Andrew Ross Sorkin on Market Bubbles, Banking Rules, and the Real Lessons of 1929

Conversations with Tyler is produced by the Mercatus Center at George Mason University. Bridging the gap between academic ideas and real world problems. Learn more at mercatus.org. For a full transcript of every conversation enhanced with helpful links, visit conversationswithtyler.com. Hello, everyone, and welcome back to conversations with Tyler. Today, I'm chatting with Andrew Ross Sorkin. He's an award winning journalist for The New York Times and a co anchor at Squawk Box, CSNBC's signature morning program. He's also founder and editor at large of DealBook published by The New York Times. He's the best selling author of Too Big to Fail, coproducer of a film adaptation of the same, nominated for 11 Emmy Awards, and he is also cocreator of the drama series, Billions, on Showtime. But most importantly, he has a new book out, 1929, Inside the Greatest Crash in History and How It Shattered a Nation. Andrew, welcome. Thank you so much for having me. It's a privilege. The 1929 stock prices right before the crash, were they really a bubble? Doesn't America have an amazing century to come? And arguably, those prices were were too low, and the so called speculators are the heroes of this story. Oh goodness. What a place to start. You know? Yes and no. In some ways, so many of these companies clearly represented the future. You know, you think about an RCA and radio and the future of radio and what that represented. But, you know, three years later, I think RCA was sitting at $3. And on a split adjusted basis, it has had been up in, you know, multi $100. So, yes, that you could argue that they were betting on a future that truly was, you know, better than people thought. But, you know, the chasm between 1929 and frankly, you know, the end of World War two was a long and tortured period. No? Sure. But if we look at thirty year returns, we find in American history, like any thirty year period, stocks do quite well, six to 7%, and most of the gains come just in a few of the years in the thirty year period. That seems to be the case even if you bought at the peak in 1929. By 1959, you would have had a real return, something like 6%. A lot of the gains coming later, but that's not unusual. And even then, like, World War two that it was so bad seems like a super unlucky event. So ex ante, you might have expected something even better. No. Look. For sure, it has paid to be a professional optimist, a professional speculator, if you will, way more over the course of the last hundred years than it has ever paid to be a professional Cassandra, or professional skeptic. No doubt. The question is what the time horizon is, always. And so if you are looking out thirty years, Tyler, you're a 100% right. If you're looking at five years …