1 00:00:03,240 --> 00:00:07,560 Speaker 1: This is Masters in Business with Barry Ridholes on Bloomberg Radio. 2 00:00:08,080 --> 00:00:10,760 Speaker 1: This week on the podcast, I sit down with a 3 00:00:10,960 --> 00:00:17,360 Speaker 1: delightful and really incredibly knowledgeable journalist, Bethany McClain. You may 4 00:00:17,360 --> 00:00:20,160 Speaker 1: not be familiar with the name unless you read bylines 5 00:00:20,239 --> 00:00:23,560 Speaker 1: like I do. Bethany wrote one of the best selling 6 00:00:23,640 --> 00:00:28,120 Speaker 1: books on finance. Um it was about Enron, The smartest 7 00:00:28,120 --> 00:00:33,120 Speaker 1: guys in the Room, the spectacular rise and scandalous fall 8 00:00:33,800 --> 00:00:38,680 Speaker 1: of Enron. And you may be familiar with her if 9 00:00:38,680 --> 00:00:40,519 Speaker 1: you're a little older, maybe you were a traitor in 10 00:00:40,560 --> 00:00:44,440 Speaker 1: the late nineties early two thousand's Bethany was. Her background 11 00:00:44,440 --> 00:00:46,800 Speaker 1: is really fascinating. She graduates with a degree in both 12 00:00:46,840 --> 00:00:51,040 Speaker 1: English and mathematics, ends up at Goldman sachs Uh as 13 00:00:51,040 --> 00:00:54,200 Speaker 1: an m and a analyst, before she decides that's not 14 00:00:54,240 --> 00:00:57,160 Speaker 1: what her future is going to be and she becomes 15 00:00:57,200 --> 00:01:01,760 Speaker 1: a journalist. She's writing a fortune and in two thousand 16 00:01:01,840 --> 00:01:07,720 Speaker 1: one publishes a article that at the time Enron was 17 00:01:07,920 --> 00:01:13,959 Speaker 1: a skyrocket, a moon, a moonshot, really questions the valuation 18 00:01:14,000 --> 00:01:17,640 Speaker 1: of Enron. She never alleges fraud. She points out how 19 00:01:17,720 --> 00:01:22,160 Speaker 1: challenging it is to actually find out anything about about 20 00:01:22,160 --> 00:01:25,959 Speaker 1: the company. Itself and really just raises a lot of 21 00:01:26,040 --> 00:01:30,760 Speaker 1: questions as to how can this company that's essentially positioning 22 00:01:30,760 --> 00:01:35,160 Speaker 1: itself as a utility be such a fast grower and 23 00:01:35,240 --> 00:01:38,759 Speaker 1: yet not reveal much to the investing public. And and 24 00:01:38,800 --> 00:01:41,440 Speaker 1: really that's where you start pulling the string on the 25 00:01:41,480 --> 00:01:46,440 Speaker 1: sweater and eventually the entire Enron house of cards collapses. Uh. 26 00:01:46,560 --> 00:01:49,080 Speaker 1: Obviously that's a hell of a way for a journalist 27 00:01:49,080 --> 00:01:52,480 Speaker 1: to make a name for herself bring down Enron. She 28 00:01:53,000 --> 00:01:56,000 Speaker 1: is rather humble about this. She said it would have 29 00:01:56,040 --> 00:02:00,600 Speaker 1: collapsed eventually. Anyway. You can't have that my fraud and 30 00:02:00,880 --> 00:02:04,040 Speaker 1: get away with it forever. But her book is really 31 00:02:04,080 --> 00:02:08,079 Speaker 1: well regarded. She's subsequently written a number of books, one 32 00:02:08,120 --> 00:02:12,200 Speaker 1: with Jonah Sarah about uh, Fannie May and Freddy Mack, 33 00:02:12,240 --> 00:02:15,800 Speaker 1: which is really quite fascinating. She wrote another book on 34 00:02:16,560 --> 00:02:20,800 Speaker 1: the financial crisis. UM. I find her to be tremendously 35 00:02:21,160 --> 00:02:24,560 Speaker 1: insightful and really just a pleasure to chat. Without a 36 00:02:24,600 --> 00:02:27,640 Speaker 1: delightful time talking with her about all these things. And 37 00:02:27,840 --> 00:02:30,680 Speaker 1: I think you'll hear that in the interview. I wish 38 00:02:30,680 --> 00:02:34,880 Speaker 1: we had more more time. The hour flew by really quickly, 39 00:02:35,280 --> 00:02:39,280 Speaker 1: So without any further ado, here is my Conversation with 40 00:02:39,360 --> 00:02:46,560 Speaker 1: Bethany McClain. This is Masters in Business with Barry Ridholds 41 00:02:46,760 --> 00:02:51,120 Speaker 1: on Bloomberg Radio. My special guest today is Bethany McClain. 42 00:02:51,480 --> 00:02:55,320 Speaker 1: She is currently a contributing editor at Vanity Fair, but 43 00:02:55,400 --> 00:02:59,480 Speaker 1: she is also the author of a number of fascinating books. 44 00:02:59,560 --> 00:03:03,720 Speaker 1: I would say she's probably best known for Smartest Guys 45 00:03:03,760 --> 00:03:07,080 Speaker 1: in the Room, The Amazing Rise and Scandalous Fall of 46 00:03:07,120 --> 00:03:10,800 Speaker 1: and Ron No. Not only was it a award winning book, 47 00:03:10,840 --> 00:03:14,160 Speaker 1: but it also became a documentary that was nominated for 48 00:03:14,200 --> 00:03:18,679 Speaker 1: the Academy Awards in two thousand and six. She graduated 49 00:03:18,680 --> 00:03:22,359 Speaker 1: Williams College and was a double major in math and English. 50 00:03:22,760 --> 00:03:26,520 Speaker 1: Spent three years at Goldman Sachs as an investment banking 51 00:03:26,720 --> 00:03:32,320 Speaker 1: m and a analyst before joining Fortune Uh, where she 52 00:03:32,520 --> 00:03:37,360 Speaker 1: pens a very famous article called is in Run over 53 00:03:37,440 --> 00:03:42,920 Speaker 1: Priced that ultimately pre sage the collapse of that company 54 00:03:42,960 --> 00:03:46,720 Speaker 1: and a huge scandal. She's also the author of Shaky Ground, 55 00:03:46,840 --> 00:03:50,440 Speaker 1: The Strange Saga of US Mortgage Giants, and All the 56 00:03:50,480 --> 00:03:54,080 Speaker 1: Devils Are Here, The Hidden History of the Financial Crisis. 57 00:03:54,160 --> 00:03:57,560 Speaker 1: Bethany McClain, Welcome to Bloomberg. Thanks for having me. So 58 00:03:57,560 --> 00:04:01,320 Speaker 1: so that's quite a fast, sedating background, and there's so 59 00:04:01,360 --> 00:04:05,440 Speaker 1: many places to go. I have to start with double 60 00:04:05,520 --> 00:04:08,600 Speaker 1: major English and math, which a lot of people are 61 00:04:08,600 --> 00:04:12,920 Speaker 1: either word people or number of people. You're both sign 62 00:04:12,960 --> 00:04:15,960 Speaker 1: of a confused mind. But no, seriously, I don't think 63 00:04:16,040 --> 00:04:17,880 Speaker 1: you should be one or the other. Somebody asked me 64 00:04:17,960 --> 00:04:21,920 Speaker 1: recently random question, what what influenced me more being an 65 00:04:21,920 --> 00:04:24,159 Speaker 1: English major being a math major? And I actually think 66 00:04:24,160 --> 00:04:27,440 Speaker 1: my math major influences my writing in some ways more 67 00:04:27,600 --> 00:04:31,120 Speaker 1: because math, particularly theoretical upper level math where it's proofs, 68 00:04:31,520 --> 00:04:34,680 Speaker 1: is very logical. And I was thinking, I don't have 69 00:04:34,720 --> 00:04:38,520 Speaker 1: a very aggressive personality, but what makes me aggress But 70 00:04:38,640 --> 00:04:40,920 Speaker 1: what makes me aggressive is when a doesn't lead to be, 71 00:04:41,080 --> 00:04:43,080 Speaker 1: doesn't lead to see, And I think that's my training 72 00:04:43,080 --> 00:04:45,120 Speaker 1: as a math major. And then I can't stand it 73 00:04:45,240 --> 00:04:48,040 Speaker 1: because I'm looking for the proof right or I'm looking 74 00:04:48,040 --> 00:04:50,680 Speaker 1: for the logic the logic, and when the logic doesn't 75 00:04:50,720 --> 00:04:54,000 Speaker 1: add up, that's what will make me dig in and 76 00:04:54,000 --> 00:04:56,520 Speaker 1: and ask aggressive questions in a way that perhaps isn't 77 00:04:56,640 --> 00:04:59,760 Speaker 1: isn't my natural personality. I suffer from the same condition. 78 00:05:00,279 --> 00:05:02,320 Speaker 1: It is a confused state of mind. Because people are 79 00:05:02,400 --> 00:05:05,279 Speaker 1: usually left the right brain and if you're English and math, 80 00:05:05,320 --> 00:05:07,719 Speaker 1: it means you're a little of both, and it certainly 81 00:05:07,800 --> 00:05:11,280 Speaker 1: is confusing. So let's talk a little bit about that 82 00:05:11,360 --> 00:05:14,640 Speaker 1: takes you to Goldman Sachs in the early nineties, a 83 00:05:14,839 --> 00:05:17,680 Speaker 1: really tough place to break in. How do you go 84 00:05:18,160 --> 00:05:21,880 Speaker 1: straight from college to Goldman Sachs's banking division. Well, at 85 00:05:21,920 --> 00:05:24,360 Speaker 1: that time, Goldman Sachs had an analyst program where they 86 00:05:24,400 --> 00:05:27,080 Speaker 1: hired people right out of college into their two year 87 00:05:27,120 --> 00:05:31,240 Speaker 1: analyst program, So there was a pretty established track for 88 00:05:31,240 --> 00:05:33,320 Speaker 1: for doing that. I don't think I was a natural 89 00:05:33,440 --> 00:05:36,480 Speaker 1: candidate to be on that track. I think that's true. 90 00:05:36,520 --> 00:05:39,520 Speaker 1: I didn't I didn't know what investment banking was. Quite frankly, 91 00:05:39,560 --> 00:05:41,000 Speaker 1: I think I got a job because I was a 92 00:05:41,000 --> 00:05:43,120 Speaker 1: female math major, and that was rare enough in one 93 00:05:43,120 --> 00:05:46,320 Speaker 1: of those days that they thought, oh, she must be suitable. 94 00:05:46,440 --> 00:05:50,000 Speaker 1: It's still relatively rare today, and less so than it was. 95 00:05:50,560 --> 00:05:52,680 Speaker 1: Um I think I was not very suitable. I think 96 00:05:52,760 --> 00:05:54,600 Speaker 1: Goldman was a tough place, and I think I made 97 00:05:54,640 --> 00:05:59,839 Speaker 1: it tougher on myself. I came unprepared. I would say, 98 00:06:00,320 --> 00:06:01,600 Speaker 1: you knew when you were going in that you were 99 00:06:01,600 --> 00:06:03,159 Speaker 1: going to work a hundred hour weeks and that the 100 00:06:03,200 --> 00:06:05,240 Speaker 1: environment was going to be tough. But I don't think 101 00:06:05,279 --> 00:06:07,479 Speaker 1: I expected it to be quite as as as tough 102 00:06:07,520 --> 00:06:11,719 Speaker 1: as it was. Um. And you you subsequently called something 103 00:06:12,560 --> 00:06:15,880 Speaker 1: from that era of the Goldman Sachs post traumatic stress 104 00:06:15,920 --> 00:06:19,479 Speaker 1: disorder condition? Is that a function of how difficult and 105 00:06:19,560 --> 00:06:22,679 Speaker 1: challenging a place which I got roundly and perhaps rightly 106 00:06:22,720 --> 00:06:29,359 Speaker 1: criticized by veterans for for appropriating a term military military veterans, 107 00:06:29,640 --> 00:06:32,800 Speaker 1: not not not Goldman veterans. But it was. It was. 108 00:06:32,880 --> 00:06:35,039 Speaker 1: It was. It was a tough environment, yes, but but 109 00:06:35,279 --> 00:06:37,120 Speaker 1: look I learned a lot. I'm grateful to the place 110 00:06:37,160 --> 00:06:39,200 Speaker 1: In some ways. I think I grew up quickly there. 