Bubble Trouble Wrapped 2023

Richard Kramer:

Welcome back to Bubble Trouble, the training set for every skeptical large language model with my dear Scottish co-host, economist, author, music geek and unrelenting statistics nerd, Will Page, and me, independent analyst, Richard Kramer. If there's a bubble that bursts our claim to fame is that we pricked first and this week we want to review what has been an action-packed to 2023 and wrap up a stellar year of podcast topics, guests, and really unimaginably bubbly behavior and not just the kind that you see with champagne at holiday parties. So strap yourselves in. We're going to look back at some of our favorite shows of the last year and look ahead to some of the themes and topics we want to look at for 2024. Back in a moment.

Will Page:

Thank you for that wonderful introduction, Richard. Thank you for a wonderful year. In fact, thank you for a wonderful 100 episodes of Bubble Trouble. It is crazy when you think how far the podcast has come along, the guests we've picked up along the way. But most importantly, Richard, it's the God Damn purpose of the podcast. To quote the Who, which you got to see live in Pittsburgh, I never got to see them live, "I won't get fooled again." I always felt the purpose of this podcast was that us, our audience wouldn't get fooled again, wouldn't get ahead of our skis, wouldn't get overly excited about the next big thing, and we would avoid bubbles getting us into troubles.

But Rich, park up for a quick second here. A hundred episodes in, let's just stop the clock for 2023. How many bubbles have we seen get into trouble since the global financial crisis? How many have we seen in the past 12 months? I got five fingers on one hand. I think I'm going into a second and I might need my toes as well. Let's just do a quick reflection of all the bubbles that have burst since we started this podcast. The list is long, right?

Richard Kramer:

Yeah, it is. And the funny thing about having so many to choose from is that we thought coming out of 2021 and into 2022 when we talked about the metaverse and NFTs and all of that nonsense, that was just one of those delicious reality checks that we were going to get and all of a sudden everybody was going to be fully grounded. We were heading into a potential recessionary climate in 2023 and everybody was just going to be that little bit more grounded.

Scarily, the consumer then went from net COVID savings to record levels of net debt, and of course there were huge bubbles popping here, there and everywhere. We saw the demise of storied names in investment banking like Credit Suisse and Silicon Valley Bank, just literally disappearing in a puff of smoke. And we may even be heading into some big bubbles in 2024, notwithstanding the incredibly volatile political climate we're going to see with elections likely in the UK and the US and India and lots of other major markets. It's just going to add more fuel to the fire. Now, I can't imagine we could have a longer string of bubbles bursting in '24 than what we saw in '23 and '22 and '21, but it feels like this is just a recurring theme, isn't it?

Will Page:

It does. It does. I'm going to hit on that big time because I came into this podcast all those years ago. I hate to say that, but thinking Bubble Trouble was the exception as opposed to the rule. Once every 15 years, things go belly up, we all correct ourselves and we behave ourselves. But once every 15 years, is that a fair comment? Are we looking at once every 15 months or once every 15 weeks? Is bubble trouble the rule as opposed to the exception? That's my worry when I reflect on a hundred episodes.

Richard Kramer:

And I don't know if there's just a preternatural sort of human predilection to optimism and we always want to believe the rosy projections. We'd always like to imagine there's a shortcut or on the road to riches.

Will Page:

And when music's playing, you've got to dance, right?

Richard Kramer:

You've got to dance. As says Chuck Prince, the CEO of Citigroup famously said in the last global financial crisis. But I think if you bookend the global financial crisis and some of the crazy market behavior that we saw around COVID and look at the time in between, we've had a lot of micro bubbles. And what I think we're able to do in this show is look at the hype cycles that frankly the media thrives on. And we started 2023 with the notion that AI was going to change the world. And here we are a year later and well, maybe AI hasn't quite changed everything and we certainly spent a lot of time in 2023 looking at that topic of AI and how it would affect different subsectors of the tech world.

Will Page:

Yeah, when the dust settles, will AI be just a better chatbot than we had previously or is it going to be transformative? The headlines want to lean towards a transformative. I think it's the role of this podcast to say, well, how much credibility is there in the argument that it is just going to be a chatbot with an enhanced feature set? It's just that hunger, your self-fulfilling hunger to create these bubbles, to get overexcited. It just seems to be that's the lay of the land.

