WEBVTT - What We Can Learn About Market Liquidity By Looking At Everyday Life 0:00:08.760 --> 0:00:12.559 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:12.600 --> 0:00:16.160 I'm Joe Wysn't and I'm Tracy Alloway. You know, it's 0:00:16.200 --> 0:00:19.639 really fun last week, you know, really enjoyed getting to 0:00:19.680 --> 0:00:22.919 record an episode in person for once. But now, of 0:00:22.960 --> 0:00:27.440 course we're back to our normal ways. It's it's very sad. 0:00:27.520 --> 0:00:30.680 I miss you, Joe likewise, and here we are recording 0:00:30.680 --> 0:00:33.800 a podcast on opposite sides of the world. But okay, 0:00:33.840 --> 0:00:36.920 moving on today, I think we're going to be talking 0:00:36.960 --> 0:00:40.040 about something that we've covered in a few episodes and 0:00:40.040 --> 0:00:42.600 that I think is one of your favorite themes. Okay, 0:00:42.920 --> 0:00:46.479 because you said that, I know exactly what it is. Um, 0:00:46.520 --> 0:00:48.400 so we don't have to play the guessing game like 0:00:48.440 --> 0:00:53.000 we sometimes do. No. Um, it's liquidity, right right? Why 0:00:53.080 --> 0:00:55.040 is this one of your favorite topics? It's funny, we've 0:00:55.040 --> 0:00:57.319 talked about it a lot, like the sort of it's 0:00:57.360 --> 0:01:01.440 particularly the bond market, bond market, liquidity, the market structure. 0:01:01.840 --> 0:01:04.280 We've talked about it a lot, but I guess I've 0:01:04.319 --> 0:01:07.280 never asked why is this a subject of such fascination 0:01:07.319 --> 0:01:10.080 for you? Okay, I can tell you exactly why, because 0:01:10.440 --> 0:01:15.000 liquidity is almost the essence of markets. Like, if you 0:01:15.000 --> 0:01:18.920 think that a really simple definition of liquidity is the 0:01:19.040 --> 0:01:24.119 ease of buying or selling something maybe without affecting its 0:01:24.360 --> 0:01:28.319 price too much, that's exactly what markets are, right. And 0:01:28.360 --> 0:01:31.520 the other thing is you get all these really interesting 0:01:31.800 --> 0:01:36.240 um motivational dynamics at play and lots of design issues, 0:01:36.360 --> 0:01:38.559 And even though you can think of the perfect market 0:01:38.600 --> 0:01:43.240 structure to suit a partricular asset class or transaction, there 0:01:43.319 --> 0:01:46.119 might be different players involved who don't want to see 0:01:46.120 --> 0:01:49.400 that market structure come to fruition. So it's it's a 0:01:49.440 --> 0:01:54.880 fantastic mix of human behavior and markets, I think. So basically, 0:01:54.920 --> 0:01:58.960 this idea of liquidity the ease with which one can 0:01:59.040 --> 0:02:01.760 buy or sell an asset at a given price, if 0:02:01.800 --> 0:02:04.800 we can understand why it exists or why it doesn't, 0:02:04.840 --> 0:02:07.440 then we could sort of understand the entire structure of 0:02:07.480 --> 0:02:10.320 the market, who the different players are, what their different 0:02:10.320 --> 0:02:13.920 motivations are, etcetera. That's exactly right. Are you telling me 0:02:14.000 --> 0:02:15.840 we have someone on the show today who knows the 0:02:15.840 --> 0:02:18.720 answer to this question. Well, we might, I don't know, 0:02:18.760 --> 0:02:20.920 really have the answer, but we're going to try and 0:02:20.960 --> 0:02:24.200 get a closer to the answer. But I think we're 0:02:24.200 --> 0:02:26.880 gonna do it in a cool way because obviously, normally, 0:02:27.160 --> 0:02:29.280 you know, we might talk to someone and we have 0:02:29.400 --> 0:02:31.919 who's like an expert in how the bond market works 0:02:32.040 --> 0:02:36.080 or stock market structure. Today we're going to talk about 0:02:36.520 --> 0:02:41.120 how this concept of liquidity and market structure exists in 0:02:41.280 --> 0:02:43.880 our everyday lives, so not just in what we call 0:02:43.960 --> 0:02:47.120 financial markets, but in the sort of how we how 0:02:47.160 --> 0:02:50.000 we see this concept everywhere and the things we buy, 0:02:50.120 --> 0:02:54.320 transact in, etcetera. That sounds absolutely amazing, and I hope 0:02:54.360 --> 0:02:57.280 we can come up with some real life parallels for 0:02:57.280 --> 0:02:59.880 for instance, lack of liquidity in the corporate ball market. 