Michael Lewis is my friend.
Not really, of course, I’ve never met or talked with him, but he’s taught me a lot with his writing and for that I feel very friendly towards Michael Lewis.
I found some time this winter to spend with his book, The Big Short. He promised, right up front and on the cover to show me the inside of (cue ominous music) THE DOOMSDAY MACHINE.
I can’t believe I waited so long to take him up on that.
Wall Street had created a glorious profit-manufacturing black box, a sort of magician’s cabinet where something goes in and some other thing comes out, spewing coins. No one but the magicians and some of their assistants knew how it worked, but everyone applauded.
On the outside of every in-group is at least one out-group of misfits, and Lewis introduces a few and shows what they found when they peeked into Wall Street’s little manufacturing shop of mortgage bonds.
The investments were complicated by design, creating lots of smoke. Inside the investments, bonds mirrored each other to give an illusion of endless profits.
Entire industries had been puffed up on the belief that there were endless profits. The money flowed in. Wall Street was sucking up money.
The misfits discovered the mirrors and saw through the complicated structure and realized it would implode. They found a way to trick the tricksters into giving them lots of the money too.
That’s about as simple as I can make it.
There are actually no magicians in Lewis’ book. It’s better than that. It’s a tale of greed and betrayal and we’re all still living in the aftermath. Wall Street is still blowing smoke to cover their tracks and the same people who helped blow smoke all along are still helping them now.
Anyone who still believes that it was all too complicated to understand should read this book.
Image by Flickr profile GlenBledsoe