1 00:00:15,396 --> 00:00:32,476 Speaker 1: Pushkin Pushkin from Pushkin Industries. This is Deep Background, the 2 00:00:32,516 --> 00:00:35,716 Speaker 1: show where we explore the stories behind the stories in 3 00:00:35,756 --> 00:00:40,596 Speaker 1: the news. I'm Noah Feldman. As regular listeners know, on 4 00:00:40,636 --> 00:00:43,756 Speaker 1: this season of Deep Background, we've been focusing on power 5 00:00:43,956 --> 00:00:47,676 Speaker 1: in its many different forms. We've talked a fair amount 6 00:00:47,796 --> 00:00:52,116 Speaker 1: about power and global politics. We've talked about power and publishing. 7 00:00:52,676 --> 00:00:56,196 Speaker 1: But until now we haven't had a direct conversation about 8 00:00:56,276 --> 00:00:58,436 Speaker 1: one of the most important seats of power in the 9 00:00:58,516 --> 00:01:03,436 Speaker 1: United States and indeed in the world. Wall Street Today's 10 00:01:03,476 --> 00:01:06,836 Speaker 1: guest is here to help us fill that gap. Zachary 11 00:01:06,916 --> 00:01:10,476 Speaker 1: Carrabelle is a historian and author who spent years working 12 00:01:10,556 --> 00:01:13,196 Speaker 1: on Wall Street, both as head of Global Strategies That 13 00:01:13,356 --> 00:01:16,916 Speaker 1: Investment and as president or Fred Alger and Company. He's 14 00:01:16,916 --> 00:01:20,836 Speaker 1: the author of a new book called Inside Money, Brown, Brothers, 15 00:01:20,836 --> 00:01:24,556 Speaker 1: Harriman and the American Way of Power. The book charts 16 00:01:24,636 --> 00:01:28,476 Speaker 1: the long history of this particular investment bank, suggesting that 17 00:01:28,516 --> 00:01:32,196 Speaker 1: its ability to survive for two hundred years of boom 18 00:01:32,236 --> 00:01:36,156 Speaker 1: and bust cycles comes from its refusal to over extend 19 00:01:36,196 --> 00:01:39,876 Speaker 1: itself and to take on too much risk, a lesson 20 00:01:39,956 --> 00:01:43,356 Speaker 1: that he believes Wall Street today could learn a lot 21 00:01:43,676 --> 00:01:47,876 Speaker 1: from Zach is the perfect person to talk about power, 22 00:01:48,516 --> 00:01:52,916 Speaker 1: Wall Street history and where we're going in the future. Zach, 23 00:01:53,036 --> 00:01:58,516 Speaker 1: thank you so much for being here. Zach, you are 24 00:01:59,076 --> 00:02:03,076 Speaker 1: a polymathic and unusual person, and in a sense, you're 25 00:02:03,076 --> 00:02:06,916 Speaker 1: the ideal person to have written this new book because 26 00:02:06,956 --> 00:02:10,276 Speaker 1: you have a PhD in history, You've never stopped writing 27 00:02:10,316 --> 00:02:13,236 Speaker 1: books of history, no matter what other thing you've been doing. 28 00:02:13,316 --> 00:02:17,876 Speaker 1: You've also had several different careers in and around finance, 29 00:02:18,436 --> 00:02:21,036 Speaker 1: and that really means that if anyone were going to 30 00:02:21,076 --> 00:02:23,396 Speaker 1: write a book that was going to be, in effect 31 00:02:23,436 --> 00:02:27,356 Speaker 1: a history of power in American capitalism, it would be you. 32 00:02:28,516 --> 00:02:31,796 Speaker 1: I read your new book Inside Money, Brown, Brothers, Harriman 33 00:02:31,836 --> 00:02:35,316 Speaker 1: and the American Way of Power as really that a 34 00:02:35,316 --> 00:02:39,196 Speaker 1: book that tells the story of capitalism in America through 35 00:02:39,236 --> 00:02:43,356 Speaker 1: the eyes of one venerable firm. What gave you the 36 00:02:43,436 --> 00:02:46,836 Speaker 1: idea to do this? That's exactly what the book is, 37 00:02:47,236 --> 00:02:51,276 Speaker 1: and look narcissistically, it is the perfect culmination of a 38 00:02:51,276 --> 00:02:53,156 Speaker 1: lot of what I've done for the past twenty years, 39 00:02:53,196 --> 00:02:57,236 Speaker 1: and that it brings together the academic strain and the 40 00:02:57,396 --> 00:03:03,476 Speaker 1: financial investment career strain into one delightful four hundred plus 41 00:03:03,516 --> 00:03:05,876 Speaker 1: page package. It ended up, I think, in a weird way, 42 00:03:05,916 --> 00:03:08,436 Speaker 1: being a lot more interesting to me writing the book 43 00:03:09,156 --> 00:03:14,676 Speaker 1: and really thinking through the nature of American capitalism and 44 00:03:14,716 --> 00:03:19,156 Speaker 1: the nature of American power over two centuries, and the 45 00:03:19,236 --> 00:03:24,276 Speaker 1: sort of arbitrariness of one definition of capitalism that has 46 00:03:24,316 --> 00:03:28,796 Speaker 1: emerged in the past thirty years versus multiple different capitalisms 47 00:03:28,796 --> 00:03:32,356 Speaker 1: that could just as well have predominated and at earlier 48 00:03:32,356 --> 00:03:34,476 Speaker 1: points in the past did And that you know, we're 49 00:03:34,476 --> 00:03:38,316 Speaker 1: constantly in the position of remaking our culture and remaking 50 00:03:38,356 --> 00:03:42,116 Speaker 1: what we think of our systems. And then a weird way, 51 00:03:42,156 --> 00:03:45,556 Speaker 1: this book became pointed in that direction in a way 52 00:03:45,556 --> 00:03:47,716 Speaker 1: that I didn't actually expect when I sat down to 53 00:03:47,716 --> 00:03:50,156 Speaker 1: write the book. I was going to ask you that 54 00:03:50,196 --> 00:03:52,316 Speaker 1: which came first, the chicken or the egg question? Did 55 00:03:52,316 --> 00:03:55,316 Speaker 1: you pick your topic this bank and its history, and 56 00:03:55,356 --> 00:03:58,036 Speaker 1: then from there you realize that it was emblematic or 57 00:03:58,076 --> 00:04:01,676 Speaker 1: were you looking for some concrete story to tell that 58 00:04:01,716 --> 00:04:05,276 Speaker 1: would enable you to paint the big canvas. Yeah, and 59 00:04:05,356 --> 00:04:07,356 Speaker 1: it was definitely the latter. I did not set out 60 00:04:07,396 --> 00:04:09,476 Speaker 1: to write a book about Brown Brothers Harriman. I did 61 00:04:09,556 --> 00:04:11,196 Speaker 1: sit out to write a book about the crucial role 62 00:04:11,236 --> 00:04:14,916 Speaker 1: of money making American power in the nineteenth century, and 63 00:04:14,956 --> 00:04:16,836 Speaker 1: then how the men and they were all men, and 64 00:04:16,916 --> 00:04:18,916 Speaker 1: they were all white men, and they were mostly Protestant 65 00:04:18,916 --> 00:04:22,396 Speaker 1: white men. How that cohort made the global system of 66 00:04:22,436 --> 00:04:24,996 Speaker 1: the twentieth century, and where that leaves us today. So 67 00:04:25,036 --> 00:04:27,116 Speaker 1: that's kind of the arc I wanted to look at. 68 00:04:27,596 --> 00:04:30,316 Speaker 1: And they're the perfect aperture for that art. They are 69 00:04:31,036 --> 00:04:34,516 Speaker 1: maybe the only firm that could actually tell that story 70 00:04:34,596 --> 00:04:36,796 Speaker 1: from the get go to the present, because first