What do you spend more time in, trying to get the guests or doing the work and doing the background on them? Because these are varied people. Do you...
You know, I guess everybody has Wikipedia, but you must have to go deeper.
Yeah, we have to go deeper. Like Simon having that call with you beforehand. There's a lot of podcasts that wouldn't do that; they would just tell you when to turn up.
Poor Simon. How long do you want this to be?
Seven hours, I think, because I reserved six for this, but I talk quickly.
Being from Brooklyn. Yeah. You got to be the kind of person who's curious about what other people do.
Well, I think an explorative mindset is probably one of the most important things you could have in your armory, right?
I think the most important virtue, you know, is to be curious. Well, Lloyd, welcome to the room where it happened.
Well, thank you, Jake. It's good to be here.
I want to start by going back to a moment where you were at your father's retirement party. You write about this in your brilliant new book, and there's a moment where your dad can kind of see how the future looks and everyone knows that change is coming but they're not sure in what form that change is going to come. And I wonder whether you can now see the parallels between the experience that your father was having at that time with where we now sit with the advent of automation and AI.
So my father worked for the post office. He was a mail sorter, which you did manually. So he worked at nights and knew the name of every village in the state of Connecticut as he pushed letters into one box or another. And he'd done that for a very long time. So working for the government and it was a public building, we were never allowed in. And you calling it a party is generous.
We just sort of snuck in as he was saying goodbye to his colleagues. And when I did walk in and I saw where he was working, there was this big machine behind him that was still covered in plastic. I said, 'What is that?' And it turns out that was an electronic mail sorter, which we would take for granted today, but in those days, it was new, but not that new. It had apparently been sitting behind him for a long time. At any time, it could have been plugged in, put to work, and done his job much more efficiently, much better, without making mistakes. And I thought to myself, how sad. My dad did this job for years, and it was a job that didn't need to be done because a machine could have done it. But of course, the government didn't want to fire anybody. They had people leave only by attrition when they retired. And somebody somewhere was waiting for him to retire so they could plug in the machine and turn it on. And I'm thinking, boy, what a very low level of job satisfaction. And that kind of haunted me. And my dad passed away. I never would have written about this were he still alive because it's sad for me, and I'm sure on some level it was sad for him. But for him, it was a job, and he was earning money, and he wasn't thinking in terms of job satisfaction or big questions about the displacement of human labor by machines. He was just trying to earn a living, and he was earning a living by stuff that hasn't been done. And so very often when I approach things and I think about new technologies that are coming along, I think to myself, what are we doing today that doesn't have to be? Even watching a war movie and you see people risking their lives flying these crooked machines over to drop bombs wherever they were dropping to liberate the continent of Europe, I'm thinking today people wouldn't be doing that. They'd push a button and a missile would be launched. There's a lot, I mean maybe that's not the first example that you'd pick of technology displacing labor and risk and other resources, but it has its moments today. And there have been elements of my career, early in my career, where I did things that no one would do today and no one would remember. I remember even in college taking examinations in science classes where you had to do calculations and the teacher wouldn't let us use calculators. That's how old I am, because calculators were just becoming available. Electronic calculators that now cost zero, those days were a little expensive. Not everybody had it. And they said, you know, you can't take that calculator into the exam with you because if you did, how would you ever learn how to use a slide rule? Now, I don't know if you... my kids would say, 'What's a slide rule?'
Exactly what my thought was. Yeah.
Well, did you ever see the movie Apollo 13 where they're trying to make a calculation, they're moving these things, right? It's a logarithmic scale and that's how people did division and multiplication. But anyway, the point is that there's a lot of things that I even did in my life, proofreading telexes. What's a telex? You know, you see ticker tape parades on Wall Street and you say, 'What are those ribbons and those tapes that people are throwing?' That's how people used to send messages to each other.
That's where the ticker tape comes from. I haven't even thought about that. I just thought it looks pretty.
Yes. And so there it was, holes punched in a thing. It would come across a tape and you'd read it like that, and lost to memory what people used them for. And today, of course, everything is by email. If you make a mistake, you could correct it. In those days, you couldn't correct a mistake. Anyway, as we sit here, you referred to my book. One thing I wanted to do is get my book out quickly...
Before everyone assumed that a machine wrote it.
