Transcript: Michael Lewis on SBF & FTX



The transcript from this week’s, MiB: Michael Lewis on SBF & FTX, is below.

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This is Masters in business with Barry Ritholtz on Bloomberg Radio.

[Barry Ritholtz] 00:00:07  This week on the podcast Michael Lewis out with a brand new book on Sam Bankman-Fried and F T X doing the Circuit. We managed to get him right after his 60 Minutes podcast, and he was completely open and unguarded and talked about everything. Talked about the process of writing the book, what it’s like to go on 60 Minutes and know that social media is gonna come at you. People would much rather go to the outrage machine than actually learn the details and argue from a factual perspective. He doesn’t have an opinion on whether or not Sam Bankman-Fried is gonna be found guilty or not. And the book is similar. He just lays it out as he saw it, as a fly in the wall and lets you, the reader, figure it out. So all of you haters out there, he’s just shaking it off and moving on with whatever’s gonna be his next book project. I found the book to be absolutely fascinating. Really enjoyed it. Although I, I read it, you know, quickly in a weekend. Normally I luxuriate in Michael Lewis. And I found our conversation to be completely delightful and I think you will also. So with no further ado my discussion on Going Infinite with Michael Lewis.

[Michael Lewis] 00:01:25  It’s good to see you, Barry.

[Barry Ritholtz] 00:01:26  Good To see you again. So let’s start out talking about how this landed in your lap. A friend is thinking about doing a deal with F T X and he contacts you, says, I can’t get a read on this guy, Sam Bankman-Fried. Tell us about that first meeting with SBF What was that Like?

[Michael Lewis] 00:01:42 So this friend reaches out in September of 2021, and I’d never heard of Sam Bankman Fried or F T X , I hadn’t been paying much attention to crypto. And Sam Bankman-Fried a few weeks later ends up on my front porch and I take him for a, a hike in the hills of Berkeley. He’s, I think it’s the first hike he ever went on, right? That he was always dressed for the hike, but never actually goes over sneakers,

[Barry Ritholtz] 00:02:06 Cargo shorts.

[Michael Lewis] 00:02:07  Yeah. I had no idea it was gonna turn up. And what turned up was this kind of kid, he’s 29 years old, so I wasn’t thinking this is literary material. I was thinking, my friend wants to know what I think of this guy. But an hour into the walk after I’ve discovered that Forbes has decided he’s worth 22 and half billion dollars, he’s kind of bemused by his whole situation. It’s all, it’s gone from zero, this has happened in 18 months. He’s gone from zero to 22 and a half billion in 18 months. And he’s describing what is going on in crypto where he intends to use this money, kind of his background, where he came from, these child of these two Stanford academics, his parents were just completely bewildered by what had happened to their child. ’cause they weren’t like, they weren’t money people, they weren’t materialistic people. They, they were people who just kinda lived in their heads. And he said, they don’t quite understand what to make of all this. And I thought it was kind of funny. So I called my friend at the end of it, I said, go ahead, do the deal. What could go wrong? And he did the deal. But I, I turned to Sam Bankman free at the end of it. And I said, I don’t know where this is going to end, but I just wanna watch. Can I just tag along?

[Barry Ritholtz] 00:03:16 Like that first meeting, you actually set this up.

[Michael Lewis] 00:03:18  And in fact, he was that fascinated. He was that fascinating. And, and I know this because I, I gave some interview right after this and someone said, do you know what your next book project might be? And I said, you know, I just had a two hour walk with a guy and I think I might’ve found it, but I didn’t know what the book was. I didn’t know much more about him than you can learn in two hours. I just knew I had this, I had a theory of, I had a theory about how I wanted my next book to work before Covid. I don’t wanna bore you with this, but before Covid I had made a decision that I wanted to walk into books with characters that I wasn’t gonna, I wasn’t gonna know what the story was. I wasn’t gonna have a theory of the case. I wasn’t gonna have an argument. I was going to attach myself to characters interested who interested me, Where there’s a narrative and the characters flesh out, flesh it out.

[Barry Ritholtz] 00:03:59 As opposed to prior Books as as well, Well, you’re inverting it in the

[Michael Lewis] 00:04:01  Kind of, I, I’d always kind of done this. I was just making a bigger point of it. And my prior books that I felt that were less fun to write were books where I had to strain to make the character’s, characters like, to make them live on the page. Because

[Barry Ritholtz] 00:04:06 [ ’cause I find all your characters leap off the page.

[Michael Lewis] 00:04:28 [Speaker Changed] There. I think, I think that there is a weakness, for example, to flash boys in the character of Brad Katama because he’s,

[Barry Ritholtz] 00:04:36  Well that’s ’cause he’s a chill dude.

[Michael Lewis] 00:04:37 [Speaker Changed] Precisely.You know, he’s a laid Back guy. He’s a simply nice decent guy, right? That he’s very, I love him, but

[Barry Ritholtz] 00:04:43 [Speaker Changed] He’s, but, but he’s doing something really different.

[Michael Lewis] 00:04:45 [Speaker Changed] So it different, it works only because when you drop that character into the middle of modern Wall Street, it gets very interesting.

[Barry Ritholtz] 00:04:52 [Speaker Changed] He’s very Canadian.

[Michael Lewis] 00:04:53 [Speaker Changed] He’s very Canadian, right. 00:04:54 [Speaker Changed] And that doesn’t come across. Canadian guy is not where I wanted to ever start again. And I wanted to start with complicated, interesting people. And I had an idea, my idea was Mike Leach, coach of the Mississippi State Bulldogs at the time was gonna let me move into his life for a season in the ss in s e c football. And I thought that could have been fun. And I, and so it’s character and situation. College football is in turmoil because of name, image and likeness stuff. But the transfer portal, it, it’s, and the s e it’s becoming ever more professionalized. The schools are a afterthought, you know, you know, they’re sort of like you have the school to have a football team. And Mike Leach, who is a one who I’d written about once, is a delightful character who would provide a view on it that would be so good. He died. That’s what I would have done if he had lived.

[Barry Ritholtz] 00:05:43 [Speaker Changed] You could have found some other coach to track though, if you really wanted to go that route.

[Michael Lewis] 00:05:47 [Speaker Changed] But you’d need to find a coach who you really could light up on the page. Okay. And who would let you in? So who would let, who would let me see everything. And Michael Leach I knew would let me see everything.

[Barry Ritholtz] 00:05:56 [Speaker Changed] And, and he’s quite a character.

[Michael Lewis] 00:05:58 [Speaker Changed] Oh my God, I’m, yes. So anyway, so I had that in mind when I met s I thought the character in this situation is, he’s like walking social satire. He acquired 22 and a $5 billion in a flash. And the world was reorganizing itself around him. Everybody wanted, so everybody wanted, by the way, the, the 22.5, and I don’t know if this is from the book or or my research, Forbes settled on that number. They suspected it could have been high as a hundred billion, but they just couldn’t come up with ways of showing…

[Barry Ritholtz ] 00:06:27   How?

[Michael Lewis] 00:06:28 [Speaker Changed] Do you value piles of serum and Solana and F T T and then what and who knows what the hell is inside of Alameda research. Right.

[Barry Ritholtz] 00:06:36 [Speaker Changed] Which raises an interesting question. Once you decide to write this, you have to know, you’re gonna be going to be discussing crypto. But before you began work on going infinite, did you have any thoughts on, on Bitcoin, blockchain, NFTs, ether? Like what were you thinking about prior?

[Michael Lewis] 00:06:54 [Speaker Changed] So going back to about, I dunno, maybe 2012, I’d had made several runs at writing about crypto, mainly at the behest of crypto people because they wanted attention. And I mean, the first one was funny. I

[Barry Ritholtz]  00:07:09  I hadn’t noticed that

[Michael Lewis] 00:07:10  I never wrote it. Oh, okay. I mean, I went and spent time and interviewed people and I just thought I don’t, so

[Barry Ritholtz] 00:07:14 [Speaker Changed] You never put anything. So you had some rudimentary

[Michael Lewis] 00:07:17  Well, some Sense. I did the, the first time I make it make some bid to, to get to know the people and the, write a story about it. A guy called me up from Palo Alto, he had a legitimate crypto business. He said, if you come down, there’s some people just come down in the next few days to this house. There’s some people I want you to meet. And one of ’em is Satoshi. And, and I, I fell for it, you know? I thought so. Yeah, I was gonna say

[Barry Ritholtz ] 00:07:42 [Speaker Changed] That’s,

[Michael Lewis] 00:07:43 [Speaker Changed] Well, but, but you know, it was 2012, so maybe, maybe Satoshi’s gonna reveal himself to me right. Early. And so I went down and I got out of the car about a block from the house, and you could smell the weed from a block from the house. And I got at house and they were like 12 entrepreneurs with sleeping bags in this crashing, in this multimillion dollar house in Palo Alto. And some of them turned out to be quite prominent in crypto. But the problem was, this is, this is what turned me off. They said at that moment they were selling crypto as it’s gonna replace fiat currency. Right. It’s gonna be the means of

[Barry Ritholtz] 00:08:14 [Speaker Changed] Exchange. And you’ve talked about how the narrative has changed consistently.

[Michael Lewis] 00:08:18 [Speaker Changed] They keep changing the story

[Barry Ritholtz] 00:08:19 [Speaker Changed] And, and just never, never finds a narrative that sticks.

[Michael Lewis] 00:08:21 [Speaker Changed] It’s not that there’s nothing there, it’s just that whatever’s there has not clicked with, with like a serious problem in a serious way. But at that moment it was, I spend the day with them and they, they’re selling me as hard as they can sell me that this is gonna be, we are not gonna need dollars very soon. And I said, but can you use it? And they said, here, we’ll show you. And they put some Bitcoin on my phone and we walked into Palo Alto to the one coffee shop that accepted Bitcoin as currency. And I bought a latte,

[Barry Ritholtz ] 00:08:49 [Speaker Changed] Which probably costs you a million dollars in…,

[Michael Lewis] 00:08:51 [Speaker Changed] No, no, this gets better. The coffee shop though it in theory accepted Bitcoin. Yeah. It took 10 minutes and they gave up. Right. They couldn’t do it. And I said, I got an idea. I have this thing called a dollar. I’ll just use this. It’s a miracle. And I had this thought, I thought like they’re selling this thing, but if, if, if it’s some wacky world, Bitcoin was the first currency and then someone came along and invented dollars. Right. Everywhere they go, thank God. Right, right. So I, so I just thought, it’s not right. It’s like there’s something to Lampoon, but it’s, I don’t wanna do that.

