At the Money: Want to Fly Private? Here is How! (September 4, 2025)

Flying private used to be for billionaires, but that’s no longer true. There’s fractional ownership, hourly charter, jet cards, membership & leases. There is a way to fly private for a lot more budgets than there used to be...

Full transcript below.

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About this week’s guest:

Preston Holland is the founder of Prestige Aircraft Finance and hosts a weekly Private Aviation Podcast, “The VIP Seat.” He writes the newsletter “Private Jet Insider,” providing advice and strategies to help clients navigate private aviation.

For more info, see:

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TRANSCRIPT:

 

Flying private was once the province of billionaires, but that’s no longer true. Sure, the top 0.1% can drop 50 large buying their own jet. But there are many other ways to fly private beyond owning your own GulfStream. There’s fractional ownership, hourly charter, jet cards, membership & leases. Those are another way to go.

Let’s explore this by speaking with Preston Holland. He’s the founder of Prestige Aircraft Finance, hosts a weekly private aviation podcast called “The VIP seat,” and he’s the author of the newsletter, private Jet Insider, providing advice and strategies to help clients navigate private aviation.

So Preston. Let’s start with the basics. Besides bringing my dogs on the plane, what’s the main reason people fly private? What are the benefits and drawbacks of private aviation?

Preston Holland: The one thing that you cannot buy more of is time. They say that money can buy anything in the world except for more time. I want to challenge your audience to say there, that is almost true until you start talking about private aviation.

Private aviation the only way to buy your time back. Using dollars and actually getting time back. Time is the number one differentiator when it comes to flying private. You go to a different part of the airport, you skip security, you drive up to the airplane, get on and take off, and oftentimes you’re even going to an airport that is closer to your destination than the commercial airport is.

So time is the biggest differentiator. It is private. You don’t have to deal with a lot of other people. There’s some health benefits that come to it ’cause you’re not being exposed to so many people. But at the end of the day, it is time that you’re buying back. That is the biggest difference.

Barry Ritholtz:There are obviously a lot of key differences between flying private and commercial. Time saving is one. You’re avoiding crowds and lines. What are some of the other benefits of flying private?

Preston Holland: It’s, it’s really that the airplane moves on your time. So if you think about the last time that you had to rush out of a meeting to go get to the airport, and you needed to ’cause your flight left at 6:04 PM.

That plane is leave and weather, you get there or not. If you’ve ever had the experience in the last minute, you’re rushing on and you’re running down the airport. I live close to Atlanta, Georgia, and so I have had that experience many times in which I’m running through Hartsfield Jackson trying to get onto the plane ’cause I had a meeting that went long and I’m trying to get there.

Private Aviation is different. The plane does not leave without you.

And so it really creates maximum flexibility. It also increases a lot of your ability to de-stress, right? You’re, you’re not, you don’t have kind of that stressful moment leading up to getting on the airplane, Catering. You get to pick what type of food is on the airplane. You don’t have to say, you know, cookies or pretzels. Uh, you can say, I want both. and I actually want homemade cookies and I want real pretzels and an actual big bag.

A lot of people want to try and make the justification from a dollar standpoint. They say, okay, I value my time at a thousand dollars an hour. Let’s say I’m an attorney, and you can actually put a dollar amount on how many billable hours that you have if you and, and you say, okay, my first class ticket’s gonna be a thousand dollars, and so therefore, when can I kind of justify the difference between first class and flying private? It’s a tough comparison when you think about all of the additional fringe benefits that come with flying private.

If you just try and do a cost calculation, you’re never gonna get there. It’s never going to make sense to fly private. Probably 99% of the time there is the 1% fringe time where you’re going to Nantucket. There’s six of you, and maybe everybody’s gonna fly first class, and maybe you can kind of make it make sense on a turboprop, but if you really boil it down, it’s never gonna net out from a cost dollar standpoint.

But really what it is, is it’s all those fringe benefits that come from flying private that you really can’t replace

Barry Ritholtz: Since you brought up meetings and other related things. I’m curious, how much of private jet usage is business travel, and how much of it is recreation, vacation, fun travel?

Preston Holland: It depends on the demographic that you’re looking at. I think one big misnomer that is out there is that private jets are reserved for Kim Kardashian and Justin Bieber.

You look at how the public perceives private aviation, its celebrities flying to Vegas, going on a party. They’ve got all of their friends there, but really. The bulk majority of private aviation actually looks like Main Street businesses that have multiple locations, A lot in manufacturing.

For instance, you think about just in time manufacturing and you think about uptime in a manufacturing plant, and if private aviation can make sure that your plant is staying online for longer. That can be worth millions of dollars an hour to a manufacturing plant. So private aviation a lot of times, looks a lot different than what you think. If you look at like a per hour basis, if you kind of broke it down, the majority is for business.

Now, if you own an aircraft. You want to take depreciation benefits, it needs to be 51%. This is not tax advice, but that is all of my tax friends say it’s gotta be 51% use if you want to get that depreciation. But oftentimes it really is used a lot for business.

Now you can use it for private purposes as well. You can use it for vacation. It doesn’t have to only be business, but the vast majority of travel in the private jet space is business, which is why. The use private jet and business aviation are very interchangeable, ’cause it’s oftentimes, you know, the, those two things are often seen hand in hand.

Barry Ritholtz: Let’s talk about the variety of options that exist, starting with fractional ownership. What does that mean?

Preston Holland: So there is a couple of different ways to apply private, and if it’s okay with you, I’m gonna take one half step back from there. And I’m gonna break down. The Four Ways to Fly Private. I actually wrote an article about this. Uh, it’s at my website, PrestonHolland.com. That’s a free plug for myself. Uh, but there are four ways to really fly private and they go from the least committal, the least long-term committal to the most committal.

So the least committal way to fly private is to on demand charter, that means I’m gonna call up my charter broker and I’m gonna say, I need to go from New York to Miami. I need to go tomorrow. And I have four people. You’re gonna make one transaction, you pay it, you fly the trip tomorrow and then you’re done. No more commitment. You don’t ever have to fly private again if you don’t want to. Ad hoc charter is kind of the colloquial term, ad hoc the Latin word for on demand, right?

The second committal would be a membership or a jet card, so that is kind of the second phase. Those listeners of Bloomberg will be familiar with XO Jet, they’ll be familiar with VistaJet. If you read any of the bond ratings, there’s a lot of memberships and jet card programs. You are prepaying for an hour block. So let’s say you put down a $500,000 deposit and that’s gonna buy you X amount of hours on a certain aircraft type. So that is the second, you know, second lease committal. There are, you know, membership fees that are sometimes associated with that. But you’re not necessarily committing to one aircraft type or something like that.

The next committal is fractional ownership. So you’re buying in, that was your original question. You’re buying into a program. This is NetJets, this is FlexJet, this is AirShare. There’s a few regional providers that do fractional program, but you’re buying a piece of an air.

Not too terribly dissimilar to a timeshare where you’re buying a portion of the airplane. You may never fly on the tail that you own on, but you are committing to that membership tier. So maybe you buy one 16th of an aircraft that allots you 50 hours per year.

There’s a monthly maintenance fee that’s associated with it, and then you pay per hour. You’re committing to a program, you’re committing to a flute. The most committal way to marry an airplane is to buy it. So this is, I own the airplane. Now you can do that a couple different ways. Maybe me and Barry, we both live in New York and we want to share an airplane, so we each go in 50%.

And we buy the airplane, but you’re only flying on that airplane. So it’s one tail number, one aircraft, one set of pilots. Uh, not as much membership. So that’s kind of the range to set the baseline of the different ways that you can fly private.

Barry Ritholtz: So you wrote an interesting post that con explains. The cost differences between all those four things, and what struck me as so fascinating was the least amount of money you spend annually for something like an on-demand charter is gonna be the most you spend on an hourly basis – and vice versa.

If you make a big commitment annually, your hourly costs are the lowest. When people are considering these things, is it simply a function of. Hey, how many hours do you think you’re flying this year? Do you think it’s 50 or a hundred hours? Is that what informs those choices between jet cards, hourly charter memberships, and fractional ownership?

Preston Holland: Generally speaking, yes. When you talk about the. First decision that you’re making when you’re talking about how am I gonna average my cost on an hourly basis? That is generally the right framework to think about.

It is not the hard and fast rule. I know plenty of billionaires who fly Flex Jet fractional, who can totally afford their own aircraft, and they probably fly enough hours. They just don’t want to deal with the hassle, right?

But generally speaking, if you’re gonna say. Which bucket do I fit into? Private aviation, it’s typically when you’re thinking about how much am I flying per year? If you think about it strictly on a per hour that I am going to, per hour that I’m going to actually fly, how much am I paying?

So let’s say, let’s set the benchmark $10,000 per hour. That’s gonna be a super mid aircraft that’s gonna be able to take you coast to coast. If you were to own in a fractional program and you took your purchase cost. Minus your resale costs. So there’s a depreciation factor there. You took in all of your monthly costs, um, and you average it out from time to time.

That will actually be lower on a per hour basis. But if you’re only flying 10 to 15 hours per year, you’re gonna have a lot of unused hours. You may not actually get the full benefit for it. So as you think about it, the typical breakpoint, this is, this is generally speaking, depending on the aircraft type and everybody’s different, but generally speaking anything below 100 hours, you are typically going to win in a on demand or a charter program. Anything above 100 hours, you should start considering fractional. And then somewhere between 150 and 200 hours per year of personal flying, you should consider whole aircraft ownership.

Barry Ritholtz:So I know after we broadcast this, I’m gonna get some calls from some clients and some colleagues who are gonna ask. “Hey, I’ve put some couple of million dollars away. I make a couple of million dollars a year. I’m tired of getting to the airport two hours early and fighting through through TSA, at least I don’t have to take my shoes off anymore,” and they’re gonna say, “What’s the best program for me?”

They do some business flying. They do a bunch of a few vacations a year. Every now and then they’ll fly out, oh, my kid’s in Purdue. Let me go out to the Midwest. For someone like that, what sort of program would you recommend? And I know I’m giving you broad parameters and not anything very specific.

Preston Holland: So I always suggest if you are just getting into it, an on-demand charter program is gonna be what you want to do first because you don’t know what your personal preferences are. You don’t know if you like flying on light jets or if you don’t like flying on light jets. You don’t know if you want the extra room, be able to stand up flat floor. There’s a lot of variables that go into that. So I would say find a really good broker that has education forward.

Jets are moving from one place to another and not necessarily between us. Not like a hub and spoke model like the airlines. Get a really good broker that can help educate you on what it is you might like and what it is you might not like. Try a bunch of different flavors of aircraft before you start committing to anything long-term, ’cause you just don’t know what you don’t know.

Barry Ritholtz: Since you mentioned different, uh, flavors of aircraft, let’s talk about a few. There’s, uh, Dessault and Bombardier and Embraer, Honda Jets came out a couple of years ago. They kind of surprised everybody. How broad is the range of jets that are available either for charter or lease or membership?

Preston Holland: So when you’re talking about flying in the backseat. So we’re gonna leave the people who fly in the front seat, which is another type of person. But when we look in the back seat, it ranges from turbo props, which is jet fuel, that powers a propeller. That’s your KingAirs, your PilatusPC12s. Call it the bottom end of the market.

You’re gonna have the least amount of range, the least amount of speed, but it’s also gonna be the most cost effective wheels up. If you ever watch college game day. You remember seeing, oh, the one that has the two propellers on the side, that’s a KingAir 350, for instance. So that is kind of the bottom end of the range.

You then have very light jets, which is gonna take two to three passengers. That’s, uh, very light jet qualifies as the Hondajet, the Citation M2, even the Steers Visionjet, which is. Kind of, uh, in a league of its own is a single engine jet is in the very light jet category. You then have light jets, which is gonna be Embraer Phenom 300.

The Citation CJ3 and CJ4. Light Jets are really great for regional travel, not as great for coast to coast. You’re gonna have to stop at some point.

Then you have mid, so mid-size, the Citation XLS, uh, that’s gonna be, you know, again, regional travel. You’re not quite gonna get New York to San Francisco, but you’re gonna get pretty close.

Then you have the super mid-size jet, which is kind of like, you know, the difference between large and extra-large shirts. It’s like, oh, that was lazy. Uh, super Mid Jets is a great example. Uh, super mid jets, the Challenger300, 350, 3500, is gonna qualify in that. The Citation Latitude, the Citation Longitude.

The Latitude cannot get coast to coast, but the Citation Longitude can that’s gonna be your super mid-size. Those are typically gonna have a flat floor. They’ll seat around eight people at max capacity. And that’s gonna be the super midsize jet is the first time you’re gonna unlock that New York to San Francisco, New York to LA trip.

Then you start getting into the large cabin. So when you get into the large cabin, you have the Challenger, 604, 650, 605, 650. You have the Falcon 2000, which kind of feeders on that super midsize to large cabin range

Barry Ritholtz: Can you take those New York to London, New York to Paris.

Preston Holland: You can get New York to London depending on which way the wind is blowing and how new it’s, well, that’s a little tight.

Barry Ritholtz: And my assumption is as you go from small light to mid to super, mid to large, everything, not just the cost of the jet, but the insurance, the maintenance, the hangar, the pilots. All of this scales up dramatically as you go from flying New York to DC versus San Francisco to Hong Kong.

Preston Holland: It scales up proportionately as you get larger in the aircraft, you start having higher pilot costs. You start having higher insurance costs, you have higher fuel burn on a per hour basis, so it does exponentially get larger.

That’s not to say though, that people automatically enter the light jet category, the turbo prop first. There is a vanity piece to private aviation. They, they always say that the, uh, the most expensive part of the plane is the window – and that’s because when the shade is up and you land at the FBO, you look out and you say, Ooh, I like that one, and so you’re, you’re tempted to kind of step up.

Barry Ritholtz: Really interesting. My last question. How has the technology changed private aviation in recent years?

Preston Holland: So there’s been a lot of software that’s come to market over the last, call it 10 to 15 years that have really impacted the way in which private flyers are interfacing with kind of the administrative layer of private aviation because it is such a tax complicated.

Factor there is tracking tools out there. There is services that will actually help you make sure there’s maintenance tracking softwares. There’s predictive maintenance tracking softwares, there’s logbook scanning. Aviation in general. I know this is shocking, but aviation in general lags from a technological standpoint because of how conservative it’s, so paper logbooks are still a thing. There are still maintenance records that are held in paper in a fireproof safe at the FBO. That’s like still a very common thing.

There’s been a shift towards technology and aviation. When you look at private aviation, though, the challenge for software entrepreneurs is that I get DMs all the time on X that say, Hey, I want to build X, Y, Z software and revolutionize the market.

