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Today’s episode is about a crypto implosion that stunned the world, or at the very least, stunned, me as listeners of this podcast.
No, I am not exactly the world’s biggest crypto booster.
I consider myself a skeptic who tries not to write off Technologies.
I don’t fully understand, but of all the characters in The crypto landscape, the one I was perhaps most interested in even in a way the most impressed by was Sam Venkman freed.
He went by SPF SPF is the founder of a crypto exchange ft x and a hedge fund Alameda.
Research Sam was a quirky nerd with wild hair who dressed in cargo shorts and t-shirts for conferences and he was a fixture of media events.
He appeared on the cover of magazines like fortune and Forbes, he donated to democratic candidates.
He subscribed to a philosophy known as effective altruism, which is a kind of utilitarian movement that seeks to do.
Do the most good for the most people now, and in the future and he has expressed an interest in giving away all of his money to an array of Charities from malaria prevention to artificial intelligence safety.
Some magazines had called him the next Warren Buffett.
Others went even further as cryptocurrencies fell in value over the last year.
S BF bailed out several projects which struck some as a kind of echo of Gilded Age robber barons stepping in to prop up the financial industry during the crises Of the late 1800s, people called him, the j.p.
Morgan of crypto or the jpeg Morgan, and his company was a fixture in sports to FTX spent 135 million dollars on the naming rights for FTX Arena.
Where the Miami Heat play.
They paid millions of dollars for a Super Bowl ad with Larry David.
They attracted investment from that only Blue Chip Venture Capital firms.
Like Sequoia that.
Also, Tom Brady Giselle Steph Curry.
And then it all fell apart.
One month ago FTX and SPF were The Darlings of crypto and now it’s a total cluster shed after a reports circulated couple weeks ago that this exchange is balance.
Sheets were heavily composed of tokens that were essentially invented cryptocurrencies or mathematically.
Sophisticated iou’s, there was a run on the bank that left FTX down several billion dollars a rival.
Change called by Nance initially offered to buy them but later pulled out and the company has declared bankruptcy.
SBF, 16 billion dollar wealth was wiped out in a matter of days.
We don’t yet know the full shape of the failure here, but it looks a lot like fraud.
And this is the part where I have to make a confession, or a few.
Confessions I have met and interviewed Sam.
I liked him.
I thought he was charming and weird and smart and playfully intelligent game to answer questions, about the intersection of crypto, the greater good, the nature of capitalism, I liked that, he talked about crypto, not like a True Believer, but rather like a guy who stuck a drill in the ground found a 1 billion dollars in oil decided.
He didn’t really care that much about oil but he’d like to soak it up and give it away to better.
Causes it was a really interesting perspective from the richest 29 year old in the world.
The movement that F SB F subscribed to effective.
Altruism is a movement that I have respected for a long time.
In fact, when I lived in New York City for several years, one of my subletter roommates was a philosopher named will mccaskill.
Who is now a leader of that movement effective, altruism and was until recently sort of a moral consiglieri for bank manfried I knew will I knew that will trusted SPF and so while I never wrote or podcast it, or had any money or any Financial relationship with FTX.
I sort of admired Sam strangeness from afar I fired the causes that he gave to including an especially pandemic preparedness and now like a lot of people I think he may have been a fraud I want to stress that we don’t yet know exactly what happened, but at least one plausible scenario is that SBF was in charge of both a trading platform, FTX and a hedge fund that meant, he had access to customer funds that he could bet with.
And when the hedge fund made a series of bad Investments, he may have transferred customer funds to fill that hole.
That is incredibly bad.
It might meet the legal definition of out.
And it makes me feel like this guy that I kind of admired from afar might have been less of a JP Morgan and more like a Bizarro Elizabeth Holmes, the CEO former CEO, if they’re honest if you recall Holmes had a costume, the black turtleneck, the red lipstick SBF had a costume to the frizzy hair, the disheveled clothes Holmes, hid her fraud with Bluster and confidence SBS.
