Podcast appearances and mentions of ken lay

Send us a textHow often do audiences get to experience a play directed by its own playwright? In this enlightening episode of Steps to the Stage, we take you behind the scenes of "Bending the Spoon," part of Chino Community Theatre's Three on the Edge Festival, where writer-director Ken Lay brings his own creation to life.The play centers on a three-generation family preparing to celebrate a sweet sixteen birthday that unexpectedly resurrects a 20-year-old family tragedy. While the premise might sound heavy, Lay promises plenty of laughter amidst the tears, creating a richly human experience that reflects real life's complex emotional landscape.What makes this production uniquely fascinating is the creative dynamics at play. Tracy Lay, who portrays Gina and happens to be Ken's wife, brings her third iteration of the character to stage, having originated the role in 2018. Meanwhile, Cindy East, who plays grandmother Carol, describes the rare advantage of working directly with the playwright: "He has so much more insight than the average director would have." This intimate connection between writer, director, and actors creates an electric creative environment where lines can be adjusted on the fly when Ken realizes something that worked on paper doesn't translate perfectly to stage.The cast reveals how Ken's approach to balancing comedy with tragedy stems from his belief that "you just have to laugh instead of cry" sometimes. Rather than relying on slapstick or overt jokes, the humor emerges organically from recognizable family interactions—those moments audience members will recognize from their own lives. As Tracy explains, "People are going to see these characters and relate to them," thinking, "that sounds just like my dad" or "that's how I talk to my husband."At its heart, "Bending the Spoon" explores how families navigate life's unpredictable challenges. As Ken thoughtfully puts it, "Sometimes in life, more than one thing hits you at the same time, and you don't always get to resolve one before the next one comes along." When asked to describe the play in just one word, the creative team offers three powerful options: "Life," "Humanity," and "Heart."Don't miss this rare theatrical experience where playwright vision merges directly with stage direction. Discover for yourself why this production has the cast occasionally leaving rehearsals in emotional silence after powerful scenes, yet still finding themselves laughing at the same moments after countless rehearsals.Find STTS:Steps To The Stage (@stepstothestage) | InstagramFacebookSteps To The Stage (buzzsprout.com)Steps To The Stage - YouTubePlease follow on your favorite podcast platform and we appreciate 5 Star ratings and positive reviews!

New ‘Sode: Good Evening from Wyoming. Land and of #Jesus of Horses and Bitcoin. In my Balmain riding boots, racist politics, and family values- nanny included, I feel right at home in my #PhilippeStarck designed Cabin. I come thrice a year anyway to Senator Lummis' home  armed with #PerrierJouet and impeccably rolled joints to talk cattle and stack statsAlas, I am on a horrific crypto bachelorette trip for a 'friend's' 3rd marriage. This group of Bera TradFi Baddies also includes the Princess of Wales, who just turned #10, she's forgoing the Bikini wax and the How- to -Inside Trade on- the -Ranch lecture by Ken Lay. My friend is marrying the CEO of #Ethena, the only one who has made any real money in this spiderweb3 since Hayden Adams. Fear not, we are invalidating her prenup by tokenizing it on #Hyperliquid. Princess' security wore a DOLCE&GABBANA Bored Ape T-shirt and sold at the bottom. He has a soothing voice and read Friedrich Hayek's Road to Serfdom to me at the foot of my bed before I fell asleep without any sexual tension. I have no idea what Ethena does; my quant says that its a synthetic dollar built on ETH which provides a crypto-native solution for money. Mon Dieu! If this is how she is funding her custom made Valentino gown than wrap that synthetic chemical algorithm acid all over my face. As for the ETH, I thought everyone dumped it for Gold and or for a timeshare in Guantanamo Bay.I digress, my guest today is Kelley Weaver; the White Olivia Pope of Crypto PR. We met at a sober* Law of Attraction -Manifestation -Visualization-Meditation Retreat for beautiful women who like Manolo's and good looking men when Bitcoin was 100 dollars. I dismissed it and instead bought a f*ck ton of #OXGI, but Biotech stocks are always a manipulated bust worse than memes. Lesson learned. Manifest. Bitcoin. Support the show

Send us a textWe've saved some of the biggest stories of 2004 for our last week of summer programming.Protesters, dressed as Batman, scaled Buckingham Palace. Protesters, dressed as construction workers, broke into British Parliament. And Saddam Hussein, dressed as Saddam Hussein faced his first day in court following his capture. We dissect the conspiracy theories around Eron's Ken Lay and his mysterious death, George W Bush covers Eamon's "F**k It (I don;t want you back)", Fat Joe leans back and we provide a long awaited update on Aussie reality music TV sensation Selwyn. Plus our favourite film, Napoleon Dynamite, turns 20 and we put in a few calls and chat to people in his home town.  Hang with us on socials to chat more noughties nostalgia - Facebook (@tminus20) or Instagram (tminus20podcast). You can also contact us there if you want to be a part of the show.

Studio member Ken Lay came to Core Clay earlier this year with more than passing knowledge about ceramics. But his hobby was restoration. Now he's discovering how to make ceramic art himself.

Step into the shadows of suspense as the 7th Street Community Theatre's dynamic trio, Ken, Flynn, and Jack, pulls back the curtain on their chilling adaptation of Alfred Hitchcock's "Dial M for Murder." Get a rare glimpse behind the scenes as Ken reveals his vision for honoring the master of suspense with a keen focus on music and ambiance. The actors chime in with enthusiasm; Flynn delves into the psyche of the scheming Tony while Jack avoids the original film to infuse Max Halliday's character with a fresh essence. If the intricate dance between character and plot intrigues you, this conversation will sharpen your appetite for mystery and drama.The creativity brews in our second act, where we weave through the elaborate costume and prop tapestry of the upcoming "Three on the Edge Festival." Discover how a community theater's ingenuity turns budget constraints into a showcase of period-perfect ensembles and how a vintage dial phone becomes the silent star of the show. Anticipation peaks as we tease out the festival's Hitchcockian lineup, including a nod to the much-awaited stage adaptation of "The Birds." This episode is more than a mere chat; it's an ode to the artistry and camaraderie that fuels the passion play of community theater. Join us for this auditory escapade that celebrates the pulse-quickening journey from script to stage.May 10, 23, 25 @ 8pmMay 12 & 18 @ 2:30pmFestival tickets available at the box office now!PLEASE NOTE: Festival passes with discounted prices ($39 student/senior and $48 general) CANNOT be purchased online - they are available by phone or at box office ONLY. Reservations 909-590-1149www. chinocommunitytheatre. orghttp://tinyurl.com/CCTseatsFind STTS:Steps To The Stage (@stepstothestage) | InstagramFacebookSteps To The Stage (buzzsprout.com)Steps To The Stage - YouTubePlease follow on your favorite podcast platform and we appreciate 5 Star ratings and positive reviews!

The 3AW Mornings host said a second injecting room would only benefit drug users, and would make the surrounding areas "far worse than what they already are".See omnystudio.com/listener for privacy information.

Nine News has been given exclusive detail of Ken Lay's report into a second safe injecting room, and Nine News reporter Laura Turner thinks the state government's hand "needs to be forced" to release the full report to the public.See omnystudio.com/listener for privacy information.

In this episode of the Energy News Beat Daily Standup, the host, Stuart Turley, discusses various energy-related topics in his podcast. He highlights the importance of nuclear power in achieving carbon-free electricity generation goals, noting that some states generate over 50% of their electricity from nuclear sources. Turley expresses concerns about the Green Revolution, drawing parallels to the Enron scandal and suggesting that the push for renewable energy may have warning signs of a potential crash. He also mentions the fading enthusiasm for Wall Street's ESG (Environmental, Social, and Governance) investments, attributing it to increased awareness and demand for such investments. Turley advocates for a diverse energy approach, including wind, solar, nuclear, and clean coal, to address energy poverty while minimizing environmental impact.Highlights of the Podcast00:00 - Intro01:29 - A Nuclear Renaissance Is the Best Path Forward02:54 - Climate Enron May Be Heading for a Crash06:01 - Wall Street's ESG Craze Is Fading09:16 - OutroPlease see the links below for articles that we discuss in the podcast.A Nuclear Renaissance Is the Best Path ForwardFor decades, the fruits of the fracking revolution, plus our newly minted status as the world's top net exporter of natural gas, demonstrated that American consumers were swimming in bountiful energy. But as the pandemic effects of […]Climate Enron May Be Heading for a CrashThe modern American version of “the environmental emperor has no clothes” until now has been the rise and fall of Enron. As former Ken Lay speechwriter Robert Bradley, Jr., says, “(T)he cause of Enron's financial bankruptcy […]Wall Street's ESG Craze Is FadingWall Street rushed to embrace sustainable investing just a few years ago. Now it is quietly closing funds or scrubbing their names after disappointing returns that have investors cashing out billions. The about-face comes after […]Vast Reserves of Rare Earth Metals Found at Wyoming Coal MineWhen an Appalachian-based company begins operations at a Wyoming coal mining site late this year, the energy and enthusiasm around the work may focus more on its energy transition potential than old-school fossil fuel. Ramaco […]FIRST READING: Canadians appear to have stopped caring about climate changeIn a recent Angus Reid Institute survey, Canadians were asked which political party they would prefer to manage the country's climate change file. The winner was the Conservative Party of Canada; 28 per cent wanted the […] Follow Stuart On LinkedIn and TwitterFollow Michael On LinkedIn and TwitterENB Top NewsENBEnergy DashboardENB PodcastENB Substack– Get in Contact With The Show –

It's hard to talk about corporate gossip without talking about McKinsey. They're everywhere! They advise the biggest companies in every industry in practically every company in America (90% of the Fortune 100 companies use Mckinsey). From Las Vegas Casinos to the Vatican, McKinsey consultants, armed with their Thinkbooks and Tumi rollerbags, dispense their advice on maximizing the bottom line under a veil of secrecy. That is until recently, when dogged reporters sifted through thousands of documents made public as part of a series of lawsuits and criminal investigations into the firm. Becca and Adam read through it all and are bringing you the juiciest stories. They find out that when it comes to systemic corporate malfeasance, McKinsey isn't the one who lit the match, but they're often found fanning the flames. Pictures & links on our substack Support the pod by buying us a coffee Check out our reading list  Follow us on youtube, instagram, and tiktok Hosts: Becca Platsky (Becca@nitetoast.com) Adam Platsky (Adam@nitetoast.com)  Produced by: Michael Albanese @bigmanmike Timestamps:  10:00 - Corporate Gossip #1: McKinsey, this is why we can't have nice things (Intro and background)  30:00 - Corporate Gossip #2: If Jack Welch is Theresa Giudice, McKinsey is Juicy Joe and today's billionaire boss-boys are 4 year-old Melania (How McKinsey influences the world's largest companies)  52:00 - Corporate Gossip #3: McKinsey: Our consultants are happy to provide clean pee for your patients who are addicted to heroin!! (McKinsey's role in the Opiod Crisis)  1:05:00 - Corporate Gossip #4: Enron is basically a McKinsey spinoff in which Jeff Skilling visits Ken Lay at the summer house in Montauk (McKinsey's role in the Enron rise & fall)  1:09:00 - Corporate Gossip #5: If you're looking for the Lizard people controlling the American economy it's not the west coast elites… it's McKinsey! (McKinsey as a Corporate Villian)  1:15:00 - Corporate Gossip #6: Clarence Thomas really went - guys know what would make McKinsey better??? If they had access to more white men!! Hey now… white men who can take me on Yachts. (How the overturning of affirmative action plays into McKinsey's ability to continue weaponizing capitalism)   

0:00 -- Intro. *reference to our episodes reviewing Succession Season 1: E98 of this podcast (May 22, 2023) and Season 2: E102 (June 26, 2023).2:00 -- Start of interview. 3:50 -- About Sean Berkowitz and the Enron Case: prosecuting Ken Lay and Jeff Skilling (2006).7:05 -- On whistleblowers and avoiding retaliation. "Whistleblowers are one of the trickiest things you can deal with as counsel representing a corporation."11:05 --  Kendall's whistleblower scenario. Conducting internal investigations.15:02 -- On government relations and political interference with federal investigations. "It essentially doesn't work." "The discretion and judgment of a line prosecutor is always going to rule the day."17:22 -- Cooperating with Federal investigations. 21:12 -- The role of the board of a public company under federal investigation.22:52 -- On "shifting to legals", internal investigations by outside counsel, and creating a special committee of the board to remove conflicts of interest.29:16 -- Explaining joint defense agreements. The Archer-Daniels-Midland case (reference to movie The Informant).33:34 -- On the link between good governance and how shareholders value the company, including activists (Josh Aronson scene) and the proxy battle.43:36 -- On sexual harassment complaints (situation between Roman and Gerri involving explicit pictures). The factor of CEO succession and how the board should conduct their selection.50:30 -- On potential GoJo red flags and need for due diligence, including leadership assessment and kicking the tires on their numbers. What could/should board be doing in this situation?55:33 -- Dealing with moguls and founders like Lukas Matsson. "I think that one of the elements at the heart of corporate governance is personal integrity and character... and Matsson is not a good guy."59:49 -- Family governance within public companies. "Ultimately it all comes down to the documents: who can vote what, who has control, who has the ability in a tie break, etc." The problem with "rubber stamping boards." Question: "would any of us invest in a company run by Kendall or Roman?"01:06:11 -- Kendall's Unreliable Testimony to the DOJ ("Queen for a day" opportunity) and Preparation Failure.Kate O'Leary is the Global Executive Litigation Counsel at General Electric Company.Sean Berkowitz is a Partner at Latham & Watkins and the Global Chair of the Complex Commercial Litigation Practice. He represents clients in complex litigation and regulatory investigations.__ You can follow Evan on social media at:Twitter: @evanepsteinLinkedIn: https://www.linkedin.com/in/epsteinevan/ Substack: https://evanepstein.substack.com/__Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License

Corruption in the police is a sad reality of the job. But for those investigating these coppers, it's especially hard. Often they're mates - but, they're mates who've committed crimes, so there's no holding back.  Chris Coster is Victoria Police's last Chief Inspector. His 45-year career came to an end in 2019, and with it, the rank of Chief Inspector was phased out. During his time at Vic Pol, Chris was the Head of Recruiting - meaning he was the final filter in deciding whether a recruit would be handed a gun and a badge. Then, Chris developed and lead the incredibly successful Neighbourhood Watch Program - and finally, internal investigations; work which saw him investigating his mates, and making some incredibly tough calls. Unpack his career with host Brent Sanders, and understand how Chris overcame immense challenges to be lauded as one of the greats of Victoria Police.  For more episodes, download the LiSTNR app. See omnystudio.com/listener for privacy information.

◆  US downgrade: why, if you liked US Treasuries at 3.96%, you'll love them at 4.18% ◆ A new fund for forests ◆ The African sovereign bond paradox ◆ Pemex problemsThere was a lot going on in the US Treasury market this week, following a downgrade of the sovereign by Fitch, an increase in government borrowing beyond what was expected and jobs data. We delve into what it means for the bond market.Meanwhile, former World Bank treasurer Ken Lay is gaining some traction lately with an old idea he has been working on for years — a sovereign wealth fund to save forests. We explain how it would work and which countries are up for it.Finally, we turn our attentions to the emerging markets where some see the return of Gabon to bond issuance this week as a sign that other African sovereigns will follow. But there's a paradox: investors don't want to buy bonds from those issuers until the yields are lower. We explain why and whether any of those issuers will be forced to raise debt capital anyway and how they might do it.We also talk about mounting problems at Mexico's state-owned oil company, and EM bond market giant, Pemex.

Mun Choi returns to the show to talk about Mizzou men's basketball, MU football coach Eli Drinkwitz and AD Desiree Reed-Francois' contract extensions, the future of Mizzou Athletics, gives us his walk-up song, his favorite football helmet and basketball uniform. Quick hits feature Matt Ishbia vs Jokic, Jonathan India, a perfect spelling bee, Wilson Contreras, more gambling in college baseball, the Atlanta Red Stallions, Ken Lay and a ratio triple-header. We close the show with NBA Playoffs and replay some of our favorite moments from the show on KCOU.

