. It's fantastic.
Speaker 3: So Robert here read this paragraph from the letter.
Speaker 2: Since it is prudent to raise additional capital, the fund
Speaker 2: is offering you the opportunity to invest in the fund
Speaker 2: on special terms. If you have an interest in investing,
Speaker 2: please contact Richard Leahy at Long Term Capital Management two
Speaker 2: O three five five to two five five one one
Speaker 2: for further information.
Speaker 3: Call now. Operators are standing by.
Speaker 2: It's my phone. Where's my phone?
Speaker 3: Actually?
Speaker 2: Have you called this phone? Put it on speaker? Okay,
Speaker 2: well one two oh three one.
Speaker 3: Oh, I'm trying to reach I want to invest. What
Speaker 3: are you going to say?
Speaker 2: If they answer no, The number you dialed is not
Speaker 2: in service.
Speaker 3: Spoiler alert, Robert, the investors did not call now, and
Speaker 3: in fact, the letter leaked to the press before even
Speaker 3: all the investors had got the letter. Some of them
Speaker 3: found out about it by reading about it in the news,
Speaker 3: and now in case they hadn't before, everybody knew that
Speaker 3: Long Term Capital Management was screwed. Knew, like Vinnie said,
Speaker 3: they were going to be screwed. They called it the
Speaker 3: LTCM death trade, where everybody is getting out ahead, right,
Speaker 3: because think about it, these are thinly traded markets. Long
Speaker 3: term capital has huge positions. You know they're going to
Speaker 3: have to sell. So even just to protect yourself, like
Speaker 3: if you own anything that they own, you want to
Speaker 3: sell before they sell, because they're going to drive the
Speaker 3: price down. So everybody is selling the stuff that they own,
Speaker 3: so the prices are falling, right. So this, in addition
Speaker 3: to the market behavior, is compounding Long Term Capital's troubles.
Speaker 3: On a single day September twenty first, they lose again
Speaker 3: more than five hundred million, like that bad day in August,
Speaker 3: five hundred and fifty three million dollars more, and they're
Speaker 3: still have all this leverage. In fact, in a way
Speaker 3: your leverage ratio goes up the more you lose. Right,
Speaker 3: Because they still owe all this money, their capital base
Speaker 3: is shrinking, and now the lenders are afraid that long
Speaker 3: term capital is not going to be able to pay
Speaker 3: them back. So they start saying, no, you have to
Speaker 3: give us our money back, or we're not going to
Speaker 3: roll over these short term loans that we've been rolling over.
Speaker 2: And if you're not rolling over the loans, you have
Speaker 2: to sell even more. And the more you sell, the
Speaker 2: more loans you have to pay off. And so that's
Speaker 2: the death spiral. That's the death spiral.
Speaker 3: And then there's if we widen the circle, there is
Speaker 3: now a bigger concern because long term capital is so
Speaker 3: big and so intertwined with all these other Wall Street firms,
Speaker 3: there is a bigger fear, which is, if they blow
Speaker 3: up and can't pay back their debts, then all of
Speaker 3: these other banks that they owe money to might not
Speaker 3: be able to pay their debts, and then we'll have
Speaker 3: a financial crisis. We'll have all of these firms linked
Speaker 3: to each other going down and potentially hurting the whole economy,
Speaker 3: bringing down the whole economy.
Speaker 2: And this is super important because this is how crises happen.
Speaker 2: Nobody really cares about Nobel Prize winners losing all their money. No,
Speaker 2: they should be able to like that's we want firms
Speaker 2: to fail. And even the bank that lent the money,
Speaker 2: they took a risk and they might lose money on
Speaker 2: the deal. But the situation is you don't know the
Speaker 2: full list of everyone who lent money to long term capital.
Speaker 2: And so when you're out in Wall Street and you
Speaker 2: want to make a deal, you have to ask yourself constantly,
Speaker 2: Wait a minute, is the person about to make a
Speaker 2: deal with Are they exposed to this? Are they exposed
Speaker 2: to someone who's exposed to this? It can slow down
Speaker 2: all investment at once because you just don't know where
Speaker 2: the risk is. This is the problem.
