Michael Lewis Discusses the Culture of Finance (Podcast)

I say You know about him? From Liars Poker, The New new Thing money Ball, The Blindside, The Big Short, Uh, The Undoing Project, The Fifth Risk. He has a new project, Against the Rules, a podcast about referees in life and whatever Happened to Fairness, which I have to tell you I found quite fascinating. Michael Lewis, Welcome to Bloomberger. Thanks

for having me, my pleasure. We I really enjoyed speaking with you in Florida at the That Giant conference, and I felt we did not have enough time until fully fleshed the reason you felt that way because we did not have enough time. So tonight uh, you'll be free around midnight. You'll get to go downtown and then we'll we'll set you loose. Let's set the table and start. In the nineteen eighties, you're working at one of the hottest bond firms in the world, but you don't care.

You had started a diary and had delusions of becoming a writer. Explain what you were thinking about before I went to work for Solomon Brothers. I had started publishing magazine pieces and the decided that's what I wanted to do, to be a writer, but had no sense that you could make a living doing this. You thought it was a hobby. I thought that I didn't know. I just I didn't know it because I was being paid by the Economist magazine ninety dollars for what amounted to three

weeks work. I think didn't see how this was going to work out as a living. So I thought I thought I was gonna write. But this job lands in my lap. I go take the job, and it's about six months before I realized that I'm going to write about the job. That it was such an extraory. I was saying, you know, if you think back to where it was, Solomon Brothers is making so much more money than every other Wall Street back. It looks like it's

in a different business. Um, I'm i I land as the sales in the sales arm of John Merryweather's derivative his his proprietary trading book. So I'm selling derivatives. Um, that's the stair way to start, sitting sort of sitting right in the middle of the firm and right in the middle of it's new h And you know, it was just it became pretty clear that you know, I say this glibly, but actually pretty clear. I had stories to tell that just just from my experience. I published

a few of them while I was there. I had to write under a pseudonym because they caught me writing out of my real name and they let's talk about that. You under your actual name while working at Solomon Brothers, you published a column in the Wall Street Journal essentially

calling bankers overpaid babies. And you describe what actually happened, what who called you into the office, and what was So I was in London, uh, and I got to my desk in the morning, and waiting for me at my desk was the head of Solomon Brothers International to say that he had had it just a horrible night because of this piece that I had written in the Wall Street Journal. And I was so pleased I had a piece in the Wall Street Journal. I thought that

would be proud of me. But at the bottom of it said Michael Lewis is an associated Solomon Brothers in London. And he said, you don't understand. Michaele said, the board of directors has been meeting on the phone about this piece. And for complicated reasons, well maybe not that complicated reasons, they couldn't fire They didn't work gonna fire me. They were gonna fire me because I was generating a lot of money for the firm I had. I had lucked into a really big customer, so they didn't want to

fire me. Uh. They wanted to reach some agreement that would prevent me from doing this again. And he basically said you shouldn't write. And I said, but you don't understand. I'm gonna write. And he was simple, you know Solomon, but was filled with interesting people. He was sympathetic to that. He knew, he understood was like to like to do something. Uh. He said, he said, could you write under a pseudonym? And I said, did that work. I don't care. Nobody

knows who I am. Uh. And we decided the pseudonym I should write under it was my mother's maiden name, Diana Bleaker. Uh he and he said, that's great because no one will ever guess that a woman's a man. So you were using You weren't doing Michael Bleaker. You were doing Diana Bleaker. And I published a few pieces, not many under the Diana the name Diana Bleaker, but they got a lot of attention because I because I felt liberated. I could write about what was happened right

next to me. Now no one would ever track it back to me. And one evening, uh, this was there. Two years into my Solomon brother's tenure, I got a call from Chevy Chase's father, Ned Chase, who was so Chevy Chase from Saturday U Live and the movies. His dad was a big shot in New York editor, a book editor at Simon and Schuster. And he said, I figured, I found out that Diana Blaker is you. And I read these pieces, and you really have a book in you when you write a book. And I didn't know

what they were gonna pay. I didn't have at that moment I realized, I can I can I eke out a living doing this? So at that moment I was out out the door in my head. I had to wait a few months from my bonus to hit the account. But once my bonus, my bonus arrived, I was out the door and I and I and working. But you know, I say that I was going to just write a book about my experience. But the book I sold Liars Poker. I recently saw the proposal. It really was just like

a history of Wall Street. I wasn't even in the book proposal that I sold. And then when I started writing it, it was so clear to me that my variance was richer material than all this other stuff I was going to write about. Um, they just took off in that direction, and uh, that's the beginning of my career. How did ned Chase figure out that you were Diana Bleaker? Like?

What was his clue? It wasn't. In the end, it wasn't that hard because the piece that had caught his attention was in The New Republic then edited by Mike Kinsley, and Mike Kinsley refused to let me use a pseudonym without saying on the bottom Diana Bleaker is a pseudonym. And uh and so I think he called Kinsley and Kinsley Gate told him he gave me up that. So, so here's the really interesting thing. You're making so much money at Solomon Brothers. Friends and family say he wants

to become a writer. We must stage an intervention. What what on earth was that evening? So it wasn't it wasn't even friends and family. It was it was friends and family. But my boss is a Solomon Brothers. When I told him what I was gonna do, hauled me into a room, and they actually they could have cared less. I was gonna go write a book about Wall Street, which sounds naive, right, But they're just like, sure, go

write your book about Wall Street. They were worried about my sanity, they thought, they said, look, you made to fifty last year, You're probably gonna make twice that next year, and then from there you're gonna make lots of money. Here, Um, you're crazy to go do this. Don't go do this, do this? Went do this later and my father, who my father said to me the same kind of thing.

He said, because my dad's sitting in New Orleans Louisiana had a very nice career as a lawyer, but all of a sudden, his son, at age twenty four is probably making roughly as much money as he is, and he's, what are you doing leaving that job? And he said, and he's never been one to give me advice, but

he said, look, just wait, wait ten years. Did did your twenty four was twenty six at that point, Wait ten years, and when you're in your mid thirties, you can go take your million of dollars and go write your novel. And the problem was that, you know, when you're twenty six, thirty six teams ancient. And I looked up to the people who were thirty six at Solivon Brothers, and I could not imagine any of them leaving that you you got so needful of the money and the

position in the status. I was afraid I would become that and I wouldn't I lose this desire to do this other thing. So it was I didn't have any trouble. None of these, none of this advice had any effect on me whatsoever. Uh the golden handcuffs with that obvious people had levered up their mortgages and they were they were living a life that I didn't particularly want to live,

but that they were all living that life. They were all living a life that required millions of dollars um and they were in in addition the other, I mean, my other dirty little secret was that it was the job was really interesting for a year year and a half because I was learning so much. But after a year year and a half, you know you're not learning that much. You're doing the same thing over and over and once I sort of got a sense of what

this all all was. The idea of coming and doing it again day after day after day was just deadening. I just I didn't actually believe deep down that if I had stay ten years, i'd have gotten rich, because I thought my disinterest in it would eventually have revealed itself. It makes a lot of sense. I have to ask one more question about Liars Poker before we move on to some of the other books. You've said very specifically that you thought Lars Poker would be an admonition, a

warning to people about the evils of Wall Street. It turned out it didn't really happen, So I didn't actually say that you said you said, so what I had a different at it I had. I had a different view of the whole thing. By the way, you and I have had this conversation coming around to your view that what you write may not be what other people read. So I didn't think Wall Street was evil. That wasn't

the point. I thought it was preposterous, Okay. I thought that the idea that I was being paid that money to give financial advice was insane. So I thought it was absurd, and the only thing that really disturbed me about it at the time that got me upset. I mean, there were times when I felt a little uncomfortable about

what I was expected to do to my customers. But but um, but the thing that made me really queasy was seeing people who cared about other things being drawn into Wall Street just because that's where the money was. I had friends in college who really just like they were.

