Short-seller Carson Block: a fugitive CEO, Libyan spies, and $50B fraud

Speaker A: Hello, fellow daters. M. My guest today is Carson Block. Carson is the founder of Muddy Waters Research, the defining activist short selling firms. In the last decade and a half, since 2010, Muddy Waters has published forensic research exposing accounting fraud at publicly traded companies across China, Europe, US and has been right enough times that 11 companies have been delisted as a result. Which is a pretty awesome accomplishment actually. Carson, welcome to Summation.

Speaker B: Yeah, thanks Oren. Good to see you. And uh, yeah, I'm glad to be here.

Speaker A: There's a point where you first smell something is wrong about a company. You have some sort of inkling, maybe you don't have proof yet or whatever, but you have some sort of inkling from like there to like when you actually publish something. Like walk us through how that works. Like, is it. Are you guys like, I feel like you're kind of like Sherlock Holmes where you're wearing like the Sherlock Holmes hat, you've got the monocle and the pipe and you're going through all the clues and everything. Or walk, walk us through how it works in general.

Speaker B: It's. I think the process is a lot less sexy than people think from the outside. I do also want to clarify that, you know, today I think companies that we believe are committing fraud. Right, and that's really a legal question. That's maybe only 20 to 25% of what we, of what we write on or what we deal with. I think the world's much bigger problem is gray zone conduct where probably from a legal perspective, or let's talk about the letter of the law, these companies are within the letter of the law or it's a close call, it's going

Speaker A: to be like round tripping or categorizing expenses slightly differently or.

Speaker B: Right, capitalizing expenses.

Speaker A: Ah.

Speaker B: But in terms of the spirit of the law, they're massively violating it. So to me, look, I know that from perspective of an activist short seller, if we can use the F word, fraud, people pay more attention. But in reality, you don't have to be across that line legally to massively manipulate your financial statements. And so it's kind of one of my frustrations with the world is that people in their minds have this, you know, this hard barrier. Well, uh, it's not a fraud, therefore, you know, I don't care. But anyway, but the process ends up being similar. So the first thing is to understand is that if we were a typical, you know, we, we are a hedge fund management company. So Muddy Waters llc, which owns Muddy Waters Research, has an affiliate, Muddy Waters Capital that Manages outside funds. So, so if we were a typical hedge fund that uh, was going long short and we're trying to short dodgy companies, you know, uh, say the, the bar to get, you know, if you're group of reasonably skeptical people sitting around the table trying to decide whether a company is you know, like decent short because it's scammy, which we could later go into this if you want but those are often the worst shorts unless you are going to publish on them. But you know, in the old days, pre global financial crisis, those were companies you would want to short. So if that were basically what we were trying to do, we can usually get there in two to three weeks which I think is probably the same as one of your tiger cubs that actually I think still short companies like these for some reason or some of the other funds. For us though to bring something to market, the bar is a lot higher because we're not trying to talk to other short sellers. I mean if anything we don't want other people shorting stock. We're trying to communicate to the long holders. And so the bar that you have to clear as a long short hedge fund manager to deter, to decide to short something because you think it's problematic. Company with dodgy financials, the bar to the bar you have to clear to convince long holders that there's a problem. I mean that bar would be at least 30ft if we're, you know, if we're going to try to think of this in terms of distances and the problem there, you know, there's always a psychological problem with this, right? Which is when you're telling some, see, we have to avoid trying to make people on the other end, the long holders feel stupid, right? Because what we're basically saying is like look, in a normal environment you're fine, right? You're, you're, you make your investment decisions based on the information that the company presents. And in the world that we're in which we're supposed to live, the company is not trying to hide the ball from you. But in this case they are hiding the ball. And here's what's really going on and we want to, you know, we want to avoid this coming off to the long holders as know, haha, you're stupid, we're smart as opposed to, you're not to blame, right? Like these guys have been hiding the ball. Our specialty, you know, like don't come to me if you want, you know, like to ask me like what the best, you know, stock to own in xyz Is all right, because that's not what I do. What I do is I look at what companies really managements are doing and I look to see whether they're manipulating information. Now you've asked about Indisha.

Speaker A: So what does indicia mean? I'm, I'm not, I'm, uh, maybe not smart enough to know what. What is that? What is that? I've never heard that word.

Speaker B: Yeah, so it's I guess the Latin form of indicators. Yeah. Or at least a Latin ending. I, um, only took one year of Latin I, but I, you know, like people think I studied it to, you know, to the present day. So, okay, we're looking for, we're looking for indicators. Now maybe, maybe my highest level of I, you know, there's something to do here is when I can say these are our kind of guys. Okay? So like our kind of guys level, that's often related party transactions, right? Where they're like buying and selling assets to the public company and then they'll, you know, oh, we've got independent valuations performed and like, you know, those are always just total bull, right? Like these quote, independent valuations, the my kind of guys indicators are often related party transactions. But then, you know, I'd say lower, lower levels. You also have to think about what is the company trying to accomplish. Okay. So in a way this is a pretty, you know, this is, this is an iterative process. So if you're looking at a company that has a significant debt load and it's. Its credit rating is triple B minus, that's the bottom rung of investment grade. Okay. There's a big difference to a lot of these companies. If they were to get downgraded and be high yield, uh, high yield credit issuers.

Speaker A: So they're going to do everything possible to stay above that line. And sometimes they might be doing things that are a little bit questionable.

Speaker B: Right. But you have to look at what metrics they would be most likely to manipulate at that point. So the key credit metric is usually the leverage ratio. So that's your, your net debt, you know, so debt minus cash divided by ebitda. So they, are they messing with ebitda, Right? Like what could they be doing to play around with that? So we really want to try to deconstruct that and find out if there are any ambiguities into how they're booking things. So a great example of that, you know, French company, I mean this was a huge fight. I, um, mean the French government launched an investigation, you know, cost us, you know, a Few million dollars to deal with this. They ultimately walked away, they ultimately indicted and convicted the CEO on the other side. But what this company was doing, um, it was like a Walmart or a Carre for it's called Group Casino and it owned a bunch of its real estate. And so what it decided to do when it got into trouble, it decided to sell its real estate and lease it back. And so this is the type of, this doesn't rise necessarily to our kind of guys level, but this is something that's a really interesting type of transaction that goes on all over the world in different industries, like the cell phone tower industry, for example, with companies that are especially at that triple B minus tier where they say, okay, you're a financial buyer, you will buy this real estate from me, I will lease it back to you, and if I'm going to pay a higher lease rate to you, you'll pay me more to buy it. Right. So it's basically this, you know, it's this recursive or perfectly correlated relationship. And so what Casino was doing was casino was agreeing to pay really high lease rates and they would get, they would get high purchase prices and they would book the gain on sale of this property as operating income and boost the ebitda.

Speaker A: They're selling an asset. So you have an asset that they bought for $1 million, are selling for 2 million and they're booking that as income.

