1 00:00:02,720 --> 00:00:07,200 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,200 --> 00:00:10,080 Speaker 2: I'm really jealous that you're taking two weeks off. 3 00:00:10,280 --> 00:00:12,080 Speaker 1: Yeah, I'm pretty you're already. 4 00:00:13,520 --> 00:00:15,520 Speaker 2: I was going to say that, but I was going 5 00:00:15,600 --> 00:00:18,520 Speaker 2: to say you're already pretty tan. Yeah, I feel like 6 00:00:18,560 --> 00:00:20,680 Speaker 2: so I'm excited to see you after two weeks. 7 00:00:21,120 --> 00:00:23,880 Speaker 1: I'm gonna work very rigorously. 8 00:00:23,400 --> 00:00:29,200 Speaker 2: On my good I mean, were SPF please do it responsible. 9 00:00:28,760 --> 00:00:31,880 Speaker 1: You come back and be like the colorless table for. 10 00:00:31,880 --> 00:00:36,879 Speaker 2: Those table listening at home. It's a handsome mahogany o. 11 00:00:39,120 --> 00:00:39,559 Speaker 1: Plastic. 12 00:00:40,320 --> 00:00:41,200 Speaker 2: It's not real wood. 13 00:00:41,360 --> 00:00:44,960 Speaker 1: It's maybe it is, I don't know what. But yeah, 14 00:00:45,000 --> 00:00:47,760 Speaker 1: So I'm out for the next two weeks. 15 00:00:48,960 --> 00:00:49,600 Speaker 2: I'll be here. 16 00:00:50,040 --> 00:00:52,960 Speaker 1: Yeah, keep me up to date on the gossip. 17 00:00:53,200 --> 00:00:55,840 Speaker 2: Yeah, plenty of tea. I'll keep the tea flowing. 18 00:00:56,960 --> 00:01:00,240 Speaker 1: So this episode is coming on this Friday. You will 19 00:01:00,280 --> 00:01:01,400 Speaker 1: have a mail bag. 20 00:01:01,880 --> 00:01:02,880 Speaker 2: Mail bag. 21 00:01:03,440 --> 00:01:04,959 Speaker 1: I'm gonna say we're gonna have a mail bag the 22 00:01:04,959 --> 00:01:05,720 Speaker 1: following week. 23 00:01:05,959 --> 00:01:08,920 Speaker 2: We're recording it directly after this episode, so it's actually 24 00:01:08,959 --> 00:01:11,520 Speaker 2: still up in the air. Good to see if we. 25 00:01:11,760 --> 00:01:14,600 Speaker 1: Right, we'll cut the enjoy it potentially, but like probably 26 00:01:14,600 --> 00:01:16,760 Speaker 1: we're gonna have this episode out on August eighth and 27 00:01:16,800 --> 00:01:18,679 Speaker 1: the mail bag out on August fifteenth, and then on 28 00:01:18,720 --> 00:01:21,600 Speaker 1: August twenty second, you'll be alone with your thoughts. 29 00:01:21,840 --> 00:01:25,039 Speaker 2: Money Stuff will go dark, but it'll be okay. I 30 00:01:25,040 --> 00:01:25,840 Speaker 2: think we all need that. 31 00:01:25,880 --> 00:01:27,160 Speaker 1: Recent twenty second. 32 00:01:27,520 --> 00:01:30,640 Speaker 2: Yeah, you know. Actually I won't even be on air 33 00:01:30,720 --> 00:01:34,520 Speaker 2: that day because it'll be our chick, our jackson Hole special. 34 00:01:34,680 --> 00:01:37,920 Speaker 2: So let's all just enjoy jackson Hole together. You know, 35 00:01:38,000 --> 00:01:40,480 Speaker 2: take a look at some central bankers in front of mountaintops. 36 00:01:40,680 --> 00:01:44,600 Speaker 2: And we don't need to listen to a podcast that day. 37 00:01:44,880 --> 00:01:47,440 Speaker 1: But you do need to listen to a podcast. 38 00:01:47,040 --> 00:01:49,920 Speaker 2: Today, and we're going to really try hard to make 39 00:01:49,960 --> 00:01:50,640 Speaker 2: this one good. 40 00:01:52,560 --> 00:01:56,440 Speaker 1: You might Hello, and welcome to the Money Stuff Podcast, 41 00:01:56,760 --> 00:02:00,520 Speaker 1: your weekly podcast where we talk about stuff related to money. 42 00:02:01,720 --> 00:02:03,720 Speaker 1: I'm Matt Levian, and I write the Moneys Doff column 43 00:02:03,720 --> 00:02:04,680 Speaker 1: for Bloomberg Opinion. 44 00:02:04,960 --> 00:02:07,960 Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and 45 00:02:08,000 --> 00:02:09,640 Speaker 2: an anchor for Bloomberg Television. 46 00:02:10,919 --> 00:02:16,359 Speaker 1: Kitty. I feel like I follow Elon must pay more 47 00:02:16,400 --> 00:02:20,320 Speaker 1: than he does more than I don't think that's true. 48 00:02:20,840 --> 00:02:23,600 Speaker 1: Way I believe you must pay. It is rumor that 49 00:02:23,600 --> 00:02:28,560 Speaker 1: he follows my vacation schedule schedules his most insane activities 50 00:02:28,680 --> 00:02:30,239 Speaker 1: for when I'm supposed to be on vacations that I 51 00:02:30,280 --> 00:02:32,360 Speaker 1: have to write about them. I don't think this is true. 52 00:02:32,400 --> 00:02:35,000 Speaker 1: I don't think he consciously going to find out, but 53 00:02:35,000 --> 00:02:37,679 Speaker 1: we're gonna find out here. I am talking on a 54 00:02:37,720 --> 00:02:40,639 Speaker 1: podcast about taking two weeks off. So if Elon does 55 00:02:40,639 --> 00:02:44,960 Speaker 1: something really egregious in the next two weeks, you'll know why. 56 00:02:45,080 --> 00:02:49,880 Speaker 2: Well, he should be happy or right now he got out? 57 00:02:50,000 --> 00:02:52,080 Speaker 1: Or do you think thirty billion dollars makes him happy? 58 00:02:52,240 --> 00:02:55,239 Speaker 1: I'm fine, it's. 59 00:02:56,440 --> 00:02:59,680 Speaker 2: You know, I have to imagine. Maybe he's not completely happy, 60 00:02:59,720 --> 00:03:02,679 Speaker 2: but he he's a degree happier than he was perhaps. 61 00:03:03,440 --> 00:03:06,560 Speaker 1: So the news is that Tesla's board announced that it's 62 00:03:06,600 --> 00:03:10,360 Speaker 1: going to give Elon Musk an interim award of twenty 63 00:03:10,400 --> 00:03:12,360 Speaker 1: eight billion dollars worth of I was going to say 64 00:03:12,400 --> 00:03:15,640 Speaker 1: stock options slightly Morgan's like restricted stock units with a 65 00:03:15,720 --> 00:03:18,440 Speaker 1: strike price, but it's stock options whatever. They also giving 66 00:03:18,520 --> 00:03:21,440 Speaker 1: him that as basically a good faith payment, because, as 67 00:03:21,440 --> 00:03:23,680 Speaker 1: we've talked about on this pot a lot, he was 68 00:03:23,720 --> 00:03:28,040 Speaker 1: awarded a bunch of options in twenty eighteen. They were 69 00:03:28,080 --> 00:03:30,280 Speaker 1: all contingent on him making Tesla the giant company. He 70 00:03:30,320 --> 00:03:33,000 Speaker 1: made Tesla the giant company he got the options. They're 71 00:03:33,040 --> 00:03:36,640 Speaker 1: worth something like eighty seven billion dollars today, and then 72 00:03:36,840 --> 00:03:39,880 Speaker 1: last year at Della Recurt said, no, those weren't valid. 73 00:03:40,520 --> 00:03:44,400 Speaker 1: They go away. And so now Tesla's in this weird bind. 74 00:03:44,440 --> 00:03:46,200 Speaker 1: They're like appealing the decision and stuff. They're trying to 75 00:03:46,240 --> 00:03:51,040 Speaker 1: get him back that money, but there are various governance 76 00:03:51,080 --> 00:03:53,800 Speaker 1: and tax and accounting and legal complications around getting him 77 00:03:53,800 --> 00:03:56,520 Speaker 1: back that money, and they're still kind of figuring out 78 00:03:56,520 --> 00:03:58,839 Speaker 1: how to do it. But as a good faith down 79 00:03:58,880 --> 00:04:02,119 Speaker 1: payment on there desire to give him back those options, 80 00:04:02,360 --> 00:04:05,160 Speaker 1: they gave him back twenty eight billion dollars of them 81 00:04:05,240 --> 00:04:08,800 Speaker 1: this week. So you're asked if that made him happy. 82 00:04:08,880 --> 00:04:11,960 Speaker 1: One thing I wonder is was it a surprise, because 83 00:04:11,960 --> 00:04:13,640 Speaker 1: like the previous set of options, like he sort of 84 00:04:13,680 --> 00:04:17,040 Speaker 1: negotiated with the board, you know, in twenty eighteen, and 85 00:04:17,120 --> 00:04:18,720 Speaker 1: like there was obviously like you know, this is an 86 00:04:18,760 --> 00:04:22,200 Speaker 1: incentive package that you know, we're giving you these targets 87 00:04:22,200 --> 00:04:24,080 Speaker 1: that are super ambitious, but you know you think you 88 00:04:24,080 --> 00:04:26,920 Speaker 1: can meet them. So that was like an employment deal 89 00:04:27,000 --> 00:04:29,480 Speaker 1: that he struck with the board. Right, this is like 90 00:04:29,880 --> 00:04:32,440 Speaker 1: this could have just been like surprise some of your 91 00:04:32,440 --> 00:04:35,000 Speaker 1: money back. It's possible the board did it without him, 92 00:04:35,200 --> 00:04:36,880 Speaker 1: which would be kind of funny. If he just woke 93 00:04:36,960 --> 00:04:38,880 Speaker 1: up one day and, like, you know, at a twenty 94 00:04:38,920 --> 00:04:41,159 Speaker 1: eight billion dollar transfer in his bank account, that'd be 95 00:04:41,160 --> 00:04:41,680 Speaker 1: pretty cool. 96 00:04:41,960 --> 00:04:44,720 Speaker 2: Why twenty eight billion? Why not just make it eighty 97 00:04:44,760 --> 00:04:45,400 Speaker 2: seven billion. 