Speaker 1: Pushkin Pushkin from Pushkin Industries. This is Deep Background, the
Speaker 1: show where we explore the stories behind the stories in
Speaker 1: the news. I'm Noah Feldman. As regular listeners know, on
Speaker 1: this season of Deep Background, we've been focusing on power
Speaker 1: in its many different forms. We've talked a fair amount
Speaker 1: about power and global politics. We've talked about power and publishing.
Speaker 1: But until now we haven't had a direct conversation about
Speaker 1: one of the most important seats of power in the
Speaker 1: United States and indeed in the world. Wall Street Today's
Speaker 1: guest is here to help us fill that gap. Zachary
Speaker 1: Carrabelle is a historian and author who spent years working
Speaker 1: on Wall Street, both as head of Global Strategies That
Speaker 1: Investment and as president or Fred Alger and Company. He's
Speaker 1: the author of a new book called Inside Money, Brown, Brothers,
Speaker 1: Harriman and the American Way of Power. The book charts
Speaker 1: the long history of this particular investment bank, suggesting that
Speaker 1: its ability to survive for two hundred years of boom
Speaker 1: and bust cycles comes from its refusal to over extend
Speaker 1: itself and to take on too much risk, a lesson
Speaker 1: that he believes Wall Street today could learn a lot
Speaker 1: from Zach is the perfect person to talk about power,
Speaker 1: Wall Street history and where we're going in the future. Zach,
Speaker 1: thank you so much for being here. Zach, you are
Speaker 1: a polymathic and unusual person, and in a sense, you're
Speaker 1: the ideal person to have written this new book because
Speaker 1: you have a PhD in history, You've never stopped writing
Speaker 1: books of history, no matter what other thing you've been doing.
Speaker 1: You've also had several different careers in and around finance,
Speaker 1: and that really means that if anyone were going to
Speaker 1: write a book that was going to be, in effect
Speaker 1: a history of power in American capitalism, it would be you.
Speaker 1: I read your new book Inside Money, Brown, Brothers, Harriman
Speaker 1: and the American Way of Power as really that a
Speaker 1: book that tells the story of capitalism in America through
Speaker 1: the eyes of one venerable firm. What gave you the
Speaker 1: idea to do this? That's exactly what the book is,
Speaker 1: and look narcissistically, it is the perfect culmination of a
Speaker 1: lot of what I've done for the past twenty years,
Speaker 1: and that it brings together the academic strain and the
Speaker 1: financial investment career strain into one delightful four hundred plus
Speaker 1: page package. It ended up, I think, in a weird way,
Speaker 1: being a lot more interesting to me writing the book
Speaker 1: and really thinking through the nature of American capitalism and
Speaker 1: the nature of American power over two centuries, and the
Speaker 1: sort of arbitrariness of one definition of capitalism that has
Speaker 1: emerged in the past thirty years versus multiple different capitalisms
Speaker 1: that could just as well have predominated and at earlier
Speaker 1: points in the past did And that you know, we're
Speaker 1: constantly in the position of remaking our culture and remaking
Speaker 1: what we think of our systems. And then a weird way,
Speaker 1: this book became pointed in that direction in a way
Speaker 1: that I didn't actually expect when I sat down to
Speaker 1: write the book. I was going to ask you that
Speaker 1: which came first, the chicken or the egg question? Did
Speaker 1: you pick your topic this bank and its history, and
Speaker 1: then from there you realize that it was emblematic or
Speaker 1: were you looking for some concrete story to tell that
Speaker 1: would enable you to paint the big canvas. Yeah, and
Speaker 1: it was definitely the latter. I did not set out
Speaker 1: to write a book about Brown Brothers Harriman. I did
Speaker 1: sit out to write a book about the crucial role
Speaker 1: of money making American power in the nineteenth century, and
Speaker 1: then how the men and they were all men, and
Speaker 1: they were all white men, and they were mostly Protestant
Speaker 1: white men. How that cohort made the global system of
Speaker 1: the twentieth century, and where that leaves us today. So
Speaker 1: that's kind of the arc I wanted to look at.
