Pod Insights The Prof G Pod with Scott Galloway Sports Betting, Challenges Facing Young Men, and The Fall of Sam Bankman-Fried — with Michael Lewis About this episode Michael Lewis, a New York Times bestselling author and the host of the podcast Against the Rules, joins Scott to discuss the state of sports betting, the challenges young men face, and the controversy surrounding his book, Going Infinite, which explores the rise and fall of Sam Bankman-Fried.
Scott opens with his thoughts on the Omnicom-Interpublic merger.
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0:01 Speaker 00 This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18 plus.
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1:22 Scott Galloway? Episode 328. 328 is the country code belonging to Guyana. In 1928, Mickey Mouse first appeared in the sound cartoon Steamboat Willie. What's the difference between Disney+ and youporn? Disney+ wants you to hate your stepmother.
1:37 Speaker 05 Go, go, go!
1:47 Scott Galloway? Welcome to the 328th episode of the Prop G Pod. In today's episode, we speak with Michael Lewis, the host of the podcast Against the Rules and New York Times bestselling author of several books, including The Fifth Risk, Flash Boys, and The Big Short. We discuss with Michael the state of sports betting that challenges young men face and the controversies surrounding the book Going Infinite, which explores the rise and fall of Sam Bankman-Fried. I really enjoyed this conversation. He's a very... Simply put, Michael is a great storyteller and has written some of the kind of iconic books of our time. Okay, what's happening? I'm home in London before heading to South Africa for the holidays. I'm super excited. I'm taking my sister and her family. My sister is turning 50, which in the Galloway
2:32 Scott Galloway? household means she's turning 40. And love hanging out. You know, it's wonderful. So my sister and I never lived in the same household. I was raised by a single immigrant mother. My dad, that was my dad's second wife, as far as we know. Pretty sure there was another one that we don't know about. And then he started his third marriage while he was married to my mother. Bad for him. Bad for him. And he married Linda, who is Ashley's, they had a daughter, and that was Ashley. And Ashley and I always got along, but part of it was we didn't live together. So we were just kind of, you know, just 10 years difference between the two of us. And as we got older, we became kind of, it was sort of fun to just sort of wake up and realize you had a sibling that you got along with and you
3:13 Scott Galloway? still felt that familial bond with. And we had been close siblings. It so has struck me how many siblings don't get along. And I think that's one of my biggest fears about my boys is they're going to grow up and for whatever reason not be close. But I found that not living with my sibling and then waking up and finding out you had this intelligent, interesting, you know, nice person who felt a bond with you was really wonderful. It's also been key in helping take care of my father. Anyways, I'm super excited about going to South Africa. I love Africa. This will be my third time. And people say, they say, don't say Africa. That's like saying North America. Every part of Africa I've been to,
3:54 Scott Galloway? I've really enjoyed. Anyways, moving on. Major shakeup in the advertising world. Omnicom announced a 13 and 1/4 billion all stock deal to acquire its rival, Interpublic Group. The deal We create the world's largest advertising business, merging the third largest ad buyer, Omnicom, with the fourth largest, Interpublic. According to 2020 figures, the combined entity would generate over 25 billion in annual revenue, surpassing competitors, including WPP and Publicis. By the numbers, let's look at it. WPP registered 19 billion, Publicis 16, Omnicom 15, and IPG 11. This is what happens when there's essentially a tectonic shift away from your sector, and that is, the first thing that happens is cost cutting.
