Big Technology Podcast - Are We Screwed If AI Works? — With Andrew Ross Sorkin

Episode Date: March 18, 2026

Andrew Ross Sorkin is an anchor at CNBC, columnist at The New York Times, and author of 1929, a bestselling book about the worst market crash in history. Sorkin joins Big Technology Podcast to discuss whether AI achieving its potential could lead to a similar crash, either via a labor shock or the disruption of software. Stay tuned for the second half where we discuss private credit risks, prediction market gambling, and the SpaceX IPO. Hit play for a dynamic conversation about where AI could lead, and its potential economic benefits or consequences. --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. Want a discount for Big Technology on Substack + Discord? Here’s 25% off for the first year: https://www.bigtechnology.com/subscribe?coupon=0843016b Chapters: 0:00 Introduction 3:37 Could AI's Success Cause a Market Crash? 7:02 The Mass Unemployment Question 34:39 Private Credit Explained 39:09 Private Credit Alarm Bells 42:43 The AI Debt Risk 47:14 The Prison of Financial Mediocrity 54:38 Could We Have a 1929-Scale Crash? 56:11 Fed Independence 1:03:08 The SpaceX IPO Learn more about your ad choices. Visit megaphone.fm/adchoices

Could AI cause a market crash by working too well? Let's talk about it with Andrew Ross Sorkin of CNBC and the New York Times and the author of the bestselling book, 1929, who's here with us in studio today. Andrew, great to see you. Thank you for having me. Welcome for the show. Thanks for being here. Really appreciate it. So the book comes out about four months ago, and I think it's great that we're speaking now because the worry that you had brought up in the beginning.

And obviously, it's all about the depression and the market crash. And the worry that you had brought up was, look, we have 700 billion. in capital expenditures going towards AI companies, and this could all go bust, and that could cause a cascading market crash. But actually, what we're starting to worry about is the opposite, which is that the technology will work. And right now, we've had, we're in a moment

where last month software stocks lost a trillion dollars in market cap because there was this fear that AI could just displace them. And it was moving at a pace that they wouldn't be able to recover from. Is there a worry that we'll have our own type of market crash, but just a completely different way? And that is that AI works and everybody is disrupted. You know, so I'm often asked, you know, is there a way, a modern day way to get to 1929? And what people are really asking is, is there a modern day way to get to 1932, which is 25% unemployment in America?

And I always think the answer is actually less of a market crash and more AI. Meaning, if you ever wanted to think about what would this country look like with 25% unemployment, how would you get there? And I think the answer is potentially if AI is as successful as I think we all hopefully wanted to be, to the extent you believe these valuations are real, all of the math behind it, the only way that. that really works to some degree is to create extraordinary productivity. And what does productivity mean? Well, it means a lot of growth at a lot less cost. How do you take out that cost? Well, we're both looking at each other and that's pretty much we are the cost.

Yeah, I mean, the robot employee is going to be a thing. It'll definitely be a thing. It's going to be a thing. My kids talk about it being a thing. I've got 15-year-old boys and we talk about what they're going to do. But then we talk about like literally, are we going to have a robot in our house? five years from now. And what are all the things that the robot's going to do? Physical robot, it might be a little bit longer, but will you, for instance, maybe it's a

decade from now? Will you have a handful of AI assistance working for you in your various capacities and at the times at CNBC? That I'm sure will happen. But here's, I'm a little bit surprised to hear you open to the possibility that it's going to cause mass unemployment. And actually, we should talk about the percentage chance that you think that it could happen. But I'm skeptical, and I'm willing to change my mind about this. But I'm skeptical that it's going to cause this wave of mass unemployment. Maybe it will in the near term. But for something to be, if it does live up to the dreams that the AI makers have,

and it's something as capable as being able to do the jobs of, let's say, 20% of the workforce, wouldn't you anticipate a production boom that would come along with that and help grow the economy in the way that leads to more things for people to do? So that to me is the question. It's not, is there more things to do? It's who's going to have the money to do those things? So when I think about all of the young people, and by the way, I don't think that we have to have mass unemployment forever either. I think it's possible that there could be a painful transition period.

And historically, by the way, when we've gone through these technological revolutions, there have been painful transition periods. And so if you're a young person today doing the job that, frankly, increasingly it appears that a Claude or ChatGPT could even do, whether it's research or putting together a model or being a paralegal or name your role, you say to yourself, okay, if you're running one of these firms that historically hired kids out of college to do that, are you. Are you going to still hire those kids to do that? Is there a higher order kind of work that they can do for you now that you can get this work done by the AI? I mean, I think these are the real questions. And then there's going to be an economic one, which is, you know, tokens are not free. AI is not free, but how much cheaper is it ultimately going to be than a human? And when you look at the statistics, though, it's very interesting because software engineers, they're the ones who,

all the tokens are being spent on to do software engineering work, to build websites and applications and code. AI is more sophisticated in coding than anything else. But we're definitely not seeing a wave of layoffs of software engineers now. And you could sit back and watch these things code for 24 hours at a level of competency as a software engineer. And they're being hired. The job levels, the job numbers of software developers on Indeed are going up.

You don't think that in two years from now, just in terms of just the magnitude step change, in terms of how good the technology is going to be, that it's not going to get that much better? I agree. If you just, if this is the level, I'll bet with you. But if you believe in the technology improving, which invariably it has to, and by the way, if it doesn't, then we're in a whole other different world. We're not talking about what happens in success. We're talking about what happens in failure because then we really will have a bubble.

But if it does improve the way I think the model makers, by the way, policymakers, investors wanted to, I just don't see how we're going to be sitting around doing our own programming. I just don't see it. By the way, I write my own articles today. I wrote this book without AI. AI was too late for me. This took eight years, unfortunately. But five years to now, do you really think that people are going to write books even by themselves?