Speaker 1: And they're the perfect aperture for that art. They are
Speaker 1: maybe the only firm that could actually tell that story
Speaker 1: from the get go to the present, because first of all,
Speaker 1: they're the only one that has been around for two
Speaker 1: plus centuries, which doesn't make them worth writing about. Right,
Speaker 1: living long is not living necessarily interesting. I really thought
Speaker 1: at one point, like, how am I going to make
Speaker 1: a group of stayed bankers, particularly in the nineteenth century,
Speaker 1: who wanted to be stayed, who didn't want to be
Speaker 1: in the news, who spent a lot of their history
Speaker 1: celebrating the fact that every day they woke up and
Speaker 1: their name was not in the papers as a good day.
Speaker 1: You know, how do you make that interesting? The arc
Speaker 1: I thought was interesting. Turned out I think that they're
Speaker 1: a lot more interesting than even I thought going into it.
Speaker 1: I share with you the sense that there's an alchemy here.
Speaker 1: You know the book doesn't. If you were not the
Speaker 1: author of the book, I don't think I would have
Speaker 1: picked it up, because I would have thought, this is
Speaker 1: a great topic, But how the world could you tell
Speaker 1: it in a way that is in fact engaging? But
Speaker 1: because I've read your other books, I knew you would
Speaker 1: be able to find a way to do that. What
Speaker 1: was the trick? And for listeners who are thinking, why
Speaker 1: in the world would I be interested in this, I'm
Speaker 1: definitely interested in the history of capitalism in the nature
Speaker 1: of power, But why would I want to hear it
Speaker 1: told through these folks? What for you were the features
Speaker 1: of those cautious state people who, as you show, we're
Speaker 1: trying to be the ones always to avoid going under
Speaker 1: What is it about them that you were able to
Speaker 1: make interesting? So, first of all, it turns out Brown
Speaker 1: Brothers was present at the creation of almost everything vital
Speaker 1: in American certainly economic history and in many ways just
Speaker 1: American history. They're just in the back row right, They're
Speaker 1: they're like the zelle. They're in the second row, back left,
Speaker 1: kind of looking like a bank, and they don't really
Speaker 1: want to be the story and they don't want to
Speaker 1: be the picture. But without them. There's no story and
Speaker 1: there's no picture, and there is a lot of drama
Speaker 1: in the creation of a nation, and the creation of
Speaker 1: a nation like the United States, which kind of emerges
Speaker 1: out of nowhere in the nineteenth century, graced with lots
Speaker 1: of resources but very little invested capital, and you have
Speaker 1: these this firm like Brown Brothers that essentially creates the
Speaker 1: paper money system that I think is a huge differential, right,
Speaker 1: It's partly what makes the United States the United States.
Speaker 1: Is this incredibly chaotic, liquid world where if you had
Speaker 1: a hope and a dream, it was way easier to
Speaker 1: get money because it was paper. It wasn't people, it
Speaker 1: wasn't gold, it wasn't land. And Brown Brothers is kind
Speaker 1: of at the epicenter of this, you know, the the
Speaker 1: alchemists who were really mindful of the destructive potential of
Speaker 1: their alchemy and not animated by greed and not animated
Speaker 1: by personal gain at the expense of public good. I
Speaker 1: actually found that that section of the book completely gripping,
Speaker 1: and I learned a huge amount from it. And I
Speaker 1: wonder if you'd spend just a moment telling listeners just
Speaker 1: the short version of this. I mean, I guess I
Speaker 1: knew in a general sort of way that Fiat backed
Speaker 1: currency greenbacks were really a product of the Civil War
Speaker 1: in some general way. And I also knew from working
Speaker 1: on my own interest in the history of the Constitution,
Speaker 1: that in the early years of the Republic, money was
Speaker 1: very scarce because there was still a sense that we
Speaker 1: had to be dependent on gold and silver, and there
Speaker 1: wasn't that much gold and silver in North America relative
Speaker 1: to what there was in Europe, and so it was
Speaker 1: always hard to get hold of money, and so as
Speaker 1: a consequence, there was always a lot of need for
Speaker 1: some other mechanisms of credit. What you show so beautifully
Speaker 1: in the book is that there was an interim solution there,
Speaker 1: and that that solution we've somewhat forgotten today was letters
Speaker 1: of credit. Say a word about what that is and
Speaker 1: why it matters, and then from there maybe we can
Speaker 1: talk about the metaphoric relationship that that has to the
Speaker 1: way the capital moves today in the world. So this
Speaker 1: is one of these things that narratively I found challenging
Speaker 1: the way, like a theoretical physicist can find it challenging
Speaker 1: to write a popular story of that in a way
Speaker 1: that doesn't put people to sleep. You know, the idea
Speaker 1: of writing at great length about letters of credit was
Speaker 1: kind of a nonstarter narratively. Nonetheless, just like the strong
Speaker 1: and weak forces of an atom, trying to explain that
Speaker 1: as a pretty crucial binding force for society seems essential
Speaker 1: and completely overlooked in our story of what essentially makes
Speaker 1: the United States as affluent and powerful as it was.
