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Jeffrey Epstein - Steve Bannon Full Interview https://t.co/WabLdHfSu8
Video Transcript AI Summary
Epstein recalls his path from Wall Street trader to philanthropist funding cutting-edge science, and in parallel, his views on money, complexity, and the limits of understanding complex systems.
- Santa Fe Institute and complexity: Epstein describes founding Santa Fe Institute as part of an effort to study complexity mathematically. He explains that, in the late 1980s–early 1990s, he funded the institute after Los Alamos and other physics centers were losing scientists. The aim was to see if “these areas of strange things can be described by some form of mathematics.” Langdon, Murray Gell-Mann, and Chris Langdon are mentioned in connection with Santa Fe and related complex-systems work, including artificial life and biosphere studies. Epstein stresses that the goal was to develop tools to understand complex systems rather than to force them into traditional machine-like models.
- Transition from prestige to numbers: Epstein explains how the world shifted from valuing reputation to valuing calculable metrics. He notes that by the mid-1970s on Wall Street, “the most important parts of business were really now going to calculations.” He contrasts reputational measures (like being Rockefeller) with the need to understand the financial underpinnings of institutions through numbers, not just status.
- Trilateral Commission and Rockefeller board: Epstein recounts being invited to join the Rockefeller board due to financial expertise as the university expanded, and his interactions with figures like David Rockefeller. He describes the trilateral commission—comprising leaders from North America, Europe, and Asia—asking him to join when he was in his early 30s. He even recounts jokingly listing “Jeffrey Epstein, comma, just a good kid” on the application, a detail he raises to illustrate how financial insight was valued in these elite circles.
- Money, assets, and liabilities: Epstein emphasizes a recurring theme: leaders often misunderstand money and its mechanics. He distinguishes how individuals perceive assets and debt (feeling wealthier when assets rise vs. debt) from how banks’ assets are defined (what they are owed by others). He explains fractional reserve banking simply: with one dollar held, a bank can lend out nine, highlighting how this system relies on confidence and liquidity rather than physical cash on hand.
- Inflation, central banking, and complexity: He connects inflation to fractional reserve concepts and describes how the banking system has to be understood as a network of interdependent pieces. He argues that most world leaders lack deep financial literacy, and even bankers can be unaware of systemic dynamics. He uses examples of the Liquidity and the blood-flow analogy to explain why liquidity is vital to prevent system collapse. He notes that the “central banks” live with the fear of runs on the bank, not only inflation.
- The 2008 crisis and personal circumstances: Epstein recounts being in jail in West Palm Beach in 2008 during the Lehman Brothers bankruptcy and the Bear Stearns episode. He describes solitary confinement, a brown jumpsuit marked “trustee” (spelled incorrectly), Almond Joy bars, and two phones for collecting calls. He describes making collect calls to Bear Stearns’ Jimmy Cayne and to a JPMorgan contact about Bear Stearns and the broader crisis. He recounts learning about Lehman’s collapse from these conversations and witnessing the “greatest financial crisis in world history” unfold from prison.
- The systemic nature of crisis and derivatives: The interview touches the debate over causes of the crisis, with Epstein arguing that derivatives were not the fundamental cause; rather, “these are system collapses.” He explains that the crisis involved a complex set of interactions—subprime lending, guarantees by Fannie Mae and Freddie Mac, accounting rule changes, and debt instruments—that collectively stressed the financial system. He notes that government actions often altered incentives, such as guaranteeing subprime loans, which shifted risk to the banking system.
- Subprime lending and moral hazard: Epstein discusses how politicians, particularly Bill Clinton, promoted home ownership as a political weapon to gain votes, encouraging banks to lend to subprime borrowers with federal guarantees. He describes the accounting changes that required banks to mark down asset values differently under stress tests, further stressing confidence in the system. He suggests that the combination of policy incentives and financial instruments created conditions ripe for a systemic crisis, though he cautions against single-cause explanations.
- On understanding and predictability: A recurring thread is the gap between mathematical models and real-world outcomes. Epstein emphasizes that even the world’s smartest people cannot predict complex systems with precision. He discusses the notion of “measurement” in science, arguing that “measure” is often used loosely in finance and markets. He argues that complexity makes full understanding difficult or impossible, comparing it to the limitations of Newtonian physics when faced with quantum-scale phenomena and other unexplainables.
- Newton, Leibniz, and the evolution of science: The conversation travels back to foundational figures—Newton, Leibniz, and their roles in calculus and physics. Epstein presents Newton as enabling precise predictions in the physical world through laws describing motion, gravity, and planetary dynamics, while recognizing that later theories (quantum mechanics, chaos, complexity) reveal limits to complete predictability. He notes that Newton bridged geometry and physics, and that later scientists separated mathematics from philosophy, which contributed to rifts in understanding.
- The soul, life, and science: The dialogue turns philosophical, with Epstein discussing the soul, life, and consciousness as phenomena difficult to quantify. He references thinkers like Schrodinger and Leibniz, and he suggests that life and consciousness may resist straightforward mathematical descriptions. He argues that a new science may need to incorporate intuition and non-mechanical ways of knowing, acknowledging that while mathematics can describe much of the physical world, aspects like life and the soul resist easy quantification.
- Funding, ethics, and money’s sources: The discussion ends with questions about the ethics of funding scientific research and the sources of Epstein’s wealth. He defends his philanthropy, arguing that money can fund important work (like eradicating polio) regardless of its source, while acknowledging that people may have concerns about where money comes from. He asserts that his funding priorities include exploring unexplainable phenomena with mathematical or computational approaches while recognizing the limitations of those methods.
- Closing reflections: The exchange often returns to the tension between measurement, predictability, and intuition. Epstein emphasizes the ongoing search for tools to understand complex systems, recognizing that the most meaningful questions may lie beyond current mathematical reach and may require new frameworks, interdisciplinary collaboration, and openness to non-traditional ways of knowing.
Full Transcript
Speaker 0: Before we get into the deep stuff, let's just talk let's give some basics or some things I wanna do and inquire from the others. Walk me through the Santa Fe Institute. What what was it about the time at the math? And this was in the late nineties. So they're not gonna hear me on this part.
Right? We're do it both ways? It it will not be on the video, but we do have you recorded. Fine. Remember, when you're answering the on these questions, I'm not in the shot, and they're never gonna hear my voice.
So a little bit you gotta repeat the in your answer, you gotta repeat what my question was.
Speaker 1: Oh, wait. Okay.
Speaker 0: Santa Fe Institute. Why, when you're at the top of your game on Wall Street, do you decide to finance, which was at the time, or in Dow, or become the donor or sponsor, however you wanna say it, for what was considered the most cutting edge group of mathematicians in the world.
Speaker 1: Action. So Santa Fe Institute in the late eighties, early nineties. I was interested I was on the board of Rockefeller. So that starts Rockefeller, it's a university formed by John D. Rockefeller to sort of give back to the community.
It's East Side Of Manhattan, except it was old. It was sort of old fashioned, they were talking about medicine and medicine by itself was again subject to the ideas of science. They were trying to use science to find cures for disease. And I said, no, we need to do something different. We need to start interdisciplinary work.
In most
Speaker 0: How did a schmuck like you get on the board of Rockefeller? What year was that?
Speaker 1: I don't remember. Late, I think '89 or '91.
Speaker 0: So that's some of the most prestigious research places in the world. Correct?
Speaker 1: Yes.
Speaker 0: Okay. How did a guy like you get on the board of A blue blood, internationally known internationally known, hard research, Nobel Prize winners all over the place. How do they pick a a guy like you, a trader from or or basically some guy from Bear Stearns?
Speaker 1: Good question. So I was asked to be on the board of Rockefeller. I think it was I was on the board of Rockefeller. There was a money manager who said Rockefeller needs someone with financial expertise because the university is growing and there's lots of new things. Have to again, we go back to the the original discussion the last time.
In the up until the mid eighties or sort of early set mid seventies, the most important thing was your name. If you were Rockefeller, you already were considered to be brilliant. If you were head of General Motors, it was your reputation. It was who you knew, who your family was, what was your character. And then in the mid seventies, basically if you remember, you probably had a calculator.
It was very advanced in those days to have a Texas Instrument calculator where it could by putting in the numbers, it would multiply for you to do square roots. And that was the first everyone who had a calculator was already advanced on Wall Street. A simple almost like your accountant. The most important parts of business were really now going to calculations. So it's not only mathematics, but things that could be calculated.
Reputation couldn't be calculated. I could give you are you a 10 on a reputation scale, an eight? What does it mean to have a measurement of your reputation? We'll get to that later. But people places like Rockefeller needed someone to say, look.
We are entering a different world where numbers and the numbers of companies, portfolio management was going to be balanced. It was gonna be statistical. Jeffrey, could you come on the board? Potentially sit on the finance committee, Nancy Kissinger and a bunch of other people. And David Rockefeller and I got along very well.
He was just he was this unbelievable human being, respectful to everyone. He introduced his driver as his colleague, not his driver. He would never say this is my driver. He said it's my colleague. And David started to explain to me world politics.
So David would say, Jeffrey, money is going to be sort of the most important things. People don't understand money. You seem to have this knack for money. I said to David, tell me about your life. What was the worst and the best part of your life?
So David said, when I grew up everyone knew I was a Rockefeller. They didn't know that my father told me he would not leave me a dime, no money. But every time we went out to eat, me and my five friends in school, they would leave me the bill. They would expect me to pick up the check because I was at Rockefeller. And he said, I was chairman of Chase Bank.
And he said, I remember like it was yesterday, one of the headlines in Time magazine said, David, please fire yourself. So he thought that there was a a world that existed in that would be a combination of both politics and business and leadership. What do I mean? He formed something called the trilateral commission. The trilateral commission is some spooky stuff.
People said it was something people that the Illuminati, there's some mystery about it, people that ran the world. It was politicians, but David said, most countries, the politicians get elected for four years or eight years. Separate from the royal families in England or in The Middle East. Someone's there for four years, and then they're not there anymore. The most important people to have stability and consistency would be businessmen.
So he formed this trilateral commission of businessmen and politicians from three major continents. So it was the North Americans, the Europeans, and the Asians. So he said to me, would you like to be on the trilateral commission? Now I was 30 years old, 32 years old. I said, great.
And he said, well, you have to fill out this application so they have your bio. And I looked at the list of people, and it was Bill Clinton, former president of The United States, Paul Volcker, every great leader in America, the Asians, the Japanese, and with a a very long description of their history. And they asked me to fill in what I would like to have written, and I wrote Jeffrey Epstein, comma, just a good kid, which I thought was funny. Nobody else did. So to answer to what your question, at that time, I recognized around the world that monies and currencies were not really well understood.
But, again, it was only numbers. So numbers and I'll get to the fact that it was bad thinking. It's numbers are very good for
Speaker 0: Are most people are most people that you meet even on the trilateral commission, when you meet most people, do you find most leaders financially illiterate, economically illiterate?
Speaker 1: Most fin again, most political leaders don't come out of a background of finance. Most political leaders come out of a background of being popular. So it's in some of the countries in in some of the African countries, for example, they might have been a military person. They were a general. In some of the African countries, they might have been a disc jockey.
Or in our country, they would have been an actor. The knowledge of money isn't they don't have expertise, they have no degrees in finance. They really what and this is one of the major problems. Their expertise, if they have any financial knowledge, is of their own checking account or bank account and filling in their own taxes. So many world leaders who don't really have a financial underpinning make fundamental errors when it comes to money on a country or institutional level.
Let me give you an example. If you, mister Bannon, if I said your assets increased last year, you'd say that's well, that that sounds pretty good. And I'd say, what does that mean to you? You'd say, well, I have more money, I guess. I'm I'm wealthier.
I'd say, yes. And if you had if your debt increased, would you would you feel wealthier or poorer? You'd say, well, that I don't wanna have increased debt. I don't like the idea of that sound increased debt. Now that and world leaders understand when their assets go up, they feel better.
However, institutions like banks, things that people don't really understand are financial underpinnings of banks. When I say your bank, mister Bannon, you have the Bannon Bank, you doubled your assets. Sounds good, but what does it really mean? It means people owe you more money. You don't have any money more money.
What? Yeah. A bank's assets are how much it is owed by other people. That's crazy. So if the bank goes from a $2,000,000,000 of assets to 10,000,000,000, it means people owe it an additional $8,000,000,000 and they but their assets have gone up.
