Summary of Andrew Ross Sorkin on What 1929 Teaches Us About 2025

Overview of Andrew Ross Sorkin on What 1929 Teaches Us About 2025

This New Yorker Radio Hour conversation (host David Remnick) features Andrew Ross Sorkin — CNBC co-anchor, founder of DealBook, and author of the new book 1929 — drawing parallels between the 1929 crash/Great Depression and current economic trends in 2024–25. Sorkin warns about euphoria, leverage, and shadow banking tied to heavy AI investment (and to NVIDIA in particular), while also discussing tariffs, political implications, inequality, and possible policy responses.

Key takeaways

• Historical parallels: The 1920s speculative euphoria (radio, cars) resembles today’s AI/tech boom — promising transformative technology but with stretched valuations and speculative behavior.
• Leverage is the main danger: Past crises (1929, 2008) were amplified by borrowing. Today, leverage is widespread not only in big tech but across real estate, construction, energy (to power data centers), and firms building AI infrastructure.
• Shadow banking/private credit complicates risk visibility: Many loans now come from private credit funds rather than traditional banks, with less disclosure and harder-to-trace leverage.
• NVIDIA (and spending on data centers/chips) is central: A large share of current growth expectations rests on AI hardware spending; some economists argue removing that spending would leave U.S. GDP near flat, highlighting concentration risk.
• Outcomes are uncertain — not necessarily imminent collapse: Sorkin believes the boom could continue for years with multiple growth iterations, but the timing of corrections is unpredictable and leverage could turn a correction into a crisis.
• Political and policy cross-currents matter: Tariffs, industrial policy, and partisan polarization affect the economic landscape and crisis management capacity. Historical comparisons (e.g., Hoover’s Smoot–Hawley tariffs) matter.
• Inequality and public sentiment: Growing inequality, a sense of broken mobility, and generational dissatisfaction are reshaping political discourse; younger people increasingly view “socialism” more favorably than “capitalism.”
• Tax and regulatory fixes suggested: Sorkin highlights low‑hanging tax-code changes (estate tax fixes, capital gains, scrutiny of philanthropic tax benefits) as practical policy avenues before invoking a wealth tax.

Topics discussed (concise)

• Sorkin’s new book 1929 and lessons from the Great Depression
• Current AI investment boom and speculative valuation dynamics
• Who is borrowing and why — tech firms, real estate, energy, construction; opaque private credit funds
• The centrality of NVIDIA and data center investment to recent market gains
• Risk of leverage-driven corrections and contagion via shadow banking
• Tariffs, de‑globalization, and political economy (Hoover and Trump parallels)
• Public perceptions of capitalism, inequality, and the American dream
• Potential policy measures to address inequality and tax avoidance
• Practical investor cautions (liquidity for retirees/near-term needs)

Notable quotes / insights

• On parallels between eras: “The 1920s is really what changed the way we live now… People thought RCA was the NVIDIA of its time.”
• On leverage as the common thread in crises: “Every financial crisis… it is leverage. It is people borrowing to make all of this happen.”
• On NVIDIA’s outsized importance: “If you were to eliminate all of the spending on data centers… the United States would have a growth rate of about 0.1%.”
• On private credit opacity: “We don't know about these funds. We don't know what's in them. We don't know how they're being valued or carried at any given moment.”
• On timing vs. conviction: “It has been much more profitable to be a professional optimist than a professional skeptic.”

Practical recommendations & action items (from the interview)

• Individual investors:
  • If you need cash in the short term or are retired/near-retirement, keep some liquid reserves (Sorkin suggests 10–20% for older retirees).
  • Longer horizons (30+ years): historically, staying invested has paid off, but be aware of concentration and leverage risks.
  • Consider diversified funds rather than single-stock bets (Sorkin personally limits his holdings due to journalistic constraints).
• Policymakers and regulators:
  • Increase transparency and oversight of private credit and shadow banking channels.
  • Revisit tax-code “low-hanging fruit”: estate tax enforcement, capital gains policy, and incentives around philanthropy.
  • Consider the economic trade-offs of tariffs and industrial policy — protecting some industries can have long-term costs.
• Corporate and sector watchers:
  • Probe where leverage sits across sectors (real estate, energy for data centers, construction) and how those loans are financed.
  • Watch for counterparty financing arrangements (e.g., suppliers financing customers) that can mask risk.

Possible scenarios Sorkin outlines

• Extended, multi‑year boom with iterative growth and continued investment (bubble dynamics persist longer).
• A correction that remains a market drawdown if leverage is limited or manageable.
• A deeper crisis if leveraged positions across opaque private credit channels are exposed and confidence collapses, turning price drops into forced liquidations and contagion.

Who should read or listen to this episode

• Investors and financial professionals interested in systemic risk and market dynamics.
• Policy wonks and regulators focused on financial stability, tax policy, and industrial strategy.
• General audiences curious about historical lessons (1929/Great Depression) applied to today’s AI-driven economy and political environment.

Short summary (if you only read one paragraph)

Andrew Ross Sorkin argues that history — especially 1929 and the run-up to the Great Depression — offers stark warnings for 2025: speculative euphoria, concentration of economic hopes in transformative tech (AI), and hidden leverage in non‑bank lending channels create systemic vulnerability. NVIDIA and data-center spending are central to current growth narratives; private credit hides risks that could turn a market correction into a crisis. Sorkin urges caution, improved transparency of shadow banking, and tax-code reforms to address inequality and structural imbalances, while acknowledging that timing a crash is nearly impossible and long-term investors often benefit from remaining invested.

For more, see Sorkin’s book 1929 and his ongoing reporting at DealBook/CNBC.