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This is Masters in Business with Barry

Rith Holtz on Bloomberg Radio. I'm Barry

Rholtz. You're listening to Masters in

Business on Bloomberg Radio. My extra

special guest this week is Hillary

Allen. She is a professor at the

American University Washington College

of Law in DC. Where she specializes in

financial regulation, banking law,

securities regulation, and technology

law. She published a book, Fintech

Dystopia, a summer beachread about how

Silicon Valley is ruining things,

covering the intersection of finance,

technology, law, regulation, and

politics. It's a perfect subject for us

to talk about. Hillary Allen, welcome to

Bloomberg.

>> Thank you so much for having me.

>> So, fascinating conversation,

fascinating uh topic that you write

about. Before we jump into that, let's

let's spend a few minutes going over

your background. You get a bachelor's in

laws from the University of Sydney in

Australia, a master of laws in

securities and financial regulation law

from Georgetown here in the States. Um,

and you graduated first in your class

there. What was the original career

plan? Was it simply I'm going to go be a

lawyer? What what what were you

thinking? The original career plan was

I'm just going to be a lawyer. Uh, and

then I loved law school and I practiced

for 7 years and discovered there wasn't

so much law always in the practice of

law and I'm a nerd and I missed it. And

so the the drive was to go back to

Georgetown, get my masters, do some

academic writing and then launch a

career as a professor where I could

really sort of think slowly about the

law. And

>> and you practiced, you were in London,

you were in Sydney, uh, Sherman and

Sterling here in New York. tell us a

little bit about the sort of legal work

you were doing when you were a

practicing attorney.

>> So basically there's sort of two broad

categories of the work I did. Um I did

transactional work, banking

transactional, typically acting for

banks in leverage buyouts. Um but the

work I think I enjoyed more was the

regulatory compliance advisory. Um so

there was more law in that. um

especially when you had new financial

laws being handed down in Australia and

changes in the US with DoddFrank and

sort of trying to figure out how to

comply with those new rules.

>> So, how do you go from practicing

bank transactions and some regulatory

law to ultimately working with the

Financial Crisis Inquiry Commission?

Tell us a little bit about your

experiences there.

>> So, that was a a series of series of

fortunate events. Um, while I was doing

my masters at Georgetown, I had a

professor who was tapped to be um on the

staff of the Financial Crisis Inquiry

Commission and he pulled me in to work

with them two days a week and we were

investigating the causes of the 2008

financial crisis to put together the

report uh that came out which really was

sort of

>> it's a nice thick book that they

published.

>> It's a really thick book with a really

thick index even. Um, and the idea was

to tell the story and that's really sort

of stuck with me throughout my career,

the importance of being able to explain

complex things and how they knit

together to cause things. So, working

with the FCIC, how did that affect how

you looked at regulation in general, but

more specifically the government's

response to technology, new financial

products, um, the regulatory world in

general?

So the gift that I got from working with

the financial crisis inquiry commission

is sort of understanding that there are

a lot of things that come together and

you need to really look very broadly to

understand systemic changes. Um, another

gift that it gave me was, I think, a

healthy skepticism of innovation

rhetoric, right? Because if you think

back to 2008 and what caused it, you

know, there was all these stories about,

well, these new financial products,

these complex new derivatives, we don't

need to regulate them. They're

innovation, sophisticated parties

involved. We don't want to tamp down on

innovative potential. And so that that

skepticism has been a helpful skill set

as I've been navigating the sort of

post208

financial world where you have the

innovation rhetoric from Silicon Valley

infiltrating into financial services.

>> Uh you you raise a really interesting

issue that I I have to ask about. So how

much of what we see as regulation is

either an adherence to a a an ideology

that sometimes says regulation is good

and are guard rails on capitalism uh and

other uh ideology says regulation is

expensive and anti-inovative and reduces

job creation. It seems like regardless

of the facts on the ground, each side

has their belief system. H how do you

contextualize that?

>> Well, I mean, I think I don't think

there were too many people in the depths

of the 2008 crisis who were saying

there's too much regulation, right? I

think it's a function of where you are

in a particular time. I think people's

memories fade really quickly

>> and as soon as regulation has solved the

problems it was intended to solve or the

crisis that spurred the regulation has

dissipated,

people quickly forget why that

regulation is there in place and then it

becomes much easier to see it as

something that is just a hindrance,

something that is just expensive that

doesn't have a role to play. But I think

what we're actually seeing right at this

moment is the erosion of the securities

laws that really have stood investors in

goodstead since the 1930s. Not to say

they're perfect, but the the general

sort of investor protection regime that

the Securities and Exchange Commission

has always implemented has really

encouraged trust in the US um stock

market and and sort of made it the envy

of the world and people wanted to list

here. that's really getting peeled back

right now. And so I think, you know,

it'll be

pretty soon a moment where we realize

why we had all that regulation and we'll

miss it.

>> So, so heading into the financial

crisis,

um, I recall looking at some of what I

called radical deregulation prior, and

this isn't by no means the sole cause of

the financial crisis. Lots of factors

led to this, but you had the Commodities

Futures Modernization Act, which allowed

what was essentially an insurance

product to be issued without any

insurance reserves. Seems kind of risky.

And then you had the repeal of

GlassSteagall that kept uh depository

banks separate from speculative uh Wall

Street banks. probably didn't cause the

crisis, but certainly allowed it to get

much bigger at the at the very least.

Um, and yet there didn't seem to be any

desire after the crisis. Hey, maybe we

should put these things back into place.

Maybe we should repeal what was added

and restore what was repealed. Nobody

want they want to go a totally different

direction. Well, I think again this is a

story of political economy and there are

still a lot of people who are mad at the

Obama administration for prioritizing

health care over financial reform

>> because basically they had one shot at

doing something big. Um, and if they had

and I I'm not weighing in to say that

this was the right or the wrong move,

but if they had gone right out of the

gates with financial reform, I think we

would have seen more of the bigger

structural things that you're talking

about. So, you know, in that immediate

aftermath of the 2008 crisis, you had um

Sandy While who had been the head of

Cityroup and and had sort of engineered

the end of the GlassSteagall um

legislation and and from this may be

apocryphal, but apparently he had a a

deal toy that said um shatterer of

GlassSteagall that he kept kept on his

desk. And again, this may be apocryphal,

but I heard that he basically sort of

had a conversion after 2008 and said,

"Oo, yeah, probably shouldn't have done

that."

>> Well, well, a lot of people did. Alan

Greenspan famously said, "I incorrectly

assume people's concern over their own

reputation would have prevented some of

the excesses we've seen." I'm

paraphrasing, but that was pretty close

to what he said.

