Speaker 1: Masters in Business is brought to you by ex On
Speaker 1: Mobile Energy Lives here. This is Master's in Business with
Speaker 1: Barry Ridholds on Bloomberg Radio Today. On the podcast, I
Speaker 1: have Roger Lowenstein. He is a journalist and author, and
Speaker 1: we spoke for ninety minutes. I'm not gonna make I'm
Speaker 1: not gonna take too much time in this intro because
Speaker 1: there's plenty to hear. The book that I've always adored
Speaker 1: of his uh is When Genius Failed to the story
Speaker 1: of long term capital management, and we do a deep
Speaker 1: dive into that. I use that book extensively in my
Speaker 1: prep work for Bailout Nation, as well as another book
Speaker 1: of Rogers, which was Origins of the Crash, which talked
Speaker 1: about all the factors that led to the two thousand crash.
Speaker 1: We go into a lot of details on some of this.
Speaker 1: Some of this we really just skip over um and
Speaker 1: talked very lightly about. So it's ninety minutes. It's a
Speaker 1: fantastic conversation, and rather than me babil, I'm just gonna
Speaker 1: send you right to the podcast and broadcast without further ado,
Speaker 1: my conversation with Roger Lowenstein. This is Master's in Business
Speaker 1: with Barry Ridholts on Bloomberg Radio. This week on Masters
Speaker 1: in Business on Bloomberg Radio, I have a special guest author,
Speaker 1: Rock Contour journalist Roger Lowenstein. You probably know him from
Speaker 1: what is actually one of my all time favorite books,
Speaker 1: When Genius Failed, The Rise and Fall of Long Term
Speaker 1: Capital Management. But he is also the author of Buffett,
Speaker 1: Making of an American Capitalist, Origins of the Crash, which
Speaker 1: I thought was a really interesting book that I used
Speaker 1: as part of my research for Bailout Nation, End of
Speaker 1: Wall Street, While America Aged, How the pension debts ruins
Speaker 1: General Motors, and his most recent book, An Erica's Bank,
Speaker 1: The epic struggle to create the Federal Reserve. Roger Lowenstein,
Speaker 1: Welcome to Bloomberg Barry. Always good to be on your show. Um,
Speaker 1: is this the first time we've had you on this
Speaker 1: This will well, you don't know if it's good to
Speaker 1: be always good to be with you, so it's always
Speaker 1: good to be in your company. Roger and I know
Speaker 1: each other for a few years from similar circles. We
Speaker 1: had lunch not too long ago, less lunch outside the library.
Speaker 1: I think that while you were working on that book,
Speaker 1: and we talked about your process and your research, and
Speaker 1: I really want to get into it. But before we
Speaker 1: start talking about America's bank, let's talk a little bit
Speaker 1: about your history. You were at the Wall Street Journal
Speaker 1: for a part of a decade longer. I was at
Speaker 1: the Wall Street Journal for fifteen years. Um, you know,
Speaker 1: I always had loved being at the journal, always had
Speaker 1: kind of books in my veins. And you always knew
Speaker 1: you wanted to be a writer from early on? Or
Speaker 1: how did that evolve? Um? Early on? I can't tell
Speaker 1: you. You You know, when I was a reporter the Cornell
Speaker 1: Daily Son, if I was thinking of books or not,
Speaker 1: But I was always what was called an egghead back
Speaker 1: in the day, and a walk that's right. That word
Speaker 1: didn't exist back in my Cornell days. And I was
Speaker 1: looking for a book, you know, as my career at
Speaker 1: the Journal went on, and I knew something about this
Speaker 1: investor out in Omaha. Who actually at the time we're talking,
Speaker 1: we're talking the early nineties, so no one knew who. Really,
Speaker 1: I wouldn't say no one, but not like not. He
Speaker 1: wasn't the icon. He isn't on their radio and put
Speaker 1: him on them all the time. Well I think he
Speaker 1: put himself from the map. But but I was writing
Speaker 1: the Herd in the Street column for the Journal and
Speaker 1: the song which, by the way, there is a number
Speaker 1: of storied Pulitzer Prize winning journalists who have occupied it
Speaker 1: was a good chair and one was infamous. We won't mentioned,
Speaker 1: but um doing that column, and the Solomon Brothers scandal happened.
Speaker 1: Buffett flies into New York and all of a sudden
Speaker 1: people are very interested in him, and so I pitched
Speaker 1: a book idea and did that book, did very well,
Speaker 1: went back to the General, wrote a column for a
Speaker 1: few years, and since then I've written exclusively books. So
Speaker 1: the Buffet story is kind of fascinating. The Solomon comes in,
Speaker 1: save Solomon Brothers, works them out from their headache, subsequently
Speaker 1: does the same thing with Goldman Sachs in the financial crisis,
Speaker 1: kind of gives them a capital infusion they needed to
Speaker 1: stay liquid. You talked a lot and wrote a lot
Speaker 1: in Origins of the Crash about the previous UH crisis,
Speaker 1: the two thousand dot com crash, But the end of
Speaker 1: Wall Street was really your story, not so much about
Speaker 1: the financial crisis, but what happened with Wall Street during
Speaker 1: that period. Yeah, the end of Wall Street, you know,
Speaker 1: it was about the two thousand and eight mortgage bubble
Speaker 1: and everything that happened after the FED interventions that tarp
Speaker 1: all of that, and the you know the difference between
Speaker 1: that story and the one we're gonna talk about America's
Speaker 1: Bank is this was what a crisis looked like when
Speaker 1: we had a federal reserve and we had a strong
Speaker 1: federal financial presence as opposed to before. Were you just
Speaker 1: krene from your you're on your own crisis to crisis.
Speaker 1: Maybe JP Morgan will organize a loan for you, if
Speaker 1: not Sion our maybe and and by the way, sionar
Speaker 1: to the system as well too, So we're gonna definitely
Speaker 1: spend more time talking about that. I would be remiss
Speaker 1: if I failed to mention your dad. Your father was
Speaker 1: Louis Loan Stein, and he was really a well known
Speaker 1: law professor and corporate executive who pretty much spent three
Speaker 1: decades dissecting the excesses of Wall Street. If if he
Speaker 1: was alive today, he would be active on Twitter, he
Speaker 1: would have a blog, and he would be trashing Wall
Speaker 1: Street on a fairly regular basis. Know, I don't know
Speaker 1: about Twitter, because I remember trying to get a dad,
Speaker 1: um My dear and late father to accept photos and
Speaker 1: texting on his cell phone and and different generation. But
Speaker 1: he seriously he was a law professor who, instead of
Speaker 1: just sticking with um, you know, the standard text that
Speaker 1: other professors were teaching, said hey, there's something going wrong
Speaker 1: in business. I don't care if it's business law or business.
Speaker 1: This is in the era of junk bond sales and
Speaker 1: junk bond excesses. And he really he was a pioneer
Speaker 1: and saying the way the prospectuses are written isn't right,
Speaker 1: disclosures aren't right, the risks that they are being taken
Speaker 1: by mutual funds aren't right. And he was out in
Speaker 1: front very much an investor advocate. Is that a fair statement. Yeah,
Speaker 1: he was an advocate for good, fair, open, honest disclosure transparency.
Speaker 1: He also warned about the dangers of short term investing
Speaker 1: and in ignoring the long term. The question I want
Speaker 1: to ask is how did your father's philosophy affect your
Speaker 1: your thinking? You know very much. But we both got
Speaker 1: into we sort of both edged into writing careers or
Speaker 1: authorial careers. He was a corporate lawyer for the all
Speaker 1: of my growing up, and I was a journalist and
Speaker 1: you know, at the beginning of my career, I wasn't
Speaker 1: even a business journalist. And then uh, you know, when
Speaker 1: I went to college, I wasn't even interested in business.
Speaker 1: And then at some point I joined the Wall Street
Speaker 1: Journal around uh, nineteen seventy nine. I joined the journal.
Speaker 1: At that time, Uh, he was a chairman to become
Speaker 1: a CEO of one of his clients, path Mark, the
Speaker 1: s GC, the supermarket chain. H. At some point, uh,
Speaker 1: soon after that, he segues into Columbia University become a
Speaker 1: law professor. And by now I'm writing about finance, and
Speaker 1: as a law professor, suddenly he's writing about finance, and
Speaker 1: suddenly we're sort of doing it. Not the same things,
Speaker 1: but similar things just happened almost simultaneous, Almost simultaneously. He
Speaker 1: wrote his his first two books before I wrote any books.
Speaker 1: But I was a financial reporter, and so you know,
Speaker 1: we really really enjoyed. We would add each other's books
Speaker 1: and it was a relationship. Um. There was no tension
Speaker 1: in it, there was no disagreement. It was just it
Speaker 1: was a pure love and also an intellectual connection which
Speaker 1: I treasured. You're listening to Masters in Business on Bloomberg Radio.
Speaker 1: My guest this week, author Roger Lowenstein. He has a
Speaker 1: new book out called America's Bank, The Epic Struggle to
Speaker 1: create the Federal Reserve, And it's really very much a
Speaker 1: deep dive into the history and creation of the Federal Reserve.
Speaker 1: And and it's really apparent to me you spent a
Speaker 1: long time doing some really archival research on this. When
Speaker 1: we had launched a couple of summers ago, you were
Speaker 1: already a year or two into the research process, and
Speaker 1: here it is months and months later in the book
Speaker 1: is just coming out recently. What was the research process
Speaker 1: like for digging into the creation of the Federal Reserve.
