1 00:00:15,276 --> 00:00:23,396 Speaker 1: Pushkin. Hey, there against the Rules listeners, Michael lewis here. 2 00:00:24,076 --> 00:00:27,276 Speaker 1: I know you've been very patient waiting for season three, 3 00:00:27,796 --> 00:00:31,356 Speaker 1: and it's coming this spring. But over the next few weeks, 4 00:00:31,356 --> 00:00:33,996 Speaker 1: I wanted to share something special with you. It's a 5 00:00:33,996 --> 00:00:35,916 Speaker 1: project that I've really grown to love that I didn't 6 00:00:35,916 --> 00:00:38,796 Speaker 1: think I would at first. It starts with a bunch 7 00:00:38,796 --> 00:00:41,836 Speaker 1: of boxes I kept in storage for three decades. I 8 00:00:41,876 --> 00:00:44,796 Speaker 1: brought them into the studio here in Berkeley, California, not 9 00:00:44,916 --> 00:00:48,356 Speaker 1: sure what i'd find inside, and I asked my editor 10 00:00:48,436 --> 00:00:51,476 Speaker 1: Julia Barton to listen in as I opened them up. 11 00:00:55,036 --> 00:00:57,676 Speaker 1: This is promising at the top. Here you're looking at 12 00:00:57,676 --> 00:01:00,996 Speaker 1: a banker's box that says liars Poker, scribbled in messy 13 00:01:01,436 --> 00:01:04,036 Speaker 1: black ink on the top. And sure enough you open 14 00:01:04,156 --> 00:01:07,996 Speaker 1: it and here is I have here a tattered Manila 15 00:01:08,036 --> 00:01:12,836 Speaker 1: folder with working titles. A list of all the titles 16 00:01:12,836 --> 00:01:17,516 Speaker 1: I considered, Oh, let's hear it fast and loose in 17 00:01:17,556 --> 00:01:25,116 Speaker 1: the Golden Years, bond Fever, spell Bound, no spell bonds. 18 00:01:25,156 --> 00:01:29,476 Speaker 1: I guess I thought that was a upon burnout the 19 00:01:29,596 --> 00:01:36,716 Speaker 1: empire builders disposable assets, other people's money. But it gets better, 20 00:01:36,756 --> 00:01:41,836 Speaker 1: actually get better. Bonds of Passion in the end, I 21 00:01:41,876 --> 00:01:47,516 Speaker 1: just called it Liar's Poker. I was twenty seven years 22 00:01:47,556 --> 00:01:49,316 Speaker 1: old when I wrote the book in twenty nine when 23 00:01:49,316 --> 00:01:51,796 Speaker 1: it came out. It's all about my first real job 24 00:01:51,796 --> 00:01:54,636 Speaker 1: out of college, three years working at an investment bank 25 00:01:54,636 --> 00:01:57,796 Speaker 1: called Solomon Brothers. I don't think I had any idea 26 00:01:57,836 --> 00:01:59,436 Speaker 1: at the time what was going to happen after it 27 00:01:59,516 --> 00:02:02,716 Speaker 1: was published. But when it landed, it landed like a 28 00:02:02,796 --> 00:02:07,516 Speaker 1: giant stink bomb in the middle of Wall Street. At 29 00:02:07,556 --> 00:02:09,716 Speaker 1: twenty seven, Michael Lewis was making in two hundred and 30 00:02:09,716 --> 00:02:11,796 Speaker 1: twenty five thousand dollars a year as a bond salesman 31 00:02:11,836 --> 00:02:14,796 Speaker 1: at Solomon Brothers during the Go go nineteen eighties. His 32 00:02:14,956 --> 00:02:16,996 Speaker 1: friends thought he was crazy when he quit in nineteen 33 00:02:16,996 --> 00:02:19,676 Speaker 1: eighty seven to write a book. They were wrong. The book, 34 00:02:19,756 --> 00:02:22,036 Speaker 1: Liars Poker, hit the New York Times Best seller list, 35 00:02:22,036 --> 00:02:24,396 Speaker 1: and Michael Lewis never went back to work on Wall Street. 36 00:02:25,076 --> 00:02:27,356 Speaker 1: That first book I wrote, Liars Poker, set me up, 37 00:02:27,436 --> 00:02:29,196 Speaker 1: and it's meant that I've never had to do anything 38 00:02:29,196 --> 00:02:31,396 Speaker 1: with the rest of my life. But right. But the 39 00:02:31,436 --> 00:02:34,236 Speaker 1: funny thing about the book is that I never really 40 00:02:34,476 --> 00:02:38,956 Speaker 1: read it. I mean, obviously I wrote it, but I 41 00:02:38,996 --> 00:02:42,036 Speaker 1: never went back and looked at it again, and then 42 00:02:42,076 --> 00:02:45,076 Speaker 1: about a year ago, out of nowhere, the audio rights 43 00:02:45,236 --> 00:02:47,716 Speaker 1: reverted back to me, and I realized that they had 44 00:02:47,756 --> 00:02:51,516 Speaker 1: never actually been a full length audio book of Liars Poker. 45 00:02:52,236 --> 00:02:54,796 Speaker 1: Back then, the publishers shortened the audio version so it 46 00:02:54,836 --> 00:02:58,076 Speaker 1: would fit onto a few cassette tapes. So I thought, 47 00:02:58,116 --> 00:03:01,116 Speaker 1: let's try it. You can now hear the whole of 48 00:03:01,196 --> 00:03:04,636 Speaker 1: Liars Poker for the first time, read by me, and 49 00:03:04,676 --> 00:03:08,396 Speaker 1: we've released it along with this companion podcast. And the 50 00:03:08,396 --> 00:03:10,396 Speaker 1: point of the Pike asked, is that while I was 51 00:03:10,436 --> 00:03:14,596 Speaker 1: reading the book, all these questions came up, Questions like, 52 00:03:15,636 --> 00:03:17,876 Speaker 1: what's happened to the people I wrote about? It was 53 00:03:17,916 --> 00:03:19,396 Speaker 1: a good time for you to write that book and 54 00:03:19,476 --> 00:03:21,316 Speaker 1: me to be forced to leave. Did you feel like 55 00:03:21,356 --> 00:03:24,516 Speaker 1: you were forced to leave by the book? Absolutely? What's 56 00:03:24,516 --> 00:03:27,836 Speaker 1: happened to Wall Street? The notion that men will say 57 00:03:27,996 --> 00:03:30,796 Speaker 1: today they will not be in a room alone with 58 00:03:30,836 --> 00:03:34,796 Speaker 1: a woman has been an enormous setback for the advancement 59 00:03:34,796 --> 00:03:37,396 Speaker 1: of women on Wall Street. How do other writers feel 60 00:03:37,396 --> 00:03:40,756 Speaker 1: about revisiting their early work. It's like didactic, It's like 61 00:03:40,916 --> 00:03:43,236 Speaker 1: do gooderie, It's trying to teach a lesson of how 62 00:03:43,236 --> 00:03:45,716 Speaker 1: did this even end up on the air and what's 63 00:03:45,756 --> 00:03:51,876 Speaker 1: happened to me? So welcome to other People's Money. A 64 00:03:52,036 --> 00:04:03,396 Speaker 1: Liar's Poker Companion Podcast, Episode one, Bonds of Passion. Now, 65 00:04:03,396 --> 00:04:06,276 Speaker 1: obviously we can't start without me giving you some sense 66 00:04:06,276 --> 00:04:08,476 Speaker 1: of the book. We're going to drop a whole chapter 67 00:04:08,556 --> 00:04:10,716 Speaker 1: for you at the end of this episode, but here's 68 00:04:10,716 --> 00:04:13,276 Speaker 1: a short clip from the very beginning of Liars Poker. 69 00:04:17,956 --> 00:04:21,676 Speaker 1: I was a bond salesman on Wall Street and in London, 70 00:04:22,116 --> 00:04:24,516 Speaker 1: so Jan New York down the Paris in twenty two 71 00:04:25,596 --> 00:04:28,436 Speaker 1: cable dres Frank. First, somebody asked me what intact do 72 00:04:28,476 --> 00:04:30,196 Speaker 1: you do? And I realized and I spent most of 73 00:04:30,196 --> 00:04:31,636 Speaker 1: my time on the phone, and in order to make 74 00:04:31,676 --> 00:04:33,316 Speaker 1: people think I was professional, I had to figure out 75 00:04:33,356 --> 00:04:35,716 Speaker 1: what it was I did. Working beside the traders at 76 00:04:35,716 --> 00:04:39,116 Speaker 1: Solomon Brothers put me, I believe, at the epicenter of 77 00:04:39,156 --> 00:04:42,076 Speaker 1: one of those events that helped to define an age. 78 00:04:42,996 --> 00:04:45,836 Speaker 1: Traders are masters of the quick killing, and a lot 79 00:04:45,876 --> 00:04:47,596 Speaker 1: of the killings in the past ten years or so 80 00:04:47,716 --> 00:04:51,436 Speaker 1: have been quick, and Solomon Brothers was indisputably the king 81 00:04:51,436 --> 00:04:54,876 Speaker 1: of traders. But I've tried to do here without, as 82 00:04:54,876 --> 00:04:57,356 Speaker 1: it were, leaving my seat on the Solomon Trading floor, 83 00:04:57,836 --> 00:05:00,436 Speaker 1: is to describe and explain the events and the attitudes 84 00:05:00,476 --> 00:05:04,676 Speaker 1: the characterize the era. The story occasionally tails away from me, 85 00:05:05,076 --> 00:05:08,876 Speaker 1: but it's nonetheless my story Throughout the money I didn't make, 86 00:05:09,156 --> 00:05:11,396 Speaker 1: the lies I didn't tell, I still understood in a 87 00:05:11,436 --> 00:05:15,276 Speaker 1: personal way because of my position that was somewhere near 88 00:05:15,316 --> 00:05:18,756 Speaker 1: the center of a modern gold rush. Never before have 89 00:05:18,876 --> 00:05:21,676 Speaker 1: so many unskilled twenty four year olds made so much 90 00:05:21,676 --> 00:05:24,756 Speaker 1: money in so little time as we did this decade 91 00:05:24,756 --> 00:05:27,796 Speaker 1: in New York and London. There's never before been such 92 00:05:27,796 --> 00:05:30,756 Speaker 1: a fantastic exception to the rule of the marketplace that 93 00:05:30,916 --> 00:05:34,116 Speaker 1: one takes out no more than one puts in. Now, 94 00:05:34,196 --> 00:05:37,516 Speaker 1: I don't object to money. I generally would rather have 95 00:05:37,636 --> 00:05:40,436 Speaker 1: more than less. But I'm not holding my breath waiting 96 00:05:40,436 --> 00:05:44,076 Speaker 1: for another windfall. What happened was a rare and amazing 97 00:05:44,116 --> 00:05:46,876 Speaker 1: glitch in the fairly predictable history of getting and spending. 