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Trusting Your Gut: This week, Paul Ford and Rich Ziade are joined by Michael Shaoul, the philosopher-manager of Marketfield Asset Management and an expert on business cycles and the convergence of world events and geopolitics. Is the cycle of commercial real estate on its deathbed? Are shoes the only thing immune to downtrodden cycles? We discuss what happens when people tell you that you’ve got it all wrong, and exactly what you should do if you see a volcano at the company party.


Paul Ford I kinda wanna ask a big question.

Rich Ziade To kick it off?

PF I wanna ask a big qu —

RZ Go big.

PF Michael, can I ask a big question?

Michael Shaoul Sure.

PF What’s the next crash?

MS Commercial real estate.

PF Really?

MS Yeah and I’m pretty convinced of that. And I actually think it’s — it’s already started. I mean as a — as a general rule it takes 12 to 18 months after an asset peaks for people to even notice but very clearly offices in New York City, multi-family, the renters listening, I would be hanging on — and I speak as the New York City landlord, I’ve been a New York City landlord for 25 years. So I’ve seen a lot of ups and downs. This is — this is now a renters market in — in both offices and multi-family. The development cycle, you know, is about to dump a ton of new product onto markets which are already saturated so I — I think that might be a big question. It’s not — it’s not the hardest one.

PF I feel we should just stop the podcast and run out of here —

RZ I’m — I gotta go home.

PF Yeah [laughter, music fades in, plays alone for 30 seconds, ramps down]. You know, we mostly look at the big picture of technology, not at the big picture of the whole world.

RZ Well, it’s a big — bigger picture. It’s a lot.

PF Yeah, that’s true and you have to look at a lot [chuckles] of different things.

RZ Yeah.

PF It’s not just — you gotta think about like [music fades out] corn.

RZ Yeah.


PF We don’t think about corn that much [no], we think about like Javascript.

RZ Starvation.

PF Where to find good designers. Those are — yeah.

RZ Whales eating plastic bags.

PF That’s right. That’s right. We think about that.

RZ That’s the big shit. Yeah.

PF And so um our next uh — or the person we’re talking to today [mm hmm] um is someone who thinks about the entire global economy on a day to day basis.

RZ And all of the sort of inputs. It’s craziness cuz there’s a mm — it’s endless inputs, right? So this person is looking at not just price of oil but also political climate and — [honestly] all of it. It’s crazy!

PF We’re not the ones to talk about it.

RZ [Crosstalk] No, no, we don’t know anything.

PF [Crosstalk] Let’s let him talk about it.

RZ — yeah.

PF Michael Shaoul, welcome to Track Changes.

MS Thank you.

PF We corresponded very briefly. You saw something I wrote about the blockchain and you said uh, “I’m very focused on business cycles,” and that just made my brain light up. What do you do and how did you come to be focused on business cycles as a professional focus?

MS Yeah I guess those are two — two questions. I mean what I do is — is run a mutual fund called Marketfield, Marketfield Asset Managements for Company and we’re famous and I guess when we’re bad, infamous for — for following cycles and trying to work out what happens next. How I ended up doing this I — I’ve had a, you know, a very varied career. I started off as an academic. I actually have a doctorate in — in philosophy. I went overnight from being a philosophy person to a New York City landlord. I was involved in — in the post crash in the early 1990s, and then in the mid-1990s I ended up moving from real estate to Wall Street. Once I moved to Wall Street I — I sort of found myself going back to my philosophical roots and starting to understand that there was always a narrative around markets but the dominant narrative, in other words: the one that you look at when you pick up the newspaper or — or now listen to on — on — on television or radio, often bares very little resemblance to what it is actually happening. So, to losing a great deal of money in the end of the first tech bubble, I began to understand that my guts were worth listening to second time around and — and really focused on cycles from that point onwards.


RZ Confession: the term cycles, at first it landed positively for me. Like, “Oh cool! Cycles!” Like when the sun goes up and come — goes down and then — but it always come back around again. But explain what you mean by cycles.