[Barry Ritholtz] 00:09:22 [Speaker Changed] It wasn’t, it wasn’t ready for you to write about.

[Michael Lewis] 00:09:24 [Speaker Changed] Wasn’t ready for me to write about. So

[Barry Ritholtz] 00:09:26 [Speaker Changed] Sam Bankman Fried is this fascinating, quirky character you decide to embed with him like a military journalist embedding with the troops. So while they’re covering a war, what was that like? Was it difficult to maintain arms-length objectivity? ’cause you’re a journalist essentially; Are, you are like trailing this guy?

[Michael Lewis] 00:09:49 [Speaker Changed] Right? So the first thing, I mean, if I had to, I go back hard time remembering it. But if I go back and I think, what was it that made me think, not just this character, but this situation that it, part of it was, he wasn’t trying to sell me crypto. Right. That he himself didn’t completely swallow crypto. That he wasn’t a religionist. He said basically, I am using it to make money. ’cause there are all these inefficiencies. I don’t know what’s gonna happen with it. He wasn’t, it was the first crypto person not to pitch crypto to me.

[Barry Ritholtz] 00:10:17 [Speaker Changed] That’s really interesting

[Michael Lewis] 00:10:17 [Speaker Changed]. And it was interesting. It made it more interesting to me. And I, it was the first time I thought, ah, this may be the way into crypto. Because to me, what was interesting about crypto at that point was, I mean the technology’s interesting. The fi the whole financial structure that’s arisen in crypto, it’s interesting. It’s not a book by me. What’s interesting and is a book by me are the social consequences of all of a sudden there being $3 trillion of new wealth. That’s just, it’s in randomly distributed..

[Barry Ritholtz] 00:10:46 [Speaker Changed] Or not so randomly distributed It it’s mostly dudes. It’s Crypto Bros.. And there’s a reason why Lamborghini sold out for two years.

[Michael Lewis] 00:10:55 [Speaker Changed] Right. That’s right

[Barry Ritholtz] 00:10:55 [Speaker Changed]  it’s “have fun being poor.”

[Michael Lewis] 00:10:56 [Speaker Changed] So I didn’t answer your question, but, so this is the why of it. So embedding I always embed, right? That’s what I do. The, the, the goal is to get to a point with the subject where you’re sitting in their office with a desk and they don’t even know you’re there anymore.

[Barry Ritholtz] 00:11:09 [Speaker Changed] So does that compromise your objectivity as a journalist?

[Michael Lewis]  00:11:12 [Speaker Changed] It never has before. Okay.

[Barry Ritholtz] 00:11:14 [Speaker Changed] That’s a fair answer.

[Michael Lewis] 00:11:15 [Speaker Changed] I mean, I, I’ve never, nobody’s because

[Barry Ritholtz] 00:11:17 [Speaker Changed] People are saying, oh, Michael got so close to SS b F and he’s defending him. That’s the accusation, I didn’t read the book that way. I read it as an explanatory, not a defense.

[Michael Lewis] 00:11:29 [Speaker Changed] The radical act was just to tell the story as I saw the story, what, what possible purpose, what possible good would it do me to set myself up as Sam’s Bankman Fried’s defense counsel. And that’s not what it was. And in fact, there’s all kinds of

[Barry Ritholtz] 00:11:44 [Speaker Changed] People ask me, “find out what he got paid.” I’m like, are you kidding?

[Michael Lewis] 00:11:47 [Speaker Changed] So people said this about Flash Boys. A Wall Street firm published a note that I had been given shares in I E X to write flash boys. Not True

[Barry Ritholtz] And were you paid?

[Michael Lewis] 00:11:55 [Speaker Changed] Of course not true.

[Barry Ritholtz] And and full disclosure, not only did you get a butt-ton selling the book, you sold the movie rights before this even came out. Why would anyone else have to pay you for this? It’s such a silly accusation.

[Michael Lewis] 00:12:09 [Speaker Changed] So, so it’s people I, well this let, let’s just actually establish the relationship. So of course I don’t get paid anything. Of course I didn’t have any financial interest in F T X or in fact, I’m a creditor. I have $2,000 on the US Exchange that I’m waiting to get out of the bankruptcy. There you go. ’cause I wanted to see how it worked, you know? Right. And the, the Sandman free, neither Sand Bankman freed nor anyone in his operation ever asked me what I was doing, asked me why I was doing it, questioned my, the questions I was asking, forbid me from seeing, there was only one mo one part of his empire that I had to fight to see. Like, he had to say, he first, he said, I can’t let you into that meeting ’cause the people are gonna be too uncomfortable.

00:12:55 And but other than that, it was just like, it’s here. You just watch, you ask, you’re gonna ask anybody any question you wanna ask. And it took me a while to get to that point. But so they had no finger. They’ve been, they, as far as I know, they haven’t read it. So nobody’s, nobody reads the book until it comes out. Right. And that’s the deal I’ve had with everybody I read about. And it’s sort of like at some point you just have to leave me alone and trust that I’m not some sinister person. Let, let

[Barry Ritholtz] 00:13:19 [Speaker Changed] Lemme ask you a question that’s gonna make you feel old, given how famous you are in Wall Street Finance circles from Liars Poker forward, any of these 20 somethings, know who the hell you were?

[Michael Lewis] 00:13:31 [Speaker Changed] They all love Flash Boys.

[Barry Ritholtz] 00:13:32 [Speaker Changed] They do. Okay. So they had a sense of

[Michael Lewis] 00:13:34 [Speaker Changed] Oh no, no, no. They all had books to sign and all that. Yeah. So the, so the answer is yes. It was odd what they knew Sam, not

[Barry Ritholtz] 00:13:41 [Speaker Changed] Liars Poker, not the Big Short, not Moneyball. Those are the really, the big three. And the Undoing project.

[Michael Lewis] 00:13:46 [Speaker Changed] Sam, Sam never said this, but I found out from his parents that he adored Moneyball when he was a little kid. Oh really? Of course he did. Because he was all sure he was a totally isolated math. He could sitting alone in his room who felt powerless. And all of a sudden this book says, the things you can do actually could change baseball. But, but that, apart from that, no. That was just the weird old guy. Right. I mean that’s, and that was kind of what it was. They were so odd themselves as a collection of characters. It’s the best look, F T X, nevermind Sam F T X was the best collection of characters I’ve seen in a financial operation since Solomon Brothers. Wow. Because they were just like, they, they were all these random people. Like it wasn’t, they weren’t filtered in the way that a financial forum usually filters people. It was like the odd collisions that happened between the world and F T X and from the world odd people had entered F T X.

[Barry Ritholtz] 00:14:36 [Speaker Changed] Huh, Amazing. You spend a lot of time talking about what an odd, quirky sort of socially misfit kid he was. What was the source of that? Was that Sam, his himself? Was that his parents? Was that other people? How did you get paint that picture of a, a young S b F? So

[Michael Lewis] 00:14:55 [Speaker Changed] I think it, it’s partly because of how I grew up and the importance of like who my parents were and who my friends were and who my coach was. When I, when I’m try to get to know somebody, I go right to the childhood, right? And sometimes that’s stuff that’s a, that’s a mislead. That that doesn’t lead you anywhere. It, so Sam, I asked him, I’d like just a list of people who, who knew you before the age of 18, who could gimme some picture of you just to start out right. And he said, there’s nobody. And I said, what do you mean there’s nobody? He said,

[Barry Ritholtz ] 00:15:26 [Speaker Changed] Well, it was the guy he played the game with.

[Michael Lewis] 00:15:28 [Speaker Changed] Well, I pushed and pushed and finally it’s his, the list is his parents who, who, you know, they did observe him and his little brother who says, I didn’t know him. And his, he was a tenant in the house. His little brother said, and there was one guy named Matt Nas who Sam met in middle school and be, he became partners in play in this game. They played called Magic the Gathering. And what Matt, Matt NA’s chief attribute was, he made no emotional demands on Sam. And they seem to hardly talk. They just sat there and played together. And you see them together now and they still, we’ll sit together and not hardly talk. So there was, it was that, and Matt would say, you know, they were Sam, they weren’t that close in some ways. They were close, they’re close playing games together. So you had this kid who was, he was totally isolated in, in a, in a, you can imagine if other circumstances, a child might end up being very isolated. But he is the child of two very social professors living on the Stanford campus. Right. Who have a world around them, really smart and interesting people. And Sam gets, Sam is known by nobody. And the, the, the, so the question is why he, he had, he still has horrible problems with social interactions, but when he is a kid, he, I mean he, he did, he realized, for example, that he didn’t know how to make facial expressions.

[Barry Ritholtz] 00:16:51 [Speaker Changed] Right. He teaches himself to smile and finds out that that solves a problem within the game. That is the simulation of life. That’s

[Michael Lewis] 00:16:59 [Speaker Changed] Exactly right. He sits in front of a mirror, but it’s not till college and, and learns to make the facial expressions that are appropriate to what someone says be he’s irritated that he has to do it. He doesn’t, he realizes he doesn’t have a full compliment of human feeling that he doesn’t feel happiness, he doesn’t feel pleasure, really, he doesn’t feel empathy and that this is, you know, it’s just like ma he he and he realizes the people around him see him as not completely human.

