MIchael Lewis | Open Source with Christopher Lydon

By the Way • March 26, 2015

Michael Lewis’s Age of Money

Michael Lewis is the great tale-spinner in the Second Gilded Age in America. He’s part muckraker, but part Mark Twain, too, for finding classic characters as good as the King and the Duke in Huckleberry Finn on Wall Street today: the good, the bad, the geeky, the banks and traders making billions mostly in the dark.

Like a great novelist, Lewis writes the moral ecology of the story. Five years ago in The Big Short, after the meltdown of the subprime mortgage racket, the center of the story was a thick air of anger and doom – because near-autistic social misfits saw the problem, when the go-along greedy guys didn’t. Only the mentally strange acted, and they weren’t called heroes for being right.

Now Lewis has taken on another disease in the money system: Trading is a war of robots, a black box that almost none of the players get to see inside – too fast, too algorithmic, too fragmented, too automated, too layered for human understanding. He says the market at the heart of capitalism is still rigged and that it’s become a means of systematizing unfairness.

Meanwhile the eccentrics and iconoclasts are still not rewarded for their clear sight:

It’s a problem that people who speak truth to power get quickly classified as oddball rather than important. Maybe it’s always been that way. It’s a big problem in culture of elites, in the structure of institutions. On Wal Stret, elites have lack of sense of responsibility — or their responsibility is not to the larger society. They have responsibility to shareholders, to the bottom-line, to short-term results, etc. But there isn’t a sense of noblesse oblige. That got drained out of us, I think. They don’t have any sense that they’re lucky to be there. They think they deserved whatever they got.

This Week's Show •

The Meaning of Money

Michael Lewis has become the great teller of modern morality tales around money: from the story of how high finance bubbled up, then popped, in Ireland and Iceland to the story of how a handful of eccentric thinkers saw a mortgage crisis brewing before it took down the world economy in 2007 and 2008.

In his latest book, Flash Boys: A Wall Street Revolt, Lewis sounds worried. After that last great crash, finance has gone digital. The action has moved off the downtown trading floors and into black-box servers stationed in New Jersey. Wall Street’s work has become so automatic, algorithmic and obscure that ordinary buyers and sellers have less understanding than ever of what’s happening with their savings.

In Flash Boys Michael Lewis focused on the practice of ‘high-frequency trading’ — a game of arbitrage conducted in the course of microseconds, well handled on Radiolab. But in a new afterword he says HFT is just a symptom of a larger problem. The market’s big players have once again abdicated their “clear responsibility to protect investors… and to create a fair marketplace,” meaning that the game may be more dangerous than ever.

So we’re asking the $64,000 question: can we build a more crash-proof, less leveraged, more equitable financial system? Our guest Jeremy Allaire would argue that the technology known as Bitcoin can do just that: bring back transparency and a simple standard of honest exchange. But we’re reminded that the American dream runs on credit — and we may just be too dependent on the boom-and-bust market we’ve made.

Life Under The Cheese-Grater

London — ever more a 21st-century financial capital — is undergoing the building boom. Our guest John Lanchester — novelist-journalist who’s become an obsessive wrestler of big-money topics — can see those buildings from his study window, and he’s (ever so slightly) flustered.

Lanchester says the meaning of those enormous buildings — nicknamed the Gherkin, the Spire, the Walkie-Talkie, the Cheese Grater — comes from their being built without a context, comically dwarfing the Tower Bridge and what’s left of that Dickensian skyline.

Hear our whole conversation with John Lanchester below, and — even more — buy his high-spirited book on How to Speak Money:

The Not-So-Mighty Dollar

On Medium you can read a piece asking what Bitcoin technology might actually accomplish by our newest producer, Pat Tomaino:

Here’s what I learned. Whether you see Bitcoin as a solution depends on who you are and how you define the problem. While the debate continues, here’s a rough scorecard on Bitcoin, what it can do, and for whom.