98 00:05:49,276 --> 00:05:51,516 Speaker 1: A couple of things about that passage. First, it's not 99 00:05:51,636 --> 00:05:55,476 Speaker 1: exactly me, but me after I've read Henry Adams, The 100 00:05:55,596 --> 00:05:58,156 Speaker 1: Education of Henry Adams, That's what I was reading to 101 00:05:58,196 --> 00:06:00,556 Speaker 1: get myself all warmed up at the beginning of the book. 102 00:06:00,956 --> 00:06:03,476 Speaker 1: I hear his voice there, just like I hear George 103 00:06:03,636 --> 00:06:06,716 Speaker 1: Orwell's voice a few chapters later, and Charles Dickens's voice 104 00:06:06,716 --> 00:06:09,036 Speaker 1: somewhere in there, and Tom Wolfe's voice every now and then. 105 00:06:09,516 --> 00:06:11,916 Speaker 1: I was still trying to figure out who I was there. 106 00:06:12,556 --> 00:06:15,476 Speaker 1: But the other thing is how wrong it is. I mean, 107 00:06:15,516 --> 00:06:18,476 Speaker 1: I really did think at the time that I was 108 00:06:18,556 --> 00:06:21,396 Speaker 1: writing a story that was a message in a bottle 109 00:06:21,836 --> 00:06:24,516 Speaker 1: for a hundred years from now, when they wanted to 110 00:06:24,556 --> 00:06:26,756 Speaker 1: look back and ask, like, what had happened in the 111 00:06:26,796 --> 00:06:29,716 Speaker 1: nineteen eighties, How did Wall Street ever get that crazy? 112 00:06:30,156 --> 00:06:32,196 Speaker 1: Because I assumed it was all going to end. I 113 00:06:32,236 --> 00:06:35,036 Speaker 1: assumed that I represented a kind of a market top. 114 00:06:35,636 --> 00:06:37,796 Speaker 1: It turned out that wasn't true. It turned out that 115 00:06:37,796 --> 00:06:39,716 Speaker 1: I was at the beginning of something that would go 116 00:06:39,756 --> 00:06:41,716 Speaker 1: on and on and on, and is in some ways 117 00:06:41,716 --> 00:06:45,196 Speaker 1: still going on. Wall Street just keeps getting bigger and 118 00:06:45,236 --> 00:06:47,716 Speaker 1: bigger in relation to the rest of the American economy, 119 00:06:48,356 --> 00:06:50,076 Speaker 1: or anyway. That's how it seems to me. But what 120 00:06:50,116 --> 00:06:52,796 Speaker 1: do I know. I'm just a writer now, So to 121 00:06:52,876 --> 00:06:55,236 Speaker 1: check my hunch, I called up someone whose job is 122 00:06:55,276 --> 00:06:58,316 Speaker 1: to know this sort of thing. Gary Gensler, the current 123 00:06:58,356 --> 00:07:01,316 Speaker 1: head of the Securities in Exchange Commission, and here's how 124 00:07:01,356 --> 00:07:08,316 Speaker 1: he put it. In the nineteen eighties, finance including banking 125 00:07:08,356 --> 00:07:11,036 Speaker 1: and ensure in Wall Street and so forth. But finance 126 00:07:11,116 --> 00:07:14,116 Speaker 1: was about five and a half percent of our overall 127 00:07:14,156 --> 00:07:17,836 Speaker 1: economy the nineteen fifties, actually three and a half percent. 128 00:07:19,076 --> 00:07:22,356 Speaker 1: Now we're at eight percent. If you would have asked 129 00:07:22,356 --> 00:07:25,676 Speaker 1: me back in nineteen eighty nine what Wall Street would 130 00:07:25,676 --> 00:07:27,956 Speaker 1: look like in two twenty one, I would have said 131 00:07:27,996 --> 00:07:29,996 Speaker 1: that the society would have gotten its arms around Wall 132 00:07:30,036 --> 00:07:31,876 Speaker 1: Street and it would have kind of stuck it back 133 00:07:31,916 --> 00:07:34,916 Speaker 1: in its box. But it hasn't. If you'd asked me 134 00:07:34,916 --> 00:07:37,396 Speaker 1: back in nineteen eighty nine, what would happen to Liars Poker? 135 00:07:37,756 --> 00:07:40,636 Speaker 1: I would say, well, it's nice it had this little run, 136 00:07:41,196 --> 00:07:44,396 Speaker 1: but this world of Wall Street changes so fast there's 137 00:07:44,396 --> 00:07:47,196 Speaker 1: no way it will remain current in any way. So 138 00:07:47,316 --> 00:07:49,636 Speaker 1: flash forward to twenty twenty one, and I have a 139 00:07:49,716 --> 00:07:52,996 Speaker 1: daughter who's a junior in college, who has told me 140 00:07:53,196 --> 00:07:56,356 Speaker 1: now three times about friends who returned from Wall Street 141 00:07:56,396 --> 00:08:00,596 Speaker 1: internships and been made by their bosses to read Liar's 142 00:08:00,676 --> 00:08:02,876 Speaker 1: Poker because they view it as a description of how 143 00:08:02,876 --> 00:08:06,916 Speaker 1: Wall Street really works, which is I think nuts. I mean, 144 00:08:06,996 --> 00:08:10,396 Speaker 1: I think it's actually very different now how it was then. 145 00:08:10,996 --> 00:08:13,716 Speaker 1: But this also raises the question of, like, what is 146 00:08:13,716 --> 00:08:16,196 Speaker 1: it that's going on, What is it that was in 147 00:08:16,236 --> 00:08:19,196 Speaker 1: my experience that still feels relevant to the experience of 148 00:08:19,236 --> 00:08:22,916 Speaker 1: the people who are there now? I mean, why on 149 00:08:22,956 --> 00:08:26,356 Speaker 1: earth are people still reading my book? To get at this, 150 00:08:26,516 --> 00:08:28,836 Speaker 1: I asked Pushkin's Jacob Goldstein to come to have a 151 00:08:28,916 --> 00:08:32,436 Speaker 1: chat with me. Jacob was a longtime host of NPR's 152 00:08:32,436 --> 00:08:35,116 Speaker 1: Planet Money, and he's also the author of a book 153 00:08:35,156 --> 00:08:38,756 Speaker 1: called Money, The True Story of a Made Up Thing. 154 00:08:39,356 --> 00:08:41,156 Speaker 1: And I figured if anyone can help me work out 155 00:08:41,236 --> 00:08:43,796 Speaker 1: while Liar's Pokers still around after thirty years, it was 156 00:08:43,796 --> 00:08:57,636 Speaker 1: going to be him. So stick around, Welcome back. I'm 157 00:08:57,676 --> 00:09:00,876 Speaker 1: here with Jacob Goldstein, who's now an executive producer at Pushkin, 158 00:09:01,516 --> 00:09:04,036 Speaker 1: and he's written and reported for years on the worlds 159 00:09:04,076 --> 00:09:11,116 Speaker 1: of finance and money. The question I'm here we're here 160 00:09:11,156 --> 00:09:14,956 Speaker 1: to talk about is why, right, Why is Liar's Poker 161 00:09:15,116 --> 00:09:19,916 Speaker 1: still so relevant many decades after it was written? Yeah, 162 00:09:19,956 --> 00:09:23,516 Speaker 1: And I've got two ideas I want to talk about 163 00:09:23,516 --> 00:09:28,556 Speaker 1: with you for why right? So one is you captured 164 00:09:28,676 --> 00:09:31,836 Speaker 1: something about life on Wall Street, just about like what 165 00:09:31,996 --> 00:09:36,476 Speaker 1: it's like to work there. And then two is you 166 00:09:36,596 --> 00:09:40,916 Speaker 1: basically wrote the origin story of modern finance and its 167 00:09:41,036 --> 00:09:45,116 Speaker 1: role in American life, the sort of broader invention of 168 00:09:45,156 --> 00:09:48,596 Speaker 1: modern finance moment. Do you want to just start out 169 00:09:48,636 --> 00:09:50,876 Speaker 1: talking with that? Let's just start out wonky and then 170 00:09:50,996 --> 00:09:53,876 Speaker 1: get like less wonky as we go. Yeah. Yeah. So 171 00:09:54,036 --> 00:09:57,076 Speaker 1: it is true that a lot of the things that 172 00:09:57,556 --> 00:10:00,756 Speaker 1: we've come to just assume about Wall Streets started back 173 00:10:00,796 --> 00:10:04,036 Speaker 1: in kind of the late seventies eighties. And when I 174 00:10:04,076 --> 00:10:06,796 Speaker 1: think in no particular order of what those things are, 175 00:10:07,996 --> 00:10:10,276 Speaker 1: the first thing it pops to mid is the nature 176 00:10:10,276 --> 00:10:14,716 Speaker 1: of the financial enterprise slash corporation. That the world I 177 00:10:14,796 --> 00:10:20,396 Speaker 1: walked into was a world filled with partnerships. Goldman Sachs 178 00:10:20,476 --> 00:10:23,236 Speaker 1: was a partnership, Morgan Stanley was a partnership. Solomon Brothers 179 00:10:23,236 --> 00:10:26,276 Speaker 1: had very controversially just stopped being a partnership and become 180 00:10:26,316 --> 00:10:31,996 Speaker 1: a corporation, a public corporation, and was growing with incredible speed, 181 00:10:32,116 --> 00:10:34,476 Speaker 1: going from a place with just a few hundred people 182 00:10:34,476 --> 00:10:36,916 Speaker 1: to a place with eight thousand people over six or 183 00:10:36,956 --> 00:10:41,396 Speaker 1: seven years, and risk that had been managed in a 184 00:10:41,476 --> 00:10:45,396 Speaker 1: partnership by people who knew that if they got it wrong, 185 00:10:46,156 --> 00:10:48,076 Speaker 1: it wasn't just they didn't get a big bonus at 186 00:10:48,076 --> 00:10:49,716 Speaker 1: the end of the year, they might lose their houses 187 00:10:49,956 --> 00:10:52,476 Speaker 1: that they had liability for. The risks they were taking 188 00:10:52,956 --> 00:10:55,316 Speaker 1: were all of a sudden going to be managed by 189 00:10:55,436 --> 00:11:00,396 Speaker 1: a public corporation whose shareholders were basically on the hook, 190 00:11:00,436 --> 00:11:02,156 Speaker 1: and the shareholders, of course, weren't in the room when 191 00:11:02,156 --> 00:11:04,076 Speaker 1: the risk weren't being taken. So it was all of 192 00:11:04,116 --> 00:11:06,676 Speaker 1: a sudden other people's money in a whole new way. 193 00:11:07,436 --> 00:11:10,836 Speaker 1: That was like the first thing that happened, and that's 194 00:11:10,836 --> 00:11:13,276 Speaker 1: a big one. It's a big one. That one is wonky, 195 00:11:13,316 --> 00:11:17,036 Speaker 1: and just on a really kind of basic structural level, 196 00:11:17,116 --> 00:11:20,676 Speaker 1: that is a profound change, right because in the older 197 00:11:20,756 --> 00:11:24,636 Speaker 1: partnership model, the partners, the senior people at the firm, 198 00:11:24,716 --> 00:11:27,156 Speaker 1: have their money in the firm, right, So if the 199 00:11:27,196 --> 00:11:30,636 Speaker 1: firm gets bigger, they get rich. But if the firm 200 00:11:30,676 --> 00:11:34,356 Speaker 1: goes under, if they make stupid bets, they lose their money. 