Book Review: Liar's Poker

A few months back I reviewed Michael Lewis' The Big Short. Shortly thereafter, a few friends recommended his earlier work, Liar's Poker. I got around to reading it last week.

Liar's Poker was Lewis' literary debut, and tells the account of his time as a Wall street trader at Salomon Brothers, where he spent several years.

The book talks in detail about the hiring process, culture, and career path at the firm, and in the process paints an accurate picture of the dog-eat-dog harsh culture in these firms. It would strain credibility for me if I didn't have a good friend who worked at such a firm and who has shared countless stories that mirror Lewis' account. It then goes on to talk about the rise and fall of the firm during rushes around gold-rushes in the mortgage security and junk bond markets.

While not as detailed an account of the systemic flaws of modern day markets & market regulation as The Big Short was, it does go into enough detail in the style that Lewis has become famous for. Namely, taking complex and dry topics and making them engaging and digestible.

Where the book shines though, is in the portrayal of the personalities and the culture of trading firms. Characters given pseudonyms such as "The Opportunist" and "The Human Piranha" should give you an idea of why so many who work in this business don't last more than a few years.

Liar's Poker

Book Review: Panic!

I really enjoyed Michael Lewis' The Big Short, and so when I saw this previous work at the local library I picked it up.

Panic: The Story of Modern Financial Insanity, is *edited* by Lewis, but is really an anthology of articles from WSJ and other financial news outlets. The book takes a look the last few big financial market panics (the 'black monday' of '87, the Russian crisis, the southeast Asian currency crisis, the dot-com bubble, and the recent real estate crash) and takes select pieces of reporting from before, during, and after each of those panics.

When viewed as whole one is led inevitably conclude three things:

1. That no matter how many instances of "irrational exuberance" we go through, we never learn. We have innate ability to believe that this time it's different. The ability for amateur investors, professional investors, economists and reporters to collectively lose touch with reality and start drinking each other's kool-aid is *amazing*.
2. That after panic hits, after the bomb goes off, and when people finally pop their heads out again, everyone has an equally amazing ability to claim that they knew this was going to occur, and that they called it ahead of time. This level of revisionist history is somewhat akin to how every friend you have that went to Vegas has convinced themselves that they returned "up a couple bucks" (they didn't. Somone is paying for those hotels).
3. That in both the run up to the peak and in the panic afterward, the press is not only not objective, but possibly an even greater contributor to the mob mentality than the investors they later blame for it. Examples from the dot-com era here were an awesome example, buying hook-line-and-sinker the pitch that fundamentals no longer applied and that it was about a land grab now in favor of user revenues later - the press *loved* this story and sang it to whomever would listen.

Some critics of the book claim that the analysis here isn't deep enough, and that solutions to the crisis (or future ones) weren't offered or expanded on. However, I don't think this is the point. I think the book is a valuable one if only to view how important it is to lift your head up from whatever current trending thought there is and ask yourself if there isn't myopic group think happening once again.

In this sense, the book serves it's purpose, and so provides insight as well as a fun little history lesson.

Panic: The Story of Modern Financial Insanity