In his debut, Liar's Poker, Michael Lewis described in hilarious detail how he stumbled into a job on Wall Street with Salomon Brothers, and what he found among "the king of traders."
"Salomon Brothers really did make me alive to the way markets worked and how important they were," Lewis explains.
The evidence is everywhere in his work, alongside a well honed talent for engaging portraiture. Lewis doesn't so much write about business as the people who change it.
In 2000's The New New Thing, we met Jim Clark, the visionary founder of Silicon Graphics, Netscape, and Healtheon. Six years later, the book remains among journalism's most illuminating records of the dot-com boom.
2003's Moneyball stands as perhaps the best (certainly the most important) baseball book since Jim Bouton's Ball Four. In Oakland A's general manager Billy Beane, Lewis discovered an ex-ballplayer who discarded the sport's longstanding traditions and in doing so turned a franchise with one of the league's lowest payrolls into an annual contender.
With Moneyball still riding bestseller lists, the syndicated columnist embarked on what he imagined to be a small project, an essay about his high school baseball coach (later published as Coach). That research put him back in touch with a childhood friend and set him off, unknowingly, on the path to his next book.
The reclusive son of a drug-addled single mom suddenly becomes one of the most valued football prospects in America — how? A year before the scouts came calling, young Michael Oher had virtually no formal education, no social skills, and no athletic experience.
In The Blind Side, Michael Lewis investigates changes in the pro game that transformed an anonymous position, offensive left tackle, into the NFL's second highest paid job. Among the beneficiaries, he uncovers Big Mike, and a remarkable story of life-altering second chances. From the outskirts of Memphis, The Blind Side offers another engaging example of market forces at work.
Dave: I want to start by asking about a story in yesterday's New York Times. Netflix announced they're going to give a million dollars to the first person who can improve the site's personal recommendation engine.
Michael Lewis: They're offering a bounty to geeks.
Dave: There was a great quote in the article by the company's chief executive, who says, "The beauty of the Netflix prize is that you can be a mathematician in Romania or a statistician in Taiwan, and you can be the winner." And I'm thinking to myself: The beauty of the prize is that they don't pay a nickel to any of the people who don't win. They don't pay health insurance. They're not even required to hire the winner.
Lewis: A really smart thing to do because they will get more than a million dollars of labor. They're applying a tournament logic to the labor market. If you start thinking about it, you wonder why anyone has employees. That's very odd. I bet it works, too.
Dave: Even if no one improves their system, they've already received plenty of publicity.
Lewis: That's right. Does every person who improves the system win?
Dave: No. The Times said the winner will be the first person to achieve "a ten percent improvement." How exactly that ten percent is gauged, I don't know.
Lewis: It could get messy in the execution.
Dave: It's easy to imagine a lawsuit on behalf of the person who improves the system by five or eight or nine percent.
Lewis: I hadn't seen that story. I'll go dig it out.
Dave: I enjoyed reading in Next about the development of TiVo and its competitor, Replay. I've always wondered why the fast forward button on my DVR doesn't skip straight over the commercials.
Lewis: They embedded in the technology compromises between the old way and the new way. They stiffed their customers slightly in interest of the business model.
Dave: But the technology represented such a huge leap forward that it didn't matter.
Lewis: Right. It didn't matter. And when I wrote that, TiVo had not yet won the war.
It's funny. It's so hard to tell in the moment which technology is going to succeed. I remember walking with Jim Clark into his Healtheon office after they had gone public — no, actually, it was the MyCFO office, what was going to be the successor to Healtheon — and TiVo was across the hall from him. He said, "I don't see the point in that. I can't see why anyone would want it."
He dismissed it, so I thought, Well, there must be nothing there. But I went back and looked at it, and I thought, God, this seems fantastic. But even someone as prescient as Jim Clark said it wasn't going to work. And it may not work, actually, as a business model — it's still unclear whether TiVo will survive — but the technology is relentless, it's inevitable, everybody will have it sooner or later.
Dave: Have you followed much of what's going on with YouTube and iTunes? What do you think will happen to video and television programming?
Lewis: People will be able to slice and dice it however they want.
In television, the established forces are always slow to respond, but everyone is now preparing for a day when there are no actual ads, when the ads are all embedded in the programming. There is huge pressure on people who are creating television programs to come up with clever ways to write the programs so viewers don't know they're watching an ad. That's probably the end game there.
There will always be a market for good drama and good comedy. If people want to watch it, there are ways to get them to pay. I don't think it's the end of television. I do think it's the end of the network model, though.
Dave: Regarding The Blind Side, how did writing a book with an old friend at the center of the story affect your relationship to the material?
