WEBVTT - Live with Nicolle Wallace 0:00:15.316 --> 0:00:15.796 Pushkin. 0:00:22.436 --> 0:00:25.996 I'm Leady agen Kott, I'm Michael Lewis, and we're here 0:00:26.036 --> 0:00:28.796 with a special kind of bonus episode of The Big 0:00:28.796 --> 0:00:30.676 Short Companion podcast. 0:00:30.356 --> 0:00:33.036 Yes, which you've heard because you were there for it live. 0:00:33.876 --> 0:00:37.636 I was interviewed by Nicole Wallace at Symphony Space and 0:00:37.716 --> 0:00:40.396 you were in the audience. And there were a few 0:00:40.396 --> 0:00:42.756 wrinkles to this interview that made it really fun. One 0:00:42.756 --> 0:00:46.236 it was Nicole Wallace, and she's a fabulous interviewer, and 0:00:46.276 --> 0:00:49.236 I've been on her show on MSNBC and she has 0:00:49.316 --> 0:00:50.716 a devoted and large. 0:00:50.436 --> 0:00:52.036 Following, and there's a reason for it. 0:00:52.476 --> 0:00:56.716 Two was, as we'll hear, an actor came out at 0:00:56.716 --> 0:01:00.356 the beginning of the show and performed one of the 0:01:00.396 --> 0:01:03.596 passages from the book and he was so much better 0:01:03.716 --> 0:01:07.476 at reading my book than I was, and I was mesmerized. 0:01:07.516 --> 0:01:08.996 It was like I was listening to the thing for 0:01:08.996 --> 0:01:12.276 the first time. And the third was that characters from 0:01:12.316 --> 0:01:15.236 The Big Short were actually in the audience, and that 0:01:15.436 --> 0:01:17.636 was a rare treat for me to be able to 0:01:17.676 --> 0:01:19.276 talk about them in front of them. 0:01:19.716 --> 0:01:21.116 Could you see them? They were like kind of in 0:01:21.156 --> 0:01:22.676 the front row. I was kind of trying to watch 0:01:22.676 --> 0:01:23.716 them out of the corner of my eye. 0:01:23.716 --> 0:01:27.116 It was Danny Moses, Vincent Daniel, and Porter Collins. And 0:01:27.156 --> 0:01:29.436 they're so loud. I could not see them because of 0:01:29.476 --> 0:01:31.596 the stage lights, but I could hear them. I could 0:01:31.636 --> 0:01:34.556 hear them laughing, you know, So that was a good sign. 0:01:34.756 --> 0:01:36.956 So that made it kind of fun. And it was 0:01:37.036 --> 0:01:38.956 just fun to like recap this whole thing. And it's 0:01:38.996 --> 0:01:40.236 a great I feel like it's a great way to 0:01:40.356 --> 0:01:41.356 end our little season. 0:01:41.916 --> 0:01:44.236 And there are even stories that you told Nicole Wallace 0:01:44.276 --> 0:01:45.476 that I had never heard before. 0:01:45.916 --> 0:01:47.196 This I find hard to believe. 0:01:47.356 --> 0:01:48.796 But it's nice that there's. 0:01:48.596 --> 0:01:50.436 Still a few coming up. 0:01:50.756 --> 0:01:54.836 Michael Lewis and Nicole Wallace recorded live at Symphony Space 0:01:55.156 --> 0:01:55.716 in New York. 0:02:01.116 --> 0:02:04.556 This is sort of celebrating an anniversary of the Big 0:02:04.556 --> 0:02:08.676 Short and and you've just released a new audio book 0:02:08.756 --> 0:02:11.636 in your Own Boys, in your Own Telling. What is 0:02:11.676 --> 0:02:14.356 it like to relive this story? 0:02:15.116 --> 0:02:17.796 First? You really should give me credit for having the 0:02:17.836 --> 0:02:20.156 balls to come out for two days of media for 0:02:20.156 --> 0:02:21.476 a book that's fifteen years old. 0:02:22.676 --> 0:02:25.076 Well, I'm taking notes. I want to know how it's done. 0:02:25.116 --> 0:02:26.876 I do feel like I do feel this is the 0:02:26.956 --> 0:02:29.116 last thing I'm doing, and I do feel I need 0:02:29.156 --> 0:02:32.076 to come clean to someone about why we're doing this. 0:02:32.476 --> 0:02:34.796 We happy? Can I be this? Can we just do it? 0:02:34.796 --> 0:02:34.956 Here? 0:02:34.996 --> 0:02:37.476 Are we safe space? Yes? Safe space? Safe space? 