111 00:06:39,560 --> 00:06:42,120 Speaker 1: I can imagine. So you're there for all of three 112 00:06:42,200 --> 00:06:46,599 Speaker 1: years and you say, hey, this is interesting, but I'm 113 00:06:46,600 --> 00:06:49,279 Speaker 1: going to give this writing thing a shot, and you 114 00:06:49,400 --> 00:06:52,120 Speaker 1: end up at Fortune. I actually said, I was out 115 00:06:52,120 --> 00:06:53,800 Speaker 1: on my way to business school. I was in I 116 00:06:53,839 --> 00:06:56,240 Speaker 1: had a roommate UM, and I thought, you know, I'm 117 00:06:56,279 --> 00:06:58,320 Speaker 1: going to graduate from business school with a lot of debt, 118 00:06:58,360 --> 00:07:00,479 Speaker 1: and I'm going to be right back where I started 119 00:07:00,560 --> 00:07:02,360 Speaker 1: because I'm gonna need to get a high paying job 120 00:07:02,360 --> 00:07:04,800 Speaker 1: in order to pay off the deck. So if there's 121 00:07:05,040 --> 00:07:07,760 Speaker 1: if I want to do something else, now's the time. 122 00:07:08,240 --> 00:07:10,320 Speaker 1: And I didn't grow up in a family that necessarily 123 00:07:10,400 --> 00:07:13,640 Speaker 1: encouraged artsy things like journalism. But I thought, now is 124 00:07:13,640 --> 00:07:15,240 Speaker 1: my time to give it a try, and if I 125 00:07:15,240 --> 00:07:17,600 Speaker 1: don't like it, I'll go to business school. So I 126 00:07:17,680 --> 00:07:19,560 Speaker 1: took a huge pay cut and got a job at 127 00:07:19,560 --> 00:07:22,080 Speaker 1: Fortune as a fact checker. And they were willing to 128 00:07:22,120 --> 00:07:25,000 Speaker 1: hire me back in those days of well funded, glossy 129 00:07:25,080 --> 00:07:27,760 Speaker 1: magazines with lots of time to fact check stories before 130 00:07:27,760 --> 00:07:30,320 Speaker 1: they went out the door, because I had my experience 131 00:07:30,320 --> 00:07:32,320 Speaker 1: at Goldman, and they thought, well, she may not be 132 00:07:32,360 --> 00:07:34,280 Speaker 1: able to write, and she may not even be smart, 133 00:07:34,320 --> 00:07:36,840 Speaker 1: but she at least understands what we're writing about. And 134 00:07:36,880 --> 00:07:41,239 Speaker 1: this was really little bit pre inter internet, not quite 135 00:07:41,240 --> 00:07:43,840 Speaker 1: the same cost squeeze that we see today. It was 136 00:07:43,920 --> 00:07:47,400 Speaker 1: the last golden age of journalism. And so you're there 137 00:07:47,480 --> 00:07:51,000 Speaker 1: for five or so years. When did you before this 138 00:07:51,120 --> 00:07:53,560 Speaker 1: story comes out, when did they move you to say, 139 00:07:53,760 --> 00:07:55,960 Speaker 1: all right, kid, let's see if you can write sort 140 00:07:56,000 --> 00:07:59,240 Speaker 1: of slowly, but I still definitely I did writing for 141 00:07:59,240 --> 00:08:01,360 Speaker 1: the Personal Finance section, which at that time was sort 142 00:08:01,400 --> 00:08:03,800 Speaker 1: of a backwater where nobody wanted to write right for 143 00:08:04,040 --> 00:08:06,280 Speaker 1: so you could get in the door writing wise if 144 00:08:06,280 --> 00:08:08,280 Speaker 1: you were willing to do it. And I did this 145 00:08:08,320 --> 00:08:10,360 Speaker 1: column called Companies to Watch, where I was supposed to 146 00:08:10,440 --> 00:08:13,800 Speaker 1: pick two stocks every three stocks every two weeks, which 147 00:08:13,840 --> 00:08:16,240 Speaker 1: is unfortune was published that We're gonna double or triple 148 00:08:16,320 --> 00:08:20,880 Speaker 1: or quadruple and value. But it was It was easy 149 00:08:21,000 --> 00:08:22,760 Speaker 1: because of all the people who come by and pitch 150 00:08:22,800 --> 00:08:25,960 Speaker 1: you right, the analysts and the portfolio managers and the 151 00:08:26,320 --> 00:08:28,440 Speaker 1: and the company executives, and you can write up these 152 00:08:28,480 --> 00:08:31,360 Speaker 1: really charming little stories that are great and then you 153 00:08:31,400 --> 00:08:33,840 Speaker 1: watch the stock goes in the opposite direction. So I 154 00:08:33,880 --> 00:08:37,080 Speaker 1: began to realize that there was this whole Wall Street 155 00:08:37,120 --> 00:08:39,920 Speaker 1: by machine that I was inadvertently becoming part of, and 156 00:08:39,960 --> 00:08:41,840 Speaker 1: I didn't want to be part of it. So in 157 00:08:41,880 --> 00:08:44,760 Speaker 1: the last minute we have in this segment, you put 158 00:08:44,760 --> 00:08:48,960 Speaker 1: out the piece is and run over priced. And you've 159 00:08:49,000 --> 00:08:53,680 Speaker 1: worked with very famous short seller Jim Chanos, a previous 160 00:08:53,720 --> 00:08:57,680 Speaker 1: guest on the show. How how did he approach you 161 00:08:57,800 --> 00:09:00,600 Speaker 1: to say, hey, you're probably hearing a lot of positive stuff. 162 00:09:00,679 --> 00:09:02,760 Speaker 1: Use a story that might not be quite as savory 163 00:09:02,800 --> 00:09:06,160 Speaker 1: as the others. So I met a guy named Doug Millette, 164 00:09:06,200 --> 00:09:09,240 Speaker 1: who has since passed away, who worked for Jim Um 165 00:09:09,280 --> 00:09:12,480 Speaker 1: and I hounded Doug mercilessly to talk to me and 166 00:09:12,520 --> 00:09:16,440 Speaker 1: help me come up with ideas, and um, finally Doug said, Hey, 167 00:09:16,600 --> 00:09:18,640 Speaker 1: you know, we're looking at this company called Enron. If 168 00:09:18,679 --> 00:09:20,480 Speaker 1: you can tell us how it makes money, what would 169 00:09:20,520 --> 00:09:22,480 Speaker 1: love to hear it? And so that was that was 170 00:09:22,520 --> 00:09:25,320 Speaker 1: actually how it came about. I'm Barry Ridhults. You're listening 171 00:09:25,360 --> 00:09:28,520 Speaker 1: to Masters in Business on Bloomberg Radio. My special guest 172 00:09:28,520 --> 00:09:32,960 Speaker 1: today is Bethanie McClean. She is a journalist and author 173 00:09:33,120 --> 00:09:37,800 Speaker 1: of Smartest Guys in the Room, Amazing Rise and Scandalous 174 00:09:37,800 --> 00:09:42,520 Speaker 1: Fall of Enron. And we were talking um earlier about 175 00:09:42,679 --> 00:09:45,120 Speaker 1: when the book came out. It kind of came out 176 00:09:45,480 --> 00:09:50,520 Speaker 1: in two way dot com implosion void And despite how 177 00:09:50,800 --> 00:09:53,520 Speaker 1: well regarded the book is today, not a lot of 178 00:09:53,559 --> 00:09:56,440 Speaker 1: people really saluted when that came out. No, the book 179 00:09:56,440 --> 00:09:58,880 Speaker 1: came out into a weird vacuum. I would say people 180 00:09:58,920 --> 00:10:01,679 Speaker 1: were really interest didn't end round when it went bankrupt, right, 181 00:10:01,920 --> 00:10:03,800 Speaker 1: and it was all over the front page of every paper. 182 00:10:04,000 --> 00:10:07,480 Speaker 1: Fastest Bankruptcy in American His Your Biggest Bankruptcy, just all 183 00:10:07,559 --> 00:10:09,680 Speaker 1: sorts of it on the front page of the paper 184 00:10:09,720 --> 00:10:11,640 Speaker 1: for a year. Everybody was covering by the by the 185 00:10:11,640 --> 00:10:13,160 Speaker 1: time our book came out in the fall of two 186 00:10:13,160 --> 00:10:15,520 Speaker 1: thousand and three, I think people had end round fatigue, 187 00:10:15,520 --> 00:10:17,840 Speaker 1: and I think she had scandal fatigue. And I think 188 00:10:17,880 --> 00:10:19,960 Speaker 1: we were all in that awful period after the dot 189 00:10:19,960 --> 00:10:22,040 Speaker 1: com implosion where the last thing you wanted was more 190 00:10:22,080 --> 00:10:24,439 Speaker 1: bad news. Plus you had the world com collapse, and 191 00:10:24,480 --> 00:10:26,439 Speaker 1: you had the analyst scandal, and there was all these 192 00:10:26,440 --> 00:10:29,319 Speaker 1: other things, and people might have been really like right, 193 00:10:29,440 --> 00:10:32,000 Speaker 1: So the book barely cracked the best seller list and 194 00:10:32,040 --> 00:10:35,200 Speaker 1: then it it sort of disappeared, but it continued to 195 00:10:35,200 --> 00:10:37,400 Speaker 1: sell over the years, and actually, because it sold so 196 00:10:37,440 --> 00:10:39,199 Speaker 1: well over the years, it ended up doing really well. 197 00:10:39,240 --> 00:10:41,600 Speaker 1: But it was a slow thing, not a not an 198 00:10:41,600 --> 00:10:45,360 Speaker 1: immediate explosion of interest. It ultimately ended up on a 199 00:10:45,440 --> 00:10:49,160 Speaker 1: number of either college or business school reading lists. So 200 00:10:49,480 --> 00:10:54,320 Speaker 1: it's a regular, literally required reading for certain students, I hope. 201 00:10:54,320 --> 00:10:57,520 Speaker 1: So so, so let's talk a little bit about the 202 00:10:57,559 --> 00:11:01,200 Speaker 1: initial article. Was it a function when you were reading 203 00:11:01,200 --> 00:11:06,400 Speaker 1: it of overvaluation or did you think fraud? I was 204 00:11:06,480 --> 00:11:09,120 Speaker 1: too naive to think fraud, I think, but if you 205 00:11:09,520 --> 00:11:11,560 Speaker 1: if you try to put yourself back at that point 206 00:11:11,559 --> 00:11:14,520 Speaker 1: in time. We hadn't had fraud in a major American 207 00:11:14,559 --> 00:11:17,280 Speaker 1: business for such a long time. The idea that a 208 00:11:17,320 --> 00:11:20,000 Speaker 1: company could be fraudulent, that the accountants and lawyers could 209 00:11:20,000 --> 00:11:22,680 Speaker 1: have signed off on things, I just I wouldn't have 210 00:11:22,720 --> 00:11:25,640 Speaker 1: believed it. I remember reading through the description of the 211 00:11:25,640 --> 00:11:28,840 Speaker 1: transactions that the CFO, Andy Fasta, was doing with with 212 00:11:28,880 --> 00:11:31,520 Speaker 1: the company and thinking, Yeah, but the accountants and lawyers 213 00:11:31,520 --> 00:11:33,360 Speaker 1: signed off on this, I must I must just not 214 00:11:33,440 --> 00:11:36,839 Speaker 1: get it. So these weird disclosures about these transactions that 215 00:11:36,920 --> 00:11:38,560 Speaker 1: ended up being very central to the end Roun story, 216 00:11:38,600 --> 00:11:41,079 Speaker 1: I didn't even write about in my story. I instead 217 00:11:41,160 --> 00:11:45,080 Speaker 1: focused on end Roun's price and it's pe ratio relative 218 00:11:45,160 --> 00:11:47,600 Speaker 1: to the fact that people didn't understand its business, didn't 219 00:11:47,640 --> 00:11:50,160 Speaker 1: understand how it made money, and that although the company 220 00:11:50,240 --> 00:11:53,200 Speaker 1: said it wasn't a trading business because Jeff Skilling, the 221 00:11:53,200 --> 00:11:55,439 Speaker 1: then CEO, wanted it to have a higher stock price, 222 00:11:55,720 --> 00:11:58,160 Speaker 1: it was very much a trading business. So I focused 223 00:11:58,160 --> 00:12:01,559 Speaker 1: on that fraud. I think it would have I think 224 00:12:01,600 --> 00:12:04,600 Speaker 1: it would have surprised me. Well, it's certainly surprised a 225 00:12:04,600 --> 00:12:07,040 Speaker 1: lot of people, especially those who were long the stock. 226 00:12:07,120 --> 00:12:12,760 Speaker 1: And we mentioned the previous segment, um uh, folks from 227 00:12:12,840 --> 00:12:16,480 Speaker 1: Jim Chainos's funds, can A Coast Partners? Had you had 228 00:12:16,520 --> 00:12:19,040 Speaker 1: reached out to them? This wasn't them shopping and around 229 00:12:19,040 --> 00:12:21,560 Speaker 1: you had tag them? What made you go to them 230 00:12:21,760 --> 00:12:24,640 Speaker 1: of all people? Well, I think going back to this column, 231 00:12:24,679 --> 00:12:27,040 Speaker 1: I did companies to watch where I was selecting these 232 00:12:27,040 --> 00:12:29,640 Speaker 1: stocks to write about. I felt burned. I felt like 233 00:12:29,640 --> 00:12:32,240 Speaker 1: I was inadvertently becoming part of this buy machine that 234 00:12:32,280 --> 00:12:35,560 Speaker 1: was succoring the American public by writing these positive stories 235 00:12:35,600 --> 00:12:38,160 Speaker 1: about companies that were soon to implode. So I began 236 00:12:38,200 --> 00:12:39,880 Speaker 1: to seek out short sellers and try to get to 237 00:12:39,920 --> 00:12:42,439 Speaker 1: know them because I thought I need another source of information. 