201 00:11:34,516 --> 00:11:37,556 Speaker 1: They don't get to stay rich. So it becomes their attitude. 202 00:11:37,796 --> 00:11:41,196 Speaker 1: The attitude of that person towards risk is different from 203 00:11:41,236 --> 00:11:43,716 Speaker 1: the attitude of the trader who if the corporation goes 204 00:11:43,996 --> 00:11:47,436 Speaker 1: kaboom and blows up. Can walk across the street and 205 00:11:47,436 --> 00:11:50,036 Speaker 1: work for somebody else and keep all his money. Right. 206 00:11:50,076 --> 00:11:53,036 Speaker 1: The old world is symmetric, right, your firm does well, 207 00:11:53,116 --> 00:11:56,076 Speaker 1: you do well. Your firm does poorly, you do poorly. 208 00:11:56,356 --> 00:11:59,076 Speaker 1: This new world, the world you're walking into, just as 209 00:11:59,076 --> 00:12:02,396 Speaker 1: it's being born, is asymmetric. The firm does well, you 210 00:12:02,436 --> 00:12:05,036 Speaker 1: get rich, the firm blows up, you walk away, get 211 00:12:05,076 --> 00:12:07,436 Speaker 1: another job, get rich at your next exactly right. And 212 00:12:07,516 --> 00:12:11,356 Speaker 1: it's a world in which not only is it asymmetric, 213 00:12:11,916 --> 00:12:15,276 Speaker 1: but it's much more fluid. In this new world. If 214 00:12:15,316 --> 00:12:16,596 Speaker 1: you don't get paid at the end of the year, 215 00:12:16,596 --> 00:12:18,436 Speaker 1: you walk across the street and work for somebody else. 216 00:12:18,796 --> 00:12:21,596 Speaker 1: You aren't working so much anymore for a company. You're 217 00:12:21,636 --> 00:12:25,276 Speaker 1: working for the whole system. And what you're trying to 218 00:12:25,356 --> 00:12:28,316 Speaker 1: maximize the value of is your value to the system 219 00:12:28,436 --> 00:12:31,756 Speaker 1: rather than to any particular company. Okay, so that's one 220 00:12:32,116 --> 00:12:36,356 Speaker 1: big and I do think underappreciated shift that just happened 221 00:12:36,356 --> 00:12:38,436 Speaker 1: to happen right when you got there, the shift from 222 00:12:38,676 --> 00:12:42,236 Speaker 1: partnerships to publicly traded corporations. What else? I feel like 223 00:12:42,276 --> 00:12:44,316 Speaker 1: you were rattling off a list, what's next? On the list. Well, 224 00:12:44,396 --> 00:12:50,596 Speaker 1: Number two would be the way money got made, broadly speaking, 225 00:12:51,116 --> 00:12:53,916 Speaker 1: even at a place like Solomon Brothers, which was famelessly 226 00:12:53,916 --> 00:12:57,196 Speaker 1: a bond trading shop when it was a partnership. These 227 00:12:57,236 --> 00:13:02,476 Speaker 1: businesses were service businesses. There were fat fees associated with 228 00:13:02,596 --> 00:13:05,716 Speaker 1: everything they did. When stocks changed hands, they were big 229 00:13:05,716 --> 00:13:08,596 Speaker 1: commissions that were fixed. The spreads in the bond market 230 00:13:08,636 --> 00:13:10,916 Speaker 1: were big enough does moving bonds around on behalf of 231 00:13:10,996 --> 00:13:13,476 Speaker 1: customers from one pension fund to the other. You could 232 00:13:13,476 --> 00:13:18,676 Speaker 1: take out quite a bit advising big mergers and acquisitions transactions, 233 00:13:18,836 --> 00:13:23,116 Speaker 1: or raising a whole bunch of money for IBM. People 234 00:13:23,196 --> 00:13:28,476 Speaker 1: made a very comfortable living providing a service. In a 235 00:13:28,676 --> 00:13:33,236 Speaker 1: very short order, the firms turned into trading shops where 236 00:13:33,356 --> 00:13:35,956 Speaker 1: the way they made money was by taking big risks, 237 00:13:36,316 --> 00:13:41,116 Speaker 1: and their fees were eroded by competition and changes in rules. 238 00:13:41,316 --> 00:13:42,836 Speaker 1: I mean, we got to the point now where there 239 00:13:43,156 --> 00:13:45,836 Speaker 1: are no stock market commissions basically, right. And that is 240 00:13:46,716 --> 00:13:49,636 Speaker 1: one example of something that's happened across the financial sector 241 00:13:49,716 --> 00:13:53,316 Speaker 1: where you don't get paid as much for providing services, 242 00:13:53,796 --> 00:13:57,316 Speaker 1: and so the firms themselves at the same time they're 243 00:13:57,316 --> 00:14:02,236 Speaker 1: becoming other people's money. They become more risk taking enterprises. 244 00:14:02,436 --> 00:14:04,756 Speaker 1: So I think that's a great, big change. And the 245 00:14:04,796 --> 00:14:08,916 Speaker 1: book Liars Poker is largely about this change, right, about 246 00:14:09,316 --> 00:14:12,196 Speaker 1: how they become risk taking enterprises. And in fact, you 247 00:14:12,476 --> 00:14:15,916 Speaker 1: write at great length about this very specific thing, which 248 00:14:15,956 --> 00:14:19,556 Speaker 1: is the trading of what are called private mortgage backed securities. 249 00:14:19,996 --> 00:14:24,756 Speaker 1: And these securities sort of amazingly, they wind up decades 250 00:14:24,836 --> 00:14:27,396 Speaker 1: later at the heart of the two thousand and eight 251 00:14:27,476 --> 00:14:30,556 Speaker 1: financial crisis. And I go back and I read this book, 252 00:14:30,556 --> 00:14:33,076 Speaker 1: and I think, like, how did he know, you know, 253 00:14:33,236 --> 00:14:35,756 Speaker 1: how did he know in the eighties to write all 254 00:14:35,796 --> 00:14:39,436 Speaker 1: these pages about private mortgage back securities. But but there 255 00:14:39,436 --> 00:14:42,076 Speaker 1: it is. It's like this this weird key to the 256 00:14:42,116 --> 00:14:46,236 Speaker 1: financial crisis. Well, it's one key. You need a couple 257 00:14:46,276 --> 00:14:48,796 Speaker 1: of keys to get to the finanti crisis, right, And 258 00:14:48,916 --> 00:14:53,076 Speaker 1: the other key is it's the introduction of a new 259 00:14:53,156 --> 00:14:57,316 Speaker 1: kind of complexity into finance. All of a sudden, there 260 00:14:57,396 --> 00:15:01,796 Speaker 1: is some benefit to having higher math skills on a 261 00:15:01,836 --> 00:15:03,956 Speaker 1: trading floor, not just being able to add and subtract 262 00:15:03,996 --> 00:15:08,316 Speaker 1: really fast. And all of a sudden, there are instruments 263 00:15:08,676 --> 00:15:11,276 Speaker 1: that are be invented, and I invented some of them, 264 00:15:11,276 --> 00:15:14,396 Speaker 1: I helped invent some of them that are as good 265 00:15:14,396 --> 00:15:17,396 Speaker 1: as opaque to the wider world because the wider world 266 00:15:17,396 --> 00:15:19,876 Speaker 1: doesn't understand how they work and what they do. And 267 00:15:20,236 --> 00:15:24,116 Speaker 1: that complexity got to the point where, I mean, I 268 00:15:24,156 --> 00:15:26,916 Speaker 1: found myself in a room with John Goodfriend, the CEO 269 00:15:26,956 --> 00:15:30,716 Speaker 1: of the firm, trying to explain to him what it 270 00:15:30,836 --> 00:15:35,156 Speaker 1: was I'd just done with an option trade, and he 271 00:15:35,236 --> 00:15:39,556 Speaker 1: clearly didn't understand it. The rapid innovation has this other effect. 272 00:15:39,916 --> 00:15:42,196 Speaker 1: It's an effect that you see in Silicon Valley too. 273 00:15:42,276 --> 00:15:45,316 Speaker 1: It's to shift power from older people down to younger people, 274 00:15:45,556 --> 00:15:49,116 Speaker 1: because the younger people are the engines of innovation. The 275 00:15:49,156 --> 00:15:51,636 Speaker 1: younger people are inventing this stuff and the older people 276 00:15:51,636 --> 00:15:55,116 Speaker 1: don't understand it. As you describe the sort of older 277 00:15:55,156 --> 00:15:59,716 Speaker 1: generation of traders, it was basically a blue collar job, right. 