1929 vs 2025: Andrew Ross Sorkin on Crashes, Bubbles & Lessons Learned

0:28Hey, Sorkin, I just went through the comments. crush your questions in a minute. We are giving people ground truth data to underwrite your own opinion. What did you guys say? That was fun. That was great. I'm doing all in. Chamath, you're going to love these characters. I kid you not. I kid you not. The people who are involved in this at that time, like the main character. I totally agree with you. I am a huge, to be honest, I've studied this period for a while, actually. I think it's great that you wrote this book. I think it's incredibly fascinating. We're here with Andrew Ross Sorkin, Chamath and I, with another all-in interview.

1:00Riveting. Today, we're going to talk about Andrew's new book, 1929, and specifically cover why Andrew got into it, what the history teaches us, and are we looking at another 1929 or something different this day and age, as a lot of people may speculate. But Andrew, thanks for joining Chamath and I to talk about this. Thank you for having me, and I love your background there. Thank you. A true image of what was actually happening in October of 1929, crazily enough. That's right. And it was colorized by some AI or something, I think. But yeah, great. How and why did you get into this era of 1929, the great stock market crash of 1929?

1:44Like you're a busy guy. You're on TV every day. We see you all over. You're at conferences. I saw you at a conference in Southern California this week. Then you're at another conference and you're back in New York. You're very busy. At what point did you say, hey, I want to sit down and write a book about this era? Okay, so here's what happened to me. So I've written that book, Too Big to Fail, about the 2008 financial crisis. And people used to always say to me after that, they'd get into these very in-depth conversations about 1929, or they'd want to know more about 1929. And most people know that something terrible happened in 1929.

2:17They know there was a crash in 1929. they oftentimes think it like is the great depression or leads to the great depression but if you were to ever ask most people now chamath and you are maybe in a different category and say well who are the people who actually were engaged in this what were they saying to each other who was sleeping with who who was trying to over who what was actually happening here and what were the incentives and what were the motivations that led to what clearly were some poor decisions. I couldn't find that. So I went on a vacation like 10 years ago with my wife, very nerdy.

2:50And I like downloaded all these books to my Kindle. And there's some great books, by the way, about this period. Don't get me wrong. But they didn't have the sort of character driven story. Like I loved Den of Thieves. I love Barbarians at the Gate. I love stories about people. Fabulous books, fabulous books. What did your wife think when you ignored her the entire vacation you guys were on and were just reading books on your kindle i mean i think she thought it was out of my mind but um no so i i read these books and i was like okay where's the story where's the where are the people before you get to the people can you can you give people a concise tick like i was gonna ask you for a tick tock of the overarching economic issues before we get to the sort of the characters because i think yeah because i think what to your point which is an important one people think it was like a okay stocks went down right but the other things like the overproduction of the economy tightening interest rates the war debt like all of this stuff was just commingled and nobody fully understands that can you maybe give folks a precise representation of the setup the setup okay so let's just go back even let's go back to 1919, because actually I think that's a critical year.

4:06So prior to 1919 in America, people did not really borrow money. It was like a moral sin to get credit, but people didn't do it. In 1919, General Motors says, you know what, we're going to start lending people money so that you can buy a car. And that was actually like a major inflection point in America, because then Sears Roebuck clocks what's going on and says, okay, we're going to do this too. for appliances. And then a guy named Charlie Mitchell, who ran a bank called National City, which becomes Citigroup, says, you know what? We can do this for stocks. And all of a sudden, brokerage houses are opening up on the corners of streets the way we see Starbucks today.

4:49It's literally like that. And you could go into one of these places and you could put a buck down and they would literally loan you$10 off of your dollar. I mean, that's how insane things were. And at the time - There was no risk underwriting of any kind. Zero risk underwriting. Nobody understood what they were doing. By the way, there's no SEC. There's no regulations. Somebody who read this book early said, oh, in your research, did you get a chance to read any of the prospectuses for the companies? I was like, prospectuses? Like if there was like a leaflet that they handed out on the street, you'd be lucky.

