Transcription
Santa Fe Institute. Why, when you're at the top of your game on Wall Street, do you decide to finance, which was at the time, or endow, or become the donor, or sponsor, however you want to say it, for what was considered the most cutting-edge group of mathematicians in the world? Action. So, Santa Fe Institute in the late '80s, early '90s. I was interested as I was on the board of Rockefeller. So that starts Rockefeller. It's a university formed by John D. Rockefeller to sort of give back to the community, east side of Manhattan. Except it was old. It was sort of old-fashioned. They were talking about medicine, and medicine by itself was again subject to the ideas of science. They were trying to find, use science to find cures for disease. And I said, "No, we need to do something different. We need to start interdisciplinary work."
"In most..."
"How did a schmuck like you get on the board of Rockefeller?"
"What year was that?"
"I don't remember. Late, I think '89 or '91."
"So, that's one of the most prestigious research places in the world."
"Correct."
"Yes."
"Okay. How did a guy like you get on the board of Rock—a blueblood, internationally known, internationally known, uh, hard research, Nobel Prize winners all over the place. How do they pick a a guy like you, a trader from, or basically some guy from Bear Stearns?"
"Good question. So, I was asked to be on the board of Rockefeller, and I think it was right. I was on the board of Rockefeller. Uh, there was a money manager who said Rockefeller needs someone with financial expertise because the university is growing and there's lots of new things. You have to, again, we go back to the the original discussion the last time. In the up until the mid-'80s or sort of early '70s, the most important thing was your name. If you were Rockefeller, you already were considered to be brilliant. If you were head of General Motors, it was your reputation. It was who you knew, who your family was. What was your character? And then in the mid-'70s, basically, if you remember, you probably had a calculator. It was very advanced in those days to have a Texas Instruments calculator where it could, by putting in the numbers, it would multiply for you, do square roots. And that was the first. And everyone who had a calculator was already advanced on Wall Street. A simple, almost like your accountant. The most important parts of business were really now going to calculations. So, it's not only mathematics, but things that could be calculated. Reputation couldn't be calculated. I could give you, are you a 10 on a reputation scale? An 8? What does it mean to have a measurement of your reputation? We'll get to that later. But people, places like Rockefeller needed someone to say, 'Look, we are entering a different world where numbers and the numbers of companies, portfolio management was going to be balanced. It was going to be statistical. Jeffrey, could you come on the board, potentially sit on the finance committee?' Nancy Kissinger and a bunch of other people, and David Rockefeller, and I got along very well. He was just, he was this unbelievable human being. Respectful to everyone. He introduced his driver as his colleague. Not his driver. He would never say, 'This is my driver.' He said, 'It's my colleague.' And David started to explain to me world politics. So David would say, 'Jeffrey, money is going to be sort of the most important thing. People don't understand money. You seem to have this knack for money.' I said to David, 'Tell me about your life. What was the worst and the best part of your life?' So David said, 'When I grew up, everyone knew I was a Rockefeller. They didn't know that my father told me he would not leave me a dime. No money. But every time we went out to eat, me and my five friends at school, they would leave me the bill. They would expect me to pick up the check because I was a Rockefeller.' And he said, 'I was chairman of Chase Bank.' And he said, 'I remember like it was yesterday, one of the headlines in Time magazine said, David, please fire yourself.' So he thought that there was a a world that existed and would be a combination of both politics and business and leadership. What do I mean? He formed something called the Trilateral Commission. The Trilateral Commission is some spooky stuff. People said it was something the people that the Illuminati, there's some mystery about it. People that ran the world. It was politicians. But David said most countries, the politicians get elected for four years or eight years, separate from the royal families in England or in the Middle East. Someone's there for four years and then they're not there anymore. The most important people to have stability and consistency would be businessmen. So he formed this Trilateral Commission of businessmen and politicians from three major continents. So it was the North Americans, the Europeans, and the Asians. So he said to me, 'Would you like to be on the Trilateral Commission?' Now, I was 30 years old, 32 years old. I said, 'Great.' And he said, 'Well, you have to fill out this application so they have your bio.' And I looked at the list of people, and it was Bill Clinton, former president of the United States, um, Paul Volcker, every great leader in America, the Asians, the Japanese, and with a a very long description of their history. And they asked me to fill in what I would like to have written. And I wrote, 'Jeffrey Epstein, just a good kid,' which I thought was funny. Nobody else did. Um, so in answer to what your question, at that time, I recognized around the world that monies and currencies were not really well understood. But again, it was only numbers. So numbers, and I'll get to the fact that it was bad thinking. It's numbers are very good.
"Are most people, are most people you meet, even on the Trilateral Commission, when you meet most people, do you find most leaders financially illiterate?"
"Economically illiterate. Most, again, most political leaders don't come out of a background of finance. Most political leaders come out of a background of being popular. So in some of the countries, in some of the African countries, for example, they might have been a military person, they were a general. In some of the African countries, they might have been a disc jockey, or in our country, they would have been an actor. The knowledge of money isn't, they don't have expertise. They have no degrees in finance. They really, what, and this is one of the major problems. Their expertise, if they have any financial knowledge, is of their own checking account or bank account, and filling in their own taxes. So many world leaders who don't really have a financial underpinning make fundamental errors when it comes to money on a country or institutional level. Let me give you an example. If you, Mr. Bannon, if I said your assets increased last year, you'd say, 'That's, well, that sounds pretty good.' And I said, 'What does that mean to you?' You'd say, 'Well, I have more money. I guess I'm, I'm wealthier.' And say, 'Yes.' And if you had, if your debt increased, would you, would you feel wealthier or poorer?' You say, 'Well, I don't want to have increased debt. I don't like the idea of that. Sounds increased debt.' Now, that, and world leaders understand when their assets go up, they feel better. However, institutions like banks, things that people don't really understand are the financial underpinnings of banks. When I say your bank, Mr. Bannon, you have the Bannon Bank, you doubled your assets. Sounds good. But what does it really mean? It means people owe you more money. You don't have any money. More money? What? Yeah. A bank's assets are how much it is owed by other people. That's crazy. So if the bank goes from $2 billion of assets to $10 billion, it means people owe it an additional $8 billion, and they, but their assets have gone up. So the terminology of assets and liabilities is different for banks. It's not natural. And what most people, and you ask questions about world leaders, there's many people, I think your old boss Mercer understood. There's a fundamental part of money which is called fractionalized banking. And fractionalized banking is something that finance people understand. And the people on the street, and when I say people on the street, that's where I was when I started on Wall Street, would find it impossible to believe, impossible. Why? Bank and bank, I give you $1, just one single dollar. In our system of banking, I would say, 'Okay, Steve, I gave you a dollar. How much could you lend out to your friends?' And your natural reaction would be probably something less than a dollar because I want to keep something in my pocket. The way our system works is if I, you as a bank are holding my dollar, you can lend out an additional eight or $9.' No, it's impossible. I only have a dollar. 'Jeffrey, we have something called fractionalized reserves, which is if you have one, you can lend out nine. That's the way our system works.' And so, not only do world leaders not understand banking, but the man on the street, my father, who worked in the park department, it, it would be beyond his imagination that people could lend out more money than they actually had in their pocket. Next question."