Kid behind this illusion that he was in on the joke that he partially understood that some crypto valuations relied on a kind of infinite Ponzi scheme.
Where home seduced with impressiveness.
SBF may have seduced by being disarming.
I don’t know, maybe there is a ton, we still don’t know about this.
Maybe there’s a more innocent explanation, but right now, I don’t think there is, I think people got played, there are so many lessons, we can draw from an implosion, like, this and Icarus story like this.
I think one of the lessons is the dangerous power of stories.
When SBF was raising money from Sequoia, which is one of the most famous and successful Venture Capital firms in the planet.
He reportedly wowed the entire VC Movement the entire VC team while playing a video game on a separate screen.
So at the same time, the fact that he could secure millions in funding from Discerning investors while playing a video game, it was seen as a sign of incredible genius, right?
His ability to do nine things at once which is an important trait for a Founder.
But now in retrospect, it looks like Sequoia gave their money to a kid who was either in way over his head or Worse was so unmoved by the immorality of his entire Enterprise that he Couldn’t be bothered to give investors his full attention.
Another lesson is that we the media kind of suck at allocating our trust, we idolize wealth.
We idolize people who braid mainstream success and radical personality quirks.
We Hollywood eyes complicated characters in failed to ask the hard questions questions.
Like, hey Sam, you run a trading and exchange that has an obscure and complex relationship with a hedge fund.
Are we sure that’s about board or is this arrangement in obvious invitation for duplicity and fraud?
Well, today’s guest is no stranger to writing about duplicity or fraud in the business World.
Bill Cohen is a long time.
Best selling Finance journalist, whose latest book, power failure traces.
The rise and fall of GE.
He’s been following the SBF FTX crypto meltdown even as he’s producing a documentary on the state of and future of the crypto industry and he provides us.
Excellent background on the finance aspects of This Disaster.
Even as we debate, what it means that we were all duped or so many of us were duped by this bizarre and extraordinary character.
I’m Derrick Thompson.
This is plain English.
Welcome to the podcast.
Thank you for having me.
It’s great to be here.
I’m real honor.
I think we should start by talking about this character.
Who’s Sam bank man freed is tell me about the SPF.
That the world thought we knew just 23 weeks ago, because I’ve already said this knee open, I interviewed him about a month ago.
I had no idea that this guy was about to become the most infamous name in business.
What made him?
Such a captivating and unique figure before the sky fell down.
Yeah, I thought I thought a lot about that Derek in the last few days and, you know, I had interviewed him for this documentary film about crypto that Working on for the last year.
So think about it.
Last December and like Bitcoin peaked last November is should like 69000.
So in December, you’re talking about SBF sandbank manfried, you know, flying into New York on a cold winter night.
No, we’re up in this, you know, Hotel on Sixth Avenue and like 55th Street and I’m freezing.
I mean, I’m freezing my ass off and he comes in, of course, in his shorts and his T-shirt looking like a mini, you know, Albert Einstein and you got to remember, he’s at that point, he’s 29.
He’s the richest person, under 30 in the world.
So already, there’s this aura about him, he comes in t-shirt shorts, it’s cold.
He doesn’t seem to feel it.
Talking about being a vegan, his parents.
Are both Stanford law professors.
So, I’m sorry, I don’t really know anybody who’s both of whose parents or Stanford law school professors.
He graduated from MIT and physics.
So already, okay, anybody who has a degree in physics, in college, you know, is already on a separate plane from mere mortals and then having a degree from MIT and physics puts him, you know, on a separate plane and he goes and becomes The a Trader at a hedge fund downtown, New York, you know, excetera.
So I think the cop this resume, the combination of the resume, the parentage, the DNA, the appearance, the wealth, you know, having accumulated, and like this FTX name, being everywhere right on the on the stadium.
On the frickin you know, umpire uniforms his Lewis in Washington being the second largest donor to the Democrats, you know, in this cycle, after George Soros.
I mean, what more do you need to be, you know, sort of wowed from the outset.