So the terminology of assets and liabilities is different for banks. It's not natural. And what most people and you ask questions about world leaders. There's many people, I think your old boss Mercer understood. There's a fundamental part of money which is called fractionalized banking.
And fractionalized banking is something that finance people understand and the people on the street and when I say people on the street, that's where I was when I started on Wall Street, would find it impossible to believe. Impossible. Why? Banning Bank, I give you $1. Just 1 single dollar.
In our system of banking, I would say, okay, Steve. I gave you a dollar. How much could you lend out to your friends? And your natural reaction would be probably something less than a dollar because I wanna keep something in my pocket. The way our system works is if I you as a bank are holding my dollar, you can lend out an additional 8 or $9.
No. It's impossible. I only have a dollar, Jeffrey. We have something called fractionalized reserves, which is if you have one, you can lend out 9. That's the way our system works.
And so not only do world leaders not understand banking, but the man on the street, my father worked in the park department, it it would be beyond his imagination that people could lend out more money than they actually had in their pocket. Next question.
Speaker 0: But how how did this in in in understanding that, when you get on something like the trilateral commission, you're on the board Rockefeller, which is the most advanced research. You get brought into the to the trilateral, which is the elite of the elite. How since you're only, at that time 30. Twelve. Eight years from teaching at Dalton.
Right? You're Dalton Ten years. Ten years teaching at Dalton.
Speaker 1: Yes.
Speaker 0: Walk us through I mean, put us in the room. Walk walk me through exactly what it felt like. What it felt like being on the board at Rockefeller. You got these Nobel laureates, and you're sitting there making decisions, and you start to meet these people at Rockefeller. And you start to meet these people at trilateral commission.
What what did it feel like?
Speaker 1: That's a great question. So what did it feel
Speaker 0: like in the business of asking.
Speaker 1: What does it feel like meeting some of these people like Kissinger or Rockefeller? And those are two extraordinary people. And in general, I think the question the people on Wall Street I tell the story. The first day one of the first days when I was in Wall Street, someone said to me, would you like to buy ATV? And I could I was looking in the brochure, and I I couldn't figure out what stock had a symbol of ATV.
And when I finally said, well, I I can't find it. And they said, what the heck what's the matter with you? Do you wanna buy ATV? Which is he he was selling hot televisions, stolen televisions from the floor of the American Stock Exchange, referred to in common policies, the televisions fell off the truck. That's so I knew what that phrase meant from Coney Island.
But what I found was most people, what be it in business, in normal life, or in the world leaders, don't really understand money. It is something they think about. They have a sense of what it is. They certainly want more of it. But they also make statements like we want more money, but we don't want more debt, which just shows a misunderstanding of what money at its core really is.
So they don't most people don't they wanna make it, they wanna save it, but to understand it intimately is is not a normal characteristic.
Speaker 0: At the at the the first trilateral or something? Yeah. Yeah. Good. Good.
You're good. Just just give me approximate. You you joined the trilateral pressure.
Speaker 1: Might be
Speaker 0: And we'll be able to show the the we'll pull down the the chart of where your name was, but just give me roughly when it was.
Speaker 1: I think it could be 90. I don't remember.
Speaker 0: Let's say early nineties. Yes. When you got on the trilateral commission and had the fur where was the do you remember the first meeting was? It was in Tokyo. In Tokyo.
And and what hotel?
Speaker 1: I would like to say the Hilton, but it's probably not.
Speaker 0: And it's a three day, four day?
Speaker 1: Give me a three event and and
Speaker 0: Walk me through the whole thing. It starts with a dinner. Take me just walk me through it. It was boring. I can't I You couldn't possibly think it was boring.
Speaker 1: It was bullshit. Boring. You're you had any
Speaker 0: stars in your eyes? No. Did you fly over privately?
Speaker 1: Yes. But it wasn't my plane.
Speaker 0: So it didn't count? No. You you fly over?
Speaker 1: Yes. And And it was who were
Speaker 0: the first like, when you first met those leaders, you had to be wowed. No. You're ten years out of Coney Island.
Speaker 1: No. I'm not wowed by people of position. I'm wowed by people of great ideas. And I don't care if it's the bus driver. I don't care if it's the student they had who has teeth stric coming out every direction.
Speaker 0: Have to have great ideas of the leaders of the three great continents of the world, North America, Europe, and the and and Japan.
Speaker 1: No. Many of these world leaders become world leaders because they're popular, They were able to get votes or they were able to convince people to vote for them. I learned later. Many of them were just good at what they did in terms of politics. Remember, world leaders are politicians in general.
They're not scientists. They're not intellectuals. They're not great thinkers. They're great politicians.
Speaker 0: At the at the first Trilateral Commission meeting that you remember in Tokyo in sometime in the early nineties, do you remember what were the big issues of the day that they were talking about, and what did you think about it?
Speaker 1: Yeah. In fact, it was funny because they they were talking about inflation, and they were worried that what would happen this how do you control inflation? And I as a mathematician, I didn't understand the concept. I don't understand the concept today. How's that possible?
Well, when you talk about most things to do with money, they really money is meant to be local. It's US dollars. Then I understand what it means if inflation it means my dollar today inflates and it doesn't buy as much as it did a couple of years ago. The price the prices go up. I don't have as it seems that everything is great, but in fact, my dollar is shrinking in value.
If if you
Speaker 0: and you're the financial genius here. I'm just a I'm just a lonely M and A guy.
Speaker 1: Sure. If you let me if you let me finish the thought.
Speaker 0: Go ahead.
Speaker 1: So if if you're in America, you start to you can feel inflation. You have salaries gone up, but you don't buy as can't buy the same car. In fact, it starts feel to weird because the value why I
Speaker 0: wanted to ask the question then. This is my point. Sure. The the central the people who live and breathe this, the central banks, have been haunted by the specter of inflation since the late seventies. Yes.
First off, tell our audience, how did that happen? The two great the two great financial events in the twentieth century, I'm not gonna get to the twenty first, were the the the the the great inflation in Europe after World War one, the the Great Depression, the hyperinflation in Germany that led to the rise of Hitler, and then this inflation in the mid seventies. What was before you go over explaining this question, why is why is this specter of inflation always the central thing in central bankers' minds?
Speaker 1: Because it goes back to this the first concept I said, the weird concept of fractionalized reserves. The system is not well understood. It will most systems, in fact, are not well understood. We don't know how our digestive
Speaker 0: system Stop. This is impossible. This is The most the most the the world banking system, the world currency system, the world monetary system
Speaker 1: Yes.
Speaker 0: Has to be so well understood by the Greenspans of the world and the Bernanke's of the world and the and the and you. Right? The the the currency the currency traders, the the the the guys making billion dollar bets every day, the the legendary guy on Wall Street in the late nineties, the Solin Brothers.
Speaker 1: Will Rinieri?
Speaker 0: No. No. The guy that wrote the money
Speaker 1: Michael Willis? Larius Poker?
Speaker 0: Yeah. Larius Poker. Who's that about, that great trader?
Speaker 1: Will Rinieri.
Speaker 0: No. One the Lou guy that ran the desk that eventually ran the the the hedge fund that went, long term capital.
Speaker 1: Yes. I don't remember.
Speaker 0: Who's the guy I
Speaker 1: wanna say I don't remember. I'm sorry.
Speaker 0: Lou Ranieri is big, but those guys have to understand the system perfectly.
Speaker 1: No. They don't understand the system. Understand the local part of the system. So, for example, why is not only inflation most bankers are terrified to if the public understood that the bank really doesn't have their money at any one time, There's it's one of the things during the depression, there were runs on the bank. The reason the banks don't keep much money in the actual bank is they assume that not everyone's gonna want their money on the same day.
So it's not it's not really the fear of inflation. The fear is a run on the bank. Everybody wants to take out something that doesn't really exist. Inflation is tied to interest rates. It's a more complicated example.
But when your money doesn't buy the same amount of product this year than it did last year, if it buys less and less, like it happened you used the term hyperinflation. There's certain countries that are not managed well, like in Africa at the current, a $100,000,000,000 bill, a $100,000,000,000 bill in Zimbabwe is worth 1 American cent. That's the perfect example of hyperinflation. It goes up it doubles every day. So people are afraid that their value in the system starts to break down.
But so if I said to you, does your doctor understand your body system? You'd say, well, hope so because I want him to keep me healthy. But you could have a kidney infection, you could have a heart attack, you could have a broken knee. There's lots pieces of this system. And in fact, when you ask the question, very few doctors understand your entire body.
There's a specialist for your knee, there's a specialist for your polynoidal cyst, there's a specialist for your head, and now we have specialists in different areas. So in and I'm I'm gonna get to your first question about Santa Fe Institute. The world economy and your body are both comprised of little systems interacting with each other and making one big system.
Speaker 0: You're you you expect this is what's stunning for all the little guys out there, the the populist movement, the little guys that that haven't had a pay raise in in thirty years. They think that these elites, you know, have everything. The the guys in the room making the decisions, the the the party of Davos guys. You're sitting there, and you don't think many people today really understand complexity and really all the moving pieces and how they interconnect at the world's financial system?
Speaker 1: No. The nice not only don't they understand the complexity, and that goes back to Santa Fe Institute was an attempt of trying to see if there was a way to mathematize, formulaize, or algorithmically understand what the term complexity means. That goes back to the original question. Complex systems are complex by definition, but there's not necessarily it's not one level of complexity. As we might say, well, our fingers are complex, the movements, the muscles of our hands, but it's not as complex as the blood system.
Now I have a circulatory system. I have systems on top of systems so that there's no one group of or person that really understands the way the body works. There's no one group that understands the way the financial systems work. You might understand US bond market. Now you've asked about the trade at long term capital.
That was a bond fund, very small part of this very complex system. So the goal of the Santa Fe Institute was to see is there a way to get and somehow understand how complex systems interact. Fast forward, Steve, to today where Google and these other engine companies, the other tech companies are trying to build artificial intelligence. The strangest thing that they found, one of the strangest things, is that the systems that they designed, this artificial intelligence which a lot of people have heard about, is they designed a bunch of systems, they're called neural nets. Terms simply taken out of brain work, neurons in the brain.
Nets because they actually look like a net. They put in some inputs, the computers work, spit out an answer. Sounds normal to you? It's because you're thinking about that calculator you had in 1976 on your desk. When you ask the person who designed the system how did it come to that answer?
How did your neural net? Can you show me the calculations? They say, no. We don't know. We don't know how the thing we designed actually came up with that answer.
That's pretty strange. They take the same neural net now they put it in front of a video game. No no learning. Nothing. They said to the computer, they say, sit in front of the your video game and learn how to play.
It seems the computer learns better than any human in history, faster than any human history, beats any human in history. But when you ask the designer how did it do it, no one knows. It just did it. So it's the first little touch of things that we already have gotten to a place where we don't understand it, and we built it.
Speaker 0: On Sunday afternoon, 09/14/2008, where were you?
Speaker 1: Sorry?
Speaker 0: It was the night they put Lehman Brothers in bankruptcy in London.
Speaker 1: I was in jail.
Speaker 0: Seriously? Yes. So did the financial crisis of two thousand and eight happened when you were in jail? Yes. Oh, this is gonna be so amazing.
This is gonna be so amazing. I take it you didn't have your Wall Street Journal dropped off to you in the morning, your Financial Times? No. How did you hear about the how did you hear about because I wanna the the I'm
Speaker 1: I forgot about this, but yes.
Speaker 0: I'm trying to get this is gonna be amazing. This is let's go back and do that again. Sunday afternoon because I wanna find out about people the geniuses understanding the complexity of the financial system. Because I think the best example we have is the financial crisis of the crash of two thousand eight. Sunday afternoon, September 14, I think it was, 2008, is when they were working feverishly in Midtown Manhattan at the Lehman Brothers offices and the various law firms around town and with the secretary treasury about the Federal Reserve what they're gonna do with Lehman, they decided they weren't gonna save it.
And so they prepared to put it into bankruptcy at the opening of the market in London the next day. How did you hear about what was gonna happen to Lehman Brothers, and what did you immediately think when you heard that it was gonna be put into bankruptcy?
Speaker 1: I'm glad you asked that question. I was in solitary confinement September 14. And unbeat again, some of the public stories about the wonderful time I had in jail and my work release, which didn't come till months after, I'd been there since June in an eight by 10 cell with a bed in the back, a six foot bed in the back, a chrome sink with toilet attached to it, and a little piece of metal sticking out that was supposed to act as a table. Now since I was in jail, there were no books. Why?