of all, 71 00:04:36,836 --> 00:04:39,036 Speaker 1: they're the only one that has been around for two 72 00:04:39,036 --> 00:04:42,076 Speaker 1: plus centuries, which doesn't make them worth writing about. Right, 73 00:04:42,276 --> 00:04:45,436 Speaker 1: living long is not living necessarily interesting. I really thought 74 00:04:45,436 --> 00:04:46,996 Speaker 1: at one point, like, how am I going to make 75 00:04:47,596 --> 00:04:50,876 Speaker 1: a group of stayed bankers, particularly in the nineteenth century, 76 00:04:51,196 --> 00:04:53,276 Speaker 1: who wanted to be stayed, who didn't want to be 77 00:04:53,276 --> 00:04:55,396 Speaker 1: in the news, who spent a lot of their history 78 00:04:56,036 --> 00:04:58,116 Speaker 1: celebrating the fact that every day they woke up and 79 00:04:58,156 --> 00:05:00,836 Speaker 1: their name was not in the papers as a good day. 80 00:05:01,276 --> 00:05:03,756 Speaker 1: You know, how do you make that interesting? The arc 81 00:05:03,796 --> 00:05:06,276 Speaker 1: I thought was interesting. Turned out I think that they're 82 00:05:06,316 --> 00:05:09,036 Speaker 1: a lot more interesting than even I thought going into it. 83 00:05:09,236 --> 00:05:11,716 Speaker 1: I share with you the sense that there's an alchemy here. 84 00:05:11,756 --> 00:05:14,276 Speaker 1: You know the book doesn't. If you were not the 85 00:05:14,316 --> 00:05:16,596 Speaker 1: author of the book, I don't think I would have 86 00:05:16,636 --> 00:05:18,956 Speaker 1: picked it up, because I would have thought, this is 87 00:05:18,956 --> 00:05:20,916 Speaker 1: a great topic, But how the world could you tell 88 00:05:20,956 --> 00:05:23,956 Speaker 1: it in a way that is in fact engaging? But 89 00:05:23,996 --> 00:05:25,956 Speaker 1: because I've read your other books, I knew you would 90 00:05:25,956 --> 00:05:28,076 Speaker 1: be able to find a way to do that. What 91 00:05:28,116 --> 00:05:31,276 Speaker 1: was the trick? And for listeners who are thinking, why 92 00:05:31,316 --> 00:05:33,716 Speaker 1: in the world would I be interested in this, I'm 93 00:05:33,716 --> 00:05:35,836 Speaker 1: definitely interested in the history of capitalism in the nature 94 00:05:35,836 --> 00:05:37,196 Speaker 1: of power, But why would I want to hear it 95 00:05:37,236 --> 00:05:41,196 Speaker 1: told through these folks? What for you were the features 96 00:05:41,556 --> 00:05:44,316 Speaker 1: of those cautious state people who, as you show, we're 97 00:05:44,356 --> 00:05:47,316 Speaker 1: trying to be the ones always to avoid going under 98 00:05:48,596 --> 00:05:50,596 Speaker 1: What is it about them that you were able to 99 00:05:50,596 --> 00:05:53,476 Speaker 1: make interesting? So, first of all, it turns out Brown 100 00:05:53,516 --> 00:05:57,516 Speaker 1: Brothers was present at the creation of almost everything vital 101 00:05:57,996 --> 00:06:00,716 Speaker 1: in American certainly economic history and in many ways just 102 00:06:00,796 --> 00:06:04,396 Speaker 1: American history. They're just in the back row right, They're 103 00:06:04,836 --> 00:06:07,596 Speaker 1: they're like the zelle. They're in the second row, back left, 104 00:06:08,116 --> 00:06:09,796 Speaker 1: kind of looking like a bank, and they don't really 105 00:06:09,796 --> 00:06:11,916 Speaker 1: want to be the story and they don't want to 106 00:06:11,636 --> 00:06:14,036 Speaker 1: be the picture. But without them. There's no story and 107 00:06:14,036 --> 00:06:18,876 Speaker 1: there's no picture, and there is a lot of drama 108 00:06:19,076 --> 00:06:22,796 Speaker 1: in the creation of a nation, and the creation of 109 00:06:22,796 --> 00:06:25,196 Speaker 1: a nation like the United States, which kind of emerges 110 00:06:25,196 --> 00:06:29,476 Speaker 1: out of nowhere in the nineteenth century, graced with lots 111 00:06:29,476 --> 00:06:33,316 Speaker 1: of resources but very little invested capital, and you have 112 00:06:33,356 --> 00:06:35,636 Speaker 1: these this firm like Brown Brothers that essentially creates the 113 00:06:35,636 --> 00:06:40,436 Speaker 1: paper money system that I think is a huge differential, right, 114 00:06:40,436 --> 00:06:42,996 Speaker 1: It's partly what makes the United States the United States. 115 00:06:43,076 --> 00:06:46,236 Speaker 1: Is this incredibly chaotic, liquid world where if you had 116 00:06:46,236 --> 00:06:48,556 Speaker 1: a hope and a dream, it was way easier to 117 00:06:48,556 --> 00:06:50,836 Speaker 1: get money because it was paper. It wasn't people, it 118 00:06:50,916 --> 00:06:54,316 Speaker 1: wasn't gold, it wasn't land. And Brown Brothers is kind 119 00:06:54,356 --> 00:06:56,796 Speaker 1: of at the epicenter of this, you know, the the 120 00:06:57,236 --> 00:07:01,196 Speaker 1: alchemists who were really mindful of the destructive potential of 121 00:07:01,236 --> 00:07:05,276 Speaker 1: their alchemy and not animated by greed and not animated 122 00:07:05,276 --> 00:07:09,276 Speaker 1: by personal gain at the expense of public good. I 123 00:07:09,316 --> 00:07:12,996 Speaker 1: actually found that that section of the book completely gripping, 124 00:07:13,596 --> 00:07:16,116 Speaker 1: and I learned a huge amount from it. And I 125 00:07:16,156 --> 00:07:20,876 Speaker 1: wonder if you'd spend just a moment telling listeners just 126 00:07:20,916 --> 00:07:23,756 Speaker 1: the short version of this. I mean, I guess I 127 00:07:23,836 --> 00:07:27,236 Speaker 1: knew in a general sort of way that Fiat backed 128 00:07:27,316 --> 00:07:31,076 Speaker 1: currency greenbacks were really a product of the Civil War 129 00:07:31,596 --> 00:07:34,836 Speaker 1: in some general way. And I also knew from working 130 00:07:34,876 --> 00:07:38,796 Speaker 1: on my own interest in the history of the Constitution, 131 00:07:39,596 --> 00:07:44,036 Speaker 1: that in the early years of the Republic, money was 132 00:07:44,116 --> 00:07:47,876 Speaker 1: very scarce because there was still a sense that we 133 00:07:47,916 --> 00:07:50,516 Speaker 1: had to be dependent on gold and silver, and there 134 00:07:50,556 --> 00:07:53,316 Speaker 1: wasn't that much gold and silver in North America relative 135 00:07:53,356 --> 00:07:55,396 Speaker 1: to what there was in Europe, and so it was 136 00:07:55,436 --> 00:07:58,396 Speaker 1: always hard to get hold of money, and so as 137 00:07:58,396 --> 00:08:00,796 Speaker 1: a consequence, there was always a lot of need for 138 00:08:00,876 --> 00:08:05,276 Speaker 1: some other mechanisms of credit. What you show so beautifully 139 00:08:05,356 --> 00:08:08,676 Speaker 1: in the book is that there was an interim solution there, 140 00:08:09,276 --> 00:08:14,276 Speaker 1: and that that solution we've somewhat forgotten today was letters 141 00:08:14,316 --> 00:08:18,196 Speaker 1: of credit. Say a word about