The transcript from this week’s, MiB: Matt Levine on Money & Stuff, is below.
You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.
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00:00:00 This is Masters in business with Barry Ritholtz on Bloomberg Radio.
00:00:06 [Barry Ritholtz] This week on the podcast, I have an extra special guest. Matt Levine writes The Money Stuff Daily newsletter for Bloomberg. Matt has become this fascinating character in the world of Wall Street research and analysis and commentary. He brings an unusual background as both as an attorney and a derivative specialist at two of the best firms in the world for those spaces. And so he has this unique way of taking these very complicated, sophisticated ideas and making them both accessible and amusing to both finance professionals and, and laypeople. Nobody in the world writes about markets, finance derivatives, hedge funds, you name it, the way Matt does. And it’s why he has such an amazing following. Over 300,000 people get his, his daily missive. I, I found this conversation to be really intriguing and I think you will as well. With no further ado, my conversation with Money stuffs Matt Levine,
00:01:14 [Matt Levine] Thanks for having me. I walked all the way across this floor to get here. [Not easy right not easy to get to the broadcast area] Weirdly, I went upstairs and then came downstairs.
Barry Ritholtz: 00:01:23 Right. So, so let’s talk, this is really the only kind of odd question I’m gonna ask, and everything else is all very career oriented, so hopefully this isn’t too embarrassing, but let’s ask this. So your undergrad at Harvard, where you major in classics and you list your activities as quad Wiffle ball and Tequila Tuesday, which doesn’t strike me as you take it very seriously. You, you were valedictorian Harvard, you never mentioned your Ivy League education.
00:01:53 [Matt Levine] That’s, you’re quoting my LinkedIn, which probably my proudest social media presence is my LinkedIn is. I would like to think a little bit funny and yes, I was, I was, I was, I believe the Cocom commissioner of Quad Wiffle Wall, a very, which is neither like prestigious, neither prestigious nor nor athletic, nor organizationally impressive.
Barry Ritholtz: 00:02:17 But I had to dig that up. I had to dig up that you were valid Victorian.
Matt Levine: 00:02:21 I wasn’t really valedictorian. I didn’t give a speech. I like had a
Barry Ritholtz: 00:02:26 Okay, so you, you were, you just didn’t accept the No,
Matt Levine: 00:02:30 No, no, no. There’s there’s not a thing called valedictorian. I, I won a prize for.
Barry Ritholtz: 00:02:33 So where, where is this coming from? You you’s not the first time you’ve heard
Matt Levine: 00:02:37 This? No, no, no. I, I did win a prize for having the highest GPA, so there’s like a technical sense, but not the most technical sense. I was not the valedictorian; and there’s no valedictorian. I never hear you talk about the Ivy League. You go to law school at Yale. It’s almost as if you’re embarrassed by the whole bruhaha around the Ivys.
Barry Ritholtz: 00:02:58 I don’t know. It’s like a little embarrassing to say that you,
Matt Levine: 00:03:02 Well, the old joke is, How do you tell if someone went to Harvard? They’ll tell you,
Barry Ritholtz: 00:03:06 They’ll tell you repeatedly. But you are the exception to that rule.
Matt Levine: 00:03:09 I think there are a lot of exceptions, but I do, I will say that like in my, in my column, I fairly regularly have occasion to disclose that I worked at Goldman because I’m often writing about Goldman. And it feels like somehow same thing, dishonest, not to mention that I worked at Goldman, right. So I get a lot of my bragging in that way. ’cause ’cause it used to be, and it’s less true now. It used to be that like, there was a lot of, like, you could be like, oh, I worked at Goldman. I was like, oh, you worked at Goldman. Now, like that’s a little tarnished, but there’s still some truth there.
Barry Ritholtz: 00:03:34 All right, so you go to Yale Law School, you are on the law review, given your current career as a writer, did you, did you publish a, a law review article?
Matt Levine: 00:03:44 You know, I did. I published what’s called a comment, so like a very short one about this great tax law case with this guy who like won the lottery and then wanted to get his lottery winnings treated as capital gains. And he lost. But I thought that was so funny. And then it had nothing to do with like, anything I did for the next, like seven years after law school. But it’s like, you know, like it could have been a money stuff section. Like it was pretty close to what I do now.
Barry Ritholtz: 00:04:09 Very much so. So we’ll skip you teaching Latin because my brain can’t wrap my head around that.
Matt Levine: 00:04:14 Was fun. I was pretty bad at it though.
Barry Ritholtz: 00:04:17 Why have to go to finance So Latin. So you say, I know I’ll become an M&A attorney at Wachtel Lipton, perhaps the most infamous M&A law shop.
Matt Levine: 00:04:27 Yeah, I mean, like, the normal thing to do with a classics degree is conclude that you should not continue to be a classist and therefore go to law school. So that was pretty, that was pretty straightforward decision. But yeah, then I went to Wachtel afterward because it, it seemed like, because like, you know, you’re, you’re a law student and you don’t know what a law firm is. And then like you can spend your second year summer at a law firm. And if you spend your second-year summer at most law firms, they take you out to fancy lunches. Right? And you end the summer not knowing what a law firm is, but if you go to tell, they just put you to work. And so you end the summer knowing what a law firm is. And I was like, all right, might as well find out.
Barry Ritholtz: 00:05:02 So I imagine it’s endless hours focused on minutiae. What was your experience like?
Matt Levine: 00:05:09 There’s some of that, but like, you have to like, like yeah, you’re like writing merger agreements and then the other side is marking up the merger agreement and like you’re arguing over commas and stuff. And I love that. I thought that was really fun. So I was very interested in that stuff. But there’s also a lot of, like at Wittel, you know, I was at Wachtel in 2005 to 2007, so really near the peak of a big merger’s boom. And so I saw a lot of deals and it was very much, you know, I read Barbarians the Gate when I was like, in high school or whatever, and I was like, this seems cool. And then like Yoda and MA law firm being like, I’m gonna do like, like m and a stuff. And like, I really did. I tell people like there’s this time
when we, you know, we had like two sets of bidders for some company, like on in conference rooms on different floors.
And they’d be like, you know, they’d be like, this is our final offer, but don’t shop to the other side. And we’re like, wow, we’ll go to the bathroom. We’d go shop to the other side. It’s real like, you know, like the sort of like high drama of of, of like the highest drama in finances and like big ticket m and a and as a junior m and a lawyer, like I was, you know, doing a lot of marking up merger groups, but I was also like kind of exposed to the high drama. Like I was in like these board meetings I was in. Like, I got to see a lot of cool stuff.
Barry Ritholtz: 00:06:24 So how do you, how do you shift from m and a legal work to structuring derivatives at Goldman?
Matt Levine: 00:06:34 So I worked in this very weird desk at Goldman that it was corporate equity derivatives. And so the thing we were doing was sort of solving like often securities law or tax or accounting problems for people with like derivatives. So like a
component of it was like the standard derivatives math, right? And so like, you know, I got there and I learned derivatives math, right? But a component of it was also like thinking through all these like legal and regulatory and quasi legal regimes. Like, like the, you know, like the accounting standards. And I, I say that everyone on that desk was a good lawyer. Some of us had law degrees, but like the other people, the people who didn’t have a law degrees, who just like were Goldman lifers were like, would’ve been really good lawyers because it was a very like, you know, sort of Legalistic. There was a practice that was like spotting issues and sort of thinking through rules and thinking like how we could get through the rules in a way that
advantaged us in addition to like sort of standard financing stuff.
Barry Ritholtz: 00:07:33 Seems very legalistic. What, what led you to leap from Wachtel to Goldman?
