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Ladies and gentlemen, welcome to
the Business Brew. 

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I am your host, Bill Brewster. 
This one is a banger. 

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John Maxfield from Maxfield on 
Banks joins the show. 

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We'll drop a couple links in the
show notes. 

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I'm just going to say what I 
said to him at the end of it. 

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I didn't know if this would be 
entertaining or not. 

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I was a little bit like John's, 
some dude that likes Banks. 

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He might be kind of nerdy. 
This guy has got personality. 

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He's got substance. 
I enjoyed talking to him, I 

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cried laughing listening or 
talking to him. 

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So I hope you all enjoy it. 
I don't think that there's any 

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disclaimers that are needed, but
just in case, nothing in this 

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program is financial advice. 
Consult your financial advisor 

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before making investment 
decisions. 

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This is for entertainment 
purposes only. 

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Don't do anything stupid. 
Read all the SEC filings. 

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You know the drill. 
Do your own due diligence. 

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And that's all I got. 
Before this music drops, I do 

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want to give a shout out to my 
editing team at Speech Docs. 

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You can find them on Twitter at 
Speech and Docs's Docs. 

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Dax and his team are fantastic. 
All I can say is that Dax and 

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his team offer incredibly good 
value, and I very much 

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appreciate what they do on the 
back end of the show. 

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So if you are somebody who is 
thinking about starting a 

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podcast, please consider Dax and
his team at Speech Docs. 

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That's SPEECHDOCS. 
Ladies and gentlemen, joined by 

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John Maxfield. 
Maxfield on Banks. 

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If you don't know him, you 
should know him and you're going

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to know him after this. 
And I was fortunate enough John 

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sent me some of his background 
work and a link to some of his 

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presentations. 
And I am glad that I did the 

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prep work because I think John 
is a an interesting personality 

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with interesting thoughts and 
probably the guy that loves 

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banking the most. 
Is that fair to say? 

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That's probably nobody has said 
that ever, but that may be true.

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Actually, Bill, I think that, 
yeah. 

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I mean you just basically like 
developed a love for banking out

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of nothing. 
Right. 

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I mean, life is what we make of 
it. 

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I'm like creative guy, but also 
pretty analytical. 

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And so like, I approach banking 
as an art, you know what I mean?

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And so like it's about 
storytelling because it's 

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through stories that you teach, 
you know what I mean? 

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Stories stick in people's heads.
And so like, I like to tell 

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stories and I like to play with 
ways to tell stories, whether 

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it's in writing, whether it's 
videography, all the different 

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ways. 
And so that that's kind of kind 

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of what I do. 
All right. 

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A story I do want to tell 
because I want to get into the 

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periodization stuff that we were
talking about offline before we 

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started recording, but the story
that I was watching right before

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we hopped on the mic. 
Do you mind talking a little bit

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about the commonalities of 
really great bankers? 

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You were talking about AP 
Giannini saw his dad get shot 

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and you know, that died with 
$550,000 in his bank account. 

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And, and it seems to me that a 
lot of the, a lot of the bankers

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had trauma in their life or grew
up in, in tough circumstances. 

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So if you could riff on that, I 
think that's a good story to 

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hook people in. 
Yeah. 

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So the thing to note about 
banking is that the supply and 

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demand dynamics in banking are 
opposite the supply and demand 

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dynamics in other businesses. 
And that's because the demand 

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for like a car or, you know, a 
pair of shoes or whatever it is,

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there's an there's a limit to 
how much somebody's going to 

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buy. 
Even if you reduce the price to 

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like $1.00 for Mercedes, like 
I'd buy 5I love Mercedes, OK, 

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but I would still only buy 5. 
Credit is a completely different

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animal, right? 
You are a banker, you know that 

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if you drop the terms and the 
rates low enough, right? 

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And you ease up on those terms, 
the demand for credit is 

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literally infinite, right? 
And so that means that the 

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people that run these 
institutions, that it is 

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incumbent upon them to throttle 
their growth. 

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The market won't throttle your 
growth, which is the traditional

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way growth is throttled in other
businesses, right? 

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In banking, it is upon you to 
throttle your own growth. 

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And so then you have to start 
digging into and you have to 

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say, OK, like what are the 
characteristics that enable 

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bankers to throttle their own 
growth? 

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And I say they need to throttle 
their own growth because what 

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you see is in the cycles in 
banking on the upswing, it's the

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banks that grow the fastest and 
kind of drink their own kool-aid

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that then crash on the other 
side. 

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And so you have to say, OK, 
well, what is it about a banker 

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or a person that enables them to
operate in that environment to 

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throttle their own growth? 
And so you think like, OK, that 

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is very opposed to how the 
normal human is, right? 

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We've all read all the 
behavioral science studies, 

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right? 
The marshmallows, we want one 

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marshmallow now, not 2 
marshmallows tomorrow. 

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You know what I mean? 
Like we know how that that the 

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brain works. 
And so you have to actually find

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brains that work in a different 
way, kind of like a Warren 

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Buffett type of brain, right? 
And so then you say, well, OK, 

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where do those brains come from?
OK. 

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And in my opinion, in my 
research, they come from two 

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different places. 1 you can be a
part of the lucky gene pool, a 

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Jamie Dimon, right, A Bill 
Dimcheck, the brilliant just, 

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but just part of the lucky gene 
pool. 

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Now Jamie also grew up in an 
environment where his father was

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good friends with Sandy Weill 
and then he went and worked 

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Sandy Weill. 
So he was also in an environment

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where that was, he was 
conditioned to be excellent, 

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right. 
But the other place where I have

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found extraordinary bankers or 
what enables a banker to get to 

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that place is some sort of acute
tragedy of hardship early in 

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their life. 
It is amazing when you go around

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and you look at the performance 
of banks throughout the entire 

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country and then you'd kind of 
like, you know, big, small, 

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north-south, East, West, AG 
banks, business banks, retail 

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banks, whatever it is. 
When you look at all those 

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different banks and you say, OK,
what is the commonality here? 

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There is no statistical 
significant commonality in the 

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quantitative metrics that ties 
them all together. 

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So then you have to step into 
the kind of the subjective realm

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and say, what is it about these 
people? 

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And it is this what it seems to 
be some element of tragedy of 

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hardship or early in their life,
which steals them later on in 

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life to make the right decisions
because everybody's going to be 

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pressuring them to grow fast. 
Their employees are going to 

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pressure them to grow fast. 
Their shareholders, their 

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everybody is right, even 
themselves. 

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So they have to have that 
fortitude to say no. 

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And that is where I believe that
fortitude comes from. 

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One, especially 2 if you're 
public and other other bank 

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stocks that are growing faster 
going up higher than yours and 

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they may not be reserving as 
much, but you kind of, yeah, 

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that is a lot of pressure. 
Yeah. 

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And it's a negative art, right. 
I I like the story that you told

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there was, I want to say it's a 
Chicago bank, but I could be 

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wrong. 
There was one bank that had a 

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bunch of earnings and then 
basically went bankrupt 

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overnight and the guy was trying
to collect. 

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He hung himself in his client's 
house, and his client owed him 

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$17 million. 
But the guy was a plumber. 

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Yeah. 
So that yeah, right. 

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Like that's a. 
Great kind of clients that you 

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can get. 
Yeah, that I mean like a plumber

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is lives in a has got a $17 
million credit line. 

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You know what I mean? 
Let me tell you a, a story that 

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really gets right down to this, 
OK. 

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Richard Davis, good friend of 
mine, he was the former chairman

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and CEO of U.S. bank, the 5th 
largest bank in the country. 

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This guy is absolutely 
phenomenal. 

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I mean, a, a true prodigy, 
mathematical prodigy also just 

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like a, a really, really special
guy. 

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Well, early on in his life and 
he was an AVP at a bank in 

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Southern California called 
Security Pacific. 

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It was one of the big Southern 
California banks that eventually

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folded into what became today's 
Bank of America. 

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And he was over at his parents 
house with his wife and kids the

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night before Thanksgiving. 
It was like in 1988, I think. 

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And the toilet in the house was 
broken and it was like dripping.

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And Richard says to his father, 
he says, let me go down to the 

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hardware store, get the piece, 
I'll come back and fix it real 

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quick. 
And his dad says, no, get the 

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kids home. 
You know, I'll take care of it. 

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We'll see you tomorrow for 
dinner. 

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So Richard and his wife packed 
with the kids up in the car. 

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They drive across Los Angeles to
their house. 

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They get home. 
The phone is ringing as soon as 

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they walk in the door and they 
pick it up. 

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Hello, It's his parents, 
neighbors. 

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And they say, get to the 
hospital. 

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Something happens to your 
father. 

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So Richard and Teresa, they drop
their kids off at their 

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neighbors. 
They rushed the hospital. 

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By the time Richard and Teresa 
got to the hospital, this father

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had passed away. 
And what at the time, Richard 

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was like an AVP, which there 
weren't very many AV PS at a 

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bank that size. 
So he was already a kind of a 

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big deal. 
But then he went on to become 

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one of the greatest bankers of 
all time as the CEO of U.S. 

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bank. 
He came out and spoke after one 

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of those meetings in the White 
House. 

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He was the banker that came out 
and spoke. 

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And I was up there visiting one 
time after, after he has retired

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as CEO and I was because I 
wanted to figure out like, how 

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is this guy like so amazing? 
The performance of the bank is 

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amazing. 
He's amazing. 

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He had like 100% on like, you 
know, whatever that, what's 

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that, that website where you 
gauge employ your employers. 

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What's that called? 
Oh, Glassdoor. 

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Glassdoor. 
Yeah, he like 99% approve on 

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Glassdoor. 
So I'm up there and we're I 

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spend 2 days with him and we're 
going through all these 

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questions and we take a break. 
And he's the Co chairman of the 

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Super Bowl committee in 
Minneapolis that year because 

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they had just built U.S. bank 
Stadium and they're going to 

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have the Super Bowl in that. 
And so he's like, well, let's 

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just go around and I'll walk you
through the skyways. 

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The you know, like the, you 
know, all those, you know, 

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things like those bridges that 
the internal bridge or the 

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indoor bridges that connect all 
the buildings in Minneapolis 

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because it's so cold. 
Well, they're all glass. 

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And so he's like, what we'll do 
is I'll walk you around, I'll 

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show you where all the stuff for
the Super Bowl is going to be. 

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And I'm like, that sounds like a
great idea, Richard. 

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And so we go around, he's like, 
you know, that's where the the 

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ski jump, fake ski jump is going
to be. 

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The Dallas Cowboy cheerleader is
going to dance over that, you 

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know, all that kind of stuff, 
you know? 

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And we come across a young lady 
and her parents. 

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I didn't know that her parents 
were as we're walking across one

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of these skyways and she comes 
up and, oh, Mr. Davis. 

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And he's like, oh, and I don't 
remember what her name was, but 

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he did. 
And she's like 24 years old. 

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She's young, OK, young. 
OK. 

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So he comes up and she's like, 
oh, well, these are my parents. 

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And he turns on her parents. 
And it was one of the most 

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amazing things I've ever seen in
my entire life. 

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Like the distance at which he 
stood, the tilt of his body, 

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like the level of his voice, how
he was making eye contact with 

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him. 
And he just tells him, you 

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should be so proud of your 
daughter. 

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She is such an asset to this 
bank. 

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We are so lucky to have her. 
This is one of the finest 

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bankers in all of America. 
Telling a 24 year old who knows 

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what she did at the bank, You 
know how she probably just 

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started. 
Do you know what I mean? 

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It's a people. 
Business though, it's a people 

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business and I'm watching the 
continents on these people's 

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faces and I'm like, these people
are never going to forget this. 

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I mean, this is a gift that like
they'll remember till till the 

225
00:11:09,320 --> 00:11:11,840
very end. 
And so I was like, where did he 

226
00:11:11,840 --> 00:11:14,280
learn this? 
So I go and I call his wife. 

227
00:11:14,280 --> 00:11:16,640
I said, Teresa, where did 
Richard figure that out? 

228
00:11:17,080 --> 00:11:19,040
You know what I mean? 
What an amazing gift that is 

229
00:11:19,040 --> 00:11:21,560
because when I was watching it, 
I'm like, this is how he built 

230
00:11:21,560 --> 00:11:22,960
that bank. 
Yeah. 

231
00:11:23,320 --> 00:11:25,440
This is how we built that bank, 
you know what I mean? 

232
00:11:25,440 --> 00:11:26,680
How you get employees to love 
you. 

233
00:11:27,080 --> 00:11:29,560
How you get employees to love 
you and do hard works too, all 

234
00:11:29,760 --> 00:11:32,320
these different things, you 
know, and she says, well, tell 

235
00:11:32,320 --> 00:11:34,400
let me tell you a story. 
And she told that story about 

236
00:11:34,400 --> 00:11:36,640
his father. 
And she said, and so because 

237
00:11:36,640 --> 00:11:41,240
what happened is after they 
left, his then father walked one

238
00:11:41,240 --> 00:11:45,120
block down the street to a 
shopping center where there's a 

239
00:11:45,120 --> 00:11:48,040
hardware store. 
And he went in and he has, he's 

240
00:11:48,040 --> 00:11:50,920
walking across that street, he's
hit by a truck and killed 

241
00:11:50,920 --> 00:11:53,120
instantly, a hit and run driver.
I don't think they ever found 

242
00:11:53,120 --> 00:11:56,360
the guy. 
And what's Teresa's point was 

243
00:11:56,360 --> 00:12:00,360
that Richard always wants 
parents to have the opportunity 

244
00:12:00,360 --> 00:12:04,560
to be proud of their children. 
That is one of his core beliefs.

245
00:12:04,800 --> 00:12:07,640
And so on his employees 
birthdays, if he knows about 

246
00:12:07,640 --> 00:12:11,440
them, he calls their parents. 
Oh wow, it's interesting. 

247
00:12:11,480 --> 00:12:12,600
I don't know that I would like 
that. 

248
00:12:12,600 --> 00:12:17,080
I'd be like you don't want. 
To call my parents, some of us. 

249
00:12:17,080 --> 00:12:20,520
But The thing is that like that 
is where that comes from. 

250
00:12:20,640 --> 00:12:23,800
And I could tell you stories 
like that about two dozen 

251
00:12:23,800 --> 00:12:26,360
bankers. 
And here's the next. 

252
00:12:26,360 --> 00:12:28,520
Let me tell you one last piece 
of this story that I love. 

253
00:12:28,520 --> 00:12:34,880
OK, so a couple years later 
after I hear this story, I'm in 

254
00:12:34,880 --> 00:12:38,080
Los Angeles and I'm like, I'm 
going to go down to where his 

255
00:12:38,080 --> 00:12:40,400
parents house was and I'm going 
to walk that walk. 

256
00:12:40,520 --> 00:12:41,800
You know what I mean? 
Yeah. 

257
00:12:42,120 --> 00:12:46,240
And so I go down there and I 
park in front of their old house

258
00:12:46,360 --> 00:12:49,880
and I walk down the block and I 
walk across the street into the 

259
00:12:49,880 --> 00:12:52,560
shopping center and I look 
around and there's no hardware 

260
00:12:52,560 --> 00:12:54,640
store. 
And I'm like, OK, so I go on. 

261
00:12:54,640 --> 00:12:56,680
I'm asking people, do you know 
if there's a hardware store and 

262
00:12:56,680 --> 00:12:59,000
there's like these are like 18 
year old kids working at like 

263
00:12:59,000 --> 00:13:00,600
Dollar General? 
They're like, they're like, no, 

264
00:13:00,600 --> 00:13:02,600
dude. 
Get lost bro, like we're going 

265
00:13:02,600 --> 00:13:04,600
to call the. 
Police, get out of your boomer. 

266
00:13:04,920 --> 00:13:09,360
Yeah. 
And so like, I finally rented to

267
00:13:09,400 --> 00:13:12,760
an older woman and she's like 75
years old. 

268
00:13:12,760 --> 00:13:15,200
She's like a hairdresser. 
And I said, ma'am, do you know 

269
00:13:15,200 --> 00:13:17,320
if there there's a hardware 
store here, if there ever was 

270
00:13:17,320 --> 00:13:18,800
one? 
And she said, yes, there was 

271
00:13:18,800 --> 00:13:21,200
one. 
I said, well, do you know where 

272
00:13:21,200 --> 00:13:23,320
it was? 
And she said, yeah. 

273
00:13:24,000 --> 00:13:26,560
And there it's one of those 
strip malls where it's in an L 

274
00:13:26,760 --> 00:13:29,720
And then there's a detached 
thing like where like 

275
00:13:29,720 --> 00:13:31,600
restaurants, kind of like a 
Chili's, you know what I mean, 

276
00:13:31,600 --> 00:13:34,480
would be. 
And she said, she's right over 

277
00:13:34,480 --> 00:13:35,600
there. 
And I turn around. 

278
00:13:37,160 --> 00:13:39,160
It's a motherfuking U.S. bank 
branch. 

279
00:13:39,720 --> 00:13:42,800
Oh wow. 
Yeah, wow. 

280
00:13:43,360 --> 00:13:47,480
There. 
You go, yeah, that is that is 

281
00:13:47,480 --> 00:13:49,680
sick. 
My first boss. 

282
00:13:49,680 --> 00:13:52,320
Shout out to Erica Coleman if 
she's listening. 

283
00:13:52,360 --> 00:13:56,320
She was fantastic with with 
clients just like knew everybody

284
00:13:56,840 --> 00:13:59,360
and grew up in investment 
banking. 

285
00:13:59,360 --> 00:14:03,120
So knew how to cover industries 
and knew who to connect, how to 

286
00:14:03,120 --> 00:14:05,720
connect them, what everybody 
needed, what the right 

287
00:14:05,720 --> 00:14:07,880
facilities were. 
I mean, it would I like when you

288
00:14:07,880 --> 00:14:11,480
talk positively about bankers, I
think that too often people have

289
00:14:11,480 --> 00:14:13,960
a negative association of 
banking and it's because they're

290
00:14:13,960 --> 00:14:17,880
focused on investment banks or 
and even I mean, investment 

291
00:14:17,880 --> 00:14:19,880
banks have an important role, 
but you know, sort of the 

292
00:14:19,880 --> 00:14:21,800
banking blow ups. 
And I don't think that they're 

293
00:14:21,800 --> 00:14:24,600
thinking about like the true 
grease of the economy and what 

294
00:14:24,600 --> 00:14:27,480
banks really do. 
I had another guy, Mark 

295
00:14:27,480 --> 00:14:30,000
Pressler, that took me under his
wing for a bit and he said our 

296
00:14:30,000 --> 00:14:32,800
job is to make our clients as 
rich as possible while 

297
00:14:32,800 --> 00:14:36,280
protecting the bank's capital. 
And I thought that that was a 

298
00:14:36,280 --> 00:14:38,240
pretty good way of saying it. 
Yeah. 

