Transcript: Liz Hoffman – The Big Picture

 

 

The transcript from this week’s, MiB: Liz Hoffman on Crash Landing, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, Stitcher, Bloomberg, Google, and YouTube. You can find all of our earlier podcasts on your favorite platforms here.

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ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, Liz Hoffman comes in to tell us about writing “Crash Landing” which I found to be a fascinating book about telling the story of the pandemic that we all just lived through. The economic dislocation, the health risks, just the mayhem that took place, but from the perspective of a number of corporate CEOs, Bill Ackman of Pershing Square Capital, the hedge fund that had a couple of amazing trades based on this. The CEO of Delta, of Hilton, of Ford, of Goldman Sachs, of Morgan Stanley, of Airbnb. Really a fascinating discussion from a perspective that I think you probably are unfamiliar with.

You know it feels like we all went through more or less the same thing. That turns out not necessarily to be true. Some of these people were dealing with inordinate stress, tremendous risk, concerned that their businesses and their companies, some of which have been around the United States for a century or more, were going to go out of business. And it really is a fascinating tale told from a really interesting perspective.

I really enjoyed it, and I think you will find it to be delightful summer reading.

With no further ado, my conversation with Semafor’s Liz Hoffman discussing “Crash Landing.” T

LIZ HOFFMAN, BUSINESS AND FINANCE EDITOR, SEMAFOR: Thanks, Barry. It’s great to be here.

RITHOLTZ: I have to tell you, I don’t always say this, I really enjoyed the book. I found it to be a fascinating look into an experience we all had and thought we shared together, but it turned out a lot of people had very, very different experiences.

We’ll get into that in a minute.

Let’s just start with your background. You have a master’s degree from the Northwestern School of Journalism. Was the plan always to cover finance? What led you into this area?

HOFFMAN: No, not at all. I started out as a sports reporter in college.

RITHOLTZ: Really?

HOFFMAN: Division III athletics, if that’s your thing.

RITHOLTZ: That’s what my college was, Division III football. Not exactly a hotbed of skill and talent.

HOFFMAN: Not a powerhouse, no. But thought I wanted to cover sports. Actually I played sports growing up and I really liked that kind of reporting, which is sort of really beat reporting at its most basic, right?

And then, you know, at some point, well, I went to grad school because I graduated college in 2008, and was shockingly enough, yeah, having trouble getting a newsroom job. And I said, I’ll go get a master’s and things will be better in 2009, because these are one year programs.

RITHOLTZ: Right.

HOFFMAN: So obviously, I’ve — you know, economically minded from the jump. But no, I really wanted to be a sports reporter. And then at some point it occurred to me that even if you do that and you get to the pinnacle of that career, your reward is to live in Bristol, Connecticut.

RITHOLTZ: Right, that’s right.

HOFFMAN: And work for ESPN. And it was really, frankly, just like beggars couldn’t be choosers. I graduated in ’09. The first job I had was at a family-owned media company outside of Chicago, in the west suburbs of Chicago.

RITHOLTZ: Well, “The Wall Street Journal” is part of a family-owned media company.

HOFFMAN: It’s true, I found my way back, yeah.

RITHOLTZ: So where did you, what was the first place?

HOFFMAN: It was called “Wednesday Journal” and they ran a bunch of weekly newspapers and a monthly parenting magazine called “Chicago Parent” That was my, truly my first job was running, I was their web editor. I mean, it was really grim times in ’09.

RITHOLTZ: How did you get to the journal?

HOFFMAN: I moved to New York in 2010, working for a legal trade pub, a competitor of “Bloomberg Law”, “Law 360”, where I was hired, you know, your career is just a series of lucky breaks. I was hired to cover, I think, securities litigation or insurance regulation, something like truly technical and awful.

RITHOLTZ: Sounds dry and tedious, but.

HOFFMAN: And then my recollection anyway, and this is the myth that I’m going to create, was that my first day they said, actually we’re thinking about launching a corporate law vertical, do you want to cover M&A? And I said, I don’t know what that is, but yes, that sounds better.

RITHOLTZ: I’m familiar with M, but A is super-flexible, right?

HOFFMAN: No idea, but you know, working at a trade pub is such a great training ground, right? because you got to get really smart fast and you have to know what you don’t know and find out, you know, because the readers are incredibly sophisticated. So anyway, I covered M&A for them for about two years. And then I don’t know what God smiled on me, but I got hired by the Wall Street Journal in 2013.

RITHOLTZ: So you start in 2013, and then you proceed to get some major news stories that you either covered intimately or broke. Burger King buys Tim Hortons, Baker and Hughes and Halliburton merged, Dell and EMC, what stands out from that era? And what was your lucky break that you were very often amongst the first reporters breaking this news?

HOFFMAN: Well, the Journal is an incredible seat from which to do that. There’s a lot of institutional privilege that you bring to the job every day there.

You know, when I got hired in 2013, M&A was dead. Part of the reason, actually, I think that I got hired was that I was covering kind of messy, wonky, legally complicated M&A that had gone sideways, you know, and ended up in court and that was at the time what the journal thought was a blind spot for them, which they were very good at breaking deals, but didn’t totally understand them or lost sight of them after they came out.

And then, as it turns out, a switch flipped in the market in 2014 was a record, 2015 was a record. None of them still stand, right? They’ve been eclipsed by 16, 17, and then again in 21. But there were big deals falling out of the sky and I don’t know, I always say it’s better to be lucky than good, though if you can be both, that’s helpful. But yeah, some of those were fun.

Burger King Tim Hortons, I remember very clearly because it was in the middle of those waves of kind of tax dodgy, those inversion deals.

RITHOLTZ: Right.

But these are two big legitimate, you know, franchises.

HOFFMAN: Totally, but they were reincorporating in Canada and there was a lot of sensitivity around that. And I remember that one came together pretty quickly, if I remember, which is pretty unusual, but like Friday or Thursday to a Sunday scoop.

RITHOLTZ: So what about the COVID beat? How did you find your way to that space? Were you regularly covering epidemics or clearly there’s a corporate story there. How did you tumble your way into that?

HOFFMAN: You know, go back to early 2020, I mean, every beat was a COVID beat pretty quickly too, right? At that point, I’d been covering, as you mentioned, investment banking, Goldman Sachs for a couple years. And again, I’m probably pretty lucky. I had the sense at the time that maybe that story was at least that chapter of it was a bit played out. You know, that February, March market started to go, I mean, this started as a financial story, I guess, is how I got involved, which is that markets woke up to it very quickly, and things got hairy very fast. And basically, every reporter at the Wall Street Journal at the time became a COVID reporter.

RITHOLTZ: That’s interesting. So when did you get a sense that, hey, this COVID thing isn’t just another flu, there’s something, an order of magnitude more significant than what’s usually a background story, 40,000 people die from the flu every year in the US. Anyway, when was it clear to you as a reporter this wasn’t the usual flu?

HOFFMAN: I won’t say that it was ever clear to me from the health perspective, I’m not a health expert, but you would see these headlines coming…

RITHOLTZ: Well, even from a business perspective.

HOFFMAN: Right, so I think really what happened was, and I tried, we’ll talk about the book in a bit, but I tried to kind of recreate that slowly and then all at once feeling, right? If you remember–

RITHOLTZ: Hemingway-esque.

HOFFMAN: Yeah, but markets peaked, would turn out to be a peak on I think February 18th or 19th. Things are, you’re starting to see it a little bit in the repo market, you’re starting to see commercial paper credit get a little rickety, spreads are widening, stocks are still kind of hanging on. And then it was really, you know, the last couple of days of February and the first week of March, where, I mean, things just went crazy.

And I remember, you know, to give you a sense of, you know, the fact that I try not to Monday morning quarterback this stuff, I was coming back from a family vacation on March 8th in the Gulf and sitting there, not a mask in sight. I remember my sister-in-law had stolen some extra wet naps from Chick-fil-A, like wiping down the airline seat, feeling a little foolish doing it. And so I came back to the office on a Monday.

Wednesday, we were told, you know what? We’re going to try a work from home on Thursday. This is Thursday, March 12th. Never went back.

RITHOLTZ: Wow, that’s unbelievable.

HOFFMAN: So I mean, that’s how quickly this happened.

RITHOLTZ: I have a vivid recollection of my sister lives in the city, I live in the burbs, and she was out visiting late February, and we had gone to Target. Hey, as long as you’re out here, let’s swing by Target. And I never really go to Target post-pandemic, it’s all delivered, but at the time, we were walking through Target, there’s no toilet paper, there’s no bleach, there’s no — this is February, this isn’t March, and that was my first, hey, something’s going on, but it turns out, in the book, lots of companies had a much earlier sort of lead on something bad, something wicked this way comes, and it’s not the usual. Tell us a little bit about that.