Richard Kramer:

It is, but I think also if you ask pretty much anyone, have you had a positive experience with some sort of AI chatbot and you wind that back to all of our experience from 20 or 30 years ago with what used to be called, sexy name here coming up, pause for that, audio texts. Which was the press one, to get frustrated, press two, to get annoyed, press three, to wait an interminable queue to talk to a human being, press four to go in an endless recursive loop back to press one again. We've had these systems of automating customer service for decades and mostly they just annoy people.

Maybe they save a bit of cost from having human operators for the end companies, but the idea that we're going to have some sentient chatbot that is going to figure out what we want and be able to really help us just still feels a bit far-fetched, just like those telephone banking systems we all thought we'd get used to. I'm not saying we haven't made huge leaps in convenience and using my internet banking apps every day, seeing how well that works, but a lot of that automated customer service behavior just still seems far-fetched.

Will Page:

Yeah. Now before we get into the meat of the show, this free-form show, Modal Jazz, freedom within a framework, there is something else I want to pick up on, which is you mentioned climate, you refer to the political climate. If I can flip it back to the economic climate, something I'm really keen to ask you before we get going here is when the news broke last week about Spotify's job losses, I saw on the BBC World business report, Roger Hearing interviewed me in honor. He actually interviewed me in 2009 when Spotify launched as well. So it all came full circle and I made a point which I wanted to throw at you because I've made it live on radio and didn't really give it that much thought, but Spotify and the entire app economy has never existed in a world where interest rates were above the rate of inflation.

Because if you think the iPhone was 2008, the app store was 2009, apps really started building out in 2010. They have never known a world where inflation is at 2%, interest rates are at 4%. The private banks lend to you at five. That's normal. That was normal for a century. It's not been normal for the past, let's say 14, 15 years, but we're going to get back there in 2024. I'm convinced interest rates could have settled at five, inflation's going to come below five and we're going to have a functional banking sector. I want to stress, Rich, the entire app economy does not know how that works. And you've always taught me and our audience about the importance of cash flow. If there's no cash flow, where are you're going to go? Do you see a big shakeout as we bed into our normal functioning finance system for the first time in 15 years given none of these companies have ever known what that looks like?

Richard Kramer:

So I'll give you two thoughts on that. The first is that we already saw a massive shakeout. If you remember back 18 months ago, there were a dozen companies in London promising to bring you a Snickers bar and a Coke in 10 minutes for almost nothing. Getir and Gopuff and Flink and all of these companies that were doing quick commerce because they assumed there would be an inexhaustible pool of lazy millennials who couldn't get up off the sofa and walk down to the [inaudible 00:08:51]. And they're all gone. The same with all those crypto trading apps and direct-to-consumer brands. And you were going to get your toothpaste as a subscription and your shaving kit as a subscription and your breakfast as a subscription, you name it. And a lot of those companies just fizzled out because they didn't make it through an era where capital started having a cost.

Now, the flip side of that is that as there are fewer and fewer viable stocks to invest in the market, when there's less supply, demand goes up. Because everybody wants to invest in the stock market. And so valuations have gotten pretty darn high. And you see again, companies like a Spotify, for example, which has never consistently generated cashflow but still has a $35 billion valuation, even though when it had a profit last quarter, that profit was 37 million euros. And you can do the math on just what kind of market value to profit base that is. But those are stupendous valuations, not like you'd see for those old economy companies. And the crowding into the scarce growth stories in the market has led to another bubble of valuations. You see it with the magnificent seven, the five big tech companies plus Tesla and Nvidia, which collectively represent close to $10 trillion of market value.

Will Page:

10.

Richard Kramer:

And how do we have that? Apple's at $3 trillion, Microsoft's at over $2 trillion. How do you have those kinds of concentrations of market power? Because growth is concentrated into a very small number of very large companies, and for a lot of investors, as back to Chuck Prince, when that music's playing, you got to dance. You can't be out of those stocks if they're the ones going up the most. And valuation be damned, you can't be left off the party or off the train.

Will Page:

Wow, it's going to be an interesting year. It's going to be an exciting year of volatility as we get back to normal. And that's an oxymoron type statement right there. But as normality resumes, we're going to see abnormality in markets. Now let's go to the West Ham Stadium, which greets its fans with the song I'm Forever Blowing Bubbles.

Richard Kramer:

They are.

Will Page:

But let's go back to 2012 London Olympics and there's a podium and you're going to announce the bronze, the silver, and the gold winner. So I want you as a judge to place this gold, silver, bronze medals around the three podcasts of 2023. You've got about 40 odd to choose from. Starting off with Lauren Jarvis, wonderful podcast with Lauren Jarvis. She built the podcast strategy at Spotify. Great interviewer, brilliant brain. All the way up to Andy Fastow. We closed out our two-parter last week, a lot to choose from. Let's go to bronze first. Who do you announce on said podium for the bronze medal and why?

