That is an audio transcript of the Tech Tonic podcast episode: A sceptic’s guide to crypto: boom and bust
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Wajahat Mughal
Hiya. Welcome again to the channel. My title is Wajahat and we’ve bought one other Terra video as we speak. On this video we’re gonna . . .
Jemima Kelly
Wajahat Mughal is a physician in his twenties. He posts movies about crypto on YouTube. You could possibly, for those who had been that means inclined, name crypto his facet hustle. He does guides on cryptocurrencies and he trades them too. It made him fairly rich till . . . it didn’t.
Wajahat Mughal
The previous few days have been fairly troublesome. My web price is gone fully. Yeah. I made a mistake. (Sniff) Actually powerful week for me. Haven’t been in a position to sleep correctly. I’m certain you guys might see how passionate I used to be about it. And I’m sorry that I’ve really, you already know, gotten so many individuals into this. And I assume most of them have all misplaced cash now.
Jemima Kelly
Wajahat comes throughout as refreshingly trustworthy and real. A bit naive, sure, however you’ll be able to’t assist however really feel unhealthy for him. However his story isn’t uncommon. There are hundreds of thousands extra who’ve misplaced cash on crypto on the market. Everybody has their very own story. Right here’s the way it occurred for Wajahat.
Wajahat Mughal
I used to be at all times studying, studying about all totally different asset courses, actually. However then, so that you type of shifted to crypto as a result of the extra I just about learn, the extra, the extra I learnt, the extra I loved it. And I discovered that a number of my pals didn’t actually perceive or didn’t actually grasp the idea of it, and actually simply the infinite quantity of issues that you can really do along with your property that you are able to do with crypto. And that’s just about how I went down that rabbit gap to develop into a crypto YouTuber.
Jemima Kelly
Wajahat teamed up with one other good friend, one who did perceive crypto, or who thought he did anyway. They reckoned they had been forward of the curve, recognizing what they thought had been alternatives the place others had been simply confused.
Wajahat Mughal
What we’d do is we’d go on to a web site referred to as CoinMarketCap and we’d mainly go down the listing from primary being bitcoin and go down so far as we might to only attempt to discover and analysis each single crypto venture that we, that we might discover. Our principle was mainly if we might analysis them earlier than anybody else might, we is likely to be on to one thing. Finally, I believe I simply got here throughout Luna simply by, simply by doing that. After which when I discovered it, I simply discovered the idea actually attention-grabbing as a result of there wasn’t actually the rest prefer it.
Jemima Kelly
Luna captured Wajahat’s creativeness as a result of it was a part of a crypto ecosystem referred to as Terra Luna. It was two cash linked along with an entire raft of pseudo-banking and funding apps being constructed up round it. Luna was a free-floating cryptocurrency and Terra was a stablecoin, that means its worth was at all times supposed to remain equal to 1 US Greenback. The names are useful for remembering which is which. Luna, Latin for Moon and Terra, Latin for Earth. This was in late 2021. Crypto markets had been booming and the worth of Luna was certainly going to the moon, to make use of the crypto jargon. Wajahat jumped in.
Wajahat Mughal
, Luna went from like $2 to $5 to $10 to $20 and again down to 10. After which ultimately went on this enormous run the place it went all the best way as much as 100 earlier than going again all the way down to 70. And, you already know, each single day, your, your portfolio was fluctuating by 1000’s and 1000’s. Issues had been getting actually heated up. , this can be a actually for a 20- or 22-year-old, a life-changing amount of cash. You could possibly, you can achieve this a lot with this.
Jemima Kelly
However it was fairly scary too watching his cash transfer round like that. So Wajahat determined to do what he thought was the wise factor. He bought his Luna and acquired Terra, which is also referred to as UST, the peg coin that was supposed to remain at $1.
Wajahat Mughal
So the whole lot was nice even originally of this yr as properly.
Jemima Kelly
After which fairly all of a sudden it wasn’t.
Wajahat Mughal
It was someday in, initially of Could actually when folks on Twitter, so crypto Twitter primarily, the place they had been saying that persons are really promoting their UST for different stablecoins. And you already know, I checked out that and I used to be like, why are folks doing this? As, it doesn’t appear proper.
