The book Liar's Poker came out in 1989. Its depiction of Wall Street culture — obnoxious, crude, drunk on risk — may seem very different to today's big bank trading floors. Nonetheless, the book is still a popular read. In some places, interns are even assigned to read it. So why the enduring appeal? And what are the lessons from the book, over 30 years since its release? On this episode, we speak with its author Michael Lewis, who recently recorded an audio version of the book, while also doing a short companion podcast. He reflects on his latest rereading of it, and what it means today.
Joe Weisenthal:
Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.
Tracy Alloway:
And I'm Tracy Alloway.
Joe:
So Tracy, one topic that we actually don't talk about that much, though we have a few times is like Wall Street itself. We talk about markets, all different kinds. We talk a lot about economics and theoretical finance, like actual Wall Street banking, etc., we probably could talk about it more.
Tracy:
I feel like we do quite a few market structure episodes, but you're right. Yes. We don't get so much into I guess the experience of actually working in those markets.
Joe:
No, we don't. And of course it's an interesting time. I mean, it's always an interesting time, but so many of the banks are doing extraordinarily well. And I feel like for both of us, our careers post-Great Financial Crisis, I think the standard thing is each year it's like, oh, bonuses are down at this bank or trading is down. And it feels like that at least right now for the moment, it's a lot of up arrows on Wall Street.
Tracy:
But I do feel like there's a weird dichotomy at the moment in the sense that the banking and trading results have been excellent. And it's definitely boom times for Wall Street. But on the other hand, a lot of people are expressing unhappiness about the actual job at the moment, right? You have a lot of younger bankers especially who just don't seem that into Wall Street at the moment.
Joe:
No, you know, they all wanna go work on crypto. Probably everyone else is traveling and working from Tulum or something like that. And their bosses are telling them to come into the office and they're not having as much fun. And so yes, our colleague Max Abelson wrote a great piece recently. It was like, everyone's making a lot of money on Wall Street, but no one's having any fun.
Tracy:
Yeah, exactly. So today we are going to get into the actual experience of working on Wall Street and how it's changed and why fewer people seem to be enjoying it and why everyone wants to go into crypto, I guess.
Joe:
Yeah, we have an amazing, the perfect guest for it. We are going to be speaking with the author, Michael Lewis, of course he is the author of numerous books, but of course, one of his most famous is Liar’s Poker -- about Wall Street -- it came out in 1989. His most recent book is The Premonition. He also has his own podcast, Against the Rules. And he's also -- while we're talking about Liar’s Poker -- done a new audio book and come out with a new sort of mini-series podcast that goes along with it, called Other People's Money. So just a real treat to have him on. Let's get right to it. Michael, thank you so much for coming on Odd Lots.
Michael Lewis:
Hey guys. Thanks. Thanks for having me.
Joe:
So why now to revisit Liar’s Poker?
Michael:
So two things happened at once. One was the audio rights of the book reverted to me. They reverted to me at a time when I've been, because of the podcast, I've been talking to my podcast company, Pushkin Industries about how we would do all audio books informed by what we've learned about podcasts. Like the audio books typically are just, you just read them and nothing else is going on, right. And they really are starting to produce audio books. And we've been looking for an excuse to do a fun, a more fun audio book. And this thing never got done. I mean, never even, you know, back when Liars Poker was published, there was really not a market. There was like, they'd send out these cassettes, you know, and it was an abridged -- very abridged -- version.
So the fact that it hadn't been done, that so many more people are kind of listening than reading. It just seemed like -- and the thing still sells. I don't know how many, 10, 15,000 copies a year. So there's still a market for it. But the other thing that happened was my eldest child is a junior in college and she has now three times said my friend just came back from an internship on Wall Street. And they were made to read Liar’s Poker to understand, which makes no sense. But the fact that this thing is being now handed out as sort of like a work manual, it interested me. Plus now the asterisk to all this was, I never read the book again. I mean, I published it in 1989, I guess I read little bits and pieces when I was on book tour back then.
