Make Me Smart October 3, 2023 Transcript

Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.

Kimberly Adams 

Hi everybody I’m Kimberly Adams, welcome back to Make Me Smart where we make today make sense.

Kai Ryssdal 

I’m Kai Ryssdal. Thanks for joining us on this Tuesday October the third also known as the first day of the Sam Bankman-Fried trial in New York City. FTX is, was his company and is no longer his company anymore. the now defunct crypto exchange, Mr. Bankman-Fried, SBF to those in the know is on trial for fraud and conspiracy in New York.

Kimberly Adams 

Right and we talked about this a lot after FTX collapse last year and as effects rippled through the industry. But we want to know how crypto has been doing since then and how SBF trial might impact that and in sort of the zeitgeist so here to make a smart about this, Zeke Faux, he’s an investigative reporter at Bloomberg and author of “Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall.” Welcome to the show.

Zeke Faux 

Thank you so much for having me on.

Kimberly Adams 

So you’re in your car outside the courthouse, cuz you were there this morning. What was it like in there?

Zeke Faux 

So it was a zoo. I counted maybe 50 reporters, and Bankman-Fried did came in through a separate entrance since he lost his bail and is now locked up in Brooklyn. So there wasn’t like a scrum when he walked in. He appeared to have trimmed his trademark shock of curly hair. And he sat there you know impassively as a squad of maybe 50 jurors and alternates filed in and the judge started to question them about whether there was any reason why they couldn’t sit for what’s expected to be a six week trial.

Kai Ryssdal 

Remind us would you Zeke, how Sam Bankman-Fried finds himself sitting in court this morning.

Zeke Faux 

So FTX his company is a crypto exchange. What that basically means is people sent money to FTX so that they could trade Bitcoin, Ethereum, all these other random coins. And the company failed, an $8 billion hole was discovered. So the company did not have the money to send back the customers have sent in, which is a big problem. And the government says that’s because Sam Bankman-Fried, more or less embezzled that money. So he’s accused of wire fraud, commodities fraud, securities fraud, and several of his top lieutenants have already pleaded guilty and are expected to testify against him.

Kimberly Adams 

What do we not know about what went down that you think we might be able to find out over the course of this trial?

Zeke Faux 

So Bankman-Fried when I back in November, before the cops showed up at a store, I flew down to the Bahamas to talk with Sam. And we spent a whole day going over his version of what happened. And what he claimed to me. And I found this a little hard to believe was that here he is this math genius, but he had totally lost track of how much money he was spending. He claimed that essentially, he had misplaced this $8 billion that he had no idea that it was gone and that he had not intentionally taken this money and spent it even though he did spend huge sums on real estate in the Bahamas, political donations, buying all sorts of random crypto coins, but he just claims he lost track.

Kai Ryssdal 

Do you buy it?

Zeke Faux 

I mean, I told him when I was down there that this did not sound very plausible. Um And he actually, in front of me, pulled out his laptop and started making a spreadsheet to try and show just where the money had gone, where he thought it was going, and how he might have missed it. But I think it’s going to be a tough sell to the jury to say that this guy who was so smart and so focused on money, that in just a couple years, he turned himself into one of the richest guys in the world, that he just wasn’t paying attention.

Kimberly Adams 

But that this is the whole narrative around crypto, right that if you if you’re not in it, you’re just not smart enough, and the people who were in it, and were making money, they were in the know, and these are really smart, mathematically inclined, mostly guys. And if you were not on the bandwagon you were behind because you weren’t smart enough.

Zeke Faux 

Yeah, they were like they were so good at at spreading that story. And I they tried it on me a million times, I spent a couple years going down the crypto rabbit hole. And they always said like, you just don’t get it, you need to understand the power of the blockchain. But starting last summer, nearly all the coins collapsed. Some of the biggest companies failed. And many of them were revealed to be fraud, not just FTX.