Lewis: I probably don't know exactly, but this was a person I had not seen or heard from in twenty-five years, and I didn't think of him as a friend the last time I saw him. We had been friends when we were about eight.
It was a little odd, but it saved me a lot of trouble trying to figure out his character because I'd seen it in action as a kid.
More to the point, I'd have never written the story otherwise. I stumbled into it well before Michael Oher became a hot football prospect. I saw the humble beginnings. When I first met Michael at Sean's house, Sean was telling me about writing letters to Division 2 coaches that he'd known in his playing days at Ole Miss; he thought he could get Michael into college as a basketball player. He didn't have a future as a basketball player, but Sean could maybe get him an education; these coaches would take care of him.
Sean was oblivious at that point to Michael's value. If I hadn't seen that with my own eyes — and I wouldn't have seen it if I hadn't known him — I don't think I would have believed their motives were as pure as I think they are.
It's funny because their motives became slightly impure once he became valuable. It would have been slightly embarrassing if Michael hadn't gone to Ole Miss, for example. They did become conflicted, and they know it. But he was in their lives before they thought he had value; that's not why they made him part of the family.
It was important also that I had some sense of what Sean's heart was like. It's all helpful. When you write characters fresh, like Jim Clark, someone I'd never laid eyes on until I walked into his office two years before I wrote The New New Thing, there's a limit to how well you can get to know them. And you have to work much harder to get to know them. Think of your own life. Think back to people you knew when you were little kids. You develop a feel for a person's character when you're a kid that's very hard to duplicate later on, especially when you're functioning as a journalist, inspecting them. You saw them when they didn't think they were being watched. That was a huge advantage.
Dave: Did you ever get inside Michael's mother's home?
Lewis: Several times. I spent I don't know how many hours interviewing her.
She's very elusive because she gets evicted from properties a lot. She would go from one housing project to the next, and once every couple months she goes into rehab because the state pays for it. She'll come out, and she'll be in pretty good shape, emotionally and mentally, for a week or two. There were two kinds of conversations. I found that if I didn't catch her in that week or two after she came out, she was useless.
First she was very hard to pin down. She didn't really want to see anybody, and she just wasn't lucid. But I spent a lot of time with her, and she was, in her own way, a sympathetic person. At least at this level: You could see that she had had it no better than her children. She was reprising the experience as a parent that her mother had had. She had never been given a chance. She was very clear about that.
And she was pretty clear about her sorrow. She wept a lot in my presence about what had happened to her family and her kids, and what they had had to go through because of her.
The Department of Social Services is very sensitive about girls born into those circumstances because they can get sold, essentially, into sex slavery. And so the girls got taken away. She doesn't know where they are and will probably never see them again. You can tell she has feelings for them, even though she had no real relationship with them. That was all rough. There was lots of sobbing.
It doesn't really show in the book, but I bet I spent a third of my reporting time in inner-city Memphis digging out this kid's past. It took more hours per nugget of information than anything else in the book.
The mother was happy to talk to me when she was sober, but erratic otherwise. I worked on the book for two years; her cell phone number changed ten times. She'd get one and then wouldn't pay the bill. Then she would go through periods where she would just vanish. Big Tony would be my way back in.
Dave: Somehow you were admitted to a gang meeting.
Lewis: I didn't get everything I wanted, but Delvin Lane was a great character.
Delvin ran that whole show. He found god. He was born again. Now he's working with something called The Streets Ministries in the inner city. He's clean, and the police have decided to leave him alone. But Delvin was my jungle guide.
I really wanted to get to know a fellow named Big Brim, Delvin's bodyguard — his left tackle: 6'7", 450 pounds. Big Brim was wanted for a number of murders. The FBI was looking for him for a lot of drug-related stuff. He had agreed to meet me for lunch, to let me get to know him. Then things got hot for him and he vanished. So I didn't get to Big Brim.
I spent a lot of time piecing together Michael's childhood. I interviewed most of the brothers. The older ones had much more vivid recollections of what Michael's life was like at five years old than Michael did. To get it all, I would typically find out what had happened from other people and then bounce it off Michael to see if he remembered, or if it was true, or what his response was.
Dave: You got access to Billy Beane and the A's front office, despite the fact that Moneyball wouldn't make their lives any easier. Jim Clark, also, for The New New Thing. For The Blind Side, it was gangs and addicts and also NFL locker rooms. How do you get earn their trust? One thing I learned from bartending is that most people are anxious to tell their story if you genuinely care to listen.
Lewis: Well, I don't always get access. You don't see the failures. It appears I'm getting access everywhere when in fact some stories have been shut down because I didn't.
