State of Play: Inflation, Recession Signals, and the Housing Market — with Mark Zandi

Mark Zandi, the chief economist of Moody’s Analytics joins to discuss the economy, including geopolitical uncertainty, the housing market, and why he’s not all that concerned about a possible recession. Follow Mark on Twitter, @Markzandi. Scott opens with his thoughts on investing in Chinese stocks. Algebra of Happiness: Communicating with your elderly parent. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Scott Galloway?

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• 0:48Speaker 01

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• 1:18Scott Galloway?

  Episode 218, 218 is the area covered in northern Minnesota. In 2018, Pete Davidson and Ariana Grande got engaged and disengaged, and Miley Cyrus and Liam Hemsworth tied the knot. True story. My girlfriend looks a little bit like Ariana Grande. And a lot like Patrick Ewing.

• 1:37Speaker 02

  That means I'm single again. Oh, behave! Go, go, go!

• 1:51Scott Galloway?

  Welcome to the 218th episode of the Prop G Pod. In today's episode, we speak with Mark Zandi, the chief economist of Moody's Analytics. True story, I met Mark back in 2008, although as you'll hear in our conversation, he doesn't remember me. So I hate Mark. I hate him. I think he's lying. I think he wants to be my friend and he's pretending not to know me. Anyways, we discussed with Mark the state of the economy, including geopolitical uncertainty, the housing market, and why he's not all that concerned about a possible recession. Okay, what's happening? The nationwide protests against strict pandemic protocols in China have actually had some results, or specifically successful results. Several Chinese cities, including Shenzhen and Shanghai, have eased up on restrictions, including eliminating PCR testing requirements

• 2:35Scott Galloway?

  before riding public transportation, and some apartment complexes in Beijing are being more lenient with respect to where residents are required to quarantine. China has yet to announce any plans to end the zero COVID policy, and for good reason. This country is nowhere near the immunity it should be by now. Health experts and economists believe it will be mid 2023 and potentially 2024 before vaccination rates are high enough and hospitals are prepared to handle a possible spur of infections. There's sort of been a nice power to the people over the last week. The, some of the protests in Iran, you would have to argue, have led to the regime announcing they're going to ban or discontinue the morality police. Think about how ridiculous that is, the morality police. Ian Bremmer would argue it's mostly symbolic, but still symbolism

• 3:20Scott Galloway?

  is important. And these protests in China, can you imagine? They are still, about a quarter of the population in China is still under some sort of partial or full lockdown. I mean, can you imagine how pissed up they are? I mean, in Florida, we couldn't handle it for five days. They've been dealing with it for about two and a half years. Anyways, the CCP has to be responsive to the middle class, or somewhat responsive, because if they vote the party in power, out of power, that's called revolution. When you don't have a two-party system, there is no peaceful transfer of power, so to speak. So they have to be somewhat responsive, and I think this is at least a nod to that. At the same time, the CCP is really worried about COVID, because they have, I think,

• 4:02Scott Galloway?

  approximately one-third the number of ICU beds per capita as the US, and one-fifth the nurses. And what you could effectively have here is just a, simply put, a fucking disaster. They estimate that- If COVID had kind of followed the same pattern as the West, and it didn't, their zero COVID policy was effective, they would lose three to five million Chinese people, which is obviously a huge, a huge loss of human life, but also would just be bad, I don't know, also, just bad. Three to five million people dying would be very bad. But there is some question around whether a kind of total lockdown, zero COVID policy is the correct one, because early in the pandemic, when the virus

• 4:44Scott Galloway?

  was more lethal and less contagious, total lockdown makes sense. Now that it's more contagious and less lethal, there's some question whether or not this makes sense. But I get the sense this is the kind of thing where to a certain extent, it needs to get through a community. I mean, I guess if you could purely isolate a community, it would make sense. But effectively, why we had so much mortality in nursing homes and in prisons was none of these individuals or few of these individuals had had any exposure to novel coronaviruses. They're not hanging out with snotty-nosed kids. And it just ripped through these, these facilities. And I wonder if China is about to finally get their turn at the woodshed here. Anyways, it is an interesting week.

• 5:27Scott Galloway?