The problem is in the grand scheme of things, it’s not that big.

Barry Ritholtz: So people listening to this conversation are thinking to themselves, Hey, I’d like to fly private ballpark figures. How much money do you need to have to make this really a worthwhile experience?

Preston Holland: Generally speaking, it’s $2 million in net income, right? So that’s kind of cash flow to you and $20 million net worth before you start chartering on a regular basis. So that’s, you know, probably vacations, that’s probably some business trips that’s not, you know, you’re not pedal to the metal, never have seen the inside of a commercial airport again. But you’re seeing it less and less at $2 million of income and $20 million in net worth.

Before you start thinking about buying a mid-size jet where you sit in the back and you have pilots and all of that. The number was between 10 and 20 million of net income and around $100 to $200 million of net worth. Now, that includes privately held companies. That includes my operating company, has been marked to market at $200 million, and then I’m starting to think about an aircraft.

But that is generally speaking. Now that is not the rule In my day job, I look at people’s financials and help them place debt. For aircraft purchases. I will tell you that that number is not a hard and fast rule. It is a good rule of thumb, but for everybody it’s different, right? It may be a higher net worth, maybe you’re a lower cash flow, maybe you’re a really cash flow person, and this is really what you want to do.

Those, that’s kind of a good general, you know, general term, uh, to start looking at kind of mid-size jets. And then as you kind of scale up, you’re, you’re really not buying a, a brand new G700 until you’re knocking on the billion dollar mark.

Barry Ritholtz: So to wrap up, if you’re doing pretty well income-wise and have a couple of shekels put away, you don’t have to go out and drop tens of millions of dollars buying your own jet.

You could do an hourly charter, you could do fractional ownership, or you could do one of the jet membership cards that allow you to spend less time in commercial airports and more time getting to where you go quicker, faster, and more comfortably. I’m Barry Ritholtz. You are listening to Bloomberg’s. At the Money.

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The post ATM: Want to Fly Private? Here is How! appeared first on The Big Picture.



 

 

On this special edition of the show, I speak with Neal Katyal, Milbank LLP partner and former acting Solicitor General of the US. We sat down in the studio on Wednesday, August 27th, just two days before the D.C. Court of Appeals issued its decision in VOS Selection vs Trump on Friday, August 29th.

It was a resounding 7-4 victory for Katyal’s clients, which found Presdient Trump’s tariffs null and void. The case was remanded back to the International Court of Trade for remedies.

The decision was around 5 pm Friday evening before the long Labor-Day holiday weekend; we followed up on the results Sunday, August 31st, when we reviewed the decision and discussed the likely path forward.

Katyal explained the process of challenging President Trump’s authority to impose steep tariffs on imports from other countries, and what the next steps could look like as the case makes its way through the US legal system. We also discuss his career working on appellate and complex litigation, including arguing over 50 cases before the US Supreme Court.

A transcript of our conversation is available here on Monday.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

 

 

 

 

The post MiB: Special Edition: Neal Katyal on Challenging Trump’s Global Tariffs appeared first on The Big Picture.

 

 

The transcript from this week’s, MiB: Mark Zandi, chief economist of Moody’s Analytics, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

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This is Masters in business with Barry Ritholtz on Bloomberg Radio

Barry Ritholtz: This week on the podcast. Wow. What a fascinating conversation with a really interesting, intelligent guy. Mark Zandi has been the chief economist of Moody’s Analytics for 20 years. He co-founded a regional analytics shop in the nineties coming out of both Wharton and University of Pennsylvania, where he got his undergraduate and graduate degrees in economics. He buys economy.com in the late nineties and builds out that really a fascinating career, unique insight. You know, we live in a highly polarized, partisan world, whether it’s the fed inflation labor, BLS, the economy. I love speaking to somebody who was an advisor to both the McCain campaign and the Obama White House. He just looks at the world through a set of lenses that are data driven, model driven, and tries to provide the best analysis as to what’s going on where and why. I thought this conversation was great, and I think you will also, with no further ado, moody Analytics Chief Economist, mark Zandy. Let’s just start with your background. You get a bachelor’s from Wharton, a doctorate in economics from the University of Pennsylvania. What was the original career plan?

Mark Zandi: I had no career plan. None. None. No. Never thought about going into markets

Barry Ritholtz: Economics? Like a PhD in economics. Were you thinking academia or just…?

Mark Zandi: Well, I definitely knew, not academia. My father was a professor at Penn. At Penn, and that’s why we all went to Penn because, you know,

Barry Ritholtz: Discounted tuition at that time, which is a long time ago, you’re gonna Tell me it was free?

Mark Zandi: It was free. (Wow). Tax free.( Wow). Tax free. And you know, I have four siblings. (Wow). In fact, he actually, he was pretty smart guy. He bought a Red Stone at 42nd and Spruce, you know, just off campus. And we all lived in that, in that Red Stone.

Barry Ritholtz: Amazing. (Yeah). All right. You come out of college and grad school with a deep background in economics. What inspired you to explore a career in economics?

Mark Zandi: Well, my work was very empirical. My thesis advisor was the guy named Larry Klein. He was a Nobel laureate. Yes. He got it as a result of all the work he did, building macro models, us macro models, and I, I needed to make money when I was in school, so I worked part-time. Hi. His firm is called Wharton Econometrics, you know, after the Wharton School worked

Barry Ritholtz: There, hold on a sec. The school let him set up a program called Wharton Econometrics. A company, a separate company. Yeah. Apart from the school. Yeah, that’s what I’m asking.

Mark Zandi: Yeah. Yeah. I don’t know. I’m sure there was some kind of financial arrangement that he must have paid some kind of royalty or something to, but I’m, I’m not sure, you know, but they, they,

Barry Ritholtz:  I don’t think you could get away with even paying royalties today. You couldn’t set up MIT economics or Stanford econometrics? No, you

Mark Zandi: Don’t think so.

Barry Ritholtz: Yeah. I mean, if you do certain research right, and you get a patent Right, they get a piece of it. Right. But setting up a, like, there is such a branding Right. Focus these days. I, I can’t imagine a big school would let you do that?

Mark Zandi: Do that unless you played a really big royalty, I assume. Right. But, yeah. But anyway, so that was a firm, a business economic forecasting business. And so I learned the business as a graduate student, you know, working there to earn money. And I, I also used their main, they at that time was a mainframe. Everyone was on, there was no pc. It was the main, this was 80.

Barry Ritholtz:  Was it still the punch cards?

Mark Zandi: Punch Cards for train.  You wanted to change the federal funds rate by 25 bips. You’d punch a card, you have a stack of cards, you would take it down to some guy who would put it into the mainframe,

Barry Ritholtz: Takes 12 hours for three minutes. Oh, it take 12

Mark Zandi: And if you messed up, if you hit the wrong, you know, button, then you had to wait another 12 hours to get the answer. Well, how, how much was a quarter appointed increase in the funds rate, gonna do damage to the economy? That kind of thing.

Barry Ritholtz: What was, what was your doctoral thesis on?

Mark Zandi: It was regional economics. It was examining fancy word factor flow, so labor capital and the movement between regions in the country. And that was the basis for the firm. I started in 1990, called Regional Financial Associates. Because at that time,

Barry Ritholtz: So you started your own firm, right? Pretty much right outta school?

Mark Zandi: Pretty much right outta school. Wow. Yeah, with my brother and my best friend. My best friend was also working, he was in the graduate program at Penn, and we were working at Wharton together. We could see there was a lot of problems, you know, with the way it was being run. It was mainframe oriented, and the PC was just coming out. So we were able to use the PC to do the things that we needed to do.

Barry Ritholtz: I remember in grad school using this pokey Mac Classic in 1988.

Mark Zandi: Oh, the Mac, really?

Barry Ritholtz: And the technology was just, Ooh, look how advanced this was. Bear skins and stone knives. Yeah. That’s what it, it reminds me of. Well,

Mark Zandi: We bought IBM’s at the time.

Barry Ritholtz: Yeah. So, so you, you launched this, when does economy.com come along to regional economics?

Mark Zandi: Almost a decade later.

Barry Ritholtz: Late nineties. The internet boom really took off, what, 98 99? 2000, 2001.

Mark Zandi: Yeah. It’s like two years after the irrational, exuberant speech. Yeah. Is when it really became irrational. Exuberant. That was what, 96?

Barry Ritholtz: yeah. Late 96. Yeah.

Mark Zandi: Greenspan speech. In fact, we bought the uur l economy.com, this guy from Quest, he was an executive at Quest, remember Quest? Sure, of course. Yeah. Yeah. One of the baby bells that was spun out of at TA headquartered in Denver, I believe.

Barry Ritholtz: Colorado.

Mark Zandi: It was Colorado. Right. And he made, he squatted on all these names. In fact, when we were negotiating the price for that buying economy.com, he was on a yacht somewhere in the South Pacific. He had made so much money on squatting

Barry Ritholtz: So what did you end up paying for economy.com

Mark Zandi: At the time? It was a lot of money. 250 K. Yeah.

Barry Ritholtz:  That is a, and, and you a hundred Xed it eventually. Yeah.

Mark Zandi: It certainly was a good investment,

Barry Ritholtz: To say the very least. Yeah. I know your thesis advisor was, you mentioned Lawrence Klein and Nobel Laureate. Was he an advisor to the firm when you were, when you were first building that out?

Mark Zandi: No, I thought that he was older at that point, and he was, and actually we were competitor now, right? To Wharton. Oh, Whitney Econometrics. I don’t think so. I mean, we weren’t really  doing, we were a bunch of guys. Right, right. Yeah. And we got the economy.com. I’m making this up, but we might have had 40, 50 employees, something like that, so.

Barry Ritholtz: Oh, really? So, so what was it like building out what essentially became a.com in the late nineties?

Mark Zandi: Oh, it was a lot. It was so much fun. I mean, I’ve been a startup. I’ve been a small business guy, and I’ve been part, now obviously part of Moody’s, a large multinational. So I’ve seen business from a lot of different angles. And I’ll have to tell you maybe, ’cause I was just young. I mean, I loved being a startup. It was just,

Barry Ritholtz: It’s a lot of fun, especially if it’s working.

Mark Zandi: I can imagine. And we got lucky, you know, the, the interstate banking happened. So all these banks needed to think about their footprint outside of their state. So they needed our, the data and information that we were providing. So if I were a bank in Connecticut and I was thinking about moving into Massachusetts, I now needed to understand the Massachusetts economy. And we would help, you know, Seanette Bank was Connecticut, Connecticut Bank. That was one of our first clients back in the day.

Barry Ritholtz: So how you, you built this out in the late nineties. You survived a.com implosion, because although you were technically a.com, you weren’t a frivolous clicks and eyeball sort of company. It was a real company with real clients and real revenue. Right. Kind of set you apart from Yeah. The pets.com of the world.

Mark Zandi: Well, we were an economic forecasting firm masquerading as a.com. Right. Because we, you know, it was@thattime.com, your valuations were a lot higher. And Sure, of course it was practically speaking, we set up economy.com. Right. That was our, when you came to our site, you came to economy.com. So it was a way to advertise where you go to get our information. So,

Barry Ritholtz:  And today you go to economy.com and it forwards you to Moody’s.

Mark Zandi: It does, yeah. How

Barry Ritholtz: Did the relationship with Moody’s come about five, six years later?

Mark Zandi: The CEO of Moody’s Analytics was this fellow Mark Almeida great guy. He was a Philly boy, a Philly guy. He, he, and he and I worked together at Wharton Econometrics, which is Philly based ’cause of Klein and I, he was a data guy. He was in a cube next to me. I was in his young economist working on models and data and forecasting. He was a data person, and so we knew each other quite well. And he went on to Moody’s at that time, was the rating agency. And he did extraordinarily well, became the CEO of Moody’s Analytics when they formed Moody’s Analytics. And he just knocked on the door and said, Hey, are you interested in selling? And the answer was no. ’cause we had no idea what it was worth. Just serendipity. Fitch knocked on the door at roughly the same time within a week or two. I don’t, I can’t connect the dots. Exactly.

Barry Ritholtz: A bidding war. right?

Mark Zandi: Yeah, exactly. So we were able to get a price. Right, right. And I do remember him saying to me, Hey, mark, what price would it take for us to end this, this negotiation? And to this day, I gave, he, I gave him a price. He, and he said he took it right away. And I go, too, little, too low.

Ritholtz: Well, if you Google it, it says $27 million. Yeah, yeah. But I have no idea how accurate that is. Yeah. E everything that I find through AI and search, I always seems to have a little asterisk with it. You don’t, you don’t know what’s especially private, stuff like that. So, Moody’s Analytics is a division of Moody’s, the big rating company. It’s, it’s a, a group within, is that right?

Mark Zandi: Yeah, it’s, there’s Moody’s, the rating agency, and then Moody’s Analytics. More recently they’ve been, we’ve been moving together, but it’s still, I’m still in the entity. Moody’s Analytics.

Barry Ritholtz: So what was it like going from a startup to a large multinational con?

Mark Zandi: I can tell you it was great because we were allowed to remain independent in every respect, except for some of the back office kind of things that legal, hr,hr,

Barry Ritholtz: Which no one wants to do anyway.

Mark Zandi: Yeah. Sales. And that’s the key reason why we sold, was because we were mostly us and we were trying to go global. And that’s hard. It’s very expensive. We set up an office in London and Sydney and it was difficult.

Barry Ritholtz: And they have a giant client base with,

Mark Zandi: Oh, they’re everywhere.

Barry Ritholtz: Clients all over the world. Yeah. That has to be a huge benefit to Oh yeah. A small startup. It allows you to really supersize

Mark Zandi:  And a Salesforce all over the world. Right. And, you know, Moody’s a respected institution, but overseas it’s highly respected if you go into many emerging markets. Right. Rating debt, sovereign debt is really, really critical. And so when a Moody’s or an s and p says something, it really does move markets. And, and so it helped us raise our credibility. We had no credibility overseas and this allowed us to gain some credibility overseas

Barry Ritholtz: Right away. Yeah. Speaking about gaining credibility in 2005, you wrote a piece, where are the regulators, the runaway housing market needs tougher regulatory oversight, very prescient analysis warning about, Hey, you can’t just give mortgages to people regardless of their ability to actually service that debt. What drove that analysis? That was really the first time I became aware of you as an economist.

Mark Zandi: Yeah, I remember that piece. I’m a macro guy, but my area of expertise is housing and housing finance. I was watching the housing and mortgage finance markets very carefully at

Barry Ritholtz: The time, which a lot of Wall Street didn’t really seem to be paying much attention

Mark Zandi:  No, no, no.

Barry Ritholtz: My mom was a real estate agent. That’s the only reason why is that? Right? I was paying attention to this space. And that’s probably how I found you. ’cause we were having regular conversations.

