The Big Short: Inside the Doomsday Machine
Michael Lewis, 2010
W.W. Norton & Co.
320 pp.
ISBN-13: 9780393353150
Summary
Truth really is stranger than fiction.
Who better than the author of the signature bestseller Liar's Poker to explain how the event we were told was impossible—the free fall of the American economy—finally occurred; how the things that we wanted, like ridiculously easy money and greatly expanded home ownership, were vehicles for that crash; and how shareholder demand for profit forced investment executives to eat the forbidden fruit of toxic derivatives.
Michael Lewis's splendid cast of characters includes villains, a few heroes, and a lot of people who look very, very foolish: high government officials, including the watchdogs; heads of major investment banks (some overlap here with previous category); perhaps even the face in your mirror.
In this trenchant, raucous, irresistible narrative, Lewis writes of the goats and of the few who saw what the emperor was wearing, and gives them, most memorably, what they deserve. He proves yet again that he is the finest and funniest chronicler of our times. (From the publisher.)
The 2015 film version of Lewis's book stars Christian Bale, Steve Carell, Ryan Gossling, and Brad Pitt.
Author Bio
• Birth—October 15, 1960
• Where—New Orleans, Louisiana, USA
• Education—B.A., Princeton; M.B.A., London School of Economics
• Currently—Currently—lives in Berkeley, California
Michael Lewis is an American contemporary non-fiction author and financial journalist. His bestselling books include Flash Boys: A Wall Street Revolt (2014); The Big Short: Inside the Doomsday Machine (2010); The Blind Side: Evolution of a Game (2006); Moneyball: The Art of Winning an Unfair Game (2003); and Liar's Poker (1989).
Background
Lewis was born in New Orleans to corporate lawyer J. Thomas Lewis and community activist Diana Monroe Lewis. He attended the private, nondenominational, co-educational college preparatory Isidore Newman School in New Orleans. Later, he attended Princeton University where he received a BA in art history in 1982 and was a member of the Ivy Club.
After graduating from Princeton, he went on to work with New York art dealer Daniel Wildenstein. Despite his degree in art history, he nonetheless wanted to break into Wall Street to make money. After leaving Princeton, he tried to find a finance job, only to be roundly rejected by every firm to which he applied. He then enrolled in the London School of Economics to pursue a Master's degree in economics.
While still in England, Lewis was invited to a banquet hosted by the Queen Mother at St. James's Palace. His cousin, Baroness Linda Monroe von Stauffenberg, one of the organizers of the banquet, purposely seated him next to the wife of the London Managing Partner of Salomon Brothers. The hope was that Lewis, just having obtained his master's degree, might impress her enough for her to suggest to her husband that Lewis be given a job with Salomon Bros.—which had previously turned him down. The strategy worked: Lewis was granted an interview and landed a job.
As a result of the job offer, Lewis moved to New York City for Salomon's training program. There, he was appalled at the sheer bravado of most of his fellow trainees and indoctrinated into the money culture of Salomon and Wall Street in general.
After New York, Lewis was shipped to the London office of Salomon Brothers as a bond salesman. Despite his lack of knowledge, he was soon handling millions of dollars in investment accounts. In 1987, he witnessed a near-hostile takeover of Salomon Brothers but survived with his job. However, growing disillusioned with his work, he eventually quit to write Liar's Poker and become a financial journalist.
Writing
Lewis described his experiences at Salomon and the evolution of the mortgage-backed bond in Liar's Poker (1989). In The New New Thing (1999), he investigated the then-booming Silicon Valley and discussed obsession with innovation.
Four years later, Lewis wrote Moneyball (2003), in which he investigated the success of Billy Beane and the Oakland A's. In August 2007, he wrote an article about catastrophe bonds entitled "In Nature's Casino" that appeared in the New York Times Magazine.
The Big Short, about a handful of scrappy investors who foresaw the 2007-08 subprime mortgage debacle, came out in 2010. Flash Boys, detailing high-speed trading in stock and other markets, was published in 2014. Like both The Big Short and Moneyball, the book features an underdog type who is ahead of the pack in understanding his industry.
Lewis has worked for The Spectator, New York Times Magazine, as a columnist for Bloomberg, as a senior editor and campaign correspondent to The New Republic, and a visiting fellow at the University of California, Berkeley. He wrote the "Dad Again" column for Slate. Lewis worked for Conde Nast Portfolio but in February 2009 left to join Vanity Fair, where he became a contributing editor.
Film
The film version of Moneyball, starring Brad Pitt, was successfully released in 2011. The Big Short, with its all-star cast—Christian Bale, Steve Carell, Ryan Gossling, and Brad Pitt—came out in 2015 to top reviews.