There's no library. No library, but you're in jail. No. I was in jail, not prison. So in jail, I was in a place what's called the special housing unit, which is for the roughest, toughest, meanest people.
They had put me there, they said, for my own protection. So I was in a eight by 10 cell with a little slit in the door where they would serve my food on a a tray about nine inches by four inches. And then as soon as I finished eating, they would take the tray and close it down. And one of the guards said, do you understand there's a there's Wall Street's crashing. I'm I'm worried about my pension fund.
What should I do? And I said, sorry? Wall Street's crashing. What's happened? And he said, there's some crisis and some companies are going bankrupt.
I said, are you sure? And he said, yeah. It's all over the papers. Everybody's we're all terrified. We're gonna lose us life savings because we have either a four zero one k or our pension funds.
We don't know anything about money. Mister Epstein, can you tell us, like, what's going on? Am I gonna am I gonna be able to afford my children's education? Am I gonna be bankrupt? Like this company called Lehman Brothers.
And there's another company in the front page today called Bear Stearns. Oh no, I said. Why? Because that's the company I was a partner in, and in fact, that was a company I had a very large investment in. So it's a great story.
I I didn't have my Wall Street Journal, but in the early mornings, you're allowed to make two phone calls, collect. And when you you pick up the phone, you can dial a number, and the when the person picks up, they say, you're getting a call from the Palm Beach County Jail. Will you accept reverse charges? And the person either says yes, and the call goes through, or the person says no. The person I called was Jimmy Cain, the president of Bear Stearns.
And I said, tell me what's going on. And so that my knowledge of the financial crisis happened with Jimmy, who's at the center of the storm, telling me about what Lehman had gone under. And they were trying to figure out a way, should they bail out Bear Stearns? The
Speaker 0: did it strike you at the time of the mess you had made with your life to be in a situation that you're one of the greatest financial minds in the world, looked at by world leaders and, asked their, you know, your thinking by the most prominent and important people in the world. And here you are in solitary confinement. You can't even you can't even you gotta make a collect call to somebody. Did it did it did it strike you at the time how how all the threads of your life had come together and and and put you in a position or you had put yourself in that position? No.
So it never struck you when you had to make a collect your one collect one of your two collect 50% of your collect calls that day, you call the president or the head of the CEO of Bear Stearns. The biggest financial event in your life is taking place of which, one, every important person in the world would be seeking your opinion. Number two would be a once in a lifetime opportunity to apply your craft. Number three, it would be a once in a lifetime opportunity to make money if you were smart, and, obviously, you're smart. You're telling me here, truthfully, that it never hit you at all of how you'd ended up in a place where you had to make a collect phone call from a jail cell that was six by nine with a steel bed and your food being passed into into a slot.
Speaker 1: The question you wanna ask is who was the other call to?
Speaker 0: K. Who was the other call to?
Speaker 1: The other call was to my friend at JPMorgan who was then, I didn't know at the time, trying to buy Bear Stearns. So at one point, I had two phones. It was difficult because they're afraid people are gonna hang themselves with the phone cord so they don't actually come together when they're pretty short. So I was actually going between two phones talking to Bear Stearns and JPMorgan at the same time. So I found it amusing.
Speaker 0: And it never struck you about how to end up in a situation like this?
Speaker 1: No. That would be probably means I would be too self aware.
Speaker 0: You can't possibly expect me to believe this.
Speaker 1: I know. I don't believe it. It's no. Even because of
Speaker 0: you're telling me that during that day, you never had a moment. You sat there and go, what the fuck have I done with my life that I'm in a six by nine jail cell when I should be on a train desk or I should be in my $250,000,000, you know, greatest townhouse in New York City taking calls from Arabia, the president of China, the head of Russia, the president of The United States to save the world's population from a financial debacle. You'd honestly expect me to believe that you that never happened.
Speaker 1: You're suggesting I was somewhat depressed, and how how could this happen to me?
Speaker 0: I I'm not saying depressed. I'm saying a moment of awareness of how could I get myself into this situation. No.
Speaker 1: I would just say how strange that this happens. Just it's strange. I'm wearing a jumpsuit and flip and flip flops.
Speaker 0: What color was the jumpsuit? Brown. Brown. Brown jumpsuit? Yes.
I noticed I don't see you in a lot of brown. No. Brown jumpsuit and flip flops?
Speaker 1: Flip flops. Yes.
Speaker 0: With no access to books, no access to newspapers, no access to You had lived on information.
Speaker 1: Except my Almond Joy bars. I had extra Almond Joy bars.
Speaker 0: Did you eat Almond Joy bars and things like that because you're afraid of what the the cooks did to your food?
Speaker 1: Yes. Is
Speaker 0: that because of of the that you're in for the crimes that you were in for?
Speaker 1: No. It was just be in fact, I was
Speaker 0: Is it because you're wealthy?
Speaker 1: Yes.
Speaker 0: How did it how did you know that?
Speaker 1: Well, people people would constantly come if I was passing by or I'd have to go for my medical, people would either ask to borrow money or make some other types of comments about In in beginning, what
Speaker 0: were the comments? At the beginning, what were the comments? It
Speaker 1: it serves you fucking rich guys right that you are here next to me.
Speaker 0: There was nothing about your crimes? No. So all this rumor you hear all the time about people in prison that commit the type of crimes you commit, that's you're saying in your personal thing is not true? No. It was all because you were rich?
Yes. And it was all because they wanted to borrow money?
Speaker 1: Well, get advice. Yes.
Speaker 0: Well, they get advice to to to to go long to go long. Yes. You're telling
Speaker 1: me It's time to buy.
Speaker 0: You're telling me in solitary confinement, they're they're they're interested in going long? Yeah. They wanted to what human nature?
Speaker 1: Well, what I think the people find one of the reasons they wanted to keep me in solitary confinement was they're afraid that everybody would wanna know which stocks to buy. And but what happened was after this crisis now it's on the front page of every newspaper.
Speaker 0: Lose this day. Sorry. Sorry. When you first heard that, did you was it bear Bear Stearns had been kicked into bankruptcy, what, six months before?
Speaker 1: No. No. Since the same time. This is part of the same deal.
Speaker 0: I thought I thought no. No. Bear Stearns, they just said the Bear Stearns, they oh, they saved Bear Stearns and didn't save Lehmanville. That's right. They left months before, they had bailed out Bear Stearns.
But Bear Stearns was still a zombie.
Speaker 1: A za what? For a shell of its former self.
Speaker 0: A former self. But they had, quote, unquote, saved it. They admit why did they make the decision in your mind? Why did Hank Paulson and Bernanke this what's this concept of moral hazard? Explain to the audience what moral hazard is, and why why did they save Bear Stearns six months before, and why did did the smartest guys in the room decide not to save Lehman Brothers?
Speaker 1: It's a good question. The real issue is is I'd have to go back when you have these systems to the way your doctor responds to any type of emergency in your body. If they might decide to save your kidneys and let your gallbladder go because the gallbladder is less important to your overall system. It people if at that time, even it's it's not that long ago, the boogeyman was when said, well, what really happened? Jeffrey, what really happened?
Why what is this financial crisis? And, you know, some of the progressives and the right wing blame it on the banks. It was the banks' fault, and it's the fault of this very esoteric unknown concept of derivatives. It was really the derivatives that caused this financial crisis because the derivatives got somehow out of control and, like, the in the Mickey Mouse
Speaker 0: And that was the way you started your financial your financial. Your your road to a billionaire went right through derivatives.
Speaker 1: Yes. But it's but derivatives were not the cause. Derivatives were not the cause at all. It's it's like saying your hair was the cause of your heart attack because it was on top
Speaker 0: of your head. So what was the cause?
Speaker 1: There isn't let me say, there's no one specific cause. These are system collapses. So when many times when they have to make your death certificate, when you say, well, what did he die from? They'll say heart failure. But if you say, what was the cause of his heart failure?
Well, he had blood pressure, his sugar was high, he was diabetic, he had all these other problems. They said, no. No. No. We need a word on your death certificate.
Did he die from brain damage? Did he die from heart failure? That's the financial crisis. Many said people said, well, what caused it? They wrote, like, on its death certificate derivatives.
But derivatives were not a fundamental derivatives are not a fundamental cause of anything.
Speaker 0: On the so the was it Sunday or Monday? I can take it was Monday morning when you made your two collect calls and you're talking to Bear Stearns on one hand and Morgan Stanley on the other? JP Morgan. JP Morgan. Did you that was Monday morning.
Did you Jeffrey, being one of the financial geniuses in the world, did you understand what Lehman Brothers is going into bankruptcy, the domino effect that by Thursday, the financial system would be under such extremis that if it didn't have a trillion dollar cash infusion in The United States, it might collapse. Did you know that at the time? Did you view that at the time? Yes. You did?
Speaker 1: Yeah. Why? Again, I I I don't wanna bore you or the audience with the the idea of it's a medical procedure, but you had system failures. So you'd recognize that if I said to you, did you realize when your father was on the ground and he was clutching his chest and he couldn't breathe, it was a bad situation. He he could die.
That's how I saw it.
Speaker 0: Did you did you know did you immediately think about the commercial paper market? I mean, the the mechanical triggers that actually had to you had to blow through these circuit boards. Did you know the circuits? Did you understand the circuits, or did you have a concept of the circuits that were gonna get blown through?
Speaker 1: Yes. But only because of an analogy to a body. And in fact, from my set my telephones against the wall with my little metal wires because the next day, I talked to another person in Washington about the issues of what I thought was happening, and I made the same discussion about the
Speaker 0: They were at the treasury department? Yes. So in a in a six by nine cell in
Speaker 1: The phones were outside the cell.
Speaker 0: In county in in in Palm Beach County, California?
Speaker 1: West Palm Beach, Florida.
Speaker 0: West Palm Beach, Florida.
Speaker 1: That's what you juice diet.
Speaker 0: West Palm Beach, Florida. West Palm Beach, Florida. West Palm Beach, Florida. You're making a call to Washington DC to talk to some deputy or deputies secretary of treasury.
Speaker 1: Someone in treasury. Right.
Speaker 0: Someone in treasury.
Speaker 1: Right.
Speaker 0: And that does not the night before before you go to bed, it doesn't dawn on you at all. You never have a moment of self reflection that how did I end up on this metal cot when I should be at the center of things?
Speaker 1: No. I had a telephone. So I've said, I can talk to it it makes no difference where I am, in fact. I'm still talking to the same person if I was at my home in Palm Beach, but I'm here in jail.
Speaker 0: Home in Palm Beach.
Speaker 1: I can dial my own phone.
Speaker 0: That's that's that's bullshit. No. But you can also make a thousand phone calls. Here, you gotta make one, and he's gotta take
Speaker 1: Think how much better that was. I had to decide who was the right person to call. That was unusual for me cause I would have called 20 people.
Speaker 0: And what was this what was the advice you gave?
Speaker 1: I said, we have you have a sick patient, and it's very much like a sick patient in the emergency room. Don't you can't think about it like your car. People in normal walks of life think about money and things as a machine. And then unfortunately, so if your car breaks, cars are always easy to fix. My jets, my cars, if it breaks, I know it can be fixed because it simply follows the same pattern.
If this part breaks, replace the part and the thing works again. People and the financial system are not machines. They can't be fixed the same way. You can't simply take out the put some more juice into the commercial paper market and that's like replacing the carburetor on the car. It's much more I have a patient who can't breathe, has a stomach problem, can't see, looks bleeding at the same time.
What do I do first? I have to think about it as a system. Where's the most logical place? What's the most dangerous place? If your heart stopped, we have to start your heart again.
If the in the equivalent to the money market, why do I have to start your heart again? I need to get your blood flowing. If your blood stops, you're dead. If liquidity, which is the equivalent of blood in the financial system, dries up What's
Speaker 0: liquidity is basically cash, putting cash into
Speaker 1: the system? Forget about what it is. K. Liquidity is liquidity. It allows the system it's the blood of the system.
You need to pump blood hard into the body of the economy to keep it flowing. And if you if you're especially when you're worried about someone dying, you're not going to be worried about the niceties of, well, you got the shirt dirty and there was some damage. Pumping that blood, keep that whole pump
Speaker 0: to on the person in Treasury on Tuesday, the sixteenth, did you get a feeling as you were sitting in your six by nine jail cell in West Palm Beach, Florida that they were on top of things?