Speaker 1: So that's a good question. Because my other books were
Speaker 1: mostly contemporary stories. This is a history. Although there is
Speaker 1: some contemporary aspects relative to what just took place, but
Speaker 1: most of it is really a deep historical go back
Speaker 1: and interview wood Row Wilson. You can't interview Carter Glass,
Speaker 1: Paul Warburg, Teddy Roosevelt. These are all big characters in
Speaker 1: the book. So you go to archives, and um, you
Speaker 1: wouldn't believe archives all of these famous people either in
Speaker 1: the library Congress or the Woodrow Wilson Library, Like you're
Speaker 1: doing White glove. Original document is white glove. Because you
Speaker 1: go into the say the Library Princeton, and um, they
Speaker 1: almost do a strip search. You can't take in you know,
Speaker 1: I can't take my cappuccino and with me because they
Speaker 1: don't want me spilling my cappuccino one hundred year old
Speaker 1: original pieces of parchment. I can't blame them, can't really
Speaker 1: blame my. I'm not allowed to take cappuccinos, by the way,
Speaker 1: in the living room either at my house. But that's
Speaker 1: for a different reason. All the Bloomberg people in relationists
Speaker 1: the entire places waterproof so's it's quite amazing. So each
Speaker 1: of these and there were about ten different sets of
Speaker 1: archives JP the Morgan Library of different basically bankers and
Speaker 1: politicians at the time. And what you see when you
Speaker 1: get into them is that although you can't to contemporaries interviews,
Speaker 1: there are no emails, people back then really wrote letters,
Speaker 1: and they really bared their souls and give an example
Speaker 1: of of something you can you can learn from then
Speaker 1: you couldn't learn today. Washington, d c. Obviously is a
Speaker 1: very hot, steamy town. Before the ear of air conditioning,
Speaker 1: political spouses would take the summer off. That was true
Speaker 1: in n in the summer when the Federal Reserve Act
Speaker 1: was really reaching a peak in terms of the legislation.
Speaker 1: So Ellen Wilson, the President's rather delicate wife, holds up
Speaker 1: in New Hampshire during the summer. So he's writing her
Speaker 1: virtually every day, and you're seeing in the archives the
Speaker 1: problems he's facing the legislation, which committees and committee congress
Speaker 1: people are giving him trouble, what his strategy is. He's
Speaker 1: telling her, don't worry. The press is writing this. They
Speaker 1: don't know what they're talking about. I'm gonna do an
Speaker 1: end run around him. People bear their souls and letters
Speaker 1: in a way that's more trustworthy than an interview, because
Speaker 1: you know, you go interview somebody, of course they're going
Speaker 1: to tell you what they want you to know. But
Speaker 1: is his Woodrow talking to his wife, or it's Paul
Speaker 1: Warburg talking to his most trusted comrade or something, and
Speaker 1: it just opens up a window into the contemporaneous activities
Speaker 1: back years ago that that sounds like it would have
Speaker 1: normally been dinner table conversation if if the misses was
Speaker 1: in town. But since he doesn't get to come home
Speaker 1: from work, how is your day, honey, here's what happened
Speaker 1: in Congress. He actually wrote specific details. Do these guys
Speaker 1: realize this stuff ends up in archives and libraries or
Speaker 1: is it just Hey, I'll be dead. I don't care.
Speaker 1: What's the thinking that. No, they're saving their letters, they're
Speaker 1: saving duplicates. Carter Glass, who many people may know from
Speaker 1: the Glass Steagel Act, but he's also the father, legislative
Speaker 1: father the Fed Reserve Act, a very fiery guy. He
Speaker 1: goes to the White House one day and Wilson shocks him.
Speaker 1: Glass wants to have on this emergent legislation for this
Speaker 1: new body, the Federal Reserve. He wants to be run
Speaker 1: by bankers, not by federal appointees, not by presidential appointees.
Speaker 1: Lewis Brand, Wilson's adviser, and William Jennings Bryant, his Secretary
Speaker 1: of State, says, uh, this is a new day and
Speaker 1: new a new dawn. This agency is going to run
Speaker 1: the banking system has to be presidential appointees. Wilson lays
Speaker 1: down the line. Glass goes back to his hotel. He's shocked,
Speaker 1: he's outraged. He's a kind of he's a conservative, doesn't
Speaker 1: he can't begins to write letters. You can see them
Speaker 1: today on the Raleigh Hotel stationary. That's where he stayed
Speaker 1: when he was in Washington. Page after page, he's exploding
Speaker 1: off the page, you know he was. He wasn't thinking
Speaker 1: then about his reputation for posterity because he sort of
Speaker 1: embarrasses himself. He's a He's finally says to somebody, I'm
Speaker 1: gonna call the president tomorrow and see if I can
Speaker 1: get him to change his mind. No way, Wilson's gonna
Speaker 1: change his mind. Wilson's made have made up his mind.
Speaker 1: But um, they they they bear themselves in a way
Speaker 1: that that we rarely see today. And it just because
Speaker 1: there's such big characters in history. You know, if if
Speaker 1: you're a nut for that sort of stuff, it's kind
Speaker 1: of fascinating. Let me ask a broader historical question. How
Speaker 1: come in the United States was one of the last
Speaker 1: major industrial countries to get a central bank. You look
Speaker 1: at Europe and Japan and elsewhere, just about everyone else
Speaker 1: at a central bank. Why were we so far behind
Speaker 1: the rest of the civilized world. So the thesis of
Speaker 1: the book is, this is our heritage. We rebel against
Speaker 1: the English king. Uh, we were at rebel against the
Speaker 1: central government. What's the first debate in American history. It's
Speaker 1: Hamilton's against Jefferson. Hamilton wants a central bank. Jefferson says, no,
Speaker 1: that's like the English tyranny that as settlers pushed west
Speaker 1: and the pioneers pushed west. They're continually saying, we don't
Speaker 1: want control by New York, we don't want control by Washington.
Speaker 1: This is recreating everything that we rebelled against. And by
Speaker 1: the way, Barry, look today, look to the Tea Party today.
Speaker 1: You know they don't want a strong central legency. They
Speaker 1: want to under the Fed right now. So in every
Speaker 1: country in Europe they sort of accepted, we have a
Speaker 1: national government, we have a national monetary system. Of course
Speaker 1: we're gonna have a central bank. But in America, you know,
Speaker 1: a good swath the population remains very touchy about it.
Speaker 1: Ask Rand Paul, this is this is our heritage. And
Speaker 1: if you look one whose last book, by the way,
Speaker 1: was and one of the main opponents of the federal
Speaker 1: reserve legislation is Charles Lindbergh, senior father of the Aviator,
Speaker 1: real populist out in Minnesota, so who held this district
Speaker 1: until a few years ago. In our day and age,
Speaker 1: Michelle Bachman, the Tea Party Report. You know, Crusader, This
Speaker 1: is not a coincidence. This is we have this populist,
Speaker 1: suspicious mindset in much of the country that always feared
Speaker 1: in Andrew Jackson's day, in Woodrow Wilson's day, and today
Speaker 1: that if you have a central bank, Wall Street's gonna
Speaker 1: run it, They're gonna be inco hoots against the common
Speaker 1: man and so on, and that's that's our legacy. There
Speaker 1: are people who wouldn't disagree with with those fears. Let
Speaker 1: let me ask you a question about the most surprising
Speaker 1: thing you found about the FED in your research. What
Speaker 1: really leapt out and surprised you. You know, I was
Speaker 1: surprised at how similar the eras were. People. We had
Speaker 1: a financial cray seven. We had a bank panic, a
Speaker 1: real panic. By the way, I don't mean red lines
Speaker 1: in the computer screen. I mean people running to the
Speaker 1: street corner to take their money for fd I c
Speaker 1: pree really and every any federal supervision control of the currency.
Speaker 1: One guy in Washington. That was it. But people were
Speaker 1: some people wanted deposit insurance, some people were afraid of
Speaker 1: moral hazard. That idea was, you know, very current JP
Speaker 1: Morgan steps in. He's kind of a hero, kind of
Speaker 1: like you know JP Morgan Chase today buying up bear Sterns.
Speaker 1: Six months later, people are accusing JP Morgan of having
Speaker 1: plotting the whole panic, and Teddy Roosevelt says, wait a second,
Speaker 1: this is getting out of hand. People are people are
Speaker 1: starting to say that every bank is something rotten in it.
Speaker 1: Their populous fighting bankers. Uh, there's a people who want
Speaker 1: the goal standard, people who are very upset about it
Speaker 1: because they think it's too deflationary, too tough on the
Speaker 1: average farmer, average worker. The the fights between regions of
Speaker 1: the country Republicans and Democrats sounds just like today. It's
Speaker 1: it's it's hard to I was shocked at how current
Speaker 1: the debates sounded as I read them. You're listening to
Speaker 1: Masters in Business on Bloomberg Radio. My guest today is
Speaker 1: author and journalist Roger Lowenstein. You probably know him from
Speaker 1: such books as When Genius Failed, The Rise and Full
Speaker 1: of Long Term Capital Management, as well as Buffett Making
Speaker 1: of an American Capitalist. I found Origins of the Crash
Speaker 1: about the two thousand Crash to be fascinating book, and
Speaker 1: it was tremendously helpful in my own research about compensation
Speaker 1: and stock options. And and I recall you're the first
Speaker 1: person who reported about the Hinz executive who I think
Speaker 1: it was in had gotten a hundred million dollars. Some
Speaker 1: insane that back when a hundred million dollars was real money,
Speaker 1: it was. It was crazy. So let's talk a little
Speaker 1: bit about your your research and your writing process. Us
Speaker 1: walk us through through your process. How do you decide
Speaker 1: on a topic. Where do you begin? Well, if you
Speaker 1: let's look at the recent book America's Bank, it's a
Speaker 1: history of the founding the Federal Reserve. I was interested
Speaker 1: in doing a history. I began that one after the
Speaker 1: last book, which was the End of Wall Street, which
Speaker 1: was a contemporary story about the mortgage crash. I wanted
Speaker 1: something historical. And as my editor and I were talking,
Speaker 1: you know, it was we were very aware of how
Speaker 1: present the Federal Reserve today had been in everything throughout
Speaker 1: you know, throughout this experience in two thousand and two
Speaker 1: thousand and nine. And she said, at one point, you know,
Speaker 1: be interesting to look at what what the country was
Speaker 1: like before we had a FED, How we're crises handled?
Speaker 1: Why was it? The people thought, why didn't we have
Speaker 1: one until so late? Why do they think we needed one?
Speaker 1: How do they get one? And it just seemed it
Speaker 1: just seemed to fit there. Would it would be in
Speaker 1: a sense of great book end to the contemporary history
Speaker 1: we're living today. So you said you were working with
Speaker 1: your editor and she help you shape. I mean, we're
Speaker 1: always throwing ideas back and forth and and she said, um,
Speaker 1: and she's not a financial expert per se. She's and
Speaker 1: got off. She's in my mind, the best editor there is,
Speaker 1: but she's throwing out topic ideas. And then I would
Speaker 1: go back and say, hey, is there something to this idea?