Mark Zandi:  So interesting. Yeah. And you, so regional financial associates, banks, regions, you know, obviously it’s real estate and housing are kind of top of mind. They write a lot of mortgages. Yeah. They make HELOC loans and other things against it.

Barry Ritholtz: And they were losing market share to these unregulated non-bank lenders, the private label securities market market.

Mark Zandi:  Yeah. And of course, and the regulators were my client. So the FDIC for many, many years was my largest client by far and away. Wow. Yeah. So I, you know, I was looking at this space from the prism of housing, housing, finance, and also from a regulatory perspective. And I could see this was, you know, a problem.

Barry Ritholtz: So something was totally, totally a afoot.

Mark Zandi: I did have one, I’ve had, I had a number of periods of doubt in that, in that lead up to the crisis. One was the Fed under Greenspan asked me to come in and brief them on housing. ’cause I, I was a housing guy and I give this talk and it was pretty dark. And at the end of it saying that we’re gonna have a problem, I didn’t think we were gonna have a problem to the degree we had the problem. But I knew there was a problem coming. That was the message of the talk. And when I finished, I didn’t get a single question from one fed member.

Barry Ritholtz:Really? Not one.

Mark Zandi:  So there was this just a pro se discussion, or I, I was confused stu them into silence. I was totally confused by the whole thing. , there was a guy, ed Gramlich, who was of course, do you remember him? And

Barry Ritholtz: Sure. A hundred percent. He was kind of a naysayer.

Mark Zandi: Very much so. Yeah. He was in the camp of, Hey, you know, you have to be able to, the the history of finance Yeah. Is not based on the Securtizers ability to sell their product. It’s based on the borrower’s ability to service the loan. If you take that step out, you’re asking for trouble.

Barry Ritholtz:  He very famously was the fly in the ointment and also very Right. Passed away before everything blew up

Mark Zandi: Yeah, that’s right. That’s right. But he even, he didn’t say anything. So I walk out of that meeting and I’m going, ah, I’m, I’m, maybe I have this all wrong. So points in time. I had my doubt. But it became clear by 2006

Barry Ritholtz:. So, so after the crisis in 08, 09 or eventually post financial crisis, you become an informal policy advisor to the Obama administration. Tell us how that came about outside nonpartisan economic advisor.

Mark Zandi: Well, that was the time when the administration was trying to figure out, how do I respond. Obama administration had just come the crisis that occurred September oh eight, he was in office by January of oh nine. They used that period to try to figure out how do I respond to this mess? What do I do? You know, both from a coming a fiscal policy perspective. From a regulatory perspective, from all angles. And I had done a lot of work on estimating so-called multipliers of different policies. So if you do this, you know, what is the impact on the economy if you do that, what is the impact on the economy? Now that’s widespread, that kind of work. Lots of people do that work, do it much better than I do. But at the time, there, there just really wasn’t anyone looking at it that way. And trying to estimate those multipliers. So they used those multipliers in trying to design the response, the, the, the stimulus, so-called stimulus package that they put in place in, in January 20th, 2000, in 2009,

00:15:23 [Speaker Changed] Arguably knowing near large enough to drive a recovery in the economy quickly.

00:15:30 [Speaker Changed] Well, yeah. And I, I think that’s the lesson that the, the Biden administration took coming outta the pandemic. Right.

00:15:35 [Speaker Changed] Even the Trump administration, the First CARES Act. Yeah. The first two CARES Act. Were under President Trump. Right.

00:15:40 [Speaker Changed] Biden gets into office March of 2021. 2021, he passes a, the American Recovery Act, $2 trillion in, you know, obviously it was very large, a lot of criticism. Even Larry Summers was all over it saying it’s too large. Right. But I think the Biden administration was looking back at the Obama administration and saying, Hey, look, the Obama administration was, we, we will come up with this package and if we need more, we’ll get it. They never got it. So the economy struggled for 10 years after the financial crisis. Right. And so the Biden administration saw that, and they said, Hey, we probably should go for a bigger bite of the Apple because we may not get another bite, and therefore let’s go for a bigger

00:16:15 [Speaker Changed] Package. Right. And that was over the next 10 years. And that came into the environment where the first CARES act under President Trump was the largest fiscal stimulus since World War ii, at least as a percentage of GDP. Then there was the CARES Act two under Trump, and then a whole bunch of,

00:16:35 [Speaker Changed] I think at CARES Act three. And then you come in with Biden. So if you tell Cares

00:16:38 [Speaker Changed] Act three was Biden, which was short term and drop, but all, most of the other legislation under Biden was on, was over 10. The infrastructure bill. Yeah. The, the Inflation Reduction Act, those are all 10 year legislation. So it feels very much like the 2010s was the era of monetary stimulus. And the 2020s seems to be the era of fiscal

00:17:02 [Speaker Changed] Stimulus. You know, I hadn’t thought of it that way, Barry, but that’s a really good way of putting it. Yeah, exactly. I mean, the Fed had to work really hard back in the 2010s. ’cause they weren’t getting any support from fiscal policy. That was government shutdowns. That’s right. The treasury debt limit battles fiscal policy was contractionary. And so the Fed had to step in and provide a lot of support. And this

00:17:19 [Speaker Changed] Go around. Right. The Congress did not, you know, they seemed to have forgotten everything we had learned from Keynes. Yeah. And they remembered it in 2020. It, it’s kind of amazing. ’cause I recall being at a dinner with a number of people, including some Nobel Laureates in economics. And when I said, oh, I think they’re trying to cause a recession Congress, they are, they know how this works. They’re just, you know, they, they want to submarine this administration. It was very much poo-pooed by the people there. And then eventually it’s like, oh, this has become much more partisan. And I, I wasn’t making a partisan argument. It was just an observation. Hey, we know how this works. We’ve done giant fiscal stimulus, whether it’s tax cuts or spending, we know what the impact is refusing to do it. I can’t come up with an, a better explanation other than we want to tank the economy and

00:18:13 [Speaker Changed] Get this guy out. Well, the explanation of face value was of course, deficits in debt. Right. We wanna reign that in.

00:18:19 [Speaker Changed] Right. Except for giant tax cuts and big spending. O other than that, you know, it’s, everybody is a deficit hawk when they don’t control the White House. That’s a great point. And it’s, it doesn’t matter if you’re Republican or a Democrat, when your guy loses, suddenly the debt matters. Yeah. And it’s been going on my entire adult life. It’s so transparently

00:18:40 [Speaker Changed] Political.

00:18:40 [Speaker Changed] And that’s where, where,

00:18:41 [Speaker Changed] Where, where we are on the deficit debt.

00:18:43 [Speaker Changed] For sure. So I wanted to ask about your relationship with John McCain. Yeah. ’cause I, I find this both fascinating and hilarious. Yeah.

00:18:51 [Speaker Changed] Yeah. Well, perhaps it equally as interesting. My friend Kevin Hassett asked me to come help out the McCain campaign. You know, now Kevin is the head of the National Economic Council and Donald Trump, he was at a EI, the American Enterprise Institute at the time

00:19:06 [Speaker Changed] And name consistently floated for potential figure roles. Yeah.

00:19:12 [Speaker Changed] And this is well before Obama came on the scene. I didn’t know President Obama at all, and I knew McCain and I, I admired him mostly around foreign policy. That’s obviously where his expertise was. But I also felt like he, they needed real help. The campaign needed real help on economics. And I was the guy who took all the incoming information about the economy and translating that into what does it mean for the economic activity and what, how should we, the campaign respond to that. Well, I wasn’t paid, I wasn’t officially part of the campaign, but that’s the kind of support I provided. But, you know, obviously when the crisis hit Senator McCain, that wasn’t his strong suit. Right. Again, he was foreign policy. He wasn’t economics. He kind of struggled across the finish line and never really grabbed on, I I can recall briefing the campaign saying, we got a real problem here. This is a, this is gonna be a mess. And there was, you know, complete kind of, no, there’s not. It’ll be, everything will be okay. And so there was a little bit of tension at the end of that campaign. It

00:20:13 [Speaker Changed] Feels like he just encountered some unfortunate timing because between the war in Iraq and the crisis, I think the Bush administration had made any mainstream Republican unelectable in 2008. And the Democrats put up a charismatic guy. Yeah. I don’t think McCain would’ve been anything but a really good president. Right. And in any other year, a really strong candidate. Right. Kind of shocking the way this plays out. Yeah. But you are often painted as this. Oh, that’s, Andy is a lib. Like he was a, a, an advisor to both McCain and Obama. That’s more of someone trying to serve his country, not a partisan.

00:20:58 [Speaker Changed] I have always provided advice when asked from both sides of the aisle. So, you know, sometimes more from the D side at times more from the R side. But I’ve done both. Clearly the political center of gravity has shifted here. And McCain, even McCain, I’m not sure where that kind of lines up in the political spectrum. But yeah, I’ve always been non-partisan. I tried my very best to be non-partisan. And even now it’s, it’s tough to talk about the economy as an economist in the, given all of the things that are going on with economic policy, tariffs and immigration and doge, generally when I address a group, I start saying, I, you know, I know I’m gonna sound political. I don’t mean to be political. I’m doing my very best not to be political, so please forgive me. And that generally people take that in and, you know, forgive me if I overstep in some way in their

00:21:45 [Speaker Changed] Mind. It, it’s tough to be an honest criticizer of policy without people. I, it’s kind of a lazy accusation to say, Jacques, this is partisan. Well, no, we could talk about tariffs. We, we tried ’em in 1930, didn’t work out great. Why do we think it’s gonna work out well this time? Right. That’s not partisan. That’s just, that’s the factual situation. That’s right. If you wanna make a, an argument for why a consumption tax on consumers of imported goods is an efficient, effective way to either lower the deficit or raise capital or realign global trade, have at it. But understand there’s a body of of history that informs us what happened the last time

00:22:32 [Speaker Changed] We talked. Totally. It’s so interesting because on almost every issue, economists debate and the debate is reasonable. Right. Economists,

00:22:40 [Speaker Changed] Reasonable people can disagree.

00:22:42 [Speaker Changed] Oh, yeah. And economists think about the second, third, fourth, fifth order effects of these things and how they platter of time. So it’s very not at all unusual to have these knockout drag down fights between economists over issues, but on tariffs, broad-based tariffs. It’s not much of a debate.

00:23:00 [Speaker Changed] Right. There’s a pretty big consensus. Right. Hey, the world isn’t flat. We, we figured this

00:23:05 [Speaker Changed] Out a already. Yeah. Yeah. So, so I feel like I’m on pretty sound ground when I say I’m not a fan of these broad-based tariffs.

00:23:11 [Speaker Changed] The phrase that always comes up with me on these sort of things, these accusations of partisanship, is the Overton window. You could be middle of the road or, you know, maybe center left or center Right. But when the entire framework shifts far to one way or another, it suddenly looks like you’re an outlier, even though you were kind of centrist. It’s

00:23:34 [Speaker Changed] Kind of how I feel. Yeah.

00:23:35 [Speaker Changed] Right. The wings have, have expanded and suddenly what, what seems like it’s pretty middle of the road. I isn’t any, any longer coming up. We continue our conversation with Mark Zai, chief economist of Moody’s Analytics, discussing what the firm is focusing on in the 2020s. I’m Barry Riol. You’re listening to Masters in Business on Bloomberg Radio. I am Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Mark Zandy. He’s chief economist of Moody’s Analytics. Previously he co-founded economy.com and hosts the Inside Economics Podcast.

00:24:23 [Speaker Changed] I bet you say that to all the economists.

00:24:24 [Speaker Changed] Everybody is my extra special guest. I get, get grief about it because once I painted myself into that corner, Hey, my ordinary guest is this bum. Let’s talk about your Moody’s experience. We talked earlier about, you know, your warnings on housing and, and home financing. And what ended up happening with subprime securitization. Moody’s was one of the biggest rating agencies. I criticized them in Bailout Nation. Tell us what it was like when you joined the firm in oh five, and you are wagging a finger about these sort of things. Did you get any sort of pushback? What, what was it like stepping into a firm that indirectly was a focus of, of some of your analytical critiques?

00:25:12 [Speaker Changed] Yeah, I got pushback. You did? I did. Yeah. I mean, I, I wrote a paper on the subprime mortgage space and did everything but say, you know, these securities should be downgraded, house price declines, credit risk, defaults, foreclosure, these are the losses. But I didn’t take it the next step and say, okay, what does this mean for ratings? But I wrote that paper and it went to the CEOA great guy and the C-E-O-C-C-E-O

00:25:38 [Speaker Changed] Of analytics or the CEO EO of Moody’s. No, Moody’s. Full

00:25:41 [Speaker Changed] And full Moody’s.

00:25:42 [Speaker Changed] Right.

00:25:43 [Speaker Changed] And this, of course, I just had sold my company to them. So this is all brand new. He didn’t, who, who is this guy?

00:25:49 [Speaker Changed] What’s

00:25:50 [Speaker Changed] His, what’s he doing xy Andy. What? That’s 00:25:52 [Speaker Changed] The back of the alphabet. We never get to his stuff.

00:25:54 [Speaker Changed] Yeah. He goes and he goes, why is he talking about subprime mortgage? What does that have to do about the economy? And at the time, that was a reasonable question. The best thing that ever happened. Yeah. Bernanke gave a speech called

00:26:05 [Speaker Changed] Contained

00:26:06 [Speaker Changed] Subprime mortgage. Right. And he remember in that speech and he said, don’t worry, this is not a problem. But because he wrote that speech, I could send it to the CEO, gave, I said, look, this is why I’m talking about it. Right.

00:26:17 [Speaker Changed] The, so if the head of the Fed is talking about it, I I should be treated talking. Yeah. Right. What was he vice chair or just a governor back then, or was that as chairman?

00:26:24 [Speaker Changed] He was chair, I think at the time. He was, yeah, he was definitely chair to the CEO’s credit. He said, okay, you know, you publish it and it’s the best thing that ever happened to Well, one of the things, best things that happened to Moody’s, because when the Financial Inquiry Commission, you remember the Financial Inquiry

00:26:39 [Speaker Changed] Commission? Sure. FCIC. Absolutely. Yeah.

00:26:40 [Speaker Changed] They,

00:26:41 [Speaker Changed] They, and that I have that book. It’s like this thick sitting on a show.

00:26:44 [Speaker Changed] Oh, yeah, yeah, yeah, yeah. I I was, I was that report, I testified I was the first Yes. Panel. Oh really? Those panelists. Yeah.

00:26:50 [Speaker Changed] Amazing.

