OK, so the thing about Going Infinite is that it might differ in degree from other Lewis books, but it does not differ in kind. Lewis is a very gifted story teller (and not just when writing; he is also a very entertaining speaker), but he is not a historian, he is not an economist, he is not a political analyst, he is not actually a journalist, and you should never, ever mistake him for any of those things.
The Big Short is an excellent case in point. Lewis presents Michael Burry as an "interesting, semi-obscure individual who sees something that others don’t, struggles against the perverse incentive structures of the status quo, and ultimately turns out to be ahead of the curve". The only problems are that:
1) Michael Burry was not an unusual individual.
2) He did not struggle against the perverse incentive structures of the system, but rather was a vital component of those incentive structures.
3) See 1). He was not ahead of the curve; the curve was made of Michael Burrys.
The reason we had sensational stories like immigrant strawberry pickers getting subprime mortgages was that there was not enough raw material for CDOs to meet the demand. But it wasn't practical to meet that demand with ever dodgier borrowers; instead, the solution was the "synthetic" CDO. The assets of a synthetic CDO weren't subprime mortgages, they were credit default swaps on mortgage bonds. Sound familiar? Burry was making his bets by supporting the creation of CDOs. You should know that synthetic CDOs accounted for about 2/3 of all the problem CDOs. It' the "side bet" scene in the movie, except that Burry was the side bettor, and the action on the side was twice as big as the "real" action.
Now sure, Burry didn't do anything immoral or illegal, the way SDF did. But the fact is that millions of people would have been able to keep their homes, their jobs, or their money had the likes of Burry never existed. Doesn't make for such a good story though, huh?
In fairness to Michael Lewis, at a time when finance writers in the NYT were writing about how the US mortgage market wasn't big enough to cause *too* much damage to the US economy, Michael Lewis did indeed understand that synthetic CDOs changed all that. Synthetic CDOs allowed the creation of massive amounts of bad debts, effectively amplifying the size of the bad mortgage market.
He also covered another big part of the story, which is how so many systemically important banks managed to get caught holding the bag, instead of dumping the crap on ignorant retail investors, ie. their clients.
The other fun part of The Big Short was when the folks who had the winning side of those bets realized that even though they were right, the counterparties were *so* wrong that they might go bankrupt before they paid off the winners.
Also, I'm not sure that I believe that "[T]he fact is that millions of people would have been able to keep their homes, their jobs, or their money had the likes of Burry never existed. "
I'm not sure I buy that, if by "the likes of Burry" you mean people who bought credit default swaps. The fact is that millions of people had mortgages for properties that they could never have afforded, even in a world where there were no synthetic CDOs. Housing prices were in a bubble, and when that bubble popped, those homeowners would have been toast anyway.
Well, I suspect that Bitcoin's price keeps moving up simply by people laundering money; they're the only people who'd consistently be happy paying a 5% premium over current prices.
I don't feel moral outrage due to people making money on a bubble, but I'm not happy that people are aiding others in commission of crimes (like ransomware, and all the stuff North Korea does to evade sanctions).
North Korea "evading sanctions" is perfectly good and non-criminal according to North Korean law. The lawmakers make the crime. It is no less criminal in an ethical sense to set up a huge market bubble and profit from the burst (of which the ignorant parties have no way to know, unlike inside traders), than to rob somebody point blank.
FWIW, I liked the "preamble". The best book reviews are the ones that talk less about the books per se (i.e., information that I can find on the back cover) and more about what the books made the review writer think about. I feel like that's what you were doing at the beginning of this review, and it's the best part.
Dec 23, 2023·edited Dec 23, 2023Liked by Dave Karpf
Some years ago, I read "The new new thing" and found it entertaining. Given my own experiences in Silicon Valley, some of Lewis's remarks about the dominant culture of the place strike me as accurate.
However, for some years, I've also known Lewis isn't necessarily a careful or penetrating observer. For example, in 2009, Vanity Fair published a piece of his about the banking crisis in Iceland, which weirdly claimed ordinary Icelanders had been tacitly complicit in the corruption and malfeasance that led to the crisis. At the time, I regularly read a blog (now sadly defunct) called The Iceland Weather Report, which was written (in English) by an Icelandic woman. She brought Lewis's piece to my attention with a post protesting its inaccuracies. I commented as follows:
"I read the piece, and I wasn't impressed - not one of Michael Lewis's better efforts, in my opinion. I found it bizarre that he wrote as if everyone in Iceland had been in on the 'action', when his own books ('Liar's poker', 'The money culture', etc.) depict the world of financial prestidigitation as freakishly disconnected from ordinary life or even ordinary banking. It stands to reason most Icelanders had no more awareness of what was going on in their financial institutions than most Americans had of what was going on in theirs."