Podcast: The Lunar Society (LS 37 · TOP 2.5% )Episode: [Best] Bethany McLean - Enron, FTX, 2008, Musk, Frauds, & VisionariesRelease date: 2022-12-21This was one of my favorite episodes ever.Bethany McLean was the first reporter to question Enron's earnings, and she has written some of the best finance books out there. We discuss:* The astounding similarities between Enron & FTX,* How visionaries are just frauds who succeed (and which category describes Elon Musk),* What caused 2008, and whether we are headed for a new crisis,* Why there's too many venture capitalists and not enough short sellers,* And why history keeps repeating itself.McLean is a contributing editor at Vanity Fair (see her articles here) and the author of The Smartest Guys in the Room, All the Devils Are Here, Saudi America, and Shaky Ground.Watch on YouTube. Listen on Spotify, Apple Podcasts, or your favorite podcast platform.Follow McLean on Twitter. Follow me on Twitter for updates on future episodes. If you enjoyed this episode, please share. Helps out a ton.Timestamps(0:04:37) - Is Fraud Over? (0:11:22) - Shortage of Shortsellers(0:19:03) - Elon Musk - Fraud or Visionary?(0:23:00) - Intelligence, Fake Deals, & Culture(0:33:40) - Rewarding Leaders for Long Term Thinking(0:37:00) - FTX Mafia?(0:40:17) - Is Finance Too Big?(0:44:09) - 2008 Collapse, Fannie & Freddie(0:49:25) - The Big Picture(1:00:12) - Frackers Vindicated?(1:03:40) - Rating Agencies(1:07:05) - Lawyers Getting Rich Off Fraud(1:15:09) - Are Some People Fundamentally Deceptive?(1:19:25) - Advice for Big Picture ThinkersTranscriptThis transcript was autogenerated and thus may contain errors.Dwarkesh Patel: the rapid implosion of a company worth tens of billions of dollars. Insider dealing and romantic entanglements between sister companies, a politically generous c e o, who is well connected in Washington, the use of a company's own stock as its collateral, the attempt, the short-lived attempt to get bought out by a previous competitor, and the fraudulent abuse of mark to market account.[00:01:00] We are not talking about ftx, we are talking about Enron, which my guest today, Bethany McClean, uh, first broke the story of and has written an amazing and detailed book about, uh, called The Smartest Guys in the Room. And she has also written, uh, a book about the housing crisis. All the devils are here, a book about Fannie and Freddy Shaky Ground, and a book about fracking Saudi America, all of which we'll get into.She's, in my opinion, the best finance nonfiction writer out there, and I'm really, really excited to have this conversation now. So, Bethany, thank you so much for coming on the podcast. Bethany McLean: Thank you so much for the, for the probably Undeserved Conference, for having me on the show. Dwarkesh Patel: My first question, what are the odds that Sbf read the smartest guys in the room and just followed it as a playbook, given the similarities there?Bethany McLean: You, you know, I, I love that idea. I have to, I have to admit, I guess I love that idea. I don't know. That would make me responsible for what, for what happened, . So maybe I don't love that idea. L let me take that back . [00:02:00] Anyway, but I, I, I actually think that, that, that even if he had read the book, it would never have occurred to him that, that there was a similarity because self-delusion is such a, Strong component of all of these stories of business gone wrong.It's very rare that you have one of the characters at the heart of this who actually understands what they're doing and understands that they're moving over into the dark side and thinks about the potential repercussions of this and chooses this path. Anyway, that's usually not the way these stories go.So it's entirely possible that Sbf studied Enron, knew all about it, and never envisioned that there were any similarities between that and what he was doing. Dwarkesh Patel: Oh, that's a fascinating, um, which I guess raises the question of what are we doing when we're documenting and trying to learn from books like yours?If somebody who is a, about to commit the same exact kind of thing can read that book and not realize that he's doing the same exact thing, is there something that just [00:03:00] prevents us from learning the lessons of history that we, we can never just, uh, get the analogy right, and we're just guided by our own delusions.Bethany McLean: Wasn't there a great quote that history rhymes, but it doesn't repeat. I'm Yeah. Relying on who it is who said that, but I think that's, that's absolutely true. Oh, I think it's important for all of us, those of us who are not gonna find ourselves at the center of, uh, giant fraud or, so, I hope, I think my time for that has passed.Maybe not you, but, um, I think it's important for all of us to understand what went wrong. And I, I do think these, I do think just there, there's a great value and greater understanding of the world without necessarily a practical payoff for it. So I think when something goes wrong on a massive societal level, it's really important to try to, to try to explain it.Human beings have needed narrative since the dawn of time, and we need narrative all, all, all the more now we need, we need to make sense of the world. So I like to believe. Process of making, trying to make sense of the world. , um, [00:04:00] has a value in, in and of itself. Maybe there is small, some small deterrence aspect to it in that I often think that if people understand more the process by which things go go wrong, that it isn't deliberate, that it's not bad people setting out to do bad things.It's human beings, um, at first convincing themselves even that they're doing the right thing and then ending up in a situation that they, they never meant to be in. And maybe on the margin that does, maybe on the margin that does, that does help because maybe it has deterred some people who, who would've started down that path, but for the fact that they now see that that's the, that's the usual path.Dwarkesh Patel: Yeah. Yeah. That actually raises the next question I wanted to ask you. Bern Hobart, uh, he's a finance writer as well. He wrote a blog post, um, about, uh, I mean this was before FTX obviously, and he was talking about Enron and he said in the end, it actually looks like we fixed the precise problem. Enron represented.Nobody I know solely looks at gap [00:05:00] financials. Everybody ultimately models based on free cash flow, we're much more averse to companies that set up a deliberate conflict of interest between management and shareholders. And I guess there's a way in which you can read that and say, oh, it doesn't FTX prove I'm wrong.But, you know, there's another way you can look at it is that FTX deliberately set up outside the us. So there's a story to be told that actually we learned the lessons of Enron and, you know, uh, so remains obviously worked. Uh, that's why, you know, they were in The Bahamas and we haven't seen the scale fraud of that scale in, you know, the continental United States.Um, do, do you think that the FTX saga and I guess the absence of other frauds of that scale in America shows that. The regulations and this changed business and investment practices in the aftermath of Enron have actually. Bethany McLean: Well, I think they've probably worked in narrowly, written in, in the way in which the writer you quoted articulated, I think it would be very hard for the cfo, F O of a publicly traded company to set up other private [00:06:00] equity firms that he ran, that did all their business with his company.Because everybody would say That's Enron and it would be completely. On the nose. And so, and Sarbanes Oxley in the sense of, in the sense of helping to reign in corporate fraud of the sort that was practiced by Enron, which was this abuse of very specific accounting rules. Um, I think I, I, I think that worked.But you know, you say there hasn't been fraud on a scale like Enron up until perhaps f ftx, but you're forgetting the global financial crisis. Yeah. And then the end, the line between what happened at Enron. and, and what happened in the global financial crisis. It's not a matter of black and white. It's not a matter of, one thing was clear cut fraud and one thing great.We love these practices. Isn't this fantastic? This is the way we want business to operate. They're both somewhere in the murky middle. You know, a lot of what happened at Enron wasn't actually outright fraud. I've coined this phrase, legal fraud to describe, um, to describe what it is that, that, that, that happened at Enron.And a lot of what [00:07:00] happened in the global financial crisis was legal, hence the lack of prosecutions. But it's also not behavior that that leads to a healthy market or mm-hmm. , for that matter, a a a a healthy society. And so there's a reason that you had Sarbanes Oxley and what was it, eight short, short years later you had Dodd-Frank and so Riri broadly.I'm not sure Sarbanes actually did that much good. And what I mean by that is when President George Bush signed it into law in the Rose Garden, he gave this speech about how investors were now protected and everything was great and your, your ordinary investors could take comfort that the laws were meant to protect them from wrongdoing.And you compare that to the speech that President Barack Obama gave eight years later when he signed Don Frank into law in the Rose Garden. And it's remarkably similar that now ordinary investors can count on the rules and regulations keeping themself from people who are prey on their financial wellbeing.[00:08:00] And I don't think it was, it's, it's true in either case because our markets, particularly modern markets move and evolve so quickly that the thing that's coming out of left field to get you is never gonna be the thing you are protecting against. Mm. . Dwarkesh Patel: , but given the fact that Enron, as you say, was committing legal fraud, is it possible that the government, um, when they prosecuted skilling and Fastow and lay, they in fact, We're not, uh, they, they prosecuted them to a greater extent than the law as written at the time would have warranted.In other words, were, uh, was there something legally invalid in the, in this, in the quantity of sentence that they got? Is it possible? Bethany McLean: So that's a really, it, it's, it's a, I I get what you're asking. I think it's a really tricky question because I think in absolute terms, um, Enron needed to be prosecuted and needed to be prosecuted aggressively.And while I say it was legal fraud, that is for the most part, there was actually real fraud around, around, uh, but it's on the margin. It doesn't [00:09:00] entire, it doesn't explain the entirety of Enron's collapse. Much of what they did was using and abusing the accounting rules in order to create an appearance of economic reality.Nothing to do with actual, with actual reality. But then there was actual fraud in the sense that Andy Fasta was stealing money from these partnerships to benefit himself. And they were, if you believe, the core tenant of the prosecution, which was their, this agreement called Global Galactic that was signed by, that was between Andy fau and Jeff Skilling, where Jeff agreed that Andy's partnerships would never lose money.Then that invalidated all of the, all of the accounting, and that's the chief reason that that. That skilling was, was, was convicted, um, was that the jury believed the existence of this, of this, of this agreement that in, um, one set of insider stock sales, which, which we can talk about, which was also a really key moment relative to the, so in absolute terms, I don't know, it's, it's hard for me to, to say there was [00:10:00] such, Enron was such a, to a degree that is still surprising to me, such a, a watershed moment in our, in our country, far beyond business itself.it, it, it caused so much insecurity that about our retirements, our retirement assets safe. Can you trust the company where you work? That I think the government did, did have to prosecute aggressively, but relative to the financial crisis where a lot of people made off with a lot of money and never had to give any of it back, does it seem fair that, that, that Jeff Skilling went to jail for over a decade and no one involved in a major way in the financial crisis paid any price whatsoever?People didn't even really have to give up that much of the money they made then. Then it seems a little bit unfair. Yes, so I think it's, it's an absolute versus a relative Dwarkesh Patel: question. Yeah. Yeah. By the way, who do you think made more money? Um, the investment banks, uh, like, uh, Goldman Sachs and Morgan Stanley, um, from doing, [00:11:00] providing their services to Enron as the stock was going up, or Jim Chanos from shorting the stock?In absolute terms, who made more money? Bethany McLean: Oh, I think the investment banks for sure. I mean, they made, they made so much money in investment banking fees from, from, from Enron. But, you know, it's a good question. . , it's a good question actually, because I think Jim made a lot of money too, so, Dwarkesh Patel: Yeah. Yeah. I mean, I, I, you've spoken about, I guess the usefulness and the shortage of short sellers des a sort of, uh, corrective on irrational exuberance.And I'm curious why you think that shortage exists in the first place. Like, if you believe in the efficient market hypothesis, you should think that, you know, if some company has terrible financials and implausible numbers, then people would be lining up to short it. And then you would never have a phenomenon like Enron.And so it's, it's, you know, it's so odd that you can. , you know, reporters who are basically ahead of the market in terms of predicting what's gonna happen. Uh, well, uh, how do you square that with like the efficient [00:12:00] market hypothesis? Well, do you Bethany McLean: believe in the efficient market hypothesis, ? Dwarkesh Patel: I, I, I'd like to, but I'm like trying to , trying to wrap my head around Enron.Bethany McLean: I, I'm, I'm, I'm, I'm not sure how you. Can, unless you, unless you adopt Warren Buffett's point of view, and I'm gonna mangle the quote because, uh, but, but it's that the market in the short term is a voting machine in the long term. It's a weighing machine, right? Mm-hmm. , or is it the other way around? . Anyway, but the idea is that the market may be very efficient for a long, very inefficient, for a long period of time.But, but it does actually, rationality does actually work in, in, in the end. And I think I might believe that, but isn't it John Maynard Cas who said the market can remain irrational for a lot longer than you can remain solvent. And so I think that's true too. I think believing that the market is efficient and rational in the short term is just obviously wrongUm, but back to your question about short sellers, which is, which is interesting, you know, I think part of it is that there is still this, um, there certainly was a couple of [00:13:00] decades ago, and I think it still exists, this idea that. Owning stocks is Mom, American, and apple pie in shorting stocks somehow is bad and evil and rooting, rooting against America.And I remember going back to the Enron days, someone, people criticizing me, even other people in the press saying, but you took a tip from a short seller. They're biased. And I. , I would say. But, but, but wait, the analysts who have buy ratings on stocks and the portfolio managers who own those stocks, they're biased too.They want the stocks to go up. Everybody's biased. So the trick as a journalist is getting information from all sides and figuring out who you think is right and what makes sense. But it's not avoiding anybody with any bias. But it was really interesting that people saw the bias on the part of short sellers and did not see it on the part of, of, of Longs.And I think there is that preconception that exists broadly, that somehow you are doing something wrong and you're somehow rooting for a company's failure. And that this is, I don't know, anti-American if you, if, if you [00:14:00] short a stock. And so I think that's part of why there's, there's, there's a shortage of shortage of, of, of short sellers.Um, I think also, I mean, we've had. Incredible, unprecedented bull market for the last four decades as a result of falling interest rates, and especially in the decade before the pandemic hit, it was very, very difficult to make money shorting anything because everything went to the moon. Didn't matter if its numbers were good, if it was eventually unmasked to be somewhat fraudulent, , it stocks just went to the moon anyway.The riskier the better. And so it is only diehard short sellers that have managed to stick it out . Yeah, and I think, I think lastly, Jim Chano said this to me once, and I, I think it's true that he could find, dozens of people who were skilled enough to come, smart enough to come work for him.There's no shortage of that. People who are technically skilled and really smart, but being able to be contrarian for a long period of time, especially when the market is going against you, is a different sort [00:15:00] of person. It that it requires a completely different mindset to have everybody in the world saying, you're wrong to be losing money because the stock is continuing to go up and to be able to hold fast to your conviction.And I think that's another, uh, part of the explanation for why there are fewer short sellers. Dwarkesh Patel: Yeah, and that raised an interesting question about. Uh, venture capital, for example, where, or private markets in general? Um, at least in the public markets, there's shorting maybe in shortage, but it, it is a possible mechanism, whereas, uh, I'm a programmer.So, you know, if, if like a one guy thinks the company's worth a hundred million dollars and everybody else thinks it's not, you know, the company will still be, uh, the price will still be said by the, you know, the person who's a believer. Um, does that increase the risk of some sort of bubble in venture capital and in technology?Um, and I guess in private markets generally, if they're, they're not public, is that something you worry about that they're, they will be incredible bubbles built up if there's a lot of money that's floating around in these Bethany McLean: circles. . Well, I think we're seeing that now, [00:16:00] right? And I don't think it's a coincidence that FTX and Theranos were not publicly traded companies, right?Mm-hmm. . Um, there's a certain sort of, uh, black box quality to these companies because people aren't charting them and aren't, aren't, and aren't, you know, whispering to journalists about that. That there's something wrong here and there aren't publicly available financials for people to dig through and look, look, and look at the numbers.So now I don't think that's a coincidence. And I do think this gigantic move into private assets has been, um, probably not great for the, for the, for the, for the. for the, for the safety of the system. And you'd say, well, it's just institutional investors who can afford to lose money who are losing money.But it's really not because institutional investors are just pension fund money. Mm-hmm. and in some cases now mutual fund money. So that distinction that the people who are investing in this stuff can afford to lose it is not really true. Um, so I don't, I don't like that rationalization. I think we're gonna see how that plays out.There was [00:17:00] just a really good piece in the Economist about private equity marks on their portfolio companies and how they are still looked to be much higher than what you would think they should be given the carnage in the market. And so all of what, what actually things are really worth in private markets, both for venture capital firms and for private equity firms, Is absent another, another bubble starting, starting in the markets.I think we're gonna see how that plays out over, over the next year. And it might be a wake up call for, for a lot of people. Um, you know, all that, all that said, it's an interesting thing because investors have been very complicit in this, right? In the sense that a lot of investors are absolutely delighted to have prep, to have their, their private, um, their private investments marked at a high level.They don't have to go to the committee overseeing the investments and say, look, I lost 20% of your money the way they might, um, if, if the numbers were public. And so that the ability of these of private investors to smooth as they call it, the, the, the returns is, is it's [00:18:00] been, it's been part of the appeal.It hasn't been a negative, it's been a positive. And so I would say that investors who wanted this moving are. Art might be getting what they deserve except for the pointing made earlier that it isn't, it isn't their money. It's, it's the money of, of teachers and firefighters and individual investors a around the country, and that's, that's problematic.Dwarkesh Patel: Yeah. Yeah. Being in the world of technology and being around people in it has. made me, somewhat shocked when I read about these numbers from the past. For example, when I'm reading your books and they're detailing things that happened in the nineties or the two thousands, and then you realize that the salary that Hank Paulson made a c e o of Goldman, or that skilling made as, you know, um, c e o of Enron, you know, I, it's like I have friends who are my age, like 22 year olds who are raising seed rounds, , that are as big as like these people's salaries.And so it just feels like the, these books were, you have $50 billion frauds or, you know, hundreds of billions of dollars of collapse and the individuals there, um, it just feels like they, it's missing a few zeros, uh, [00:19:00] because of the delusion of the private markets. But, um, but speaking of short sellers and speaking of private equity, um, I think it'd be interesting to talk about sbf.So, you know, your 2018 Vanity Fair article I thought was really interesting about, you know, sbf factory in Buffalo H How, how do you think back on Tesla and sbf now, given the fact that. The stock did continue to rise afterwards, and the factory, I believe, was completed and it's, I hired the 1500 or so people that had promised New York State, uh, is sbf just a fraud?Who can pull it off? And so he's a visionary. How, how do you think about sbf in the aftermath? Bethany McLean: So I don't think that's right about Buffalo and I have to look, but I don't think they ended up, I mean, the Solar City business that Tesla has pretty much collapsed. I don't think people haven't gotten their roofs.There was just a piece about how they're canceling some of their roof installations. So sbf has repeatedly made grand visions about that business that haven't played out. And I will check this for you post the podcast, but I don't think [00:20:00] if there is employment at that factory in, in Buffalo, it's not because they're churn out solar, solar, solar products that are, that are, that are doing.What was originally promised. So I guess I, I think about that story in a, in a couple of ways. It definitely, um, it was not meant to be a piece about Tesla. It was meant to be a piece that shown a little bit of light on how sbf operates and his willingness to flout the rules and his reliance on government subsidies, despite the fact that he, um, presents himself as this libertarian free, free, free market free marketeer, and his willingness to lie to, to, to, on some level enrich himself, which also runs counter to the Elon sbf narrative that he doesn't care about making money for, for himself.Because the main reason for Teslas to by Solar City was that Solar City had the main reason, was it Tes, that was, that Solar City had, that, that sbf and his, and his and his relatives had extended the these loans to Solar City that were gonna go. [00:21:00] There were gonna be lo all the money was gonna be lost at Solar City when bankrupt.And by having Tesla buy it, sbf was able to bail himself out, um, as, as as well. And I also think a good reason for the, for the, for, and it brings us to the present time, but a reason for the acquisition was that sbf knows that this image of himself as the invincible and vulnerable who can always raise money and whose companies always work out in the end, was really important.And if Solar City had gone bankrupt, it would've cast a big question mark over over sbf, over over the sbf narrative. And so I think he literally couldn't afford to let Solar City go bankrupt. Um, all of that said, I have, I have been, and was I, I was quite skeptical of Tesla and I thought about it in, in, in, in.And I always believed that the product was great. I just, mm-hmm. wasn't sure about the company's money making potential. And I think that, that, it's something I started thinking about, um, background, the Solar City time, maybe earlier, but this line, something I've talked about [00:22:00] before. But this line between a visionary and a fraudster.You know, you think that they're on two opposite ends of the spectrum, but in reality they're where the ends of the circle meet. Characteristics of one. One has that many of the characteristics of the other. And sometimes I think the only thing that really separates the two is that the fraudster is able to keep getting mo raising money in order to get through the really difficult time where he or she isn't telling the truth.And then they, that person goes down in history as a visionary. Um, but because no one ever looks back to the moment in time when they were lying, the fraudster gets caught in the middle. Um, so Enron's Lo lost access to to the capital markets lost AC access to funding as the market collapsed after the.com boom.And people began to wonder whether skilling was telling the truth about Enron's broadband business. And then there were all the disclosures about Andy fasa partnerships if Enron had been able to continue raising money, Business of Enron's called Enron Broadband might well have been Netflix. It was Netflix ahead of its time.So Enron just got caught in the middle and all [00:23:00] the fraud, all the fraud got exposed . Um, but that's not because Jeff Skilling wasn't a visionary who had really grand plans for, for, for, for the future. So I think sbf falls somewhere in that spectrum of, of, of fraudster and visionary. And what's gonna be really interesting why I said that this, we bring it to the present time about what happens to the mu narrative.If something fails is what happens. Yeah. Is as the world watch watches Twitter implode, um, what does that mean then for the Elon sbf narrative overall? Dwarkesh Patel: Yeah. Yeah. Um, going back to the Smartest Guys is the Room, the title obviously suggests something about. The, I guess in general, the ability and the likelihood of very smart people committing fraud or things of that sort.Um, but you know, Begar Jones has this book called Hi Mind, where he talks about how the smarter people are more likely to cooperate in prisoners dilemma type situations. They have longer time preference. And one of the things you've written about is the problem in corporate America is people having shorter, [00:24:00] um, uh, you know, doing two too big time discounting.So, uh, given that trend we see in general of greater Cooperativeness, um, and other kinds of traits of more intelligent people, do you think the reason we often find people like S B F and skilling running big frauds just by being very intelligent, is it just that on, on average smarter people, maybe less likely to commit fraud, but when they do commit fraud, they do it at such garat scales and they're able to do it at such gar scales that it just brings down entire empires?How, how, how do you think about the relationship between intelligence and fraud? . Bethany McLean: That's interesting. Um, I'm not sure I know a coherent answer to that. Um, smartest guys in the room as a title was a little bit tongue in cheek. It wasn't meant to say, these guys actually are the smartest guys in the room. It was, it, it was a little bit, it was a little bit ironic, but that doesn't take away from the really good question that you asked, which is what, what, what is that relationship?I, I mean, I think if you look at the history of corporate fraud, you are not going to find unintelligent people having [00:25:00] been the masterminds behind this. You're gonna find really, really, really smart, even brilliant people having, having, having been, been behind it, maybe some at part of that is this linkage between the visionary and the fraud star that so many of these, of these corporate frauds are people who have qualities of the visionary and to.The qualities of, of a visionary, you have to have a pretty, pretty, pretty, pretty high intelligence. Um, and I do think so many of these stories are, are about then self delusion. So I don't think smart people are any less likely to suffer from self delusion than dumb people. And they're probably more likely to, because you can rationalize, you know, the smart person's ability to rationalize just about anything they wanna rational rationalize is pretty profound.Whereas perhaps someone who doesn't have quite the same, the same brain power isn't gonna be able to create a narrative under which their actions are blameless and they're doing the right thing. So I think sometimes, so maybe there is some sort of relationship [00:26:00] there that somebody more qualified than I am would have to study between smart people's ability to, to, to rationalize just about anything as a way of, as part of the path to self delusion and part of the path by which these things happen.Yeah, that's completely, that's completely , that's Bethany theory. There's absolutely nothing to back that . I'm just Dwarkesh Patel: well clear. Let's do some more speculation. So, um, one of the things, uh, John Ray talked about in his testimony, um, was it two days ago where he said that, you know, FTX had done $5 billion of investments and deals in the last year, and most of those investments were worth a fraction of the value that FTX paid for them.And we see this also in, obviously in Enron, right? With, uh, broadband and with, um, ul, or is that how pronounce it, but basically their international department. Yeah. Um, what is this, uh, this obsession with deal making for its own sake? Is that to appease investors and make them think a lot's going on, is that because of [00:27:00] the hubris of the founder, of just wanting to set up a big empire as fast as possible, even if you're getting a bad sticker price?What, why do we see this pattern of just, you know, excessive deal making for its own sake? Bethany McLean: That's an interesting question too. I'm not sure that that's, um, limited to companies that go splat dramatically. There's a lot of, a lot of deal making in, in corporate America has that same frenzied quality. Um, I haven't seen an updated study on, on this in a, in a long time, but, you know, I began my career working as an analyst in an m and a department at at at Goldman Sachs.And. Definitely deals are done for the sake of doing deals. And I once joked that synergies are kind of like UFOs. A lot of people claim to have seen them, but there's no proof that they actually exist. , and again, I haven't seen an updated study on, on, on this, but there was one years back that showed that most m and a transactions don't result in increased value for shareholders.And most synergies, most promised synergies never materialize. [00:28:00] Just getting bigger for the sake of getting bigger and doing deals for the short term value of showing Wall Street a projection. That earnings are gonna be so much higher even after the cost of the debt that you've taken on. And that they're these great synergies that are gonna come about from, from combining businesses.So I don't know that either the frenzy deal doing or deal doing deals gone wrong is, um, solely limited to people who are committing fraud. , I think it's kinda across the spectrum. , . Dwarkesh Patel: Um, um, well one, one thing I find interesting about your books is how you detail that. And correct me if this is the wrong way to read them, but that, uh, incentives are not the only thing that matter.You know, there there's this perception that, you know, we've set up bad incentives for these actors and that's why they did bad things. But also, um, the power of one individual to shape a co co company's culture and the