Liar’s Poker, like many a writing debut, is an accessible yet detailed and revealing autobiography. The book, published in 1989, chronicles Michael Lewis’ two-year career as a bond salesman at Salomon Brothers, Inc., one of the largest and most influential investment banks of the 1980s.
Over the course of the story, Lewis reveals many tricks of the trade, general know-how, and means from the world of Wall Street, illustrating how he came to understand the caprices of the Wall Street firm culture and gradually grasp investment trends, ultimately giving readers a relatable and comprehensive reading experience. Told from his unique professional perspective, Lewis’s detailed and dramatic account of the history of Salomon Brothers at its peak also includes a profound description of the U.S. stock market crash in October 1987, wherein he explains how Wall Street maintained its development during the period.
The card game which originated the title appears throughout the book as a main metaphoric theme, with Lewis using it to describe his work experience– (whose timeline spans from his accidental employment and training to his becoming a star trader able to mobilize millions of dollars with a single phone call).
“The Game: […] similar in spirit to the card game known as I Doubt It […] The bidding escalates until all the other players agree to challenge a single player’s bid. Then, and only then, do the players determine who is bluffing whom.”
In addition to presenting a comprehensible approach to fundamental trading ideas and concepts, Lewis’s nuanced prose allows the reader to get a sense of each character’s personality. And, perhaps most significantly, Lewis’s unique brand of humor (mostly conveyed through his personal anecdotes) separates Liar’s Poker from the standard canon of books covering Wall Street and effectively establishes it as an enjoyable experience in its own right.
Liar’s Poker begins with a detailed telling of the creation of a trading department specializing in mortgage-backed securities, which goes on to gain Salomon Brothers its monopoly in Wall Street.
We meet Michael Lewis after he has just received his master’s degree from the London School of Economics. After becoming acquainted with the wife of an executive director at Salomon Brothers by chance at a British Royal charity dinner, Lewis begins a five-month training period at its New York headquarters and joins Salomon London as a bond salesman.
Like the vast majority of young people who have just entered Wall Street, Lewis, an Ivy League-educated man, feels a huge cultural shock; the atmosphere of the trading hall in the 1980s breathes three words: high energy, high intensity, high profanity. But he soon learns that this intensity is necessary and standard considering the high stakes of the environment; every single hand holds more than a million… every moment the telephone light is flashing… every moment those millions could be lost…
We learn that the monopoly held by Salomon Brothers in the 1980s was the result of a breakthrough in the process behind mortgage-back bonds, wherein the prepayment risk is reduced for the seller. This proved to be highly efficient? Cheap? Successful and influential on other firms. The department’s monopolization of the mortgage back bond allowed Salomon to become the most sought-after potential employee on the Street.
The young age of most of the traders in the mortgage department contributes to their vigor and ambition, which helps to promote competition in the workplace. However, this competition introduces two faults that lead to the ultimate demise of the department, and consequently Salomon Brothers as a whole. The first is that the success of the department leads to jealousy and contempt from other department heads, resulting in the firing of the head of the mortgage department; the second problem is the trader’s dissatisfaction with their salaries and dissatisfaction with what they claim is a lack of recognition for their contributions to the firm’s success.
Despite the already high wages the traders receive, Salomon loses its workers to even higher paying firms. Naturally, the firm’s monopoly leaves with its workforce, and it is finally surpassed by the other bulge bracket investment banks. Drexel, once Salomon’s competitor, cements its status in Wall Street by introducing the junk bond, further sealing Salomon’s doom.
Believing the junk bond to be a passing fad, Salomon misses the opportunity to capitalize on its invention and ultimately loses the rest of its workforce to competing against firms who do. Lewis is among this horde of deserters; however, instead of transferring to another, more successful firm––or even continuing in Wall Street––he decides to take his chips and go home.
“If there was a single lesson I took away from Salomon Brothers, it is that rarely do all parties win. The nature of the game is zero sum. A dollar out of my customer’s pocket was a dollar in ours, and vice versa.”
Through Liar’s Poker Lewis is able to present the cacophony of Wall Street and the complex bond trading scene to readers in simple terms. Despite this simplicity and accessibility in the tour of Wall Street, the characters portrayed are fraught with complexity and nuance, allowing readers to see each character as a real, three-dimensional person with idiosyncrasies and vivid character traits. For example, one trader needs to take off his/her cigarette filters before smoking. This level of detail is indicative of Lewis’ personal experience with the people on whom these characters are based. And such level of detail further plays into the accuracy of the book.
Despite the usual exaggerations for dramatic effect and to tie the story together, the book presents a realistic description of the trading market and traders at that time––the latter being particularly accurate; the trader is indeed a reckless and rude animal. And, though there have been many variations over time in the way people relate to each other as well as technological advancements since the book’s release, the core message is not outdated. The ethical problems in Wall Street still exist; money is always the priority. Lewis’s two-years at Salomon also enables the reader to understand Wall Street from its foundations, with details and attitudes that bring the world to life rather than merely recounting its history.
However, his subjectivity does come with a price. Considering the work as an autobiography, and not an objective history, is necessary. Though Lewis offers a detailed history of the development of Salomon’s mortgage department while mentioning his own experience as a trader, he does not seek to present a comprehensive description and involve himself as part of the story. And, although he does mention some of his interactions with his colleagues, they are either talked about very briefly or through a subjective and biased view. In essence, it’s hard for readers to grasp a broader, more objective perspective on Salomon Brothers at that time. For a more in-depth description of Salomon’s real intellectual machine, consider Emanuel Derman's My Life as a Quant or Richard Bookstaber's A Demon of Our Own Design. And for more generalized writing on Wall Street, consider Lewis’s modern classic, The Big Short, which depicts a wider range of events and covers Wall Street as a whole.
All in all, it’s very hard to balance keeping a detailed description and a panorama; the judgment of the value of perspective often depends on personal taste and what one expects to learn from this book. It may seem to just be about a segmented history of speculation in a way: we watch how the cruel, selfish, and elitist corporate culture is combined in a deformed way. And how, in the end, this led to Solomon’s loss to himself, where it disintegrated and merged into Traveller, followed by Citibank. And sometimes we need to read this because there are no new fanatics or new games—history can tell us about the present. Any game, no matter how illogical, will attract countless number of people as long as they can taste the profit. And the unlucky one will always be the one who takes over the game last. Those super players who act without abandon are always the ones who make a fortune. Just like Lewis said, “Any player unaware of the fool in the market probably is the fool in the market.”
Write something about yourself. No need to be fancy, just an overview.