1 00:00:02,240 --> 00:00:06,800 Speaker 1: This is Master's in Business with Very Riddholts on Bloomberg Radio. 2 00:00:09,720 --> 00:00:12,520 Speaker 1: This week on the podcast, I have an extra special guest. 3 00:00:12,640 --> 00:00:15,840 Speaker 1: Her name is Bethany McClain. She is the author, most 4 00:00:15,960 --> 00:00:22,079 Speaker 1: recently of Saudi America, all about the rise of fracking. 5 00:00:22,560 --> 00:00:26,239 Speaker 1: It's really a fascinating book that brings up all sorts 6 00:00:26,239 --> 00:00:30,040 Speaker 1: of interesting things that I had never considered before about fracking, 7 00:00:30,480 --> 00:00:34,600 Speaker 1: most notably the direct line from the financial crisis and 8 00:00:34,680 --> 00:00:38,159 Speaker 1: the very low rates we've had to the fracking boom 9 00:00:38,200 --> 00:00:42,919 Speaker 1: of the ensuing decade. UM. Bethany is a highly regarded 10 00:00:42,960 --> 00:00:47,199 Speaker 1: author who has written numerous books, many of which UM 11 00:00:47,360 --> 00:00:50,280 Speaker 1: have won awards in our and are highly thought of. 12 00:00:50,760 --> 00:00:52,839 Speaker 1: She's one of my favorite writers. I find her stuff 13 00:00:53,159 --> 00:00:57,600 Speaker 1: absolutely fascinating, and I think you'll find this conversation fascinating 14 00:00:57,640 --> 00:01:01,640 Speaker 1: as well. So, with no further adoo my conversation with 15 00:01:01,720 --> 00:01:08,560 Speaker 1: Bethany McClain. I'm Barry Ritults. You're listening to Master's in 16 00:01:08,600 --> 00:01:12,039 Speaker 1: Business on Bloomberg Radio. My extra special guest this week 17 00:01:12,200 --> 00:01:16,640 Speaker 1: is Bethany McClean. She is a contributing editor at Vanity Fair. 18 00:01:17,400 --> 00:01:20,720 Speaker 1: She also spent three years in the investment banking department 19 00:01:20,720 --> 00:01:24,840 Speaker 1: of Goldman sachs Uh, from which she joined Fortune as 20 00:01:24,880 --> 00:01:29,720 Speaker 1: a reporter. She is known for her books. Probably the 21 00:01:29,760 --> 00:01:32,679 Speaker 1: most famous one is Smartest Guys in the Room, The 22 00:01:32,760 --> 00:01:37,240 Speaker 1: Amazing Rise and Scandalous Fall of Enron. Eventually that became 23 00:01:37,280 --> 00:01:41,360 Speaker 1: an Academy Award nominated documentary. She also wrote the book 24 00:01:41,400 --> 00:01:45,680 Speaker 1: Shaky Grounds, The Strange Saga of the US Mortgage Giants 25 00:01:45,760 --> 00:01:48,760 Speaker 1: and All the Devils Are Here, The Hidden History of 26 00:01:48,800 --> 00:01:54,240 Speaker 1: the Financial Crisis. Her latest book Saudi America, The Truth 27 00:01:54,240 --> 00:01:58,760 Speaker 1: about Fracking and how It's changed the World. Bethany McLean, 28 00:01:59,120 --> 00:02:01,960 Speaker 1: Welcome back to Bloomberg. Thank you so much for having 29 00:02:02,000 --> 00:02:05,720 Speaker 1: me so. I really enjoyed the book Saudi America. And 30 00:02:05,840 --> 00:02:09,960 Speaker 1: let's jump right into that because there's some really fascinating things. 31 00:02:10,400 --> 00:02:13,640 Speaker 1: I have to start with a quote that really stood 32 00:02:13,639 --> 00:02:17,960 Speaker 1: out to me. Quote, the most vital ingredient in fracking 33 00:02:18,080 --> 00:02:22,560 Speaker 1: isn't chemicals, but capital. If it wasn't for historically low 34 00:02:22,600 --> 00:02:25,760 Speaker 1: interest rates, it's not clear there would even have been 35 00:02:25,800 --> 00:02:28,800 Speaker 1: a fracking boom. Now, all this time I've been told 36 00:02:29,080 --> 00:02:32,560 Speaker 1: that it's technology that's driving fracking. You're saying it's not. 37 00:02:32,639 --> 00:02:36,839 Speaker 1: It's ultra low interest rates. It certainly is technology as well. 38 00:02:36,919 --> 00:02:40,720 Speaker 1: Horizontal drilling is a big is a big innovation, So 39 00:02:40,800 --> 00:02:43,200 Speaker 1: I do want to I do want to give credit 40 00:02:43,200 --> 00:02:45,600 Speaker 1: to that. But I think most people when they focus 41 00:02:45,639 --> 00:02:47,720 Speaker 1: on the problems with fracking are the issues. They focus 42 00:02:47,800 --> 00:02:51,000 Speaker 1: on the environmental issues. Very few people focus on the 43 00:02:51,040 --> 00:02:54,760 Speaker 1: shaky financial foundation of of the fracking industry. And this 44 00:02:54,880 --> 00:02:58,240 Speaker 1: is an industry that needs huge amounts of capital. Um 45 00:02:58,400 --> 00:03:00,799 Speaker 1: need huge amounts of capital are require to drill a well. 46 00:03:00,919 --> 00:03:03,079 Speaker 1: And then because the decline rates of the wells are 47 00:03:03,120 --> 00:03:05,919 Speaker 1: so steep, if you are going to maintain production or 48 00:03:05,960 --> 00:03:08,880 Speaker 1: grow your production every year, you get on this treadmill 49 00:03:08,960 --> 00:03:12,600 Speaker 1: of constantly needing more capital. So most shale companies have 50 00:03:12,600 --> 00:03:15,120 Speaker 1: have an a fair amount of debt, and so if 51 00:03:15,160 --> 00:03:18,120 Speaker 1: it weren't for record low interest rates, it's unclear that 52 00:03:18,160 --> 00:03:20,160 Speaker 1: they would have been able to raise all the debt 53 00:03:20,200 --> 00:03:22,280 Speaker 1: that they needed to get this thing going the way 54 00:03:22,280 --> 00:03:25,840 Speaker 1: it did. Let's talk about those decline rates. You cite 55 00:03:25,840 --> 00:03:28,360 Speaker 1: a study in the book you side a study by 56 00:03:28,360 --> 00:03:32,440 Speaker 1: the Kansas City Federal Reserve that showed the average well 57 00:03:32,520 --> 00:03:37,119 Speaker 1: in the Bachan region first year decline of output is six. 58 00:03:38,680 --> 00:03:42,520 Speaker 1: Within three years it's eight. So what do they have 59 00:03:42,600 --> 00:03:45,560 Speaker 1: a very short window to squeeze whatever they can out 60 00:03:45,600 --> 00:03:48,600 Speaker 1: of that well. Yes, and you can make one well 61 00:03:48,720 --> 00:03:52,160 Speaker 1: can be profitable in a simple return on capital analysis. 62 00:03:52,280 --> 00:03:54,320 Speaker 1: But if you're part of a publicly traded company and 63 00:03:54,360 --> 00:03:57,040 Speaker 1: you need to show growth in production every single year, 64 00:03:57,320 --> 00:04:00,240 Speaker 1: you're on this treadmill of constantly needing to raise more 65 00:04:00,280 --> 00:04:03,160 Speaker 1: capital in order to show production growth. And the big 66 00:04:03,240 --> 00:04:06,280 Speaker 1: question overhanging the shale industry is does that ever come 67 00:04:06,320 --> 00:04:08,320 Speaker 1: to an end? Is there a point where this industry 68 00:04:08,360 --> 00:04:11,560 Speaker 1: begins to produce free cash flow? Because right now it doesn't. 69 00:04:11,800 --> 00:04:14,400 Speaker 1: It depends on the large guess of Wall Street um 70 00:04:14,440 --> 00:04:16,840 Speaker 1: being willing to fund it. So so let's talk about 71 00:04:16,880 --> 00:04:21,760 Speaker 1: that a second. You describe how how fracking developed with 72 00:04:21,880 --> 00:04:25,120 Speaker 1: thousands of wildcatters. They would go out, they would get 73 00:04:25,160 --> 00:04:31,359 Speaker 1: these land leases. They were deploying the technology using horizontal drilling, 74 00:04:31,800 --> 00:04:35,560 Speaker 1: lots of Canadian sands, and all sorts of other surprising 75 00:04:35,560 --> 00:04:39,400 Speaker 1: things I had no idea about. You're suggesting that these 76 00:04:39,440 --> 00:04:43,920 Speaker 1: one off drills themselves, these one off wells themselves, they 77 00:04:43,920 --> 00:04:47,200 Speaker 1: were profitable for those wildcatters. A one off well can 78 00:04:47,279 --> 00:04:51,719 Speaker 1: be profitable, yes, not as profitable I think as people 79 00:04:51,760 --> 00:04:53,920 Speaker 1: think it is I got some numbers for the returns 80 00:04:53,960 --> 00:04:56,400 Speaker 1: at the wellheads on a bunch of the wells that 81 00:04:56,480 --> 00:04:59,640 Speaker 1: Aubrey McClendon, who's the most colorful character and this whole 82 00:04:59,640 --> 00:05:03,120 Speaker 1: story the former CEO of Chesapeake had, And even at 83 00:05:03,160 --> 00:05:05,919 Speaker 1: the wellhead those returns were at nine percent. That's before 84 00:05:05,960 --> 00:05:08,960 Speaker 1: the cost of marketing and transporting that the gas. It's 85 00:05:09,000 --> 00:05:12,039 Speaker 1: not clear how profitable, but some wills can be profitable. 86 00:05:12,120 --> 00:05:14,600 Speaker 1: The problem is for publicly traded companies, or for any 87 00:05:14,600 --> 00:05:17,520 Speaker 1: company that needs to show growth um that they get 88 00:05:17,560 --> 00:05:21,040 Speaker 1: on this basically the steamroller of needing to raise more 89 00:05:21,080 --> 00:05:23,680 Speaker 1: capital all the time. So you mentioned Aubrey McLennan. He 90 00:05:23,880 --> 00:05:27,920 Speaker 1: looms large over both fracking. He's the founder of Chesapeake 91 00:05:28,320 --> 00:05:32,400 Speaker 1: and really the father of capital. Reason I had no 92 00:05:32,520 --> 00:05:35,640 Speaker 1: idea who this person was before reading the book. Tell 93 00:05:35,720 --> 00:05:38,520 Speaker 1: us a little bit about him and some of his 94 00:05:38,839 --> 00:05:43,040 Speaker 1: outrageous leverage and some of the things he did. Really 95 00:05:43,400 --> 00:05:47,920 Speaker 1: a colorful and fascinating person in Saudi America. So I've 96 00:05:47,920 --> 00:05:51,080 Speaker 1: been fascinated with Aubrey mcclennon going back to two thousand 97 00:05:51,040 --> 00:05:52,800 Speaker 1: and ten. A guy I talked to a lot used 98 00:05:52,839 --> 00:05:55,480 Speaker 1: to tell me with some degree of hyperbole, that McClendon 99 00:05:55,520 --> 00:05:58,080 Speaker 1: was the most important man in America and really, and 100 00:05:58,120 --> 00:06:00,880 Speaker 1: what he meant by that was that if McClendon was 101 00:06:01,000 --> 00:06:04,279 Speaker 1: right and our country could produce immense amounts of cheap 102 00:06:04,360 --> 00:06:07,960 Speaker 1: natural gas, that really changed the future of of the country. 103 00:06:08,200 --> 00:06:11,880 Speaker 1: It made us an energy rich place where manufacturing of 104 00:06:11,880 --> 00:06:15,800 Speaker 1: all kinds would would relocate if McClendon was wrong and 105 00:06:15,920 --> 00:06:18,400 Speaker 1: this wasn't economic. And this friend of mine and his 106 00:06:18,440 --> 00:06:20,680 Speaker 1: partner used to have this debate all the time. The 107 00:06:20,720 --> 00:06:23,360 Speaker 1: partner would say, the oil and gas were real, and John, 108 00:06:23,560 --> 00:06:26,600 Speaker 1: my friend John, would say, yeah, but the economics don't work. Um. 109 00:06:26,640 --> 00:06:29,920 Speaker 1: Aubrey was the guy that the technological development of shale 110 00:06:30,000 --> 00:06:32,159 Speaker 1: credit goes to somebody else, a guy named George Mitchell, 111 00:06:32,440 --> 00:06:35,800 Speaker 1: But the father of capital raising was Aubrey McClendon. This 112 00:06:35,839 --> 00:06:38,400 Speaker 1: guy was one of the best salesman the world has 113 00:06:38,480 --> 00:06:41,760 Speaker 1: ever seen. He could get anyone to give him money. 114 00:06:41,960 --> 00:06:44,280 Speaker 1: Had this great story in the book from an analyst 115 00:06:44,360 --> 00:06:46,400 Speaker 1: who is at a big investment firm who was very 116 00:06:46,400 --> 00:06:49,240 Speaker 1: skeptical of McClendon and of Chesapeake, and he said, I'd 117 00:06:49,240 --> 00:06:51,200 Speaker 1: never let him in the door to talk to our people, 118 00:06:51,240 --> 00:06:53,400 Speaker 1: because we would have ended up investing, and it wouldn't 119 00:06:53,400 --> 00:06:56,960 Speaker 1: and it wouldn't have ended well. UM and McClendon had 120 00:06:57,000 --> 00:07:01,400 Speaker 1: this larger than larger than life personality and life he 121 00:07:01,480 --> 00:07:05,560 Speaker 1: really sort of remade Oklahoma City. Chesapeake was this extravagant 122 00:07:05,560 --> 00:07:08,960 Speaker 1: company with daycare on premises and a massage studio. I 123 00:07:08,960 --> 00:07:13,440 Speaker 1: mean it was Silicon Valley transported to Oklahoma City. UM 124 00:07:13,440 --> 00:07:17,400 Speaker 1: and McClendon died essentially bankrupt in a fiery car crash 125 00:07:17,480 --> 00:07:19,800 Speaker 1: in the spring of two thousand sixteen, right after he 126 00:07:19,840 --> 00:07:24,080 Speaker 1: had been indicted by the Justice Department, accused of rigging 127 00:07:24,240 --> 00:07:28,120 Speaker 1: rigging deals to buy land. And when he died, American 128 00:07:28,200 --> 00:07:30,400 Speaker 1: shail was flat on its back. It looked like this 129 00:07:30,520 --> 00:07:33,680 Speaker 1: was this was the end. Thanks to UM some of 130 00:07:33,680 --> 00:07:36,720 Speaker 1: the some of the strategy OPEC pursued, and so McClendon's 131 00:07:36,760 --> 00:07:40,520 Speaker 1: death was it was as if it underscored the problems 132 00:07:40,560 --> 00:07:42,920 Speaker 1: with the American shale industry. There's a stat in the 133 00:07:42,960 --> 00:07:47,000 Speaker 1: book that really stunned me. From two thousand and one 134 00:07:47,040 --> 00:07:51,480 Speaker 1: to two thousand and twelve, Chesapeake sold sixteen point four 135 00:07:51,520 --> 00:07:55,320 Speaker 1: billion dollars worth of stock and fifteen point five billion 136 00:07:55,360 --> 00:07:58,840 Speaker 1: dollars worth of debt. It's a nice balanced portfolio there, uh, 137 00:07:58,880 --> 00:08:01,560 Speaker 1: and paid Wall Street more than one point one billion 138 00:08:01,560 --> 00:08:05,600 Speaker 1: in fees. So when you say capital was the key 139 00:08:05,680 --> 00:08:09,880 Speaker 1: driver fracking, at least that at Chesapeake, that seems like 140 00:08:09,920 --> 00:08:12,680 Speaker 1: an awful lot of money. That is an awful lot 141 00:08:12,720 --> 00:08:14,840 Speaker 1: of money. And I'd add that that's not the only 142 00:08:14,920 --> 00:08:18,720 Speaker 1: amount that Chesapeake raised. They raised probably another thirty billion 143 00:08:18,760 --> 00:08:21,800 Speaker 1: dollars in ways that are a bit more subterranean than 144 00:08:21,840 --> 00:08:24,360 Speaker 1: public sales of equity and debt. They did these and 145 00:08:24,520 --> 00:08:28,160 Speaker 1: run esque prepaid deals where they'd sell natural gas forward 146 00:08:28,480 --> 00:08:31,640 Speaker 1: and get the cash now and not book that as alone, 147 00:08:31,640 --> 00:08:35,040 Speaker 1: but it essentially is alone, right, and pulling forward forward 148 00:08:35,080 --> 00:08:37,880 Speaker 1: revenues to encounting it today. Yeah, and they did over 149 00:08:38,320 --> 00:08:42,000 Speaker 1: twenty billion of of those kind of deals, and so 150 00:08:42,000 --> 00:08:45,840 Speaker 1: so even that huge, stunning number actually understates the sheer 151 00:08:45,880 --> 00:08:48,600 Speaker 1: amount of capital they raised. And with all of that, 152 00:08:48,760 --> 00:08:53,520 Speaker 1: Chesapeake never before asset sales to soccers. Essentially, Chesapeake never 153 00:08:53,679 --> 00:08:56,120 Speaker 1: produced free cash flow. And so people would look at 154 00:08:56,120 --> 00:08:58,720 Speaker 1: that