Author Michael Lewis discusses The Big Short and the future of finance



this is another sold-out Dean speaker series event I think we have all have a good sense for just why it is sold out I want to thank Michael Lewis very very much for being here and I will do that more formally in a moment and also to Kelly McElhaney who was absolutely instrumental for allowing this event to happen for all of us tonight Kelly is the Margo Alexander adjunct professor here at the Haas School our Center for Responsible business is really in the most fundamental way her creation responsible business and that set of concepts has always been important for this business school she built it into dare I say a franchise a really important signature quality for our business school so I thank her for that and also of course for making making tonight possible this event is also co-sponsored I mentioned it's part of our Dean speaker series it's also co-sponsored by our Center for Responsible business and in particular the Peterson lecture series so it's really sponsored by both the Peterson series that's Rudolph Peterson a leaders at Bank of America also the United Nations Development Program a notable philanthropist we we thank the support for that series as well the area of corporate social responsibility and Kelly's work the work of Joe Magnus and many people here how do we think about strategic corporate responsibility how do we think about this not as just a piece of the organization but right at the center of organizations this is work that Kelly and Joe and many others have been doing around here for a long time they've been doing it on the applied side but some of the biggest firms in the world and this is part of of those efforts and representative of those of those efforts let me talk a little bit also about some of the other events that are coming up so for the Center for Responsible business thinking about for example our finance industry hugely important globally not just obviously in the u.s. just how sustainable is it we've made some fundamental changes we will be having an event just this wednesday on the sustainability of the finance industry with lots of practitioners that will be there I hope you'll be able to make that that's at 12:30 at in the Bank of America forum we also in the Dean speaker series we bring in the top level leaders in so many different domains John Chambers CEO of Cisco Systems will be here that's on September 28th Donald Canales the CEO of Clorox will also be here as part of that series on the 20th of October I hope you'll be at both of those talks continue to stay engaged all of you please continue to stay engaged as we lean into one another more and more we will just get stronger and stronger and we'll have exactly the kind of impact that Berkeley Hass needs to have without further ado let me pass the microphone over to Kelly and she will introduce our very very special guest Michael Lewis thank you Kelly thank you Michael here I have a pretty difficult task of interviewing somebody who I think is probably in the Enron speak the smartest man in the room so it's a little bit daunting no offense to my boss do the second smartest man I don't need to introduce Michael because you in terms of you can wiki Wookieepedia him or you know his myriad books I had to admit to him tonight that this was not my favorite book The Blind Side was still my favorite book but I want to just tell you a few things that that you may not know about Michael I met Michael because he was tasked with writing a New York Times story about you me in 2004 and I came here from Michigan so I didn't know a lot at the time and so I kind of knew who he was but I didn't know how cynical or I didn't how dangerous he was so I just did what I always do which is love my job and taught a course and Michael would sit in on my course and then you were you were traveling a lot so Billy we worked it out as you would call me on Wednesday nights or something and he would say okay now tell me what really happened in your course today what does this acronym mean and what does that acronym mean and then we found out that our kids were in camps together and we we'd crossed paths but I think the next time I saw you and I will say one thing you said in the art you wrote a really interesting article the New York Times Sunday magazine in 2004 and you called Berkley the natural home for woolly-headed business idealism so I just want to know it was very loving yeah you said McElhaney who oddly enough is not selfish at all but open and generous or at least clever at seeming opening open and generous while in fact pursuing a strategy of intense self-interest so six years later you're scarred six years later you're scarred am i actually generous and open or am i self-interest or you've reached this higher sort of plateau where you fuse the two so they're in the state fair enough and we will spend the rest of the time trying to disabuse you that this is a place of fully armed headed idealism or whatever you called us but um but I live you know I walked over here so you're not gonna fool me let's try right now so why are you here tonight you asked me I don't I never do this stuff I know I never do this stuff but you asked me and I said you said no I still feel a little guilty about the article I think is that it let me say so you got a certain leverage okay so you asked I said yeah and I didn't think all these people would be here I have a slightly different memory I did ask you to speak at a lunch in April your first response before I even got the question I was no you said I make and I won't give him the dollar amount X amount for giving talks and I give talks for free for charity and Berkeley is nowhere near either either and and so I thought well I mean my boss has asked me to see if this could work I'll try to make a pitch he said no so we we had lunch and then I said but Michael you could speak to the Future Business Leaders so that maybe things could change does that appeal to you at all you said hell no Kevin that was about the mo where I start to feel guilty about the article ah because my memory of it is you said no Kelly that's your job I don't pretend for a moment that I can change the world and then we went on talking about personal things kids and yoga and spin class and you said halfway through a completely unrelated thought you said okay I'll do it so I think you actually do think you can change the world not here no I'm serious I don't I don't I think that to the extent I can have an effect on things I'm much more likely to do when I'm sitting at a computer writing something but I'm very circumspect about the effect I have I've seen I've seen pieces of prose have exactly the opposite effect that I intended fact this book comes about in part because the liars poker it had such a perverse effect I felt I should go back and redo it over and see how I get it right the second time it's your guilt for having written liars poker that I think was used by Ohio State yes I don't know I feel I don't guilt is probably too strong a word but I wondered if I could get it right the second time I mean I really did think it was 27 years old and I walked out of a job on Wall Street that I was doing perfectly well and it would have made me rich because I had this thing I really like to do I really like to write I looked ahead of me on on Wall Street look the people who were older than me and I couldn't see anybody who was really happy being there and I couldn't see at more point I could see anybody who would who would once they'd really become established in that world leave to do something they loved it just got too got too expensive to leave and so so I bolt out of there and I write this book that is called liars poker that is if I if I wanted I didn't really have any particular agenda with it I really just wanted to kind of I thought this is such an extraordinary period in finance if some if the worm's-eye view is not captured on the page now it will be forgotten for all time and 20 years from now people will look back on this and say well how could Wall Street ever have been so insane I mean that's what I was thinking at the time and and I thought if there's anything to come out of this is any good some kid who's at Princeton Harvard and Yale sitting there wondering with or Berkeley but my right that my orientation was he I'd never been out here my orientation was East Coast and thinking about go do I go do this thing I love or do I go to Wall Street we'll say well I don't know what it's about it's a little bit silly in a lot of ways I'd be the thing I love and instead the book comes out and I kid you not I had a thousand letters if I had one from people at like Ohio State University saying dear mr. Lewis I've read your how-to manual how to get ahead of Wall Street and I think I've learned all everything there is in there and it's made me even more excited to go and work there are there any tips you held out of the book that you care to share with me now and it was read as how to look it was that's exactly and when I went back to work right the big short it was the first time I really wanted back onto Wall Street in a serious way over and over I met people who were in the middle of this mess that has been created who said to me the only reason I came to Wall Street as I read your book and and and you know I was destined to be an engineer or an X or a why but they gave us liars poker and business school and I thought I got to do that and in some way I felt responsible for this debacle because all the people who had lost all this money had gone into Wall Street that there was it sent out that it was a very funny thing because and it does teach you you become very yo become humble in other ways but you become humble about your ability to influence the world with a