Speaker 1: So for much of the nineteenth century, you either had
Speaker 1: too little money or too much money, too much currency.
Speaker 1: People needed money, so they're all these banks issuing a
Speaker 1: lot of currency, and it was worth about as much
Speaker 1: as it was until it wasn't. And that's why you
Speaker 1: had every twenty years in the nineteenth century, you have
Speaker 1: a financial crisis, a panic in eighteen nineteen, eighteen thirty seven,
Speaker 1: eighteen fifty seven, eighteen seventy three, eighteen ninety three, nineteen
Speaker 1: o seven, of course nineteen twenty nine. And behind the
Speaker 1: scenes in the system you have a very few number
Speaker 1: of players at which Brown Brows was essential, who make
Speaker 1: sure that the trains run on time. Literally, I mean
Speaker 1: they helped build the first passenger railroad, the BNO, and
Speaker 1: they helped create the transatlantic shipping system so that people
Speaker 1: knew that if they made stuff and grew stuff, that
Speaker 1: someone would buy the stuff. And letters of credit were
Speaker 1: the connective tissue, first between cotton growers in the South
Speaker 1: and people bought the cotton in England and turned it
Speaker 1: into cloth, and then for all sorts of trade, every
Speaker 1: single trade, and without which there's no system, right, there's
Speaker 1: no assurance that people will be able to buy and
Speaker 1: sell stuff. And the amount of cher liquidity in the
Speaker 1: United States did lead to these incredible periods of capital
Speaker 1: creation and booms, and then it led to these incredibly
Speaker 1: tumultuous bus much worse than anything we saw in two
Speaker 1: thousand and eight two thousand and nine. I mean, these
Speaker 1: panics eviscerated the financial system, and then you had these
Speaker 1: bankers at the center of it, of whom Brown Brothers
Speaker 1: were the most important, making sure that in spite of everything,
Speaker 1: there would be trade, there would be goods. Some of
Speaker 1: it was hugely morally problematic, right, the cotton trade was
Speaker 1: on the backs of enslaved men and women, and Brown
Speaker 1: Brothers was totally complicit in that, and a lot of
Speaker 1: which was basically helping the creation of the American economy
Speaker 1: and the creation of the United States. And these letters
Speaker 1: were what you used as kind of a trusted I
Speaker 1: know that if I part with my goods, someone on
Speaker 1: the other side, the other side the Atlantic, will buy them,
Speaker 1: and if I part with my money, I'll get my goods.
Speaker 1: And these letters of credit were that connective tissue. And
Speaker 1: we're essentially, if not invented by Brown Brothers, perfected by
Speaker 1: them and then used by other banks and other financial intermediaries.
Speaker 1: First of all, that was a fantastically clear explanation, so
Speaker 1: thank you. But I think you do so well in
Speaker 1: the book to show that Brown Brothers played a major
Speaker 1: role in answering the question who can you trust? You
Speaker 1: know that basically, unless there's an answer to that question
Speaker 1: where a person attached, a financial system cannot gain the
Speaker 1: kind of trajectory that it needs to get flowing. Flow
Speaker 1: is everything, and if you don't trust people, you can't
Speaker 1: get flow with the scale that is necessary. Reading that,
Speaker 1: one starts immediately to feel the question of what about today?
Speaker 1: Where does such trust lie in the system today, if
Speaker 1: at all, should it exist to a greater degree than
Speaker 1: it in fact does? And what is the presence or
Speaker 1: absence of trust in our current system? Tell us about
Speaker 1: where things stand, you know, So the interesting thing is,
Speaker 1: as you highlight their word was their bond. The reputation
Speaker 1: was key a lot of the letters at Alexander Brown
Speaker 1: in the first thirty years of the nineteenth century writes
Speaker 1: to his four sons, who are the Brown brothers? Heads?