Speaker 1: And started to research, um, what went into the making
Speaker 1: of the Federal Reserve? What else has been written about it?
Speaker 1: How resident is it to today? And you know, it's
Speaker 1: just astonished. There's this incredible, mysterious trip that bankers in
Speaker 1: the U. S. Senator take down to a remote island
Speaker 1: in Georgia. Because the thing is so controversial, they got
Speaker 1: to plot it in secret. There's a Wall Street crash
Speaker 1: very much like the crash that um that we just
Speaker 1: lived through. There are great characters, great presidents, um, financial
Speaker 1: tycoons and so on. And at that point I go
Speaker 1: back to her and say, I think we got one here,
Speaker 1: and she says, okay, put it in paper, because you
Speaker 1: until you write a proposal, anything can sound good, uh,
Speaker 1: in a coffee shop or you know, over the dinner table.
Speaker 1: But and you're I think I wrote a proposal about
Speaker 1: is something like that? And at that point she says,
Speaker 1: wow this. You know you've got something here and let's go.
Speaker 1: And then uh, you do a timeline. That's a that's
Speaker 1: a for me, the most important next apt chronology of
Speaker 1: a chronology of the events. What happens, you know, when
Speaker 1: does the book start? And this book has a background period.
Speaker 1: We go into the Gold Silver debates, across a Gold
Speaker 1: Speech and all that stuff in the late nineteenth century.
Speaker 1: To set the table um, Paul Warburger is a major character.
Speaker 1: He this German financier emigrates the US, is astonished that
Speaker 1: our system is so primitive, and you know, and he
Speaker 1: begins to lobby for the federal reserves. So when does
Speaker 1: he come in? When does he come into this country?
Speaker 1: And you go on with a timeline so that as
Speaker 1: you're getting information, you can add, you can fill it
Speaker 1: into the timeline. So things are where you want to
Speaker 1: find them when you go to you go to writing
Speaker 1: the book. So let me talk a little bit about
Speaker 1: some of your other books. Do you have any personal
Speaker 1: favorites as a finished work? Which one of those books
Speaker 1: the finished products are you happiest with? You know, it's
Speaker 1: really for me as a writer, like asking about my
Speaker 1: which one of your children? Of course, so I like
Speaker 1: my three children best. After that, I like my six
Speaker 1: books right right now, I'm very partial to America's Bank.
Speaker 1: You know, it just came out. The history, the historical characters, Um.
Speaker 1: The process of trying to bring them alive, UM, was
Speaker 1: just enriching and fun for me. And UM, so that's
Speaker 1: because it's so new, you know, you're it's not surprising.
Speaker 1: I would say that you mentioned origins of the crash
Speaker 1: the compensation system, and that for me was really fun
Speaker 1: to dig into what's really wrong with the compensation system
Speaker 1: and and to flush it out in a way I
Speaker 1: hope hadn't been done before. Uh, the Pension book. You know,
Speaker 1: in a way that was too early, because the idea
Speaker 1: of that book was, hey, we have a real way,
Speaker 1: you know, we have a problem. But I think it
Speaker 1: still holds up today that these cities and states you
Speaker 1: can't just keep legislating increases saying you know, we'll take
Speaker 1: up we'll take care of it later. And that I mean,
Speaker 1: look around today, you know, Puerto Rico, Illinois, wherever you look,
Speaker 1: all these cities in California, Detroit, it's it's come home
Speaker 1: to roost um. The Buffet book was really fun to
Speaker 1: write because I was sitting in people's living rooms, partically
Speaker 1: in Omaha, asking him about this little, um precocious kid
Speaker 1: they knew named Warren, who was telling everybody he was
Speaker 1: gonna be a millionaire back in the in the middle
Speaker 1: of the depression in Nebraska, when nobody knew what a
Speaker 1: million dollars was. Um, you know, so you liked them
Speaker 1: all in a different way. When Genius Failed was a
Speaker 1: really tough reporting exercise because as much as everybody wants
Speaker 1: to get in on the Warren Buffet story and say, hey,
Speaker 1: it was Warren and me, you know, I helped him
Speaker 1: out on this, nobody wants to be part of the
Speaker 1: when Genius failed story. Nobody wants to be part of
Speaker 1: a hedge fund that went down. I'm Barry Ridults. You're
Speaker 1: listening to Masters in Business on Bloomberg Radio. My guest
Speaker 1: today is author Roger Lowenstein. His latest book is America's Bank,
Speaker 1: the Epic struggle regarding the creation of the Federal Reserve.
Speaker 1: And we were talking earlier about one of my not
Speaker 1: just favorite Lowenstein books, but one of my all time
Speaker 1: favorite finance books is When Genius Failed. And not just
Speaker 1: because it's such a fascinating story and it is an
Speaker 1: epic story of of hubrist and failure and and Nobel
Speaker 1: laureates and people being blind blindsided by their own failings
Speaker 1: and shortcomings, but the characters are so vivid and the
Speaker 1: story is so amazing, and really it was the last
Speaker 1: great opportunity for Wall Street to learn a lesson about risk,
Speaker 1: and that was really a great missed opportunity. I recall
Speaker 1: you ending the book UM and ending UH the discussion
Speaker 1: of origins of the crash with a reference back to, Hey,
Speaker 1: if the FED didn't bail out Wall Street with the
Speaker 1: collapse of long term capital management, what lessons might the
Speaker 1: Street have learned? So I said it in the end
Speaker 1: of the book. Uh. Two things at the end of
Speaker 1: but one was I thought that the Fed on balance
Speaker 1: UM was wrong to organize the rescue because it was
Speaker 1: a private sector rescue. So no dollars went into it.
Speaker 1: But you know, when you have the New York Federal
Speaker 1: Reserve Bank calling in the sixteen because Wall Street firms,
Speaker 1: that's some pretty heavy pressure. You can't say, I have
Speaker 1: a busy calendar. I can't make you cannot tell the
Speaker 1: New Federals or if you have busy calendar, your chief regulator.
Speaker 1: And I really thought at the time that as dire
Speaker 1: as the crisis was, that Wall Street and the economy
Speaker 1: would have worked its way through um. And look, you
Speaker 1: don't want the government to come in unless they really
Speaker 1: really really have to judgment call. But that was my judgment.
Speaker 1: And the other thing I said at the end of
Speaker 1: the book was I made a reference to the dot
Speaker 1: com bubble, which was riding high at the time, and
Speaker 1: and this might have let air out of the bubble
Speaker 1: before it inflated so much so much larger. But of
Speaker 1: course the real comparison, you know, and people have said
Speaker 1: this to me later on, was that when Genius failed
Speaker 1: about this collapse, his hedge fun was really a dry
Speaker 1: run and a mislesson for the mortgage crisis. For the
Speaker 1: bubble that you know so much seems similar. If you
Speaker 1: look at a firm like Bear Stearns, these seemingly well
Speaker 1: capitalized Wall Street firms with seemingly safe assets, you know,
Speaker 1: mortgage securities, triple a uh, you know, low risk rating,
Speaker 1: all of that, and suddenly nobody wants them. All correlations
Speaker 1: go to one. Nobody wants any kind of these assets,
Speaker 1: and just in so many. In fact, I did a
Speaker 1: piece in the spring of two thousand and eight, the
Speaker 1: tenth anniversary of when ltc M began to get into trouble,
Speaker 1: uh and right around the time of Bear Sterns, because
Speaker 1: the comparisons uh were so close to the level of leverage. Well,
Speaker 1: LTCM a hundred to one, bear Sterns thirty five or
Speaker 1: forty five to one, that's still a tremendous amount of
Speaker 1: average dicey assets. Ltc M was backwater Russian paper as
Speaker 1: amongst other stuff. Who really knew what securitized sub prime
Speaker 1: mortgages were pre crisis. That's really something we all kind
Speaker 1: of learned it once. And correlation is going to one
Speaker 1: when nobody wants when the when the proverbially, you know
Speaker 1: what hit the fan. Not only did nobody want Russian debt,
Speaker 1: nobody wanted any kind of debt other than US treasuries,
Speaker 1: and the same thing happened. You know, look in in
Speaker 1: the fall of two thousand and eight, General Electric could
Speaker 1: not sell its paper. Nobody wanted commercial debt, nobody wanted
Speaker 1: risky paper with even this until of risk. And just
Speaker 1: like General Electric or that's just like that point general
Speaker 1: everything is a real example. You know, Goldman Sachs, which
Speaker 1: on paper was completely solvent, was running off to Warren
Speaker 1: Buffett to get capital because he was sort of the
Speaker 1: only place that they could get capital from. And these
Speaker 1: examples are just you it was just one firm and
Speaker 1: a few firms around it. In two thousand and eight
Speaker 1: it was all of Wall Street, so that was really
Speaker 1: a missign And in terms of limits on leverage, reliance
Speaker 1: on on arithmetic risk measures, which is really a big
Speaker 1: theme in when Genius failed. These these you know, computerized
Speaker 1: value at risk measures tell you you can only you're
Speaker 1: only gonna lose so much. Why because the computer says
Speaker 1: that's that's how much you've lost in every every previous day.
Speaker 1: What about if tomorrow is different and they didn't learn
Speaker 1: that lesson in what do you know suddenly in two
Speaker 1: thousand and eight tomorrow was different. So you had a
Speaker 1: firm bear Stearns was trading what a hundred and seventy
Speaker 1: bucks I think peaked around that and and a year
Speaker 1: later it's sold for two dollars two dollars, but they
Speaker 1: did lobby it back up to ten dollars. My favorite
Speaker 1: picture of the entire crisis, some wise guy took a
Speaker 1: two dollar bill taped it to the front glass door
Speaker 1: of the new beautiful bear Sterns building over on Vanderbilt
Speaker 1: and forty and there's a picture of the two dollar
Speaker 1: bill with the bear Sterns logo that that is now
Speaker 1: the JP Morgan building which they got as part of
Speaker 1: the deal, that that might be one of the best
Speaker 1: assets they picked up in that deal for pennies literally
Speaker 1: pennies on the dollar. So lost opportunity to um prevent
Speaker 1: a little moral hazard, inject a little normal risk management.
Speaker 1: What other lessons do we pick up from from lt
Speaker 1: CM that are applicable not to oh eight but today. Well,
Speaker 1: one lesson is that when interest rates are very low, uh,
Speaker 1: there's a particularly strong ten and see to look for
Speaker 1: yield elsewhere and to reach to reach you know, how
Speaker 1: often what is it hogs get fat, pigs get slaughter?