But your observation is accurate. It isn't just that people want to tell their stories; they want to tell their stories to someone who really wants to understand them. It's almost the way in which you listen, how you bring their stories out.
The other big thing is that it really helps to bring something to the table. When I was doing Moneyball, the players wanted to talk to me because they knew I could tell them what the front office was doing. I could explain it to them. And I could tell Billy Beane what was going on in his clubhouse because I spent so much time there. In the case of Michael's mother, she desperately wants to be in touch with her son. I provided her with information about him, so she had an interest in talking to me. It doesn't hurt for them to have an interest in talking to you.
Dave: Much of the book is about the ascendancy of the left tackle position in football. Did you hear from Tom Lemming or from coaches or agents whether the position is actually overvalued now? Is that a market that's waiting for a correction of its own?
Lewis: People have different opinions about it. Some say no, some say yes. But it's not like baseball; they have no objective way to value it. It's just the market in action, people making decisions.
There isn't a Billy Beane in football, saying, "You can show objectively what this is worth. Here's how." So yes, possibly it's a reaction to fear. In the NFL, your team is usually built around your quarterback, one way or another. I was with Bill Parcells two weeks ago, doing a piece about him, and I asked, "What happens if Bledsoe goes down?" He said, "Well, this kid Romo is pretty good. Romo's probably going to take over for Bledsoe, maybe at some point this season." So I said, "What happens if Romo goes down?" And he goes, "Then our season's over." He just said it point-blank. He didn't think he was saying anything interesting. It's just over.
If you are in that situation, running one of these franchises... If Peyton Manning goes down, the Colts' season is over. If Carson Palmer goes down, the Bengals' season is over. If you feel that way, it's quite likely that you're going to react hysterically to protecting him. And if you sense, as a lot of these people do, that the risk of injury is worse from the left side — it's worse because your quarterback doesn't know he's about to get hit, and it's worse because the thing that's hitting him tends to be the most lethal weapon on the defense... It's hard to know, but there are emotions at work that would lead to irrational decision-making.
I would say this, however: I don't think the position was accurately valued back in the old days when it was just another line position. I do think it's more important. And to go back to Parcells for a second: I watched him game-plan for the Redskins game. He was obsessing about his left tackle. This was one of two players about whom he said, "If this guy doesn't play well, we lose."
In a lot of NFL games, it's a pressure point. Microseconds in the pocket make all the difference, a few yards more distance between the beast coming in and the quarterback.
Dave: Since 1992, when the NFL instituted a salary cap, the league has achieved a level of parity unprecedented in major league sports. Maybe that's better for fans — you could argue either way — but is parity best for the league's financial health? And if so, if baseball owners could make more money with a salary cap, why would they resist it?
Lewis: Because the players won't let them do it. The players think that it's a way to cheat them.
It would make sense for baseball to have identical payrolls. I think it would maximize the league-wide revenues, but it would do so at the expense of some parties. The Yankees would not be happy. Neither would the Red Sox. The Mets and the Dodgers probably wouldn't be happy. Enough teams will block the change. It's very hard to get everyone to agree.
It's really a happy accident that it happened in football. Pete Rozelle was responsible, and it only happened because he got owners to agree to share television revenues back at a time when those revenues were trivial. If they had known what they'd be sharing, I bet the New York Giants would have said, "We're not doing that." Teams in big TV markets wouldn't have agreed.
Selig may have done the same thing with baseball when he got teams to share Internet revenues. They look at it and they see pennies. Maybe twenty years from now it's not pennies.
My hunch is that parity is very good for the NFL. Every team has a chance, year in and year out. In baseball, it can't be good that a third of the teams are basically hopeless all the time and have little chance of digging their way out.
Dave: Some of the most interesting scenes in Moneyball describe Billy Beane making trades. What does a good trader in baseball have in common with a good trader on Wall Street?
Lewis: Everything. When I thought of Billy Beane, I thought of him as a gifted Wall Street trader. He has a sense of whose position is soft and whose is strong, who would want to do what and why. And he knows the value of things. He's armed and dangerous: He had an advantage in the marketplace of superior information. He doesn't anymore, but he did.
Dave: It was startling to discover how little control Art Howe had over the team.
Lewis: Yes, it is startling, but that's the way the A's are run.
One of the big reasons that revolution happened in Oakland was that Billy Beane was able to impose it with the threat of violence. If he had been 5'4" and 130 pounds, none of this would have happened. A threat of physical violence was always in the air. There was always the sense that you didn't want to piss Billy off because maybe he'd take a swing at you. It was a very odd case of reason being imposed with violence. You can't impose democracy with violence, but reason you can.