299
00:14:38,240 --> 00:14:39,640
Just got to remember the second 
part. 

300
00:14:40,360 --> 00:14:43,640
In, in, in banking, there's that
natural tension between revenue 

301
00:14:43,640 --> 00:14:46,560
and risk, you know what I mean? 
That is really, really acute. 

302
00:14:46,560 --> 00:14:49,960
And it's the the those who 
balance that, that do the best 

303
00:14:49,960 --> 00:14:52,680
over the long term, obviously. 
Yeah, it's tough. 

304
00:14:52,720 --> 00:14:56,640
It's tough to have a deal at the
end and then like, you know, 

305
00:14:56,640 --> 00:15:00,600
somebody else gets stupid on 
terms and you can't do it. 

306
00:15:00,600 --> 00:15:03,600
But over the long term, you 
know, in five years when that 

307
00:15:03,600 --> 00:15:05,400
bank's not there, you get 
another bite at the apple. 

308
00:15:05,400 --> 00:15:08,360
But it's tough to swallow that 
in the moment. 

309
00:15:09,160 --> 00:15:11,400
Well, and the other thing kind 
of to your point about like 

310
00:15:11,720 --> 00:15:13,720
society has a perception of 
bankers. 

311
00:15:13,720 --> 00:15:17,600
And I've read contemporary 
materials on banking going back 

312
00:15:17,600 --> 00:15:18,600
to the beginning of this 
country. 

313
00:15:18,600 --> 00:15:22,720
And it's always been this case, 
that case, except for very brief

314
00:15:22,720 --> 00:15:25,840
periods of time where kind of 
bankers are treated like 

315
00:15:25,840 --> 00:15:29,040
celebrities. 
And what you find is that really

316
00:15:29,040 --> 00:15:31,280
kind of the thrust of the 
argument against bankers is that

317
00:15:31,280 --> 00:15:34,040
they're greedy fat cats who are 
just intent on making money off 

318
00:15:34,040 --> 00:15:35,880
of other people's money. 
You know what I mean? 

319
00:15:35,880 --> 00:15:38,560
But the reality is that when you
meet these people, they are 

320
00:15:38,560 --> 00:15:42,040
literally like the finest people
in the country. 

321
00:15:42,040 --> 00:15:46,080
Like you go to any small town, 
any medium sized town, and you 

322
00:15:46,080 --> 00:15:48,680
go to any of those charitable 
organizations and you look at 

323
00:15:48,680 --> 00:15:51,040
the people who are moving and 
shaking them on those boards. 

324
00:15:51,320 --> 00:15:54,720
They're like 9 times out of 10, 
their bankers are on those 

325
00:15:54,720 --> 00:15:56,200
boards and they're major 
players. 

326
00:15:56,480 --> 00:15:58,360
So they do so much for their 
communities. 

327
00:15:58,360 --> 00:16:01,120
And then you think about like 
you drive into a small town, you

328
00:16:01,120 --> 00:16:03,840
go to the main intersection that
the what's the only two-story 

329
00:16:03,840 --> 00:16:05,120
building in the town? 
It's a bank. 

330
00:16:05,760 --> 00:16:07,280
Yeah. 
Do you know what I mean? 

331
00:16:07,280 --> 00:16:12,280
And so like these things, like 
money matters a lot. 

332
00:16:12,480 --> 00:16:15,240
You know, people pretend like 
maybe it doesn't matter, like 

333
00:16:15,240 --> 00:16:16,600
you get rich, you shouldn't care
about money. 

334
00:16:16,600 --> 00:16:19,840
No, no, no, money matters a lot.
Do you know what I mean? 

335
00:16:20,120 --> 00:16:24,720
This is the bankers who can 
really responsibly take control 

336
00:16:24,720 --> 00:16:27,600
of that money, make an enormous 
difference in their communities.

337
00:16:28,040 --> 00:16:31,280
Yeah, yeah, that's right. 
And, and and that's how, I mean,

338
00:16:31,280 --> 00:16:33,560
that's how people just dreams 
get financed, you know, and 

339
00:16:33,560 --> 00:16:36,840
that's how they employ people. 
And I don't know, it's an 

340
00:16:36,840 --> 00:16:38,960
immensely important industry. 
What was? 

341
00:16:39,000 --> 00:16:40,320
I. 
Shoot, I was thinking of 

342
00:16:40,320 --> 00:16:43,400
something. 
Oh, well, let's go into the 

343
00:16:43,400 --> 00:16:45,920
periodization thing and then 
I'll come back to my thought 

344
00:16:46,400 --> 00:16:47,800
that escaped. 
All right. 

345
00:16:48,160 --> 00:16:51,880
So, so you want to describe sort
of without the graphs, it can be

346
00:16:51,880 --> 00:16:53,960
kind of tough. 
I can link to your presentation 

347
00:16:53,960 --> 00:16:56,880
in in case people want to see. 
But to the extent that we can 

348
00:16:56,880 --> 00:16:59,120
talk about it, maybe that's a 
good place. 

349
00:17:00,600 --> 00:17:04,480
So let me start here. 
SO ever since that we were 

350
00:17:04,480 --> 00:17:06,720
talking about this earlier, but 
ever since I was a child, I've 

351
00:17:06,720 --> 00:17:08,760
gone subject matter by subject 
matter in my life. 

352
00:17:08,760 --> 00:17:12,880
And what I do is I study them. 
I, I, I totally concentrate 

353
00:17:12,880 --> 00:17:15,280
myself in the literature. 
I study them until I'm able to 

354
00:17:15,280 --> 00:17:19,079
reduce them to a simple, single,
simple underlying principle that

355
00:17:19,079 --> 00:17:21,160
is robust enough to explain 
everything that happens in that 

356
00:17:21,160 --> 00:17:23,359
environment. 
And so I was doing, I've done 

357
00:17:23,359 --> 00:17:25,280
this with a whole bunch of 
different topics, high Mountain,

358
00:17:25,440 --> 00:17:28,560
High Mountain, High altine, 
mountaineering, geopolitics, 

359
00:17:28,920 --> 00:17:31,920
certain elements of physics, all
sorts of stuff, hard stuff, easy

360
00:17:31,920 --> 00:17:34,920
stuff, all sorts of stuff. 
And so when I came upon banking 

361
00:17:34,920 --> 00:17:37,520
in 2008, when the financial 
crisis said, I thought, I don't 

362
00:17:37,560 --> 00:17:40,080
know very much about this and, 
and I would like to know more. 

363
00:17:40,440 --> 00:17:43,400
I figured it would probably take
me like 6 months a year to do 

364
00:17:43,400 --> 00:17:45,840
what I did in these other 
subject matters because banking,

365
00:17:46,360 --> 00:17:49,200
it may be hard, but it is not 
complicated, particularly if 

366
00:17:49,200 --> 00:17:53,560
it's done right. 
OK, but I was reading dozens of 

367
00:17:53,560 --> 00:17:56,800
books, hundreds of books, and 
then going through all the data,

368
00:17:57,240 --> 00:17:59,760
aggregating data sets to go back
all the way to the beginning. 

369
00:18:00,040 --> 00:18:02,680
And then I built a network of 
the finest CE OS in this 

370
00:18:02,680 --> 00:18:04,040
country. 
And I don't go and just ask them

371
00:18:04,040 --> 00:18:07,160
like a journalist, like some 
lame questions for a story. 

372
00:18:07,160 --> 00:18:10,320
We spend days together and we 
talk about philosophy and all 

373
00:18:10,320 --> 00:18:13,280
sorts of things, you know? 
And so I'd gone through all this

374
00:18:13,280 --> 00:18:15,360
and I still couldn't reduce 
banking in the same way. 

375
00:18:15,360 --> 00:18:18,480
And I was like, this, this 
doesn't make any sense. 

376
00:18:19,080 --> 00:18:22,080
And So what you realize is that 
when you study subject matters, 

377
00:18:22,080 --> 00:18:25,320
there's an invisible scaffolding
that exists behind every subject

378
00:18:25,320 --> 00:18:27,040
matter. 
And it's the same exit, 

379
00:18:27,040 --> 00:18:29,960
invisible scaffolding. 
And if the scaffolding works, 

380
00:18:30,000 --> 00:18:31,400
you can. 
And you know, you know the 

381
00:18:31,400 --> 00:18:33,600
scaffolding, it's easy to climb 
your way up to the top 

382
00:18:33,600 --> 00:18:36,840
relatively quickly, OK. 
But if the scaffolding is 

383
00:18:36,840 --> 00:18:39,160
broken, you get off in the wrong
place, OK. 

384
00:18:39,920 --> 00:18:42,200
And what there's different 
pieces to the scaffolding, but 

385
00:18:42,200 --> 00:18:45,200
one of the pieces is this 
historical vertical. 

386
00:18:45,680 --> 00:18:48,560
If you want to master a subject 
matter, you've got to master the

387
00:18:48,560 --> 00:18:50,920
history of it. 
But if you want to master the 

388
00:18:50,920 --> 00:18:53,760
history of a subject matter like
banking that is like 230 years, 

389
00:18:53,760 --> 00:18:55,800
like thousands of banks and all 
these different things 

390
00:18:55,800 --> 00:18:59,160
happening, the only way you can 
do it is if you simplify it. 

391
00:18:59,480 --> 00:19:01,840
And the way you simplify it in 
this context is called 

392
00:19:01,840 --> 00:19:04,000
periodization. 
So you break the subject matter 

393
00:19:04,000 --> 00:19:08,160
down into periods or eras, OK, 
like the Roman Empire era, the 

394
00:19:08,160 --> 00:19:11,240
Ottoman Empire era, right? 
That in the context of banking, 

395
00:19:11,960 --> 00:19:16,440
what you choose to be, the thing
that switches from one era to 

396
00:19:16,440 --> 00:19:18,960
another era is really, really 
important. 

397
00:19:19,240 --> 00:19:22,800
And done right, the most elegant
periodization is 1, where it's 

398
00:19:22,800 --> 00:19:26,320
the same thing that switches all
the different, all the errors 

399
00:19:26,320 --> 00:19:29,640
through time, right? 
It's that same simple underlying

400
00:19:29,640 --> 00:19:32,400
principle, right? 
So I was going through the 

401
00:19:32,400 --> 00:19:35,720
scholars and I had the data, and
the scholars were saying that 

402
00:19:36,040 --> 00:19:39,440
the thing that causes errors to 
switch from 1:00 to another is 

403
00:19:39,480 --> 00:19:42,840
in my terms, in my words, the 
presence or absence of a central

404
00:19:42,840 --> 00:19:45,480
bank like authority. 
And so you go back to time, and 

405
00:19:45,480 --> 00:19:49,000
then you take that period, OK. 
And but then you take those data

406
00:19:49,000 --> 00:19:51,320
sets that I build and you take 
them all the way back, and you 

407
00:19:51,320 --> 00:19:53,200
layer those two things on top of
each other. 

408
00:19:53,560 --> 00:19:56,440
You put the periodization on top
of the charts, the Seminole 

409
00:19:56,440 --> 00:19:58,360
charts. 
And what you find is that the 

410
00:19:58,360 --> 00:20:01,520
two don't match. 
And So what I mean is that like 

411
00:20:01,920 --> 00:20:04,680
there'll be a, there's a like in
the population of bank, the bank

412
00:20:04,680 --> 00:20:07,760
population chart, there's this 
huge run up that starts in 1879 

413
00:20:07,960 --> 00:20:10,800
and then peaks out in 1921 and 
then drops down because there's 

414
00:20:10,800 --> 00:20:14,080
a bunch of failures in the 20s 
and the Great Depression, the 

415
00:20:14,080 --> 00:20:17,000
periodization that the scholars 
had was ran right in the middle 

416
00:20:17,000 --> 00:20:20,200
of that big run up. 
So it didn't explain it, right. 

417
00:20:20,440 --> 00:20:22,200
So you're not explaining the 
cycles. 

418
00:20:22,560 --> 00:20:26,040
So then once I realized the 
periodization was wrong, then it

419
00:20:26,040 --> 00:20:28,400
was just a matter of going back 
and figuring out what the right 

420
00:20:28,400 --> 00:20:30,880
thing was. 
And in the in the course of 

421
00:20:30,880 --> 00:20:33,200
figuring out that right thing is
how I was able to reduce it to 

422
00:20:33,200 --> 00:20:35,440
the simple kind of underlying 
principle that that I've been 

423
00:20:35,440 --> 00:20:38,240
seeking. 
So, so there's a period in there

424
00:20:38,240 --> 00:20:41,920
called the free banking area or 
free banking era that you refer 

425
00:20:41,920 --> 00:20:43,400
to. 
What was that like? 

426
00:20:44,920 --> 00:20:47,160
OK. 
So the free banking era, if you 

427
00:20:47,160 --> 00:20:50,080
think about what makes the 
banking industry today, there 

428
00:20:50,080 --> 00:20:54,000
are some really big important 
players within the top one or 

429
00:20:54,000 --> 00:20:57,320
two is Andrew Jackson. 
Because what we had is early in 

430
00:20:57,320 --> 00:21:00,560
the country, we had two central 
banks, central bank like 

431
00:21:00,560 --> 00:21:02,800
authorities, the First United 
Bank of the United States and 

432
00:21:02,800 --> 00:21:04,160
the Second Bank of the United 
States. 

433
00:21:04,160 --> 00:21:06,080
They're both based in based in 
Philadelphia. 

434
00:21:07,400 --> 00:21:10,320
Those were basically like 
political gifts given to 

435
00:21:10,320 --> 00:21:14,280
friends, OK, those charters. 
And like, that was the same 

436
00:21:14,280 --> 00:21:15,880
thing with like the Bank of New 
York. 

437
00:21:15,880 --> 00:21:19,480
That was Alexander Hamilton, 
then Barr, then, you know, like,

438
00:21:19,560 --> 00:21:23,240
so like those those were given 
as political like favors. 

439
00:21:23,520 --> 00:21:25,880
Andrew Jackson was like, well, 
I'm done with this. 

440
00:21:26,040 --> 00:21:30,040
Like we're going to democratize 
banking and allow anybody to 

441
00:21:30,040 --> 00:21:35,600
open a bank if they want, OK. 
And so he comes in in 1836 and 

442
00:21:35,600 --> 00:21:38,720
does not he, he, the Congress 
renews the charter of that 

443
00:21:38,720 --> 00:21:41,200
second bank, but then he vetoes 
it. 

444
00:21:41,400 --> 00:21:44,960
So that bank goes away. 
So now there's a just open 

445
00:21:45,200 --> 00:21:48,000
season for people all over the 
country. 

446
00:21:48,080 --> 00:21:50,960
And this is while we're 
expanding westward and there's 

447
00:21:50,960 --> 00:21:53,520
these huge real estate bubbles 
going on with these westward 

448
00:21:53,520 --> 00:21:56,120
expansion. 
So as this is happening, all 

449
00:21:56,120 --> 00:22:00,160
these banks are opening up, 
expanding westward to finance 

450
00:22:00,160 --> 00:22:01,480
these people coming in on the 
railroad. 

451
00:22:01,600 --> 00:22:04,840
Sure, right. 
But what they would do is this 

452
00:22:04,840 --> 00:22:07,800
is back in the day when banks 
would actually issue currency, 

453
00:22:08,880 --> 00:22:11,880
OK, but you'd have to have your 
currency backed by bonds, state 

454
00:22:11,880 --> 00:22:14,280
bonds typically. 
So what these banks would do, 

455
00:22:14,280 --> 00:22:16,240
they're they're called Wildcat 
banks. 

456
00:22:16,520 --> 00:22:19,360
They would take. 
So you they would have a bank 

457
00:22:19,360 --> 00:22:22,240
and they would base it in like 
Detroit, which back in the day 

458
00:22:22,240 --> 00:22:24,400
was just a swamp. 
And they do. 

459
00:22:24,400 --> 00:22:27,080
I have an unlimited amount of 
currency that I can issue. 

460
00:22:27,200 --> 00:22:28,760
I mean, it's got to be backed by
bonds. 

461
00:22:28,760 --> 00:22:32,080
So what, I hold the bonds and 
then I can issue the currency 

462
00:22:32,080 --> 00:22:34,320
and I assume there's some sort 
of fractional reserve? 

463
00:22:34,800 --> 00:22:37,120
There's a ratio. 
Exactly. 

464
00:22:37,120 --> 00:22:39,680
There's a ratio. 
Well, but what you do is you 

465
00:22:39,680 --> 00:22:42,320
have these Wildcat banks. 
You put a bank way out in the 

466
00:22:42,320 --> 00:22:45,440
woods, right? 
And then you you issue that 

467
00:22:45,440 --> 00:22:48,880
currency into, say, a large 
metropolitan area, so that 

468
00:22:48,880 --> 00:22:51,280
currency never gets back for 
redemption. 

469
00:22:52,840 --> 00:22:54,160
Oh do. 
You see what I'm saying? 

470
00:22:54,320 --> 00:22:57,040
And So what you find is that 
you'll have these banks that are

471
00:22:57,040 --> 00:22:59,760
issuing these currencies in 
these far off cities that the 

472
00:22:59,760 --> 00:23:02,920
examiners or whoever's looking 
after the banks in these smaller

473
00:23:02,920 --> 00:23:04,720
towns have no idea what's going 
on. 

474
00:23:04,880 --> 00:23:07,240
So you'll have like these some 
of these banks failed and 

475
00:23:07,240 --> 00:23:12,880
they'll have like $10 in assets 
versus like $100 in liabilities.

476
00:23:12,880 --> 00:23:15,040
I mean, it was like that kind of
situation. 

477
00:23:16,120 --> 00:23:19,480
And what, they were just taking 
salary out the whole time or 

478
00:23:19,480 --> 00:23:22,720
something like they weren't 
doing it for the equity to go 

479
00:23:22,720 --> 00:23:24,160
up? 
No, no. 

480
00:23:24,160 --> 00:23:26,880
So what they're doing is you 
arbitrage they're they're 

481
00:23:26,880 --> 00:23:28,880
effectively. 
So here's another really 

482
00:23:28,880 --> 00:23:30,840
interesting thing. 
So let's say you and I wanted to

483
00:23:30,840 --> 00:23:34,400
start a bank in this time and 
you and I, we need $10 million 

484
00:23:34,400 --> 00:23:36,360
for capital, right? 
And you've got let's say 

485
00:23:36,360 --> 00:23:39,360
1,000,000 and I've got maybe a 
million, OK, like we have 

486
00:23:39,360 --> 00:23:40,640
2,000,000. 
Where are we going to get the 

487
00:23:40,640 --> 00:23:42,920
other 8 million? 
Well, me and Bill just decide 

488
00:23:42,920 --> 00:23:45,680
that the bank we're about to 
found is going to lend us the 

489
00:23:45,680 --> 00:23:48,400
money to found it. 
Hell of a deal, right? 

