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    The Big Short: Inside the Doomsday Machine
    The Big Short: Inside the Doomsday Machine
    The Big Short: Inside the Doomsday Machine
    Audiobook9 hours

    The Big Short: Inside the Doomsday Machine

    Written by Michael Lewis

    Narrated by Jesse Boggs

    4.5/5

    ()

    About this audiobook

    Featuring an Exclusive Audio Interview with Michael Lewis

    When the crash of the U.S. stock market became public knowledge in the fall of 2008, it was already old news. The real crash, the silent crash, had taken place over the previous year, in bizarre feeder markets where the sun doesn’t shine, and the SEC doesn’t dare, or bother, to tread: the bond and real estate derivative markets where geeks invent impenetrable securities to profit from the misery of lower and middle-class Americans who can’t pay their debts. The smart people who understood what was or might be happening were paralyzed by hope and fear; in any case, they weren’t talking.

    The crucial question is this: Who understood the risk inherent in the assumption of ever-rising real estate prices, a risk compounded daily by the creation of those arcane, artificial securities loosely based on piles of doubtful mortgages?

    Michael Lewis turns the inquiry on its head to create a fresh, character-driven narrative brimming with indignation and dark humor, a fitting sequel to his #1 bestselling Liar’s Poker. Who got it right? he asks. Who saw the ever-rising real estate market for the black hole it would become, and eventually made billions of dollars from that perception? And what qualities of character made those few persist when their peers and colleagues dismissed them as Chicken Littles? Out of this handful of unlikely—really unlikely—heroes, Lewis fashions a story as compelling and unusual as any of his earlier bestsellers, proving yet again that he is the finest and funniest chronicler of our times.

    Michael Lewis, “is the finest storyteller of our generation.”—Malcolm Gladwell
    LanguageEnglish
    PublisherSimon & Schuster Audio
    Release dateMar 15, 2010
    ISBN9781442300064
    The Big Short: Inside the Doomsday Machine
    Author

    Michael Lewis

    Michael Lewis is the host of the podcast Against the Rules. He has published many New York Times bestselling books, including Liar's Poker, The Fifth Risk, Flash Boys, and The Big Short. Movie versions of The Big Short, Moneyball, and The Blind Side were all nominated for Academy Awards. He grew up in New Orleans and remains deeply interested and involved in the city but now lives in Berkeley, California, with his wife, Tabitha Soren, and their children.

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    Reviews for The Big Short

    4.5/5

    342 ratings75 reviews

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    • 5/5
      Amazing book, a "must listen" to understand the financial system; plus, the narrator is excellent.

