WEBVTT - Indoor Cat: JPM, AI, 777

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to

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<v Speaker 1>The Money Stuff Podcast, your weekly podcast where we talk

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<v Speaker 1>about stuff related to money. I'm Matt Levian and I

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<v Speaker 1>read the Moneys dot Com for Bloomberg Opinion.

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<v Speaker 2>And I'm Katie Greifeld, a reporter for Bloomberg News and

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<v Speaker 2>an anchor for Bloomberg Television.

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<v Speaker 1>You were reporting live from the field this week.

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<v Speaker 2>I was. I am a studio anchor. I like being

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<v Speaker 2>in the studio. Boy, boy do I love sitting behind

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<v Speaker 2>a desk and screaming at a camera. But I had

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<v Speaker 2>to go into the field this week because JP Morgan

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<v Speaker 2>was having their ribbon cutting ceremony for their big, beautiful

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<v Speaker 2>building at two seventy Park Avenue. Beautiful, one big beautiful building.

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<v Speaker 2>They actually own a bunch of buildings, Yes they do.

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<v Speaker 1>It's not fun to have a campus, and it is

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<v Speaker 1>really cool. I joked. I joked this week that the

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<v Speaker 1>JP Morgan building at a forest ory gold statue of

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<v Speaker 1>Jamie Diamond in the lobby, which you can now report.

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<v Speaker 2>They can tell you it's not true. They do. I

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<v Speaker 2>don't know if they had the three story I don't

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<v Speaker 2>know if they have this all the time. But when

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<v Speaker 2>I was there for the ribbon cutting ceremony.

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<v Speaker 1>They had uh had a live Jamie Diamond.

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<v Speaker 2>There was a live Jamie Diamond or really convincing AI robot.

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<v Speaker 2>But they also had a flagpole and they had a

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<v Speaker 2>fan on the flag so that the flag was waving

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<v Speaker 2>in the artificial breeze.

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<v Speaker 1>Wait. Wait, like they had an HVAC system that circulated

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<v Speaker 1>air in such a way that the end of our

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<v Speaker 1>flag waved, or they had like a desk fan.

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<v Speaker 2>I could not see the fan.

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<v Speaker 1>Everything was it wasn't It wasn't like a guy with

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<v Speaker 1>a stick with a dusk van.

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<v Speaker 2>No, No, the fan was hidden. If it was circulating,

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<v Speaker 2>I didn't feel any of it. But yeah, it was

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<v Speaker 2>specifically for the flag so that it would flap.

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<v Speaker 1>That's awesome.

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<v Speaker 2>It was awesome, and it was fine. A few people,

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<v Speaker 2>including you, asked me who did you interview there? And

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<v Speaker 2>I said, no one. I was just there to be like,

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<v Speaker 2>I'm here the building. Yeah, I'm inside the building, but

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<v Speaker 2>the thing is Matt to prepare.

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<v Speaker 1>For Jamie Diamond's physical ribbon cutting, which happened. Of course.

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<v Speaker 2>I mean, I wasn't going to go there and not

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<v Speaker 2>see you. No, they wouldn't let me that Close's crazy,

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<v Speaker 2>but yeah, I know. He held a giant pair of scissors.

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<v Speaker 2>I believe New York Governor Kathy Hokeel was next to

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<v Speaker 2>him for that. And he cut the ribbon so it

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<v Speaker 2>was awesome.

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<v Speaker 1>Did they have backup ribbons?

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<v Speaker 2>They must have. They must have.

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<v Speaker 1>I mean he cut the angle and do it again.

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<v Speaker 2>Imagine if they spent five billion dollars on this building. Yeah, no, no,

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<v Speaker 2>they were gonna they were going to get this over

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<v Speaker 2>the finish line properly. But Matt, to prepare for these

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<v Speaker 2>hits that I had to do about the building, I

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<v Speaker 2>accumulated so much knowledge, so many facts about the building.

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<v Speaker 1>That you're going to tell us, tell me and the listener.

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<v Speaker 1>I'm going to step that I need.

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<v Speaker 2>I need to use it somewhere. It's not it's not

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<v Speaker 2>knowledge that I can build on.

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<v Speaker 1>You can use it during the hits or not as.

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<v Speaker 2>Much as you would think. You always you always over

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<v Speaker 2>prepare and then me and then they ask you, like

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<v Speaker 2>one question. I forgot what it's like to be a reporter,

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<v Speaker 2>and you have just these anchors who don't care about

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<v Speaker 2>what you're saying. No, are all my colleagues are lovely.

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<v Speaker 1>Okay, some facts, all.

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<v Speaker 2>Right, So to so Many Park Avenue is the new building,

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<v Speaker 2>that's what we're talking about. Six years of construction.

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<v Speaker 1>Yes, so that I noticed that. Yeah, it's on the

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<v Speaker 1>wactor ground Central.

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<v Speaker 2>It's not over because their temporary headquarters has been at

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<v Speaker 2>three eighty three Madison Avenue, which is directly across forty

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<v Speaker 2>seventh Street. And now now that the new headquarters is open,

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<v Speaker 2>now they're going to spend a billion dollars to renovate

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<v Speaker 2>three eighty three Madison. So they're going to close it

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<v Speaker 2>in twenty twenty six, redo the exterior, redo the interior,

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<v Speaker 2>and it'll open at the end of twenty twenty seven.

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<v Speaker 2>So we're just getting started when it comes to JP

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<v Speaker 2>Morgan doing construction in that specific area of New York City.

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<v Speaker 2>But let me go on, let me go on. It's

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<v Speaker 2>sixty stories tall, Okay, a normal number of Well that's

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<v Speaker 2>the thing. It's nearly fourteen hundred feet tall. So the ceiling,

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<v Speaker 2>oh yeah, no, the ceilings are super high. And the

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<v Speaker 2>lobby specifically it's the building itself is raised eighty feet

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<v Speaker 2>off the ground, so just as a super huge lobby.

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<v Speaker 2>And the reason why is because they wanted to like

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<v Speaker 2>have more outdoor space outside of the building, theoretically giving

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<v Speaker 2>space back to the city. But I don't know. I

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<v Speaker 2>don't think you're going to be eating your sandwich up

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<v Speaker 2>against the JP Morgan building necessarily, but it's a nice idea.

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<v Speaker 1>Yeah, I find the overhang slightly alarming, which it does

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<v Speaker 1>look like a somewhat precariously balanced building. I understand at

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<v Speaker 1>an intellectual level that they employed good architectes and the

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<v Speaker 1>building will not topple over in a slight preece. But

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<v Speaker 1>i'd like, you know, if you're on that overhanging, yeah,

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<v Speaker 1>there's a big building above me.

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<v Speaker 2>Well, those architects were there. Lord Norman Foster designed this building.

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<v Speaker 2>He's done a bunch of famous buildings over in Europe.

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<v Speaker 2>But he also did Apple Park in Kupertino, so that's

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<v Speaker 2>cool park. Yeah, yeah, yeah. Anyway, so I'm just getting started.