[Barry Ritholtz Michael Lewis] 00:17:29 [Speaker Changed] So I have a question that I was gonna ask you later on, but I might as well bring it up here. So it’s already come out, he’s being treated with the M s A patch for Adderall and, and Adderall for A D H D and depression. The persona in the book that you just described kind of reminded me a little bit of the reference you make in the big short to Michael Burry, who when he finds out his son has Asperger’s, has himself tested and he’s on Asperger’s. So the obvious question is, I have seen no mention of this anywhere, Sam, on the Autism slash Asperger’s spectrum,

00:18:03 [Speaker Changed] Whatever it is that he’s diagnosable with, is so much more extreme than Michael Berry. Really? Oh yeah. And it’s, I don’t know. So I don’t use any of those words in the book.

00:18:15 [Speaker Changed] I I, I noticed that, which is what made me ask the que, by the way, nobody has brought that up anywhere in any interview I found something buried in a Reddit where someone brought it up. But other than that, ’cause I was hunting to see, hey, this guy, I’m not a diagnostician, but I’ve read enough about this. I’ve worked with enough of those folks. I’ve had enough people with Asperger’s on the show.

00:18:37 [Speaker Changed] You know, the word that it’s funny, whatever word you would use would put him in a box that probably he doesn’t belong in because he fe it feels different from what I’ve seen before. Okay. Of those, Bo and Italian seems different. He’s very, very good at reading you. Which,

00:18:53 [Speaker Changed] Which people on the spectrum generally are not.

00:18:55 [Speaker Changed] So, so there’s this odd one way thing. He reads you very well, but he’s hard to read as a kid. So the other thing about it, the important beats in his childhood, I think are, are one, his parents don’t think of him as gifted. They worry about him. They think of him and their parents. His parents’ friends said to me, they thought the parents were both afraid for and of him. Huh? Which was a curious thing to say about a parent and a child. Yeah. And the, it’s not until he is in middle school when his mom finds him sobbing in his room alone. And he says, I’m just so bored that she realizes that he’s an average student and he’s an average student because whatever’s coming outta the teacher’s mouth just does not get interesting.

00:19:34 [Speaker Changed] Knows it’s a piece in the book where he, his mom is gonna give a, a paper somewhere and like the eight year old gives her a read on the paper, more sophisticated than the PhD candidates gave her a, as a critique.

00:19:48 [Speaker Changed] So it was, it was a bit like he was, he was waiting, he wasn’t living his childhood. He was waiting it for it to end, right. So that he could start talking to people. And in any case, he’s eventually, he’s identified as gifted mathematically,

00:20:01 [Speaker Changed] Right? So, so he’s brilliant at math. He goes to m i t to study, study physics and math.

00:20:06 [Speaker Changed] So it so brilliant, but not that brilliant. So brilliant enough. Oh, really? So brilliant enough so that sure, he goes to math camp in the summer and find, kind of finds his tribe. But in math camp, he’s not the best. He’s, he’s kind of just average among the brilliant math kids. He’s average. So he, he has no sense of himself as special until he collides with Wall

00:20:26 [Speaker Changed] Street. So that’s where I was about to go. So he goes from m i t to Jane Street Trading, which is a high frequency trading shop where it’s really partly about math, but mostly about probabilities and problem solving and gameplay where he excels.

00:20:44 [Speaker Changed] And so quantifying what, what usually doesn’t get quantified, quantifying things that seem to be sort of subjective, the tests that he gets. This is where he finds out, oh my God, I’m actually off the charts good at this. Right? The Jane Street interviews where they’re making him do all kinds of weird puzzles and solve puzzles and play games and make betts that he just, he flies through the thing and he realizes that what he’s good at is not, it’s not, it’s not chess. He’s good at, it’s, it’s chess where you’re on a clock, you can only, you have five seconds to make the move. And every five minutes someone shouts a rule change. Right? So the, the queen is now a rook. And so every, it’s, it’s semi chaos.

00:21:21 [Speaker Changed] But he can manage that.

00:21:22 [Speaker Changed] He, he can manage that. It’s not that he’s better than, than when he is playing chess, radio, chess. It’s that everybody else is worse.

00:21:29 [Speaker Changed] He’s, it’s a quote right from the book. It wasn’t that he thrived under pressure, he just didn’t feel it. He wasn’t better than usual, he just wasn’t worse. Most people felt emotions he did not. And therefore perform poorly under

00:21:40 [Speaker Changed] Pressure. And you know what I think, I think this is an, this is a really important key to everything that happens next in Sam Bankman Free’s life. Because once he discovers that it’s this environment, it’s sort of the semi chaotic environment where mathematical aptitude, ability to quantify, ability to make quick judgments about probabilities really benefit you. But there’s no clear, perfect right answer. He’s so good compared to other people in that environment. He creates that environment over and over and over so he can be the best. I think it’s set, that’s like the beginning of the understanding of Sam Bagman Fried. He loves that feeling of being the best, who doesn’t, it’s a weird environment and he realizes what it is. So he creates it Jane Street, the market’s created for him. Right? So it’s a really good, you know, it’s, he’s a natural in the markets. But even in his like own company, the reason there’s chaos in his company, he, I would tell you there are reasons we don’t have job titles and we have no organization chart and there’s no list of employees and nobody knows who’s supposed to be doing what. But in fact, he wanted everybody to be in the same state of chaos. That that’s where he won, allows

00:22:45 [Speaker Changed] Him to thrive. I I love the story at Jane Street where he figures out that they can scrape each state’s presidential election data. Oh yeah. And figures out they get a five minute lead on C N N and they start trading futures overnight in 2016 in the presidential election, they’re up $300 million. Tell us what happens.

00:23:08 [Speaker Changed] This is an amazing story. I love that part. So this is, there’s some scoops in the Jane Street part of the book I think. I mean, just assembling a portrait of Jane Street is not easy ’cause they just won’t talk to you. Right. But, but, but Sam sort of created the portrait because he hired so many former Jane Street people, right. And they felt free to talk. But there was the trade, the Trump trade. So Sam banging free was partly responsible for the worst trade in Jane Street history as far as he knew, which

00:23:30 [Speaker Changed] Started out as a giant winner.

00:23:32 [Speaker Changed] That’s right. And it’s, but it’s, if you really think about it, it’s a wild trade. So going into the 2016 election, Hillary Clinton, Donald Trump, it looks like every time there’s good news for Trump in the weeks running up to the election, the markets tank, it looks like that’s the trade if you can, the trade is can you get election information before the rest of the market? Now it seems like a wild idea. That seems like information that is everybody’s gonna get basically at the same time. But in fact, where everybody’s getting it is from John King on CNN. And John King has commercials and John King has to walk from getting the data to get to his board. The data is slow to get to John King. So Jane Street creates its own data gathering system in the important states people took,

00:24:14 [Speaker Changed] Right? It’s just Florida and Ohio. Virginia.

00:24:16 [Speaker Changed] And there sometimes moments and sometimes hours ahead of c n n in knowing what just happened in the election and how the odds just shift shifted and what John King’s gonna say next and what that’s gonna do in to s and p futures. So their bet they put on, in retrospect, they should have maybe thought more about the bet, but it was good for Trump short s and PSS in a big way and short in foreign markets like Mexican markets or whatever, in a less big way. And during the night it, it, as it progresses, it looks like the genius trade. The markets collapse. Sam Banger free goes home at like three in the morning and they’re up $300 million. He sleeps for six hours and comes back. And the problem is the international markets stayed down, but the US stock market popped

00:25:00 [Speaker Changed] Back up. Tax cuts and fiscal stimulus, what’s not gonna be good for

00:25:03 [Speaker Changed] Equities. And so it went from a $300 million win to a $300 million loss. And the

00:25:08 [Speaker Changed] Biggest in Jane Street

00:25:09 [Speaker Changed] History. So mu not much of this makes it into the book, but there were these long memos that were written about in Jane Street about the trade. Oh really? Yeah, I’ve got ’em.

00:25:18 [Speaker Changed] ’cause there was no postmortem, no one ever pulled him aside and said, so hey, you blew us up. It

00:25:22 [Speaker Changed] Was just like, so Sam wrote these long memos to his boss about we need to write long memos about this ’cause we ought to understand what we did. ’cause this is a wild opportunity. We got inform, we succeeded, we got the information before anybody else. It wasn’t in the market, nobody else had it. You didn’t see the markets move when we got the information. Right. We were the only ones there. So he describes like how they should have thought about the trade and what they should have done is they should have shorted international markets. That was just that, that was the, and and maybe even hedged it against with the US markets. That’s his view. But he can’t get his superiors to engage. They just like think as he put it, that we just shouldn’t be doing this. Like this is not our wheelhouse. And it disappointed him. I mean I think he thought set,

00:26:03 [Speaker Changed] Set the grounds for him to exit.

00:26:04 [Speaker Changed] It was one of several things. But yes, he, which is, and if you think about this, you gotta kinda love Jane Street that in my, in my day, if someone had done this, they would’ve been a scapegoat.

00:26:19 [Speaker Changed] Oh

00:26:19 [Speaker Changed] Absolutely. Someone had been strung up, there

00:26:21 [Speaker Changed] Would’ve been a committee, there would’ve been a review. Someone would’ve been fired. Tar and feathered drummed outta Wall Street. This

00:26:26 [Speaker Changed] Is a very smart place because the process was right. The outcome was a problem. Process was mostly right. And it wasn’t some

00:26:33 [Speaker Changed] No, no second level thinking, no second. They didn’t stop and say, alright, so what happens if he’s elected? That’s

00:26:39 [Speaker Changed] Right. And, but that they don’t go punish Sam. And the handful of people who are really at the center of it, I, if I were Sam, it would cause me to love my employer for sure. Right. It’d be a reason to stay. And for him it becomes a reason to leave. And that’s a part of a reason to leave. And that’s curious.