      1 person found this helpful

    • 4/5
      Recommended by Ira Glass, of This American Life, this is an interesting look at the people who saw the 2008 financial meltdown coming, and helped it along, while placing bets against the system. And eventually winning. So to speak.
    • 4/5
      Great story from the view of those who saw the sub prime mortgage coming and made money from it. It explained part of the financial meltdown in an easy to understand way. He also tries to explain credit default swaps and collateralized debt obligations.
    • 5/5
      This is the true story of a handful of investors who bet a relatively small amount of money in the mid-2000s that the housing market would collapse. It took approximately 2 years for their bets to pay off but they made a ton of money. They placed their bets by buying exotic financial instruments (specifically, credit default swaps on collateralized debt obligations, or "CDOs," backed by triple-B or lower-rated tranches of mortgage bonds) that the vast majority of people, including the Wall Street firms that sold them, didn't fully understand. Most people couldn't conceive of housing prices falling everywhere in the country at once and, as a result, Wall Street firms didn't have to do much to convince the rating agencies to give triple-A ratings to securities backed primarily by subprime mortgage bonds. Those triple-A ratings then gave everyone else an excuse to ignore the risks they were running. "Wall Street investment banks had somehow conned the rating agencies into blessing piles of crappy loans; . . . the machinery that turned the loans into supposedly riskless securities was so complicated that investors had ceased to evaluate risks." (p 243) Lewis describes most people on Wall Street as stupid rather than corrupt. "One of the reasons Wall Street had cooked up this new industry called structured finance was that its old-fashioned business was every day less profitable. The profits in stockbroking, along with those in more conventional sorts of bond broking, had been squashed by Internet competition." (p 172) The problem was that Wall Street CEOs didn't really know their balance sheets anymore and therefore did not understand the risks their banks were taking (and the regulators knew even less). As Lewis says, on page 177, "far too many people were taking far too many financial statements on faith." And, "the rating agencies had abandoned their posts . . . they were almost surely rating CDOs without knowing exactly what was inside them." Lewis thinks Wall Street firms took a wrong turn when they started to go public because that's when "they transferred the ultimate financial risk from themselves to their shareholders. . . . The shareholders who financed the risk taking had no real understanding of what the risk takers were doing. . . . All that was clear was that the profits to be had from smart people making complicated bets overwhelmed anything that could be had from servicing customers, or allocating capital to productive enterprise." (p 258) He also takes aim at the system of incentives on Wall Street that made even people on the wrong side of the housing market bet rich. "What are the odds that people will make smart decisions about money if they don't need to make smart decisions--if they can get rich making dumb decisions?" (p 257) And finally he points out that Wall Street firms may have disdained the need for government regulation in good times but insisted on being rescued by the government in bad times or, as he puts it, "success was individual achievement; failure was a social problem." (p 210) At the end, he quotes John Gutfreund, the former head of Salomon Brothers and his former boss, as saying "It's laissez-faire until you get in deep shit." (p 264) This is a well-written and very entertaining book but also a very disturbing one. The investors Lewis focuses on may have been smart but it's hard to see them as heros. They were able to see reality when most people couldn't or wouldn't and were rewarded by making billions of dollars but they made that money because the housing market collapsed and alot of people suffered. Wish this book had an index and a glossary and that the descriptions of the exotic financial instruments were a little clearer (but maybe that's impossible). I did really like it and would highly recommend it, but I think it would be easier to understand if you read a book about the big picture first (such as Chasing Goldman Sachs). 4 1/2 starts.
    • 5/5
      Reads as a Le Carré thriller on the financial world: I was sorry to have turned the last page and have used up all the excitement. Part of the thrill is of course that the story is true, and that the government instituted air into means of payment swindles, of which the latest extension is recounted here, may now have serious consequences for nearly all of us. (As Lewis makes clear, the guilty ones, in banking and in politics, will not suffer.) Heartily recommended - as entertainment, and as important information regarding the state of our banking system.
    • 5/5
      Excellent treatment of a complex subject. By presenting the subprime mortgage crisis from several different perspectives, Lewis makes it understandable to the non-expert audience. Confirms Jefferson's worst predictions about bankers: "I believe that banking institutions are more dangerous to our liberties than standing armies."
    • 5/5