I had a good friend who was like born to be an oceanographer, and oceanography just looked like something he couldn't afford to do when Goldman Sachs is offering him this job coming out out of Princeton, So that I thought what the purpose To the extent I had a social purpose with the book. I thought young people will read it. They'll see what this is. They'll understand it's preposterous. They if they have not got nothing better to do

with their lives, they'll go to Wall Street. Or if they have a passion for finance, they'll go to Wall Street. But if they've got some other plan, they won't be distracted by the money. That's not That's not how people read it. What happened instead was um two months after the book could come out, I had a stack of letters as high as my nique on the floor from kids at colleges, uh say, and they all read the

kind of the same way. Dear Mr Lewis, I loved your book about how to get Ahead on Wall Street. I think I've got all the principles, but I really want to know some things that other people don't know so that I can get there quicker. Is there anything you left out that will help me, like make it on Wall Street? So it became a how to manual. So you and I have had this discussion before. You have made the claim that very often the book you write and set out into the world is very different

than the book that people actually read. They bring their own biases and filters and they see things differently than perhaps you expect. I'm really to make even stronger case, and it would be that if a book is any good, it has the capacity to be misunderstood and and and it's and it's for this reason that if I had been all aflame about the evils of Wall Street, um, instead of just kind of funny about it, nobody would

have read the book as a how to manual. No one read the book anyway, but they wouldn't have read the book it had been tedious, like who cares what you think? Tell me the story. And if you tell a story and you're telling it kind of honestly, you're leaving room for people to think different things about the story, just as people naturally would about any story. You tell ten people the same story, and they hear ten different stories,

they emphasize different things in their minds. You leave, You try to leave holes for the reader to have their own point of view. Now I didn't, I didn't do that intentionally with the first book. But I think the fact that I was feeling kind of detached about Wall Street, you know, I didn't. I wasn't. It wasn't a moralistic

diatribe about Wall Street. Um, and the book is very funny, like what I enjoyed with the people in the humor, right, it was that that the characters in the situation was was It was rich and funny and interesting, And I was at some level always grateful that Solomon Brothers gave me a job and at some level always kind of love the place because of how curious it was. It let it, it, let me in, It let all kinds of characters in who wouldn't naturally fit into a more ordinary,

corporate kind of environment. How much did that shape what you looked for in future books? Because all of your writing contains interesting, odd bowl quirky characters. Every book has that person as a driver. They all have teachers as drivers. I mean some of them, You're right, some of them are odd, but they all all the all the main characters have the capacity to teach the reader something. I'd say, that's what they have in common. I would say, like

Brad Kottsi Yama and Flashboys. As a wildly quirky character. Um, you on the podcast which will get too later, you describe him as this unique bird in the it's he's a completely ordinary Canadian. You put him on Wall Street. He's a freak, right, because they're no completely ordinary Canadians on Wall Street. Uh So that that he was working at Royal Bank of Canada, which is headquartered what in Toronto. I mean, he's kind of in the midst of it. It was he was there, well, he was down here

in New York. He was there their U S stock Trader had of US stock trading. But but uh so what Liars Poker. Uh the only one, very specific effect

on what I wrote. So subsequently it made it possible for me to write the big short that a lot of the people who were in the middle of the financial crisis, people who made a lot of the bad bets at the banks, I got into the business after reading Liars Poker, so they felt in a connection to me that led them to open up and talk to me, so that it was really important it It really did

lead to that book. But other than that, most of Liars Poker's effect on the rest of my writing life has been negati if I just don't want in that and that I don't want to write the same book twice. So I'm not looking for another Liars Poker, just the opposite, looking for something completely different. And and if we just take the course of um, the course of your bibliography, well, well, clearly, um moneyball is something completely different. The new new thing

is something totally different. I mean, it's not too hard to see how you go from subject to subject. There's a thread through all of these things that are fairly recognizable, but they're clearly different topics and different approaches and in virtually all the others, with the exception of my little Parenthood book. In the book I did about my high school baseball coach, um, someone else is the main character and not me. Uh, it's fun to have me is

the main character. Makes it easy in some ways. But that's what I had in a Liars Poker. I could I myself could stand in for Billy Being or Bradcott's Yama or Jim Clarker. I mean that I could carry the book because I had had that experience. Makes perfect sense. I want to ask you about the fifth risk. What what motivated you too suddenly take on the transition of

the newly elected president Rick Perry. In short, when Trump appointed Rick Perry to be Secretary of Energy, I just something clicked in my brain and it was it was well, first the memory of Rick Perry calling for the elimination of the Department of Energy when he was a presidential candidate but not being able to remember its name on stage when he was calling for its elimination, and he did so cavalier, I'm just gonna get rid if I

was president, that's I get rid of that. I thought, well, that's curious to pick a guy who says he wants to get rid of the thing to run the thing. He clearly, and then he came Then he came right full circle and said, I just didn't know what the thing did. I'm sorry. I said that. Now I'm glad to be running it. He thought it actually was involved in energy as opposed to nuclear weapons and cleaning up. I didn't know. So I really wise at that point, WHOA,

I don't know what the Department of Energy does? What does it do? Like? What do we just hand this guy who doesn't know what it does? And it really should be called the Department of Nuclear Weapons. Uh, it's it's a vast science project that that, among other things, manages the nuclear arsenal. So I so then I thought, what happens in a society, in a government where you're putting people so ill equipped to run the thing into

the position of running the thing. Uh. And it led, you know, once I started digging, it led to the story of the transition, which was an incredible story that there essentially wasn't one that that this meant to be, uh, a pretty elaborate hand over the government from one administration to the next, and that the Obama administration had prepared

essentially this great course on how the government works. Uh, like a thousand people in the Obama administration and spent six months preparing these books, preparing these talks so that whoever won would come in and they could say, look, this is this is how we dealt with the a bowla virus. This is how you assemble a nuclear weapon, this is these are the loose nukes that were worried

about in Eastern Europe. You know, there's lots of practical information. Uh. And that the Trump administration Trump had fired his entire transition team moments after the election. The Trump adminstration had not shown up to get that knowledge. I thought, well, this, it's given me first a device I'm gonna go get.

I'm gonna go get these briefings. I'm gonna go hear these things that they didn't bother hearing, and in fact, you're the only person who actually heard some of these many I think, I think the majority of the briefings I heard, I'm the only one who heard them. No, it's more than astonishing. It's like it's and they were boring.

You know, you would think government when if you said if we did like a word association game two years ago, and you said government, I'd say boring and actually riveting, riveting, especially riveting when it's in the hands of people who have no idea what it does. But but the the degree what the U. S. Government does in so many different sectors is so incredibly important, including and including places where um, you don't much think the government has a place.

Basic science research largely corporate America has a banned in long term scientific research, and so it's moved into the government. And there are mission critical science projects scattered around the government that if we don't do them, you know, we don't have a food supply in thirty years kind of thing. And and it's a data collection. There's data in the census, the weather data, so and so forth, unbelievably valuable. If if we don't have um prescription drug data that the

government collects. We probably still don't know there's an opioid epidemic. You've got people, You've got thousands of people dying every year,

tens of thousands of people dying every overdose. And the only reason it was found out was the federal government made available all the prescription drug data and geeks started hacking in and said, well, this is a lit law of these pattern the pattern of distribution of of opioid prescriptions doesn't make any sense, like more pills being dispensed in West Virginia than there are West Virginians, and uh so it's the government is like the source of that.

Important things are going on there, and so it's that's surprised me. The other thing that surprised me. If you's asked me play that word association game government worker, I just said sleepy, maybe a little ambitious beta. I don't know what. I wouldn't have been flattering terms. The people I met and there was like permanent civil servants were

the best people on the planet. They were like if they were mission driven, passionate people go to the weather, the weather if you spent two days and like the storm center at the University of Oklahoma, where they tracked tornadoes with the National Weather Service people there, you will find yourself in a room with like the really smart kid from the fifth grade, who's who's who's Who's Like dog was killed when a tree blew over in a storm that no one warned them about, and became obsessed

with predicting weather events, so no one so no one

got hurt. And they're they're like, they can make more money twice as much money doing something else, but it's in the National Weather surface where they're where their passion has the biggest consequence in In the book, you write a number of really fascinating factoids, and I'm gonna come to some of them, But on weather prediction, you described this as one of the great unsung achievements of the twentieth century is how far our ability to forecast dangerous

storms has has advanced, not just dangerous storms, like whether it's gonna be sunny or rainy five days from now. You're your fifth day forecast now is as good as your one day was like twenty five years ago. It's gotten that much better. And I don't know, I grew up in New Orleans, so you know, hurricanes used to when I was a kid used to like come out of nowhere and you didn't know where they were going to hit, and you just kind of go out with a frisbee and wait until I got two windy that

you that was your warning system. But it's the the precision with which these storms now can be tracked. It's a great it's a great intellectual achievement. And it's an achievement maybe more to the point that it's not just the government, but without the government it doesn't happen. The

government collects all the data. So so let's talk about that because in the book you describe a congressman who wants to get the government out of the weather forecasting business and turn it all over to one of the private which which uses all of the government data. Yeah, it's like which is like a three billion dollar year. The congressman said to the head of NOAH and the National Oceanic and Atmospheric Administration and here ring UH and the weather services inside of NOAH, said why do I

need you. I can get my weather from ACU weather. And she said, you know where do you think ACU weather gets its weather? It gets it from us. You know that without us ACU Weather can't make a forecast. They don't have the booty data. They'll have the satellite data, they don't have the radar data. Plus the weather models

all originate out of the National Weather Service. Now that's true that each of these private weather companies now has his own little wrinkle on weather prediction, But the bulk of the both both the information you need to make the prediction and the intellectual work about how to handle that information came out of the government. So it's it's insane to say you give it over to the private sector. The private sector wouldn't in the first place collect the data.