278 00:15:59,756 --> 00:16:02,436 Speaker 1: I mean not only were they not, you know, physicists. Yeah, 279 00:16:02,476 --> 00:16:05,476 Speaker 1: they weren't even college graduates. Right. These people who are 280 00:16:05,556 --> 00:16:08,476 Speaker 1: essentially running the trading desk came up through the mail room. 281 00:16:09,116 --> 00:16:11,556 Speaker 1: That's right. There were essentially blue collar jobs that were 282 00:16:11,596 --> 00:16:15,676 Speaker 1: being transformed before your eyes into very complicated white collar jobs. 283 00:16:16,156 --> 00:16:19,236 Speaker 1: And there was a friction. And the book describes this 284 00:16:19,276 --> 00:16:22,516 Speaker 1: friction between this old world and this new world. And 285 00:16:22,556 --> 00:16:24,396 Speaker 1: I can remember there was a guy and it was 286 00:16:24,436 --> 00:16:27,756 Speaker 1: a trader, an old trader named Donnie Green. People would 287 00:16:27,796 --> 00:16:30,236 Speaker 1: refer to Donnie Green types, and Donnie Green type was 288 00:16:30,276 --> 00:16:32,956 Speaker 1: a guy who hadn't graduated from high school, who traded 289 00:16:32,956 --> 00:16:36,036 Speaker 1: bonds by his gut, which is very ample, but also 290 00:16:36,396 --> 00:16:39,676 Speaker 1: you know, well educated in the marketplace, who was loud 291 00:16:39,716 --> 00:16:42,596 Speaker 1: and profane. And there was this moment where Donnie Green 292 00:16:42,676 --> 00:16:45,196 Speaker 1: himself had this interaction with a new young guy who 293 00:16:45,276 --> 00:16:47,196 Speaker 1: had just come out of like Mit or Harvard, and 294 00:16:47,236 --> 00:16:50,836 Speaker 1: who was near him. And the young guy was had 295 00:16:50,836 --> 00:16:52,596 Speaker 1: his bags and he was on his way off the 296 00:16:52,596 --> 00:16:55,596 Speaker 1: trading floor, and Donnie Green stood up and shouted, hey, kid, 297 00:16:56,276 --> 00:16:58,796 Speaker 1: where are you going? And the guy kind of stopped 298 00:16:58,796 --> 00:17:00,596 Speaker 1: in his tracks and looked over and big old Harry 299 00:17:00,636 --> 00:17:02,956 Speaker 1: Donnie Green was like staring at him, and he was scared. 300 00:17:02,996 --> 00:17:06,476 Speaker 1: And everybody could hear the interaction. And guy says, I'm 301 00:17:06,516 --> 00:17:08,796 Speaker 1: I got a cloud of Chicago on my way out, 302 00:17:08,836 --> 00:17:12,196 Speaker 1: and Green says, come here, and the guy walks over 303 00:17:12,196 --> 00:17:14,196 Speaker 1: to him, and Donna Green pulls out like twenty bucks 304 00:17:14,196 --> 00:17:17,836 Speaker 1: from his wallet. He says, when you get to the airport, 305 00:17:18,156 --> 00:17:21,156 Speaker 1: you know those machines where you can buy the crash insurance. 306 00:17:21,516 --> 00:17:22,956 Speaker 1: Not if you remember, you used to be able to 307 00:17:22,956 --> 00:17:27,996 Speaker 1: buy airplane crash insurance at the airports. Yeah, And he says, 308 00:17:28,196 --> 00:17:30,836 Speaker 1: when you get to the airport, take this money and 309 00:17:31,036 --> 00:17:33,916 Speaker 1: buy some crash insurance and put it in my name. 310 00:17:34,596 --> 00:17:38,356 Speaker 1: And the guy goes like he's like sweating. He goes why, 311 00:17:38,436 --> 00:17:42,476 Speaker 1: And Donnie Green says, I feel lucky, And I just 312 00:17:42,476 --> 00:17:45,156 Speaker 1: thought that. I remember hearing this story and thinking, that's 313 00:17:45,196 --> 00:17:48,476 Speaker 1: sort of like the moment these old guys who kind 314 00:17:48,516 --> 00:17:50,516 Speaker 1: of thought the world was one way, or watch these 315 00:17:50,556 --> 00:17:53,356 Speaker 1: new guys roll in and they're they're smart, alex and 316 00:17:53,596 --> 00:17:55,916 Speaker 1: they know things that Donna Green doesn't know. And pretty 317 00:17:55,956 --> 00:17:58,196 Speaker 1: soon they're gonna take Donnie Green's job. And Donna Green, 318 00:17:58,396 --> 00:18:00,556 Speaker 1: the Donnie Greens of the world just hated it. That 319 00:18:00,596 --> 00:18:03,596 Speaker 1: moment is like the last stand of Donnie Green, the 320 00:18:03,676 --> 00:18:07,156 Speaker 1: last stand of Donna Green. And so that's right. And 321 00:18:07,476 --> 00:18:10,276 Speaker 1: the new guard you know, had all gotten eight hundred 322 00:18:10,276 --> 00:18:12,396 Speaker 1: on their SATs, had been told they were the brightest 323 00:18:12,476 --> 00:18:14,996 Speaker 1: kid in the class for their whole lives, had gotten 324 00:18:14,996 --> 00:18:18,476 Speaker 1: into Harvard or Mit, had succeeded there, and thought that 325 00:18:18,556 --> 00:18:20,076 Speaker 1: when they got to the Solomon But this is my 326 00:18:20,156 --> 00:18:23,156 Speaker 1: natural reward for being the smartest person. So you have 327 00:18:23,236 --> 00:18:27,796 Speaker 1: an arrogance, and it's a quieter arrogance. Where do you fit? 328 00:18:28,196 --> 00:18:31,876 Speaker 1: Where do you you know, young Michael Lewis arriving at 329 00:18:31,876 --> 00:18:35,996 Speaker 1: Solomon Brothers fit in that map you just laid out 330 00:18:36,516 --> 00:18:38,956 Speaker 1: on the surface. I'm very much part of the problem, 331 00:18:39,036 --> 00:18:41,596 Speaker 1: right I went. I go to Princeton and they have 332 00:18:41,676 --> 00:18:44,476 Speaker 1: a Masters in economics from the London School of Economics. 333 00:18:44,876 --> 00:18:47,916 Speaker 1: I don't have a lot of body hair. I appear 334 00:18:48,396 --> 00:18:52,476 Speaker 1: to be part of this meritocratic machine that's spitting out 335 00:18:52,516 --> 00:18:55,316 Speaker 1: this new kind of person who's going to overwhelm Wall Street. 336 00:18:56,036 --> 00:18:59,396 Speaker 1: The truth was that I was always a little bit 337 00:18:59,436 --> 00:19:02,036 Speaker 1: of a renegade inside my own life that I didn't 338 00:19:02,076 --> 00:19:04,716 Speaker 1: I was an art history major at Princeton. I studied 339 00:19:04,756 --> 00:19:07,036 Speaker 1: economics because I thought I needed to learn this language 340 00:19:07,076 --> 00:19:09,356 Speaker 1: so I could wouldn't be buffaloed by people for the 341 00:19:09,356 --> 00:19:11,996 Speaker 1: rest of my life by people who understood economics. I 342 00:19:12,156 --> 00:19:14,556 Speaker 1: thought of myself when I arrived there as a writer 343 00:19:14,636 --> 00:19:17,436 Speaker 1: who is just, you know, trying to make some money 344 00:19:17,476 --> 00:19:21,316 Speaker 1: so I could house myself but also have experiences that 345 00:19:21,356 --> 00:19:23,596 Speaker 1: I might write about one day. So I was what 346 00:19:23,836 --> 00:19:26,956 Speaker 1: was I I was both insider and outsider, and that 347 00:19:27,116 --> 00:19:29,716 Speaker 1: is both a It's kind of a character trait I 348 00:19:29,756 --> 00:19:31,836 Speaker 1: think probably of me that I do tend to kind 349 00:19:31,836 --> 00:19:34,396 Speaker 1: of join and not join at the same time every 350 00:19:35,436 --> 00:19:38,436 Speaker 1: group I watched a writer move right, Yeah, that's right. 351 00:19:38,556 --> 00:19:40,436 Speaker 1: It's kind of like who I am. I've always kind 352 00:19:40,436 --> 00:19:43,396 Speaker 1: of like, I've never been completely in anything, but I'm 353 00:19:43,516 --> 00:19:46,036 Speaker 1: uncomfortably being completely out. I kind of like to be 354 00:19:46,076 --> 00:19:51,476 Speaker 1: in and out at the same time. Their culture was 355 00:19:51,516 --> 00:19:55,396 Speaker 1: based on food, and as strange as that sounds, it 356 00:19:55,436 --> 00:19:58,676 Speaker 1: was stranger still to those who watched mortgage traders eat 357 00:19:59,516 --> 00:20:01,916 Speaker 1: You don't die it on Christmas Day and you didn't 358 00:20:01,956 --> 00:20:05,276 Speaker 1: die it in the mortgage department said one every day 359 00:20:05,396 --> 00:20:07,636 Speaker 1: was a holiday. We made money no matter what we 360 00:20:07,676 --> 00:20:11,716 Speaker 1: looked like. They began with a round of onion cheeseburgers 361 00:20:11,796 --> 00:20:14,436 Speaker 1: fetched by a trainee from the Trinity Delhi at eight am. 362 00:20:15,676 --> 00:20:18,556 Speaker 1: I mean he didn't really want to eat him, recalls 363 00:20:18,596 --> 00:20:21,476 Speaker 1: trader Gary Kilberg, who joined the trading desk in nineteen 364 00:20:21,476 --> 00:20:24,876 Speaker 1: eighty five. You were hungover, you were sipping coffee, but 365 00:20:24,956 --> 00:20:28,236 Speaker 1: you'd get winded. That smell everyone else was eating them. 366 00:20:28,556 --> 00:20:31,996 Speaker 1: See you grab one of those suckers. So you have 367 00:20:32,076 --> 00:20:36,316 Speaker 1: this kind of insider, outsider perspective, and this perspective is 368 00:20:36,356 --> 00:20:40,116 Speaker 1: what lets you tell the story of this profound drama 369 00:20:40,436 --> 00:20:43,156 Speaker 1: that's happening inside your firm when you're there. And the 370 00:20:43,276 --> 00:20:45,956 Speaker 1: key character really in this drama is a guy named 371 00:20:46,116 --> 00:20:48,716 Speaker 1: Louie Ranieri who's actually going to be a big deal 372 00:20:48,756 --> 00:20:51,156 Speaker 1: in the whole history of modern Wall Street. Can you 373 00:20:51,236 --> 00:20:53,916 Speaker 1: just talk about him a little bit? So, Louie Ranieri, 374 00:20:54,036 --> 00:20:55,716 Speaker 1: who is at the kind of the heart and soul 375 00:20:55,716 --> 00:20:57,996 Speaker 1: of Solomon Brothers. When I joined and three years later 376 00:20:57,996 --> 00:21:00,916 Speaker 1: we'll be run out of the firm, had joined as 377 00:21:00,956 --> 00:21:03,196 Speaker 1: a mail room clerk. I think he eventually got a 378 00:21:03,236 --> 00:21:05,476 Speaker 1: college degree, but he was at that point, he was 379 00:21:05,516 --> 00:21:08,356 Speaker 1: just a high school graduate and worked his way up 380 00:21:08,516 --> 00:21:12,276 Speaker 1: into a position on the trading floor where he sees 381 00:21:12,316 --> 00:21:16,476 Speaker 1: this opportunity. And the opportunity is to create a new market. 