power of that culture to enable bad behavior, whether scaling at Enron or with Clarkson Right at Moody's.Yeah. Um, is that a good, good way of reading your books or how, how do you think [00:29:00] about the relative importance of culture and incentive? Bethany McLean: I think that's really fair. But incentives are part of culture, right? If, if you've set up a culture where, where how you're valued is what you get paid, I think it's a little, it's a little difficult to separate those two things out because, because the, the incentives do help make the culture, but for sure culture is incredibly, um, incredibly compelling.I've often thought and said that if I had, when I was leaving my short lived career in investment banking, if I had, if I had gotten in some of the head hunters I was talking to, if one of them had said, there's this great, really energetic, interesting energy company down in Houston, , why don't interview there?If I had gone there, would I have been a whistleblower or would I have been a believer? And I'd like to believe I would've been a whistleblower, but I think it's equally likely that I would've been a believer. Culture is so strong. It creates this. What's maybe a miasma that you can't see outside?I remember a guy I talked to who's a trader at Enron, really smart guy, and he [00:30:00] was like, after the, after the bankruptcy, he said, of course, if we're all getting paid based on creating reported earnings and there's all this cash going out the door in order to do these deals that are creating reported earnings, and that's the culture of the entire firm, of course it's not gonna work economically.He said, I never thought about it. . It just didn't, it didn't, it didn't occur to me. And I think the more compelling the CEO o the more likely you are to have that kind of mass delusion. I mean, there's a reason cult exist, right? . We, we are as human beings, remarkably susceptible to.Visionary leaders. It's just, it's the way the human brain is wired. We, we wanna believe, and especially if somebody has the ability to put a vision forward, like Jeff Gilling did at Enron, like Elizabeth Holmes did it Theranos like SPF F did, where you feel like you are in the service of something greater by helping this, vision, , actualize then, then you're, particularly susceptible.And I think that is the place where [00:31:00] incentives don't quite explain things. That is, there is this very human desire to matter, to do something important. Mm-hmm to be doing something that's gonna change the world. And when somebody can tap into that desire in people that feeling that what you're doing isn't just work in a paycheck and the incentives you have, but I mean, I guess it is part of the incentive, but that you're part of some greater good.That's incredibly powerful. Yeah. Dwarkesh Patel: It's what we all speaking of. We all wanna matter. . Yeah. Speaking of peoples psychology, uh, crime and punishment, underrated or overrated as a way to analyze the psychology of people like scaling and S B F or maybe SBF specifically because of the utilitarian nature of SB F'S crime?Um, Bethany McLean: I think it's, I think it's underrated, overrated. I'm not sure anybody. , I'm not sure anybody has ever proven that jail sentences for white collar criminals do anything to deter subsequent white collar crime. Mm-hmm. , and I think one part of this is the self delusion that I've, that I talked about. Nobody thinks, [00:32:00] oh, I'm doing the same thing as Jeff Skilling did at Enron, and if I, and if I do this, then I too might end up in jail.Therefore, I don't wanna do this. I just don't think that's the way the, the, the, the, the thought process works. I think Elizabeth Holmes at Theranos, probably for the most part, convinced herself that this was going to work, and that if you just push forward and push hard enough and keep telling people what they wanna hear and keep being able to raise money, it's gonna work.You know, if. . If, if you pause to think, well, what if it doesn't work and I've lied and I go to jail, then, then you'd stop right, right then and there. So I think that, I think that, that I'm, I'm not, I'm not sure it's much of a deterrent. I remember, and partly I'm, I'm biased because I remember a piece, my co-author Peter Alkin, and I wrote out right after Jess Gilling and Kenley were, were convicted and can lay, we're we're convicted.And we wrote a piece for Fortune in which we said that the entire world has changed. Now that corporate executives are, um, are, are put on high alert that behavior in the gray area will no longer be tolerated and that it will be aggressively prosecuted. And this was spring of [00:33:00] 2006 and the events that caused the global financial crisis were pretty well underway.It didn't. Do much to prevent the global financial crisis. Mm-hmm. , Enron's, Enron's jail time, didn't do anything to present, prevent, Elizabeth Holmes doesn't seem to have done anything to change what Sbf was doing. So I just, I, I just, I'm, I'm, I'm not sure, I'm sure a psychologist or somebody who specializes in studying white color crime could probably make a argument that refutes everything I said and that shows that has had a deterring effect.But I just, I just don't think that people who get themselves into this situation, con, con, consciously think, this is what I'm doing. Dwarkesh Patel: Yeah. Yeah. Um, speaking of other incentives, stock options, uh, you've spoken about how that creates short-term incentives for the executives who are making decisions. If you wanted to set up an instrument that aligned an executive or a leader's compensation with the long-term performance of a company, what would that look like?W would you have the options of less than 10 years instead of a [00:34:00] year? H how would you design it? How do you usually design a compensation scheme to award long-term thinking? Bethany McLean: If I could do that, I should ru rule the world . I think that very sweet. I think that is one of the really tough, um, problems confronting boards or anybody who is determining anybody who's determining stock options and that almost anybody who's determining compensation and that most compensation schemes seem to have really terrible unintended consequences.They look really good on paper. And then as they're implemented, it turns out that there was a way in which they accomplished exactly the opposite of, uh, thing the people who designing them wanted, wanted them to accomplish. I mean, if you think back to the advent of stock options, what could sound better?Right. Giving management a share of the company such that if, if, if shareholders did well, that they'd do well, nobody envisioned the ways in which stock options could be repriced. The ways in which meeting earnings targets could lead to gaming the ways in which the incentive of stock-based [00:35:00] compensation could lead to people trying to get anything they could in order to get the stock price higher and cash out when they're, as soon as their stock options vested.So, and even there was, there was, the whole valiant saga was fascinating on this front because the people who designed Mike Pearson's compensation package as ceo e o Valiant, they were convinced that this was absolutely the way to do it. And he got bigger and bigger, um, stock option incentives for hitting certain, for having the stock achieve certain levels.But of course, that creates this incredible bias to just get the stock to go up no matter, no matter what else you do. Um, it does seem to me that vesting over the long term is. is, is a much better way to go about things. But then do you create incentives for people to play games in order to get the stock lower at, at various points where there's about to be a stock optional board so they have a better chance of having directions be, be worth, be worth something over the long term.And do you, particularly on Wall Street there is this, or in firms where this sort of stuff matters the most? There [00:36:00] is this, there was this clearing out of dead wood that happened where people got paid and they got outta the way and made way for younger people. And I don't know, it was a harsh culture, but maybe it made sense on some level.And now at least I've been told with much longer vesting periods, you have people who don't wanna let go. And so you have more of a problem with people who should have retired, stick sticking around instead of in, in, instead of clearing out. And then it also becomes a question, How much money is, is enough.So if somebody is getting millions of dollars in short-term compensation and then they have a whole bunch more money tied up in long-term compensation, do the long-term numbers matter? At what point do they, do they, do they really matter? I mean, if you gave me $5 million today, I'm not so sure I'd really care if I were getting another $5 million in 10 years.Right. ? Yeah. So, so I think all of that is, is it, it's, I'm not, I'm not sure there's a perfect compensation system. All things considered though, I think longer term is, is probably better, [00:37:00] but. Dwarkesh Patel: Yeah, I didn't think about that downside of the long investing period. That's so interesting there. I guess there is no free lunch.Uh, so with Enron, um, it, it was clear that there was a lot of talent at the firm and that you had these companies and these trading firms launch at the aftermath by people who left Enron, kinder Morgan and John Arnold's, um, uh, Sintas, uh, that were wildly profitable and did well. Do you think we'll see the same thing with FTX, that while Sbf himself and maybe the, his close cadre were frauds, there actually was a lot of great trading and engineering talent there that are gonna start these very successful firms in the aftermath.Bethany McLean: That's, that's interesting. And just, just for the sake of clarification, kinder Morgan was actually started years before Enron's collapsed, when Rich Kinder, who was vying with Jeffs skilling in a sense, to become Chief Operating Officer. Um, Ken Lay, picked Jeffs skilling and Kinder left. Mm-hmm. and took a few assets and went to create Kinder, kinder Morgan.But your overall point, I'm just clarifying your overall point holds, there were a lot of people who [00:38:00] left Enron and went on to do, to have pretty, pretty remarkable careers. I think the answer with ftx, I bet there will be some for sure. But whether they will be in the crypto space, I guess depends on your views on the long-term viability of, of, of the crypto space.And I have never , it's funny is crypto exploded over the last couple of years. I was, I've been working on this book about the pandemic and it's been busy and difficult enough that I have not lifted my head to, to think about much else. And I always thought, I don't get it. I don't understand , I mean, I understand the whole argument about the blockchain being valuable for lots of transactions and I, I get that, but I never understood crypto itself and I thought, well, I just need to, as soon as this book is done, I just need to put a month into understanding this because it's obviously an important, important enough part of our world that I need to figure it out.So now I think, oh, Okay, maybe I didn't understand it for a reason and maybe, um, maybe there isn't anything to understand and I've just saved myself a whole life of crime because it's all gone. And you have [00:39:00] people like Larry Fink at BlackRock saying, whole industry is gonna implode. It's done. And certainly with the news today, this morning of finances auditor basically saying We're out.Um, I, I don't, I don't know how much of it was, how much of it was, is, was a Ponzi scheme. You might know better than I do. And so I don't know what's left after this whole thing implodes. It's a little bit like, there is an analogy here that when Enron imploded, yes, a lot of people went on to start other successful businesses, but the whole energy trading business is practiced by kind of under capitalized, um, um, energy firms went away and that never came back.Yeah. And so I, I, I don't, I don't know, I'm, it'll be, I, I don't know. What do you. The Dwarkesh Patel: time to be worried will be when Bethany McLean writes an article titled Is Bitcoin Overvalued for the Audience. My Moments on That ? Yeah, for the audience that, that was, I believe the first skeptical article about Enron's, um, stock price.Yeah. Uh, and it was titled [00:40:00] Is Enron Overvalued. In aftermath understated, , title. But , Bethany McLean: , I joked that that story should have won, won, won awards for the NICU title and business journalism history. , given that the company was bankrupt six months later was overpricedDwarkesh Patel: Um, uh, well, let me ask a bigger question about finance in general. So finance is 9% of gdp, I believe. How much of that is the productive use and thinking and allocation of the, uh, the capital towards their most productive ends? And how much of that is just zero sum or negative sum games? Um, if, if you had to break that down, like, is 9% too high, do you think, or is it just.I think it's Bethany McLean: too high. I have no idea how to think about breaking it down to what the proper level should be. But I think there are other ways to think about how you can see that in past decades it hasn't been at the right level when you've had all sorts of smart kids. Um, Leaving, leaving business school and leaving college and heading into [00:41:00] finance and hedge funds and private equity is their career of choice.I think that's a sign that that finance is too big when it's sucking up too much of, of, of the talent of the country. Um, and when the rewards for doing it are so disproportionate relative to the rewards of of, of doing other things. Um, the counter to that is that there've also been a lot of rewards for starting businesses.And that's probably, I think, how you want it to be in a, in a product. In a productive economy. So I think the number is, is too high. I don't know how to think about what it should be other than what a, actually, a former Goldman Sachs partner said this to me when I was working on all the devils are here, and she said that finance is supposed to be like the, the substrata of our world.It's supposed to be the thing that enables other things to happen. It's not supposed to be the world itself. So the, the role of a financial system is to enable businesses to get started, to provide capital. That's what it's supposed to be. It's the lubricant that enables business, but it's not supposed to be the thing itself.Right. And it's become the thing itself. [00:42:00] You've, you've, you've, you've, you've got a problem. Um, um, and I think the other, Dwarkesh Patel: there's your article about crypto , that paragraph right there. . Bethany McLean: There you go. That's, that's a good, um, and I think, I think the other way, you, you, you can see, and perhaps this is way too simplistic, but the other way I've thought about it is that how can it be if you can run a hedge fund and make billions of dollars from, and have five people, 10 people, whatever it is, versus starting a company that employs people mm-hmm.and changes a neighborhood and provides jobs and, you know, provides a product that, that, that, that, that improves people's lives. It, it is a shame that too much of the talent and such a huge share of the financial rewards are going to the former rather than the latter. And that just can't mean good things for the future.Dwarkesh Patel: Yeah. Yeah. And I, you know, when people criticize technology, for example, for the idea that, you know, these people who would've been, I don't know, otherwise teachers or something, they're, you know, making half a million dollars at Google. [00:43:00] Um, and I think like when I was in India, people were using Google Maps to get through the streets in Mumbai, which is, which is unimaginable to me before going there that, you know, you would be able to do that with, um, a service built out of Silicon Valley.And so, Yeah, I think that actually is a good allocation of capital and talent. I, I'm not, I'm not sure about finance. Um, yeah, Bethany McLean: I think I, I, I agree with you. I think there are other problems with Google and with the, the social media giants, but, but they are real businesses that employ people, that make products that have had, uh, huge.Um, impact on on, on people's, on people's lives. So in, in that sense, it's very different than a private equity firm, for instance, and especially private equity, even more so than hedge funds draws my ire. Mm-hmm. , because I think one of the reasons they, that it, they've been able to make part of the financialization of our economy has been due to super, super low interest rates and low interest rates that have enabled so many people to make so much money in finance are not, they're just a gift.It wasn't because these people were uniquely smart, they just [00:44:00] found themselves in a great moment in time. And the fact that they now think they're really smart because money makes me crazy. Dwarkesh Patel: Um, are Fanny and Freddy America special purpose entities? Are they our Alameda? It's just the way we hide our debt and uh, that's interesting.Yeah. Bethany McLean: Well, I guess we, you know what? I don't know anymore because, so I last wrote about them when was it in 2016 and I don't know now. No, you're right. Their, their debt is still off, off, off balance sheet. So Yeah, in a lot of ways they, they were. . I would argue though that the old Fanny and Freddy were structured more honestly than, than the new Fanny and Freddy, that it really is conservatorship that have made them, um, that have made them America's off balance sheet entities, because at least when they were their own independent entities.Yes, there was this odd thing known as the implicit guarantee, which is when you think about, back to your point about efficient markets, how can you possibly believe there's an as such a thing as an efficient market when their [00:45:00] Fanny and Freddy had an implicit guarantee, meaning it wasn't real. There was no place where it was written down that the US government would bail Fanny and Freddie out in a crisis, and everybody denied that it existed and yet it did exist.Yeah. Dwarkesh Patel: No, but we, I feel like that confirms the official market hypothesis, right? The, the market correctly, they thought that mortgages backed by Fannie and Freddy would have governments. Uh, okay, okay. You might be father Bethany McLean: and they did . You might be right. I, I, I think what I was getting at you, you might be right.I think what I was getting at is that it is such a screwed up concept. I mean, how can you possibly, when I first, when people were first explaining this to me, when I first read about Fanny and Freddie, I was like, no, no, wait. This is American capitalism . This is, no, wait. What? I don't, I don't understand . Um, um, so yeah, but I, I, I, I think that Fanny and Freddie, at least with shareholders that were forced to bear some level of, of the risks were actually a more honest way of going about this whole screwed up American way of financing mortgages than, than the current setup is.Dwarkesh Patel: What [00:46:00] is the future of these firms? Or are they just gonna say in conservatorship forever? Or is there any developments there? Well, what's gonna happen to them? Bethany McLean: The lawsuit, the latest lawsuit that could have answered that in some ways ended in a mistrial. Um, I don't think, I don't, I don't think unfortunately anybody in government sees any currency in, and I mean, currency in the broad sense, not in the literal sense of money in, in taking this on.And unfortunately, what someone once said to me about it, I think remains true and it's really depressing, but is that various lawmakers get interested in Fannie and Freddy. They engage with it only to figure out it's really, really goddamn complicated. Mm-hmm. and that, and that any kind of solution is gonna involve angering people on one side of the aisle or another and potentially angering their constituent constituents.And they slowly back away, um, from doing anything that could, that, that could affect change. So I think we have a really unhealthy situation. I don't think it's great for these two [00:47:00] entities to be in conservatorship, but at this point, I'm not sure it's gonna change. Dwarkesh Patel: Yep. Speaking of debt and mortgages, um, so total household debt in the United States has been, uh, climbing recently after it's, it's like slightly d decline after 2008, but I think in quarter three alone it increased 350 billion and now it's at 16.5 trillion.Uh, the total US household debt, should we worried about this? Are, are, are we gonna see another sort of collapse because of this? Or what, what should we think about this? Bethany McLean: I don't know. I don't know how to think about that because it's too tied up in other things that no one knows. Are we going to have a recession?How severe is the recession going to be? What is the max unemployment rate that we're gonna hit if we do, if we do have a recession? And all of those things dictate how to, how to think about that number. I. Think consumer debt is embedded in the bowels of the financial system in the same way mortgages were.And in the end, the, the, the [00:48:00] problem with the financial crisis of 2008, it wasn't the losses on the mortgages themselves. It was the way in which they were embedded in the plumbing of the financial system. Mm-hmm. and ways that nobody understood. And then the resulting loss of confidence from the fact that nobody had understood that slash lies had been told about, about that.And that's what caused, that's what caused everything to, to collapse. Consumer debt is a little more visible and seeable and I, I don't think that it has that same, um, that same opaque quality to it that, that mortgage backed securities did. I could be, I could be wrong. I haven't, I haven't, I haven't dug into it enough, enough to understand enough to understand that.But you can see the delinquencies starting to climb. Um, I mean, I guess you could on, on, on mortgages as well, but there was this, there was this profound belief with mortgages that since home prices would never decline, there would never be losses on these instruments because you could always sell the underlying property for more than you had [00:49:00] paid for it, and therefore everything would be fine.And that's what led to a lot of the bad practices in the industry is that lenders didn't think they had to care if they were screwing the home buyer because they always thought they could take the home back and, and, and, and, and make more money on it. And consumer debt is, is unsecured. And so it's, it's, it's different.I think people think about it differently, but I'd have. I'd have to, I'd have to do some more homework to understand where consumer debt sits in the overall architecture of the financial industry. Dwarkesh Patel: I, I, I'm really glad you brought up this theme about what does the overall big picture look like? I feel like this is the theme of all your books that people will be, So obsessed with their subsection of their job or, or that ar area that they won't notice that, um, broader trends like the ones you're talking about.And in Enron it's like, why, why, why do we have all these special purpose entities? What is the total debt load of Enron? Um, or with the, you know, mortgage back securities a similar kind of thing, right? What, what, uh, maybe they weren't correlated in the past, [00:50:00] but what's that? Do we really think that there's really no correlation, um, uh, between, uh, delinquencies across the country?Um, so that, that kind of big picture, think. Whose job is that today? Is it journalists? Is it short sellers? Is it people writing on ck? Who's doing that? Is it anybody's job? Is, is it just like, uh, an important role with nobody assigned to it? Bethany McLean: I think it's the latter. I think it's an important role with nobody, with nobody assigned to it, and there there is a limit.I mean, , I hate to say this, it is not, uh, um, it is not an accident that many of my books have been written. That's probably not fair. It's not true of my book un fracking, but that some of my books have been written after the calamity happened. So they weren't so much foretelling the calamity as they were unpacking the calamity after it happened, which is a different role.And as I said at the start of our conversation, I think an important one to explain to people why this big, bad thing took, took place. But it's not prediction, I don't know, as people that were very good at, at prediction, um, they tried [00:51:00] to set up, what was it called? In the wake of the global financial crisis, they established this thing called fsoc, and now I'm forgetting what the acronym stands for.Financial Security Oversight Committee. And it's supposed to be this, this body that does think about these big picture. That thinks about the ways, the ways an exam, for example, in which mortgage backed securities were, um, were, were, were, were, were, were, were repopulating through the entire financial system and ways that would be cause a loss to be much more than a loss.That it wouldn't just be the loss of money and that security, it would echo and magnify. And so that there are people who are supposed to be thinking about it. But I think, I think it's, it's, it's really hard to see that and. In increasingly complex world, it's even, it's even harder than it was before, because the reverberations from things are really hard to map out in, in, in advance, and especially when some part of those reverberations are a loss of confidence, then all bets [00:52:00] are off because when confidence cracks, lots of things fall apart.But how do you possibly analyze in any quantitative way the the risk that that confidence will collapse? Mm-hmm. . So I think it's, I think, I think, I think it's difficult. That said, and of course I am talking my own book here, I don't think that the lack of the, the increased financial problems of journalism really help matters in that respect, because in an ideal world, you want a lot of people out there writing and thinking about various pieces of this, and then maybe somebody can come along and see the.Pieces and say, oh my God, there's this big picture thing here that we all need to be thinking about. But there's, there's a kind of serendipity in the ability to do that one, that one that the chances, I guess the best way to say that is the chances of that serendipity are dramatically increased by having a lot of people out there doing homework, um, on the various pieces of the puzzle.And so I think in a world, particularly where local news has been decimated mm-hmm. , um, the [00:53:00] chances of that sort of serendipity are, are definitely lower. And people may think, oh, it doesn't matter. We still got national news. We've got the Washington Post, we've got the Wall Street Journal, we've got the New York Times.Um, I would love to have somebody do a piece of analysis and go back through the New York Times stories and see how many were sparked by lp, a piece in the local paper that maybe you wouldn't even notice from reading the New York Times piece, because it'd be in like the sixth paragraph that, oh yeah, credit should go to this person at this local paper who started writing about this.But if you no longer have the person at the local paper who started writing about this, You know, it's, it's, it's, it's less likely that the big national piece gets written. And I think that's a part of the implosion of local news, that people, a part of the cost of the implosion of local news that people don't really understand the idea that the national press functions at, at the same level, um, without local news is just not true.Dwarkesh Patel: Yeah. And, but even if you have the local news, and I, that's a really important point, but even if you have that local news, there still has to be somebody whose job it is to synthesize it all together. And [00:54:00] I'm curious, what is the training that requires? So you, I mean, your training is, you know, math and English major and then working at working in investment banking.Um, is that the, uh, I mean, obviously the anecdotal experience then equals one, seems that that's great training for synthesizing all these pieces together. But what is the right sort of education for somebody who is thinking about the big picture? Bethany McLean: I, I don't, I don't know.And there may be, there may be, there are probably multiple answers to that question, right? There's probably no one, one right answer for me. In, in the end. My, my math major has proven to be pivotal. Even though , my mother dug up these, um, my, my parents were moving and so my mother was going through all her stuff and she dug up these, some my math work from, from college.Literally, if it weren't for the fact that I recognized my own handwriting, I would not recognize these pages on pages of math formula and proofs. And they're like, get gibberish to me now. So , but I, but I still think that math has, so I do not wanna exaggerate my mathematical ability at this stage of [00:55:00] the game.It's basically no. But I do think that doing math proofs any kind of formal, any kind of training and logic is really, really important because the more you've been formally trained in logic, the more you realize when there are piece is missing and when something isn't quite, isn't quite adding on, it just forces you to think in, in a way that is, that in a way that connects the dots.Um, because you know, if you're moving from A to B and B doesn't follow a, you, you understand that B doesn't follow a And I think that that, that, that kind of training is, is really, really important. It's what's given. , whatever kind of backbone I have as a journalist is not because I like to create controversy and like to make people mad.I actually don't. It's just because something doesn't make sense to me. And so maybe it doesn't make sense to me because I'm not getting it, or it doesn't make sense to me because B doesn't actually follow, follow away, and you're just being told that it does. And so I think that, I think that training is, is really, really important.Um, I also have, have often thought [00:56:00] that another part of training is realizing that basic rule that you learned in kindergarten, which is, um, you know, believe your imagination or you know, your imagine follow your imagination. Because the truth is anything can happen. And I think if you look at business history over the last couple of decades, it will be the improbable becoming probable.Truth over and over and over again. I mean, the idea that Enron could implode one of the biggest, supposedly most successful companies in corporate America could be bankrupt within six months. The, from its year, from its stock price high. The idea that the biggest, most successful, um, financial institutions on wall, on Wall Street could all be crumbling into bankruptcy without the aid of the US government.The idea that a young woman with no college degree and no real experience in engineering could create, uh, uh, um, could create a machine that was going to revolutionize blood testing and land on the cover of every business magazine, and that this [00:57:00] whole thing could turn out to be pretty much a fraud. The entire idea of ftx, I mean, over and over again, these things have happened.Forget Bernie Madoff if you had told people a year ago that FTX was gonna implode six months ago, three months ago, people would've been like, no, no, no, no, no, no, no. And so I think just that, that, that, that knowledge that the improbable happens over and over again is also a really fundamental, fundamentally important.Dwarkesh Patel: If we're con continuing on the theme of ftx, I, I interviewed him about four or five months ago.Wow. And this is one of these interviews that I'm really, I'm, I don't know if embarrass is the right word, but I knew things then that I could have like asked, poked harder about. But it's also the kind of thing where you look back in retrospect and you're. If it had turned out well, it's, it's not obvious what the red flags are.Um, while you're in the moment, there's things you can look back at the story of Facebook and how, you know, Marcus Zuckerberg acted in the early days of Facebook and you could say, if the th