Now having said that, um, it's also true that the private sectors has made contributions. It's important, and the government encourages this partnership. It opens it gives all this data everywhere for free. Hack away at it. If you can find a better way to predict, like when the tornado

is gonna happen, we're all ears, um. But it's a kind of like an open source thing that everybody has to have access to this and into the position of running this operation, Trump is appointed the see the former CEO of VACU Weather, who has campaigned for twenty years to essentially prevent the National Weather Service from communicating with the American people on the grounds that if you can make money with this in the private sector, the government

shouldn't be competing with you. Uh, which is I mean nuts. The American taxpayers paid for all of his data. How much have we paid for all that data? Uh? It's I mean several billion dollars a year. It's a running cost, it's uh, it's it's close to half the budget of the Department of Commerce. This weather collect data collection. And the idea that the Weather Service, like he prevented them from having an appu, but that they should They shouldn't

have a website, they shouldn't have it. It It is insane. Um. And if you restrict the access to the data uh to a handful of companies that happen to have an inside track right now, the Weather Channel or Acue, whether whoever it is, you prevent the next smart geek in his basement from finding new patterns in the data that they help us predict the weather. Um. So it's a it is a there's a public enterprise side to this, just like there's a a public good side to this.

And that's like there's a public good side to long term scientific research, and it isn't that offers a natural role for the government, And that attracts some really interesting people. And that's which surprised me, you know, And I think I I had the felt I had the luxury of not paying much attention to it because it seemed to like kind of run itself badly or well, and whatever I thought or said about the government wasn't gonna have any effect. But now all of a sudden, it feels

like it is at risk of being seriously disabled. So all of a sudden, it's gotten to be kind of interesting material. So some of the some of the specific factoids you bring up in the book, I just pulled five or six aside because I were just fascinated by these. There are two million federal employees, seventy of whom work in national security. That's a mind blowing stat I assumed

there were all these bureaucrats and pencil pushers. Most of the government spends their time working and personnel working to keep everybody else. Say, that's the basic function of the government. Uh. And and it's also it's also you know, another kind of misunderstanding is that like the federal workforce is just out of control. There fewer federal workers per capita than they were thirty years ago. The thing that's really alarming about the federal workforce is how it's aged, uh that

young people don't want to go work there anymore. And you've got so you've got um in information technology alone in the federal in the in the federal government, five times more people uh over the age of sixty than under the age of thirty. So you know, no tech company could function that way. And so this is when you look at what's what's happening is we're kind of living on borrowed time with the federal government running on fumes.

And it's all a consequence of this enterprise being basically demonized and a lot of decades now and a lot and and and allowed, partly by Congress UH to atrophy. I mean, it's it's just too hard to hire and fire people. It's too who wants to go work for a place where the only thing, the only time you ever recognized is if you do screw up, and if you screw up, you're in the front page of the Washington Post. But but but you do something great like

who's nobody pays any attention. Uh, you're actually gonna get rich. Uh So it's it's why why can't we find out more? Short of the next Michael Lewis book, why aren't more? Of a perfect example, I didn't know until I read the book that fracking, the technology for fracking which has brought out so much gas and natural gas and and crude oil and allowed the United States to effectively become energy independent, that was the brainchild of the Department of

Energy Research. Yes, how is that not known by people or people or that, or that the entire solar power industry begins with funding from the Department of Energy, or that the Tesla factory that makes cars in Fremont, California

starts with a loan from the Department of Energy. That they're they're both big loan guarantee programs and essentially of essentially a venture capital fund run by really smart people who come in and out from industry, from universities to fund kind of very long term ideas that aren't going to pay off for the wrong term. I mean, that's the gap in the market. Right if if if there's research that will pay in two or three years, the corporations will fund it, but if there's research that that

may not pay off for the tow years. Uh, there's no there's you know, there used to be more of that in corporate America, Bell Labs or Xerox park or, but the markets have encouraged are discouraged long term that kind of long term investment would be. The government is even more important. Um, China isn't hesitating to make No, that's exactly right, This is exactly right. I think. So here's what I think. I think we're an inflection point. I think that the society, if it's going to succeed,

can't be hostile to its own government. We're bizarre in this way. And there isn't another democracy where people think the government is evil or or the problem. Uh. Now, people in Europe might say, the French might say, or the British might say, the European government's a problem. But but but that of kind of turning your ire are on your own government, it's it's like self defeating. I think someone is going to emerge who can sell the government.

I think politicians going to emerge, because it's not that hard to sell once you start, once start explaining people what it does, and we once you trot out some of the people who are doing what they're doing this, it's a it's an inspiring place in many ways. So like a Mayor Pete or I think I think Mayor Pete might be the ideal person to do this. So yes, for me, I'm just an opportunist. I'm looking for stories. I'm I'm looking for stories to tell that's surprise and

interests me that might surprise an interest to reader. And Trump was a gift because his willingness to entirely neglect this enterprise, two million person enterprise he's tasked to run, left an opening, uh to go learn about it. Huh. So last three bullet points from the fifth risk that I'm fascinated by either Tech or A and M. So anytime you see Texas A and M or Virginia Tech. All these colleges were formed on the basis of US

land grants. Yes, back in the mid nineteenth century, the same legist body of legislation that created the part of agriculture creates these these schools. And it's it's Lincoln's observation. I think that we need to make uh, we need to bring science to agriculture and let's talk about that because again from your book, in eighteen seventy two, the average farmer fed four people, and due to the AGG colleges and the A and M colleges, the average farmer

now feeds a hundred and fifty five people. Yes, so think about that. What that does is it enables a modern life that you free people from the farms and the burden of having to grow stuff and they can do other things. So of the labor pool used to be farm based and now it's single low, single digits tiny. It's amazing. And then the last one I just have to ask you about disposable diapers invented by NASA, is Yeah,

that was a throwaway line, that's right. One of the care archers in the book is Kathy Sullivan, who ran who was the head of the National Oceanic and Atmospheric Administration and so ran the National Weather Service under it, and she was before that, uh, the first she was an astronaut, and she was the first American woman to walk in space. Uh. Extraordinary characters. But this is in an illustration of my general point that you'd be amazed who you find in government when you start banging on

the doors quite fascinating. His latest project, for reasons unfathomable to me, a podcast by the name of Against the Rules. You're you're a writer, You're you're an author. Why dabbling in this podcasting? You're not feeling threatened, are you? Yeah, that's what I'm This is a competitive concern. By the way, I've listened to your whole first season, except for episode six, which wasn't ready for me. It's great. I really love it.

It's totally your voice. I mean, I don't mean you speaking, which is also takes place, but it's so Michael Lewisy. It's just infused throughout that each one of these segments, each one of these podcasts are like a chapter in a Michael Lewis book, which kind of raises the question, why not a book. It's a really good question. And the answer is that, so there's some kind of material

that seemed to be very naturally a book. Narrative material is what I really prefer, and that's where you have a character that you can follow from beginning to end. And that's most of the real books I've done that there's a it's the structure is not all that different from a novel. This was an idea, and the idea was referees in American life. It's it's people whose job is to maximize fairness, enforce the rules. Uh, not just sports referees, but judges and government regulators. And I mean

we kind of wander with the idea. But each this was essay material. This wasn't narrative material. Um each chapter and they have seven episodes, so there's seven chapters in a book. They all go together, but you wouldn't feel like you were reading exactly the same story. There's a theme that connects everything. Every they're all distincts. They're all distincts. It's like a bunch of short stories around set in the same place. Um, well not always. Some of its

New Jersey, some of it's Berkeley. But but it's right. But but I thought that this material. I've wondered about your medium. I've wondered about you know where that could pull off a podcast. It's a very lazy medium to do what I do, which is conn people to come in here and have a conversation with me. So I have it easy. Yours is a very well, it's narrative. It's narrative, but it's it's it's like it's a series of short stories that are essays that are strung together.

