There are a lot of good pieces in the book, but I gravitated to the pieces by Lewis himself. In particular, I loved a piece he did for the New York Times Magazine back in October 2002. It's called "In Defense of the Boom." Before you dismiss it as glib sophistry, please read it. It might be the most dispassionate, well-reasoned, even-handed summary of the benefits and deficiencies of the Internet Bubble. Even though it was written nearly six years ago, it's still a really relevant piece, actually, it's more prophetic than relevant.
The same boosterism and asleep-at-the-wheel regulatory bodies and media were just as present in 1997 as they were in 2007. Though the Internet boom had it's poster boy in the form of Henry Blodget, this era has yet to name one (Bernie Madoff and Angelo Mozillo are probably ranked 1 and 2 for this dubious honor). In hindsight, we often pillory booms as some sort of amorphous collective haze that obscured everyone's vision. Lewis paints a different, more nuanced picture. Booms are a byproduct of an intensely competitive, self-interested people and system (capitalism). He accurately points out that wealth is not so much destroyed as transferred (I think Gordon Gekko, made a similar point in Wall Street, but I digress).
Anyway, read the piece and make your own calls about it. However, I took away five points from it that I think could benefit every investor. These points aren't necessarily new or original, but they are easily forgotten.
1. Booms and busts have always been with us and always will be with us. You can't repeal the law of supply and demand or eliminate the business cycle.
2. Booms produce benefits that can't accurately be quantified and who's beneficial nature may not be apparent for years.
3. Brokerage analysts are useless.
4. The people who ought to know better(institutional investors and smart financial journalists for example) are no better equipped emotionally than retail investors to recognize and/or avoid a bubble.
5. The media is very adept and creating heroes and than tearing them down. Jeff Bezos was Time's Person of the Year in 1999.
6. The Internet is a new technology, but is still like all other previously new technologies. It's pros and cons will be overstated.
7. Human nature will never change.
8. Good or bad, even profitable, depends largely upon perspective. As Obi-Wan Kenobi famously said, "many of the truths we cling to depend greatly on our point of view”
9. Failure is useful. Even if you don't learn from it, someone will.
10. The business of America is business. As Michael Lewis, so eloquently points out in the article:
There's plenty to criticize about American financial life, but the problems are less with rule-breaking than with the game itself. Even in the most fastidious of times it is boorishly single-minded. It elevates the desire to make money over other, nobler desires. It's more than a little nuts for a man who has a billion dollars to devote his life to making another billion, but that's what some of our most exalted citizens do, over and over again. That's who we are; that's how we seem to like to spend our time. Americans are incapable of hating the rich; certainly they will always prefer them to the poor. The boom and everything that went with it -- the hype, the hope, the mad scramble for a piece of the action, the ever escalating definition of ''rich,'' the grotesque ratcheting up of executive pay -- is much closer to our hearts than the bust and everything that goes with it.
These are all great lessons that will hopefully allow to keep your head during the next boom. They might not be able to keep you from being swept up in it, but they might help you bail with some money in your pocket before the ride comes to its inevitable end.
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