and say, well, that's just Chesapeake. Aubrey McClendon is this, 155 00:08:59,080 --> 00:09:01,680 Speaker 1: He's the larger than life character that's not emblematic of 156 00:09:01,720 --> 00:09:04,480 Speaker 1: the rest of the industry. But it actually is. Aubrey 157 00:09:04,520 --> 00:09:07,760 Speaker 1: McClendon is the rest of the industry on steroids much 158 00:09:07,760 --> 00:09:10,640 Speaker 1: more extreme, but the rest of the industry was cash 159 00:09:10,679 --> 00:09:13,360 Speaker 1: flow negative as well. There's a data point from the book, 160 00:09:13,360 --> 00:09:15,440 Speaker 1: and I'm I'm thumbing through my notes to try and 161 00:09:15,480 --> 00:09:20,160 Speaker 1: find it where you said something like the total investment 162 00:09:20,240 --> 00:09:24,640 Speaker 1: dollars that the industry drew in was far, far in 163 00:09:24,679 --> 00:09:27,160 Speaker 1: excess of the total value of the gas they pulled out, 164 00:09:27,320 --> 00:09:30,120 Speaker 1: or or am I misquoting learn No, it's a number 165 00:09:30,120 --> 00:09:33,320 Speaker 1: from David Einhorn. So people you obviously known people on 166 00:09:33,320 --> 00:09:35,760 Speaker 1: this podcast will probably know Einhorn well, But for those 167 00:09:36,000 --> 00:09:39,160 Speaker 1: who don't, he's a very well known hedge fund manager 168 00:09:39,200 --> 00:09:42,560 Speaker 1: who famously called Lehman before the financial crisis of two 169 00:09:42,600 --> 00:09:45,000 Speaker 1: thousand and eight. Relevant again, given given where we are 170 00:09:45,080 --> 00:09:47,960 Speaker 1: right now, we're recording this literally three days before the 171 00:09:47,960 --> 00:09:53,119 Speaker 1: anniversary of Lehman's collapse, exactly, so in early two thousand fifteen, 172 00:09:53,400 --> 00:09:56,319 Speaker 1: David Einhorn, there's a lot of skepticism about SAIL for 173 00:09:56,360 --> 00:09:58,840 Speaker 1: exactly the reasons we're discussing, and Einhorn was the first 174 00:09:58,840 --> 00:10:02,079 Speaker 1: one to really go public and to put put numbers 175 00:10:02,080 --> 00:10:06,040 Speaker 1: to this whole thing, and he calculated that um, the 176 00:10:06,080 --> 00:10:10,440 Speaker 1: shale industry had outspent its outspent its cash flow by 177 00:10:10,440 --> 00:10:14,520 Speaker 1: eighty billion dollars. So that's amazing. It's not that they 178 00:10:14,559 --> 00:10:16,920 Speaker 1: spent eighty and and the time frame for that is 179 00:10:16,960 --> 00:10:21,199 Speaker 1: oh six, It's not that they spent eighty billion. They 180 00:10:21,200 --> 00:10:24,600 Speaker 1: spent eighty billion more than the value of the oil 181 00:10:24,640 --> 00:10:27,600 Speaker 1: and gas they sold. Yes, that's just a start. And 182 00:10:27,600 --> 00:10:29,400 Speaker 1: you have to remember that that was a period when 183 00:10:29,400 --> 00:10:31,640 Speaker 1: oil prices were over a hundred dollars a barrel, and 184 00:10:31,679 --> 00:10:34,480 Speaker 1: it encompasses a period when natural gas prices were over 185 00:10:34,559 --> 00:10:38,280 Speaker 1: ten dollars as well. And so it's what the argument 186 00:10:38,280 --> 00:10:41,000 Speaker 1: of skeptics is that this is an industry that can't 187 00:10:41,000 --> 00:10:44,320 Speaker 1: make money with super high commodity prices. Forget super low 188 00:10:44,320 --> 00:10:47,280 Speaker 1: commodity prices. Right, Let's let's talk a little bit about that, 189 00:10:47,280 --> 00:10:49,720 Speaker 1: because is a quote from an analyst in the book 190 00:10:50,160 --> 00:10:53,600 Speaker 1: that I really liked. With oil, there's a price that 191 00:10:53,679 --> 00:10:57,240 Speaker 1: kills supply and there's a price that kills demands. So 192 00:10:57,400 --> 00:11:01,360 Speaker 1: two questions about that, First x landing exactly what that means, 193 00:11:01,400 --> 00:11:04,959 Speaker 1: and then secondly, where are we in that cycle? Well, 194 00:11:05,080 --> 00:11:06,880 Speaker 1: what he meant by that is that there's a price 195 00:11:06,960 --> 00:11:10,240 Speaker 1: that's so low that nobody can make money, although meaning 196 00:11:10,240 --> 00:11:12,520 Speaker 1: people don't explore, they don't drill, they'd rather just sit 197 00:11:12,559 --> 00:11:15,800 Speaker 1: around away, right, And that actually put that that actually 198 00:11:15,880 --> 00:11:19,040 Speaker 1: pushes us toward lower cost sources of supply, because if 199 00:11:19,080 --> 00:11:21,319 Speaker 1: you think about the world, there are places that can 200 00:11:21,360 --> 00:11:23,720 Speaker 1: get oil out of the ground for a really small 201 00:11:23,720 --> 00:11:27,679 Speaker 1: amount of money, namely Saudi Arabia. Their their immense oil field. 202 00:11:27,880 --> 00:11:30,719 Speaker 1: UM is probably the cheapest place to extract oil in 203 00:11:30,760 --> 00:11:32,800 Speaker 1: the world. I think they've said their cost is about 204 00:11:32,800 --> 00:11:35,480 Speaker 1: ten dollars a barrel, although in the book you describe 205 00:11:35,600 --> 00:11:40,559 Speaker 1: that their own financial situation has changed the world, so 206 00:11:40,640 --> 00:11:44,480 Speaker 1: they they really need seven or eighty dollars to oil 207 00:11:44,600 --> 00:11:47,400 Speaker 1: in order to pretty much be break even versus their 208 00:11:47,400 --> 00:11:49,760 Speaker 1: own infancy. That's because of their public spending on other 209 00:11:49,840 --> 00:11:53,680 Speaker 1: things to keep up populous, a restless populus quiet. So, 210 00:11:53,880 --> 00:11:56,480 Speaker 1: but that's not the actual that's the public spending they've 211 00:11:56,520 --> 00:11:58,600 Speaker 1: layered on top of it, not the actual cost of 212 00:11:58,600 --> 00:12:01,360 Speaker 1: of of of the olive oil. But so it is 213 00:12:01,400 --> 00:12:03,720 Speaker 1: a certain at a certain price, nobody can make money, 214 00:12:03,720 --> 00:12:06,760 Speaker 1: and so exploration stops. And then at a certain price, 215 00:12:07,040 --> 00:12:09,280 Speaker 1: um oil is so high that people start to look 216 00:12:09,320 --> 00:12:13,120 Speaker 1: for substitutes yep. And so that's what this guy meant 217 00:12:13,160 --> 00:12:14,880 Speaker 1: by there's a price that kills supply and a price 218 00:12:14,880 --> 00:12:17,880 Speaker 1: that kills demand. And so the next question is where 219 00:12:17,920 --> 00:12:20,760 Speaker 1: are we in that cycle? Are we about halfway? What 220 00:12:20,800 --> 00:12:26,319 Speaker 1: are we about? Yep. So that's UM much lower than 221 00:12:26,360 --> 00:12:29,080 Speaker 1: people thought oil prices would ever be UM back in 222 00:12:29,240 --> 00:12:31,760 Speaker 1: two thousand and eleven and two thousand and twelve, when 223 00:12:31,800 --> 00:12:34,600 Speaker 1: oil prices were over a hundred dollars a barrel, right, 224 00:12:34,679 --> 00:12:36,960 Speaker 1: and I think it's still not quite high enough for 225 00:12:36,960 --> 00:12:41,480 Speaker 1: Saudi Arabia to be fiscally stable um UM, and whether 226 00:12:41,559 --> 00:12:43,840 Speaker 1: it's a price at which US shale can make money 227 00:12:43,920 --> 00:12:47,720 Speaker 1: or not remains to be seen. People claim. UM proponents 228 00:12:47,760 --> 00:12:52,520 Speaker 1: claim that technological improvements and the beginning of fracking in 229 00:12:52,559 --> 00:12:54,920 Speaker 1: an area of Texas and New Mexico called the Permian 230 00:12:55,240 --> 00:12:57,760 Speaker 1: which has been an oil field for a century but 231 00:12:57,840 --> 00:13:00,640 Speaker 1: has turned out to be really prolific with this new 232 00:13:00,679 --> 00:13:03,520 Speaker 1: technology of fracking, that these things are going to reshape 233 00:13:03,559 --> 00:13:05,880 Speaker 1: the financial firmament of the industry, and so we're going 234 00:13:05,920 --> 00:13:09,120 Speaker 1: to start seeing profits from the from the publicly traded UM, 235 00:13:09,120 --> 00:13:12,840 Speaker 1: from the publicly traded fracking companies. Skeptics say those decline 236 00:13:12,880 --> 00:13:16,439 Speaker 1: rates are still bad. All we're doing by getting more 237 00:13:16,480 --> 00:13:18,880 Speaker 1: oil at the ground more quickly with new technology is 238 00:13:18,880 --> 00:13:21,680 Speaker 1: emptying the well more quickly. We're not increasing the amount 239 00:13:21,720 --> 00:13:23,640 Speaker 1: you can get out over over the life of the well, 240 00:13:23,920 --> 00:13:26,480 Speaker 1: and this still isn't going to work economically. So the 241 00:13:26,480 --> 00:13:29,600 Speaker 1: theory is that within the premium basin, even under seventy 242 00:13:29,640 --> 00:13:33,199 Speaker 1: five dollars a barrel and under five dollars, the linear 243 00:13:33,200 --> 00:13:37,360 Speaker 1: square foot for the um natural natural gas that that's 244 00:13:37,520 --> 00:13:40,840 Speaker 1: or is cubic square FI don't remember the measurement, but 245 00:13:40,840 --> 00:13:45,199 Speaker 1: but it's been three four five dollars recently, premium basin 246 00:13:45,320 --> 00:13:50,360 Speaker 1: can become profitable at those those certain parts of certain 247 00:13:50,400 --> 00:13:52,240 Speaker 1: parts of the premium basin. For sure, it can be 248 00:13:52,280 --> 00:13:55,400 Speaker 1: profitable at those prices. Whether the whole basin can be 249 00:13:55,520 --> 00:13:58,240 Speaker 1: profitable because I profile in the in the book a 250 00:13:58,280 --> 00:14:00,560 Speaker 1: company called eo G that's kind of guarded as the 251 00:14:00,559 --> 00:14:03,600 Speaker 1: Apple of shale if there is a total counterpoint to 252 00:14:03,640 --> 00:14:08,679 Speaker 1: Aubrey McClendon's Chesapeake, it's eo G. Highly efficient, very cost conscious, 253 00:14:09,040 --> 00:14:12,800 Speaker 1: um basically kind of the technocrats of the of of 254 00:14:12,800 --> 00:14:15,800 Speaker 1: of the shale industry, and they say the CEO V 255 00:14:15,920 --> 00:14:18,720 Speaker 1: O G says, all land isn't created equal. The idea 256 00:14:18,760 --> 00:14:20,360 Speaker 1: that you can drill a well in one place in 257 00:14:20,400 --> 00:14:22,560 Speaker 1: the Premian basin, and that means you can drill well 258 00:14:22,640 --> 00:14:25,280 Speaker 1: is everywhere on the Premian basin and produce the same results. 259 00:14:25,320 --> 00:14:29,200 Speaker 1: It's it's crazy. Geology is really complicated, and so he 260 00:14:29,200 --> 00:14:31,840 Speaker 1: he believes that some of what we can extract from 261 00:14:31,840 --> 00:14:35,600 Speaker 1: the Premian basin is at low prices is overstated. Last 262 00:14:35,640 --> 00:14:38,840 Speaker 1: question about Aubrey, because you describe in the book how 263 00:14:39,360 --> 00:14:42,240 Speaker 1: it's not just that he's spending two and five and 264 00:14:42,280 --> 00:14:46,040 Speaker 1: ten x on land leases versus everybody else but his 265 00:14:46,120 --> 00:14:49,840 Speaker 1: own personal life. He's all in on everything. There's no 266 00:14:50,160 --> 00:14:53,440 Speaker 1: safe money, there's no will let me buy my He's 267 00:14:53,520 --> 00:14:57,560 Speaker 1: just fully leveraged, constantly in every segment of his life. Right. 268 00:14:57,840 --> 00:15:00,280 Speaker 1: He struck me as a fascinating character because he wasn't 269 00:15:00,320 --> 00:15:02,600 Speaker 1: just willing to risk other people's money. He was willing 270 00:15:02,640 --> 00:15:04,840 Speaker 1: to risk his own money. He risked every bit of 271 00:15:04,840 --> 00:15:07,080 Speaker 1: money he ever he ever got. There's this great quote 272 00:15:07,120 --> 00:15:09,040 Speaker 1: from him when an analyst on a conference call said, 273 00:15:09,080 --> 00:15:11,680 Speaker 1: at one point, when is enough enough? And he said, 274 00:15:11,720 --> 00:15:14,440 Speaker 1: I can't get enough, and I think that sums up 275 00:15:14,480 --> 00:15:17,440 Speaker 1: the man. But yeah, he bought the Seattle Sonics, moved 276 00:15:17,480 --> 00:15:20,400 Speaker 1: them to Oklahoma City renamed them the Thunder. He had 277 00:15:20,480 --> 00:15:23,960 Speaker 1: mansions around the country, including around the world, including this 278 00:15:24,080 --> 00:15:27,200 Speaker 1: extravagant place on Lake Michigani at an antique map collection. 279 00:15:27,240 --> 00:15:29,800 Speaker 1: And he was best known you'll appreciate this for an 280 00:15:29,800 --> 00:15:32,520 Speaker 1: incredible collection of wine. Um. Someone who knew him told 281 00:15:32,520 --> 00:15:34,160 Speaker 1: me that his collection of wine at one point was 282 00:15:34,160 --> 00:15:36,400 Speaker 1: actually the best in the in the world. Um. He 283 00:15:36,440 --> 00:15:38,840 Speaker 1: had a special love for the really big bottles what 284 00:15:38,880 --> 00:15:43,760 Speaker 1: are those things called the jere boems and the yeah yeah, yeah, 285 00:15:43,840 --> 00:15:46,160 Speaker 1: so the really rare jarrab bones. I mean, he was 286 00:15:46,240 --> 00:15:50,680 Speaker 1: a character fascinating. Let's talk a little bit about your 287 00:15:50,720 --> 00:15:54,960 Speaker 1: writing process and and let me go back to that 288 00:15:55,200 --> 00:15:59,360 Speaker 1: UM column about and Run, the first piece that was 289 00:15:59,360 --> 00:16:04,640 Speaker 1: pretty much the first major mainstream piece that called out 290 00:16:04,800 --> 00:16:07,920 Speaker 1: and Ron for Hey, maybe things are not quite as 291 00:16:08,040 --> 00:16:11,680 Speaker 1: rosy there as the company is claiming. Tell us a 292 00:16:11,720 --> 00:16:14,760 Speaker 1: little bit about that piece and what motivated you to 293 00:16:14,800 --> 00:16:17,920 Speaker 1: turn it into a book. Well, so that piece actually 294 00:16:17,960 --> 00:16:21,440 Speaker 1: came about because when I started working at Fortune, I'll 295 00:16:21,480 --> 00:16:22,800 Speaker 1: give you a little bit of back story. I did 296 00:16:22,800 --> 00:16:24,920 Speaker 1: a column called companies to watch where I was supposed 297 00:16:24,960 --> 00:16:27,040 Speaker 1: to pick stocks every week that we're gonna, you know, 298 00:16:27,040 --> 00:16:32,320 Speaker 1: appreciate thanks task. Well, it was remarkably easy because there 299 00:16:32,320 --> 00:16:35,239 Speaker 1: were no shortage of people coming by fortune, from portfolio 300 00:16:35,280 --> 00:16:37,840 Speaker 1: managers who owned the stock to a company. Management would 301 00:16:37,920 --> 00:16:40,080 Speaker 1: lay out these great little stories from me, and I'd 302 00:16:40,080 --> 00:16:43,080 Speaker 1: write them up because I believed I didn't why would you? 303 00:16:43,280 --> 00:16:45,520 Speaker 1: Why would I doubt them? And I'd watch in horrors. 304 00:16:45,520 --> 00:16:48,360 Speaker 1: The stock promptly went in the opposite direction. So I 305 00:16:48,400 --> 00:16:50,880 Speaker 1: started at a pretty early age trying to get to 306 00:16:50,960 --> 00:16:53,600 Speaker 1: know short sellers because I was just tired of being wrong. 