1 00:00:03,120 --> 00:00:10,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news, A little behind the 2 00:00:10,800 --> 00:00:14,160 Speaker 1: scenes Money Stuff podcast. Here we are waiting for me 3 00:00:14,480 --> 00:00:16,520 Speaker 1: to hit send on the Money Stuff email. 4 00:00:16,880 --> 00:00:18,959 Speaker 2: A peek behind the curtain if you will. 5 00:00:21,320 --> 00:00:24,200 Speaker 1: Hello, and welcome to the Money Stuff Podcast, your weekly 6 00:00:24,239 --> 00:00:28,400 Speaker 1: podcast where we talk about stuff related to money. I'm 7 00:00:28,440 --> 00:00:30,360 Speaker 1: Matt Levine and I heard the Money Stuff column for 8 00:00:30,440 --> 00:00:31,280 Speaker 1: Bloomberg Opinion. 9 00:00:31,520 --> 00:00:33,920 Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and 10 00:00:33,960 --> 00:00:35,519 Speaker 2: an anchor for Bloomberg Television. 11 00:00:35,880 --> 00:00:37,560 Speaker 1: Katie, how was friends? 12 00:00:37,800 --> 00:00:41,000 Speaker 2: Oh my god, Matt, it was the best. I went 13 00:00:41,040 --> 00:00:43,920 Speaker 2: to the Olympics. As we said from the last time 14 00:00:43,920 --> 00:00:46,839 Speaker 2: we did this, I went to the Olympics as a 15 00:00:46,920 --> 00:00:49,519 Speaker 2: horrorse I did super good in my event, but in 16 00:00:49,520 --> 00:00:52,000 Speaker 2: a more real sense, I went as a human and 17 00:00:52,360 --> 00:00:54,520 Speaker 2: I went to go watch track and field. It's a 18 00:00:54,600 --> 00:00:56,800 Speaker 2: huge bummer not being at the Olympics. 19 00:00:57,040 --> 00:00:58,200 Speaker 1: I thought you were going to say it's a huge 20 00:00:58,240 --> 00:01:01,520 Speaker 1: bummer that you didn't participate as a human. 21 00:01:02,000 --> 00:01:04,800 Speaker 2: I mean, just in general, it is a huge bummer 22 00:01:04,840 --> 00:01:07,039 Speaker 2: that I am not a horse, but also that I'm 23 00:01:07,080 --> 00:01:10,200 Speaker 2: not a good enough athlete to compete at the Olympics. 24 00:01:10,200 --> 00:01:12,679 Speaker 2: But then I think, actually, I have this podcast that 25 00:01:12,760 --> 00:01:15,399 Speaker 2: I do every week with Matt Levine, So it's not 26 00:01:15,440 --> 00:01:15,920 Speaker 2: that bad. 27 00:01:16,760 --> 00:01:17,720 Speaker 1: Cats and apples. 28 00:01:17,720 --> 00:01:19,560 Speaker 2: That's great, that's true. I get treats. 29 00:01:22,640 --> 00:01:26,880 Speaker 1: This is the between vacations money stuff podcast because I'm 30 00:01:26,920 --> 00:01:29,680 Speaker 1: going to be off next week going to the beach, 31 00:01:30,280 --> 00:01:34,480 Speaker 1: and you're that's incredible. Yes. So it's almost like we 32 00:01:34,560 --> 00:01:37,480 Speaker 1: could have just taken August off, but instead we're doing 33 00:01:37,480 --> 00:01:39,720 Speaker 1: this one. I know here we are doing this one 34 00:01:39,880 --> 00:01:43,800 Speaker 1: despite it being the mid August money stuff. There is 35 00:01:43,880 --> 00:01:44,399 Speaker 1: some news. 36 00:01:44,760 --> 00:01:45,800 Speaker 2: Should I tell you about it? 37 00:01:46,120 --> 00:01:47,320 Speaker 1: Yeah? Why don't you tell me about it? 38 00:01:48,160 --> 00:01:50,800 Speaker 2: Okay, We're going to talk about Starbucks and they're very 39 00:01:50,880 --> 00:01:54,600 Speaker 2: expensive new CEO. Yes, we're going to talk about creditor 40 00:01:54,640 --> 00:01:58,680 Speaker 2: on creditor violence, which is pretty exciting. And then we're 41 00:01:58,680 --> 00:02:01,559 Speaker 2: going to talk about Bank of a America and the long, 42 00:02:02,320 --> 00:02:04,440 Speaker 2: long hours that their junior bankers work. 43 00:02:04,640 --> 00:02:08,720 Speaker 1: All right, So Starbucks, Starbucks. 44 00:02:08,720 --> 00:02:11,680 Speaker 2: So this was a big one. Basically, Brian Nichols, he 45 00:02:11,840 --> 00:02:15,840 Speaker 2: was the CEO of Chipotle. He's been CEO since March 46 00:02:15,880 --> 00:02:19,919 Speaker 2: twenty eighteen. He's moving over to Starbucks as their chief 47 00:02:19,919 --> 00:02:23,400 Speaker 2: executive officer but also as chairman of their board, which 48 00:02:23,880 --> 00:02:25,400 Speaker 2: I mean there's so many different ways we could talk 49 00:02:25,440 --> 00:02:28,720 Speaker 2: about this. From governance like you discussed in the Money 50 00:02:28,760 --> 00:02:32,640 Speaker 2: Stuff newsletter. There's also just the sheer amount of money 51 00:02:32,800 --> 00:02:35,440 Speaker 2: that he's making, which is a lot. And then there's 52 00:02:35,480 --> 00:02:38,680 Speaker 2: also the fact that he's going to be a remote CEO, 53 00:02:39,080 --> 00:02:40,520 Speaker 2: which is also super interesting. 54 00:02:41,080 --> 00:02:45,200 Speaker 1: Also invented like Durrita's Locos tacos. He's like a marketing 55 00:02:45,200 --> 00:02:48,440 Speaker 1: guy who came up at both Pizza Hut and Taco Bell, 56 00:02:48,919 --> 00:02:52,040 Speaker 1: and I think they view him as a visionary of 57 00:02:52,080 --> 00:02:56,400 Speaker 1: like funding products to market at food restaurants. So that's exciting. 58 00:02:56,520 --> 00:02:59,959 Speaker 2: I kind of get more the inventor of the Daria 59 00:03:00,240 --> 00:03:03,440 Speaker 2: Locos taco I hope I got that right. Going to Chipotle. 60 00:03:03,639 --> 00:03:06,560 Speaker 2: Starbucks is a different animal. Starbucks has been in the 61 00:03:06,639 --> 00:03:09,679 Speaker 2: hurt locker for a couple of years now. It has 62 00:03:09,720 --> 00:03:11,919 Speaker 2: spawned a lot of good jokes on social media. I 63 00:03:11,960 --> 00:03:15,200 Speaker 2: saw someone tweet that they're going to start charging for 64 00:03:15,400 --> 00:03:17,440 Speaker 2: extra milk at Starbucks. 65 00:03:17,200 --> 00:03:20,240 Speaker 1: Right, Chaps, Like main thing in pop culture is like 66 00:03:20,400 --> 00:03:23,440 Speaker 1: portion sizes, and so yeah, well, I don't know how 67 00:03:23,520 --> 00:03:25,400 Speaker 1: you carry that over to it's tart. 68 00:03:25,639 --> 00:03:28,600 Speaker 2: Yeah, he did work magic over at Chipotle. At least 69 00:03:28,639 --> 00:03:30,600 Speaker 2: when it comes to the stock price. I was looking 70 00:03:30,600 --> 00:03:33,200 Speaker 2: at the numbers before I came to this little room 71 00:03:33,240 --> 00:03:37,320 Speaker 2: to record this podcast. And since March twenty eighteen through 72 00:03:37,400 --> 00:03:42,080 Speaker 2: Monday's close, Chipotle stock was up something like eight hundred 73 00:03:42,160 --> 00:03:46,360 Speaker 2: percent versus Starbucks being up like fifty six percent over 74 00:03:46,360 --> 00:03:49,440 Speaker 2: that timeframe, obviously underperforming the S and P five hundred 75 00:03:49,720 --> 00:03:54,440 Speaker 2: and massively underperforming Chipotle. So it makes sense that the 76 00:03:54,440 --> 00:03:57,880 Speaker 2: Starbucks board was like, Wow, things aren't going too well 77 00:03:57,960 --> 00:04:00,680 Speaker 2: right now. Who's really crushing it the industry? 