“What you want at the center of the financial world is a degree of awareness of the destructive capacity of money.”
Zach Karabell is an author, columnist and podcast host. Karabell is also founder of Possibility Project at New America and president at River Twice Research and River Twice Capital. His latest book is Inside Money: Brown Brothers Harriman and the American Way of Power.
In his book Inside Money, Karabell describes the early stages of American capitalism powered by WASP men and its evolution into modern times. The book looks at the history of the banking institution Brown Brothers Harriman and its influential role shaping the 19th and 20th century world order. Karabell is concerned with modern elites, particularly tech company founders, and their unwillingness to assume more responsibility that comes with their newfound power. He wants to see tech leaders take more active roles in the larger debate about the role their creations play and how they should be positioned appropriately.
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SPEAKER
Zach Karabell
Author
Inside Money
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darcie: (00:07)
Hello everyone. And welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Salt talks are a digital interview series that we started in 2020 with leading investors, creators and thinkers. And our goal on these salt talks is the same as our goal at our salt conferences, which we're excited to resume here in September of 2021. And that's to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And we're very excited today to welcome, uh, another great author to salt talks, Zach Caravel, who wrote a fantastic book. Uh, that's coming out here in a couple of days. Uh, Zach is an author and columnist and founder of the progress network at new America and president of river, twice research and river twice capital previously.
John Darcie: (01:05)
He was the head of global strategies at Envestnet, a pub publicly traded financial services firm. And prior to that, he was the president of Fred Alger and company. His next book, again, that's coming out here shortly is called inside money, brown brothers Harriman and the American way of power. And that's published by penguin press. Uh, here again in the next couple of days, uh, as a commentator, Zach is a contributing editor for wired and for Politico. And he's the host of the podcast. What could go right? Uh, previously he wrote the edgy optimist, a column for slate Reuters and the Atlantic hosting today's talk is Anthony Scaramucci, who is the founder and managing partner of SkyBridge capital, which is a global alternative investment firm. Anthony is also the chairman of salt and I would also in some ways call Anthony and edgy optimist. So I think it'll be a good chemistry here today, uh, on, on this salt talk. But with that, I'll turn it over to Anthony for the interview. And
Anthony Scaramucci: (01:59)
Zach, I'm also a best-selling author. If you don't believe me, you can come into this basement right here. You can see every book that I had to buy in order for me to get that equitation. Okay. Well,
Zach Karabell: (02:08)
If you've got any room in the basement, by all means,
Anthony Scaramucci: (02:13)
The good news for you is you actually, you actually sell books because you are a brilliant writer. Uh, I want to go to a couple of things that I think people need to know about you because in a lot of ways you predict a future, you see things, uh, you wrote a book almost 23 years ago. Now what's college for it turns out that, uh, we're discovering the college may be for lots of things and may not be for certain people. Uh, more or less you wrote that in that book, 23 years ago, you wrote a book called superfusion how China and America became one economy and why the world's prosperity depends on it. That was about 10 or 11 years ago. Uh, but it correctly assessed what was going on in that bilateral relationship and why that bilateral relationship is arguably the most important bilateral relationship in the world.
Anthony Scaramucci: (03:02)
Uh, you wrote a book about leading indicators, uh, basically a short history of numbers and how we know the cliche lies. There are, there are lies, lies, and there are statistics. And you point out that sometimes we're made to believe certain things that may or may not be true. Um, one of your more fascinating books, which I read, and then I went on to read other books about this was the Harry Truman book. You remember the Harry Truman book, Zack, how he won that 1948 election and what was going on in the United States at that period of time, uh, which is interesting because you have a lot of Truman people in inside money, uh, that then ended up in the Truman administration. Um, and the reason I'm bringing all these different books up, all of which were best sellers, is that you have a pressure point instinct for what is going on. And so now let me push back after I just praised you. Why the hell are we writing about brown brothers Harriman? That seems like an old WAFs investment bank that doesn't have any relevance to today. Now, of course, Dorsey that's a setup because we know it does. Please continue Mr. Caravelle.