  These protests appear to be getting purchased and we'll absolutely see what happens. But there is something good and nice about protests and people taking to the streets and seeing some results here. U.S. listed Chinese stocks did in fact rise on Monday due to the easing of COVID restrictions. Bloomberg reported that the Nasdaq Golden Dragon China Index closed up 2.8% compared with a loss of 1.5% in the S and P. The e-commerce firm, Pinduoduo, I think I'm saying that right, registered the greatest gains at 13%. I think that company deserves to get much lower stock returns just because of that name. That's an awful name. CNN said that Morgan Stanley improved its view of the future performance of Chinese equities for the first time in nearly two years.

• 6:11Scott Galloway?

  Morgan Stanley believes that the MSCI China, an index tracking major Chinese stocks, will hit the 70 level by the end of 2023, which would be a 14% increase from its current level. My colleague Aswath Damodaran mentioned the other week that he's wary of investing in China companies because they will always be tied to the Chinese government. I actually find The Chinese stocks, every year I do predictions, I do a predictions deck and I say, based on what I'm seeing and looking at some data, I'm gonna make predictions about the upcoming year. Last year I predicted that Twitter would be acquired, the fundamentals and valuations would reunite, got those very right. And I also predicted I thought OpenSea's valuation would double, and it's an NFT marketplace, I got that one wrong. But last year was my best year in terms of the ones we got right, and it's better to

• 6:54Scott Galloway?

  be lucky than good. Predictions are shitty business, because if you say Twitter will be acquired, all the events leading up to Musk acquiring Twitter seem logical now, or illogical, and it doesn't seem like that bold a prediction, but if you got it wrong, everyone's like, oh, you know, ha ha, and like comes on Twitter and reminds you for the next three millennium that you got it wrong. But anyways, I can't resist. And also, you should not predict stock prices. But again, see above, I can't resist. I think on a risk-adjusted basis, the best buy right now would be a basket of Chinese internet stocks. If you look at these stocks as a multiple of EBITDA relative to their competitive position in the marketplace, basically what you're getting with these stocks is American internet companies, but at a third of the valuation, and sometimes they're growing

• 7:36Scott Galloway?

  faster. Alibaba is a formidable competitor, a formidable analog to Amazon, and is trading at a fraction of the valuation on any reasonable metric. So, to Aswath's point, the existential threat here, and the reason these things have gotten the shit kicked out of them, I mean, if the Dow had followed the Hang Seng, the Dow would be at like, I don't know, 12 or 15,000 right now, we're all bitching when it goes down 4% or 5%. Anyways, Chinese internet stocks have just gotten the crap kicked out of them, and it's because, it's because the government, the CCP, has gone from being the wind at their back, to the monkey on their back. And that is, the government used to be seen as kind of blocking and tackling for its great internet heroes, its great corporate titans that were helping create

• 8:21Scott Galloway?

  the prosperity and economic value to bring tens of millions of people out of poverty. By the way, the most impressive feat of the last 50 years, or one of them, you'd have to argue, is China bringing a half a billion people out of poverty. And whenever we wave our finger at them for various reasons, some of them very warranted, we just have to acknowledge what they've accomplished is incredible. By the way, at that same period, we've actually lost people in the American middle class. Anyway, anyway, I think these companies, the question is, will the government continue to kneecap these companies? The government has looked at Americans, said, okay, individuals that think they're more powerful than the government. Privacy violation, weaponization of elections, although they don't have elections. And they're like, you know, not here, girlfriend. No, thanks.

• 9:02Scott Galloway?

  Imagine if you, you want to talk about a distinction, a difference in systems. Imagine if Jeff Bezos was shitposting the Biden administration and then just disappeared for several weeks. That is what the CCP is. That, that is what it means to live in China. So for all of you that are bitching about America, and I'm one of them, I'm a glass half empty kind of guy. Where would you rather be? Where would you rather be? Would you rather be in Europe, which is a lovely quality of life in a center, kind of the epicenter for, I think, culture and great food and beautiful fashion. But guess what? The economies there have basically gone sideways for about the last three or four decades. Where would, would you rather be in China, that economic juggernaut?

• 9:43Scott Galloway?