0:02:37.596 --> 0:02:37.996 You guys in. 0:02:38.116 --> 0:02:40.516 Sas safe space and nobody's going to talk about it. 0:02:40.636 --> 0:02:42.196 No it well this is classified. 0:02:42.236 --> 0:02:46.756 Okay. So what happened was a few years ago the rights, 0:02:46.836 --> 0:02:48.876 the audio rights to Liar's Poker came back to me. 0:02:49.436 --> 0:02:52.956 And the audiobook market is what's changed. It's the biggest 0:02:52.996 --> 0:02:56.236 change in the way books are consumed in my career 0:02:56.716 --> 0:02:59.956 and in the old days, in olden times, even big 0:02:59.996 --> 0:03:02.196 short times, there wasn't a whole lot of effort that 0:03:02.236 --> 0:03:06.116 went into making the audiobooks. And in the case of 0:03:06.156 --> 0:03:10.956 like Liar's Poker, the audiobook was cassettes on you know, 0:03:10.996 --> 0:03:13.356 really you got a box. You got this giant cardboard 0:03:13.396 --> 0:03:15.436 box full of cassettes if you ordered it. So we thought. 0:03:15.516 --> 0:03:19.716 I thought with Pushkin my podcast company, and I'm a 0:03:19.796 --> 0:03:22.196 kind of an itinerant podcast right now, I'm not on 0:03:22.316 --> 0:03:23.556 all the time, but I do this. See I'll do 0:03:23.676 --> 0:03:26.876 seasons from time to time that it would be it 0:03:26.876 --> 0:03:29.156 would be fun to just try to redo the Liar's 0:03:29.156 --> 0:03:32.996 Poker and see if see if anybody would be interested. 0:03:33.236 --> 0:03:35.516 And we did a podcast season alongside of it, and 0:03:35.556 --> 0:03:39.316 the thing just took off, I mean, and so we thought, hmmm, 0:03:40.036 --> 0:03:43.476 like these things are coming back, Big Shorts coming back, 0:03:43.516 --> 0:03:45.796 Moneyball's coming back, the blind Side's coming back, all these 0:03:45.796 --> 0:03:49.796 books that are coming back, and this chance to uh 0:03:50.396 --> 0:03:55.516 make free money. It's really great. But also it's kind 0:03:55.516 --> 0:03:58.036 of fun to revisit the stories. Like I never reread 0:03:58.076 --> 0:04:00.396 my books. I don't think about them. They really just 0:04:00.516 --> 0:04:03.036 kind of they're in the back past. And this one, 0:04:03.436 --> 0:04:07.476 this had Moneyball in particular, we're still living in a 0:04:07.556 --> 0:04:11.396 world that it was sort of just and it seemed relevant. 0:04:11.436 --> 0:04:13.996 So we did recorded the book a couple of months 0:04:13.996 --> 0:04:17.156 ago when we have a new fancy audio book, but 0:04:17.196 --> 0:04:20.596 we have a seven episode podcast with going back and 0:04:20.636 --> 0:04:22.836 looking at the consequences of the financial crisis, talking to 0:04:22.876 --> 0:04:24.876 some of the characters in the book. Some of them 0:04:24.916 --> 0:04:30.396 were here. I think they got in Danny Moses, Vincent, 0:04:30.476 --> 0:04:33.116 Daniel Poor Collins. Did they hear, Yeah, there we go 0:04:36.276 --> 0:04:39.556 and I think that's all. I think that's all that's here, 0:04:39.876 --> 0:04:44.756 and there's an and it was. It was It's just interesting, 0:04:44.916 --> 0:04:46.196 still interesting, still in the air. 0:04:46.556 --> 0:04:49.636 It's riveting. I mean I and I'm so glad that 0:04:50.756 --> 0:04:53.236 you brought it back to the people because your gift 0:04:53.276 --> 0:04:55.316 to the story we're telling every day in the news 0:04:55.996 --> 0:05:01.116 is that it is very easy to shorthand everything. But 0:05:01.156 --> 0:05:05.756 there's nothing that you experience on a more human level 0:05:06.116 --> 0:05:08.996 than the human stories. And so I want to spend 0:05:09.316 --> 0:05:10.956 tonight talking about these humans. 0:05:11.276 --> 0:05:13.836 Do you want me to start now I start talking, 0:05:13.876 --> 0:05:15.036 I kind of don't say. 0:05:14.876 --> 0:05:17.876 Give me one Give me one note on the humans 0:05:17.996 --> 0:05:19.436 and then we'll listen. 