This was one of my favorite episodes ever.Bethany McLean was the first reporter to question Enron's earnings, and she has written some of the best finance books out there. We discuss:* The astounding similarities between Enron & FTX,* How visionaries are just frauds who succeed (and which category describes Elon Musk),* What caused 2008, and whether we are headed for a new crisis,* Why there's too many venture capitalists and not enough short sellers,* And why history keeps repeating itself.McLean is a contributing editor at Vanity Fair (see her articles here) and the author of The Smartest Guys in the Room, All the Devils Are Here, Saudi America, and Shaky Ground.Watch on YouTube. Listen on Spotify, Apple Podcasts, or your favorite podcast platform.Follow McLean on Twitter. Follow me on Twitter for updates on future episodes. If you enjoyed this episode, please share. Helps out a ton.Timestamps(0:04:37) - Is Fraud Over? (0:11:22) - Shortage of Shortsellers(0:19:03) - Elon Musk - Fraud or Visionary?(0:23:00) - Intelligence, Fake Deals, & Culture(0:33:40) - Rewarding Leaders for Long Term Thinking(0:37:00) - FTX Mafia?(0:40:17) - Is Finance Too Big?(0:44:09) - 2008 Collapse, Fannie & Freddie(0:49:25) - The Big Picture(1:00:12) - Frackers Vindicated?(1:03:40) - Rating Agencies(1:07:05) - Lawyers Getting Rich Off Fraud(1:15:09) - Are Some People Fundamentally Deceptive?(1:19:25) - Advice for Big Picture ThinkersTranscriptThis transcript was autogenerated and thus may contain errors.Dwarkesh Patel: the rapid implosion of a company worth tens of billions of dollars. Insider dealing and romantic entanglements between sister companies, a politically generous c e o, who is well connected in Washington, the use of a company's own stock as its collateral, the attempt, the short-lived attempt to get bought out by a previous competitor, and the fraudulent abuse of mark to market account.[00:01:00] We are not talking about ftx, we are talking about Enron, which my guest today, Bethany McClean, uh, first broke the story of and has written an amazing and detailed book about, uh, called The Smartest Guys in the Room. And she has also written, uh, a book about the housing crisis. All the devils are here, a book about Fannie and Freddy Shaky Ground, and a book about fracking Saudi America, all of which we'll get into.She's, in my opinion, the best finance nonfiction writer out there, and I'm really, really excited to have this conversation now. So, Bethany, thank you so much for coming on the podcast. Bethany McLean: Thank you so much for the, for the probably Undeserved Conference, for having me on the show. Dwarkesh Patel: My first question, what are the odds that Sbf read the smartest guys in the room and just followed it as a playbook, given the similarities there?Bethany McLean: You, you know, I, I love that idea. I have to, I have to admit, I guess I love that idea. I don't know. That would make me responsible for what, for what happened, . So maybe I don't love that idea. L let me take that back . [00:02:00] Anyway, but I, I, I actually think that, that, that even if he had read the book, it would never have occurred to him that, that there was a similarity because self-delusion is such a, Strong component of all of these stories of business gone wrong.It's very rare that you have one of the characters at the heart of this who actually understands what they're doing and understands that they're moving over into the dark side and thinks about the potential repercussions of this and chooses this path. Anyway, that's usually not the way these stories go.So it's entirely possible that Sbf studied Enron, knew all about it, and never envisioned that there were any similarities between that and what he was doing. Dwarkesh Patel: Oh, that's a fascinating, um, which I guess raises the question of what are we doing when we're documenting and trying to learn from books like yours?If somebody who is a, about to commit the same exact kind of thing can read that book and not realize that he's doing the same exact thing, is there something that just [00:03:00] prevents us from learning the lessons of history that we, we can never just, uh, get the analogy right, and we're just guided by our own delusions.Bethany McLean: Wasn't there a great quote that history rhymes, but it doesn't repeat. I'm Yeah. Relying on who it is who said that, but I think that's, that's absolutely true. Oh, I think it's important for all of us, those of us who are not gonna find ourselves at the center of, uh, giant fraud or, so, I hope, I think my time for that has passed.Maybe not you, but, um, I think it's important for all of us to understand what went wrong. And I, I do think these, I do think just there, there's a great value and greater understanding of the world without necessarily a practical payoff for it. So I think when something goes wrong on a massive societal level, it's really important to try to, to try to explain it.Human beings have needed narrative since the dawn of time, and we need narrative all, all, all the more now we need, we need to make sense of the world. So I like to believe. Process of making, trying to make sense of the world. , um, [00:04:00] has a value in, in and of itself. Maybe there is small, some small deterrence aspect to it in that I often think that if people understand more the process by which things go go wrong, that it isn't deliberate, that it's not bad people setting out to do bad things.It's human beings, um, at first convincing themselves even that they're doing the right thing and then ending up in a situation that they, they never meant to be in. And maybe on the margin that does, maybe on the margin that does, that does help because maybe it has deterred some people who, who would've started down that path, but for the fact that they now see that that's the, that's the usual path.Dwarkesh Patel: Yeah. Yeah. That actually raises the next question I wanted to ask you. Bern Hobart, uh, he's a finance writer as well. He wrote a blog post, um, about, uh, I mean this was before FTX obviously, and he was talking about Enron and he said in the end, it actually looks like we fixed the precise problem. Enron represented.Nobody I know solely looks at gap [00:05:00] financials. Everybody ultimately models based on free cash flow, we're much more averse to companies that set up a deliberate conflict of interest between management and shareholders. And I guess there's a way in which you can read that and say, oh, it doesn't FTX prove I'm wrong.But, you know, there's another way you can look at it is that FTX deliberately set up outside the us. So there's a story to be told that actually we learned the lessons of Enron and, you know, uh, so remains obviously worked. Uh, that's why, you know, they were in The Bahamas and we haven't seen the scale fraud of that scale in, you know, the continental United States.Um, do, do you think that the FTX saga and I guess the absence of other frauds of that scale in America shows that. The regulations and this changed business and investment practices in the aftermath of Enron have actually. Bethany McLean: Well, I think they've probably worked in narrowly, written in, in the way in which the writer you quoted articulated, I think it would be very hard for the cfo, F O of a publicly traded company to set up other private [00:06:00] equity firms that he ran, that did all their business with his company.Because everybody would say That's Enron and it would be completely. On the nose. And so, and Sarbanes Oxley in the sense of, in the sense of helping to reign in corporate fraud of the sort that was practiced by Enron, which was this abuse of very specific accounting rules. Um, I think I, I, I think that worked.But you know, you say there hasn't been fraud on a scale like Enron up until perhaps f ftx, but you're forgetting the global financial crisis. Yeah. And then the end, the line between what happened at Enron. and, and what happened in the global financial crisis. It's not a matter of black and white. It's not a matter of, one thing was clear cut fraud and one thing great.We love these practices. Isn't this fantastic? This is the way we want business to operate. They're both somewhere in the murky middle. You know, a lot of what happened at Enron wasn't actually outright fraud. I've coined this phrase, legal fraud to describe, um, to describe what it is that, that, that, that happened at Enron.And a lot of what [00:07:00] happened in the global financial crisis was legal, hence the lack of prosecutions. But it's also not behavior that that leads to a healthy market or mm-hmm. , for that matter, a a a a healthy society. And so there's a reason that you had Sarbanes Oxley and what was it, eight short, short years later you had Dodd-Frank and so Riri broadly.I'm not sure Sarbanes actually did that much good. And what I mean by that is when President George Bush signed it into law in the Rose Garden, he gave this speech about how investors were now protected and everything was great and your, your ordinary investors could take comfort that the laws were meant to protect them from wrongdoing.And you compare that to the speech that President Barack Obama gave eight years later when he signed Don Frank into law in the Rose Garden. And it's remarkably similar that now ordinary investors can count on the rules and regulations keeping themself from people who are prey on their financial wellbeing.[00:08:00] And I don't think it was, it's, it's true in either case because our markets, particularly modern markets move and evolve so quickly that the thing that's coming out of left field to get you is never gonna be the thing you are protecting against. Mm. . Dwarkesh Patel: , but given the fact that Enron, as you say, was committing legal fraud, is it possible that the government, um, when they prosecuted skilling and Fastow and lay, they in fact, We're not, uh, they, they prosecuted them to a greater extent than the law as written at the time would have warranted.In other words, were, uh, was there something legally invalid in the, in this, in the quantity of sentence that they got? Is it possible? Bethany McLean: So that's a really, it, it's, it's a, I I get what you're asking. I think it's a really tricky question because I think in absolute terms, um, Enron needed to be prosecuted and needed to be prosecuted aggressively.And while I say it was legal fraud, that is for the most part, there was actually real fraud around, around, uh, but it's on the margin. It doesn't [00:09:00] entire, it doesn't explain the entirety of Enron's collapse. Much of what they did was using and abusing the accounting rules in order to create an appearance of economic reality.Nothing to do with actual, with actual reality. But then there was actual fraud in the sense that Andy Fasta was stealing money from these partnerships to benefit himself. And they were, if you believe, the core tenant of the prosecution, which was their, this agreement called Global Galactic that was signed by, that was between Andy fau and Jeff Skilling, where Jeff agreed that Andy's partnerships would never lose money.Then that invalidated all of the, all of the accounting, and that's the chief reason that that. That skilling was, was, was convicted, um, was that the jury believed the existence of this, of this, of this agreement that in, um, one set of insider stock sales, which, which we can talk about, which was also a really key moment relative to the, so in absolute terms, I don't know, it's, it's hard for me to, to say there was [00:10:00] such, Enron was such a, to a degree that is still surprising to me, such a, a watershed moment in our, in our country, far beyond business itself.it, it, it caused so much insecurity that about our retirements, our retirement assets safe. Can you trust the company where you work? That I think the government did, did have to prosecute aggressively, but relative to the financial crisis where a lot of people made off with a lot of money and never had to give any of it back, does it seem fair that, that, that Jeff Skilling went to jail for over a decade and no one involved in a major way in the financial crisis paid any price whatsoever?People didn't even really have to give up that much of the money they made then. Then it seems a little bit unfair. Yes, so I think it's, it's an absolute versus a relative Dwarkesh Patel: question. Yeah. Yeah. By the way, who do you think made more money? Um, the investment banks, uh, like, uh, Goldman Sachs and Morgan Stanley, um, from doing, [00:11:00] providing their services to Enron as the stock was going up, or Jim Chanos from shorting the stock?In absolute terms, who made more money? Bethany McLean: Oh, I think the investment banks for sure. I mean, they made, they made so much money in investment banking fees from, from, from Enron. But, you know, it's a good question. . , it's a good question actually, because I think Jim made a lot of money too, so, Dwarkesh Patel: Yeah. Yeah. I mean, I, I, you've spoken about, I guess the usefulness and the shortage of short sellers des a sort of, uh, corrective on irrational exuberance.And I'm curious why you think that shortage exists in the first place. Like, if you believe in the efficient market hypothesis, you should think that, you know, if some company has terrible financials and implausible numbers, then people would be lining up to short it. And then you would never have a phenomenon like Enron.And so it's, it's, you know, it's so odd that you can. , you know, reporters who are basically ahead of the market in terms of predicting what's gonna happen. Uh, well, uh, how do you square that with like the efficient [00:12:00] market hypothesis? Well, do you Bethany McLean: believe in the efficient market hypothesis, ? Dwarkesh Patel: I, I, I'd like to, but I'm like trying to , trying to wrap my head around Enron.Bethany McLean: I, I'm, I'm, I'm, I'm not sure how you. Can, unless you, unless you adopt Warren Buffett's point of view, and I'm gonna mangle the quote because, uh, but, but it's that the market in the short term is a voting machine in the long term. It's a weighing machine, right? Mm-hmm. , or is it the other way around? . Anyway, but the idea is that the market may be very efficient for a long, very inefficient, for a long period of time.But, but it does actually, rationality does actually work in, in, in the end. And I think I might believe that, but isn't it John Maynard Cas who said the market can remain irrational for a lot longer than you can remain solvent. And so I think that's true too. I think believing that the market is efficient and rational in the short term is just obviously wrongUm, but back to your question about short sellers, which is, which is interesting, you know, I think part of it is that there is still this, um, there certainly was a couple of [00:13:00] decades ago, and I think it still exists, this idea that. Owning stocks is Mom, American, and apple pie in shorting stocks somehow is bad and evil and rooting, rooting against America.And I remember going back to the Enron days, someone, people criticizing me, even other people in the press saying, but you took a tip from a short seller. They're biased. And I. , I would say. But, but, but wait, the analysts who have buy ratings on stocks and the portfolio managers who own those stocks, they're biased too.They want the stocks to go up. Everybody's biased. So the trick as a journalist is getting information from all sides and figuring out who you think is right and what makes sense. But it's not avoiding anybody with any bias. But it was really interesting that people saw the bias on the part of short sellers and did not see it on the part of, of, of Longs.And I think there is that preconception that exists broadly, that somehow you are doing something wrong and you're somehow rooting for a company's failure. And that this is, I don't know, anti-American if you, if, if you [00:14:00] short a stock. And so I think that's part of why there's, there's, there's a shortage of shortage of, of, of short sellers.Um, I think also, I mean, we've had. Incredible, unprecedented bull market for the last four decades as a result of falling interest rates, and especially in the decade before the pandemic hit, it was very, very difficult to make money shorting anything because everything went to the moon. Didn't matter if its numbers were good, if it was eventually unmasked to be somewhat fraudulent, , it stocks just went to the moon anyway.The riskier the better. And so it is only diehard short sellers that have managed to stick it out . Yeah, and I think, I think lastly, Jim Chano said this to me once, and I, I think it's true that he could find, dozens of people who were skilled enough to come, smart enough to come work for him.There's no shortage of that. People who are technically skilled and really smart, but being able to be contrarian for a long period of time, especially when the market is going against you, is a different sort [00:15:00] of person. It that it requires a completely different mindset to have everybody in the world saying, you're wrong to be losing money because the stock is continuing to go up and to be able to hold fast to your conviction.And I think that's another, uh, part of the explanation for why there are fewer short sellers. Dwarkesh Patel: Yeah, and that raised an interesting question about. Uh, venture capital, for example, where, or private markets in general? Um, at least in the public markets, there's shorting maybe in shortage, but it, it is a possible mechanism, whereas, uh, I'm a programmer.So, you know, if, if like a one guy thinks the company's worth a hundred million dollars and everybody else thinks it's not, you know, the company will still be, uh, the price will still be said by the, you know, the person who's a believer. Um, does that increase the risk of some sort of bubble in venture capital and in technology?Um, and I guess in private markets generally, if they're, they're not public, is that something you worry about that they're, they will be incredible bubbles built up if there's a lot of money that's floating around in these Bethany McLean: circles. . Well, I think we're seeing that now, [00:16:00] right? And I don't think it's a coincidence that FTX and Theranos were not publicly traded companies, right?Mm-hmm. . Um, there's a certain sort of, uh, black box quality to these companies because people aren't charting them and aren't, aren't, and aren't, you know, whispering to journalists about that. That there's something wrong here and there aren't publicly available financials for people to dig through and look, look, and look at the numbers.So now I don't think that's a coincidence. And I do think this gigantic move into private assets has been, um, probably not great for the, for the, for the, for the. for the, for the safety of the system. And you'd say, well, it's just institutional investors who can afford to lose money who are losing money.But it's really not because institutional investors are just pension fund money. Mm-hmm. and in some cases now mutual fund money. So that distinction that the people who are investing in this stuff can afford to lose it is not really true. Um, so I don't, I don't like that rationalization. I think we're gonna see how that plays out.There was [00:17:00] just a really good piece in the Economist about private equity marks on their portfolio companies and how they are still looked to be much higher than what you would think they should be given the carnage in the market. And so all of what, what actually things are really worth in private markets, both for venture capital firms and for private equity firms, Is absent another, another bubble starting, starting in the markets.I think we're gonna see how that plays out over, over the next year. And it might be a wake up call for, for a lot of people. Um, you know, all that, all that said, it's an interesting thing because investors have been very complicit in this, right? In the sense that a lot of investors are absolutely delighted to have prep, to have their, their private, um, their private investments marked at a high level.They don't have to go to the committee overseeing the investments and say, look, I lost 20% of your money the way they might, um, if, if the numbers were public. And so that the ability of these of private investors to smooth as they call it, the, the, the returns is, is it's [00:18:00] been, it's been part of the appeal.It hasn't been a negative, it's been a positive. And so I would say that investors who wanted this moving are. Art might be getting what they deserve except for the pointing made earlier that it isn't, it isn't their money. It's, it's the money of, of teachers and firefighters and individual investors a around the country, and that's, that's problematic.Dwarkesh Patel: Yeah. Yeah. Being in the world of technology and being around people in it has. made me, somewhat shocked when I read about these numbers from the past. For example, when I'm reading your books and they're detailing things that happened in the nineties or the two thousands, and then you realize that the salary that Hank Paulson made a c e o of Goldman, or that skilling made as, you know, um, c e o of Enron, you know, I, it's like I have friends who are my age, like 22 year olds who are raising seed rounds, , that are as big as like these people's salaries.And so it just feels like the, these books were, you have $50 billion frauds or, you know, hundreds of billions of dollars of collapse and the individuals there, um, it just feels like they, it's missing a few zeros, uh, [00:19:00] because of the delusion of the private markets. But, um, but speaking of short sellers and speaking of private equity, um, I think it'd be interesting to talk about sbf.So, you know, your 2018 Vanity Fair article I thought was really interesting about, you know, sbf factory in Buffalo H How, how do you think back on Tesla and sbf now, given the fact that. The stock did continue to rise afterwards, and the factory, I believe, was completed and it's, I hired the 1500 or so people that had promised New York State, uh, is sbf just a fraud?Who can pull it off? And so he's a visionary. How, how do you think about sbf in the aftermath? Bethany McLean: So I don't think that's right about Buffalo and I have to look, but I don't think they ended up, I mean, the Solar City business that Tesla has pretty much collapsed. I don't think people haven't gotten their roofs.There was just a piece about how they're canceling some of their roof installations. So sbf has repeatedly made grand visions about that business that haven't played out. And I will check this for you post the podcast, but I don't think [00:20:00] if there is employment at that factory in, in Buffalo, it's not because they're churn out solar, solar, solar products that are, that are, that are doing.What was originally promised. So I guess I, I think about that story in a, in a couple of ways. It definitely, um, it was not meant to be a piece about Tesla. It was meant to be a piece that shown a little bit of light on how sbf operates and his willingness to flout the rules and his reliance on government subsidies, despite the fact that he, um, presents himself as this libertarian free, free, free market free marketeer, and his willingness to lie to, to, to, on some level enrich himself, which also runs counter to the Elon sbf narrative that he doesn't care about making money for, for himself.Because the main reason for Teslas to by Solar City was that Solar City had the main reason, was it Tes, that was, that Solar City had, that, that sbf and his, and his and his relatives had extended the these loans to Solar City that were gonna go. [00:21:00] There were gonna be lo all the money was gonna be lost at Solar City when bankrupt.And by having Tesla buy it, sbf was able to bail himself out, um, as, as as well. And I also think a good reason for the, for the, for, and it brings us to the present time, but a reason for the acquisition was that sbf knows that this image of himself as the invincible and vulnerable who can always raise money and whose companies always work out in the end, was really important.And if Solar City had gone bankrupt, it would've cast a big question mark over over sbf, over over the sbf narrative. And so I think he literally couldn't afford to let Solar City go bankrupt. Um, all of that said, I have, I have been, and was I, I was quite skeptical of Tesla and I thought about it in, in, in, in.And I always believed that the product was great. I just, mm-hmm. wasn't sure about the company's money making potential. And I think that, that, it's something I started thinking about, um, background, the Solar City time, maybe earlier, but this line, something I've talked about [00:22:00] before. But this line between a visionary and a fraudster.You know, you think that they're on two opposite ends of the spectrum, but in reality they're where the ends of the circle meet. Characteristics of one. One has that many of the characteristics of the other. And sometimes I think the only thing that really separates the two is that the fraudster is able to keep getting mo raising money in order to get through the really difficult time where he or she isn't telling the truth.And then they, that person goes down in history as a visionary. Um, but because no one ever looks back to the moment in time when they were lying, the fraudster gets caught in the middle. Um, so Enron's Lo lost access to to the capital markets lost AC access to funding as the market collapsed after the.com boom.And people began to wonder whether skilling was telling the truth about Enron's broadband business. And then there were all the disclosures about Andy fasa partnerships if Enron had been able to continue raising money, Business of Enron's called Enron Broadband might well have been Netflix. It was Netflix ahead of its time.So Enron just got caught in the middle and all [00:23:00] the fraud, all the fraud got exposed . Um, but that's not because Jeff Skilling wasn't a visionary who had really grand plans for, for, for, for the future. So I think sbf falls somewhere in that spectrum of, of, of fraudster and visionary. And what's gonna be really interesting why I said that this, we bring it to the present time about what happens to the mu narrative.If something fails is what happens. Yeah. Is as the world watch watches Twitter implode, um, what does that mean then for the Elon sbf narrative overall? Dwarkesh Patel: Yeah. Yeah. Um, going back to the Smartest Guys is the Room, the title obviously suggests something about. The, I guess in general, the ability and the likelihood of very smart people committing fraud or things of that sort.Um, but you know, Begar Jones has this book called Hi Mind, where he talks about how the smarter people are more likely to cooperate in prisoners dilemma type situations. They have longer time preference. And one of the things you've written about is the problem in corporate America is people having shorter, [00:24:00] um, uh, you know, doing two too big time discounting.So, uh, given that trend we see in general of greater Cooperativeness, um, and other kinds of traits of more intelligent people, do you think the reason we often find people like S B F and skilling running big frauds just by being very intelligent, is it just that on, on average smarter people, maybe less likely to commit fraud, but when they do commit fraud, they do it at such garat scales and they're able to do it at such gar scales that it just brings down entire empires?How, how, how do you think about the relationship between intelligence and fraud? . Bethany McLean: That's interesting. Um, I'm not sure I know a coherent answer to that. Um, smartest guys in the room as a title was a little bit tongue in cheek. It wasn't meant to say, these guys actually are the smartest guys in the room. It was, it, it was a little bit, it was a little bit ironic, but that doesn't take away from the really good question that you asked, which is what, what, what is that relationship?I, I mean, I think if you look at the history of corporate fraud, you are not going to find unintelligent people having [00:25:00] been the masterminds behind this. You're gonna find really, really, really smart, even brilliant people having, having, having been, been behind it, maybe some at part of that is this linkage between the visionary and the fraud star that so many of these, of these corporate frauds are people who have qualities of the visionary and to.The qualities of, of a visionary, you have to have a pretty, pretty, pretty, pretty high intelligence. Um, and I do think so many of these stories are, are about then self delusion. So I don't think smart people are any less likely to suffer from self delusion than dumb people. And they're probably more likely to, because you can rationalize, you know, the smart person's ability to rationalize just about anything they wanna rational rationalize is pretty profound.Whereas perhaps someone who doesn't have quite the same, the same brain power isn't gonna be able to create a narrative under which their actions are blameless and they're doing the right thing. So I think sometimes, so maybe there is some sort of relationship [00:26:00] there that somebody more qualified than I am would have to study between smart people's ability to, to, to rationalize just about anything as a way of, as part of the path to self delusion and part of the path by which these things happen.Yeah, that's completely, that's completely , that's Bethany theory. There's absolutely nothing to back that . I'm just Dwarkesh Patel: well clear. Let's do some more speculation. So, um, one of the things, uh, John Ray talked about in his testimony, um, was it two days ago where he said that, you know, FTX had done $5 billion of investments and deals in the last year, and most of those investments were worth a fraction of the value that FTX paid for them.And we see this also in, obviously in Enron, right? With, uh, broadband and with, um, ul, or is that how pronounce it, but basically their international department. Yeah. Um, what is this, uh, this obsession with deal making for its own sake? Is that to appease investors and make them think a lot's going on, is that because of [00:27:00] the hubris of the founder, of just wanting to set up a big empire as fast as possible, even if you're getting a bad sticker price?What, why do we see this pattern of just, you know, excessive deal making for its own sake? Bethany McLean: That's an interesting question too. I'm not sure that that's, um, limited to companies that go splat dramatically. There's a lot of, a lot of deal making in, in corporate America has that same frenzied quality. Um, I haven't seen an updated study on, on this in a, in a long time, but, you know, I began my career working as an analyst in an m and a department at at at Goldman Sachs.And. Definitely deals are done for the sake of doing deals. And I once joked that synergies are kind of like UFOs. A lot of people claim to have seen them, but there's no proof that they actually exist. , and again, I haven't seen an updated study on, on, on this, but there was one years back that showed that most m and a transactions don't result in increased value for shareholders.And most synergies, most promised synergies never materialize. [00:28:00] Just getting bigger for the sake of getting bigger and doing deals for the short term value of showing Wall Street a projection. That earnings are gonna be so much higher even after the cost of the debt that you've taken on. And that they're these great synergies that are gonna come about from, from combining businesses.So I don't know that either the frenzy deal doing or deal doing deals gone wrong is, um, solely limited to people who are committing fraud. , I think it's kinda across the spectrum. , . Dwarkesh Patel: Um, um, well one, one thing I find interesting about your books is how you detail that. And correct me if this is the wrong way to read them, but that, uh, incentives are not the only thing that matter.You know, there there's this perception that, you know, we've set up bad incentives for these actors and that's why they did bad things. But also, um, the power of one individual to shape a co co company's culture and the power of that culture to enable bad behavior, whether scaling at Enron or with Clarkson Right at Moody's.Yeah. Um, is that a good, good way of reading