Entrepreneurship vs. Wall Street and Washington

Michael Lewis’s book The Big Short is among my favorites. When it was announced Adam McKay, the director of “Talladega Nights” and “Anchorman,” was directing the film version of what I consider Lewis’s second masterpiece (the first was Liar’s Poker) I shuddered, remembering the cinematic debacle that was made of Tom Wolfe’s Bonfire of the Vanities.

Happily McKay didn’t make a mockery of Lewis’s work, although, at times, he tried. Lewis admits he’s baffled by Hollywood  and didn’t expect “The Big Short” to be made for the screen. It’s more than ironic the movie begins with the primary subject of Liar’s Poker, Lewis Ranieri, who created mortgage-backed securities (MBS).

Very quickly the story jumps to 2005 and Dr. Michael Burry (Christian Bale). Bale plays Burry in all the character’s Aspergery quirkiness  (although his condition is never mentioned in the movie or by reviewers). Socially awkward, incapable of understanding analogies and metaphors, Bale nails the essence of the portfolio manager who read the collateralized debt obligation (CDO) legal documents cover to cover with his one eye. He alone understood them to be trash wrapped in nice, shiny Wall Street wrapping.At the end moviegoers are supposed to be outraged at Wall Street’s greed and fraud. Brad Pitt’s character Ben Rickert goes on sanctimonious rant after making millions with a couple young investors.  “You just bet against the American economy,” he shouts, and goes on to spew about lost jobs, lost houses, and shattered dreams.

McKay then makes a point to highlight that only one person went to jail: Some nobody who just did what everyone else was doing.   The Lehman Brothers failure is portrayed in dramatic fashion, but the ensuing bailouts get barely a mention. And, the Fed isn’t part of the story at all.

It is the entrepreneurial genius and chutzpah that really shines through in “The Big Short.” Without the creation of credit default swaps making it possible to bet against accepted wisdom, the market would be more warped than it still is.  Entrepreneurship is as much about guts and conviction as it is about Carl Menger’s insights of leadership, alertness, and risk taking.

After brief “where are they now” summaries scroll on the screen, moviegoers are left with the message that a new product is being offered on Wall Street that are CDOs but called by a different name. The message is clear, another financial mess is on its way.

Maybe so. Here in Las Vegas, The Mandarin Hotel is selling condos for $1,600 per square foot, land prices have reached boom-time highs again, all while Zillow reports that 41% of Las Vegas homeowners are “effectively” underwater.  A local  appraiser recently told me, “It’s just crazy again. Nobody remembers 2008.”

The Fed’s cheap money makes memories short. And while the public flocks to “Star Wars,” sadly, McKay’s movie and Lewis’s story is relegated to preaching to the choir.

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