Plain English with Derek Thompson - The End of the Everything Boom (Plus: The Federal Reserve's Risky Move)

Episode Date: June 15, 2022

This is a huge week for economic and finance news. On Wednesday afternoon, the Federal Reserve raised interest rates by 0.75 percentage points, its biggest move since 1994. Derek breaks down what this means for your wallet and the future of the economy. Then he brings on The New York Times' Kevin Roose for a conversation about the end of the "everything boom." For the last decade-plus, just about every asset class has gone to the moon: stocks, housing, crypto. That era is over. But where did the everything boom come from? How did it change our lives, from cheap Uber rides to risky crypto projects? And what does it mean that this era is coming to a close? Derek and Kevin also talk about their idea of a "millennial consumer subsidy"—the notion that for many years venture capitalists subsidized ride-share and delivery companies in a way that was unsustainable and not all that great for the people behind the wheel. Host: Derek Thompson Guest: Kevin Roose Producer: Devon Manze Learn more about your ad choices. Visit podcastchoices.com/adchoices

What's up, guys, Rachel Lindsay here, and I am teaming up with your favorite Ringer podcasters to deliver the Bravo drama and news that you've been craving on morally corrupt. It's the show about all things Bravo, from the housewise to summer house and everything in between. We'll be mentioning it all every week. Check it out on Spotify and the ringer.com. Today's episode is about the end of the everything boom and the wide ripple effect. of the Federal Reserve's latest interest rate announcement. For the last decade plus, basically every asset class you can name has gone to the moon. Stocks up, housing, up, crypto, up.

That was the everything boom, and it's over. It was over when the stock market crashed into bare territory this week. It was over when the housing market you turned earlier this month, and home buying screeched to a halt. And it is definitely, definitely over now that the Fed, And today on Wednesday afternoon announced its raising interest rates by 75 basis points, which is nerd speak for 0.75 percentage points. This is the highest interest rate increase in 28 years. Today's guest is Kevin Ruse.

Kevin and I in this episode talk about Fed policy, interest rates, crypto, the everything boom. But before we get to that interview, I want to do a few words on this historic rate announcement specifically. what the Federal Reserve is doing, and what the Federal Reserve is telling us it will do in the future. And we're going to do this in a typical plain Englishy evidence versus interpretation breakdown. So first the evidence. No editorializing. This is just what happened. The Fed raised its target interest rate by 0.75 percentage points and sharply raised its projection of rate increases over the next year, right?

Basically, interest rates are going up faster than we thought they would, and they will continue to go up higher than we anticipated. say six months ago. The Federal Reserve also comes out with new forecast for the economy when it raises interest rates, and it now projects lower GDP growth and higher unemployment. Now, in the short term, for you as a consumer, this means borrowing costs are going to get higher, mortgage interest rates are going to go up, auto loans are going to get more expensive. All right, so that's all the what.

Now this is the interpretation. This is me editorializing here, okay? I think the Fed's freaked out. I think the Fed is freaked out by the inflation data, by the stickiness and the the inflation data. It is newly resolved to do whatever it can to bring down inflation. And that means it is willing to risk a recession. I think what the Fed is telling us in a lot of subtle different ways is that we, the Fed, quote, we are willing to take this economy into a recession to cure the inflation bug. You go to the numbers here. The Fed is projecting

three straight years of unemployment rates rising. Three straight years of rising joblessness. You go back through recent history, that just doesn't happen outside of a recession. So when the Fed says we are projecting that joblessness is just going to go up and up and up in 23 and 4 and 5, that's them saying, be prepared for a recession. And this is all a part of the Fed just falling behind the eight ball here. Last year, the Fed projected that its preferred inflation measure was going to end 2022 around 2.6%. Now they say it's going to be 5.2%. 5.2 is two times higher than 2.6. There's just no way around the fact that the Fed has a massive whiff here, a massive mistake on its hands,

and it is trying desperately to correct that mistake, earn the trust of markets, and tell people we are willing to risk a recession to bring down inflation. Whether that's good or bad, we'll say that for future episodes. But that is what I think the Fed is saying right now. Be prepared for a slowdown. be prepared maybe for a downturn. Now on to the end of the everything boom. I'm Derek Thompson, and this is plain English.