4:39 Scott Galloway? The second thing that happens is consolidation, so that you can bulk up, which is effectively a way of cost cutting, because then you only need one headquarters, one CFO, one admin staff. The modern kind of ad conglomerate was sort of forged by Sir Martin Sorrell, and it was the following. These are good businesses, or at least they used to be, the ad agency business or the agency business, where companies would think, all right, we're intel, we're not that creative, we get engineers to come work here, but we're not about making commercials or designing logos or putting on conferences or buying keywords or what have you, so we're going to outsource this part of the company, and we need to find really creative people who see all these types of ideas and played with the wrong toys or the right toys, and where those people that decorated their desk in funky shit, or you went over to their apartment and their apartment just seemed cooler than yours even
5:24 Scott Galloway? though they made less money, those people, and we need to outsource it. And from 1945 to 1995, the algorithm for printing money or creating shareholder value was the following: mediocre shoe, salty snacker car, and then wrap brand codes, or these amazing brand codes around it, of masculinity, maternal love, European elegance, American macho, whatever it might be, to be smart, to be practical, whatever it was. And the thing about brand building was it was the ultimate strategy, because the sword around building a brand was so incredibly sharp, it was such valerian steel, and it was specifically, not the creative, but the fact that you could consolidate the market and reach people with these pieces of creative that created these intangible associations wrapped around
6:07 Scott Galloway? a mediocre product. You could find 80% of all of America in one of three places, NBC, ABC, or CBS, for five hours a day, so we could build these brands. So essentially, the ability to find- Mediocre product and build amazing associations around it such that it became not eight dollars of leather and laces, but a hundred and forty bucks of, you know, being like Mike or not twenty cents of peanut butter paste, but two dollars or three dollars of maternal love because choosing moms choose Jeff. This was the ultimate way to kind of build shareholder value. And you had General Motors, you had P and G, you had Coca-Cola. I think kind of the beginning of the decline of the brand age was when Honda introduced a compact car in the US and said, all right,
6:48 Scott Galloway? it's not all about branding. It's just about a better car at a better price. And then the big, big unlock or kind of the last nail or what really took the vampire of kind of ad supported or the brand age down or was sort of the wooden stake in Don Draper's heart was the introduction of Google. And that is you no longer needed to defer to the shorthand of a brand. And a brand is just diligence, right? I used to stay at the Mandarin Oriental, it's Four Seasons, wherever I'd go, one, because someone else was paying for it and two, they always do a good job. Now I want to use my social graph, Google AI to find out that the best gym in Europe or in Berlin is at the Soho House or that I want to stay at, you know, which lodge do I want to stay at in Africa? All of a sudden, I'm no longer deferring strictly
7:31 Scott Galloway? to the brand, right? I can find, I can do my own homework. And also a big digital unlock, right? Tesla doesn't need to advertise as much because if you can tune up your electric car over the airwaves, that's amazing. Google, Instagram are in fact 10x better products. So digital innovation is kind of made product cool again. Brands are now built by supply chain and innovation and technology that unlocks some sort of product feature. That leaves ad agencies, quite frankly, with declining power. And the problem is, it hasn't been overnight. It's kind of like the magazine industry. The worst thing that can happen to you is to die slowly. Because the thing about marketing and ad spending is that it's incredibly resilient. It's always been about one and a half percent of GDP, but it also doesn't grow a lot as a
8:14 Scott Galloway? whole. Google hasn't grown the market. They've just taken tens and now hundreds of billions of dollars out of the ecosystem. It is a bit of a zero sum game. And these guys have been on the wrong end of that. Now, The merger we're talking about here is expected to result in $750 million in annual cost savings. Omnicom CEO John Ren. I met with John Ren literally 25 years ago about potentially selling my brand strategy firm profit to him. He seemed like a very smart guy. He'll lead the new company, which will keep the Omnicom name, the combined company. Interpublic IPG CEO Philip Krakowski will serve as the co-chief operating officer, co-officer. That means he's on his way out. Omnicom shareholders will own 60.6% of the combined company, while Interpublic shareholders will
8:59 Scott Galloway? command 39.4%. Interpublic shares were up 11% on the news, while Omnicom's fell 6%. Typically, the acquiring company who's on top, their shares fall because usually people get excited about building a bigger empire and they overpay. Only one in three acquisitions works. Omnicom has tried to do this before. Back in 2013, Omnicom tried a $35 million merger with Publicity, but it fell apart due to regulatory issues. Still, Omnicom CEO John Ren remains optimistic and has said the current regulatory environment is more friendly to business. It's not that they're more friendly to business, John. It's just they realize what trouble you're in and that you need to bulk up or specifically cut costs. The notion that they're going to get in the way of this, or they're going to have some sort of monopoly power is just insane. Now, I wouldn't put it past the DOJ or FTC because in my mind, they
9:44 Scott Galloway? do make irrational decisions every once in a while. But for God's sakes, this isn't about monopoly power controlling the media ecosystem. This is about literally just trying to stay afloat. In some, if you can't beat big tech, you need to consolidate and get bigger yourself. The deal is expected to close in the second half of 2025. The big question is, will this integration actually succeed? This is the right thing to do. You know, IPG's on bottom here. If you're at headquarters, in admin, in middle management, you're not client facing, you're not ringing the register at IPG, folks, let's be clear, you're on the green mile. And while John Ren will paint a vision of the future and how there'll be a lot of growth and they don't have an immediate layoffs plan, okay, stick around to get the severance.
10:28 Scott Galloway? But be clear, if you're not directly linked to a client or a critical, mission-critical function, phew, and you're making a good living, you're about to be consolidated. We'll be right back for our conversation with Michael Lewis.
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13:09 Scott Galloway? Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. Their Agentic Trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?