382 00:21:16,636 --> 00:21:19,636 Speaker 1: And the new market is going to sort of finance 383 00:21:19,716 --> 00:21:22,796 Speaker 1: home buying in America in a completely different way than 384 00:21:22,836 --> 00:21:25,436 Speaker 1: it's been financed up till then. I mean, up to 385 00:21:25,476 --> 00:21:28,436 Speaker 1: that point, the savings and loan or the bank lent 386 00:21:28,676 --> 00:21:31,476 Speaker 1: the home buyer money to buy the house and then 387 00:21:31,676 --> 00:21:35,036 Speaker 1: sat on the loans, and Louis saw that if you 388 00:21:35,036 --> 00:21:38,636 Speaker 1: could bundle up a lot of these loans together into 389 00:21:38,796 --> 00:21:42,596 Speaker 1: a big pool and sell sort of like the rights 390 00:21:42,636 --> 00:21:45,876 Speaker 1: to the pool off, you essentially could create an investment 391 00:21:45,916 --> 00:21:48,876 Speaker 1: that anybody could buy, and you could let anybody, not 392 00:21:48,916 --> 00:21:51,196 Speaker 1: just banks and savings and loans, into the business of 393 00:21:51,276 --> 00:21:54,996 Speaker 1: lending money to the American homeowner. And so he essentially 394 00:21:55,076 --> 00:21:59,356 Speaker 1: invents the market from mortgage backed securities. And the end result, 395 00:21:59,436 --> 00:22:01,996 Speaker 1: you know, twenty years later, as Louis Ranieri, I guess 396 00:22:02,116 --> 00:22:05,516 Speaker 1: was among the first to admit, is that the market 397 00:22:05,556 --> 00:22:08,636 Speaker 1: got so complicated that it didn't track the risk anymore 398 00:22:08,756 --> 00:22:13,316 Speaker 1: proper and only through like great diligence could you figure 399 00:22:13,316 --> 00:22:15,916 Speaker 1: out how screwed up the market was. And just to 400 00:22:16,036 --> 00:22:20,956 Speaker 1: state it clearly right, that these very mortgage backed securities 401 00:22:20,996 --> 00:22:26,356 Speaker 1: that your colleague Louis Ranieri invented were at the center 402 00:22:26,476 --> 00:22:29,636 Speaker 1: of the two thousand and eight financial crisis. Like that's correct. 403 00:22:29,676 --> 00:22:32,996 Speaker 1: It starts in Liar's Poker and it blows up in 404 00:22:33,076 --> 00:22:36,716 Speaker 1: two thousand and eight. In this story, Louie's role is 405 00:22:36,756 --> 00:22:40,476 Speaker 1: the role of doctor Frankenstein. That he creates the monster 406 00:22:40,836 --> 00:22:43,196 Speaker 1: he didn't mean for the monster to do what it did. 407 00:22:43,836 --> 00:22:47,356 Speaker 1: Louie didn't make the very bad loans that blew up, 408 00:22:47,436 --> 00:22:51,796 Speaker 1: but the world took his invention and used it to 409 00:22:51,836 --> 00:22:55,276 Speaker 1: create a catastrophe. That's true. Take a funny thing. When 410 00:22:55,276 --> 00:22:57,836 Speaker 1: I really thought when I wrote Liars Poker, I'm done 411 00:22:57,836 --> 00:22:59,876 Speaker 1: with Wall Street, I thought, when am I ever going 412 00:22:59,916 --> 00:23:01,916 Speaker 1: to get the inside view again? No one's ever gonna 413 00:23:01,956 --> 00:23:03,516 Speaker 1: let me let me back in, right, I mean, I'm 414 00:23:03,556 --> 00:23:05,876 Speaker 1: never gonna have such good materials, So why go back 415 00:23:05,916 --> 00:23:09,356 Speaker 1: ever again to this subject? And when the world old 416 00:23:09,396 --> 00:23:11,996 Speaker 1: did blow up in two thousand and seven and two 417 00:23:12,036 --> 00:23:15,236 Speaker 1: thousand and eight, it surprised me but delighted me that 418 00:23:15,316 --> 00:23:18,036 Speaker 1: Liars Poker ended up being my ticket back into the world. 419 00:23:18,636 --> 00:23:23,076 Speaker 1: That one. It was pretty clear that the catastrophe in 420 00:23:23,076 --> 00:23:25,276 Speaker 1: two thousand and eight had its origins and stuff I'd 421 00:23:25,316 --> 00:23:27,236 Speaker 1: written about in Liar's Poker, so that there was a 422 00:23:27,356 --> 00:23:29,916 Speaker 1: natural reason for me to be come back. That there 423 00:23:29,956 --> 00:23:32,156 Speaker 1: was this kind of a bookend to write, which became 424 00:23:32,436 --> 00:23:35,956 Speaker 1: the big short. And when I started calling around and 425 00:23:36,276 --> 00:23:39,116 Speaker 1: trying to talk to the traders who had made the 426 00:23:39,156 --> 00:23:42,836 Speaker 1: catastrophic bets inside Morgan, Stanley and Merrill Lynch in city group, 427 00:23:42,876 --> 00:23:44,956 Speaker 1: the people who had not seen that they'd built this 428 00:23:45,036 --> 00:23:48,116 Speaker 1: doomsday machine. Instead of them saying no, I will never 429 00:23:48,156 --> 00:23:50,396 Speaker 1: talk to you, they'd all go have a beer with 430 00:23:50,476 --> 00:23:53,436 Speaker 1: me and they'd all say the same thing over the beer. 431 00:23:53,876 --> 00:23:55,716 Speaker 1: But the first thing they say, this wasn't my fault. 432 00:23:56,876 --> 00:24:00,676 Speaker 1: Nobody say it was the other guy. Yeah. But the 433 00:24:00,716 --> 00:24:03,276 Speaker 1: other thing they all said was the reason I'm having 434 00:24:03,276 --> 00:24:05,596 Speaker 1: this off the record beer with you to explain to 435 00:24:05,636 --> 00:24:08,596 Speaker 1: you what happened is you're the reason I'm in the business. 436 00:24:08,636 --> 00:24:10,756 Speaker 1: I read Iyars Poker and it made me want to 437 00:24:10,756 --> 00:24:14,236 Speaker 1: be a bond trader, and I thought, like the fourth 438 00:24:14,276 --> 00:24:16,836 Speaker 1: time I heard that, I thought, Jesus Christ, I created 439 00:24:16,876 --> 00:24:20,476 Speaker 1: this crisis that I created that the book. Books have 440 00:24:20,556 --> 00:24:23,796 Speaker 1: the funniest effects on the world. When you think you've 441 00:24:23,836 --> 00:24:26,276 Speaker 1: written one thing, but you've in fact, it's turned out 442 00:24:26,316 --> 00:24:29,316 Speaker 1: you've written something entirely different the reader. You write your book, 443 00:24:29,316 --> 00:24:32,276 Speaker 1: but the reader reads his her book. And they'd read 444 00:24:32,356 --> 00:24:35,636 Speaker 1: this thing as college students, and there was this dog 445 00:24:35,676 --> 00:24:40,196 Speaker 1: whistle coming out of the book, and the dog whistle was, huh. 446 00:24:40,196 --> 00:24:43,436 Speaker 1: This is a story of a young man, Michael Lewis, 447 00:24:43,836 --> 00:24:47,116 Speaker 1: who persuades the reader that he really doesn't know much 448 00:24:47,156 --> 00:24:51,356 Speaker 1: about anything, and certainly nothing about money, and yet if 449 00:24:51,396 --> 00:24:54,716 Speaker 1: he goes to Wall Street, they start giving them hundreds 450 00:24:54,716 --> 00:24:58,116 Speaker 1: of thousands of dollars just to be there, and it's 451 00:24:58,156 --> 00:25:02,356 Speaker 1: exciting and it's fun. And so all these guys, and 452 00:25:02,396 --> 00:25:05,116 Speaker 1: it was always guys, they read it and they said, ah, 453 00:25:05,156 --> 00:25:09,116 Speaker 1: it's made for me. I don't know anything either, you know. Yeah, yeah, 454 00:25:09,156 --> 00:25:12,076 Speaker 1: you've said you're writing it as like a cautionary tale, 455 00:25:12,596 --> 00:25:15,796 Speaker 1: but like you make it sound so fun. Like I 456 00:25:15,836 --> 00:25:17,476 Speaker 1: don't want to say I don't believe you. It's not 457 00:25:17,516 --> 00:25:20,196 Speaker 1: that I don't believe you, but like you're clearly very 458 00:25:20,276 --> 00:25:24,436 Speaker 1: skilled as a writer. I feel like you should. You 459 00:25:24,476 --> 00:25:26,636 Speaker 1: should know how fun it's going to sound. I don't know. 460 00:25:26,636 --> 00:25:28,276 Speaker 1: I'm not quite saying it the way I want to 461 00:25:28,276 --> 00:25:30,316 Speaker 1: say it, But do you know what I mean? Yes, 462 00:25:30,396 --> 00:25:32,356 Speaker 1: I know what you mean, because