Happy Early Birthday, Liar’s Poker
In 1988, a 28 year old bond trader with an undergraduate degree in art history sat down on his sofa and recorded a two-hour voice memo recounting the crazy things he witnessed working at Salomon Brothers, the most prestigious bank on Wall St. That cassette tape would later become Michael Lewis’s debut book, “Liar’s Poker.”
This October will mark its 34th birthday.
I first read Liar’s Poker in two days, before I started my first job in finance as a bank analyst in 2005. Michael Lewis felt like he was speaking for all of the cultural outliers like me who accidentally found themselves working in finance. I swore in the beginning of my finance career that I would never become one of ‘them.’ But, like Lewis, I got sucked into it, and soon found myself in the epicenter of the subprime mortgage market. (I was on the right side of it - I predicted it would collapse. But it was still scary)
There is a fundamental truth that Lewis lays bare in Liar’s Poker: Wall Street is not fueled by greed - It is fueled by men (mostly) who are terrified of their own vulnerability. Greed is just the most obvious symptom. Liar’s Poker is more than a memoir of an aspiring writer who stumbled into the sweat-drenched, alpha male trading pits of 1980s Wall Street. It is a masterclass on how power and money distorts human behavior. It’s a PhD thesis on the organizational psychology of extreme wealth. And, it is a model of bold, visceral storytelling, where the reader is transported into the room. Where lionized heroes are made human and accessible.
Here are some excerpts from the book that had an enduring impact on my life.
“It was a joy to see a man rediscover his youth.”
One of the greatest scenes in Liar’s Poker takes place during the 1987 stock market crash when the Dow Jones Industrial Average dropped 22.6% in a single day.
“On October 19, 1987, the day of the stock market crash, John Gutfreund, the CEO of Salomon Brothers, went out onto the trading floor.” Lewis writes. “He had never done this before. He was usually too busy in his office, making deals. 'We're going to buy bonds’ Gutfreund announced.”
"Throughout the crash John Gutfreund seemed in his element. He was, for the first time in ages, excited about the markets. It was a joy to see a man rediscover his youth."
That line, ‘it was a joy to see a man rediscover his youth.’ became a leadership Litmus test for me. It was invigorating to see how much vicarious pleasure my first CEO in finance, Matthew Kiernan, derived from me being in the trenches of the subprime mortgage crisis. Ethan Berman, another finance CEO who I loved, was visibly energized when he pulled up a chair late one night so he could learn about the product I was building. The new CEO of Starbucks, Laxman Narasihman did something similar when he worked as a barista for a month when he was hired for the top job. The hierarchy of a company disappears when a leader rediscovers their youth by working in the trenches. It makes them accessible.
A Great Producer Is Often A Toxic Leader
A recurring thread in Liar’s Poker is that there is dangerous misalignment between producing and leading. To be a great trader, one has to be ruthless. To be a great leader one had to be empowering. The traders who were promoted to lead others were almost never able to swap ruthlessness for empowerment, turning the company into a political tinderbox.
"Wall Street makes its best producers into managers…. The best producers are cutthroat, competitive, and often neurotic and paranoid. You turn those people into managers, and they go after each other. They no longer have the outlet for their instincts that producing gave them. They usually aren't well suited to be managers. Half of them get thrown out because they are bad. Another quarter get muscled out because of politics. The guys left behind are just the most ruthless of the bunch…. The ruthless people are bad for the business but can only be washed out by proven failure.”
‘Proven failure’ is harder to pinpoint the more senior someone becomes. The leader who lives by a code of toxic ruthlessness is harder to root out. Especially when the business is performing well. It’s one of the reasons I am always suspicious of innovation executives who don’t have a clear P&L. In the absence of financial performance how do we know if their seniority is a product of ruthlessness or positive leadership? It’s why non-profits and academic departments are consistently more politically dysfunctional than for profit companies.
When you write, write like this:
Lewie Ranieri, as depicted in the “Big Short”
This is how Michael Lewis introduces us to the mortgage backed securities desk run by Lewie Ranieri:
"Every morning at eight o'clock, a trainee would go to the Trinity Deli and bring back a round of onion cheeseburgers for the mortgage traders. The onion cheeseburgers were a tradition. They were greasy and disgusting, but they were also a source of great bonding. The traders would sit around eating their cheeseburgers and talking about the market. They would joke and laugh and make fun of each other. It was a way of starting the day off right."
Prior to Liar’s Poker, Lewie Ranieri was known as a mathematical genius who reinvented the way homes were bought and sold in America. Michael Lewis transformed him into a salt-of-the-earth slob from New Jersey, who happened to also be a financial trailblazer. His description of Ranieri, and the culture he created, was so vivid that deep into my own time on Wall Street, the term “mortgage backed security’ evoked an image of an overweight man, shouting a trade order into his squawk box while holding a slice of pizza with the other hand.
If you write about something complex, bring the reader into the room. They should be able to smell it. They should be able to see themselves sitting quietly in the corner, taking it all in.
Thank you, Michael Lewis for bringing us into the room, and letting us take it all in.
Y’all are my heroes,
Greg
Founder, CEO, Punks & Pinstripes
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