Michael Lewis: Banking has become a world of ‘meaningless respectability’

Michael Lewis bursts onto the screen with smiles and greetings: bubbly, friendly, with a passionate, infectious enthusiasm that seeps onto the page but is even more palpable in person (well, over video call).

He talks about London, how much it has changed since the seven-year-old in the 1980s when he studied at the London School of Economics and then sold bonds at the UK headquarters of Salomon Brothers.

“I got to a point where I had to make a conscious decision to come back,” he says from his home in Berkeley, California. “I sensed, ‘I’m just going to stay here,’ I really liked it.” He misses the theatre, the literary and journalistic scene and the tenacity of his foreign friendships. “Once you have an English friend, you can’t lose the English friend.”

He then calls the decision to sell his Hampstead house “the biggest mistake I’ve ever made”, which seems like a spectacular mistake, especially for a man known for misrepresenting financial transactions.

“It would be great to have a postage stamp of an apartment there and [then I] I could spend a couple of months a year there”, he sighs.

Comparisons with the past are a big topic of our hour-long conversation. He reflects on the Wall Street he represented ple human piranhas to Liar’s Poker in 1989 with today’s more robust and bureaucratic version.

And he’s full of energy talking about his next project, where he returns to his Wall Street roots but has found a more exciting niche outside of mainstream finance: the world of cryptocurrency.

“When I was on Wall Street, it was a strange period where the very institutions of Wall Street were disruptors,” Lewis said. “Drexel Burnham was underwriting hostile takeovers of corporations, Salomon Brothers was inventing securities that will screw up the world, but also make it more interesting. There was a lot of effervescence within institutions—intellectual excitement, even—just figuring out a price for all this new stuff.”

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That excitement leaps off the page in Liar’s Poker, and Lewis has often lamented how his warning about the excesses of wealth and industry greed has become something of a playbook for young bankers decades later. Not that they could replicate today’s world of Liar’s Poker inside the bank itself, he notes.

“If you’re really ambitious, your ambition isn’t within Goldman Sachs. The banking industry itself looks awful,” he says. “Many young people really work 16 hours a day and have no life doing things that even they think are not interesting. And some older people get paid more than they do in other places, but they don’t really have a great mission in life, or a purpose, except to make that money. And, you know, a lot of pointless respectability.

“The people inside the big companies look like peasants compared to the private equity people, the venture capital people, Ken Griffins of the world”, he continues. “There are people making a few million dollars inside the companies, and people making billions outside, so that’s where the action is, outside.”

Lewis has often leaned toward outsiders: Take Flash Boys’ Brad Katsuyama, The Big Short’s Michael Burry, and Moneyball’s Billy Beane. Perhaps it’s no surprise that the protagonist of his next book works in crypto.

“I’ve walked away from Wall Street a couple of times thinking I’d never come back,” he said, adding that the industry’s compelling stories tend to draw him back. “The part of Wall Street that interests me now is this Renegade movement out of the system. Banking compared to crypto is really boring. The stuff is a lot less good.”

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One gets the sense that Lewis often ponders the big questions, the larger ideas. He becomes more animated and engaged as he articulates thoughts that seem to come to him on a whim.

“Here’s a thought experiment,” he says. He wonders how a Michael Milken-type scandal would happen today. Milken was a junk bond guru who made hundreds of millions of dollars in the 1980s, before securities fraud violations led to jail time, a fine and a ban from the industry. He was pardoned by then-President Donald Trump in 2020.

“I don’t think if Michael Milken was doing what Michael Milken did then, now, the system would have the guts to put him in jail. Michael Milken would put the system in jail. And that’s the big change.”

Another massive change is social media, which has transformed the way information is consumed and helped shift the financial center of gravity away from brokers and trading rooms to anyone with WiFi and a Robinhood account. What would have happened, Lewis wonders, if Twitter had existed during the global financial crisis he documented in The Big Short?

“Oh my God,” says Lewis. “You would have had, instead of Michael Burry sitting there by himself with his opinions that no one will listen to because all he can do is email them to a couple of people on Wall Street… If he’s tweeting what he’s looking inside the portfolios. , the collateralized debt obligations of the real mortgage-backed securities, and he’s showing people on Twitter? It might have played out a lot differently. The music might have stopped a lot earlier.”

But with crypto, social media was central to its rise, despite the red flags. The Big Short’s real-life Cassandra, Michael Burry, has it warnedamong other things, about the dangers of cryptography, it was of little use.

“It’s a different phenomenon” when it comes to crypto, Lewis explains. These “quasi-religious groups” mixed with social media mechanisms “seem to be central to crypto enthusiasm. It’s the craze that social media will encourage rather than discourage.”

In the run-up to 2008, the Federal Reserve and the “institutions that were creating the conditions would have been very amenable to clear arguments on Twitter,” Lewis says. “There could have been real actions there. What institution is going to act to do something about crypto? It’s a multitude of individuals.”

Illuminates again: “Crypto has been fun to watch.”

resume
born
October 1960

education

resume

born

October 1960

education
1982

BA, History of Art, Princeton University

1985

Master in Economics, London School of Economics

career
1989-present

Author: stands out
2021

The Premonition

2019

The fifth risk

2017

The undo project

2015

Flash Boys

2011

The Great Short

2009

game at home

2007

The blind side

2003

money ball

1999

The New Thing

1989

Liar’s Poker

To contact the author of this story with comments or news, email Trista Kelley



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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!