Speaker B: Yeah, well, and even better, even better, they depreciated it over the years. And look, this is one of these things where this is gray zone, right? Like their auditor was well aware of it. They were audited by Deloitte. Now when we, you know, when we talked to each other in the office, we said, look, this, we think this is fraud, but there will never be a conviction based on fraud because they've got the auditor who's like, look, this is a big audit client, they're paying us fees. And we certainly don't want to ever position ourselves to France Inc. As unreasonable auditors, you know, the kind who argue with management. So you know, we can, we can let this one go. Our lawyers talk to their lawyers and you know, the uh, whatever. So basically that's, you know, so that, that, that's a typical kind of gray zone. But in that case they were, that,

Speaker A: you know, the CEO was convicted of something else or of that.

Speaker B: He was convicted of stock manipulation. Yeah, that had to do with engineering a short squeeze later on. So, because when you guys, I mean

Speaker A: like when you're going short on a company like the company has a lot of reasons to go after you specifically. Right. You, Carson, and also Muddy Waters and say, okay, these are the bad guys. They're trying to deflect. So obviously you might be wrong. So you might be saying something that isn't true. And then, then maybe it's legitimate to go after you, but you also might be right. They might know that you're right, and then they want to try to deflect the, uh, the, the press to go after you as like the bad guy, the villain. Right? Yeah.

Speaker B: So the tem kind of funny because you've seen the evolution of what the crisis communication firms are selling to these companies over the years. So initially it was kind of like this mad lib, right, where blank is a, uh, short seller. They are trying to drive the stock price into the ground. We are audited by Blank Big four, and our financial statements are comport with all laws. And then what they would do is they would basically take, you know, uh, they would take questions they wish they'd been asked. Well, I mean, actually questions that weren't asked. They would create them out of thin air. So I mean, this is an exaggeration here, but, you know, for example, if you said, you know, oh, we observed the company's blue delivery van, they'd say, you know, muddy Waters accuses us of having a blue delivery van. Wrong, our delivery van is purple. And, you know, it's like, that wasn't the point. But, you know, the reality is most people are too lazy to actually read our report. And so, you know, they can. These companies have this advantage of being able to reframe what you're saying in ways that they think are advantageous. So that's, that's the way they used to do it. But the problem that created for them was when they did have to answer something substantive. So of course, if they avoided answering anything substantive, then the short activist says, these are the, you know, these are the, you know, eight questions that they did not answer. And you frame them very crisply. You explain what possible answers they could give and why each answer matters to investors. And at this point, you really want investors to read this. So you're trying to write this no more than three pages, basically. So then if the company feels backed into the corner, maybe they try to answer one of these questions. And that's often where they screw up. So they'll mislead or they'll lie. And then we use the short. Activists would hang them out to dry.

Speaker A: They try to do too hand wavy and people see through it or right it. Whenever this is true for anyone trying to, um, you know, when they get a hard question, a politician or other types of things as well, you either have to like attack the question and attack the questioner or you're faced with the hard question. And then sometimes people can answer and sometimes they can't.

Speaker B: I guess one of the things that's changed over the years is, you know, and look, I really blame policy response to the GFC being way too long. I mean, we're in. A lot of people like me lament that right now in the market and policymakers try to define the outcomes as opposed to letting markets have losers as well as winners. And so the net effect of this or one of the effects of this is that people don't want truthful information anymore. It used to be that on the long side you were remunerated as an investor in part for trying to assess risk and risk of management kind of bamboozling you as an investor. And that's gone out the window. I mean, it's really this lie to me culture. Investors don't care in many cases on the long side about the quality of information. They want the information to be positive. And so look, uh, this business that I'm in has changed a lot over the years. And it doesn't mean that it's an impossible business because the flip side of that is that these behaviors that were really egregious and that had pretty much been confined to the micro cap world. Well, with the inflation of market caps, you find my kind of guys having some companies that are running companies that are much larger in market cap and more liquid. So our universe grows. But also the, I guess the degree to which people are inured to being messed with by managements, that increases more or less every year as well. So in the push pull of these dynamics, maybe this business is somewhat harder than it used to be when I started doing it. But I, uh, wouldn't say it's infinitely harder.

Speaker A: We have scenarios where you see these things with companies maybe have good margins. There's maybe an AI narrative like how does that change

Speaker B: the game? When a company is clearly unmoored from reality in terms of valuations and it's caught up in hype, we generally try to stay away from it.

Speaker A: If it's a meme stock, it doesn't matter. You can't short it right.

Speaker B: For a lot of these things, even the less sophisticated market participants understand, you know, to some extent, like there was this circular financing and AI and they don't care Right. Like that's, I mean, what are you going to tell them that they can't know? I think there's occasionally, I think there is ultimately space for, or there's opportunity for going in and saying, look, this is not a real, you know, AI or EV or whatever company, but you have to, there's a supply and demand dynamic that you have to be attuned to. Right. So when the supply of, you know, me too companies gets to be a certain level, that's when you pull the trigger. So if we go back to early 2021, right? So starting in the, you know, November, December of 2020, if you look at the mo, like Goldman Sachs's Most Shorted Companies index that ripped, I think was up like something like 50, 70% in December 2020, end of January 21, GameStop happens and that squeeze. And at that moment in time, early February, all these people are asking me, oh, Carson, are you going out of business? I didn't think so, but I didn't really have any proof. But it turns out that we had just passed that moment. That was the tipping point. So, um, another short activist firm, Hindenburg, uh, Research, ended up publishing, I think, on Clover Health. And it was weird because they actually weren't shorted. So I think they were so concerned about the dynamics in the market. Um, I, I don't know what the real reason they didn't actually have any risk on was, but they published this short report saying we're not actually short, but otherwise this reads exactly like a short report on Clover Health, which had been a spac and it was really effective. And so that was the signal that, like, okay, activist short sellers, like, it's okay to get back in the water now. We published a few weeks later on a fake EV company called XL Fleet. And you know, so then. And then 2021 for activist short sellers was a great year. And so if you were looking, you know, people who look just at The S&P 500 index, I mean, the S and P was up in 21, but it, you know, cracked in 22 on the rate hikes. That's not really our universe as activist short sellers. So 21 ended up being a great year. So, you know, now might be a little too early to say this is a fake AI company and that's a fake AI company, but that, that's coming very soon.

Speaker A: That's important. Like bubbles. Bubbles pop in general. And when bubbles pop, they. I would assume that the fake companies will pop faster, but maybe that's not true. I don't know. Yes. I mean in the world we're living in, it's hard to know.

Speaker B: So normally that's true. The only thing that could uh, be different in this case is just because of this is entirely different direction. But it's how passive has warped the capital markets. So you have this virtuous cycle within the S&P 500 index and the Nasdaq 100, but where the largest companies in that index just benefit from these flows and those flows shrink the floats, you know, shrink constrain the supply. And if they turbocharge that with stock buybacks, then you just get this virtuous cycle. But the day those flows go neutral or go in reverse, boom. So I mean, Google has a long way to fall on that day, even though it's a real company. Clearly.

