An OK Horse

Harvard Business School executive education delivers a world-class learning experience to energize aspiring and established change makers. Prepare for the next elevation for your organization and yourself. Learn more at hps.me/breakthrough. That's hps.me/breakthrough. As frequent listeners know, we record this on Thursdays generally and apparently, we're going to get a biblically bad storm this weekend in the New York City area. And you are like, yes, just great. I feel like we had a real storm this past weekend, and it was like, criminally underhypes. I had no idea it was coming. I was also surprised by the difference. I used to like snow a lot more before I became a suburban dad, and now it's a shovel in your foot. It's just like, no. It's not fun anymore. Brow into your heart. Try to find that child like joy. I try, but it's pretty deeply buried under. I root for chaos. Sure, sure, sure. You don't have to shovel this now. I was telling you before this, and you were like, you gave me the impression you had like 15 minutes of a material on the snowstorm this weekend. Mostly, I just wanted to talk about why there's been a lot of headlines, like first big snowstorm of the mom Donnie era. And it's like, are we all just trying to forget that last weekend happened? I feel like that was the first big snowstorm. Our colleague Joe Weisen though was tweeting about prediction markets for the snowstorm. Oh, they're popping off, I'm sure. This is the first time I've ever felt inclined to get involved in a prediction market. Really? You were like, having an inside view of that. Oh, yeah, speaking of folks writing in, we have some JP Morgan material to get through. The first is a correction. And I mistakenly said in last week's podcast that JP Morgan CEO Jamie Dimon did not attend the JP Morgan Health Care Conference, which I attended. Which I attended. And I'm sorry. I was mistaken. He was in attendance. Just not talking to you. Well, the thing is I was like, acutely aware of his presence last year because we were recording in a hallway, which I guess was some I don't want to get myself into more correction territory. But he was giving some sort of fireside or keynote address. And the hallway that we were in was somehow on the route. So people were lining up behind us. And it was like an enormous scene. And everyone was talking about Jamie Dimon. So again, I was keenly aware. Didn't have that experience this year. So I assumed that he didn't attend. But that was you know what assuming does makes makes you make corrections on podcasts. We have another JP Morgan. I guess we do before we do that. I'm going to say hello and welcome to the Money Stuff Podcast. Right, right. You're a weekly podcast where we talk about stuff related to money. I'm Matt Levine and I write the Money Stuff column for Bloomberg opinion. And I'm Katie Greitheld, a reporter for Bloomberg News and an anchor for Bloomberg television. What else are you going to tell you Morgan? Oh, I was just going to talk about the pub. Of the pub. Oh, yeah, today is included in the banter. I'm going to talk about the banter this week is very long. It's the it's the whole episode. It's just the weather and the pub. Although they did get sued for debanking Donald Trump. Yeah, on Thursday, which we should. Yeah, we'll get there. The pub. Yeah, the pub. Yeah, I'm excited. I'm going tonight at their office. It's been 20% of the content of this podcast. They have a pub at their office. Yes, brand new office. Do you have given us some fights and figures about? Yeah, I know so much about this office. At that pub, they serve drinks, although allegedly not before. Were you a clock? I think we said I'm on the air until five. So I'm going after five, so I can't stress test that. Yes, you will definitely get served at the JP Morgan pub. I hear the Guinness is particularly excellent. So you do hear that? I have heard that. You can get screen printed on the foam, the building itself. No, yeah, like latte art on your Guinness. Yeah, I've heard that. I've also I don't know if this is true. I'm excited to find out that you can get a screen printing of Jamie Dimon's face as well on your Guinness. That's what I've heard. I'm going to fact check all of this in our in our shannets. Yeah, you will you will certainly order multiple Guinness's. Yep. Get every available image. Yeah, print it on them. Yeah. Photograph them. If I can, if there's photography allowed. There's photography. Am I even allowed to say that I'm going to the pub tonight? We'll hear it by next week. It's your another correction. You did not go to the pub last week. I'm pretty excited. I saw it the outside of it when of the pub. Inside the office. You saw the you saw the facade of the pub of the town square in the middle of the the JP Morgan office. Exactly. So now I'm working my way inside. Working