How Fracking Went From Boom to Bust

In this episode of Industry Focus: Energy, Nick Sciple chats with Bethany McLean, contributing editor at Vanity Fair and financial journalist widely known for writing on the Enron scandal and the global financial crisis. They discuss her most recent book, Saudi America: The Truth about Fracking and how It's Changing the World. They also talk about the rise and fall of the fracking industry in America, the challenges it faces, and the way forward.

Finally, they talk about the important role of local journalism, her new book analyzing the United States' response to coronavirus, and much more.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on July 2, 2020.

Nick Sciple: Welcome to Industry Focus. I'm Nick Sciple. My guest today is Bethany McLean. Bethany is a contributing editor at Vanity Fair and a financial journalist widely known for writing on Enron scandal and the global financial crisis, among other topics. Her most recent book is Saudi America: The Truth about Fracking and how It's Changing the World, which we'll be discussing today. Bethany, thanks so much for joining me.

Bethany McLean: Thanks for having me.

Sciple: It's great to have you on. It's a great time to be talking about Saudi America, given this is a book that focuses heavily on Aubrey McClendon and Chesapeake Energy (CHKA.Q), and its role in the growth of the fracking industry. Well, on Sunday, news came down that Chesapeake Energy is filing for Chapter 11 bankruptcy. The New York Stock Exchange is in the process of delisting the stock from the stock market. So, just high-level, how did Chesapeake get here from being, at one point, the second biggest natural gas producer in the United States to now at the brink of bankruptcy?

McLean: It's in some ways a tragic story because Chesapeake and its co-founder, Aubrey McClendon, really did, arguably, changed the world. He was the classic definition of the visionary founder. He had this idea that he could grow this company into the largest natural gas producer, one of the largest natural gas producers in the country, and that fracking for natural gas was going to unleash this profound supply that was going to change America forever. And you know, in that he was right.

But the company never made money, and so the seeds of its failure were sown a long time ago, long before this bankruptcy. During the years that Aubrey ran the company, Chesapeake never produced free cash flow before asset sales, never. And these were even during the years where natural gas prices were really high. The business model simply didn't work. And eventually, it's just the oldest rule in finance, eventually a company with unsustainable leverage is unsustainable.

Sciple: Right. So, you paint this picture of this company, this long history hasn't ever been able to produce free cash flow, but was able to raise massive amounts of money, grow to, as I mentioned before, one of the largest natural gas producers in the U.S. How are they able to raise so much money despite not actually producing returns for investors?

McLean: Well, so there are two different things. A stock can be a stock market superstar even though the company doesn't actually make money. So, you can get decent returns as an investor with a money-losing company as long as the company, either A. starts to make money eventually and your thesis is right, or you just time it really well. But one of the biggest misconceptions out there, I think, is that Wall Street wouldn't support a company that doesn't make money. Why would they do that? Well, I just say, look at subprime mortgages, that whole thing was a Wall Street invention, right? [laughs] Not only did it not make money, it doesn't serve any purpose. It wasn't good for anybody, but Wall Street made a lot of fees out of it. And the same was true of Chesapeake.

So, through the deals that Wall Street structured to help Chesapeake raise, both, equity and debt; I calculated, when I did the book, that from, I think, 2001 to 2012, Wall Street made over $1 billion in fees. So, Wall Street can do really well helping a company raise money, even if that company isn't eventually successful.

And investors often are willing to bet that profits are around the corner, right? Or in this case, during an era of really low interest rates, Chesapeake's debt is paying a higher interest rate, and they're willing to take that risk. And believe that their debt is going to get paid. There are all sorts of reasons why money-losing businesses can fund themselves.

Sciple: So, there was this narrative of energy independence in the U.S., this narrative that if we get access to these assets, the technology will catch up and sooner or later we'll be able to be profitable. Why wasn't that narrative actually able to come true?

McLean: So, a few things happened that was the narrative, and Aubrey had this idea that this was a land grab, a once-in-a-lifetime opportunity, and the smartest thing to do was to acquire as much land as you possibly could at almost any price, because what you wanted to do was have the land that you could drill, and you wanted it under your control. Which is not so different than, say, an internet company making a land grab or making a grab for eyeballs.