5:22So there's nothing. And it's just like a complete go-go era. Forget about 1929. In 1928, the stock market went up 48%. So people are just, there's just sort of like this, it's a little bit of the Chuck Prince when the music's playing, you're dancing and everybody's dancing and nobody's even thinking about the music stopping, kind of like ever. Now, meanwhile, there's also these technological changes. I mean, huge generational technological changes in the same way. I think we're probably talking about like AI today, radio. So RCA was like the NVIDIA of its time. Everybody wanted into RCA, the stock ticker was radio, because it was like going to change the world.

6:07And the other big piece of this was also similar to today, this idea of democratizing finance. It was like, OK, the elites have had their way. They've made all the money. We're now going to let everybody in on the action. Now, the difference between then and now, though, was there was also like crazy amounts of manipulation, insider trading. As I said, there were no rules, like literally no rules. Nobody's going to jail for this stuff because there wasn't a rule against it. By the way, it wasn't just individuals that was investing and overextended with margin, but the banks would take depositors' money and they were going along the stock market.

6:44The banks were doing it? By the way, the banks, regular old corporations. I mean, could you imagine if it turned out that like JP Morgan and Goldman was going long in video with depositor funds? That's the effective equivalent of what was happening back then too. You had corporations taking their balance sheet and effectively then loaning it out so that people could go buy stocks. That was the other thing that was happening. So there's a sort of like just the push towards investing and overproduction and all sorts of other things created this sort of frothy market. And you had a Fed. You mentioned the Fed, which is an interesting part of this.

7:24There was a Fed. It was new, started in 1913. They knew this was a mess. Like they kept saying to themselves, you read all the diaries and notes that I was in the last eight years. They knew there was a problem. But they were scared out of their mind about doing what they probably should have done, which is raise interest rates. But they couldn't pull off like a Volcker kind of thing. Sorry, but can you double click into what you said about the fact that there was a social contagion around wealth creation that people felt like the elites had had their way and now it was everybody else's turn? Just describe that.

7:58Like what had caused that and what amplified that social contagion? And who was everyone else? Were these factory workers because we're kind of on the heels of a big industrial buildout? So like, was it the folks were had savings for the first time? Like, where's this coming from? Well, so what's really happening is you have a lot of folks who are coming from the from farms, frankly, and moving to the big cities for the first time. That's a huge part of what's happening. So most of the trading, I should say, is happening in the big cities. It's not happening, you know, out in small towns. It's happening in big cities for the most part.

8:32But that whole sort of scenario, once they're in the big city and they're seeing that there's sort of this wealthy group of people, talk about inequality, this wealthy group of people, and they want in on the action. And also, by the way, the people at the top, meaning the bankers and investors and entrepreneurs, are like, we think there's this big opportunity to open this up for the little guy or the ordinary investor. We think this is like a huge opportunity. There was a guy named John Raskob, who's sort of like the Elon Musk of his era. He actually ran General Motors, created the credit program there, then becomes hugely wealthy, then gets into politics, by the way, and to building the Empire State Building.

9:11But he was trying to create almost like the first mutual fund because he thought that people should be able to get in on the action the way he did. That was like his whole conceit. And he talked about it pretty openly. There was a famous article called Everyone Ought to be Rich. That was his line. Everyone ought to be rich. And it also was a time where sort of the American dream shifted a little bit, I think, from sort of a Horatio Alger story a little bit to like a lottery. Can we get rich? Like the whole idea of capitalism is going to give us this great opportunity. And, you know, obviously we're traveling with that today.

9:49Do you think that radio played a role in that because it amplified these stories and made them go faster and people would just like start to tell these tales and folks started to forget the Horatio Alger part? Like, I'm just still trying to understand, like, you have you have folks on the farms, right? They're getting educated. The industrial revolution is happening. So they're moving to the city. And the radio then is maybe what Instagram is like now. You're seeing people with wealth. You're seeing this wealth that you don't have. You aspire to that. Yes. And then something comes in and fills the void?

10:21Is that kind of the mechanic? I think something fills the void and all of a sudden you now have the opportunity because the bank or the brokerage houses are going to lend you all this money. And it's not just radio being the communication device. It's really the media. So the other thing that was happening during this period, so Time Magazine starts in 1923, Forbes, 1917. all of a sudden Charlie Mitchell, the CEOs, are now on the cover of magazines the way Babe Ruth and Charles Lindbergh had been on the cover. So sort of the shift in how people even thought about business, none of these guys were famous before the 1920s, but they became famous and everybody wanted to be them.

