The World's Best Book Summaries
What is “slow thinking?” How can you use it to become a better thinker and make better decisions? Slow thinking is when you allocate attention to the effortful mental activities that demand it, including complex computations. It’s often associated with the subjective experience of agency, choice and concentration. We’ll cover what slow thinking is and how to use it to make better decisions.
Who is Wing Chau of The Big Short fame? What was his role in the 2008 financial crisis, and why was it controversial? And how did he make an estimated $26 million shuffling papers? Wing Chau is an investment advisor and bond manager whose role as a CDO manager was depicted in The Big Short. Wing Chau wasn’t happy with the way he came across in the book and movie. Learn why his position as a “CDO manager” was, and is, controversial and how he contributed to the 2008 financial crisis.
How were the credit rating agencies involved in the financial crisis of 2007-2008? Why did they fail so miserably in their role rating subprime? We’ll cover how credit rating agencies contributed to the financial crisis and why their failures were the result of both incompetence and greed.
The movie The Big Short, starring Christian Bale, Steve Carell, Ryan Gosling, and Brad Pitt, among others, is based on the 2010 book The Big Short: Inside the Doomsday Machine by Michael Lewis. Do you know the real story behind the movie? The Big Short explores the origins of and fallout from the 2007-2008 financial crisis through the eyes of a handful of eccentric and oddball investors who saw that the U.S. housing market—and, by extension, the entire financial system—was built on a foundation of sand.
What is the planning fallacy? How can I avoid it? And what are some examples of the planning fallacy? The planning fallacy is the phenomenon of habitually underestimating the amount of time and resources required to finish a project. When estimating for a project, you tend to give “best-case scenario,” which rarely happens. We’ll look at a planning fallacy example that fleshes out the above definition, and cover how the planning fallacy works and how to avoid it.
What is a CDO, or collateralized debt obligation? Why are CDOs so confusing, even for people in the financial world, and how did they contribute to the 2008 financial crisis? A CDO (collateralized debt obligation) is a financial instrument that bundles together low-quality bonds into a new product. Learn why CDOs were developed and how they contributed to the 2008 financial crisis.
Who is Greg Lippmann of The Big Short fame? How was he involved in shorting the housing market leading up to the 2007-2008 financial crisis? Greg Lippmann is a hedge fund manager and the former head of asset-backed securities trading at Deutsche Bank. He’s known for his involvement in shorting the housing market in the early 2000s. In the film The Big Short, Ryan Gosling’s character is based on Greg Lippmann. We’ll cover how Greg Lippmann orchestrated much of the activity surrounding shorting the housing market leading up to the 2008 subprime mortgage crisis.
What happened to Household Finance Corporation? Why did it have to pay a $484 million fine, and how did the scandal serve as a harbinger of the coming greed and deception of the subprime loan market? Household Finance Corporation was a leading corporation providing mortgage loans. It was merged with HSBC in 2004 after a loan fraud scandal. Learn how the Household Finance Corporation scandal affected customers and what the attitudes of the corporation’s leader and those tasked with protecting consumers say about the causes of the 2008 financial crisis.
Are the characters in the film The Big Short based on real people? Which characters? We’ll cover the main players in The Big Short that are based on real people. Learn why the real people who shorted the housing market are just as compelling as the characters based on them.
What is a synthetic CDO, or synthetic collateralized debt obligation? A synthetic CDO is a type of CDO that bundles credit default swaps into a new financial product. While a traditional CDO is valued based on cash assets like mortgage payments, the value of synthetic CDOs comes from the premiums paid on bets that certain bundles of securities (like mortgages) will default. We’ll cover what synthetic CDOs are, why they’re so confusing, and how their involvement in the 2008 financial crisis makes them controversial.