And I had the feeling that if we did it this way, it would feel more like one story because you have that person's voice there all the time, and it was just it was material. I never would have written a book about it. I never would have written a book about So let's start with the first episode about referees, which is kind of interesting. And referees in the nba UM I have found it amusing you bringing your son in, who who seems to not be thrilled

with with the officiating in in his uh place. For he played, he's moved on. He played for a Japanese Buddhist temple in the Japanese Buddhist Temple League, and he was getting thrown out of games. I mean, you got to get booted from fouling up. But he come out and he beat steam. ConA is here to be screaming at the referee ten years old or eleven years old, but he picked it up from the Warriors. That's where

he got. That's where he watch. He's watching, He's watching Steph and Clay and Durant, and they're screaming at the refs too, and uh, and so you know, that was one of the things that got me interested because he's otherwise. My son is actually very mild mannered, kind of sweet and detached, and but reffs drive him nuts and he's always sure he's a victim, like he's they're they're all

it's always against him, which which is preposterous. The guy on the court's like a Buddhist, He's not against anybody, and it makes no sense. So so um, you tell the story about the replay center in New Jersey, which

was mind blowing. So there's a bigger point. The bigger point is there's more friction now between especially the star players, but the players on the court and the coaches and the NBA reffs than there's ever been that it's regard the NBA is starting to regard this as a kind of crisis, like this problem, that this conflict, And of course this bleeds into the way the fans treat the reffs, the way the weffs are treated on the street. They need bodyguards to go back and forth to their hotels.

It's insane. But you also point out that the officiating has never been better. There's no question I mean, this is no question if you back away from it. Um. It used to be a handful of kind of dumpy white guys, a lot of whom went to the same high school, who were not who were there because they were part of a club, who didn't get any particular training. Who who who? Uh? Those are the refs, and they

were not checked, really checked in any way. We have now a highly professional, highly trained workforce that has video replay to go to to fix its some of its mistakes when it makes mistakes, acknowledges it makes mistakes. Uh, so we'll fix them. Has to review any era it makes after the games, so they're you know, they're told

where you made mistakes. In addition, they've been studied every which way for racial bias, for home court bias, for all these and they've been informed about their various biases. There's no way that referee is not more accurate than the referee of twenty thirty years. The home court bias was a real thing, much less so today than it once was. That's a really good example that it's a it's a good example of of why you want good independent refs. It's a good example of how independence gets

undermined home court. A large part of home court advantage was simply the ref's favoring the home team. And they do that because if you don't, you get screamed at, right, That's it's human behavior. They now do it much less. There is less of a home court advantage in the NBA. The home team is not as likely to win as a as it used to be, and the rests are mercilessly treated by the by the crowds. So, so let's talk about another segment because I could talk about that.

We'll come back to basketball later. So you talk to a woman who has an issue with her student loan. She's a teacher, and she believes she's qualified to get a waiver after ten years of the band. There's a program, so Congress creative program in two thousand seven to relieve the student debt of public servants, so public teachers, firemen, policeman, soldiers, and UH and set up you know, the criteria for qualifying for this program. And this is a woman who

did in fact qualify for the program. UH. Whose servicer navigant Um, a publicly traded, publicly traded company whose interest is keeping her in her student loan they get paid for thing here there. Um made it verstly impossible for her to get into the program. And and this program that was created, people have applied to it and should that they're probably another there's probably another another thirty thousand who are eligible who never even heard of it. Nineties

six people have qualified for the program. And the broader story was, this is a story about the Consumer Financial Protection Bureau. It's it's like, who should referee this space between big finance and ordinary Americans who are dealing with big finance and this it seems to me very obvious that this space needs a referee. In every other aspect of our consumer lives as a referee, there's a consumer

UH Product Safety Commission. Your toaster doesn't blow up because because because you've got people who are there who will pull it off the market if it does. Um And and the Consumer Financial Protection Bureau was created on the back into the financial crisis to essentially be a referee. And the story, I think the story of the Consumer Financial Production Bureau is how hard it is to create a referee in this world, even when it's obvious that

you need one. Because what's been happening the last two years this Trump has been gutting it. Uh. And they even tried to rename rename it the Bureau of something, just like a multimillion dollar project to waste money doing that, to make it less attractive to the consumer out there. Right, you talk about that, it's it's yeah. And by the way, the theme in all of this, which kind of is a theme in in In the Big Short, it's a theme in money Ball, It's certainly a theme and Flashboys,

is how unfair so much of this life is. And here's a person who just wants to make it right. That that is absolutely consistent throughout all of against the Rules and so many of your books. Or do you disagree? No? I agree? I agree in the curiously about the podcast was You've got? It's about that. It's the story of this character, the referee, who's under attack at a time when when issues of fairness seemed to be more heated

than they've ever been in American life. I mean, maybe not since since like a century ago, that the national politics, the political campaigns that gained traction, the Sanders Bernie Sanders campaign, of the Trump campaign. We're all all got their energy from anger about unfairness. Uh. And that in this environment, we're making it hard for referees. It's perplexing. I think there's an answer, there's a reason, But what's thesis. My pet thesis is referees have a harder time the more

unequal the environment there. Refereing is so if you have two people who are just who are basically the same power, money and so on, it's easy to ref that situation compared to having Lebron James versus bench Warmer and and I think it's a the pressure on One of the sources of pressure on referees is is inequality in the society.

Another source of pressure is technology. I mean that that when they screw up now it's all over the it's all over the internet, and and people who are upset by whatever the mistake was can gather together to cause more trouble for the resure. Look what happened pre Supable with the blown call. It's a really good example, right that those kind of calls have probably happened all the

time in the NFL. But we've gotten the forces that are there to assault the referee have gotten stronger and stronger and stronger, and there's no there's no counterbalancing force. To protect the referee. So you have the city of New Orleans out on the streets during the Super Bowl instead of watching the boycotting. That just wouldn't you know if that if a similar sort of injustice had taken place twenty years ago, it would have been people have been angry for a moment and forgot about it. So

what was your experience like doing the podcast? Did you enjoy it? Was it fun? Was it more work than you expected? Shall we expect another seven episodes next year? To tell us about that? That experience you had creating this? It was? It was both more work and more fun than I thought it was gonna big. I got into it because my two friends Jacob Weisberg and Malcolm Gladwell, who've created podcasting. Basically, it will be a lot of fun and it's not that big. It's not that hard.

In fact, you know this, this crap that you and I are doing, this is easy. This is I. I live a a gentry, gentrified life. What you did that serious production writing? Like there's you could tell a boatload of work one a lot of work. We didn't do it. Um, So I don't know if I'm going to do another season. It will be. That decision will be driven entirely by the reception to this one. If people were if I can get to people in this medium, I'll try again.

But if I can't, pointless to try again, because it really was a lot of work. So I could tell you so far you have an audience of one like I really enjoyed it. But to be fair, I listened to it a few weeks after our conversation in Miami in a I'm sorry, a few weeks after our conversation in Hollywood, Florida, and in anticipation of this, so I kind of crash course it. But I I really enjoyed it. Your your pal Malcolm Gladwell is doing a revisionist history.

I've heard that he could not tell you it wasn't a lot of work, because that sounds like a lot of work. Also, you know, he said afterwards that maybe he'd underestimated the amount of work involved. Right, I'm serious. This is fun for me. This is easy I put to I read all your books, I put some questions together. You do all the heavy lifting. My job is to

just get out of your way creatively. It's an interesting experience though that it's different from writing a book in a bunch of ways, but and bunch of little ways, and Biggs. One of the big ways is what when you can hear the voices of the characters. When I write the voice of the character, you know it's just quoting them. You don't really hear the voice. You don't hear that how what it sounds like. When you hear

what someone sounds like, you learn a lot. You know, you hear the woman whose student loans have crushed her life. Her teeth are falling out of falling her heads. You have three little kids, and she's a public school teacher, and she's grinding her teeth and they're falling out of her head. And you don't think that person's a fraud. You don't think that person is lazy. You don't think that person is anything but in a sad state that

no one should be in. It's an unfair situation. But in a way I could never get across in print because you just wouldn't believe me, But you believe her. So there's something about those voices that enable you to cut through prejudice are preconceived ideas that it's harder to do as an author. A lot of what I do as an author in a funny way. Is is preached to converted. I don't know how many minds I change when I am writing. Um, I think I think this form can change minds. Well, I have to tell you

I really enjoyed it. I hope you bring it back for a second season. I am looking forward to hearing the finished product. What I heard was like three quarters done. Um, I can easily I can strongly recommend it. It It was really interesting. Can you stick around a little bit. I have some more questions for you. We have been speaking to Michael Lewis. He is the author of you know his books and his new upcoming podcast is Against the Rules.