"Well, how, how did this, in, in understanding that when you get on something like the Trilateral Commission, you're on the board of Rockefeller, which is the most advanced research, you get brought into the to the Trilateral, which is the elite of the elite."
"How, since you're only at that time..."
"30 something."
"...eight years from teaching at Dalton, right?"
"You're adult, 10 years teaching at Dalton."
"Yes."
"Walk us through, I mean, put us in the room. Walk, walk me through exactly what it felt like. What it felt like being on the board at Rockefeller. You got these Nobel laureates, and you're sitting there making decisions, and you start to meet these people at Rockefeller, and you start to meet these people, the Trilateral Commission. What, what did it feel like?"
"That's a great question."
"So, what did it feel like?"
"I'm in the business of asking. What does it feel like meeting some of these people like Kissinger or Rockefeller? And those are two extraordinary people. But in general, I think the question, the people on Wall Street, I tell the story. The first day, one of the first days when I was on Wall Street, someone said to me, 'Would you like to buy ATV?' And I could, I was looking in the brochure, and I couldn't figure out what stock had a symbol of ATV. V. And when I finally said, 'Well, I, I can't find it.' And they said, 'What the what's the matter with you? Do you want to buy a TV?' Which is, he was selling hot televisions, stolen televisions from the floor of the American Stock Exchange, referred to in common parlance, the televisions fell off the truck. That's so I knew what that phrase meant from Coney Island. But what I found was most people, be it in business, in normal life, or in the world leaders, don't really understand money. It is something they think about. They have a sense of what it is. They certainly want more of it. But they also make statements like, 'We want more money, but we don't want more debt.' Which just shows a misunderstanding of what money at its core really is. So they don't, most people don't. They want to make it, they want to save it, but to understand it intimately is not a normal characteristic."
"Just, just give me, approximate, you, you join the Trilateral Commission."
"Name it, might be."
"And we'll be able to show the, the, we'll pull down the, the chart of where your name was. But just give me roughly when it was."
"I think it could be '90. I don't remember."
"Let's say early '90s. Yes."
"When you got on the Trilateral Commission."
"And had the first, where was the, do you remember the first meeting was?"
"It was in Tokyo."
"In Tokyo. And at what hotel?"
"I would like to say the Hilton, but it's probably not."
"Um, and it's a three-day, four-day, three-day event. And..."
"Walk me through the whole thing. Starts with a dinner. Good. Take me. Just walk me through it."
"It was boring. I can't."
"You couldn't possibly think it was boring. It's [ __ ] It was boring."
"You had to be stars in your eyes."
"No."
"Did you fly over privately?"
"Um, yes, but it wasn't my plane."
"So, it didn't count."
"No."
"Um, you, you fly over."
"Yes. And and it was, who were the first, like when you first met those leaders, you had to be wowed."
"No."
"You're 10 years out of Coney Island."
"No. I am not wowed by people of position. I'm wowed by people of great ideas. And I don't care if it's the bus driver. I don't care if it's the student that I had who has teeth sticking out."
"Well, these guys have to have great ideas. The leaders of the three great continents of the world, North America, Europe, and the and and Japan."
"No. Many of these world leaders become world leaders because they're popular and they were able to get votes or they were able to convince people to vote for them. I learned later, um, many of them were just good at what they did in terms of politics. Remember, world leaders are politicians in general. They're not scientists. They're not intellectuals. They're not great thinkers. They're great politicians."
"At the, at the first Trilateral Commission meeting that you remember in Tokyo, in sometime in the early '90s, do you remember what were the big issues of the day that they were talking about, and what did you think about it?"
"Yeah. In fact, it was funny because they, they were talking about inflation and they were worried that what would happen, they, how do you control inflation? And I, as a mathematician, I didn't understand the concept. I don't understand the concept today. How's that possible? Well, when you talk about most things to do with money, they really, money is meant to be local. It's US dollars. Then I understand what it means. If inflation, it means my dollar today inflates and it doesn't buy as much as it did a couple of years ago. The price, the prices go up. I don't have as, it seems that everything is great, but in fact, my dollar is shrinking in value."
"If, if you, and you're the financial genius here. I'm just a, I'm just a lonely M&A guy."
"Um, if you let me, if you let me finish the thought."
"Go ahead."
"So, if, if you're in America, you start to, you can feel inflation. You have salaries gone up, but you don't buy as, can't buy the same car. In fact, it starts to feel weird because the value..."
"That's why I wanted to answer the question. That's my point."
"Sure."
"The, the central, the people who live and breathe this, the central banks have been haunted by the specter of inflation since the late '70s."
"Yes."
"First off, tell our audience how did that happen? The two great, uh, the two great financial events in the 20th century, I'm not going to get to the 21st, were the, the, the, um, the great inflation in Europe after World War I, the, the Great Depression, the hyperinflation in Germany that led to the rise of Hitler, and then this inflation in the mid-'70s. What was, before you go, explain inflation. Why is, why is this specter of inflation always the central thing in central bankers' minds?"
"Because it goes back to this, the first concept I said, the weird concept of fractionalized reserves. The system is not well understood. And will most systems, in fact, are not well understood. We don't know how our digestive system..."
"Stop. This is impossible. The most, the most, the world banking system, the world currency system, the world monetary system has to be so well understood..."
"...by the Greenbergs of the world, and the Bernankes of the world, and the, and you, uh, right, the currency traders, the, the, the, the guys making billion-dollar bets every day, the, the legendary guy on Wall Street in the late '90s, Solomon Brothers, um..."
"Lineri. No, the guy that wrote the money..."
"Michael P..."
"Yeah, Lars P..."
"Who's that about that great trader?"
"Lier."
"No, the guy that ran the desk that eventually ran the hedge fund that went Long-Term Capital."
"Ah, yes. I don't remember."
"Who's the guy?"
"I want to say, I don't remember. Sorry."
"Lutiner is big, but those guys have to understand the system perfectly."
