Thanks for joining us. My name is alex meriwether. Onbehalf of harbors bookstore im pleased to introduce tonight talk with Thomas Levenson presenting his new book money for nothing the scientists and corrupt politicians who reinvented money , panicked and nation and made the world rich. Professor levinson is joined by david dobbs. Through Virtual Events like tonights, Harvard Bookstore continues to bring authors and their work to our community and our new digital community. Find our Event Schedule at harvard. Com events where you can sign up for our newsletter and shopper shelves from home. This evening discussion will conclude for some time for your questions. If you have a question speakers go to the q and a box to submit a question at any time during the discussion. We will come to it at the end of the talk and work on answering as many of your questions as timeallows. And in just a moment ill post the harvard. Com link to purchase money for nothing in the chat box your purchases and contributions make this virtual author series possible and now , more than ever support the future of a landmark independent bookstore so thank you. We appreciate your continued support now and always. And finally if we have any tech issues tonight during the event we will do our best to resolve them quickly. Thanks for your patience and understanding and now im pleased to introduce our speakers. Thomas levenson is a professor of science writing at mit and the author of several previous titles including the hunt for vulcan, einstein in berlin and newton. Hes also received several awards for his featurelength documentary films including the walter p tischler science documentary award, peabody award and new york chapter emmy and he is joined this evening and conversationby journalist and ethicist david dobbs. Also to the book my mothers lover and reef madness. Both discussing money for nothing in which the history of science meets the history of finance. It has been long listed for the Financial Times and mckinsey business book of the year award and author james glick writes levinson is a brilliant synthesizer with a grand view of history. Or is the first of moderns finance among catastrophe and flawed, a gripping story of scientist and schindlers all too pertinent to our modern world and so now im pleased to turn things over to tonights speakers with the digital podium is yours. Thanks so much alex. Tom, i was intrigued by this book from the getgo because of the title. Which obviously references a great song by dire straits but some other things as well. What all did you mean to convey by the title . The great miracle of capitalism is captured by the immortal words of a cultural icon for us all. If you recall, the euro slogan i will gladlypay you tuesday for a hamburger today , thats wimpy in popeye and the reason that so important is thats credit. What credit does, what borrowing does is it creates money in the here and now out of a promise that we make for the future. And figuring out how to do that in a way that could sustain, that would be prone prone to crisis or my whole book is about it but the first crisis is exactly this, but figuring out how to make credit work and not just for todays drink or hamburger but for all nations and hold economies and hold global systems. Figuring that out was one of the great innovations of a period that historians called early modern era. Festival as your book details its spurned a lot of other innovations to and theres two ways, money for nothing, one is i gave money and i got nothing. And the other is all right, im making moneyand i didnt get anything and both things, theres a lot of both of those things here. What led you to, when did you start and whatled you to write it . All my books come out of something that bugs me and usually they come out of some thread i find in another project that i may not have time or may not be appropriate into that project but just something is out of place and i want to figure it out. In this case i was doing some work on isaac newton. And you know, a great crime story and all this cool stuff. And you know, in reading up about newton and trying to dive more into his life and character i found that 20 years after the event that was chronicling in that project he had some troubles withmoney. And he famously said i can predict the motions of the heavens but i cannot predict the madness of the folly of the people. And i said thats weird. I want to know more about that and that ultimately led to this. That makes sense. He does play an interesting role in this. Both role he plays is actually he suffers from i dont think its, i dont want to keep asecret about what happened in this book. This is about sort of the bubble of allbubbles. And isaac got caught in it in a bad way. But he also laid the foundation in a way, yes . But newton is an integral character in the entire book. Hes there at the beginning and at the end and the critical thing is the whole story hinges on this really wonderful malicious, horrifying financial crash that occurs in 1720. In fact the actual moment that the stock market turns on this great boom from really january but especially april through the summer and then right at the beginning of september and you know, pretty much today 300 years ago, it turned and it just all went to hell. So thats happening 300 years ago. Reminded me how bad it took. I feel when the film sort of made my heart beat, it was when you wrote that he traded an annuity that was worth every year more than his salary. You kind of say he put that into cash and put it into this stock that then fell off a cliff. Thats right. Its hard to say what each transaction cost him but overall it looks like he lost 20,000 pounds. Thats a lot of money in 21st century money but 20,000 pounds in 1720 was the equivalent of, certainly the equivalent of some millions today. It would not be an exaggeration to say it was three or 4 Million Pounds and it could be much more so he took a bath. He was just wrecked. It have any money left . He was lucky in that he basically that half his fortune on this and he still have the other half. And he still had a job that paid him okay. It wasnt out on the streets but he had been, he built from being an ordinarily modestly prosperous kind of middle level member of London Society tosomebody who was genuinely