238 00:12:42,760 --> 00:12:44,920 Speaker 1: You know, I'm tired of writing this glowing story about 239 00:12:44,920 --> 00:12:46,880 Speaker 1: this company, not hearing another point of view, only to 240 00:12:46,920 --> 00:12:48,880 Speaker 1: have my phone ring and somebody start, you know, swearing 241 00:12:48,880 --> 00:12:50,760 Speaker 1: at me on the other end, being like you stupid whatever, 242 00:12:50,760 --> 00:12:52,719 Speaker 1: How could you not have known that this is? Did 243 00:12:52,760 --> 00:12:54,760 Speaker 1: that really? Have? It did a couple of times, and 244 00:12:54,800 --> 00:12:56,840 Speaker 1: I thought, you know, I need to at least understand 245 00:12:56,880 --> 00:12:58,720 Speaker 1: the other side of the story, even if they're wrong. 246 00:12:58,800 --> 00:13:00,280 Speaker 1: I want to know it and then I can do 247 00:13:00,400 --> 00:13:02,560 Speaker 1: my own thinking to figure out if they're right or wrong. 248 00:13:02,640 --> 00:13:04,840 Speaker 1: So trying to get to know Jim was part of 249 00:13:04,880 --> 00:13:06,839 Speaker 1: a broader effort on my part of trying to get 250 00:13:06,880 --> 00:13:08,760 Speaker 1: to know people who are skeptics so that I could 251 00:13:08,800 --> 00:13:11,360 Speaker 1: doom with things that were more accurate. So with with 252 00:13:11,520 --> 00:13:14,840 Speaker 1: the benefit of hindsight, it seems kind of ridiculous that 253 00:13:14,920 --> 00:13:19,040 Speaker 1: here's a company. They make money in ways that no 254 00:13:19,080 --> 00:13:24,520 Speaker 1: one really knows. Their books are completely forget transparent, they're impenetrable. 255 00:13:24,640 --> 00:13:27,280 Speaker 1: Nobody has any idea what's going on with that? How 256 00:13:27,440 --> 00:13:31,600 Speaker 1: did the best and brightest of corporate America, of Wall Street, 257 00:13:31,760 --> 00:13:35,600 Speaker 1: of the investment community not stop to think, Hey, what's 258 00:13:35,640 --> 00:13:39,000 Speaker 1: really going on here? How did everybody buying into the 259 00:13:39,240 --> 00:13:43,319 Speaker 1: story which turns out to just be complete and total fraud. 260 00:13:44,040 --> 00:13:45,480 Speaker 1: I think there are a bunch of answers to that. 261 00:13:45,520 --> 00:13:47,560 Speaker 1: I think one thing is that we like the story, right. 262 00:13:47,880 --> 00:13:50,040 Speaker 1: We all want to believe in the story of this 263 00:13:50,120 --> 00:13:52,959 Speaker 1: company that's revolutionizing markets and that's going to make everybody 264 00:13:52,960 --> 00:13:55,480 Speaker 1: a fortune. What could possibly be wrong with that? But 265 00:13:55,559 --> 00:13:57,400 Speaker 1: I think underneath it there are some things that are 266 00:13:57,400 --> 00:13:59,520 Speaker 1: specific to end Run. I think Jeff Skilling was a 267 00:13:59,559 --> 00:14:05,160 Speaker 1: really powerful personality and the biggest a very intellectually convincing personality, 268 00:14:05,160 --> 00:14:09,520 Speaker 1: and charismatic personality and intimidating personality, and the most the 269 00:14:09,559 --> 00:14:12,120 Speaker 1: greatest compliment he could give you was that you got it, 270 00:14:12,160 --> 00:14:13,840 Speaker 1: was that you you were part of the team. You 271 00:14:13,960 --> 00:14:16,240 Speaker 1: got it, you understood what they were doing. The biggest 272 00:14:16,280 --> 00:14:18,280 Speaker 1: insult he could give was that you didn't get it. 273 00:14:18,440 --> 00:14:21,000 Speaker 1: You're too stupid. You're too stupid. And so people, because 274 00:14:21,040 --> 00:14:22,960 Speaker 1: we get it, we're the smartest guys in the room, 275 00:14:23,080 --> 00:14:25,760 Speaker 1: you don't write. And he would say this to people 276 00:14:26,240 --> 00:14:30,960 Speaker 1: who were Harvard, M. I. T. Wharton, like really the 277 00:14:31,000 --> 00:14:35,160 Speaker 1: best and brightest, and literally intimidate them into thinking, you're 278 00:14:35,160 --> 00:14:37,360 Speaker 1: not smart enough to understand what we do, right, And 279 00:14:37,400 --> 00:14:39,840 Speaker 1: so people were afraid of feeling like that, are being 280 00:14:39,840 --> 00:14:41,520 Speaker 1: made to look like that in a crowd, and so 281 00:14:41,560 --> 00:14:43,200 Speaker 1: I think a lot of people pretended to get it 282 00:14:43,240 --> 00:14:46,120 Speaker 1: when they really didn't get it because they wanted to 283 00:14:46,160 --> 00:14:49,440 Speaker 1: bask in Jeff Skillings admiration. I think it happens far 284 00:14:49,480 --> 00:14:51,680 Speaker 1: more frequently than you would think, even today, though I 285 00:14:51,680 --> 00:14:54,480 Speaker 1: think it's a common phenomenon. It's the Emperor's new clothes 286 00:14:54,560 --> 00:14:58,560 Speaker 1: right when we live with it today, that is um 287 00:14:59,040 --> 00:15:02,640 Speaker 1: absolutely stun so. Someone I mentioned I was interviewing you, 288 00:15:02,760 --> 00:15:05,280 Speaker 1: and someone said to me and we talked about the article, 289 00:15:05,280 --> 00:15:07,960 Speaker 1: and the question that this person asked was interesting enough 290 00:15:07,960 --> 00:15:12,160 Speaker 1: that I'm gonna pass it along. Assume your article never 291 00:15:12,240 --> 00:15:15,640 Speaker 1: came out. Is en run over priced? How long could 292 00:15:15,680 --> 00:15:20,360 Speaker 1: this have continued before someone would have noticed that the 293 00:15:20,400 --> 00:15:23,600 Speaker 1: emperor was not wearing any clothes. I actually don't think 294 00:15:23,600 --> 00:15:27,080 Speaker 1: that my article influenced en Roun's trajectory at all. I 295 00:15:27,120 --> 00:15:29,120 Speaker 1: think what my article did was pick up on the 296 00:15:29,200 --> 00:15:32,960 Speaker 1: underlying skepticism about en Ron that was growing in the marketplace. 297 00:15:33,240 --> 00:15:34,880 Speaker 1: And in the end, what brought en run down was 298 00:15:34,920 --> 00:15:37,200 Speaker 1: a funding crisis, right, they couldn't roll their debt, and 299 00:15:37,240 --> 00:15:40,080 Speaker 1: then the rating agencies rating agencies downgraded them, and that 300 00:15:40,160 --> 00:15:43,400 Speaker 1: was the final nail in the coffin um. But I 301 00:15:43,440 --> 00:15:46,600 Speaker 1: think my article highlighted because it was at that that 302 00:15:46,640 --> 00:15:49,920 Speaker 1: time where it was becoming undeniable that the broadband business, 303 00:15:49,960 --> 00:15:52,680 Speaker 1: for instance, was collapsing, and Jeff Skilling was continuing to say, 304 00:15:52,680 --> 00:15:55,040 Speaker 1: this is a great business for en Ron. We're defying 305 00:15:55,080 --> 00:15:57,520 Speaker 1: the industry, and it was becoming more and more apparent 306 00:15:57,560 --> 00:15:59,400 Speaker 1: than what he was saying was at odds with what 307 00:15:59,440 --> 00:16:02,560 Speaker 1: everybody in the industry was was was saying. So I 308 00:16:02,840 --> 00:16:05,840 Speaker 1: guess I believe it probably didn't. My article probably didn't 309 00:16:05,840 --> 00:16:08,080 Speaker 1: influence the trajectory of events at all. I think it. 310 00:16:08,280 --> 00:16:10,400 Speaker 1: I think it explained what was starting to happen. So 311 00:16:10,560 --> 00:16:13,320 Speaker 1: at the time he was saying that you already had Metromedia, 312 00:16:13,360 --> 00:16:15,600 Speaker 1: Fiber Go belly up, you had Global Cross and go 313 00:16:15,720 --> 00:16:19,160 Speaker 1: belly up. They were spending thousands of dollars per mile 314 00:16:19,600 --> 00:16:22,160 Speaker 1: to lay this dark cable that will eventually light up 315 00:16:22,200 --> 00:16:24,560 Speaker 1: with all this content, which turned out to be true 316 00:16:24,640 --> 00:16:27,080 Speaker 1: Facebook and YouTube and all these things a decade later. 317 00:16:27,560 --> 00:16:30,400 Speaker 1: But that was brought up for pennies on the dollar later. 318 00:16:31,120 --> 00:16:34,280 Speaker 1: How can someone be so brazen as to make that 319 00:16:34,480 --> 00:16:38,360 Speaker 1: claim in the face of collapse. Was it just oh, 320 00:16:38,360 --> 00:16:40,920 Speaker 1: those were poorly run companies and people brought into that. 321 00:16:41,480 --> 00:16:44,480 Speaker 1: I think that Jeff Jeff was the ultimate stock salesman. 322 00:16:44,520 --> 00:16:47,080 Speaker 1: He could sell and run better than anybody else, and 323 00:16:47,120 --> 00:16:49,440 Speaker 1: he desperately needed to keep the stock price high or 324 00:16:49,520 --> 00:16:53,640 Speaker 1: high because all these complicated financial things Andi Fasto the 325 00:16:53,640 --> 00:16:56,480 Speaker 1: CFO had built depended on keeping the stock price above 326 00:16:56,520 --> 00:16:58,840 Speaker 1: a certain level, and if the stock price started to decline, 327 00:16:58,880 --> 00:17:01,280 Speaker 1: all these losses would come back on and Ron's balance sheet. 328 00:17:01,640 --> 00:17:03,840 Speaker 1: So I think Jeff was very aware of the need 329 00:17:03,920 --> 00:17:07,280 Speaker 1: to keep Enron's and Roun stock price high UM, and 330 00:17:07,320 --> 00:17:09,359 Speaker 1: I think that was part of it. Just share desperation 331 00:17:09,680 --> 00:17:12,280 Speaker 1: UM to en Ron was is a great example of 332 00:17:12,320 --> 00:17:15,439 Speaker 1: you know, the famous quote is a Pendiman Graham that 333 00:17:15,480 --> 00:17:17,399 Speaker 1: a stock in a company are two different things. And 334 00:17:17,520 --> 00:17:20,440 Speaker 1: Enron's case, the company became the stock to say the least. 335 00:17:20,760 --> 00:17:23,399 Speaker 1: I'm Barry Hults. You're listening to Masters in Business on 336 00:17:23,440 --> 00:17:26,800 Speaker 1: Bloomberg Radio. My special guest today is Bethany McClain. She 337 00:17:27,000 --> 00:17:31,000 Speaker 1: is a former Goldman Sachs analyst and Fortune magazine reporter 338 00:17:31,080 --> 00:17:35,040 Speaker 1: who broke the big story on en Ron, ultimately writing 339 00:17:35,400 --> 00:17:38,080 Speaker 1: a number of really well regarded books. And let's talk 340 00:17:38,080 --> 00:17:42,200 Speaker 1: about a different book of yours, which is shaky ground. 341 00:17:42,720 --> 00:17:47,800 Speaker 1: The strange saga of the US mortgage giants. Now, I've 342 00:17:47,840 --> 00:17:52,399 Speaker 1: covered subprime, and I've covered mortgages, and whenever I talked 343 00:17:52,400 --> 00:17:57,719 Speaker 1: about Fannie or Freddie, the two government sponsored enterprises that 344 00:17:57,840 --> 00:18:00,600 Speaker 1: handle most of the mortgages in the country, they are 345 00:18:00,600 --> 00:18:03,800 Speaker 1: one of two reactions. Either people are furious and they 346 00:18:03,840 --> 00:18:05,920 Speaker 1: want to shut them down, and let's turn this over 347 00:18:06,000 --> 00:18:09,080 Speaker 1: the free market or their eyes glaze over and they 348 00:18:09,280 --> 00:18:11,919 Speaker 1: lovingly slip into a coma never to be seen again. 