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<v Speaker 2>So six years of construction on this building, matt As,

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<v Speaker 2>we've established that, includeed demolishing the old building that was there.

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<v Speaker 2>So in terms of the features, I know that you're

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<v Speaker 2>dying about the amenities on the thirteenth floor of the building,

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<v Speaker 2>which I did get to see. They have a pub

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<v Speaker 2>called Morgan's it's reservation only, so you can't just make your.

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<v Speaker 1>Reservation three o'clock for the pub or he just immediately fired.

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<v Speaker 2>That's the thing I was thinking, like, would I be

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<v Speaker 2>bold enough, Like if Bloomberg had a pub that you

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<v Speaker 2>had to make reservations at, would I ever do that?

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<v Speaker 2>I don't know.

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<v Speaker 1>I would definitely go to the Bloomberg pub all the time.

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<v Speaker 2>But like, well, you have a certain amount of clout here,

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<v Speaker 2>so they'd be like, oh, he's thinking his thoughts.

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<v Speaker 1>I just feel like Jamie Diamond has really gone on

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<v Speaker 1>record being like everyone in the office all the time.

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<v Speaker 1>And I understand that the pub is in the office,

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<v Speaker 1>but still.

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<v Speaker 2>Yeah, well it's a great way to keep them in

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<v Speaker 2>the office all the time.

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<v Speaker 1>Now I think about it, like taking the clients to

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<v Speaker 1>the JP Morgan and has pub is kind of a

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<v Speaker 1>nice Oh yeah at all.

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<v Speaker 2>I would like to go. Invite me please, I'll go.

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<v Speaker 2>I have to expense it though, So anyway, apparently JP.

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<v Speaker 1>Morgan, you and I just like into the JP Morgan.

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<v Speaker 2>That'd be great. Let's do a podcast episode for there

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<v Speaker 2>from Jamie Diamond. If you're listening, you're our special guest.

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<v Speaker 1>I think that we could know the guest be like

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<v Speaker 1>the bartender at Morgan's. Oh true, twelve hours Yeah.

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<v Speaker 2>Right, yeah, that would be a lot of fun anyway,

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<v Speaker 2>JP Morgan imported the parts needed to pour a proper

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<v Speaker 2>pint of guinness at Morgans, so just no, it's quality.

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<v Speaker 2>There's also a fitness center at two seventy Avenue. I'm

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<v Speaker 2>reading off the notes that I printed out for TV.

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<v Speaker 2>I was prepared to say all of this on air.

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<v Speaker 2>So they have a fitness center and Bloomberg News reported

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<v Speaker 2>that this was an uphill battle. Apparently Jamie Diamond personally

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<v Speaker 2>dislikes in office gym's and didn't want it, but eventually

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<v Speaker 2>he was brought over. Which again, if you're trying to

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<v Speaker 2>get your employees to live at the office, you need

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<v Speaker 2>a pub, but you also need a jim.

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<v Speaker 1>Yeah, I'm not an in office gym guy.

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<v Speaker 2>But no, I think I would be. I think I

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<v Speaker 2>would love it. We don't have one.

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<v Speaker 1>Here, so like this is all like very you know,

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<v Speaker 1>nostalgic for me because I worked at Goldman when they

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<v Speaker 1>opened their new office on jenderbut Street, and it did

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<v Speaker 1>have an office gym. It's been so long as an

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<v Speaker 1>office gym where people would you know, like you run

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<v Speaker 1>into like your boss's boss's boss in like you know, a.

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<v Speaker 2>State of I would love Well, no, not that specifically

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<v Speaker 2>that specifically. No, I thought you were going to say,

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<v Speaker 2>like doing doing a chest press, and like, I feel

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<v Speaker 2>like I would be very good at having a conversation

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<v Speaker 2>in that scenario.

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<v Speaker 1>I think you would. Yeah, I think that's why you're

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<v Speaker 1>a TV anchor. I would be very bad at having

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<v Speaker 1>a conversation in that scenario. But like there's also the

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<v Speaker 1>more specific like locker room scenario. And so the other

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<v Speaker 1>thing that I remember about the Goldman office is that

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<v Speaker 1>it was very very nice. It's like, yeah, I knew

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<v Speaker 1>it's shiny, but everyone got a little bit less space

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<v Speaker 1>than they had in their own office. And I have

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<v Speaker 1>read that something similar is true at JP Morgan where

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<v Speaker 1>they have this new big office building, but because the

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<v Speaker 1>ceilings are so hot, there's less room for desks.

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<v Speaker 2>Well that's the thing. You have fewer floors, just sixty stories,

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<v Speaker 2>which is you know, the stories for.

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<v Speaker 1>All those bankers who did you see.

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<v Speaker 2>Did you see the things circulating on social media? It's

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<v Speaker 2>like a photo of one of their trading floors and

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<v Speaker 2>it's like just stocked with Dell computers, which have four

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<v Speaker 2>monitors a piece.

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<v Speaker 1>I think I did see it, and they're all, well.

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<v Speaker 2>It's exactly as I described.

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<v Speaker 1>There's there right, because it's they haven't moved into the

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<v Speaker 1>trading floor yet.

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<v Speaker 2>It's like, yeah, they've been moving people in gradually, is

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<v Speaker 2>what I understand. I think the floor is yeah yet Yeah.

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<v Speaker 2>Shall I tell you about some of their other buildings

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<v Speaker 2>in their campus. I need somewhere to record this, you know,

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<v Speaker 2>when I when I podcast, when I sort back through

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<v Speaker 2>the rubble of my life, I want to remember this. Okay,

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<v Speaker 2>So we already talked about three eighty three Medison Avenue.

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<v Speaker 2>Well get this, Matt. They bought two fifty Park Avenue

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<v Speaker 2>in twenty twenty four for more than three hundred million dollars.

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<v Speaker 2>Not sure what they're going to do with it right now.

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<v Speaker 2>The plans are still in flux. They collection kind of

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<v Speaker 2>They could keep it as is, They could knock it

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<v Speaker 2>down and build a new office tower, which they now

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<v Speaker 2>have some experiences, or they could turn it into a

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<v Speaker 2>hotel for visiting employees. That's not all four to ten

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<v Speaker 2>Madison Avenue. They're not sure, JP Morgan, according to Bloomberg Reporting,

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<v Speaker 2>not sure if they're going to keep or sell for

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<v Speaker 2>ten Madison. They bought that during the worst days of

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<v Speaker 2>the pandemic in twenty twenty. They've been using it basically

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<v Speaker 2>as a project office for the headquarters construction. But all told,

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<v Speaker 2>in these blocks that we're talking about, JP Morgan has

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<v Speaker 2>nearly six million square feet of office space, which is

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<v Speaker 2>almost as much as Goldman Sachs has in all of

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<v Speaker 2>North and South America. So the physical footprint of JP

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<v Speaker 2>Morgan is pretty stunning. Yeah, yeah, I.