Speaker A: Probably one of my favorite books I read over the last few years was Money Men on Wirecard by Dan mcrum. And I just love the book because it was both a cool mystery and a spy thriller and all the other kind of things. But uh, how does it come out like that? I mean the fraud apparently went on for like 20 years. Like that seems like a long time. It also seems like so stressful for the fraudsters. Like they have to complete. They have to have all these plates spinning all the time. Like how were they able to do something like that for that long?

Speaker B: Some portion of this is particular to Germany or, or maybe we'd say other European countries.

Speaker A: And the Germany SEC did seem like they were doing everything possible to, to do the opposite of what you would think the uh, an SEC should do, which is they seem like they were trying to cover up for them and not look and all these other types of things.

Speaker B: Yeah, so that was, that's that organization. The acronym is Boffin B A fin. And um, look around the same time. And this received much less publicity because Wirecard was going on. But you know, we were. I was actually apparently close to being indicted in Germany in 2017 criminally because we had published in 2016 on a media company called Strower. So Strower had been a billboard company. And then they realized like, hey, if we start buying a bunch of quote, digital companies, you know, we can, you know, we'll get this growth narrative and you know, people get excited and, and look, I, I mean there was definitely a lot of gray zone stuff there. There were things that we again, m suspected could legally be called fraud, but you know, we didn't have the proof of that. But anyway, you know, Germany was. Germany hates public critics of Its companies. And so just like it, uh, actually went after the short sellers and Wirecard and the journalists for the ft. Again, um, this was more below the radar because the stuff started going on with, you know, with Wirecard that was really high profile. But yeah, the prosecutor was going to apparently indict me over our disclaimer. And the irony is we had that disclaimer lawyered by these excellent lawyers in Germany. I mean, I remember saying before all this happened, like these are probably the most thorough but non useless lawyers I've ever dealt with. I mean I used to be a lawyer myself so. And I'm a professional litigant, you know, effectively now, so, so I can appreciate that. But they were just so desperate, right to, to try to persecute critics. And that was held open, you know, I mean I think the guy was trying to shake me down at the end of the day for 25, 50,000 Euro settlement. Like I think I could have made this thing go away years earlier. But that guy kept it open until 2022 before formally closing it.

Speaker A: By the way.

Speaker B: Good thing.

Speaker A: No invocations in Germany. So you don't have to go there though. Was there a red notice on you like where you did you have to not even go to France or something?

Speaker B: So the prosecutor kept holding open that possibility. Every time my lawyers talked to him, he'd say something like, well, you know, you know, I assume you've advised your client not to travel to Europe or what have you. And so I did not leave the United States for five years. And at the, when this started, there was that situation with those Volkswagen, uh, executives who'd been pulled off that flight. They were changing planes in Miami, coming back from uh, South America. You know, this was over the diesel emissions, uh, cheating scam. So they were pulled off the plane and prosecuted here. So that was going on in the background, you know, and, but I kept thinking to myself, well, you know, what if I got to be bottled up in a country, I'd much rather be an American than a German. Because you know, Germany, it's just not that many places, you know, I mean I could be in Hawaii in the US or the mountains. So that persisted till 22. So with Wirecard, I mean the state was really protecting wirecard because it had grown nominally into this large bank for a while.

Speaker A: It was the number two tech company in Germany after SAP. In terms of market cap, I think they got to like a $50 billion market cap at one point.

Speaker B: Yeah, there was that. And look, they'd actually proposed, you know, Angela Merkel, when she was chancellor, went over to China and actually lobbied, you know, it's a foreign ministry or, you know, or Xi Jinping himself, but, you know, actually lobbied to have one of the large Chinese policy banks acquire Wirecard. But the denouement that I don't think was in the book Money man, which is incredible. So the CEO of wirecard, Jan Marsalek, he fled to, he fled to I think Belarus and then to Russia. But this guy was actually sounds like a gru, maybe even officer. I mean if not, he was definitely an asset. But he had this plan where he wanted, you know, while he was at Wirecard, he was trying to control the flow of refugees from Africa into Europe. Literally, like, you cannot make this up. You're like, wow, I thought you were just pulling the stock scam and you were processing payments for, you know, money launderers.

Speaker A: And I'm so excited for the movie. Like it's going to be such a good movie when they, when they make a great movie about Wirecard, I think

Speaker B: they did make a movie about it. But the problem is like this happened in Europe, it was reported by the ft. So in America there's not a lot of knowledge of that. This thing called Wirecard happens.

Speaker A: I mean, didn't they like pay people, like beat up some of the short sellers? Like, didn't they like punch somebody in the face at some point?

Speaker B: One of the early activist short sellers who was out there on this, that guy has a problem with the truth himself, you know, so like they're. He told multiple versions of the same story and I think probably none of them are true, but they're. But then, but one thing that Wirecard did was it did hire. So ultimately there's just so many layers of this that are amazing. But what happens to spur the investigation, the manipulation investigation into the Financial Times journalists was that the FT started running this series on it, um, on Wirecard and showing that it was a fraud. In early 2019 and in the aftermath of the GFC, the authority had been created for, um, European countries for their, for their market regulator to suspend trading in a stock. Now they had suspend, they would suspend trading in, you know, in various countries. Suspend short selling, sorry, to suspend short selling stocks. This power had never been exercised once since the GFC with respect to a particular stock.

Speaker A: Oh, so it was like it was going to say like a basket, like you can't short sell like the top basket of something because they're worried about that. Not a, uh, not a specific stock.

Speaker B: It had never been exercised with respect to a single stock. But then in 2019, Boffin said, okay, we're suspending all short selling of Wirecard. And, you know, we're investigating this for manipulation. And we're investigating the reporters and what, what had happened was Jan Marsalik, you know, they've been getting these questions from the ft, you know, these are the questions, you know, you have, uh, you know, like, please send us your responses within two days or whatever. So he knows the article's coming out, he knows he can't stop it. So he ended up calling some hedge fund managers in London and saying, like, yeah, uh, this FT article's coming out. Uh, they're going to allege we're a fraud.

Speaker A: Da, da, da.

Speaker B: Uh, so these hedge fund managers hang up the phone and like, I'm going to go short the stock. And so they short the stock, the articles come out. Then Jan Marsalik goes to Boffin and says, look at the short interest increasing before the articles were published. And so the other thing that they had done was they had hired the former number two, um, person at the Libyan intelligence, uh, organization post fall of Gaddafi, like during that period in between Gaddafi and whatever exists today, they hired that person to conduct espionage operations in London. And so they've got pictures of like, Dan McCrum that they're showing Boffin. And like, yes, you know, we heard our operative there, you know, tells us that Dan, uh, McCrum received €1 million from hedge funds to put these, to put these reports out. So that's why Boffin, I mean, they are so stupid. And look what ended up happening. Well, I'll tell you a little bit more in just a second on that.

