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I'm Ted Side is and

1:01

this is Capital Allocators. This

1:03

show is an open exploration

1:05

of the people and process

1:07

behind capital allocation. Through conversations

1:09

with leaders in the money

1:11

game, we learn how these

1:13

holders of the keys to

1:15

the kingdom allocate their time

1:17

and their capital. You can

1:19

keep up to date by

1:21

visiting Capital Allocators podcast.com. By.

1:26

A guest on Today Show

1:28

is Jonathan Tepper, the founder

1:30

of Variant Perception and Economic

1:32

Research group that works with

1:34

institutional managers, hedge funds, and

1:37

allocators to provide objective and

1:39

comprehensive data and actionable ideas

1:41

from leading indicators and emerging

1:43

trends. He's also the author

1:45

of Three Bucks, the most

1:48

recent of which the Myth

1:50

of capitalism, monopolies, and the

1:52

Death of Competition received widespread

1:54

acclaim earlier. this. Year our

1:57

conversation covers Jonathan to

1:59

anew. Will upbringing learning

2:01

about currencies from Big

2:03

Macs, building economic and

2:06

liquidity forecasting models, and

2:08

catering very perceptions research

2:10

to investors. We then.

2:12

Turned to the myth of. Capitalism Discussing

2:14

the history, causes and

2:16

ramifications of the absence

2:18

of competition and Us

2:20

industries natural and unnaturally

2:22

monopolies. examples in the

2:24

Giants: funeral home operators,

2:26

airports and hospitals and

2:28

what can be done

2:30

to counter this negative

2:32

trends. Seat enjoy. My

2:34

conversation with Jonathan happens.

2:39

Next Jodie Meeks Thank you so much for having

2:41

this Hello! We started the beginning: I know your.

2:43

Upbringing as so fascinating aspect to it. he

2:46

as I suspected my abreast of more the

2:48

first things people notice because it is pretty

2:50

weird and when you're growing up often things

2:52

seem normal until you encounter other people who

2:55

don't share the same background. So things releases

2:57

only late in high school in and colleges

2:59

are realizing just how odd my childhood was.

3:02

or my parents my mother father were presbyterian

3:04

missionaries and the moved to Spain in the

3:06

nineteen eighties and a started working with heroin

3:08

addicts. is Spain had when the highest rates

3:11

as Herman use in Europe and installed has

3:13

pretty high rates. And by coincidence they

3:15

settled in some Glass which was a neighborhood

3:17

Madrid had but ten thousand and gypsies living

3:19

there and at a huge drug problem. And

3:22

then they just started helping the addicts on

3:24

the street realize that we're sending them off

3:26

drugs centers and probably the north of Spain.

3:28

And they thought that there is so much

3:30

needed Madrid a day. decided to start a

3:33

drug center and so they started with one

3:35

attic to mention eighty Five. And then today

3:37

there's drug centers in twenty five countries with

3:39

ever to now thousand and addicts and it's

3:41

all run by the addicts themselves. So. The

3:44

drug rehab. Basically operates a

3:46

series of businesses no accident, thirty stores

3:48

whether it's sickening, furniture, signal clothing I

3:51

used to work in the summertime, side

3:53

work with the painting teams, and brother

3:55

P would work with mechanics and basically

3:57

almost all the revenue from entire centers.

4:00

The narrated by the addicts themselves so

4:02

that these donations parts less than three

4:04

or four percent of the entire budget.

4:06

So it's my father's studied economics at

4:08

Cambridge and and goes and be Harvard

4:10

and as it turned out lot of

4:12

what he had been reading and learning,

4:14

it ended up becoming useful. Tips

4:16

or did they do before? My father and

4:19

mother had been minutes but four years in

4:21

Mexico need to next in Chaplin since they

4:23

thought their anger to Madrid and work with

4:25

students in that was their line of thinking.

4:27

And then there was only by saying the

4:29

need. And neighborhood and it really started almost

4:31

by accident. There was a young Australian missionary. Lindsay

4:34

Mckinsey is now is in Australia by one addict

4:36

said he needed to get clean before his court

4:38

date. he was a cease city shopping court. new

4:40

ones get clean and so yes he'd stay for

4:43

two weeks and then Lindsay invited into live in

4:45

his apartment. then he brought ate of his friends

4:47

in all the neighbors are you complaining that are

4:49

always addicts willing the building to my father and

4:52

when she went and found a farm and and

4:54

as thirty min living on the farm and it's

4:56

are growing exponentially like that to the need was

4:58

so great to be one. To get off

5:00

drugs and was all of the early

5:02

addicts stayed and we're helping others and

5:05

then they ended up going off and

5:07

starting at the center and other cities.

5:09

So you mentioned in that spirit has

5:11

little bit different from other people who

5:13

you're around on how do you think

5:15

it aims to do one? I saw

5:17

my parents were real entrepreneurs even though

5:19

they're they're missionaries are starting businesses. oliver

5:21

Spain run by the addicts. They trusted

5:23

them. I also learned a lot of

5:25

leadership lessons from my parents. Stairs a

5:27

very good book and com Mastery by

5:29

Robert Green. And in the to simple rules he

5:31

has his one funny great mentor and to get

5:33

rid of them. And I think that what often

5:35

happens in organizations is that. The. Person

5:38

running the show doesn't really want the it's

5:40

meant to your the percent of them to

5:42

develop lot met him get my parents did

5:44

every well which is when people did very

5:46

well they got responsibility, were given their own

5:48

set of new center new city to starts

5:50

and I think you see that was some

5:52

very good companies were in a people are

5:54

sort of promoted and given more responsibility and

5:56

because that people stay for a long time

5:58

because they can grow rather than feel that

6:00

there's an stuff hold you know within would

6:02

say staying in the same city in the

6:04

same role under the same person and sorry

6:06

I really learned quite a lot from them

6:08

and transistor that aspect of management and added

6:10

that take you through your education and into

6:12

your career. It was very strange because my

6:14

parents were missionaries the nineteen eighties and the

6:16

way that worked a lot of your American

6:18

churches would send money and I became a

6:20

cute we were at the age of ten

6:22

the foreign exchange was a big issue because

6:24

my grandparents or semi checks and so I

6:27

would get something like twenty dollars for my

6:29

birthday and I would. Take my brother's Mcdonalds

6:31

in outside tree tonight he eighties and and

6:33

Madrid and so have real us as buying

6:35

half as many big Macs My brother's as

6:37

I used to by coincidence of the same

6:39

time as the com is came out the

6:42

mac index and my father said explain to

6:44

me foreign exchange and economics and I just

6:46

I was so fascinating. The island became so

6:48

obsessed by economics and finance because my parents

6:50

also weren't sitting are salary can have That

6:52

wasn't just my big Macs that are really

6:55

have much money and so my mother taught

6:57

us at home for two years and when

6:59

my favorite pictures. Is of my mother teaching

7:01

us at home sounds going and I hated it

7:03

Time because of those very embarrassing to not really

7:05

the school of my friends but it was extraordinarily

7:08

liberating. Say realize as long as I had the

7:10

books and the desire I can learn and wanted

7:12

and I can get whatever pace and wanted and

7:14

ask that. When I did go back to school

7:16

with my brothers and my older brother went to

7:19

college, I got him to send me all his

7:21

freshman textbooks and so I didn't Was able to

7:23

take ten advanced placement tests and stuff credit for

7:25

about two years of college so I could gone

7:27

to college in two years that ended up doing

7:30

forty six I saw a going to cause once

7:32

might as well take advantage of the timing be

7:34

working with my life. Means

7:38

Counts economics textbooks so I I'd already

7:40

done like the first year micro Macro

7:42

an international trade by the time I

7:44

enrolled as a freshman and seven demi

7:46

time to do more fans topics and

7:49

and do my honors thesis which was

7:51

on optimal currency area series so that

7:53

was Sipri Euro. It was Ninety Seven

7:55

Ninety eight and I thought the arrows

7:57

and crilly stupid idea because when I

7:59

was. The correlation of employment shocks

8:01

with Netherlands and Germany and Spain and Germany

8:03

and that's the core periphery issues quite were

8:06

already evident then, and it was clear that

8:08

there were different business cycles and the same

8:10

one is straight or when monetary policy wasn't

8:12

going to work As you. Developed.