What happened, I'd say, two things went wrong. One thing is that, because fracking for natural gas unleashed a plethora of supply, which is what you would expect, right; if it worked, we're going to have lots of supply of natural gas. But the natural gas titans, like, McClendon forgot the old role of commodity investing. Once you have more supply, the price goes down. [laughs] So, as fracking unleashed this dramatic supply of natural gas, it cratered the price of natural gas from, I think, around $12 per MMBTu before the 2008 financial crisis to the low levels up to $3 we've seen in recent years. That, obviously, makes it much harder to make money.

But the second part of this really is a technological story. While fracking is an amazing technological achievement, one thing that nobody has yet figured out how to fix is the decline rate on the wells. So, once you drill a well. If you drilled a conventional well, it's going to keep producing oil or gas for a lot of years. In the case of fracking, the wells decline at a really steep rate. Meaning, you're going to get a huge amount of the oil or gas you're going to get in year one, and after that it's going to fall off by somewhere between 60% and 80%.

So, if you need to keep your production levels constant or growing in order to please Wall Street, you're going to have to keep reinvesting billions of dollars of capital each year to drill. So, that's the fundamental problem underlying the failed shale revolution in the U.S.

Sciple: So, it sounds like it's a two-fold problem. One, it works too well, like, literally, too much natural gas came out of the ground. And then two, the market, I guess, at one point probably thought that these investors we're making in shale wells, are like traditional wells, it's a fixed cost, that over time production can amortize that cost. But really what we're looking at in shale production, these are very much variable costs, you need to keep pumping in money in order to get oil out on the back end.

McLean: Yes, that's a really good way to think about it. And that's the truth of the matter. And the argument in the industry has always been -- and look, this could change tomorrow -- the argument from the industry has always been, the decline rates are going to get better. Now, that we're really focused on technology in this industry, this is a fixable issue. But it hasn't proven out thus far. And, in fact, it's gone the opposite way with some of the new technologies, like, drilling wells closer together, that were supposed to really fix the decline rates, it's actually turned out to backfire.

Sciple: So, another company you talk about in the book it is EOG Resources, kind of the opposite side of the coin from Chesapeake, where Chesapeake is this high-flying gambling company, Aubrey McClendon is always going all-in with his next bet. EOG, very much focused on cash-on-cash returns, living within their means. For these operators that have tried to be conservative and tried to follow the right rules of the game and be profitable, what position are you put in when you're dealing with these other operators in the industry just, you know, throwing money to the wind with abandon?

McLean: I think it's been a really hard operating environment for those companies for a couple of reasons. One, because the flood of supply that has been unleashed has cratered prices, making it hard for responsible operators, who only want to drill where they can make money, to make money. But the other part, and the people, the CEO of EOG, Bill Thomas, when I spoke to him a couple of years ago was quite unhappy about this that you had a lot of people who weren't geologists by training and didn't really understand how to drill a well, and basically that you have to be respectful of the earth.

So, one of the damaging legacies Aubrey left was this idea that drilling shale wells was a manufacturing process. It wasn't wildcatting; it was just as reliable as manufacturing, you just drill the well and out popped the oil or gas. And it's not a manufacturing process, this is the earth we're dealing with. [laughs] Putting aside the environmental issues, the vagaries of the earth can mean that a well drilled 500 feet from another well is going to be very different in quality. And so, that's something that Aubrey didn't understand and respected that, and a lot of the private equity money that flooded into this industry didn't understand and respect that either. And that was upsetting to those operators who really did understand and respect it.

Sciple: Yeah, it's something that I thought about reading the book is, you have these operators that are trying to operate within their means, and you have these other people that are just really pouring tons of hype on the industry. Do you think, but for these people, like Aubrey McClendon, that really built up that narrative around what shale could offer to the country, that fracking ever would have gotten as big as it did today? Like, if we just had responsible operators, would fracking be what it is today?

McLean: I don't think it would. So, my position in the book was that Aubrey wasn't the technological pioneer, he's not the guy who came up with the technology to make fracking work, but he is the guy who was the capital-raising pioneer, the financial pioneer. And without Aubrey's salesmanship, there would have been a lot less capital going into U.S. fracking. And without the capital, the production levels never would have been what they got to.