your books or how, how do you think [00:29:00] about the relative importance of culture and incentive? Bethany McLean: I think that's really fair. But incentives are part of culture, right? If, if you've set up a culture where, where how you're valued is what you get paid, I think it's a little, it's a little difficult to separate those two things out because, because the, the incentives do help make the culture, but for sure culture is incredibly, um, incredibly compelling.I've often thought and said that if I had, when I was leaving my short lived career in investment banking, if I had, if I had gotten in some of the head hunters I was talking to, if one of them had said, there's this great, really energetic, interesting energy company down in Houston, , why don't interview there?If I had gone there, would I have been a whistleblower or would I have been a believer? And I'd like to believe I would've been a whistleblower, but I think it's equally likely that I would've been a believer. Culture is so strong. It creates this. What's maybe a miasma that you can't see outside?I remember a guy I talked to who's a trader at Enron, really smart guy, and he [00:30:00] was like, after the, after the bankruptcy, he said, of course, if we're all getting paid based on creating reported earnings and there's all this cash going out the door in order to do these deals that are creating reported earnings, and that's the culture of the entire firm, of course it's not gonna work economically.He said, I never thought about it. . It just didn't, it didn't, it didn't occur to me. And I think the more compelling the CEO o the more likely you are to have that kind of mass delusion. I mean, there's a reason cult exist, right? . We, we are as human beings, remarkably susceptible to.Visionary leaders. It's just, it's the way the human brain is wired. We, we wanna believe, and especially if somebody has the ability to put a vision forward, like Jeff Gilling did at Enron, like Elizabeth Holmes did it Theranos like SPF F did, where you feel like you are in the service of something greater by helping this, vision, , actualize then, then you're, particularly susceptible.And I think that is the place where [00:31:00] incentives don't quite explain things. That is, there is this very human desire to matter, to do something important. Mm-hmm to be doing something that's gonna change the world. And when somebody can tap into that desire in people that feeling that what you're doing isn't just work in a paycheck and the incentives you have, but I mean, I guess it is part of the incentive, but that you're part of some greater good.That's incredibly powerful. Yeah. Dwarkesh Patel: It's what we all speaking of. We all wanna matter. . Yeah. Speaking of peoples psychology, uh, crime and punishment, underrated or overrated as a way to analyze the psychology of people like scaling and S B F or maybe SBF specifically because of the utilitarian nature of SB F'S crime?Um, Bethany McLean: I think it's, I think it's underrated, overrated. I'm not sure anybody. , I'm not sure anybody has ever proven that jail sentences for white collar criminals do anything to deter subsequent white collar crime. Mm-hmm. , and I think one part of this is the self delusion that I've, that I talked about. Nobody thinks, [00:32:00] oh, I'm doing the same thing as Jeff Skilling did at Enron, and if I, and if I do this, then I too might end up in jail.Therefore, I don't wanna do this. I just don't think that's the way the, the, the, the, the thought process works. I think Elizabeth Holmes at Theranos, probably for the most part, convinced herself that this was going to work, and that if you just push forward and push hard enough and keep telling people what they wanna hear and keep being able to raise money, it's gonna work.You know, if. . If, if you pause to think, well, what if it doesn't work and I've lied and I go to jail, then, then you'd stop right, right then and there. So I think that, I think that, that I'm, I'm not, I'm not sure it's much of a deterrent. I remember, and partly I'm, I'm biased because I remember a piece, my co-author Peter Alkin, and I wrote out right after Jess Gilling and Kenley were, were convicted and can lay, we're we're convicted.And we wrote a piece for Fortune in which we said that the entire world has changed. Now that corporate executives are, um, are, are put on high alert that behavior in the gray area will no longer be tolerated and that it will be aggressively prosecuted. And this was spring of [00:33:00] 2006 and the events that caused the global financial crisis were pretty well underway.It didn't. Do much to prevent the global financial crisis. Mm-hmm. , Enron's, Enron's jail time, didn't do anything to present, prevent, Elizabeth Holmes doesn't seem to have done anything to change what Sbf was doing. So I just, I, I just, I'm, I'm, I'm not sure, I'm sure a psychologist or somebody who specializes in studying white color crime could probably make a argument that refutes everything I said and that shows that has had a deterring effect.But I just, I just don't think that people who get themselves into this situation, con, con, consciously think, this is what I'm doing. Dwarkesh Patel: Yeah. Yeah. Um, speaking of other incentives, stock options, uh, you've spoken about how that creates short-term incentives for the executives who are making decisions. If you wanted to set up an instrument that aligned an executive or a leader's compensation with the long-term performance of a company, what would that look like?W would you have the options of less than 10 years instead of a [00:34:00] year? H how would you design it? How do you usually design a compensation scheme to award long-term thinking? Bethany McLean: If I could do that, I should ru rule the world . I think that very sweet. I think that is one of the really tough, um, problems confronting boards or anybody who is determining anybody who's determining stock options and that almost anybody who's determining compensation and that most compensation schemes seem to have really terrible unintended consequences.They look really good on paper. And then as they're implemented, it turns out that there was a way in which they accomplished exactly the opposite of, uh, thing the people who designing them wanted, wanted them to accomplish. I mean, if you think back to the advent of stock options, what could sound better?Right. Giving management a share of the company such that if, if, if shareholders did well, that they'd do well, nobody envisioned the ways in which stock options could be repriced. The ways in which meeting earnings targets could lead to gaming the ways in which the incentive of stock-based [00:35:00] compensation could lead to people trying to get anything they could in order to get the stock price higher and cash out when they're, as soon as their stock options vested.So, and even there was, there was, the whole valiant saga was fascinating on this front because the people who designed Mike Pearson's compensation package as ceo e o Valiant, they were convinced that this was absolutely the way to do it. And he got bigger and bigger, um, stock option incentives for hitting certain, for having the stock achieve certain levels.But of course, that creates this incredible bias to just get the stock to go up no matter, no matter what else you do. Um, it does seem to me that vesting over the long term is. is, is a much better way to go about things. But then do you create incentives for people to play games in order to get the stock lower at, at various points where there's about to be a stock optional board so they have a better chance of having directions be, be worth, be worth something over the long term.And do you, particularly on Wall Street there is this, or in firms where this sort of stuff matters the most? There [00:36:00] is this, there was this clearing out of dead wood that happened where people got paid and they got outta the way and made way for younger people. And I don't know, it was a harsh culture, but maybe it made sense on some level.And now at least I've been told with much longer vesting periods, you have people who don't wanna let go. And so you have more of a problem with people who should have retired, stick sticking around instead of in, in, instead of clearing out. And then it also becomes a question, How much money is, is enough.So if somebody is getting millions of dollars in short-term compensation and then they have a whole bunch more money tied up in long-term compensation, do the long-term numbers matter? At what point do they, do they, do they really matter? I mean, if you gave me $5 million today, I'm not so sure I'd really care if I were getting another $5 million in 10 years.Right. ? Yeah. So, so I think all of that is, is it, it's, I'm not, I'm not sure there's a perfect compensation system. All things considered though, I think longer term is, is probably better, [00:37:00] but. Dwarkesh Patel: Yeah, I didn't think about that downside of the long investing period. That's so interesting there. I guess there is no free lunch.Uh, so with Enron, um, it, it was clear that there was a lot of talent at the firm and that you had these companies and these trading firms launch at the aftermath by people who left Enron, kinder Morgan and John Arnold's, um, uh, Sintas, uh, that were wildly profitable and did well. Do you think we'll see the same thing with FTX, that while Sbf himself and maybe the, his close cadre were frauds, there actually was a lot of great trading and engineering talent there that are gonna start these very successful firms in the aftermath.Bethany McLean: That's, that's interesting. And just, just for the sake of clarification, kinder Morgan was actually started years before Enron's collapsed, when Rich Kinder, who was vying with Jeffs skilling in a sense, to become Chief Operating Officer. Um, Ken Lay, picked Jeffs skilling and Kinder left. Mm-hmm. and took a few assets and went to create Kinder, kinder Morgan.But your overall point, I'm just clarifying your overall point holds, there were a lot of people who [00:38:00] left Enron and went on to do, to have pretty, pretty remarkable careers. I think the answer with ftx, I bet there will be some for sure. But whether they will be in the crypto space, I guess depends on your views on the long-term viability of, of, of the crypto space.And I have never , it's funny is crypto exploded over the last couple of years. I was, I've been working on this book about the pandemic and it's been busy and difficult enough that I have not lifted my head to, to think about much else. And I always thought, I don't get it. I don't understand , I mean, I understand the whole argument about the blockchain being valuable for lots of transactions and I, I get that, but I never understood crypto itself and I thought, well, I just need to, as soon as this book is done, I just need to put a month into understanding this because it's obviously an important, important enough part of our world that I need to figure it out.So now I think, oh, Okay, maybe I didn't understand it for a reason and maybe, um, maybe there isn't anything to understand and I've just saved myself a whole life of crime because it's all gone. And you have [00:39:00] people like Larry Fink at BlackRock saying, whole industry is gonna implode. It's done. And certainly with the news today, this morning of finances auditor basically saying We're out.Um, I, I don't, I don't know how much of it was, how much of it was, is, was a Ponzi scheme. You might know better than I do. And so I don't know what's left after this whole thing implodes. It's a little bit like, there is an analogy here that when Enron imploded, yes, a lot of people went on to start other successful businesses, but the whole energy trading business is practiced by kind of under capitalized, um, um, energy firms went away and that never came back.Yeah. And so I, I, I don't, I don't know, I'm, it'll be, I, I don't know. What do you. The Dwarkesh Patel: time to be worried will be when Bethany McLean writes an article titled Is Bitcoin Overvalued for the Audience. My Moments on That ? Yeah, for the audience that, that was, I believe the first skeptical article about Enron's, um, stock price.Yeah. Uh, and it was titled [00:40:00] Is Enron Overvalued. In aftermath understated, , title. But , Bethany McLean: , I joked that that story should have won, won, won awards for the NICU title and business journalism history. , given that the company was bankrupt six months later was overpricedDwarkesh Patel: Um, uh, well, let me ask a bigger question about finance in general. So finance is 9% of gdp, I believe. How much of that is the productive use and thinking and allocation of the, uh, the capital towards their most productive ends? And how much of that is just zero sum or negative sum games? Um, if, if you had to break that down, like, is 9% too high, do you think, or is it just.I think it's Bethany McLean: too high. I have no idea how to think about breaking it down to what the proper level should be. But I think there are other ways to think about how you can see that in past decades it hasn't been at the right level when you've had all sorts of smart kids. Um, Leaving, leaving business school and leaving college and heading into [00:41:00] finance and hedge funds and private equity is their career of choice.I think that's a sign that that finance is too big when it's sucking up too much of, of, of the talent of the country. Um, and when the rewards for doing it are so disproportionate relative to the rewards of of, of doing other things. Um, the counter to that is that there've also been a lot of rewards for starting businesses.And that's probably, I think, how you want it to be in a, in a product. In a productive economy. So I think the number is, is too high. I don't know how to think about what it should be other than what a, actually, a former Goldman Sachs partner said this to me when I was working on all the devils are here, and she said that finance is supposed to be like the, the substrata of our world.It's supposed to be the thing that enables other things to happen. It's not supposed to be the world itself. So the, the role of a financial system is to enable businesses to get started, to provide capital. That's what it's supposed to be. It's the lubricant that enables business, but it's not supposed to be the thing itself.Right. And it's become the thing itself. [00:42:00] You've, you've, you've, you've, you've got a problem. Um, um, and I think the other, Dwarkesh Patel: there's your article about crypto , that paragraph right there. . Bethany McLean: There you go. That's, that's a good, um, and I think, I think the other way, you, you, you can see, and perhaps this is way too simplistic, but the other way I've thought about it is that how can it be if you can run a hedge fund and make billions of dollars from, and have five people, 10 people, whatever it is, versus starting a company that employs people mm-hmm.and changes a neighborhood and provides jobs and, you know, provides a product that, that, that, that, that improves people's lives. It, it is a shame that too much of the talent and such a huge share of the financial rewards are going to the former rather than the latter. And that just can't mean good things for the future.Dwarkesh Patel: Yeah. Yeah. And I, you know, when people criticize technology, for example, for the idea that, you know, these people who would've been, I don't know, otherwise teachers or something, they're, you know, making half a million dollars at Google. [00:43:00] Um, and I think like when I was in India, people were using Google Maps to get through the streets in Mumbai, which is, which is unimaginable to me before going there that, you know, you would be able to do that with, um, a service built out of Silicon Valley.And so, Yeah, I think that actually is a good allocation of capital and talent. I, I'm not, I'm not sure about finance. Um, yeah, Bethany McLean: I think I, I, I agree with you. I think there are other problems with Google and with the, the social media giants, but, but they are real businesses that employ people, that make products that have had, uh, huge.Um, impact on on, on people's, on people's lives. So in, in that sense, it's very different than a private equity firm, for instance, and especially private equity, even more so than hedge funds draws my ire. Mm-hmm. , because I think one of the reasons they, that it, they've been able to make part of the financialization of our economy has been due to super, super low interest rates and low interest rates that have enabled so many people to make so much money in finance are not, they're just a gift.It wasn't because these people were uniquely smart, they just [00:44:00] found themselves in a great moment in time. And the fact that they now think they're really smart because money makes me crazy. Dwarkesh Patel: Um, are Fanny and Freddy America special purpose entities? Are they our Alameda? It's just the way we hide our debt and uh, that's interesting.Yeah. Bethany McLean: Well, I guess we, you know what? I don't know anymore because, so I last wrote about them when was it in 2016 and I don't know now. No, you're right. Their, their debt is still off, off, off balance sheet. So Yeah, in a lot of ways they, they were. . I would argue though that the old Fanny and Freddy were structured more honestly than, than the new Fanny and Freddy, that it really is conservatorship that have made them, um, that have made them America's off balance sheet entities, because at least when they were their own independent entities.Yes, there was this odd thing known as the implicit guarantee, which is when you think about, back to your point about efficient markets, how can you possibly believe there's an as such a thing as an efficient market when their [00:45:00] Fanny and Freddy had an implicit guarantee, meaning it wasn't real. There was no place where it was written down that the US government would bail Fanny and Freddie out in a crisis, and everybody denied that it existed and yet it did exist.Yeah. Dwarkesh Patel: No, but we, I feel like that confirms the official market hypothesis, right? The, the market correctly, they thought that mortgages backed by Fannie and Freddy would have governments. Uh, okay, okay. You might be father Bethany McLean: and they did . You might be right. I, I, I think what I was getting at you, you might be right.I think what I was getting at is that it is such a screwed up concept. I mean, how can you possibly, when I first, when people were first explaining this to me, when I first read about Fanny and Freddie, I was like, no, no, wait. This is American capitalism . This is, no, wait. What? I don't, I don't understand . Um, um, so yeah, but I, I, I, I think that Fanny and Freddie, at least with shareholders that were forced to bear some level of, of the risks were actually a more honest way of going about this whole screwed up American way of financing mortgages than, than the current setup is.Dwarkesh Patel: What [00:46:00] is the future of these firms? Or are they just gonna say in conservatorship forever? Or is there any developments there? Well, what's gonna happen to them? Bethany McLean: The lawsuit, the latest lawsuit that could have answered that in some ways ended in a mistrial. Um, I don't think, I don't, I don't think unfortunately anybody in government sees any currency in, and I mean, currency in the broad sense, not in the literal sense of money in, in taking this on.And unfortunately, what someone once said to me about it, I think remains true and it's really depressing, but is that various lawmakers get interested in Fannie and Freddy. They engage with it only to figure out it's really, really goddamn complicated. Mm-hmm. and that, and that any kind of solution is gonna involve angering people on one side of the aisle or another and potentially angering their constituent constituents.And they slowly back away, um, from doing anything that could, that, that could affect change. So I think we have a really unhealthy situation. I don't think it's great for these two [00:47:00] entities to be in conservatorship, but at this point, I'm not sure it's gonna change. Dwarkesh Patel: Yep. Speaking of debt and mortgages, um, so total household debt in the United States has been, uh, climbing recently after it's, it's like slightly d decline after 2008, but I think in quarter three alone it increased 350 billion and now it's at 16.5 trillion.Uh, the total US household debt, should we worried about this? Are, are, are we gonna see another sort of collapse because of this? Or what, what should we think about this? Bethany McLean: I don't know. I don't know how to think about that because it's too tied up in other things that no one knows. Are we going to have a recession?How severe is the recession going to be? What is the max unemployment rate that we're gonna hit if we do, if we do have a recession? And all of those things dictate how to, how to think about that number. I. Think consumer debt is embedded in the bowels of the financial system in the same way mortgages were.And in the end, the, the, the [00:48:00] problem with the financial crisis of 2008, it wasn't the losses on the mortgages themselves. It was the way in which they were embedded in the plumbing of the financial system. Mm-hmm. and ways that nobody understood. And then the resulting loss of confidence from the fact that nobody had understood that slash lies had been told about, about that.And that's what caused, that's what caused everything to, to collapse. Consumer debt is a little more visible and seeable and I, I don't think that it has that same, um, that same opaque quality to it that, that mortgage backed securities did. I could be, I could be wrong. I haven't, I haven't, I haven't dug into it enough, enough to understand enough to understand that.But you can see the delinquencies starting to climb. Um, I mean, I guess you could on, on, on mortgages as well, but there was this, there was this profound belief with mortgages that since home prices would never decline, there would never be losses on these instruments because you could always sell the underlying property for more than you had [00:49:00] paid for it, and therefore everything would be fine.And that's what led to a lot of the bad practices in the industry is that lenders didn't think they had to care if they were screwing the home buyer because they always thought they could take the home back and, and, and, and, and make more money on it. And consumer debt is, is unsecured. And so it's, it's, it's different.I think people think about it differently, but I'd have. I'd have to, I'd have to do some more homework to understand where consumer debt sits in the overall architecture of the financial industry. Dwarkesh Patel: I, I, I'm really glad you brought up this theme about what does the overall big picture look like? I feel like this is the theme of all your books that people will be, So obsessed with their subsection of their job or, or that ar area that they won't notice that, um, broader trends like the ones you're talking about.And in Enron it's like, why, why, why do we have all these special purpose entities? What is the total debt load of Enron? Um, or with the, you know, mortgage back securities a similar kind of thing, right? What, what, uh, maybe they weren't correlated in the past, [00:50:00] but what's that? Do we really think that there's really no correlation, um, uh, between, uh, delinquencies across the country?Um, so that, that kind of big picture, think. Whose job is that today? Is it journalists? Is it short sellers? Is it people writing on ck? Who's doing that? Is it anybody's job? Is, is it just like, uh, an important role with nobody assigned to it? Bethany McLean: I think it's the latter. I think it's an important role with nobody, with nobody assigned to it, and there there is a limit.I mean, , I hate to say this, it is not, uh, um, it is not an accident that many of my books have been written. That's probably not fair. It's not true of my book un fracking, but that some of my books have been written after the calamity happened. So they weren't so much foretelling the calamity as they were unpacking the calamity after it happened, which is a different role.And as I said at the start of our conversation, I think an important one to explain to people why this big, bad thing took, took place. But it's not prediction, I don't know, as people that were very good at, at prediction, um, they tried [00:51:00] to set up, what was it called? In the wake of the global financial crisis, they established this thing called fsoc, and now I'm forgetting what the acronym stands for.Financial Security Oversight Committee. And it's supposed to be this, this body that does think about these big picture. That thinks about the ways, the ways an exam, for example, in which mortgage backed securities were, um, were, were, were, were, were, were, were repopulating through the entire financial system and ways that would be cause a loss to be much more than a loss.That it wouldn't just be the loss of money and that security, it would echo and magnify. And so that there are people who are supposed to be thinking about it. But I think, I think it's, it's, it's really hard to see that and. In increasingly complex world, it's even, it's even harder than it was before, because the reverberations from things are really hard to map out in, in, in advance, and especially when some part of those reverberations are a loss of confidence, then all bets [00:52:00] are off because when confidence cracks, lots of things fall apart.But how do you possibly analyze in any quantitative way the the risk that that confidence will collapse? Mm-hmm. . So I think it's, I think, I think, I think it's difficult. That said, and of course I am talking my own book here, I don't think that the lack of the, the increased financial problems of journalism really help matters in that respect, because in an ideal world, you want a lot of people out there writing and thinking about various pieces of this, and then maybe somebody can come along and see the.Pieces and say, oh my God, there's this big picture thing here that we all need to be thinking about. But there's, there's a kind of serendipity in the ability to do that one, that one that the chances, I guess the best way to say that is the chances of that serendipity are dramatically increased by having a lot of people out there doing homework, um, on the various pieces of the puzzle.And so I think in a world, particularly where local news has been decimated mm-hmm. , um, the [00:53:00] chances of that sort of serendipity are, are definitely lower. And people may think, oh, it doesn't matter. We still got national news. We've got the Washington Post, we've got the Wall Street Journal, we've got the New York Times.Um, I would love to have somebody do a piece of analysis and go back through the New York Times stories and see how many were sparked by lp, a piece in the local paper that maybe you wouldn't even notice from reading the New York Times piece, because it'd be in like the sixth paragraph that, oh yeah, credit should go to this person at this local paper who started writing about this.But if you no longer have the person at the local paper who started writing about this, You know, it's, it's, it's, it's less likely that the big national piece gets written. And I think that's a part of the implosion of local news, that people, a part of the cost of the implosion of local news that people don't really understand the idea that the national press functions at, at the same level, um, without local news is just not true.Dwarkesh Patel: Yeah. And, but even if you have the local news, and I, that's a really important point, but even if you have that local news, there still has to be somebody whose job it is to synthesize it all together. And [00:54:00] I'm curious, what is the training that requires? So you, I mean, your training is, you know, math and English major and then working at working in investment banking.Um, is that the, uh, I mean, obviously the anecdotal experience then equals one, seems that that's great training for synthesizing all these pieces together. But what is the right sort of education for somebody who is thinking about the big picture? Bethany McLean: I, I don't, I don't know.And there may be, there may be, there are probably multiple answers to that question, right? There's probably no one, one right answer for me. In, in the end. My, my math major has proven to be pivotal. Even though , my mother dug up these, um, my, my parents were moving and so my mother was going through all her stuff and she dug up these, some my math work from, from college.Literally, if it weren't for the fact that I recognized my own handwriting, I would not recognize these pages on pages of math formula and proofs. And they're like, get gibberish to me now. So , but I, but I still think that math has, so I do not wanna exaggerate my mathematical ability at this stage of [00:55:00] the game.It's basically no. But I do think that doing math proofs any kind of formal, any kind of training and logic is really, really important because the more you've been formally trained in logic, the more you realize when there are piece is missing and when something isn't quite, isn't quite adding on, it just forces you to think in, in a way that is, that in a way that connects the dots.Um, because you know, if you're moving from A to B and B doesn't follow a, you, you understand that B doesn't follow a And I think that that, that, that kind of training is, is really, really important. It's what's given. , whatever kind of backbone I have as a journalist is not because I like to create controversy and like to make people mad.I actually don't. It's just because something doesn't make sense to me. And so maybe it doesn't make sense to me because I'm not getting it, or it doesn't make sense to me because B doesn't actually follow, follow away, and you're just being told that it does. And so I think that, I think that training is, is really, really important.Um, I also have, have often thought [00:56:00] that another part of training is realizing that basic rule that you learned in kindergarten, which is, um, you know, believe your imagination or you know, your imagine follow your imagination. Because the truth is anything can happen. And I think if you look at business history over the last couple of decades, it will be the improbable becoming probable.Truth over and over and over again. I mean, the idea that Enron could implode one of the biggest, supposedly most successful companies in corporate America could be bankrupt within six months. The, from its year, from its stock price high. The idea that the biggest, most successful, um, financial institutions on wall, on Wall Street could all be crumbling into bankruptcy without the aid of the US government.The idea that a young woman with no college degree and no real experience in engineering could create, uh, uh, um, could create a machine that was going to revolutionize blood testing and land on the cover of every business magazine, and that this [00:57:00] whole thing could turn out to be pretty much a fraud. The entire idea of ftx, I mean, over and over again, these things have happened.Forget Bernie Madoff if you had told people a year ago that FTX was gonna implode six months ago, three months ago, people would've been like, no, no, no, no, no, no, no. And so I think just that, that, that, that knowledge that the improbable happens over and over again is also a really fundamental, fundamentally important.Dwarkesh Patel: If we're con continuing on the theme of ftx, I, I interviewed him about four or five months ago.Wow. And this is one of these interviews that I'm really, I'm, I don't know if embarrass is the right word, but I knew things then that I could have like asked, poked harder about. But it's also the kind of thing where you look back in retrospect and you're. If it had turned out well, it's, it's not obvious what the red flags are.Um, while you're in the moment, there's things you can look back at the story of Facebook and how, you know, Marcus Zuckerberg acted in the early days of Facebook and you could say, if the thing fell apart, that this is why, or, you know, this is a red flag. So [00:58:00] I have a hard time thinking about how I should have done that interview.B

