Wait Wait...Don't Tell Me!

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PETER SAGAL, Host:

And now the game where we ask smart people to do something stupid, namely, appear on our show. Michael Lewis is one of the most influential nonfiction writers there are. His first book, "Liar's Poker" was credited with helping to bring down the head of Salomon Brothers in the 1980s. His book "Moneyball" changed the game of professional baseball. And most unlikely of all, his book "The Blind Side" ended up winning an Oscar for Sandra Bullock.

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SAGAL: His new book is "The Big Short." It is about the great financial crisis of the last few years. Michael Lewis, what a pleasure. Welcome to WAIT WAIT...DON'T TELL ME!

(SOUNDBITE OF APPLAUSE)

MICHAEL LEWIS: Hello, Peter.

SAGAL: Michael, so, this book, "The Big Short" is a return to the area of your first book, finance and Wall Street. This is something that you lived back when you got out of college in the '80s, right?

LEWIS: That's correct. When I got out of graduate school, I took a job at the now defunct Salomon Brothers.

SAGAL: Right.

LEWIS: And my first book was the story of that experience. It was because I couldn't understand, couldn't fathom why anybody was paying me hundreds of thousands of dollars a year to give financial advice.

SAGAL: Yeah.

LEWIS: And I thought there was a story in this. I just thought people paying me that kind of money signaled doom. And there was no way the system was sustainable. And so when I left, I really did think I was getting out at the right time. It turned out I really should have hung around another couple of more decades.

SAGAL: Right. Because, you know, you say in the introduction to your current book, "The Big Short," that you thought that book would be like a warning, like, my God, stay away from this crazy world where they're paying young kids vast amounts of money who don't know what they're doing.

LEWIS: The lesson that seems to have been extracted is that if you didn't know anything about anything, you could make a fortune on Wall Street. And it attracted everybody who didn't know anything about anything, and this is what we've got.

SAGAL: Right. That may be the simplest explanation for how we ended up where we are. So, your new book "The Big Short" it's about the current financial crisis, but what's interesting is you don't write so much about the people who caused it as the people who saw it coming.

LEWIS: Well, when I left Wall Street, the big Wall Street firms were kind of the smart money at the poker table. And somehow they've become the dumb money at the poker table. I mean, they all were saddled with these horrible losses when the subprime mortgage bond market collapsed. And I was kind of curious, well if they were the dumb money, who was the smart money? And...

SAGAL: And some...

LEWIS: ...there was this collection of oddballs and misfits who had basically bet on the collapse of the financial system. And those are the main characters of this story.

SAGAL: And some of them are rather odd, as you say.

LEWIS: They had a view that was at variance with the entire financial system and if you want to have variant views, it helps to be variant.

SAGAL: Tell me about one of these guys, or any of them you like.

LEWIS: Well, let's pick the easiest.

SAGAL: Okay.

LEWIS: All right. The first investor to make a bet that this whole subprime mortgage bond experiment was a disaster was a fellow named Dr. Michael Burry who had been a neurologist. He quit neurology to start a hedge fund. And he doesn't know it, but he has Asperger's syndrome. He knows it now because it's in my book, but before...

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SAGAL: Wait a minute...

LEWIS: But, but...

SAGAL: You told him?

LEWIS: Well...

SAGAL: Like, you sent him the galleys and he's like, wait a minute, I have Asperger's syndrome?

LEWIS: Perhaps that's taking too much credit.

SAGAL: Yeah.

LEWIS: But he didn't know it when he made his bet. He found out later. And he's basically isolated in a room alone, just looking at financial data. And so he's sort of a blind judge of what's going on in the system.

SAGAL: And he...

LEWIS: And he sees what everybody doesn't see just by looking at how bad the subprime mortgage loans had become.

SAGAL: So he saw that this whole thing was going to collapse because it was built on nothing?

LEWIS: He believed it, yeah. And he saw it and he...

SAGAL: And he bet against it.

LEWIS: Yeah.

SAGAL: And he ended up making a lot of money. Tell me just briefly about the guys who were betting bad, who were creating this whole thing, were they just dumb? Did they just delude themselves because they were making so much money?

LEWIS: Well, I think the world would like to think they're criminals because they're so angry at them now. But I think it's much more interesting and complicated than that. I think really that they - it's amazing how much you will miss that's right in front of your face if you're paid to miss it.

SAGAL: Right.

LEWIS: And they were paid to miss it. They were paid to ignore like really simple facts. And there was so much propaganda around the market, people believed it.

ROXANNE ROBERTS: May I ask a question?

LEWIS: Yeah.

ROBERTS: Are the guys now any smarter than the people that got us into this mess in the first place?