98 00:04:45,839 --> 00:04:48,960 Speaker 1: Part of it is like they're still figuring out what's happening, right, 99 00:04:48,960 --> 00:04:50,960 Speaker 1: So this is like a down payment on figuring out 100 00:04:51,200 --> 00:04:53,760 Speaker 1: the whole answer to this question. Right. If they win 101 00:04:53,800 --> 00:04:56,880 Speaker 1: the appeal, this award goes away, and it's really easier 102 00:04:56,920 --> 00:05:00,800 Speaker 1: to have given him less while they're on appeal. I 103 00:05:00,839 --> 00:05:04,400 Speaker 1: think it's possible that part of the answer is that 104 00:05:06,680 --> 00:05:10,160 Speaker 1: funny that this is to say that Tesla's board of 105 00:05:10,200 --> 00:05:13,720 Speaker 1: directors and the special committee that gave him this award 106 00:05:14,200 --> 00:05:17,480 Speaker 1: are independent and are thinking about their friduciary duty to 107 00:05:17,680 --> 00:05:22,480 Speaker 1: Tesla's minority sholders or outside shoolders, and are thinking not 108 00:05:22,560 --> 00:05:26,159 Speaker 1: only what would be nice for Elon, but also how 109 00:05:26,200 --> 00:05:29,159 Speaker 1: do we motivate him to maximize the value of the company. 110 00:05:29,480 --> 00:05:31,400 Speaker 1: And it's possible that giving him all of the options 111 00:05:31,440 --> 00:05:33,120 Speaker 1: right now is not the answer to that question. It's 112 00:05:33,120 --> 00:05:36,599 Speaker 1: possible that, like the ultimate structure they'll come to is 113 00:05:36,640 --> 00:05:39,160 Speaker 1: something like, you get thirty billion dollars of this stuff 114 00:05:40,160 --> 00:05:43,240 Speaker 1: and a new award with new targets that requires you 115 00:05:43,320 --> 00:05:46,320 Speaker 1: to do new stuff. But for now, they give him 116 00:05:46,320 --> 00:05:51,800 Speaker 1: this award and it has essentially two contingencies. One is 117 00:05:51,800 --> 00:05:54,599 Speaker 1: that he has to say there for two years, which 118 00:05:55,400 --> 00:05:58,320 Speaker 1: who knows, and the other one is that it goes away. 119 00:05:58,400 --> 00:06:01,080 Speaker 1: If they win the appeal, he gets all the previous 120 00:06:01,080 --> 00:06:01,600 Speaker 1: options back. 121 00:06:01,600 --> 00:06:03,560 Speaker 2: He doesn't get these options twenty eighteen options. 122 00:06:03,640 --> 00:06:05,480 Speaker 1: Yeah, so if he gets that, like nineteen thirty seven 123 00:06:05,480 --> 00:06:08,320 Speaker 1: billion dollars, this is not additive to that. 124 00:06:08,400 --> 00:06:11,360 Speaker 2: Like, so no double dipping, no double dipping. Isa, you 125 00:06:11,440 --> 00:06:15,160 Speaker 2: talk about this a little bit in your column that Okay, 126 00:06:15,520 --> 00:06:18,160 Speaker 2: it has these strings attached. It's contingent on him staying 127 00:06:18,160 --> 00:06:19,039 Speaker 2: there for two years. 128 00:06:19,200 --> 00:06:21,960 Speaker 1: Very few strings. Well, like, sure he has to say 129 00:06:22,000 --> 00:06:24,239 Speaker 1: there for two years, but it's like a fourteen billion 130 00:06:24,279 --> 00:06:25,239 Speaker 1: dollars a year payback. 131 00:06:25,400 --> 00:06:28,159 Speaker 2: But isn't I don't know. Isn't a little weird that, Okay, 132 00:06:28,160 --> 00:06:30,359 Speaker 2: you have to stay here another two years, but also 133 00:06:30,480 --> 00:06:33,080 Speaker 2: this is making good on our promise for things you 134 00:06:33,120 --> 00:06:34,000 Speaker 2: already Yeah, I. 135 00:06:34,000 --> 00:06:36,440 Speaker 1: Agree with you. It's a little weird if their mentality 136 00:06:36,480 --> 00:06:39,400 Speaker 1: is truly like we owe you this and we're giving 137 00:06:39,400 --> 00:06:42,520 Speaker 1: it to you no matter what. Then you're right, he 138 00:06:42,560 --> 00:06:45,159 Speaker 1: shouldn't have this there for two years. But I don't 139 00:06:45,160 --> 00:06:46,960 Speaker 1: think they can really do that. I think they really 140 00:06:47,000 --> 00:06:50,120 Speaker 1: have to be like in a posture of like, we 141 00:06:50,160 --> 00:06:53,480 Speaker 1: are maximizing value for the shareholders, and we have to 142 00:06:53,520 --> 00:06:55,839 Speaker 1: get something going forward from it. And if we're just 143 00:06:55,880 --> 00:06:59,120 Speaker 1: giving Elon Musk twenty eight billion dollars on his way 144 00:06:59,120 --> 00:07:02,640 Speaker 1: out the door, then that is not a good use 145 00:07:02,680 --> 00:07:05,719 Speaker 1: of shareholder resources, even if it's in some sense fair true. 146 00:07:05,960 --> 00:07:09,279 Speaker 1: Also like it doesn't seem like that big an ask 147 00:07:10,200 --> 00:07:14,480 Speaker 1: like years, it's like, you know, his main source of 148 00:07:14,560 --> 00:07:17,240 Speaker 1: wealth more or less. And also like it's not that 149 00:07:17,280 --> 00:07:21,160 Speaker 1: big an asking in the sense that, like you and I, 150 00:07:21,160 --> 00:07:24,160 Speaker 1: if we got like a great job opportunity, we would 151 00:07:24,200 --> 00:07:26,800 Speaker 1: have to sadly quit this job to pursue that great job. 152 00:07:27,520 --> 00:07:29,480 Speaker 1: That is not a problem for Elon Musk. He can 153 00:07:29,520 --> 00:07:31,800 Speaker 1: have as many jobs as he wants. Like, they're not 154 00:07:31,840 --> 00:07:34,840 Speaker 1: requiring him to only work at Tesla for two it's 155 00:07:34,840 --> 00:07:35,880 Speaker 1: just like to have it. 156 00:07:35,880 --> 00:07:38,480 Speaker 2: You know, have his name on the door for continuously 157 00:07:38,680 --> 00:07:40,920 Speaker 2: right intermittently. 158 00:07:41,080 --> 00:07:44,760 Speaker 1: Yeah, an alternate two days so I think it's fine. 159 00:07:44,800 --> 00:07:46,280 Speaker 1: I think he's like not a big ass, right, Like 160 00:07:46,320 --> 00:07:48,520 Speaker 1: he can spend one hundred percent of his time elsewhere 161 00:07:48,560 --> 00:07:51,000 Speaker 1: for two years and still be the CEO of Tesla. 162 00:07:51,160 --> 00:07:57,320 Speaker 2: So yeah, which is so would argue that's what's been happening. 163 00:07:57,960 --> 00:07:58,960 Speaker 1: Many would argue. 164 00:08:00,280 --> 00:08:00,440 Speaker 3: Quo. 165 00:08:00,600 --> 00:08:01,920 Speaker 1: And I think, you know, again, like the board, like 166 00:08:01,920 --> 00:08:03,760 Speaker 1: they're doing two things right. They're trying to be fair 167 00:08:03,800 --> 00:08:05,960 Speaker 1: to Elon, which I think is like a legitimate concern. 168 00:08:06,040 --> 00:08:09,160 Speaker 1: Like I think the board things and Elon things. I 169 00:08:09,160 --> 00:08:11,720 Speaker 1: think they have a real point that he earned this 170 00:08:11,800 --> 00:08:13,840 Speaker 1: eighty seven billion dollars of options, and so you should 171 00:08:13,840 --> 00:08:16,800 Speaker 1: get them and just retroactively, he should get them for 172 00:08:17,160 --> 00:08:19,520 Speaker 1: his prior work. Right, So they're trying to be fair, 173 00:08:19,680 --> 00:08:21,560 Speaker 1: But they're also trying to you know, do good things 174 00:08:21,600 --> 00:08:24,960 Speaker 1: for the company and situate the company well going forward. 175 00:08:25,040 --> 00:08:27,480 Speaker 1: And so you know, their announcement is not just like 176 00:08:27,560 --> 00:08:29,440 Speaker 1: literally like yes, I have a name there for two 177 00:08:29,440 --> 00:08:32,280 Speaker 1: more years. It's like we need him to focus on 178 00:08:32,400 --> 00:08:36,720 Speaker 1: building AI and like attracting talent to this company because 179 00:08:36,840 --> 00:08:39,480 Speaker 1: we're in an arms race for AI and Tesla is 180 00:08:39,480 --> 00:08:43,240 Speaker 1: an AI company. You know, Kittie's rolling rys. It's reasonable 181 00:08:43,240 --> 00:08:46,679 Speaker 1: because like Elmos does have an AI company that's not Tesla. 