But apart from that, I've never picked it up. And so it's just like, I was curious what was in it. And when I started reading it, I had all these reactions. And the reactions led to the little podcast series that's alongside of it. There were just kind of things I wanted to do. Like go talk to the people who were characters in the book to see what they, you know, when they look back on their lives, what they saw. So all that's why. There's no, there's like no real reason. There's nothing that just happened on Wall Street that is triggering my interest in my own old book.
Tracy:
So I gotta say, I love audio books. I'm really looking forward to this. And I really only started listening to them in the past year, so I'm basically doubled my reading, which is awesome. Secondly, I mean, you mentioned the idea of Liar’s Poker being the go to book for people who are interested in finance and economics. And it was certainly one of the first books that I read when I first went into financial journalism. I remember that, many, many years ago. But as you said, or suggested, Wall Street has changed quite a bit since the 1980s. Why do you think Liar’s Poker seems to have this enduring legacy? Or why are people still so interested in it and still reading it as the first thing, you know, on their reading list when they start thinking about Wall Street?
Michael:
It's really great question, because it's bewildering to me. I thought, you know, when I wrote it, I thought it was gonna be dated any moment and that it was written as kind of like a message in the bottle to people a hundred years from now who would never believe what happened on Wall Street in the 1980s. I was like this discreet period of insanity that was coming to an end. So I think that there's two answers to the question and there's, it's slightly contradictory. The first answer is when you read the book, as I just did and was reminded of all this stuff, I was struck by just how much of what Wall Street became was seeded back then. Like things that were just starting to happen back then were telling you where this place was going. I had no idea, but you know, in retrospect, the intellectualization of finance, that all of a sudden, like we had a PhD in Physics on the trading floor and everybody thought how bizarre is that? Then there were a few PhDs. And then the PhDs were actually in charge of most of the trading decisions.
I was just talking to someone who graduated not that long ago from MIT in the physics department. And he said, without thinking it was even interesting, he said, oh, my department just goes to Wall Street, everybody in my class physics department in MIT, everybody. And I said, don't some of them become physicists? And he says, physics isn't interesting anymore. So it’s just understood that this is the path and that, I mean, so that starts back then. Finance starts to get sufficiently complicated that it rewards that kind of intellect and drives out a different kind of person. So that's one thing that you can see just starting to happen. The hold, the place it has in the imaginations of young people.
If you go back to like the sixties, fifties, sixties, seventies, it wasn't the best and the brightest, from the best schools who went to Wall Street. It was like the C student from Yale and guys named Vinny from Staten Island. I mean it was a trade. It was, you know, it paid well, but it didn't have that same status. And then it's persisted. Even though the jobs have gotten, I think probably even more horrible in some ways, but it still has this grip on the imagination of young people. If you went to Harvard, the next thing you do that's a similar thing to getting into Harvard is getting into Goldman Sachs. That's amazing to me, but that was amazing to me then. So there's some things like that. There are other things like that, just the financialization of the economy, which is related to the other two things. Finance, you know, it's never stopped growing as a part of, as a share of the economy.
All that's happened. So these mega trends kind of thing, make the book feel like, ah, there's a little relevance here. But I think there’s this other thing that's going on. And when I was reading and I thought, this is why people are read it. Wall Street's gotten so dull. I mean, just personally dull. It's essentially, you know, a tech job. You go into one of these places and it's totally silent. It's people sitting at terminals, just in a little bubble, for better or worse. It's lost a lot of its color. And it's very hard to persuade a young person that this is the fun job. I mean, it's a job that pays you well and it gives you an answer to the question, what are you doing after you got out of Harvard?
It's just like even more soul depleting than it was. And I think the book, you know, I didn't intend for this to happen, but I was having so much fun writing it, and the experience was there were aspects of it that were just funny. You know, just, it was alive. People screaming each other on a trading floor. People behaving in ways that were outrageous. It was human and wet. And I think that is part of the reason the book persists. It's like, you can't write anything interesting about it now. It's much harder. I mean, if you look at the books I've written since that are about Wall Street, Big Short and Flash Boys, both those books. I mean, part of it is a function of where I sit in relation to Wall Street, but both those books depended on kind of outsiders crashing in on the system. It would've been very hard, I felt, and I reported pretty heavily inside the system, to have brought the system itself to life. Because it felt in some ways dead, even if it was making a lot of money. Whereas Liars Poker was sitting, you know, that was the right at the heart of the system.
