Byrne Hobart: uncertainty

Transcript context

…Yeah, that's a good point. In fact, in the interview I did of him, I asked him what is the difference between Jane Street and FTX? And he mentioned that at Jane Street, there was this button he could press to buy and all the intermediaries, all the servers and all the bank accounts were just taken care of. What was really funny is he then said, “Let’s talk about that. Just getting a bank account is so hard when you're independent.” Apparently it turns out that it's so hard that you might have commingled funds because you couldn't manage to separate them out. You had this really interesting take. At one point we were talking about how every single market crash can be explained by the drug that was common in the industry at the time. And we finally achieved the hypergrade meth stage of that Emsam patch he was taking that’s stronger than Adderall. I think I was saying every crash can be explained by the drug they're taking at the time. That takes it a little far but I do think that the impact of new drugs on financial markets is underrated. You can have examples of this going back pretty far. There is some connection between caffeine consumption and extroversion and risk taking. You temporarily get a little bit more willing to do deals when you consume caffeine. Before Lloyd's of London was this insurance consortium, it was Lloyd's coffee shop. So you do have some history of coffee shops being associated with financial centers. And then you have to zoom forward because we just haven't had that many novel stimulants. Depressants, deliriums, and other drug categories probably just don't lead to that much financial activity. I don't know how someone would trade differently or invest differently if they had a really strong acid trip or took ecstasy or something. But the stimulants where people can just consistently reuse them, they keep people alert, they make them active and wanting to do things, it seems those would have a connection to financial markets. The theory is — if you look at the 1980s where there were a lot of these hostile takeover deals where someone would find a company that's underperforming. When you look at the spreadsheets and say this company is underperforming, what you're often looking at is a story that is more like, this company believes that they have this social obligation to the community where people work and that they have an obligation to give their customers a fairly priced product and maybe they give them really good customer service that doesn't really pay for itself and it's the right thing to do. Well, if you are a coke head with a coke head morality, you decide well that's not the right thing to do at all. You should actually just take the money and we should fire these people and replace them with cheaper employees. So levering up a company in order to buy out a bigger company and then firing everyone and shutting down the pension plan and distributing the surplus to shareholders, it is just very standard cokehead behavior. Whereas if you look at the mortgage backed securities boom and structured products generally, in the mid-2000s, the way that people made money in that was just by being very, very detail oriented and being able to make these incredibly fine-grained distinctions between different products that were basically similar but one of them pays 5.7% and one of them pays 5.75% and if you lever up that difference enough times you're actually making really good money consistently. It's super boring but maybe with enough Adderall it's actually very tolerable work that you can enjoy. So I do think that within stimulants the difference between short acting stimulants and long acting stimulants does mean the difference between a hostile takeover boom and a structured products boom. So I do think that within stimulants the difference between short acting stimulants and long acting stimulants does mean the difference between a hostile takeover boom and a structured products boom. The drug in FTX’s case is called Emsam, which is a Parkinson's treatment and there's some evidence from pretty small sample size studies that one of the side effects of this drug is compulsive gambling. There have been very, very fun tweets about this claim and there have been these official denials from the company doctor on the other hand. If you're a company that has a company doctor, maybe that says something about the level of medication you're consuming and maybe the company doctor's job is partly to say, “As a doctor I can assure you, I would never give someone three times the normal dose of Adderall just because their boss hired me to do that specifically.” Dealers don't exactly have patient confidentiality norms, doctors do. So maybe you hire a doctor instead of a dealer specifically to get that plausible deniability.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.