rich. For a few months. And he got usually rich for a few months but the real real heartbreak for him was that he got out of the market with a reasonable profit, about 20,000 pounds. And one of the telling parts of the story, were leaving ahead in the narrative but one of the telling parts of the story is he got out. He figured he made as much money as he needed. He was happy with his return but the stock kept rising in this sort of feed on itself frenzy that happens in money that we all experience in our own livesmost recently. In the 2000 and before that, of the tech levels about the housing boom and before that those other steps, weve experienced that and knew was sitting there with his real profit that was cash in the back. He had it, it was safe and he couldnt stand watching the stocks. It was as if looking at it from theoutside its as if he felt it was losing money by not getting those gains. So he sold on average around 500 pounds a share, Something Like that and the share finally get a peek six weeks to two months after he sold at 1000 units so it doubledagain. This was starting at the beginning of the year around 200 but its a really big rapid boom, almost tenfold. He sold and then bought it again. And it didnt sell fast enough. He bought some of his stuff, not all of it. When he reentered the market he bought some of itliterally at just above the highest price britain paid for it. So we can all say youre not nearly as smart asi get isaac newton and look at what he did. Go back then and how did he, but tell briefly what created this whole . There are two ways to look, it was a approximate set of decisions in the late 17 teams and there was a huge intellectual cultural and political change took place in the mid17, mid17th century. Right around the time of the bubble so 50 to 70 years there were big changes going on in the way written and britain and europe in general about all kinds of things that turned out to be important. And basically its the scientific revolution and some of the things that go along with it along with britain but england and britains specific Political Revolution makes the role of parliaments and running the country and the role of the money men in london in funding the country much more important than it had previously been. This is because they essentially a new set of tools and set of calibrating where money moves and how it works made it for the first time. That it was possible to try to manage an economy, basically. Is that right, or a market. There were people who were thinking about running the whole sort of business of getting and spending for the nation in a way that would maximizenational power. A bought this in france, they bought it in london. There was this belief that on some way they had crackedit. And this is cartoon but its a cartoonwith some truth to it. You can almost reduce the scientific revolution to 2 core concepts. One is that you quantify and mathematic size experience to gain more understanding and gain the ability to predict and hence manage the future. One of the critical things with some of the basic mathematical ideas of scientific relation including especiallycrucially newtons greatinvention , thats all about change over time. The other thing that new and many others did, its never just one person but newton is a symbol and avatar and in some ways the leader at the climactic battle in the revolution as it were the other thing is imperialism and not just looking out of the world but the systematic observing , measuring, experimenting on the world. Trying things, getting this information, turning into numbers and performing math on it allows you not just to think about abstract things like how do you do a lot of rhythm or how do you work out that series or just celestial things like where is jupiter going to be in six months time or what governs the behavior of the moon or the tides. These are things we worked on but the idea of mathematics is asian, quantification and rigorous empiricism can be applied to you and me, here and now figuring out what to buy, what tomorrow and they weredoing it back then. One of the things that gets worked out in this period is the concept of present value. If i have a piece of land or maybe a business or a ship, its going to do things over time that make money. Whats its value right now . How do i take the income stream i get off growing wheat off this eight acre land or how much does that make, how should i think about what that land is worth given whati know. Your ability for it to change over time in essence was calculus. As you said earlier newton said he couldnt predict the dynamics of the humancause or something to that effect. So it is, were thinking right now and trying to manage this pandemic because knowing the virus is one thing but electing people is another. So again, is it cartoonishly, is it accurate to say, hopeful to say that this book is a story about modern financial sox and quickly foundered and also, that sort of like the atomic science of this past injury, when they thought they had the knowledge to control, to predict markets and thereby control them so they keep them calm the growing, they unleashed some powerful forces and said in some cases they were so powerful they couldnt control them. I think thats right. To me one of the things i found actually fairly late in sort of trying to figure out how to make the book sing was like newton, defoe shows up over and over again in the book. Because hes in some ways the first journalist or one of the first journalists. Hes a muckraker, hes a propagandist. And hes a moral thinker. But one of the things i think people know less about him as they think Robinson Crusoe and so forth is that he was on the very beginning an enthusiast for this new ideas, his first big book was an essay on projects and it was a sort of catalog of an celebration of all the things you were trying to do that new ways to farm the land and with manufacturing, he was of thatstuff. And as britain actually invented thetools of credit , aggressively in the 1690s, actually inventing what we now call the idea of a national bank, thats a thing that hasa birthday. The reason it has a birthday is in the european system and certainly in england, the idea behind running estate finances was that ultimately it lent on the monarch, many removes