what that is and 142 00:08:18,356 --> 00:08:20,596 Speaker 1: why it matters, and then from there maybe we can 143 00:08:20,636 --> 00:08:24,236 Speaker 1: talk about the metaphoric relationship that that has to the 144 00:08:24,276 --> 00:08:27,276 Speaker 1: way the capital moves today in the world. So this 145 00:08:27,356 --> 00:08:30,556 Speaker 1: is one of these things that narratively I found challenging 146 00:08:30,636 --> 00:08:34,196 Speaker 1: the way, like a theoretical physicist can find it challenging 147 00:08:34,236 --> 00:08:37,596 Speaker 1: to write a popular story of that in a way 148 00:08:37,636 --> 00:08:40,316 Speaker 1: that doesn't put people to sleep. You know, the idea 149 00:08:40,356 --> 00:08:42,756 Speaker 1: of writing at great length about letters of credit was 150 00:08:43,196 --> 00:08:47,156 Speaker 1: kind of a nonstarter narratively. Nonetheless, just like the strong 151 00:08:47,196 --> 00:08:50,196 Speaker 1: and weak forces of an atom, trying to explain that 152 00:08:50,236 --> 00:08:55,156 Speaker 1: as a pretty crucial binding force for society seems essential 153 00:08:55,276 --> 00:09:00,956 Speaker 1: and completely overlooked in our story of what essentially makes 154 00:09:00,956 --> 00:09:04,076 Speaker 1: the United States as affluent and powerful as it was. 155 00:09:04,556 --> 00:09:07,316 Speaker 1: So for much of the nineteenth century, you either had 156 00:09:07,676 --> 00:09:10,276 Speaker 1: too little money or too much money, too much currency. 157 00:09:10,836 --> 00:09:12,916 Speaker 1: People needed money, so they're all these banks issuing a 158 00:09:12,956 --> 00:09:14,956 Speaker 1: lot of currency, and it was worth about as much 159 00:09:14,956 --> 00:09:16,716 Speaker 1: as it was until it wasn't. And that's why you 160 00:09:16,756 --> 00:09:19,036 Speaker 1: had every twenty years in the nineteenth century, you have 161 00:09:19,116 --> 00:09:22,476 Speaker 1: a financial crisis, a panic in eighteen nineteen, eighteen thirty seven, 162 00:09:22,516 --> 00:09:25,716 Speaker 1: eighteen fifty seven, eighteen seventy three, eighteen ninety three, nineteen 163 00:09:25,716 --> 00:09:29,516 Speaker 1: o seven, of course nineteen twenty nine. And behind the 164 00:09:29,556 --> 00:09:31,716 Speaker 1: scenes in the system you have a very few number 165 00:09:31,756 --> 00:09:34,476 Speaker 1: of players at which Brown Brows was essential, who make 166 00:09:34,556 --> 00:09:36,756 Speaker 1: sure that the trains run on time. Literally, I mean 167 00:09:36,796 --> 00:09:39,916 Speaker 1: they helped build the first passenger railroad, the BNO, and 168 00:09:39,996 --> 00:09:43,196 Speaker 1: they helped create the transatlantic shipping system so that people 169 00:09:43,276 --> 00:09:46,476 Speaker 1: knew that if they made stuff and grew stuff, that 170 00:09:46,636 --> 00:09:50,636 Speaker 1: someone would buy the stuff. And letters of credit were 171 00:09:50,676 --> 00:09:54,596 Speaker 1: the connective tissue, first between cotton growers in the South 172 00:09:54,636 --> 00:09:57,236 Speaker 1: and people bought the cotton in England and turned it 173 00:09:57,236 --> 00:10:00,276 Speaker 1: into cloth, and then for all sorts of trade, every 174 00:10:00,276 --> 00:10:04,276 Speaker 1: single trade, and without which there's no system, right, there's 175 00:10:04,316 --> 00:10:06,676 Speaker 1: no assurance that people will be able to buy and 176 00:10:06,676 --> 00:10:10,356 Speaker 1: sell stuff. And the amount of cher liquidity in the 177 00:10:10,476 --> 00:10:15,876 Speaker 1: United States did lead to these incredible periods of capital 178 00:10:15,916 --> 00:10:18,436 Speaker 1: creation and booms, and then it led to these incredibly 179 00:10:18,996 --> 00:10:22,436 Speaker 1: tumultuous bus much worse than anything we saw in two 180 00:10:22,436 --> 00:10:24,636 Speaker 1: thousand and eight two thousand and nine. I mean, these 181 00:10:24,676 --> 00:10:28,636 Speaker 1: panics eviscerated the financial system, and then you had these 182 00:10:28,636 --> 00:10:31,036 Speaker 1: bankers at the center of it, of whom Brown Brothers 183 00:10:31,076 --> 00:10:34,996 Speaker 1: were the most important, making sure that in spite of everything, 184 00:10:35,076 --> 00:10:37,276 Speaker 1: there would be trade, there would be goods. Some of 185 00:10:37,276 --> 00:10:40,836 Speaker 1: it was hugely morally problematic, right, the cotton trade was 186 00:10:40,956 --> 00:10:43,276 Speaker 1: on the backs of enslaved men and women, and Brown 187 00:10:43,316 --> 00:10:46,476 Speaker 1: Brothers was totally complicit in that, and a lot of 188 00:10:46,476 --> 00:10:50,356 Speaker 1: which was basically helping the creation of the American economy 189 00:10:50,356 --> 00:10:52,956 Speaker 1: and the creation of the United States. And these letters 190 00:10:52,956 --> 00:10:55,116 Speaker 1: were what you used as kind of a trusted I 191 00:10:55,196 --> 00:10:57,516 Speaker 1: know that if I part with my goods, someone on 192 00:10:57,556 --> 00:10:59,956 Speaker 1: the other side, the other side the Atlantic, will buy them, 193 00:11:00,436 --> 00:11:03,476 Speaker 1: and if I part with my money, I'll get my goods. 194 00:11:03,636 --> 00:11:06,316 Speaker 1: And these letters of credit were that connective tissue. And 195 00:11:06,316 --> 00:11:09,836 Speaker 1: we're essentially, if not invented by Brown Brothers, perfected by 196 00:11:09,836 --> 00:11:13,196 Speaker 1: them and then used by other banks and other financial intermediaries. 197 00:11:13,436 --> 00:11:15,796 Speaker 1: First of all, that was a fantastically clear explanation, so 198 00:11:15,836 --> 00:11:17,396 Speaker 1: thank you. But I think you do so well in 199 00:11:17,396 --> 00:11:21,156 Speaker 1: the book to show that Brown Brothers played a major 200 00:11:21,236 --> 00:11:24,436 Speaker 1: role in answering the question who can you trust? You 201 00:11:24,436 --> 00:11:27,356 Speaker 1: know that basically, unless there's an answer to that question 202 00:11:27,396 --> 00:11:31,956 Speaker 1: where a person attached, a financial system cannot gain the 203 00:11:32,076 --> 00:11:36,076 Speaker 1: kind of trajectory that it needs to get flowing. Flow 204 00:11:36,196 --> 00:11:39,516 Speaker 1: is everything, and if you don't trust people, you can't 205 00:11:39,636 --> 00:11:43,156 Speaker 1: get flow with the scale that is necessary. Reading that, 206 00:11:43,396 --> 00:11:47,916 Speaker 1: one starts immediately to feel the question of what about today? 