Are We Reliving 1929? Parallels to Today’s Market Mania — ft. Andrew Ross Sorkin
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this episode of Prof G Markets, Scott Galloway and Ed Elson interview Andrew Ross Sorkin, editor-at-large of DealBook at the New York Times and co-anchor of CNBC's Squawk Box, about his new book "1929." The conversation explores the parallels between the 1929 stock market crash and today's market environment, examining key figures from the era and their modern equivalents. (08:43)
• Main themes include the dangerous parallels between the speculative markets of the 1920s and today's AI boom, the role of leverage in financial crashes, and lessons for modern policymakers from past financial crises
Speakers
Andrew Ross Sorkin
Andrew Ross Sorkin is the editor-at-large of DealBook at The New York Times and co-anchor of CNBC's Squawk Box. He is the author of multiple bestselling books, including "Too Big to Fail" and his latest work "1929." Sorkin is also the creator and executive producer of the Showtime series "Billions."
Scott Galloway
Scott Galloway is a clinical professor at NYU Stern School of Business, serial entrepreneur, and bestselling author. He hosts the Prof G podcast and recently received an award from the Simon Wiesenthal Center for advocacy and protection of Jewish people.
Ed Elson
Ed Elson is the co-host of Prof G Markets and works alongside Scott Galloway in building their media business. He represents the younger perspective on the show and is known for his analytical approach to market trends.
Key Takeaways
Speculation Built America, But Balance Is Key
Sorkin argues that speculation, while often viewed negatively, has been fundamental to American innovation and growth. (24:04) He notes that betting on visionary entrepreneurs like Elon Musk with Tesla was speculation that drove technological advancement. The challenge lies in maintaining "some semblance of speculation in the system" without allowing it to go overboard. This insight reframes speculation not as inherently destructive but as necessary for progress, requiring careful calibration rather than elimination.
Modern Markets Face Hidden Leverage Risks
Unlike 1929, today's financial system has better regulations and oversight, but Sorkin warns that leverage has moved into less transparent areas. (17:00) Much of the loan market has shifted to private credit since 2008, creating disclosure gaps. The AI boom involves complex partnerships between tech companies and private credit funds, making it harder to understand where systemic risks lie. This suggests investors and policymakers need enhanced visibility into modern leverage structures to prevent future crashes.
Policy Response Capacity Is Compromised
A critical difference between 1929 and today is America's fiscal position. (26:07) In 1929, the U.S. had a budget surplus and minimal debt, allowing aggressive monetary stimulus during recovery. Today's high debt levels limit the government's ability to "flood the system with money" during future crises without creating new problems with bondholders demanding higher yields. This constraint means future financial crises may require different policy tools and could be more prolonged.
Character-Driven Understanding of Markets
Sorkin's approach to understanding financial history focuses on people rather than abstract economic theories. (48:13) He believes that by understanding the motivations, insecurities, and decision-making processes of key figures, we can better comprehend how economic cycles develop. This human-centered approach makes complex financial events more relatable and provides deeper insights into why markets behave as they do, suggesting that studying personalities is as important as studying fundamentals.
Kindness as a Career Strategy
The conversation reveals that exceptional success often correlates with kindness and generosity rather than ruthless behavior. (59:59) Sorkin's own success is attributed partly to his willingness to help others without expecting immediate reciprocal benefits. This creates a network of goodwill that opens opportunities and builds lasting professional relationships. The insight challenges the stereotype that success requires stepping on others and suggests that collaborative approaches can be more effective long-term strategies.
Statistics & Facts
- The stock market was up 90% from 1928 to September 1929, creating an environment of speculative euphoria. (09:21)
- By 1932, the market was down 90% from its peak, and unemployment reached 25% of the population. (15:30)
- Approximately 9,000 banks effectively failed during the Great Depression period. (15:38)