Yeah. Or while people are still reading books, while people are still rather than just putting it into AI and summarizing it in one sentence.
Yes. And so now, but I think this is what's really interesting though is that you're saying like you looked at your dad the day that he walked away and you kind of thought, man, there's a sadness there that he thought he had to do something he doesn't need to do. And I wonder whether we have that same feeling now, like we're so clinging to what we know and we're so fearful of what AI is going to do. And it's...
Of course, the modern world is the telex, the modern world is the slide rule world. We need to let go of these things. Of course, I get the point. So in other words, the rumination today, people are stressed and wringing their hands. AI is bad because look at the job it's going to displace. How could you be mad at anything that makes people more productive? There will be, at the beginning, I'm not as familiar with the UK, but I'm sure the statistics are similar in the United States. At the turn of the 20th century, more than half the country was involved in agriculture. Single-digit percentages today in the US, they all found something to do. Detroit, the auto industry, different manufacturing that goes by the board, they found software. Software will go by the board. They'll find other things. Maybe there'll be more massage therapists. Maybe people will work six hours a day instead of eight hours a day and four days a week instead of five days a week. Two generations ago on Wall Street, people worked five and a half days a week. They came in Saturday to finish their paperwork for the week. And now people don't do that at all. There is no paperwork. And so, how could anyone be against progress? And even if you found someone who was against progress, it doesn't matter. Progress is inexorable. You might as well be cursing at the tides or the winds. It's just going to happen.
See, I look at these kind of modern tech bro influencers who are talking all the time about productivity and hard work and output and achievement. They never talk about flow. They never talk about happiness. They never talk about contentment. And I wonder whether AI is going to put us into a world where we actually as human beings can start prioritizing the things that actually we love more than needing to just work to live.
Look, the economy could deliver to you time and wealth and good housing and available meals. I think you have to go to other sources, other places to source your happiness and stuff, and you shouldn't rely too much or blame the economy or the political system for that. I think if you can get your needs satisfied by working 25 hours a week instead of 45 hours a week, I think the economy has kind of done its job. Now it's up to other sectors of life to deliver your happiness.
Who do you think will be the winners in this AI movement?
Well, and again, this is not a one-off moment of time where somebody sounded a horn and now we have technology. We've been, you know, again cursed or benefited by technology all along and it's kind of incremental. And so what we call AI, I was listening to somebody on television say, 'This industry is 98% involved in AI, 98% of them use AI in some capacity.' And I'm saying, well, that depends on how you define AI. I mean, going back a few minutes ago, I guess you could say something that does arithmetic for you, a calculator, is a form of intelligence in some way. So winners will be the people who can adapt the quickest and deploy it and make themselves more efficient. And yes, there is an incentive for industry, for employers, to deploy machines because they're going to be cheaper than having humans. And somebody will identify that as callousness because they'll hire fewer people and therefore they'll support fewer families. But those people and those families will find other things to do, other services to perform, other things to create, or else the society will require less time to satisfy the material needs of society. And so they're all good things, but nobody has singular responsibility for delivering wealth and happiness to everybody. So who are the winners? Yes, the people who can apply these things more efficiently. By the way, in the early days of anything new, what we think of doing first is the same things we do today, quicker, more efficiently, and with fewer mistakes. But as you get comfortable with the technology, you suddenly discover things that you never thought you could do that you'll now do for the first time that you haven't thought of now. I'd love to tell you what they are, but I haven't thought of them either necessarily. But I remember, again, I was reading a book on architecture in New York and they're repurposing one of the earliest skyscrapers in New York where it was one of the first skyscrapers that used structural steel. Prior to that, you just made a very heavy base and you just built on top until the weight would be crushing. And so the buildings were six stories tall or seven stories, and this was big. But they used structural steel on this building and they clad it. The building was clad not in glass, which you could do in a modern skyscraper, because they didn't contemplate the buildings. They made the building look like other buildings, just a lot bigger. And so they clad it in stone all the way to the top of it, and they thought about that because they couldn't get it out of their head of what a building should look like.
And then of course time goes on and now you can make buildings, because of structural steel, you didn't have to use that material. You could use glass and you could use other things to build your skyscraper. And that's going to be in a lot of things. We're going to find uses that we don't think of today, we're going to do activities that we don't think of today, and there'll be new industries that will grow up around it. Now in the short term there'll be dislocation because software programmers don't want to be massage therapists.