Joe:
How much of this sort of more inert Wall Street has to do with, you know, the rise of technology, the fact that it's not as much people necessarily screaming into phones, not as much of a people business, and how much would you say, you know, how much is the last 12 or 13 years is this sort of de-risking of the banking system that occurred over after the great financial crisis?
Michael:
So that's part of it. That's definitely a part of it, right? A big bank is no longer the place where you're taking the big interesting risks. So if you're gonna take the big, interesting risks, you're gonna be at a hedge fund or you're gonna be at a venture capital fund or you're gonna be in private equity. And the rewards also have moved outside of kind of the heart of the system. I mean the highest paid people on Wall Street when I was there, I'm trying to think what the... I'm sure this is not completely right, but there were barely hedge funds. You know, there were people effectively doing what hedge funds did, but the compensation was nothing. And the size was nothing like today and you know, John Gutfreund making whatever $3 million or $5 million was considered just amazing.
And Milken made a billion right? Inside of the bank. So I think the action has moved outside of the banks too. So that's happened. So the other thing that's happened, I mean, and I'm probably partly responsible for this in a small way, is Liar’s Poker, that era must have been the last time that someone like me could roll into a big bank without signing nondisclosure agreements, without having lawyers looking at everything you do, without being terrified, everybody being terrified of everything they put in their emails and all that. Where people didn't behave as if they were being watched, where even the bosses kind of thought... I mean, when I walked out, I told them I was writing a book about Wall Street and they couldn't have cared less. It was like, they were worried about my sanity in leaving a really lucrative job for what they thought was penury but they didn't… You know, ‘Go write a book about Wall Street, who cares?’ was kind of the attitude. The access to unselfconscious behavior has definitely shrunk. I mean, that's another reason I think I got the material was just sort of, it was the last time it really had a lot of flavor to it and you had total access to it and you could write it up. I mean, there’ve been other accounts from inside of Wall Street, the behavior, it's just not as interesting
Tracy:
Do you think there were any benefits to that type of culture? Because nowadays we're used to looking back at the 1980s as this era of excess. You know, you described in the book, basically how much of a nightmare a lot of the traders were. And I remember the trainees, like sitting in the back row and throwing things at the speakers and stuff like that. So everyone looks back at that — sexism as well — and thinks, wow, this was terrible, but was there any upside to having this sort of unfettered, I guess culture?
Michael:
So I'm gonna give you not my answer, but the answer of one of the subjects of the companion podcast Anne Clark Wolff, who has just started, she started an investment bank that has been dubbed Salomon Sisters. She was at Salomon Brothers when I was at Salomon Brothers. She was there right when the book was coming out, rather. She said to me, something that sort of was on the tip of my brain. And I was asking her, I was trying to get her basically to say how horrible it was for women. Right? Because from my point of view, it was appalling. I mean, it's hard for you to believe, but here's a place of work and it is routine and acceptable to call a stripper in and have her take all her clothes off on the top of a trading desk while everybody cheers. Or to swat women on the rear end as they’re walking by your desk. I mean, it was just one thing after another.
I mean, it was just outrageous sexual harassment, nothing subtle about it. And it bothered me, you know, that it bothered me was between the lines of the books in places. And I thought I would get someone on to talk about this who actually endured it. And instead of saying what I wanted her to say or thought I wanted her to say, she said, now you got it wrong. Now this is just one woman's perspective. But she said, yeah, there was that kind of stuff. But women could advance. There might be that kind of stuff going on. But at the same time you got moved up if you were good. And it was very open, there was a kind of openness about it. Everybody wore their attitudes on their sleeve, yeah. But they kind of seemed to move past those attitudes.
