Author Michael Lewis on 10 Years of “The Big Short," AI Bubble, and Sports Gambling

0:00What should you invest in? And how often? Making investing decisions is easier with Fidelity. With their step-by-step experience, you can find investments based on your goals and comfort level. And if you'd like, you can decide how much and how often to invest with recurring investments that happen automatically. Ready to make your next investing decision? Head to fidelity.com slash trading. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC, member NYSE SIPC.

0:32Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Michael Lewis revisits the big short 10 years later. What did he really think of the movie? Would he recast anyone? All that and more. It's Tuesday, November 11th. Let's ride.

0:52Good morning on Veterans Day. Like many of you, we are off for the federal holiday, but this podcast never sleeps in. You are about to hear a fascinating interview with one of the leading storytellers of our time. The author, Michael Lewis, has written more books that become movies than most authors have written books. He coined the term moneyball and protected the blind side. But when Michael joined us in the studio recently, the conversation topic was about his third book adapted into a film, The Big Short. This winter marks the 10th anniversary of The Big Short movie starring Ryan Gosling, Christian Bale, and Steve Carell as the traders who saw the financial crisis coming before it happened and got really rich from shorting the housing market.

1:30We also talked sports betting. He's got strong thoughts on that, how he comes up with his titles, and gave him some thoughts on how we'd recast the big short. Spoiler alert, we're getting Jack Black involved. Such a fun convo and cannot wait for you all to hear. But first, a word from our sponsor, U.S. Bank. It's no secret that the economy's a little rocky right now. You're already budgeting carefully, so the last thing you want is to have to pay for an unexpected vet bill or laptop repair completely out of pocket. introducing the U.S. Bank Split World MasterCard, a new type of card that lets you pay later on every purchase.

2:05With a split card, all purchases are automatically divided into three payments and placed into a payment plan to be paid back over three months. If you're looking for additional flexibility, any purchase over$100 can be extended to six or 12 months with equal monthly payments for a low monthly fee. So whether you're covering an unexpected bill or are splurging on concert tickets, Pay later on every purchase with a U.S. Bank split card. Learn more at usbank.com slash split card. That's usbank.com slash split card. Now, without further ado, here's Michael Lewis. Michael Lewis, thanks for joining us.

2:41It's a pleasure already. All right, so many people listening to the show don't remember 2008. Heck, Toby over here just learned how to walk. So as you revisit the book and the movie now in 2025, can you describe to people who may not have experienced the financial crisis firsthand how it's impacting their lives today. All right. So you've got to know a little bit about what happened. Very broadly, the big Wall Street banks, which were at the time, exciting places to work, you know, Morgan Stanley and Goldman Sachs and Citigroup and all the rest were like thought to be the smart places in the financial world.

3:17And these places made hundreds of billions of dollars of really stupid bets. You can think of the world back then as having organized itself around a bet. And the bet was on subprime mortgage bonds, which was in turn a bet on what was going to happen to house prices. And the Wall Street firms were all, almost all, really heavily on the wrong side of the bet. They owned a lot of this stuff. And not only because they had bought the actual loans, they use derivatives to replicate the absolute worst of them. So it's like the stupidest loans, in theory, replicate them infinitely. And so not only do we have like hundreds of billions of really dumb loans, but you had possibly infinite number of similarly stupid bets, all kind of concentrated in the heart of the financial system.

4:10On the other side of this were a handful of smart people who took the other side of the bets. and my book, The Big Short, tells the story of the financial crisis through the eyes of the people who were on the right side of the bed. All right, the market wakes up to how bad these loans are. The banks all basically would have failed. Even the ones that didn't go all in on it, they were so tied to the other banks. The whole financial system was going down, like bankrupt. If this had happened in 1929 before the Federal Reserve grew a pair, it would have been just depression it would have been 35 unemployment it would have been it would have been cataclysmic the federal reserve and the u.s government steps in and guarantees basically i mean this is crude think of it as they guarantee all the loans they say everybody we make everybody whole we're going to take these off you know banks will take some haircuts but we're going to take all these loans off your balance sheets and we're going to we're going to make all the banks stable and calms it all down the effect of this is to infuriate both the left wing and the right wing.