If you enjoy this conversation, we'll be sure and come back for the podcast extras, where we keep the tape rolling and continue discussing all things Michael Lewis related. You can find that at iTunes, Overcast, SoundCloud, Bloomberg, uh, Stitcher, wherever your finer podcast sold. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. Check out my daily column at Bloomberg

dot com slash Opinion. You can follow me on Twitter at Rit Halts chant on my daily column at Bloomberg dot com slash Opinion. Follow me on Twitter at Rit Halts. I'm Barry Riholts. You're listening to Master's in Business. I'm Bloomberg Radio. Welcome to the podcast, Michael, Thank you so much for doing this. I have to share a funny story with you, UM about the referee segment in UH in against the Rules, UH the NBA referee segment, and

you're the perfect person to tell this. Here's here's a little bit of NBA fish creating and behavioral economics all wrapped up in one. So I'm a long suffering Nick fan. During the Ewing Patrick Ewing, Charles Oakley, John Stark's Anthony Mason Era, I lived a few blocks from the garden, I had season tickets. I would go all the time. The officiating made me crazy. You mentioned in the podcast

you mentioned Larry Bird. Really, Michael Jordan was the guy who had his own set of rules unofficially, and and he got away with everything. He was constantly tormenting the Knicks. And then a few years later upcomes this monstrosity Shaquille O'Neal, and he's Patrick Ewing is a big guy Shaquille O'Neill is constantly bodying him, hitting him, fouling him, no calls, and I just couldn't understand how completely unfair and terrible

the officiating is. Put a pin in that. A second, A buddy of mine invites me to an n i T Invitational game at the Garden. This next hear of col Ledge players below the march madness. Uh, you know, I'm not a crazy college basketball fan, but they're on the floor. I'll go big. Joe Bessaker of Emerald Asset Management. He's six five, he's three hundred pounds, and his team is in in this this game. So we're sitting there courtside. You can't miss him. He's a mountain of a man.

And I'm watching the game and I have no vested interest in the outcome. I could not care less who wins losers. But these are fantastic seats. The players are great. I have a front row. Wow, this is awesome. I've never seen a game. I was up in sections two oh five normally courtside. Awesome, except for the fact that Joe Besker screaming at the ref cons relf. You're walking, Joe. That's one and a half stuff, that's a foul. What do you do it? No, Joe, the ball is part

of the hand. It's that and every and he's pulling his hair and and said, oh my god, this is the worst. And all of a sudden, I just had this, like fifteen years ago. I have a realization. You were that guy. I was that guy. That's subjective lack of ability to pull out my rooting for my team for any objective ability to evaluate the game. So take your son to a game with two other teams that he doesn't care about and see what he says about the officiator.

That's exactly right. No one ever has a problem if they don't have a root. If it's not your team, you you know, why is it that the officials suck with your team? But with the rest of the league where your teams that involved? And and why isn't it Both sides think the ref suck. Both sides think the refs have screwed them in some way. That's not possible. If somebody got screwed, the other person is the beneficiary of it. Uh, it's zero sum one. What's think right,

It's it's amazing. So we think for everybody who's upset with the ref. There'd be someone on the other side who's happy with the ref. But that's not the way it works. So as I listened to the first episode of Against the Rules, all I can think of was Big Joe Bessica screaming and me saying, you know, there's a subjectivity and a lack of of ability to separate

yourself from your desires and goals. And so then throw into that in addition to that, um the idea that you're making the rest are actually getting better, that they're actually making more accurate calls. Who's going to be furious when that happens. People who are used to getting the Bennett who used to getting calls. So the problem now in the Superstars are furious because they're not getting as many calls as they used to get and they expect them.

Uh So you describe in and you we we kinda passed by this too quickly before you describe in the podcast the Replay Center that every time there's a basketball game, not too far from where the high frequency co Located Traders servers are is a giant warehouse filled with hundreds and hundreds of screens, hundred and ten television screens and

nothing on them but direct feeds fib optic. There's fiber optic cable from that replay center in secaucas to the twenty nine arenas in the NBA where they play, and and the pictures on the screen are nothing but the cameras the angles of the court. So you don't get you don't get the scores, you don't you don't even you don't even know who's no commercials, it's whatever is

happening in that arena. So if you went and dance naked in the middle of the floor in the you know on someday when they see Jersey, Uh, no matter when you did. It's just constant. And so that center was built to defend referees from this growing chorus of outrage. Uh the reason, I mean fifteen million bucks it costs to build that center. And they only changed two calls a game, uh two calls. But it's to create it's just a weapon that to try to defend the refs

from these growing attacks. That's that's what you need it because if you don't have it, the refs. The refs are doing a pretty good job anyway, and they only turned changing two calls a game here. Um, but it's it's it's like it's needed in order to assure you're everybody that there that they know stuff you don't, that someone objectively is looking at this over and over and giving you the right answer. Because they don't. Nobody trusts

the rests anymore. So, So let's stay with basketball, and the shift gears on you away from the podcast and back towards the Undoing Project. You tell the story in the beginning about essentially the Billy being of the NBA, UM Daryl Daryl Morey Millam of the Houston Rockets. So so again there's a theme that seems to run consistently through your work, which is he was a really interesting guy in a challenging job who wants to approach it

very very differently. Tell us a little bit about how you discovered him and how that got worked into the Undoing Project. So he got in touch with me after Moneyball, came out to thank me because he thought the book was responsible for him getting hired to run a basketball team. Really, because the owner of the Rockets had read the book and said, and nobody is using data in the NBA

as well as it could be used. Uh, and there will be inefficiencies that we can exploit to And Daryl was part of the business side of the Boston Celtics, of the of the ownership group that had bought the Boston Celtics, and I guess he the owner heard about him and said, you know about these analytics, come here, and he gave him the job, so Daryl, and so from that moment, I started paying more attention to what

Daryl was doing in the Houston Rockets. And it's been riven ng because it's for him, it's like one big lab experiment. I mean, he's trying to win, but he's also trying to learn. He's trying to just kind of create new basketball knowledge. And where he came into the Undoing Project was here was a person who was sort of state of the art in in both both analytics and in sort of being aware of the mistakes people

make when they're making judgments about basketball or basketball players. UM. And then, by the way, the parallel back and forth between UM money Ball and the Undoing Project, what some of the scouts said in in money Ball is he doesn't have a player's body. He's got an ugly girlfriend like the cliches, and and prejudices were absurd. But there are different set of cliches with the basketball players, right and so, but it interested in me. Was here as

a person. He'd been running by the time I walked into his life to write that chapter in the Undoing Project. I mean, he'd been on the job for seven or eight years, and he had purged the operation of the kind of dumb scouting approach. To give us some some example and well, I mean he nicknames, yeah, we no

so so. But but even in his scouting, even with all smart people he had around the table, they had an incredible difficulty keeping the mistakes that the human makes when it's making judgments out of the room, and he had to be They built they would they built in kind of rules to try to guard against errors and judgments. So for example, they made when they saw when they

made a mistake, he would analyze the mistake. And when they made a mistake, they had opportunity to draft uh Mark Gasol, Paul Gasol's little brother of future NBA All Star um and one of the scouts pulled up a picture of Gasol on the Internet and he was without a shirt on and he had man boobs fleshy flabby boobs, and the scout gave whenever he was referred to. From then on, he was referred to as man Boobs, and

they didn't draft him. And you think that's why he thinks, there's no question in the fact that they gave him a nickname distorted everybody's judgment. From the moment he was called man boobs, there was no way they were going to draft. So he banned nicknames, said, no nicknames, it distorts our judgment of the person. Another example, he um he noticed that when UH scouts were arguing for a player,

they draw analogies. They'd say, he looks like Michael Jordan's he reminds me of magic, or you know, he looks like Shaquille O'Neal, or whoever it is. Invariably, he noticed,

Um the analogies were within the same race. Black guys always reminded people of black guys, and white guys arts mander people of white guys, and UH nobody thought, oh, a black eye reminded him of Larry Bird, or a white guy reminded of the Magic, and he thought that, he said, he banned right analogy analogies within race, so you can compare a player to another player and say, oh, he plays a lot like X if the guy is a different race. And he said, at that moment, it

just stopped. It just stopped. So I actually love my favorite part of the genesis story of the book came about because you you write the you right? Um? Was it money Ball or the Big Short? That Taylor and Sunstein right and say, hey, you guys love there's Moneyball. So they they that I had written Moneyball, and you know, I knew. I thought I knew what that book was about.