your way past the belt, right? Yeah. So that's what I had in terms of JP Morgan content, but you're right. We should briefly talk about debate. Yeah, I entered this lawsuit, but like I gather from like what I've read on the Bloomberg summary of it, but it's not long. Yeah, to recap, President Donald Trump is suing JP Morgan and Jamie Dimon himself for at least five billion dollars over those allegations that it stopped offering him and his businesses banking services for political reasons. And they did for seven weeks. They closed accounts of Trump and his businesses after January 6, 2021. Banks shut accounts for various reasons. Banks have gotten a lot of trouble for banking Jeffrey Epstein. They weren't like co-conspirators in his crimes. They were providing him banking services. And if you provide banking services to people who give off red flags of committing crimes, then you get in a lot of trouble, right? And after January 6, it might have been reasonable for JP Morgan to think we don't want to be involved in banking people who have been involved in certain sorts of criminal activity, right? But that sort of criminal activity is now associated with the certain sort of politics. So you can say, you're backing me, debacking me because of politics, rather than because of crime. Yeah. It's all absurd. It's a little bit interesting when paired with what happened to Brian Moynihan at Davos. Brian Moynihan. He didn't get past the velvet wrap. Brian Moynihan. He's not invited to the pub. Being the CEO of Bank of America, the FT reported. Also a notorious debanker. Yeah. Well, the FT reported that the White House excluded Brian Moynihan from a Davos reception that included the leaders of other banks and financial institutions. And one of the reported reasons was potentially debanking. Yeah. The suspicion of debanking. Yeah. This is like, well, it's not a successful investment banker, and by some level, I'm not a good financial journalist. Like, no part of me wants to go to Davos. And like, if I happen to find myself at Davos, like, no part of me would want to go to the Trump reception. But like, that's the job, right? Like, that's the job. Well, Jamie Dimon was there. Jane Frazier was there. Charlie Charles was there. Just by being silly. Jamie Dimon was there. Yeah. I know. I guess they had dinner and then Charles was like, you know what? I'm going to tell you about my week. Yeah. Please. I have a meme coin. Yes. But you didn't create it. The opposite of having a meme coin. A meme coin was forced to depart me. Let me take a step back and tell this story. So the guy named Steve Yegg, who's a software developer launched this thing called Gas Town, which is like a AI coding, vibe coding situation. It's like open source software that he announced and people liked and got a lot of attention. And at some point, he did that during the first, at some point in the last couple of weeks, someone launched a meme coin called Gas on a crypto platform. And the idea is like, it's a meme coin that has the same name as Gas Town. So if you like think that Gas Town is a cool project, maybe you'll buy the meme coin, like whatever, because classic meme coin logic. There's no connection. The person who launched it wasn't the guy who launched Gas Town. It's just like, yeah, they launched it on a platform. But the way this platform works is that when the token trades it generates what they call royalties, like trading fees. And the royalties, you know, some, like whatever, like one percent of the trade volume or something. And the royalties accrue to someone when you launch the coin, you can designate who gets the royalties. And the person who launched this coin said the royalties would accrue to the developer who launched Gas Town. So there is a connection between the coin and the open source project. The connection is that the coin generates some money for the developer of the project, not because he launched the coin, not because he had anything to do with it, but just because they were like, we'll give some of this money to him. It's sort of like a non-consensual connection. Yeah. I mean, it's not exactly what people used to call an airdrop, but it's related to the idea of an airdrop in crypto where like someone just gives you a coin and they're like, oh, you have this coin, right? And why do they do that? Well, what happened here is that someone who was involved in or at least owned some of the crypto tokens, emailed the developer and was like, hey, you have all these royalties waiting for you. All you have to do is like set up an account, connect your Twitter to the crypto platform. And then like you can withdraw something like. I didn't mean to buy Salana. He had to like open a Salana wallet to withdraw the money. Yeah. And he was like, that's weird. And then he did it. And he was like, oh, well, I really