00:26:51 [Speaker Changed] And of course, the CEO was a later panel with Warren Buffet. Warren Buffet was the, is a shareholder in Moody’s. I think he still is a big shareholder. The lawmakers were questioning them and the CE could say, Hey, look, here’s, here’s the study.

00:27:05 [Speaker Changed] Hey, can I tell you something? A little, a little self-awareness.

00:27:09 [Speaker Changed] And so that, yeah, I’ve been there for 20 years. I love Moody’s. And, but that really helped a lot. Right. In every respect. It helped my credibility.

00:27:19 [Speaker Changed] Helped the company’s

00:27:20 [Speaker Changed] Credibility. Yeah. Help the company’s cred established a set of ground rules that I’m able to write about, think about, talk about anything that I think is important about the economy. All that was established in that point. Now that, that’s getting tested at different points in time as we move along here. But, and we’re in a trying time now, but that was very, very important to my successful stay at Moody’s for 20 years.

00:27:43 [Speaker Changed] I, I wish I could remember who wrote a criticism in response to the Bernanke speech about subprime. ’cause the line was subprime is contained. Yeah. And the response, it could have been Alan SSON and Barron’s, it could have been James Grant, could have been Josh Rosner, Chris, Chris Waylan. Oh, great. Yeah. But it was, yes, subprime is contained to planet Earth. The rest of the solar system is safe. Right. And I, it was one of those lines where, damn, I wish I wrote that. That just, I, I might have been Ableson or Grant, but that

00:28:15 [Speaker Changed] Sounds like a Jim grant.

00:28:17 [Speaker Changed] It, it very much does. It’s sort of dry. Is he still writing Jim Grant? I think so.

00:28:21 [Speaker Changed] Yeah. You know, we kinda lost track.

00:28:23 [Speaker Changed] Yeah. It, it happens. Especially in this era of substack where Right. Your inbox is just overflowed with, with stuff. So you got some pushback, but they cleared it. I gotta ask, what was your experience like at Moody’s during the great financial crisis? It had to be 24 7 work plus terrifying everything.

00:28:46 [Speaker Changed] Oh, it was an amazing scary, I can remember a few scary mo real scary moments in, in my mind. You know, when I get, I got a call from a CEO of a major retailer saying that, you know, if we don’t do something, he’s going to not be able to make payroll, you know, on. And I’m saying, I’m thinking to myself, he’s telling me this, so we got a real problem.

00:29:08 [Speaker Changed] Well, he wants you to tell DC Yeah, that’s,

00:29:11 [Speaker Changed] That’s exactly what it was. DC That was exactly what it was. I did,

00:29:14 [Speaker Changed] Didn’t the Bush administration, I don’t remember if it was Hank Paulson or, or Bernanke have conversations, maybe it was the CEO of, of Ford or gm, Hey, we have money, but our credit facility is frozen. We can’t get at our money to make payroll.

00:29:30 [Speaker Changed] Right. Well, there was so many things going on. I remember this commercial paper market was, had frozen and Yep. Completely frozen. And of course that’s key to making payroll for a lot of these

00:29:40 [Speaker Changed] Companies. I, I have a buddy who was on a derivatives trading desk, and he always pushes back when I use the word frozen, he’s like, Hey, I dunno what you’re talking about. We were trading billions of dollars a day in paper. It was just discounted 30, 40, 50%. Oh, there you go. So there was liquidity, but there was a haircut involved.

00:29:58 [Speaker Changed] Well, and also just trying to find out, was it 30 or was it 50 or was it 75? You don’t know. Yeah, you don’t know.

00:30:04 [Speaker Changed] You really don’t know the that that led to the line. There’s no such thing as toxic paper. Only toxic prices.

00:30:10 [Speaker Changed] There you go. Yeah.

00:30:11 [Speaker Changed] So, yeah, absolutely. So, so that experience had to be just mind blowing.

00:30:16 [Speaker Changed] Well, and also from coming just a purely academic perspective for an economist, I mean, this was just an incredible time. One, once every century you see something like this and you, there’s so much that you’re learning while you’re doing. And it, it was not only just economics, it was also political economy. You know, how do, what, what should lawmakers do and how should they do it? And, and all the moving parts there. So it was a very amazing time. And that’s when I wrote that first book was I, it’s not a great book, Barry. And there is a, I wrote, did write a chapter, chapter seven on the rating agencies, but I did not put it in ’cause I was part of the rating agency and no one would’ve believed me. Anyway.

00:30:58 [Speaker Changed] Now you’ve been there 20 years. The financial crisis is more than 15 years in, in the rear window. Tell us a little bit about what Moody’s Analytics is doing here. And now.

00:31:12 [Speaker Changed] We’re very simple business. My part of Moody’s is a very simple business. We produce economic forecasts in scenarios.

00:31:20 [Speaker Changed] Yeah. But that’s not really a simple thing to do. There’s a lot of inputs and a lot of moving parts.

00:31:26 [Speaker Changed] There is, but the actual business itself is very simple. And the, the, one of the things that has been kind of a tailwind to our work has been the regulatory environment. Right. The financial institutions all over the globe need to do stress tests, capital planning. It’s even now embedded in the loan loss provisioning Cecil here in the US as an accounting framework that requires forward looking projections. If R nine overseas, climate stress testing, all those things require a very disciplined, comprehensive approach to economic forecasting. And so that’s really been key to key to the business here over the last 10, 15 years.

00:32:12 [Speaker Changed] So that’s kind of interesting. Your clients, are they necessarily Wall Street investing firms? Are they government institutions or non-governmental agencies?

00:32:23 [Speaker Changed] All, all of the above. All

00:32:24 [Speaker Changed] The above. When, when I think of climate stress testing, I, I, I just was involved in this silly debate about climate change. And my answer is, Hey, my opinion is irrelevant. Go talk to an insurer if climate change is a hoax. Yeah, great point. And and what, what are your experiences doing climate stress tests for you? Look how hard it is to get insurance in places like Florida. Like how significant is something like that to the sort of research you would sell to a private entity like insurance?

00:32:56 [Speaker Changed] Yeah, it’s, it’s critical. So house prices, go look at house prices in Florida, we’re talking about the west coast of Florida. They’re falling and they’re falling because homeowner’s insurance costs are rising because of the cost of, of hurricanes and other storm damage. So the insurers take that all in. They raise a homeowner’s insurance and that depresses demand and, and price. And of course that has all kinds of implications for mortgage credit risk for if you’re an mortgage insurer, if you’re in the mortgage business, in any, in any kind of respect. So that’s a great example of where, you know, the kind of economic forecasting is really critical to what’s going on in real life. And, and particularly with climate, it’s real. It’s, it’s happening. There’s damage and insurers are trying to figure that out. And they’re now building that into their premiums. And it’s having a real impact in, right now it’s more concentrated in places like Florida and Texas and California. But it’s gonna become more of a, a problem in other parts of the country. You know, pretty quickly,

00:33:56 [Speaker Changed] Huh? To to, to say the very least, we’ve seen fires in California. We’ve seen flooding in the Mid-Atlantic states. Well,

00:34:04 [Speaker Changed] Let me, here’s a good factoid for you or I’ll ask you, I’ll ask you guess which state has the highest homeowner’s insurance costs in the country?

00:34:13 [Speaker Changed] So the two that come to mind immediately are Florida and California. But the question makes me

00:34:19 [Speaker Changed] Think of

00:34:20 [Speaker Changed] Wonder are, are we talking about places like Texas or car, the Carolinas,

00:34:26 [Speaker Changed] Nebraska,

00:34:27 [Speaker Changed] NBRA ’cause of tornadoes?

00:34:29 [Speaker Changed] Well, yeah, in convection, convective storms, the, the, the, the big thunderstorms that come along and they drop a lot of

00:34:37 [Speaker Changed] That hail.

00:34:38 [Speaker Changed] The hail does tremendous damage. Yeah,

00:34:40 [Speaker Changed] Yeah. You know, we just had a mild storm and this little branch smashes the windshield of the truck. And I’m waiting three weeks to, to replace it. And when I asked the ins, we have glass coverage, and I asked the insurer about this, they’re like, you have no idea how backed up everything is. And yeah, there are delays in getting dumb things like windshields. Right. So all that stuff plus all the pandemic shortage of automobiles and things like that, that’s driven automobile insurance up. I never would’ve guessed Nebraska. That’s an amazing,

00:35:15 [Speaker Changed] Yeah. Isn’t that interesting? And, and, and also,

00:35:17 [Speaker Changed] Who’s number two or three? I’m curious who’s right behind them? Oh,
like we are a

00:35:21 [Speaker Changed] Florida, they’re, they’re up there. They’re up, they’re definitely up there. Top 10. Yeah. Top 10. The state that had the lowest, and this is I’m sure gonna change when we get more up to date data is Hawaii, but

00:35:30 [Speaker Changed] Well, you just had the, there,

00:35:31 [Speaker Changed] The fires. Fires. So that’s gonna change. But that, that had been the case. But the other thing is, overseas climate is a real issue. Just go to Indonesia, whether Right, the central bank is, you know, a client and they, they’re doing a lot of climate assessment because Jakarta is increasingly underwater. Right. So literally

00:35:51 [Speaker Changed] Not, you don’t mean negative cash flow, you mean

00:35:54 [Speaker Changed] Literally under sea. Water is, sea level is rising and there’s there’s there it’s doing real damage. And so you have to consider that. So here in the US it’s a, an issue overseas is becoming in some parts of the world, existential,

00:36:07 [Speaker Changed] You know, the, I’m trying to remember if this was wired or the Atlantic, but there was a big piece a year or two ago about Miami and the flooding risk from Miami. And this is very surprising. It’s not the seas coming over the land, it’s that so much of South Florida is built on the sort of limestone Yeah. Base. Yeah. Which is very porous to water. And so the flooding is not storms surging over the coastline, it’s bubbling up water bubbling up from Right. Literally it’s like a crazy, I never, you know. Yeah. It, it, there’s so many random factors that if it’s not your space. Yeah. Wow. Like I never would’ve guessed Nebraska and I never would’ve guessed Southern Florida’s. Well

00:36:52 [Speaker Changed] That’s why those sinkhole Right. That’s why the, the sinkholes are a real problem because where in Florida? No kidding. Yeah, because the bubbling up it undermines the, the, the ground.

00:37:01 [Speaker Changed] Huh. That, that’s, that’s unbelievable. Coming up, we continue our conversation with Mark Zandy, chief economist at Moody’s discussing the state of the economy today. I’m Barry Ritholtz, you’re listening to Masters Business on Bloomberg Radio.

00:37:26 I’m Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My better than average guest this week is Mark Zai. He’s the chief economist of Moody’s and hosts, I’ll take it, hosts my extra special guest. You called me out on it. So you know, con O’Brien’s podcast, he makes everybody say their name and I feel blank to be Conan O’Brien’s friend. And it’s kind of a funny, throw it to the guest to fill that in. And I forgot her name. She was on shrinking Jessica and former Daily Show. She said, I feel pressured to say anything about being Corn Bride and Fred. So I kind of painted myself into the corner. Maybe I’m gonna have the guest. Oh,

00:38:14 [Speaker Changed] You did a great job getting out of it. So

00:38:16 [Speaker Changed] No, maybe I have the guest say, what sort of a guest are you this week? So let’s talk about the state of the US economy today. How do you assess where we are? What indicators are most concerning to you? And then we will drill down more specifically.

00:38:32 [Speaker Changed] The economy’s struggling. I think it’s on the precipice of recession.

00:38:37 [Speaker Changed] Precipice of recession. Yeah. What does that mean? Does that mean 50 50 chance this year? ’cause we’ve had economists forecasting recession pretty much since 2022. Not me.

00:38:49 [Speaker Changed] Not me. I haven’t been. So this is, so this is a

00:38:52 [Speaker Changed] Change. You’re now starting to get more cautious. This as nervous

00:38:55 [Speaker Changed] As I’ve been since.

00:38:55 [Speaker Changed] And you’ve been robust. You’ve seen this as a robust economy the past few years.

00:39:00 [Speaker Changed] I have. Yeah.

00:39:01 [Speaker Changed] So the switch is, is significant. It is. So what, what is driving that?

00:39:06 [Speaker Changed] And I have to be humble. I, because the, what a LC economy’s pretty obvious it’s economic policy and it can change quickly. Therefore you have to be humble here because policy can change and we may not, the economy may find its footing as a result and we avoid recession. So there’s a lot of, I hate using the word, but it’s the only word I can think of. It’s uncertainty. I mean, there is a lot of, of that in, in economic

00:39:31 [Speaker Changed] Forecast. I, I steer clear of the U word and, and

00:39:34 [Speaker Changed] What do you say?

00:39:35 [Speaker Changed] Just lack of clarity.

00:39:36 [Speaker Changed] I can like

00:39:37 [Speaker Changed] That because I think it’s, yeah, I think it’s not as pregnant as

00:39:40 [Speaker Changed] UNC

00:39:41 [Speaker Changed] Uncertainty. Yeah, yeah. Lack of clarity. But, but no doubt about that. Yeah. We’ve seen CFOs talk about withholding CapEx spending and even families postponing trips to disneylands

00:39:53 [Speaker Changed] And the data. Say it. So GDP growth, the value of all the things we produce, that was barely 1% in the first half of the year. Right. Consumer spending has gone nowhere all year long. Manufacturing’s in recession. Constructions in recession, transportation distribution is in recession.

00:40:09 [Speaker Changed] Not, not, you’re not saying this is growth rate is slowing, you’re saying this is in the

00:40:14 [Speaker Changed] Red In the red in red, yeah.

00:40:16 [Speaker Changed] Manufacturing, construction. Why is construction in the red there such a demand for housing.

00:40:22 [Speaker Changed] Home building is weakening very rapidly. Really

00:40:25 [Speaker Changed] That a function of high rates and mortgages? Or is that a function of, hey, we can’t find people to build these houses to say nothing of. We’re going to Home Depot and deporting the guys looking for workouts.

00:40:37 [Speaker Changed] It’s affordability. People can’t afford the new homes.

00:40:38 [Speaker Changed] That’s all it is. Yeah. It’s just affordability.

00:40:40 [Speaker Changed] And, and the builders have done an admirable job trying with incentives, interest rate, buy downs to keep the market going and maintaining construction levels. But that’s over the, they’re not able to do it. The this

00:40:52 [Speaker Changed] No more buying down rates. No.

00:40:53 [Speaker Changed] So now we’re seeing single family home building come down for the first time. Multifamily has been coming down for, for, for at least a year. Right. ’cause it got overbuilt. All these luxury towers going up in New York and Philly

00:41:04 [Speaker Changed] And Chicago, Palm Beach. It just up

00:41:05 [Speaker Changed] Vacancy rates. Rates are too high. Rents are too weak. The commercial non-residential side is also very weak. The only strength is data centers. Clearly. Clearly. Yeah. And that, that, even with that though, if you look at overall construction spending, it’s like over, was it $2 trillion? It’s declining.