182 00:08:46,880 --> 00:08:50,000 Speaker 2: Yeah, but like Tesla is, you know, it's valued like 183 00:08:50,040 --> 00:08:50,400 Speaker 2: an AI. 184 00:08:50,880 --> 00:08:52,680 Speaker 1: It's not valued like a car company that sells as 185 00:08:52,720 --> 00:08:56,120 Speaker 1: many cars as itself. Right, It's valued like the future 186 00:08:56,160 --> 00:09:00,920 Speaker 1: of life, robotics, AI something, some thing something, And so 187 00:09:01,720 --> 00:09:03,959 Speaker 1: to you know, live up to that valuation, they need 188 00:09:04,000 --> 00:09:07,480 Speaker 1: to keep him around to be their futurist in residence. 189 00:09:07,760 --> 00:09:11,920 Speaker 2: Yeah. I anchor a television show with Matt Miller. Yeah, 190 00:09:12,080 --> 00:09:15,959 Speaker 2: and he's a car guy, So talking about Tesla makes, 191 00:09:16,040 --> 00:09:17,560 Speaker 2: you know, smoke come out of his ears. When we 192 00:09:17,559 --> 00:09:20,160 Speaker 2: talk about the fact that it's a trillion dollar company, 193 00:09:20,200 --> 00:09:23,680 Speaker 2: you add up the market caps of the big three Stilantis, Ford, 194 00:09:23,760 --> 00:09:25,840 Speaker 2: and GM and it comes out to less than one 195 00:09:25,880 --> 00:09:28,480 Speaker 2: hundred and fifty billion dollars, which shocked me. Actually, I 196 00:09:28,480 --> 00:09:32,959 Speaker 2: didn't realize it was that low. So a trillion dollars, Yeah, 197 00:09:33,200 --> 00:09:34,960 Speaker 2: I wanted to talk a little bit more about the 198 00:09:35,000 --> 00:09:40,280 Speaker 2: fact that, Okay, if we're talking about this options package, 199 00:09:40,320 --> 00:09:42,600 Speaker 2: the thirty billion dollar one, so Tesl would take an 200 00:09:42,720 --> 00:09:45,840 Speaker 2: enormous tax hit if this happens. 201 00:09:45,520 --> 00:09:47,559 Speaker 1: Well, Elon Muss would take a tax hit. 202 00:09:47,840 --> 00:09:49,960 Speaker 2: Elon Muss would take a tax hit, Tesla would take 203 00:09:49,960 --> 00:09:51,440 Speaker 2: a hit to their earnings. 204 00:09:51,480 --> 00:09:51,800 Speaker 3: Correct. 205 00:09:51,920 --> 00:09:53,520 Speaker 1: Yeah. Basically, the way it works is that when they 206 00:09:53,520 --> 00:09:57,520 Speaker 1: granted the options in twenty eighteen, they were, for accounting purposes, 207 00:09:57,840 --> 00:10:00,760 Speaker 1: kind of worthless because they were at the money, so 208 00:10:00,840 --> 00:10:03,240 Speaker 1: they were not like a gift of stock that day. 209 00:10:03,600 --> 00:10:06,400 Speaker 1: And because they had these really aggressive conditions where you know, 210 00:10:06,440 --> 00:10:08,480 Speaker 1: it's like a sixty billion dollar company, you would have 211 00:10:08,520 --> 00:10:10,200 Speaker 1: to grow it into a six hundred and fifty billion 212 00:10:10,240 --> 00:10:12,640 Speaker 1: dollar company to get all the options, and so you 213 00:10:12,640 --> 00:10:14,800 Speaker 1: can go to your accounts and say, that's not very 214 00:10:14,840 --> 00:10:17,560 Speaker 1: likely to happen. So the value of this grant day 215 00:10:17,559 --> 00:10:20,680 Speaker 1: one is not very much. When they do it retroactively, now, 216 00:10:21,000 --> 00:10:23,200 Speaker 1: the value of the grant day one is kind of 217 00:10:23,240 --> 00:10:29,439 Speaker 1: twenty eight billion dollars. But they apparently this is a 218 00:10:29,600 --> 00:10:32,240 Speaker 1: disclosure and it's at a little unclear while though I 219 00:10:32,280 --> 00:10:35,439 Speaker 1: have my assumptions. They apparently went to the accounts and 220 00:10:35,480 --> 00:10:37,440 Speaker 1: said it's very unlikely that he'll get these options, and 221 00:10:37,440 --> 00:10:39,920 Speaker 1: so they're worth nothing, and the accounts a great and 222 00:10:40,000 --> 00:10:41,720 Speaker 1: so they say right now that they plan to not 223 00:10:42,080 --> 00:10:44,719 Speaker 1: incur any expense for the options because it's unlikely that 224 00:10:44,760 --> 00:10:47,600 Speaker 1: the performance conditions of the options will be met, but 225 00:10:47,640 --> 00:10:50,560 Speaker 1: there are no performance conditions. So we talked about the 226 00:10:50,559 --> 00:10:52,640 Speaker 1: two conditions, which are one he has to say that 227 00:10:52,679 --> 00:10:55,480 Speaker 1: for two years, and two these go away if he 228 00:10:55,520 --> 00:10:57,800 Speaker 1: gets back the previous charge, like basically, if they win on. 229 00:10:57,760 --> 00:11:01,760 Speaker 2: Appeal court case, it's a Delaware decision is overturned returned. 230 00:11:01,840 --> 00:11:05,320 Speaker 1: Yeah, And so what I think they're saying is that 231 00:11:05,400 --> 00:11:07,559 Speaker 1: there is a less than like twenty five percent chance 232 00:11:08,800 --> 00:11:12,160 Speaker 1: of both of those conditions being met. That is, either 233 00:11:12,520 --> 00:11:16,480 Speaker 1: they're very confident that the Delaware decision will be overturned, 234 00:11:17,160 --> 00:11:20,040 Speaker 1: or they're very confident that he lends going to quit 235 00:11:20,080 --> 00:11:23,679 Speaker 1: in the next two years, or they believe like the 236 00:11:23,760 --> 00:11:26,360 Speaker 1: joint probability of neither of those things happening is very low, right, 237 00:11:26,400 --> 00:11:29,440 Speaker 1: Like they think if the decision is not overturned, hell 238 00:11:29,520 --> 00:11:32,800 Speaker 1: quit something like that. So this is a funny little 239 00:11:32,880 --> 00:11:36,400 Speaker 1: like I don't know what those conversations with their accountants 240 00:11:36,440 --> 00:11:39,839 Speaker 1: were like, but I found it amusing that, Yeah, they 241 00:11:39,840 --> 00:11:42,320 Speaker 1: would not have a high degree of confidence of him 242 00:11:42,360 --> 00:11:44,360 Speaker 1: meeting these very limited performance. 243 00:11:43,880 --> 00:11:47,360 Speaker 2: Conditions, but it seems like, I don't know, listening to that, 244 00:11:47,360 --> 00:11:50,000 Speaker 2: that they seem somewhat confident that the Delaware decision. 245 00:11:50,160 --> 00:11:51,800 Speaker 1: Beeve weird to go to your accountant and be like, 246 00:11:51,800 --> 00:11:55,679 Speaker 1: this one hundred page opinion by the Delaware chancellor is 247 00:11:55,720 --> 00:11:58,680 Speaker 1: obviously wrong in the accounts, Like, yeah, it's obviously wrong. 248 00:11:58,960 --> 00:12:00,840 Speaker 1: That's going to be overturned. Like, you know, I don't 249 00:12:00,840 --> 00:12:02,720 Speaker 1: think they got a legal opinion saying this is definitely 250 00:12:02,760 --> 00:12:04,679 Speaker 1: going to be overturned. Maybe they did. I don't think 251 00:12:04,679 --> 00:12:06,440 Speaker 1: it's crazy, by the way, Like it's kind of a 252 00:12:06,440 --> 00:12:09,520 Speaker 1: weird opinion. It's kind of a weird outcome. Like there's 253 00:12:09,559 --> 00:12:13,240 Speaker 1: this weird political environment where Delaware is losing companies. You 254 00:12:13,240 --> 00:12:16,599 Speaker 1: could imagine it being there's the reasons it would be overturned, 255 00:12:16,960 --> 00:12:19,320 Speaker 1: but it's not like, oh, it's definitely going to be overturned. 256 00:12:20,520 --> 00:12:24,000 Speaker 2: History in real time and we are chronicling it. 257 00:12:24,440 --> 00:12:26,319 Speaker 1: Not for the next two weeks or not that's true. 258 00:12:26,800 --> 00:12:30,120 Speaker 2: Who knows. I didn't say anything about his political activities, 259 00:12:30,240 --> 00:12:34,120 Speaker 2: Like you think about the the serious overhand over the stock. 