Conversations with Tyler - Matt Levine Live at Bloomberg HQ

Episode Date: February 14, 2018

Is Matt Levine a modern-day Horace? Like Matt, Horace has a preoccupation with wealth and the law. There's a playful humor as he segues from topic to topic. An ability to read Latin. And many of Horace's letters are about the length of a Bloomberg View column. QED, says Tyler. So Matt, the Latin teacher turned lawyer turned investment banker turned finance writer, recently joined Tyler for a conversation on Horace and more, including cryptocurrencies, Buffy the Vampire Slayer, Nabakov, New York, Uber, financial regulation, market volatility, M&A, whether finance is nerdy, and why panic is central to the Matt Levine production function. Read a full transcript enhanced with helpful links. Other ways to connect Follow us on Twitter and Instagram Follow Tyler on Twitter  Follow Matt on Twitter Email us: [e-mail] Subscribe at our newsletter page to have the latest Conversations with Tyler news sent straight to your inbox. 

Conversations with Tyler is produced by the Mercatus Center at George Mason University, bridging the gap between academic ideas and real-world problems. Learn more at Mercadis.org. And for more conversations, including videos, transcripts, and upcoming dates, visit Conversationswithtyler.com. I thought we would start with Matt Levine's greatest hits, and then Matt, having been a classics major, we'd move on to the Latin classics and maybe tie the two together a bit.

So just to think about derivatives markets, you've worked in that sector. By some measures, derivatives are over a quadrillion in value outstanding. But there's another way you can measure the net positions and turn it into zero. So what's the right way to think about how large derivative markets are and what's the risk associated with that size? The right way to think about it,

in the way that you would do it at a at a you know if you're actually working in the derivatives market is to sort of think about the like the risk exposures of it so like if you have a you know if you have an interest rate swap the right way to think about it is the devO one or you know like the right way to think about a equity swap is like the delta of it so you know often you see these quadrillion dollar numbers they're like you know they're a quadrillion dollar notional of like you know short term interest rate swaps where like like you know the idea that you could lose a quadrillion dollars on it is quite low. The risk of that is quite low. The systemic question, I don't know the answer to, right? I mean, like, how risky are derivatives in general is, I think, a sort of, you know, there's a time when it was derivatives are weapons of mass destruction. And I think obviously there's, like, a sense in which that came true. But, like, you know, I worked in equity derivatives and, like, you know, total return swaps

didn't, like, blow up the world, right? I mean, it's like a specific set of exposures to specific risks were bad and were perhaps magnified by the ability to make zero-sum bets on them. But the idea that, like, the notion of derivatives is somehow like itself a risk factor was never super compelling to me. And there's a certain centralization of risk with derivatives. So you put a lot of risk into a clearinghouse. Maybe you can bail out the clearinghouse if you have to more efficiently than individual investors, but that also increases moral hazard. At the margin, do you think we've centralized derivatives risk too much or too little?

I think we're still sort of in, you know, we're like a little bit in early phases of doing it, but like I think we've, you know, I'm among those who are a little skeptical of the notion of centralizing derivatives risk into clearinghouse, right? Like it seems to me that a clearinghouse has more moral hazard than a bank, right? Like a clearinghouse is often a sort of like, you know, member association where like you're ultimately relying on the members for your capitalization and for your, for your protection against blowing up. Whereas like a bank, like, you know, if you're on a.

desk. Like you're like obviously banks have a lot of moral hazard and like the sort of notion that banks have moral hazard is is a lesson that has been learned and probably overlearned from the financial crisis. But like you know, like if you're on a desk, like you don't want to lose a lot of money. If you're a clearinghouse, like your concerns about losing a lot of money are a little a little more attenuated, I think. Does your experience with derivatives make you feel better or worse about crypto kitties being priced at 117,000 K per pop? Are they just a derivative? Crypto-Ki-

is a crypto-kitty a derivative on ether? In the sort of, you know, in the... Is there a fact of the matter? Yeah, I mean, like, sure, like, in the naive sense of, like, did it come from ether? Sure. Like, I think that, like, all those markets are so immature, right?

Like, I think of, like, derivatives markets as being a sort of, like, mark of maturity and of, like, the ability to sort of, like, understand what exposures exist in some instrument or in some, like, economic reality. and then say, well, we're going to pick these exposures and hedge them out, and we're going to pick these exposures and magnify them. And we're going to have the ability to kind of like fine tune all of our exposures because we've like been doing this for a long time. We've been trading currencies or equities or whatever for a long time. You know, like there's like the beginning of like a thing that you could call a derivatives market in cryptocurrency. But it's not it's not that, right?

It's like the opposite of that. It's like no one knows what like ether is in a sense. And so like the idea that you're fine tuning your exposures to it is just. not. The crypto cadiz are the opposite of that. They're like making your exposure is weirder and more complicated. We have a good idea of how to price most futures and options, but when it comes to pricing, say, Bitcoin or other crypto assets, what do you think is the best model we have, however bad they may all be, for thinking about what that value should be? I actually think it's, you've said it, which is, which is like, there's some, like a pool

of world financial wealth, and then there's, you pick a random small number. And you say that percentage of world financial wealth should be Bitcoin, right? So the people used to, and I was like sort of persuaded by the notion that you could use like a currency model and say, well, you know, like the amount of transactions that you do with Bitcoin is this and the velocity of is that. And so this is the total value of Bitcoin there should be. But I'm no longer persuaded by that because I don't think that Bitcoin is particularly, I don't think that people's claims for Bitcoin now that it's a currency, right?

That it's a store of value. And it's a store of value that isn't like tethered to anything else. And so it's just a question of like how much, you know, there's some percentage of people's wealth is in gold. Like, well, if they'd shifted half of that to Bitcoin, Bitcoin would be worth X. That, I think, is the bad but best available model. I think there are other cryptocurrencies. You could imagine a currency model where you say, well, you know, how many, how much file storage?

How big is the file storage market? And then what would the velocity of a file coin be? But I'm not sure that you could answer that because I think that like the intuitions that you'd have around velocity of money are not necessarily the right intuitions for velocity of like a token that you use to spend on files. And how well Bitcoin does as a hedge or store a value relative to gold, I mean, what variables do you think of when you try to figure that out? You're trying to project 10, 20 years in the future, crypto assets competing against gold or maybe even stores of fine art as held in warehouses. What does that depend upon? Is it transactions uses? Do they matter at

all anymore? Will the dominant crypto asset be one that people also use to buy things? Or will those two functions be totally separate? I don't know. I mean, like, you know, I was talking to someone today who argued that if Bitcoin hadn't been invented and if the white paper had been, or if the white paper had been out there, but if people hadn't started using Bitcoin, what would have, what would have made more sense to happen first would be the useful, the utility tokens would come first. Because you can explain, well, you know, you use file coin to buy file storage or you use whatever to buy whatever. Whereas with Bitcoin, it's just you can use it to buy anything. but there's no tethered store of value to it.

