Tell us about Eli Black, his career trajectory, and the relationship that he had with his son, Leon.

Well, of course, this family was like the American, not only American success story, but also a story of immigration that is sort of classic in a way.

You know, settled on the Lower East Side.

Family had, in addition to rabbis, Orthodox rabbis, like kosher butchers.

In the family, Eli Black was very studious, and that was clear from the outset.

He was sent to, you know, they lived on the Lower East Side.

I think he went to the Shiva's up by Columbia, which required lengthy commutes each day.

But talk to us about the private equity days when that was the primary business for Apollo.

What was Jeffrey Epstein bringing to the table? [laughs]

Exactly.

Why would somebody with Leon Black's reputation for, uh, financial shrewdness be paying Jeffrey Epstein, a guy who didn't even, you know, barely graduated high school, an autodidact, for financial advice? It just blew everybody's mind.

And of course, 50 to 75 million b- was low.

It turned out to be 158 million, which blew people's mind.

So on quarterly analyst calls, uh, uh, Leon e- has started getting questions from research analysts about his relationship with Epstein.

Uh, I think some sort of institutional investors were getting nervous about that relationship and wanted to know the extent of it.

Hmm.

Could Apollo trigger a financial crisis?

I think there's a risk that the architecture of Apollo right now, which has also been basically copied by KKR and Brookfield Asset Management.

But basically, the architecture of the private credit industry now, as epitomized by Apollo, is that they created Athene, this insurance company that provides annuities.

So it's not like a property and casualty thing.

insurance company.

It's not a life insurance company.

They provide annuities.

And

Could Apollo trigger a financial crisis?

I think there is a risk that the architecture of Apollo right now, which has also been basically copied by KKR and Brookfield Asset Management.

But basically, the architecture of the private credit industry now, as epitomized by Apollo, is that they created Athene, this insurance company that provides annuities.

So it's not like a property and casualty.

insurance company.

It's not a life insurance company.

They provide annuities.

the only person who introduced him to Bill Gates was

Could Apollo trigger a financial crisis?

I think there's a risk that the architecture of Apollo right now, which has also been basically copied by KKR and Brookfield Asset Management.

But basically, the architecture of the private credit industry now, as epitomized by Apollo, is that they created Athene, this insurance company that provides annuities.

So it's not like a property in casualty.

insurance company.

It's not a life insurance company.

They provide annuities.

the only person who introduced him to

Yes.

And you add that to, what, our $40 trillion of debt, our 6% annual, uh, de- uh, deficits on the budget.

I mean, we're fiscally irresponsible.

As Ron and I were talking before, bond rates are going up steadily, and this is just going to add to th- This is never gonna happen, first of all, 'cause this is another one of his ridiculous promises that he makes that people actually believe, and nobody seems to care whether he delivers on it or not.

You know, winning wars and bringing grocery prices down, and giving us checks.

Who cares whether he does it or not? But if he were to do it, bond yields would, you know, crater, and, I mean, IE go up-

Okay.

He did have a hearing in June, that was in closed doors.

I remember those very well.

Okay.

And he made those, uh, his company that he, uh, ran, uh, owned, uh, made those, uh, p- paper tops to the milk, glass milk bottles, which of course now of course don't even exist, even in fossil form.

Um, and he converted that into a, uh, a conglomerate.

You know, conglomerates were really big in the '70s, '60s and '70s, you know, whether it was ITT or GE or, or any of the other big conglomerates.

Well, he created one called United Brands, the, the big centerpiece of which was United Fruit, which was the largest importer of bananas.

You know, we don't, uh, grow bananas in this country.

But this has destroyed the guy, right? So what happened, Bill?

What, throughout your work, struck you about Leon Black's, uh, his rise and his fortune and his relationship with Jeffrey Epstein?

Well, I mean, uh, first of all, yes, I agree that, uh, everybody, if they know him at all, they know him because of his relationship with, uh, Jeffrey Epstein, which is, of course, uh, I mean, uh, Jeffrey Epstein's behavior is reprehensible in e- every way, as we all know, and Leon's relationship, uh, is sordid, uh, at worst, uh, maybe even, uh, uh, potentially, uh, uh, criminal, although he's certainly not been, uh, found to have, uh, any, uh, criminal engagements with him.

Um, but it certainly is reflective of poor judgment, which he and Leon and I talked about.

Uh, but again, the, the story of, of Leon, uh, and his father and his family and, uh, you know, and I mean, Jeffrey Epstein is really the last portion of all of this.