>> Yeah. He said, "The world sort of didn't

work the way I thought it did." And I

think, you know, had they gone straight

out of the gates with financial reform,

you might have seen some of that

structural reform, but by the time they

got around to it, you know, DoddFrank

wasn't passed to 2010. You know, then

then the political economy calculus had

shifted. Um, the industry was in more of

a position to sort of argue for weaker

rules and and fewer structural changes.

It it's amazing how rapidly memories

fade and and people just quickly,

>> oh no, that was then, now it's new.

You've worked inside the global

financial system as well as studying it

from the outside. How did being part of

the FCIC affect how you perceive

technology, new financial products,

regulation,

um, and deregulation? How how did that

affect your your perspective?

>> You know, I didn't think a ton about

technology at that time. and that's sort

of been a later addition to the work

that I do. But the broader themes of

financial innovation, um, regulation,

deregulation,

you know, I see the value in financial

stability regulation in particular. So

financial stability regulation are the

rules that are supposed to prevent

financial crisis and they work often

sort of handinhand with investor

protection regulations, but they also

aim to do something differently. And

part of the challenge when you're trying

to prevent a financial crisis is this

silo mentality where people just think

about their own little piece of the

world and okay we can deregulate our

little piece and we don't won't think

about the flow on consequences and what

what incentives it'll create etc. And so

you know my real takeaway was always to

have the most holistic perspective

possible to break down that silo

mentality. And later in my career that

meant learning about the new

technologies that are sort of

infiltrating the the financial system.

>> So so I want to talk about technology

and I want to talk about fintech

dystopia. But there is a quote from

within that that applies directly to

what you're describing with stability

which was it's the economic precarity

stupid. Um paraphrasing James Carville

tell us a little bit about the economic

procarity. Yeah. So I think a mistake

that we have made collectively in recent

years is to say well look the economy is

doing well everything's fine and that

really doesn't

you know mesh with many people's

experience of the economy. So it used to

be well probably not always the case but

closer to the case in the Clinton years

where there was less economic inequality

than there is now that you could sort of

say a rising tide lifts all boats but

now what we're seeing is over half of

Americans live from paycheck to paycheck

even in a good economy right and so in

that kind of circumstance

the financial systems not in the economy

aren't working for everybody and so I

think when we think about what we're

trying to achieve with our financial

system. It should be

that we are trying to find an a solution

to this economic procarity. And also

that begs the question of whether the

financial system and investing is in

actually the way to get there

>> and maybe we need broader public

policies to address that economic

procarity so that no one or at least not

half of the population are just scraping

by. So, we just passed a new set of laws

that include thousand accounts for for

newborns. Isn't that going to solve

financial inequality? All these kids, by

the time they're 30, they'll be worth

millions.

>> Um, I think you might need to offset

against the people losing their health

insurance subsidies. I don't think that

$1,000 is going to go very far,

>> right? And and what's fascinating is

watching um just a parade of

billionaires come out and no no we need

to supplement that $1,000. So first it

was Michael Dell and then it was Ray

Dallio. I don't know who else is going

to step forward. But it appears hey

we're not really paying a whole lot in

taxes. We might as well throw some money

at some some babies. That seems to be

the philosophy.

>> Yeah. I mean I don't love

philanthropy in that sense.

supplementing democratically sort of

elected policies. You know, it it gives

a lot of sort of discretion and power to

people as to how they want to distribute

their large ass and to to some degree

that's fine. But again, when we have a

society where half of the population is

barely scraping by, I don't think their

livability should be predicated on the

whims of billionaire large s fair

enough. Um you you talked about

technological

innovation in your book. You argue that

that is financial technology innovation

is driven largely by legal design rather

than technical brilliance. Explain that

a little bit. What what is it about

fintech that seems to be working the

perspective uh from an attorney rather

than an engineer?

>> Yeah. So this was something that as I

said I came to a little later in my

career. I think earlier in my career

when I first started looking at fintech

I generally accepted you know the party

line. This technology is revolutionary.

This technology is making things more

efficient. This technology is fixing

things. And then I realized that the

people who were saying that had

something to sell and I probably should

learn a little more about the technology

because if you want to work on financial

regulatory policy now you need to

understand the extent to which the

technology actually lives up to what is

claimed it can do. And so sort of my

first sort of foray into this was I've

looked really in detail at blockchain

which is is truly frankly a terrible

technology. It's a clunky database and

and and it's not something you would

ever choose for any kind of financial

market infrastructure, but for the fact

that it's been very easy to convince

regulators not to regulate it. And so

the value ad that comes from crypto has

never been blockchain technology as a

technology. It's been whipping up

stories about that technology that have

justified avoiding regulation. And we

see it in other instances as well. You

know, there are um fintech lending that

is replicating

um some of the the predatory payday

lending that we've seen before.

>> The buy now pay later sort of financing

or

>> Well, the payday payday loans have been

around a lot longer than that. Um these

is sort of a sort of it's like a $400

loan that you get to bridge you over

till your next payday.

Um, and you know there's been a lot of

predation in that market and some states

had banned those those products

essentially.

>> You think 29% interest is not fair? You

have a problem with that? We're just

trying to make a profit here.

>> Some of these interest rates are 300%.

>> Get out.

>> Yeah.

>> That's insane. And and what does New

York top out at? Like 19% something like

that?

>> I I don't know about New York. Yeah. Um

but but normally anything you know mid

double digits is is thought of as

usurious. 300% is just next level.

>> Yeah. I mean, they're not it's not set

as an interest rate per se. They're

fees, but once you actually convert that

into a peranom, they can be in the

hundreds of percentages. And so, that

has always been a problem. And we have

had states act. And then we've had new

fintech lenders saying, "Well, actually,

we're different from payday lenders

because we use AI to screen our

borrowers and so you should treat us

differently." Um, and yet they're

charging interest rates that are

equivalent to what payday lenders do.

And then you mentioned buy now pay

later. Again, they say, "Well, we're

we're not even extending loans. This

isn't a loan at all, so we shouldn't

have to comply with the laws around

lending, around disclosure, around that

kind of thing."

>> How is that not a loan? You're buying a

product that you don't have money for.

Someone is paying for that. Isn't that a

loan?

>> I would say so.

>> Okay.

>> But but what what's the counter to this

isn't a loan. This is a a pre- layaway

>> essentially. Yeah. you know, we you

know, we we we don't charge interest.

There are late fees if you don't pay,

but that's not the same as interest, you

know.

>> Oh, that's fair. Like we we we bought a

couch, no interest for 6 months. So, as

long as you pay it off within 6 months,

that sort of thing seems to be interest

free.

>> But then when you look at the business

model and you see that a significant

chunk of the people are incurring these

late fees, then

>> well, that's their fault, isn't it?

That's human nature. We you can't blame

us if we take advantage of people

procrastinating and not paying off their

uh fees in time.