You could imagine a world where all the ICOs work and where all of the coins that you use to buy useful things work, and then Bitcoin is less, you know, because it doesn't have a sort of obvious utility value, loses value. But I don't know. I don't buy that. I think that people's desire to use 100 different currencies

to do 100 different activities is probably overrated by the crypto community. and I think that Bitcoin's first mover advantage and popular fame has the potential to entrench it. I mean, to answer your first question, I have no idea what variables you look at, but I think it's if Bitcoin stays above X,000 dollars for a year, and that just increases its likelihood of staying above X,000 dollars for another year, and eventually it just, you know, by force of repetition becomes a store of value. Since almost every store issues gift certificates, and this seems to be a profitable activity,

can we not imagine a future where almost every business issues cryptocurrency in some form? Maybe the velocity or a volume will be low, but there'll be a cryptocurrency for every business and an ICO, just like now we have gift certificates, and this is perfectly fine. We shouldn't think it's weird. The real question is, why not more crypto-kitties? I've never heard of a crypto-doggy. I've never heard of a crypto-turtle, right? Yes, no.

No store, you want a crypto doggy? No store like quintuples its market value by issuing gift certificates, right? I mean, like the, like the crypto frenzy is not, if this were a story of gift certificates, I think it would be a lot less interesting. I mean, if you say, look, you know, it's true that people don't want 100 currencies, but they use gift certificates, which is not, I don't know how much people use those gift certificates every day. But like, if you're, if that's the story, then I suppose it's true, but that's not, that's a sad outcome

for like a let a thousand cryptocurrencies bloom if it's if it's just you know Starbucks accepts starbuck tokens would you rather i give you a Ponzi coin or a banana coin a banana coin being connected to an organic bananas blockchain drawing upon banana supply and louse i think i would take the well i'm tempted to say like if i'm answered like i'm tempted to say i would take the Ponzi coin because I suspect that neither, I think that they're probably equally connected to like a viable blockchain in Laos and at least the Ponzi coin like says it on the tin. But I'm going to be careful with that because like the, you know, the reason I take either of them is to resell them. And like clearly the like the frenzy of saying that you have a utility, saying that there's

a blockchain somewhere probably does increase the resale value in the extremely short term in which I'd be holding these coins. In New York, we have Uber, we have taxis, they compete against each other. There at least appears to be a long history of the taxi sector being somewhat of a natural monopoly. What's the final equilibrium in New York City and elsewhere? And does the company Uber have positive value? Given that right now it's losing money per ride, right? Chinese investors are subsidizing us at the margin.

If the price goes up, I would prefer to shift back to taxis. How do you think about that market? As a consumer, you know, I really like that. Uber. And I think that Uber addressed some technological failings in the tax, just in terms of like being able to hail Uber's without going out on the street and waiting for them and being able to hail them around the world rather than, you know, like, hailing taxes in New York is nice, but it's to have an app on your phone where you can do it wherever you go. So as a consumer, I'm a big fan of Uber. And I think that, you know, our tax is a natural monopoly. I mean, there's certainly a secret of regulatory

rents in New York that, you know, it is, to some extent, by Uber's rhetoric about kind of, you know, breaking down. There's clearly some taxi protective regulation that is not pro-consumer, and to the extent Uber is fighting against that, you know, they make a good case for their flagrant disregard for the law. You know, and the big question is they continue to be subsidized by investors and what is the long-term outcome of that? And I don't know. I think that, probably i mean their bet is that the long-term outcome of that is self-driving cars and that they have some sort of advantage in being the provider of the self-driving car app which i'm not sure if that

is super compelling because it seems to me it's hard to build the self-driving car it's relatively easy to build a routing app to send the self-driving car to you and so if tesla or apple or whoever build the best self-driving car i'll just download tesla's app so it's a risk for uber But, like, you know, as a strategy bootstrapping by getting a $70 billion market cap and then spending a lot of money to be the leader in self-driving cars, it's not a crazy strategy, right? I mean, they built from an app to being a $70 billion company. So the so-called moat for the company, it starts with the app, but over time it shifts to owning a fleet of self-driving cars? Maybe. Maybe.

I mean, it doesn't seem like a routing app is that great a moat. Let me ask you a very Matt Levine. It's not bad, right, because it's a network effect. around the world, but it's not it. But the network of drivers, they'll work for Lyft and Uber. That doesn't seem like much of a moat. Consumers will stick with Uber insofar as they're happy, but they're probably not intrinsically that loyal to Uber.

Yeah, you need someone else to get significant name recognition. So like if Apple builds this all driving car, and Apple, you know, Apple builds a driving app or a ride-haling app, then it can take on Uber pretty quickly, I think, if some random interloper comes, it's harder. Let me ask you a very Matt Levine question. Are you worried that people aren't worried enough? So if we look at markets than security prices, there are plenty of signs that volatility has been quite low. By some measures, it hasn't been this low for 50 years.

The world seems slightly unusual. Not only the crypto-kitties, there are other strange features of our country and world. And is this decline in volatility? Is it driven by investors getting smarter? By more ETFs? Fewer shares out there to trade by more indexing, foreign investors with nowhere else to go. What's your best hypothesis? There's a general background answer to that.

I'm like such a, like in my personal life, I'm such an efficient markets guy. Like the answer to the question, are you worried that people aren't worried enough about anything? Is like I'm not because I sort of like assume that there is like a giant pool of people who are smarter than I am and they're coming to a reasonable conclusion. They're reading you, of course, and thinking what does Matt Levine say? But so like, you know, in general, if people are like, our stock price is too high as well as is, you know, the VIX's too low. I'm like, if it was too high, it'd be lower. Right. But so.

And the volatility thing, look, it's a thing that I find incredibly weird because I think like you, I find the world right now incredibly weird. And, you know, one wants to explain it. And I don't know the right explanation. The explanation that I sort of like is that the prices of financial assets, have somewhat decoupled from human emotion about the world that is not financial assets. And, you know, why would that be? You know, I would love it to be a story. And I think there's probably some argument for it to be a story of markets have become

more technological. We've, you know, there's famously market's stock prices overreacted to news as measured by subsequent dividend changes, you know, forever. And, you know, eventually that's an anomaly that someone will exploit, right? eventually you'll build a thing that reacts correctly to news. I think that there are, I don't think that's a wholly compelling thesis. I think that what I like the story to be is that financial markets have gotten smarter and they react less to news.