Jemima Kelly
Wajahat couldn’t consider what he was seeing. It was one factor for the worth of free-floating cryptocurrencies to be everywhere. However stablecoins, they had been speculated to be steady.
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Terra UST has bought all the way down to 23 US cents. It wasn’t anticipated. It has spooked crypto . . .
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Crypto clearly proper now getting crushed . . .
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Buyers getting jolted by volatility rippling by the crypto world . . .
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. . . Luna erasing 99 per cent of its worth now price almost nothing.
Jemima Kelly
In a matter of days. Terra Luna went from being a multibillion greenback crypto venture to being, properly, nugatory. Wajahat’s losses had been within the six figures. He didn’t inform us precisely how a lot. And within the midst of this collapse, he discovered himself type of paralysed, fully and completely unable to behave.
Wajahat Mughal
what, the humorous factor is, is that over these 18 months, I constructed a lot conviction, I couldn’t, I couldn’t promote. I had loads of alternatives to promote the USD. I did have. I had perhaps two days even to, you already know, even get out with a ten or 20 and even 40% loss. However I simply nonetheless had conviction. I nonetheless thought that one thing would occur. I assumed there was an excessive amount of know-how, too many purposes, too many customers, an excessive amount of cash throughout the system. I by no means actually in my head thought that this might really go to zero.
Jemima Kelly
And even as we speak, months later, the implications of Terra Luna’s collapse are nonetheless weighing on his thoughts.
Wajahat Mughal
I believe the factor that made me most upset was listening to that over 20 folks commit suicide following the collapse of Terra. That basically damage. , cash is one factor, however folks’s well being and other people’s lives are a lot extra essential.
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Jemima Kelly
That is Tech Tonic from the Monetary Occasions, a podcast concerning the methods know-how is altering the world for the higher and for the more serious. I’m Jemima Kelly. I write a weekly column on all kinds of issues for the FT. I’ve been writing about cryptocurrencies and blockchain know-how since 2015. I began out with an open thoughts, however the longer I reported on what I name crypto land, the much less I believed in it. In a world divided into crypto evangelists and crypto sceptics, you’ll be able to contemplate me firmly on the sceptic facet today. Or to place that in crypto phrases, I assume I’m a salty no-coiner. I take a look at the mania of those markets, the hype across the blockchain know-how that crypto is constructed on, and I see on the entire, a large rip-off. The newest solution to get folks to half with their cash, however with a bit of little bit of know-how and Austrian economics sprinkled on prime to make the entire thing actually thrilling. However loads of folks do consider that crypto and the blockchain are gonna change the world. That crypto is the way forward for cash, the way forward for finance, the way forward for the web. And never simply folks like Wajahat, however big-time buyers and technologists too. So I wanna know why. Why achieve this many apparently clever, critical folks consider on this stuff? On this, the primary episode in our crypto sequence, I’m asking, has the crypto market crash modified something for all these crypto believers? Has it introduced them again all the way down to earth? Or do they nonetheless assume they’re on the best way to the moon? And if it’s the latter, why?
It wasn’t simply the full wipeout of Terra Luna that shook crypto land this yr. The crypto market had already been falling for a number of months. Nothing uncommon there. It’s notoriously unstable. However this crash, this crash was totally different. And it was totally different as a result of the world of crypto had grown far larger and extra advanced than ever earlier than.
Michael Saylor
I’m Michael Saylor. I’m the founder and the chairman and the CEO of MicroStrategy. We’re a publicly traded enterprise software program firm, and we’re additionally the most important public firm holder of bitcoin on the earth.
Jemima Kelly
For those who don’t observe bitcoin or aren’t a finance geek, you in all probability gained’t have heard of Michael Saylor. However amongst diehard bitcoiners and those that prefer to poke enjoyable at them, he’s a little bit of a star. Up till a few years in the past, Saylor was the CEO of a comparatively unknown firm referred to as MicroStrategy. It mainly sells software program to different corporations, and he was in all probability greatest recognized for having managed to lose $6bn in someday, greater than any human being in historical past. That was again in 2000. And that loss was one of many defining moments of an earlier crash, the dotcom crash. However quick ahead to the summer time of 2020 and Saylor had one other enterprise downside. MicroStrategy was promoting loads of software program, but it surely wasn’t rising. Income had was losses, and it risked being swallowed up by larger tech rivals. His firm wanted a brand new technique, a brand new massive wager.