I assume you would be co-authoring a book with AI. I imagine people will be writing articles at minimum with AI if AI is not doing it entirely, In which case, then there's a question about sort of what is the role of the human in all of this. So my pushback would be on the idea of mass unemployment. I definitely think there will be disruption. And I'm open to the possibility that it will be what you say. I don't think you can completely discount it. I think in this discussion, though, and I'm curious what you think about this, it's almost been fully weighed to the we're going to have mass job loss because.

we can see what this technology can do, we can see its pace of improvement. I think in the public discussion, like you probably remember this Citrini letter a couple weeks ago, where they believe that, okay, AI is going to be able to take over work and then you'll have this cascading collapse. The thing that I wonder about is whether the economy, whether businesses in the economy, will be content with what they're doing today because you'll have the capability increase, you know, in terms of work, But that also increases the capability increases of a company. And whether they'll be satisfied with what they're doing today or then just go after their roadmap in a way they've never been able to before because they've been constrained on labor. Right.

But that generally assumes that you have to be able to massively upsize the size of the pie, right? This is growth for everybody, not just do I think that companies are going to say, I can be in that business? I can go after that guy. Yes. but there is some of this is a zero-sum game. It is not like that the pie can just grow exponentially. I know there are people who believe that it could, but invariably, at least historically, hasn't.

There are sort of upper limits to even what growth could ultimately even look like. So, yes, I imagine there will be people who will do even more, but I would also say, you know, I walked in here and I called Alex. I said, I think I described you as a, what's it like to be an independent media titan, right, in this role that you're in. And you've got a sort of satellite group of people who you use and work around you and things like this. And maybe over time you'd hire some more people here and there. But maybe you wouldn't in the future. And maybe, you know, the sort of network that you'll have will be your agents that will do this for you.

Well, if you don't have those people doing that work for you, what are those people doing? I've told this story before. I myself, I'm a little bit of a small business as I was promoting my book. I ended up having to hire a couple different people, social media people, this and that and the other thing. And I was sent a contract, which I needed to fill out. And typically I would have sent it off to a lawyer who would have charged me. I don't know, a couple hundred dollars, maybe $1,000. And what did I do? I took the contract. I put in his chat GPT. I said, tell me everything that's good and bad in this contract. It spotted the things that I already saw and spotted some others. It then says, do you want me to redline the contract and, you know, mark it up? I say, sure. It then says, would you like me to write a cover letter back? I say, sure. I make some changes to it. I make sure it hasn't hallucinated. And it's a, it's.

off. But it means that if every other small business owner, if you will, operated the way I did in that moment, all of the lawyers who do business for small businesses for things that are not that complicated. And these were, you know, it was very little at stake in this context. But I think that people wouldn't probably use lawyers for those things. Now, then you say, well, maybe then the lawyers are going to have to figure out, you know, can they be doing work that's even higher grade work? what is that higher grade work? We already have that higher grade work. It's what big corporations look to them to do for mergers and acquisitions and other things. But the small business lawyer typically hasn't been doing that work in the past. Well, it's a worthwhile debate. And I think the answer goes to the question that you asked in the beginning, which is, well, is there going to be a limit on growth. And the argument, this is fun to go back. Well, actually, I'd be curious to hear where you believe the limits are. Because I don't think it's exponential. But I think it can grow. I think if you were to take the example that you just gave, where now you're able to go in and negotiate this contract with AI, well, all of a sudden, that's time that you get back, money you get back.

And you can work on improving your book. You can work on writing another article for the Times, researching a segment for the next day, squack box. Yes, I become that much more productive. Right. But I'm now not employing more people. So I do believe this is, talk about inequality. I believe that the wealth and the great riches are going to go both to the model makers, some of the big tech companies, and probably the folks who already have had success because they will be at the top of these food chains. And instead of hiring more people, they're going to hire more agents.

Definitely possible. I'll just make one more. Please. Tell me I'm wrong. By the way, I hope I'm wrong. I pray that I am wrong. I hope five years from now, you will have me back on your broadcast. And I will say, mea culpa, the world is such a better place. So let me just preface this by saying, I just want to flesh these ideas out. I think I totally accept the possibility that you might be totally right on this one. Can we have the listeners make a gamble on a prediction market about this? kind of get to prediction markets in a moment. I would just say that when you start to increase what you're able to do, all of a sudden economic activity happens that you didn't anticipate before. So, for instance, with Cloud Code, you know,

I went and started building, you know, workflow tool that I use for this small, needy operation that like the people I work with, we can all gather together and use it to communicate and track progress and things like that. And then all of a sudden I start plugging into services that I never will, have paid for you know as someone who didn't have the access to the ability to build these things with Claude code so i think that as you as you find these ways to be more productive there are opportunities and economic activity that gets created far better than the time you might have spent doing the drudgery work but maybe i'm wrong i want to hear all about your modeling a little bit

later you're going to have to tell me about this app of yours not that type of modeling okay um But there are places, I'll just, just to end this segment, there are places where I could definitely see some real disruption accounting to me. I mean, watching Claude code go out and build computer programs, take over my web browser, take over my computer, and just go out it. You see that these things can work autonomously for a number of hours and do quite well, fix their mistakes, follow prescribed rules. And for something like accounting, financial modeling, you know, they could go out, grab the regular. from a certain city and then go out. And then you're that question of, well, what about the higher level work? Well, for accounting, you know, maybe you can do financial strategy for a company, but it just does seem like there are less roles than there are. But there's so much of that

throughout our entire economy. By the way, take journalism, for example. So you got a football game over the weekend. You got the scores. You know what happened during the game. The value proposition for a journalist to be watching that game and to ultimately be reporting on that game is their ability to analyze the game potentially as a sort of a columnist to be able to sort of explain what happened in an entertaining way, but maybe have some insight into the player. And maybe they had a relationship with the player and knew a player, you know, had had been in the exact same position five years ago and they have a whole bunch of different stats and all of these things. Some of that, not all, but some of that, I imagine AI in the future will be able to replicate. It just is.

