Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Commentary

Readings: Shorting oneself, and No Loan For Google

Michael Lewis: This hedge fund manager tried to short himself

As the trading room filled with smoke, and acquired that only sweet smell I know that is not success, I realized it was time for me to share more. To go deeper. I needed to re-examine honestly who I was, and why.

What could possibly have caused me to doubt my own value? I cannot say. But with my lungs stretching to the bursting point I felt a sudden urge to make the argument for shorting myself. I looked for weaknesses. I found three:

Very interesting read.

Friedman: If Larry and Sergey Asked for a Loan …

The government had to step in and shore up the balance sheets of our major banks. But the question I am asking myself, and I think Paulson and Bush were asking themselves, is this: “What will this government intervention do to the risk-taking that is at the heart of capitalism?”

There is a fine line between risk-taking and recklessness. Risk-taking drives innovation; recklessness drives over a cliff. In recent years, we had way too much of the latter. We are paying a huge price for that, and we need a correction. But how do we do that without becoming so risk-averse that start-ups and emerging economies can’t get capital because banks with the government as a shareholder become exceedingly cautious.

Let’s imagine this scene: You are the president of one of these banks in which the government has taken a position. One day two young Stanford grads walk in your door. One is named Larry, and the other is named Sergey. They each are wearing jeans and a T-shirt. They tell you that they have this thing called a “search engine,” and they are naming it — get this — “Google.” They tell you to type in any word in this box on a computer screen and — get this — hit a button labeled “I’m Feeling Lucky.” Up comes a bunch of Web sites related to that word. Their start-up, which they are operating out of their dorm room, has exhausted its venture capital. They need a loan.

What are you going to say to Larry and Sergey as the president of the bank? “Boys, this is very interesting. But I have the U.S. Treasury as my biggest shareholder today, and if you think I’m going to put money into something called ‘Google,’ with a key called ‘I’m Feeling Lucky,’ you’re fresh outta luck. Can you imagine me explaining that to a Congressional committee if you guys go bust?”

And then what happens if the next day the congressman from Palo Alto, who happens to be on the House banking committee, calls you, the bank president, and says: “I understand you turned down my boys, Larry and Sergey. Maybe you haven’t been told, but I am one of your shareholders — and right now, I’m not feeling very lucky. You get my drift?”

Maybe nothing like this will ever happen. Maybe it’s just my imagination. But maybe not …