00:41:22 [Speaker Changed] It’s declining. So I was on the impression that medical facilities, warehouses, things like that were still fairly robust. You’re telling me that’s no longer

00:41:32 [Speaker Changed] The case. It there’s different They’re in Yeah. Yeah. There. I you know, healthcare is fine. Data center’s, booming offices are way down. Multifamily ISS down residential, single family’s way down. So you add it all up and now public instruction’s starting to roll over. Right, right. Because you had that big lift because of the infrastructure legislation that was passed a few years ago

00:41:53 [Speaker Changed] Still. But it’s still on Some of it is still on ongoing. It’s, it’s

00:41:55 [Speaker Changed] High. But the, you know, that the, it’s now rolling over. It’s a high level of spending, but you’ve now passed the peak. Right. And spending, it is now starting to come in and we’re not gonna see any more infrastructure spending on the public side for, you know, quite some time. Really? I

00:42:06 [Speaker Changed] Don’t think so. I thought that would continue on for a couple of years. Wasn’t that like a five or 10

00:42:10 [Speaker Changed] Year legislation? It’s, it’s an elevated level.

00:42:12 [Speaker Changed] Oh. And then it starts the tail down. But

00:42:14 [Speaker Changed] What really matters for growth is the change in Gotcha. And you’ve passed the peak. Yeah. It’s coming now starting.

00:42:19 [Speaker Changed] So you’ve talked about everything. We haven’t gotten to labor

00:42:22 [Speaker Changed] Jobs, by the way. That’s,

00:42:23 [Speaker Changed] That’s my next question. Yeah. Tell us about the labor market. It it,

00:42:26 [Speaker Changed] It’s consistent with the economy of struggling. The job numbers are showing very little job growth in recent months. And I would not be surprised in the next few months, assuming we get the data from the rural labor statistics, we can count on talk about that. But assuming we actually get the data, we could actually see some, and that we would not be surprised if we saw some negative numbers, you know, actual declines in employment.

00:42:48 [Speaker Changed] So, so Jim Bianco said something the other day that really kind of surprised me. First time in US history, we are actually seeing negative population growth. Not, not caused by a war or anything, but immigrants aren’t coming to the country and people are being deported. And by the end of 2025, we may have a lower total population number than we had at the end of 2024. What does that mean for the labor market?

00:43:16 [Speaker Changed] Yeah. I mean, at the end of the day, if you’re a full employment and we’re close 4.2% unemployment rate, the only way you can generate a job is if you’ve got someone to fill the job. Right. You need a labor, you need someone who’s working. So if the labor force isn’t growing, and right now it’s just flat, it really has, well actually if you look at,

00:43:35 [Speaker Changed] Well, you could have job openings, but just they’re unfilled. Get the, that’s data. And that’s,

00:43:39 [Speaker Changed] That’s right. But it’s not a job until you fill it. Right. So you could actually, and right now labor force is declining if you believe the data, believe the precision of the data. But the level of the labor force in July, the last data point is higher, is lower than it was back in January. And so that would suggest that it’s gonna be very difficult for the economy to, to generate jobs. And it’s very possible we start getting job loss and just negative numbers.

00:44:06 [Speaker Changed] So, so what are, what odds are you putting on a recession? And we, we’ll talk about inflation and tariffs in a moment, but what odds are you putting on a recession in Q4 2025 or Q1 2026? I,

00:44:19 [Speaker Changed] I, I think our baseline outlook, my baseline outlook has no recession, just a weak economy. We kind of struggle the way

00:44:27 [Speaker Changed] Through like a sub 1%. GDP and a slightly.

00:44:30 [Speaker Changed] It’s a 1%, it’s actually 1% on the nose year over year through Q4 of this year, Q1 of next, which is historically below the economy’s potential. Right. No job growth.

00:44:39 [Speaker Changed] Zero like a zero BLS print every month.

00:44:42 [Speaker Changed] I think I have average monthly job growth in

00:44:45 [Speaker Changed] Sub 100. Oh

00:44:46 [Speaker Changed] Wait, wait, like 20 5K Really? 25 50 K, something like that. Yeah.

00:44:50 [Speaker Changed] That, that’s a, you know what’s shocking about this sort of discussion is regardless of who you voted for or what your political affiliation is, there’s no debate. The first quarter, 2025 was a very robust economy with markets hitting all time highs. And here we are eight months later, revenue is high, profits are high expectations of, of forward growth in the stock market is high. I know the old joke is stock markets have predicted none of the last four recessions. Right? Right. But what are all time highs and this ongoing enthusiasm for growing corporate profits? What, what is that saying about the

00:45:38 [Speaker Changed] Economy? Yeah. And that’s the reason why, one reason why I don’t have a recession in the baseline, the equity market is held up. Although obviously a big part of what’s going on in the equity market is related to ai. And that has nothing to do with the business cycle. That’s

00:45:50 [Speaker Changed] It’s ai and half of the s and p 500 revenues are overseas. So it may not be reflecting US

00:45:56 [Speaker Changed] Growth. And also you got tax cuts, right? So if you just assume a

00:45:59 [Speaker Changed] Stimulus, fiscal stimulus, you have pe

00:46:01 [Speaker Changed] Constant PE multiple. If you raise after tax earnings, you should get a higher price. So if you, if you abstract from those things that are independent of the economic cycle, the stock market at best is flat from, from where it’s at the beginning of the year. And that that’s the economy. It’s flat, it’s, it’s gone nowhere. Now the

00:46:17 [Speaker Changed] Economy is flat, but it, it mean the stock market can still elevate off a flat economy with tax cuts AI spending. Exactly.

00:46:24 [Speaker Changed] International. And that’s my sense of what’s happening. What’s what happen. So what’s going on in the equity market is actually, I think, consistent with what we’re observing in the economy. Now, if the stock market starts to head south writ large, and we see non-AI part of the market starting to go south here, I think that’s a strong signal that we’re we’re going in, that we’re going into. And, and the equity market is not only important as a signal, but increasingly it drives economic activity because the bulk of spending in the economy today is done by folks in the top part of the income and wealth distribution.

00:47:00 [Speaker Changed] Top 20% is half of all

00:47:02 [Speaker Changed] Spending by our calculation, the top 10% account for, oh say you’re right. It’s top 20% account for 50% of the spending. Right,

00:47:09 [Speaker Changed] Right. Top and the top 10% is most of that and

00:47:12 [Speaker Changed] Most of that. And the top 5% is most, most of that. So, so

00:47:15 [Speaker Changed] Very not a well distributed consumer spend. It’s it’s high-end. High-end and luxury goods. Which, you know, that’s top 2% like that, that that skew is very, the good news is if you go buy a private jet, you can depreciate all of it in year one of, there you go. The I didn’t know that. Thanks to the thanks to the new tax bill. Bill. Yeah. But that’s sort stuff. So I remember when Bush did his accelerated depreciation, which I wanna say it was depending on the item, it was three to seven years instead of 10 to 20 years. 20. Right.

00:47:58 [Speaker Changed] Being

00:47:58 [Speaker Changed] Able to depreciate these luxury goods, maybe that’s a factor in driving some higher

00:48:04 [Speaker Changed] Spending. Yeah. And that should also help the construction markets too, right? Because

00:48:08 [Speaker Changed] You would, you would think, right? Yeah,

00:48:10 [Speaker Changed] I’d take some

00:48:10 [Speaker Changed] Time. Real estate’s a little different. Yeah. So I don’t know if you could depreciate all of your build out in year one, but I’m going to guess it’s not a 20 year depreciation schedule. You probably can do it. Right. I should really ask one of my tax guys what the depreciation schedule is for new construction. ’cause you would think that would encourage more building and we desperately need more single family homes

00:48:35 [Speaker Changed] And that, and that may be the way out of recession. Not only the, it is really get more fiscal support. Right. And that, and we, we will likely get another reconciliation, a piece of BBB. The bill big beautiful bill was reconciliation. They’ll take another, they have another shot at that on the other side of the fiscal year.

00:48:51 [Speaker Changed] October.

00:48:52 [Speaker Changed] Yeah. That’s when the new fiscal year begins. And so they could come up with more stimulus. Yeah. Right. I you’ve heard talk of a stimulus check, you know, I’ll pay for the, we will take the tariff revenue and I’ll rebate some of that back to Americans in the form of a check. And that would, that that would be stimulus for sure. And that would support

00:49:10 [Speaker Changed] The economy. Listen to work. The last Trump administration, he wrote a check. Exactly. And when people were stuck at home. Right. And you know, I I try and be non-partisan when I look at those sort of things. It turns out Keens was onto something a century ago, wasn’t he? Well,

00:49:25 [Speaker Changed] Particularly if the economy’s not at full employment. If you’re, if you’re flat on your back like you were in the pandemic or the financial crisis, you provide stimulus, then you don’t get the crowding out. You don’t get the higher interest rates, you don’t get the inflation, but you get the growth.

00:49:37 [Speaker Changed] So, so, but

00:49:38 [Speaker Changed] You’re now, we’re now closer to full employment. So that’s a bit of a more dangerous game, right. Because if you overstimulate and you’re in full employment, you’re gonna get the inflation already inflation’s an issue given the tariffs and the immigration policy.

00:49:49 [Speaker Changed] So let’s talk about tariffs before we get to inflation. What’s your perspective of the impact of both the policy and the way it’s been implemented?

00:50:00 [Speaker Changed] Well, I’m not a fan of broad-based tariffs. I mean strategic tariffs, no problem. I can, I can kind of get that, but broad-based tariffs. So, you know, we’ve been there, we’ve done that. You mentioned the 1930s, in fact, you can go back a hundred years before that under Andrew Jackson. And we tried broad-based turfs and it didn’t work out so well. It takes about a hundred years for us to forget the mistake and do it again. So I- I-I-I-I don’t think this is gonna end well. It, it, it’s raises inflation by definition. And then we’ll see more of those pass those prices pass through to consumers over the next six, 12 months as the time passes here. And it lowers growth. It’s, it’s pushes the economy towards stagflation and, and the immigration policy, highly restrictive immigration policy. And I, and I get the, the need for addressing the southern border.

00:50:45 [Speaker Changed] We’re we’re talking about legal immigration, not illegal

00:50:48 [Speaker Changed] Immigration. Exactly. It’s very restrictive. And that does, that reinforces the higher inflation and the weaker growth. So you’ve got two policies that are very substative of working together to raise inflation work. Weak, weak economic activity. So

00:51:03 [Speaker Changed] Reducing legal immigration contributes to higher inflation. Explain that.

00:51:07 [Speaker Changed] You’re in a very, go back to the labor force. Tight labor market. Gotcha. Just

00:51:12 [Speaker Changed] Less bodies, higher weights.

00:51:13 [Speaker Changed] You’re constructing a lot of businesses. Ag we know that. Restaurants, construction. Yeah. Leisure, hospitality, elder care, childcare, all those things. And it will ra it presumably will raise costs, labor costs, you’ll see wages rise and add to inflationary

00:51:29 [Speaker Changed] Pressures. So, so we keep hearing from the Fed that they’re data dependent, things are ambiguous. There’s no clear, necessarily clear path to future policy. Is that a reasonable response given everything that’s been going on? Because it seems odd to, to say, on the one hand, we’re at risk of recession. On the other hand, there’s a chance of increased inflation. Sounds a lot like seventies era stagflation. It

00:51:58 [Speaker Changed] Is stagflation.

00:51:59 [Speaker Changed] What does that mean for where rates could go over the next couple of meetings? It seems like a 25 BIP cut is sort of locked into September. Right. And I don’t know how much of that is, Hey, let’s just throw a virgin in the volcano and make the, make the president happy. But they’re in credible reasons, in both directions. This isn’t like a one-sided debate. I

00:52:24 [Speaker Changed] I I think the, their decision to stay on hold was the right decision. ’cause they don’t know what do I respond to the inflation that I know is coming or the weaker growth that is in train. I, I just, and I don’t know what, where the policies are. I don’t, I have no sense of where the tariffs are gonna land, when they’re gonna land there. I don’t know what’s going on with immigration policy. So let’s just sit on our hands and just let this thing unfold a little bit before we can move on. Policy businesses are done roughly the same thing. They’re saying, I don’t really know, therefore it’s not, I’m gonna cut, but it means I’m not gonna expand. I’m gonna sit on my hands. And that’s why the economy has gone sideways here since the beginning of the year, but here we are now, and if I’m, you’re at the Fed, and I think their, the, their kind of, their weights on their, their, their goals are, are shifting.

00:53:08 They’re putting more weight on the economy than on inflation. They’re thinking is inflation because of the tariffs will be more one off. They won’t be persistent, which I think is a reasonable thing to think, but we will have to see. But we know the economy’s weakening, particularly the job numbers. And I, and I, again, going back to, we’re gonna get some negative numbers here, and I think that’s what they want to avoid, particularly in the context of the political environment, because there’s a lot of stuff coming outta Washington about reevaluating the fed’s, the Federal Reserve Act of 20 of 1913, their independence. And if you’re at the Fed and you’re seeing that the, the last thing you wanna do is go into a recession and get blamed for the recession in the context of all those, kind of, that political

00:53:49 [Speaker Changed] Overlay to, to say the very least. So, so we haven’t really talked about integrity of data, but since you alluded to it earlier, let’s bring it up. You know, I’m a big fan of George Box. All models are wrong. Yep. But some are useful. Yep. And so my experience over the past, I don’t know, 15 years, whenever I have a question about how something is put together in either a BEA or BLS data point, I just pick up the phone and call them and they eventually route you to the person, oh, here’s in charge, the person who developed the birth death model, or here’s the person in charge of, of survey data. They couldn’t be more forthcoming, transparent, and helpful. Totally. And I, I’m kind of surprised at some of the crazy stuff I hear from people. I just heard a bunch of stuff about the M-I-B- M-I-T billion price project. Yeah. Which ended up getting picked up by somebody and they were talking about how great that is. And I’m like, Hey, when you track this against CPI, they’re almost identical. So they’re both different models. One is a little more skewed to the weighting of how consumers spend money. The other is just scraping all these data points, but they end up in the same place. How do you think about the integrity of data from the BLSI?

00:55:11 [Speaker Changed] Right now I think it’s gr I think it’s fine. There’s problems particularly with survey responses, but everyone’s

00:55:20 [Speaker Changed] Response. But that’s true everywhere. Look at University of Michigan. Sentiment data has been absolutely plummeting for 10 years.