Uh, uh, you know, it, it began with, uh, his, uh, f- his famous father, uh, committing suicide when, uh, Leon was, uh, in his second year at Harvard Business School, which he didn't even wanna go to, but his father, uh, basically, uh, insisted that he do that.

Uh, and then, uh, after his father's death, realizing that he had to become the family's breadwinner, uh, and he figured out that the best way to do that was to go to Wall Street.

Uh, turned out that he was very, very good at, uh, what Wall Street did, especially advising, uh, companies on mergers and acquisitions.

Hmm.

So what did Leon Black and Apollo take from that generation? What did Milken do? What did he teach them that sort of turned finance on its head?

Well, I, I mean, I- as we all know, I mean, Mike Milken was one of the true genius innovators on Wall Street.

The fact is that there's really not a whole lot of innovation on Wall Street, um, when you cut through it all.

I think Paul Volcker, the former Fed chairman, once said that the, you know, biggest innovation on Wall Street was the ATM machine, which, uh, was a nice line and, uh, obviously is a great thing, uh, to be able to get your money through a machine without having to go to the teller.

But Mike Milken and Lew Ranieri, who you mentioned, and, uh, and others who created, uh, the whole market for, you know, credit default swaps, um, were real innovators on Wall Street, with Milken probably being the biggest and most important innovator.

And, um, he essentially realized that, uh, you know, financing companies with less-than-stellar credit ratings, uh, could be lucrative to investors because they got, uh, a higher rate of interest and a higher yield, and the default rates were not particularly much higher than if you, uh, you know, bought investment-grade debt.

Uh, and, you know, for a long time, access to, uh, the debt markets was limited to a very few companies, uh, and they had to go to insurance companies or the banks.

And, and it might be hiding under some layers of financialization, though.

What was Lazard like when you got there in 1989? The offices, first of all, you're struck

by the offices because at that time they were in One Rock, One Rockefeller Center, and they were the same offices that...

Lazard had taken over from General Dynamics or something, a company that was in those offices in the 60s and 70s and then went bankrupt and had to jettison those offices.

And Lazard just took them over the way they were and didn't do any upgrades to them.

And by the time I got there, whatever it was, 20 or 30 years later, the carpet was... stained corridors, smelled cigar smoke.

The plants were dying in the corner.

There was gray, ugly linoleum.

I just love to

It seems like almost, I don't know how you think about it in terms of the development of the firm, but reading the book, it seems like that was the thing that really set them apart and also has fueled a lot of their recent growth, at least.

I mean, absolutely.

I mean, I think you have to make sure you understand the context for this, which is the financial crisis in 2008 and the new regulations from Dodd-Frank and the Fed that basically restricted...

the big Wall Street banks who many in Washington believe and I think correctly, you know, exacerbated the financial crisis and many of them as we discussed almost failed and would have failed if not for the bailouts and of course Lehman failed.

So, out of that crisis, out of those ashes rose what became a new architecture.

See, One of the major problems, as I'm sure you're well aware, with a fractional banking system and depository institutions is that, number one, the money that we deposit there is not at the bank.

Because in a fractional banking system, they are allowed to take the money that we put in the bank, our money, and for which we get very little interest.

What's your hunch? Is there a better mousetrap or not?

Um, explain him for people to understand.

Yeah.

So obviously, you're right.

Uh, private equity billionaires or hundred millionaires are kind of a dime a dozen these days.

I don't think there's a better business you could have been in that is both legal and can make you as much money as private equity did for the last forty years.

It's...

We kind of hit on more difficult times these days.

How do you square that with his financial acumen in making claims like these? Because it's obviously hurt his reputation, I think probably fatally.

Gotta stop the billionaires.

I, I mean, I think what, what, what is having a-an effect Is that, you know, these data centers are, um, designed to keep the AI boom going, and may be a requisite part of the AI boom.

And who are the beneficiaries of the AI boom? Uh, essentially, you know, billionaires and trillionaires, uh, who, um, you know, are already plenty rich.

So they're, like, moving forward to get even more, uh, rich without really, um, stopping at all and pausing at all.

And I think that's the purpose of this, uh, legislation and, and what's been going on here, to, to have people pause and really consider some of the consequences of these huge data centers, which use tremendous amounts of water and electricity, obviously, uh, destroy the landscape that was existing there and that will probably never be restored.

Um, uh, I read, uh, somewhere that, you know, calves in, uh, uh, in, in, uh, in some states are being born stillborn bec- because of proximity to the data centers.