And so even though the news is noisier, they react less to that noisy news because it turns out not to affect asset prices in as noisier way as you'd think by just watching TV. I think that there is something compelling to that because we actually have seen smart people build smart things that do a good job of, you know, making investing decisions. And so you'd sort of expect over time, as people build more rational investing tools, investing would become more rational. The good counter argument to that is that investing is not a sort of technological problem in the world that can be solved. It's a interpersonal fight. It's a, you know, trading in particular is a sort of attempt to be better than someone else. And so you can never

make trading more rational because as you get better, you know, someone, you know, else gets better and like your, you know, the residue will ultimately still be your sort of human biases. But I don't know. I'm biased towards the view that, that we have gotten gotten smarter at kind of decoupling our emotional reactions to the news from financial asset prices. And part of that is just like, whether or not that's true globally, there's like a local sense in which like, you know, like the first day of like Trump's election, everyone panicked. And then he said another crazy thing. And then he said another. And like, there's just like, Eventually, you tune it out, right?

And that's a form of this thing of, like, reacting less to financial assets, reacting less to sort of human reactions to the news. There are three sets of market prices that bug me. One is Bitcoin and other crypto assets. Another is all the negative real yields on government securities and sometimes even negative nominal yields. And then there's blue chip stocks being so high. Could it be those three are part of the same general phenomenon, namely, that good stores of value are relatively scarce compared to growing global wealth, and that money flows to each of those that has nowhere else to go.

They all look high. They're going to stay high. It's a sign of aeroposity of insurance markets and other ways of protecting wealth. And in some ways, it's a pessimistic sign. So the price can be permanently high, and we should be worried about our own inability to deal with risk. Yes or no? Sure.

I mean, you know, it's a sort of like transmuted story of the, financial crisis of like the supply of low risk assets was insufficient to meet the demand. And so people built things that were low risk financial assets that turned out to be risky. Right. I mean, now it's a Bitcoin can replace CDOs maybe. Like there's a, there's a lot of money chasing assets that are good stores of value. Investors who index, again, a Matt Levine question. First, how worried are you about the spread of indexing?

but also if you think of indexing as somewhat endogenous. So if more market research is needed, you would expect fewer people to index because there's a higher return to learning something. So the flow of funds in and out of indexing, how rational or efficient process do you think that is at the end of the day? And as we move more and more to indexing,

how will this affect securities markets? Please address any combination of those you care to. So the thing that I like is that, you know, U.S. public markets, the companies that are in, there are fewer companies, they're older, they're bigger, they're more profitable. And so that's a sort of interesting fact about like the composition of markets. And one sort of straightforward thing to take away from that is that in a world like that,

it makes sense to index more, right? In a world where you can't find the next Facebook in public markets in a world where like all companies are kind of the same. They're kind of, you know, they're established, they're profitable. the spread between companies is sort of narrower, the returns to the stock picking are going to be a little lower and it's more rational to index. And then like the next question is like which side of it is causal. And I think there's probably some story you could tell about the rise of indexing and the sort of focus on cost and investing generally leading to a real focus on scale in investing. And when investment funds are trying to operate at enormous scale, the attractiveness of 100 million.

million dollar IPO is lower. The attractiveness of like a weird company that doesn't fit into the index is lower. And so you have the rise of indexing driving the sort of phenomenon of companies of there being fewer and larger and more profitable public companies. And so you have a feedback loop in that sense. I feel like I've traveled away a little from your question. Some activities are what we might call nerdy and others are not. So country and Western music is not very nerdy. There are plenty of bars saying, lower Manhattan that are not very nerdy. A finance has become pretty nerdy.

What makes an activity nerdy? Has finance become pretty nerdy? So I think that what makes an activity nerdy. Like I think there are two like sort of, you know, clusters of factors. One is having some sort of academic like barrier, right? Right. You have to be smart to do it or you have to learn something to do it, right? And the other traditionally is unpopularity.

Right? Like, you're a nerd because you're not cool. Right. I think that, like, what's happened with finance, like, finance in the last, you know, end years has become nerdier in the academic sense, right? Like, it's just, you know, the threshold to be hired at a, you know, on a trading floor, you know, in like the days of liar's poker was like, you know, you needed to like, you know, be like a fun guy to hang out with and maybe I've gone to high school right and like and now it's like you need a PhD in physics right and so um and so like in that sense it's

become nerdier but like there's also like I think of tech is having be you know computer programming when I was like a kid was quite nerdy because it was academic but also people are you doing that like go play sports right whereas now I think computer you know you see enough like Mark Zuckerberg stories and it's like computer programming is like the way to become a billionaire who controls the world's, not just, like, it has not just power, but, like, controls the world's, like, social relationships. And finance is, like, that weird point where, like, you know, in New York, if you, like, go out to the club, like, there are a lot of finance people there, right? It doesn't have, like, quite the nerdy, the sort of, like, pure nerdiness component, I think.

Has finance become less unpopular just because of passage of time since the crisis? Or is it in part because tech is now so unpopular with the media and some intellectuals that it's taken over that pride of place and finance is pushed to the side and we can be ignored a bit maybe like highly skilled carpenters but nerdier. I think there's there is some of that. I was sort of like taking a broader view of your question. I think finance was like unpopular in the sense of just sort of niche and then it became extremely central to the world in like 2005 and then it became extremely unpopular. I think extremely unpopular is almost as good as popular in terms of not being nerdy. If you're a villain, you're not a nerd. But no, I think there is some of that, like, you know,

the world is, you know, I say memories are short in finance, but it's actually been 10 years since the crisis. Like the world, you know, there's some reason for the world to have found new things to be interested in. Here's a question from a reader, and I quote, are there huge bets being made on Wall Street now that could end in something like the CDO MBS financial crisis debacle? Maybe that I don't know about. I think that my general impression is that like the reform of financial regulation since the financial crisis has had a lot of its intended effects. And one of those is that systemically important financial institutions by some reasonable definition probably aren't making huge directional bets on things that, huge levered directional bets on things that aren't sort of traditional banking products anyway.

So, you know, you'd ever know, right, like what someone's getting up to. But, like, I'd be surprised if, like, there are huge levered directional bets existing at regulated financial institutions. Do you have a single biggest worry? However tiny, tiny, tiny it may be? I don't think I do. I mean, I don't think I do. Like, I, the thing that I find weirdest is the lack of volatility in the face of

a very strange and volatile world, but I've reconciled myself to that. If you were running the division of enforcement... But this is my like efficient markets, like optimism where like I just, you know, I just assume that if someone, if something bad is happening, it would happen. But efficient markets is also pessimism, right? It's harder to make the world better than it already is

because you can't see past what others are seeing very easily. Sure, it's in efficient markets like conservatism or something. Right. If you're running the division of a. enforcement at the SEC right now, what would you be telling your people to concentrate on? Well, like, ICO frauds. But they're all informed investors, right? Grandma's in this country are not buying ICOs so much, let them lose their money to each other, or not?

