The Big Short: Completing the Financial Crisis Trilogy

I watched The Big Short on its recent opening day, and together with Charles Ferguson’s Academy Award–winning 2010 documentary Inside Job and J.C. Chandor’s remarkable low-budget first feature Margin Call (2011), it forms a trilogy of excellent and thought-provoking movies about the global financial crisis.

The Big Short follows Michael Lewis’s 2010 book with the same title very closely. Right from his debut book Liar’s Poker (1989) Lewis has made a career of combining lucid explanation of the complexities of modern finance with portraits of protagonists who are unique, idiosyncratic, and memorable.

In his book The Big Short (2010) Lewis explained mortgage backed securities, collateral debt obligations, and credit default swaps – the financial instruments responsible for the bankruptcy of Lehman Brothers, bailout of AIG, and near-collapse of the banking system. He focused on four groups of contrarian hedge-fund investors who had the foresight to see the collapse coming and who made bold bets on it. And, even by Lewis’s own standards, the big shorts, one of whom was an initially undiagnosed case of Asperger’s Syndrome and another honest to the point of rudeness, were idiosyncratic.

The four groups of big shorts in the book were each given their due in the movie, which makes for a sprawling plot and ensemble acting from Christian Bale, Steve Carrell, Brad Pitt, and Ryan Gosling, as the head man in each group. The movie also explained the financial instruments in ways a mass audience would understand. For this purpose, Inside Job used an omniscient narrator, frequent charts and tables, and commentary by leading academics. That approach would have been too pedantic for a docudrama. The Big Short had its characters step out of their roles to provide explanations and also used celebrity asides delivered by Margot Robbie in a bubble bath, Anthony Bourdain in a kitchen, and Selena Gomez and behavioral finance professor Richard Thaler at a casino. Concrete metaphors such as a rickety tower of building blocks, a fish-stew with three-day old halibut, and a casino where people make bets on Selena Gomez’s bets and on each other’s bets on Selena Gomez’s bets, all delivered the essential content that enabled the audience to understand what the big shorts were shorting and why.

Lewis’s sympathies very clearly lay with the shorts because they had the insight that there was something wrong about the housing bubble, the tenacity to do the research to what the problem was, and the boldness to make big short bets based on their analysis. The movie portrays them in exactly the same light, especially in contrast to their counter-parties, who are portrayed as crooks or fools or both.

The movie’s writer and director, Adam McKay, has made his career in fast-paced comedy (Anchorman, Anchorman 2), and that spirit infuses the movie. Ann Hornady of The Washington Post called it a “madcap montage of expository speeches, hyperventilating meetings, [and] revelatory encounters with corrupt brokers and their hapless marks.” The New Yorker‘s critic Anthony Lane sums up McKay’s method as “tak[ing] the choppy, skittish, and impatient mood of modern comedy and past[ing] it onto the story of a fiasco.”

Michael Lewis’s writing has always been characterized more by irony than by outrage. He is no Michael Moore, and has never claimed to be. He concludes his book questioning why it was that those who had been on the losing, or long, side of the big bets on mortgages also walked away rich. And he added an epilogue of a lunch with an elderly John Gutfreund, former President of Salomon Brothers. Lewis believes that by converting Salomon Brothers from a partnership to a public corporation, Gutfreund ushered in an era of excessive risk-taking and greed on Wall Street that led to the financial crisis.

The movie concludes less subtly with screens showing the extent of the real human suffering caused by the recession – people who have lost their homes and their jobs. Some reviewers, notably Anthony Lane, felt that by portraying the shorts as underdogs of a sort, the movie provoking the audience’s sympathy for them, undercutting the outrage that these final images were meant to provoke. To quote him a second time, “The Big Short is a feel-good film about doom, and it pays the price. It bets on our indignation, and loses.” At this point, I’m not sure. Ongoing critical and audience reaction will tell whether Lane assessed both the film and the audience correctly.

The semester is now over, and I am now looking back on my Management and Narratives course with a view to what I will do differently when I teach it next year. Judging by the student evaluations, the course was entirely successful, but it can always be better.

I’m now contemplating focusing on the financial crisis and showing the complete trilogy. They provide a diversity of genre: a documentary, a fictional narrative, and a docudrama. They focus on different sets of participants in the crisis: policy makers and advisers, traders scrambling to survive, and contrarians striving to make a killing. And they look at a societal disaster from a number of different perspectives: a complete condemnation, a critique of the morals of the Wall Street players, and a measure of admiration for the contrarians. By looking at all three perspectives, we will have a better sense of why the crisis happened and how we can avert a recurrence.

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