Speaker 1: Brown brothers? You sound like some distillation of Ben Franklin
Speaker 1: and Poor Richard's Almanac, and Polonius and Hamlet and every
Speaker 1: kind of homily and cliche that every parent has ever
Speaker 1: given to every child. Don't take risks that are beyond
Speaker 1: your means. Make sure you know the people you're in
Speaker 1: business with. Its trust is easily lost and hard to gain.
Speaker 1: And they kind of live this and breathe it because
Speaker 1: they recognize that in a world without a lot of trust,
Speaker 1: those things are unequivocally true. What's really fascinating about today
Speaker 1: is I don't think we have fully appreciated what a
Speaker 1: radical break the past fifty years have been globally in
Speaker 1: terms of how human beings conceive of money, right, and
Speaker 1: that the idea that a paper promise is worth more
Speaker 1: than the paper it's written on was a completely alien
Speaker 1: concept for most societies for most of history and still
Speaker 1: makes people, you know, radically uncomfortable with the notion of really,
Speaker 1: at the end of the day, if I give you
Speaker 1: a dollar, whether it's digital or paper, it's a pretty
Speaker 1: abstract thing. And the fact that we say that it
Speaker 1: has values because all of us have kind of collectively
Speaker 1: decided that it has value, not because it actually has
Speaker 1: any intrinsic value. And cryptocurrency dramatizes this to an incredible
Speaker 1: degree exactly, which is also why I'm really impatient with
Speaker 1: a lot of crypto skeptics. Not that I'm a crypto bull,
Speaker 1: I'm just saying the crypto skeptics say, oh, come on,
Speaker 1: it's not worth anything, right, without recognizing that frankly, we
Speaker 1: live in a world that there's no intrinsic value to
Speaker 1: most things. You know, it's the value we ascribe to
Speaker 1: it with intermediars who we think will be good for it.
Speaker 1: And in many ways, you know, us power today, as
Speaker 1: cemented by the global possession of the dollar, because there
Speaker 1: needs to be some common means of exchange, relies on
Speaker 1: a lot of faith in the system. That makes a
Speaker 1: lot of people uncomfortable, but it is the product of
Speaker 1: several hundred years of evolution, of which the paper money
Speaker 1: part of the nineteenth century is like the first chapter
Speaker 1: of which we're now living. In the later chapters, the
Speaker 1: question of trust isn't interesting, and that like, I don't
Speaker 1: necessarily trust my bank in the sense of I think
Speaker 1: they're good people, But I trust my bank in the
Speaker 1: sense of I clearly believe that if I put money
Speaker 1: in the bank, they're good for it. And that's a
Speaker 1: combination of a little bit of a regulatory framework, right
Speaker 1: new deal law is saying your deposits are insured, and
Speaker 1: a little bit of you know, I don't have any
Speaker 1: reason to believe otherwise, and I need that, like we
Speaker 1: need that to function. And in an early version, you
Speaker 1: need something like Brown Brothers, which is surely their reputation.
Speaker 1: So I don't think trust has gone away. We just
Speaker 1: don't think of it in quite the same way. And
Speaker 1: arguably it's a slightly different phenomenon. Right, I mean, we
Speaker 1: begin with the idea that I know you, and I
Speaker 1: trust you because I know you to be the kind
Speaker 1: of person based on my experience of you, whom I
Speaker 1: can rely on. Then you get a firm like Brown
Speaker 1: Brothers that begins to institutionalize that trust. I may not
Speaker 1: know you, but I know your brand and I know
Speaker 1: that your bank is committed to not going under, and
Speaker 1: so in that sense, I trust you. So that's a
Speaker 1: bit of an institutionalization of the trust away from one
Speaker 1: person to an institution, but it's still a small institution,
Speaker 1: and it's still a family owned institution. What you have today, though,
Speaker 1: is a very different stage in the evolution, where the
Speaker 1: trust is almost almost not at all in the institutions
Speaker 1: and almost all in the governmental structures that create the
Speaker 1: conditions where we think that the institution will follow the
Speaker 1: rules because otherwise people would go to prison. And that's
Speaker 1: a different kind of institutional trust. It's still trust in
Speaker 1: a set of institutions, but they're less the institutions, the
Speaker 1: financial institutions themselves, and more the regulators of those institutions.
