WW Norton, 2010, 320 pages, 36.95$C hc, ISBN 978-0393-07223-5
At the height of the 2008 financial crisis, the old saw “if you’re not outraged, you’re not paying attention” came back as a preface to nearly any explanation of the situation. A systematic accumulation of greed had created a ludicrous situation that was destined to fail and when it went, even the so-called smart guys of Wall Street seemed oblivious to the problem facing them. When Bear Sterns and Lehman Brothers disappeared, the cause of their problem seems obvious enough—financial speculation based on risky loans. But why did that problem become such a problem? Didn’t anyone see it coming?
As it turned out, plenty of people saw it coming. Many people involved in real estate in the mid-2000s realized that there was an unsustainable bubble going on, fuelled by ridiculously generous mortgages given to people who couldn’t possibly repay them. A much smaller number of people, however, actively bet on the collapse of those mortgages and associated speculative instruments, and it’s their story that Michael Lewis tackles in The Big Short.
The book revolves around four characters—and “characters” is the right word to describe people such as Michael Burry, a mildly autistic medical doctor turned investment managers who pieced together the coming crisis from his own painstaking research. Or Greg Lippmann, who heard about the crisis and became determined to make a profit from it. Or Steve Eisman, a morally righteous crusader who saw in the coming collapse of the housing market both a vindication of his own cynical views and the ghastly realization that he was still an idealist at heart. Or Charlie Geller, a boutique investor specializing in speculative pessimism, who made even-crazier bets against the fundamental values of the American economy. (Notably absent are any extended mentions of the rather most famous John Paulson, most likely in the interest of allowing four lesser-known stories to be told.)
As a lens through which to see the 2008 financial crisis, adopting the viewpoint of those who actually benefited from the events, The Big Short takes an ironic stance toward the usual triumphalism of business stories. Sure, our heroes made money … but at the expense of whom? As they themselves agonize over their gains, the book ends on an unusually glum note. (Although one character’s interest in drinking water portends far worse to come.)
Most readers will now come to the book from the movie adaptation, and so it’s noteworthy to point out that much of the book is, indeed, quite faithful to the details of the book. That “zero!” hand gesture at a Las Vegas conference, followed by “a call from my wife”? It happened. That stripper with five houses? It happened (in Vegas rather than Florida, but still). While the film does a magnificent job at adapting the specifics of the book into a cinematic narrative, adding extra layers of visual irony along the way, it remains surprisingly faithful to its material, which is remarkable given the complexity and seriousness of the topic and Hollywood’s tendency to dumb down as many things as it can. Strong source material can be lauded for inspiring strong adaptations, and that’s what we have here.
The Big Short is, in other words, a really good book. It’s infuriating, enlightening, funny and gripping at once. The ironic tone is almost the only sane response to an insane situation … and it back up a powerful message that greed is powerful enough that it snares the smart and the dumb alike. No greater ingenuity exists than what is required to convince ourselves of our righteousness.