Deep Dive
Shownotes Transcript
Hello and welcome to the TLDR podcast, a show about the culture, gossip, and business of money. And this week, it's intern season.
My name is Devin Friedman. I am here with my co-hosts and a special guest. Matt Karras is the director of product for Well Simple. Matt, it's a big day for you. Almost a big day for me. I'm getting married tomorrow. But don't you have your rehearsal dinner tonight? Yes. Do you know what you're having for dessert tonight? This is just like a quiz to see if you actually even know what's happening at your own wedding. I do know. I was given a fact sheet. I was also given a presentation with people
people's photos and their names so that I can remember them. You need one of those succession people, like assistants walking around with you that's just like whispering in your ear. It's like, this is Priscilla. She's your aunt. Yeah, exactly. Sarah Rieger is the markets and business correspondent for the TLDR newsletter. Sarah, you look like you're in a different location today.
I am. Can I use this moment for a PSA? Yeah. If you're going away and ask someone to house it, please do not turn off your hot water. It's bad for your hot water tank. It's also bad for the person who really wants to shower. Maybe they just want you to do cold plunges because it's healthy for you. I'm not...
built for cold plunges. We have a special guest with us this week. Rudy Adler is one of the co-founders of Wealthsimple and a man who's never stopped making fun of me because I wore a jean jacket in 2019. Rudy Adler, how are you? I'm good. I'm wearing a jean jacket right now in your honor.
We have an excellent show for you this week. We're going to talk about the state of the crypto market. We're going to talk about whether we can afford to have pets anymore. We're going to talk about what we can learn from Wall Street's intern season.
And we're going to get to that by asking a very simple question. Rudy, who's making or losing money that's interesting to you right now? Bitcoin's doing pretty well right now. Yeah, very well since you told me to buy it and I didn't. I've been telling you to buy Bitcoin since, what, 2015-ish? Maybe. I'm waiting for the right time, Rudy. Yeah. It's going to be any time.
Okay, you are on the show because you're something of an expert in the world of crypto. You are one of the co-founders of Wealthsimple and also helped build the Wealthsimple crypto platform.
But you're also just like a person who genuinely cares about crypto, believes in it. Yeah. So, yeah, I'm going to say it probably a couple of times, but like this is a speculative asset. We're going to talk about this as, you know, a concept and a question of what the future is going to look like. But we are not giving anyone investment advice here.
How did you start caring about crypto? Yeah, I mean, I wouldn't call myself a crypto expert, but I was told about Bitcoin in 2013 by an employee in my first startup. And at the time, Bitcoin was trading around $80. Uh-huh.
And I bought a little bit, but let's say about like three Bitcoin for $80. Also context, I'm living in San Francisco, which is like the techno-optimist capital of the world. And people kind of just believe that these crazy ideas...
can succeed. But the reason why everyone in the technology community at the time was interested in it is because Bitcoin solved a mathematical problem called the double-spend problem.
And basically, it was a way to send a digital something over the internet, and a sender would lose ownership of whatever was being sent, and the person who received it would gain ownership. So if you think about, I'll date myself a little bit, but if like, Devin, if I sent you an MP3 back in the day, like a
killer song, I would have a copy of that MP3 and you would have a copy of that MP3. So that doesn't work very well for money. But once you solve the double spend problem, then you can actually apply money digitally to that. And that was a very intriguing idea back then. As someone who's known you for a while...
There was a time where you got truly obsessed with crypto. And I want to say it was like around 2020, where it became like, this is the thing I want to work on. And when I would talk to you about it, you had like a whole set of ideas about what crypto was going to do in the world and how it could reorganize and change finance and the way people do business and the way nations operate and everything.
the distribution of wealth. And I guess my question is, given that since then there was a crash and now there's sort of like a reemergence, the green shoots of the scene are sort of coming back. Do you have the same set of beliefs and optimism about what it can do now that you did then? There have been so many crashes of, you know, I mean, I guess like 2021 was a pretty public, but
There's even a website that categorizes all the times that the media has called Bitcoin dead. I think it was like 500 citations at this point.
It's a very volatile asset, but I think the main use case really is the same. And I think your opinion of it will change depending on who you listen to. So for example, if you are in the investment community, those people tend to see Bitcoin as an investment vehicle primarily. So that's why you have Warren Buffett calling it rat poison. And that's why you have Jamie Dimon who hates it because it's kind of like a threat to his business.