0:05:19.156 --> 0:05:24.236 To this elevated the human There was a logic to 0:05:24.316 --> 0:05:27.436 the book. There was there was The book got cast 0:05:27.476 --> 0:05:29.876 in a way no book I have ever written has 0:05:29.916 --> 0:05:31.876 gotten cast, but in the way the book I'm writing 0:05:31.876 --> 0:05:35.596 now is getting cast. And and I will explain that 0:05:35.716 --> 0:05:37.476 logic after we hear the reading. 0:05:37.676 --> 0:05:40.396 So without further ado, this this is I mean, you 0:05:40.436 --> 0:05:44.316 are always a highlight. This is really going to be They're. 0:05:43.916 --> 0:05:44.636 Here for you. 0:05:44.676 --> 0:05:48.036 No, no, no, Now, Zach Renier is going to do 0:05:48.196 --> 0:05:49.676 reading from from the book. 0:05:57.876 --> 0:06:01.636 It had been four days since Lehman Brothers had been 0:06:01.676 --> 0:06:05.036 allowed to fail. But the most powerful effects of the 0:06:05.156 --> 0:06:09.756 collapse we're being felt right now. The stop of Morgan 0:06:09.876 --> 0:06:13.196 Stanley and Goldman Sachs were tanking, and it was clear 0:06:13.276 --> 0:06:17.036 that nothing short of the US government could save them. 0:06:17.716 --> 0:06:21.796 It was the equivalent of the earthquake going off, Danny said, 0:06:22.396 --> 0:06:27.516 And then much later the tsunami arrives. Danny's trading life 0:06:27.556 --> 0:06:31.356 was man versus man, but this felt more like man 0:06:31.556 --> 0:06:38.076 versus nature. The synthetic cdo had become a synthetic natural disaster. Usually, 0:06:38.676 --> 0:06:41.356 you feel you have the ability to control your environment, 0:06:41.916 --> 0:06:45.476 said Danny. You're good because you know what's going on now. 0:06:45.676 --> 0:06:49.796 It didn't matter what I knew. Peel went out the window. 0:06:51.116 --> 0:06:54.636 Front Point had maybe seventy different bets in various stock 0:06:54.716 --> 0:06:58.756 markets around the world. All of them were on financial institutions. 0:06:59.236 --> 0:07:02.276 He scrambled to keep a handle on them all, but couldn't. 0:07:02.476 --> 0:07:05.156 They owned shares in Key Bank and were short the 0:07:05.196 --> 0:07:07.636 shares of Bank of America, both of which were doing 0:07:07.676 --> 0:07:10.716 things they had never done done before. There were no 0:07:10.876 --> 0:07:13.556 bids in the market for anything, said Danny. There was 0:07:13.596 --> 0:07:17.036 no market. Was really only then I realized there was 0:07:17.076 --> 0:07:20.076 a bigger issue than just our portfolio. 0:07:20.556 --> 0:07:22.356 For fundamentals didn't matter. 0:07:22.796 --> 0:07:25.036 Stocks were going to move up and down on pure 0:07:25.156 --> 0:07:29.036 emotion and speculation of what the government would do. 0:07:30.396 --> 0:07:32.436 The most unsettling loose. 0:07:32.196 --> 0:07:36.276 Thought rattling around in his mind was that Morgan Stanley 0:07:37.276 --> 0:07:42.516 was about to go under. Their fund was owned by 0:07:42.556 --> 0:07:47.036 Morgan Stanley. They had almost nothing to do with Morgan 0:07:47.116 --> 0:07:50.436 Stanley and felt little kinship with the place. They did 0:07:50.476 --> 0:07:55.876 not act or feel like Morgan Stanley employees. Heisman often 0:07:55.916 --> 0:07:58.356 said how much he wished he was allowed to short 0:07:58.396 --> 0:08:02.356 Morgan Stanley's stock. They acted and felt like the managers 0:08:02.396 --> 0:08:08.756 of their own fund. If Morgan Stanley failed, however, its 0:08:08.796 --> 0:08:11.956 shared and their fun wound up as an asset in 0:08:12.036 --> 0:08:16.676 a bankruptcy proceeding. I'm thinking we got the world by 0:08:16.716 --> 0:08:19.916 the fucking balls, and the company we work for is 0:08:19.996 --> 0:08:25.876 going bankrupt. Then Danny sends something seriously wrong with himself. 