Book Review: The Big Short – Inside the Doomsday Machine

Do you ever get that feeling that a book was written just so you could read it? It’s a pretty self-centred emotion however I often find myself thinking this. If I linger too long, I wonder off into a world of the Truman Show, examining the things around me for cameras. I digress.

I just finished “the Big Short: Inside the Doomsday Machine”, by Michael Lewis. I’ll admit up the top, I’m a massive Lewis fan. The Blind Side was a Christmas present a couple of years back (thanks Dad) and since then I’ve scoured Longform and Amazon for the rest of his work. It might be clichéd for an Australian, American sports fan, but Moneyball is one of my top 5 books of all time (and this is my favourite ever long article).

Anyway, the Big Short filled my mind with vivid images of Manhattan, downtown suits of greedy bankers, Government officials at a loss of what to do and oddball good guy characters whose traits resonated with my urgings for how people (including myself) should behaviour but don’t. It seemed to reach into my mind and tell me a story that I would find both fascinating, emotionally compelling and impossible to imagine.

Yet the saddest thing about the Big Short, the most compelling thing about the book is that it is a set of cold hard facts. Every obscene dollar figure Lewis quotes, and there are many, are not fictional treasure chests but real dollars and cents, affecting not only investment banker holding shareholders but the very poorest across the Western world who continue to find themselves victims of credit crunches and sovereign debt crises.

Lewis has a method for his stories. By mixing words from others in the know  with his personal experience, he paints a picture that allows the reader to experience what occurred, instead of a typical account of history. At the same time, Lewis has an ability to frame a story so you know what’s going on from the very start. “Even on Wall Street people think he’s rude and obnoxious and aggressive” is a description given to one of the books alternative heroes. This comes very early in the book, slamming home the theme of the book. Namely, however rude, obnoxious and aggressive you think ‘Wall Street’ is, it’s worse.

The star of the Big Short is undoubtedly Michael Burry, a one eyed loner, who manages to spot the coming Global Financial Crisis in 2004 and transforms his investment portfolio from finding value in companies through painstaking analysis to basically placing a multi-trillion dollar (one-sided) bet against the viability of the institutions of American finance. Burry is a man who lives in a dark world, removed from his investors and seemingly his family. After Lewis produces a 101 to the world of Credit Default Swaps and the bond market (a remarkable feat achieved in about 5-6 pages), he uses Burry as a proxy to the world of financial markets. He is obsessed with fairness and presented to be completely honest. He communicates in lengthy emails as opposed to pithy statements designed influence stock prices. These are traits which the reader immediately admires. They are also easily manipulated as Burry struggles to initially establish his ability to bet against Wall Street.

The Big Short gathers four of these individual stories, fleshing them out at the expense of financial data and deep analysis of the functionality of Wall Street. Which is a good thing. Eventually they are interwoven through the years of 2006 and 2007 where the Western world essentially rubs it’s hands with glee at the economic bounty only to have it dissipate in an instant, relying on everything that is anathema to it’s existence, the Government, to bail out companies deemed to big to fail.

In perhaps the best part of the book, Lewis describes the subway trip of a young man as he makes his way to work. As the man people watches, he outlines the history of change that occurred to the finance world by the transformation of his daily commute. As the financial crisis takes it’s toll, whole genres of people vanish from the train as their jobs cease to exist.

It is an apt conclusion from a Wall Street perspective. However it also showcases the biggest weakness of the book, that is the inability to see past the realm of the finance and into the wider world that was affected by it. Apart from passing references to some blue collar workers who own multiple houses at the top of the boom, the ten’s of millions of people who were seriously harmed by the greed of Wall Street are not mentioned. The misery and dysfunction of home foreclosure is the very end part of the GFC in the western world.

While Lewis obviously feels shame that he was ever part of such an industry and the fact you can sense his anger flowing from the pages about the lack of responsibility, it feels like an empty conclusion. The bad guys end up with protected jobs and large pay packets. The good guys end up with many times what they invested yet this sits uncomfortably with them or they cannot handle it.

Perhaps it had to be this way. An empty conclusion because as I had to keep reminding myself, this is no work of fiction but recent history that swept through western society. A recommended read.

One thought on “Book Review: The Big Short – Inside the Doomsday Machine

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