You know, I just have an aesthetic objection to the ICO parts. No, you know, yeah, I mean, like, I think if you're the division of enforcement at the SEC, like, your number one priority is protecting uninformed retail investors from, from, you know, very high on your list is protecting unformed retail investors from fraud. Also pretty high in your list is protecting dumb retail investors from egregious frauds that undermine. That just make you look bad. You know, like there's a sort of like, you don't really want to be the country where people are committing fraud and, you know, running pump and up groups and talking about it and having articles written about it and high-fiving each other. It doesn't seem to like encourage confidence in the markets.

And the other thing that like, you know, as the SEC Division of enforcement you might consider is like larger, more systemic things than retail fraud. And I've gone back and forth on this. Like I think that the grandma's losing their pensions to boiler room operators in Florida like is a very clear harm. I think, you know, there's a lot of interest in, in among regulators in like the people lying to their customers about. large structured credit trades because those are bigger trades and you can like get bigger penalties because you're defrauding a bank or whatever. And I think that like, you know, you have to weigh like the bigness of the potential harm and like the sort of overall size of the transaction with like how morally and aesthetically abhorrent the transactions are. And I think that like

the person defrauding the grandma in the boiler room is like very clearly doing something wrong. I think there's a lot of gray area behavior in like institutional bond markets that have like, that has gotten a lot of focus because it is gray area. So it's more interesting to bring a case if you're an enforcement, you know, if you're a prosecutor or an enforcer. And it's institutional. So it's just sort of a sexier thing to deal with and like retail fraud in Florida. But in some ways, it's less bang for your buck because you are kind of just like

tweaking the rules in a market that is, that is essentially among informed investors who kind of take care of themselves. Now, like you, I'm mostly an efficient markets guy, but when I look at initial public offerings, I'm very baffled because investment banks take such a huge cut. If you needed to argue, well, they need the cut because they talk up the security and in the absence of their efforts, no one would be interested and it's worth it. Maybe that argument works, but it seems somewhat to stand in tension with an efficient market's hypothesis, which suggests the thing will find its appropriate level without any particular investor. having to talk it up. And furthermore, attempts to get around the current mainstream system of

IPOs have not always been successful. Auctions have been tried. Israel has tried other methods. Spotify is giving it a go. We'll get further data, but they're not obviously doing better. But how do you reconcile IPOs in their current form continuing the investment banks taking such a huge cut and some version of efficient markets hypothesis actually making sense? Do you see what I'm asking? Yeah, I mean, how do I reconcile? One version of efficient markets is that in the absence of news, the price yesterday is going to be the price today or whatever. There's some sort of continuity of prices. And the IPO is a huge discontinuity, right?

I mean, like, you don't have a price and then you have a price. And so you'd sort of like, if your notion of efficient markets is like a sort of straight line of like the price not moving very much or like of the price, you know, sort of instantly incorporating information, you sort of, it's not unintuitive that you'd have a big squiggle at the start, right? like that you wouldn't really know what the price is for three days and then you would. And so that's like, I don't think it's unusual that like the first trade of a stock would not be the price that it settles to in a week, but then the second week would be pretty close to the first. But that the direction is so predictable, though. That's odd. The pop, right?

The direction is so, so there's, sure, but that's like, like what's happening. Like, one thing that's happening is that the banks are doing the thing that, create that they're doing the work they're getting paid for, which is going out to a bunch of buyers and talking about the stock and sort of trying to generate a price. And that work is like sort of non-efficient markets work. Right? It's like M&A work where it's like there's no like sort of visible price and you're sort of negotiating one off with big investors. And then once they have that price, they sell it for less. I mean, that's not really true. But that's kind of like intuitively what's happening is that once they have that price, they sell it for less for a variety of reasons.

You're like, the stories for it are, I think, somewhat compelling, right? I mean, it's like you sell, you want a pop because you want the early investors to be rewarded for taking a leap of faith in the company. And that's like maybe a little silly in like a giant IPO. But like it's not that silly in like a tiny IPO where there's like some hair on it and where it's a small company. And you have to give someone some expectation of returns to get interested. And yeah, I mean, I think that work before the pop, that figuring out what the thing is worth and selling it to investors and doing research and everything, that's like what the banks are getting paid for. Like the pop is not the same thing as the bank's fee, right? The bank is like doing work to try to get to a reasonable price and then they're selling it for 15% less than that price.

The other thing is the other thing about the pop is that investors in the IPO have an interest in the stock going up. The sellers in the IPO have no interest in the stock going down, right? It's bad for them. It's bad for them for a variety of reasons. The main one being that they are keeping most of the stock and they don't want the stock to go down. And so when you have that set of dynamics, no one is sad when the stock goes up.

Everyone's sad if the stock goes down. Why would you overpriced it? Now, Matt speaks Latin, and he was a classics major as an undergraduate at Harvard. I don't really speak Latin. You once told me that law was easier than classics. What did you mean by that? I mean, they're both like sort of, you know,

like the activity that you do in your academic job as an undergraduate or law student is like sort of sitting around analyzing dense texts, but like in law, they're mostly in English, right? So like that's a big, it's just very straightforward. Like, if you're not raised speaking ancient Greek, it is much easier to read even like a 19th century legal decision than to read, you know, Thucydides. I don't know. I mean, like, law is so, it's so just like embedded in our society, you know, like, sort of like, you know, you grow up watching, you know, law and order or whatever, right?

Like, there's a sort of like, it is like, it is very much part of like the fabric of how we live. Whereas, you know, reading Greek poetry when I was in college was an extremely niche activity. And so required a little bit more investment to just kind of like come up to any familiarity with it. Now, I brought my copy of Horace's epistles for this conversation. It's just been terrifying me all right. And I actually think of a lot of your. Bloomberg writings as being a kind of modernized Horace. So you read Horace, there's a preoccupation with wealth, with law, there's a humor in it, the way he segues from one topic to another.

There are even mixed feelings on how the pursuit of wealth would translate into happiness. The length of a lot of Horace's letters is actually about the same as the length of some of your Bloomberg columns. So there's a little quiz here. I'm going to read a few sentences, and you need to tell me, were they written by Horace? Or were they written by Matt Levine? This is a better way easy. Are you going to read them in Latin? In English, here's the first one, quote,

I store up and organize material so that I may be able to draw upon it before long. Horace or Matt? Can I say Horace? That's Horace, very good, from the Ars Poetica. And he's trying to tell you he doesn't speak Latin. That was in English.

