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The Big Short: Inside the Doomsday Machine Paperback – February 1, 2011
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“No one writes with more narrative panache about money and finance than Mr. Lewis....[he] 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....Writing in faintly Tom Wolfe-ian prose, Mr. Lewis does a colorful job of introducing the lay reader to the Darwinian world of the bond market.”
- Michiko Kakutani, The New York Times
“Superb: Michael Lewis doing what he does best, illuminating the idiocy, madness and greed of modern finance. . . . Lewis achieves what I previously imagined impossible: He makes subprime sexy all over again.”
- Andrew Leonard, Salon.com
“One of the best business books of the past two decades.”
- Malcolm Gladwell, New York Times Book Review
“I read Lewis for the same reasons I watch Tiger Woods. I’ll never play like that. But it’s good to be reminded every now and again what genius looks like.”
- Malcolm Gladwell, New York Times Book Review
About the Author
Michael Lewis, is the best-selling author of Liar’s Poker, Moneyball, The Blind Side, and Flash Boys. He lives in Berkeley, California, with his wife and three children.
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In "The Big Short," Michael Lewis tells the story of the subprime mortgage crisis in a way that couldn't be more removed from my own perspective, or that of anyone I knew: the story of the money managers, traders, and analysts who figured out the weaknesses in the subprime bond market and placed their bets that the bubble would burst in a *big* way, and *soon*. They were right, of course, but even they didn't realize just how deeply corrupt the system was, or how devastating the fallout would be when the crash came.
Although I follow the news more closely now than I did in my twenties, I've still never taken much interest in the world of high finance, and I probably never would have picked up "The Big Short" if my husband hadn't been intrigued by the trailers for the movie released late last year. When I learned that one of the men profiled in Lewis's book had Asperger's syndrome, like me, I was definitely in.
Lewis explains in detail how the subprime mortgage crisis happened, but his interest is less in analyzing the event as a whole than in profiling the eccentric, self-confident, cautious men who dared to swim against the current of the most respected financial entities - and found themselves vindicated. My favorite parts of the book were, by far, the small-picture slices: personal histories, colorful anecdotes, delicious little ironies. As often happens when I stumble upon the human element of something I've never taken any interest in before, I found myself suspecting that perhaps high finance wasn't an inherently tedious subject after all.
Unfortunately, Lewis starts in assuming his reader has a pretty good understanding of the world of high finance already. As assumptions go, that's really not such a bad one; anyone who picks up a book like this probably already knows a stock from a bond, a hedge fund from a mutual fund. A chapter on "Finance 101" would certainly be annoying, if not actually insulting, to the book's target audience. However, this isn't a technical book for market insiders, either. Lewis knows he's not exactly writing a fluffy beach read; he even jokes, about a quarter of the way through the book, that the reader who has managed to follow the narrative that far deserves a gold star. I believe a glossary would have been a useful addition: readers unfamiliar with some of the terms specific to the subprime mortgage bond market explained in the book could refer to the glossary to clarify anything they'd forgotten without having to flip through earlier chapters, while definitions of more basic terms would make the book more accessible to a wider audience. (Perhaps the most prominent example of the kind of thing that could have used a better explanation is found in the title itself. An unofficial poll among friends of mine, all more or less educated, productive adult members of society, turned up only a couple who knew what "short selling" was. For the record, "short selling" is essentially a way of betting against the market by borrowing an asset and then selling it, on the basis of the belief that the price will have dropped when it comes time to return what was borrowed. Lewis never explains this.)
I wouldn't say "The Big Short" is entirely inaccessible to the general reader, especially one with easy access to the Internet. (Fortunately, I had my smartphone close at hand while I was reading.) Even when I didn't understand the specific details of what I was reading, I was almost always able to get the gist of what was going on, and Lewis is very good about succinctly summing up the effects of complex sequences of events. I did enjoy reading this, and came away from it vowing to be more confident in my own carefully reasoned conclusions even when they go against the grain. I haven't seen the movie yet, but if it stays true to the basic events of the book while presuming a little less knowledge of high finance on the part of its audience, this may well be one of those rare cases in which the majority of readers are better served by seeing the movie instead, or at least seeing the movie first.
As soon as I finished watching the 2015 movie “The Big Short,” I immediately decided to read Michael Lewis’ book “The Big Short: Inside the Doomsday Machine,” which forms the basis for the film. Lewis, who was himself a Wall Street bond trader in the 1980s and 90s, is the author of several non-fiction books, many of them dealing with the world of finance.
“The Big Short: Inside the Doomsday Machine” isn’t so much “about” the financial crisis as it is about what caused the meltdown in the first place. Lewis tells his story through the actions of four separate investment groups: Scion Capital; managed by Dr. Michael Burry; FrontPoint Partners LLC, led by Steve Eisman; Cornwall Capital, co-managed by James Mai and Charlie Ledley; and Greg Lippmann, a bond trader with Deutsche Bank. These investors, each working independently from each other, correctly foresaw the collapse of the housing markets in the United States in 2007. Nobody else saw it – or wanted to, for that matter.
For years, many of the world’s biggest investment and commercial banks had been investing heavily in high-risk subprime mortgages. This caused housing prices to rise, and a “housing bubble” to form. But soon, variable interest rates on these mortgages would begin to rise sharply, and massive numbers of people with little or no income would begin to default on mortgages they could no longer afford. Our four investors each decided to “sell short” the housing markets by investing in “credit default swaps” – a form of insurance against mortgage defaults. They essentially were betting against the housing markets: when (not if) the housing markets failed, the investors would end up making millions…
“The Big Short” is a very well written book. It’s fast-paced, easy to read, and short (less than 300 pages). Michael Lewis’ story is very much character-driven. His profiles of the main players are surprisingly detailed, brutally honest, and fascinating. Some people who start out looking like villains end up as quite heroic and admirable figures. Others do not fare so well.
One of the things Michael Lewis does best is explain many of the technical aspects of the financial system in a manner that I could easily understand. Although I’m sure “mortgage backed securities,” “credit default swaps,” and “collateral debt obligations” are probably a lot more complicated than even Lewis presents them, I found his explanations simple, straightforward, and very useful. As a result, I gained a better knowledge of the financial crisis.
“The Big Short: Inside the Doomsday Machine” is a very informative and entertaining book. For those looking to understand the basics of the 2008 financial crisis, this is one very good place to start. Highly recommended.