I was first introduced to Michael Lewis by an article of his in the now-defunct Portfolio entitled The End of Wall Street’s Boom. Despite being published last December, it’s still the second-most viewed article. Liar’s Poker is a memoir about investment banking in the late 1980s, an era of rapid financial innovation not too dissimilar to our own. Lewis chronicles the birth of the CMO (Collatoralized Mortgage Obligations) and touches on Michael Milken and the junk bond craze without diluting the narrative with incomprehensible jargon.
What stands out the most throughout the book is the dysfunctional work environment at Salomon Brothers, the firm where the young Lewis works. Traders and managers are continually heaping abuse on trainees and one another, making it a minor miracle that any money was made at all. You can thank the Fed and Congress for that. Salomon Brothers was also one of the first investment banks to go public, so its losses accrued to shareholders rather than partners. This naturally increased the boundaries for reckless behavior.
Lewis has a dry wit and an eye for colorful characters to highlight that keep the story engaging. While it’s not a technical manual for getting into banking (at least in the 80s) it’s at least a human, well-written story of how one inexperienced young person found himself responsible for tens of millions of dollars in institutional investor’s cash.
I have no idea if Wall Street is still as brutal a place to work as it was back then. I sincerely doubt it, but I have little first hand experience to work on. Government subsidies of all kinds have an inevitable way of destroying discipline and introducing calculation errors.
Financial reporting is generally brain-scrambling because it focuses on tracking concepts - like corporations. Lewis enlivens his reporting by writing about actual human beings and what they do to change the world. Thanks to Lewis, I have a good idea of what went on at Salomon Brothers, who the most important characters were, and what the overall context of what was happening at similar firms around the world.