Kevin Roos, my friend, welcome back to the podcast. Derek, what a pleasure. The theme of today's episode, which I am taking directly from our email exchange, Kevin, is the end of the everything boom. So I want to start by asking, what does the everything boom mean to you, and why do you think it's ending?

Well, the everything boom is not my phrase. it's been appearing in stories for a while, but it's basically this period that we've been in, this multi-year, sort of you could call it 14-year bull market, in which basically anywhere you put your money in the market, you were going to make money. We had stocks that have been just like, you know,

growing and growing and growing. We had, you know, real estate market was growing and growing and all of these, you know, companies were a, wash and cash. We just had this cycle where money was essentially free because of the decisions of the Federal Reserve, which implemented what we tend to call a zero-interest rate policy or a ZERP. One of my favorite blog posts of the past few years was by my friend Ranjan Roy, who has a theory called ZERP explains the world. And it's basically this sort of theory,

which I mostly but don't totally agree with, that everything weird in our economy for the past 10 years has been related in some pretty direct way to the availability of very, very low interest rate money. Money that was not free in technical terms. Usually there's some nominal interest rate, but it's definitely low. And that the availability of that money

just kind of distorts the entire economy. Distorts or at least affects the entire economy. I mean, I only want to amend the term distort because a lot of things in the last 14 years that were happening were weird, but a lot of things were also wonderful. There were some wonderful things that were happening in terms of, you know,

we had slow labor market recovery that was happening. You had people spending money on not only durable items, but also services. It was easy to get money if you were starting a company. And I'm very attracted to this idea. I love universal theories of everything. And I'm very attracted to this idea that if you sort of like peaked behind the curtain of every single weird phenomenon, whether it was cheap Uber prices or a slurry of crypto companies or, you know, just an easy, it's easy to get a car loan.

You'll peek behind the curtain and, oh, there it is. That's why this is happening. it's because interest rates are incredibly low, and that only were the interest rates low, but also the Federal Reserve and a bunch of other central banks, were injecting liquidity into the system through quantitative easing. They would buy assets from banks. They'd give the bank's money. Suddenly the banks are like, wow, got all this cash.

What am I going to do? I'm going to lend it. And I would also pull down interest rates, make it easier for people to buy houses. So I agree. This is, it's a fascinating phenomenon that basically all the weirdness and the wonderfulness of the last few years has, you can trace back to this zero interest rate policy. you can trace it back to ZERP. Yeah, and it makes sense in like a classical economics perspective.

If you can get, you know, better yield, if you can get more interest, investing in riskier things, as you have been able to do for the past 10 years, like your savings, your bank was maybe going to pay you 0.1% interest on a savings account with them, which is basically a negative interest rate. So investors went looking for riskier stuff, not just, individuals like companies, hedge funds, private equity firms, angel investors, venture capitalists, you know, soft bank, like they all just went looking for more and more yield. And that resulted in these kind of risky propositions becoming very viable. It resulted in, you know, dog walking companies raising billions of dollars from venture capitalists. It resulted in cheap Uber prices.

It resulted in crypto because we had all of a sudden this. asset class that seem to be doing better for people in a return sense than just stashing their money away in a savings account somewhere. This is a great summary of the ZERP explains the world thesis. It's basically that ZERP makes the crazy rational. It is crazy to think that a dog walking company should be worth $5 billion. It is crazy to think that a real estate company like WeWork should be worth $100 billion. But as long as you are holding fast the idea that, interest rates are going to be zero basically forever and money is going to be basically free forever, you're looking for these yields, you're looking to build the next Amazon of the future,

and so you have all these venture capitalists that are throwing money at these companies, willing to subsidize the next Amazon. I actually want to take a half step back and read this article that economics writer Neil Irwin, your former colleague, wrote for the New York Times. It goes, quote, around the world, nearly every asset class is expensive by historical standards. This is basically your list, Kevin. Stocks and bonds. emerging markets and advanced economies, urban office towers in Iowa farmland, you name it, and it is trading at prices that are high by historical standards. End quote.

