Andrew Ross Sorkin: Understanding this current economic moment | Masters of Scale Summit 2025

Speculation is like the twin. It's not

the evil twin of innovation, but they

are connected. They're like Siamese

twins to some degree. You need you need

one. You can't have one without the

other. We all want more. And the

question is, what are the guard rails?

How much speculation is good

speculation?

And when you layer on credit and debt,

what happens? That, by the way,

unfortunately is the magic ingredient of

both a fabulous sort of growth period

and what often times ends it and ends it

badly. It's not that it's all going to

go wrong. It's that charlatans and

frauds and others emerge and the

question is how much protection do we

want? Hey folks, Jeff Berman here. This

week we are sharing a conversation I had

recently with Andrew Ross Sorcin at our

Masters of Scale Summit in San

Francisco. Andrew is truly a brilliant

journalist whose work appears in the New

York Times and on CNBC. He's the author

of the best-selling book about the 2008

financial crisis, Too Big to Fail. His

new book is called 1929

and it is an incredibly wellressearched

history of that year's stock market

crash chalk full of parallels and

cautionary tales for today's economy. I

am so grateful he joined us on stage for

this conversation.

This is Masters of Scale.

So, Andrew and I were were standing

backstage as Reed and Feay were

finishing up and um Andrew shared that

uh he had an interview where the the

person you were sitting across from said

uh throw him as hard as you can. Uh,

>> I was standing in the back of the stage

>> and a a billionaire who you all know,

>> right,

>> looked at me and said, "Throw it as hard

as you can." And I looked at him and

thought, "What is he doing? Is this some

way to screw with me? Like, am I to get

me off my game?" I didn't really know

what was happening. We do the interview.

I try to throw a couple

>> balls as hard as I can.

>> Um, though I, by the way, prefer uh a

tennis rally. I always think we all like

to watch the ball go back and forth. You

want to you want to see whether they can

run and get the ball and hit it back.

But anyway, we're backstage afterwards

and I look at him and I go,

>> "Why did you say that?" Cuz most people

say, you know, take it easy on me. Don't

don't ask a hard question. I don't want,

you know,

>> and he looked at me and he said,

"Because if you throw it underhand, both

of us lose."

>> I thought it was the smartest thing.

>> And everyone here loses.

>> Everybody here loses.

>> I throw my opener. Um, based on your

scholarship, based on the the research

you've done about the 1920s, what led up

to the crash, what what created the

crash,

>> are we heading for a stock market crash

in the second Great Depression?

>> You asked. I mean, you know, that's my

it's my slice.

>> Okay. So, the truth is we are right now

there is no question and I will say when

I wrote started working on this, I did

not intend to write a book that mirrored

or paralleled today. There is no

question to me now, and I hate to say

this, that we are directionally

um in a bubble of some sort

when it's going to pop. I mean, you just

talked about AI. It's a huge amazing

force in our economy. I'm excited about

it, but along the way, something bad is

going to happen, and I think that

there's a bunch of forces at play right

now that will probably set us up for a

massive hiccup. Now, will that hiccup

look like 1929? Will it look like 1999?

will look like 2008. I don't know. But I

do think that there are a number of

parallels today which we can get into

that suggest

something is uh

something is not right. Okay. So, so

let's let's let's lay the foundation for

it then. Let's go take us back to the

late 1920s. What what are you see? And

by the way, I mean the book is

extraordinarily researched. It is um

especially the second half an absolute

page turner. Um you you are going to

love this book and get a ton out of it.

But take us back to the 1920s. What is

happening that mirrors today where where

history might not just be rhyming but

repeating. Okay. So here's the thing and

I didn't know any of this really before

I began this book. I think I knew that

something very bad happened in 1929 but

I figured I needed to understand who the

people were and what they were saying

and what was really happening. So the

first thing to know about the 1920s was

it was this remarkable period of

technological advancement. Actually

somewhat similar in a sort of AIish way

to now but in the context of radio

telecommunications. By the way the hot

stock back then uh was RCA. Ticker

symbol was radio. It was like the the

meme stock would have been like Nvidia

basically.