Speaker 1: No, can't. It's impossible to be on top of things. There's no such thing. It's again, the doctor watching the patient die, you hopefully have some confidence that he's seen it before. He recognizes that there are some steps he has to take first before he bandages the guy's finger or worries about what shoes he has on.
So you hope that the people in charge, your doctors who are working on the emergency patient, have enough experience and frankly, judgment to try to keep the patient alive. Did think that
Speaker 0: they had those things, patience and judgment?
Speaker 1: They had pretty good judgment, and you needed a lot of luck, just like in the dead patient. You need to hopefully, you put that blood in and it's not too late. And you maybe you make some mistakes, but you have to know you're gonna have to give it a shock.
Speaker 0: In the run up to the September 2008
Speaker 1: Yeah.
Speaker 0: I guess you weren't occupied with finance. That whole summer, how long had you been in jail?
Speaker 1: I got went to jail June 30.
Speaker 0: So the entire summer? Yes. Before you went into jail, you were still very active in the financial markets?
Speaker 1: Yes.
Speaker 0: When you say active, you trade currencies every day, you trade stocks every day. When when people
Speaker 1: I don't do any
Speaker 0: Someone like you, or you give you give advice to people to trade stocks or trade currencies.
Speaker 1: I I don't trade every day. I I think that's like like Woody Allen said, it's you can't beat the bank. So I I try to pick my spots. You know, George Soros picked his spot when the pound collapsed. This would have been a great money making opportunity that passed me by when I was in jail, but that's not how I think.
Speaker 0: In the run up to that, in the 2008, were you that's when Bear Stearns got in problems, I think, in in the 2008, and they decided to bail it out. Did the Bear Stearns guys talk to you for advice at that time in the in the big crisis in Bear Stearns?
Speaker 1: No. But the the see, again, unbeknownst to most people and it's easy to blame people for the financial crisis like you'd blame the someone for giving your father the drink before he had his heart attack. But what really happened, the real enemy of the finance system was Bill Clinton. And if if you ask me what and who caused the financial crisis, I would tell you it was Bill Clinton.
Speaker 0: Because of what Bob Rubin and he did to the financial deregulate the financial system?
Speaker 1: No. Because as of the last time we had our sixty minute interview, you talked to me about home ownership, and you asked me whether everyone should own a home. And I told you, no. It's too risky.
Speaker 0: So the financial collapse of two thousand eight is because of hardworking African Americans, Hispanics, and and and and whites who wanted to have a piece have a ownership stake in in in the society that all rests on their shoulders. They're the culprits?
Speaker 1: No. Not at all. Okay. Then I didn't I didn't say they were the culprits. I I was pretty clear it was Bill Clinton.
K. And why was it Bill Clinton? Because Bill Clinton wanted to get votes from those people, And he sold them the idea that instead of renting a house and historically, the values of houses have gone up. And he said, you guys in these local communities who haven't been able to afford a house before, I'm gonna show you a way. I'm gonna give you a way because I'm sure you'll I'll get your vote that you can own a house because I want your vote.
So what we're gonna do is I'm gonna let you buy a house, mister Bannon, when you really you it you're right on the border, maybe, or not even on the border. You your credit is not good. K? Let's let's be honest. And it's not my fault or it's not Bill Clinton's fault, but whatever happens, at the moment your credit score or whatever it is, your credit's not good.
Now, normally, you come to me and you're a wanna borrow money. I'm a bank. And I say, I'm sorry, mister Bannon. I can't lend you money because your credit score is not up to where it needs to be. Hopefully, if you work harder and clean up some of your problems, it will be.
But now what I say to you is I'm gonna figure out a way to lend you lend you, not give you. I'm gonna lend you money anyway, though you don't have a good credit score. And don't worry. I'm gonna get rid of the term that you don't have bad credit. Bad credit sounds pejorative.
You don't wanna be a person.
Speaker 0: Sounds judgmental.
Speaker 1: Yeah. Sounds judgmental. So what we're gonna do is we're gonna call your credit situation subprime. Oh, nobody knows what that means. Subprime.
That means prime is good credit. Subprime is not good credit, less than good credit. So we'll call it something that people really won't follow, and we'll tell you what. We're gonna have people lend you money though you are a sub prime borrower, and I will figure out some government agencies to guarantee your loan. Though I don't think you're a good risk.
So the banks say, no. No. No. We don't want initially, the banks said, sorry. This is too risky, mister president, for us.
We're in the business of managing risk. It's not our money. It's the hard working people's money sitting in our bank. We can't lend to people whose credit is not prime. You're asking us to lend to people who are subprime.
And he says, here's the key, if you don't, mister Bannon, I am going to make sure the justice department charges you with discriminatory lending because you refuse to lend to my sub primers. In business terms, you should never lend to. But what we'll do is we're going to I'm gonna form an agency called Fannie Mae and Ginnie Mae, just another agency names. They'll guarantee your loan. So don't worry.
Don't worry. You don't have to pay it back anymore. Even though you and maybe you don't even have to work as hard anymore. That's that's probably a harsh statement. But these players, these two big firms, Fannie Mae, will guarantee the fact that that bank will receive its money.
Now the bank says, wow. Best deal in history. I refused to lend to mister Bannon, but now he has the big brother, uncle his uncle Sam. He went to his uncle Sam, and uncle Sam says, I'm guaranteeing it. The bank says, I want everybody.
Give me as many people as you can give me because uncle Sam is the best credit in the the world. Not only that, it's the United States government. We'll take it all. We'll take as much subprime as we can handle because it's the best investment for the moment. It's a strange investment because it has politics that has inserted its way into the numbers.
Politics doesn't belong in the in the markets. But now we're going to have I want the votes. We'll make guarantees that you who can't get a house normally will be able to get a house from the bank. The bank says this is the best deal in history. We will package a hundred, three hundred, a thousand of you sub primers, and will sell it off to somebody else.
And the whole system becomes mired in sub prime mortgages. That's becomes the issue. Mired?
Speaker 0: This is too much supply is the supply demand problem? Do you get too much supply?
Speaker 1: No. It it's a very good question. What does too much supply mean? Well, then you get the people go back to your first question to me. Government leaders.
Government leaders know if they're good and they can do mathematics, they can balance their checkbooks. So certain people in Congress said, Well, how do you value these subprime mortgages? The banks said, We've been valuing them the same way we've always valued them for the past twenty years. The accounting firms, there's something in this country called GAAP accounting, which is a standard type of accounting. And we account for them the same way we've always accounted for them.
If we paid a thousand dollars for your mortgage last night, when we put it on our books today, we're going to say its value is a thousand dollars. Makes sense. I paid for it what's its value? It's a thousand dollars. That's what I paid for it last night.
No. The congresspeople said, that's not really a good answer. You know? That does that doesn't give us confidence that you know what you're doing. Because what happens if you have to sell it tomorrow morning?
If I you there's a something's happened and you have to sell it. Remember, there's a kinds of stress tests. Would you be able to value it at what you paid for it the day before? And Wall Street says, that's not the way you can think about this. This is crazy.
We always value things at the cost from the day before. And they change the accounting method, in essence to say, not what it was worth yesterday, but if I have to sell, what would it be worth? That's impossible. So what happens is every bank now has to value something they bought yesterday at lower than they paid. Never before in twenty years did they have to do this.
So something they bought at a thousand, on their books was a thousand, is now 990. That starts to you asked the question about what did I start to think about. Something's a thousand and $9.90. This person now has to value it at $9.80.
Speaker 0: When did you first start to get nervous? Understanding Bill Clinton in all this. Did you change glasses?
Speaker 1: Yes.
Speaker 0: Okay.
Speaker 1: I changed shirt.
Speaker 0: I saw the black. Are you okay with
Speaker 1: the Yeah.
Speaker 0: Great. I think we're gonna have all kinds of chances.
Speaker 1: I'm experimenting. Okay.
Speaker 0: When did you get a feeling? Did you ever anticipate before it happened something like 2008 could happen?
Speaker 1: No. How could that be? It's it's the word I can beat to death is that it's very much like it would I expect anticipate I'll have a heart attack tomorrow? Unlikely.
Speaker 0: Was 2008 a heart attack or a stroke? Debilitating?
Speaker 1: It's a better I don't it was both. But why was it both? Because, in fact, as I said, the blood was getting dried up in the system, and the head, which is sort of the central bank, wasn't working. So to some extent, it it was a combination. It was just a crisis.
Did you see
Speaker 0: that building up over time?
Speaker 1: It's it's always been lurking in the background. I mean, if if you if you have an older parent, would you say it's possible did you anticipate him having a heart attack today? No. You hope things are gonna go better, and maybe they'll fix it up. The system was getting too complex, and it wasn't based on derivatives.
Because what people keep forgetting, and as I was just explaining, Wall Street and what in many professions, including Wall Street, Wall Street makes it sound complicated. They don't want the little guy to understand what they do because they make so much money, and they don't do very much. So they they couch it in words like derivative and stock options and commodity futures and different types of contracts. It's all fairly everyone is capable of understanding it. It is not complicated.
But Wall Street, because they make so much money from doing fairly simple things, needs to make it more complicated than it really is.
Speaker 0: The we had a a very big recession in the early nineties based upon real estate and and and Japan basically imploding
Speaker 1: Let's again k? You had a recession in the nineties. I don't know what it's based upon. It it's always interesting to look back and say, separate from this certain triggers, like, there in the seventies, there was
Speaker 0: a What what do you think it was based upon, the nineties downturn? Clearly, there was a huge downturn.
Speaker 1: No. I I just I know there was a downturn. That's what I know for sure. I don't
Speaker 0: That's a fact. What what
Speaker 1: Everything else is is sort of speculation about why why did he have I
Speaker 0: understand that, but there's some speculation that has 0% probability of being true, and there's others that have 90%. In the in the range, when you look at the range of alternatives of what could have caused it of n 90, and what I'm trying to do is get you all the way up to 2,008. Look. You're the smartest guy in the room. Right?
You know that. Do you think there's anybody in the world today
Speaker 1: Oops. That's a good this is gonna be a bad question.
Speaker 0: No. No. But do you sir, do you think anybody in the world today, the Alan Greenspans, the Bernanke's, any cent is there any central banker you know, any partner of any Wall Street firm, any guy running a trading desk? And I would take it that would be or anybody at a Larry Fink at BlackRock, Steve Schwartzman at at Blackstone. The top 100 financial guys, let's throw in a couple of Nobel economists, and let's throw in the best professors at the at Wharton, at Harvard, at Stanford.
Do you think that there's anybody that understands money or understands the world's financial system as good as you?
Speaker 1: There must be.
Speaker 0: But it doesn't come to the top of the head? No. Okay. Fine. Now now now that okay.
Now that I've gotten that no. Now that I've gotten that, let's go back to 1990. In that arc from '90 from the fall of the Berlin Wall to 2008
Speaker 1: Good.
Speaker 0: We had we started with the the implosion in Tokyo of the the Japanese economy, Japanese financial markets. We had the huge run up in in Internet stocks. Right? We had the explosion of that in 2000. The, you know, the the the the the bankruptcy of bear of of Drexel Burnham in '90 Mhmm.
Implosion of Japan, huge run up in equity markets for the Internet, implosion of the Internet 2000, ten years later, roughly Mhmm. And then this run up through the Iraq war and all that, the run up to 2008. Every ten years, it seems like we're in some sort of ten years before the nineteen nineties was the was the seventies. Am I
Speaker 1: You sound like an astrologer. Okay. And and that if they ask
Speaker 0: us I'm really not to be a mathematician. It just seems to me a pattern of every ten years.
Speaker 1: That's that's misleading. That's exactly right. Because people like to see patterns. People like to see patterns where there are none.
Speaker 0: So a pattern of a financial crisis every ten years is just in my mind?
Speaker 1: Yes.
Speaker 0: Long term capital. Long term capital that had to be bailed out back in the late nineties when everybody panicked. And that one, the big that bailout today would look small, and it was a $5,000,000,000 or it was $30,000,000,000.
Speaker 1: Was People businesses fail all the time.
Speaker 0: Well, they'd launch on capital, and the Federal Reserve stepped in.
Speaker 1: But I'm saying they things people go bad. Things go bad all the time.
Speaker 0: Yes. The the the local the you're you're correct. The audience is watching this. The little guys, they go bankrupt all the time and nobody gives a shit. You know why?