Matt Levine: 00:07:38 The hours
Barry Ritholtz: 00:07:40 Really?
Matt Levine: I tell people I’m the only person who went to Goldman for the hours for less hours. Yeah, I was working, I loved wta. I thought it was really fascinating and interesting, but it was, you know, it was, it’s like notoriously the hardest working law firm and this was in like a big m and a boom. And so I was just working all the time and I got a call from a guy who actually had left Wachau and gone to Goldman and he said, do you want a job here? And I said, is it better than this job? And he said, it’s a little better than this job. And I was like, walk me through your week. And he like, walked me through and I was like, yeah, that’s, that’s a little better than this job. So I left for the hours.
Barry Ritholtz: 00:08:14 So you stay at Goldman for a couple of years?
Matt Levine: 00:08:17 I there for four years. Yeah. The longest I’ve been at a job until this job.
Barry Ritholtz: 00:08:20 So, so you’re there right into the teeth of the financial crisis. What was that like?
Matt Levine: 00:08:29 I was just telling someone a, a friend who was going to Sonoma for vacation and I was like, I remember I like woke up in Napa, like took this vacation where, you know, I was worried I wouldn’t be able to go because with this deal going, and I wrote this long memo to people being like, this is what’s gonna happen if the deal goes. ’cause I was trying to be a responsible citizen of the desk, and then by the time I got to Napa, I was like, I don’t think this deal is gonna go. And then I woke up and Lehman had filed and you know, it’s like I, this is a cliche, everyone in finance says this, but like, I remember walking around the day Lehman had filed in Napa looking at people who were being normal and thinking, how are you not freaking
out?
Because like I was freaking out, you know, I was, I I it seemed like the end of the world, but no, it’s wild. I, I like, the thing that I think back on now a lot is what did I do? Because there was, you know, we had this, we had this spreadsheet of just like every deal that that, like, one thing, one aspect of what I did in my job was convertible bond underwriting. And so I had the spreadsheet of every convertible bond deal that we or anyone else in the market did. And it stopped in like September of 2008. And it restarted in, I wanna say March of 2009, but like onlya little bit. And so for six months there were no deal. Like we did not like print any revenue. We did not do any deals. And I, I, I don’t, like, I didn’t take six months off.
Like, I came into the office every day. I didn’t leave early, I didn’t like take long lunches. I don’t know what I was doing for six months. I think it was just like sort of walking around panicking, but like, you know, or like scraping sticks together and like trying to find deals to do. But like we didn’t do anything. Like we could have just taken the six months off and I think back on that time and think, you know, wouldn’t it have been nice if we had just not gone to work? But no, it was a, it was a scary time and it was, you know, there were, there were like a number of layoffs, you know, there were a couple rounds of layoffs in, you know, within my first two years at Goldman and I didn’t get laid off and I was like, oh, okay, I’m probably safe for a while.
Barry Ritholtz: 00:10:26 You said about that job, I felt both that the job was bad and I was bad at it
Matt Levine: 00:10:33 Over time. I mean, I, I liked, I, I like learned a lot from that job and it’s like really helped me do what I do today because it really touched on a lot of elements of the bank. You know, it was all this like structuring and like tax and legal and accounting stuff. It was derivatives math, it was like working with the traders on like risk management. It was underwriting, you know, it was like doing investment banking, underwriting public offerings. It was dealing with like the sort of guts of the bank and like new product development and capital and, and balance sheet. So I learned a lot, but like early on I was really learning a lot because I was sort of like building stuff and learning how to like build, you know, like learning how to use Excel and just like sort of just kind of like figuring out all the stuff. And then over time the job morphs as you get more senior into just like getting on planes and flying around and giving market updates to corporate treasurers. And that I found less fulfilling. I was learning less and I was bad at that. Like I was good at the, like sitting in the lab during, after roads, I, I was okay at that, but like, I was bad at the like getting on planes and sweet talking corporate treasurers. And so over time it was a less and less good fit for me.
Barry Ritholtz: 00:11:43 So what, what inspired the pivot to writing?
Matt Levine: 00:11:48 I don’t have a good answer. I like could always vaguely imagine myself as a writer without doing anything about it. And I really, I, I didn’t want to be a corporate equity derivatives banker anymore. And you know, in general when you have jobs like these, it’s very hard to find a new job because you’re working all the time. And so my plan was actually to quit and not do anything and figure out what my next step was. And I like went to my very nice boss and was like, I’m quitting. And he said, what are you gonna do? And I was like, nothing, I’m gonna figure out my next step. And he is like, well, don’t quit now. Like, take some time off and figure out your next, you know, it was very sweet, like, you like sort of thoughtful response and
then he was like, we’ll give you a bunch of time off, but for now go back to your desk.
And so I went back to my desk and I worked for like three more weeks and then I saw the deal breaker, the great like comedic financial blog was hiring. And so I shot in an application and they hired me and I was like, okay, I’m gone. But there was really very little thought to it,you know, I had not been like blogging on the side or like practicing at night or anything like that. It’s just like I had this vague itch that I was gonna be a writer. I was at a point in my life where I was very willing to gamble. You know, I was, I didn’t have kids. I had saved a bunch of money at Goldman in part because I really did think I was gonna take time off and figure out what my next thing was. And so it felt like a fairly low risk time to take a gamble on something that would pay a lot less and, and that I didn’t know that I’d be good at, you know, but I figured I’d give it a shot.
Barry Ritholtz: 00:00:13:12 So making a lot of money at a, an investment bank that you leave to take a much lower-paid job as a writer sounds a little parallel to Michael Lewis and Solomon Brothers. Ever think about that as someone who, who blazed that trail before you
Matt Levine: 00:13:32 Oh, of course. I mean, I wouldn’t like go around saying that because like, you don’t wanna, you don’t wanna be like, well that’s why I brought her up in 2011. You’re not gonna leave Goldman be like, I’m gonna go be Michael Lewis. Right? Because like
that’s a little, that’s a little implausible. But no, I mean, of course like, and, and I don’t think I even thought about it at the time. I just like, it’s just like in the background of what you think of like how you perceive the possibilities of like the financial writing world. But yeah, no, I actually talked, I was on his podcast the other week and I talked about that, you know, we talked about that exact point. Yeah. Huh. In some ways there were parallels between his career and that
Barry Ritholtz: 00:14:05 Real really intriguing. So let’s talk about some of your favorite subjects. Everything is securities fraud. Explain
Matt Levine: 00:14:13 If a bad thing happens at a public company, public company does a bad thing. If the CEO sexually harasses someone, the company gets hacked. If it’s polluting, usually what happens is like the stock drops and when the stock drops, the shareholders and sometimes even the SEC will sue the company saying, essentially, you didn’t tell us about this bad thing. And then when it came out, the stock drop, so we bought the stock before at this inflated price because we were deceived, you were lying to us. You were saying that you had a code of ethics, but then your CEO was sexually harassing people. Or you were saying that you like, were careful about the environment, but you were like dumping pollution or you were saying that you like used good passwords but used bad passwords and you got hacked. Right? So anytime like a bad thing happens and the stock goes down, there’ll be a lawsuit over securities fraud and interesting because like often the bad thing has like diffuse victims or unclear victims, or it’s unclear how to quantify the harm.