Richard Kramer:

Now here, unlike the Olympics where the performance is pretty obvious and with the exception of a couple of events more in the Winter Olympics with figure skating and those sorts of things where the judges have a heavy say, usually in a race you see who comes in for a second and third or who gets the most points in a decathlon or these sorts of things, or who wins the match. Now this bronze choice of mine is a bit of a surprise because at the end of this podcast you were pretty unimpressed. You thought, geez, that wasn't that exciting.

Will Page:

I think I know which one you going to pick.

Richard Kramer:

I got fantastic feedback, fantastic feedback. Maybe it's just because it was from a fellow Scotsman. And that is the Behind the Balance Sheet podcast with Stephen Clapham. Now, let's talk about why this hit a nerve. I mean, I think Stephen did a great job of laying out how there are just so many basic sense checks that are not done when looking at investments or looking at financial statements. And whether it's an issue of willful blindness, of conflicts, of interest of our innate biases and human foibles, which are clearly shown in reams of research and behavioral economics about loss aversion versus gain seeking and so forth. I think he did a great job of articulating that in something that you thought was not our best or most exciting podcast. It's a relatively dull subject.

But he said, look, in a nutshell, step back and ask yourself some common sense questions. Does this make sense? What's missing here? And there are some basic rules we can follow in looking at companies, looking at financial statements that people ordinarily don't do, can ask why they don't do those things, but when you do them, they reveal so much. And that's why we have seen so many spectacular blowups from the Wirecards to the NMC Health to the Carillions, to the again and again, these companies that just simply don't do or aren't what they represented themselves to be to investors.

Will Page:

I always remember the lesson that he taught me, which was, if you're looking at a company's balance sheet and it's got plenty of cash, ample cash, more than enough cash, and then you read that they're raising more money, why? Perhaps that's because the cash isn't there. I always loved that point, but I agree with you. I left that podcast episode walking home staring at my shoes thinking what a wasted hour that was utter garbage. And I got flooded, flooded with feedback from the most unusual people saying, "Hey, my friend of a friend of our friend told me I had to listen to this podcast. It was great. I never thought about balance sheets that way," so a deserve bronze medal. All right, up onto the podium again, bring up number two, silver, who gets the silver medal?

Richard Kramer:

So there were so many wonderful ones to choose from over the course of the year, but I want to pull out as my silver medalist Waterworks with Feargal Sharkey. And the reason why-

Will Page:

He stole it off me.

Richard Kramer:

Well the reason why you ask me for my choices is this conflates a real world issue of basic utilities that we all need day to day. The water we expect to come out of our taps when we need to fill the kettle or take a shower with the massive debt in private equity bubbles we see all around us. And I think it gives us a really stark reality that we just can't laugh off these bubbles. Hey, it's easy to look back on our 2022 podcast when you came back from south by Southwest slating NFTs and what a joke they were. And to say a year later, "Weren't we so right," Because a bunch of dumb fools lost money on NFTs. No big deal. It's not that big of a market.

But those water utilities, we depend on them every day and we've allowed them to be effectively taken over and loaded with debt by these private equity firms. And I think he articulates how troubling this is and how we've allowed this to happen so beautifully with the passion that he has for being a fly fisherman, just wanting to have clean rivers and the water company's not just willy-nilly dumping sewage into them because it's cheaper to do that than to treat it properly or to build the infrastructure that they promised that the rate payers they'd be building.

Will Page:

Well, when you turn the tables on me in part two, he might need some silver polish because he's got more medals coming. But on that podcast, to your point, I always like the point you said at the very start, which is how hard can it be to supply water to a country in 2023? Denmark's building a tunnel to Germany this year, that's hard. Delivering water out the taps in 2023, given Bazalgette built our sewage systems in the late 1800s, it can't be that hard. But somehow we've made it that hard by taking it away from state control and handing it to the free hand of the market. And it's not a technical point to make, it's not a Nobel Prize winning point to make, but it's a very philosophical point about state of market, which is should it be as hard as we've made it. And since that podcast, Richard, you've got to update our listeners. Thames Water is in some serious soapy bubble right now, correct?

Richard Kramer:

They are. They are. And you have to look at also a giant infrastructure project, which feels like a colossal white elephant. It's massively over budget and questionable at best, with HS2. And you wonder if we can somehow afford 80 billion pounds to build a high speed rail link between two cities, which will shave a half an hour off train journeys. Why is it we can't afford a fraction of that money to rebuild the core infrastructure that is critical for public health and our daily lives?