Michael Saylor
So what do I make investments my cash in? And we did a search, we did a hunt, and we checked out, can we purchase the S&P index? Can we purchase actual property? Can we purchase gold or valuable metals or commodities or oil? And the conclusion was, let’s purchase crypto gold.
Jemima Kelly
And crypto gold, in keeping with Saylor, meant bitcoin. So in August 2020, MicroStrategy purchased 1 / 4 of $1bn price of bitcoin.
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It’s now to debate MicroStrategy and its technique on bitcoin is the chairman and CEO, Michael Saylor.
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Michael Saylor. Michael, thanks a lot for becoming a member of us right here tonight. You’re gonna must do some explaining to us. You’re a enterprise software program agency. Why do you retain shopping for bitcoin? Three purchases, giant purchases . . .
Michael Saylor
My first embrace of bitcoin was to keep away from loss of life, to keep away from a company loss of life. After which ultimately I realised essentially the issue is all of the currencies on the earth are collapsing towards the greenback and the greenback is collapsing towards fascinating, scarce property.
Jemima Kelly
So far as Saylor was involved, bitcoin was one of the best place to place his firm’s cash. I do know it would sound ridiculous, but it surely had been gaining worth over time and he thought it was a great way to guard towards inflation, higher than placing it into {dollars} or every other forex. However then he began to consider that it wasn’t only a resolution to his firm’s issues, however an answer to the entire world’s damaged monetary system.
Michael Saylor
There are 8bn folks on the planet whose life is hopeless. If we don’t give you a worldwide cash that they will use to retailer their life financial savings and gold gained’t work. And their native currencies just like the peso and the boulevard don’t work. And bitcoin is the one factor that appears prefer it might presumably work. It’s an instrument of financial empowerment for the world, and it’s a software for freedom and fact and justice . . .
Jemima Kelly
I’d higher lower in right here. It’s a legislation, isn’t it? However Michael Saylor is a superb illustration of the best way that true bitcoin believers discuss these things. If all of it sounds a bit highfalutin to you and perhaps a bit optimistic, utopian, you’re not alone.
Michael Saylor
All the pieces else is hopeless. No different fairness or property or different technique provides hope to all of the folks on the earth which are going through this sort of forex collapse.
Jemima Kelly
Over the following two years, Saylor led MicroStrategy to purchase much more bitcoin, $4bn price of it, and he stored shopping for even because the crash got here earlier this yr. By the summer time, with bitcoin costs having tanked by about two-thirds, MicroStrategy had misplaced a ton of cash. In early August, Saylor introduced that he can be standing down as CEO after greater than 30 years on the helm. He’s staying on as govt chairman and is now main what the corporate calls its bitcoin acquisition technique, as a result of, sure, even amid the carnage, Michael Saylor continues to be a bitcoin believer. What about for those who’re mistaken?
Michael Saylor
Nicely, our selection was a quick loss of life two years in the past, and we haven’t been mistaken but. I imply . . .
Jemima Kelly
So if bitcoin had been to go all the way down to, let’s say, $100.
Michael Saylor
If bitcoin goes to zero, we’ll be mistaken.
Jemima Kelly
What about if bitcoin goes all the way down to $100?
Michael Saylor
I’ll in all probability be shopping for a number of it.
Jemima Kelly
However you wouldn’t be mistaken at that time?
Michael Saylor
If bitcoin goes successfully to zero. However you already know once more, the purpose is we’d all be out of enterprise if we hadn’t accomplished it and I don’t assume we’re mistaken.
Jemima Kelly
Michael Saylor’s devotion to bitcoin, I might say blind devotion to bitcoin, marks a shift. You see, the final time crypto crashed again in 2018, there have been some skilled buyers, however nothing on the dimensions of MicroStrategy and Saylor’s gamble on bitcoin signalled that it was OK for extra conventional and company buyers to enter the market, and so they had been coming into the market with masses and a great deal of money.