It’s an unbelievable package that this guy is put together and and being incredibly pretty much incredibly open to the media and available to the media and cover boy for the media, you know, and once again, people Just fell for it.
Hook Line & Sinker.
Let’s do a little tick tock on the week, leading up to the FTX bankruptcy filing.
There are a lot of steps here that I am not going to collapse for our purposes but basically I see this is a three-part Story Part 1.
There are rumors of Revelations that FTX is balance.
Sheet is composed of tokens that each invented and that are potentially nearly worthless, customers freak out.
And there’s a run on the bank part 2 as it goes with bank runs sometimes ft.
X does not.
Have the cash on hand that it needs to fulfill all these requests that used to have the cash but the cash is gone.
It is somewhere else, we will return to this mystery in a second and then part three after this Bank Run reveals is eight billion to maybe 16 billion dollar hole in FTX is balance sheet.
SBF scrambles to raise funds or otherwise collapse in a bankruptcy.
It’s at this, finally gets into the big question, which is what the hell actually happened here?
You know, where’s the money essentially?
Where’s the Lebowski to the story that most people seem to be telling, is that FTX, of course, was not just a trading platform, it was a trading platform attached to a hedge fund called Alameda research and that hedge fund had been making absolutely wild amounts of money during the crypto boom.
But when asset values crashed, the hedge fund was wiped out and SBF tried to fill the hole by transferring customer funds into that private private investment fund.
But as the market continues, to be a Master.
He then lost that money too.
And as a result, the entire thing, imploded, is that your closest understanding of what we’re looking at here with FTX?
Well, first of all, it’s important.
I think to not, Project not be definitive about what we know or don’t know.
I mean obviously there’s some been reporting and usually the Wall Street Journal and Bloomberg or whatever, who are sort of leading the charge here are in the New York Times are responsible and trying to get it right.
But we have a bankruptcy filing.
We know that for a fact what we really need here is I was saying the other day is an examiner hired by the bankruptcy court to really sort through what happened, but I’m hearing happened.
And what is kind of like the big mystery is and what could be?
I mean, the real issue here Dirk is whether SBF is a naive, which he certainly comes across, as, from time to time, almost childlike.
As I’m sure you would agree or whether he is a major-league criminal fraudster.
And so, on the one hand, if he’s a criminal fraudster, what I’ve heard is that That you know the question is people would send him money or crypto to trade on his exchange and did they actually have accounts on the exchange?
Did he actually open accounts on the exchange or was that all just a fiction as a way to take their money and put it into his hedge fund?
Like it never even was on the exchange.
And there, never really was, this is one Theory, never really were any accounts on the exchange.
So all these customers.
Whether there’s a hundred thousand or a million is the latest numbers, they gave him all this money and he just high-fived it off into Alameda research, okay?
Then that’s so that’s that would be completely fraudulent and criminal and that’s jail time right there then I’ve heard that he had these tokens, you know the shit coins which you know and they were thinly traded because he controlled most of them and then he you know No gave or you know, he exchanged 500 million of them in exchange it to to see Z over at Finance, in exchange for his stake in FTX that he wanted to sell.
So, he got shit coins in return and then when he realized he wanted to sell them, you know, all hell break loose.
But in the before that, you know, apparently we don’t know yet, but apparently, our boy has to be F, was using the shit.
Goins is collateral for margin loans.
We don’t know who is making those loans to him.
That would be nice to find out.
But as the value of the collateral, the shit coins fell because CZ said he wanted to sell his 500 million of worth of them.
Then he got the margin loan spiral just spiraled out of control, cash cash at this is this is great, it’s exactly right.
Why don’t you two go?
I just want to tap the brakes here for people who might have their head spinning when you say collateral and margin loans.
You’re, you’ve written about this for years.
So you’re the perfect person to ask about this in plain English.
Like what are you talking about, when you’re talking about using collateral for margin loans?
And then maybe if you can try to introduce the idea that that collateral in this case is a made-up crypto token, right?