78 00:04:00,880 --> 00:04:03,560 Speaker 1: Yeah, I mean it's like such a good illustration of 79 00:04:03,600 --> 00:04:06,280 Speaker 1: the possibility of CEO talent, right, I mean, it's all 80 00:04:06,400 --> 00:04:08,600 Speaker 1: it sort of seems abstract from the outside. But then 81 00:04:08,680 --> 00:04:11,040 Speaker 1: like you see, like you know, there's two companies that 82 00:04:11,080 --> 00:04:14,880 Speaker 1: are and you know, probably comparable businesses. One is doing 83 00:04:15,440 --> 00:04:20,080 Speaker 1: really well, one is doing less well, and they picked 84 00:04:20,080 --> 00:04:22,080 Speaker 1: the good CEO to run the bigger company, right, I mean, 85 00:04:22,120 --> 00:04:24,160 Speaker 1: like you know, you talked about the money he's getting 86 00:04:24,160 --> 00:04:26,839 Speaker 1: paid something like one hundred and thirteen million dollars, Like 87 00:04:27,000 --> 00:04:30,400 Speaker 1: that's the valuation of his package to come from Chipotle 88 00:04:30,480 --> 00:04:34,839 Speaker 1: to Starbucks. When they announced him, Starbucks stock was up 89 00:04:36,240 --> 00:04:39,480 Speaker 1: twenty billion dollars, like it was up, you know, like 90 00:04:39,560 --> 00:04:42,159 Speaker 1: twenty added like twenty billion dollars of market cap, which 91 00:04:42,200 --> 00:04:44,479 Speaker 1: is like he's a bargain at one hundred million dollars, right, 92 00:04:44,560 --> 00:04:47,719 Speaker 1: If the difference in CEO talent and CEO skill is 93 00:04:48,400 --> 00:04:51,360 Speaker 1: twenty billion dollars of market cap, then like, of course 94 00:04:51,440 --> 00:04:54,440 Speaker 1: it makes sense for him to move. Also, it's like interesting, 95 00:04:54,440 --> 00:04:57,080 Speaker 1: you know, Chipotle lost like six billion dollars of market cap, 96 00:04:57,120 --> 00:04:59,400 Speaker 1: so it was like an efficiency enhancing trade, right if 97 00:04:59,400 --> 00:05:01,680 Speaker 1: you just go to this prices right, Like he had 98 00:05:01,720 --> 00:05:03,880 Speaker 1: sort of done his work at Chipotle, he'd righted the ship, 99 00:05:04,240 --> 00:05:07,360 Speaker 1: and him leaving Chipotle was sad, but not that sad, 100 00:05:07,480 --> 00:05:10,640 Speaker 1: whereas him going to Starbucks was like extremely good for Starbucks. 101 00:05:10,720 --> 00:05:14,280 Speaker 1: So you know, everyone's a sort of long term winner. 102 00:05:14,360 --> 00:05:16,720 Speaker 2: I guess, yeah, it was a good pair trade to make, 103 00:05:16,800 --> 00:05:20,560 Speaker 2: specifically on Tuesday, with Starbucks stock up I don't know, 104 00:05:20,720 --> 00:05:24,440 Speaker 2: a bazillion percent and Chipotle down by almost double digits. 105 00:05:24,839 --> 00:05:27,360 Speaker 2: But I mean, it's going to be fascinating to see 106 00:05:27,880 --> 00:05:31,279 Speaker 2: what he does at Starbucks. It is in the same industry. 107 00:05:31,400 --> 00:05:34,120 Speaker 2: Coffee is different from burritos though, and also, as you 108 00:05:34,120 --> 00:05:37,440 Speaker 2: wrote about in the newsletter, he has to contend with 109 00:05:37,880 --> 00:05:40,640 Speaker 2: the former CEO as well the founder. His name is 110 00:05:40,640 --> 00:05:41,320 Speaker 2: Howard Schultz. 111 00:05:41,640 --> 00:05:44,359 Speaker 1: Yeah, he's been CEO I think three times now. He 112 00:05:44,680 --> 00:05:48,080 Speaker 1: keeps going back after they're unhappy with other CEOs, and 113 00:05:48,160 --> 00:05:49,760 Speaker 1: he's a big shareholder. He has like a lot of 114 00:05:49,880 --> 00:05:53,400 Speaker 1: kind of retained influence over the board and like ability 115 00:05:53,480 --> 00:05:57,720 Speaker 1: to kind of kibbets and Starbucks operations and send emails 116 00:05:57,760 --> 00:05:59,680 Speaker 1: to the CEO. I Mean, one thing I wrote about 117 00:05:59,800 --> 00:06:03,000 Speaker 1: is like Brian Nichol is going to have more power 118 00:06:03,240 --> 00:06:05,400 Speaker 1: than the previous CEO did. Right, He's going to be 119 00:06:05,400 --> 00:06:07,159 Speaker 1: the chairman of the board. He's going to be paid 120 00:06:07,200 --> 00:06:09,800 Speaker 1: a bucket of money, and he's gonna work from home 121 00:06:09,920 --> 00:06:12,280 Speaker 1: because I mean, he's not going to have to move 122 00:06:12,320 --> 00:06:14,560 Speaker 1: to Seattle to their headquarters. He's gonna kind of set 123 00:06:14,600 --> 00:06:16,240 Speaker 1: up a remote office by his house. 124 00:06:16,520 --> 00:06:18,360 Speaker 2: And Newport Beach. Baby. 125 00:06:18,640 --> 00:06:21,159 Speaker 1: Yeah. It like insulates him a little bit from the board. 126 00:06:21,160 --> 00:06:24,040 Speaker 1: It gives him a little bit more like Imperial CEO power, 127 00:06:24,400 --> 00:06:26,840 Speaker 1: and probably also insulates them a little bit from Harart Schultz. Right, 128 00:06:26,880 --> 00:06:29,359 Speaker 1: Like I don't know what the conversations between him and 129 00:06:29,360 --> 00:06:31,039 Speaker 1: the board were like, but I imagine they were like, 130 00:06:31,080 --> 00:06:32,880 Speaker 1: you can't have that guy emailing me at all hours 131 00:06:32,920 --> 00:06:35,640 Speaker 1: telling me what to do. Like, if you want the 132 00:06:35,680 --> 00:06:37,839 Speaker 1: magic that I brought to Chappola, you have to kind 133 00:06:37,839 --> 00:06:39,600 Speaker 1: of lead me alone and let me do it and 134 00:06:39,800 --> 00:06:41,719 Speaker 1: have the leverage to ask for that. What I wrote 135 00:06:41,760 --> 00:06:45,080 Speaker 1: is like, abstractly, like shareholders want good governance at public companies, right, 136 00:06:45,120 --> 00:06:47,479 Speaker 1: And like one thing that good governance means is like 137 00:06:47,520 --> 00:06:51,080 Speaker 1: there's an engaged board that supervises the CEO, and if 138 00:06:51,080 --> 00:06:53,200 Speaker 1: the CEO isn't doing well, they get rid of him 139 00:06:53,240 --> 00:06:55,960 Speaker 1: and get someone else. And that kind of looks like 140 00:06:56,000 --> 00:06:58,120 Speaker 1: what happened here, right, I mean, there's an independent board. 141 00:06:58,520 --> 00:07:00,960 Speaker 1: They talked among themselves and talked to the CEO. They 142 00:07:01,000 --> 00:07:02,520 Speaker 1: were like, we don't like this guy. He's not doing 143 00:07:02,520 --> 00:07:04,800 Speaker 1: well enough. We're gonna find someone else. And they went 144 00:07:04,800 --> 00:07:06,400 Speaker 1: out and found someone else, and they found a guy 145 00:07:06,440 --> 00:07:09,120 Speaker 1: who you know, made the stock up by twenty billion dollars. Right, 146 00:07:09,120 --> 00:07:11,360 Speaker 1: So they've found someone who the market seems to think 147 00:07:11,440 --> 00:07:15,880 Speaker 1: is a really good choice. But to get him, they 148 00:07:15,920 --> 00:07:17,440 Speaker 1: have to give up some of that governance, right, Like, 149 00:07:17,480 --> 00:07:19,640 Speaker 1: they built up some governance to sort of get to 150 00:07:19,640 --> 00:07:21,240 Speaker 1: the place where they are, and then they have to 151 00:07:21,280 --> 00:07:23,880 Speaker 1: spend some of that governance to get a really good CEO, right, 152 00:07:23,880 --> 00:07:25,680 Speaker 1: because like they get a really good CEO, you're like, 153 00:07:25,920 --> 00:07:28,080 Speaker 1: we're putting the company in your hands now. And you 154 00:07:28,120 --> 00:07:30,160 Speaker 1: see that with like he's gonna be the chairman of 155 00:07:30,200 --> 00:07:32,040 Speaker 1: the board. But also you see it with like the 156 00:07:32,080 --> 00:07:35,520 Speaker 1: pay package and the not having to relocate. He's just like, 157 00:07:36,480 --> 00:07:38,239 Speaker 1: this is gonna be a little bit more his company 158 00:07:38,240 --> 00:07:40,040 Speaker 1: than it was the previous CEO's company. 