MS Well, you know, I think ideas have cycles and beliefs have cycles. I — I think as human beings we are prone to ignore certain things and then start noticing them and start obsessing about them and believing that situations are never going to end and — and then it’s kind of on the way down again. I mean, you ask a good question, much harder question than the first one, actually, because there are multiple cycles that you learn to pay attention to and what one of the things I say is that — that when you look at cycles across decades or — or — or centuries or different asset classes, you know, what I say is that the nouns and the verbs are always changing. It’s always something different but the adjectives and the adverbs stay the same. In other words, the emotions attached to a cycle, you start to become very — you know, you start to become very familiar with.

PF Is there a way to know where you are in the middle of the cycle? Like I mean you have a macro view, I feel that with the first dot-com wave that that tech bubble — I was pretty young and I just felt relatively whiplashed. I had no idea what was going on around me except for one day when I went to a party thrown by Yahoo and they had a fake volcano —

RZ Mm hmm.

PF — and that to me was a strong — I was like, “Ok! Alright! This is over.”

RZ Hold on. What’s spewing out of the volcano?

PF Like sort of fake lava. It just had like —

RZ Oh ok not not chocolate.

PF No!

RZ Ok.


PF It might’ve been. I don’t remember. I just remember like, “This is an unusual signal to be sending [right]. There’s a volcano at the party. I need to start making some decisions about my life.” [Rich laughs] So that was — that’s — that is the — my economic ability outlined there.

MS Yeah, look, I — I — that’s what I mean by listening to, you know, to your guts [mm hmm] when things are too good to be true, they normally are. So it’s very difficult. You can understand, I think, when you are in the middle of a — a great bull market, a great cycle, clearly. We’re here in the middle of a great technology cycle. When it’s gone over its skis, when it’s no longer investable, when it’s out like dangerous is a — is a hard thing to — to notice but if I went back to the early 1990s, I mean language starts to change. Valuation metrics start to change. You start valuing eyeballs rather than — than revenue.

PF Oh so people start to kind of rearrange reality to suit the thesis.

MS Yeah! That’s what I mean: the adjectives and the adverbs start to change and the most dangerous part is when you’re told it’s permanent.

PF I mean we’re seeing that with blockchain [pause] stuff right now. Although it’s on the slide right now [yes] but for — but for about a year, um, there’s been this narrative which to me I have found almost comic because I lived through it with the first dot-com where it’s just infinite upside —

MS Yes, yes, I actually was at a dinner at a friend’s house who is involved in — in real estate, and he turned round to be and asked me how I was going to explain to my children that I had not invested in Bitcoin and this was coming off [Paul laughs] the back for me of my [Rich laughs] — my best year in — in financial markets in ages and I — I told him what I’d done in the market and like I don’t think I need to apologize to my children for not owning Bitcoin. But to me that’s what the end of one of these investment cycles looks like, you — you look like a moron for having not put an indiscriminate amount of cash to work in the space and, you know, and — and everybody on the outside is kind of laughing at you and trying to pull you in. So —

PF Which is very seductive. Right?

MS [Crosstalk] Very seductive.

PF I mean this sounds like a successful person on the other end of the table.

MS Yes, yes, he’s not an — an intelligent man but — but had certainly drunk the uh Bitcoin — Bitcoin Kool Aid.


PF But tapping you on the back and saying, “Michael, what are you doing?!”

MS I — I wouldn’t have minded if I’d lost money that year but [stammers] I went to that dinner [Paul chuckles] feeling I’d had — it was late December, I thought I’d had an excellent and leave losing a loser [laughter] so [stammers] I’ll tell you a — I’ll tell you a true —

RZ You could’ve done better, Michael!

MS So I’ll tell you a true story. In the day after the Nasdaq peaked in 2000, the firm I ran used to have a fiscal year which was February 28th because we were too cheap to pay the accountant for December 31st [chuckling in background]. So we used to do our employee reviews beginning of March and I sat with one of my favorite employees and I did his review and I explained what I was gonna pay him and he kind of looked a bit unhappy and I go, “Look, what’s wrong?” And he was telling me about all his friends who were working in technology and how much money they were making and how he feels like a failure. And I said to him, “Look, I dunno what to tell you. I’m a number two person in a small New York stock exchange member firm and I feel like a failure too.”

PF Mm hmm.

MS And I said, “Look, all that tells me is we must be near the end because I know objectively I’m — I’m not a failure. I’m 33 years old and I’ve had a successful career to this point,” but that’s what — what the end of cycles feel like and, you know, when I read your article on blockchain, one of the things that really kind of brought it home to me cuz you were going back and talking about the late 1990s is how little fun is had towards the end of the cycle.