  By the way, that their stock market is down 50, 60% and 250 million people are under lockdown and two thirds of millionaires have either left or want to leave. Would you want to be in China? Would you want to be in, where would you rather be? Where would you rather be on a risk adjusted basis in terms of freedoms, economic prosperity? Our last quarter here in the United States, inflation came down and we're growing. We had the Goldilocks economic report this last quarter. Where would you want to be economically from a civil liberty standpoint, from a freedom standpoint, from an opportunity standpoint than here in the lower 50? So we call it the lower 50. Anyways, God bless America. Out of the US World Cup, but go England versus France.

• 10:27Scott Galloway?

  That's going to be a great game. Saka is my favorite player, plays, I think, right wing for Arsenal. And also you're going to get to watch Kylian Mbappe, who arguably is the best player in the history of football right now. You've heard it here. He rivals Pele. We're a little bit nostalgic for Pele, but I think right now, and if he maintains this form, you're going to see Kylian kind of crowned as the best football player in history at this point, or at least in the best form. What does that have to do with China and internet stocks? Almost nothing, but it's called the Prop G Pod for a reason. Go England.

• 11:06Scott Galloway?

  We'll be right back for our conversation with Mark Zandi.

• 11:11Scott Galloway?

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• 12:14Scott Galloway?

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• 13:34Scott Galloway?

  Welcome back. Here's our conversation with Mark Zandi, the chief economist of Moody's Analytics.

• 13:42Scott Galloway?

  Mark, where does this podcast find you?

• 13:44Mark Zandi?

  I'm in suburban Philly. This is where I grew up.

• 13:47Scott Galloway?

  Nice. So let's bust right into it. You're, you're a bit of a contrarian here. You recently wrote an op-ed in the Inquirer where you stated that a recession is far from a done deal and that forecasts regarding recession have been overly glum. Say more?

• 14:04Mark Zandi?

  Yeah, well, I mean, obviously recession risks are high. Inflation's a problem and the Fed's on high alert. And in that kind of environment, we're vulnerable to anything else that goes wrong. But I've just been struck by how pessimistic the collective psyche is, you know, from the CEO, Jamie Dimon's a hurricane coming to, you know, really my, literally my next door neighbor who thinks we're going into recession are already there. So it just, I've been a professional economist for over 30 years. I've never seen such deep pessimism around the economic outlook. And I think we, despite the risks, have a fighting chance to get through this without recession for a bunch of reasons, but I'll just, you know, name one. And that's the American consumer. They're the firewall between an economy that

• 14:47Mark Zandi?

  continues to grow and one that goes into recession. And the consumer's in pretty good shape. Lots of jobs, low unemployment, lots of excess cash built up during the pandemic. We're starting, you know, low income households are starting to blow through that because of the high inflation, but still a lot of cash, leverage is low, despite the decline in the stock market and housing values rolling over, people are still a lot wealthier than they were before the pandemic hit. So just adding it all up, it feels like the consumer can hang in tough, do their part. Nothing extravagant, just continue to do their thing. If they do, then we'll avoid recession. So yeah, I think we have a fighting chance to get through this without going into a downturn.

• 15:28Scott Galloway?

  Do you think the Fed has been overly aggressive in terms of how quickly they've raised interest rates?

• 15:32Mark Zandi?

  No, I mean, I think they were slow to start raising interest rates back at the start of the year. I mean, it's hard to imagine, but at the start of the year, we were at zero, the zero lower bound on the federal funds rate. So that doesn't make a lot of sense when the economy is as strong as it is and inflation is as high as it is. So, no, I think they've been playing some catch up. I do think, though, you know, at this point, given where interest rates are, they do now start to need to think about tapering the rate increases and thinking about ending the rate hikes and seeing what kind of impact that has on the economy. But at least up to this point in time, I think they've been playing catch up and appropriately so.

• 16:13Scott Galloway?

  Don't we need a recession? I mean, I feel as if a recession is a natural part of the economic cycle and kind of cleans out some stuff and is sort of a reset. And Jamie Dimon, I like what Jamie Dimon said, when defining a recession, he said, something that happens every seven years. It's been 13 years.

• 16:31Mark Zandi?

  Yeah.

• 16:31Scott Galloway?

  Would a reset or a decline in asset values be somewhat healthy?

• 16:36Mark Zandi?