00:55:24 [Speaker Changed] And the answer to that isn’t cut budgets. It isn’t to cut staff. It is to put more resource in to help try to figure out how to improve those response rates. But even in the employment data, the payroll employment data that we’re focused on, the response rates by the third month is the first month, the response rate’s 65, I’m making this up, but roughly speaking, 65%, 70%, which

00:55:44 [Speaker Changed] Is below what it used to be.

00:55:45 [Speaker Changed] It’s down from where it was by the third. It’s 90, 95%. So it’s still a very, very good survey. But we all, we, as a result of the low response rates, we always get revisions to the data. In more typical times when the economy’s moving in a straight line, those revisions are small. When you’re at an inflection point or a turning point, like I’ve been arguing, we are, you get these big revisions. In fact, there’s information in the revisions. It’s not, it’s not a a bug, it’s a, it’s a feature. It’s saying, Hey, the economy’s weakening. And so the response rates, the responses we’re getting after, after the first month are weaker than the ones we got in the first month. And therefore we’re revising down the data. That signaling that’s a, that’s a strong tell that the economy is struggling and potentially at a, a

00:56:28 [Speaker Changed] Turning point. So, so you are saying the July non-farm payroll, and I, I don’t wanna put words into your mouth. We had a July non-farm payroll that was pretty punk that came out the first week in August. But the revisions were substantial for the prior two months. This isn’t just a noisy data series or somehow partisan wrangling. This is a warning shot across the bow. Hey, the economy is starting to transition into a weaker state. Exactly. Pay attention. Is is that a, that’s the

00:56:58 [Speaker Changed] Point. That’s the point. It’s not that the data is any worse than it has been historically. There’s anything nefarious going on. It’s, that is the nature of the, of the data and it’s telling us something. There’s real information there. And so I, you know, I do, the thing I worry about the most is if there’s a decision to not release the data as timely as it’s being released today, the employment numbers that we’ve been talking about are the most timely data that get released. The Friday of the first

00:57:25 [Speaker Changed] One. Oh, the quarterly nonsense that came out. That just seems

00:57:28 [Speaker Changed] Yeah, that really makes me nervous

00:57:29 [Speaker Changed] That that’s, I I think Wall Street would’ve a hissy fit. You do if that happened. Yeah. The, the, you know what people talk about the, the, the Powell put? Yep. I I prefer the expression, the the Trump collar. Yeah. When the, when the market’s near all time highs, he’s emboldened and rolls out stuff. When the market’s down 15, 20%. That’s a floor. All right, we’ll pause this for 90 days. Yeah. Because rightly or wrongly, and I think there’s more to this than we, we give President Trump credit for. But when the stock market is doing well, he takes that as his report card. And when the stock market is doing poorly, it makes him unhappy. And his bias is towards doing something, anything. What do we have to do to get the stock market back on track? Right. He doesn’t care about polls. He cares about one poll. And that’s the Dow Jones Industrial average. Yeah. Or the Nasdaq or the s and p. Yeah. Yeah. Kind of focuses his

00:58:27 [Speaker Changed] Attention. Yeah. Yeah. That’s a nice way of putting it. The Trump collar. Yeah.

00:58:30 [Speaker Changed] So, so I don’t wanna make you late for lunch. I have one more question before we get to our speed round. Our favorite questions. Oh. And, and it, it’s a curve ball question, which is, what are investors and economists not talking about, but perhaps they should be. What, what do you think is an important topic, and I don’t care. Policy assets, geographies, what’s getting overlooked, but shouldn’t,

00:58:57 [Speaker Changed] I’d say fed independence. Not that people aren’t talking about it, but they’re not focused on it. Like they should be focused on it. I think this is a real, potentially a real significant problem. And they’re, the, the, the independence of the Fed is critical to a well-functioning market economy, like our own, we know that from our own history. You can see what happened back in the seventies and eighties and or looking overseas. Sure. And we need to preserve that independence. And it’s not only about the actual independence, it’s the perception of independence. That’s really critical. And I, I just doesn’t, it doesn’t feel like to me, you follow markets more closely than I do. May maybe have a different view, but I just don’t get the sense markets are focused on this like they should be at this point in time. Huh.

00:59:39 [Speaker Changed] Pretty, pretty interesting take. All right. Let’s jump to our speed round. Okay. Feel free to, all right. Bang through these as quickly as you want. And we’ll get you to lunch on time. Starting with, who are your mentors who helped shape your career?

00:59:52 [Speaker Changed] Well, I mentioned Dr. Klein, the Nobel Laureate. He clearly was a, a key person in my professional life. My father professor of engineering at Penn, by the way. He will, he will claim he, he was the first to use neural nets back in the day. Huh. So for, for the studies he was doing. But I’d say those two folks are, those two, two men were the key to my, to my professional development.

01:00:20 [Speaker Changed] Let’s talk about books. What are some of your favorites? What are you reading right

01:00:23 [Speaker Changed] Now? It sounds hackney now, but you know, Barry, I like, I just love Alexander Hamilton by Chernow. I mean, I, that was, why is that

01:00:30 [Speaker Changed] Hackney?

01:00:31 [Speaker Changed] Well, because now everyone,

01:00:32 [Speaker Changed] The book doesn’t have any wrapping in it. People should be aware if they go get this book. Yeah. It’s a deep historical dive. It’s not a entertaining bunch of show tunes.

01:00:42 [Speaker Changed] I Oh, yes, that’s for sure. But it’s very entertaining. I I, at least from a nerdy kind of perspective. I think

01:00:48 [Speaker Changed] Cher now has a new book coming out this fall, doesn’t he? Or did it come out already?

01:00:51 [Speaker Changed] Well, I’ve got the, I’m reading the one on Washington.

01:00:54 [Speaker Changed] Is that, is that his latest?

01:00:55 [Speaker Changed] That might be. I think that’s his latest. Yeah, I think so.

01:00:57 [Speaker Changed] He, he is an amazing writer. And,

01:01:01 [Speaker Changed] And I like that period in economic history

01:01:05 [Speaker Changed] To, to say the, the, the very least. It’s, and I,

01:01:08 [Speaker Changed] It’s don’t fascinating. I don’t normally read self-help books, but I, I like this book Outlive. I know everyone else has read it by 3, 4, 4 years ago. So now I’m hanging,

01:01:17 [Speaker Changed] Is it worth reading? It’s, oh, mark Twain is his name.

01:01:21 [Speaker Changed] Oh, mark Twain.

01:01:21 [Speaker Changed] That’s right’s. I ha it’s, it’s a twain. Big to Yeah. It’s sitting on my nightstand gathering dust. ’cause it’s so,

01:01:28 [Speaker Changed] I don’t know how he does it.

01:01:29 [Speaker Changed] So intimidating. Yeah. Deep, deep research. Yeah. Outlive.

01:01:34 [Speaker Changed] Oh yeah. So it’s an easy book, a summer book Right. When you’re on the beach. It, it, it’s a how do you live your life? Well, long run. And it’s a lot of, it’s just intuitive. It’s not non-intuitive, but there’s some things in there that I found useful in terms of the test you should take. And I love the, the hanging you, A big part of, of, of the work is around the strip grip strength. And so one of the ways you improve your grip strength is by just literally hanging from go try it. Okay. It’s, it’s, I’ve

01:02:08 [Speaker Changed] Been, he’s, by the way, you don’t have to

01:02:10 [Speaker Changed] Do, he

01:02:10 [Speaker Changed] Says chin ups or pullups. You just have to hang it. This is

01:02:12 [Speaker Changed] Hang You think this is easy. And he says, men, if men can do it for two minutes, that’s great. Women. One minute I’ll tell, tell you, I, I can’t get to, I literally cannot get to two

01:02:21 [Speaker Changed] Minutes. I, I can’t imagine I can, I Im not gonna do 10 pullups. Yeah. But I, I would be surprised if I couldn’t hang for right. For two minutes. But yeah, try

01:02:31 [Speaker Changed] It. Try it,

01:02:31 [Speaker Changed] Try it. Especially that, that’s, that’s interesting. Yeah. Yeah. Alright, so we’re talking about books. What about streaming? What are you watching you

01:02:38 [Speaker Changed] Listening to? Well, I, I, my wife and I watch something every night. Usually half hour to an hour. And

01:02:42 [Speaker Changed] We’re we’re the same. It’s a post pandemic is

01:02:45 [Speaker Changed] Hang there. What?

01:02:45 [Speaker Changed] It’s, yeah. Yeah. Because when you’re stuck at home, you couldn’t go out. Right. Didn’t we all

01:02:49 [Speaker Changed] Sort And I’m highly annoyed with all these streaming services. I like, like, come on, hand me a break. I mean, so,

01:02:55 [Speaker Changed] So what, what are you streaming these days?

01:02:57 [Speaker Changed] Well, I got, you got any suggestions? Yes.

01:02:59 [Speaker Changed] Yes, I do. I have plenty.

01:03:01 [Speaker Changed] I just finished disclaimer. Did you watch disclaimer?

01:03:03 [Speaker Changed] No, I, I love a good suggestion. Disclaimer.

01:03:06 [Speaker Changed] Yeah. It’s Kevin Klein and what’s her name? Cape Blanchet. Oh, no

01:03:11 [Speaker Changed] Kidding. It’s

01:03:12 [Speaker Changed] Short six seven. I love

01:03:14 [Speaker Changed] Those. We watched Department Q, which was a limited series.

01:03:17 [Speaker Changed] Department Q is good. Really

01:03:19 [Speaker Changed] Interesting.

01:03:19 [Speaker Changed] Yeah. Actually I watched that. That was very good. This is one I liked a lot. It’s the ending is the acting is great. Yeah. The ending is a little contrived. They need to do two more episodes or

01:03:28 [Speaker Changed] Something. I’ll give you three interesting things. We’ve been watching my wife this down, my wife got me sucked into Killing Eve, which is an espionage thriller. Oh, I heard this. We just, it’s four seasons. We just started the second season Killing Eve. Everybody in it is great. It’s a little, it’s a little, you know. Right. Some of it is, it’s not terribly gory. Right. People, people get killed. Yeah. It’s assassin. I’m okay. And yeah. You know, I don’t like the police procedurals where they show you all the it when it’s too realistic. Yeah. Like, we tried to watch The Pit. My wife is like, I’m out. Yeah. All right. I get that. So, so Killing Eve has been really interesting. That’s, that’s a good one. And you know what’s fascinating about the, the Gilded Age is it’s four stories. Old money, new money. Ah, the staff in both of these houses across the street. Right. And then the old Money Secretary, who is a black woman, and then her whole family and that storyline. But what’s amazing is all the issues. It’s 150 years

01:04:35 [Speaker Changed] Ago. Yeah. Same it today.

01:04:37 [Speaker Changed] It’s wealth inequality, it’s status, it’s economic mobility and it’s tribal. And it, it’s so fascinating. Gilded

01:04:46 [Speaker Changed] Age. The

01:04:46 [Speaker Changed] Gilded Age gr really?

01:04:48 [Speaker Changed] That’s a good one too.

01:04:49 [Speaker Changed] Interesting. Yeah. I I didn’t wanna watch it. To me it

01:04:51 [Speaker Changed] Just was a down abbey kind of thing, or

01:04:52 [Speaker Changed] Kind of, it looked like another soap opera. Yeah. But amazing cast, you get sucked into it, period. That’s on HBO. And so, so you

01:05:01 [Speaker Changed] Said three,

01:05:02 [Speaker Changed] You third it if, well, department Q was the department Q was the limited.

01:05:07 [Speaker Changed] That was a good one.

01:05:08 [Speaker Changed] If, if you like the, that’ll be back. I think if you like the espionage sort of thing, that one kind of unfolds really slowly. Yeah. And deliberately. But Killing Eve is much, it’s much faster and crazier and more interesting. And it, it’s mostly takes place in Europe, which makes it funner. You know, it’s MI six. Yeah. I, I won all sorts of awards. This, like, I got, she saw it Ready and when she was, she, I walk in and, and like, what’s this? She’s like, just watch 10 minutes of the first episode. All right. And we started watching it and sucked right in, so.

01:05:50 [Speaker Changed] Oh, that sounds good. Yeah, definitely. Watch that. And it’s four seasons we need. That’s,

01:05:53 [Speaker Changed] That’s right. So it gives you plenty. And I, you could bang out two a night very, very comfortably. Our final two questions. What sort of advice would you give a recent college grad interested in a career in economics and finance?

01:06:08 [Speaker Changed] Just show up.

01:06:09 [Speaker Changed] Show

01:06:09 [Speaker Changed] Up. Just show up. Do

01:06:10 [Speaker Changed] The work. Show up, show

01:06:12 [Speaker Changed] Up. Huh. I, I guess the other thing I’d say is I tell my kids this, every point of contact matters, every relationship, every phone call, every email, every teams meeting. Because things come around, you know, you meet somebody in one way, they’ll come back 10 years from now. And if they, if you did the right thing, if you were attentive to their, their needs and interests, it’ll, it’ll benefit you in the long run. It’s not easy to do it. It takes energy, but every point of contact matters.

01:06:51 [Speaker Changed] Huh. Really interesting. And our final question. What do you know about the world of economics today? You wish you knew way back in the 1990s when you were first starting out?

01:07:01 [Speaker Changed] Well, I didn’t, I thought everything could go back. Back to your point about box and models. I think ev I thought everything could be solved with a model. It’s like, you guys, come on. This is just arithmetic, you know, mathematics. We could, we could, we should be able to do this. No, you know, the world is a very messy place.