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14:26 Scott Galloway? Welcome back. Here's our conversation with Michael Lewis, New York Times bestselling author and host of the podcast Against the Rules.
14:34 Scott Galloway? Michael, where does this podcast find you?
14:36 Speaker 06 Smoke Tree Ranch off the side of Palm Springs, which is a gated community created by Walt Disney and some of his pals way back when.
14:46 Scott Galloway? Wow. Let's buzz right into it. In the latest season of your podcast, Against the Rules, you investigate sports betting, which we talk a lot about here on the pod, which you refer to as a great social experiment. Walk us through the state of play of this experience and where you think we're headed.
15:01 Speaker 06 So in 1992, Bill Bradley, then a senator, created essentially a federal ban on sports betting. It exempted Nevada, but basically it was against the law. And the Supreme Court repealed that in 2018. And the new law of the land is states can legalize it if they want to, and 39 states have. And about two thirds of the American population has access to sports betting on their phones. About one third still doesn't. And the industry here is dominated by two companies, FanDuel and DraftKings. They have, hard to say exactly, but say roughly 70% of the market.
15:44 Speaker 06 And they were, before they were sports gambling companies, they were daily fantasy sports companies, which gave, they actually was the perfect, the perfect thing to be before mobile sports gambling is legalized is a daily fantasy sports company. You know, all the customers, you have data on all the customers. Sports bets in America have skyrocketed. It's a little, again, a little hard to say because it's hard to know what numbers to trust because there was an illegal market that presumably is not quite as big as it used to be. But, but it's gone from, the legal market has gone from a few billion to over 100 billion a year. And there's just starting to be some academic research showing the social effects of this.
16:28 Speaker 06 I mean, it's kind of cool, this, the way it's rolled out has created these natural experiments that you have because you have states that are side by side. One has legalized it, one has not legalized it. So you can sort of, you can sort of tease out the effects of legalizing it. But bankruptcies are up, savings rates are down. If it follows the path that it followed in the United Kingdom and Australia, suicide rates will be up. So there's some social costs to it all. But I think like really early days, I mean, you know, it's only been legal for six years. There were companies that really only been up and running in most states for just a few years. It's kind of not hard to make some predictions about where it's going, but it's not there yet.
17:09 Scott Galloway? So I'm a glass half empty kind of guy, but you cited some stats. I've seen 20 to 30% increase in bankruptcies in states that legalize it. I see young men with kind of less structure in their lives who are more prone to addiction. I think six out of seven. Gambling addicts are men. My understanding is gambling has the highest suicide rate because if you're addicted to meth, people figure it out and try and intervene. You can get in way over your skis with gambling and nobody knows and decide there's only one way out. I'll use an academic, I think this is a fucking disaster. Your thoughts?
17:41 Speaker 06 Yeah, I'm totally with you. This is why I was talking to the subject. I couldn't believe, well, look, once it's legalized, I'm a little shocked by the insensitivity to the social, to the public health crisis it's going to trigger. Because it's essentially Wild West in how you can get to the customer. And they aren't, you know, the sports gambling companies, they were mistaken for casino companies. When the people kind of thought, oh, it's going to be like a casino business. So that the kind of vig with the house takes about roughly 5%. It's always been kind of 5%. It will remain kind of 5%. This number keeps going up with these companies. They're like, it's like at 15%. And effectively, what they
18:26 Speaker 06 are doing is mining the entire US population for people willing to make stupid sports bets. And they have a finely honed ability to identify anybody who actually knows what they're doing, like the sharp gambler, somebody who actually might have some edge in a sport, and toss them out, or limit them to the point where they're effectively tossed out. So that their business is built on people who don't know what they're doing. And it's further, in a way that, you know, casinos, when you're in a casino, of course, is manipulating you in all kinds of diabolical ways. But when the casino's in your pocket, it's like your whole life is in the casino kind of thing. And they have, they have an ability
19:09 Speaker 06 to sort of like nudge people in doing stuff that they just wouldn't think to do. It is, and it's making the dumber and dumber bets. And you kind of think about, okay, like, what's the disaster going to look like? It's not just men, it's young men. Uh, young men, young men are the, are the real target. Uh, the Lancet, the medical, British medical publication just came out with a study that said, I mean, this number is so high that I, I wanted to pause before I say it, but, but the 26% of young men who were exposed to gambling developed some sort of gambling problem. That seems very high, but even if it's half that, it's like the NCAA,
19:50 Speaker 06 whose new president, Charlie Baker, was just shocked by the gambling activity he was seeing on campuses, commissioned a study to see how many people were doing this and, and more than 60% of young men on college campuses are sports gambling. So you do the math. It's just like, you got, we're like, it's almost like we're creating a pool of future gambling addicts. And you're right, it's very interesting. You're right about, like, when you think about what's going to stop this train, if you compare it to like opioids, like opioids was able to run for 20 years before anybody really put a stop to it. And, and 750,000 people die and it was about as visible an epidemic as you can have.