00:26:58 [Speaker Changed] So let’s talk a little bit about Alameda Research and F T X. Alameda predates F T X. It’s the sort of hedge fund trading operation that Sam Bankman freed is operating under. And it begins arbitraging crypto between like Asia and the United States and making a ton of money in what should be something that in the equity markets there wouldn’t be that big a gap. So, so

00:27:27 [Speaker Changed] Tell us about that. So the basic idea, he’s sitting at Jane Street and his financial ambition is limitless. Not because he wants to buy a yacht, but because he wants to save humanity from existential risk. But nevermind that for a minute. And he looks at the crypto markets and this is two th late 2017 and they’re exploded right? That year. And they’re, it’s a trillion dollar market and the Jane streets of the world, which are engaged in this sort of radical, radical efficiency inside of financial markets, like efficient to a microsecond, but

00:28:00 [Speaker Changed] But heavily regulated.

00:28:01 [Speaker Changed] But heavily regulated. But, but that getting information into the markets as fast as information can be gotten to the markets that isn’t happening in crypto. It’s not happening to the extent that, you know, a Bitcoin is trading for a thousand in Japan and 800 in the United States. And

00:28:20 [Speaker Changed] Literally that’s the gap. It’s 00:28:21 [Speaker Changed] Giant. It’s j it’s huge. Sometimes

00:28:22 [Speaker Changed] It’s like, like it would be 20 cents in the, in in equities and it’s it’s $200. That’s

00:28:27 [Speaker Changed] Right. It’s, so the Sam looks at that and says, we can be, I can be Jane Street for crypto. And, and, but then from then it becomes high comedy because he, he’s doing it on behalf of his movement effective altruism. And his idea of starting it is to start it with a bunch of effective al altruists in Berkeley where there’s money from effective altruist to supply the capital.

00:28:51 [Speaker Changed] So, so let’s define effective altruist. ’cause I, I, I read a lot of stuff about it and I don’t think people really get it. Get it. This is a philosophical movement that really began in, in, was it Cambridge? The Oxford. Oxford. And

00:29:03 [Speaker Changed] It,

00:29:04 [Speaker Changed] And migrates to quickly it goes,

00:29:05 [Speaker Changed] It grows out of utilitarianism and the general, I I mean we think about it as sort of like

00:29:09 [Speaker Changed] Meaning maximize the benefit for the most amount of people.

00:29:12 [Speaker Changed] That’s right. And, and be actually mathematically rigorous about how you do your good.

00:29:18 [Speaker Changed] You you call that into question also as did I, but, but we’ll we’ll talk about that

00:29:21 [Speaker Changed] Later. Nevermind. What you think of effective 00:29:23 [Speaker Changed] Altruism made up numbers. You just

00:29:24 [Speaker Changed] Need to Yes. You just, but you need to just accept this is, this has captivated the minds of the 20 people who sand bankman free gather to create the first Jane Street for crypto in Berkeley, California in 2017.

00:29:37 [Speaker Changed] And, and these folks are literally, they set up charities. People are donating money and they figure out what are the biggest threats to human to humanity. And we’ll donate money to those causes.

00:29:46 [Speaker Changed] We’ll find smart ways to donate money to those causes. That’s right. And 00:29:51 [Speaker Changed] So go out and make a ton of money and Right. And give it away.

00:29:53 [Speaker Changed] At that moment, they were pretty focused on, on existing human beings and saving their lives. So it was like a lot of public health in Africa. So that, which is pretty straightforward. Sure. The mo movement was about to jump the shark and, and focus on future humans who’d never been born by preventing existential catastrophe. Preventing so, so they stop giving money for bed nets to prevent malaria in Africa and they start giving money to anthropic or whatever, to, to, to AI out people who, who are thinking about AI risk. So it becomes, it becomes a more complicated thing. In any case, they have appetite for virtually unlimited dollars. Sam is making a pitch to his fellow effective altru. This is a market in which we can make unlimited dollars. Almost none of them have a financial background. All of them are kind of under 30, some of them are basically 20.

00:30:47 And, and they gather together and it works for a bit like weeks. For, for a few weeks. They’re able to do some trades that make, you know, I think half a million dollars a day kind of thing. They were doing pretty well. And, but very quickly, Sam has created his semi chaotic environment in which only he can operate and stay sane. And he’s driven everybody else bad. And, and and half of the people in the, there’s a management committee of five people and the other four think he is either insane or criminal or both. And because they’ve start, they’ve, it can’t, they don’t even know where the money is. Like it’s outing plus

00:31:17 [Speaker Changed] The right, at this point, they go from winning to losing. They go

00:31:19 [Speaker Changed] From winning, the trades start to go bad or it looks like they go bad. And some of the, they don’t have a record of some meaningful number of trades, which

00:31:25 [Speaker Changed] Is a little foreshadowing in the book that, oh my 00:31:27 [Speaker Changed] God, that

00:31:28 [Speaker Changed] There’s no, we’ll talk about this. There’s no record keeping. There’s no c f o. There is nothing of the normal

00:31:33 [Speaker Changed] Controls. None of the normal controls. And Sam has created this algorithmic, algorithmic trading bot, he call it model bot, that he wants to, it’s like release the Kraken. He wants to release in the markets and make 250,000 trades a day. And they’re

00:31:47 [Speaker Changed] Horrified. It’s just gonna crash and burn. Well,

00:31:49 [Speaker Changed] They would’ve been given $175 million from fellow rich effective altruist. And they’re thinking we’re supposed to be making money to give away and we’re losing effective altruist dollars. Right. And it gets everybody’s, everybody gets upset. And it what, there comes a moment where they realize that actually $4 million of Ripple X R P is the token, but of Ripple is missing. And they just literally, they can’t find how much 4 million for them it was a lot. Oh right. But it’s like gone. Like we have, we, we don’t know where it went and how much more is gone. And Sam’s attitude is, I don’t worry. Let’s keep trading. ’cause they, you know, markets are only good for so long and Jane street’s gonna come out, come out and wipe us out. And so let’s, and their, and their attitude is, no, we need to stop trading and find the ripple.

00:32:30 And this becomes a war in the end. Every, all the rest of the management team quits takes big severance packages and quits half the firm leaves. I interviewed all these people and you interview ’em. Now they, one of them will say, I still think he’s kind of crooked. The others say we overreacted. But in any case, the punchline was, it is total chaos. They were probably right to, I, I mean they were huge risk. He had created his environment in which he flourished. But once they leave, they find the money. It’s there. It’s the ripple is on some South Korean exchange. And the South Korean exchange is bewildered that no one’s called. How come no one’s

00:33:06 [Speaker Changed] Come

00:33:07 [Speaker Changed] Coming? We found the news, which is 00:33:09 [Speaker Changed] The theme that keeps repeating later on.

00:33:10 [Speaker Changed] Pete’s repeating itself like,

00:33:11 [Speaker Changed] Hey, is this your $150 million?

00:33:14 [Speaker Changed] That’s right. And, and so that was a moment where you had a foreshadowing of what might happen later in Alameda research. But it, it gets, it finds its footing and it’s kind of fine. It does well for the next, the, the

00:33:27 [Speaker Changed] Next day after everybody leaves, he turned, he releases the Kraken, 00:33:31 [Speaker Changed] He releases the Kraken and it works. And it

00:33:33 [Speaker Changed] Starts cr killing. It does, it’s making a ton of money. It does. Well, 00:33:36 [Speaker Changed] Yes it does. Well,

00:33:37 [Speaker Changed] When does he come to realize, hey, you know, some of the other players are coming in and these big fat arbitrage opportunities are going away. So

00:33:44 [Speaker Changed] He was the one who made markets. He was the one who everybody noticed in crypto what just happened to the spreads? Oh my God. Like some, something just happened it all of a sudden start to look like a real Wall Street market. And, and it took a while. People figure out that there was this wholly anonymous operation called Al Alameda research with this vegan 26 year old who was behind it. So it’s about a, what is it? About a nine months where Sam and Alameda starts to realize they have a lot of competition and this, and, and it is not. They, the markets will never be as fat as they were. It’s gonna be more complicated. And they start thinking about other ways to make money. And they’re, and and

00:34:25 [Speaker Changed] That’s the genesis of F fda. This is the,
00:34:26 [Speaker Changed] So ftx, it’s important to know that this is how F D X comes about. And it’s also important to know that they didn’t

think they had the capacity to actually run an exchange. Running exchange meant having customers. It meant dealing with ordinary people.

00:34:40 [Speaker Changed] That was the big issue. How are we gonna get people

00:34:42 [Speaker Changed] Do this? People aren’t gonna, I don’t, I don’t know how to talk to people. I don’t know what people feel. How on earth am I gonna be like a carnival barker at the middle of an exchange? So he knew he had the ability to create the software.

00:34:53 [Speaker Changed] Hi, his c t o, brilliant guy, 00:34:56 [Speaker Changed] Gary Wang.

00:34:58 [Speaker Changed] Basically one guy writes all the code better than everybody else that’s out there. Yes.

00:35:01 [Speaker Changed] Which apparently didn’t take much, but was true. And their thinking is, we’ll get some, we’ll get people who  understand people to do this for us. They went to all the other exchanges and said, we’ll sell you this and we’ll keep a kind of licensing fee, but we don’t wanna run it. And nobody wanted it. And so they get, they all of a sudden it’s like, oh my God, if we’re gonna do this, we gotta do it ourselves. So they ba really back into creating an exchange. It’s not, it, it was not. And he really had severe doubts about whether he was gonna be able to pull this off.

00:35:31 [Speaker Changed] That’s interesting. And there are two things that really leapt out about the launch of F T X. The first is all these other exchanges sort of socialized losses. So you’re, you’re doing futures trading and every customer effectively is putting up money. And if somebody has a big loss and it drops way below the, the collateral they put up, that loss gets spread out. So his brilliant idea is, hey, we’ll have tight stops. If someone loses money, we liquidate the collateral, they’re done. We’re not gonna have losses here.