And it was also a period of time where

people took on debt for the first time

in America ever. So prior to 1919,

taking on credit use I mean this idea of

a credit card today, all of that was

almost a moral sin. Nobody did that. Um

and it wasn't until General Motors came

along and said, you know, we got to sell

more cars. How are we going to do that?

We're going to start lending people

money. And people started to do it. And

then Sears Robbuk said, "Oh my goodness,

they're doing that. We can offer uh

credit as well, people with appliances."

And then a guy named Charlie Mitchell uh

Sunshine Charlie ran a bank called

National City, turned into Cityroup,

came up with this idea. We're going to

start lending people money so they can

buy stocks. And brokerage houses across

the country started to emerge on the

corners of streets the way you see

Starbucks today. And you could literally

walk in to one of these brokerages, put

down a dollar, and they would lend you

$10.

And for a very nice stretch of time, it

was like free money. In 1928, the stock

market was up 48%. Between the beginning

of 1928 and September of 1929, the stock

was the stock market was up 90%. And so,

if you are completely and utterly

leveraged, it was this unbelievable

thing. And all of this was done under

the umbrella this idea that they were

going to democratize finance. Um

>> we're hear we're hearing that in our

>> we're hearing that a lot.

>> And it was this idea that, you know, the

elites had gotten their fair share, but

now we got to give everybody else the

opportunity at the lottery ticket. And I

think you're hearing that a lot today in

the context of look, we just had a bill

just passed that's going to allow

private equity, venture capital, private

credit to show up in our 41k plans. Like

this is all happening. Crypto obviously

and so many other sort of component

parts I think are very reflective of

that moment.

>> So you you're you're also the too big to

fail guy. So um do we not learn our

lessons here? like what what what is it

about us that we're not looking at

history and going like this doesn't end

well given what we know. Look, the human

condition

um is that we all want more.

>> There's a great line u Wall Street 2 the

movie which was not nearly as good as

Wall Street one. There's a a great line

where um you know Douglas looks at um

was it Shy Labou and says something like

you know what's your number? and he

looks at him and he says, "More." And I

think that that's reflective of what we

all want. We all want more. And the

question is, what are the guard rails?

>> How much speculation is good

speculation?

And when you layer on credit and debt,

what happens? That, by the way,

unfortunately, is the magic ingredient

of both a fabulous sort of growth period

and what often times ends it and ends it

badly. It's the accelerant. It's the

match that lights the fire. You could

have all the bad actors on stage doing

all the bad things you could possibly

imagine, but it that is the thing that

sets you back. In 1929, it was it was

margin loans. People were buying stock

and they just had way too much debt. In

19 in 2008, you'd argue it was subprime

loans. The question now is it the

leverage in the system around the AI

ecosystem? And yes, it looks like, you

know, whether it's Meta or Google,

they're using cash, but if you look at

meaning to buy to buy the chips in the

data, but if you look at so many of

these deals now to build these data

centers, the energy companies, the

construction companies, the real estate

companies, that is a complete leveraged

mess. And if you look even at some of

the deals that Nvidia just made with

OpenAI or OpenAI made with um AMD,

they're almost circular deals with money

that's literally being made out of

nothing. So if you think about how the

AMD deal worked that was just announced

earlier this week, AMD selling chips to

OpenAI,

OpenAI technically can't really afford

to buy the chips. Okay, they don't have

enough, if if you actually just look,

they don't have enough cash to buy the

chips technically.

They take a warrant, a stake in AMD.

They know that if they announce this

deal, the stock of AMD is going to go

up. So now the warrants are worth

something. And now you could effectively

sell those warrants or or take a loan

against those warrants. And now you have

cash to buy the chips.

>> Andrew, I want you to imagine that that

um we're we're going to you're

temporarily not a journalist. No ethical

issues. And

>> here we go. uh the no ethical issues the

well no ethical issues when um uh the

Treasury Secretary and Commerce

Secretary and perhaps the president call

you up and say, "Boy, you you seem to

know a lot about this.

>> What what should we do?"