Kai Ryssdal 

So, Sam Bankman-Fried has become in some ways because of himself. And in some ways, you know, in spite, despite what he says happened, he has become the face of crypto of this moment. And I guess my question is, do you think this trial is actually crypto on trial, in addition to Sam Bankman-Fried?

Zeke Faux 

I think the crypto bros have discredited themselves in so many ways already, that this is like the final nail in the coffin. Basically, I spent two years trying to figure out what these coins are good for. And the only thing I could find that that people could really use them for was gambling. And Sam Bankman-Fried, what was more or less regarded as the most trustworthy, the best casino to gamble on crypto. Now, it’s been revealed that he was stealing the money out of the back of the casino. So who’s gonna go gamble on crypto again? Like and, and who’s gonna believe the next, you know, boy genius who comes along and says I’ve got a innovative and trustworthy new crypto platform for you? Right.

Kimberly Adams 

But people still are buying crypto. I mean, I’m looking at the Bitcoin price. It’s still up over where it was a year ago. You know, not doing great, like in the last month or so. But I mean, well, no, it’s still up in the last month. I mean, so people are still buying crypto. And I guess that leads me to the next question, which is since the collapse of FTX, how has crypto been doing?

Zeke Faux 

I mean, it’s still sputtering along. And I’m kind of amazed by how well it’s held up. Even though most coin prices are way down off the peak. I was just checking the other day and the price of a mutant ape Yacht Club NFT, which is one that I’ve I one of the silliest ones. Yeah, I thought this would be sure to go all the way to zero. They were around 20 grand when I was writing the book, they’re still at eight grand for a digital image of like a kind of melted ugly monkey. And I want to investigate like, who is buying one for eight grand now, after after all that’s happened? It’s really amazing to imagine.

Kai Ryssdal 

Alright, so look, if I live in Ottumwa, Iowa or Birmingham, Alabama or Sheboygan, Michigan, and I’m just trying to get by in this economy. I’m thinking two things right now. Number one is all you crypto people are out of your minds. And number two is, why should I even care about this? So help me with the second question.

Zeke Faux 

What I would say is that you, from an investing standpoint, you don’t need to care about this, you’re better off ignoring it, because what are the odds that you’re going to be the person who actually picks like the good crypto coin that turns out not to be a scam? Right. But in terms of this trial, I think it’s just fascinating to see how this guy was able to fool so many of us to convince the whole world that he had, that he was sort of the future of finance when he was effectively running an offshore casino for gambling on random crypto coins. So I’m hoping that more will come out about his interactions with venture capitalists with politicians. And I’m also excited to see like his former lieutenants, his best friends testify against him. They probably haven’t seen each other since everything collapsed.

Kimberly Adams 

I was reading, you know, some of the reporting around this including yours. And it’s like a lot of the people in the crypto industry want to see him go down. Why is that?

Zeke Faux 

So they would love to say that he is the rotten apple, that he’s an exception in the crypto world, they would like to forget that nearly every coin, its price collapsed in the past year, Bitcoin being the main exception. And they’d like us to not focus on the fact that so many other people in crypto are bankrupt or facing criminal charges. If they could say, hey, crypto was great. It was just this one guy who committed a massive fraud. That’s a better pitch the next time they try and convince someone to go, you know, invest their life savings in Dogecoin or whatever.

Kai Ryssdal 

Yeah, well, so first of all, everybody listening to this, number one, consult your own financial advisor. And number two, do not invest your life savings in Dogecoin, or anything like that. But but but in the fullness of time, Zeke, and I’m not talking like tomorrow, but but you know, years from now, do you think crypto actually becomes a viable currency?

Zeke Faux 

So crypto now is as old as WhatsApp, it’s as old as Uber. And those are like, apps that now are part of our daily life, like we use them as verbs. And I don’t see people using crypto for anything. And I’ve really spent a long time digging into it trying to find some useful, some use case for crypto, and I really just don’t see it. So I mean, there still are a lot of smart people working on it. Maybe one day, they’ll come up with something, but I can only judge it by its results so far, which are just truly disappointing.