piece of writing in the way you intend to influence it because I told what I thought I was writing when I was writing instead when I wrote liars poker was there was a subtext that got picked up by everybody read the book in a subtext what was alright here's this doofus who admits he knows nothing when he goes to Wall Street he stumbles in and they want to make him rich uh I know nothing I could go do that to so everybody who knew nothing and wanted to get rich found my book and then went and did it and and so uh anyway I don't know how we got distracted here because we were talking about you and sorry but this is all oh yeah we can go back to talking about you so guilt no but guilt but guilt is a bi fine guilt is a very powerful motivator but on a more micro level that when I say finally sit down to write it's usually because I'm so guilty that I have not written that it's usually a response to some really long period of procrastination so is this a long period of procrastination for having caused so many people to go to Wall Street as opposed to doing what they love uh well I thought this was this was opportunism this book because I did think that I'd had a ringside seat when Wall Street had really transformed itself in the firm that was lay the the center of the action Salomon Brothers it was a leading bond trading firm when all of a sudden that became hot and it was the first big firm to go keel public and I thought that an awful lot of the crisis could be you give you if you said what are the root causes of this and there were a lot but the inside the financial industry you try you could really trace it back to what I live through without couple without completely understanding it in the 80s that that the firm's had ceased to be partnerships and become corporations so that the people who were who were who were making the bets inside these places no longer had their own money on the line or the people of or the money of people immediately around them who could supervise I mean stayed they were playing with someone else's money shareholders money that the inside the big Wall Street firm had been this shift away from servicing clients and customers to using clients and customers in the service of one's trading books and I'd watch that and describe that in some detail and watch the beginning of that in a big way and the and this morphed into you know the best thing to do in a Wall Street firm is not to serve customers do what financial people have always done but to be the proprietary trader to be trading the firm's own capital the proprietary trading business was invented under my nose at Salomon Brothers that's how I worked for with the proprietary traders at Salomon Brothers and so I'd seen that that seen the business get so complicated but the CEO couldn't understand it and I've seen this kind of culture shift that then it happened on Wall Street and it was and being very crudely put it used to be the bottom third of the class at Yale who went to work on Wall Street my father's generation that's it went the dopes is was that you know is there people who are not the dope test they were the people who were the sea students and and who were sociable and then all of a sudden it's not it's that it's the PhD in physics from MIT who's going to work and that happily and Berkeley sorry in Berkeley right sorry again but again they weren't many Berkeley one around the Salomon was trading for worse oh yeah I know I Angeles and and this transformation was uh you know I watched the very beginning of it was was long since completed when I come back to write this book but I can remember I mean it was like one this wonderful moment of transition that I got to witness that reminded me when I have years later end up writing a book about the Oakland A's called Moneyball which is about sort of the intellectualization of sports among other things but it's this new sort of person with a new kind of aptitude wandering into a world where he was previously not just unwelcome but thought to be unneeded and this had happened on Wall Street in the 80s when with the invention of derivatives basically that they didn't call them that options and futures there was all of a sudden a and the end the arrival of computer Technic imputed technology all of a sudden a role for a quant a different sort of role for a trading role a risk-taking role for a court and you know for a brief moment side-by-side you had on a trading floor a bond trader who had the guys who worked in that job the decade before I got there were all high school graduates they didn't have college degrees from someplace horrible in New Jersey and they were all named Vinnie and Danny and Bobby and they had unbelievable amounts of body hair coming out of the tops are their or their collar and they kind of walk like this and their kids are now doing Jersey Shore yeah that gives it down you're right the kids matter and really right so was that that was who was the bond trader and then all of a sudden you've got this hairless wonder from the MIT physics department planted down next to him who who and they're trading the same things and the bonds all of a sudden have options in them and then he's buying and selling them that day because he likes the way it feels or he has some social sense of what customers are going to do and the guy from MIT can value the option with his models and you could see that Vinnie was doomed that was the beginning of the extinction of an old kind of Wall Street and I can remember these wonderful like flash points where you realize that both the the hatred but the suspicion in contempt that the old guard had for the new guard the new guard thought the old guard was just a little dull and that wasn't completely fair but that was the that was if you ask them and say oh he's just not that sharp but the ass Vinny what he thought about the new guys he was some ways very astute and there was a moment that I never got out of my head right after I'd started at Salomon Brothers kind of five months after Christmas break came along and I was on the big there big trading floor in New York and one of my one of my fellow trainees who'd gone to the Chicago Business School and was an intellectual of sorts was wandering off the trading floor with his bags in his hands and there was a guy who was sort of the epitome of the Vinnie and Danny types name was Donny green when you got the Salomon Brothers if you had a advanced degree you were told never never go try to talk to Donnie green he does not like you he doesn't think you should be here stay away from him you know he'll hit you or eat you or something and and so Donnie green sees this kid walking off a trading floor and he stands up and he screams out a kid get over here I need to talk to you and very nervously this kid goes over to Donnie green seat and says you know what Donnie Greece is where do you think you're going because I'm it's Christmas I'm going on vacation die Green says uh you're flying Kidd said yeah I'm going to the airport and Donnie green reached into his pocket and he pulled out a $20 bill and he gave it to the kid and he said good when you get to the airport he said go to one of those machines where they sell the crash insurance remember they used to sell those that was not such a good marketing thing for the airline's but the basic bit but he says go to Wall Street in it and end and buy buy some crash insurance and put it in my name and the end the kid goes why Danny Green says I feel lucky and and he did feel like it was part of his problem but he but they would that story made the rounds at firm and everybody said odds you know it's sort of like the last roar of the dinosaur the last dinosaur this is just the anger of an extinct species is being extinguished but the L asada was down in green I think it's some level understood how dangerous this guy from the Chicago Business School was and and in a bad way in a bad way I mean that they were dehumanizing essentially a human endeavor and but anyway so I had this this the sense that I'd been there I'd written this book that I thought was about the end of something it was actually about the beginning of something it was about the beginning of a decades-long thirty years thirty years event in the financial sector and so I thought I think this this feels like the end or the beginning of the end of that and it does to me so that's my question that's why I went back into it are you optimistic are you pessimistic about what reform future of Wall Street future of banking your children's future look I we're living in a very strange time in American history right all of a sudden my children are thought to have a less bright future than I did I the I'm slow to get pessimistic and I do think this our society has unbelievable powers of rejuvenation it's a very very very sort of fertile it's a but it's full of possibility so I don't I don't feel I don't have a generally kind of pessimistic view of the world you know every now and then I'm sold on one and I feel dark and gloom for about three hours and then I get over it and but with Wall Street I think I feel like I'm watching a very powerful force go down very slowly that I would have thought given what happened in in this latest episode of Finance capitalism that the reform would have taken plate would have been ruthless and and Swift and draconian toward and it has not been but I don't think it's over why don't you think it was more draconian the reform because the interests of the people of Wall Street were so entrenched in so many different ways not just not just being able to write checks to people who are running for office but you know that that the secretary of the Treasury and people around even around Obama kind of can't imagine a world where the out at the end of their jobs in Washington isn't working getting