There's other parts. You know, AI can't walk into the locker room and start to interview the athlete or figure out what the coach did two days earlier and try to get somebody to tell them something off the record or behind the scenes. And that'll become a sort of higher order value proposition. But there's a lot of things that just we, we, that are part of our daily life that I imagine we'll get automated. Okay. On the journalism example, I want to talk about this. And then we'll move on because we have a lot of other stuff to cover. But this has existed for a long time, narrative science is a company that's been able to take the box score. And if they see a baseball team, you know, gets an eight in the ninth inning, they'll be like had a ferocious comeback and

won the game because that's a data point. They can turn. But we still, we love, watching ESPN. In fact, and I guess watching live sports is that thing. Oh, I don't think we're going to stop watching live sports. The question is, are we going to read about them in the same way? You know, the service you described is looking at the delta between the scores and then is able to sort of be able to describe what happened in a particular way. What happens when the AI can actually watch the game itself? You know, if Sam Altman and Johnny I have their way, we will have something sitting on this desk probably in six months from now that may be watching what we're doing all the time.

Right. In which case, it'll have a persistent memory about all of our interaction. And maybe if we're watching the game, it'll be able to report on the game itself. Okay, but this is where I think it's different. That the, so narrative science was able to do a great job with the box score. Maybe AI can watch the game. Nothing will beat the reporter going into the locker room. Correct.

And speaking to the clobiles. closer and be like, what were you thinking when you threw that fastball down the middle? And then go into the other locker room and saying, how did it feel? No, no. And that is correct. I'm with you. They matter. They matter.

And people, by the way, Google's notebook L.M makes amazing podcasts on any topic you could want. I've seen one podcast. It did happen. One podcast hit the top 30 trending on Spotify. That was entirely AI created about the Epstein files, an 84-part series taking those documents and turning it into a show. But by and large, we have the ability to create these shows, and we would still rather see two human beings have that discussion.

You're freaked out by that Epstein podcast, aren't you? No, you're actually giving me an idea. Exactly. He just pointed, for those listening, he pointed to the book 1929. And I'm thinking maybe Notebook LM could put together an awesome podcast on 1929. I think you should do that. See what happens. Be cool.

They'd be a little bit of a interesting. Okay. Okay. Here we go. So, all right, we've done labor. Yeah. Let's go to the capital. So then the other side of this is we talked in the beginning about if AI works, what's going to happen?

So there's a labor risk. There's two, though, there's two competing forces here. There's all this money, you know, betting on this stuff to work. We know that will disrupt the economy. Like, let's just go back to the, you know, what our software company is going to do. So if that 700 billion in CAPEX that the tech giants are spending this year on AI pays off, you're going to have this entire hollowing out of the software industry of maybe other industries. I mean, I was looking before at the of the SMP 500 IT is one third.

Now, part of that is the tech giants. But it seems like we have these colliding forces where either that bed needs to go bust or there's going to be some serious consequences for everybody else. So maybe I'll be on the other side of this one for it. I'm not sure that software is dead just yet because I think to myself, sure, we can build our own model for whatever app we want to build for our company. But at the same time, a lot of these software companies already have an install base. They have some data, I imagine, I'd like to believe. and on top of that, they probably should be and are using AI too to be able to build their apps and their software. So I would imagine, unless you think that everything is just going to be built either by individuals of companies or we're all hiring, you know, Accenture to come.

And instead of being the integrator, that is not going to be about integrating. It's just going to be about building custom software for everybody. I would think that some of these software companies will actually continue to have success. There's a partner at Sequoia who recently said something like the one, the software companies that will survive are the ones that are actually managed services

with the technology layer on top. Like that, I believe. The others, he said, are just one iteration away from being replaced by the model builders. So I think if you're really a services company, probably you're all right. But I think, I'm curious, Well, you think about this.

The companies that are not the AI chatbot makers, they tend to think that there's going to be a set of chat bots. There's going to be a bot you use when you want to have a conversation like a chat TPT style one, but one that you shop and when where you're doing your enterprise and your enterprise stuff and learning about what's going on inside the company, I just see it consolidating. I mean, I'm with you. I think we are all going to have one bot. Now, the question is, does that bot do a sort of secret or quiet handoff to another bot, and it's seamless to us and we don't even know?

Meaning our interaction is going to be just with our bot. And it's not just that there's one big model that's going to do everything, but it's that our bot says, oh, you know what? Sorkin wants to shop right now. Or Sorkin's looking for this. There's a specialty shopping bot. over here. I'm just going to hand them off to that bot and I'll tell the bot everything I know about Sorkin so that it feels as if it's the exact same bot working with them and then they go off and do the thing. I think that's probably going to happen. But the interesting thing is that,

that I think is the bet among many tech companies right now. They don't fully know. We don't know how good the core bot gets. So the reason why you would hand off to a shopping bot is because it's difficult to build shopping capabilities into a general purpose bot right now. It takes a lot of planning, special knowledge. But once you get a bot that can do everything in this AGI way, maybe that need to specialize goes away or maybe it can teach itself. Sure. And then we're, yeah, no, no, I completely agree.

But I do think there will be at least one. How about this? I think I'll go with there's going to be one interface. I don't know if it's one bot, but one interface that you will interact with. I imagine likely talking rather than even typing. By the way, I'm talking now constantly to my phone in a way that I was in six months ago. Do you do that? Definitely, all the time.

And we, I mean, we have three Alexa pluses in the house and we're talking to Alexa plus all the time. And were you doing that a year ago though? Because the capabilities have gotten so much better. Like my wife and I will have disagreements about something. And she's European. I'm American. So we're typically fighting over what's better, the American system or the European system. We would never.

We would tell the echo previously to do that and it would play music or turn the lights off. Are you typing your newsletter? I'm typing it. You're typing it. I still believe in writing unassisted by AI because to me that's the only way to think. Type it out. What about texting? Like writing to the bot and then?

