Somewhat lost in the internet hub bub (“OMG! He said what?” “Well, actually he didn’t“) around Michael Lewis’ The New Republic cover story/review of a new Warren Buffett biography, is his 1992 jeremiad about Buffett.
Most fascinating to me was a paragraph describing behavior of the financial markets from 1982-1992. Close your eyes and think he’s talking about 1999-2008 and it’s spooky how well it fits. Eventually we’ll figure out that you can’t just make money out of nothing. Until then, I guess we’ll just cycle through.
Still, in the short run he is probably right. You can frighten people into behaving themselves for a while. But in the long run he’s wrong. The financial revolution of the last decade introduced to Wall Street all sorts of temptations to abuse one’s position. When socially unproductive behavior pays as well as it has, it isn’t merely a matter of needing a few more good men. The dirty little secret on Wall Street is that the men responsible for its current reputation were not exceptionally bad. They were just ordinary people placed in unusual circumstances.
Also of note, and the thrust of the entire piece, is Lewis dismantling Buffett’s (at that time) pristine moral and ethical reputation with examples of deals Buffett cut seemingly at odds with his public statements. I had no idea Lewis wasn’t a fan of Buffett:
This modesty is inconsistent with Buffett’s vanity about his reputation as an investment genius. The main threat to this reputation–other than his performance, which has lagged the market during the past two years–is the strong academic evidence that success in the stock market is no different from success in a coin-flipping contest. The suggestion that he is merely lucky drives Buffett to distraction. He regularly ridicules skeptical professors with a vaguely thuggish if-you’re-so-smart-why-am-I-rich routine. (The reason he is rich is simply that random games produce big winners, but pity the business school professor on fifty grand a year who tries to argue with a billionaire.) While his little rhetorical victories may offer him short-term consolation, they also reveal the enormous pressure on Buffett to vindicate his precarious perception of himself.