207 00:11:48,116 --> 00:11:51,516 Speaker 1: Where does such trust lie in the system today, if 208 00:11:51,556 --> 00:11:55,316 Speaker 1: at all, should it exist to a greater degree than 209 00:11:55,396 --> 00:11:57,756 Speaker 1: it in fact does? And what is the presence or 210 00:11:57,756 --> 00:12:00,436 Speaker 1: absence of trust in our current system? Tell us about 211 00:12:00,436 --> 00:12:03,316 Speaker 1: where things stand, you know, So the interesting thing is, 212 00:12:03,356 --> 00:12:06,676 Speaker 1: as you highlight their word was their bond. The reputation 213 00:12:06,796 --> 00:12:09,036 Speaker 1: was key a lot of the letters at Alexander Brown 214 00:12:09,236 --> 00:12:12,156 Speaker 1: in the first thirty years of the nineteenth century writes 215 00:12:12,236 --> 00:12:14,836 Speaker 1: to his four sons, who are the Brown brothers? Heads? 216 00:12:14,916 --> 00:12:19,916 Speaker 1: Brown brothers? You sound like some distillation of Ben Franklin 217 00:12:19,916 --> 00:12:23,356 Speaker 1: and Poor Richard's Almanac, and Polonius and Hamlet and every 218 00:12:23,396 --> 00:12:26,476 Speaker 1: kind of homily and cliche that every parent has ever 219 00:12:26,516 --> 00:12:30,356 Speaker 1: given to every child. Don't take risks that are beyond 220 00:12:30,396 --> 00:12:33,396 Speaker 1: your means. Make sure you know the people you're in 221 00:12:33,436 --> 00:12:37,316 Speaker 1: business with. Its trust is easily lost and hard to gain. 222 00:12:38,236 --> 00:12:41,236 Speaker 1: And they kind of live this and breathe it because 223 00:12:41,316 --> 00:12:44,836 Speaker 1: they recognize that in a world without a lot of trust, 224 00:12:45,356 --> 00:12:49,116 Speaker 1: those things are unequivocally true. What's really fascinating about today 225 00:12:49,436 --> 00:12:53,276 Speaker 1: is I don't think we have fully appreciated what a 226 00:12:53,356 --> 00:12:57,156 Speaker 1: radical break the past fifty years have been globally in 227 00:12:57,236 --> 00:13:00,076 Speaker 1: terms of how human beings conceive of money, right, and 228 00:13:00,196 --> 00:13:04,156 Speaker 1: that the idea that a paper promise is worth more 229 00:13:04,236 --> 00:13:07,516 Speaker 1: than the paper it's written on was a completely alien 230 00:13:07,596 --> 00:13:10,676 Speaker 1: concept for most societies for most of history and still 231 00:13:10,716 --> 00:13:14,636 Speaker 1: makes people, you know, radically uncomfortable with the notion of really, 232 00:13:14,676 --> 00:13:15,956 Speaker 1: at the end of the day, if I give you 233 00:13:15,996 --> 00:13:19,276 Speaker 1: a dollar, whether it's digital or paper, it's a pretty 234 00:13:19,476 --> 00:13:22,476 Speaker 1: abstract thing. And the fact that we say that it 235 00:13:22,516 --> 00:13:24,716 Speaker 1: has values because all of us have kind of collectively 236 00:13:24,796 --> 00:13:28,116 Speaker 1: decided that it has value, not because it actually has 237 00:13:28,156 --> 00:13:32,996 Speaker 1: any intrinsic value. And cryptocurrency dramatizes this to an incredible 238 00:13:33,156 --> 00:13:35,876 Speaker 1: degree exactly, which is also why I'm really impatient with 239 00:13:35,916 --> 00:13:38,836 Speaker 1: a lot of crypto skeptics. Not that I'm a crypto bull, 240 00:13:38,876 --> 00:13:41,636 Speaker 1: I'm just saying the crypto skeptics say, oh, come on, 241 00:13:41,716 --> 00:13:44,956 Speaker 1: it's not worth anything, right, without recognizing that frankly, we 242 00:13:45,036 --> 00:13:47,516 Speaker 1: live in a world that there's no intrinsic value to 243 00:13:47,636 --> 00:13:50,596 Speaker 1: most things. You know, it's the value we ascribe to 244 00:13:50,636 --> 00:13:53,996 Speaker 1: it with intermediars who we think will be good for it. 245 00:13:54,556 --> 00:13:57,996 Speaker 1: And in many ways, you know, us power today, as 246 00:13:57,996 --> 00:14:00,916 Speaker 1: cemented by the global possession of the dollar, because there 247 00:14:00,956 --> 00:14:04,996 Speaker 1: needs to be some common means of exchange, relies on 248 00:14:05,036 --> 00:14:07,476 Speaker 1: a lot of faith in the system. That makes a 249 00:14:07,516 --> 00:14:10,076 Speaker 1: lot of people uncomfortable, but it is the product of 250 00:14:10,116 --> 00:14:12,956 Speaker 1: several hundred years of evolution, of which the paper money 251 00:14:13,356 --> 00:14:16,716 Speaker 1: part of the nineteenth century is like the first chapter 252 00:14:17,156 --> 00:14:19,556 Speaker 1: of which we're now living. In the later chapters, the 253 00:14:19,676 --> 00:14:22,396 Speaker 1: question of trust isn't interesting, and that like, I don't 254 00:14:22,436 --> 00:14:25,116 Speaker 1: necessarily trust my bank in the sense of I think 255 00:14:25,116 --> 00:14:28,076 Speaker 1: they're good people, But I trust my bank in the 256 00:14:28,156 --> 00:14:31,036 Speaker 1: sense of I clearly believe that if I put money 257 00:14:31,076 --> 00:14:34,316 Speaker 1: in the bank, they're good for it. And that's a 258 00:14:34,356 --> 00:14:37,076 Speaker 1: combination of a little bit of a regulatory framework, right 259 00:14:37,116 --> 00:14:40,236 Speaker 1: new deal law is saying your deposits are insured, and 260 00:14:40,356 --> 00:14:42,876 Speaker 1: a little bit of you know, I don't have any 261 00:14:42,916 --> 00:14:45,276 Speaker 1: reason to believe otherwise, and I need that, like we 262 00:14:45,316 --> 00:14:47,876 Speaker 1: need that to function. And in an early version, you 263 00:14:47,916 --> 00:14:51,396 Speaker 1: need something like Brown Brothers, which is surely their reputation. 264 00:14:52,196 --> 00:14:54,476 Speaker 1: So I don't think trust has gone away. We just 265 00:14:54,476 --> 00:14:57,916 Speaker 1: don't think of it in quite the same way. And 266 00:14:58,116 --> 00:15:00,876 Speaker 1: arguably it's a slightly different phenomenon. Right, I mean, we 267 00:15:00,996 --> 00:15:03,476 Speaker 1: begin with the idea that I know you, and I 268 00:15:03,516 --> 00:15:05,556 Speaker 1: trust you because I know you to be the kind 269 00:15:05,596 --> 00:15:09,276 Speaker 1: of person based on my experience of you, whom I 270 00:15:09,276 --> 00:15:12,516 Speaker 1: can rely on. Then you get a firm like Brown 271 00:15:12,556 --> 00:15:17,476 Speaker 1: Brothers that begins to institutionalize that trust. I may not 272 00:15:17,596 --> 00:15:20,076 Speaker 1: know you, but I know your brand and I know 273 00:15:20,116 --> 00:15:23,796 Speaker 1: that your bank is committed to not going under, and 274 00:15:23,836 --> 00:15:26,556 Speaker 1: so in that sense, I trust you. So that's a 275 00:15:26,556 --> 00:15:29,116 Speaker 1: bit of an institutionalization of the trust away from one 276 00:15:29,196 --> 00:15:32,436 Speaker 1: person to an institution, but it's still a small institution, 277 00:15:32,476 --> 00:15:36,956 Speaker 1: and it's still a family owned institution. What you have today, though, 278 00:15:37,116 --> 00:15:40,916 Speaker 1: is a very different stage in the evolution, where the 279 00:15:40,956 --> 00:15:44,476 Speaker 1: trust is almost almost not at all in the institutions 280 00:15:44,796 --> 00:15:50,556 Speaker 1: and almost all in the governmental structures that create the 281 00:15:50,596 --> 00:15:53,516 Speaker 1: conditions where we think that the institution will follow the 282 00:15:53,636 --> 00:15:58,196 Speaker 1: rules because otherwise people would go to prison. And that's 283 00:15:58,196 --> 00:16:01,796 Speaker 1: a different kind of institutional trust. It's still trust in 284 00:16:01,796 --> 00:16:04,316 Speaker 1: a set of institutions, but they're less the institutions, the 285 00:16:04,356 --> 00:16:08,756 Speaker 1: financial institutions themselves, and more the regulators of those institutions. 