Review: “All the Devils Are Here”

Book Review
Book: All the Devils Are Here by Bethany McLean and Joe Nocera

Reviewer: Bobby Powers

My Thoughts: 9 of 10
I loved this book. Although the book is long and dense, it is a powerful documentary of the hidden aspects of the subprime mortgage crisis. The authors explain how each misstep led to another until the entire system unraveled. It takes talent to stimulate understanding of such a complex topic, yet McLean and Nocera pull it off with ease.  They
 don’t withhold any punches, which is exactly what our country needs in order to understand the subprime crisis and prevent such colossal failures in the future.

Takeaways from the Book

“Hell is empty, and all the devils are here.” -William Shakespeare, The Tempest

McLean and Nocera’s title perfectly encapsulates the infernal greed that overtook many financial players during the housing market crash of 2007/2008. The book unearths the seedy underbelly of mortgage lending. Let’s meet the Devils who collectively caused the crash…

1) Securitization: MBS, CDO, CDS

  • Confused about how securitization works?  I don’t blame you!  It’s pretty complicated.  Check out this awesome video by Jonathan Jarvis if you’d like to learn more:
  • “Historically…less than 2 percent of people lost their homes to foreclosure, because ‘what was good for the lending institution was also good for the borrower.’ But the new securitization market threatened to change that, because once a lender sold a mortgage, it no longer had a stake in whether the borrower could make his or her payments.”
  • “CDOs could absorb an infinite supply of triple-B-rated bonds and then repackage them into triple-A securities.”
  • “Synthetic CDOs made it possible to bet on the same bad mortgages five, ten, twenty times…Merrill’s risk manager, John Breit, would later estimate that some tranches of mortgage-backed securities were referenced seventy-five times. Thus could a $15 million tranche do $1 billion of damage.”
  • “A credit default swap is essentially an insurance policy against the possibility of default—credit protection, it came to be called. One party—a bank—would buy credit default swaps to protect against a default in its loan portfolio.”
  • AIG began to sell a ton of CDSs, viewing the sale of those securities as “virtually no risk at all.” “Their internal models told them that there was a 99.85 percent chance that they would never have to pay out a penny.”
  • When the mortgage market began to collapse, AIG was on the hook for billions in credit protection in the form of CDSs.  AIG’s eventual collapse meant that dozens of large investment institutions didn’t receive the money they deserved.

2) Government Initiative to Put More Consumers In Homes

  • “Early in his second term as president, Bill Clinton announced his National Homeownership Strategy. It had an explicit goal of raising the number of homeowners by 8 million families over the next six years…To get there, the administration advocated ‘financing strategies fueled by creativity to help home buyers who lacked the cash to buy a home or the income to make the down payments.’”
  • While improving home ownership numbers was a noble goal, this directive created a perverse incentive in the market to get individuals into homes, no matter the consequences.

3) The Government-Sponsored Enterprises (GSEs): Fannie Mae and Freddie Mac

  • “The GSE guarantee meant that the investors no longer had to worry about the risk that homeowners would default, because Fannie and Freddie were assuming that risk.”
  • “Fannie, in what would become its response whenever it was challenged, wrapped itself in the mantle of homeownership. It argued that its low costs also lowered mortgage rates for consumers, and that forcing it out of the market would make homes more expensive.”
  • “By the end of the 1990s, Fannie and Freddie’s combined assets exceeded the GDP of any nation except the United States, Japan, and Germany, according to a research report by Sanford Bernstein. There was even talk—encouraged by the GSEs—that Fannie and Freddie’s thirty-year note was going to replace thirty-year U.S. Treasury debt as the United States’ benchmark bond.”
  • By the summer of 2007, Fannie held or guaranteed $2.7 trillion in mortgages, and Freddie held or guaranteed $2 trillion. Fannie lost $2.1 billion that year and Freddie lost $3.1 billion.