Speaker A: But.

Speaker B: So Boffin ends up suspending short selling and they criminally investigate for manipulation the journalists. Now it came out later with Boffin that there were employees at Boffin who had owned wirecard in their accounts who had actively traded it.

Speaker A: Are those people still there? Are they still employed?

Speaker B: Or they.

Speaker A: Were they fired?

Speaker B: At least the top guy. So the top guy who had. The person who had headed Boffin, his name is, uh, Felix Heufeld, I think. So the person who was his boss was the finance minister, who I think is now the Chancellor of Germany. That dude couldn't, initially, he couldn't throw. He felt under the bus because he's trying to become chancellor, so that would make him look bad. So he publicly gives Heufeld an attaboy. Right? So it totally reminds me of that George W. Bush with FEMA fiasco, where Bush is like, you're doing a heck of a job, Brownie. This guy comes out like, you're doing a heck of a job, Hubie. Um, and actually proposes Boffin getting more market regulatory powers in the wake of Wirecard. Because it's like, oh, oh, is that why they didn't have enough authority? Is that why this whole thing happened? So anyway, when it came out then subsequently that all these people had been trading, you know, all these Boffin employees have been trading Wirecard. Then all of a sudden he couldn't hold the break in the dam and he had to throw Heu Feld under the bust. So that dude got fired. I think some other people at both and got fired. And, you know, and I think that, I think the finance minister became the chancellor.

Speaker A: It does seem like there are way more bribery scandals in Germany. You know, if you look at, like, whether it's, you know, all these different companies and way more kind of like huge companies having, like, massive scandals, it seemed like in the U.S. like, there were a lot of those in like the 99, 2000, but it doesn't seem like if I looked at the top 50 companies today in the U.S. they seem to be run, um, much, um, better than the top 50 in Germany. Why is that the case at first, Am I right? And then if so, why is that?

Speaker B: You are correct. And it points to a really interesting dynamic. And so that is. So Germany is what we would call, you know, it's maybe the exemplar of a high trust environment. The average German citizen is more honest and more forthright than the average American citizen. But smart criminals understand that in those high trust environments, they take advantage so they flock to those environments. So you can look at a place like Russia or China, which these are very low trust environments. And you say, well, yeah, everybody's scamming. And like, yeah, a lot of people are scamming over there, but at least you're expecting it. When I published on my first activist short, it was a Chinese. It was Chinese fraud. It's funny, I was explaining to my, my maid in China, you know, who had, uh, college education. I just started explaining what was going on. Like, I'm not even close to done with my explanation. And she just starts laughing. She's like, oh, yeah, I get it. Da, da, da, da, uh, da. You know, he owns the customers, he owns the suppliers. It's all fake, right? Like the Chinese people, uh, like Chinese people because they're in a low trust environment, you know, they understand this and they know you can't take anything for granted. But, but when you're in Germany, which is, you know, maybe one of the ultimate high trust environments, I mean you could put Singapore up there as well.

Speaker A: I hear about it. Germany, I don't hear about that in the Nordics as much.

Speaker B: Telia, uh, company that's a company that we published on 2015. I think they had bribed everybody in the stands. I mean they paid literally like there have been convictions. They settled. They paid a settlement to the Department of Just or to the United States for uh, an FCPA prosecution, uh, just under US$1 billion is how much they settled for. I mean they paid billions of dollars in bribes to the stands. That is documented. And they tried it. And this is actually, this was the, uh, largest single shareholder was the Swedish government at the time. So they tried to sweep all this under the rug. Some of it had come out by the time we, we shorted it. But our whole point was like, hey, this, this is operation rug sweeping. This is a lot bigger than you guys are letting on. So look, these high trust environments are where you can have the most egregious crimes because they take advantage of those environments.

Speaker A: Okay, that makes sense because like when I think of Germany, I don't think like, okay, this is like, I don't even. I would, I would imagine most police officers would be upstanding citizens. They would, they wouldn't even accept a bribe or most government officials wouldn't accept their bribe. But you're right, I guess, I guess it's like the one bad apple could be way more successful there because of the high trust thing.

Speaker B: During this whole time we were going to actually circulate a slide deck sort of anonymously, but send it out to all of our venture friends like you and other people who I'm sure we both know, proposing a, uh, startup in Germany, the purpose of which was to cede a multinational crime ring and really just extolling the virtues of Germany as a base from which to commit multinational crimes. And look, there's also one other really interesting thing here, um, about the European Union. So part of the problem we've seen even outside of Germany, we've seen companies that are really corrupt. And the problem you have in Europe is that money and people flow freely throughout the block. Uh, and business can be conducted almost frictionlessly.

Speaker A: It's very easy to move things around. Money, people, information goods.

Speaker B: There is no supranational regulator or enforcement body. Every country has their own enforcement bodies.

Speaker A: So it's easy to like, like hide things and say, oh, this is, happens to be in this, this is in Slovakia now. And it just, it would just be like a lot of bureaucracy to go figure that out. If you're a, uh, regulator in Luxembourg or something.

Speaker B: Well, if you're in Luxembourg, I mean in the business of Luxembourg is to not care. But let's say you did care, you know, you've got to call up a counterpart in Slovakia. Counterpart in Slovakia. I mean, look, you're, you know, you're familiar with the public sector, you know, Right. So overworked, underpaid, right? So they're going to have a stack of case files and like, okay, why am I going to help you? Because at the end of the day, if I help you, am I going to get the credit? No, you in Luxembourg, you're going to get the credit. So why do I care about your problem? And so I think that's, you know, so at the end of the day, the European Union is really well set up for money laundering and financial crime.

Speaker A: For that reason in the US there's lots of fronts and uh, but in Europe, the fronts can be like much bigger and much more impactful because of all this stuff. It's just like a lot harder to find all these things.

Speaker B: Then you layer on top of this world the existence, the continued existence of Dubai and how everybody pretends that that's like a normal financial center. So when you combine like Dubai and of course Malta is part of the eu, like when you get these places, you know, Luxembourg does its part. It's just, it's just such a joke. And so I got to tell you man, like one of my rants is every time I want to open up just a piddling little bank account, I've got to fill out like you know, 30 pages of stuff and provide all these IDs, you know, in the name of like anti money laundering. And I can point to work that we've done where were finding hundreds of millions of dollars being laundered in real estate transactions through shell companies in broad daylight. And nobody does anything about it because it's usually in Europe after you've seen

Speaker A: all these frauds over the years, all these issues and stuff like that, is there some sort of like, could you. Personality type, the fraudster? Is there something about those types of people? Like sometimes I feel like it's like they're like, I've seen many different types of fraudsters. It's like the, the up and coming poser. It's the uh, someone who comes from like a lot of money but just not enough. And they're trying to like overly impress everybody. They have some sort of title like they were, they have a, you know, some sort of zoo title in um, in Germany or something like that or some sort of duh title and you know, whatever country. Right. So, but they, they're like, what's the tell? Like ahead of, like, you know, ahead of time.

