A VC in Vacationland

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I am a big fan of Michael Lewis' writing, starting with Liar's Poker in the late 1980's, The New, New Thing and Money Ball in the early 2000's. And The Big Short is perhaps the best book he has ever written. 

If you want to understand what happened to Wall Street and our economy over the last decade, then his book is the place to start. It is people that ultimately make the good and bad decisions about creating and selling financial instruments and the best and brightest were mostly on the sidelines (thanks, Alan Greenspan) when the creation of credit default swaps (CDSs) and Collateralized Debt Obligations (CDOs) proliferated and became the downfall of finance as we knew it.

Lewis does a superb job of following the fortunes of people on both sides of the trade–those on Wall Street who were creating these repackaged sub prime mortgages and those hedge funds and individuals who were betting against them. His narrative goes back and forth between the money hungry investment bankers who can't create the junk fast enough, the rating agencies who get convinced that this is all triple A rated debt, AIG who cannot insure the junk fast enough and a small group of contrarians who make massive bets against these new financial instruments (hence the title, The Big Short). You get to see all sides of the story in living color and gory detail.

The amazing part is the end when the bubble has burst and the shorts win. They do not feel victory or become heroes, having just witnessed the near collapse of the world financial systems. Sure, they made a lot of money but none seem very happy about it and either do their investors. A weird and tragic ending, since the whole story has yet to play out. FIVE STARS OUT OF FIVE…but depressing.

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David Liss' superb first novel, A Conspiracy of Paper, reaches back to London in the 1700s to wrap a mystery around the simultaneous emergence of venture capital and stock exchanges. One of the few people ever to turn a PhD thesis into a best selling book, Liss explores the criminal underbelly of the new world of exotic venture companies( The South Sea Company, for example) and the competition with the Bank of England for control of the English financial system. All the usual suspects are in place–the hated and rich Jews, corrupt "stock jobbers", murky CEOs, minions often bribed for favors, criminal gangs and best of all, the gullible royalty. 

Benjamin Weaver, an ex-boxer, Jew and consummate outsider, plays the heavy in this tale of stock fraud, idiotic projects and unsuspecting investors desperate for outrageous (and impossible) returns. If this sounds a lot like the early 2000's in the US venture community, you are right on. The London of the early 1700s is a lot more rough than Silicon Valley in the early 2000's but the results are the same–lots of money thrown at questionable companies, much hype in the media and then everyone wakes up one morning to ask why a company with no revenues and little promise of any is worth millions. Duh….

This is a well written thriller that appealed both to the mystery lover in me as well as the venture guy.  I found myself saying, " what a dumb presentation–I'd never fund that dog" and "what are these dopey investors thinking??"  Lots of fun, enough history to make it all believable and a good dose of realistic London life in the 1700s–not very pretty, where life was cheap and hanging was the usual penalty for most any offense by the lower classes.

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