So, anybody who has a brokerage account, might be familiar, which is like half the country is might be familiar with, you know, quote-unquote a margin loan, which Is something that a broker will allow you to do which is to take a loan from the broker using your stocks as collateral.
I don’t recommend this at all.
It is very stupid to do and very risky and very expensive.
The money is very expensive because what happens is, if the value of your stocks goes down, you know, then the essentially, the loan to value.
A ratio or the value to loan ratio if you will you know the collect the assets.
Your stocks are collateral that The Brokerage or Bank uses to get comfortable with making you in the loan in the first place.
Just like when you get a mortgage on your house, the asset is your house and the bank is making you a loan based on what they perceive as the value of that house.
Now that doesn’t really fluctuate that much, but stocks, go up and down all the time.
And so you know, if a stock goes down and you’ve got a margin loan against it, then they can ask for more collateral more stocks or if you don’t have that they’ll sell you they’ll sell out the stocks to pay themselves back and that’ll just you know, deteriorate very quickly and if your collateral or if your asset that you are getting a loan against is shit coins.
IE made up cryptocurrencies which seems to be something that these crazy Exchange.
Is do and for the life of me I frankly wasn’t even aware of it and yet the more I hear about it I cannot even believe that anybody fell for this, okay, let alone gave them value, let alone got a margin loan against it.
So these people all need to have their heads examined and they’re kind of getting what they deserve at the moment because this is so ridiculous.
But what happened was when these you know I think what happened was that CZ and finance wanted his Equity bought out of FTX and Sam did that by giving him five hundred million dollars worth of ftt the shit coins and then he said, you know, some point when he started here looking at that balance sheet that came out which I by the way, not sure anybody could ever decipher but people did.
And anyway, that’s another that’s another rat hole to go down but You know, when he just said he was going to think about selling these shit coins because they weren’t for shit.
Then the margin loans came in and because the value of them started dropping and then therefore the asset value would decreased and the margin calls came and the spiral began SBF needed to make those margin calls needed cash and either he tapped into his customers accounts, or he had already tapped into To them, and then customers wanted their money back because it’s really seem like it was spiraling out of control.
And, of course, he didn’t have it because he had either invested in all these, you know, he invested in Sequoia or whatever.
All the things that, you know, I’ll need a research was investing in, right?
And that’s why a lot of people on Wall Street, are trying to think about what the right historical analogy is, you know, is this fairness?
Is it Enron Worldcom is that, is it a Lehman moment?
We don’t know for sure.
What is going to be?
Because we don’t know exactly what happened yet and we’re still trying to piece it together.
When will we know if you understand the bankruptcy process better than I do.
But it seems to me that one of the points of the bankruptcy process is to reveal the underlying reality of the fraud, or the mistake, or the naivete, as you said earlier, when do you think we’re going to get something like that as formal?
As it anchors, the process.
Well it is.
It has filed for bankruptcy in Delaware.
There is FTX Council, has not believed Sullivan & Cromwell has been hired.
I’ve heard, you know, there may be a restructuring advisor, who’s hired, you know, probably in the mold of somebody like an Alvarez and Marcel or something.
That that, that I don’t know whether that’s happened.
Yet, is obviously a new CEO, who the guy who was, you know, got, you know, supervised dendron post-bankruptcy.
So, the guy, you know, kind of knows what he’s doing or should in this situation.
SPF is gone.
He’s acting as an advisor.
He’s probably singing like a canary at this pointer if he’d better be.
Mike milken’s, counsel from Paul Weiss, which is telling, why is that telling well, because, Mike Milken was criminal as well.
And, you know, spend time in prison, I’ll be at.
I’m sure a country club prison for his misdeeds during the 1980s, which I could talk about it forever another time, but I don’t think, but it’s but there’s chaos now, right?
There’s chaos in NASA.
There’s probably chaos in the Delaware Court.
Nobody knows what’s really going on.
Trying to get their hands on it.
They don’t know whether there’s 100 creditors or a million creditors or or what.
