Non-Fiction: “The Big Short” by Michael Lewis

Big Short Revise 011316_978-0-393-07223-5.inddSecond on my list of Oscar-nominated titles to read was The Big Short by Michael Lewis. This film was the early front-runner for Best Picture, until it was overshadowed by Spotlight (and rightly so) and sadly, by The fucking Revenant.

No, I will never not refer to that movie in any other way. Go fuck yourself with a bear, Leonardo DiCaprio.

As you can tell by re-reading my review for The Intern’s Handbook, I had wanted to read The Big Short since at least November 2015. I mean, a movie starring Steve Carrell, Brad Pitt, and Ryan Gosling, and directed by the same guy who wrote and directed Movie of My Heart, Anchorman? And it’s about the housing crisis? Uh … sign me up, because I’m an even bigger nerd than I thought I was? But thanks, Barnes & Noble, for not believing in having a very organized and structured non-fiction section. Although serious thanks do go out to the Yarmouth Library, for having a copy that I could read.

Long-time readers of That’s What She Read will also recognize the author, Michael Lewis. He wrote Moneyball, another Oscar-nominated film which I enjoyed. With Moneyball, I watched the movie first and then read the book, so I was a little surprised – but pleased – when the book wasn’t as linear as the movie made it out to be.

In Moneyball, Mr. Lewis would use one chapter to tell the story of Billy Beane, the manager for the Oakland A’s who, using some new-fangled notion called “Sabermetrics,” was able to turn one of the most languishing teams in the American League into a World Series contender. That same Sabermetrics led the Boston Red Sox to winning the 2004 World Series. But anyway, one chapter would be about Billy Beane and his quest to transform the A’s; the next chapter would either be an in-depth look at another one of the players on the team, or a more detailed explanation about the math and statistical analysis that makes up sabermetrics. Billy acted as our guide, for lack of a better term: we learn about how he uses sabermetrics, we see his goals and his hopes, we see his struggles, and we see his successes. The math stuff falls by the wayside, because we the reader are following a hero on a journey.

The Big Short follows the same pattern, mostly. This time, our hero is a bunch of different Wall Street bonds-men. They interact with the housing market in different ways, but their stories are surrounded by the intricate and, at times, incomprehensible financial functions that all contributed to the housing crash.

I’m going to attempt to see if I can remember the financial stuff, but I’ll get into how I think the film was a better vehicle for understanding this stuff in a minute. Anyway. The housing market was always stable: housing is an actual need for a human, and while there may have been dips and spikes, there was never a crash like what we saw with stocks in 1929. People invest their equity in houses, and those mortgages were the base of the bond economy for decades.

Until someone figured out that they could package mortgages into a bond on its own. The banks would sell the ownership of their mortgages to these bond companies and turn packages of mortgages into a single bond item, called a CDO. A CDO was made up of tranches, which —

Look, I work with taxes all day, and I’ve come to identify myself as a big ol’ nerd. But this stuff is totally beyond my ken. I may have an accounting and finance degree, but that’s because at the time, that’s the only way I could get the accounting degree (thanks, USM!). I took a total of two finance classes: Basic Financial Management, and International Financial Management. They were taught by the same professor, who was a horrible teacher. Made us buy a $150 textbook, told us to read it and do the homework, but never taught from the textbook, and never went over or even collected the homework. The only reason I got a B in Basic Finance is because my graphic calculator had a finance function, so I didn’t have to remember any fancy equations.

And I maintain that the only reason I got a C- in International is because the professor really didn’t want me to have to teach me again. Because seriously, I skipped a lot of classes and flunked at least one test. No amount of studying was going to make me understand puts and libors. So, I do have to thank him for Charlie’ing me out, because otherwise I’d still be in college.

[Puts and libors = the only things I remember from that class. To clarify: just the words, not the concepts. I have no idea what they mean.]

ANYWAY. Mr. Lewis really knows his shit – he worked on Wall Street, after all. So the book is rich with information on just exactly how the Wall Street firms – especially AIG, Deutsch Bank, and Bear Stearns were able to con all of America. The stories about the bankers – Steve Eisman, the individual with the loudest personality, who set out to short the banks to teach them all a lesson about greed, was easily my favorite. (It didn’t hurt that his character was the one Steve Carrell portrayed under a different name.) Dr. Michael Burry, an ex-neurologist who created a hedge fund and then poured all of his clients’ money into his attempt to short the banks, was very compelling as a character, but was in it to prove himself right as opposed to fighting for something.

All of these guys – Eisman, Burry, Greg Lippman from Deutsche – they all decide to short the banks. Essentially, they’re going to spend a lot of money at first betting that the CDOs and other shenanigans the banks have gotten up to are going to fail. The banks laughed at them while they took their money; Dr. Burry’s clients threatened to pull out. But these guys all could tell that a crash was imminent, and when the crash occurred, they won big.

In spite of all the financial stuff which was, admittedly, over my head, the book was a very interesting read. I actually would bring it to the gym with me, and it made my 25-minute elliptical workout fly by. I read because I could understand just enough of the shenanigans to know that they are all fucking shady, and also, the people within the tale were very compelling to read about.

Having said that, I do think the film does an excellent job in explaining all of these financial concepts – and not just because they rely on people like Margo Robbie and Selena Gomez. But they have fourth-wall breaks where, either Ryan Gosling’s character, acting as the quasi-narrator, or maybe one of those random celebrities will take a couple of minutes and use a metaphor to explain one of these concepts. I think Mr. Lewis explained how a CDO is built three times within his book, but once Ryan Gosling’s character used a Jenga tower to demonstrate it, the concept made way more sense. And the concept of trading CDOs was well-illustrated by Selena Gomez and … the guy who was in her scene that I can’t remember.

I really do have to applaud Adam McKay and Charles Randolph on their adaptation of the book: the book is extremely dense at points with hard-to-understand financial concepts, and they were able to turn that into a compelling, human-driven David-vs-Goliath tale that was charming and comprehensible. Even this early in my Oscar!Read – I still have two books to go at this point – The Big Short was my front-runner for winning the category.

I was mightily pleased when it won. Not just because I felt it did the best job adapting its source material into a script – remember, not just the best film whose screenplay was adapted from a different source; the film with the best adaptation of its source material — but most importantly, because now I can say that Anchorman was written and directed by an Oscar winner.

Which makes Anchorman an Oscar-winning film. If only by association, and retroactively.

I’ll take it.

Oh come on — don’t act like you’re not impressed.

Grade for The Big Short: 3 stars

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