paid a huge sums of money for working for Goldman Sachs or some such place and that the it's it's disguised it's a this is putting it way too strongly but if I was putting it in a you know in a in a caricature of a sentence I feel like it's a kleptocracy disguised as a meritocracy that it's a very elegant form of theft that's going on on Wall Street in a lot of ways it's not it's not that it's what happens there is all socially destructive or entirely useful but it's just just become wildly overcompensated and but it masquerades as the reason you're wildly overcompensate is you're the smartest and that's because it's no longer the bottom third of the class at Yale what's going to the Wall Street but the people at the very top so it looks like you're getting is just to it this is just an affirmation the pay is an affirmation of all the success they've had before they get there so there's a you know when I was reporting this book I went talked a lot of people in positions of power and I was just shocked by how at the mercy of important investment bankers they were when they were having the world explained to them that there wasn't an independent source of information to them and one of the things that shocked me about this book when it came out it feels from by the way this feels a bit like ancient history to me I published this in March right and I've I'm off probably writing about baseball game so I'm doing a lot of other things I'm really I don't like I couldn't tell you everything that's in there anymore it's kind of but the but the or the shocking thing to me was it hit I the book would do okay the books that sold better than any book I've ever written by a factor – and part of the reason is that it got picked up by important people who felt they were getting an explanation they hadn't gotten elsewhere and I thought that's shocking I mean I just wander back into this world for nine months and wrote it figure today and I don't know that much and so that that I'm playing that role is depressing there should have been a lot better smarter people than me who were right there tell it to tell them what to do but you know I had calls from half the United States Senate and and the White House and the Treasury and and and and I mean was one after another people get in touch saying tell me more and and I felt I did have this moment I turned to Tabitha my wife and I said we're mind if I'm a Monty Python fan I said I feel like Brian I'm not yeah I'm not Jesus I'm Brian and but somehow I got born in the manger next to Jesus and everybody thinks I'm Jesus and I kind of run it away for it for a while because I thought you really should not be mistaking me as the Messiah I concur yes no you know I do know what was your most surprising reaction to this book any death threats any uh no well that's apart from from actual United States state senators thinking I had something to tell them to the point where I went through to talk to first the House Republicans the House Republicans if you can believe it have a book group and it I wrote an article that was the predecessor to the led into this for portfolio magazine and they grabbed that they called me actually because the blindside Moneyball I think and they said we have this book group where you come in we bring authors in would you come in and talk to the house proposal I thought there but I thought they paid you what your standard fee no fee so that's this is not well they look when that when that when the when half the United States Congress is calling you to come talk to you kind of go to school if you have an obligation okay right so so I mean even if you were to pollute their minds you have an obligation to go and pollute their minds and and so it also thought I got to see this you know it is really a business and they the further shocking thing about it is that they don't they read the book they actually read they actually do the reading and did you hear that students and I gave him a magazine oracles have a book so it was even easier and even the and the most shocking thing of all was how sweet they all are I mean you know you think these you think of when you think of Republican politicians you think of foaming at the mouth these days kind of thing but they're actually when you meet him everybody who ever gets into that position who's a member of Congress there they were the guy you knew in junior year in high school who ran for class president they they wanted to be everybody right yeah well not popular exactly they weren't so popular they couldn't afford they can afford not to become president they weren't that they weren't the star football team they were but they wanted they were glad-handing they were you know they got along with everybody that and so they were that that type but they were shocked by what I told them and they this is my first little taste of of just how how a loss our elected officials were and I thought when I talked to my I felt totally sympathetic I realized it's for guys they show up here knowing whatever they know about the world and then all sudden they've got to be expert enough on fifty different very complicated things to cast votes and this is just one of you know one of the fifty and it's it's taken me six months to make sense of it my off so and I worked in the business so you couldn't in a way blame them and then the Democrats called and they they didn't call it a book group they call us something else but it was basically a book group and I went I went talk to the Democrats and when I was there nicer the Republicans were far better listeners the Democrats were all in their BlackBerry's and they were they were distracted they were it was it was an annoying audience the the and I told him that I said you guys are an annoying audience and they and they actually put their stuff away it was good but but yeah but they so did half the front row yeah well this is just a general rule of public speaking the less you're paid the less they listen but but anyways value for so after I went and saw the Democrats this is all in a way of answering you know surprising reaction the Democrats would call me because of the book I go up to the Senate gallery and there they're actually casting votes on they're trying to get the cloture on the financial reform bill and so they're actually the Senators are seldom all there but they were there and someone told a senator I was up in the gallery and before I watched from the gallery for a minute I was just watching him because it was riveting theater and it was the high it looked like the high school cafeteria you could see the cool ones you can see the cool ones were and you can see it was it was they were clicks they were it was just like high school and and they start coming up to the gallery six of them came up because they said that everything they knew they kind of got from the book you know and so this is by far the shocking most shocking response the second I mean in retrospect which should have been shocking to me but wasn't was that no Wall Street firm came back at me that nobody said oh he exaggerated how awful the things we were we did were or I thought I'd get some fight I got some fight outta liars poker I mean it was a fight for a while and then they ran away because basically the author always wins when there's a fight it's just publicity but in this I thought I'd get at least a call from someone say come in we can explain this to you you didn't understand it but just the opposite from people who were in the inside the sort of message I got was it's even worse than you No and that if you aired you air that way and you were too credulous about this person or and that so that should have been shocking to me but I could but I it wasn't that it wasn't shocking it's a surprising thing given how caustic the story is it's not me being caustic it's these main characters being cost we never this is their caustic about Wall Street and nobody was willing to kind of come back at them that surprised me so but I want to go back to your I I learned something about you tonight that you um you were the most gung-ho member of your Salomon training class all Solly's here he told you yeah in fact I think I'm I think he said that he had read I wasn't gonna out you but he did so I was gonna die you had red suspenders with dollar signs yes I did but but it was kind of a joke I just thought because I it was a joke than it was there in a way I thought it's unbelievable these people have hired me and and and I had a sense about what there was you know the new breed the Reagan greed was in the air and I went to I had to go buy a couple suits because I didn't have and we didn't it like Paul Stewart they had these suspenders with a guy I know where those people think it's funny and nobody thought was funny they thought they didn't think it was they didn't think it was a bad case either they thought yeah that's kind of what you oh yeah yeah but but our training program was full of the most interesting people I mean they've all had these it was this was the other thing that struck yet which surprised me this is what surprised not surprised me but struck me when I wandered back into Wall Street having been away for so long was how much less interesting the people had become because the institutions didn't tolerate interesting people interesting people because it becomes so corporate so everybody was everybody's wings were clipped there were so many colorful characters with why could write liars poker there were so many colorful characters it's always a call from a lot of the right ways they were there was just there were a lot of intellectual energy it was an exciting place and I was gung-ho in the training program because it was intellect it was stimulating you sat there for six months in what place that felt like the center of