Scott Chipolina
Actually, a number of of us would say that he was the beginning of this vital development of establishments pouring cash into bitcoin, pouring cash into crypto.
Jemima Kelly
That’s Scott Chipolina, the FT’s digital property correspondent. He spends, for his sins, a number of time following the crypto markets.
Scott Chipolina
After Michael Saylor and MicroStrategy purchased into bitcoin, the highest-profile instance was actually Tesla, which early in ‘21 introduced a $1.5bn funding into bitcoin. The bitcoin market reacted, we noticed the cryptocurrency’s worth skyrocket above $50,000, which on the time was an all-time excessive. You began to see the commercialisation of cryptocurrencies.
Jemima Kelly
And Scott reckons that this new interval of company cash flooding into bitcoin modified the sport.
Scott Chipolina
I bear in mind overlaying the trade on the time, when Tesla’s 1.5bn funding was introduced in early 2021, I had pals of mine, even relations name me, who don’t have an oz. of curiosity in cryptocurrencies by any means, extra in investing extra typically, name me up and say, what’s this story I’m studying about Elon Musk shopping for, you already know, $1.5bn price of bitcoin. So these kinds of developments definitely propelled the bull run that we noticed in 2021 as a result of, you already know. Michael Saylor, sure. But in addition Elon Musk being, you already know, one of the vital well-known folks on the planet, after they took the numerous curiosity in bitcoin and crypto, it definitely propelled a wider, broader market curiosity in these items too.
Jemima Kelly
All kinds of different crypto merchandise had been additionally being dreamt up. There have been so-called crypto banks, crypto loans, crypto futures and different extra obscure monetary devices. And in addition to all these more and more advanced crypto merchandise being invented on the earth of DeFi or decentralised finance, the broader crypto market now included much more individuals who traded and invested for a dwelling. These had been individuals who didn’t simply purchase and promote crypto. In addition they had cash in different markets just like the inventory market. So when buyers began dumping shares earlier this yr, inflicting markets to fall, additionally they began taking their cash out of crypto. How unhealthy has this crash really been? Why is it so unhealthy this time?
Scott Chipolina
The only solution to reply that query instantly is as a result of the market is larger, extra money has been misplaced and extra folks have been harmed. Again to the Terra Luna state of affairs that we that we noticed in Could. The corporate behind Terra Luna is predicated in South Korea. And one titbit of data that I in all probability gained’t ever overlook once I was reporting this, on the unravelling of the Terra ecosystem was that police in Seoul, in South Korea had began to place additional boots on the bottom on this bridge in Seoul that’s form of notorious as a hotspot for suicide, as a result of they had been so involved that folks within the metropolis would, you already know, tragically take a choice like that exactly due to what had been occurring within the crypto trade. So . . .
Jemima Kelly
Wow . ..
Scott Chipolina
That, I believe that, you already know, we are able to take a look at the numbers and we are able to see the market tendencies, however behind all of which are some actually, actually tragic tales of those who, for one motive or one other, put much more cash than they might have afforded to lose in these tasks. After which they misplaced that cash. And that hurt, you already know, for them is, you already know, it, it’s insufferable for lots of them.
Jemima Kelly
So that you may assume that with all this destruction of corporations, of individuals’s fortunes and of some folks’s lives, this enormous crash can be a crippling blow. However that might ignore some extent that the majority of us who criticise this trade agree on. Crypto markets as we speak have just about nothing to do with the concept cryptocurrencies ought to be used as cash, and even with the concept blockchain know-how may develop into helpful someday. That is merely a extremely speculative market populated by folks hoping to purchase low and promote excessive, and make some huge cash within the course of.
Stephen Diehl
There’s been type of two totally different eras in crypto.
Jemima Kelly
That Stephen Diehl, a software program engineer and, like me, a crypto critic.
Stephen Diehl
The primary period I name the Cypherpunk period, and people folks really aspired to construct personal cash. And that lasted, I’d say, till like perhaps just like the 2016 period, at which level then its use as a cost system was actually very clearly flawed.