Will Page:

Yeah, I'm struggling to build, as an economist, to build a business case to get into Manchester faster. Don't actually get that. But I can understand the business case for getting out of Manchester faster. So it's asymmetric. All right, onto our podium for the gold medal of the 40 plus episodes that came out this year, who do you ask to step up and take the gold? Who gets that one? Who's in pole position?

Richard Kramer:

Look, I know there's a recency bias in these things, and when it's the Olympics, you have that gold medal 100 meter sprint and you can see who won immediately in 10 seconds or less. But the recency bias here is our show, last show of the year, two-parter, with Andy Fastow. It was fascinating to reflect upon the spectacularly fast demise of the seventh-largest company in America, an iconic name on the way up and gone in a heartbeat. And to have Andy in such a while, self-serving also very thoughtful way, lay out this notion that all of those enablers, the lawyers, the bankers, the accountants were just there to say, "Can we do this?" They said, "Yeah, we can do this."

Will Page:

Is it within the rules?

Richard Kramer:

Is it within the rules?

Will Page:

Is it within the rules?

Richard Kramer:

And it just put into high relief for me the constant issue of regulatory capture and failure. The fact that we have been attacking government for decades, mostly from the right for being inept or unable to help people out when indeed they had this critical role to play in safeguarding the economy and ordinary citizens. And I thought Andy really brought home how, look, every single executive in every one of the companies that we'll be looking at will have those incentives to sail as close to the wind as they can without capsizing.

Will Page:

Another great mind that we lost this year famously said, Charlie Munger, he famously said, "You show me the incentives and I'll show you the outcome." And that was-

Richard Kramer:

Absolutely.

Will Page:

Those fingerprints were all over those two hours of conversation.

Richard Kramer:

Absolutely. And so I was very proud of that one. I would love next year to get Elliot Spitzer onto the show to reflect about his time trying to bring Wall Street to heel and what he feels has been accomplished or not 20 years later. But when you see guys that were at the sort of axis of history at these pivotal moments and we can get them on the pod and have them break things down and explain things to people, especially someone who, like Andy Fastow, had to live six years in prison and reflect upon what he did so thoughtfully, I think it was a real honor.

Will Page:

And maybe just to wrap up part one, the one question we couldn't ask and we shouldn't have asked, but I was so tempted to ask, was about Jeff Skilling coming out of prison this year and going straight into setting up a spec. It's like, do we ever learn?

Richard Kramer:

But I guess the question there is who is going to back the guy? And are people really so inured to the bursting of these bubbles that they just take it in their stride?

Will Page:

Well, that is our Olympic ceremony over for part one. Bronze, Balance Sheet. Silver, Water. And gold, oil. Black gold, you could say.

Richard Kramer:

Nice one.

Will Page:

Well, a great year and a great award ceremony. I would've struggle to disagree with those, but I will. And we'll come back in part two to announce my winners.

Richard Kramer:

Welcome back to part two of our wrap-up for 2023 of Bubble Trouble. We're reviewing our favorite shows and thinking about what sort of bubbles might burst in the year ahead. Now, Will Page, I've got to ask you about one bubble that we feel might have burst, which is that bubble around the very type of content we're creating, the podcast world. It seems so easy during lockdown, everybody should have a podcast and everybody has plenty of time to listen to them. But can you walk us through what's happened to that podcast bubble? I know you've got some interesting economic research and content coming out around it. And also I'd love your thoughts on this freak out. We had in the middle of the year, we had quite a few podcasts on this topic about AI music. Have we finished freaking out about it yet? Are the robots taking over the orchestras and recording studios? And we're just going to be listening to what the computer algorithm thinks sounds best.

Will Page:

Well, on podcasts, it's interesting to think how excited we were about the podcast format at the start of the year. It's interesting to think about how excited we were about NFTs back in March last year and how meh, spelled M-E-H, we are about them now. And I got to say at the very top of this, I think everybody in the podcasting bubble has been cooking their books with regards to audience figures, engagement, downloads, everyone from the BBC right the way across to the biggest shows, right the way across to the small shows, just nobody is being up front about genuine unique reach. A publication in America, which is a bible for fact checking and said to me, "We get three quarters of million listeners a month." It's like, no, you have a daily podcast and you're getting 28,000 a day times 30 gets you to your figure.