307 00:16:53,680 --> 00:16:56,160 Speaker 1: It wasn't I just I was tired tired of being 308 00:16:56,160 --> 00:16:58,400 Speaker 1: wrong and tired of having people call me up after 309 00:16:58,440 --> 00:17:01,000 Speaker 1: a piece ran and basically saying you idiot, like how 310 00:17:01,040 --> 00:17:03,160 Speaker 1: could you, How could you be writing a puff piece 311 00:17:03,160 --> 00:17:07,240 Speaker 1: about this insane fraud and so anyway, So through that 312 00:17:07,280 --> 00:17:10,359 Speaker 1: I got to know Jim Chainos, and Jim I think 313 00:17:10,400 --> 00:17:13,520 Speaker 1: in the fall of two thousand a fall of two thousand, 314 00:17:13,840 --> 00:17:15,760 Speaker 1: UM said why don't you take a closer look at Enron? 315 00:17:15,840 --> 00:17:17,359 Speaker 1: And it happened to be. It's one of those interesting 316 00:17:17,400 --> 00:17:19,760 Speaker 1: things in life because I have a weird background. I 317 00:17:19,800 --> 00:17:21,920 Speaker 1: was a math major um and I went to work 318 00:17:21,960 --> 00:17:24,199 Speaker 1: at Goldman as an analyst out of college, and so 319 00:17:24,520 --> 00:17:26,640 Speaker 1: I didn't have a writing background at all, And so 320 00:17:26,680 --> 00:17:30,880 Speaker 1: it was kind of serendipity of my weird background actually 321 00:17:30,920 --> 00:17:34,040 Speaker 1: being incredibly helpful, because certainly, at that stage, I still 322 00:17:34,119 --> 00:17:36,440 Speaker 1: knew how to put together, you know, elaborate spreadsheets on 323 00:17:36,480 --> 00:17:38,800 Speaker 1: a company's financials. I was pretty fresh out of out 324 00:17:38,800 --> 00:17:41,840 Speaker 1: of doing that. Eical and and their their financials were 325 00:17:41,880 --> 00:17:44,800 Speaker 1: as transparent and easy don't understand as any on the street. Right, 326 00:17:45,280 --> 00:17:47,840 Speaker 1: So I'd say, over my years in journalism, what's changed 327 00:17:47,880 --> 00:17:50,680 Speaker 1: as I've become far more obsessed with characters, far more 328 00:17:50,760 --> 00:17:53,560 Speaker 1: interested in the human story. But I'm still a numbers 329 00:17:53,560 --> 00:17:56,840 Speaker 1: girl at heart. And so when numbers are contrary and 330 00:17:57,200 --> 00:17:59,879 Speaker 1: don't make sense and aren't what everybody else thinks, or 331 00:18:00,000 --> 00:18:02,040 Speaker 1: how a different picture than what the world thinks is 332 00:18:02,080 --> 00:18:05,000 Speaker 1: going on, Like with shale, most people think what must 333 00:18:05,000 --> 00:18:08,440 Speaker 1: be immensely profitable making gobs of money, and no, actually 334 00:18:08,440 --> 00:18:11,200 Speaker 1: it's not. And so I'm really interested always in those 335 00:18:11,240 --> 00:18:14,119 Speaker 1: disconnects that numbers can show you. How quickly did you 336 00:18:14,200 --> 00:18:17,920 Speaker 1: realize something was afoot at en Ron? When you started 337 00:18:18,119 --> 00:18:22,320 Speaker 1: delving into the numbers. So I would say I was skeptical, 338 00:18:22,440 --> 00:18:25,680 Speaker 1: but not skeptical enough. My original piece, I actually think 339 00:18:25,720 --> 00:18:28,479 Speaker 1: should have won awards for the meekest headline in history 340 00:18:28,560 --> 00:18:31,960 Speaker 1: because the title was his end Run over priced. Um, yeah, 341 00:18:32,800 --> 00:18:36,000 Speaker 1: that turned out to be true. Um anything over zero? 342 00:18:38,400 --> 00:18:40,720 Speaker 1: I just I never would have guessed. Um, I was 343 00:18:40,840 --> 00:18:42,840 Speaker 1: naive then. I never would have guessed that a company 344 00:18:42,880 --> 00:18:47,160 Speaker 1: could be so riddled with over statements and outright fraud 345 00:18:47,240 --> 00:18:50,040 Speaker 1: as as as en Run was. So the piece was skeptical. 346 00:18:50,080 --> 00:18:52,439 Speaker 1: It pointed out problems in en Ron's business. Speaking of 347 00:18:52,480 --> 00:18:54,560 Speaker 1: cash flow, it pointed out en Roun's lack of cash 348 00:18:54,560 --> 00:18:57,080 Speaker 1: flow and it's burgeoning debtload, and the fact that nobody 349 00:18:57,160 --> 00:19:00,320 Speaker 1: understood how this company actually made made its money. But 350 00:19:00,359 --> 00:19:02,640 Speaker 1: if you had asked me at that time that I 351 00:19:02,680 --> 00:19:05,400 Speaker 1: would end Ron be bankrupt in six months or nine months, 352 00:19:05,440 --> 00:19:07,840 Speaker 1: I would have said what now? So you were looking 353 00:19:07,840 --> 00:19:11,920 Speaker 1: at this as an expensive company, not a fraudulent correct, right? 354 00:19:12,160 --> 00:19:14,439 Speaker 1: And how soon was it clear that it was the 355 00:19:14,520 --> 00:19:18,200 Speaker 1: latter and not the former. I think the Enron tail 356 00:19:18,560 --> 00:19:21,959 Speaker 1: unspoiled in an interesting fashion. In August of two thousand 357 00:19:22,000 --> 00:19:25,200 Speaker 1: and one, Jeff Skilling abruptly quit is the company's CEO, 358 00:19:25,320 --> 00:19:29,560 Speaker 1: citing personal reasons, as everybody does. But the idea that 359 00:19:29,600 --> 00:19:32,560 Speaker 1: the mastermind behind this company, who once that I am 360 00:19:32,640 --> 00:19:35,720 Speaker 1: en Ron, was suddenly just stepping down was a real 361 00:19:35,760 --> 00:19:38,080 Speaker 1: sign to people that there were that there were problems. 362 00:19:38,240 --> 00:19:40,280 Speaker 1: And then the Wall Street Journal did some great work 363 00:19:40,359 --> 00:19:43,280 Speaker 1: pointing out these off balance sheet partnerships that the then 364 00:19:43,359 --> 00:19:45,960 Speaker 1: CFO Andy Fasta was running, and the whole thing began 365 00:19:46,000 --> 00:19:48,280 Speaker 1: to create her pretty quickly. So let's talk a little 366 00:19:48,280 --> 00:19:51,800 Speaker 1: bit about your writing process. At what point, obviously, is 367 00:19:51,960 --> 00:19:55,200 Speaker 1: n one blows up, It's clear, Wow, there's a book here. 368 00:19:55,720 --> 00:19:57,840 Speaker 1: But some of the other books you've written, you've co 369 00:19:58,080 --> 00:20:01,679 Speaker 1: authored with various people. Uh, the en Ron book, the 370 00:20:01,800 --> 00:20:04,480 Speaker 1: all the all the devils are here. What makes you 371 00:20:04,600 --> 00:20:07,360 Speaker 1: decide to work with someone else on a book when 372 00:20:07,359 --> 00:20:09,840 Speaker 1: you've been so successful writing on your own. Well, so 373 00:20:09,920 --> 00:20:12,879 Speaker 1: the first two books I did were both big books. Um, 374 00:20:13,000 --> 00:20:15,879 Speaker 1: the en Roun book was I was How old was 375 00:20:15,880 --> 00:20:17,560 Speaker 1: I when I started that? I don't know, thirty one 376 00:20:17,840 --> 00:20:19,679 Speaker 1: and I'd been a journalist for a few years. But 377 00:20:19,720 --> 00:20:21,920 Speaker 1: the longest piece I'd ever written was you know, three 378 00:20:21,920 --> 00:20:24,399 Speaker 1: thousand words and Fortune magazine. I've never even written a 379 00:20:24,440 --> 00:20:27,440 Speaker 1: really long story, let alone written a book. And actually 380 00:20:27,480 --> 00:20:30,840 Speaker 1: collaborating with Peter el Kind and having my old pal 381 00:20:30,920 --> 00:20:33,119 Speaker 1: Jonah Sarah edit it was was the best decision. I mean, 382 00:20:33,160 --> 00:20:35,600 Speaker 1: it's a far better book because of their input and help. 383 00:20:35,640 --> 00:20:39,160 Speaker 1: I learned a lot about um investigative reporting from Peter, 384 00:20:39,320 --> 00:20:41,600 Speaker 1: and I learned a lot about writing from from Joe. 385 00:20:42,280 --> 00:20:44,800 Speaker 1: Joe and I actually co authored All the Devils Are Here, 386 00:20:44,840 --> 00:20:47,440 Speaker 1: and it was, you know, ten years ago about this day. 387 00:20:47,440 --> 00:20:49,720 Speaker 1: We were sitting in my house in Chicago just watching 388 00:20:49,720 --> 00:20:52,399 Speaker 1: the world go up, and in the financial world go up, 389 00:20:52,480 --> 00:20:54,480 Speaker 1: go up, in flames, and we were both we both 390 00:20:54,520 --> 00:20:56,359 Speaker 1: said we have to do a book, and so it 391 00:20:56,400 --> 00:20:59,080 Speaker 1: really just came about organically. It wasn't any kind of 392 00:20:59,280 --> 00:21:02,000 Speaker 1: um stra g on on my part. But again, it's 393 00:21:02,000 --> 00:21:04,840 Speaker 1: a much better book because of because of Joe's collaboration. 394 00:21:05,400 --> 00:21:07,400 Speaker 1: The other two books I've done have been these mini 395 00:21:07,400 --> 00:21:09,720 Speaker 1: books for Columbia and this book's Audi America. As a 396 00:21:09,760 --> 00:21:14,000 Speaker 1: mini books, that's only words. It's a short, quick read. Yeah, 397 00:21:14,119 --> 00:21:16,760 Speaker 1: they're They're meant to be quick takes or a slice 398 00:21:16,800 --> 00:21:19,800 Speaker 1: of a topic, so they're not as all encompassing or 399 00:21:19,880 --> 00:21:23,080 Speaker 1: as demand. They don't take a commitment of your entire 400 00:21:23,160 --> 00:21:26,159 Speaker 1: life the way the way these these bigger books on 401 00:21:26,200 --> 00:21:32,040 Speaker 1: these bigger topics have um too big to read exactly exactly. 402 00:21:32,080 --> 00:21:34,080 Speaker 1: These are not too big to read um and so 403 00:21:34,119 --> 00:21:37,840 Speaker 1: they're more manageable. I guess I would say fascinating. We're 404 00:21:37,880 --> 00:21:40,919 Speaker 1: recording this not too far off from the anniversary of 405 00:21:40,920 --> 00:21:44,239 Speaker 1: the collapse of Lehman Brothers. Let's talk about that a 406 00:21:44,280 --> 00:21:47,000 Speaker 1: little bit. Uh and and during the break we were 407 00:21:47,040 --> 00:21:51,119 Speaker 1: discussing the issue that infuriates me and so many other people, 408 00:21:51,840 --> 00:21:54,920 Speaker 1: why nobody went to jail? What? What are your thoughts 409 00:21:55,000 --> 00:21:58,520 Speaker 1: on this? I do think overall it's harder to send 410 00:21:58,560 --> 00:22:01,560 Speaker 1: people to jail than is commonly thought, because there's a 411 00:22:01,600 --> 00:22:05,040 Speaker 1: difference between what is unethical and what is illegal. And 412 00:22:05,080 --> 00:22:08,640 Speaker 1: sometimes what is unethical is actually worse than what is illegal. 413 00:22:08,760 --> 00:22:11,720 Speaker 1: And that's one of the conundrums of our criminal justice situation. 414 00:22:11,720 --> 00:22:13,600 Speaker 1: Even en Ron wasn't a slam dunk. It was a 415 00:22:13,640 --> 00:22:16,920 Speaker 1: case that took years to prosecute. It was pretty much 416 00:22:17,080 --> 00:22:19,720 Speaker 1: a slam I mean it actually it actually wasn't. And 417 00:22:19,880 --> 00:22:22,280 Speaker 1: Ron went bankrupt in two thousand one. Jeff Skilling wasn't 418 00:22:22,320 --> 00:22:25,480 Speaker 1: indicted until two thousand three. The trial wasn't until two 419 00:22:25,520 --> 00:22:27,600 Speaker 1: thousand and six, and I said, I sat through that 420 00:22:27,640 --> 00:22:31,960 Speaker 1: there was In the end, what Skilling was was indicted 421 00:22:32,040 --> 00:22:35,480 Speaker 1: for was less sweeping than you might expect. It wasn't 422 00:22:35,480 --> 00:22:37,840 Speaker 1: just straight up accounting fraud. No, it was not just 423 00:22:37,880 --> 00:22:41,119 Speaker 1: straight up accounting fraud. Because the accountants and lawyers can 424 00:22:41,160 --> 00:22:45,480 Speaker 1: sign off on things that are clearly misrepresentative of economic reality. 425 00:22:45,720 --> 00:22:48,320 Speaker 1: But once you've gotten accountants and lawyers to sign off 426 00:22:48,359 --> 00:22:50,639 Speaker 1: on them, the Justice Department can't come in after the 427 00:22:50,640 --> 00:22:53,879 Speaker 1: fact and say, well, that's illegal. So it's plausible deniability 428 00:22:54,000 --> 00:22:56,960 Speaker 1: and buyout. And there's some truth to that in the 429 00:22:57,000 --> 00:22:59,399 Speaker 1: financial crisis too. But what we were just talking about, 430 00:22:59,400 --> 00:23:02,639 Speaker 1: which is what mystifies me, is why there were no 431 00:23:02,800 --> 00:23:06,159 Speaker 1: prosecutions around what seemed to be very clear financial fraud, 432 00:23:06,200 --> 00:23:09,639 Speaker 1: which was Wall Street's knowledge that the subprime mortgages it 433 00:23:09,760 --> 00:23:13,159 Speaker 1: was buying did not meet the standards they were promising investors, 434 00:23:13,440 --> 00:23:16,240 Speaker 1: and yet they continued to buy these subprime mortgages and 435 00:23:16,280 --> 00:23:20,000 Speaker 1: package them up into securities and misrepresent the quality of 436 00:23:20,000 --> 00:23:24,200 Speaker 1: those mortgages to to investors. Sounds it sounds like fraud 437 00:23:24,240 --> 00:23:27,119 Speaker 1: to me too, And What's what's infuriating and upsetting about 438 00:23:27,119 --> 00:23:29,720 Speaker 1: this is that the big firms all paid billions of 439 00:23:29,720 --> 00:23:32,560 Speaker 1: dollars to settle these cases, hundreds of billions of dollars, 440 00:23:32,600 --> 00:23:35,000 Speaker 1: and I think it's two hundred and the reference in 441 00:23:35,040 --> 00:23:38,359 Speaker 1: today's columns two hundred forty three billion dollars in fine. 442 00:23:39,400 --> 00:23:43,600 Speaker 1: But literally, if you read the settlements, you can't tell 443 00:23:43,640 --> 00:23:46,639 Speaker 1: what happened. You can't tell if the Justice Department is 444 00:23:46,680 --> 00:23:48,840 Speaker 1: extorting the firms trying to get money out of them, 445 00:23:49,320 --> 00:23:52,840 Speaker 1: or if something really bad happened here, because it's all cloaked, 446 00:23:52,880 --> 00:23:55,560 Speaker 1: it's a settlement. It's all part of what it's all 447 00:23:55,600 --> 00:23:57,680 Speaker 1: part of what I call the shadow legal system, which 448 00:23:57,720 --> 00:24:01,960 Speaker 1: is the way big corporations uh settle allegations outside of 449 00:24:01,960 --> 00:24:04,639 Speaker 1: the public eye. There's no court documents, there's no trial. 450 00:24:04,680 --> 00:24:06,600 Speaker 1: And look, my husband is a litigator. I get why 451 00:24:06,640 --> 00:24:09,439 Speaker 1: this happens, but I think it's really bad for democracy 452 00:24:09,480 --> 00:24:12,399 Speaker 1: and really bad for people's faith in our system to 453 00:24:12,480 --> 00:24:15,240 Speaker 1: have so many of these big cases settled in these 454 00:24:15,280 --> 00:24:18,520 Speaker 1: ways that she had absolutely no light on what actually happened. 455 00:24:18,640 --> 00:24:22,480 Speaker 1: And now some of these cases were settled with admissions 456 00:24:22,480 --> 00:24:25,560 Speaker 1: of guilt, but a lot of them were no admission, no, 457 00:24:25,560 --> 00:24:28,400 Speaker 1: no deny, Just write a check. Just write a check. 