Brian sandra navidi, author of superhubs. Page 13 of your book, you write this, serial entrepreneur, super investor nick hanauer has cautioned his fellow zillionaires that the pitchforks are coming. Can you tell us whether you agree with that . Or why you think thats true . Sandra i think the pitchforks have been coming for a long time. I have been concerned since 2007, which is why i call my Company Beyond global because i thought we would see a huge backlash that would be global in nature and farreaching and actually result in a scaling back not just of the financial institutions, but of globalization in general. Brian what do you do for living . Sandra i consult. Brian about what . Sandra about macroeconomics. Brian i probably would not hire you. But who would hire you . Sandra private banks, it gives them an outside perspective and connects the dots. My perspective would be an outside perspective because what i also i touch upon is the echo chamber that many ceos operate in. I used to work with Nouriel Roubini, whos an economist, and he would also give his analysis. There is value in an outside perspective. Like i say in the book, if you are surrounded by likeminded people who all think the same things, have the same background, it becomes an echo chamber that results in analysis paralysis. The situation we find ourselves in now. Brian can you tell us a story about bill gross . Sandra the story in terms of brian pimco, the story you tell in the book. What does he do and why did that get your attention to put him in the book . Sandra the book is about networks. Superhubs are in the center and are the nodes because they have the most connections to any other node in the system. And so, i point out people like george soros or jamie dimon or bill gross because they are connected to everything. They have the greatest influence on the system. I tried to describe how these people get there, what propels them to the center of the network. Part of it is personality. And their personalities in general deviate a little from the norm. They are extreme in many different respects. I talk about bill gross in that respect. He is singleminded and very focused and very conscious of his power. I basically describe how he has been very influential. Has attracted a lot of money. Even when he left pimco, because he clashed with staff, he immediately attracted billions to follow him. Brian what is pimco . Sandra pimco is a giant bond investor. They invest billions in the global bond market. It now belongs to allianz. Brian who do they relate to . Who do they do business with . Sandra they do business they manage money for other people, meaning Institutional Investors. Could be your pension fund, my Insurance Company. They collect our money and they have to invest in Institutional Investors because they have to pay us on a regular basis. Say, pensions funds on a monthly basis or the Insurance Company needs to make a payout. They need to generate income and that is why they invest with all kinds of different Institutional Investors. So they manage their money for them. Brian go back to superhubs is that a person . Sandra well, i use Network Theory and i apply it to the Financial System in our society. Network theory is a relatively new science. It ties into complexity science. Network theory is the architecture of complex systems. The Financial System is a complex self organizing system. The people in the center, the superhubs have the most influence over the system but no control over it. To answer your question, examples of other complex systems, our brain or an ant colony in our brains, the synopses all well, there is no major cell telling the other cells what to do. We have superhubs in our brains. Ecology is another example. Nodes prefer to attach to other nodes which already have many connections. In nature or our lives, those who have the most connections, it increases the chance of our survival. Brian how smart are these people who manage all this money . Sandra exceedinly smart. They have a birdseye view over the system. If they understand the system, it enables them to put themselves in the best position. Brian i want to ask you about some personalities. Dick fuld, who used to run Lehman Brothers. I want to show you a short clip. If he was so smart, why did the company go out of business . Lets watch. [video clip] lehmans demise was brought about by many destabilizing factors. Estatelapse of the real market. Rumors, Rating Agency downgrades, a loss of confidence by clients and counterparties, and buyers sitting on the sidelines. And buyers waiting for an the sidelines. N it is too late for Lehman Brothers. But the government has been forced to change the rules and provide substantial support to other institutions. [end video clip] brian he blamed everybody but himself. Is that a Fair Assessment . Sandra what i say is everybody in that sphere at the very top, they are all extremely smart and industrious. What sets them apart is their networks. He was a little bit of an outlier. He was not a people person. He came from a different background. He physically isolated himself within the bank and cut himself off from Vital Information flows. Meaning from other wall street superhubs. Other ceos, the market in general, but also within the company. He landed in one of those echo chambers where he surrounded himself with yesmen. People who were exactly like him. They figured out quickly it was easier to get along with him if they did not object to anything. That became his downfall because he wasnt plugged in anymore. Brian what would have happened if a lot of people liked him during the 2008 crash . Would they have bailed out Lehman Brothers . Sandra it could have made a little bit of a difference. It is hard to say. Apparently, he antagonized hank paulson and was not on the best terms with him. To paulsons credit, he tried to help lehman. It wasnt purely personal, but i do think