0:03:00.680 --> 0:03:03.679 That's what I'm hoping for. I'm hoping that by understanding 0:03:04.040 --> 0:03:06.840 how liquidity exists in everyday life or lack of it, 0:03:07.000 --> 0:03:10.200 that we can then translate that back into maybe some 0:03:10.240 --> 0:03:14.520 new insight into the financial world. So, without a further ado, 0:03:14.560 --> 0:03:16.120 I want to bring in our guest. His name is 0:03:16.200 --> 0:03:19.760 Karthik Shah Shudar. He is the author of Between the 0:03:19.800 --> 0:03:23.800 Buyer and the Seller, a book that examines some of 0:03:23.840 --> 0:03:26.560 these topics. Karthik, thank you very much for joining the 0:03:26.600 --> 0:03:30.000 Odd Lots podcast. Hi to Hi Trizzy. I'm glad to 0:03:30.040 --> 0:03:33.520 be here. So Karthik, What did you think about our introduction? 0:03:33.639 --> 0:03:38.320 Did you think that Tracy's explanation for why liquidity is 0:03:38.360 --> 0:03:41.839 such an important aspect of the market to understand sort 0:03:41.840 --> 0:03:45.520 of parallels with why this interests you? Absolutely? I think 0:03:45.520 --> 0:03:48.080 she's kind of bang on, and I think the definition 0:03:48.080 --> 0:03:51.040 of liquidity she used is also like precisely the one 0:03:51.120 --> 0:03:54.240 that I use in my book. But yes, liquidity, I 0:03:54.240 --> 0:03:57.160 think is an important topic because it's it's around us everybody. 0:03:57.160 --> 0:04:00.560 It's around us in pretty much every market that we 0:04:00.720 --> 0:04:04.080 happen to transact in on a daily basis, and like 0:04:04.400 --> 0:04:07.880 as Stacy just explained, it's a wonderful combination of markets 0:04:07.880 --> 0:04:11.280 and human behaviors. So we always used to write that 0:04:11.480 --> 0:04:14.600 liquidity is kind of a nebulous concept and people have 0:04:14.760 --> 0:04:18.320 different definitions of good and bad liquidity, So why don't 0:04:18.360 --> 0:04:21.680 we just jump right into it to clarify the concept, 0:04:22.160 --> 0:04:27.440 give us a real life example where liquidity is an 0:04:27.440 --> 0:04:31.719 issue or that tells us about one specific aspect of liquidity. 0:04:31.920 --> 0:04:34.840 So I'll start with liquidity itself. I'll start to the 0:04:34.920 --> 0:04:36.880 quote that I have that I begin my book with. 0:04:37.040 --> 0:04:40.479 It's by Michael Lewis, and it's from Flashboys and He 0:04:40.560 --> 0:04:43.799 says liquidity was one of those words Wall Street people 0:04:43.839 --> 0:04:46.880 through around when they wanted the conversation to end and 0:04:46.960 --> 0:04:49.400 for brains to go or date and for all questioning 0:04:49.440 --> 0:04:52.600 to cease. This book is basically an attempt to kind 0:04:52.600 --> 0:04:56.640 of like dake liquidity beyond its kind of Wall Street origins. 0:04:56.640 --> 0:04:58.200 I myself have a little bit of a background in 0:04:58.279 --> 0:05:00.719 Wall Street type. Briefly, you work for a couple of 0:05:00.760 --> 0:05:04.479 years at Goldman Sacks, and now I'm working in the 0:05:04.520 --> 0:05:08.080 financial services industry, working for a company called our Kra 0:05:08.279 --> 0:05:11.719 where we're trying to revolutionize how client engagement has done 0:05:11.720 --> 0:05:15.080 in investrent banks. That aside, I think to come coming 0:05:15.080 --> 0:05:19.440 back to liquidity, to take a very simple example that 0:05:19.520 --> 0:05:21.000 I think a lot of us kind of deal with 0:05:21.040 --> 0:05:23.800 every day. UH. It's to do with the market for 0:05:24.680 --> 0:05:28.719 uh what it call is motorized local transportation. That's cabs 0:05:28.760 --> 0:05:32.960 and cab like uh instrument pretty much everywhere. So one 0:05:33.000 --> 0:05:36.200 of the biggest kind of UH. It was actually one 0:05:36.200 --> 0:05:38.120 of the motivations from my book in terms of like 0:05:38.200 --> 0:05:40.400 one of the markets that have seen