458 00:24:28,760 --> 00:24:31,880 Speaker 1: No no, no clear sign of how this happened within 459 00:24:31,920 --> 00:24:34,400 Speaker 1: a company, of who was responsible, of who actually knew 460 00:24:34,400 --> 00:24:37,160 Speaker 1: this was taking place, of who benefited from it, just 461 00:24:37,760 --> 00:24:40,159 Speaker 1: so cloaked that you can't tell from the outside what 462 00:24:40,240 --> 00:24:42,639 Speaker 1: actually happened. Just write a check and make it go away. 463 00:24:42,760 --> 00:24:45,360 Speaker 1: So you're with shareholder's money. By the way, since since 464 00:24:45,359 --> 00:24:47,919 Speaker 1: your numbers, girl, and you spent all that time waiting 465 00:24:47,920 --> 00:24:52,479 Speaker 1: into the balance sheets of UM and Ron, there's two 466 00:24:52,560 --> 00:24:55,600 Speaker 1: really interesting things that come out of that. One is 467 00:24:55,720 --> 00:25:00,280 Speaker 1: the eventual collapse of Arthur Anderson, their auditor. They were 468 00:25:00,400 --> 00:25:02,919 Speaker 1: orderer for a bunch of frauds, not just Enron, but 469 00:25:02,960 --> 00:25:06,000 Speaker 1: World common. I think world uh. Enron was just the 470 00:25:06,440 --> 00:25:10,640 Speaker 1: last straw. In Jesse Eisinger's book whose title I can't 471 00:25:10,640 --> 00:25:14,520 Speaker 1: say on the radio, the Chicken Bleep Club, UM basically 472 00:25:14,560 --> 00:25:17,040 Speaker 1: explains that was the beginning of the end for the 473 00:25:17,080 --> 00:25:20,639 Speaker 1: Department of Justice. Plus nine eleven moved a ton of 474 00:25:20,680 --> 00:25:24,439 Speaker 1: forensic accountants to follow the money. UM. But that's really 475 00:25:25,400 --> 00:25:29,400 Speaker 1: part of it. The other part of it, I'm convinced 476 00:25:30,040 --> 00:25:35,080 Speaker 1: was was that the prosecutors had been convinced that if 477 00:25:35,119 --> 00:25:38,520 Speaker 1: you bring charges, we just bailed out all these banks, 478 00:25:38,520 --> 00:25:40,960 Speaker 1: you're gonna send us right back into the abyss. They 479 00:25:41,000 --> 00:25:43,480 Speaker 1: scared the hell out of everybody. I think that's true too, 480 00:25:43,520 --> 00:25:45,919 Speaker 1: And I think there is a third component as well, 481 00:25:46,200 --> 00:25:49,560 Speaker 1: which is that when Enron was prosecuted so aggressively, it 482 00:25:49,720 --> 00:25:52,679 Speaker 1: was those guys down in Texas. They weren't our right, 483 00:25:53,119 --> 00:25:56,200 Speaker 1: the bankers and the financial crisis were our crowd. They 484 00:25:56,200 --> 00:25:59,199 Speaker 1: were the people that the people in Washington no intimately, 485 00:25:59,480 --> 00:26:03,000 Speaker 1: So there was a preconception that our crowd couldn't have 486 00:26:03,040 --> 00:26:06,080 Speaker 1: engaged in fraud. They didn't. They they're not actually guilty. 487 00:26:06,119 --> 00:26:08,199 Speaker 1: They just got caught up in the hype of the moment, 488 00:26:08,400 --> 00:26:11,440 Speaker 1: whereas when it was those guys down in Texas who 489 00:26:11,520 --> 00:26:14,480 Speaker 1: who aren't our friends, it was an entirely different issue. 490 00:26:14,640 --> 00:26:17,680 Speaker 1: Let me push back against you want, okay, So my theory. 491 00:26:17,920 --> 00:26:22,080 Speaker 1: So that's oh eight. We had the analyst scandal a 492 00:26:22,119 --> 00:26:24,600 Speaker 1: few years before that, we had the I p O 493 00:26:24,720 --> 00:26:29,120 Speaker 1: spinning scandal a few years before that. We had just 494 00:26:29,200 --> 00:26:34,560 Speaker 1: go down the list of all sorts of fraud. Um 495 00:26:34,600 --> 00:26:38,760 Speaker 1: I mentioned Lehman brothers. Given your background, REPO one oh five, 496 00:26:39,200 --> 00:26:44,040 Speaker 1: moving fifty plus billion dollars off the balance sheet every quarter, 497 00:26:44,160 --> 00:26:47,800 Speaker 1: hiding there from investors. How is that not anything more 498 00:26:47,840 --> 00:26:51,520 Speaker 1: than felony fraud? Well, that's my point is that if 499 00:26:51,880 --> 00:26:54,480 Speaker 1: one of the reasons the Justice Department was as not 500 00:26:54,680 --> 00:26:56,920 Speaker 1: willing to be as aggressive as they were with Enron 501 00:26:57,320 --> 00:26:59,840 Speaker 1: is because these guys were people they knew, and so 502 00:27:00,119 --> 00:27:02,720 Speaker 1: they weren't. Do you, Jane, those brothers, I can understand 503 00:27:02,720 --> 00:27:04,280 Speaker 1: if you're gonna say the U S attorney for the 504 00:27:04,320 --> 00:27:08,920 Speaker 1: second District, maybe, and then more more of Hank Pauls 505 00:27:08,960 --> 00:27:11,960 Speaker 1: and Tim Geitner. They all know each other. It's not 506 00:27:12,240 --> 00:27:14,720 Speaker 1: it's it's different than it's different than those people down 507 00:27:14,760 --> 00:27:17,679 Speaker 1: in Texas, those energy people down in Texas. Again, I 508 00:27:17,720 --> 00:27:20,320 Speaker 1: think your two reasons are bigger. I think I think 509 00:27:20,359 --> 00:27:23,359 Speaker 1: that what happened with Arthur Anderson is absolutely part of 510 00:27:23,359 --> 00:27:26,240 Speaker 1: the explanation um And I think the fear of crushing 511 00:27:26,240 --> 00:27:29,879 Speaker 1: the very firms you had just rescued is bigger too. 512 00:27:29,960 --> 00:27:31,879 Speaker 1: I'd put those among the top two reasons. But I 513 00:27:31,920 --> 00:27:35,040 Speaker 1: think there also is this sort of interesting component of 514 00:27:35,520 --> 00:27:39,560 Speaker 1: of it's easier to to aggressively prosecute an outsider than 515 00:27:39,600 --> 00:27:42,439 Speaker 1: it is an insider do you remember the op ed 516 00:27:42,480 --> 00:27:44,720 Speaker 1: written by and it was unusual because it was a 517 00:27:44,840 --> 00:27:51,040 Speaker 1: sitting judge in the Southern District who basically said the 518 00:27:51,280 --> 00:27:56,320 Speaker 1: d J chickened out, They're absolutely were crimes committed, and 519 00:27:56,359 --> 00:28:00,960 Speaker 1: all of the explanations claiming otherwise ring hollow. When was 520 00:28:01,000 --> 00:28:03,800 Speaker 1: the last time we had a sitting judge who covers 521 00:28:03,800 --> 00:28:07,040 Speaker 1: wool Street that's his jurisdiction, right and up as saying, 522 00:28:07,040 --> 00:28:10,200 Speaker 1: why aren't you guys prosecuting? Yeah, I think it. Um, 523 00:28:10,240 --> 00:28:13,800 Speaker 1: it's a question that will always remain from from this episode, 524 00:28:14,000 --> 00:28:18,439 Speaker 1: despite the then head of the Southern District trying to 525 00:28:18,440 --> 00:28:21,720 Speaker 1: distract us all with insider trading charges. So let's talk 526 00:28:21,760 --> 00:28:25,480 Speaker 1: about another bank that you've written about. Um, what's going 527 00:28:25,520 --> 00:28:28,359 Speaker 1: on with Wells Fargo? They were once the model bank 528 00:28:28,840 --> 00:28:31,920 Speaker 1: for good corporate behavior? How did they go so far 529 00:28:31,960 --> 00:28:33,959 Speaker 1: off the rails? Oh? My god? And by the way, 530 00:28:34,040 --> 00:28:37,320 Speaker 1: during this conversation, we've already opened three checking accounts in 531 00:28:37,359 --> 00:28:40,760 Speaker 1: your name from Wells Fargo, which and an insurance bill, 532 00:28:40,840 --> 00:28:44,160 Speaker 1: so I wouldn't be surprised. I mean, it's it actually 533 00:28:44,240 --> 00:28:47,400 Speaker 1: is really disheartening to me because it makes you always 534 00:28:47,400 --> 00:28:49,320 Speaker 1: have to wonder when a company seems to be so 535 00:28:49,400 --> 00:28:52,120 Speaker 1: perfect is there's some deep, dark secret lurking under there. 536 00:28:52,320 --> 00:28:54,160 Speaker 1: And Wells Fargo is the bank that came through the 537 00:28:54,160 --> 00:28:57,560 Speaker 1: financial crisis better than other any any other bank. They 538 00:28:57,560 --> 00:29:00,960 Speaker 1: build themselves as just this goodhearted community bank. The culture 539 00:29:01,080 --> 00:29:03,760 Speaker 1: is the old Norwest Bank UM, which had merged with 540 00:29:03,800 --> 00:29:06,520 Speaker 1: Wells Fargo back and I think UM the late nineties. 541 00:29:06,960 --> 00:29:10,400 Speaker 1: And UM Norwest is a Minneapolis headquartered firm. You know, 542 00:29:10,400 --> 00:29:13,320 Speaker 1: it's got that Midwestern sort of goodness to it. And 543 00:29:13,360 --> 00:29:16,840 Speaker 1: they always in Washington presented themselves as the community bank, 544 00:29:16,960 --> 00:29:19,720 Speaker 1: you know, was the biggest holding of Warren Buffett for 545 00:29:19,720 --> 00:29:22,280 Speaker 1: the long We're not like all those other firms out there. 546 00:29:22,280 --> 00:29:24,840 Speaker 1: And then it turns out they have this really ugly 547 00:29:25,400 --> 00:29:28,560 Speaker 1: um sales culture that puts immense amounts of pressure on 548 00:29:28,600 --> 00:29:30,640 Speaker 1: the people in the system who are least able to 549 00:29:30,680 --> 00:29:32,160 Speaker 1: deal with it, you know, those at the bottom of 550 00:29:32,200 --> 00:29:35,920 Speaker 1: the wrong the tellers to meet these utterly horrible sales goals. 551 00:29:36,240 --> 00:29:39,080 Speaker 1: And we all thought that the problem was confined to 552 00:29:39,120 --> 00:29:42,120 Speaker 1: the retail bank because Wells Fargo has these three different segments. 553 00:29:42,120 --> 00:29:44,600 Speaker 1: That's got its community banking segment, it has its corporate 554 00:29:44,600 --> 00:29:47,840 Speaker 1: banking segment, and has its investment management segment. But now 555 00:29:47,880 --> 00:29:51,000 Speaker 1: it turns out that the sales pressure was felt elsewhere too. 556 00:29:51,240 --> 00:29:54,880 Speaker 1: There were crazy goals in the corporate bank and crazy 557 00:29:54,920 --> 00:29:56,640 Speaker 1: goals which is what the subject of a couple of 558 00:29:56,640 --> 00:29:59,480 Speaker 1: recent articles I've done in the investment management division where 559 00:29:59,480 --> 00:30:02,320 Speaker 1: people were have been given quotas in the same way. 560 00:30:02,320 --> 00:30:06,000 Speaker 1: So this really intent sales culture had actually spread throughout 561 00:30:06,720 --> 00:30:09,720 Speaker 1: the entire bank. Where did that sales culture originate? Where 562 00:30:09,720 --> 00:30:12,680 Speaker 1: did that come from? So I think it came from Dikovasovich, 563 00:30:12,760 --> 00:30:16,680 Speaker 1: who was the CEO of Wells Fargo through the financial crisis, 564 00:30:16,880 --> 00:30:20,360 Speaker 1: and he was the first to start talking about banks 565 00:30:20,400 --> 00:30:23,880 Speaker 1: as stores where you were supposed to sell things to customers. 566 00:30:23,880 --> 00:30:26,320 Speaker 1: And he's the one who coined the now infamous phrase 567 00:30:26,440 --> 00:30:29,880 Speaker 1: eight is great, which is getting every customer at Wells 568 00:30:29,880 --> 00:30:33,960 Speaker 1: Fargo had to um to have at least eight products 569 00:30:34,000 --> 00:30:36,640 Speaker 1: with with the firm. That's where it came from. Whether 570 00:30:36,680 --> 00:30:40,240 Speaker 1: it would have a lot of things from securitization to 571 00:30:40,360 --> 00:30:42,840 Speaker 1: Wells Fargo. Sales culture can start in a place that's 572 00:30:42,880 --> 00:30:45,880 Speaker 1: perfectly okay and then get taken to an extreme and 573 00:30:45,920 --> 00:30:48,240 Speaker 1: tip over into a place that is so not okay. 574 00:30:48,760 --> 00:30:52,479 Speaker 1: And whether whether if Kavassovich had stayed at Wells Fargo, 575 00:30:52,520 --> 00:30:55,000 Speaker 1: whether the sales culture would have tipped over that line 576 00:30:55,160 --> 00:30:58,040 Speaker 1: or not is a debate that nobody will ever be 577 00:30:58,080 --> 00:31:01,000 Speaker 1: able to answer. I mean, but obvious, slee it tipped 578 00:31:01,000 --> 00:31:04,000 Speaker 1: over that line pretty soon after he left. So with 579 00:31:04,160 --> 00:31:07,360 Speaker 1: these his policies, why did everybody stay with this if 580 00:31:07,400 --> 00:31:10,959 Speaker 1: this was such an obviously terrible idea? I think his successor, 581 00:31:11,120 --> 00:31:13,600 Speaker 1: John Stump, who by all accounts as a lovely man, 582 00:31:13,880 --> 00:31:15,920 Speaker 1: was not the sort of executive who was going to 583 00:31:16,240 --> 00:31:19,320 Speaker 1: radically reverse course. And why would you when it appeared 584 00:31:19,320 --> 00:31:22,760 Speaker 1: to work so well? Wall Street celebrated Wells Fargo. It 585 00:31:22,840 --> 00:31:25,000 Speaker 1: had the highest p multiple of any bank for a 586 00:31:25,000 --> 00:31:27,960 Speaker 1: long time because precisely because it did have these amazing 587 00:31:27,960 --> 00:31:30,880 Speaker 1: cross cell numbers. And so when the strategy appeared to 588 00:31:30,920 --> 00:31:33,560 Speaker 1: be working and was winning, you all these plot all 589 00:31:33,560 --> 00:31:37,000 Speaker 1: these all these all this praise, why would you stop it? 590 00:31:37,040 --> 00:31:39,400 Speaker 1: Why would you listen to the whistleblowers inside the bank 591 00:31:39,440 --> 00:31:41,920 Speaker 1: who were saying, this is a real problem. You know. 592 00:31:42,000 --> 00:31:44,600 Speaker 1: The metaphor that always sticks out in my mind is 593 00:31:44,640 --> 00:31:47,640 Speaker 1: you could set the track record on the straightaway, but 594 00:31:47,680 --> 00:31:49,240 Speaker 1: if you can't make the turn and you hit the 595 00:31:49,280 --> 00:31:52,400 Speaker 1: wall that record shouldn't count. And that's kind of like 596 00:31:52,720 --> 00:31:56,080 Speaker 1: Wells Fargos, don't I like that. The thing that really 597 00:31:56,080 --> 00:31:58,520 Speaker 1: bothers me about Wells Fargoes that it seems to me 598 00:31:58,600 --> 00:32:01,200 Speaker 1: a perversion of capital is um in this this sense, 599 00:32:01,320 --> 00:32:04,640 Speaker 1: I have nothing against the people at the top taking 600 00:32:04,680 --> 00:32:06,480 Speaker 1: a lot of money as long as they also bear 601 00:32:06,520 --> 00:32:09,520 Speaker 1: all the risk when things go wrong. Wells Fargo managed 602 00:32:09,560 --> 00:32:11,560 Speaker 1: to put in place a system where the people at 603 00:32:11,600 --> 00:32:14,240 Speaker 1: the very bottom didn't make much money, and they bore 604 00:32:14,280 --> 00:32:16,280 Speaker 1: all the risk because they were the ones who had 605 00:32:16,320 --> 00:32:18,800 Speaker 1: these horrible sales calls. To me, they were the ones 606 00:32:18,840 --> 00:32:20,920 Speaker 1: who got fired if they didn't meet them, and they 607 00:32:20,920 --> 00:32:23,520 Speaker 1: were the ones who got fired if they met them 608 00:32:23,560 --> 00:32:25,800 Speaker 1: in a way that in a way that was was unethical. 609 00:32:26,120 --> 00:32:28,600 Speaker 1: And so all the pressure, all the all the all, 610 00:32:28,840 --> 00:32:30,680 Speaker 1: none of the reward, but all the risk went to 611 00:32:30,680 --> 00:32:32,400 Speaker 1: the people at the bottom of the pyramid, and that 612 00:32:32,520 --> 00:32:35,440 Speaker 1: I think is a perversion, to say the least, Can 613 00:32:35,480 --> 00:32:36,800 Speaker 1: you stick around a bit? I have a ton more 614 00:32:36,880 --> 00:32:39,800 Speaker 1: questions for you. We have been speaking with Bethany McClain. 