>> Well, it's not that they're

procrastinating. It's that they're

choosing between paying rent or paying

this off. So, this

>> food, medicine.

>> Exactly. So, this this is coming back to

it's the econ economic procarity,

stupid. Right. If people are in these

dire straits, we should not be surprised

that fintech firms are trying to

capitalize on that and profit from it.

which is why I think, you know, what we

need are

some kind of public safety nets um to to

sort of make and and a higher minimum

wage and higher social security

benefits.

>> Coming up, we continue our conversation

with Professor Hillary Allen discussing

her new book, Fintech Dystopia, a summer

beachread about Silicon Valley and how

it's ruining things. I'm Barry Rholtz.

You're listening to Masters in Business

on Bloomberg Radio.

I'm Barry Rholz. You're listening to

Masters in Business on Bloomberg Radio.

My extra special guest this week is

Hillary Allen. She teaches at the

American University Washington College

of Law in Washington DC where she

specializes in regulation of financial

and technology laws. So, so let's talk

about the digital only book. Ironic,

right? um fintech dystopia where you

describe modern financial technology

simply as Silicon Valley ruining things.

Explain that seems like an extreme

example and and give us some examples of

how Silicon Valley is ruining things. So

just to be clear, not all modern

technology is ruining things. There's a

particular business model approach that

I think is ruining things and that is

derivative in many ways of the venture

capital model in Silicon Valley.

>> Venture capital,

>> just venture.

>> Okay.

>> Yeah. Venture capital model in Silicon

Valley. So, it's sort of got this sheen

around it that's iconoclastic and they

they make bets on these moonshots

that'll, you know, save all of humanity

and yada yada yada. But in fact, it's

it's pretty well established as a

playbook at this point. Um, you know,

there's a lot of subsidies that go to

venture capital by virtue of their

having access to pension funds um by

virtue of sort of um capital gains

taxation. And so they've got sort of and

and especially in low interest rate

environments, they attract a lot of

money. So they have pretty cheap money

available to them.

>> And then they go shopping. Um, and what

they go shopping for is not the

iconoclastic sort of outlier that we

think of, but what we've seen and what

the evidence shows is that they tend to

go shopping for the same things that

their friends are going shopping for.

And they go shopping for the businesses

that their friends have developed. And

so there's this sort of very sort of uh

insular mentality in what they're

looking for. And they're also looking

for something that they can cash out of

very quickly. Um because the you know

the average venture capital fund has a

what a 10 year sometimes 12 but usually

10 year duration that's really not that

much time to find something to invest in

have it grow and then cash out and so

they're not looking for things that are

going to take decades to develop.

They're looking for things that they can

grow quickly and get out of in about

five or six years.

>> So give us a few examples. What do you

think is uh the sort of um you know not

adding a whole lot of value

venturebacked businesses?

>> So

not intentionally but it just turned out

that way as I wrote this this book.

Almost every fintech business I looked

at had been funded by Andre Harowitz. Um

they had been sort of the lead. So you

know they they

>> they're the hot VC these days. I I've

full disclosure I've interviewed Andre.

I've interviewed Kapoor. I've

interviewed Horowitz. So, I've sat with

them and talked about a lot of their

businesses, but the past few years

they've been very front and center, very

active.

>> Yeah. No. And and they sort of they have

their as a marquee name, as you said,

they're the hot VCs. Once they say they

like something, they can basically

attract other venture capital to those

those businesses. And so, they're

essentially taste makers. Um,

>> which which is fascinating you say that

cuz before that it was Sequoia, before

that it was Kleiner Perkins. Like you

work your way there's a hot firm for a

decade. The '9s had it, the 2000s had

it, the 2010s had it. Um, they tend not

to maintain that position forever.

Although to Andre and Harowitz's credit,

they've been the itgirl for a good good

run so far.

>> Yeah. I mean, I wouldn't say that that's

a good thing, but um Yeah. So, you know,

they they basically built the crypto

industry. So, you know, we we the the

narrative around crypto is that is this

organic sort of community of cyber punks

and libertarians, but but they really

built that industry. They were um early

investors in Coinbase. That was their

first crypto investment. And then they

have plowed a lot of money into the

industry and it's sort of their seal of

approval has been what's attracted

people to it. And you know, part of what

Andre and Horowitz does is it doesn't

just invest. it's go does aggressive

marketing campaigns for the things that

they've invested in aggressive lobbying.

Um so they've really been at the

forefront for trying to get the laws

changed um to accommodate their business

models. Um so yeah they there's there's

crypto but they've also been at the sort

of the forefront of um I always there's

one of the do not pays I think it's a

firm that's theirs. I always get get

mixed up. Um they they were very um

early investors in Robin Hood um the the

fintech trading stock app

>> which originally started out as a stock

app and then it became eventually a

crypto app and now it's a bet on

anything app.

>> Yeah. And again that is a company that

by the time it IPOed had racked up all

kinds of fines from the SEC and FINRA

because it was violating laws left,

right, and center. Um, you know, it's

it was one of the first to offer

commission free brokerage. Um, but as

the chestnut goes, if you're not paying

for the product, you are the product.

and it makes most of its money from

payment for order flow and was not clear

with its customers in the early years

about that how that was going on and how

that they get paid a lot more for your

options trades than your regular stock

trades because um

>> more profitable.

>> Yeah. More profitable for the Citadel

securities of this world to to take

those. Yeah.

>> Huh. Really kind of interesting. Um, and

yet at the same time you have a chapter

in your book, Silicon Valley Welfare

Queen.

>> Explain. I thought that these are, you

know, Ein Randian

um, libertarians that don't want to

suckle off the teeth of big government

and these are people that are builders

and self-made um, people. You're arguing

not so much. Well, they don't want us

suckling on the teeth of the state

because they might have to fund that

with taxes, but but they're okay

suckling themselves,

>> right? So, so give us a few examples.

What companies started out as as welfare

queens?

>> Well, I mean, again, the whole story of

of tech, the the internet and smartphone

boom is very much based on technologies

developed by the government,

>> DARPA and the whole internet.