      This is the best description so far of the inside story about the sub-prime mortgage crisis. Reading this book is like riding a time machine back a couple years, walking into the Wall Street offices and asking them, "What in the world were you thinking?" The story is told from the view point of several investors who were betting against the sub-prime mortgage industry. But there were so few other people who saw it their way that they kept second guessing their position because they couldn't understand why so few other people agreed with them. It's apparent that the vast majority of "experts" were totally oblivious to impending doom. The book tells of one individual who visits numerous investment companies trying to get them to bet against the sub-prime mortgage industry, but almost nobody was willing to believe him. He even had a complete power point presentation explaining how buying credit default swaps (betting against sub-prime mortgages) was a virtual sure thing. Still, he convinced few people.The book also tells of the owner of an investment company that shorted the home mortgage business, and the investors in his company wanted their money back. They thought he was crazy to bet against house prices continuing to go up. He refused to give their money back because he was highly leveraged and would experience large losses if he gave their money back. So the investors sued him. In the midst of this rancor the housing market collapsed and suddenly their investments increased 70 fold. In other words, a million dollar investment was suddenly worth 70 million. His investors had gone from a position of asking for a big loss to a position of receiving a tremendous gain. After it was over, not one of his investors apologized, said thank you, or said "You were right and I was wrong." The narrative of the book is structured to build suspense in the mind of the reader even though we all know what happens in the end. Michael Lewis did a good job writing this book. In the end he sums up by speculating why so many smart people were so stupid. It can be blamed on incentives and shedding of risks.
    • 3/5
      interesting read on who knew about the disaster coming with the mortage crises between 2000-2008. And how they figured out how to profit from it
    • 4/5
      As good as it gets. This is not a book you pick up because Lewis usually has an entertaining spin and attitude on any subject. You have to be truly interested in the mechanics behind the 2008 economic crash. I'd read God-knows-how many news stories and didn't realize that credit default swaps were *insurance* on the bond bundles of crapulous mortgages. And AIG was the initial insurer. How could so many layers of people--AIG!--be so stupid? Well, with one or two exceptions, you won't learn who was stupid and who was plain evil.Lewis focuses on the stories and chaacters of some of the few people who had the foresight to see disaster early on and bet against it. (This took an incredible amount of work!) There are two investment fund managers--one in New York and a California medical doctor with Asperger's--and a pair of young amateur semi-doofuses investing for themselves and a few friends. The pros are not quite the assholes I would have guessed. The first actually tried to warn about the dangers of subprime mortgages when they surfaced small-scale in the 1990s and he kept saying so publicly in the 00's even as he was buying up the swaps. The Asperger's guy would rather go long on equities. Lewis clearly hates the Lehman Bros types and the top executives of investment banks for packaging the crappy bonds in the first place much more. Not to mention the ratings agencies.You will be disappointed, though, if you are looking for answers about the laws and regulations, or lack of, that made the whole mess likely. Where was the regulatory oversight? I was especially disappointed by the quickie wrap-up re Washington's rescue response. OK, you couldn't let all these banks and houses fail. Lehman's collapse sent the world economy into a tailspin. But the government should have retained more control in the ones it helped out. Why not at least fire the top executives? There must have been a lot of pro and con arguments goings on, within the White Houses, and among economists. You get no sense of the rationale for what was done.Lewis is really sloppy with his terms at this point too, talking of the govt giving handouts and bailing out banks, leaving the impression these were straight giveaways for God knows what. But they were loans that have been paid back, right? I supposed the book would have been much longer with that kind of information. Politics and policy have never been Lewis's strong point--which is pretty weird for someone that lived in D.C. But I'd like to read a book that explains that! Maybe Too Big Too Fail?
    • 4/5
      While no amount of listening to NPR's Planet Money prepared me to understand all the financial jibber-jabber in this book, Michael Lewis' always engaging storytelling style made this book an enjoyable (if infuriating read). And central to this narrative is that few people understood the financial instruments that lead to the great collapse of 2008, even the CEO's of Wall Street's top financial firms. The heroes of this book are the odd bunch of characters who saw the flaws of bundling subprime mortgages into triple-a-rated bonds and profited by betting on their eventual collapse. The part of the book where one of Lewis' subjects speaks at a Bear Stearns event at the same time that companies stocks are crashing is unbelievable and cinematic in its brilliance. This is a must-read for anyone wanting to learn about the fiscal crisis and the evils of the Wall Street system.Favorite Passages:"That was Eisman's logic: the logic of Wall Street's pecking order. Goldman Sachs was the big kid who ran the games in the neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be part of things. The game, as Eisman saw it, was crack the whip." - p. 175"The ability of Wall Street traders to see themselves in their success and their management in their failure would later be echoed, when their firms, which disdained the need for government regulation in good times, insisted on being rescued by government in bad times. Success was individual achievement; failure was a social problem." - p. 210
    • 4/5
      Great book focusing on the people involved in the financial meltdown. But . . . it needs a cheatsheet or appendix explaining the terms and/or concepts (credit default swap, etc.), and an index.
    • 5/5
