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Biography & Autobiography. Business. Finance. Nonfiction. HTML: The time was the 1980s. The place was Wall Street. The game was called Liar's Poker.Michael Lewis was fresh out of Princeton and the London School of Economics when he landed a job at Salomon Brothers, one of Wall Street's premier investment firms. During the next three years, Lewis rose from callow trainee to bond salesman, raking in millions for the firm and cashing in on a modern-day gold rush. Liar's Poker is the culmination of those heady, frenzied years�??a behind-the-scenes look at a unique and turbulent time in American business. From the frat-boy camaraderie of the forty-first-floor trading room to the killer instinct that made ambitious young men gamble everything on a high-stakes game of bluffing and deception, here is Michael Lewis's knowing and hilarious insider's account of an unprecedented era of greed, gluttony, and outrageous fortu… (more)
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This book is an account of Michael Lewis' time at Salomon Smith Barney in the mid 80s, at the height of the junk bond craze. He perfectly
What came as a surprise to me is that Lewis describes the mortgage bond market, an obtuse and vague instrument, very clearly and in a way most non-business people could also understand. This explanation also serves to show why these junk bonds ultimately collapsed.
Then, of course, are his hilarious descriptions of his orientation, his bosses and coworkers. To read about these outlandish characters is worth the price of the book alone.
So, to close, this book is a classic for a reason. It is informative and well written, but manages to be hilarious at the same time, a feat few authors can achieve. Read this book at all costs.
Michael Lewis retraces his beginnings with Salomon Brothers, first as a bright eyed trainee, then as a bond salesman. It is his knack for writing that makes Liar's Poker such a treat to read. It is bitingly funny, wicked and fun. My favorite part is about the new guy, so nervous about his first day on the job that he does nothing but ride the elevator up and down until he has the courage to finally get off, exit the building and disappear forever.
A scene that exemplifies the risk-taking, and bluffing of the scene in investment banking is where John Meriwether is challenged by John Guttfreund, the former trader viewed by disdain in the firm as no longer a real player, to a single game of liars poker for a million dollars: “One hand, one million dollars, no tears.” By this, he seemingly hoped to establish his credentials when Meriwether backed down, at a price that was low enough that he could afford it if he lost. The problem in such a challenge is that a single two person game of liar’s poker, irrespective of the skills of the players, is essentially a roll of the dice. The amount was enough that Meriwether could not afford to lose it, and his status was such that he couldn’t decline. Instead, knowing that Gottfreund was able to afford a one million dollar loss, he counter challenged; “I’d rather play for real money. Ten million dollars. No tears.” Merriwether quickly backed down, unable or unwilling to bet so substantial a percent of his fortune on a game at which he knew he was outmatched. (two thirds of his liquid capital, after his wife remodeled their new apartment, according to the author.)
This wasn’t only the game they played with their own fortunes, which could multiply or melt away with tremendous rapidity; it was the game they played for, or with, their clients. Of course, you could “blow up” a client or two when you were still learning (bankrupt them by advising a bad financial move,) and then once you had your legs, you would move up the ladder, earning money for the firm by maneuvering around either the market, the clients, or the other players in the market. At the end of the day, the profits taken out of the market are zero-sum, so in this context it’s all a big game of liar’s poker, with the additional benefit of giving the players a sense that they control the world, or at least the world’s financial fortunes.
The hubris, and of course the cocaine, hookers, and profligate spending habits of the traders are legendary, but Lewis does a wonderful job of portraying the traders, as it were, in their natural habitat with motives and scenery intact. It is a interesting perspective looking at the way the street works, especially given the short viewpoints of the traders and the asymmetric motives of traders and investors. In short, anyone interested in investing, and especially working on Wall Street, should see this perspective to more fully understand some of the problems that Wall Street has representing their clients, especially on the sell side.
Good lesson: Worked as a journalist part time during his time at Salomon, something which made him keep the perspective of an outside world.
I always wonder about such accounts where some, here: the bankers, screws the customers, why is there not competition that drives this away? Not that I doubt that a lot of such things were done. Maybe part of the answer is in this quote: “The men on the trading floor may not have been to school, buth have Ph.D.’s in man’s ignorance. In any market, as in any poker game, there is a fool. The astute investor Warren Buffett is fond of saying that any player unaware of the fook in the market probably is the fool in the market.” But is this true? Isn’t there an equilibrium strategy in poker?
It seems strange that they reasoned around deals in such an anecdotal way, for example reasoning after the Chernobyl disaster that demand for other forms of energy than nuclear and for uncontaminated food crops would go up. Aren’t these sort of implications were automated? Maybe it was not like that in those days? But surely they are now?
*The quote continues: “Most of the time [...] people will believe. Heavy selling out of the Middle East was an old standby. Since no one ever had any clue what the Arabs were doing with their money or why, no story involving Arabs could ever be refuted. So if you didn’t know why the dollar was falling, you shouted out something about Arabs.”
I have heard this book described of as "funny" and "entertaining", but to be honest, I never found it to be either in any way.
The author was a bond salesman
More than 20 years after its publication, the events and personalities that Lewis writes about are no longer shocking. However, they are still entertaining and occasionally very funny. If nothing else, he provides great insight into the inner workings of one of the most influential institutions operating during a historically significant time in the financial markets. While Lewis has gone on to write a number of other interesting books on various topics (e.g., “The New New Thing,” “Moneyball,” “The Blind Side”), this one is still my favorite.
The tale would be depressing if it weren't for the hopeful ending. Lewis was self-aware throughout his experience, and he ultimately walked away at the peak of his earnings. The bond market corrected its own inefficiencies as competitors turned big spreads into small ones, and the imprudent risk takers eventually found themselves on the wrong side of the market. No matter what he contributed to his clients' portfolios, Lewis has definitely contributed to our understanding of business and the ugly circumstances that occur when motivation is unchecked by character.