Zach Karabell: (04:14)
So it is a, it is a great question. And just for corrective, unfortunately, the books were not bestsellers except for in my mother's, you know, conception of my career
Anthony Scaramucci: (04:25)
This way. Maybe they weren't best sellers, but they were brilliant books. I got introduced to you by Gary convinced skating. And 2013 was Dez 13. I'm a reader. I went back and read your books. I read your column. I encourage everybody listening to this Saul talk cast to read your column a, because they're always loaded with insights and they're always loaded with non-conventional thinking, but I'm doing too much talking now. So I'm going
Zach Karabell: (04:49)
To show you, so the, so the reason the brand brothers book, um, first of all, it's just a good way to write the history of how money made America over a 200 year period, but separate from that in terms of its relevance to the moment. And you never know when a book is going to be published relative to them when you start writing it. So sometimes books land with a thud because I have no residents. And sometimes they, they unlock something in the moment. And I think the book is frankly, more relevant now than I thought it would be when I sat down to write it. And part of it is this idea of, you know, when I told people I was writing the book, a lot of the responses in the, in the financial world for people who actually knew the name of the firm was, huh, are they still around or kind of shaking their heads?
Zach Karabell: (05:35)
You know, what, what a great story, what a great firm that used to be. And it occurred to me that a firm that has 5,000 employees today, $2 billion in revenue, about $500 billion in profit, uh, that has lasted 200 years. When did that stop being a success story? Right? When, when did the aperture, particularly on wall street become much more lionize? The Goldman Sachs is the world. I know that's a sensitive topic, Anthony for you. Um, and I was saying that he's at a sensitive time, I'm teasing because I know your Goldman experience was a formative moment in the, in the arc of your career. That's all I was nodding. No,
Anthony Scaramucci: (06:19)
Listen, I, I, I like Goldman. I mean, I think, I think at the end of the day, I wasn't the right fit for Goldman. They, they correctly figured that out. So did I, but I do like, oh, well, go ahead. I'm sorry.
Zach Karabell: (06:30)
And so, but I just made that, that has become the model, right? Bigger, better, more. Um, whereas the words was a model and it was true more of that kind of self-effacing genteel wasp establishment of which brown brothers is totally exhibit a, um, where there was, uh, a greater sense of sometimes enough is enough. And I'm very clear in the book that I do not believe that all of wall street, all of finance should embrace that mantra. Right? Brown brothers Harriman would never have underwritten Elon Musk or many of the technology innovations that have great, you know, have unlocked great potential, but also have great risks. So you don't want a world composed only of brown brothers.
Anthony Scaramucci: (07:13)
Let me push back a little bit. This was a parochial white world, a white male world. It was a white wasp male world. Uh, when my Italian immigrant grandparents got here, there were signs in the windows that said, Nina, no Italians need apply that also for the Irish, no Irish need apply. And so is it a case where, and again, I'm speaking from the prism of a wool coach culture today, um, is it the case that these guys directly benefited from that and directly benefited from the lack of asset access and assets for that matter that people didn't have, and that allowed them to flourish the way they did
Zach Karabell: (07:54)
It is a great and important question. This is unequivocally a history of white men and what they did, and, you know, in a woke time that may not be the kind of history that a lot of people are, are willing to embrace. I suppose my general point about that is a lot of American history was made by white men for better and for worse and understanding who we are with a, maybe an, a Gimlet eye about all of the devices. And the virtues is kind of an essential aspect of understanding, literally who we are. So, you know, this is not a celebration or a condemnation. I don't, I don't believe the role of the historian overlay should be to sit in judgment. You know, there's whole there's whole passages and times in the book where the brown fortune was made initially on facilitating the cotton trade, they were the largest cotton broker.
Zach Karabell: (08:48)
They underwrote much of the import and export of cotton between New York, Baltimore liberal, uh, and you know, you cannot get rich from the cotton trade in the 19th century without being complicit in slavery, full stop. You know, there's no ands ifs or buts, but almost everybody was complicit in the slave system in the United States leading up to the civil war, William Lloyd Garrison. One of the great abolitionist did not absor wearing cotton, uh, even as he was fighting that system because you, it was almost impossible to opt out just like, it's almost impossible to opt out of the carbon economy today, even if you believe it's destroying the planet. So it is not saying, oh, we should, this was some golden age we should return to. Um, but I do think the past offers select lessons as applied to a different reality, right? I'm not saying, wouldn't it be great if there was a closed tight knit establishment that went to a few Ivy league schools and what it made it impossible for you or for me to participate in. And, uh, that's not, that's not the point.
Anthony Scaramucci: (09:54)
Was the world better back then? Zack, was it simple or was it easier?