When did Neil write this? 2020? 2017? No, Neil wrote this in July 7, 2014. Eight years ago, he was diagnosing the everything boom in the middle of the Obama administration. So the Jenga tower that is toppling right now has been under construction for a long, long time. And you gave me the perfect segue, which is that this, you have this sneaky side effect of the everything boom, which is that when stocks are trading at prices that are historically high,

it means relatively low returns for investors, which means they want to put their money into riskier bets. And when they put their money into companies like Uber and Lyft and DoorDash and Postmates and all these Uber for ex-consumer tech companies that were floating around the world in the late 2010s, you have the beginning of something that you and I have called the millennial consumer subsidy or the millennial lifestyle subsidy. Kevin, how would you define this millennial lifestyle subsidy that emerged from the swamp of ZERP? Well, I'm glad we're settling the debate over nomenclature today because you and I have both, I think I might have stolen it from you originally and then well. So this is actually, this is a tiny arcane internet debate right now.

But what happened was in 2019, you and I were tweeting back and forth about this phenomenon that you were about to explain, the phenomenon of venture capitalists essentially subsidizing the life of millennials. And then I think you said it's as if they're subsidizing millennial lifestyles. Then I wrote an article for The Atlantic about it. And then you wrote an article for The New York Times about it. And then I wrote an article for the Atlantic about it. And so now we are coming together and sharing a conversation live about this subject that I believe

we've only tweeted about. So, yeah, explain what this is, the millennial, let's just call it lifestyle subsidy. Yes, it's a cheeky way of referring to the way that a certain type of startup has attempted to grow in the past 10 or 15 years. And this is best exemplified by things like Uber, but there are a million examples. I'm sure we can all name them. They sort of at their peak ran the gamut from, you know, parking apps to, you know, mobile restaurants to just every part of the economy had some very well-funded VC-backed startup trying to expand through artificially low pricing. So I'll explain what that means. So basically, the playbook of business over time is that you try to do something, provide some good or service, and charge more for

it, then it costs you to produce, right? Like, that is a pretty basic, you know, if you were going to start a sandwich shop and your ingredients cost $5, you're probably going to sell the sandwich for $10 or $8. A number higher than five, for sure. Exactly. And what happened is that a bunch of investors

decided that a more promising way to grow a business at scale was to effectively sell low cost, was to take your Uber ride, your lunch, your dog walking experience, and through promo codes and discounts and introductory offers to essentially sell that $5 sandwich for like $4 or $3. And the idea was that in all of these companies was that you do this for a while. You use venture funding to expand aggressively. you gain as much market share as possible. You elbow all your competitors out of the market.

And then once you have basically established a monopoly through these artificially low prices, then you get pricing power. Then you can jack up your rates. Consumers don't have any other choices. You are the entire market for dog walking or Uber's or, you know, lunches delivered to you. And then you have the best of both worlds.

You have no competitors. You're able to set your own prices and you win. And this model has been not just like a fringe model in Silicon Valley. This has been like kind of the main way that DC back startups in consumer marketplaces have tried to expand in the past 10 years. And it has been phenomenally unsuccessful for the investors and the companies, but it has been kind of nice to be like an urban millennial who like wants to get below cost goods and services. It basically sort of financed, I think as I put it in my piece, it allowed us to live like Balenciaga lifestyles on a Banana Republic budget. We were all getting chauffered around and free lunches, and now that's over, although I should

say there is one place where the millennial lifestyle subsidies still exists. The only thing I want to edit there is that you mentioned that it's not necessarily been a good deal for investors. It certainly hasn't been a good deal for investors, especially those that came on late in the life cycle of these companies. But if you're like Jason Calacanis and you're like an angel investor in Uber and Lyft, you know, you got in on these companies and they were worth like $5 million. Like they're not worth $5 million now.

