“Liar’s Poker” – Michael Lewis – A Book Review

 

“Liar’s Poker” is a hilarious look at Wall Street from the inside and captures the go-go era of the roaring 1980s as clearly as if it happened yesterday.

Michael Lewis chronicles his life as a junior bond salesman for Salomon Brothers from getting hired, working on the trading floor and becoming a “big swinging dick,” to leaving. As with Mario Puzo’sThe Godfather,” which helped create the legend and modern day culture of the mafia, “Liar’s Poker” has defined and help create the trading floor subculture in finance. Having worked on different trading floors longer than I care to remember, I see echoes of “Liar’s Poker” every day. This book is so widely read in the industry and its influence so pervasive that if you ask a banker, sales person, trader, etc. if they have read “Liar’s Poker,” the answer is always, “Of course.”

From Bond Salesman to Brad Pitt

Liar’s Poker” was Lewis’ first book and it was a runaway success. He went on to write a lot more and become more famous, including two books that were recently turned into movies, “The Blind Side” and “Moneyball,” starring Brad Pitt. Warner Brothers has owned the rights to “Liar’s Poker” for years and are rumored to be considering casting for that movie soon.

Innovation and Disruption

The 1980s were hugely important to modern finance as the early part of the decade was the beginning of the longest bull market in equities, which began, I can tell you with perfect hindsight, when I was in high school in 1982. In school at the time twiddling my thumbs and staring at girls though, nobody wanted to work on Wall Street unless their father was already working there. Kids grew up wanting respectable jobs that had prestige: airline pilot, engineer, doctors and lawyers were huge as well. Computer engineering was considered a hot, new career. This was probably because markets had been in the doldrums since The Doors had released their first album in 1966. We had been living through the financial equivalent of Prohibition; the second longest bear market in history – 16 years. An entire generation had grown up pure as the wind driven snow, undistracted by gross thoughts of “making a killing” on Wall Street.  Our innocence was about to end as the 1980s saw the death of inflation lay the foundation of a massive bull market in equities while there were two fundamental innovations in the bond market: the development of mortgage backed securities (CMOs) and junk bonds. In case you don’t know, both innovations end in disaster with junk bonds helping take down the thrift (savings and loan) industry at the end of the decade and CMOs almost snuffing all of us out in 2008.

Equities was Not Respected:

The inside view of what it was like to work on the trading floor at Salomon Brothers is summed up by one of their traders in a thick Brooklyn accent, “Ya gotta tink a Salomon Bruddahs as like a jungle.” Bond trading was what the firm was about and it was built and run by burly traders. Everyone else there, other departments even, were second class citizens, or “lower than whale shit on the bottom of the ocean floor.” Lewis, a total neophyte with an art history degree (!) learned during his three month training session with other new entrants, the culture is brutal. When one young woman in the class asks a stupid, kiss-assey question, she is shouted down by the rest, “Equities in Dallas!” Instead of being at the center of the money making machine bond trading in New York, she was likely to be sent off to Dallas to sell equities – Salomon Brothers equivalent of Siberia. The phrase has since become code in the industry for someone with NO FUTURE.

Food was Not Respected:

“The traders performed astonishing feats of gluttony never before seen at Salomon. Each Friday was “Food Frenzy” day, during which all trading ceased, and eating commenced.

 ’We’d order four hundred dollars of Mexican food,’ says a former trader. ‘You can’t buy four hundred dollars of Mexican food. But we’d try – guacamole in 5 gallon drums, for a start…’”

Women were Not Respected:

“Maria Sanchez recalls… ‘We were introduced, and he (Lewie Ranieri) asked, ‘You Italian?’ I said no, I was Cuban. I was wearing a blouse with a long string bow tie. Lewie took out a pair of scissors and with this big smile on his face cut off my tie. He said he didn’t like ties on women. He pulled a hundred-bill from his wallet and told me to buy a new shirt. I thought, Jesus, what have I gotten myself into?”

Clients were not respected:

“’Clients have very short memories.’ If that was the guiding principle of Salomon Brothers in the department of customer relations, then all was suddenly clear. Screw ‘em, they’ll eventually forget about it!”

Another one from the training class on the subject of attitudes toward customers:

“The trainee had tried to impress the trader and failed. The trader said, ‘You are proof that some people are born to be customers.”

Big Swinging Dickdom was Not Enough

Excess was what was respected: excess in making money and spending it. But at the end of it all, even though he becomes a “big swinging dick,” Lewis, to his credit, decides to leave the jungle as “…having lost my need to stay at Salomon Brothers, I discovered a need to leave.”

Times have moved on since that era but there is a lot of nostalgia out there for that period on most trading floors. The stunts, characters and the attitudes of Salomon Brothers would be difficult to imagine today with the industry now ruled by compliance managers, lawsuits and lawyers. Unencumbered by such niceties, “Liar’s Poker” not only educates you on what was and is no more but gives you insight into what the industry has evolved from and how it sees itself. A must read.

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2 Comments Add yours

  1. Pete Gemmill
    March 27, 2012
    2:51 pm #comment-1

    Hey just wanted to give you a quick heads up. The words in your post seem to be running off the screen in Firefox. I’m not sure if this is a format issue or something to do with browser compatibility but I thought I’d post to let you know. The design look great though! Hope you get the issue fixed soon. Thanks

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