Roshena Campbell told Tom Elliott she'd been contacted by residents and businesses "sick" of the uncertainty.See omnystudio.com/listener for privacy information.

This has since been confirmed by the Premier.See omnystudio.com/listener for privacy information.

Fearful prisoners at Victoria's biggest women's jail have launched a petition demanding the ­removal of a transgender inmate who committed serious sex offences against females while a man.  A motion before the City of Melbourne is demanding the “urgent” release of former top cop Ken Lay's report, which will determine the fate of Melbourne's second injecting room.  The Victorian Bar association is reviewing CCTV footage taken from inside a well-known barristers' chambers as part of an investigation into homophobic notices posted in lifts.  McDonalds has been hit with a mammoth wage theft claim, with a union representing their workers seeking at least $250 million in compensation for more than 250,000 people.  For updates and breaking news throughout the day, take out a subscription at herald sun.com.au See omnystudio.com/listener for privacy information.

Oh boy. We are finally doing it.... ENRON!!! The crazy Houston energy company that took the US for a ride - Part 1! From bad boy Ken Lay, the Valhalla scandal, a book called "the selfish gene" and the most brutal bonus system you've ever heard of.... this is truly one of the most epic financial disasters out there.  Bonus episodes and content every week: ▶▶https://www.patreon.com/risquebusinessnews ▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬ SUPPORT OUR SPONSORS: Breakshot Pool: Get Breakshot Pool on iOS or Android https://www.breakshotpool.com ▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬

In this episode of The Ethics Experts, Gio and Nick welcome Sherron Watkins, former Vice President of Enron Corporation who alerted then-CEO Ken Lay in August 2001 to accounting irregularities within the company, warning him that Enron ‘might implode in a wave of accounting scandals.'.

After years spent building its "lies and choices" case, the Department of Justice's Enron Task Force took Enron executives Ken Lay and Jeffrey Skilling to court. In this episode, the unprecedented trial that became something of a litmus test for all of corporate America. How much did Lay and Skilling know about the crimes that occurred at Enron, and when did they know it? Learn more about your ad choices. Visit megaphone.fm/adchoices

The Wall Street Journal works to expose the shady financial deals key to Enron's success. With his company pushed to the brink of bankruptcy, Ken Lay engages in a desperate ploy to avert disaster.This episode originally aired on September 17, 2019.Listen to new episodes 1 week early and to all episodes ad free with Wondery+. Join Wondery+ for exclusives, binges, early access, and ad free listening. Available in the Wondery App https://wondery.app.link/americanscandal.Support us by supporting out sponsors! Sleep Number - Proven quality sleep is life-changing sleep. Special offers, for a limited time. Only at Sleep Number stores or sleepnumber.com/SCANDAL.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Back from a road trip, Randy Lee shares some money making ideas he discovered on the way. In addition, we share some insights from Alabama master Dealer KJ Howard and Flipping Genius Car Flipping Forum member Ken Lay. Next Randy shares his 12 point Pre-purchase inspection that has produced over a decade of consistently profitable car flips! Be sure to check out www.FlippinGenius.com to learn more and benefit from the Flipping Genius Resources page. #Car Flipping #Flipping Cars #Inspecting Used Cars #The Legends of Branson #Ryan Pelton --- Send in a voice message: https://anchor.fm/flippinggenius/message Support this podcast: https://anchor.fm/flippinggenius/support

Ken Lay fights to restore public confidence in Enron as the bad publicity mounts and the stock price continues to fall. Sherron Watkins is encouraged when an internal review of company practices is launched, but stunned when it appears to backfire.This episode originally aired on September 10, 2019.Listen to new episodes 1 week early and to all episodes ad free with Wondery+. Join Wondery+ for exclusives, binges, early access, and ad free listening. Available in the Wondery App https://wondery.app.link/americanscandal.Support us by supporting our sponsors!Nom Nom Now - Try Nom Nom today and you'll get 50% off a two week trial. Go to trynom.com/as.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

In Episode 12 of History's Greatest Idiots, Lev and Derrick discover the fascinating history of the worst bank robber in history and uncover the murky secrets behind one of the most notorious financial scandals of the last 100 years! Now in Video Podcast format Support us on Patreon Visit our Instagram Or our Twitter Hosts: Lev & Derek https://linktr.ee/Lev_Myskin https://linktr.ee/ThatEffnGuy Artist: Sarah Chey https://www.fiverr.com/sarahchey Circus Man by Jeris (c) copyright 2012 Licensed under a Creative Commons Attribution (3.0) license. http://dig.ccmixter.org/files/VJ_Memes/37243 Ft: A.M. mews by MommaLuv SKyTower --- Support this podcast: https://anchor.fm/historysgreatestidiots/support

In Episode 12 of History's Greatest Idiots, Lev and Derrick discover the fascinating history of the worst bank robber in history and uncover the murky secrets behind one of the most notorious financial scandals of the last 100 years! Now in Video Podcast format Support us on Patreon Visit our Instagram Or our Twitter Hosts: Lev & Derek https://linktr.ee/Lev_Myskin https://linktr.ee/ThatEffnGuy Artist: Sarah Chey https://www.fiverr.com/sarahchey Circus Man by Jeris (c) copyright 2012 Licensed under a Creative Commons Attribution (3.0) license. http://dig.ccmixter.org/files/VJ_Memes/37243 Ft: A.M. mews by MommaLuv SKyTower --- Support this podcast: https://anchor.fm/historysgreatestidiots/support

The plot thickens in the story of California’s 2003 Gubernatorial Recall and ENRON has plenty to contribute! For Part II, Jordan rewinds to 2000 – the year a series of blackouts hit California. Was it at all suspicious that these blackouts occurred at the same time ENRON (and several other energy companies) made obscene profits selling high-priced energy back to California? Governor Gray Davis struggled to prove this, so the energy-deprived public blamed him! Explored in this episode: ENRON’s shameless energy trading schemes, the Bush Administration’s complicity, and the day Enron Chairman Ken Lay courted a certain action movie-star to take over the Golden State. Stay tuned for Part III, where YEAR 2000 FIX will exclusively analyze the 2003 Recall and Arnold Schwarzenegger’s successful gubernatorial campaign. Message YEAR 2000 FIX on Anchor here! SELECTED WORKS CITED: Part I on ENRON’s bankruptcy and ties to the Bush Administration Info on the 2005 Documentary ENRON: THE SMARTEST GUYS IN THE ROOM. I’m sure you can find this on Netflix. National Geographic Study on CA Blackouts Timeline of Blackouts Gray Davis’ advisor, David Freeman, testimony on the energy crisis World Socialist Website on ENRON’s schemes. Also, see here. CBS News Report on ENRON’s schemes Selected audio of Enron’s traders. See here for “Grandma Millie” call. PROJECT CENSORED on Arnold Schwarzenegger meeting Ken Lay. Also, see here. And here. And here. Aftermath of “Honest” Tim Belden Governor Gray Davis’ interview with FRONTLINE Article on the current state of CA Energy Policy Legacy of 2003 Recall

The recent Texas power blackouts did not happen in a vacuum. They were engineered to happen for one specific cause--to increase demand and skyrocket profits. The energy industry serving Texas has been deregulated for many years now, and is not part of any federal grid. Now the blackout has resulted in households receiving power bills in the THOUSANDS of dollars, for shoddy, undependable service. Now, those of you who believe this was due to a recent oversight are wrong. This has been in the making for quite a while, tracing its origins in part, to a law signed off in 1999 by then Governor George W. Bush, which legalized price gouging that would make the original mafia--blush.  Come tune in and hear the story of legalized criminality in Texas. 

- An old testament biblical style story of rise, pride and ensuing fall. - Center of an era filled with Young smart and ambitious people working at these uber trading firms in Houston that dominated energy trading around the world. Downtown renaissance. Energy firms were putting technology innovations out that rivaled what Silicon Valley was doing at that time. - They were visioning the future - Broadband trading. Did a deal with Blockbuster that was a pre-runner to Netflix. - Energy industry lost its swagger when Enron collapsed. - Note how despite the speed and size of Enron's fall, Fed did not have to get involved, no systemic risk, no bailouts for institutions. Goes back to the point that energy markets have natural self correcting mechanisms + Enron's fall had more to do with accounting/financing than the corruption of the markets they engaged with and created. - Separate fact from myth. Why so many today owe their livelihood to the risks that Enron took to be successful. - Ultimate first mover advantage. An aggressive appetite for risk. - NGPA - removal of federal price controls at well head and FERC Order 363 unbundling gas supply from gas delivery. Without that no choice in electricity providers that we enjoy today. - Ken Lay's role in lobbying for deregulation and his connection to the Bush family. - They did not fail from being successful traders but from financial leverage. - Enron online and the financialization of core markets of energy trading. - The conflict of being a “super local” in the physical markets for gas and power. How they would push their market position and view of market positions. - Valuing optionality of assets, securitizing them - meant that you did not have to own the asset to operate in the energy markets.

Ken Lay was determined to build America’s premier natural gas company in the 1980s and ‘90s. But his mindset of “growth at any cost” laid the foundation for some of the biggest white-collar crimes in corporate history. 

Ben and Dianne discuss All Apologies by Nirvana. Happiness, death, suicide (or WAS it?) conspiracy theories, Ken Lay. Cool, wait, did we say Ken Lay? Yeah. And Bobcat Goldthwait. Dressed Up Like a Douche Misheard lyrics from our pal Tommy Drake Kiss - Rock and Roll All Night“I want to rock and roll all night and part of every day” Guilty Pleasure SongsDianne: This is How We Do It  - Montell Jordan Ben: Things Can Only Get Better - Howard Jones Special THANK YOUChuck Savage & Eddie Hawkins: Intro music Sara Wessling: Guilty Pleasures vocals ********** We have a Patreon Page! https://www.patreon.com/rockthecashbar If you would like to help support Rock the Cash Bar we have some fun perks! For $5 a month Patreon members will receive early access to all episodes, RTCB swag AND they will have the opportunity to VOTE on every other songs of the week! Website: https://www.rockthecashbarpodcast.com PLEASE rate and leave us a review! It really helps!! Thank you!

  Episode 9 is a co-production by the Words & Actions and en clair podcasts, sponsored by the Aston Institute of Forensic Linguistics. For further info, references and a full transcript please visit our blog https://wordsandactions.blog. The way we decided to work together is by having the usual parts of a W&A episode ‒ introduction, interview and analysis ‒ bracketed by the en clair host, Claire Hardaker, tell the story of the rise and fall of Enron. In the introduction part after Claire’s first narration, Veronika reads out parts from an email that a former employee wrote to Enron CEO Kenneth Lay, a few months before the scandal broke. Here is the full email:  On Behalf Of Pamela.J.Allison@dynegy.com Sent: Wednesday, August 15, 2001 5:39 PM To: Lay, Kenneth  Subject:  Jeff’s Leaving   Mr. Lay,  I am not writing this in malice but in hopes that it helps get Enron back the way it used to treat their employees and makes it the number one employer of choice again. I hope you can get back the feeling that I had when I first started there and get the stress level down in your organization for the sake of your employees. I am a former employee who worked at Enron for 10 years – my husband was,at one time, in charge of A/P.  My one big disappointment was that I never got to meet you. During that time, I made a lot of friends who I continue to see from time to time.  I left last year and have missed the company since I left but would not contemplate coming back unless several people have been replaced.  (Joannie Williamson and Sheri Sera know my story.) I “knew” Jeff but I don’t think he knew me by name, only by sight, even though I worked in ENA when it only had 400 employees with 3 of us in HR. He was NOT what I would call a people person! Unless you were in an upper level position, he did not take the time to find out your name. (Ron Burnsis still one of my favorite people because of his talent with people – we need more like him in the business world!) As you can see, I am now working for a competitor and since I work in HR, I continually run into former Enron workers who have also left – most of their reasons are the same. It is not that they have lost faith in Enron as a company but because of the way they were treated by their managers. During the last 5 years I was there, I noticed a change in direction in the way employees were treated by upper management – and upper management was getting away with it.  Not only were they getting away with it, these people were being rewarded for this behavior.  I have heard stories of lower level employees being screamed at and in one instance, one of the VP s who was brought down from Canada was heard in his office screaming and pounding his telephone on his desk. Heaven only knows how he treats his subordinates. Believe me, the way employees are treated at Enron is being talked about on the streets of Houston and on the different college campuses.  You might also at some point take the time to find out why so many good people have left the HR community at Enron and it is not because they wanted to. I don’t know if you will see this, but I hope so.  Good luck on bringing Enron back to way it was – I still own stock!! Thanks for listening…Pam Allison    We then go on to interview David Wright, a forensic linguist who has worked with the large collection of publicly available emails from inside Enron. After the interview, we mention Andre Spicer’s book to refer to a communication strategy that we saw at work with Enron, but that is also used frequently in politics. We can certainly detect this kind of communication in the email that Ken Lay sent in reply to the message above. Here is the text of the full email that we analyse:  Dear Pam, Thank you for your e-mail of August 15th.  It is always a pleasure to hear from former employees.  Thank you also for calling attention to instances which, on the surface, do not appear to be representative of our expectations of Enron leadership. Part of our continuous improvement involves an on-going review of our management and the diversity of styles therein. True, not everyone is agreeable to Enron’s culture or the many different management styles at Enron. We do, however, expect all of our employees – not just management – to adhere to our core values of respect, integrity, communication and excellence. These values become even more significant as we continue to grow and expand our scope of business, and more critical as we become a more culturally diverse workforce. We enjoy our status as one of the best places in America to work according to Fortune and other sources thanks in part to our willingness to examine our organization and make needed change. Our employee surveys, belief in open communication, and exit interview process for employees choosing to leave Enron are examples of our efforts to seek out feedback and scrutinize the way we do business.  Your feedback will help play a role in that process. Sincerely, Ken Lay This email features many of the ways in which companies often respond to complaints (even though the first email, by Pam Anderson, was intended as a warning). In the second part of her narration, Claire mentions the “‘this is fine’ dog’s coffee meme”. You may well have seen it on social media, where it is often used to indicate denial in the face of a crisis:   And finally, if you haven’t had enough of the Enron scandal yet ‒ and it is a fascinating story! ‒, here is some further reading:  Swartz, M., &  Watkins, S. (2004). Power Failure: The inside story of the collapse of Enron.  New York: Doubleday. 

Not all those who wander are lost. Most of us fantasize about started a new life somewhere. Few of us succeed.Covered Topics: Maura Murray, John List, Patrick McDermott, John J. Nazarian, Evan Ratliff, Alan Watts, Ken Lay, Plato, David HumeFurther Reading:https://plato.stanford.edu/entries/identity-personal/https://www.youtube.com/watch?v=trqDnLNRuSc&t=312shttps://www.latimes.com/archives/la-xpm-1989-06-18-mn-3671-story.htmlhttps://en.wikipedia.org/wiki/John_Listhttps://murderpedia.org/male.L/l/list-john-emil.htmhttp://content.time.com/time/specials/packages/article/0,28804,2009445_2009447_2009502,00.htmlhttps://medium.com/@ephromjosine/after-the-death-of-jeffery-epstein-its-time-we-revisit-ken-lay-69ea22f41545https://www.dailykos.com/stories/2006/07/07/225351/-Ken-Lay-escapes-life-conviction-by-faking-his-deathhttps://www.wired.com/2009/11/ff-vanish2/https://www.wired.com/2009/08/gone-forever-what-does-it-take-to-really-disappear/https://www.alanwatts.org/life-of-alan-watts/https://en.wikipedia.org/wiki/Alan_Wattshttps://www.theparisreview.org/blog/2016/08/24/alan-watts-this-is-it/https://www.youtube.com/watch?v=B7ufX3VaTJc Our GDPR privacy policy was updated on August 8, 2022. Visit acast.com/privacy for more information.

(https://www.bobmurphyshow.com/wp-content/uploads/2019/11/rob-bradley.jpg) Rob Bradley is the world’s leading expert in energy economics in the Austrian tradition. His treatise Oil, Gas, and Government is the definitive record of U.S. government intervention in the oil & gas markets. Rob chose Murray Rothbard as the chair for his dissertation in Political Economy. At one point in his career, Rob served as a speechwriter for Ken Lay, CEO of Enron, which afforded Rob a firsthand view of the skullduggery that would later be wrongly blamed on capitalism. . . . . . Mentioned in the Episode and Other Links of Interest: The YouTube video (https://youtu.be/xV_VqkLTai0) of this interview. Bob’s introductory essay (https://www.masterresource.org/bradley/oil-gas-government-introduction/) to Rob Bradley’s classic work (which was his dissertation under Rothbard), Oil, Gas, and Government: The U.S. Experience. Bob’s article in the Journal of Private Enterprise (https://econpapers.repec.org/article/jpejournl/1462.htm) which relays the “daisy chain” story of how oil resellers gamed the price controls during the 1970s. Rob’s website devoted to energy issues: Institute for Energy Research (http://instituteforenergyresearch.org) , which Rob founded. Rob’s trilogy on cronyism (“political capitalism”) in industry: (1) Enron Ascending (https://www.amazon.com/gp/product/1118549570/ref=as_li_qf_asin_il_tl?ie=UTF8&tag=consultingbyr-20&creative=9325&linkCode=as2&creativeASIN=1118549570&linkId=1fdd6f4a685234ac4e2f2bfb319de03f) . #CommissionsEarned (As an Amazon Associate I earn from qualifying purchases.) How you can contribute (http://bobmurphyshow.com/contribute) to the Bob Murphy Show. The audio production for this episode was provided by Podsworth Media (https://www.podsworth.com/) .

Exodus 1:8-14

Kathy Ruemmler served for three years as White House Counsel to President Barack Obama. She advised the President on numerous complex issues and helped usher the Affordable Care Act into law. A graduate of the University of Washington and Georgetown Law School, Ruemmler was a federal prosecutor in the U.S. Attorney’s Office for the District of Columbia and one of the Enron Task Force lead prosecutors. In one of the most complicated and brazen cases in US history, Ruemmler convicted former Enron executives Ken Lay and Jeff Skilling of corporate fraud. In this episode, Kathy Ruemmler talks about her distinguished work in public service and return to private practice. As always, if you have thoughtful feedback, please email us at theoathpodcast@gmail.com. 

The Wall Street Journal works to expose the shady financial deals key to Enron’s success. With his company pushed to the brink of bankruptcy, Ken Lay engages in a desperate ploy to avert disaster.Support us by supporting our sponsors!

Ken Lay fights to restore public confidence in Enron as the bad publicity mounts and the stock price continues to fall. Sherron Watkins is encouraged when an internal review of company practices is launched, but stunned when it appears to backfire.Support us by supporting our sponsors!

The Wrestling Estate‘s David Gibb and Juice Make Sugar's Nick Bond are here weekly to provide a pleasantly in-depth discussion on a specific subject that professional wrestling helps explain in ways you may not have realized. This week, it's Enron: it's a story that fits right into the strange turn of the century world that caused WCW, Eric Bischoff and Vince Russo to self immolate at nearly the same time Jeff Skilling, Ken Lay and Andy Fastow's byzantine plans keep their company going started to unravel before our eyes. And all for exactly the same reason: egos unmatched by anything other than their ruthless aggression and need for validation from people they thought were cooler than them.  Don't forget to check out Dave's Follow-up Files on our Patreon -- this episode's edition will be the only one available without contributing -- to which if, for whatever reason, you like the people behind the show you can help us pay for hosting by contributing (you'll also receive a shout out on the show as a sexy wizard, so that's something to look forward to.)  If you liked our theme song, "Dog of War" by the Hell Yeah Babies, you should buy their album All The Things You Believe on Bandcamp. If you like the show after the theme song: Rate, Review and Subscribe to us on Podbean, iTunes, Stitcher, Spotify and the Google Play Store.

Join Lara & Tanya for their first deep dive series exploring the collapse of the 7th largest corporation in America Enron. It ended up being the largest corporate bankruptcy in the history of the United States. But how did it get there? In this first episode Lara & Tanya discuss the source materials, a few key things to keep in mind while we cover this topic, and finally the founder of the company who would turn out to be the enabler of the disaster, Ken Lay. Then we cover the architect of the disaster and his life that lead him to Enron, Jeff Skilling. Make sure to subscribe to get parts 2 & 3. Also, please share this episode on your social media pages. We worked so hard on this and we really want to share it. 

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

Bending the Spoon by Ken Lay is a story revolving around three generations of a family looking to celebrate the upcoming birthday of the youngest member of the family. Doing so, however, forces them to come to terms with past relationships, past decisions and past actions involving a long-ago family tragedy.

In this episode of the Yarra BUG Radio Show which was pre-recorded for the Easter break, Faith and Val take a look at the history of Critical Mass in Melbourne.Its a personal history with Val sharing his own involvement, and the significance of the movement for him personally. We also touch on the significance for Melbourne itself with several long-term participants going on to help shape planning and implementation of active transport policies in suburbs around Melbourne. Val's highlights between 1996-2010 include cameo appearances from Ken Lay and Andrew Bolt in addition to the hundreds of regular riders Critical Mass enjoyed. 

We return to continue the ENRON saga. In part 2 of Ken Lay we talk about the California Energy Crisis of 2000 and 2001.     SOURCES The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, By Bethany McLean and Peter Elkind Enron: The Smartest Guys in the Room, A documentary based on the book above. (article) “Is Enron Over Priced?” By Bethany McLean PBS: Frontline "BLACKOUT, what caused the power crisis in California? And who's profiting?" ENRON Traders Calls Enron's Close Ties to Bush (ABC NEWS) ENRON'S COLLAPSE: THE RELATIONSHIPS; Bush and Democrats Disputing Ties to Enron (THE NEW YORK TIMES)  

Ken Lay, the son of a preacher, a political figure, and business man with a blind eye to mis-dealings. His life isn't contained to one episode! This two part edition of the show will cover the largest figure in the Enron story.

Sherron Watkins, known as the Enron Whistleblower who in 2002 was named one of Time Magazine's Persons of the Year. Sherron is the former Vice President of Enron who alerted then-CEO Ken Lay in August 2001 to accounting irregularities within the company, warning him that Enron ‘might implode in a wave of accounting scandals.' She was right. Today she travels across the globe sharing her story of bravery and courage and providing companies with a blueprint for restoring integrity. Tribe – let's listen to Sherron Watkins. Support the show (https://www.patreon.com/atribecalledyes)

In this week’s episode of The Secret Sauce, Palantir Founder and CEO George DeMet dives into the importance of being in tune with your company’s purpose. TRANSCRIPT Allison Manley [AM]: Welcome to The Secret Sauce, a short podcast by Palantir.net, that offers a quick piece of advice to help your business run a little bit better. I’m Allison Manley, an Account Manager at Palantir, and today we’re talking with our Founder, George DeMet. He’s going to share why it’s so critical to understand your company’s purpose. It sounds like a basic concept, but it’s important to give clarity around why a company exists. George DeMet [GD]: In a previous installment of the Special Sauce a couple of months ago, I talked a little bit about my personal history with family-run businesses and some of the values and principles that have helped guide some of the world’s most enduring companies. Values and principles are important because they help answer the question of how we as a company strive to interact with each other, with our customers, and with the world around us. Today, I’d like to talk about the importance of understanding your company’s purpose, or why it is that we do what we do. Being able to say what it is that gives your company direction and purpose is vital to attracting motivated employees and helping prospective customers understand why they should choose to work with you. Knowing what you do and why you do it is essential, but so is being able to communicate that vision to others. A core purpose can be articulated in many ways. If you’re a very small company, everyone on the team probably already knows and understands your core purpose, and you may not even need to articulate it. But as your company grows and evolves, chances are that not everyone will come in with that shared understanding, and you’ll need to find a succinct and understandable way to describe to others the reason why your company exists. Now the flip answer is “because getting a paycheck is what puts a roof over my head and food on my table”, but I think we can all agree that that’s not enough. There are a lot of different ways to make money, and we make a deliberate choice to do what we do. Fundamentally, a core purpose is an organization’s most fundamental reason for being. It does not change, but it inspires change. And most importantly, it must be authentic to the organization’s values and culture. Many companies have a mission statement, which is a (usually) brief and aspirational statement describing what it is that the company seeks to do. The difference between a mission statement and a vision statement is that a mission statement focuses on a company’s present state while a vision statement focuses on a company’s future.  Some companies tend to blend these statements, and in most cases, that’s okay. What’s important is that there’s an easy way for people to understand what the company is about and its approach. This is usually something that appears in the company handbook or field guide, and it’s often on the website as well. To be clear, a mission statement or purpose is something that should be distinct from your tagline or marketing slogan. It’s my belief that regardless of what form it takes, a statement of purpose is not one of those things that you can just knock out in a workshop over an afternoon. It needs to come from deep inside you, and it needs to “feel” right. It’s also really important that the stated mission, vision, and values are be aligned with the actual culture of the company, or else they’re just lip service. For example, Enron advertised Communication, Respect, Integrity, and Excellence as their core values, yet the actions of their senior leadership created a culture of greed that encouraged unethical behavior at all levels, using a variety of deceptive, bewildering, and fraudulent accounting practices to make the company appear more profitable than it actually was. The company’s traders were also actively involved in manipulating the energy market in California, illegally cutting power to the state and causing rolling blackouts in order to keep prices artificially inflated. Enron’s CEO, Ken Lay, even bragged to the Chairman of the California Power Authority that "In the final analysis, it doesn't matter what you crazy people in California do, because I got smart guys who can always figure out how to make money." 
 I would argue that one of the most important things that the executive leadership of a company can do is to reinforce the company’s vision and values. They need to hold other leaders in the organization accountable and accept ultimate responsibility for the company’s actions. As Harry Truman famously put it, the buck stops here. At Palantir, our purpose is to strengthen humanity by helping others discover, create, and share knowledge. This informs the kinds of projects and clients we choose to work with, and along with our values and principles, it informs the approach our team takes to helping solve problems. It’s important to note that our purpose is not connected to any specific technology or even to the web itself; we just happen to believe that at this time and place in human history, the web is the primary conduit by which knowledge is discovered, created, and shared, and that we at Palantir have a role in helping others use the web in a way that helps strengthen humanity. Especially during times of economic and political uncertainty, it’s especially important for companies to understand why they exist. Market conditions and technology change all the time, and if you’re going to be successful in the long term, you need to root yourself in something that is more stable. In our case, that means being able to help customers understand, articulate, and solve their problems in a holistic way. We have always defined our success by the results we help our customers achieve, not by the names of the brands we work with, or the amount of profit we make. At the end of the day, I believe that companies are most effective when they can communicate who they are and why they are here. That’s something that we try to do at Palantir every day, and I think it’s a big part of what’s contributed to our success for the last twenty years. AM: Thank you George! For more great tips, follow us on Twitter at @palantir, or visit our website at palantir.net. Enjoy your day.