Speaker 3: Yes, this is why in the eighteen hundreds there were
Speaker 3: panics every few years because this would happen again and again,
Speaker 3: and in fact, to stop it from happening, or at
Speaker 3: least reduce the risk of it happening, America created a
Speaker 3: central bank, the Federal Reserve. And as long term capital
Speaker 3: is about to blow up in September, the Federal Reserve
Speaker 3: does its job. They say, oh wait, we better make
Speaker 3: sure this doesn't cause a financial crisis. You know, there
Speaker 3: is a branch of the FED in New York that
Speaker 3: deals with Wall Street. A guy we used to work
Speaker 3: with said, the New York Fed is actually more baller
Speaker 3: than the main FED headquarters in Washington, the Board of Governors.
Speaker 2: And they have a special conference room there just for
Speaker 2: moments of crisis. And they invite everyone into this conference room.
Speaker 3: Yes, it's Wednesday, September twenty third when they use the
Speaker 3: special crisis conference room, which is not a special crisis
Speaker 3: conference room, and they call all the heads of the
Speaker 3: big Wall Street banks to a meeting. And the FED
Speaker 3: says to all these bankers, look, you're all doing business
Speaker 3: with long term capital. You're all screwed if they go under.
Speaker 3: Figure something out. We have a FED. We're not going
Speaker 3: to put money in. We're not going to bail you out.
Speaker 3: You're all in this together. Work together to figure it out.
Speaker 2: Oh kumbaya, Just run together. Now.
Speaker 3: A bunch of Wall Street bankers love to hold hands
Speaker 3: and help each other out.
Speaker 2: Hyper competitive, they want to stab each other in the back.
Speaker 2: This is their normal day. And now the FED, and
Speaker 2: this does happen occasionally. The FED is saying, hey, for
Speaker 2: the good of everyone, can we set aside our immense
Speaker 2: greed and hatred of each other on this day and just.
Speaker 3: Be a little more long term greedy, right, Like it
Speaker 3: is in your greedy interest for this not to blow up.
Speaker 3: And so the bankers sit in this room and over
Speaker 3: the next several hours they actually come up with a plan.
Speaker 3: They're going to put in three point sixty five billion
Speaker 3: dollars into the fund of their own money, of the
Speaker 3: bank's money, and the partners at long Term Capital, their
Speaker 3: equity will be wiped out, right, they won't get any
Speaker 3: of this money, and they won't own any of the
Speaker 3: fund anymore. And Meriweather, you got to love him, negotiates
Speaker 3: is like, because part of it is they need Merriweather
Speaker 3: and his traders to stay on. There's like literally thousands
Speaker 3: of trades they have put on and they're not worthless importantly, right,
Speaker 3: they need somebody to run this fund, not to just
Speaker 3: liquidate it at firesale prices. And so Meriwether's like, well,
Speaker 3: if you want us to stay on, you're gonna have
Speaker 3: to pay us. You're gon have to give us a bonus.
Speaker 3: And so in fact, Meriweather and a bunch of other
Speaker 3: people agree to stay on at long term capital get
Speaker 3: paid hundreds of thousands of dollars for their labor, and
Speaker 3: in fact, over the next year, the thing happens that
Speaker 3: they said would happen. Spreads do converge, they actually turn
Speaker 3: a profit. The banks got all the money back that
Speaker 3: they put into the fund in that emergency moment, and
Speaker 3: in early two thousand, long term capital management ceased to exist.
Speaker 2: I love this story because this is a classic issue
Speaker 2: in finance, which is, if you could go back and
Speaker 2: replay history one hundred times, long term capital management would
Speaker 2: be great. Ninety nine of those times, like they knew
Speaker 2: what was going to happen, they made the correct bet
Speaker 2: on that maybe borrowed too much money on this, but
Speaker 2: they weren't wrong. Their timing was off, their liquidity was off,
Speaker 2: they didn't have the money to deal with the kind
Speaker 2: of debt and leverage that they had. But it's interesting
Speaker 2: that you can be right and still almost destroy the
Speaker 2: world economy.
