Why Michael Lewis is worried about the sports betting boom
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Today, I've got a special one for you. It is a conversation with author Michael Lewis about sports betting and Donald Trump and crypto. I'm pretty sure you know who Michael Lewis is because the people who listen to this podcast are a self-selecting group. Just in case, Michael Lewis has been a world-famous writer since 1989 when he wrote Liar's Poker about his time on Wall Street. You probably know that since then, he's written huge books that often turn into huge movies like Moneyball and The Blind Side and The Big Short.

And you also probably know that a couple of years ago, he came out with a biography of Sam Bankman Freed, which came out just as SPF was on trial for fraud. We talk about that one in this conversation near the end. You may not know that in the last few years, Michael Lewis has also become a podcaster. It comes for us all. His show is called Against the Rules. It's excellent. This new season is about the sports betting boom, and I highly recommend it. So let's start there with Michael Lewis.

Michael Lewis, delighted to have you on the podcast. Thank you for joining. Thanks for having me, Peter. I want to talk to you about a bunch of things, including crypto and Donald Trump and Steve Bannon and Sam Backman Freed, if we have time for all that. But first, I wanted to talk about this amazing podcast series, which I think you've wrapped up.

It's a new season of Against the Rules, and this season is focused on the sports betting boom and its effect on all of us, I guess. You've done a bunch of different topics for these sort of long-form reported podcast series. Why did you decide you wanted to focus on sports betting this time around? Kind of backed into it in a weird way. So the sort of conceit of the podcast, which is now in its fifth season, is...

that we pick a character in the arena, like it's a sports arena, and we just explore what's happened to the character. And it started with referees and went on to coaches and moved on to experts and thought, "What if we do the fan? And what's happening with the fan?" And then it was just blazingly obvious that the biggest thing that's happening with the fan is he's been turned into a gambler. And then we just started thinking, "Well, maybe

I mean, yes, it is about the fan, but it's actually about this experience the fan is being drenched in. And I thought when I started looking into it, I didn't have any particular animus. Like it now might sound like I came at it wanting to attack sports gambling. I really didn't. I thought, in fact, I wanted to kind of keep it light. I thought, I'm just going to see what this is.

And the more I learned, the more outraged I got. Although I hope it doesn't come across too much as outrage. But it was... Oh, you make it pretty clear that you are, at the end, not happy about the situation. Well, I do feel like I have a 17-year-old son. I need to defend him against this now. What the fuck is that? You know, it's like half his boys in his high school class are losing their, you know, their allowances to gray market sports gambling apps.

So when I saw what was happening, I thought it was so interesting because I hadn't paid it much attention. But of course, you can't, anybody who watches sports can't miss it all of a sudden. You know, every ad is for FanDuel or DraftKings and there are all these celebrities, very reminiscent of a crypto. And it's plugged into the broadcast now. It's plugged into the broadcast. That's right. They're telling you what the lines are and they just kind of encourage you to be a gambler.

And I just thought, you know, it wasn't that long ago when this was taboo in the sports world. A few years ago, ESPN was going to do a deal with, I think it was DraftKings for what was then called Fantasy Sports. And there was a lot of money was going to be involved. And they backed out at the last minute because Bob Iger didn't want to be associated with gambling.

Right. And you could- Bob Geiger now owns a gambling company. Right, right. And all these, all the heads of the sports leagues, it was like, you know, you get anywhere near gambling. And this is why there weren't supposed to be sports teams in Las Vegas. And now they are regarded as like the engine of growth and profit, these gambling companies and the gambling movement. And I just thought, so the thought that popped into my head in the very beginning was what we were dealing with was like an end of a prohibition.

And it was. There was a law that was overturned by the Supreme Court, essentially a sports gambling ban. It's a little simplistic. But it was overturned by the Supreme Court in 2018.

And almost instantly, not only did the law change, but the norms changed. And it was... And we were in an environment where there were already corporate interests that had a pretty good database of anybody who might like the sports gamble, and they were the fantasy sports companies. It was FanDuel and DraftKings. And...

It was as if at the end of liquor prohibition, alcohol prohibition, liquor companies had like a perfect register of anybody who might be prone to alcoholism and they could go over to their house and wave various bottles of liquor under their noses and see how they responded and see if they could get them addicted.

It was that much of a change and it felt that sinister. And I just kind of like, how did it happen? So we tell the story of how it happened and then we kind of explore some of the implications of it. And then in the end, I give my son $5,000 to go vaporize in the sports gambling markets just to see what happens. I do have a question for you about that later. We'll get to it.

I've written a bit about gaming mostly from the perspective of the media companies and how excited they were to have a new line of revenue coming in. But as it was being legalized, I would talk to the various companies and I would say, ask them two questions. First of all, what's the point of sports betting? Are you trying to legalize, are you trying to take the audience that was doing this illegally and just convert them? Or do you want to reach a new audience? And then when I talk to the sports leagues, I would say, are you going to sort of keep gambling sort of

out of my TV when I'm watching sports because I don't not against gambling, but I'm not really interested in you guys used to keep it out. And they were pretty consistent said, we're really going to do is take care of the illegal gamblers and make them legal gamblers. That's what we're most interested in. And we're going to keep this sort of clear. If you want to watch an NFL game and not worry about the line, you don't have to see that. And none of those things turned out to be true. Do you think they were bullshitting me from the beginning? Or do you think something changed?

i think they didn't know what they were going to be able to get away with i think i don't think i think they anticipated a resistance in the culture that just wasn't there i think they thought they would be you know a thousand bill bradley's who stood up and said this is this is you know antithetical to the values of sports this is i think so they they were they proceeded cautiously because they didn't know what resistance they were going to meet and then they rushed in and there was no resistance it was like you were about to fight a war and there there was no army on the other side

I think that's what happened. And they certainly aren't just converting people who were gambling anyway. I mean, there's revelation after revelation to me in this story. But there was a moment when I was talking to Charlie Baker, former governor of Massachusetts, who's now the head of the NCAA. He took the job like a year ago or so. And he did this thing when he got the job. He didn't know really what the job was or what the problems were. He went and did this listening tour. He ran around college campuses and talked to athletes and talked to athletic directors.