00:36:03 [Speaker Changed] That’s right. They, they built, they built a better risk engine. This is funny given what happened, but yes, they’re sitting well

00:36:09 [Speaker Changed] On the, on the futures trading that risk engine was very professional and well

00:36:13 [Speaker Changed] Done. That’s right. And it was, it was this chief, there were other selling points, but it was probably the chief selling point was all you crypto traders have now had the misery of socialized losses on all these exchanges and you’ve just lived with it. You know, you get these clawbacks of 40 and 50% of your trades because somebody blew up and we’re not gonna have that and that, so that, that is what they were selling. But problem with Sam is he never sold anything. Right. And he had, he, if you think about his background, not only is he entirely isolated as a child when he gets to Jane Street, he’s in a culture where it’s disregarded as the, the most foolish thing in the world to say anything to anyone about what you do. They, they are phobic about media attention. It’s all bad. And it’s their, their attitude towards the world is, is suck information out of it. Don’t put information into it. But you can’t sell that way. You have to go out and present yourself to people. And this is the big moment in Sam Bankman Reed’s life when all of a sudden he realizes that, oh, I have to be a, a character or I have to be a a person out there. And

00:37:19 [Speaker Changed] So he starts going to conferences and he’s the guy that was scalping all the, that cash and suddenly he kind of becomes a bit of a star. Well,

00:37:26 [Speaker Changed] Bloomberg launches him

00:37:27 [Speaker Changed] The first first TV show, right? That’s right.

00:37:29 [Speaker Changed] First tv. We’re in the place that launches him. That he goes on tv. He is by my lights very awkward on tv. Right.

00:37:38 [Speaker Changed] I mean, playing a video game while he is

00:37:40 [Speaker Changed] On live TV’s, he’s on live TV at his computer monitor playing a video game at the same time, you can see his eyes going back and forth. Right. You can see him stall, not half listening to the questions he’s being asked. He always says it’s you could, well that’s a really good question. Right. Just delay. That’s Yeah. Just he give himself a little beat. He’s not, and then he, he’s all, he just, he gives a little sli in response to every question, but he doesn’t seem guarded in any way. He seems completely open and is probably much more open. And although he is a little jittery Right. His knee is bumping, bouncing up and down Jack hammering. Yeah. But, but it works. It’s like the person who, or his, his PR person, she’d never done PR before they’d hired Natalie, Natalie, Natalie 10 had said, she looked at Sam, she said, you know, when people meet Sam, they feel some, they sense his vulnerability. They’re really interested in what comes out of his mouth. They see he’s odd, but they kinda like his oddness. I’m just gonna see if that oddness works on tv. And it did. I mean it just did. And so all, so

00:38:42 [Speaker Changed] He goes from there to every major crypto exchange and suddenly every major crypto conference and, and Asia, they’re located in Hong Kong at time, well suddenly

00:38:50 [Speaker Changed] They start to get volume. Right. Right. 00:38:52 [Speaker Changed] And money starts to flow to fdf.

00:38:53 [Speaker Changed] And if you look at, if you look at the way people have made money in crypto, there are like two basic strategies. You bought Bitcoin is zero or bought it low and it went way up. Or you created an exchange. The exchanges have been the sources of great fortunes. And it’s, it’s, and it’s such a simple, easy business if you manage the risk. Right? Right. It’s like you take a, you take a a a,

00:39:14 [Speaker Changed] You’re the casino.

00:39:15 [Speaker Changed] You’re the casino. That’s right. Instead of, instead of getting your money by playing games with better odds against your customers, you’re just taking a slice of each transaction. But you’re the casino. And he was F T X appealed because of where Sam came from and because of the way it was designed immediately to big institutional trading, which was coming in the, the jump tradings, the tower researches. So you, you had started to have volume there. It was slower to appeal to the retail people who the, who the institutional people wanted to interact with. But they, it, I mean it was the fastest growing exchange. And it,

00:39:50 [Speaker Changed] It, and, and to put some flesh on those bones, two bips, they were earning on $250 billion a month, which meant they’re doing, you do the math, a few billion dollars in revenue and 400 million in profits. It was,

00:40:05 [Speaker Changed] It ended up being, I think in 2021, it’s a billion in a billion in revenues. And I’ve about 400 million in profits. That’s just you. So you’ve got this business, it’s a really simple business that is growing so fast. And you, if you’re looking at it as like what might happen to this business, it seems to be poised, it’s only whatever, 8% of the marketplace to grow to be 20 or 30% of the marketplace. The marketplace end of 2021 is a couple of two or $3 trillion. But that, I mean, who knows. It’s a, it’s a tool above

00:40:35 [Speaker Changed] People are talking about a hundred trillion. Yes. That’s it’s crazy numbers. That’s right. So

00:40:38 [Speaker Changed] It’s this, this business is gonna be in direct proportion to that. But there’s this other thing. It is a different financial structure. This exchange. It is for, for a start, it cus it custodies the customer’s money. But secondly, it doesn’t require any intermediaries. You trade directly on the exchange. Right. And you keep, you don’t, you don’t go through a broker. You don’t have any high frequency trader between you and the, and the marketplace. The exchange isn’t selling your data. What if this model finds its way into the ordinary financial markets? What if they can trade stock futures? What if they can trade commodities? Venture capitalists look at this and thought, my God, this is a trillion dollar company if it goes right. And, and it’s, that’s when the, when the, when he starts to interact, it starts to get big time venture capital money. He starts to get normalized. It starts to become something different than an ordinary crypto exchange. Hmm.

00:41:31 [Speaker Changed] Really, really intriguing. You go on 60 Minutes as you have for some of your recent books. Yep. I thought the interview tracked the book, which I had literally just finished that day. Right. Very closely.

00:41:43 [Speaker Changed] Hard to do in 26 minutes a whole book. But yes. They, so

00:41:47 [Speaker Changed] You had two segments. Most people only get one segment. What was your experience like with 60 Minutes and, and some of the backlash to the interview?

00:41:55 [Speaker Changed] Well, backlash was anticipated. I mean, really

00:41:59 [Speaker Changed] I did not anticipate that. I read the book and thought this is a fun romp and a crazy part of the world. That’s

00:42:04 [Speaker Changed] What will happen. Eventually people will read the book. But this is how I think about it. I think I said this on 60 Minutes, that we’re now in kind of a story war that about the story, right? What is the story of Sam Beckman freed, lots of people who didn’t know very much about him, or it have told lots of stories with great conviction. Twitter lynched him right away without thinking very much about what

00:42:28 [Speaker Changed] Island Lynch. We had a dinner, what was it last December with Right. A a number of people who were very interested in the space. Right. And you kept saying it, whatever you think it’s 10 times crazier than your dad.

00:42:39 [Speaker Changed] It’s crazier than you imagine. And more complicated and more fun actually.

00:42:42 [Speaker Changed] And that turned out to be a fair description.

00:42:44 [Speaker Changed] And, but the story we’re now is going to be a very loud story that comes outta the prosecution and a story that’s probably presented in a more muted way from the defense. And I don’t think either of those stories can be very good or full or complete. They, they, they’re not gonna be nearly what I have just from having been a fly on the wall for a year and a half. And I know what I think like of I know, I know what I experienced and what it felt like. What with the, the spirit in which things were done with this guy as best as possible, who this guy is and how he behaves and how he thinks. Interviewed all around him. Interviewed all his colleagues before they all got hauled off by the Department of Justice. And so I just had, I, I had a peculiar, privileged view of it. Right. The prosecutors haven’t spoken to Sam.

00:43:28 [Speaker Changed] Did they speak to you?

00:43:29 [Speaker Changed] They asked for the book, but they didn’t speak to me. Well, 00:43:32 [Speaker Changed] When did they, when did you give ’em

00:43:33 [Speaker Changed] The book? We didn’t give ’em the book. So they’ve got it now. Say 00:43:36 [Speaker Changed] Go to Amazon, go buy your own

00:43:37 [Speaker Changed] Kind of, and that’s interesting. And, and, and the defense can’t talk to Caroline or Gary or Nha or a whole bunch of other people. They’re witnesses, but they’re, and I still can have been able to talk to a lot of the witnesses. Huh. So not all of ’em, but a lot of ’em. And so I’ve got like unusual 360 view of the whole thing. Yeah. And it’s, it was such an amazing just story. I thought, I’m just gonna tell a story. And the radical act is to withhold judgment like innocent until proven guilty. But that, but leave that to

00:44:10 [Speaker Changed] Objective

00:44:11 [Speaker Changed] Journalism. But leave that to one side. Right. There’s just this story and all the books, when they work, they work, I have this experience with every book. 10 different readers will read 10 different books.

00:44:23 [Speaker Changed] We have discussed this, the book you write is not the book people read. That’s

00:44:26 [Speaker Changed] Exactly right. They come to it with their baggage and they supply, they walk into the hole in the book. And this came with a ready-made hole. Right. You, you’re

00:44:34 [Speaker Changed] The good guy or bad guy, you’re

00:44:35 [Speaker Changed] The juror. You get to decide. It’s you, you decide. And I could tell you that I have had the most radical range of responses to the book and to the characters

00:44:43 [Speaker Changed] More than any book you’ve ever written.

00:44:44 [Speaker Changed] More than any book I’ve ever written. And, and it’s a mistake to think that I had some ambition, some, some ambition to affect like the trial outcome that’s preposterous. The trial’s gonna be the trial that that. But I did wanna force the reader to, to grapple with how they felt about this situation once they’d seen the situation in full. And, and that seems to offend people who have already just made up their mind about him.

00:45:11 [Speaker Changed] Well, well once you make your mind up, you know, it’s very hard to walk it back. You dedicate the book to your daughter in memory of Dixie Lee Lewis. You remain inside of me. Tell us about that. ’cause I recall after your daughter’s accident, you kind of described yourself as, I don’t know if I’m ever writing again.

00:45:29 [Speaker Changed] Yeah, that was true. I had a very specific response. It was the tiniest sliver of my response to her death. You know, I, I adored her and we were just, she was the best kid. Brave and full of love and just the best kid. And I thought up to that point in my life that I was just, that was the luckiest person I knew. Nothing bad really had ever happened to me. I hadn’t had that kind of experience. And I’d also thought that kind of the trick about it takes, I think of writing is a kind of trick. It’s like, I don’t know where it comes from. I that I, I can do this thing. I don’t know why, but I’ve always associated with joy and pleasure and kind of happiness. And I wondered whether I’d feel that again when I sat down before a blank computer screen. And it was joyous to find that I did feel it. Like I didn’t, that I was right back in my place with maybe a little extra thing in me when I sat down to write this thing. But I, but before I did that, I just didn’t know. I just didn’t know whether like I was so fundamentally changed that I would never wanna do this.