  I don't, no, I don't think we're in that kind of situation. I mean, I think the fundamentals of the economy, which is what you're pointing to, are good. You know, typically before recession, households have too much debt. They're over levered. That's not the case today. Typically before recession, businesses have over borrowed, taken on too much leverage and debt. And of course, I'm paying with a broad brush here and there's exceptions, but generally, that's not the case. Typically before recessions, the financial system has extended out way too much credit. Underwriting has been too easy. People who shouldn't have got loans, got them. That is definitely not the case. You know, the banking system is on as solid financial ground as it's ever been. Typically before recession,

• 17:18Mark Zandi?

  the real estate markets are vastly overbuilt like they were before the financial crisis. And that's just the opposite today. In the housing market, we're significantly underbuilt. Typically before recession, state and local governments are struggling, you know, with trying to maintain their rainy day funds and revenue. There's cash everywhere. So, you know, the only thing that feels a little off is our high debt load, federal debt load, government debt load, you know, but that's understandable, given all the Support that was provided during the pandemic and going back to the financial crisis. And that's, that's a problem for another day, I think. But no, I don't, I don't think, and I agree with the premise, that, you know, the statement

• 18:00Mark Zandi?

  that, you know, recessions are a natural part of the business cycle in a market economy. You know, things tend to get overdone, people take too much risk, get overextended, borrow too much money, but banks lend out too much credit, but that, that's just not the case today. So I, I don't think it's, it's necessary, as you say, clean out the system at this point.

• 18:22Scott Galloway?

  So inflation, we're food independent, we're energy independent, oil prices coming down. I look at everything and I can understand or why inflation wouldn't come down as fast as it went up in 2023. In terms of everything on their credit cards, their mortgage payment, their car payment, everything's gotten more expensive, which should, in my opinion, dampen spending.

• 18:46Scott Galloway?

  We're likely going to see energy prices come down, supply chain gunk will get ungunked. It strikes me that every moon is lining up for a massive decrease in inflation. Where do I have that wrong?

• 18:59Mark Zandi?

  You don't. I think inflation's, it will, it will slow very sharply here going forward, assuming oil prices don't go back up. I mean, if oil prices, gas prices, diesel prices stay roughly where they are, which I think is the most likely outlook, although there's a lot of risk around that, given everything that's going on overseas. If that's the case, then yeah, you will see inflation come in pretty quickly. Good, and other prices for other goods, they're, they're already starting to roll over, given the improvement in supply chains. And, you know, of course, a key part of inflation is the cost of housing and that goes back to rents. And there too, some good, good news, rent growth has really come to a halt for lots of different reasons, and that should show up in the inflation statistics by this time next year.

• 19:43Mark Zandi?

  The, the thing that, you know, will take a bit more time to write and, and get back in. Is around wage costs and you know, the impact that has on the prices for various kinds of services, particularly healthcare. That's a very labor intensive and and wages have risen very sharply there. And that's going to translate through for a while. But assuming that the economy continues to moderate, job growth slows, unemployment starts to notch a little bit higher and wage growth starts to come in. I think inflation will be back close to the Fed's target by, you know, early 2024, something like that. So it will come in. But you know, everything I just said is based on a boatload of assumptions

• 20:23Mark Zandi?

  around oil prices and you know, OPEC and the EU sanctions on Russian oil and how that's implemented. It goes back to the pandemic, what's going on in China. They shut down again. That will disrupt supply chains, create shortages and more price pressures. So there's a lot of ifs, ands, and all kinds of assumptions being made here. But I think the most, under the most reasonable assumptions, you're right, inflation is going to come in. It's, we're not going to get back, we're at 7.7% on the Consumer Price Index. So that's a long way from 2, 2.5% where the Fed wants it. So it's going to take some time to get there. But I do think we're headed in that direction and will get there by early 2024.

• 21:04Scott Galloway?

  How does a three or four decade historic strength in the dollar impact all of this?

• 21:10Mark Zandi?

