Michael Lewis on How the Global Financial Crisis Explains Trump, Crypto, and Everything Else
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this engaging conversation, bestselling author Michael Lewis joins Derek Thompson to discuss his writing craft, the lasting impact of financial crises, and the art of storytelling. Lewis reflects on how he stumbled upon the story for "The Big Short" while researching in New Orleans, eventually uncovering a constellation of contrarian traders who bet against the housing market. (12:00)
The discussion explores how financial crises share common characteristics—particularly the hiding or misunderstanding of risk—and how the 2008 crisis continues to shape our world today through cryptocurrency, political polarization, and institutional distrust. (06:55) Lewis also shares his thoughts on artificial intelligence, explaining why he's "far less interested in artificial intelligence than natural stupidity," and discusses his approach to finding compelling characters and narratives.
- Main themes: Financial crisis patterns, storytelling craft, the ongoing consequences of 2008, AI limitations, and the joy of writing
Speakers
Michael Lewis
Michael Lewis is the bestselling author of numerous acclaimed books including "Liar's Poker," "Moneyball," "The Big Short," and "The Blind Side." A former bond trader at Salomon Brothers, Lewis has become one of America's most celebrated narrative nonfiction writers, with several of his books adapted into major Hollywood films. He has written for publications including Vanity Fair and The New York Times Magazine, and his work often explores the intersection of finance, sports, and human behavior.
Derek Thompson
Derek Thompson is the host of Plain English and a staff writer at The Atlantic, where he writes about economics, technology, and media. He is the author of "Hit Makers: The Science of Popularity in an Age of Distraction" and co-author of "Abundance: The Inner Life of Wealthy Nations." Thompson is known for his ability to make complex economic and cultural trends accessible to general audiences.
Key Takeaways
Financial Crises Share Common DNA
According to Lewis, every major financial crisis involves risk being either misunderstood or deliberately hidden by the financial system. (06:55) He explains that while the financial system is supposedly designed to expose and price risk accurately, there's tremendous value in being able to conceal it. This pattern emerges across different eras—from the 1929 crash to 2008—where incentive structures reward short-term thinking while ignoring longer-term catastrophic risks. The key insight is that people often get paid handsomely for creating what will obviously become disasters, creating a dangerous feedback loop.
Great Stories Require Simple Frames for Complex Problems
When Lewis discovered The Big Short story, he realized it could be reduced to one simple sentence: "There was a giant bet being made in the financial system. Almost all the big financial firms were on the wrong side of the bet." (21:01) Despite the incredible complexity of CDOs and derivatives, the core narrative was elegantly simple. This approach allows readers to understand sophisticated financial concepts through human characters and clear stakes. The lesson for any storyteller is to find the simple human drama within complex technical subjects.
Character Selection Is Like Casting a Movie
Lewis describes his character selection process as being "almost like a casting director with a script in hand." (24:00) Once he identified the conceptual framework for The Big Short, he discovered there were different intellectual paths that led people to the right answer about the housing crisis. He then chose the most compelling character from each "bucket" based on who could best teach the lesson or would be most enjoyable to write about. This systematic approach ensures both narrative coherence and reader engagement.
The 2008 Crisis Never Really Ended
Lewis argues that the global financial crisis continues to shape our world in profound ways that many people don't fully recognize. (27:26) The crisis gave birth to cryptocurrency as an expression of institutional mistrust, supercharged political careers like Elizabeth Warren and Steve Bannon, and created the conditions that led to Trump's political rise. The fundamental anger about elites rigging the system while ordinary people suffer consequences became a defining emotion in American politics. Additionally, financial risk didn't disappear—it just moved from regulated banks to less regulated entities like high-frequency trading firms and private equity giants.
Writing Should Be Joyful, Not Tortured
Unlike many writers who view writing as inherently painful, Lewis describes his peak creative state as pure pleasure. (59:57) When he's four chapters into a book and knows how the entire narrative will unfold, he experiences such joy that he needs nothing else—no companionship, entertainment, or distractions beyond basic necessities. This joy, he believes, transfers to readers and makes his work more engaging. He attributes this perspective to coming to writing later in life without being indoctrinated into the "suffering artist" mentality that many writers learn in academic settings.
Statistics & Facts
- Michael Lewis mentions that financial institutions lost massive amounts on single trades during the 2008 crisis, with Morgan Stanley announcing it had lost $10 billion on what was essentially one trade. (16:02) This statistic illustrates the concentrated risk-taking that characterized the financial crisis.
- Lewis notes that Elizabeth Warren and Steve Bannon represent political careers on opposite ends of the spectrum that were "supercharged" by the financial crisis. (29:14) This demonstrates how the crisis created political opportunities across the ideological spectrum.
- According to Lewis, Zendesk AI agents resolve 30% of interactions instantly, as mentioned in the podcast's advertising. This statistic reflects the current capabilities and limitations of AI technology in customer service applications.
