“The line between gambling and investing is artificial and thin. The soundest investment has the defining trait of a bet (you losing all of your money in hopes of making a bit more), and the wildest speculation has the salient characteristic of an investment (you might get your money back with interest). Maybe the best definition of ‘investing’ is ‘gambling with the odds in your favor.’ The people on the short side of the subprime mortgage market had gambled with the odds in their favor. The people on the other side – the entire financial system, essentially – had gambled with the odds against them.” (The Big Short – p256)
Title: The Big Short
Author: Michael Lewis
Publication Date: 2010
Origin: I popped into Chapters/Starbucks for a coffee, and saw The Big Short sitting in the bargain books section. Having thoroughly enjoyed every Michael Lewis article and book I’ve read, moments later I exited with a coffee in one hand and a book in the other.
Summary: Lewis takes us on a tour of the 2008 subprime mortgage crisis, from the perspective of the folks who saw the crash coming and positioned themselves (and their portfolios) to make insane amounts of money. Through this narrative, he explains the causes of the meltdown, recaps the warning signs that were obvious to some, illustrates the hubris endemic in Wall Street, and shines a light on the widespread corruption (and/or incompetence and/or apathy) that led to the largest financial disaster of recent times.
My Take: While at times I found the repetition a bit tedious and the overlapping timelines a bit tough to follow, Lewis has done a great job adding some compelling new perspectives to the discussion. A part of me takes comfort knowing that there are at least a few people on Wall Street who know what they’re doing. But another part of me is *massive negative emotion* that so many people consciously dismissed the warning signs for no reason beyond the thinking that the magnitude of the potential disaster was so unimaginable that the disaster itself must have a probability of zero. Of course, it could also be that they just didn’t care, which is arguably more upsetting.
Read This Book If: You liked Inside Job or related documentaries, or simply want to confirm your belief that the financial industry and markets are just one giant carnival game designed to take advantage of
suckers everyone. If you’re an idealist and/or live in a wonderfully insulated bubble, then you might want to skip this one because reading it will make you cry.