Barry Ritholtz: 00:15:08 So like you guys have a sexual harassment scandal, there will be some number of people at the company who are victims of that and they’ll have different stories. If they were to sue, you’d need a lawyer to kinda get all of their stories and then like the, the, the company would say, well these stories are different and like, you know, we’ll argue them separately and like, how do you quantify their damages? And it’s, it’s kind of a mess. Whereas if the stock goes down by a billion dollars, then like some securities lawyer will say, well, the shareholders lost a billion dollars. We’ll bring a very straightforward class action on behalf of the shareholders. And so you see these cases where like the company pays a big security settlement because like, it’s not that like the shareholders of the company are the most direct or the most harm to victims of whatever the bad thing is, but they’re the easiest victims, right? They’re the easiest victims for a plaintiff’s lawyer to like round up file a class action on behalf of quantify their damages and settle it for 10 cents on the dollar. And so it’s just like a fascinating development in American securities law where like there are so many bad things get litigated as securities fraud because it’s like an easy way to litigate it.
Barry Ritholtz: 00:16:10 And, and let’s do the related topic, is everything insider trading? Because if you’re selling stock as an insider and there’s some, everything is securities fraud going on, seems that that would naturally file one file or the other.
Matt Levine: 00:16:23 Yeah, and I, and I’ve written about that. Yeah, I mean like you can
definitely, it is unusual for like a CEO to like get arrested for selling stock while he was, you
know, doing sexual harassment or whatever. But like it’s not unheard of and there are private
lawsuits that, that do sort of express exactly that theory that everything is also insider trading.
Barry Ritholtz: 00:16:40 So you, you wrote a lot about all the meme stocks. What, was
your biggest takeaway from that era?
Matt Levine: 00:16:47 I was struck by like the ability of retail investors collectively to
move stock prices, right? Like I was, I was not expecting that. I was, I mean I think people
confidently declared it on Reddit and I was like, sure, but it’s retail. And then like in fact these
stocks went up and stayed up for very long periods through like the actions of retail investors and like people creating gamma squeezes by buying options. And I was like, yeah, sure, like that works in theory, that’s not really gonna work. And that kind of did work. But the other takeaway that I think is interesting is like, just from the corporate finance side, I think like there are some companies where they were like, we’re gonna make our like investor relations and corporate finance strategy be about retail investors. And I think that that was never a thing that people did for, you know, the last like 20 or 30 years because, you know, everyone sort of understood that the money was in was in institutional investors and like, there’s not an efficient way to reach and like rely on retail investors for funding.
Matt Levine: 00:17:42 And in the meme slack craze a MC very early on was like, oh yeah, we can do that. Like we can, we can raise money if we can do tons of at the market offerings to retail investors, we can offer popcorn to our shareholders to keep our stock price up and we can like really, you know, do our financing in re retail markets by being a meme stock. And I think like the way to do meme stock investor relations, like had to be kind of invented on the fly. And it’s fascinating the way people did it. Now I don’t think it’s like permanent, right? If you’re a CEO now, you can’t be like, let’s become a meme stock and rely on retail investors because I think it’s like, it’s always been a crapshoot and you know, it’s much less common than it was two years ago. But I think it was like a fascinating like, lesson from that. And,
Barry Ritholtz: 00:18:21 And some of these companies managed when the stock price went, went meteoric were able to, to do secondaries, we were able to do refinancing. ’cause they, they took full advantage. I mean AMC was Recapitalized,
Matt Levine: 00:18:33 Was like filing going concern warnings. Like, we’re gonna go
bankrupt. We, you know, we run movie theaters in a pandemic. We have all this debt and then they just refinanced their debt and like, and you know, bought a lot of it down because they could sell stock at very high prices. Like they had an asset that was not, you know, that was a very untraditional, you know, like we have this ability to tap retail investors to refinance and they played it really fascinatingly. Yeah.
Barry Ritholtz: 00:18:56 And it seems like it was clearly not the sort of thing buy and hold
investors wanna play with off the highs. Most of these stocks are down the, the meme stocks are down 70, 80, 90 plus percent. They’ve all gotten taken a big hit.
Matt Levine: 00:19:10 Yeah, I mean it was, it lasted much longer than I expected, but it didn’t last forever.
Barry Ritholtz: 00:19:14 Let’s talk about another subject that you come back to regularly,
which is the philosophy of active versus passive investing. It seems like active managers who
have been underperforming according to the academics for a long time are constantly throwing novel new theories at the passive worlds, trying to take them down a notch. You, you cover this on a regular basis. Tell us a little bit about that space.
Matt Levine: 00:19:43 So my favorite part of it is not really about active passive. My
favorite part is right now is, is this notion that like owning all of the companies is bad,
Barry Ritholtz: 00:19:54 Owning all the companies in a sector because you’re, you’re an
index investor somehow leads to price fixing.
Matt Levine: 00:20:00 So that’s like the, that’s like the, the starting point of it, but I think
it’s like a bigger theory than that, right? I mean I think it’s that and like sometimes my headline is sometimes like, should index ones be illegal, right? The basic idea is that if all of the companies in a sector or all of the companies in the country or in the world, you know, all the comp, if they’re all owned by 12 people, right? John Coates, the Harvard law professor has, has a book out called the Problem of 12 where he’s like, yeah, there’s like 12 people. There’s, and the people are like, you know, the people who run BlackRock, Vanguard, you know, state Street, but also like Fidelity, right? Like isn’t really a passive question. This is a like very large diversified investor question, right? If like 12 people control, you know, 51% of the stock in all of the companies, then it sort of stands to reason that those people will want stuff to happen that is broadly good for all of their companies rather than for one company to compete against another company.
00:20:54 And that the CEOs of those companies who are fiduciaries for these shareholders will think like, yeah, I gotta do what is right for these shareholders. And so that happens in a lot of ways. And the, the alleged to happen in a lot of ways and like the, the the starting point for all of this is, is some papers that people published about price fixing. Like the idea was that if all of theairlines are owned by the same dozen investors, then the airlines will not compete hard on price. And like they will try to divvy up roots in a way that keeps prices high. Because if you compete on price, you’re essentially, you know, mostly taking a dollar away from your competitor. And like that dollar ends up in the hands of your shareholders anyway. So why would you compete? Why wouldn’t you just try to grow the pie for everyone? And it’s like super controversial and like the empirical evidence where it’s not super clear and like especially
Barry Ritholtz: 00:21:38 Focusing on airlines as opposed to tech or industrials or they cherry pick that sector, which kind of reveals how bankrupt the argument is. But, but keep going.
Matt Levine: 00:21:48 Like there are fascinating stories about like, this is not in public
companies, this is not the problem at all, but like ride sharing startups like SoftBank was fi
financing all these ride sharing startups, right? And then like they kind of didn’t compete against each other and they kind of like divvied up the world, you know? And it’s like, well yeah, they’re like subsidiaries of SoftBank, right? And if you think about the world as being like all companies are subsidiaries of BlackRock, then it’s just like an interesting analytical framework. And I think,
Barry Ritholtz: 00:22:11 But you need, but you need that leap, which is you intellectual’s leap actually the part that nobody talks about is, hey, we’re running a $10 trillion company. I know, let’s put that at risk to reduce competition in the airline sector. Okay? But it’s such an
absurd argument. Okay.
Matt Levine: 00:22:28 But, but, but like here’s where it is universally accepted to be true,
which is ESG think about like what BlackRock is, right? Like, like they don’t really gain from
one company like improving its competitive position against another company ’cause they own all the companies what they get, right? They
Barry Ritholtz: 00:22:43 They, but that’s their business. Their business is to own all the
companies. Yeah. And they gain when they run that business better.