the universe it felt like the center of the fan to universe when we when I went to Salomon Brothers Salomon Brothers was making so much more money than everybody else on Wall Street that it looked like they were in a different industry because they were because they discovered bond trading in a time when deaths in America were exploding when the volatility of the instruments were moving when things were moving around a lot more they were just in the right place at the right time and it was filled well as people who knew all this stuff and the real live people who were making the money would come in front of you from and you could ask them anything and they didn't care if you were rude or well they cared if you hit him with with with paper wads on the head but short of that you could ask them anything you could challenge their authority and you got answers and it was just an incredible learning experience it was so compressed I've been he thinks that – it was an incredible experience so I was really I wasn't so much excited about what I was going to do after the training program but I thought this isn't a you know it was like getting a drink water from a firehose getting it gets different today training programs I don't know I don't know I assumed that there was such a there's no way that in these corporations that people would say the things as bluntly as they said to you there and then they were very there wasn't any phone enos that nobody nobody felt watched that's the thing now everybody feels watched so I can't believe it says I can't believe they're really solid brothers had a weird intellectual side to it at the same time and Ed Vinny and Donnie and the COS bonds were more complicated than stocks even when they weren't doing when they were simple they were more complicated than stocks so Matt you know quantitatively more challenging and they it's hard to believe that they're that a major Wall Street firm could create that kind of spirit of learning thing in the right in the middle of it at the way that this place did so do you think business schools are complicit and I want you look right at Dean Lyons and tell him are we complicit and we partly can't call his business school bully I Willie and idealistic at the same time I blame him for what happened on Wall Street and no I don't be in business school that you have every you can't blame business schools as a group anyway for anything I mean the business it's there's different they're not all the same I think the educational system generally is complicit and I think let me just figure out my own University Princeton University it's gone from being a place where people went to get an education a general education that was wooly and idealistic ah to a place that people a place of people that students have turned into a very efficient trade school and there's some great education that happens in the way and not all the students get it sucking the same thing but there's now our department of financial engineering on the Princeton campus but you can you can come as close as you can to majoring in Investment Banking and just skip the Shakespeare kind of thing and and the that was happening when I was going through all the Economics Department was being turned into a tool for Wall Street personnel departments and people were using the Economics Department to signal that they were willing to sacrifice their education to get the job on Wall Street not because they were interested in academic standing economics not because they were interested in it but because they knew that was the step and Princeton uh doesn't has not really fought back very hard they'd certainly far probably back hard in the beginning about this they've been some token gestures in response to this move to sort of remind the students what they might get out of this place aside from really Richard at the Morgan Stanley two years later or five years later but there's a reason they don't because the institutions themselves become so much about money I mean the fundraising ambition of Princeton University is just extraordinary and so they need to be sweet with the people on the receiving end of their graduates so it's it's um I do think the institutions are complicit but it's much you don't what could they have done is the question the the financial world organized itself in a very strange way in a way that the generated really outrageous paychecks for a handful of people and those have those have really distorted the behavior of America's youth and it's a shame it's writing it's a totally ashamed that that people you know decide not to be doctors or medical researchers because they can go work with wants on Wall Street and this was starting when I was there I mean the first brain surgeon to work on the Salomon Brothers trading for came when I was there quit brain surgery became a bond trader and that's a camp piece that can't be good for the society can't people who might have started actually productive businesses going to work in these places that can't be good for the society so the the the the question is could these institutions have fought back but I don't know if they could couldn't people fight back well they early keine why weren't some people do some people don't go so some people don't listen to this the market signals did you fight back by leaving yes and by writing absolutely right but it was easy for me because I knew I was a fraud there I was that offenders are knows a spender I knew that that the I got less and less interested in the job every day from the minute I left the training program I had this incredible stroke of luck when I started on it I met this man who ran what was it didn't hedge funds didn't really exist in a big way then but he went I was sent to London and I met this man who ran the single most exciting and biggest hedge fund in the world and who was completely contemptuous of the salesman who came to him from Wall Street and he thought it was funny it kind of joke on the industry to adopt me and may and refused to do business with anybody but me and it refused to speak to the head of Salomon Brothers when he came through London because he'd only speak to me and and this man became in a matter of about three months the second biggest customer of Salomon Brothers in the world and so I was generating all this money for the firm without knowing anything he'd called me up and he would teach me he'd say we're doing this because of this because this is why you're doing it tell me what you're seeing there I give him a kind of rapport and I never tried to tell him to do anything because he knew he knew you knew what he was doing and this created for me a kind of smoke screen for a couple of years where I seem to be an enormous ly successful person on the Salomon Brothers trading floor but I knew that that was a fluke and I also knew that I really like to do this other thing and so it wasn't so much it wasn't a political gesture on my part was a personal one I knew that I was going to become an ever more inept person on the on the Salomon Brothers training floor who was ever less likely to make it be able to make this jump into writing and I thought Paul is Paul Paul solid from my training program just asked me tonight I haven't think I've seen you since then it's been a long time anyway and he asked me if I wrote for the New Republic while I was there because he saved some articles from the New Republic and I did what I was nervous and your mother's maiden name I know my mother's me I ride to write under a pseudonym but I wrote all these things these things about Wall Street under my mother's made ah because I got in trouble for using my own name once and and they were being circulated around the fur and I realized that I could get this all that there was a market for my services doing that so it wasn't so brave daring is all that and also when you're 26 year immortal right are 27 whenever was I when I let him that ends with men uh yeah oh yes it is yeah no I mean you just it so wasn't he wasn't that hard to move to make yeah you got happy did I get happy happier you know I was always kind of happy but I would just yes it was preventing me from getting really unhappy I think I think I would have been very unhappy if I'd stayed I'd been a crappy investment banker who and which means I still been rich but but but but I wouldn't I would have been it would have been I just was not uh I was heading for a very bad place so you write a lot about a theme that was interesting and not just in this book and Michael or could be the same and blindside but you write a lot about being or not fitting in mm-hmm do you think there's a role in education to train people to be comfortable being awed hmm kind of its kind of a oxymoronic but don't you suppose at the end of the day everyone feels odd or like they don't fit in and then they have two choices just to amplify their oddity mm-hmm or to work incredibly hard to try to fit in um I never felt that odd growing up so I decided there must be there must be some people who don't feel you are incredibly on no bike with a notepad that's wrong that I'm normal everybody else is off no no no but I think that I think I don't you can encourage cultures can encourage deviant characters right I grew up in one I live in one I grew up in New Orleans what I loved about New Orleans was just how many crazy people were allowed to roam around the streets without being criticized that you could that the range of behavior that was tolerated was just that why you moved to Berkeley it's why I felt at home when I got here I mean I looked at what was one or around the streets I said I know this you know it's slightly different because it's a political thing sure to it but it's different New Orleans is just just it it's just strange but but but the tolerance of personal