159 00:07:40,160 --> 00:07:43,320 Speaker 2: Yeah. I mean, he did agree to commute to Seattle 160 00:07:43,400 --> 00:07:45,560 Speaker 2: as much as needed to do the job, and I 161 00:07:45,600 --> 00:07:47,600 Speaker 2: do wonder what that will look like in practice. 162 00:07:47,840 --> 00:07:50,640 Speaker 1: But he gets to decide, right, he's the CEO. I 163 00:07:50,640 --> 00:07:52,840 Speaker 1: mean probably a lot, right, I mean, like he's not 164 00:07:52,880 --> 00:07:54,800 Speaker 1: gonna be like lazy about it, but like, yeah, he's 165 00:07:54,800 --> 00:07:56,840 Speaker 1: the CEO. Where is that gonna be checking up on 166 00:07:56,880 --> 00:07:57,600 Speaker 1: him every week? 167 00:07:57,840 --> 00:08:00,480 Speaker 2: Yeah? I do think it's interesting the juxtap issi that 168 00:08:00,840 --> 00:08:04,640 Speaker 2: he will be in Newport Beach, California, and Starbucks required 169 00:08:04,640 --> 00:08:07,520 Speaker 2: of their white collar employees that they need to be 170 00:08:07,560 --> 00:08:09,800 Speaker 2: in the office at least three days a week at 171 00:08:09,840 --> 00:08:12,600 Speaker 2: the beginning of last year. I feel like that might 172 00:08:12,640 --> 00:08:16,040 Speaker 2: be harder to enforce when you have a remote CEO. 173 00:08:16,080 --> 00:08:18,560 Speaker 1: But well, he might change the previous guy's policy. He 174 00:08:18,600 --> 00:08:21,280 Speaker 1: might change the policy. Yeah, But it also reminds me 175 00:08:21,320 --> 00:08:24,160 Speaker 1: of this story about David Solomon, the CEO of Colbyn. 176 00:08:24,360 --> 00:08:27,080 Speaker 1: This is like two summers ago or something. He went 177 00:08:27,120 --> 00:08:30,320 Speaker 1: around complaining that he was at a restaurant having lunch 178 00:08:30,400 --> 00:08:34,199 Speaker 1: in the Hampton's and like associated Colbyn came up to 179 00:08:34,240 --> 00:08:36,040 Speaker 1: him and introduced themselves and said, Hi, I work at 180 00:08:36,120 --> 00:08:39,800 Speaker 1: Colvin too, you're the CEO. And Solomon was so offended 181 00:08:39,800 --> 00:08:42,880 Speaker 1: because he's like, what are you doing having lunch at 182 00:08:42,880 --> 00:08:46,360 Speaker 1: a restaurant in the Hamptons during the week, Like, shouldn't 183 00:08:46,360 --> 00:08:48,560 Speaker 1: you be doing work? And he's like telling this anecdote 184 00:08:48,559 --> 00:08:50,560 Speaker 1: to everyone and looks like a grieved tone. People are, well, 185 00:08:50,840 --> 00:08:52,920 Speaker 1: you were there too, write like what what are you 186 00:08:52,960 --> 00:08:57,200 Speaker 1: complaining about? I don't know. Also, like you know, one 187 00:08:57,240 --> 00:09:00,400 Speaker 1: reason to follow the coming into the office policy is 188 00:09:00,440 --> 00:09:02,560 Speaker 1: like you might run into the CEO there, and if 189 00:09:02,600 --> 00:09:04,920 Speaker 1: he because while you're desking, you're not there, I'll get mad. 190 00:09:05,200 --> 00:09:07,520 Speaker 1: But if he's not there, it's a little easier to 191 00:09:07,520 --> 00:09:08,319 Speaker 1: not be there yourself. 192 00:09:08,920 --> 00:09:11,560 Speaker 2: That's true. That's true. You kind of don't have the 193 00:09:11,600 --> 00:09:13,800 Speaker 2: moral high ground there. So we'll see if he changes that. 194 00:09:14,080 --> 00:09:17,320 Speaker 2: I do want to talk about the economy a little bit, 195 00:09:18,320 --> 00:09:21,960 Speaker 2: if you'll indulge me. There's this great story on the 196 00:09:22,080 --> 00:09:26,199 Speaker 2: terminal about CEO turnover. So there's one hundred and ninety 197 00:09:26,240 --> 00:09:28,880 Speaker 2: one CEOs who have left companies in the Russell two 198 00:09:28,880 --> 00:09:32,360 Speaker 2: thousand index this year. Stay with me. Seventy four of 199 00:09:32,400 --> 00:09:35,000 Speaker 2: them were considered to be fired or forced out. That 200 00:09:35,120 --> 00:09:38,160 Speaker 2: apparently is the most at this time of year since 201 00:09:38,200 --> 00:09:41,600 Speaker 2: the beginning of this data set in twenty seventeen. So 202 00:09:42,120 --> 00:09:44,080 Speaker 2: we are at a moment where it feels like a 203 00:09:44,080 --> 00:09:47,920 Speaker 2: lot of CEOs are being fired, and I think that 204 00:09:48,200 --> 00:09:51,600 Speaker 2: kind of says something about the economic environment that we're in. 205 00:09:51,760 --> 00:09:53,880 Speaker 2: I don't know what exactly, but I'm putting the thought 206 00:09:53,920 --> 00:09:54,320 Speaker 2: out there. 207 00:09:55,280 --> 00:10:00,920 Speaker 1: I'm sorry, Okay, I need no, I'm sorry, I need 208 00:10:00,960 --> 00:10:03,640 Speaker 1: to take one minute to send my newsletter. 209 00:10:06,360 --> 00:10:08,600 Speaker 2: Let's leave this minute in here, of. 210 00:10:08,480 --> 00:10:11,559 Speaker 1: Cour I think we're just like right, so we can 211 00:10:11,640 --> 00:10:13,680 Speaker 1: leave both my asking for a minute and also the 212 00:10:13,720 --> 00:10:17,280 Speaker 1: awkward silence and joke's during this minute, and like the 213 00:10:17,360 --> 00:10:20,439 Speaker 1: cooking of the keys, like this is the behind the 214 00:10:20,480 --> 00:10:22,120 Speaker 1: scenes money stef contact that you came for. 215 00:10:23,520 --> 00:10:26,120 Speaker 2: Well, thinking more about the economy, you know, we are 216 00:10:26,160 --> 00:10:28,120 Speaker 2: in the heart of earning season, and it just feels 217 00:10:28,120 --> 00:10:33,040 Speaker 2: like there are a lot of idio syncretic issues that 218 00:10:33,120 --> 00:10:36,480 Speaker 2: keep popping up earnings calls, like it's hard to paint 219 00:10:36,559 --> 00:10:39,320 Speaker 2: any one industry with a broad brushtroke right now. And 220 00:10:39,320 --> 00:10:41,920 Speaker 2: it just feels like at this moment, at least people 221 00:10:41,960 --> 00:10:45,920 Speaker 2: on TV keep telling me that management really matters right now, 222 00:10:46,080 --> 00:10:50,560 Speaker 2: because overall things are pretty good, but there are a 223 00:10:50,559 --> 00:10:58,760 Speaker 2: lot of company specific issues to work through. Matter. I 224 00:10:58,800 --> 00:11:14,760 Speaker 2: wish I was a horse. Creditor on credit or violence 225 00:11:14,760 --> 00:11:18,920 Speaker 2: another very human story about basically trying to cut in 226 00:11:19,000 --> 00:11:22,920 Speaker 2: line and extract value from other people who might have 227 00:11:22,960 --> 00:11:23,640 Speaker 2: been ahead of you. 228 00:11:24,400 --> 00:11:27,400 Speaker 1: Yeah, I'd never liked the phrase creditor on credit or violence. 229 00:11:27,559 --> 00:11:28,440 Speaker 2: What would you call it? 230 00:11:28,679 --> 00:11:31,640 Speaker 1: Well, the actual term that people in the industry mostly 231 00:11:31,760 --> 00:11:35,440 Speaker 1: use is LMES, which is sense for liability management exercises. 