>> Well, I think that the answer is, and

this is you you want some semblance of

speculation in the market. So, I just

want to say straight up, here we are in

one of the greatest cities in in the

country, and it's a city that's about

innovation. And no innovation has ever

happened without some form of

speculation. Speculation is like the

twin. It's not the evil twin of

innovation, but they are connected.

They're like Siamese twins to some

degree. You need you need one. You can't

have one without the other. Elon Musk

would not exist. Uh SpaceX would not

exist. Tesla would not exist without

somebody deciding to speculate on

something that seemed completely and

utterly crazy. So, you want that.

However, you don't want it to go too

far. So, my anxiety today is about a lot

of the things that we're doing to take

the guard rails off. So there's a move

of foot you've probably read about.

President's announced plans doesn't

believe that public corporations for

example should um have to have quarterly

earnings declared. Wants to do it twice

a year. I more transparency to me is

better. Typically that's probably not

the best idea. I'd say Mr. President

this is not going to help the situation.

>> I mean we could argue we do need

companies think on longer horizons and a

quarter right. 100% and I get the

argument if you're a CEO, you don't want

to waste the time. You don't want to

waste the money. You don't want to waste

the energy. But there one of the things

that has kept us from going totally over

the edge. And by the way, there was no

SEC in 1929. None of these rules existed

in 1929. That's why one of the reasons I

think we had the deepest uh recession,

if you will, or depression we've ever

had. And so the the argument I would

make is you have to keep some of those

guardrails around. One of the things

we're doing right now is we're saying,

"Okay, we want to we want the public to

have access to private investments."

Well, private investments are great, and

it's true. If you had access to shares

of Uber or shares of Facebook before

they went public, you would have made a

fortune. The conundrum is that there's

not the same kind of disclosures that

are required with those private

companies. And if you look at most

venture capital firms right now, I would

argue there's some like mark to

bakeelieve situation that goes on every

day when you get the numbers because

it's not a real market yet.

>> And it's not that it's all going to go

wrong. It's that charlatans and frauds

and others emerge and the question is

how much protection do we want? Now,

it's interesting. Some people say to me,

Andrew, don't protect me. And by the

way, if you're trying to protect me,

what you're really doing is you're

protecting the man. I mean, like that's

the argument. you're protecting the man

cuz I want a shot. For years, we had

something called an accredited investor

rule. You had to have a million bucks to

invest in some of these things because

the argument was we didn't want people

who couldn't afford to to lose to lose.

Is that the right argument? I don't

know. But I think we have to start

thinking about this and talking about it

because this is not the conversation

that's happening in America right now.

So the the one of the other things

that's happening in our economy is um I

think unprecedented in American history.

Uh we are seeing companies uh kicking a

share of profits to the federal

government um outside of the normal tax

code. Uh we are seeing the federal

government take stakes in companies. Um

uh you did a recent long piece on this

and an episode of the daily talking

about this.

um h how do you think about whether you

want to call it state capitalism or or

some other phrase how do you think about

what's happening on that front

particular as we look at the broader

economy I want to come to specific

companies in a minute

>> so I don't think it's unprecedented

because it happens in Russia and China

every day

>> um it's unprecedented here

>> and I'm surprised that more people are

not raising their hand and saying hello

what's happening here this is a little

crazy um I think that

in the short term maybe it's not a

problem. In the long term, the idea of a

free market and the capitalism I think

we've all enjoyed, having the

government, I think, pick pick winners

and losers. This idea of of industrial

policy, nobody's doing these deals

genuinely because they want to. They're

doing these deals because they're being

coerced into doing them. Let's just call

a spade a spade. That is what is

happening. And I don't know what that

portends longer term in this country.

Now, by the way, the flip side is

China's been doing this for a very long

time. And by the way, it's been working

for them

most of the time in our country when

we've tried things like this, it hasn't

worked. Is there an example of where

we've tried it? Well, you could argue I

mean look, the Obama administration used

to get uh a lot of criticism for giving

money to Celindra, for example, or there

have been these instances where we have

subsidized, you know, EV uh plug-in

stations across the country.