490
00:23:48,520 --> 00:23:51,440
And so you are borrowing money 
from the bank that you are found

491
00:23:51,440 --> 00:23:53,440
isn't even found. 
You're bootstrapping your way 

492
00:23:53,440 --> 00:23:55,600
up, right. 
And So what you're doing in that

493
00:23:55,600 --> 00:23:59,400
situation is you're arbitraging 
the interest that you have to 

494
00:23:59,400 --> 00:24:02,320
pay to the bank on those on 
you're borrowing versus the 

495
00:24:02,320 --> 00:24:03,600
dividends the bank is paying 
you. 

496
00:24:04,160 --> 00:24:08,840
So here's what's interesting. 
OK, what that let bankers to do 

497
00:24:08,840 --> 00:24:11,520
at the time was what you go get 
higher yielding securities. 

498
00:24:12,080 --> 00:24:14,280
They were limited with their 
charges because of the state 

499
00:24:14,280 --> 00:24:17,760
legislation that they could only
buy state backed bonds or 

500
00:24:17,760 --> 00:24:20,360
federal bonds. 
Well, what were the best 

501
00:24:20,360 --> 00:24:24,160
yielding bonds in the 1850s? 
In particular, bonds from 

502
00:24:24,160 --> 00:24:26,040
Confederate, what became 
Confederate states. 

503
00:24:26,680 --> 00:24:30,680
And so like you had Indiana, 
Illinois, Ohio, like Illinois in

504
00:24:30,680 --> 00:24:34,160
1861, you see this humongous 
spike in bank failures and you 

505
00:24:34,160 --> 00:24:36,360
think like, oh, that's because 
of Fort Sumter. 

506
00:24:36,360 --> 00:24:38,720
And then the Union Army went 
down and whooped some butt in 

507
00:24:38,720 --> 00:24:40,160
the South and like all those 
banks failed. 

508
00:24:40,240 --> 00:24:45,920
No, in 1861, the humongous spike
was northern banks that were 

509
00:24:45,920 --> 00:24:49,200
holding Southern bonds to 
maximize that arbitrage. 

510
00:24:49,200 --> 00:24:51,840
And then when Fort Sumter hit 
those southern bonds like 

511
00:24:51,840 --> 00:24:55,080
Missouri, Tennessee, Georgia, 
they literally overnight fell 

512
00:24:55,080 --> 00:24:56,360
50%. 
Huh. 

513
00:24:56,360 --> 00:24:58,400
Wiped them all out. 
Literally wiped almost every 

514
00:24:58,400 --> 00:25:00,920
bank in Illinois out immediately
after Fort Sumter hit. 

515
00:25:01,240 --> 00:25:02,080
It's crazy. 
Interesting. 

516
00:25:02,440 --> 00:25:04,400
Yeah, Huh. 
Yeah. 

517
00:25:04,400 --> 00:25:07,040
Well, that's credit it. 
It's all going well until it 

518
00:25:07,040 --> 00:25:09,960
doesn't go well. 
Everything is fine until it 

519
00:25:09,960 --> 00:25:11,440
isn't. 
That's right then. 

520
00:25:11,440 --> 00:25:15,760
Then you better hope that your 
your LGD is not too bad, which 

521
00:25:15,760 --> 00:25:18,720
in that case it was it. 
Was 100%. 

522
00:25:19,360 --> 00:25:22,680
Yeah. 
So, So what do you so where are 

523
00:25:22,680 --> 00:25:24,840
we now? 
I I mean, I know that that's 

524
00:25:24,840 --> 00:25:27,640
kind of like where are we now? 
Where are we going? 

525
00:25:27,640 --> 00:25:30,200
Is kind of what I'm what I'm 
thinking. 

526
00:25:31,280 --> 00:25:35,000
So very good question. 
So let's go back to 

527
00:25:35,000 --> 00:25:37,600
periodization real quick because
that that will make it very 

528
00:25:37,600 --> 00:25:41,000
clear where we're at. 
So what you found is that the 

529
00:25:41,000 --> 00:25:43,720
thing that causes these big 
changes in the curves are what I

530
00:25:43,720 --> 00:25:47,400
call novel liquidity flows. 
So when a ton of liquidity flows

531
00:25:47,400 --> 00:25:49,840
into a system and it can flow 
into a system from one of two 

532
00:25:49,840 --> 00:25:53,200
ways through the ground like a 
geyser money creation or from 

533
00:25:53,200 --> 00:25:55,560
another system, IE Europe. 
OK. 

534
00:25:56,080 --> 00:25:59,240
So like a bunch of money that 
big run up that we saw between 

535
00:25:59,240 --> 00:26:03,120
1879 and 1921, that was a 
function of capital coming in 

536
00:26:03,280 --> 00:26:06,880
from Europe, new liquidity 
coming in from Europe to finance

537
00:26:07,280 --> 00:26:10,120
the growth of the United States 
because the trade patterns had 

538
00:26:10,120 --> 00:26:13,480
switched that year from 
basically a century of perpetual

539
00:26:13,480 --> 00:26:16,000
deficits to a century of 
perpetual surpluses. 

540
00:26:16,240 --> 00:26:19,120
So you're thinking, think about 
all that money that you're 

541
00:26:19,120 --> 00:26:22,600
reversing the flow of huge flows
of money, You know what I mean? 

542
00:26:23,120 --> 00:26:25,080
And so you look at that and you 
think like, OK, well, that's 

543
00:26:25,080 --> 00:26:28,280
really interesting. 
And one of the things you see is

544
00:26:28,320 --> 00:26:31,040
after every major novel 
liquidity surge, there is 

545
00:26:31,040 --> 00:26:33,440
something that falls, and I call
them liquidity destruction 

546
00:26:33,440 --> 00:26:36,360
events, because what you see is 
all this money comes in and you 

547
00:26:36,360 --> 00:26:38,560
have your goods and services. 
So it gets totally out of whack,

548
00:26:39,000 --> 00:26:40,280
right? 
And the system is trying to 

549
00:26:40,280 --> 00:26:41,960
bring it back. 
That's why inflation does what 

550
00:26:41,960 --> 00:26:43,960
inflation does, right? 
Is is trying to bring it up like

551
00:26:43,960 --> 00:26:46,320
this, right? 
But you can't inflate that fast 

552
00:26:46,320 --> 00:26:48,640
over one year, you know, you got
to kind of slowly inflate, 

553
00:26:48,680 --> 00:26:52,080
right? 
And So what you see is that when

554
00:26:52,080 --> 00:26:55,800
that money comes in, the way you
kind of bring it back into 

555
00:26:55,840 --> 00:26:58,280
equilibrium is these liquidity 
destruction events. 

556
00:26:58,280 --> 00:27:00,840
And there's two particularly 
effective liquidity destruction 

557
00:27:00,840 --> 00:27:02,960
events. 
First is a bank failure, and the

558
00:27:02,960 --> 00:27:05,360
second is a stock market crash. 
They just light liquidity on 

559
00:27:05,360 --> 00:27:09,320
fire, right? 
And so now if you think about 

560
00:27:09,320 --> 00:27:11,560
bank history, that's how you can
think about it. 

561
00:27:11,880 --> 00:27:14,680
Novel liquidity surge, liquidity
destruction events, novel 

562
00:27:14,680 --> 00:27:16,960
liquidity surge, liquidity 
destruction events, novel 

563
00:27:16,960 --> 00:27:18,800
liquidity surge, liquidity 
destruction events. 

564
00:27:19,040 --> 00:27:21,040
That explains the entire history
of banking. 

565
00:27:21,240 --> 00:27:23,200
So now, where does that put us 
today? 

566
00:27:23,920 --> 00:27:26,200
So what we found is we had the 
novel liquidity surge in the 

567
00:27:26,200 --> 00:27:29,880
1870s that ultimately ended up 
in the Great Depression. 

568
00:27:29,880 --> 00:27:32,400
And then we had this period of 
like, basically nothing is 

569
00:27:32,400 --> 00:27:34,600
happening in the industry 
because everybody's so afraid 

570
00:27:34,600 --> 00:27:36,800
from another Great Depression. 
And we just gone through World 

571
00:27:36,800 --> 00:27:39,360
War 2, so this period called the
Great Moderation. 

572
00:27:39,360 --> 00:27:41,680
But then that all changes in 
1973. 

573
00:27:42,240 --> 00:27:46,080
There's a huge surge of current 
of liquidity into the system in 

574
00:27:46,080 --> 00:27:48,120
an unusual way. 
That was really the 

575
00:27:48,120 --> 00:27:50,920
proliferation of the euro dollar
market and euro dollars, 

576
00:27:50,920 --> 00:27:54,360
although they are ostensibly 
dollars, U.S. dollars that are 

577
00:27:54,360 --> 00:27:57,360
unrepatriated, that's so they 
just exist out in the ether and 

578
00:27:57,360 --> 00:27:58,920
they're not included in our 
money supply. 

579
00:27:59,280 --> 00:28:03,640
The reality is that while those 
dollars are in foreign banks, 

580
00:28:03,800 --> 00:28:06,680
they tend to be in foreign banks
branches in New York better than

581
00:28:06,680 --> 00:28:09,120
lending that money into our 
economy. 

582
00:28:09,360 --> 00:28:12,920
So unbeknownst to us, there's 
basically a a surreptitious 

583
00:28:12,920 --> 00:28:16,920
doubling on the money supply in 
the 1970s, OK, as a result of 

584
00:28:16,920 --> 00:28:20,040
the changing trade patterns as a
result of the oil crises in the 

585
00:28:20,040 --> 00:28:23,720
1970s, OK. 
And so that leads that whole 

586
00:28:23,720 --> 00:28:27,120
thing, OK, That leads into the 
1980s, all those liquidity 

587
00:28:27,120 --> 00:28:28,840
destruction events. 
There are four major banking 

588
00:28:28,840 --> 00:28:30,640
crises. 
Then you have a CRE crisis in 

589
00:28:30,640 --> 00:28:33,400
the early 90s. 
But then that that liquidity 

590
00:28:33,400 --> 00:28:36,320
destruction or that that novel 
liquidity surge doesn't end 

591
00:28:36,360 --> 00:28:40,800
until the financial crisis of 
2008, that change in trade 

592
00:28:40,800 --> 00:28:43,480
patterns into the 70s that 
caused the financial crisis of 

593
00:28:43,480 --> 00:28:47,080
2008. 
So then after 2008, people like 

594
00:28:47,080 --> 00:28:49,920
me were like, they're not very 
many people like me, thank God. 

595
00:28:50,240 --> 00:28:53,720
But like we were like, well, are
we in the old era? 

596
00:28:53,720 --> 00:28:56,320
Are we in the new era? 
Or are we in purgatory? 

597
00:28:56,320 --> 00:28:57,600
And This is why I don't have any
friends. 

598
00:28:57,600 --> 00:28:58,920
But that's neither that's beside
the point. 

599
00:28:59,640 --> 00:29:02,440
You really don't want to sit 
around and talk about that. 

600
00:29:03,720 --> 00:29:07,760
Like literally nobody cares. 
Most of all my wife. 

601
00:29:07,760 --> 00:29:10,480
She cares the least. 
Your banker friends care. 

602
00:29:11,200 --> 00:29:14,400
Exactly. 
Anyways, So we're all so like a 

603
00:29:14,400 --> 00:29:16,400
guy, like, I'm sitting like, 
what does this mean? 

604
00:29:16,400 --> 00:29:19,960
Because, like, the system had 
like, expended all that excess 

605
00:29:19,960 --> 00:29:22,240
liquidity. 
So where are we at now? 

606
00:29:22,560 --> 00:29:23,800
Yeah. 
And so we had all that 

607
00:29:23,800 --> 00:29:25,360
deflation. 
Remember that, all that kind of 

608
00:29:25,360 --> 00:29:27,720
stuff. 
Then what happens in 2020? 

609
00:29:28,400 --> 00:29:30,680
COVID hits. 
That fiscal and monetary 

610
00:29:30,680 --> 00:29:33,120
response is enormous. 
It is the largest novel 

611
00:29:33,120 --> 00:29:35,040
liquidity surge in the history 
of the United States by a 

612
00:29:35,040 --> 00:29:37,360
significant margin. 
If you look at the response to 

613
00:29:37,360 --> 00:29:39,520
the financial, the government's 
response to financial crisis is 

614
00:29:39,520 --> 00:29:42,160
like this. 
The response to COVID crisis is 

615
00:29:42,160 --> 00:29:44,280
like this. 
Yeah, it's that big. 

616
00:29:44,560 --> 00:29:46,680
And So what did we see 
immediately after the novel? 

617
00:29:46,680 --> 00:29:49,360
Liquidity surge. 
Liquidity destruction events. 

618
00:29:49,920 --> 00:29:53,000
Bank failures. 
Yeah. 

619
00:29:53,320 --> 00:29:57,800
But but in aggregate, we haven't
seen that many, right? 

620
00:29:57,840 --> 00:30:02,880
I mean, it's not what we got 
First Republic Silicon Valley, 

621
00:30:03,200 --> 00:30:06,280
but like things were pretty OK 
after that, right? 

622
00:30:06,280 --> 00:30:08,600
And the liquidity just went 
somewhere else. 

623
00:30:09,520 --> 00:30:11,960
The stock market's got a ton of 
flows. 

624
00:30:12,800 --> 00:30:16,840
The only reason that things went
OK is because the potency of the

625
00:30:16,840 --> 00:30:18,520
government's response to those 
banks. 

626
00:30:18,840 --> 00:30:22,120
Yeah, only reason. 
So that kind of gone. 

627
00:30:23,000 --> 00:30:28,600
That kind of makes me wonder are
are we like in in questions that

628
00:30:28,600 --> 00:30:32,080
are unanswerable? 
Do you think that that we are 

629
00:30:32,360 --> 00:30:37,240
trending towards a period where 
institutions are a little less 

630
00:30:37,240 --> 00:30:39,720
trusted and therefore the 
government won't be able to 

631
00:30:39,720 --> 00:30:42,960
respond as well? 
Or is, or have we sort of 

632
00:30:42,960 --> 00:30:49,560
learned as an economy that these
kind of responses are necessary 

633
00:30:49,560 --> 00:30:51,200
and they're going to be 
ingrained in the way that we 

634
00:30:51,200 --> 00:30:54,880
live? 
It's kind of like Mike Tyson's 

635
00:30:54,880 --> 00:30:58,760
like saying like everyone has a 
plan until they get punched in 

636
00:30:58,760 --> 00:31:02,360
the face, you know what I mean? 
Everybody has these ideas about 

637
00:31:02,360 --> 00:31:05,080
what they are and are not going 
to do in a financial crisis in 

638
00:31:05,080 --> 00:31:07,240
terms of government response. 
And when the financial crisis 

639
00:31:07,240 --> 00:31:08,520
hits, they all just do the same 
thing. 

640
00:31:08,800 --> 00:31:10,560
That's they always just throw 
everything at it. 

641
00:31:10,560 --> 00:31:11,760
And that's what we want them to 
do. 

642
00:31:11,760 --> 00:31:14,400
We don't want a Great 
Depression, you know what I 

643
00:31:14,400 --> 00:31:18,360
mean? 
So like I whether in, in periods

644
00:31:18,360 --> 00:31:19,800
like that, it doesn't really 
matter. 

645
00:31:19,920 --> 00:31:22,320
There's rational thought of 
suspended anyways, you know what

646
00:31:22,320 --> 00:31:23,520
I mean? 
These people are just pouring 

647
00:31:23,520 --> 00:31:26,960
stuff in. 
So I, you know, I, I would say 

648
00:31:26,960 --> 00:31:31,560
it wouldn't change that. 
Now there are, we are seeing 

649
00:31:31,560 --> 00:31:34,600
question, you know, like there 
are questions about the 

650
00:31:34,600 --> 00:31:37,280
integrity of these institutions,
all institutions right now in 

651
00:31:37,280 --> 00:31:38,360
the country, you know what I 
mean? 

652
00:31:38,360 --> 00:31:40,800
So you know, there's going to be
a little bit of that shaking out

653
00:31:40,800 --> 00:31:42,640
for everyone. 
Yeah, Yeah. 

654
00:31:42,640 --> 00:31:43,680
Well, that's kind of what I 
wonder. 

655
00:31:43,680 --> 00:31:47,760
I mean, it just seems like, and,
and maybe it is the global 

656
00:31:47,760 --> 00:31:52,280
savings glut thesis, but it, it 
just seems to me like there's so

657
00:31:52,360 --> 00:31:57,960
much liquidity and so many flows
into the US that I, it's like a 

658
00:31:58,560 --> 00:32:00,600
tidal wave that I don't know 
when it'll stop. 

659
00:32:01,520 --> 00:32:03,200
And if you look at like have you
heard the red those? 

660
00:32:03,200 --> 00:32:04,360
I don't know that you want it to
stop. 

661
00:32:04,360 --> 00:32:07,160
For the record, I mean the the 
fun times are fun. 

662
00:32:07,160 --> 00:32:10,840
I mean. 
But, you know, things that can't

663
00:32:10,840 --> 00:32:12,320
go on forever don't go on 
forever. 

664
00:32:12,320 --> 00:32:15,440
No doubt, no doubt. 
You and I both know that we 

665
00:32:15,440 --> 00:32:17,040
can't predict the future. 
You know what I mean? 

666
00:32:17,240 --> 00:32:19,240
We're both, we're both 
comfortable with that. 

667
00:32:19,320 --> 00:32:22,600
But what I will say is that 
there's so much liquidity out 

668
00:32:22,600 --> 00:32:27,680
there looking for places to go 
that are, you know, you can earn

669
00:32:27,680 --> 00:32:33,200
a decent return that like if 
things get even marginally bad, 

670
00:32:34,080 --> 00:32:36,280
that money floods in. 
You know what I mean? 

671
00:32:36,680 --> 00:32:39,320
Particularly in real estate. 
I mean, I have tons of people, I

672
00:32:39,520 --> 00:32:41,160
know tons of people who are 
investments are in real estate, 

673
00:32:41,160 --> 00:32:42,960
like they would love to be 
buying deals, you know what I 

674
00:32:42,960 --> 00:32:44,240
mean? 
If there's, if they're a good 

675
00:32:44,240 --> 00:32:47,000
price, because balance sheets 
across this country look 

676
00:32:47,000 --> 00:32:51,200
fantastic because of PPP. 
I mean, they still look good 

677
00:32:51,200 --> 00:32:53,720
because of PPP, which is an 
interesting thing. 