260 00:12:34,240 --> 00:12:37,040 Speaker 1: No, you're the Tesla board and you're like, OKAYLN, in 261 00:12:37,160 --> 00:12:39,840 Speaker 1: order to get your twenty eight billion dollars of options, 262 00:12:40,000 --> 00:12:43,520 Speaker 1: you have to not do a list of bad things, right, 263 00:12:43,520 --> 00:12:45,360 Speaker 1: we're the list of bad things, Like Okay, sure it 264 00:12:45,400 --> 00:12:48,160 Speaker 1: starts with like enraging customers by doing political activities and 265 00:12:48,160 --> 00:12:50,520 Speaker 1: then go out to like Ketamane and like, you know, 266 00:12:51,360 --> 00:12:54,080 Speaker 1: running seven other companies. Like no, he would much rather 267 00:12:54,160 --> 00:12:56,120 Speaker 1: have his complete freedom to do whatever he wants. And 268 00:12:56,160 --> 00:13:01,400 Speaker 1: then twenty eight billion dollars. I mean, I'm speculating that. 269 00:13:02,320 --> 00:13:03,520 Speaker 2: I talked to him this morning. 270 00:13:03,559 --> 00:13:06,440 Speaker 1: I don't know, Like it's easy for me. 271 00:13:08,320 --> 00:13:10,400 Speaker 2: We're just talking about plenty of money at this point. 272 00:13:10,400 --> 00:13:13,640 Speaker 1: Right, He's like, right, we are talking about funny money. Yeah, 273 00:13:13,760 --> 00:13:16,440 Speaker 1: Like he lives in a state in which if he 274 00:13:16,520 --> 00:13:19,720 Speaker 1: wanted any number of dollars to do anything, he could 275 00:13:19,720 --> 00:13:22,240 Speaker 1: snap his fingers and it would like magically appear. So 276 00:13:22,480 --> 00:13:26,760 Speaker 1: like there is a sense of fairness. There is a 277 00:13:26,800 --> 00:13:28,960 Speaker 1: sense of like, you know, wanting to have a certain 278 00:13:29,000 --> 00:13:31,800 Speaker 1: ownership of Tesla. There's all this stuff that goes into 279 00:13:31,880 --> 00:13:34,079 Speaker 1: him wanting to have tens of billions of dollars of 280 00:13:34,120 --> 00:13:37,080 Speaker 1: Tesla actions. But if he needs money to do something, 281 00:13:37,080 --> 00:13:38,240 Speaker 1: he'll find money to do something. 282 00:13:38,720 --> 00:13:41,400 Speaker 2: He's going to be all right, Gus, he wants to 283 00:13:41,440 --> 00:13:59,440 Speaker 2: be okay, how about corporate actions? 284 00:13:59,440 --> 00:14:00,600 Speaker 1: About corporate access? 285 00:14:01,200 --> 00:14:06,040 Speaker 2: Bradley Sacks over a business insider Bloomberg along great peace 286 00:14:06,080 --> 00:14:07,319 Speaker 2: out about. 287 00:14:07,080 --> 00:14:09,000 Speaker 1: Like the big hedge funds and corporate access. I love 288 00:14:09,000 --> 00:14:12,280 Speaker 1: corporate access because it's like it makes no sense, No, 289 00:14:12,559 --> 00:14:15,079 Speaker 1: it makes total sense, but like it makes people insane. 290 00:14:15,440 --> 00:14:22,280 Speaker 1: Corporate access is like investors largely big you know, institutional investors, hedgehunds, 291 00:14:22,320 --> 00:14:26,440 Speaker 1: and like mutual fund matters. Investors like to meet with 292 00:14:26,520 --> 00:14:28,800 Speaker 1: the companies who shares they own and the companies who 293 00:14:28,880 --> 00:14:31,280 Speaker 1: shares their considering buying. And they will sit down with 294 00:14:31,320 --> 00:14:35,000 Speaker 1: the CEO and be like, so, how's business, And they 295 00:14:35,080 --> 00:14:39,320 Speaker 1: learn things in these meetings. Theoretically, No, theoretically they don't, 296 00:14:39,400 --> 00:14:41,920 Speaker 1: right because, like you know, the US has rules saying 297 00:14:41,960 --> 00:14:45,840 Speaker 1: that regulation FD says that companies can't disclosed material and 298 00:14:45,880 --> 00:14:49,160 Speaker 1: public information to some investors without disclosing it publicly to everyone. 299 00:14:50,200 --> 00:14:54,040 Speaker 1: And yet these meetings happen, and you know that they 300 00:14:54,160 --> 00:14:57,760 Speaker 1: learn something because one they keep doing the meetings, right. Sure, 301 00:14:58,000 --> 00:15:00,000 Speaker 1: you know, people don't waste their time for no reason, right, 302 00:15:00,040 --> 00:15:02,280 Speaker 1: Like they think they're learning something. And then it's like 303 00:15:02,320 --> 00:15:03,880 Speaker 1: a little hard to study. But there are some empirical 304 00:15:03,880 --> 00:15:06,680 Speaker 1: studies where academics like look at these meetings and they 305 00:15:06,680 --> 00:15:09,960 Speaker 1: find that investors who have meetings with management then make 306 00:15:10,040 --> 00:15:12,840 Speaker 1: more informed trading decisions than they do if they don't 307 00:15:12,840 --> 00:15:15,080 Speaker 1: have the meetings. So it's clear that these meetings have 308 00:15:15,120 --> 00:15:19,720 Speaker 1: some value. And you know, it's like this gray intermediate 309 00:15:19,720 --> 00:15:22,880 Speaker 1: area between. They can't get material on public information, right, 310 00:15:22,920 --> 00:15:24,640 Speaker 1: Like the company can't be like, oh, our earnings are 311 00:15:24,640 --> 00:15:26,160 Speaker 1: going to be really good next quarter if they haven't 312 00:15:26,160 --> 00:15:28,360 Speaker 1: already given guidance on the earnings. They can't be like, oh, 313 00:15:28,400 --> 00:15:29,600 Speaker 1: we're getting acquired next week. 314 00:15:29,640 --> 00:15:29,760 Speaker 2: Right. 315 00:15:29,800 --> 00:15:32,880 Speaker 1: They can't give like big material information, but they can 316 00:15:32,880 --> 00:15:34,840 Speaker 1: talk about how they think about the business. They can like, 317 00:15:35,000 --> 00:15:36,520 Speaker 1: you know, talk through the model. They can do a 318 00:15:36,520 --> 00:15:40,120 Speaker 1: lot of helpful stuff for the investors where the investors 319 00:15:40,160 --> 00:15:45,640 Speaker 1: come away learning something without being spoon fed next quarter's earnings. 320 00:15:45,800 --> 00:15:46,000 Speaker 3: Yeah. 321 00:15:46,720 --> 00:15:49,240 Speaker 1: The thing that people always say about this to make 322 00:15:49,280 --> 00:15:54,200 Speaker 1: themselves feel better is that the investors can get a 323 00:15:54,280 --> 00:16:01,680 Speaker 1: read on the executive's tone and body language. On its face, absurd, yes, 324 00:16:02,520 --> 00:16:05,000 Speaker 1: but people keep saying it. They're like, oh, yeah, they 325 00:16:05,000 --> 00:16:07,120 Speaker 1: don't say anything that they haven't already said, but the 326 00:16:07,240 --> 00:16:08,560 Speaker 1: body language tells you something. 327 00:16:08,600 --> 00:16:11,240 Speaker 2: So I can tell you it probably lost its edge 328 00:16:11,320 --> 00:16:13,400 Speaker 2: during the pandemic when you were all on zoom. And 329 00:16:13,440 --> 00:16:14,440 Speaker 2: it's a lot harder to see. 330 00:16:14,960 --> 00:16:17,080 Speaker 1: Oh, that's an interesting question. I feel like there are 331 00:16:17,120 --> 00:16:20,720 Speaker 1: studies and I don't know them, because like that would 332 00:16:20,760 --> 00:16:22,760 Speaker 1: tell you something, right, Yeah, if it in fact lost 333 00:16:22,760 --> 00:16:25,160 Speaker 1: its edge on the pandemic, then that would tell you 334 00:16:25,600 --> 00:16:28,560 Speaker 1: that tone and body language mattered a lot. Yeah, and 335 00:16:28,600 --> 00:16:31,840 Speaker 1: when people are only getting zoom calls, they got less information, 336 00:16:32,240 --> 00:16:34,840 Speaker 1: whereas my thesis is that in fact they're being told 337 00:16:34,880 --> 00:16:37,800 Speaker 1: information and tone in body language is just a euphemism. 338 00:16:38,160 --> 00:16:40,520 Speaker 1: And so in the pandemic, as you get on a 339 00:16:40,600 --> 00:16:42,600 Speaker 1: zoom call and you're like, so, walk me through how 340 00:16:42,600 --> 00:16:45,000 Speaker 1: you're thinking about strategy, and the executive tells you they're like, 341 00:16:45,040 --> 00:16:45,840 Speaker 1: still informative. 