Fannie and Freddie at the Table

4) The Subprime Mortgage Lenders (Countrywide Financial, Ameriquest, Long Beach Mortgage, and Others)

  • “Some of them may have genuinely cared about putting people in homes. All of them cared about getting rich. None of them remotely resembled George Bailey.”
  • Mortgage lenders scrapped the traditional model of giving loans to consumers on the basis of the four Cs (credit, capability, collateral, and character).
  • “From 1994 to 1999, the number of loans made by companies that identified themselves as subprime lenders increased roughly six times, from about 138,000 to roughly 856,000, according to the Federal Reserve.”
  • “Economists, including those at the Federal Reserve, credited subprime lending with the increased rate in homeownership, which by 1999 hit a record 66.8 percent. What tended to be forgotten, though, was that most subprime mortgages did not go toward the purchase of a new house, but rather were refinancings by existing homeowners. (According to a joint HUD-Treasury report, a staggering 82 percent of subprime mortgages were refinancings, and in nearly 60 percent of those cases the borrower pulled out cash, adding to his debt burden.)”

5) The Credit Rating Agencies

  • “The rating agencies had always been stingy about bestowing triple-A status on corporate debt. In 2007, for instance, only six companies had a triple-A rating. Yet when it came to tranches of mortgage-backed securities, the rating agencies handed out triple-As like candy. Literally tens of thousands of mortgage-backed tranches were rated triple-A.”
  • “There were many reasons why the rating agencies continued to grant triple-As long after they should have stopped: an erosion of standards, a willful suspension of skepticism, a hunger for big fees and market share, and an inability to stand up to Wall Street.”
  • “The law allowed investors who weren’t supposed to take much risk—like pension funds—to invest in certain securities if they had a high enough rating.”  Pension funds and other “low-risk” funds began to invest in MBSs and CDOs, believing that because many of these securities were given triple-A ratings, they were low-risk investments.

6) The Investment Banks

  • “The people who are propelled upward in many cases in corporate America are the guys who said yes to an idea that worked. The guys who said no to a big failure—there’s no list for that. That’s why we end up with bubbles.” -Stan Kurland
  • Many risk managers who spoke up against against subprime exposure were told to sit down and shut up.
  • When banks started to wise up and buy CDSs to cover their mortgage exposure, they failed to realize that “every firm on Wall Street was going to AIG to buy credit default swaps on their super-senior tranches…AIG was on the hook for some $60 billion worth of subprime exposure.”
  • By the time of the crash, Bear Stearns, Lehman Brothers, AIG, Merrill Lynch, Washington Mutual, Wachovia, and Citigroup all failed or needed serious help. Congress stepped in to give $700 billion to banks as part of the Troubled Asset Relief Program (TARP).

Poor People Cant Afford Homes

7) Implicit Trust in the Value at Risk (VaR) Model

  • “VaR was meant to measure market risk from one day to the next, with the working assumption that tomorrow would be more or less like yesterday.”
  • “Later, many Wall Street CEOs would view their daily VaR number as an expression of their firm’s worst-case scenario. But it was nothing of the sort.”
  • “Firms could use VaR to persuade regulators—and themselves—that they were taking on very little risk, even as they were loading up on subprime securities.”

8) The Regulators

  • “There is no question, looking back, that Greenspan’s Federal Reserve could have taken steps to cure the growing problems with subprime lending before they got worse…There is also no question that the problems with subprime lending weren’t a secret. After the crisis of 2008, a common refrain arose that no one saw it coming. But that was never true. State attorneys general had filed lawsuits. Housing advocates had continually beaten tom-toms. Repeatedly and in graphic detail, Congress and the regulators—including Greenspan—had been told what was happening on the ground.”
  • “In the subprime market, where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.” -Edward Gramlich

9) The Individual Consumers

  • Tens of thousands of consumers fell for “teaser rates” and 2/28 adjustable-rate mortgages.
  • When new homeowners hit the third year of their 30-year mortgage, their interest rates skyrocketed.  Unfortunately, so did foreclosure rates.

Those Who Profited from the Crash–Namely, John Paulson and Goldman Sachs

  • In 2007, John Paulson made $4 billion betting against subprime mortgages!
  • “Paulson was seeking to do something that would have a big potential payoff. He wanted to make an industrial-sized short by betting against all of the triple-A tranches of a single synthetic CDO—a CDO, in fact, that he would secretly help construct. In other words, he would make money if homeowners couldn’t pay their mortgages—and to improve his odds, he was going to, in effect, select which homeowners he thought were least likely to pay.”
  • “The Goldman Sachs mortgage department, which at its peak had some four hundred people, was, by its nature, conflict central. It underwrote mortgage-backed securities, which it sold to clients…Sometimes Goldman itself was on the other side of a client bet. Most of the time, the client had no knowledge of Goldman’s position.”
  • “Later, the Senate Permanent Subcommittee would charge Goldman with making a fortune—$3.7 billion—by betting against its customers when it knew the market was going to fall apart. But that’s not really what happened. The huge gains Goldman made from its short position in 2007 were offset by substantial losses from the securities it couldn’t get rid of.”