And it was like at the top of the list of concerns were every time I go play a basketball game, people are threatening me, conjoling me, asking me for tips. Everyone on campus is gambling. And it's affecting my life as an athlete. I mean, I'm afraid to go out my door if I don't meet my point and rebound totals kind of thing. And he saw the communications between the athletes and the on-campus gamblers. And he was shocked. And he commissioned a study.

And these numbers, whenever I say this number, I think this can't be true, but they stand by these numbers, the NCAA does, that 60% of the boys on college campuses are gambling on sports. 60%.

Now, I don't know if you remember college gambling on sports was like, I mean, it just was like not a thing. I don't know anyone. I'm sure somebody did it, but it was like not a thing. It is now so woven in to especially male college culture and so woven into male high school culture.

the sports gambling industry has cultivated an entirely new market. And then they say like, we're just beginning to see the social effects. I mean, there are studies showing like bankruptcies rise in places where sports gambling is introduced, savings rates collapse. What they will find soon, because they found it in England, the suicide rates will go up. And it's a kind of an

I'm not like I don't mind pleasure. I don't mind like doing bad things in moderation, but gambling on sports on your phone it's already an addictive device and the structure of the gambling markets are changing to kind of mimic the most the most addictive Casino games still slots. It's like in-game repetitive gambling starting to play slots then it's it's taking the shape of of an addictive the most addictive possible shape it could take and

That, you know, if 60% of the boys on college campuses are doing this, 6% of them are going to become addicts. You know, it's like there's a math and you're going to see really nasty side effects. And it's a peculiar kind of problem.

Because you don't see it until it's either like you see when someone starts shooting up heroin, you see it. This is kind of invisible. It's like this until they break, until they break. And that was one thing that kind of just shocked me. I didn't realize that was going on. But the other thing was, I didn't realize these markets are structured and that the companies had such good information and such ability to analyze your behavior that if you actually know what you're doing, if you are, if you are, if you are actually kind of a pro and you have an edge of any sort, you're

It takes like eight bets before you're not allowed to bet anymore. You're a bet to bet so little that it doesn't matter. This is something I had never heard of until I read Nate Silver's book earlier this year. And then you spend a lot of time on it. If you're if you're competent at gambling, they don't want you there in the casino on the phone. They will kick you out. They'll kick you. They'll really kick you out. And so there are there with the tobacco and think what they're doing. They're sort of sifting the population for people who do this badly or addictively and all letting only encouraging only them to do it.

And I was funny. I was on stage like three months ago. I was talking to an audience of not money managers, but people who, people who give their money to money managers. So it was like university endowment heads and heads of pension funds. And they asked me a question that I like, I didn't see coming. It was like, you have any advice for us? How do I identify someone who is a good money manager? And, or like how you would sift somebody, what questions would you ask the person? I said, you know,

FanDuel and DraftKings are kind of doing your work for you. Anybody who has got an account at good standing at FanDuel and DraftKings is almost by definition a bad financial decision maker. And you should never allow that person to manage your money. That you are sort of sifting the population for people who shouldn't be doing this.

And so ask like that first question she asked is like, do you have an account of FanDuel DraftKings? Do you like sports gambling? How do you do? I do pretty well. I'm a VIP. Never in a million years give that person your money. Thank you for your time. Thank you for your time. That's right. But it just feels, you know, I know that, you know, casinos throw people out when they count cards at the blackjack table. You could say, oh, that's just the same as this. It's not quite for a couple of reasons, I think.

I mean, it's similar, but not quite. One is...

It's like there's something different about counting from between county cards and actually figuring out something, something about sports that no one knows. Like the, all the research that goes into. Like you don't get kicked out of wall street when you get out of wall street. It feels like more wall, like wall street. This is wall street. And you're, it's like, it's as if the New York stock exchange would not accept your investment. If you actually knew if you were actually Warren Buffett, you know, it's that's what it feels like. And it feels like un-American somehow.

Anyway, I don't know why I found it so irksome because I don't find it terribly irksome that a casino throws out a card counter. I find this obnoxious. Well, it's pretty wild to think, to say, come win big, but if you do win big, don't come back. We only want losers in the house. You might luck out a couple of times, right? Yeah. As my son says, anybody can win, but everybody loses. It's not that you're not allowed to win. You're not allowed to make smart bets.

We'll be right back with Michael Lewis, but first a word from a sponsor.

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And we're back. You've touched on a couple of things I wanted to ask you about. One is this other obsession I have is the phones. And I keep waiting. You said exactly what I've written before. You're marrying an addictive property, an addictive thing, gambling to an addictive property. The phone seems like a disaster waiting to happen. And Google and Apple, giant companies,

conservative in lots of ways. You can't have a porn app on Apple. I don't think you can have one on Google. They're not really making meaningful money from gambling. You would think either for moral reasons or for legal ass covering reasons, they would say, we got to stop this. Of course, you can use our phone to gamble, but we're not going to allow apps. We're going to add friction to this. And whenever I've asked anyone about that, they give me a blank look and pretend like they can't understand what I'm saying.