Dave: In The Blind Side, you write, "No one invested in Michael Oher, and so he yielded no visible returns." Did your brain parse life in a language of markets before you worked at Salomon Brothers, or was that job simply a life-changing experience?
Lewis: Salomon Brothers really did make me alive to the way markets worked and how important they were. I don't think I really thought about it much before then. I did have a pretty good training in economics — I got a Masters in economics at the London School of Economics, and my mind works naturally that way a bit — but Salomon Brothers was a life-changing experience for me, yes.
Dave: MySpace has become such a phenomenon that it's easy to forget sites like Friendster, which seemed poised to do the same. Is it possible for that particular kind of company to maintain its hold on a community? It seems a new web destination comes along every year.
Lewis: There's Google.
Dave: True. In a different way, but yes.
Lewis: And Microsoft.
It's true, in a technology space, your hold on the market is always going to be tenuous. You're attracting people who by their very nature are fickle. That's what you like about them: They've come to your product because they're willing to try something new. The problem is that they're willing to try somebody else's new thing, too.
It is more difficult, but yes, it happens. Google is a great example. Remember all the search engines? People wondered which one people would use. Now they've all gone away. Google has become a byword for the search engine.
Dave: Reading The New New Thing, I had to keep reminding myself that I worked in the Internet industry when all that was going on. It seems like twenty years ago.
Lewis: I know.
Dave: You're describing the proliferation of stock options as a substitute for competitive salaries, and I'm remembering friends who joined those companies.
Lewis: Right. Remember meeting all those people who were rich for a day? I remember meeting billionaires who, I think, don't have what I have now. It is incredible. But that was such a remarkable episode in American capitalism. There was never anything quite like it. I remember thinking, when I was working on the book, Just get it down. Get it down on paper because you have to have a document. No one will believe in twenty years.
It was such an aberration. There were so many crazy things. But I liked it. I thought, If we could keep it like this all the time, it wouldn't be so bad.
Dave: Music downloads have become a mainstream technology. What will it take to make people convert to electronic books?
Lewis: I don't know. You're kind of off my turf there.
Dave: I suppose. But it came to mind because you're a writer and you study markets. It's hitting your world from a couple angles.
Lewis: But you're talking about consumer taste. I like holding a book in my hand. I like the portability of a book and the way it feels in my hands, but that's probably because I grew up with them. If I were to answer that question, I might go talk to an eight-year-old.
Dave: Are you working on anything right now?
Lewis: I finished The Blind Side about eight weeks ago, and then I took a long vacation with my family. Now I'm starting the promotion. I really haven't started anything.
Dave: What's next?
Lewis: When I sold Moneyball, I sold it as two books. I've been nursing a long sequel. There will be another book about baseball down the road.
I went into New Orleans right after Katrina, and I wrote a long piece about the experience, about being there during the crisis. I'm from there, and my family's all there, so I've been toying with the idea of a New Orleans book.
But I don't have any firm plans right now. My wife is six months pregnant, and we have two little kids. Probably I'm going to take a few months and cool my heels. I'd like to be home for a while. I didn't completely move to Memphis for The Blind Side, but it felt like it sometimes.
Dave: I've been talking all week about a syndicated column you wrote last year titled "Are You Weird Enough to See Profit in Katrina?" It raises some very interesting questions about perspective. Out of this devastation comes opportunity, but merely suggesting such a thing would be repugnant to most people. Still, to cite one of your examples: "The destruction of the public housing projects... was a godsend." Once you accept the tragedy and what went wrong — it happened, and there's no ignoring that — there's actually a chance for some positive change.
Lewis: There's been an absence of direction at the top; it's almost like an ungoverned city, in some ways, except in cases of someone saying you can't do this or that. It's slowed everything down. But there still is opportunity, and we will see positive change, I think.
The markets are doing things there that are very interesting to watch. At the same time that New Orleanians are saying, "Our city is going to hell and nothing is happening," the property market is going through the roof. That tells you something. People are betting on New Orleans with their wallets.
One very positive development is the charter school system. There are still public schools, but there's a kind of quasi-voucher system. Anybody can go anywhere, and schools have to compete for students. Every school is a charter school. There's a lot of opportunity there.
Dave: You mentioned the possibility of a book about New Orleans, where you grew up. Already, at least a couple of your books are something like local projects. You live in Berkeley. You've written about the A's, and you've written about Silicon Valley.
Lewis: That's true. I was living in Palo Alto for most of the Silicon Valley thing. But Moneyball, oddly, ended up being a lot of travel because I went on the road with the team.
Michael Lewis visited Powell's City of Books on October 12, 2006. This conversation took place over the phone, a week prior, on October 4.
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Books mentioned in this post
Dave is the author of Out of the Book, Volume 3: State by State