Identity Theory is no more, apparently, which means death for the two book reviews I had pending there. (It also means no more free shots at the Powells.com Review-a-Day slot. Just when I was getting used to it!) I guess I’ll post them here, for lack of any better options: book reviews go stale fast. And does anything say “game changer” like an unpublished book review that the author posted on his personal blog?! Reel, mortals …
Orphaned Review of Michael Lewis’s The Big Short
We all were waiting for someone to explain, definitively and clearly, what happened to the world’s money in 2008, and while we waited it kept on happening. As I write this*, the newspapers (a metaphor, these days) are full of the Goldman Sachs boys’ most recent evasions of Congressional blame for having nearly wrecked the markets (another metaphor). Between their shamelessness, and Congress’s cowardice, and our inability to attend to all the explanations that events like these require, we can expect to see sequels and reboots of this horror movie before the reviews of Part One are in.
Nevertheless, Michael Lewis’s attempt at an explanation is valiant and necessary. Lewis has a reputation as the best kind of reporter, someone who can successfully explain complex social changes with the use of rich characterization and revealing anecdotes. He has Tom Wolfe’s keen eyes and winning flippancy, but lacks, thank God, Wolfe’s snobbery, his talent for siding with Goliath against David and then asking us to admire his contrarianism. This sense of humor (and humanity) makes him an ideal writer on finance. Indeed, if The Big Short has any flaw, it is, surprisingly for a book about credit default swaps and bond trading, an overreliance on its human characters. Lewis is so good at exposition—which in this case means rendering understandable the behavior of impersonal economic forces—that I really wasn’t as interested in his analyses of the characters of actual persons, such as the socially graceless financial analyst Steve Eisman or the one-eyed, Asperger’s-afflicted bond trader Michael Burry.
These two were among the first people to realize that crisis was in the offing, and they, along with a handful of others (a prototypical greedy salesman; a group of hippy-dippy survivalists who establish a capital-management firm), made billions betting against the solvency of the American economy. They provide the book with its angle. Rather than asking, as so many have, why “no one” saw the economic collapse coming, Lewis, with Swiftian self-assurance, assumes a general incompetence on the part of Wall Street generally and examines the few who got things right. His cynicism is based in personal experience. Lewis’s first book, Liar’s Poker (1989), was a memoir of the years he spent cluelessly accruing money (while losing other peoples’) on Wall Street, engaged in tasks of “no social utility.” He wrote it as a call to arms, but a generation of college students have, he tells us, read it as a How-To-Succeed-in-Business manual.
The prevalence of that kind of stupidity is, finally, the message of this book. The Big Short demonstrates, again and again, that the primary problem with our Masters of Capital is not greed but incompetence. (In so doing, by the way, it refutes the predictable conservative charge that feckless poor people caused the crisis. It’s clear from Lewis’s telling that subprime mortgage lending was a marginal part of the economy until, in the late 1980s, bond traders figured out how to make large short-term gains from such loans, thus creating an incentive for huge sums of money to be thrown at those who couldn’t repay it. Thanks, fellows.)
We have been in the habit of justifying Wall Street in Darwinian terms: their methods, arcane and destabilizing as they are, will always lead capital (by the nuts) to those places where natural selection, in the form of consumer need, requires it. They aren’t nice people, but—like Kara Thrace or Jack Bauer—they get the job done. What becomes overwhelmingly clear from Michael Lewis’s account is that, as far as the bond market is concerned, there is no “job.” Bond traders’ behavior has no justification, Darwinian or other. Their “financial products” not only had no relationship to economic reality but created incentives for ignoring that reality. These products were like cancers, which create an environment conducive to the production of more cells nobody needs. Or they were like bad metaphors, which, as metaphors tend to do, proliferate, creating further, complementary metaphors, trapping more and more of the world within a faulty conceptual scheme. It is folly to expect repentance from these people; like the ex-Nazis that history shakes out of hiding every few years, they will never apologize, because they have grown accustomed to living in a fiction. The question for all of us is how not to live there with them.
*Late April, 2010.
Coming next week (after I do some light re-editing): A review of Marilynne Robinson’s amazing Absence of Mind that will be summarily ignored, like the book.