a massive revolution 0:05:40.440 --> 0:05:43.600 and liquidity is the way is the cab market well, 0:05:43.640 --> 0:05:45.840 which I kind of existed in the fairly low level 0:05:45.839 --> 0:05:49.200 equilibrium for a lot of years. I mean different the 0:05:49.360 --> 0:05:53.880 regulation was different in different cities, but pretty much each 0:05:53.880 --> 0:05:57.680 city was broken in one way or the other. Like 0:05:58.360 --> 0:06:00.680 for example, in a lot a lot of cities in 0:06:00.720 --> 0:06:04.680 India where I come from, Uh, it's common for taxi 0:06:04.800 --> 0:06:07.800 drivers to refuse you are right once they know where 0:06:07.800 --> 0:06:11.440 you want to go. Or for example, if taking the 0:06:11.480 --> 0:06:14.000 example of New York City in the mornings, if you're 0:06:14.000 --> 0:06:17.479 trying to take a taxi from midtown to downtown, it's 0:06:18.320 --> 0:06:21.080 highly unlikely that you're going to find one. This is 0:06:21.120 --> 0:06:25.280 a market which was kind of very, very inefficient. It 0:06:25.360 --> 0:06:28.880 was people. I tried to regulate it in the in 0:06:28.920 --> 0:06:30.719 a whole lot of ways, but like none of it 0:06:30.760 --> 0:06:34.400 had really worked out. And then comes along this company 0:06:34.400 --> 0:06:39.760 called Uber, which using an app and using this concept 0:06:39.839 --> 0:06:43.280 of dynamic pricing, which is highly controversial, but I mean 0:06:43.360 --> 0:06:45.720 I I absolutely love it by the way they have 0:06:46.440 --> 0:06:51.800 kind of changed the way, changed the taken the liquidity 0:06:51.839 --> 0:06:54.680 in the cap market to a whole new level. So 0:06:54.800 --> 0:06:58.039 there's several ways. I think obviously it's great that we're 0:06:58.040 --> 0:07:01.040 starting with the Uber discussion because it's probably one of 0:07:01.080 --> 0:07:04.919 the most clear ways in modern life in which something 0:07:04.960 --> 0:07:08.159 we just took for granted. Uh, you know, putting out 0:07:08.160 --> 0:07:11.320 your hand and getting a taxi is really a sort 0:07:11.360 --> 0:07:15.119 of quasi financial market, and the new market has changed. 0:07:15.160 --> 0:07:19.320 So there's dynamic pricing. There's the fact that you know, 0:07:19.400 --> 0:07:22.400 the ubers have to take you everywhere. You can sort 0:07:22.440 --> 0:07:26.400 of see the supply that's on the road more vividly, 0:07:26.600 --> 0:07:28.720 because you know, you're not just sort of wondering when 0:07:28.760 --> 0:07:31.280 a cab is going to come around. You can set 0:07:31.360 --> 0:07:36.320 up timing very well in your view. Hey, what is 0:07:36.720 --> 0:07:40.080 the most sort of radical thing about Uber? Perhaps it's 0:07:40.120 --> 0:07:42.920 the dynamic pricing. And then you know, since we're looking 0:07:42.960 --> 0:07:46.640 for financial market lessons, what is sort of is there 0:07:46.680 --> 0:07:49.880 an Uber equivalent in the world of finance that we 0:07:49.920 --> 0:07:53.000 could say, Okay, this thing that Uber does is similar 0:07:53.040 --> 0:07:57.040 to this on an exchange. Good question. So the first 0:07:57.040 --> 0:07:59.600 party guard bangled. I think the most important part of 0:08:00.360 --> 0:08:03.520 is UH dynamic pricing in the financial markets. I can't 0:08:03.560 --> 0:08:06.040 think of a direct parallel right now. I can't think 0:08:06.040 --> 0:08:09.280 of a direct part where like where let's say an 0:08:09.320 --> 0:08:13.160 intermediary Uber is also an intermediary between the cab driver 0:08:13.240 --> 0:08:16.840 and the passenger, where an intermediary uses kind of dynamic 0:08:16.880 --> 0:08:21.080 pricing to kind of, uh make the markets more efficient 0:08:21.240 --> 0:08:25.600 for everyone. I think UBER one of the work of 0:08:25.640 --> 0:08:29.280 the taxi market is that, like it's extremely fragmented when 0:08:29.280 --> 0:08:32.320 it comes to both space and time. Like the market 0:08:32.440 --> 0:08:36.760 that you see is limited by the taxis that are 0:08:37.040 --> 0:08:39.480 you as a passenger, you see the taxis