>> Exactly. And you know and and I think if

you look at the iPhone a lot of the

individual technologies that went into

that again came from

>> everything with microwaves comes out of

NASA right

>> so you know first of all this this

entirely self-made story falls apart

right there because as I mentioned

earlier if you've only got six years to

turn around a technology you're not

really investing in prototypes in

thinking really hard about physical

hardware and how that works. you're

really looking for a software thing that

you can jin up pretty quickly. And so

the really long-term investment comes

from the state um and and has always

done and then it's commercialized. Um

you know and I think that that sort of

has worked well except that you get to

the point where the you know the venture

capitalists who are commercializing are

saying well we shouldn't have to pay any

taxes to fund the state that develops

these technologies. They also benefit as

I said enormously from um laws that they

lobbied for in the late 70s I believe u

changes to Orisa um which allowed

pension funds to vent to uh invest in

venture capital basically didn't exist

before and at that same period they were

lobbying for changes to the capital

gains taxation

>> well you have the carried interest

loophole which continues to persist um

I'm drawing a blank on the author's name

there's the book Americana 400 years of

technological innovation that makes the

argument you're making go back to the

telegraph funded by Congress go back to

railroad like every major technological

innovation o or most major innovations

got seated with the government and then

eventually uh the private sector takes

over and what has changed in recent

years is that public private partnership

seems to have broken

Yeah, actually. So, the book I really

like on this is Margaret Omara's book,

The Code, who does she does a great

history of Silicon Valley. Um, and yeah,

I think the

the understanding that there was a

quidber quo has sort of fallen away. So,

always the private sector has

commercialized this this technology. But

if we have an unwillingness to sort of

pay any taxes, if we have an

unwillingness to invest in government

capacity to invest in universities where

so much of this stuff is developed, you

know, you take Mark Andre, he you know,

he got his start because he was happy or

sorry lucky enough to be a student at

the University of Illinois at the time

where they had a special grant to look

at the beginnings of the internet. He

worked on a team there that developed a

prototype internet browser and then he

went into the private sector and they

let him build one from the private

sector and that was Netscape and that's

how he made his fortune. So he was sort

of in the right place at the right time

to take advantage of public investment

in this kind of thing and yet this is

the kind of thing that we're seeing that

these leading venture capitalists want

to shut down.

>> Really interesting. Since we've been

talking about books, you've you've

criticized abundance, which is by Derek

Thompson and Ezra Klene, as as the whole

concept of abundance is sort of a sexy

way to make excuses for technosolutions.

Tell us a little bit about that. Yeah.

So this is this is a something I get

into a lot of conversations with people

these days because I think there are

some elements of the original sort of

abundance agenda that are very appealing

to people in terms of for example

increasing housing capacity and I I do

think that that is something that needs

to happen and has to be done in the

right way.

>> But if you look at who is funding the

abundance movement they have conferences

etc. it is Andre Horowitz and other

people from Silicon Valley

>> and it seems to be this attempt to

essentially um put a a happier face on

the deregulatory project that Silicon

Valley is looking for to sort of make it

seem kinder, gentler, and more

progressive because the abundance

movement sort of in a nutshell is

supposed to be well we shouldn't have

artificial scarcity. we should build

more of what we want to do that we

should take away some of the roadblocks

that are getting in our own way. And

when you say it like that, it's sort of

hard to disagree with.

>> Well, that works for housing. You you

have nimiism with housing, but when you

take that away, it also means you're

going to end up with perhaps highrises

or multif family units in a suburban

area that some people don't want in

their neighborhood. There's always a

series of trade-offs with people who are

already there versus people who want to

get there. What is the specific problem

with abundance as a philosophy towards

building more of what we want as a

society?

>> Because it's who gets to decide what

more of what we want is. And if you look

at who's funding the abundance agenda,

it is the billionaires and the tech

elite. And these are people who have

really shown that they are quite willing

to run rough shod over regulations that

are there to protect the public from

harm if that enables them to profit. And

so I am just skeptical that a movement

that is funded by these people is really

going to be prioritizing the kinds of

projects that would benefit the

economically precarious. I think it's

more likely that it'll be benefiting

themselves and will lose protections for

people with less voice that are

currently in place.

>> So, what sort of overhyped products do

you think best explain um the problems

with this approach? Like what are these

companies putting out that either is a

result of regulatory capture or just

don't do what they promise? Because you

would think that in the world of venture

either your product finds um an

audience, it finds a customer base or it

doesn't and fails and that goes out of

business.

>> Yeah. So that's sort of the perverted

part of this is that that market logic

like you know survival of the fittest

because of all the subsidies that

benefit venture capital that doesn't

really apply that logic anymore. So, you

know,

>> give us an example.

>> Crypto,

>> crypto should have died many times

already. Particularly, it should have

died in 2022 when we had the big crypto

winter.

>> Mhm.

>> At that time, particularly um Andre

Harowitz's crypto had this huge war

chest of funds that they had raised and

they stopped investing in crypto

startups at that point because, you

know, everything was more abundant. But

what they started using that money for

was lobbying, political spending. Um,

and they really worked very hard on

members of Congress to essentially

create laws that would allow the crypto

industry to keep doing what they're

doing, which was not allowed under the

securities laws as they were. So the

whole business model was regulatory

arbitrage.

>> Mhm. Um they wanted laws that would sort

of give a patina of legitimacy and

hopefully encourage institutional

investment, attract more money to the

space um

but not actually make them have to for

example like Coinbase combines combines

the functions of a broker dealer and an

exchange. That's not allowed in

securities. You can see why there's all

kinds of conflicts of interest that go

>> right either you're an exchange or a

brokerage firm, not both.

>> But in crypto you're both, right? And so

if you applied the securities laws to

crypto, they would have to disagregate

and basically would probably destroy

their business model. So what they

wanted was a law that said, "No, it's

fine. Crypto special. You do both." Um

and so that that really

an industry that should have failed is

you know again rising being propped up

all through this sort of aggressive

political spending and and um I mean I

I've talked to people in Congress off

the record who have said that they've

only voted for these laws because

they're afraid that if they don't that

crypto industries will target them. Hm.

Um, what other products do you think are

are overhyped and and fail to satisfy

their markets?

>> Well, right now the obvious answer is a

lot of the AI products. Um, the anything

sort of it's hard when you talk about AI

because it's such an umbrella term for

so many different things, right?

>> I I have perplexity on my phone. It it

does a better job with search than

Google does. I get better, more

comprehensive

answers. Um, what's wrong with AI?

>> Well, let me disagregate it first

because there's plenty of AI that

there's nothing wrong with, right? So AI

is not intelligent in any way, shape, or

form. It's a market, that's a marketing

term. What is it is it's an applied

statistical engine.

>> You have an algorithm that looks for

patterns in data and then acts

accordingly.

>> Um, and that kind of technology has been

around for a long time. It does like for

example, it's great for fraud detection

in a bank um for credit card

transactions for example. So that that

you know that's that's an A+ use of of

AI.

>> But the last few years everybody has

been pouring everything they've got into

these um LLM based tools these large

language made model based tools. So

these are tools that can um you know old

AI tools would just sort of classify

something, put something in a group or

or predict something but but now we have

these tools that generate content um

particularly text but also you know

video um music etc. And there are so

many problems with this technology

because it's being sold as technology

that can replace humans, right? That

that can basically it's worth throwing

trillions of dollars into this because

of the productivity gains that we'll get

by firing all the humans essentially is

is the story they're telling. Um, first

of all, that wouldn't be great,

>> right? That's a problem in and of

itself. the the way I have heard it

described that's a little less um

catastrophic is this is going to make

everybody more efficient, more

productive. It'll make companies more

profitable and we'll all be able to do

more with our existing um staff than

having to go out and hire hundreds of

more people.

