This last weekend, I finally saw the film, The Big Short, the Academy Award winning movie about the 2008 financial collapse. I’d spent more time than I’d like to admit looking into the ins and outs of what happened, and when I heard there was a movie, I wondered how they were going to present it. Would it be about Bob and Wendy Graham’s campaign to create the Derivative Market, abetted by Fed Chairman, Alan Greenspan? or about Brooksley Born’s valiant attempts to stop it? or the raters who overvalued the CDOs? or maybe about the visionary Yale economist, Robert Shiller, and his book, Irrational Exuberance that predicted the whole thing? or the simple fact that no market can ever keep growing forever? There were so many angles.
[spoiler alert!] But the way they did it was a surprise to me and just plain brilliant by my estimate. They told the story through the eyes of the few people on the edges of Wall Street who saw it clearly from the start, and when they hit parts where the movie-goer needed a few complicated things explained, they mimicked a technique from antiquity, the Greek Chorus, in the form of a blond in a bubble bath, a player at a roulette table, or an actor stepping out of character and talking directly to the audience – truthsayers on the sidelines. I thought it was one fine piece of film-making!
Back when the markets crashed [September 15, 2008], I hadn’t seen it coming. But thinking back on things, like a lot of people, I registered some of the warning signs without realizing what they were warning us about. Some years before, I had needed some money to pay for the last of our two girls’ college costs and had refinanced my house – standard operating procedure in those days. To my surprise, lenders were calling us at home vying to get our loan. It was actually kind of fun. I did a spreadsheet model of all the loan parameters, and my wife spent the days fielding the calls and using my model to compare the offers. But the significance eluded me. In 2004 when we sold our home to move out of the City, I was staggered [pleasantly staggered] by the selling price. But I just thought of it as our good fortune, saying, "Boy, this neighborhood has sure come up since we moved here twenty-five years ago." It never dawned on me that the banks were gathering mortgages not as investments, but to use as chips for playing in the huge casino called the Commodities Market [futures] – creating illusions, the inflated values that I had just taken advantage of.
I doubt that many among those of us who follow blogs like this didn’t find ourselves making analogies with the pharmaceutical industry and the Irrational Exuberance [and corruption] in psychopharmacology marketing that has plagued psychiatry for the last quarter century. I won’t catalog all the obvious things that seemed parallel to me, but I want to mention one conceptual piece – futures. The traditional products traded on the Commodities Market are next season’s soy beans – growers selling their crops in advance to raise the money needed to plant and run their farms – buying and selling future value. The buyers take out insurance to cover their losses in case of a draught etc. With deregulation, that way of buying and selling future value was expanded to encompass almost anything and everything. And what better product than home mortgages – a guaranteed future value. For that matter, what better way to market tepid drugs to a hot market than to present them as on a continuum of future promise?
We’ve lived in a world where "new! improved!…" has been a permanent meme for our toothpaste and wash·day products. And it was easily transported to the psychopharmacology world of the 1980/1990s. The formula seemed to be keeping up an exuberant rhetoric of future-breakthroughs-just-around-the-corner, deceptive presentations maximizing efficacy and minimizing harms in scientific journals, expert testimonials and endorsements from all the right academic places, and questionable marketing techniques. The result has been a couple of decades when the psychiatric drugs have been consistently on top of the sales charts – an almost unimaginable outcome in a rational world. It happened with only two basic drug classes – the SSRIs and the Atypical Antipsychotics. And in spite of the pharmaceutical industry literally shutting down its CNS research several years ago, the so-called empty pipeline continues to produce "new! improved!…" versions of these drugs [see a future blog]. But unlike the mortgage futures market or something like the Madoff Ponzi scheme, it doesn’t seem that this version yet has any built-in ending. So long as the story line of future promise persists and new is still presumed to mean better, the drugs we call me too drugs keep on coming and remain successful.
One of the effective aspects of The Big Short was the subtle way it portrayed the real message of the story, how the Irrational Exuberance of the business end of the housing bubble either lost sight of or didn’t care about its impact on our everyday world [another analogy]. The graphic at the top was a scene of a visit to a defunct neighborhood of unoccupied new houses. And the six million who lost homes were represented by only one man [the insert picture above], but he got the message across in a only few brief appearances. The shots of traders being marched out of Lehman Brothers with boxes of personal items added to that side of the message – participant·victims, many of whom unlikely completely knew what they had been a part of until they entered the ranks of the disillusioned.