various people have said 463 00:25:32,396 --> 00:25:35,036 Speaker 1: the same thing to me over the years. And it 464 00:25:35,196 --> 00:25:41,236 Speaker 1: is absolutely true that that the literary strength of the 465 00:25:41,276 --> 00:25:44,116 Speaker 1: book turns out to be a moral weakness. And the 466 00:25:44,116 --> 00:25:47,596 Speaker 1: literary strength of the book was that I did not 467 00:25:48,236 --> 00:25:52,956 Speaker 1: muscle the reader around to make them think one thing 468 00:25:53,196 --> 00:25:56,636 Speaker 1: or another about the story. I was telling that. Mostly 469 00:25:56,796 --> 00:25:59,756 Speaker 1: I just told the story, and I just left it 470 00:25:59,796 --> 00:26:04,716 Speaker 1: to the reader and the reader's sensibility to make sense 471 00:26:05,316 --> 00:26:09,076 Speaker 1: of the story. And I assumed that the reader would 472 00:26:09,156 --> 00:26:11,076 Speaker 1: make sense of the story in just the way I 473 00:26:11,196 --> 00:26:14,596 Speaker 1: made sense of the story. I thought the book would 474 00:26:14,596 --> 00:26:18,636 Speaker 1: sort of cause young people in college who had a 475 00:26:18,676 --> 00:26:21,556 Speaker 1: sense of purpose to say, Oh, that's what that is. 476 00:26:21,636 --> 00:26:24,196 Speaker 1: It's silly, it's of no real value. I'm going to 477 00:26:24,236 --> 00:26:27,556 Speaker 1: go do what I was meant to do. And sometimes 478 00:26:27,556 --> 00:26:30,196 Speaker 1: it did that, but mostly it didn't. On the other hand, 479 00:26:30,636 --> 00:26:33,476 Speaker 1: if you don't really know what to do with yourself, 480 00:26:33,516 --> 00:26:35,356 Speaker 1: and the idea of getting a job where you can 481 00:26:35,396 --> 00:26:38,116 Speaker 1: eat cheeseburgers at nine in the morning and scream into 482 00:26:38,116 --> 00:26:40,476 Speaker 1: the phone and make hundreds of thousands of dollars a 483 00:26:40,556 --> 00:26:43,396 Speaker 1: year when you're twenty four sounds good. You can read 484 00:26:43,436 --> 00:26:46,436 Speaker 1: the book and say, oh, this sounds great. Yeah. I 485 00:26:46,636 --> 00:26:52,756 Speaker 1: thought since then that the price you pay for writing 486 00:26:52,796 --> 00:26:56,956 Speaker 1: a living story is that you lose some control about 487 00:26:56,956 --> 00:26:59,676 Speaker 1: how the story is going to be interpreted or used 488 00:26:59,756 --> 00:27:04,076 Speaker 1: or read, and that actually, a good piece of writing 489 00:27:04,196 --> 00:27:07,236 Speaker 1: leaves a hole for a reader to walk into it 490 00:27:07,276 --> 00:27:12,636 Speaker 1: and exercise judgment about what this all means, and Liars 491 00:27:12,676 --> 00:27:15,956 Speaker 1: Poker did that kind of inadvertently, but it did do that, 492 00:27:15,996 --> 00:27:18,116 Speaker 1: and I think that I think that's the only reason. 493 00:27:18,356 --> 00:27:20,956 Speaker 1: If it was a more moralistic track, it would not 494 00:27:21,156 --> 00:27:28,156 Speaker 1: have survived. Thank you so much to Jacob Goldstein. Other 495 00:27:28,156 --> 00:27:31,836 Speaker 1: People's Money is just getting underway. We have four more episodes, 496 00:27:31,836 --> 00:27:33,916 Speaker 1: and coming up in the next one, the author of 497 00:27:33,996 --> 00:27:37,036 Speaker 1: Liars Poker finds out what happened to the people who 498 00:27:37,036 --> 00:27:39,356 Speaker 1: were in Liars Poker. It was a good time for 499 00:27:39,396 --> 00:27:40,996 Speaker 1: you to write that book and me to be forced 500 00:27:40,996 --> 00:27:43,476 Speaker 1: to leave. Did you feel like you were forced to 501 00:27:43,556 --> 00:27:49,116 Speaker 1: leave by the book. Yeah, yeah, I didn't know that. Really, 502 00:27:49,436 --> 00:27:53,916 Speaker 1: It's okay. I don't blame Other People's Money is a 503 00:27:53,916 --> 00:27:57,356 Speaker 1: production of Pushkin Industries. If you like the show, please 504 00:27:57,356 --> 00:28:00,316 Speaker 1: remember to share a rate and review. You can buy 505 00:28:00,356 --> 00:28:03,756 Speaker 1: our new Liars Poker audio book, unabridged and read by 506 00:28:03,796 --> 00:28:08,076 Speaker 1: me the author at Pushkin dot fm, slash Liars Poker, 507 00:28:08,356 --> 00:28:14,076 Speaker 1: and also at Audible define more Pushkin podcasts, listen on 508 00:28:14,116 --> 00:28:28,436 Speaker 1: the iHeartRadio app, Apple Podcasts, or wherever you listen to podcasts. Okay, now, 509 00:28:28,596 --> 00:28:32,316 Speaker 1: as promised, here's a chapter from the new audiobook version 510 00:28:32,356 --> 00:28:39,036 Speaker 1: of Liar's Poker. I hope you like it. Chapter one, 511 00:28:39,876 --> 00:28:48,236 Speaker 1: Liar's Poker, South Ja, New York down the Paris of 512 00:28:48,356 --> 00:28:53,116 Speaker 1: twenty two. Somebody asked me, what in fact do you do? 513 00:28:53,196 --> 00:28:54,956 Speaker 1: And I realized and I spend most of my time 514 00:28:54,956 --> 00:28:56,596 Speaker 1: on the phone in order to make people think I 515 00:28:56,636 --> 00:28:58,036 Speaker 1: was professional. I had to figure out what it was 516 00:28:58,076 --> 00:29:03,516 Speaker 1: I did. Wall Street reads a sinister old gag. Is 517 00:29:03,516 --> 00:29:05,596 Speaker 1: a street with a river at one end and a 518 00:29:05,636 --> 00:29:09,876 Speaker 1: graveyard at the other. This is striking, but income it 519 00:29:09,956 --> 00:29:14,396 Speaker 1: omits the kindergarten in the middle. Frederick Schwed Jr. Where 520 00:29:14,396 --> 00:29:19,396 Speaker 1: are the customers yachts? It was sometime early in nineteen 521 00:29:19,436 --> 00:29:22,756 Speaker 1: eighty six, the first year of the decline of my firm, 522 00:29:23,196 --> 00:29:28,396 Speaker 1: Solomon Brothers. Our chairman John good Friend left his desk 523 00:29:28,436 --> 00:29:30,156 Speaker 1: at the head of the trading floor and went for 524 00:29:30,196 --> 00:29:33,556 Speaker 1: a walk. At any given moment on the trading floor, 525 00:29:33,956 --> 00:29:37,836 Speaker 1: billions of dollars were being risked by bond traders. Good 526 00:29:37,836 --> 00:29:40,036 Speaker 1: Friend took the pulse of the place by simply wandering 527 00:29:40,036 --> 00:29:43,556 Speaker 1: around it and asking questions of the traders. An eerie 528 00:29:43,596 --> 00:29:46,756 Speaker 1: sixth sense guided him to wherever a crisis was unfolding. 529 00:29:47,596 --> 00:29:51,476 Speaker 1: Good Friends seemed able to smell money being lost. He 530 00:29:51,596 --> 00:29:54,236 Speaker 1: was the last person a nerve racked trader wanted to see. 531 00:29:54,876 --> 00:29:57,716 Speaker 1: Good Friend liked to sneak up from behind and surprise you. 532 00:29:58,636 --> 00:30:02,236 Speaker 1: This was fun for him, but not for you. Busy 533 00:30:02,236 --> 00:30:05,236 Speaker 1: on two phones at once trying to stem disaster, you 534 00:30:05,316 --> 00:30:08,356 Speaker 1: had no time to turn and look. You didn't need to. 535 00:30:09,116 --> 00:30:12,636 Speaker 1: You felt him. The area around you began to convulse 536 00:30:12,716 --> 00:30:16,476 Speaker 1: like an epileptic ward people were pretending to be frantically 537 00:30:16,516 --> 00:30:19,156 Speaker 1: busy and at the same time staring intently at a 538 00:30:19,196 --> 00:30:22,396 Speaker 1: spot directly above your head. You felt a chill in 539 00:30:22,436 --> 00:30:25,236 Speaker 1: your bones that I imagine belongs to the same class 540 00:30:25,236 --> 00:30:27,996 Speaker 1: of intelligence as the nervous twitch of a small furry 541 00:30:27,996 --> 00:30:31,436 Speaker 1: animal at the silent approach of a grizzly bear. An 542 00:30:31,436 --> 00:30:35,756 Speaker 1: alarm shrieked in your head. Good Friend, good friend, good friend, 543 00:30:36,996 --> 00:30:40,036 Speaker 1: often as not our chairman just hovered quietly for a bit, 544 00:30:40,356 --> 00:30:44,116 Speaker 1: then left. You might never have seen him. The only 545 00:30:44,116 --> 00:30:46,236 Speaker 1: trace I found of him on two of these occasions 546 00:30:46,636 --> 00:30:50,676 Speaker 1: was a turred like ash on the floor beside my chair. Left. 547 00:30:50,756 --> 00:30:55,036 Speaker 1: I suppose as a calling card. Good Friend's cigar droppings 548 00:30:55,036 --> 00:30:57,716 Speaker 1: were longer and better formed than those of the average 549 00:30:57,716 --> 00:31:01,276 Speaker 1: Solomon boss. I always assumed that he smoked a more 550 00:31:01,316 --> 00:31:04,436 Speaker 1: expensive blend than the rest purchased with a few of 551 00:31:04,436 --> 00:31:06,876 Speaker 1: the forty million dollars that he cleared on the sale 552 00:31:06,876 --> 00:31:09,796 Speaker 1: of Solomon Brothers in nineteen eighty one, or a few 553 00:31:09,796 --> 00:31:11,756 Speaker 1: of the three point one million dollars that he paid 554 00:31:11,836 --> 00:31:14,996 Speaker 1: himself in nineteen eighty six, more than any other Wall 555 00:31:15,036 --> 00:31:19,436 Speaker 1: Street ceo. This day in nineteen eighty six, however, good 556 00:31:19,516 --> 00:31:23,716 Speaker 1: Friend did something strange instead of terrifying us all. He 557 00:31:23,796 --> 00:31:26,756 Speaker 1: walked a straight line to the trading desk of John Merryweather, 558 00:31:27,196 --> 00:31:29,836 Speaker 1: a member of the board of Solomon Ink and also 559 00:31:29,916 --> 00:31:33,996 Speaker 1: one of Solomon's finest bond traders. He whispered a few words. 