Public service. And brought to you today by your television provider. Host thank you for joining us for my name is alex meriwether. On behalf of Harvard Bookstore and very pleased to introduce our talk with thomas levenson. They panicked the nation and made the world richford tonight professor levinson is joining conversation by david dobbs. The Virtual Event tonight Harvard Bookstore continues to bring authors and their work to our community and our new digital community. Finer Event Schedule harvar harvard. Com events we can also sign up for our email newsletter and shopper shells from home. This evenings discussion will conclude for some time for your questions. If you have a question for speakers go to the queue and a box to submit questions at any time during the discussion. Will come to those at the end of the talk. I will work on answering as many of your questions as time allow allows. And in just a moment i will post the harvard. Com link to purchase money for nothing. Your purchases and contributions make this virtual series possible. And not more than ever support the future of a landmark independent bookstore so thank you. We sincerely appreciate your continued support now and always. And finally, we have any tech issues tonight during the event will do our best to resolve them quickly. Thank you for your patience and understanding. Now im pleased to introduce our speaker. Thomas levenson is a professor at mit and the author previous titles including the hunt for vulcan, einstein in berlin, and newton and the counterfeiter. Hes also received several awards for his featurelength documentary films including the walter p tressler science documentary similar to the peabody award and the new york chapter. And he is joined this evening in conversation by david dobbs author of the books my mothers lover and brief madness. Theyll be discussing money for nothing in which the history of science meets the history of finance. It is been long listed for the Financial Times and mckinsey book of the year award. An author james glicks rights in state synthesizer with the grand view of history. Heres the birth of modern finance amid catastrophe and fraud. The gripping story of scientists and swindlers all too pertinent to our modern world. And so now i am pleased to turn things over to tonight speakers on the digital podium insures. Thanks 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 did you mean to convey by that title . Guest the great article of capitalism is captured by the immortal words of a cultural icon for us all. If you recall the look and ill gladly pay you tuesday for a hamburger today thats wimpy and popeye. And thats why its so important is that his credit. What credit does what borrowing does is it creates money in the here and now out of a promise that we make to the future. And figuring out how to do that in a way that could be sustained would not be killed by Crisis Action my whole book is exactly this figure out how to make credit work not just todays cage drinker or hamburger but for whole nations and whole economies and whole systems figuring that out was one of the great innovations of the period that historians call early modern europe. Sue and as your book details that spurned a lot of other innovations too. With the other book titles are to money for nothing and one is a gave money i got nothing. And the other one was i making money and i didnt get anything. Theres a lot of those here. What led you, when you start this book it would lead you to write it . Guest all of my books come out of something that bugs me. And usually they come out of some thread i find in another project. But i may not have time or may not be appropriate to go into that project. Something is out of place and i want to figure it out. In this case is doing some work on isaac newton. And as a great crime story chasing counterfeiters in all the school stuff. I started reading up about newton and tried to dive more into his life and his character. I found 20 years after the event i was chronicling at that project he had some troubles with money. And he famously said i can predict the emotions of heavens but i cannot predict the madness of the folly of the people. I said i want to know more about that and that ultimately led to this. Its one that doesnt make sense. He has an extremely interesting role in this. The one role he plays is he suffers from i dont think its a secret about what happened in this right . I was the bubble of all bubbles. Isaac got caught in it in a bad way. Also laid the foundation in a way, yes . Sweet it newton is an integral partner in the entire book. And the critical thing to know is the whole story hinges on a really wonderful horrifying financial crash that occurs in 1720. The actual moment that the stock market turns on this great boon january especially from april to december. And then right into the beginning of september. And pretty much like today 300 years ago. I turned this at all went to hell. Thats happening 300 years ago. Host are my may have out of the bath newton took. It made my heart beat for him. Traded an annuity that was worth every year more than his salary. But that into the stock that fell off a cliff. Its hard to say what each transaction cost him but overall look like alexandria ocasiocortez 20000 pounds was the equivalent its hard to make leaps across some much time. It was certainly the several millions today and depending on how you count it could be much much more. So he took a bath. He was correct. And it bugged him. She wanted to have any money left . Yes he did. He bent half his fortune on this and he still had the other half. And he still had a job that paid him okay. He was out on the street, but he had been, he built from being ordinarily modest and prosperous middle level member of lead in society to someone whos genuinely rich. Sue and for a few months. [laughter] switches hugely rich for a few months for the real heartbreak for him said got out of the market with a reasonable profit. And one of the telling parts of the story, or leaping ahead of the narrative. He got out, he figured hes made as much money as he needs, he was happy with his return but the stock kept rising