LEWIS: No, they're not smarter. No, you know, it's terrifying. It's terrifying that in effect the same system is in place as was in place before, only with a taxpayer guarantee.

SAGAL: We want to talk, before we go on much longer, about baseball because we're all baseball dorks around here. And you wrote a book called "Moneyball"...

LEWIS: Mm-hmm.

SAGAL: ...which actually has become a term of art in the baseball world. Some credit you for saving baseball, some say you ruined baseball. Can you tell us what "Moneyball" really was because there's so much myth about it?

LEWIS: Yes. "Moneyball" was a book about how one baseball team, the Oakland A's, competed with a much smaller budget than everybody else, or most the other teams. So you've got the New York Yankees spending $200 million on their 25 players going against the Oakland A's that spends, say, at the time, $40 million on their players. The question was, why were they doing so well? And at bottom it's about market inefficiencies and exploiting, but it's really about how badly the market values people. I mean, that they could find misvalued baseball players was, to me, just a revelation.

SAGAL: If there's one thing that is a theme in your books, it is, as you've already said, it's the guys who see the thing coming that nobody else sees, be it Billy Beane, the general manager of the A's, who sees the things about the players that nobody is valuing, these guys in "The Big Short." So, do you know? Since you're writing about the guys who always see and the women who see what's coming next, do you know what's coming next?

LEWIS: I don't have any clue.

SAGAL: Really?

LEWIS: Oh no, absolutely not. I mean, one of the amazing things to me is that when you write a book, say, about all the people who saw the subprime mortgage market collapse coming, people think you're saying that you saw the subprime mortgage market collapse coming. When you a write a book, "Liar's Poker" for that matter, that maybe the point of "Liar's Poker" was if you could ask anyone in the whole world for investment advice, it should not be me.

SAGAL: Right.

LEWIS: And the minute it's published, everybody is asking me for an investment advice. I mean, I really do feel like I'm at this moment in my life where I walk out the door and I scream I'm not Jesus, I'm Brian.

SAGAL: Right.

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LEWIS: And I'm just Brian, you know?

SAGAL: And so where is your money invested? In gold, in livestock, is it under your mattress?

LEWIS: You just asked me the question I told you you'd be an idiot to ask.

SAGAL: I know, I was tempted. Well, whatever you're doing, I'm going to do the other thing, I guess.

LEWIS: There is no point to that.

SAGAL: There's no point.

LEWIS: I'm not going to tell you because someone might listen.

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SAGAL: Well, Michael Lewis, we are delighted to have you on our show. Now, we have asked you here to play a game we're calling...

CARL KASELL, Host:

Pyoo, pyoo, pyoo, pyoo, pyoo.

(SOUNDBITE OF LAUGHTER)

SAGAL: That was Carl doing ray gun noises.

LEWIS: Oh, I see.

SAGAL: That was that.

(SOUNDBITE OF LAUGHTER)

ROBERTS: That was kind of a small ray gun.

SAGAL: That was kind of a small ray gun.

ROBERTS: Yeah.

SAGAL: Come on, let's try it again.

ROBERTS: A bigger ray gun.

SAGAL: Give us some...

KASELL: Okay.

SAGAL: Give us some wattage here.

KASELL: I got to pipe up now.

SAGAL: All right.

KASELL: Pyoo.

(SOUNDBITE OF LAUGHTER)

KASELL: Pyoo. Pyoo, pyoo, pyoo.

SAGAL: All right, Carl, repeat after me.

KASELL: Okay.

SAGAL: Repeat after me. Pyoo, pyoo, pyoo, pyoo.

KASELL: Yeah, don't you know, ray...

SAGAL: Pyoo, pyoo, pyoo, pyoo, pyoo...

TOM BODETT: It's a universal ray gun.

SAGAL: All right, Carl.

KASELL: Pyoo, pyoo, pyoo, pyoo.

(SOUNDBITE OF LAUGHTER)

BODETT: That's closer.

SAGAL: All right, that's good. Anyway, the reason Carl is doing ray gun noises...

(SOUNDBITE OF LAUGHTER)

SAGAL: ...as I'm sure you're wondering, Michael...

ROBERTS: I thought it was a kitten.

(SOUNDBITE OF LAUGHTER)

BODETT: I thought it was a heart monitor.

(SOUNDBITE OF LAUGHTER)

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SAGAL: You know, this...

KASELL: This is one of the mild things they make me do.

SAGAL: Yeah, I know, I know, I know.

(SOUNDBITE OF LAUGHTER)

SAGAL: Anyway, Carl is doing ray gun noises, Michael...