678
00:32:53,720 --> 00:32:56,240
A friend of mine asked the other
day, he's like, since why 

679
00:32:56,240 --> 00:32:59,960
haven't we seen an enormous rise
in corporate defaults or 

680
00:32:59,960 --> 00:33:03,920
commercial defaults since the 
rates jumped 500 basis points? 

681
00:33:04,320 --> 00:33:06,680
And the reason is that 
ordinarily that would be a 

682
00:33:06,680 --> 00:33:09,560
problem, but these balance 
sheets can absorb so much more 

683
00:33:09,560 --> 00:33:11,520
right now. 
Yeah, well, the government's 

684
00:33:11,520 --> 00:33:13,280
balance sheet is the one that 
doesn't look good, no. 

685
00:33:13,600 --> 00:33:15,840
No, that's a fair statement. 
Yeah. 

686
00:33:15,840 --> 00:33:20,200
But we, but we just transferred 
it, I feel like interesting. 

687
00:33:20,200 --> 00:33:25,280
So there is this interesting 
dynamic that is going on that on

688
00:33:25,280 --> 00:33:30,880
one hand, I think banks should 
be in a position to lend as 

689
00:33:30,880 --> 00:33:34,400
aggressively as ever and make 
safe loans in part because of 

690
00:33:34,400 --> 00:33:36,160
the balance sheets that you 
alluded to. 

691
00:33:36,680 --> 00:33:38,840
And on the other, you have the 
growth of private credit. 

692
00:33:39,360 --> 00:33:43,120
And I'm kind of curious how 
people that you talk to think 

693
00:33:43,120 --> 00:33:48,360
about why that industry has 
grown in the way it has and 

694
00:33:48,360 --> 00:33:50,800
whether or not banks are 
hamstrung in certain ways. 

695
00:33:51,960 --> 00:33:54,320
You, you answered your question 
with the last with your last 

696
00:33:54,320 --> 00:33:55,880
point. 
I mean that's how bankers feel. 

697
00:33:55,880 --> 00:33:59,160
Bankers feel like in a lot of 
these areas they cannot compete 

698
00:33:59,160 --> 00:34:02,400
competitively because of the 
regulations that they face that,

699
00:34:02,400 --> 00:34:04,720
that the non that like kind of 
the shadow banks Oregon, like 

700
00:34:04,720 --> 00:34:07,720
the non banks financial 
institutions don't face that. 

701
00:34:07,720 --> 00:34:08,920
That's what a banker would tell 
you. 

702
00:34:09,440 --> 00:34:13,120
Yeah. 
And I mean, we believe that to 

703
00:34:13,120 --> 00:34:15,960
be the truth, yeah. 
I believe that to be the truth, 

704
00:34:16,000 --> 00:34:17,199
yes. 
OK. 

705
00:34:17,639 --> 00:34:21,280
Because what triggered some of 
our like, I think what got us 

706
00:34:21,280 --> 00:34:26,280
talking is I had commented about
the Andreessen pod and you would

707
00:34:26,280 --> 00:34:30,280
sort of given your take. 
And it's interesting to me that 

708
00:34:30,280 --> 00:34:37,080
banks feel like they cannot 
lend, but we are somehow OK 

709
00:34:37,080 --> 00:34:41,679
with, I don't know if the right 
term is like a neo bank or a 

710
00:34:41,679 --> 00:34:44,800
rent a bank or I mean, now 
there's, I don't even know 

711
00:34:44,800 --> 00:34:47,480
what's going on in crypto. 
I probably should, but I don't. 

712
00:34:47,920 --> 00:34:50,440
It's just interesting how many 
things are popping up around 

713
00:34:50,440 --> 00:34:54,600
banks that are taking share from
the traditional lending market. 

714
00:34:55,719 --> 00:34:57,760
I guess in theory you could say,
well, they don't have the 

715
00:34:57,760 --> 00:35:00,000
fractional reserve risk, right? 
They're not as levered. 

716
00:35:00,000 --> 00:35:01,800
So if the risk is there, it's 
fine. 

717
00:35:02,240 --> 00:35:05,120
But I'm just kind of, I find it 
interesting. 

718
00:35:06,160 --> 00:35:07,400
I don't know how I feel about 
it. 

719
00:35:08,360 --> 00:35:10,880
I don't know how I feel about it
either, other than that, that 

720
00:35:10,880 --> 00:35:12,600
what I would tell you is that 
this has always been the case. 

721
00:35:12,920 --> 00:35:16,080
There's always been always, 
always, always, always, always, 

722
00:35:16,080 --> 00:35:17,440
always, always going back to 
being there. 

723
00:35:17,760 --> 00:35:21,120
The trust companies in the late 
1800s, then you had like MMA 

724
00:35:21,120 --> 00:35:23,280
accounts and all these other 
things that are popping up in 

725
00:35:23,280 --> 00:35:26,800
the United 70s and 80s. 
And like it's this has always 

726
00:35:26,800 --> 00:35:28,280
been the case. 
There's always been, you know, 

727
00:35:28,280 --> 00:35:31,000
people kind of nipping on you 
kind of on the perimeter, you 

728
00:35:31,000 --> 00:35:33,040
know what I mean? 
Because it's such an incredible 

729
00:35:33,040 --> 00:35:35,440
business if it's done right. 
I mean, the thing that you need 

730
00:35:35,440 --> 00:35:39,480
to understand about banking is 
that you cannot be too 

731
00:35:39,480 --> 00:35:42,040
ambitious, OK? 
You cannot be too ambitious. 

732
00:35:42,040 --> 00:35:44,560
And that comes straight from the
word the mouth of Renee Jones, 

733
00:35:44,560 --> 00:35:47,880
who's the CEO of M&T Bank, which
is like IT and Glacier are the 

734
00:35:47,880 --> 00:35:49,760
two best performing banks of all
time, OK. 

735
00:35:50,360 --> 00:35:55,920
And what I mean by that is that,
like if you try to earn 20% on 

736
00:35:55,920 --> 00:35:58,840
your equity, you can earn 20% on
your equity. 

737
00:35:59,840 --> 00:36:03,120
Like then you're going to earn 
0% or -10% at some point and 

738
00:36:03,120 --> 00:36:05,200
then those FDIC is going to take
you over. 

739
00:36:05,840 --> 00:36:10,240
The, the good banker takes his 
12% happily and goes and golfs 

740
00:36:10,240 --> 00:36:11,560
at three. 
I mean, that's a little bit of 

741
00:36:11,560 --> 00:36:14,320
an exaggeration, but they take 
it, you know what I mean? 

742
00:36:14,320 --> 00:36:16,840
They just take their 12%. 
They know that the market 

743
00:36:16,840 --> 00:36:19,920
overall returns 8 to 9 percent 
on an annualized basis over a 

744
00:36:19,920 --> 00:36:22,560
long time. 
So they know that a 12% return 

745
00:36:22,560 --> 00:36:27,000
on equity is nothing to shake a 
stick at and not and nothing to 

746
00:36:27,000 --> 00:36:30,240
risk by pushing for a few more 
basis points by taking on a 

747
00:36:30,240 --> 00:36:32,440
bunch of risk with a highly 
leveraged institution. 

748
00:36:32,920 --> 00:36:37,040
Yeah, yeah, that makes sense. 
And I, I do think there is merit

749
00:36:37,040 --> 00:36:40,520
to saying like, look, if if 
private credit is full of junkie

750
00:36:40,520 --> 00:36:44,160
loans, but it's only whatever 1 
1/2 times levered, that's a 

751
00:36:44,160 --> 00:36:46,680
whole lot better than having it 
in a bank that's 10 times 

752
00:36:46,680 --> 00:36:49,840
levered or with the famous 
Buffett quote, what it that was 

753
00:36:49,840 --> 00:36:53,360
20 times levered, right. 
So right, you can, you can have,

754
00:36:53,360 --> 00:36:56,080
I don't know, I don't know, I 
guess you, you can have the risk

755
00:36:56,080 --> 00:36:58,960
elsewhere and not have a 
contagion issue I think. 

756
00:36:59,560 --> 00:37:01,480
There is. 
There's an interesting story 

757
00:37:01,480 --> 00:37:04,920
that overlaps these two right 
now, and that's Sofi. 

758
00:37:04,920 --> 00:37:08,040
I don't know how much you 
followed them and I didn't know.

759
00:37:08,840 --> 00:37:12,600
Dude, feel free to educate me. 
The community of investors that 

760
00:37:12,840 --> 00:37:16,240
I mean, they are like rabid, the
Sofi investors, they're that 

761
00:37:16,360 --> 00:37:19,240
they're like, they are rabidly 
in favor of like Anthony Noto 

762
00:37:19,240 --> 00:37:22,720
and Sofi and stuff like that. 
And so I would just, I was asked

763
00:37:22,720 --> 00:37:24,480
to be on a podcast to talk about
Sofi. 

764
00:37:24,520 --> 00:37:26,400
And so I come at it from a 
traditional bank perspective. 

765
00:37:26,400 --> 00:37:28,160
So I was looking at it and I'm 
thinking like, Oh my God, this 

766
00:37:28,160 --> 00:37:31,200
looks like a tinderbox. 
I mean, how they're getting 

767
00:37:31,200 --> 00:37:33,480
their funds, what they're 
lending on, their lack of 

768
00:37:33,480 --> 00:37:35,400
experience doing any of it they 
haven't been through. 

769
00:37:35,440 --> 00:37:37,160
I mean, it looks the rate of 
growth. 

770
00:37:37,240 --> 00:37:39,960
It looked to me, and I could be 
totally wrong. 

771
00:37:40,200 --> 00:37:44,080
It looks completely bonkers. 
Oh, I thought that you were 

772
00:37:44,080 --> 00:37:45,400
going to say. 
I thought that you were going to

773
00:37:45,400 --> 00:37:46,960
be like. 
And then I look deeper and now I

774
00:37:46,960 --> 00:37:49,360
don't think so. 
But yeah, I mean, gross 

775
00:37:49,400 --> 00:37:52,000
financial institutions in 
general are not where you want 

776
00:37:52,000 --> 00:37:54,160
to play, I don't think. 
Yeah. 

777
00:37:54,160 --> 00:37:56,560
And so you have these like you 
have this one that's kind of 

778
00:37:56,560 --> 00:37:59,200
like doing the fintech stuff, 
but with the charter and 

779
00:37:59,200 --> 00:38:02,000
growing. 
I mean, so 5 stadium, I mean, 

780
00:38:02,000 --> 00:38:04,280
this is not an old company and 
they're big enough to, I mean, 

781
00:38:04,280 --> 00:38:07,720
like, you know, yeah, I I hope 
the best for them. 

782
00:38:07,720 --> 00:38:11,520
But like, it's. 
Do you understand how that 

783
00:38:11,560 --> 00:38:13,720
doesn't end poorly? 
Yeah. 

784
00:38:14,480 --> 00:38:17,800
Well, it's probably going to. 
Well, I mean, what's their 

785
00:38:17,800 --> 00:38:20,000
market cap now? 
This is going to be a huge 

786
00:38:20,000 --> 00:38:22,680
company that I know nothing 
about, thankfully. 

787
00:38:23,160 --> 00:38:25,520
It's like if you asked me if I 
could avoid poison, I'd be fine 

788
00:38:25,520 --> 00:38:29,400
with it. 18 billion? 
I don't know. 

789
00:38:30,400 --> 00:38:32,600
Geez. 
What are they, what are they, 

790
00:38:32,600 --> 00:38:33,800
what are they, what are they 
trading at? 

791
00:38:34,520 --> 00:38:39,560
Well, I I only have earnings up 
91 times, so you know. 

792
00:38:39,800 --> 00:38:41,600
Does it say what they're trading
to for book? 

793
00:38:42,160 --> 00:38:44,560
I'm going to pull it up. 
I don't have it up right now, 

794
00:38:44,560 --> 00:38:47,760
but I mean it's got to be 5-6 
times, don't you think? 

795
00:38:49,200 --> 00:38:51,040
And my guess? 
Is it's, it's a healthy margin. 

796
00:38:51,360 --> 00:38:56,400
Yeah, that's wild. 
Hey, I don't know, let me not to

797
00:38:56,400 --> 00:38:59,080
not to derail this, but like 
there's another really 

798
00:38:59,080 --> 00:39:01,520
interesting bank that like your 
viewers are probably your 

799
00:39:01,520 --> 00:39:03,240
listener I'd be really 
interested in. 

800
00:39:03,520 --> 00:39:07,480
What is does Sofi do anything 
unique that you think that 

801
00:39:07,480 --> 00:39:11,880
you've been able to figure out 
other than alternate a good 

802
00:39:11,880 --> 00:39:14,320
shareholder base? 
They started as basically a 

803
00:39:14,320 --> 00:39:18,160
monoline student lender, student
loan company, and now they've 

804
00:39:18,160 --> 00:39:22,480
gone into more general consumer 
lending, you know, loss given 

805
00:39:22,480 --> 00:39:25,880
defaults on consumer loans, non 
secured consumer loans, They're 

806
00:39:25,880 --> 00:39:29,280
high, you know what I mean? 
And so they're a huge portion of

807
00:39:29,280 --> 00:39:30,880
their portfolios. 
Now that and then they have some

808
00:39:30,880 --> 00:39:33,520
mortgage products that they 
portfolio but like I'll. 

809
00:39:34,280 --> 00:39:37,640
Tell you what the forward price 
to book is only 2.8. 

810
00:39:37,640 --> 00:39:40,600
Of course you got to believe the
reserves and the quality of the 

811
00:39:40,600 --> 00:39:43,280
book, but that's right, That's 
that. 

812
00:39:43,720 --> 00:39:46,800
Yeah, a bank's balance sheet is 
not shelved in the non fiction 

813
00:39:46,800 --> 00:39:50,440
section, You know what I mean? 
Well, it isn't. 

814
00:39:50,480 --> 00:39:52,240
You go to the fiction section to
find that thing. 

815
00:39:52,640 --> 00:39:55,120
Yeah, it is until it isn't. 
OK, I didn't mean to cut you 

816
00:39:55,120 --> 00:39:56,640
off, but that that's the answer 
there. 

817
00:39:57,000 --> 00:39:58,640
But have you heard about 
triumph? 

818
00:39:59,200 --> 00:40:02,000
No, I haven't. 
I haven't covered financials in 

819
00:40:02,000 --> 00:40:03,840
a bit. 
I I sort of outsource that for a

820
00:40:03,840 --> 00:40:06,360
bit. 
Listen to this story so good 

821
00:40:06,360 --> 00:40:09,000
friend of mine runs his name is 
Aaron Graft randomly we went to 

822
00:40:09,400 --> 00:40:12,160
we both did the law school in 
Texas even he went to Baylor. 

823
00:40:12,160 --> 00:40:13,680
I went to SMU. 
He was two years ahead of me. 

824
00:40:14,000 --> 00:40:17,440
I interviewed with him at a he 
was at a law firm as a young 

825
00:40:17,440 --> 00:40:19,800
associate and he interviewed me 
and then we met like years 

826
00:40:19,800 --> 00:40:20,760
later. 
I was like, you were the one 

827
00:40:20,760 --> 00:40:23,880
that interviewed me. 
Anyways, so he goes and he buys 

828
00:40:23,880 --> 00:40:26,600
these. 
He was in 2006, he quit law. 

829
00:40:26,600 --> 00:40:28,200
He didn't want to be a lawyer 
any longer. 

830
00:40:28,200 --> 00:40:31,720
So and he bought these 
commercials in college. 

831
00:40:32,000 --> 00:40:34,400
He borrowed money from this 
famous banker, Ross McKnight and

832
00:40:34,400 --> 00:40:36,800
built this apartment building, 
this apartment complex. 

833
00:40:37,200 --> 00:40:38,960
And then he decided I want to 
stay in real estate. 

834
00:40:39,120 --> 00:40:42,680
But so then what he was doing is
he, he was buying bad deals out 

835
00:40:42,680 --> 00:40:45,680
of CMBSS, fixing them up and 
then selling them. 

836
00:40:45,680 --> 00:40:47,800
He did it three times and made 
1,000,000 bucks each time or 

837
00:40:47,800 --> 00:40:50,120
something like that. 
Financial crisis hits. 

838
00:40:50,440 --> 00:40:53,200
He can no longer compete because
now you have like the oak trees 

839
00:40:53,200 --> 00:40:55,880
and stuff like that, the black 
zones, the big ones coming in, 

840
00:40:55,880 --> 00:40:58,000
the big money coming in to buy 
up that kind of stuff, right? 

841
00:40:58,840 --> 00:41:00,880
And but he has boosted up his 
company because he thought they 

842
00:41:00,880 --> 00:41:02,280
had figured it out. 
So he's got all these people, 

843
00:41:02,280 --> 00:41:04,240
he's got to pay. 
He's got to figure out like how 

844
00:41:04,240 --> 00:41:06,360
to make that happen. 
So he decides, well, like, I 

845
00:41:06,360 --> 00:41:08,920
need a more permanent supply of 
capital, so I'm going to buy a 

846
00:41:08,920 --> 00:41:10,600
bank. 
He's 30 years old at the time, 

847
00:41:11,320 --> 00:41:14,640
OK? 
He goes and raises $45 million 

848
00:41:14,640 --> 00:41:17,800
from investors in Midland, which
of course, like, oh, Texas, 

849
00:41:17,800 --> 00:41:21,240
that's like raising one. 
Oil company oil money, Yeah. 

850
00:41:23,160 --> 00:41:24,360
Yeah, OK. 
He raises it. 

851
00:41:24,520 --> 00:41:26,360
He buys a bank. 
And what he's going to do, he 

852
00:41:26,360 --> 00:41:28,520
buys a bank in Dallas, a 
troubled bank in Dallas. 

853
00:41:28,520 --> 00:41:30,520
And what he's going to do is 
he's going to run a Beal, an 

854
00:41:30,520 --> 00:41:33,080
Andy Beal model. 
That means he's going to expand 

855
00:41:33,080 --> 00:41:34,720
and contract the balance sheet 
like an accordion. 

856
00:41:35,040 --> 00:41:38,480
OK, which is like risky as hell,
but like, and very few, 

857
00:41:39,080 --> 00:41:41,480
basically nobody but Andy Beal 
has proven that they can do it. 

858
00:41:41,920 --> 00:41:44,640
And, and a guy back in the 
1800s, very famous banker back 

859
00:41:44,640 --> 00:41:47,720
in the 1800s could do it too. 
But it takes him so long to get 

860
00:41:47,720 --> 00:41:49,760
regulatory approval because like
these bankers, the, the 

861
00:41:49,760 --> 00:41:52,080
regulators like dude, you don't 
have any idea how to run a bank 

862
00:41:52,480 --> 00:41:54,520
and you're going to have to put 
25,000,000 in capital in this 

863
00:41:54,520 --> 00:41:56,480
thing and then 20 million in 
take care of the bad loans. 