>> But that is not true sadly. That's the

pitch line, right? So these these tools

make a lot of mistakes. Um you know even

the very best ones make mistakes.

>> We we've seen a lot of attorneys, you

and I are both attorneys. A lot of

judges have been calling out attorneys

who theoretically are supposed to be

doing this on their own and instead are

outsourcing it to AI and all of its

hallucinations and citing cases that

don't exist. The assumption is that's

going to get better eventually,

>> but it won't. So this is this is the

problem.

>> But it won't

>> but it won't. So these things are

statistical engines, right? They they

can't check for accuracy because they

don't understand accuracy as a concept.

>> Mhm.

>> Right. There's no reasoning. It's it's

literally I the the most statistically

most likely word after the last word I

gave you is this word.

>> There is no way to make that care about

accuracy because it's it's it's not a

it's not a thinking machine. And I think

there's increasing acceptance that these

these models have hit a wall and they

are as accurate as they are going to

get.

>> Really?

>> Yeah, that's kind of that's kind of

fascinating. Uh my concern was at least

on the legal side, hey, you have this

existing body of work and all this

research and brief writing and arguments

that exist as of now. If you're going to

replace people from doing that, are you

going to freeze the state of legal

knowledge at 2026 and five or 10 years

from now? If you don't have people

writing these briefs, you don't have

people writing these decisions, how can

AI respond to what's taken place over

the past 10 years, if we don't have the

humans actually doing the grunt work?

>> Yeah. I mean, there's a there's I mean,

I think those kinds of concerns have

been expressed very much in the cultural

context. you know, if if we

disincentivize creators from making new

music and new art, is is this it? Are we

stuck with with what we've got?

>> With something like the law, one of the

challenges is that, you know, these

large language models,

>> they don't get updated on a day-to-day

basis. You know, there's there's sort of

a stop point and then they they don't

know well, they don't know anything that

they don't have the data from after a

certain date. So, that that's a

limitation. But the thing I worry most

about with the law is that you

have to be able to spot the

hallucinations or you're going to get

yourself in very big trouble. And I

think this is true for a lot of

different um fields. And and this is

again just to digress a little

>> why the the profitability narrative is

not true,

>> right? Because the only place where you

can just put this content out and just

leave it there is in very low stakes

places, right? where it doesn't matter

if you get something wrong. But even,

you know, things that you wouldn't think

are such a big deal have proved to be

quite high stakes. So, Air Canada had a

chatbot that told a um customer that if

they wanted to apply for a bereavement

discount for a flight, they could do

that after their flight was done. Now,

that's not Air Canada's policy. They

they you had to do it in advance. And so

this customer tried to get their refund

after the fact and Air Canada said,

"Well, the chatbot got it wrong. Too

bad. So sad for you." And

>> it's your chatbot. You own You're

responsible for it.

>> Exactly.

>> Not not my mistake, your mistake.

>> Exactly. And so even in these sort of

reasonably low stakes customer service

interactions, there's reason to be

really worried about inaccuracy. Now you

start dialing up to things to medical

advice, legal advice, you know, it's

just you you can't rely on them. And I

worry that we're putting people in a

very difficult position because it's a

it's a lot easier to get something right

when you write it yourself than it is to

find mistakes in something someone else

has put together. Right. So, let me push

back a little bit cuz I've been watching

the

AI reading medical scans and at some

point last year um or maybe it was two

years ago, the the technology

theoretically passed the accuracy rate

of humans. um fewer false positives,

more identifying

um missed negatives that should have

been positive than people. Is is that

not accurate or where where are we with

with the medical application of that?

>> So, this is why I think it's so

important to disagregate the different

kinds of AI because that is not sort of

LLM based AI and some, as I said, some

of those tools are great. I can't weigh

in on medical imaging and things like

that. So, it may very well be the case.

What I'm talking about is, you know,

what if you've got um, you know, a

doctor coming up with instructions for a

care plan for their patients

>> and they let the AI do it, right? If

there's a mistake in there, they're much

less likely to catch it if the AI

because you know, you know how things

go. You'll be expected to look at more

of these because you're not generating

them yourself, right? And it's always

easier to get things right when you do

it yourself than when you're reviewing

someone else. I mean, when we were

lawyers, we used to that's why you want

to have the pen on contracts. You want

to you want to hide things from the

other side. And now it's now it's the AI

hiding stuff from you. And I worry that

especially with younger lawyers coming

up through the ranks who are encouraged

to rely on these tools from the

beginning who won't actually develop the

skills

because you don't learn well when you

sort of don't process it yourself. So if

you you spent your whole career using

AI,

>> you're not going to be able to spot the

problems in the AI.

>> You're not going to have the skill set.

>> No. And so then I'm worried about, you

know, those young lawyers getting sued

for malpractice because they missed

something that the AI generated, but

they were never even given the

opportunity to learn how to spot it

themselves.

>> It's it's a problem with the rungs on

the ladder being removed, especially

um we see that now manifesting itself.

The unemployment rate of the under 30 is

about double what it is for the national

unemployment rate. And I can't help but

wonder how much of that is somehow

related to the proliferation of AI tools

for white collar jobs.

>> I think you know Corey Doctor um who

does a lot of work in the tech space has

a great quote on this that I'm going to

butcher a little not say it quite as

well as he does it but he said the AI

can't do your job but the AI salesman

can convince your boss to replace you

with AI that can't do your job. Right?

So it's I think you're right that there

is at this moment you know I mean it's

also hard to say how much of this is a

AI washing as opposed to real AI

displacement right

>> the economy is not in a great place

right now. People don't want to hire

anyway. It looks a lot better if you say

well we're not hiring because we're

replacing them with AI than just we're

having a rough time. We're not hiring.

AI washing is a phrase I haven't heard

used in modern parliament yet, but it

certainly makes a whole lot of sense.

The line I heard, and I don't know where

I'm stealing this from, is you're not

going to be replaced by AI. You're going

to be replaced by somebody with a

greater facility working with AI than

you have. And it sort of creates a

self-fulfilling arms race to make sure

you you learn how to use that tool.

Otherwise, you're at risk for being

replaced by somebody who knows how to

use that tool.

>> I've heard that, too. But I don't think

these tools are that hard to use, right?