PF Oh it’s not good.

MS I mean it’s just miserable.

PF Ugh!

MS You know it’s like there’s nothing, you know, there’s nothing genuinely creative going on, it’s all about the bottomline or the topline, everybody’s expectations go beyond what is possible. It’s just a lot of stress and aggravation and good luck keeping employees.

PF And really humiliating mergers. Is what [yeah] I remember just being part of like a 300 person company and then it would sort of squeeze in with another one and like they’d add an exclamation point to the end of the name.

RZ Yeah and sometimes there would be like a little sliver of IP and they would just unload everyone [oh yeah] and just keep the little cute thing that they could grab.


PF You know, I — there is something very real, too, about the number of people when you’re doing ok, who will show up to tell you that you’re doing it wrong.

MS Yup.

PF It’s shocking. Like we — we experience this. This firm is doing fine. We’re doing ok and the number of people who are ready to come in, sit across from a table, and tell me that I need to pay them, in order for them to fix what’s wrong —

RZ Yeah.

PF — is legion.

RZ Well, “You can do it better,” is often the —

PF Yeah, which is um obviously we can, right?

RZ Yeah.

PF But everybody thinks you’re an idiot and then you look at how things are going —

RZ Coaching. The word coaching [yeah] starts to kick in.

MS Mm hmm [Rich laughs].

PF Yeah. Look, all of it — all of it can be real, it’s just but there is that fundamental assumption like your friend who is just like, “Well, you know, no Bitcoin, you’ve — you’ve let your children down.”

MS Right.

PF And you’re children are just fine.

RZ They’ll probably yell at you but for other reasons.

MS Absolutely [Rich laughs].

PF That’s true. They’re never gonna take you aside [music fades in] and be like Bit —

RZ “We need to talk.” [Laughter] [Music plays alone for five seconds, ramps down]


PF For the first parts of my career in technology I felt that [music fades out] technology was always kind of chasing the economy.

RZ Mm hmm.

PF There’s kind of a steady state now. The things that we’re building are similar to the things we built a few years ago, and I think in a few more years we’ll be building sort of solid platforms — some of the languages will be different, some of the ways you access them will be different but like measures of code quality, sense of overall design, things that we do all day — about cutting risk and making platforms, I don’t think that’s [pause] changing that much.

RZ They’re pretty constant.

PF That’s right.

RZ They’re pretty dura — If you do it right, they’re quite durable.

PF It used to be, I think, just less of a discipline and increasingly we’ve got this discipline of technology that obviously when times are up, people come to us and ask us to build more things but overall I think year to year if you asked me what I’m gonna be doing five years now it’s — it’s not gonna be shockingly different [right] from where we are. We’re gonna be building platforms and thinking about how to, you know, cut risk and do it faster, and have fewer bugs, but it’s — it’s going to be like this.

RZ You may have moved to Argentina.

PF Right.

RZ But you’re still doing the same thing.

PF You think it’ll be like that in a hundred years? I think it’s gonna be kinda the same.

RZ Not that different, yeah.

PF No, you’re gonna have like modules and you’ll plug them in.

RZ Somebody’s pitching that AI will write — write the software. There’s software that’s gonna write the software but I don’t think it works like that.

PF [Crosstalk] They started — they’ve been talking about that since I was seven years old [yeah]. I mean it just like that narrative never ends. I think —


RZ You need good, thoughtful people that care about craft [pause] to write the software, to build the experience. Not just write the software. Design and build that beautiful thing.

PF Make your own damn economic cycle is what I’m talking about!

RZ Mm hmm!

PF Yeah. That’s — that always works out great [music fades in. Anyway, look, Let’s get back to Michael talking about the big picture [music plays alone for five seconds, ramps down].

RZ When I think of funds, I think of [music fades out] a blend of stuff, right?

MS Mm hmm.

RZ It’s like when you go to buffet, you gotta — even though you don’t really want the anchovies, you’re like, “Oh, whatever, it’s — it’s on the buffet.”

PF You know what it is? It’s — You know what it is? It’s the shrimp.

RZ The shrimp!