So, you know, I think that people are really upset with the consequences, to say nothing of the potential job loss, 'cause we all know that, uh, AI at least is, uh, rumored, uh, to, or expected to cause job losses.

Will they not be able to accomplish their speedy development, their goals, their products, their LLMs, whatever? Will they not be able to build if they don't have the data centers to support compute? Are they worried about that?

Sure.

They're not making any more of it, and if you can afford to buy it, you want it, 'cause it's not gonna lose value.

These things have proven historically that they do not lose value.

Now, historically, the rules have been that you couldn't, uh, have private equity ownership in there.

You had to sort of have like individual owners.

You couldn't have like a private equity firm own, uh, a stake.

I was gonna say that, you know, you couldn't really have corporate ownership, but you know, that's not really true.

[laughs]

Just how reliant is our economy on AI at this point?

Hugely reliant.

One third on the spending is going to AI is new capital spending going to AI is kind of unprecedented.

And frankly, if I may quote the great late Yogi Berra, I mean, to me, it feels like deja vu all over again.

You know, what Wall Street likes to do is spend, spend, spend, you know, or provide capital to all sorts of funky ideas, uh, like mortgage backed securities as we did leading up to the 2008 financial crisis, like, uh, uh, building out, uh, the internet and, and, uh, uh, new telephone lines and data lines leading up to the crash of 2000 in the NASDAQ crash.

So to me, this feels like just sort of wanton, crazy capital spending, $500 billion going to NVIDIA.

I mean, it makes no sense, and I don't have any explanation yet for what all this capital is going for and why we need it and why it has to happen so quickly now.

who are trying to prepare for or AI-proof their lives, their jobs, what should they be concerned about?

So Bill, that sounds quite reasonable, but I guess the question really is, is David Ellison really in control or is his father, Larry Ellison, who has the money?

well obviously it is larry not only has he agreed to pony up 47 and a half billion dollars of equity He's also agreed to put more equity in if needed to sell the debt, which is going to end up being around $80 billion on this company.

So he's on the hook for a lot of money, more money than most human beings have.

And of course, now they've agreed to, in a sense, delay the closing until potentially June of next year.

And that's going to cost Larry Ellison another $650 million a quarter to Warner Brothers shareholders in a so-called ticking fee, because they actually thought they were going to close the deal by September 30th.

And so as part of the negotiation for the merger, he agreed to this ticking fee of $650 $50 million a quarter, which is going to approach another $2 billion by next June.

He's also agreed to pay a $7 billion breakup fee if he has to.

So I don't know what the son can say that takes away the shadow of the father.

Mm-hmm

... to do a deal with and had a merger agreement with.

Uh, and then Paramount obviously came in and offered more money, and the merger agreement with Netflix was rescinded, and one was signed with Paramount.

So even before that happened, uh, Paramount was trying to restrict, uh, what, uh, Zaslav, uh, and Warner Brothers could do between the s- between the signing of the merger agreement and closing.

And, and as you remember, you know, um, some on the Paramount side thought that that closing could be, you know, July 15th.

Well, obviously we're gonna be far away from that now.

So all of a sudden, you know, w- what those operating covenants are between signing and closing become much more relevant because if the deal's now not gonna close till the earlier of, uh, a- adjudication of this antitrust issue, which could go to the Supreme Court, which means it could take forever, or, or, or June of twenty twenty-seven, then, you know, that's alm- that's, like, 11 months that David needs to continue to operate this company as an independent, publicly traded company, uh, with its own board and, you know, uh, but he's basically ha- has to ask permission from the Ellisons really to do anything of substance-

[laughs]

Are we in an AI bubble?

Well, what we're in, uh, is an AI valuation bubble, and we're in a capital, uh, expenditure bubble.

Um, so there's way too much money being, uh, invested, uh, in, uh, AI and AI-related things, whether it's chips or data centers.

Uh, and so, uh, at, at way too high valuations.

I mean, again, just look at SpaceX as one example.

I mean, it was a $3 trillion company.

You know, three weeks later, it's a $1.5 trillion company.

And wait, explain how they get all that money out of an IPO.

But what did George have to say? Is this the dot-com bubble all over again or is it like something else, another recent historical analogy?

Yeah, I mean, I think he thinks it's worse than the dot-com bubble.

Um, maybe a few weeks ago, I had, uh, written a piece about how some investors were likening it to sort of the infrastructure build that was done in the creation of the internet back 25-plus years ago, you know, with the Ciscos of the world and all the emerging telecom companies, and how basically, uh, Cisco didn't go bankrupt, but all those emerging telecom companies did, like Global Crossing and McLeod and all the rest of them.