Do you hear or see any movement that would sort of push the phone folks or anyone who could be a, could slow this down to actually slow this down? So I've heard what little I've seen or heard is just the opposite that I know Apple wants to have relationships with the sports leagues and the sports leagues wants that one Apple to offer, you know, make it easy for gambling. The Apple sports app shows, shows you the odds from the center. That's right. I think, I think they've all underestimated the,

the social consequences, like the bad things that are going to happen because of this. We're just getting going in this country. I mean, in Australia, it's a crisis. It's become a political issue. I think they, I think they think, oh, their model in their mind was as long as we police, we now have the, because of the, because of the technology, we maybe have a really superior ability than ever, better ability than ever to police the athletes that

that we can't, they'll know they're not going to get away with doing anything squirrelly in the game. So it won't compromise. But they're going to do it anyway. But, but yeah, but the, but they could, I'd see how they're, if you're sitting there and you're a commissioner of a league, you're thinking, well, we can actually kind of police the athletes in a way we couldn't before. So you don't have to worry about the integrity of the games.

And my model of the person who's sports betting is just like, you know, this guy's having some fun with a few bucks that he can afford to lose. That's a false model. It's like it is a model. It's one of them. But this thing is overrunning the culture. And I mean, I hate to go on about this, but among the things, a professional sports bettor, Matt Davidoff said this to me, among the things that's sort of disturbing, which doesn't, it's not a first order disturbance, kind of second order is that

He spent, David, I was a professional gambler. He has an eight-year-old son. His son watches the sports on TV and he's getting such a stupid idea of how you make financial decisions from these people. Like the idea that you can roll in and do a parlay and it's a smart, it's a smart idea. And he's spending time teaching his son. He never wanted to teach his son how to gamble at the age of eight. How, why not to do this?

But most people don't have that. They don't have Matt David out by their side to teach them what's dumb about this. So this leads me to my second thing I wanted to ask, which is a fake weak straw man argument.

There's lots of things that your kid can see on TV that aren't good for him. And he can watch Viagra ads. And by the way, I can legally buy booze and weed and all the fast food I want. And I can enjoy them all in moderation or I can make mistakes and get myself in a lot of trouble. And that's all on. It's my responsibility as the consumer to deal with that. Why is that not the case for you? Or do you think that's an appropriate way to look at gambling?

I would argue in the case of all products that are sold, they're kind of can be really bad for people. I think that if you frame it as, oh, just let anybody do what they want to do to sell these things and it's on the consumer to check their behavior, you could say that you're going to end up with a mess. You know, that you don't, you're not going to want the society that leads to. What you're going to want, what you want is, you know, how you frame the product.

I mean, just introducing some snags, making some friction into the process, making it a little more difficult to do, stops lots of bad things from happening. The world right now doesn't please junk food, but we do please heroin. And we tax the hell out of cigarettes. And we tax the hell out of cigarettes. Right. And we don't allow cigarette ads. I'm not saying ban sports gambling.

That's not what I in fact, I've got the podcast is not quite done I'm about to go lobby in Washington in it is it's kind of a stunt like no exam I listen to me, but it's like I want to hear with how Senators who are thinking about this are thinking about it and make some suggestions But seems to me no-brainer that you know get rid of the ads on TV Like why should you should be pushing people into it? Like that's crazy

make the apps a lot more transparent. So if you bet a parlay show that you have to show what the, the true odds are. You can't trick people into making stupider and stupider bets, or if they're going to do it, they're going to have to, you, they can see it. So they have a technology, uh,

And if you talk to regulators state by state, this thing is regulated state by state to the extent it's regulated. They tell you that one of the great things we thought about FanDuel and DraftKings and so on is that they have the technology to understand who's got a problem. You can watch the pattern of bets and you can identify the problem gambler. This is why we like them monitoring their gamblers.

What the companies have done instead is use that power to monitor the ones, figure out the ones who know what they're doing and get rid of them. They don't, they aren't doing, they aren't identifying the ones who are problem gamblers and, and sending them to counseling. But every time I listen to a podcast, someone speaks very quickly about promoting a, uh, and at the end they say, if you have a problem called this gambling, and then they list six States and yeah, mainly it's like people's wives calling this line. It's, but it's, it is a quick disclaimer at the end. That's right.

But you could actually put some of the responsibility on the companies to at least not mine addiction, at least not figure out who have the biggest problems and encourage the problem. Do you think there's any appetite to do this regulation? Yes, I do. Or do you think something catastrophic has to happen first? So it's interesting to ask, what would the catastrophe be? Because it would be a slow, probably a slow rolling thing unless, you know, a couple of senators' sons committed suicide. That's one thing that could happen.

Something like that might happen. The other thing that can happen is like just an explosion of integrity problems in sports. I don't know if you saw that, like the FBI is looking into Terry Rozier all of a sudden. I did see that. You did see that? And we talked to Larry Nance Jr.,

He was very forthcoming forward on the Atlanta Hawks said like, this is a no brainer. I can see it coming. Like guys are going to be getting in trouble, like in ways you just want to believe they're not. I know it seems he says, I know it seems millions, tens of millions, hundreds of millions of dollars at stake are willing to piss it away for, for stupid stuff. Yeah. And so that could be a source of,

the reform impulse. But I can already tell you, like Richard Blumenthal is introducing a bill. There is, I can't, I don't want to say his name because he hasn't outed himself, but I know there's a Republican House member who wants to introduce a bill. So there is some interest. And I think there's still probably interest

a reservoir of memory of like the purity of sports. I don't want to go too far about this, but it's like there was a reason why Bill Bradley, when he introduced his bill to prevent sports, to ban sports gambling outside of Vegas or places that already had it back in whatever it was, 1992, there was no opposition. Everybody just said, yeah, that makes a lot of sense to us. I mean, morals don't change that fast. I think

Yes, there's an appetite. What the triggering events would be, I have no, I can't predict, but you can imagine some weird stuff happening. And if I had to bet, I could be completely wrong about this.