20:34 Speaker 06 This is, it's, it's, it's invisible. You don't see what's happening to people until, so you wonder if it takes 20 years for the society to get its hands around the, the opioid industry, how long is it going to take it to get its hands around the gambling industry? So I, yes, I agree with you. It's like, how on earth did we let this happen? But it's of a piece with other things we have let happen.
20:57 Scott Galloway? I mean, when I think about it, it's not only, my fear isn't only about gambling addiction, but when you put kind of an on-demand Dopa bag in young people's pockets, just as they're kind of hardwiring their brain and learning about life and reward.
21:12 Scott Galloway? That we're just setting them up to be just fucking DOPA monsters. And if they can't get it from gambling because they run out of money, they're going to find it somewhere else. Have you seen any of them? My thesis is we are literally unleashing into the economy, into the world, millions of DOPA monsters that will, are just going to find whatever way they can, opiates, sex, porn, online shopping. They're just going to be so hungry for that rush because their brains will have been wired to expect that rush. That it's, it's going to have all sorts of ramifications outside of gambling. Am I catastrophizing here?
21:52 Speaker 06 I mean, it doesn't sound unreasonable to me. My first thought when you started down that little path was it's interesting that sports used to be a place where you learned the slow rewards that come from hard.
22:06 Scott Galloway? Gratification, yeah.
22:07 Speaker 06 Yeah, you learned the opposite thing. And that we're turning that, this mechanism that used, used to take young men and teach them a certain lesson. Are you taking it to teach a different lesson? So it was disturbing enough to me that I have a seven, my youngest is a 17 year old son. Like I gave him some money and adult supervision so he could learn how to navigate this world because it does feel like you're not only are we creating a world of, of, you know, dopamine addicts, but the signal you send, especially to young men, because they're so susceptible to this, is the world actually doesn't give a shit about you. That it's, it's out to get you.
22:51 Speaker 06 When I got into this, when I started working on the story, that what motivated me was the book I wrote about, stuff I'd learned in the book I'd written about the pandemic. I got interested in it because the US response in the beginning was just so appalling. We had like, you know, 20% of the world's deaths with 4% of the world's population in the first six months. And, and I learned in the, in the process that this was, that in the few years running, leading up to the pandemic, we'd had experienced the decline of life expectancy. In three straight years, and that had not happened since 1918. And I thought, well, the pandemic's happening in the context of a society that's already not taking care of its people. That there's some basic failure is occurring.
23:35 Speaker 06 And this feels like part of that, that it's like it's a public health problem and that it's not that hard, even if, even if you can't do anything about legalizing sports gambling, it's not that hard to do some things to blunt its effects. So here's my solution. I'm trying to work within the constraints of the society. I don't think actually me going off about how diabolical it all is, is going to help anything. They're doing something that I think is kind of interesting. The company, the sports gambling companies, they are, because they're so good at chucking out of their businesses, anybody who knows what they're doing. They're isolating people who don't know what they're doing.
24:17 Speaker 06 So by definition, if you have an account in good standing at FanDuel and DraftKings and you're doing a lot of sports betting, you have signals of the world, you don't know what you're doing. I think that if we get that message out and that if you say like, if you're looking for someone to manage your money, the first question you should ask them is, do they have account in good standing at FanDuel and DraftKings? If they do, you should never give them your money to manage. Like, like that if you make it, if you make it a point of shame that you're in good with the industry, that you might stigmatize it in a way that makes it less dangerous.
24:56 Scott Galloway? We'll be right back.
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27:01 Scott Galloway? Your book, Going Infinite, you fell under some of what I call the same texture of criticism as Walter Isaacson's biography on Elon Musk, in that of you were kind of seen loosely as having a front-row seat, but not seeing what was going on. Do you think that's a fair criticism?
27:16 Speaker 06 I didn't write it until after it all collapsed. When I sat down to write the first words, I, there wasn't much I didn't know had happened. I mean, very little happened, came out in the trial that wasn't already kind of known. But it is true that I was there, a fly on the wall from kind of end of 2021 through the collapse of 2000, in November 2022. And if you'd have said, he has the money, the customer's money in Alameda. I would have said, you're insane. There's no way. That would be so dumb. So I did poke, everybody did this. Everybody who saw the structure of the business.
