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Big Short

Michael Lewis's book about the 2008 real estate/stock market crash, The Big Short, is a well-written but ultimately disappointing effort. It focuses on personalities, not facts; the story is disorganized and cries out for timelines, none of which are supplied; there is no index. In a zero-sum game such as Lewis describes there have to be as many winners as losers, but the author doesn't seem to be aware of that. Instead, he focuses on a small set of obscure, obsessive derivative traders and tries to make them into heroes. They come across instead as foul-mouthed gamblers.

Overall, The Big Short is rather akin to Christopher McDougall's Born to Run, an "Entertainment Tonight"-style collection of dubious celebrity anecdotes. Lewis's earlier book Moneyball was far better, with verifiable statistics and memorable lessons. The Big Short does improve somewhat in its later chapters, when it touches upon Value at Risk and other quantitative measures. But the clear, if unintended, message that this book sends is that most (>90%?) of the current international financial system is built upon sand, speculation that provides little or no social benefit. The implied conclusion: broader, tougher regulation is essential to prevent further damage. Michael Lewis, however, seems not to follow that logic.

(cf. MoneyWisdom (2001-05-20) for excellent financial advice from 1885, still valid today) - ^z - 2011-04-24