How many unique people with the policies are we actually reaching with these shows? And it's not, I want to stress this, it's not a problem if the number is small because to use those three word summary I've used time and time again, this format is and always will be a sea of niches. That's what our godfather podcasting, Eric Nuzum, told me that three years ago before I started working my book and I'll never forget it. We are not in the blockbuster business. We should not aim to be in the blockbuster business. Don't expect us to become a blockbuster business. We are a niche of people who want to learn about bubbles. Joe Rogan is a niche about people who want to hear original conversations. Harry and Megan is a niche about people who want to hear fake interviews done by somebody in the studio and then it's patched on top. Okay-

Richard Kramer:

Now, now.

Will Page:

$43 million down [inaudible 00:24:27], sorry, $20 million, didn't mean to mention the figure. But if you think about it, they are niches, Richard. And niches ain't going to bubble like blockbuster media models have done in the past. They're not supposed to. And I think that's what we struggle with. So the research on Podnews, and we'll link it to the article and it'll be up on LinkedIn along with this piece, is just to ask, where's the ad money? A, there's not that much of it relative to other media formats, and B, it's all in the United States. The ad revenues from podcasts in Britain, Australia, New Zealand, Canada is a fraction, a fifth, a quarter of what it should be compared to America. So what I then asked is given there's this huge gap, are we going to see convergence, the rest of the Commonwealth will catch up with the United States. Or divergence, the first mover advantage of America just strips ahead and the rest of world is left with very little money to compensate for its podcasting efforts. Touched on a few things.

Richard Kramer:

But let me ask you, let me drill into that just a tiny bit before we move on to your picks for the year.

Will Page:

Sure.

Richard Kramer:

When I think about the relative size of the podcast ad market, the golden dream has always been that it's going to steal all the revenue away from radio, but radio seems to be fairly resilient, holding up, if not on a slight glide path down. And it does feel like that one-to-many medium of radio that is part of people's daily lives takes a very long time to shift. And is it that podcasts haven't found the targeting or the mass audience? Is it that podcast is more like book publishing where there's a million titles in a year.

Will Page:

It is the sea of niches point. How much doomsaying have you heard about the advertising markets since digital came along? Countless conferences. God knows how many blogs saying, "The advertising market is broken, blah blah, blah. The big guys are going to lose and you guys are going to come in and win share," They haven't. A spot in the Super Bowl today costs more than it's ever cost in history when you see the Philadelphia Eagles win it in February this next year. Now why is that? That's because advertisers like to get to lots of people at once. At once.

Richard Kramer:

But Will-

Will Page:

There's challenges-

Richard Kramer:

I'm going push back on that.

Will Page:

There's challenges.

Richard Kramer:

That's incorrect. Hang on.

Will Page:

There's challenges.

Richard Kramer:

That's incorrect because the linear TV market puked up and fell by about $6 to $8 billion in 2023. And yes, it's true for that NFL type content, which is broadly watched and 75 of the top hundred shows watched in the US and by audience are NFL football games. But, and this is the but, that sea niches of the hundreds of cable channels are losing their audience and losing their appeal for advertisers. And advertisers are shifting instead to where the eyeballs are going, which is to various forms of online media. That's why-

Will Page:

But they're not going to podcasts. They're not going to podcasts.

Richard Kramer:

Correct.

Will Page:

And that's where we can agree to disagree-

Richard Kramer:

Yeah.

Will Page:

But then agree again. Which is they're taking shots but they're not taking shots in this format. And that sea of niches point is key, which is if you're going to advertise, let's say Beyonce's Tour and it's coming up in five, six days time and you've got Wembley Stadium half failed and you need to promote the tour with adverts, what happens if I listen to the podcast three days after the concert's over? Give me the guarantee. It's niche, it's interactive, it's on demand. It's a discretion of the consumer. I just think media advertising likes big things to happen at once, which is the opposite of what podcasts are. There are narrow cast, not a broadcast. Case closed.

Richard Kramer:

And they're also a time shifted. Therefore, they don't have the immediacy of radio, which is, "Come on down this weekend to Bubba's Amusement Park because we have a special on this weekend." Doesn't help if you're time shifting and you listen to the podcast next week.

Will Page:

And then just to maybe cap it off, and I don't want to go down the rabbit hole of the RSS feed debate here, bore our listeners for that. But how do the platforms make money out of podcasts given they're free and open? I agree they should be free and open, but if you're a Spotify, an Amazon, an Apple or YouTube, all this revenue just washes through your hands. It's like prune juice. It just comes out the other end. And I just think... I started off this podcast two and a half years ago saying podcasting as an industry was the Wild West. It's an even Wilder West right now because there's been so much investment with so little return.