But if I had to bet Roger Goodell and Adam Silver and Rob Manford, is he still ahead of him? Did he resign or still? I believe so. These are all the commissioners of the big sports. I'm not sure I'm based on this. If I had to bet this, some little part of every one of their minds thinking, oh shit, this is not going quite as we thought. This is a little out of control.

We thought it was going to be maybe a little more heavily regulated. But you think the genie can go back in the bottle, the horse can go back in the barn. I do. Oh, yeah. I mean, like with cigarettes. Like with cigarettes. I think that it can be treated like, you know, it's a vice. It should be heavily taxed. It's bad for people. It should be harder to do.

I mean, there was never a delivery mechanism for cigarettes as efficient as the phone is for delivering the gambling apps. It's like there's two, the world has created less and less friction for the behavior when what it needs is more and more. But so I just think like there are things like that could happen. And another interesting character we talked to, the state regulator who is just insane.

overwhelmed and bewildered by how badly behaved the biggest companies are. How, how like, what was the state regulator in Ohio? The guy, he knows like they have the talk, no one under 21. Don't, you're not allowed to peddle this hard to, to, to young people kind of thing. And,

And his son is like a teenager. And with his takeout pizza, he gets a free bet from FanDuel or DraftKings. And he gets, he looks and goes like, what is going, you know, I'm the regulator of this and they're sending my son solicitations to gamble. It's just like the regulars have not got teeth yet. That it's because of the way it crept into, because it was the federal ban was eliminated and then states could be allowed to legalize it. 38 or whatever have done so.

It was legalized. The way it was framed was this is a great source of revenue for states. States can tax it. And that hasn't panned out either. It hasn't panned out either, but there is some revenue and it is new revenue and new revenues. And they think that maybe it will get bigger. And so because it was framed as we're in partnership with these businesses, no one wanted to put brakes on them. But I think that's the next thing that happens. And it may take a couple, two or three years.

Let me ask you this, because it's an act of the imagination. What do you think, assuming some events come along that aren't just academic studies showing suicide rates going up and bankruptcies going up, they're anecdotes that are vivid in the public mind.

I think it has to be fentanyl level stuff. Yeah. Where upper middle class white people are befalling great tragedy. There you go. I think that's right. I think that's right. You don't think it comes out of the sports of corruption of sports. I mean, it seems to me the leagues are going to...

just kick the shit out of anyone. I mean, they've been very clear about banning anyone who comes near this. Now, Sho Hayabitani is the closest to a superstar, but it was supposedly his translator who was doing it. I think they'll rein that in. I think it's got to be, like you said, a congressman's son or something like that. But who knows? Speaking of sons, I did want to ask you that you do this great stunt in the podcast where you give your 17-year-old son $5,000 to gamble so he can learn a lesson. I

He's 17. So he can't, he's not supposed to gamble. He's in California. He's not supposed to gamble. I thought they prevented that. I thought they had geo, geo fencing, Michael, that prevented you from doing. And then I saw you were in the, in the, in the show, he's doing it from Paris at the Olympics. Yeah. Yeah. And he's betting on the Olympics while we're sitting in the Olympics. Yeah.

I was told that when they legalized gambling in New Jersey but not New York, that I could not. I couldn't gamble until I got halfway across the GW Bridge and the geofencing would kick in and then I could do it. So what am I missing? You're missing the gray market apps that it's complicated and I don't fully understand how they pull this off. But half the boys in his class use an app called Fliff.

and it's not FanDuel or DraftKings, and they call it sweepstakes betting. And somehow you put your money in and they turn it into something called flip dollars or flip cash, and you're betting flip cash, but then you can turn the flip cash back into dollars and take it out. So it looks, the app looks just like a gambling app. But anyway, I wondered this too. I didn't know. I was not paying much attention. He just said like, oh, half the boys in my class are gambling. And he was saying like, how hard could it be kind of thing. Guys are winning. All the things that a 17 year old boy would say.

And so I said, okay, here's five grand with a friend. I had him put a wire on him so I could listen to their conversations. Go do it. I don't want to know how you're doing it. Just go do what you can do. It took him a nanosecond to have the five grand out of my account into his Fliff account and betting. So it did not even occur to him that there'd be any kind of trouble. Like all his friends knew how to do it. So he just asked a friend, how do I open my account? And he opened his account.

What did irritate him is it was true that FanDuel and DraftKings have sufficiently good geofencing that he couldn't open an account in California with them. And I have a FanDuel account just to see how it works. And it is true that when I roll into California with it, they won't let me bet. But if I get to other states that it's legal, I can bet.

And I don't know about overseas. It's a good question because he was doing this in Paris and nobody stopped him. He was putting in... I know, I know, I know. But they were... So they were... It was... I wanted... So I was quite serious about this. It was a stunt, but I did feel...

Like everything I tell him he doesn't listen to but if I show him that if I am if he humiliates himself by losing all this money After thinking he knows what he does that we could start to have a conversation I'd pay five grand for the writer to have the conversation about why why you are making Nate These are all negative expected value bets. What is a negative? What is a positive expected value bet? What is a negative? Why they don't want to offer you poverty positive how markets work and

How like the market price has lots of information in it and you're unlikely to know something the market doesn't. All those conversations. I thought I was paying five grand for that. I did not expect him to go win $4,000. I did not. What happened? The stories, I don't want to blow the podcast for the listener, but it was funny how it all turned out.

Now, do you think when he goes off to college and he's out of your watchful eye that he's right back to sports betting? No, he actually was kind of cool. Not only did he win, he realized how stupid it was. Because they came so close. He tells you that now. Yeah, but I think... But he's living in your house. No, I think it's... No, no, no. I think he's quite...