around you 0:08:39.600 --> 0:08:42.680 at that point in time. So there's massive fragmentation on 0:08:43.040 --> 0:08:46.160 two dimensions, and that kind of fragmentation. I mean you 0:08:46.160 --> 0:08:48.840 can say that like even the regular stockore bond markets 0:08:48.840 --> 0:08:51.520 have that kind of fragmentation because they are like there 0:08:51.559 --> 0:08:54.160 are like you have like multiple venues and you have 0:08:54.280 --> 0:08:57.720 like kind of there is fragmentation through the day because 0:08:57.720 --> 0:09:00.920 there are some market makers who operate more heavily at 0:09:01.000 --> 0:09:03.520 different times of the day and volume changes through the 0:09:03.600 --> 0:09:06.680 day and so on. But the key difference between Uber 0:09:06.760 --> 0:09:08.720 and the kind of first stock market is that, like 0:09:08.960 --> 0:09:12.959 in a stock market, by providing supplying supply in one place, 0:09:12.960 --> 0:09:16.240 you're not taking supply away from another place. So for example, 0:09:16.280 --> 0:09:19.920 if if I am Golden SAX and I'm participating right 0:09:19.920 --> 0:09:22.600 now in the New York Stock Exchange, that doesn't come 0:09:22.640 --> 0:09:24.880 at the cost of my participation at this point of 0:09:24.960 --> 0:09:28.440 time in ASDAC, if I had to kind of choose 0:09:28.480 --> 0:09:30.200 between one or the other, then like it would have 0:09:30.240 --> 0:09:32.680 been more like Uber. So in that sense, I feel 0:09:32.679 --> 0:09:35.760 like I got It's hard to at this moment draw 0:09:35.800 --> 0:09:40.440 a direct parallel between between Uber and financial markets, because 0:09:40.679 --> 0:09:43.520 Uber is a far more complex problem. I would say. 0:09:44.040 --> 0:09:47.320 So Uber is a great example of a sort of 0:09:47.320 --> 0:09:51.920 technological change that has arguably boosted liquidity or the availability 0:09:52.040 --> 0:09:56.400 of a certain service. But there are existing assets or 0:09:56.440 --> 0:10:02.040 services out there that have also resisted technological change, UM, 0:10:02.080 --> 0:10:04.200 And I think you brought one of them up in 0:10:04.280 --> 0:10:08.000 your book, And I'm particularly interested in this. The real 0:10:08.120 --> 0:10:11.280 estate market, the concept of all these real estate agents 0:10:11.440 --> 0:10:14.560 who find you a house or an apartment. There have 0:10:14.600 --> 0:10:19.240 been multiple attempts to make that market more liquid, either 0:10:19.360 --> 0:10:24.160 with online platforms or some other new big ideas, and 0:10:24.200 --> 0:10:27.680 they seem to have largely failed. So why is it 0:10:27.800 --> 0:10:31.360 that liquidity hasn't come to the property market and we 0:10:31.400 --> 0:10:34.480 all still have to pay, you know, obscene commissions to 0:10:34.880 --> 0:10:38.240 New York real estate agents. The thing with the real 0:10:38.360 --> 0:10:42.120 estate market, UM, is that like the way in which 0:10:42.200 --> 0:10:45.280 the new players like take somebody like a rape frill 0:10:45.360 --> 0:10:47.559 in the U S or housing in India. The way 0:10:47.600 --> 0:10:50.280 they are approaching the market is very different from how 0:10:50.440 --> 0:10:55.160 your local real estate agent approaches the market. So here 0:10:55.240 --> 0:10:57.320 I bring in an analogy in the book from the 0:10:57.360 --> 0:11:00.840 Financial market Tan right to distinct between what I call 0:11:00.920 --> 0:11:04.439 us brokers and clearing houses for this podcast audience, I 0:11:04.480 --> 0:11:06.720 don't think I need to explain those two terms, so 0:11:07.280 --> 0:11:10.360 the difference between your tradition. Actually, I do think a 0:11:10.440 --> 0:11:13.280 quick definition of the two terms would be able to focus. 0:11:13.320 --> 0:11:15.840 I get confused myself, and I think I suspect we 0:11:15.880 --> 0:11:19.000 have a lot of listeners that would like a clarification. Okay, 0:11:19.080 --> 0:11:22.240 So broker's basically take a mandate on behalf of a 0:11:22.280 --> 0:11:25.959 client and take responsibility for executing the trade on behalf 0:11:26.000 --> 0:11:28.880 of the client. Clearing Houses, on the other hand, don't 0:11:28.920 --> 0:11:31.600 really take them, but they don't work for a particular client. 