Iceland; Ireland; Greece; California. They are all in trouble – deep, serious trouble. The debts are massive. The way out looks… well, there doesn’t seem to be a very workable way out.
And the financial situation in other corners of the globe have ripple effects in every corner of the globe like never before. What happens here does not stay here, not in the financial arena.
This is the disturbing message of the new Michael Lewis book, Boomerang: Travels in the New Third World. I’m reading this book, and preparing a synopsis for a client group. It is Michael Lewis at his best – great storytelling, with plenty of “this is really important, and genuinely enlightening” insights. I have read, and presented three other books by Lewis: The New, New Thing; Moneyball; The Big Short. They are all still worth reading. This new one, Boomerang, just adds to my appreciation of Lewis as a writer and thinker, even as it adds to my understanding of the current fiscal crisis.
But it is more than a financial crisis alone. It is a moral crisis. Here’s an excerpt from an interview with Lewis conducted by Fareed Zakaria.
“I think we get the democracy we deserve, and in California it’s very hard to argue otherwise. We have essentially direct democracy – all big fiscal decisions are made by the people by plebiscite. And the idea that somehow in essence the people are not getting what they want – they are getting what they want. That’s the problem.
They (the people in California) are getting what they want. They want public services, and they don’t want to pay for them. They want to cheat the future for the present. And that’s not just a financial problem. That’s a cultural/moral problem.” (emphasis added).
A moral crisis. And a moral crisis requires a moral solution. And, so far, I’m not reading much in the solution department.
We live in a troubling time.
Here’s the interview with Lewis. The excert above is just after 3:30 in the video.
The new Jim Collins and Morten Hansen book, Great by Choice: Uncertainty, Chaos, and Luck – Why Some Thrive Despite Them All, and the significant “how is the internet affecting our brains” book, The Shallows, will be our two selections of the November 4 First Friday Book Synopsis.
I will present the synopsis of the new Collins and Hansen book. When Jim Collins comes out with a new book, it is a big deal. And this new book, just out, is already generating interest and buzz. And Karl Krayer will present the synopsis of The Shallows. This was selected as the title for the Dallas Morning News reading focus this year. It asks some very serious questions about the impact of the internet on our brains.
These will be valuable and useful presentations. So, if your schedule is free, come join us on Friday, November 4. You can reserve your spot through the link on our home page.
And, I will also present a “bonus program,” immediately following our usual event. This will go from 8:30 to about 9:45. Prompted by the ongoing financial crisis and uncertainty, I will provide key insights from an array of important and best-selling books:
Is This Time Really Different?
Based on a compilation of the key thoughts about the great financial crisis facing our country and the world,
from a number of best-selling books, including:
That Used to Be Us; Boomerang; This Time Is Different;
The Great Stagnation; The Big Short; All the Devils are Here, and others
• Note: The November First Friday Book Synopsis is sponsored by
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I have read and presented synopses of This Time is Different and The Big Short and All the Devils are Here. And I’ve had so many, many conversations about all that went wrong in the 2008 financial meltdown that was “thirty years in the making” (All the Devils are Here).
We are in such a politically charged and divided time, that it seems that everyone wants to point the biggest finger of blame at the “other side” (it’s the Democrats fault; it’s the fault of Wall Street; it’s Barney Frank’s fault).
But, here’s what I think: whoever is to blame (and the blame really should be spread far and side), people do not want to read the vital signs and face up to the difficulties that confront them. Not people; not CEOs; not industries; maybe not countries.
This insight is clearly stated by Bernie Madoff, of all people. In an interview (you can read about the interview on the Huffington Post here), he stated:
“They (the banks) had to know,” Mr. Madoff said. “But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know.’ “
Now, the blame for Madoff’s crime is all on Madoff. But that little tidbit of wisdom is, I’m afraid, right on. “We don’t want to know.’
And because we don’t, the volcano erupts.
The Big Short is coming out in paperback today. It is still #2 on the New York Times Hardcover Business Best Sellers list (just behind #1, with an asterisk, meaning that it is actually tied for #1 with the newer take on the financial meltdown, All The Devils Are Here – now my March selection for the First Friday Book Synopsis).
The Daily Beast has a short interview with the author, Michael Lewis. Here are two brief excerpts:
After the success of Liar’s Poker you wrote that few readers picked up on the true message of your book and instead read it as a celebratory how-to or guide to the financial world. Do you think readers got the message of The Big Short? The sense that so few people truly understood what was going on.