Richard Kramer:

Indeed. And it gets so much hype as if it's this brilliant new medium when it's just an amalgamation of some old mediums that frankly are the kind of radio shows we would tune in at a specific time to listen to on the BBC, but now are available on demand like so much other content. But let's move on, Will. I don't want to get too far down this podcast rabbit hole. I need to hear your bronze, silver, and gold. What were your top shows of 2023? What were the biggest bubbles that burst?

Will Page:

So onto the podium for the bronze medal, please take a bow as I put this around your neck like Jimmy Savile. No, not like Jim will fix it. So with bronze, I want to go back to NFTs - They're Not For Me as a precursor to this, which was a completely unplanned podcast which gets quoted by people all the time. Why? Because something funky was going on and Richard Kramer bothered to explain it. And if you want to impress friends at dinner, parties and NFT are the topic, you could enter the conversation and explain what a wash trade was. I have lost count of the number of people who have cited that podcast, which had no script, no preparation, but just resonated. This year we did Damned by Duration. And I remember you saying to me before we went into the podcast, "I've got the best way of explaining duration."

I pushed you. I said, "I need something as clear as the wash trade explanation you gave us last year. I need that this year." And you gave the example of a house. You buy a house that's a big investment. Then you invest in improvements to the house. Let's say it's a garden, a conservatory, an extension, and you want the capital asset of that house to appreciate in value over time, but it's going to take a long time for that appreciation to overcome the initial upfront cost. And if interest rates change and other factors kick in and push out that duration even more, you get caught in a trap. And you applied that to Silicon Valley Bank and all of a sudden it just clicked. I can now impress friends at dinner party telling them why Silicon Valley Bank collapsed. So for all the friends I've impressed, I want to thank you for that and give that the bronze medal.

Richard Kramer:

I get a medal, what do you know. And look for our listeners, we love having guests, but every once in a while there's something that happens in the market where we feel we just need to break it down in super simple language and that's what we try to do. But I'll happily take a bronze medal. I'm gunning for gold next year, but I'll wait to see who shows up for your silver and gold.

Will Page:

So for silver, I'm going to announce to the podium, Sir, which narrows it down nicely, Sir Peter Bazalgette, great-grandson of the famous Joseph Bazalgette, which I cited in part one. Joseph Bazalgette, for those who don't know, built the sewage systems of London, famous for taking shit out of our households. Peter Bazalgette was famous for bringing Big Brother to London, so bringing shit back into our households. Best media joke in history. But Sir Peter Bazalgette has been inspiring me to think ever since he explained why a gorilla mimicking the drums and the vocals of, I can feel it coming In the Air Tonight tonight by Phil Collins, can help sell chocolate. It was one of the most successful for non-British people on the podcast, one of the most successful viral adverts ever in the age of 2007, 2008, this gorilla drumming along to Peter Collins, I could not understand who comes up with that idea.

People like Peter Bazalgette come up with that idea. And throughout the entire conversation he touched on areas which just took me aback. A, we were doing it in person, I think it was the first podcast we did at the World-class Apple Studios. But B, the way he stretched the conversation to areas which actually made me feel uncomfortable in person. And to close off why he's getting the bronze medal, it was a remark he gave about the importance of children getting bedtime stories. For a podcast called Bubble Trouble, what the hell am I doing talking...

He talked about, think about the correlation causation relationship between kids who are going to young offenders homes or jail and the knife stabbings across British cities. That whole behavior and as a relationship with the fact that they didn't get a bedtime story as when they were growing up. And I basically couldn't continue the conversation. I always remember the importance of having parents that gave you bedtime stories, just that sense of love. And it was just completely out of kilter for bubble trouble. But boy was it important to me and I'll never forget that remark that he gave.

Richard Kramer:

And certainly as someone who'd loved reading to my kids, no greater joy than to have... My one son would always say, "Read, Papa, read," whenever I tried to put them to bed, turn out the lights. They kept insisting that we get a few more chapters or a few more pages. Read all of Harry Potter and all of the Philip Pullman historic Materials trilogy. I literally fouled tens of thousands of pages to my kids over the years and it was a greater pleasure for me than for them. And you're a gold medalist?

