Sunday, August 7, 2011

The Big Short

If the first Wall Street movie is to Liar's Poker as the second Wall Street movie is to The Big Short, then Michael Lewis has outdone Oliver Stone by far. In both cases, the original was better, but in this case, the second volume still tells a new great story, updated for and relevant to a couple decades later.

The Big Short is a character-driven story of highly complex financial transactions and a corrupt system that works for no one but the handful of people who are making tens, sometimes hundreds, of millions of dollars off of it. So was Liar's Poker. The difference is that Liar's Poker was an autobiographical story. Lewis himself had recently left a lucrative Wall Street job where he made, he felt, way more money than he was worth doing something that had no social purpose. He wanted to chronicle a time of irrational excess that he thought wouldn't last, and he wrote about it in a way that was funny and a little self deprecating here and there. Twenty years later he reports, not only was I wrong that it wouldn't last, things got worse than ever, and the whole economy nearly went down with them.

The choice in The Big Short to focus largely on people who saw subprime lending and mortgage-backed securities for what they were, and to tell their story, was a great one. We get to see how these people had unique perspectives and personalities that led them to believe that although everyone said they were wrong, they weren't wrong. Like so many of the books I've written about here, it made me think of Outliers, by Malcolm Gladwell. In that book, Gladwell shows how the people who are the best at what they do got that way by not just intelligence and hard work (lots of people are smart. lots of people work hard. But there's only one Steve Jobs.) but also by unique combinations of circumstances. Steve Eisman, one of the main characters in The Big Short, was the child of investment bankers who became a corporate lawyer, hated it, then had his parents get him a job at the one investment banking firm that still tolerated renegades. If he hadn't learned about the field from his parents, and they hadn't gotten him a job at what was probably the only firm where he could thrive, he would not have become the man who foresaw the meltdown, no matter how brilliant he was. That's not the point of the story -- the point of the story is that everything sucks and we're all screwed, I'm pretty sure -- but it's an interesting point nonetheless.

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