"No, they don't understand the system. They understand the local part of the system. So, for example, why is not only inflation, most bankers are terrified to, if the public understood that the bank really doesn't have their money at any one time. There's one of the things during the Depression, there were runs on the bank. The reason the banks don't keep much money in the actual bank is they assume that not everyone's going to want their money on the same day. So, not really the fear of inflation. The fear is a run on the bank. Everybody wants to take out something that doesn't really exist. Inflation is tied to interest rates. It's a more complicated example, but when your money doesn't buy the same amount of product this year that it did last year, if it buys less and less, like it happened, you use the term hyperinflation. There's h certain countries that are not managed well, like in Africa. At the current, a hundred billion, billion dollar bill in Zimbabwe is worth one American cent. That's the perfect example of hyperinflation. It goes up. It doubles every day. So people are afraid that their value, and the system starts to break down. But so, if I said to you, does your doctor understand your body system? You'd say, 'Well, I hope so, because I want him to keep me healthy.' But you could have a kidney infection. You could have a heart attack. You could have a broken knee. There's lots of pieces of this system, and in fact, when you ask the question, very few doctors understand your entire body. There's a specialist for your knee. There's a specialist for your polyoidal cyst. There's a specialist for your head. And now we have specialists in different areas. So, in, and I'm going to get to your first question about Santa Fe Institute. The world economy and your body are both comprised of little systems interacting with each other and making one big."
"You, you, this is what's stunning for all the little guys out there, the populist movement, the little guys that that haven't had a pay raise in in 30 years. They think that these elites, you know, have everything. The, the guys in the room making the decisions, the, the, the party at Davos guys. You're sitting there and you don't think many people today really understand the complexity and really all the moving pieces and how they interconnect of the world's financial system."
"No. The nice, not only don't they understand the complexity, and that's goes back to Santa Fe Institute was an attempt of trying to see if there was a way to mathematize, formulize, or algorithmically understand what the term complexity means. That's, that goes back to the original question. Complex systems are complex by definition, but there's not necessarily, it's not one level of complexity. It is we might say, 'Well, our fingers are complex, the movements, the muscles of our hands,' but it's not as complex as the blood system. Now, I have a circulatory system. I have systems on top of systems. So, that there's no one group of or person that really understands the way the body works. There's no one group that understands the way the financial systems work. You might understand US bond markets. Now, you've asked about the trader, Long-Term Capital. That was a bond fund, very small part of this very complex system. So, the goal of the Santa Fe Institute was to see, is there a way to get in, somehow understand how complex systems interact. Fast forward, Steve, to today, where Google and these other, um, engine companies, the other tech companies are trying to build artificial intelligence. The strangest thing that they found, one of the strangest things is that the systems that they design, this artificial intelligence, which a lot of people have heard about, is they design a bunch of systems. They're called neural nets. Terms simply taken out of brain work. Neurons in the brain. Nets because they actually look like a net. They put in some inputs. The computers work. Spit out an answer. Sounds normal to you. It's because you're thinking about that calculator you had in 1976 on your desk. When you ask the person who designed the system, 'How did it come to that answer? How did your neural net? Can you show me the calculations?' They say, 'No, we don't know. We don't know how the thing we designed actually came up with that answer.' That's pretty strange. They take the same neural net now, and they put it in front of a video game. No, no learning, nothing. They said to the computer, they say, 'Sit in front of your video game and learn how to play.' It seems the computer learns better than any human in history, faster than any human in history, beats any human in history. But when you ask the designer, 'How did it do it?' No one knows. It just did it. So that's the first little touch of things that we already have gotten to a place where we don't understand it, and we built it."
"On Sunday afternoon, September 14th, 2008. Where were you?"
"Sorry."
"It was the night they put Lehman Brothers in bankruptcy in London."
"I was in jail."
"Seriously?"
"Yes."
"So, the financial crisis of 2008 happened when you were in jail?"
"Yes."
"Oh, this is going to be so amazing."
"This is going to be so amazing. Um, I take it you couldn't, you didn't have your Wall Street Journal dropped off to you in the morning, your Financial Times."
"No."
"How did you hear about the? How'd you hear about it? Because I want the, I'm..."
"I forgot about this, but yes."
"I'm trying to get this is going to be amazing. This is, let's go back and do that again. Uh, um, Sunday afternoon, because I want to find out about people, the geniuses understanding the complexity of the financial system, because I think the best example we have is the financial crisis of the crash of 2008. Sunday afternoon, September 14th, I think it was 2008, is when they were working feverishly in Midtown Manhattan at the Lehman Brothers offices, and at various law firms around town, and with the Secretary of Treasury about, and the Federal Reserve, what they're going to do with Lehman. They decided they weren't going to save it, and so they prepared to put it into bankruptcy at the open of the market in London the next day. How did you hear about what was going to happen to Lehman Brothers, and what did you immediately think when you heard there was going to be put into bankruptcy?"
"I'm glad you asked that question. I was in solitary confinement, September 14th, and unbe, again, some of the public stories about the wonderful time I had in jail and my work release, which didn't come till months after I'd been there since June, in an 8x10 cell with a bed in the back, six-foot bed in the back, a uh chrome sink with toilet attached to, and a little piece of metal sticking out that was supposed to act as a table. Now, since I was in jail, there were no books. Why? There's no library. No library, but you're in jail. No, I was in jail, not prison. So, in jail, I was in a place called the Special Housing Unit, which is for the roughest, toughest, meanest people. They had put me there, they said, for my own protection. So I was in an 8x10 cell with a little slit in the door where they would serve my food on a on a tray about 9 by 4 inches, and then soon as I finished eating, they would take the tray and close it down. And one of the guards said, 'Do you understand? There's a, there's Wall Street's crashing. I'm, I'm worried about my pension fund. What should I do?' And I said, 'Sorry, Wall Street's crashing. What's happened?' And he said, 'There's some crisis and some companies are going bankrupt.' I said, 'Are you sure?' And he said, 'Yeah, it's all over the papers. Everybody's ter, we're all terrified. We're going to lose our life savings because we have either a 401k or our pension funds. We don't know anything about money. Mr. Epstein, can you tell us like what's going on? Am I going to, am I going to be able to afford my children's education? Am I going to be bankrupt? Like this company called Lehman Brothers, and there's another company on the front page today called Bear Stearns.' Oh, no, I said, 'Why?' Because that's the company I was a partner in. And in fact, that was a company I had a very large investment in. So, as a great story, I, I didn't have my Wall Street Journal, but in the early mornings, you're allowed to make two phone calls, collect. And when you, you pick up the phone, you can dial a number, and when the person picks up, they say, 'You're getting a call from the Palm Beach County Jail. Will you accept reverse charges?' And the person either says yes, and the call goes through, or the person says no. The person I had called was Jimmy Cayne, the president of Bear Stearns, and I said, 'Tell me what's going on.' And so, that my knowledge of the financial crisis happened with Jimmy, who was at the center of the storm, telling me about what Lehman had gone under, and they were trying to figure out a way, should they bail out Bear Stearns. The, um..."
