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: The Big Short

I ripped through The Big Short: Inside the Doomsday Machine in a few days. I'd been told it was a easily digestible take on the recent financial crisis.

What I didn't expect was something that frightened me like a horror novel. For such a dry topic, he really turns it into a page-turner.

Some folk have critiqued the book for over-simplifying the topic. Little blame is placed on government, for example. The blame is mainly placed on improperly structured incentives and lack of risk prevention systems in Wall Street firms. These concerns are probably well founded. Nothing is so cut and dried, for sure.

That said, it's a good lesson in how companies - especially large complex ones - can get into real trouble when the left hand doesn't know what the right hand is doing, and in how leadership has a responsibility in both understanding their businesses and making sure the systems are in place to make sure those businesses don't run off the rails. Bottom line: If the buck stops with you, do you understand your balance sheet, and do you feel confident that the people and systems that report information into it are honest and correct?

I recommend the read, though be forewarned that you may find yourself pulling your money out of your mutual fund afterward and shoving it under your mattress.

The Big Short: Inside the Doomsday Machine