And it was about this this front office. It found using data better ways to value baseball players and baseball strategies and reveal that markets make huge misjudgments when they value people. When the book came out, UH, Richard Thaylor and Cass Sunstein Um wrote a review in The New Republic basically saying that I didn't know what my own book was about, and that what it really was was a case study and of Conomen and diverse Key's work.

And I went who, I didn't know who they were? Uh, And this was Danny Kneman and Amos Diverseky and Kneman had won the Nobel Prize in Economics the year I wrote Moneyball. Um, you have to be alive to win the prize to Versky had passed away or that's right, and uh and you, by the way, so I'm an interject here. You were uniquely situated to write this book for a number of reasons. And you you you've pushed

back about this, but you're wrong. And I want to get you to project because first of all, you had written money Ball, which was effectively case study in their works, sort of like because what they had done is classify all the mistakes that the Oakland A's were exploiting. But but more importantly, you had a relationship with Kneman or at least his family that you were barely even so in some ways, before I write a book, I do like to tell myself a story about why I'm the

one who should be writing this book. And usually the story holds up pretty well in my mind. In this case, the story I told before the undoing project was Yes, it's got a connection to Moneyball. Yes, I know the Tversky family. Yes, Danny Knoman lives up the hill from me in Berkeley. But where I hit up, where I where I hit a roadblock, was No, I don't know

a thing about the field. Of psychology and um and no, I don't know a thing about the origins of the state of Israel and and the Hebrew University department in which all of this stuff got cooked up. And now with most things I read, most books, I mean, part of the joy writing the book is having to learn new things. So that's not you know, of itself, that's

not the problem. The big problem was I did have a sense, with these two characters condom in Diversity that I was I was writing about people who were so much smarter than I was, that I was never going to be able to get my mind around them. That that that was that it was gonna always feel like the B student writing about the A student. And that

caused me to hesitate for years writing the book. Had I spent I mean normally from the moment I just get a get like a Jones for a subject, to the moment I got a book out, it's like three years, and in this case it was nine, and I shoved it aside and said I wasn't going to do it four or five times. So so what made you finally pull the trigger and say? People started to die? The people who were helping, the people who were helping me

with the book. I mean, their colleagues there. The story was dying, and I looked around and I asked myself, well, who else is going to write this? And it became quite clear no one else is gonna write it. And it's effectively a love story, isn't it is? It's a love story between the It's a platonic love story. There were these two guys, each of who each of them is a great literary character, and together it's this combustible, wonderful force, and it's it's about that relationship and how

that relationship, you know. I framed the book in my mind lots of different ways and lots of different moments. But one of the ways I framed it for a while was it's just about the power of collaboration, to which two minds can do together when they really fit together. It's just so different from what mind one mind will

do on its own. One plus one is three. Was that feeling, you know, And and you really bring it so so richly to life, the story of them being behind closed doors and just peals of laughter hours and hours at a time, and everybody wondering what the hell is going on? And also but it's a Israel makes academics much more interesting than most other places because the academics are forced to interact with the society. Everybody's gonna

be useful, everybody's got to be in the army. So they were drawing there their insights from rich interactions with the world around them, and that that helped bring I mean, what was would otherwise be a kind of a dusty academic story to life. Well, the whole thing with Tversky and the fighter pilots and the reversion to the mean like too, there's there's still a giant leap that gets made from when you're yelling at a um enlisted or

pilot or what have you. Well, if they're underperforming, they will eventually mean revert, and if they're overperforming, they'll mean reverts. So praise doesn't help, and yelling at them seems to work. Yes, that that this is conomans insight, that that life has

this horrible feedback loop. This lesson. It teaches us that we get response to our punishment but not to our praise, because because you're praising someone when they're naturally performing better than usual, and you're punishing them or criticized them when they're naturally performing worse than usual, and mean reversion will make will tend to make them better after you've criticized them, and tend to make them worse after you've praised them.

So so I took, I actually took. When I learned that from him, I changed the way I coached little kids. I basically stopped. I stopped with a criticism except except when it was really lathered in and when it almost sounded like praise. And what was the result when you as much of the happier environment? Sure anything I said ever had any effect, but everybody was happier. That that makes That makes a whole lot of sense. Let last

question on Knomen and Tversky. Um, they describe the role of luck in life, and they really emphasize it a lot. Tell us a little bit about about that part of um, their beliefs, their writings. How important is luck to who we are and how successful we become? You know? They they I think the way they would put it as that people people have extraordinary pattern recognition abilities, and they see patterns even in randomness. Uh So they don't They're

not good at seeing randomness and understanding what randomness means. Um. I mean you saw this with the that was that was sort of one of the themes that ran through the Moneyball story that one of the things that Oakland A's front office was able to do was exploit other people's misunderstanding of randomness. That if a picture pitched a few innings and pitched them really well, uh, they start to get over valued a very small sample with lots of randomness baked into it, um, and they could sell

them from more than he was worth. Conversely, someone who had a short bad streak would start to get undervalued. UM. But the so so that the general idea that that Diversky econom and do play with a bit is is it people are mistaking a random event for a meaningful event and vice versa. Um. The broader thing that interests me is the way people dismiss it in their lives. I mean, there's so much luck in life, and people after the fact are really good at telling a story

about how it was inevitably so um. Kind of. Traversky had this wonderful line that, um, that life isn't a point, it's a cloud of possibilities, and that that at any given time, there's anything would have happened and just because it did happen didn't mean it had to have happened. So we we we we we're sort of like deterministic machines in a probabilistic world. There's there are certainly elements of that, but there's also a whole lot of ego that if it's luck, then it wasn't my genius and

my hard work and I made this happen. If you're gonna say it's lucky, you're taking my accomplishment away from me. Or so some people seem to behave absolutely I mean it's a really flattering successful people are people who feel successful, don't are I think, probably less likely to acknowledge the role of chance in their lives. Right. Uh, I don't completely get this because it's I'm not sure it actually leads to happiness to ignore the role of chance in

your life. I think that I think that a great source of happiness is gratitude, and if you just think you did it all yourself, you have nothing to be grateful for. Uh, it's um And I think like seeing just how many different ways the ball could have bounced does leave you more grateful when it bounces your way, and that leads to better happiness. I can tell you from experience sitting in this chair, I'm shocked at the number of really successful people have brought up the concept of,

you know, you gotta get lucky. Sometimes you get you get a lucky bounce or a good call, and it's life changing. And it's nice to see certain people recognize that. And the converse is also true. Unluckiness can have you know, oh died in fact for sure. So let me ask you about a book you did not write. Right. You did this giant article on long term capital management and with all due respect to Roger Lowenstein When Genius Failed,

which is one of my favorite books. You that article you did for I don't remember who was the New York Times magazine it well, okay, that was a monster piece. I I very specifically remember that that could have easily you become that sort of book. What Why did you not go down that rabbit ale? Um? I think I had an aversion of going back to Wall Street from for yet another book at that time. Was it too soon? It was too soon? And um I also felt like

a magazine article. In a magazine article, I had said everything I really wanted to say about it. Uh, And didn't have that much more interest. You know, often I start out, almost always the book start out as magazine pieces. You don't think, oh, I'm going to write a book about that. You you think, oh, that's interesting, or write a little something about it, and then it gets even more interesting. So it's three words mushrooms, and all all of a sudden you realize I've written ten thousand words,

but really I wish I could write eighty. And that didn't happen with that subject. I had already written a bunch of it in Liars Poker, the stuff that might have fleshed it out into a book, And it was about this very narrow, peculiar thing that happened to those guys at Long Term Capital, and I just thought it would be useful to try to explain it to a lay audience in a way that it wasn't being explained. And a lot of those players from Solomon, right, they

were my colleagues. I knew them quite well. Um, I mean really, there were people I talked to you every day. So yes, uh, if I had one of the alternative paths in my life, if I had stayed at Solomon Brothers and managed to remain interested and actually continue to do well. I'd have been there. I'd have been there. I wouldn't have been that one would ever let me trade anything, but I would have been I would have been their sales arm uh, because my that's where my

boss was. Um, that's amazing. That's what you could have been ltcms uh institutional sales right. Yes, that's that's a different career path, different career path, and it would have been. It would have been, you know, as interesting a life in the financial sector as you could have had, very lucrative until it all went to zoo and then all of a sudden. Yes, they didn't make the turn at the end. They sent the record on the straighta way,

but they So I have a question for you. My question for you is, I mean, so I'm now and I'm just an interloper in on Wall Street. I when I I dip back in every now and then when it seems to be a story to write, and then got to educate myself all over again about what's going on because they don't follow it that closely day to day. If you were to dropped me anywhere now into the

financial sector to write stories, where would you drop me? Wow, that's a really interesting question, Um, stories that you're interested in, Our stories that you're interested in. Well, first, you know, I'm a giant behavioral finance junkie, so you've already covered that space and in two or three books. UM. So there's three or four things that are are kind of intriguing.