HOFFMAN: You know, I start the book kind of in earnest at Davos 2020, which will to me just go down as like the most absurd gathering of human beings in history. And it was this private dinner that, it was actually being hosted by my then employer, the Wall Street Journal, though I was not invited. They don’t let the reporters into the fun stuff, but it’s a bunch of CEOs with Steven Mnuchin, the Treasury Secretary, and they’re all yakking about this, the big theme that year, as it often has been since then, was environment, ESG, and they’re all talking about the kind of corporate babble that you hear at these things.

And Steven Mnuchin, the Treasury Secretary, stands up and says, “You guys, you’re looking at the wrong thing. There is a city of 11 million people in China that’s on lockdown.” This is the end of January of 2020. And I start there because, you know, in my reporting, these are people who should have had, they have the best lines of sight in the world. They run global businesses, they’ve got regulators and government officials on speed dial. They sometimes are regulators and government officials. And they were totally blindsided.

And, you know, there’s two ways to look at that. One is like celebrities are just like us, right? They’re like, these guys bumped along in the dark, just like the rest of us. The other is, I don’t know, I found it a little unsettling. These are people who really should be able to see around corners. They’re paid a lot of money to see around corners. And most of them didn’t.

RITHOLTZ: Most of them didn’t, but a few did.

And I’m fascinated in the book, and we’ll get into the details, how some companies in different sectors, they were able to see a little bit around corners, starting with the airlines.

They were getting cancellations long before everybody shut down. They had a sense, hey, something’s a little different here. You talk about hotels, Airbnb, and then the banks were having people draw down their line of credit weeks and weeks before things really got bad. So that’s the question. Who had the earliest read? Who was hippest to what was going on? And what was their response?

HOFFMAN: In my reporting, actually, someone you didn’t mention, I think, had the earliest read, and that was Bill Ackman.

RITHOLTZ: That literally, next question, of Pershing Square Capital, who got very nervous very early.

HOFFMAN: Yeah, so Bill, bit of a germaphobe, but he, you know, in mid-February, he has been reading, he’s a voracious consumer of, everything’s kind of a funnel to him and internalizes it in these investment theses. And he is starting to get very spooked in late January, mid-February. He goes to London School of Economics and mid-February gives this talk and is asked about the coronavirus. And as he’s sort of getting ready to answer this, kid in the front row, just like very innocently coughs or something, and Bill kind of like leans back.

RITHOLTZ: Jumps.

HOFFMAN: Yeah, jumps. And it’s one of those dumb little things that we would all kind of, later you would look back and be like, oh, that’s what did it for me. And he comes back and says, okay, I think we are dramatically underestimating this. And so the key components of any investment are like thesis, expression, and timing, right? And so he says, “I think the market is not aware of the risks here.” Okay, how do I express it? And most people think of Bill, his bread and butter business is activist, very concentrated stock investing, but he has a bit of a background in macro too, back from ’07, ’08, and he actually decides to do this in the credit markets, where spreads are incredibly tight.

Investors are assigning basically no risk premiums to corporates over governments, or junk over investment grade, and he said, “All right, when things get bad, that’s where it’s going to blow out.” And he shorts the entire credit market, and it only takes about two and a half weeks for people to realize that he is right, and he’s holding an incredibly valuable piece of paper. Ends up turning about $27 million of swap premiums into 2 billion plus in profit.

RITHOLTZ: I really like the way you tell this tale from multiple perspectives, multiple storylines, lots of different leading characters. What led to that approach?

HOFFMAN: I mean, at heart, I’m a narrative journalist. I like to tell stories and collect facts and present them in ways that people can understand and grab onto. But really the origin story of the book was I’d done a story for the Wall Street Journal that published the first Saturday in April. And it was a TikTok day by day of the month of March. And I’d worked with lots of colleagues around the newsroom. And it was day by day from the seat of, it was the month that the economy shut down. We’d never seen it before. We thought that was an important story to tell.

And it’s two dozen CEOs, investors, policy makers from like all across the economy. And it was just incredibly clear coming out of that, that we just barely scratched the surface, right? That this was fundamentally just like the kind of yarn that reporters dream up, which is it’s narrative, it’s tense, there’s a lot of drama, there’s high stakes, things really mattered.

And so that’s I think where the germ sort of got planted. Spent a couple weeks, you know, talking to publishers and agents as one does and tried to write a proposal and see if anyone would buy it and then they did. thing I knew I was, you know, summer or fall of 2020 and I was at a book deal.

RITHOLTZ: Really, really interesting. So, so you choose a number of specific industries or did you choose them? Did they self-selected? It’s kind of apparent some of these industries are going to be the first to really succumb to an economy shutting down. How did you decide who were the key players to focus on? What, what sectors to really delve into?

HOFFMAN: Yeah, this is, you know, most reporters who write a book, they have a beat and a huge thing happens on their beat and they crush it and then they write a book about it, right? Think about whatever your —

RITHOLTZ: “Bad Blood” is a perfect example.

HOFFMAN: “Bad Blood” perfect example. John Carreyrou at “The Journal” crushes the Theranos story and says, “Of course I should write a book.” This was a little different, right? This is nobody’s beat at “The Journal” or elsewhere is every company on the planet, the entire economy. So, and in part I think the reason that I thought I was maybe in a good position to do it was I thought it would be more of a financial story.

You remember early on, right? The markets are going crazy. There’s, you know, people are always kind of solving the next crisis by looking at the last one and there’s this concern that it’s going to be 2008 all over again. And I thought the banks would be a bigger piece of it, honestly, than they it turned out really to be a story about a crisis in the real economy.

So then, you know, that summer, you’re looking around, you’re thinking, okay, like, some combination of what is important. So some obvious ones there, airlines, obviously important, right? Travel, obviously important, finance important, it was a little unclear then how that would it all shake out. I know I wanted a big sort of multinational industrial.

RITHOLTZ: Manufacturing, Ford as an example, sure.

HOFFMAN: And I wanted, people have asked me, why is Airbnb in the book if you have Hilton? And did you want a tech company? And the truth is at that point, I really didn’t think, and I think it ultimately was the right call. I’m not sure that tech had a uniquely interesting pandemic.

RITHOLTZ: Not at all.

HOFFMAN: No, despite being the reason that we kind of all got through it, I’m not sure Apple had like an incredibly compelling story.

RITHOLTZ: Right, if anything, of any sector that was able to sort of, all right, everybody go work from home, you all have laptops and high speed connections, do what you have to do, they seem to almost take it in stride.

HOFFMAN: Tech was the scaffolding on which the pandemic story hung, I think, but not to me anyway, at the time, an important part of it. But I did want a company that was, in addition to kind of making sure that you’re checking boxes on sectors and really getting a picture, at the end of the day, books are character driven, these kind anyway. And so you’re going to end up sort of essentializing these CEOs into archetypes that are carrying a narrative that’s sort of buzzing underneath the story that they’re telling.

RITHOLTZ: You have a lot of great characters as CEOs and great storylines. David Solomon, Ed Goldman, you have the CEO of Hilton, Delta, American Airlines, like work your way, and Airbnb, Brian Chesky.

HOFFMAN: Brian Chesky, I wanted a CEO who was younger. I wanted a company that was in a different place in their life cycle…

RITHOLTZ: Right.

HOFFMAN: And Airbnb was on the verge of going public, which is just such a naturally high stakes thing. And we can talk about the Airbnb story, but I fully thought they were left for dead, which is why I’m a journalist and not an investor.

RITHOLTZ: So when you’re selecting these storylines, when you’re choosing these characters, how obvious are some of these? Because these are all big personalities, big egos, not, there’s no shrinking violets amongst any of the people you’re writing about, was that part of the reason you selected them? Tell us a little bit about the thought process.

HOFFMAN: You know, you never know why some, I mean, this is true at a daily journalism job or a book, you never really know why anyone is talking to you.

RITHOLTZ: Right.

HOFFMAN: And, you know, again, because of the way this book came together, I had to kind of go out and say, here’s what I’m trying to do. I think you have a good story to tell. And by the way, you shouldn’t assume that any of the people in the book spoke to me, their stories are the ones that I tell. But it’s a little bit of a kind of layer, all right, what are the important stories? Where can I get people to talk to me? And then you kind of throw things overboard where like one or both of those isn’t quite working.

