The End of Wall Street (Liar's Poker author) | Hacker News Reader

The End of Wall Street (Liar's Poker author)

portfolio.com

112 pointsalecco34 comments

Joel Spolsky, or maybe Steve Yegge (or maybe both), wrote an article once about how you should always understand your business at a level of abstraction lower than what you actually deal in. If you write in C, know what a C compiler does. If you sell clothes, know something about your distributors. And so on.

Does anyone else think this may have all been avoided if investors had followed that rule? If you trade C.D.O.s, know what they're made of; if you trade mortgages, know who they're sold to?

Or maybe nobody knew this because it was deliberately hidden. I'm just assuming that on this vast a scale, it's more likely incompetence than corruption.

Sufficiently advanced incompetence is indistinguishable from corruption.

Insane and hilarious:

He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number.

I find that almost impossible to believe.

From an intellectual point of view I do too.

When I read the news I'm sure it's true.

I mean, what if there's a sqrt or something like that in the model. Imaginary numbers are fun to pay off, but no fun to receive :)

Also: perhaps the model was built up using empirical data and they just never really had a chance to update the model when home prices were going down... I don't find it all that weird for them to produce data-driven forecasts ;)

Single-page link: http://www.portfolio.com/news-markets/national-news/portfoli...

The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed

and the exact same thing will happen again. symptoms will be treated, root causes ignored.

Michael Lewis is one of my favorite writers and this article exemplifies why.

I highly recommend Liar's Poker even if you only have a passing interest in finance. My favorite exchange from the book went something like this:

>Boss: I thought you said you spoke French

>Lewis: No, that's just something I put on my resume.

The slayed Bull picture alone was worth the click.

It seems to me that when you make money by investing, you can never really know if you are lucky or smart. But of course, we'd rather see ourselves as smart, and the ones who see themselves as lucky are not going to want full-time jobs on Wall Street.

So if a bunch of people make investment decisions over and over again and get rich (or make their employers rich), they will see themselves as very very smart. When the market reverses and wipes them out, most of them will see themselves as very very smart people who just had a little bit of bad luck.

Thus, one damn bubble after another.

I recommend that Barack Obama give Steve Eisman a role in his team of economic advisers.

This is really very good, especially if you read Liar's Poker (makes me want to re-read it). He even meets up with Gutfreund which makes for interesting reading.

I'm very glad that I read this. It put the financial crisis into a narrative that was easy to understand and interesting

Great read. I too recommend Liar's Poker if only for its inside look at how Lewis Ranieri created the mortgage backed security market that fueled our economic downturn.

It isn't explained in depth but it's interesting to see how Ranieri fought for it from within Solomon Bros.

Man I wish I could write like Michael Lewis.

agree. best article i've read in 2008, hands down. phenomenal prose, somehow he seems to write in a way that could make any subject compelling. This is what the author of Bringing down the house should aspire to be.

Read all his books :)

I have; even the painfully dated "Next: The Future Just Happened"; Lewis is even worth reading when he's writing about Marillion, the UK's answer to Kenny Loggins.

If you're an entrepreneur and you haven't read Moneyball, [insert snark here].

I was disappointed by The Blind Side, his football book, but it was at least well-written and enjoyable.

I even have a huge bound volume of classic econ texts with his commentary in it. I will probably never really finish it, but I'm a huge fan and a completeist, so, he got me.

"The New New Thing" is among his best, and the most directly relevant for the HN crowd -- a really insightful look at Silicon Valley history in the mid 90s and the story behind SGI, Netscape, and Jim Clark.

Really? I liked The Blind Side. Wasn't a fan of Coach.

I liked The Blind Side, but found it more entertaining than insightful, and I think he papers over the most interesting conflict in the story --- whether Michael Oher's benefactors were in fact gaming the college football recruitment system.

Great article, not sure about the title though. A classic story of Wall Street channeling money from rich idiots to smart young people though.

Well, it's the end of the independent Wall Street Investment Bank. They're all gone.

The avenue may be gone, but there will always be rich idiots and smart young people to take their money.

Smart young people keen to become rich idiots?

The question is - how much of everyone else's money will go down the drain to pay for these financial gigolos and their obscene money fetishes.

Great article... just what I didn't need to be spending time reading this morning! Lewis does anecdote journalism in a riveting way.

Indeed. I apologize for posting this. It consumed a good 2h reading for me if you include the jumps to searching and reading about concepts or names I wasn't familiar with. :)

the problem was a feedback loop. everyone thought of course these guys knew what they were doing, otherwise why would people give them money? and promptly give them some money...etc. getting one big client is hard, getting the next ten is much much easier.

Sounds like an excerpt from his next book, Panic, due December.

http://www.amazon.com/Panic-Story-Modern-Financial-Insanity/...

Is it reasonabe to say that extensive arbitrage made no holes left to exploit?

arbitrage failing to fix a hole is a sure sign of wrongful government intervention. for example: the yen carry trade that made and is now breaking iceland. in a real free market the arbitrage between yen interest rates and ISK interest rates would have eventually closed. instead, governments forcibly controlled interest rates.

superb!!

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