The Big Short

“Since I was a child, I feel more comfortable being alone.” Michael Burry, the main character in the movie, stated. If he prefers to be alone, how he can succeed in the investment business, or in any business?

A person alone has a lot of time. He is also under less pressure to conform. He did his own homework, his own analysis and formed his own opinion. For example, he didn’t rely on professional rating agencies to value mortgage bonds. He actually looked into individual mortgage contracts himself. Moody and S&P rated those bonds AAA. But he knows a lot of those mortgages will default. His inability to socialize makes it easy for him to do his own work and to form his own opinion. As a result, he produced stellar investment performance. Others seek his professional service. He doesn’t have to socialize with others.

The Big Short is about a bunch of weirdos who foresaw the coming collapse of the financial markets in 2007. They short the market early on. That’s why the movie is called The Big Short.

“I may be early. But I am not wrong.” Michael Burry defended his investment decisions when questioned by Lawrence, a large investor. Lawrence replied, “They are the same.” Indeed, being early or being wrong, you get the same result. 

In financial markets, you could be one or two years early. You will be redeemed in one or two years. Major social trends may never reverse, until the society collapses. That might be several generations away. If your ideas differ from the mainstream, you short the society. You had better lie low and try to avoid conflict and confrontation as much as possible.