He's quite, he learned that like they didn't know what they were doing. They almost lost it all. They had moments of panic. They lucked out and got back to even and made some money. And he thinks, God, we just lucked. We don't know. We don't know. He was wrong enough.

and couldn't explain why he was wrong, that it was a really good experience. Now, I've been told, I didn't need to be told, I could guess, that the inoculation method is not a smart way to deal with kids and addictive substances. Like, don't give him a bottle of whiskey so that he can learn not to drink. And don't give him a pack of cigarettes. My uncle gave me a cigar when I was in like 10 years.

They're great. And then I nearly vomited and I learned a lesson. It was great. So that was the thing. Like you catch a kid smoking, you make them smoke a box of cigarettes and then they never want to smoke again.

I think there have been... I don't know this. I think there have been studies showing that that actually is not a good idea. However, we did get some... I didn't pay much attention to it, but we got a paper sent to us after the episode aired from an academic in the UK who had studied attempts to inoculate children with gambling. And he showed that it had worked. Now...

I don't know. I don't know what to make of that. Just another study. But that made me feel a little less bad as a parent. So there were two stunts that we performed. That was one of them. The other was we had a professional gambler who knew what he was doing, who's not able to get his bets down because everybody knows he knows what he's doing. And he hires these mules. He has all these people like his mom, his aunt, a network of people who do nothing. Go place this bet for me. Yes, that's right. Go place this bet for me.

And he gave our producer, I don't know how much money it was in the end, but it was like 150 or $200,000. And she had to have a little piece of it for it to be legal. She freaked out, but she was like throwing around tens of thousands of dollars. And we learned just watching the response of all the sports gambling apps to her because she was making only smart sports bets. Not to say winning ones, but like positive expected value bets.

it took a nanosecond for like FanDuel and DraftKings to say, sorry, you can't bet here. It was amazing. And she was someone with, you know, she was a,

young woman with no interest in sports or gambling and There was no reason to think anything about her bets, but they looked at the best if drought immediately immediately They were so good. It was it was really kind of impressive I don't think you can see it's hard to sneak around as a smorgasbord if you're gonna be if you actually know what you're doing the only way that you you you maintain I think accounts and good standing with those apps as you start by making intentionally stupid bets and

and that you distract them with some losses and some dumb bets so that they kind of don't pay attention to you. But it's not a long-term strategy. Yeah.

So anyway, it's a riveting market. And I got to say, I, I, and it's a riveting social phenomenon. And I just find, I don't know about you, but I do find when I get excited about a subject, it's, it's when there's a subject that's like under your nose, you turn on the TV and that's all you see is sports gambling ads, but there's nothing about it. Like where did this come from? It's the best subject. It's just the best subject. It's a great podcast. I can't encourage people to listen to it enough. So I hope they will. Thanks.

We'll be right back with Michael Lewis, but first a word from a sponsor.

And we're back. I did want to ask you about regulation in a different way. I've been thinking about your book, The Fifth Risk, up here, the last few weeks. Because the book, The Fifth Risk, you wrote in 2018, chronicling... Well, you're doing two things. One, chronicling Donald Trump and his cohort's attempt to sort of destroy the federal government. And you're really making a case for why the federal government is a good thing by highlighting several people doing good work. I

I'm wondering, having gone through that experience, what you're what you make of the newest round of the Trump, the new Trump administration, really trying to do the same thing, supposedly with more efficiency and more vigor. Right. So I'm not I'm really not a fan of my own hot takes. So I'm watching, you know, we're now whatever, a couple of weeks into this. And I want to watch for a while. There are obvious things to say. Here's an obvious thing to say.

And obviously to say is the first time around Trump won and the fifth risk, it was kind of a comedy. It was kind of comedy because it's pretty clear he didn't think he was going to win when he got into it. And it sort of like got out of control. And it was the dog caught the car. And what does a dog do? And then he turns to Chris Christie, fires the transition team, turns to Chris Christie and says, we don't need to learn anything about the federal government. It's so simple. It'll take us an hour to do it.

And the fact that he had gotten rid of any mechanism for learning about it and that there was this course that the Obama administration had prepared for whoever was going to win to teach them about what happened inside the transportation department, the most of which is not political. I just thought, this is funny. I can run around and get the briefings and know more than the entire Trump administration knows about the executive branch that they're supposed to be running. I thought it was funny.

I know it's not just funny, but I thought it was funny. It was a funny premise.

So I wasn't all that worked up about it because it was more neglect. I know they had some malignant intention, but it felt more like neglect. Like they just didn't even know what they were doing. I mean, Donald Trump is very uninterested in most of government. Yeah, I don't think he's like, I hate government. I don't think he's a libertarian. There were a lot of people around him who said, oh, we're going to use this opportunity to kill the baby in the bathwater like we've always wanted. And that didn't work as well as they would have expected. That's right. Now, this time around...

Because Trump has twisted it up in his head that the federal government exists solely to attack Donald Trump, that he sees it as an instrument that has been weaponized against him.

rightly or wrongly, that's how he sees it clearly. And I mean, I think he, if you asked him what went on in the agriculture department, he'd say, oh, those people probably like the deep state and they're figuring out ways to subvert me. You know, that it's, I think he's got that kind of mindset about it. And he's not a learner, but the people around him have learned.

And he's now animated. He cares enough. I think he just didn't care at all before. It's like, who gives a shit about the federal government? And, you know, as we've seen, I mean, they've been preparing for this moment for some time. Yeah. But it's like people with different agenda want different things. And I think Donald Trump can deliver the things. I mean, the, you know, the Heritage Foundation wants one thing. Steve Bannon wants another thing.

the various people who are occupying the various agencies. Elon Musk, what? Well, it's a whole separate thing, right? Depending on what day it is. Yeah, depending on what day it is. So now it feels less like comedy. I could change my mind about it. Now it feels like, oh, they're going to actually do some pretty effective damage.