RITHOLTZ: So I have to interrupt you here. I assumed you spoke to all of these people. It looks like you have amazing access. People, there’s a lot of details that are very, very specific that someone would say, and it keeps coming up to food, oh, they’re out in Montauk and they have a lobster roll, or he’s stuck in a hotel and he’s eating the same sort of food that comes in every day, because it’s him and a bunch of Saudis stuck in a DC hotel. Those sort of things, it looks like these are very specific recollections from individuals who appear to have spoken to you.

HOFFMAN: Yeah, look, I mean, I think readers can draw their own conclusions. I think what I had said when I approached people was, you know, here’s how I want to tell this story, which is very voice of God, very fly on the wall. I think just from a reader, that’s really what you want. You don’t want to be jumping back and forth between live quotes and old things, and you’re trying to tell a story. And I think that gives people the safest space to speak.

RITHOLTZ: But you did speak to most of these people.

HOFFMAN: Certainly, everyone in the book had ample opportunity to talk to me, and many of them took it.
RITHOLTZ: All right, that makes a lot of sense.

Were there any narratives that you wanted to cover but didn’t like any companies or sectors or space that you thought, oh, this could be a great thread and for whatever reason, it never came together?

HOFFMAN: Yeah, there’s two buckets of those, I would say. Like you will notice, and I think it’s better to just address it straight on. There’s not a cruise company in the book. There’s not a meat packing. There’s not like a, what we would consider to be like bad or at least slightly dubious actors.

RITHOLTZ: What a shock.

HOFFMAN: And like, look, I never covered those industries and a challenge of a project like this is you just, you can’t source up at 20 places in six months. It’s not how journalism works. It took me years to get the relationships that I have now. And so, yeah, there is a little bit of self-selection there, which is like a totally fair criticism of the project if you’re making one.

And then there were some that I pursued that ultimately just, I didn’t think were additive. So Macy’s is a good example.

RITHOLTZ: Right.

HOFFMAN: Kind of thought they would have a more interesting pandemic than they did. I got to the end and we sort of, my editor and I kind of looked at the storylines, like, what are we doing here? And we threw one or two overboard.

RITHOLTZ: Retail just is nothing at all. hey, there’s no retail, order online.

HOFFMAN: You know what it was? Honestly, it was yes, and I think that story is going to take a couple years to play out. And I couldn’t say at the time, and that’s a hard thing about writing a book, particularly when you come from the world of journalism, particularly if you come from a place like the “Wall Street Journal” which is that you’re supposed to have a point of view on this stuff, and you’re supposed to be able to say something definitive, and it felt too early to me at the time.

RITHOLTZ: Squishy?

HOFFMAN: Yeah, it felt too squishy.

RITHOLTZ: Really interesting. So let’s talk a little bit about Bill Ackman. He not only was early in seeing the crisis, but that bet he made ended up netting Pershing Square $2 billion. That’s a hell of a trade. I don’t know why we haven’t heard more about that.

HOFFMAN: Look, say what you want about Bill. I mean, he’s a controversial figure and he doesn’t always get it right. And that is one of the best trades of all time.

RITHOLTZ: Yeah, that’s great.

HOFFMAN: And you know, it’s a pure trade. He saw something that people didn’t. He was right on the thesis. He found a place to express it efficiently.

RITHOLTZ: Right.

HOFFMAN: And he absolutely nailed the timing. I mean, you’re talking about, I don’t, I could do the math, it’s like a 10,000% return in like three weeks. I mean, it’s, I mean, really crazy.

RITHOLTZ: Wild number. So I love that he reaches out to different people like Warren Buffett and Bill Gates. Anybody ever get back to him?

HOFFMAN: I don’t think so. I mean, that’s the other thing about Bill, which is, you know, I can say straight face, like very impressive piece of financial footwork there, but also like, is like, is a little, is flailing a little bit, is a little vulnerable, the thing about Bill Ackman, and I write about this in the book, is he has this tendency to take what are investment theses and turn them into holy wars. You’ll remember years ago, he had a proxy fight at Target, and I think it was invoking JFK in his speech to shareholders.

RITHOLTZ: It’s really Target. At least the battle with Carl Icahn over what he describes as a pyramid scheme, you could say that’s a holy war.

HOFFMAN: But also even that, you know, tears in his eyes, talking about taking the battle to the ends of the earth.

RITHOLTZ: Right.

HOFFMAN: And you know, they are genuinely felt.

RITHOLTZ: Right.

HOFFMAN: These are theses that become, he wraps himself in the flag of them. And he totally did it here, right? He takes to Twitter for the first time in a year or two and says, “Mr. President, we can solve this,” right? Injects himself right in the middle of this thing. Ends up parlaying that into a CNBC interview where he —

RITHOLTZ: Brownlee excoriated for, even though he had already covered his short and moved to the long side.

HOFFMAN: Exactly right. Now, in fairness, live television is not a place that is super comfortable with a lot of nuance, right? But what he did was he went on television and said, “Hell is coming.” And the stock market went down and I think Mike Novogratz was like, “Get him off the air.” I mean, it was, but you’re right. He, I think ultimately, and I spent a lot of time on this because I didn’t want to carry anyone’s water into anything wrong.

RITHOLTZ: Yeah, no, he really was fascinating.

HOFFMAN: He was bullish at that point. He had gone long stocks.

RITHOLTZ: Yeah, he had pocketed the two billion and said, “We’re going to go the other way because I think eventually the Fed and the White House will do the right thing here.”

HOFFMAN: Yes. And that’s the way he thinks, right? The answer to him was so obvious that someone was going to do it and arbor away the trade that he saw.

RITHOLTZ: Right. So he covers the short, goes long, and yet there’s a ton of criticism that he’s talking down the market because he’s short. He was no longer short.

HOFFMAN: Yeah, he just wasn’t. That’s just not true.

RITHOLTZ: So in the book, and my recollection of the period is, the criticism seemed to be not just unfair, but very personal. How did he respond to the sort of public flaying that he got on Twitter?

HOFFMAN: Actually, he responded pretty responsibly, put out, I think, two shareholder letters about a week apart in late March, and actually did what no portfolio manager usually loves doing, which is he deconstructed the trade.

RITHOLTZ: Right.

HOFFMAN: He said, “Here’s what we bought, here’s what we bought, here’s what we paid, here was my positioning more or less when I went on the air. I got handled with the right way. Got a little lost in all the noise.

RITHOLTZ: Sure. I mean at that point the world is going to hell and who cares about a letter from a hedge fund manager explaining why he wasn’t jawboning the market down, but still a great trade that he never really got full credit for other than the two and 20, which is not a terrible thing.

HOFFMAN: You know, most of the money is his though.

RITHOLTZ: Yeah, at this point it’s practically a family office.

HOFFMAN: … outside money anymore, so yes.

RITHOLTZ: Right, right. with a lot of hedge funds and so even better than the 20 is the 2 billion. It’s not a bad week’s work or bad month’s work, right?

HOFFMAN: The other thing about Bill, I don’t know if you want to get to this later.

RITHOLTZ: Yeah, no, no, tell me more.

HOFFMAN: But you know, he called this thing coming and going, right? We’ve talked about the coming.

On the way out, back before inflation was really a thing, he does what any sort of freshman economic student could do. He says, I don’t know, oh man, like a lot of pent up demand here, a lot of money. Most people by and large, and this is true at kind of every income level, came out of the pandemic wealthier than they went into it. And just a total show on the supply side. We are going to have massive inflation here. And he put on a trade, he was a little earlier on that one. His actual IRR is not quite as good, but feels like another $2 billion trade.

RITHOLTZ: There really weren’t a lot of people who were correct about that. Jeremy Siegel was one for the same reasons. And Ackman was one, so kudos.

HOFFMAN: Called it coming and going. I will note that when he went back to doing what he is ostensibly paid to do, which is to take deeply researched positions in single name stocks, he lost a ton of money on Netflix.

RITHOLTZ: Which is kind of funny because, did he lose it on the way up or did he lose it on the way down?

HOFFMAN: You know, I’d have to go back and look. My recollection is that he came out publicly, not in activist position, so we think this is a great company, and literally did it right at peak streaming. The next quarter Netflix announced it’s like first subscriber, either slowing growth or loss, I don’t remember, and sort of kicked off this now two year kind of slow bleed of peak streaming.

RITHOLTZ: Happens.

HOFFMAN: Happens.

RITHOLTZ: Hey, you can’t bet a thousand in this business, right? You make $2 billion on the pandemic, you make $2 billion on the inflation call.

HOFFMAN: At a cost of about 200 million, if I remember right, maybe a little more.

RITHOLTZ: Right, and so then you lose a couple of bucks on Netflix, you know, this too shall pass.

HOFFMAN: Yes.

