 So, you know, one of the interesting phenomena, I'd say, in the world is the attitude we have towards finance, towards finances. Since day one, or since the last, certainly the last 2,000 years, I can't think of a group that has been demonized more than anybody who has anything to do with money, money changing, money lending, banking, finance, Wall Street, so on. Every crisis is blamed on them, every problem is blamed on them. Every villain in a movie or in a TV show is usually somebody involved in finance, so certainly a businessman. I think that's just the two ones. The 51% of all the movies committed on television are committed by business leaders, right? Whereas in real life it's .0001% of something, you know, trivial like that. But in television we need villains, and businessmen and primarily financiers are attractive villains. And this is not new. If you go back to Jesus kicking them out of the temple, right, the money changes are kicked out of the temple, they're the bad guys. If you go to Dante, Dante's Inferno, the money lenders, bankers basically, I mean the 7th rung of hell, they've got a bag of gold around their neck, and the gold is dragging them into the fire, right? It's pulling them down into the fire. They are the bad guys. If you've ever had one of my favorite Shakespeare plays, it's a play called The Roach in Venice. Highly recommended if you've ever seen it on stage. There's actually a movie with Al Pacino. He plays Shylock, the money lender, the Jewish money lender, and there's a whole angle here about Jews as well in terms of finance. They're always linked, historically. And of course Shylock is the bad guy and he's the guy who demands the payment for a loan upon the flecks, basically the life of the guy who can't pay him back. So instead of, in a sense, bankruptcy, what you get is a pound of flesh. It's a fascinating play, both in terms of the anti-Semitic aspect of it, but also in terms of the attitude towards finance, the attitude towards money lending, and the way the court system runs in Venice of the 1500s or 16th century. You know, at modern times, I don't know, you've probably seen the movie Wall Street. I don't know about if your generation, if that's a big time movie, but for us, that was the movie to see. And of course in Wall Street, the real bad guy is the Wall Street guy, right? And if you listen to the movie, it's a fascinating dialogue throughout the movie because the movie from the beginning, the guys who talk finance are talking in terms of warfare, in terms of blood, in terms of machine guns, in terms of everything is about violence. And there's this strong association, generally I think of capitalism and violence, but certainly of finance and violence. Finance, and the reason is that we perceive finance to be a zero sum game. War is a, what's war? Zero sum game, positive sum game, negative sum game? What's war? Yeah, what is a negative sum game? Right? Negative sum game in the sense that you're worse off after than before. You've lost, wealth has been destroyed, lives, obviously, have been destroyed. War is always a negative sum game. It's always interesting to listen to economists like Paul Krugman claim that war creates economic activity and it's somehow a good thing, you know, because GDP goes up during war. Do you know why GDP goes up during war? Yeah, they're putting money, so GDP measures government spending. So government spending is a positive on GDP. So government spending goes through the roof, so GDP goes up. So for example, first year of World War II, GDP in the United States grew, like the US economy's closing grew by 12%. But if you think about it, what did standard of living do? What did quality of life do? Like it plummeted, right? If you were a man, you were often a trenches somewhere in Europe or in the Pacific, your life sucked, right? And if you were a woman, you were now going to work, but you were working in factories to build what? To build machine guns and tanks, which were useless when it comes to actually improving human life. I mean, you necessarily have to defend yourself if you're a war, but they're not for really economic growth. So even though GDP goes up, standard of living goes down, you always have to watch GDP numbers because they're always tricky in that way because they measure things that are not necessarily correlated with human wellbeing. So sometimes GDP goes up in the wrong reasons, like during the war. So war is a negative sum game. And the attempt is to associate finance, and always has me to associate finance, with a negative sum game. The idea is when you enter financial transaction, everybody loses. Oh, somebody wins, but it's at your expense. And overall society is worse off. That is kind of how finance is presented in the movies and stories and our popular culture in kind of the way we think about the world. And the two questions one has to ask about this. One is it true? Maybe it's true, maybe finance really is a horrible profession, right? And second, if it's not true, then why do we have this perception of finance? Why do we think of finance financiers, financial activity in such negative terms, in such a zero sum or even negative terms? Because there's something important going on here. And it's not new, as I said, this idea has been going on forever. Money lending is always the first guys in olden times to get killed. And there's certainly the ones to be demonized throughout. So first, is it true? It's amazing to me that anybody would consider that it's true if you look at the world around us. Every business that starts, every business that grows, and we know that businesses are what hire people, so every job that is created is at the end of the day created by, because somebody's willing to invest capital in order to make that business sustainable. So think about what is it, let's take a bank, a bank of the easiest kind of financial markets, what a bank's good, what a bank's good, what's that? They give loans, so what does that mean? Who do they primarily give loans to? Who is the primary who gets loans? Businesses, most of the loans are given out to business, it's not to consumers, but most loans are business loans. What do the businesses do with the money? Run it, waste it, what do they do with it? Yeah, they grow their plans and equipment, they buy stuff, they buy hireable people, they're using it to run the business, to actually grow the business. I mean, a bank's not gonna give you money, not gonna lend you money