342 00:16:46,120 --> 00:16:50,280 Speaker 2: Yeah, someone should do that. I guess I come at 343 00:16:50,360 --> 00:16:53,760 Speaker 2: it from a skeptical lens as a journalist who talks 344 00:16:53,800 --> 00:16:57,640 Speaker 2: to a lot of CEOs. Not to besmirch any CEOs, 345 00:16:57,680 --> 00:17:00,240 Speaker 2: but a lot of them just follow the script. And 346 00:17:00,480 --> 00:17:02,840 Speaker 2: I mean you listen to them speak at conferences, and 347 00:17:03,640 --> 00:17:05,679 Speaker 2: you know, it's hard to get new news out of 348 00:17:06,280 --> 00:17:06,960 Speaker 2: someone in the C. 349 00:17:07,000 --> 00:17:10,720 Speaker 1: Suite maybe three answers that one you don't five percent 350 00:17:10,760 --> 00:17:13,600 Speaker 1: of their stock. It's possible that a conversation with an 351 00:17:13,600 --> 00:17:17,639 Speaker 1: investor is a different framework from a conversation at a 352 00:17:17,680 --> 00:17:20,800 Speaker 1: conference with a journalist, right, Like, they're media trained, but 353 00:17:20,840 --> 00:17:25,480 Speaker 1: they're trained differently to talk to investors. Right. Two, you 354 00:17:25,560 --> 00:17:28,760 Speaker 1: do not have CIA interrogators to understand their body language. 355 00:17:28,880 --> 00:17:33,119 Speaker 1: Apparently some edge ones that do. And then did I 356 00:17:33,160 --> 00:17:33,520 Speaker 1: have a third? 357 00:17:33,760 --> 00:17:36,120 Speaker 2: You said you had three, so you got to think 358 00:17:36,160 --> 00:17:39,760 Speaker 2: of something. Okay, I'm reading your body language right now, 359 00:17:39,800 --> 00:17:43,600 Speaker 2: and it seems like you're really trying to think. Okay. 360 00:17:45,480 --> 00:17:48,600 Speaker 1: The third point is like you could imagine the investors 361 00:17:48,600 --> 00:17:51,280 Speaker 1: asking different questions because they're not trying to make news. 362 00:17:51,320 --> 00:17:54,280 Speaker 1: That's like like they're trying to make very incremental news, right, 363 00:17:54,280 --> 00:17:57,080 Speaker 1: They're trying to find out like like update their model. 364 00:17:57,440 --> 00:18:00,040 Speaker 2: Well, that was part of the piece. Bradley wrote a 365 00:18:00,080 --> 00:18:04,200 Speaker 2: out how one of the complaints is that the questions 366 00:18:04,200 --> 00:18:07,000 Speaker 2: that are being asked or like becoming so niche to 367 00:18:07,040 --> 00:18:08,680 Speaker 2: the point that they're not useful anymore. 368 00:18:08,720 --> 00:18:10,439 Speaker 1: Oh, I know what my third point was. Okay, My 369 00:18:10,520 --> 00:18:13,359 Speaker 1: third point was that actually in this piece, several investors 370 00:18:13,359 --> 00:18:16,119 Speaker 1: complain that in fact, they have the same point you do, 371 00:18:16,160 --> 00:18:18,159 Speaker 1: which is that the CEOs are now so scripted that 372 00:18:18,200 --> 00:18:20,600 Speaker 1: these meetings have become less useful than it used to be. Yeah, 373 00:18:20,840 --> 00:18:22,800 Speaker 1: not just because the questions are very granular, which is 374 00:18:22,840 --> 00:18:26,800 Speaker 1: like their questions are granular because hedge funds are competing 375 00:18:26,920 --> 00:18:31,560 Speaker 1: to like add extremely granular information to like the information set, 376 00:18:31,720 --> 00:18:34,679 Speaker 1: and so they have very detailed questions, which sometimes annoy 377 00:18:34,800 --> 00:18:36,840 Speaker 1: CEOs who want to talk about like the big pictures. 378 00:18:36,880 --> 00:18:39,120 Speaker 2: Make sure, come on, here's my strategy. Isn't it great? 379 00:18:39,920 --> 00:18:42,320 Speaker 1: Right? I mean the THESS Like the point of this 380 00:18:42,359 --> 00:18:44,359 Speaker 1: piece and what I read about it is that like 381 00:18:44,680 --> 00:18:46,840 Speaker 1: in my role, do you think of like the prestige 382 00:18:46,840 --> 00:18:50,040 Speaker 1: and importance of investment firms and like right now, the 383 00:18:50,080 --> 00:18:54,560 Speaker 1: big four multi strategy hedge funds like the Citadel Millennium 384 00:18:54,680 --> 00:18:57,639 Speaker 1: point seventy two vali Asnis of the world are really 385 00:18:57,680 --> 00:19:00,680 Speaker 1: like on the ascendant, Like they're really prestigious, really sort 386 00:19:00,680 --> 00:19:05,000 Speaker 1: of top employers and the asset management business. But when 387 00:19:05,040 --> 00:19:08,000 Speaker 1: you think about what a CEO wants, they don't want 388 00:19:08,040 --> 00:19:09,520 Speaker 1: to meet with those guys. They want to meet with 389 00:19:09,560 --> 00:19:11,600 Speaker 1: Fidelity and Wellington. They want to meet with long arming 390 00:19:11,640 --> 00:19:15,000 Speaker 1: managers for a number of reasons, one of which is 391 00:19:15,040 --> 00:19:19,240 Speaker 1: that the long only managers have longer tenure, both like 392 00:19:20,160 --> 00:19:23,320 Speaker 1: they hold the stock for decades and also like the 393 00:19:23,359 --> 00:19:26,200 Speaker 1: portfolio managers for decades, whereas like you know, the big 394 00:19:26,240 --> 00:19:29,520 Speaker 1: hedge funds, they're constantly churning through portfolio managers, and they're 395 00:19:29,520 --> 00:19:31,880 Speaker 1: constantly turning through stocks, and so like if you talk 396 00:19:31,920 --> 00:19:34,359 Speaker 1: to Citadel because they own your stock this week, they 397 00:19:34,400 --> 00:19:36,320 Speaker 1: made it own it next week or maybe a different person. 398 00:19:37,119 --> 00:19:38,720 Speaker 1: But there are other reasons, one of which is that 399 00:19:38,960 --> 00:19:41,240 Speaker 1: the hedge funds have these really granular questions, like they're 400 00:19:41,240 --> 00:19:43,480 Speaker 1: really interested in, like what's going to drive the stock 401 00:19:43,520 --> 00:19:45,639 Speaker 1: in the next couple of weeks, and so they're not 402 00:19:45,640 --> 00:19:47,280 Speaker 1: going to ask you about your strategy. And if you're 403 00:19:47,280 --> 00:19:49,440 Speaker 1: the CEO and you're like want to pontificate about the 404 00:19:49,440 --> 00:19:51,960 Speaker 1: big picture for a while, you'd much rather talk to 405 00:19:52,119 --> 00:19:55,440 Speaker 1: a long term, long only investor than to a hedge 406 00:19:55,440 --> 00:19:59,159 Speaker 1: fund who has like very specific questions about margins. And 407 00:19:59,200 --> 00:20:01,280 Speaker 1: then the other reason that they're all twenty seven and 408 00:20:01,320 --> 00:20:03,399 Speaker 1: wearing T shirts and the people at Fidelity know how 409 00:20:03,400 --> 00:20:03,920 Speaker 1: to dress. 410 00:20:03,760 --> 00:20:05,520 Speaker 2: To meet with the CEO just amazing. 411 00:20:05,640 --> 00:20:07,640 Speaker 1: Yeah, it's like literally true that like point seventy two 412 00:20:07,720 --> 00:20:12,480 Speaker 1: now mandates blazers because like they were having trouble booking meetings. 413 00:20:12,160 --> 00:20:16,159 Speaker 2: Because they twenty seven year olds and whatever. Yeah, that 414 00:20:16,280 --> 00:20:18,879 Speaker 2: was a fun to bit. I also, and this was 415 00:20:19,119 --> 00:20:22,399 Speaker 2: partly addressed in the article and in your column, I 416 00:20:22,440 --> 00:20:24,840 Speaker 2: feel like part of the reason that these meetings are 417 00:20:24,920 --> 00:20:28,920 Speaker 2: in such high demand is just because time is finite, 418 00:20:29,000 --> 00:20:33,320 Speaker 2: you know, and anything that's scarce is going to be valued, 419 00:20:33,720 --> 00:20:36,560 Speaker 2: and time is scarce, and time with these CEOs is scarce. Yeah, 420 00:20:36,600 --> 00:20:38,560 Speaker 2: so even if it doesn't add that much of an edge, 421 00:20:38,600 --> 00:20:40,800 Speaker 2: you still have it right. 422 00:20:40,880 --> 00:20:43,600 Speaker 1: I think there's an enormous culture in finance and business 423 00:20:43,600 --> 00:20:46,760 Speaker 1: generally of like, if you think that doing a thing 424 00:20:47,240 --> 00:20:50,080 Speaker 1: has a one percent chance of adding one percent to 425 00:20:50,119 --> 00:20:53,399 Speaker 1: your returns, you're just like hardcore and you do it anyway. 