560 00:31:34,796 --> 00:31:38,716 Speaker 1: The traders in the vicinity eavesdropped what good Friends said 561 00:31:39,156 --> 00:31:42,276 Speaker 1: has become a legend at Solomon Brothers and a visceral 562 00:31:42,316 --> 00:31:46,516 Speaker 1: part of its corporate identity. He said, one hand, one 563 00:31:46,556 --> 00:31:51,836 Speaker 1: million dollars, no tears, one hand, one million dollars, no tears. 564 00:31:52,836 --> 00:31:56,796 Speaker 1: Merriweather grabbed the meeting instantly. The King of Wall Street, 565 00:31:56,956 --> 00:31:59,836 Speaker 1: as Business Week had called Goodfriend, wanted to play a 566 00:31:59,956 --> 00:32:03,436 Speaker 1: single hand of a game called Liar's Poker for a 567 00:32:03,436 --> 00:32:07,716 Speaker 1: million dollars. He played the game most afternoons with Merryweather 568 00:32:07,756 --> 00:32:11,356 Speaker 1: in the six Young Bond bitrage traders who work for Merriweather, 569 00:32:11,716 --> 00:32:15,636 Speaker 1: and he was usually skinned alive. Some traders said good 570 00:32:15,676 --> 00:32:19,556 Speaker 1: Friend was heavily outmatched, others who couldn't imagine John Goodfriend 571 00:32:19,596 --> 00:32:22,796 Speaker 1: is anything but omnipotent, and there were many said that 572 00:32:22,916 --> 00:32:26,276 Speaker 1: losing suited his purpose, though exactly what that might be 573 00:32:26,516 --> 00:32:30,436 Speaker 1: was a mystery. The peculiar feature of good Friends challenge 574 00:32:30,516 --> 00:32:34,116 Speaker 1: this time was the size of the steak. Normally his 575 00:32:34,236 --> 00:32:37,876 Speaker 1: bets didn't exceed a few hundred dollars. A million was 576 00:32:37,956 --> 00:32:42,236 Speaker 1: unheard of. The final two words of his challenge, no tears, 577 00:32:42,596 --> 00:32:44,876 Speaker 1: meant that the loser was expected to suffer a great 578 00:32:44,916 --> 00:32:48,236 Speaker 1: deal of pain, but wasn't entitled to whine, bitch or 579 00:32:48,316 --> 00:32:50,916 Speaker 1: moan about it. He'd just have to hunker down and 580 00:32:50,996 --> 00:32:54,596 Speaker 1: keep his poverty to himself. But why, you might ask, 581 00:32:54,796 --> 00:32:57,116 Speaker 1: if you were anyone other than the King of Wall Street, 582 00:32:57,796 --> 00:33:01,196 Speaker 1: why do it in the first place, Why in particular 583 00:33:01,276 --> 00:33:05,836 Speaker 1: challenge Merryweather instead of some lesser managing director. It seemed 584 00:33:05,876 --> 00:33:09,356 Speaker 1: like an act of sheer lunacy. Merryweather was the king 585 00:33:09,356 --> 00:33:12,436 Speaker 1: of the game, the liars poker champion, of the Solomon 586 00:33:12,476 --> 00:33:16,156 Speaker 1: Brothers trading floor. On the other hand, one thing you 587 00:33:16,276 --> 00:33:18,236 Speaker 1: learn on a trading floor is that winners like good 588 00:33:18,236 --> 00:33:21,676 Speaker 1: Friend always have some reason for what they do. It 589 00:33:21,796 --> 00:33:23,636 Speaker 1: might not be the best of reasons, but at least 590 00:33:23,636 --> 00:33:26,996 Speaker 1: they have a concept in their mind. I wasn't privy 591 00:33:27,036 --> 00:33:29,916 Speaker 1: to John good Friends innermost thoughts, but I do know 592 00:33:29,996 --> 00:33:32,556 Speaker 1: that all the boys on the trading floor gambled, and 593 00:33:32,596 --> 00:33:34,716 Speaker 1: then he wanted badly to be one of the boys. 594 00:33:35,556 --> 00:33:37,156 Speaker 1: What I think good Friend had in mind in this 595 00:33:37,276 --> 00:33:40,796 Speaker 1: instance was a desire to show his courage like the 596 00:33:40,876 --> 00:33:44,236 Speaker 1: boy who leaps from the high dive. Who better than 597 00:33:44,316 --> 00:33:48,876 Speaker 1: Merryweather for the purpose. Besides, Merriweather was probably the only 598 00:33:48,876 --> 00:33:50,996 Speaker 1: trader with both the cash and the nerve to play. 599 00:33:52,316 --> 00:33:57,036 Speaker 1: The whole absurd situation needs putting into context. John Merriweather had, 600 00:33:57,036 --> 00:33:59,276 Speaker 1: in the course of his career, made hundreds of millions 601 00:33:59,276 --> 00:34:02,796 Speaker 1: of dollars for Solomon Brothers. He had an ability, rare 602 00:34:02,836 --> 00:34:06,076 Speaker 1: among people and treasured by traders, to hide his state 603 00:34:06,116 --> 00:34:09,756 Speaker 1: of mind. Most traders divulge whether they are making or 604 00:34:09,756 --> 00:34:12,316 Speaker 1: losing money by the way they speak or move. They're 605 00:34:12,316 --> 00:34:16,516 Speaker 1: either overly easy or overly tense with Merriweather. You could 606 00:34:16,556 --> 00:34:21,196 Speaker 1: never ever tell. He wore the same blank, half tense 607 00:34:21,236 --> 00:34:23,396 Speaker 1: expression when he won as he did when he lost. 608 00:34:24,236 --> 00:34:27,076 Speaker 1: He had, I think, a profound ability to control the 609 00:34:27,076 --> 00:34:31,516 Speaker 1: two emotions that commonly destroy traders, fear and greed, and 610 00:34:31,596 --> 00:34:33,916 Speaker 1: it made him as noble as a man who pursues 611 00:34:33,956 --> 00:34:36,876 Speaker 1: his self interest can be. He was thought by many 612 00:34:36,916 --> 00:34:39,516 Speaker 1: within Solomon to be the best bond trader on Wall Street. 613 00:34:40,396 --> 00:34:43,236 Speaker 1: Around Solomon, no tone but awe was used when he 614 00:34:43,276 --> 00:34:47,276 Speaker 1: was discussed. People would say he's the best businessman in 615 00:34:47,316 --> 00:34:51,316 Speaker 1: the place, or the best risk taker I have ever seen, 616 00:34:52,036 --> 00:34:57,596 Speaker 1: or a very dangerous liars poker player. Meriweather cast a 617 00:34:57,636 --> 00:35:00,196 Speaker 1: spell over the young traders who work for him. His 618 00:35:00,396 --> 00:35:03,316 Speaker 1: boys ranged in age from twenty five to thirty two. 619 00:35:03,796 --> 00:35:08,036 Speaker 1: He was about forty. Most of them had PhDs in math, economics, 620 00:35:08,036 --> 00:35:11,676 Speaker 1: and or physics. Once they got on a Merryweather's trading desk, however, 621 00:35:11,716 --> 00:35:15,276 Speaker 1: they forgot they were supposed to be detached intellectuals. They 622 00:35:15,316 --> 00:35:20,196 Speaker 1: became disciples. They became obsessed by the game of liars poker. 623 00:35:21,196 --> 00:35:24,556 Speaker 1: They regarded it as their game, and they took it 624 00:35:24,596 --> 00:35:29,796 Speaker 1: to a new level of seriousness. John Goodfriend was always 625 00:35:29,796 --> 00:35:33,196 Speaker 1: the outsider in their game. That Business Week put his 626 00:35:33,236 --> 00:35:35,676 Speaker 1: picture on the cover and called him the King of 627 00:35:35,716 --> 00:35:39,596 Speaker 1: Wall Street held little significance for them. I mean that was, 628 00:35:39,796 --> 00:35:43,396 Speaker 1: in a way the whole point. Good Friend was the 629 00:35:43,516 --> 00:35:46,516 Speaker 1: King of Wall Street, but Merryweather was the king of 630 00:35:46,516 --> 00:35:49,436 Speaker 1: the game. When good Friend had been crowned by the 631 00:35:49,476 --> 00:35:52,756 Speaker 1: gentleman of the press, you could almost hear Trader's thinking. 632 00:35:53,356 --> 00:35:56,876 Speaker 1: Foolish names and foolish faces often appear in public places. 633 00:35:57,636 --> 00:36:01,076 Speaker 1: Fair enough, good Friend had once been a trader, but 634 00:36:01,156 --> 00:36:03,476 Speaker 1: that was as relevant as an old woman's claim that 635 00:36:03,556 --> 00:36:07,236 Speaker 1: she was once quite a dish. At times, good Friend 636 00:36:07,316 --> 00:36:11,516 Speaker 1: himself seemed to agree. He loved trade compared with managing. 