And she said she found as Wall Street kind of became more sanitized, the difficulty women had moving up, got worse. This is her talking, not me, but it was an interesting perspective. And she said, you know, one of the things that's happened is that the male Wall Street person's fear of being in a compromised situation with a female on Wall Street, has completely eliminated the kind of mentorship that leads to people moving up. And I thought, wow. I, I mean, I’d never heard that before. That was completely, like novel to me. I thought, well, maybe it's more complicated than I thought. At the time I thought, one of the nice things about this place is that nobody's pretending to be anything but what they are. That whatever vices there are here — and their virtues and vices — there's very little hypocrisy.
And it was refreshing and it was filled — so this is related to this — the diversity of the characters which made the book work much better, it wasn't all the same person. There were a lot there. There was a huge variety of personality, character types. It was sort of like a pool, a random pool of talent. So that's kind of an appealing trait in a place. The tolerance of a range of a range of kinds of people. That's an argument ‘for’ how it used to be. I'd say the one other argument, and this was kind of like what was ending when I was there, is there was this wet relationship between the firm and its employees. It wasn't just a corporate relationship. There was a residue of the partnership and the spirit of the partnership, the idea that, you know, yeah, you worked in the mail room, but if your wife got sick and you couldn't afford to pay the hospital, bill, some partner just came in and paid 'em because that was just how you did it.
That glue was loosening while I was there because it had ceases to be a partnership and had become a corporation and it was becoming what it would become — a much less kind of wet and cohesive place and much more corporate. But that old feeling of like an emotional connection, I bet people miss that. I bet people who work on Wall Street now just miss that. There's no pretense that you have like love of the firm and the firm doesn't love you. So there's things to be said about that era. Probably more things to be said against it, than things to be said for it.
Joe:
You kind of anticipated my next question, but this idea of like Wall Street banks becoming more corporate or maybe interchangeable where an executive at a major bank could leave and go work at Google or Nike or FedEx or something like that. Why did that happen? I mean, it feels like that. And you know, obviously in the intro we talked about, yeah, they're making a ton of money, but it seems like they're having less fun or they're certainly not having a lot of fun these days. Why do these banks, why are they just sort of corporations in a way that they didn’t used to be?
Michael:
Well because they were corporations. Right? So I think that was the thing that was happening. You know, again, it gets back to why this book still gets read. Part of it is just like the moment in financial history. I walked into a firm that was the first big investment bank to turn itself, to go public. And it was regarded as a great act of betrayal when it did, to old partners, to the idea of the firm. There was a lot of anger in the air, even inside the firm when I was there. And this had happened. But what that does is it changes the relationship of the employee to the place. The employee, the people who run it are much less likely to be exposed to its failure in a big way.
It's not a sticky relationship. More of their wealth comes in the form of just their annual bonus and less in the ownership of the firm. So people just didn't stay as long. What you had happen was free agency. That was the period where you started to get the free agent trader. Guys, you know, leaving from Merrill Lynch for $3 million bucks. And it was interesting. No one would bat an eye at that now. Right? If you're at Goldman and Morgan Stanley offers you twice as much money, everyone at Goldman probably just says, well, you should just take it, you know, or vice versa. At the time, it was regarded as a betrayal. People were treated as if they were traitors. If they left the firm for more of a higher paying job somewhere else. What you were seeing there was the residue of the partnership ethic. And there are firms on Wall Street that are still, you know, Brown Brothers, there are little firms that have kind of kept the old structure. And it really works for what it does. It creates a lot of stability. It doesn't work for big risk-taking — much better to be playing with other people's money.
Tracy:
So this is a very, I guess, zeitgeisty question, but you know, we're talking about culture and you mentioned this idea of Wall Street firms having much more cohesiveness during this era, you called it wetness. And I guess nowadays there's this big push on Wall Street to get everyone back into the office. Everyone went to work for home during the pandemic. And I guess two things here. Why do you think it's such a big deal for a lot of the banks to have people in the office? And then secondly, is there a tension between a work from home model and a business like trading? Do you have to actually be physically present talking to, you know, your peers, your colleagues in order to make it work? Or is it something that can be done remotely nowadays?