"Did it strike you at the time of the mess you had made of your life to be in a situation that you're one of the greatest financial minds in the world, looked at by world leaders, leaders, and asked your, you know, your thinking by the most prominent and important people in the world, and here you are in solitary confinement. You can't even, you can't even, you got to make a collect call to somebody. Did, did it strike you at the time how, how all the threads of your life had come together and and and and put you in a position, or you had put yourself in that position?"
"No."
"So, it never struck you when you had to make a collect, your one collect call, one of your two 50% of your collect calls that day, you call the president or the head of the CEO of Bear Stearns. The biggest financial event in your life is taking place, of which one, every important person in the world would be seeking your opinion. Number two, would be a, a once-in-a-lifetime opportunity to apply your craft. Number three, it would be a once-in-a-lifetime opportunity to make money if you were smart. And obviously, you're smart. You're telling me here truthfully that it never hit you at all of how you'd ended up in a place where you had to make a collect phone call from a jail cell that was 6x9 with a steel bed and your food being passed into through a slot?"
"The question you want to ask is, who was the other call to?"
"Okay. Who was the other call to?"
"The other call was to my friend at JP Morgan, who was then, I didn't know it at the time, trying to buy Bear Stearns. So, at one point, I had two phones. It was difficult because they're afraid people are going to hang themselves with the phone cord. So, they don't actually come together, and they're pretty short. So, I was actually going between two phones, talking to Bear Stearns and JP Morgan at the same time. So, I found it amusing."
"And it never struck you about how to end up in a situation like this?"
"No. That would be probably means I would be too self-aware."
"You can't possibly expect me to believe this."
"I know. I don't believe it. It's even, you're telling me that, and during that day..."
"You never had a moment you sat there and go, 'What the [ __ ] have I done with my life that I'm in a 6x9 jail cell when I should be on a trading desk, or I should be in my $250 million, you know, greatest townhouse in New York City, taking calls from the King of Saudi Arabia, the President of China, the head of Russia, the President of the United States, to, uh, save, uh, the world's population from a financial debacle?' You're honestly expecting me to believe that that never happened?"
"You're suggesting I was sort of somewhat depressed, and how, how could this happened to me?"
"I'm not saying depressed. I'm saying a moment of awareness of how could I get myself into this situation?"
"No, I was just say, how strange that this happens. Just, it's strange. I'm wearing a jumpsuit and flip-flops."
"What color was the jumpsuit?"
"Brown."
"Brown. Brown jumpsuit."
"Yes."
"Brown jumpsuit and flip-flops."
"Flip-flops. Yes."
"With no access to books, no access to newspapers."
"No access to anything."
"You had lived on information..."
"Except my Almond Joy bars. I had extra Almond Joy bars."
"Did you eat Almond Joy bars and things like that because you're afraid of what the cooks did to your food?"
"Yes."
"Is that because of, that you were in for the crimes that you were in for?"
"No, it was just be, in fact, I was..."
"Because you're wealthy."
"Yes."
"How did it, how did you know that?"
"Well, people, people would constantly come if I was passing by or had to go for my medical, people would either ask to borrow money or make some other types of comments about..."
"In the beginning."
"What were the comments?"
"At the beginning? What were the comments?"
"It, it serves you [ __ ] rich guys right that you're here next to me."
"There was nothing about your crimes."
"No."
"So, all this rumor you hear all the time, uh, about people in prison that commit the type of crimes you commit, that's, you're saying in your personal thing is not true?"
"No."
"It was all because you were rich."
"Yes."
"And it was all because they wanted to borrow money."
"Well, get advice."
"Yes."
"Where they get advice to the, to go long, to go long. You're telling me, you're telling me in solitary confinement, they're, they're interested in going long?"
"Yeah, they want to know what..."
"What's that say about human nature?"
"Well, what I think the people find, one of the reasons they wanted to keep me in solitary confinement was they're afraid that everybody would want to know which stocks to buy. And but what happened was after this crisis, now it's on the front page of every..."
"I don't want to leave, lose this day. Sorry. Sorry. When you first heard that, did you..."
"Was it Bear, Bear Stearns had been kicked into bankruptcy, what, six months before?"
"No, no. This is the same time. This is part of the same deal."
"I thought, I thought..."
"No, no. Bear Stearns, they said, the Bear Stearns, oh, they saved Bear Stearns and didn't save..."
"Uh, Lehman Brothers. That's it. Six months before, they had bailed out Bear Stearns, but Bear Stearns was still a zombie."
"A what?"
"A shell of its former self."
"A former self. But they had, quote unquote, saved him. They admit. Why did they make the decision, in your mind? Why did Hank Paulson and Bernanke, this, what's this concept of moral hazard? Explain to the audience what moral hazard is, and why, why did they save Bear Stearns six months before, and why did, did the smartest guys in the room decide not to save Lehman Brothers?"
"It's a good question. The real issue is, is I'd have to go back when you have these systems to the way your doctor responds to any type of emergency in your body. If they might decide to save your kidneys and let your gallbladder go, because the gallbladder is less important to your overall system. It, people, if at that time, even, it's not that long ago, the boogeyman was, when said, 'What really happened, Jeffrey? What really happened? Why, what is this financial crisis?' And you know, some of the progressives and the right-wing blame it on the banks. It was the bank's fault, and it's the fault of this very esoteric, unknown concept of derivatives. It was really the derivatives that caused this financial crisis because the derivatives got somehow out of control and like the in the Mickey Mouse..."
"And that was the way you started your financial, your financial, your your road to a billionaire went right through derivatives."
"Yes. But it's, but derivatives were not the cause. Derivatives were not the cause at all. It's like saying your hair was the cause of your heart attack because it was on the top of your head."
"There isn't, let me say, there's no one specific cause. There's a system collapse. So, when many times when they have to make your death certificate, when you say, 'Well, what did he die from?' They'll say, 'Heart failure.' But if you say, 'What was the cause of his heart failure?' 'Well, he had blood pressure, his sugar was high, he was diabetic, he had all these other problems.' But he said, 'No, no, no. We need a word on your death certificate. Did he die from brain damage? Did he die from heart failure?' That's the financial crisis. Many said, people said, 'Well, what caused it?' They wrote, like on its death certificate, derivatives. But derivatives were not a fundamental, derivatives are not a fundamental cause of anything."