0:08:27.476 --> 0:08:31.236 Just before eleven in the morning, wavy black lines appeared 0:08:31.236 --> 0:08:34.436 in the space between his eyes and his computer screen. 0:08:34.956 --> 0:08:37.316 The screen appeared to be fading in and out. 0:08:37.836 --> 0:08:40.516 I felt this shooting pain in my head, he said, 0:08:40.636 --> 0:08:44.196 I don't get headaches. I thought I was having an aneurysm. 0:08:44.716 --> 0:08:47.276 Now he became aware of his heart. He looked down 0:08:47.316 --> 0:08:50.156 and he could actually see it banging against his chest. 0:08:50.876 --> 0:08:53.316 I spent my morning trying to control all this energy 0:08:53.356 --> 0:08:56.476 and all this information, he said, and I lost control. 0:08:57.556 --> 0:09:00.036 He rose up from his desk and looked for someone 0:09:00.436 --> 0:09:03.196 eyes been normally sat across from him, but Ivesan was 0:09:03.236 --> 0:09:06.796 out at some conference trying to raise money, which showed 0:09:06.836 --> 0:09:10.036 you how unprepared they all were at the arrival of 0:09:10.076 --> 0:09:13.956 the moment for which then they thought themselves perfectly prepared. 0:09:14.836 --> 0:09:18.716 Danny turned to the colleague beside him, Porter, I think 0:09:18.756 --> 0:09:22.596 I'm having a heart attack, he said. Porter Collins laughed 0:09:22.596 --> 0:09:26.356 and said, no, you're not. An Olympic rowing career had 0:09:26.396 --> 0:09:28.996 left Porter Collins a bit inerd to the pain of 0:09:29.076 --> 0:09:32.516 others as he assumed that they didn't know what pain was. No, 0:09:32.756 --> 0:09:35.796 Danny said, I need to go to the hospital. His 0:09:35.876 --> 0:09:38.556 face had gone pale, but he was still able to 0:09:38.596 --> 0:09:39.876 stand on his own two feet. 0:09:39.956 --> 0:09:41.036 How bad could it be? 0:09:41.436 --> 0:09:45.036 Danny was always a little jumpy, That's why he's good 0:09:45.036 --> 0:09:48.716 at his job, said Porter. I kept saying, you're not 0:09:48.756 --> 0:09:52.596 having a heart attack, and then he stopped talking and 0:09:52.636 --> 0:09:55.276 he said, all right, maybe you are. 0:09:56.196 --> 0:09:57.996 This actually wasn't all that helpful. 0:09:58.196 --> 0:10:01.436 Unsteadily, Danny turned to Vinnie, who had been watching everything 0:10:01.436 --> 0:10:03.436 from the far end of the long trading desks and 0:10:03.556 --> 0:10:08.036 was thinking about calling an ambulance. I got to get 0:10:08.076 --> 0:10:12.356 out of here now, he said. By the time Heisman 0:10:12.436 --> 0:10:14.876 got the call from Danny Moses saying that he might 0:10:14.956 --> 0:10:17.996 be having a heart attack, and that he and Vinnie 0:10:17.996 --> 0:10:20.996 and Porter were sitting on the steps of Saint Patrick's Cathedral, 0:10:21.036 --> 0:10:26.476 he was in the midst of a slow, almost menopausal change. 0:10:28.276 --> 0:10:31.476 He had been unprepared for his first hot flash in 0:10:31.516 --> 0:10:34.476 the late fall of two thousand and seven. By then, 0:10:34.516 --> 0:10:36.956 it was clear to many that he had been right 0:10:37.396 --> 0:10:40.556 and they had been wrong, and that he had gotten 0:10:40.676 --> 0:10:43.796 rich to boot. He gone to a conference put on 0:10:43.876 --> 0:10:46.756 by Merrill Lynch right after they had fired their CEO, 0:10:47.036 --> 0:10:51.116 Stan O'Neill and disclosed twenty billion dollars or so of 0:10:51.156 --> 0:10:55.116 their fifty two billion in subprime related losses. There he 0:10:55.196 --> 0:10:58.516 had settled up to Merrill's chief financial officer, Jeff Edwards, 0:10:58.996 --> 0:11:02.596 the same Jeff Edwards Heisman had taunted some months earlier 0:11:02.636 --> 0:11:06.556 about Merrill Lynch's risk models. You remember what I said 0:11:06.636 --> 0:11:10.996 about those risk models of yours, Eisman now said, I 0:11:11.036 --> 0:11:11.956 guess I was right. 