eccentricity is something that can happen in the culture and it's very valuable I think and interesting it makes life more interesting but whether an institution can do it I don't know I don't know can we do anything I mean can I you teach people things what can we teach them so can I help me evil you said you teach them right no I so our Dean has I think a pretty good four prong strategy for the school he really says we should make our mark on culture we're not going to make our mark on leadership because every business school does leadership we're not going to make our mark on technology because every business school but we're going to make our mark on culture so his four attributes of our Cole just true okay I just you know she says stuff I mean she says all kinds of stuff and you just pipe up if it's not me forget was not working for you I would love to hear you talk to our Dean about the four cultural attributes of Hawes that are our core competency confidence without attitude beyond yourself learners always and I always forget the fourth say good suction the status quo but why it all sound great but what a robot why not it all sounds great so where was that on Wall Street any of that beyond yourself challenge a status quo well this is kind of a self-selection that goes on in employment in Wall Street that that it's more but it's more complicated than that there are plenty of great people who work on Wall Street they playing people on Wall Street they get in and they make a lot of money and they give a lot of it away so it's not everybody but it is just it is well it is probably generally true that it that those some of those traits some of those virtues are minimized in the financial sector some so well wait well what was the one confidence without attitude question authority or challenges status quo well there's quite a bit of that on Wall Street it's quite a bit the hedge fund industry is always premise done I mean if you're trying to find everybody you're trying to the investment business is finding other people mistakes the markets are making right so I don't even generalize Hoss good Wall Street bad but but I'm happy to accept that Hoss is like no I don't be your dinner after this yeah no it is not I don't and I think would you tell me asking someone who is a profoundly an institutional person how to fix it how to create an institution that's not your job I don't know job I wouldn't even know how to begin and you wouldn't want me in the role the second day I wouldn't show up so so I'm the wrong person to ask so I want to open it up for Q&A one more question before I do that what what what things keep you awake at night besides Walker have a three-year-old has now decided that that they're monsters in the room so so I don't have anything I don't have a chance for anything else to keep me awake Lachi lately that's literally true for quite a long time but uh even what am I worried about in the world what just wakes you up in the morning with a nagging feeling deadlines always do that and what I can't trouble I always have always had told my hole I'd get it getting to sleep at night because a lot of my best work happens at night and so I'm in a in a frenzy when I go to sleep and we keeps me awake right now is I mean I'm in such a target-rich environment as a writer there's so many things I could be doing this all could be so good if I don't screw them up and that's sorry that's how you want to feel you want to get to a story where you feel like it's so good I can only screw this up and it's hard to find those but I found several at once right just now and that's what you got me having trouble sleeping I have that trouble sleeping lately is this is I'm kind of stewing on the things that I can't screw up but when I think about what makes me you know kind of what gets my blood boiling I can find not to let it because it's not very useful for me to sit around walk around being angry about a financial reform not like a fight with a handicapped woman this morning oh that's a good question and ECAP woman this morning this was just a by way of illustrating that things make you angry yeah she was asked me if she sent you were saying maybe the things to mania she'd actually behaved horribly but but and what she wasn't actually handicapped she just had the de license plate and she was parking where she shouldn't park okay and then she was yelling at me for parking a bicycle in a slot that wasn't a handicap slot but she thought should be and I didn't actually yell at her I just said maybe you want to look at whether this is a handicapped parking spot then I felt a little guilty I thought I'm criticizing a handicapped person that's probably not good I never less rode my bike in front of her for a few minutes so she had to drive slowly so that that's how that played out okay I'm going to save two more questions for the very end we're gonna take Q&A from the audience couple of rules you have to come to a microphone if you aren't in the room right now if you're out in the be of a forum you can text a question into the following phone number five one zero seven three zero zero two seven two so if you're not in the room and you want to text a question in seven three zero zero two seven two and they really real read it we will yeah um come to a mic and really short questions it's more about what we want to hear from him is less we want to hear from you go nuts alright it's Berkeley you can't have this doesn't work in Berkeley this process is about listening now bunny my money yeah that's a this is a very good question because we're we just first say that one of my problems on Wall Street was I never had any view that I was any good with money I was just giving people advice what to do with it and and I never had any of you about what to do with my own and so as a result I've always been very cautious it's just Lutton it's not lets make money it's just no don't lose it so it ends up being in a really boring in the best of times a really boring diversified portfolio of indices basically is what it is stock market indices and few bonds and that's kind of it in this but I got so spooked working on the big short so completely spooked in fact at one point I oh my I was almost persuaded by a hedge fund manager I was after he laid the rap on me about what he thought was going to happen as a result of this debacle where we were all of a sudden gonna be it was we were going to be in Mad Max basically it was going to be crazy Australian cutting us down in the desert when we were going out for water that I say and he lays out this whole scenario he's totally persuasive and I said oh I said sourabh thats just horrible what do you tell your mother when she calls you and ask for like financial vice I said he says I tell her mom guns and gold get some gig arm yourself you do know you're in Berkeley yes arm yourself and get any sit and then he proceeded to say and I don't mean gold futures because that's the futures markers not gonna exist bars and he started he pulled out platinum and gold bars from this thingy that he was gas or he's keeping his money and I and I can't go there I kind of figure if that happens you can't eat the gold so what it's what I have done instead I've done with the rest of world's done that I take even less risk than I took before even though I took very little so instead of having 50% of what I have in stocks I have 20 percent or 15 percent and I just just try and not to lose it but chorus this could be a strategy for losing at all if our government do bases the dollar ism that I'm holding then then I'm in trouble but I don't have any any great answer I always tell people to ask me that question what should I do with my money the first and as always if you're listening to me probably got a problem already but but the second answer is this isn't answerable there are all these people out there who could pretend to be able to tell you which you can do with your money and they almost they if you listen to them you get in trouble it's so hard to this it's a great question whether this is even identifiable skill who the ability to predict where markets are going to go or where stock prices are going to go and in my career as an investor such as it is they've been a few times where really almost as a matter of politeness I've listened to a broker that I had old family friend who was a guy at Merrill Lynch who was in a financial advisor I kept our money at Merrill Lynch because his dad was friends with my dad and his grandad had been friends with my granddad and he calls me up in he's peppering me with ideas for eight years I've kind of feel badly because he thinks I'm a like a big-time financial writer and I'm not listening to his ideas and he sort of so I think I'm going to just do a couple of things he says just so he feels okay and this is mm seven and I said and I say all I want is just not to lose it I don't care what happens this as long as it doesn't leave it and the two things he sells me or Lehman Brothers preferred and auction rate securities and that's pretty great – he's two for two but and this was someone who was regarded in his Merrill Lynch office is a great wizard for this stuff and then I actually at that after that episode I pulled all of our money out of Merrill Lynch and put it in Charles Schwab because I didn't have to defend myself against Charles Schwab because they didn't try to tell me what to do they didn't that they weren't they didn't make money off the churn so it was a you got to be so careful it's in a weird way the more willing someone is to answer your question the less likely you should be to take their advice you tin related us what are the the various projects you're percolating around now for the future ah all right I can't tell you too much about him because I don't want to I don't want