Yeah. And don't want to be gardeners that may not be displaced by AI.
And so we'll talk about retraining and that won't work so well, and people will take time and some people will resist retraining and won't be effective at it. And so sometimes the public sector has to step in and sort of, as the society gets more wealthy, they'll have to tax them and somehow redistribute things in a way that if they do it correctly, that makes it more seamless than it otherwise would be. But there's always things that are being displaced by technology and always new things and new opportunities that are being advanced. We're sitting here in a podcast, who would have thought this? And now the network television has found itself in a different position than it otherwise was in before, and life moves on. This is the perfect example. The days are gone where a television network has all the power. They're now coming to podcasters trying to get a podcast owned by an individual onto a TV network.
Sure. You disintermediate, and those platforms are now somewhat disintermediated. You have your own brand and your own reputation and your own following, and you don't have to be, maybe it's a poor choice of words, you don't have to be a slave to a bigger enterprise that wants you to do things in a certain kind of way. You're liberated. And that means a specific audience can find you that might not find you on one of three or four networks. Everyone can be his own network.
Now, this is progress, and at the end of the day, I could try to persuade someone to like it and get used to it, but at the end of the day, there's no choice. So, are the people who are going to be the winners the individuals and the companies investing in AI? Well, not necessarily. Well, I think no, that's the big issue in the world today. The big issue in the finance world today, and again I live this more probably more than you do, where people are nervous about credit that's been extended to build these data centers. Where you have, for example, companies in the United States that are each spending over a hundred billion dollars of research. Countries don't spend a hundred billion, but each of these companies, by the way, they're spending it out of their cash that they earn every year. These are how massive these multi-trillion dollar companies are. And the question is now that this has been going on for a bit of time, people have said, 'Whoa, have we overbuilt this? Will we get a return on this investment? Have we overdone it?' Will the companies that are building these things, and some of these things are built for these companies but are owned by other companies that are dedicated and bear the credit risk of having built these things. In other words, they need, in order to pay back their loans, they need to get the revenue. And thinking, will they earn that revenue and is it overdone? And then one of the things now that's roiling finance a little bit is have we institutionally overinvested in building these data centers, which are very, very expensive, and have we overbuilt it? Or will some technology come along and mean we don't have to invest? And if we build these data centers, will we have the energy to actually run them?
Yeah. And if we do have the energy, will that come at the cost of elevating everybody else's, the energy cost of real humans? You know, life is never, when you're at the precipice of change, which we seem always to be, it's never that simple.
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What I really like about this conversation, well, for a start, I like your humility. For someone that's done what you've done at the level you've done it, for the number of years you've done it, to sit here and say, 'What do I know?' Well, the answer is you know quite a lot. I also like the fact that I think there's often a point in people's lives where they stop exploring because they think they know everything. And you are clearly an explorer who is still as excited about the future, if not more so than the present, and certainly the past. And you tell a story about a sort of a run-in with the whole Robert Maxwell affair. And in that you said it paid to be paranoid. And I wonder where the importance of 'it pays to be paranoid' sits with the importance of exploration and optimism for the future. How do you balance the two?
Well, I relate that story. It happened. You know, I'm happy to say I was very young when that happened and I wasn't a full-fledged adult, but I was a very young person in my firm at the time. And I got a little bit overseduced by the great man who was calling the desk and transacting in foreign exchange. And I was a little person on the foreign exchange desk making... and to get to the point, I was an unwitting, being-duped instrument of part of his fraud, which I didn't know. I'm not even in the whole story of Robert Maxwell, which your audience probably won't even know about. He was a fraudster, and one of the things he did is he moved money from a public company that he controlled to his private company that he owned, and basically dissipated the pensions of people in that public company. And it was very, very scandalous. And he did that, and I worked for the bank at that time, Goldman Sachs, which was making payments, and he was transacting, and he was authorized to do these things, and there was no reason I should have known it. But I was so impressed with myself that the great man was calling me up and executing foreign exchange plans, and his back office would give me instructions, 'Move the money here rather than there,' and all legal. And the feeling was he was a great man because he was achieving a lot.