Speaker 1: So you're totally right about the regulatory framework and that
Speaker 1: being an essential component to people's trust in the financial system.
Speaker 1: This is an explicit in the book. It's certainly explicit
Speaker 1: in a lot of what I've written about. I think
Speaker 1: regulation is necessary but not sufficient, right, and some of
Speaker 1: the regulatory craze today in the Biden administration this is
Speaker 1: a whole other conversation, but I think it treats regulation
Speaker 1: as sufficient and necessary. One of the lessons of a
Speaker 1: Brown Brother's culture is that you need a culture. Right.
Speaker 1: You can regulate behavior, but you can't really regulate culture,
Speaker 1: or you cannot create a regulatory framework that leads companies
Speaker 1: in the near and I think even the mid term
Speaker 1: to embody a different culture. What's fascinating about an earlier
Speaker 1: version of American capitalism was it was an an internal
Speaker 1: culture that recognized the ineluctable bond between private gain and
Speaker 1: public good, and that individuals and collectives that were private.
Speaker 1: It was part of a narrative of we I eat
Speaker 1: the individual, and the company is responsible to the collective
Speaker 1: because ultimately, we the individual in the company can't thrive
Speaker 1: unless the collective in which we're embedded also thrives. That
Speaker 1: was a non regulatory ethos, and it led to some
Speaker 1: of the behavior that regulation seeks to force. So it
Speaker 1: was internal guardrails rather than external guardrails. And I happen
Speaker 1: to believe in part of the point of the book
Speaker 1: is culture matters, and without those internal guardrails, all the
Speaker 1: external guardrails in the world, they can create an adversarial
Speaker 1: culture where behavior is constrained, but they cannot easily create
Speaker 1: positive behavior, they can curtail negative behavior. We'll be right back.
Speaker 1: Let me ask you a question, Zach, about a theme
Speaker 1: that is already in the title of your book. There's
Speaker 1: a more ultiple meaning to the title inside Money. But
Speaker 1: on any of those possible meanings of that phrase, there's
Speaker 1: an idea that there is an inside and an outside
Speaker 1: to money, that there are elites who understand what's going
Speaker 1: on and who have a lot of power and the
Speaker 1: capacity to pull strings, and then there's the rest of
Speaker 1: us who are on the outside. Maybe our noses are
Speaker 1: pressed up against the glass. Maybe we don't even know
Speaker 1: where the glass is to press our nose up against it,
Speaker 1: And sociologically that remains true. But arguably there is a
Speaker 1: democratizing impulse in finance today that it's not the first time.
Speaker 1: You know, There's been lots of other moments when the
Speaker 1: public got interested, and sometimes that was a sign that
Speaker 1: there was about to be a crash, but we certainly
Speaker 1: seem to be in one now where people talk about
Speaker 1: gamification of trading, They talk about how easy it is
Speaker 1: to open a coin base account, they talk about how
Speaker 1: easy is to trade on platforms like robin Hood, and
Speaker 1: then you actually have the crazy phenomenon of activists whose
Speaker 1: nature of their activism is to boost up stocks that
Speaker 1: the insiders agree aren't very valuable, and that frankly, any
Speaker 1: rational person would agree aren't very valuable, and they're experiencing
Speaker 1: it as a kind of thrill of the outsiders. And
Speaker 1: in that sense, it's a populist or democratizing with a
Speaker 1: small d mode of finance. What do you think about
Speaker 1: that when you read about populist impulses to beat the
Speaker 1: insiders at their own game, yea? Or when you read
Speaker 1: people saying, you know what's wrong with finances, that it's
Speaker 1: in the hands of the few. It ought to be
Speaker 1: in the hands of the many, right or wrong? Do
Speaker 1: you feel some sense of fear when you hear that?