Michael:
Well, you probably know the answer to this better than I do, but my sense is that there's much less reason to actually have to be there. It would've been bizarre not to be there in 1988. You couldn't have functioned. Everything was happening there. And it was personal interaction that was driving a lot of the decisions. And you were watching the markets when you were watching the traders. That's not true anymore. I'm trying to think of what couldn’t done remotely that's important that would for force people into the office. I mean, for a lot of this, you don't even need really people. You need algorithms. The New York stock exchange used to be people. It’s now servers in New Jersey. There are people in the New York Stock Exchange, but they're essentially a television set. They're not doing anything important.
I think the way finance has evolved, I can see why there's pressure to not go back to the office because you don't really need to be there. I think I get the sense — I could be wrong about this — I get the sense that like bosses are much more interested in having their employees there than the employees are interested in being there. So there's some like status stuff probably going on where it's, you know, nice and you probably feel like you can monitor your employees better if they're physically present, but I'm not even sure that's true. So, no, I can't see any reason. I don't know why you would need a trading floor, why it can't be distributed. Even back then, there are people who did real well sitting in a room by themselves. They weren't, you know, not, not people who worked for the banks, but traders, hedge fund types.
In fact, if you wanna make the argument, you know what succeeds in the financial markets? Independent thinking, taking a view that's slightly apart from the crowd, all that may be easier to do if you weren't in a room full with other people who are all doing the same thing. So I would've thought that it's gonna be hard to get everybody back because you're not gonna be any better with everybody back. It's not gonna give you a huge competitive advantage. The exception is that when you actually have face to face interactions with clients, people are more persuaded by personal encounters. And so there's still slices of the business like that. I mean, I bet it would be hard to be a, I don't know, M&A advisor without being able to be with people, but those people are not your colleagues. Those people are like some CEO somewhere. So you think that's wrong? I could be wrong. Give me the argument for why you would go back to work?
Joe:
I don't know, Tracy?
Tracy:
I hate doing this because I'm on the record as a big work from home fan, but it's culture and spontaneous cooperation, the kind of spontaneous cooperation and synergies you get from running into someone.
Michael:
How often does that happen to you actually?
Tracy:
Well, it does on occasion. I have to say it does occasionally. You do run into people and say, oh, Hey, what are you working on? You know? And maybe they ask you for help or something like that. But I do think nowadays there are a lot of spontaneous interactions that can happen just through, you know, instant messaging and stuff like that.
Joe:
I totally agree. And, you know, most of the interactions I have in the world are clearly digital. I really like the sort of like three or four people that sit at proximity with me in the office and I really genuinely enjoy coming in and just sort of chatting verbally so I would miss it. I love like the news energy and just sort of joking around and talking news with the people who sit near me. So I'm a little bit more office-sympathetic perhaps than Tracy is. Speaking of zeitgeist, so literally every time some crazy story happens in the crypto world. I see people like, I can't wait to read the Michael Lewis book about this event. And of course there's gonna be a Michael Lewis crypto book? At some point, there has to be, right?
Michael:
There's a chance. You know, it's funny. I've been told a lot by a lot of people I need to write such a book and that's persuasive, but what I think is true, is if you asked, like, what's the version of Liar’s Poker now? Where is the Liar’s Poker-like story happening? It's crypto. That’s where there's shocking and unprecedented behavior and events and people trying to make sense of something that's completely new or feels completely new, where massive disruption is occurring. With Salomon Brothers trading floor and Michael Milken’s Drexel bonds department were really like turning the financial world on its head at that time. And that was part of the excitement of the story. So the same may be true of crypto.