They're worth billions and billions and billions of dollars. So that equity that you have is now worth quite a lot of money. So right now the Millennial lifestyle subsidy seems to be going away. You look at your Lyft and Uber prices. They are way higher than they used to be. You look at your DoorDash prices, your Postmate prices, much higher than they used to be. And this is because as interest rates are rising and these companies feel like they have to husband their cash, they can't burn money like they used to, which means they have to be profitable

on a unit economic basis, on a ride per ride basis. And that means that prices are going up across the board for these millennial lifestyle subsidy companies. You said there's an exception to this rule, Kevin. What is the exception to this rule? Well, I'm a little hesitant to give it away because it's like the one joy. left in my in my daily spending but in the in the Bay Area at least there are these like fast delivery apps have you seen these like 15 minute like sort of get you know get your i don't know your

diet coke and oreos delivered in 15 minutes um i don't think this is going to last very long but there are a bunch of startups um that raise billions of dollars and are doing essentially uh you know uber for groceries and uh and in the Bay area the one the one the the one everyone uses out here is called popcorn. And it's just phenomenally unprofitable. Like, I don't have any access to their internal corporate financials. But like, you know, the other day, they were running this like crazy promotion. It was like 50% off your first order. And so everyone I knew was just like texting each other, like, go get like half-price groceries from popcorn. And so, you know, I did. I like filled up my fridge with like, you know, groceries that were essentially

half price. And to be clear, they're not getting a special deal on those groceries. They are just purely like it's like the venture capitalists are just like stapling bills to every order and like handing them to you. And so that's the one

place in the economy, I think, that is still experiencing a little bit of subsidy like that. But yeah, the glory days of artificially cheap Ubers and other other, you know, sort of Uber for X startup.

appears to be over. I'm glad to know that there's like a little kernel of nostalgia that's holding out in San Francisco at least that you are still getting your Oreos and Pepsi with VC's dollar staples. The group texts are like filling up with referral codes and people are like, they're just running a new promo. We've all gotten, the other thing that I think

the millennial lifestyle subsidy created was extreme hyper-awareness on the part of consumers like when you are getting a deal that is objectively too good to be true. I think I most recognize this a couple summers ago when like everyone I know started getting really into MoviePass. This was the summer before Movie Pass collapsed, and it was like they were offering this like insane deal, which was all the movies you could watch in a theater for like $10 a month.

And like if you saw one movie, it was worth it. And if you saw more than one movie, Movie Pass was essentially like giving you free tickets to the movies while paying for them themselves. So it was like a deal that everyone at the time was like, this makes no sense. I'm definitely going to take advantage of this and like go see every movie I've ever wanted to see. So that was a moment in time that I don't think we'll get back for quite a while. Movie Pass just seemed like absolute magic. I mean, it really did feel like for a brief period of time, a company in a capitalist system had just like forgotten how to do a capitalism and was just like, we're just going to basically be,

a charity for people who love sitting in movie theaters. We're just going to give you money in exchange for doing that, which you were always going to do anyway, which is just see the movies you want to see. It really was like an amazing, beautiful sci-op. And when it ended, it was tragic, but at the same time, it made me feel like a little bit sane. Like, while MoviePass was taking off,

I was like, I'm sorry, of course I would love everyone who loves movies to be able to be paid to watch movies. but this just doesn't make any sense. And when the company finally went under, I was like, this sucks on the one hand, but on the other hand, my sense that reality has like an underlying sense to it has been restored.

And to a certain extent, that's kind of what coming out of the millennial lifestyle subsidy has been like. It's like all these little inklings that you felt are the last few years. Like, that price can't be right. This price can't be right. There's no way this company

can actually exist in the long term. Well, it turns out that if you raise interest rates by literally 25 basis points, the company, poof, disappears because it cannot survive the subtlest rate increase. So this takes us to... Yeah, it's like discovering

that gravity still exists or something. There's something reassuring about it. And I know we're trying to move on, but I want to make one more point about the millennial lifestyle subsidy, which is that we're sort of being tongue-in-cheek about how it's been just like this amazing thing for consumers

and, you know, for us, yuppies who want cheap ubers. there is a cost to all of this. It's not totally free. A lot of these startups relied on the availability of cheap labor that was drivers were getting squeezed, delivery folks were getting squeezed. The gains of the millennial lifestyle subsidy did not necessarily flow to the people who actually provided the services. And it also was bad for small and local businesses who didn't have access.