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<v Speaker 1>Do appreciate that there's a JPA Morgan district in Mindow, Manhattan.

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<v Speaker 2>Yeah. I think Bloomberg News called it a neighborhood, which

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<v Speaker 2>I think is cute. Yeah, city within a city to

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<v Speaker 2>so many Park Avenue. I'm almost done. It's going to

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<v Speaker 2>house about ten thousand workers all told. In terms of

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<v Speaker 2>corporate employees, they have more than seventeen thousand. So this

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<v Speaker 2>is why they need all these buildings. Yeah yeah, all right,

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<v Speaker 2>big bank walk past it, you know, if you find

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<v Speaker 2>yourself in your grand center. I do see it from

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<v Speaker 2>I live in Hoboken now and I run a lot,

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<v Speaker 2>so you can see it from the waterfront and it

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<v Speaker 2>lights up in different colors and you know, it's a

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<v Speaker 2>nice addition to the skyline. Good on you.

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<v Speaker 1>Okay your architecture criticism, your own record is liking it.

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<v Speaker 2>I like the building, doesn't it not?

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<v Speaker 1>I really like it?

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<v Speaker 2>Yeah? Who doesn't like it? What are their criticisms? I

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<v Speaker 2>want to know, because I mean, I think it's cool

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<v Speaker 2>to get new skyscrapers. Sorry, and this one.

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<v Speaker 1>I see it from street level and it feels threatening

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<v Speaker 1>to it from the street level.

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<v Speaker 2>Yeah, it doesn't.

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<v Speaker 1>Strike me as having to make a sense of lightness

0:11:53.320 --> 0:11:57.720
<v Speaker 1>or no rightness. It's kind of like a massive, ominous building.

0:11:58.240 --> 0:12:00.280
<v Speaker 2>I will say that part of my brain that doesn't

0:12:00.320 --> 0:12:04.280
<v Speaker 2>really understand how airplanes stay in the sky gets nervous

0:12:04.320 --> 0:12:05.559
<v Speaker 2>about the way.

0:12:05.760 --> 0:12:08.280
<v Speaker 1>Yeah, it's going in every direction.

0:12:08.520 --> 0:12:10.079
<v Speaker 2>Yeah, Yeah, it's cool.

0:12:10.240 --> 0:12:12.400
<v Speaker 1>It is cool, But like, is it cool enough? Like

0:12:12.480 --> 0:12:13.400
<v Speaker 1>you want to go there every day?

0:12:14.040 --> 0:12:14.480
<v Speaker 2>I don't know.

0:12:15.120 --> 0:12:19.320
<v Speaker 1>Actually, I have no basis for architectural criticism. It's fine,

0:12:19.320 --> 0:12:21.160
<v Speaker 1>it's great. It's a big building. It's cool. It's got

0:12:21.200 --> 0:12:21.480
<v Speaker 1>a pub.

0:12:21.920 --> 0:12:26.320
<v Speaker 2>Yeah Morgan for theory, statue beautiful, a waving flag.

0:12:26.760 --> 0:12:29.079
<v Speaker 1>I mean, he's like got on record second he had

0:12:29.120 --> 0:12:32.439
<v Speaker 1>some funny CREDI was like, it's a monument to it's

0:12:32.440 --> 0:12:34.120
<v Speaker 1>something permanent. You know, what do we do? We push

0:12:34.200 --> 0:12:34.880
<v Speaker 1>paper all day?

0:12:35.200 --> 0:12:51.600
<v Speaker 2>Yeah, it's really good. You could ask the question, does

0:12:51.880 --> 0:12:55.920
<v Speaker 2>JP Morgan need all that space because AI is just

0:12:55.920 --> 0:12:58.840
<v Speaker 2>going to wipe out an entire generation of junior bankers.

0:12:59.480 --> 0:13:01.200
<v Speaker 1>Well that's why they don't have enough space for all

0:13:01.200 --> 0:13:04.439
<v Speaker 1>the bankers, right, they need to replace the junior bankers

0:13:04.440 --> 0:13:07.800
<v Speaker 1>with AI and a monument to yeah, the last to

0:13:07.840 --> 0:13:10.440
<v Speaker 1>the bankers. Yeah, but yeah, there's a great story this

0:13:10.440 --> 0:13:14.560
<v Speaker 1>week about open AI as a thing called Project Mercury. Yes,

0:13:14.640 --> 0:13:18.080
<v Speaker 1>Sydney step back. Like the AI companies, like the first

0:13:18.120 --> 0:13:20.720
<v Speaker 1>thing they did was sort of train their models on

0:13:20.800 --> 0:13:23.640
<v Speaker 1>all of the Internet to like understand at some superficial

0:13:23.720 --> 0:13:24.840
<v Speaker 1>level all of human knowledge.

0:13:24.920 --> 0:13:26.559
<v Speaker 2>And then you had a Reddit chatbot.

0:13:27.040 --> 0:13:29.200
<v Speaker 1>Yeah, and now they're like the next step is to

0:13:29.280 --> 0:13:34.320
<v Speaker 1>get specialist humans to train the models to be really

0:13:34.360 --> 0:13:38.360
<v Speaker 1>good at specialist things. And so they've had they have

0:13:38.400 --> 0:13:41.240
<v Speaker 1>a lot of them. They have like you know, astrophysicists

0:13:41.240 --> 0:13:44.679
<v Speaker 1>and you know, like lawyers and everyone like training out

0:13:44.679 --> 0:13:48.040
<v Speaker 1>the models. But the story this week was that they

0:13:48.040 --> 0:13:51.719
<v Speaker 1>also have an army of former investment bankers getting paid

0:13:51.720 --> 0:13:54.280
<v Speaker 1>on hundred and fifty dollars an hour to build LBO

0:13:54.400 --> 0:13:57.760
<v Speaker 1>models for open AI, so that chat GPT can build

0:13:57.760 --> 0:14:01.160
<v Speaker 1>a really good LBO model. And by really good LBO model,

0:14:01.480 --> 0:14:04.880
<v Speaker 1>I mean not only that it as it's formula is

0:14:04.920 --> 0:14:08.080
<v Speaker 1>linked correctly and gets it correct result, but also that

0:14:08.320 --> 0:14:11.160
<v Speaker 1>it has all of the percentages I talicized in the

0:14:11.240 --> 0:14:14.679
<v Speaker 1>right way. And generally will not make an investment banking

0:14:14.760 --> 0:14:18.839
<v Speaker 1>VP angry because you don't want when you like, fire

0:14:18.880 --> 0:14:21.000
<v Speaker 1>all the analysts and replace them with AI, what you

0:14:21.040 --> 0:14:23.880
<v Speaker 1>don't want is to be annoyed at the formatting of

0:14:23.920 --> 0:14:26.520
<v Speaker 1>the output. Because if you're an investment banking VP, you've

0:14:26.520 --> 0:14:29.560
<v Speaker 1>spent your life getting annoyed at the formatting done by

0:14:29.600 --> 0:14:32.000
<v Speaker 1>investment banking analysts, and like you want the AI to

0:14:32.000 --> 0:14:33.440
<v Speaker 1>be a strict improvement over that.