Speaker 1: Is it the diverse but reaching for a little bit,
Speaker 1: reaching for extra yield. Uh, when the safe stuff isn't
Speaker 1: isn't paying off? Why do you think it's safe? Why
Speaker 1: do you think the other stuff is paying more yield?
Speaker 1: And the way to invest if you want to buy
Speaker 1: the risky stuff, buy it when it's down by it,
Speaker 1: when it's thirty cents in the dollars, or at least
Speaker 1: when it's being this when you're getting paid for it.
Speaker 1: That way. If you're wrong, yes you're wiped out. But
Speaker 1: if you're right, you really get paid for it. But
Speaker 1: but to buy a piece of potentially really risky paper
Speaker 1: to make um, you know, a couple of a hundred
Speaker 1: extra basis points, you know that, I think that's really lesson.
Speaker 1: And to think that an asset that everyone regards as
Speaker 1: safe therefore makes it safe. Look at these um mortgage securities. Okay,
Speaker 1: so standard pors moody is, you know, Fitch. They all
Speaker 1: said their trip bal a rated. But how many people
Speaker 1: really looked at the Did anyone look at the securities
Speaker 1: behind them? Did anyone look at the homes behind them?
Speaker 1: The quality of mortgages so painfully few, you know, do
Speaker 1: your own research, look at within those securities the fact
Speaker 1: that everyone's in them might tell you, in fact that
Speaker 1: they're selling for a pretty a high price, that they're
Speaker 1: selling it a premium, and you should be extra wary.
Speaker 1: And that that was a lesson that was just skated over.
Speaker 1: And I think the other lesson is the over reliance
Speaker 1: on the I mentioned this before, Uh, the arithmetics, the
Speaker 1: computerization of Wall Street. Um, don't get fooled by these
Speaker 1: spreadsheets and these you know, thirty page printouts. Look at
Speaker 1: the underlying asset. You know, release your inner war and buffet,
Speaker 1: so to speak. Beneath every security, there's an asset on
Speaker 1: Main Street? What are the houses really worth? Don't look
Speaker 1: at the trading patterns. The trading patterns don't tell you anything.
Speaker 1: All they do is tell you what somebody else is
Speaker 1: willing to pay for it yesterday. Because when liquidity drives up,
Speaker 1: that's a meaning. This number, you know, there was there
Speaker 1: was an embedded red flag in the whole proposition. And
Speaker 1: I heard this repeatedly in oh four, oh five or six.
Speaker 1: This is as safe as treasuries. It's rated triple A,
Speaker 1: but it pays two fifty bases points more. Someone should
Speaker 1: have turned around and said, isn't that economically impossible. Either
Speaker 1: it's riskier and paying more, or it's not paying more
Speaker 1: and it's the same risk. How do you get this
Speaker 1: wildly disparate spread between two triple A rated things. Everybody
Speaker 1: ignored that in the Reach for You. Barbara Reguez at
Speaker 1: f p A, the Great Mutual Fund Investor, was one
Speaker 1: of the few people who didn't ignore it. And I
Speaker 1: think two thousand and six or seven he went to
Speaker 1: the one of the meetings of one of the big
Speaker 1: credit rating houses and he said, he asked him a question,
Speaker 1: what happens what's the assumption behind your your your risk
Speaker 1: ratings on real estate? And they said, our our assumption
Speaker 1: is that the increase in real estate values is going
Speaker 1: to taper off. And he said, well, what happens to
Speaker 1: your assumptions if they don't taper off? But if real
Speaker 1: estate prices are flat And they said, well, the models
Speaker 1: will be a little off then. And then he said,
Speaker 1: what happens to your models if in fact, real estate
Speaker 1: prices in the US fall by say two percent a
Speaker 1: year And they said, this is this is documented in
Speaker 1: the book at the end of Wall Street. They said,
Speaker 1: then the model completely breaks down. So here's a model
Speaker 1: one of the three big rating agencies on which you
Speaker 1: know thousands of investors are relying. And the assumption is
Speaker 1: that there can't even be a two percent per year
Speaker 1: decline in real estate prices, and before the next season comes,
Speaker 1: we're having a five. That's what kind of uberses that.
Speaker 1: Forget the Great Depression where real estate prices, depending on
Speaker 1: what data you want to use, fell fifty. Back then,
Speaker 1: mortgages were three or five year interest only you had
Speaker 1: to roll them over. But just go back to the
Speaker 1: early nine indies and you had a big real estate
Speaker 1: pulled back from the peak of the late eighties. It
Speaker 1: wasn't unthinkable to see flat real estate here in New
Speaker 1: York City. You bought something in eighty nine, you didn't
Speaker 1: get back to break even until ninety eight or so.
Speaker 1: How could that not be? There was this myth that
Speaker 1: real estate doesn't go down, And as you say, there
Speaker 1: was a terrible real estate depression in basically nine to
Speaker 1: It hit Texas, it hit the Midwest, it hit New
Speaker 1: England and hit New York, hit Atlanta, hit Florida, um
Speaker 1: everywhere where Moody's in SMP actually operated. Yeah, so I
Speaker 1: don't know how this you know it was a sort
Speaker 1: of at this time. It's different. Uh, same thing with
Speaker 1: the tech bubble. Uh, you know, this is different new
Speaker 1: economy all that stuff. Um. Look, it happened with the
Speaker 1: railroads in the in the eighteen sixties, seventies and eighties. Um,
Speaker 1: we have a lot of railroads today. But those original
Speaker 1: securities aren't worth anything, most of them. Uh, there's this
Speaker 1: fiber optic, television, automobiles crossing right name and industry. There
Speaker 1: was a boom and bust, and then you building on
Speaker 1: the on the survivors. Virtually all of the early computer makers,
Speaker 1: the Tandi's and so on, they're gone. Computers are here,
Speaker 1: Both those early manufacturers aren't here. People who want to
Speaker 1: find your work outside of Amazon and Roger Lowenstein dot com.
Speaker 1: Where else can they see what you've done? You know,
Speaker 1: Barnes and Noble, Amazon, the website, Roger Lowenstein dot com,
Speaker 1: and the indie bookstores. I love to sell books in
Speaker 1: indie bookstores. There you go in independent bookstores. We've been
Speaker 1: speaking with Roger Lowenstein. Be sure and hang around for
Speaker 1: the rest of our conversation. That will put up on
Speaker 1: the web and on Apple, iTunes, SoundCloud, and Bloomberg dot com.
Speaker 1: Check out my daily column on Bloomberg View dot com.
Speaker 1: Follow me on Twitter at rid Halts. I'm Barry rid Holts.
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio.
Speaker 1: Masters in Business is brought to you by x On
Speaker 1: Mobile Energy Lives Here. Welcome back to the podcast. My
Speaker 1: guest this week is Roger Lowenstein, who is actually an
Speaker 1: author I've been reading for quite a while and I've
Speaker 1: been a huge fan of his work. His his books
Speaker 1: are um, how do I say this and not embarrass him?
Speaker 1: They are the standard by which all financial writing is measured.
Speaker 1: There aren't a lot of people who can take a
Speaker 1: relatively dry topic and make it come to life the
Speaker 1: way you can. And you seem to pensions, uh, complex
Speaker 1: financial instruments that crash on an obscure hedge funds stop
Speaker 1: and think about, and the Federal Reserve. These are terrible,
Speaker 1: terrible topics that you had to make a compelling pitch
Speaker 1: for a publisher to say that sounds like a great idea,
Speaker 1: and you described the pitch for America's Bank. I remember
Speaker 1: when Genius Fail came out that was relatively soon after
Speaker 1: everything kind of hit the fan, wasn't it? How deep
Speaker 1: and long was that after the collapse. That was a
Speaker 1: real rushed pace because that it was so tied to
Speaker 1: one event. Um they that rush paste suits you because
Speaker 1: that book is so readable you don't even need an
Speaker 1: interest in finance. It's a great narrative thing of itself.
Speaker 1: That book came out excuse that they imploded in the
Speaker 1: full of course, and the book came out exactly two
Speaker 1: years later. So that's a story search it. You got
Speaker 1: to write it. The publisher needs, you know, a good
Speaker 1: eight months to turn around, so it was it was
Speaker 1: a very fast You should get Brad Pitt to do
Speaker 1: a movie version of you know, he should call my agent.
Speaker 1: All right, well, I think Michael Lewis has him lockdown
Speaker 1: for money. Bull was not only a great book, but
Speaker 1: a fabulous movie. Everything I hear about The Big Short
Speaker 1: is that it's a great movie. But I think I
Speaker 1: would actually like you to play, you know, a lead role. Okay,
Speaker 1: no wants to see my fat behind on screen. This
Speaker 1: when Genius failed. It's such a great story. It's it's
Speaker 1: from a purely let me gush a bit, from a
Speaker 1: purely financial perspective. It's a fascinating tale about Nobel Laurel
Speaker 1: its and complexity and value at risk and all the
Speaker 1: other we talked about, all the mathematical um illusions that
Speaker 1: create a full sense of certainty that lead people to say, yeah,
Speaker 1: we could buy this obscure paper at a hundred and one.
Speaker 1: But the narrative about all the people is absolutely fascinating. Well,
Speaker 1: thank you the narrative people. Really, I mean you you
Speaker 1: opened up by saying you know you're right about boring topics,
Speaker 1: but you you don't make them boring. That's the people wrote,
Speaker 1: not boring, right, So that's always the key. So you know,
Speaker 1: this America's Bank about the FED, but it's not about
Speaker 1: the FED. It's about Woodward Wilson and Paul Warburg and
Speaker 1: JP Morgan and Teddy Roosevelt. These people are fun in
Speaker 1: um and when genius failed, the narrative in way I
Speaker 1: think it was almost a template narrative for financial crisis.
Speaker 1: You had these guys who were considered the smartest guys
Speaker 1: on Earth or on Wall Street. So let's go over
Speaker 1: some of the list. You have John mer John Merryweather,
Speaker 1: who was head of Solomon Brothers, or the head of
Speaker 1: the risk arbitrage that the risk arbitrage, the UH, the
Speaker 1: trading the high powered trading group at Solomn Brothers did
Speaker 1: this in house, left with a few of his guys
Speaker 1: such as Eric Rosenfeld, Larry hillibrand Victor Gatti Uh to
Speaker 1: start their own head shoes Stacks development in that group.