So I wouldn't recommend reading Lewis if you're looking for deep insight.
Not that deep insight was really needed to recognize the "crypto" frenzy for the carnival of scams it was (and is, even yet).
Michael Lewis is apparently aware of the self-inflicted damage generated by his unwavering support of SBF and his attacks on Caroline Ellison. It looks like he's set out a reputation laundering campaign. Lewis was recently on the 'Freakonomics' podcast where Stephen Dubner did an excellent job of carrying water for him to toss on the blazing fire of his celebrity status. Didn't work. Hubris burns pretty fast.
This is a great breakdown of these three books. I'm excited to read the first two. Any recommendations on which to read first? I have only the vaguest "read the New York Times headlines, skimmed the articles" knowledge of the crypto bubble and the SBF debacle.
Dec 19, 2023·edited Dec 19, 2023Liked by Dave Karpf
Zeke Faux's book is great. A ton of fascinating new stuff in there and I say that as someone who has followed cryptocurrency from the beginning.
Edit to add: one thing I really love about Faux's book is that it doesn't really address the technical nature of Bitcoin or cryptocurrencies/NFTs at all except insofar as it's all happening on the Internet using software. Given the way it all played out that is totally appropriate; the grift is nearly all there is.
OK, so the thing about Going Infinite is that it might differ in degree from other Lewis books, but it does not differ in kind. Lewis is a very gifted story teller (and not just when writing; he is also a very entertaining speaker), but he is not a historian, he is not an economist, he is not a political analyst, he is not actually a journalist, and you should never, ever mistake him for any of those things.
The Big Short is an excellent case in point. Lewis presents Michael Burry as an "interesting, semi-obscure individual who sees something that others don’t, struggles against the perverse incentive structures of the status quo, and ultimately turns out to be ahead of the curve". The only problems are that:
1) Michael Burry was not an unusual individual.
2) He did not struggle against the perverse incentive structures of the system, but rather was a vital component of those incentive structures.
3) See 1). He was not ahead of the curve; the curve was made of Michael Burrys.
The reason we had sensational stories like immigrant strawberry pickers getting subprime mortgages was that there was not enough raw material for CDOs to meet the demand. But it wasn't practical to meet that demand with ever dodgier borrowers; instead, the solution was the "synthetic" CDO. The assets of a synthetic CDO weren't subprime mortgages, they were credit default swaps on mortgage bonds. Sound familiar? Burry was making his bets by supporting the creation of CDOs. You should know that synthetic CDOs accounted for about 2/3 of all the problem CDOs. It' the "side bet" scene in the movie, except that Burry was the side bettor, and the action on the side was twice as big as the "real" action.
Now sure, Burry didn't do anything immoral or illegal, the way SDF did. But the fact is that millions of people would have been able to keep their homes, their jobs, or their money had the likes of Burry never existed. Doesn't make for such a good story though, huh?
In fairness to Michael Lewis, at a time when finance writers in the NYT were writing about how the US mortgage market wasn't big enough to cause *too* much damage to the US economy, Michael Lewis did indeed understand that synthetic CDOs changed all that. Synthetic CDOs allowed the creation of massive amounts of bad debts, effectively amplifying the size of the bad mortgage market.
He also covered another big part of the story, which is how so many systemically important banks managed to get caught holding the bag, instead of dumping the crap on ignorant retail investors, ie. their clients.
The other fun part of The Big Short was when the folks who had the winning side of those bets realized that even though they were right, the counterparties were *so* wrong that they might go bankrupt before they paid off the winners.
Also, I'm not sure that I believe that "[T]he fact is that millions of people would have been able to keep their homes, their jobs, or their money had the likes of Burry never existed. "
I'm not sure I buy that, if by "the likes of Burry" you mean people who bought credit default swaps. The fact is that millions of people had mortgages for properties that they could never have afforded, even in a world where there were no synthetic CDOs. Housing prices were in a bubble, and when that bubble popped, those homeowners would have been toast anyway.
Well, I suspect that Bitcoin's price keeps moving up simply by people laundering money; they're the only people who'd consistently be happy paying a 5% premium over current prices.