615 00:32:39,960 --> 00:32:44,800 Speaker 1: She is the author, most recently of Saudi America. If 616 00:32:44,800 --> 00:32:48,000 Speaker 1: you enjoy this conversation, come back and check out the 617 00:32:48,000 --> 00:32:51,000 Speaker 1: podcast extras. Will we keep the tape rolling and continued 618 00:32:51,040 --> 00:32:56,520 Speaker 1: discussing all things fracking, fraud and financial crises. We love 619 00:32:56,560 --> 00:33:00,160 Speaker 1: your comments, feedback and suggestions right to us at m 620 00:33:00,160 --> 00:33:03,280 Speaker 1: IB podcast at Bloomberg dot net. Follow me on Twitter 621 00:33:03,400 --> 00:33:05,840 Speaker 1: at Rid Halts. You can check out my daily column 622 00:33:05,840 --> 00:33:09,560 Speaker 1: on Bloomberg dot com. I'm Barry rit Haults. You're listening 623 00:33:09,600 --> 00:33:26,160 Speaker 1: to Masters and Business on Bloomberg Radio. Welcome to the podcast, Bethany, 624 00:33:26,200 --> 00:33:27,800 Speaker 1: Thank you so much for doing this. I have to 625 00:33:27,800 --> 00:33:30,520 Speaker 1: tell you I sat on the beach a couple of 626 00:33:30,520 --> 00:33:35,480 Speaker 1: weeks ago UM and read Saudi America. It's such a 627 00:33:35,560 --> 00:33:39,000 Speaker 1: weird pair of words to say, because I you feel 628 00:33:39,000 --> 00:33:41,920 Speaker 1: like you're saying it wrong because you are UM. And 629 00:33:41,960 --> 00:33:45,520 Speaker 1: it really it was a fast and really informed him 630 00:33:45,520 --> 00:33:49,880 Speaker 1: and an interesting read. Not just aubury, but the whole 631 00:33:50,000 --> 00:33:56,640 Speaker 1: concept of money driving cat low cost of capital, driving fracking, 632 00:33:56,920 --> 00:34:00,680 Speaker 1: changing the world of energy, changing UH, the Middle East, 633 00:34:00,800 --> 00:34:05,200 Speaker 1: changing the relationship of Russia to Europe. It's really incredibly 634 00:34:05,640 --> 00:34:08,960 Speaker 1: intricate web and you can help, especially this week, you 635 00:34:09,000 --> 00:34:12,560 Speaker 1: can't help but draw a line from Alan Greenspan and 636 00:34:12,680 --> 00:34:17,560 Speaker 1: the post nine eleven pre financial crisis interest rates straight 637 00:34:17,600 --> 00:34:20,880 Speaker 1: to the boom and fracking. So the best compliment I 638 00:34:20,880 --> 00:34:22,640 Speaker 1: could ever get is that one of my books could 639 00:34:22,680 --> 00:34:26,239 Speaker 1: be considered a beach read. So I'm absolutely beyond it. 640 00:34:26,520 --> 00:34:30,560 Speaker 1: Literally literally not just a beach read. But it was 641 00:34:30,640 --> 00:34:33,840 Speaker 1: compelling and in not like I don't get to the 642 00:34:33,880 --> 00:34:36,759 Speaker 1: beach all that early, from from nine ten o'clock in 643 00:34:36,800 --> 00:34:40,239 Speaker 1: the morning to to three in the afternoon straight through. 644 00:34:40,360 --> 00:34:44,719 Speaker 1: It really was a great narrative. There are great characters, 645 00:34:44,960 --> 00:34:48,920 Speaker 1: and there's some really interesting insights. What motivated you to 646 00:34:48,920 --> 00:34:52,360 Speaker 1: to start looking at fracking? Well, so I was always 647 00:34:52,360 --> 00:34:55,800 Speaker 1: obsessed with Aubrey McClendon being really who couldn't be Is 648 00:34:55,840 --> 00:34:58,359 Speaker 1: this related to Enron because he's in a similar part 649 00:34:58,400 --> 00:35:01,160 Speaker 1: of the country. Yes, I have an affinity for these 650 00:35:01,200 --> 00:35:03,839 Speaker 1: these business these characters in the world of business who 651 00:35:03,920 --> 00:35:06,600 Speaker 1: come along every so often, who are larger than life, 652 00:35:06,880 --> 00:35:09,320 Speaker 1: and who really proved the old adage that truth is 653 00:35:09,360 --> 00:35:11,839 Speaker 1: stranger than fiction, and who could be stars in their 654 00:35:11,840 --> 00:35:16,560 Speaker 1: own Shakespearean drama. Whether it's Jeff Skilling, whether it's Mike Pearson, 655 00:35:16,680 --> 00:35:21,440 Speaker 1: whether it's Aubrey McClendon. I find these characters just fascinating. 656 00:35:21,520 --> 00:35:25,600 Speaker 1: What what drives them, what makes them tick? Why their excesses? Um? 657 00:35:25,960 --> 00:35:28,080 Speaker 1: So I? So I was. I was obsessed with Aubrey 658 00:35:28,120 --> 00:35:31,359 Speaker 1: for for years. And then there was this um dichotomy 659 00:35:31,520 --> 00:35:36,359 Speaker 1: between these grand promises of how fracking was reshaping geopolitics, 660 00:35:36,400 --> 00:35:38,680 Speaker 1: with the fact that it doesn't make money, that there's 661 00:35:38,680 --> 00:35:41,760 Speaker 1: this deep skepticism about the industry and this heavy short 662 00:35:41,760 --> 00:35:45,040 Speaker 1: seller interest in it because the companies don't produce free 663 00:35:45,040 --> 00:35:48,040 Speaker 1: cash flow. And so I thought that is a dichotomy 664 00:35:48,120 --> 00:35:50,960 Speaker 1: worth exploring, that a business can be changing the world 665 00:35:51,280 --> 00:35:54,000 Speaker 1: yet not not make any money. And so I thought 666 00:35:54,080 --> 00:35:57,359 Speaker 1: that was that was worth digging into. Who first heared 667 00:35:57,400 --> 00:35:59,600 Speaker 1: you in this direction? Who who said, hey, you should 668 00:35:59,800 --> 00:36:03,799 Speaker 1: look closely? So do you know John Hampton? I know 669 00:36:03,880 --> 00:36:07,319 Speaker 1: the name, sure, So John's uh for a long time 670 00:36:07,360 --> 00:36:10,920 Speaker 1: pall of mine, who lives in Australia runs runs Bronte Capital. 671 00:36:11,160 --> 00:36:12,680 Speaker 1: And he's the one who used to say that Aubrey 672 00:36:12,760 --> 00:36:17,480 Speaker 1: McClendon was the most important guy in America, with again 673 00:36:17,600 --> 00:36:20,200 Speaker 1: some degree of hyperbole. But John was the one who 674 00:36:20,239 --> 00:36:24,000 Speaker 1: first got me interested in Aubrey and got me focused 675 00:36:24,080 --> 00:36:29,280 Speaker 1: on Jessapeake's dire financial condition. So he's an interesting character himself. 676 00:36:29,320 --> 00:36:33,239 Speaker 1: Speaking of interesting characters, his writing is always quite fascinating. 677 00:36:33,280 --> 00:36:38,399 Speaker 1: I get his regular missives and they're always, um, it's 678 00:36:38,440 --> 00:36:42,399 Speaker 1: so refreshing reading something that's just a luloff kilter and 679 00:36:42,520 --> 00:36:46,920 Speaker 1: certainly well thought out and interesting. So what made you 680 00:36:46,960 --> 00:36:49,200 Speaker 1: think this was a mini book and not a full 681 00:36:49,239 --> 00:36:54,120 Speaker 1: blown Oh boys? So as I got into it, I 682 00:36:54,200 --> 00:36:56,799 Speaker 1: realized it probably could have and should have been a 683 00:36:56,800 --> 00:37:00,239 Speaker 1: longer book, because trying to find a path through the 684 00:37:00,280 --> 00:37:03,200 Speaker 1: fracking story that can be told in thirty words or 685 00:37:03,280 --> 00:37:08,040 Speaker 1: so was was a huge challenge. Um. My issue is 686 00:37:08,080 --> 00:37:10,840 Speaker 1: purely a life one to be. To be perfectly honest, 687 00:37:10,880 --> 00:37:12,920 Speaker 1: every time I've written a big book, it's ended up 688 00:37:12,960 --> 00:37:15,120 Speaker 1: costing me, I'd say, a good six months to a 689 00:37:15,200 --> 00:37:18,080 Speaker 1: year of my life where I am just gone. And 690 00:37:18,440 --> 00:37:21,640 Speaker 1: this isn't that the nature of writing that that is 691 00:37:21,680 --> 00:37:23,640 Speaker 1: the nature of writing books. But at this stage of 692 00:37:23,680 --> 00:37:25,680 Speaker 1: my life, I have kids at an age where I 693 00:37:25,719 --> 00:37:27,800 Speaker 1: don't want to miss six months of their life, and 694 00:37:27,920 --> 00:37:33,839 Speaker 1: so it's um so so it's hard, totally totally understandable. 695 00:37:34,520 --> 00:37:40,360 Speaker 1: In the book, you describe Audrey Aubrey's death. He drives 696 00:37:40,400 --> 00:37:43,280 Speaker 1: this big suv. He always drives too fast. He's texting 697 00:37:43,320 --> 00:37:46,680 Speaker 1: while he drives, and he happens to slam into an overpast, 698 00:37:47,320 --> 00:37:51,799 Speaker 1: leading some people dead instantly, leading some people to think, hey, 699 00:37:51,880 --> 00:37:55,560 Speaker 1: he was just indicted. This could be a suicide with 700 00:37:55,640 --> 00:37:59,439 Speaker 1: no suicide note and therefore full insurance and everything else 701 00:37:59,480 --> 00:38:02,960 Speaker 1: that comes with it. The police never found anything related 702 00:38:03,000 --> 00:38:05,239 Speaker 1: to that. What what are your thoughts on this? It's 703 00:38:05,280 --> 00:38:08,799 Speaker 1: one of those great mysteries that you'll you'll you'll never 704 00:38:08,960 --> 00:38:12,280 Speaker 1: quite know, along with why it is that Jeff Skilling 705 00:38:12,280 --> 00:38:16,240 Speaker 1: actually resigned from Enron in the the in the two thousand. 706 00:38:16,320 --> 00:38:19,560 Speaker 1: Aubrey's death is another of those mysteries. The most many 707 00:38:19,640 --> 00:38:22,200 Speaker 1: people believe it must have been suicide. He had just 708 00:38:22,280 --> 00:38:26,759 Speaker 1: been indicted. His empire was in shambles, although that wasn't 709 00:38:26,760 --> 00:38:29,120 Speaker 1: the first time his empire had crumbled. No, it was 710 00:38:29,160 --> 00:38:32,160 Speaker 1: not the first time his empire had crumbled. But but 711 00:38:32,160 --> 00:38:35,120 Speaker 1: but this with but with the indictment, This was this 712 00:38:35,239 --> 00:38:37,360 Speaker 1: was a big one because even if even if people 713 00:38:37,440 --> 00:38:40,080 Speaker 1: view an indictment as being unfair, nobody's going to do 714 00:38:40,120 --> 00:38:42,560 Speaker 1: business with a guy who just co indicted, right, tough 715 00:38:42,560 --> 00:38:44,759 Speaker 1: to money. But but there are other people who say, 716 00:38:44,800 --> 00:38:46,920 Speaker 1: but this was Aubrey. He drove too fast, he's always 717 00:38:46,960 --> 00:38:49,760 Speaker 1: texting while he drove. It's possible he was just exhausted 718 00:38:49,800 --> 00:38:53,120 Speaker 1: and distracted. And so I think the police department was 719 00:38:53,200 --> 00:38:55,480 Speaker 1: unable to make a ruling either way. There's this quote 720 00:38:55,480 --> 00:38:57,360 Speaker 1: in my book from the police captain saying, you know, 721 00:38:57,400 --> 00:39:01,719 Speaker 1: we'll never know what happened. Huh. Quite quite interesting. Who 722 00:39:01,719 --> 00:39:04,920 Speaker 1: else from the book stood out as a really interesting 723 00:39:05,000 --> 00:39:09,279 Speaker 1: character to you? So I think, Um, I think e 724 00:39:09,400 --> 00:39:11,560 Speaker 1: O G. As a company is to be a really 725 00:39:11,600 --> 00:39:15,480 Speaker 1: interesting character. It's former CEO Mark Poppa, who has a 726 00:39:15,520 --> 00:39:18,360 Speaker 1: really nuanced view on the fracking revolution. He isn't a 727 00:39:18,800 --> 00:39:23,480 Speaker 1: pro fracking as as you might think, um, But e 728 00:39:23,600 --> 00:39:26,279 Speaker 1: O G. Um well he's he's he's pro fracking, but 729 00:39:26,360 --> 00:39:28,560 Speaker 1: he's not as sure that it's going to change the 730 00:39:28,640 --> 00:39:30,920 Speaker 1: energy world forever as as other people are. He has 731 00:39:30,960 --> 00:39:33,560 Speaker 1: a nuance to you, um. And so I liked setting 732 00:39:33,600 --> 00:39:36,239 Speaker 1: up E O G. As a counterpoint to Chesapeake, to 733 00:39:36,239 --> 00:39:38,839 Speaker 1: tell the other side of the story, because in the end, 734 00:39:38,880 --> 00:39:40,719 Speaker 1: this isn't a book that says this whole thing is 735 00:39:40,760 --> 00:39:42,920 Speaker 1: a fraud. It's gonna it's destined for a bad, a 736 00:39:42,920 --> 00:39:47,359 Speaker 1: bad ending. Um. I couldn't, I couldn't actually get there Um, 737 00:39:47,400 --> 00:39:49,160 Speaker 1: and so I wanted to tell both sides of the 738 00:39:49,200 --> 00:39:51,440 Speaker 1: story to leave it a little bit open to the 739 00:39:51,480 --> 00:39:54,760 Speaker 1: reader's judgment. The one thing for sure about the history 740 00:39:54,800 --> 00:39:57,160 Speaker 1: of oil overall, in the history of fracking, is that 741 00:39:57,200 --> 00:39:59,799 Speaker 1: everybody who ever makes predictions has been wrong. And so 742 00:40:00,280 --> 00:40:02,799 Speaker 1: i'm i'm, i'm, I'm, I'm not smart enough to to 743 00:40:02,840 --> 00:40:05,000 Speaker 1: say how it's gonna end. So there's a theme that 744 00:40:05,080 --> 00:40:08,040 Speaker 1: runs through all of your books. You're you're never going 745 00:40:08,080 --> 00:40:13,640 Speaker 1: to write the Steve Jobs, you know, hagiography about how 746 00:40:14,200 --> 00:40:18,359 Speaker 1: you know, successful and innovative. The theme throughout all your 747 00:40:18,400 --> 00:40:22,200 Speaker 1: books is there's always too much access. There's always elements 748 00:40:22,200 --> 00:40:26,200 Speaker 1: of fraud. Throughout there are always problems, both legal, personal, 749 00:40:26,280 --> 00:40:31,400 Speaker 1: what have you. It's more than just larger than life personalities. 750 00:40:31,760 --> 00:40:34,920 Speaker 1: It's larger than life personalities who really step in it 751 00:40:34,960 --> 00:40:38,640 Speaker 1: to say the least? Uh So, from Enron to Fannie 752 00:40:38,640 --> 00:40:42,440 Speaker 1: and Freddie to Um, the writings should do about wells Fargo. 