11:05This was what America was about, was this industrialization, right? And this was kind of like, hey, we're pioneering an entirely new world and these are the leaders doing it. And these are the rock stars that are transforming this country. I mean, was that kind of a big part of what was going on at the time? Totally. And everybody wanted to be a rock star. By the way, it's the same way everybody wants to be you, David, or everybody wants to be Chamath, or they all want to be Elon. Like, I think there was a huge thing like, okay, and here's this opportunity. And they were being sold the opportunity and given the opportunity, not just to invest, but again, I think that the margin piece of it was such a crucial, crucial element.

11:41Do you think it's a coincidence, Andrew, that now you're publishing this book in 2025, but does it feel like eerily similar to you, like way too similar where you can almost map one-to-one those boundary conditions then in some version of that today? Is that what you feel? Like a little bit, but I would say that wasn't my intent. Like when I got involved in this, I just wanted to retell the story and figure out who these guys were. I ended up after that crazy vacation with my wife, I ended up going to the Baker Library. I happened to be giving a speech at Harvard. And I walk in there and I had some time and I asked the librarian, I said, can I see these boxes?

12:19This guy, Thomas Lamont, who ran JP Morgan at the time. And I said, can I look inside these boxes? And inside the boxes, his secretary is keeping transcripts of his phone calls with Hoover and Roosevelt. Like, by the way, Same way like everybody's probably talking to Trump or Trump today. And I'm like, oh, my God, I haven't seen it. And you're seeing the conversation. And I thought, OK, if you could use those transcripts in an actual story and then you could figure out, I didn't know if other transcripts existed for all the other characters. Wow, you could recreate this whole crazy situation. Right.

12:53But I didn't go into it thinking, OK, this is all one to one. And I don't think it is one to one. I think there's a lot of leverage in the system today, but it's a different kind of leverage. I like to believe that there's now an SEC. There's other regulations. You can believe it. There is one. Paul's doing a good job. He's there. So I'm not here to tell you that we're going off a cliff tomorrow. I think there's probably some things that are happening in our economy today that do mirror that period. And I hope there's some lessons in here. But do you think the regulations that have been put in place over the past 100 years, and there have been several cycles, one of which happened after 08, of trying to create new protective provisions around how we operate in our financial markets, have they actually changed things enough?

13:38Or does the human element always find its way? It always finds its way to frothiness, to frenzies, to these kind of moments of exuberance, easy money. And this like, there'll always be a path, you know, whether some people might argue crypto tokens, there was an NFT moment a few years ago, wherever the regulation kind of path of least resistance is, that's where everyone goes. Totally. That's always going to be the case. That's the human condition. We all want more. You know, there's that great line in Wall Street 2 where I think Michael Douglas says to Shia LaBeouf, I thought the second Wall Street was not as good as the first one, by the way, says something like, what's your number?

14:16And he looks at him and he goes, more. Right. And that's... That's humans. That's humans. And that's humans. And more means we're all trying to figure out how we're going to get to more. And I think that that was what was going on then. To some degree, it's what's going on now. I think what it's always going on. It never changes. It's not like there's some unique moment today. Maybe there's technology that's kind of unlocked this kind of news cycle. Look, the other piece of this, and it was actually a lesson for me that I still grapple with today. I think people think the word speculation is like a dirty word.

14:50And the truth is, having never written this book and too big to fail and just spending you know all this time reporting on all this you need speculation speculation is the twin of innovation it's putting your capital at risk there is no it's right it's price discovery it's risk discovery it is the hard underbelly of innovation i completely agree there is no innovation without some speculation elon musk would not have created tesla and said somebody speculated on him early when it all seemed totally insane and also he's probably speculated himself in 50 different ideas that never saw the light of day.

15:26That's what it means. It's like you're investing risk capital. That capital is not always money. It's a lot of time. It's time and reputation as well. It's convincing other people to come work on something and you're doing it speculatively. That's what Silicon Valley does. We're betting on the come. And so then the question becomes, how do you create an environment where you can have speculation not just have it but encourage it but not let it get out of control right like that is the sort of fundamental question what ends up happening andrew is like no one gives a when a big fund manager or a big bank or some kind of dark pool of capital loses loses money but when it hits the consumer when it hits the individual then there's this rush to protection It's like we need to protect the system.