8:15

Her knowledge of macroeconomics current

8:17

see. How did you

8:19

come to form views that lead into

8:21

what you've done with their perception? Some

8:23

very Perception is the economic research company

8:25

that I started about ten years go

8:28

with couple colleagues and that really almost

8:30

real by accident before that I started

8:32

as an equity analyst as is the

8:34

capital but I still have that to

8:36

the economics bugs and my brain and

8:38

of friend was running a prop desk

8:40

banks american London's I went over to

8:42

work with him and it was at

8:44

the times I just are consuming loads

8:47

of economic research and a realize. That

8:49

a lot of it was I didn't think very

8:51

suited to our purposes so front of figure out

8:53

when the next procession is gonna happen to know.

8:55

Five of seven and a soothing, loads and loads

8:57

of research and I thought surely some economists have

9:00

already sold this one and a realize that nine

9:02

and of take comments had missed the last for

9:04

a session for we had the blue chip consensus

9:06

estimates and so I thought all the bond traders

9:08

there were sitting next to an abrupt us were

9:10

three nonfarm payrolls and I realized all the state

9:13

he gets heavily revise it's pretty useless anyway and

9:15

I saw it really. Make money by what's going

9:17

to happen, not by what. Has happened. And

9:19

then more importantly, it doesn't matter where the

9:21

com is good or bad, what matters is

9:24

a change in the directions to markets are

9:26

all about surprise. I thought if I can

9:28

figure out where things are going in, have

9:30

a better sense of where assets are priced

9:33

relative to what one would expect. Adding that

9:35

for you get ranged interesting ideas so variable.

9:37

What we do is build leading economic and

9:40

leading liquid indicators and to the extent it's

9:42

our tools diverge from what we're seeing in

9:44

prices. That's where you end up with. surprising

9:46

that where you end up with reading opportunities.

9:49

And the other thing I saw was they

9:51

loved the research shows consuming was by people

9:54

I respected and liked but ultimately it was

9:56

guru and I think the macro in particular

9:58

has of spoke isn't an answer. This on

10:00

Gurus in the problem there is a secret

10:02

a bone away as a black box. These

10:04

guys supposedly can read the future and you

10:06

don't really know how they do it right.

10:09

the of some sort of an inspiration and

10:11

I thought surely this could be done in

10:13

a way that's robust, a repeatable and scale

10:15

herbal, you know. So if you develop certain

10:17

insights about how business cycles work and beyond,

10:19

apply this across multiple economies and then you'd

10:21

be able to apply this across time. I'm

10:23

starting with the skeptical premise, and any time

10:26

you think that forecasting there's always been so

10:28

much noise ran any signal. With.

10:30

That sort of healthy degree of skepticism

10:32

when he walks through how you sort

10:34

of took apart what these indicators are

10:37

Certainly so on the the leading economic

10:39

side to certain things that tell you

10:41

where it economies going to in three,

10:43

six, nine or twelve months and is

10:45

generally difficult to look out past that

10:48

to gonna grow side on inflation side

10:50

because inflation so lagging city thinkers supermarkets

10:52

don't immediately start raising prices until their

10:54

sure the demand is there. they don't

10:56

start cutting prices until their sure that

10:59

it's dropping off. And then wage

11:01

cycles are yearly so you wait to

11:03

ask for your raise and than it

11:05

takes time to see through. Sensation lags

11:07

considerably, but generally when you're looking at

11:09

the economic cycle, there's certain things that

11:11

intuitively makes sense and have a clear

11:13

cause and effect. So for example, the

11:15

building cycle where it's housing prickly residential,

11:17

when you get a building permit, he

11:19

knows you got to sort of long

11:21

pathway of disability where you have to

11:23

go break ground, hire workers, and when

11:25

the house has done people go out

11:27

and buy white goods and carpets and

11:29

so. The gives you a long

11:31

lead intuitively and a way that some

11:34

other indicators don't feel. Curve is extensive

11:36

amount of academic research and research that

11:38

we've done shows that it's very useful.

11:40

People tend to ignore it at most

11:42

points in time. I mean lately to

11:44

beginning of obsessed with it is quite

11:46

rare. Normally people nor it's but even

11:48

there for example, it makes complete sense,

11:50

right? Banks are in the business of

11:52

essentially marring shorten lending long and so

11:54

to the extent the deal for flan

11:56

significantly compress net interest margins and therefore

11:58

as an impact on the lending and

12:01

liquidity and markets. Sweet will find things

12:03

like that that make complete sense when

12:05

you explain it to someone. There's no

12:07

sort of real magic than what we

12:09

do. it's identifying sensibly what things are

12:11

useful and then aggregating them and turning

12:13

them into an index where you can

12:15

take multiple components together and then see

12:17

what the overall picture is. So.

12:19

What's different? In the

12:22

indicators that use from you know

12:24

I'm thinking of the broad level

12:26

leading indicators. So. The

12:28

work on leading economic indicators goes back many

12:31

decades and we certainly are not the ones

12:33

to invent them even go back to. the

12:35

actors are oh it's Jeffrey More and others

12:37

and then you have the O E C

12:40

D and to the conference board with their

12:42

leading indicators. And then if you look at

12:44

like the big banks only Goldman has a

12:47

few eating A indicators most economists said ignores

12:49

them. The washer banks ignore them. That There

12:51

is a very good research company called E

12:53

C I that doesn't leading indicators the we

12:56

try to do in. The only reason. We

12:58

care about them is because actually want

13:00

to try to help clients make money,

13:02

service pays sector or and economy at

13:04

large is turning down according to our

13:06

tools and the markets. Not pressing that

13:08

in than you get a very asymmetric

13:10

as the risk award and from says

13:12

present before recessions progress downturns. Likewise when

13:14

everyone's extremely negative and valuations are quite

13:17

low in our tools are turning up

13:19

than that's very helpful. But in terms

13:21

of is that a how ours are

13:23

difference we focus very heavily on liquidity.

13:25

So for example. Pst.

13:27

Auto Leading indicators of turning down that's

13:29

interesting but no one directly trades car

13:31

sales in the U. Rates not tradable.

13:34

What you treat as Gm and Ford

13:36

stocks and start themselves are leading indicators

13:38

because they're essentially for looking and investors

13:40

talk to management. They go to show

13:43

rooms, the gathering a lot of data

13:45

points and so what you really want

13:47

to do is get a lead on

13:49

stock prices themselves. And so we've done

13:52

and norms man work on global financial

13:54

conditions liquidity conditions on a country specific

13:56

basis. And then on aggregate

13:58

consolidated basis. And those are

14:01

very, very useful because they tend to

14:03

lead the economic leading indicators themselves by

14:05

about six months. and they tend to

14:08

eat asset prices too. So we have

14:10

a lot of our liquidity indicators will

14:12

lead commodity prices on the lead, even

14:14

stock prices i good six nine months

14:17

and others market level the Korean caters

14:19

outta. They also drill down into different

14:21

sectors. Some. Sectors are much more

14:24

cyclical, others and less south And a

14:26

sad to say that for example, healthcare

14:28

telecoms are unaffected by global liquidity changes.