Speaker 1: I can't remember where shoes stack came from. So um
Speaker 1: but then we also had not one, but two Nobel Laureates.
Speaker 1: Of course they became Nobel Prize winners during um uh
Speaker 1: during the period in which LTCM was up and running.
Speaker 1: Uh well it wasn't wasn't um right? But what uh
Speaker 1: Myron Shoals didn't he win previous to No, they both won.
Speaker 1: So but look they were acclaimed to claim they had
Speaker 1: invented along with fish are black the black shows option
Speaker 1: pricing theory. So you know who could this is like
Speaker 1: getting Jonas Salt to prescribe penicillin. You know they are
Speaker 1: you know who who could better trade risk? These guys
Speaker 1: that had amaze invented if they created the method for
Speaker 1: evaluating risky they created the modern method for evaluating a
Speaker 1: risk in an arithmetic sense, which is different, by the way,
Speaker 1: than risk the notion of uncertainty. If you look at,
Speaker 1: for instance, if you're standing at the edge of the cliff,
Speaker 1: and and you see maybe tend people the edge of
Speaker 1: the cliff, and you say, I wonder what the odds
Speaker 1: are that one of those people are going to fall
Speaker 1: off the cliff. That's uncertainty, not risk. You can't calculate
Speaker 1: the odds. You know that the closer they get to
Speaker 1: the cliff, the higher degree of likelhood is, but there's
Speaker 1: no way of measuring it. However, if someone said to you,
Speaker 1: what's if I roll dice, what's the odds I'm gonna
Speaker 1: roll snakeheads snake guys, I can tell you it's one
Speaker 1: out of thirty six. That's the difference between how regulated
Speaker 1: arithmetic risk and uncertainty. Most things that happen in financial
Speaker 1: markets really are given over to uncertainty. What's the risk
Speaker 1: that some company is going to have a terrible quarter?
Speaker 1: Is it one out of three, one out of four,
Speaker 1: one out of eight? Hard to measure. The conceit of
Speaker 1: these risk managers, of of of these scholars was to
Speaker 1: think that they could turn financial markets from uncertainty to risk,
Speaker 1: that it could be calculable, that they could determine down
Speaker 1: to the penny what their risk exposure was, and it
Speaker 1: turned out to be dead wrong. Isn't that the underlying
Speaker 1: issue with all models? You know? The statistician George Box
Speaker 1: has a wonderful quote, all models are wrong, but some
Speaker 1: are useful. Once we forget that this is merely a
Speaker 1: useful model and start thinking it's true, it's reality, not
Speaker 1: just a depiction of reality, doesn't that lead us down
Speaker 1: the road to increasing the possibility of of some implosion? Yes,
Speaker 1: because you you bet on. Look, if if you had
Speaker 1: been if you'd ask some uh, some guy with a
Speaker 1: computer model in the year two thousand, what are the
Speaker 1: odds that we would have a cataclysmic breakdown of the
Speaker 1: economic system and then unemployment would go to ten percent?
Speaker 1: He would say, we haven't had a real breakdown since
Speaker 1: the Great Depression. Unemployment hasn't been ten percent since the
Speaker 1: early nineteen eighties. You know, I would say, the odds are,
Speaker 1: you know, one and a hundred if this happens. If
Speaker 1: you asked him now, he'd say, even money, even money,
Speaker 1: you know, isn't that? Isn't that like the hundred year floods.
Speaker 1: They always show these houses washed away on the banks
Speaker 1: of the missiles we're getting every two years. Yeah, you're right,
Speaker 1: it's maybe we need to rename the hundred of your flood.
Speaker 1: That's very different than if you're at Las Vegas. You
Speaker 1: know what the odds are at black check and they
Speaker 1: don't change, so you can make an intelligent mathematical bet
Speaker 1: at Black Chack. Securities are different, to say the very least.
Speaker 1: So UM. John Corzine is mentioned in Long Time Capital
Speaker 1: Management in One Genius Failed. What was his involvement in
Speaker 1: uh in the hedge Fund? He had a very significant
Speaker 1: involvement in that story. And um, this is the former
Speaker 1: CEO of Goldman Sachs and then governor and senator from
Speaker 1: New Jersey who ultimately ended up running UM. What was
Speaker 1: the company that we had a little Jersey company with
Speaker 1: a little sniff, Yeah, oh, dear lord, you'll plug it in,
Speaker 1: but pop in. We were talking about the reading glasses.
Speaker 1: This is another So he m global, m F global,
Speaker 1: very good. So I liked John a lot, and um
Speaker 1: he was a very helpful source to me when I
Speaker 1: was researching the book. He had UM a large involvement
Speaker 1: in some ways the tragic involvement with LTCM LTCM needed
Speaker 1: this is the hedge fund. Of course. John Murraywether's hedge
Speaker 1: fund needed strong financial backers, people who would fund its trades,
Speaker 1: and they basically went to the main Wall street firms,
Speaker 1: so Mol Goldman and so Goldman was very very involved
Speaker 1: in UM backing LTC. M uh core design at the
Speaker 1: time was co chief coc Co Ceo. I believe the
Speaker 1: title was with a guy named John, Hank Paulson, UM
Speaker 1: and Goldman. Believe it or not, it is hard to
Speaker 1: believe because it seems so Reacon was then a private firm.
Speaker 1: That's right. Everybody forgets most of these banks were private
Speaker 1: firms prior to twenty years ago. So that makes a
Speaker 1: big difference because you know, Merrill Lynch is UM lending
Speaker 1: some of their credit over to LTCM, so is Morgan Stanley.
Speaker 1: Uh So, why does it make a difference that they're
Speaker 1: a partnership and not a public because doesn't Merrill go
Speaker 1: home at night and don't worry about it when the
Speaker 1: guys go home from Goldman. It's their capital in the line.
Speaker 1: It's a partnership. It's owned by John Corsign and Hank
Speaker 1: Paulson and the other you know senior bankers. A joint
Speaker 1: and several liability means that if the firm collapses, they
Speaker 1: don't just lose their stock options, they lose their entire everything.
Speaker 1: They are on the hook as partners untill every partner's
Speaker 1: assets are exciting. And look, let's let's you know, at
Speaker 1: Meryl Today or at at at any public securities firm.
Speaker 1: The people who are called partners aren't really partners. Their
Speaker 1: managing directors or whatever shareholders. They own a small scintilla
Speaker 1: of the firm, but their liability is limited to that ownership.
Speaker 1: But the partners at Goldman owned it all. So the
Speaker 1: exposure to ltc M was their exposure. So what happens
Speaker 1: as lt cm UH starts to go down UH is
Speaker 1: they're scrambling around for money and they're turning to the
Speaker 1: big Wall Street firms. John Corsign is very involved in
Speaker 1: trying to get um UH big folks on Wall Street,
Speaker 1: Warren Buffett, others to put up money. Goldman thinks about
Speaker 1: whether it should recapitalize UM ltc M. At the same
Speaker 1: time his partners are getting UH core designs. Partners at
Speaker 1: Goldman are getting more and more upset with him because
Speaker 1: they don't want more of their capital risk. And to
Speaker 1: make matters worse, Goldman has an I P. O scheduled. Okay,
Speaker 1: right in the middle of this, what do you want
Speaker 1: to do? You know, when you have an I p O.
Speaker 1: You want to have a road show. You want to
Speaker 1: direct dress yourself up, you want to look pretty. We're
Speaker 1: a great firm. We've been around since uh you know
Speaker 1: Sam Sacks in nine ten or whatever it was. You
Speaker 1: don't really want to go on the road and say, oh,
Speaker 1: we got major exposure to the worst hedge fund implosion
Speaker 1: in history, in history. And as this is going down,
Speaker 1: core Design is battling his partners. As the FED is
Speaker 1: telling all the Wall Street banks you gotta go in.
Speaker 1: You each got to put up a few hundred million
Speaker 1: dollars to bail out this firm, Core Design is getting
Speaker 1: it from his partners, and he really, um, he really
Speaker 1: lays his own backside on the line. At the end
Speaker 1: of the day, Goldman does join the consortium. Uh, they
Speaker 1: do bail out LTCM. Uh. The I p O is
Speaker 1: post owned, but at the moment it's canceled that nobody knows.
Speaker 1: Goldman is itself uh suffering huge losses because they owned
Speaker 1: some of the security same securities the LTCM does. Everybody's
Speaker 1: getting everybody's Piggy the same Meryl takes a terrific loss
Speaker 1: to UH and John Corzyne is sacked and loses his
Speaker 1: loses his job, he goes into politics, and goes into politics,
Speaker 1: and and um, you know, I think we we talked
Speaker 1: about MF Global, and I wondered after that went down
Speaker 1: if some of that over reaching there was an attempt
Speaker 1: to regain some of the rehability loss luster at at
Speaker 1: the unfortunate way his career ended at Goldman. But I
Speaker 1: really think, um, he was being a citizen of Wall
Speaker 1: Street and a citizen of the country when he said
Speaker 1: we we got to participate in this, We got to
Speaker 1: see this thing through. So he fell on his sword.
Speaker 1: Quite fascinating. There's a footnote to the rescue of Long
Speaker 1: Term Capital Management. Of all the banks on Wall Street,
Speaker 1: one refused to participate, That's right. So that was bear
Speaker 1: sterns Uh. They were the prime book broker of of LTCM.
Speaker 1: So they said, we have too much exposure to LTCM already.
Speaker 1: We can't bail them out. We're already on in the
Speaker 1: hook as a counter party, and we have holdings and
Speaker 1: we have this, and we have that. What were the
Speaker 1: repercussions of that a decade later. Well, so that's a
Speaker 1: great you know, Wall Street parlor discussion. Jimmy Caine didn't
Speaker 1: want any more exposure than it came time to help
Speaker 1: out Bear. Was anybody going to help them? And so on?
Speaker 1: Um uh, you know, at the end of the day,
Speaker 1: JP Morgan Chase did come in to buy them at
Speaker 1: two dollars, at two bucks, but down from almost right
Speaker 1: and with the Fed's backing. Let's not forget it was
Speaker 1: only agreed to guarantee. You know, Carl con said it,
Speaker 1: you want a friend on Wall Street by a dog.