But that we ended up with, uh, what we needed, which was the infrastructure, the actual, you know, pipes in the ground.

Even though the companies behind them all went pretty much kaput, the pipes in the ground, uh, became very useful and valuable.

And, you know, whether this AI infrastructure build, the data centers and all that, the companies behind them or the companies that have lent money to them will end up taking hits on those loans and there might be some bankruptcies, but the infrastructure that is being built will end up being useful.

I think there's a, a similarity between the two there, although it's obviously early days in the AI infrastructure build, although unbelievable amounts of money have been spent and are continuing to be spent, in fact, much more than, you know, what was needed to build the, uh, pipes for the internet.

Yeah

So,

you know, that sort of greases the skids.

But yes, look, they really, you know, they were the last big Wall Street firm to go public.

And that was a competitive disadvantage, even though they were still Goldman Sachs.

It was a competitive disadvantage because other firms that were public had cheaper, less expensive forms of capital.

When Goldman went to raise capital during the time before they went public.

The equity capital was very expensive.

Talk to me about how Lloyd was able to steer Goldman Sachs through that tempest and get to the other side almost unscathed.

How much worry should we have, Bill?

Bill?Look, I mean, Stephanie, we've seen this before.

We saw it with the, you know, internet 1.0. We saw it with the emerging telecom companies that built the infrastructure to power the internet.

Uh, all of, all of which companies, by the way, you'll remember, went bankrupt.

And of course, the interesting thing is, of course, we still use that infrastructure, and it's important infrastructure.

So I suspect, as others have said, that something like that will happen again.

Uh, the valuations for these AI companies are astronomic and way too high.

Bill, what is your take? Because to me, this seems like another example of the president giving big business a whole lot more power, which is one of the reasons he's getting so much support from corporate America.

[laughs]

Well, the, uh, you know, the five guys who pulled off Bending Spoons, which is some sort of crazy name that could only fly in a very frothy IPO market, especially, you know, uh, an Italian company, uh, with that name.

And as you say, a collection of, uh, you know, sort of one-time great and now pretty much irrelevant internet companies.

But I mean, I guess ...

I mean, it is generating a bunch of EBITDA and a bunch of cash flow, uh, so I kinda get that.

I mean- I guess there are still people who use, uh, AOL to dial up to the internet.

I find that rather amazing.

Yeah.

So who is he, and what is his connection to Epstein?

Well, Stephanie, it's great to be here, and thank you for having me.

Uh, look, this is a big day for Leon.

I think he's wanted to tell his version of what happened between him and Jeffrey Epstein for a long time.

He spent several years, uh, the past several years spending a lot of time with me telling me his version.

And, you know, you alluded to his opening statement, uh, and I didn't find anything in there that, um, surprised me or is anything much different than he's told me, uh, over the last few years.

So I think he's there to, uh, explain himself, explain $158 million that he spent, uh, giving Jeffrey Epstein, uh, over the years.

I'm pretty sure Mark Zuckerberg was sitting an arm's length from Donald Trump at the UFC fight a week ago.

What are your big thoughts on why this is happening, and is the bottom not even here yet?

Well, uh, you know, who knows w- with a speculative asset like Bitcoin, you know, why it goes up, why it goes down.

It's all dependent on quasi greater fool theory.

I mean, you need somebody to come along, Peter, and buy your Bitcoin at a higher price, or else it's not gonna happen.

In other words, there's no income statement, there's no balance sheet, there's no future cash flows that you can discount back to try to arrive at some sort of valuation for Bitcoin.

Uh, what it has going for it is, um...

And having just done a documentary on this called Finding Satoshi, where we really plumb the depths of all of this.

Mm-hmm.

Just describe to us what that signals.

Well, I, I think, uh, Bianna, it's a very interesting question.

Maybe it's a moment to take a pause and reflect on what it means to have one single man be worth, on paper, anywhere, anyway, in excess of one trillion dollars.

I, I believe today, given that SpaceX's stock is up another 13% and that company is now worth 2.3 trillion, uh, given all of Elon's other holdings, he's now listed at around 1.1 trillion.

I mean, I think many of us, Bianna, are struggling as it is to get our minds around, you know, billionaires.

I mean, we've been living with billionaires now for 30 or 40 years, uh, and the amount of billions that has, have accumulated in the hands of, say, the top 10 people, wealthiest people in the world, uh, is hundreds of billions of dollars.

That already requires a lot to get your mind around.

Is that more dangerous, do you think, th- the power that one man wields versus an institution like Goldman Sachs?