14:30

The certainly are. But the biggest beta

14:33

to are indicators tends to come from

14:35

the highly cyclical sectors. So if some

14:37

of our liquidity indicators for example are

14:39

contracting men, iron ore and copper or

14:41

Baltic dry things that are very sickly

14:44

sensitive a will tend to have a

14:46

much bigger move. He was attacked and

14:48

on of your research about. Touching.

14:51

Inflection points and particularly to downsize from

14:53

protecting. The downside I've seen. important thing

14:55

to be able to do notoriously difficult

14:58

had you go about trying to

15:00

cats and fix it. So that means

15:02

moves that we've seen in markets with

15:04

our leading indicators are when you

15:06

go from positive to negative and the

15:09

indicators are you simply have a first

15:11

vivid have changed and then when

15:13

you're going from the second derivative essentially

15:15

it's negative, the less negative and a

15:18

three the biggest news asset prices.

15:20

So for example, Are China leading indicator

15:22

as a phenomenal job of leading Chinese

15:24

growth in there when it starts turning

15:27

down. And you see, let's say that

15:29

China related plays Whether it's the Ozzy

15:31

Dollar or Copper, are other things still

15:33

levitating that's a great risk or trade

15:36

where we know that d indicators are

15:38

telling us that going to turn down.

15:40

So for example are China Index leads

15:42

semiconductor sales and so weird. There's a

15:45

big discrepancy between the tools for strip

15:47

have a positive negative that's a fantastic

15:49

tell. and then. On the

15:51

upside, when we're looking at the

15:53

upturn in are indicators. For example,

15:56

the Classic is where you can

15:58

combine fundamentals with technical. Then valuation

16:00

and there and Brazil for example in late

16:02

two fifteen or twenty sixteen or leading and

16:05

cater for Brazil where surging and turning up

16:07

pretty strongly and same was true for China

16:09

and every has very negative Brazil and of

16:11

remember there was the front cover of The

16:13

Economist with Dilma Rousseff on it. I went

16:16

around to see clients in the U S

16:18

and it about twenty meetings and and we

16:20

can have not a single client side. One

16:22

endowment liked Brazil and it told me that

16:25

he didn't need very much for it to

16:27

get marginally less worse for a Brazilian starts

16:29

to well end up was bottom in the

16:31

equity markets and are leading indicators deciding that

16:34

so like those are specific cases where they

16:36

can help you make when lot of money

16:38

and from xyz allocating to these trades shiver

16:40

range of clients his friend or a hedge

16:42

fund managers mission damage so did they use

16:45

your research. I would say that everyone uses

16:47

slightly differently and from says different funds have

16:49

their own internal processes and then some of

16:51

them have different mandates but is a couple

16:54

East cases of example one of our clients

16:56

or equity long short funds and they're real

16:58

fear is essentially being blown up. And caught

17:00

off guard like in Two Thousand and Eight

17:02

where they had massive drawdowns and they were

17:05

often exposed to cyclical sectors or banks. And

17:07

so what they really want use Us is

17:09

as an insurance policy of sorts where they

17:11

want to know that things are turning down

17:13

said the uses for that purpose. and we

17:15

also have, by the way, like a lot

17:18

of market health indicators and buy and sell

17:20

signals that we've generated to try to capture

17:22

these divergences in terms, sentiment, positioning, and so

17:24

on. I think for some of the allocators

17:26

you might have a longer time frame. they're

17:28

not so worried about. What's happening month to

17:31

month. but they would like some slightly longer

17:33

term themes in terms of what should they

17:35

be avoiding which they be allocating to. So

17:37

when we started out the first big report

17:39

that we wrote, I wrote that one and

17:41

was called Spain a hole in your it's

17:43

balance sheet. New is essentially laying out the

17:45

path ahead for Spain and part of the

17:47

periphery, and so Bingham to avoid that at

17:49

the time was very, very useful. Likewise, stay

17:51

Brazil long or other positives. We've recently put

17:53

out a piece early this year on Argentina

17:55

desert things where you might decide you want

17:57

to make a longer term allocation for. You're

18:00

catching it. It a pretty low point and an

18:02

inflection and so that's how the longer term investors

18:04

tend to use what we do. When you look

18:07

at other forecasters, she said, you're trying to make

18:09

this robust of scale born repeatable and other people

18:11

are Gurus is not Scenario Anti Blues uncovered some

18:13

of these ideas or relationships and sermon is quite

18:15

a lot of other research out there and I

18:17

don't want to denigrate. Some groups were still admire,

18:19

but I thought the does Not repeatable. They might

18:21

be able to hire someone and train them and

18:24

teach them, but it's probably like a one off

18:26

and I thought surely the best thing to do

18:28

is to create a system that. Nothing

18:30

could be remain idiot, but can be run

18:32

by someone perhaps who doesn't have that touches.

18:34

Genius. Whatever it might be if you're looking

18:37

at people. I really like the My or

18:39

whether it's David Rosenberg or others. He's great,

18:41

but I don't know what the transmission is

18:43

to someone else and so and I want

18:45

to create a system where if I last

18:48

the machine would keep plugging along and a

18:50

lot of what I see is whatever chart

18:52

popular would have the latest data releases. People

18:54

get fixated on that in general and so

18:57

you suffer from Britain see bias essentially where

18:59

you're chasing the headlines. And it's all

19:01

trailing right. censor. What I wanted to

19:03

do is to construct a system that

19:05

was fairly coherent and allowed for systematic

19:07

approach nets really. But we try to

19:09

do is to assemble good ingredients and

19:12

then be able to approaches systematically. So

19:14

sorry you go from spending your days.

19:16

Creating. Models as the crazy

19:19

indicators and leading indicators on the

19:21

economy to writing a book. About.

19:25

Monopolies. So the answer to that is

19:27

that one of the charge the really

19:29

bugged me was we have a leading

19:31

indicator for us wages and the indicator

19:33

itself when you inverted are you turn

19:36

upside down leads corporate profits very well

19:38

And so you know wages are one

19:40

of the biggest parts of the corporate

19:42

spending and employees are a huge part

19:44

so his employees are not getting most

19:47

the a comic. by then corporations are

19:49

in there for corporate profits are gonna

19:51

be very high and that's exactly what

19:53

we've seen. Over the last couple years

19:55

are Indicator was telling us their wages

19:58

should be going up and so. I

20:00

was going to visit clients many your midtown remember

20:02

like when meeting specifically were looking at it Central

20:04

Park in the hatch from and you're saying is

20:06

likely your indicators broken it's just not working and

20:09

I so when an hour indicators work for a

20:11

well they do as a just give it time

20:13

and Nicholas went back to his office again a

20:15

year later and is lighter and they're still doesn't

20:17

work and I saw a dose is pretty bad

20:20

and you to go look into this one as

20:22

a citizen into Why is it that wages just

20:24

really weren't going up for a much why are

20:26

indicator might be broken and sometimes the world does

20:28

change? So similar fixed income models. After Kiwi really

20:31

stop working as a new at it's growth

20:33

rate was and what inflation was that would

20:35

have to do anything about where the ten

20:37

Ryo should be. So I wanted to find

20:39

out what are these indicators broken or is

20:41

there something I'm missing? And so looking into

20:43

the question of why corporate profit margins are

20:45

so high? that was the first thing that

20:47

led me down that path. But incidentally, I

20:50

was going to The Pardon in London with

20:52

some friends of mine, their non economist there

20:54

were telling me or we just for dismissing

20:56

book by Thomas Tickets singers a fatal flaw

20:58

in capitalism and returns. The capital. The

21:00

are going to get their a bigger and

21:02

eventually it'll and capitalism much such as make

21:04

any sense at all like if returns on

21:06

capital get higher in. also you have a

21:08

great business and I'm going to want to

21:11

compete with your business and I'll drive down

21:13

the returns and Calderon said it's i naturally

21:15

self correcting mechanism and than I thought well

21:17

maybe these two questions are related cause. He.