And so, this idea that shale was changing geopolitics and reshaping the global economy, never would have been able to take place, because the U.S. wouldn't be a huge low-cost producer of natural gas, and the U.S. wouldn't have briefly been the biggest producer of crude oil again, for the first time since the 1970s. That's all because of this flood of capital into fracking.

And I think, some part of that was, for sure, Aubrey's salesmanship and this vision, and then it became reinforcing, right, because, wow! Look at this, we're producing all this oil and gas, this has to work somehow, right?

Sciple: Yeah, I want to talk about what happened in 2014, because I think, you know, the 2014 to 2016 period when Saudi Arabia and OPEC really decided we want to try to break shale, push oil prices down to a level that those companies couldn't operate, and hundreds of shale companies went bankrupt, the industry was really in a position where folks questioned whether it could survive. However, they were able to raise capital and were able to come back, in part because of that private equity backing. Again, why do you think capital rushed back despite massive amounts of bankruptcies in the space, despite, famously, David Einhorn coming out with his "mother frackers" presentation, pointing out, what you've said today, that that these companies aren't profitable? What happened in 2014, why wasn't that the end of this industry, why was it able to survive?

McLean: Well, you can't underestimate the importance of that event, because it created a narrative in the shale industry among the believers that this is the phoenix, it'll always rise from the ashes, you can't kill us. Look at this, you tried to kill us, and you can't. And people thought we were dead ones and they were wrong, and they're going to be wrong again. So, it really created this fundamental narrative that skeptics were wrong about shale. Which I think was more of a timing [laughs] issue than being wrong.

But backing up to your question. So, there were a couple of things that were going on. The biggest one is that when the Federal Reserve, really, slashed interest rates in the wake of the financial crisis, that's what helped enable the capital for the shale revolution, because all of a sudden you had really, really, really cheap debt. And so, there was a fascinating piece by a guy at Columbia basically saying that cheap capital was the enabler, the financial crisis was essentially the enabler of the shale revolution.

And so that didn't change in 2014, debt stayed really, really cheap 2015, 2016. So, investors were still willing to put money into things offering an ever so slightly higher yield, because they were in a desperate hunt for yield. And low rates enabled a lot of troubled companies to be able to refinance their debt. So, that was one big part of it.

The era of low rates also has had this other effect, which is that pension funds have not been able to make the returns on the fixed income markets they once made. So, they've increasingly put money into private equity, and private equity, in turn, became a major funder of shale. And again, going back to this idea that Wall Street can make money even when the underlying businesses don't. For a long time, private equity firms did really, really well in the shale industry, because you could take a company public. And public market investors were willing to buy these companies based on production growth, not underlying profits. And by the way, the CEOs were compensated based on production growth also. [laughs] So, you see the pernicious effect that this had.

Or you could fund a company, a shale driller, prove out a couple of wells and create this picture of this really desirable company, and a publicly traded company would buy it and take you out for, you know, 10X your money. And so, private equity firms, for a while, did really, really well in the shale industry. So, those things combined. And then on top of that, you have the Permian basin. And for some reason, nobody has ever been [laughs] able to explain this to me, but the Permian was the last major area in the U.S. for people to apply fracking technology to. And it's odd, because, you know, the Permian has always been, kind of, the center of U.S. oil production, but people just didn't think to frack there. And once they did, the Permian turned out to just be made for fracking, its geology was tailor-made to be fracked and it became this Permania, people called it. And so, the idea was that while other fracking basins, like the Eagle Ford and like the Bakken, maybe it was hard to make money there, maybe the breakeven price was higher. But here in the Permian, the breakeven price was $20, $15 a barrel, and that it was a miracle. So, there was the idea that the Permian was also fundamentally different.

Sciple: This time, it's different -- that classic thing you always hear.

McLean: Yeah.

Sciple: So, when I think about 2014, this move from OPEC and Saudi Arabia, those actors to try to push shale out of the market, I see some parallels to what's happened this year when we see the big ramp-up in production from OPEC earlier this year. Obviously, we didn't have coronavirus at that time. But it looks like, when it comes to, which you talked about off the top of the show, Chesapeake going bankrupt, Whiting Petroleum going bankrupt. Bankruptcy seems to be sweeping the industry. Once again, we're in a condition where other major oil producers are trying to put some weight on shale to weaken the industry, do you think that shale can come back from the ashes again here today?