Personal life
Lewis married Diane de Cordova Lewis, his girlfriend prior to his Salomon days. After several years, he was briefly married to former CNBC correspondent Kate Bohner, before marrying the former MTV reporter Tabitha Soren in 1997. Lewis lives with Tabitha, two daughters, and one son (Quinn, Dixie, and Walker) in Berkeley, California. (Adapted from Wikipedia. Retrieved 1/11/2016.)
Book Reviews
No one writes with more narrative panache about money and finance than Mr. Lewis, the author of Liar's Poker, that now classic portrait of 1980s Wall Street. His entertaining new book does not attempt a macro view of the financial crisis, but instead proposes to open a small window on the calamities by recounting the stories of some savvy renegades who cashed in on their conviction that the system was rotten… Mr. Lewis does a nimble job of using his subjects' stories to explicate the greed, idiocies and hypocrisies of a system notably lacking in grown-up supervision, a system filled with firms that "disdained the need for government regulation in good times" but "insisted on being rescued by government in bad times.
Michiko Kakutani - New York Times
Since his first book, the autobiographical Liar’s Poker, Lewis has tackled big, engaging stories…by finding and developing characters whose personal narratives reveal a larger truth. He's done it again. The story of the crash is, overwhelmingly, a tale of failure. But Lewis managed to find quirky investors who minted fortunes by making unpopular, calculated bets on a financial meltdown. Ditching the aloof irony of his earliest works, he constructs a story that is funny, incisive, profanity-laced and illuminating—full of difficult-to-like underdogs whose vindication and enrichment we end up cheering.
Daniel Gross - New York Times Book Review
If you read only one book about the causes of the recent financial crisis, let it be Michael Lewis's, The Big Short…What's so delightful about Lewis's writing is how deftly he explains and demystifies how things really work on Wall Street, even while creating a compelling narrative and introducing us to a cast of fascinating, all-too-human characters…The Big Short manages to give us the truest picture yet of what went wrong on Wall Street—and why. At times, it reads like a morality play, at other times like a modern-day farce. But as with any good play, its value lies in the way it reveals character and motive and explores the cultural context in which the plot unfolds.
Steven Pearlstein - Washington Post
[A] microcosmic lens on the personal histories of several Wall Street outsiders who were betting against the grain—to shed light on the macrocosmic tale of greed and fear.
Publishers Weekly
Lewis is a storyteller, and he weaves the personal stories of these renegades against the inner workings of Wall Street's mortgage-backed securities money machine.... Verdict: Readers from generalists through specialists will find this fast-paced, engaging account both illuminating and disturbing. Highly recommended. —Lawrence Maxted, Gannon Univ. Lib., Erie, PA
Library Journal
[Combines] an incendiary, timely topic with the author's solid, insightful, and witty investigative reporting.... Lewis is a capable guide into the world of CDOs, subprime mortgages, head-in-the-sand investments, inflated egos—and the big short.
Booklist
Discussion Questions
Use our LitLovers Book Club Resources; they can help with discussions for any book:
• How to Discuss a Book (helpful discussion tips)
• Generic Discussion Questions—Fiction and Nonfiction
• Read-Think-Talk (a guided reading chart)
Also, consider these LitLovers talking points to help start a discussion for The Big Short.
1. After reading The Big Short, do you have a clearer understanding of the Wall Street collapse of 2008? Does Michael Lewis do a good job, or a poor one, of explaining the arcane financial devices and the ins and outs of the bond markets? Did you find it interesting? Or were you bored to tears?
2. Follow-up to Question 2: How much did you know about financial crisis before reading The Big Short? What have you learned since that confirmed, or deviated from, your prior understanding of the events of 2008?
3. Where, or on whom, does Michael Lewis place blame for the events leading up to the crash?
4. What role did the rating agencies play—Moody's, Standard & Poor's, and Fitch? Were they at fault, or was the system such that they were forced to become unwilling partners?
5. Talk about the mortgage initiators. What role did they play? Discuss the array of mortgages offered and how they destabilized the system.
6. Steve Eisman, Mike Burry, and the men who ran the "garage band hedge fund" made huge fortunes off the downfall of others. Do you see them as prophetic heroes, greedy opportunists...or something else? How does Lewis portray them?
7. Follow-up to Question 6: Why did a handful of outsiders foresee what would happen with the subprimes while neither the heads of the large financial firms nor government regulators saw what was coming? Do you think it was genuine ignorance (the derivatives were simply too obscure to understand) or willful ignorance (no one really wanted to turn off the money spigot)? What about the risk managers for the Wall Street firms—where were they in all of this?
8. Another way to approach this book is to think of it almost as a mystery: who know how much...and when did they know it?
(Questions by LitLovers. Please feel free to use them, online or off, with attribution. Thanks.)