But, I mean, this is a big but. It's not like the federal government's perfect. It's been really neglected. And it is... There's screwed up incentives in it. And there's a lot of waste. There is waste. Especially in, like, the way procurements are done. And it's like... But not only they're looking in... I don't think they know... So I think they...

I'm not opposed to someone coming in and trying to reform the federal government, figuring out better ways to manage. Most presidents do. Most presidents do. They come in and say, oh, we're going to fix this waste and we're going to have efficiency and we're going to solve the $400 toilet seat. Yes. And you know, if I were to measure, it's very hard. You know, it gets boring very quickly and you start to not pay attention to what they actually did and you can't figure out whether they made it any better or worse. But the one metric I would pay attention to if someone was coming in with a sincere desire to make this place work better.

is volume of smart young people who want to work there. It's like... It's a huge problem that the aging of the federal workforce and the disinterest of young people in replacing the old people. And the whole thing needs to be refreshed. I would look at that. But what they're doing instead is demonizing the federal workforce, making it an even less attractive place to work, not paying a whole lot of attention to critical functions. And, you know...

It's not fair to say, no wonder planes are crashing over Reagan Airport. But that is what's going to happen. They are essentially upping the risk of lots of bad things happening. Because if you look at what the federal government does broadly, I mean, like its big mission is keeping us safe. And that means preventing lots of stuff. And it's very hard. You don't get paid to prevent things.

Right. And you've got a whole chapter on the Department of Energy and, you know, who is this? Who is the senator from Texas who was going to get rid of it and then ended up running? It couldn't tell you what it does. And most people think it has something to do with energy. And it's mostly about tracking down nukes and nuclear weapons. It's they manage our nuclear stockpile. And he said the minute Rick Perry saw what it is like, I'm really sorry. I said I wanted to eliminate it.

But it's like, that should be disqualifying. If you're running for president and you say shit like that, like, I'm going to get rid of the Department of Energy, and you have no idea what's in the Department of Energy, that should be disqualifying. We're long past disqualifying. I know, we really are. We're at the point where anything negative you want to say about the federal government is an applause line.

And and that's got to change. I don't know how it's going to change, but that's got to change. You I mean, the book is really structured around just a sort of a series of kind of classic Michael Lewis heroes. Like here's someone you've never heard of. They've done this amazing thing, mostly unheralded. I'm going to tell you about them. Was there one character that's.

most striking to you? I mean, you're really sort of making the case for government. So it's funny. I didn't set out to do that. I just set out to get the briefings. And it was just like, it was pretty innocent. Like what the hell does go on inside of the energy department? You just made Rick Perry the head of it and he doesn't know what's in it. I just would like to know what's in it.

Because none of my neighbors know what's in it. That was that simple. So it starts out being less focused on the people, like there weren't big, bold characters exactly, and more focused on the function. And the more I was kicking around the place, the more interested I got in the people. And so I'd say the first real character I drew is in the afterword of the paperback. And there's a whole other book that's coming. I got it right here. Here's the galley.

Who is government? This is the follow on and it's me and six other writers who parachuted into the federal government just found people. You're doing this with the Washington Post, right? We did. It's a series of the Washington Post. Not all of the stuff in here that didn't appear in the Washington Post. Like I wrote a whole another 10,000 word piece at the end, but Art Allen. So this is the, this is the story. I got to the paper a year after the fifth wrist came out, had to do something because the publisher wants something new in the paperback and

It was the moment of the Trump government shutdown. So they'd furloughed all these people and deemed them unnecessary and sent them home without pay. And I just got a list of the thousands of government employees who were then currently furloughed who had been nominated for some award. So someone had thought that what they did was good. And I just picked, it was alphabetized. I picked the name at the top of the list. His name was Arthur A. Allen. And I call him up.

What do you do? I want to learn about it. I know I told him I was writing about him, but stick a pin in that. So he says he's leaving. I fly across country to Connecticut where he's furloughed at home. He's the only oceanographer in the Coast Guard Search and Rescue Division. And he has devoted his life. He's been there like 35 years. And there's a pretty moving moment where he watches a wife and child die.

get lost and die because the Coast Guard couldn't figure out how their capsized boat drifted because different objects at sea drift differently. They didn't know where to look for them. They didn't know where to look for them.

So he sets out and makes a career of figuring out how objects drift 150 different objects he tosses them in the Long Island Sound he he writes equations showing how like an inner tube is different from a boat versus naked person in the water Enabling the postcard Coast Guard to predict they know someone got in trouble at point A and it's ten hours later where they'll be where point B is and go right there and

And it was like a miracle, the effect of his work. Like people being plucked out of the ocean who'd fallen off of cruise ships, you know, eight hours after they'd fallen off of cruise ships and like never would have been found otherwise. So anyway, it's just a moving character portrait of him. It's the first time I really draw one of these guys, people as characters. When I was done with him, I spent three days with him.

I went to his old office. I interviewed his wife and his kids. I mean, it was really kind of immersive. I'm driving back to the airport and he calls my cell phone and he says, hey, you're a writer.

And I said, yeah. He said, my son just told me, like he said, like you're big time. Like some of the movies, you have books, you've written books and they can turn into movies. And I said, yeah. And he said, wow, you're going to write about this? And I said, yeah. Why did you think I was there? I spent three days with you. And he said, I just thought you were really interested in how objects drift. Yeah.

And so this, to me, is the federal... It's like this federal expert. The federal government is filled with this expertise. And these people are so narrow. And they're so unaware of themselves as characters. And so unaware, like... They're so tunnel-visioned that they don't look up and think, oh, I'm a story. Or I need to call my PR person. It was just like, sure, I'll teach you how objects drift. And it was...

