Saturday Morning Breakfast Cereal is one of my favorite comics these days, and aside from giving me a chuckle, today’s post also struck a deeper chord, reminding me of the philosophical truism: “the more you know, the less you understand.” It was the perfect cartoon to run across on the day that I read Michael Lewis’ Boomerang: Travels in the New Third World, the best of a handful of fantastic books I’ve read over the past few months.
My first “the more you know” experience was in 2003. Back in high school I was a chemistry whiz. Twelve years later, as I was finishing my Computer Science PhD dissertation and volunteering at a Seattle community college, a student asked for chemistry help understanding electron configuration. As I helped the student, I realized that I had no idea what orbitals and spins actually were, how anybody had ever discovered them, or whether there were any alternative explanations. By attempting to create and document new knowledge myself as the product of my PhD research, my perspective on existing knowledge had changed without my realizing it. Things that I’d once taken for granted, and which helped me breeze through the AP exam, were more mysterious than I’d ever considered. It was as if I’d just learned the truth about the Matrix, but was simultaneously baffled by all the little green characters flying everywhere I looked.
Reading Boomerang was a similar experience, eye-opening yet utterly mystifying. Each chapter in the book describes a country in the throes of financial crisis: Iceland, Greece, Ireland, Germany, and the USA, in that order.
In the first four chapters, Lewis comically describes the economic insanity perpetrated in these four European countries and how this insanity is tied to some massive cultural delusion. It was surprisingly easy to chuckle and shake my head at these silly Europeans, playing with fire and getting burned in ridiculous ways.
Then, in the final chapter, he sets his sights back in on the US, and the narrative changes. Lewis begins with the observations of banking analyst Meredith Whitney, which amount to a literal hierarchical passing of the buck. As much as possible, the US federal government will pass its financial burdens down to the states, and the states will in turn pass their burdens down to the municipalities.1 The state in the deepest trouble? California. The city? Vallejo, in my own back yard. Sound familiar? Yes, I’ve touched on that before. In a masterful zoom from macro to micro, Boomerang literally hit home for me and confirmed some of my deepest fears, but from a top-down perspective.
The storytelling, facts, figures, and opinions are spectacular and have to be read to be appreciated, but ultimately they are really just a vehicle for the Lewis’ message, which is about a culture of greed and its consequences. Culture can be made funny and interesting and at one level “easy” to understand. But as I read Boomerang, I couldn’t help but fixate on the other part of the message, which was the raw mechanics of debt.
Like the electrons that somehow bond together atoms, debt is the substrate that holds together the extremely complex web of modern finance. Between countries, corporations, states, cities, and individuals (what’s the difference anymore?), there are pools of sticky, gooey debt, stretched thin and piled high in all kinds of arrangements between all kinds of parties. It’s invisible and yet everywhere we look, like another form of matter. Like the Matrix. It’s what makes the world go round, and it’s what might cause it to implode.
And like the electrons, debt has its own conservation laws. One man’s gain is another man’s loss. But enough men’s gains and losses, when put together, can be society’s loss, in the form of bubbles and busts and “too big to fail” bailouts and intricate chain reactions that have to be meticulously deconstructed, after the fact, like Lewis has done in Boomerang. These conservation laws made me think about flipping a startup in a whole new light, and generally about value and different forms of sustainability. Sustainability is something I’ve been thinking a lot about anyway, as I take the year off to travel around the world, but Boomerang raised the question up a level or five. Before I questioned the personal ethics of a leisure life. Now I question the global ethics of it.
If you want to begin to understand the global financial crisis, Boomerang is a great place to start. But if you’ve never thought much about economic theory, be prepared to have your mind blown. Are you ready to take the red pill?