5:12So this is where we're getting to why you need to know about now. You can draw a direct line from that event to Donald Trump. You can draw a direct line from that event to AOC. If you've heard of Steve Bannon or Elizabeth Warren, their careers were actually created by this event, their political careers, on either side of the political spectrum. But what happens is one side becomes the Tea Party, is infuriated that the government has walked in to save these Wall Street jerks from the mistakes they made. And it's a populist, both sides are populist movements, but the correct idea they had is that like, well, we in America live by capitalism and we all suffer when we make stupid business decisions.

5:53How come the richest people who went to the best schools who made the most stupid decisions, why are their banks get propped up and they still get bonuses? This pissed off people just enormously and rightly so. And that The anger was never slaked. The anger that, that anger is, you see American Political Life now and you kind of wonder why is everybody so angry? They say they're angry at different things. It starts there. So why wasn't your book angry? Because I was listening to a conversation with you and Adam McKay, the director of the big short movie. You told him that the movie was angrier than the book.

6:28Why wasn't your book angry? And was that on purpose? So that's a really good question. And when I watched what Adam did with the movie, quick answer is the movie is five years after the book. The book comes out in 2010. I had not fully digested what had happened. I didn't know that no one was going to go to jail. So that's one thing. But that's a cheap answer because I think the deeper truth is that Adam's just capable of more moral outrage than I am. He just has it in him. And I just don't. like I have a hard time getting outraged. I'm more amused is the wrong word, but I was, I was just delightfully interested in the human folly.

7:11I thought it was kind of funny that all the wall street firms were stupid. And I thought, and I was so interested in it and I was focused on these characters who had done the, basically the smart thing. Um, and there was, I did think this, this is, I, it wasn't outrage, but I did leave, I think best books I find when I try to write my books, you sort of leave room for the reader to decide how they feel about it so if you're bringing a lot of outrage bring a thunder to it you don't give them any choice it's like oh you got to feel this way it screws up the story it just it's bad it's bad writing but but in this case in particular i had this thing that i wanted the reader to feel uncomfortable with and have them figure out where they were going to go with this discomfort and the thing was the heroes so in quotes the protagonists of this book who would, you would naturally be lionizing because, oh, wow, they're so smart.

8:06They figured out what was wrong and they made a killing. They made a killing on the collapse of the society. How do you feel about that? And I wanted to, if I'm throwing around a lot of outrage, you're not leaving the reader the room to jump one way or the other. That's the most disorienting thing about all this. I was just watching the movie yesterday and the fact that was I? These guys, yeah, as you build to the climax, the fact that these guys know they're standing to make how an insane amount of money as the world economy collapses at the same time, it's, you don't really know exactly how to feel about that.

8:38You don't know how to feel about it. And what complicates it even further is all of the characters as they get into the big short, as they get into this, oh my God. First, I think I'm making a kind of interesting trade against Wall Street. This looks like a good bet. They're giving me, they're giving me 25 to one odds that nothing bad is going to happen here. And they dig in and realize this is not just a good bet. It's a great bet. Wait, wait, this is almost a sure thing. I'm getting 25 to one odds for it's going to happen. And that starts to feel criminal. Like this is, there's some sort of criminal.

9:12And they start to realize that all the people on the other side of the bet, the people who, whose institutions are going to lose money and those losses are going to be possibly foisted upon the taxpayer, the individuals have all made a fortune generating these crappy loans. And it starts to look really sinister. And all the people on the right side of the bed went to various, it was either law enforcement or media. They tried to, or they went to Washington, they went to the FBI, they went to the Wall Street Journal and tried to like, look at this, like this is a problem. And all of them thought, in fact, when I was approaching them to write about them, their trepidation was, if my name is in your book, I might get lynched because this society might be going down.

9:56And the fact that the government came in and calmed it all down, and it wasn't a depression, it was a recession, it still, people were angry, but not that angry. And not angry enough to go lynch the people, but they were worried about that. And so the complicating factor is they themselves were kind of trying to do something about it once they figured out the real implications of the situation. I'm going to try to ground it in present day again, because right now we have seen mentions of the word bubble kind of spike in the media, specifically tied to AI. Do you see any current parallels between the current AI moment that we're in right now and 2008?