28:00 Speaker 06 He's got his own private hedge fund on the, our trading firm on the side of an exchange. And he owns them both. I did ask lots of questions about conflicts of interest. But what I imagined would be the problem wasn't the problem. I imagine the problem was that his trading firm would have the same sort of privileged access to the exchange that high frequency traders get on the New York Stock Exchange. And privileged access to data and so on, so front running, whatever. And that wasn't the case. I did not see that like, oh, yeah, the money's in the wrong place. So that's true. Did I, in retrospect, think I should have seen it? Nah, really. No one else saw it either.
28:45 Speaker 06 You know, there wasn't, the interesting thing, there are many interesting things about the story. But one interesting thing is, yeah, a lot of people said, I wonder if they're shady, like FTX. But that's the, in crypto, that's easy. Like as a heuristic, if you're, if you're a successful crypto business, you're, you know, you're largely unregulated and you're 26 years old and no one's paying that much attention. The specific criticism, oh, he's got the customer's money in his hedge fund. No one said, zero people said. So not even any, any ad, whatever, a hundred and something professional investors who owned a piece of them and they didn't say it. So I don't know. I don't know. That would have been very hard.
29:29 Speaker 06 I don't know how you would have detected that.
29:32 Scott Galloway? Well, a couple of follow up questions there. So when I'm sort of, follow the story a little bit from an adjacent, I actually bought.
29:37 Speaker 06 I know, I know this. You bought the claims and if I could have, I would have.
29:43 Scott Galloway? Oh, really?
29:44 Speaker 06 Oh, my God. I mean, it just seemed pretty obvious that they weren't worth 10 cents on the dollar.
29:49 Scott Galloway? Well, I wasn't that smart. I bought them for 23 cents, but because it's better to be lucky than good because of the surge in crypto. They're now probably your, the payout's going to be somewhere between 120 cents on the dollar, 150 cents. And other than, other than patting myself on the back for one of the few good investment decisions I've made in the last year, if everyone gets their money back, now granted, he committed fraud. He, he took customer accounts from people who thought they were investing, you know, putting their money in a deposit, not even investing. And then he used it to take risks they had not signed up for. So that's illegal. But one, given that everyone's giving their money back, given, I don't understand the difference between what Sam Bankman-Fried did and what John Corzine did at MF Global, I think it was called.
30:32 Speaker 06 You're, you're taxing my memory there, but yeah.
30:35 Scott Galloway? Remember that?
30:36 Speaker 06 Yeah, I do.
30:36 Scott Galloway? Did the same thing.
30:37 Speaker 06 Can I back you up a sec? Cause I really wanted to ask you about this. I, I was, I take, took a keen interest in the market in claims on FTX. Cause, because it seemed really clear to me that what the bankruptcy people were saying are signaling, that it's like, it's, it's this dumpster fire and there's nothing there. And boy, just be incinerated, all this money, that, that wasn't true. And it was amazing to me how cheaply these things traded at first. How did you, how did you even think to buy claims?
31:12 Scott Galloway? I'm fascinated by, I've invested across every asset class from angel to venture to growth to public. And by far, the best asset class is distress because similar to biology, people don't want to hang around old people. So the best businesses are businesses dealing with old people. And the best asset class is distress. So I look at bankruptcy filings and I was fascinated by this. I got the bankruptcy filing from the court. I read through it and in the bankruptcy claim, it listed all their assets, cash, some Bitcoin, et cetera. And one of the assets that just popped out to me is they had invested $500 million in Anthropic. Anthropic is the number two AI company LLM and I couldn't find for the life of me what the valuation was that they invested at, but I figured it was somewhere between three and
31:56 Scott Galloway? five billion. So I took the most conservative, which meant a number, which meant that one of the things that the, that FTX, the bankrupt FTX had that would ultimately be distributed to the claimants was 10% assumed of Anthropic. I valued Anthropic at four, at approximately, approximately 40 billion. So I thought the stake is worth four billion, claimants, total claimants, nine billion. So just the stake in Anthropic, I valued it 44 cents on the dollar. Claims were selling for 22 cents. To me, this was the easiest trade I ever made.
32:32 Speaker 06 And why do you think other people didn't make that trade?
32:35 Scott Galloway? Occasionally you find something. I don't, this doesn't happen to be very long. I'm like, oh my God, they've missed it. And that is people didn't see the $500 million number. They could see the $500 million. What they couldn't see was the numerator or the denominator. And that was the valuation they invested, that they invested at. And I thought, there's no way they don't own at least 10% of this thing. And then you have to value another unknown. And that is, what is that 10% now? But I thought it's worth probably 40 cents, a minimum of 23 cents. So all the crypto, all the cash, everything else was just going to be gravy.