Kimberly Adams 

You’ve spent a lot of time digging into this, have you found any crypto coins or tokens are anything in this industry that you can be like, yeah, that’s not a scam?

Zeke Faux 

I mean, my lawyers will tell me that scam implies like an intent to defraud. So I don’t think that everyone in the crypto industry is trying to steal your money. But I just saw a lot of like far-fetched schemes. I saw a lot of wishful thinking. And I did see a lot of scams. So there’s not one that I would say, “Oh, this one seems really promising. I’m gonna bet that this is this is the one that that’s going to go mainstream.” I didn’t see anything that my mom would ever have any reason to use, right. I traveled all around the world trying to find this use for crypto. And I gained a new appreciation for my Visa card. Like, you just tap it you pay. Like any country you’re in, it works great. Sometimes I never even got cash out. So the crypto people, they don’t realize they like to pretend, you’re competing with that you have to come up with a product that people would like better than a Visa card. And right now they’ve got nothing.

Kimberly Adams 

But what about the blockchain, Zeke?

Kai Ryssdal

Yeah right.

Kimberly Adams

This is what they always say, right? Anyway, we’ll leave it.

Zeke Faux 

I mean, you know, the blockchain is pretty cool when you think about it. But I’ve been hearing pitches about how it’s gonna revolutionize everything from finance to the supply chain. We’ll have our passports on a blockchain, we’ll have every fish in the sea on the blockchain. I really heard that. And like it hasn’t happened. So you know, I believe it when I see it,

Kimberly Adams 

Yeah, Zeke Faux, investigative reporter at Bloomberg, author of “Number Go Up,” and keeping an eye on the Sam Bankman Fried trial. Thanks so much Zeke.

Kai Ryssdal

Thanks a lot, Zeke.

Zeke Faux

Thank you so much for having me on.

Kai Ryssdal

You bet.

Kimberly Adams

I have to say like, that conversation was very validating the level of gaslighting that has been going on for years around crypto. And I remember, somebody was asking me about this, like, when the collapse was happening. And I said, “look, I am not a stupid person. I’m not dumb. And I read a lot and I follow finance and markets and I have a grasp of most things. I don’t get this, which is a red flag to me.”

Kai Ryssdal 

I think you’re totally right. And his comment there about, you know, his mom finding a reason to use this. We got to get the moms on board right. And I’m speaking you know, not not, you know, every mom but the moms who are like writing checks still like my mom and going ATMs and all that jazz. You gotta get everybody on board. And until you do, it ain’t happening.

Kimberly Adams 

Well, and the predatory nature of some of this stuff was so icky. I mean, I don’t know if you remember that story I did, I think it was last year about how black people tended to be over invested in crypto relative to other groups, because they were specifically targeted. And I went to this, you know, sort of learn about crypto and build generational wealth for your families, which is a huge like, thing that people want to do in the black community, because you’ve been denied access for so many generations. And it was a multilevel marketing scam. Scam, scam, scam, scam scam, and I will say it here, you know, maybe the lawyers lawyers will come after me, but wow. And it was so gross. It was so gross. Anyway.

Kai Ryssdal

I totally agree.

Kimberly Adams

All right. I’m sure that we still have some people on board with crypto listening to the show, and we would love to hear your thoughts about it convince us otherwise, please. Is crypto dead? What do you think our number is 508-827-6278 also known as 508-U-B-SMART. You can also email us at makemesmart@marketplace.org. But before we go to the break, I do want to give you an update on our fall fundraiser. You know, our goal, as we’ve mentioned before, is to reach 2,000 Marketplace investors. And thanks to everybody who’s already chipped in we are counting down now and we just need about 700 more donors before midnight on Friday to hit that goal and it would really mean a lot to us. If you can chip in whether it’s your first donation you’re chipping in again, you’re starting a monthly gift, increasing your monthly gift. All of that matters. It all counts.