753 00:40:42,600 --> 00:40:47,239 Speaker 1: Are you attracted to fraud and nefarious characters or is 754 00:40:47,280 --> 00:40:51,200 Speaker 1: it just a better story? Oh that makes me sound dark. Indeed, 755 00:40:51,440 --> 00:40:53,080 Speaker 1: you're by the way, I wish I could when we 756 00:40:53,120 --> 00:40:56,719 Speaker 1: get a picture later, she's sitting here dressed. I can't 757 00:40:56,719 --> 00:40:59,520 Speaker 1: tell if that's black or blue. That's okay, all dressed 758 00:40:59,520 --> 00:41:06,600 Speaker 1: in black? Care you you are right? Um, I honestly 759 00:41:06,600 --> 00:41:08,399 Speaker 1: I don't know the answer to that. Actually, I think 760 00:41:08,400 --> 00:41:10,400 Speaker 1: of I grew up in Minnesota, and I think of 761 00:41:10,440 --> 00:41:13,560 Speaker 1: myself in many ways as as Minnesota nice. I have 762 00:41:13,600 --> 00:41:15,759 Speaker 1: a hard time being rude to people. I don't like 763 00:41:16,640 --> 00:41:19,799 Speaker 1: it's like Canada nice. Yeah, I don't. I don't have that. 764 00:41:19,920 --> 00:41:22,759 Speaker 1: And I don't actually like confrontation. I don't. I don't 765 00:41:22,800 --> 00:41:25,839 Speaker 1: particularly like fighting with people. So I'm not quite sure. 766 00:41:25,880 --> 00:41:28,120 Speaker 1: I haven't been able to analyze myself enough to know 767 00:41:28,280 --> 00:41:30,480 Speaker 1: why it is that I have sort of come up 768 00:41:30,520 --> 00:41:33,040 Speaker 1: with the specialty of writing about business gone wrong. If 769 00:41:33,080 --> 00:41:35,960 Speaker 1: only you had an outlet to express your outrage. Oh, 770 00:41:36,000 --> 00:41:38,640 Speaker 1: I know, write a bunch of books about it. I 771 00:41:38,680 --> 00:41:41,000 Speaker 1: guess it just I guess it just interests me more 772 00:41:41,040 --> 00:41:44,839 Speaker 1: than stories of of of things going going perfectly. It 773 00:41:44,880 --> 00:41:48,680 Speaker 1: feels it feels more real somehow, um um, And the 774 00:41:48,719 --> 00:41:51,319 Speaker 1: analytical part of me loves trying to figure out how 775 00:41:51,360 --> 00:41:54,160 Speaker 1: it went wrong. How things are working usually seems to 776 00:41:54,160 --> 00:41:57,399 Speaker 1: be squishier and all these you know, generic phrases about 777 00:41:57,480 --> 00:42:01,000 Speaker 1: leadership etcetera, etcetera. Whereas how things went wrong, it's usually 778 00:42:01,080 --> 00:42:03,880 Speaker 1: very grounded in the in the really gritty specifics, and 779 00:42:03,920 --> 00:42:07,000 Speaker 1: I like gritty specifics. I have a pet theory which 780 00:42:07,000 --> 00:42:10,359 Speaker 1: will eventually become a column, and the theory is that 781 00:42:10,920 --> 00:42:15,160 Speaker 1: everybody's conception of the world is wrong because it's just 782 00:42:15,280 --> 00:42:19,520 Speaker 1: examples of survivorship bias. Everything we see means that there 783 00:42:19,560 --> 00:42:22,799 Speaker 1: are a thousand other things that failed, and so we assume, oh, 784 00:42:22,880 --> 00:42:25,400 Speaker 1: this works, this pencil. Look it's gotten a racer and 785 00:42:25,440 --> 00:42:27,359 Speaker 1: it's covered in paint, and it's got a point. Oh 786 00:42:27,440 --> 00:42:30,120 Speaker 1: isn't that great. You don't see the millions of other 787 00:42:30,200 --> 00:42:34,520 Speaker 1: devices that were attempted and failed. And so how else 788 00:42:34,560 --> 00:42:37,440 Speaker 1: can you explain why people keep opening restaurants? Wait, restaurants 789 00:42:37,440 --> 00:42:40,400 Speaker 1: are a terrible investment. Half of them go out in 790 00:42:40,640 --> 00:42:44,920 Speaker 1: six months, the rest go out in two years. It's 791 00:42:44,960 --> 00:42:48,719 Speaker 1: a terrible idea, and yet people keep opening restaurants. We 792 00:42:48,800 --> 00:42:51,879 Speaker 1: all have this long view. You like to look at 793 00:42:51,880 --> 00:42:56,360 Speaker 1: the cd fraudulent underside of things gone awry. I guess 794 00:42:56,360 --> 00:42:58,640 Speaker 1: that's true. I guess I like. I think you can 795 00:42:58,719 --> 00:43:01,440 Speaker 1: learn a lot from stories of business gone wrong too, 796 00:43:01,520 --> 00:43:04,520 Speaker 1: because these, to me, the characters are never as simple 797 00:43:04,640 --> 00:43:07,160 Speaker 1: as purely bad or purely good. Maybe some of them 798 00:43:07,160 --> 00:43:08,839 Speaker 1: are Bernie made off, I think is as close as 799 00:43:08,840 --> 00:43:12,160 Speaker 1: it gets too purely bad. But most of these stories 800 00:43:12,200 --> 00:43:15,920 Speaker 1: aren't so much sort of clear cut criminality as they 801 00:43:15,920 --> 00:43:22,840 Speaker 1: are a mixture of idealism um, arrogance, um, hubris um, 802 00:43:22,880 --> 00:43:26,160 Speaker 1: a little bit of fraud tossed into the mix, um, 803 00:43:26,200 --> 00:43:29,080 Speaker 1: a lot of wishful thinking um. And so they're very 804 00:43:29,080 --> 00:43:32,279 Speaker 1: they're very human stories. And that's that's what draws me 805 00:43:32,360 --> 00:43:34,560 Speaker 1: to them. I always want to understand. I guess it's 806 00:43:34,560 --> 00:43:36,120 Speaker 1: a little bit maybe it's a little bit of a 807 00:43:36,320 --> 00:43:38,719 Speaker 1: version of the famous line from Anna Kranida. You know, 808 00:43:38,760 --> 00:43:41,239 Speaker 1: every happy family is happy in the same way, but 809 00:43:41,280 --> 00:43:44,440 Speaker 1: every unhappy family, that's where you know that is unhappy 810 00:43:44,480 --> 00:43:46,600 Speaker 1: in a different way. And so every story of business 811 00:43:46,600 --> 00:43:48,560 Speaker 1: gone right is kind of the same every story of 812 00:43:48,560 --> 00:43:51,359 Speaker 1: business gone wrong. It's really different and really fascinating. Don't 813 00:43:51,400 --> 00:43:54,360 Speaker 1: don't we learn more from from the mistakes and business 814 00:43:54,400 --> 00:43:59,120 Speaker 1: has gone wrong than the success stories. What do you 815 00:43:59,200 --> 00:44:02,560 Speaker 1: learn from Google? Make the best search engine that and 816 00:44:02,640 --> 00:44:05,040 Speaker 1: figure out how to monetize it. There's not a big 817 00:44:05,120 --> 00:44:09,480 Speaker 1: lesson there, but the disasters there's always lots of lessons. 818 00:44:09,520 --> 00:44:11,839 Speaker 1: There's so many lessons. I mean, here's a gritty one 819 00:44:11,880 --> 00:44:15,359 Speaker 1: from Wells Fargo, which which which I find fascinating. Back 820 00:44:15,400 --> 00:44:17,600 Speaker 1: in two thousand thirteen, the l A Times did a 821 00:44:17,680 --> 00:44:21,440 Speaker 1: story about all the sales pressure and the terrible impact 822 00:44:21,480 --> 00:44:24,000 Speaker 1: it was having, and Wells Fargo ignored it because then 823 00:44:24,040 --> 00:44:26,960 Speaker 1: CEO John Stump said, oh, well, this is only one 824 00:44:27,000 --> 00:44:30,080 Speaker 1: percent of our workforce, so we are actually great. Far 825 00:44:30,160 --> 00:44:33,160 Speaker 1: from criticizing ourselves for this, we should be praising ourselves 826 00:44:33,160 --> 00:44:35,359 Speaker 1: for this because only one percent of our employees has 827 00:44:35,400 --> 00:44:38,319 Speaker 1: ever had a problem. And it's a classic example of 828 00:44:38,400 --> 00:44:42,480 Speaker 1: using math to um justify your wishful thinking. Because in 829 00:44:42,520 --> 00:44:46,440 Speaker 1: a retail sales force that had turnover a year, and 830 00:44:46,480 --> 00:44:49,600 Speaker 1: where that one percent measured the people who got caught, 831 00:44:49,760 --> 00:44:51,880 Speaker 1: not the people who were pressuring them to engage in 832 00:44:51,880 --> 00:44:54,960 Speaker 1: this behavior, not the people who quit because they couldn't 833 00:44:55,000 --> 00:44:56,719 Speaker 1: do it, and not the people who just did it 834 00:44:56,840 --> 00:44:59,720 Speaker 1: because they got away with it. It was a meaningless figure. 835 00:45:00,360 --> 00:45:02,600 Speaker 1: And so that's not math, that's rationalization. But so I 836 00:45:02,640 --> 00:45:05,000 Speaker 1: love that. I love those kind of lessons, right, And 837 00:45:05,040 --> 00:45:07,480 Speaker 1: that's so much more interesting to me than how to 838 00:45:07,560 --> 00:45:10,960 Speaker 1: be a great leader exhibit compassion. I don't know. I'm 839 00:45:11,000 --> 00:45:14,439 Speaker 1: intrigued that there was a story in in where where 840 00:45:14,480 --> 00:45:17,600 Speaker 1: was that l A Times? And the company didn't take 841 00:45:17,600 --> 00:45:21,080 Speaker 1: it seriously. There was, you know, the other bank that 842 00:45:21,200 --> 00:45:24,440 Speaker 1: more or less came through the crisis pretty well was J. P. 843 00:45:24,600 --> 00:45:29,440 Speaker 1: Morgan under Jamie Diamond, and they had an automated underwriting 844 00:45:29,520 --> 00:45:33,120 Speaker 1: system called Zippy and UM. It was a way to 845 00:45:33,280 --> 00:45:36,439 Speaker 1: process more mortgages more quickly, so you can move through 846 00:45:36,520 --> 00:45:39,520 Speaker 1: more through the pipeline. The problem with Zippy was it 847 00:45:39,680 --> 00:45:43,799 Speaker 1: occasionally would reject a mortgage and so there was an 848 00:45:43,840 --> 00:45:48,440 Speaker 1: internal document that the mortgage department created called Zippy Tips 849 00:45:48,440 --> 00:45:50,719 Speaker 1: and Tricks, and it was all the ways you could 850 00:45:50,719 --> 00:45:54,520 Speaker 1: tweak the inputs to make sure that Zippy would approve it. 851 00:45:54,880 --> 00:45:57,160 Speaker 1: UM and a local I forgot which one it was. 852 00:45:57,239 --> 00:45:59,800 Speaker 1: It was a local not as big as the l A. Times, 853 00:46:00,640 --> 00:46:03,760 Speaker 1: but not the East Podunk Express. It was somewhere in between. 854 00:46:04,120 --> 00:46:08,440 Speaker 1: Wrote a story about Zippy tricks and tips, and you know, 855 00:46:08,560 --> 00:46:12,640 Speaker 1: the company had the exact same answer that Wells Fargo did. Listen, 856 00:46:12,719 --> 00:46:15,000 Speaker 1: this isn't representative of how we do it. Zippy was 857 00:46:15,040 --> 00:46:17,720 Speaker 1: set up and it's very effective here in two thousand 858 00:46:17,760 --> 00:46:20,840 Speaker 1: and six and mortgages are just fine. But it's amazing 859 00:46:20,840 --> 00:46:25,440 Speaker 1: how people's capacity to rationalize what's in their own self interest. 860 00:46:25,520 --> 00:46:28,759 Speaker 1: And back back to your point, it's actually amazing how 861 00:46:28,920 --> 00:46:31,760 Speaker 1: we don't see what we don't want to see, especially 862 00:46:31,800 --> 00:46:34,680 Speaker 1: when our salary, to paraphrase up to in Sinclair is 863 00:46:34,719 --> 00:46:37,719 Speaker 1: based on not seeing are when your political ideology is 864 00:46:37,760 --> 00:46:40,360 Speaker 1: based on not seeing it. Per little conversation on Twitter 865 00:46:40,440 --> 00:46:44,279 Speaker 1: the other day, um well, I just found it am 866 00:46:44,320 --> 00:46:49,120 Speaker 1: using that somebody was man splaining gender neutral pronouns to you. 867 00:46:49,239 --> 00:46:53,760 Speaker 1: It there is some kind of irony there. Some people 868 00:46:53,760 --> 00:46:59,000 Speaker 1: are ironing impaired, especially online. It doesn't come across well. 869 00:46:59,040 --> 00:47:01,319 Speaker 1: I got into a war of words on this with 870 00:47:01,360 --> 00:47:05,200 Speaker 1: somebody on Twitter once and it was over Larry Summers 871 00:47:05,239 --> 00:47:07,880 Speaker 1: and his comments about women in math. And I actually 872 00:47:08,239 --> 00:47:12,120 Speaker 1: defended Summers. Really, yes, I have a great Summers and 873 00:47:12,440 --> 00:47:16,280 Speaker 1: the anyway, this this exchange ended with the guy lecturing 874 00:47:16,360 --> 00:47:19,640 Speaker 1: me about why I was wrong to defend Larry Summers, 875 00:47:19,880 --> 00:47:24,840 Speaker 1: and I thought this is just the height of irony. 876 00:47:24,880 --> 00:47:27,239 Speaker 1: Listen here, a little lady, let me explain to you 877 00:47:27,560 --> 00:47:30,080 Speaker 1: about how women are. Let me let me explain to 878 00:47:30,120 --> 00:47:32,440 Speaker 1: you why you should be so offended. You don't obviously 879 00:47:32,440 --> 00:47:34,720 Speaker 1: don't understand what you're talking about. So let me explain 880 00:47:34,760 --> 00:47:36,560 Speaker 1: to you why you should be so offended that Larry 881 00:47:36,560 --> 00:47:38,920 Speaker 1: Summer said women didn't understand what they were talking about. 882 00:47:38,920 --> 00:47:41,920 Speaker 1: It was very funny. You do you remember the column 883 00:47:41,920 --> 00:47:46,000 Speaker 1: and the Boston Globe that just shredded the Harvard Endowment. 884 00:47:46,160 --> 00:47:49,520 Speaker 1: It it basically this it won all sorts of awards. 885 00:47:50,080 --> 00:47:52,440 Speaker 1: Not the writer, the editor on it went on to 886 00:47:52,520 --> 00:47:57,360 Speaker 1: do the article that revealed all of the priest abuse 887 00:47:57,400 --> 00:48:00,719 Speaker 1: in Boston. So it was that so everyone involved in 888 00:48:00,800 --> 00:48:06,799 Speaker 1: this article absolutely stroling reputation. I merely linked into it 889 00:48:07,280 --> 00:48:10,399 Speaker 1: in a column and got a furious phone call from 890 00:48:10,440 --> 00:48:14,400 Speaker 1: Summers about it, and I asked him about it, and 891 00:48:14,880 --> 00:48:18,120 Speaker 1: his answer struck me as so disingenuous. I tracked that 892 00:48:18,160 --> 00:48:22,120 Speaker 1: report down, called her and basically she gave me, no, 893 00:48:22,280 --> 00:48:24,680 Speaker 1: that's not true. No. I called him a dozen times. No, 894 00:48:24,960 --> 00:48:27,000 Speaker 1: he said he was too busy saving the world to 895 00:48:27,120 --> 00:48:30,279 Speaker 1: pay attention to to this. I was. I was just 896 00:48:30,560 --> 00:48:33,600 Speaker 1: so every time somebody defends Larry Summers, in the back 897 00:48:33,640 --> 00:48:38,319 Speaker 1: of my head, I just think, yeah, right, and he's 898 00:48:38,320 --> 00:48:41,840 Speaker 1: a very public intellectual, and I just decided I'm not 899 00:48:41,880 --> 00:48:43,960 Speaker 1: going to write about him, and I probably shoudn't even 900 00:48:44,000 --> 00:48:46,120 Speaker 1: talk about him anymore, but you brought it up, so 901 00:48:46,200 --> 00:48:49,319 Speaker 1: I had to, um, what else? What else are you 902 00:48:49,360 --> 00:48:52,080 Speaker 1: looking at these days that interest you? What? What's the 903 00:48:52,160 --> 00:48:54,759 Speaker 1: next mini book going to be? Well? Something that got 904 00:48:54,800 --> 00:48:57,239 Speaker 1: my attention in this book. So, part of what is 905 00:48:57,320 --> 00:49:00,680 Speaker 1: keeping the chain of financing for fracking going is pension 906 00:49:00,719 --> 00:49:03,560 Speaker 1: fund money. Because in this era of super low interest rates, 907 00:49:03,560 --> 00:49:06,200 Speaker 1: it isn't just that fracking companies can raise debt and 908 00:49:06,239 --> 00:49:09,120 Speaker 1: have low interest expense given where interest rates are. It's 909 00:49:09,160 --> 00:49:12,040 Speaker 1: also that, in this world of very low returns elsewhere, 910 00:49:12,080 --> 00:49:15,239 Speaker 1: particularly in fixed income securities, a lot of pension funds 911 00:49:15,280 --> 00:49:18,240 Speaker 1: have been putting money in private equity firms. Private equity 912 00:49:18,320 --> 00:49:21,040 Speaker 1: in turn, has the highest allocation to the energy sector 913 00:49:21,080 --> 00:49:23,680 Speaker 1: than they've had in like twenty years. They're shuttling billions 914 00:49:23,680 --> 00:49:27,640 Speaker 1: of dollars into fracking, into shale companies, and that's part 915 00:49:27,640 --> 00:49:30,480 Speaker 1: of what's keeping the Okay, this is an overstatement, but 916 00:49:30,520 --> 00:49:33,120 Speaker 1: the daisy chain of money of money going, and so 917 00:49:33,280 --> 00:49:36,080 Speaker 1: thinking about this issue and the low returns of pension 918 00:49:36,120 --> 00:49:38,680 Speaker 1: funds um and given that I live in Chicago, which 919 00:49:38,719 --> 00:49:42,000 Speaker 1: has massive problems, as does the state of Illinois. Has 920 00:49:42,000 --> 00:49:43,799 Speaker 1: made me really interested in coming up with a way 921 00:49:43,880 --> 00:49:47,680 Speaker 1: to explore this. So what's fascinating to me is the 922 00:49:47,760 --> 00:49:52,600 Speaker 1: pension side of things. They have moved very heavily into 923 00:49:52,680 --> 00:49:57,319 Speaker 1: hedge funds and private equity because, for some reason, at 924 00:49:57,400 --> 00:50:00,520 Speaker 1: least on the hedge fund it's unexplained, there's a higher 925 00:50:00,680 --> 00:50:04,400 Speaker 1: expected return for private equity um than there is for 926 00:50:04,480 --> 00:50:07,160 Speaker 1: stocks and buns. I don't know why there's a higher 927 00:50:07,160 --> 00:50:10,839 Speaker 1: expected return for hedge funds given their terrible performance over 928 00:50:10,880 --> 00:50:14,479 Speaker 1: the past ten years. Somebody else was it? Simon Lack 929 00:50:15,080 --> 00:50:18,480 Speaker 1: said the financial crisis wiped out all the gains of 930 00:50:18,480 --> 00:50:21,560 Speaker 1: the entire hedge fund industry for the prior twenty years. 