McLean: So, I'm not sure what Russia and Saudi Arabia, that's uppermost in their mind, and look, nobody can ever know. But I'm not sure that what's uppermost in the strategy, particularly for Saudi Arabia, is crushing shale. I think it's much more the sense that the end of the era of oil is coming. We are at the dawn of the era of renewables. We don't know when that's going to be, but it's soon. And so, Saudi Arabia's strategy is to get as much money for its oil as it can now before the end comes. Because once we see the end, it doesn't even have to be the end, but once we see the end, the price of oil is going to go into secular decline.

So, if you're Saudi Arabia and you're thinking about, how do we build a war chest so that we can retool our economy? We're going to sell as much oil as we possibly can now before the end of the age of oil, right. So, I'm not sure it's so much designed to crush shale as it is to help them survive. And I think the whole question of whether Saudi Arabia is a dangerous and fascinating one for the world.

Can shale come back? I think there will be a shale industry in the U.S. I think it will be a lot smaller. I don't think we're going to be seeing the gushing headlines about the American shale industry. And I think that's probably a good thing. I think it's a good thing for the earth. I've always thought -- at the end of my book I turn to Charlie Munger, who made a really convincing arguments about, not only a country's energy supply, but its food supply still being dependent on hydrocarbons, and if you're really thinking about long-term national security, you would be leaving some of this stuff in the ground instead of selling it, just pumping it out and selling it as fast as you can, especially at prices that don't make money. So, I think if we have a far more measured shale industry that would be, both, better for the earth and better for the country in the long-term. But, look, that's what I think is going to happen. The big humbling thing, I've said this before that I learned [laughs] in writing about shale, is that anybody who makes predictions about the energy industry usually has one thing in common and that's that they're wrong.

And so, I could make a case where shale could come on back, I could make a case that we're going to have 0% interest rates that I could make a case that people will be willing to keep funding it, I could make a case that there's going to be a technological breakthrough. And maybe, especially if there's less drilling, and oil prices rise again, that maybe it'll make money.

And then natural gas and oil are two separate things. So, lastly, even David Einhorn, who as you mentioned, famously bearish on the industry, was actually pretty bullish about natural gas versus oil frackers, because it's fundamentally different to get -- I mean, natural gas is just it's a gas, right, [laughs] it's not oil. It's fundamentally different to get it out of the ground than it is to get oil out of the ground. And even at really low natural gas prices, that industry is closer to making money. And nobody debates that the U.S. is sitting on top of a huge long-term supply of natural gas.

So, in an ideal world, if you could fix some of the environmental problems with natural gas fracking and turn it into something that is sustainability and a bridge to a cleaner future, I could see paths out of this that aren't the end of the shale industry.

Sciple: So, assuming you're right and the shale industry downsizes, becomes more reasonably sized. What does that mean for the U.S. economy? Because we look out over the past 10 years or so, shale has been a big contributor for job growth, at least high-income job growth among folks who aren't college educated. What do you think that means for the U.S. economy going forward, particularly given what's going on with coronavirus?

McLean: Tragedy. No, seriously, it frightens me quite a bit. I was talking to a shale industry guy, and I haven't fact checked this number, but he said that in the decade after the financial crisis, the shale provided 4 million jobs. And precisely, as you mentioned, the kind of blue-collar jobs that the U.S. used to have and that have been well-paid blue-collar jobs that are in short supply and desperately necessary. And instead of that being not very talked about, but huge helping hands are coming out of the financial crisis, that's going to be a huge headwind coming out of this, because those job losses are going to be profound and they're going to be in parts of the economy where they're not easily replaceable. So, I am very worried about that, and not happy about it. I think it's really upsetting.

Sciple: Yeah. And I guess kind of last thing. We've seen this last decade of U.S. oil production, we really thought that its best days were behind it. We had this surge up from shale that led the U.S. to be the biggest oil producer in the world for at least the time. You know, when we look back 50 years from now on this decade, this period in time, how do you think we're going to remember the shale boom?

McLean: I think we'll remember it as something of a flash in the pan, one of those things that turned out to be unsustainable. I hope we don't look at it with profound regret, both, because we wish we had some of those hydrocarbons, particularly if, for example, agricultural production doesn't easily transition to a renewable world. And I hope we don't look back at it with a huge amount of environmental regret, in terms of safeguards for the environment that we could have taken and didn't.