0:11:31.720 --> 0:11:35.440 They just provide a platform where clients can come on 0:11:35.559 --> 0:11:40.079 and find each other and transact. So the way the 0:11:40.240 --> 0:11:42.920 traditional real estate industry has been set up with the 0:11:42.960 --> 0:11:46.240 broker's brokers and brokers they take a mandate from me. 0:11:46.520 --> 0:11:49.720 They I tell them I want a two bedroom apartment 0:11:49.800 --> 0:11:51.560 on the Upper West Side and I'm willing to pay 0:11:51.640 --> 0:11:54.320 up to two tho dollars a month, and they will 0:11:54.320 --> 0:12:00.000 take that mandate and possibly try and find me how 0:12:00.640 --> 0:12:03.280 if one exists, if there is a supply for it, 0:12:03.360 --> 0:12:05.240 and so on. On the other hand, if you take 0:12:05.840 --> 0:12:09.240 something like housing and taking any Indian example, because that's 0:12:09.440 --> 0:12:12.679 that's what I'm most familiar with, but what they do 0:12:12.720 --> 0:12:16.920 is it's an online portal where I, as a seller 0:12:16.960 --> 0:12:20.080 of a house or a landlord, can list my house, 0:12:20.600 --> 0:12:23.560 and you, as a buyer or a tenant, can come 0:12:23.559 --> 0:12:27.400 and search for listings. So so red fin or Housing 0:12:27.480 --> 0:12:30.000 doesn't take a mandate on behalf of the client, so 0:12:30.040 --> 0:12:34.240 they just kind of enabled transactions. And what happens because 0:12:34.280 --> 0:12:36.200 of that in the real estate market because like no 0:12:36.360 --> 0:12:38.800 two houses are similar, and there's a lot of a 0:12:38.840 --> 0:12:41.880 lot of quirks, and like people have weird preferences. I 0:12:41.920 --> 0:12:44.920 think what's happened is that, like it's very hard for 0:12:44.960 --> 0:12:50.160 the clearinghouse to kind of really offer the precise, like 0:12:52.480 --> 0:12:54.880 offer a really short list. So if you want, if 0:12:54.920 --> 0:12:58.679 you have a particulars a set of preferences, and you 0:12:58.760 --> 0:13:01.480 might put in the filters on the website and you'll 0:13:01.480 --> 0:13:04.199 get a really long list. In the effort required and 0:13:04.320 --> 0:13:06.880 going through that and and eliminating the stuff that you 0:13:07.040 --> 0:13:10.800 don't want as pretty high. So on the other hand, 0:13:10.800 --> 0:13:14.360 a broker as as a human being, his advantage over 0:13:14.400 --> 0:13:18.120 the platform is that, like he can really represent you. 0:13:18.120 --> 0:13:21.720 You can clearly communicate to him what you're what you're 0:13:21.760 --> 0:13:25.880 looking for, and he can kind of find you precisely 0:13:25.960 --> 0:13:28.960 that kind of UH deal and so on. So in 0:13:29.040 --> 0:13:32.360 that sense, they have been able to add value. And also, 0:13:32.440 --> 0:13:34.240 as I mentioned in the book, especially in the India, 0:13:35.080 --> 0:13:38.560 brokers have kind of leveraged these online platforms because they 0:13:38.679 --> 0:13:41.160 I mean, it always happens in the stock market where 0:13:41.400 --> 0:13:44.880 your local broker goes and participates on your behalf on 0:13:45.000 --> 0:13:48.240 the New York Stock Exchange. So similarly, in the property 0:13:48.240 --> 0:13:51.320 market you have brokers taking their clients mandate and going 0:13:51.360 --> 0:13:55.080 to one of these UH websites to find a deep 0:14:05.559 --> 0:14:09.960 It is interesting hearing this explanation because, you know, once 0:14:09.960 --> 0:14:13.480 again going back to sort of traditional financial markets, one 0:14:13.520 --> 0:14:17.040 of the themes that we've talked about is UH. You know, 0:14:17.120 --> 0:14:20.560 the degree to which the bond market is characterized by 0:14:20.600 --> 0:14:24.160 such a greater diversity of instruments than the stock market. 