But if you're in the technology community, it's actually a technology. You have people like Marc Andreessen who call internet money rails. And technology has been a little bit slow to hit the financial banking world because it's so heavily regulated. But I think you're starting to see that change. And I think you're starting to see the inevitable, which is when technology breakthrough happens,
It just has a way of taking over. Just so people understand what you mean, when you say it's, you know, digital money rails, what are rails? So, I mean, I would talk about crypto in three buckets. There's Bitcoin, stablecoins, and then there's everything else. So I think your question refers specifically to stablecoins, right?
And it's just infrastructure that enables fast, global, low-cost payments. And it's just a better way to send money. So for people who don't know what a stablecoin is, can you explain it quickly? Yeah, I mean, it's basically a digital currency. It could be on any number of blockchains, but it is pegged to a fiat currency. So it's like a one-to-one currency.
I think the most popular stablecoin is USDC, the equivalent of one-to-one with a US dollar. I can exchange one stablecoin for $1 if I want to. Yes. This is just an easier-to-use digital version of USD than the ones that you use through your banks or credit card providers. Yes. And I think you're going to hear a lot more about stablecoins in the future because the US is about to pass stablecoin legislation that
You have companies like Stripe who are now getting into stablecoins. And I believe that if you just look at monthly...
transaction volume, I believe stablecoin transactions now exceed Visa and MasterCard transactions combined. Yeah, I saw that stat too. And this morning, I actually noticed that the Wall Street Journal published an article about Amazon and Walmart exploring accepting stablecoins for purchases they're either issued by themselves or other stablecoins in order to avoid the 3% credit card fees that they have to eat in their prices. And
I think Shopify also just added it as a payment option as well. So, Rudy, the reason I like talking to you about this stuff is that you have relationships with people who are working on interesting stuff in this world. What's different about what people are working on now versus a few years ago? I mean, I listen to people talk about
the latest stuff with crypto. Like, you know, a lot of people talk about crypto is going to be a check on AI because in a world of AI, you don't know what the truth is and the blockchain can be used as a source of truth. For me, the boring stuff is the real stuff. The boring stuff being Bitcoin as a store of value outside of government control. It is the one currency, I guess, outside of gold, maybe arguably, that cannot be manipulated by a central bank.
That is an insanely useful and valuable use case. Stablecoins, very interesting to me. That is really, really boring. But for somebody who's been following this stuff for over a decade,
We're now seeing an environment where you're getting a lot of regulatory clarity, you're seeing institutions adopt it, you're seeing governments embrace it. And so for me, the most interesting thing that's happening right now is just that the boring stuff that people have been talking about that usually doesn't get the headlines, but that stuff is really unstoppable at this point.
And that is going to continue to happen. I will end this segment by saying we're not giving anyone investment advice. Obviously, I think this stuff is really important to understand and to sort of see a theory about how the world could change and technology could emerge. But, you know, do your homework and invest in whatever you believe in. Can I say one more thing?
We're recording this the day after there was an attack between Israel and Iran, and you saw gold spike and Bitcoin dropped with the market. It's interesting to watch that because it really is not behaving like gold yet. It does trade like a risk asset. But I would
Bet you that over time, as more of the Bitcoin gets mined and the volatility decreases, I do think you're going to see a shift. I don't know when this will happen. It could be a decade away. It could be two decades away. It's going to start trading as a safe haven asset, which I think will further...
make its way into people's portfolios. Not financial advice, but... Yeah, you know, this is just one take. There are lots of countertakes out there. Just ask Jamie Dimon what he thinks. Do any of you guys know how Bitcoin works? No. No.
Sarah Rieger, you are up. Who is making or losing money right now that walks on four legs? Well, I did think this would be kind of a fun segment talking about pets, but actually I feel like I'm starting with the hugest downer, which is that pet owners are really struggling to afford vet care right now.
I literally thought you were going to say, like, I'm starting a huge downer because my cat died this morning or something. See, now I'm happy. You're right. We have to start with something sad and then be like, but my cat's fine. So we've actually covered this before. You know, there are just some areas of the economy where, like, inflation is so insane that it's gotten, like, a step function harder. Like, you know, like auto insurance, homeowners insurance.
And apparently owning a cat? Is that right? Yeah, and surveys often show pet owners are willing to spend a ton of money on their pets more than they'd spend on themselves. But this new study came out from Gallup and PetSmart last week that showed that half of pet owners in Canada have skipped a vet visit or declined recommended care last year. And the majority said it was due to affordability issues.