No, no, no. So like an open call style thing. No, no. No, my wife sends me a text saying, are you late? which is typically what I am. And then it used to be that I write yes or I'm 20 minutes behind. I type it. And now I just constantly like, yeah, I'm running late.

Sorry, I'll be there shortly. I feel like I'm doing that all the time now, you know, just a completely different way. So there's definitely come a point. So I'll use AI for lots of fitness stuff, talking about, you know, diet, talking about workouts. And I used to be like typing it. And I'm like, why am I typing it in? You just press that microphone button. button transcribes it perfectly and then and it goes you don't know about you you're into fitness i know

you are i used to yes use my fitness pow all the time i was like entering in the food yes yes yes yes made a pretty good database yes yes it took a long time it was it was annoying how to constantly go in there now i'll i only usually do it for like a week at a time because then i sort of fall off fall off the wagon but um i'll say just ate a sandwich this is you know it was da da da da da da da da And it will say, yeah, that was 300 calories and it knows all of the macros. And it can keep it going for, you know, weeks or months on an end. I do that too. A program in like, all right, I want to like follow this.

It was Peter Rattia, but I won't talk about it anymore. Like this health guru's advice, can you give me like recommendations and count that stuff? And the crazy thing that you could do is after you've inputted that data for a while, what do you get in my fitness pal, just a lot of data? In a chat bot, you could be like, tell me about my trends. where am I weak? Where am I strong? What happens when I'm traveling versus when I'm not? And you get real insights from it. It's nice. Have you asked it to assess you? Oh, absolutely. I mean, it's a little narcissistic to do, but yeah. But it's also, yes, and when are you going to get that type of analysis

from someone who you're speaking with all day long and has drawn from all the literature? It's impossible. If you say, please be my biggest critic. Let me, just tell you this thing can be pretty harsh. Yeah. Well, that happened to me with the fitness stuff, where it was like, don't worry about the four slices of pizza you ate. And I was like, can you be a little bit tougher? And it's like, you're weak and you're breaking.

And I'm like, that's what I want. So the interesting thing that you've been talking about along this line on your book tour has been if the AI companies can't make good on all the money that's been invested and there's a lot of debt there, then we could see some form of crash. Has the fact that they're starting to make real revenue changed your perspective there or made you feel a little bit better? Open AI is now at a $25 billion run rate and Anthropics at a $19 billion run rate, although those numbers might be. I feel better about it in two contexts. One is that they're making more money.

And two is that I think when you really dig under the covers of a lot of these commitments that these companies, that these companies have made to others, meaning data centers that are going to be built on the back ends of these things, or even some of the investments that we heard being made in Vida early on saying they were putting it $100 billion. And I think when you realize, and then we were looking at them

and calling them circular deals and whatnot, that they really were going to come in tranches, that everything was trunched. And those tranches make it safer because it doesn't mean that you're going to go out and spend $100 billion dollars tomorrow, even though you don't have $100 billion today. So I do think that there's, that there's hopefully we're in a bit of a better situation in that regard. I still don't think we've taken

full account, though, of two component parts of this. What happens in great success from a technology perspective in terms of the efficiency of these models? Could we ever get to a point where you actually don't need all of these data centers, where a lot of the compute moves to the edge. And then all of a sudden, the economics of that sort of get upended. So you could see it get upended on that side. And then the other side is, you know, could the depreciation schedule of these chips either be way shorter or way longer than we think and how is that going to work? So I think there's still a whole bunch of pieces of the puzzle that we haven't figured out. Yeah, that's kind of one of the hypotheses we've been playing with on the show now is, did Apple just do it right where Apple

becomes the infrastructure for AI where it happens on your phone and on the Mac Mini and the models become so efficient or purpose built that you don't need the data centers? It may very well be that that's where this lands. Having said that, I would imagine that this should be the greatest opportunity for Google and Alphabet, Effective, Alphabet, to truly take share. because Gemini, if built the way I think it should be built, should be able to move you around their phone in shocking ways. It should be able to move into any app, control any app,

do everything throughout the phone. I can't imagine that Apple, which really has made its name around privacy and controls and sort of a walled garden, even under this new deal that they're going to have with Google using Gemini as sort of their Siri are going to let whatever that is go super deep

throughout the entire phone. And so I would imagine that's why I've always thought this should be Google's time. Yeah. And here I am holding my iPhone and I love my iPhone more than anything.

iPhone products too. Yeah, but we haven't seen it yet. And even though Google's AI is better, people haven't left the iPhone for They haven't left the iPhone and gone to Gemini. So the book is 1929. 20 weeks on the bestseller list. Congratulations. Thank you.

The thing that's kind of scary is, I think, part of the reason why it's, I mean, it's about something that happened about 100 years ago, and it's getting a lot of attention. And I think part of that is because people see parallels to now. We're in our own roaring 20s. We have our own market that's riproaring with a lot of people, you know, maybe even more uneasy about it now than they were back then. So, you know, I think a lot of folks look at the book and think, oh, it's a warning about today. And the truth is two things.

One is when I began writing this book, I wasn't even thinking about today. That was not even on my radar. It was really much more about trying just to bring the public back to this moment so you could understand it because frankly I didn't and I thought once I got into it and started to understand these characters and who they were and what they had done I thought wow this is an amazing world the other part of it though is I think it's not just about today in a certain way I know people looked at the parallels today but I think I think we as the public citizens are always trying to play this sort of pattern recognition game and we are always looking at

at history to try to understand the present in some ways. So, by the way, when I was working on this book back in 2021, I want to say, the whole GameStop phenomenon was happening. And I remember the publisher of the book was like, Andrew, could the book come out like now? And I was like, no, no, I'm totally not finished at all. But you could have, I could have imagined if the book had come out then, you would have said GameStop and AMC and meme stocks and all of this was was also like 1929. If we had- Can I say something about that? You were on the show, I think, in 21.