426 00:20:53,480 --> 00:20:55,400 Speaker 2: I gotta get it right, Like. 427 00:20:55,359 --> 00:21:00,119 Speaker 1: I have transcended that. But like, you know, you're in 428 00:21:00,119 --> 00:21:02,359 Speaker 1: that seat because you work really hard and like sort 429 00:21:02,359 --> 00:21:04,520 Speaker 1: of do everything you possibly can to get edge. And 430 00:21:04,520 --> 00:21:06,400 Speaker 1: so even though the meeting will probably be worth less, 431 00:21:06,400 --> 00:21:08,600 Speaker 1: peel got it anyway. But the other thing about scarcity 432 00:21:08,680 --> 00:21:10,600 Speaker 1: is that at these firms, you know, like the big 433 00:21:10,640 --> 00:21:14,399 Speaker 1: hedge ones have multiple teams trading the same sector, and 434 00:21:14,480 --> 00:21:17,600 Speaker 1: so you know, if you're the CEO and you book 435 00:21:17,600 --> 00:21:20,360 Speaker 1: a meeting with Citadel, there's like five pms at Citadel, 436 00:21:20,400 --> 00:21:22,119 Speaker 1: who are fighting each other tooth and nail to be 437 00:21:22,160 --> 00:21:23,480 Speaker 1: the one in the meeting or like the two in 438 00:21:23,520 --> 00:21:23,879 Speaker 1: the meeting. 439 00:21:23,920 --> 00:21:26,600 Speaker 2: You know, honestly, it reminded me so much of working 440 00:21:26,640 --> 00:21:27,520 Speaker 2: in a large newsroom. 441 00:21:27,640 --> 00:21:29,720 Speaker 1: I know, I was gonna see right yeah, right. 442 00:21:29,560 --> 00:21:33,000 Speaker 2: Like it's very you have a beat, and you're pretty 443 00:21:33,000 --> 00:21:36,680 Speaker 2: protective of your beat, and it's funny to read about 444 00:21:36,720 --> 00:21:39,679 Speaker 2: it becoming like part of a recruiting perk is that 445 00:21:39,800 --> 00:21:43,159 Speaker 2: you're the only person covering this. You don't have to 446 00:21:43,240 --> 00:21:45,800 Speaker 2: fight for your lane. This is only your lane, or 447 00:21:45,840 --> 00:21:46,440 Speaker 2: it's even worse. 448 00:21:46,480 --> 00:21:49,360 Speaker 1: It's like Bradley Sacks writes that like the most tenured 449 00:21:49,400 --> 00:21:52,919 Speaker 1: pms will often get the best meetings. Like you know, 450 00:21:52,920 --> 00:21:54,840 Speaker 1: if Citadel has a meeting with a company, they'll be like, 451 00:21:55,160 --> 00:21:57,280 Speaker 1: the guy's been here the longest and like does the 452 00:21:57,280 --> 00:22:00,879 Speaker 1: best work gets to have the meeting. But like sometimes 453 00:22:00,920 --> 00:22:03,679 Speaker 1: they'll hire someone and like the new guy gets the 454 00:22:03,720 --> 00:22:06,399 Speaker 1: meeting because that's like a recruiting perk, and then the 455 00:22:06,560 --> 00:22:08,640 Speaker 1: long tenured person doesn't get that good at the meeting. 456 00:22:08,640 --> 00:22:12,520 Speaker 1: And it's it's just like there's a lot of parallels, right, no, right, 457 00:22:12,560 --> 00:22:15,760 Speaker 1: Like I've been in meetings with like many other journalists 458 00:22:15,800 --> 00:22:18,159 Speaker 1: where one it's competitive to get into the meeting, and 459 00:22:18,200 --> 00:22:20,480 Speaker 1: then too everyone's like, you know, it's competitive to get 460 00:22:20,480 --> 00:22:21,320 Speaker 1: your question answered. 461 00:22:21,480 --> 00:22:22,840 Speaker 2: Yeah, and it seems. 462 00:22:22,560 --> 00:22:23,560 Speaker 1: Similar in this case. 463 00:22:23,880 --> 00:22:24,600 Speaker 2: That's so funny. 464 00:22:24,960 --> 00:22:26,760 Speaker 1: The other thing I wanted to say, yeah, because I 465 00:22:26,800 --> 00:22:30,600 Speaker 1: wrote about this, and I wrote about broadly speaking, CEOs 466 00:22:30,640 --> 00:22:32,960 Speaker 1: would rather meet with like Fidelity or Wellington than with 467 00:22:33,359 --> 00:22:36,200 Speaker 1: State a point seventy two. And then it's a throw 468 00:22:36,359 --> 00:22:37,840 Speaker 1: I was like, and they probably won't meet with you, know, 469 00:22:37,840 --> 00:22:39,639 Speaker 1: if you want a hundred shares and you're a retail industrial, 470 00:22:39,680 --> 00:22:42,960 Speaker 1: they probably won't be with you. And I found the 471 00:22:43,040 --> 00:22:46,800 Speaker 1: academic paper I wrote about Wednesday where they basically tested 472 00:22:46,800 --> 00:22:48,879 Speaker 1: that out by sending cold emails to a lot of 473 00:22:48,920 --> 00:22:52,800 Speaker 1: investor relations departments. And the cold emails, some of them 474 00:22:52,840 --> 00:22:57,399 Speaker 1: were from like a Yahoo dot commumail address like like 475 00:22:57,440 --> 00:22:59,400 Speaker 1: a high I'm an individual investor, I'd like to buy 476 00:22:59,400 --> 00:23:01,240 Speaker 1: your stock? Could you meet with me? And some of 477 00:23:01,240 --> 00:23:05,560 Speaker 1: them are from fake investment firms like like I work 478 00:23:05,600 --> 00:23:08,000 Speaker 1: at Blue Willow Capital and I'd like to meet with you. 479 00:23:08,119 --> 00:23:08,760 Speaker 2: It sounds right. 480 00:23:09,000 --> 00:23:12,679 Speaker 1: Yeah. They found, first of all, that about sixteen percent 481 00:23:12,720 --> 00:23:16,199 Speaker 1: of these messages resulted in meetings, which is higher than 482 00:23:16,240 --> 00:23:18,600 Speaker 1: I would have thought. Not bad, right, And second, well, 483 00:23:18,640 --> 00:23:21,520 Speaker 1: there's no distinction between retail investor and Blue Weellow capital, 484 00:23:21,560 --> 00:23:24,000 Speaker 1: Like retail people could get the meetings just blue. Well 485 00:23:24,200 --> 00:23:26,159 Speaker 1: they did find racial discrimination though. 486 00:23:26,520 --> 00:23:31,200 Speaker 2: Yeah, don't love that. This reminds me. We were talking 487 00:23:31,200 --> 00:23:34,040 Speaker 2: about Hymns and HER's earnings on air this week, and 488 00:23:34,640 --> 00:23:36,680 Speaker 2: the Hymns and Her CEO has made sort of a 489 00:23:36,720 --> 00:23:39,240 Speaker 2: big show of like giving questions in the earnings call 490 00:23:39,320 --> 00:23:40,520 Speaker 2: to retail investors. 491 00:23:41,040 --> 00:23:43,320 Speaker 1: Yeah, right, Like my perception of it being hard for 492 00:23:43,359 --> 00:23:45,640 Speaker 1: retail is kind of an old school perception, and now 493 00:23:45,680 --> 00:23:47,359 Speaker 1: with like memeslags, it's a different game. 494 00:23:47,560 --> 00:23:48,280 Speaker 3: Yeah. 495 00:23:48,480 --> 00:23:50,679 Speaker 2: Also somewhat related to this, I was talking to a 496 00:23:50,760 --> 00:23:56,120 Speaker 2: CEO who reported earnings this week, and the CEO said that, Okay, 497 00:23:56,880 --> 00:23:58,520 Speaker 2: if you're report in the afternoon, then you do the 498 00:23:58,520 --> 00:24:04,359 Speaker 2: earnings call. But then this CEO was answering questions from 499 00:24:04,359 --> 00:24:06,800 Speaker 2: analysts until like ten pm that night. Like, you have 500 00:24:06,840 --> 00:24:09,639 Speaker 2: the earnings call and they asked the questions and the 501 00:24:09,680 --> 00:24:11,879 Speaker 2: transcript goes out and you can see it is public. 502 00:24:11,920 --> 00:24:14,960 Speaker 2: But then like the real questions come after the earnings call. 503 00:24:15,200 --> 00:24:16,679 Speaker 2: So you have the earnings call and then you have 504 00:24:16,720 --> 00:24:17,800 Speaker 2: all your individual calls. 505 00:24:17,920 --> 00:24:21,880 Speaker 1: This is the thing that people naively think regulation FD prevents, right, 506 00:24:22,480 --> 00:24:24,400 Speaker 1: everything has to be public, But no, And you see 507 00:24:24,440 --> 00:24:26,720 Speaker 1: it on like public earnings called transcripts. You know, people 508 00:24:26,720 --> 00:24:29,520 Speaker 1: ask questions and the CFI will be like, follow up 509 00:24:29,520 --> 00:24:31,760 Speaker 1: with me afterwards and we'll walk through that, right, and like, 510 00:24:31,960 --> 00:24:34,960 Speaker 1: you know, like obviously the case that companies talk to 511 00:24:35,040 --> 00:24:38,840 Speaker 1: analysts and investors outside of the you know, one hour 512 00:24:38,920 --> 00:24:41,720 Speaker 1: public earnings call, and it seems to be obviously the 513 00:24:41,760 --> 00:24:44,159 Speaker 1: case that those conversations are useful, but they exist in 514 00:24:44,200 --> 00:24:45,720 Speaker 1: this weird regulatory limbo. 515 00:24:46,520 --> 00:24:49,280 Speaker 2: I find that frustrating because as a journalist, I'm not 516 00:24:49,320 --> 00:24:52,040 Speaker 2: allowed to sit in on those one on one leadings. 