Could It Happen Again? Lessons from 1929 with Andrew Ross Sorkin

1. Key Themes

The 1929 Crash Was Not a Single Event But a Multi-Year Unraveling

The conventional understanding of 1929 as a single crash is fundamentally wrong. Sorkin discovered through his research that "the very strange thing is that despite the market going down, you know, 40, 50 percent between September or end of September and November, by the end of the year, by the end of the year, the stock market was only down 17 percent" [00:23:01]. The real devastation came from a "series of dominoes" that extended through 1933, including policy mistakes like the Smoot-Hawley Tariffs which caused "global trade [to be] down 60%" [00:26:28]. The Great Depression wasn't caused by the crash itself, but by "a series of terrible decisions that get made in Washington, oftentimes in conjunction with the CEOs and bankers who are trying to influence the president" [00:11:44].

The AI Bubble Is Masking Fundamental Economic Problems Today

Sorkin argues that current economic strength is largely illusory, powered by an AI investment bubble. "If you would actually take the AI investment piece out of it and look at the rest of the economy, you'd say actually kind of lousy or not so great" [00:51:21]. The AI bubble is different from just stock prices—it's "impacting the entire economy" through massive spending on data centers, construction, energy, and chips [00:52:00]. However, this is ultimately "a sugar high" because "once the data center is built, it could take five or 10 people to manage the data center. It's not like it requires thousands of people" [00:53:09]. The fundamental contradiction is that "if this is truly a success, you know, if they shoot the moon and this is really successful, at the same time that the companies may seemingly be successful, there's going to be a lot of people who lose their job" [00:41:17].

Democratization of Finance Without Guardrails Leads to Disaster

A core parallel between 1929 and today is the push to democratize finance without proper protections. In the 1920s, "nobody ever took credit. Nobody borrowed money. It was considered a moral sin in America to borrow money" [00:09:01] until Charlie Mitchell and others changed everything, allowing people to borrow 10-to-1 to buy stocks [00:09:58]. Today, Trump's administration "implemented a new law that effectively is going to allow the venture capital guys and the private equity guys and the private credit guys to literally sell product to the ordinary investor" including in 401Ks [00:29:23]. Sorkin warns: "when everybody has a lottery ticket, most people have a lottery ticket lose. That is the great conundrum of the lottery. And the people who lose, who lose are often the people who can't afford to lose" [00:31:03].

2. Contrarian Perspectives

FDR Wasn't an Economic Genius—He Got Lucky with Timing

Sorkin challenges the conventional wisdom about FDR's economic prowess: "I don't think that anybody would have told you that somehow FDR was some kind of, you know, financial genius or guru who understood how to deal with the economy. I think he saw a mess. It was a mess. I think he got a little bit lucky in terms of the timing of when he came in" [00:49:21]. The New Deal "was not like an economic plan really initially. It was, there was all so many other sort of social aspects to what he was trying to do, but it all happened to work. And so and then of course World Two comes along and that helps economically too" [00:50:04]. The success was more about psychological restoration of confidence than economic mastery.

Some Speculation Is Necessary for Innovation

Sorkin offers a nuanced view that contradicts the pure anti-speculation narrative: "we all think speculations like a dirty word, right? You don't want too much speculation. But we all need a little bit of speculation because speculation is like the twin of innovation. If you look and think about Elon Musk and Tesla, somebody at some point had to speculate on Elon Musk early on when it seemed like an insane thing to do. It was a complete speculation. And you need that in the economy for there to be innovation" [00:35:28]. The challenge is finding the line between productive and destructive speculation.

Tariffs May Be Necessary for National Security Despite Economic Costs

Sorkin presents a contrarian case for tariffs based on resilience: "If we didn't have tariffs on cars in America, there's a company called BYD in China that can make the cars better and cheaper than any car that's made here. We would have no car automobile industry at all...Is that okay? Is that acceptable?" [00:54:43]. He argues we learned during the pandemic "that you do need some form of resilience around drugs, around masks, around potentially cars and parts and all sorts of things" [00:55:16]. However, he acknowledges the tradeoff: "10 years from now, we will pay more for lousier cars in America than most people will be able to get in other places" [00:55:55].