They're a little guy. But when long term capital management goes bankrupt or Bear Stearns goes bankrupt or Lehman Brothers goes bankrupt, people care because it
Speaker 1: it You know, it's a it's an unfair characterization. What do you say? Because, again, it's the complexity of the situation. If you think about the you have a complex system. You have your body.
Now, in fact, the little guy is my finger. This this is And
Speaker 0: Bear Stearns is your heart.
Speaker 1: That's correct. The banking system is my heart. The system I can't risk my my because remember, it's not only my
Speaker 0: You haven't been able to name Hang on. You haven't hang hang on. No. Hang You you
Speaker 1: haven't was trying to hang I wanted to see if the hang on was good. You haven't
Speaker 0: been able you're not good enough. You should you're like junior junior wizard trying to do it. You you haven't you haven't I'll say, since we can't name another guy that's as as as good as you there may be a couple out there. You're not you're not bragging. You're you're humble.
It had to be some time. Please tell me there was some time before you went to jail and and and basically got cut off from daily information in the 2008 that you started to get very nervous that this complex system that something was deeply wrong.
Speaker 1: Okay. First, let's go back. When I say no one understands the system better than I do, it doesn't mean I understand
Speaker 0: sound like a doctor, you're afraid, is gonna get sued for giving a a thing. Yeah. You're not gonna you're you're not taking on any liability. There's no contingent liability here for
Speaker 1: your interest. No. No. But the word understand is the problem. K.
I don't understand the system. So that's I don't understand the financial system.
Speaker 0: Stop. You cannot sit here and tell me No. The what we just went through I'll go through again. The hedge fund managers, the money managers, the central bankers, the commercial bankers, the heads of the investment banks, the heads of all the trading desks, the top, economists, and I'll throw in the business school lectures at Stanford. Of all the top two hundred, two hundred fifty, you can't name off the top of your head the the guys are at least at your level.
You have to understand it somewhat.
Speaker 1: No. Sorry. We all don't understand it. No one understands it. It's a miracle.
It's this this that's part of the problem. It's impossible to understand. That word understand simply means if this happens here, that will happen there. It's predictable. Understanding means it's predictable.
It's not predictable. That's the problem. It's very in complex systems, that was the fascination. Is there a way to tease out some level of predictability?
Speaker 0: So even
Speaker 1: if this what you ask you would ask the question. It's a great question, which was, was it a stroke or a heart attack? Now most people don't know that before they were gonna have a stroke they had a stroke. Did they just have a stroke. Do they why?
In hindsight you go back and you can make lots of explanations that might sound good, and if you're talking to the working man you're using language that he'll never understand, it's complex so he's just like going to his doctor he says he has a gastrointestinal problem or he has diverticulitis as opposed to saying you had a stomachache, you ate bad food. People don't like to say it in normal everyman terms. The system had a stroke, but we don't know why.
Speaker 0: But you just okay. Hardworking people, and and there's a great social benefit, would you not agree, with having people having ownership in the system?
Speaker 1: When you say ownership in the system, it doesn't mean
Speaker 0: Let's start over
Speaker 1: because Okay. Yeah.
Speaker 0: So flip flip over your phone too
Speaker 1: because Yes.
Speaker 0: I don't want anyone to see this on your phone. So maybe flip it down or something. Yeah. Yeah. Yeah.
Who knows what the fuck comes up with that?
Speaker 1: That's correct.
Speaker 0: Which one has sent
Speaker 1: you? KSA. I can't
Speaker 0: even get I can't I not believe I've got the magic moment when you're in fucking prison or jail or whatever
Speaker 1: the fuck it is. It's crazy. Solitary. Now there's a funny part that we missed, which is said Go
Speaker 0: ahead. Tell it.
Speaker 1: The funny part is just what you asked me Is
Speaker 0: there anything funnier than that? For black humor, it's
Speaker 1: It's I don't I don't make any black comments. Sorry. You asked me what I was wearing.
Speaker 0: That's right. You two wrapped in the Me Too movement.
Speaker 1: Yes. So I was wearing a brown jumper and a brown pair of pants given to me by the jail with the word trustee on the back.
Speaker 0: Because you you had qualified to be a trustee?
Speaker 1: Well, it's the funny part was it was spelled t r u s t y, so I wasn't really sure. I I've been a trustee in many different operations, but it was the first time it was actually printed on my back and spelled incorrectly.
Speaker 0: Probably had a higher level of of being a trustee at at that than you had at all the all the boards that you were trustees. Right?
Speaker 1: Yes. Right. Because if if the trustee meant you get two devices to to clean your toilet as opposed to one.
Speaker 0: Yeah. But it also meant that you you had some sort of personal fiduciary own responsibility for oneself. Right?
Speaker 1: In the jail? You mean
Speaker 0: Well, that's what being a trustee is. That's where they give you two.
Speaker 1: The the yes. You you get two cleaners. Yeah. To try I was a trustee in the jail because I was able to teach some of the kids from to help them get their GED. So that's how they gave me a trustee jot.
Speaker 0: There's no time I gotta go back to this because it's it's I'm like a dog with a bone in this thing. Yes. You can't there's something deeply fucked up with you.
Speaker 1: At least something.
Speaker 0: Well, we know there are things deeply fucked up with this you will get through in this film. Right. But you cannot possibly have to sit there knowing that you came from nowhere, knowing that you went to the very top of what is considered outside of science and maybe physics, the thing people most admire because it's like alchemy, understanding high finance. To sit there in what will be the defining financial crisis of our time, like like Black Friday and or Black Monday, whatever it was in the Great Depression, and be there at that exact moment triggered in part by a firm that you used to be a partner in and knew intimately well and created much of your initial net worth because of and know that you couldn't someone who lives on a phone. Right?
Yes. Because you do live on a phone. Right? Correct. You had to make collect just to collect calls.
You cannot tell me sometime during that day you did not have that conversation with yourself of how the fuck did I do this to myself to put myself in West Palm Beach in a six by nine cell with a metal fucking bed with a brown shirt that said trustee spelled wrong.
Speaker 1: So did I find it amazing that I was there?
Speaker 0: Not amazing. I don't wanna say it was not funny. Oh, I thought it was I I wasn't funny. Right. Not amazing.
No.
Speaker 1: It was incredible.
Speaker 0: Incredible in what way? Incredible like how do I do this to myself?
Speaker 1: No. It's as incredible as me sitting here in this house. They're both just two sides of the coin. That's how I think about it. That my life today is incredible.
Speaker 0: Do you consider yourself a stoic?
Speaker 1: No. I just consider myself a hermit. Stoic's not very happy.
Speaker 0: Being a hermit then, being in that six by nine cell, being in the cell, qua the cell was not the problem. Right?
Speaker 1: Correct.
Speaker 0: What was the problem?
Speaker 1: The the eating the Almond Joy bars.
Speaker 0: Because you couldn't eat the food?
Speaker 1: No. Right. And then but remember, my my life is
Speaker 0: Did that ever strike you that I gotta I can't eat the food because somebody might have done something to it? I gotta eat I gotta live off an Almond Joy bar one a day or two a day or whatever. How many ever sneak in a day? No sneaking in. Your one almond joy bar, did that not it did not hit you at some time.
How the fuck did I do this?
Speaker 1: No.
Speaker 0: Let's go back to the spring of of two thousand eight. Were you so wrapped up in your personal issues at time you were not spending enough time on the financial markets, or were you deeply involved in the financial markets like you normally were
Speaker 1: in spring? I was involved.
Speaker 0: And you and you so we're saying that the smartest guy in the room didn't see it coming?
Speaker 1: No. Of course.
Speaker 0: The bankruptcy of Bear Stearns, you just thought it a Bear Stearns problem. You didn't see it as systemic.
Speaker 1: I I know you keep hopping on
Speaker 0: it, but it's it's not Because you're a mathematician who understands systems. I I It seems that anybody that understands that they had a systemic problem, you at least be the first on the early search radar. If if you're not gonna see it, then then you're then I'm really afraid afraid because because that that means means that that that I always assume there's at least a set of guys out there that have some sort of sense that something's not right.
Speaker 1: Imagine the guy who has a a stroke or had the heart attack. When you ask him, did did you feel funny the day before? He's gonna tell you, yeah. I didn't feel right. Something was off.
I didn't feel right. I had a my my stomach was right. I felt a little dizzy. I felt a little weak. But if you asked him the day before, do you think you're gonna have a heart attack tomorrow?
He'd say, no. I just feel a little weak. I'm a little dizzy. My stomach hurts. So the these systems and that's the issue of complexity.
What complexity says is that, in fact, there's everything seems to go along and people have seen it. One of the great examples of complex systems is sand dunes. In fact, the sand keeps building up. People have seen some and all of a sudden, one more sand drop and the things all the sand starts running down the hills. That's the way I see the financial markets.
But you funded
Speaker 0: Santa Fe in the early nineties or late eighties?
Speaker 1: I believe it was early nineties. I can get back
Speaker 0: to you. But early nineties, Santa Fe was funded for the study of complexity theory.
Speaker 1: The study was so let's let's back up. So why did I buy a ranch in New Mexico in 1993? So that's gives you some sense. So I would have funded it in 1990. Los Alamos, which was the high energy lab up in in New Mexico, was losing all its scientists.
Speaker 0: In Los Alamos, it was where Oppenheimer and where the where the a lot of the the nuclear weapons burned, the bomb
Speaker 1: That's where the Manhattan Project.
Speaker 0: Manhattan Project was Yes, sir. At Los Alamos. And you bought your property out in New Mexico to be near that?
Speaker 1: Yes. Because the scientists were going to be they cut the funding for high energy physics, but the people who worked in Los Alamos would still be in the Santa Fe area.
Speaker 0: They cut that because the end of the this was the Cold War dividend. Right?
Speaker 1: I don't remember exactly why. It was because, again, people thought there was that physics and high energy physics really wasn't that important.
Speaker 0: Because that was about nuclear weapons?
Speaker 1: No. It was because they were trying they decided it was maybe not right. This was the same time that Murray Gell Mann came up with the term quark, q u a r k. He he picked that out of a old poem, the word quark. But it was something it was mysterious.
So they were starting to understand in the nineties that the in the our world of the physical world, there was things that were just unexplainable. They called it strange things. You gave it a name. You gave it some characteristics. You called it it had charm.
It was one of the term. It had a charm. It had a flavor. It had a color. But nobody really no one, mister Bannon, understood what it was just like the financial system.
Speaker 0: And you wanted to investigate that?
Speaker 1: I I wanted to see if we could build tools so others smarter than me could help investigate it.
Speaker 0: And that was the beginning of your concept of the Santa Fe Institute? Yes. And Santa Fe Institute was founded to do study in this type of
Speaker 1: Can you can these areas of strange things be described by some form of mathematics? So
Speaker 0: that's what I'm trying to get at. The the the the the foundational thought, the organizing principle of Santa Fe
Speaker 1: Yes.
Speaker 0: In high physics lab at at Los Alamos Right. Which had created the been the the headquarters of Manhattan and the Trinity project. Right? The bomb. Yes.
So you're talking about the the elite the high priest
Speaker 1: Of physics.
Speaker 0: Of physics.
Speaker 1: Yes, sir.
Speaker 0: Which high priest of physics, some subset of that is also mathematics.
Speaker 1: Yes. Yes. They're both similar.
Speaker 0: Project out. One of the tools you wanna do is to make sure that in this complex system, the finance system I'm doing a lot of this for philanthropy and a lot for the good of mankind, but also to be able to understand this complex system, the most complex outside of maybe our body of of the financial world.
Speaker 1: Yes.
Speaker 0: Did they create tools, or were you a were you smarter in than the mid aughts fifteen years later than you had been then because of work that was done at Santa Fe?
Speaker 1: No. That was it was great. But in fact, most of the money most of my philanthropy in the area of can you describe things that appear to be unexplainable by mathematics? And can can you fund people who have new ideas? And unfortunately, when someone thinks they've been able to there was a man, Stuart Kaufman, when they think that, okay, I figured out how to be able to predict the unpredictable, what appears to other people to be unpredictable.
But my system, in those days it was called genetic algorithms, can predict what things will happen, then they all wanna make money. So they use their systems to try to figure out they know they have figured out the way to make money because they figured out the unexplainable. They try, they go bankrupt, and we start again. So in with a cold view, what I've come to realize is that the the attempt to mathematize, formulaize, or what in your prior work to understand what really is, in today's world, still unexplainable is impossible. They're miracles.