Speaker 1: Do you think, oh my god, these poor people are
Speaker 1: gonna hurt themselves. Nope. I think I celebrate almost all
Speaker 1: of that, but with the cautionary reality of people will
Speaker 1: be harmed by that, just as they were harmed by
Speaker 1: the system that they're being rejected. You know, revolution is
Speaker 1: often necessary, but it's not very balanced. I mean, I
Speaker 1: would prefer for evolutionary change. I think we'd all be
Speaker 1: healthier for it, because there'd be less collateral damage along
Speaker 1: the way, So a populist opening, you know, that's a
Speaker 1: little less burn it all down, burn baby burn. I
Speaker 1: mean there's an element of the the whole thing that
Speaker 1: went on with Game Stop, and there's an element with
Speaker 1: Robin Hood that can approach the burn baby burn attitudes
Speaker 1: of the late sixties, like the system is irremediably corrupt,
Speaker 1: so we should just blow it up and start it again.
Speaker 1: I'm not really into that one, but but it's so
Speaker 1: interesting you're saying that because I have the exact opposite instinct.
Speaker 1: I look at Game Stop and I say, boy, in
Speaker 1: the sixties, when they wanted to burn it all down,
Speaker 1: they didn't say it and let's do it by trading
Speaker 1: and making money. Right. There was a kind of utopian
Speaker 1: idealism associated with being anti capitalist. Today, capitalism is so
Speaker 1: much the you know, the air we breathe, the water
Speaker 1: we drink, that the burn it down comes in the
Speaker 1: form of let's do a trade, right, let's let's I
Speaker 1: mean that you can't get closer to the ultimate victory
Speaker 1: of capitalism than if the people who want to break
Speaker 1: capitalism want to break it by capitalist means. They're not
Speaker 1: trying to use the master's tools to deconstruct the master's house.
Speaker 1: They're trying to use the master's tools to become the masters.
Speaker 1: Neither more nor less, that is definitely true. I do
Speaker 1: think more inputs, more egalitarian, more access to more capital
Speaker 1: for more people who can make their own choices, that
Speaker 1: I find a good thing, you know, And the same
Speaker 1: way that unlocking capital in the nineteenth century was nett
Speaker 1: I think a better thing than not led more people
Speaker 1: to have what we would consider to be a middle
Speaker 1: class life. It's the story of what's going on in Asia.
Speaker 1: You know, it's like unlocking human capital and actually creating
Speaker 1: a capital system. But this honestly is a philosophical discussion
Speaker 1: because it leads to answers in action of kind of
Speaker 1: the cup half full, cup half empty. Right, If you
Speaker 1: somewhat celebrate these moves, you have a different attitude. If
Speaker 1: I'm at the SEC right now and I think both
Speaker 1: game stop and crypto and the kind of unregulated mass
Speaker 1: of financial activity is unleashing destructive forces that need to
Speaker 1: be bottled, You're going to have a particular regulatory and
Speaker 1: or philosophical response if you think that they are inherently
Speaker 1: positive developments and that they would create more inclusivity. What
Speaker 1: wasn't very elite to system you're going to think in
Speaker 1: terms of regulation and guardrails very differently. So in that sense,
Speaker 1: I think the where you sit visa VI these developments
Speaker 1: shapes what kind of policies and what kind of actions
Speaker 1: you take in the present. Really, intimately, I'm really interested
Speaker 1: to hear you say that, Zach, because in reading the book,
Speaker 1: I felt maybe this is just confirmation bias. But as
Speaker 1: I read the book, I thought to myself, Wow, in
Speaker 1: the wild, wild West days, with all the booms and
Speaker 1: all the busts, there were some people trying to hold
Speaker 1: it all together. Thank goodness. Then you know, there's the
Speaker 1: role people associated with the firm played in the creation
Speaker 1: of the International Financial Institution in the post World War
Speaker 1: two era. That too was a group of elites trying
Speaker 1: to stabilize things in that case, both globally and domestically.
Speaker 1: And then I looked at the contemporary world, where we
Speaker 1: seem to be entering a period of relative destabilization, and
Speaker 1: I thought, oh, boy, who's playing that role now? But
Speaker 1: what I'm hearing from you is something a little different.