286 00:16:09,356 --> 00:16:13,676 Speaker 1: So you're totally right about the regulatory framework and that 287 00:16:13,756 --> 00:16:17,036 Speaker 1: being an essential component to people's trust in the financial system. 288 00:16:17,276 --> 00:16:19,556 Speaker 1: This is an explicit in the book. It's certainly explicit 289 00:16:19,596 --> 00:16:21,916 Speaker 1: in a lot of what I've written about. I think 290 00:16:22,036 --> 00:16:25,716 Speaker 1: regulation is necessary but not sufficient, right, and some of 291 00:16:25,716 --> 00:16:30,476 Speaker 1: the regulatory craze today in the Biden administration this is 292 00:16:30,476 --> 00:16:33,476 Speaker 1: a whole other conversation, but I think it treats regulation 293 00:16:33,516 --> 00:16:36,956 Speaker 1: as sufficient and necessary. One of the lessons of a 294 00:16:36,996 --> 00:16:40,356 Speaker 1: Brown Brother's culture is that you need a culture. Right. 295 00:16:40,836 --> 00:16:43,476 Speaker 1: You can regulate behavior, but you can't really regulate culture, 296 00:16:43,556 --> 00:16:47,436 Speaker 1: or you cannot create a regulatory framework that leads companies 297 00:16:47,836 --> 00:16:49,516 Speaker 1: in the near and I think even the mid term 298 00:16:49,876 --> 00:16:53,076 Speaker 1: to embody a different culture. What's fascinating about an earlier 299 00:16:53,156 --> 00:16:56,756 Speaker 1: version of American capitalism was it was an an internal 300 00:16:56,796 --> 00:17:01,156 Speaker 1: culture that recognized the ineluctable bond between private gain and 301 00:17:01,196 --> 00:17:05,956 Speaker 1: public good, and that individuals and collectives that were private. 302 00:17:08,276 --> 00:17:11,796 Speaker 1: It was part of a narrative of we I eat 303 00:17:11,836 --> 00:17:15,916 Speaker 1: the individual, and the company is responsible to the collective 304 00:17:16,476 --> 00:17:19,396 Speaker 1: because ultimately, we the individual in the company can't thrive 305 00:17:19,876 --> 00:17:23,916 Speaker 1: unless the collective in which we're embedded also thrives. That 306 00:17:23,996 --> 00:17:27,356 Speaker 1: was a non regulatory ethos, and it led to some 307 00:17:27,436 --> 00:17:32,036 Speaker 1: of the behavior that regulation seeks to force. So it 308 00:17:32,116 --> 00:17:35,316 Speaker 1: was internal guardrails rather than external guardrails. And I happen 309 00:17:35,356 --> 00:17:36,956 Speaker 1: to believe in part of the point of the book 310 00:17:37,156 --> 00:17:41,476 Speaker 1: is culture matters, and without those internal guardrails, all the 311 00:17:41,516 --> 00:17:44,356 Speaker 1: external guardrails in the world, they can create an adversarial 312 00:17:44,396 --> 00:17:47,556 Speaker 1: culture where behavior is constrained, but they cannot easily create 313 00:17:47,876 --> 00:17:53,996 Speaker 1: positive behavior, they can curtail negative behavior. We'll be right back. 314 00:18:03,556 --> 00:18:06,476 Speaker 1: Let me ask you a question, Zach, about a theme 315 00:18:06,516 --> 00:18:08,876 Speaker 1: that is already in the title of your book. There's 316 00:18:08,876 --> 00:18:11,996 Speaker 1: a more ultiple meaning to the title inside Money. But 317 00:18:12,436 --> 00:18:16,276 Speaker 1: on any of those possible meanings of that phrase, there's 318 00:18:16,276 --> 00:18:18,716 Speaker 1: an idea that there is an inside and an outside 319 00:18:18,836 --> 00:18:23,156 Speaker 1: to money, that there are elites who understand what's going 320 00:18:23,196 --> 00:18:27,196 Speaker 1: on and who have a lot of power and the 321 00:18:27,236 --> 00:18:29,756 Speaker 1: capacity to pull strings, and then there's the rest of 322 00:18:29,836 --> 00:18:32,196 Speaker 1: us who are on the outside. Maybe our noses are 323 00:18:32,196 --> 00:18:34,156 Speaker 1: pressed up against the glass. Maybe we don't even know 324 00:18:34,156 --> 00:18:36,796 Speaker 1: where the glass is to press our nose up against it, 325 00:18:36,836 --> 00:18:43,636 Speaker 1: And sociologically that remains true. But arguably there is a 326 00:18:43,716 --> 00:18:49,996 Speaker 1: democratizing impulse in finance today that it's not the first time. 327 00:18:50,116 --> 00:18:52,316 Speaker 1: You know, There's been lots of other moments when the 328 00:18:52,356 --> 00:18:55,356 Speaker 1: public got interested, and sometimes that was a sign that 329 00:18:55,396 --> 00:18:57,156 Speaker 1: there was about to be a crash, but we certainly 330 00:18:57,196 --> 00:18:59,396 Speaker 1: seem to be in one now where people talk about 331 00:18:59,996 --> 00:19:03,436 Speaker 1: gamification of trading, They talk about how easy it is 332 00:19:03,436 --> 00:19:05,196 Speaker 1: to open a coin base account, they talk about how 333 00:19:05,196 --> 00:19:08,316 Speaker 1: easy is to trade on platforms like robin Hood, and 334 00:19:08,356 --> 00:19:13,716 Speaker 1: then you actually have the crazy phenomenon of activists whose 335 00:19:14,196 --> 00:19:17,276 Speaker 1: nature of their activism is to boost up stocks that 336 00:19:17,916 --> 00:19:20,316 Speaker 1: the insiders agree aren't very valuable, and that frankly, any 337 00:19:20,396 --> 00:19:23,436 Speaker 1: rational person would agree aren't very valuable, and they're experiencing 338 00:19:23,436 --> 00:19:27,476 Speaker 1: it as a kind of thrill of the outsiders. And 339 00:19:27,556 --> 00:19:31,196 Speaker 1: in that sense, it's a populist or democratizing with a 340 00:19:31,196 --> 00:19:35,996 Speaker 1: small d mode of finance. What do you think about 341 00:19:36,036 --> 00:19:43,236 Speaker 1: that when you read about populist impulses to beat the 342 00:19:43,316 --> 00:19:46,956 Speaker 1: insiders at their own game, yea? Or when you read 343 00:19:46,996 --> 00:19:49,436 Speaker 1: people saying, you know what's wrong with finances, that it's 344 00:19:49,476 --> 00:19:51,556 Speaker 1: in the hands of the few. It ought to be 345 00:19:51,596 --> 00:19:54,516 Speaker 1: in the hands of the many, right or wrong? Do 346 00:19:54,596 --> 00:19:56,956 Speaker 1: you feel some sense of fear when you hear that? 347 00:19:57,076 --> 00:19:58,676 Speaker 1: Do you think, oh my god, these poor people are 348 00:19:58,716 --> 00:20:02,476 Speaker 1: gonna