The Investment Banker’s Bible
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“You don’t get rich in this business. You only attain new levels of relative poverty.”
It’s often the case that in a group of friends, I am the only person who works in the financial sector. Which means I am very prone to hearing the phrase “Where can I make big returns quickly right now?”. To which I reply that there is no such thing as a large guaranteed return, for whatever you aim for in reward you must balance with higher risk. As unfortunate as it sounds, it is based on the principle that arbitrage (a guaranteed return with no risk) is rare and quickly-fleeting in liquid markets. However, these rules are thrown out the window when you work on Wall Street, where the potential for returns is boundless if you are smart enough.
The book ‘Liar’s Poker’ by Michael Lewis snaps you back in time to the bond desk at Saloman Brothers in the 1980’s, where the times were good and the money was plentiful. Despite being one of his most popular books, it is often less known than some of his other works which were adapted to blockbuster movies, namely Moneyball or The Big Short.
While many people from the outside of these buildings saw the financial professionals walking into their sky-high offices with thousand-dollar suits and shiny shoes, on the inside they were wolves vying for the top spot as alphas of the pack; a collection of what Lewis refers to as ‘Big Swinging Dicks’ (BSDs).
Although first published in 1989 and hailed as a defining encapsulation of the greed and wild-west attitude of Wall Street, the book can be seen in a new context and meaning today.
The sobering effects of the 2008 financial crisis has changed the landscape to more of a “mild-west”. Financial regulation has attempted to curb the extreme risks that were able to be taken in pursuit of returns. The culture of trading desks has also changed immensely since this era. Even where I work they will only hire those with Mathematics, Computer Science, or Engineering degrees in the trading roles that previously only required two things: (1) a drive to make money, and (2) a desensitized conscience.
Yet despite these changes in culture and rules, this book is still as important as ever. The heart of Wall Street only beats when there exists fear and greed, and there will always be a market where overconfidence will get the best of someone.
I would strongly suggest this book for anyone looking to get a better understanding of the characters and culture within financial markets, and is a must read for anyone looking to get into the industry. Too often do young people go into business schools with the goal of prosperity and social status with little regard for ethical awareness. The 2008 crisis humbled the industry yet I still see some in their early 20’s looking for the Wolf of Wall Street lifestyle despite that story’s intended message of the disillusionment of such glory.
Something can be said about money not buying happiness, which is true once a certain income-level is reached. But for those at the top of the food chain, greed will always dictate that it isn’t enough.
“You don’t get rich in this business. You only attain new levels of relative poverty.”
This Executive Summary was contributed by Kienan McLellan.
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