PF You’re always gonna have some shrimp.

RZ So, I mean, Michael, you must’ve bought some shrimp, just a little bit on the side, even though you might not eat it. You must have some Bitcoin in your fund, otherwise I think it’s fundamentally irresponsible [laughter].

MS Though fortunately, fortunately, I’m — I’m lucky Bitcoin never became an equity and so [laughter] it became hard to buy any liquid so —

PF [Crosstalk] We’re all lucky! [Rich laughing]

MS — I — I — I wouldn’t say that professionally I felt a great deal of pressure to be involved but obviously I had a large number of questions from —

RZ Right.


MS — clients and investors that know me about what I would, you know, what I would do about it. I always say to people, “It’s ok to do something stupid and reckless with your money, as long as you follow two rules. One is: you put a small amount of money rather than a large amount of money; and number two: that you remember you’re doing something stupid and reckless.” And the mistake people make is that they think that they found the answer and they overcommit and uh, you know, it gets ugly.

RZ [Crosstalk] [inaudible] Yeah.

PF Well this is — I, you know, the people we know who are very into blockchain who are kind of rational about it, basically are like, “Yeah, you’re going to the track. See what happens.” But, yeah, you don’t — you don’t put your kid’s college fund.

RZ Right.

PF Ok. I’m very glad you’re here cuz I get to ask a question I’ve wanted to ask for years which is as someone who runs a mutual fund, what do you do all day?

MS We’re macro driven so I — I sit around, I — I look at the data that’s come out, and then I spent an awful lot of time just reading stuff, and I’ve always found that the most useful because what I’m trying to do is get the temperature of where the cycle is on a real time basis, even if I’m not reacting to it, I like to be constantly involved by what is being written; what’s being emphasized; what’s being de-emphasized; what is it that people have wrong in the narrative; and what it is that should be in the narrative that hasn’t — hasn’t got in there yet. Which is how I read your article in the first place.

PF So, that was on the Bloomberg Terminal, right?

MS Sure. Sure. Yeah, I live on the Terminal.

PF So you’re on the Terminal?

MS Yeah.

PF Ok and then — Here’s a question then how — something catches your eye [mm hmm], what happens next? Do you write it in a notebook? Is it like — do you send an email? What do you do?

MS I have the Terminal, so obviously it’s Bloomberg News but — but what I have is the raw news feed which — which has hundreds and hundreds of newswires [right]. So [stammers] you know, I literally have the world’s news scrolling past my eyes in real time and if I ever see something interesting, I click on it, and I probably read two, three hundred stories a day. I don’t necessarily finish them all but I’m constantly clicking on something which I think is interesting and, you know, a lot of it’s nonsense and garbage or sport. Some of its to do with, you know, I guess most of its to do with the economy in some way whatsoever. If it’s really interesting, I might email it out. I might send it to someone, I might, as you say, jot it down in a notebook. You know, I — I’m lucky that I have really an excellent memory and the Terminal itself makes it relatively easy to go back and find something that you looked at. Um but that altogether sort of forces me to make a, you know, just have a constant view on what I think is — is — is going on.


PF Alright, so we have, let’s say, 300 unique data points enter into your brain [mm hmm] through your eyes [mm hmm]. Sometimes you write things down, sometimes you — you’re in meetings, you’re having conversations with people. How do those 300 data points, obviously they have to be synthesized, and —

RZ [Stammers] Can we just say: that’s a lot.

PF That is a lot. It’s a lot of news.

MS Yeah. I read a lot. I read a lot.

RZ I mean I imagine the lunchbowl just in front of the keyboard.

MS Uh.

RZ You didn’t go out [Paul chuckles].