Zach Karabell: (09:58)
I think the idea that there was a cohesive elite that believed they had a responsibility to address the commons, meaning that they believed that unless society overall thrived, that they individually would ultimately not thrive. That was an important ingredient. And maybe it begins a little bit with, with Andrew Carnegie and the gospel of wealth. You know, this idea that those with great means have a responsibility to give back. Um, but I do think that that as an ingredient in a constructive society is, is certainly absent amongst a lot of elites today. Not all, uh, certainly absent amongst a lot of tech elites today. You know, all you get now in tech land as a kind of crickets in the face of huge public pressure to be more responsible and more diligent about the effects of their business and their wealth on the overall society in a way that those financial elites at the, uh, during the cold war really did step up. You know, they really did function with an understanding of the commons.
Anthony Scaramucci: (11:01)
Let me ask you a different question and we come at it from a different angle. Um, you're suggesting that no police oblige this sort of notion that too much is given much as expected as a result of which there was a culture among those elites that they were going to do things for others. The current leads seem more selfish. Is that fair
Zach Karabell: (11:22)
To say? I think that's fair to say. Okay.
Anthony Scaramucci: (11:24)
And so then what could the kernel leads the lead learn from inside money?
Zach Karabell: (11:33)
Well, one the idea that the boundless pursuit of more is unbelievably potent, um, but carries with it the potential for unbelievable disruption, right? So one of the things that brown brothers that allows it to survive and thrive, and I also am very clear, living long is not in and of itself. A virtue living well is so the fact that a firm or any individual has a long life is not a reason to go, wow, that's, let's celebrate it. Um, but within their culture was an understanding that every thing you do that strives for more and more and more creates the possibility for more and more risks and more and more risks should be measured, measured doesn't mean it shouldn't be taken. It just means you should be aware of the fact. And I do think there's something that I, by no means the first person to say this, that there's something about publicly traded financial companies, shareholder, capital driven that removes some of that sensitivity to risk versus reward so that if you're not personally exposed to the risk, but you are absolutely personally exposed to the reward, it changes your incentive structure. I don't think it's fair. I mean, I don't think that that's healthy.
Anthony Scaramucci: (12:48)
I used to say that they'd say that, you know, we were long right after the garden hose in our garage. So they would, they were more cautious right. About the risks that they were taking. Um, I want to switch to something fun for a second Avril Harriman, who was the Seon of the Herrmann of brown brothers Harriman, the great railroad enterprise. And these were the merger of an investment bank and a railroad family, as you point out in the book, um, uh, he married, she's having an affair with, uh, Pamela Churchill, uh, who became Pamela Harris. Paramin was having an affair with her during the war. He reconnected with her 30 years, hence, and, uh, he was at a cocktail party in Georgetown, in DC. Somebody said to him, wow, your 85 year old, there's only you look great. Do you remember what he said?
Zach Karabell: (13:38)
I don't, but I, I mean, I know he said something pithy. I just don't remember.
Anthony Scaramucci: (13:41)
It was very pithy. He said, well, of course, I'd look great. I've spent my entire life playing polo and shagging young women effectively. That's what he said. And so I want you to react to that. Um, man of privilege, Getty went on to do great things. He's ambassador to Moscow, governor of New York. Uh, tell me a little bit about Admiral Howell. I mean, heroin's
Zach Karabell: (14:05)
A bit of a cipher, right? He has this glamorous external life. He's clearly totally to the Manor born. And this is a man who did not lose one wink of sleep to his inherited privilege and belief that, that, that placed him in a position. She's a member
Anthony Scaramucci: (14:23)
Of his country club. I just thought I would point that out while we're fair enough. Um, now he'll have a chance to react to it. He's not wrong.
Zach Karabell: (14:31)
I think he was immensely charming with women, but I also think not overly interesting. You know, maybe this was not a curious man. This was a man who believed that his position in society gave him privilege, but he also believed that, you know, he's taught this by his father over and over again, that, that those with more have a responsibility to, um, to serve society, which I don't think ever means that they're not also self-serving right. The two or the two are not, um, in inherent contradiction. Right. You
Anthony Scaramucci: (15:00)
Know, and, and by the way, I think you make the case in the book, this, this, uh, firm was very close to the U S government, both on domestic and foreign issues. Um, is that you think there are any companies today that are as close to the American government as brown brothers Harriman was back in the day? No,
Zach Karabell: (15:20)
I mean, you did have that period of Goldman from like early nineties with Robert Rubin and then Paulson and, and, you know, a whole series of others who really were central in government. So you had a kind of a, I don't know, 20 year Goldman period, that was pretty pronounced. Um, and I think in many ways, emulated that brown brothers model in the sense of, you know, we, we are, we are bound to take a role in shaping the commons, um, much more controversial. And I think in a way that many people are more ambivalent about, although frankly, they became deeply ambivalent about the role of the wasp elite in the sixties. You know, the world that we grew up in was a world that was reacting against that pretty dramatically.