  Well, the dollar's strength is a more of a reflection of this relative strength of the US economy, right? I mean, we're just doing better. And so we've normalized more quickly. Our interest rates have risen more quickly. And we still are the AAA credit, you know, when there, when there's a problem anywhere on the planet, including here at home, you know, money comes flowing here. So, you know, given all the geopolitical uncertainty and given our relative strength and how well we've done during the pandemic compared to everywhere else, you know, money has come in. So it's a, you know, it's a result of our relative performance. You know, it does make it more difficult to trade. I mean, it's gonna, it has, you know,

• 21:52Mark Zandi?

  one constraint on our economy's growth rate has been a widening trade deficit, and that goes back to our relative strength of the economy, but also to the relative strength of the currency, the strong dollar. But in the grand scheme of things, that's pretty small. I mean, we're a big economy that does a lot of trade with the rest of the world, but we're still, compared to other economies, very domestically oriented. Going back to my point about the American consumer, they, the consumer still drives the train, the economic train. So the strong dollar does matter, but it's small in the grand scheme of things. It's, you know, the, our economy still depends most significantly on what's happening here domestically, and particularly what the American consumer is doing.

• 22:36Scott Galloway?

  Try and overlay this all on the markets. What, when you look at economic activity, the fact that we may not go into a recession, and you look at the performance in the markets or specific sectors, any thoughts or hypothesis regarding market performance in 2023?

• 22:54Mark Zandi?

  Well, I think the stock market, let's take that, that's down 20% from the peak at the start of the year. I think that largely reflects higher interest rates. I mean, so when you think about stock prices, it's equal to expectations around the earnings of companies, and then the multiple, you know, what investors were willing to pay for those earnings, the PE, so-called PE multiple. And the price earnings multiple, what they're willing to pay, investors are willing to pay, is very closely tied to interest rates. And we can talk about why, but with the rise in interest rates this year, that, that means price earnings multiples have come in, which is a good thing. Going back to, that was one place at the start of the year where you could say, oh, it feels like the markets are overvalued, and we need

• 23:35Mark Zandi?

  some cleaning out there. We need some moderation, and people's thinking about, you know, what appropriate multiples are. And they've come in. And that's very consistent with the higher interest rates. I don't think down 20% from the all-time high at the beginning of the year does, is consistent with recession. If we were going to go into recession, I think the market would be down a lot more. It'd be down 30, 35%. That's the kind of the typical decline, peak to trough. In equity prices during recession, typical recession since World War II. We've had 12 of them, so you can go back and take a look, but it's down 30, 35. So the down 20, that's really multiples coming in because of the higher rates. It's not, has any to do with expectations around corporate earnings. In fact, you know, American businesses are doing really pretty amazingly well.

• 24:20Mark Zandi?

  I mean, profit growth has been very good. It's moderating, but it's very, very good. Profit margins, they've, they're down from their peaks, but they're pretty close to record highs. I mean, going back to World War II. Similarly, going to the bond market, you don't see recession signals. I mean, you know, one of the tried and true measures there is the corporate bond spread. You look at the yield on corporate bonds compared to risk-free treasuries. And that, that difference, that spread reflects the, the risk that that corporation may not pay you back because of a bad economy, you know, their business is bad, defaults. And that spread is incredibly, it's, it's risen a little bit maybe, but it's very consistent

• 25:04Mark Zandi?

  with long run historical averages. So not at all, you know, consistent with the idea that bond investors are pricing in some kind of recession. Yeah, a weaker economy, a slowing economy. I mean, by definition, that's going to happen, but not a recessionary one. So the, the markets in my view, the financial markets in my view are, are not signaling at this point that we're, we're going into a downturn.

• 25:28Scott Galloway?

  So fairly or unfairly, I think of you as a housing guy. I always go to @markzandi on Twitter when I'm looking for information on housing. I'd love just the Cliff Notes, if you will, or the voiceover on the US housing market right now.

• 25:40Mark Zandi?