0:11:12.236 --> 0:11:13.876 Huh. 0:11:13.996 --> 0:11:20.116 Instantly, and amazingly, he regretted having said it. I felt 0:11:20.196 --> 0:11:23.876 bad about it, said Eisman. He was obnoxious. He was 0:11:23.916 --> 0:11:25.716 a lovely guy. He was just wrong. I was no 0:11:25.796 --> 0:11:28.276 longer the underdog, and I had. 0:11:28.036 --> 0:11:30.316 To conduct myself in a different way. 0:11:31.676 --> 0:11:37.116 Valerie Fagan watched in near bewilderment as her husband acquired 0:11:37.396 --> 0:11:44.196 haltingly in fits and starts, a trait resembling tact. There 0:11:44.236 --> 0:11:46.996 was a void after everything happened, she said. 0:11:47.276 --> 0:11:47.956 Once he was. 0:11:47.956 --> 0:11:52.916 Proved right, all this anxiety and anger and energy went away, 0:11:52.996 --> 0:11:57.356 and that left this big void. He wanted on an 0:11:57.396 --> 0:12:00.396 ego thing for a while. He was really kind of 0:12:00.516 --> 0:12:04.596 full of himself. Eisman had been so vocal about the 0:12:04.836 --> 0:12:07.916 inevitable doom that all sorts of unlikely people wanted to 0:12:07.956 --> 0:12:11.356 hear what he now had to say. After the conference 0:12:11.356 --> 0:12:14.236 in Las Vegas, he had come down with a parasite. 0:12:14.356 --> 0:12:16.796 He told the doctor who treated him that the financial 0:12:16.836 --> 0:12:19.596 world as we knew it was about to end. A 0:12:19.676 --> 0:12:22.316 year later, he went back to the same doctor for 0:12:22.356 --> 0:12:26.436 a colonoscopy. Stretched out on the table, here's the doctor say, 0:12:27.036 --> 0:12:29.076 here's the guy who predicted the crisis. 0:12:29.236 --> 0:12:30.596 Come in and listen to this. 0:12:31.276 --> 0:12:33.676 And in the middle of Iman's colonoscopy, a room full 0:12:33.716 --> 0:12:34.596 of doctors and nurses. 0:12:34.636 --> 0:12:36.516 We told the story of heisman genius. 0:12:39.076 --> 0:12:43.996 The story of Iceman's genius quickly grew old to his wife. 0:12:44.836 --> 0:12:47.996 Long ago, she had established a sort of Iceman's social 0:12:48.036 --> 0:12:52.236 emergency task force with her husband's therapists. We beat him 0:12:52.356 --> 0:12:55.076 up and said, you really just have to knock the 0:12:55.196 --> 0:12:59.316 shit off. And he got it, and he started to 0:12:59.316 --> 0:13:02.116 be nice, and he liked being nice. 0:13:02.916 --> 0:13:03.636 It was a new. 0:13:03.516 --> 0:13:05.596 Experience for him. 0:13:06.076 --> 0:13:06.676 All around. 0:13:06.716 --> 0:13:10.836 She and others found circumstantial evidence of a changed man 0:13:11.276 --> 0:13:13.956 at the Christmas party at the building se door, for example. 0:13:14.036 --> 0:13:17.436 She wasn't planning to even let Eisman know about it, 0:13:17.476 --> 0:13:19.676 as she never knew what he might do or say. 0:13:20.596 --> 0:13:22.796 I was just trying to kind of sneak out of 0:13:22.836 --> 0:13:25.836 our apartment, she said, and he stops me and said, 0:13:26.756 --> 0:13:30.436 how will it look if I don't go. The sincerity 0:13:30.476 --> 0:13:32.756 of his concern shocked her into giving him a chance. 0:13:33.156 --> 0:13:36.676 You can go, but you have to behave, she said, 0:13:37.076 --> 0:13:41.036 to which Eisman replied, well, I know how to behave now, 0:13:41.636 --> 0:13:43.716 And so she took him to the Christmas party and 0:13:43.756 --> 0:13:44.516 he was as. 0:13:44.436 --> 0:13:45.756 Sweet as he could be. 0:13:46.756 --> 0:13:49.676 He's become a pleasure, said Valerie. 0:13:50.476 --> 0:13:51.196 Go figure. 