And there’s a longer piece by Max Larkin about Berkshares, a small but resilient local currency used in Berkshire County, Mass.:

One thinks of a few Berkshire towns — like North Adams, out of Berkshare buying range — as monuments to the power of modern capital: how it all but literally floats in and floats out of a place. Like a kind of slow-motion weather event, money has whipped into Detroit, and Haverhill, Mass., and Gary, Ind. — building up their physical plant and infrastructure so long as that promoted profit — then whipped out and away, leaving something skeletal and defunct behind it.

This is, by the terms of the market, a morally neutral phenomenon. Monopoly capitalism of this kind is indeed like weather, in that one accomplishes nothing by complaining about it.

Podcast • July 11, 2012

Chris Hayes: Smart Guy against the “Smart Guys”

Part of what makes the strange disorienting nature of our time is that the old institutions have been discredited but remain in power. The people who run them remain in power. There’s been the discrediting ...

Part of what makes the strange disorienting nature of our time is that the old institutions have been discredited but remain in power. The people who run them remain in power. There’s been the discrediting without the conceptual change, without the actual reforms on the ground, which is a bizarre interregnum to live through.

Chris Hayes with Chris Lydon at Rockefeller Center, July 9, 2012

Chris Hayes has done a 180 on Groucho Marx, who said he wouldn’t join a club that would have him as a member. Chris Hayes has rushed the media elite that he knows is sinking. He won’t save it alone, of course, but he’s a temptation or maybe a model for wary 30-somethings like himself, for people who’ve stopped listening to anyone in authority. A great deal of his book Twilight of the Elites and of our conversation is fixed on his own mixed emotions about being the “it” boy in a dubious game and a bad time — in the “fail decade,” as he calls the opening era of his adulthood. He seems to be writing and living out a warning to himself.

The cover story is that talk TV has a rising star in Chris Hayes, cast as Rachel Maddow’s kid brother, as learned and lively as she is. In a pretty sclerotic media scene full of people who got suckerered into selling the Iraq War, he’s the bright-eyed millenial kid from Brown (2001, philosophy major) and The Nation magazine who’s inspected the emperor’s new clothes and keeps talking about them. He harps on inequality as the story in 2012, plus unimaginable debt and an awful losing streak on the American scorecard. He says it all without wailing or gnashing his teeth and everybody thinks he’s a nice, cool guy. The multitudinous fans of “Up with Chris Hayes” on MSNBC are encouraged to call themselves “Uppers.”

The back story in Twilight is his judgment that the “meritocracy” that selects high-testing hard-working overachievers like him (like me in another generation) has been a big part of undoing the American Dream in the last 30 years or so. His “iron law of meritocracy” is that it becomes a smug elite that pulls up the ladder behind it, is socially isolated, prone to failure and inevitably corrupt. Not to mention that it becomes “a pathological way to live.”

This is increasingly a social set-up that’s fated to produce crisis, catastrophe, dysfunction, poor decision-making — and a lot of unhappy people. This is a model of ceaseless competition and what I call “fractal inequality,” in which there’s no top. The ladder always ascends ever upward, as if you’re in some M. C. Escher drawing that you climb rung by rung, only to see a new one come into view… It’s the way finance works, and finance dominates the American elite.

There’s a model of scarcity that’s fundamental to the conception of society as a meritocracy, which is this funnel that everything goes through. The idea is that not everybody can get into it: whether it’s schooling, jobs at the top firms, clerkships with the best judges… The model of scarcity produces anxiety and competition; and the whole way we think about where everything is headed is this model that there’s some small set of happy lives and fulfilling jobs. Whereas the social model should be: everybody’s who’s willing to work can have a fulfilling job and a happy life… That was the model of the auto workers’ treaty with Detroit. The vision was deeper than good wages. It was about who deserved a good life — and the idea that working people deserved a good life. We just don’t have that anymore. The meritocratic model is that you deserve a good life if you meet these elite criteria, if you find your way through all these funnels.