Matt Levine: 00:22:49 Yes, and, and so like broadly speaking, competition is good for
them because like competition sort of, you know, does ultimately grow the pie. But like there are places and like the, the place that I think is, is sort of obvious is like BlackRock has, and they do less of this now because of political pressures, but they have put out papers and they’ve put out, you know, strongly worded letters to CEOs saying you need to take climate risk seriously because climate risk is a systemic risk that affects all of our companies. And like that strikes me as straightforwardly true. And BlackRock is saying, you know, we have to care about not just like year to year bottom line of these companies, we have to care about like the systemic, like long run sustainability of like the entire capitalist system whi
Barry Ritholtz: 00:23:28 Which by the way is their way of doing business. Vanguard hasn’t
done that State hasn’t done that.
Matt Levine: 00:23:34 Yeah I agree. And the competition amongst the three of those is why there’s no real price fixing. If anything it’s going the other way.
00:23:42 I don’t wanna argue for like there’s price fixing in airlines because
of BlackRock. But I do think that like if you are a broadly diversified, enormous asset manager, you do have to think about your portfolio primarily in systemic ways and not in like competitive decisions that your individual companies are making. And if you’re thinking about your portfolio systemically, like that creates different incentives for you and for your portfolio company’s managers. Then if they all had shareholders who only owned their company and they were just trying to maximize their company’s share all sorts of like ESG stuff, it’s about externalities, right? It’s about a company saying we can make more money by doing bad stuff that causes externalities to other companies, but we’re not gonna do that. And I think part of why they’re not gonna do that is ’cause like their shareholders absorb those externalities, right?
And like that’s like the simplest form of the story, right? And like then you can be like, well one thing that causes externalities is like airlines cutting prices and like that seems bad and stopping them from doing that seems bad. Another thing that causes externalities is like pollution and stopping them from doing that is good, right? Like there’s all sorts of things and some of ’em are good and some of ’em are bad. But like this notion that like a systemic shareholder is doing systemic stewardship and that it wants its companies to act in a way that
benefits all of its portfolio rather than just that one company I think like makes total intuitive
sense. And then like you’re gonna have questions about the individual cases.
Barry Ritholtz: 00:25:01 So I wanted to bring it up because you bring it up every couple of
months, there’s always some crazy law review article or some wacky that, that are at the outer
limits of how the world really works. How, how indexing works and how big asset managers like BlackRock or Vanguard or State Street work. But if we pretend that they’re colluding, well
maybe index funds are illegal.
Matt Levine: 00:25:27 I don’t really think they should be illegal. And by the way, there are
people and I’ve I’ve made fun of the people who like really strongly believe they should be illegal
Barry Ritholtz: 00:25:33 Now, do they really believe that? Or are they just hired by active
managers to push the silly because I, I kind of feel Side deal going on, Hey, push the fish.
Matt Levine: 00:25:44 I don’t think most of ’em even believe that index funds should be
able to go. I think they, I think that like, like me, they find, they find this like an interesting sort of theoretical point. And I agree with you that like a lot of them feel like empirically sort of pushing the limits of what is plausible, but like there’s some nub of it that like just seems
uncontroversially true. And then it’s just about like sort of figuring out like what the, like how to, how to frame it and understand it. Where, the line, how far you could take it.
Barry Ritholtz: 00:26:07 All right, last topic that you talk about on a regular basis, derivatives, high requency trading, hedge funds, endowment, short selling. Let, let’s talk a little bit about SPACs, which you covered pretty aggressively during the SPAC frenzy over the past couple of years.
Matt Levine: 00:26:25 Yeah, It’s over. It’s done.
Barry Ritholtz: 00:26:26 Right? Are we gonna see this again or is this another, another 10 years have to go by before this pops up again? ’cause you remember mid two thousands SPACs were a thing as well. There
Matt Levine: 00:26:35 Was a, right, there was a long period where SPACs were like a
known technology but like notoriously shady. And then in like the recent boom they became
kind of like mainstream and popular. I don’t know if they’ll go back to being like a notoriously
shady thing. I think it’s a plausible tool, right? I think that like, you know, before SPACs there
was a bit of a boom in direct listings in the US and that’s still kicking around people still,
Barry Ritholtz: 00:26:57 Bill Gurley’s been talking about that forever.
Matt Levine: 00:26:59 You’ll still see an occasional direct listing. Like that’s just like a
technology that like someone built and that was, it’s kind of domesticated and is now part of the toolbox. I think SPACs are different because like, you can’t just like go to a company and be like, well you can do an IPO, you can do a spac ’cause you need to have a preexisting SPAC lying around, right? The SPAC experience, you know, was very lucrative for SPAC sponsors for, you know, the first half of that boom. And then more and more sponsors got into it and a lot of them ended up stuck. And like with SPACs that will expire and they will eat a million dollars or whatever of set up costs and feel burned. So I think that you’ll be less likely to see people starting SPACs like on SPAC as it were and trying to, you know, find a deal.
So I don’t know, I think it will kind of dissipate, but there’s still stuff, I mean like, I
really like Bill Hackman’s Spark, you know, his, like his spac where you don’t raise the fund
first. Like that solves like a number of issues. But one issue that it solves is like, it’s not as risky for the sponsor upfront, right? Like, because you set up the thing and it’s like, well you have as long as you need and like you’re not raising a specific amount of money you have like, you know, you can raise as much money as you want. And so it’s like a tool where like seven years from now, a bank can go to a company and be like, well, you can go public with an ipo, you can do a direct listing or you can call it Bill Ackman and see if he’s got a Spark Langer, right? And so there’s something as a technology, it’s interesting, but like, because it needs to be set up in advance. Like it’s possible that like they mostly go away.
Barry Ritholtz: 00:28:19 A any other topics that you’ve been looking at lately that are, are gonna become regulars? And I’m holding crypto to be its own. So,
Matt Levine: 00:28:26 You know, crypto, you’re right, like crypto was a regular topic and it still is, but you know, a large subset of my readers are sick of it. I mean, crypto is fascinating
because like Elon Musk, it was a laboratory for understanding financial concepts, right? Like
people who were like kind of rebuilding the financial system from scratch. And so you could
have like great discussions about like, what is margin lending, right? Because like crypto
exchanges were like thinking of new ways to do it, right? The retrenchment of crypto has been, has meant that there’s just like much less of that, there’s much less like interesting financial experiments in crypto because like crypto is just like, there’s just less new stuff happening incrypto. The thing that like that’s been on my mind a lot recently because of the open AI saga is just ai, right? Like, I just like the influence of large language models and other sort of AI tools in, in finance it’s still kind of early days, but you, there’s like always an article about how AI tools are being used, you know, to do new stuff, to like take over jobs from humans to like find new ways to do things in finance.
Barry Ritholtz: 00:29:20 And I think that’s like, you know, obviously gonna be a, a central theme.
Matt Levine: 00:29:23 All right, so let’s, let’s talk about a few of your other favorite topics. I just love the way you put this quote. I have to say, nobody makes being a billionaire look like less fun than Elon Musk. He’s the richest person in the world, exclamation point. He decided to buy his favorite toy and to make it more closely aligned with his tastes. So he did that and it
worked. And yet it seems to make him more miserable every day. So when, when the Twitter
acquisition was early days, it was front page with you all the time, it was top of mind. Tell us a
little bit about why you find it so fascinating to write about Elon Musk.
00:30:04 So in terms of like my professional interests, I’m really interested in
like kind of financial stuff. And Elon Musk is a fascinating like financial guy because he really
rethinks everything. And I think like his, his, his biggest supporters would say this, he really
rethinks everything from first principles. And that’s kind of a terrible way to do almost
everything in like regulated financial markets. And so like, I write a lot of like imagined dialogue
for Elon Musk, and a lot of it is like Elon calling his lawyers and saying, why can’t I pretend I’m
gonna take Tesla pri private or whatever. And his lawyers being like, you can’t do that. And I
think, you know, you, you read, you read stories where you’re like, at SpaceX they’re like, well
the laws of physics don’t allow you to, to do whatever you’re doing right? In like the laws of like
financial markets and the laws of the SEC, everything’s like a little grayer, you know, it’s a little
bit less clear what’s allowed and what’s not allowed.