"On the, so, was it Sunday or Monday? I take it was Monday morning when you made your two collect calls, and you're talking to Bear Stearns on one hand and Morgan Stanley on the other."
"JP Morgan."
"JP Morgan. Did you, that was Monday morning. Did you, Jeffrey, being one of the financial geniuses in the world, did you understand what Lehman Brothers going into bankruptcy, the domino effect that by Thursday, the financial system would be under such extremis, if it didn't have a trillion-dollar cash infusion in the United States, it might collapse? Did you know that at the time? Did you view that at the time?"
"Yes."
"You did."
"Yeah."
"Why?"
"Again, I, I, I don't want to bore you or the audience with the idea of it's a medical procedure, but you had system failures. So, you'd recognize that if I said to you, 'Did you realize when your father was on the ground and he was clutching his chest and he couldn't breathe? Uh, it was a bad situation. He, he could die.' That's how I saw it."
"Did you, did you know, did you immediately think about the commercial paper market? I mean, the, the mechanical triggers that actually had to, you had to blow through these circuit boards. Did you know the circuits? Did you understand the circuits, or did you have a concept of the circuits that were going to get blown through?"
"Yes, but only because of an analogy to a body. And in fact, from my se, my telephones against the wall with my little metal wires, because the next day I talked to another person in Washington about the issues of what I thought was happening, and I made the same discussion about the..."
"They were at the Treasury Department."
"Yes."
"So, in a, in a 6x9 cell in..."
"The phones were outside the cell."
"...in Connie, in, in Palm Beach County, California."
"West Palm Beach, Florida."
"West Palm Beach, Florida. West Palm Beach, Florida. West Palm Beach, Florida. Uh, you're making a call to Washington D.C. to talk to some deputy, deputy Secretary Treasury."
"Someone in Treasury."
"Right. Someone in Treasury."
"Right."
"And that does not, the night before, before you go to bed, it doesn't dawn on you at all. You never have a moment of self-reflection that, 'How did I end up on this metal cot when I should be at the center of things?'"
"No. I had a telephone. So, I've said, I can talk to it. It makes no difference where I am. In fact, I'm still talking to the same person if I was at my home in Palm Beach, but I'm here in jail."
"Home in Palm Beach."
"I can dial my own phone."
"That's, that's [ __ ] No, but you can also make a thousand phone calls here. You got to make one, and he's got to take..."
"Think how much better that was. I had to decide who was the right person to call. That was unusual for me because I would have called 20 people."
"And what was this? What was the advice you gave?"
"I said, 'We have, you have a sick patient, and it's very much like a sick patient in the emergency room. Don't, you can't think about it like your car. People in normal walks of life think about money and things as a machine. And unfortunately, so if your car breaks, cars are always easy to fix. My jets, my cars, if it breaks, I know it can be fixed because it simply follows the same pattern. If this part breaks, you replace the part, and the thing works again. People and the financial system are not machines. They can't be fixed the same way. You can't simply take out the B, put some more juice into the commercial paper market, and that's like replacing the carburetor on the car. It's much more, I have a patient who can't breathe, has a stomach problem, can't see, has looks bleeding at the same time. What do I do first? I have to think about it as a system. Where's the most logical place? What's the most dangerous place? If your heart stopped, we have to start your heart again. If the, in the equivalent to the money market, why do I have to start your heart again? I need to get your blood flowing. If your blood stops, the, you're dead. If liquidity, which is the equivalent of blood in the financial system, dries up."
"What's liquidity is basically cash, putting cash into the system."
"Forget about what it is."
"Okay."
"Liquidity is liquidity. It allows the system, it's the blood of the system. You need to pump blood hard into the body of the economy to keep it flowing. And if you, if you're especially when you're worried about someone dying, you're not going to be worried about the niceties of, 'Well, you got the shirt dirty, and there was some damage.' Pump in that blood. Keep that."
"When you talked to, to the person in Treasury on Tuesday the 16th, did you get a feeling, as you were sitting in your 6x9 jail cell in West Palm Beach, Florida, that they were on top of things?"
"No. You can't. It's impossible to be on top of things. There's no such thing. It's again, the doctor watching the patient die. You hopefully have some confidence that he's seen it before. He recognizes that there are some steps he has to take first before he bandages the guy's finger or worries about what shoes he has on. So, you hope that the people in charge, your doctors who are working on the emergency patient, have enough experience and frankly judgment to try to keep the patient alive."
"Did you think that they, did you think that they..."
"Had those things? Patience and judgment."
"They had pretty good judgment, and you needed a lot of luck. Just like in the dead patient, you need to hopefully you put that blood in, and it's not too late. And you maybe you make some mistakes, but you have to know you're going to have to give it a shock."
"In the run-up to, uh, the September crash of 2008. Yeah."
"I guess you weren't occupied with finance that whole summer. How long had you been in jail?"
"I got, went to jail June 30th."
"So, the entire summer?"
"Yes."
"Before you went into jail, you were still very active in the financial markets."
"Yes."
"When I say active, you trade currencies every day. You trade stocks every day. When, when people, someone like you, or you give, you give advice to people to trade stocks or trade currencies?"
"I, I don't trade every day. I, I think that's like Woody Allen said, it's, you can't beat the bank. So, I, I try to pick my spots. You know, George Soros picked his spot in the, when the pound collapsed. This would have been a great money-making opportunity that passed me by when I was in jail, but that's not how I think."
"In the run-up to that, in the spring of 2008, were you, that's when Bear Stearns got in problems, I think, in, in the spring of 2008, and they decided to bail it out."
"Did the Bear Stearns guys talk to you for advice at that time, when the, the big crisis in Bear Stearns?"
"No. The, you see, again, unbeknownst to most people, and it's easy to blame people for the financial crisis, like you'd blame someone for giving your father the drink before he had his heart attack. But what really happened, the real enemy of the finance system was Bill Clinton. And if, if you ask me what, and who caused the financial crisis, I would tell you it was Bill Clinton, because of what Bob Rubin and he did to the financial, deregulate the financial system."
"No, because as of the last time we had our 60 Minutes interview, you talked to me about home ownership, and you asked me whether everyone should own a home, and I told you no, it's too risky. So, the financial collapse of 2008 is because of hardworking African-Americans, Hispanics, and and and and whites who wanted to have a piece, have a ownership stake in in in the society, that all rest on their shoulders. They're the culprits."
"No, not at all."
"Okay. Then..."
"I, I didn't say they were the culprit. I, I was pretty clear it was Bill Clinton."
"Okay."