I mean, that's a failure on the part of

the AI companies if they're so hard to

use, right? Wasn't hard to use. Google

search

>> perplexity and and even chat GPT is is

absolutely easy as pie to use. I don't I

don't find them difficult. Sometimes you

have to keep changing the prompts to get

an improved answer. Like if you just ask

a question and walk away, well then

you're getting what everybody gets. But

if you I don't I don't really buy into

the prompt engineer job title. But a

little exposure is the more you ask it

and the more you vary it, you get a

variety of answers and eventually you

come up with something. Oh, that's

interesting and different. Let me let me

take a look at that. So I mean I have

strong feelings about this as an

educator because if these tools are

worth their salt,

>> it shouldn't take our students long to

figure out how to use them. Right.

>> Right.

>> So why are we bringing them into

education where what they really need to

learn is how to spot hallucinations, how

to think critically so that if they are

going to use these tools later, they can

use them to the best of their abilities.

This whole arms race sense of well they

need to use them in in school so they

don't get left behind. I'm like it it

didn't take long to learn how to Google.

they'll be fine.

>> You've been pretty critical of things

like crypto and stable coin. We're gonna

get to those in a moment. I want to talk

about some other things you've

discussed. Um you've brought up the

whole idea of um technology as a

branding exercise phrases like

democratizing finance, disruptive

technology,

banking the unbanked. you've described

these as just, you know, marketing and

not really accomplishing anything. Tell

us a little bit about those and and give

us some examples.

>> Sure. I mean, I think at the heart of

all this is is innovation speak and

innovation worship, right? When we

alluded to that earlier, this sense that

anything that is innovative is

inherently good and must therefore be

permitted at all costs. And that is sort

of the font of a lot of the rhetoric and

narrative that we get out of Silicon

Valley that ultimately is there to

attract funding. Yes. But also to

procure

legal treatment that facilitates what

they want to do. It actually creates

often an unlevel legal playing field

where you have the incumbents who have

to comply with all the laws and then the

disruptors as you say um who don't have

to comply with all the laws and can

succeed on that basis even if their

product isn't superior in the way we

would typically expect a disruptor's um

product to be. So yeah, I mean

disruptive innovation

um you know goes back to Clayton

Christensen and and the innovator's

dilemma. This this sense that if you if

you stay still and just make good

products, you'll be out competed by

someone who is trying to um do things a

little differently. But you know there

there's no real formula that you can

take away from that as to what you

disruptive is in the eye of the

beholder. So, so let me push back on

that a little bit. Um, and all my VC

friends, I could just hear their voices

in my head. Um, and the push back is

look, most new companies fail. Most new

technologies crash and burn. Most new

ideas never make it. And even the best

of the best VCs, they'll make a hundred

investments for that one moonshot that

works out. and most of the other 99 are

at best break even but mostly losers.

How could you say uh this is true? Oh,

and real innovation often finds itself

in between the regulatory regime because

the technology that's being created was

never anticipated by the regulators or

or anybody else. Fair push back.

>> A lot of points that I would quibble

with there. That's fair. Um,

>> quibble away.

>> Quibble away. All right. So,

there's this idea that the law is a

barrier to innovation because law is old

and innovation is new and the law

couldn't possibly have contemplated the

innovation.

The story about the innovation is what

makes it new. Right? Most of the things

that we're seeing in the fintech space,

>> they're not that new. Right? As I said,

you know, we've got fintech lending has

a lot of the things that we didn't like

about payday lending, right? Why

shouldn't the laws from payday lending

apply? Crypto basically, I mean, the the

crypto markets for all the world look

like the stocks and bonds and the

unregulated markets of the 1920s. We saw

how that ended. They ended in such a

spectacular crash that we ended up with

the securities laws. Why shouldn't they

apply? What's what's so different?

Right? So this construction of novelty

is something that is done intentionally

as as a as a narrative. Now I fully

appreciate that we need the optimists in

this world who are going to try new

things and and and I say that very early

on in the book, the people who these

stories are useful because they attract

funding to new things. So I'm not saying

we should do away with it completely. My

argument is that the the yin and yang,

the balance between the optimists and

the realists is badly out of whack

because we give so much difference to

the stories about innovation, about

disruption, about how technology can

solve problems that have been with us

for centuries. We can magically get rid

of intermediaries now with blockchain

technology apparently. Well, that was

one of the that was one of the story

narratives was this intermediation and

until um it no longer was a story, but

but let's talk about some specific

companies that you've mentioned that

you've written about um and I and I want

to get your sense on it and and the the

oldest one was PayPal. To this day, and

I was a PayPal user back in the 1990s

with eBay and those sort of things. Um,

to this day, I don't understand what

they did that was any different than a

credit card other than being a bit of

middleware

uh that uh uh eventually became a renty

air. Why not just use a credit card? Why

do I need PayPal between me and Amazon

or me and eBay? So this is really an

interesting story and I learned a whole

lot about this in research for this book

um by reading Max Chaffkin's book uh the

contrarian about Peter Teal and the

start of the beginning of of PayPal and

in fact it the idea for PayPal came from

the same place that the idea for crypto

has come from which is this this

technolibertarian idea of we don't like

regulation we don't like central banks

we would like to have private money and

we would like technology to help us have

private money. And PayPal wasn't the

only one of these kinds of startups back

in the the early bubble. So, PayPal, I

think, succeeded because it sort of

lucked into this deal with eBay, as you

said, right? It it sort of had no

distinguishing features, as far as I can

tell, that made it any superior to the

beanses and the flooes of this world. It

lucked into this deal with with eBay. Um

and so

>> and eventually eBay buys them um to

solve their I guess credit card

management problem. I don't really

understand I still you know 20 or 25

years later I still don't understand

>> why they were necessary.

>> I think yeah I mean my my knowledge of

this comes primarily from reading Max

Trafkin's book which I highly recommend

but that's that's my understanding too.

And so you know they are a payments

technology. Um I too struggle to sort of

understand what they offer that a credit

card doesn't in many ways. Um one thing

they are though is they are sort of the

regulatory arbitrage um story in fintech

right so you know I've said so much of

fintech is actually about arbitrageing

the law rather than technological

superiority.

PayPal from the beginning was flaunting

quite aggressively the banking laws

because only banks are allowed to accept

deposits and people were keeping money

in their PayPal PayPal wallets and for

all the world that looks like keeping a

deposit. Peter Thiel from the beginning

was very aggressive on the um lobbying

to make sure that that was not

considered deposit taking. Early on

there were multiple states that were

investigating it because they thought it

was the unlawful taking of deposits. um

he lobbied heavily in Congress and

lobbied heavily at the FDIC and

ultimately um you know that worked and

so I think that has sort of been the

prototype that blitzcaling prototype. I

think people

>> perhaps underestimate the degree to

which blit scaling is really about

playing it on an unle unlevel legal

playing field.