So until things sort of get organized and sorted out and they’re like creditor committees appointed and frankly until the judge appoints an examiner.
Mean this is a case that screams for an examiner to figure out what went wrong just like Lehman Brothers case screamed for an examiner and it could be almost that size in terms Terms of the billions of capital at stake here or that was lost.
Potentially and until, you know, an examiner comes in with the powers of the bankruptcy court to subpoena people and get them to talk and to say what happened and look at the accounts and to look at the books, I mean that that piece of paper that is now serving as Like the quote, unquote balance sheet of ft x and and, you know, his head.
Fund is beyond pathetic, right?
It’s not even, let’s, can you expand on that because you we’ve referenced it a few times now just like this, absolutely bizarre balance sheet that was circulated to the then it’ll yes Rescuers produced what makes it so bizarre.
Because, you know, you know, a company that is being properly regulated like by the SEC, which, of course, FTX wasn’t.
You know, it’s a private company even private companies had audited financials.
And, you know, given that he founded this company in 2019 in the three years in the interim he was able to get one point, eight billion dollars from, supposedly smart investors who apparently made these Investments, you know, without audited financials because you know, I’ve not seen any audited financials.
I’ve never heard of anybody.
Talking about any audited financials.
So What appears is a one-pager listing, some shit coins on it as you said, is both assets and liabilities and using that to try to raise eight billion dollars of cash.
It’s, it’s beyond absurd.
It’s it’s pathetic.
It’s, is that naive or criminal?
It’s just, I don’t know.
But obviously, he completely did not succeed because but he obviously had succeeded in years earlier raising 1.8 billion dollars from the likes of sir.
Sequoia and other, you know, Ontario teachers.
I mean, it just blows my mind that he was able to do that from people who just sort of should be doing the due diligence on behalf of their limited partners.
I mean, how anybody can give these firms any additional money after this Fiasco is beyond me as well.
But of course, you know, we know that our friends at a 16z, you know, Mark and driessen’s you know who’s this has to be the smartest.
In the world next to SPF, right?
He gave Adam Newman, a note new fresh 350 million dollars after we work.
I just don’t understand how this can keep happening over and over again, or why you would ever want to be a limited partner in funds that do this.
So so you want to put a pin in that because I want to get back to the idea that a lot of LPS are potentially going to just give up on the entire crypto Enterprise, because it’s just such a wild west.
For now, the last question I have about fpsb especifically Is the tweeting that’s happened in the last few days.
It’s just gotten increasingly surreal and bizarre at one point he was just tweeting letters letters and numbers that seem to spell out a kind of a cross stick of what happened.
I mean I’m not going to try to psychoanalyze exactly what’s going through his mind there.
But there was one tweet that really, really surprised me and caught my attention which is where SPF seemed to indicate that he was still trying to figure out what This is and would explain it to us and we’ll explain it to us.
This is a week, a week and a half.
After the implosion of the business for which he is the CEO, it is run or seems to be run by about 10 people living out of about 30 million dollar apartment, 30 million dollar mansion on the water.
How is it possible or look your that you’re the expert you’ve been reporting on this for decades?
Have you ever heard of a situation?
Where this CEO of a hedge fund or the CEO of any kind of Investment Bank, akin to the Ft Exile, made a research hybrid did not understand what had happened to their company at the moment that it seemed to be collapsing.
You may find this hard to believe, but this is kind of the way it goes.
What when there’s a financial implosion, I haven’t I’ve written about any number of financial opposed and especially around 2008.
Financial crisis, obviously wrote a book about the implosion that bear Stearns wrote a book about how Goldman was able to avoid the implosion.
You know I will tell you that the executives including Jimmy cayne that I interviewed at Bear Stearns and all the rest of the senior Executives at Bear Stearns.
They did not know what had happened to their company.
Basically bear Stearns disappeared about as rapidly as FTX disappeared.
You know, it all happened in a week, The Ides of March in March of 2008.
