The big short
brilliant account—character-rich and darkly humorous—of how the U.S. economy was driven over the cliff. When the crash of the U. S. stock market became public knowledge in the fall of 2008, it was already old news. The real crash, the silent crash, had taken place over the previous year, in bizarre feeder markets where the sun doesn’t shine, and the SEC doesn’t dare, or bother, to tread: the bond and real estate derivative markets where geeks invent impenetrable securities to profit from the misery of lower- and middle-class Americans who can’t pay their debts. The smart people who understood what was or might be happening were paralyzed by hope and fear; in any case, they weren’t talking. The crucial question is this: Who understood the risk inherent in the assumption of ever-rising real estate prices, a risk compounded daily by the creation of those arcane, artificial securities loosely based on piles of doubtful mortgages? Michael Lewis turns the inquiry on its head to create a fresh, character-driven narrative brimming with indignation and dark humor, a fitting sequel to his #1 best-selling Liar’s Poker. Who got it right? he asks. Who saw the real estate market for the black hole it would become, and eventually made billions of dollars from that perception? And what qualities of character made those few persist when their peers and colleagues dismissed them as Chicken Littles?
Stats for nerds
99recommend
235mentions
202people
2010–2026years
46% recommend53% neutral1% critical
Mentions per year
What Hacker News says
- I was too - and to be frank: it's dishonestly revisionist to say this was a topic in the public eye.
There's a very good reason a book (and movie) like The Big Short was such a big hit. It's because it was about the handful of people who actually saw the crash coming and were confident enough to put their money and reputation on the line.
- Yeah, modern stock-market capitalism is, at its core, the layering of a 'second derivative' layer — growth in rate of growth of profit year-over-year — on top of the 'first derivative' — growth in profit year-over-year — that most non-financiers consider it to be. If you've read/seen "The Big Short" it helps immensely to consider how the layering of bets, tranches, and insurance is not the first time the financial industry has implemented widespread layering, it's just the first widely recognized time they've done so.
This is also why the market tolerates destructive private equity firms: their sole purpose is to create growth in the second derivate; that they 'pull up the ladder behind them', so to speak, by killing the business and terminating investment gains for investors in the first-derivative tier (market stockholders) and zeroth-derivative tier (capital investors), and that they kill great products in a market so that buyers are forced to buy shitty products, are recursively beneficial to more efficient cycles of vampirism.
- To understand Bitcoin you need to forget the technology and first understand the problem. You need to understand what caused the 2008 financial crisis and how it resulted in us collectively funnelling more value into the hands of useless bankers. You need to understand that there are people who are literally spending their days playing games with each other, trading bits of paper and making silly deals and bets. If you don't understand the word "literally" or don't believe it, read more, study harder. If you don't understand a zero sum game or how this nonsense fucks up the lives of regular people, read more.
Read The Big Short by Michael Lewis. You could even start with the film by Adam McKay who also gets it. Then read Other People's Money by John Kay.
Only once you understand the problem can you begin to understand why a trustless digital cash would be good for us. Bitcoin is simply the first viable solution to the problem. If you can come up with a better one you'll change the world.
- Heh, read The Big Short. A large point of the book is that a lot of rich people are both greedy (which we already assumed) and also stupid (which we didn't assume).
- The existing financial system is one where the money supply is controlled by private bankers. Money is created by banks when they issue loans (mostly mortgages) and destroyed when people pay the loans back. When a bank issues a mortgage to a first time buyer of, say, 300,000 credits, that 300k is brand new money injected into the system. The loan will be slowly paid off, but over the span of maybe 30 years that single loan will contribute on average 150k of money in the system. Almost all of the money in the system is just people's loans they haven't paid back yet. If the banks issue more loans, the money supply increases, if they issue fewer it decreases.
This sounds stupid and most people usually think "there must be something more to it, but I don't understand". Well, there isn't. Money is just made up numbers that we use to do accounting. The only thing that is real is physical (houses, food, minerals, energy etc.)
To attempt to reign in the stupidity, governments have created layers upon layers of regulation to the extent that much of finance is basically working out how to keep legally creaming off the top of the money supply. They play silly games with each other where they trade bits of paper until one of them is left holding the bag. The trouble is the silly games end up affecting everyone else because we actually use this money to do real finance, like paying for food and shelter, insurance, savings etc.
Read up on the 2008 financial crisis. There's a very entertaining book and subsequent film called The Big Short which is highly recommended. Bitcoin was started as a direct response to the events that played out around 2008.
- The Big Short is an excellent book about failures. Really shows how, despite huge institutions and government regulation, human hype and bluster still was the main culprit.