Kai Ryssdal

We are going to do, if we get to where we want to be with the 2,000 people, we’ll do a trivia night later this fall. And if you’ve given $5 or more you get the invite marketplace.org/givesmart. Couple of shout outs here: Neil in West Friendship, Maryland, Kelly in Anchorage, Arkansas, Vinay in Coralville, Iowa, Barbara in Simi Valley, California not far from where I am, Mark in Saint Petersburg, Florida, and Carol in Las Cruces, New Mexico. Join them would you contribute what you can marketplace.org/givesmart, we’re coming right back.

Kai Ryssdal 

Alright let’s go news, what do you got?

Kimberly Adams 

I’m still stuck on the crypto thing one more thought I had, which is that I don’t want to dismiss the fact that there were a lot of normal people who did make a lot of money off of crypto, life-changing money. And, you know, I don’t want to dismiss how real that was and how real the hope was, is for so many people. And but you know, it’s like Zeke said it’s kind of like your hope for winning the lottery. Or your hope for, you know, when you go to the casino that you’re going to hit it big and yeah, that’s you want to hang your life savings on hope.

Kai Ryssdal 

Totally I will offer this story that she has told on his podcast, I’m not breaking any confidences. Molly Wood was a Bitcoin millionaire.

Kimberly Adams

Right?

Kai Ryssdal

And then it’s all vaporized.

Kimberly Adams 

Oh my gosh. I remember that.

Kai Ryssdal 

I mean it’s got to be six, eight years ago now. But and you know, it would be worth much more now.

Kimberly Adams 

And she just had to come to terms with it.

Kai Ryssdal

Right. Right. Right.

Kimberly Adams

Because it’s she was caught up in that it was something related to mountain or something where everybody got their wallet

Kai Ryssdal 

Mt. Gox. Right.

Kimberly Adams 

Yeah, where everybody got their wallet stolen. Geez, that was so sad. Okay, well, two bits of news for me. Number one, if you haven’t heard about this yet, I will just add to the chorus of people giving you a heads up that tomorrow, your phone is going to blow up at approximately 2:20pm Eastern Time, tomorrow, Wednesday, October, the 1st, there’s going to be a national test of like emergency broadcast things bid for by FEMA and the FCC. And it’s going to go to TVs, radios and cell phones. As I understand it, it’s supposed to bypass Do Not Disturb settings. So if you’re someplace where you really can’t have your phone go off, you might want to switch it off altogether. But it is a test. And so just if you haven’t heard it yet, this is happening tomorrow, make your preparations as necessary. So that’s number one.

Kai Ryssdal 

I will just sorry, I will just add here an editorial comment, what could possibly go wrong?

Kimberly Adams 

True, but I also am kind of glad they’re doing it. You know, like, let’s let’s do the test before we need it and not do it the way that that thing happened in Hawaii where you tell people a nuclear attack is incoming. And you know, it’s not. And yes, that was an accident, you know, but that was horrid. Just like any who. The other story that I have is one of the very first stories I ever did when I came to

Marketplace was like a multi part series on orbital debris. And I had so much fun doing those stories, because it allowed me to like bring in a little clip from an anime, I got to talk about space, it was a lot of fun. But orbital debris, specifically in low Earth orbit is a big problem. And we’ve talked about that here and elsewhere. There’s a lot of junk floating around our planet that is making it increasingly difficult to navigate space. And as if I recall correctly, one of the reasons that lieutenant colonel who just returned to the planet had to stay up there so long was because a piece of orbital debris hit a part of the International Space Station, and that delayed his return home. All of this leading up to the fact that the Federal Communications Commission has fined Dish Network $150,000 for failing to properly deorbit a satellite. And I think this may be one of the first times that they’ve issued a fine like this for basically somebody contributing to orbital debris. They have rules about this, that if you launch a satellite into space, you are supposed to have a deorbiting plan, a plan that its orbit will eventually degrade so that it burns up in the atmosphere that it doesn’t just stay out there floating around when it doesn’t work. Right. And they fairly, it’s $150,000 fine against Dish  Network for failing to properly dispose of its broadcast communication satellite, leading to an increase in orbital debris. And the FCC is calling it a breakthrough settlement. And I think that this is this is a an interesting moment. And the Gizmodo article I’m looking at quotes that the European Space Agency says there are currently 34,580 debris objects being tracked by space surveillance networks with 1000s of smaller pieces floating around. So it’s a problem and they’re starting to address it.