Anthony Scaramucci: (16:04)
So if I had a book club of Elon Musk and Tim cook and Jeff Bezos, and you picked three or four other people that should be in that book club, and I said, I want you to read inside money, brown brothers Harriman and the American way of power. Uh, what's my pitch to them. Why should they read it? Well,
Zach Karabell: (16:26)
First it is, where are you right now? Right? Where are you
Anthony Scaramucci: (16:31)
Working on? My first sentence would be Zach Carol is an amazing writer. And so she's read it for that reason, but now you give the pitch, go ahead.
Zach Karabell: (16:39)
I would be, where are you? You know, what, what, where are you in the debate other than fighting a series of intense rear guard actions, hiring lobbyists to try to prevent regulation or shaping the regulation that's coming, where are you front and center in the what's the value of technology to society? What's the balance between privacy and all the things that the lack of privacy provide for all of us, you know, the ease of which our information is used also as the ease of which our lives become somewhat simpler and less friction full. But where are you in that public discussion? Partly governmental, partly, you know, using the convening power of these platforms. And in my view, they are absent. They're absent partly because they score in government and they're absent, partly because they don't, I think they're somewhat tone deaf to the, to the reality of you do something that has great consequence to the world around you, you benefit mightily from it.
Zach Karabell: (17:40)
Um, you had better be in the fray, in the mix of shaping what the rules are, what the framework is, right? So part of the point about brown is every single institution that exists globally today, the world trade organization, the United nations, all the, you know, the world health, every ancillary group, as well as the, the architecture of a lot of our government, the Pentagon, the CIA, the national security council, none of these things are without, you know, massive flaws, but, but they are the world. They are the architecture of the world we live in and they shaped it. You can say, look, we should reshape it. And that's totally fair. Where's tech land now in, in shaping that architecture around these new technologies about, you know, why are we using a hundred year old antitrust statute to even think about these symphonies and where are they in reframing these things? So I would say to them, read this book to understand the role of, you know, those with power and the comments, and there's a self-interest in it. You know, you've gotta be in the mix.
Anthony Scaramucci: (18:38)
I think that you are writing in the book that yes, some of it could have been too close for comfort in certain areas. We'll talk about that in a second. But in general, the nexus between a private enterprise company, Mike Brown brothers Harriman in the U S government was beneficial to both, but the government was able to get lots of insight and knowledge about the economy and capitalism and how to put the right policies in place to further that. And then secondarily, and I think this is important. I want you to address it. Uh, brown brothers and the people at brown brothers had a role in what I would call the post-World war II order. What was that role and how did it shape up?
Zach Karabell: (19:22)
So you mentioned Harriman before the other two major individuals was that a man named Robert Lovett who was intertwined with Harmon and the Browns, um, who becomes assistant secretary of war or world war II, and basically helps create the modern air force with John McCoy was, was, was twined with McCoy. They were known as the heavenly twins who supported Henry Stimson, who was then secretary of war, you know, creates the B 29 bomber funds. Boeing then becomes under secretary of state under George Marshall. And one of the main implementers of the Marshall plan Herrmann is even more central to that moves to Europe, becomes the aid administrator, and then love, it becomes secretary of defense, the renamed war department, uh, in 1950 when Marshall retires and he oversees the last years of the Korean war. And then you've mentioned Harman, and then there's Prescott Bush. So, you know, one of the many reasons why brown brothers has had a less than clear reputation is this whole notion of where did the Bush family fortune come from? Was there complicity with the rise of Germany in the thirties? So Prescott is a junior partner,
Anthony Scaramucci: (20:31)
Russia, the Russian revolution, and that the Russians got, uh,
Zach Karabell: (20:36)
And then Harmon [inaudible], that's also in the bulk. Okay. So these, you know, those individuals and actually Harmon's younger brother as well, role in Ted, some had some role were know part of what we call the establishment. Um, and, and for the coterie of what Walter Isaacson, once dubbed, uh, the wise men, I mean, they were called that in the sixties too. So again, they create this world that we're in now where we are living in that architecture. It much the way, you know, we're living in the constitutional architecture of the founding fathers saying that is not a validation or a, an encomium. It's just a recognition of, you want to understand the world we're in, you have to understand the framework that these individuals had. And a lot of that comes out of the world
Anthony Scaramucci: (21:21)
Of money. So tell us about the framework.
