The financial crisis of 2008-09 and the worldwide recession that followed gave us several years of disappointment but a few really good movies. The Big Short, based on Michael Lewis’s 2010 The Big Short: Inside the Doomsday Machine. The movie focuses on several American financial professionals who predicted the ultimate collapse of the house market and profited from the subsequent fall of the real-estate bubble by shorting the housing market.
The film adaption introduces us to a brief introduction to Lewis Ranieri’s mortgage-backed securities and how they were first introduced. The subsequent story is narrated by Jared Vennett (portrayed by Ryan Gosling) though many of the characters take over during the course of the movie and indulge in breaking the fourth wall. These characters based on real life individuals, portray a particular type of human. Let’s delve into each of them and identify the traits that drive them.
MEET JARED VENNETT
Jared Vennett is the inside man at Deutsche Bank. He knows the toxic nature of the mortgage backed securities and that most of the AAA rated ones were also full of bad mortgages, by learning about Michael Burry’s analysis on an early Credit Default Swap. Using his quant genius (a guy who took second place in a math competition in China) to verify that Burry is most likely correct, he decides to enter the market, to earn a fee on selling the swaps to firms who will profit when the underlying bonds fail. However, no one bites until Mark Baum’s FrontPoint Partners, gets a whiff of the same, via missed call. Jared Vennett convinces them about his idea and the journey begins from then on.
We all know a Jared Vennett, they know something big and they are sure of it but they love to play both sides, and preserve their standing in both corners. This way they avoid putting all their eggs in one basket. They get a taste of the risks on one side while defending themselves against any real backlash by insulating themselves and let someone else face the music. However, the Jared in this movie, unlike many of the real-life Jareds, is extremely honest about his self-interest – he isn’t hiding the fact that he is using Mark’s fund to make himself a big pile of money and they respect him for it.
MEET MARK BAUM
Mark Baum, after a personal tragedy, is a highly cynical human being. He takes an active leadership role whenever someone says a greedy financial institution has overplayed its hand. After Jared’s pitch, he and his team find out that there is actually a housing bubble and short the Mortgage Backed Securities immediately. As the premium payments hit them, and after the crisis hits, when Morgan Stanley begins to unravel, Mark remains strong and profits off the overall collapse. Seeing the damage caused by the crisis, Mark opens up about his brother’s suicide and lets go to a large extent.
We don’t meet a lot of Mark Baums. True leaders are rare – sure there are those occupying the corporate offices with President or Chief this or that in their title but most of them have either brown-nosed someone to achieve that title, gained the title playing off someone else’s work as their own or have just endured long enough to be promoted. True leaders don’t let their teams off the hook until what they decided to achieve, has been achieved. They lead from front, with courage and even when their own people are against them, have enough faith in themselves to see things to the end.
MEET MICHAEL BURRY
Michael Burry is an eccentric hedge fund manager who discovers that the US housing market, is extremely unstable. He believes that the market’s collapse in the second quarter of 2007 is eminent, as interest rates would rise from adjustable-rate mortgages, and he proposes to create a credit default swap market, allowing him to bet against market-based mortgage-backed securities, for profit. He is the first one to create the market for the same allowing Jared Vennett to hear about the same and bring in Mark Baum and accidentally Charlie, Jamie and Ben into the same short though unknown to each other.
His long term bet, causes him to pay heavy premiums to the banks, causing his investors to turn against him and for some to even sue him, as he prevents them from withdrawing their money. His refusal to cave into investor demands, sticking to what he has envisioned, allows him to make up to 500% in returns for his fund.
A Michael Burry is another rare individual out there. He can be categorized as a Visionary – it is a type of individual, who sees things as not what they are but as what they should be. His vision about where things are headed is crystal clear and he shows what a man/woman with a clear sense of where he is headed, is capable of achieving. When our vision is strong, we can overcome any resistance and we get the strength to hold off even when the whole world turns against. It is that sort of vision, that allowed Michael Burry to achieve such huge profits for his investors.
MEET BEN RICKERT (& CHARLIE & JAMIE)
Let us meet Ben Rickert, the mentor who helps Jamie and Charlie, from Brownfield Capital get their ISDA as well as sell their swaps for a huge profit. Jamie and Charlie, are young fund managers who have managed their small fund successfully but to move into the big league, they look to Ben Rickert to act as their mentor and provide guidance.
Ben Rickert is a ex-Investment Banker who grew tired of the greed and debauchery of Wall Street and is no longer in the game. He however, provides the necessary guidance to Jamie and Charlie, in getting their ISDA and profiting from their swaps. He also provides a moral guidance – something which a lot of “mentors” in big business, are unwilling to provide. He shouts at them as they celebrate betting against the AA tranche of securities; he tells them that they have effectively bet against the US economy. People’s lives, jobs, incomes – everything would be ruined in the crisis to come. So, don’t celebrate that. In the end, he realizes that the cost of the financial crisis would be borne by the average man.
Mentors like Ben Rickert, are not easily found. Someone who has nothing to gain from your success, yet not only puts himself out there he also guides you when arrogance and pride threaten to overtake you. In life, everyone needs such a mentor and very few, would actually have the opportunity to act as a mentor to someone in this way. So when the opportunity provides, do try to become a Ben Rickert – help guide someone out of a tough spot when the opportunity provides.
The characters in The Big Short are many aside from the four mentioned above – but as the story revolves around them, we decided to delve into these. The Big Short explains the financial crisis, the toxic instruments which caused the crisis and the greed of the people in the financial industry in a brilliant, easy to understand fashion.
Take a bet on watching The Big Short – you won’t be disappointed.