I don't feel moral outrage due to people making money on a bubble, but I'm not happy that people are aiding others in commission of crimes (like ransomware, and all the stuff North Korea does to evade sanctions).
North Korea "evading sanctions" is perfectly good and non-criminal according to North Korean law. The lawmakers make the crime. It is no less criminal in an ethical sense to set up a huge market bubble and profit from the burst (of which the ignorant parties have no way to know, unlike inside traders), than to rob somebody point blank.
FWIW, I liked the "preamble". The best book reviews are the ones that talk less about the books per se (i.e., information that I can find on the back cover) and more about what the books made the review writer think about. I feel like that's what you were doing at the beginning of this review, and it's the best part.
Some years ago, I read "The new new thing" and found it entertaining. Given my own experiences in Silicon Valley, some of Lewis's remarks about the dominant culture of the place strike me as accurate.
However, for some years, I've also known Lewis isn't necessarily a careful or penetrating observer. For example, in 2009, Vanity Fair published a piece of his about the banking crisis in Iceland, which weirdly claimed ordinary Icelanders had been tacitly complicit in the corruption and malfeasance that led to the crisis. At the time, I regularly read a blog (now sadly defunct) called The Iceland Weather Report, which was written (in English) by an Icelandic woman. She brought Lewis's piece to my attention with a post protesting its inaccuracies. I commented as follows:
"I read the piece, and I wasn't impressed - not one of Michael Lewis's better efforts, in my opinion. I found it bizarre that he wrote as if everyone in Iceland had been in on the 'action', when his own books ('Liar's poker', 'The money culture', etc.) depict the world of financial prestidigitation as freakishly disconnected from ordinary life or even ordinary banking. It stands to reason most Icelanders had no more awareness of what was going on in their financial institutions than most Americans had of what was going on in theirs."
So I wouldn't recommend reading Lewis if you're looking for deep insight.
Not that deep insight was really needed to recognize the "crypto" frenzy for the carnival of scams it was (and is, even yet).
Michael Lewis is apparently aware of the self-inflicted damage generated by his unwavering support of SBF and his attacks on Caroline Ellison. It looks like he's set out a reputation laundering campaign. Lewis was recently on the 'Freakonomics' podcast where Stephen Dubner did an excellent job of carrying water for him to toss on the blazing fire of his celebrity status. Didn't work. Hubris burns pretty fast.
This is a great breakdown of these three books. I'm excited to read the first two. Any recommendations on which to read first? I have only the vaguest "read the New York Times headlines, skimmed the articles" knowledge of the crypto bubble and the SBF debacle.
Zeke Faux's book is great. A ton of fascinating new stuff in there and I say that as someone who has followed cryptocurrency from the beginning.
Edit to add: one thing I really love about Faux's book is that it doesn't really address the technical nature of Bitcoin or cryptocurrencies/NFTs at all except insofar as it's all happening on the Internet using software. Given the way it all played out that is totally appropriate; the grift is nearly all there is.
I think I will have to buy the first two. I am not sure I would even take a used copy of Lewis' work.
Oh I would recommend chapters 4-7 of a used copy for sure.
Just read it like you're watching a horror film. "Don't go into the garage alone! You're gonna get yourself killed!"
I will keep an eye out for a used copy with that recommendation!
It will surely be populating those Little Free Libraries boxes around suburban neighborhoods for years to come.
Perhaps it can be used in an outhouse if you run out of corn cobs
Likely to end up on the 'remainder' shelves soon (if it is not already there).
I bought Easy Money for a family member and this post helps me feel good about that choice.
“The belief that there is only one truth and that oneself is in possession of it seems to me the root of all the evil that is in the world”
― Max Born (1882-1970)
And also, just to say, that there really wasn’t such a thing as tulip bulb mania as commonly understood.
It’s entirely likely that no-one really lost any money and the number of people impacted was…about 6 people:
https://en.wikipedia.org/wiki/Tulip_mania
“ fewer than half a dozen who experienced financial troubles in the time period, and even of these cases it is not clear that tulips were to blame”
(great article btw!)
My fave finance YouTuber (Patrick Boyle) has a whole video on this: https://youtu.be/O1dbtWZFsIk?si=NWFlZISNFgeSo88J - I did not see the twist end coming.
Nice. And just in time for the holidays.
Small point, it was a tulip *bulb* craze, not a tulip craze.