Speaker 0: The your first head of Santa Fe was Christopher
Speaker 1: Langdon, I think.
Speaker 0: Langdon from from Austria.
Speaker 1: Murray Gellman was right. Murray Gellman was the funder. He was he was the the the rock.
Speaker 0: Yes. He was the rock. He was a Nobel Prize winner. Yes. Yes.
And and a wonderful guy. He came out and helped us with the Biosphere two project. He came with Chris Landon. Yeah. Chris Landon was the op operator of the day to day
Speaker 1: Chris was doing artificial life. Right. Murray tried to lead his own artificial life. Yes.
Speaker 0: When Chris came to Biosphere 2 for the for the first big conference we had in 1994, he was one of the most impressive guys there Mhmm. Among all the world's elite. Kew Gardens, the Lawrence Livermore lab, the the the labs at Sandia, you know, all the all the major universities, Lamont Doherty, all the big earth absorbers, Woods Hole. What set Langdon apart, I thought, and the reason I invited Santa Fe to be part of it, was Langdon actually made a presentation that everything and he was making this to scientists, a lot of marine biologists, a lot of people that are just beginning Wally Broker and people who are just beginning the study of climate change, at that time called global warming, that he made this compelling presentation that everything's really mathematics. Yes.
It's all just back to math. And you have to all these experiments you do, you're not one of the reasons are not considered by the high priest in physics as being real experiments is that they don't have a mathematical basis to it, and everything has a mathematical basis to it. Langdon seemed like a radical visionary. What happened to that concept?
Speaker 1: You go back three hundred and fifty years. So you have Isaac Newton, and you have Leibniz. From move forward, you have people like Heisenberg and Godel, Gerdl etch, and what every one of those mathematicians and philosophers came to understand is that there's something with these numbers can describe certain things, approximate certain things. But in fact trying to put measurements and numbers on other things that are really unexplainable is folly. Three hundred years ago, they said that unexplainable realm was god.
And people who attempted, in fact, to explain the unexplainable, who said, yes. I understand the unexplainable, were charlatans. They were the occults. They were the astrologers. They were the con men.
Alchemists. Yes. Well, no. Alchemists was in fact they believed that there was a way to transmute one metal into another. In fact, they always wanted to see if they can create gold.
There's no reason, if you think about it, they recognize that one metal is different than another metal because it has some additional pieces to it. Has additional neutrons or protons or electrons. So because they thought it was a machine, they believed it was a machine, if I can take five protons and add five, that gives me 10, I should be able to get gold. They'll move everything around inside these systems, the molecules transmute one molecule into another. And if this molecule I've transmuted it into is gold, I'm a rich man.
It's back to money. But this something strange happens. Isaac Newton says, this is really weird. If if I wanna push a ball on the table, I have to touch it. Maybe I have to blow on it.
But I actually have to push one side of the ball or the book to move that side. I'm pushing here and obviously this thing is what appears to us humans to be solid, so it moves as one thing. But the only way to get something to move was to touch it or put a force against it. Okay. Seems to make sense.
Everybody has that experience. You know, if I wanna lift a glass, I lift it. If I wanna push a ball, I push it. If I wanna pull a ball, I pull it. But he recognized when the ball fell off the table fell off the table, it went in a different direction.
How is that possible? Nobody pushed the ball down. And he said, this is crazy. Why did the ball go down? I didn't push it.
I just let it go. So someone's pushing the ball because I know that I am confident that the only thing that gets something to move is with a force that pushes. So there's a force that's pushing the ball down. In fact, he never he called it gravity. He measured how fast it was pulled but never was able to explain why it happened.
How is it what is gravity? It's this everybody says, well, why did the ball fall to the ground? Because gravity took it. But what's gravity? That's as Feynman would say, that's the name of the thing we have no idea what it is.
This goes to Santa Fe. They were trying to put explain the unexplainable. Can we measure? Can we figure out a way to predict the stock markets using these types of chaos complexity?
Speaker 0: Before we get there, let's walk back to the let's let's go let's let's go back to Newton. Sure. Pre Newton and then Newton, what did Newton solve that for millennia up to Newton had not been solved? And then I wanna go forward all the way to Santa Fe, what they were trying to solve. Let's start with just two or three of the basic guys, but let's go with Newton.
What pre Newton, it was what? And then why is Newton such a A genius. In such a in in the I think mathematically, they told me one time I've seen there's been a 115,000,000,000 people roughly, that have lived on the Earth. And of that 115,000,000,000, new
Speaker 1: Are you sure that's the number? That sounds a lot very high. We only have seven now.
Speaker 0: I I think in the history of the Earth, I think, is I'd I'll I'll pull I'll pull up the the stat for you, but I think it's a 115,000,000,000 people, they figured.
Speaker 1: That probably is inflation. That's why you
Speaker 0: see Have have lived have lived through the have lived on Earth. But he's on the handful of the most important. What did he solve for? Why is he so important for how we live today? And then we wanna go through Leibniz and the other two or three other major ones to get us to Santa Fe.
Speaker 1: Well, that's a long it's a long journey.
Speaker 0: It's this is the heart what we're trying to do.
Speaker 1: Let me take a bit of a detour just a second. If you went to high school and the last year in your high school, you took calculus, so Isaac Newton sort of invents calculus. Well, that sounds invents you know, mathematicians
Speaker 0: To torture to torture seniors in high school before they graduate.
Speaker 1: Yes. But obviously no. Yes. The answer is yes. People can't could never do calculus.
Speaker 0: Why why is it why is calculus so why is that the dividing line between, you know, to me, people who could handle that and could go on to do certain things and people just hit the wall even if they know math? It seems to me that there's that that that calculus is the is the thing that changes. It it it it it it bridges. That's because it's about the the about the theory of change and the theory of how things change?
Speaker 1: It it's a great question. But in fact, what calculus does is it's it's somewhat philosophical. That's why mathematics is is you know, they used to be Newton wasn't a mathematician. He was called the geometer. That's what they used to call themselves.
They understood geometry and and numbers. But there was an there's an old conundrum where it says if during Pythagoras' days, Zeno's paradox it's called, where they said, well, if I take if the wall is two feet away from me and I take one step that's halfway to the wall, that'll be one foot away. And if I take another step that's half again, that'll be half a foot away, then a quarter of a foot, I could walk forever but never touch the wall. Doesn't sound realistic, doesn't make any sense in our real lives of the physical. But what Newton understood is many problems were like that.
Many things approached the wall or in his in calculus, approached the limit, but never really reached it. So he said, it's okay. You don't have to reach it. We can do lots of the mathematics as if it was so close it was almost there. And we could do lots of mathematics almost being at the limit.
And this is really important, Steve, for today because most of the science up until today was things that are starting to approach the limit. This you were taught in high school that if you had one divided by zero, if you remember your high school algebra, you were told, what's the answer to that? Is there an answer to one divided by zero? No. If you were in high school, it's like, stay away from it.
It's the boogeyman. You could write it down as it's undefined, it's not able to be determined, that there's a bunch of things. But in fact, one divided by zero is a strange things happen. It's a world of the strange. And it would I'll explain to you after is that when you get one divided by zero you get into a world we don't know what happens.
The answer is it's not explainable. We can give it we can call it things like undetermined is what We can give have a convention to say it's it's x y or z, but in real life we don't know what happens when you are actually at the limit. So that's a Newton thought the same concept is that the limits were filled with God. You got close to God, but you can never be God. He had this sort of religious interpretation.
Speaker 0: Okay. I wanna go back to Newton. Why is Newton such a big dividing line in mankind's history? What is it about Newton? What is it about him?
What are you trying to solve? What did they not know beforehand? What because we live to a degree in a new Newtonian universe, although I realized later some sub particle atomic physics, but at least for a while, it was Newtonian. So what's the divine? Why is he so important?
Why is he an inflection point in mankind's movement from the swamp to the stars?
Speaker 1: That's a great question. The stars was by Kepler what what Newton starts to allow us to do is to make prediction accurate predictions. Remember that we've got talked about that with money, about the things in our physical world. How cars he didn't have cars there. How horse carriages moved.
How things how bowling balls moved, how pool cues and pool excuse me. Pool table balls And people
Speaker 0: tried to solve that before Newton?
Speaker 1: Many
Speaker 0: many. Heraclitus or or or, you know, Plotinus, Pythagoras, had had these greats that we hear about, had they tried to solve the same problem?
Speaker 1: Not the same problem. They tried to again, what Pythagoras did, he starts to figure out these relationships in triangles. For example, everyone knows the a squared plus b squared is equal to c squared. That Pythagorean theorem, which is basically says, these shapes in a triangle, each side of the triangle has a fixed relationship with the other two sides. That's strange.
He knew, again, but it was all numbers. This was a a system of things in the physical world, and Pythagoras says, we can start putting numbers on things that help you predict how they will behave. You can add two triangles and make a square, some different shapes. They were looking at geometric forms. Newton says, well, I wanna know how planets move.
I wanna know how things around me move. Can we find formulas? Can I find formulas that explain what I see in the physical world, how physical things interact and how they describe one another? Again, the fact that two things, two solid masses, for some very strange unknown reason, unknown today, attract one another no matter what they are. People have seen the experiment.
You hang up something two little metal balls from a string. They move towards each other. In fact, there's a they move towards each other was a very I'm very specific. So when you drop the ball to the floor of this room, Newton says, in fact, the room came up a bit to meet the ball. The room moved.
It's in percept you can't really perceive that motion, but they attracted each other with certain ratios. So he started to be able to measure things in the physical world, and that was great advances. It also now you wanted to move move very quickly. Unfortunately, most people, especially in the twentieth century, nineteenth century, said, well, like Newton, let's measure everything. Let's measure people's behavior.
Let's measure their psychology. Let's measure their health. You go to the we could have my blood test. Let's measure everything. Let's measure Wall Street.
Speaker 0: Their their voting habits.
Speaker 1: Measure. Measure. Measure. Can we put a number on how much I care for my wife? Could I put a number on how I feel?
And we tried unfortunately, we try to mathematize the the finer things in life and then recognized that there was things that unfortunately just fall outside. Everyone Schrodinger wrote a very famous book about what is life. He was trying to figure out a way, can he describe the difference formulaically between things that are alive and things that are dead? The answer is no. The things that are alive in my world are miracles, Not magic.
Magic has a bad connotation. We don't believe in
Speaker 0: You you don't believe in the spirit or the soul? That's what animates people is your spirit or your soul. That's what but you've have you ever seen someone die? When they die, their spirit leaves.
Speaker 1: Their soul leaves. No question. So in fact
Speaker 0: question to you about that. No question. There what there's no question to you that there is some animating life force within us that leaves when you're dead?
Speaker 1: Yes. In fact, I refer to the soul. There's obviously a certain the questions in the past, even during
Speaker 0: would normally think you were soulless. So
Speaker 1: Thank you.
Speaker 0: To have you just no. To have you talk about you actually believe in it and have done some thinking about it is pretty shocking in its own right, isn't it?
Speaker 1: Well, I I get mathematic Leibniz and Leibniz's thoughts
Speaker 0: To know Newton was at Cambridge, and he was the head of the math department. Right? He's
Speaker 1: a professor, essentially.
Speaker 0: To Leibniz. Who was Leibniz a German professor?
Speaker 1: Yes. But what Leibniz said is the soul is so strange that because God took chemicals, which is simply the material, like tables, and he somehow made this material able to have a thought. How strange is that? Not only does it have a soul, but this some way it was put together that this material substance can is able to think. So when you say to me, it's obvious to everyone that there's such a thing as a soul.
Now if you're part of the Charlottesville, you'll try to explain it to people. The soul, describe, is the dark matter of the brain. Why is it dark matter? Because in high energy physics nowadays, you hear terms of dark matter, dark energy. Again, terminology.
It's a complicated term. Why is it dark matter? Because we can't see it. That's all. What what do you mean you can't see it?
Well, somehow we see something moving towards this area of darkness. Something I can see this thing. This appears to me to be empty. It's just black, but I see it being drawn this way. So I say, well, I know if this were matter, that would follow that equation.
If this was solid, it it would explain the way this particle moves. But I can't see anything here, so I'll just call it dark matter. And I'll say, I don't know what it is, but it behaves as if there was something there. The soul is obvious to everyone that there's something different between things that are alive and things that are not alive, but we have no idea what it is. It's currently unexplainable.