00:30:59 And so he’s constantly pushing up against what’s allowed. So he’s always doing weird
stuff. That one is funny. And then two, like kind of illuminates how these mechanisms work,
right? I mean, I wrote so much about his acquisition of Twitter because I, you know, I was an m
and a lawyer and I, I have written over the, you know, 12 years of my career in financial
journalism. There have been m and a deals where like there’s been some dispute about whether
some deal had to close and like where you could be like, oh, this is how merger agrees work.
This is how remedies work and merger disputes, right? But I didn’t do a lot of that. ’cause people
find that kind of boring, right? And you’re like, yeah, yeah. Like merger dispute, you know,
remedies in, in, in, in merger contracts. And then Elon Musk makes it like hilarious front page
news.
00:31:40 I’m like, I can write about merger disputes. And you often don’t see those mechanics
because usually people just kind of do the expected thing and Elon Musk is like, no, I’m gonna
test every like, pressure point of how mergers work. It turns out they do work, right? Like they,
he, we might’ve been wrong, right? We might’ve like all done merger agreements in ways that
were vulnerable to Elon Musk finding flaws in them, but in fact it held up, you know? And
there’s just like a lot of stuff like that. There’s a lot of, you know, he like pushes the boundaries ofwhat he can get away with. He does weird things and sort of pushes people to acquiesce to them.
And sometimes they do and sometimes they don’t. And it’s always just like illuminating about
how finance and how the law works.
00:32:20 I I love this description. Nobody has been penalized more in history
for their inability to manage their impulse control.
00:32:29 Well, you know, like in, in like dollar terms. But like, you know,
other people have been penalized worse, like in terms of their own utility. Like he’s had to pay a
lot of money for his inability to resist Twitter. But like, I mean that’s, he’s still quite rich,
00:32:42 Right? That’s, that’s $44 billion. I I always wondered why he didn’t
just write the billion dollar breakup fee and walk
00:32:49 Away. Well this is, this is what we’re talking about. Like, he
couldn’t do that. That wasn’t how it worked. The merger agreement isn’t that simple. It had a
specific performance closet said you can’t walk away for by writing a billion dollar breakup fee.
The breakup fee is payable in specific circumstances where you’re sort of allowed to walk away,
but he was not allowed to walk away by writing, by paying a billion dollar fee.
00:33:08 Who, who is advising him to waive due diligence? I recall you
wrote about that. Well,
00:33:14 He, so I actually think that in hostile public company m and a, it is
not that uncommon to not do due diligence, right? And that’s how hostile m and a works. Like
you don’t talk to the management will talk to you and you’re like, I’m gonna put in a bid anyway
these days. Normally the hostile deals sort of end up going quasi friendly and like you get to do
some due diligence. But like, I mean, the reasoning is Twitter’s financials and you know, its
business were all fairly well known publicly and there was no information that he didn’t have
that was relevant to his bid. So like he had all the information he needed. Like what happened is
like, first of all, he was kind of overpaying, you know, wild generally, but more importantly like
kind of the market tanked right? Between when he announced the deal and when it closed, like
waiving due diligence was not the problem there, right? Like, like he, he was buying a very well-
known public company and he knew what he needed to know about it.
00:34:10 So your, your headline for that story was, Musk lost interest in
pretending to buy Twitter, which is kind of ironic. Well,
00:34:18 That’s what I thought at the time,
00:34:19 Right? I ironic. ’cause he ends up being forced to buy Twitter.
’cause he made a firm offer. Yeah. Which raises a big question. How could you be the wealthiest
person in the world and not have one or two lawyers and accountants on staff that say, Hey
genius, you’re gonna be 45 billion in the hole if you don’t stop this. Like, nobody says no to him.
00:34:42 Well, there’s two points, right? Like, be before he signed the deal.
Like I think that, like there are a lot of people signing a public company merger agreement is sort
of different from like signing a letter of intent to buy a private company, right? Like I think that like he might have some experience in doing deals where like you sign a piece of paper that is
not a final binding commitment, right? Whereas in a public company merger, like it doesn’t
really work that way. You sign a piece of paper, you’re pretty committed, you’re done. I think it’s
possible that he had lawyers who told him that and he didn’t listen. I think it’s also possible that it
did not occur to a lawyer to say, when you sign the definitive merger agreement, that’s a
definitive merger agreement. I think it might’ve been like the lawyer might’ve assumed that was
obvious right after he signed the deal. The reporting on this suggests that he did that. His lawyers
did tell him, you know, you signed a binding deal. But I think that they probably accurately told
him he had some chance of winning.
00:35:29 Not, not exactly the same as,
00:35:31 And he was like, let’s roll the dice, man. I like, I don’t think he
minds going up against long odds
00:35:36 Going forward. Really, really interesting stuff. Let’s talk a little bit
about how money stuff got started before it was the most red item on, on Wall Street. How did it
begin? Tell tell us a little bit about the background.
00:35:49 You know, I don’t, I don’t really know. It’s sort of like accrued in
stages. So I was blogging at Dealbreaker for a while, you know, writing like, you know, one to
three blog posts a day about the financial industry back when people wrote blog posts. And then
I came to Bloomberg and they sort of, it was at a time when they were sort of thinking you do the
same thing, you know, you’ll blog a couple of times a day. And like many blogs like dealbreaker,
like some other financial blogs, you know, there’s this notion that in the morning you just send
out a roundup of links. And so it became like my morning link roundup was like a couple
paragraphs about four stories, right? And at some point I was like, I want this link wrap to be an
email that goes to your inbox. I, I didn’t like do a lot of thinking and market research about this. I
think I was mostly inspired by this great media newsletter called Today and Tabs by Rusty
Foster that was like hilarious and just very like stylish And
00:36:43 Still, still around.
00:36:44 Still around. Yeah. Yeah. It’s like gone through different iterations
today
00:36:46 In
00:36:47 Tabs today in tabs, it’s great. And
00:36:49 Back in the pre-up stack days. Yeah. Now
00:36:51 It’s all email. This, this is, this was thousand 11, 13, 14, something
like that. Yeah. And so I was like, I’m gonna make this an email newsletter. And everyone was,
you know, Bloomberg was like, sure, whatever. And I don’t know
00:37:02 That’s precisely what they said. Sure. Whatever. There
00:37:05 Was a ton of like real thinking about it and we, we were like, we
should give it a name. And I do think that Tim O’Brien now the head of Bloomberg opinion
came up with the name money stuff, but he thinks it was me. But any, any case, someone came
up with the name money stuff, which I, which I adore and is like,
00:37:21 Because it’s so, it it it’s so perfectly ambiguous and generic. Yeah.
And, and yet it it, it’s so winking at the same time. One,
00:37:32 One of my editors once called my Tone and headlines blandly
sarcastic and I think I think of money stuff as being blandly sarcastic. But so he came with a
name, which was, which was great. But then like, you know, I started sending out as an email
and then like over time more of my work went into the email and it got longer. And frankly it got
later in the day and less of my work went into the standalone blog post until I realized like I had
this audience on email, it would be obscene for me to write a long good post and put it up on
Bloomberg and not send it to my email subscribers. So instead the email is gonna be the whole
thing and like, if I have something good, I’m gonna put it in the email, you know? And so I no
longer write like standalone blog posts and, and the word blog has sort of vanished from the
internet, but I still kind of think of myself as a blogger. It was such a good strategic decision to
like, capture this audience of people who expect to hear from you each day, who know your
name, who get an email from your name rather than like, you know, a column that they, they
don’t necessarily look at the byline who expect it every day, who feel some sort of like,
parasocial relationship with you where they’re like, were you, they’re in some sense in
correspondence with you rather than just like reading some stuff on the internet.