got the money. I love the excerpt that you included. Yeah. Yeah. He wrote, he was like, because it sounds like a scam. Yeah. It sounds like, yeah, just throw it in a Salana wallet. And so but in fact, it was real, apparently. And he withdrew something like $70,000 of royalties. And then here's the important thing. Then he blogged about it. It's got a big platform. People like Gaston. And he blogged about it for apparently a couple of reasons. One is that he thought it was good because it an engine that fuels creation, just like the stock market that is like, because this thing is retroactively financing his open source software budget. He thinks it's cool, right? It's like, this is a way to fund projects through like crowd meme, something, something, right? So one, he thought it was cool. And then to the other reason he blogged about it is because that will get attention to it, which will one make the token go up. And I think he ended up buying some of the token and to create more royalties for him. So he actually wrote in his blog post, allow me to get richer just by telling you about it, just like a good one. And so he did that. And I read about it because I thought that was funny in various ways. He's not wrong that it's a, it's a way to finance something, something. I don't know that it's a sustainable way to like fund a lot of projects, but it is like in certain sort of crowds or see Mimi areas of the world. It's a way for people to get money. It almost reminds me of a Patreon. It has some Patreon like, oh, let me tell you like one reason that it's not like a Patreon, which is that you got tens of thousands of dollars out of this, but the market cap of the coin at some point went from like kind of zero to like $40 million and back down, you know? The people who I think, I have no proof of this, just like just looking at the market. I know it's the people. I think made a lot of money on this and the people who bought the coin, cheap, emailed him, we're like, hey, blog about this. He blogs about it. The coin goes up and they make a lot of money selling it, right? So it is not just a way to funnel money to creators. That's a way to funnel money to creators. Well, also giving a lot of that money to the people involved in the crypto trading. Sean Gettaker wrote a blog post about this with the title crypto. Gryfters are recruiting open-source AI developers, which is I think closer to my view of it than like this is the way to fuel creation. But in any case, it's interesting. I call that meme coin venture capital. I'm like, you know, as in regular venture capital, you know, the entrepreneur's get some of the money and the finance here's get some of the money. You can quibble over the split of that. And so how do you factor in that? Well, I know about it. Yes. And then someone launched one for me. Of course. So I wrote about that in my column the next day, but I'm not going to name the coin or the platform. I do not want people trading the thing to generate royalties for me for a number of reasons. That is on the record. You heard it here. You heard it here. As a matter of journalists, like ethics and Bloomberg standards and everything like that. And another is like, I'm not going to log into the thing like I'm not taking the money. But you know, there's like supposedly $10,000 in account for me. That is in okay horse. You could do a lot with that. I love that your conception of money is just thinking horses. I mean, what else? How do you think about what you can do with $10,000? I don't because like there's no part of you that is tempted to get and spend this $10,000. I mean, you'd have to put some work into it. But I don't know that it's that much work. But it's like putting like passwords into some. Oh, no, into the horse. I mean, Oh, into the horse. Yeah. Oh, I'm not going to buy a horse. No, it's not my. Well, you're not going to use $10,000. You're not going to take the money. I'm not going to take the money. I'm surprised there hasn't been some sort of Matt Levine meme coin. There probably has been. Yeah. This is like the first one that I know that like attempts to generate profits for me personally. So something that I was wondering about as I was reading your initials. I just want to be really clear. Don't buy it. Don't buy it. I don't want you to assume if you like don't buy it and then it goes up. But to the extent you were buying it for reasons relating to wanting to help me or thinking that I will talk about it more like don't buy it for those reasons. I'm not going to talk about it more and I'm not going to be helped by any aspect of it. We'll speak. I don't own it. You don't own it. I'm not getting the royalties. I didn't launch it. I had no involvement in it. All I've done is talk about it. But I have not talked about it in an encouraging way. No, no. A negative way, if you