00:46:36 [Speaker Changed] I I very vividly a mutual friend said, Hey, you should give Michael a call. So we spoke a few months afterwards and you said something that, you know, you’re such a mensch. I was genuinely shocked at this point when you’re still mourning and you said, Hey, this tragedy showed me that up until this point, how lucky I actually was. Most humans aren’t wired to think that way. That’s a very unusual perspective. To look at something that’s not good and try and find the, the goodness in a tragedy. So

00:47:12 [Speaker Changed] This is the way to honor her. The way to honor her is not to crumble. It’s, it’s to build on it. You

00:47:18 [Speaker Changed] Call her a warrior, is that the thinking she was, was she

00:47:21 [Speaker Changed] Was an absolute warrior. But the way to honor her is, is in the spirit of improv. It’s, it’s, you can’t say no, you can’t reject this rejecting her death or rejecting the feelings that go with it is, is to deny her in some way. What I need to do is accept whatever the emotions are and build on them. And whatever I build will have a little of her in it. So this book has a little of her in it. You know, what’s in her about this? In, in about her in this book. It very consciously, I knew when I wrote this book, I was gonna be in a war. I knew that there, I knew that there was a mob sentiment. And we, this culture is very good at whipping up mobs very fast. Twitter like exists for it. It’s an outrageous,
00:48:09 [Speaker Changed] It’s an, it’s an outrage machine.
00:48:10 [Speaker Changed] It’s an outrage machine. And people are so sure they’re right. And that, that mob to get between that mob and its target is always dangerous. And Dixie would’ve done it, huh? That she, she, she would, she would put her body between a mob and had done it before, that kind of thing. Sure. And so I thought it’s gonna be a little painful, but it’s worth it and it will honor her.
00:48:34 [Speaker Changed] So when you’re talking to him and thinking this is not long after her accident, you are thinking, I’m gonna go for this. And she would absolutely support this decision. Absolutely. Huh. That’s an amazing conversation. I remember you did a podcast. It’s three actors, comedians, I don’t remember.
00:48:56 [Speaker Changed] Smartless
00:48:56 [Speaker Changed] Smartless Smartless, that’s right. Yeah. And I try never to listen to people’s podcasts before I go on with them. But we were doing the 25th anniversary of Liars Poker. And I, I listened to that. And the last segment was 15 minutes of you discussing Dixie. It, it, it, it was just the most poignant, beautiful conversation I’ve ever heard from anybody experiencing loss. So
00:49:27 [Speaker Changed] I can
00:49:28 [Speaker Changed] Do you, do you recall that podcast in
00:49:30 [Speaker Changed] The time? I do. I do. I don’t remember what I said, but I, I do remember the spirit in which I said it. And in life, I have found, I mean, this connects to this book. It connects to many my books. That there’s a richness in recognizing and really insisting on any difference between what you feel and what you’re supposed to feel. And there’s always pressure to feel a certain thing like this pressure right now to hate sand bankman free. But if you actually feel something different, hold onto that feeling and explore it. And there’s, there’s, there’s great stuff in it. Great life stuff, great literary stuff. And with my grief, right after she died, I was inundated with correspondence, very well-meaning correspondence from people who thought they’d gone through the same thing and had on the surface, gone through something similar. Lost a child, right.
00:50:25 And giving me advice, sending me books, you know, telling me how I was gonna, telling me how I was gonna feel. And there were it. None of it rang true, huh? I knew how, I knew how I felt. And I knew it was different from how they thought I should feel. And I thought that’s interesting. And the books just looked like dead words on the page to me. So I thought, I felt this way when Dixie was born. I felt that way about fatherhood in the beginning. I just felt differently about my children than I was expected to feel. I didn’t feel attached to them right in the beginning. It’s like I had to learn to love my children. Love wasn’t there in the beginning. You learn to love something or you come to love something by taking care of it. At least in my experience. And I hadn’t taken care of him. Oh, I taking care of ’em. I loved him. I felt with the grief, for example, a lot of people told me I was, I should, I would feel guilty. And I thought, what? Why would I, I didn’t, I didn’t feel
00:51:17 [Speaker Changed] Survivor’s guilt, so to say. Yeah.

00:51:18 [Speaker Changed] Yeah. I, I didn’t feel, I thought she had a fantastic life. We had a fantastic relationship. We had magical amounts of time together. It there that she was on her way to a brilliant future. I feel sad, but I don’t feel guilty. I don’t feel anger. I, I didn’t feel any of the toxic emotions. I felt sad and sad is that you can work with sad, sad and funny. This book I’ve just written is sad and funny. There’s, I it’s, there’s so much funny stuff in it, but it’s a, it’s a sad story. They go together, these emotions. You’re in a, you’re in an emotional space rather than a kind of angry, you’re in a rich emotional space rather than a kind of cheap emotional space.
00:52:01 [Speaker Changed] Huh. That, that, that’s really fascinating and, and unexpected take, let’s bring this back to the crew of 20 somethings running F T X. I read the book not so much as in a def defense of where F T X went off the rails, but just an explanation here are people with no experience in finance, no experience in management, no organizational structure, none of the usual controls in place to run a few million dollars, much less hundreds of billions of dollars. How criminal was this? Or was this really just terrible management run amuck? Was there any criminal intent?
00:52:47 [Speaker Changed] That’s the question at the heart of the trial. And 00:52:52 [Speaker Changed] I mean, clearly there was
00:52:54 [Speaker Changed] Rambling of funs. Lemme I’m gonna answer this. Oh yeah. Clearly it’s all in there, right? It’s all bad. There’s no happy story to explain it all. But I wanna say this, I don’t want to answer the question because I’ve left the question for the reader to answer. I intentionally didn’t answer the question. ’cause I didn’t want my thumb on the scale. So I don’t really want to answer this in interviews.
00:53:18 [Speaker Changed] So let me ask you,
00:53:18 [Speaker Changed] But I also, but let me also add to that, just that it’s quite possible that stuff will come out in the trial that has not come out yet. That will change my views. So I don’t know. So, so let me, I’m withholding judgment.
00:53:30 [Speaker Changed] So let me pull something from the book that I thought was really fascinating. And I think Twitter has gotten wrong. It wasn’t that F T X transferred money to Alameda transferred $8.3 billion as I read it. F T X was unbanked. You could give them crypto, but you couldn’t give them cash. Alameda had a pre-existing bank account so you could wire money into Alameda and then they’re supposed to move it over to F T X. Is is that a fair statement? That’s
00:53:57 [Speaker Changed] That’s, that’s how eight of the 10 something billion that got into Alameda from FJS got in
00:54:02 [Speaker Changed] And, and at one point in time, Alameda’s sitting on like, I don’t know, 90, a hundred billion dollars worth of assets. It’s not that 8 billion is a rounding error, but in the grand scheme of things Yeah. Yeah. We will make that mark to accounting eventually. So
00:54:15 [Speaker Changed] That would be the story Sam would tell. Yeah. And the, the way you would challenge that story, and I do, is we are really sitting on $90 billion if you of, of, of assets that was Solana and F t T and serum. And what, what is it worth? You know? Yes. The market seems to say it’s worth that, but it’s not. And you couldn’t liquidate,

00:54:34 [Speaker Changed] You couldn’t
00:54:35 [Speaker Changed] Liquidate it. Right. The the second thing is, it’s just like, unless you know Sam Bankman fried to know what he did back when he was trading the ripple in Berkeley, that it seems preposterous that someone could not pay attention to $8 billion of other people’s money that was in the wrong place. And that the minute they have bank accounts, or for that matter, you know, wallets to store crypto in, in F T X ’cause the dollars are gonna become crypto that you move it over. So one would think Right, it’s, it’s inexcusable that it was there, but it does seem that it got, I mean, and how much difference it makes, how it got there, I’m not clear, may not make any difference at all legally, but that, that appears to be how it, most of
00:55:21 [Speaker Changed] It got there. It came into Alameda. Yeah. From the client, not from F T X. Right. I, well that, that sounds like that’s an important distinction.
00:55:28 [Speaker Changed] It’s, it may be, I I mean
00:55:29 [Speaker Changed] Clearly it it’s problematic. Yeah. Oh yeah. Whether that amounts to fraudulent intent is again, is for the jury to decide.
00:55:37 [Speaker Changed] That’s right. That’s gonna be the interesting thing. What, this is why you need to understand Sam Bankman fried, if you’re the jury, it’s like, what would that mind have intended? And that’s what they will decide. His, you know, his odds are not good.
00:55:51 [Speaker Changed] So, so you mentioned F T T, which is the coin. The, this story was really, this part of the, the narrative was really fascinating ’cause I was unaware of this. So F T X issues, F T T, which is effectively like equity in F T X. Yes. And they don’t,
00:56:10 [Speaker Changed] It’s got a claim on the revenues,
00:56:11 [Speaker Changed] Right? So it literally profit distributions, right. Go out to F t T 00:56:15 [Speaker Changed] Holders in the form of buybacks.
00:56:17 [Speaker Changed] So in the form of buybacks of ftt. Right. So that’s how you get, you get paid on that, that suddenly, and he does it at like pennies, not, not a whole lot of money. Suddenly this runs up in price. Right. At what point, what, what is F T X holdings of F T T worth?
00:56:36 [Speaker Changed] So as long as F T X is functioning in profitable, right? The F T T is actually pretty liquid and valuable. It, the minute F T X goes down, it’s worth zero. Right. So it’s all correlated,
00:56:48 [Speaker Changed] All the same. It’s a going concern
00:56:50 [Speaker Changed] Sort of. And in fact, pretty much everything in, well not that, not everything, but a lot that was in Alameda was simply one thing. Sam F T X F T t, Solana, even, and serum, these big, these other tokens were so associated with him, right. That if one thing, if F T X went down, they were all gonna go down. They’re, there are parts of the story. It’s funny when I think back of like former financial scandals, Madoff is not the analogy make Yeah, well
00:57:18 [Speaker Changed] Actually, so you’ve said this and I have another question, so let me bring it up here. Madoff had a legitimate business. He was the largest market maker on the nasdaq.