232 00:11:36,000 --> 00:11:37,800 Speaker 1: When I was a banker, there is a thing called 233 00:11:37,840 --> 00:11:41,120 Speaker 1: liability management, which is like you have like bonds, and 234 00:11:41,679 --> 00:11:43,400 Speaker 1: you like do a tender offer for your bonds, and 235 00:11:43,400 --> 00:11:45,079 Speaker 1: you shoul just the new bonds of paper, Like you're 236 00:11:45,360 --> 00:11:48,760 Speaker 1: you're managing your liabilities. You're like repaying your old debt 237 00:11:48,760 --> 00:11:51,240 Speaker 1: and adding some new debt, or you're you know, sometimes 238 00:11:51,280 --> 00:11:55,480 Speaker 1: trying to restructure your dot. But in the modern usage, 239 00:11:55,720 --> 00:11:58,959 Speaker 1: there's like a bad association with that phrase because when 240 00:11:58,960 --> 00:12:02,960 Speaker 1: people say liability management exercises, they mean calling up some 241 00:12:03,040 --> 00:12:07,120 Speaker 1: of your creditors and saying, hey, we could use more money. 242 00:12:07,480 --> 00:12:09,760 Speaker 1: If you give us more money, we will put you 243 00:12:10,040 --> 00:12:11,760 Speaker 1: at the front of the line to be paid back, 244 00:12:11,960 --> 00:12:14,640 Speaker 1: and all those other creditors who were ahead of you 245 00:12:14,679 --> 00:12:17,240 Speaker 1: in line will get put behind you in line, and 246 00:12:17,880 --> 00:12:19,880 Speaker 1: the creditors that way you can do that, and they'll 247 00:12:19,880 --> 00:12:22,439 Speaker 1: say yes, because there's a loophole in our documents and 248 00:12:22,480 --> 00:12:24,760 Speaker 1: like our credit agreement says that those guys are first 249 00:12:24,760 --> 00:12:27,480 Speaker 1: in line, but actually we can do a thing that 250 00:12:27,559 --> 00:12:30,440 Speaker 1: makes them second or third or tenth in line. People 251 00:12:30,559 --> 00:12:33,400 Speaker 1: really dislike this for a lot of reasons. Why as 252 00:12:33,400 --> 00:12:35,520 Speaker 1: they get like bumped out in line too. It's because, 253 00:12:35,559 --> 00:12:38,080 Speaker 1: like you're a lender, you're sort of like expecting a 254 00:12:38,080 --> 00:12:41,080 Speaker 1: certain amount of like stability and predictability, and you keep 255 00:12:41,120 --> 00:12:43,720 Speaker 1: finding out that these documents that you negotiated that said 256 00:12:43,720 --> 00:12:45,880 Speaker 1: that you had to be first in line actually mean 257 00:12:45,880 --> 00:12:48,240 Speaker 1: you can be fourth on line. And so there's this 258 00:12:48,320 --> 00:12:50,480 Speaker 1: real sense of like having the football pull out from you. 259 00:12:50,960 --> 00:12:54,080 Speaker 1: Because people keep getting like surprised by new ways to 260 00:12:54,120 --> 00:12:56,920 Speaker 1: get liability managed. The only reason people don't like it 261 00:12:56,960 --> 00:12:59,800 Speaker 1: is because it is this like prisoner's dilemma where if 262 00:12:59,840 --> 00:13:05,040 Speaker 1: you you don't like this happening to you, the thing 263 00:13:05,120 --> 00:13:07,960 Speaker 1: that you have to do is do it to someone 264 00:13:07,960 --> 00:13:10,560 Speaker 1: else first. Right, if there's some company that's in trouble, 265 00:13:10,880 --> 00:13:13,160 Speaker 1: it's going to do this transaction. It's going to do 266 00:13:13,200 --> 00:13:16,520 Speaker 1: some sort of transaction that puts some creditors ahead of 267 00:13:16,559 --> 00:13:18,360 Speaker 1: other creditors, and you want to be the one who's ahead, 268 00:13:18,400 --> 00:13:20,360 Speaker 1: not the one who's behind. So you will like go 269 00:13:20,400 --> 00:13:22,800 Speaker 1: form a club with other creditors, and you will go 270 00:13:22,840 --> 00:13:24,480 Speaker 1: to the company and say, hey, let's do a deal. 271 00:13:24,800 --> 00:13:27,560 Speaker 1: And so there's the sense that like no one wants this, 272 00:13:27,600 --> 00:13:29,120 Speaker 1: but everyone feels forced to do it. 273 00:13:29,120 --> 00:13:32,800 Speaker 2: It's like hurt people, hurt people exactly exactly. 274 00:13:32,880 --> 00:13:36,760 Speaker 1: Everyone is like, I don't mean to hurt the other people, 275 00:13:37,120 --> 00:13:39,720 Speaker 1: otherwise they will hurt me. And they're very sad. But 276 00:13:39,760 --> 00:13:41,319 Speaker 1: this is all answering the question what do you call it? 277 00:13:41,360 --> 00:13:44,000 Speaker 1: And I think like the official term is liability management exercises. 278 00:13:44,360 --> 00:13:47,480 Speaker 1: But what I loved in this Bloomberg News article is 279 00:13:47,520 --> 00:13:51,480 Speaker 1: that there are like firms like credit hedge funds that 280 00:13:51,559 --> 00:13:54,880 Speaker 1: are setting up businesses to I don't want to say 281 00:13:54,880 --> 00:13:58,080 Speaker 1: do this, but they're called capital solutions businesses. And capital 282 00:13:58,160 --> 00:14:00,640 Speaker 1: solutions is like you have like you go company, like, hey, 283 00:14:00,679 --> 00:14:02,160 Speaker 1: we have a solution for your capital. We can give 284 00:14:02,160 --> 00:14:04,880 Speaker 1: you money if and the if is always like if 285 00:14:04,880 --> 00:14:07,200 Speaker 1: you stiff your other creditors. There's not always doesn't have 286 00:14:07,280 --> 00:14:09,040 Speaker 1: to be like you could imagine, you know, a capital 287 00:14:09,080 --> 00:14:11,360 Speaker 1: solution that has win win and just friendly. But like, 288 00:14:11,760 --> 00:14:14,280 Speaker 1: in practice, a lot of the capital slutions seem to 289 00:14:14,320 --> 00:14:17,440 Speaker 1: be taking money from some creditors to give to other creditors. 290 00:14:17,520 --> 00:14:18,800 Speaker 2: I do like that name, right. 291 00:14:18,840 --> 00:14:21,920 Speaker 1: All the other really benign names are the scary things. 292 00:14:22,120 --> 00:14:24,760 Speaker 2: So is this good for the companies themselves, the companies 293 00:14:25,200 --> 00:14:28,040 Speaker 2: where they're borrowing money from these lenders? 294 00:14:28,280 --> 00:14:30,920 Speaker 1: Well, I always love it because it's like back in 295 00:14:31,000 --> 00:14:35,160 Speaker 1: the day, a lot of trades like this didn't run 296 00:14:35,240 --> 00:14:38,640 Speaker 1: through credit agreements. They ran through credit default swaps. What 297 00:14:38,680 --> 00:14:40,920 Speaker 1: I mean by that is like there were some really 298 00:14:40,920 --> 00:14:46,120 Speaker 1: cool trades where a lender would come to a company 299 00:14:46,120 --> 00:14:48,600 Speaker 1: and say, we have bought a bunch of credit default 300 00:14:48,600 --> 00:14:50,760 Speaker 1: swaps on you. If you just default on your debt 301 00:14:50,800 --> 00:14:53,120 Speaker 1: for fifteen minutes, we'll make a ton of money and 302 00:14:53,120 --> 00:14:55,600 Speaker 1: we'll give you half of it. Right, And the companies 303 00:14:55,600 --> 00:14:57,440 Speaker 1: are okay, found we'll do that. We're desperate, and they 304 00:14:57,440 --> 00:14:59,680 Speaker 1: would default on their debt for fifteen minutes and the 305 00:15:00,160 --> 00:15:01,400 Speaker 1: to make a lot of money and give the company 306 00:15:01,480 --> 00:15:03,560 Speaker 1: some of it, and then the company would like live 307 00:15:03,600 --> 00:15:05,480 Speaker 1: to fight another day. And I always thought that was 308 00:15:05,520 --> 00:15:08,480 Speaker 1: so cool that like a like zero sum bet between 309 00:15:08,520 --> 00:15:13,040 Speaker 1: hedge funds could create funding for a real company. And similarly, 310 00:15:13,040 --> 00:15:16,119 Speaker 1: here there's something kind of fun about like these companies 311 00:15:16,320 --> 00:15:19,800 Speaker 1: can generate funding to like keep their actual business going 312 00:15:20,120 --> 00:15:23,440 Speaker 1: by like sort of inter credit or fight among hedge funds. 