Let me let me take them off. I'm fascinated by people who have a fundamental flaw in their model of the universe, and for whatever reason, they become gold blow bugs, they become bitcoin fanatics, they become short sellers. Not that each of those groups are delusional, um as a as any individual can be rational and like gold or rational

and by bitcoin or whatever. But but these like little society, these little communities grow up around these concepts that like, if you think about bitcoin as no government and we're gonna well, when the government really goes to hell and there's no electricity and running water, good luck getting that little thumb drive to buy you you know the the you know what I mean, the there's no the rationality sort of fades at a certain point. So that's one

area I'm fascinated about. It's um And there was a book called The Heretics written by an Australian and it had a different name in the US. I'm drawing a blank on it. But all these people flat earthers and and Holocaust deniers and like just you know, really crazy. Turns out they're not crazy. There's just something wrong with their basic model of the universe, and everything built on top of it is jana that's gonna collapse. So that's

one area. Um. The other area that's really fascinating is so there's parts of Wall Street that's incredibly successful, the rise of indexing, the rise of ETFs UM, the move towards lower cost, and everybody in those spaces are petrified that they're going to be made obsolete, even though they're the drivers of this. So we're replaced by robots. Yes and no maybe, I mean there's this I'll give you

another thing, and you you I don't understand that. Why if it's if indexing is obviously a huge success, etf a huge stess, why what are they worried about? So so if we just wiped out or or if we fill in the blank indexers, passive e t f UM manufacturers, low cost advocates, if we just completely disrupted the old guard, then clearly the acyclical, who's going to come along and

disrupt us? And then the third area that I would drop you into the issue of income inequality and wealth inequality that hearkens back to the pre nine crash days, is very much tied into what you you're writing about fairness and what you're seeing in about government. And we're in an alternative timeline. We've kind of jumped our timeline. We're on a different track. And like you, if you were a Star Trek fan, you remember the bearded Spock

in the Alternative University. So I kind of feel that we've jumped the timeline and this is in our universe. We we need to get back to the timeline where the United States is the country that defeated the Nazis, and that we haven't demonized government, and that my goddamn street can be isn't filled with potholes because Grover Norquist hasn't demonized the idea of how dare government pave the roads? What are you doing? It's confiscation wanting to have an infrastructure,

how dare you? Like I think everybody should take blown out tires and broken axles and dump them on Grover Norquist's front lawn, so it looks like a junkyard a thousand feet high of broken car parts. And but hold hold that pet peeve aside the the income inequality, the

wealthy inequality. There's this fantastic chart I'll email it to you that you ask people how badly they think the wealth distribution is and how much does the top of the top ten percent, of the top one percent, top tenth of one percent owned relative And they lay out this this picture of this really unequal society, and they're off by like a factor of a hundred. It's much

worse than people really believe. It's astonishing if people knew how bad it was, right, And I would drop you if if you're gonna say, tell me what next book to write. But I don't know if that's so much Michael Lewis book as something that would color a Michael Lewis book. That's right, that's right. No, I think I'm the whole. I think inequality is going to be the backdrop of the next thing I do. I haven't figure out what it is, but it does seem the subject

of our time. It does seem, it does seem a subject that infects everything else. You name the topic climate change the books at the moment, uh that our ability to grapple with it is hamstrung by inequality. Uh now, now drove the Venn diagram of inequality and then drove the Venn diagram of all the cognitive eras and behavioral

issues that condamin In Tavarsky you have written about. And maybe you can explain to me why people don't understand what's in their own best interest, why they consistently are bamboozled by politicians. And I'm not picking one side of the other, but it's pretty clear that most of America, or at least tansent hand, some millions of Americans every election vote against their own interests. There an economic their own economic interests, right and and so what what matters more?

Some gen d up you know, social divisional issue that so if so, my issue tribal identity matters a lot I gotta do is go to SEC football game, for sure. But but there's a difference between going with a football game and saying, look at West Virginia and the cold people, we're gonna bring back Cole No, you're not that ship as sale. Wouldn't you be better off if we brought you solar jobs or some other retraining or is everybody is p t bottom right? Is everybody a soccer? Enough

enough far enough far that that's quite shocking. Now we're getting into depressing. So so, but there is a giant overlap between your interest and behavior stuff and unfairness and how it manifests itself in society. So what can be done to fix that? I'm that that's the next book. Go Mike, go fix it? Right, go fix it? Can

you fix us? We need some help? Don alright? So that'll be uh in So all right, now that we've depressed the hell out of everybody, let's get to our speed round, our favorite um that you refuse to I didn't want to see the question. You wanted to be kept objective, objective. I used to want to have to steal surprise. All right? What was the first car you have? Our own? Make earin model? It was a nineteen seventy five c J five jeep right yellow. Interesting? Um, So,

I don't know if you can answer this question. What's the most important thing we don't know about you? I kind of feel like you're an open book. What don't we know about you? I am? I am an insane sports dad. Yeah, you kind of wrote a book about that. No, no, no, I didn't really write about that. No, no, you kept a lot out of that. My peak insanity is when I'm watching my kids play sports. That is peak insanity.

And it's the refs make you crazy. No, it's not the ref not no, no, no, it's not the refs. It's my kids. You want them to do better. Yes, I'm just too invested, so so I try to hide it, try to hide it. I'm not I'm not doing anything embarrassing, but I am pacing. I'll walk, I have my fitbit. I'll do twenty thousand steps in the outfield during a football game because I can't be near anybody. It's peak insanity. Really, that's quite that's quite fascinating. Um, your mentors who mentored

the way you thought about finance writing. So the people who were most influential were when I was a little kid. My dad easily is the most and then after that the baseball coach I wrote about, Billy Fitzgerald just kind of like spirit how you approach life. When when I finally got to putting words on a page for a living, the first editor who really got inside my head was Michael Kinsley, the editor of the New Really yes, uh,

and it was. And the message he delivered was a really simple message, is like, what are you trying to say? Like kind of get rid of the fancy stuff? Does tell me what is it? Does that make any sense? Uh? And just he taught me a certain ruthlessness towards my own pros. That's interesting. Tell us how you invest your own money, very very simply. I mean, I do think that I do like to spend as little time as

possible thinking about money. So so it's so it's it's making some broad decision about asset allocation, meaning the proportion of it's sort of like I've been I have in the stock market, so and then probably ten in California mun Muni bonds and the rest and kind of cash at any given time bonds just cash. So uh. And the stock market stuff is either index funds or Berkshire Hathaway. Now that's kind of interesting because you used to kind

of dunk on Warren Buffett. I dunked once on Warren Buffett, but it made me famous because no one else would do it when I did it. Um, I'm invested in him for the same reason I dunked on him, and that was that is he's got he's got special deals. His capital gets a special treatment in the market, So you want to be on that side for free. Uh So you know, And and I quite admire him and like him and uh and like the idea of him, and I think his model of the business is going

to survive him. I think, oh, I think they've kind of got it right. Yeah, They've put together a great team there, and their capital will continue to be highly valued. So so anyway, he's my when that's when I'm feeling sexy and I don't want to buy just an index fund. I'd buy some Berkshire Hathaway. So tell us about your favorite books. This is everybody's favorite question. Non Michael Lewis books. So these aren't the best books, they're favorite the books that have hit me at a time in my life