Yes. And he was important. He was famous, and his name was in the newspaper. He owned the newspapers. And I did this, and I realized problems can come at you from all sorts of different directions, and one shouldn't be... and then as life moved on for me and I became much more important and more influential and was able to control more levers, one has to step back and not get overly seduced by the fact that people who you look up to or you think are important are now favoring you with their attention. And we all want to be well thought of, especially by people who we think of well.
Especially if they're famous or important or rich.
And I learned early in my professional life that you have to make yourself a little bit remote from that and withdrawn. And I will note for you that the people who had the job I have, which is running big financial institutions, and again I don't live here, I live more in New York, but those people tend not to be in the social swirl of New York. You make yourself remote because people come to you to finance them, to help them launch their stuff, to lend them money and take their credit risk, or to endorse their products with your imprimatur and validate them. And if you're too friendly, you get drawn into things. But that's just my observation. I'm a friendly person and I like knowing people. But you have to be a little bit aloof from that because you have to exercise this judgment, and sometimes judgment can get a little clouded by your own natural desire to be liked and put on a pedestal by others. And people can fawn over you and have an influence, and you have to make yourself a bit impervious to that.
So interesting. And you had to do that in your career.
One does that, or else one wouldn't survive in his career. So I never said, 'I have to do that,' but in thinking back and reflecting back, I realize I have done that.
And do you think that there is enough paranoia in the financial markets today?
Oh, I can't tell you how... I may have been an outlier in terms of my level of nervousness and paranoia. I always ask, and people are talking about finance, and I came from the trading side of the business, and people project themselves as tough. And I once said to someone, 'I'm a worrier, not a warrior.'
A worrier, not a warrior.
A worrier, not a warrior. And so I was always nervous, and I think that nervousness in a financial business, in a business where you take risk and where you take credit, up to a point, is a virtue. Being nervous is a virtue and not taking things for granted. You always had an expression in this business, you know, you had to see around corners. Now, you can't literally see around corners, but the point was you had to look for things that weren't easy to see.
And of course, when things go wrong and when something does happen, everybody thinks they saw it all along. And when they look back, hindsight is 20/20, and when sentiment changes, it affects your memory. And I promise you, if AI turns out to be a success with never a move back, everyone will remember having always thought that. And if parts of AI turn out to be a bubble, everyone will remember thinking that it was a bubble. And that's also a part of human nature. But by the way, you started the conversation by referring back to the tech bubble. Tech was a bubble because there were too many companies that weren't very good, and the companies that were very good all couldn't make it. So it was a bubble. It burst. But guess what? The technology was still valuable, but not as valuable in that moment as they thought. And a lot of the valuable companies that remain today, Microsoft, Amazon, they all had their roots in the tech bubble and they came through it, and others fell by the wayside. And so you say, when you sit here and think, was it really bad that we had that? Maybe it's just inevitable that you overdo stuff. Who's going to get it right? It's an uncertain future. You don't know where it's going to go.
Of course, you're going to go in multiple directions and they won't all work. Of course, you're going to overinvest. That's why when somebody said...
'Do you believe that this is good or bad that we're investing here?' It's inevitable that some of it will be investing in a cul-de-sac that goes nowhere and some of it will be overdone. But we're just people and we don't know the future until we get there. And so it's kind of baked in the cake that we're going to have to write off some mistakes. To say that we're not overinvesting is to say that we're not going to make mistakes about an uncertain future, about guessing an uncertain future. And that's impossible.
So failure is the price of ambition.
When you look forwards and you try and look around the corner, I wonder what you see, because I saw an interview with you recently where you said that you can sniff a potential financial crisis in the offing.
Yes. Unfortunately, I'd probably sniff 10 out of every three of them because your paranoia makes you see this. But I'd rather over-sniff than under-sniff.
Okay. Well, let's over-sniff then for our audience because I think it's valuable for them and it's much better for them to listen to over-sniff at all.
Today there's a number of... and by the way, they could come from left field. You can have a financial crisis from a malevolent tech hacker...
Who erases, you know, some system that we all rely on to keep track of everybody's payments or where everybody's wealth are because they all exist on computers.
So these left field things can happen. These things can happen. A meteor could come down and, you know...