00:57:26 [Speaker Changed] Oh. Way back when?
00:57:27 [Speaker Changed] Way back when. And, and the problem is nobody really knows when his business turned into a Ponzi scheme. Right? Right. There’d been multiple books. None of them have found that information right here. It’s pretty clear from the beginning. No controls co-mingling of funds. Yeah.
00:57:44 [Speaker Changed] But F T X itself was never, never looked like Right. The end of
00:57:48 [Speaker Changed] It was a legitimate business making a lot of money. Right.
00:57:50 [Speaker Changed] The but this, this thing rhymes to me with both Michael Milken and with Long-Term Capital management, long-term capital management didn’t realize that all of its stuff was correlated because it owned it. Right. And once, once people started going after their positions and knew their positions, even if it was, you know, a position in Russian government bonds and over, over here, or positioning gold, it didn’t matter. ’cause everybody knew they were weak and these positions were gonna be puked out. And so they, the collapse of Sam’s World reminded me a little of that and it reminded me a little of part
00:58:23 [Speaker Changed] Of, wait, well stay there before you move on. Yeah, yeah. So you talk about cz, right? Basically starting a run on the bank and or a run on F T X because he starts saying, Hey, our F T T we’ve sold and we have other things, we, we are no longer trusting F T X as an exchange. Did he precipitate the entire collapse?
00:58:46 [Speaker Changed] He he couldn’t have done it. It’s a combination of him and the moment in which he says what he says, and there’s a reason I think he says what he says. He’s even kind of hinted at this reason. Sam Idiotically had made a trip to Dubai like the week, a week earlier. Right. Met with, with Anthony Scaramucci. I was actually invited on this trip. I didn’t go. But he tried to persuade the Dubai regulators to throw Binance and CZ out of Dubai.
00:59:16 [Speaker Changed] Really? And and they have an ongoing relationship both Sam and, and Binance and Dubai and Binance.
00:59:25 [Speaker Changed] Yes. And you know, Binance needs to find a home if by Dubai has given them a home. CZ needs to find a home. Dubai’s given them a home. And so Sam was basically trying to render Cz stateless and I think
00:59:42 [Speaker Changed] Wildly overplayed his
00:59:43 [Speaker Changed] Hand. Oh. Wildly overplayed his hand. That it was just a dumb thing to do. I mean, it gets to Sam, but if he thought he was vulnerable, why would he have done that? Did he, so maybe he didn’t think he was vulnerable. Right. That moment tells you, argues that Sam is oblivious at that moment to how weak his hand is. ’cause you don’t do it if your hand is right. That weak. I mean, it is really not gonna get you very much. Well, we
01:00:11 [Speaker Changed] Were talking earlier. You go up against the king, you better better kill him.
01:00:15 [Speaker Changed] Best not miss. And the other thing is Sam was di potentially disruptive to us financial structure that he, he was arguing, he was making an argument. It was similar to Brad Llama’s argument in Flash Boys that a lot of unnecessary intermediation in the markets. And there’s a much

simpler way to do this. The, the structures are being built in crypto that could be ported into the US stock market, where all of a sudden, you know, the exchange isn’t selling customer data for business that offended and bothered a lot of existing players.
01:00:51 [Speaker Changed] So you, you talk about this specifically towards the end of the book, the takeaway from F T X and crypto is the reason this collapsed. The reason crypto had had another crypto winter is there is no banker of last resort to step up. And that it turns out capitalism needs guardrails, banks need regulations. And guess what? We all need intermediaries because the supposedly trustless sy system works much worse than the system that that is highly regulated and supervised. Yes.
01:01:25 [Speaker Changed] It’s, it’s a great irony to me of crypto that it starts out with Satoshi’s paper. And, and Satoshi is clearly obsessed with, with, with, with not wanting to have to trust governments and banks. The whole point of this is you, this is a way to eliminate banks and governments from the monetary system. And it’s a trustless system. It’s peer, you, you, you trade directly with someone else and then the transactions are irreversible, et cetera, et cetera. And that he must be, if he’s alive, if he’s dead, he is rolling in his grave. Because what happens next, crypto goes and invents a whole nother financial system that looks an awful lot like the existing financial system except without regulators. Right. Right. And it’s, and or deposit insurance. Right. And it’s, and and which
01:02:14 [Speaker Changed] Turns out to be a good thing deposit insurance. Oh my,
01:02:17 [Speaker Changed] My god. Right. And so, and regulators too. It and so who would’ve flawed, I wouldn’t have thought that crypto would end up in this place. It would end up with all the same exchanges and brokers and banks that, that the financial system has. Turns out there are reasons for these things.
01:02:34 [Speaker Changed] So, so let’s talk a little bit about the bankruptcy and the trustees and, and what so far has been recovered. You write in the book what there’s 8.3 billion missing. So
01:02:46 [Speaker Changed] There’s 8.6 billion in customer deposits. This is all from the bankruptcy people that’s
01:02:50 [Speaker Changed] Unaccounted for that
01:02:51 [Speaker Changed] They, that the customers are still owed. Okay. Including me. Right. Mike 200 grand is
01:02:57 [Speaker Changed] Two grand. Is there you And most of the employees had all their net That’s, that’s tied up. That’s these, these people were drank the Kool-Aid. They thought this was the next great thing.
01:03:04 [Speaker Changed] Their employees who had their whole families and had their parents had their brothers and sisters in with their assets on F T X. Yes. Right.
01:03:11 [Speaker Changed] So 8.6 is owed. Yeah.
01:03:13 [Speaker Changed] And they’ve said they found seven, this is three months ago. And they said they were still finding it. 7.3 billion of liquid assets

01:03:21 [Speaker Changed] Of liquid. And and in the book you talk about other exchanges saying, Hey, we have 300 million of your Ethereum here, come get it.
01:03:30 [Speaker Changed] When the thing is unraveling people, not, not Sam, probably Sam too, but people not Sam, are getting phone calls from banks saying, we have, we have $300 million of dollars in an account. Do you know? And they didn’t know about it. Right. I mean, so I
01:03:43 [Speaker Changed] I and then you talk about the dragons layer, which is all these assets. So he bought a hundred million dollars of Twitter a year before Musk buys it at like $20 a share. So this is,
01:03:54 [Speaker Changed] Well the big a ton of money, you know, the, the elephant in the room is, and it’s a really interesting elephant. So Sam Beckman freed, one of his obsessions is artificial intelligence and making sure artificial intelligence doesn’t slip its leash and need us all right? And this is before it’s fashionable at all to think about this now, this way back when nobody was thinking about it are really few people. And he buys a stake in a company called Anthropic. He buys a, I think at the time it was a 20% stake, I can’t remember exactly,
01:04:25 [Speaker Changed] I think it was 400 million. 01:04:26 [Speaker Changed] That’s something like that. 01:04:27 [Speaker Changed] Some huge amount of money.
01:04:28 [Speaker Changed] Huge amount of money. And when the bankruptcy happens, the guy who’s running the bankruptcy, John Ray said to me as a Dr as an illustration of the idiocy of Cy Bankman Freed said to me, can you believe he put like $400 million into this thing called anthropic? And it’s just air, it’s just an idea. There’s not, there’s nothing there. Well, last week Amazon has announced they’re making a 4 billion up to $4 billion investment and it’s a minority stake. So this company is now being valued at least 8 billion more probably. And it seems going like it’s going to the moon. This is a
01:05:01 [Speaker Changed] So means his 4 billion is that’s three or a five x. 01:05:05 [Speaker Changed] Yes. And it’s, that’s right.
01:05:07 [Speaker Changed] So, so it very much looks like they may 01:05:10 [Speaker Changed] Get paid
01:05:10 [Speaker Changed] Back. Not, not only they may get paid back, but the implication is, hey, if they had accounting and, and A C F O, where is it possible that they were never truly insolvent If you take all their assets and add ’em up, might they not have needed to go into bankruptcy if there was an adult in the room running the place?
01:05:29 [Speaker Changed] Well, if there’s an adult in the room running the place, the money would never have been in the wrong place. But the, but it’s, it’s, I think that’s certainly true of ftx us the
01:05:40 [Speaker Changed] Well that was tiny compared to the
01:05:41 [Speaker Changed] Big one. Yeah. The, it’s hard to know. It’ll be after the fact. We will find out. But but it’s