to lose my little monopolies I can ya know but so for the last six or seven years I've had interest in from the TV industry and I think TV is in a golden age not the reality program TV stuff but the scripted dramas on TV is unbelievable work being done and you can get you can you can put a novel on a screen and the television writing is so superior to movie writing now because the writer has control in the television business and he has control because they need a next episode and the writers are created and the director is the guy who just points the camera sometimes the rider picks up the camera he points it to but the role of the writer is at the center of the things so it's intriguing you began to get my hands on a TV show and I've written three scripts that didn't get made for four networks and I never watched network television and about a year and a half ago I had some interest from HBO which I watch obsessively to write a drama and I got distracted by the big short so I have only just gotten rendered I've just finished I've just in basically the script tool and it's a I wrote a magazine piece for Vanity Fair from whom I write occasionally year and a half ago about Cuba two years ago now about Cuba it was about a true story American baseball agent pretty well-known American baseball agent who has been who was sentenced to and served five years in jail for helping Cubans get out of Cuba so they could play baseball here we have these weird laws with Cuba but you can if a Cuban lands on the beach you can help him he's a city as a right to citizenship if he's in the water and you pull him to the beach you can go to jail and it's the wet foot dry foot policy anyway he was accused of helping Cubans in the water and he got put in jail and I thought in the piece but even more so in the TV show that this nexus this sports agent who's in the middle of this market for Latino ballplayers and Cubans to is is a wonderful way to get an immigration as a subject you can you can fool the audience into watching a TV show that's really about immigration because they think it's about sports and money and and human smuggling so that's what I what I hope happens is that I get a call from HBO saying we're doing it get down here and so that's what I create the shed create a TV show if that doesn't work and it probably won't the odds are always against the TV show I've got this when I sold my baseball book Moneyball I sold it as two books and I sold it the how many people have read Moneyball to say we're doing all right I won't reprise it then but anyway the I never written about sports at all and I got I went in spent a couple of months with the Oakland A's and there's this incredible story this this this team that has no money it's rethinking how you value baseball players in baseball strategies in response to its its poverty and actually generating new baseball knowledge who would have thought such a thing existed the moment it dawned on me just how it was a story I couldn't screw up that it was that'd that good a story was when they were drafting players in the 2002 amateur draft and they were drafting players using an algorithm rather than listening to the expert scouts they were they were trying to turn it into a science and these so they drafted this pool of players not all the players in that draft but most of them were drafted with an algorithm and I thought I want to write a story about what happens to these lab rats who are on the other end of this algorithm so I followed those players for the first few years that did a lot of reporting in the minor leagues and there's a one and I needed to wait until we saw what happened to him and now we know now they're all 30 and now you nothing much good happens to a baseball player after he's 30 years old so but any case I wrote my publisher I said I'm gonna write not just a magazine piece but a book about baseball not one book but two books and I got to write this first one which is going to be called Moneyball because I really want to write the second which is going to be called underdogs and so that's the best the next book the third strand here I'm glad my wife won't listen to this I mean it's been I appreciate you asking the question because she really won't listen to this and I get every chance to talk and people always cut me off and I'm trying to explain to them what's on my mind so I can just get this out here and you guys want to go ahead and leave you can leave if you want but this is this I'll shut up after this evening quite it this is the third of four the third is so this this financial debacle that we're living through it hit that the raw financial event was very similar across the world especially in Europe and America that that cheap credit washed around the globe people financial people made money lending lending money to people who could never pay it back and so lots of people who were never going to pay it back got loans and but the the specific event was different from culture to culture so Iceland was very different from England which was very different from Greece I've written to big magazine pieces already one about Iceland one about Greece that came out this week in Vanity Fair where they drop me in it I describe it it's financial disaster tourism I get financial disaster tourism I get dropped in to be a tourist and write about the financial design in these places that are decimated by this event and write about what it shows you about this culture the way it responded to free money and I've got three more I want to do Ireland one of the Baltic republics and California leading to the US Treasury it's more it's less interesting to in California because I know what I'm not coming in as an alien from out of space but I could try and and so I think so those and I kind of want to do Germany too because they're they're on the receiving end of it all they bought everybody's crap they did every bad investment there was to make the Germans made it you can't name one they didn't make they bought the condos in Spain they bought they've bankrupted they bankrolled the Icelandic tycoons they bought Greek government bonds and they bought a raft of subprime mortgage backbones and the Germans yet have emerged from this relatively more powerful than anybody and in a weird way or having their identity reshaped by this event all of a sudden they're self-righteous all of a sudden they're on their because they've been stiffed by all these people and it's been in my lifetime I can't remember what is OK for Germans to be self-righteous more and morally indignant and nobody and and so that's so as a change that going on the world because of what's happened in money and I think you can kind of get at it in my superficial way dropping into these cultures for a couple of weeks each and writing these stories so I want to do those and I just can't figure out how them I do mole that's my problem Thanks here since you've raised money ball a theme that I see throughout your books is that you write about a handful of people who see things that a lot of people at large who should get paid get paid theoretically to see these things they don't and in Moneyball is Billy Beane in the big short is about a guy Asperger's is blind in one eye who basically robs the market blind because they're mispricing risk right my question to you now is who in society do you think is seeing something we're not seeing and what do you think it is that they are seeing that we don't see that's a big that's a very broad question to charge you for that information I mean I even know where to begin with that it's it's uh I mean if you're talking about people who are getting a commercial who have a commercial angle to it who are going to profit from what they're saying I have no idea people who have some perspective that's interesting to me Obama actually is someone I'm very interested in if Obama is a wonderful story right now I think he's a very very very wise and shrewd and interesting man who's been put in this really horrible position and is learning about the world but as a it has a he has a if you get if you could sit him down and ask him about how this country works you learn a lot the you know there's there they are individuals that I that are on my radar screen who I might write stories about it's a guy in basketball the GM of the Houston Rockets who's got a very curious view of basketball of how to evaluate basketball players that's a little example but I don't you know off the top of my head I don't know I don't know answer the question can I ask a completely innocent follow-on question completely innocently any women on your radar screen let me think no I mean because it's a good question I mean the main character one of the main characters of the HBO thing is a woman and if the HBO thing doesn't work out I have this script that's in it in turnaround but has a buyer it's all women it's a it's a wall street show and the main characters are all women they're women who didn't who were one way or another maltreated by the big firms and they set up their own their own hedge fund and the whole story is how women see this world differently than men so that they've been they were on my mind a lot recently but we but I put in turnaround but I think this could come out I think that but so they are in my life but those are fictional female characters you know no but they're not a lot of many I mean really you know with the stories I'm writing there no women in baseball is one you know there – there's nobody this is nobody who would naturally be a character there except the wives of the players are in the in that story and the financial the the financial disaster tourism them in flirting with seldom do you find a woman in the middle of this mess so is it possible that's part of the problem look at the eiseley did you