Speaker 1: What I'm hearing from you is, look, the other institutions
Speaker 1: aren't really playing that role, and insiders maybe have a
Speaker 1: little bit too much power, and so some spreading of
Speaker 1: the power might actually be desirable in this historical moment. Yeah,
Speaker 1: and that's why I think it's back to this culture thing,
Speaker 1: which I'm going to hammer home on unsatisfying though it
Speaker 1: is at times to myself as well, which is, if
Speaker 1: you're going to democratize finance and democratize nodes, you also
Speaker 1: have to democratize responsibility. And that's where culture becomes really
Speaker 1: important individually, right, which is like I don't get to
Speaker 1: just pursue what I'm going to pursue without consequence. Some
Speaker 1: of that has to be self imposed, right, It cannot
Speaker 1: just be imposed by others. And we're not going back
Speaker 1: to an elite construct world because there's no evidence that
Speaker 1: we could or should. Although I actually think large multinational companies,
Speaker 1: by virtue of the pressures on them from governments and
Speaker 1: their own employees and financial forces, have become many of
Speaker 1: them much more responsible to the global commons than any
Speaker 1: one government and then to a lot of people, and
Speaker 1: that's a kind of an interesting development. You know, they've
Speaker 1: been much more focused on climate change because it hurts
Speaker 1: their bottom line. They've been more focused on being efficient,
Speaker 1: they've been more focused on sometimes on minimum wages than
Speaker 1: government has often self interested. You know, why does Walmart
Speaker 1: raise the minimum wage of its workers? The idea, you
Speaker 1: know that this can all be done surely by a
Speaker 1: regulatory framework, I just think is a mistake. I think
Speaker 1: that's a necessary back to that question, necessary but not
Speaker 1: sufficient part of what we tried to teach ourselves in
Speaker 1: schools and you know, the whole education systems. How do
Speaker 1: you create people who feel responsibility as citizens to a
Speaker 1: larger good? And I guess you know the utopian translation
Speaker 1: of that into the GameStop thing is you just you
Speaker 1: can't endlessly make your own money. It's got to come
Speaker 1: from somewhere. You can't endlessly destroy or create companies out
Speaker 1: of nothing. Eventually there has to be something. And look,
Speaker 1: we might look back at this all very quaintly in
Speaker 1: ten years as a luxurious discussion for a system that's collapsed.
Speaker 1: But we also might look back all of this in
Speaker 1: ten or fifteen years as the messiness in the fray
Speaker 1: getting to a more constructive place of what you'd call
Speaker 1: inclusive or sustainable capitalism. Zach, I want to thank you
Speaker 1: for writing yet another book that explains hard to understand
Speaker 1: stuff that's really important to those of us who care
Speaker 1: to learn the books. Is great, and please keep up
Speaker 1: your dual track body of work of writing history to
Speaker 1: explain things to us while also continuing to do it
Speaker 1: in practice yourself. Thanks so much, Noah, We'll be right back.
Speaker 1: Listening to Zach talk about the history of capitalism in
Speaker 1: the United States and its future really made me reflect
Speaker 1: on a deep tension in the way that power works
Speaker 1: in the context of capitalism. On the one hand, capitalism
Speaker 1: is a space of radical equality in that my dollar
Speaker 1: is worth the exact same amount as your dollar, and
Speaker 1: in theory, the markets don't care at all about what
Speaker 1: we look like or how we sound. They only care
Speaker 1: about how much money we can generate. And yet, at
Speaker 1: the same time, on the other side of the split screen,
Speaker 1: the history of capitalism is a history of particular people
Speaker 1: becoming insiders, as in Zach's title Inside Money, and using
Speaker 1: that insider status, either for good or ill, to shape
Speaker 1: the future of the power of capital. Brown Brothers begins
Speaker 1: in his story as trustworthy and successful because of the
Speaker 1: specific identity of the firm and the reputational concern that
Speaker 1: it has to be trusted, that trust starts as personal,
Speaker 1: and by virtue of it being personal, it creates tremendous
Speaker 1: power in the people who are able to establish that reputation.
