A hedge-fund manager predicts the 2008 financial meltdown, but adds little to our understanding—or our sympathy.
Most diaries aren’t meant to be read. I doubt Anne Frank, had she survived Bergen-Belsen, would’ve allowed her innermost thoughts to go to press without some serious modifications and restructuring. The diary we do get to read portrays Frank as a smart, prudent, fiercely self-reflective writer; not all diaries feel as poised or knowing, and often publishers justify loose ends or unfinished edges as adding qualities of “rawness” and “intimacy,” revealing juicy secrets that were meant to remain private. The n+1-facilitated Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager, rather than being “juicy,” is more like a dried-out piece of raw meat: yielding little flavor, presented without apparent preparation, and with vestigial nutritional value.
The aim of n+1 and Keith Gessen, one of that journal’s editors and the middleman of this unwieldy transaction, was clearly well intended. In 2006, an anonymous hedge fund manager (henceforth referred to as “HFM”) was introduced to Gessen as a “financial genius,” someone who would speak candidly about the impending crisis in the financial markets. Over the course of two years, and over the multitudes of false plateaus and more frightening false bottoms in the market’s decline, Gessen listened to HFM’s stories of catastrophe and consequence, then dutifully transcribed them for publication. Gessen says in his introduction that little was changed from the interviews’ original structure or content:
We have kept the interviews in their proper order, and where HFM was sometimes too optimistic, a little callous, or just off base, we’ve kept that too… a portrait of a mind at home in the world, moving with agility and certainty, though not without doubt, not without regret, and not without making its share of mistakes.
Gessen is true to his word: He has kept HFM’s voice intact, and that is a problem. HFM turns out to be fairly flat and dull. Every now and then, he makes an attempt at metaphor—he brings up Shirley Jackson’s short story “The Lottery,” or links American concepts of wealth and success with those of the Disney character Scrooge McDuck swimming in his pool of gold coins. But most of the time, he remains mired in long, brittle explanations of economies of scale, FDIC insurance, and the short-term credit market, leaving little room for clarification. Had Gessen chosen to frame HFM’s interviews as Bob Woodward framed his interactions with “Deep Throat,” we might be intrigued by his voice, even deeply afraid for his survival. However, we get no real sense of who this all-too-anonymous man is: What are his priorities? Does he even like his job? What motivates him to speak out? And why won’t he reveal his identity?
Sadly, HFM’s dullness is only one problem; the inherently dry, euphemistic language of the financial world is another. Instead of truly dismal consequences for the economy, HFM describes a “process of loss allocation.” The bite is gone, much in the way that “downsizing” sterilizes the unpleasantness of “firing,” a term that HFM actually holds onto: “We’ve fired a lot of people. I hate all the mumbo-jumbo terms people use. The last one I heard was ‘involuntary redundancy’—someone had ended up in involuntary redundancy. I like to say we fired people. We fired people. Yes, we did.”
Readers are supposed to understand HFM’s ambivalence about such misleading language as a sign of his great insight and moral fortitude. Yet he casts very little light onto the shadows of the financial markets’ destruction. Many brilliant journalists have found ways to slice through the nearly incomprehensible mechanisms of hedge funds, short selling, and what have you, some with great flourishes of humor and intelligence. (Listen, for example, to the brilliant podcasts co-produced by This American Life and Planet Money, which are unparalleled in their dissection of the whole mess, and make for surprisingly entertaining radio.) Why couldn’t HFM—and Gessen—do the same?
A possible explanation—one that Gessen and n+1 might only begrudgingly acknowledge—lies in the obvious paradox that when HFM takes apart what happened to our financial system, he is taking apart the way he earns a living. Only occasionally does he concede the ludicrousness of some of what went on, as he does here while discussing an early hiring boom in the hedge-fund industry:
HFM: The way talent gets sucked into those places is by a price signal, the compensation going out. The pay scale for finance was just—incredibly out of whack. You had guys who were literally just a couple of years out of college, maybe they’d done a year or two at an investment bank, making several hundred thousand dollars a year doing pretty low-value-added Excel modeling tasks.
N+1: What does that mean?
HFM: They do financial models on Excel.
N+1: I know Excel.
But the appeal of a narrative like this is not just schadenfreude—at the same time we watch the high-rise luxury condos burn, we might secretly wish to get a peek inside at the apartment that could’ve been ours. Another motivation—anxiety about what comes next—might be satisfied by what HFM and Gessen manage to dish up. And the play-by-play events that emerge from the timeline of these interviews is indeed frightening. Look at how closely certain events and certain realizations occur:
- In early September, 2008, HFM says, “Banks are going to struggle much harder to avoid admitting that they’re bust, and that’s why the regulators have to step in and say, ‘You’re bust.’”
- On September 21, 2008, Morgan Stanley and Goldman Sachs fold.
- On September 25, Washington Mutual is seized by federal regulators and sold off to JP Morgan Chase.
- October 6-10 is the stock market’s worst week since the Great Depression.
This vantage point—watching the chain reaction in parallel with HFM’s growing anxiety—might be the best thing Diary of a Very Bad Year has to offer.
However precise some of its information, though, the book suffers from its dryness and from Gessen’s refusal to give the interviews a narrative structure, ultimately leaving readers in the dark. While things were slightly on the upturn as HFM and Gessen closed their interviews, the crisis was far from over, and heading into 2011 with the end still not in sight one wishes HFM might be called upon to answer some more questions about his prognostications way back when. When Gessen asks him, in 2008, if he was going to have a holiday party at the end of 2008, HFM says, “I’m anti-holiday party. I sit with these people all day long, I don’t need to spend any more time with them. And people always get too drunk—and something bad happens.”
If by “something bad” he means the mess we’re in now, one imagines HFM has learned just what a bitch that kind of hangover can be.