hurt themselves. Nope. I think I celebrate almost all 349 00:20:02,476 --> 00:20:05,356 Speaker 1: of that, but with the cautionary reality of people will 350 00:20:05,396 --> 00:20:07,276 Speaker 1: be harmed by that, just as they were harmed by 351 00:20:07,316 --> 00:20:10,676 Speaker 1: the system that they're being rejected. You know, revolution is 352 00:20:10,716 --> 00:20:12,876 Speaker 1: often necessary, but it's not very balanced. I mean, I 353 00:20:12,876 --> 00:20:14,996 Speaker 1: would prefer for evolutionary change. I think we'd all be 354 00:20:15,036 --> 00:20:19,116 Speaker 1: healthier for it, because there'd be less collateral damage along 355 00:20:19,116 --> 00:20:21,836 Speaker 1: the way, So a populist opening, you know, that's a 356 00:20:21,836 --> 00:20:25,236 Speaker 1: little less burn it all down, burn baby burn. I 357 00:20:25,236 --> 00:20:27,596 Speaker 1: mean there's an element of the the whole thing that 358 00:20:27,596 --> 00:20:29,476 Speaker 1: went on with Game Stop, and there's an element with 359 00:20:29,556 --> 00:20:32,956 Speaker 1: Robin Hood that can approach the burn baby burn attitudes 360 00:20:32,996 --> 00:20:36,916 Speaker 1: of the late sixties, like the system is irremediably corrupt, 361 00:20:37,236 --> 00:20:39,076 Speaker 1: so we should just blow it up and start it again. 362 00:20:39,156 --> 00:20:41,476 Speaker 1: I'm not really into that one, but but it's so 363 00:20:41,596 --> 00:20:44,476 Speaker 1: interesting you're saying that because I have the exact opposite instinct. 364 00:20:44,836 --> 00:20:47,596 Speaker 1: I look at Game Stop and I say, boy, in 365 00:20:47,636 --> 00:20:49,516 Speaker 1: the sixties, when they wanted to burn it all down, 366 00:20:49,876 --> 00:20:51,796 Speaker 1: they didn't say it and let's do it by trading 367 00:20:51,836 --> 00:20:54,956 Speaker 1: and making money. Right. There was a kind of utopian 368 00:20:55,036 --> 00:20:59,796 Speaker 1: idealism associated with being anti capitalist. Today, capitalism is so 369 00:20:59,916 --> 00:21:02,116 Speaker 1: much the you know, the air we breathe, the water 370 00:21:02,156 --> 00:21:05,316 Speaker 1: we drink, that the burn it down comes in the 371 00:21:05,316 --> 00:21:08,276 Speaker 1: form of let's do a trade, right, let's let's I 372 00:21:08,276 --> 00:21:10,956 Speaker 1: mean that you can't get closer to the ultimate victory 373 00:21:10,956 --> 00:21:13,196 Speaker 1: of capitalism than if the people who want to break 374 00:21:13,316 --> 00:21:16,396 Speaker 1: capitalism want to break it by capitalist means. They're not 375 00:21:16,436 --> 00:21:19,676 Speaker 1: trying to use the master's tools to deconstruct the master's house. 376 00:21:20,076 --> 00:21:23,156 Speaker 1: They're trying to use the master's tools to become the masters. 377 00:21:23,396 --> 00:21:26,836 Speaker 1: Neither more nor less, that is definitely true. I do 378 00:21:26,916 --> 00:21:31,436 Speaker 1: think more inputs, more egalitarian, more access to more capital 379 00:21:31,516 --> 00:21:34,756 Speaker 1: for more people who can make their own choices, that 380 00:21:34,876 --> 00:21:37,716 Speaker 1: I find a good thing, you know, And the same 381 00:21:37,716 --> 00:21:41,236 Speaker 1: way that unlocking capital in the nineteenth century was nett 382 00:21:41,276 --> 00:21:43,796 Speaker 1: I think a better thing than not led more people 383 00:21:43,836 --> 00:21:45,756 Speaker 1: to have what we would consider to be a middle 384 00:21:45,796 --> 00:21:47,876 Speaker 1: class life. It's the story of what's going on in Asia. 385 00:21:47,916 --> 00:21:50,796 Speaker 1: You know, it's like unlocking human capital and actually creating 386 00:21:50,796 --> 00:21:55,196 Speaker 1: a capital system. But this honestly is a philosophical discussion 387 00:21:55,236 --> 00:21:58,076 Speaker 1: because it leads to answers in action of kind of 388 00:21:58,076 --> 00:22:00,396 Speaker 1: the cup half full, cup half empty. Right, If you 389 00:22:00,516 --> 00:22:04,036 Speaker 1: somewhat celebrate these moves, you have a different attitude. If 390 00:22:04,116 --> 00:22:06,116 Speaker 1: I'm at the SEC right now and I think both 391 00:22:06,196 --> 00:22:10,916 Speaker 1: game stop and crypto and the kind of unregulated mass 392 00:22:11,036 --> 00:22:15,716 Speaker 1: of financial activity is unleashing destructive forces that need to 393 00:22:15,756 --> 00:22:19,436 Speaker 1: be bottled, You're going to have a particular regulatory and 394 00:22:19,756 --> 00:22:22,596 Speaker 1: or philosophical response if you think that they are inherently 395 00:22:23,316 --> 00:22:26,636 Speaker 1: positive developments and that they would create more inclusivity. What 396 00:22:26,836 --> 00:22:29,556 Speaker 1: wasn't very elite to system you're going to think in 397 00:22:29,676 --> 00:22:32,756 Speaker 1: terms of regulation and guardrails very differently. So in that sense, 398 00:22:32,756 --> 00:22:36,796 Speaker 1: I think the where you sit visa VI these developments 399 00:22:36,916 --> 00:22:39,996 Speaker 1: shapes what kind of policies and what kind of actions 400 00:22:40,036 --> 00:22:44,236 Speaker 1: you take in the present. Really, intimately, I'm really interested 401 00:22:44,276 --> 00:22:47,156 Speaker 1: to hear you say that, Zach, because in reading the book, 402 00:22:48,076 --> 00:22:51,756 Speaker 1: I felt maybe this is just confirmation bias. But as 403 00:22:51,796 --> 00:22:54,996 Speaker 1: I read the book, I thought to myself, Wow, in 404 00:22:55,036 --> 00:22:58,836 Speaker 1: the wild, wild West days, with all the booms and 405 00:22:58,876 --> 00:23:01,996 Speaker 1: all the busts, there were some people trying to hold 406 00:23:01,996 --> 00:23:06,716 Speaker 1: it all together. Thank goodness. Then you know, there's the 407 00:23:06,836 --> 00:23:09,396 Speaker 1: role people associated with the firm played in the creation 408 00:23:09,396 --> 00:23:12,636 Speaker 1: of the International Financial Institution in the post World War 409 00:23:12,676 --> 00:23:16,436 Speaker 1: two era. That too was a group of elites trying 410 00:23:16,516 --> 00:23:20,316 Speaker 1: to stabilize things in that case, both globally and domestically. 411 00:23:20,996 --> 00:23:24,276 Speaker 1: And then I looked at the contemporary world, where we 412 00:23:24,356 --> 00:23:26,996 Speaker 1: seem to be entering a period of relative destabilization, and 413 00:23:27,036 --> 00:23:31,196 Speaker 1: I thought, oh, boy, who's playing that role now? But 414 00:23:31,276 --> 00:23:33,476 Speaker 1: what I'm hearing from you is something a little different. 