Yeah. It was during the COVID times. We were all in lockdown. You went to your home studio. I was still in San Francisco. And I asked you that. Yeah. And you said the problem that I see, the problem in every financial collapse is the debt.

Yes. And so that's so in the GameStop, that, was the end of the discussion because it wasn't debt that was being taken on. But one of the interesting things that you've said repeatedly on the tour, obviously made clear in the book is that there if there's too much leverage, that's where you have the problem. It's the dry tender. It's the dry tender. The problem is that we don't know. And I just find it astounding that we don't know where the debt is in the system because so much of it is happening in private credit. Well, private crude, 100%. I mean, look, I think that and we're seeing right. And we're seeing

right now a lot of hand-wraining around private credit, a lot of questions about what that whole market's going to look like. And if that market seizes up, what does that do to lending in other parts of the economy? What does it do to real estate? I mean, you could see how it could have a big impact. I will say one thing we haven't really wrestled with is the private credit business really can't fall apart before, frankly, the private equity industry falls apart. Meaning, if you think about it, who has taken on the biggest loans from private credit space? It's oftentimes the private equity players or some of these tech players or some of these. So the private credit people can't lose money unless the other people lose money first. And we really haven't sort of grappled

with that. And that's in large part because so many businesses today are private companies. and the marks, the sort of valuations, are not in the public market. It's not a day-to-day operation. And there is a whole sort of universe that I'd put in the category of mark to make belief. And the incentive system is such that you want that mark to make belief to go on as long as possible because if you are the equity owner, you don't want to mark your market down because, by the way, then you can't raise new money.

By the way, if you're the private credit firm, you actually also don't want them to mark it down because it's going to therefore impact your own. value. I mean, so you can see that it's a cascading effect. So I think there's a whole lot of people who are sort of holding on as tight as they can, hoping they can sort of bare-knuckle this thing. Maybe we can get to a place where, I don't know, Kevin Warsh gets in the seat, and we get some lower interest rates and things kind of ease off and maybe the world gets a little easier. Okay, so I definitely want to get into what's happening in private credit today. And I think that for listeners, you know, if we have technology listeners who aren't fully right into this,

Can you just briefly explain what is this private credit, private equity thing and why isn't happening in the big banks, but briefly? Yeah. So very basic. In the old days, you go to a bank. If you were a company, you go to a bank, they'd give you a loan. You need money. Post financial crisis, in large part because of a lot of the regulations that were put in place, there became a whole other world where people basically created funds that look a lot like private equity funds. out and raise maybe a billion dollars. And you'd say, instead of using that billion dollars to go

off and buy companies, we're going to loan that money out to folks. And by the way, we're not going to give you the money back for 10 years. So we're going to give out a 10-year loan and you'll get the money back in 10 years plus, plus, hopefully. That's the concept. And that's what private credit is. But what it means is the banks are not doing it anymore. It's living in this sort of private arena, which means that there's very little transparency around it. And then on top of that, you had a lot of private equity firms that, by the way, started buying up software companies and other things. A firm called Thomas Bravo's bought a lot of them. There's another company called Vista that's bought a lot of them.

A lot of software companies, a lot of SaaS companies, using the revenue, the monthly recurring revenue from those businesses to pay down these loans. You take an enormous loan so you go buy one of these companies. Well, if you decide the software company is no longer a thing and may not have this reoccurring revenue, all of a sudden its value has to come down, and all of a sudden, therefore, they would have to lose all their money. And then for the credit guys who won the money, they would also therefore then lose money to. And that is to worry that a lot of the money that's funding this AI buildout is coming from there. Yes. Okay. Well, there are starting to be some shocks in private credit, and I want to speak about what that might mean and whether that is going to be the source of further problems.

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and he's the author of this great new book, 1929, 20 weeks on the New York Times bestseller list. So let's talk about this issue with the private credit. We'll keep going on what we were talking about pre-break. Reuters recently writes, private credit alarm bells Echo 2007 subprime warnings. There's growing risk that the mounting stress in private credit could spill over into the public securities market. BlackRock, the world's biggest asset manager with some. 14 trillion under management said Friday it had limited withdrawals from a flagship debt fund after a surge in redemption requests. A few days earlier, alternative asset manager Blackstone said it raised the redemption cap on its B-Cred private credit fund to meet record withdrawal requests.

We're also seeing similar issues with Blue Owl. And then some companies are going bankrupt, including an auto part supplier, first brands, and a car dealership tri-color. So is this the beginning of the unraveling? And why are people panicking about this? Well, the reason they're panicking is not just that there's potentially something underlying concern in the economy. It's that so many of these funds were sold to the equivalent of the retail investor. It's not just to the pension fund that is supposed to wait for 10 years for the loan to come due and then get paid off at the end. a number of these financial services companies have created what they're calling semi-liquid products. So effectively, you can buy into the fund.

And when you buy into the fund, it looks like a stock. It looks like you're buying a stock. You can buy it on any given day. However, it's called semi-liquid for a reason. You can't sell it on any given day. On most days, you can sell it. But if too many people rush towards the exit at the same time, the firms are, are allowed to say, excuse me, we're not sending you your money back right now.

We're putting up the gates. And that's what you see happening right now. And so that's creating its own concern, that sort of run on the bank kind of feeling. Now, the financial services firms behind these funds would say, look, this is a feature, not a bug. It's in the literature. If you actually not just read the fine print, but if you understand what the product is, that's what it is. But I think any time you have a product where you think you can get your money back and you really can't, people get anxious. But it's not AI, right?

Like I'm looking at it and it's car dealerships and auto parts suppliers. I mean, I think that those are just a couple of the examples of companies that are struggled. But I think there's a broader question about, again, because technology, I don't say technology is volatile, but maybe it is. And because technology can change so quickly, there's sort of a real question about like, what is the future really like? Right. And if the future really is different than where it is today, that also is a problem. Well, this is sort of, you used the word exponential earlier in our conversation. And this is sort of where the rubber meets the road, right?

