Submitted by Brian Hanks on
Michael Lewis (Blindside, Moneyball, etc) has a nice follow-up book to his investment banking expose "Liar's Poker." Essentially, this book is about the financial crisis and tells the story of the crisis through the eyes of people who saw the coming calamity and profited from it. Think George Soros made a lot of money back in the day? Some of these guys tripled Soros' fortune.
If you're looking for actionable advice from this book, you might come away disappointed. One take-away was I learned new ways to be skeptical of the financial markets and investment banks in particular. Other than that, feel free to settle in to a well-told story.
Did anyone else gain any valuable insights that I missed here?
In the land of the blind the one-eyed man is king
I enjoyed this book. I did not read this book with professional development intentions. I read it to learn more about a very important event in our adult lives, and to better understand the financial services industry, and the capital markets.
A common MT quote did keep running through my head: "In the land of the blind the one-eyed man is king."
I think it is also a fable about trust and relationships, and human behavior, and why they still matter in business.
I think I wrote this in one of my weekly notes. As with everything I've read by Lewis, this was OUTSTANDING.
I also loved it - couldn't put it down, even though I knew the ending ! Pretty unbelievable at times..... makes you wonder at the world around you. 'If it seems too good to be true, it probably is'.
lessons in the Big Short - trust your gut
This quote really resonated with me....
"In the course of trying to figure it out, we realized that there's a reason why it doesn't quite make sense. It's because it doesn't quite make sense"
Work isn't really setup for you to say "the emperor has no clothes" or "I don't understand X" ... I think we often blame ourselves for not understanding things, when the reality is that they just don't make sense because they are overly complicated for no good reason (or based on faulty reasoning cloaked in something fancy sounding...)
I'm part way through it (around a third I'd estimate). The main thing that has struck me so far is how the people who came up with a lot of the instruments and trading methods that supported the bubble and eventually lead to it's collapse exhibit behaviours consistent with Dyspraxia (which I have, saw a lof ot my own thought processes there) and related conditions (e.g. Aspergers). It has also flagged up for me the difficulty in, possibly irrelevance of, regulating something like the financial market. You regulate one area and the traders wil just move to a diferent area (stocks to heavily regulated, move to bonds &c). Regulators are in a Red Queen's Race and doomed always to slip further behind.
I agree with Jarber in that for most of us at work saying "I don't know" or "I don't understand" is just not allowed. I do get the impression that whilst the instruments that built then popped the recent bubble were very complex and difficult to understand there was a certain degree of not wanting to understand. When the money is flying in very few seem willing to ask why or how, you don't dissect the goose whilst it's laying golden eggs, it's only when the money starts to evaporate that people start to ask questions.
Edited to Add:
On the way home after writing the above comment I was reading the April 2011 issue of HBR ('The Failure Issue') , specifically the article 'Ethical Breakdowns' (pages 58-65, R1104C). The article looks at 5 barriers to an ethical organisation, behaviours that prevent employees and managers from challenging unethical behaviours. Two of these, "The Slipperly Slope" and "Overvaluing Outcomes" seemed particular appropriate to the recent bubble, the latter especially.
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"Start with the customer and work backwards, not with the tools and work forwards" - James Womack
Rules based versus principles based regulation
I am an accountant for a reinsurance company and this book quickly went round the office like wild fire, it gave us a great insight (& reminder) into how the minds of humans work against a back drop of regulation. As others have said some humans will try to exploit situations for their own gains and some will support those trying to exploit situations in complete ignorance.
I ask myself what form of regulation is best to combat this behaviour? A rules based regulation regime can be exploited via loop holes such as Enron who followed the USGAAP accounting rules (although obviously went against what the underlying principles of those rules were) whilst principles based regulation offers those less scrupilous an opportunity to exploit. I believe that the answer ultimately lies in senior executives and as many people reporting to them as possible (I realise here that the motivations of some people below senior executive is often different) in having the courage and conviction to ask the simple questions as posed in this book, such as "who is on the other side of this bet", "what is the downside risk", etc
All in all a very enjoyable book.