Jemima Kelly
Stephen says the concept cryptocurrencies might work as cash was quietly deserted by most individuals years in the past. These days, it’s simply all about how a lot you can also make from promoting in your crypto.
Stephen Diehl
Individuals are buying and selling crypto tokens, not primarily based on any type of underlying financial worth, proper? They’re buying and selling it purely on the idea of the higher idiot that the worth of the token is what the following particular person will purchase it from me for. There’s no revenue related to a crypto token, in contrast to, say, a inventory or bond. And the comparability to a multilevel advertising scheme is extraordinarily apt. In some methods, crypto is Silicon Valley’s multilevel advertising scheme, simply scaled as much as a really, very giant scale and put on the web.
Jemima Kelly
All of which could clarify why loads of persons are determined for crypto to outlive. Multilevel advertising schemes solely work if new folks maintain shopping for into them.
Jackson Palmer
Crypto is type of like a cockroach in that it’s very onerous to kill. It’s resistant to the nuclear winter of a crash like we’re at the moment seeing in crypto.
Jemima Kelly
Jackson Palmer is aware of concerning the insanity of crypto markets first-hand. Just a few years in the past, he selected a whim to create his personal cryptocurrency. You might need heard of it. It’s referred to as dogecoin.
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Jackson Palmer
Yeah, it began as a joke in response to one of many first type of crypto market run-ups in 2013. There was a number of one thing cash being launched. I used to be massive into memes on the time and I believe with assistance from a few beers tweeted, I’m going to put money into dogecoin. It’s the following massive factor, simply as a joke. And a couple of week or so later, anyone that I had by no means met earlier than on Twitter type of reached out to me. It was like, hello, you already know, as a joke was simply launched as an actual factor. Be humorous for a number of days and all people will overlook about it. So we did that, assuming that it will, you already know like most jokes, most memes type of path off and not likely achieve any adoption. However it did. And it was (laughter) it was only a joke. Like, I don’t assume we actually thought previous Huh? Like, that’s humorous.
Jemima Kelly
For those who’re not already aware of that, dogecoin is predicated on an web meme. The meme exhibits an image of a breed of canine referred to as a Shiba Inu trying considerably askance on the digicam. For some time, dogecoin turned a little bit of successful inside a type of meme-friendly web subculture who purchased dogecoin for the LOLs. However it wasn’t till 2021 that dogecoin began making main headlines.
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What are cryptocurrencies? They’re a sort of digital cash, however as a substitute of being managed by a central authorities, they’re decentralised utilizing blockchain know-how. And recently, costs have been hovering for cryptos like bitcoin, ethereum, particularly, dogecoin.
Jemima Kelly
You may recognise that voice. That’s the world’s richest man, Elon Musk, on the US comedy present Saturday Night time Dwell (SNL) in Could of 2021. He liked dogecoin a lot that he was calling himself the Dogefather and he was usually tweeting about it, too. There was a number of hype. By the point Musk appeared on SNL, all the foremost exchanges had been itemizing dogecoin and the coin had hit an all-time excessive. For Jackson Palmer, the entire thing was absurd. A crypto token that he had began as a joke with completely no plans for taking up the monetary system or removing evil central bankers was now being valued at greater than $80bn. Let me simply repeat that: $80bn. That’s greater than twice the present worth of Twitter.
Jackson Palmer
Dogecoin simply intrinsically of itself, when it remained as a joke, when it remained as one thing that was completely nugatory, it was humorous, and I believe it was simply an amusing type of in-joke. I believe as soon as it bought past that and when it began to get added to exchanges and other people began to position a monetary worth on it, what occurs is it’s type of blood within the water, proper? And all of the sharks within the trade type of come round. They’re like, wait, there’s cash hooked up to this? I could make a buck if I, if I construct a enterprise or extract revenue from folks. That’s when it actually soured for me. And I used to be like, yeah, like this joke is isn’t humorous anymore.
Jemima Kelly
Palmer says that is why crypto gained’t die. It doesn’t matter that these tokens don’t work as currencies or that they haven’t any intrinsic worth. Crypto exchanges and shills don’t really care what they’re promoting. It is likely to be a token that was designed as a joke, or it is likely to be one which takes itself very critically. It doesn’t matter so long as they will persuade folks to purchase it.