to billions of dollars in cheap capital and had to actually sell sandwiches for more than they cost to make. It's really, really hard to compete in a market where SoftBank or the Saudi sovereign wealth fund or someone else is just showing up and showering cash on some startup that is doing what you do,

except they don't have to make money doing it. So there has been a cost to the millennial lifestyle subsidy era. I don't think it's a totally benevolent scheme, but I do think that it has given people a false sense of what kind of lifestyle they can afford. I'm so glad you said that. Just to connect a few dots here, because I think the story you're pointing to is so interesting and so important. When we came out of the Great Recession, the housing market was in shambles. It was disgusting. And aggregate demand, consumer spending, was very weak.

So the Fed comes in and says, we're going to keep interest rates really low. We're going to have aggressive quantitative easing because we want to stimulate the housing market. We want to get consumer spending back on track. Now, this was really good for Wall Street prices. It was really good for raising asset prices. But low interest rates reflected something broken on Main Street. It reflected weak labor markets. So a lot of people were driving an Uber or delivering Thai food because they didn't have competing job offers that would clearly pay more per week.

So there's a story here in the biggest picture about how the Great Recession created the necessary economic conditions for companies like Uber to thrive. And that means that the millennial consumer subsidy that we're like, you know, kind of joking about here, is in a kind of dark way an expression of weak aggregate demand. Like watch the dominoes here. Weak labor markets meant lots of low-wage workers contributed to low-interest rates, and that meant plentiful cheap ubers. But all of this has changed. All of it has changed. Job openings have hit record highs. Quits have hit record highs. Nominal wages are rising fastest for low-income workers.

The labor market has recovered really nicely from a pandemic flash fees recession. And this is coincided with inflation. So now interest rates are going up. And now all this is showing up in the high Uber prices that you're looking at on your phone. Again, in the biggest picture, I won't belabor this point anymore. But basically, you can tell an entire history of 21st century economics through the price of an Uber ride. Now, another category that's gotten walloped here by rising interest rates is crypto. Bitcoin is down 70%. Large crypto companies like Coinbase are laying off one-fifth, one-third of their workforce. Kevin, let's start with a big picture here in crypto land, and then we'll descend through the clouds to see the carnage up close. How would you

summarize the disaster zone in crypto right now? Well, I think it's related to the end of the everything boom. This is the end of a historic bull market, period, like in every asset class, including crypto. And in an environment where, you know, stocks are going down, you know, real estate's going down, people are losing their jobs, people tend to try to get rid of their riskiest assets first. And for a lot of people who invest in crypto, like, crypto is the riskiest thing that they own. And so that's going to be the thing that they get rid of first. And crypto has also historically had a very sort of basically a four-year boom and bust cycle. Like every four years, crypto crashes. It happened in 2014. It happened in 2018. And now it's

happening in 2022, like clockwork. And so what's happening in the crypto market is essentially what's happening in the stock market. Crypto is not the only thing that's down 70% from its all-time highs. Netflix is too, for example. And so you have investors who are pulling back from crypto. You also have these sort of spectacular blowups and failures that have happened in the crypto market in the past few months that I think are making people skittish

when it comes to holding any crypto assets at all. One interesting distinction between, let's say, Bitcoin and Netflix, because you're absolutely right, they've both fallen by basically the exact same percentage amount, is that no one ever talked about Netflix as being an inflation hedge. Quite the opposite. It was very clear that Netflix was a bet on growth. This was a low-profit company that was growing subscribers quickly, and the faith that Netflix's valuation should be as high as it was in 2019 and 2020 was in part a bet on the future of cheap

money that would allow Netflix to continue to spend $20 billion every single year while turning a small profit. You look at Bitcoin, it's the opposite. A lot of people were pointing at Bitcoin as digital gold, digital gold, at least here representing the possibility of it being an inflation hedge. Well, now inflation, at least headline inflation, is 8.6%. Core inflation is really high, and Bitcoin is getting its teeth knocked out. So it's interesting that when you look at how people actually treated Bitcoin, they talked about it like it was digital. They talked about it like a potential inflation hedge, but they treated it like essentially a tech stock on steroids. When you talk to people in crypto right now who are working on crypto projects big or small,