Because all this money is being invested on in AI data centers, hundreds of billions of dollars this year, hundreds of billions of dollars last year, probably more the year after. in the belief that AI is improving on an exponential. And so private credit is funding a good chunk of it, right? You have companies like Blue Owl, for instance, who's funding a lot of the development. If you stopped getting that exponential progress, that would basically be the thing that could cause a panic. And that's where you get the, nope, you actually can't take your money out. Right. And things can go belly out.

There's a whole bunch of things that could go wrong. By the way, including, as we said earlier, the technology could get so good. that you don't need the data centers. I mean, I imagine long term that AI is going to be very much like the Internet on steroids, which means that it will be here for a very long time and we will ultimately need these data centers. That is to me not really the question. The bigger question is whether there's going to be like a timing mismatch, that there's going to be some period of time. Same way, by the way, we had a dot-com bubble and bust where the economics,

didn't match the investments at that time. Now, Amazon is still here. The Internet is still here. It's bigger than it's ever been. But for a period of time, it didn't really work the way it was supposed to. And I think that something similar could happen in AI. The one other thing about data centers, which is a little bit more nerve-wracking, is it's not like putting, you know, people compare it to putting fiber in the ground

or building the railroads. You put the tracks down. because once you build the data center, you probably are going to still want to upgrade those chips relatively constantly. So it's unclear whether the investment ever either stops or even slows down. I mean, look, I'm so addicted to this phone.

I buy a new one every year or two. And so I imagine people are going to want the latest, greatest, next technology. And so what does that look like? Right. But the current video chips are actually, the current inviative. video chips are actually being rented at prices higher from when they were bought.

I mean, that just shows, I guess, the demand. But I'll tell you one story. I was in Utah skiing earlier this year. And we were on the ski lift with the guy. And I was like, what do you do? And he's like, well, I build data centers out here. I was like, oh. And I was like, well, what do you think?

He goes, all of this will go bankrupt. Really? I mean, I don't think he has the full picture. But that's, I think, what it looks like to someone who is in construction and sees the level of build out that's happening and it just doesn't compute. It's unlike anything they've ever seen. But it paid for the lift ticket. Did pay for that lift ticket. So good time. Well, he's like, I'm going to get paid. Exactly. Right. The question is about the person, you know, footing that bill. So there is an interesting, in the times that we're in, there's this sort of interesting argument

that I love to put to you and get your perspective on. I'm sure you, or maybe you haven't seen this, There was a post that went kind of viral on X called the Prison of Financial Mediocrity. And the prison of financial mediocrity. This is like a late stage capitalism thing? Well, basically it was this person who talked about why we're, because we've talked a little bit about, you know, risky bets. And this person talked about how he said, I'm absolutely betting the house that long degeneracy is the prevalent socioeconomic theme of the coming century.

And here's what he writes. Deal used to be simple, show up, work hard, stay loyal, and you'll be rewarded. Companies offered pensions, tenure meant something, your house appreciated while you slept. The system worked if you trusted it. Staying at one company for 20 years, he says, is now a career liability, not an asset. Wages grew 8% while housing costs doubled and debt payments for young people increased 33%. The math doesn't support patients anymore. And this is sort of getting back to This theme of debt and the economy and speculation and bets when they shouldn't be made, basically what this person is saying is because the system is broken for so many people, that's why they're going to things like crypto prediction markets and sports betting. What do you think about this? So I don't disagree with the last part of what you said,

which is that one of the reasons why people are moving to prediction markets and moving to what I would describe as the sort of lottery ticket approach to life. It's a little bit yolo. Yes. Is a function of the inequality that we have in this country. I would argue to you that the American dream actually shifted in the 1920s of all times to this scenario of the lottery ticket scheme. I think what happened was you had a lot of people coming from.

all parts of the country into big cities, they were seeing the wealth that was being accumulated. And I thought, how am I going to get a piece of this? The only way to get a piece of this is some kind of get rich quick scheme. That's the only way I'm going to get there. And so you had this sort of lottery ticket approach. What I haven't seen the tweet that you're talking about,

but what I think this person is referring to is what I call the Leave It to Beaver American Dream. This is the paint buy a numbers American Dream. And this is sort of a 1950s American dream. If you went to college and you worked hard, you get a job, you get a house, a spouse, two kids and a dog with a white picket fence, and it all kind of works out. I actually think that was an historical aberration. That was not the way it used to be. If you look at the 1920s, it was not like that.

You look at the 1930s, it wasn't like that. The Leave It to Beaver American Dream that I think this individual is referring to began post-World War II in a universe in which the United States was a monopoly power. Every other country in the world was out of business. We owned everything. We were the only player. And as a result, you had the rise of the middle class. You had unions. We could charge monopoly rents.

If you really look at when wages in America start to stagnation, you're going to stagnation. Nate. When? Late 70s, early 80s. Why? Because the rest of the world all of a sudden came online and all of a sudden we were competing again for the first time. Yes. And all of a sudden, we started to raise questions about whether that leave it to be of American dream could still continue. First of all, by the way, the leave it to be of American dream was a very white dream. It was not a dream for all of America. They did not benefit during that period. And as I said, I think it was actually an historic collaboration. I thought it was a 30 or four. 40-year period of time that obviously happened, but I don't think you can always go back and look at that and say, well, that's the way it should or could be because I think we live in a completely new universe. Right. But the argument that this person is making is basically saying that the only place people feel agency right now is in the casino. Even though they know that prediction markets are rigged with insider trading, that's where they feel like they actually can control their life. Look, I've experienced this in a very unusual way, you know, anchoring on CNBC in the morning. I remember during the SPAC, what would you call that, the SPAC trend, SPAC craze, or even the GameStop craze.