415 00:23:33,596 --> 00:23:37,036 Speaker 1: What I'm hearing from you is, look, the other institutions 416 00:23:37,076 --> 00:23:40,476 Speaker 1: aren't really playing that role, and insiders maybe have a 417 00:23:40,516 --> 00:23:44,756 Speaker 1: little bit too much power, and so some spreading of 418 00:23:44,756 --> 00:23:49,196 Speaker 1: the power might actually be desirable in this historical moment. Yeah, 419 00:23:49,236 --> 00:23:51,796 Speaker 1: and that's why I think it's back to this culture thing, 420 00:23:51,796 --> 00:23:55,156 Speaker 1: which I'm going to hammer home on unsatisfying though it 421 00:23:55,196 --> 00:23:58,436 Speaker 1: is at times to myself as well, which is, if 422 00:23:58,476 --> 00:24:01,796 Speaker 1: you're going to democratize finance and democratize nodes, you also 423 00:24:01,836 --> 00:24:04,716 Speaker 1: have to democratize responsibility. And that's where culture becomes really 424 00:24:04,716 --> 00:24:07,276 Speaker 1: important individually, right, which is like I don't get to 425 00:24:07,276 --> 00:24:10,516 Speaker 1: just pursue what I'm going to pursue without consequence. Some 426 00:24:10,556 --> 00:24:12,636 Speaker 1: of that has to be self imposed, right, It cannot 427 00:24:12,716 --> 00:24:16,836 Speaker 1: just be imposed by others. And we're not going back 428 00:24:16,836 --> 00:24:19,916 Speaker 1: to an elite construct world because there's no evidence that 429 00:24:19,916 --> 00:24:23,836 Speaker 1: we could or should. Although I actually think large multinational companies, 430 00:24:24,036 --> 00:24:26,476 Speaker 1: by virtue of the pressures on them from governments and 431 00:24:26,516 --> 00:24:30,556 Speaker 1: their own employees and financial forces, have become many of 432 00:24:30,556 --> 00:24:34,276 Speaker 1: them much more responsible to the global commons than any 433 00:24:34,316 --> 00:24:37,036 Speaker 1: one government and then to a lot of people, and 434 00:24:37,076 --> 00:24:39,836 Speaker 1: that's a kind of an interesting development. You know, they've 435 00:24:39,836 --> 00:24:42,476 Speaker 1: been much more focused on climate change because it hurts 436 00:24:42,476 --> 00:24:44,716 Speaker 1: their bottom line. They've been more focused on being efficient, 437 00:24:44,996 --> 00:24:47,836 Speaker 1: they've been more focused on sometimes on minimum wages than 438 00:24:47,876 --> 00:24:50,996 Speaker 1: government has often self interested. You know, why does Walmart 439 00:24:51,236 --> 00:24:53,876 Speaker 1: raise the minimum wage of its workers? The idea, you 440 00:24:53,916 --> 00:24:56,636 Speaker 1: know that this can all be done surely by a 441 00:24:56,676 --> 00:24:58,796 Speaker 1: regulatory framework, I just think is a mistake. I think 442 00:24:58,796 --> 00:25:01,156 Speaker 1: that's a necessary back to that question, necessary but not 443 00:25:01,196 --> 00:25:04,596 Speaker 1: sufficient part of what we tried to teach ourselves in 444 00:25:05,436 --> 00:25:08,916 Speaker 1: schools and you know, the whole education systems. How do 445 00:25:08,956 --> 00:25:13,316 Speaker 1: you create people who feel responsibility as citizens to a 446 00:25:13,396 --> 00:25:16,756 Speaker 1: larger good? And I guess you know the utopian translation 447 00:25:16,756 --> 00:25:19,676 Speaker 1: of that into the GameStop thing is you just you 448 00:25:19,716 --> 00:25:23,476 Speaker 1: can't endlessly make your own money. It's got to come 449 00:25:23,516 --> 00:25:27,036 Speaker 1: from somewhere. You can't endlessly destroy or create companies out 450 00:25:27,036 --> 00:25:30,156 Speaker 1: of nothing. Eventually there has to be something. And look, 451 00:25:30,396 --> 00:25:32,116 Speaker 1: we might look back at this all very quaintly in 452 00:25:32,156 --> 00:25:36,556 Speaker 1: ten years as a luxurious discussion for a system that's collapsed. 453 00:25:36,596 --> 00:25:38,036 Speaker 1: But we also might look back all of this in 454 00:25:38,356 --> 00:25:42,116 Speaker 1: ten or fifteen years as the messiness in the fray 455 00:25:42,276 --> 00:25:45,076 Speaker 1: getting to a more constructive place of what you'd call 456 00:25:45,116 --> 00:25:48,676 Speaker 1: inclusive or sustainable capitalism. Zach, I want to thank you 457 00:25:48,756 --> 00:25:52,436 Speaker 1: for writing yet another book that explains hard to understand 458 00:25:52,556 --> 00:25:55,836 Speaker 1: stuff that's really important to those of us who care 459 00:25:55,876 --> 00:25:59,236 Speaker 1: to learn the books. Is great, and please keep up 460 00:25:59,276 --> 00:26:03,116 Speaker 1: your dual track body of work of writing history to 461 00:26:03,156 --> 00:26:06,596 Speaker 1: explain things to us while also continuing to do it 462 00:26:06,636 --> 00:26:10,996 Speaker 1: in practice yourself. Thanks so much, Noah, We'll be right back. 463 00:26:21,676 --> 00:26:24,836 Speaker 1: Listening to Zach talk about the history of capitalism in 464 00:26:24,876 --> 00:26:29,396 Speaker 1: the United States and its future really made me reflect 465 00:26:29,556 --> 00:26:32,956 Speaker 1: on a deep tension in the way that power works 466 00:26:33,036 --> 00:26:37,436 Speaker 1: in the context of capitalism. On the one hand, capitalism 467 00:26:37,516 --> 00:26:42,436 Speaker 1: is a space of radical equality in that my dollar 468 00:26:42,636 --> 00:26:46,036 Speaker 1: is worth the exact same amount as your dollar, and 469 00:26:46,156 --> 00:26:50,516 Speaker 1: in theory, the markets don't care at all about what 470 00:26:50,596 --> 00:26:53,796 Speaker 1: we look like or how we sound. They only care 471 00:26:53,916 --> 00:26:57,996 Speaker 1: about how much money we can generate. And yet, at 472 00:26:57,996 --> 00:27:00,676 Speaker 1: the same time, on the other side of the split screen, 473 00:27:01,156 --> 00:27:04,716 Speaker 1: the history of capitalism is a history of particular people 474 00:27:05,036 --> 00:27:10,236 Speaker 1: becoming insiders, as in Zach's title Inside Money, and using 475 00:27:10,276 --> 00:27:13,756 Speaker 1: that insider status, either for good or ill, to shape 476 00:27:13,796 --> 00:27:17,956 Speaker 1: the future of the power of capital. Brown Brothers begins 477 00:27:18,036 --> 00:27:21,436 Speaker 1: in his story as trustworthy and successful because of the 478 00:27:21,516 --> 00:27:26,156 Speaker 1: specific identity of the firm and the reputational concern that 479 00:27:26,276 --> 00:27:30,596 Speaker 1: it has to be trusted, that trust starts as personal, 480 00:27:30,916 --> 00:27:34,076 Speaker 1: and by virtue of it being personal, it creates tremendous 481 00:27:34,116 --> 00:27:37,796 Speaker 1: power in the people who are able to establish that reputation. 