Here, have a book review too
Jun. 27th, 2010 09:58 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
petroniaMichael Lewis, The Big Short: highly engaging page-turner - so engaging that I elected to keep reading this in lieu of the latest Steven Brust novel for the four hours I had to spend in the bookstore. Granted, the theme of the latest Brust appeared to be "lawyers"... could be potentially more scathing if he had Orca to write over but that is more Pratchett territory anyhow. XD;
This is definitely the best book for a layman's explanation for what went wrong with mortgage-backed bonds, synthetic CDOs etc. because it follows the characters' thought processes as they figured the big picture out over the course of years. So you get a history of the instruments and players, rather than a picture of the market as a fait accompli ("investment banks doing all this incomprehensible stuff, who knew?"). There is simplification at the facts level to keep the average reader on board, rather than inaccuracy (I think); unabashed bias, though, comes from the fact that Lewis picked relative outsiders as his protagonists (or made them out to be), portrayed them with sympathy* and gave them tons of Hollywood-ready pithy quote space, even though the twisted logic of the market was such that their actions contributed to inflating the bubble regardless of intent (...which was to make money, anyway). They were not the ones who made the biggest trades in $$$ terms, either, although Paulson - barely mentioned - already has his own book, and Greg "I'm short your house" Lippman works best as a "colour" character. XD Meanwhile, antagonists are clearly cast as villains or morons. It's an extremely entertaining piece of novelistic demagoguery.
* Lewis's thesis, as far as I can tell, is that dudes were resistant to groupthink because... they're autistic-spectrum nerds. XD;; (Eisman is a socially awkward contrarian and comic-book geek, Burry is full-out Asperger's and named his investment firm after a Shannara novel. The other three... are kind of Liberal hippie slackers by nature I guess which is worse than Asperger's if you are in high finance lmao dying) Though it's probably more like, autistic-spectrum dudes in obsession mode are more likely to have the gumption to read volumes of fine print and make sense of it; and for that matter are probably a dime a dozen among the quant population to begin with. I mean, Lewis doesn't seem to have bothered to interview "Lippman's Chinese quant" Eugene Xu (instead electing to run with the racist gag he was handed), but dude doesn't sound like the life of the cocktail party, yanno?
EXECUTIVE SUMMARY: would make an excellent movie.
Reading this made me remember the one accounting class I took, very early on in my MBA, when I still took notes on the culture-clash aspect of the experience. XD In his introduction the professor talked about accounting as if it were an epistemological pursuit... In retrospect mid-2007 was probably a weird time to begin studying finance and accounting with practical examples from real corporations' annual reports. XD; It makes it harder for me to assign blame for rampant groupthink, because I clearly remember that feeling of having no reference for comparison except what "everyone else" was doing, and all the companies had these tottering towers of leverage on their balance sheets left over from buyouts. Among other things. Our big end-of-term project was to take apart Hertz's numbers (the team picked the rental-car industry) and make a lending recommendation. We squinted and squinted and it looked crapola no matter what. Finally we asked a second-year finance-stream student and he said, equably, "You can refuse to lend them more money if the numbers look bad. Maybe the company is bad."
Amazing!
Of course, Hertz is still in business, so what do I know? Not much, clearly.
This is definitely the best book for a layman's explanation for what went wrong with mortgage-backed bonds, synthetic CDOs etc. because it follows the characters' thought processes as they figured the big picture out over the course of years. So you get a history of the instruments and players, rather than a picture of the market as a fait accompli ("investment banks doing all this incomprehensible stuff, who knew?"). There is simplification at the facts level to keep the average reader on board, rather than inaccuracy (I think); unabashed bias, though, comes from the fact that Lewis picked relative outsiders as his protagonists (or made them out to be), portrayed them with sympathy* and gave them tons of Hollywood-ready pithy quote space, even though the twisted logic of the market was such that their actions contributed to inflating the bubble regardless of intent (...which was to make money, anyway). They were not the ones who made the biggest trades in $$$ terms, either, although Paulson - barely mentioned - already has his own book, and Greg "I'm short your house" Lippman works best as a "colour" character. XD Meanwhile, antagonists are clearly cast as villains or morons. It's an extremely entertaining piece of novelistic demagoguery.
* Lewis's thesis, as far as I can tell, is that dudes were resistant to groupthink because... they're autistic-spectrum nerds. XD;; (Eisman is a socially awkward contrarian and comic-book geek, Burry is full-out Asperger's and named his investment firm after a Shannara novel. The other three... are kind of Liberal hippie slackers by nature I guess which is worse than Asperger's if you are in high finance lmao dying) Though it's probably more like, autistic-spectrum dudes in obsession mode are more likely to have the gumption to read volumes of fine print and make sense of it; and for that matter are probably a dime a dozen among the quant population to begin with. I mean, Lewis doesn't seem to have bothered to interview "Lippman's Chinese quant" Eugene Xu (instead electing to run with the racist gag he was handed), but dude doesn't sound like the life of the cocktail party, yanno?
EXECUTIVE SUMMARY: would make an excellent movie.
Reading this made me remember the one accounting class I took, very early on in my MBA, when I still took notes on the culture-clash aspect of the experience. XD In his introduction the professor talked about accounting as if it were an epistemological pursuit... In retrospect mid-2007 was probably a weird time to begin studying finance and accounting with practical examples from real corporations' annual reports. XD; It makes it harder for me to assign blame for rampant groupthink, because I clearly remember that feeling of having no reference for comparison except what "everyone else" was doing, and all the companies had these tottering towers of leverage on their balance sheets left over from buyouts. Among other things. Our big end-of-term project was to take apart Hertz's numbers (the team picked the rental-car industry) and make a lending recommendation. We squinted and squinted and it looked crapola no matter what. Finally we asked a second-year finance-stream student and he said, equably, "You can refuse to lend them more money if the numbers look bad. Maybe the company is bad."
Amazing!
Of course, Hertz is still in business, so what do I know? Not much, clearly.
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you probably know more than most, actually
Date: 2010-06-28 06:47 am (UTC)usually, the bigger the corporation, the longer it takes to go down; see: enron, barings, anything with layers of bureaucrazy and/or many subsidiaries to fudge the accounting with.
also i love you for that summary of the quant conundrum. finance loves them, the rest of the world.... probably doesn't!