The Big Short

The Big Short Study Guide

The Big Short: Inside the Doomsday Machine was written by Michael Lewis and first published in 2010. Lewis wrote the book to trace the many factors that led to the United States housing bubble, which burst catastrophically in 2008. By the time he wrote this book, Lewis was well-known for his writing about the US financial system. He had previously published Liar’s Poker in 1989, about the corruption and inefficiency he observed on Wall Street from his time working as a bond salesman. This first book was so well-received that it came to be considered an important defining text for the Wall Street of the ‘80s. It also established Lewis’ reputation as a deft and critical voice for financial journalism. Lewis went on to write Moneyball: The Art of Winning an Unfair Game and The Blind Side: Evolution of a Game in 2003 and 2006, respectively. These two books helped him to hone his statistical and analytical writing, this time on the subject of the economics of sports. But The Big Short stands out amongst Lewis’ many best-selling books for its focus on an issue that was both of major national importance, and extremely difficult to understand.

In The Big Short, Lewis profiles several people who predicted the housing crisis well before anyone else did. Amongst these was Steve Eisman, a pushy and vocal member of FrontPoint partners, and Michael Burry, the socially-withdrawn and quirky owner of Scion Capital. These two characters, along with the founders of Cornwall Capital and the aggressive Deutsche Bank mortgage trader Greg Lippmann, recognized the early warning signs of the housing crisis. They decided to bet against the subprime mortgage market, which underpinned the housing bubble. Ultimately, their bet, which was disparaged at the time for being unrealistic and foolish, paid off big-time. Lewis investigates how these few men knew so much more than everyone else on Wall Street. He also looks into why most of Wall Street failed to see what they did, and what the fallout of the housing crisis was really like. Throughout, he explains the inner workings of Wall Street to his readers, in a way that is clear and easy to understand even for those with no financial background.

The Big Short spent a remarkable 28 weeks on the New York Times bestseller list. It was also shortlisted for the 2010 Financial Times and Goldman Sachs Business Book of the Year Award, and was awarded the 2011 Robert F. Kennedy Center for Justice and Human Rights Book Award. It went on to be made into a comedy-drama directed by Adam McKay and starring Christian Bale, Steve Carrell, Ryan Gosling, and Brad Pitt, which was released to critical acclaim in 2015. The film adaptation of the book went on to win the Academy Award for Best Adapted Screenplay and was nominated for Best Picture, Best Director, Best Supporting Actor, and Best Adapted Screenplay. Overall, both the book and the film were widely praised for the accessible and honest portrayal of the 2007-2008 financial crisis.