  Yeah, that's in recession. So, you know, it, it, the US economy is slowing. It will slow further going into next year. And as I said, recession risks are going to be high. My sense is the economy essentially goes sideways, you know, flat in terms of GDP and jobs and everything we we take a look at. But if that's the case, then that means big parts of the economy are going to be in recession. They are going to be shrinking, contracting, and those most likely would be the most interest rate sensitive sectors of the economy. And there's no more rate sensitive sector of the economy than single family housing, right? I mean, if you go want to go buy a home, you got to get a mortgage. If you get a mortgage, you know, that's right tied to the interest rate, and it's getting

• 26:21Mark Zandi?

  nailed in a significant part because of the surge in house prices during the pandemic. So if you go back February 2020, month before the pandemic hit, go to the peak in house prices in June or July of this year, nationwide, they were up over 40%. Nationwide, you know, so in Phoenix, in Boise, in Tampa, in Austin, Texas, they're up 60, 70, 80%. That's crazy increase in price, obviously going back to the record low interest rates at the time, remote work dynamics, those kinds of things. But now with interest rates up, you mix those higher rates with these higher house prices, people just can't afford it. I mean, I'll give you a statistic. The typical American household going out to buy the typical American

• 27:06Mark Zandi?

  home, a median price, that prevailing interest rates now has to pay over $1,000 more a month for that home than they did back a year ago. $1,000 a month. I mean, for most potential first time home buyers, that's just, you know, forget about it. And even trade up buyers, I mean, they're not going to do it because they everyone's refi'd. If you owed a home and a mortgage, you've refi'd down in the last five, 10 years, and you probably have a mortgage at three and a half percent. When the mortgage rate's now sitting at six and a half, seven, you're just not going to move because you have to get a new mortgage at this higher interest rate. It's just not affordable. So affordability has been hammered, and so this demand has been crushed, meaning home sales have fallen way off. And, you know, that is now starting to show up in weakening house prices. So the housing market,

• 27:50Mark Zandi?

  house prices are now declining in a pretty consistent way. They're probably down, I'd say probably about 2, 3, 4% from their peak. This is again nationwide. And I suspect, you know, if my worldview comes to pass and we don't go into recession, given everything else we know about interest rates, we'll see probably a 10% decline in price, you know, from that peak to the bottom.

• 28:13Scott Galloway?

  Couldn't you just go through the housing markets that have gone up the most and say those are the ones that are most vulnerable?

• 28:18Mark Zandi?

  Yeah, that's exactly right. So the areas that got most juiced, you know, when the prices went stratospheric are in those Mountain West and Southern metropolitan areas. And that goes to the pandemic to a large degree, you know, remote work. You saw a lot of folks during the teeth of the pandemic, leave these big urban areas, you know, people from, you know, New York, Philly, you know, where I'm from, moving into, you know, the South, into Raleigh, into Atlanta, into Charleston, into Jacksonville, Florida, Tampa, Orlando, over Austin, by the way, Austin is the most juiced market.

• 29:02Mark Zandi?

  It's got people coming in from the, from the Northeast corridor and California at the same time. So that's the one market that's gotten the people from, from both coasts coming in. All the Californians, they kind of Bay Area, a lot of tech folks moved over into, into Vegas and Denver, into Phoenix. And, you know, so you saw these, these massive flows of people, which by the way, they're unwinding, but they're still very elevated. If you look at the migration patterns, there's still a lot more people leaving those big urban areas for those other areas, but less so than was the case at the peak back in the summer of 2021.

• 29:40Scott Galloway?

  So when you look at every, the pendulum is rarely at the bottom, right? Things either, people get overexcited or people unfairly punish asset classes. Is there a sector across everything you look at where you think this feels like on a risk adjusted basis, there's opportunity that it's been unfairly punished?

• 29:58Mark Zandi?

  No, not yet. I mean, I think all asset prices got juiced when interest rates were very low, you know, going back to those P multiples. I mean, valuations got very high for housing, for stocks, for crypto, for bonds. You could make the case if interest rates stayed where they were, that's, those valuations were fine. But again, reversion of the mean, if interest rates just simply normalize, you know, those prices were, those asset prices were just overvalued and they were going to come in. And what we've been experiencing, you know, this so far this year with the run up in rates is just kind of a normalization in price. So if you look around. You know, the spectrum of assets out there, they all feel like they're kind of coming back close to where they should be long run. Reversion to the mean.

• 30:42Mark Zandi?

  I don't get the sense yet that we've gotten to a place where there's screaming value out there.

• 30:50Scott Galloway?

  We'll be right back.

• 30:54Scott Galloway?

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• 31:39Scott Galloway?

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• 32:01Speaker 04

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• 32:38Scott Galloway?