read the piece I wrote about Iceland that was the theme the theme was the problem was men a male over confidence in the women and if you look at what's happened in Iceland since the piece came out but it was happening anyway the women have taken over well they elected a female Prime Minister they they basically they've at least two of the three big banks have booted men out of the CEO job and put women in and such as its 300,000 people it's a it's a it's a village and basically I think what happened is the women said we listen to you because we thought you knew what you were doing is you thought you knew you don't know what you're doing so you're out of here and the women and so that that story was all about that gender the gender issue but I and I've always thought that Wall Street would be much less insane if to the extent it let women in but the problem is and it has let women in a lot more than when I was there the problem is let them in as honorary men that it's sort of like you're in but you have to play by our rules and so women aren't in as women they're in they're in as long as a masquerade as men it the very senior levels so but I think that I think that very easily change I don't think that's there's no reason that's got to be that way and I think when it does we'll all be a little safer I think I'd be an interesting topic for you to think about and I think that tabatha I would listen to you look you can't really accuse me see you accuse me of not focusing on women I wrote about you right I felt another question and then we've got one text question and then I get the last question you know it's going to be a hard ball after this other so given the audience that you have now given your ability to empathize with Brian and Monty Python and also your calling to go talk to the Republicans and Democrats I'm curious with the rest of your career that there was a specific impact that you want to leave on society and all of us you know it's this is a very strange question I think that it's a strange issue for a writer because some part of me really believes that the myth the writer starts thinking that way he's done it he starts thinking of himself is this important world changer and he's going to write you know it's that he's going to write the instruction manual for Humanity he see is he ceases he begins to suck at his job and that he becomes pompous he becomes it becomes a ridiculous person just overly self-important and the the but you can't deny that there's some effect that the written word has you can't just you just can't really predict what the effect your written word will have I think that to the extent the extent I can have in effect I like the idea this way I like the idea I like the idea of being a carrier of the virus of irony I like the idea of giving of introducing irony into Wall Street or into situations that are previously humorous humorless I like giving people an attitude towards problems and an attitude towards the world rather than giving the idea that I'm going to like tell them how to how to be how to behave how to what decisions to make so I don't that's the extent of it with me really and for my career such as it is it's really it's a very up close it's not terribly respectable thing I mean it's not a well-built house my career is jumping from rock to rock to get across the stream and just trying to find the next rock then I don't have a I don't have a theory about what I should be doing with my time except I should be really passionately engaged with it I really I should really care about what I'm writing about and it feel important to me but beyond that nothing and and so given that it's a little hard for me to have a global strategy for how I'm going to affect the world cuz I don't even know what I'm gonna be writing about the thing I have fear with what I do and you see it you see it with rock you see it with writers who've had been lucky who've been lucky enough to find audiences is that there's enormous pressure on you to just repeat yourself to do the same book over and over and so the faculty job yeah but it is it yet but even fail writers will write the same book over and over but successful ones have enormous pressure to do kind of the same sort of thing and the pressure just gets as you get older and gets harder to do new things because it does it's you know it's hard to try new foods and harder to listen to new kinds of music and where new kinds of clothes they're very whether their elaborate studies of this that the human taste for novelty shrinks dramatically starting about the starting at the age of 25 and then and really kicking in about age 35 then when I'm 49 I know that I am resistant to things that when I was 25 I wouldn't be resistant to I try to keep myself open so that because you never know what's going to going to come but my fear is that then I'm going to ossify and that I'm going to that I'm going to that I may become more interested in just being successful in the eyes of others then getting the kind of gratification I get out of what I do what I'm doing it and they really are two different things so we have a text question which i think is actually Mo's question I don't think it came through text I think he put it in there but I'm going to try to match it with my question to the end because we're in an educational institution so you know I have to ask you some people in this room are graduating with your MBA soon your advice to them is what and let me just meld together two questions the text question is you sort of thinking that a lot of the crisis was a result of the misalignment of incentives I've heard you talk about a few themes tonight about what should be individuals incentives moving forward through life so the life according to Michael Lewis is do the thing that you love very important be passionately energized really care about what you do and stay open they're all vague and you put them on pillows and put pillows on your sofa they're a bit like your mission statement in that you know they're they're totally unobjectionable Eddie came from your mouth Hitler probably was passionate about what he was doing it's it's you know it's not if not a these are unobjectionable it's true though right so is that what the incentives in the world are gonna be when these guys get out what should they do with their lives know what are they gonna find are going to be the incentives when they get out into the world is it going are they gonna be incentive to do to do the thing they love are they gonna be know to be passionately you know almost you know they're very lucky if they're incentive to do things they love because typically the things you love to do other people love to do too and and people will do it for less than you will do it kind of thing in the same way that it is analogy that's an investment world is never invest in the movie business because too many people will do it for non economic reasons but the the so it all that I am are one of our I'll give a piece of advice that's what you want me do I'd end with advice all right not to me to them so you get all these short-term financial signals I Adam I got paid two hundred and sixty thousand dollars when I was 24 years old at Salomon Brothers and told that if I hung around another year get half a million and after that was just Millions and all I had to do is basically keep the seat and and with it and so there's there's a that's that's information is telling you something and you can you can be ruled by that information or you can just take it and leave it and sometimes it's worth taking and leaving it I'm amazed in our culture how often people even very rich people only do what it pays them to do so every season after every season there's some baseball player who goes from making five million dollars leaving a team that loves him and that he loves in a community where his children and in school is wife loves and he uproots them all for eight million dollars a year and the this this mindless response to the most money is crazy it's not us it's not a recipe for a happy life we have much research that shows that over a certain pretty low level of income money doesn't buy happiness and so to let money make your decision for you is appalling it's just a mistake it's like a mental error it's a status mistake because people make money or a they're able to present to other people as a different status and people who don't make money but but if when you get to that juncture I mean some people have a problem they never find anything they love to do so in which case disco make money and me right but but but there will be plenty of your students I assume if they're here they were attracted by the woolie idealism so they so that's a there's this kind of passion underneath that so they probably do all have passions and they're all smart and and there will be some moment in their lives when the money says do this and their heart says do that and unless it's just horribly irresponsible to your loved ones or your children might starve and all you got to do that you don't do this so that's what I say it's pretty woolly hair done ideally all-sec of you yes I want to actually sincerely thank Michael for not charging his standard speaking rate tonight and for being here as a friend of mine and as a friend of Hawes and we will now ask you for money on the way out yes but now I want to thank everybody for coming and thank Dean Lyons for what I think is a phenomenal even though you don't the four prong strategy for this I know it's it's unobjectionable I do still think we can actually change the future of business leadership and thank you all here and think what you eat you can do when you walk out of here to be a little bit woolly haired and a little bit idealistic in a way that makes the world a better place so thank you you