864
00:41:56,480 --> 00:41:59,080
You know what I mean? 
Once he raised the money and 

865
00:41:59,080 --> 00:42:01,760
they approve it, he misses the 
opportunity to have a Beale 

866
00:42:01,760 --> 00:42:04,040
model because he can't buy 
because at that point, like 

867
00:42:04,360 --> 00:42:07,440
assets are on the run. 
So then he goes and he buys a 

868
00:42:07,480 --> 00:42:11,920
factoring company up in Chicago 
that factors trucking invoices, 

869
00:42:12,120 --> 00:42:15,320
OK? 
The typical yield on those are 

870
00:42:15,320 --> 00:42:19,840
like 24%, OK, And these are 
short term credits, OK, These 

871
00:42:19,840 --> 00:42:21,000
are short. 
These are almost as good as 

872
00:42:21,000 --> 00:42:24,120
cash, OK. 
These are 30 day credits OK from

873
00:42:24,400 --> 00:42:25,760
legit? 
Depending on who your 

874
00:42:25,760 --> 00:42:27,600
counterparty is, it's a legit 
counterparty. 

875
00:42:28,040 --> 00:42:30,520
But by and large, so long as you
kind of know the lay of the 

876
00:42:30,520 --> 00:42:32,840
land, there is fraud and there 
certainly you know what I mean. 

877
00:42:33,400 --> 00:42:36,280
But the problem is that you go 
your trucker and you go and you 

878
00:42:36,280 --> 00:42:39,640
pick up a load. 
You have a paper invoice, right?

879
00:42:40,120 --> 00:42:43,360
You have them sign it at the 
dock at the loading document. 

880
00:42:43,800 --> 00:42:45,880
You take a picture of that. 
You send it to get a factor. 

881
00:42:45,920 --> 00:42:48,480
You send it to, you know, and 
then you send it to the broker, 

882
00:42:48,480 --> 00:42:49,560
you send all the different 
things. 

883
00:42:49,840 --> 00:42:53,720
But it is a, such a, an 
inefficient way to deal with 

884
00:42:53,720 --> 00:42:56,360
things because then all that 
stuff has to be hand entered and

885
00:42:56,360 --> 00:42:58,800
it's prone for fraud and it's 
prone to mistake and all these 

886
00:42:58,800 --> 00:43:01,120
things. 
So just to service it cost like 

887
00:43:01,120 --> 00:43:05,880
14 an annualized basis of 14 
yields, Fortune percent 14%. 

888
00:43:05,880 --> 00:43:10,440
OK, so he comes in Aaron's like 
whoa, like we're going to do it.

889
00:43:10,560 --> 00:43:13,480
We're going to basically do kind
of a PAC W model where you put a

890
00:43:13,480 --> 00:43:16,480
high yield and commercial 
finance engine on top of a of a 

891
00:43:16,480 --> 00:43:19,120
retail deposit franchise. 
They re Jack out that yield. 

892
00:43:19,480 --> 00:43:21,520
So they do that because now 
they're doing these this 

893
00:43:21,520 --> 00:43:24,520
factoring, right? 
So their yield goes way up. 

894
00:43:24,840 --> 00:43:27,960
But then they go to this that in
the trucking industry. 

895
00:43:27,960 --> 00:43:31,200
And mind you, the trucking 
industry is equivalent to 8% of 

896
00:43:31,200 --> 00:43:34,440
USGDP. 
That's how big that is, OK? 

897
00:43:34,880 --> 00:43:36,600
So they go, they're like, it's 
just a mess. 

898
00:43:36,600 --> 00:43:39,000
And they're like, well, is I 
wonder if there's a way to make 

899
00:43:39,000 --> 00:43:40,920
this easier so we can like bring
down these costs. 

900
00:43:41,240 --> 00:43:44,360
So they go to this industry 
event and it has all the 

901
00:43:44,360 --> 00:43:46,840
players, the brokers, the 
shippers, the truckers, the 

902
00:43:46,840 --> 00:43:50,520
factors that has everybody, OK. 
And they're going to sit down 

903
00:43:50,520 --> 00:43:52,880
and talk about using the 
blockchain to build out a 

904
00:43:52,880 --> 00:43:54,960
network. 
So then you can verify these 

905
00:43:54,960 --> 00:43:56,640
transactions. 
So everybody's just going to get

906
00:43:56,640 --> 00:43:58,360
on this network. 
So you can just immediately 

907
00:43:58,360 --> 00:44:00,400
verify these transactions, 
right? 

908
00:44:00,800 --> 00:44:02,960
So that makes it so quick and 
easy. 

909
00:44:02,960 --> 00:44:05,760
I mean, it drops the cost from 
like 14 percentage points to 

910
00:44:05,760 --> 00:44:08,600
like 14 basis points, something 
like that. 

911
00:44:08,680 --> 00:44:11,520
You know what I mean? 
Takes and sucks that much cost 

912
00:44:11,520 --> 00:44:14,560
out of the system. 
OK, so they're doing it, but 

913
00:44:14,560 --> 00:44:16,960
everybody in the trucking 
industry, I guess, hates each 

914
00:44:16,960 --> 00:44:18,320
other. 
I don't know why, but I guess 

915
00:44:18,320 --> 00:44:19,640
they all hate each other. 
OK. 

916
00:44:20,000 --> 00:44:23,000
It's so like, the thing 
descended and it fell apart. 

917
00:44:23,560 --> 00:44:25,520
So Aaron goes home and he's got 
this younger brother. 

918
00:44:25,520 --> 00:44:28,960
He comes in this amazing family,
and he goes home and he's got 

919
00:44:28,960 --> 00:44:31,360
this younger brother who's, 
like, a whiz at computers, OK? 

920
00:44:31,360 --> 00:44:34,040
And he's like, because his 
brother's like, we can just do 

921
00:44:34,040 --> 00:44:36,760
it ourself. 
And Aaron being Aaron was like, 

922
00:44:36,760 --> 00:44:39,280
that sounds like a terrific 
idea, OK? 

923
00:44:39,280 --> 00:44:42,120
Aaron is the type of guy who 
runs towards challenge and runs 

924
00:44:42,160 --> 00:44:44,640
away from boredom, just runs 
towards the most challenging 

925
00:44:44,640 --> 00:44:46,880
thing he could finally possibly 
find, OK? 

926
00:44:47,520 --> 00:44:51,520
They build this network, OK. 
And now they're in the process 

927
00:44:51,520 --> 00:44:54,040
of putting everybody on it. 
They've, I think they've gotten 

928
00:44:54,040 --> 00:44:56,520
like I, I, I haven't talked to 
Aaron for in a bit, but like, I 

929
00:44:56,520 --> 00:45:01,040
think they've gotten 6065% of 
the market share of all the, all

930
00:45:01,040 --> 00:45:04,560
the players in the industry are 
now using their network. 

931
00:45:05,280 --> 00:45:08,360
And so you think about it, it's 
like the competitive advantage 

932
00:45:08,360 --> 00:45:11,640
of that network effect. 
Yeah, it's, it's, it's 

933
00:45:11,800 --> 00:45:15,640
unbelievable. 
It's such a crazy story about 

934
00:45:15,640 --> 00:45:19,680
how like where a story can begin
and where a story can end. 

935
00:45:19,960 --> 00:45:22,440
You know what I mean? 
Because the story begins with 

936
00:45:22,440 --> 00:45:25,480
this guy who just wants to buy, 
you know, troubled properties 

937
00:45:25,480 --> 00:45:29,080
out of CNBS is it's ending with 
what is basically going to be a 

938
00:45:29,080 --> 00:45:31,040
complete monopoly of controlling
the payments. 

939
00:45:31,040 --> 00:45:33,520
I'm sure you wouldn't want me to
use that word, but controlling 

940
00:45:33,520 --> 00:45:35,680
the payment system in the 
trucking industry, I mean, it's,

941
00:45:35,880 --> 00:45:39,000
it's absolutely bonkers. 
Well, when you say monopoly, I 

942
00:45:39,000 --> 00:45:40,800
mean it's a network effect, 
right? 

943
00:45:40,840 --> 00:45:44,600
Which I mean, I, what do you 
think? 

944
00:45:44,600 --> 00:45:46,320
I think those are legal. 
I don't know. 

945
00:45:46,320 --> 00:45:48,440
We'll see. 
I, I think the government would 

946
00:45:48,440 --> 00:45:50,440
not like them to be legal. 
But I don't know. 

947
00:45:50,640 --> 00:45:52,160
I don't know how you recreate it
right. 

948
00:45:52,440 --> 00:45:54,200
Yeah. 
Yeah, exactly. 

949
00:45:54,440 --> 00:45:56,920
And how do you, how do you spin 
off half of a network effect? 

950
00:45:57,040 --> 00:46:00,560
Can you make people undo things 
that create monopolies? 

951
00:46:00,600 --> 00:46:04,000
I don't think so, at least not 
if they're a monoline business. 

952
00:46:04,680 --> 00:46:07,280
And did we not learn with like 
AT&T that it just going to go 

953
00:46:07,280 --> 00:46:09,040
back anyways? 
Yeah. 

954
00:46:09,680 --> 00:46:11,800
Well, I do. 
I do have some sympathy to like 

955
00:46:11,800 --> 00:46:16,240
using a profitable part of your 
business to subsidized the loss 

956
00:46:16,240 --> 00:46:21,360
leader in order to, you know, 
eventually own everything I that

957
00:46:21,360 --> 00:46:25,040
that makes me uncomfortable, but
it's good for consumers in the 

958
00:46:25,040 --> 00:46:28,000
interim. 
It is good for truckers and this

959
00:46:28,000 --> 00:46:31,560
is a community of people that 
high finance people don't give a

960
00:46:31,560 --> 00:46:34,360
shit about. 
Yeah, Aaron Graft and his team, 

961
00:46:34,680 --> 00:46:37,240
they love truckers. 
Like they are so good to 

962
00:46:37,240 --> 00:46:40,960
truckers and they've made 
truckers lives so much easier. 

963
00:46:41,920 --> 00:46:43,960
Are they going to capture the 
margin or is some of the margin 

964
00:46:43,960 --> 00:46:45,680
going to go back to the 
truckers, do you think? 

965
00:46:45,800 --> 00:46:51,360
Oh, they give most of it, the 
majority of it, the majority of 

966
00:46:51,360 --> 00:46:54,240
it back to the truckers. 
I mean, like they capture just a

967
00:46:54,240 --> 00:46:57,520
very, very tiny portion, but of 
course, like we're talking large

968
00:46:57,520 --> 00:46:58,760
numbers. 
Yeah. 

969
00:46:59,040 --> 00:47:02,000
Well, it's one of those things 
that if it used to cost 14%, now

970
00:47:02,000 --> 00:47:05,680
it costs four and you give them 
six and keep four of the 

971
00:47:05,680 --> 00:47:07,640
difference, right. 
I think that math works. 

972
00:47:07,920 --> 00:47:11,000
You can make nice margins. 
They would give like 11 of the 

973
00:47:11,000 --> 00:47:12,920
12% like that or you know what I
mean? 

974
00:47:13,320 --> 00:47:18,080
They give it a a ton back. 
Wow, Yeah, that's interesting. 

975
00:47:18,080 --> 00:47:21,920
And I'd imagine the speed of of 
the factoring increases, right, 

976
00:47:21,920 --> 00:47:26,320
'cause you don't have to mess 
with all of the paperwork and 

977
00:47:26,320 --> 00:47:30,480
all the people in the middle. 
Wow, how efficient is that? 

978
00:47:30,480 --> 00:47:34,360
Organization gonna be you can 
put before they're just pulling 

979
00:47:34,360 --> 00:47:36,400
payments now you can push them 
out. 

980
00:47:36,400 --> 00:47:39,800
I mean, it's like they've 
conceptualized this whole 

981
00:47:39,800 --> 00:47:42,560
process in such a fascinating 
way and and they're just 

982
00:47:42,560 --> 00:47:44,200
absolutely killing it. 
Huh. 

983
00:47:45,320 --> 00:47:48,000
Reminds me there's AI can't pull
it out of my head right now, but

984
00:47:48,000 --> 00:47:50,760
there's an insurance company in 
Richmond that the stock is done 

985
00:47:50,760 --> 00:47:52,120
well. 
So people talk about it, but I 

986
00:47:52,120 --> 00:47:55,720
think there's really something 
to this where they're just so 

987
00:47:55,720 --> 00:47:57,920
much more efficient than 
everybody else that they seem to

988
00:47:57,920 --> 00:48:01,600
be growing like crazy. 
But then then I talked to 

989
00:48:01,600 --> 00:48:05,560
insurance people and, you know, 
you start talking to specialists

990
00:48:05,560 --> 00:48:07,840
and, and say something's 
different this time. 

991
00:48:07,840 --> 00:48:10,760
And when it comes to insurance 
and banking, more often than 

992
00:48:10,760 --> 00:48:14,160
not, they say no, It's never. 
Different things are always the 

993
00:48:14,160 --> 00:48:16,120
same. 
It's like I mean I swear to God 

994
00:48:16,320 --> 00:48:18,960
it they are always the same. 
Like when Silicon Valley went 

995
00:48:18,960 --> 00:48:21,240
down people were like this has 
never happened before. 

996
00:48:21,240 --> 00:48:24,120
Can you believe what an 
unparalleled situation bro? 

997
00:48:24,120 --> 00:48:26,360
Like no this has happened like 3
or 4 times. 

998
00:48:27,480 --> 00:48:30,120
Yeah, I don't know that the 
thing that I don't know has ever

999
00:48:30,120 --> 00:48:34,760
happened before is like VCs 
crying for help before the help 

1000
00:48:34,760 --> 00:48:37,920
is even needed and then creating
the lack of confidence. 

1001
00:48:37,920 --> 00:48:39,520
But that was interesting to 
watch. 

1002
00:48:39,520 --> 00:48:41,040
OK, that's. 
An interesting question. 

1003
00:48:41,400 --> 00:48:43,760
Wait wait wait. 
The VCs crying for help ahead of

1004
00:48:43,760 --> 00:48:45,800
time. 
Or I mean, or once it went now. 

1005
00:48:46,800 --> 00:48:50,640
No, it's just I this the way 
that social media accelerated 

1006
00:48:50,640 --> 00:48:55,120
the panic and and who was at the
middle of spreading some of that

1007
00:48:55,120 --> 00:48:58,960
gasoline on the fire I found 
unsightly, but that. 

1008
00:48:58,960 --> 00:49:01,040
But that's no different than 
going to the town square and 

1009
00:49:01,040 --> 00:49:03,040
saying everybody's got to pull 
out their money, right? 

1010
00:49:03,040 --> 00:49:06,480
It's just a different form. 
So there's a bank here? 

1011
00:49:06,480 --> 00:49:08,400
Have you been to Portland, OR 
have you been out here before? 

1012
00:49:08,960 --> 00:49:11,080
No, I'm just going to finish my 
thought though real quick. 

1013
00:49:11,400 --> 00:49:13,760
It's interesting. 
It's no, it's just interesting 

1014
00:49:13,760 --> 00:49:17,920
that that people that that like 
Atlas Shrugged seem to cry for 

1015
00:49:17,920 --> 00:49:23,120
help when shit hits their fan. 
You don't want to go off to the 

1016
00:49:23,120 --> 00:49:27,120
magical garden in the valley. 
No, it's on Gault. 

1017
00:49:27,800 --> 00:49:31,280
What's on Gault? 
I mean, you know, I, I it. 

1018
00:49:31,680 --> 00:49:33,080
Was Gault? 
Isn't that what it is? 

1019
00:49:34,000 --> 00:49:34,760
Yeah. 
I gotta get awesome. 

1020
00:49:34,760 --> 00:49:36,760
I love that book, though. 
It's a tremendous. 

1021
00:49:36,760 --> 00:49:38,520
Yeah, well. 
I mean, there's an elegant, it's

1022
00:49:38,520 --> 00:49:40,960
elegant, right? 
But people show you who they are

1023
00:49:40,960 --> 00:49:43,840
when the chips are down and the 
times are tough and when you're 

1024
00:49:43,840 --> 00:49:46,240
out there crying for help, I 
don't know that you can then, 

1025
00:49:47,400 --> 00:49:50,840
you know, claim that that that's
your favorite book to live by. 

1026
00:49:50,840 --> 00:49:52,240
But that is neither here nor 
there. 

1027
00:49:52,400 --> 00:49:54,200
What were you asking me? 
Have I been out to Portland? 

1028
00:49:54,200 --> 00:49:56,440
I've never been out to Portland.
You have. 

1029
00:49:56,800 --> 00:49:59,920
No, I've never. 
The only the only northwestern 

1030
00:49:59,920 --> 00:50:02,960
state I've ever been to is 
Washington. 

1031
00:50:04,000 --> 00:50:08,040
So there's one of the patriarchs
of the city is a guy named, his 

1032
00:50:08,040 --> 00:50:12,200
last name is Pitoc PITTOCK. 
And there's this big mansion up 

1033
00:50:12,200 --> 00:50:14,440
on the hill that now you can go 
on tour or stuff like that Pitoc

1034
00:50:14,440 --> 00:50:16,240
mansion. 
And he owned like The Oregonian 

1035
00:50:16,240 --> 00:50:19,880
and a whole bunch of stuff and a
bank because that's what you did

1036
00:50:19,880 --> 00:50:21,960
back in the day. 
The big industrials also owned 

1037
00:50:21,960 --> 00:50:24,040
banks and. 
Bad ass. 

1038
00:50:24,040 --> 00:50:27,000
Some people get a Mercedes, he 
got a bank. 

1039
00:50:27,320 --> 00:50:30,200
I like it. 
Little guys like us get Mercedes

1040
00:50:30,640 --> 00:50:32,920
guys like. 
Yeah, I want a bank. 

1041
00:50:32,920 --> 00:50:35,800
But anyways, he died and there 
was a big dispute about what who

1042
00:50:35,800 --> 00:50:39,040
was going to control the bank in
like kind of how the will was 

1043
00:50:39,160 --> 00:50:41,720
playing out. 
The other banks in town spread 

1044
00:50:41,720 --> 00:50:44,440
rumors in the newspapers that 
the bank was going under and it 

1045
00:50:44,600 --> 00:50:46,720
in fact did because that's what 
you can do in banking. 

1046
00:50:46,720 --> 00:50:48,360
You can become a self fulfilling
prophecy. 

1047
00:50:49,280 --> 00:50:51,880
So your point is your point 
about like that you had made 

1048
00:50:51,880 --> 00:50:55,760
earlier like this kind of thing 
like about the VCs and how 

1049
00:50:55,760 --> 00:50:58,640
they're treated and what they 
did in that context about like 

1050
00:50:58,640 --> 00:51:01,320
Peter Thiel, like he basically 
was the one who ignited the run?