931 00:50:21,880 --> 00:50:25,440 Speaker 1: That is a stunning That is a stunning anyway. But 932 00:50:25,560 --> 00:50:27,040 Speaker 1: I don't know what I'll end up That's that's a 933 00:50:27,160 --> 00:50:28,839 Speaker 1: that's a really interesting figure. I don't know what I'll 934 00:50:28,920 --> 00:50:30,880 Speaker 1: end up doing with this. Because of Fannie and Freddie 935 00:50:30,920 --> 00:50:33,400 Speaker 1: were an un sexy subject. I think pensions might be 936 00:50:33,520 --> 00:50:36,400 Speaker 1: one step worse. So I'm going to tell you the 937 00:50:36,400 --> 00:50:39,800 Speaker 1: problem with Fannie and Freddie are all the crazy anti 938 00:50:39,920 --> 00:50:45,319 Speaker 1: GSC people. It adds, it injects the level of insanity 939 00:50:45,360 --> 00:50:49,200 Speaker 1: to it that makes it tedious. But if you look 940 00:50:49,280 --> 00:50:52,560 Speaker 1: at let me man explain to you what your next bush. 941 00:50:52,800 --> 00:50:55,920 Speaker 1: If you I appreciate all ideas, whether they come from 942 00:50:55,960 --> 00:50:58,640 Speaker 1: men or otherwise. If you look at Charlie Ellis's book 943 00:50:58,640 --> 00:51:02,520 Speaker 1: on the retirement crisis send his and and Jack Bogel, 944 00:51:02,560 --> 00:51:05,400 Speaker 1: there have been you know, these are legendary folks writing 945 00:51:05,760 --> 00:51:09,240 Speaker 1: people aren't saving enough. The other side of that issue, 946 00:51:10,320 --> 00:51:12,560 Speaker 1: I'm gonna I'm not gonna give you another idea and 947 00:51:12,680 --> 00:51:15,640 Speaker 1: encourage you to do that idea, the idea that pension 948 00:51:15,680 --> 00:51:20,400 Speaker 1: funds are highly leveraged, highly exposed to alternatives, are looking 949 00:51:20,440 --> 00:51:24,760 Speaker 1: for a much greater return than we should perhaps reasonably 950 00:51:24,760 --> 00:51:28,799 Speaker 1: expect given current valuations. That's setting itself up for a 951 00:51:28,840 --> 00:51:32,200 Speaker 1: disaster down the road. That to me, maybe I'm wonky, 952 00:51:32,280 --> 00:51:35,600 Speaker 1: but that's fascinating stuff. I think it's fascinating too. I 953 00:51:35,600 --> 00:51:38,279 Speaker 1: think it's fascinating to it. Just there are these words that, 954 00:51:38,320 --> 00:51:42,920 Speaker 1: for whatever reason, just lack intrinsic appeal. Pension is one 955 00:51:42,960 --> 00:51:47,040 Speaker 1: of those words. Mortgage is actually another word Fannie and Freddie. 956 00:51:47,680 --> 00:51:51,319 Speaker 1: It's like that it's subprime. Sub Prime was kind of fascinating. 957 00:51:51,840 --> 00:51:54,520 Speaker 1: It got to be fascinating after it caused the financial crisis. 958 00:51:54,560 --> 00:51:57,319 Speaker 1: But I think part of the reason that it didn't 959 00:51:57,320 --> 00:52:00,600 Speaker 1: that that that nobody saw it coming was because mortgages, 960 00:52:00,680 --> 00:52:02,759 Speaker 1: some prime mortgages. I mean, I don't know. It's like 961 00:52:02,800 --> 00:52:05,920 Speaker 1: eat your spinach. It's just such an unappealing concept to 962 00:52:05,960 --> 00:52:10,719 Speaker 1: think about. Agree to disagree. Um, do you, by the way, 963 00:52:10,760 --> 00:52:13,000 Speaker 1: do you find it? I just was talking to a 964 00:52:13,000 --> 00:52:15,440 Speaker 1: couple of other people about this recently. Do you find 965 00:52:15,480 --> 00:52:18,040 Speaker 1: it a slog or do you enjoy doing the circuit 966 00:52:18,480 --> 00:52:22,480 Speaker 1: if it's a reasonable period of time, So I'd say 967 00:52:22,520 --> 00:52:25,200 Speaker 1: I'd say it's a mixture. I'm always happy when anybody 968 00:52:25,239 --> 00:52:27,600 Speaker 1: wants to talk to me about something I've written, because 969 00:52:27,760 --> 00:52:31,680 Speaker 1: it means it resonated somewhere, So I'm grateful for any 970 00:52:31,719 --> 00:52:35,480 Speaker 1: attention it it gets. I'd say I have less of 971 00:52:35,560 --> 00:52:38,879 Speaker 1: a worry of a slog than I always have when 972 00:52:38,880 --> 00:52:43,040 Speaker 1: I've published something. My predominant emotion isn't excitement and look 973 00:52:43,040 --> 00:52:45,799 Speaker 1: at me. It's fear that I've gotten something wrong, that 974 00:52:45,840 --> 00:52:49,120 Speaker 1: I've made a mistake somewhere. It's um and it's and 975 00:52:49,239 --> 00:52:52,480 Speaker 1: it's sort of agony in within me because I always 976 00:52:52,480 --> 00:52:54,000 Speaker 1: see the ways in which it could have been better. 977 00:52:54,280 --> 00:52:56,719 Speaker 1: After it's too late to do anything. It's never done though, 978 00:52:56,800 --> 00:52:59,839 Speaker 1: Isn't that true for anything you write that you could 979 00:53:00,000 --> 00:53:03,480 Speaker 1: always there's always another draft waiting time you can. Books 980 00:53:03,480 --> 00:53:06,640 Speaker 1: are pretty set in stone at a certain point. Um. 981 00:53:06,719 --> 00:53:10,359 Speaker 1: And so that's so I have trouble being as enthusiastic 982 00:53:10,400 --> 00:53:13,240 Speaker 1: and excited as I as I should be, because my 983 00:53:13,239 --> 00:53:16,000 Speaker 1: my initial reaction isn't look at me, it's let me dock. 984 00:53:16,960 --> 00:53:19,120 Speaker 1: So you're you're expecting to be told you were wrong. 985 00:53:19,360 --> 00:53:21,239 Speaker 1: You know what I already have then, I mean, I 986 00:53:21,680 --> 00:53:23,839 Speaker 1: did this op ed for the New York Times, um, 987 00:53:23,880 --> 00:53:26,319 Speaker 1: and they put a pretty incendiary headline that was that 988 00:53:26,400 --> 00:53:30,600 Speaker 1: headline had nothing, it did not um and I got 989 00:53:30,640 --> 00:53:33,319 Speaker 1: the next financial crisis looks underground. I got a lot 990 00:53:33,360 --> 00:53:36,600 Speaker 1: of flaming on Twitter for that. So for the record, 991 00:53:36,719 --> 00:53:41,200 Speaker 1: can I inform listeners that writers don't get to write 992 00:53:41,239 --> 00:53:44,200 Speaker 1: their own headlines. It's the editors who write that. The 993 00:53:44,239 --> 00:53:47,319 Speaker 1: Times actually has a policy of not allowing people to 994 00:53:47,360 --> 00:53:51,240 Speaker 1: look everywhere. Yeah it's and it's and it's fine. Actually 995 00:53:51,280 --> 00:53:53,719 Speaker 1: there the headline they put on it got attention. And 996 00:53:53,760 --> 00:53:57,520 Speaker 1: in today's world where everything is drowned out by by 997 00:53:57,640 --> 00:54:00,759 Speaker 1: news of Trump. You know what, I I'm not going 998 00:54:00,760 --> 00:54:03,919 Speaker 1: to complain, all right, that that's fair enough. So so 999 00:54:04,040 --> 00:54:07,399 Speaker 1: let's some let's jump into our speed round. These are 1000 00:54:07,480 --> 00:54:11,040 Speaker 1: the ten questions I ask everybody, and we'll we'll plow 1001 00:54:11,120 --> 00:54:14,920 Speaker 1: through them. Tell us the most important thing people don't 1002 00:54:14,960 --> 00:54:20,520 Speaker 1: know about your background? M hmm. Let's see. I guess 1003 00:54:20,520 --> 00:54:23,960 Speaker 1: it's probably that I grew up in a mining town 1004 00:54:24,200 --> 00:54:28,000 Speaker 1: called Hibbing, which is in northern Minnesota. And if you 1005 00:54:28,040 --> 00:54:30,560 Speaker 1: know it, it's probably because you're a Bob Dylan fan, 1006 00:54:30,719 --> 00:54:34,840 Speaker 1: because that's where Bob's Emmerman also grew up. And Hibbing 1007 00:54:34,920 --> 00:54:38,760 Speaker 1: has the two distinctions of being often the coldest spot 1008 00:54:38,760 --> 00:54:42,120 Speaker 1: in the United States and of having the world's largest 1009 00:54:42,120 --> 00:54:47,040 Speaker 1: pit open eye, world's largest open pit iron ore mine interesting. 1010 00:54:47,400 --> 00:54:49,560 Speaker 1: Tell us about some of your early mentors who helped 1011 00:54:49,600 --> 00:54:53,200 Speaker 1: you along with your career. Let's see. So I had 1012 00:54:53,200 --> 00:54:55,959 Speaker 1: two great teachers in high school who were brothers, Dan 1013 00:54:56,040 --> 00:55:00,760 Speaker 1: and Matt bergen Um. Dan was English teacher and Matt 1014 00:55:01,000 --> 00:55:04,800 Speaker 1: was a math teacher. And Dan taught me to write, 1015 00:55:04,960 --> 00:55:07,600 Speaker 1: and Matt made me believe that I was far better 1016 00:55:07,640 --> 00:55:10,160 Speaker 1: at math than I actually am, enough so that I 1017 00:55:10,200 --> 00:55:13,279 Speaker 1: managed to get through a college major UM in it, 1018 00:55:13,840 --> 00:55:16,600 Speaker 1: and then I guess that Fortune. I think the real, 1019 00:55:17,160 --> 00:55:19,840 Speaker 1: the real mentor I had was was really Jonah Sarah 1020 00:55:19,880 --> 00:55:23,600 Speaker 1: who UM, who really helped me learn how to tell 1021 00:55:23,640 --> 00:55:26,280 Speaker 1: a story? UM? When I got to Fortune, the knock 1022 00:55:26,360 --> 00:55:30,040 Speaker 1: on me was, she's debatably smart, but totally unable to write. 1023 00:55:30,440 --> 00:55:34,319 Speaker 1: And I like to blame my perfect tire. Maybe she's 1024 00:55:34,360 --> 00:55:39,040 Speaker 1: smart but hard. I was a fact checker from my 1025 00:55:39,080 --> 00:55:41,440 Speaker 1: initial years. I was really good at checking facts. It 1026 00:55:41,520 --> 00:55:44,319 Speaker 1: was fine. But if if I've learned to write at all, 1027 00:55:44,360 --> 00:55:47,279 Speaker 1: it's probably because of Joe Well. I have to tell 1028 00:55:47,320 --> 00:55:49,480 Speaker 1: you you clearly have learned to write, and and I 1029 00:55:49,520 --> 00:55:55,000 Speaker 1: really enjoyed Uh America. UM. Who influenced your approach to 1030 00:55:55,280 --> 00:56:01,719 Speaker 1: investigative journalism? UM? I would say probably. I learned the 1031 00:56:01,760 --> 00:56:05,080 Speaker 1: most from Peter el Kind, who was the my co 1032 00:56:05,160 --> 00:56:08,520 Speaker 1: author and smartest guys in the room. When I began 1033 00:56:08,560 --> 00:56:10,040 Speaker 1: to work with Peter, I thought I was going to 1034 00:56:10,160 --> 00:56:13,280 Speaker 1: learn the shortcuts for doing this, and I quickly learned 1035 00:56:13,360 --> 00:56:16,480 Speaker 1: there are no shortcuts. You talked to everybody, You call everybody, 1036 00:56:16,520 --> 00:56:18,359 Speaker 1: You call them back. If they don't call you, you back. 1037 00:56:18,760 --> 00:56:21,080 Speaker 1: You read every document, you go through the footnotes, of 1038 00:56:21,120 --> 00:56:23,640 Speaker 1: every document, but you leave no stone unturned, and you 1039 00:56:23,719 --> 00:56:26,719 Speaker 1: go down a lot of rabbit holes because you never 1040 00:56:26,800 --> 00:56:28,520 Speaker 1: know if at the bottom of the rabbit hole you're 1041 00:56:28,520 --> 00:56:30,799 Speaker 1: going to find something that becomes the threat of your book. 1042 00:56:30,840 --> 00:56:34,360 Speaker 1: Are just sort of a vast black hole, and you 1043 00:56:34,400 --> 00:56:36,480 Speaker 1: find a lot of the vast black holes. But but 1044 00:56:36,520 --> 00:56:38,839 Speaker 1: I think Peter Peter made me realize that it's just 1045 00:56:38,960 --> 00:56:43,480 Speaker 1: work in persistence. Tell us about some of your favorite books, 1046 00:56:43,520 --> 00:56:47,840 Speaker 1: be they fiction, non fiction, fraud related, or something else. 1047 00:56:47,880 --> 00:56:50,799 Speaker 1: So my list is always changing, but i'd say right now, 1048 00:56:50,840 --> 00:56:53,640 Speaker 1: the books I've been thinking about a lot our Team 1049 00:56:53,719 --> 00:56:56,680 Speaker 1: of Rivals by Doris Karns Goodwin. And the reason I 1050 00:56:56,719 --> 00:56:58,359 Speaker 1: think about that book a lot is that it took 1051 00:56:58,400 --> 00:57:01,280 Speaker 1: a well known period and look through a different lens, 1052 00:57:01,719 --> 00:57:05,279 Speaker 1: you know, through the lens of these rivals, who nonetheless 1053 00:57:05,360 --> 00:57:09,880 Speaker 1: became an incredibly effective cabinet. And I love that Lincoln Lincoln, 1054 00:57:10,080 --> 00:57:12,319 Speaker 1: and I love that that that is a sort of 1055 00:57:12,400 --> 00:57:14,879 Speaker 1: lesson for writing about how you can take something that's 1056 00:57:14,920 --> 00:57:17,720 Speaker 1: well known and see it through a different slant and 1057 00:57:17,960 --> 00:57:20,000 Speaker 1: make people learn and understand it in a in a 1058 00:57:20,000 --> 00:57:22,800 Speaker 1: whole different way. It doesn't have to be this fresh 1059 00:57:22,840 --> 00:57:24,800 Speaker 1: thing that nobody has ever heard of before, you know, 1060 00:57:24,880 --> 00:57:28,000 Speaker 1: Abraham Lincoln's presidency. But but but I love that. I 1061 00:57:28,000 --> 00:57:30,640 Speaker 1: think that's very instructive. And then my favorite fiction book 1062 00:57:30,640 --> 00:57:34,640 Speaker 1: of late was a book called Homegoing U Homegoing, which 1063 00:57:34,720 --> 00:57:39,960 Speaker 1: is about um, two sisters born in Africa, one stays there, 1064 00:57:40,200 --> 00:57:42,800 Speaker 1: one is taken away as a slave in the United States, 1065 00:57:42,800 --> 00:57:46,320 Speaker 1: and about It's about the different trajectories of these two um, 1066 00:57:46,600 --> 00:57:49,400 Speaker 1: these two families. And I'd say the reason I liked 1067 00:57:49,400 --> 00:57:51,720 Speaker 1: it so much is that it's a book that kind 1068 00:57:51,760 --> 00:57:55,880 Speaker 1: of excavates your own still still deeply held prejudices, and 1069 00:57:55,920 --> 00:57:58,360 Speaker 1: we all have some of them, and it's a book 1070 00:57:58,360 --> 00:58:01,200 Speaker 1: that really changes minds and souls, I think on a 1071 00:58:01,280 --> 00:58:03,480 Speaker 1: very deep level. That's two. You have a third one. 1072 00:58:03,800 --> 00:58:06,440 Speaker 1: What's the last thing? You God, I've been rereading because 1073 00:58:06,440 --> 00:58:08,680 Speaker 1: my kids are reading it. And I will always love 1074 00:58:08,880 --> 00:58:12,240 Speaker 1: Lord of the Rings just for the sheer scope, the 1075 00:58:12,320 --> 00:58:15,880 Speaker 1: sheer scope of Tolkien's imagination. And even though I know, 1076 00:58:16,040 --> 00:58:18,320 Speaker 1: and this whole conversation has been about how good and 1077 00:58:18,360 --> 00:58:21,240 Speaker 1: bad aren't always so simple, man, is there something so 1078 00:58:21,280 --> 00:58:23,560 Speaker 1: satisfying about a world where good as good and bad 1079 00:58:23,600 --> 00:58:26,120 Speaker 1: as bad? That's right. Starting with the hobbit and then 1080 00:58:26,160 --> 00:58:29,720 Speaker 1: straight straight Absolutely. As a kid, I used to reread 1081 00:58:29,760 --> 00:58:31,680 Speaker 1: those over the summer, and then at a certain age 1082 00:58:31,720 --> 00:58:33,600 Speaker 1: you kind of say, all right, I have to stop 1083 00:58:33,600 --> 00:58:35,640 Speaker 1: doing this, But they were fine. I just started again. 