Kai Ryssdal 

It is hazardous up there I did not know actually that it was possible to get a fine for improperly the orbiting your satellite. I will say that $150,000 is nowhere near enough. But that’s true of fines in practically every case. But super interesting. I know.

Kimberly Adams 

Yeah. But it’ll start adding up like because companies are launching, you know, hundreds of satellites, you know, over the course of a couple of years because not all the satellites are big. Sometimes there are multiple satellites on each launch. And so if you start getting hit with $150,000 on each one of them, it may start to make a difference.

Kai Ryssdal

Totally true.

Kimberly Adams

Okay, what’s unique?

Kai Ryssdal 

Alright, so mine is an interesting little tidbit that shows sometimes regulations actually work. So there’s a piece in The New York, in The Wall Street Journal today, sorry, that says “Millennials are on better track for retirement that Boomers and Gen X.” And if you’re familiar with the the economic narrative around millennials, it has been that they are getting hosed to maintain us without that E rating, right, that they have been behind the power curve, and will not do as well as their parents’ generation. And they’re just are, they’re not making as much money, they’re not going to be able to buy houses all of those things. Well, turns out that because of opt in regulations on retirement plans, millennials are saving more and earlier, largely because I’m reading from the article “contributing to a 401k became the default in many plans. Unlike Baby Boomers and Gen X workers, many of whom delayed joining 401k plans, millennials were often automatically enrolled earlier in their careers”. And the earlier you get on on retirement program, the longer your money has to sit there and compound and opting in works. I just I think it’s super interesting. And it’s great news for those now who are participating that.

Kimberly Adams 

Yeah, I mean, I think the times that I have been employed in a place where they have retirement contributions, it’s always been the default. And now even I think, defaults to automatically increase over time your contributions. And, you know, I don’t really check all the time. So for the most part, yeah, I’ve been on autopilot. I mean, I, I believe this when it comes to retirement accounts, but a lot of people still don’t get homes. I know, I know, we’ve seen data that most millennials own homes, but Boomers and Gen X are still more likely to have the value of their homes to rely on in their retirement and controlled housing costs. So I wonder how that balances out. You may have we may have more money in retirement, but if you don’t own a home and you can’t control your housing costs, you know, does that money go as far and then there are a lot of boomers still getting pensions on top of their 401 K’s. So, you know, this is great news, but I would love a little bit more context around it. Cuz you know.

Kai Ryssdal 

That is it for the news, let’s do the mailbag.

Mailbag

Hi Kai and Kimberly. This is Godfrey from San Francisco. Jessie from Charleston, South Carolina. And I have a follow up question. It has me thinking and feeling a lot of things.

Kimberly Adams 

Just can’t take any good news, can I? All right. Last week, we talked about the paper ceiling, referring to the barriers that workers in the United States may face if they don’t have a four year college degree. And this often affects workers in the trades. And we got this message about it.

David

Hi, this is David from Pennsylvania. I teach at the community college. And well one of the features of us teaching community colleges we also teach the trades. You want to be an air conditioner repairman. That’s a trade, you wanna learn welding, that’s a trade it will teach you all those things. And I find this really fascinating because it’s like, no, that’s a degree and like, but that’s a trade. We teach that we’re a trade school in like 50% of our subjects we teach. So I always find that kind of divide interesting. Thank you for making us smart, take care.