01:07:22 [Speaker Changed] Really, really good stuff. Mark, thank you for being so generous with your time. We have been speaking with Mark Zandy. He is the chief economist of Moody’s Analytics. If you enjoyed this conversation, check out any of the 550 previous discussions we’ve had over the past 11 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcast. And be sure and check out my new book, how Not to invest the ideas, numbers, and behaviors that destroys wealth and how to avoid them. How not to invest at your favorite bookstore. Now, I would be remiss if I did not thank the crack team that helps put these conversations together each week. Meredith Frank is my audio engineer. Alexis Noriega and Anna Luke are my producers. Sean Russo is my researcher. Sage Bauman is the head of podcasts at Bloomberg. I’m Barry Riol. You are listening to Masters in Business on Bloomberg Radio.

~~~

 

 

 

 

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The Greatest Challenge Facing Mankind:
Remarks to the Commonwealth Club
by Michael Crichton
San Francisco, September 15, 2003

 

 

I have been asked to talk about what I consider the most important challenge facing mankind, and I have a fundamental answer. The greatest challenge facing mankind is the challenge of distinguishing reality from fantasy, truth from propaganda. Perceiving the truth has always been a challenge to mankind, but in the information age (or as I think of it, the disinformation age) it takes on a special urgency and importance.

We must daily decide whether the threats we face are real, whether the solutions we are offered will do any good, whether the problems we’re told exist are in fact real problems, or non-problems. Every one of us has a sense of the world, and we all know that this sense is in part given to us by what other people and society tell us; in part generated by our emotional state, which we project outward; and in part by our genuine perceptions of reality. In short, our struggle to determine what is true is the struggle to decide which of our perceptions are genuine, and which are false because they are handed down, or sold to us, or generated by our own hopes and fears.

As an example of this challenge, I want to talk today about environmentalism. And in order not to be misunderstood, I want it perfectly clear that I believe it is incumbent on us to conduct our lives in a way that takes into account all the consequences of our actions, including the consequences to other people, and the consequences to the environment. I believe it is important to act in ways that are sympathetic to the environment, and I believe this will always be a need, carrying into the future. I believe the world has genuine problems and I believe it can and should be improved. But I also think that deciding what constitutes responsible action is immensely difficult, and the consequences of our actions are often difficult to know in advance. I think our past record of environmental action is discouraging, to put it mildly, because even our best intended efforts often go awry. But I think we do not recognize our past failures, and face them squarely. And I think I know why.

I studied anthropology in college, and one of the things I learned was that certain human social structures always reappear. They can’t be eliminated from society. One of those structures is religion. Today it is said we live in a secular society in which many people—the best people, the most enlightened people—do not believe in any religion. But I think that you cannot eliminate religion from the psyche of mankind. If you suppress it in one form, it merely re-emerges in another form. You can not believe in God, but you still have to believe in something that gives meaning to your life, and shapes your sense of the world. Such a belief is religious.

Today, one of the most powerful religions in the Western World is environmentalism. Environmentalism seems to be the religion of choice for urban atheists. Why do I say it’s a religion? Well, just look at the beliefs. If you look carefully, you see that environmentalism is in fact a perfect 21st century remapping of traditional Judeo-Christian beliefs and myths.

There’s an initial Eden, a paradise, a state of grace and unity with nature, there’s a fall from grace into a state of pollution as a result of eating from the tree of knowledge, and as a result of our actions there is a judgment day coming for us all. We are all energy sinners, doomed to die, unless we seek salvation, which is now called sustainability. Sustainability is salvation in the church of the environment. Just as organic food is its communion, that pesticide-free wafer that the right people with the right beliefs, imbibe.

Eden, the fall of man, the loss of grace, the coming doomsday—these are deeply held mythic structures. They are profoundly conservative beliefs. They may even be hard-wired in the brain, for all I know. I certainly don’t want to talk anybody out of them, as I don’t want to talk anybody out of a belief that Jesus Christ is the son of God who rose from the dead. But the reason I don’t want to talk anybody out of these beliefs is that I know that I can’t talk anybody out of them. These are not facts that can be argued. These are issues of faith.

And so it is, sadly, with environmentalism. Increasingly it seems facts aren’t necessary, because the tenets of environmentalism are all about belief. It’s about whether you are going to be a sinner, or saved. Whether you are going to be one of the people on the side of salvation, or on the side of doom. Whether you are going to be one of us, or one of them.

Am I exaggerating to make a point? I am afraid not. Because we know a lot more about the world than we did forty or fifty years ago. And what we know now is not so supportive of certain core environmental myths, yet the myths do not die. Let’s examine some of those beliefs.

There is no Eden. There never was. What was that Eden of the wonderful mythic past? Is it the time when infant mortality was 80%, when four children in five died of disease before the age of five? When one woman in six died in childbirth? When the average lifespan was 40, as it was in America a century ago. When plagues swept across the planet, killing millions in a stroke. Was it when millions starved to death? Is that when it was Eden?

And what about indigenous peoples, living in a state of harmony with the Eden-like environment? Well, they never did. On this continent, the newly arrived people who crossed the land bridge almost immediately set about wiping out hundreds of species of large animals, and they did this several thousand years before the white man showed up, to accelerate the process. And what was the condition of life? Loving, peaceful, harmonious? Hardly: the early peoples of the New World lived in a state of constant warfare. Generations of hatred, tribal hatreds, constant battles. The warlike tribes of this continent are famous: the Comanche, Sioux, Apache, Mohawk, Aztecs, Toltec, Incas. Some of them practiced infanticide, and human sacrifice. And those tribes that were not fiercely warlike were exterminated, or learned to build their villages high in the cliffs to attain some measure of safety.

How about the human condition in the rest of the world? The Maori of New Zealand committed massacres regularly. The dyaks of Borneo were headhunters. The Polynesians, living in an environment as close to paradise as one can imagine, fought constantly, and created a society so hideously restrictive that you could lose your life if you stepped in the footprint of a chief. It was the Polynesians who gave us the very concept of taboo, as well as the word itself. The noble savage is a fantasy, and it was never true. That anyone still believes it, 200 years after Rousseau, shows the tenacity of religious myths, their ability to hang on in the face of centuries of factual contradiction.

There was even an academic movement, during the latter 20th century, that claimed that cannibalism was a white man’s invention to demonize the indigenous peoples. (Only academics could fight such a battle.) It was some thirty years before professors finally agreed that yes, cannibalism does inbdeed occur among human beings. Meanwhile, all during this time New Guinea highlanders in the 20th century continued to eat the brains of their enemies until they were finally made to understand that they risked kuru, a fatal neurological disease, when they did so.

More recently still the gentle Tasaday of the Philippines turned out to be a publicity stunt, a nonexistent tribe. And African pygmies have one of the highest murder rates on the planet.

In short, the romantic view of the natural world as a blissful Eden is only held by people who have no actual experience of nature. People who live in nature are not romantic about it at all. They may hold spiritual beliefs about the world around them, they may have a sense of the unity of nature or the aliveness of all things, but they still kill the animals and uproot the plants in order to eat, to live. If they don’t, they will die.

And if you, even now, put yourself in nature even for a matter of days, you will quickly be disabused of all your romantic fantasies. Take a trek through the jungles of Borneo, and in short order you will have festering sores on your skin, you’ll have bugs all over your body, biting in your hair, crawling up your nose and into your ears, you’ll have infections and sickness and if you’re not with somebody who knows what they’re doing, you’ll quickly starve to death. But chances are that even in the jungles of Borneo you won’t experience nature so directly, because you will have covered your entire body with DEET and you will be doing everything you can to keep those bugs off you.

The truth is, almost nobody wants to experience real nature. What people want is to spend a week or two in a cabin in the woods, with screens on the windows. They want a simplified life for a while, without all their stuff. Or a nice river rafting trip for a few days, with somebody else doing the cooking. Nobody wants to go back to nature in any real way, and nobody does. It’s all talk-and as the years go on, and the world population grows increasingly urban, it’s uninformed talk. Farmers know what they’re talking about. City people don’t. It’s all fantasy.

One way to measure the prevalence of fantasy is to note the number of people who die because they haven’t the least knowledge of how nature really is. They stand beside wild animals, like buffalo, for a picture and get trampled to death; they climb a mountain in dicey weather without proper gear, and freeze to death. They drown in the surf on holiday because they can’t conceive the real power of what we blithely call “the force of nature.” They have seen the ocean. But they haven’t been in it.

The television generation expects nature to act the way they want it to be. They think all life experiences can be tivo-ed. The notion that the natural world obeys its own rules and doesn’t give a damn about your expectations comes as a massive shock. Well-to-do, educated people in an urban environment experience the ability to fashion their daily lives as they wish. They buy clothes that suit their taste, and decorate their apartments as they wish. Within limits, they can contrive a daily urban world that pleases them.

But the natural world is not so malleable. On the contrary, it will demand that you adapt to it-and if you don’t, you die. It is a harsh, powerful, and unforgiving world, that most urban westerners have never experienced.

Many years ago I was trekking in the Karakorum mountains of northern Pakistan, when my group came to a river that we had to cross. It was a glacial river, freezing cold, and it was running very fast, but it wasn’t deep—maybe three feet at most. My guide set out ropes for people to hold as they crossed the river, and everybody proceeded, one at a time, with extreme care. I asked the guide what was the big deal about crossing a three-foot river. He said, well, supposing you fell and suffered a compound fracture. We were now four days trek from the last big town, where there was a radio. Even if the guide went back double time to get help, it’d still be at least three days before he could return with a helicopter. If a helicopter were available at all. And in three days, I’d probably be dead from my injuries. So that was why everybody was crossing carefully. Because out in nature a little slip could be deadly.

But let’s return to religion. If Eden is a fantasy that never existed, and mankind wasn’t ever noble and kind and loving, if we didn’t fall from grace, then what about the rest of the religious tenets? What about salvation, sustainability, and judgment day? What about the coming environmental doom from fossil fuels and global warming, if we all don’t get down on our knees and conserve every day?

Well, it’s interesting. You may have noticed that something has been left off the doomsday list, lately. Although the preachers of environmentalism have been yelling about population for fifty years, over the last decade world population seems to be taking an unexpected turn. Fertility rates are falling almost everywhere. As a result, over the course of my lifetime the thoughtful predictions for total world population have gone from a high of 20 billion, to 15 billion, to 11 billion (which was the UN estimate around 1990) to now 9 billion, and soon, perhaps less. There are some who think that world population will peak in 2050 and then start to decline. There are some who predict we will have fewer people in 2100 than we do today. Is this a reason to rejoice, to say halleluiah? Certainly not. Without a pause, we now hear about the coming crisis of world economy from a shrinking population. We hear about the impending crisis of an aging population. Nobody anywhere will say that the core fears expressed for most of my life have turned out not to be true. As we have moved into the future, these doomsday visions vanished, like a mirage in the desert. They were never there—though they still appear, in the future. As mirages do.

Okay, so, the preachers made a mistake. They got one prediction wrong; they’re human. So what. Unfortunately, it’s not just one prediction. It’s a whole slew of them. We are running out of oil. We are running out of all natural resources. Paul Ehrlich: 60 million Americans will die of starvation in the 1980s. Forty thousand species become extinct every year. Half of all species on the planet will be extinct by 2000. And on and on and on.

With so many past failures, you might think that environmental predictions would become more cautious. But not if it’s a religion. Remember, the nut on the sidewalk carrying the placard that predicts the end of the world doesn’t quit when the world doesn’t end on the day he expects. He just changes his placard, sets a new doomsday date, and goes back to walking the streets. One of the defining features of religion is that your beliefs are not troubled by facts, because they have nothing to do with facts.

So I can tell you some facts. I know you haven’t read any of what I am about to tell you in the newspaper, because newspapers literally don’t report them. I can tell you that DDT is not a carcinogen and did not cause birds to die and should never have been banned. I can tell you that the people who banned it knew that it wasn’t carcinogenic and banned it anyway. I can tell you that the DDT ban has caused the deaths of tens of millions of poor people, mostly children, whose deaths are directly attributable to a callous, technologically advanced western society that promoted the new cause of environmentalism by pushing a fantasy about a pesticide, and thus irrevocably harmed the third world. Banning DDT is one of the most disgraceful episodes in the twentieth century history of America. We knew better, and we did it anyway, and we let people around the world die and didn’t give a damn.

I can tell you that second hand smoke is not a health hazard to anyone and never was, and the EPA has always known it. I can tell you that the evidence for global warming is far weaker than its proponents would ever admit. I can tell you the percentage the US land area that is taken by urbanization, including cities and roads, is 5%. I can tell you that the Sahara desert is shrinking, and the total ice of Antarctica is increasing. I can tell you that a blue-ribbon panel in Science magazine concluded that there is no known technology that will enable us to halt the rise of carbon dioxide in the 21st century. Not wind, not solar, not even nuclear. The panel concluded a totally new technology-like nuclear fusion-was necessary, otherwise nothing could be done and in the meantime all efforts would be a waste of time. They said that when the UN IPCC reports stated alternative technologies existed that could control greenhouse gases, the UN was wrong.

I can, with a lot of time, give you the factual basis for these views, and I can cite the appropriate journal articles not in whacko magazines, but in the most prestigeous science journals, such as Science and Nature. But such references probably won’t impact more than a handful of you, because the beliefs of a religion are not dependant on facts, but rather are matters of faith. Unshakeable belief.

Most of us have had some experience interacting with religious fundamentalists, and we understand that one of the problems with fundamentalists is that they have no perspective on themselves. They never recognize that their way of thinking is just one of many other possible ways of thinking, which may be equally useful or good. On the contrary, they believe their way is the right way, everyone else is wrong; they are in the business of salvation, and they want to help you to see things the right way. They want to help you be saved. They are totally rigid and totally uninterested in opposing points of view. In our modern complex world, fundamentalism is dangerous because of its rigidity and its imperviousness to other ideas.

I want to argue that it is now time for us to make a major shift in our thinking about the environment, similar to the shift that occurred around the first Earth Day in 1970, when this awareness was first heightened. But this time around, we need to get environmentalism out of the sphere of religion. We need to stop the mythic fantasies, and we need to stop the doomsday predictions. We need to start doing hard science instead.

There are two reasons why I think we all need to get rid of the religion of environmentalism.