>> Let let's talk about stable coins. What

sort of value do they provide? again um

unless you are trying to do illicit

transactions or gamble not a whole lot

right so

>> well a stable coin is worth a dollar and

it promises to always be worth a dollar

don't we have dollars why do I need a

stable coin

>> well you need a stable coin often to do

illicit payments um so if you want you

know if you're they're very popular for

example with all kinds of drug cartels

and um they're good for sanctions

evasion

>> they're also very good if you want to

gamble in crypto and you want to use it

as sort of a cash management tool in

between crypto investments. Kind of like

a money market mutual fund in your

brokerage account for parking funds in

between crypto gambling.

>> Mhm.

>> Um but they've really never had any

utility in any big way as a legal

payments mechanism.

>> All right. So what about you mentioned

the blockchain? I keep reading that

blockchain uh is going to allow us to

use smart contracts and have things

happen automatically that now have to be

manually. What what's the problem with

blockchain?

>> Well, first of all, smart contracts can

work without a blockchain. Smart

contracts predate blockchains. They can

run on all kinds of databases. So, if if

you want that kind of functionality, and

it has pros and cons, and I've written

about this a ton, um you can have that

without a blockchain. The reason why you

don't want to have it on a blockchain

and this is something that does not get

anywhere near the attention it needs is

that there's all kinds of operational

risks associated with the blockchains

themselves. So blockchains are software.

They are maintained by

>> in the case of the the Bitcoin

blockchain just a few individuals. In

the case of the Ethereum blockchain,

it's the Ethereum Foundation. They're

not regulated at all. They have no

obligation to invest in cyber security,

to invest in getting their blockchains

up and running again should something go

wrong. you're just you're really sort of

as I sometimes say yoloing operational

risk with regards to these um these

blockchains. And so if you want smart

chain sorry smart contract functionality

like don't use a blockchain.

>> Huh. Coming up we continue our

conversation with Professor Hillary

Allen discussing her new book Fintech

Dystopia a summer beachread about

Silicon Valley and how it's ruining

things. I'm Barry Rholz. You're

listening to Masters in Business on

Bloomberg Radio.

I'm Barry Rholz. You're listening to

Masters in Business on Bloomberg Radio.

My extra special guest this week is

Hillary Allen. She teaches at the

American University Washington College

of Law in Washington DC where she

specializes in regulation of financial

and technology laws. So we mentioned

stable coin, we've mentioned blockchain.

Is there any value in any of the crypto

coins be it Bitcoin or Ethereum? Um I

know we we can't actually describe the

last hundred coins that are out there on

the radio. um will will violate George

Carlin's seven words you can't say on TV

or radio, but there's a outside of the

you know, Dogecoins and everything below

that, what's the value of the first five

or so cryptocurrencies? Is there

anything worthwhile to these or is this

just a solution in search of a problem?

>> It's a solution in search of a problem.

I mean essentially even so Bitcoin often

is seen as the most credible of these

because it's been around the longest and

has the largest

>> Bitcoin and ETH. Those are the two I

hear about the most.

>> Um but both of them are essentially

ponzies in the sense that there's

nothing backing them. The only reason

they have value is because someone else

might buy them from you. If they choose

not to, it could go to zero. And

actually someone put it to me this way.

It's not that they could go to zero.

they could go to less than zero because

they don't even have any assets that

could be used to administer a winding

up. Right. Right.

>> And and and and that's expensive. Um you

know, you you're going to get the

lawyers and the courts and everybody

involved that

>> Well, you're not suggesting that if you

own Bitcoin, you may have a liability

down the road. Is that is that the

implication?

>> No, I'm just saying that if if someone

was trying to work out the end of one of

these things, there wouldn't even be,

you know, office furniture you could

sell to pay the lawyers. Okay. Um, you

you've written about uh startups like

Theronos. I remember Juicero. You

>> Juicer is the best.

>> Tell us a little bit about those two.

And was that just uh, you know, one of

these products that just didn't work

out? What What's the problem with that

technology solution to our uh, juicing

problems?

>> So, Juicer is just my favorite metaphor

for all of this. So, for those of you

who are unfamiliar with the the gift

that is Juicerero, so basically this was

a machine. It cost hundreds of dollars.

It was Wi-Fi enabled.

>> Well, roll back. The the guy, and you

described this in the book, the guy who

invented this previously had set up a

fairly successful

um was it a juicing uh chain of

companies that got bought. And so, he

had some credibility in the space. And

now, I'm not going to run restaurants.

I'm going to create a technology that

people can juice at home

>> and it was venture funded. They put a

lot of money into this

>> 100 plus million dollars

>> and these these what it did was it

squeezed these juice pouches and the

problem was that people could just

squeeze the juice pouches with their

bare hands and get all the juice. There

was there was a notorious Bloomberg

article about this,

but what it raises the question, did the

company already squeeze the juice and

put in these pouches? Why didn't they

like why wasn't this set up so that you

can actually put fresh fruit? Like,

doesn't it defeat the purpose if you're

buying pouches? Or was the whole idea

the razor blade model? So I mean the

reason why I love this as a metaphor is

it it really gets at this this

technosolutionism which is one of the

concepts that I'm really coming for in

in this book. And technosolutionism is

this idea that everything in our world

can be reduced into a technology

problem. And that the only reason we

haven't solved certain things is because

we haven't spent enough time and money

on developing the the technology. And

and what that does is it it sort of

flattens problems into it gets rid of

the human messiness. It it flattens

problems. It ignores domain expertise.

People who've been working in particular

fields for a long time and know a lot of

non- tech stuff. It it sort of dismisses

their expertise.

And sadly, you know, there's just this

magic associated with technology at this

point. And and as I said, I'm not

anti-technology. A lot of it's great,

but it doesn't deserve the level of sort

of magical difference that we give it.

It can't solve all our problems. And

when we get into this mindset where we

think that if we throw enough money at

technology, it can solve anything and it

will always be the best solutions, we

end up squeezing pouches with a machine

that we could squeeze with our bare

hands. And and a joke that I try and

make in the book is like with with AI,

we may be better off squeezing things

with our bare minds. Mhm. So, one more

company I have to ask about um Theronos.

Uh I love the book Bad Blood, which

really went into details about how

corrosive and co-opting co-opting the

company itself was for everybody around

it, including the attorneys and and all

sorts of other bad actors. Um why wasn't

Theronos just an idea that didn't work?

that you can't if you want to draw blood

from a vein, you have to draw blood from

a vein, you can't just prick your

fingertip and think that's going to be

the same as as venal draws.