482 00:27:38,516 --> 00:27:42,556 Speaker 1: This kind of capitalism is the capitalism that creates stability, 483 00:27:42,756 --> 00:27:47,436 Speaker 1: but that also simultaneously creates fundamental inequality, because in this 484 00:27:47,476 --> 00:27:49,836 Speaker 1: world you and I are not equal. When we put 485 00:27:49,836 --> 00:27:54,236 Speaker 1: a dollar on the table, it matters entirely who is trusted, 486 00:27:54,476 --> 00:27:55,996 Speaker 1: And when you get to the question of who's going 487 00:27:55,996 --> 00:28:02,476 Speaker 1: to be trusted, suddenly the determinants of background, identity, race, class, 488 00:28:02,516 --> 00:28:06,316 Speaker 1: and sex start to come into the picture. So our 489 00:28:06,316 --> 00:28:10,956 Speaker 1: distributional inequalities are partly a result of this aspect of 490 00:28:11,076 --> 00:28:16,476 Speaker 1: capitalism itself. Another major takeaway of Zach's book is that 491 00:28:16,516 --> 00:28:20,076 Speaker 1: the risk taking that we associate with the most famous 492 00:28:20,116 --> 00:28:25,796 Speaker 1: financial firms is not necessarily the only way for big 493 00:28:25,836 --> 00:28:31,796 Speaker 1: financial institutions to last and even to get rich. It 494 00:28:31,916 --> 00:28:35,836 Speaker 1: is rather a product of a new historical period in which, 495 00:28:35,916 --> 00:28:40,196 Speaker 1: as Zach explained, the fact that the big banks are 496 00:28:40,236 --> 00:28:43,156 Speaker 1: publicly traded, means that the people who work for them 497 00:28:43,676 --> 00:28:46,716 Speaker 1: have a lot to gain by taking risk and very 498 00:28:46,716 --> 00:28:50,196 Speaker 1: little to lose. By taking risk, and that is fundamentally 499 00:28:50,236 --> 00:28:52,516 Speaker 1: different than the way the system worked when the big 500 00:28:52,556 --> 00:28:55,236 Speaker 1: banks were partnerships, and if you took a risk to 501 00:28:55,316 --> 00:28:58,476 Speaker 1: make money, that meant you were personally taking a substantial 502 00:28:58,556 --> 00:29:01,476 Speaker 1: risk to lose money. As Zach points out, he's not 503 00:29:01,476 --> 00:29:03,396 Speaker 1: the first person to have made that point, but he 504 00:29:03,476 --> 00:29:08,236 Speaker 1: makes it tremendously powerfully. The third and final takeaway for 505 00:29:08,356 --> 00:29:13,276 Speaker 1: me was the question of the democratization or the popularization 506 00:29:13,476 --> 00:29:17,436 Speaker 1: of finance. I thought in reading Zach's book that he 507 00:29:17,436 --> 00:29:22,516 Speaker 1: would be nervous about GameStop, coin base, robin Hood, crypto, 508 00:29:22,756 --> 00:29:26,036 Speaker 1: and the general idea that right now finances being taken 509 00:29:26,196 --> 00:29:29,876 Speaker 1: out of the hands of the responsible financial institutions and 510 00:29:29,996 --> 00:29:34,036 Speaker 1: increasingly put into the hands of the ordinary investor sitting 511 00:29:34,396 --> 00:29:37,596 Speaker 1: at a computer screen and treating the whole thing as 512 00:29:37,636 --> 00:29:40,436 Speaker 1: a kind of a game. But to my surprise and 513 00:29:40,556 --> 00:29:43,596 Speaker 1: to my interest, Zach is actually very open to the 514 00:29:43,636 --> 00:29:48,516 Speaker 1: idea that capital needs to be small d democratized, or 515 00:29:48,596 --> 00:29:53,036 Speaker 1: popularized because the institutions at the top are not very 516 00:29:53,076 --> 00:29:56,516 Speaker 1: good at caring for the overall well being the way 517 00:29:56,516 --> 00:30:00,236 Speaker 1: they once perhaps were, in large part because they don't 518 00:30:00,316 --> 00:30:03,036 Speaker 1: care as much as they once did about maintaining their 519 00:30:03,076 --> 00:30:07,796 Speaker 1: reputations for trust and caring about the whole. Zach favors 520 00:30:07,796 --> 00:30:12,196 Speaker 1: our being more responsible and talking about utopian ideals. At 521 00:30:12,196 --> 00:30:14,836 Speaker 1: the same time, He's distrustful enough of our capacity to 522 00:30:14,876 --> 00:30:18,396 Speaker 1: do so that he welcomes the possibility of change from 523 00:30:18,436 --> 00:30:23,516 Speaker 1: the outside. I love to be surprised in conversation. Indeed, 524 00:30:23,516 --> 00:30:25,916 Speaker 1: that's one of the reasons that I love doing this 525 00:30:25,996 --> 00:30:28,116 Speaker 1: Deep Background show, because I love to be surprised by 526 00:30:28,116 --> 00:30:30,196 Speaker 1: things that people have to say, and that came as 527 00:30:30,236 --> 00:30:33,876 Speaker 1: a genuine and interesting surprise to me. I learned a 528 00:30:33,916 --> 00:30:36,436 Speaker 1: tremendous amount from the conversation and from the book, and 529 00:30:36,476 --> 00:30:39,876 Speaker 1: I hope that you listeners learn something too. Until the 530 00:30:39,916 --> 00:30:43,836 Speaker 1: next time I speak to you, breathe deep, think deep thoughts, 531 00:30:44,396 --> 00:30:49,476 Speaker 1: and if possible, have some fun. If you're a regular listener, 532 00:30:49,636 --> 00:30:52,836 Speaker 1: you know I love communicating with you here on Deep Background. 533 00:30:53,476 --> 00:30:56,436 Speaker 1: I also really want that communication to run both ways. 534 00:30:56,956 --> 00:30:58,676 Speaker 1: I want to know what you think are the most 535 00:30:58,676 --> 00:31:01,876 Speaker 1: important stories of the moment and what kinds of guests 536 00:31:01,956 --> 00:31:04,916 Speaker 1: you think you would be useful to hear from. More So, 537 00:31:04,996 --> 00:31:08,476 Speaker 1: I'm opening a new channel of communication to access it. 538 00:31:08,796 --> 00:31:12,276 Speaker 1: Just to my website. Noah Dashfelman dot com. You can 539 00:31:12,316 --> 00:31:15,076 Speaker 1: sign up from my newsletter and you can tell me 540 00:31:15,236 --> 00:31:18,636 Speaker 1: exactly what's on your mind, something that would be really 541 00:31:18,716 --> 00:31:23,516 Speaker 1: valuable to me and I hope to you too. Deep 542 00:31:23,516 --> 00:31:26,916 Speaker 1: Background is brought to you by Pushkin Industries. Our producer 543 00:31:26,996 --> 00:31:30,276 Speaker 1: is mo La Board, our engineer is Bentaladay, and our 544 00:31:30,316 --> 00:31:35,036 Speaker 1: showrunner is Sophie Crane mckibbe. Editorial support from noahm Osband. 545 00:31:35,556 --> 00:31:39,716 Speaker 1: Theme music by Luis Guerra at Pushkin. Thanks to Mia Lobell, 546 00:31:39,996 --> 00:31:45,236 Speaker 1: Julia Barton, Lydia Jeancott, Heather Faine, Carlie mcgliori, Maggie Taylor, 547 00:31:45,356 --> 00:31:48,516 Speaker 1: Eric Sandler, and Jacob Weisberg. You can find me on 548 00:31:48,516 --> 00:31:51,516 Speaker 1: Twitter at Noah R. Feldman. I also write a column 549 00:31:51,516 --> 00:31:54,316 Speaker 1: for Bloomberg Opinion, which you can find at Bloomberg dot 550 00:31:54,316 --> 00:31:59,156 Speaker 1: com slash Feldman. To discover Bloomberg's original slate of podcasts, 551 00:31:59,356 --> 00:32:03,316 Speaker 1: go to Bloomberg dot com slash podcasts, and if you 552 00:32:03,356 --> 00:32:05,916 Speaker 1: liked what you heard today, please write a review or 553 00:32:05,956 --> 00:32:08,796 Speaker 1: tell a friend. This is Deep Background