So, the most ... I think of it as a flash in the pan, something that ultimately made some people a great deal of money, and ultimately proved to be unsustainable. And I hope it's not darker than that.

Sciple: Okay. I want to transition now to talking more broadly about financial journalism. You've been a well-known name in this industry for a long time. How has financial journalism changed since your career started?

McLean: Oh my God! [laughs] I mean, so dramatically. Some of us -- I began my career working at Fortune amid kind of the last golden age of magazine print journalism, right. And so some of us who were there during the '90s and 2000s, kind of, look back at that and say, we just didn't realize how good we have it. We were spoiled. And you could work on two or three big stories a year. And, yeah, you know, things you're doing had to pan out at some decent rate, but you've had a salary you could live on, and a fair amount of stability and not everything had to work. And that's changed a lot.

You know, you still have a few big papers, obviously, like The Times and The Journal, where people have a fair amount of, I guess, career security, but every place else is more and more freelance and harder and harder. And my biggest, I guess, fear about that is the stories that don't get done. The pieces that require a reach, a stretch that you don't know if they're going to come through, you don't know if it's going to work out, and they're really time consuming. And if you're a freelancer, you have very little incentive to work on one of those pieces, because if it doesn't work out, you just don't get paid.

So, that, I think, is one thing I worry about. I worry a lot with this pandemic that we have seen New York biased media coverage, and that it has really been a place where the death of local journalism has -- and all of the job losses in local papers have been so profound. And so, the narrative has been dominated by a New York-based view of the world, which I think led economic considerations about places where the virus was not manifesting itself, to really get pushed aside for a long time, and allowed for a one-size-fits-all policy that will be a big detriment of this country.

Sciple: Yeah, that's another thing I wanted to ask you about, is local journalism. As someone who is an investigative journalist, does deep dive pieces, I'm sure you depend somewhat on local journalists to, you know, become aware of stories, to get some details that you might have to otherwise gather on your own. How has the shrinking population of local journalists affected your process as a writer?

McLean: Well, so as a magazine journalist -- but you're right, it is the dirty little secret of a lot of national journalism that it begins with a great local piece, and there has been some little sporadic controversies about that, particularly with The New York Times, which has a habit of picking up local stories and expanding on them and not always giving credit to the local journalists who first wrote on them; it's a huge thing. I mean, it's a huge thing. It really is an ecosystem.

And I thought about that a lot recently, because I did a piece, one of my last Vanity Fair pieces was on SolarCity and it focused heavily on Buffalo. And if it hadn't been for the great reporting of a couple of local journalists there, including a guy named Dave Robinson, and a guy named, Dan Tevlock, who did great investigative pieces about what was going on in SolarCity's Buffalo plant, sources wouldn't have brought it to me, because people brought it to my attention because they read those stories, and said, there's a bigger SolarCity piece to do here.

So, without their great work, I'm not sure I would have turned to the issue, then done a bigger, kind of, Musk focused piece. So, I think that's really, really problematic. And I think just the vanishing of perspective is really problematic. I mean, it's great that The Times and maybe The Journal are able to transition and make money and survive, but it's not great if that comes at the expense of a broader viewpoint.

Sciple: You mentioned Tesla, another area I want to ask about. You've seen this emergence with TSLAQ, but there's other communities as well. You got EFT [Energy FinTwit] community around shale that has really been pushing the uneconomic nature of that business. What do you make of these Twitter movements, emerging skeptics around different subsectors of the market, and how is that changing the way people consume finance and learn about what's going on in the market?

McLean: I think it's actually awesome, and I get there can be a mom mentality, particularly on Twitter that is really not pleasant. And I found myself at the other end of it occasionally, and that doesn't make your day brighter. But I think the whole thing is really fantastic, because getting back to the days of Enron, there was plenty of skepticism about Enron, but it was kept in very close quarters. Very few people knew that skepticism existed. Among the smart money hedge funds, people knew that people were skeptical and that this thing was a fraud, but that viewpoint did not make its way out into the broader market at all.

And now with Twitter, often skeptical stuff does make it out there. I mean, think that Elon Musk is the pioneer who's going to change the world or think that he's a giant fraud. Whichever view you take, you can find so much smart information on Twitter to help you figure out how to think about it. And if you think you know how to think about it, to challenge how you think about it. And I think just for anybody who's interested in information, that's a great thing.