You know, I would be cautioning people in the morning. I would say, look, guys, this SPAC thing is going to end badly, folks. This GameStop thing, it cannot. I've seen the movie. I know how it ends. I'm telling you. And the reaction that you would get was, Andrew, you are so paternalistic. Stop trying to protect me.

You are not protecting me. In fact, by you thinking you're protecting me, you're protecting the man. That's what they would say. Because I do think that people think that they have agency in these casinos and they want the lottery ticket. That's what they want. But it was just such an irrational thought to me that I can. can't even think straight about it. Yeah, it's not institutional debt, right, which is what causes these crises.

But it is, I think it's a pretty big risk right now for the societies where this exists. I mean, you've heard the stories, I'm sure, of people taking their student loans and bringing them into Fanduil. Now, I'm sure that doesn't happen all the time. But everybody out there is sports betting. And a lot of people are losing. People forget, by the way, about lottery tickets. I don't know if you've ever thought about this. You know, in most states in America, you cannot buy a lottery ticket with a credit card.

It's illegal. You can only buy it with cash or a debit card. And the reason is because they don't want people to overextend themselves by buying lottery tickets. And yet we've now built this entire apparatus for even much larger gambling, if you will, in terms of prediction markets, sports betting and everything else, and people are just yoloing it undead. Yeah. I mean, one more thought about this.

In the book, you highlight that actually in the 20s, in the era of speculation, they talked about it as democratizing finance, which is a tagline that's come back. I mean, it's what Vlad Tenev talks about all the time, democratizing finance. CEO of Robin Hood, yeah. CEO of Robin Hood. I mean, that's the whole idea is trying to democratize finance, trying to, you know, the prediction market guys would say, you know, you have an expertise in something. I want you to have access to be able to make money using that expertise.

So, but then the question would be, well, why should people be shut out from these? Like, why, why just, you know, let's just actually bring it full circle? The private equity people have made a ton of money by exploiting this ability to invest in opportunities that are not available to the every man. So why should they be shut out of or why should they be cautious? when those that have this brighter appetite for risk are doing great? So this is a great question you're asking, and it's really like a philosophical one more than anything else.

In the United States, we have investor laws that effectively suggest if you don't have a million dollars, that there are certain types of investments, typically in private equity, venture capital and other things, that we don't allow you to make because we think they're risky. and the view is that if you don't have a million dollars or are essentially educated enough, but we'll take the education piece out, the sort of money dollar number is sort of uses a proxy for that in some ways, that without the million dollars, you can't afford the loss.

And the truth is, depending on how you run a country and a social safety net and a system, if you can't afford the loss, then the loss gets fully socialized. So this becomes the fundamental question. Now, you could also argue that we have socialized losses for banks. During the pandemic, we socialized losses for, well, everybody. So there is a question about who we're socializing losses onto, but that's a little bit of how, at least I think about the risk schema, if you will. You know, one of the things I thought about when I thought about this crash in 29 was it seems like our institutions have done a good job of keeping us out of potential crashes since maybe with regulations or bailouts.

I mean, we have $30 trillion in debt in this country, so maybe that will come to. Well, one of the lessons, the big lesson of this crash in 29, and I think we learned it in and Ben Bernankeu did his thesis on the Great Depression at Princeton sort of put it into effect in 2008. is when you have a crash, you can't move into a period of austerity. You actually have to throw money at the problem as politically unpopular as a bailouts are. The Federal Reserve needs to throw money in. The problem with that now is we now did it in 2008 and it worked, as unpopular as it was. By the way, we did it again during the pandemic. So now I think we have a playbook or we think we have a playbook.

We're like, okay, we can avoid a really nasty situation if we just print money. Right. But you're right, we've $38 trillion of debt now. By the way, back in 1999, there was a government surplus, a budget surplus at the time. And the next time, well, someone's got to probably write a check for $5 trillion or whatever it's going to be. And so if that happens, you tell me, is there some invisible line that becomes a red line where the investor class in the world says, we're going to lend you money, but you got to pay us like two, three times we used to pay us. And if that's the case, then you do move into an austerity period. And then all of a sudden, you were back in the soup.

And this is kind of what I was setting up, is that we, through these crises, when the Fed has stepped in, have had decent independence of the Fed. And it doesn't seem like that's going to be the case. Like, those walls are in the middle of eroding. There's a criminal probe from the White House into Jerome Powell about this renovation that he did of the Fed headquarters. And right now, Kevin Walsh, who's been nominated is. that nomination is being actually held up by Tom Tillis, who's not happy with the fact that the executive is, or the White House is, you know, influencing the Fed in this way. How important is Fed independence from politicians who obviously will want that money to be spent no matter what

if we're going to have a system that doesn't get into another crash? So I'm generally of the view that Fed Independence is hugely important, especially because typically if you're you do get into a crisis situation, you often have to make hugely politically unpopular decisions. If you just were playing politics, you might not do some of these things, and that's a problem. The question that I don't think we will know until a year or two or maybe even three from now is Kevin Warsh, who I've known, by the way, for many years, who is very, very bright, clearly has gotten this job, in part because the president believes that he's going to follow what either the president wants or that currently their thinking is aligned to lower rates to lower rates it'll be very interesting to see whether a Kevin Warsh stays in line with the president I by the way think he could be an independent actor ultimately because interestingly once you get this job

the job is yours it's a little bit like becoming a Supreme Court justice there are people that the president's appointed that have then you know decided against him. So I think it's possible. The other thing is the Fed is a little bit like the Supreme Court also in that just because you are the chair in this case, Kevin isn't the one who isn't the only vote. He has to convince all of these other people to do what he wants. And I would imagine in the first six months, it's going to be a challenge to get everybody

to back this view. I think that it might be a honeymoon period. Maybe they sort of throw a bone. Throw an early bone. But I think there's going to be meaningful disagreements on that board about which way the economy is going and how fast to act. Especially, by the way, if you have a continued war in the Middle East and Iran and, you know, we have this jobs issue. We obviously have a continued inflation issue. The answers are not so obvious.