Speaker B: The most common. So the most egregious frauds are the one are committed by people who start out saying, hey, you know, we can scam it. You know, like. And look, China offered China. Chinese companies going public in the US offered an amazing, you know, once in a, I mean once in many generations opportunity for the type of person to say like, look, I want to, you know, I want to make real money. I'm going to do it through, you know, just cheating people out of their money. I would say that's a minority of fraudsters.

Speaker A: So it's like they start out and like things aren't going well and maybe they have to like, okay, well just this one time we'll change the books a little bit. And then, then it's a plate spinning thing.

Speaker B: And I would add another layer to that. So I think that, you know, let's, let's say, you know, let's say you've got a business. It's, it's been doing well, it's attracting attention. You know, as I often put it, they put you on the COVID of Business Genius Monthly and when that happens to you, you know, I think that it's pretty natural that in a way you feel a little bit like a fraud because you're like, I don't, I

Speaker A: don't, I'm not, I don't know if I'm that smarter than all the other

Speaker B: people or something or whatever. And look, I, you know, like I went to a little bit of a version of this myself and you know, like I went from zero to you know, in 2010 to you know, 2011. Bloomberg naming one of the 50 most influential in global finance or like, you know, Warren Buffett and Ben Bernanke at, you know, so suddenly everybody comes up to me and is like, Carson, you know, what do you think of, you know, the Eurozone situation and this and that and you know, and you feel kind of like a fraud. You're like, I don't, I don't know, you know, like, well, like if you

Speaker A: think of like sbf, uh, with ftx, like, I, I doubt, I think he probably always thought he was the smartest person. Like I don't think he ever thought he wasn't the smartest person. Or, or, or do you disagree?

Speaker B: So this might be different, this might be a different pattern. So I guess where I'm going with this and get right over to SBF in a second and I haven't paid a ton of attention to him. But what, you know, what I think ends up happening, though is, you know, so the rocket ship starts stalling out. And for a lot of people, you know, their identity is really wrapped up in, you know, in their companies and the success of their companies. And, you know, people think they're infallible and it's kind of like, like it's a pretty addictive situation to be, to be in. And so you think this gets back to what you just said. You're like, well, you know what, like this quarter. Yeah, you know, like, let's, let's fudge this a little bit and we'll m. Make it up next quarter.

Speaker A: And do you think this was like, what happened at Enron? Like, uh, like it just, it started with like, a little fudge and then it just like became this like, ultimate crazy fudge. Like you, uh.

Speaker B: Well, let's talk about Enron, because actually, when I was talking about Gray Zone, Enron is the best example. What killed Enron was the accounting that was and still is legal. Okay, So I think what. So basically, you know, the last year that Enron was public, I think this was, uh, 2000, it reported about $4 billion in cash flow from operations. And of that, 4 billion, all 4 billion of that was really financing cash flow. It was borrowings from banks that were dressed up as business transactions. Now that was legal at the time, and it is still legal. And if you want to know how those transactions worked, one of them, they called it one template. They called a total return swap. Just Google, Enron, Mahonia. And so you'll see how Chase bank facilitated this. And so again, you can still do this legally. The only backstop would be if the bank cares about its reputation and the banks care about the reputations for maybe two years after something like this happens. So Enron cratered because it had all of this off balance sheet debt. And actually, Ken Lay had an opportunity to save the company if he had pledged. If he pledged more stock and in order to underpin the debt rating, he wouldn't do that or issue stock rather. And so the ratings agencies downgraded, which triggered all of these, you know, which triggered all these capital calls. And they couldn't meet them and they imploded. So my view as to what happened was this was such a spectacular, massive fall from grace that the federal government came in and it's like something bad stuff had to have been going on. And they found some stuff that rose to the level of fraud. There were convictions, but this was the stuff that in terms of the impact on Enron's financials was really on the margins. And I think that that happened again because of the political imperative to find something.

Speaker A: So in some ways the story about Enron was they were over levered.

Speaker B: Yeah, I mean they were over levered legally. Right. So they made their debt appear lower than it was. They made their EBITDA and cash flow appear much greater than it was through measures that were legal. And while some of the accounting. There were accounting rule changes that would require them to consolidate the debt if they tried to structure it the same way. The thing is, you can still, as I said, engage in those financing transactions that get dressed up as actual sales. And the funny, just the irony of all this is that accounting rule change regarding consolidation, so that's what those entities were referred to that were off balance sheet, they were called variable interest entities. Vies. It's to all these Chinese companies that then came along and took advantage of that. So they've got these Chinese businesses that are operating in heavily regulated industries in China where foreign investment is either prohibited or limited. And so they say, well, gee, you know, we can't, you know, you can't have these Internet licenses owned by a foreign company. Let's set up a company that's, you know, a subsidiary of the list code that'll have a series of contracts with this and through this series of contracts we're required to consolidate the operations of the company that has the license. But you know, if push came to shove and those foreign shareholders ever wanted to take control of the actual, the operating entity in China, they'd be screwed. But it's just kind of funny that, you know, you close one, you know, you, you turn off one valve for abuse and just another one like opens and it's like a flood of abuse.

Speaker A: So you were going to see, you were going to give you your theory on sbf.

Speaker B: I don't think he was in that mold. It sounds to me like he started off. Yeah. Thinking he was the m. Smartest guy around, it sounds like. And look, I haven't read the book. I read criticisms of Michael Lewis's book on, on him that it was too much of a hagiography and you know, that I don't know. So I, and normally I really like Michael Lewis's writing, but. So I didn't read that. But it seems to me like, from what I understand, the fraud started going on very early. You know, it's not respecting segregation of, you know, client money, you know, keeping it apart from Alameda's, you know, his money. And I don't know that that puts him in the category of the kind of person like a Yan Marsalik, um, or, you know, Mark Marcus Braun, who says, I'm going to start out and build this total fraud and steal all this money. But I think this puts him in the. Yeah, maybe. I, you know, I think he just felt like, look, rules are for little people. They're stupid.

Speaker A: You know what you're thinking about someone's m. Morality. Let's say there's a company and they are. They need a cash to survive and they illegally borrow from their pension fund or something, and then they survive and then they give the money back to the pension fund. And like, no one, no one, no one suffers. In fact, everyone's still employed and all this other stuff, but they like, did so something wrong. Clearly they did something wrong. Like, what's your. How do you. How do you think about like, you know, the moral culpability of the management team and like, uh, that type of situation?