That was an English. What is to prevent one from telling the truth? as he laughs. Horace. Horace. Okay, very good. Two for two. No, you're done.

Here's another, quote, football player derivatives are the best derivatives. Horace. Three for three. And finally, quote, in laboring to be concise, I become obscure. Wow.

I mean, Horace, but thumbs up Horace. That's the part. I feel like I feel like when you when you're like an undergraduate classics major you read like Horace and Catullus are sort of paired with each other

and Catullus is the like sort of like hot-headed young romantic who wrote sort of like quasi-pornographic love poems and Horace is the like sort of older, wiser like you know backed away from the world you know like the famous Horace love poems

are sort of more cynical and more eddery move from the world. And that's something I also admire an attempt to emulate in my own work to be like a little, like I'm probably like, you know, I tell people I'm an opinion columnist and I don't have any opinions. I try to be a little less like a little more removed from the like passionate engagement. As is often the case in some of the Latin classics. Oh yeah. Now what's the best thing you've read or re-read in Latin in the last five years? I don't read a lot of Latin in the last five years. I mean, the answer, honestly, and the answer is because I don't read a lot as Horace Oads 1-5 is the sort of famous

Chris Multae-Graculous tape who are in Rosa. It's the sort of most famous world-weary, renunciatory Horatian love poem. It's good stuff. What do Latin speakers and readers get about ancient Rome that non-Latin speakers miss. I don't have like a substantive answer. What you get is like a sort of sense of, like what I took from like a classical education is like this like sense of like direct engagement with like humans who lived 2,000 years ago, right? Of like a like a being able to like, like Cicero's letters are like a sort of classic piece of Latin literature because Cicero has this like sort of like

famous like stern orator who like, you know, wrote these very serious law courts speeches. But then he also has a lot of letters that have come down to us. And some of them are sort of like for publicity and some of them are much more personal. But like they're all at least ostensibly personal. And like you get the sense of like this actual human who's this like sort of famous figure and this famous lawmaker. But like you experience his consciousness more directly in his language. And that to me was like just sort of like the weird and interesting part of being a classics major was just like being able to sit with people from. 2,000 years ago and see how many of their concerns are similar and see how many of their concerns

are so different and so weird in a pretty direct way. Now, as you met now in every conversation with Tyler, there's a middle segment called underrated versus overrated. I toss something out. You tell me if it's underrated or overrated. You're always free to pass, of course. And the first one is writing in legalese, underrated or overrated. you know, under, like, I mean, it's not great, but like, underrated, I would say.

Like, I think that, like, in general people, like, I don't know what that means, but, like, in general, people are, like, too quick to, to criticize jargon and legalese and all these things, right? I mean, like, there's often a set of technical meanings that are just easier and more efficient to use when you're using the jargon of a field. and I think aesthetic criticisms of legalese are often overblown. That said, I read some really bad legal writing and some mixed feelings, but like, that's I under. Legal realism, overrated or underrated? It feels like it's gone from the academy and it's gone from, you know, it's not something that people talk about in daily life.

And I, you know, to me it explains everything. So I'd say under. Buffy the Vampire Slayer. Oh, my God, underrated. I mean, you know, well, like highly rich. rated, but like, um, but comparative, like, among the most important American cultural products and not rated that way. What makes it special?

What makes it? It's, you know, like, part of it is like, you know, you go back and watch it and it's not as good as you think because like it has had such an influence on later things that, that, like the, it's, it's shockingness has been attenuated. Um, sort of part of is just its influence on, on subservent television. But it's, it's like, it's a, it's a perfect. example of dealing very intelligently with serious themes in a way that on its surface and particularly in its title is silly, right? And so, and is, is not presented as serious, which I think is obviously something that I often aspire to do. But I also think it's just something that, like, the

internet aspires to do. Like, I think a lot of, like, just sort of, like, modern internet culture has that sort of vein of like using colloquial language and being casual, but like, you know, attempting to address more serious issues. And I think, you know, Buffy didn't invent that, but Buffy is such a like, is a cultural touchstone for some of that approach. Harkening back to the Romans, Virgil's magnum opus, the Aionid. Overrated? Yeah, sure, overrated.

You know, I told you, I, you know, when I was in college, I did a summer program in Rome. run by Father Reginald Foster, who was the Latin secretary to the Pope. And he does this, he's a Carmelite Friar from Wisconsin. And he would have a program for whoever wants to come. We'd come and read and read and read some gorgeous passage of Abed. And he concluded, and he said, isn't that nice? Isn't that better than Virgil?

Virgil is gray and wicked. He was always biased against Virgil after that. But he was, you know, so this is not true. But, like, he was a propagandist. I mean, sort of like a, you know, I don't know. What's the most underrated neighborhood of New York City? I was saying I don't, I don't have an answer to that because I've only lived in extremely highly rated neighborhoods. I live in Park Slope now or some magazine a few years ago to clear the best neighborhood in America, which like it would be hard to argue.

It may be better yet. I don't know. Other like Park Slope adjacent neighborhood, like Gowanus. Maybe I'd say Gowanus is underrated. It's like a great like food destination. It's like got to create like industrial. chic architecture. It's fair, go on us.

Footnotes, overrated or underrated? Underrated, but like fairly rated now? I don't know. People have come around on footnotes. A lot of footnotes started in medieval times as commentary on the Latin classics, of course, including horace. Sure. I mean, right. You know, the notion of like a sort of like intertextuality or like, you know,

like having multiple lines of the text, like having a main line and having asides is a sort of valuable notion and one that I think has been like kind of valorized by internet writing in a way, right? Like I think it's just easier to have links. You have, you know, you can, the notion of having like a single narrative with no distractions and having that be the sort of like highest achievement of writing is I think a little diminished by the internet and therefore footnotes have become more appropriately valued. What financial stories or issues do you think are not getting a little?