Zach Karabell: (21:24)
You know, they, they believed in the dollar, they believed that American capitalism was a unique formula that had made America rich and powerful, even with, with a massive hiccup and disruption of the great depression. They believed, therefore that the dollar was a, was a governing factor, right? And that the more the dollar govern the world and not the British pound, the better it would be for the United States and the better it would be for the world. And they believed in institutions and rules, and they believed that those with more power had a responsibility globally to keep the peace, right. And that's the whole point of the security council in the UN, but it's also the point of, of the world. What was then the general agreement on tariffs and trade, and they believed in trade. They believed that more commerce was better, partly because it was fight against communism. And partly because it would make everyone more affluent
Anthony Scaramucci: (22:15)
During, during the 2016 campaign, the former president who I obviously worked for not just for the short period of time in the white house, but during the campaign said to me, why the hell are we paying for the basis in South Korea? Why are they paying for the base? And I tried to take him through Robert Lovitz explanation of that, that this was in fact, an insurance policy. This was a global insurance policy. Moreover, Mr. Candidate, you want the Americans to pay for this stuff because the more we pay for it, if we can create a vibrant economy, we're going to push out all the other people that we don't want to militarize. Ultimately, those men and they were white men made a decision. And by the way, it was the right decision because we've had great prosperity despite proxy wars over the 80 or so years is American supremacy because of the benevolence of the American democracy would lead to more global peace and more prosperity. And so you don't necessarily need the NATO people that contributed to 2%, uh, because you want to maintain the supremacy of what the Americans AV on the ground around the world. What did I miss?
Zach Karabell: (23:27)
No. I mean, that is totally the argument for it. I mean, there's clearly an argument today of has it's useful on this ended, has the statute of limitations of those reasons, has it come to an end? Um, I would argue that it probably has in so far as, uh, you know, NATO in particular, you know, Putin is, is a threat because of his, the way in which he maintains power. Uh, it, it seems deeply unlikely that he's a threat at the level of invading Western Europe. If you really were going to maximize NATO, you would be protecting Eastern Ukraine, which seems to not be what NATO is geared to do right now. The Korean peninsula is probably, uh, a separate issue given the north Korean regime. The question more is, is it necessary for the world and is a good for the United States? Uh, and as an American, I'm frankly more focused on what's good for the United States.
Zach Karabell: (24:30)
And I don't think that being, this was always supposed to be transitory, right? It was always supposed to be, we will do this until the rest of the world can do it for itself. And I, and I do think the idea that we have a soul and unique capacity to maintain the peace and that the rest of the world is some sort of a narcotic jungle, which many have argued. Um, I think infantilizes 7.8 billion people at, at our own expense, uh, and that we would be better off saying, look, your region, your issues. We will support what we think we should support, but we're not the prima enterprise. We're, we're not the arbiter and we're not the access of global peace, highly debatable. You know, these are, these are legitimately hard. It's a, it's
Anthony Scaramucci: (25:15)
A grand debate currently. Uh, that's going to rage in Washington as to where we should be. Um, you know, but I'm also super worried about the bilateral relationship that we have with China. And while the Chinese have problems and human rights issues, we have our own racial tension here in the country. There's no system that's perfect. We can argue that our system is better than their system. Um, but I don't think that's going to make a lot of hay, uh, us arguing that I think we have to be practical about how we approach these things. I'm going to turn it over to John Dorsey, the Harriman golf club member at the sands point country club out here on long island, which
Zach Karabell: (25:56)
I write about the beginning of and the book, the origins of
Anthony Scaramucci: (26:00)
Yeah. See that,
John Darcie: (26:03)
Not lying well, Anthony, Greg actually grew up in port Washington, so he knows, you know, the full
Anthony Scaramucci: (26:07)
Landscape club Carabella. I just want to make sure you know, that, although I suspect that given Darcie's influence, I may, I may even have a shadow the membership there at this point.
John Darcie: (26:20)
Yeah. I mean the, the annual tournament that we have it at Sam's point, uh, is called the, the Herrmann bowl. Uh, the, the club is off of Herrmann drive. So he certainly has influence on the origins of that club, but I'm a native, uh, North Carolina, Anthony likes to categorize me in this, you know, uh, Mayflower wasp category. But really my family came over from Scotland in the 18 hundreds actually came into New York, but I grew up in North Carolina if people, a little personal history, if you're a avid viewer of salt talks. But anyways, um, you know, one of the fascinating things I found, uh, when going through the topics that you covered in your book was the fact that brown brothers Harriman, as we referred to a little bit earlier, acted almost as like a proxy, uh, you know, secretary of state or, or strategic puzzle piece that the U S government used abroad. You talk more for people that are less familiar with the role they played in places like Nicaragua in places like Russia to contain, you know, the rise of communism, you know, what role brown brothers Harriman played.