It was literally gone in a week for nearly three days, not unlike FDX because that’s because Derek Wall Street and finance is a confidence game.
It is a confidence game if you have confidence in your Financial institution, you know, you can put up with a lot of shit.
The moment that confidence is lost, it’s over, it’s over and it happens like that and you know, people don’t think it’s going to happen.
They’d never expect, it’s going to happen.
They don’t believe it’s going to happen.
I mean, bear Stearns was around for 85 years.
It didn’t have a losing quarter until the fourth quarter of 2007, two and a half months later, it was gone.
And it was gone in a week after people like, Jim Cramer went on CNBC saying you’d be crazy to sell your bear Stearns stock, and Allen Schwartz.
This who had become the CEO of bear Stearns for 3 months.
In January of 2008.
You know, said everything was fine and, you know, it’s not because once the way you finance you once the where your source of capital comes from dries up, whether it’s repo financing in the case of bear Stearns or customer.
Counts which is Criminal but if he was using them that, you know, that the opposite of being available is when everybody wants their money back.
At the same time, that’s called a run on the bank.
When there’s when there’s a run on the bank, Confidence is completely lost.
And that’s because in a fractional banking system, your money is never at the bank.
Do you ever wonder why?
When you go into a bank branch their impressive, they’re made of marble their Bank Vols, there’s a huge vault in the corner, you know, the size of a football field.
It’s to give you the impression of safety that your money is safely at the bank, but guess what?
Your money is.
Not at the bank.
It’s never been at the bank, if it At the bank, we would not have a banking system.
You put your money in the bank and they immediately, or soon thereafter, lend it out and they lend it.
They pay you nothing for the money.
You leave with them and they lend it out a big spreads.
If your money was at the bank, they couldn’t use it to make money from your money and therefore there wouldn’t be a banking system.
So as long as people don’t want their money, all at the same time, the system works when people freak out and lose confidence which happens like once every decade, Or so, they make a run on the bank.
They want their money at the same time, just like it.
FTX just like at Bear Stearns just like at Lehman.
Just like in the 1929 1930 just like over and over and over and over and over again.
Then the system collapses for that entity collapses, and that’s what happened at FDX.
And what’s so interesting to me is that in a way to put a bow on the SPF story for now, he was playing a kind of reverse Confidence Game because the typical bank is, you said, looks like a temple.
The typical Banker is in an Atty.
Three-piece suit with a perfect tie-in, perfectly coifs hair, he or she is supposed to look like the absolute picture of, like a Bull column or a bust etched into deep marble and SBF was playing the exact opposite game.
I never comb my hair.
I am never going to look comfortable in a suit.
I’m gonna wear t-shirts and cargo pants.
I’m going to give the impression of such extraordinary extraterrestrial intelligence that I don’t even have to get dressed for you for you to trust that.
I understand what’s going on with your money and my investment scheme.
It like it, if it does finally come out that He was basically Elizabeth Holmes with worst hair and cargo shorts.
Like that’s going to be the story that he play this extraordinary reverse Confidence, Game on a lot of really sophisticated investors two more layers here.
First crypto and second, the philosophical movement of effective.
Altruism that SPF was a part of, you know, I’m really curious what this does to Institutional Investor trust in crypto like of course is going to be a Vibe damaged.
It’s rough to have the white knight of your Revealed as a fraud or a failure, but it’s really the institutional JPMorgan of your industry.
Were the jpeg Morgan of your industry.
It’s really the institutional damage that I’m most interested in like one of the investors when the major investors in FTX was the Ontario, Ontario, teachers, pension the next pension fund is going to look at the next marginal investment in crypto and say, no frigging way.
There is no way.
I’m making the same mistake that Ontario made six weeks ago.
Six months ago.
Go and how devastating do you think it is for the near term future of crypto, to have an implosion like this, that might have a chilling effect in all these institutional investors.
It might be the best thing that ever happened to crypto.
Just like the implosion of Internet 1.0 pets.com was the best thing that ever happened to the internet, right?