      You need to read this book. Everyone needs to have an understanding of how we got into the economic fix we are in, and this book shows the recipe of greed and ignorance that got us there.Michael Lewis has done an incredible job of finding the details and information on the investments that were based on sub-prime loans. He has shown the few people who were smart enough to see what was going to happen. And he explores why everyone else didn’t have a clue. At some times it seems like he’s singing the same note over and over (bad sub-prime loans bundled to make triple-A investments, for example) but that is because those notes are so prevalent in the story. What Lewis has also done is provide a human face to some of the people in this story; enough to understand them a little better, but not so much as to detract from the story that needs to be told. The ultimate result is the most complete story you will read about the history that led to our current recession.I repeat, quite simply, you need to read this book.
    • 5/5
      The most informative, investigative, and relevant work on the subprime mortgage, consumer financing, and credit default swap markets leading up to the bailouts I have come across. A must read for those wanting to be truly informed on what happened.
    • 5/5
      TERRIFIC BOOK. In it, Lewis examines the history and causes of the recent (and ongoing?) financial crisis, focussing on some of the (very few) guys who figured out what was going on before the whole thing blew up. This creates a marvellous frame, since the guys are very interesting guys (and very unusual ones), and since his reporting of their process of discovery helps the reader understand what happened. He explains the complex securities that greased the wheels more clearly than anyone else I've read: for one brief shining moment I think I understood synthetic CDO's. Most of what Lewis has to say is more about mass delusion and an incredible ability to avoid unpleasant truths than it is about outright criminality. Nonetheless, I very much hope that the SEC lawyers in the Goldman suit read the book and call on some of its heros for testimony. Lewis ends the book with a discussion of the fact that not much has changed in the way Wall Street works, despite the crash. This suggests two things. One, financial reform a la Volcker is long overdue -- it would be wonderful if every member of the U.S. Congree were to read the book. Two, the aftermath of the crash is not over yet. Thank you, Mr. Lewis! I'm an old Wall Streeter, and I loved "Liar's Poker" when it cam out. I love this book too, and I learned a whole lot from it.
    • 5/5
      This book is presented to us in a reader friendly manner that makes this complicated story of true events easy to follow and the dots easy to connect. The recession of 2008 impacted nearly everyone in the United States and made its presence known all over the globe from the trickle down after effects that were spread out to other nations as well. There were many factors that contributed to the events of 2008 but there were key mistakes that were made and key shifts in the world of investing that played a major role and contributed greatly to these events. Even if you are not familiar with investing or not of a financial background, this book will be easy for you to follow and a worthwhile read. I'd recommend this book to just about anyone and I feel it is an important read and book to have in your library.
    • 4/5
      I wanted to like this book more, but there were passages describing financial instruments that I found pretty tedious. I really enjoyed Moneyball, so I had high hopes going in. Still and all, this was an important book for me to read. It laid out some of the atrocities going on in the financial markets, and particularly the inscrutable bond market, leading up to the 2008-and-beyond debacle. In some ways, it was infuriating to read about the tons of money being thrown around with virtually no due diligence, and no understanding of the details. It is mind-boggling. It also makes me very dubious about my current investments, and particularly about the people running the investment funds, etc.
    • 5/5
      I’m a finance guy, but I learned so much and enjoyed so thoroughly that I went through it twice. And I will again many more times. It’s also a compelling story.
    • 5/5
      I loved reading this book. Great insight into what was happening on wall street a couple years ago.
    • 4/5
      Michael Lewis knows how to tell a story and keep his readers engaged. This book reads like a suspense novel, only what he is writing about actually happened. It is shocking that the financial crisis ever could have gone down the way it did - - and Lewis gives us a look at some of the few people who actually saw it coming. Highly recommend this book.
    • 4/5
      a bit confusing but interesting inside story.
    • 5/5
      a terrific and lively and outraged look at the forces - and characters - that created the sub-prime mortgage debacle of the late 2000s.
    • 4/5
      I finally feel like I sort of understand what happened in the mortgage industry meltdown, and I was entertained as I learned. Lewis, as always, writes a very entertaining book. This time he tells us the story of the global financial crisis by helping us get to know a handful of people that saw it coming, and made billions when it happened.
    • 3/5
      Pretty easy reading, considering the topic. Makes me want to stay far away from Wall Street!
    • 5/5