First, we need an environmental movement, and such a movement is not very effective if it is conducted as a religion. We know from history that religions tend to kill people, and environmentalism has already killed somewhere between 10-30 million people since the 1970s. It’s not a good record. Environmentalism needs to be absolutely based in objective and verifiable science, it needs to be rational, and it needs to be flexible. And it needs to be apolitical. To mix environmental concerns with the frantic fantasies that people have about one political party or another is to miss the cold truth—that there is very little difference between the parties, except a difference in pandering rhetoric. The effort to promote effective legislation for the environment is not helped by thinking that the Democrats will save us and the Republicans won’t. Political history is more complicated than that. Never forget which president started the EPA: Richard Nixon. And never forget which president sold federal oil leases, allowing oil drilling in Santa Barbara: Lyndon Johnson. So get politics out of your thinking about the environment.

The second reason to abandon environmental religion is more pressing. Religions think they know it all, but the unhappy truth of the environment is that we are dealing with incredibly complex, evolving systems, and we usually are not certain how best to proceed. Those who are certain are demonstrating their personality type, or their belief system, not the state of their knowledge. Our record in the past, for example managing national parks, is humiliating. Our fifty-year effort at forest-fire suppression is a well-intentioned disaster from which our forests will never recover. We need to be humble, deeply humble, in the face of what we are trying to accomplish. We need to be trying various methods of accomplishing things. We need to be open-minded about assessing results of our efforts, and we need to be flexible about balancing needs. Religions are good at none of these things.

How will we manage to get environmentalism out of the clutches of religion, and back to a scientific discipline? There’s a simple answer: we must institute far more stringent requirements for what constitutes knowledge in the environmental realm. I am thoroughly sick of politicized so-called facts that simply aren’t true. It isn’t that these “facts” are exaggerations of an underlying truth. Nor is it that certain organizations are spinning their case to present it in the strongest way. Not at all—what more and more groups are doing is putting out is lies, pure and simple. Falsehoods that they know to be false.

This trend began with the DDT campaign, and it persists to this day. At this moment, the EPA is hopelessly politicized. In the wake of Carol Browner, it is probably better to shut it down and start over. What we need is a new organization much closer to the FDA. We need an organization that will be ruthless about acquiring verifiable results, that will fund identical research projects to more than one group, and that will make everybody in this field get honest fast.

Because in the end, science offers us the only way out of politics. And if we allow science to become politicized, then we are lost. We will enter the Internet version of the dark ages, an era of shifting fears and wild prejudices, transmitted to people who don’t know any better. That’s not a good future for the human race. That’s our past. So it’s time to abandon the religion of environmentalism, and return to the science of environmentalism, and base our public policy decisions firmly on that.

Thank you very much.

The post The Greatest Challenge Facing Mankind appeared first on The Big Picture.

My end of Summer, welcome to September, Labor Day morning reads:

• Is summer getting longer where you live? In recent decades, sweat-inducing temperatures have been arriving earlier and ending later in the year. An analysis of U.S. weather data shows which places are experiencing notably longer summer seasons than they were three decades ago. Temperatures are spiking to levels typically seen in June earlier than expected and lingering longer at the end of the season. (Washington Post)

• US Trading Partners ‘Dazed and Confused’ After Tariff Court Loss: A federal appeals court ruled that President Trump’s global tariffs were issued illegally under an emergency law, upholding a May ruling by the Court of International Trade. The ruling applies to Trump’s “Liberation Day” global tariffs and affects the extra levies on Mexico, China, and Canada, with a final ruling against the tariffs potentially upending Trump’s trade deals. gift article (Bloomberg) see also Bessent on Tariffs, Deficits and Embracing Trump’s Economic Plan: The US Treasury secretary has the ear of an impulsive president—and nervous investors worldwide hope it stays that way. An exclusive interview. (Bloomberg)

• Scrolling instead of working? YouTuber Hank Green’s new app wants to help: Can a smiley cartoon bean help you stay focused? Hank Green, one of the earliest and most influential online creators, hopes so. The app, called Focus Friend, features a smiling cartoon bean that encourages users to boost their productivity. (NBC News)

• AI ‘deadbots’ are persuasive — and researchers say they’re primed for monetization: AI avatars of deceased people — or “deadbots” — are showing up in new and unexpected contexts, including ones where they have the power to persuade. (NPR)

• Inside Bridgehampton, the Most Expensive Place to Buy a Home in New York: The Hamptons enclave draws well-to-do buyers to its sandy beaches, small-town charm and diverse housing stock. (Wall Street Journal) see also Can’t Afford a House? Try Baltic Avenue. It’s getting harder to become a homeowner. But in Monopoly, The Game of Life and The Sims, the rules are simple: Play your cards right, and you’ll get a house.(New York Times)

• The Glorious Future of the Book: It’s still the best data center of them all.  (The Honest Broker)

• Scientists can make an enormous difference in the world. Counting lives saved is difficult, but it can show us the great difference some people have made. (Our World In Data)

• One Universal Antiviral to Rule Them All? Taking inspiration from a rare mutation that makes people impervious to viral diseases, a Columbia researcher is developing a therapy that could bestow this superpower on the rest of us. (Columbia / Irving Medical Center) see also What Does It Take to Get Men to See a Doctor? Men in the United States live around five years less than women. One clinic is trying to persuade men that getting checked out could save their life. (New York Times)

• What brain surgery taught me about the fragile gift of consciousness: After the trauma of a high-risk medical procedure, Eric Markowitz discovered a kind of consciousness that lives not in thought — but in presence. (Big Think)

• The Cracks in America’s Rule of Law Are Getting Deeper: Court battles over the administration’s sweeping use of executive power are exposing limits on how much judges can constrain the presidency. (Bloomberg)

Be sure to check out our Masters in Business this week with Mark Zandi, chief economist of Moody’s Analytics, a subsidiary of Moody’s Corp. Dr. Zandi is a cofounder of Economy.com, which Moody’s purchased in 2005. He currently hosts the “Inside Economics” podcast.

 

Existing homes are now more expensive than new ones… That’s not normal.

Source: Sherwood

 

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The post 10 Labor Day Reads appeared first on The Big Picture.

Avert your eyes! My Sunday morning look at incompetency, corruption and policy failures:

• Powell Will Hang Separately: The Federal Reserve Has Already Failed its Duty to Lisa Cook and the Constitution (Notes On The Crises)

• Analysis: Mass Deportations Are Starting to Hurt Agriculture: Labor statistics and food prices now show early signs of negative economic impact, according to a new report. (Civil Eats) see also Wilted Lettuce. Rotten Strawberries. Here’s What Happens When You Round Up Farmworkers. Our farmworkers — eeliable, skilled and experienced labor force — is overwhelmingly made up of immigrants. An estimated 80% of farmworkers were born outside of the United States, and around half are undocumented. (New York Times)

• How the Richest People in America Avoid Paying Taxes: A clever new paper puts concrete numbers to the taxes paid by members of the Forbes 400. (The Atlantic)

• ETF Slop: How Wall Street Flooded the Market With Gimmick Funds: Wall Street has launched nearly 700 ETFs this year, but much of the boom is built on gimmicks. (ETF.com)

• The $140 Billion Failure We Don’t Talk About.  If the reconstruction of Lower Manhattan and the Marshall Plan are hailed as triumphs of American exceptionalism, then the response to Katrina belongs in a darker corner of U.S. history: the Afghanistan or Vietnam of rebuilding — painful, expensive and, ultimately, a failure. It is now a cautionary tale for every place in America that will one day face its own disaster. (New York Times) but see ‘Never seen before’: How Katrina set off an education revolution Twenty years after the hurricane, taking stock of the miracle in New Orleans schools. (Washington Post)

• An Industry Insider’s Changes at the E.P.A. Could Cost Taxpayers Billions: A Trump appointee has proposed rewriting a measure that requires companies to clean up “forever chemicals,” documents show. The new version would shift costs from polluters. (New York Times)

• The myths that made Putin’s war: The Alaska summit exposed the flawed history and personal vanity that fuel the conflict with Ukraine, argues Timothy Snyder.(Financial Times) see also Trump, Gabbard fired top CIA Russia expert days after Alaska summit: The CIA officer was due to take up a prestigious assignment in Europe approved by CIA Director John Ratcliffe. Instead, her security clearance was summarily revoked. (Washington Post)

• How vaccine misinformation led to an officer’s murder at the CDC: ‘In the face of danger … he ran into the fire’ black-and-white portrait of man in police uniform DeKalb county police officer David Rose. Illustration: Guardian Design/DeKalb County After a gunman reportedly deceived by anti-vaccine disinformation opened fire on the CDC and fatally shot David Rose, a community grieves as Trump officials remain silent. (The Guardian)

• Scams And Bribery Are Becoming the Foundation of Our Economy: It’s bad and you should be alarmed. (How Things Work)

• Trump just did the one thing the Supreme Court said he can’t do: Trump’s decision to fire Federal Reserve governor Lisa Cook is a test of the Republican justices’ submissiveness. (Vox) see also The Lisa Cook Case Could Be the Whole Ball Game: If the Supreme Court lets Trump replace Cook with a loyalist, he might soon achieve a full-blown takeover of the Federal Reserve. (The Atlantic)

Be sure to check out our Masters in Business this week with Mark Zandi, chief economist of Moody’s Analytics, a subsidiary of Moody’s Corp. Dr. Zandi is a cofounder of Economy.com, which Moody’s purchased in 2005. He currently hosts the “Inside Economics” podcast.

 

What a sudden change in consumer sentiment says about us

Source: Washington Post

 

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The weekend is here! Pour yourself a mug of Colombia Tolima Los Brasiles Peaberry Organic coffee, grab a seat outside, and get ready for our longer-form weekend reads:

• Citadel’s Ken Griffin on Markets, the Fed, and Building His Firm for the Next Century: His business handles one out of every four stock trades. Our deep dive into the Wall Street firm of the future. (Barron’s)

• The Happiest Place on Earth: I spent a week in Finland eating trees, swimming naked, and ordering room service in pursuit of its famous contentment. I wish I could unlearn the country’s secret. (Slate)

• The Global Car Reckoning Is Here. Far Too Many Auto Companies Don’t Have a Plan: How are the CEOs of Ford, BYD, Lamborghini, Polestar, and more planning to survive the hellscape that is the current automotive world? We asked them. (Wired)

• The Man Who Ate NASA: How NASA Engineered Its Own Decline: The agency once projected America’s loftiest ideals. Then it ceded its ambitions to Elon Musk. (The Atlantic)

• Why New York City Has a Fleet of New EVs From a Dead Carmaker: After EV startup Fisker went under, a leasing company bought $45 million worth of Ocean SUVs to rent them out to NYC ride-hailing drivers. What could go wrong? (CityLab)

• How the Domino’s pizza tracker conquered the business world: Transparency became Domino’s modus operandi. They aired ads in which Doyle and others issued mea culpas for their crummy pizza and released a documentary about revamping their recipe. They shared footage of people visiting the farms that grew Domino’s tomatoes. They used real photos sourced from customers – even of pies mangled during delivery. For the next decade, Domino’s stock rose like dough in an oven.  (The Hustle)

• ‘We are what we drive’: How car dealers became college football’s power brokers. There has always been a mystique around cars in college football. Before NIL, there were whispers, message-board postings and social media photos soft-pedaling accusations of underhanded dealings by boosters. Because of NIL, that’s changing. (ESPN)

• A.I. Is Coming for Culture: We’re used to algorithms guiding our choices. When machines can effortlessly generate the content we consume, though, what’s left for the human imagination? (New Yorker)

• NASA’s Juno Mission Leaves Stunning Legacy of Science at Jupiter: The Juno spacecraft has rewritten the story on Jupiter, the solar system’s undisputed heavyweight. (Scientific American)

• He’s big. He’s slow. And now he’s making stolen base history. What happened? Josh Naylor is one of the biggest, slowest players in Major League Baseball. And out of nowhere, he’s become one of the game’s most prolific base stealers. (New York Times)

Be sure to check out our Masters in Business this week with Mark Zandi, chief economist of Moody’s Analytics, a subsidiary of Moody’s Corp. Dr. Zandi is a cofounder of Economy.com, which Moody’s purchased in 2005. He currently hosts the “Inside Economics” podcast.

 

What is the richest country in the world in 2025?

Source: Economist

 

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This week, I speak with Mark Zandi, chief economist of Moody’s Analytics, a subsidiary of Moody’s Corp. Dr. Zandi is a cofounder of Economy.com, which Moody’s purchased in 2005. He currently hosts the “Inside Economics” podcast. We discusse the state of the US economy today.

A list of his favorite books is here; A transcript of our conversation is available here Monday.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Neal Katyal, former Acting Solicitor General of the United States, and currently partner at Milbank, LLP, and a member of the firm’s Litigation & Arbitration Group. A specilist in appellate and complex litigation, Katyal has argued 52 cases before the Supreme Court of the United States. His most recent argument in the D.C. Court of Appeals was VOS Selections vs, Trump, representing small busainess owners which seek to have the entirety of the Trump tariffs tossed out as unconstitutional. Katyal is the recipient of the highest civilian award given by the U.S. Department of Justice, the Edmund Randolph Award, (2011). Chief Justice of SCOTUS  appointed him to the Advisory Committee on Federal Appellate Rules.

 

 

Favorite Books

 

 

 

Books Barry Mentioned

 

 

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My end of Summer, 3-day weekend reads:

• Walmart and Other Retailers Have Eaten the Cost of Tariffs. Now It Is the Consumer’s Turn. While the last quarter’s sales were strong, price increases could be felt starting now. (Barron’s) see also No More Free Ride for Small-Dollar Parcels as Tariffs Kick In. After midnight last night, a tariff exemption for packages worth less than $800 comes to an end. So that gadget or bauble you ordered online is going to be subject to the duties Trump imposed previously on the country of origin and in some cases the component materials. (Bloomberg) see also Higher Prices Are Coming for Household Staples: Companies from Hormel to Ace Hardware forecast prices rising as the costs of Trump’s tariffs are passed on to consumers. (Wall Street Journal)

• Buffett’s Intangible Moats. Buffett’s long-term success is largely driven by systematic exposure to two key factors: Intangible Value and Quality. (Sparkline Capital)

• Disney and the Decline of America’s Middle Class. That middle class has so eroded in size and in purchasing power — and the wealth of our top earners has so exploded — that America’s most important market today is its affluent. As more companies tailor their offerings to the top, the experiences we once shared are increasingly differentiated by how much we have. (New York Times)

• FTAV Q&A: Claudia Sahm The economist behind the ‘Sahm Rule’ talks recession trade-offs and the future of the Fed as tensions with the Trump administration escalate. (FT Alphaville)

• Bigger dreams and the colossal effect of “power laws” Fund manager and writer John Candeto is on a mission to decode the hidden patterns that drive extraordinary outcomes. (Big Think)

• Why It’s Actually a Good Time to Buy a House, According to a Zillow Economist: Orphe Divounguy walks would-be homeowners through this confusing moment.(Bloomberg) see also It’s a great time to buy or sell a home (2006): In fact, its such a good time, that the National Association of Realtors decided they need to drop $40 million telling you so: (The Big Picture)

• Are We Approaching Peak Lobster? From the coasts of Maine to Chinese banquet halls, Greg Mercer’s The Lobster Trap traces a luxury food’s uncertain future. (Bloomberg)

• Simple chemistry helps explain the origin of life: Scientists have figured out how proteins may have been created on early Earth. (Washington Post)

• If You Must Play One Sport, Make It Tennis: The longer you play, the more it will do for your health. (The Atlantic) see also ‘Hash court’ and high drama: how weed became the US Open’s new distraction: Subway rumble, rowdy crowds, celebrity cameos – and now pot smoke. Tennis’s loudest major is rubbing up against New York’s shifting culture around marijuana. (The Guardian)

• Taylor Swift is entering her conservative era: The billionaire pop star now takes her bigger career risk — marriage. (Financial Times)

Be sure to check out our Masters in Business this week with Mark Zandi, chief economist of Moody’s Analytics, a subsidiary of Moody’s Corp. Dr. Zandi is a cofounder of Economy.com, which Moody’s purchased in 2005. He currently hosts the “Inside Economics” podcast.

 

AI Needs So Much Power, It’s Making Yours Worse

Source: Bloomberg

 

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