  So a quick lightning round to wrap up here. Quick crisp answer. Last piece of media you binged.

• 32:44Mark Zandi?

  1975, I just discovered 1975. Believe it or not, you know, the group 1975?

• 32:49Scott Galloway?

  I don't.

• 32:50Mark Zandi?

  Oh, okay. Highly, well, I don't know if you like my, I'm a kind of a, sad to say, I'm a little poppy in my, in my music. Because I like it when I run or I, you know, at the gym or something.

• 33:01Scott Galloway?

  Best piece of advice you've received?

• 33:04Mark Zandi?

  Well, this goes to my dad. You know, he always said, I don't care what you do, just be, try to be the best at, at whatever it is that you do do. And, you know, I think that's true. I mean, if you're excited about what you're doing, you try to be the best at it. You know, you need to be lucky. Everyone needs a little bit of luck, but generally people gravitate to that because they, they get, if you're excited, they get excited, right? So you got to find the thing that really is exciting and decide that I'm going to be the best I can possibly be at. I'm in, you know, if you're doing that, then people really, I think, gravitate to that. So I think that's a very, that to me was a very key piece of advice.

• 33:46Scott Galloway?

  Lowest professional moment?

• 33:48Mark Zandi?

  Um, you know, the lowest professional moment for me was when I started my company and I was about six, nine months in. And it was hard. You know, I didn't have any cash and my firstborn was coming and I actually got sued by the company, the, another company. For, and I won, by the way, so I did win, but they sued because they, you know, I think, you know, competition. I didn't think I was going to make it through. And I was young. I was 30 years old. So, you know, I, you know, it's a failure is fine. I mean, I, I would be fine. But I didn't want to fail.

• 34:27Scott Galloway?

  It's capital F when you got a kid coming though. I might do the same thing.

• 34:31Mark Zandi?

  My wife's saying, well, what are you doing exactly?

• 34:33Scott Galloway?

  Yeah. How are we, how are we going to pay for preschool?

• 34:36Mark Zandi?

  Or, or just simply. You know, the, the medicine they need, right? I mean, how are you gonna do that? Uh, because medical care, right? I mean, so that, I can remember, um, I remember one day I was having a hard time breathing, literally, a hard time breathing. I'm going, you know, I'm in good shape, I'm a young guy. Why can't I breathe? Why can't I breathe? And I, it dawned on me, it was, I was under so, I was just tense. I was so, so much pressure. And once I got to that realization, I, I could start to breathe again, right? Cause I didn't understand what was going on until I, and then I understood and I go, okay, uh, you know, everything will be, you know, we'll, we'll be, we'll be fine. You know, we'll figure it out. And I got, it's not like I don't have a support system, right?

• 35:20Mark Zandi?

  I've got a big family and, you know, so it's not the end of the world. But that was, that, you know, there were times when I thought I wasn't gonna, that wasn't gonna succeed.

• 35:28Scott Galloway?

  All right, last one. You got 10 seconds with your 25 year old self. What would you tell them?

• 35:34Mark Zandi?

  I'm not sure I would really say this if I had the opportunity, but thinking if I, you know, I had to think about it, I'd say take more risk. You know, take more risk, you know, what's, what are you gonna lose? Um, yeah.

• 35:46Scott Galloway?

  Other than the capacity to breathe?

• 35:49Mark Zandi?

  You fail, you fail, but on the other hand, you know?

• 35:52Scott Galloway?

  I can't breathe. Take more risk.

• 35:56Mark Zandi?

  Okay, good point, good point.

• 35:59Scott Galloway?

  There's that.

• 36:00Mark Zandi?

  Yeah, there's that, there's that, there is that. Yeah, good point. Yeah, it's so funny. So, yeah, probably wouldn't have said that to a 25 year old self. I'm glad you say that. Great point.

• 36:11Scott Galloway?

  Mark Zandi is the chief economist of Moody's Analytics, a leading provider of economic research, data and analytical tools. Mark is also a co-founder of economy.com, which he sold to Moody's in 2005 and the author of three books. Paying the Price, Ending the Great Recession and Beginning a New American Century. Financial Shock, A 360-degree Look at the Subprime Mortgage Implosion and How to Avoid the Next Financial Crisis. He joins us from his home in suburban Philadelphia. Mark, I appreciate this and I appreciate the good work you do.