10:37I mean, the big feature of the 2008 crisis was the disguising of risk. all the complexity and the financial instruments disguised what these people were doing. And so it was hide the risk. Nobody, you know, it took a while, it took a, it took some digging to see just how sort of unstable the situation was. This is wide open. This is right out in the open. You know how much people are spending on AI. You know, they're making, it feels more like the internet boom, right? Like everybody, they're saying the world has changed. It's going to be completely new. This is transformative. Everybody's going to make a fortune off of AI.

11:10we need to pour all this money into AI. It's a bet. It is, but it's a bet we all know they're making. And that, it feels like, I mean, my, I, who knows what's going to happen. My, my instinct is that like, they're all, they're all a little optimistic about the financial returns of AI and probably underselling, um, the social disruption of AI that a lot of people are going to lose their jobs. So more pissed off people in our, in our country, anger gets, just goes ratchets up in our political process. I could see that happening. I don't think AI is going to come kill us all. They like to say that.

11:44It's kind of funny how the AI people, they don't pause to talk about the actual really plausible social consequences of this because they can't do anything about it. And if we actually stop and think about it, we might hate them. They say, we want to stop AI from killing us all. Like they go right there. And it makes everybody, it kind of distracts everybody from the real problem. and also makes them feel very important because they're in the middle of something that might kill us all. But when I think about what is the connection between 08 and like what might happen now, I don't think that, I think something else.

12:17And what I think is in 08, even though the systems, the institutions we had in place, the federal reserve, the treasury performed a miracle. I mean, we, it really said they saved us. I mean, you can be upset that nobody went to jail and be upset that they bailed out the banks, but the alternative was so bad that they saved a lot of pain. Yet, the country's takeaway was we hate those institutions. We don't trust them. We trust them less and less. The Federal Reserve's independence right now is being threatened as it's not been threatened maybe ever in its history. I don't know, you can argue, but I think that's true.

13:01the federal finances are so out of control. I mean, seemingly, not only are we running these huge deficits, but we seem incapable of addressing them. That's the thing. It's like, we just had an exercise, the Doge exercise, which was the most dramatic attempt to cut the deficit that we'll ever see again, probably. And the deficits have gone up. So you've got this really unstable. The grownups in the room in 2008 who could stabilize a financial crisis are no longer grownups. And the institutions that might come in and make everything calm down are getting less and less capable of doing it. So I worry about not like, sure, there's going to be a financial crisis somewhere.

13:45It happens all the time. Every 20 years or 30, it'll happen. I don't know what will trigger it or why. There are other stories about AI that out there that might lead, but it's it's like, what do you do when there is one? We were talking before the show how the titles of your books seem to just encapsulate exactly the idea and the moment that you were trying it to capture. So Moneyball, Big Short, if you were to write a book about our current moment, maybe it's the AI frenzy, maybe it's about knowing what you want to do. You want a title? I want a title from you. I want to put you on the spot.

14:17You just told me before we got on there that your mom wants you to write a book. And now you're getting me to give you the title. I think you almost gave us one. And it was like no grownups in the room or something like that. Something there. Oh, that's not bad. I know. Yeah. That's not bad. It's from you. So how long does it take you typically to come up with a book title? It come, it usually arises organically from the writing of the book. And it usually is agony. If you saw like the false starts, you'd be horrified. You would be horrified. Wait, scare us a little bit. I want to hear about what was the big short before.

14:49The Liar's Poker. Oh, well. The title on the book proposal was Fast and Loose in the Golden Years. It kind of sounds like a – That sounds like a – Yeah. No, it was like it was horrible. It was never going to last. And then there were 74 others like that. The Big Short was a little different because I came into the story at a snail's pace. I was reluctant to get into it in the first place because I thought Wall Street – I, Wall Street was so pissed off about, about Liars Poker. I did not think they would let me back in and that I just wouldn't be able to get the story. So I, I did, I went in, I stuck a toe in the water and did a magazine piece during which I figured out, I realized, oh my God, I can get this.

15:33And when I, when I realized it was about this simple bet and it was about the people who were on the right side of the bet and the bet was a short, the big short, that phrase just popped into my mind. And I, and I, and I remember thinking, I'm not going to tell the magazine about that because I want to save it for the book. It was too good of a title. And then what happened, this is creepy. After I published the book, this came out somewhere else at roughly the, almost exactly the same time I was working on the magazine piece, the CFO of Goldman Sachs, a guy named at the time named David Vineyard wrote a memo about what was going on in the markets.

