Liar's Poker


Liar's Poker is a book by Michael Lewis, which documents the life of Wall Street traders in the 1980s, and follows Lewis as he goes from trainee to geek to Big Swinging Dick.

I'm not quite sure why I'm reading this book. I think that it was mentioned in a Reddit thread I was reading a couple months ago and something about it piqued my interest. Fast forward to now, having freshly finished Infinite Jest my chains have been broken and I'm now free to read whatever else I fancy. It wasn't until I ended up looking up Lewis that I realized he was the man behind Money Ball which is apparently also a book by him -- I have seen the movie!

I find it interesting that Michael Lewis wrote this book in hopes of deterring people from idealizing Wall Street, but seemingly it has had the opposite effect among young people. Anthony Burgess tried to tell a similar cautionary tale in his novel, A Clockwork Orange and he also noticed the exact opposite behaviour from his readers. Once something is released to the public, it is in their hands to decide whether to take your position or turn it against you. It's amusing to me that despite best efforts to make something look bad, if you describe it well enough, your work also serves as a guide for how to do that thing. Convincing people of anything is really quite hard to do.

At this point in time I'm really not a big fan of trading, money, stocks, or wall street in general. Generally I agree with the sentiment that the money made there has little correlation with actual contribution to society. Not that I'm against making money. I'd just rather dedicate my time towards something I can justify as having a subjective amount of value. I personally see no such value in pushing money around. Despite this, there are parts of the culture that are appealing, while other parts are obviously reprehensible.

Lewis describes the whole of wall street and life in general as a giant game of Liar's Poker. The people described within the book make trades and bets on all sorts of things, stocks, bonds, their careers, basically any aspect of their day to day lives. Naturally, I can relate to this type of behaviour and am always looking to use my knowledge for games in other parts of my life. I think the one trait that the traders have that I don't is greed. I'm more of a hoarder.

In the midst of all this, the mind of a good player spins the probabilities. ... For a great player, however, the math is the easy part of the game.

At the end of each year the people on the Salomon Brothers trading floor dropped whatever they were doing for a period of several weeks and traded their careers.

The Howie Rubin legend drew into mortgage trading people who planned to leave just as soon they got their three-million-dollar contracts elsewhere. A whole new attitude toward working at Salomon Brothers was born: Hit and run.

From Lewis' description, what fueled wall street at the time was the willingness of young people to endure anything while pursuing the dream of getting to wear dollar sign embroidered suspenders out on the trading floor. I see this type of behaviour all the time in the world of software. In fact, large portions of this book could easily be about the circumstances of young developers and their quest to reap the crops of silicon valley. Perhaps there's some foreshadowing here as to what will happen or is happening within the tech bubble, although I'm hesitant to make any predictions.

Never before have so many unskilled twenty-four-year-olds made so much money in so little time as we did this decade in New York and London.

I often asked otherwise intelligent members of the prebanking set why they studied economics, and they explained that it was the most practical course of study, even while they spent their time drawing funny little graphs. They were right, of course, and that was even more maddening. Economics was practical. It got people jobs. And it did this because it demonstrated that they were among the most fervent believers in the primacy of economic life.

Jobs were doled out at the end of the program on a blackboard beside the trading floor. Contrary to what we expected when we arrived, we were not assured of employment.

Money is easy to analyze. Most of the time we work to abstract things into a dollar value. I find a similar ease in weight lifting. If you want to get better, simply do one more rep or lift 5 extra pounds. In trading, your value is there for everyone to see, just as I can look across to the next squat rack and see an absolute beast of a man squat 600 pounds. No one can deny your million dollar worth as a trader, and if they do, you look to the next company that's willing to double your salary. Having this sense of simplicity pushes everything else towards the extreme. The people get meaner and fatter while profits multiply.

For each step forward in market technology they took a step backward in human evolution.

"You don't diet on Christmas Day, and you didn't diet in the mortgage department. Every day was a holiday. We made money no matter what we looked like," says a former trader.

I think this book is a great read for anyone interested in making money.