21:19

Stared at Competition can't come in and compete

21:21

if you can't write down the returns and

21:24

capital. And yes, you would end up with

21:26

a persistence, a very high court for profit

21:28

margins, low wage capture, low increase in wages

21:30

and maybe that's what's going on. So I

21:33

didn't have a predetermined thesis before I started

21:35

writing the book. What I really want to

21:37

do is a figure out why this is

21:39

happening and I started doing lot of research

21:42

on competition and the key paper that I

21:44

read that I highly recommend and as he

21:46

does of and pressure this link to it

21:48

on the website. Myth of capitalism.com It's

21:51

by Gustave On is a professor

21:53

at Rice and he wrote that

21:55

with two colleagues and it's called

21:57

our industries becoming more concentrated handy.

22:00

Issue was you've heard a look at

22:02

for the median industry are there are

22:04

fewer competitors? is are left hundreds of

22:06

a national level today vs. ten twenty

22:08

years ago and the answer is for

22:11

about two thirds of industries answers, there's

22:13

a lot less competition. So that paper

22:15

itself started outside the I profit margins

22:17

to competition and pointed out that it's

22:20

not because he's from just that much

22:22

better and more efficient the being hired

22:24

her assets and comes from scale. Rather,

22:26

they end up with pricing power which

22:28

coursework bus it talks. About so you

22:31

end up with power over the consumer and

22:33

then also you end up with power of

22:35

the worker. You don't have to pay your

22:37

workers as much because there's not much competition.

22:40

Or it's a the Books called the Midst

22:42

of Capitalism and how would you describe somebody

22:45

said okay, what is the Midst of Capitalism.

22:47

So. The midst of capitalism is

22:49

one that I'd take because I

22:51

saw it ruins critiquing capitalism's as

22:53

is horrible flaws and it's terrible.

22:55

And I think that what we're

22:57

seeing right now is not true

22:59

capitalism as a capitalism involves one prayer

23:02

property, but to also involves competition.

23:04

Meaning that Spiderman can set prices, and

23:06

ultimately when you look at supply,

23:08

it's sort of constricted you, not

23:10

really dealing with a multitude of players.

23:12

delivery you and the often use

23:14

government to keep competitors out to.

23:16

These aren't just. Of natural monopolies that

23:19

might emerge due to industry structure. whether

23:21

that's network effects in of sampling visit

23:23

make sense to have one team existence

23:25

or a huge scale where you end

23:27

up with for very large planes like

23:29

Doing or Airbus. But they're just many

23:31

industries where there's absolutely no reason why

23:33

they should be doable. You're an oligopoly

23:35

and a lot of his comes down

23:37

to regulation and submitter. Capitalism to my

23:39

mind is that we're not really looking

23:41

at a true capitalist system is or

23:43

isn't competition, so this is a problem.

23:46

So. If you wanted to talk very broad

23:48

theoretical level clearly there are some economic arguments

23:50

that you could offer and and you can

23:53

drill down to why the average person might

23:55

care or on the economic angle a while

23:57

there are as decency to scale and some

23:59

into. The A beyond a certain point

24:01

those go down to zero and if

24:03

not then become this economies of scale.

24:06

So you end up with problems of

24:08

productivity problems, arms to innovations. He find

24:10

out primarily I would argue on the

24:12

digital side that it's really happens in

24:14

other industries, you end up with fewer

24:16

jobs unless economic vitality, turning and creation

24:18

of new companies and competition is an

24:20

important parts. Even if you think about

24:23

the traditional disruptor literature, you don't know

24:25

which start ups are going to be.

24:27

The good ones are succeed and a

24:29

lot will. Fail, but you have to

24:31

have that going on so you end

24:33

up with more anemic economic roasts. be

24:36

also end up with lot more inequality

24:38

sir is companies are able to extract

24:40

economic rents and are able to squeeze

24:42

workers. That what's gonna happen is that

24:44

in many industries across the U S,

24:46

these companies work is very efficient means

24:49

of transferring money from the middle and

24:51

lower class to people who own shares.

24:53

The average person doesn't really on shares

24:55

in any meaningful way and therefore what

24:57

ticket he talked about certainly does happen.

25:00

Which is that you end up with an increasing

25:02

inequality and it doesn't come because is afraid of

25:04

one capitals and comes because it's And for this

25:06

none of competition. I capitalism itself is not functioning

25:08

properly. I

25:12

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And. Now back to the show. My.

26:24

To his you wait it out in the

26:26

book. We can start with the obvious one

26:28

which is detect Giants. Show. And they

26:30

spent so in a written about that. What's.

26:33

Your take on. That.

26:35

The perspective of were monopolies or a

26:37

problem or become a problem with the

26:39

tech giants. What's. Interesting is almost

26:41

any interview that I do about the book

26:44

always starts with the tech giants the first

26:46

question. So it's a great saying meeting the

26:48

people might not be talking about monopolies right

26:50

now is the tech Giants hadn't raise this

26:53

issue and they're certainly lot of other hidden

26:55

monopoly. So to the extent that monopolies now

26:57

becoming a bow common word number capillary again,

26:59

I think it's a wonderful thing. So Google

27:02

and Facebook essentially are an ad do Apple.

27:04

In terms of the ad markets, Google is

27:06

a monopoly when it comes to search, with

27:09

roughly not ninety percent market share. Globally for

27:11

his book on a social Side his

27:13

lover eighty percent on the social side

27:15

you have the As Twitter snapshots on,

27:17

but basically they have monopolies in their

27:19

respective fields and the name and do.

27:21

Ah but when it comes online ads

27:23

and the problem here essentially is that

27:25

while there are a very strong feedback

27:27

loops, Google is like a two sided

27:29

market between searchers and advertisers and then

27:32

face because Inslee has very from network

27:34

effects he won't be on the social

27:36

network rail. Your friends are one of

27:38

the big from Sears and they're able

27:40

to use. Their platform to their own

27:42

benefit. So Google is not just

27:44

serving you every single search result

27:46

according to their page rank. They

27:48

actually can favor Google related businesses.

27:50

They were able to make sure

27:53

that Google reviews and other Google

27:55

services hop out before competitor services

27:57

and so you can tilt the

27:59

playing field. To your advantage stays bird

28:01

effect. We killed off fine by implementing

28:03

out from being shared. So much as

28:05

Twitters video platform is but one's own

28:07

video so you can use the platform

28:10

essentially law a competitive standpoint, it's a

28:12

problem and in the regulators is essentially

28:14

Boots I would say been asleep at

28:16

the wheel. With that to benign make

28:18

indoor. Him for example is the Attorney

28:20

General for anti trust in Us. He

28:22

was Google lobbyist for the Double Click

28:24

acquisition. The recent settlement was reached between

28:27

Facebook and yet to see this of

28:29

lead lawyer essentially worked. For the head

28:31

of the Ftc and disagreements know immunized

28:33

them from all private claims. There's no

28:35

reason. revolving door that implies some separation.