if you're gonna use the money to go back to the bank, because then you can't return it. It's usually because you're gonna invest that money in a way that makes a return from which you can return the money to the bank. So bank loans are one of the few ways in which the economy grows by growing businesses. By growing and businesses growing means employment is growing. And the banks loan money to all businesses. Anybody who walks into the bank, hey, I need a loan, I need to grow my business, do they all get it? No. No, what is the criteria by which a bank decides whether to give a loan or not to give a loan? Why would you give one guy a loan and another guy a loan? No. Yeah, creditworthiness and what's the creditworthiness, particularly on the business side, based on? Your ability to actually do something with the money, right? Do something useful with the money. Actually produce, actually employ more people, actually grow the business. So on the long-giving side, not only are they giving loans to businesses, but they're giving loans to the businesses that based on their judgment are the best businesses. If you're a lousy business, if you're gonna basically waste the money, if you're not gonna be successfully investing in it, the bank is gonna try not to give you that money, right? So the bank does two things. One, it provides financing, but second, and I would say much more important, it discriminates. It decides who are the good guys and who are the bad guys. Who's gonna actually be a good business person? Who's not gonna be a good business person? Think about venture capital. Does everybody get venture capital in Silicon Valley? Do you have an idea? You just walk into Sequoia Capital or client programs and they just write you a check, right? No, they're selective. On the basis of the same thing a bank is, right? Psychic and business, but same idea. They decide who is worthy, who has a good idea, who can actually generate probably profits, who's gonna employ, who's gonna build, who's gonna grow a business, and who is not. So capital is not wasted. It's put, efficiently deployed to productive activities. Which is hard. It's hard to decide what's gonna be successful and what's not. Very few venture capitalists are good at what they do. Banking's a little easier, but even in banking, some of those loans, particularly if there's a recession, you know, don't get paid back. And you get rewarded, i.e. in profit as a bank, if you're good at it and you get penalized and ultimately go bankrupt if you are bad at it. So there's a self-reinforcing system which makes sure that the best people at allocated capital, decided who deserves capital, who's good at deploying capital, who's not, they rise to the top, they're the ones who success. Now that's one thing, one thing begs us, yeah. So you would regard bailouts of certain financial businesses as interfering with the mechanism that's determining who is the city manager? Yeah, absolutely, I mean bailouts are a way for the government to say, you don't have to be responsible anymore. You don't have to think too hard about how you're gonna get the money back or who's a good investment and who's a bad investment. Indeed, you can take on massive amounts of risk which is often associated with high, actually short-term returns because on the upside you get to benefit and on the downside, we bail you out. So don't worry, don't do your job. Don't think about what you actually need to do because we'll bail you out no matter what. So I think bailouts are unbelievably destructive to the ability of a bank or ability in any financial institution to do their job properly and to get penalized when they do their job badly. And therefore, if one bank, right, if one bank is doing badly, you know, if one bank is doing badly due to financial crisis or whatever, and therefore is about to go bankrupt and another bank hasn't done badly. It's actually did a good job during this period and it's doing okay. When you bail out the bad bank, you're doing two things. One, you're awarding vice. You're awarding, or at least you're awarding incompetence. And you're saying incompetence is okay and you're penalizing the good bank. Why are you penalizing the good bank? What would happen if the bad bank goes bankrupt? The good bank would take their customers. They would grow, right? But now they've got competition which is funded by government funds which is funded by a bailout, not funded by a market, not funded because this other bank is really a competitor. So you're penalizing the ability of the good bank to expand, to grow, to... And therefore, you're actually expanding competence in the economy. And what they did in 2008 during the bailout of the banks is just who, in terms of its consequences for financial institutions in the United States in terms of how we see banking and how banks can function. Because the good guys got penalized and the bad guys got rewarded. And when you create that kind of incentive structure, you're just asking for more trouble. You're asking for more crises. You're asking for bad investments and bad allocation of capital. Which is, I think, why we got such slow economic growth for this crisis, one of the reasons and why I think the next crisis is very likely to be worse than the previous crisis because we're building up this bad, these bad investments, these bad incentive structures. But you have bailouts, a distortion to a healthy market process of correcting for bad behavior. And rewarding good people. Rewinding, I know banks that came into the financial crisis during the financial crisis never had a losing quarter. Made money every single quarter. They had no financial problems. And that they were forced to take top the bailout money. They were forced to pay it back to the government with an interest, so the government made money off of it. And they couldn't expand their business because the banks they would have liked to have, you know, actually taken business from were bailed out. They also got the same kind of top money. The government treated good banks and bad banks exactly the same. Between good kids and bad kids exactly the same. There's gonna be problems as they grow up. There's gonna be problems. So having a healthy financial market on that side, on the side of who gets the money and who doesn't is crucial because it is what, suppose economic growth, it's what rewards good companies, encourages them to grow. It's what holds back bad companies and encourages them to shrink.