The problem with crypto so far for me is — I'm gonna get slayed for this — but taking it seriously. So I had this encounter and it's like a little parable, it's a microcosm of a bunch of similar encounters I've had. I got a call. This is like six years ago. So kind of early in the whole thing. Bitcoin is like, people are starting to look like they were smart to own some Bitcoin. And there were like the great and the good of Bitcoin, I was told, were gathering in a house in Silicon Valley and I should come down and just meet 'em. And the guy who asked me actually said, if you come down, you meet Satoshi, and I thought, well, I don't really care all that much, but I'm curious. So I drove, I got in my car and drove all the way to Palo Alto and I could smell the weed from like two blocks away. You know, it was just like, the weed was like coming out of the chimney and, it was a funny scene.
It was like 12 rooms and sleeping bags in all the rooms. And some of the people actually, they ended, there were future billionaires in that house. But they were trying to persuade me that this was the money of the future. And it did feel like, when I came to understand what this money was, that if this had been the money of the present and someone had actually created dollar bills, people would say, wow, this is a fantastic revolution. So I said, I just don't believe this is money. I don't believe this is gonna work. I think the kind of things you need to do to make this money are gonna undermine the things you love the most about it. And they said, no, no, come on with us.
We're gonna show you that you can spend this already. And we walked into Palo Alto and there was a coffee shop and sure enough, it said, we accept Bitcoin. And we sat there for, I don't know, 20 minutes trying to pay for a cup of coffee with Bitcoin. And they couldn't do it. And I finally pulled out a $5 bill and it worked just beautifully. And I just, you know, the first problem, like what this is apart from a speculative instrument, put me off now. Now everybody has a smarter story. The smarter story is it's the new gold. It's better gold. It's not a currency, right? It's better gold, you know, I mean, it's a better argument. You don't have to store it. Really, it’s gonna be cheaper to store, easier to lose. But gold has this like millennium of faith behind it.
And you're asking people to believe that people believe in Bitcoin the way they believe in gold. And I just don't, maybe that happens, maybe it doesn't. I think there's a funny end game where in the end there is no Bitcoin because all of it's lost. There's so much of this stuff is already lost. Just a matter of time before the last, you know, Bitcoin key is gone, right? It's inconvenient in many ways. But the cultural stuff, what interests me the most about it, is just like the cultural disruption it causes. The fact, you have random people who randomly have $3 or $4 billion now because they bought some Bitcoin. The fact that you’ve got people who've lost half a billion dollars of Bitcoin and can't find their key, what people are doing with the wealth that kind of landed in their lap?
So anyway, it interests me. It all interests me. For me to have something that is worthy of a book, it requires what I had in Liar’s Poker and Flash Boys, of the financial books, people I wanted to be with. If I find a character who can walk me — the reader — through that world in an interesting way and teach us all what it is and give us the pleasure of fiction and that you get from a character, that would draw me to the subject. You're right. It's got the ingredients, it's got like stuff. But I just didn't buy the original argument for why I should be interested. And I haven't really found the character.
Tracy:
So I guess you didn't meet Satoshi in Palo Alto, right?
Michael:
No, that was a ruse. Maybe I did meet him, you know, it's possible he was there and he took one look at me and said, he's not worthy.
Tracy:
Sort of on a related note, but what do you think is the attraction for people who are in finance or have been in finance who are making the transition to crypto? Is it purely a money-making exercise? Is it just the next big speculative asset that they see kind of, you know, a bubble inflating in front of them and they can get in, make their money and get out? Or do you think there's a genuine adherence to some of the belief systems and culture around crypto?
Michael:
I think it's a mix. I haven't done that much work in this area, but I've met both kinds. I've met people who were attracted to the libertarian utopia and who were there for those sort of reasons. But my sense is that was there at the beginning. And as Bitcoin became more and more of an attractive speculative asset, it attracted a different kind of person. And I think like any gold rush, why did people come out to San Francisco during the gold rush? There were some people who were there who had a better idea about where to find the gold. And they went and found gold and got rich. There were some people who were just there because everybody else was there and they thought they'd get lucky and it didn't work out.