22 thoughts on “Author Michael Lewis discusses The Big Short and the future of finance

  1. I love the advice at the end: pick heart over money (assuming heart pays the bills).

  2. This woman is hot and smart! I love her legs and great smile.

  3. Sorry, Obama doesn't care about this country.
    He is not wise. Sorry. (1:00 or so) Goodbye.

  4. Have we not learned a thing. We'll have another crash soon guaranteed. People are just too greedy

  5. Boy is she bitter and does she hold a grudge.
    She isn't an open honest genuine person.
    I'm a wahman. I see right thru that shit and help me please god not ever have friends or family like this woman.

  6. The host is so rude to Mr. Lewis with her cuts and barbs it's unbelievable. You never discuss pre-interview private conversations publicly. She tries to dis him at every chance. I can't help but wonder why? Certainly lacks in etiquette. Lewis is absolutely gracious to her and keeps moving along. I'm sure after the interview when he left he must have just shook his head. But, he has a thick skin, he gets it, and knows that unfortunately there are a lot people like this host who are plain stupid.

  7. I love that he got so excited when he was asked on his future plans. Some just doesn't want to share.

  8. FF to five minutes in to avoid the overwrought intros and get to THE FUCKING point. KKthanks.

  9. Interesting discussion but not one word about the actual story.

  10. Too many college graduates, systematically raping Main Street and the world, and they do nothing, create nothing, like Facebook, Amazon, Netflix, Google, the FANGs of Wall Street.

  11. She opened the interview with a story about herself… I think she answered the question she raised.

  12. "the future of finance" a book written by art lover / journalist w/ a BA degree (cum laude) in Art History '82. OK, he's got an MS in Economics but not a fund manager. more things change, more things stay the same. including finance future.

  13. First interesting progressive person I got to know in this year.

  14. At the one hour mark………………Obama???? With or without teleprompter?

  15. I fines ir really annoying when people ask questions during the Q&A session that have already been answered during the conference. To me it's disrespectful because either you were distracted or late but definitely not listening.

    And, yeah, I'm saying this because of the shaved head guy.

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