what are they saying? Are they, is there a sense of gallows humor? Are they like, we are completely screwed? This is the end of the party. Are they optimistic? There'll be a kind of like trampoline effect here where it's kind of like the dot-com crash where a lot of companies like Amazon lose almost all of their valuation. but then they bounce back the next 10 years

and become giants that rule the world. What's the vibe right now in CryptoLand? Yeah, there's a lot of gallows humor. There are a lot of memes about going to work at McDonald's now that my crypto startup has tanked. There's a lot of really depressing. The cryptocurrency subreddits that I have been browsing over the past week, it's bleak out there.

People are losing their shirts. There's just no two ways about it. And the way that people who, you know, crypto has like, I would say like a culture of sort of toxic positivity. And this is, you know, functions in some ways like a, like a religion. And so you have people who are saying this is good for crypto, that all the prices are falling because it's clearing out the casual tourists and the speculators. And the people who are going to be left are the builders.

And like, you know, high prices attract a certain kind of person to invest and work in the crypto industry, and those kind of people aren't in it for the right reasons. The joke is that everyone who's going to be left is in it for the tech. And so now they say we'll have this period where prices have crashed, and there will still be startups building things and infrastructure. And they'll say, you know, all these big crypto companies, like a lot of them started during the last crypto winter. And so they are sort of trying to, I guess, put a half,

on what is a pretty cataclysmic event for them. But, yeah, I mean, if you catch them in their less guarded, less sort of positive, spinny moments, they'll say, like, yeah, this is horrible. We're all laying off people. We all feel like we're waiting for the bottom. I want to ask about a specific crypto project to maybe see some of the disaster at a close-up level.

Of all the specific examples that you can think of, Bitcoin, the stable coins that have collapsed, some of the individual companies like Coinbase or Celsius that have had a really, really hard time in the last few months. What to use, like, the most interesting Icarus story in this whole space, that you think the story of this company really goes a long way to explaining what's happening in crypto and what the stillover effects might be. Well, I've been really fascinated this week by what's happening to Celsius. Celsius. Tell us what Celsius is.

Yeah, Celsius is sort of like a crypto quasi bank. It's not a bank. It's not regulated like a bank. But they take deposits and lend and give people yield on their assets. It's basically like a little crypto quasi bank. And Celsius is not little, actually. At its peak, it had something like almost 2 million users, like $25 billion. and assets. It's a big, big firm

in the crypto space. And it was one of the kind of more legit-seeming ones. It was raising money from all these this Canadian pension fund, gave it a bunch of money in a recent fundraising round.

And the way that Celsius worked was basically that they would you would deposit your crypto with them and they would give you some interest rate back on that crypto, which was much, much higher than anything that you would get from your regular old bank. So they were paying, you know, anywhere between like five and 18 percent on, on crypto deposits,

depending on the asset. And what they... And this is just money that's held in the bank. Like, I just, I have some crypto coins. I deposit them in Celsius. It's basically in like a checking account, and they're giving me 5% interest on that checking account? No.

So they're turning around. going out and looking for, basically, they are taking those deposits. And like a bank, they're going out and turning around and lending them and using them in other ways. And their model was basically, we pay you, say, 5% on your Bitcoin deposits. And then anything we can earn with your Bitcoin above and beyond that 5%, we get to keep. And so they were going out and basically trying to put people's deposits in things that would make more money than they were paying out on interest. And one of the ways that

they did this was sort of interesting. This was something that they did called staking. And staking in crypto is basically when you promise to lock up a certain amount of crypto for a period of time in exchange for interest or certain other rewards. And they did this with millions and millions of of dollars, and it turned out to be kind of one of the things that is now putting them in a lot of trouble. You know, listening to you now, I'm realizing that crypto is also a deep story about the legacy of the Great Recession. Maybe if listeners come away from this episode with one lesson, it is that when it comes to the financial crisis of 2008, the past isn't over, and it's not even past. Part of the appeal of crypto, I think, has always been that the 2008,

financial crisis exposed the banking system as broken and often quite corrupt. Like banks were supposed to be responsible, but instead they were incredibly reckless and they helped to blow up the world. And what crypto promises, or at least what, to be specific, decentralized finance promises to a lot of people is that we'll solve the banking problems that were laid bare by the financial crisis. But this is a point that Matt Levine and Joe Eisenthal at Bloomberg make all the time. the way the crypto solves these problems often makes the problems much, much, much, much, much worse.