I mean, he was bewildered that I was going to write about him. And I swear to God, that story, I think that story is one of the best things I ever wrote. And it's, and, and so I was so taken by that, that I thought, shit,

They must, I know there are thousands of these people in the federal government. I'm going to get six writers I really admire, let them go find each, find them. And took everybody a second to find their subject. And it was true. It's like, they're the amazing stories of people who are there for a reason. They're very mission driven. The mission is something the market's not going to do. Only the government's going to do it if it's going to be done at all. And only the United States government is going to do it in many cases. And those people are interesting people.

All my adult life, I've heard the government in general demonized, federal government demonized. You know, it's usually from the right, but it's kind of pervasive and everyone has a bad run in with someone from the IRS or Social Security or whatever it is, or the post office, whatever it is. It seems like we are farther apart.

more deeply set against government and federal government workers than we've ever been. You know, Elon Musk is literally in the White House trying to get them fired and Silicon Valley is ascendant and everyone's pro-regulation cuts and pro- and privatizing as much stuff as possible.

Do you think we're just going to be on that trajectory forever? Do you think there's a pendulum shift at some point and we suddenly become more interested in government? The moment we face a serious existential threat, there will be a pendulum there. The moment the safety of upper middle class white Americans is really called into question, there'll be a pendulum shift.

I thought a pandemic would do it. Well, that's what I think about a lot is we went through this and we came out way dumber than we started. Rich people's kids weren't threatened. In fact, they said rich people's kids had to miss school. And I used to be blasé about that. I'm less blasé about it now.

But I thought, oh, all of a sudden a bunch of rich people I knew were worried about educational loss among minorities. I'm like, you've never once talked about this before, but now you're suddenly. But so they've come out of it saying, oh, our lesson we learned is federal government's terrible or worse. Anthony Fauci's a fascist. It seems like our lesson was to trust the government even less. That's right. That's right. That's right. In that case, it wasn't sufficiently threatening. H5N1 could do it because it kills kids.

and would kill kids if it gets into people. So I think that it's that. It's like the minute it gets serious and real, everybody turns to the government. They do it all the time. You know, the most government-hating people, when their region is wiped out by floods or fire or whatever, they're, "Oh, where is the government?" And so I think that the society as a whole, if it feels the threat, they could be a pendulum swing. But it is true. You know, it's funny. I'm not a politician.

I assume people who are politicians are pretty shrewd that it's a pretty efficient marketplace. I mean, as much, and that's saying a lot, but it's efficient ish marketplace. And then if there was a big market for people standing up and selling the government and they would get, that they could get elected doing it. And they don't, I don't think the market must market must not be there right now, but that market could change.

Yeah, and sometimes the market's not so efficient. I know that, too. I know. Speaking of which, crypto is back. Trump is back. Crypto is back. Last spring, even as Trump was ascending, I noticed, oh, my, all the crypto prices are back to where they were in the bubble a couple years ago. They were in a crash, and they're back. Now they're higher than ever, and Trump became a Bitcoin evangelist somehow last year. Yeah.

You've been around many bubbles. Do you assume this is another bubble and another cycle and it will go back to zero or not zero, but it'll fall back down again? Yes. Or do you think it sticks around? Your answer is yes. You think we become less interested in crypto again? Yes, I think we become less interested in crypto again. I don't know exactly how it happens, but it is impressive.

the social buy-in with Bitcoin in particular. But, you know, it's sort of like a solution in search of a problem. It's a little unclear what it's for, except as a speculative instrument. And so it feels like

a lot of hot air and it's going to, it's that I would not, I would not buy it, but I wouldn't short it because it's like, it's a religion. Like what's, what's going to happen with Christianity? Scientology. Can you predict the future of Scientology? Same question. I'm not short either of those. I would not. Yeah. So, but, but what I find when I, there are things I want to ask you a question because I have a question that nobody's been able to answer. It's about Trump and crypto. It's, it's pretty simple question, but I, I've just not seen the answer. So he, he creates his own coin, Trump coin.

He mints a billion of them. I think that's right. Keeps $800 million for himself. Sells $200 million to the public at $10 a coin. I've seen two numbers, 7 and 10, but let's say 10 to keep the math simple. That's $2 billion. What's been reported in the press is that he's made a few millions of dollars in transaction fees.

I don't understand who gets the $2 billion then. I assume he does. That someone, the $2 billion that were paid, that were used to buy the first $200 million of coin went from the people who bought the coin to someone. And so it's a $2 billion transaction, not a several million dollar. And I can't figure out where it went. I don't...

Do you know? No, I don't know. I'm not going to bullshit an answer. But I mean, I do have the same question about that as I have about True Social, which is how does he get his money out without crashing the thing? And maybe the answer is, sure, it crashes. But if he can take out a big chunk of it.

Yeah. Or even a medium. By the way, he's like, he's got, he just extracted $22 million out of Meta and $15 million out of Disney. And meanwhile, he's in theory got billions from crypto. You would think he didn't have time to shake down the biggest media and tech companies in the world, but he's doing that. I think he likes any and all money. So if he could just escape with a sliver of it, he'd be happy. But $2 billion is not a trivial sum of money. No, no. And for him, it's probably more than he's ever had, really. And it's...

it's a huge sum of money and it's somewhere. I want to know where it is. And, uh, and I haven't, I thought that's the story and I just need to, I need, I,

Fortunately, I've been kind of like stuck in my house for three weeks and I had a chance to go out and report. But I really do want to, it's like someone needs to explain. I think one way to follow, to write about the Trump administration now is just follow the money. It's like figure out what the financial angles are everywhere and ignore ideology, ignore everything. Just think, what are the narrow financial things that are going on? And I mean, the nice thing about that, and nice is in quotes, is it's incredible. So much of it is incredibly transparent. Yeah. Yeah.