Speaker B: A lot of times I am really depressed about the, the state of the rule of law. And you know, and I do think that as a society we've become overly technical so that we're focusing on the letter, not the spirit. But, you know, that said, you either believe in the rule of law or you don't. So even if it ends up being a victimless crime and you want to arg, it's therefore a non crime. You know, I would say, well, you either have the rule of law or you don't. And if you have the rule of law, that has to be prosecuted. And, and from my experiences in China, you know, I've lived there six years and uh, that I came out with this understanding that when you have corruption at the top, be it of a company, a club, or an entire country or society, the corruption cascades down and it, it just corrodes everything. And so, yeah, if you let these people walk, you know, that. That has, that has a corrosive effect on society. And you know, look, I think that's part of the problem that we have in America today, where it's obvious that so many of the most financially rewarded people in this country have been aggressive. You know, maybe they haven't crossed the line legally. Maybe they have Crossed the line legally, maybe it's obvious that they have at times done that. But when nothing bad happens to them in society just, and they just continue to get rewarded, you know, look, I think the average person can be forgiven for saying, look at so and so. You know, they didn't care about the law when they did xyz. Why should I care like that? You know, that seems like that's for chumps. And that's exactly how that dynamic works, where it just cascades down. So people in the company, if they see that, everybody says, well, look, you know, everybody whose job it is to care about this says, well, you know what? It ended up working out, so we're just all better off pretending it didn't happen. That's going to beget more corrupt behavior and probably that'll end up ultimately having deleterious consequences.

Speaker A: They mentioned Hindenburg earlier. They're kind of like, uh, a, like a newspaper, A newspaper with a short selling thing on the side or something.

Speaker B: You're thinking of Hunter, Brooklyn.

Speaker A: Sorry, Hunter Brook. Sorry, Hunter Brook. Yeah. What do you think of that model?

Speaker B: They do good work and you know, just a couple weeks ago they, they actually scooped us on something this they published a few days before we did on a company called Ensign, which operates skilled nursing facilities. It does kind of get under my skin when people, you know, ask me like, oh, you know, what do you think of this new model? It's not a new model. I've been arguing for years that what activist short sellers do is investigate a financial journalism just married to a non traditional revenue model. Now the difference between Hunter Brook and Muddy Waters is that Hunter Brook will publish these investigative stories on topics other than companies. The hedge fund is short. And look, they did that because they were able to raise money at the management company level or they do that like that's, that's how they can pay for. That's how they can pay for that. I like them. But I believe firmly that's a money losing proposition because if you look at all these traditional media organizations, investigative journalism is. The amount of long form investigative journalism is just decreasing every year, especially in financial markets, because there's just not that much of a, there's not that much of a market for that. And, and you know, my, I. Look, I've spent, you know, many times over the years I've asked myself like, you know, because obviously what I do, we run a lot of risk. You know, we can lose real money. I mean, I've, I've had days where I've lost like Eight figures, you know, on a trade like, you know, mine and investors money, those are bad days. And those are days when I, you know, tend to drink a lot and you know, do things to myself that shorten my lifespan. And it's not easy from that perspective. I've been through, you know, investigations by three different governments, you know, which I don't think would have happened if we were deemed to be a traditional media organization, get sued all the time, you know, never, never lost one, never will. But so I've asked myself repeatedly, like, is there a way to do this other, you know, a uh, financially viable model to do this other than shorting stocks? And I can't come up with it right, like because advertiser led model won't work. Subscription, you know, payments for, I mean to do real in depth, you know, there, there's a, there's a publication, uh, called the Bear Cave. But that's like subscription, you know, that subscription kind of short, um, short ideas. But you know, and I respect, I respect them, but they don't have the resources to do months and months of investigation on companies like they do. They can't fly in people to conferences to pretext as potential clients, you know, to understand what's going on. So you know, if you want that work, I think shorting stocks is the only way that pays for. So if you're doing that, but you're also reporting on interesting things that should be reported on, you know, like about the dysfunction of the world. Unfortunately there just isn't a model that pays for that. So, you know, and I don't feel like I'm making so much money, uh, as an activist short seller that I can divert a portion of this and kind of do uh, this pro bono news stuff. So they were able to raise money at the management company level to do this news, I suspect. I mean, I assume they sold this as an economic way of doing it. I mean if they can make it work, God bless them. I mean, I'd love to see him do it. I'm just skeptical that, that that's really economic.

Speaker A: What are your thoughts on the Andrew Laff conviction?

Speaker B: What I've read. Uh, so I'll tell you what I've read and what I haven't read. So it's important to understand, you know, that uh, I can't have a fully formed opinion yet, but I've read the government's Superseding indictment. I've read his Rule 29 motion for acquittal, the government's response to Rule 29 motion for acquittal, read the jury instructions, and I've read a transcript of the closing arguments. This was poorly covered by media. So I think that, you know, based, know. So again, the caveat I've given you the universe of what I've read. So based on that universe, I think this was poorly reported by the media. And so there's a misunderstanding as to what, uh, you know, on what bases Andrew was convicted. So Andrew would quickly de risk positions after publication. And that's, you know, in activist short selling, that's the norm. Like you get really risked up. And if the company is going to be acquired before you publish, you might be gone like for the rest of your life, basically, you know, then you de risk so that you can actually, you know, try to sleep well at night. And um, and so there was, there's this idea that came out of the trial that that was a problem. Now what I would say is that, so, okay, my read is that Andrew was convicted of making statements of opinion that the government and then the jury felt he didn't honestly believe. And especially when it came to target prices. I think this is going to see, you know, I think 160 before it sees 120. And you know, say the stock was uh, at like, you know, 130 at the time. And then he blows out of it at 140 right after tweeting that this

Speaker A: is like, there's like an Nvidia, uh, kind of thing where he's like, this is, this is. Nvidia is going to go, go bonkers. And then obviously it did go bonkers, but he went out of it a lot earlier than, than he had. Uh, you know, he didn't ride the