Think you’d like this book? Purchase it from Amazon:

Other books you may enjoy:
Too Big to Fail by Andrew Ross Sorkin
The Big Short by Michael Lewis
A Colossal Failure of Common Sense by Lawrence McDonald and Patrick Robinson

Other notable books by the authors:
The Smartest Guys in the Room by Bethany McLean and Peter Elkind

Review: “The ONE Thing”

Book Review
Book: The ONE Thing by Gary Keller and Jay Papasan

Reviewer: Bobby Powers

My Thoughts: 10 of 10
The ONE Thing changed the way I live and work. It helped me break unproductive habits and recognize many ways in which I was working inefficiently. I strongly recommend this book for leaders and managers who struggle with more work than hours in the day. I felt much like you until I read this book. Now I am able to prioritize what has to get done each day and focus on those priorities before doing anything else.  

Takeaways from the Book

The Perils of Multi-Tasking

  • “If you chase two rabbits, you will not catch either one.” -Russian Proverb
  • “Multitasking is merely the opportunity to screw up more than one thing at a time.” -Steve Uzzell
  • “Researchers estimate that workers are interrupted every 11 minutes and then spend almost a third of their day recovering from these distractions.”
  • The time cost of context-switching: “The cost in terms of extra time from having to task switch depends on how complex or simple the tasks are.  It can range from time increases of 25 percent or less for simple tasks to well over 100 percent or more for very complicated tasks.” -Dr. David Meyer
  • “Workers who use computers during the day change windows or check e-mail or other programs nearly 37 times an hour.”

Multitasking Dwight

Relentless Prioritization and Focus Are Necessary

  • “When everything feels urgent and important, everything seems equal. We become active and busy, but this doesn’t actually move us any closer to success. Activity is often unrelated to productivity, and busyness rarely takes care of business.”
  • “The things which are most important don’t always scream the loudest.”
  • “Live with purpose and you know where you want to go. Live by priority and you’ll know what to do to get there.”
  • “Be like a postage stamp–stick to one thing until you get there.” -Josh Billings
  • “Extraordinary results are directly determined by how narrow you can make your focus.”
  • “Leaving some things undone is a necessary tradeoff for extraordinary results.”

What’s Your ONE Thing?

  • “What’s the ONE Thing you can do this week such that by doing it everything else would be easier or unnecessary?”
  • “Until my ONE Thing is done, everything else is a distraction.”
  • “If you want to get the most out if your day, do your most important work – your ONE Thing – early, before your willpower is drawn down. Since your self-control will be sapped throughout the day, use it when it’s at full strength on what matters most.”
  • “To experience extraordinary results, be a MAKER in the morning and a MANAGER in the afternoon.” That is, do your own creative work early in the day. This kind of work generally requires large blocks of time to think and brainstorm new ways to execute your own projects. Use the afternoon for meetings and overseeing your team.

Other Things to Bear in Mind

  • “People do not decide their futures. They decide their habits and their habits decide their futures.” -F.M. Alexander
  • ”Be careful how your interpret the world; it is like that.” -Erich Heller

Application to My Life
Keller and Papasan urge the reader to prioritize only ONE Thing in each area of life that makes everything else unnecessary or less important.  You’ll find my list below.  What’s yours?

  • Marriage ONE Thing: Go on a date night with my wife Kaylyn every week
  • Personal ONE Thing: Read 60+ books every year
  • Physical ONE Thing: Play basketball at least once per week and work out 2+ times every week
  • Spiritual ONE Thing: Read the Bible 4+ times every week
  • Leadership ONE Thing: Meet with one of my four mentors every month over coffee or lunch
  • Financial ONE Thing: Update our budget spreadsheet at least once per month
  • Travel ONE Thing: Take one international vacation and one other vacation every year
  • Work ONE Thing: Spend 15-30 minutes each day sorting/prioritizing the new software development requests that have come in to our team