349 00:18:12,200 --> 00:18:14,840 Speaker 1: But nothing in the middle. What do you find when 350 00:18:14,840 --> 00:18:17,920 Speaker 1: you talk about mortgages? I went to a housing finance conference, 351 00:18:17,960 --> 00:18:20,760 Speaker 1: the Goldman Sachs speaking of which hosted um when in 352 00:18:20,760 --> 00:18:22,040 Speaker 1: the winter, when I was working on the book, I 353 00:18:22,040 --> 00:18:24,320 Speaker 1: guess it was last winter, and the Goldman Pierre guy 354 00:18:24,359 --> 00:18:25,720 Speaker 1: said what are you doing here? And I said, well, 355 00:18:25,720 --> 00:18:27,480 Speaker 1: I'm writing a book about Fanny and Freddie. And he 356 00:18:27,520 --> 00:18:28,840 Speaker 1: looked at me and he said, well, no one's going 357 00:18:28,880 --> 00:18:32,639 Speaker 1: to read that, and just how book sales going, you 358 00:18:32,680 --> 00:18:34,600 Speaker 1: know what? For what it is, so I published it 359 00:18:34,640 --> 00:18:38,120 Speaker 1: through this upstart publishing press called Columbia Global Reports, which 360 00:18:38,160 --> 00:18:40,720 Speaker 1: seeks to write mini books. So it's not a long book. 361 00:18:40,840 --> 00:18:43,880 Speaker 1: But many books on topics of global importance that are 362 00:18:43,920 --> 00:18:45,960 Speaker 1: there are meant to be walkier. So for what it is, 363 00:18:45,960 --> 00:18:49,639 Speaker 1: it's actually done quite well. Okay, that's great. It's every 364 00:18:49,680 --> 00:18:53,280 Speaker 1: time the conversation comes up, it's just so difficult, and 365 00:18:53,320 --> 00:18:56,639 Speaker 1: it's amazing because mortgages. Look, anybody should care about Fannie 366 00:18:56,640 --> 00:18:58,159 Speaker 1: and Freddie. I don't care who you are, if you 367 00:18:58,200 --> 00:18:59,920 Speaker 1: have a mortgage or if you want to buy a 368 00:19:00,000 --> 00:19:01,680 Speaker 1: ho If you want to buy a house, you should care. 369 00:19:01,720 --> 00:19:03,919 Speaker 1: If you just own a house, you should care about 370 00:19:04,160 --> 00:19:06,359 Speaker 1: what the government's going to do with mortgage finance because 371 00:19:06,359 --> 00:19:08,880 Speaker 1: the availability of financing determines the value of your house. 372 00:19:09,200 --> 00:19:11,280 Speaker 1: And if you're in none and homes are still, by 373 00:19:11,280 --> 00:19:13,439 Speaker 1: the way, the most important asset to most Americans for 374 00:19:13,480 --> 00:19:15,359 Speaker 1: the vast majority. And if you are in neither of 375 00:19:15,400 --> 00:19:17,560 Speaker 1: those camps, but you care about the economy, you should 376 00:19:17,600 --> 00:19:20,600 Speaker 1: still care about housing because it's still fift our g 377 00:19:20,680 --> 00:19:24,080 Speaker 1: d P and so whatever the government does full fifth. 378 00:19:24,359 --> 00:19:26,840 Speaker 1: So whatever the government does to resolve we are still 379 00:19:26,880 --> 00:19:29,719 Speaker 1: housing is still There was a great quote Mariner Mariner 380 00:19:29,760 --> 00:19:32,600 Speaker 1: Echoes back in the nineteen thirties who said housing is 381 00:19:32,600 --> 00:19:34,600 Speaker 1: the wheel within the wheel of our economy. And it 382 00:19:34,680 --> 00:19:37,400 Speaker 1: and it still is. And so even if you care 383 00:19:37,400 --> 00:19:39,439 Speaker 1: about the just care about the economy, you should care 384 00:19:39,440 --> 00:19:41,880 Speaker 1: about what the government does with Fannie and Freddie. Ultimately, 385 00:19:41,920 --> 00:19:44,200 Speaker 1: that's it's it's a big topic. I did a column 386 00:19:44,240 --> 00:19:46,360 Speaker 1: don't care here right. I did a column not too 387 00:19:46,359 --> 00:19:48,240 Speaker 1: long ago. I moved a year ago. We bought a 388 00:19:48,280 --> 00:19:51,840 Speaker 1: new house, and the experience with that house, the hoops 389 00:19:51,840 --> 00:19:56,399 Speaker 1: you had to jump through in versus the experience with 390 00:19:56,480 --> 00:19:59,720 Speaker 1: the prior house we did. I recalled doing the refinancing 391 00:19:59,720 --> 00:20:03,080 Speaker 1: in OH five or oh four, where literally the guy 392 00:20:03,080 --> 00:20:05,639 Speaker 1: would pull up in the driveway, you left the engine running, 393 00:20:05,640 --> 00:20:08,720 Speaker 1: flung open the door, ran in with papers here initial 394 00:20:08,720 --> 00:20:11,400 Speaker 1: initial sign sign I apologize, I have a closing around 395 00:20:11,400 --> 00:20:14,159 Speaker 1: the corner. I disappeared, left us with the check for 396 00:20:14,240 --> 00:20:17,720 Speaker 1: thirty dollars was gone, and I looked at my wife. 397 00:20:17,720 --> 00:20:22,439 Speaker 1: Did that really happen? Contrast eight years later, where you know, 398 00:20:22,720 --> 00:20:26,840 Speaker 1: I've had colonoscopies that were gentler and easier and less 399 00:20:26,840 --> 00:20:32,120 Speaker 1: intrusive than than these sort of um experiences. So that 400 00:20:32,200 --> 00:20:38,160 Speaker 1: raises the question, why has financing, the most important purchase 401 00:20:38,359 --> 00:20:42,600 Speaker 1: most Americans make, become so insane? Well, there are a 402 00:20:42,600 --> 00:20:45,000 Speaker 1: bunch of answers to that. The fate of Fannie and Freddie, 403 00:20:45,040 --> 00:20:47,080 Speaker 1: as most people know, it's unresolved. They were put into 404 00:20:47,200 --> 00:20:49,720 Speaker 1: a state called conservatorship during the dark depths of the 405 00:20:49,760 --> 00:20:52,480 Speaker 1: financial crisis. It was supposed to be temporary. There they 406 00:20:52,480 --> 00:20:55,040 Speaker 1: still said, they're making lots of government money. The government 407 00:20:55,080 --> 00:20:57,680 Speaker 1: is using their money to reduce the overall budget deficit. 408 00:20:58,000 --> 00:21:00,399 Speaker 1: I think it's a huge scandal, But that's but and 409 00:21:00,440 --> 00:21:03,560 Speaker 1: that's been reported that, but that's out there. But the 410 00:21:03,720 --> 00:21:06,280 Speaker 1: big problem is that the government's been schizophrenic and what 411 00:21:06,359 --> 00:21:09,280 Speaker 1: it wants out of the mortgage market. So politicians, including 412 00:21:09,320 --> 00:21:12,159 Speaker 1: President Obama have said repeatedly, we want more private capital 413 00:21:12,240 --> 00:21:14,479 Speaker 1: in the market. At the same time they've done everything 414 00:21:14,520 --> 00:21:18,119 Speaker 1: possible to discourage private capital from getting involved in the market. Again, 415 00:21:18,280 --> 00:21:21,480 Speaker 1: witnessed the huge fines the big banks have paid, um so, 416 00:21:21,600 --> 00:21:25,320 Speaker 1: and so what are the big banks paying fines? Well 417 00:21:25,359 --> 00:21:28,520 Speaker 1: for for behavior for which they should pay fines. But nonetheless, 418 00:21:28,680 --> 00:21:31,080 Speaker 1: if you realize suddenly that you Mr. Bank may have 419 00:21:31,160 --> 00:21:33,919 Speaker 1: to pay billions of dollars in fines because you screwed 420 00:21:34,000 --> 00:21:36,359 Speaker 1: up on some lending to subprime customers, you're probably gonna say, 421 00:21:36,400 --> 00:21:37,520 Speaker 1: you know, I don't think I'm gonna do that. Len, 422 00:21:37,680 --> 00:21:39,959 Speaker 1: Let let me push back on that a little bit, 423 00:21:39,960 --> 00:21:42,879 Speaker 1: because I know you've written about foreclosure gate, which is 424 00:21:42,920 --> 00:21:46,240 Speaker 1: one of my big pet peeves. Yes, as it turns out, 425 00:21:46,359 --> 00:21:51,480 Speaker 1: if you actually commit fraud and take these signed documents 426 00:21:51,520 --> 00:21:55,560 Speaker 1: and present them to a court, they're usually a penalty 427 00:21:55,680 --> 00:21:58,520 Speaker 1: for for lying under oath that way. And yet it 428 00:21:58,560 --> 00:22:02,240 Speaker 1: seems there has been no one woman one mid level 429 00:22:02,320 --> 00:22:06,040 Speaker 1: executive who was just a irrelevant to the whole story 430 00:22:06,200 --> 00:22:09,400 Speaker 1: got prosecuted. But the vast majority of people who said, 431 00:22:09,480 --> 00:22:12,040 Speaker 1: just make up documents, throw people out of the house. 432 00:22:12,080 --> 00:22:15,080 Speaker 1: We'll probably get the right people agreed. Agreed. I'm not 433 00:22:15,160 --> 00:22:19,080 Speaker 1: defending the big banks. Nonetheless, if you say, if you 434 00:22:19,160 --> 00:22:21,920 Speaker 1: penalize something for doing something bad, they're probably going to say, 435 00:22:21,960 --> 00:22:24,280 Speaker 1: I'm not going anywhere near that bad thing in the future. 436 00:22:24,480 --> 00:22:26,440 Speaker 1: And maybe we'll get there, But before we get there, 437 00:22:26,440 --> 00:22:28,000 Speaker 1: the government has to figure out what it's for. All 438 00:22:28,040 --> 00:22:30,040 Speaker 1: in the market is going to be right and right now, 439 00:22:30,080 --> 00:22:32,159 Speaker 1: there's no resolve about what the government's going to do 440 00:22:32,160 --> 00:22:34,920 Speaker 1: with Fannie and Freddie. So the present political function, or 441 00:22:34,960 --> 00:22:38,760 Speaker 1: a political malfunction, is that what it is. It's not economic, 442 00:22:38,800 --> 00:22:41,400 Speaker 1: it's it's basically nobody in Washington knows what to do 443 00:22:41,520 --> 00:22:43,800 Speaker 1: with these two companies, and so we have complete and 444 00:22:43,840 --> 00:22:47,080 Speaker 1: total stalemate. Everybody knows we need Fannie and Freddie to 445 00:22:47,200 --> 00:22:49,520 Speaker 1: keep providing a thirty or fixed rate mortgage to the 446 00:22:49,520 --> 00:22:53,399 Speaker 1: majority of Americans. Nobody really seriously wants to risk ripping 447 00:22:53,400 --> 00:22:55,840 Speaker 1: that underpinning out from under the mortgage market and see 448 00:22:55,840 --> 00:22:59,760 Speaker 1: what happens. And yet nobody can say, actually, we probably 449 00:22:59,800 --> 00:23:02,000 Speaker 1: need Fannie and Freddie either. So we sit in the 450 00:23:02,119 --> 00:23:04,639 Speaker 1: state of dysfunction, made worse by the fact that the 451 00:23:04,680 --> 00:23:08,160 Speaker 1: government has gotten two hundred plus billion dollars in profits 452 00:23:08,160 --> 00:23:10,600 Speaker 1: from Fannie and Freddie because they're seizing all the profits, 453 00:23:10,760 --> 00:23:12,800 Speaker 1: and so what politician wants to get rid of that 454 00:23:12,840 --> 00:23:15,479 Speaker 1: source of money. So I think it's it's it's not 455 00:23:15,520 --> 00:23:18,359 Speaker 1: a great situation. I'm Barry rid Halts. You're listening to 456 00:23:18,480 --> 00:23:22,040 Speaker 1: Masters in Business on Bloomberg Radio. My special guest today 457 00:23:22,080 --> 00:23:25,920 Speaker 1: is Bethany McLean. She is a contributing editor at Vanity 458 00:23:25,960 --> 00:23:30,960 Speaker 1: Fair and uh well regarded journalist and author. Let's talk 459 00:23:31,000 --> 00:23:34,000 Speaker 1: about one more book of yours, which I happened to 460 00:23:34,080 --> 00:23:38,520 Speaker 1: have pulled off my bookshelf. All the Devils Are Here, 461 00:23:38,600 --> 00:23:41,840 Speaker 1: The Hidden History of the Financial Crisis, which you actually 462 00:23:41,920 --> 00:23:45,440 Speaker 1: wrote with the Jonah Sarah. He's a really interesting Uh. 463 00:23:45,520 --> 00:23:48,360 Speaker 1: Joe was my longtime editor at Fortune and he actually 464 00:23:48,480 --> 00:23:51,320 Speaker 1: edited the End Round book. Oh really, I didn't know that. 465 00:23:52,000 --> 00:23:55,160 Speaker 1: I'm a fan of his only because I have big 466 00:23:55,160 --> 00:23:57,399 Speaker 1: issues with the n c a A. And he's been 467 00:23:57,920 --> 00:24:01,960 Speaker 1: well for many reasons, but most recently he's been torching 468 00:24:02,040 --> 00:24:04,680 Speaker 1: them read his new book in Denschard. It just came out, 469 00:24:04,840 --> 00:24:09,399 Speaker 1: just came out presolutely. He's absolutely I love the fact 470 00:24:09,440 --> 00:24:12,000 Speaker 1: that these guys have gotten away with so much for 471 00:24:12,040 --> 00:24:16,080 Speaker 1: so long, and suddenly one person comes along and completely changes, 472 00:24:17,080 --> 00:24:20,000 Speaker 1: you know, the narrative. The story is something wholly different, 473 00:24:20,040 --> 00:24:23,120 Speaker 1: and that's it's nice having a free press. So let's 474 00:24:23,119 --> 00:24:25,919 Speaker 1: talk a little bit about this book because it's really interesting, 475 00:24:26,480 --> 00:24:29,879 Speaker 1: and we could talk about a number of other columns 476 00:24:29,960 --> 00:24:34,240 Speaker 1: that you've released following the