and feed on itself frenzy that weve all experienced her own lives quite recently. The two thousands of them them before that the tech bubble. The housing boom in that other stuff. Revolt experience that. Newton was sitting there with his real profits that was cash in the bank, he had it was safe. I cannot stand watching looking at it from the outside losing money by not getting those gain gains. So he sold for on average around 500,000 a share or Something Like that. The share from the hit a peak about six weeks to two months after he sold to double again. This starts beginning of the around 100. As a really big rapid boom almost tenfold. Host he sold and bought in again. But didnt sell fast enough right . Guest he bought some of it, not all of it. When he reentered the market he but some of it literately it almost the highest price they paid for. Host youre not nearly as smart is isaac newton look what he did. Theres probably a lesson here. Go back then and, till briefly what created this bubble . Guest this to a silica what created this bubble per there is a set of decisions and there was a huge intellectual culture on political change that took place in mid 1700s that 17th century through to right around the time of the bubble. Over 50 to 70 years there were big changes going on in the way britain and europe in general thought about all kinds of things that they found to be important. Basically its a scientific revolution. In some of things that go along with it along with england and then britain specific revolution. Which makes the role of parliament and running the country in the role of the money and funding the company much more important him previously. Guest this is because a new set of tools and calibrating work money moves and how it works, made it for the first time appear that it was possible to try to manage an economy. Is that right . Guest there people who were really thinking about running the whole business of getting and spending for the nation in a way that would maximize national power. They thought in france, they thought in london. There was a belief that on some level that cracked if they figured it out. This is a cartoon, right . But its a curtain was some truth to it. Could almost produce the scientific revolution to core concepts. One is that quantify and then experience to gain more understanding gain the ability to predict the future. One of the critical things of the basic mathematical ideas including especially crucially newtons great invention a calculus is about to change over time right . The other thing that newton and many others did i was never just one person in some ways the leader of the climactic battle of the revolution as it were. Everything is imperialism. Not looking at the world but systematic observing, measuring experimenting on the world. Trying things, getting this information turning it into numbers and performing now fondant allows you not to just think about abstract things like howdy to logarithm howdy work out an intimate or even just celestial things like where is jupiter going to be in six months time . What governs the behavior of the moon or the tides for instance. But the idea that quantification and rigorous imperialism can be applied to you and me here and now figure out how to borrow all these kinds of things. They were doing it back then. One of the things that gets worked out in this. This present value. If i have a peace of land court may be a business or a ship thats going to do things over time that makes money, whats his value right now . Finally take the income stream i get off of growing wheat on this acre of land for 20 years , how should i think about what that is worth given what i know . Host because your ability to predict change over time. She said earlier newton said he could not predict the dynamics something to that effect. Were trying to manage this pandemic knowing the virus is one thing but predicting people is another. So in the way against cartoon initially is it accurate to say hopefully say this book is a story about a minor while quickly foundered and then also the atomic science of this past century when they thought they had the knowledge to control, to predict markets thereby control them to keep them calm but growing, they unleash some powerful forces. And in some cases they were so powerful they could not control it. Which i think thats right. One of things i found very late we try to as a passage by daniel defoe like newton devotions up over and over again. Hes one of the first journalist susan muckraker he is a moral thinker. But one things i think people know a little less about him is that he was from the very beginning and enthusiast for this new ideas his very first book was an acacia on projects. Was a catalog and celebration of all the things people were trying to do, new ways to form the land and manufacture you just love that stuff. Unless brinton invented the tools of credit really aggressively on the 1690s inventing what we call a National Debt. Thats the thing that has a birthday its in 1693. The reason is up until then the youre in the european system, and certainly in england the idea behind running state finances wasnt ultimately rested on a person holds the, many, many removes but still in theory its the kings purse or the queens purse. No one in the 1690s that changed. They sort of contracting stetson enacting them by parlett and trying different Revenue Streams they could create by passing. This was a radical change on something as seemingly dull and boring as a borrowing money to pay the soldiers, right . Im so defoe watches all the stuff i know im ramming on but i have a point. [laughter] daniel watches all this and he sees at work. In england is able to do things with this borrowing and really expand its reach and power by having access to credit and await other european for able to do. And he said this is her secret powers or superpowers. And he writes this passage when he talks about how the government raises thats and manages them. And he has whole elaborate metaphor its a machine. Thats both amazing because he is a vision of it as being something he can rational, design and control which is something youre