Speaker 1: This kind of capitalism is the capitalism that creates stability,
Speaker 1: but that also simultaneously creates fundamental inequality, because in this
Speaker 1: world you and I are not equal. When we put
Speaker 1: a dollar on the table, it matters entirely who is trusted,
Speaker 1: And when you get to the question of who's going
Speaker 1: to be trusted, suddenly the determinants of background, identity, race, class,
Speaker 1: and sex start to come into the picture. So our
Speaker 1: distributional inequalities are partly a result of this aspect of
Speaker 1: capitalism itself. Another major takeaway of Zach's book is that
Speaker 1: the risk taking that we associate with the most famous
Speaker 1: financial firms is not necessarily the only way for big
Speaker 1: financial institutions to last and even to get rich. It
Speaker 1: is rather a product of a new historical period in which,
Speaker 1: as Zach explained, the fact that the big banks are
Speaker 1: publicly traded, means that the people who work for them
Speaker 1: have a lot to gain by taking risk and very
Speaker 1: little to lose. By taking risk, and that is fundamentally
Speaker 1: different than the way the system worked when the big
Speaker 1: banks were partnerships, and if you took a risk to
Speaker 1: make money, that meant you were personally taking a substantial
Speaker 1: risk to lose money. As Zach points out, he's not
Speaker 1: the first person to have made that point, but he
Speaker 1: makes it tremendously powerfully. The third and final takeaway for
Speaker 1: me was the question of the democratization or the popularization
Speaker 1: of finance. I thought in reading Zach's book that he
Speaker 1: would be nervous about GameStop, coin base, robin Hood, crypto,
Speaker 1: and the general idea that right now finances being taken
Speaker 1: out of the hands of the responsible financial institutions and
Speaker 1: increasingly put into the hands of the ordinary investor sitting
Speaker 1: at a computer screen and treating the whole thing as
Speaker 1: a kind of a game. But to my surprise and
Speaker 1: to my interest, Zach is actually very open to the
Speaker 1: idea that capital needs to be small d democratized, or
Speaker 1: popularized because the institutions at the top are not very
Speaker 1: good at caring for the overall well being the way
Speaker 1: they once perhaps were, in large part because they don't
Speaker 1: care as much as they once did about maintaining their
Speaker 1: reputations for trust and caring about the whole. Zach favors
Speaker 1: our being more responsible and talking about utopian ideals. At
Speaker 1: the same time, He's distrustful enough of our capacity to
Speaker 1: do so that he welcomes the possibility of change from
Speaker 1: the outside. I love to be surprised in conversation. Indeed,
Speaker 1: that's one of the reasons that I love doing this
Speaker 1: Deep Background show, because I love to be surprised by
Speaker 1: things that people have to say, and that came as
Speaker 1: a genuine and interesting surprise to me. I learned a
Speaker 1: tremendous amount from the conversation and from the book, and
Speaker 1: I hope that you listeners learn something too. Until the
Speaker 1: next time I speak to you, breathe deep, think deep thoughts,
Speaker 1: and if possible, have some fun. If you're a regular listener,
Speaker 1: you know I love communicating with you here on Deep Background.
Speaker 1: I also really want that communication to run both ways.
Speaker 1: I want to know what you think are the most
Speaker 1: important stories of the moment and what kinds of guests
Speaker 1: you think you would be useful to hear from. More So,
Speaker 1: I'm opening a new channel of communication to access it.
Speaker 1: Just to my website. Noah Dashfelman dot com. You can
Speaker 1: sign up from my newsletter and you can tell me
Speaker 1: exactly what's on your mind, something that would be really
Speaker 1: valuable to me and I hope to you too. Deep
Speaker 1: Background is brought to you by Pushkin Industries. Our producer
Speaker 1: is mo La Board, our engineer is Bentaladay, and our
Speaker 1: showrunner is Sophie Crane mckibbe. Editorial support from noahm Osband.
Speaker 1: Theme music by Luis Guerra at Pushkin. Thanks to Mia Lobell,
Speaker 1: Julia Barton, Lydia Jeancott, Heather Faine, Carlie mcgliori, Maggie Taylor,
Speaker 1: Eric Sandler, and Jacob Weisberg. You can find me on
Speaker 1: Twitter at Noah R. Feldman. I also write a column
Speaker 1: for Bloomberg Opinion, which you can find at Bloomberg dot
Speaker 1: com slash Feldman. To discover Bloomberg's original slate of podcasts,
Speaker 1: go to Bloomberg dot com slash podcasts, and if you
Speaker 1: liked what you heard today, please write a review or
Speaker 1: tell a friend. This is Deep Background