16:16We need to kind of protect the consumer because they're always the ones that get taken advantage of. Is that kind of fair? And as you look at what happened coming out of 2009, out of 2008? Look, you can look at both of those things. You could look at, by the way, I think an interesting one because we're now dealing with it now is the accredited investor rule. So, you know, by the way, that really goes back to the late 1930s and 1940. You know, the idea was we only wanted the wealthy to be able to have opportunities to invest in private companies because they were the only ones that we thought should be prepared to lose the money.

16:48And we didn't want the little guy to lose the money. Here we are now in, you know, 2025. And there's a lot of folks saying, you know, I want I want the access. I want the opportunity. and you know sometimes like i remember chamath you and i probably talked about this years ago i remember i'd either talk about like game stop or some of these other companies and tell people you know oh you got to be careful guys this go wrong i said that a little bit about spacky stuff and some other things and people like sorkin stop it you're not protecting me you're protecting the man you're protecting the man and it was sort of regulatory capture it's a very interesting concept So anyway, I haven't come up with a neat answer about that, but I do think about it a lot.

17:35Well, to your point, I think the 1940s Act, I think it's been a very complicated piece of legislation because if you fast forward to today, we're still trying to unwind and fit a square peg into a round hole, if you will. The entire crypto economy contorts itself around the 40 Act. Right. All these BDCs contort itself. Private credit contorts itself. and why? Well, right now we don't have the regulatory will to just go and have a wholesale rip and replace of what is really old legislation. I think Scott... Do you want to talk about the 40s? Chamath, do you want to just describe the 40s Act, like what's in it?

18:12Well, it was basically written as a way to sort of try to delineate what is a security, what is allowed to be traded, what kind of businesses can be public. And at the time, with the understanding that they had of the economy, it all made sense. There was a pretty bright line of here's a commodity, here's a security, and here's what is allowed. The problem is, as we've seen, is that businesses today in 2025 are way too dynamic and they don't map to the brittle definitions of 80 years ago. The problem is that when you try to go and rewrite those rules, there isn't the legislative will because what Andrew says comes up over and over again, which is the fear of what could go wrong stops people from doing what I think could go right.

19:00And that has pretty profound consequences, I think. I think in part, when you look at what happened in GFC, you can pull the string back to the 1940s and the 40 Act and people's reaction to regulations. The savings and loan crisis, that's another one that was absolutely unnecessary, but happened because we tried to contort ourselves to expand the economy in ways that were brittle. Andrew, I want to ask you a question, which is if we go back to the 29, so we have a good sense of the setup. Can you explain the big characters and who they were and the roles that they were playing? Okay. So there's a whole bunch of characters, but I'd say there's two main characters in this book that really drive the storyline.

19:46One is Charlie Mitchell, this fellow who runs National City. He is the Jamie Dimon of his time in terms of fame. He might actually be more like Michael Milken because he really does develop sort of credit for the public. Michael, of course, did it for businesses later. But they used to call him Sunshine Charlie. And he was on the board of the New York Fed. He was constantly calling for lower interest rates, interestingly. and all of this. And he was the guy who was not just loaning to speculators and stockholders. He was also loaning money to different brokerage houses across the country. On the other side of the story in Washington is a guy who you probably heard of or know named Carter Glass.

20:30Yeah. Carter Glass was the Elizabeth Warren of his time, or maybe even like AOC. AOC. Yeah. And he would, by the way, he was like a racist Elizabeth Warren, interestingly, given the weird things going on down there at the time. Anyway, he would rail for years about this thing that he described as Mitchellism. He believed that Charlie Mitchell and what Charlie Mitchell was doing was going to upend the economy effectively. And as the story plays out, they are sort of pitted against each other. One of the things that Charlie does is he defies, or at least appears at one point to defy the Federal Reserve, which is trying to clamp down on speculation.

21:10They don't try to raise interest rates. What they weirdly do is they send a letter to all the banks saying, please stop lending to speculators. And the banks don't know what that even means. So they stop lending basically to everybody. And Charlie says, we're not going to have that. So we're going to start lending ourselves. And that sort of creates this whole other dynamic, which leads him to end up being in front of Congress. And I don't want to give away the story, but he does get arrested on the steps of his own home for doing some crazy things later in the story. But those two sort of play a big role.