28:37

You basically have siblings working for industry

28:39

back in government than negotiating with her

28:41

former partners. And so there's no real

28:43

effort to one prevent murders. So Google

28:45

was able to basically by double click

28:47

says because it would buy Instagram and

28:50

so the laws as written in, intended

28:52

or not enforced and then you end

28:54

up Odyssey with even more the winner

28:56

take all dynamic when it comes to

28:58

be tech companies. but at least. It's

29:00

signed a spotlight into the problem

29:02

of concentration. In addition to the

29:05

tech giant under Skinner, ramble off

29:07

a laundry list of some of

29:09

the sectors that you discuss in

29:12

the book. or maybe with a

29:14

corner to talk about them. So

29:16

this isn't just set diet, it's

29:19

insurance, paper, agriculture, hospitals, cable airlines,

29:21

beer, milk, funerals, Payments.

29:23

Dialysis glasses, Tax preparation, Credit bureaus,

29:26

banks, meat and Poultry, Pbms, Medical

29:28

Care and Title Insurance as a

29:30

subset. So is there a commonality

29:32

in those sectors and subsectors? Yes,

29:35

you could broadly put those different

29:37

industries in the two separate categories.

29:39

One would be where you could

29:41

call natural monopolies economist and refer

29:44

to never Probably says industries like

29:46

electrical utilities doesn't make sense to

29:48

lay down copper wires. Every hum

29:51

In Manhattan, you get one and.

29:53

Adidas regulated to make sure that and not gouging

29:55

people and they get a return on assets and

29:57

science, but I use the term a little more

29:59

broadly. Where know the delivery at a

30:01

product dictates they're not be many many

30:04

players and earlier I reference network effects

30:06

and things like that's You then has

30:08

another broad set of companies that what

30:10

I call on natural monopolies absent regulation

30:12

or legislation that would be multiple competitors

30:15

and he would not have to companies

30:17

dominating the Us beer in the streets

30:19

for example the idea that Burger King

30:21

or Mcdonalds my achieve a wobbly in

30:23

the restaurant industry is insane Space for

30:26

you and I could go get a

30:28

kitchen and cook and serve competing. The

30:30

question of why this doesn't happen when it

30:32

comes to alcohol is because even though there

30:35

has been an explosion and craft breweries, most

30:37

craft breweries. The. Release of their

30:39

beer Be on county lines. This is

30:41

essentially a legislative and regulatory problem. Were

30:43

going back to the ending of prohibition.

30:45

What happened was it was all devolve

30:47

down to the states into the county's

30:49

It's very difficult for companies to get

30:51

national distribution. Said that those who do

30:53

have it have a pretty big advantage

30:55

and it's research. A merger is because

30:57

the regulators and don't honestly care. Even

30:59

it up with two companies having over

31:01

seventy five percent market share, but effectively

31:03

controlling around ninety percent market share. So

31:05

you have a duopoly in terms of

31:07

production and. Volume in sales and an

31:09

as an oligopoly in terms of distributions

31:12

and all of this is really legislative.

31:14

I mean at American. Beer in general

31:16

is pretty terrible from the big brands

31:18

and it probably was new and more

31:20

market share is a lot of the

31:22

crapper as can actually get more trade

31:24

be on the counties are there other

31:26

notable examples who were and regulation created

31:28

an unnatural monopoly in Alabama. There were

31:30

some monks who thought that to out

31:32

the monastery they might sell coffins made

31:35

of wood and is ideal for coffins.

31:37

and of course the logo. For or

31:39

homes and went after them in Sudan

31:41

and then the state of Alabama went

31:43

after them for providing wooden coffin for

31:45

centuries. Evil managed to die and decompose

31:47

without a problem. and wooden coffin spurts.

31:50

What's happening in many states is that

31:52

you have local now please. Were mergers

31:54

are allowed? Answer service corporations the biggest.

31:56

They've ended up like a monopoly in

31:58

towns in a given. Radius. But to

32:01

help maintain this often their restrictions in

32:03

terms of who can sell Casket San

32:05

in terms of we're can his funeral

32:07

homes be provided in what kind of

32:10

creature they have to meet and it's

32:12

only done essentially to prevent competition and

32:14

to exclude others. See insurance industries, ones

32:16

that basically should be a lot more

32:19

competitive and he should essentially have competition

32:21

across state lines. But you don't. The

32:23

Mccarran Ferguson Act essentially devolved regulation down

32:26

to the state level, which meant that

32:28

d Dangerous commissioners at once you decide

32:30

things you essentially have a do ah,

32:32

billie or three players and almost all

32:35

states when it comes to health insurance

32:37

and then states mandate you buy title

32:39

insurance and your house even though the

32:42

General Accounting Office and York Times have

32:44

called it a scam in a way

32:46

for century, Word records were must all

32:48

digital. why should you have to be

32:51

forced to buy insurance for your title?

32:53

So there's all sorts of industries that

32:55

essentially exist purely due to legislation and

32:58

regulation. You. Don't have some other

33:00

ones that are much less obvious which

33:02

are sample local airports right Cities generally

33:04

besides New Yorker, London, don't really have

33:07

room for two or three airports or

33:09

son of traffic. and so if you

33:11

have the airport concession you have a

33:13

captive audience everyday that's growing a little

33:16

faster than gdp. Spending money while they

33:18

were their flight and serve as like

33:20

a small local monopoly and diseases are

33:22

two examples, but there are loads of

33:25

hidden he says that people don't really

33:27

look at and realize that generates. The

33:29

significantly higher returns than the average stock

33:31

and some of these are well behaved

33:34

meaning they provide a great service to

33:36

the user. They don't gouge the user

33:38

my promise. an opposite generally where they

33:40

behave anti competitively and gouge users. A

33:42

classic one that hedge funds love and

33:45

I think is horrific is Trance Time.

33:47

Basically there's not competition because to get

33:49

an essay a part approved takes for

33:51

a long time and so you and

33:53

I can go and provide seatbelts cheaper

33:56

than trance time and anytime the by

33:58

a company. They're basically roll up. The high

34:00

prices by five six hundred seven hundred

34:02

percent and they're being with into by

34:04

the department offense because the term fences

34:06

think our rights and is society better

34:08

off because all these small cost panels

34:10

are seat belts are are much higher

34:12

know just basically which is the Ceo

34:14

and future older space. Compared that to

34:17

sir the Valley it's sure it's the

34:19

hunter vitreous and was always at. These

34:21

are very low priced. Parts.

34:23

Compared to a plane or something like that.

34:25

To any think about that price. Dynamic works.