MS Uh, yeah, you know, I do take a break for lunch. I [stammers] I actually have a desk and a table, so I do make a point, partly for this reason — first of all: I like to leave the office for lunch, even if it’s for two minutes and then I eat lunch away from the Terminal because otherwise it’s all over the place [Rich laughs] uuuum but [laughter] otherwise, yeah, I mean, I’m on the telephone, talking to people. I’m constantly reading, you know, stories. It’s a lot. So how do I synthesize it? Partly through the discipline of writing. I — I — I’ve been writing daily and weekly stuff now for — for years and I’ve — I — I — people say, “Well how do you have enough time to write if you’re like reading and talking to people?” I’m like, “Unless I write something, I don’t know what I understand.” And it is that discipline of a blank piece of paper or — or a blank screen and typing away that — that forces you to decide what you actually care about and what doesn’t really matter and it’s strange, I mean, I finish writing and I very rarely look at it again and sometimes — I remember once picking up a newspaper, reading some guy’s comments, thinking, “Wow, he’s on the same track as me. This is scary how similar his ideas are.” And I made a point of looking who had written it and it was myself being quoted. So that’s how [laughter] — I mean at least — at least I’m not schizophrenic but that’s how sort of oddly distant I can be with something I’ve written —

PF Sure.


MS — two or three days later but that’s — that’s really the discipline that I use.

PF Now is this like a memo that you’re going to email and —

MS I — I — I publish my weekly thoughts on markets. Daily — daily commentaries is kind of more dry and is just simply [mm hmm] about, you know, data that’s come in and whether it matters or not but I — I, you know, put together a sort of chatty weekly piece, you know, maybe, you know, 2000, fifteen hundred words long or so. Just saying, “Look this is what’s happened in the last week and uh this is why it matters or this is why it doesn’t.”

PF And that goes out to the world? To?

MS It goes out, you know, we probably have a few thousand readers who have either been investors of the fund or are investors of the fund, you know, we have a pretty wide sway of the financial media, you know, that get it, and um I think people find it useful.

PF And when we’re talking macro, does macro mean [sighs] currency exchange? Does it mean the healthcare industry? Like where —

MS No, no it’s a funny term. It’s like saying what does technology mean? [Mm hmm] It’s a very broad term. So the way we look at it is we think that at any given point in time there are things which are worth focusing on, obviously I’ll always talk about the S&P 500 in my job because that’s the starting point for whether it’s been a good week or a bad week as far as most people are concerned but we’ll focus on a particular sector we think is really in motion and — and there’s really something that people part aren’t paying attention to, and ignore things that might be interesting but we feel that, you know, 25 other people have already written about then I don’t necessarily need to be the 26th person who says the obvious.

PF And so commercial real estate you feel is there’s — there’s gonna be distress in that marketplace. So what do you do —

MS You know I think a much harder question is kind of where is technology right now? And much more, you know, commercial real estate’s a bit part as far as the equity market’s concerned. It’s a — it’s a big asset but it’s tiny compared to where — where technology is.


PF Now when you say tech, are you thinking sort of the big four and five uh like you know your Googles and your Facebooks or?

MS You do have to split this up, yes, to have — have the valuations of those four, five, ten companies peaked, you know, and it’s possible they could peak and that some of the more established, large technology companies that were dominant in the last cycles, the Intels, and the Ciscos, and the Microsofts could take on the baton of leadership as far as technology’s concerned —

PF Not Cisco. Not Cisco [Rich laughs].

RZ We’ve had WiFi issues recently [laughter].

PF Microsoft is always a surprising one cuz it —

RZ It still blows my mind they pull in the revenue they pull in.

PF Oh it’s so much. It’s — it’s SQL [pronounced sequel] server, man. It’s just —

RZ Is that what? I don’t know what it is.

PF Yeah.

RZ It’s — it’s odd to me like maybe cuz personally I — I open Google Docs to put notes down instead of Word. But it just still blows my mind — it’s still massive amounts of money.

PF I think they’re good now. I think they’re well led and I think they know what they’re doing, even if we don’t.

RZ Well my interaction with them is that I buy the three dollar keyboard for my — my phone and like this is not gonna cut it, Microsoft. You got a lot of money at stake here. Maybe it’s — it’s probably deeply personal. So I have a related, slash unrelated question.

MS Mm hmm!

RZ There are new factors now, right? What did Facebook lose in value over the last —

PF Like a hundred billion dollars.

RZ Is it that much?

PF It was a lot of money.

RZ [Laughing] It was a lot of money! And technology is seeping into, or the world is seeping into the value that, you know, the formulas around value and technology that come from really dramatically different places.


PF Wait, clarify that a little bit.

RZ Like foreign policy.

PF Oh right.