RITHOLTZ: So let’s talk a little bit about YOLO. You only live once, that means go out and buy the crappiest meme-based companies there are. Discuss.

HOFFMAN: I mean, no, it’s such an important part of the pandemic story because I think, I mean, it’s just so fueled by it, right? Like all of the very normal human behaviors came to an end and there’s that A, a lot of money as we’ve discussed, these stimmies, stimulus checks, and just this, like you can’t go to a sports game, bet on sports.

RITHOLTZ: Right, no betting, no casinos, no bars, no anything.

The stock market becomes a casino. Most stock markets are largely momentum driven, which is weird if you think about it. A stock goes up, it’s presumably a little more overvalued than it was before it did, you should sell it, right? Same if it goes down. And instead, you end up having these waves that fuel themselves. And you’re a professional wealth manager, you talk to investors, they will say that underpinning it is some basic fundamentals of corporate analysis and management. Not really.

And actually, the meme stock stuff just didn’t even pretend, right?

RITHOLTZ: Right.

HOFFMAN: It was so nakedly goofy. And as Spencer wrote this great book, certainly some people made some money, but ultimately a giant cell phone by that entire community.

RITHOLTZ: Right, right. No doubt about it. And it all started with GameStop and Reddit and Wall Street Bets. And that became like a self-fulfilling prophecy of a small company with a huge excess short position in it, which meant it was primed for a squeeze. And then these people discovered gamma trades. Hey, we can buy out-of-the-money call options and force these people to cover their shorts and to take a — let’s be honest, it’s a junk company, right? Wait, you’re selling video games in retail shops in malls? Who cares? To take that from single digits to multi triple digits, that’s a hell of an orchestrated short squeeze.

HOFFMAN: And it was interesting too, because retail had just been getting less and less relevant as a market force. Forever.

RITHOLTZ: Right. Buy an ETF, go passive.

HOFFMAN: Totally. You’ll remember IPOs back in the day, investment banks used to win them by saying, “We’ve got retail, give us that allocation, it doesn’t matter at all anymore.” And trying to see retail reassert themselves. And I think it also, I don’t know whether they were both just riding the same wave or one fueled the other, but had that the same sort of populist political establishment, right?

RITHOLTZ: Right.

HOFFMAN: Sort of putting your thumb in the eye of the political establishment, same thing in the financial establishment. And like, to some degree they kind of won.

RITHOLTZ: Ironically, right. It’s like, wait, you’re going to, all this Robinhood is a public company. The way they make money with their free trades is they sell it, payment for order flow is what it’s called. So if you don’t like the big hedge funds like Citadel or Millennial, you’re putting money in their pocket.

HOFFMAN: Yeah, what’s funny about, and I’m not an expert on payment for order flow, but the way that I think people commonly look at it is like your trades are being sold and people are trading ahead of you. That’s not really why people buy order flow. They do it because it’s random and actually uninformed. The sense is that retail doesn’t know anything that Citadel doesn’t, so they want that flow to kind of balance stuff out and just provide liquidity.

RITHOLTZ: Plus it’s volume. Right, it’s volume.

If you’re getting a cent, a share on billions of shares, that adds up.

HOFFMAN: Totally, I mean, which isn’t to say that the deck isn’t in many ways stacked against retail, but I don’t think it’s some kind of like all consuming conspiracy that Ken Griffin is directing from Miami Beach or whatever.

RITHOLTZ: Right, if you discovered that the deck is stacked against the individual investor in 2020, you’re a century late to the party.

HOFFMAN: But in some ways actually, it’s never been friendlier to retail. You’re talking about, you know, if you want to have a basic, If you want access to basic investment products, it’s never been friendlier, cheaper, easier.

RITHOLTZ: Free to trade, you could buy the S&P 500 for four basis points.

HOFFMAN: Totally.

RITHOLTZ: And so the best way to beat people at their game is don’t play their game, play a different game.

HOFFMAN: And they made up this insane game and then somehow won it and then lost at it. Everyone seemed to lose here. But no, but I think it was, I mean, it wasn’t strictly a pandemic story, except that if you were sitting in March of 2020 and you’re watching the Dow go from 30 to 22, in the course of a couple of weeks. The idea that it would be hitting fresh highs again, like by the end of the year, seemed insane. And it was just such a good reminder that like, there was no ability to forecast this.

RITHOLTZ: I thought this was totally a pandemic story.

People are stuck at home, they don’t have their usual outlets, a lot of pent up energy, a lot of pent up cash, and suddenly this comes along. I loved Investor TikTok, because there was not a bigger collection of people that you could see the train crash coming, like, “Get out of the way,” and they didn’t want to hear. People literally said to them, “You guys don’t understand what you’re doing and you’re going to get hurt.” And your old school was the pushback, and then all of those people, with very few exceptions, got demolished.

HOFFMAN: Well, I think it’s a pandemic story in two ways, right? To your point, people are bored, they have a lot of cash sitting around, but they could have bought the Fortune 50 with it. They didn’t.

RITHOLTZ: Not exciting. Not thrilling.

HOFFMAN: Yeah, but even more than that, they were angry and there was a lot of angst and they wanted, they were fed up with authority. I mean, a huge story coming out of the pandemic is, I think, fueled by it, is this declining trust in institutions, right? Like why buy the S&P 50 when you can resurrect some dead retail store from your youth? I mean, there was a real political edge to it.

RITHOLTZ: I think that traces back decades, or certainly at least to the financial crisis, and institutions have been seeing a decline. And in fact, we’ll talk a little bit about the Trump administration later, but they very much captivated on the, the hell with the man, I’m anti-establishment, vote for me, no doubt about it, but let’s talk about something else that was very related, the great resignation.

I have a pet theory, people stuck at home with cash, CARES Act cash, in industries they weren’t happy about, took the opportunity to upskill, to look for new jobs, to start their own businesses. New business formation in 2020 and ’21 were huge. What happened during the great resignation?

HOFFMAN: I think it’s two things. Like to your point, yes, people had all this cash. They also like, frankly, because they were spending more time with family in part because a lot of people died. You start to kind of reassess what you care about in life. And if you can afford it, given the stimulus payments, then you might do that.

But that’s not the whole story because like those stimulus payments, a lot of estimates out there, it seems like probably two, two and a half trillion dollars of excess savings during the pandemic. Half of that, maybe two thirds has been spent down. So like, if that’s the whole story, then we’ll see people go back to work very soon.

RITHOLTZ: Right.

HOFFMAN: You know, which ultimately wouldn’t be the worst thing for the economy given where the labor market is. But I think it’s actually just like a little more complicated than that, which is, and this is an economic book, I’m not a psychologist, but the pandemic was so weird, and it was just such a reset for a lot of people.

RITHOLTZ: That’s a great word, I’ve used that phrase. It was a great reset where people, they rethought their jobs, they rethought their relationship between their work-life balance, they rethought their commute. Let’s talk about hybrid working and the return to office.

HOFFMAN: I think that’s the most lasting change to come out of this. I mean, people have talked about, you know, the digitization of the economy. Actually, a lot of that, to me, is overblown. Like, if you look at, for example–

RITHOLTZ: It was years old.

HOFFMAN: Totally, and I think the pandemic pulled forward stuff more than anything else. If you look at, like, retail, e-commerce as a percent of retail, like, it soared during the pandemic, but now is basically back on the trend line that it would have been on.

RITHOLTZ: Which was–

HOFFMAN: Which was 10% a year.

RITHOLTZ: Rising dramatically since the late ’90s, but, you know–

HOFFMAN: But the idea that that was, like, a total, It is stratosphere change, I think is not true. The thing that I think is really lasting is the relationship between capital and labor, right? Between management and their employees.

You know, I do tell this story in the book, you referenced it early on, we’ve got the CEO of Goldman Sachs, who’s out in the Hamptons on a Friday.

RITHOLTZ: Playing DJ.

HOFFMAN: I don’t think he was DJing that trip, but I don’t have access to his schedule. But you know, is waiting in line at, I think, is it the Montauk Lobster Club?

RITHOLTZ: Yeah, exactly.

HOFFMAN: Yeah, I should remember this.

RITHOLTZ: It’s always food.

HOFFMAN: It’s always food.

RITHOLTZ: It cracked me up. I noticed that on a regular basis throughout the book.

HOFFMAN: That’s funny, I’ll have to check that instinct in myself. But I was waiting for a table and a young woman comes up to him and says, “Mr. Solomon, I work for you. “I’m an analyst at Goldman.” And me and like six of my colleagues points over to some table. We all took the day off and came to the beach. And some of that is true.