313 00:15:23,680 --> 00:15:27,360 Speaker 1: But mostly it's bad because first of all, these companies 314 00:15:27,400 --> 00:15:29,680 Speaker 1: are not like you know, mom and pop businesses. They're 315 00:15:29,720 --> 00:15:33,080 Speaker 1: like most traditionally owned by private equity firms who are 316 00:15:33,120 --> 00:15:35,320 Speaker 1: like the sort of Sharbel Bode bars who are going 317 00:15:35,400 --> 00:15:37,600 Speaker 1: to do this. But then secondly, you knew like a 318 00:15:37,640 --> 00:15:39,560 Speaker 1: lot of these things end in bankruptcy anyway, and so 319 00:15:39,600 --> 00:15:42,000 Speaker 1: it's just like who is first in line to be 320 00:15:42,000 --> 00:15:44,640 Speaker 1: paid back in bankruptcy? And so it's like if all 321 00:15:44,680 --> 00:15:47,320 Speaker 1: of these things like solved, that the company's problems and 322 00:15:47,360 --> 00:15:49,600 Speaker 1: like made everything better. Then you'd be like, okay, so 323 00:15:49,640 --> 00:15:52,480 Speaker 1: like a hedge fund lost money for you know, the 324 00:15:52,480 --> 00:15:55,480 Speaker 1: greater good of the company. But in practice, it seems 325 00:15:55,640 --> 00:15:57,240 Speaker 1: that a lot of the men in bankruptcy anyway. 326 00:15:57,520 --> 00:15:59,720 Speaker 2: So I was thinking about this. I was reading the story. 327 00:15:59,760 --> 00:16:02,000 Speaker 2: I was reading money stuff as I do to prepare 328 00:16:02,000 --> 00:16:04,880 Speaker 2: for the podcast, and my naive thought was, is this 329 00:16:04,960 --> 00:16:06,040 Speaker 2: going to lead to lawsuits? 330 00:16:06,200 --> 00:16:08,280 Speaker 1: Oh my god, at least there's so many lawsuits. There's 331 00:16:08,720 --> 00:16:09,920 Speaker 1: everyone on the leads a law suits. 332 00:16:10,040 --> 00:16:13,160 Speaker 2: But here's the thing I was thinking about it when 333 00:16:13,200 --> 00:16:15,880 Speaker 2: it comes to crypto, because there's that notion you know, 334 00:16:15,920 --> 00:16:19,840 Speaker 2: it's in the code, and here it seems like you're 335 00:16:19,920 --> 00:16:25,960 Speaker 2: exploiting an overlooked part of the documents, right, Like it's 336 00:16:26,040 --> 00:16:29,160 Speaker 2: in the documents. Uh, and you just happen to find 337 00:16:29,200 --> 00:16:30,000 Speaker 2: like this loophole. 338 00:16:30,560 --> 00:16:33,720 Speaker 1: Yes, And this is like an interesting difference between debt 339 00:16:33,720 --> 00:16:36,480 Speaker 1: and equity. I think like in general, companies are not 340 00:16:36,480 --> 00:16:39,840 Speaker 1: supposed to treat their shareholders unfairly, right, and like even 341 00:16:39,880 --> 00:16:43,360 Speaker 1: if like something in the you know, certificate corporation says 342 00:16:43,680 --> 00:16:46,640 Speaker 1: you can do something if it's really unfair to shareholders, 343 00:16:47,000 --> 00:16:50,080 Speaker 1: if it like treat some shaholders better than others. If 344 00:16:50,120 --> 00:16:52,560 Speaker 1: it violence FORDU shared duties, you can't do it right 345 00:16:52,840 --> 00:16:55,600 Speaker 1: beyond just like the language of the documents, Judges are 346 00:16:55,600 --> 00:16:58,640 Speaker 1: going to say, you have to treat your shareholders fairly. Traditionally, 347 00:16:59,160 --> 00:17:02,320 Speaker 1: debt doesn't work that. Traditionally you don't have fiduciary duty 348 00:17:02,440 --> 00:17:06,719 Speaker 1: to your creditors. And traditionally, if your bond agreements let 349 00:17:06,760 --> 00:17:09,320 Speaker 1: you do some wild thing, courts are going to let 350 00:17:09,359 --> 00:17:11,719 Speaker 1: you do the wild thing. There's some exceptions to that. 351 00:17:12,280 --> 00:17:14,439 Speaker 1: Some courts will look at the bond document and say, oh, 352 00:17:14,440 --> 00:17:16,480 Speaker 1: I couldn't possibly have met that, so we're not going 353 00:17:16,520 --> 00:17:18,359 Speaker 1: to let you do the wild thing. But in general, 354 00:17:18,880 --> 00:17:21,320 Speaker 1: the rule is kind of like whatever the documents say 355 00:17:21,320 --> 00:17:23,439 Speaker 1: you're allowed to do, you're allowed to do. And so 356 00:17:24,359 --> 00:17:26,800 Speaker 1: there is much more of this sort of thing in 357 00:17:26,840 --> 00:17:29,719 Speaker 1: de restructuring than there would be for like stock, because 358 00:17:30,480 --> 00:17:32,560 Speaker 1: there is this traditional rule that you're allowed to do 359 00:17:32,600 --> 00:17:35,800 Speaker 1: whatever you want to creditors because they're sophisticated people who 360 00:17:35,840 --> 00:17:37,679 Speaker 1: negotiated a contract with you, and if they didn't put 361 00:17:37,680 --> 00:17:39,720 Speaker 1: it in the contract, then they don't get the protection. 362 00:17:40,720 --> 00:17:43,680 Speaker 1: I think there's some sense that like one thing that 363 00:17:43,720 --> 00:17:46,960 Speaker 1: could happen. Is that could change, right, that courts could 364 00:17:46,960 --> 00:17:50,720 Speaker 1: get less receptive to this sort of thing and say, 365 00:17:51,440 --> 00:17:53,760 Speaker 1: you know, it's just like, as a policy matter, bad 366 00:17:54,040 --> 00:17:57,479 Speaker 1: for companies to always go around posing their creditors and 367 00:17:57,560 --> 00:18:00,520 Speaker 1: like treating some people more unfairly than others. And so 368 00:18:00,600 --> 00:18:02,399 Speaker 1: we're not going to let them do that anymore, and 369 00:18:02,440 --> 00:18:05,880 Speaker 1: we're gonna like apply some sort of like fairness standard 370 00:18:05,960 --> 00:18:08,280 Speaker 1: or like what do people really want to reading these 371 00:18:08,320 --> 00:18:10,480 Speaker 1: credit documents instead of just you know, reading what they say, 372 00:18:10,520 --> 00:18:13,280 Speaker 1: and so they allow it. That's like one possibility. The 373 00:18:13,320 --> 00:18:17,760 Speaker 1: other you keep reading about people like creditors trying to 374 00:18:18,080 --> 00:18:20,960 Speaker 1: prevent this by you know, forming groups and sort of 375 00:18:21,720 --> 00:18:24,640 Speaker 1: saying we're gonna knock this off or like demanding better 376 00:18:24,680 --> 00:18:26,840 Speaker 1: covenants so they can't have this happen to them. And 377 00:18:26,880 --> 00:18:29,320 Speaker 1: so you keep reading about these liability management exercises, but 378 00:18:29,320 --> 00:18:32,080 Speaker 1: there's enough grumbling from like, you know, people who participate 379 00:18:32,119 --> 00:18:35,119 Speaker 1: in them that like maybe the industry will find some 380 00:18:35,240 --> 00:18:37,960 Speaker 1: way to reduce their frequency. 