Zach Karabell: (27:19)
So there's a whole chapter of the book about what goes on in Nicaragua in 1912, where the us sends Marines that basically occupied the country, but they do it almost entirely, um, to preserve loans that brown brothers and JW Solomon had made to the Nicaraguan government. And, uh, the result of that is, is a decade plus of financial stewardship, which basically means brown brothers takes over the national bank of Nicaragua and owns the national railroad. And in fact, issue's a new paper currency in Nicaragua that is signed by James Brown, one of the brown brothers partners to the point where the nation, which was not then quite what the, the nation magazine is today, um, refers to Nicaragua was the Republic of brown brothers. But it was an example of what was then called dollar diplomacy, but it set a template for a lot of the as really, even till today, which is the way in which the United States extends its influence globally on the backs of the U S dollar.
Zach Karabell: (28:20)
And that sometimes that global influence is, is enforced and maintained by military presence. But it's often actually enforced and maintained by dollar supremacy. Um, lots of people recognize this, but you cannot overstate it enough that a lot of American power is a product of the dollar, which is then a manifestation of the strength of the American economy. And the military is, is an add on to that, but it's not the initial foundation and it, and, and that remains true today. And it's sort of this continual argument of, have we abused that power? Have we used it? You know, you take over a country because you want to get repaid on your loans. It'd be like Elliot management today, invading Argentina so that its bonds would be honored at par, which is essentially what happens in Nicaragua. You know, they buy the bonds from someone else at a discount. The government can't pay the troops, occupied the country and then brown brothers gets repaid.
John Darcie: (29:21)
Right. So I'm going to ask you a very medic question here. And
Zach Karabell: (29:26)
I was an academic for awhile and I just, you say the word Metta and my heart leaps.
John Darcie: (29:31)
Um, and, uh, you know, you, you've been, you're involved in the financial industry as well as being a great author and commentator. Um, so, you know, I'm sure you've been studying these things as well, but we're involved in the digital space. So at SkyBridge we have 600 plus million dollars invested into Bitcoin. We bought into that story, especially in 2020, as the world moves to more of a digital world. And also the U S government created 25% more dollars out of thin air to address the economic fallout from the pandemic. There's been a lot said about the role that cryptocurrencies and digital assets could play in the destruction of the U S dollars hegemony around the world. And whether China could potentially be playing a long game by helping the rise of something like Bitcoin and digital assets to chip away at the U S dollars dominance. Stan Druckenmiller was on CNBC this week, talking about how he believes in 15 years, the us dollar will no longer be the global reserve currency. And cryptocurrencies could be part of that story. Have you studied that space, especially in the context of what you've written about in your various books, including this book about the importance of the U S dollar, do you think that we're going to see a major shift in the U S dollars roll around the world over the next decade plus? And what impact will that have on the United States?
Zach Karabell: (30:43)
Look, I think assuming the eternal continuance of the dollar is a mistake, um, mostly because that creates complacency in American policy and laziness. Uh, so assuming anything is going to be true tomorrow because it was true today is a mistake. And frankly, you know, part of the brown brothers lesson is you better go to sleep every night prepared for something being totally different tomorrow. Um, and I don't know if the time is 15 years, I don't know at the time was 20. I don't know whether, you know, Bitcoin or Ethereum or any of the digital assets or, you know, Elon Musk favorite. Those coin will be the thing that is the hinge point, um, in a Franklin until there's an app that makes the utilization of digital currencies easier. Uh, it's, it's a bit theoretical right now, right? The transaction part is really complicated and you guys know this better than, than anyone I'm sure a lot of people listening know that quite well, but the idea that, you know, everyone's going to use the dollar, maybe they will just the way English remains the lingua franca and Indi yeah, 70 years after the British empire departs somebody because they have to have a common language and it, and using English is actually less Laden than using other things.