1084 00:58:35,720 --> 00:58:38,200 Speaker 1: It's never too late. How older you kids, I've got 1085 00:58:38,200 --> 00:58:39,800 Speaker 1: a nine year old and a six year old. So 1086 00:58:39,880 --> 00:58:44,800 Speaker 1: let me let me jump ahead and ask a different question. Um, 1087 00:58:44,840 --> 00:58:48,439 Speaker 1: what do you do for fun out of the office? Oh? Fun? 1088 00:58:49,320 --> 00:58:52,040 Speaker 1: What do you do to stay mentally or physically fit? So, 1089 00:58:52,040 --> 00:58:54,640 Speaker 1: so I read a lot. I'm a big yoga person, 1090 00:58:54,680 --> 00:58:56,480 Speaker 1: and I've done a kind of yoga called the Shtunga, 1091 00:58:56,640 --> 00:59:00,720 Speaker 1: which is which is a self practice for one years now, 1092 00:59:01,160 --> 00:59:04,240 Speaker 1: so I usually pretty ripped. So I usually because I 1093 00:59:04,280 --> 00:59:07,640 Speaker 1: work at home, I usually just do my stronger practice 1094 00:59:07,640 --> 00:59:11,040 Speaker 1: at home. And you've been doing that for twenty years. 1095 00:59:11,080 --> 00:59:13,480 Speaker 1: So what has changed since you became a writer? What 1096 00:59:13,520 --> 00:59:16,800 Speaker 1: do you think is the biggest difference these days? Oh? 1097 00:59:16,920 --> 00:59:20,880 Speaker 1: So much. I mean that the whole firmament has changed. 1098 00:59:21,000 --> 00:59:22,520 Speaker 1: You know. It used to be that if you were 1099 00:59:22,560 --> 00:59:24,840 Speaker 1: going to be a writer, well then you worked at 1100 00:59:24,840 --> 00:59:27,720 Speaker 1: a magazine and you were a journalist. And now some 1101 00:59:27,800 --> 00:59:30,240 Speaker 1: of the best, most interesting writing comes from people who 1102 00:59:30,240 --> 00:59:34,520 Speaker 1: aren't journalists, who are publishing on blogs and and elsewhere. 1103 00:59:34,560 --> 00:59:37,680 Speaker 1: So in some ways it's incredibly freeing and that you 1104 00:59:37,720 --> 00:59:39,919 Speaker 1: don't have to be a full time journalist to get 1105 00:59:39,960 --> 00:59:44,000 Speaker 1: hurt and to to to be to be a journalist. Um, 1106 00:59:44,040 --> 00:59:46,880 Speaker 1: but it's of course the other changes in the business 1107 00:59:46,880 --> 00:59:50,560 Speaker 1: have just undermined the whole financial foundation of journalism, and 1108 00:59:50,640 --> 00:59:52,959 Speaker 1: so it's it's really different. If you could have told 1109 00:59:53,000 --> 00:59:55,600 Speaker 1: me when I started working at Time Inc. Back in 1110 00:59:56,960 --> 00:59:59,000 Speaker 1: Time Inc. Was in the time built in life building 1111 00:59:59,120 --> 01:00:02,600 Speaker 1: and Rockefeller say enter that Time would be long gone 1112 01:00:02,680 --> 01:00:05,040 Speaker 1: from there and the magazines would be being sold piecemeal. 1113 01:00:05,240 --> 01:00:08,080 Speaker 1: I would never have believed that what are these blogs 1114 01:00:08,080 --> 01:00:11,800 Speaker 1: you refer to? What I mean yours? You know, people 1115 01:00:11,880 --> 01:00:15,440 Speaker 1: people people, people are really smart, great things to say, 1116 01:00:15,480 --> 01:00:18,440 Speaker 1: and are really good writers. Don't have to be writing 1117 01:00:18,440 --> 01:00:22,720 Speaker 1: for Fortune magazine. Now, that's reason. And I wasn't fishing 1118 01:00:22,720 --> 01:00:26,120 Speaker 1: for anything there. I just that's a good thing about 1119 01:00:26,400 --> 01:00:28,959 Speaker 1: tell us what you're really excited about in the world 1120 01:00:29,000 --> 01:00:34,360 Speaker 1: of journalism or books were writing? Well, I guess when 1121 01:00:34,440 --> 01:00:37,960 Speaker 1: everything is getting ripped apart, comes opportunity, right, And so 1122 01:00:38,600 --> 01:00:41,600 Speaker 1: the world of journalism is getting ripped apart, right, right now, 1123 01:00:41,640 --> 01:00:44,880 Speaker 1: and it's it's not getting any better. But out of that, 1124 01:00:45,040 --> 01:00:48,520 Speaker 1: I think comes new opportunities for storytelling, whether it's these 1125 01:00:48,560 --> 01:00:51,919 Speaker 1: little books that Columbia is doing, like Saudi America, whether 1126 01:00:51,960 --> 01:00:56,000 Speaker 1: it's podcasts like like you're doing, but new opportunities to 1127 01:00:56,320 --> 01:00:59,080 Speaker 1: create content in ways that are relevant to people. And 1128 01:00:59,120 --> 01:01:01,400 Speaker 1: so it's still story telling at the end of the day, 1129 01:01:01,440 --> 01:01:05,480 Speaker 1: and communicating. And so I guess I'm trying to believe 1130 01:01:05,640 --> 01:01:10,240 Speaker 1: that where there's disruption, there's also opportunity. That's that's pretty fair. 1131 01:01:10,640 --> 01:01:12,920 Speaker 1: Tell us about a time you failed and what you 1132 01:01:13,040 --> 01:01:16,800 Speaker 1: learned from the experience. Oh so, let's see, I could 1133 01:01:16,800 --> 01:01:19,800 Speaker 1: do two of those. I really struggled through my math 1134 01:01:19,840 --> 01:01:22,440 Speaker 1: major in college. Math was easy, easy, easy from me 1135 01:01:22,560 --> 01:01:26,120 Speaker 1: until I hit the really upper level theoretical stuff where 1136 01:01:26,160 --> 01:01:28,000 Speaker 1: all of a sudden, it was like a black wall 1137 01:01:28,080 --> 01:01:30,920 Speaker 1: came down in front of my eyes. I would I 1138 01:01:30,960 --> 01:01:34,600 Speaker 1: would sit doing We would have these math exams that 1139 01:01:34,640 --> 01:01:37,440 Speaker 1: were forty take home exams, and they would be proofs 1140 01:01:37,480 --> 01:01:39,200 Speaker 1: and I would look at them and I wouldn't even 1141 01:01:39,200 --> 01:01:42,000 Speaker 1: be able to start, and I would hear people around 1142 01:01:42,000 --> 01:01:45,640 Speaker 1: me scratching away. They just had the insight, And I 1143 01:01:45,960 --> 01:01:48,959 Speaker 1: would say persevering through my math major was a really good, 1144 01:01:49,320 --> 01:01:52,520 Speaker 1: really good lesson um even though I mean I fought 1145 01:01:52,560 --> 01:01:56,400 Speaker 1: for a sea in one class. That's what I've never 1146 01:01:56,440 --> 01:01:58,720 Speaker 1: gotten to see in my life, learning learning that you're 1147 01:01:58,720 --> 01:02:01,880 Speaker 1: not very good at something, um um um. So that was. 1148 01:02:02,120 --> 01:02:04,400 Speaker 1: But I learned more from sticking through that than I 1149 01:02:04,440 --> 01:02:06,600 Speaker 1: did from all the things I was I was good at. 1150 01:02:06,920 --> 01:02:09,040 Speaker 1: And then I'd say I probably failed in my first job. 1151 01:02:09,080 --> 01:02:11,640 Speaker 1: I was a terrible analyst at Goldman. You were there 1152 01:02:11,680 --> 01:02:14,840 Speaker 1: for three years. For three years, I ended up, Um, 1153 01:02:14,880 --> 01:02:17,920 Speaker 1: I ended up sticking it out. But I think I learned. 1154 01:02:18,080 --> 01:02:21,520 Speaker 1: I learned a lot from that about importance to detail, detail, 1155 01:02:21,920 --> 01:02:25,320 Speaker 1: about committing to where you are instead of if you're 1156 01:02:25,320 --> 01:02:27,720 Speaker 1: going to be there at all, instead of having a 1157 01:02:27,720 --> 01:02:31,680 Speaker 1: bad don't half asset right um. If you're there, then 1158 01:02:31,720 --> 01:02:36,320 Speaker 1: just do it and and and and behave um Instead, 1159 01:02:36,400 --> 01:02:39,280 Speaker 1: Why were you were you misbehaving at Goldman in terms 1160 01:02:39,320 --> 01:02:41,400 Speaker 1: of I mean, in terms of the work I think 1161 01:02:41,440 --> 01:02:43,280 Speaker 1: I acted. I think I acted like I didn't want 1162 01:02:43,320 --> 01:02:45,800 Speaker 1: to be there, I think, And it took them three 1163 01:02:45,840 --> 01:02:49,840 Speaker 1: years to pick that up. I thought they're the smartest guy. 1164 01:02:49,880 --> 01:02:53,200 Speaker 1: I pulled it together after after my first year. But um, 1165 01:02:53,440 --> 01:02:55,600 Speaker 1: that was that was a lesson to me because failing 1166 01:02:55,600 --> 01:02:57,840 Speaker 1: in your first job is a hard is a hard thing. 1167 01:02:57,880 --> 01:03:00,240 Speaker 1: When you get very negative feedback from people, yeah, it 1168 01:03:00,240 --> 01:03:05,120 Speaker 1: crushes your confidence. So I would imagine, Um, so if 1169 01:03:05,400 --> 01:03:07,720 Speaker 1: a millennial came up to you or recent college grad 1170 01:03:07,760 --> 01:03:11,240 Speaker 1: said they're thinking about becoming a film in the blank writer, 1171 01:03:11,720 --> 01:03:16,040 Speaker 1: book author, journalist, what sort of advice would you give them? 1172 01:03:16,080 --> 01:03:18,760 Speaker 1: I would tell them to start writing and to write 1173 01:03:18,760 --> 01:03:20,840 Speaker 1: a lot, because the only way you get to be 1174 01:03:20,880 --> 01:03:23,440 Speaker 1: a better writer is by writing a lot. And you 1175 01:03:23,480 --> 01:03:25,600 Speaker 1: can get to be a better writer, you have to 1176 01:03:25,600 --> 01:03:28,160 Speaker 1: have some innate skill at it, I guess, but you 1177 01:03:28,200 --> 01:03:30,960 Speaker 1: can learn, and you will learn. It's a craft. And 1178 01:03:31,000 --> 01:03:33,320 Speaker 1: that's why people call writing a craft, because a craft 1179 01:03:33,360 --> 01:03:35,000 Speaker 1: is something that you can get better at. You can 1180 01:03:35,080 --> 01:03:38,120 Speaker 1: get better, and so I think that's the most important one. 1181 01:03:38,600 --> 01:03:42,120 Speaker 1: But I would say also that, especially given how uncertain 1182 01:03:42,200 --> 01:03:46,280 Speaker 1: financially this life is right now, um, that you have 1183 01:03:46,360 --> 01:03:50,520 Speaker 1: to really really be deeply curious and not be able 1184 01:03:50,560 --> 01:03:54,840 Speaker 1: to rest unless you've explored your curiosity, because that's the 1185 01:03:54,920 --> 01:03:58,000 Speaker 1: thing that makes it makes it worth doing right to me, 1186 01:03:58,760 --> 01:04:00,640 Speaker 1: wonky as it may be, but getting to spend a 1187 01:04:00,720 --> 01:04:03,840 Speaker 1: year thinking about Aubrey McClendon and fracking. I was deeply 1188 01:04:03,920 --> 01:04:05,800 Speaker 1: curious about this, and I would not have been able 1189 01:04:05,840 --> 01:04:08,960 Speaker 1: to rest if I hadn't eventually done something about that. 1190 01:04:09,320 --> 01:04:11,760 Speaker 1: And that's what makes it all worthwhile to me. Sometimes 1191 01:04:11,760 --> 01:04:13,680 Speaker 1: you have an introducer, and I think if you don't 1192 01:04:13,720 --> 01:04:16,320 Speaker 1: have that, if you're more practically minded in some ways, 1193 01:04:16,400 --> 01:04:19,640 Speaker 1: that maybe this isn't especially right now, the right the 1194 01:04:19,720 --> 01:04:23,360 Speaker 1: right place. So you're a little obsessive about the topics 1195 01:04:23,400 --> 01:04:27,040 Speaker 1: you cover, do you do you impart that on on 1196 01:04:27,080 --> 01:04:31,120 Speaker 1: the college grads and say you have to be all 1197 01:04:31,160 --> 01:04:34,840 Speaker 1: in or what? Because that that's similar to the failure 1198 01:04:34,880 --> 01:04:37,040 Speaker 1: answer as well. I say you have to be all 1199 01:04:37,080 --> 01:04:40,280 Speaker 1: in because otherwise you won't make that additional phone call. 1200 01:04:40,480 --> 01:04:42,600 Speaker 1: You won't. You'll do what you have to do or 1201 01:04:42,600 --> 01:04:44,439 Speaker 1: what you think you have to do, but you won't 1202 01:04:44,480 --> 01:04:47,960 Speaker 1: pursue that loose, dangling end that may may end up 1203 01:04:47,960 --> 01:04:51,320 Speaker 1: becoming the most important piece of information that that that 1204 01:04:51,360 --> 01:04:53,840 Speaker 1: you got. And so you have to be just really 1205 01:04:53,880 --> 01:04:59,280 Speaker 1: really deeply passionate, passionately curious, quite fascinating. And our final question, 1206 01:04:59,720 --> 01:05:04,000 Speaker 1: would you know today about writing and investigative journalism and 1207 01:05:04,600 --> 01:05:08,560 Speaker 1: book authoring that you wish you knew back in when 1208 01:05:08,560 --> 01:05:11,840 Speaker 1: you first started twenty plus years ago. I think what 1209 01:05:11,920 --> 01:05:13,720 Speaker 1: I wish I had known about writing is that being 1210 01:05:13,760 --> 01:05:16,600 Speaker 1: a good student isn't always helpful. And what I mean 1211 01:05:16,680 --> 01:05:18,400 Speaker 1: by that is that when you're a good student, you 1212 01:05:18,440 --> 01:05:21,120 Speaker 1: think you have to show everybody everything that you've learned, 1213 01:05:21,320 --> 01:05:23,960 Speaker 1: because God forbid, the teacher thinks you didn't you miss 1214 01:05:24,040 --> 01:05:27,000 Speaker 1: this little nuance, right, So you're gonna throw everything at 1215 01:05:27,040 --> 01:05:29,720 Speaker 1: the reader in order to show them that you've mastered this. 1216 01:05:30,400 --> 01:05:32,920 Speaker 1: And I think it's actually sometimes hard for good students 1217 01:05:32,960 --> 01:05:34,600 Speaker 1: to be good writers because you need to let go 1218 01:05:34,600 --> 01:05:36,760 Speaker 1: of that. You need to learn to tell a story, 1219 01:05:37,040 --> 01:05:39,640 Speaker 1: and you need to step back from all of your facts. 1220 01:05:39,680 --> 01:05:41,720 Speaker 1: Somebody said to me once that facts are like lights 1221 01:05:41,720 --> 01:05:44,680 Speaker 1: on a Christmas tree. You actually can have too many, um, 1222 01:05:44,720 --> 01:05:46,800 Speaker 1: and I thought that was a great, a great line. 1223 01:05:47,080 --> 01:05:49,920 Speaker 1: And you need to tell a story that communicates with people, 1224 01:05:50,240 --> 01:05:52,560 Speaker 1: not try to impress people by how much with how 1225 01:05:52,640 --> 01:05:56,760 Speaker 1: much you know. Quite interesting. We have been speaking with 1226 01:05:56,800 --> 01:06:01,280 Speaker 1: Bethany McClaine. She is the author of Saudi America, as 1227 01:06:01,320 --> 01:06:03,880 Speaker 1: well as Smartest Guys in the Room and numerous other books. 1228 01:06:04,240 --> 01:06:07,000 Speaker 1: If you enjoyed this conversation, we'll be showing look up 1229 01:06:07,040 --> 01:06:10,160 Speaker 1: an inch or down an Inch on Apple iTunes, and 1230 01:06:10,200 --> 01:06:13,520 Speaker 1: you could see any of the other two hundred plus 1231 01:06:13,840 --> 01:06:19,800 Speaker 1: interviews we've recorded. You can find that on Apple iTunes, Stitcher, overcast, 1232 01:06:19,880 --> 01:06:24,000 Speaker 1: Bloomberg dot com, wherever final podcasts are sold. We love 1233 01:06:24,040 --> 01:06:28,320 Speaker 1: your comments, feedback and suggestions right to us at m 1234 01:06:28,320 --> 01:06:31,880 Speaker 1: IB podcast at Bloomberg dot net. I would be remiss 1235 01:06:31,920 --> 01:06:33,800 Speaker 1: if I did not thank the crack staff who helps 1236 01:06:33,800 --> 01:06:38,160 Speaker 1: put together these conversations each week. Attica val Bron is 1237 01:06:38,160 --> 01:06:42,600 Speaker 1: our project manager, Medina Parwana is our audio engineer. Slash 1238 01:06:42,960 --> 01:06:47,520 Speaker 1: producer Taylor Riggs is our booker producer. Michael bat Nick 1239 01:06:48,080 --> 01:06:51,480 Speaker 1: is our head of research. I'm Barry Ritolts. You've been 1240 01:06:51,520 --> 01:07:00,240 Speaker 1: listening to Masters and Business on Bloomberg Radio p