00:38:38 So, so let’s talk a little bit about your audience and, and I have a
few quotes I’ve, I’ve pulled from the internet. Matt’s one of the best writers today chronicling the
ironies, paradoxes and absurdities of Modern Business and Finance. That, that’s Jim Chanos of
Kinkos Associates. His work is some of the most sophisticated analysis of what’s really
happening on Wall Street, says Bill Ackman, the, these are some pretty big hitters blowing kisses
your way. What’s it like to know that your daily email is being read by some pretty big Wall
Street titans?
00:39:14 I try not to think about it too much, right? ’cause like sometimes
you write about them
00:39:18 When you, when you write something, do you know this is gonna
be read by them? Is that in the back of your head?
00:39:23 The thing is that like, the tone of the email is so, like, it is written
for like me and my friends, you know, it’s like, I used to think of my audience as being like the
analysts on my desk who are like, sort of like young people who know a little about finance, but
like, you can still explain a lot of things to them. I no longer really think of it that way, but I still
think of it as like, like the audience is to like make myself laugh. I don’t think of it as being like,
oh, bill Ackman’s gonna see this. You know, the
00:39:45 New York Times described your analyses as humor with a nerdy confident tone. Sounds like you’re writing for your buds on the, in the analyst room.
00:39:55 Yeah, a little bit. Yeah.
00:39:57 So, so let, let’s talk a little bit about some of that nerdiness. What’s
with the endless humorous footnotes?
00:40:06 I don’t know. Like, it’s just like I is a, it’s a tick that started at
Dealbreaker and then I sort of pro it over because like, people complain if I don’t have footnotes
that, you know, it’s like an email newsletter is a very linear thing, but like sometimes there are,
there are like digressions that you want to have and the best way to do that is in a footnote. And
you have some rudimentary HTML that allows you to jump back and forth. Although in an email
newsletter it’s like pretty rudimentary as it’s gone on longer. Like, you know, the audience has
broadened, right? And so, so it’s not like I’m literally writing for like, you know, an audience of
analysts at a bank. I’m writing for a kind of rage of audiences. And there are times when I will
say something general and straightforward in the text and then I’ll be like, I know you’re gonna
complain about this. So in the footnote I’ll be like, this is like not quite right and here’s why. You
know? And I try to like be like not in the direction of like a sort of deeper understanding without
necessarily cluttering up the description of the text. But there’s other things too. Some these are
just like funny jokes that are, that are like distracting in the text. And so I’ll put a joke in the foot.
00:41:04 So, so you mentioned the audience. How often do you hear, hear
from them? How often are readers hitting you up with emails?
00:41:10 I often get emails from people who are very much on my
wavelength, right? So I wrote recently about this like trading mistake by the, a power company
that led to Finn Electric prices being negative. And so there were like these news stories about
like Finnish people running their saunas all night to like, to make money because they’re getting
paid to run their saunas. And so many people emailed me about that being like, oh, here’s the
time that my electro presses were negative. And I, you know, like the, it’s like when I write about
like weird trades, I have enough of of an audience who does weird trades and who like think
about this in the same way that they’ll be like, oh, here’s a weird trade I did that. It’s hilarious.
And like, I always love those. And so I often I’m able to like, if I write about something weird,
I’ll have like then a week of follow-ups of readers corresponding and saying being like, here’s an
even reader story. You know,
00:41:56 I, I have a vivid recollection when oil prices went negative and your
headline was something along the lines of there’s no place to store oil. It’s smelly, it’s it’s
dangerous, it’s this, it’s that. And so we’ll pay you to take this oil off our hands. You, you
probably affected certainly my understanding of what was going on with negative oil prices, but
I bet a whole lot of other people as well.
00:42:21 Thanks. I I, that’s the goal. I mean like, I like to, you know, the best
things are like things were like, there’s some weird story and like the headline’s like, oh here’s a
weird thing. And I can be like, here’s like a sort of intuitive conceptual framework forunderstanding that weird thing. You know, here’s like how to think about that weird thing. Like that’s always like super satisfying to do,
00:42:39 But it’s a little more than that. I’m gonna quote the New York Times
on that. He makes readers feel in on the savage joke that is late capitalism. And, and the Times
was referring to what I thought was a pretty hilarious acronym that’s about 30 letters wrong,
long, about a city group share, downside protection derivative that that you decided to
abbreviate. And it was a really, really funny tongue in cheek line.
00:43:10 I think there’s like a sort of standard mode in financial journalism of
like, you look at like stuff that banks do and you’re like, this is really bad. And then like my
mode is, I often find it really funny and I think that resonates with a lot of readers in different
ways sometimes ’cause they work in capital, in finance and also find it funny sometimes ’cause
they don’t work in finance and find it funny. You know, I have a lot of readers these days who
work, like broadly speaking in tech and like what they’re interested in is not like specifically
descriptions of finance, but like this like sort of like system d like nerdy, almost algorithmic way
of thinking about the world. And so like I have a lot of tech readers who are sort of like, I like
your style. I don’t really care about finance, but like, this is like a explanation of finance that
resonates with tech people. I have a lot of readers who are like very strong critics of, of banks
and of, of finance and who like what I do because sort of neutrally explanatory and tries to get at
what’s actually going on and how people are in the industry are actually thinking about things.
And the people who are like strong critics of banking often find that useful. Right? Well you as
opposed to just be like, oh, banks are evil. Right?
00:44:14 You, you are critical without seeking to be critical in, in a way that
once you understand the absurdity of certain situations, it can help but be critical.
00:44:26 I work for Bloomberg opinion. I, I joke that I’m an opinion
columnist without any opinions. That’s not really true. But like, I’m not, like, it is not high on my
list to be like, this is bad or this is good, right? Like I’m, it’s always like, this is interesting, right?
Like look at this interesting thing, let’s try to understand it. Yeah. I I definitely think that a lot of
readers come away being like, you have explained this thing and now I think it’s much worse.
But like, that’s not always my goal, you know?
00:44:49 That’s, that’s hilarious. So let’s talk a little bit about a somewhat
infamous podcast you did with Sam Bankman Freed and FTX on Odd Lots a good year before or
so before it crashed. What was your sense of FTX at the time?
00:45:06 I’ve no story that makes me look good. I thought Ft X was really
interesting. I thought FTX seemed like a well run crypto exchange that seemed to be printing a
lot of money and that had interesting, you know, aggressive ideas for how to change the structure
of derivatives margining and what’s your end game as a crypto exchange. I thought that Sand
Bankman free had a like, reasonably clever end game, which was like he was going to consume
the regular financial system. He was going to be a place where you could like tokenize stocks
and run a crypto exchange that gradually became like the main financial exchange for the world,
right? I, I don’t wanna say like, I thought that plan was inevitable, but I thought that was like, likethat’s a better plan for your crypto exchange than like, well crypto will take, you know, all of like
financial life will be in Bitcoin, right? I thought he had like a pretty good idea for like how we’re
going to be a, you know, enormous company. Well,
00:45:54 Well he clearly came up with a better mechanism for extending
credit and, and liquidating portfolios that were in the red than other exchanges had. He just kept
building FTX and kept focusing on being the biggest, baddest crypto trading platform and, and
crypto exchange that could have been wildly successful. It certainly looked like he was printing
money for a while. Turned out there were some co-mingling funds and other issues there.