(SOUNDBITE OF LAUGHTER)

SAGAL: ...because this week is the 50th anniversary of the first patent on the laser.

LEWIS: Oh.

SAGAL: Yes. So we're going to ask you three questions about lasers because why not? Get two right, you'll win our prize for one of our listeners, Carl's voice on their home answering machine. Carl, who is author Michael Lewis playing for?

KASELL: Michael is playing for Sheri Arrison of Chester, Vermont.

SAGAL: All right. Ready, Michael? Here is your first question. Laser technology can sometimes be controversial, as when it was introduced about a decade ago into what? A, the EZ Bake Oven, B, the World Pea Shooting Competition, or C, knitting?

LEWIS: A.

SAGAL: A? You're going to go for when they put the laser in the EZ Bake Oven?

LEWIS: I'm not going to think out loud for you, A.

SAGAL: You're just going to go A?

LEWIS: Yeah.

SAGAL: No. Actually, it was the World Pea Shooting Competition.

LEWIS: Oh, okay. I'll slow down then.

SAGAL: You'll slow down.

LEWIS: Because I got to get two out of three, right?

(SOUNDBITE OF LAUGHTER)

SAGAL: Yeah, you do.

LEWIS: All right.

SAGAL: Well, the World Pea Shooting Competition happens every year in Witham, Cambridgeshire in England and 10 years ago people started attaching laser sights to their pea shooters, causing much controversy, but they have now been grudgingly accepted there. All right, next question. Over at Carnegie Mellon University, engineers are thinking up great new uses for lasers, such as which of these: A, etching the picture of the animal whose meat you are eating onto baloney, so you know...

(SOUNDBITE OF LAUGHTER)

SAGAL: ...hold on, B...

LEWIS: All right, no, do I need to even hear any of the others?

SAGAL: Well...

(SOUNDBITE OF LAUGHTER)

SAGAL: I happen to have them.

LEWIS: Okay, go ahead.

(SOUNDBITE OF LAUGHTER)

SAGAL: B, hitting the perfect ping pong shot, or C, making really, really, really tiny hamburgers.

(SOUNDBITE OF LAUGHTER)

LEWIS: If I get it wrong, are you going to give me one more final try?

SAGAL: I am.

LEWIS: All right, panelists, you vote, which should I go?

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SAGAL: Oh, the audience wants the...

ROBERTS: The audience is overwhelmingly A.

BODETT: The audience wants A.

LEWIS: Oh well, then I think, you know, the wisdom of crowds. Oh, I think we're going to have to go with A.

SAGAL: You're going to go with A?

LEWIS: Yeah.

SAGAL: The baloney?

(SOUNDBITE OF CHEERING)

SAGAL: Yes.

(SOUNDBITE OF BELL)

KASELL: Well done.

(SOUNDBITE OF APPLAUSE)

SAGAL: That's right, it was A, etching the picture onto the baloney. The idea is that it's a piece of baloney with a picture of a pig or a pig and a chicken or a cow or something unidentifiable, so you know what it is you're eating.

(SOUNDBITE OF LAUGHTER)

SAGAL: Here's your next and final question. If you get this right, you win. We remember the Star Wars system, these were the plans to blast Soviet missiles in the sky with lasers. Well, scientists in Washington State recently adapted the technology for a new application. What is it? A, a machine that blasts buzzing mosquitoes from the sky with lasers. B, lasers mounted on lamp posts that short out cell phones being used in moving cars. Or C, an educational game in which kids who get spelling questions wrong are hit with lasers.

(SOUNDBITE OF LAUGHTER)

LEWIS: I'm going to go with A.

SAGAL: You're going to go with A? You were all right again. Well done.

(SOUNDBITE OF BELL)

(SOUNDBITE OF APPLAUSE)

SAGAL: They hope to bring the Star Wars mosquito laser system to market sometime in the next few years.

LEWIS: Oh, I want that so bad.

SAGAL: Me too.

(SOUNDBITE OF LAUGHTER)

SAGAL: Carl, how did Michael Lewis do on our quiz?

KASELL: Michael had two correct answers, Peter, so he wins for Sheri Arrison.

(SOUNDBITE OF APPLAUSE)

SAGAL: Michael Lewis, he's a great author. His books include, "Moneyball," "The Blind Side," but his latest is "The Big Short: Inside the Doomsday Machine" in bookstores now. Michael Lewis, thank you so much for joining us on WAIT WAIT...DON'T TELL ME!

LEWIS: Thanks for having me.

SAGAL: Great to have you, bye-bye.

KASELL: Thank you, Michael.

LEWIS: Bye-bye.

SAGAL: Bye, Mike.

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Wait Wait...Don't Tell Me!