If you enjoy films such as Wall Street or The Wolf of Wall Street you will surely enjoy Liar’s Poker where Michael Lewis takes you through his experience at Solomon Brothers in the mid-1980s. If you are unfamiliar with Lewis he is the author of Money Ball, The Blind Side, and The Big Short which have all been turned into films. The storytelling and insight Liar’s Poker provides into the way in which business was conducted in the financial services industry is both entertaining and enlightening. Wall Street during this period (and still today) has a reputation for being a boys club where vulgarity, rudeness, and greed dominate the culture. You can see the ruthlessness in the compensation, organization, and internal structure of Solomon and the utter disregard for long-term consequences.
Liar’s Poker takes you through Michael Lewis’s own experience starting off early on in the financial sector and the things that occurred during his time in this world. The story is told in an engaging manner that will keep you turning to pages while also wondering if the world depicted is an exaggeration or truly the cutthroat environment told to us. You gain an understanding of how financial instruments are created, the incentives that motivate the creation of these products, and the sheer lack of care for long-term consequences. This book will also start to peel back the world of investment banking as you begin to understand the differences between the traders and the sellers as well as the bond department versus the equities department.
As you look at today’s financial markets and what the “hot” area is for investment bankers to be a part of you notice an ebb and flow. As growth in one sector dominates the returns for companies you see a shift in who holds the power within these investment banking machines. The idea of someone in their mid-20s advising investors to invest 10s and even 100s of millions of dollars is quite intriguing with a lot of their knowledge coming primarily from the proximity they are to the markets. Lewis depicts understanding where the traders are making bets and their motivations allowing him, for instance, to be duped into advising his first investor to purchase awful positions Solomon was looking to unload off its balance sheet. Lewis not realizing at the time this was what was taking place and eventually causing his first investor to “blow up” a term for causing an investor to lose a lot of money.
You see Lewis’s internal conflict as he works to be successful and drives tremendous revenue to Solomon while also looking to make decisions in his investors’ best interest. You see the contradiction in what is the role within the sales and trading floor of delivering revenue to the institution vs investors. Sometimes they are aligned but often times they are not. In the instances when the brokers lost their clients money, they could wash their hands clean as middle-men merely taking orders, yet receive credit when those bets pay off.
Liar’s Poker is a book that will take you down the rabbit hole of investment banking during the boom in the 1980s and highlight the level of greed and foolishness that took over many individuals at the time. Management’s egos stood in the way of treating its people properly and it opened up opportunities for other institutions to steal Solomon’s top guys and turn Solomon’s monopoly into a losing position over time. I recommend this book for those that are interested in finance or simply who love a good story about the consequences of ego and greed. Lewis notes at the end how he was grossly overpaid for the value he brought to the world noting that he did little in his role that could justify his bonus and compensation at Solomon.