1929 vs 2025: Andrew Ross Sorkin on Crashes, Bubbles & Lessons Learned
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
Andrew Ross Sorkin joins the All-In podcast to discuss his new book about the 1929 stock market crash, revealing the untold human stories behind one of America's most pivotal financial disasters. (01:44) Sorkin explains how his research into this era began during a vacation ten years ago when he couldn't find character-driven narratives about the crash, despite there being excellent academic books on the period. (02:54)
- Main Theme: The book examines the personal motivations, relationships, and poor decisions of key players in the 1929 crash, drawing parallels to modern financial markets while exploring whether we're facing similar risks today through technological disruption, leverage, and speculation.
Speakers
Andrew Ross Sorkin
Financial journalist, author, and co-host of CNBC's Squawk Box. Sorkin previously wrote the acclaimed book "Too Big to Fail" about the 2008 financial crisis and is known for his character-driven approach to financial storytelling. He's also the creator of the hit HBO series "Billions" and is a regular fixture at major financial conferences.
Chamath Palihapitiya
Venture capitalist and founder of Social Capital, known for his outspoken views on technology, markets, and economic policy. He's a co-host of the All-In podcast and has been vocal about his investments in companies like Tesla and Bitcoin over the years.
David Sacks
Entrepreneur, venture capitalist, and co-host of the All-In podcast. Sacks has founded and invested in numerous technology companies and is known for his contrarian takes on economic and political issues.
Key Takeaways
Credit Democratization Always Precedes Financial Bubbles
Sorkin reveals how 1919 marked a turning point when Americans first began borrowing money regularly. (04:09) General Motors started lending money for car purchases, followed by Sears Roebuck for appliances, and eventually banks like National City began lending for stock purchases. This created a cultural shift where people could put down $1 and borrow $10 to buy stocks with no risk underwriting or regulations. The parallel to today's democratization of finance through apps like Robinhood and crypto platforms shows how expanding access to leverage often precedes market crashes.
Speculation Is Essential for Innovation, But Requires Careful Balance
Sorkin emphasizes that speculation isn't inherently evil - it's "the twin of innovation." (14:58) He argues that without someone willing to speculate on Elon Musk early when Tesla seemed "totally insane," we wouldn't have revolutionary companies. The challenge isn't eliminating speculation but creating an environment that encourages it while preventing it from spiraling out of control. This insight is particularly relevant for today's AI boom and startup ecosystem.
Technology Amplifies Both Opportunity and Risk
The 1920s saw RCA become "the NVIDIA of its time" with radio technology transforming society. (05:54) Sorkin notes how technological revolutions always create massive investment opportunities while also enabling dangerous levels of speculation. Today's AI revolution mirrors this pattern, with massive corporate spending on data centers potentially propping up GDP while creating new forms of systemic risk through interconnected investments and circular funding arrangements.
Media Creates Financial Celebrities Who Drive Speculation
Sorkin describes how Time Magazine (1923) and Forbes (1917) began putting business leaders like Charlie Mitchell on magazine covers alongside Babe Ruth and Charles Lindbergh. (10:39) This celebrity culture around finance leaders drove public fascination with wealth creation and speculation. The same dynamic exists today with social media amplifying the reach of financial influencers and tech entrepreneurs, potentially driving retail investment decisions based on personality rather than fundamentals.
Regulatory Solutions Often Serve Special Interests Over Consumer Protection
The Glass-Steagall Act, commonly viewed as consumer protection legislation, actually resulted from banking lobbying to marginalize JPMorgan's dominance. (22:40) Sorkin found letters showing that even Carter Glass was frustrated that "the bankers" were taking over his bill. This reveals how regulatory responses to financial crises often serve industry power dynamics rather than genuine consumer protection, a lesson relevant for evaluating today's proposed crypto and AI regulations.
Statistics & Facts
- In 1928, the stock market went up 48%, creating an atmosphere where "nobody was thinking about the music stopping." (05:30) This massive gain in the year before the crash shows how quickly speculation can build momentum.
- Unemployment reached 25% in 1932, three years after the initial crash, demonstrating how financial crises can have delayed but devastating real economic impacts. (33:28)
- By the end of 1929, the stock market was only down 17%, which made people think it would recover quickly - showing how initial market movements can mask underlying economic problems. (37:39)