0:14:33.560 --> 0:14:35.680
<v Speaker 2>So I will say I enjoy all the police fix

0:14:35.800 --> 0:14:39.200
<v Speaker 2>memes as an outsider. I've never worked in banking. I'm

0:14:39.200 --> 0:14:40.400
<v Speaker 2>a pure play journalist.

0:14:40.480 --> 0:14:42.840
<v Speaker 1>We have been a banking analyst, yeah, but I've been

0:14:43.320 --> 0:14:45.720
<v Speaker 1>the recipient of please fix that's yeah.

0:14:45.880 --> 0:14:47.760
<v Speaker 2>Do people really care that much about formatting?

0:14:48.040 --> 0:14:50.160
<v Speaker 1>Well, it's like it's a signaling thing, right, It's like

0:14:50.240 --> 0:14:53.360
<v Speaker 1>your analysts come in and they're humans with hopes and dreams,

0:14:53.840 --> 0:15:00.480
<v Speaker 1>and you want them to immediately become automative. You can

0:15:00.640 --> 0:15:03.200
<v Speaker 1>tell to produce a pitch book, and they will produce

0:15:03.200 --> 0:15:06.360
<v Speaker 1>a perfect pitch book. And if they produce an imperfect pitchbook,

0:15:06.600 --> 0:15:11.040
<v Speaker 1>you want them to charge. It's reinforcement learning, but it's

0:15:11.200 --> 0:15:13.240
<v Speaker 1>you know, you want them to quickly be trained out

0:15:13.240 --> 0:15:15.200
<v Speaker 1>of that so that they produce perfect pitch books for

0:15:15.240 --> 0:15:17.240
<v Speaker 1>you so you don't have to worry about it anymore. Right,

0:15:17.520 --> 0:15:19.760
<v Speaker 1>You want the analyst to take the work off your plate,

0:15:20.160 --> 0:15:23.280
<v Speaker 1>and if they give you bad formatting, then you worry

0:15:23.320 --> 0:15:24.920
<v Speaker 1>about what else is in the pitch book that's wrong

0:15:24.920 --> 0:15:26.200
<v Speaker 1>because you can't you want to get to check the

0:15:26.280 --> 0:15:30.320
<v Speaker 1>numbers necessarily, right, I mean the depends like like you'd

0:15:30.400 --> 0:15:31.920
<v Speaker 1>like to be at a point where you can trust

0:15:31.920 --> 0:15:34.200
<v Speaker 1>the analyst and not have to check the numbers, and

0:15:34.680 --> 0:15:38.080
<v Speaker 1>formatting is a visible sign of something else might be wrong.

0:15:38.200 --> 0:15:40.160
<v Speaker 1>And it's also like, you know, the people who get

0:15:40.280 --> 0:15:44.560
<v Speaker 1>to these positions are perfectionists and they get troubled by

0:15:44.600 --> 0:15:45.280
<v Speaker 1>bad formatting.

0:15:45.440 --> 0:15:48.160
<v Speaker 2>Yeah, okay, fair enough. It sounds almost am I going

0:15:48.200 --> 0:15:50.720
<v Speaker 2>to get this wrong? That sounds like broken window theory.

0:15:50.920 --> 0:15:52.200
<v Speaker 1>It is like recommended theory.

0:15:52.280 --> 0:15:55.920
<v Speaker 2>Okay, that makes sense. I really want to interview actually

0:15:56.000 --> 0:15:59.040
<v Speaker 2>the one hundred x investment bankers working on this project

0:15:59.080 --> 0:16:00.680
<v Speaker 2>in the pub at JP Morgan.

0:16:01.320 --> 0:16:05.080
<v Speaker 1>Not one hundred, not all at I have a guess.

0:16:04.880 --> 0:16:06.960
<v Speaker 2>You don't want to interview all one hundred of them,

0:16:07.000 --> 0:16:08.720
<v Speaker 2>not at once, No, just the funniest ones.

0:16:09.040 --> 0:16:11.160
<v Speaker 1>I have a guess about what the vibe is. Like,

0:16:12.520 --> 0:16:15.560
<v Speaker 1>it's interesting to me like these people are clearly putting

0:16:16.720 --> 0:16:20.160
<v Speaker 1>their successors out of work. Maybe they're not, but like, yeah,

0:16:20.720 --> 0:16:25.080
<v Speaker 1>that's what it's the vision, right, And you might think

0:16:26.000 --> 0:16:32.400
<v Speaker 1>that if you went to people in some industry and said, hey,

0:16:32.800 --> 0:16:34.760
<v Speaker 1>would you like to get paid one hundred fifty dollars

0:16:34.800 --> 0:16:38.720
<v Speaker 1>an hour for like three months? One month? I don't

0:16:38.760 --> 0:16:40.400
<v Speaker 1>know how long this project is, but I don't I

0:16:40.400 --> 0:16:43.080
<v Speaker 1>don't think they envision a decade's kind of thing. Would

0:16:43.080 --> 0:16:44.400
<v Speaker 1>you like to get paid one hundred and fifty dollars

0:16:44.440 --> 0:16:47.120
<v Speaker 1>an hour for a month to put everyone in your

0:16:47.160 --> 0:16:49.160
<v Speaker 1>industry out of work? I think a lot of people

0:16:49.200 --> 0:16:50.960
<v Speaker 1>in a lot of industries would say no. Like I

0:16:50.960 --> 0:16:52.800
<v Speaker 1>think if you went to a lot of journalists, they'd

0:16:52.800 --> 0:16:54.760
<v Speaker 1>be like, no, I don't want to put journalists out

0:16:54.800 --> 0:16:56.240
<v Speaker 1>of work. I think if you went to a lot

0:16:56.280 --> 0:16:58.520
<v Speaker 1>of investmentanking analysts. You'd get a pretty good hit rate.

0:16:58.600 --> 0:17:01.400
<v Speaker 1>You know, you'd be like I hated it, or they'd

0:17:01.440 --> 0:17:03.440
<v Speaker 1>be like, yeah, I'm out of it now they can

0:17:03.440 --> 0:17:04.240
<v Speaker 1>move on. Yeah.

0:17:04.359 --> 0:17:06.320
<v Speaker 2>I do you feel like journalists have a certain affection

0:17:06.440 --> 0:17:11.399
<v Speaker 2>for the craft of journalism, whereas a burnt out banker

0:17:11.480 --> 0:17:11.800
<v Speaker 2>might not.