will. Speaking of doing something that I was wondering about reading your initial entry when it comes to gas town. Let's say that he was receiving no economic benefit from this meme coin and it has no actual connection to gas town. If that happened, if you started a thing and then someone launched a meme coin that is connected only in name, do you have any sort of recourse? Can you sue them for trying to ride the popularity of your thing? I think practically it's often hard to sue them. It came up a lot in NFTs. People do NFTs linked to other people's art. Because you're just like, yeah, NFTs is like an online pointer to an image, right? And you just take someone else's image and then you sell on NFTs. People I think have tried lots of it, but I think it's hard because these are typically somewhat anonymous decentralized platforms and they're not. Yeah. There's not an obvious person to sue. And you know, I don't know, I mean, it seems like it could. And some circumstances would be a copyright violation. But like, yeah, get a weight into like some weird corners of the internet. What are you going to do? [Music playing] Harvard Business School Executive Education creates powerful connections for leaders from around the world. Their programs are designed to strengthen organizations and individuals by deepening relationships and fostering new ones. Participants leave with lifelong friends, new potential business partners, and the powerful globe-spanning network of fellow changemakers. Learn more at hbs.me/breakthrough. That's hbs.me/breakthrough. I just love the phrase moonshot. Dude. I think it's so romantic. Moonshot. Anyway, pay packages, though, is what we're talking about specifically. Not so romantic. Yeah, so romantic. There's a lots of journal story about an equity study of, let me try to do the math here. There's some CEOs who got moonshot compensation packages, which they defined as compensation packages that have like an emotional value of at least 10,000 horses. Yeah. That's really funny. 10,000 horses. We're $100 million. I hope I did the math right. It used to be that CEOs got paid millions of dollars. And now there's a new vote for paying them in a form that sort of looks like zero-ish dollars plus a bajillion dollars if they hit some very aggressive growth and stock price targets. Right. It's a long period of time. The idea is like when it's like a long-term element of incentives and two, it is incentives to like do a lot, right? So it's not just like steadily grow profits. It's like transform the company or make it huge. And this is like, probably wasn't invented that Tesla, but it's very Tesla, right? Like Tesla in 2018 gave Elon Musk like a, people throw on the number of 56 billion, I think, like, you know, some tens of billions of dollar package. If he grew the company 10x and then he did and then they gave him the money and then they thought about a lot. And now they've given him another one that's like a trillion dollars of extra equity if he goes to 8.5 trillion. And other people were like, ooh, Elon Musk did it. It must be cool. And so a lot of companies have done these packages. And what the Echolar study found is that most of them, most of those companies have underperformed the S&P, which as I wrote, makes total sense because these are supposed to be like all of them moonshots, right? And like most of the time they shouldn't work out. And they're getting no reward for matching the S&P performance, right? Like that's not what they're there for. They're there to like 10x the company. And if they can't do that, then like they'll fall short and they'll be a bad payoff, right? And the idea of these moonshots is like most of them won't work out and some of them will work out enormously well. And so if you're a diversified shareholder, you'll get, you know, the benefit of a few companies. Do you think that the companies went into it with that attitude, though? Like this probably won't work out. No, but that's fine. I mean, everyone thinks they're going to be the successful moonshot, right? But like, if you're a shareholder, if you're a diversified shareholder, they're like, that's fine. You have like 10 CEOs who think they're going to get to the moon and eight of them are diluted and two of them are right. And you don't know which is which, but they let them all try. You know, the CEO is all thinking, Oh, of course, I'll do this, right? If some of them are wrong, like that's good for shareholders, as long as some of them are right. I really liked that framing thinking about it through the perspective of a shareholder. And obviously my brain went to you could construct a moonshot portfolio of these 21 companies or something that EqualR found did this since a lot of them have underperformed the S&P. But some of them are Tesla. Yeah, that's true. It seems like KKR. This is working