0:13:53.196 --> 0:13:56.636 That afternoon of September eighteenth, two thousand and eight. The 0:13:56.676 --> 0:14:00.196 new and possibly improving eyes been ambled toward his partners 0:14:00.196 --> 0:14:04.356 on the steps of Saint Patrick's Cathedral. Getting to places 0:14:04.396 --> 0:14:07.956 on foot always took him too long. Steve such a 0:14:08.156 --> 0:14:12.036 fucking slow walker, said Danny. He walks like an elephant 0:14:12.036 --> 0:14:15.076 would walk, if an elephant could only take human size steps. 0:14:17.036 --> 0:14:17.716 The weather was. 0:14:17.676 --> 0:14:20.676 Gorgeous, one of those rare days where the blue sky 0:14:20.836 --> 0:14:24.236 reaches down through the forest of tall buildings and warms 0:14:24.276 --> 0:14:28.196 the soul. We just sat there, says Danny, watching the 0:14:28.236 --> 0:14:32.716 people pass. They sat together on the cathedral steps for 0:14:32.756 --> 0:14:36.276 an hour or so. As we sat there, we were 0:14:36.316 --> 0:14:39.956 weirdly calm, said Danny. We felt insulated from the whole 0:14:40.036 --> 0:14:43.556 market reality. It was an out of body experience. We 0:14:43.756 --> 0:14:47.996 just sat and watched the people pass and talked about 0:14:47.996 --> 0:14:51.556 what might happen next. How many of these people were 0:14:51.556 --> 0:14:54.556 going to lose their jobs. Who was going to rent 0:14:54.596 --> 0:14:58.036 these buildings after all the Wall Street firms had collapsed. 0:14:58.916 --> 0:15:02.956 Peter Collins thought that, well, it was like the world stopped. 0:15:03.516 --> 0:15:05.916 We were looking at all these people and saying, these 0:15:05.956 --> 0:15:10.436 people are either ruined or about to be ruined, and 0:15:10.516 --> 0:15:13.116 apart from that, there wasn't a whole lot of hangaring 0:15:13.676 --> 0:15:16.836 inside Front Point. This is what they had been waiting for, 0:15:17.076 --> 0:15:23.276 total collapse. The investment banking industry is fucked, Heisman had 0:15:23.316 --> 0:15:27.396 said six weeks earlier. These guys are only beginning to 0:15:27.516 --> 0:15:28.996 understand how fucked they are. 0:15:29.476 --> 0:15:32.476 It's like being a scholastic prior to Newton. 0:15:32.796 --> 0:15:36.676 Newton comes along and one morning you wake up, holy shit, 0:15:37.276 --> 0:15:45.196 I'm wrong. Layman Brothers had vanished, Merrill had surrendered, and Goldman, 0:15:45.316 --> 0:15:48.036 Sachs and Morgan Stanley were just a week away from. 0:15:47.876 --> 0:15:49.796 Ceasing to be investment banks. 0:15:50.516 --> 0:15:55.556 Investment bankers were not just fucked, they were extinct. That 0:15:55.676 --> 0:15:59.356 Wall Street has gone down because of this is justice, 0:15:59.836 --> 0:16:03.516 Heisman said. The only one of them who wrestled a 0:16:03.516 --> 0:16:06.116 bit with their role as the guys who made a 0:16:06.116 --> 0:16:11.476 fortune betty against their own society was Vincent Daniel Well 0:16:11.596 --> 0:16:14.916 Vinnie's being from Queen's needs to see the dark side 0:16:14.916 --> 0:16:20.116 of everything, Heisman said, to which Vinnie replied, well, the 0:16:20.156 --> 0:16:23.076 way we thought about it, which we didn't like, was 0:16:23.676 --> 0:16:27.316 by shortening this market, we're creating the liquidity to keep 0:16:27.356 --> 0:16:32.196 the market going. It was like feeding the monster, Heisman said, 0:16:32.236 --> 0:16:36.236 We fed the monster until it blew up. The monster 0:16:36.396 --> 0:16:41.036 was exploding, yet on the streets of Manhattan, there was 0:16:41.116 --> 0:16:42.836 no sign anything important. 0:16:42.836 --> 0:16:43.596 It just happened. 