33:11 Speaker 06 To my bewilderment, people weren't paying attention. It was, I mean, what he did, he didn't take whatever it was, $11 billion of customer assets and spend it on, you know, blow and hookers and private jets. He put five billion of it into, into venture capital investors. And this was just one of them. And yet there was, there was this pile of stuff. And I keep waiting for someone to come and ask the question, how good a VC was Sam Bankman-Fried? He was doing it, he was, you know, like, how, how well did he perform compared to his peer group? Because it wasn't, he has a piece, you may not even know this, he has a piece of SpaceX in there. He has it through Michael Kivis. So you don't
33:52 Speaker 06 see it, but he's got, he's got pieces of some really valuable stuff, even if, even if crypto goes to zero. And, and never mind all the crypto businesses he bought. So. So the one last question is because I'm just, I'm curious because I haven't, because I knew you made this trade. Someone told me about you being in the market and I thought, well, that's kind of, that's kind of cool. Did you worry at all that the bankruptcy process itself was going to incinerate your profits? That it was so expensive, it would be so expensive that you would just, you wouldn't end up, you should have seen the money, but in the end, it would go in the pockets of Solomon and Cromwell lawyers?
34:32 Scott Galloway? That's, that's a great question, but part of the analysis I did when I put together the spreadsheet was it's the same administrator that handled Enron and I estimated the cost at about a billion dollars. And I thought, okay, if, if just the anthropic stake is worth four billion, the coins are worth three, I saw 70 cents on the dollar and then take out a billion, so 60 cents on the dollar. And then what it ends up, it looks like the payout and a lot of the stakes we're talking about have already been sold. But it looks to me what they're saying, the court administrator saying that they now think they're going to get somewhere between 120 and 160 cents on the dollar. A lot of that because crypto has surged. But the lesson I take away from all of this, and this is a larger lesson
35:13 Scott Galloway? about investing in life, is the greatest return on invested capital is inversely correlated to how sexy something is. This isn't true of sports, which you know better than me because there's no shortage of billionaires with midlife crises and it's a regulated monopoly to control supply. But generally speaking, outside of sports, the best asset classes are the least sexy. And this was a really unsexy investment. Everybody thought this thing, it had fraud, it had crypto, which was out of vogue. This thing was supposedly going to zero. And any reasonable diligence said, no, this is, this is all upside.
35:47 Speaker 06 We did, I didn't really answer your question about what was different from, between what he did and what John Corzine did. And I, you've taxed my memory about what John Corzine did. But I do think, what do I think? I think that there's a kind of misapprehension in the general tenor of the response to Sam Bankman Fried, that the, it, people still talk about it as if what he did Was intentionally set up a business to steal customer money. Stole the customer money and the customers don't have any money now. And what he actually did was set up a business that was, I mean, it was jankily set up in the first place, but it was clearly not start, didn't start as a fraud.
36:30 Speaker 06 Was in and of itself a successful business if he'd just not done the idiot things he'd done with his hedge fund. And, and then got himself in a pickle in June of two thousand and twenty-two. When crypto lenders asked for the $10 billion they'd lent him back. And instead of just telling them, I don't have it, I put it in VC investments. He used the customer money to fill the hole. And that was a really stupid thing to do. It is fraud, but it's, it's, it's just, it's different than like evil person sets out to do evil. So how I feel about it, I feel sad about it mainly. And I think that what it is, is like the vice, the character flaw, if you will.
37:11 Speaker 06 Or the pattern, it's more the pattern in his character that leads to this behavior. It was, that was visible in every other aspect of his life. And it was a pattern of foisting risk upon other people without their permission. And he did it, he does, he did it over and over. He did it in his romantic life, he did it in his friendships. And he get, comes by this vice, honestly, I think he himself is sort of numb to risk. And kind of thinks he's right all the time anyway. So he didn't actually probably completely grok the risk that he was foisting on others. He thought this is all gonna work out. That was stupid and a crime, but I can understand how he got there.
37:54 Speaker 06 And I do have a problem with 25 years in jail. I think like, okay, jail, that, that makes some sense. But like, I don't know, I don't know how you even measure these things, but it's like.
38:06 Scott Galloway? It's a death sentence. Twenty-five years for a guy like that is almost a death sentence.
38:10 Speaker 06 Yeah, so I just don't, I think that's excessive and I don't get it, but people will argue with me.
