You're listening to Bloomberg Business Week with Carol Messer and Jason Kelly on Bloomberg Radio. So I'm thinking building and perhaps some conversations we've had as of late around this table in our Bloomberg and Director Broker studio. UM. I want to get to our next guest, because he has noted how dangerously disconnected the public is from our financial system. It is the subject of his new book. Joining us on the phone is Chris Farrell as he's co founder
of Riverwood Capital. His book How Money Became Dangerous, The Inside Story of our Turbulent Relationship with Modern Finance. He joins us on the phone from Menlo Park, California. Hey, Chris, nice to have you here with Jason and myself. UM, tell us a little bit about I mean, you have
an interesting background. You understand the financial world. Yeah, Hi, Carol, thanks thanks for having me on you has spent thirty five years in the industry and has traversed many of the doctors within the finance were commercial banking, sales and trading, investment banking mn A private equity and uh, yeah, I've had a long, long career and been fortunate to work on some of the more interesting transactions in Wall Street history.
What's changed about maybe when you started on Wall Street and kind of where the financial community financial system is today, Well, so much has changed, you know, in just one generation. I like to say, my parents only cared about two numbers, right, they cared and they were both years. They cared about the year they paid off their mortgage in the year they qualified for their pension. And since then, you know,
so much has happened. The complexity of the of the financial system has grown dramatically and so many different ways, as we pushed for scale, scope and efficiency at the expense of the you know, the personnel, of the interaction, of the of the knowing, the person of of knowing who we're interacting with, even having a person on the other side of that, and the complexity of this of the system has grown so much, while are under standing
of it really has gone in many cases down. And I think a lot of people have said, you know, I can't possibly understand this, so I'm just going to step back and sort of you know, disingage completely well. And I do wonder what the financial crisis did to either reinforce that or to maybe change the direction. What what impact ultimately did the crisis have on consumers and on behavior? Yeah, you know, it's a great question, um,
And we think about this a lot. So it initially inspired this sort of rage, right the Occupy Wall Street movement. What people are like, this is not acceptable, we can't have this. We need to do something. But because people couldn't articulate the challenge and the problem, and therefore, if you can't articulate the challenge, you're not gonna come up
with solutions. And then it's sort of faded as most you know, typically financial crisis do crisis do, and then you sort of said, Okay, I'm just gonna walk away. And in a sense it almost turned people more we're off and more distant from it because I said, oh, this is just one of those scary things I just
don't want to like tankle with. And now we see, we see that in all kinds of behaviors, you know, we see you know, we see millennials wanting to trade off an algorithm when you know, not even deal with people because the trust level is so low they'd rather trust an algorithm than than a person. And you know that this manifests itself in so many ways. I have to say, I think about the market all the time that how much of it is now you know, driven
by computers, and what that means for the retail investor. UM. You know, sometimes good when everything is going up, but you know, I do wonder when we get to a downturn, which ultimately we will at some point, but I do wonder about the impact on it. What are your biggest
concerns here? Well, my biggest concerns are we have a we have a sort of antiquated system, you know, at all levels we're talking about how money has managed UM and then we have um, you know, people and complexity that that aren't keeping able systems can't manage and we most do that, I think in the in the pension system,
for example. So we have this, you know, we've have debt being raised to fund you know, two fund pension deficits or any actions that are taken, and the system is focused on this, okay, this annual budget challenge of how do I pay employees? And you know, look, let's see, like I can't meet my cash shortfall, I can't give them a race, so you know, let's let's sort of promise more more benefits in the future. That I won't have to worry about because it's beyond my term of office.
And so as a result, we have you know, people disconnected where they're like, who's holding that system accountable for a mismatch and sent a system where I can sort of make promises that I'm not going to have to be responsible for being you know, being there when it happens. I think that's one Another example is, you know, I think we have the twenty five anniversary of the ETS wonderful mechanism to democratize access to market returns on a
very efficient, cost based system. And you know, that's been
a wonderful development and a positive. But when you have fifty plus percent of the market who's completely you know, passively involved and doesn't doesn't actually engage or care really you know what's going on in that system, you know, that does create the potential for you know what happens when liquidity drives up and you know no one's really that invested in any particular ownerships that you know that there's there's it's pervasive throughout the system, this challenge and
that's that's the direction we're going. We're going towards this efficiency scale, passive disconnected combination that you know that that just creates challenges, systemic challenges that we haven't seen. Right. All right, Well, it's incredibly thought provoking. I feel like we just barely scratch the surface. You're gonna have to come visit us. Uh. Here in New York, Christopher Elist, co founder of Riverwood Capital, his book How Money Became Dangerous,
incredibly timely. Uh as we get into Carol, I just feel like, right now people are going to be thinking more and more about this. I think about what Elizabeth Warren said and didn't say candidly when she spoke with our own job. Wasn't all last night? This has become a big topic and the debate between capitalism not all bad, right if you think about job creations and so forth, But how do we get a better understand how do we understand exactly how do we under money them out
there and get our arms around it. It's a great book, How Money Became Dangerous? Check it out, put it on your Christmas list, stick it in the stocking.