0:17:12.880 --> 0:17:14.920
<v Speaker 1>I think a lot of bankers do have an appreciation

0:17:15.000 --> 0:17:17.560
<v Speaker 1>for the craft of building LBO models, and I think

0:17:17.840 --> 0:17:24.240
<v Speaker 1>that the opportunity to have their LBO model enshrined perpetually

0:17:24.320 --> 0:17:28.399
<v Speaker 1>as the official CHATCHPT, like the best practice is that

0:17:28.560 --> 0:17:31.119
<v Speaker 1>chat GPT perpetuates forever. I think that would be kind

0:17:31.119 --> 0:17:31.440
<v Speaker 1>of cool.

0:17:31.640 --> 0:17:33.440
<v Speaker 2>Yeah, I could see that, you know, you know, it

0:17:33.480 --> 0:17:35.920
<v Speaker 2>sounds like, you know, you're raising your hand a little bit.

0:17:37.240 --> 0:17:39.040
<v Speaker 1>I take it back. I would put journalism out of

0:17:39.040 --> 0:17:42.600
<v Speaker 1>work now. I think it's like if open A came

0:17:42.640 --> 0:17:48.560
<v Speaker 1>to me and Zeid, we want whenever people ask a

0:17:48.640 --> 0:17:51.760
<v Speaker 1>question about a financial topic, we want chat GPT to

0:17:51.840 --> 0:17:53.680
<v Speaker 1>explain it the way you would. So I spend three

0:17:53.720 --> 0:17:55.840
<v Speaker 1>months training chat GPT to do that. I'd be a

0:17:55.880 --> 0:17:56.600
<v Speaker 1>little flattered.

0:17:57.000 --> 0:18:01.160
<v Speaker 2>You're speaking that into the universe. It could happen anything.

0:18:00.840 --> 0:18:03.120
<v Speaker 1>Could I feel like they're already trained onized Like that's

0:18:03.160 --> 0:18:04.440
<v Speaker 1>the thing. They're already just.

0:18:04.400 --> 0:18:06.119
<v Speaker 2>Like you do, have a public body.

0:18:06.240 --> 0:18:09.520
<v Speaker 1>Training themselves on my work, whereas the LBO models are

0:18:09.520 --> 0:18:12.280
<v Speaker 1>not the model of like the best analyst that JP

0:18:12.400 --> 0:18:15.080
<v Speaker 1>Morgan is not public, right, so they got to hire

0:18:15.119 --> 0:18:16.439
<v Speaker 1>that guy and type it in.

0:18:16.800 --> 0:18:18.800
<v Speaker 2>Let's get into some of the details of this article.

0:18:18.880 --> 0:18:22.359
<v Speaker 2>In terms of the application process, according to a person

0:18:22.400 --> 0:18:25.720
<v Speaker 2>familiar with the matter, it involves almost no human interaction.

0:18:25.960 --> 0:18:28.119
<v Speaker 2>The first step is a roughly twenty minute interview with

0:18:28.160 --> 0:18:31.840
<v Speaker 2>an AI chatbot who asks questions based on the resume,

0:18:32.320 --> 0:18:35.040
<v Speaker 2>and then the second phase test candidates on their knowledge

0:18:35.080 --> 0:18:38.440
<v Speaker 2>of financial statements. The final stage is a modeling test,

0:18:38.520 --> 0:18:40.080
<v Speaker 2>so it's fairly involved.

0:18:40.119 --> 0:18:42.399
<v Speaker 1>For like three months ago, they hired some major R

0:18:42.440 --> 0:18:48.480
<v Speaker 1>people to train chat GPT to hire the investment banks. Yeah,

0:18:48.960 --> 0:18:51.040
<v Speaker 1>get and everything so automated.

0:18:51.440 --> 0:18:55.040
<v Speaker 2>Apparently, the job expects contractors to submit one model per week.

0:18:55.520 --> 0:19:00.280
<v Speaker 2>Instructions include writing prompts in simple terms, then executing the models.

0:19:00.320 --> 0:19:03.000
<v Speaker 2>Receive feedback from a reviewer and are expected to fix

0:19:03.000 --> 0:19:05.760
<v Speaker 2>any issues before their work is ultimately plugged into opening

0:19:05.800 --> 0:19:06.399
<v Speaker 2>as systems.

0:19:06.520 --> 0:19:09.160
<v Speaker 1>Open feedback is a pencil, please fix a fix.

0:19:09.240 --> 0:19:11.680
<v Speaker 2>Please fix for a job that isn't going to last

0:19:11.680 --> 0:19:13.520
<v Speaker 2>that long. I mean, I wonder if you could do

0:19:13.600 --> 0:19:15.320
<v Speaker 2>this as just a side hustle.

0:19:15.720 --> 0:19:17.960
<v Speaker 1>I am sure that everyone doing it is doing it.

0:19:18.040 --> 0:19:20.359
<v Speaker 2>You don't think anyone is just I'm just going to

0:19:20.400 --> 0:19:22.000
<v Speaker 2>devote to some people.

0:19:22.080 --> 0:19:23.919
<v Speaker 1>I shouldn't say ever. I feel like some of them

0:19:23.920 --> 0:19:26.480
<v Speaker 1>are like current NBA students who are like, yeah, I'm

0:19:26.560 --> 0:19:28.160
<v Speaker 1>used to working one hundred hours a week and banking,

0:19:28.200 --> 0:19:32.800
<v Speaker 1>and now I'm doing two to fifteen minutes of homework

0:19:32.840 --> 0:19:35.080
<v Speaker 1>a week in my MBA program, and so I could

0:19:35.160 --> 0:19:38.679
<v Speaker 1>use some free cash, and it's interesting to do.

0:19:38.920 --> 0:19:41.440
<v Speaker 2>It's funny you bring that up because some current NBA

0:19:41.600 --> 0:19:45.600
<v Speaker 2>candidates at Harvard and MIT are participating for sure.

0:19:45.640 --> 0:19:47.280
<v Speaker 1>And then I think probably there are some people who

0:19:47.400 --> 0:19:50.480
<v Speaker 1>like were burned out and are like, I could do

0:19:50.480 --> 0:19:51.840
<v Speaker 1>it twenty hour a week job from.

0:19:51.960 --> 0:19:55.959
<v Speaker 2>Yeah, why not. One of the perks here, in addition

0:19:56.040 --> 0:19:58.159
<v Speaker 2>to the one hundred and fifty dollars per hour, is

0:19:58.160 --> 0:20:01.040
<v Speaker 2>that contractors get early act access to the AI that

0:20:01.200 --> 0:20:04.600
<v Speaker 2>is being created that aims to replace these entry level

0:20:04.640 --> 0:20:06.800
<v Speaker 2>tasks at investment banks. So that's pretty cool.