How much more expensive has it gotten to take care of a pet? And does it point toward anything interesting in the economy in general that it would help us understand? Yeah, so it has gotten a lot more expensive. According to the Competition Bureau, the average dog owner is spending more than $4,000 a year at the vet, and the average cat owner is spending more than $2,800 a year.
Wait, how much per year? The average dog owner spends more than $4,000 a year at the vet. Wow, I am not a good dog owner. This year I spent probably $700 and I'm like, I don't know. I don't know if it's worth it, Norman. But remember, that's an average too. So if your dog is pretty healthy, hopefully it's a cheaper year for you. But those trusts have really outpaced inflation. One of the reasons for that is veterinary fees aren't set in Canada the same way medical fees are. So they can really vary across providers, across provinces.
In 2019, Canadians spent about $4 billion on vet care. And in 2023, that hit $9.3 billion. The prices for procedures have been rising between 6% and 10% annually for the last few years, where the average inflation rate has been just over 3%. Why is the inflation higher for vets than for other stuff? Well...
I think like a lot of stuff in Canada, it is a competition issue. CBC Marketplace looked into the rising costs earlier this year. And before 2010, almost all vet clinics in Canada were independently owned. And now more than half of emergency pet hospitals and 20% of clinics are owned by just six major international corporations. And that's not to say like that's the only issue. There is a shortage of vets in Canada. More people have gotten pets.
Since the pandemic, there's more demand and some specific costs like specialty pet food have gone up. But it's also true that there's way fewer independent vets than there used to be. So it's another monopoly problem in part. Yeah. And what CBC found is that these corporate clinics were quietly using something they called a creative pricing model to basically hide that they were hiking prices for consumers. I like that. We're charging higher prices because we're being creative. It's quite the phrasing, hey? Yeah.
So I guess my other question is like, is this indicative of something bigger in the economy? I think it's indicative of so many issues in Canada's economy, right? Like unchecked consolidation, lack of competition leading to fewer choices.
That's really leading to worse services, fewer options, and higher prices for consumers. And it's hard to say what could really be done about it. You know, like there's the possibility of introducing price caps, more regulation, stuff like telemedicine, sliding steel treatments. But also, I think it's just something people should be aware of if they have pets that costs have really jumped dramatically in the last few years. I don't know if you think your pet might need...
I guess like dental services, you might want to set aside a few hundred or even a few thousand bucks for that if you can. Sarah, you've inspired me to go get Norman top of the line dental care before it gets too expensive. Do it up for Norman. Give him that shining smile. What is it you want? I'm here to negotiate the race. All right, Matthew, you are up. Who is making or losing money that is interesting to you?
On the eve of your nuptials. So I was walking around Midtown Manhattan earlier this week, and I was struck by how many kids were walking around in suits and branded gym bags.
And I was like wondering to myself, like, what is going on? Is there like a convention or something like that? And then I realized, no, it is summer intern season on Wall Street. And these kids are walking around with their branded totes because they are making a lot of money. So when you first said that, you're like, I saw a lot of kids walking around in suits. And I imagine like a Wes Anderson, like 210-year-olds. I mean, some of them did look like they were 10. I mean, like a nerdy 10. They were pretty young looking. And I like...
you know, went to my group chat and just started making jokes about it with my friends. And one of my friends asked me, like, do you know just how much money those people are making? I was like, no, I don't know that. And he started sending me screenshots of different amounts that interns were making. And it's like $20,000 a month.
$19,000 a month. And these are all like with a signing bonus. And so I was thinking about something like, wow, these like kids, like these people look like they should still be in high school, you know, are walking away from a summer with like 60, $70,000 USD. And then if they're like even close to reasonable, they're going to get a job again. And I can't even imagine what they're making. You know, obviously it suggests that there is a stiff competition out there for the best and brightest. Yeah.
And I'm wondering which parts of finance are willing to pay that much money to get the best and the brightest. So one of the reasons I actually find the topic of Wall Street internships exciting and interesting is that it's actually a good window into who is willing to pay the most for talent. And so like in the 90s and early 2000s, it was the big banks. Then post-crisis,
You had some banks still hiring, but also these big private equity funds like Bain Capital had a big internship program. Right now, it is the multi-strategy hedge funds. So we had a little bit of debate on this on the group chat, but it seems like the hottest job in town right now is being an intern for Citadel, Ken Griffin's
$60, $70 billion hedge fund. Brennan, the fact checker for the show, and I actually looked up some stats on the internship, and Citadel reported that their class of 300 interns comes from a pool of over 100,000 candidates. And so they actually had a 0.4% acceptance rate. Wait, how many interns does Citadel have? 300. And 100,000 people applied for it?