In the wake of countless scandals at the highest corporate levels, it’s easy to think that the key to getting ahead in business is to be a taker, but actually it turns out that the success of Enron execs like Jeff Skilling and Ken Lay are the exception rather than the rule. As Adam Grant, the youngest full professor at Wharton has found, Givers are the most successful…and the least successful people. In his fascinating New York Times Bestseller, Give and Take, Adam takes readers through the latest research on the promise and pitfalls of being both a Giver and a Taker. In this interview, Adam shares not only some of his superb book but also some of the other interesting insights in who make the best leaders. (Hint: it’s people who are not men.) Give and Take is available on Amazon, Audible and everywhere else. You can follow Adam Grant on twitter @adamgrant.

Introduction: John Lawrence Allen is a securities litigation attorney helping investors recover funds lost through investment fraud or incompetence. He's a former Los Angeles Deputy District Attorney and author of the new book, “Make Wall Street Pay You Back.”  Allen talks about the dirty tricks Wall Street plays and how average people can protect themselves from Wall Street. Allen also gives some tips for investors before they invest a large sum of money with an advisor or hedge fund. He also shares how financial advisors can mitigate their risk of fraud.   Key Takeaways & Time Stamps: (2:20) John Lawrence Allen: background and history of latest book (3:06) How Wall Street and the investment landscape have changed over the last 20 years (4:06) On the arbitration process (7:34) On the laws not being in favor of the consumer (11:34) A brief message from Bill Clinton (12:13) Causes of action: fraud, incompetence, etc. (17:00) The extraordinarily high commissions on life insurance sales (19:11) How does the investor know what fees are being assessed by financial advisors? (22:08) The length of the FINRA arbitration process (22:55) On “simplified arbitration” for small claims (24:58) Discussion of other types of fraud, beyond incompetence and excessive commission (30:20) Discussion of a managed future deal Jason was pitched on (33:30) Some tips on buying gold: always invest in bullion, never numismatic coins (38:12) Who claims are usually made against (39:42) Jon Corzine, MF Global, & the Insider's Game (44:19) Bad monetary policy forces people to take inappropriate risks (45:03) Closing statements   Links: www.MakeWallStreetPayYouBack.com. www.Amazon.com to purchase the book: Make Wall Street Pay You Back Find out more about John Lawrence Allen at www.myinvestorfraud.com.   Bio: Former Los Angeles Deputy District Attorney John Lawrence Allen represents investors nationwide in securities arbitration. Mr. Allen spent seven years working for two major Wall Street firms and was chief investment officer for two hedge funds. Mr. Allen pens a blog on impactful subjects that affect all of us and is a respected legal expert who provides insightful commentary on national TV, radio and print.   Audio Transcription: ANNOUNCER: Welcome to Creating Wealth with Jason Hartman!  During this program Jason is going to tell you some really exciting things that you probably haven't thought of before, and a new slant on investing: fresh new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible.  Jason is a genuine, self-made multi-millionaire who not only talks the talk, but walks the walk.  He's been a successful investor for 20 years and currently owns properties in 11 states and 17 cities.  This program will help you follow in Jason's footsteps on the road to financial freedom.  You really can do it!  And now, here's your host, Jason Hartman, with the complete solution for real estate investors.   JASON HARTMAN: Welcome to the Creating Wealth Show.  This is your host, Jason Hartman, and thank you so much for joining me today.  We'll be back with today's guest or segment, in just a moment.   [MUSIC]   JASON HARTMAN: It's my pleasure to welcome John Lawrence Allen to the show!  He is a securities litigation attorney, helping investors recover funds lost through investment fraud or incompetence.  He's a former Los Angeles Deputy District Attorney, and the author of a new book, entitled, Make Wall Street Pay You Back.  And of course you know over the years I've said with some degree of sarcasm, that Wall Street is the modern version of organized crime, and my Commandment #3 for successful investing is, maintain control, because when you don't maintain control, you leave yourself susceptible to three major problems.  Number one, and we're gonna address that during the interview with John today, you might be investing with a crook.  Number two, you might be investing with an idiot.  And so we'll address those two.  And number three, even if they're honest, even if they're competent, they take a huge management fee off the top for managing the deal.  So, we'll kind of dive into this.  John, welcome.  How are you?   JOHN LAWRENCE ALLEN: I'm good.  How are you today?   JASON HARTMAN: Good, good.  Well, it's great to have you.  And just to give our listeners a sense of geography, where are you located?   JOHN LAWRENCE ALLEN: My office is in White Plains, New York.  I used to have an office in California and midtown Manhattan, and I've now moved out to the Connecticut countryside to work in White Plains.   John Lawrence Allen: background and history of latest book   JASON HARTMAN: Fantastic.  Well, tell us about your background, and how you came to write the book.   JOHN LAWRENCE ALLEN: Well, I wrote my first book, Investor Beware, 20 years ago.  And that was—actually, more than 20 years, I guess it's been now.  Almost 25 years ago.  And that was the result of having been in the industry.  I spent 7 years on Wall Street, and I invented an arbitraged [unintelligible] program.  That's how I went into Wall Street.  And I got very, very dissatisfied with the [unintelligible], and the outright unethical activity I saw around me.  And it got so bad that I quit, and I wrote my first book, Investor Beware, to help people protect themselves from the way Wall Street operates.  But over the last 20 years, the entire investment landscape has radically, radically changed.  And the entire way brokers do business has changed.  And if investors aren't aware of these changes, they may very well end up becoming victims of the Wall Street community.   How Wall Street and the investment landscape have changed over the last 20 years   JASON HARTMAN: You know, when you say those changes, I don't know what you're referring to, so I'll have you tell me.  but is one of them—one way that I think large corporations really oppress people, is through the commercial arbitration act.  And I know so many years ago in the 90s, when there was a lot of securities fraud in the news—of course, that seems to be an ongoing issue, of course.  And, you know, a lot of people have lost money in the stock market.  They made some new rules—I don't know, you know, exactly which agency that came out of.  Maybe it was the FCC, or FINRA, I didn't mean to say FCC, did I say that?  The SEC, the Scoundrels Encouragement Commission, as it's been called.  But it is—is that arbitration?  Because arbitration, really I think takes away people's rights quite a bit.   On the arbitration process   JOHN LAWRENCE ALLEN: Well, that's an interesting—there's two sides to that coin.  Yes, they take away people's rights.  And people don't know it, but if you have a problem with a broker dealer—that's, you know, any licensed firm that buys and sells securities for you—if you have a problem with the representative who works at a broker dealer, when you sign your contract with them, you waive your right to a court trial or jury trial.  That means, you don't get to be in front of a group of your peers, you don't get to have any of the help that you would get in a court room, or in a civil or jury trial.  That's the negative side.  But there's a positive side to it.  The positive side is, you're gonna go into arbitration, which is significantly less expensive, significantly less time-consuming, and far swifter justice than you could ever get in a court.  Let's say you win a court case, and what's gonna happen?  Well, the arbitration—not the arbitration.  Securities firm is going to appeal that matter, and you're gonna get stuck in court for another couple of years.  On the other hand, if you go to FINRA—Financial Industry Regulatory Authority arbitration—you're gonna be in front in a case of $100,000 or more, three arbitration judges, who are gonna rule very quickly, and you're gonna have a result very quickly.  And if you win, they have to pay within 30 days.  You don't have any of the problems of collecting, or appeal, or the lengthy process that's involved in the court proceeding.  And there's one more positive, I find, in arbitration.  That is, if you get into a complex securities case, there are complex issues and facts that the average juror really can't grasp that well.  But these arbitrators are usually business people, and they have a business background, and they understand wrongdoing when they see it, and they're not afraid to make an award.  The one thing that is difficult is to try to get punitive damages.  That's very difficult arbitration.  I've attained it more than once, I've gotten it, but it's a difficult road to go, to try to get punitive damages.  And lastly, you don't have to get bogged down in a motion practice where a wealthy brokerage company with an unlimited pocket can paper you to death with motions and motions to compel and sanctions and hearings and depositions and request remissions and all the discovery stuff that goes on.  None of that's allowed in arbitration.   JASON HARTMAN: I mean, I've been in arbitrations.  They have depositions though.   JOHN LAWRENCE ALLEN: Not in federal arbitration.  For securities cases.  Yes, in civil arbitration, but if you go into a FINRA arbitration, there are no depositions, there are no request remissions, there are no interrogatories.  You can do a document request, but it's very limited, which means that you're gonna save a great amount of time and a great amount of expense, and a great amount of heartache.  So, all in all, oddly enough I actually—when I started, I didn't like, or I perceived not to like, the arbitration process.  But now that I've done it for so many years, I think that it's a good methodology to get swift justice.   JASON HARTMAN: Okay.  Well, I don't want to belabor that one, because it'll take away from sort of the crux of our discussion, but it's good to hear your point of view on that.  So, the thing you were saying, in terms of the laws not being in favor of the consumer, in this case the investor, is no jury trial, and what was the other one?   On the laws not being in favor of the consumer   JOHN LAWRENCE ALLEN: No court trial.  No judge—   JASON HARTMAN: Okay, no court trial at all.  So, arbitration.  But, were there any other things you wanted to mention there, before I got you on this tangent of arbitration?   JOHN LAWRENCE ALLEN: Well, I just—I think that the cost effectiveness is so overwhelmingly in the—you know what it does?  It puts you on an even footing with someone who has an unlimited budget, which you can't do in litigation unless you're willing to spend the money to ante up.  But in arbitration, you're on an equal footing with your opponent.  And if you have a competent, skilled, highly qualified and knowledgeable attorney who knows the ins and outs of FINRA arbitration, you've got a long way towards getting your money back.   JASON HARTMAN: So, that may be different—and again, I don't want to belabor this arbitration point too much, because there's other issues, of course.  But, it sounds like it's better, with a FINRA situation, for people that have been defrauded, just lost money because of incompetence on Wall Street.  But in a typical arbitration, those arbitrators—I think, I'm pretty sure, they really lean toward the person who put the arbitration clause into the contract, because they view them as repeat customers, and we'll call it part of the vast Wall—the vast arbitration conspiracy.  It blows my mind that AAA, the American Arbitration Association, is actually a nonprofit organization.  The fees are enormous.  And we all pay taxes to have a public court system.  And listen, I'm no fan of prolonged litigation, or litigation at all, but gosh, why do you have to pay for a private court, which in the typical arbitration, probably not FINRA, with what you explained, acts, in my opinion, as a bit of a kangaroo court—especially the fact that these things are confidential.  And you get these real estate developers that develop these condo properties and so forth, and you know, they all put arbitration clauses in their contracts.  And you can't do a litigation search on them before you, say, buy a property, to see if they're a bad apple, if they've been sued by hundreds of investors!  It's all hidden from public view.  And that just makes me think of a Third World, Banana Republic country where they've got these kangaroo courts, and you know, our whole system is based on transparency.  At least that was the original idea of it.  So, that's my bone to pick with arbitration.   JOHN LAWRENCE ALLEN: Well, you raise a good point.  And I would tend to agree with you.  Up until a couple years ago, arbitration had two panel members that were public, and one who actually came from the industry, and it was in many cases biased in favor of the arbitration people, meaning the broker dealers.  And I think the statistics, not from me personally, but the statistics generally bear out your concerns.  People don't do all that well in arbitration.  They win about half their cases, and of the cases they win, they win about half the money they got back.  So, I don't put that as good odds.  That's not been my experience, but I am very selective in the cases I take, and I put in a great deal of time to win these cases.  I understand that you're not gonna get money from three business people unless you can find a way to emotionally connect your client with them.  if you can't find a way for them to care about your client, they're not gonna give you anything back.  But if you can find a way to develop the cast to find an emotional connection—something that touches them, they're gonna be far more willing to knock the arbitration—when I say, to go after the broker dealer for fraud.   JASON HARTMAN: Let me take a brief pause; we'll be back in just a minute.   A brief message from Bill Clinton   BILL CLINTON: Hi.  This is Bill Clinton, and I want to invite you to hang out with my friend, Jason Hartman, in my hometown of Little Rock.  Jason and his interns, you know I like interns, are having his famous Creating Wealth Seminar and Property Tour here!  So drop everything, including Hillary, and go register at www.jasonhartman.com, right now.  This event is coming up soon, but, as I like to say, it depends on what the meaning of the word ‘is' is.  See ya there.   [MUSIC]   Causes of action: fraud, incompetence, etc.   JASON HARTMAN: Let's talk about what are some of the causes of action.  I mean, of course fraud is one of them.  But you also mentioned incompetence, and when someone has a securities claim, whom is the claim directed at?  You know, you've got the advisor who works at Merrill Lynch, which in my opinion, or whatever firm, I'm just saying Merrill Lynch because they're big.  But they can work at any firm; Ameriprise, Merrill Lynch, whatever, okay, and I tend to find those advisors are usually just slick salespeople who wear nice suits, okay?  Nothing more than salespeople.  They have cursory knowledge.  Very little real depth of knowledge, usually.  Of course I'm making a generalization here, and I apologize to those smart, great, ethical good brokers out there, because there are some.  But you've got the broker, you've got the investment banker, you've got the firm.  Who are you really—you've got the company.  There are so many layers to this.   JOHN LAWRENCE ALLEN: Well, let's talk about that for a second.  People don't know that you can hold a brokerage firm and its registered representative—that's the stock broker who provides you with a recommendation—for giving bad advice.  People think, well, that doesn't sound right!  If he gave me bad advice?  I mean, if I get advice, and the stock doesn't do what he thought, how can he be responsible?  And the corollary, or the answer to that, is this.  Under the FINRA guidelines, and the Securities and Exchange Commission guidelines, brokers are required to know your risk tolerance, time horizon, financial goals, and anything that can affect your capacity to invest.  That means if you're employed, unemployed, medical problems, but mostly, what they have to do is they have to match the correct product with your goals, objectives, risk tolerance, and time horizon, so that they make a recommendation that's suitable for you.  So, if you're 35, and have a good job, and you want to take some risk with having 70, 60, 75% of your money in the stock market, probably not bad.  The opposite of that is, what if you're 65 or 70, and you're retired, and living on your retirement assets, it would not be appropriate for a broker to recommend that you buy a highly speculative stock, or that you have 70 or 80% of your investments in equities, and stocks!   JASON HARTMAN: They seem like they do a pretty—I mean, I'm sure there are brokers out there that do that kind of stuff, but it seems like they do a pretty good job of making all the appropriate disclaimers, and you gotta sign a mountain of paperwork that of course is all written in their favor, and has a zillion disclaimers, and a lot of legalese—I mean, don't they pretty much cover themselves on that type of stuff usually?   JOHN LAWRENCE ALLEN: The paperwork covers them perfectly fine.  But that doesn't relieve them from their obligation.  A broker that makes a recommendation to a customer has a fiduciary duty to that customer to put the customer ahead of the broker.  So, let's say I have a client who wants to make an investment of a couple hundred thousand dollars, and I want to put them in what quote is a suitable investment, based on what they've told me about themselves.  Unless they put it in a suitable investment, I can make, let's say, $200,000 investment, maybe I can make $100, $150 in fees.  However, if I put them in something that the brokerage company is promoting, or pays a double commission, or is highly speculative, I might be able to charge them significantly more.  Let's say $1000.  So, if I can make $1000 on a improper or unsuitable investment, and $100 or $200 on one that's suitable, that puts in kind of a trap for the broker to say to themselves well you know, I'm really gonna forgo that extra 800 bucks I'm gonna make on this transaction and do what's right for my client.  How many people have the ethical and moral heart to do that?   The extraordinarily high commissions on life insurance sales   JASON HARTMAN: Not a lot of people, certainly on Wall Street.  Not a lot.  And you know, when you say that, it reminds me of two investments that are really just laden with heavy commissions, from what I understand.  One of them is oil and gas, and another is life insurance.  The fact that life insurance is even kind of promoted as an investment bugs me in some ways, although the needle might be moving a little bit, for me, on that.  But still, I just think it's insurance.  You know?  But those—I mean, some of these things have extraordinarily high commissions.  I mean, I'll give you an example of one.  One time a life insurance guy came into my office, and he wanted to market his life insurance products as an investment to my investors in my real estate firm.  And he slapped down literally a copy of some checks that he earned on some policies that he sold.  And one of them was like a $7 million life insurance policy.  And I'm not gonna get this exactly right, because I don't remember, but the check was for like $250,000.  I mean, it was insane, how—he says, look, I could split this with you.  I'm like, well don't I have to have a license or something?  And he says, well, there's a way around that.  We'll reclassify the fee.  And obviously I didn't do any deal with him, but I mean, some of these commissions on these things are just extraordinary.  On these oil and gas deals?  I hear that some of them are like half of the investment amount!  You know, if they get an investor to put $100,000 into some oil and gas deal, the salesmen will make 50 grand!  Whoa!  That's crazy!   JOHN LAWRENCE ALLEN: Yep.  That's true.  And in fact, if you want to go back a little bit further in time, there was a period in the late 80s and middle 90s where Prudential [unintelligible], which, you know, the rock solid, sold 400,000 of its customers $8 billion in phony partnership deals.  And those deals, they were making 30, 35, and 40% off the top before the customer saw a single dime.   JASON HARTMAN: Unbelievable.  That's just—that's just crazy.  So, is—so, okay.  So, the broker, or the investment advisor, with a registered rep—I don't know exactly what to call them—but, they steer the investor into something that's not as good for them, that obviously pays them a higher fee.  Right?  So, that's one form of—that's one actionable thing.  Now, how is the investor ever going to find that out though?  How does the investor know what the menu of fees is for the things that that advisor has to steer them into, available to them?   How does the investor know what fees are being assessed by financial advisors?   JOHN LAWRENCE ALLEN: Well, that's a very tough question.  And that's a very good question.  And the reason is because on a lot of these products that they're selling a product, the commission's in the product, and the customer will never know.  So, on that $200,000 example, if the broker makes $5000, you know, a 2½% fee, and that's in the cost of the $200,000, that means that really 195 of your money actually ever went into the investment.  And there's no way you can know, unless you read the prospectus, or you ask the broker.  They're certainly not gonna volunteer and tell you, oh yeah I'm gonna make 5 grand on this break.  And also, that also happens on principle transactions.  If you ever buy a stock or a bond, most bonds are sold on principle transactions.   JASON HARTMAN: What is a principle transaction?  What does that mean?   JOHN LAWRENCE ALLEN: A principle transaction is where there's no commission charge.  The fee is in the price of the bond.   JASON HARTMAN: Alright.   JOHN LAWRENCE ALLEN: So, as an example, if I call up my broker and say, you know, I want to get a 10-year bond, and let's say you can get a 10-year bond for 2.3% return per year over the 10 years.  So, you buy the bond with this 2.3%.  You don't know what the brokerage firm picked that up for.  Let's say they picked it up for 2%, and they charge you 2.3.  That difference in that spread is an enormous markup.  It could be many thousands of dollars.  So you just don't know in a principle transaction, and that's another way brokerage companies can—in fact, I've gotta case right now, I have a lady who had a very, very, very substantial portfolio, many millions of dollars, and she was charged over $3 million in markups and fees on bond transactions, and she never knew it, over the course of a 6-year period.   JASON HARTMAN: Wow.  Wow.  So, $3 million in fees and markups on what—   JOHN LAWRENCE ALLEN: On municipal bond transactions.  The safest most conservative of all transactions.   JASON HARTMAN: Right.  Yeah, right.  And I'll tell you something.  If you ask me, a lot more municipalities are gonna be filing bankruptcy in the future, because there are so many of them underwater.  Of course we've seen that with Detroit, Vallejo, California, some others.  But very interesting.  So, $3 million in fees—that is unbelievable!  What was the principle investment though?  I've gotta have some comparison.   JOHN LAWRENCE ALLEN: She had $30 million in municipal bonds.   JASON HARTMAN: So, 10%.   JOHN LAWRENCE ALLEN: In a laddered portfolio that never should have been touched, that had never been—not that—there should not have been any transactions, and in 6 years they traded $120 million with the bonds in her portfolio.   JASON HARTMAN: Unbelievable.  That's just insane.  So, she's in process, right?  Did you recover for her yet?   JOHN LAWRENCE ALLEN: We're in the arbitration process now.   JASON HARTMAN: How long does that take, when it's a FINRA arbitration?  What's the length of that process?   The length of the FINRA arbitration process   JOHN LAWRENCE ALLEN: Somewhere between 11 and 14 months, on average.   JASON HARTMAN: Okay, alright.  And, what is the amount of money—I mean, obviously that's a large client with some big money you're talking about, in terms of the investment size, and the investment losses.  But, how much does someone need to lose in order to make going to a FINRA arbitration worth it?   JOHN LAWRENCE ALLEN: Well, that's a good question.  I would answer that in twofold.  First of all, anybody that wants to seek help should only hire an attorney that would be willing to work on a contingent fee so they don't end up spending a lot of money trying to get back their losses.  That's item one.  Two, there are different levels of arbitration.  FINRA, within the last year and a half, has established a new type of arbitration called small claims.  They call it simplified arbitration.   On “simplified arbitration” for small claims   JASON HARTMAN: Oh, that's great.  Like small claims court kind of idea.   JOHN LAWRENCE ALLEN: Kind of, but a little different.  And that would—for FINRA, small claim is any loss below $50,000.  And if you have a loss below $50,000, you don't—and you go into this simplified arbitration, you don't even have to appear at a hearing.  You submit the entire claim, on paperwork; the respondents, the broker dealer, file an answer, and one arbitrator makes a ruling without you ever having to appear.  So it saves you testimony, litigation cost, travel expense, hearing fees, expert testimony.  It's all done in the pleas.  Now, you don't have to do it that way.  If the case is $50,000 or smaller, you have a one party, one arbitration chairperson, that's it.  You don't have a panel of three.  You have a panel of three above $100,000.  So really, I would say anybody that loses $10,000 or more, even $5000 or more, it's certainly worth it to pursue it.  I don't think you'd probably get many attorneys to handle a $5000 case.  But I've developed a methodology to help people with cases between $10 and $50,000, which is on my website, and I take them into the small claims arbitration process, and the whole thing can be done for very, very little money, and the best part is, unlike regular arbitration, small claims are usually resolved in 7 months or less.   JASON HARTMAN: Excellent.  So give out your website if you would.  That's a great resource, thank you.   JOHN LAWRENCE ALLEN: Well, my website is the same as my book; the book is Make Wall Street Pay You Back, and the website iswww.MakeWallStreetPayYouBack.com.   JASON HARTMAN: www.MakeWallStreetPayYouBack.com.  And you've got the small claims information on there, which is fantastic.  But then also, for larger losses, they can hire you, or another attorney?   JOHN LAWRENCE ALLEN: Correct.   Discussion of other types of fraud, beyond incompetence and excessive commission   JASON HARTMAN: Okay, good.  So, talk to us more about some of the other types of fraud out there.  there's incompetence, there's, I guess I'll call it steering to the product that pays the highest commission.  What else is there?   JOHN LAWRENCE ALLEN: Well, beyond the suitability issues, which are very numerous, and that expands a lot of things that brokers might do.  They might put you in—there's an example, as I said before, if you're 70 years of age, you probably shouldn't be in a 75% stock portfolio.  On the other hand, if you're 75 and they put you on 100% in one investment, and over-concentrate you, that's not correct, that's not suitable either.  So, it really doesn't matter what age you are.  if a brokerage company takes all your money and puts it in one investment, that's clearly unsuitable, because if that investment goes down—even Apple, as an example.  People do fabulous in Apple, but Apple also had, about six months ago, a 300-point drawdown.  And if you had all your money in Apple, you're hurting!  So, that's another thing they do.  Also churning.  Churning is where a broker makes excessive buys and sells in your account, without an interest in making you profits, the broker's interest is in getting as many commissions as they can from your account.  And what's interesting is in a churning case, you could actually—I've had cases in churning where the client never knew the account was churned, because they didn't lose any money!  The account was churned for a couple years, they ended up—you know, the stock market was up 30% over a two-year period and their account was flat.  They couldn't understand why.  And when I dived into it, I found out, well, it was flat because $200,000 in commissions were paid over that period, and if you hadn't had the $200,000 in commissions, you would have been up 200 grand, and you would have been up pretty much where the stock market was.  So, if a broker exercises control over the account, and buys and sells excessively to generate commissions, they churn your account, and that's actionable.   JASON HARTMAN: So, in other words, you don't have to have actually lost money in the aggregate.  You could still have an investment.  Your portfolio could still be up.  But just because of the malfeasance of the brokerage firm, or the individual broker, you could have lost money through churning—now, the churning thing, is that as big as a deal anymore?  Because it seems like the industry has moved to a model of managed money, where all they're really doing is, you give them $100,000, and they're charging you, you know, 2% a year, or whatever the number is.  And you're not really paying for trades.  But, one of the scams is, a lot of times, you're paying in multiple layers!  So, you'll give the guy sitting at Merrill Lynch your $100,000, and he'll say, well, I'm gonna charge you 2% a year, or whatever the number is, and so, he doesn't make money on churning per se, but then what he does is he goes and he puts your money into a bunch of other funds like mutual funds where they're making money inside that fund too, because of all these management fees.  I mean, that's just, wow.   JOHN LAWRENCE ALLEN: Well, you're absolutely correct.  And that is—and that's one of the things I had to cite in the book.  The methodology on Wall Street has shifted from a commission-driven business to an asset-gathering business.  So, the churning claims are down dramatically.  They're not out.  And the reason they're not out is because there are products called managed futures.  And most of these managed future products really don't exist to have the customer make money.  They exist for the broker dealer to reap huge commissions from buying and selling at a high velocity commodities.  And, what's interesting about these managed futures, is most of them have a program in which, let's say you give somebody 50 grand.  And let's say they have a hot hand and their managed commodity accounts have doubled, and you go up from 50 to 100,000.  The prudent thing to do would be to pull your 50 out and play with their money.  But that's not what they do.  What they do is, if you go to $100,000, they merely double the amount of contracts they're trading, so they can generate double the commissions.  So, if you had a $50,000 account, and you were doing, let's say, five contracts in a trade, and you now have $100,000 account, they double that, they go to 10 contracts.  Let's say you make an incredible profit, you go to $200,000. Your 50 has grown to 200.  Well, you're now gonna go from 5 to 20 contracts.  Which means that even the smallest move, after those enormous profits, will wipe out all your gains in a very short time.  Classic example of that is long term capital, which made 30, 35, 40% a year for three years, and then in six weeks, wiped out not only all of the gains, but the $4.5 billion that was still there.  Totally wiped it out when the commodity markets went the wrong way.   Discussion of a managed future deal Jason was pitched on   JASON HARTMAN: Wow, unbelievable.  Hey, can I run something by you that I was pitched on?  I actually had the guy on one of my shows, and it sounded pretty good…it's a managed future deal, and I just wanted to see what you thought of it.   JOHN LAWRENCE ALLEN: Sure.   JASON HARTMAN: I didn't do this investment; at least not yet.  But, the guy was pretty convincing, I have to tell you.  And so, he works in Chicago, and you know, is on the floor of the exchange there, and the big pitch is that Japan, which most of us know is massively in debt, the whole country is just in a mess.  I mean, the US is too, but the US has the reserve currency, and you know, some different circumstances, obviously.  And the pitch is that Japan will default on their debt, and what you should do is over a 5-year plan, with a $30,000 minimum investment, let me buy options on this debt, that it'll default.  Let me short the Japanese debt.  It's just saying, it's gonna default at some point.  And there will be what's called option decay.  Now, granted, I don't have a big understanding of this.  I'm just a consumer.  But there's something called option decay, and as the option decays, what he's basically doing is over the course of five years, using $500,000 per month of your $30,000.  I think—I don't know the math on that.  Yeah, 60 months.  500 a month.  To pay for option decay.  But at some point in that 5 years, there's gonna be a default, and you're gonna win, you're gonna make money.  That's the prediction.  Of course it's a prediction.  What do you think of that?   JOHN LAWRENCE ALLEN: Well, that's a long-term bet, and I guess the thing I'd be most concerned about would be, do they have the—I presume this is not an exchange-traded fund?  If it doesn't trade at any known stock exchange or commodity exchange, you have to worry about the counterparty risk of the person, should they do what they claim it's gonna do, are they gonna be able to pay you?  And a lot of these counterparty risk cases that have come up during the 08, 09 crisis when a lot of off-market contracts were traded, and they couldn't make good when the unlikely event occurred, like AIG, which was betting on collateralized debt obligations, they said, oh, no country's ever gonna go into bankruptcy.  No, we're not really gonna have to worry about that.  And lo and behold, Greece goes into bankruptcy, and AIG almost went under!  Took us close to a trillion dollars to bail out AIG, which I think was a big mistake.  But there was a counterparty who couldn't pay!   JASON HARTMAN: Maybe the concept is a winner.  Maybe it actually works.  But then the counterparty just defaults, and they can't pay you.   JOHN LAWRENCE ALLEN: Yeah, that's why I try to stick with anything that's exchange listed.  So then at least I know they're going through a well known New York stock exchange, the COMEX, the NASDAQ, and there's some third party who's trying to make sure that they're gonna honor their margin requirements.   Some tips on buying gold: always invest in bullion, never numismatic coins   JASON HARTMAN: Good.  Okay, good point, good point.  Okay, what else should people know?  Do you want to talk about any other types of investments?  I mean, maybe you want to mention just quickly maybe gold?  I know that that's not a huge market, but we touched on oil and gas.  If, you know, you want to mention any other alternatives.   JOHN LAWRENCE ALLEN: Well, I think for gold, my suggestion would be, anybody who wants to invest in gold, I don't have a problem with them investing in gold.  I do have a problem in how they do it.  I don't think anybody who wants to own gold should ever use leverage, options, or margin.  They should only buy it for cash.  They should take delivery, they shouldn't allow any third party to store their gold, and they should only buy gold from a reputable dealer who's been in business over 10 years, and then finally, only gold bullion, not numismatic coins which are supposed to have great asset value.  And when I say bullion, I mean a Canadian maple leaf, an American gold eagle, you know, a South African Kruger rand, an Austrian krone, some well known gold bullion that's difficult to make in a, what I would call a forged or dishonest way.   JASON HARTMAN: Right, right.  A lot—the scams and the numismatic market are rampant, and every gold dealer, when you call them up, you know, a lot of times they're advertising on the radio, and they're promoting the concept of gold or silver or platinum or palladium, and they're talking about bullion.  But when you call them, they try to up sell you to numismatic coins, because they're just much higher margins.   JOHN LAWRENCE ALLEN: Tremendous, tremendous margins.  You're talking sometimes 30, 40% margin on a numismatic coin.   JASON HARTMAN: Right.  But you know, that's not a security necessarily.  I mean, are you talking about—see, I think the only way someone should invest in gold, or precious metals, is in the way where you actually take possession of it.   JOHN LAWRENCE ALLEN: I agree.   JASON HARTMAN: You're talking about inside of a fund, right?  I mean, you're not talking about—I mean, there's—there are frauds where people actually take possession, and they find out the metal is fake.  But I don't think that's super common, probably.   JOHN LAWRENCE ALLEN: Those are very, very rare.  And those are usually not government-sponsored products like American eagles or maple leaves from Canada.  And, they're usually sold by disreputable dealers.  But if you buy gold from a reputable dealer and have it shipped to your home, put in a safety deposit box, or bury it somewhere, that's the safe way.  You don't want to have them tell you, oh, we'll store it for you.  No, you want your gold, if you're gonna buy gold.   JASON HARTMAN: I agree with you.  The point of that types of investing is to be in possession of it.  absolutely.  And I just can't believe the people that go for these deals where they say, oh, they're gonna store them in a vault in Switzerland.  Yeah, right.   JOHN LAWRENCE ALLEN: And another thing now—another section of my book, Make Wall Street Pay You Back, is, as you said very early on, we're no longer a commission-driven business; we're a management business, where they grab their assets and send them out to management.  That adds a layer of protection to the broker dealer and the registered representative, the stockbroker.  However, that doesn't stop them from still having to make a suitable recommendation to this manager.  So, when you go to a broker dealer and you give them your assets, and they agree to manage them, and they're not gonna charge you a commission, they're gonna charge you a percentage of the assets you have under management, you need to be sure that whatever manager they hire, that that manager is—and the manager style—is in keeping with your goals, objectives, risk tolerance, and time horizon.  You don't want to go into an all equity small cap microcap fund, if you're trying to invest in what is supposed to be on the stock investing side, a more conservative portfolio.  And also, you want to be sure that the style of that manager doesn't involve, unless you're willing to take that risk—you know, I'm not saying risk is bad.  You just need to know about it, make an informed consent about it, and be willing to accept it.  But you need to be sure that that style of that manager is in keeping with your risk assessment.  Because, if you don't want to take a lot of risk, then you can't have options, derivatives, or futures, or leverage, employed by that manager.  So you need to know the style, and the type of investments, and where they're gonna make those investments.   Who claims are usually made against   JASON HARTMAN: Toward the beginning of the show I talked to you about all the different layers of this onion, and how, who are you really—who is your claim against?  We've talked about registered reps, brokerage firms.  What about the other people in the food chain?  And then, all the way up to the actual company, whose stock you own.  In the board of directors, and the CEO, and the CFO, and the CTO—all of these guys are just skimming off the top.  I mean, the Dennis Kozlowskis of the world, and all the rest of them.  I mean, there's a lot of fraud going on at that level too, where, you know, the brokerage firm could be okay, the rep could be okay, but the actual company whose stock you own, do you go after them too?   JOHN LAWRENCE ALLEN: Well, I try to make a rule not to go after anybody who has a questionable pocketbook to recover from.  Generally—   JASON HARTMAN: Oh, right.   JOHN LAWRENCE ALLEN: Generally, when there is a corporate crime, or a corporate fraud, most of the time, not always, most of the time, there aren't assets sufficient to recover for the shareholders.   JASON HARTMAN: Because they've sucked it all out of the company, and the company's basically an empty shell.   JOHN LAWRENCE ALLEN: Exactly.  Madoff, or Enron, or Delphi, you know, if we were to go back a few years to all of the security problems going on.  But interestingly enough, if you do it at a grand enough scale, you get to walk away scot-free and you don't even go to prison.   JASON HARTMAN: It's unbelievable.  Yeah.   Jon Corzine, MF Global, & the Insider's Game   JOHN LAWRENCE ALLEN: A perfect example is Corzine, who was the governor of New Jersey—   JASON HARTMAN: MF Global.   JOHN LAWRENCE ALLEN: And Jon Corzine.  And he was a huge donator to the Democratic Party, and a big supporter of Obama, and he took over a company, MF Global.  And they were just a plain bread and butter vanilla commodity broker.  They bought and sold commodities, they made, you know, a few pennies off of the buying and selling of these commodities.  Well, he didn't think that was enough money.  So he went and made a multi-billion dollar—I think 3.6, to be exact—billion dollar bet on the debt of other countries and companies.  And that bet went awry.  Very badly awry.  And Corzine went in, and he claims he did not do this.  He claims he didn't know.  But under his supervision as the chairman of the company, they invaded the assets of their own clients, and stole $1.3 billion of assets from their clients to cover their bad bet.   JASON HARTMAN: And that's Jon Corzine, and $1.3 billion, that's billion with a ‘b.'  Not million—billion, okay?  Huge.   JOHN LAWRENCE ALLEN: Correct.  Took it out of their clients' accounts.  They got caught, they had to return what money they could find, he paid a fine, and he walked away without going to jail for committing absolute grand larceny on a monster scale.   JASON HARTMAN: Un-fricking-believable.  I mean, this is so disgusting.  It's just—it's just disgusting!  And it's amazing to me, like, one of the things I tell my listeners is, don't trust resumes.  Ken Lay, with Enron—he was buddies with George Bush, okay?  I'm sure the pictures were all over the company for people to see when they came in.  Bernie Madoff was president of NASDAQ.  Jon Corzine was governor of New Jersey!  I mean, your resume doesn't get much better than any of those, right?   JOHN LAWRENCE ALLEN: Oh, absolutely.  And let's add to the list Mr. Mozilo, who was the chairman of Countrywide, who got bought out by B of A, and he was one of the large perpetrators of the entire mortgage debacle, and people lost billions, maybe even trillions, and he walked away scot-free and he, he had his “friends of Mozilo,” who got mortgage—well, I should put it this way.  Members of Congress and the Senate, who got special mortgages from Countrywide at highly reduced rates, because they were friends of Mozilo.  And he walked away scot-free.   JASON HARTMAN: It's just a total insider's game.  That old question, you know, when the broker takes his buddy down to show his buddy his new yacht, and his friend says, where are all the clients' yachts?  You know?  It's an in—that's what people have to understand.  Wall Street is an insider's game.  And the insiders are the ones who get rich, because the insiders have all the connections, and they basically make the laws.  Because they have lobbyists, they have lawyers, they have PR firms, they have accounting firms, and the game is just so stacked against the investor, I don't know why the general public is still playing in this field.  They're totally outgunned!  And then you look at Michael Lewis and his great new book, Flash Boys, which I'm sure you're familiar with—I mean, are these—Goldman Sachs—are they just a totally criminal organization too?  Probably.  I don't know.  It sure seems like it.  It's just unbelievable.  I mean, in Flash Boys, which I highly recommend, Michael Lewis talks—he just profiles all of these companies that are like, getting in line to do this high frequency trading, where the speed of light is not even fast enough anymore, at 186,000 miles per second, and all the people profiting from all of this stuff in the food chain, it's beyond despicable.  It's totally rigged.   JOHN LAWRENCE ALLEN: It's very difficult.  It's a hard game to play.  But, the other side of the coin is, with the Fed maintaining these totally illusionary, 0% interest rates—   JASON HARTMAN: What else can you do?   JOHN LAWRENCE ALLEN: Everybody's having a hard time trying to make ends meet, and they're forced, almost, to go into the stock market.   Bad monetary policy forces people to take inappropriate risks   JASON HARTMAN: Yeah, they're forced to do—see, this is—bad monetary policy like we have, forces people to take inappropriate risk!  Because they can't get any yield in their bank account.  And it's so sad to see the people that are older and have really done the right thing all their lives.  You know, they saved money, they planned for the future, they delayed gratification, and now they got a few bucks.  It's sitting in a bank account, being destroyed by taxes and inflation, especially inflation, which, you know, is higher than what the government would have us believe, and they just can't get any yield.  So, they go in, and they play with the stock market, and, you know what happens.  I mean, that's your business.   JOHN LAWRENCE ALLEN: Yes.   JASON HARTMAN: Yeah.  It really—   JOHN LAWRENCE ALLEN: Sad but true.   Closing statements   JASON HARTMAN: Yeah.  It really is sad.  Well, this has been a fascinating discussion.  A lot of people tell lawyer jokes, but I'm glad there are lawyers out there who really help people get some justice.  And one of them is you, so, thank you for doing that.  And give out your website again.  Of course the book is onwww.Amazon.com.  I definitely encourage people to read it: Make Wall Street Pay You Back.  The website is the same name, right?   JOHN LAWRENCE ALLEN: Yeah.  www.MakeWallStreetPayYouBack.com.  There's also a section in the book about arbitration, what it's like, what you have to know, what it's like to go through one, so people won't feel so nervous about going through the process, and realizing that they have rights, they ought to stick up for their rights, and not be afraid to pursue even Merrill Lynch or Morgan Stanley or Goldman Sachs.   JASON HARTMAN: Good.  Good stuff.  Well John Lawrence Allen, thank you so much for joining us today.  This has been very informative.   JOHN LAWRENCE ALLEN: Thank you very much, Jason, and I appreciate the time.   [MUSIC]   ANNOUNCER (FEMALE): I've never really thought of Jason as subversive, but I just found that's what Wall Street considers him to be!   ANNOUNCER (MALE): Really?  How is that possible at all?   ANNOUNCER (FEMALE): Simple.  Wall Street believes that real estate investors are dangerous to their schemes, because the dirty truth about income property is that it actually works in real life.   ANNOUNCER (MALE): I know!  I mean, how many people do you know, not including insiders, who created wealth with stocks, bonds, and mutual funds?  Those options are for people who only want to pretend they're getting ahead.   ANNOUNCER (FEMALE): Stocks, and other non-direct traded assets, are losing game for most people.  The typical scenario is: you make a little, you lose a little, and spin your wheels for decades.   ANNOUNCER (MALE): That's because the corporate crooks running the stock and bond investing game will always see to it that they win!  Which means, unless you're one of them, you will not win.   ANNOUNCER (FEMALE): And, unluckily for Wall Street, Jason has a unique ability to make the everyday person understand investing the way it should be.  He shows them a world where anything less than a 26% annual return is disappointing.   ANNOUNCER (MALE): Yep, and that's why Jason offers a one book set on creating wealth that comes with 20 digital download audios.  He shows us how we can be excited about these scary times, and exploit the incredible opportunities this present economy has afforded us.   ANNOUNCER (FEMALE): We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing, and achieve exceptional returns safely and securely.   ANNOUNCER (MALE): I like how he teaches you to protect the equity in your home before it disappears, and how to outsource your debt obligations to the government.   ANNOUNCER (FEMALE): And this set of advanced strategies for wealth creation is being offered for only $197.   ANNOUNCER (MALE): To get your creating wealth encyclopedia, book one, complete with over 20 hours of audio, go to www.jasonhartman.com/store.   ANNOUNCER (FEMALE): If you want to be able to sit back and collect checks every month, just like a banker, Jason's creating wealth encyclopedia series is for you.   [MUSIC]   ANNOUNCER: This show is produced by the Hartman Media Company.  All rights reserved.  For distribution or publication rights and media interviews, please visit www.HartmanMedia.com, or email media@hartmanmedia.com.  Nothing on this show should be considered specific personal or professional advice.  Please consult an appropriate tax, legal, real estate, or business professional for any individualized advice.  Opinions of guests are their own, and the host is acting on behalf of Platinum Properties Investor Network, Inc. exclusively.  