0:14:24.640 --> 0:14:27.800 And so hearing you explain, you know, each each apartment 0:14:28.040 --> 0:14:30.280 or house that someone would want to buy is probably 0:14:30.280 --> 0:14:32.680 going to be a little different, even if they're sort 0:14:32.680 --> 0:14:35.920 of can be grouped in general categories. The you know, 0:14:35.960 --> 0:14:39.200 there's not any two apartments are not as fungible the 0:14:39.240 --> 0:14:41.320 way you know, sort of every other every share of 0:14:41.360 --> 0:14:45.960 Microsoft is basically identical. Wait, so, I mean, I've heard 0:14:45.960 --> 0:14:50.160 that explanation for bond market um issues and it makes 0:14:50.160 --> 0:14:53.280 some sense. But the other thing to consider, and I'm 0:14:53.280 --> 0:14:55.600 pretty sure we've talked about it at various points on 0:14:55.640 --> 0:14:59.400 all thoughts, is the motivation of the players involved. So 0:14:59.480 --> 0:15:01.480 a lot of people will say that the bond market 0:15:01.640 --> 0:15:05.840 is resistant to change because, for instance, the big dealer banks, 0:15:05.880 --> 0:15:08.240 the guys that buy and sell bonds on behalf of 0:15:08.240 --> 0:15:11.360 their clients, don't want to give up a really lucrative 0:15:11.640 --> 0:15:15.920 form of commission. So cartex I'm just wondering, in terms 0:15:15.920 --> 0:15:20.800 of everyday examples of market structures or liquidity, is there 0:15:20.840 --> 0:15:24.760 one that springs to mind where the participants in it 0:15:24.920 --> 0:15:29.280 have been, you know, basically unmotivated to change their ways. 0:15:30.160 --> 0:15:32.560 I'd probably go back to the kind of the taxi 0:15:32.640 --> 0:15:35.680 example because in a uber obviously you know what, it's 0:15:35.680 --> 0:15:39.720 been fairly controversial in London where it now live. Ugle 0:15:39.800 --> 0:15:44.120 kind of has been effectively banned in its uh fairly 0:15:44.160 --> 0:15:46.640 recently and as a huge controversy going on over there 0:15:46.960 --> 0:15:49.080 and there. I think it's more to do with the 0:15:49.120 --> 0:15:52.520 fact that the fact that the traditional taxi industry has been, 0:15:52.600 --> 0:15:54.720 like they have immense lob being power, and they have 0:15:54.800 --> 0:15:58.280 been kind of resistant to change in terms of like 0:15:58.400 --> 0:16:01.560 they have been, uh, have been a few ways in 0:16:01.560 --> 0:16:04.120 which they have been in afficiate, Like for example, even 0:16:04.160 --> 0:16:07.360 in the most well regulated markets, you have the problems 0:16:07.400 --> 0:16:10.640 of taxis not wanting to go into certain parts of town, 0:16:10.680 --> 0:16:15.120 that and so on, so so from so, what's happened 0:16:15.120 --> 0:16:17.080 there is that, Like, I mean, one of the reasons 0:16:17.080 --> 0:16:19.960 you see the regulatory backlash against Tuba is because the 0:16:20.040 --> 0:16:23.280 incumbents kind of are kind of afraid of this threat 0:16:23.280 --> 0:16:25.680 time they want to kind of because they're sitting on 0:16:25.800 --> 0:16:29.160 fairly valuable assets. They're not valuable assets in terms of 0:16:29.200 --> 0:16:31.800 like as intermediaries, which is what it is with the 0:16:31.840 --> 0:16:33.760 banks in the bond market. Here. It more it is 0:16:33.800 --> 0:16:36.360 in terms of like they're sitting in terms of valuable 0:16:36.400 --> 0:16:39.320 assets as the right to sell in this particular market, 0:16:39.400 --> 0:16:43.160 think of the New York taxi Medalian for example. So 0:16:43.160 --> 0:16:47.680 so so they have been stymying all efforts to kind 0:16:47.680 --> 0:16:51.800 of reform the markets because of their unwillingness to change. 