"Why was it Bill Clinton? Because Bill Clinton wanted to get votes from those people, and he sold them the idea that instead of renting in a house, and historically the values of houses had gone up, and he said, 'You guys in these local communities who haven't been able to afford a house before, I'm going to show you a way. I'm going to give you a way because I'm sure you, I'll get your vote, that you can own a house because I want your vote.' So, what we're going to do is I'm going to let you buy a house, Mr. Bannon, when you really, you, it's, you're right on the border, maybe or not even on the border. You, your credit is not good. Okay, let's, let's be honest. And it's not my fault, or it's not Bill Clinton's fault, but whatever happens at the moment, your credit score or whatever it is, your credit's not good. Now, normally, you come to me, and you're a, want to borrow money. I'm a bank, and I say, 'I'm sorry, Mr. Bannon. I can't lend you money because your credit score is not up to where it needs to be. Hopefully, if you work harder and clean up some of your problems, it will be.' But no, what I say to you is, 'I'm going to figure out a way to lend you. Lend you, not give you. I'm gonna lend you money anyway, though you don't have a good credit score.' And don't worry, I'm gonna get rid of the term that you don't have bad credit. Bad credit sounds pejorative. You don't want to be a person."
"Sounds judgmental."
"Yeah, it sounds judgmental. So, what we're going to do is we're going to call your credit situation subprime. Oh, nobody knows what that means. Subprime. That means prime is good credit. Subprime is not good credit, less than good credit. So, we'll call it something that people really won't follow. And we'll tell you what, we're going to have people lend you money though you are a subprime borrower. And I will figure out some government agencies to guarantee your loan. No, I don't think you're a good risk. So the banks say, 'No, no, no. We don't want, initially.' The banks said, 'Sorry, this is too risky, Mr. President, for us. We're in the business of managing risk. It's not our money. It's the hardworking people's money sitting in our bank. We can't lend to people whose credit is not prime. You're asking us to lend to people who are subprime.' And he says, 'Here's the key. If you don't, Mr. Bannon, I am going to make sure the Justice Department charges you with discriminatory lending because you refuse to lend to my subprimers.' In business terms, you..."
should never lend to. But what we'll do is we're going to I'm going to form an agency called Fanny May and Jinny May. Just another agency names. They'll guarantee your loan. So don't worry. Don't worry. You don't have to pay it back anymore. Even though you and maybe you don't even have to work as hard anymore. That's that's probably a harsh statement, but these players, these two big firms, Fanny M will guarantee the fact that that bank will receive its money.
Now the bank says, "Wow, best deal in history. I refuse to lend to Mr. Bannon, but now he has the big brother uncle, his uncle Sam." He went to his uncle Sam, and Uncle Sam says, "I'm guaranteeing it." The bank says, "I want everybody. Give me as many people as you can give me because Uncle Sam is the best credit in the the world. Not only it's the United States government. We'll take it all. We'll take as much subprime as we can handle because it's the best investment for the moment. It's a strange investment because it has politics that has inserted its way into the numbers. Politics doesn't belong in the in the markets. But now we're going to have I want the votes. We'll make guarantees that you who can't get a house normally will be able to get a house from the bank. The bank says this is the best deal in history. We will package a 100, 300, a thousand of you subprimers and we'll sell it off to somebody else and the whole system becomes mired in subprime mortgages. That's becomes the issue."
>> What do you mean mired?
>> Does too much supply is a supply demand problem. You get too much supply.
>> No, it it's a very good question. What does too much supply mean? Well, then you get to people go back to your first question to me. Government leaders. Government leaders know if they're good if and they can do mathematics, they can balance their checkbooks. So certain people in Congress said, "Well, how do you value these subprime mortgages?" The banks say, "We've we've been valuing them the same way we've always valued them for the past 20 years." The accounting firms. There's something in in this country called GAAP accounting, which is a a standard type of accounting. And we account for them the same way we've always accounted for them. If we paid $1,000 for your mortgage last night, when we put it on our books today, we're going to say its value is $1,000. Makes sense. I paid for it less. Value. It's $1,000. That's what I paid for it last night.
No, the Congress people said that's not really a good answer. You know, that does that doesn't give us confidence that you know what you're doing because what happens if you have to sell it tomorrow morning? If I you there's a something's happened and you have to sell it. Remember there's kinds of stress tests. Would you be able to value it at what you paid for it the day before? And Wall Street says that's not the way you can think about this. This is crazy. We always value things at the cost from the day before. And they changed the accounting method. In essence, to say not what it was worth yesterday, but if I have to sell, what would it be worth? That's impossible. So what happens is every bank now has to value something they bought yesterday at lower than they paid. Never before in 20 years did they have to do this. So something they bought at a,000 on their books was a,000 is now 990. That starts to you asked the question about what did I start to think about? Something's a,000 and 990. This person now has to value it at 980.
When did you first start to get nervous understanding Bill Clinton?
>> In all this? Did you change glasses?
>> Yes.
>> Okay.
>> I changed shirt.
>> I saw that black.
>> Um
>> Are you okay with the
>> Yeah, great. I think we're going to have all kind of changes.
>> I'm experimenting. Okay.
>> Um when did you get a feeling? Did you ever anticipate before it happened something like 2008 could happen?
>> No. How could that be? Because anticipated to death is that it's very much like a Would I expect anticipate I'll have a heart attack tomorrow? Unlikely.
>> Was 2008 a heart attack or stroke? Debilitating?
>> Um, it's a better um I don't to It was both. But why was it both? Because in fact as I said the blood was getting dried up in the system and the head which is sort of the central bank wasn't working. So to some extent it was a combination.
It was did you see that building up over time?
>> It's it's always been lurking in the background. I mean if if you have an older parent would you say it's possible did you anticipate him having a heart attack today? No. You hope things are going to go better and maybe they'll fix it up. um the system was getting too complex and it wasn't based on derivatives because what people keep forgetting and as I was just explaining Wall Street and in many professions including Wall Street, Wall Street makes it sound complicated. They don't want the little guy to understand what they do because they make so much money and they don't do very much. So they they couch it in words like derivative and stock options and commodity futures and different types of contracts. It's all fairly everyone is capable of understanding it. It is not complicated. But Wall Street because they make so much money from doing fairly simple things needs to make it more complicated than it really is.
The we had a a very big recession in the early 90s based upon real estate and and and Japan basically imploding.
>> Let's again you had a recession in the '90s. I don't know what it's based upon. It it's always interesting to look back and say separate from there's certain triggers like there in the 70s there was a
>> What what do you think it was based upon in the '90s downturn? It's clearly there was a huge downturn.
>> No, I I just I know there was a downturn. That's what I know for sure.
>> That's a fact. What
>> Everything else is sort of speculation about why why did he have that?