RITHOLTZ: Smart, smart thing to say to the CEO of Goldman Sachs. He was infuriated.

HOFFMAN: I tell that story because I think it like sets the table for this fight that we are somehow now, two years later, still having. I am, I would say, at the risk of being called like a capitalist shill. I’m somewhat sympathetic to CEOs here, who for a lot of the pandemic, especially in places like New York, are walking around the city on the weekends and seeing the bars packed, and then seeing their offices empty on Monday.

So like, the it’s not safe for us to come in, you are making us risk our lives, like was certainly true in the beginning, and you’ll remember an outbreak on the, I think, equity trading floor.

RITHOLTZ: Morgan Stanley.

HOFFMAN: JP Morgan.

RITHOLTZ: Yeah.

HOFFMAN: Where genuinely like there were places that were not safe and I talk in the book a lot about the New York Stock Exchange for that reason. But at some point that just wasn’t true anymore and you talked about flexibility and reassessing your priorities and that’s totally fine to a point but there’s clearly some professional self-indulgence that was baked in.

RITHOLTZ: Here’s my pushback to that, right? The US return to office is 60% except in big metropolitan areas where it’s 50%. In Europe, it’s almost 95%. Why is that? Their mass transit is much better. Their cost of housing is much lower. You could live much closer to your work. My big takeaway from the pandemic is that commuting in America sucks and sucks in a way that, oh my God, I’m not going to do this anymore unless I have to. And a lot of people decided, It’s amazing how we get used to something and you just don’t question it. Lots of people have a two hour commute into the office because they can afford a place in Rockland or in Suffolk County or in mid New Jersey coming into New York as an example.

And suddenly recapturing three, four, five hours a day, “Hey, I don’t care if I have to make 20% less. “I’m not doing that.”

HOFFMAN: I think that, I totally agree though. I’m not sure that that’s a trade most people are willing to make, right? Morgan Stanley, you mentioned–

RITHOLTZ: I think a lot of people made that trade, right?

HOFFMAN: You don’t have to be here, but we’re going to pay you for where you live, and people lost their minds about it.

RITHOLTZ: Right.

HOFFMAN: You know, there was a study a couple months ago, I’d have to go pull it, but I think it found that Americans got like 93 minutes back, or something, from work from home.

RITHOLTZ: A day.

HOFFMAN: A day. And it, you know, spent it, I think, it was a little bit of a gender split, but like spent it, you know, a third, a third, a third on like work, personal life, and caregiving, and some other things.

RITHOLTZ: Right.

HOFFMAN: And I don’t remember the numbers, you could check me, in Europe they were lower, And then in Asia, they were like 120 minutes. So there is some, I’d be curious to see what happens if you overlay that. But I think there’s this frog boiling thing, which is your commute as your life gets more complicated, you get older, you get wealthier, kind of just expands. And it doesn’t occur to you that that’s weird to spend three hours of your day, because everybody does it. And then you don’t do it anymore and you realize this is great.

RITHOLTZ: The thing that I found so amusing in the first, I don’t know, couple of quarters of the pandemic, the productivity numbers go through the roof. People are working longer hours and they just seem to be doing a better job at first.

HOFFMAN: Yes, but then they start to, and I think it was Jamie Dimon last year who said, you know, as you can imagine, we keep quite close tabs on our employees and we notice that productivity on Fridays is really low.

RITHOLTZ: Right, that’s right.

HOFFMAN: Which like, maybe we should have a four day work week. That’s a totally fair–

RITHOLTZ: It’s not so far off, right?

HOFFMAN: Totally not far off. There’s actually a lot of pilots, mostly in Europe, that are really interesting about this.

RITHOLTZ: I love the stories about the people who didn’t take Fridays off. They took two jobs and were doing two full jobs, time jobs at once and neither company figured it out.

HOFFMAN: Yes, yes.

No, but I think to your point, journalism is an apprentice business.

RITHOLTZ: Right.

HOFFMAN: I learned how to do it by sitting next to people who are really good at it. Not every job is like that.

RITHOLTZ: Right, but it’s a very fair issue.

HOFFMAN: A lot of businesses like that, right? Like you hear, I would hear senior reporters on the phone, like learning how to talk to a source, you follow someone to a meeting, you learn how to deal with a client. That stuff is soft and is really hard to do remotely. And I think what young people actually want is, I think they’re mostly okay going in, but they want real value.

They don’t want taco Tuesday. They want to say, if I’m here, I need to go to that meeting, right?

RITHOLTZ: Like collaboration, mentorship, training, trailing.

HOFFMAN: The places that you’re seeing the most turnover, we saw some data on this the other day, are the why am I here jobs, right? Which is the ones where people never left or have to go in. They work on the assembly line, they got to physically be there, they get that. And then the ones where people understand that they can be remote. I’m often remote because I’m out meeting sources or traveling or working at home or whatever. It’s the ones in the middle where they’re like, why am I here? This is a job that I could very much do from home and I’m not getting any additional support or mentorship or encouragement. Those are the people who are quitting.

RITHOLTZ: My favorite story of that era was in the “Washington Post” about companies making people come into the office to do Zoom calls.

HOFFMAN: Well, and right, because there’s this sort of equity belief, right, that there’s some, And by the way, I think a lot of this will reset after the first promotion cycle, when people realize that FaceTime–

RITHOLTZ: There’s an advantage to be–

HOFFMAN: There’s a huge advantage. And it’s actually unfortunate, I think, if you track these cohorts, because the people for whom flexibility is deemed to be the most valuable are, frankly, like women with kids, minorities who have much further commutes and tougher personal situations that they need more time to deal with, but I actually think it’s going to work against them, which is that the people who can afford, for a bunch of reasons, to come in every day and see the boss and slap some backs, are going to get overpromoted. And we’re starting to see it now, we’ll see how it shakes out in the commercial real estate market.

But companies are upgrading their space, but needing less of it. So trying to figure out how to actually right size your footprint and have an office that people want to be in.

RITHOLTZ: Yeah, that’s absolutely true. It’s fascinating.

So I’m in the office yesterday, and we have this new division that we launched, and we have people in from around the country, And it’s like, wow, I forgot what it was like to have 20, 30 people in an office that normally holds 20 people, but the past year it has been eight, 10, 12 people.

It’s like, everything’s popping, we bring in lunch, it’s this and that. Wow, this is kind of fun. I forgot how much fun it can be when you have an office full of people. We’re more startup than established entity, so not everybody has that ability. I’m not sure how much I’d buy into the, you must be here for culture. I’ve been hearing a lot of that lately, but the FaceTime, the collaboration, the mentorship, just the learning how companies operate, that’s got to be a huge, huge aspect of this whole thing.

HOFFMAN: I completely agree. And I mean, look, it’s every generation kind of shakes their fists at the next one. So these kids have no respect. They don’t know how anything works. But I do think like losing two years of that, if you were in your 20s, starting out, There’s a lot of just sort of like passive osmosis that happens.

RITHOLTZ: That you miss out on when you’re remote. And, you know, whenever we see like a Zoom call with 20, 30, 40 people on it, it’s usually one person, maybe two people speaking. And it’s, wait, I have to give you my full attention for an hour? That seems like a lot for very little in return in terms of what you’re learning. Like that could be a, if it’s a half a page memo instead of 50 people spending an hour, isn’t it more efficient to say, important, read this, as opposed to–

HOFFMAN: Well, it’s the old joke, right? This meeting could have been an email, this email could have been a Slack, this Slack could have not existed, like whenever there’s some inflation that happens. And I think it’s good that some of that got dispensed with, but, and look, maybe I’ll be wrong about this, but like AR, VR, it doesn’t seem like a replacement to me.

Like the replacements seem bad. Like if you don’t want to have a meeting, don’t have a meeting. We don’t have a fake meeting.

RITHOLTZ: Right. I’m with you on it. By the way, what you said, my colleague Mike Batnick had a hilarious Tweet, which was most books should be magazine articles, most magazine articles should be tweets, and most tweets should be deleted. Which I find to be–

HOFFMAN: I hope not this one. I hope this one justified the 300 pages.

RITHOLTZ: So just so you know, what I found so interesting about the book is it reads, so we all went through this pandemic together. We all more or less experienced maybe 80% of the same stuff, the concern about what’s going to happen with my job, what’s going to happen with the economy, am I going to get sick? I’ll never forget walking the dog around the block and watching a guy spray a package that was delivered with Lysol. How long did we idiotically wash down our groceries? Like there was a lot of confusion as to what was going on. So most of us had a very similar experience. What I really found entrancing about the book is, oh, there were a lot of people that had an incredibly more stressful, more at risk, higher level, real economic catastrophe experience than I had. And you use their storylines and the characters of the CEO of Delta and American Airline and Airbnb and Ford and Hilton and on and on and Goldman Sachs to tell a story.