381 00:18:38,200 --> 00:18:40,600 Speaker 2: Well that's all I have to say. Do you have 382 00:18:40,640 --> 00:18:41,280 Speaker 2: anything more? 383 00:18:41,800 --> 00:18:43,040 Speaker 1: The one thing I want to say, and this is 384 00:18:43,080 --> 00:18:46,280 Speaker 1: I don't know where this goes in, but I talked 385 00:18:46,280 --> 00:18:50,159 Speaker 1: a while back to a credit fund manager and they 386 00:18:50,200 --> 00:18:52,439 Speaker 1: get this story slightly wrong. But like he said that, 387 00:18:52,440 --> 00:18:55,680 Speaker 1: people would ask him as a lender, as a credit investor, 388 00:18:55,720 --> 00:18:58,199 Speaker 1: do you look first at the assets or the liabilities? Right? Like, 389 00:18:58,280 --> 00:19:00,119 Speaker 1: do you look at like what this company does but 390 00:19:00,200 --> 00:19:02,679 Speaker 1: it has, like how much productive capacity it has to 391 00:19:02,680 --> 00:19:04,399 Speaker 1: pay back loans? Or do you look first at like 392 00:19:04,440 --> 00:19:06,800 Speaker 1: how many bonds it already has outstanding? And he's like, 393 00:19:06,880 --> 00:19:09,159 Speaker 1: I was always an assets guy, and like, increasingly the 394 00:19:09,200 --> 00:19:12,760 Speaker 1: business is a liabilities business. Like increasingly what you do 395 00:19:13,200 --> 00:19:16,640 Speaker 1: as a credit investor is you look at the company's 396 00:19:16,680 --> 00:19:19,600 Speaker 1: capital structure and you say, who can we hose here? 397 00:19:19,960 --> 00:19:22,960 Speaker 1: What debt can we get ahead of? And as a 398 00:19:23,040 --> 00:19:25,840 Speaker 1: lever of like complexity and nonsense, I enjoy that, but 399 00:19:25,920 --> 00:19:28,000 Speaker 1: it seems kind of bad for like the world. I 400 00:19:28,080 --> 00:19:30,520 Speaker 1: was reading somewhere like research analysts complaining about this, because 401 00:19:30,520 --> 00:19:32,760 Speaker 1: it's like as a credit research analyst at bank you 402 00:19:32,840 --> 00:19:35,360 Speaker 1: have to spend all of your time thinking about liability 403 00:19:35,359 --> 00:19:38,119 Speaker 1: manage exercises. You don't spend as much time thinking about like, 404 00:19:38,160 --> 00:19:40,600 Speaker 1: you know, does this company have the capacity to cover 405 00:19:40,640 --> 00:19:45,760 Speaker 1: its deeps? And it seems like a loss in capacity 406 00:19:46,080 --> 00:19:48,760 Speaker 1: when the industry is not about like finding good things 407 00:19:48,800 --> 00:19:52,240 Speaker 1: to finance, but rather about like finding people to host 408 00:19:52,400 --> 00:19:55,200 Speaker 1: to you know, restructure the financing. It seems like that's 409 00:19:55,240 --> 00:19:58,320 Speaker 1: like a less good use of people's time and energy. 410 00:19:58,600 --> 00:20:01,200 Speaker 1: But I hope that's true. Just like so as a 411 00:20:01,200 --> 00:20:03,399 Speaker 1: first impression, it seems like it would be better to 412 00:20:03,440 --> 00:20:06,040 Speaker 1: spend time on like growing the pie than on splitting 413 00:20:06,080 --> 00:20:20,800 Speaker 1: up the pie. But like, maybe that's not true. So 414 00:20:20,840 --> 00:20:22,800 Speaker 1: the Wall Street Journal this week had a story about 415 00:20:22,920 --> 00:20:26,119 Speaker 1: Bank of America junior bankers being asked to like fake 416 00:20:26,200 --> 00:20:29,800 Speaker 1: their hours. So okay, Investment banking has always had very 417 00:20:29,840 --> 00:20:33,440 Speaker 1: horrible hours, right, and like junior bankers in particular were 418 00:20:33,480 --> 00:20:35,600 Speaker 1: sort of known for working one hundred plus hour weeks 419 00:20:35,880 --> 00:20:39,800 Speaker 1: and it was very hard and bad, and over the 420 00:20:39,880 --> 00:20:42,200 Speaker 1: last few years people have complained about it, in part 421 00:20:42,240 --> 00:20:45,919 Speaker 1: because it's caused serious health problems and some deaths in 422 00:20:45,960 --> 00:20:49,600 Speaker 1: the industry. And so a lot of banks responded to 423 00:20:49,600 --> 00:20:52,760 Speaker 1: these complaints by instituting some sort of humane hours policy 424 00:20:53,240 --> 00:20:55,280 Speaker 1: exactly the details varied from bank to bank. But like 425 00:20:55,280 --> 00:20:57,679 Speaker 1: people often talk about protected weekends, where like you're supposed 426 00:20:57,680 --> 00:20:59,000 Speaker 1: to have like one weekend a month you get like 427 00:20:59,040 --> 00:21:01,159 Speaker 1: both days off, or like you're supposed to have one 428 00:21:01,200 --> 00:21:03,280 Speaker 1: day off each week or whatever. Right, so it's like 429 00:21:03,720 --> 00:21:06,280 Speaker 1: there's some policy that says you're not supposed to work 430 00:21:06,280 --> 00:21:09,240 Speaker 1: one hundred and twenty hour weeks every week. And this 431 00:21:09,320 --> 00:21:10,760 Speaker 1: has come into a lot of focus at Bank of 432 00:21:10,800 --> 00:21:14,040 Speaker 1: America because a young banker there died recently after working 433 00:21:14,160 --> 00:21:18,960 Speaker 1: one hundred hour weeks on a deal. And the story 434 00:21:19,359 --> 00:21:22,119 Speaker 1: in the Wall Street Journal this week is that although 435 00:21:22,119 --> 00:21:24,880 Speaker 1: Bank of America has these policies to protect people from 436 00:21:25,040 --> 00:21:28,040 Speaker 1: working all the time, a lot of people were disregarding them, 437 00:21:28,080 --> 00:21:31,639 Speaker 1: and in particular, like bankers are being told to fake 438 00:21:31,680 --> 00:21:33,439 Speaker 1: their hours and fill out a form saying how many 439 00:21:33,480 --> 00:21:37,399 Speaker 1: hours you work, and you write fewer hours than you 440 00:21:37,440 --> 00:21:39,080 Speaker 1: actually work so that you don't get a call from 441 00:21:39,200 --> 00:21:41,840 Speaker 1: HR saying you can't work anymore because you know your 442 00:21:41,880 --> 00:21:44,480 Speaker 1: VP wants you to keep working, and if you get 443 00:21:44,520 --> 00:21:47,800 Speaker 1: taken off the deal, your immediate managers will be angry 444 00:21:47,840 --> 00:21:49,280 Speaker 1: and sad and think less of you. 445 00:21:50,000 --> 00:21:52,560 Speaker 2: My reaction here is that there has to be a 446 00:21:52,560 --> 00:21:57,000 Speaker 2: better system of tracking hours than self reporting hours. I 447 00:21:57,080 --> 00:22:00,840 Speaker 2: was thinking about like we spent and I don't know 448 00:22:00,960 --> 00:22:04,480 Speaker 2: a good hour talking about that wells Fargo Mouse Jiggler 449 00:22:04,560 --> 00:22:07,000 Speaker 2: story where they were able to detect when people were 450 00:22:07,080 --> 00:22:10,359 Speaker 2: using technology to jiggle their mouses at home to make 451 00:22:10,400 --> 00:22:13,439 Speaker 2: it look like they were working. Shouldn't there be a system, 452 00:22:13,520 --> 00:22:16,119 Speaker 2: whether you track how often people are badged into the 453 00:22:16,160 --> 00:22:19,639 Speaker 2: office or I don't know how much they're using their 454 00:22:20,080 --> 00:22:23,520 Speaker 2: work devices, that would kind of solve this problem. It 455 00:22:23,520 --> 00:22:25,280 Speaker 2: seems like a lot of this trace is back to 456 00:22:25,920 --> 00:22:29,040 Speaker 2: the fact that you're self reporting your hours. 457 00:22:29,320 --> 00:22:32,080 Speaker 1: Yeah. I agree. I get an email from a reader saying, like, 458 00:22:32,560 --> 00:22:35,399 Speaker 1: do the vps that Bank of America have mouse unjiggler 459 00:22:35,520 --> 00:22:38,200 Speaker 1: software to make it look like their work less? 460 00:22:38,280 --> 00:22:38,639 Speaker 2: Yeah? 461 00:22:38,680 --> 00:22:40,399 Speaker 1: But right? I mean he also makes a point like, 462 00:22:40,560 --> 00:22:42,919 Speaker 1: as you said, like if well as Fario, wants to 463 00:22:42,960 --> 00:22:45,760 Speaker 1: know how much people are working, and so it installs 464 00:22:45,840 --> 00:22:48,320 Speaker 1: software to track how much they're working, so it makes 465 00:22:48,320 --> 00:22:51,080 Speaker 1: sure they're working enough. Right. If Bank of America wants 466 00:22:51,080 --> 00:22:53,600 Speaker 1: to make sure that people aren't working too much, it 467 00:22:53,680 --> 00:22:56,359 Speaker 1: could install that software too, right. And if it doesn't 468 00:22:56,359 --> 00:22:59,600 Speaker 1: install that software, that'd suggests something about its actual priorities. Right. 