637 00:36:12,036 --> 00:36:16,436 Speaker 1: Trading was admirably direct. You made your bets and either 638 00:36:16,476 --> 00:36:19,676 Speaker 1: you won or you lost. When you won, people all 639 00:36:19,676 --> 00:36:22,116 Speaker 1: the way up to the top of the firm admired you, 640 00:36:22,556 --> 00:36:26,516 Speaker 1: envied you, and feared you, and with reason you controlled 641 00:36:26,516 --> 00:36:30,836 Speaker 1: the loot. When you managed a firm, well, sure you 642 00:36:30,876 --> 00:36:34,676 Speaker 1: received your quota of envy, fear, and admiration. But for 643 00:36:34,716 --> 00:36:37,596 Speaker 1: all the wrong reasons you did not make the money 644 00:36:37,596 --> 00:36:41,796 Speaker 1: for Solomon. You did not take the risk. You were 645 00:36:41,876 --> 00:36:46,316 Speaker 1: hostage to your producers. They took the risk. They proved 646 00:36:46,356 --> 00:36:49,476 Speaker 1: their superiority every day by handling a risk better than 647 00:36:49,516 --> 00:36:52,636 Speaker 1: the rest of the risk taking world. The money came 648 00:36:52,676 --> 00:36:55,476 Speaker 1: from risk takers such as Merriweather, and whether it came 649 00:36:55,596 --> 00:36:59,036 Speaker 1: or not was really beyond good Friend's control. That's why 650 00:36:59,036 --> 00:37:02,076 Speaker 1: many people thought that the single rash act of challenging 651 00:37:02,116 --> 00:37:05,276 Speaker 1: the arbitrage boss to one hand for a million dollars 652 00:37:05,876 --> 00:37:07,676 Speaker 1: was good Friend's way of showing that he was a 653 00:37:07,716 --> 00:37:11,356 Speaker 1: player too, and if you wanted to show off, Liar's 654 00:37:11,356 --> 00:37:14,396 Speaker 1: Poker was the only way to go. The game had 655 00:37:14,396 --> 00:37:18,396 Speaker 1: a powerful meaning for traders. People like John Merriweather believe 656 00:37:18,436 --> 00:37:20,916 Speaker 1: that Liar's Poker had a lot in common with bond trading. 657 00:37:21,796 --> 00:37:25,636 Speaker 1: It tested a trader's character, It honed a trader's instincts. 658 00:37:26,516 --> 00:37:29,636 Speaker 1: A good player made a good trader, and vice versa. 659 00:37:29,996 --> 00:37:36,036 Speaker 1: We all understood it. The game. In Liar's Poker, a 660 00:37:36,036 --> 00:37:38,076 Speaker 1: group of people as few as two as many as 661 00:37:38,116 --> 00:37:42,396 Speaker 1: ten form a circle. Each player holds a dollar bill 662 00:37:42,476 --> 00:37:46,356 Speaker 1: close to his chest. The game is similar in spirit 663 00:37:46,436 --> 00:37:50,436 Speaker 1: to the card game known as I Doubted. Each player 664 00:37:50,476 --> 00:37:53,956 Speaker 1: attempts to fool the others about the serial numbers printed 665 00:37:53,956 --> 00:37:57,436 Speaker 1: on the face of his dollar bill. One trader begins 666 00:37:57,476 --> 00:38:02,436 Speaker 1: by making a bid. He says, for example, three sixes. 667 00:38:03,556 --> 00:38:06,876 Speaker 1: He means that all told, the serial numbers of the 668 00:38:06,956 --> 00:38:11,876 Speaker 1: dollar bills held by every player, including himself, contain at 669 00:38:11,956 --> 00:38:15,836 Speaker 1: least three sixes. Once the first bid has been made, 670 00:38:16,236 --> 00:38:20,076 Speaker 1: the game moves clockwise in the circle. Let's say the 671 00:38:20,116 --> 00:38:22,556 Speaker 1: bid is three sixes. The player to the left of 672 00:38:22,636 --> 00:38:25,756 Speaker 1: the bidder can do one of two things. He can 673 00:38:25,756 --> 00:38:28,596 Speaker 1: bid higher there are two sorts of higher bids the 674 00:38:28,636 --> 00:38:31,556 Speaker 1: same quantity of a higher number three sevens, eights, or nines, 675 00:38:32,436 --> 00:38:36,636 Speaker 1: and more of any number four fives, for instance. Or 676 00:38:36,676 --> 00:38:39,956 Speaker 1: he can challenge, which is like saying I doubt it. 677 00:38:41,236 --> 00:38:44,516 Speaker 1: The bidding escalates until all the other players agree to 678 00:38:44,596 --> 00:38:48,836 Speaker 1: challenge a single player's bid. Then and only then do 679 00:38:48,916 --> 00:38:52,236 Speaker 1: the players reveal their serial numbers and determine who is 680 00:38:52,276 --> 00:38:57,076 Speaker 1: bluffing whom. In the midst of all this, the mind 681 00:38:57,116 --> 00:39:00,796 Speaker 1: of a good player spins with probabilities. What is the 682 00:39:00,836 --> 00:39:05,876 Speaker 1: statistical likelihood of there being three sixes within a batch of, say, forty, 683 00:39:06,036 --> 00:39:10,516 Speaker 1: randomly generated serial numbers. For a great player, however, the 684 00:39:10,636 --> 00:39:13,556 Speaker 1: math is the easy part of the game. The hard 685 00:39:13,596 --> 00:39:16,796 Speaker 1: part is reading the faces of the other players. The 686 00:39:16,876 --> 00:39:20,116 Speaker 1: complexity arises when all players know how to bluff and 687 00:39:20,276 --> 00:39:23,956 Speaker 1: double bluff. The game has some of the feel of trading, 688 00:39:24,036 --> 00:39:26,036 Speaker 1: just as jousting has some of the feel of war. 689 00:39:26,836 --> 00:39:30,676 Speaker 1: The questions a Liar's poker player asks himself are up 690 00:39:30,676 --> 00:39:34,036 Speaker 1: to a point, the same questions a bond trader asked himself. 691 00:39:34,876 --> 00:39:39,036 Speaker 1: Is this a smart risk? Do I feel lucky? How 692 00:39:39,116 --> 00:39:42,076 Speaker 1: cunning is my opponent? Does he have any idea what 693 00:39:42,116 --> 00:39:44,916 Speaker 1: he's doing? And if not, how do I exploit his ignorance? 694 00:39:45,956 --> 00:39:48,756 Speaker 1: If he bids high? Is he bluffing but does he 695 00:39:48,836 --> 00:39:52,556 Speaker 1: actually hold a strong hand? Is he trying to induce 696 00:39:52,596 --> 00:39:54,916 Speaker 1: me to make a foolish bid? Or does he actually 697 00:39:54,956 --> 00:40:00,276 Speaker 1: have four of a kind himself? Each player seeks weakness, predictability, 698 00:40:00,436 --> 00:40:02,796 Speaker 1: and pattern in the others and seeks to avoid it 699 00:40:02,796 --> 00:40:07,556 Speaker 1: in himself. The bond traders of Goldman, Sachs, First Boston, Morgan, Stanley, 700 00:40:07,596 --> 00:40:10,516 Speaker 1: Merrill Lynch, and other Wall Street firms all play some 701 00:40:10,676 --> 00:40:13,276 Speaker 1: version of liars Poker, but the place where the stakes 702 00:40:13,356 --> 00:40:17,076 Speaker 1: run highest, thanks to John Merryweather, is the New York 703 00:40:17,116 --> 00:40:21,356 Speaker 1: bond trading floor of Solomon Brothers. The code of the 704 00:40:21,396 --> 00:40:24,396 Speaker 1: Liars poker player was something like the Code of the Gunslinger. 705 00:40:25,356 --> 00:40:28,916 Speaker 1: It required a trader to accept all challenges because of 706 00:40:28,956 --> 00:40:33,596 Speaker 1: the code, which was his code. John Merriweather felt obliged 707 00:40:33,636 --> 00:40:37,196 Speaker 1: to play, but he knew it was stupid for him. 708 00:40:37,236 --> 00:40:40,356 Speaker 1: There was no upside. If he won, he upset good Friend. 709 00:40:40,916 --> 00:40:43,636 Speaker 1: No good came of this. But if he lost, he 710 00:40:43,676 --> 00:40:46,356 Speaker 1: was out of pocket a million bucks. This was worse 711 00:40:46,356 --> 00:40:49,796 Speaker 1: than upsetting the boss. Although Merriweather was by far the 712 00:40:49,836 --> 00:40:52,236 Speaker 1: better player of the game, in a single hand, anything 713 00:40:52,276 --> 00:40:56,836 Speaker 1: could happen. Luck could very well determine the outcome. Merryweather 714 00:40:56,916 --> 00:40:59,236 Speaker 1: spent his entire day avoiding dumb beets, and he wasn't 715 00:40:59,236 --> 00:41:02,996 Speaker 1: about to accept this one. No, John, he said, if 716 00:41:02,996 --> 00:41:04,556 Speaker 1: we're going to play for those kind of numbers, I'd 717 00:41:04,636 --> 00:41:07,716 Speaker 1: rather play for real money. Ten million dollars, no tears, 718 00:41:09,196 --> 00:41:13,476 Speaker 1: ten million dollars. It was a moment for all players 719 00:41:13,516 --> 00:41:17,156 Speaker 1: to save her. Meriweather was playing liars poker before the 720 00:41:17,236 --> 00:41:21,636 Speaker 1: game even started. He was bluffing good Friend. Considered the 721 00:41:21,676 --> 00:41:24,796 Speaker 1: counter proposal. It would have been just like him to accept, 722 00:41:25,476 --> 00:41:27,956 Speaker 1: merely to entertain. The thought was a luxury that must 723 00:41:27,996 --> 00:41:30,916 Speaker 1: have pleased him. Well, it was good to be rich. 724 00:41:32,196 --> 00:41:35,396 Speaker 1: On the other hand, ten million dollars was and is 725 00:41:35,716 --> 00:41:38,436 Speaker 1: a lot of money. If good Friend lost, he'd have 726 00:41:38,476 --> 00:41:41,956 Speaker 1: only thirty million or so left. His wife, Susan, was 727 00:41:41,996 --> 00:41:45,196 Speaker 1: busy spending the better part of fifteen million dollars redecorating 728 00:41:45,196 --> 00:41:49,196 Speaker 1: their Manhattan apartment. Meriweather knew this, and as good Friend 729 00:41:49,236 --> 00:41:52,796 Speaker 1: was the boss, he clearly wasn't bound by the Merriweather code. 730 00:41:53,476 --> 00:41:57,196 Speaker 1: Who knows, maybe he didn't even know the Merriweather code. 731 00:41:57,756 --> 00:42:00,036 Speaker 1: Maybe the whole point of his challenge was to judge 732 00:42:00,076 --> 00:42:04,036 Speaker 1: Meriweather's response. Even good Friend had to marvel at the 733 00:42:04,116 --> 00:42:08,516 Speaker 1: king in action. So good Friend declined. In fact, he 734 00:42:08,596 --> 00:42:12,956 Speaker 1: smiled his own brand before smile and said, you're crazy. 735 00:42:13,196 --> 00:42:17,316 Speaker 1: No thought, Merriweather, just very, very good