110,000, yeah. That's insane. But let me backtrack one second. For people who don't know what a multi-strategy hedge fund is, let me see if I can explain it. You talk about them a lot on this show. I know, but you can't assume that people have listened to any given episode, Matthew. So basically, the old idea of a hedge fund is you have one genius person who sits at the top and decides what they're doing and what the idea is behind the hedge fund idea.
And then you have a bunch of people who are executing that or pitching ideas to the boss and the boss approves or not. The multi-strategy hedge fund is I'm the boss and my job is picking a bunch of people who have interesting ideas about how to invest money. They all go and run their own mini hedge fund. The ones who make money
You keep. And it's as if by the invisible hand that you make mountains and mountains of money for yourself and your family. And none of you for five generations will ever have to work again. Did I get it right? Yeah.
It was good. Okay, so that's a great one. What else? I mean, it's mostly those. Like, you go down the list, you got, like, James Street, which is Citadel, but, like, a little bit more quantitative. You know, you got Millennium, D. Shaw, which started as a, like, macro-quant hedge fund. My former employer, Bridgewater, apparently, is paying a lot to their interns. I guess the question is, like...
Why do you need to pay an intern that much money? Like, what's the business sense for that? The main reason that these funds, you know, have internships is that, like, they think this is a great talent acquisition mechanism. Like, you know, you be the first person to give one of these kids a job, and because people are risk-averse and make relationships at the places they work, it's much more likely that if you can hook them while they're young, they'll stick with you over time. Okay, so that's my other question, is, like,
What kinds of people get hired for these jobs? You know, is it someone who's like just generally super smart? Is it someone with specialized knowledge? Is it so-called credentialists? You know, you're actually talking about like pretty impressive people. Like these are the top 0.5% of technical talent from the major universities around the world.
whether it's, you know, MIT, Stanford, Harvard, Princeton, Oxford and Cambridge, Waterloo, or even University of Singapore. You know, usually these kids have backgrounds in math and computer science. Citadel likes to boast that dozens of their 300 interns this year won medals in the computing and math Olympiads around the world. It is interesting that, like, I wonder...
If, you know, these big funds can stay this successful by just relying on these kids that they track right out of school, because a lot of the people that founded them had like much more diverse backgrounds. And I sort of think that like it's that kind of diversity of experience that lets you have, you know, real insight. Give me a quick example of someone with a diverse background. The clearest one is Jim Simons, who was a codebreaker and philist.
physicist and then applied that to markets in a way that, you know, allowed him to have the single most successful hedge fund of all time. Right. You're bringing different experience from the world rather than having been secreted away from Princeton and stuffed in a closet in Westport, Connecticut. Yeah, exactly. What was your skill? Why did they hire you? I have no idea. It must have been nepotism. Oh,
I also had an internship on Wall Street when I was in college. Really? Where did you have an internship? I was an intern on the New York Stock Exchange trading desk at Solomon Smith Barney. Oh, wow. In 2000? I don't know. The only thing that really stands out is that my boss, his personality was so angry. Anytime he picked up the phone, he would slam it down. And I sat right next to him, so I had to hear the phone slam.
50 times a day. And that drove me insane. And I just was like, I'm out of here. Well, so one guy I know who's a big credit trader, I was actually interviewing to work for him. And he picked me up in the lobby and we went upstairs to his desk. And he was just holding a golf club, swinging it around the entire time. It was just so intimidating. We're done with our episode. Sarah Rieger, tell the people what they learned.
Unsurprising, that last one.
That is it for this week. Thank you all for listening. The show is sponsored by Wealthsimple. It is made by me, Devin Friedman, Matt Keres, and Sarah Rieger, with Mathilde Erfolino, Leah Fetter, and Jared Sullivan. Help from Eva Cruz and Juanita Leong. Research and fact-checking by Brennan Doherty. Theme music by Andy Huckvale. And engineering by Emma Munger. Special thanks this week to Rudy Adler.
The TLDR podcast is offered by Wealthsimple Media Incorporated and is for informational purposes only. The content in the TLDR podcast is not investment advice, a recommendation to buy or sell assets or securities, and does not represent the views of Wealthsimple Financial Corporation or any of its other subsidiaries or affiliates. Wealthsimple Media Incorporated does not endorse any third-party views referencing this content. More information at wealthsimple.com slash TLDR.