Like, think about what Celsius is promising here. Celsius is basically like, hey, you know how traditional banks are broken pieces of shit that take your money, offer unrealistic promises, but then make a bunch of reckless trades and lose your money? Well, what we're going to do

is take your money, offer unrealistic promises, make a bunch of reckless trades, and then lose your money. And oh, by the way, the money won't be insured by the FDIC. Hooray, innovation, you lost your deposit. I mean, I'm laughing here, but people are losing incredible amounts of money, and it's awful. It's really bad.

And I'm not going to accuse Celsius of fraud because I'm not a lawyer and I don't want to get sued for defamation. But I will report that other people are using the F word very liberally right now about crypto. There are lawsuits being brought against companies and celebrity endorsers. Kim Kardashian, Floyd Mayweather, and the claimants are basically saying, crypto scammed us. We trusted them. They lost our money.

Kevin, how serious do you think these crypto lawsuits are right now? Oh, I think we certainly will see a spade of lawsuits. Like, that's pretty clear to me. Whether they'll succeed, I'm not so sure. I think the key issue is, like, what representations were these crypto companies making? Like, were they saying,

we can guarantee you 8% yield, or were they saying, you know, here's an idea for an investment that we have, you should do it, but like, by the way, you could lose all your money. I think the sort of relevant issue in securities law will be, were they promising things that they knew to be false, that they didn't deliver on? And I think that's the question that, I think there are certainly going to be cases where that happened. And I think that it's also sort of relevant.

I don't think Matt Damon is likely to go to jail for appearing in a Super Bowl. But I do think that, you know, a lot of celebrities promoted sort of projects that they didn't fully understand that they were just

cashing the check for. And I think a lot of them, you know, were sort of pawns, in this larger sort of effort to make crypto consumer friendly and make it appear riskless and non-threatening. And what was really happening under the hood, as we now know, that a lot of these companies that were promising, you know, safe returns were actually investing in all kinds of risky stuff under the hood. And so I think, yeah, the people who have been involved in, you know, pumping and promoting the space,

I think they should be doing some serious self-reflection. Last question for you about the crypto apocalypse. Why should Normies care? If you're someone who never got into the crypto hype, you always thought this space was kind of stupid, you're feeling really, really satisfied about the predictions that you made about crypto right now, that it's just red, red, red across this entire asset class.

Why should those people care about the story starting right now? the early, the people who are early in crypto, the people who are sort of the big winners in crypto, a lot of them have cashed out, or they've moved money out of the crypto market, and they're just rich people now. Like, they're not going to be less, I mean, they'll be less rich, but they won't, you know, there will still be crypto billionaires. And those crypto billionaires will still have lots of money and will have lots of ideas about how the world should work. And they are going to plow that money into elections, they are going to plow that money into think tanks and non-profits. I think that you should understand that the people who are deep into crypto are going to stay deep

into it, and they are committed to making this happen, and they have some of them quite a lot of money and quite a lot of influence. You've made this point before in the podcast, and I think it's a great point to end with. I am uncertain about the future of crypto as a class, of innovations. I am much more certain about crypto as a means by which lots of extremely rich people have been made extremely rich. And it is important, I think, to continue to follow any space whose ideology and philosophy you have to stay on top of in order to understand the future of where rich people are going to spend their money. They are going to have a huge impact, I think on the future of politics, on the future of business, on the future of names of

sports stadiums, on the future of regulation. And I think understanding what they want from the world is really, really important. Kevin Roos, thank you very much, my friend, as always, and we will have you back in the pod very soon. Always a pleasure. Thank you very much for listening. Plain English is produced by Devin Manzi. If you have a comment, a concern, a question, an idea for a future show, please, Email us at plain English at Spotify.com.

That's plain, no space, English at Spotify.com.