by the time we get to the spirit but still, in theory its the kings verse. And what happened in the 1690s if that changed. Parliaments controlled it and they started contracting debt and authorizing acts of parliament and trying to use different Revenue Streams that they could create by passing attacks and this was a radical change in something as seemingly dull and boring as borrowing money to pay the soldiers. And so defoe watches all this stuffand im rambling on but theres a point. I have a point. Daniel defoe watches all this and sees it work and england is able to do things with this borrowing like wars with france and so forth and really expand its reach and power by having access to credit in a way that other european nations are not able to do. And he says this is our secret power, this is our secret power and he writes this passage where he talks about how the government raises debts and then manages them and he creates this whole elaborate metaphor that its an automaton, its a machine and thats amazing because he has this vision of it as being something you can ration and design and control in that way. But its also explicitly a newtonian metaphor, its as predictable as covers, shaking up a future curb iskind of like calculus. Its interesting to that he got mixed up in manyother ways. So this is important. At the time and theres a crisis of revelations in the book, thats a general outlier but at the end you talk about why this is so vital to britain and at first they regrouped and walpole figured out how to have the cake and, thats a wrong metaphor. How to do this. That was written to see countries with more riches and more soldiers because they can raise money quicker to purchase out their way as youput it. The public itself emerges from in some ways the successes of the first attempts to move these new ideas about money and credit to their advantage because what happens is from the 1690s forward or actually, britain gets involved in a series of wars last until1815. Sometimes its referred to as the long 18thcentury and one of the things that defines it is the first of william and mary wars against louis xiv and the last of reddish war against france ending with a defeat of new napoleon in 1815, thats the parameters so in these firstrounds , the invention of the National Debt is explicitly responsive for the extraordinary cost of war britain cant just channelout of every day receipts. Theyre coming in right now enough to keep the army in the field. So they start raising quite vast sums starting from 1693. And that first war ends and they kind of regroup a little bit but then another war starts and they keep doing the same thing and they always borrow when theyre right at the point of crisis but the terms of the loans are crafted, that gives them decades and decades of high Interest Rates and by the mid17th, over half of britains annual revenue, the money the government takes in from all sources is going to pay off interest on the debt that has been accumulated over the previous five years. So the key thing was they thought they found a way to actually, this company at first was in a place to take the first shot at consolidating this debt and then selling it, selling the right to receive payment of the debt. You could attain that by buying stock in theory. So they packaged it as an asset which in a sense it was but only if you count an asset as dumping to come. Absolutely it was an asset but they said britain followed borrowed every way they could read a carried Interest Payments for years in the lottery. They sold annuities so people could buy our guaranteed payment for two or three lives. They sold just straight up debt and they all had different terms and different constraints and one of the things about almost all of them is the people who let the money to the government and received these annuities or lottery tickets or whatever in return could keep the income stream but they couldnt sell the underlying audits. So they spent 100 pounds to buy something from the government, they would get their five pounds or eight pounds or whatever it was a year but they never get there hundred pounds back. They just keep getting their income stream. What the company did was a said lets get rid of this complete mess of crap, its too complicated and nobody can get theirmoney out of it. We will trade our stock, if you give us your debt government will allow us to create more stock , the government will pay us at a reduced rate and will pass that on in dividends and use anything we can to fund a trading operation, that will because all very rich and best of all, if you take stock instead of hold onto your debt and you never want the money back, you can just walk down toExchange Alley, go to jonathans coffeehouse and shake say i got a share, who wants it. And the government got better terms on their debt. They got the ability to retire, all kinds of things and the company got this big transit business and it was supposed to be a win win kind of deal. And the problem was they were right. This kind of debt for equity swap had worked on a small scalebefore this. It has worked since. But they set it up in a way that would if it were, if it had all hung together it would have made the people who were inside of the company before the deal happen insanely rich. Richer than you can imagine. Richer than anybody previously had been. That sounds vaguely familiar. So the government agreed to this because they were so desperate but also they had no choice. They really needed tosolve this problem but it was also a great deal from the government. It was good for the time it seemed that it was good for everybody at the time but what ensued was, well, tell me a little bit. I want to get into in a minute how the bubble that is essentially a combination of conscription as people, some people, the people who ran the subsidy company and others who became allies through bribery and so on, there were people who were deceiving others and also a lot of people who were deceiving themselvesincluding isaac newton but tell me the role , just solve really what we now call the side market. Of the modern one, this centered around a place named jonathanscoffeehouse. How did that get started . It was a digression in the book on coffeehouse culture and we dont have time here. You even have the notes co