1929 vs 2025: Andrew Ross Sorkin on Crashes, Bubbles & Lessons Learned

Overview

This episode dives into Andrew Ross Sorkin's new book, 1929: Inside the Greatest Crash in Wall Street History—and How It Shattered a Nation, exploring the causes and consequences of the 1929 stock market crash, its parallels to today's economy, and lessons for navigating speculative bubbles, regulation, and societal shifts.

Notable Quotes

- Speculation is the twin of innovation. There is no innovation without some speculation. — Andrew Ross Sorkin, on the necessity of risk-taking in progress.

- Would I be okay with a less better car, but having a national transportation infrastructure that we control? I would say, yeah. — Chamath Palihapitiya, on the trade-offs of economic resilience versus technological superiority.

- The irony is, when the government provides a service, it completely distorts the market, and you can never get out of that free fall. — David Friedberg, on the unintended consequences of government spending.

📖 The Setup: What Led to the 1929 Crash

- Andrew Ross Sorkin explains how the introduction of consumer credit in 1919 by General Motors and Sears Roebuck revolutionized borrowing, eventually extending to stock market speculation.

- Brokerage houses proliferated, offering extreme leverage (10:1), with no regulations or risk underwriting.

- Technological advancements like radio fueled speculative mania, akin to today's AI boom.

- A social contagion emerged, driven by the democratization of finance and the aspiration for wealth among ordinary Americans.

🧑‍🤝‍🧑 The Characters: Major Players in 1929

- Charlie Mitchell, head of National City Bank, was a key figure in fueling speculation, earning the nickname Sunshine Charlie.

- Carter Glass, a staunch critic of Mitchell, pushed for regulation, leading to the Glass-Steagall Act, which separated commercial and investment banking.

- Sorkin reveals how lobbying and corporate rivalries shaped pivotal legislation like the FDIC and Glass-Steagall, often for business interests rather than consumer protection.

📉 Parallels Between 1929 and 2025

- The panel discusses eerie similarities between the speculative bubbles of 1929 and today's AI-driven economy.

- Andrew Ross Sorkin notes that while regulations exist now, human behavior—fueled by greed and the pursuit of more—remains unchanged.

- Concerns about leverage in private credit and real estate echo past financial crises, though the scale differs from 1929's extreme margins.

🤖 AI's Impact on Productivity and Employment

- Chamath Palihapitiya highlights the psychological resistance to AI adoption, contrasting it with previous tech revolutions.

- AI's promise of productivity gains could lead to significant unemployment, but also opportunities for higher-quality work.

- David Friedberg warns of the novelty phase of AI, where speed is prioritized over quality, delaying meaningful advancements.

💰 The Case for a Modern New Deal

- The group debates whether America needs a new social compact to address economic inequality and spending inefficiencies.

- David Friedberg argues that government overspending distorts markets, inflating costs in education, housing, and healthcare.

- Chamath Palihapitiya advocates for strategic investments in resource independence to preserve national security and economic resilience, even at a premium cost.