00:46:24 Yeah, I think it’s interesting to ask if, if he was doing what he said
he was doing, was that a good idea? Because I was like, yeah, it sounds like interesting. I don’t
know. He was very much about like, we’re gonna have an automated margining system where
we’re never gonna call you for margin calls. We’re just gonna blow you out. If you fall below a
certain level, it’s gonna be all 24 7 mark to market. It’s gonna be much less subjective. And he
was talking about this at a time when, like the London Medals Exchange had had this like sort of
semi scandalous problem where like this big trader accumulated this huge deficit position and
like he couldn’t meet margin calls and they couldn’t do anything about it because like if, oh, you
know, they would’ve like blown up the exchange, so they just sort of like paused trading for a
week and it just looked bad, right?
00:47:04 And it was like, oh yeah, this like system of like subjectively doing margin calls and
like doing margin calls once a day. And if like, if it’s moved too far, then like you’re like, oh no,
it’s too big to fail the, the SBF endorsed system of like, we’re gonna do everything automated.
You know, you’re like, oh, yeah, I see the appeal of that. I don’t know that it was a good idea. I
think that, like, there are obvious downsides to it too, but like what brought FTX down was not
any of those downsides because like what was in fact happening was that he had simply
exempted his own big hedge fund from the automated margining rules and it accumulated a
vastly bigger deficit position than like the, the London Metals Exchange guy did. And then it did
in fact blow up the exchange and take customer money down with it.
00:47:44 The thing he said he wasn’t doing was what caused him to, to blow up. But as far as I
know, FTX was printing money, like the exchange was very valuable in terms of, it made a lot of
revenue. And some of what they did was just they overspent that revenue. And then most of what
they did was like they had this affiliated hedge fund that, you know, lost bajillions of dollars.
Right. And because it was just taking enormous margin loans from the exchange, when it lost a
bajillions of dollars, it took the exchange down with it, but the exchange itself was very
profitable. And one thing you could say, like, there was a time, I think like over the summer
when like they considered shutting down Alameda, the the hedge fund. And you do look back
and say like, could they have managed to do that in a way that, you know, it was like
embarrassing, it was whatever, you know, like lost money, but that left FTX intact and then FTX
could continue printing money and maybe, I don’t know, like maybe they’d already gone too far
by that point.
00:48:33 The other thing is like, there, there is a theory that one reason that FTX was printing so
much money was that it was a very good trading experience for customers because Alameda was
on the other side of a lot of trades and Alameda was losing money to all these customers. So
you’d go to FDX, you’d trade, you’d make money, you’d be like, oh, this is great, I’ll come back.
Right? But it was all sort of like an indirect Ponzi scheme where like you were making money
from Alameda and Alameda was failing it from you. I don’t think that’s really true, I think, but I
think there’s like a like element of truth of that. I don’t think that’s like what mainly explains
FTX. Like, I think FTX was a good business and Al Alameda was like a hilariously bad business
and like they were intermingled.
00:49:07 So last summer you write this giant piece in business week about
crypto, essentially you were that entire issue of business week. Tell us about what led to that
massive piece and, and what the thinking was that I had you say, I know I’m gonna take over
business week for a week and write about nothing but crypto.
00:49:29 Joel Weber, the editor of business week, came to me and he was
like, Hey, do you remember what is code? So what is code? Is Paul Ford, this great computer
programmer wrote a business week issue, took over the entire issue of business week to write a
thing called What is Code? It was trying to explain computer programming to a, like, like a
sophisticated business audience, but not coders, right? And it was just like this really fabulous
like, just piece of writing and explaining and thinking. And I, I loved it when it came out and
Joel came to me and he was like, remember what is code? We’d like to do that for crypto? And I
was like, I, I found it appealing because one, I I like to write long. And I was like, oh, a whole
magazine, two crypto felt to me like a big enough subject to warrant a whole magazine, but a
small enough subject that you could like almost do all of it.
00:50:10 Like I didn’t do all of it, but you can almost like sort of start at the most basic building
block intuitions and build up to a full understanding of the entire crypto universe in the space of
like 40,000 words. And that just seemed like a really interesting, like, just technical challenge to
be like, take a reader from nothing to like, not like some vague intuitions, but like a detailed
understanding of like all the stuff that matters in crypto that felt really interesting. But also, like
in my day job, I was often writing about crypto and you have this question of where to start,
right? Do I explain what a blockchain is in order to like make a joke about this? Like, you know,
crypto exchange that got hacked, right? And so the idea of writing this, this magazine piece was
partly like, selfishly for me.
00:50:50 I could be like, I’ve explained what a blockchain is over there so I can just tell you
about this thing that got hacked, right? So it felt like a useful like, like reference piece for me to
do from, from from then on. Oh, the other thing that I was thinking at the time, to be honest, is
that Joel came to me in like, I don’t know, June or whatever, and I was like, summer’s always
slow. I’m gonna be so bored writing my newsletter every day. I’m not gonna have enough to
write about, so why don’t I take some time off from the newsletter to write this long thing? And
then of course, that was the summer of Elon and, and Twitter. And so like, I was like, oh damn.
And so then, yeah, like that’s, that was, that was kinda the motivation for it. My, my biggestregret is that, you know, this was really directly inspired by Paul Ford’s what his code and the
Joel’s sort of like, working title was like, what is crypto?
00:51:31 And I was like, we should call it what was crypto? And we were like, that’s too mean,
we’re not gonna do it. And then it came out in like, I don’t know, they come out in October of
2022. It came out like, you know, like two weeks before FDX exploded and had we called it
what was Crypto I, you would’ve like, what about all the awards man, that would’ve like, what a
great title that would’ve been. And we just like, we didn’t have the courage or a conviction, so we
didn’t call it what was crypto? Well
00:51:53 This leads me to a sort of curve ball question that was almost a
book. When is the Matt Levine book ever
00:52:01 Get publish? Yeah, when I, I don’t know. I mean like, I like there’s
there sure there’ll be a book. I wanna do a book, but like I, I really like my day job a lot and it
00:52:09 Books get in the way.
00:52:10 Yeah. It like involves writing a lot of words. So like, I don’t have
any more words to go when I go home at night, but I really like the, my my, you know, I, I like
the day job, but like, I don’t know, I, I found the, what was crypto exercise really fun. And I
would like to do something like that for, you know, not crypto. Alright,
00:52:25 Well we only have you for another 10 or so minutes. So let’s jump
to our favorite questions that we ask all our guests. Starting with what are you streaming these
days? Tell us what you’re either watching on Netflix or listening to in terms of podcasts. What’s
keeping you entertained? I
00:52:41 Don’t really watch television. I have like a lot of children’s
television in my life. So streaming a lot of Eleanor Wonders why a lot of Frozen two things like
that. I used to listen to weirder podcasts, but now I listen to like the long form podcasts. I love, I
love song Exploder the like yeah. Music podcast that that’s great. Yeah, in podcast I like, I find
myself like long form is the same thing, right? Like, it’s like people who are really good at
something explaining like at a, like a, like a truly like mechanical specific level, like how they do
what they do. It’s like always satisfying and like how they do what they do and also like their sort
of psychological traumas as they do it. I find it very useful.
00:53:18 Tell us about your mentors who helped shape your career.