0:16:51.920 --> 0:16:54.400 But but yeah, but because we were shown away out 0:16:54.440 --> 0:16:58.080 in terms of like it's increasing efficiency, it might not 0:16:58.320 --> 0:17:02.200 be very h that might not be a fight that 0:17:02.280 --> 0:17:06.720 might last too long, hopefully. Let's see now speaking of 0:17:06.840 --> 0:17:10.399 real estate, Um, one of the you know, with the 0:17:10.520 --> 0:17:13.720 rise of the Internet, one of the big theories that 0:17:13.840 --> 0:17:18.199 people had was that geography would be destroyed. So we 0:17:18.240 --> 0:17:20.440 can all work from anywhere. We could work from home, 0:17:20.520 --> 0:17:23.679 we could work from wherever, So there's no reason to 0:17:23.960 --> 0:17:27.080 live in New York or Silicon Valley or Washington, d C. 0:17:27.560 --> 0:17:31.000 Or l A. And yet the opposite seems to have happened, 0:17:31.040 --> 0:17:33.000 and you wrote about you write about this in your book, 0:17:33.000 --> 0:17:36.240 where in fact, people, you know, cities and urban centers 0:17:36.240 --> 0:17:39.639 have become even more and more important for the economy. 0:17:39.680 --> 0:17:43.600 Despite what sort of this theory of disrupting geography would say, 0:17:44.000 --> 0:17:46.840 what what happened there? Why has that idea that the 0:17:46.880 --> 0:17:51.919 Internet would sort of subvert traditional geography not really played out? Okay, 0:17:52.280 --> 0:17:55.080 so I think what we kind of ignored us in 0:17:55.160 --> 0:17:58.680 terms of to use some Silicon Valley speak here, uh 0:17:58.800 --> 0:18:01.800 that cit saide if it to leave platforms. Cities can 0:18:01.840 --> 0:18:05.399 be viewed as platforms that connect employees on one side 0:18:05.400 --> 0:18:09.240 and businesses on the other, and like at a different level, 0:18:09.320 --> 0:18:13.080 they connect consumers of local goods and services to produce 0:18:13.160 --> 0:18:15.840 us of local goods and services such as restaurants and 0:18:15.880 --> 0:18:18.399 so on. But we leave that aside right now. So 0:18:18.480 --> 0:18:24.199 what people had kind of vastly underestimated was the importance 0:18:24.200 --> 0:18:28.800 of proximity in terms of getting work done and so on. 0:18:28.880 --> 0:18:32.200 So what people have assumed is that with Internet there 0:18:32.280 --> 0:18:35.199 is going to be like there is, it is going 0:18:35.280 --> 0:18:39.320 to be possible to kind of uh communicate seepless Lee 0:18:40.160 --> 0:18:43.200 across great distances, and so you can sit in your 0:18:43.359 --> 0:18:47.240 farm and Wyoming and kind of work the same way 0:18:47.359 --> 0:18:50.439 as somebody sitting in his office in San Francisco can. 0:18:50.560 --> 0:18:54.199 So I think that was something people assumed and that 0:18:54.280 --> 0:18:56.439 has not come to be because like, there is always 0:18:56.480 --> 0:18:59.639 a transaction cost involved in talking to somebody who's not 0:19:00.560 --> 0:19:02.840 next to you, So you'll have either have to call 0:19:02.960 --> 0:19:05.960 the tye and make sure he understands what you're saying, 0:19:06.040 --> 0:19:08.879 and there can be various kind of places where like 0:19:09.040 --> 0:19:13.919 coordination across distance can kind of falter. And because of that, 0:19:14.040 --> 0:19:18.359 I think, like people companies have recognized the recognized the 0:19:18.480 --> 0:19:21.359 need to kind of be in one place and so on, 0:19:21.400 --> 0:19:25.119 and so you have like the despite how expensive San 0:19:25.160 --> 0:19:28.240 Francisco has gotten nowadays, like people still continue to move 0:19:28.280 --> 0:19:30.520 to the Bay Area and so on, because that's where 0:19:30.560 --> 0:19:34.280 the kind of the liquid market for the skills that 0:19:34.320 --> 0:19:37.800 people have. This is making me feel bad about working 0:19:37.840 --> 0:19:42.360 from our Abu Dhabi satellite office of my living room. 0:19:42.960 --> 0:19:47.880 Um Karthik, I have a slightly more theoretical question for you, 0:19:48.280 --> 0:19:52.800 to what extent do systems of buying and selling reflect 0:19:53.400 --> 0:19:57.080 the nature of the underlying assets, Like if you have 0:19:57.119 --> 0:20:00.919 a bunch of really diverse things that are actual that fungible, 0:20:01.560 --> 0:20:06.000 and to what extent do they reflect the nature and 0:20:06.040 --> 0:20:10.440 the motivations of the parties involved, and which one would 0:20:10.440 --> 0:20:14.480 you give more weight to. That's not a very easy 0:20:14.560 --> 0:20:18.240 question to answer. I think it's it's highly interdependent. I 