Government Equity Stakes in Companies May Be Justified

Against conventional free-market thinking, Sorkin suggests government equity positions could be appropriate: Regarding university research funded by taxpayers, he asks: "Should we, like an investor would, get a stake in the patent?" [01:05:00]. On Intel's government funding: "this president said, you know what, this whole thing is so screw ball. We want more. If I'm going to give you all this money, instead of granting you the money, just so you could have it, I want it for me. What's in it for me? I want a piece of the action" [01:02:23]. While acknowledging problems with this approach, Sorkin admits having "totally mixed views" on whether this is good or bad policy [01:06:11].

The 1929 Suicide Narrative Is Overblown

Contrary to popular belief, Sorkin found that "from a data perspective that were actually not more suicides in 1929 than there were the year before" [00:19:33]. The perception exists because "to the extent there were suicides, they were more dramatic...and they were recovered in the newspapers constantly because oftentimes, if you read the article about somebody committing suicide, it was also about how they had lost their fortune" [00:19:54]. This challenges the iconic image of mass despair following the crash.

3. Companies Identified

RCA (Radio Corporation of America)

The Nvidia of the 1920s, RCA was "the hottest stock in the 1920s" with ticker symbol RADIO [00:13:26]. "Everybody was going crazy because they thought this is going to change the world. Just the way we thought the internet was to change the world. Just the way we think AI is going to change the world" [00:13:33]. The company represented the technological revolution of the era, similar to today's AI boom, and was heavily speculated on despite not paying dividends because "they don't have any cash" [00:24:30].

National City Bank (Later Citigroup)

Run by "Sunshine Charlie" Mitchell, this was "the bank that becomes city group" and Mitchell "was the Jamie Diamond of his time...probably the most famous banker in America in the world" [00:15:39]. Mitchell "invented the idea" of lending money to buy stocks [00:15:49] and "was called Sunshine, Charlie, because he would tell anybody who would listen to him that everything was always going to be better" [00:15:56]. The bank's innovations in credit fundamentally transformed American finance and enabled the speculation bubble.

JP Morgan

Led by Thomas Lamont, who "really was the man who ran the bank" [00:14:29], JP Morgan was "considered like the most important bank in the country" [00:14:19]. Lamont "believed that if you could just get a bunch of people in a room like the right people, you could control the world" [00:14:36] and was "befriending all the journalists" while "whispering in everybody's ears" [00:14:56]. The bank played a central role in attempting to stabilize markets during the crash.

BYD (Modern Chinese Auto Company)

Used as an example of current competitive threats, Sorkin notes BYD "can make the cars better and cheaper than any car that's made here. We would have no car automobile industry at all" without tariff protection [00:54:47]. This illustrates the modern tension between free trade and industrial policy.

Intel

Currently at the center of controversial government industrial policy, Intel "is struggling" and received government funding under Biden as a grant [01:01:26]. Under Trump, the government took a different approach: "this president said, you know what, this whole thing is so screw ball. We want more. If I'm going to give you all this money...I want a piece of the action" resulting in a 10% government stake [01:02:23]. Sorkin notes "it was probably a bad investment in Intel to start with and became an even bigger problem" [01:02:06].

Nvidia

The modern equivalent of 1920s RCA, Nvidia is at the center of the AI investment boom. Sorkin describes a concerning "circular transaction" where "Nvidia, invest money into open AI...they have now committed to give them a hundred billion dollars, which then they're going to take the hundred billion dollars and buy the Nvidia chips" [00:38:28]. This kind of "vendor financing" arrangement raises red flags about market stability.