personal connections can tip the scale and supposedly president bush did not take his call. Sometimes these personal relationships make a difference. Brian let me show you a short video clip. You are not with Nouriel Roubini anymore. Tell me about him and how much work you did for him. [video clip] there is already backlash because of this financial crisis against market economies, free trade, against capital flows, against trade globalization and it causes a clash because of the economic and social cost of this crisis. A populist backlash. [end video clip] brian that was back in 2010. We have not seen as much of him. He was telling us things were not going to go well before the crisis. Why did he know . Sandra interestingly and i also at the time had conversations with george soros. We were all people not from here. We had a transatlantic perspective and more of an outsiders perspective. And i think sometimes that can give you a leg up. I think nouriel is a very independent thinker and not afraid of controversy. I think it takes great courage to stick your neck out and go against consensus. Especially in 2007. I remember davos, that year in january, nouriel was in the absolute minority. The prevailing opinion was that we would have another goldilocks year. Nobody foresaw the crisis. I mention in the book that ben bernanke mentioned that he had no clue of the crisis because he was not aware of the toxic the huge vehicles out there and the papers that were in there. Brian you have a law degree . Sandra i have a law degree in germany and here. And im admitted in both countries to practice. Brian where are you from . Sandra germany. Brian when did you come to the u. S. . Sandra 16 years ago for a job offer. Brian did you grow up learning english . Sandra i got english later. I started with latin. My parents made me start with latin. I had english when i was 13. Brian what did your parents do . Sandra my father ran his own country. He was from iran and came to germany to study. He had a phone company. My mother was a housewife. Brian when did you get interested in money . Sandra i have never been interested in money. I would say more generally business. Brian why . What got you interested in it . Sandra business is entrepreneurial. It is international. You interact with interesting people. Brian go back to what you do for a living. If i say im going to hire you, what is the first thing you do for somebody when you walk into a Large Company . Sandra it is very individual. I deal with a handful of clients. I deal with Family Offices. What i have done for them it is i establish a platform for them. I mention in the book the importance of networks can only thrive on platforms. The way we organize our society is through networks. We have become the prevailing species on this planet. Through our cooperation and networks. For instance, Family Offices tend to be slightly isolated. A Family Office if the family makes a lot of money because they have a company or sell a company, new money, old money, thirdgeneration, they make so much money. If its in excess of 500 it becomes worth it to become your own investing firm. These Family Offices, they are not from the financial industry and often they come from small cities and are quite isolated. I help them to come together on a platform where they can Exchange Expertise globally. So i was essentially brought on because my global contacts. Brian you open the book by talking about a trip to davos. What is davos, where is it, and what does it look like . Why did you open the book that way . Sandra davos is a small ski village in switzerland where the World Economic forum has been taking place for over 40 years. The World Economic forum essentially has been a private conference endeavor but it has been elevated to the status of an institution akin to the red cross for publicprivate partnership. And every year, in excess of 2500 people come together, world leaders, decisionmakers, ceos from all countries. But not just them. Also, young global leaders, people from philanthropic institutions, a wide mix of people come together to discuss global problems and find solutions. Brian what does it cost to go . Sandra it is expensive. I think for a company, close to 500,000 swiss francs. Brian what happens when you go there . How often have you been . Sandra i have been 10 years in a row now. Brian so, what do you do when you get there . Sandra essentially, you attend panels and workshops and you interact with people and you speak. It is kind of amorphous. Everybody can do whatever they want. You can sit in workshops or panels all day long. Many people use these meetings for bilateral or side meetings. It is very efficient. Four days can spare you three months of travel. You get to see everybody. It is very good to take the temperature of the world. The first year i attended was 2007. I was already very worried. I could tell something was in the pipeline, something was brewing. I think it is because of my background in structured finance. I knew something was off. At the latest, 2009, it was doom and gloom. Everybody was always worried. The last two years have been better. This year, people were concerned again. Brian i want to put on the screen i want to get your perspective on this. Between 2008 and 2015, this government fined a whole bunch of banks a lot of money. We see it on the screen there, itll show you. Bank of america was fined 80 billion. Jpmorgan, 39 billion. Lloyds of london, 20 billion. Barclays, 14 billion. Rbs, 11 billion. Wells fargo, 10 billion. You can see down the list. Why was no one ever indicted for criminal activity . Why is it that all these banks were fined this kind of money and the people who run them never got a hit on their salaries and their stocks stayed up . And i could go on and on. To the outside world, its hard to figure this. Sandra i have no good explanation or an excuse for it. I do not think it is