      One of the easier to read books on the financial collapse that originated in the subprime mortgage market. That said, this book is still a challenge for those who don't have a background in economics. I left the book with a somewhat hazy general picture of what happened, though some of the details left me scratching my head.Lewis takes a unique approach- by telling the story of investors who predicted the collapse and actually put their money where their mouths were, Lewis simultaneously develops credibility and a readable narrative.In a nutshell, the subprime mortgage fiasco was the result of a new lending paradigm. Unlike the traditional model involving a bank that gives loans to vetted customers, this new paradigm saw mortgage companies sell their loans to banks who then resold those same loans to fund managers. The connection between lender and lendee was lost- no one knew the status of the people in the homes, and no one cared because faith in the U.S. housing market was unshakable. There is more here. Credit default swaps and other funky things. Just know that you don't need to understand everything to walk away feeling like you understood something. Highly recommended.
    • 5/5
      An absolutely riveting "financial thriller" that describes how three groups of investors, working independently, managed to win big betting against an overinflated housing market. Lewis, who's intimately familiar with the subject of monetary misadventure, uses these intertwined narratives as a tool to make an extremely complex subject accessible to the lay reader. "The Big Short" is, among other things, the clearest explanation of the Crash of '08 that I've read to date. CDOs, mortgage bonds, floating ARM loans: they're all explained here in gruesome detail. The book also provides fascinating portraits of its oddball investor heroes. It seems that making money off real estate derivatives was such an intoxicating experience for Wall Street that it took a slightly cracked outsider to see how doomed the market really was. In more personal terms, it's gratifying to see these talented eccentrics – most of them late bloomers without any formal training in finance – beat the Wall Street pros and make a bundle doing it. Lastly, "The Big Short" is a stunning indictment of Wall Street fecklessness and irresponsibility. Say what you will about those Occupy Wall Street folks beating on drums in downtown Manhattan: "The Big Short" will make you want to heave a brick through the window of an investment bank and hide your own money in a mattress. After finishing Lewis's book, you'll never look at modern capitalism the same way again.
    • 3/5
      Pretty easy reading, considering the topic. Makes me want to stay far away from Wall Street!
    • 5/5
      Difficult for the layperson but important; compelling and pretty frightening, too. I'm only sorry I didn't read it sooner.
    • 5/5
      This is the story of the causes of the current recession, and the (very few) people who saw it coming. It is focussed on people - Steve Eisman of Oppenheimer Group, Michael Burry of Scion Hedge Fund, Greg Lippmann of Deutsche Bank, and a few others. These were people who read the prospectuses, who figured out what was really going on in the sub-prime mortgage market, and who looked for a way to bet against them -- because it was clear to these people that there would be defaults. Massive defaults. Even though the Big Boys on Wall Street seemed to think there was no problem now and never would be. I found myself reading a few pages, then getting out of my chair to do something else for a time. Or surf the web, or munch something. Because what this book describes is scary in the extreme. Stocks are out in the open - you can see what you are investing in; you can do your homework on companies. Bonds had always felt like something safe - less return, but less risk. This book pulls back the curtain a bit on bond markets, the rating system from Moody's and S&P, and some clear out and out fraud, that is scary indeed. Do I fully understand the financial instruments the book talks about? no. But I can now use phrases like "credit default swaps" and know what it means. And how incentives can drive actions that make sense, because they make money, in the short term, but overall only drive the risks higher and make the ultimate crash worse. I am only part way through the book so far, and I find myself yearning for stronger regulations and more transparency on investment risks. I know that I am personally very fiscaly conservative and risk averse. And that is why I am in favor of strong regulations on what Wall Street bankers and brokers can do with my money, as well as the quality of information that they must provide investors about the risk of particular investments. I feel no empathy for those who make their money by throwing mine away. This book resonates particularly aptly with the news today about Goldman Sachs being indicted by the SEC for fraud.
    • 4/5
      A fast-paced, well-told story of the subprime meltdown and a few of the short sellers who predicted and profited from it. The account is almost entirely journalistic and relies heavily on the cooperation of the heroes that it portrays. Less finely drawn are the stock villains, the Wall Street traders who make large bets on the other side, the middle-men who pass on CDOs without holding any them themselves, and the ratings agencies.Michael Lewis has an amazing eye for detail, pacing, and ability to tell multiple perspectives of a story through people's lives. Although the book comes from a clear perspective, it has almost no analysis and draws little in the way of conclusions -- except to argue that investment banks should not have gone public, which whatever your perspective seems at most to be a small part of the story -- especially since the agency problem portrayed by the book seems like it would be equally difficult to address at a partnership (i.e., a trader with a good year followed by a spectacularly bad year walking away with a large paycheck while management has little ability to understand and/or supervise their trades).
    • 4/5
      Lewis does a great job of using some of the personalities involved in the sub-prime events leading up to 2008 to tell a very compelling story. He managed to keep his narrative compelling despite the complexities of the subject. This is a wonderful illustration of financial storytelling and illustrates how accessible complicated subjects can become if they are presented by a skilled practitioner!