Speaker B: trade all the way comes to Nvidia. There was a particularly problematic statement in that he made an electronic message. So he was communicating with somebody who appeared, I think was an analyst at a fund. And Andrew was talking about how Nvidia was set up to move upward. And so he said, look, go through some old analyst reports, give me some bullet points there to tweet out and let's make some money on this thing today. And so what the government argued is that Andrew works the process in reverse for the companies for which it indicted him, rather than saying, hey, I've done this research, I have this view about this company. You know, I'm going to voice my opinion. It was, you know, they argued and I think this is what the jury believed in. You know, in 13 of the, you know, the specific names, plus the overall, you know, um, scheme, the first indictment, uh, count, um, that he worked the process in reverse, where he's looking at how these stocks are trading. He says, okay, this one can move up, this one can move down. Now let me go find something to say about it. Throws out a price target that's as the government turned it extreme in either direction and then closes parts of the position. Now, I do think there were some defects here. So when I read one of the jury instructions, jury instruction 22, it talks about. And this was also a factor because Andrew's, of course, being sued civilly by the sec. It's one of the weird things with securities, right, where you have to fight potentially. You know, the government gets two shots on you, right? You get the criminal side of the DOJ, you get the SEC side civilly. So that. That's weird. And the 10B5 statute and the, and the rule, well, the, sorry, the securities act fraud on the market in the 10v.5 rule are really poorly worded. I mean, really vague. Like, I don't understand how they withstood constitutional scrutiny because there's this void for vagueness doctrine, which I would think the statute and the rule would fall well within being too void to be valid. But putting that to the side, there was this half truth doctrine that got introduced, which is this idea that, well, if you make a statement to the market, if you are not disclosing the full truth, well, you might have had a duty to disclose that. And failure to disclose the full truth truth is therefore, uh, it's fraud. So what they were referring to here is Andrew saying, I'm short, I'm long, and not disclosing that he intended to de. Risk the position right soon afterward. Now, this is problematic because the line of cases that have created under 10B5 or under the securities act, that this standard, this requirement that you make full disclosures has to do with issuers. So the companies that are selling stock, they have fiduciary duties. Andrew was just a market commentator. He does not have a fiduciary duty to the market. So, number one, applying this omnicare doctrine of half truths rising to the level of fraud to somebody who doesn't have fiduciary duty, I think that's, that's a up. That's number one. Number two, though, the jury instruction said while commentators are not required to disclose their positions, you may consider that disclosure of position without additional information could constitute fraud. This is also wrong, okay? Because everybody. And again, this gets back to where the statute and the rule are so vague. But, but every lawyer I've ever gone to. And I used to be on the long side. I was working with my father starting in 99. We held long positions in stocks. He distributed research on them. Um, so every lawyer that ever talked to said, listen, you must disclose that you are long this stock before you comment on it publicly or before you tell anybody really, that potential, an existing institutional client. So, Andrew, everybody had gotten that same advice with respect to short positions from lawyers. So, effectively, there is a requirement to state that you're long or short. That's the rule of the road. So this idea that the government then turned that against him and said, well, he was using that to commit fraud because he was trying to make people think that he believed in it when he said, I'm long. And that therefore his failure to disclose an intention to de. Risk the position that could be fraud. See, that's a major problem because that is an effective misstatement of the law. So I do intend to file an amicus brief. I mean, quite possibly, if not probably as part of a group of investors, and maybe some academics will join this too. But that's one of the things that I really, you know, I want the ninth Circuit Court of Appeals to clarify is that you effectively have compelled speech when you have a position here. So clarify that it's compelled speech. And therefore, the failure to disclose the intention is not a half truth. You know that. And there's no duty to disclose that. And like, one other point that I would make there, and my apologies for this getting a little bit technical, but you could say that an intention to disclose is a fact that presently exists. Exists, Right. So if I tweet, you know, we're short xyz and I'm intending to, you know, try to close out most of the position, you could say, well, that, you know, my intention is a fact, so you can disclose that. Right? Just as my. The fact that I have a, uh, position already is a disclosable fact. But the problem is, while an intention having an intention, you know, you can say that you either do or don't have that intention, and that's a fact. An intention is just an opinion about the future. Like, I mean, I've been in this situation numerous times, right? When you. When you release, you know, when you release your commentary, I mean, things could go very differently from how you expect. And that. That trading plan that you make, you know, it's kind of like Mike Tyson said, everybody's got a plan till they get punched in the mouth. And those plans, things seldom go according to Your plan. So that's why disclosing that you have an opinion about the future and that opinion is that leads you to believe that you will be closing substantially or a good portion of your position. I mean that's very dangerous grounds there because to compel disclosure of an opinion effectively about the future. I really don't like that path.

Speaker A: By the way. One thing I think interesting is Andrew left a tea slicker, a well known short seller. But it seems like a lot of the things that the government went after him on were his longs, um, which was kind of like uh, so they kept saying oh, he's the short seller, but it's like oh, but they're going after like. So it's interesting kind of narrative.

Speaker B: Well that's. Look, that's also an important distinction because you know, when you get into First Amendment, like not all speech is protected the same right. So you've got, you've the, the, the strongest First Amendment speech protections are accorded to matters of public concern. So typically that's, or that includes political speech and um, religious speech. But with activist short selling, when you're pointing out that there are companies

Speaker A: that

Speaker B: are basically in the process of destroying trust and eroding the capital markets which are the lifeblood of the economy, uh, I think most people think that's a matter of public concern. So that's entice. So if you were to say, well gee, you know, if you're exercising your First Amendment protected right to speak on a matter of public concern, but immediately after you do that, you're prohibited from taking an action in the market that any other trader who you know is pro is permitted to take, that would fly, that would fly in the face of First Amendment. Now because Andrew was often saying I'm long this, you know, or I'm short because I think they're going to miss earnings, that's commercial speech. I would, you, uh, know, I think. And that's not, that doesn't rise to the, the level of protection that you would accord to an expose on a company that is bilking investors and taking advantage of the capital market. So the go. It doesn't look like, from what I can tell, it doesn't look like the First Amendment issues really were litigated here. But you know, I, but I do think that if the government tried to apply a similar theory in a situation which somebody had just been commenting and exposing bad practices in the capital markets, then I think the First Amendment would have to kick in and would provide a very strong layer of protection. That most cases Andrew didn't have because it was, like I said, um, I think commercial speech in most of these instances for which he was indicted.

Speaker A: All right, there's also two more personal questions before we go. First of all, what AI tools are you using? What are you personally building in AI personal life or in your work? What are you actually hint on keyboard building?

Speaker B: Yeah, I mean, look, I was using Gemini a lot, but then it did become too sycophantic. So I was obviously a genius and the most fit person who ever walked the face of the earth. And then I realized I'm not. So I don't use Gemini as much. Claude is amazing. Um, I mean, I do use Claude for like I was running Monte Carlo simulations because we did put together an AI disruption basket and because, look, I, you know, I think AI is going to just destroy a lot of knowledge jobs. Right. And that will have profound implications for markets. So I started using Claude back in February to run Monte Carlo simulations on different trade structures. And this is the sort of thing where, you know, if I'd had somebody who graduated college a few years earlier, you know, top university and was strong in math, I would have thrown this, you know, kind of work to them to do. And to do two Monte Carlo simulations would have taken probably the entire day. And I would have said, well, you know what? Nothing good came out of this. All right, I can't keep tying up your time. And I wouldn't have been able to run these Monte Carlo simulations, but with Claude, it's done in minutes and so ran a lot of these simulations. So it's really helped from that perspective. It's helped with a lot of the work, you know, where I'm like, okay, there were these changes that my analysts made in the stack, like, like Claude, you know, do a side by side comparison and you know, explain this. And we also have somebody, you know, we also have somebody on the team who, um, Not a good communicator. You know, I think it's, you know, possibly, you know, like an Asperger's thing as well as, you know, a language barrier and using ChatGPT. And Claude has really bridged the communication divide at times because otherwise it would have taken me, me hours because the, you know, the work they're doing, very technical. Would have taken me hours to be like, that's what you're saying. Okay. And so, so yeah, it's, it's been, it's been a pretty big impact. And I'd say our decks look nicer than they ever have.