I mean, you know, it went from being a total speculative Paradise or nightmare after To 2000.
You know, when we remember, you know, you’re too young to remember eyeballs and, you know, all the crap that was being slung about all these companies and all they, you know, they all went public, they got their Capital.
They spent it on marketing to try to get eyeballs or creating their website and then it all crashed out.
And then out of that out of that Wasteland, that that that, you know, the forest fire the Raging for Fire of that, that came green shoots and out of that came.
You know, the Google’s, the Amazons, you know, the next generation of companies in the internet that actually could use.
It could actually provide services and products that people wanted and could actually make a profit.
And, you know, now, of course that’s Web 2.0.
Now, of course people have started talking about web 3.0 and how it’s going to be decentralized again.
Blah blah blah.
Let’s not go down that rabbit hole, but that whole concept might be on ice now.
But I think, you know, the whole, you know, facade of crypto capitalism has been, I think, you know, plowed us under at the moment.
And, you know, I still believe even though I don’t really understand it.
Derek I have to say, I don’t really still don’t really understand it because I’m obviously not smart enough because I’m an old fogy, but you know, perhaps there’s something to the blockchain.
And the technology behind Bitcoin and cryptocurrencies that might be useful.
And can be built upon to make something that might be truly Innovative invaluable for society.
And but I think you know, clearing out this underbrush of all this crap and, you know, all this shit coins and all the 2000 coins that are traded on coinbase, and, you know, all this BS that’s being flung at us for For years now, I think will be potentially quite healthy.
I think bending over backward all the way to be fair to crypto in this moment when no one needs to be fair to crypto.
It is, of course, possible.
We can see, some kind of forest fire effects that we saw with Web 2.0 in the early 2000s, where the pets.com crashes, the pets dot-coms of the world, crash and the Amazons nearly go bankrupt but end up becoming the next behemoths of the 21st century.
Of course, something like that could happen.
But there’s something that you said that I think is really potent, which is that you just said I’m a smart person, but I might not Not be smart enough to get crypto so who knows?
Maybe it’s have to like, trust that smart.
He’s better than me are going to figure out the way forward and in web three crypto decentralized, whatever it is potentially precisely that attitude that is responsible for giving us people like SBS.
A lot of really smart people, at a lot of venture capital firms saying, you know what?
I’m really smart.
I bet I’ve made huge bets and hard tech.
I’ve made huge bets in consumer Tech.
I’ve made huge bets and you know native apps, Etc.
I don’t think I’m smart enough to We understand what’s going on in crypto.
But damn these physics Majors from MIT really seem smart and they dress weirdly and they talk and circuitous language and it sounds really brilliant and I might as well write them a check for a hundred million dollars to see what all this is about.
And it turns out that the fact that these people who are very smart didn’t feel smart enough to truly understand what crypto is about was an important signal that there was no underlying product.
There was the promise of a product.
Built upon a interesting piece of math and Technology but had yielded anything of use to actual consumers, certainly in America.
Like there is always that possibility that your uncertainty is actually the most important signal here, that underneath all these promises.
It’s just a lot of hand webbing and shit coins.
Well, of course, that is absolutely correct.
There’s no question that, that is absolutely correct.
And and that is you know, at one point created a trillion-dollar industry out of nothing that’s now shrinking close, you know, getting a three trillion at its peak, right?
Three train at its peak and now about seven hundred billion.
But on the other hand, you know, both things can be true.
It can’t be true that we don’t understand it for shit.
And they can also be true that it’s might have some value at some point.
Like, I don’t understand, you know, I don’t understand how my iPhone works.
I don’t understand how a car works.
I don’t understand how a combustion engine works.
I don’t understand how an electric engine works.
I don’t understand understand how to use all those things because you drive a car, and you use a phone and you turn on a combustion engine.
I think it’s a really important distinction that you don’t, but I didn’t understand there were time.
When people freaked out about cars.
Absolutely freaked out about cars, you know, it just written this book about GE.