0:16:44.156 --> 0:16:47.276 The force that would affect all their lives was hidden 0:16:47.276 --> 0:16:50.396 from their view. That was the problem with money. What 0:16:50.516 --> 0:16:53.316 people did with it had consequences, but they were so 0:16:53.516 --> 0:16:57.556 remote from the original action that the mind never connected 0:16:58.076 --> 0:17:01.516 the one with the other. The teaser rate loans you 0:17:01.636 --> 0:17:04.156 make to people who will never be able to repay 0:17:04.196 --> 0:17:07.716 them will go bad. Not immediately, but in two years, 0:17:07.756 --> 0:17:11.476 when their interest rates rise. The various bonds you make 0:17:11.516 --> 0:17:13.716 from those loans will go bad. 0:17:13.836 --> 0:17:15.476 Not as the loans go bad, but. 0:17:15.676 --> 0:17:19.356 Months later, after a lot of teds, foreclosures and bankruptcies 0:17:19.356 --> 0:17:23.516 and for sales. The various CDOs you make from the 0:17:23.556 --> 0:17:26.956 bonds will not go bad right then, but after some 0:17:26.996 --> 0:17:30.796 trustees sort out whether there will ever be enough cash 0:17:30.796 --> 0:17:34.516 to pay them off, whereupon the end owner of the 0:17:34.556 --> 0:17:38.956 cdo receives a little note, Dear sir, we regret to 0:17:39.036 --> 0:17:43.876 inform you that your bond no longer exists. But the 0:17:43.876 --> 0:17:47.356 biggest lag of all was right here in the streets. 0:17:48.836 --> 0:17:52.236 How long would it take before the people walking back 0:17:52.276 --> 0:17:57.276 and forth in front of Saint Patrick's Cathedral, figure out 0:17:57.396 --> 0:18:00.396 what had just happened to them? 0:18:00.756 --> 0:18:02.356 Who thank you for. 0:18:04.356 --> 0:18:04.396 That? 0:18:04.636 --> 0:18:07.756 Gren proving that the book is always better than the movie. 0:18:07.916 --> 0:18:11.756 Oh no, I made such a mistake reading this book myself. 0:18:11.836 --> 0:18:12.716 That was incredible. 0:18:13.036 --> 0:18:15.876 I should have hired him. Incredible. That was incredible. 0:18:15.916 --> 0:18:18.156 That was, of course Zachrenier from The Good Wife, The 0:18:18.196 --> 0:18:21.436 Good Fight, Ray Donovan, Fame and Tony nominated for thirty 0:18:21.436 --> 0:18:23.596 three variations. While we're round, thank you. 0:18:32.836 --> 0:18:35.956 How did the Volkswagen Beatle go from being Hitler's dream 0:18:36.036 --> 0:18:39.396 car to a hippie icon? How did a disgruntled center 0:18:39.436 --> 0:18:43.116 fielder change the business of sports? I'm Jacob Goldstein and 0:18:43.276 --> 0:18:46.036 on Business History, my co host Robert Smith and I 0:18:46.116 --> 0:18:49.116 dig into the people and companies who created the modern world. 0:18:49.516 --> 0:18:53.076 Business history is full of innovations and failures and insights 0:18:53.116 --> 0:18:56.356 into how business works today. At the end of today's 0:18:56.356 --> 0:18:58.356 episode of Against the Rules, we're going to play a 0:18:58.356 --> 0:19:02.756 clip from our episode about Jim Simon's decades ago. Simon's 0:19:02.796 --> 0:19:07.316 basically invented modern algorithmic trading, and after a few early hiccups, 0:19:07.596 --> 0:19:11.196 including buying up all the titles in Maine, Simon's built 0:19:11.236 --> 0:19:15.796 a machine that generated incredible returns for decades. The show 0:19:15.876 --> 0:19:18.676 is called Business History and the previous coming up at 0:19:18.676 --> 0:19:20.836 the end of today's episode of Against the Rules. 0:19:24.676 --> 0:19:28.596 I just want to start with the human stories are 0:19:29.196 --> 0:19:32.916 sometimes hardest to tell because they involve such meticulous reporting. 0:19:33.516 --> 0:19:36.196 You can't just you can't get it wrong. They're real people, 0:19:37.596 --> 0:19:40.756 and it strikes me that the Big Short is a 0:19:40.796 --> 0:19:43.756 story about what happens when the reporting doesn't happen, when 0:19:43.756 --> 0:19:45.996 people don't pursue the facts and they look the other way. 0:19:46.076 --> 0:19:47.756 And so I want to know what it is in 0:19:47.836 --> 0:19:50.996 you that inspires you to report out stories like this. 0:19:51.276 --> 0:19:53.356 I'll try to end with that. And I want to 0:19:53.436 --> 0:19:56.756 end the whole night by telling my own colonoscopy story. 