enough coverage and why? It's hard for me to answer questions like that because I'm such a creature of coverage. Like, I wake up and I read the news and I write about it. So I rarely take a step back. But I don't know. The thing that I would like to read and hear more about is they came to this from a bank and I think banks are interesting objects. Like banks and hedge funds are not like perfect substitutes which are like banks do something interesting. And there's a lot about it, but I'd be interested in seeing more because I don't feel like I have a good answer. I'm like, what will happen to banks? Like what, you know, we're in the early days of,

it seems to be pretty wholesale financial deregulation. And obviously, banks in 2006 were different places from what they are now. And one possibility is they'll go back to doing exactly what they did in 2006, right? Another possibility is they'll go back to doing something precisely analogous to that, but in totally different instruments and ways and whatever. But like we'll be similarly freewheeling, fascinating, dangerous, places. Another possibility is that like something like a switch has been effectively flipped in the culture and they won't go back. And I just don't know. And I'd love to like I think that banks have

become very boring. I think like the coverage of like what banks are doing to be more interesting is like things have moved on to like more interesting places. You know, there's a million articles about Bitcoin. And it's possible that banks will be becoming more interesting and I don't have a handle on the ways in which they're doing that. Bloomberg aside, who would you say is under followed as a writer, not counting our colleagues. I always want to pass on these. I just like forget people. Abed once wrote,

In our leisure, we reveal what kind of people we are. Do you agree? I guess, yeah, sure. I mean, right. In my leisure, I read the internet and do crossword puzzles and hang out with my daughter. I'm pretty boring in my leisure, which is probably accurate. You once wrote,

I think this was a speculation rather than a, definitive pronouncement. But you wrote... Everything is. I think more and more about how all of Western culture is a footnote to Iliad book nine. What did you mean?

I have a sort of idiosyncratic take on book nine of the Iliad. You know, the Iliad is the story of like Achilles is the great warrior on the Greek side in the Trojan War and he gets mad at some slight and he goes back to his tent to sulk and the Greeks start losing.

And so then they send emissaries to his dead. tent to say, please come back, and he says no. And then the Greeks start losing some more. And he eventually comes back and he gets killed. And that's basically the story of the Iliad. And in Book 9 is where they send the emissaries to say, please come back. And he says, no. And he gives this speech, this response that is weird, where he says, you know, effectively, the prophecy is that if I go back to fight here, I will die here and my name will be immortal. If I go home, don't go back to fight, I'll go home and live a long life and will be forgotten.

And he chooses to go back and be forgotten. And then later he changes his mind because his friend gets killed. And this, like, crux point of the Iliad is this, like, really existential almost, like, examination of, like, like, you know, this Greek warrior and this heroic culture that, you know, like, clearly valorizes, like, heroism and deathless fame and everything. and who is like the, you know, canonically the most famous heroic warrior and the one of the most deathless fame. He's the one who says, no, I'd rather go back and live a long life on my farm.

And, you know, the forcing of that choice is like the central point of like the highest work of Greek art prefigures a lot of like existentialist and sort of like thought in the future, I think. What makes Nabokov's Pinyin an interesting novel? I've been reading my secret, Tomlin. Which I'll not put a link up to you. It's just very, like, Navajovian.

It's just like a bunch of, you know, he's just this great, like, esthet of, like, sort of almost pointless pleasure in writing. And so there's this, there's this scene that I love where Phineen, the, like, absent-minded professor character is, like, heartbroken after I run in with his ex-wife. and he's like dejectedly walking through the park on the way home and he's pondering the meaning of life. And Bachav says something like he's about, he's almost come upon a sort of solution to one of the great mysteries of life. And then he's interrupted by a squirrel who runs up on a water fountain and demands that he help the squirrel drink from the water fountain.

And so he helps the squirrel and then he moves on. So it's just like sort of random interlude of just gorgeous writing and bizarre scenery and just sort of like random pile up of, weird delightfulness with no point that I find very appealing. If we think about mergers and acquisitions, one of the standard results in the empirical finance literature is that acquiring firms do fairly poorly. That is, acquisitions don't seem to pay off.

Yet, of course, acquisitions persist, and you've done M&A work in your life. How do you think about this process? If it doesn't pay off, is it about empire building? Is it about winner's curse? Do you somehow not trust the data? you would challenge the interpretation of the result? Or how good are acquisitions for the acquiring firm?

And what goes wrong? So I wouldn't challenge the data. I mean, like, to me, like, it's like a similar story to active management in some ways, right? Like, the fact that M&A is bad doesn't mean that your merger will be bad, right? And so, like, there's a sort of, so one, there's like obviously a bias towards empire building, right? And then, two, you can, you don't say that, right? You're not like, well, I'd like to have a bigger company to run. What you say is this merger will be good and you believe it, right?

And like the data is not overwhelming that all mergers are bad, right? The data is like, you know, on average they're a little bad. And so you say, here are the reasons why we are better, right? And so everyone can say that and 49% of them will be right. And you throw in some empire building and it's a, people want to do stuff, you know? I think it's very similar to the active management story. You want to do stuff. You see an active manager who seems smart has a good rating, right?

You see a charismatic banker or charismatic corporate development guy or whatever, and you want to do some stuff, and then you can persuade yourself that you're in the 49%. The Shad Johnson Agreement, should the SEC and CFTC be independent agencies? Or should they be combined into one? I don't have a strong view on that. I mean, I don't see a compelling difference among them, but I always... also, you know, like, if you combine them, there'd be departments for commodities and departments for equities and, you know, like, if you split off the SEC into like the equities and, like,

the bond department tomorrow. Like, the, I'm not sure that, I'm not sure what the institutional dynamics are that matter very much. I suspect that most of the time the agencies are, like, roughly on board with each other and sort of like broadly, like how much regulation should there be sort of perspective? Obviously there are times that there aren't, right? The CFTC fighting against derivatives in the, you know, early 2000s is a famous example of that. But I think like in general, I'm not sure like what the dynamics are where it matters that much one or the other.

Is American financial regulation too federalistic and too fragmented or not? You know, in my experience, the existence of like state financial regulation was only like a weird footnote, but I think in general it is almost certainly too federalistic and fragmented. And the particular, the example that was not core to my experience as a person in finance is insurance regulation is like very clearly to state-based and fragmented and gamable. And I think that there are probably some securities cases that are similar, but like the insurance regulation is kind of the big one. And then like you could argue that corporate law should be federalized. So I don't think there's a huge.

huge case for that just because in practice, corporate law is a creature of Delaware, and so it's essentially, there's only one corporate law anyway. And what's the most overrated neighborhood in New York City? I don't know. I don't know. Why is William Gaddis an interesting writer? Why is William Gaddis an interesting writer? Because he's part of that, like, it's part of like the, I don't know, there's like a, there's like a period of like interesting modernist experimentation that sort of, I feel like the peak of it was like from like Joyce through like you know mid 50s or something and I think goddess is the sort of like most contemporary like weird writer like weird kind of like mid-century esoteric yeah you know I sometimes like to say Matt Levine only you can do what you do so my final

question is about what I call the Matt Levine production function so so many days in the week early in the morning typically you have produced some something that is perfectly clear and lucid and witty and informative and original. So many days over the course of a year, more than anyone else I know, spanning law, economics, finance, history, other things. So there are many facets of your day and your work routines, but if you had to explain to someone, what is the Matt Levine production function? What is it you would draw our attention to?