0:20:06.600 --> 0:20:08.960
<v Speaker 1>Too, right, Like I shouldn't be too cynical about this

0:20:09.000 --> 0:20:11.760
<v Speaker 1>because I think a lot of investment banking analysts do

0:20:11.960 --> 0:20:14.280
<v Speaker 1>think a lot about how can I automate this work

0:20:14.480 --> 0:20:17.000
<v Speaker 1>so that it's just, you know, it is button pushing,

0:20:17.320 --> 0:20:20.480
<v Speaker 1>and like, maybe in the long run that is bad

0:20:20.520 --> 0:20:23.040
<v Speaker 1>for employment at investment banks, but it's not clear that

0:20:23.080 --> 0:20:25.480
<v Speaker 1>it is. Right. Yeah, it's like very possible that if

0:20:25.480 --> 0:20:27.879
<v Speaker 1>you had the ability to push a button and produce

0:20:27.920 --> 0:20:30.240
<v Speaker 1>a perfect model, you would keep the same number of

0:20:30.280 --> 0:20:35.359
<v Speaker 1>analysts and they would run more hypothetical scenarios. And the

0:20:35.440 --> 0:20:37.400
<v Speaker 1>thing people always say is like, move up the value

0:20:37.480 --> 0:20:39.280
<v Speaker 1>chain and think more creatively and not have to just

0:20:39.280 --> 0:20:41.200
<v Speaker 1>spend all their time modeling. I'm not sure that's true,

0:20:41.200 --> 0:20:44.680
<v Speaker 1>but you know they certainly you know, throw more spaghetti

0:20:44.680 --> 0:20:45.160
<v Speaker 1>against the wall.

0:20:45.240 --> 0:20:49.320
<v Speaker 2>Yeah, maybe AI could compliment the human experience rather than destroying.

0:20:49.720 --> 0:20:51.880
<v Speaker 1>But I think it is hard for me to imagine

0:20:52.480 --> 0:20:56.920
<v Speaker 1>investment banking becoming purely automated. It feels like it's a

0:20:57.000 --> 0:21:00.000
<v Speaker 1>high dollar, high touch sales business, and so you always

0:21:00.200 --> 0:21:02.679
<v Speaker 1>need some people to shake the client's hands, and so

0:21:03.080 --> 0:21:05.600
<v Speaker 1>it is very possible that AI can be complementary to

0:21:05.640 --> 0:21:09.840
<v Speaker 1>that experience. Now that people do worry about, you know,

0:21:09.920 --> 0:21:12.600
<v Speaker 1>if the junior bankers don't ever build the models and

0:21:12.640 --> 0:21:15.760
<v Speaker 1>they just push a button. Do they learn less? And

0:21:15.920 --> 0:21:20.280
<v Speaker 1>they are they less intuitive about you know, financial analysis

0:21:20.280 --> 0:21:22.199
<v Speaker 1>when they become senior bankers. And I think that is

0:21:22.480 --> 0:21:23.199
<v Speaker 1>a hard problem.

0:21:23.280 --> 0:21:25.520
<v Speaker 2>Yeah, the idea that you're just hollowing out the bench.

0:21:26.240 --> 0:21:28.960
<v Speaker 2>One of the people who has voiced a concern similar

0:21:29.040 --> 0:21:31.800
<v Speaker 2>to that is actually the CEO of Bridgewater near Bardea.

0:21:32.280 --> 0:21:34.919
<v Speaker 2>He said in March, we are well positioned to replace

0:21:34.960 --> 0:21:37.679
<v Speaker 2>a lot of the basic tasks with machines, but what

0:21:37.840 --> 0:21:41.560
<v Speaker 2>does that then mean to talent development over the long

0:21:41.720 --> 0:21:44.639
<v Speaker 2>period of time? And then he continued, you do the

0:21:44.680 --> 0:21:47.320
<v Speaker 2>tough work, then that leads you to be able to

0:21:47.359 --> 0:21:50.760
<v Speaker 2>do the higher level, more conceptual things. So I think

0:21:50.800 --> 0:21:53.160
<v Speaker 2>that's like a nice summary of the concerned there.

0:21:53.680 --> 0:21:56.760
<v Speaker 1>Yeah, and I tend to believe that, Yeah.

0:21:56.240 --> 0:21:57.320
<v Speaker 2>You have to cut your teeth.

0:21:57.440 --> 0:22:00.560
<v Speaker 1>Yeah, there's a you know, just a period of learning

0:22:00.600 --> 0:22:04.520
<v Speaker 1>that gives you the sort of foundation to think creatively

0:22:04.600 --> 0:22:06.640
<v Speaker 1>later on. And if you just cut that out, it's hard.

0:22:06.880 --> 0:22:09.320
<v Speaker 1>By the way, that's not an investment anything, that's a

0:22:09.480 --> 0:22:11.320
<v Speaker 1>that's a life thing, right, like you see that in

0:22:11.359 --> 0:22:14.960
<v Speaker 1>school now, right, Yeah, you use AI to de Allier homework.

0:22:15.000 --> 0:22:16.680
<v Speaker 2>You never learned how the kids can't read.

0:22:16.840 --> 0:22:17.560
<v Speaker 1>Kids can't read?

0:22:17.720 --> 0:22:20.280
<v Speaker 2>Yeah, I mean, I just relate everything back to myself

0:22:20.840 --> 0:22:23.160
<v Speaker 2>as the center of my own universe. I remember being

0:22:23.160 --> 0:22:26.240
<v Speaker 2>a baby reporter and just doing these bullet point fixtures

0:22:26.240 --> 0:22:28.560
<v Speaker 2>on the Bloomberg terminal that like twelve people read. But

0:22:29.119 --> 0:22:31.560
<v Speaker 2>it taught me a lot and it really serviced those

0:22:31.600 --> 0:22:32.200
<v Speaker 2>twelve people.

0:22:32.880 --> 0:22:35.160
<v Speaker 1>Now AI does a lot of those blood Well.

0:22:35.680 --> 0:22:36.440
<v Speaker 2>That's true though.

0:22:51.119 --> 0:22:54.040
<v Speaker 1>Okay, if credit cockroaches for like five minutes.

0:22:53.800 --> 0:22:56.199
<v Speaker 2>Okay, you talk about it in the same way that

0:22:56.800 --> 0:23:00.000
<v Speaker 2>I told you everything I know about JP Morgan's new

0:23:00.040 --> 0:23:03.240
<v Speaker 2>building a two seventy Park Avenue, Tell me everything you

0:23:03.280 --> 0:23:06.120
<v Speaker 2>know about cockroaches. At this moment, part.

0:23:05.960 --> 0:23:09.359
<v Speaker 1>Of me hates that we just decided that they're called cockroaches.

0:23:09.920 --> 0:23:11.480
<v Speaker 1>Part of me is like I keep leaning into it

0:23:11.520 --> 0:23:12.520
<v Speaker 1>in the columns or whatever.

0:23:12.640 --> 0:23:16.440
<v Speaker 2>That's the thing. It's already it's interesting, it's a useful shorthand.

0:23:16.440 --> 0:23:18.840
<v Speaker 1>But right there's been a number of, you know, credit

0:23:18.880 --> 0:23:21.280
<v Speaker 1>blow ups, and they all kind of have the same flavor,

0:23:21.320 --> 0:23:25.960
<v Speaker 1>which is that someone is or maybe it was, or

0:23:26.040 --> 0:23:28.760
<v Speaker 1>looks like they might have been double pledging collateral, or

0:23:28.760 --> 0:23:32.560
<v Speaker 1>it happens its collateral they didn't have come on, you know,

0:23:32.640 --> 0:23:35.920
<v Speaker 1>all these things, and I think we talked about Tracolor

0:23:36.000 --> 0:23:37.000
<v Speaker 1>and first Browns.