I feel like I got to look behind the curtain of stuff that we all kind of suspected was going on during the pandemic, but most of us had no idea and that’s what made the book so interesting to me. It’s like, oh, there was some serious going down as this all unfolded.

HOFFMAN: I mean, first of all, thank you.

RITHOLTZ: Is that a fair description of the book?

HOFFMAN: I hope so. I mean, at some point you get so close to these projects, you kind of can’t see them. So it’s always nice to hear it from readers. But I think, well, just high level, one thing that I kind of wasn’t aware of at the time was just how close it came to being really bad.

RITHOLTZ: Worse, right, right.

HOFFMAN: Really, really bad. And in some respects, I just think the economic toll would have been worse if the pandemic itself was not quite as bad, right? There is a sort of a thought experiment that you can do. You’re like, okay, we have a pandemic that’s half as bad.

RITHOLTZ: Right.

HOFFMAN: I’m not sure it generates the same–

RITHOLTZ: Reaction.

HOFFMAN: Reaction. Same, you don’t get $6 trillion. You get real divergence in outcomes, which ultimately, I’ll tell you a funny story, that at some point, the subtitle of the book, I think was “Failure and Fortune in the Pandemic Economy,” or something like that.

RITHOLTZ: Right.

HOFFMAN: And at some point, I don’t know, late, just from 2021, talking to my publisher, I was like, “You know, Paul, not a lot of failure at the end of the day.” I think corporate bankruptcies were at an all-time low in 2020, ’21.

RITHOLTZ: You had a handful of retailers, and it was mostly local, local restaurants, and dry cleaners and things like that, but it wasn’t the big companies.

HOFFMAN: No, right, and I think had the pandemic been just not as bad, you wouldn’t have seen that incredible geyser of financial support.

RITHOLTZ: I have a vivid recollection of early 2020 of a Congress that was so divided that a bill was introduced to rename a library and they couldn’t move it forward.

And then the pandemic hits and the biggest fiscal stimulus in history, CARES Act 1, passes, it’s 10% of GDP, it’s over $2 trillion. How did this massive fiscal stimulus come together in such a short period of time?

HOFFMAN: On the economic side, I think the government did quite well. I actually think it’s sort of an undersung hero in all this is Steven Mnuchin. I think he really deserves a lot of credit. And frankly, before the pandemic, when he became Treasury Secretary, he had obviously worked on Wall Street, he’d come out of Goldman Sachs, he’d asked people. I don’t think there was like super high confidence that he was going to make his mark. And a lot of the jobs in Treasury remained unfilled. I mean, the administration was very chaotic.

RITHOLTZ: Very slow to fill across the whole board. Every department.

HOFFMAN: Totally. This was like an understaffed financial regulatory apparatus run by someone pretty unknown that I’m not sure the street specifically had a ton of confidence in and I think really nailed it.

So there’s two pieces to this, right? There’s the fiscal, the stimulus side, which is Congress. And look, nothing brings people together like a crisis. They are, you know, this. That’s the other thing too is that I tried to kind of get back in the book. You got to remember, early pandemic, it became this terrible toxic sludge and groundhog’s day forever, but it didn’t start that way. It started out as kind of a unifying, weirdly earnest moment of like…

RITHOLTZ: Genuine threat, life threatening.

HOFFMAN: It was obviously important at the moment and I felt that way, which is unusual. And I kind of wanted to try to bring people back to that moment that now sort of seems sort of saccharine and stupid that we bang pots out of windows and you know…

RITHOLTZ: at the time it didn’t seem that way.

HOFFMAN: Congress like saying on the steps. I mean, the whole thing was goofy.

RITHOLTZ: So you have a little bit of criticism, you both compliment and criticize the Trump administration, and you were talking about the key players. On the one hand, you have the Treasury Department, which really seems to be doing its best to hold things together. On the other hand, there’s the White House and the CDC. How did both those groups do?

HOFFMAN: Look, I don’t think this is a partisan or political statement, but the White House did not cover themselves in glory here, and neither did the CDC, which by, you know, in its nature…

RITHOLTZ: Which is kind of surprising.

HOFFMAN: It was not an overly political organization, right? Just the science was bad. And I don’t think it was certainly not a conspiracy.

RITHOLTZ: The communication was bad also. It was very confusing.

HOFFMAN: Should we wear a mask? Should we not wear a mask?

RITHOLTZ: Don’t wear a mask, wear a mask, right, exactly.

I always like to tell people, if you don’t think you should wear a mask, whenever you have surgery, tell everybody in the operating room, don’t bother with the mask, they don’t do anything, right?

HOFFMAN: Yeah, yeah, look, I mean, there were plenty of great books written about the Trump White House, and two “Washington Post” reporters wrote a great book about the health response itself, which you should really read. Looking at sort of the world that I know, just to the economic side, I think did a really good job with a couple of important caveats. The first one of which is the spigot was open too wide for too long. That last round of stimulus aid in, was it April of 21? Pretty clearly unnecessary, both from like a household wealth perspective and actually just the other day, I did a story looking back at the airline aid, and very clearly that last round of aid, totally unnecessary.

The first one, very clearly necessary and well done. You could argue about the second one, which is at the end of 2020.

RITHOLTZ: So let me ask you, that leads to an obvious question. The airlines as an industry got this giant package. Most other industries did not see the same, so the hotel industry didn’t get that, the restaurant industry didn’t get that. There were a lot retail. There were a lot of industries that the pandemic really tore a swath through that did not seem to have the same sort of luck in getting Congress to, how do you explain that?

HOFFMAN: You’re right.

RITHOLTZ: Good lobbyists or right place, right time?

HOFFMAN: Partly good lobbying, but fundamentally airlines and actually banks too, which is why those tend to be the industries that we have to bail out every so often are national resources in private hands.

RITHOLTZ: Right.

HOFFMAN: Planes are national resources. we need to have them and we’ve decided that we’d rather have the private sector manage them than the government. For, I don’t know, customer service reasons, I don’t know. But like, but–

RITHOLTZ: Those big things, bad no matter who does them.

HOFFMAN: You know, it is a, and actually I think the first time we meet an airline CEO in the book, it’s Ed Bastian from Delta and he’s at the Consumer Electronics Show in Las Vegas in January of 2020, giving a keynote, which is a weird place for an airline CEO to be, this is a gadget show, right?

RITHOLTZ: Right.

HOFFMAN: And he’s talking about, you know, the seat back entertainment should be a streaming platform, right? They’re going to have this bionic software that shows you your itinerary when you look at a screen. I mean, really like next level stuff. And I tell that story as a reminder that like, airlines are an incredibly capital intensive business that involve flying really expensive hunks of metal around. And every like 10 to 15 years, something bad happens. And they had forgotten that. I think that industry had really thought they had escaped that boom and bust cycle. So plenty of arrogance coming into this. Plenty of people have rightly pointed out that they spent something like 96% of their free cashflow on stock buybacks.

RITHOLTZ: Stock buybacks, yeah.

HOFFMAN: Totally, but like, had they spent 80%, that wouldn’t have saved them either.

RITHOLTZ: Right, unless they did no stock buybacks.

HOFFMAN: Look, you can have a company that is 100% cash, but like, that CEO won’t have a job for very long because some investor’s going to come in saying, “What are you doing?”

RITHOLTZ: Right.

HOFFMAN: There’s an optimal capital structure, but there’s not an optimal capital structure for a pandemic. And so look, and especially if the government is saying, it’s not just the market telling you we don’t want to fly, it’s the government in a lot of cases saying, you cannot fly.

RITHOLTZ: You cannot fly.

HOFFMAN: We’re shutting down your business, which is a wild thing to do in a capitalist society. And so look, ultimately, like I did an accounting of this recently for Semafor and the bill comes to something like $62 billion out the door of which less than a third is designed to be repaid. And that’s sort of the math. There’s some interest rates, some warrants getting out there that are somehow still underwater three years later should tell you something about the markets. But like–

RITHOLTZ: Even though good luck booking a flight, everything is filled up.

HOFFMAN: Can you imagine that, so the travel hell that we went through in 2021, ’22, can you imagine how much worse that would have been if you had hundreds of thousands of people kicked off of payrolls, they lose their training, right? This is an incredibly regulated industry at the same time that a lot of airlines modernizing their fleets, so having to retrain pilots on new planes. I mean, it just would have been a disaster.

And by the way, like, you fire them, the government pays for them anyway, unemployment, which is less efficient.