Sciple: One other question I wanted to ask you about is Wirecard, you mentioned Enron just a second ago, CNBC is calling Wirecard the Enron of Germany. This is the case where financial journalists have been questioning this company's books and its operations for a number of years. What do you make of this story? Does it compare to Enron in any meaningful way?

McLean: It does in some ways, but it doesn't in the sense that the skepticism about Enron didn't make its way into the public domain. A few little pieces here-and-there, but very, very little. Almost anything you would find on Enron would have been glowingly positive. And the odd thing about the Wirecard story is that it was out there, right? People were writing about this and highlighting this and saying it, but it's a little bit reminiscent to me of the financial crisis, because people were saying in the years running up to that, the real estate market is totally overvalued, you know, we're heading for a crash, but it just didn't matter. And so, sometimes I think that maybe it's kind of a version of, you know, the famous-is it Warren Buffett or is it Keynes, "The market can stay irrational for far longer than you can stay solvent," the market can refuse to listen for far longer than you can lay out the truth, [laughs] you know what I mean.

I think there's got to be some way to say that better, but you can put the truth out there in a peace and tell people that this is what's going to happen and they should pay attention. And they will pay attention when they're damn ready. [laughs] Everything has its own timing to it, right?

Sciple: What do you make of the German regulators, their active pushback against financial journalists, banning short-selling. Does that trouble you at all?

McLean: Of course, it does. I think [laughs] there's always this idea that, you know in every field of life, right, shoot the messenger. And if you can just silence the messenger, it's all going to be fine. And it never fails to amaze me that the people who pretend they're believers in the free market when they're benefiting from that, are precisely the same people who, as soon as it turns against them, say, oh, no, no, no, this isn't the market, it's not functioning. This journalist has an agenda and, you know, this short-seller is trying to profit from our distress.

And so, there's a lot of hypocrisy about this and people are just not very consistent. I remember in the fall of 2008, as the financial crisis got into full swing, you had the heads of investment banks who were the most rabid defenders of the market that there could possibly be, saying, we needed to ban short-selling because it was increasing the chances that they were going to go bankrupt. And it's like [laughs] come on, you guys, can't you see just rampant ugly hypocrisy at work here? But I've seen it so many times now that it doesn't surprise me.

Sciple: One of the big issues coming out of this Wirecard scandal is Ernst & Young not being able to find $2 billion worth of cash that are supposedly sitting in bank accounts. Coming out of the Enron scandal, there was a serious backlash against Arthur Andersen, the firm ended up going under. And there was another round of auditing regulation. You know, following up what's going on with Wirecard, with Ernst & Young, do you think we're due for more auditing regulation in the U.S.?

McLean: Due, and is it going to happen, are two separate questions, right? And the auditing firms are a little bit like the credit rating agencies. There is a lot of talk about reform and how we need to do things different and better. And it never really changes, and when it does, it ends up creating more problems than it solves. And what I mean by that is that the government's decision to prosecute Arthur Andersen, which put that firm out of business, made the government for the subsequent decades, much more scared to prosecute a big company, because they don't want the blame for putting that company out of business and the tens of thousands of jobs and retirement savings losses that come with it.

And it also increased our reliance on the final four accounting firms, such that no one wants to risk putting Ernst & Young out of business and having three major accounting firms left, right? So, [laughs] everything has these unintended consequences. And so, I think there'll be a huge hullaballoo for a while about what needs to be done better with accounting and reforms that we need to put in place. And I don't think many of them will stick.

On this note, I've been thinking about this, because the funniest thing, right, in the wake of Enron with accounting firms, there's this huge thing about how we needed to separate auditing and consulting. And we did. And supposedly that was a fundamental problem, because the audit partners were biased by the consulting revenue they were getting. Here we are, every big accounting firm has consulting business now. What happened to that? I don't even know how that went away, but it just did. [laughs] People started to look in the opposite direction and the accounting firms built up their consulting practices again, and here we are.