right. I think it is the way that the system is set up. Regulatory capture, psychological capture, the revolving door that elevates the problem. People go back and forth between the public and private sector. So many examples. Bob ruben, hank paulson, i mean, i have several pages in the book on that. And, i think often times, the ceo at the top does not explicitly tell people to do something that is illegal, but he sorts of sets goals and people feel pressure and make it happen on lower levels. Somehow in that whole process, the accountability is lost. Brian what is your reaction when you hear someone who is worth a lot of money say they will give half of it away before they die . Sandra i think it is very good, but i think it would be better if the system were set up differently so that they wouldnt have all this money and have the power to decide who gets it, but it would be distributed more evenly from the getgo. Brian if you do not have any deductions, you can make a lot of money. 50 of your money into texas. A guy like Warren Buffett, worth 50 billion or 60 billion, paid 17 last year. If he gives it all away, isnt he just paying the government what he should have paid them in the first place . Sandra i guess you could argue that. But i still think it would be a better way and would be more empowering of people made more money. We have a situation where ceos make 300 times more than what the average worker makes. I think this has contributed to the pitchforks coming. We are seeing increasing polarization and populism all over the world. Brian when did you think this book was worth spending four years on . What led up to that . Who is the audience for this book . Sandra what led to this book pure ignorance. I had no idea what it would entail. I just started writing. The longer i worked on it, the more passionate i became. I think it is primarily geared at the general public. I tried to reduce it was rejected a couple of times also because it was too academic. I was fascinated with Network Theory. Publishers said, this is very interesting but nobody is going to buy it. You have to insert stories. I tried to make it more tangible and as interesting as possible. Its not a bank bashing book. I am not terribly critical. I disclose this in the very beginning. I wanted to give a sort of neutral perspective so people would have the power to make their own decisions. Brian lets go to page 207. I will read it and get you to talk more about it. As we mingled during the cocktail hour, i checked the place cards. To my delight, i saw that i would be seated by John Meriwether, the John Meriwether, who had made wall street history. In light of his colorful background, i expected a charismatic and swashbuckling personality who would mesmerize us with fascinating anecdotes. Contrary to my expectations, in walked a slight, unimposing, i and shy man. Who is John Meriwether . Sandra John Meriwether started longterm capital. Decades before the crisis, was a precursor to the 2007 crisis. Because with his fund that he started, he hired two Nobel Laureates to work with him, many wall street luminaries. They started this shop and they attracted unbelievable amounts of money that they managed. They designed quantitative computer models with which they managed the money. The problems with computer models, as weve seen in the crisis, all data points come from the past and all experiences that you factor in. As steve jobs said, you can only connect dots for the past, not going forward. So, what they did not perceive, inir eating genius, genius was that all Asset Classes would become correlated. When the russia crisis happened, the market fell. Basically longterm capital was the first fund that had to be bailed out by a concerted effort of wall street, because it could have unraveled wall street at the time. Brian was John Meriwether one of the super hubs . Sandra he certainly was. He tried two comebacks and people would still give him money because he is very smart. His track record was a little bit was not the best anymore. Its the halo effect. Once people have this reputation and are considered on wall street to be ingenious, everybody buys into it. Brian is there a way you can characterize what a superhub is like . Meaning im talking about the people. What would you say about most of them . Sandra almost all of them are male. As we see on wall street. There is one woman, abigail johnson, who came into her position because her father retired from fidelity. Its the fidelity family. Botin of santander in europe, because her father passed away. We have two women because of their fathers. It is almost all male and white. They are they like to have power. They strive for power. Alpha personalities. Curious, interested in learning, expanding their horizons, good at building relationships and networks. Brian can you trust them . Sandra it depends on where you are coming from. Personally, i would say yes. Because a precondition of a Good Relationship is you are trustworthy, because otherwise people wont enter into transactions with you. Brian do they deserve the kind of money they make . Sandra everything is relative. I argue in my book that i do not think so. It should be somewhat in relation to the value that you contribute to society. I compare it to doctors for instance. They dont get a bonus because the patient does not die. Or because he survives the surgery. Or policemen who put their lives on the line and they make a fraction of what wall streeters make. But i think its a reflection of the value that we as a society have. Brian how much did you have to tiptoe around the personalities in this because of the kind of work you do and that you might work for them someday . Sandra i did not tiptoe at all. I did not include any nasty gossip i may have become aware of or any nonpublic information with which i was entrusted. It is somewhat critical here and there, but nobody has complained so f