469 00:22:59,640 --> 00:23:02,840 Speaker 1: I mean, one thing that happened like is Bank of 470 00:23:02,880 --> 00:23:04,680 Speaker 1: America has like a very clear policy that you can't 471 00:23:04,680 --> 00:23:06,879 Speaker 1: work all the time, right, and HR tells people you 472 00:23:06,920 --> 00:23:08,560 Speaker 1: can't work all the time, you have to spit your hours, 473 00:23:08,560 --> 00:23:13,280 Speaker 1: everything like that. But it seems to be, I don't know, 474 00:23:13,520 --> 00:23:15,800 Speaker 1: universally ignored, but it seems to be ignored some of 475 00:23:15,840 --> 00:23:19,199 Speaker 1: the time. And one thing that they did in reaction 476 00:23:19,280 --> 00:23:22,040 Speaker 1: to this Wall Street Journal article is they kind of said, no, 477 00:23:22,119 --> 00:23:23,760 Speaker 1: we need it right. And I think you get a 478 00:23:23,760 --> 00:23:25,520 Speaker 1: lot of mileage out of just saying no, we need 479 00:23:25,560 --> 00:23:27,960 Speaker 1: it right. Like if the CEO leaves a voicemail for 480 00:23:27,960 --> 00:23:32,280 Speaker 1: everyone saying this policy is for real, it's not just 481 00:23:32,320 --> 00:23:35,040 Speaker 1: a fig leaf. You have to follow it. If you don't, 482 00:23:35,040 --> 00:23:37,320 Speaker 1: I'll be mad. That gets a lot of the way there, right, 483 00:23:37,359 --> 00:23:40,440 Speaker 1: Because I do think that a lot of what happened 484 00:23:40,480 --> 00:23:44,119 Speaker 1: here is that there was a policy put in place, 485 00:23:45,320 --> 00:23:48,199 Speaker 1: almost as like a public relations thing, but the culture 486 00:23:48,240 --> 00:23:51,199 Speaker 1: didn't change, and everyone sort of assumed, you know, all 487 00:23:51,200 --> 00:23:53,560 Speaker 1: the mid level bankers sort of assumed the senior bankers 488 00:23:53,800 --> 00:23:56,560 Speaker 1: didn't really mean it, and they wanted everyone to keep 489 00:23:56,600 --> 00:23:58,760 Speaker 1: working really hard. And I think if you just have 490 00:23:58,800 --> 00:24:00,719 Speaker 1: the senior bankers say no, no, we mean it, that 491 00:24:00,760 --> 00:24:02,640 Speaker 1: gets a lot of the way there. But yes, installing 492 00:24:03,200 --> 00:24:05,919 Speaker 1: monitoring software could also get even more of the way there. 493 00:24:05,960 --> 00:24:07,840 Speaker 1: I think people might prefer to work more hours and 494 00:24:07,840 --> 00:24:10,080 Speaker 1: not be monitored, them to work through your hours and 495 00:24:10,080 --> 00:24:11,240 Speaker 1: be monitored. But I'm not sure. 496 00:24:11,280 --> 00:24:13,280 Speaker 2: I don't know if you really want to change the culture. 497 00:24:13,359 --> 00:24:15,520 Speaker 2: The technology is there, and when it comes to culture, 498 00:24:16,040 --> 00:24:18,200 Speaker 2: I have two comments. I mean, something that the Wall 499 00:24:18,240 --> 00:24:20,959 Speaker 2: Street Journal article brought up was that this is how 500 00:24:21,000 --> 00:24:22,680 Speaker 2: a lot of people grew up. A lot of these 501 00:24:22,800 --> 00:24:25,600 Speaker 2: you know, mid level bankers who are now working these 502 00:24:25,680 --> 00:24:27,919 Speaker 2: junior bankers so hard. This is how they grew up. 503 00:24:27,960 --> 00:24:30,160 Speaker 2: And it kind of gets back to the hurt people, 504 00:24:30,280 --> 00:24:36,760 Speaker 2: hurt people argument. Hurt people, hurt people. I say it 505 00:24:36,800 --> 00:24:40,840 Speaker 2: all the time, but obviously this story blew up on 506 00:24:40,880 --> 00:24:44,160 Speaker 2: social media and I follow a lot of the accounts 507 00:24:44,160 --> 00:24:48,120 Speaker 2: such as Liquidity for example, both on Twitter and on Instagram. 508 00:24:48,440 --> 00:24:50,960 Speaker 2: And like you said, Bank of America did put out 509 00:24:50,960 --> 00:24:53,720 Speaker 2: this statement that they really mean it. The reaction that 510 00:24:53,760 --> 00:24:56,520 Speaker 2: I've seen so far on social media is that, Okay, 511 00:24:56,560 --> 00:24:58,720 Speaker 2: these are just words. I think if they are serious 512 00:24:58,760 --> 00:25:02,200 Speaker 2: about changing the culture, they do something like they would 513 00:25:02,240 --> 00:25:05,879 Speaker 2: do some action, such as either installing that technology or 514 00:25:06,160 --> 00:25:07,399 Speaker 2: actually firing people. 515 00:25:07,640 --> 00:25:10,400 Speaker 1: The last time there was a big rash of stories 516 00:25:10,440 --> 00:25:15,040 Speaker 1: about bankers complaining about hours. A lot of banks instituted 517 00:25:15,080 --> 00:25:18,879 Speaker 1: protective weekend policies, but some banks are also said, we 518 00:25:18,960 --> 00:25:22,360 Speaker 1: are going to hire more people, right, because that's actually 519 00:25:22,760 --> 00:25:25,680 Speaker 1: often the way that you fix this problem, right. I mean, 520 00:25:25,760 --> 00:25:28,800 Speaker 1: part of the thing that is going on here is 521 00:25:28,840 --> 00:25:30,879 Speaker 1: some sort of like cultural thing, some sort of like 522 00:25:30,960 --> 00:25:32,840 Speaker 1: hazing thing where it's like, we want them to work 523 00:25:32,880 --> 00:25:35,600 Speaker 1: long hours because one that trains them better than if 524 00:25:35,640 --> 00:25:37,680 Speaker 1: they worked a few hours, and two there's in a 525 00:25:37,760 --> 00:25:40,240 Speaker 1: culturation and like a hazing process of like, you know, 526 00:25:40,280 --> 00:25:42,119 Speaker 1: we worked long hours, they should work long hours. We 527 00:25:42,119 --> 00:25:44,120 Speaker 1: should make them feel part of the firm by making 528 00:25:44,119 --> 00:25:45,879 Speaker 1: them work on undred twenty hour weeks. But some of 529 00:25:45,920 --> 00:25:47,159 Speaker 1: it is just there's a lot of work to do, right. 530 00:25:47,160 --> 00:25:48,639 Speaker 1: It feels move fast, and you need a lot of 531 00:25:48,680 --> 00:25:50,680 Speaker 1: people to do a lot of work on them. That 532 00:25:50,800 --> 00:25:54,560 Speaker 1: part of the problem can be partly not entirely, but 533 00:25:54,600 --> 00:25:56,639 Speaker 1: like partly solved, but just hiring more people so that 534 00:25:56,720 --> 00:25:58,679 Speaker 1: you have more people to do the work. You know, 535 00:25:58,680 --> 00:26:00,439 Speaker 1: if you have like the certain amount of work to do, 536 00:26:00,600 --> 00:26:01,920 Speaker 1: more people do it and then each of them can 537 00:26:01,920 --> 00:26:05,080 Speaker 1: work less. You occasionally see that as a solution, but 538 00:26:05,119 --> 00:26:07,320 Speaker 1: you don't see it a ton of the time as. 539 00:26:07,240 --> 00:26:09,360 Speaker 2: A solution, should I say AI? 540 00:26:10,480 --> 00:26:13,720 Speaker 1: AI is the other one, right, I mean, and you 541 00:26:13,760 --> 00:26:16,119 Speaker 1: definitely see that as a thing banks talk about. I 542 00:26:16,160 --> 00:26:17,760 Speaker 1: don't have a great sense on the ground of like 543 00:26:17,800 --> 00:26:21,119 Speaker 1: how much junior banker's lives are improved by And I 544 00:26:21,160 --> 00:26:23,760 Speaker 1: do think there is a thing where like work expands 545 00:26:23,800 --> 00:26:26,960 Speaker 1: to fill the time. And it's like, if you have 546 00:26:27,080 --> 00:26:32,320 Speaker 1: the ability to generate a pitch book through AI in 547 00:26:32,359 --> 00:26:35,919 Speaker 1: twenty minutes, you will probably be asked to generate a 548 00:26:35,920 --> 00:26:37,680 Speaker 1: lot more pitch books than you would have been otherwise. 