where they just stuck with me. Huckleberry Finn when I was seventeen years old, Confederacy of Dunces when I was eighteen or nineteen, The Movie Goer by Walker Percy when I was seventeen or eighteen, George Orwell's Collected Essays when I was maybe one Tom Wolfe's Radical Chic and Mao Mauting, the Flatcatchers, and then the Right Stuff when they came out basically when when I was a teenager, All all of it, almost all of it is stuff that hit

me between the ages of fourteen, fifteen and four since since I became a writer. Um, I just read more critically. It's hard for starter for stuff to get in quite as deeply the stuff I love when I read it. But it just doesn't. It didn't infect doesn't infect me in the same way. Quite quite interesting? Tell us about you say quite interesting? Does that mean it's not interesting? No, it's just a verbal tick to move on to the next question, as opposed to saying nothing and move on,

which is what someone who is professional would do. But after two hundred and fifty of these, I have now worked my way up to mediocre. I'm at that point in the Dunning Krueger curve. Okay, Um, tell us about a time you failed and what you learned from the experience. By the way, I just get by on witt and charm and actual skills are nowhere to be found. A time I failed and what I learned from the experience? Um, I mean there, there's lots to choose from. Pick one, um,

all right, I'll pick one. In the first grade. In the first grade, we walked over to the library every every day for a library period. In the library had these chairs that kind of holes in the back, you know, cut out back where you're back on a lower back. And I spent the whole library period wondering if I could climb out of my chair through the hole rather

than just normally getting up out of it. And at the end of library I dove through the hole and got so that not only the whole class have to file out past me as I'm wearing this chair, but the janitor to come with like a hack stack and cut the chair off me because they couldn't pull it off me. And I'd say, what I learned from that is, if you're gonna do something really radical and different, do it alone in your home, and don't do it in front of a big crowd. But that's the first time,

that's right, that's a sample set of one. So if you were successful, you would have been the hero and every would have been talking about. I think the upside of success in that case, it's probably pretty trivial compared to the downside of failure. It was just mortifying. It was mortifying. So I know what you do for fun, which is basically coach your kids and and do some travel. But what what else do you do for fun outside of that? Um? I hike. I do. It's endless, endless

kind of activity. Play tennis. Um, I write, I ride bikes with friends. I don't know. I live in just like the best place to do this kind of stuff, to Bay Area. Uh so, my my work life is so sedentary, you know, it's sitting there writing. I can't run and right, so, uh, everything else tends to be just like active. I go off for a week every year with five guy friends into the woods. Uh. We have this annual trip that we've been doing for six or seven years, like the best week of the year,

just hiking and biking in the wilderness. Um, that sort of thing. Simple. I'm not I don't have hobbies. I've never had. Hobbies. Is a hobby that kind of I like to do this stuff I like to do, but I don't really have I only have hobbies. I don't collect anything. I don't collect stamps. I don't I don't don't. I don't know. You know, I don't collect books. I don't. I read a lot, but I don't know. I'm not interested in cars, stuff like stuff doesn't interest me. All

that experiences over. That's exactly right, right, That's Thomas Gilovich and Alan Krueger both said, if you want happiness, spend your money on experiences. Don't you spend your money on junk? And I think that life experience bears that out. It makes me happier. Stuff doesn't make me happy. So a millennial comes to you and says, I'm thinking about a career in either finance or writing. What sort of advice

would you give them? Um? If someone put it that way, I'm thinking about a career in writing when they're young, I'd worry about them as opposed to I really love to write, I really love to write. What do I do? Um? And I tell you why? Because so many young people who have come to me saying, more or less I want a career as a writer. More or less they've said, how do I get to have your life? Uh? I asked them, do you do you actually want to write? Or do you want to be a writer? And most

of them want to be a writer. They don't act, have some romantic size notion about what it is all about, and you get to go on TV and talk about your books and you know all that stuff writers do. But so if you actually love to write, you're just gonna write. And uh, just then I tell that person, Uh, go do something to interest you and write about it. Let's start there. Uh. The in finance, I don't know what to tell people because it's so moved on from where I was when I was coming in. It doesn't

it's not an obviously joyful industry. There was quite a bit of joy in it when I rolled. I was gonna say, there are periods where it's more joyful and periods, and that's on where you are in it. I mean venture capital world, some of the hedge funal world, some of the private equity world that seems kind of fun um, working for a big Wall Street bank that seems freaking miserable. Well it was fun back in the day. But but you know, people wrote books like mine and they shut

down the fund. Uh because it's you. It's partly my fault. It's just like just generally working in corporate publicly traded corporate America does not my idea of fun except for those stock options. People can make real money with that, but that's different from fun for sure. So so I wouldn't I guess if I were if like my son said to me, Daddy, I really want to be a Wall Street person, I would say, I try to ship him down to Silicon Valley into a venture capital firm

and see if he could be useful there. I think something like that, What do you know about the world of finance, trading, investing, and writing today you wish you knew thirty years ago when you were first starting out. Um, ask the question again. Let me think about it while you asked that question again, What what do I wish I knew? So this isn't I wish I knew to

buy Amazon at a dollar? It's what knowledge do you wish you had when you began your career year in finance that would have been helpful along the thirty five years that perhaps you learned much later down the path. You know that even the smart people on Wall Street

didn't really know what they were doing. I took the biggest mistake I had in my head when I left Solomon Brothers was that the people at the top of Solomon Brothers, the people that the people in the middle of the trading had some mystical knowledge that I lacked. And I mean, the thing that shocked me the most about the financial crisis with it was that these firms made these stupid, stupid bets that in these you know, these zero sum bets, that they were all long one

way or another the subprime mortgage market. Um, it would have been there had been some interesting writing to do about those firms between the time I left the time I came back for the financial crisis, if I had

appreciated just how moronic the the moronically they were managed. Uh. What's what's interesting is though many of those same people came to you and tried to convince you to stay in finance, and you had enough confidence in your own understanding of the world to say, thanks, but I got other stuff to do, you guys, But I always had other stuff to do. That was my so for me. For me, it was a really lucky detour uh into Wall Street because it gave me material, But it was

always a detour. I mean, I could just as easily have gotten I don't know, uh, job selling insurance. I mean I was going to need a job doing something and it just was really lucky I ended up in Wall Street. I didn't have any particular passion for Wall Street. Um, it just worked out that this worked out that way, and so so, but there's no like, is there any great I feel like, Um, my ignorance has been a

huge advantage to me. So knowing more starting out would have been a disadvantage because it forced you to go do the homework, and that homework each each of that homework segments became a book. Yes, that's right. So, UM, I don't I don't actually honestly wish for some prior knowledge of any of the stuff that, especially in finance. So last question about Solomon Brothers. It was a gentleman in the training program with you, named Hans huff Schmidt.

You both left the same training program in New York, you went to the same London training floor. You're both supervised by John Merryweather. And you had written that over the years you tracked your progress by how well you were doing relative to what Hans huff Schmid was doing, and you frequently felt, God, if I would have stayed there, Look how much money he's doing. So he's doing so well. And then one day, long term capital management blows up.

He ended up there where you said you would have gone, And now his salary and and net worth plummets to zero, and you wrote, I was once again satisfied to be paid by the word. Do you remember writing that? I do remember writing that, and I don't want your audience to think that. I was actually like stalking Hans Hofschman, wondering how much money he made each year. I would just every now and then here that did you hear that Hans Hoshman is now worth fifty million dollars? And

I think, what the hell you want? That was because that was my alternate, that was my thro the path I would have maybe had. And I never actually thought I wished I had done that, because I loved what I was doing. It wasn't quite that, but it was like, that's the opportunity cost. The opportunity cost of being a writer is that I don't have Hans Hashman's fifty million dollars, and when that went to zero, it made being a

writer feel even better. Now I think the truth is since then hams Har Harshman has gone and remade his fortune, so I probably am still. I'm still finishing second here right I gotta I gotta get some cash over to Hans because he seems to know what the hell he's doing with capital. Michael Lewis, thank you for being so generous with your time. We have been speaking with author

and podcaster extraordinaire Michael Lewis. If you enjoy this conversation, We'll be sure to look up an inch or down an inch on Apple, iTunes, Stitcher, Overcast, Bloomberg dot com and you could see any of the other two hundred and fifty or so of these conversations that we have had. Um we love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. I would be remiss if I did not thank the crack staff that helps put together these podcasts each week. Modina

Parwana is my producer slash audio engineer. Our bookers are Taylor Riggs and Michael Boyle uh A. Tica val Brun is our project manager. Michael bat Nick is our head of research. I'm Barry Ritolts. You've been listening to Masters in Business on Bloomberg Radio.