Chris Hayes with Chris Lydon at Rockefeller Center, July 9, 2012

Might Jon Stewart have smacked this guy — at least rolled his eyes — for all the hi-falutin’ stuff about the “dominant meritocratic ethos”? I wondered as I left his office: is Chris Hayes a little hung-up on himself and the vertigo of his own success? A little too smart about the cult of smartness at the top of the heap? Is he speaking truth to power, or talking his way through it? And: is it still okay to like this kid a lot for his “kind of naive earnestness”? For naming the four corners of his drive as “frustration, betrayal, disorientation and curiosity”? For his readiness to say, yes, what a “bizarre interregnum” it is we’re living through? Comments please.

Podcast • April 14, 2010

James Kwak: The Problem is Bank-o-cracy

Click to listen to Chris’s conversation with James Kwak. (42 minutes, 19 mb mp3) James Kwak extends Michael Lewis’s point and feeds my fascination with apocalyptic hysteria and helpless torpor as the twin markers of ...

Click to listen to Chris’s conversation with James Kwak. (42 minutes, 19 mb mp3)

James Kwak extends Michael Lewis’s point and feeds my fascination with apocalyptic hysteria and helpless torpor as the twin markers of American politics these days. He makes it believable that the angry Tea Party wackitude in the far countryside and the smug sleepiness inside the Beltway and the media mainstream are both symptoms of the same “quiet coup” that James Kwak and his writing partner Simon Johnson diagnosed in The Atlantic last Spring.

To Simon Johnson, former chief economist at the International Monetary Fund and now professor of entrepreneurship at MIT, the deeper condition of the American republic looks all too familiar. The essential problem — easily recognizable if we were looking at, say, Thailand or Korea or Russia — is known in the trade as “state capture,” meaning the accretion of overwhelming political power by a financial elite, an oligarchy, known in our case as Wall Street, or in the title of the riveting analysis by Johnson and Kwak, Thirteen Bankers. The idea of “capture” extends by now past the political parties, Congress and the controlling agencies of the executive branch. James Kwak, in conversation, quips that “capture” encompasses “media capture,” too, and “ideology capture.” And the same oligarchy seems to be working its will in foreign as well as domestic misadventures:

JK: One of the parallels between the financial crisis and the Iraq War is that despite all the things that have gone wrong we still have largely the same people. We see the same people on TV, the same people in Congress telling us how we should understand the crisis and what we should do next. And during the Bush Administration people were saying, “Why didn’t anyone get fired for the Iraq War?” And the same question applies now: Why hasn’t anyone been fired because of the financial crisis?

I think there’s another parallel as well, which is that, again, the cover-up that’s going on by Wall Street today is this idea that the financial crisis was an accident, that it was a lot of people making mistakes—it was lenders making bad lending decisions, and homebuyers making bad borrowing decisions, and rating agencies making bad decisions when they rated these toxic securities, and unbelievably these investment banks holding onto their own toxic assets, and then regulators being asleep at the switch.

CL: Perfect storm.

JK: Yes, exactly. It’s the perfect storm theory. And what they’re trying to do is they’re trying to analogize the financial crisis to a natural disaster. How do you blame someone for a natural disaster? And you hear the same language from the Administration. You hear Timothy Geithner saying, “Well, do we want to protect against a hundred-year flood or a 30-year flood?”

I think this is all deeply wrong, and it’s an exact parallel to the Iraq War. Because you know, as we all remember, we invaded Iraq, we didn’t find Weapons of Mass Destruction, and what did people say? They said, “Oh, it was bad intelligence.” So people gathering the intelligence made mistakes, people analyzing the intelligence made mistakes, people brought the intelligence to President Bush and Vice President Cheney and they made an error of judgment because of the bad intelligence, and then a majority of the Congress went and voted for this war because they had been misled. It’s the same idea. It’s the same idea that it’s all an accident, it’s not our fault, it’s somebody else’s fault and it was just a big mistake. And in both cases that is just fundamentally wrong. I mean, we invaded Iraq because our political leaders wanted to invade Iraq, and our Congress voted for it because they did not want to be seen as voting against a war in the run-up to an election, and that’s all there is to it.