Jackson Palmer
I believe that the trade that has popped up round it and type of just like the cartel of exchanges who’ve a giant incentive to maintain folks making as many trades as attainable as a result of that’s their enterprise mannequin. I believe they’ve constructed a web based on line casino and there’s a number of massive gamers operating the home. The cruel actuality of it’s that due to an absence of regulation, as a result of, you already know, lawmakers are primarily asleep on the wheel and have been for you already know the final decade with cryptocurrency, I believe there’s nothing stopping even the identical people who find themselves declaring chapter as we speak, launching one thing new a yr or two years from now, that does the identical factor, extracting extra money from perhaps even the identical folks as a result of they don’t know that it’s simply the identical crypto grift.
Jemima Kelly
That’s the factor about crypto. Even when it’s crashed and hundreds of thousands of individuals have misplaced a lot cash, folks like Wajahat and, on a a lot bigger scale, crypto super-gambler, Michael Saylor, it nonetheless holds the likelihood that it might make you a fortune. Perhaps you’ll be the one that buys the precise token on the proper time after which sells on the proper time too. Perhaps, simply perhaps, you’ll get fortunate.
Jackson Palmer
Saying that, will the crash kill crypto, is type of saying does folks shedding cash after they go to Las Vegas flip folks off Las Vegas and kill Las Vegas? No, it doesn’t proper? Despite the fact that folks know that numerous folks lose their life financial savings playing that means, Las Vegas, they nonetheless flock there in droves.
Jemima Kelly
It’s greed and hope that retains the wheel turning. However it’s additionally perception. Perception in one thing.
Jackson Palmer
There are folks which are actually shedding their life financial savings proper now as a result of they had been bought some imaginative and prescient about this being the long run. They usually thought, properly, perhaps I don’t perceive it or perhaps I’m simply too silly and I ought to do what all of the cool folks, what the billionaires are doing, as a result of that’s how I get wealthy. Does that take crypto to zero? No. Crypto is a cockroach. It should at all times exist and I don’t have any type of delusion about that going away.
Jemima Kelly
However again to Wajahat Mughal, the crypto YouTuber we met initially of the present. Certainly after shedding a six-figure sum of cash, he’s now able to throw within the towel on crypto.
Wajahat Mughal
. . . assume it’s altering my perspective in any respect. I believe the know-how continues to be excellent. The know-how works. My feeling is that this area is barely gonna get rising and get higher and persons are gonna be taught from the errors that they’ve made now and, you already know, over the following decade, I believe the know-how is gonna be unbelievable in comparison with what it’s proper now. And so I believe it’s solely really simply helped me regain extra religion. And I believe that this area is simply gonna develop into even higher sooner or later.
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Jemima Kelly
Within the subsequent episode on this season of Tech Tonic, the massive Silicon Valley buyers who say that crypto just isn’t solely alive however that it’s gonna energy the web of the long run.
Unnamed interviewee
I consider Web3 as a brand new period of the web, new social networks, methods for creators to monetise video games, simply, you already know, any type of utility that you just see as we speak on the web, now you can construct in a brand new means utilizing Web3.
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Jemima Kelly
You’ve been listening to Tech Tonic from the Monetary Occasions, with me, Jemima Kelly. Particular due to Scott Chipolina, the FT’s digital property correspondent. Learn extra of his tales at FT.com. We’ve put hyperlinks within the present notes. Our senior producer is Edwin Lane. Josh Gabert-Doyon is our producer and Manuela Saragosa is govt producer. Our sound engineer is Breen Turner, with authentic scoring by Metaphor Music. Cheryl Brumley is the FT’s head of audio. And for those who like what you’ve heard, why not depart us a overview? No trolling, please. Simply good ones. And don’t overlook to subscribe. There’ll be 4 extra episodes on this crypto sequence of Tech Tonic. They usually’ll be touchdown each Tuesday. So don’t miss them.
This transcript has been routinely generated. If by any likelihood there may be an error please ship the main points for a correction to: typo@ft.com. We’ll do our greatest to make the modification as quickly as attainable.