517 00:24:52,520 --> 00:25:08,359 Speaker 3: Yeah. 518 00:25:08,400 --> 00:25:11,520 Speaker 2: Should we check in on the state of on cycle recruiting. 519 00:25:11,680 --> 00:25:15,440 Speaker 2: Let's check in Bank of America. Yeah, well, Bank of America, 520 00:25:15,920 --> 00:25:18,520 Speaker 2: the news came out this week, written by Catherine Doherty 521 00:25:18,640 --> 00:25:23,080 Speaker 2: that their junior bankers face reassignment if they accept other jobs. 522 00:25:23,680 --> 00:25:26,800 Speaker 2: Just the latest in a string of the big banks 523 00:25:27,160 --> 00:25:31,920 Speaker 2: pushing back against on cycle recruiting. Right, so the busy summer. 524 00:25:32,040 --> 00:25:34,080 Speaker 1: One thing I wonder about is like why are they 525 00:25:34,080 --> 00:25:34,600 Speaker 1: pushing back? 526 00:25:34,760 --> 00:25:38,000 Speaker 2: Why are they pushing back in general, like the dynamics. 527 00:25:37,480 --> 00:25:40,320 Speaker 1: Here are like JP Morgan led the charge of saying 528 00:25:40,359 --> 00:25:43,840 Speaker 1: we're not going to allow recruiting, we're mad about it, 529 00:25:43,920 --> 00:25:47,119 Speaker 1: we'll fire you, and then a number of big private 530 00:25:47,119 --> 00:25:51,399 Speaker 1: equity firms announced they would wait to do on cycle. 531 00:25:51,119 --> 00:25:53,400 Speaker 2: Recruiting led by Apollo. It feels like. 532 00:25:53,480 --> 00:25:57,400 Speaker 1: Most banks did not join in saying where we're going 533 00:25:57,440 --> 00:25:59,240 Speaker 1: to fire you, and most private acuity firms did not 534 00:25:59,280 --> 00:26:01,920 Speaker 1: announce we're not going to do encycle recruiting for two years, 535 00:26:02,720 --> 00:26:08,000 Speaker 1: but also didn't happen. Like everyone is like quietly tacitly 536 00:26:08,200 --> 00:26:11,399 Speaker 1: going along with this process started by JP Morgan, and 537 00:26:11,440 --> 00:26:13,320 Speaker 1: it's like a two side like the banks and the 538 00:26:13,320 --> 00:26:16,320 Speaker 1: priority from every seems like to have. There's like a 539 00:26:16,480 --> 00:26:19,960 Speaker 1: possibly fragile equilibrium where they're not doing the recruiting, and 540 00:26:20,040 --> 00:26:24,199 Speaker 1: so there's not really a need I don't think for 541 00:26:24,280 --> 00:26:26,159 Speaker 1: the banks to say we'll fire you if you do it, 542 00:26:26,200 --> 00:26:28,359 Speaker 1: because it's not happening. But you know, you got to 543 00:26:28,359 --> 00:26:30,000 Speaker 1: get ahead of it. So some of the banks are 544 00:26:30,080 --> 00:26:32,679 Speaker 1: joining in, and so this week Bank of America said 545 00:26:33,440 --> 00:26:36,800 Speaker 1: except an offer elsewhere, you'll be reassigned, which is very 546 00:26:36,800 --> 00:26:42,240 Speaker 1: ominous because they don't say where, and like, well, Bank 547 00:26:42,280 --> 00:26:46,359 Speaker 1: of America has tellers a lot of possibilities. 548 00:26:46,720 --> 00:26:49,560 Speaker 2: Yeah, that was more tired than I was thinking I do, 549 00:26:49,760 --> 00:26:51,280 Speaker 2: I don't say yeah. 550 00:26:51,320 --> 00:26:53,399 Speaker 1: And it's you know, like the idea of on cycle 551 00:26:53,400 --> 00:26:56,439 Speaker 1: recruiting is so strange, right, but it essentially it's you 552 00:26:56,520 --> 00:26:59,400 Speaker 1: will at the beginning of your investment making analyst job 553 00:26:59,680 --> 00:27:02,720 Speaker 1: except an offer at a private equity job. But that 554 00:27:02,760 --> 00:27:05,879 Speaker 1: private equity job is contingent on you spending two years 555 00:27:06,240 --> 00:27:09,040 Speaker 1: being an investment banking analyst, because you do need to 556 00:27:09,119 --> 00:27:11,080 Speaker 1: learn the stuff that you do as an investment banking 557 00:27:11,080 --> 00:27:15,720 Speaker 1: analyst to be an effective private equity associate. And so 558 00:27:15,840 --> 00:27:19,000 Speaker 1: you have two years of working in you know, an 559 00:27:19,000 --> 00:27:20,520 Speaker 1: industry group or an m and A group or a 560 00:27:20,560 --> 00:27:23,600 Speaker 1: Leffin group at a bank where you like learn enough 561 00:27:23,880 --> 00:27:26,960 Speaker 1: to become a useful associate at a PE firm. And 562 00:27:27,000 --> 00:27:29,640 Speaker 1: if you get fired at your bank, the PE firm 563 00:27:29,640 --> 00:27:33,080 Speaker 1: will probably rescind your offer because you haven't done the 564 00:27:33,080 --> 00:27:35,399 Speaker 1: training that they require, And if you'd reassigned to being 565 00:27:35,440 --> 00:27:38,400 Speaker 1: a teller, then like also not the training they would 566 00:27:38,440 --> 00:27:38,800 Speaker 1: have wanted. 567 00:27:39,080 --> 00:27:42,359 Speaker 2: Yeah, you can kind of feel for these analysts because 568 00:27:42,400 --> 00:27:45,960 Speaker 2: also they're probably not having a lot of fun in general, sure. 569 00:27:45,760 --> 00:27:48,840 Speaker 1: And like one thing reassigned could mean is like if 570 00:27:48,880 --> 00:27:54,000 Speaker 1: you work in the tech group and you get a 571 00:27:54,080 --> 00:27:58,720 Speaker 1: job at like a tech focused private equity firm, then 572 00:27:58,840 --> 00:28:00,920 Speaker 1: Bank of America will say, Okay, we're gonna reassign you 573 00:28:01,000 --> 00:28:02,840 Speaker 1: because there's conflict of theventswers there, so we're going to 574 00:28:02,880 --> 00:28:06,560 Speaker 1: move you to like the natural resources group. Like that 575 00:28:06,600 --> 00:28:09,639 Speaker 1: would be like appairly benign interpretation that this one doesn't 576 00:28:09,640 --> 00:28:11,560 Speaker 1: get the sense that's what's happening, right, You get the 577 00:28:11,600 --> 00:28:13,359 Speaker 1: sense that it's like a punitive reassignment. 578 00:28:13,560 --> 00:28:16,520 Speaker 2: Yeah, going by what the story said, this is according 579 00:28:16,560 --> 00:28:19,480 Speaker 2: to people familiar with the matter, junior bankers are being 580 00:28:19,480 --> 00:28:21,840 Speaker 2: asked by their managers to divulge whether they have a 581 00:28:21,880 --> 00:28:25,440 Speaker 2: new employment opportunity and if future offers are accepted, those 582 00:28:25,480 --> 00:28:29,560 Speaker 2: individuals will likely be moved to another area within the bank. 583 00:28:29,680 --> 00:28:32,440 Speaker 2: So searching for detail there. But they have a week. 584 00:28:32,680 --> 00:28:36,280 Speaker 2: Apparently those who fail to disclose accepted offers within a 585 00:28:36,280 --> 00:28:40,760 Speaker 2: week would be deemed in violation. It's interesting to see 586 00:28:40,760 --> 00:28:45,239 Speaker 2: how different banks are approaching this. Apparently Goldman has you right, 587 00:28:45,280 --> 00:28:45,880 Speaker 2: Goldman has. 588 00:28:45,760 --> 00:28:48,360 Speaker 1: The chart approach where they're like most are they do have. 589 00:28:48,440 --> 00:28:50,840 Speaker 2: Well, you have to restate your loyalty every three months 590 00:28:50,880 --> 00:28:51,280 Speaker 2: or something. 591 00:28:51,440 --> 00:28:53,000 Speaker 1: Yeah, every three months you have to say you haven't 592 00:28:53,000 --> 00:28:55,560 Speaker 1: taken a job elsewhere. Yeah, But they also have like 593 00:28:55,840 --> 00:28:58,560 Speaker 1: you know, there's like three tiers of prestige. Right, there's 594 00:28:58,640 --> 00:29:02,080 Speaker 1: like private equity, and then there's investment banking, and then 595 00:29:02,120 --> 00:29:06,680 Speaker 1: there's like operations back office tellers. Right, and Goldman says, 596 00:29:06,680 --> 00:29:08,160 Speaker 1: if you stay here for two years, we're going to 597 00:29:08,200 --> 00:29:10,840 Speaker 1: try to move you into our own I was gonna 598 00:29:10,840 --> 00:29:14,160 Speaker 1: say private equity division. Yeah, their own like alts division, Yeah, 599 00:29:14,280 --> 00:29:17,560 Speaker 1: private area is. And then Man of America says, if 600 00:29:17,560 --> 00:29:18,800 Speaker 1: you don't stay here for two years, we're going to 601 00:29:18,840 --> 00:29:19,840 Speaker 1: move you into being a teller. 