16:08and he called, he called the trade. He said, the trade here is the big short. If the big short is shorting the housing market. So he came up with the title. It is, it's one of my favorite titles. It's great. And maybe this is an easier question. Maybe it's a harder question. If you were the director and the big short was in development now, who would you cast? I mean, all the same actors could still do it, but who, so Ryan Gosling as Greg Lipman, I cannot improve upon that. I just can't, I just, I can't even, I wouldn't, I don't even know where to start. And Christian Bale as Michael Berry. I can't, I just can't do any better than that.

16:42So I would cast those two. They could still do it. And I'd cast them. Um, I love Steve Carell's performance, but I could, I could think of like what actor you helped me. What actor, when you see him is fingernails on chalkboard, like is so, so upsetting, like irritating. Yeah. His job is to irritate. Well, we, we had a list. We, we recast this. Oh, you did. Okay. You know what that's called? This is called boomer asking. You asked me a question you wanted me to ask you. Okay, so tell me, fellows, if you were going to cast my movie now, why don't you tell me who should play who? I agree that Ryan Gosling and Christian Bale are top tier, but we just had a little fun with it.

17:23So we're going to put, you know, for a new generation, Toby's generation. So we did Timothee Chalamet as Michael Burry. We did Glenn Powell as Jared Bennett, Ryan Gosling's character. That's good. We're going to keep Margot Robbie. She's good. Okay. We're going Jack Black as Brad Pitt's character. Oh, yeah. We like that one. Jeremy Strong stays the same. He's perfect. He's an incredible actor. We've got to get Miles Teller in there somehow so he can be the quant or maybe the dumb mortgage guys. And then here we go. Okay, we'll talk Mark Baum, Steve Carell. We're going to go Adam Sandler. Adam Sandler, Uncut Gems.

17:56He'd be great. He'd be great. He could do it. He could do it. You're right. That's good. Well done. Let's let it happen. If it doesn't work out for you in podcasting, you can be casting directors. Casting directors. We're going to take a quick break and come back with more Michael Lewis right after this. You know that saying, more money, more problems, Toby? Of course. Why do you think my life is so chaotic? Sure. Well, with startups, it's more like more money, more security. Big enterprise deals usually come with even bigger security and compliance requirements. Yeah, the right kind of security posture doesn't just protect you.

18:33It can actually make or break a deal. Thankfully, Vanta's AI and automation makes it easy for you to get big deal ready in days. They automate your compliance and continuously monitor your programs so future deals never get blocked. Plus, Vanta scales with your company so you'll always have the support you need no matter what growth phase you're in. Morning Brew Daily listeners can get$1 ,000 off at Vanta.com slash Morning Brew. That's Vanta.com slash Morning Brew. The crypto landscape changes daily. Keep up with some of the best launches and new tech all in one place on your commute. Join Ripple for a series of crypto and blockchain conversations with some of the best in the business.

19:14Learn how traditional banking benefits from the blockchain. Or how your digital assets can be kept safe and secure thanks to their all-in-one custody platform. Or how you can convert fiat to stablecoin faster than you can get home. Or how you can send a transaction halfway across the world before you make it to work. Or how you're probably already using crypto technology without even realizing it. Level up your commute and join Ripple and host David Schwartz for a special series of blockchain conversations on Blockstars, the podcast. Payments, custody, stablecoin, it's happening with Ripple. I want to talk a little bit about your process for finding out what to write about, though.

19:51Sometimes it seems like the story just finds you. Other times, maybe you go out searching for it. How do you know what's the next rabbit hole that you want to dive down? It starts usually with just idle curiosity, like some question. I mean, with the big short, it was like, how did those firms get so stupid? I just didn't understand it. Because I had worked inside Salomon Brothers when the part of Salomon Brothers that was making its proprietary bets. And I knew that back then, if you were on the other side of those trades, you were in trouble. They were making the smart bets. They had better information.