financial crisis, some of which 477 00:24:34,280 --> 00:24:37,639 Speaker 1: I find endlessly fascinating. Let's just jump right to this. 478 00:24:38,280 --> 00:24:42,359 Speaker 1: What was the hidden history within the financial crisis? What 479 00:24:42,400 --> 00:24:46,480 Speaker 1: do you think most people just don't realize that took 480 00:24:46,480 --> 00:24:50,040 Speaker 1: place in that whole collapse. I think one of the 481 00:24:50,080 --> 00:24:52,640 Speaker 1: most surprising things, okay, two of the most surprising things 482 00:24:52,680 --> 00:24:54,800 Speaker 1: to me where the whole history of subprime lending, how 483 00:24:54,840 --> 00:24:57,600 Speaker 1: it developed. So even sophisticated people tend to think of 484 00:24:57,640 --> 00:25:00,600 Speaker 1: subprime lending as a phenomenon in the mid tooth, but 485 00:25:00,640 --> 00:25:02,760 Speaker 1: it really wasn't. There was the first wave of subprime 486 00:25:02,840 --> 00:25:05,119 Speaker 1: lending in the nine in the nineties, and then the 487 00:25:05,160 --> 00:25:07,440 Speaker 1: second wave in the two thousands, which was run by 488 00:25:07,480 --> 00:25:11,520 Speaker 1: the executives of the companies that that first proliferated in 489 00:25:11,520 --> 00:25:15,240 Speaker 1: the nineties. So understanding how that happened and the regulatory 490 00:25:15,320 --> 00:25:18,680 Speaker 1: response to it that made it, that made subprime lending 491 00:25:18,760 --> 00:25:21,480 Speaker 1: something that nobody in Washington would would rain in, I 492 00:25:21,520 --> 00:25:24,360 Speaker 1: think to me is a really important part of part 493 00:25:24,359 --> 00:25:26,840 Speaker 1: of this story. It's funny you said one or two 494 00:25:26,880 --> 00:25:29,800 Speaker 1: things that people don't know. I have like listen list 495 00:25:29,880 --> 00:25:32,280 Speaker 1: of things that people are always surprised at. One of 496 00:25:32,320 --> 00:25:35,080 Speaker 1: the things that came up recently, Hey, how come it 497 00:25:35,240 --> 00:25:38,640 Speaker 1: was that all Wall Street banks got killed in subprime 498 00:25:39,119 --> 00:25:42,280 Speaker 1: except one JP Morgan? Why Why is that? Because they 499 00:25:42,320 --> 00:25:44,919 Speaker 1: had their subpront crisis in the early two thousands and 500 00:25:44,960 --> 00:25:46,720 Speaker 1: when they went to get out of it, it was 501 00:25:46,760 --> 00:25:52,480 Speaker 1: actually buyers for their paper. Very interesting. Yeah, a huge 502 00:25:52,520 --> 00:25:55,680 Speaker 1: difference from everybody else, right, But that's a really it's 503 00:25:55,680 --> 00:25:57,320 Speaker 1: a really important part of the story for a bunch 504 00:25:57,359 --> 00:25:59,920 Speaker 1: of reasons. One is because consumer advocates were going to 505 00:26:00,160 --> 00:26:02,320 Speaker 1: Alan Green's fan then the chairman of the FED in 506 00:26:02,359 --> 00:26:05,240 Speaker 1: the nineties and saying basically, look, people are getting loans 507 00:26:05,240 --> 00:26:07,399 Speaker 1: they can't pay back. Something's going wrong in the system. 508 00:26:07,680 --> 00:26:09,920 Speaker 1: And greens Band would say, what a lot of regulators 509 00:26:09,920 --> 00:26:12,040 Speaker 1: and politicians thought, which is that the market doesn't work 510 00:26:12,080 --> 00:26:15,919 Speaker 1: that way. People banks, lenders won't make loans. Banks certainly 511 00:26:15,960 --> 00:26:18,720 Speaker 1: won't buy up loans and securitize them. Investors won't buy 512 00:26:18,760 --> 00:26:21,560 Speaker 1: the resulting securities if the underlying loans aren't sound. A 513 00:26:21,600 --> 00:26:24,560 Speaker 1: market economy doesn't work that way. And so I think 514 00:26:24,560 --> 00:26:26,720 Speaker 1: he let his ideology get in the way of the facts, 515 00:26:26,720 --> 00:26:28,640 Speaker 1: which I think about that a lot is a good 516 00:26:28,720 --> 00:26:31,159 Speaker 1: as a good as a good life lesson. But I 517 00:26:31,160 --> 00:26:33,600 Speaker 1: think a lot of people did not Not only did 518 00:26:33,680 --> 00:26:37,119 Speaker 1: consumer advocates, but on the Federal Reserve Board was a 519 00:26:37,160 --> 00:26:40,359 Speaker 1: gentleman named um was Bill Pool. I thought it was 520 00:26:40,480 --> 00:26:42,920 Speaker 1: Ed Graham Graham. That's right. Bill Pool is still around 521 00:26:42,960 --> 00:26:46,159 Speaker 1: and grahamar unfortunately passed away and Ed grahamlock. I think 522 00:26:46,200 --> 00:26:48,719 Speaker 1: maybe Billpool did the intro to his book. That's why 523 00:26:48,800 --> 00:26:51,320 Speaker 1: it's on my head. Ed Graham look was saying, hey, 524 00:26:51,960 --> 00:26:55,080 Speaker 1: none of these things makes sense. I understand what you're saying, 525 00:26:55,440 --> 00:27:00,359 Speaker 1: but look, here's all of your predatory, predatory owns that 526 00:27:00,400 --> 00:27:04,919 Speaker 1: are defaulting in these huge numbers, and amongst the many 527 00:27:05,040 --> 00:27:09,080 Speaker 1: things that people don't realize in oh five, uh, I 528 00:27:09,080 --> 00:27:11,560 Speaker 1: think it was the o c C issued an edict 529 00:27:11,560 --> 00:27:15,160 Speaker 1: to the States that said, you cannot enforce predatory lending 530 00:27:15,240 --> 00:27:19,040 Speaker 1: laws against banks. That's our it was. It was preemption 531 00:27:19,400 --> 00:27:23,440 Speaker 1: and and the o c C thought that subprime lending 532 00:27:23,600 --> 00:27:26,040 Speaker 1: was contained outside the banking system. And I think that's 533 00:27:26,080 --> 00:27:29,119 Speaker 1: another huge lesson for the modern world. You know, our market, 534 00:27:29,240 --> 00:27:32,040 Speaker 1: the global markets are very complex place, and people don't 535 00:27:32,119 --> 00:27:35,400 Speaker 1: see all the interdependencies and interconnectedness until it's too late. 536 00:27:35,760 --> 00:27:38,120 Speaker 1: And that's one reason why the financial crisis is still 537 00:27:38,160 --> 00:27:41,160 Speaker 1: so relevant because people said, oh, the subprime lending thing, Well, 538 00:27:41,160 --> 00:27:44,200 Speaker 1: it's all these lenders, these little shops out in California, 539 00:27:44,400 --> 00:27:46,880 Speaker 1: and so it really cares. It's not infiltrating our precious 540 00:27:46,880 --> 00:27:49,800 Speaker 1: banking system. But oh yes it was. That's right on 541 00:27:50,040 --> 00:27:52,879 Speaker 1: one another. One of the many things that people probably 542 00:27:52,880 --> 00:27:55,760 Speaker 1: didn't know when they were selling these thirty year mortgages 543 00:27:55,800 --> 00:27:58,679 Speaker 1: to Wall Street to securitize into a new new paper, 544 00:27:59,280 --> 00:28:04,480 Speaker 1: um came with a warranty like a toaster. Wait, I'm 545 00:28:04,480 --> 00:28:08,679 Speaker 1: warranting that this thirty year loan against a house that 546 00:28:08,720 --> 00:28:11,439 Speaker 1: could last a hundred years at the last three months, 547 00:28:11,440 --> 00:28:14,160 Speaker 1: so we promised they'll make the first three payments. How 548 00:28:14,200 --> 00:28:18,160 Speaker 1: crazy is that it's astonishing. It's completely astonishing. And it's 549 00:28:18,200 --> 00:28:20,320 Speaker 1: interesting in light of Fannie and Freddie, as we discussed, 550 00:28:20,359 --> 00:28:22,840 Speaker 1: because you know, there's been a whole political movement to 551 00:28:22,840 --> 00:28:26,119 Speaker 1: blame Fanny and Freddie, blame low income and lending to 552 00:28:26,200 --> 00:28:29,000 Speaker 1: low income borrowers and home ownership for the financial crisis, 553 00:28:29,240 --> 00:28:30,919 Speaker 1: and when you actually look at the history of it, 554 00:28:31,119 --> 00:28:33,439 Speaker 1: I might have gone into my book thinking that was true. 555 00:28:33,840 --> 00:28:36,640 Speaker 1: When you look at the history of it, then you see, oh, no, no, no. 556 00:28:36,720 --> 00:28:39,440 Speaker 1: This whole subprime lending thing that started in the ninety 557 00:28:39,560 --> 00:28:41,760 Speaker 1: nineties was enabled by Wall Street, had nothing to do 558 00:28:41,840 --> 00:28:44,880 Speaker 1: with Fanny and Freddie. It started outside Fanny and Freddie. 559 00:28:45,120 --> 00:28:46,960 Speaker 1: The other fascinating thing to me that I think most 560 00:28:46,960 --> 00:28:49,160 Speaker 1: people don't realize about the subprime crisis was that it 561 00:28:49,200 --> 00:28:52,200 Speaker 1: was not about home ownership. If risky loans had been 562 00:28:52,200 --> 00:28:54,400 Speaker 1: limited to first time homebuyers, we never would have had 563 00:28:54,400 --> 00:28:57,440 Speaker 1: a crisis. It was cash out refies. So this so 564 00:28:57,560 --> 00:29:00,880 Speaker 1: this the crisis doesn't prove that giving mortgages to poor 565 00:29:00,880 --> 00:29:02,760 Speaker 1: people as a bad idea, as a lot of people 566 00:29:02,760 --> 00:29:04,840 Speaker 1: seem to think. It doesn't prove home ownership one way 567 00:29:04,920 --> 00:29:07,320 Speaker 1: or the other. What it proves is that extending credit 568 00:29:07,320 --> 00:29:09,360 Speaker 1: to people of any income level who can't afford to 569 00:29:09,360 --> 00:29:12,080 Speaker 1: pay it back. It's a really bad idea. So I 570 00:29:12,120 --> 00:29:14,920 Speaker 1: think that's another huge misconception and kind of an evil 571 00:29:14,960 --> 00:29:18,480 Speaker 1: misconception about the crisis. Right, So there's so many components 572 00:29:18,480 --> 00:29:22,280 Speaker 1: to that. One is, you have a population that's not 573 00:29:22,360 --> 00:29:25,480 Speaker 1: seeing their wages go up, especially in the two thousands 574 00:29:25,480 --> 00:29:29,640 Speaker 1: when there's really high inflation. So flat wage is high 575 00:29:29,680 --> 00:29:32,720 Speaker 1: inflation means your standard of living is falling unless you 576 00:29:32,760 --> 00:29:34,480 Speaker 1: have a way to get more money. And the cash 577 00:29:34,520 --> 00:29:38,160 Speaker 1: out reflies, which, like Endron, it works as long as 578 00:29:38,200 --> 00:29:41,800 Speaker 1: this price keeps going up. Once that stops, well, when 579 00:29:41,840 --> 00:29:43,840 Speaker 1: the music stops, that's where the real trouble comes. And 580 00:29:43,920 --> 00:29:46,240 Speaker 1: you drive through Chicago streets and you see in the 581 00:29:46,280 --> 00:29:49,880 Speaker 1: dirty snow, flat flapping banner from Chase that says let 582 00:29:49,920 --> 00:29:52,360 Speaker 1: your home, take you on vacation, and you say, not 583 00:29:52,480 --> 00:29:54,560 Speaker 1: so much. Take you on vacation, get you a big 584 00:29:54,600 --> 00:29:58,080 Speaker 1: screen TV, buy you a new car, all standard of 585 00:29:58,160 --> 00:30:00,520 Speaker 1: living things, and that's really eating your sat coorn. But 586 00:30:00,560 --> 00:30:03,680 Speaker 1: you're absolutely right. The underlying stories of the stagnation and 587 00:30:03,720 --> 00:30:06,640 Speaker 1: American incomes, right, that was masked for a while by 588 00:30:06,680 --> 00:30:08,760 Speaker 1: the creation of credit, and I think that's a huge 589 00:30:08,800 --> 00:30:11,160 Speaker 1: underlying story that we have yet to see play out. 590 00:30:11,640 --> 00:30:14,880 Speaker 1: Creation of credit, flat wages, and when people are talking 591 00:30:14,880 --> 00:30:18,240 Speaker 1: about income inequality, there are two sides. Yeah, the top 592 00:30:18,320 --> 00:30:22,200 Speaker 1: one tenth doing great with stock market and all sorts 593 00:30:22,200 --> 00:30:24,720 Speaker 1: of other things, but there's a huge swath of the 594 00:30:24,760 --> 00:30:28,280 Speaker 1: country that's just seeing stagnant wages. And when you say 595 00:30:28,280 --> 00:30:32,160 Speaker 1: to people who aren't used to having free money, hey, 596 00:30:32,200 --> 00:30:35,080 Speaker 1: here's free money, I mean that story I mentioned about 597 00:30:35,120 --> 00:30:39,960 Speaker 1: us doing the cash out refly, so we got starter house, 598 00:30:40,080 --> 00:30:44,840 Speaker 1: replaced a kitchen, and I know neighbors who were why 599 00:30:44,880 --> 00:30:48,840 Speaker 1: is there a portion your little starter house driveway? Well, 600 00:30:48,880 --> 00:30:51,360 Speaker 1: because I can't. And it gets to another huge issue 601 00:30:51,360 --> 00:30:53,480 Speaker 1: about our society too, which is that a lot of 602 00:30:53,520 --> 00:30:56,960 Speaker 1: people aren't financially sophisticated enough to understand these products. So 603 00:30:57,000 --> 00:30:59,000 Speaker 1: they assume if the lender is giving them the money, 604 00:30:59,000 --> 00:31:01,400 Speaker 1: then the lenders that and the lender knows that they 605 00:31:01,400 --> 00:31:03,160 Speaker 1: can pay it back and the lender has done the work. 606 00:31:03,160 --> 00:31:06,160 Speaker 1: And that's obviously a really bad assumption. But lenders, especially 607 00:31:06,960 --> 00:31:08,920 Speaker 1: mortgage brokers, are trained to be your friend and say 608 00:31:08,960 --> 00:31:10,840 Speaker 1: it's all going to be okay in the end. So 609 00:31:11,000 --> 00:31:13,680 Speaker 1: I'm a big believer in personal responsibility, but I think 610 00:31:13,680 --> 00:31:16,160 Speaker 1: responsibility has to go two ways. And you can't put 611 00:31:16,200 --> 00:31:19,160 Speaker 1: it all on people and then have financial services institutions 612 00:31:19,400 --> 00:31:22,280 Speaker 1: out there selling bad products that they're trying it just 613 00:31:22,360 --> 00:31:24,840 Speaker 1: it doesn't work that way. Responsibility is a two way story. 614 00:31:24,880 --> 00:31:28,360 Speaker 1: Thanks to the Consumer Finance Protection Board, is a direct 615 00:31:28,520 --> 00:31:31,920 Speaker 1: result of the exact sentiment you mentioned the other the 616 00:31:31,920 --> 00:31:35,240 Speaker 1: other thing that people forget when we talk about or 617 00:31:35,480 --> 00:31:38,360 Speaker 1: or don't know. You know, Fannie and Freddie they got 618 00:31:38,360 --> 00:31:41,560 Speaker 1: into subprime. Yeah, they got into subprime. They petition o 619 00:31:41,680 --> 00:31:45,000 Speaker 1: FAIO later oh five because they were losing so much 620 00:31:45,040 --> 00:31:48,200 Speaker 1: market share to Wall Street. Hey, the subprime is where 621 00:31:48,200 --> 00:31:50,680 Speaker 1: the growth is. All our business is going away. If 622 00:31:50,680 --> 00:31:53,320 Speaker 1: you don't let us compete with them in the subprime space, 623 00:31:53,800 --> 00:31:56,200 Speaker 1: we're not gonna have any business. So they jumped in 624 00:31:56,240 --> 00:31:59,680 Speaker 1: around oh six just as the market was topping the 625 00:31:59,680 --> 00:32:01,520 Speaker 1: time and couldn't have been better. And that's why their 626 00:32:01,560 --> 00:32:04,440 Speaker 1: losses were so bad. But that's actually fascinating because you know, 627 00:32:04,480 --> 00:32:06,640 Speaker 1: there are forces in the government that wanted to see 628 00:32:06,760 --> 00:32:09,560 Speaker 1: the private label Wall Street market take over Fanny and 629 00:32:09,600 --> 00:32:12,000 Speaker 1: Freddy's market share, and there was a big change in 630 00:32:12,040 --> 00:32:13,800 Speaker 1: around I think it went into effect around O one 631 00:32:13,880 --> 00:32:17,160 Speaker 1: or O two that allowed these Wall Street created mortgage 632 00:32:17,160 --> 00:32:20,760 Speaker 1: backed securities that got triple A ratings to be treated 633 00:32:20,800 --> 00:32:23,160 Speaker 1: the same way for capital purposes as Fanny and Freddy 634 00:32:23,240 --> 00:32:26,560 Speaker 1: back securities. The two things are obviously totally different. One 635 00:32:26,640 --> 00:32:29,040 Speaker 1: is a creation of the credit rating agency process. The 636 00:32:29,080 --> 00:32:31,960 Speaker 1: other actually had two companies standing behind them saying we'll 637 00:32:31,960 --> 00:32:34,760 Speaker 1: pay if the homeowner can't. Plus the United States government 638 00:32:34,760 --> 00:32:37,880 Speaker 1: behind those two, right, But the banking lobby got them 639 00:32:37,920 --> 00:32:40,320 Speaker 1: treated the same way for capital purposes. And that's what 640 00:32:40,440 --> 00:32:42,920 Speaker 1: unleash the crave of craze of some prime lending. So 641 00:32:43,200 --> 00:32:45,360 Speaker 1: let's use that as a leaping off point to look 642 00:32:45,360 --> 00:32:47,600 Speaker 1: at some of the columns you have written and on 643 00:32:47,800 --> 00:32:52,680 Speaker 1: the rating agencies UM subject you wrote, if everyone hates 644 00:32:52,720 --> 00:32:57,000 Speaker 1: the creating credit rating agencies, why won't anyone enforced dot 645 00:32:57,040 --> 00:32:59,840 Speaker 1: frank provisions to dethrone them? So I have to ask 646 00:32:59,880 --> 00:33:03,600 Speaker 1: you what are the provisions and why has that not happened? Well, 647 00:33:03,680 --> 00:33:08,760 Speaker 1: some of it has in limited ways. The SEC is trying, um, 648 00:33:08,800 --> 00:33:12,560 Speaker 1: but very ineffectively. Um. The main thing that was supposed 649 00:33:12,600 --> 00:33:14,680 Speaker 1: to happen, and the big issue is the way credit 650 00:33:14,800 --> 00:33:18,320 Speaker 1: rating agencies have been enshrined in regulations, making them making 651 00:33:18,360 --> 00:33:21,440 Speaker 1: them critical arbiters. And the idea and Dodd Frank was 652 00:33:21,480 --> 00:33:22,800 Speaker 1: we were going to take them out of all the 653 00:33:22,840 --> 00:33:25,680 Speaker 1: regulatory framework, and that is not happening. People have basically 654 00:33:25,680 --> 00:33:28,800 Speaker 1: admitted it's really difficult. It's really hard to do. And 655 00:33:28,840 --> 00:33:32,160 Speaker 1: part of the problem is that institutional investors love being 656 00:33:32,200 --> 00:33:34,320 Speaker 1: able to blame the credit rating agencies when it all 657 00:33:34,360 --> 00:33:37,280 Speaker 1: goes wrong, and so they don't necessarily they kind of 658 00:33:37,320 --> 00:33:39,400 Speaker 1: like being able to say, but the credit rating agencies 659 00:33:39,440 --> 00:33:41,360 Speaker 1: said it was so um. So there are a lot 660 00:33:41,400 --> 00:33:44,440 Speaker 1: of forces against any any reform. And the clearest way 661 00:33:44,440 --> 00:33:47,120 Speaker 1: you can see that is if you remember that the 662 00:33:47,120 --> 00:33:50,480 Speaker 1: credit rating agencies were already reformed before the financial crisis. 663 00:33:50,480 --> 00:33:52,960 Speaker 1: In the wake of en Run, when they famously rated 664 00:33:53,040 --> 00:33:55,520 Speaker 1: en Run's debt investment grade up until two days before 665 00:33:55,520 --> 00:33:58,000 Speaker 1: it's collapsed, there was a huge outcry about the credit 666 00:33:58,080 --> 00:34:00,800 Speaker 1: rating agencies, and in two thousand and set Congress past 667 00:34:00,880 --> 00:34:03,960 Speaker 1: the credit rating agency reformat. So did you know that 668 00:34:04,040 --> 00:34:06,840 Speaker 1: heading into the financial crisis, the credit rating agencies has 669 00:34:06,880 --> 00:34:09,600 Speaker 1: had already been reformed. And once once you know that, 670 00:34:09,640 --> 00:34:12,120 Speaker 1: you realize why nothing is happening. If people want to 671 00:34:12,160 --> 00:34:16,080 Speaker 1: find your work, where would they track you down? Mainly 672 00:34:16,120 --> 00:34:19,480 Speaker 1: through Vanity Fair, but I guess you can google me. 673 00:34:19,560 --> 00:34:22,040 Speaker 1: You can buy my books on Amazon if you're interested. 674 00:34:22,560 --> 00:34:25,160 Speaker 1: If you've enjoyed this conversation, be sure and hang around 675 00:34:25,200 --> 00:34:27,480 Speaker 1: for the podcast extras, where we keep the tape rolling 676 00:34:27,520 --> 00:34:30,880 Speaker 1: and continue chatting. Be sure and check out my daily 677 00:34:30,960 --> 00:34:34,040 Speaker 1: column on Bloomberg View dot com or follow me on 678 00:34:34,080 --> 00:34:37,000 Speaker 1: Twitter at rid Halts, where I tweet a little more 679 00:34:37,040 --> 00:34:39,600 Speaker 1: than once a week or so. I'm Barry rid Halts. 680 00:34:39,640 --> 00:34:42,880 Speaker 1: You've been listening to Masters in Business on Bloomberg Radio. 681 00:34:43,440 --> 00:34:46,239 Speaker 1: Welcome to the podcast portion of the show. This is 682 00:34:46,280 --> 00:34:48,600 Speaker 1: where we take off our shoes and kick back a 683 00:34:48,600 --> 00:34:51,560 Speaker 1: little bit. I'm literally taking my shoes off, Bethany. Thank 684 00:34:51,560 --> 00:34:53,800 Speaker 1: you so much for doing this. This is really quite 685 00:34:54,040 --> 00:34:57,319 Speaker 1: interesting stuff. You and I have an interest in a 686 00:34:57,360 --> 00:35:03,400 Speaker 1: lot of similar wonky, tedious, boring stuff. That's true. The 687 00:35:04,000 --> 00:35:06,880 Speaker 1: Dick Fold thing, So did you know that about it? 688 00:35:07,000 --> 00:35:09,239 Speaker 1: I did not know that story. There was a Bloomberg 689 00:35:09,560 --> 00:35:13,960 Speaker 1: article on it, and I've had this conversation with countless people. 690 00:35:14,280 --> 00:35:17,800 Speaker 1: They're like, no, no, if he was offered money by Buffett, 691 00:35:17,840 --> 00:35:19,640 Speaker 1: he would have had to take it. Not only was 692 00:35:19,680 --> 00:35:23,600 Speaker 1: he offered money by Buffett, he was offered more money 693 00:35:23,760 --> 00:35:27,799 Speaker 1: then a better deal than what ultimately now six months 694 00:35:27,840 --> 00:35:32,279 Speaker 1: later obviously was a much uglier situation after following the 695 00:35:32,280 --> 00:35:36,600 Speaker 1: collapse of Lehman Brothers. But um talk talk about reality 696 00:35:36,640 --> 00:35:40,319 Speaker 1: distortion field and being a salesman and surrounding yourself with 697 00:35:40,360 --> 00:35:43,680 Speaker 1: people who are afraid to say no to you. That's 698 00:35:43,719 --> 00:35:48,160 Speaker 1: a This is a not uncommon set of circums now 699 00:35:48,280 --> 00:35:50,920 Speaker 1: except now, which I think is almost worse. If you 700 00:35:50,960 --> 00:35:52,799 Speaker 1: talk to any leader, they're going to tell you that 701 00:35:52,840 --> 00:35:54,960 Speaker 1: they surround themselves with people who challenge them and that 702 00:35:55,000 --> 00:35:57,520 Speaker 1: they really like being challenged. And as soon as I 703 00:35:57,600 --> 00:36:00,480 Speaker 1: hear that, my bsmter goes off because I know it's 704 00:36:00,520 --> 00:36:02,920 Speaker 1: not true. Nobody likes being challenged. The trick is to 705 00:36:02,960 --> 00:36:04,920 Speaker 1: do it anyway. So if I hear an honest leader, 706 00:36:05,040 --> 00:36:07,440 Speaker 1: they say, I really hate being challenged, but I make 707 00:36:07,520 --> 00:36:11,440 Speaker 1: myself undergo it anyway. Now that's honesty. The other if you, 708 00:36:11,600 --> 00:36:14,320 Speaker 1: if you've read some of the Bridgewater stuff, what what 709 00:36:14,600 --> 00:36:18,319 Speaker 1: Dahio has created in terms of some people have called 710 00:36:18,360 --> 00:36:20,640 Speaker 1: it a cult. I think that goes too far, but 711 00:36:20,760 --> 00:36:24,760 Speaker 1: it's a really interesting culture. Where so there's another book 712 00:36:24,920 --> 00:36:28,160 Speaker 1: Um Originals by Adam Grant that I'm just starting, where 713 00:36:28,200 --> 00:36:32,520 Speaker 1: he references how like a junior analyst sends an email 714 00:36:32,560 --> 00:36:36,440 Speaker 1: to Dahio like screaming in him, essentially saying, we told 715 00:36:36,440 --> 00:36:39,560 Speaker 1: you this was a really important presentation, and you muffed 716 00:36:39,560 --> 00:36:42,520 Speaker 1: it and you came in unprepared and you were unfocused. 