I think like a lot of people, a lot of it is panic. And I'm just sort of like, you know, like I talk about, you know, I, um, at various points thought of being a law professor, I thought of being a classics professor, and I never could write papers. Like I turned in my final paper in law school like two weeks after graduation. And when I thought about leaving my job as a banker to become a blogger, my girlfriend and my wife, I was like, remember how you didn't write your papers in law school or you're sure you want to do this? And, you know, like what I think is like people have like their like proper metabolism for producing stuff.

for me, I wouldn't say it's easy. It's like incredibly difficult, but it is like reliable that I can produce something in a panic every day. Whereas if I think I think if I had to produce something every week and I have some experience with this, if I have to produce something every week, I do it about every three weeks. So that's like one thing is just the sort of drive of panic. The other thing is like I try to be pretty ruthlessly focused on places where I have an advantage or where I like can add value. and like I try not like nice thing. One nice thing about working at Bloomberg is that there's like, if I don't write about something, someone else will write about it. So I don't ever write about things because like someone needs to write about it.

If I write about it, it's because I have something to say about it. And that I think is a rare and valuable flexibility to have. Like my beat is not, you know, I'm not like doing things because I have to do them. Those are main things. I mean, the other thing that I have is like I worked on this weird derivative desk. at a bank where I was as an investment banker. So I covered corporate clients. I went to meet with corporate clients with coverage bankers who did M&A.

But I was also selling them equity derivatives products, which were booked against our trading desk and where we were acting as a principal. And I was also underwriting convertible bond. So I was seeing a lot of different sides of banks, of a bank, and exposed to a lot of different ways of being in finance. I mean, like, the life of an investment banker is very different from the life of a Vol trader and I was sort of like to some extent bridging those lives which was helpful. The other thing I was doing is I was explaining fairly complicated products to smart people

who did not know anything about them. And so you'd go to a CFO and be like, what you want to do is an uncapped collar at ASB with, you know, valuable maturity and they'd be like, and then you'd have to explain to them not what the thing was because they don't care. care what the set of legal documents are, but what the economic intuitions behind it are. And so that, like, explaining economic intuitions to a smart person about a thing that is complicated is, I think, valuable in my current job. The other thing that was valuable about that is that the economic intuitions I was explaining

to the CFO were not necessarily the economic intuitions that we had. Like, we were doing the trade for something, for some exposure that we wanted or some set of payoffs that we got. And they were doing the trade for some other set of payouts. And it wasn't like we were betting against them. It was like we had sort of two sort of overlapping set of interests in the trade. And so having some awareness of that is useful in sort of looking at complicated financial things that like different people can be getting something different and complicated out of a trade

that is not necessarily described in the public documents for that trade. Matt Levine, only you can do what you do. And thank you for the conversation. We now do have some time for questions. I will call on you. A mic will come to you. Please note, these are questions, not speeches. The goal is to hear from Matt Levine. I will cut you off if need be. So, questions for Matt. There's one right here. Thanks a lot. I just had it on the topic of efficient markets and crypto assets. I wonder if you think it's possible that the prices of many of these assets are far too high now, and if that might be because the risks of buying and the risks of

selling are very different. And whether, in particular, whether there's other assets like, say, binary options or something that might result in more accurate, lower prices. I'll preface by saying, in general, I'm an efficient markets believer. Like, I never want to be like, oh, these cryptos are too highly valued and they're all going to crash to zero. Because, you know, what do I know? That said, do I think that there are some, let's say, technical reasons? that a lot of crypto assets are too highly valued. Like, I do think that there are, like, some obvious limits to arbitrage. One is that there's a perception that it's hard to short a lot of crypto assets.

Some people tell me that's not true, and you can borrow Bitcoin, no problem. But, like, there is a perception that it's hard to short them. Even if it's, like, easy to borrow them, you have, like, you know, it's always more dangerous to short something super volatile than to be long something super volatile. The other thing that, like, I don't really understand about Bitcoin is, like, exchange withdrawal limits that. make it seem like there are a lot of places where you can buy Bitcoin and then not sell of nevermind shorting, but like where it is very easy to put as much money as you want

into an exchange to buy as many Bitcoins as you want. But selling those Bitcoins and taking your cash out as a more complicated and lengthier process. I don't know that's true at all exchanges, but it's clearly true at some exchanges. So yeah, I mean, I think there are some technical factors that probably lead to Bitcoin overvaluation can technical things solve that. Maybe, I mean, the futures, the spread region of futures and cashes converge would suggest that there is some, there is some like price discovery going on in the futures market and maybe it is being helpful in Bitcoin. I've never heard an argument that binary options make pricing more efficient in any asset class,

but who knows? Next question is here in the front. If you could bring the mic. My question for you, Matt, is how do you avoid writing on political topics when it feels like that's what the whole rest of the world is talking about? Or does an editor just kind of strike the paragraphs right before post? No, quite the opposite. My God.

Sometimes I straight the paragraphs right before posting, but not often. I don't know. I think it's actually pretty easy to avoid writing what everyone else is writing about. As I said to Tyler, like, you know, my interest is in places where I have an advantage. And it seems to me that even if I write a really good take on Trump, it will only be the 50th best take on Trump of the 12,000 written that morning. whereas, you know, if I write about Kodak coin, I'll be only one of 20 people writing about if I write about, you know, gaming of FERC regulations, I might be alone, right? So, like, you know, like, you don't want to, you don't want to only write about total esoterica,

but I think it's really easy to figure that people are full up on Trump news and want something else. And I think that's empirically true because people, when I do, like, occasionally write about political news, people email me like, man, your newsletter is such a nice relief from political news. I'm so mad that you wrote about Trump today. Front row, there's a question. We're in midtown where there's an extreme clustering of the finance industry, an industry where rarely do we actually need to meet each other. Do you think that will grow, continue, decay?

I guess it'll decay. I think that, like, I worked in as an investment banker. And, like, there is something in high dollar sales about people really believe in-person meetings. And I experienced it where I'd like go to a meeting where like a colleague would dial in and you could tell how much better my experience was in the room than her experience was on the phone. So I think that like, yeah, on the one hand, like to the extent that like trading consists of computers trading with each other, it does seem somewhat unnecessary that we all sit within 10 blocks of each other. On the other hand, to the extent that finance is like the business of M&A and of like very high dollar sales businesses, I'm not sure that it's as amenable to. as fragmentation as you might think. Three rows back, this question in the middle.