And with the financial crisis: I’m not saying that bankers wanted the financial crisis, but they engineered it. They engineered a climate of deregulation and non-regulation that allowed them to invent whatever products they wanted to, sell them to anyone they wanted to, increase their leverage so that they could make larger and larger profits, and they engineered that consciously. This was the product of intention, and it was bound to blow up. And it finally blew up. And that is the message that Wall Street does not want people to hear. They want people to think it was all a colossal mistake made by well-meaning people who had mistakes in their models. That is not what happened.

James Kwak in conversation with Chris Lydon in Boston, April 12, 2010.

Podcast • April 12, 2010

Michael Lewis: Our Appetite for Apocalypse

Michael Lewis is the non-fiction novelist of our apocalyptic American mindset in 2010. The heroes of The Big Short, as he puts it in conversation “were betting on the end of the world… The only ...

Michael Lewis is the non-fiction novelist of our apocalyptic American mindset in 2010. The heroes of The Big Short, as he puts it in conversation “were betting on the end of the world… The only characters you can really trust are the people who are delivering a very, very dark message.”

Michael Lewis, remember, was never really a sportswriter, despite Moneyball, Coach and The Blind Side. Nor was he ever a finance guy, despite the prescience of Liar’s Poker and his sure touch now with the Wall Street collapse of 2007-2008. Michael Lewis’s real business and his genius instinct is for resonant social fables that just happen to play out on ballfields and bond markets.

The Big Short is a high literary feat, complete with a real-life “unreliable narrator,” a particularly despised contrarian bond dealer, Greg Lippmann, who was betting brazenly against his own market. “The guy selling the best ideas is a completely untrustworthy character,” the author remarks. The true center of The Big Short is an atmosphere of anxiety that has developed a taste for the catastrophic. Lewis’s short-selling characters resonate because they’re acting out our common sense of “the probability of extreme change” in financial markets and in real life. It’s an anxiety that envelops Tea Baggers and Greenpeaceniks in the same cloud of anger.

ML: The broader thing about all these characters to me is that their attitudes, their approach to life, their ability to hear the data, was something that was marginalized in the system itself. They didn’t belong, none of them belonged, and they should have belonged. What is it about the system that doesn’t want them as a part of it? And it’s terrifying when all the people who were wrong are in charge, and all the people who are right are on the outside.

CL: It sure is. To me there’s a direct analogy to be drawn with the war in Iraq. The Congress signed off “oh well, he must know something.” Tony Blair embraced it. The media by and large encouraged it. A very, very few people said “are you kidding?” And yet the ones that warned against the war in Iraq got the same prize that your guys got for warning of the meltdown.

ML: Yes. Ostracism.

CL: Exactly, and they’re still ostracized.

ML: It’s funny. There is an analogy. And the analogy is there’s a kind of a blind faith in leadership that is the result in both cases of ordinary people feeling they can’t evaluate the situation because it’s too complicated. The financial system got so complicated, and the complexity became opacity. When Alan Greenspan stands up and says something, no one understands what he’s saying. But they think that’s a good thing, because it’s all so complicated they shouldn’t understand what he’s saying. And the fact is they should. The fact is, if things aren’t being explained in a way you and I can understand them, it should be a bad sign, not a good sign. But the complexity was turned on its head. It was used as a way to mask bad things that were happening.

There’s a joke in it all. The joke is that the financial system, and there are analogies to the political system, but the financial system wanted to do something it really shouldn’t do. It wanted to make lots of loans that it shouldn’t make. They created all this risk that was going to blow up the system. In order to do that they needed to disguise the risk. So to disguise the risk it used all this complexity, which served as a smokescreen. And the joke is that it ended up disguising the risk from itself. That the very people who created the smokescreen were engulfed in it, and they couldn’t parse the system they created.

Michael Lewis with Chris Lydon in Boston, April 7, 2010.