1051
00:51:01,720 --> 00:51:04,680
Like. 
This, this type of thing where 

1052
00:51:04,680 --> 00:51:06,640
other people intentionally do 
these things. 

1053
00:51:06,680 --> 00:51:08,760
This happened many, many, many, 
many, many times. 

1054
00:51:08,880 --> 00:51:10,960
Let me give you one more story. 
This is a great one, OK? 

1055
00:51:11,400 --> 00:51:15,120
This is I think it's 1874 when 
Jay Cook's bank went down. 

1056
00:51:15,280 --> 00:51:18,720
So there's a panic, OK? 
People are worried about what's 

1057
00:51:18,720 --> 00:51:23,120
happening on Wall Street, OK. 
And they, there's a bank, Union 

1058
00:51:23,120 --> 00:51:28,440
Bank, that that Vanderbilt, the 
Cornelius Vanderbilt is behind 

1059
00:51:28,840 --> 00:51:32,000
and like has money and get 
borrows money from it and all 

1060
00:51:32,000 --> 00:51:35,000
this kind of stuff. 
And a rumor circulates around 

1061
00:51:35,000 --> 00:51:41,080
town that Vanderbilt cannot pay 
his $1.2 million credit line. 

1062
00:51:42,240 --> 00:51:43,840
And so Vanderbilt is out of 
money. 

1063
00:51:44,320 --> 00:51:48,280
Oh shit, his hitting the fan. 
So there's a run on this bank 

1064
00:51:48,560 --> 00:51:51,480
because the newspaper goes to 
his house and they're like, we 

1065
00:51:52,000 --> 00:51:53,800
want to ask him about that. 
He wasn't home. 

1066
00:51:53,800 --> 00:51:56,680
They're like he's run off. 
Oh. 

1067
00:51:56,720 --> 00:51:58,960
Interesting. 
He's run out of money. 

1068
00:52:00,080 --> 00:52:03,760
There's a panic on Wall Street 
and all these banks go down. 

1069
00:52:04,280 --> 00:52:06,720
And then later on in the 
afternoon, he comes sauntering 

1070
00:52:06,720 --> 00:52:09,880
in on his source, saying, like, 
what's going on, guys? 

1071
00:52:09,880 --> 00:52:11,960
Yeah, that's right. 
I was just having tea, bitches. 

1072
00:52:11,960 --> 00:52:14,880
I I didn't run out of money. 
Right into my thing for a horse.

1073
00:52:14,880 --> 00:52:19,760
Literally, he had no idea. 
I was doing really important 

1074
00:52:19,760 --> 00:52:22,520
rich people stuff. 
I was shooting things and riding

1075
00:52:22,520 --> 00:52:23,360
on my horse. 
Exactly. 

1076
00:52:25,000 --> 00:52:26,560
Interesting. 
So then what happens to the 

1077
00:52:26,560 --> 00:52:28,840
bank? 
There was a run, yeah. 

1078
00:52:29,440 --> 00:52:31,280
Yeah, it's gone. 
It it was gone. 

1079
00:52:32,080 --> 00:52:34,520
That's an expensive horse ride. 
Now mind you that. 

1080
00:52:34,520 --> 00:52:38,240
There have been the failure rate
in banking is much much greater 

1081
00:52:38,240 --> 00:52:40,720
than the survival rate that by 
my research there have been 

1082
00:52:40,720 --> 00:52:42,880
17,000 plus banks that have 
failed and we only have about 

1083
00:52:42,880 --> 00:52:46,200
4000 banks today. 
Yeah, some of that was mergers, 

1084
00:52:46,200 --> 00:52:48,400
though. 
No, no, no, no, no, no, no, no. 

1085
00:52:48,400 --> 00:52:50,880
There's 22,000 mergers. 
Yes. 

1086
00:52:50,920 --> 00:52:53,040
OK. 
So you're saying out of like 

1087
00:52:53,040 --> 00:52:56,360
roughly 40,000 banks, we're down
to 4000? 

1088
00:52:56,880 --> 00:52:59,480
Yeah. 
So 17 + 22 + 4 and then throw in

1089
00:52:59,480 --> 00:53:01,840
a few more thousand because 
there's periods in the 1800s 

1090
00:53:01,840 --> 00:53:03,800
where like certain states didn't
give us any data. 

1091
00:53:04,440 --> 00:53:07,000
Interesting. 
So when you're building these, 

1092
00:53:07,000 --> 00:53:10,360
these data sets, I mean what the
one, I don't think, I know we 

1093
00:53:10,360 --> 00:53:12,440
said this offline. 
I don't think we said it already

1094
00:53:12,720 --> 00:53:15,480
took you 2000 hours to build one
of the data sets. 

1095
00:53:16,560 --> 00:53:20,280
Yes, to to build and verify, I 
mean, cause a lot, some of these

1096
00:53:20,280 --> 00:53:23,880
like you have to go into old 
newspapers and get the data from

1097
00:53:24,000 --> 00:53:26,160
you know what I mean? 
And so let me, let me give you a

1098
00:53:26,160 --> 00:53:28,600
crazy story, OK? 
I've never told this story 

1099
00:53:28,600 --> 00:53:31,200
before in public, but it's like 
one of my favorite stories, OK, 

1100
00:53:31,520 --> 00:53:34,280
So I'm I, so I've, I've built 
out a data set going back to the

1101
00:53:34,280 --> 00:53:37,560
civil war of bank failures 
because bank failures. 

1102
00:53:37,560 --> 00:53:39,480
If you want to understand 
banking, that's where you begin 

1103
00:53:39,640 --> 00:53:41,600
failures. 
You begin there and then you go 

1104
00:53:41,600 --> 00:53:43,760
elsewhere, OK, Because failure 
is the rule, not the exception. 

1105
00:53:43,880 --> 00:53:45,840
OK, So I built it back to the 
Civil War. 

1106
00:53:46,080 --> 00:53:50,880
And then I'm like just failure 
by failure, state by state, year

1107
00:53:50,880 --> 00:53:54,280
by year, going through these old
newspapers on newspaper.com. 

1108
00:53:54,280 --> 00:53:56,840
I mean, they're, I guarantee if 
they looked at all the usage of 

1109
00:53:56,840 --> 00:54:00,040
that thing and they like I 
ranked number one by a long way 

1110
00:54:00,040 --> 00:54:01,360
for that year, you know what I 
mean? 

1111
00:54:04,600 --> 00:54:07,080
Like who's this guy? 
Yeah, yeah, yeah, yeah, yeah. 

1112
00:54:07,080 --> 00:54:07,880
Who's this guy? 
Oh, my God. 

1113
00:54:07,880 --> 00:54:09,320
I just totally lost track of 
where I was going. 

1114
00:54:09,320 --> 00:54:09,800
What was I? 
What? 

1115
00:54:09,800 --> 00:54:11,360
Was this, I don't know, it was 
your favorite story that you've 

1116
00:54:11,360 --> 00:54:13,520
never told in public? 
Oh, yeah, yeah, yeah, yeah, 

1117
00:54:13,520 --> 00:54:14,800
yeah. 
So I didn't. 

1118
00:54:15,280 --> 00:54:17,400
I'm like, well, let me just do 
some. 

1119
00:54:17,480 --> 00:54:19,840
So one of the things I'll do 
when I'm looking for something 

1120
00:54:19,840 --> 00:54:22,360
is I'll do a Google search and 
then I'll just go down and I'll 

1121
00:54:22,360 --> 00:54:23,560
just go click, click, click, 
click, click. 

1122
00:54:23,560 --> 00:54:25,400
I'll just like open up all the 
tabs, like click, click, click, 

1123
00:54:25,440 --> 00:54:27,840
click, click, click, click. 
And then like all the tabs will 

1124
00:54:27,840 --> 00:54:29,760
go across, you know what I mean?
And then I'll do 50 and I'll 

1125
00:54:29,760 --> 00:54:31,880
just go through each tab, you 
know what I mean? 

1126
00:54:31,880 --> 00:54:33,200
I'll just go through all of 
them, you know what I mean? 

1127
00:54:33,480 --> 00:54:37,560
And then like you would be 
amazed, like you'll be like 250 

1128
00:54:37,560 --> 00:54:38,960
in and then you'll find the 
thing. 

1129
00:54:39,200 --> 00:54:41,840
It's crazy. 
OK, so I'm clicking through all 

1130
00:54:41,840 --> 00:54:44,760
these things and I click on this
link and an Excel file starts 

1131
00:54:44,760 --> 00:54:47,960
loading. 
I'm like, the fuck is that? 

1132
00:54:48,280 --> 00:54:50,560
You know, I opened that Excel 
file. 

1133
00:54:51,000 --> 00:54:54,360
It's got like thousands. 
It's got basically every bank 

1134
00:54:54,360 --> 00:54:57,880
that had failed between the 
beginning of the country, 1809 

1135
00:54:58,240 --> 00:55:00,080
and the Civil War. 
Wow. 

1136
00:55:00,520 --> 00:55:05,120
Almost impossible to build. 
Turns out I'd it came from the 

1137
00:55:05,120 --> 00:55:06,560
Federal Reserve Bank in 
Minneapolis. 

1138
00:55:07,360 --> 00:55:10,760
And I think what it was is they 
were it was a back channel where

1139
00:55:10,760 --> 00:55:13,800
they would share the data set. 
I don't know for sure. 

1140
00:55:14,240 --> 00:55:16,680
My gear system shared the data 
set with the researchers. 

1141
00:55:17,600 --> 00:55:19,960
Huh. 
I happened upon it and so that 

1142
00:55:19,960 --> 00:55:23,720
helped me I'm so I then took my 
list and then augmented theirs 

1143
00:55:23,760 --> 00:55:25,840
where they missed some I 
included. 

1144
00:55:26,320 --> 00:55:28,560
And then that's what allowed me 
to build out the whole thing. 

1145
00:55:28,960 --> 00:55:33,440
So a couple years later I was 
like, I should e-mail this guy 

1146
00:55:33,440 --> 00:55:35,760
and thank him. 
You know the main guy. 

1147
00:55:35,800 --> 00:55:37,480
Probably like I wish you'd never
found it. 

1148
00:55:37,480 --> 00:55:39,560
I got fired. 
He was like the top. 

1149
00:55:40,160 --> 00:55:43,400
He was like the top research guy
at at at the bank at the 

1150
00:55:43,720 --> 00:55:46,560
Minneapolis at the time. 
And then he moved down to teach 

1151
00:55:46,560 --> 00:55:49,080
in Emory, I believe. 
And so I emailed him at Emory. 

1152
00:55:49,080 --> 00:55:53,760
I said, well, Sir, just so you 
know, thank you for the data set

1153
00:55:53,760 --> 00:55:55,520
I happened upon. 
It is amazing. 

1154
00:55:55,520 --> 00:55:58,440
I will only use it for good. 
I never heard from him. 

1155
00:55:59,040 --> 00:56:01,840
Yeah. 
But like, yeah, it's, yeah. 

1156
00:56:01,840 --> 00:56:05,160
So that's why these things take 
a long time, because just 

1157
00:56:05,240 --> 00:56:08,280
nobody's very few people have 
ever actually tried to do it 

1158
00:56:08,280 --> 00:56:11,720
before. 
Yeah, I'm in a, this is not at 

1159
00:56:11,720 --> 00:56:14,400
all that, but I was in an 
investing group and I shared a 

1160
00:56:14,400 --> 00:56:19,000
transcript with with them 
yesterday and it was like 15 

1161
00:56:19,000 --> 00:56:21,760
pages or 14 pages and one 
important paragraph. 

1162
00:56:21,760 --> 00:56:23,400
And the paragraph was at the 
end. 

1163
00:56:23,960 --> 00:56:27,440
And we were like, yeah, you 
know, 15 pages of reading for 

1164
00:56:27,440 --> 00:56:30,040
one, one paragraph. 
But the other comment that was 

1165
00:56:30,040 --> 00:56:34,760
made with that is if you had 
uploaded that particular 

1166
00:56:34,760 --> 00:56:40,480
transcript to an AILLM and asked
it to summarize, there would be 

1167
00:56:40,480 --> 00:56:44,120
no way that it would know that 
that paragraph was the important

1168
00:56:44,120 --> 00:56:47,000
paragraph. 
So to your point on like opening

1169
00:56:47,000 --> 00:56:50,800
50 links and whatnot and going 
through it and finding the link,

1170
00:56:51,560 --> 00:56:53,920
I think that kind of research 
isn't going anywhere for a very 

1171
00:56:53,920 --> 00:56:56,000
long time and there's a lot of 
value in it. 

1172
00:56:56,560 --> 00:56:58,960
I mean, when people go around 
talking the I'm going to use AI 

1173
00:56:58,960 --> 00:57:02,600
to do this, I'm going to use AI 
to do that, I say please do. 

1174
00:57:03,040 --> 00:57:04,600
Yeah, please do. 
You don't even know the 

1175
00:57:04,600 --> 00:57:06,680
questions. 
You don't leave me alone in my 

1176
00:57:06,680 --> 00:57:08,040
field. 
I'm going to be the only one who

1177
00:57:08,040 --> 00:57:11,240
actually knows what I'm talking 
about because I have actually 

1178
00:57:11,240 --> 00:57:12,720
learned it. 
Yeah. 

1179
00:57:13,360 --> 00:57:16,320
I'm not taking shortcuts. 
So I'm like, use AI all you want

1180
00:57:16,320 --> 00:57:18,800
because I also know because the 
data I have and what I know 

1181
00:57:18,800 --> 00:57:22,600
about banking, I've used it. 
I've tested AI on the things 

1182
00:57:22,600 --> 00:57:25,080
that I know that I know a lot of
people don't know, and it 

1183
00:57:25,080 --> 00:57:26,920
doesn't know it either. 
Yeah. 

1184
00:57:27,120 --> 00:57:28,800
And these are central things in 
banking. 

1185
00:57:28,800 --> 00:57:29,840
So it's like, I'm like, 
whatever. 

1186
00:57:30,760 --> 00:57:34,000
So when you're testing it, 
you'll ask it specific questions

1187
00:57:34,000 --> 00:57:37,320
that you know the answer to and 
it can't pull them. 

1188
00:57:37,920 --> 00:57:39,760
I'll be like, how many banks 
have failed since the beginning 

1189
00:57:39,760 --> 00:57:41,280
of the country? 
Yeah. 

1190
00:57:41,560 --> 00:57:44,120
And I can't remember what the 
number was, but it was way off. 

1191
00:57:44,480 --> 00:57:47,600
Way off. 
But I mean like, like by a 

1192
00:57:47,600 --> 00:57:48,960
factor of like 4, something like
that. 

1193
00:57:48,960 --> 00:57:51,920
I mean, it's huge way off. 
Yeah, well, that's a shame. 

1194
00:57:51,920 --> 00:57:53,680
Now you won't trust it. 
That's what happened to me with 

1195
00:57:53,680 --> 00:57:55,360
the news. 
Once I started reading about 

1196
00:57:55,360 --> 00:57:58,600
things I knew about and I was 
like, this is not what I think 

1197
00:57:58,600 --> 00:58:03,440
is going on here. 
Yeah, AI, it's like there's a, 

1198
00:58:03,560 --> 00:58:05,480
there's a role for it, no 
question about it. 

1199
00:58:05,480 --> 00:58:08,800
But it's not at our level. 
It's not people who use their 

1200
00:58:08,800 --> 00:58:13,360
brains to actually figure things
out like we are safe from that, 

1201
00:58:13,480 --> 00:58:16,520
certainly for now. 
Yeah, yeah. 

1202
00:58:16,520 --> 00:58:18,920
I don't know how it'll look in a
year, right, but. 

1203
00:58:19,240 --> 00:58:21,320
I think it'll look better, I 
hope. 

1204
00:58:22,160 --> 00:58:23,920
Yeah. 
I, I think because I think the 

1205
00:58:23,920 --> 00:58:26,840
more and more that like as kids 
come through school and they 

1206
00:58:26,840 --> 00:58:28,800
like, the more and more they get
prone to take all these 

1207
00:58:28,800 --> 00:58:31,320
shortcuts. 
Like it's like to develop the 

1208
00:58:31,320 --> 00:58:36,560
deep, to develop my knowledge 
took me not only just 15 years, 

1209
00:58:36,560 --> 00:58:41,080
but I spent 12 months, 365 days 
working 18 hours every single 

1210
00:58:41,080 --> 00:58:45,120
day because I, I studied banking
for 12 years. 

1211
00:58:45,120 --> 00:58:48,040
I couldn't figure the thing out.
I said, listen, I'm going to 

1212
00:58:48,040 --> 00:58:50,680
give this one more year because 
I'm not going to spend my life 

1213
00:58:50,680 --> 00:58:53,040
on something I can't figure out.
I'm giving it one year. 

1214
00:58:53,040 --> 00:58:55,080
If I can figure it out, then 
I'll stay in here for a little 

1215
00:58:55,080 --> 00:58:56,680
bit longer. 
If I can, I'll move on to 

1216
00:58:56,680 --> 00:58:59,080
something else. 
And so I said the only way I'm 

1217
00:58:59,080 --> 00:59:02,160
going to be able to find the 
flaw in the in this, whatever 

1218
00:59:02,160 --> 00:59:04,720
the theoretical flaw was, I 
didn't know what the time is. 

1219
00:59:04,720 --> 00:59:07,080
If I read contemporary, if I 
would just read contemporary 

1220
00:59:07,080 --> 00:59:10,320
materials starting the year 1790
every single year about what 

1221
00:59:10,320 --> 00:59:12,560
happened in banking all the way 
through to 2020. 

1222
00:59:13,080 --> 00:59:15,920
The thought process being that 
if I do that, I will have more. 

1223
00:59:15,920 --> 00:59:18,600
I will have jammed more into my 
head at any one particular point

1224
00:59:18,600 --> 00:59:21,160
in time that I can conceptually 
move around than anyone ever 

1225
00:59:21,160 --> 00:59:26,680
before, and probably by a lot. 
And so it was that process going

1226
00:59:26,680 --> 00:59:30,040
through this that allowed me to 
identify that the periodization 

1227
00:59:30,040 --> 00:59:32,720
was wrong. 
But in the process of figuring 

1228
00:59:32,720 --> 00:59:35,800
out the periodization, like I 
can talk about all the different

1229
00:59:35,800 --> 00:59:39,840
crises and like I can, I can. 
I can get on TV or on a stage in

1230
00:59:39,840 --> 00:59:42,160
front of 1000 people without 
notes. 

1231
00:59:42,200 --> 00:59:46,680
I don't prepare for speeches. 
I get on stage and just speak. 

1232
00:59:47,040 --> 00:59:49,160
And I, yeah, well, the 
preparations been done, right? 