• 36:41Mark Zandi?

  Thanks, Scott. I really appreciate it.

• 36:53Scott Galloway?

  So Algebra of Happiness, not a lot of insider lessons here, but just sort of a tip. And that is, my father is 92 and we're struggling to communicate. And I don't mean the kind of struggles you usually have with your dad. Like, you know, "Why don't you love me, Dad?", that kind of shit. I'm talking about the logistics of communication. And that is, my dad is pretty much deaf now. And it is very difficult for us to have a phone conversation. And our phone conversations kind of consisted of me going outside, such that I didn't wake the kids so I could scream, "How are the Maple Leafs doing? You know, did you watch the last episode of, you know, House of Drat?" I mean, just screaming over and over the same goddamn question, him processing it for a second because he's slowing down,

• 37:38Scott Galloway?

  and then answering. And sometimes he gets frustrated or upset because he forgets what he's talking about. And the bottom line is, our communications and our dialogue are just not that rewarding. And more than that, they're frustrating for him. I inherited some not wonderful things from my father, but I inherited some wonderful things. The reason I am here, speaking to you now, making a good living, having really wonderful opportunities to meet interesting people and work with talented people, is I inherited from my father the ability to communicate well. And I got a lot of practice, standing in front of 300 people twice a week, teaching, being a consultant. You know, I've had a lot of practice, but I'm, obviously I'm a modestur. I'm gifted.

• 38:22Scott Galloway?

  I'm a gifted communicator. I can write well. I can speak well. And I got that from my father. My father can walk into any room, or used to be able to walk into any room, and within five minutes, a semicircle of people were around him laughing at his jokes. The Scottish accent didn't hurt. But he has a turn of phrase, the ability to tell a joke and then stop, and then laugh out loud such that you had no choice but to laugh along with him and think, "Wow, what a funny guy." He thinks very conceptually. He's just a creative, great storyteller. And I think it is incredibly upsetting for him.

• 38:59Scott Galloway?

  That he's lost that ability. And I think he knows it. And so it's like, you know, you're a world-class athlete and you can no longer walk. Right? So I think it's really difficult for him. And what I have found in this, I apologize for the long preamble, is I'm doing these voice memos. And I usually call him on Sunday nights, but now I do a long voice memo. And or sometimes I even record a video and I have my kids say some stuff. Nothing too dramatic, just this is what's going on with me. This is what I did this week. This is what I'm thinking about. Did you see the USA team? You know, did you see their loss? Did you see England beat Senegal? Nolan is, you know, having a little trouble adjusting to school.

• 39:43Scott Galloway?

  Some basics and I do this voice memo and then I send it to him and someone else reads it to him or plays it for him. And then we'll pause it and say it out loud if he can. I have someone at his facility helping him read it to him such that he can process it on his own time. And he doesn't have to do real time or try and deal with the pressure of having a real-time conversation with me. And you might say, well, that's not as personal. That's true, but I think it's, it's been really nice for us and I wish I'd thought of it sooner. And then he will record with the help of someone else, a voice memo back. Anyways, that's my pro tip is that voice memos and videos to someone in your life

• 40:25Scott Galloway?

  who is struggling to communicate in a real-time, fluid conversation is a real gift because, you know, intimacy is a function of contact and you want to maintain that sort of contact. My dad's not going to be around a lot longer. He's in decline and I want, I want to make sure that he has some form of communication for me on a regular basis.

• 40:48Scott Galloway?

  Our producers are Caroline Shager and Claire Miller and Drew Burrows. Sammy Resnick is our associate producer. If you like what you heard, please follow, download and subscribe. Thank you for listening to the Prof G Podcast from the Vox Media Podcast Network. We will catch you next week.

• 41:10Scott Galloway?

  So I don't know if you, you're probably not gonna remember this. We met 14 years ago. Do you remember where? I don't remember, Scott. Where did we meet? Yeah, I am not insulted. I was on the board of the New York Times and you came and did a economic briefing for us in 2008. Did I really? Yeah. It was getting real.

• 41:29Speaker 05

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• 41:37Speaker 06

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• 41:59Speaker 07

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