Apologies for another crypto question, but to me, the fact that Bitcoin took off, some would say, because it has a fixed supply, has made me question even how much low and stable inflation has political costs. So my question would be, how is the rise of crypto changed your mind about some of your beliefs around finance and economics? It's hard. I mean, like, in some ways, like, you know, so I think it is probably, you know, at the margin weakened my general view of myself as an efficient market fundamentalist, right?

I mean, it just feels so weird. It feels so weird and it feels so like, you know, when you say that you believe in efficient markets, like one aspect of that is believing in like, you know, that markets incorporate fundamental information in some way, right? That's whatever Bitcoin is doing. It's not that, right? So it is just, it is just weird on that basis. Beyond that, I don't know.

I mean, like, this is not a good answer, but like, I'm used to. believing in a financial system, right, where it's not just like a series of like actors, but like where there is a sort of like sociological set of connections between like the banks do this and the prime brokers do this and hedge funds do this and like the retail investors do that. And there's like this very sort of structured system. And Bitcoin really is just spike that that kind of is totally unrelated to that system and that has nonetheless had pretty big impact. And also like had pretty big impact on that system where like all the actors in that system

are recalibrating themselves. So that's just like a weird, like, you know, I wouldn't have guessed that X Bitcoin, if you had said, can some fintech new entrant disrupt banking or whatever? I'd have been like, it's like really hard. There are a lot of like relationships already. And Bitcoin is like a pretty good argument that like something big can disrupt the financial system. Next question. Yes. Here. Thank you. If, if we were to look at the most frequent words used on this stage, I'm guessing that weird would be probably one of the most popular. So What's your framework for deciding whether something is weird? I don't know that I have one.

I mean, it's just like sort of like if it matches with my sort of prior intuitions. I mean, it's, I like weird. So when I use weird, it's often just a sort of synonym for interesting. And it's just like my own.

I wouldn't say I have a framework. What I would say is that like whatever sort of set of biases I have to find things interesting and weird and funny and quirky, I just write about it. And like that seems to have resonated with some audience. But like, I'm not sure that I can articulate. what that framework is.

Next question. Hi. What's a rule that should be amended or repealed? I should always be prepared for these things. You know, I don't know. I'm going to give a weird one, which is, this is not an answer to your question. But I've been thinking a lot recently about regulation FD,

which is the rule that says that companies can't disclose material non-public information to one investor unless they've simultaneously disclosed it to all of their investors. seems like a very straightforward fairness rule, and which is, like, the weird aspect of it is that, the weird aspect of it is that companies meet constantly with their investors and their investors are very excited to meet with them and, like, want research analysts to set out these meetings. Like, there's a whole economy of these meetings, and yet they're never disclosing material non-public information.

And then the investors leave those meetings and go trade. And it's like, well, they didn't learn anything in those meetings. It's just a striking set of facts. what I think is striking about it is that it's clearly how the world should work, that companies should talk to the people who own them, and those people should be able to, like, ask questions and propose, you know, and say, hey, you should really be doing this, and then watch the executive's reactions. And yet at the same time, like, the law says you can't do it. So I don't know how I would amend it, but I think that there is a tension between the existence

of this rule that on its face you would think would prohibit substantive meeting. between companies and their investors and like the lived practice of finance in which companies meet with their investors and have investor relations departments and are owned by those investors and have fiduciary duties to those investors. It would be strange if they never met with them. But it's also strange that they do meet with them because this law, this rule exists that you would think would cast a shadow on those meetings. Next question. You write pretty frequently on information security and hacks. Are we as worried as we should be

about that. And non-sequitur, have we reached peak beard? I was noticing when we were backstage at Shipley and we both have beards, I guess we're at. My beard is cyclical. My beard runs from like end of December through like spring. I suppose we're at the peak of my own beard cycle. I actually, I have no expertise in information security. It seems overwhelmingly likely to me that we're not worried enough about hacks. because when I occasionally read people who are experts, they're like, the world will end and you will die horribly because you don't change your password.

And they're probably telling the truth, and I don't change my password. So I'm certain that the answer to your questions are not sufficiently worried of hacks. I mean, you know, there was a story that I just saw the headline that someone conducted a successful jackpot attack on a US ATM, which means that you do the thing where, like, somehow get the ATM to give you all the money that was in the ATM.

and that seems like a good hack. And like, you know, I always read about bank hacks and they're like, well, they had this bank and, like, they got some email addresses and now they're sending them spam. And I'm like, that doesn't seem like a very good hack. But, you know, on some time frame, like, they'll get the money, right? And then that'll be really bad, right? Like, not just because, like, they'll take money from a bank, but that, like, you know, like our whole world exists on, like, a series of computers.

And, like, if you hack one of those computers that is, like, central to, like, the world and our identity and our financial lives. I'm like, this is really bad. And like, you know, they're still in the email addresses, right? They're hacking the ATM. It's like, well, I don't know. Last question. In democracy in America, Tocqueville called lawyers,

America's priests of Egypt because both professions are the only interpreters of an occult science, which I take to mean sort of that they're both responsible for explaining enough of their systems that people retain their faith in them, but not so much that people lose their faith or they put themselves out of a job. I'm wondering if you could put that same mantle on financiers or on financial journalists. And if you think the sector as a whole has achieved sort of an efficient sweet spot in the extent to which it's understood, its mysteries are understood by the American public. Softball question. That, you know, I think that like, like, sure. Yeah, but like, I think that's true of a lot of sectors actually, right? I mean,

I think we just like live in a specialized economy, right? We're like, if you ask, like, our finisier's like a priesthood because they explain like just enough to like maintain a mystery like yeah but like Facebook way more so right like I mean I think that like we live in a specialized economy and everyone is sort of angling for that notion that what they do is complicated and mysterious and important and you can sort of get a glimpse of it but like I need to maintain the secrets I do think finances like you know high up in the sweet spot where like people think it's very complicated and they need to they need to like defer to a priesthood but I also think think that like finance has like come down a bit where now like people think ah it's complicated we

need to ban it or ah it's complicated and need to need to radically simplify and get rid of leverage rules and you know like we're like you know i have simplified leverage rules and all these things that are that are that suggests that like the general public does not believe the mystique they find it confusing but not in a not in an awe-inspiring way it's a true of lawyers too Matt Levine thank you very much two announcements first you all should subscribe to conversations with Tyler. There are also chats with Malcolm Gladwell, Stephen Pinker, Cliff Asniss, Karim Abdul-Jabbar, Martina Navratilova to come, David Brooks to come. And thank you all again. And Matt, great job. Thank you. Thanks for listening to Conversations with Tyler. You can subscribe

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