21st March 2010: Bloomberg on Michael Lewis and The Big Short

Wrote two pages for PhD draft on Alastair Johnston‘s generational model of strategic culture analysts in security studies and international relations theory.

Cover of

Image Source: Amazon.com

Michael Lewis on Bloomberg‘s ‘For the Record’ to promote his new book The Big Short: Inside the Doomsday Machine (New York: W.W. Norton & Company, 2010). Amazon’s #1 book although the reviews are affected by end-user problems with the Kindle  version. Lewis clearly has had extensive media training.

Major points that Lewis makes:

The five main people that Lewis profiles are outsiders — stockmarket analysts rather than bond market specialists — who had to learn about the subprime mortgage market in order to track stocks that they were interested in, and who then decided to short the market.

Financial innovation should be regarded with some skepticism – we can see examples that led to greater inefficiencies rather than more efficient markets, so some innovation can have a downside, and this may be clear only in retrospect. Lewis believes collateralised debt obligations should be more transparent, i.e. traded on exchanges and clearinghouses, so that all parties can manage their counterparty risk.

Financial service firms are now more professional than what Lewis saw at Salomon Brothers during the late 1980s. Yet Wall Street is now far more cynical: bonuses, incentives and hypercompetition have eroded the partnership ethic that keeps these firms stable.

Reviews of The Big Short: The Big Money, Washington Post.

A 20th anniversary piece on David Lynch’s Twin Peaks has a couple of interesting anecdotes on how Lynch dealt on-set with his actors.

Roger Lowenstein asks: Who needs Wall Street?

John Kay on oblique decisions.