Bombardiers

I am as far removed from the world of finance as one can be. I simply do not understand how billions can vanish or how blue-chip companies can get hosed down overnight or how people earn millions as bonuses or how all this has made our lives interesting since 2008. The ramble of economists was a bit too academic for my liking, more so when flavoured with politics. Therefore, I asked a friend of mine who is from that world to enlighten me. The more he explained, the more it sounded like bullshit. And I should know bullshit, having spent most of my career in advertising!

I accidently laid my hands on Bombardiers by Po Bronson. It was published in 1995 and happens to be Po Bronson’s first book. The book is one hell of a ride. It is insightful, provocative and an extremely funny look at the world of investment banks. Bombardiers are the sales guys who sell ‘creative financial instruments’ in an investment bank. The fact that Po Bronson was a hotshot executive in a blue-chip investment bank makes this book seem real even though it is a work of fiction.

The book was prophetic. In fact, one of the reviews of the book urges politicians and financiers to read the book in the hope that they will think twice about the way they’re mortgaging America’s future. I guess, they did not and we know what happened. Well, at least I got answers to my questions.

Here’s a nugget from the pages of Bombardiers:

“The Information Economy was a Ponzi scheme spiralling out of control. The investment bankers got rich slaving away, so they call their tax accountants, who got so rich filing government forms that they called their investment bankers back for advice about where to invest their surging wealth...........The politicians kept changing the laws so the lawyers could keep busy, and they kept changing the tax code so that the accountants could keep busy, and they kept borrowing money to keep the investment bankers busy. This was the Third Law of Information Economy at work, and it was the future.......They all profited from the increasing disarray of the information glut. So many experts led to so many theories, and they needed an expert to sort them all out.

....They bought and sold money, and every year the Fed pumped more money into the economy for them to buy and sell. They paid for the money they had bought with money they had sold...........Money had direction, and a speed, and acceleration. The acceleration was always increasing with the benefit of computers and politicians, who gave the markets free rein in the name of efficiency. It was the most efficient system at making the rich richer. It was a far better system than entrepreneurism – that antiquated way of starting a business from scratch and growing it a little every year without borrowing, which sometimes took a decade to make a rich man richer.” 

Read this book if you haven’t already and when the economy tanks next time, you can say with confidence “I know why it happened!”

(Update: I would also recommend Liar's Poker which is a true story of a young man's experience working in an investment bank. It is funny and brilliant.)