OpenAI

Exemplifies the speculative nature of AI investment. OpenAI "can't afford to buy all the chips that it's committing to buy. It doesn't make it doesn't make money. It's losing money right now" [00:38:17]. The company recently structured a deal where "we're going to get a stake in AMD. And when the shares magically go up, we'll now have money from those and then we'll go buy the chips" [00:39:00], which Sorkin notes "reflects that there's not a sort of underlying stability in that market" [00:39:11].

4. Operating Insights

Research Methodology: Build a Network of Sources When Archives Are Scattered

Sorkin's research approach offers lessons for any comprehensive investigation: "The challenge in this case was there really wasn't like one or two or three places you could go. It was you had to be like needle in a haystack situation with 15, 20, 30 different places" [00:05:16]. His solution: "you almost have to say, OK, well, my character doesn't have an archive for this character. But he might have called somebody or talked someone after, well, who are the 12 people he might have talked to. OK, I'm now going to go to their archives and then pray to God that I'm going to find some letter there" [00:05:33]. During COVID, he recruited graduate students through librarians who had archive access, paying them to photograph documents [00:06:47].

Time Management: No Golf Philosophy for Major Projects

When asked how he found time for an 8-year book project while running multiple demanding jobs, Sorkin's answer was simple: "I don't play golf. I don't do other things" [00:01:14]. He "would do this on airplanes on weekends at nights...sneaking little time in at any moment I possibly could" [00:01:24]. For entrepreneurs and operators with major projects, the implication is clear: meaningful work requires sacrificing other activities and capturing marginal time.

Pattern Recognition: Always Chase Interesting, Which Often Means Chasing Failure

Sorkin's operating philosophy: "I'm always chasing interesting, which oftentimes means chasing failure...because I oftentimes think that's where the most drama is. It's where the most interesting characters are. It's where we can try to understand things that we do well and things where we may need to do better" [00:01:50]. This explains his focus on the 1929 crash rather than successes—failures reveal more about human nature and systemic vulnerabilities.

Strategic Positioning: Understanding Leverage Is Everything

Describing Trump's entire strategy, Sorkin identifies a principle applicable to all negotiations: "there's actually one through line to everything the man does, which is he wants leverage over everyone...Where can he find the leverage? Where is the leverage point that he will have over somebody else? That is the entirety of the strategy" [00:57:46]. Whether in government, business, or investing, identifying and building leverage points is fundamental to achieving objectives.

5. Overlooked Insights

The Federal Reserve's Inaction in 1929 Was Driven by Fear of Political Consequences

Sorkin reveals a critically important but briefly mentioned fact: "one of the reasons that the federal reserve didn't do what it probably should have done in 1929, which was raise interest rates in a material way, was because they were worried about the politics of it. They were worried about the optics of it. The federal reserve was a new entity, started in 1913, and these guys thought, you know what, if we do something that damages the economy...we may lose our jobs, but not just that, the federal reserve may disappear" [01:07:29]. This suggests that institutional insecurity—not just bad economic analysis—drove catastrophic policy failures. The parallel to today's debates about Fed independence is unmistakable and suggests current political pressure on the Fed could trigger similar institutional paralysis at a critical moment.

Circular Financing Deals Signal Fundamental Market Instability

Sorkin briefly mentions but doesn't fully emphasize the significance of what he calls "round trip deals" where "Nvidia, invest money into open AI...they have now committed to give them a hundred billion dollars, which then they're going to take the hundred billion dollars and buy the Nvidia chips. So it's a completely circular transaction" [00:38:28]. He then notes OpenAI doing similar deals with AMD, buying equity in chip makers to fund chip purchases [00:38:54]. This is potentially the most important warning signal in the entire conversation—it represents the kind of vendor financing that has historically preceded major corporate collapses. When companies can't afford to buy products except by the vendor investing in them first, it suggests fundamental cash flow problems masked by financial engineering. This could be the specific trigger mechanism for an AI bubble collapse, yet it's receiving minimal attention in public discourse.