717 00:36:42,520 --> 00:36:46,520 Speaker 1: Then that's the culture, and it makes them it's not 718 00:36:46,600 --> 00:36:49,600 Speaker 1: a coincidence that they've become the biggest hedge fund in 719 00:36:49,600 --> 00:36:51,960 Speaker 1: the world. It would be very hard to execute, but 720 00:36:52,040 --> 00:36:56,000 Speaker 1: it's a powerful idea. Yeah, very hard to execute. So 721 00:36:56,000 --> 00:36:57,840 Speaker 1: so let's talk about some other things that are a 722 00:36:57,880 --> 00:37:01,319 Speaker 1: little hard to execute or easy to execute. What one 723 00:37:01,320 --> 00:37:05,120 Speaker 1: of the columns of yours that I really liked, just 724 00:37:05,480 --> 00:37:09,680 Speaker 1: want to buy the new Jersey Turnpike privatization and it's 725 00:37:09,760 --> 00:37:13,439 Speaker 1: discontent And I don't know if that's your subhead or mine, 726 00:37:14,000 --> 00:37:17,440 Speaker 1: but I just remember that column being fascinated. And you 727 00:37:17,520 --> 00:37:21,720 Speaker 1: see this for cash strapped states, municipalities around the country 728 00:37:22,120 --> 00:37:26,280 Speaker 1: selling these really impossible to replace things to the private sector, 729 00:37:26,920 --> 00:37:29,480 Speaker 1: and these are disasters, aren't they. Well, we did it 730 00:37:29,480 --> 00:37:32,879 Speaker 1: in Chicago, right, And the problem is if you really 731 00:37:32,920 --> 00:37:36,200 Speaker 1: actually did take the money and invest it as a 732 00:37:36,239 --> 00:37:38,560 Speaker 1: city and do what you were supposed to do with it, 733 00:37:38,600 --> 00:37:41,160 Speaker 1: then maybe at least financially for the city, it wouldn't 734 00:37:41,160 --> 00:37:43,560 Speaker 1: be such a problem. But all you're doing is getting 735 00:37:43,680 --> 00:37:45,759 Speaker 1: rid of your long term assets in exchange for a 736 00:37:45,800 --> 00:37:49,000 Speaker 1: quick cash infusion, right, And so it ends up being 737 00:37:49,040 --> 00:37:51,319 Speaker 1: a complete disaster because then the assets are gone and 738 00:37:51,320 --> 00:37:53,520 Speaker 1: the money's gone, and all it does is bridge a 739 00:37:53,560 --> 00:37:56,320 Speaker 1: short term gap instead of funding anything for the future. 740 00:37:56,560 --> 00:37:58,439 Speaker 1: And then there are a lot of questions about how 741 00:37:58,440 --> 00:38:02,919 Speaker 1: well the private owners actually do. Horror stories with enforcements 742 00:38:03,640 --> 00:38:07,960 Speaker 1: of traffic tickets and and parking tickets and raising rates 743 00:38:07,960 --> 00:38:12,959 Speaker 1: and everything. Real real horror stories about about how it works. Um. 744 00:38:13,000 --> 00:38:14,799 Speaker 1: And there was quite a push a few years ago 745 00:38:14,880 --> 00:38:16,920 Speaker 1: for the banks to get more into this business, and 746 00:38:17,000 --> 00:38:20,040 Speaker 1: everybody was talking about setting up an infrastructure fund. So 747 00:38:20,120 --> 00:38:21,880 Speaker 1: it'll be interesting to see how it pans out. If 748 00:38:21,920 --> 00:38:26,239 Speaker 1: we've got another economic downturn, it won't do well. The 749 00:38:26,280 --> 00:38:31,040 Speaker 1: other title I really liked squid Love, Why Aren't Clients 750 00:38:31,320 --> 00:38:35,520 Speaker 1: Fleeing Goldman Sacks. It's a great title, but the point 751 00:38:35,520 --> 00:38:39,520 Speaker 1: it raises, why didn't clients fleet Goldman Sacks? Well, you 752 00:38:39,560 --> 00:38:43,040 Speaker 1: could have two different interpretations. One could be that clients 753 00:38:43,040 --> 00:38:45,680 Speaker 1: didn't care even though the rest of us did. When 754 00:38:45,719 --> 00:38:48,239 Speaker 1: you say didn't care, didn't care about them taking the 755 00:38:48,280 --> 00:38:51,400 Speaker 1: other side of the trades, didn't care about how Goldman 756 00:38:51,480 --> 00:38:55,319 Speaker 1: behaved in the financial crisis. When I think by any characterization, 757 00:38:55,320 --> 00:38:57,560 Speaker 1: they looked out for their own interest and didn't look 758 00:38:57,560 --> 00:39:00,160 Speaker 1: out for their client interests. That a given is and 759 00:39:00,239 --> 00:39:02,239 Speaker 1: everyone assume, hey, that's what they're doing. I know who 760 00:39:02,320 --> 00:39:05,080 Speaker 1: I'm in bed with. Well, look in Goldman and Goldman's defense, 761 00:39:05,200 --> 00:39:07,680 Speaker 1: they say that's the trading business, and the clients knew 762 00:39:07,719 --> 00:39:10,080 Speaker 1: what they were doing. But Goldman has always said is 763 00:39:10,120 --> 00:39:12,040 Speaker 1: one of its ten principles. I think the number one 764 00:39:12,120 --> 00:39:14,560 Speaker 1: principle is our client's interests come first. They don't say 765 00:39:14,560 --> 00:39:17,200 Speaker 1: our client's interests come first in our investment banking business. 766 00:39:17,400 --> 00:39:20,400 Speaker 1: They come way down the list in every other business. 767 00:39:20,600 --> 00:39:22,480 Speaker 1: And so it's hypocrisy, right, I think they mean their 768 00:39:22,520 --> 00:39:26,520 Speaker 1: client's interest in principal payment. Until we get those payments, 769 00:39:26,560 --> 00:39:29,600 Speaker 1: we just can't even chut it. That's really funny. But 770 00:39:29,600 --> 00:39:32,239 Speaker 1: but but Goldman has done fine in the years since 771 00:39:32,320 --> 00:39:34,360 Speaker 1: the cis there still at the time, still at the 772 00:39:34,360 --> 00:39:36,080 Speaker 1: top of the M and A leagues, they haven't lost 773 00:39:36,080 --> 00:39:39,080 Speaker 1: client business at all. And I think if my there's 774 00:39:39,120 --> 00:39:40,759 Speaker 1: no way to know what the answer to that is, 775 00:39:40,840 --> 00:39:43,879 Speaker 1: my guests would be that clients still want what they 776 00:39:43,920 --> 00:39:46,319 Speaker 1: perceive as the best advice. They still think Goldman is 777 00:39:46,360 --> 00:39:49,680 Speaker 1: the best, and they're willing to take the whatever risks 778 00:39:49,680 --> 00:39:51,799 Speaker 1: come with that. I think the other part of it 779 00:39:51,840 --> 00:39:53,680 Speaker 1: is that it's not like any investment bank came out 780 00:39:53,680 --> 00:39:55,960 Speaker 1: of the crisis well, right, So it's not like you 781 00:39:56,000 --> 00:39:58,960 Speaker 1: have the super Goldman who did perfectly and behave beautifully 782 00:39:59,000 --> 00:40:02,239 Speaker 1: during the crisis. Don't everybody you have Wells Fargo as 783 00:40:02,400 --> 00:40:05,520 Speaker 1: as a survivor did really well, and you had JP Morgan, 784 00:40:05,880 --> 00:40:09,880 Speaker 1: but not among the top investment banks. So Morgan, Stanley, Maryland, 785 00:40:10,600 --> 00:40:14,319 Speaker 1: I mean far worse behavior, right, can you go down 786 00:40:14,360 --> 00:40:17,959 Speaker 1: that hole? List Ubs and Credit Swiss Following shortly after 787 00:40:18,000 --> 00:40:21,200 Speaker 1: the crisis, the Buffett quote that when the Todd goes out, 788 00:40:21,200 --> 00:40:24,360 Speaker 1: you see who swimming naked. Suddenly a lot of warts 789 00:40:24,440 --> 00:40:28,400 Speaker 1: that were not seen previously to the crisis, we're all revealed. 790 00:40:28,440 --> 00:40:30,200 Speaker 1: And you have to think no one would have noticed 791 00:40:30,400 --> 00:40:33,399 Speaker 1: but for the crisis. Right. So if a client were 792 00:40:33,480 --> 00:40:35,759 Speaker 1: going to leave Goldman SAX after the crisis, they would 793 00:40:35,760 --> 00:40:37,799 Speaker 1: have had to go somewhere else. Where is that somewhere else? 794 00:40:37,840 --> 00:40:41,400 Speaker 1: Deutsche Bank, Royal Bank of Scotland, they do great work. 795 00:40:42,280 --> 00:40:45,080 Speaker 1: It's it's well so. In other words, there there are 796 00:40:45,080 --> 00:40:48,520 Speaker 1: no options. And as long as you're dealing with the sharpie, 797 00:40:48,560 --> 00:40:50,600 Speaker 1: they might as well be your sharp right. And you 798 00:40:50,680 --> 00:40:53,760 Speaker 1: do have um a bunch of independent investment banks, boutique 799 00:40:53,800 --> 00:40:56,279 Speaker 1: investment banks that have been set up, particularly in recent years, 800 00:40:56,280 --> 00:40:58,480 Speaker 1: some of them populated by ex Golmen bankers. It will 801 00:40:58,520 --> 00:41:01,560 Speaker 1: be interesting to see how that plays out, but there is, 802 00:41:01,880 --> 00:41:04,040 Speaker 1: you know, there is some truth to the idea that 803 00:41:04,360 --> 00:41:07,719 Speaker 1: a global client base they want financing when they come 804 00:41:07,760 --> 00:41:09,480 Speaker 1: to you for adeal. They want the whole package that 805 00:41:09,560 --> 00:41:11,440 Speaker 1: a big bank like Goldman can offer. They don't want 806 00:41:11,440 --> 00:41:13,320 Speaker 1: a boutique and you can't get that with a potique. 807 00:41:13,320 --> 00:41:15,160 Speaker 1: I've also noticed that there have been a number of 808 00:41:15,200 --> 00:41:18,360 Speaker 1: companies seeded, but it's it's like when there's a super 809 00:41:18,440 --> 00:41:21,360 Speaker 1: over in a star, all that star dust eventually becomes 810 00:41:21,400 --> 00:41:24,640 Speaker 1: another star. When AI g blew up, there's a whole 811 00:41:24,680 --> 00:41:27,799 Speaker 1: bunch of other little companies, including I think it's called 812 00:41:27,880 --> 00:41:31,920 Speaker 1: Pure Coincidentally, an insurance company that's trying to compete with 813 00:41:32,080 --> 00:41:35,480 Speaker 1: chub on the high end for residential real estate insurance 814 00:41:36,200 --> 00:41:38,920 Speaker 1: x A I G. Guy so following, and I think 815 00:41:38,960 --> 00:41:42,440 Speaker 1: that began long before the crisis. But it's fascinating how 816 00:41:42,440 --> 00:41:45,200 Speaker 1: every time there's a disaster, you have good people, you 817 00:41:45,239 --> 00:41:46,920 Speaker 1: have less than good people when some of the good 818 00:41:46,960 --> 00:41:49,560 Speaker 1: people ultimately end up. There've been a couple of stories 819 00:41:49,560 --> 00:41:52,880 Speaker 1: that have been interesting, one tracking former Drexel people, another 820 00:41:52,920 --> 00:41:55,440 Speaker 1: tracking former end Round people, a lot of whom have 821 00:41:55,520 --> 00:41:58,360 Speaker 1: gone on to do really interesting things. I mean circling 822 00:41:58,360 --> 00:42:00,480 Speaker 1: back to end Round to me that the that company 823 00:42:00,520 --> 00:42:01,960 Speaker 1: is just such a tragedy. There are a lot of 824 00:42:01,960 --> 00:42:04,279 Speaker 1: good ideas and a lot of brilliant people. They just 825 00:42:04,360 --> 00:42:07,080 Speaker 1: couldn't wait for the ideas to actually produce revenue, so 826 00:42:07,160 --> 00:42:10,920 Speaker 1: they accelerated the revenue through ways both legitimate but sketchy 827 00:42:10,960 --> 00:42:14,760 Speaker 1: and totally illegitimate. And that's why I understanding you correctly. 828 00:42:14,760 --> 00:42:16,920 Speaker 1: You're saying there were a lot of really good ideas. 