21:41And then you get to see how Glass-Steagall came about, which, by the way, is shocking because it is not what you would think at all. It almost has nothing to do – I don't want to say it has nothing to do with breaking the banks apart for like political reasons. But it actually has to do with business reasons, meaning there was like some major bank money and lobbying going on behind the scenes to F over J.P. Morgan by the guys who were running Chase and the Rockefellers. So it's wild. The story is wild. Okay, so just a summary, but the Glass-Steagall, I think, as I understand it, but Tommy, basically separates commercial banks and investment banks.

22:20Separates commercial banks and investment banks. And then sets up the FDIC, basically. And sets up the FDIC. Right. Again, when you see how that all came together, the FDIC piece of it, the backstory of these laws - It's not coming from consumer protection as much as you're saying lobbying to try to basically like marginalize the 800-pound gorilla. Exactly. Exactly. And you'll see it. You will be in the room with these people literally going in there, sitting in the White House, begging Roosevelt to do this. And by the way, Carter Glass is actually unhappy about it. I found letters where Carter Glass is like, this bill is getting taken away from me and is basically being taken over by the bankers, which is almost hilarious because Elizabeth Warren loves to cite this bill as sort of some panacea.

23:09Andrew, as you look at markets today, just to come back to the modern era, I don't want to ask you the simple like draw the parallels, but are we in, and I've heard you ask this question a lot lately, like, are we in a monetary bubble? Are we in an inflationary bubble? Are we in a speculative bubble? Are we in no bubble? So I'm assuming we're in some bubble and we just don't know when it's going to pop of some sort. And by the way, we don't know how big it's going to pop either. You know, it doesn't have to be 1929. It could be 1999. It could be 2008. It could be smaller than that. I don't know.

23:47Do I think that there's leverage? I mean, you guys talk about this AI investment phenomenon that's taking place right now. And for the most part, the big corporations are spending real cash. So that's not levered. But you look at a lot of the real estate plays, the energy plays that sort of on the periphery of this, there's a lot of leverage there. I think the private credit world, we don't really know where all the leverage lies right now. Now, I don't think that any of that is as leveraged as what we were talking about, this like 10 to 1 situation in 1929 or maybe or even like the subprime situation in 2008.

24:23But I don't know. At some point, you start to look at some of these, you know, like the NVIDIA Open Eye deal or the AMD deal. And there is a little bit of a circular kind of thing going on there for now. And I just don't know. But we could still be years away from this. And by the way, it could work out on the other end. But what about like government monetary fiscal issues? So central bank monetary policy, interest rates, and then the fiscal issue, the government spending right now. Ultimately, if you have a devaluation of the dollar, we're seeing gold at$4 ,000 an ounce. We're seeing the dollar basket trade down, I think one of the worst years we've ever seen this year.

25:04Does that ultimately translate into a higher index on the stock market because the dollar is worth less? I mean, could this actually be more of a monetary or fiscal kind of problem than it is a speculative kind of problem? Well, so you would think it would be, but then explain. So, yes, I think like the traditional, the classic economists would say this, you know, these things should not be happening at the same time. Meaning look at the price of equities, look at the price of gold, look at the price of U.S. Treasuries right now. It doesn't, at least classically, it shouldn't line up the way it's lining up right now.

25:36So I just don't know. I would have thought that the investor class would have wanted to charge us a higher premium for our bonds these days for a whole bunch of reasons. But they don't. Maybe that's just like life is relative and other countries are not doing as well. And so we're still the prettiest girl at the dance. I think that's exactly right. But we've never seen so much capital, so much printing happening as we see today. I mean, the 7 % debt to GDP in peacetime with an expanding economy, never seen that before. Totally. But then if that's the case, you'd think that we'd all have our money in Bitcoin or gold.

26:16But we don't. Why is that? I don't know. How do you invest? Anyone ever ask you that? Most people don't ask me that. And the truth is, I'm not allowed to invest in individual stocks. It's actually, given what I do for a living, that's part of the nunnery that I have to live in. You're long the index. I'm long the index. I'm long the indexes. And no, by the way, I wish I could. I thought for many, many years, it's probably shifted now. But for years upon years, I was always, I think Chamath and I have talked about this. I was always worried about buying Bitcoin because I didn't know, I didn't want to be on TV or in the papers.