Quotes About Risk

Mike Burry didn't own any triple-B-rated subprime mortgage bonds, or anything like them. He had no property to "insure"; it was as if he had bought fire insurance on some slum with a history of burning down.

There is another way to think of John MacWilliams's fifth risk: the risk a society runs when it falls into the habit of responding to long-term risks with short-term solutions.

the risk we should most fear is not the risk we easily imagine. It is the risk that we don't. Which brought us to the fifth risk.

The longer-term the option, the sillier the results generated by the Black-Scholes option pricing model, and the greater the opportunity for people who didn't use it.

Subprime borrowers tended to be one broken refrigerator away from default. Few

Leverage buys you a glimpse of a prosperity you haven't really earned.

unpleasant odor wafting from the subprime mortgage industry that Eisman had detected. These companies disclosed their ever-growing earnings, but not much else. One of the many items they failed to disclose was the delinquency rate of the home loans they were making.

To Redelmeier the very idea that there was a great deal of uncertainty in medicine went largely unacknowledged by its authorities. There was a reason for this: To acknowledge uncertainty was to admit the possibility of error. The entire profession had arranged itself as if to confirm the wisdom of its decisions.

But the more we looked at what a CDO really was, the more we were like, Holy shit, that's just fucking crazy. That's fraud. Maybe you can't prove it in a court of law. But it's fraud." It

There is another way to think of John MacWilliams's fifth risk: the risk a society runs when it falls into the habit of responding to long-term risks with short-term solutions. "Program management" is not just program management. "Program management" is the existential threat that you never really even imagine as a risk.

banks—the biggest of which was the $13.9 billion AIG owed to Goldman Sachs. When you added in the $8.4 billion in cash AIG had already forked over to Goldman in collateral, you saw that Goldman had transferred more than $20 billion in subprime mortgage bond risk into the insurance company, which was in one way or another being covered by the U.S. taxpayer. That fact alone was enough to make everyone wonder at once how much more of this stuff was out there, and who owned it.

It's what you fail to imagine that kills you.

It's one thing to bet on red or black and know that you are betting on red or black. It's another to bet on a form of red and not to know it.

The long-shot bet, in some strange way, was a young man's game. Charlie Ledley and Jamie Mai no longer felt, or acted, quite so young.

human imagination is a poor tool for judging risk. People are really good at responding to the crisis that just happened, as they naturally imagine that whatever just happened is most likely to happen again. They are less good at imagining a crisis before it happens—and taking action to prevent it.

The people on the short side of the subprime mortgage market had gambled with the odds in their favor. The people on the other side—the entire financial system, essentially—had gambled with the odds against them. Up to this point, the story of the big short could not be simpler. What's strange and complicated about it, however, is that pretty much all the important people on both sides of the gamble left the table rich.

What are the odds that people will make smart decisions about money if they don't need to make smart decisions—if they can get rich making dumb decisions? The incentives on Wall Street were all wrong; they're still all wrong.

The shareholders who financed the risk taking had no real understanding of what the risk takers were doing, and, as the risk taking grew ever more complex, their understanding diminished. All that was clear was that the profits to be had from smart people making complicated bets overwhelmed anything that could be had from servicing customers, or allocating capital to productive enterprise.

The problem wasn't that Lehman Brothers had been allowed to fail. The problem was that Lehman Brothers had been allowed to succeed.

No partnership, for that matter, would have hired me, or anyone remotely like me. Was there ever any correlation between an ability to get into, and out of, Princeton, and a talent for taking financial risk?   At

default swaps on subprime mortgage bonds. Only a triple-A-rated corporation could assume such risk, no money down, and no questions asked. Burry was right about this, too, but it would be three years before he knew it. The party on the other side of his bet against subprime mortgage bonds was the triple-A-rated insurance company AIG—American International Group, Inc. Or, rather, a unit of AIG called AIG FP. AIG Financial Products was created

best definition of "investing" is "gambling with the odds in your favor." The people on the short side of the subprime mortgage market had gambled with the odds in their favor. The people on the other side—the entire financial system, essentially—had gambled with the odds against them.

And so it went in football. The game attracted the very people most likely to get in trouble outside

Real risk was not volatility; real risk was stupid investment decisions.