Speaker 1: I think if someone had thought Bear Stearns was worth uh,
Speaker 1: you know, twenty bucks, they would have paid twenty bucks
Speaker 1: and everyone was terrified. No one want to step back. Yeah. So,
Speaker 1: although it certainly seemed to be poetic justice, I think
Speaker 1: that's the point you're arriving at it, and I agree
Speaker 1: with you. You know, suddenly the tables returned. I don't
Speaker 1: think that's the reason that that they came a cropper.
Speaker 1: I I you know, people in Wall Street, we're gonna
Speaker 1: offer whatever they thought Bear Stearns was worth, not a
Speaker 1: penny more, not a penny less on account of what
Speaker 1: they had or hadn't done for LTCM. Wall Street just doesn't.
Speaker 1: It's it's too cold blooded, right, it's too bloodless for
Speaker 1: that to have happened. But it's still there's a touch
Speaker 1: of irony in that. Here, here's the one firm that
Speaker 1: didn't participate in that. It's very ironic. That's right to
Speaker 1: say the least um so Lehman participated didn't do them
Speaker 1: a lot of good ten years later. Now, now my
Speaker 1: favorite footnote with Lehman. Since you brought up the gentleman
Speaker 1: name Warren Buffett, and not a lot of people knew this,
Speaker 1: I dropped this into bail outmation. I've mentioned that many times.
Speaker 1: People say, I don't I never heard that before. Is
Speaker 1: that true? When Lehman was spending the summer looking for
Speaker 1: financing and we have the Korean finances amidst Bank of
Speaker 1: Mitsubishi and all these people who ultimately fell through, Buffett
Speaker 1: made a very credible multibillion dollar offer to Dick Fold
Speaker 1: of Lehman brothers, including and and by the time we
Speaker 1: got to oh eight, Berkshire Hathaway was essentially the Wall
Speaker 1: Street equivalent of the Good Housekeeping Seal of approval, and
Speaker 1: Fold said, look at this terrible deal. Uncle Warren is
Speaker 1: offering us. This is awful. He's trying to steal the company.
Speaker 1: It turns out that that was a much better deal
Speaker 1: that he ultimately ended up doing with Goldman Sachs, a
Speaker 1: much bigger, better, stronger bank. Goldman got better, worse terms
Speaker 1: than Dick Fold rejected. Yes, because the when he when
Speaker 1: Buffett did the Goldman deal, although Goldman's obviously stronger firm,
Speaker 1: the conditions on Wall Street by then had become so
Speaker 1: much more die or that. But that was three months later.
Speaker 1: It's not like it was years later, four months later.
Speaker 1: It was. Yes, it was after Lehman said no to Warren,
Speaker 1: and ultimately, now it turned out at that point Goldman
Speaker 1: was you know, everybody was saying, o our Morgan Stanley
Speaker 1: and Goldman going to be the next martl the next Lehman.
Speaker 1: At that point, Goldman was not in a position to negotiate. Obviously,
Speaker 1: had Dick Fold cut that deal, it's very unlikely that
Speaker 1: Lehman would have gone down, because you know what that
Speaker 1: would have done for its confidence. But Dick Fold, you know,
Speaker 1: you get a better deal, and he got wrong. You know,
Speaker 1: the amazing thing is Folded Buffett a favor because between
Speaker 1: REPO one oh five and everything else. Who news knows
Speaker 1: how long it would have taken for Buffett to make
Speaker 1: his money back. Maybe he never makes it. Maybe he
Speaker 1: never makes it back. That's correct, that's correct, And so
Speaker 1: we end up with a situation that Fold, being not
Speaker 1: especially smart or or let's just say, especially arrogant about
Speaker 1: the deal, rejects Buffett. Sends Buffett a few months later
Speaker 1: into the arms of a much better deal, which ultimately
Speaker 1: made him what was in a nine percent ten percent
Speaker 1: coupon plus a nice slug of equity that was a
Speaker 1: home run for Yes, I heard Buffett talking about it
Speaker 1: at Berkshire's annual meeting. I can't recall his last year
Speaker 1: the year before, but he started to talk about how
Speaker 1: it was ten percent and he said, you know, uh,
Speaker 1: we get paid even when we're sleeping. Ten percent tick
Speaker 1: tick tick with the deal made him very happy, to
Speaker 1: say the least. So let's talk a little bit about
Speaker 1: Warren Buffett. And you wrote a book on him before
Speaker 1: he was the legend he is today. What was it
Speaker 1: like researching Buffett in Omaha? What was that process like?
Speaker 1: It was a lot of fun because, um, you know,
Speaker 1: some people are famous because of one thing that happens
Speaker 1: in their career or because they're successful. But um, if
Speaker 1: you went back, um earlier in their career, you know,
Speaker 1: in their childhood, you wouldn't necessarily see that. You know,
Speaker 1: young Michael Eisner was going to be in the entertainment business.
Speaker 1: There are very few people. You know, Steve Jobs is
Speaker 1: obviously Steve Jobs from the moment. You know, he was
Speaker 1: different from the beginning, from when they were hacking phone
Speaker 1: and and most Mozart was writing symphonies. You know, from
Speaker 1: the time he was four. Uh, Buffett was like that.
Speaker 1: He was thinking about making money, fascinated by it. Uh,
Speaker 1: you know, from the age he could talk. He walked
Speaker 1: around with a little change person you know, you know,
Speaker 1: like a Triluman's change personally, you know, strapped to his
Speaker 1: he was you know, he was selling cokes, he was
Speaker 1: selling lemonades. He was going to the race track looking
Speaker 1: for use tickets. Every so often you found one that
Speaker 1: someone had arrently discarded. It was worth something. He was
Speaker 1: telling people as a uh, you know, a twelve year
Speaker 1: old boy, he was going to be a millionaire by
Speaker 1: the time he was thirty, or he's going to jump
Speaker 1: off the tallest building in Omaha, which I guess was
Speaker 1: tall enough to do some damage and which horrified people.
Speaker 1: But so this it wasn't by accident that he became,
Speaker 1: if you. Um. When I talked to his former fraternity brothers,
Speaker 1: they said that they would have this game at at
Speaker 1: fraternity nights. They would gather around a semicircle and listen
Speaker 1: and ask him questions. They lobb him questions. They just
Speaker 1: like to hear him talk. He was such a good talker,
Speaker 1: such a good explainer. And then I thought of that,
Speaker 1: this is the guy who would have people come to
Speaker 1: his annual meeting because people have to hear him talk,
Speaker 1: the great explainer. Um. There was just something intrinsic and
Speaker 1: inherent about the person, uh that that has come out
Speaker 1: in his career. So it was just fun to uncover
Speaker 1: these steps all along the way. It was all of
Speaker 1: a piece. Um. The Warren Buffett who hangs onto his
Speaker 1: stocks for so long, you know, forever being his favorite
Speaker 1: holding period. As he says, and and and often lives by.
Speaker 1: He's the guy who never changes his foods, never changes
Speaker 1: his restaurants, still lives in the same house he lived
Speaker 1: fifty years ago, still works on that street in Omaha.
Speaker 1: So the biography was a there's no Warren Buffet at
Speaker 1: work and Warren Buffett at home. It's just warn Buffett.
Speaker 1: There's one guy. There's one guy, and you know, you'd
Speaker 1: hear about him and his wife going out to dinner
Speaker 1: and the couple of good friends are entertaining them, and
Speaker 1: after twenty minutes, Warren's often aside room reading an annual report.
Speaker 1: That's his dinner. What now today, I think Charlie Munger
Speaker 1: has really come into his own. He's really regarded as
Speaker 1: an equal partner to Buffet, although I don't know how
Speaker 1: widespread that belief either is today or certainly was ten
Speaker 1: or twenty years ago. What was your thought process with
Speaker 1: Munger as his partner when you were researching? Uh, Buffett,
Speaker 1: I don't think Munger is or was an equal partner
Speaker 1: in the sense that overwhelmingly the bulk of the ideas
Speaker 1: that end up in the Berkshire, and I'm a shareholder,
Speaker 1: I should say full disclosure. Uh, overwhelmingly they come from Warren.
Speaker 1: But um, Charlie is unique ability and it is unique
Speaker 1: with regard to Warren is he can tell him he's
Speaker 1: fully you know what, not a lot of people can
Speaker 1: he is fearless. I mean Warren used to call him.
Speaker 1: I think I use this line in the book The
Speaker 1: Abominable no Man. But Charlie's not afraid to say Warren,
Speaker 1: you're full of it. This is wrong, this is crazy.
Speaker 1: I don't like this. And so they just have this,
Speaker 1: you know, freewheeling relationship like you and I are talking.
Speaker 1: You know, we're not afraid. And whereas it may be
Speaker 1: one of the longest running partnerships I'm aware of, they've
Speaker 1: been working together for how long they've been working together
Speaker 1: since the mid seventies, So you're talking forty plus years. Yeah,
Speaker 1: you're talking forty plus years? Um, how many? And they
Speaker 1: were and they were good friends from the late sixties.
Speaker 1: Uh Monger was a blue Chip Stamps at some point,
Speaker 1: I believe in the early seventies blue Chip merges into
Speaker 1: UH to Berkshire Hathaway. So they had a sort of
Speaker 1: an unofficial partnership going on, and then at some point
Speaker 1: they're in the same company and it's an official relationship.
Speaker 1: How many people are you know? Warren's now run Brookshire.
Speaker 1: This is the fiftieth anniversary. Monger has been there for
Speaker 1: virtually all of it. You know, so the record of
Speaker 1: management consistency is unheard of, probably never to be replicated.
Speaker 1: But Monger himself is scarily bright. He has terrific instincts
Speaker 1: about business. Uh. He has a BS monitor or detector,
Speaker 1: you know, that is second to none. Great instincts, great
Speaker 1: perspective instincts. And he's not so diplomatic. In fact, he's
Speaker 1: not diplomatic at all. That that's the beauty. He's just
Speaker 1: says what he thinks. And Warren is not like. Warren
Speaker 1: doesn't like conflict, doesn't want to hurt people's feelings. Central
Speaker 1: cent Charlie at that had given the bad news. Um.