RZ And security. And just all kinds of — I mean if you had told me 15 years ago that global, geopolitics would affect Microsoft Excel [laughs] —

PF Well, sure, or that —

RZ [Laughing] I would’ve — It was walled in. We were fine. I just had a spreadsheet.

PF We’ve had a lot of European regulation that’s affecting the way that Google works.

RZ [Crosstalk] Europe — Europe’s more sensitive to it. That’s right. So you’ve got —

MS And — and Microsoft itself was heavily regulated at the end of the last technology cycle —

PF That’s right. That’s right.

RZ Right.

MS — when it was the poster child for antitrust, you know [yeah], antitrust efforts. So this is — Look, this is the price of success and this is how, again, what’s fascinating about cycles are they end in a very different place to where they begin and obviously in terms of valuations and money that’s the case, but in terms of what the actual companies are; how they actually react; what their status in society, you know, are; and — and, you know, this is a very different place and you go back 15 years ago and you remember what a joke technology had become and how uncool Microsoft was. The fascinating thing about Microsoft is it’s nearly a trillion dollar company and it never actually got cool again. I mean I wasn’t surprised to hear you say, “I’m not sure how — how they did it.”

RZ I don’t get it.

PF [Crosstalk] No, I’ve come to accept it.


RZ But the ribbon is so like in Outlook there’s too many buttons!

PF [Crosstalk] I know but they — Now, you know, they’re getting — they’re going in other directions. You can tell like Visual Studio Code is open source and a very good code editor [yeah] and it’s good! It runs on everything.

RZ But open source is no — This is just you getting sentimental.

PF No, this is like me going — this is me as someone who’s writing some code again going like, “Wow this is a pretty good tool. I appreciate it.”

RZ But there’s no money!

PF I know but that’s ok cuz it made me go like, “You know maybe Microsoft is — maybe Microsoft’s ok.” Alright, is regulation an indicator of a cycle ending?

MS Yes. Yes. I mean regulatory cycles are just another one of your overlays. It’s almost like you have these acetates with different cycles on them and you put ’em on top of each other but, yeah, no, regulation has its own cycle. So, you know, what — what tends to happen is regulation fixes the old problem. [Mm hmm] I — I think the markets to — You know, I think, for instance, we talk about Facebook. If — if they change their business model radically it’s more likely going to be because they’re absolutely terrified that advertisers and users are gonna disappear [right] than the actual laws drafted by the European Union or — or — or — or — or Congress.

PF Well, Facebook at this point is all — is — is basically saying, “Go ahead and regulate.” Right? I mean it’s — they’re — they’re willing to deal with it.

RZ They’ve said it.

PF Yeah.

RZ They’ve actually said it.

MS But regulation, yes, it — it follows success and — and particularly oligopolistic success.

PF Sure.

MS And people are less terrified by a hundred companies than five companies becoming successful in the same sphere.


PF I do get the sense that there’s almost a lot of sine waves overlapping in your brain at any given time. Like it’s just cycles on top of cycles —

MS Yeah, yeah, yeah. I guess my subconscious is obsessed with cycles. Consciously I’m not quite that bad but subconsciously yes.

PF Is it like a doctor where you go to a party and people ask you for stock tips?

MS People do talk to me about cycles [laughter] um aaand, you know, sometimes I’ll say something and — and someone will say, “Well, did you really mean that?” So, yeah, certainly my — my real estate friends um I think are becoming aware — I mean I try — I don’t try and sort of put it out there. If I met someone who was involved in commercial real estate, I wouldn’t say, “God, I hate your industry right now.” There’s no upside in being a jerk. And — and even if you’re right about a cycle it takes months and months and months, if not quarters and quarters and quarters to really be proved out, so, you know, why fight it along the way?

PF Well, I don’t really — I have to go and process. This is a lot.

RZ It is a lot.

PF This is great though.

RZ Yeah.

PF What is the — if someone wants to read and think cyclically, where do they go? What do they do?

MS You know I think it’s good to read about past cycles because, you know, even if, as I say, even if the players change and the — the technology changes, it’s — it’s always the same story. So there’s a great book about the 1960s, The Go-Go Years by John Brook[s] [mm hmm]. Yeah, that — that’s a great book about cycles.

PF Is he the person who wrote Business Adventures?

MS Yes! Yes!

PF He’s great! I love him.