out for them. Who else is it working out for Airbnb? Also, which is interesting. It's specifically not working out for a lot of people, including trade desk, but it was interesting to see that EqualR was specifically looking at 2020 and 2021 packages, excluding Tesla, but it does feel like a moment in time. I mean, maybe they're having more in the year since, but it feels like 2020, 2021. You did see a lot of these. Yeah, that was like, that was apparently there were more than than before or since. Yeah, some of it was the Tesla packages was in 2018, but I think you hit the targets in like 2021, it's like 20 or 20. And so there was a lot of like, Oh, wow. It works. From the perspective of a CEO, it's like, wow, I could make 60 billion dollars. And from the perspective of a board, it's like, oh, this incentivization works and gets CEOs to transform companies. Yeah. It's a little weird to be aboard me. Well, our guy could be Elon Musk too, but it's you know, someone's got to be Elon Musk 2.0. We'll be interesting to see like what the lag effect of his most recent pay package is like whether and you know, I don't think anyone else is going to get a trillion dollar pay package for. No, you don't think so. I don't know, it's bad. I mean, I'll say he's like, I've written this about, you know, his earlier pay package and his trillion dollar pay package is like the classic moonshot pay package is you're a early stage startup founder, right? And your pay is like ramen and 30% of the equity of a company that is now worth, you know, nothing-ish and it could be worth a trillion dollars, right? Like that's the moonshot pay package. That's the package where in theory, you know, every startup CEO is trying to create something out of nothing. And if they fail, they get roughly nothing. And if they succeed, they get Mark Zuckerberg level wealth. And that's like a normal pay package. And but this is doing is translating that to giant public companies. And it shouldn't work that well, right? Tesla's a car company. And it makes clear. And it can sell cars. And like now, Elon Musk's incentives are to transform it utterly to making it a point five trillion dollar company. The theory there has to be like either he will succeed and it will, we'll have a human odore that never he home. It'll be worth a point five trillion dollars. And he'll get paid or he'll fail. And he won't get paid and won't like sell cars anymore. Like you're sort of making these like very bold bets. And that makes sense when you're a startup and maybe makes less sense for a large public company, but maybe make more sense. I don't know. Maybe it's what the shareholders want. Can you walk me through the psychology of the CEOs who canceled their moonshot? Oh, sure. Like the say college, you're just like, I'm not going to do this. This is all stock options, right? Like the way it works is like, you're optimistic. The board is like, we're going to pay you a lot of stock options that will be worth a lot of the stock goes up and be worth nothing if the stock goes down. And you're like, great, the stock will go up. And then the stock goes down. And you're like, well, but I'm a nice guy. Like I come in every day. I work hard. Like why am I not getting paid? And the board is like, you're right. And they cancel your stock options and give you new stock options. So you still get paid. And like the moonshot stuff is like that too, right? It's like at the beginning of the moonshot package, it's like, you'll get nothing unless you're 10x the company, in which case we get a bajillion dollars, right? And then after two years, you're like, well, I'm not going to 10x the company, but like, yeah, I'm working hard. And then I don't get money to take some money. That's the psychology. It's pretty reasonable. Yeah, no, it makes sense. At some theoretical level, like this sort of like all or nothing that creates the right incentives, but like, you know, they're working hard. They're fine. What an interesting article that landed on Monday. So I didn't fully appreciate it until Tuesday, because Monday was a holiday. The New York Stock Exchange and our related entities are building a 24-ish, hour, seven-ish day trading idea. Yeah, yeah, tokenized stocks and ETFs. You can train them. You can train them around the clock. ETFs. They're building it. They're thinking about it. It's in the works. Yeah. I feel like we've been talking about the concept of 24/7 trading for a while. Yeah. And it has the usual problems later, liquidity, fewer market makers to add. Well, that was interesting about this story. It was that it's, and I'd never really like, closely thought about this, but it's combined with blockchain, blockchain, blockchain, tokenizing stocks. I think there is kind of a reason for that, which is that traditionally, trade and settlement are separated in a world of