Speaker A: There's no excuse to have a bad looking website or deck nowadays, right?

Speaker B: We still have a bad looking website. We, we still do. We, we have to point Claude at that soon. So you're right. There is no excuse.

Speaker A: All right, last question. We ask all of our guests, what conventional wisdom or advice do you think is generally bad advice?

Speaker B: You know, maybe I've just become such a positive person recently that I can tell you what I think is good advice. But, uh, so maybe there's conventional wisdom about, you know, about having kids. I, I don't know. Like, a lot of people don't want to have kids, right? You know, they think it's, uh, you know, they, they, it's like they think it's too much of a drain on resources. They don't understand the payback. I was one of those people. I was in a massive car accident in 2000 with my then girlfriend. And it was just before I had Lasik. And so, and back then, I mean, my prescription was awful, so I had to wear glasses for the week beforehand, so my glasses were thrown. And I knew that we'd taken, um, two, you know, like an SUV in her door at 65 miles an hour on the 405, and an Acura Integra. I mean, a smaller car, you know, a car just behind that glass, shattered, car spun, somehow got us over the side of the road and. But I couldn't really see and, you know, and I asked her, are you okay? And she said, yeah. And then I paused, asked with more gravity, are you okay? She took a moment. Yeah, I'm fine. And that moment changed so much for me because that crystallized how, like, I was so scared that something had happened to her. And so I, uh, came out of that. I'm like, man, I understand that. I'd always viewed, like, marriage as just a stupid contract. You know, if two people want to cohabit, they can do that. But now I wanted to marry her. So we got married. But, you know, I went along thinking, like, look, we were living all over the world and why do we want kids? And, you know, she kind of was the one who said, like, I want to have kids.

Speaker A: Felt okay.

Speaker B: Well, you know, I'm financially stable enough, you know, to do it. Um, but I used to say, like, yeah, I want to kind of keep them locked away until they're like 16 or 17 and can have a. Can have a good conversation. But from day one, man, I mean, it was, it was just so. It was intellectually really interesting. And it gives you a whole new perspective on your existence.

Speaker A: There's a trend that's happening now where a lot of people were having like two kids before now having three or a lot of people having three or having four. For people, it's still the same number of people having zero. But it does seem like the two more twos are going to three and more three threes are going to four. So we're seeing this like, weird. And maybe it's like, obviously you have to be more wealthy to have more kids to support it and everything, but there's starting to be like a bit of a baby boom of people who already have kids rather than like the zeros to one.

Speaker B: That's interesting. I mean, look, I know at the macro level the birth rates, you know, the overall birth rates have declined massively, especially after the gfc. And it's a factor in developing as well as developed countries. You know, I think there are real policy failures that, you know, have, you know, that have occurred that have not been addressed and maybe we do need to address. And if you're also thinking, no, children are not right for me, look, maybe they're not. But what I, that was me. And what I found is that, I mean, it's definitely the most fulfilled I've ever been. And I, every now and then I stop and I think to myself, okay, what if my, you know, what if we didn't have kids? I'd vote in my life, be like, yeah, I'd be traveling more, I'd probably be making more money because I'd be working a lot harder. I would not be as happy. Like, I'm convinced I would not be nearly as content as, as I have been since having kids. So I don't know what the conventional wisdom is on this now, but I, I would say absolutely do it. Don't that up.

Speaker A: Uh, and would you say absolutely do it? Even if you haven't found a partner like you, you have a partner and obviously it's a lot easier to do it.

Speaker B: I mean, one way kids do turn out messed up is when you don't have, you know, two parent household. I mean, like, uh, you know, if you're not out there, if you're not out there taking the swings, trying to meet people, get out there and try to make, you know, try to try to meet people. If there's just something so idiosyncratic about you that there, there isn't the right person out there, which I find that hard to believe. Um, yeah, I don't know. I mean, look, I, I can't speak to that. That's individual. But people who aren't in that situation, people who can pair bonds, should get out and try to pair bond. You know, it's not just. Life is not just one big Tinder app. I mean, I certainly went through like that phase pretender, of course, in my life. And you know, there are good things to be said about that when you're, you know, that age. But it doesn't beat this because in

Speaker A: the US most married people have kids, right? Is in fact, they have the same. The birth rate of married people has not gone down. In fact, in the last 30 years in the US that may even be going up. The, the bigger thing about the fertility rate in the US is that people are fewer people getting married. And by the way, divorce rates also plummeting. So divorce rates gone down pretty dramatically in the US as well. Um, so, uh, it hasn't been this low in like 30, 40 years in the US divorce rate. So you have these kinds of like, the problem is just the marriage rate is also plummeting. So. And people are maybe smartly or not smartly, depending on how you think about just not having kids until they get married.

Speaker B: Yeah, I mean, look, you know, there's obviously, obviously a societal problem with, you know, fewer people coupling and I mean, less dating. And it's complex. I mean, some portion of it goes back to social media, but there's also political polarization that, I mean, just so sadly is part of this, you know, as well, from what I understand. But, um. But yeah, you know, like, I, I think there's also, with Gen Z, there's also just a fear of failure. And you know, look, I mean, it's, it's the most conventional wisdom you'll hear from successful people. And it's.

Speaker A: Right.

Speaker B: It's like, you gotta be able to fail now. You gotta control, you gotta mitigate your potential losses. Like, you know, if we're talking business, you never want that failure to take you out of the game. And so if you go back to what I'm saying about having, you know, lost eight figures on a single trade, you know, knock wood. But I've never put myself in a position, you know, hope not to where it would be lights out if we take catastrophic loss. And so that's a general principle for life. Take risk, fail, mitigate your downside. But there's no downside to going out there and, you know, and looking to buy, buy somebody a drink or, you know, however a girl should initiate it these days.

Speaker A: This has been amazing, by the way. I Even though I know it's terrible for you, I'm. I'm kind of glad you were in that car accident back in the day, back in 2000. It does seem like it made your life more enriching and, and better. So. But thank you Carson Block for joining us on Summation. And I'm uh, by the way for those who don't know, you and I have been friends for a very long time. I'm a huge fan of yours. It has been really great and I really really appreciate you being on Summation, uh, podcast.

Speaker B: I really enjoyed it Oren. So great to reconnect and hope to do it in person. Not too distant future.

Speaker A: One more thing before we go. I write a blog called Summation. It's the same as this podcast. The blog is about non obvious idea sharing on business talent, data, longevity and random contrarian takes. If you like the conversations on this show, you'll probably like the blog. It's free, new content comes out twice a month. You could subscribe@orin.substack.com that's oren.substack.com.