34:28

I'm associated. Costs: Oh yeah you can raise

34:30

price of a seatbelt. That's an an argument

34:32

that some smart had fund investors have in

34:34

the and as a gay class of companies

34:37

that are low price and was released to

34:39

the whole and therefore give you some pricing

34:41

power. and as you often find this for

34:43

drugs were they farm industry says well drugs

34:46

are only about ten percent of us spending

34:48

their the largest part of the spending that

34:50

employers pay and that consumers pay out a

34:52

pockets. And if you look at some

34:54

of these drugs while it might be

34:56

a total part of the whole gouging

34:58

a customer and getting there was wilson's

35:00

disease was the classic with valiant were

35:03

absent regulation they would not be able

35:05

to charge two hundred grand a year

35:07

for a life threatening drug that really

35:09

to costs pennies rights and so to

35:11

me that says price gouging with gnomes

35:13

aggregate benefit like is no benefit that

35:15

the you're driving or the society's deriving

35:17

from these companies providing it does base

35:19

which they lacked competition with from legal

35:21

and regulatory reasons and then people are

35:23

daft. Is that simple? A One of

35:25

my favorites was always the eyeglasses industry

35:27

and it was stunning to learn to

35:29

silly one company or to. Yes,

35:32

so the looks of the guys. A

35:34

tiny company they've recently merged with as

35:36

he Lured which is a French companies

35:38

that vertically integrated it so lopsided. Can

35:40

basically does the frames as Lord does

35:42

the lenses and they argue that they're

35:44

not that high when it comes to

35:46

glasses for the entire world. they have

35:48

close to a monopoly when it comes

35:51

to be branded classes. And then they've

35:53

also been buying up where people think

35:55

that there's a choice between like Lens

35:57

Crafters and others Are you go to

35:59

these two. Boudreau actually owned by Look

36:01

So to get and seasons go through the

36:03

dozens of brands they actually own under different

36:05

labels he sings your shopping around and fifteen

36:07

price comparison central banks from the same company

36:10

and in industry after industry. What's happened is

36:12

that the D O J and yet to

36:14

see over the years the low level at

36:16

which they will scrutinize mergers and should have

36:18

gone up and up and then effectively. they've

36:20

blocked and was no mergers and scrutinize Almost

36:22

no mergers. Why is it that

36:25

the regulators haven't scrutinize some of these

36:27

murders If it's creating this absence of

36:29

competition, so or one is ideological. I

36:31

think many them actually do think that

36:33

monopolies are better. So the history the

36:35

U S monopoly movement in a few

36:37

sentences. Basically as you had a huge

36:39

move to regulate the trust them Now

36:41

please me, eighteen eighties wasn't very well

36:44

enforced. You ended up with the quite

36:46

knack and nineteen fourteen that was after

36:48

Sen. Roy was broken up and into

36:50

just wasn't really and forth until the

36:52

Nineteen thirties and or Str. As

36:54

he had like murder emerge away from the

36:56

nineteen twenties and then after if the are

36:58

basically there was quite a lot of in

37:00

address enforcement and then it became the consensus

37:02

and sir Republicans and democrats blocked mergers. Eisenhower

37:05

talk about it in his state of union

37:07

and this is widely accepted and it it

37:09

would become so ingrained that it was very

37:11

difficult from with any competitors to merge and

37:13

there is a famous case. some freshly stores

37:15

and Los Angeles or in emerge and achieve

37:17

seven percent market share and I was blocked.

37:19

Answer: Some of the economists thought you know

37:21

what? we've gone too far as they were

37:24

probably. Right in the Nineteen sixties. Back then

37:26

you had to conglomerate ways and part of

37:28

that was it. You can buy your competitor,

37:30

you buy some random company so you ended

37:32

up with seem like a Hollywood studio, own

37:35

buy an oil company which also owned a

37:37

ball bearing company and a Scar factory ends.

37:39

There's all that broke up but he just

37:41

couldn't buy or competitors. Answer these Economists particular

37:44

from University of Chicago you had not and

37:46

Friedman, George Stigler. and then you had Robert

37:48

Bork on the legal side who wrote the

37:50

at address paradox basically argue that murders were

37:52

good, They would create. Efficiency as you get

37:55

passed on to consumers and price was the

37:57

only thing that mattered. And if he ignored

37:59

price. Then basically was a demagoguery answer

38:01

even though none of these ideas are present

38:03

in the Sherman Antitrust Act or in there

38:05

quite knocked. it's just basically was the teaching

38:08

in the ideology the To had and when

38:10

Reagan came to power he appointed faster to

38:12

the Justice Department and then they changed the

38:14

merger guidelines and I see to as it

38:16

ever since. What we had is a merger

38:18

ways after merger ways and at first it

38:20

didn't make that much of a big deal.

38:23

But I mean you can write the movie

38:25

Wall Street It was about mergers and tips

38:27

and you had booked in have seized by

38:29

Jim Stewart. And that was a dick saying.

38:31

And now we've gotten so used to it

38:33

that in a known that fi winter mergers

38:36

but when you have for decades of mergers

38:38

one after the other you basically you're in

38:40

a situation like World Cup or the Sweet

38:42

Sixteen where you start with sixteen teams and

38:44

good and eight and into for And so

38:46

the damage is not done in a single

38:49

year but ever forty year period. Many industries

38:51

have gone from being a highly competitive now

38:53

essentially being the hands of two or three

38:55

players to mention the notion of price which

38:57

is I know when I was studying bad

38:59

anti trust. It was, or the

39:02

consumers hurt because prices artificially

39:04

high. What are the alternatives

39:06

to? That metrics as a

39:08

means of trying to determine whether a

39:10

merger censorship got to go through. Firstly,

39:13

I'd if they did sucks on price I

39:15

would be thrilled. I think the problem is

39:17

that they say that they care about price

39:19

but then they allowed has emerged go through

39:21

where prices actually go up So I would

39:23

say to the complete absence and enforcement of

39:25

their own standards. He reminds me of what

39:27

Gandhi said. They once ask Gandhi what he

39:29

thought of western civilization. He said he thought

39:31

it would be a good idea these the

39:33

consumer welfare standard about price or they would

39:35

be a good idea if it was actually

39:38

practiced. There is extensive evidence that mergers particular

39:40

you know six players lead to higher prices

39:42

but even moving beyond. Price some the case

39:44

of the digital giants says but free

39:46

Google freeze I could complaining there's no

39:48

harm the arguments there are one the

39:51

anti competitive facts which is a that

39:53

they're discriminating against other people and in

39:55

their cases nineteenth century for example or

39:57

railroads had the only bridge going. The

40:00

Mississippi and if you have the only bridge,

40:02

the law is stated that you had to

40:04

provide sort of open in nondiscriminatory access to

40:07

your competitors, right you can. Just because you

40:09

have it doesn't mean that you can't a

40:11

liar computers to use it and I would

40:13

argue that is these businesses are and businesses

40:16

preventing search results from the should be savoring

40:18

their own or of Amazon's in the business

40:20

of providing said of a third party delivery

40:23

of goods they can ultimately be saving their

40:25

own goods are screwing their suppliers. A sense

40:27

of using advertising is attacks for the competitors

40:29

sharpness. Search results. But then you also

40:32

have a harms innovation meaning that if

40:34

these platforms don't want competitors and have

40:36

access to whether it's a P Eyes

40:38

and they can shut them out, you

40:40

end up with what you could call

40:42

age innovation right where you have harms

40:44

to innovation, that happens and all these

40:46

I think do make sense and are

40:48

beyond price. But ultimately the Sherman Act

40:50

and the Queen Act were much more

40:52

political than truly economic, meaning that there

40:55

was a decision that we don't want

40:57

to live in a society where one

40:59

or two people. Control entire industries. And

41:01

so I think that's to focus

41:03

exclusively on price without actually realizing

41:05

the reasoning behind why We have

41:07

these laws, minutes, and force the

41:10

trees somewhere behind the. Curtains

41:12

In D C there are people. Who.