Zach Karabell: (31:58)
Um, although Hindi is quickly supplanting that as well. So I think that is what we should be thinking, which is we have this window, we don't know how long this window will be open. Uh, and we should use it well, which means we shouldn't be lazy. And we shouldn't assume. And I mean, I have a real issue with the way in which over the past 10 years plus, and this is not a Republican or democratic thing. It's the way the United States security establishment has used. The dollar has used swift has used our clearing in a far more coercive way than we, than we did before. Um, because we know that we can force other countries to basically tow our foreign policy line at the expense of we're going to cut you off from, from dollar assets and dollar currency. And that's where digital becomes incredibly attractive, right? Because it's a non-governmental currency in theory. And therefore I think the great, the greatest threat to it is governments,
John Darcie: (32:57)
Right? What are some examples, uh, of, you know, we, there's a man by the name of Michael Greenwald. He worked at us treasury, a friend of ours. He now works at a advisory firm called Cheatham and advisors, but he basically worked on us dollar diplomacy related issues, including the implementation of sanctions on countries like Iran and other places around the world. You know how just to crystallize it a little bit more in people's head, how do we use the dollar, um, building on what you were talking about before? What are some specific examples of times we've used it in recent history and throughout history to achieve our foreign policy goals?
Zach Karabell: (33:32)
So, you know, the way this worked in the coal board is a lot of countries actually did depend on USAID. So you could basically say, look, you either structure your government and create laws, create contract laws, give our com your, our company's privileged position in your economy, or we'll cut you off from aid and potentially cut you off from American companies. That was a powerful statement and the globalization of commerce and the multinational reality of companies. You can't do that as easily, but you can say even to your powerful and close allies like France or Italy, meaning those are powerful countries, relatively economically to lots of the rest of the world. Um, if you do business with a Chinese company, X, you know, Huawei or, or a Chinese bank, um, we will potentially prevent your government or your companies from using, uh, global clearing exchanges for dollars.
Zach Karabell: (34:28)
And if, if X percentage of your economy is tethered to dollars, that is an untenable risk. Now we don't always go so far. Um, but in, in many of our sanctions, we have insisted on allies who do not agree with sanctions, whether it's against Iran, whether it's against Chinese companies to follow our regime at the, at the, at the threat of, we will cut you off, uh, from being able to transact in dollars. And there's a whole, you know, as you know, there's a whole part of the treasury department called OFAC that really is able to use this. I'm not saying, you know, we do this quite clearly and quite intentionally, and it's often quite effective. I just think if you want to accelerate blowback against the dollar, the resentment, that that causes is not to be underestimated.
John Darcie: (35:15)
Right. And, and at that time, you know, we were almost the only game in town and we do a lot of business in places like the middle east in Europe. And increasingly you're seeing by their actions, you know, that they have an alternative. And in a lot of cases, especially given the U S is rise from an energy perspective. We now produce enough oil and gas to, to service ourselves. That's not to that. We don't import oil and gas. Um, but there's less dependence. We have less dependence on foreign oil and thus, you know, there, there's more natural partnerships that are being formed throughout sort of east Asia, um, through, through to the middle east, um, that are reshaping sort of the global world order. And then Europe, you know, is obviously stuck in a period of stagnation. And, um, they, they can't really afford to, to shut off the pipeline, so to speak the economic pipeline, uh, through to China.
John Darcie: (36:05)
So we're having a tough time sort of implementing our goals related to that geopolitical relationship. But I want to go back again to the overarching lesson of your book, which would support I took away was that, you know, slow and steady in a world where, you know, uh, obviously you have cryptocurrencies that are exploding and you have companies like Tesla and, and space X and Amazon that are growing at such rapid rates and investment returns are so high. Uh, you sometimes have to resist that temptation to, to jump onboard that train and take excess risk. Do you worry at all about the U S stock market, the economy and where we're headed? And we could potentially he'd lessons from brown brothers Harriman and, and, uh, you know, pull things back a little bit, so a more sustainable level. So
Zach Karabell: (36:49)
I think part of it is it's like a hub and spoke idea. So I do not think that a world composed only of a brown brothers sensibility would be an economic. It would be an economically vibrant or dynamic one nest at, or not vibrant or dynamic enough. Uh, but, but what you want at the center, particularly the financial world is a degree of awareness of the destructive capacity of money. You know, it is the power, the Quicksilver power in an atom, and you want to be mindful of its capacity to destroy, even as you are aware of its capacity to unlock immense wealth. So I think at the center, you want a degree of small state conservatism and on the periphery, you want a degree of risk-taking, right? Like go to town, buy doge coin, you know, do what do whatever you want. You just don't want that to inhabit the core, because if it's the core, it's not just boundaryless it's heedless. So I'm not suggesting that everything be,
John Darcie: (37:50)
Do think it's become the core traditional metrics of whether it's stock valuations or this, this rise of meme cryptocurrencies now are the market cap of those currencies is larger than every us bank,
Zach Karabell: (38:03)
Right? So I think, I think you have to distinguish between those things, right. There are bubbles in, there are bubbles. I don't happen to believe the stock market is anywhere near a bubble. And I don't think valuation is nearly as sanctified as as many on wall street. Believe it is, you know, valuation is just an average at which certain assets have traded over a hundred years. There's nothing, you know, the hand of God did not come down and said, that's all traded to 17 PE or fifth, whatever the number is, um, you know, non fungible tokens and millions of dollars being spent for those. And, uh, my friend, Gary Vaynerchuk, going to town. I mean, I have no idea whether that will retain value, but I have no idea why some modern art retains value. Uh, so there's certainly pockets of immense liquidity. I think it's more of a mentality and a culture, uh, and yes, wall street, you know, in terms of highly regulated banks is no longer what it was 20 years ago, because they are so intensely regulated in a way that creates huge inefficiencies, but it also tamps down untrammeled, greed, or tamps down on examined risk.