>> I understand that, but there's some speculation that has 0% probability of being true and there's others that have 90%. In in the r in the range when you look at the range of alternatives of what could have caused it of and 90 and what I'm trying to do is get you all the way up to 2008. Look, you're the smartest guy in the room, right? You know that.
>> Do you think there's anybody in the world today?
>> Oops. That's this is going to be a bad question. No, no, but do you s do you think anybody in the world today, the Allen Greenspans, the Bernankis, any C, is there any central banker you know, any partner of any Wall Street firm, any guy running a trading desk, and I would take it that would be or anybody at a Larry Frink at Black Rockck, uh Steve Schwarzman at at Blackstone, the top hundred financial guys, and let's throw in a couple of Nobel economists and let's throw in the best professors at the at Wharton and at Harvard, at Stanford. Do you think that there's anybody that understands money or understands the world's financial system as good as you?
>> There must be.
>> But it doesn't come to the top of the head.
>> No.
>> Okay. Fine. Now,
>> Now that now that Okay, now that I've gotten that, no, now that I've gotten that, let's go back to 1990 in that arc from 90 from the fall of the Berlin Wall to 2008.
>> Good. We had we started with the the implosion in Tokyo of the Japanese economy, Japanese financial markets. We had the huge runup in in internet stocks, right? We had the implosion of that in 2000. Uh the um you know the the the bankruptcy of bar of uh of Drexel Burnham in 90. Mhm.
>> Implosion of Japan, huge runup in equity markets for the internet, implosion of the internet 2000, 10 years later roughly,
>> And then this runup through the Iraq war and all that, the runup to 2008. Every 10 years, it seems like we're in some sort of 10 years before the 1990s was was the 70s. Am I
>> You sound like an astrologer.
>> Okay.
>> And not a financial you're a mathematician. It just seems to me a pattern of every 10 years.
>> That's that's misleading. That's exactly right. Because people like to see patterns. People like to see patterns where there are none.
>> So a pattern of a financial crisis every 10 years is just in my mind.
>> Yes.
>> Long-term capital. Long-term capital that had to be bailed out back in the late 90s when everybody panicked. And that wasn't a big that bailout today would look small and was $5 billion or was $30 billion.
>> People businesses fail all the time.
>> But they long-term capital. The Federal Reserve stepped in. But I'm saying they f things people go bad. Things go bad all the time.
>> Yes. The the the local the You're correct. The audiences watching this, the little guys, they go bankrupt all the time and nobody gives a [ __ ]. You know why? They're a little guy. But when Long-Term Capital Management goes bankrupt or Bear Sterns goes bankrupt or Lehman Brothers goes bankrupt, people care because it,
>> You know, it's a it's an unfair characterization.
>> Why do you say that?
>> Because again, it's the complexity of the situation. If you think about the think you have a complex system you have your body now in fact the little guy is my finger this this is
>> And Bear Sterns is your heart
>> That's correct the banking system is my heart the system I can't risk my my because remember it's not only
>> You haven't been able to name you haven't no hang
>> I was trying to hang I wanted to see if the hang on
>> You haven't been able you're not good enough yet you're like junior junior wizard trying to do it you you haven't you haven't since we can't name another guy that's as as as good as you. There may be a couple out there. You're not you're not bragging. You're you're humble.
>> It had to be sometime. Please tell me there was some time before you went to jail and and and basically got cut off from daily information in the summer of 2008 um that you started to get very nervous that this complex system that something was deeply wrong.
>> Okay, first let's go back. When I say no one understands the system better than I do, it doesn't mean I understand.
>> You always sound like a doctor you're afraid is gonna get sued for giving a a thing. You're not you're not taking on any liability. There's no contingent liability here for you.
>> No, no, no. But the word understand is the problem. I don't understand the system. So that's I don't understand the financial system.
>> Please stop. You cannot sit here and tell me what we just went through. I'll go through again the hedge fund managers, the money managers, the central bankers, the commercial bankers, the heads of the investment banks, the heads of all the trading desks, the top uh economists, and I'll throw in the business school lectures of Stanford. Of all the top 200, 250, you can't name off the top of your head. The guys are at least at your level. You have to understand it somewhat. No, sorry. We all don't understand it. No one understands it. It's a miracle. It's this this that's part of the problem. It's impossible to understand. That word understand simply means if this happens here that will happen there. It's predictable. Understanding means it's predictable. It's not predictable. That's the problem. It's very in complex systems that was the fascination. Is there a way to tease out some level of predictability? So even in fact you ask you would ask the question it's a great question which was was it a stroke or a heart attack. Now most people don't know that before they were going to have a stroke they had a stroke. Did they they just have a stroke? Do did they understand why? In hindsight you go back and you can make lots of explanations that might sound good and if you're talking to the the working man you're using language that he'll never understand. It's complex. So he just like going to his doctor. He says he has a gastrointestinal problem or he has diverticulitis as opposed to saying you had a stomach ache, you ate bad food. People don't like to say it in in normal everyman terms. The system had a stroke and we don't know why.
>> Let's go back to the spring of of 2008. Were you so wrapped up in your personal issues at the time you were not spending enough time on the financial markets or were you deeply involved in the financial markets like you normally were?
>> No, I normally I was involved. And you and so we're saying that the smartest guy in the room didn't see it coming.
>> No, of course not.
>> The bankruptcy of Bear Sterns you just thought was a Bear Sterns problem.
>> You didn't see it as systemic.
>> I I know you keep hopping on it, but it's it's not
>> Because you're a mathematician understands systems. It seems that anybody understands that they had a systemic problem, you at least be the first on the early search radar. If if you're not going to see it, then then you're then I'm really afraid because that means that that I always assume there's at least a set of guys out there that have some sort of sense that something's not right. Imagine the guy who has a stroke or had the heart attack when you ask him, "Did did you feel funny the day before?" He's going to tell you, "Yeah, I didn't feel right. Something was off. I didn't feel right. I had a my my stomach was right. I felt a little dizzy. I felt a little weak. But if you asked him the day before, do you think you're going to have a heart attack tomorrow? He'd say, no, I just feel a little weak. I'm a little dizzy. My stomach hurts. So the these systems and that's the issue of complexity. What complexity says is that in fact this everything seems to go along and people have seen it. One of the great examples of complex systems is sand dunes. In fact, the sand keeps building up. People have seen some and all of a sudden one more sand drop and the thing start all the sand starts running down the hills. That's the way I see the financial market.
>> But you funded uh Santa Fe in the early 90s or late 80s?
>> I believe it was early 90s. I can get back to
>> But but early 90s Santa Fe was funded for the study of complexity theory.