But there was a whole class of people who made blue jeans and sold them to the miners and I think it’s that class of person now, the whole crypto world has gotten so big there is that kind of person who's figured out how to be the blue jean salesman and actually is kind of agnostic on the subject of crypto. Doesn't believe in it or disbelieve in it, doesn't care one way or the other just as long as people are trading it. I think we're kind of past the point where people think there's easy money just buying Bitcoin. I don't think that exists anymore. I mean, it feels pretty scary.
Joe:
So, you know, we just have a couple minutes left, but I kind of want to sort of pivot a little bit. You mentioned San Francisco and you've been talking about the three Wall Street books. You also wrote a tech book in 1999 — The New New Thing — talking about James Clark, who among other things is the Netscape co-founder, that obviously came out very close to the peak of dotcom bubble and it felt like, you know, that captured everyone's attention and so I feel like Silicon Valley went dormant for a few years. And now obviously it's just everything. I'm curious, you know, how your perception of tech right now feels compared to 99, because obviously we've had this little sell off in tech stocks lately. People wonder how it's different, how it's similar. Does it feel like there was a bubble that has to cool at some point? Like how does tech look to you right now versus when you wrote that book?
Michael:
It's a much more thoroughly developed and articulated religion. What was happening in 1999, this world didn't have its story completely straight. Look what's happened since then. Jim Clark, the hero of my book, The New New Thing, who I put at the center because he had been this constant disruptive force and was in the middle of the internet bubble too with Netscape. Jim Clark, who lived for innovation, who knew as much about Silicon Valley and the tech world as anybody, at the end of that book, he flees California and gets out of tech and venture capital because it's all gotten too insane because Kleiner Perkins has given $25 million to this startup called Google, which he assures is just nonsense. Now for him that was the sign that the bubble was about the burst. I mean, we are now sitting here with the biggest corporations in the world having grown out of that period, they create their own dynamic, borrowing a concerted government effort to like bust them up, it's very hard to imagine how… There's not just a bubble there obviously, right?
There's a lot else going on. The religion's gotten, I mean it just, many more people have come to accept that we live in a world that's defined by constant innovation and wealth is innovation. And the financial sector has reconfigured itself around this idea so that there’s huge amounts of capital that are thrown at people who will innovate, that it's a buyer's market if you are an innovator. And I don't really see that changing, because at the bottom of it is something that is true, is that wealth and innovation are very closely linked, that we get richer as a society as we innovate and that it pays everybody to encourage this kind of behavior to encourage total constant disruption.
It feels a lot less, it felt kind of thin back then. There are a lot of companies that just, you know, they just didn't, you really couldn't see how they're gonna work. And everybody said they're gonna work and then they didn't work. It doesn't feel quite like that to me. I mean, of course it's frothy right now, but do I think it would be smart to like pull out a venture capital right now? No. Do I think it might be smart to get out of some stocks in the stock market? Maybe for a while, but it feels like there's more of a solid foundation under it all to me.
Tracy:
You mentioned at the beginning of this conversation that you went back and you read Liar’s Poker as part of this project. And I tried to do the same thing before this conversation and there was one bit in it about Paul Volker sort of inadvertently giving birth to the big bond business of the 1980s by allowing interest rates to float and that introduced price volatility into the market. And that was kind of surprising to me because nowadays you think Paul Volker and you kind of think Volker Rule and that he, you know, essentially castrated the big swinging dicks of the era and it was all because of him. as you were re-reading, was there anything that surprised you or that seemed unexpected or ironic with the benefit of hindsight?
Michael:
Well, the first thing, a big chunk of the book that's about the creation of the mortgage bond market. Even I at that moment, had no sense that this is Frankenstein's monster being created, that the way risk was going to be allocated would create problems. I saw nothing but good in that. I thought, and it wasn't very, at the moment, it seemed great. It was like you were opening up, you were knocking down a wall between capital and home buyers. And it was going to make buying a home cheaper for everybody to give everybody cheaper access to capital. It would seem like a great efficiency. But the complexity of the instruments was gonna make something possible that I never would've imagined coming. So that was one thing. It was like, huh, didn't go so well. I mean it went well and went well in the beginning, but in the end it didn't go so well.