01:05:45 [Speaker Changed] A real, this isn’t like a one in a billion possibility. 01:05:48 [Speaker Changed] No, no, no. This is a
01:05:49 [Speaker Changed] Realistic chance. It’s yeah. I think and I picked that number on purpose. ’cause you know why.
01:05:53 [Speaker Changed] Yeah, I think so. I think that’s right. And I think, you know, one way to think about this, it’s is you talk to the people who are trading the claims on the, on on. If I wanted to sell my claim on the, on my deposits, right, I could. And I think I get like 35 cents on the dollar. Not much, but some, right. It’s not zero, not two.
01:06:13 [Speaker Changed] And that’s not atypical.
01:06:14 [Speaker Changed] That’s not, if you talk to the people who buy those, I had a couple tell me we think it’s maybe we can make gonna get a hundred cents on the dollar. Wow. And, but the problem is it’s gonna take six, what
01:06:24 [Speaker Changed] Did Madoff end up? It was pretty close to a hundred cents, wasn’t it really? Yeah, I think they clawed back a lot.
01:06:29 [Speaker Changed] But this is without clawbacks. Right. So the interesting thing about this is I don’t think, I mean some people like politicians, people are embarrassed to have taken Sam’s money and can give it back, have given some of it back. It’s pretty peanuts that, but there are rules about clawbacks in bankruptcy, right? You have to demonstrate that when the money was given that the,
01:06:47 [Speaker Changed] It was a proceeds of a crime
01:06:49 [Speaker Changed] Also that it was insolvent. And it’s unclear when F T X becomes insolvent. Is it November of last year? Is it June? It certainly wasn’t January of last year. They were fine. So anything that went out the door before then, you’re not gonna be able to claw back.
01:07:01 [Speaker Changed] And with, with Madoff, it was pretty easy. There was never Right. You know, the last 20 years there was no business. There’s whatever you got, you were getting somebody else’s money. That’s, so that was easy. This is a little more, little more nuance.
01:07:12 [Speaker Changed] Different. And they have not made the argument yet. And tellingly, if it turns out that the money is there, it will be because those a, the assets add up to what the, the liabilities that nobody’s really gone systematically through this pile of stuff. An incredible pile of stuff that Sam Bankman freed, accumulated. It’s a hundred and something private investments, you
01:07:31 [Speaker Changed] Call it the dragons lair. He threw $5 billion into 300 separate entities. And many of these are giant winners, you know, some of his zeros. But
01:07:41 [Speaker Changed] Yeah, it’s a VC portfolio. Yeah. And the question is, what’s it worth? And I don’t know what it’s worth. Is it enough to close the gap between 8.6 and 7.3? It seems. So there’s some other, they owe, they owe some other stuff, but the customer, it’ll be interesting to see what the customers get back.

01:07:56 [Speaker Changed] So one other thing I have to ask about is you throw some shade at some of the big law firms, Sullivan and Cromwell and others. First Sullivan and Cromwell was for a while, Ft X’s outside counsel for certain things,
01:08:09 [Speaker Changed] Including their dealings with the regulators,
01:08:11 [Speaker Changed] Which, which kind of raises questions. How could they be bankruptcy counsel?
01:08:15 [Speaker Changed] I don’t understand it. ’cause they’re sitting on the, isn’t that 01:08:17 [Speaker Changed] An inherent conflict
01:08:18 [Speaker Changed] Of interest? They’re sitting on the evidence for the trial. So you would’ve thought, I would’ve thought that at least people would raise questions about the lawyers for F T X being also the lawyers for the bankruptcy. And also, especially since they’re the ones who really twisted Sam’s arm to sign that the bankruptcy documents. Right.
01:08:35 [Speaker Changed] And, and there was a typo I found in the book. You, you wrote that the bankruptcy lawyers are gonna generate fees of a billion dollars. That’s a typo. What, what’s that number supposed to be?
01:08:46 [Speaker Changed] It’s not a typo.
01:08:47 [Speaker Changed] It’s a billion dollars in lawyers.
01:08:49 [Speaker Changed] They’re, they’re, they’re hundreds. Advisor, lawyer and other fees. Real lawyer and other fees. So this is where we are, we’re at several hundred million now. One of the creditors, big creditor did an analysis of what what they were gonna charge by the time the dust settles and they figured out is gonna be about a billion dollars. That’s
01:09:06 [Speaker Changed] Unconscionable.
01:09:08 [Speaker Changed] The the thing that’s striking to me is just how insider a game the bankruptcy process is
01:09:15 [Speaker Changed] For a long time now too.
01:09:17 [Speaker Changed] But it used to be regulated by the S E C and in, in the eighties they got, they took it outta the s e c and they created this thing called bankruptcy trustee who’s in the, who’s in the Department of Justice, but has no real power except the power to bitch and moan to the bankruptcy judge.
01:09:33 [Speaker Changed] Right. He could petition, but he’s got no authority. And
01:09:35 [Speaker Changed] So he did in this case, he said, this is outrageous. They shouldn’t be the, the Department of Justice guy wrote long letters saying you should not allow Solomon Cromwell to be the, the bankruptcy lawyers. And they should also, so
01:09:45 [Speaker Changed] This isn’t Michael Lewis whining at any, this is basically D O J saying these are the wrong attorneys, but

01:09:52 [Speaker Changed] They don’t have the power to do anything about it. And, and 01:09:54 [Speaker Changed] Did the s e C back in the day.
01:09:56 [Speaker Changed] Yeah, yeah. So they’ve, it it’s just cha it’s changed so that it, the power resides with the bankruptcy judge and the bankruptcy judge is usually a former bankruptcy lawyer and it just starts to smell like a club. And what with all the, the, the trustee was asking for is there needs to be like an outside examiner to, to watch this stuff and the judge wouldn’t even allow that. So this thing is happening essentially inside of a black box. And, and, and I just find that curious. It just seems like how could that be?
01:10:31 [Speaker Changed] How, how could it be? So, so I have hundreds of questions more for you, but I’m gonna just stick to the two most potent ones. Now, effective altruism seemed like a big part of, of Sam’s persona and his self-identification. I came away from the book thinking this is a bunch of nonsense. I I I mean seriously, they, they talk about, well the risk from a supernova is one in a billion and an asteroid is one in a million and a pandemic is one in a hundred and AI is one in 30. And these are just BSS made up numbers, which, you know, to a math guy, even a middling m i t math guy should have been like obvious red flags that this is crap. How did they get away fooling so many smart people? Or, or am I overstating this?

01:11:23 [Speaker Changed] I said the same thing. I,

01:11:25 [Speaker Changed] I mean I, I, I immediately, so, but by the way, if you just sit down for two minutes with a, a pen and paper, the one in a billion on, on the supernova, you could show us something like one in 4 trillion very, very easily. And I’m sure, but it doesn’t matter. They’re just round made up numbers.

01:11:43 [Speaker Changed] So in their heads, you gotta understand this is a psychological as much of an, as an intellectual movement, right? It’s, it’s tribal. They’re finding solace in each other’s company. They’re loving having these arguments about this thing. And what would they say? Lemme see if I can defend it for just a moment. There’s some number that’s true. Whatever it is, we don’t may not know the number, but it’s some number That’s true. And if any number’s true and you multiply it by an infinite future, you get a big number.

01:12:13 [Speaker Changed] Yes and no. I mean, for a guy who specializes in probabilities, I 01:12:18 [Speaker Changed] Try. I tried, I tried, I tried.

01:12:20 [Speaker Changed] Hey, listen, eventually the universe suffers from heat, death and entropy means that everything dies. Yeah. Yeah. So, so why bother doing your homework? I tried, right?

01:12:29 [Speaker Changed] I I just tried. I I’ll stop now. I didn’t try to do much in the way of defending this. I I

01:12:34 [Speaker Changed] No, I was completely simpatico with you as you, as I’m reading and I’m, I’m turning my nose up and then you throw the numbers out. Say this is offer is

01:12:41 [Speaker Changed] Nonsense. Lemme offer, let me offer another kind of Okay. Weird defense of them and that it’s pretty cool how quickly they got to threats from artificial intelligence. Right.

01:12:52 [Speaker Changed] And when

01:12:53 [Speaker Changed] That’s fair. When nobody cared about it. Right. And now everybody 01:12:56 [Speaker Changed] And, and a pandemic before covid. Yeah, that’s

01:12:58 [Speaker Changed] Right.

01:12:58 [Speaker Changed] So soll give them credit to that. Give ’em

01:13:00 [Speaker Changed] Credit for paying attention to things. These things are not unimportant. Once you start to kind of turn math about them, it starts to feel a little silly. Yeah. And especially when you devote your life to these equations. Yeah. Then it seems to sit like a little just off. But it wasn’t just stupid, it was 4.0 stupid. It was, it was, it was, you know what that is sort of like, it’s sort of like the kid on the softball team. Weapons

01:13:24 [Speaker Changed] Grade stupid.

01:13:25 [Speaker Changed] Yeah. It’s like the kid on the softball team who’s the best student but doesn’t know when to steal a base. And it is a little of that, it’s a different, it’s like blind spots to the intelligence is what it felt like. Like really smart people with this big blind spot.

01:13:37 [Speaker Changed] Last question. So I’ve read your whole Body of work some books multiple times and we, we talked a little bit about Flash Boys, but the thing that kind of stood out to me is wondering, regarding the characters in this book, do you find any similarities between the world of crypto and the world of subprime mortgage securitization? Any parallels there?

01:14:05 [Speaker Changed] You know, there probably are. That’s not what popped into my mind. What popped into my mind when I was working on the book, the nature of the characters and kind of how outrageous it all was and how there were no guardrails was Liars poker. I just felt like I’m back at a time, I’m back in a space where your jaw is on the floor because of what’s going on and you can’t believe this happens in a business. And that was a feeling about liar’s poker, wait, this, this is an actual business and people are strippers are on the floor and all that stuff. And, and then it quickly got very straight laced on the surface. This is before, this is the moment in crypto before it gets straight laced. And, and it, it reminded me of that different people, you know, they’re, they’re more nerds than jocks, but, but still wacky, like, just wacky behavior. And the wackiness was kind of joyous. It was like this, a range of behavior is being tolerated here that’s not ordinarily tolerated in commercial and financial life. Right.

01:14:59 [Speaker Changed] This was more frat house than trading floor there. 01:15:02 [Speaker Changed] Or, or yes. Nerd frat house. But yes,

01:15:05 [Speaker Changed] Michael, thank you for being so generous with your time. We have been speaking with the one and only Michael Lewis discussing his brand new book Going Infinite, the Rise and Fall of a New Tycoon. If you enjoy this podcast while be sure and check out any of the previous 500 we’ve done over the past nine years. You can find those at Apple Podcast, Spotify or YouTube or Follow me on Twitter “at ritholtz” follow all the Bloomberg family of podcasts at podcast. Check out my daily I would be remiss if I did not thank the crack team who helps put these podcasts together each week. My audio engineer is Meredith Frank, Atika Valbrun is my project manager. Anna Luke is my producer. Sean Russo is my researcher. I’m Barry Ritholtz, You’ve been listening to Masters in Business on Bloomberg Radio.



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