Purchase at AmazonRob Bradley, formerly Ken Lay's speechwriter and a 16-year Enron employee, argues that the Left has incorrectly blamed capitalism for Enron.  But he also believes that the Right’s take on the company's collapse has scarcely acknowledged the extent to which the mixed economy and anti-capitalist doctrines allowed the worst to get on top.Bradley maintains that a preoccupation with the diagnostics of Enron's failure (the market did exact its revenge) has neglected the why behind the why.  The systemic failure known as Enron, Bradley argues, not only exonerates free-market capitalism but also strengthens  the capitalist worldview.  Enron's boom and bust is the story of how company founder and chairman Ken Lay developed a sophisticated business model based on rent-seeking (political  capitalism).  Of particular note, Enron tried and failed to parlay climate alarmism, "energy sustainability," and social corporate responsibility into business viability. Bradley's unique, insider interpretation of Enron has direct implications for today's debates over energy and climate policy, business ethics theory, and best business practices. William Niskanen, who holds a somewhat different view, will comment. See acast.com/privacy for privacy and opt-out information.

This year marked the fifth anniversary of the demise of two companies -- Arthur Andersen and Enron. Recently, a panel of former executives from these companies spoke out publicly for the first time about their experiences during this key moment in American business history. This podcast highlights remarks by Dr. Vince Kaminski, Professor of Executive Education at Rice University and former Director of Research for Enron; Jack Tompkins, former Andersen partner and former Chief Financial Officer of Enron – he left the company before Ken Lay took over in 1986; and Phil Wedemeyer, Director of Research for the Public Company Accounting Oversight Board (PCAOB) and former Andersen partner.

Ken Lay of Enron fame suffered a fatal heart attack this week, which raises the question, “Is it possible to be 'stressed to death'??  Today we'll discuss the difference between acute and chronic stress, and what you can do to protect yourself. We'll discuss all sorts of news regarding B vitamins and homocysteine. And, yet more news reinforcing the dangers of teenage drinking. Dr. Cooper takes calls.

Includes an interview with Lori Lipman Brown, the first fulltime secular lobbyist in D.C., working with the Secular Coalition for America, which the Freedom From Religion Foundation belongs to. Also a little commentary on religion in the news (Ken Lay conviction, Iraq war developments & the anniversary of the founding of the Gideon Society). Songs include Kristin Lems' "Days of the Theocracy," and Dan Barker's musical version of The War Prayer by Mark Twain, as well as "God-Less America." Freethinkers Almanac looks back at Anne Newport Royall, the nation's first lobbyist for state/church separation, working in the early 1800s. (MP3, 49 min, 22.2 MB)

With this spring's criminal trial of former Enron executives Ken Lay and Jeffrey Skilling the public was again seeing accounts of Raptors Chewco and Osprey -- some of the shadowy ”special purpose vehicles” the energy company used for improper purposes such as concealing its mushrooming debt. But while much of Enron's SPV use was illegal most SPVs are proper and they can serve a variety of functions. Many are separate business-financing operations whose transactions do not appear on the parent company's books. They can be used to create easily traded asset-backed securities that allow their ”sponsor” companies to convert cash flows expected over many years into immediate lump-sum payments according to Wharton finance professor Gary B. Gorton who with colleague Nicholas Souleles has written a paper on the topic titled ”Special Purpose Vehicles and Securitization.” See acast.com/privacy for privacy and opt-out information.