So it was my own naive, at the time, basic approval of financial innovation. I was doing it. I thought it was cool. I thought it was making everything more efficient. It didn't occur to me at the time that complexity was the new opacity that no matter how supposedly transparent these businesses were, and you knock down the wood panel walls and put up glass walls and everybody could see what everybody else was doing, if it was complicated enough, people would be able to do all kinds of nefarious stuff because other people wouldn't understand. And I didn't completely see that. And when I'm reading the book, I can tell, I didn't see that. I mean, Iwas kind of on the side of the innovator you. So that's the most obvious thing that leaps to mind.
The other thing reading the book that was just shocking to me was me. I mean, 27-year-old me was, I guess I could have stood to have a drink with that person, but I wouldn't want to have stayed for dinner. My appetite for my own company, with 27-year-old me was much more limited than I thought it would be. It was like, oh, was I really this insufferable? But I think that's kind of true — and we explored this in the little podcast — when you go back to stuff you did when you were young, it's jarring.
Joe:
Michael, I think that's a great place to leave it. This is a real treat, very excited about checking out the new audio book and the new podcast series. And thank you so much for coming on Odd Lots!
Michael:
Thanks for having me see you guys later.
Joe:
That was really fun, Tracy. I feel that was a real treat, getting to chat with such a legend in our industry.
Tracy:
Totally. And I mean, like I said, I remember reading Liar’s Poker as one of the first things before I joined the Financial Times or even, I think, before the interview, something like that. So really great to actually meet Michael in person and speak to him. So first of all, he has to do a crypto book, right?
Joe:
Of course, he’s got to.
Tracy:
Yeah. But secondly, I know we were talking a lot about how much has changed on Wall Street, but I kept back to the idea that a couple things haven't really changed and one is the bond market, I guess it's not quite like it was in the 1980s, but we've discussed this on the podcast, it's still not standardized. There's still no price transparency. And so you can still make a lot of money from trading debt.
Joe:
Yeah, hat that's true. Like that is one area that is still on some level pretty chaotic. I think it was really cool, there aren't many people with his perspective and I'm thinking obviously about both Liar’s Poker, but also writing about tech in ‘99, The New New Thing, who have seen these like huge industries and can sort of look at it with both ends. Like how many people do we talk to — like huge arcs of history. And so I thought, and, you know, hearing him that last answer, and I thought that was a great question you asked, like the fact, you know, he wrote a book like, oh, this is cool, the mortgage bond market at like the beginning. And so being able to look back and obviously have no idea that I guess essentially, literally, I guess 20 years later, that would be at the heart of this major international financial blow up.
Tracy:
Yeah. But again, it's funny how things kind of change, but they also stay the same because I mentioned that I was rereading it, or trying to before this recording, but there's a bit in there about Henry Kaufmann talking about the financialization of the economy and how the U.S. is borrowing so much money and debt's gonna be an issue. And this was, you know, in the late 1980s and fast forward 30 years, and we're still kind of having the same conversation it feels like.
Joe:
Yeah. And I thought that was interesting, your point, like Volker these days known for like the Volker Rule, but his era, this is where it all came from. Like that was it. So that was interesting. Anyway, I really enjoyed that conversation.
Tracy:
Totally. And yeah, I enjoyed getting an excuse to reread Liar’s Poker, especially because I'm now in New York. It's a very good New York book.
Joe:
Welcome back to New York, Tracy. This is very exciting. It is great to have you here. I'm excited about all the recordings we're gonna do in the same time zone.
Tracy:
Yeah. I feel like this was an auspicious start to the New York era. Although I should just say for any Odd Lots listeners, this is not gonna be our permanent audio set up. It's going to get better. But yeah, talking to Michael Lewis about Wall Street in the 1980s and Liar’s Poker is a great way to begin the new Odd Lots era.
Joe:
Sounds good. I like it. We're back.
Tracy:
Shall we leave it there?
Joe:
Let's leave it there.
You can find Michael Lewis’s new Liar’s Poker audio book here and the companion podcast ‘Other People’s Money’ here.