829 00:42:16,960 --> 00:42:20,120 Speaker 1: It's just a shame it was all a fraud. Is 830 00:42:20,160 --> 00:42:22,360 Speaker 1: that what you're actually saying. I'm sort of saying that 831 00:42:22,400 --> 00:42:24,399 Speaker 1: except Ron, you know, it was a fraud and very 832 00:42:24,520 --> 00:42:26,279 Speaker 1: it was a legal fraud. A lot of what they 833 00:42:26,280 --> 00:42:28,960 Speaker 1: did technically met the letter of the law. It was legal, 834 00:42:29,239 --> 00:42:32,839 Speaker 1: so it's still a very complicated scam. But but yes, 835 00:42:32,920 --> 00:42:35,839 Speaker 1: there were the ideas were good. It's just that they 836 00:42:35,840 --> 00:42:38,359 Speaker 1: couldn't wait to show revenue and profits that they came 837 00:42:38,440 --> 00:42:40,560 Speaker 1: up with scammy ways to make it look like they 838 00:42:40,560 --> 00:42:43,640 Speaker 1: were producing more profits than they were. But the ideas 839 00:42:43,800 --> 00:42:45,120 Speaker 1: and the people who were there, there are a lot 840 00:42:45,120 --> 00:42:47,759 Speaker 1: of good people. I'm fond of saying one of the 841 00:42:47,760 --> 00:42:50,920 Speaker 1: biggest problems in finance is that no one's willing to 842 00:42:50,960 --> 00:42:53,319 Speaker 1: wait to get rich slowly. And it's really Oh, I 843 00:42:53,360 --> 00:42:58,160 Speaker 1: love that life. Every time people run into trouble, I've 844 00:42:58,320 --> 00:43:00,759 Speaker 1: I've met and worked with and been on the other 845 00:43:00,840 --> 00:43:06,120 Speaker 1: sides of discussions with people who are just incredibly talented salespeople, 846 00:43:06,719 --> 00:43:10,720 Speaker 1: and invariably some of these guys end up getting into trouble. 847 00:43:10,840 --> 00:43:14,480 Speaker 1: And it's almost always guys, and it's the question is 848 00:43:14,480 --> 00:43:16,640 Speaker 1: always all you have to do is put your head 849 00:43:16,640 --> 00:43:22,840 Speaker 1: down and be a reasonable human and not do really stupid, 850 00:43:23,680 --> 00:43:29,080 Speaker 1: ethically dubious, legally questionable things, and eventually you become very wealthy. 851 00:43:29,160 --> 00:43:31,840 Speaker 1: What what is so challenging about that? I don't know. 852 00:43:31,880 --> 00:43:34,080 Speaker 1: I've been thinking a lot lately about the difference between 853 00:43:34,080 --> 00:43:36,439 Speaker 1: being smart and why being wise. And I think there's 854 00:43:36,480 --> 00:43:38,400 Speaker 1: a lot of smarts out there, but there's not a 855 00:43:38,400 --> 00:43:41,400 Speaker 1: lot of wisdom. So how many how much time do 856 00:43:41,400 --> 00:43:44,040 Speaker 1: we have left? So in the last few minutes we 857 00:43:44,120 --> 00:43:46,800 Speaker 1: have let me get to some of my favorite questions 858 00:43:47,160 --> 00:43:50,880 Speaker 1: that I asked for of all my guests. UM, and 859 00:43:50,960 --> 00:43:53,640 Speaker 1: I have I have us with Oh, you're right about 860 00:43:53,680 --> 00:43:56,760 Speaker 1: the time. UM, So let's talk a little bit about mentors. 861 00:43:56,760 --> 00:43:59,439 Speaker 1: Any mentors stand out in your mind? I think i'd 862 00:43:59,480 --> 00:44:02,799 Speaker 1: have to say Joe No, Sarah is the the is 863 00:44:02,840 --> 00:44:05,879 Speaker 1: probably and John Huey too, who ran Fortune magazine when 864 00:44:05,880 --> 00:44:08,400 Speaker 1: I got there. I still remember John Pulling calling a 865 00:44:08,400 --> 00:44:11,399 Speaker 1: big meeting of Fortune right when I started and basically saying, 866 00:44:11,440 --> 00:44:13,440 Speaker 1: if you don't know what you're doing, there's no place 867 00:44:13,480 --> 00:44:15,200 Speaker 1: for you here at this magazine. And I was like, 868 00:44:15,239 --> 00:44:17,640 Speaker 1: I don't have a clue. I'm not gonna last long here, 869 00:44:17,680 --> 00:44:20,759 Speaker 1: and this this is my my new job. But Joe 870 00:44:20,840 --> 00:44:23,399 Speaker 1: too has always been really good both on the big 871 00:44:23,440 --> 00:44:25,520 Speaker 1: picture He's the one who encouraged me to write the 872 00:44:25,560 --> 00:44:28,359 Speaker 1: un Run book, but also really good at sorting through 873 00:44:28,480 --> 00:44:30,279 Speaker 1: ideas because I have a lot of ideas and I 874 00:44:30,320 --> 00:44:32,600 Speaker 1: need someone to say this one sucks. Go for this one. 875 00:44:32,719 --> 00:44:34,960 Speaker 1: So let's talk about books. Since you mentioned what are 876 00:44:34,960 --> 00:44:40,000 Speaker 1: some of your favorite books, fiction or nonfiction? Let's see. Um. Okay, 877 00:44:40,000 --> 00:44:43,040 Speaker 1: so I'm a total sucker for The Lord of the Rings. Okay, 878 00:44:43,239 --> 00:44:45,879 Speaker 1: I think it's one of the one of the best, 879 00:44:47,239 --> 00:44:49,520 Speaker 1: and thinking about it again and I actually am Now 880 00:44:49,680 --> 00:44:51,759 Speaker 1: I have enough distance between the movies and I'm willing 881 00:44:51,800 --> 00:44:57,040 Speaker 1: to watch the first three movies again. The Hobbit. Hobbit 882 00:44:57,480 --> 00:44:59,480 Speaker 1: not as not as great as the first three. Lord 883 00:44:59,480 --> 00:45:01,120 Speaker 1: of the Ring now, no, no, no, But the Lord 884 00:45:01,120 --> 00:45:05,080 Speaker 1: of the Rings is absolutely amazing. Game of Thrones is awesome. 885 00:45:05,480 --> 00:45:07,440 Speaker 1: I haven't been able to watch the TV show because 886 00:45:07,480 --> 00:45:10,880 Speaker 1: I found I found the book so stressful. Um on 887 00:45:11,000 --> 00:45:15,480 Speaker 1: a on a more series friend, Um Middle March obviously amazing. 888 00:45:15,600 --> 00:45:19,160 Speaker 1: I love biographies. There's a great biography of Collette that 889 00:45:19,320 --> 00:45:21,600 Speaker 1: really made me think about called Secrets of the Fresh 890 00:45:21,719 --> 00:45:24,000 Speaker 1: of the Flesh, that really made me think differently about 891 00:45:24,080 --> 00:45:27,520 Speaker 1: how biographies can be done. But I think life stories. 892 00:45:28,120 --> 00:45:30,719 Speaker 1: Secrets of the Flesh, yes, but I think I think 893 00:45:30,760 --> 00:45:35,000 Speaker 1: stories about fascinating people that explore the nuances of their lives, 894 00:45:35,000 --> 00:45:39,160 Speaker 1: particularly fascinating, controversial people are are just great. And then 895 00:45:39,280 --> 00:45:42,279 Speaker 1: I loved UM recently All the Light We Cannot See. 896 00:45:42,360 --> 00:45:45,080 Speaker 1: I think that's one of the most beautiful books, although 897 00:45:45,200 --> 00:45:47,600 Speaker 1: deeply sad, books, that I've read in a long time. 898 00:45:48,000 --> 00:45:50,560 Speaker 1: I gave one of the people in my office The 899 00:45:50,680 --> 00:45:55,520 Speaker 1: Right Brothers book for the holidays, and he raved about 900 00:45:55,520 --> 00:45:58,000 Speaker 1: So now I have to everything. All rights is great, 901 00:45:58,000 --> 00:46:00,600 Speaker 1: but now I have to I gave it as a gift. 902 00:46:00,640 --> 00:46:02,200 Speaker 1: Now I actually have to wait. Now you have to 903 00:46:02,200 --> 00:46:05,360 Speaker 1: go read it. UM. So, millennials, you've been doing this 904 00:46:05,400 --> 00:46:07,279 Speaker 1: for a couple of years. If a millennial comes to 905 00:46:07,320 --> 00:46:10,320 Speaker 1: you and says, hey, I want to get into your field, 906 00:46:10,400 --> 00:46:12,800 Speaker 1: what sort of advice would you give, either a recent 907 00:46:12,840 --> 00:46:16,960 Speaker 1: college graduate or a millennial. Seriously, now what what I 908 00:46:17,040 --> 00:46:19,520 Speaker 1: What I actually say is that you have to be 909 00:46:19,560 --> 00:46:22,239 Speaker 1: really committed to this, and you can't expect it to 910 00:46:22,280 --> 00:46:24,480 Speaker 1: be something where there's a set career path, and there 911 00:46:24,480 --> 00:46:26,560 Speaker 1: never really has been. Right, You've found your way into 912 00:46:26,840 --> 00:46:29,440 Speaker 1: showing this in a totally different way I did. Some 913 00:46:29,480 --> 00:46:31,760 Speaker 1: people go to journalism school and train to be journalists 914 00:46:31,760 --> 00:46:34,520 Speaker 1: all their life, so it always has been a flexible 915 00:46:34,560 --> 00:46:36,560 Speaker 1: career path, but now so that more than ever right, 916 00:46:36,640 --> 00:46:38,520 Speaker 1: we don't know where our industry is going. It's not 917 00:46:38,600 --> 00:46:40,680 Speaker 1: like there's while you start on the bottom run here 918 00:46:40,680 --> 00:46:42,799 Speaker 1: and then you get a job here. It's it's all 919 00:46:42,960 --> 00:46:45,600 Speaker 1: made up, All bets are off. So I think you 920 00:46:45,640 --> 00:46:47,839 Speaker 1: have to have a real passion to want to tell 921 00:46:47,920 --> 00:46:51,799 Speaker 1: stories and learn things and be curious and and not 922 00:46:51,920 --> 00:46:54,399 Speaker 1: to and to be willing to work hard, to say 923 00:46:54,400 --> 00:46:58,279 Speaker 1: the least. And our final question that I ask everybody, 924 00:46:58,480 --> 00:47:04,880 Speaker 1: what is it that you wish you knew about investing companies, journalism? 925 00:47:04,920 --> 00:47:06,879 Speaker 1: What is it that you wish you knew twenty years 926 00:47:06,920 --> 00:47:11,759 Speaker 1: ago that you know today? I think I had wish 927 00:47:11,800 --> 00:47:13,279 Speaker 1: I had known. I think I wish I had known 928 00:47:13,280 --> 00:47:16,040 Speaker 1: how to be more skeptical. And I still sometimes think 929 00:47:16,080 --> 00:47:19,239 Speaker 1: I should be more skeptical even than I am. Not 930 00:47:19,320 --> 00:47:22,000 Speaker 1: only do people not always tell the truth, but sometimes 931 00:47:22,000 --> 00:47:24,360 Speaker 1: people don't even know that they're not telling the truth. 932 00:47:24,880 --> 00:47:28,799 Speaker 1: And so I wish I knew to listen more and 933 00:47:28,880 --> 00:47:32,320 Speaker 1: really challenge things that don't appear to that don't make sense. 934 00:47:32,560 --> 00:47:34,560 Speaker 1: And you know what, sometimes you're an idiot because you 935 00:47:34,680 --> 00:47:37,239 Speaker 1: just missed something somebody said and you didn't understand and 936 00:47:37,239 --> 00:47:39,959 Speaker 1: you actually didn't get it. But sometimes if you're really 937 00:47:39,960 --> 00:47:42,000 Speaker 1: willing to say that doesn't make sense to me, can 938 00:47:42,000 --> 00:47:46,040 Speaker 1: you repeat that you'll really learn something? And I wish 939 00:47:46,080 --> 00:47:49,359 Speaker 1: I were better at that than I am. That's quite fascinating. 940 00:47:50,200 --> 00:47:53,319 Speaker 1: For those of you who have enjoyed this conversation, be 941 00:47:53,400 --> 00:47:56,640 Speaker 1: sure and check out Bethany's various books. You can look 942 00:47:56,719 --> 00:47:59,400 Speaker 1: Up an Inch or Down an Inch on Apple iTunes 943 00:47:59,440 --> 00:48:03,120 Speaker 1: and see the other eighty or so conversations we've had. 944 00:48:03,719 --> 00:48:06,680 Speaker 1: H be sure and check out my daily column. I 945 00:48:06,680 --> 00:48:09,520 Speaker 1: already said that, so I don't need to say that again. UM. 946 00:48:09,560 --> 00:48:11,720 Speaker 1: I want to thank Mike bat Nick, my head of research, 947 00:48:11,800 --> 00:48:15,480 Speaker 1: for helping me um do the deep dive into this, 948 00:48:15,560 --> 00:48:18,000 Speaker 1: as well as Charlie Vollmer, who is about to kick 949 00:48:18,040 --> 00:48:21,040 Speaker 1: me out of the studio. I'm Barry Ridholts. You're listening 950 00:48:21,080 --> 00:48:23,480 Speaker 1: to Masters in Business on Bloomberg Radio.