41:15

Are the ones who are deciding whether or

41:17

not a merger goes through or what the

41:20

impact of that is? As you said earlier,

41:22

there is this revolving door in D C

41:24

where someone to so obvious works in the

41:26

government. I'm in the make more money in

41:28

the private sector. What's the alternative to get

41:31

good people in government. Who.

41:33

Can't. And. Go into private

41:35

industry, So. Right now

41:38

lot of the people working at a trust

41:40

and a good enough to see many hammer

41:42

find people but they do tend to come

41:44

from the case three law firms or from

41:46

the to consulting group that do miss all

41:49

the research arguing that mergers a wonderful on

41:51

that does not a problem which is Compass

41:53

Lexicon and Charles River his associates and so

41:55

I think that if you're dealing with a

41:58

broad fields such as it is using. The

42:00

really cast a wider net when you're looking

42:02

at people who should be serving in a

42:04

Dj and if you see and not necessarily

42:06

going and hiring people who would have to

42:08

recuse themselves when they are cases come up

42:11

or who certainly don't want to see any

42:13

impediments to future mergers that might harm them

42:15

when they're on the way out. I were

42:17

to peaceful american conservative about this I think

42:19

the they titled it why Regulators when soft

42:21

on monopolies and I went through a dozen

42:24

revolvers and some of them have been doing

42:26

enough forty years. So the idea that there

42:28

representing you or me or the consumer. Makes

42:30

no sense when they're ultimately during his it's

42:33

witnessing Talat called the Retrospective Bride where it's

42:35

not like some as giving them a suitcase

42:37

a cast. rather they're very aware unconscious that

42:39

if they're gonna go back to their law

42:41

firm, they want to make sure that they

42:44

made the right choices. And so the evidence

42:46

is overwhelming on a case by case basis.

42:48

When you go through and look at their

42:50

careers that the regulators essentially are fully captured.

42:53

When. You read through the book you

42:55

get the sense that it's very much

42:58

a haves and have nots and if

43:00

you're part of one of these companies

43:02

are probably in a particular for an

43:04

owner and pretty good. So here on

43:07

this mission through the book was trying

43:09

to figure out like we have a

43:11

problem with identified problem we need to

43:14

foster better competition as an individual. What

43:16

do you do about it? So I

43:19

started out just to efforts was all

43:21

disorganized ahead like I just one tab

43:23

and a spreadsheet and is kept dropping

43:25

notes. and and then I said organizing

43:27

it more than organize it more and

43:29

more and eventually ended up to sixth

43:32

ordinarily organized highly detailed map of the

43:34

Us. and then I saw a killer

43:36

forgot to you as I should use

43:38

Broad as a Day of Bryant service

43:40

go have a extremely detailed industry map

43:42

of a highly concentrated industries with all

43:44

the companies and players laid out. And

43:47

then I've classified them by whether the

43:49

natural or unnatural in some of the

43:51

sources, the monopoly or audibly and was

43:54

quite clear as as I started doing

43:56

now, finding Buffett behind ledges and rights

43:58

And the first chapter. The parking lot

44:00

tougher and sure whether they're both say different

44:03

so but it tends to like or I

44:05

call the a natural monopolies right? So he's

44:07

an owner of Moody's that only exists because

44:09

his neck to Congress which created the interest

44:12

rate is nation and it's easier to raise

44:14

an armed militia and Us than it is

44:16

to start a rating agency. She'll praised monopolies,

44:18

but interestingly if you read his book, the

44:20

only examples he gives the monopolies recently. Once

44:23

in a very strong network effects in feedback

44:25

loops were yeah we do end up with

44:27

a winner take all dynamic am he never

44:29

talks. About the Drugstore. To oddly with

44:32

Cbs Walgreen that's purely down to regulation,

44:34

essentially to kill prison Nobly, but ultimately

44:36

is really looking at the natural monopolies.

44:39

So when has billions dollars or I

44:41

realize like this essentially is like a

44:43

road map for buffet? So Odyssey, It's

44:45

quite useful on the investing side. And

44:48

I think that pussy himself he is

44:50

a progressive, is a democrat. Auto. He's

44:52

not doing very much to change. the

44:55

status quo is certainly not encouraging the

44:57

reform of Moody's He loves his Jax.

45:00

I will up one day to be an

45:02

enlightened robber baron and give the money to

45:04

good causes and and monopoly sake of probably

45:06

will be doing something. Ultimately, this database censuses

45:08

street can't beat em. Join em I guess.

45:11

Yeah, I think he has to be a

45:13

Robin Hood asserts you've identified it as as

45:15

a prop on. What

45:17

would you suggest? The.

45:19

Country is it's the appropriate entity

45:21

do about the problem. Said.

45:24

The last chapter of the books or I

45:26

can emerge as an epilogue or chapter but

45:28

it has a series of proposals because I

45:30

I realize that if this book did catch

45:32

on all it would end up getting read

45:35

by regulators and legislators and I've given up

45:37

hope on the regulators. I don't actually think

45:39

that any them one agree or to care

45:41

at the legislators have met many them do

45:43

and they have been getting in touch with

45:45

me. So I have been speaking to senators

45:48

and congressmen and even the staff his presidential

45:50

candidates and they do cared deeply about this

45:52

issue and I think to d. Solutions and

45:54

reforms gonna come from the legislative sides.

45:56

I thought I needed to have a

45:59

blueprint A since. The Reform and you

46:01

could broaden. Lay out a couple simple proposals,

46:03

one you have to undo past mergers that

46:05

are harmful in the past. With rescind Royal

46:07

got broken up into Get Broken Up The

46:10

World and and it actually got much better

46:12

and I seem to there are many mergers

46:14

that's clearly be broken up and things improved.

46:16

but the main point going forward is that

46:18

day murder guidelines every few years go higher

46:21

and higher where they had to read such

46:23

a level of concentration that before getting blocked

46:25

one you can add dramatically reduce that men

46:27

and say that the were they call the

46:30

a church I index for concentration should be

46:32

much lower to would begin any scrutiny and

46:34

they should I think have a bright lines

46:36

So for example is an injury has six

46:38

players are fewer A merger should be allowed.

46:41

We just know the prices go up when

46:43

that happens you end up with competition so

46:45

mergers to do ah police never be allowed

46:47

mergers even down for players are in general

46:50

I don't think should be allowed and that's

46:52

one of the main things. I think ending

46:54

the revolving door is a key saying. see

46:56

you wanna make sure that when people were

46:59

to the Deirdre Ft. See the can immediately

47:01

go back to private sector divan represent

47:03

clients want to get their mergers through

47:05

and then they're all sorts of other

47:07

more particular things. Industry by industry. Earlier,

47:09

I talked about insurance industry rights. Believe

47:11

it or not, the insurance industry is

47:13

exempt from antitrust supervision under Mature and

47:15

Ferguson. right? Like this is truly insane.

47:17

I would get rid of it act,

47:19

But at a minimum, I would not

47:21

make them exempt from our antitrust division.

47:23

So those are just some of his

47:25

simple reform proposals. Sensible and concept. A

47:27

year now. From. Time Time having conversations

47:30

with people who are empowered to do something.

47:32

That's what do you see about the practicality

47:34

of some of these. So I think change

47:36

takes time, and while I am hopeful that

47:38

there is the beginning of change, I'm not

47:40

overly optimistic about how quickly it will happen.

