Liar’s Poker Summary (7/10)

In Liar’s Poker, Michael Lewis tells the story about how he got into Wall Street because of the money, but when he was interviewed, he committed the error of admitting so. Apparently, it was faux pas to give “money” as the reason for wanting to be in f

inance, you were supposed to be in it for humanitarian reasons.

He was later informed of his mistake. Another quirk was that when these banks hired people, they constructed uncomfortable situations that the applicants had to go through – such as having to engage in conversation with an interviewer who repeated the same question, or just sat in silence. The point was to test how the applicants would respond – or how long it would take them to throw a chair out the window.

The Corporate Hierarchy

The corporate hierarchy was divided into 3 categories: Trainees, Geeks, and Big Swinging Dicks. It more closely resembled a fraternity than a serious business organization. Being a Trainee was everyone’s worst nightmare, they were the butt of every joke. Geeks were more knowledgeable, but still spent most of their time doing research, they were also in non-enviable position. Big Swinging Dicks was what everyone wanted to be, those were the people that moved money around.

Traders watched the news all day, they had to respond to new information by finding the most appropriate course of action to follow. If an important event took place such as the diminishing of corn supplies, or an oil spill, the shrewd trader’s job was to quickly figure out the consequences and make a snap decision about what to buy as a result.

Mind Games

It wasn’t about how much you knew, or how smart you were, it was about how good you were at bluffing and playing the psychology of other people. You got rewarded when you got your clients to move large amounts of money around, while not taking any risk yourself. You had to balance good salesmanship with some ability to predict the future – although it is impossible to predict what happens in the markets.

Lewis admitted that he felt no remorse or guilt when he convinced a client to take a position that was clearly designed to benefit Lewis and not the client. The explanation is that money itself loses its meaning over time, and it becomes a much more frivolous thing – this is not only reflected in the expensive lifestyles of people who took home large pay checks, but in the greed of people who stole food from the cafeteria, and were hopelessly out of shape physically.

Near the end of the book, Lewis recalls how his father taught him to work hard, to be diligent, because money reflected an individual’s contribution to society, but when he worked in Wall Street, and saw 21 year olds (including himself) making hundreds of thousands of dollars a year and they didn’t know anything, the relationship between hard work and income diminished in his mind. Further, even when his contribution was large – if he won his firm millions of dollars, his efforts were never adequately compensated for.

If you’re an entrepreneur and you want a quick guide to know what to think about before launching you business, check out The Myth of Entrepreneurship.

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