Will Page:

Well, he got silver, but he's going to have to upgrade because I'm going to give gold to Feargal Sharkey as well. I could say Fastow. Fastow is an emotional one for me. I met him in 2015. I didn't plan to meet him. I didn't plan to see him stand on stage holding those two objects, CFO of the year and a prison card, never forget that moment. Had a great conversation with afterwards and to bring him back on the show, yes, that is worthy of a gold. But Feargal was different because Feargal took on something which matters to me, which is how do we run this bloody country? I mean, is it that difficult?

Richard Kramer:

And he's a tireless campaigner.

Will Page:

I know.

Richard Kramer:

Tireless.

Will Page:

I'm going to spend a lot of next year working in Denmark. It's a country I really admire. 5 million people, small. They [inaudible 00:34:44] bridges, tunnels. They have no unemployment, they have no poverty. They open their shutters in the morning and they close them at night. It can't be that hard to run a country, but somehow this country has made it now an impossible to get water to come out of our taps and to keep our beaches clean. That's not progress. [inaudible 00:35:02] famously said, "If a cannibal eats with a fork, do you call that progress?" I'm not sure we're seeing genuine progress here. And just to wrap up, what made that podcast so special was A, we did it in person. Again, huge thank you to Apple for allowing us to record at studios. It's a big accolade for a very niche podcast. But you were able to curtail his energy and say, "Let's just remind ourselves, Feargal, how do we solve the situation? Allow the bondholders to get wiped out and then we'll restructure this thing from the ground up."

To which he agreed. But with his emotional energy, what I loved was the dynamic of all of this emotion and tireless campaigning and then back to, well, how do we fix what we've got here? You just kept bringing them back like a force of gravity back to ground zero. Remember Feargal, the bondholders have got to take the hit here, and once they've taken that hit, then we can proceed to base two. And I was just in awe of the dynamics of that conversation of there is a way out of this, but somebody's going to get whacked and it can't be the taxpayer.

Richard Kramer:

Well, and this was one of the great tragedies in the global financial crisis is when the giant insurance company AIG went under the folks holding their debt, the Morgan Stanley's and Goldman's of the world were made whole by the former CEO of Goldman, who was the treasury secretary at the time, Hank Paulson, instead of having to take the 60 or 70% haircut on the debt. And the principle at the time, a terrible one to set, was that we were effectively taking privatized gains and socializing the losses.

Those big steamingly important investment banks simply couldn't take the haircut from backing a business that they should have known better was going under. And that's what I feel should happen with the private equity folks who've put their hard-earned money into and then taken far more out of it than they should have taken. And that's what I feel should happen with the private equity folks who've put their hard-earned money into and then taken far more out of Thames Water without investing what they should have. They should take the hit, they should take the haircut and we should leave a recapitalized business, possibly in public hands, not in private hands anymore. Not sitting with seven layers of a shell company that at each layer of that shell company are loading the business up with debts that they can't afford to pay.

Will Page:

Yeah. It was a hard podcast to do because it just made you angrier and angrier when you realized the snakes and ladders this public utility has gone through to do exactly that. Private sector gain-

Richard Kramer:

And the revolving door of regulators and executives, that is just shameful that people cannot resist leaving the regulatory side of things and then going from gamekeeper to turn poacher. Now I want to ask you for a couple of our classic wrap-up ideas, which is smoke signals. You're the one who came up with this concept when we started Bubble Trouble that we should ask our guests or ask each other for. What are the uh-oh beware moments, the things to look out for when you hear certain waffle words or strange language from executives, things to be wary of. And what's your smoke signal of last year or looking forward something that you're worried about for 2024?

Will Page:

Interestingly, I'm not worried about the elections. I actually think we're going to get quite a stable outcome from those elections that are on a horizon. I think democracy will work its way out. There'll be some hype, there'll be some hysteria, but we'll get there.

Richard Kramer:

Even in the US?

Will Page:

Yeah, I'm pretty convinced that your favorite blonde-haired, orange-skinned president won't be back in office. He will be behind bars. I'll leave it there. But I do think the AI one is a big one for me, I think. And it's not a bad bubble trouble, it's not a bad bubble to burst, but I think there's another AI winter on the horizon. And the reason I say that was something, a flippant remark you made on one of our conversations this year where you said there's a gap between CEOs who claim they're looking into AI and CEOs who are actually using AI in their business. And the gap was wide, and I'm sure it's wider today than it was back then. I just think people are, again, that expression you've given me in 2023, ahead of our skis, you've got well ahead of their skis on this one.