>> It was stud math. So let's let's back up. So why did I buy a ranch in New Mexico 1993? So that's gives you some sense. So I would have funded it in 1990. Uh Los Alamos, which was the high energy lab up in New Mexico, was losing all its scientists.
>> And Los Alamos was where Oppenheimer where the where the a lot of the the nuclear weapons program, the bomb,
>> That's where the Manhattan Project
>> Manhattan Project was as Los Alamos. And you bought your property out in New Mexico to be near that.
>> Yes, because the scientists were going to be they cut the funding for high energy physics, but the people who worked in Los Alamos would still be in the Santa Fe area.
>> They cut that because the end of the this was the cold war dividend, right?
>> I don't remember exactly why. It was because again people thought there was that physics and high energy physics really wasn't that important
>> Because that was about nuclear weapons.
>> No, it was because they were trying they decided which maybe not right. This was the same time that Murray Gell-Mann came up with the term quark. Qu U A R K. And he he picked it out of an old poem, the word quark. But it was something it was mysterious. So they were starting to understand in the '90s that the in the our world of the physic world there was things that were just unexplainable. They called it strange things. You gave it a name. You gave it some characteristics. You called it had charm was one of the term. It had a charm. It had a flavor. It had a color. But nobody really No one, Mr. Bannon, understood what it was, just like the financial system.
>> And you wanted to investigate that.
>> I I wanted to see if we could build tools so others smarter than me could help investigate it.
>> And that was the beginning of your concept of the Santa Fe Institute.
>> Yes. And Santa Fe Institute was founded to do study in this type of
>> Can you can these areas of strange things be described by some form of mathematics. So that's what I'm trying to get at the the the foundational thought, the organizing principle
>> Of Santa Fe in the high physics lab at um at Los Alamos, which had created the been the the headquarters of Manhattan and the Trinity project, right? The bomb.
>> Yes.
>> So you're talking about the the elite the high priest
>> Of physics
>> Of physics.
>> Yes, sir.
>> Which high priest of physics some subset of that is also mathematics.
>> Yes. They're both similar. Project out. One of the tools you want to do is to make sure that in this complex system, the finance system, I'm doing a lot of this for philanthropy and a lot for the good of mankind, but also to be able to understand this complex system, the most complex outside of maybe our body of of the financial world.
>> Yes.
>> Did they create tools or were you a were you smarter in than the mid as 15 years later than you had been then because of work that was done at Santa Fe?
>> No, that was it was great. But in fact most of the money most of my philanthropy in the area of can you describe things that appear to be unexplainable by mathematics and can can you fund people who have new ideas and unfortunately when someone thinks they've been able to there was a man Steuart Calfman when they think that okay I figured out how to be able to predict the unpredictable what appears to other people to be unpredictable but my system in those days it was called genetic algorithms can predict the what things will happen then they all want to make money so they use their systems to try to figure out they know they have figured out the way to make money because they figured out the unexplainable they try they go bankrupt and we start again so in with a cold view what I've come to realize is that the the attempt to mathematize formulize or what in your prior work to understand What really is in today's world still unexplainable is impossible. They're miracles.
>> The uh your first head of Santa Fe was Christopher
>> Langden. I think
>> Langden from from Australia.
>> Murray Gell-Mann was
>> Mur Gell-Mann was the fun. He was he was the the the rock.
>> Yes. He was the rock. He was a Nobel Prize winner.
>> Yes.
>> Yes. And and a wonderful guy. He came out and helped us with the Biosphere 2 project. He came with Chris Landon. Yeah. Chris Landon was the operating the dayto-day.
>> Chris was doing artificial life. Murray tried to lead his own artificial life.
>> Yes.
>> When Chris came to Biosphere 2 for the for the first um big conference we had in 1994, he was one of the most impressive guys there among all the world's elite. Q Gardens, the Lawrence Livermore Lab, the the labs at Sandia, um you know, all the all the major universities, Lamont Dar, uh all the big earth observatories, Woods Hole. What set Langden apart I thought and the reason I invited Santa Fe to be part of it was Langden actually made a presentation that everything and he was making this to scientists a lot of marine biologists a lot of people that are just beginning Wally Broker and people who were just beginning the study of climate change at that time called global warming that he made this compelling presentation that everything's really mathematics
>> It's all just back to math
>> And you have to all these experiments you do you're not one of the reasons they're considered by the high priest in physics as being real experiments is that they don't have a mathematical basis to it and everything has a mathematical basis to it. Langon seemed like a radical visionary. What happened to that concept?
>> You go back 350 years. So you have Isaac Newton, you have Leibniz. From move forward, you have people like Heisenberg and Gödel, Gür. And what every one of those mathematicians and philosophers came to understand is that there's something with there's numbers can describe certain things. Approximate certain things but in fact trying to put measurements and numbers on other things that are really unexplainable is folly. It's so 300 years ago they said that unexplainable realm was God and people who attempted in fact to explain the unexplainable who said yes I understand the unexplainable were charlatans they were the occults they were the astrologers they were the conmen alchemist
>> Yes well no alchemist was in fact they believed that there was a way to transmute one metal into another in fact they always wanted to see if they can create gold. There's no reason if you think about it they recognize that one metal is different than another metal because it has some additional pieces to it has additional neutrons or protons or electrons. So because they thought it was a machine, they believed it was a machine. If I can take five protons and add five, that gives me 10, I should be able to get gold. The move everything around inside these systems, the molecules transmute one molecule into another. And if this molecule I've transmuted it into is gold, I'm a rich man. It's back to money. But there's something strange happens. Isaac Newton says, "This is really weird. If if I want to push a ball on the table, I have to touch it. I could maybe I have to blow on it, but I actually have to push one side of the ball or the book to move that side. I'm pushing here." And obviously the this thing is what appears to us humans to be solid. So it moves as one thing. But the only way to get something to move was to touch it or put a force against it. Okay, seems to make sense. Everybody has that experience. I want to lift a glass, I lift it. If I want to push a ball, I push it. If I want to pull a ball, I pull it. But he recognized when the ball fell off the table, fell off the table. It went in a different direction. How's that possible? Nobody pushed the ball down. And he says, "This is crazy. Why did the ball go down?" I didn't push it. I just let it go. So, someone's pushing the ball because I know I am confident that the only thing that gets something to move is with a force that pushes. So, there's a force that's pushing the ball down. In fact, he never he called it gravity. He measured how fast it was pulled, but never was able to explain why it happened. How is it? What is gravity? It's this. Everybody says, "Well, why did the ball fall to the ground?" Because gravity took it. But what's gravity? That's, as Feynman would say, that's the name of the thing. We have no idea what it is. This goes to Santa Fe. They were trying to put explain the unexplainable. Can we measure?