Speaker 1: But so that that's the dynamic. There's a little Lenin
Speaker 1: and McCartney there. There each different, two geniuses in their
Speaker 1: own way. Yeah, but I I don't think it's right
Speaker 1: to look at them as um. Warren is the executive operator.
Speaker 1: He's the guy who's coming up uh with most of
Speaker 1: the ideas. When one of the units wants to say
Speaker 1: invest more capital, that Warren's making that decision. Yes, that
Speaker 1: sounds like a good project or no, uh, you can
Speaker 1: dive it in that money back to Omaha, thank you.
Speaker 1: We'll find something better to do. With it. Those are
Speaker 1: Warren's decisions, but the tough decisions he's They have a
Speaker 1: running conversation and so Charlie is going to be in
Speaker 1: on all those. He took Sees Candy to Warren. That
Speaker 1: was because California Candy, it was an early company He's taking.
Speaker 1: You know, plenty of others over the years, but this
Speaker 1: he was very influential. Also early on when Warren made
Speaker 1: something of a switch, not in his philosophy but in
Speaker 1: his approach in being willing to pay up more for
Speaker 1: good business as this think from paying as this think
Speaker 1: from only paying really low prices for businesses and naturally
Speaker 1: once so good and Monger's discussed that philosophy as a
Speaker 1: good business has a value that it's very hard to
Speaker 1: um either recognize or or easy to underestimate the value
Speaker 1: of a really good business that even a terrible management
Speaker 1: team can't message the gift that keeps on giving. Uh.
Speaker 1: So you know what is it worth to be Sees
Speaker 1: Candy and Airport in those stands? Uh? Would you pay
Speaker 1: more for it than you know, Joe's candy, someone's never
Speaker 1: heard of. You would pay more for it? Now? How
Speaker 1: much more? That? That's an open question? But Munger really worked.
Speaker 1: And now Phil Fisher, the Great Investor, was another person
Speaker 1: who worked on Buffett, who stuff Buffett read and influenced
Speaker 1: him in that regard and moved him away from the
Speaker 1: strict Ben Graham buying stuff for you know, just less
Speaker 1: in the cash value of the scurity and so on.
Speaker 1: So when you were researching this, you spend a lot
Speaker 1: of time in in Omaha, Nebraska, a lot of time.
Speaker 1: What was that like and what was it like speaking
Speaker 1: to all these local families who had known young Warren
Speaker 1: as a it The first thing that was interesting me
Speaker 1: about Omaha was if you come from the East, and
Speaker 1: I came from New York, you think of Omaha as
Speaker 1: a complete hay seed place. Uh, you know, I think
Speaker 1: of Mutual of Omaha's the first thing that pops into
Speaker 1: my head. But I'm of the age where that show
Speaker 1: was on Sunday nights when I was a kid, and
Speaker 1: so that's been drilled into my head for however many
Speaker 1: years of my youth. So I thought of as purely
Speaker 1: the sticks, and what I saw was it's a real city,
Speaker 1: a real downtown. Warren Buffett was not a farmer. His
Speaker 1: father was. His father was a stockbroker. And I say
Speaker 1: that because there was this tendency to to say that
Speaker 1: the street Warren Buffett is some savant who you know,
Speaker 1: wizard of oz who emerged on the planes or something.
Speaker 1: But he was not a farm boy. He was not
Speaker 1: a hay seed stockbroker's son. Grew up in an urban
Speaker 1: area or not too far from a completely an urban area,
Speaker 1: and he roamed the streets of Omaha. He went to
Speaker 1: his father's you know, stockbroker in office. He was not
Speaker 1: uh uh some you know Carlos Castanada, uh, you know,
Speaker 1: a grarian savant or something. Um. And that was that
Speaker 1: was the thing that struck me about Omaha was and
Speaker 1: for you know, if you're in Nebraska, it's a big city.
Speaker 1: You know. He was following the baseball teams and so on, um,
Speaker 1: following the stock market and so as a kid, uh,
Speaker 1: the research in Omaha just all these people who knew him,
Speaker 1: and the story never changed. He thought about nothing but
Speaker 1: making money morning, noon and night. And he had this
Speaker 1: infectious enthusiasm so that everybody he knew at every stage
Speaker 1: of his life got caught up in it. And I
Speaker 1: you know, for instance, this idea to you know, to
Speaker 1: to drum home, the point how it was there all along.
Speaker 1: He used to say that he liked his favorite business
Speaker 1: would be a monopoly toll bridge. Okay, so because you
Speaker 1: know monopoly toll bridge, you gotta get over the bridge.
Speaker 1: He's the only one they can set the toll. So
Speaker 1: he's sitting pretty right. So it turns out I was interviewing.
Speaker 1: I'll never forget this his He had a friend named
Speaker 1: Bob Russell he grew up with. They were friends, particularly
Speaker 1: when he was ten twelve round there. Bob Russell's mother
Speaker 1: was still living when I when I was researching the book,
Speaker 1: and she said, and they had a house that overlooked
Speaker 1: a main thoroughfare in Omaha where trolley went by, and
Speaker 1: they had a porch and they'd sit on the porch
Speaker 1: drink lemonades and watch the trolley. And Mrs Russell said,
Speaker 1: he used to sit there and say, if only you
Speaker 1: could set up a toll booth. Mrs Russell judge the trolley?
Speaker 1: What what? Twelve year old thanks of this? You know,
Speaker 1: it's more like give me another lemonade. But not Warren Buffett.
Speaker 1: He's thinking of setting up a toll booth on a
Speaker 1: busy street. Uh you know when he's twelve years old,
Speaker 1: and so that that was just something in him that
Speaker 1: that that you know, And so I as I wrote
Speaker 1: the book, I sort of thought that regardless of what
Speaker 1: society he had been born into, um, you know, he
Speaker 1: would have been the numbers guy, the financial guy. He
Speaker 1: was born to do it. So before I get into
Speaker 1: some of my favorite questions, I'm compelled to ask, what's
Speaker 1: the next book we're going to see from you? The
Speaker 1: next book will be a history. I'm going over a
Speaker 1: few ideas I am not in a position to tell
Speaker 1: you which we enjoyed this sort of deep diving. I
Speaker 1: really loved UM late nineteenth century, early twentieth century. There's
Speaker 1: a sort of a larger than life equality, Gilded Age,
Speaker 1: progressive era, UM because really everything else I've read of
Speaker 1: yours was sort of teared right off the headlines, so
Speaker 1: very tell. If you look at those books, there's there's
Speaker 1: a lot of history and all of them, if you
Speaker 1: there's a lot of context, which requires understanding the history
Speaker 1: of the history of markets, the history of pension funds,
Speaker 1: the history of Warren Buffets goes back to Ben Graham,
Speaker 1: goes back to his father in the nineteen thirties. But
Speaker 1: you can only put so much history in these books. Um,
Speaker 1: if you go back to the early nineteen hundreds, they're
Speaker 1: worried about inequality, you know, they're worried about big corporations,
Speaker 1: about America becoming a sterile soul is place run by
Speaker 1: far off, remote corporations. Well, thank goodness, we avoided that faith,
Speaker 1: thank god. So sound familiar. So there's something about in
Speaker 1: the old age, they're horrified all of a sudden they're millionaires,
Speaker 1: you know, never used to have those. So these periods
Speaker 1: both hold a fascination for me, and I think they're
Speaker 1: particularly resident today. So it'll be something in that area
Speaker 1: again that sounds interesting. Let me go, because I know
Speaker 1: I can't keep you forever, although you and I could
Speaker 1: keep chatting about this stuff for a long time. Let's
Speaker 1: talk a little bit about these are questions I asked
Speaker 1: all my guests, and I always get some fascinating answers.
Speaker 1: You mentioned your father was an influence on you. Who
Speaker 1: are some of your other early mentors hm Um, I
Speaker 1: had some very good editors, you know along the way
Speaker 1: in newspapers, um both um, Norm pearl Stein at the Journal,
Speaker 1: and Paul Steiger. So you had some real terrific rock
Speaker 1: star legends, terrific, terrific editors at the Journal. I'm hesitating
Speaker 1: that I don't want to forget anybody. You'll get an
Speaker 1: angry man. Um. You know, Warren Buffett letters were an
Speaker 1: education in business. You know, I went to grad school
Speaker 1: with Lawrence Cunningham, who wrote that book, The Essays of
Speaker 1: Warren Buffett, which was amazing that I was in grad
Speaker 1: school saying, what why are you publishing on this? This
Speaker 1: is a law school, this is a and yet it
Speaker 1: turned out to be tremendously insightful idea before there were
Speaker 1: really a lot of that was back before you couldn't
Speaker 1: go on to Edgar and pulled down or the website
Speaker 1: and pulled down the actual letters. He bound, had them
Speaker 1: bound published and there were a huge success. So when
Speaker 1: I was reading those letters, the contrast reading those letters
Speaker 1: and writing the herd on the street every day and
Speaker 1: being involved in how you know, the average company was
Speaker 1: doing things. And then I go back and read the
Speaker 1: letters and the contrast was such that, Um, that was
Speaker 1: also an education. I saw um that what he was
Speaker 1: preaching was so unusual in Wall Street that you know,
Speaker 1: most annual reports, they're written by consultants. Uh, they're full
Speaker 1: of malarkey. They're spinning everything. Um. And he's just outlanded
Speaker 1: the way it is. You know, they're they're trying to
Speaker 1: game their earnings. Uh. There was just so much that
Speaker 1: was different. And and the combination of reading those letters
Speaker 1: and being involved in the everyday work a day Wall
Speaker 1: Street experience was an educational Did you get to speak
Speaker 1: to Buffett for the book? Very little? Um. Buffett didn't cooperate. Um.
Speaker 1: He said in the beginning that he said that he
Speaker 1: didn't stop people or discourage them or encourage him. He
Speaker 1: just said, that's you know, you do what you can do.
Speaker 1: He said, it will work better for me, and it
Speaker 1: will work better for you too. Huh. And that's interesting
Speaker 1: with interesting And do you think that was right? I
Speaker 1: didn't at the time. I thought thanks a lot. I
Speaker 1: thought thanks a lot, war And he actually said, Um,
Speaker 1: he said he didn't want to give me his own
Speaker 1: stuff because he was saving it for his book and
Speaker 1: I would cut into his sales. Come on, warrened, that's hilarious.