>> Well, so that's the thing with this

technosolutionism. It presumes that

everything is a tech problem waiting to

be solved. It doesn't even countenance

the possibility that there may not be a

technological solution for what you want

to do. that the technology you want may

not be able to do the thing you want it

to do. And when you have that sort of

collective sense that I think we have

now that if we throw enough money at any

technology, it can solve any problem we

give it. You can see how people get so

susceptible to being sort of drawn in to

the stories that outright con people

like Elizabeth Holmes might be telling,

but also the stories that we're being

told about, you know, about AI right now

and about crypto. You know, the more you

know about these technologies, the less

impressive they seem and the more

clearly it becomes illuminated that that

they just can't do a lot of the things

that they're going to do. But that's so

counter to how we typically talk about

technologies that it sort of it feels a

bit weird to talk like that. Um and and

you sort of you're going against

societal norms in a way. And so one of

the things that I really wanted to do

with this is to start making it easier

to talk about these things critically to

be not such an outlier to express your

frustrations. And I think we're actually

having a moment like that about AI

because so many people really hate it.

>> Really? So, so you use the phrase

technosolutionism

and Theronos is really the poster child

for that because as you're describing a

lot of these things I am recalling the

story a especially what you're referring

to with domain expertise she had no

medical or medical device training

>> none of the VCs who put money into um

Theronos were healthcare biotech medical

devices like they all passed. Um

eventually she hired a number of people

to try and with some background but they

seemed to turn over pretty quickly

because no you can't do that. What you

just pricking the skin you're getting

all the interstitial tissue and fluids

and you're corrupting the sample that

you want to test for something you have

the re the reason we draw from the vein

is very medically specific. Um, and yet

it attracted

uh Henry Kissinger and the uh all sorts

of big law firms and everybody plowed

in. She's the next Steve Jobs, the

youngest self-made female billionaire.

What is it about us that we're just so

susceptible to buying into these

narrative tales that turn out to be

nonsense?

So, I mean, part of it is that we're

humans and humans have often sort of

been snowed by things that are flashy

and shiny and exciting. I mean, that

that's just very much the human

condition. Um, some of the stuff I talk

about in the in the book that I really

enjoyed working on was the cognitive

psychology aspects of it. you know, sort

of

when we hear certain stories,

it's very difficult to budge ourselves

and and be contrarian. And I was as I

was saying earlier, so you sort of need

a a collective tipping point where

people start to question it. So you're

you don't feel like an outlier or the

norm when you start to question these

things. And so I think there's a role

for media here. I think there's a role

for education. Unfortunately, the people

who benefit from technosolutionism also

know this and have a very big media

presence and invest a lot in education.

So, it's it's an uphill battle to start

talking about these things differently.

Um, but you know, ultimately we we are

all human. Um, and it's nicer to believe

that something will succeed than than

that it will fail. I mean, you might not

think I'd be much fun at cocktail

parties, although I am. And the book is

available for free at

fintechdistopia.com.

Um, let's jump to our final questions,

our favorite questions we ask all of our

guests. Uh, starting with tell us about

your mentors who helped steer your

career.

>> Um, so my first mentor is probably my

first law firm partner boss um in in

Australia, Steven Kavanagh. Um, and I

had thought I was going to be an IP

lawyer. Um, but we had a rotation system

and we ended up and I ended up in his

financial services practice. Um, and he

was just a wonderful person to work for.

It was a time when the law had just

changed in Australia and and he really

was willing to hear what I had to say

about this this new new law. And so it

was just I just felt very invested in

and that that was that was lovely. And

then I think as an academic

Patricia McCoy who I adore um sort of I

I had had a very non-traditional path to

academia. I had more practice experience

than is usually the case. I had fewer of

the bells and whistles credentials that

people usually have. And again she just

saw in me someone who was really

passionate about preventing financial

crisis about sort of systemic risk. um

and and sort of was willing to look

through the fact that I wasn't as

polished as most of the other people

trying to enter academia and support me

and I was very grateful for that.

>> We've talked about a run of different

books. Uh what are some of your

favorites? What are you reading right

now?

>> Oh, I was an English lit major so I I

have many favorites. I'm I'm very into

the dystopian track. So, Handmaid's Tale

1984. Yeah. I just finished the parable

of the sewer in that vein, which was

>> parable of the

>> the parable of the sewer.

>> Um, Octavia Butler. Um, I also have

always had a soft spot for really good

children's literature. So, um, Philip

Fulman's Dark Materials trilogy is one

of my favorites and and right now I'm

reading with my kids um, Katherine

Randelle's books um, Impossible

Creatures and um, The Poison King and

it's just they're just so good. And then

work-wise, I've just started Jacob

Silverman's Gilded Rage, which is very

much on point for the conversation we're

having.

>> Gilded Rage. You know, we talked about a

few cryptoreated books. Did you see uh

Zeke Fox's

>> number go up?

>> It really is just an astonishing

astonishing work. Um, what sort of

advice would you give to a recent

college grad interested in a career on

uh whether it was law uh financial

technology, regulation? What's your

advice to those people?

>> It's a really hard time for them and I I

talk to my students a lot about the

careers and you know things are the

ground is shifting under our feet and in

this time of uncertainty it's really

it's really hard um to figure out what

to do. So I would recommend investing in

the fundamentals. Um, and I think it's

it's hard to do when AI is being pushed,

but but becoming a good communicator,

learning how to write and speak to

people clearly will never, I think, go

out of fashion. And investing in

relationships, again, we're in this time

where everything is sort of becoming

technologized and atomized, etc. But in

my career, having good relationships

with people, and I'm pretty sure you'll

agree with this, has been one of the

most successful things um that has

helped me along the way. Um, and so just

investing in personal relationships I

think is is always good advice.

>> And our final question, what do you know

about the world of fintech investing

regulation today might have been useful

20 25 years ago?

>> Well, honestly,

I'm not sure that there's much because

the world was very different 20 20 to 25

years ago. you know, I I always just

invested in um

in index funds basically and and you

know, and that worked out frankly great

for me. Um the challenge is and I study

financial crisis.

>> The challenge is that when things go

horribly wrong, everything is

correlated.

>> Everything is correlated.

>> All correlations go to one in a crisis

for sure.

>> And I think we're on the brink of a

crisis. When you say on the brink, days,

weeks, months, years,

>> ah, well, John Maynard Kane said that

the markets can stay irrational longer

than you and I can stay solvent. So, I

will never put a time frame on it. But

I, you know, all warning indicators are

flashing red at the same time as we are

pulling back all regulatory apparatus.

So, I think it's safe to say we're on

the brink of a crisis. H

>> how could that ever go wrong?

>> Regulation unleashes the animal spirits.

As long as we're talking about canes.

Um, it's all good.

>> Perhaps not.

>> Perhaps not. Um, Hillary, thank you so

much for being so generous with your

time. We have been speaking with Hillary

Allen, professor of law at American

University Washington College in DC and

author of the book available for free

online, Fintech Dystopia, a summer

beachread about how Silicon Valley is

ruining things. If you enjoy this

conversation, well, check out any of the

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the past 12 years. You can find those at

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Russo is my researcher. Anna Luke is my

podcast producer. I'm Barry Rholtz.

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