I believe we need an entirely different system of analysis to try to figure out Sorry.
Speaker 0: No. With Newton, you know, with all his alchemic study chemical studies and and and and things he worked on in the spiritual side, Leibniz had just talked about the soul, Schroeder talked about what his life, if a modern scientist or someone that you funded at MIT or Harvard or one of these things talked in those types of terms, they would be considered to be a wing nut today, wouldn't they? They would not be they would not be on the path for tenure. Right?
Speaker 1: Unless they were in the philosophy department.
Speaker 0: That this is exactly my point. Talking about three of the greatest mathematicians in mankind's history that have really changed mankind. Talking like this, what happened? How do we get to a situation where they could not be in the high physics you know, they could not be in the mathema in the mathematics department or working in high energy physics.
Speaker 1: Good. It's an easy answer. Newton was a combination of mathematician or geometry then and philosopher. And as time went on, that those disciplines seemed to move apart. We had philosophy.
Some of the philosophers can't do math and some of the mathematicians. And, again, mathematicians often break into two categories. People that solve problems. Those are more like geometrists, the old they're just problem solvers. And then there's thinkers, theoreticians.
They're more like the old movement towards philosophy. But neither one of those two groups have been able to figure out why something is alive as opposed to something that's not alive. No one's been able to describe what the soul is, but we all know it exists. And my I I think what we need is a new science is a bad word. I I think science only describes the things we already know about the physical world.
In fact, there's an argument that the physical world that we see has been created out of our systems to be of mathematics. Mathematics everyone knows mathematics describes the physical world much greater than it should. Unless you my view, the physical world really comes out of conscious beings that have mathematics, so they create it. This table appears to you and I to be solid. To a bat, because we have light that's bouncing off the table into our eyes, it appears solid.
If instead of eyes that responded to wavelengths of visual light, our eyes responded to radio waves, the radio frequencies, it's not different, it's the same type of frequency as light with different speeds, the table is invisible. We know that our phone works in this room so the waves are coming through the windows, the waves are coming through the walls. So the walls are invisible to that type of radiation, that type of energy. The walls are I can see them because my eyes, a physical system, determines that the walls are there.
Speaker 0: You with with Murray Gelton, you founded or with the original donor and what had the idea of Santa Fe Institute. In ten or fifteen years later, effort to study the complexity of systems mathematically
Speaker 1: Yes. Is it that's a total failure.
Speaker 0: Yes. A total failure. Total failure. Why is that?
Speaker 1: It it's the failure of science because, in fact, if if to some extent science doesn't describe romance, I don't know why I'm attracted to somebody. I don't know people are attracted to each other and some everyone has the same feeling. They've seen someone walk in the room and they say, oh, that person gives me the a creepy feeling. Science has tried to describe science doesn't describe what creepy feelings means. They just know it's a creepy feeling.
I think women, as I said the last time, have an intuitive sense. What is intuitive? They have intuition. They have feelings, and they're able to deal in the realm of things that men, especially men like myself, find unexplainable. They have great women have intuition.
Men see things a bit differently. They men wanna measure everything. Women are not really that interested in measuring.
Speaker 0: In in what you're saying in macro terms, you actually think science, mathematics, maybe ultimately technology is moving to that more intuitive
Speaker 1: I think science and math are old fashioned. And, unfortunately, people are still taught that they have to learn algebra in school and certain things in school as opposed to learning to give have an emotion
Speaker 0: Is this what Larry Summers was trying to get at? Maybe he didn't say it perfectly enough, but what he was trying to get to in that system the systems we study today, the way mathematics is either taught or understood, that women just haven't gotten up to the highest realms of engineering or physics or mathematics because of that. And you're you're actually implying that there's a either new branch of science where we've hit an inflection point like a Newton that's gonna go in a Newton took mankind in a different direction because he was able to measure. Then you had subatomic, you know, non Newtonian physics later. Are you saying that you think there's another developing field that's coming up that may take us, I don't know, how many decades to get our hands around, but that that's what's evolving out of this?
Speaker 1: Yes. Yeah. In in fact, I think that mathematics it's it's not the end of science. Every year someone says it's the end of we can't discover everything. There's lots to discover with the relationship to the physical world, but we know a lot already.
With in respect to the unexplainable world, we almost know nothing. Women, again, sense it. And instead of Larry Summers, I'll just I won't digress too much, but Howard Gardner early on said, there's not one form of intelligence. It's not mathematical intelligence. There's emotional intelligence, there's this kinesthetic intelligence.
You know, there's there's this argument that I reject that black people are less intelligent than white people. It's not true. We know, for example, that if you if I was in a in the forest and I had to run from the lion or figure out a way not to be eaten and my competition is a local African, I'm gonna I'm the one who's getting eaten because they have the intelligence to deal with their local environment. So it's just different. It's not better.
It's not worse, but there's many differences amongst different types of people. And so people have different intelligences and they excel in some intelligences usually and less so in others.
Speaker 0: When did it come to because the world of high finance is a world of pure reason, or is it is it a lot of emotion and gut checks and and and, you know, on trading desk and central banks when these decisions get made? Is it is it that high church like the high church of science of of high energy physics, or is it as much emotion that comes in as as much as the mathematics and the reason?
Speaker 1: It's a great question. I think if you talk to really experienced and successful traders and you ask them how they know what's going on, they can't give you an answer. They don't know. They feel it. They can feel the way the market's moving.
They can feel the way the stock's moving. And that these are not very well defined terms. It's not it's difficult to put in mathematics terms, how did I feel it? You could look back and make guesses what I was seeing. But great traders feel it and then act on their feelings.
That's the difference. Many people feel it but are afraid because they want a mathematical justification before they take that
Speaker 0: next step. When you first got on the trading desk at Bear Stearns in the late seventies or mid seventies, were you shocked by how little actual understanding of mathematics that the traders comprehended?
Speaker 1: Yeah. Well, again, we had a Texas Instrument calculator. Most most stockbrokers in the especially before 1975, if they were good stockbrokers, could add. That's about it. They could multiple if you could multiply, you were already in the top 15% of stockbrokers.
Stockbrokers simply meant I there's a great there's a story. When I went to the first person, I I had no money. And I said, how much money do you make a year? And he said, $400,000. I said, impossible.
I'm I'm making $10,000.
Speaker 0: That's probably more than your family he had made in his entire Yes.
Speaker 1: And he makes it in a year. Said, what do you do? And he said, it's too complicated for you to understand, which is what the main thrust of Wall Street people they they wanna tell you it's too complicated. Because if if you understood that that person was simply had a brother-in-law, in fact, this case, who ran the pension fund, the General Motors. His brother-in-law would call him and say, buy a thousand IBM.
He'd hang up the phone. He'd write it out on a ticket and walk it to a window. That was his entire skill set. Hello? Write what my brother-in-law says.
Walk it to a ticket window.
Speaker 0: Give me an example when you were on the trading desk in the early days at Bear Stearns of a time that you felt either complete uncertainty or you saw total panic, where people something was happening that people couldn't foretell and that they were, like, in a in a airplane cockpit where it's going wrong. Walk us through that.
Speaker 1: In 1978, I think it was, across the news wires, there had been a collapse of the currency in Thailand. On the other side of the world had no relationship to me. I wasn't sure where Thailand was. But the fact that a currency, a country's money had all of a sudden dropped tremendously in value affected the rest of the world's markets. And people panicked because they never had they never seen that before.
A a very small part of a very complex system had a shock throughout the whole system. So prices on Park Avenue apartments, the bond markets, the stock markets, every started to gyrate. You know, there's an old mathematics mathematical expression that if a butterfly wings in Mexico make the wrong turn, it spins out and eventually when it by the time it gets to Canada, it turns into a tornado. So these are part of complex systems. So, yeah, Wall Street in in certain parts.
Speaker 0: Santa Fe Institute was supposed to actually come up with a formula for that, for the butterfly wings. Why in fifteen years did you reach the end of of at least that experiment?
Speaker 1: Every attempt to so my that's why it's so exciting now because we I think certain people are starting to realize that there's so many things that are unexplainable that that we have to think about them differently. Music is a great example. Just a it's a common man's example. You know when you hear a certain song, it makes you feel a certain way. How does it do that?
We don't know. We can't mathematize it. And even that music, Steve, nowadays we compress music. When you have a violin, it's compressed onto your iPhone. So what does compression mean?
I'm taking lots of information and I'm cutting it into lots of pieces and squishing it together. And when I squish it or compress it, I have to take out lots of pieces, but I say that they're not very important pieces. It's those pieces that we take out, when we compress data, to me, are the most interesting parts of life.
Speaker 0: You just said a while ago, part of this new search for science may may go back to when people were actually talking about a soul, and you said there's no doubt in your mind that there is a soul. Describe for me what you mean by that. What do you mean by soul? What do you mean soul different than the physical analog body that we're we're seeing on film right now?
Speaker 1: It's it's it's difficult to describe in words. I mean, I I'm not a I'm not a poet. Poems get a little closer to what that really means. But we can even the concept of what is life becomes complicated when you deal with plants and seeds. Is a seed alive?
I don't know. Certain people would say, no. It's dead. When when you're a banana, my one of my favorite examples is the banana that's sitting on the countertop in your kitchen today, is it alive or dead?
Speaker 0: What do you think about human life? One is what what is human tell me about human life.
Speaker 1: But your banana is alive. That banana's breathing. It's on your you say, that's impossible, Jeffrey. No?
Speaker 0: Is is the banana conscious?
Speaker 1: All these were these are words so you everyone's trying to fit very complicated concepts into a very small box called con conscious or alive. It's these don't fit in that way. So if you put your banana in a bag and put another fruit in with it, the fruit ripens faster because the banana breathes with it. That's a we don't understand most of those things. So you asked the the question.
Sorry.
Speaker 0: You talked about the life. What about human life?
Speaker 1: What about it?
Speaker 0: What what tell me what what do you think what do you think human life is?
Speaker 1: It's a miracle. We it's a miracle. And when I say miracle, I can't ex I can't explain it and I make no attempt to explain it at the moment. This we don't know how to think about it. And anyone and and it's again another one of the Feynman quotes when he was talking about quantum physics.
He said anyone, Jeffrey, who says they understand quantum physics and quantum mechanics and quantum behavior, you know they're lying.
Speaker 0: Let's talk about it. That's post Newtonian. Talk talk about what's the difference who founded quantum mechanics? Why is quantum mechanics taking Newtonian physics and taking it to the next level?
Speaker 1: It it's forms a much broader category.
Speaker 0: Let's go back to this desk. You you you use the thing of Newton using this desk. What is sub why can't Newton's theory explain everything? Why did subatomic quantum mechanics or quantum physics have to come in to explain explain this?
Speaker 1: Well, quant so let's let's go right back to square one. Why is it called quantum physics? Quanta is a word that simply means packet, small amount. So it's quantized. When we recognize that this table appears, another very complicated word, solid to us, it's really made up of molecules or atoms.
Atoms, we've given lots of names to some of the behaviors. You if you were in school when you and I were in school in the fifties, the model was a little center thing in the middle and electron went around and around it. It was seen as a ball that went around and around it. And as we start to look at say, well, let's see what this ball looks like. I wanna be able to examine that little thing called an electron.
We found that there was nothing there. There wasn't the thing. It it was simply a cloud of energy that we can call an electron. We already started to see mysterious things as we go into very super small quantities, quantum physics. Quantum physics started to go into the very small and at very small distances.
We we see things that we can't explain we just cannot explain.
Speaker 0: How am I doing on time? Four minutes.
Speaker 1: Fine. And to summarize no. Sorry.
Speaker 0: Let's go back to human life. When do you think human life starts?
Speaker 1: It's not this so you see, this is the question. You're you're asking me to measure something again. It's the the
Speaker 0: disease. Measured. You're just you just hate making commitments. The say
Speaker 1: you measure not married.
Speaker 0: I I'm a I'm I'm peeling this onion back a layer at a time. All your bullshit and happy target can't be measured, can't be measured, or like that, is that to say measure makes it's a commitment. You don't even like a commitment when you answer a question.
Speaker 1: I don't know Is
Speaker 0: it saying in golf, commit to the shot?
Speaker 1: I don't know what it means to be measured.