1233
00:59:49,480 --> 00:59:53,080
The preparations been done, and 
so it's like if you don't give 

1234
00:59:53,080 --> 00:59:55,760
yourself that opportunity to 
learn a subject matter like 

1235
00:59:55,760 --> 00:59:57,600
that, you're never going to be 
able to compete with people who 

1236
00:59:57,600 --> 01:00:02,440
do. 
What is the your take away from,

1237
01:00:02,440 --> 01:00:05,880
well, I don't know that you can 
summarize this, but what's 

1238
01:00:05,920 --> 01:00:08,640
what's like the big take away 
that you have from banking? 

1239
01:00:09,200 --> 01:00:14,560
And all this studying. 
Like if I were to reduce it to. 

1240
01:00:15,200 --> 01:00:19,040
So let me answer that two ways. 
So in the banking context, the 

1241
01:00:19,080 --> 01:00:23,080
way to think about banking is 
that abundance begets failure, 

1242
01:00:23,600 --> 01:00:25,720
not scarcity. 
I like that abundance begets 

1243
01:00:25,960 --> 01:00:28,080
failure. 
So that's the number one thing 

1244
01:00:28,080 --> 01:00:30,120
to think. 
The second thing is that like, 

1245
01:00:31,200 --> 01:00:34,560
you know, I've talked and spent 
time with hundreds of bank CE OS

1246
01:00:35,160 --> 01:00:37,120
and I've studied many, many, 
many more. 

1247
01:00:37,640 --> 01:00:41,320
And the thing that I have found 
is that the best bankers in 

1248
01:00:41,320 --> 01:00:43,720
terms of performance also tend 
to be the best people. 

1249
01:00:44,560 --> 01:00:49,960
Like there is a huge overlap. 
I have not met any good bankers 

1250
01:00:49,960 --> 01:00:52,720
that I consider good from a 
quantitative perspective. 

1251
01:00:53,520 --> 01:00:59,880
OK, that is a jerk, not one. 
And and now who I am now, they 

1252
01:00:59,880 --> 01:01:02,160
can't be a jerk to me that 
they'd be a Doo Doo. 

1253
01:01:02,720 --> 01:01:05,240
But that is not always, that is 
not always been the case. 

1254
01:01:05,240 --> 01:01:07,440
And for most of my career, that 
was not the case. 

1255
01:01:08,320 --> 01:01:09,760
So how did you build your 
network? 

1256
01:01:09,760 --> 01:01:11,920
Like to somebody that's like, 
Dang, I hope that I could do 

1257
01:01:11,920 --> 01:01:14,480
what John did in a, in a 
different way. 

1258
01:01:14,920 --> 01:01:17,360
Like what'd you do? 
Just grind it out, reach out to 

1259
01:01:17,360 --> 01:01:19,920
people, try to add value and do 
it that way. 

1260
01:01:20,680 --> 01:01:24,320
Yeah, I mean, I, I developed, 
unbeknownst to me, I developed 

1261
01:01:24,320 --> 01:01:26,880
somewhat of a reputation for the
depth of my research. 

1262
01:01:26,880 --> 01:01:30,040
I did not know that. 
And then the the thing that 

1263
01:01:30,040 --> 01:01:32,880
changed everything for me, I'll 
tell another Richard Davis 

1264
01:01:32,880 --> 01:01:35,240
story, is I called U.S. bank 
because I'd studied Richard 

1265
01:01:35,240 --> 01:01:37,120
Davis and U.S. bank. 
I I can't remember why I called 

1266
01:01:37,120 --> 01:01:40,240
them, but their comms guy said, 
hey, are you John? 

1267
01:01:40,240 --> 01:01:41,400
You're John Maxfield. 
I said, yeah. 

1268
01:01:41,400 --> 01:01:44,080
He said Richard told me as soon 
whenever you call that he wants 

1269
01:01:44,080 --> 01:01:45,360
you to come up here and spend 
time. 

1270
01:01:45,400 --> 01:01:47,120
So I went up there to spend time
with him. 

1271
01:01:47,720 --> 01:01:50,600
And my thought process was that 
I'm not going to go into this 

1272
01:01:50,600 --> 01:01:53,880
very important man's office and 
take all these hours from his 

1273
01:01:53,880 --> 01:01:56,760
life and ask him questions that 
are in an SSCC document. 

1274
01:01:56,960 --> 01:02:01,000
Yeah, the level of disrespect 
that these analysts go in and 

1275
01:02:01,000 --> 01:02:03,560
they what they are asking these 
people to spend their time on is

1276
01:02:03,560 --> 01:02:05,560
unbelievable. 
You know, the the numbers are 

1277
01:02:05,560 --> 01:02:08,200
there and asking any for 
forecast is absurd. 

1278
01:02:08,400 --> 01:02:09,640
You know, just logically, right.
Yeah. 

1279
01:02:10,520 --> 01:02:12,560
Well, so I said. 
I'm justify your job. 

1280
01:02:13,080 --> 01:02:15,560
I'm going to go in there and I'm
going to ask him the most 

1281
01:02:15,560 --> 01:02:18,840
personal questions you can 
possibly imagine, you know, like

1282
01:02:18,840 --> 01:02:22,520
about the death of I like. 
And so I asked him, I said, and 

1283
01:02:22,520 --> 01:02:25,720
I was so freaking nervous 
because I've never been in that 

1284
01:02:25,720 --> 01:02:28,360
environment before. 
I was like, you know, those the 

1285
01:02:28,400 --> 01:02:30,240
floors of those buildings are 
quite impressive. 

1286
01:02:30,240 --> 01:02:33,240
And I remember sitting in the 
chair and, like, just a little 

1287
01:02:33,240 --> 01:02:36,320
shaking with nerves. 
And there was a like a magazine 

1288
01:02:36,320 --> 01:02:39,200
on the table, but it was a 
hardcover and it was for private

1289
01:02:39,200 --> 01:02:40,640
jets. 
And I thought, this is a 

1290
01:02:40,640 --> 01:02:44,440
different place for me to be 
than a magazine that's hardcover

1291
01:02:44,440 --> 01:02:48,040
for private jets, you know? 
And so I go into his office and 

1292
01:02:48,040 --> 01:02:49,280
we're just kind of shooting the 
shit. 

1293
01:02:50,240 --> 01:02:51,280
And then he said, well, let's 
get going. 

1294
01:02:51,280 --> 01:02:54,640
So OK, well, let's go, you know,
And I said, here's my first 

1295
01:02:54,640 --> 01:02:56,040
question. 
I want you to tell me who you're

1296
01:02:56,040 --> 01:02:57,720
more like, your mom or your dad,
and why. 

1297
01:02:58,440 --> 01:03:00,240
And he let out this audible 
gasp. 

1298
01:03:00,560 --> 01:03:04,520
It was just like instantaneous, 
this short and instantaneous. 

1299
01:03:04,840 --> 01:03:08,040
And in that second, I saw who 
Richard Davis was. 

1300
01:03:08,480 --> 01:03:12,160
I got past the armor. 
And it was in that second I 

1301
01:03:12,160 --> 01:03:15,480
thought, this is what I'm going 
to do because nobody else will 

1302
01:03:15,480 --> 01:03:16,920
have the balls to go and do 
this. 

1303
01:03:17,600 --> 01:03:21,480
I would imagine that was Adam 
Robinson always talks well, 

1304
01:03:22,200 --> 01:03:24,800
talks frequently about 
delighting people, right? 

1305
01:03:24,800 --> 01:03:28,040
And like, adding value to their 
day and to go and have an actual

1306
01:03:28,040 --> 01:03:30,680
conversation with him where 
you're not, you know, like 

1307
01:03:30,680 --> 01:03:33,680
sucking up and you're genuinely 
interested in who that person 

1308
01:03:33,680 --> 01:03:38,800
is, I suspect accomplished the 
goal that both of you wanted to.

1309
01:03:39,080 --> 01:03:40,840
I mean, he's your friend now, 
right? 

1310
01:03:40,840 --> 01:03:44,640
So it's a good use of time. 
I've been told by some of the 

1311
01:03:44,640 --> 01:03:46,480
top bankers in this country not 
to. 

1312
01:03:47,720 --> 01:03:50,840
I'm saying this because it shows
how much it matters. 

1313
01:03:50,840 --> 01:03:54,680
If you care about people, OK, if
you genuine, I genuinely care 

1314
01:03:54,680 --> 01:03:56,880
about these people. 
Like I don't care about 

1315
01:03:58,120 --> 01:03:59,400
professional life is personal to
me. 

1316
01:03:59,400 --> 01:04:01,520
I can't separate them, you know,
they're all the same. 

1317
01:04:01,520 --> 01:04:02,640
So these are my personal 
friends. 

1318
01:04:03,320 --> 01:04:06,000
So many of these bankers have 
told me that spending time with 

1319
01:04:06,000 --> 01:04:09,000
them, my spending time when I go
and spend those two or three 

1320
01:04:09,000 --> 01:04:10,920
days with them was the highlight
of their career. 

1321
01:04:10,920 --> 01:04:14,400
It's not because of me. 
Let me be very clear, it's not 

1322
01:04:14,400 --> 01:04:17,760
because of me. 
I am a vehicle for I ask good 

1323
01:04:17,760 --> 01:04:21,840
questions and I listen to every 
word they say and I ask all the 

1324
01:04:21,840 --> 01:04:24,800
follow up questions and I 
remember what they said early on

1325
01:04:24,800 --> 01:04:26,440
or the previous day or the last 
year. 

1326
01:04:26,600 --> 01:04:29,640
You know what I mean? 
And like that is why I've been 

1327
01:04:29,640 --> 01:04:32,880
able to build the network I've 
built because I care and they 

1328
01:04:32,880 --> 01:04:36,920
know it and they trust me. 
They've I know secrets about 

1329
01:04:36,920 --> 01:04:40,400
these people you would not 
believe and they all know they 

1330
01:04:40,400 --> 01:04:42,240
will never go anywhere. 
I like it. 

1331
01:04:43,280 --> 01:04:45,840
This this part of the 
conversation is the part that 

1332
01:04:45,840 --> 01:04:47,880
people should listen to. 
I mean, not that the rest is 

1333
01:04:47,880 --> 01:04:50,920
not, but this is the golden 
conversations I feel like. 

1334
01:04:52,040 --> 01:04:55,160
Yes, yeah. 
You ask good questions. 

1335
01:04:55,160 --> 01:04:57,600
So you know the effect it has on
people. 

1336
01:04:57,600 --> 01:04:59,840
You know, like the saying if you
want to be interesting, be 

1337
01:04:59,840 --> 01:05:00,960
interested. 
It's true. 

1338
01:05:01,040 --> 01:05:03,520
I mean, how many good 
conversations have you been in 

1339
01:05:03,520 --> 01:05:06,320
built where the person learns 
literally nothing about you, But

1340
01:05:06,320 --> 01:05:08,720
you get, oh, you leave knowing 
like literally I, I mean, I'll 

1341
01:05:08,720 --> 01:05:10,720
leave with a conversation, like 
after a 30 minute conversation 

1342
01:05:10,720 --> 01:05:11,760
with a person. 
I mean, I'll know what their 

1343
01:05:11,760 --> 01:05:13,600
great granddaddy did, you know 
what I mean? 

1344
01:05:14,360 --> 01:05:16,080
And they're like, that's the 
most interesting conversation 

1345
01:05:16,080 --> 01:05:18,040
I've ever had. 
I'm like, you're just, you don't

1346
01:05:18,040 --> 01:05:19,560
say this, but you're just like, 
you were just talking about 

1347
01:05:19,560 --> 01:05:20,520
yourself, the whole. 
Time. 

1348
01:05:20,520 --> 01:05:23,520
Yeah, people do like that. 
You know, but I'm like, I agree 

1349
01:05:23,520 --> 01:05:24,640
with you. 
That was the most interesting 

1350
01:05:24,640 --> 01:05:26,720
conversation because I learned 
everything about you that was 

1351
01:05:26,760 --> 01:05:29,240
super interesting, you know? 
So yeah, I. 

1352
01:05:29,760 --> 01:05:31,760
Don't. 
Know well, I try to teach my 

1353
01:05:31,760 --> 01:05:33,000
kids. 
I'm like, listen man, if you 

1354
01:05:33,000 --> 01:05:36,920
talk and you're not learning, 
and that's not totally true, but

1355
01:05:36,920 --> 01:05:40,240
it's true more often than not. 
Yeah. 

1356
01:05:40,640 --> 01:05:43,640
I got to ask you this before I, 
before you get out of here, why 

1357
01:05:43,640 --> 01:05:46,560
is city everybody's favorite? 
You said something, you had a 

1358
01:05:46,560 --> 01:05:49,280
chart and it was something you 
were like, it's everybody's 

1359
01:05:49,280 --> 01:05:51,120
favorite. 
And then somebody was like, oh, 

1360
01:05:51,120 --> 01:05:53,960
city, what's go? 
What's what's going on behind 

1361
01:05:53,960 --> 01:05:57,840
that comment? 
I don't know if you have a 

1362
01:05:57,840 --> 01:05:59,440
position in city. 
Sir, I don't. 

1363
01:05:59,520 --> 01:06:01,840
I don't. 
You might I, I know. 

1364
01:06:01,840 --> 01:06:04,400
It's always pitched as a 
turnaround story that I know. 

1365
01:06:05,760 --> 01:06:09,200
For 150 years, Citigroup has 
stepped right into the middle of

1366
01:06:09,200 --> 01:06:12,200
every goddamn crisis this city, 
this country has had. 

1367
01:06:12,680 --> 01:06:16,600
Right into the middle of them. 
I mean, like, there's all you go

1368
01:06:16,600 --> 01:06:19,440
back to the 1920s, they were 
like lending money to like Cuban

1369
01:06:19,440 --> 01:06:22,000
sugar companies and then Cuba 
revolution and like that all 

1370
01:06:22,000 --> 01:06:24,320
goes away, you know what I mean?
And then in the 80s, they're 

1371
01:06:24,320 --> 01:06:27,760
lending money, they're recycling
the Petro dollars into like less

1372
01:06:27,760 --> 01:06:30,280
developed countries. 
And then like it was insolvent 

1373
01:06:30,280 --> 01:06:31,840
at that point. 
And then like, of course, in the

1374
01:06:31,840 --> 01:06:33,680
financial crisis of 08, it was 
insolvent. 

1375
01:06:33,680 --> 01:06:37,360
And this is like the problem 
with Citigroup is it's so 

1376
01:06:37,360 --> 01:06:40,160
freaking complicated. 
It is literally impossible to 

1377
01:06:40,160 --> 01:06:41,680
manage. 
That is my take on it. 

1378
01:06:41,960 --> 01:06:44,640
I mean, like, it is so 
complicated, but it is such an 

1379
01:06:44,640 --> 01:06:47,560
important element of the global 
financial system. 

1380
01:06:47,600 --> 01:06:50,080
And one of the ways that we 
project financial power is 

1381
01:06:50,080 --> 01:06:53,560
through that company, which is 
why that company never fails. 

1382
01:06:53,720 --> 01:06:56,640
Like the government could not 
allow that that bank to fail 

1383
01:06:56,640 --> 01:06:59,680
because it is such a big piece 
of the global economy and 

1384
01:06:59,680 --> 01:07:01,440
sitting here on our shores is 
really important. 

1385
01:07:02,480 --> 01:07:05,480
Interesting. 
That's my take on it anyways. 

1386
01:07:05,520 --> 01:07:09,280
Yeah, yeah, yeah. 
No, it's like what what did, 

1387
01:07:09,280 --> 01:07:11,880
what did Andreessen talk about? 
It's it's almost like a non 

1388
01:07:11,880 --> 01:07:15,640
governmental governmental 
organization in a way. 

1389
01:07:16,280 --> 01:07:19,560
I mean, like I said, I, I 
haven't covered financials in a 

1390
01:07:19,560 --> 01:07:21,080
bit. 
And, and a lot of the reason is 

1391
01:07:21,080 --> 01:07:23,720
because I just don't, I mean, I,
there's a couple banks that I'm 

1392
01:07:23,720 --> 01:07:26,600
comfortable with being like, OK,
I kind of understand this. 

1393
01:07:27,000 --> 01:07:29,600
Most of them. 
I just know that the people that

1394
01:07:29,600 --> 01:07:32,240
cover them know a lot more than 
I do, which is probably true of 

1395
01:07:32,240 --> 01:07:35,400
everything to be fair, but that 
specifically I know. 

1396
01:07:36,080 --> 01:07:38,720
Can I tell you another story 
that I've ever said publicly? 

1397
01:07:39,680 --> 01:07:42,080
So I'm not going to say the name
of this person, although like, 

1398
01:07:42,080 --> 01:07:43,400
it won't be hard to figure out 
who they are. 

1399
01:07:43,920 --> 01:07:48,320
So whenever I go on like big 
interviews, I typically bring my

1400
01:07:48,320 --> 01:07:51,240
wife because like, I want a 
second set of eyes. 

1401
01:07:51,560 --> 01:07:52,800
Do you know what I mean? 
Yeah. 

1402
01:07:52,920 --> 01:07:54,400
She's really, she's from 
Afghanistan. 

1403
01:07:54,400 --> 01:07:56,080
She's really perceptive, you 
know what I mean? 

1404
01:07:56,080 --> 01:07:58,000
Like, you walk into a valley, 
they'll get you, you know what I

1405
01:07:58,000 --> 01:07:59,120
mean? 
Like, she's not going to joke 

1406
01:07:59,120 --> 01:08:00,800
around. 
She was like, she is a killer, 

1407
01:08:00,800 --> 01:08:02,880
you know what I mean? 
OK. 

1408
01:08:02,880 --> 01:08:04,480
And so, like, she's good, you 
know? 

1409
01:08:04,480 --> 01:08:06,240
You want eyes like that on you, 
you know what I mean? 

1410
01:08:06,720 --> 01:08:09,680
And so I go to the. 
I'm hanging out with the 

1411
01:08:09,680 --> 01:08:13,800
chairman of Citigroup, OK? 
And we go to his house. 

1412
01:08:14,240 --> 01:08:16,399
So I always make them. 
I'd make them let me into their 

1413
01:08:16,399 --> 01:08:19,680
house. 
I part of the deal you want you 

1414
01:08:19,680 --> 01:08:20,880
want you want to chill with 
John. 

1415
01:08:21,080 --> 01:08:22,680
I got to see your house. 
You know what I mean? 

1416
01:08:22,960 --> 01:08:24,720
Interesting. 
That's that's how you learn 

1417
01:08:24,720 --> 01:08:25,720
about something. 
There's one way. 

1418
01:08:25,760 --> 01:08:29,000
So we go to his house in 
Greenwich and like, I've been to

1419
01:08:29,000 --> 01:08:31,760
some nice houses before, OK, but
never like this one. 