0:23:37.040 --> 0:23:39.560
<v Speaker 2>I'm not even sure we've definitely named dropped them.

0:23:39.960 --> 0:23:43.320
<v Speaker 1>And then I think last week the Zions and Western

0:23:43.359 --> 0:23:46.000
<v Speaker 1>Alliance news had just come out and you mentioned it

0:23:46.040 --> 0:23:46.680
<v Speaker 1>on this podcast.

0:23:46.840 --> 0:23:48.120
<v Speaker 2>Thank god I did well.

0:23:48.160 --> 0:23:50.160
<v Speaker 1>Then I had it cut out because we didn't really

0:23:50.200 --> 0:23:51.880
<v Speaker 1>talk about it.

0:23:52.480 --> 0:23:56.360
<v Speaker 2>Something that's happening today on Thursday is what's going down

0:23:56.400 --> 0:23:59.280
<v Speaker 2>with Western Alliance and Zions. These are two regional banks

0:23:59.840 --> 0:24:04.000
<v Speaker 2>and apparently they disclosed problems with loans involving allegations of

0:24:04.119 --> 0:24:08.560
<v Speaker 2>fraud and currently, at like two twenty three pm last

0:24:08.560 --> 0:24:10.560
<v Speaker 2>sight check, the stock market was kind of freaking out

0:24:10.560 --> 0:24:10.919
<v Speaker 2>about that.

0:24:11.080 --> 0:24:11.640
<v Speaker 1>Who's wrong?

0:24:11.840 --> 0:24:15.720
<v Speaker 2>Let me tell you? Okay, So Zions apparently it disclosed

0:24:15.760 --> 0:24:18.320
<v Speaker 2>a fifty million dollar charge off for a loan underwritten

0:24:18.359 --> 0:24:22.639
<v Speaker 2>by its wholly owned subsidiary, California Bank in Trust Western.

0:24:22.960 --> 0:24:26.080
<v Speaker 2>Their problem is is that it said that it's dealing

0:24:26.080 --> 0:24:29.600
<v Speaker 2>with a borrower that failed quote to provide collateral loans

0:24:29.600 --> 0:24:30.360
<v Speaker 2>in first position.

0:24:31.280 --> 0:24:34.600
<v Speaker 1>Yeah, you know, topy market toppy mark, don't know, let's

0:24:34.680 --> 0:24:35.440
<v Speaker 1>check your collateral.

0:24:35.640 --> 0:24:37.000
<v Speaker 2>Yeah, why would you?

0:24:37.920 --> 0:24:42.439
<v Speaker 1>Yeah, they compete to make the loans. So like Zions

0:24:42.440 --> 0:24:44.840
<v Speaker 1>and Western Alliance both announced that they sort of were

0:24:44.880 --> 0:24:48.240
<v Speaker 1>exposed to what they characterized as fraud, although the people

0:24:48.240 --> 0:24:50.359
<v Speaker 1>who allegedly defront of them said they didn't defrove them.

0:24:50.480 --> 0:24:53.960
<v Speaker 1>But basically they like made some loans to this like

0:24:54.280 --> 0:24:57.200
<v Speaker 1>real estate lending firm, and the real estate lending firm

0:24:57.480 --> 0:25:01.760
<v Speaker 1>they say did not actually own the mortgages that they

0:25:01.760 --> 0:25:04.840
<v Speaker 1>were boring against or like they did and then they

0:25:04.880 --> 0:25:07.199
<v Speaker 1>sold them or they did and the properties were for

0:25:07.280 --> 0:25:10.879
<v Speaker 1>clothes on or they made the loans with they were

0:25:10.960 --> 0:25:13.560
<v Speaker 1>second leans. Like there's all this like stuff where there's

0:25:13.760 --> 0:25:16.640
<v Speaker 1>like sort of sloppiness around collateral. And then the other

0:25:16.720 --> 0:25:18.600
<v Speaker 1>story that came out I think last week was on

0:25:19.080 --> 0:25:22.760
<v Speaker 1>seven seven seven Partners, which is a fascinating company that

0:25:22.800 --> 0:25:27.199
<v Speaker 1>both buys your lottery payments few in the lottery and

0:25:27.240 --> 0:25:29.560
<v Speaker 1>you get twenty years of payments like they'll buy them

0:25:29.560 --> 0:25:32.000
<v Speaker 1>from you and so you get cash upfront. And they

0:25:32.040 --> 0:25:34.000
<v Speaker 1>also buy sports teams like they own a lot of

0:25:34.200 --> 0:25:37.680
<v Speaker 1>like European soccer teams. They own the London Lions, the

0:25:37.720 --> 0:25:40.040
<v Speaker 1>basketball team, and they tried to buy Everton, the big

0:25:40.080 --> 0:25:44.640
<v Speaker 1>Premier League team, and there are some allegations that they

0:25:44.680 --> 0:25:48.160
<v Speaker 1>were at least sloppy with the collateral that they were

0:25:48.400 --> 0:25:51.960
<v Speaker 1>selling on to investors, where they basically were borring against

0:25:52.040 --> 0:25:54.840
<v Speaker 1>these future cash flows of lotteries or structured settlements, and

0:25:54.880 --> 0:25:58.239
<v Speaker 1>they would maybe double pledge them and maybe didn't have

0:25:58.320 --> 0:26:00.800
<v Speaker 1>all the assets that they claimed to have. Think the

0:26:00.840 --> 0:26:04.720
<v Speaker 1>founder was charged criminally last week in part because one

0:26:04.720 --> 0:26:08.400
<v Speaker 1>of the lenders got i think an anonymous whistleblower tip

0:26:08.480 --> 0:26:10.960
<v Speaker 1>saying that they were double pledging assets, and the lender

0:26:11.000 --> 0:26:12.960
<v Speaker 1>called them to be like, what's all this then, and

0:26:13.000 --> 0:26:16.840
<v Speaker 1>the founder, on a recorded line, was like, yeah, we

0:26:16.880 --> 0:26:19.320
<v Speaker 1>did do that, but like it's because our computer systems

0:26:19.320 --> 0:26:20.600
<v Speaker 1>are stoppy and we'll fix it.

0:26:20.840 --> 0:26:21.840
<v Speaker 2>Oh my gosh.