Or the broader message that the incentives in the financial system were bizarre and in need of changing? Not really.
Your dispatches from around the world on the economic crisis have proved excellent guides to problem spots, so where is next? Is there another Iceland or Greece looming?
Ireland, obviously. I have a piece about it that comes this week in Vanity Fair. After that…New Jersey?
Read the full interview here
You can purchase my synopsis of The Big Short, with audio + handout, at our companion web site, 15minutebusinessbooks.com.
This is the time of the year that we see so many collective lists of the “best of 2010.” In the last few days, we have seen such lists for films, sports accomplishments, songs, architecture, recipes, restaurants, and of course, books.
I want to tell you that I am unimpressed with most of the lists that I have seen that focus on books. As with films, these book lists contain great confusion among quality and quantity. That premise is particularly true when the lists come from booksellers themselves, such as a recent e-mail I received from Barnes and Noble with their “Books of the Year.”
Just like a film, a book is not necessarily good because it sells. Popular, best-selling books are of no greater quality than are popular, high dollar-grossing films. Because people buy a book does not make it good. Nor do I consider it a good barometer for quality.
Consider the terrible film from the late ’70’s, the “Rocky Horror Picture Show.” That film grossed millions of dollars and played regularly in theatres on Friday and Saturday nights through the mid ’90’s. It had no redeeming merit and critics panned its quality. Yet, it had a cult-like following, and it played to packed audiences, mostly either inebriated or bored, for many years.
In the recent Barnes and Noble list, I saw one business book for the 2010 year. It was The Big Short by Michael Lewis. I saw no other business books. I believe that was a fine book, but not as good as his previous offering, Moneyball. Why was it on the list? Because it sold. The best books in that list are the best-sellers. But, best-selling does not indicate high quality. I can give you titles of at least a dozen other books this year that were of higher quality than that one, but that simply did not sell as well.
Please remember that we only summarize the content of best-selling books at our monthly First Friday Book Synopsis in Dallas. The number one criterion is that the book must be on a best-selling list somewhere that we find credible. These lists include Business Week, Wall Street Journal, New York Times, and Amazon.com, among others. I will admit to you that after 13 years of doing this, I have delivered synopses of some books that sold well, but that were simply not very good. Some were not well-written, some were ill-researched, and some were best-sellers just because of the reputation of the author.
Regardless, we will continue to use best-sellers as our basis for book selection at the First Friday Book Synopsis. But, I am telling you that popular does not equate to good. And, there are likely some very good books that do not have the boost of marketing dollars from huge publishers that likely go overlooked. Strange as it sounds, it may not be optimal, but these lists remain the best vehicle available for us to use for our selections. Remember – popular may not be good. And, good may not always be popular.
What do you think? Let’s talk about it!
My post, A Quick Graphic Overview of The Big Short, has been one of the more popular posts on this blog. Here is a new article by Michael Lewis, with a clear statement of the problem, and his proposed solution. The article, Wall Street Proprietary Trading Under Cover (Bloomberg Opinion) is worth reading in full. Here are excerpts:
A few weeks ago we asked a simple question: Why are the same Wall Street banks that lobbied so hard to dilute the passages in the Dodd-Frank financial overhaul bill banning proprietary trading now jettisoning their proprietary trading groups, without so much as a whimper?
The law directs regulators to study the prop trading ban for another 15 months before deciding how to enforce it: why is Wall Street caving now?
The many answers offered by Wall Street insiders in response boil down to a simple sentence: The banks have no intention of ceasing their prop trading. They are merely disguising the activity, by giving it some other name.
Solution proposed by Michael Lewis:
Keep It Simple
There’s a simple, straightforward way for the GAO to construe the Dodd-Frank language, and it would reform Wall Street in a single stroke: to ban any sort of position-taking at the giant publicly owned banks. To say, simply: You are no longer allowed to make bets in the same stocks and bonds that you are selling to investors. (emphasis added).
If that means that Goldman Sachs is no longer allowed to make markets in corporate bonds, so be it. You can be Charles Schwab, and advise investors; or you can be Citadel, and run trading positions. But if you are Citadel you will be privately owned. And if you blow up your firm, you will blow up yourself in the bargain.