Think you’d like this book? Purchase it from Amazon:

Other books you may enjoy:
Essentialism by Greg McKeown
The 80/20 Manager by Richard Koch
The Effective Executive by Peter Drucker

Other notable books by the authors:
The Millionaire Real Estate Agent by Gary Keller, Dave Jenks, and Jay Papasan
The Millionaire Real Estate Investor by Gary Keller, Dave Jenks, and Jay Papasan

Review: “Thanks for the Feedback”

Book Review
Book: Thanks for the Feedback by Douglas Stone and Sheila Heen

Reviewer: Bobby Powers

My Thoughts: 9 of 10
Books like Crucial Conversations and How to Win Friends and Influence People teach how to give tough messages. Thanks for the Feedback addresses the other side of the conversation: how to understand and respond to feedback. I cannot express how much I learned from this book. Stone and Heen tackle a tough topic (receiving feedback can really suck) with honesty and real-world examples. I’m sure I’ll still wince the next time I receive a tough message from my wife, co-worker, or boss, but this book gave me a good framework for receiving and understanding feedback.  

Takeaways from the Book

Strive to Learn from Everyone—Regardless How They Give Their Message

  • The majority of our learning will come from people who are not adept at giving feedback, so “if we’re serious about growth and improvement, we have no choice but to get good at learning from just about anyone.”
  • “Receiving feedback well doesn’t mean you always have to take the feedback. Receiving it well means engaging in the conversation skillfully and making thoughtful choices about whether and how to use the information and what you’re learning. It’s about managing your emotional triggers so that you can take in what the other person is telling you, and being open to seeing yourself in new ways.”
  • “Identity is the story we tell ourselves about who we are and what the future holds for us, and when critical feedback is incoming, that story is under attack.” We need to see the feedback for what it is: feedback about the situation—not feedback condemning who we are as a person.

Positive Feedback

Three Forms of Feedback

  1. Appreciation (thanks)
  2. Coaching (here’s a better way to do it)
  3. Evaluation (here’s where you stand)

“Each form of feedback—appreciation, coaching, and evaluation—satisfies a different set of human needs. We need evaluation to know where we stand, to set expectations, to feel reassured or secure. We need coaching to accelerate learning, to focus our time and energy where it really matters, and to keep our relationships healthy and functioning. And we need appreciation if all the sweat and tears we put into our jobs and our relationships are going to feel worthwhile.”

Work to First Understand the Feedback

  • “The better you understand the feedback, the more likely you are to find something in it that is useful, or at the very least to understand the ways in which you are being misunderstood, and why.”
  • “Even if you decide that 90 percent of the feedback is off target, that last golden 10 percent might be just the insight you need to grow.”
  • “We judge ourselves by our intentions, while others judge us by our impacts.”
  • “Talk about intentions and impacts separately: ‘I’ve been working hard to be more patient. And yet it sounds like that’s not the impact I’m having. That’s upsetting. Let’s figure out why.’”

You are Wrong

Two Very Different Personal Mindsets

  • Fixed Mindset: “Whether we are capable or bumbling, lovable or difficult, smart or dull, we aren’t going to change. Hard work and practice won’t help; we are as we are. Feedback reveals ‘how we are,’ so there’s a lot at stake.”
  • Growth Mindset: “These folks see themselves as ever evolving, ever growing…How they are is simply how they are now. It’s a pencil sketch of a moment in time, not a portrait in oil and gilded frame. Hard work matters; challenge and even failure are the best ways to learn and improve. Inside a growth identity, feedback is valuable information about where one stands now and what to work on next. It is welcome input rather than upsetting verdict.”

Encourage Productive Disagreement and Feedback

  • “Explicit disagreement is better than implicit misunderstanding.”
  • “Even when we have access to the same data, we tend to notice different things.”
  • “In fact, we’re both biased, and we each need the other in order to see the whole picture more clearly.”

Avoid Labels and Put Facts Before Interpretations

  • We often slap labels on behavior when giving feedback to others (“Be more proactive”, “Act more professionally”, etc.). However, those labels come woefully short of conveying what we’ve observed and actionable ways to improve.
  • “In our minds, we have a high-definition movie that captures all that we mean by those labels—the bad behavior, the angry tone, the irritating habits that we endure. When we use a label, we’re seeing that movie, and it’s painfully clear. It’s easy to forget that when we convey the label to someone else, the movie is not attached. All they’re hearing is a few vague words. This means that even when we ‘take’ the feedback, it’s easy to misconstrue the meaning.”