549 00:26:38,160 --> 00:26:41,199 Speaker 1: But it is probably the case that a lot of 550 00:26:41,320 --> 00:26:46,720 Speaker 1: junior banker work could be is being will soon be 551 00:26:47,840 --> 00:26:51,840 Speaker 1: sort of absorbed by AI, and then figuring out exactly 552 00:26:53,080 --> 00:26:55,119 Speaker 1: what to do about that with people's hours will be 553 00:26:55,119 --> 00:26:58,000 Speaker 1: an interesting problem. Yeah, Like the cultural stuff is real, 554 00:26:58,040 --> 00:27:00,399 Speaker 1: Like they do want them there all the time, because 555 00:27:00,400 --> 00:27:03,240 Speaker 1: that's how like you become a like a loyal, excited, 556 00:27:03,400 --> 00:27:05,959 Speaker 1: committed member of the banking team. Right, And if like 557 00:27:06,400 --> 00:27:08,200 Speaker 1: AI does all your working, you go home at four 558 00:27:08,200 --> 00:27:11,320 Speaker 1: every day, Like I think, like your VP will be 559 00:27:11,359 --> 00:27:13,239 Speaker 1: sad even if the work is good, because like they 560 00:27:13,280 --> 00:27:16,280 Speaker 1: wanted Also, like the training and hazing effect of all 561 00:27:16,320 --> 00:27:16,919 Speaker 1: those hours. 562 00:27:17,359 --> 00:27:19,960 Speaker 2: Yeah, it'll be interesting to see how this evolves. And 563 00:27:19,960 --> 00:27:22,600 Speaker 2: we're talking a lot about Bank of America, but this 564 00:27:22,720 --> 00:27:24,760 Speaker 2: isn't just a Bank of America thing, obviously. 565 00:27:24,440 --> 00:27:25,960 Speaker 1: It's like not a Bank of America thing at all. 566 00:27:26,000 --> 00:27:27,720 Speaker 2: The Wall Street Journal did have a lot of great 567 00:27:27,760 --> 00:27:30,720 Speaker 2: anecdotes in there about people who just left. There were 568 00:27:30,800 --> 00:27:35,800 Speaker 2: some people that they quoted anonymously who were still working there, 569 00:27:36,280 --> 00:27:38,800 Speaker 2: which I thought was interesting as well. But I saw 570 00:27:38,880 --> 00:27:42,359 Speaker 2: something on one of the liquidity type accounts I followed 571 00:27:42,359 --> 00:27:45,520 Speaker 2: that someone did what was known as a victory lap. 572 00:27:45,600 --> 00:27:47,800 Speaker 2: This isn't something I'm familiar with. It doesn't really exist 573 00:27:47,800 --> 00:27:50,320 Speaker 2: in journalism. But you would take the car service home, 574 00:27:50,640 --> 00:27:53,680 Speaker 2: like very early in the morning, and then like take 575 00:27:53,680 --> 00:27:55,959 Speaker 2: a shower and like change your clothes at your apartment 576 00:27:56,040 --> 00:27:57,760 Speaker 2: and then go back into the car service to take 577 00:27:57,760 --> 00:28:00,320 Speaker 2: it back into the office. That just seems crazy. I 578 00:28:00,320 --> 00:28:00,679 Speaker 2: don't know. 579 00:28:01,480 --> 00:28:05,680 Speaker 1: I worked at places where go on, go on. When 580 00:28:05,720 --> 00:28:08,119 Speaker 1: I was a young lawyer. I had you know, you know, 581 00:28:08,200 --> 00:28:10,080 Speaker 1: like the car service policy was like you could take 582 00:28:10,119 --> 00:28:11,719 Speaker 1: a car after I don't know whatever, it was eight 583 00:28:11,720 --> 00:28:13,560 Speaker 1: o'clock at night, and I would occasionally take cars at 584 00:28:13,560 --> 00:28:16,120 Speaker 1: three pm because like I'd been there for three days 585 00:28:16,160 --> 00:28:17,600 Speaker 1: straight and I was like, no one will question this 586 00:28:18,240 --> 00:28:21,120 Speaker 1: out of policy car service. The story about my sad 587 00:28:21,119 --> 00:28:23,040 Speaker 1: hours that I tell a lot is that I once 588 00:28:24,200 --> 00:28:26,600 Speaker 1: I had one night where I got ninety minutes of 589 00:28:26,600 --> 00:28:29,639 Speaker 1: sleep and it was under my desk, and it was 590 00:28:29,640 --> 00:28:33,520 Speaker 1: on my birthday. So that's a bad birthday. 591 00:28:33,840 --> 00:28:35,439 Speaker 2: That just went from sad to funny. 592 00:28:35,960 --> 00:28:38,120 Speaker 1: Yeah, yeah, yeah right. I had lots of night's price 593 00:28:38,240 --> 00:28:40,360 Speaker 1: got ninety minutes or less of sleep under my desk, 594 00:28:40,400 --> 00:28:42,080 Speaker 1: but only one of them was on my birthday. 595 00:28:43,560 --> 00:28:46,320 Speaker 2: Did you have a cupcake or anything like? Did you 596 00:28:46,320 --> 00:28:47,360 Speaker 2: celebrate it at all? 597 00:28:47,600 --> 00:28:49,400 Speaker 1: They had good snacks there, so I probably had a 598 00:28:49,440 --> 00:28:52,520 Speaker 1: pepper Trump cookie, but it was pretty sad. Well in 599 00:28:52,520 --> 00:28:54,240 Speaker 1: that note that dude, I'm going on vacation. 600 00:28:55,320 --> 00:28:56,560 Speaker 2: I'll see you in two weeks. 601 00:28:56,840 --> 00:28:59,320 Speaker 1: Yes, there will be no money Stop podcast next week, 602 00:28:59,640 --> 00:29:01,680 Speaker 1: be on vacation, but we'll see you back here in 603 00:29:01,680 --> 00:29:02,240 Speaker 1: two weeks with. 604 00:29:02,240 --> 00:29:04,080 Speaker 2: More stuff send us mail. 605 00:29:06,120 --> 00:29:07,880 Speaker 1: And that was the Money Stuff Podcast. 606 00:29:08,160 --> 00:29:10,200 Speaker 2: I'm Matt Levian and I'm Katie Greifeld. 607 00:29:10,520 --> 00:29:12,560 Speaker 1: You can find my work by subscribing to the Money 608 00:29:12,560 --> 00:29:14,520 Speaker 1: Stuff newsletter on Bloomberg dot com. 609 00:29:14,560 --> 00:29:17,040 Speaker 2: And you can find me on Bloomberg TV every day 610 00:29:17,080 --> 00:29:20,200 Speaker 2: on Open Interest between nine to eleven am Eastern. 611 00:29:20,800 --> 00:29:22,480 Speaker 1: We'd love to hear from you. You can send an 612 00:29:22,480 --> 00:29:25,240 Speaker 1: email to Moneypod at bloomberg dot net, ask us a 613 00:29:25,320 --> 00:29:26,920 Speaker 1: question and we might answer it on the air. 614 00:29:27,440 --> 00:29:29,920 Speaker 2: You can also subscribe to our show wherever you're listening 615 00:29:30,000 --> 00:29:32,200 Speaker 2: right now and leave us a review. It helps more 616 00:29:32,240 --> 00:29:33,120 Speaker 2: people find the show. 617 00:29:33,400 --> 00:29:36,160 Speaker 1: The Money Stuff Podcast is produced by Anna Maserakus and 618 00:29:36,200 --> 00:29:37,560 Speaker 1: Moses andm Our. 619 00:29:37,600 --> 00:29:39,640 Speaker 2: Theme music was composed by Blake Maples. 620 00:29:39,920 --> 00:29:42,680 Speaker 1: Brandon Francis Nunham is our executive producer. 621 00:29:42,600 --> 00:29:44,920 Speaker 2: And Stage Bawman is Bloomberg's head of Podcasts. 622 00:29:45,160 --> 00:29:47,320 Speaker 1: Thanks for listening to The Money Stuff Podcast. We'll be 623 00:29:47,400 --> 00:29:49,000 Speaker 1: back next week with more stuff.