There's a whole bunch of consultancy who don't understand what a large language model actually is and how simple it is. Advising it to companies who don't understand what they're going to use it for. I think we're going to take three steps forward in 2023 with the application of AI and ChatGTP and its like, and we'll probably take two and a half steps back in 2024 as we kind of let the dust settle and realize, well, what is the actual practical, meaningful use case here? It will get there, but it's not going to be next year. Next year's going to be a long winter for AI. Well, if I've just taken a puff of my smoke signal, let me pass that reefer onto my good friend and don't Bogart that joint. Richard, if you were to hold it in your hand and blow some smoke in my face, what smoke signal would you give me?

Richard Kramer:

So one of the ones I want to raise for the last year, and it's even recently, with companies you know well. Is the way in which the market jumps to enthusiastically cheer when companies fire people. Whether it's 15,000 people at Nokia or 1500 people at Spotify, the young analysts or even experienced analysts at big banks will immediately pencil in cost savings for the next year and say, "Isn't it great the company has got rid of a thousand people costing each $200,000 a year. So that's $200 million of [inaudible 00:41:03], $100 million of cost savings or whatever it's going to be. And it will just drop straight to the bottom line." And what really rankles me is the notion that companies will go from state A with all those people to state B with fewer people and not see an impact of their own business. Not lose the muscle and the grit to go after new opportunities. You assume that all those people were expendable and not doing anything and the analysts are just kind of dancing on their graves.

And I find that really an unseemly aspect of the market I find more and more disturbing over time. The way everyone cheers the sort of year of efficiency when Meta fires 23% of its staff and it's great for profits in the short term, but what about all those people? Will they find other jobs? Are they going to be bereft of opportunities? And will the companies themselves have a difficult time readjusting to life without these different departments that obviously those people were monitored by their HR departments and their managers. They weren't just doing nothing. And I don't like that sort of rush to be enthusiastic about firing people and grabbing the cost savings. I feel it misses a critical part of company cultures and you can probably speak to that with companies you know well as just as much as I can.

Will Page:

I think firing is interesting too... With the Spotify story, I was counseling a lot of friends last week who had lost their jobs. But one way of looking at that is in 2023, Spotify fired 1,900 people. That's all the people he hired in 2022. That was the growth of headcount in '22, and they'd just gone back to where they were on the 1st of January the previous year. Similarly, with Amazon, Amazon fired 10,000 people. Amazon fired 10,000 people. Amazon fired 10,000 recruiters. That's how big that machine is. So they fired the people whose job is to hire people. So firing is a relative, it's a nuanced term. So it is very clear. But on the Roger Hearing interview, on the BBC World service, maybe bring this episode and this year to close is I told that joke, which we've told in this show many times, I discussed in the Spotify situation.

So at the end of the day, back in a world of zero interest rates, these tech companies got very bloated. And the joke goes, "How many people work at Spotify Roger? How many people work at Facebook, Richard? Or how many people work at Google, Eric? How many people work at Spotify, Roger? I don't know. How many? My answer, oh, about half of them." Roger Hearing told me the origins of that joke, Richard, the origins, go to the Vatican.

Well, if I can just say something for the end of the year. Thank you, Richard Kramer. Thank you Eric Nuzum. Thank you, Julia Natt and Magnificent Noise and the wonderful team, Lizzie Pollitt, Ross Adams, at Acast. But the guests, Richard, we got to give a shout-out to our guests. We put a lot of work scripting-

Richard Kramer:

Fantastic.

Will Page:

These shows, producing these shows-

Richard Kramer:

Fantastic guests.

Will Page:

Editing these shows, but their time is precious. And to have Dan McCrum on the podcast the day that his Netflix drama went live. We are a niche podcast. Our numbers are not stratospheric by any means, but our guests are stratospheric in stature and for them to give us an hour of their time and converse with us-

Richard Kramer:

Yes.

Will Page:

Our appreciation to all of them.

Richard Kramer:

And can I say to anyone who's listened this long to this podcast, thank you so much For our listeners, the feedback we get is so well appreciated. Keep it coming. Keep spreading the word. It is so gratifying to get the feedback that we do on the podcast and we want to make it better every day.

Will Page:

With that, let's bring 2023 to a close. And if there's a bubble that bursts in '24, I promise you we'll have pricked it first.

Richard Kramer:

Thanks very much.

Will Page:

If you're new to Bubble Trouble, we hope you'll follow the show wherever you listen to podcasts. And please share it on your socials. Bubble Trouble is produced by Eric Nuzum, Jesse Baker and Julia Natt at Magnificent Noise. You can learn more at www.bubbletroublepodcast.com. Until next time, for my co-host, Richard Kramer, I'm Will Page.