The Big Short
We finally found the time to watch the The Big Short (a cracking example of how complex economics and finance can be made accessible and even entertaining). The film explores the path of a number of ‘freaks and outsiders’ who managed to see imminent disaster prior to the subprime crisis of 2008…because they looked.
Although the causes and impacts of the GFC have been explored and poured over for the better part of a decade, the movie did cause a few reflections:
- Market consensus is mostly mob wisdom…often pedaled by interests that are likely not matched with the community's own;
- A resilient, vibrant and ethical economy needs to be built on productive industries that create real goods and services that result in real value creation;
- Risk should always assessed from a project specific perspective – delegating to third parties (i.e. credit ratings agencies/banks/treasuries etc) is bloody dangerous (see point 1);
- Often evidence is there if we are willing to step outside of our assumptions and seek out a contrarian perspective;
- Nothing replaces field work (loved the scene in the film where characters went out, tested their assumptions and discovered a mortgage taken out in the name of an investor's dog); and
- There areparallels between responses that characters received in raising the spectre of market failure prior to 2008, and Western Australia experience in recent times. During the resources ‘boom’of the last decade I personally observed (and as recently as this week still received) some very interesting responses from notable decision-makers when perpetual growth assumptions were challenged. This is despite the inconvenient reality of a market correction right outside the front door.
As the movie suggests…
“ Truth is like poetry. And most people f*cking hate poetry”