Thursday, December 13, 2012

The Big Short: And Idiot's Guide to the Financial Crisis

Michael Lewis has done it again.  And this time he has truly outdone himself.  He has taken, what is quite possibly the most boring subject on the planet earth, and made it palatable.  Not just palatable, but actually quite interesting.  And during the process he’s also managed to explain the cause of the Great Recession in terms that even book blog editors and chimpanzees can understand.
The Big Short is Lewis’ finely crafted attempt at distilling the housing market bubble and the eventual collapse of the global financial markets.  He revisits the well-trodden world of Wall Street bond trading, the subject of in his 1989 debut book, Liar’s Poker.  For the uninitiated, this area of debt derivative investing is so byzantine and obscure that the lecturing of its finer points should be banned under the Geneva Accord.  Suffice to say, this confusing and completely made-up investment universe is basically incomprehensible…by design.  Even the people immersed in this paper world of complicated bets don’t understand what’s going on most of the time, and there lies the crux of the financial market meltdown of 2008.
Fortunately, Lewis expertly guides us through the process, while providing insight, understanding and even a few laughs.  Instead of diving into the nuts and bolts of it, in typical fashion, he paints this highly pedantic subject with a humanistic flourish.  He uses a group of peculiar hedge fund managers and traders as his instruments for spicing up the dry subject matter with heroes and scoundrels.  These peculiar characters belong to an exclusive fraternity of less than two dozen or so hedge funders that actually understood what was going on.  And in the face of great ridicule from their peers -and at times themselves- actually bet against the market and made a killing while most people lost their shirts.
What makes this small group of investors extraordinary, aside from their market vision, is their idiosyncrasies and Lewis has a masterful gift for not only spotting such traits but mining them for narrative adhesive as he weaves the storyline together: an Aspergers suffering neurologist turned hedge fund manager; a pair of garage band investment nerds operating out of a shed in Berkeley, CA; a New York Jew intent on exposing the myths of the Talmud and destroying the financial system as we know it; an apocalyptic trader holed up in a survival compound in the mountains; a bond-buyer villain named Wing Chau -these are the narrative vessels that Lewis uses to deconstruct the mortgage-backed securities mess.  And without their colorful personal contributions this subject matter would be impossible for most humans to digest.
And that’s the art of Lewis’ craft.  He’s a thinker on par with Malcom Gladwell and his lively writing is reminiscent of a young Tom Wolfe.  He has a knack for taking impossible to understand, and seemingly unappealing topics, and brilliantly repackaging them into beautiful things like the The Blindside, Moneyball, and The New New Thing, among others.  With his mix of academic understanding and deft treatment of the human experience there simply isn’t’ anyone writing today with his rare skill-set.  Read anything by Lewis you can get your hands on.  You won’t be disappointed.