20:23They were just better positioned. and how that place in the firms had become stupid, that was my question. And it just led to Moneyball. I had this team that was winning games and had no money. Like, you start thinking about this as markets, like a team, the teams have, one baseball team has five times more money than another baseball team. You would think that they'd buy all the best baseball players and just win all the time. Why wasn't that happening? Sam Beckman-Fried, he walks into my life and this was a really broad question. he was so bizarre and it was so crazy what was going on you know he was the richest person in the world under 30 when no one knew who he was and it all happened in 18 months and presidents wanted to hang out with him and tom brady wanted to be his friend and all the wall street heads wanted to be with him and he was just like he was the center of the universe it was like what the hell's going on and where is this going to end it was like i want to just watch this so and i and And when it sticks, I mean, I do it with, it doesn't always work out.

21:22I start things and I lose interest. But when it sticks, it's like that question gets me into a place where I'm seeing a character, seeing scenes, situations, seeing that, let's continue with Sam Beckman-Fried. After initial astonishment and then also awareness that he was going to let me just follow him around some, a lot, I started thinking, like, what can I do with this character? and I realized he could take you into Jane Street. He could take you into American politics and money in politics. He could take you into crypto. I didn't know where else. I didn't know he could also take you into bankruptcy in prison.

21:58You didn't follow him there. But I followed him in bankruptcy though. It was like he can light up these systems. And so I'm thinking like, what can you do with this material? And is it a story? So it's very organic and very feel your way through it. Just like what you're interested in. Yeah. And if it gets boring to me, it's going to be boring for the reader. So I'm out if it's boring. And three of your books have been adapted into movies. Moneyball, Big Short, The Blind Side. That's three more than 99.9999 % of nonfiction writers. So what is it about the stories you tell that are so cinematic?

22:32You know, if we were doing this interview in 2008, you might say, like, have you ever sold any of the movies? And I'd say, I've sold everything to the movies. And you said, well, how come you don't have any movies made? You know, that it was, it was not clear to me that my, the things I wrote were natural movie material until they started making them. And it was, you know, decades into my career. Um, so I don't think of the things I write as particularly suited to the movies. And in fact, let's just take the big short. I don't think anybody read that book and said, oh, that should be a movie. Really hard to do as a movie.

23:11i think what something like this happened i think so the blind side it is true had this family drama in the middle of it although it had an awful lot of football history and strategy and they got they ditched the football history and strategy and they just took the family drama it got made by an accident it got all the hollywood studios turned it down uh and well actually fox had bought it for julia roberts julia roberts didn't want to play the part Fox dropped it. No one else wanted it. The writer, director, John Lee Hancock, went all over town. Nobody, zero people wanted it. The guy, a rich guy who lived down the street from the Tui family, the main family in the book, Fred Smith, FedEx guy, said, this is a direct quote, I saw that.

23:57I saw that happen. That's a really cool story. I'll pay for that to be made. I'll just do that. And so he paid, his daughter had a little production company. He, he, he said, but he also said, I'm not paying anybody. You know, like Sandra Bullock can do it, but she gets, she gets equity. You know, she gets, you know, we're not paying anybody. So they made it on a shoestring. So that thing gets made in a kind of accidental way. It is the, it's, if you Google it, it's like the biggest grossing sports movie after Rocky. It's$300 million at the box office and another$200 million after that. And it's just a money machine.

24:34So what does that do? Oh, Michael Lewis's books. You know, so, but Moneyball was sitting there, not made. Brad Pitt really wanted to do, do it. All of a sudden that becomes plausible. So, so I think that's how it started and there's been no flop. So, so I think that's it. And I'd say that the re they've been, if they've been good, it's because they're kind of unlikely movies. And when people are making them, they're making them because they have a real Jones for the subject. They really care about it. The Michael Lewis cinematic universe. Yeah. Essentially. So the current season of your podcast is about revisiting the big short.

25:11The last season of your podcast was all about sports betting just five months ago, which I'd love to get your thoughts on. How do you see this all shaking out? We've had an increasing number of gambling scandals across sports, some signs of scrutiny from regulators and now prediction markets seem poised to shake the whole thing up. What is the end game here? I think that if you put me in a room with a senator who says, what do we need to do about this? Like, what's the problem? First, you'd say it's a new senator. A senator knows nothing. Someone who was like, what do we ship? First is like this was illegal up until whatever, five years ago, six years ago.