Kimberly Adams 

Yeah that is interesting. So can you get a college degree in air conditioning repair, which you can, because it’s like a certificate program, right?

Kai Ryssdal 

Yeah, I think you could probably get an associate’s degree. I don’t know if there’s a degree right.

Kimberly Adams 

Yeah. But you know if it’s a piece of  paper that matters to paper, people it’s it’s there’s a paper.

Kai Ryssdal 

Note producers who may be listening. Let’s explore this. Because clearly, Kimberly and I have some questions. Yeah. One more on this when we were talking the other day, Ms. Adams and I were about whether or not we are famous. And and here’s what somebody wrote in.

Joe

Hey, this is Joe from Buck Creek, Indiana. I just wanted to kill guy and Kimberly, in my world, you too are famous. So don’t sell yourself short.

Kimberly Adams

Awe thank you.

Kai Ryssdal 

Very nice of you to say Joe, very nice of you. I appreciate that.

Kimberly Adams 

All right. Before we go, we’re gonna leave you with this week’s answer to the Make Me Smart question, which is what is something you thought you knew, but later found out you were wrong about. This week’s answer comes from Ben in San Antonio.

Ben

Something I thought I knew but recently found out I was wrong about as music. I always thought music was some ethereal artistic concept and that musicians and music writers just had some mystical connection or a deep understanding of how all the notes and chords work together that allowed them to create these incredible emotive musical phrases and compositions. But in a recent attempt to recapture some of my youth and maybe dig myself a little bit deeper into my midlife crisis, I signed up for some guitar lessons. And guess what, it’s just math. And it’s not even complicated math. It’s basically just counting a number patterns. My whole life, I thought it was this innate connection that some people just had, when really, it’s just sexy math.

Kai Ryssdal 

That’s, that’s so interesting. So one of my kids is, in music school, he’s getting a vocal performance degree. And he is spending a four year degree actually getting back to the topic of schools and trade schools and all that. He’s spending an amazing amount of time on sevenths, and thirds and diminished thirds and major fifths and all kinds of math, that kind of stuff, then, and learning how to do that. It’s like a different language.

Kimberly Adams 

I think that’s true. But then there’s also people like my brother, who can just pick up an instrument and play around with it for a while, and then compose something. He can just play the piano just off of how he’s feeling in the moment. And he doesn’t use, he just has that kind of mind and that ear and can replicate sounds on a piece of equipment, even if he’s barely spent any time around it. And I have tried so hard, like since the start of the pandemic, to learn how to play piano and it’s like, the gears in my brain are like clunking along. So I think I think it is math for some people. But I also think that there’s some of that ethereal, magicalness to it for some folks as well

Kai Ryssdal 

Totally agree. Totally agree. We want to hear first of all how you feel about music and whether you have that gift which I really I do wish I had, it’d be so it’d be so cool. But also your answer the Make Me Smart question or number is 508-827-6278, 508-U-B-SMART and should you be in the mood to support us it’s marketplace.org/givesmart.

Kimberly Adams 

Make Me Smart is produced by Courtney Bergsieker. Ellen Rolfes writes our newsletter. Today’s program was engineered by Charlton Thorp with mixing by Jayk Cherry. Our intern is Niloufar Shahbandi.

Kai Ryssdal 

Ben Tolliday and Daniel Ramirez, two guys who do have that musical gift composed our theme music you know, it’s funny when they were still here, one of our what used to be a little studio booth it turned into their music room and then guitar jam school. Our senior producers is Mr.Cabrera, Marissa Cabrera. Bridget Bodnar is the director of podcast. Francesca Levy is the executive director of Digital and on demand. The Marketplace Vice President General Manager and Tuesday guy in the credits is Neil Scarbrough.