The Risk-taking World
2015-01-27
I picked up Liar’s Poker because I was keen to find out, besides money, what else might drive many Ivy League graduates to work on Wall Street, what makes working in finance so special, and what people have learned from the fall of Salomon Brothers.
This book follows at least two storylines. The first one is the author’s personal experience in Salomon Brothers, from a rookie trainee in New York to one of the Big Swinging Dicks as a bond salesman in London. Another main storyline is a history of Salomon Brothers, especially how they created the mortgage bond market.
I didn’t realize this book wasn’t a fiction until one third through it. That is where the second storyline starts and the author starts losing his focus and the the rest of the sections are sort of disconnected. It is still a rather fun read to me. Some of the stories have me laugh so hard. Behind the wolf of Wall Street stereotypes, the exaggeration, and the sarcasm, there is an underlying truth in those stories.
After reading this book, I still don’t fully understand how some of those bonds work, but the explanation on Collateralized Mortgage Obligations (CMOs) reminds me of the financial crisis of 2008, which is compounded by Credit Default Swaps (CDSs). How ironically history repeats itself. How sad it is that people have not learned much from the past.
Some of my favorite quotes from Liar’s Poker.
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“In any market, as in any poker game, there is a fool. The astute investor like Warren Buffet is fond of saying that any player unaware of the fool in the market probably is the fool in the market. Knowing about markets is knowing about other people’s weakness.“
“RIsk, I had learned, was a commodity in itself. Risk could be canned and sold like tomatoes. DIfferent investors place different prices on risk. If you are able, as it were, to buy risk from one investor cheaply, and sell it to another investor dearly, you can make money without taking any risk yourself.”
“Salomon had missed the grand shift in its own business from trading bonds to trading entire industries.”
“Who cared for tenure? the whole beauty of the trading floor was its complete disregard for tenure.”
“It is like being invited to dinner and finding out you are the dinner.”
“A whole new attitude toward working at Salomon Brothers was born: Hit and run.”
“They proved their superiority by taking risk better than the rest of the risk-taking world.”
“The larger the number of people involved, the easier it was for them to delude themselves that what they were doing must be smart.”
“Those who say don’t know and those who know don’t say.”
“To get the best job, you have to weather the most abuse.”
“You don’t get rich in this business, you only attain new levels of relative poverty.”
“The Piranha didn’t talk like a person. He said things like “If you fuckin’ buy this bond in a fuckin’ trade, you’re fuckin’ fucked.” And “If you don’t pay fuckin’ attention to the fuckin’ two-year, you get your fuckin’ face ripped off.” Noun, verb, adjective: fucker, fuck, fucking. No part of speech was spared. His world was filled with copulating inanimate objects and people getting their faces ripped off.”