Yep. All right, let's do a quick lightning round before we go. Okay. How do you stay in such good shape? I mean, you are doing CNBC, The Times, writing a book. Your Disney, My Fitness, pal? What's the secret? Well, maybe it's chat GPT now.

What? I try not to eat too much food after basically six or six-thirty, because I try to be bed by like nine or nine-thirty. That helps. Well, but I'm also waking up at 4.30, so it's a little complicated. So I think food late at night is the enemy, and I don't drink at all. At all. At all.

It was the last time you had to drink? Oh, my goodness. I can't even remember. Maybe a sip of, like, my wife's margarita at, you know, Christmas time or something. Okay. But, like, hardly ever. Okay. And I'm reversed to sun.

Sun. Sun. Just sun in general. Yeah, like I wear hats. I'm like always like. That's helpful. I just think that's good for the skin. Satan lotion.

Yeah. Agreed. All right. Thank you. That's a mystery I've been wondering because, I mean, for someone with your output, it's very impressive. All right. Why not wait for the next crash to invest? Why not wait for the – because the truth is, it could be a while. And, you know, famously, to bring it back to 1929, Charlie Merrill, who was the co-founder of Merrill Lynch, famously told everybody to get out of the stock market in 1928. And you would have thought, oh, this guy is really smart. except the stock market from 928 to September 929 went up 90%. So it's possible if you're waiting, you can be waiting four or five years. And then even if it goes down, 25, 30 percent from there, you've missed it. Exactly. Dealbook is one of the best. What do you think the key is to running a great event? The Joe Book Summit?

The summit. I think that the best events are those events that, have these sort of memorable moments, that there's like little takeaways that everybody who's watching it is looking and not only seeing, not necessarily seeing the same takeaway, but that they're looking for these little morsels.

But you can't, can you plan for that? Like Elon Musk telling someone to F themselves? I mean, having him. You can't plan for it, but you can in a way. I mean, I do think that I spend an extraordinary time. Oftentimes, 20, 30 hours prepping for each of those interviews. I mean, it was a wild situation in the month or two beforehand.

I really basically do practically nothing except that. And you can't control an interviewee, but I think if you have lots of different places that you can go and places you can move the conversation around to, you can create opportunity. Why doesn't Jeff Bezos speak more often? I mean, he was at deal book. He was a deal book two years ago. Yeah, I feel like every time he speaks, it's a very worthwhile conversation, but he doesn't talk. I completely agree with you. I think he's fascinating.

I think he's got some very fascinating views, and not just that. I think he's obviously in the middle of everything between Amazon, what Blue Origin is doing, obviously the Washington Post. You know, one thing that he said during that interview, which I do think may be extremely. why you don't hear as much from him is I asked him what he feels misunderstood about. Right. And he said that he gave up a long time ago on being understood. He said it was hard enough to be understood by your family, let alone the idea that you were ever going to get the public to really understand you.

That might be your answer. That could be it. SpaceX IPO, obviously biggest of all time. Do you think it outpaces Open AIs? Oh, I imagine it does. I mean, if we're talking, I think the numbers now $1.75 trillion with a T. I think right now Open AI doesn't start with a T yet, but maybe it will. It could.

It could, but I don't think it's coming in on two T's yet. Not yet. Do you think there's going to be enough money to fund all these IPOs? If you think about SpaceX opening high anthropic going out within a year and a half of each other. I think the big question is, you know, we're talking about these extraordinary evaluations, but we need to really see how much each of these companies' plans to raise. Because it's not that they're raising $1.75,000. They could very well raise a billion dollars and still have that kind of valuation.

So I think we're going to have to really dig into what these filings look like when they come I imagine they're going to want to raise a lot of money. I imagine they're all going to want to raise a lot of money, and that's why I think there is such a race to go first, because I think it gets to both the question and I think almost implied answer, which is, you know, if SpaceX goes to call it June, and they take a big chunk of money out of the market, if you will, then whoever comes next may have a little bit less, you know, smaller bite and the whoever comes after that probably has a smaller bite after that. What do you think of these new leaders, Dari Amadeh, Sam Altman? They're less careful than the rest, it seems. You know, I find them fascinating. They are real founders. Yes.

And I think one of the things that we've all become accustomed to in recent years is a lot of companies are no longer run by the founders. They're run by managers and operators. And I think when you are a founder, you have this. You have a license, an authority to sort of really either make decisions or end, not just make decisions, but say things sometimes that are unpopular. I mean, I, by the way, I give great credit to Dario in this whole wild fight he's having with the Pentagon for just how outspoken he's been at a time, frankly, when most CEOs in America, you know, are hiding under the table right now.

Yeah, I think lack of care, like being less careful. that's a compliment for me. Yeah. I think that they speak in a real way. Yeah. I hope that doesn't go away, although we see that it tends to. All right, last one for you. Could we have a market crash today on the magnitude of the 1929 crash?

So here's the good news. I think it's hard to end up in 1932. 1932 is 25% unemployment and an economy that goes truly, truly south. In 1929, we had a stock market that fell about 50% between October and November of 1999. But people forget, by the end of 1929, the stock market was only down 17%. The reason everyone got flushed out and it was such a crisis was because everyone had taken on such extraordinary debt.

People had been, you know, put down a dollar there had been lent 10, 10 to 1. And so when the market fell 50%, nobody could hold on. long enough to get back to even negative 17%. They had to sell their home, mortgage their house, lose their job, all the things. I think that's harder to do today, in part because individuals don't have that much leverage in the system. So I'd like to think not.

And I also think we have this extraordinary playbook, which we now know works to some degree. But I think when you layer on AI and technology and the current state of, national debt, it could all get complicated pretty quick. All right. The book is 1929. Andrew Ross Orkin. Thanks so much for joining us. Thank you for having me.

All right, everybody. Thank you for being here. We'll see you next time on Big Technology Podcast.