602 00:29:19,920 --> 00:29:24,640 Speaker 2: So yeah. So Jamie Diamond, it feels like he started 603 00:29:24,640 --> 00:29:27,240 Speaker 2: this all off a couple months ago. I do wonder 604 00:29:27,320 --> 00:29:30,560 Speaker 2: like if it had been Wells Fargo who led the charge, 605 00:29:30,960 --> 00:29:33,920 Speaker 2: would we be seeing this cascade of other banks lining 606 00:29:34,000 --> 00:29:36,080 Speaker 2: up and saying we're also not okay with this, this 607 00:29:36,160 --> 00:29:38,280 Speaker 2: is what we're gonna do. Or is it uniquely like 608 00:29:38,400 --> 00:29:41,680 Speaker 2: Jamie Diamond and JP Morgan are doing this and all 609 00:29:41,680 --> 00:29:43,480 Speaker 2: the other big banks feel pressure to follow. 610 00:29:43,880 --> 00:29:45,720 Speaker 1: I think Jamie Diamond has a lot of like moral 611 00:29:45,800 --> 00:29:48,000 Speaker 1: leadership I don't even know about the other banks feeling 612 00:29:48,040 --> 00:29:51,080 Speaker 1: pressure to follow. Yeah, the other banks feel cover to follow, right, 613 00:29:51,080 --> 00:29:53,920 Speaker 1: because like this is a competitive market. And if one 614 00:29:54,000 --> 00:29:56,200 Speaker 1: bank says, and this has happened before, if one bank 615 00:29:56,240 --> 00:29:58,200 Speaker 1: says we're going to fire you if you take a 616 00:29:58,200 --> 00:30:01,720 Speaker 1: private equity job too early, and no other bank says that, 617 00:30:01,920 --> 00:30:05,640 Speaker 1: then people won't go to work at that bank because 618 00:30:05,640 --> 00:30:08,160 Speaker 1: they will want their private equity job. But JP Morgan says, 619 00:30:08,240 --> 00:30:10,400 Speaker 1: Abymary is pretty big, and so you have cover. But 620 00:30:10,440 --> 00:30:12,840 Speaker 1: the other thing is like, also like the people who 621 00:30:12,960 --> 00:30:16,720 Speaker 1: run private equity firms care about what Jamie Diamond thinks. Yeah, 622 00:30:16,880 --> 00:30:19,320 Speaker 1: not even like as a market's and competitive matterage. So 623 00:30:19,320 --> 00:30:21,200 Speaker 1: they're like, oh yeah, they respect that guy, and so 624 00:30:21,240 --> 00:30:22,640 Speaker 1: when he says it, they're like, oh yeah, he's right 625 00:30:22,680 --> 00:30:25,440 Speaker 1: because probably everyone knows he's right. Like it's not super controversial, 626 00:30:25,480 --> 00:30:27,240 Speaker 1: Like no one's like that up said about it. And 627 00:30:27,280 --> 00:30:29,000 Speaker 1: I think if you, like, if you're talking to private 628 00:30:29,040 --> 00:30:33,440 Speaker 1: ay people, they are not thrilled with the current process. 629 00:30:34,360 --> 00:30:38,280 Speaker 1: The current process does not do a good job like 630 00:30:38,400 --> 00:30:41,280 Speaker 1: the old process, the process where they you know, interview 631 00:30:41,600 --> 00:30:44,200 Speaker 1: before people started banks does not do a good job 632 00:30:44,240 --> 00:30:46,720 Speaker 1: of finding people who are knowledgeable does not do a 633 00:30:46,720 --> 00:30:49,520 Speaker 1: good job of finding people who are really motivated because 634 00:30:49,520 --> 00:30:53,120 Speaker 1: you don't know anything yet they worked as bankers yet, Yeah, 635 00:30:53,160 --> 00:30:54,600 Speaker 1: if you interview them after a year and a half 636 00:30:54,640 --> 00:30:58,200 Speaker 1: in banking and they're like dead eyed and have both 637 00:30:58,240 --> 00:31:00,760 Speaker 1: a thousand models, like, it's easy to find out who 638 00:31:00,800 --> 00:31:02,680 Speaker 1: really wants to be there, who's really interested, who's like 639 00:31:02,760 --> 00:31:05,239 Speaker 1: learned a lot, and so it's a better system for them. 640 00:31:05,280 --> 00:31:07,800 Speaker 1: And then the other thing is we live in a 641 00:31:07,920 --> 00:31:11,880 Speaker 1: very uncertain world about the hiring needs of private equity 642 00:31:11,880 --> 00:31:12,880 Speaker 1: firms two years out. 643 00:31:13,040 --> 00:31:17,440 Speaker 2: That's true. Robots are coming, Robots are coming, the death 644 00:31:17,480 --> 00:31:19,040 Speaker 2: of the universe, the. 645 00:31:18,840 --> 00:31:23,240 Speaker 1: Deal flow situation is, and there's less need for associates 646 00:31:23,320 --> 00:31:25,440 Speaker 1: right now than people might have predicted two years ago. 647 00:31:25,480 --> 00:31:28,320 Speaker 1: And so why why predict two years out? You can 648 00:31:28,400 --> 00:31:30,840 Speaker 1: just wait and if everyone can wait, then everyone can wait. 649 00:31:31,040 --> 00:31:33,840 Speaker 2: So you called it the old system, and that I'm. 650 00:31:33,760 --> 00:31:36,880 Speaker 1: Sorry, the system as of six months ago. 651 00:31:37,200 --> 00:31:37,400 Speaker 3: Right. 652 00:31:37,640 --> 00:31:39,480 Speaker 2: Well, I was going to ask, do you think that 653 00:31:39,680 --> 00:31:42,560 Speaker 2: this changes anything? Like have we seen the end of 654 00:31:42,600 --> 00:31:46,640 Speaker 2: this cycle? Is this a lasting fragile what did you 655 00:31:46,640 --> 00:31:49,200 Speaker 2: call it? I liked that fragile equilibrium. 656 00:31:49,520 --> 00:31:54,520 Speaker 1: I think that between the AI stuff and the relative 657 00:31:54,560 --> 00:32:01,040 Speaker 1: slowdown pe no one is desperate to hire the best 658 00:32:01,040 --> 00:32:03,160 Speaker 1: possible twenty two year olds to start in two years. 659 00:32:03,680 --> 00:32:06,760 Speaker 1: Those are separate points from like Jamie Diamond's moral authority. 660 00:32:07,440 --> 00:32:12,560 Speaker 1: I think in five years. In two years, if private 661 00:32:12,600 --> 00:32:14,720 Speaker 1: equity is booming and they're desperate for people to do 662 00:32:14,800 --> 00:32:18,520 Speaker 1: deals and the A thing was just the hype, and 663 00:32:18,560 --> 00:32:21,479 Speaker 1: they think, how do I get the best possible forty 664 00:32:21,520 --> 00:32:26,040 Speaker 1: bodies and seats, they'll be interviewing earlier. These things always 665 00:32:26,080 --> 00:32:26,840 Speaker 1: break down. 666 00:32:26,680 --> 00:32:28,920 Speaker 2: But I guess that's what it's psychled does because. 667 00:32:28,680 --> 00:32:30,800 Speaker 1: Of competitive pressures, right, And if there are no competitive 668 00:32:30,800 --> 00:32:32,760 Speaker 1: pressures for them to break down, they won't break down. 669 00:32:32,880 --> 00:32:33,800 Speaker 1: So I don't know when that'll be. 670 00:32:34,800 --> 00:32:39,520 Speaker 2: So watch this space, all right, comebey, Okay, all right, Matt. 671 00:32:39,560 --> 00:32:41,840 Speaker 3: Bye. 672 00:32:42,720 --> 00:32:44,200 Speaker 1: And that was the Money Stuff Podcast. 673 00:32:44,320 --> 00:32:46,360 Speaker 2: I'm Matt Livian and I'm Katie Greifeld. 674 00:32:46,680 --> 00:32:48,760 Speaker 1: You can find my work by subscribing to the Money 675 00:32:48,760 --> 00:32:51,240 Speaker 1: Stuff newsletter on Bloomberg dot com. 676 00:32:51,200 --> 00:32:53,720 Speaker 2: And you can find me on Bloomberg TV every day 677 00:32:53,760 --> 00:32:56,800 Speaker 2: on Open Interest between nine to eleven am Eastern. 678 00:32:57,080 --> 00:32:58,800 Speaker 1: We'd love to hear from you. You can send an 679 00:32:58,800 --> 00:33:01,959 Speaker 1: email to money Pod at Bloomberg dot net. Ask us 680 00:33:01,960 --> 00:33:03,480 Speaker 1: a question and we might answer it on air. 681 00:33:03,760 --> 00:33:05,920 Speaker 2: You can also subscribe to our show wherever you're listening 682 00:33:06,000 --> 00:33:08,000 Speaker 2: right now and leave us a review. It helps more 683 00:33:08,040 --> 00:33:08,920 Speaker 2: people find the show. 684 00:33:09,400 --> 00:33:12,040 Speaker 1: The Money Stuff podcast that is produced by Ana Mazerakus 685 00:33:12,080 --> 00:33:12,959 Speaker 1: and Moses Ondon. 686 00:33:13,480 --> 00:33:16,160 Speaker 2: Our theme music was composed by Blake Maples and Sage 687 00:33:16,160 --> 00:33:17,840 Speaker 2: Bauman is Bloomberg's head of Podcasts. 688 00:33:18,080 --> 00:33:20,400 Speaker 1: Thanks for listening to The Money Stuff Podcast. We'll be 689 00:33:20,480 --> 00:33:22,040 Speaker 1: back next week with more stuff