0:19:57.076 --> 0:20:02.956 I mean, that's t we call that a d I've. 0:20:02.796 --> 0:20:03.876 Got it, So you go. 0:20:03.996 --> 0:20:07.156 I'll bring you back to my question very end. 0:20:07.276 --> 0:20:10.956 You do, okay, because I MS kolonoscopy story was pretty great. 0:20:11.156 --> 0:20:15.676 I have one. So so the logic of the book, 0:20:15.676 --> 0:20:20.996 how the it was so it was an incredibly complicated story, 0:20:21.076 --> 0:20:22.156 right It's a hairball of a story. 0:20:22.156 --> 0:20:23.956 It's like a story in Washington. 0:20:23.636 --> 0:20:28.236 Right now that it's very hard to tell. It in 0:20:29.196 --> 0:20:32.916 from eighty thousand feet in a way that's interesting. It's 0:20:32.956 --> 0:20:36.996 too it's just too complicated. And however, there was a 0:20:36.996 --> 0:20:40.036 simple there's a beautiful simplicity to the story, and the 0:20:40.036 --> 0:20:42.476 beautiful and this is the penny dropped for me pretty 0:20:42.476 --> 0:20:45.316 early on that the simplicity was you could think of 0:20:45.316 --> 0:20:48.876 the financial world as a simple bet, a giant bet, 0:20:49.116 --> 0:20:51.796 and the financial will had organize itself around the bet. 0:20:51.996 --> 0:20:53.956 And on one side of the bet was virtually all 0:20:53.996 --> 0:20:56.196 the big firms on Wall Street and the international banks 0:20:56.196 --> 0:20:58.356 and so on, and it was a bet on the 0:20:58.356 --> 0:21:00.956 subprime mortgage market, and on the on the on the 0:21:00.956 --> 0:21:02.876 other side of the bed, where all these people. 0:21:02.676 --> 0:21:03.516 Know what I'd ever heard of. 0:21:04.356 --> 0:21:09.316 And and the question was, how had the people on 0:21:09.316 --> 0:21:11.156 the wrong side of the bet, the center of the 0:21:11.156 --> 0:21:13.996 financial system, become the dumb money? How did they end 0:21:14.076 --> 0:21:17.276 up on the dumb side of the bet? So I 0:21:17.316 --> 0:21:18.196 go out to answer that question. 0:21:18.236 --> 0:21:20.396 When you figure out that structural frame. 0:21:20.276 --> 0:21:22.796 I figured that's the first thing I figure out. I 0:21:22.836 --> 0:21:25.316 figure out that, Oh I could tell this story. I 0:21:25.356 --> 0:21:27.636 can make it simple for a reader by just it's 0:21:27.716 --> 0:21:29.436 just a bet. It's a single and you're are on 0:21:29.436 --> 0:21:33.356 one side or the other. And then so what I 0:21:33.396 --> 0:21:37.076 do then, is I go out and get a list 0:21:37.396 --> 0:21:39.516 of everyone who was on the right side of the bet. 0:21:39.596 --> 0:21:42.956 Now there were probably thousands, but people who were really 0:21:42.996 --> 0:21:44.356 on the right side of the bed, who kind of 0:21:44.436 --> 0:21:46.916 laid it all on the line, and they were maybe 0:21:46.996 --> 0:21:52.556 twenty five twenty and I went and met I think 0:21:52.596 --> 0:21:55.156 all of them. Not all of them would talk to 0:21:55.196 --> 0:21:57.756 me on the record, but I got to know all 0:21:57.796 --> 0:22:00.076 of them, and all of them agreed to kind of 0:22:00.116 --> 0:22:05.116 inform my understanding. But that was that because the beginning 0:22:05.196 --> 0:22:07.796 what was essentially a casting search. Because what happened is 0:22:07.836 --> 0:22:10.916 I talked to them. I realized that there was another 0:22:10.956 --> 0:22:14.676 way to think about this. There were different ways to 0:22:14.716 --> 0:22:16.356 get to the right answer, to get to the right 0:22:16.356 --> 0:22:18.236 side of the bet. They weren't all doing the same thing, 0:22:19.756 --> 0:22:22.956 but they were categories. They were kind of three ways 0:22:22.996 --> 0:22:24.916 that people got to the right side the way these 0:22:24.916 --> 0:22:27.596