There's no, well, it's going to be in an offshore account or who knows how our, you know, who's actually financing the Trump Tower in Dubai or wherever he's doing it. You can just see a lot of this right out in the open. Yep.

Before I let you go, your last book was about crypto and Sam Backman Freed. More about Sam Backman Freed than crypto, but yes. And it came out as Freed was going on trial. And you did a book tour. And you got an enormous amount of grief for that book, more than I think I've ever seen you receive for any of your other stuff. And you seem kind of bewildered by a lot of the criticism. And I'm wondering now, a year, two years later, a year and a half later, if you've rethought. Is there any...

Is there anything you would have done over or would have done differently with that book? Did any other criticism stick with you? No, I, it was, it was, I, I, the, there's nothing horrible about him that I left out of the book. And I did actually write a long afterward for the paperback about the response to the book. I love the book. I knew that when I wrote the book, it was going to piss people off because they'd already formed their opinion of him. I think he's a much more interesting character than just a thief. And, uh,

And I never thought he was innocent. That's crazy. It's sort of like nature of the guilt is more the question. What is he guilty of? So the response I got, it was, it was all over the map. Book sold great. So whatever the response was, it was fine. But, and it's been read. But the response that usually that I worry about is, and this isn't just with that book, with all the books is,

I'm drawing a kind of pretty intimate portrait of someone. I mean, any of these books, Billy Bean and Moneyball, the big short characters, Tooey Family and the Blind Side, whatever it is. When the book comes out, lots of people who really know that person are going to read that book. People who work with them, people who hate them and people who love them, but people who knew him in high school, all that.

If, if what I hear from them is, oh, you didn't get him. Like you missed this. That would scare me. What I got from, from the Sam Bankman Freed world, not his parents, but his parents haven't read, won't refuse to read the book, I think. But from, from the people who were at FTX, many of whom had every reason to despise him. The people who suffered the most in all of this were FTX employees, right?

was universally kind of like, that's him. I recognize this person. So that's my job. Now, if people don't want to think that's that person because they've got some picture in their head of financial criminal, I can't do much about that. And I always thought right from the... I mean, when it all fell... I mean, I didn't start writing it until he was in jail. But I always thought...

This was more comedy than tragedy. It was sort of like a comedy with a tragic ending. Yeah, it was that kind of thing. It was a weird mixture of genres. And I so enjoyed the character. I still enjoy the character. I think he's a fabulous literary character.

That enjoyment definitely put people off, some people off. But that enjoyment- They felt that you were easy on them or you were letting them off the hook. Yeah, all that. But that enjoyment is why the book will be read in 20 years. That's why it will live. If I just wrote a stupid screed appeal to the people who wanted to burn him at the stake, it would have died on the vine. So there was no other way to write it. And it's the true way. I'm very happy with it. I love it.

I think time is going to change people's view of the event. Already it is a bit. Like people get very nervous with the fact that everybody's getting their money back with interest. Like, I mean, that's a complicated story, but it makes everybody uncomfortable because the model was he took $10 billion and 10 people lost $10 billion. It's like the bank robber took the money and then kind of gave it back. Yeah. More or less. Still robbed the bank. Or he took all his money and he blew it on like hookers and blow or whatever they thought he did.

What he did is he blew it on Anthropic. You know, it was more complicated than that. And I think his vice, I say this in the afterword, he does have vices. He has one particular vice that's terrifying that I was aware of before it all blew up. It's the vice of the person who offers to give you a ride.

And then hits the gas it goes a hundred miles an hour with blind with a blindfold that you he takes you on a ride You really weren't didn't want that ride It's easy he subjects you to risk that you did not agree to be subjected to and he did this in every aspect of his life And he didn't he did it to he did it to the depositors of FTX They didn't agree to have their deposits put into anthropic. It turned it worked out But that was not the deal

He went to the casino and came back with more money. That's right. That's right. So I mean, I don't think I mean, a lot of smart people read this book and say, I don't I read it and I don't find him innocent. I think I can now understand why he did what he did. Like he had this this cuckoo kind of moral.

infrastructure that excuse the behavior. But I do think 25 years is excessive. I think it's kind of crazy to put him in jail for 25 years, especially like the middle of his life. And if Trump ends up pardoning him,

After a few years, I think that's about right. He seems like the wrong guy for Trump to pardon, but I'm done predicting Donald Trump. You know what? The only way, when I think about, yeah, I agree, he's the wrong guy for Trump to pardon. If you're just thinking like you or I would think, if we were sinister people just...

Thinking of it in a very narrow way like he was never my friend. He was my enemy with Democrats Within Trump circle who don't like him however if what you're trying to maximize is the Your dominance of the news cycle like you're just creating trying to create distract story after story distraction after distraction It's a pretty fun distraction. It's like it's like I'll even let this guy out because the because I hate that judge

I can imagine him doing it. I don't think he'll do it. Michael Lewis, this has been a delight. Everyone should go listen to the podcast. And when you go write that Donald Trump crypto article, where will we see it? Bloomberg? TBD? If I write it, it's going to be part of a book. I'm trying to figure out what the book is. Okay. You'll come back and talk to us then. Thank you, Michael. Thank you, Peter. Bye-bye. Thank you to Michael Lewis. Prior to this taping, I told Michael that he may have influenced me more than any other writer.

So that was a real thrill for me. I tried not to overpraise him during the conversation itself because that would seem unseemly. I hope I succeeded. Anyway, it's a special treat. I recommend, if you can, get your own podcast and then interview your heroes. Sometimes it can work. Thanks again, Jelani Carter, who edits and produces this show. To our advertisers who bring it to you for free.

Thanks to you guys for listening. Of course, we've got a bunch of fun stuff coming up in the near future, including a trip to Austin for South by Southwest. Maybe I will see you there.