Ee, you know gu was a hundred years ago, the first manufacturer of electric cars, have you ever seen people trying to drive the first electric cars of the first combustion engines?
It’s like Laurel and Hardy is like, it’s like The Three Stooges.
I mean, people it didn’t, I mean, I didn’t understand, you know, Wi-Fi or Internet, the internet when it, you know, remember Katie Couric, what’s this thing?
What is this internet thing?
I mean, it takes time for people to internalize It to adapt it, to get used to it, to trust it.
And I think we’re just like, kind of in the early Innings of whatever this thing is.
Speaking of extraordinary, downfalls of once, esteemed companies, you have a new book out about I about GE called power failure.
Tell us a little bit about this book that comes out this week.
And why you chose the subject for your latest book?
Well again it’s not unlike kind of Michael Lewis being embedded.
You know I Once Upon a Time worked at GE Capital when I first got out of business school back in the 80s and all of a sudden this company that was once the most valuable company in the world, the most respected company in the world.
The most revered company of the world the with the CEO.
Who was the see the manager of the century who created unbelievable technology.
The technology that Google created that Microsoft created that apple.
It all rolled up into one, I mean, there was no better.
Technological leader than GE, you know, a hundred and thirty year old company.
And next thing you know it’s a dead body on the floor.
So just like I wanted to know what happened to Bear Stearns.
Just so I like, I wanted to know what happened to G at Goldman Sachs just like, I wanted to know what happened in the Duke lacrosse scandal.
I wanted to know there’s a dead body on the floor.
Namely, GE after 130 years.
How did it get there?
How the hell did it get there?
So I spent three years trying to figure it out and I pretty sure I figured it out and that’s what this book is about.
And I think it’s a riveting story.
Of course, what writer doesn’t think, what they’ve written is riveting, but, you know, to see the most of the.
So the subtitle is the rise and fall of an American icon.
I mean, there was no company more iconic around the world than GE and Hank Paulson, former treasury secretary said that to me himself, I mean, you know, when he goes to China, that’s what they talked about.
About GE what happened to this company.
How did this happen?
How did it go from the most valuable company in the world?
In 2001 to irrelevant 20 years later?
Is there a thread that connects the fact that Jack Welch and ml to the CEOs of GE were among the most respected CEOs by the media for a period of their tenure.
And now your book asks us to re-evaluate the legacy of their tenure, is there a A thread that connects that to the fact that the media doesn’t seem very good necessarily at picking out the CEO’s that are going to have the best track record in the long run.
We fall in love with people who either fit a very specific archetype like Elizabeth Holmes or people who violently push against that archetype like SPF, but seemed to not have a great track record of identifying those Leaders that are the best for the long run of their company.
Look, we did that.
The media just gets the mainstreaming of just gets captivated by these people.
I mean, you know, in addition to SBF being on the cover of Fortune and Forbes literally in the last year, right mean.
Guess who else used to be on the cover of Fortune and Forbes all the time?
Do you know Mark Zuckerberg?
You know, we you know, Miss Tara knows.
Is Elizabeth Holmes.
I mean, Adam Newman, we fall in love with these people, you know, in America, we love to build people up and we love to tear them down.
That is just the Arc of the narrative that we get totally and transpire, you know, whether in politics or business or Sports.
It’s just what we like to do and so, you know, that’s what happens in business, that’s what’s happening, you know, with SPF.
Now that’s what’s happening with Jeff, film old and Jack Welch and Elizabeth Holmes and now I’m Newman.
I mean that’s and you know Mark Zuckerberg that’s just the way it goes and it’s probably not healthy because you know the ups and the Downs you know this culture or this reverence culture that we’ve developed especially for people with you know billions of dollars in their net worth is not healthy and because a lot of money is lost along the way by people who don’t know better, who think there’s some great thing being here that the, you know, their fear of missing out.
And what really happens is, they their money disappears and they wonder what the hell happened.
Certainly seems to be what happens in this case, they’ll come.
And thank you very much.
Dirk was a pleasure.
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