Sciple: You know, it reminds me, we started off this show talking about the oil industry and fracking. I think that's a cycle you see in the oil industry as well. At the beginning of the cycle, everybody levers up and they get all this debt on their balance sheet, then the crash comes, they said, oh, we'll be more disciplined next time, we won't get ahead of ourselves. And lo-and-behold the cycle comes again and there's another cycle of bankruptcies again and again and again. And I think it's all these industries, you see it over and over.

McLean: For sure. Yes.

Sciple: Okay, the last thing I wanted to talk about, before I let you go, is the current project you're working on. About a week ago news came out that you are working with Joe Nocera to write a book analyzing the United States' response to coronavirus. So, the first question I have on that is, I've tried to follow this story; I've tried to keep up with what's going on. It's incredibly complicated.

So, as someone who is trying to write a book on this, graph the narrative that's easy to understand and explain this to people, where do you start?

McLean: [laughs] It's a really good question. Thank God, we have a lot of time [laughs] to figure it out. But I think one of the things Joe and I were talking about -- and we've worked together a lot over the years -- was just that there are a lot of fundamental flaws, whether it's racial inequities, flaws in access to healthcare and flaws in our reliance on the Federal Reserve to create policy in the wake of the financial crisis, because Congress was dysfunctional.

And all of those things have played into this pandemic being much worse than perhaps it otherwise would have been. So, we are hoping to do something similar to what we did with All The Devils Are Here, which instead of writing about the pandemic itself and all the flawed responses right in the heat of it, but write about what led to the problems, why didn't we take warnings that there was a pandemic to come seriously, what got broken in science, how did the CDC become dysfunctional, what's gone wrong in our financial markets that we have so many companies that are so indebted that they can't survive a couple of months' downturn? That sort of thing. [laughs] And as for how that combines into a coherent, readable narrative, [laughs] check with me in six months.

Sciple: Yeah, to be determined. Along those lines, one of the things I really like about your writing is you do a good job of taking these real-world characters, really bringing them to life and creating a narrative that I think is really easy to follow as a reader. So, as we're looking at this coronavirus story, who are the characters that you find most interesting and are most interested in, kind of, diving into as you write the book?

McLean: I think there are so many of them. I think governors of various states are really, really interesting, because it's easy to be a journalist, an armchair critic, but to be a governor of a state who is hearing one thing from your economic advisors and seeing the cost and hearing from small business people who are losing their businesses and having to get in line at food banks, and then hearing from your scientific advisors that you can't risk reopening the economy because here's what's going to happen. I mean, to get inside some of that, I think would be really interesting.

I think something like 40% to 50% of the deaths in this country have been in long-term care facilities. So, trying to really figure out what went wrong there, who got it right, who got it wrong and why? I think it's really interesting and important too.

Sciple: OK, and then last thing. Where do you think the United States goes from here with respect to the coronavirus?

McLean: So, I said all along, with the virus itself, I don't know. I am highly reluctant to play armchair epidemiologists the way so many of us have tried to do. So, I don't know. What I do think we should all look at and be aware of is that this is going to remake the economy, and it's already remaking the economy in ways that maybe will be good and more equitable, thanks to the protest in the wake of George Floyd's murder, but maybe dangerous and things that we don't want at the same time.

And just to name a few things, there is going to be a huge and dramatic loss in small businesses. Their market share is going to be taken over by bigger companies that were able to survive this. I think there's going to be a continuation of the march that private equity is taking through our world, because they are some of the few big players left with a lot of capital. And I'm not sure that's what we want to see.

So, just to name a few things, I think we should start focusing on the ways the economy is going to get remade and who's already actively at work trying to remake it to their own benefit.

Sciple: Well, Bethany, I'd be looking forward to reading it when it comes out. And thank you so much for taking the time today to chat with us. If folks want to keep up with the work that you're doing, keep track of your writing, where can they go find it?

McLean: Well, I am probably not going to be [laughs] doing much. People say, I always say that and then I always find stuff I want to do. I'm still Vanity Fair, and I write occasionally for Yahoo! Finance, and you can follow me on Twitter.

Sciple: Awesome! Well, thanks so much, and hope to talk to you again soon.

McLean: Thank you so much for having me on. Bye!

Sciple: Bye-bye!

As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against the stocks discussed, so don't buy or sell anything based solely on what you hear.

Thanks to Kyle Carruthers for making us sound so nice. For Bethany McLean, I'm Nick Sciple. Thanks for listening, and Fool on!