1420
01:08:31,760 --> 01:08:33,840
It had $100 million art 
collection in. 

1421
01:08:35,120 --> 01:08:36,840
It even Zazzlev would be 
jealous. 

1422
01:08:36,920 --> 01:08:39,120
Yeah. 
And part of that was that 

1423
01:08:39,319 --> 01:08:43,040
collection was financed by a 
change in control payment, $50 

1424
01:08:43,040 --> 01:08:46,439
million change in control 
payment when Bank of America 

1425
01:08:46,439 --> 01:08:50,040
sold the nation's bank. 
OK, There's $50 million change 

1426
01:08:50,040 --> 01:08:51,640
of control. 
There's $100 million went to 

1427
01:08:51,640 --> 01:08:55,160
Coulter, the CEO, and then 50 
million to this other person who

1428
01:08:55,160 --> 01:08:57,439
negotiated the deal. 
And then this person took that 

1429
01:08:57,439 --> 01:09:00,160
and to put it in Bank of Hawaii 
and then tripled, like tripled 

1430
01:09:00,160 --> 01:09:02,240
it, a whole bunch of that in 
Bank of Hawaii. 

1431
01:09:02,319 --> 01:09:05,720
So he did really, really well. 
And so we're sitting in the 

1432
01:09:05,720 --> 01:09:07,520
living room and we're like 
drinking tea. 

1433
01:09:07,520 --> 01:09:09,000
And they have like staff and 
stuff like that. 

1434
01:09:09,000 --> 01:09:11,800
And my wife and his wife are 
over at the end of the couch and

1435
01:09:11,960 --> 01:09:16,479
me and him are over here. 
And I'm like, like, anytime 

1436
01:09:16,479 --> 01:09:18,840
you're in a situation like you 
don't have like that much money,

1437
01:09:18,840 --> 01:09:20,520
you know, you're kind of like 
what? 

1438
01:09:20,600 --> 01:09:22,720
You may be different than me in 
this regard, Bill. 

1439
01:09:22,720 --> 01:09:25,160
But you know, like, it's 
intimidating a little bit. 

1440
01:09:25,520 --> 01:09:28,240
And I remember thinking it's his
teacup and I didn't want to put 

1441
01:09:28,240 --> 01:09:30,359
it on the table in front of me 
because I didn't have a coaster.

1442
01:09:30,560 --> 01:09:33,720
Yeah, no, you know that table 
might be $1,000,000 table. 

1443
01:09:33,920 --> 01:09:35,920
Yeah, and I said, and I where do
you want this? 

1444
01:09:35,920 --> 01:09:37,560
You want to put a coaster, you 
know, don't worry about it. 

1445
01:09:37,920 --> 01:09:40,359
And I'm looking at the table 
because the thing that shocked 

1446
01:09:40,359 --> 01:09:42,800
me is that it like wasn't a 
table. 

1447
01:09:43,120 --> 01:09:45,720
It was like a thing that came 
out of an Egyptian mummy's tomb.

1448
01:09:46,240 --> 01:09:48,200
Oh. 
That's gangster. 

1449
01:09:48,399 --> 01:09:51,520
It was so gangster. 
And I'm like, OK, Sir, you know?

1450
01:09:52,680 --> 01:09:54,320
Yeah. 
Is that a? 

1451
01:09:54,440 --> 01:09:56,840
People or whatever. 
That made it through an Egyptian

1452
01:09:56,840 --> 01:09:59,160
mummy's tomb. 
Your your tea glass isn't going 

1453
01:09:59,160 --> 01:10:02,360
to do anything to it. 
Yeah, yeah. 

1454
01:10:03,320 --> 01:10:06,160
I don't know, man. 
Different strokes for different 

1455
01:10:06,160 --> 01:10:07,520
folks. 
You make it, you can spend it, 

1456
01:10:07,520 --> 01:10:11,480
right? 
Hey, I am not criticizing at 

1457
01:10:11,480 --> 01:10:13,200
all. 
I'm just telling a conceptual 

1458
01:10:13,200 --> 01:10:14,480
story because it's fun, you 
know? 

1459
01:10:14,960 --> 01:10:17,840
Yeah, yeah, yeah. 
I I am all for people getting 

1460
01:10:17,840 --> 01:10:20,720
rich. 
I am all for and I want to be 

1461
01:10:20,720 --> 01:10:23,280
really, really rich at the end 
of the day, you know what I 

1462
01:10:23,280 --> 01:10:25,400
mean? 
But I do believe in getting rich

1463
01:10:25,400 --> 01:10:28,040
the right way. 
Yeah, I just want to be 

1464
01:10:28,040 --> 01:10:30,240
comfortable, man. 
I, I don't think I'd want a 

1465
01:10:30,240 --> 01:10:32,360
house that big because I don't 
want to manage the staff. 

1466
01:10:33,400 --> 01:10:35,800
I know that's kind of silly to 
say, but like, I just. 

1467
01:10:35,800 --> 01:10:37,680
I'd like to find out if that's 
pleasant or not. 

1468
01:10:38,000 --> 01:10:39,880
Yeah, I wouldn't. 
I mean, I wouldn't mind like a 

1469
01:10:39,880 --> 01:10:43,480
nanny, you know, like that. 
But we could always have an au 

1470
01:10:43,480 --> 01:10:45,520
pair if I really wanted one. 
But I don't. 

1471
01:10:45,680 --> 01:10:47,280
So there you go. 
There you go. 

1472
01:10:47,320 --> 01:10:52,360
There you, you. 
You can buy us an au pair, Bill.

1473
01:10:52,360 --> 01:10:54,640
We're happy to no. 
No, no, I'm not looking to spend

1474
01:10:54,640 --> 01:10:56,360
my money on other people's au 
pairs. 

1475
01:10:56,960 --> 01:10:59,960
If you contribute to the John 
and Jamil Maxwell Memorial 

1476
01:10:59,960 --> 01:11:01,720
Mortgage Fund, Sir, we're 
accepting. 

1477
01:11:02,040 --> 01:11:03,520
There you go. 
I like that. 

1478
01:11:03,560 --> 01:11:06,760
Well, so if people do want to 
contribute, how can they support

1479
01:11:06,920 --> 01:11:11,720
what you do? 
Read my work, sign up for my sub

1480
01:11:11,720 --> 01:11:13,600
stack where? 
Should they sign up? 

1481
01:11:13,960 --> 01:11:17,280
It's on Maxwell on banks.com. 
And so the thing about my sub 

1482
01:11:17,280 --> 01:11:19,640
stack is that you're, you're 
primarily paying for the 

1483
01:11:19,640 --> 01:11:21,680
archives. 
But if you want to understand 

1484
01:11:21,680 --> 01:11:24,440
banking, the answer is in those 
archives. 

1485
01:11:24,840 --> 01:11:27,920
And I dropped the price to $250 
a year down from 1000. 

1486
01:11:28,160 --> 01:11:29,600
So because after I stopped, 
right. 

1487
01:11:29,600 --> 01:11:32,160
So to give access to the 
archives at a reasonable cost. 

1488
01:11:32,520 --> 01:11:34,000
So that's what I would 
recommend. 

1489
01:11:34,800 --> 01:11:38,560
But more importantly, I host the
most elite banking symposium in 

1490
01:11:38,560 --> 01:11:41,360
the country every year. 
And what I do is I put these 

1491
01:11:41,360 --> 01:11:43,440
bankers in these incredible 
environments. 

1492
01:11:43,440 --> 01:11:45,040
I'm doing seven of them over 
seven years. 

1493
01:11:45,040 --> 01:11:47,080
And I'm doing in the seven major
banking cities in the United 

1494
01:11:47,080 --> 01:11:48,600
States. 
I did that. 

1495
01:11:49,200 --> 01:11:51,560
I did the first in Philadelphia,
the second in Dallas. 

1496
01:11:51,560 --> 01:11:54,000
This upcoming year is in Boston,
which is why I'm wearing my this

1497
01:11:54,000 --> 01:11:57,000
Boston hat. 
And what I do is I put these in 

1498
01:11:57,000 --> 01:12:00,000
bankers in I encase them in an 
incomplete environment. 

1499
01:12:00,200 --> 01:12:02,320
This is how I describe it. 
And excuse the language. 

1500
01:12:02,640 --> 01:12:05,880
If JP Morgan fucked Disneyland, 
out would come the banking 

1501
01:12:05,880 --> 01:12:10,320
symposium, OK? 
I don't know if it's a 

1502
01:12:10,320 --> 01:12:12,600
legitimate child or an 
illegitimate child, but out it 

1503
01:12:12,600 --> 01:12:15,160
comes, OK? 
And it's my baby, OK? 

1504
01:12:15,640 --> 01:12:19,280
God, the image that I have and. 
So like in Philadelphia? 

1505
01:12:19,560 --> 01:12:23,640
Poor Mickey Mouse, anyway. 
So in Philadelphia, I bought out

1506
01:12:23,640 --> 01:12:26,280
this old bank building that was 
built in 1855 right across the 

1507
01:12:26,280 --> 01:12:27,880
street from the Second Bank of 
the United States. 

1508
01:12:27,880 --> 01:12:30,760
So right down there by the 
there's one block away from like

1509
01:12:30,760 --> 01:12:32,720
the Liberty or like the 
Independence Hall. 

1510
01:12:33,440 --> 01:12:35,320
And I turned it into an art 
gallery. 

1511
01:12:35,320 --> 01:12:37,200
I did. 
I do like all this art. 

1512
01:12:37,200 --> 01:12:41,000
I use data to make esoteric, 
esoteric data to make art. 

1513
01:12:41,000 --> 01:12:44,720
And it's really cool stuff. 
Yeah, I I like that a lot. 

1514
01:12:44,720 --> 01:12:48,040
I the the graphs you show are 
very cool and the way that you 

1515
01:12:48,040 --> 01:12:50,120
do them is very cool. 
Well, like look at this. 

1516
01:12:52,400 --> 01:12:54,840
Like I have all these. 
Yeah, yeah. 

1517
01:12:55,120 --> 01:12:59,400
Anyways, so I turned it into I, 
I hung 200 of these things and 

1518
01:12:59,400 --> 01:13:02,400
turned the entire thing into an 
art gallery with oh, that's 

1519
01:13:02,440 --> 01:13:04,560
sweet. 
Yeah, it was sick. 

1520
01:13:04,560 --> 01:13:07,000
And then we stayed and I always 
put them in a hotel that was 

1521
01:13:07,160 --> 01:13:09,960
either an old bank building or 
significant to a bank, you know 

1522
01:13:09,960 --> 01:13:12,480
what I mean? 
And so like I and then I, we 

1523
01:13:12,480 --> 01:13:15,080
talk about these thing, we talk 
about banking in ways that 

1524
01:13:15,080 --> 01:13:18,080
nobody talks about banking ever.
And I'll get them on stage. 

1525
01:13:18,080 --> 01:13:19,880
There's crying. 
There's like, it's crazy. 

1526
01:13:19,880 --> 01:13:22,040
It's, it's these a wonderful, 
incredible experience because 

1527
01:13:22,040 --> 01:13:25,560
the level of trust is so high. 
And then in Dallas last year, 

1528
01:13:25,560 --> 01:13:28,280
this year, I turned it into a 
cinematic experience. 

1529
01:13:28,280 --> 01:13:30,800
So I traveled the country with 
this young hotshot videographer.

1530
01:13:31,600 --> 01:13:33,640
For three months, Yeah. 
Your videos are dope. 

1531
01:13:34,160 --> 01:13:35,880
Yeah, and some. 
Shows are sweet. 

1532
01:13:36,120 --> 01:13:38,360
I was like, this dude's got some
artist in them. 

1533
01:13:38,480 --> 01:13:40,080
I like it. 
Yeah. 

1534
01:13:40,080 --> 01:13:42,600
And so I turned it into this. 
So we made all these videos and 

1535
01:13:42,600 --> 01:13:44,920
these movies of like travelling 
around the country. 

1536
01:13:45,320 --> 01:13:48,720
And then we, we, I put them in 
this, this the, do you know old 

1537
01:13:48,720 --> 01:13:50,280
Parkland? 
Have you ever heard of that in 

1538
01:13:50,280 --> 01:13:51,400
Dallas? 
Sorry. 

1539
01:13:51,600 --> 01:13:54,520
OK, So the Crow family, like the
largest real estate developers 

1540
01:13:54,520 --> 01:13:57,960
in the country, like Harling 
Crow, he is now the, the, the 

1541
01:13:57,960 --> 01:14:00,400
patriarch of the family. 
And so they bought this old 

1542
01:14:00,400 --> 01:14:02,680
hospital, old Parkland right 
outside of downtown. 

1543
01:14:02,680 --> 01:14:05,160
And then they built it out to be
like the headquarters of 

1544
01:14:05,160 --> 01:14:08,960
Trammell Crow. 
They're in the company and one 

1545
01:14:08,960 --> 01:14:11,440
of the things they did is they 
built a chamber, 4 stories, but 

1546
01:14:11,440 --> 01:14:13,920
a little ground, and it looks 
like the Senate chamber. 

1547
01:14:13,920 --> 01:14:19,360
It's insane and amazing. 
And so I brought them down there

1548
01:14:19,360 --> 01:14:20,400
and we show them all these 
videos. 

1549
01:14:20,400 --> 01:14:22,160
We talked about all these 
amazing bank things and like all

1550
01:14:22,160 --> 01:14:23,680
this stuff. 
But then I also had 

1551
01:14:23,680 --> 01:14:27,000
videographers there that then 
turned them into part of the 

1552
01:14:27,000 --> 01:14:29,640
cinematic experience, you know 
what I mean? 

1553
01:14:29,760 --> 01:14:32,680
And so now I'm able to like 
bring all this stuff out and I'm

1554
01:14:32,680 --> 01:14:34,320
kind of like in preparation for 
Boston. 

1555
01:14:34,320 --> 01:14:36,240
That's why you're seeing an 
uptick in all the stuff I'm I'm 

1556
01:14:36,240 --> 01:14:38,960
rolling out because I want 
people to see like the first two

1557
01:14:38,960 --> 01:14:42,200
years for proofs of concept. 
I lost money the first two years

1558
01:14:42,200 --> 01:14:44,120
on them. 
This year I'm going to make 

1559
01:14:44,120 --> 01:14:47,200
money because this year I know 
that it works and everybody 

1560
01:14:47,280 --> 01:14:49,440
thinks that they're phenomenal. 
So we're going to run it up to 

1561
01:14:49,440 --> 01:14:51,320
200 people. 
The first year when I kept it 

1562
01:14:51,320 --> 01:14:53,800
under 100, we're going to run it
up to 200 people. 

1563
01:14:53,800 --> 01:14:59,080
So if there's anybody on this 
podcast who can afford $5000 and

1564
01:14:59,080 --> 01:15:02,400
to stay in an expensive hotel 
that wants to learn about 

1565
01:15:02,400 --> 01:15:06,240
banking and truly be among the 
best, truly be among the best, 

1566
01:15:06,240 --> 01:15:09,760
not these people out there who 
say that the best top front 

1567
01:15:09,760 --> 01:15:12,440
bank. 
No, when I say it, it's true. 

1568
01:15:12,840 --> 01:15:15,360
And like, if you want to be in 
that environment and learn about

1569
01:15:15,360 --> 01:15:17,760
banking, that is the place to 
be. 

1570
01:15:17,920 --> 01:15:20,680
And so like if, if there's 
anything, I don't need anybody 

1571
01:15:20,680 --> 01:15:23,560
to do anything for me. 
But if they want to learn about 

1572
01:15:23,560 --> 01:15:26,160
banking I would love for them to
read my sub stack and come to my

1573
01:15:26,160 --> 01:15:27,440
event. 
That's dope. 

1574
01:15:27,640 --> 01:15:30,480
Well, there you go. 
And then if enough people do it,

1575
01:15:30,480 --> 01:15:33,480
maybe I can get a little bit of 
credit for participating in 

1576
01:15:33,480 --> 01:15:35,960
funding your nanny because I 
gave you a couple leads. 

1577
01:15:36,240 --> 01:15:38,360
I don't need anything else, just
a little bit of credit. 

1578
01:15:38,880 --> 01:15:43,040
I will get If that happens, you 
will get more than a little Sir,

1579
01:15:43,240 --> 01:15:45,640
don't worry. 
I like it, man. 

1580
01:15:45,640 --> 01:15:48,640
I'll tell you what, I when when 
I was like, all right, I'm going

1581
01:15:48,640 --> 01:15:51,640
to talk to Maxfield on banks. 
I had no idea how entertaining 

1582
01:15:51,640 --> 01:15:53,880
you'd be. 
I have quite enjoyed this 

1583
01:15:53,880 --> 01:15:56,120
conversation. 
I hope when your wife listens, 

1584
01:15:56,120 --> 01:15:58,680
she enjoys it too, because you 
know that second viewpoint. 

1585
01:15:58,960 --> 01:16:02,200
I had that with one guest. 
His wife was like, I don't know 

1586
01:16:02,200 --> 01:16:04,560
how you said this, but we got 
over it. 

1587
01:16:04,840 --> 01:16:06,120
Don't worry, she's not going to 
listen. 

1588
01:16:06,640 --> 01:16:07,760
I like it. 
I like it. 

1589
01:16:07,760 --> 01:16:09,880
Well, I don't think you said 
anything that you need to be too

1590
01:16:09,880 --> 01:16:13,320
embarrassed about anyway. 
But let me say before we sign 

1591
01:16:13,320 --> 01:16:15,080
off, like it's been such a 
pleasure. 

1592
01:16:15,080 --> 01:16:16,880
I said this at the beginning 
before we were taping. 

1593
01:16:16,880 --> 01:16:20,040
Like, I've watched what you've 
been up to and I respect you as 

1594
01:16:20,040 --> 01:16:22,480
a voice and like how you go 
about doing what you do. 

1595
01:16:22,760 --> 01:16:25,120
And so like, it's just been 
wonderful, like, to be able to 

1596
01:16:25,120 --> 01:16:26,600
connect with you. 
And like, I think, I suspect 

1597
01:16:26,600 --> 01:16:28,000
we're going to be friends for a 
while, my friend. 

1598
01:16:28,400 --> 01:16:31,000
Well, I appreciate it very much.
I look forward to that. 

1599
01:16:31,000 --> 01:16:34,840
Man, you cracked me up today and
thank you. 

1600
01:16:34,840 --> 01:16:37,200
Thank you for the kind words, it
means a lot. 

1601
01:16:37,280 --> 01:16:38,520
My pleasure. 
All right, my man. 

1602
01:16:38,960 --> 01:16:39,720
All right. 
Take care. 

1603
01:16:40,160 --> 01:16:40,560
Take care.