business hours and sort of serious institutional traders. Like, you do a trade between 9/30 and 4 on a Monday and then you get the cash and you deliver the shares sometime on Tuesday and it's all sort of like civilized. But in a world of catering to retail traders who want to trade 24/7, settlement is an obstacle there. It would be weird to do a trade at midnight on Friday and then have three days of the money hasn't landed in your account yet. It's just not like the experience that you're expecting when you're trading 24/7, right? And so the Bloomberg sorry about it. Catherine Dirty quotes Michael Blower and at Nicely saying, we think it aligns with the retail investors emerging desire to be able to trade something at 504 PM on a Saturday and then use that money to buy something else at 505 PM on a Saturday, right? You can't use the money if you just like do a trade and then settle it. You're combining the 24/7 trading with real-time settlement and the way to do that these days is by tokenizing and talking about the blockchain. It's not the only way to do real-time settlement, but it's the way everyone talks about it now. Yeah, and also it's a language that I feel like the people who care about this know the idea of blockchain tokenization. We actually spoke to Michael Blagrand on ETF IQ, which is a television show in addition to being my newsletter. And he was talking about like, you know, they're in conversations with a lot of crypto native firms who are really excited about this, but also the largest, some of the largest ETF issues out there. And it's all about like getting their products in the digital wallets of the next generation investor. So that's who they're going after. And that's the language that they know. Does it all wallets? Yeah. Language I don't know as we've already established it. So we'll see. I mean, they're in talks with the SEC. It's not done deal. Yeah, it's a pretty good time to be in talks about blockchain and tokenize something. Yeah. So were you saying that you don't think like tokenization is inevitable or 24/7 trading? Oh, I don't think that tokenization is an absolute requirement for real-time settlement, but it's how it's going to happen, right? Yeah. If it's going to happen. Because I was going to say like 24/7 trading feels inevitable. Yes. It's coming. Yeah, although it's always like 23 and a half, you know? Yeah. Yeah, like time to reset the computers. Absolutely. With tokenization. I did like how you framed in your column that I'm trying to imagine another app. Like if I was like a huge fan of an app on my phone and then it stopped working at 4 p.m. on Friday and I couldn't use it all weekend, it would kind of be like. What am I doing? Like why? I come from a world where like, yes, like you go home at four o'clock and Friday. You don't trade stocks for a while, but like that's not like an app native living on your phone. Yeah, you grew up on the internet and with these apps then that doesn't really make sense. So trade stocks all the time. It's happening. Like one possibility is you'll have very limited liquidity and lots of craziness overnight. But another possibility is like, yeah, I think it will just put their traders on two shifts and you know, like it's mostly computers anyway. You just need someone on the night shift to supervise the computer and like maybe it's all fine. Maybe it's fine. I think it would be really fun to be on the night shift. Just like the one person with a bank of computers that are like trading against retail DJs all night long. I just I picture a cozy dark room, the warm glove, your computer screen. Right. Here's like sipping your tea. Got my flannel. It's aren't going down too much. My flannel, the job of bottoms on. Yeah. Sounds good. I don't think, you know, I think that job will be like you're wearing a suit and you're in Tokyo, but like it's possible. Yeah, but that's not very romantic. Yeah. All right. I feel like we covered a lot of grounds. A lot of ground. Good luck. Good luck in the snow. Good luck at the pub. Oh yeah. Thank you. Let us know how it goes. And that was the Money Stuff podcast. I'm Matt Levine and I'm Katie Grifeld. You can find my work by subscribing to the Money Stuff newsletter on Bloomberg.com. And you can find me on Bloomberg TV every day on the close between three and five PM Eastern. We'd love to hear from you. You can send an email to [email protected], ask us a question and we might answer it on the air. You can also subscribe to our show wherever you're listening right now and leave us a review. It helps more people find the show. The Money Stuff podcast is produced by Anna Maserakis, Moses Andam, and Alexis Haught. Our theme music was composed by Blake Maples. Amy Keane is our executive producer. Thanks for listening to The Money Stuff podcast. We'll be back next week with more stuff. [Music]