talking about. It is also explicitly, the ide ideas. [booing] its as predictable. [inaudible] was interesting to that he got mixed up in it and many other ways. So this is important at a time, this quite a few revelations in the book. At the end you talk about why this is so vital to britain. At first they regrouped when they figured out how to have the cake, look thats the wrong metaphor. s. [booing] was wide written trip to see countries with more riches and more soldiers because they could raise money quicker to punch up their weight. As you put it. Guest the bible itself emerges from the successes of the first attempts to use these new ideas about money. Because what happens in the 1690s forward, britain gets involved in a series of wars that last until 1815. Sometimes referred to as the long 18th century. One of the things that defines it as the first of william and marys wars against louis the 1h and the last british war against france ended with the defeat of napoleon, that is the parameters. In this first round the invention of the National Debt explicit responsible cost of war that britain cannot handle out of everyday receipts. Its not coming it enough to keep the army in the field. They start raising really vast sums. Starting from 1693. In that first war ends and the kind of regroup a little. But then another war starts in the keep doing the same thing. And they always borrow when there right at the point of crisis parts of the terms of the loan for decades and decades of high Interest Rates. By the mid 17 teens, over half of britains annual revenue, the money they taken from all other sources is going off to pay interest on the debt that has been accumulated over the previous 25 years. So the key here is they thought they found a way, this company at first was to take the first shot at consolidating this debt. And then selling the right to receive the payment on the debts. You can attain that by buying stock in theory. Right . So they packaged it as an asset. In a sense it was but only if you count it as an acid something to come. Guest absolutely was an asset. Britain barred everywhere they could they sold lottery tickets and carried Interest Payments for years. They sold annuities so people could buy a guaranteed payment for life or for two lives are three lives. They sold straight up debt. They all had different terms in different constraints. In one of the things about almost all of them is the people who lent money to the government and receive these annuities are lottery tickets or whatever and return could keep the income stream but they could not sell the underlying asset. Suffice it 100 pounds to bison from the government they get their 5 pounds or 8 pounds it was per year. They would never get their 100 pounds back the keep. But the sassy company did as i said lets get rid of this complete mess. Its too complicated and nobody gets their money out. We will trade our stock, if you give us your debt the government will allow us to create more stock will give you the stock. The government will pay us interest at a reduced rate will pass on the dividends. Who will use anything we can to fund the trading operation that will make us all very rich. And best of all, if you take stock instead of holding onto your debt and you ever with the money that you can just walk down to exchange allie johnsons coffeehouse and said got share to sell who wants it . And the government has better terms on their debt they got the ability to retire all kinds of good things. In the sassy company got this business. It was supposed to be a win, win, win kind of deal. And the problem was they were right. This kind of swap can work it worked on a small scale before this. It has worked since. But they set it up in a way that would, if it had all hung together it wouldve made the people who were inside the company before the deal happen insanely rich. I mean richer than you can imagine. Richer than anyone previously had been. When this sounds vaguely familiar. The government agreed to this because they were so desperate. Guest they really need to solve this problem is a great deal for the government. It was good for them the time it seemed like it was good for everybody at the time. But what ensued was, will tell me a little bit i want to get into and amendments about how the bubble that is essentially a combination seems to me from the description some people and others there were people who were worse deceiving others and including deceiving their selves for that includes isaac newton. Its what we now the stock market, yes . The modern won this centered around a place jonathans coffeehouse. Guest s are in the book called coffee house culture and ask him how he wanted his beans. The stock market, there had been joint Stock Companies for 150 years or more at that point. But up until the 1680s or so they were very few shares and they were almost never traded for the east India Company the hudson dade company the Royal African Company which is a slave trading company. They existed and they were in fact companies that had shares that in theory could move between cable but they very rarely did. When they tend to be bought and sold by very small group of people, correct . Guest in the 1680s that started to change change very, very rapidly class, Mining CompaniesInsurance Companies the coldest. From 1690s called the financial revolution eight term of art amongst historians in th the. They understand the financial revolution as simply as part of the scientific revolution. It was a large interim intellectual going on. The people doing them did not separate just wake up people like Edmund Talley working out the math newton himself writing about how Interest Rates were. They quantify how important things work. People who had interest were a normatively broad in their interest. But anyway, the stock market existed. There is a place originally Stock Brokers worked in this building called the royal exchange. And they got booted out for basically being too loud and obnoxious. And they moved more or less about wondered yard yards to this little alleyway called exchange allie which had for five copies of drink coffee shops set up in the coffee rooms and star