>> That was a terrible waste of money. So,

there's been lots of things and where

we've had a piece of it. We historically

haven't taken pieces of companies unless

it was after a financial crisis. So, we

did this with the banks and by the way,

that did work. We did this with General

Motors. Um, and that did work to some

degree. So, but we haven't done it just

because we want some.

>> Okay.

>> And that's there's a bit of a mafioso

kind of thing like, hey, give me some.

Otherwise, if you don't give me some,

we're not going to let you do XYZ.

>> So, let me just play devil's advocate

for a moment because certainly I think

it's undeniable the president himself

would say some of this has been coercive

and and and proudly say so. Um, one

could argue, I mean, seriously, uh, but

one could argue that, you know, Jensen

is like, I want access to the Chinese

market. There are legitimate reasons for

us not to have it. There are legitimate

reasons for us to have it. Boy, if I

just sweeten the pot a little bit, I can

get access to the market. So, Mr.

President, what if we kick 15% of our

profits to to the federal government,

everyone wins and we'll only sell a

lower quality of chip to China? Like, is

that coercive or is that a CEO simply

playing the system? Oh, no. He's playing

a system, but I'm arguing that the

system is not right.

>> And what I'm suggesting is if if we have

a national security concern, we should

make the decision based on that, not

because we're getting paid off as the

taxpayer to do something that we would

otherwise not do. That that to me is the

fundamental question here about all of

these transactions. Are these deals that

we would otherwise do or not do? And

here's where it gets complicated over

time. So now we all of us in this room,

we own a stake in Intel. We should be

rooting for Intel. In truth, we should

be rooting hopefully for all American

companies. I would like to think, but we

now actually need to all root a little

bit more for Intel. Okay. So in the past

if Intel wanted to do a merger let's say

with another company that historically

the department of justice and um

regulators would look at a scance and

say we don't want that much

concentration that's not good for

consumers. Well how does that decision

now change

that the government and all of us are

taxpayers? It may be bad for consumers

but may be good for us. These are the

kinds of things that I don't think

unfortunately we're talking about in

terms of what the true implication of

these things could be.

Um the the the flip side um it it was

difficult for me to watch Tim Cook go

into the White House and hand a gift to

the president or to see Mark Zuckerberg

at a at a dinner with tech leaders

whispering to the president, I didn't

know what number you wanted me to say.

Right. Um uh the the

>> you say diff it was difficult for me

difficultite my words carefully. Yeah.

Um thank you. Um I'm being very careful

here. Um uh see by the way we're all

being very careful now. That's the other

thing. We're all being a little too

careful probably. But maybe not. I'm I'm

curious about your perspective on on two

things. Um and I want to go micro then

macro. micro uh you're the CEO of a

company that has the opportunity to uh

play to these tendencies of this

administration. Um uh but you know that

like long-term it's probably bad for the

the overall economy and for capitalism.

Um it feels like a collective action

problem almost like if you're the one

who doesn't do it your competition may

do it and they win.

>> What's a CEO to do right now

particularly when they're in a regulated

industry?

>> Okay. So, this is where I will probably

break with the other comments that I

made. I don't actually begrudge

Tim Cook or Jensen or any of the other

leaders of these companies that are

making deals with the government, even

though I think these deals are not in

the necessary long-term interest of the

country. Because the truth is, if you

are running a business today and you're

trying to play a long-term game, there's

very little advantage in raising your

hand right this moment politically and

saying, "I don't like what's happening

here." Because what exactly can you

change in this moment? Meaning, the

politics of this country are are clearly

almost lopsided in one one way in

Washington. nothing is going to be

adjusted as a result of you raising your

hand on your own.

Maybe the politics of the country change

after the midterms. I don't know. But I

think that raising your hand now only

means you're likely to get slaughtered

tomorrow. And so if you're trying to

play for the play for later, this

doesn't help. The question is when do

you raise your hand if you don't like

what's happening? And I think that is a

very big question. And I think there's a

lot of people who say, "Well, you need

to raise your hand now because if you

don't raise your hand now, by the time

you want to raise your hand, you won't

be able to."