Zach Karabell: (39:07)
Although, as we know, from the, the blow up of, um, of, of, uh, flying's fund a few weeks ago, via credit Swiss and Deutsche bank, it does not prevent risks from being taken. I know that is not a coherently simple answer to your question. I don't, I don't think painting culture with too broad, a brush stroke. I I'm totally comfortable painting the tech world as being largely absent from its role in shaping the comments as it applies to privacy and money and commerce. Right? Most of us, I think it's hard to point to anyone who's actually deeply active in that,
John Darcie: (39:41)
Right? And it sort of reinforces our house. You have the importance of diversification, you know, you can't really afford not to have a foot in the future, uh, whether it be digital currencies or these companies that are really disrupting old models of banking or technology or automobiles or energy. Um, but you also don't necessarily want to go all in. Um, but Zach, it's been great to have you on salt talks. Again, the book is called inside money, brown brothers Harriman, and the American way of power, fantastic book it's out, uh, Tuesday. So go out and get the book. We couldn't recommend it highly enough. Anthony, you want to hold, hold it up. If you have it next to you,
Anthony Scaramucci: (40:18)
Because I don't have the book, I'm disappointed. I zag you hold the book up, but I as jog and tell you, I read these books before we get started. I will be reading this book next week when I get a copy of it from my bookseller, but I want to thank you for writing it. And I'm looking forward to reading it. And I think it's a cautionary tale as well. You know, where do you, where do you want to be today versus where we were in the past? What are we doing next act before I let you go
Zach Karabell: (40:47)
Next? As in like next book or next thing
Anthony Scaramucci: (40:50)
I know you got to know the book and your brain there. I do.
Zach Karabell: (40:52)
I'm going to, I'm going to write about how the world solve for the problem of scarcity, basically. Why did Malthus and the population bomb never happened, right? How do we, so I'm going to write about food and the, and the economy
Anthony Scaramucci: (41:07)
Essentially in a linear world. Okay. I like that. All right. So I'll look forward to reading that as well. I'd love to get you back on for that. We'll see you at our conference at the Javits center. Love it in September. And, uh, and John Dorsey, if, if, if we're nice to John's Zach, you and I may get invited to that country club. It is okay. That'd
Zach Karabell: (41:26)
Be good. And then Darcie could say to us, that is a truth universally acknowledged that a young man in possession of a large portion of it must be in search of a
Anthony Scaramucci: (41:32)
Wife. Well, he's already figured that out as well. All right, God bless be well, thank you, man.
John Darcie: (41:40)
Take care. And just, I must state for the record here on salt talks that the club that Anthony is referring to a very diverse in terms of the ethnicity of our members, uh, Jewish devalue, and lots of
Anthony Scaramucci: (41:53)
News here. Okay. There's no fake news, but the truth of the matter is that is true. I am a resident of the town and it is a diverse club and it is a great club by the way, Darcie and the food is great. And if Darcie ever is nice enough to invite you, you want to get the, uh, Buffalo, chicken wings, Zack spectacular at that club. Good
John Darcie: (42:15)
To know April Herrmann, I think love the Buffalo chicken wings as well, but, uh, thank you everybody for joining us here on today's salt. Talk with Zach Caravel, talking about his new book inside money about brown brothers Harriman. Just a reminder, if you missed any part of this talk or any of our previous salt talks, you can access them on our website@salt.org backslash talks or on our YouTube channel, which is called salt tube. We're also on social media at salt conference, uh, is where we're most active on Twitter. And we're also on LinkedIn, Instagram and Facebook as well, where I'm half of Anthony and the entire salt team. This is John Dorsey signing off from salt talks for today. We hope to see you back here again soon.