Speaker 0: It you do know what it means to be measured. You're one of the leading currency traders, hedge fund guys, stock market financial wizards. You're in the high priesthood of high finance. You certainly know how to measure. That's why you're a billionaire.
Any other answer besides that is total and complete bullshit, and you know it.
Speaker 1: I know very few things.
Speaker 0: You you know things to be measured. You measure every day. You weigh and measure every day. You weigh and measure people. You weigh and measure leaders.
You weigh and measure economies. You weigh and measure politics.
Speaker 1: It's a very good You
Speaker 0: weigh and measure you weigh you're Hang on. Your whole Hang on. Your whole life, in fact, is measuring.
Speaker 1: It's that's so what you've now done is a great thing, is you've used the word measure and a mathematic term in the common vernacular and abused it. So I don't even recognize what it means. It's so abusive to my field.
Speaker 0: Why? And let's go to that. In in mathematics, measure means and measure means what specifically?
Speaker 1: That's there's no specific it's it's a an approximation or a give it giving something a number. If I Einstein said
Speaker 0: We're not asking you to go to the ninth decimal point on
Speaker 1: Oh, not you didn't say that before.
Speaker 0: No. You're not going to the ninth
Speaker 1: decimal if I say measure how how tall are you? You'd say, in your case, six foot.
Speaker 0: Six feet.
Speaker 1: But is it six foot one inch?
Speaker 0: Give or take. Six it's between five eleven and six feet.
Speaker 1: But what's that? But but I want so the question is I want an
Speaker 0: accurate I got Zeno's paradox.
Speaker 1: I don't even know what it means to measure you. Is that am I measuring the top of your hair, the top of your skull? Which and the the finer, the more
Speaker 0: You're getting that's you're being rabbinical. This is like I took I shaved my beard off. Used to be rabbinical. My point is isn't that what isn't that going through the Torah where you're where you're you're you're you're parsing every every every definition?
Speaker 1: No. So You
Speaker 0: do you however we broadly define measure, your life literally is about measurement. Is it not?
Speaker 1: It's about get putting numbers on things so that I can try my best. I that you can call it whatever you like. If that if that makes you feel better
Speaker 0: Well, you know, I I wanna make happen to your scientific inquiry.
Speaker 1: No. It even a a number, it it people don't a number is is a complicated
Speaker 0: When did you come to this inflect when did you come to this moment? Was when it was in when it was in your solitary confinement when the biggest financial crisis in world history was going on in in your seven by nine jail cell with your metal bed and your and your two brushes because you were trustee with the brown uniform on trustee spelled wrong. Is that the moment of clarity that you had about science and and and Newtonian physics and everything that we can measure is really not gonna be the way we go forward. It's gonna be some more much more esoteric, emotional intelligence thing. Is it was that your was that your moment of clarity?
Speaker 1: I wish it was because it would make such a great story for this interview, but it it's not. It's the fact that I lead such a privileged life to come across
Speaker 0: But but when did you but but if it didn't happen then, when did it or did it happen before?
Speaker 1: I was gonna hopefully get to the
Speaker 0: k.
Speaker 1: I I'm in a privileged position to have some of the world's smartest people come to my house and tell me what they think about different subjects. And I finally realized that the thing that they had most in common was there was this area this area, no matter how smart they were, that when I asked them the questions, they said they'd have to resort to a 500 or a thousand year old response to that question, which was, I don't know.
Speaker 0: You know who who else found that out? In Socrates. That's that's what Socrates kept doing. Right? Socrates kept asking all the experts.
He would go through, you know, question after question after question and realize at the end they didn't really know under they really didn't basically understand what they were talking about.
Speaker 1: And one of the things that people won't enjoy, it turns out that potentially one of the bad things to teach children is how to write. It's impart writing, reading, arithmetic was supposed to be everyone's supposed to be taught. But writing forces you into a very narrow channel of thinking. You have to write certain in a certain form, in a certain way, in a certain linear pattern. So your thinking becomes somewhat narrow.
The most the reason I brought up writing is one of the recent discoveries of mine with respect to Socrates, Plato's, Aristotle is they never wrote anything. They spoke, and people around who could write wrote. Socrates could think. So that that that that was
Speaker 0: Jesus of Nazareth was the same way. Right? Never wrote anything.
Speaker 1: I thought he was a carpenter.
Speaker 0: He he was a carpenter.
Speaker 1: Didn't he need, like, a little carpenter's tonight? I don't wanna get that.
Speaker 0: But at least at least his written record. Right. One last thing. Sure.
Speaker 1: Thank you for having me to to your house. Vegetable juices. Let's go back let's go vegetable juices.
Speaker 0: When did when did that the beginning of that was there any one moment in all these great thinkers? Did it happen before 2008? Was it after? That came up over, I know, many years, but when did you actually realize, hey. Something new has
Speaker 1: got to
Speaker 0: something new has got to be developed?
Speaker 1: Yeah. That's great. Is that I've again, I'm I'm privileged enough to have people around me who've given lots of philanthropic gifts to institutions of higher learning. And when I said, the impact, how do you judge the impact of your giving? And we sat down and said, no really new ideas have come out.
And I realized that, of course, it hasn't come out because we've been looking at using science and mathematics, and it's the wrong tool.
Speaker 0: It's obvious. Institutions that are set up and try to put forward knowledge and and understanding and truth, should they take your money?
Speaker 1: Derek Bach at Harvard said taking money for good causes is a good thing.
Speaker 0: If Hitler took all the gold out of the teeth of the Jews and said, I want to give this to Heidelberg University to fund the Liebnitz chairs so that I can study high energy physics, Derek Bach would say that was fine?
Speaker 1: Again, these questions are questions where good people on both sides, like your Charlottesville, could differ. I don't know the answer.
Speaker 0: So tell us the two give us the two answers. The one answer why it shouldn't be and then the one answer where Derek Box says, I'll take essentially take cash from anybody because I got so many projects, so many good guys, this is way I'll do it. So I'm indifferent to where the cash comes from. Money's money. And if I got good guys, I'm the fiduciary who says these are good people and this is good research.
Okay? I'll take the cash from however from any source, including you. What's the other argument?
Speaker 1: Let me give you the the I know in in my case, I've Is
Speaker 0: your money dirty money?
Speaker 1: If you live
Speaker 0: it might Just ask a question. Is your money dirty money?
Speaker 1: No. It's not. So in fact Why is it
Speaker 0: not dirty money?
Speaker 1: Because I I earned it my a hotly.
Speaker 0: But you you earned it to I I you've earned it we went back to this before. You earned you earned it advising the worst people in the world, right, that do enormous bad things and just to make more money.
Speaker 1: So if instead of asking me the question, should you take the money? Because I think it's a legitimate question.
Speaker 0: You think it's a
Speaker 1: legitimate question? Yes. The question. What I because I think about I think you have ethics is always a complicated subject, but I can tell you that with the money I gave to help try to eradicate polio in Pakistan and India, instead of asking me whether that money was should be given to these children for vaccines, I think you might wanna ask their mothers who who received the vaccine, who know their child now won't get polio, and ask them if Epstein should have helped these people with them in we walked
Speaker 0: you're in you're a mathematician. You're mathematician. If we walked into that clinic where they're giving that money out to these people that are in the the most dire straits of poverty and and and and sickness and told them that the money was coming from a, what are you, class three sexual predator?
Speaker 1: Tier one. Your was tier
Speaker 0: tier one's the highest and worst? No. Said The lowest?
Speaker 1: I'm the
Speaker 0: lowest. You're the lowest. Okay. Tier one, you're the lowest, but a criminal.
Speaker 1: Yes.
Speaker 0: That the money came from what what percentage of people do you estimate? I understand you don't like probabilities. Do you estimate would say, I don't care. I want the money for my children.
Speaker 1: I would say everyone said, I want the money for my children.
Speaker 0: Did they know where the money came from?
Speaker 1: If if I think if you told them The
Speaker 0: 100 the devil Himself.
Speaker 1: The devil himself said, I'm gonna exchange some dollars for you Do you to your child's life.
Speaker 0: Do you think you're the devil himself?
Speaker 1: No. But I I do have a good mirror.
Speaker 0: It's a serious question. Do you do you think you're the devil himself?
Speaker 1: I don't know. Why would you say that?
Speaker 0: Because you have all the attributes. You're you're incredibly smart. You remember the devil is somebody who the knows the devil's brilliant. You read Milton's you read Milton's Paradise Lost.
Speaker 1: The devil scares me.
Speaker 0: This Satan is Satan is the is the he he he is the he is at the number one or two archangel. And the reason he goes to hell and leads the rebellion is because he can't be the top guy. And his thing is I'd rather I'd rather reign in hell than serve in heaven.
Speaker 1: I saw that in a movie once called American Dharma. I don't remember who said it. Okay? We have to go. Okay.
Good. Okay. That was good.
Posted - October 14, 2025 at 2:53 PM
Saved - October 14, 2025 at 6:55 PM
reSee.it AI Summary
yogurtmustache asks @MaxNard0, @KettyLuvz, @Warrllion, and @JustTheHound if they saw something. Warrllion replies listing several names and entities (David M. Friedman, Michael Friedman, Soucie Horner Li, Black Ledger, Chicago Ent Research, Hidden Key AI, William E Urban) and a link.
@yogurtmustache - Gurty Sanchez
@MaxNard0 @KettyLuvz @Warrllion @JustTheHound you guys saw this right?!
@infolibnews - Chris Menahan 🇺🇸
Trump's current and former US Ambassadors to Israel, Mike Huckabee and David M. Friedman, performed a rendition of "Sweet Home Alabama" in Israel titled "Sweet Home Yerushalayim." The lyrics were changed to push for Greater Israel. (Please forgive me for posting this.) https://t.co/hwvfueiG7S
Video Transcript AI Summary
Checklist:
- Identify the core statements: cycle of Torah scrolls turning, two days to finish, starting anew with Hashem’s words.
- Capture the mission: coming together to help Hattala and make it thrive.
- Note the setting and reach: based in God’s holy city, saving lives across the land.
- Highlight the emotional/spiritual framing: “Sweet home, Yerushalayim” and the claim that God’s words ring all Israel as in the holy books.
- Preserve claims without commentary or evaluation; present them clearly and accurately.
Torah scrolls keep on turning, signaling a continuing cycle of sacred reading and renewal. Just two days and we are through, after which we start from the beginning, and Hashem's holy words begin anew. A collective commitment underlies the message: We all have come to help Hattala, and we wanna help it thrive, underscoring a communal effort to support the lifesaving work associated with Hattala. The setting is explicit and intimate: based right here in God's holy city, the mission is anchored in Jerusalem, from which its reach extends across the land. The impact is described in practical terms: throughout this land, it's saving lives, implying that the spiritual activity translates into tangible public benefit. The speaker offers a warm, affectionate tribute to the city with “Sweet home, Yerushalayim,” reinforcing a sense of belonging and sacred attachment. The closing lines frame the city as a locus where divine instruction resonates broadly: Where God's words ring all Israel, just as it says in all the holy books. This clause ties the local activity to a universal biblical pattern, suggesting that Jerusalem is the place where the sacred messages are broadcast to the people of Israel in accordance with the scriptures. Taken together, the excerpt presents a cycle of sacred textual renewal, a communal drive to sustain a life-saving organization, and a reverent acknowledgment of Jerusalem as both geographic center and spiritual beacon where divine words align with the nation’s scriptural heritage.
Full Transcript
Speaker 0: Torah scrolls keep on turning. Just two days and we are through. Then we start from the beginning. Hashem's holy words begin anew. We all have come to help Hattala, and we wanna help it thrive.
Based right here in God's holy city. Throughout this land, it's saving lives. Sweet home, Yerushalayim. Yeah. Where God's words ring all Israel, just as it says in all the holy books.
Yeah.
@Warrllion - WarrLion
@yogurtmustache @MaxNard0 @KettyLuvz @JustTheHound David M. Friedman Michael Friedman Soucie Horner Li (created 12 days ago) Black Ledger (created 5 months ago) Chicago Ent Research... Hidden Key AI (created 2 months ago) Friedman, Michael J William E Urban https://t.co/p9zUt5KM8t
Posted - August 24, 2025 at 4:44 PM
Saved - August 25, 2025 at 5:30 AM
@yogurtmustache - Gurty Sanchez
@dznutzurface Bruh….you are consistently still shocking me with new threads….it’s weird cuz I’ve been out in the desert for a couple decades. Bless you, decent guy.🫡