MS Business Adventures another great — another — another great book. Kindleberger wrote the history of panics, and — and — and crashes, and — and manias. It’s one book [Manias, Panics, and Crashes: A History of Financial Crises]. If you like really heavy, weighty terms, A History of Interest Rates, I gave that to a good, young analyst once and she resigned a week later but — but — and — [laughter], you know, I think all the fiction written around, you know, Gatsby is still, to me, a great book about cycles. I mean it’s — it’s —


PF Fascinating.

MS — it could only get written at that point in time. So, you know, that’s a — that’s another cycle on top of everything else.

RZ Is there one sector or subsector [pause] it just [pause] it doesn’t break? It just keeps going and going and going? And, yeah! It — it waves. It has waves but there’s no snap.

MS I can’t think of a sector which has gone up for decades. I mean certainly for years, you can — you can have cycles last a decade like this one but I — I can’t — you know — I —

RZ How about shoes? I mean is shoes — am I — am I going too —

MS I mean obviously shoes! We’ve — look there are plenty of things we’ve continued to use but the — the — but the fashion itself is deeply cyclical. A short answer is: I can’t think — maybe — maybe a listener’s gonna call me an idiot but I can’t think of something that wasn’t cyclical. For a guy who thinks about cycles, I think I’m an optimist. I — I — I do believe that every good cycle comes to an end and is followed by a bad cycle but I do think generally you get another chance. And I think that’s the difference between the Michael Shaoul of today and 20 years ago. I was more cynical 20 years ago. I saw that technology was just a joke by ’99, 2000. I probably got negative too early and I wasn’t surprised that it blew up but, you know, the fascinating thing is it — it came back and by oh-seven I was like, “You know? All this nonsense about innovation, all this stuff I was told was gonna happen five, six, seven, eight years ago, maybe was just ahead of itself.” And I think that’s — that’s most of what happens to humanity [music fades in]. We’re not totally stupid, we just get too optimistic towards the end and too — too pessimistic at the bottoms.

PF Well, Michael Shaoul, thank you for coming on this podcast.

MS Thank you. It’s been great.

RZ Great. [Music plays alone for four seconds, ramps down]

PF Dude! I like thinking about things from the International Space Station level. It’s really fun.


RZ It’s humbling — is another word I’d use.

PF Yeah. Yeah. We don’t have those —

RZ You think you know shit. You don’t know anything.

PF You really do have a lot of fantasies of control in your life. Especially like [right] we run a company, so we get to pretend that we control something.

RZ Right.

PF That, you know, we’re gonna set the vision here [yeah] and things are gonna — First of all, it doesn’t really work that way [no]. You kind of go like, “Hey, you know I think what would be good?” And people are like, “Mmm. Maybe.”

RZ Yeah.

PF And then you — you sort of build a company out of that.

RZ Well that — that illusion kind of keeps us alive to some extent but yes.

PF Yeah. No, you don’t have the control you think you do.

RZ No. The — the residents of Miami think they control Miami but it’s sinking.

PF That’s right. No, and it’s — it’s the ocean that controls Miami.

RZ [Chuckles] Exactly.

PF I think that’s — that’s what was fun about talking to Michael is that’s somebody’s who’s kind of like, “Boy, I don’t really have the power to move all these levers but I can at least understand what’s happening.”

RZ Yup.

PF “And I can do by reading 36,000 articles a day.” [Rich laughs] That was cool.

RZ Just pumping —

PF That is intense.

RZ Attaching a pipe to Bloomberg Terminal and just inserting it into your mind.


PF That’s the future of our industry [Rich chuckles]. On that note: is how you get in touch with us [mm hmm]. If you wanna build something really solid, something that can help you weather the cycles, whether they’re up [yup] or whether they’re down.

RZ Yes.

PF We can build you something that’s gonna be there and run and work for years. Some of the software you built, some of the software I built is still running a decade later.

RZ I’ve — I’ve coded software that’s running, in production, almost 20 years.

PF Yeah. I don’t know if I’m proud of that or scared of that.

RZ I just — every time I see those people I’m like, “What are you doing? [Yeah] This is completely irresponsible.”

PF [Chuckling] It is irresponsible. Uh, thanks everybody! Talk to you soon [music ramps up, plays alone for seven seconds, fades out to end].