00:53:21 The person who I most think of that way was just like, you know,
like my first job out of law school was clerking for a judge, right? And like, that’s a very weird
job, right? Like, because it’s you, it’s like you and like two other people with like clerking for one
sort of powerful figure. And I clerked for this judge Ed Becker in Philadelphia, who was like one
of the great judges. Like he was, you know, brilliant, highly respected, but also like a mensch, a
nice guy. A guy who like in your interview would be like, I have a zero deference policy. And
like really meant it and like wanted to hear from his clerks and like wanted to to hear your
opinions and who just like had like a work ethic and a just an ethic that was really inspiring. Likehe went in doubt, do it the right way. And like he just, like, that’s how he lived his life, you
know, like he really like, wasn’t interested in shortcuts or like, he was just like, he wanted to get
things right. And that was just very inspiring to see like, you know, in my, my earliest career to
be like, oh yeah, like this is a guy who’s like, has been doing it forever and has a lot of accolades,
but who was just like totally focused on doing the right thing.
00:54:22 Let’s talk about books. What are some of your favorites and what
are you reading right now?
00:54:26 I don’t really have a favorite book. I’m like a, i I read a lot. I, I, I
feel like having a favorite book is like a, I have too many books to have a favorite, but like the,
the finance ebook that like when people are like, what should I read knowing nothing, the books
I recommend are liar’s Poker Barbarians at the Gate, which I already mentioned, right? Like, it
was just like a, I don’t know, I read it at a formative age and I was like, oh yeah, this finance stuff
is cool. And the other one that I love is, is a diary of a very bad year. It was put out by like n plus
one, the magazine. It’s, it’s keep guessing who’s the, who’s a n plus one editor interviewing this
anonymous hedge fund manager over the course of like 2007 to 2009.
00:55:00 He’s just like, it’s a series of long interviews where this hedge fund manager talks about
the financial crisis, but also just about like what it’s like to run a hedge fund. And he is just like
very thoughtful and it gives you a sort of real flavor for like what finance is like, but also like
what it is like to think about it a high level and like, like what the mindset is of someone who’s
very good at this. What am I reading now? I’m reading a book called An Nazis Gold, which is
about this conman in Ghana in like the seventies and eighties who was running a, a Nigerian
prince scam. If you,
00:55:29 I I have all this money waiting for me. If you, you could just let
00:55:32 Me exactly, I’ll
00:55:34 Split it with you.
00:55:34 His version of the scam was that the, the first president of, of an
independent Ghana had spirited hundreds of millions of dollars out of the country as, as, and then
was then deposed. And the, the money was in trust in a bank in Switzerland. He was going to get
the money back and use it for the benefit of Ghana, but he just needed investors to whatever, fill
out the formalities. And so it’s like this just fascinating story of I love cons, right? I love like
financial frauds. And what to me is so incredible about this story is just that it lasted for decades
because like, the problem with this is, is you’re like, I need money and in two months I will get
all this money and I’ll pay you back tenfold. And then you do that for 20 years. And like you’re
investors, you have like investors who stick with you for 20 years and like the, the like the, this
the, the charisma and like the ability to get this, you know, promise them a return in two months
and then 20 years later they’re still waiting for it. It’s crazy.
00:56:27 So our final two questions. What sort of advice would you give to a
recent college grad interested in a career in m and a derivative structuring or, or financial
writing?
00:56:39 Well, it depends on which of those three things. So if you’re
interested in career, in financial writing, I recommend a career in finance first because I do think
it is really helpful to have subject matter knowledge and also just like sort of cultural knowledge
of like what it feels like to work at a bank or whatever. You know, I would not be where I am
today if I had like pursued this, you know, like I came to this in a haphazard way after having
several other careers. First
00:57:01 Subject matter expertise matters.
00:57:02 Yeah. It’s just like it’s, I find it like I’m very glad that I did not try to
be a writer when I was 22. If you wanna be in derivatives, the advice that I sometimes I, I don’t
wanna say I regret that I have, but, but a dumb thing I did was like, when I left law, I was like, I
wanna be in finance and so I’m gonna take the first like finance job I get, right? And finance is
like this enormous, you know, varied industry where there are a lot of different roles and like, if
you are essentially like a math person and a tinkerer, like you’ll want different roles than if you’re
like a people person and a salesman, you know? And so there’s a lot of like, it, it’s hard to know
in advance what you’ll be good at, but like it’s important to know yourself and sort of understand
what roles exist and try to find a role that matches your characteristics rather than just like be in
finance generally.
00:57:50 The other piece of advice I love to give young people is like, like I did a very standard
career path. Like I went to college, I went to a fancy college, I went to a fancy law school, I went
to a fancy law firm and then it was like 2007. So like if you’re a fancy corporate lawyer, you
wanna be an investment maker. So I went to a fancy investment bank, right? Did everything very
standard until I was like, you know, in my early thirties. And then I was like, I’m gonna quit for
deal breaker. And that was a big change, right? I tell people I’ve made one career decision in my
life, right? Like everything was set for me and then I went to deal breaker. And I think that if you
are like in, if you’re a lot of like young people like looking, you know, like an analyst job at
Goldman, like you’ve been on this prestige seeking career path that is very set for you.
00:58:31 My advice is like, that’s good, do that. And like there’s some point at which you have to
jump off that like standard career prestige path and you have to just kinda like know when that
point is and like be really calibrated to where that point is. ’cause there are people who are
miserable law firm partners because they stayed on that path too long and they’re like, I’m gonna
do the expected thing. I’m gonna do the expected thing. Like, oh no, I’m trapped in this thing. I
can’t do anything else. I need the money and like, I don’t like it. Right? And then there are people
who jump off too early and are like, I don’t need to like pursue these hard jobs. I can just like go
be a poet and then like, they’re not happy either. Right? And like there’s some like optimally
calibrated point where you can like, they’re like optionality and prestige of the standard path and
then like exercise your optionality and like do the thing you actually want to do. And it’s not
immediately, but it’s not like never, you know,
00:59:14 You seem to have exercised that optionality.00:59:16 Yeah, I mean my timing was great and like, you know, accidentally, but like I do think that like people in these jobs think of themselves as accruing optionality and like eventually that starts to decay.
00:59:26 So our final question, what do you know about the world of finance today? You wish you knew 25 or so years ago when you were first getting started?
00:59:35 This is a mixed bag because like I love what I do now and it is so fortuitous that I landed here and like there are a lot of ways that I could have been luckier early and then been sadder overall because I would’ve found a really good job early on that that really fit me. And then it wouldn’t fit me quite as well as this one, but I would stay at it. But I do think that, like what I said earlier, like I didn’t know anything about like what the different types of jobs were. And I thought finance was this undifferentiated like world where like it’s all like, you know, the same spreadsheets or whatever. And I think had I known better, like what I was good at and like what kind of jobs there were, I might’ve like more intentionally pursued jobs in finance and I might’ve gotten rich, you know, but I might’ve been like, you know, miserable and overworked. So I don’t know. I mean, I don’t know anything Matt. I don’t
01:00:24 [Barry Ritholtz] It. It all worked out in the end. Yeah, I think so. Thanks Matt for being so generous with your time. Thank you. We have been speaking with Matt Levine. He is the author of Bloomberg’s Money Stuff Daily newsletter. If you enjoy this conversation, well check out any of the 500 previous interviews we’ve conducted over the past nine years. You can find those at iTunes, Spotify, YouTube, wherever you get your favorite podcasts. Sign up for my daily reading list@riol.com. Follow me on Twitter @ritholtz. Follow Matt Levine on Twitter at Matt Levine. Follow all of the Bloomberg family of podcasts at Twitter. And check out my new podcast at the Money where each week we’d share a quick investing insight with a industry expert. Those are on Apple Premium Podcast for the end of the fourth quarter of 2023. It will be everywhere in 2024. I would be remiss if I did not thank the crack staff that helps put these conversations together. My audio engineer is Meredith Frank. My producer is Anna Luck. Sean Russo is my head of research. Atika Val is our project manager. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.
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