47:43

But I think that people are becoming more

47:45

aware of the need and it's not just

47:47

on the last to the ideas that some

47:49

other these crazy presses out there. When I

47:51

attacked the company's I think the conservatives are

47:53

starting to realize that you could actually have

47:55

much lower health care costs if you got

47:58

rid of excessive. Regulation. That

48:00

prevents competition. You could end up with

48:02

lower insurance and medical costs if we

48:04

allowed. For example, insurance be sold across

48:06

state lines. Are you allow the importation

48:08

generic drugs from a similarly regulated and

48:11

why should we be able to import

48:13

generic drugs from Canada from the you

48:15

are from Japan So they're all sorts

48:17

of things that could be done and

48:19

employers who are paying would like that

48:21

lower drug costs When I to have

48:24

slower insurance costs and so left and

48:26

right are recognizing that the current situations

48:28

only benefits those who are capturing. The

48:30

economic rents, House or some cousin

48:32

questions. What's your favorite hobby? Your activity Outside

48:34

of work and family, Detroit changed over time.

48:36

I think of his art and soccer. see

48:39

that lately it's been writing and I think

48:41

a right to clarify on thoughts to answer

48:43

questions and written a couple books. I blog

48:45

occasionally and now I'm I'm writing a memoir

48:47

about growing up in some law school shooting

48:49

up and openly about done later this year

48:52

and it it's a complete radical change and

48:54

style in already non sections. One thing, writing

48:56

even remember as real as written, a fictional

48:58

way in the sense that the voices different,

49:00

the way that. You write his difference so

49:02

that that's been fun. And. You do

49:04

you? writing? I write in spurts when

49:07

I do, right, whether it's the books like mess

49:09

or others I tend to like like myself. Way

49:11

for we can work at ten hours a day

49:13

and then had week or two off and go

49:15

back to it. So I work in intense spurts.

49:17

But I don't understand that people can you like

49:19

three hours consistently every day? But everyone has their

49:21

own writing style. Put your biggest pet peeve. On.

49:24

A human level probably blossom temper saying

49:26

nasty things. I've seen that in i

49:28

think the happens lot and that trading

49:30

floors and other places and it might

49:32

her life of nursing my parents, razor

49:34

voice anyone and I think if you

49:36

can control yourself it's me unlikely the

49:38

arena control a business or even relations

49:40

with other people well and have it

49:43

your biggest investment. That piece probably go

49:45

bugs investing bad industries. I mean they're

49:47

totally one irrational and there are some

49:49

nice call bugs but in general I

49:51

find it disinvestment. thesis is not amenable

49:53

to logical. Discussions. And then even when I

49:55

show them that historically poor returns from coal

49:58

mines over time, that still doesn't say. Them

50:00

and so it's really a it's a

50:02

rare religion so that was really pro

50:04

arguments for because. Bitcoin is another.

50:06

a long topic was I think fails and

50:08

almost every front of currency is a means

50:10

of exchange a unit of account mr or

50:12

value sales and all three France and so

50:14

gold essentially could be a useful investment in

50:17

be given that it's the inverse of the

50:19

real rate. certain extent of ulrich negative it

50:21

might be can mess and the coal mines

50:23

and cells are terrible and gold has a

50:25

limited function in terms as a bet on

50:27

natural rights as it and Bitcoin to the

50:29

clinic. the pretty bad investment. Elder smart people

50:31

I know in Silicon Valley you made liberalism

50:33

money, bought early and sold early and know

50:35

it was. All this is dumb retail people

50:37

pollen late when he learned recently that most

50:39

struck you. So I started reading a book

50:42

on the history of financial markets and I

50:44

may do that at one stage. and the

50:46

thing that really struck me during all this

50:48

research was that we since it we live

50:51

in new and interesting times. Lot of these

50:53

problems as been looked at over time and

50:55

whether it's Romans treating essentially an early form

50:58

of insurance called Bottom Read and understand this

51:00

amazing book Run and Six Ninety Eight by

51:02

a Sephardic Jews and the books cause confusion

51:04

of confusions and it's. Sort of a diary

51:07

of a traitor in the Amsterdam Stock Exchange.

51:09

And so we sit around either United, shedding

51:11

this podcast as a for Rediscovering the world

51:13

and investing world. I These things have been

51:16

around for very long time and often their

51:18

created independently whether it's in China or increase

51:20

and so anyway the simultaneous discoveries are they

51:22

like the modern world needs a financial markets

51:25

function whether it's insurance or stock markets and

51:27

a lot of the problems that we face

51:29

today from the behavior of them point I

51:31

couldn't face at people before us and so

51:34

does wonders why I think education sir. History

51:36

and learning is very important. it else answer

51:38

some or problems today but the seen that

51:40

in practice was extraordinary was teaching from your

51:42

parents as most stayed with you. I would

51:45

hope and think that some of the moral

51:47

values they would read to us every night

51:49

at dinner table in a breakfast. in terms

51:51

of the we Have Devotional the East read

51:53

St. Augustine City of God to us all

51:56

that but also I think just experiences learning

51:58

and me of being home schooled. I

52:00

realize that you can teachers have anything in if

52:02

you set your mind to it and most of

52:04

my friends growing up died of Aids because they

52:06

were sharing needles and I used to go to

52:09

the eighth floor and Germany to silence the May

52:11

Hospital in Madrid where the Infectious diseases ward was

52:13

but at the entrance to the hospital com link

52:15

I had was a neuroscientist who is the first

52:17

Spaniards when Nobel and there's a quote from him

52:20

and it says along with if we're said liquid

52:22

totally superbly said It would assist in a proponent

52:24

which is every man can become the sculptor of

52:26

his own mind if he sets himself the task.

52:29

And that was the quote inspired me as

52:31

a kid every time a when it's a

52:33

hospital and I think that that quote by

52:35

Monica has really has been an inspiration to

52:37

me when I think so I my parents

52:39

whose given to me and my brothers. Straight.

52:42

Or it last one. What life lesson of you

52:44

weren't that you wish you knew a lot earlier

52:46

in your life. I think that you just have

52:48

to be bold and creative and gotten do things

52:51

and I think the quite often like we're self

52:53

censor or we don't think we have the ability

52:55

to go and do things. And it's interesting that

52:57

going out and running a book, restarting company or

52:59

whatever might be seems like a very bold move

53:02

but it can be tough doing it. but once

53:04

you go out and do it or clients from

53:06

just and reading stuff if you can offer something

53:08

other people want to rear pay for you to

53:10

make a success of it. I worked

53:12

at some jobs that approach the less really

53:14

in my career but I also do the

53:17

Syrian life that there's a spectrum and some

53:19

people psychologically have an extremely for stability or

53:21

what psychologists call belonging. Others have an extreme

53:23

need for independence and I think we can

53:25

figure out where you sit on that spectrum.

53:27

Mignon help inform your life choices. Not everyone

53:29

should be an entrepreneur, she a producer on

53:31

these of need for stability blind side of

53:33

the spectrum. I know the I'm on the

53:35

I independence out of spectrum and so yeah

53:37

didn't live your life choices that are consistent

53:39

with where you are on the spectrum. Grapes

53:41

are jealous. And take solicitor you time a

53:43

good luck or thank you. So much space

53:45

for listening to this episode. I hope you

53:47

found a nugget or to to take away

53:49

and apply in your best thing and your

53:51

license as you'd like what you heard. Please

53:53

tell a friend and maybe even write a

53:55

review on I Tunes deal. Help others discover

53:57

the show and I thank you for it.

54:00

Had a good one and see you ex!