0:26:21.920 --> 0:26:23.399
<v Speaker 1>After I read about this, I got a number of

0:26:23.440 --> 0:26:26.679
<v Speaker 1>emails from readers with anecdotes about their own dealings with

0:26:26.720 --> 0:26:29.240
<v Speaker 1>seven seven seven partners that I think are largely supportive

0:26:29.320 --> 0:26:31.720
<v Speaker 1>of the theory that they might have actually screwed up

0:26:31.760 --> 0:26:34.400
<v Speaker 1>their computer systems. Like there's a lot of like, yeah,

0:26:34.400 --> 0:26:37.480
<v Speaker 1>they were kind of unprofessional, so you never know, but uh,

0:26:38.840 --> 0:26:41.520
<v Speaker 1>it doesn't look good to me. We may have barred

0:26:41.520 --> 0:26:42.600
<v Speaker 1>against our collateral from.

0:26:42.480 --> 0:26:45.160
<v Speaker 2>Two different lenders, So are you holding this up as

0:26:45.200 --> 0:26:48.040
<v Speaker 2>an example of a cockroach potentially.

0:26:48.119 --> 0:26:49.720
<v Speaker 1>This is a reference to Jamie diamond saying when you

0:26:49.760 --> 0:26:52.680
<v Speaker 1>see one cockroach, there will be more. And it's definitely

0:26:52.760 --> 0:26:54.120
<v Speaker 1>since he has said that, there have been a lot

0:26:54.119 --> 0:26:57.480
<v Speaker 1>of like these credit problems that all you know, have

0:26:57.600 --> 0:26:58.440
<v Speaker 1>similar features.

0:26:58.560 --> 0:27:02.919
<v Speaker 2>It's like if you see a missile margin, yeah, in

0:27:03.000 --> 0:27:06.080
<v Speaker 2>a deck, there might be other issues, right, It's.

0:27:06.000 --> 0:27:09.679
<v Speaker 1>Like an indicator of sloppiness. And all of these are

0:27:09.720 --> 0:27:12.000
<v Speaker 1>kind of small. I mean, you know in the scheme

0:27:12.040 --> 0:27:15.280
<v Speaker 1>of like the banking system, right, but like you see

0:27:15.280 --> 0:27:15.919
<v Speaker 1>one cockroache, you.

0:27:15.920 --> 0:27:19.080
<v Speaker 2>See more they can pound potentially potentially.

0:27:19.480 --> 0:27:21.159
<v Speaker 1>The other thing that I think is interesting, and they

0:27:21.200 --> 0:27:23.680
<v Speaker 1>wrote this week, is that another thing that a lot

0:27:23.680 --> 0:27:26.560
<v Speaker 1>of these cases have in common is that the problem

0:27:26.800 --> 0:27:30.560
<v Speaker 1>company is essentially a lender. It's like a financing company,

0:27:30.600 --> 0:27:33.840
<v Speaker 1>it's a trade finance company, or a structed settlement company,

0:27:33.960 --> 0:27:36.160
<v Speaker 1>or a real estate lending firm or something. It's a lender, right,

0:27:36.760 --> 0:27:40.560
<v Speaker 1>And then the people who complain about it, the people

0:27:40.560 --> 0:27:44.199
<v Speaker 1>who take losses are lenders to that lender, right. So

0:27:44.240 --> 0:27:47.200
<v Speaker 1>it's like second order or sometimes third or fourth degree lending,

0:27:47.200 --> 0:27:48.800
<v Speaker 1>where like a bank lends to someone who lends the

0:27:48.840 --> 0:27:51.639
<v Speaker 1>someone who lends to someone and somewhere in that chain

0:27:51.880 --> 0:27:56.080
<v Speaker 1>problems happen. And I think we've talked about on this podcast,

0:27:56.080 --> 0:27:58.600
<v Speaker 1>and I certainly write a lot about like there's been

0:27:58.640 --> 0:28:02.040
<v Speaker 1>this move to banks reach launching where instead of like

0:28:02.400 --> 0:28:04.960
<v Speaker 1>banks making loans, private credit firms make loans, and then

0:28:05.040 --> 0:28:07.200
<v Speaker 1>banks make loans to the private credit firms to make

0:28:07.200 --> 0:28:11.240
<v Speaker 1>the loans. And the upside of that is that the

0:28:11.280 --> 0:28:13.720
<v Speaker 1>banks have more seniority, right, they're cushioned by like the

0:28:13.760 --> 0:28:16.080
<v Speaker 1>private credit firm takes the first loss or the you know,

0:28:16.240 --> 0:28:18.720
<v Speaker 1>the factoring firm, whoever takes the first loss. But the

0:28:18.760 --> 0:28:22.359
<v Speaker 1>downside is like they don't get to see perrectly into

0:28:22.400 --> 0:28:25.560
<v Speaker 1>the loan, Like there are several steps removed from the

0:28:25.600 --> 0:28:28.680
<v Speaker 1>actual car loan or the actual structured settlement or whatever,

0:28:28.680 --> 0:28:30.919
<v Speaker 1>and there's just more opportunity to get this sort of

0:28:30.960 --> 0:28:33.679
<v Speaker 1>cockroage situation where like you were lending against collateral, it

0:28:33.680 --> 0:28:35.600
<v Speaker 1>doesn't exist. Yeah, it's like can you make a mortgage

0:28:35.680 --> 0:28:37.760
<v Speaker 1>lane directly? You're like you see the house, you know, Yeah,

0:28:37.840 --> 0:28:40.320
<v Speaker 1>so this is all sort of indirect And I do

0:28:40.360 --> 0:28:42.960
<v Speaker 1>think it's like, you know, it is both like these

0:28:43.000 --> 0:28:49.080
<v Speaker 1>stories seem symptomatic of like late cycle exuberants, specifically like

0:28:49.280 --> 0:28:53.240
<v Speaker 1>indirect lending, where because it is indirect, it is a

0:28:53.280 --> 0:28:56.560
<v Speaker 1>little bit easier to get hoodwinked out of collateral.

0:28:57.880 --> 0:29:00.400
<v Speaker 2>So let's not cut this out of the podcast in

0:29:00.400 --> 0:29:02.880
<v Speaker 2>case we need to reference back to it a couple

0:29:02.920 --> 0:29:03.160
<v Speaker 2>of weeks.

0:29:03.440 --> 0:29:07.800
<v Speaker 1>Yeah, yeah, sorry, I cut out your crush reference to

0:29:08.280 --> 0:29:14.800
<v Speaker 1>week and that was the Money Stuff Podcast.

0:29:15.120 --> 0:29:17.240
<v Speaker 2>I'm Matt Levine and I'm Katie Greifeld.

0:29:17.440 --> 0:29:19.600
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0:29:19.600 --> 0:29:21.560
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0:29:21.160 --> 0:29:23.760
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0:29:23.960 --> 0:29:27.400
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0:29:41.560 --> 0:29:44.640
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0:29:44.680 --> 0:29:46.040
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0:29:46.120 --> 0:29:48.240
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0:29:48.640 --> 0:29:51.360
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0:29:51.320 --> 0:29:53.800
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0:29:54.160 --> 0:29:56.640
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0:29:56.680 --> 0:29:58.360
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0:30:00.920 --> 0:30:05.200
<v Speaker 2>Bob