Speaker 3: Yeah, I mean, they weren't wrong in terms of this
Speaker 3: sort of mathematical risk. But for me, there's this idea
Speaker 3: that is really useful here, which is the distinction between
Speaker 3: risk and uncertainty. And you know, colloquially we use those
Speaker 3: words largely interchangeably. But there was this economist in the
Speaker 3: twenties named Frank Knight who wrote this book called Risk, Uncertainty,
Speaker 3: and Profit, and his argument was, you know, we use
Speaker 3: risk in really different ways at different times. We use
Speaker 3: one word to mean quite different things. In particular, we
Speaker 3: use risk when we can really really measure the probability
Speaker 3: of what's going to happen, and also when we cannot.
Speaker 3: Here's an example. You're betting on a coin toss. You
Speaker 3: bet on heads. You know that there's a fifty percent
Speaker 3: risk that you're going to lose. Now say that coin
Speaker 3: happens to be a Russian ruble and it's nice ninety eight.
Speaker 3: What's the risk that Russia is gonna devalue the ruble
Speaker 3: which would make the ruble worth a lot less if
Speaker 3: you win. I mean, you can go back and look
Speaker 3: at history in terms of nuclear power, countries and default,
Speaker 3: and what is that ten twelve? You can talk for experts,
Speaker 3: you can study history, you can do a lot and
Speaker 3: you can come up with some probabilistic estimate of a
Speaker 3: Russian devaluation. Maybe it's ten percent, maybe it's fifty percent.
Speaker 3: You can put a number on it. But Crucially, that
Speaker 3: number is not the same kind of number as the
Speaker 3: risk that it'll come up tails if you bet heads.
Speaker 3: It is fundamentally different. You're fooling yourself when you put
Speaker 3: a number on it. You don't actually know the way
Speaker 3: you know the fifty percent with the coin flip. This
Speaker 3: unknowable outcome is what Frank Knight calls uncertainty. So risk
Speaker 3: is the coin flip. Uncertainty is will Russia devalue? And
Speaker 3: I think you can argue that the big mistake that
Speaker 3: long term term capital made was they confused risk and uncertainty.
Speaker 3: They thought the world was measurable, that risk could be
Speaker 3: modeled with math, and a lot of the world is measurable.
Speaker 3: To your point, math is really powerful at predicting market outcomes.
Speaker 3: But there is still some amount of unquantifiable uncertainty. And
Speaker 3: if you're highly leveraged, if you borrowed a lot of
Speaker 3: money and mail a lot of bets sooner or later,
Speaker 3: that unquantifiable uncertainty will destroy you.
Speaker 2: And that is what happened to long term capital management. Jacob,
Speaker 2: We love it when our listeners write in. We got
Speaker 2: a note from someone who talked about their seven year
Speaker 2: old who missed her dance class almost mister dance guest
Speaker 2: because she was listening to the Ice episode and the
Speaker 2: daughter asked for a show about Crayola.
Speaker 3: But Kranz please email us whatever age if you are
Speaker 3: at Business History at pushkin dot Fm, or you can
Speaker 3: find me on x at Jacob Goldstein or on LinkedIn. Robert.
Speaker 3: You're on Twitter at Radiosmith shout Out Radio. Our show
Speaker 3: today was produced by Gabriel Hunter Chang, engineered by Sarah Bruguier.
Speaker 3: Our video editor, yes we're on YouTube, is Matt Nielsen,
Speaker 3: and our showrunner and editor is Ryan Dilly. One quick note,
Speaker 3: we're going to be off taking a little summer break
Speaker 3: for the next couple of weeks, but we're still making shows.
Speaker 3: We'll be back later in July. I'm Jacob Goldstein, I'm
Speaker 3: Robert Smith.
Speaker 2: Thanks for listening.