Bloggers' note: My post below errs in associating author Michael Lewis with the Oscar-winning documentary Inside Job. In fact, Inside Job was written by Charles Ferguson. I do stand by my regard for the shortcomings of Lewis' works, and my belief that only a substantial change in corporate culture will prevent an encore to the Great Recession - or worse. -David Olive (July 7)
WaPo's Ezra Klein is among the savviest political analysts in journalism. Notice I didn't say the savviest, since one should avoid being definitive.
In alluding, bravely, to the shortcomings of the celebrated author Michael Lewis, Klein calls the writer of the book on which Inside Job is based "the best financial journalist, and arguably the best narrative journalist, working today."
Which Lewis is not, as Klein's own column shows. Lewis missed the looming Great Recession, and mocked those few who tried to warn of it. More to the point, Klein's descriptive for Lewis leaves out the superb Roger Lowenstein, Felix Salmon, Joe Nocera, Bethany McLean, Andrew Ross Sorkin and...you get the idea. With Fiasco, Tom Ricks showed himself to be arguably the best narrative journalist in America. But again that's not an assertion I'd feel comfortable making, and nor do I think would Ricks. Or Ron Chernow. Or Michael Bliss.
Now to the myth of Michael Lewis.
In Liar's Poker (1989), Lewis' first and most acclaimed book, the author is enamored of one John Meriwether, among the few good guys at the gluttony-driven Salomon Brothers investment bank. Meriwether later founded and ran Long-Term Capital Management hedge fund, which, despite having two Nobel laureate economists on its board, was a spectacular flameout in 1998 that Wall Street and the Fed rescued, believing it "too big to fail." Meriwether's next hedge fund succumbed to the Great Recession, a fate that peers like George Soros managed to avoid.
Lewis' New New Thing (2001) finds the author idolizing again, this time over Jim Clark, serial Silicon Valley start-up maven. Since the most prominent of Clark's start-ups, Netscape, in fact had many fathers, we don't hear much about how that remarkable firm set off the dot-com boom in 1995. Neither do we learn that most of Clark's disorganized post-Netscape ventures were sold before they would have collapsed. New New Thing could have been a useful look at the sociology of Silicon Valley, as its dust jacket promises. But instead it's mostly about Clark's obsession with sailboats and their construction. (Clark owns three.) The easy way to profile Silicon Valley and the dot-com boom, as New New Thing purports to do, is to fixate on a character at the center of that story. Clark never was that person; he was primarily a sailing enthusiast.
Moneyball (2004) is Lewis' initially promising look at the low-cost methods by which the low-rent Oakland As transformed themselves into contenders. Once again, however, Lewis is unduly star-struck, this time by Billy Beane, the A's unconventional general manager. The "takeaway" is that the winning formula in major-league sports is a modest payroll and infusing pride in the proficiency of obscure players. Alas this new method of major-league sports management might have endured long past the launch party for Moneyball had the Oakland As not reverted to their losing ways within a year of Moneyball's appearance at Bay Area Barnes & Noble and Borders outlets.
In 2007, Lewis mingled among the inflated egos at Davos and wrote for the Bloomberg news syndicate an excoriation of Nouriel Roubini and others at the Swiss retreat that year who were of like mind that the record U.S. housing bubble posed a catastrophic risk to the global economy. Lewis committed to print one of the worst predictions in the history of financial journalism: "The financial markets in 2007 are astonishingly robust," Lewis wrote. "They seem to be working out how to absorb and distribute risk more intelligently than any member of the global economic elite could on his own." That, of course, was precisely the argument advanced by the knuckleheads running Citigroup, Bank of America, Merrill Lynch and so on when called out by the few who dared ask how they could be sure their vaunted computer-modelled calculations of risk were accurate. Their response was that with these neat-o derivatives and collateralized debt obligations, Wall Street was not concentrating risk, as they worrywarts said, but diversifying it throughout the world. Unfortunately, what Wall Street was flipping to banks, pension funds and university endorwments worldwide was toxic waste, U.S. junk mortgages rubber-stamped with Triple AAA ratings. But the doofus U.S. bankers held onto much of the toxic waste in expectations of flipping it for ever higher sums, and were caught with billions of dollars in soured mortgage loans when the housing bubble inevitably burst. Within a year of Lewis' sanguine and gratuitously insulting Bloomberg piece, Lehman Brothers collapsed (preceded to the boneyard by the smaller Bear Stearns), and suddenly we had a global credit freeze among banks that no longer trusted each other even to make overnight loans, triggering a panic that required a $700-billion U.S. taxpayer funded bailout of Wall Street. Oh, and 8 million Americans workers were put on the street, and Main Street investors lost 40% of the value of their stock holdings as the markets plunged. Rarely has a scribe been so wrong about something so important.
Lewis goes the lazy route yet again The Big Short (2011), on which Inside Job is based, improbably inviting us to admire a few obscure money managers who bet against the housing bubble and each made hundreds of millions of dollars off the misery of others in the collapse of the Western economy. The folks Lewis has on pedestals this time are possibly more greedheaded than the CEOs of the reckless Wall Street banks. In fact, their bets helped accelerate the sudden, rapid implosion of the global banking system. Lewis' promised post-mortem on the Crash is nowhere in appearance, the author having limited himself to profiles of less than half a dozen speculators operating far from the epicentre of the crisis. Hence Ezra Klein's disappointment with Klein and with Inside Job.
So why this post? Well, it's triggered by Mr. Klein's invocation yet again of the Michael Lewis as Great Journalist myth. Such myths are difficult to sustain in the scribbling trade. It's tough to know what Sisyphus was really up to, because there weren't a lot of witnesses. But in fields like journalism the evidence of consistent sagacity or widely missing the mark is a matter of recent historic record. It matters that we pay heed of those like Rachel Carson (Silent Spring), Ralph Nader (Unsafe At Any Speed), James Baldwin (The Fire Next Time) and Betty Friedan (The Feminine Mystique) who do their homework and make an outsized contribution. And we need to put bestselling authors like John Naisbitt (Megatrends) and Michael Lewis in that perspective.
Lewis spent his impressionable youth as a trader at Salomon (ultimately a victim of its hubris, incidentally). And he's had his eye on the main chance ever since. Which, fine, but there's no similarly easy money and fame to be had in Lewis' chosen new career of journalism. At least, not in journalism of enduring value that requires backbreaking research and often several years of gestation and well-advised rewriting before committing to print. The enlightening work that Barbara Ehrenreich, Tracy Kidder and Jonathan Kozol produce, for instance.
Ezra Klein, as it happens, boasts a far superior tendency of getting it right. It's all on the record, you can look it up. As with Lewis, you can look it up.