0:20:18.280 --> 0:20:22.680 think how a market has developed historically is a function 0:20:22.720 --> 0:20:25.840 of the kind of assets that are being created in 0:20:25.880 --> 0:20:29.840 that market. So, for example, I think one of the 0:20:30.520 --> 0:20:33.199 one of the if you have things that are like 0:20:33.280 --> 0:20:36.520 easily fungible, which is easy for a lot of people 0:20:36.560 --> 0:20:39.359 to provide. You would have seen that the market would 0:20:39.359 --> 0:20:43.879 have evolved such that like the overall transaction cost and 0:20:44.040 --> 0:20:49.560 even the overall transaction cost is pretty low because because 0:20:49.600 --> 0:20:53.479 competition drives the bittern ask close together when you have 0:20:53.600 --> 0:20:56.360 lots of products which are pungible, which can be easily treated. 0:20:56.760 --> 0:20:58.960 On the other hand, I think that this is something 0:20:59.000 --> 0:21:01.199 I talk about in my in the first chapter in 0:21:01.200 --> 0:21:05.159 my book, which unfortunately you're my u S readers may 0:21:05.160 --> 0:21:09.040 not really appreciate. It's about the markets in football players. 0:21:09.080 --> 0:21:13.280 Football as an association football, where you have because the 0:21:13.320 --> 0:21:17.080 players are not fungible at all, No two players, especially 0:21:17.080 --> 0:21:19.080 at the highest level, are very similar to each other. 0:21:19.520 --> 0:21:24.640 You see the deals that happen that are either extremely expensive. 0:21:24.720 --> 0:21:27.840 We had recently a case of a footballer going UH 0:21:28.680 --> 0:21:31.840 for some two hundred million euros between a club in 0:21:31.880 --> 0:21:33.840 Spain and a club in France. So it's like, on 0:21:33.920 --> 0:21:36.600 the other hand, you can have equally highly rated footballer 0:21:36.680 --> 0:21:40.080 is moving between clubs without any transfer feedboard, so it's 0:21:40.080 --> 0:21:44.040 a highly uh. The kind of when you have less 0:21:44.119 --> 0:21:48.120 fungible kind of assets, the you the deals take place 0:21:48.160 --> 0:21:49.800 at either the bit or the ask and sol like 0:21:49.880 --> 0:21:52.520 you have a very a bit of a crazy market. 0:21:53.200 --> 0:21:58.000 But I think that the that actually drives the behavior 0:21:58.280 --> 0:22:01.840 of the that drives behavior of the intermediaries. I mean, like, 0:22:02.160 --> 0:22:05.359 if you're let's say, an intermediary who if you're making 0:22:05.440 --> 0:22:09.399 market in markets and stocks, and you decide to behave 0:22:09.440 --> 0:22:13.800 as if like stocks are the stocks are a non 0:22:13.840 --> 0:22:18.080 fungible item, might try to charge high bid asks rates 0:22:18.119 --> 0:22:20.320 and things like, you will be easily priced out of 0:22:20.359 --> 0:22:23.560 the market. So I think it's the nature of the 0:22:23.640 --> 0:22:29.280 asset that's been traded that drives the nature of the market. Okay, 0:22:29.040 --> 0:22:32.680 I want to ask about another what one might call 0:22:32.800 --> 0:22:38.280 a market in which no two of the assets are fungible, 0:22:38.800 --> 0:22:42.600 but which has been massively disrupted by the Internet, and 0:22:42.680 --> 0:22:45.679 that is the dating market or the marriage market, or 0:22:45.680 --> 0:22:49.320 whatever you want to call it. Obviously extraordinary change in 0:22:49.400 --> 0:22:51.960 behavior with the rise of Tinder, where someone can just 0:22:52.000 --> 0:22:54.760 sit on their phone and arrange numerous dates in the 0:22:54.800 --> 0:22:57.760 span of a few seconds or minutes. As far as 0:22:57.800 --> 0:22:59.760 I know, I've never you know, I've never used it. 0:22:59.800 --> 0:23:05.320 But yeah, whatever, I'm way too Oh, I'm way too 0:23:05.320 --> 0:23:08.679 I'm way too all I missed all of it versus 0:23:08.720 --> 0:23:10.960 the old days, where I guess theoretically you had to 0:23:11.080 --> 0:23:13.600 go to a bar and it was very slow, cumbersome 0:23:13.840 --> 0:23:18.520 process to meet people in theoretically arrange dates. Tell us 0:23:18.560 --> 0:23:21.320