HOFFMAN: So let’s talk about Ford. You know, we haven’t really brought them up. The CEO of Ford has a big role in here, like they did during World War II, where they built bombers and tanks and things like that. They start making respiratory devices, they start making masks, respirators. Ford really stepped up to the plate. Tell us a little bit about the CEO of Ford.

HOFFMAN: The CEO of Ford is a guy named Jim Hackett. And he was hired just a couple of years before the pandemic. Kind of an odd choice. And actually he’s a little bit of an odd duck. Like really came, was running one of the biggest office furniture companies in the world before that. Really cerebral, really thoughtful, kind of wonky, a little hard to follow for the kind of like go left, go right crew that are, you know, the engineers that work in a place like Ford.

RITHOLTZ: Right.

HOFFMAN: And so Ford had had a tough couple of years. They’d come into the pandemic incredibly leveraged, huge amounts of debt. They lose their investment grade credit rating pretty early on, they’ve got to cut their dividend. And this is a company that is in mortal trouble because every piece of its supply chain and its business doesn’t work, right? You can’t have people making cars. No one’s going to buy a car. And even if they wanted to, the idea that they would go into a dealership and sit in a car that someone else had just tested.

RITHOLTZ: Breathed in, right.

HOFFMAN: Yeah, you got to remember, like it wasn’t going to work. And then they have this whole huge finance business that is just massively at the mercy of credit markets and rates that was really high wire act. And so, I think the story of Ford that I tell is sort of in two pieces. One is that, which is they almost failed. Of all the companies that I looked at, I think they came the closest. And ultimately were saved by a pretty interesting bit of diplomacy, which is that you remember in the spring of 2020, and we talked a little bit earlier about the government’s response, which is that they did in about six weeks when it took them six or nine months to do in ’08, just stand up a lot of these backstop facilities, figure out where the pain is, what they should buy, what they should put a floor under.

And they start to buy corporate bonds, which is a pretty dramatic step to take. I mean, that’s really governments picking winners and losers, which is very un-American.

And, but you have to be investment grade to have your bonds be eligible for this facility that the Fed is, the Treasury is standing up. And, and Ford had lost it. And Jim Hackett, who spent a lot of time in Washington, I think he was on the board of Fifth Third for a while. So like knows, pretty well connected in finance. Calls Larry Fink at BlackRock and says, who’s doing the bond buying for the government. Says, listen, I don’t want to put you in a weird spot. I’m not trying to be inappropriate, but like Ford is the kind of, we’re acting the way that you guys want companies to act. Like we’re not laying, we got a union contract, we’re trying to be responsible, we’re trying to be thoughtful. But when we come out on the back of this, like do you want a thriving industrial heartland sector or not?

And very quietly, there’s a change made to that program, which is that if you had been investment grade, I think back in pre-pandemic, your bonds are eligible. And on the back of that, Ford launches the largest junk bond offering in history, massively oversubscribed, ends up at I think eight and a half billion, I don’t remember, which really saves it. So you take away from that anecdote what you want, but–

RITHOLTZ: It helps to know people–

HOFFMAN: It helps to know people.

RITHOLTZ: In the right position.

HOFFMAN: But also I think it was the right move. Like Ford is obviously a strong, important company and was waylaid by this. But the other story that you’re talking about is, it’s a company, and again, like I understand now that people will roll their eyes, but at the time there was a real–

RITHOLTZ: It was a big deal.

HOFFMAN: It was a big deal, there was a real earnestness.

RITHOLTZ: When you see surgeons come out wearing garbage bags, because they don’t have gowns, they don’t have gloves, they don’t have masks, hey, something’s gone terribly wrong.

HOFFMAN: Totally, and the fact that it ended up on the private sector to solve it is insane, but that’s where it was, and Ford is a company that bleeds Americana, right?

RITHOLTZ: Right.

HOFFMAN: They made bombers during World War II, they made iron lungs for polio patients, and it’s a little bit of, I think, this sort of faded corporate titan trying to reinsert itself in the national narrative. There’s a little bit of that. But–

RITHOLTZ: But it was also the right thing to do.

HOFFMAN: But it was the right thing to do, and I think they deserve a lot of credit for it. I mean, ultimately, not a ton of respirators, it turns out that they’re very complicated to make, but they made these, if you remember, one of the real concerns was that healthcare workers themselves were getting sick.

RITHOLTZ: Didn’t have masks.

HOFFMAN: Didn’t have masks, and so they made these kind of like hoods, like respirators, that actually just clean–

RITHOLTZ: So face shields also.

HOFFMAN: Yeah, exactly. And so, and they, I think they used, it was the fan belt from like a Ford F-150. It was, they called it Project Apollo, because you remember that scene in Apollo 13, right?

RITHOLTZ: Right, where they had to fix the–

HOFFMAN: They dump everything they have on the table and say, “What can we build with this?” And so they used, I think the fan blower from the truck, they used DeWalt’s power tool batteries.

RITHOLTZ: Right, that’s on the assembly line.

HOFFMAN: Because again, there’s so much grimness baked into these decisions, because the concern was that we were going to be standing up field hospitals, and you don’t have electricity. So you have to find things that run on battery packs or pneumatic power. I mean, just really dark stuff.

RITHOLTZ: Really interesting stuff.

HOFFMAN: Contingency planning here was brutal.

RITHOLTZ: So you talk about Treasury did great, the White House not so much. What about the Federal Reserve? Did they have much of a role here? I mean, rates were cheap anyway. What’s the difference between 1% and 0% at that point?

HOFFMAN: I mean, there’s two places where you can be fairly critical of the Fed. One was before all of this, which is they had a really hard time turning off the tap in the 2010s.

RITHOLTZ: Getting off the emergency footing.

HOFFMAN: They could not get interest rates up, which meant that they didn’t have a lot of wiggle room to your point. You know, crisis hits, first thing you do obviously is lower interest rates. And they did, and that’s fine, but it would have been a lot better if they were starting, say where we are today, at four or five and going to one or two.

RITHOLTZ: Right. And the second thing?

HOFFMAN: Second thing is they were way behind the curve on inflation on the way out.

RITHOLTZ: No doubt about it.

HOFFMAN: I really thought it would be temporary and it wasn’t. And by the way, they work.

RITHOLTZ: Transitory just is taking longer than expected. If you go back and look at CPI in March, 2021, that crossed through abruptly, their 2% target. And they sit on their hands for a full year after it goes from 2% and continues to go higher. I can’t explain that. I don’t understand that. other than the fact that historically, they’re always late to the party.

HOFFMAN: I think that’s right, but I think you saw like a diverging playbook, which is, if anything, on the fiscal side, they overdid it.

RITHOLTZ: Right.

HOFFMAN: And on the monetary side, they underdid it. And I don’t know–

RITHOLTZ: Until they panicked and overreacted and raised rates so fast, they began to break things.

HOFFMAN: 100%. And I would say probably the reason that Congress overdid it is that they are electable. People like getting checks.

RITHOLTZ: Nobody doesn’t get reelected because the fiscal stimulus was too big.

HOFFMAN: No, and like maybe someone at the Fed doesn’t get reappointed, but that’s such like an arcane, just like a different discussion. There’s less at stake there. Clearly they were late, I would say probably by two meetings, maybe three to six months, depending on how you do it. They should have started in the fall of 2018.

RITHOLTZ: I would say summer of 2021, but we’re just nitpicking at this point.

All right, so we talk about White House, the CDC, the Fed, Treasury. Let’s talk about a couple of states, because you don’t really get into this very deeply in the book, but you briefly touch upon it. Hold aside his other woes, but there seemed to be a void coming out of the White House, and into that vacuum steps Governor Andrew Cuomo with a daily briefing that felt like, “Oh, someone’s talking to us honestly like we’re adults.” It was a breath of fresh air.

HOFFMAN: You hit at something that I think is true and I might take in a different direction, which is with this huge vacuum of public sector leadership coming out of Washington at a time that it was badly needed. My takeaway from that is actually that CEOs kind of stepped in. And I think part of the reason that, I think they kind of frankly wish they hadn’t because really put themselves squarely in what I would now kind of call the culture wars, right?

RITHOLTZ: The anti-woke-ism.

HOFFMAN: Yeah, exactly.

RITHOLTZ: How dare you try and save fellow Americans from dying? Who do you think you are?

HOFFMAN: How dare you try to do anything doesn’t have to do with running your business day to day, which is what a lot of the sort of pandemic leadership involved.

RITHOLTZ: Before we let you go, we’re going to get to our favorite questions that we ask all of our guests. Starting with, tell us what you’re streaming these days. What are you watching, listening to? What’s keeping you entertained? What kept you entertained during the lockdown?

