Sunday, June 13, 2010

Book Review: Liar's Poker by Michael Lewis

I am reading Mr. Lewis's books all out of order, as this was his first and is my third. To my mild surprise, instead of just researching this book, like the other ones I've read, he actually LIVED this one. Michael Lewis worked for Salomon Brothers in the mid-1980s. You might think with all the financial turmoil of the last 3 years, and all the advances of the last 20 that this book wouldn't hold up and would be very dated, but it was disturbingly still on point. When Mr. Lewis was at Salomon was when mortgage trading was invented, as well as tranching and mortgage-backed insurance trading. The men (and it is 99% men) in this book may not have cell phones, but they'd fit in today perfectly.

The book begins with Michael Lewis getting a job at Salomon through the back door, almost accidentally. Their training class was notorious and tedious with breaks of hilarity and frat-boy pranks. The new trainees had to not just decide where they wanted to work, but then meet and befriend bosses in those departments, or they might be stuck working equities in Dallas, which was their definition of hell on earth. And once adopted, they were thrown in the deep end. They were given clients to call and funds to sell them, and the very first sale Michael made ended up "blowing up" the customer, which was not only accepted, but expected. Sometimes Salomon would end up owning bonds they didn't want, and to get rid of them they had to sell them to someone, even if that someone wouldn't want them either if they were knowledgeable. So a Salomon sales rep would sell them to a client, they'd then decline precipitously, and often that client would end up going out of business. You need balls of steel in this business. I know I could never do it (and I take comfort in that knowledge).

Late in the book Michael mentioned that he was simultaneously working as a journalist after hours, so if he were fired it would be okay, but I wish he'd discussed that further. Had he gotten the job at Salomon solely for the story? Had he always intended to do both? Did his experiences at Salomon lead him to journalism? I really wish he'd included a preface or afterward that discussed briefly the genesis of this book and if it or the job was the chicken or egg.

Luckily he's a smooth, straightforward writer who can make even the most arcane finance technicalities accessible for English majors. In the last three years instead of being scared and running away from the economy, I've bought a condo, increased my 401(k) investments, and lamented the dreadful interest rate of CDs. Nothing has scared me half as much as reading this book. (Watching the documentary, "Enron: The Smartest Guys in the Room" mid-book didn't help one whit.) One thing I learned: if you hear the word "arbitrage", run, run away! I'm certainly now well-prepped to watch Wall Street II. Liar's Poker was a great book that you do not have to be an accountant to enjoy, but you might need a bottle of Pepto if your own budget isn't in excellent order.


Jennifer Perry said...

This sounds fascinating and timely. Glad i found you thanks to Crazy for Books Blog Hop!


Carin said...

This sounds like an interesting book. I might have to pick it up. I read Web of Debt last year for my book club, and it was quite possibly one of the worst books I've ever read. It was poorly thought out and written and basically a conspiracy theory book. It had promise, but fizzled out fairly quickly. I would like to learn more about the financial system, so maybe I'll pick up this book. Great review!