Speaker 1: But by the way, many a truth is spoken in jest,
Speaker 1: and he is only half joking when he says that
Speaker 1: I don't. I don't doubt it. But but to answer
Speaker 1: to your other question, I did come to agree with
Speaker 1: him because I think had had I sat down for
Speaker 1: interview after interview with him, the book would have come
Speaker 1: out in his words and with his take, and it
Speaker 1: would have been his conception of his life. And by
Speaker 1: not talking to him and talking to everyone else around him,
Speaker 1: I got to tell the story as I would tell it,
Speaker 1: and so yes, in the end, I think it was
Speaker 1: worked best for both of us. I'm gonna have to
Speaker 1: get you as get from you his email address and
Speaker 1: and invite him to do the show the next time
Speaker 1: he's in New York, because I know he's got two
Speaker 1: hours to kill any time, any time he wants. Um.
Speaker 1: What are some of your favorite books? And I'm referring
Speaker 1: to ones that you didn't write. What other books have
Speaker 1: you enjoyed? Uh? Finance books, boy, I'm gonna could be finance,
Speaker 1: could be other books, but just not by Roger Loans. Yeah,
Speaker 1: I'll start with you know the G eight Crash by
Speaker 1: John Kenneth galbrand Um is a book that I've always loved.
Speaker 1: Read it again and again. Boy, it reads like just
Speaker 1: a lemon drop of a book. Melts in your mouth
Speaker 1: and it and it could have been written yesterday. That's
Speaker 1: the thing that's amazing, could have been written yesterday. Um.
Speaker 1: You know there's a book. I read a lot of
Speaker 1: business books, and usually because I review them, most of
Speaker 1: them don't go on the small shelf of ones I'd
Speaker 1: recommend by Italian economist Pietra Rivoli, The Travels of a
Speaker 1: T Shirt, The Travels of anybody anybody wants to. Um,
Speaker 1: have fun with a book on trade on cotton. I
Speaker 1: mean really have fun. It opens up a world you
Speaker 1: never thought was there. I just just love the book.
Speaker 1: I love John Brooks's books on Wall Street. Um, well
Speaker 1: give me a title. Uh, let's see the one the
Speaker 1: go go years about there about the sixties and once
Speaker 1: in Galconda. That on my bookshelf. Unread waiting in my
Speaker 1: que about um the nineteen thirties. Um the rob The
Speaker 1: Robber Barons by Matthew Um who what's the last name
Speaker 1: of that author? I've seen that book. I've never read
Speaker 1: that either. That's you're you're giving me homework to do.
Speaker 1: You know that's kind of a populist take, but it'll
Speaker 1: it'll be residant today. Um, I love Roncher Now's the
Speaker 1: House of Morgan and Hamilton's and his other books My
Speaker 1: head or Research. Mike bat Nick just finished that and
Speaker 1: cannot stop raving. He's working his way through all of
Speaker 1: Churnhouse book. He's just thrilled to death. Um, so there's
Speaker 1: a you know, a starting list for for Christmas Byes
Speaker 1: House of Morgan and of course America's Bank. By the way,
Speaker 1: did you ever get around? So when I'm working on something,
Speaker 1: I try not to read a book on the same
Speaker 1: top title because topic, because it influences your perspective, you're
Speaker 1: you're you want to stay away from it. But I
Speaker 1: adored Lords of Finance, and I'm wondering if you read
Speaker 1: that when you would? Is a great book. This book
Speaker 1: is like one of the so that's involves four central bankers,
Speaker 1: and this is like one bank of the four. Like
Speaker 1: this is a giant digression from Lords of the AQUITAMDS
Speaker 1: Pults Prize winner, amazing, every bit deserving of a Pulletzer Prize.
Speaker 1: It is a terrific book. And talk about a guy
Speaker 1: who can tell a story and make it come to life.
Speaker 1: You should be on any Financial Readers shortlist. Really just
Speaker 1: a tremendous, tremendous book. Let me keep going through my
Speaker 1: last few questions. Um, so you've been writing professionally for
Speaker 1: thirty years? Is that right? Well, I started out at
Speaker 1: the Newport News Times Herald in seventies. Sixty years next year.
Speaker 1: So let me ask you a question. What has changed
Speaker 1: in three hours or less since you've become a writer
Speaker 1: for for better or worse? Well, Um, finance and business
Speaker 1: are much hotter topics and the much bigues much. You know,
Speaker 1: there were no finance sections when I started. There was
Speaker 1: a Wall Street Journal and basically nothing else. There were
Speaker 1: no financial shows, there was no Bloomberg. Um, so that's
Speaker 1: just become much more central to the way we live
Speaker 1: and work. Um. Obviously, the news business itself has become
Speaker 1: way more challenged, for you know, by the Internet. You know,
Speaker 1: listeners don't need an education that when Wren Buffett went
Speaker 1: into the business, newspapers were so called monopoly toll bridge
Speaker 1: and the only way to get to advertisers now is
Speaker 1: he is he still part of part of the Washington Post?
Speaker 1: Is that now? That still still owns Buffalo Eeping News
Speaker 1: and he owns a local paper and Omaha, so he's
Speaker 1: still in the in the business local paper and Oma. Yeah, yeah,
Speaker 1: that's the world, the world, Harold, so m uh but um,
Speaker 1: those are the those are the biggest. I mean, the
Speaker 1: the number of news venues, the extent of the competition.
Speaker 1: You know, when I started at the Journal, which was
Speaker 1: in seventy nine, you could spend a long time with
Speaker 1: a story. Now the more competition is just so out there,
Speaker 1: and it's that that's a lot different things. I find
Speaker 1: when I'm writing something to just do a blog post,
Speaker 1: a little throwaway two D word blog posts. I used
Speaker 1: to schedule stuff around a certain rhythm. I like this
Speaker 1: sort of thing on Tuesday nights, and I like this
Speaker 1: on Friday mornings. And I find if I do that,
Speaker 1: it's in the ether. Somebody is going to write about
Speaker 1: it beforehand, and so you can't. You have to just
Speaker 1: publish some more choices about what to read. You can't
Speaker 1: read every blog, you can't read it. Possibly there's an
Speaker 1: overwhelming amount of stuff. So that's historically what's changed. What
Speaker 1: do you see going forward for media and journalism and
Speaker 1: book publishing in the future. You know, I think they'll
Speaker 1: be around for longer than than the word. The most
Speaker 1: pessimistic prognosticators say in indie bookstores, are you know, making
Speaker 1: a comeback? The percentage of books that are being read
Speaker 1: in print as this thing from digitally has actually leveled off,
Speaker 1: and I think as ticked up pretty smartly. Um, you know,
Speaker 1: newspapers I don't know about I think Charlie Munger has
Speaker 1: said that that the newspaper is most loyal readers, are
Speaker 1: you know, to be found in the cemeteries or something
Speaker 1: some something like that. Newspapers are obviously evolving, people like
Speaker 1: Jeff Bezos behind the Washington Post trying to be a
Speaker 1: few vanity projects that all so you'll have the Times,
Speaker 1: the Journal, the Post and a handful of others. Public
Speaker 1: is a nonprofit formula, and I think the person who
Speaker 1: took the Herd on the Street column after you, jesse eisener.
Speaker 1: So I think the formulas are still you know, it's
Speaker 1: still we're still experimenting with that, and we don't I
Speaker 1: don't as culainly don't know. And I don't think anyone
Speaker 1: knows what the news universe will look like, except to
Speaker 1: say that people we're still hungry, very hungry for news.
Speaker 1: A lot of people want to go on the news business.
Speaker 1: It'll exist. We just don't know the form. We don't
Speaker 1: know what it's gonna look like. So a millennial or
Speaker 1: a recent college graduate is beginning in their career and
Speaker 1: they want to be a writer or a journalist, what
Speaker 1: sort of advice would you give them? The advice I
Speaker 1: give I get asked that a lot is have a
Speaker 1: specialty these days. I think it's very important not just
Speaker 1: to be a journalist. You know, no all you can
Speaker 1: about finance, know all you can about sports, know all
Speaker 1: you can about ballet, know all you can about energy
Speaker 1: or global warming or whatever it is. But be someone
Speaker 1: who whatever the news venue is, is going to say
Speaker 1: we need an expert in whatever that is, and they'll
Speaker 1: be a place for you. I don't think the you know,
Speaker 1: these days, it's tough to go in and say, you know,
Speaker 1: Johnny Apple used to say the times, you've got to
Speaker 1: be able to ride a five car fatal and and
Speaker 1: and that's true. But these days you've got to be
Speaker 1: able to do more than that. Last question, what is
Speaker 1: it you know about Wall Street and finance today that
Speaker 1: you wish you knew when you started forty years ago?
Speaker 1: You know, I don't think, I mean I know now
Speaker 1: how repetitive. It is, how how how cyclical is how
Speaker 1: everything we talked about before, how the lessons don't get learned.
Speaker 1: But there's no way. It's not like you can transport
Speaker 1: that experience and and you know, put it into some
Speaker 1: pill and and give it to a twenty two year
Speaker 1: old and he will absorb it. On the other hand,
Speaker 1: that's what makes it fun. You know, he or she
Speaker 1: will go out and learn from the cells. And that's
Speaker 1: so UM. But what have you learned that you wish
Speaker 1: you knew when you started? What little tidbit of knowledge
Speaker 1: would have made your life easier? I guess I'm a
Speaker 1: little more cynical. I'm surprised at how often, UM, to
Speaker 1: avoid using a three letter word, people don't tell the truth. UM.
Speaker 1: Uh surprised at how often people will spin. You know,
Speaker 1: there are a lot of slippery characters out there, and UM,
Speaker 1: I tend to be trustworthy and sometimes naive, and I'm
Speaker 1: surprised at how often, uh, people would take advantage of that.
Speaker 1: And it it would have been nice to know that starting
Speaker 1: your career. Roger, this has been great. Thank you so
Speaker 1: much for being so generous with your time. UM. We've
Speaker 1: been speaking with Roger Lowenstein. He is the author of
Speaker 1: the new book America's Bank, The Epic Struggle to create
Speaker 1: the Federal Reserve, which you can find at Amazon, Bornes
Speaker 1: and Noble and independent booksellers everywhere. You can read more
Speaker 1: of Roger's work at Roger Lowenstein dot com. Um check
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