(This review is written by my best friend, a PhD student in Finance)
I find it interesting how I can’t read finance as a lay person anymore. I’m just not sure what the “average” well-read person of relatively high intelligence should or shouldn’t know. So I’ll leave it to some non-finance people to talk about how much of this book they understood and how much was gibberish.
There were definitely some pros and cons about this book, for me. I was initially rather disappointed. Apparently I should have actually read the summary of the book in order to find out that it was a compilation of different articles. I’ve read other works by Michael Lewis, so I just dove in expecting the same quick-witted, sarcastic, and insightful prose. After I got over the initial shock of having to read different works by different authors, I appreciated the diversity of articles represented. The articles ranged from fairly technical to an exercise in investor psychology. I think that there was something for everyone to take away from them, but I don’t know if I would have been willing to read through the more technical articles if I did not already have a base understanding.
I thought the articles/book did a fairly poor job of explaining complicated financial transactions. I didn’t utilize the glossary, but from glancing at it, it appears that there is a lot of cross-referencing going on in the definitions. For instance, if I look up call, it tells me to look up option. The option definition then includes the word derivative, which I can also look up. I was also off-put by the book’s intro (Inside Wall Street’s Black Hole). I thought it was complex and not well explained. Even as a prospective finance PhD, it took me a long time to figure out exactly what he was accusing the Black-Scholes model of missing. (For the record, I think that he was arguing that by using historical standard deviations as inputs into the model, the model fails to account for high impact, low probability events that haven’t occurred in the past.)
I think that, for me, the format just wasn’t ideal. I would have preferred to read a more cohesive account and explanation of these crises that could also include more intuitive definitions of the financial products involved. A book like Liar’s Poker, also by Michael Lewis, makes finance more interesting, exciting, and accessible than what was put forth in Panic. Also, How The Eggheads Crack is a good example of Lewiw’s writing style and why I generally like his writing on the subject of finance more than most of the other people who write about it.