HOFFMAN: Well, I, about a year ago, quit my job at the “Wall Street Journal” and joined a startup. So I know this sounds terrible. I don’t have that much–

RITHOLTZ: The name of the startup is?

HOFFMAN: It’s called Semafor. You can sign up at semafor.com.

RITHOLTZ: I actually get your daily flagship.

HOFFMAN: It’s terrific, yes.

RITHOLTZ: I get flagship and it’s great.

HOFFMAN: I will also sign you up for business before we leave. But so I actually tragically have less time for television than I used to. But I’m obviously watching “Succession.” I just watched “The Diplomat” on Netflix.

RITHOLTZ: I love that, we’re on episode seven, it’s great.

HOFFMAN: It’s very good.

RITHOLTZ: Really well written, like almost believable in a strange way.

HOFFMAN: It’s like if the Americans was a rom-com, that’s why I enjoyed it. But one thing that I did genuinely love about the pandemic and obviously with all the caveats around that that belong there, one thing that I genuinely loved about some of the darkest days of the pandemic were just the way these things would become cultural phenomenons. Like something would just hit. So “Tiger King,” just like all anyone was talking about.

RITHOLTZ: Unwatchable dreck, but —

HOFFMAN: I loved it.

RITHOLTZ: Some people loved it, right.

HOFFMAN: I’m not a reality television person at all, but got sucked into “Love is Blind” because it was so insane and everyone was talking about it. These things kind of became–

RITHOLTZ: Did you watch John Krakinski’s weekly video he used to do? How delightful was that?

HOFFMAN: Yes, how delightful, and it’s one of those things that now you look at it and you’re like, God, it feels saccharine and sort of cheesy.

RITHOLTZ: No, not really.

HOFFMAN: Corporate sponsored and it was all, but at the time it was like really genuinely moving.

RITHOLTZ: It was delightful and fun and you loved him already. It’s like, oh, no wonder Emily Blunt married him. He’s delightful and charming.

HOFFMAN: He was delightful. They were all delightful. No, there was something, there’s some, I’m not a culture reporter, and culture reporter would say it better, but there was something like some weird earnest monoculture that was kind of simmering during a lot of the pandemic that I miss a little bit, actually.

RITHOLTZ: You know, when you go back to World War I and the popular entertainment of the day, it doesn’t look saccharine. And every now and then, even during World War II, some of the Hollywood movies are a little jingoistic and a little, we just saw some movie with Cary Grant and I’m trying to remember who it was where she’s married to a German who turns out to be, an Austrian who turns out to be a Nazi and he’s trying to get her out of Europe and it’s like there’s just a, and she gives her passport to the maid in Poland who’s Jewish, like it wasn’t jingoistic, I can’t remember the name of it. Something honeymoon, something like that.

HOFFMAN: But I’m actually surprised at how little pandemic media there was. Not a lot of movies have come out. There was one with Anne Hathaway and what’s his name that was kind of interesting. But I actually think we just haven’t really grappled with it as a culture.

RITHOLTZ: Bo Burnham is the closest thing.

HOFFMAN: You know, that was terrific. “Inside” was great.

RITHOLTZ: That’s the closest thing to a pandemic popular culture thing that was really quite fascinating.

HOFFMAN: Yeah.

RITHOLTZ: Sorry, next question. Tell us about your mentors who helped shape your career?

HOFFMAN:: You know, when I first joined the “Wall Street Journal” I sat right behind Dana Cimilluca, who was then the deputy M&A editor, has now been the M&A editor for a long time. And he was the first person who really taught me about kind of the dark art of some kinds of journalism and was just really learned how to, M&A is a funny beat because most stories are basically one fact, but that fact absolutely has to be right.

And it’s sort of unique in that way, I think. And learned a lot from him about how to handle really sensitive stuff and a little bit of black magic that goes on in certain beats. So I really, I learned a lot from him. And my boss after that was Marie Beaudette, who’s totally different kind of editor, never really was a beat reporter in the traditional sense, but had incredibly good instincts about stories and really great judgment and encouraged me to be more authoritative and ambitious in the stories that I was telling. And I’ve only been working for him for less than a year, but I’ve learned a lot from Ben Smith, who’s our editor-in-chief, and is really, I think, trying to build a new kind of journalism, and we’re having a lot of fun doing it.

RITHOLTZ: Really, really interesting. Let’s talk about books. What are some of your favorite, and what have you been reading recently?

HOFFMAN: I am, perhaps disappointingly, I read a lot of, I read almost exclusively nonfiction. I read a lot of business nonfiction. I’m like, I can’t escape my job in my free time, I guess.

RITHOLTZ: Hey, this is business nonfiction.

HOFFMAN: I wrote the kind of book that I like to read, really. You know, I had COVID actually for the first time around Christmas of last year, and I reread–

RITHOLTZ: That’s funny, November for me, the first time.

HOFFMAN: Yeah, it’s funny. If you get the audio book, which I recorded, I did it that week between Christmas and New Year’s because it takes a couple of days and I have a full-time job, and I had COVID, and so you can kind of hear it. But actually I reread like “Barbarians at the Gate” and “Den of Thieves” like those old really great yarns.

RITHOLTZ: “Genius Failed” is also in that same school.

HOFFMAN: Yeah, all those are great. And then there’s a new generation of them that I’ve really loved that friends and colleagues and competitors of mine have written. Tripp Mickle had a great book come out last year about Apple. He was my colleague at the “Wall Street Journal.”

RITHOLTZ: What’s the name of that book?

HOFFMAN: He’s Going to Kill Me, it’s called “After Steve.”

RITHOLTZ: Okay, sure, I remember that coming out.

HOFFMAN: Which I really loved. Another former colleague, Erich Schwartzel, wrote this great book called “Red Carpet” about Hollywood and China, and soft power and business and commerce that’s fantastic.

RITHOLTZ: Interesting.

HOFFMAN: And again, he’s going to think I’m just buttering him up, but my boss, Ben, had a great book come out a couple weeks ago, really fortuitously timed, but about this era of viral digital media that is just now completely come crashing to an end. I thought that was a great read.

RITHOLTZ: What’s the name of that book?

HOFFMAN: It’s called “Traffic.”

RITHOLTZ: “Traffic,” really intriguing.

Our final two questions, What sort of advice would you give to a recent college grad interested in a career in journalism?

HOFFMAN: People have been talking about the death of journalism for a long time, and it’s extremely true in local journalism, which is where I really kind of wanted to go. I wanted to apply to newspapers in Boulder and Topeka, and it was right at the sort of the start of the end for them. This was 2008, you know, Facebook and Craigslist were just killing their ad business, and they hadn’t totally been hollowed out yet, but they were getting there.

I mean, like there will always be demand for smart people to make sense of an incredibly complicated world. Just sort of be agnostic about where that is. You know, again, I’ve had four jobs basically in journalism. One was, again, at a parenting magazine in the Midwest, at a legal trade publication in New York, at the “Wall Street Journal” and then a thing that didn’t exist a year ago. So you pick up skills at every one of them.

RITHOLTZ: Really interesting.

And our final question, what do you know about the world of journalism and investigative reporting today? You wish you knew 10, 15 years ago when you were first getting started.

HOFFMAN: It’s better to be lucky than good.

RITHOLTZ: There you go.

HOFFMAN: If you can be both, that’s great. And look, I think you put yourself in a position to get lucky, but I don’t know, my one piece of advice I guess is always take the meeting. You literally never know.

RITHOLTZ: Always take the meeting.

HOFFMAN: There is this 80/20 rule in journalism people talk about, which is that 80% of tips come from 20% of sources. These are like professional sources who know what the deal is. But I will tell you, that long tail is really long. And you get really interesting stuff if you’re willing to spend some time on it.

RITHOLTZ: Really quite fascinating.

Liz, thank you for being so generous with your time.

We have been speaking with Liz Hoffman. She is now the business and finance editor at Semafor and the author of “Crash Landing,” the inside story of how the world’s biggest companies survived the pandemic.

If you enjoy this conversation, well, be sure and check out any of our previous 497 that we’ve done over the past eight and a half years. You can find those at iTunes, Spotify, YouTube, wherever you find your favorite podcasts.

Sign up for my daily reading list at ritholtz.com. Follow me on Twitter @ritholtz. Follow all of our fine family of Bloomberg Podcasts @podcast.

I would be remiss if I did not thank the crack team that helps put these conversations together each week. My audio engineer is Sarah Livesey. Paris Wald is my producer. Sean Russo is my head of research. Atika Valbrun is our project manager.

I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.

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