38:16 Scott Galloway? But I want to put forward a thesis because you're a storyteller and. Just love the way you think through stuff. I would argue, and I want you to respond to this thesis, that the difference between playing golf at Centennial and going to Wimbledon, which I imagine I would be doing if I were John Corzine right now, I don't see a lot of difference in the criminal behavior here. The difference is a, is brand management. And that is, what you have with Sam Bankman Fried is a guy who had this kind of floppy, I just rolled out a bad crypto thing. He purposely set up this organization in the Bahamas, which felt sketchy. He was sleeping with and doing drugs with his coworkers. He decided to go on the most ridiculously ill-advised apology tour, which entirely backfired. Whereas
39:01 Scott Galloway? Corzine listened to very smart people who said, shut the fuck up. Nobody speaks to anybody but your lawyers. Go quiet. Act like the victim. You didn't know what was going on. Act contrite. You were a terrible fiduciary. You had no idea. As opposed to going and speaking to Andrew Ross Sorkin in cargo shorts, in crypto. The difference between Corzine, again, going to Wimbledon and Bankman Fried with a life sentence is poor communications and brand strategy. Your thoughts?
39:34 Speaker 06 Well, you're absolutely right that, that the way he handled it from the minute it all fell apart was catastrophic. Uh, you gotta remind me what John Corzine actually did, because I don't remember.
39:48 Scott Galloway? MF Global, uh, customer deposits that ends up were being used to make speculative investments in the market. John Corzine, my understanding is that interest rates were going to head one way. And he claims he didn't know these deposits were being commingled. It was pretty much the exact same crime. And Corzine got banned from the industry or, you know, paid a fee. MF Global, I think, went away. But these things, you know, tomato, tomato, as far as I can tell. And one guy's got a life sentence. And the others at Wimbledon, I don't, I don't even know if he watches tennis. But to me, it speaks to the notion of public perception.
40:22 Speaker 06 It also speaks to the mo, to the moment, that, that there's a frustration with the ability to get our hands around the necks of rich people who do bad things. And when you get a live one now, the, the, the, the sort of, the speed with which the justice system leaps into action is, is incredible. Sam was really easy to prosecute. You know, he was just like,
40:46 Scott Galloway? He gave him everything.
40:47 Speaker 06 He gave him everything. So this is, so think about this. I always stopped myself just short of thinking he has a death wish because his behavior kind of suggested and he, even when things were good, he was always extremely vulnerable, like no bodyguards, no, you know, you could sneak into his office any hour of the day. You could, he really was, he was, he has this sense that like he doesn't protect himself almost willfully. And so that just extended into what happened in the legal process.
41:22 Scott Galloway? So, Michael, I love this and you're a fascinating storyteller. Just a couple of questions to wrap up here. I find one of the most fascinating characters in all of us was, is it Carolyn Ellison? Caroline Ellison?
41:34 Speaker 06 Caroline Ellison.
41:35 Scott Galloway? Any inside, a lot of people didn't think, she ended up being what I might have scripture, I think the Southern District called her the, the ultimate perfect example, quintessential government witness, but they put her in prison. We know a little bit about Sam. We know almost nothing about her. What were your impressions or what was, can you provide us some texture on Ellison?
41:54 Speaker 06 She was a math kid who thought of herself, I think she's kind of, there was a bit of a split personality thing going on with her. She, she had a lust for a stable and normal life and at the same time thought of herself as someone who would do radical and crazy things and was, she, she in college joined the effective altruist movement and, and seemed to be kind of all in on that. And I tell you, she was very susceptible to the charms of Sam Bankman Freed. Here's texture for you. She told a colleague, this didn't even make the book, but she told a colleague that even after she and Sam had broke off their relationship,
42:37 Speaker 06 it was worth her having sex with Sam because it made Sam more efficient and making Sam more efficient was the best thing she could do for mankind because Sam was the person who most likely to save humanity. So that gives you an idea of how she is.
42:53 Scott Galloway? I'm going to try that on a bar. Just this.
42:57 Scott Galloway? The world would be a better place if I'm more relaxed tonight. So this, this will be the last question, I promise. You have, I, I look at, I mean, granted, you know, my idols are different to most people's, but I look at you and I think, I want to be this guy. You're just doing cool shit, telling great stories, writing interesting books, going to movie premieres. I think you make an exceptional living, but by all, at least from an exterior perspective, you're in a great seat. We have a lot of young men and women who listen to this podcast. Can you give us any one or two pieces of advice for someone who looks at you and thinks, you know, I'd like to be in that seat. Were there, were there any things that you wish you'd done more of or less of? What advice would you have to your younger self?