>> I don't know if that's true, but I I'm

very cognizant of, look, we're living in

a world of trade-offs. Everything is a

trade-off. And I try in my own way as a

journalist to meet people where they

are, to put myself in their shoes, and

I'm at least I I hope that we're all

cognizant of what those tradeoffs look

like.

>> You you referenced Russia and China. I

want to reference Hungary. Okay. because

um it is a softer form of autocracy

effectively. Um and uh but but Victor

Orban has picked his winners and the

winners do very well and their

competition gets gets eliminated or

swallowed up by by the winners. Um uh

and so in my in my mind democracy and

capitalism are inextricably intertwined.

Like you cannot have a free market

without without democracy. Small D

democrat. Um am I am I right? Am I wrong

about that?

I think generally you're right about it.

But then I look again, it's a very

strange thing to say. I look at China

and China's been one heck of a success

story and they've done it a completely

different way. And so you tell me where

things really are. I don't know long

term. And and by the way, AI could

change all of this. That's the other

that's the other piece of this that I

just don't know. Are we on the cusp of

something that's so revolutionary that

it upends even the way we think about

capitalism and free markets?

>> Yeah. Um I I want to go back to uh the

crash and the depression because coming

out of the great depression uh we saw

unprecedented social change in America.

Um when when you look at the history and

you look at today, what gives you

optimism about the next phase of this

future that that we're going to be

building?

Well,

look, I do think and this is sort maybe

it's Polyiana to say, but I think that

for the most part when we do have these

sort of inflections, um, amazing things

come out of it. By the way, look at the

end of 99. You could say there was a

crash, terrible thing happened, and then

an explosion. So, it's not to say that,

you know, we're going to go off the

cliff and then we end up at the at the

bottom of the some ravine somewhere.

>> I do think we do learn our lessons. It's

just a little bit more painful than we'd

like the lessons to be.

>> Yeah,

>> that that's really where I land. And I'm

optimistic that

we as a collective

have found ways almost invariably. You

know, there is a mother of invention

that happens in these moments. And I and

I think we will find our way to the

other side of the, you know, the other

side of the cliff, if you will. Um I I

um uh other side of the chasm. Hopefully

we'll get over it. Yeah. Um I I want to

I want to close on this. Um

>> one of the things that I was struck by

in the book is was the relationship

between journalists and the baronss of

the era. Um and so putting your

journalist hat back on.

>> Um

>> how's journalism doing covering what's

happening?

That's That's my slice backhand.

>> Yeah. Yeah. Yeah. Yeah. Yeah. Yeah.

>> Look, I actually think right now that

journalism is doing a pretty good job. I

do. And I and I would say I would say

journalism capital J but big tent. I

think we now know more than we've ever

known before.

>> I really do believe that. I know that

everybody thinks that journalism and

legacy journalism is dying and maybe it

is. I don't think that's true. But I

think we now have more inputs than we've

ever had before in real time. I think

it's more complicated. I think the other

component thing that's a component part

of journalism and our society that's

shifted is that everybody in this room

has become their own journalist. This is

actually to me the biggest shift that's

taken place over the last decade or two,

which is to say 20 years ago, we all

went to one or two or three different

media sources and that was our diet of

how we learned about what was going on.

And I think we believed what we were

what we were reading. Today, it's very

different. We might go to five or six or

seven or 10 different sources and

knowingly go to places um and to

writers and to speakers and to other

sources that we may not that we know may

not be accurate

>> or at least completely accurate, but we

think that there's a a grain of truth in

it and we're all searching for our own

truth. Now, that's a complicated

situation. And so I think that there's

journalism which is trying to get at

truth, but then there's a public that's

that has almost shifted the way it

thinks about that truth. And I think

that ultimately right now is the

greatest challenge that at least what

I've done historically at professionally

faces.

The book is 1929.

Thank you.

Thanks again to Andrew Rosskin for

joining us again. And the book is 1929

and it's available everywhere you find

books. Make sure you check out Masters

of Scale on YouTube to watch more videos

from our fantastic speakers and really

riveting conversations at our summit.