See the System at Play—Don’t Blame the Individual

  • “Feedback is often expressed as ‘This is how you are, and that’s the problem.’ But in relationships, ‘This is how you are’ really means ‘This is how you are in relationship to how I am.’ It’s the combination—the intersection of our differences—that is often causing the problem…It is not a problem that you speak only Swedish and it is not a problem that I speak only English. But together we’re in trouble.”
  • “Each of us is part of the problem. Maybe not to the same extent, but we’re both involved, each affecting the other…It takes the two of you being the way you are to create the problem. That’s how systems work.”

Think you’d like this book? Purchase it from Amazon:

Other books you may enjoy:
Crucial Conversations by Kerry Patterson, Joseph Grenny, Ron McMillan, and Al Switzler
How to Win Friends and Influence People by Dale Carnegie
Crucial Accountability by Kerry Patterson, Joseph Grenny, Ron McMillan, and Al Switzler

Other notable books by the authors:
Difficult Conversations by Douglas Stone, Sheila Heen, and Bruce Patton

Review: “Moneyball”

Book Review
Book: Moneyball: The Art of Winning an Unfair Game by Michael Lewis

Reviewer: Bobby Powers

My Thoughts: 8 of 10
Moneyball is a fascinating read for business and sports enthusiasts. It highlights the importance of quantitative-based management techniques and teaches leaders to question assumptions. General Manager Billy Beane’s short fuse and shrewd drafting decisions make for a gripping story. And who better to tell that story than Michael Lewis?

Takeaways from the Book


  • Many Major League Baseball (MLB) teams are backed by deep-pocketed owners who are able to “purchase success.”  (The New York Yankees come to mind.)
  • The Oakland A’s never had this luxury. Hence, A’s General Manager Billy Beane was forced to develop a new strategy for producing a successful team–a strategy that did not involve paying top-dollar for well-known recruits.

Statistical Analysis Carries the Day

  • Beane turned to “sabermetrics”–statistics used to gauge player performance in baseball. Sabermetrics was pioneered by Bill James in 1977.
  • Most MLB teams focused on a player’s physical ability and batting average when making drafting decisions. However, James developed complex algorithms to show that on-base percentages and slugging percentages were better indicators of run-scoring ability.
  • Beane was intrigued by James’s calculations.  He hypothesized he could use similar calculations to draft better players than his competitors.
  • Beane pored over piles of statistics with the team’s analytical genius, Harvard grad Paul DePodesta. They began to select proven, yet virtually unknown college players rather than the high school standouts prized by other teams.

Baseball Formula

The Result

  • From 2000 to 2002, the A’s won 91, 102, and 103 games respectively (out of 162). To top it all off, they did this with one of the lowest payrolls in all of baseball. (In 2002, the A’s payroll was $42 million–the second-lowest payroll in the MLB. By contrast, the Yankees spent $126M and also won 103 games that season.)
  • The Oakland A’s quickly became one of the hottest teams in baseball. And what did it take? Some nerdy math guys and their TI-89s. Who could have guessed?

Simpsons Baseball

Interesting Quotes

  • “Reason, even science, was what Billy Beane was intent on bringing to baseball.”
  • “The [MLB] draft has never been anything but a f***ing crapshoot. We take fifty guys and we celebrate if two of them make it. In what other business is two for fifty a success? If you did that in the stock market, you’d go broke.” -Billy Beane
  • “The twenty-three-year-old star pitcher, Barry Zito, said that it didn’t matter who played for the Oakland A’s or how much money the team had to spend: as long as Billy Beane ran the team, it had a shot at championships.”
  • “The A’s started showing me these numbers…how guys’ on-base percentages are important. It was like they didn’t want me to hit for average or for home runs, but walks would get me to the big leagues.” -Eric Chavez

Think you’d like this book? Purchase it from Amazon:

Other books you may enjoy:
The Hidden Game of Baseball by Pete Palmer
How Bill James Changed Our View of the Game of Baseball edited by Gregory Augustine Pierce

Other notable books by the author:
Liar’s Poker
The Blind Side
The Big Short
Flash Boys