The Big Short

The Big Short teaser poster.jpgI was wondering whether this film would really be able to explain collateralized debt obligations, cdo-squareds, credit default swaps, and all the rest, as the reviews suggested. When I explain these things to students, I need to write out diagrams showing cash flows, and then spend more time explaining why people created them, how they worked, and what went wrong. It takes a long time and is pretty boring. The movie’s approach was to put a woman in a bubble bath who spends 10 seconds explaining what one of these instruments was (I forget which one–the woman in the bubble bath was distracting), and to use a Jenga set as a prop for a CDO. Occasionally, celebrities were brought out to explain things. Anthony Bourdain says that a CDO-squared has something to do with reusing old Halibut in a fish stew. Even Dick Thaler, who makes an appearance, let me down. He says that the hot hand fallacy explains the financial crisis (it doesn’t–and apparently it has been debunked anyway). I suspect Thaler was happy enough to read the script, whatever it happened to say, so he could appear in a movie and meet Selena Gomez.

The movie’s creators faced a problem. How do you make a compelling story about the financial crisis for moviegoers who wouldn’t know a CDO from a cabbage. The brilliant solution was to pretend to explain what these concepts were rather than to explain them, so that the viewer would not be distracted from the glittering images and sharp dialogue by the nagging sense that he has no idea what is going on. The violation of the normal customs of movie making–including the breaking of the fourth wall by the actors–would enhance the viewers’ sense that what they were seeing was really true, and not only true but important enough to risk a collapse in verisimilitude which is normally maintained by keeping the fourth wall intact.

The relationship between the movie and reality is bewildering. The movie is based on Lewis’ nonfiction book, but only loosely–with most (but not all) of the characters’ names changed so as, I suspect, to allow the film makers to invent colorful details about them (various humanizing traumas, etc.). Lewis’ book itself, while apparently accurate in the details, gives a deeply misleading interpretation of the financial crisis that fits his crowd-pleasing template of eccentric outsiders versus complacent suits. If Lewis’ book was misleading, the movie is a CDO-squared version. Short it.