The Big Short: Inside the Doomsday Machine by Michael Lewis
Published by W. W. Norton & Company
From the publisher:
When the crash of the U.S. stock market became public knowledge in the fall of 2008, it was already old news. The real crash, the silent crash, had taken place over the previous year, in bizarre feeder markets where the sun doesn’t shine and the SEC doesn’t dare, or bother, to tread. Who understood the risk inherent in the assumption of ever-rising real estate prices, a risk compounded daily by the creation of those arcane, artificial securities loosely based on piles of doubtful mortgages? In this fitting sequel to Liar’s Poker, Michael Lewis answers that question in a narrative brimming with indignation and dark humor.
Most Americans understand that the housing bubble was a big factor in the stock market crash of 2008, yet I would bet that very few have a real understanding of what took place behind the scenes on Wall Street that led up to the catastrophe. Very few people realize the details of how incredibly risky deals were being made by greedy investment banks who were out for a profit no matter what the repercussions could be. What’s crazy is that the investment banks at the time, and the employees who made important decisions in this area, didn’t fully understand what they were doing either. The Big Short is an incredibly important book, one that traces the timeline leading up to the crash, highlighting key players on both sides, and making it as crystal clear as possible to Americans what went wrong and how a similar catastrophe can be prevented in the future.
I loved how Lewis explained what happened using as simple, layman-term language as possible. Bank speak can be very confusing – there’s an acronym for everything, what something is called often sounds like the opposite of what it actually is, and the information presented is simply not something most people are familiar with from their day to day lives. Yet Lewis took everything that could be confusing or complicated and carefully explained it so that the average person wouldn’t have any trouble understanding what really happened, who the key players were, and why. And for those more familiar with finance and banking terminology and history, fear not – I personally fall into this category, and a lot of what Lewis presents here was brand new information to me. The fact that the book has such wide appeal, both for those completely new to banking/finance stuff and those well-versed in the industry, is a huge plus and lends the book really well to recommendation.
Simply put, I do think that every American should read this book. If, however, reading it just doesn’t sound like something you can commit to, the movie that recently came out with the same title was very good. I didn’t LOVE the movie like I did the book but I think that the movie stayed very true to the book and the key points were highlighted effectively. Also, the acting was superb.
Whether you read the book or see the movie or both, The Big Short is something that is not to be missed. When catastrophes like the crash of 2008 happen, as citizens and consumers the only thing we can really do is look back and try to understand why, so mistakes of the past don’t repeat themselves. With The Big Short, that understanding is made available to everyone in a way that is not difficult to grasp. Highly recommended.