43:41 Speaker 06 Well, first off, I never thought that way about what seat I wanted to be in. I never thought I want to be that person. I always just wanted to be me. It's like the best me. And, and there were things that made me feel the best me. And I could, and writing was, writing was one of them. Writing was the big one. And I just thought, I've got to do this. So not trying to be someone else would be the, would be one of the first things I would say. Another thing that led me to like lots of the good things that have happened in my life. It's related. It's like not paying attention to what you're supposed to be paying attention to. Like what everybody else is paying attention to.
44:23 Speaker 06 If everybody else is paying attention to it, it doesn't need your attention, kind of thing. What needs your attention is the thing that you're interested in, that no one's paying attention to, and no one encourages you to pay attention to. Like your FTX investment. It, it's like, oh, there's something here and I really care about it. And if you can find that and nobody else is there, that seems like a lonely place, but it's the, it's the golden place. And you've got to like lean into that rather than lean out of it. Like learn to recognize that moment where, God, I love doing this thing. No one is saying, I should be doing this thing. No one else is doing this thing, but I love it. Go with it. Go with that feeling. It's great for an investor. It's great for a writer.
45:07 Speaker 06 But I think it's great, great beyond that. It's sort of like you're arbitraging your personality against the world. That you are finding where you are special in the level of interest you have in something. And that's when I find my subject matters are the most exciting to me when nobody. The thing that troubled me most about Sam Bankman Fried as a subject is I was genuinely interested in him right from the moment I met him, but it worried me that so many other people were. And, and the only thing that kept me going was that I had this privileged view of it. But what I really like with the subject is like the Oakland A's when nobody gives a shit about them, but I see there's something great there. And, and that's, that's the, that's the stuff. It's like, that's when you know you're in the right place.
45:51 Speaker 06 It's like, you're there for some genuine reasons because there's no ingenuine reasons to be there.
45:56 Scott Galloway? Arbitraging your personality against the rest of the world. I love that. Michael Lewis is the host of the podcast Against the Rules. He's also a New York Times bestselling author of several books, including The Fifth Risk, Flash Boys, and The Big Short. In addition, some of these have been made into great movies, The Big Short, Moneyball, and The Blind Side, all nominated for Academy Awards. Grew up in New Orleans and remains deeply interested and involved in the city, but now lives in Berkeley, California. Alma mater, go Bears. With his wife Tabitha Soren and their children. If I could give my kids any skill, Michael, it would be your skill. And that is you are a fantastic storyteller. Really appreciate your time.
46:34 Speaker 06 Thanks for having me, Scott.
46:47 Scott Galloway? Out of Happiness, Say Yes. I went shooting this weekend. And when I say shooting, I mean, out to the British countryside where you dress up in this kind of Guy Ritchie like gear, stayed in an old kind of ancient castle. And then in the morning, a bunch of, a bunch of Brits took us out and it seemed like a lot of them and a lot of dogs and we murdered birds. This is not something I'm into. Let me be clear. This is when someone described this to me, it sounded, it sounded like Chinese water torture. But here's the thing, I have some friends in my life that I really like and are wonderful, interesting people, and they love it and they love it. And you could just tell they wanted to share the experience. So I said yes. And when I had to get up at oh, dark hundred hours to put on wellies or whatever they're
47:29 Scott Galloway? called, and then figure out a way to go like fire a rifle, which I have no desire to do and animals anyways. My point is that these experiences really bond you to people. I know these are good friends, but we feel even closer to them now because we got to share in something that they're really passionate about. On the flip side of that, it's something I didn't do, something I was bad at. I really never developed any hobbies in my 30s and 40s. I like movies. I like drinking. I like travel. That's pretty easy to say. But I never really developed a passion for anything. And the thing about being around people that are passionate about something, even if it's kind of old world Britain and these shoots, it's intoxicating just sharing with them and seeing, seeing how into it they were.
48:11 Scott Galloway? The majesty, the detail, the clothes, the technology, the history. Say yes. And if you find something you like, then love it and lean into it. Because at some point, you're going to get the chance to share it with people who have no interest in it, but they'll be interested in it because they're interested in you and your passion will shine through.
48:32 Scott Galloway? This episode was produced by Jennifer Sanchez and Caroline Shager. Jew Burrows is our technical director. Thank you for listening to the Prof G Pod from the Box Media Podcast Network. We will catch you on Saturday for No Mercy, No Malice, as read by George Hahn. And please follow our Prof G Markets Pod wherever you get your pods for new episodes every Monday and Thursday.
48:53 Speaker 07 This podcast is supported by Anthropic, the public benefit corporation behind Claude. Everyone's got a hard question about AI. Anthropic was built to surface those questions and share what it finds along the way, because there's hope in hard questions. Ask yours at claude.ai/spotify and keep thinking. That's claude.ai/spotify.
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