On the Floor and The Problem of Figurative Financial Language
By Patrick McGinty
His PDF notwithstanding, Lo’s story of financial readership is a common one. Wise businesses do not let a good crisis go to waste, and the glut of texts published since the financial crisis of 2008—ranging from personal finance to journalistic accounts to variously researched theoretical and pop-theoretical summaries—has provided readers with literally thousands of competing explanations, scapegoats, and proposed courses of action. Much of my own study on the subject overlaps with Lo’s “21,” and like Lo, I can sense an inverse relationship growing between my understanding of contemporary finance and the number of books I’ve read about it. Like many readers, I began with Michael Lewis’ The Big Short: Inside the Doomsday Machine (hyperbolic, fear-mongering titles are a must in this genre; Lo’s PDF would have likely gone viral had he titled it 21 Paces And Turn!: My Do-or-Die Shootout with Books on Finance). Lewis tracks several individuals who, guided by unyielding research or plain old eccentricity, bet against the collateralized debt obligation (CDO) market. While many claim to have “seen it all coming,” Lewis’ narrative focuses on claimants who bear profit as proof, allowing readers to see the crisis unfold through their stunned and seasoned eyes.
Lewis’ book is a satisfying if general introduction to a study of the crisis, and it taught me one of my first core lessons of financial readership: beware the word “complex” or “complicated.” An author generally cites a transaction as being “complicated” only when he or she does not wish to explain it. Lewis, to his immense credit, not only acknowledges his tendency to underexplain certain transactions and financial instruments in the interest of breezy reading, but he also points readers to resources where they can follow up. A footnote on credit default swaps, specifically concerning the firm AIG, seemed promising: “The story of how and why they did this has been painstakingly told by Financial Times journalist Gillian Tett, in her book Fool’s Gold.”
Eager to move past Lewis’ general account of the crisis, I began Tett’s, which tracks a J.P. Morgan derivatives team known as the “Morgan Mafia” (to reiterate: hyperbole reigns supreme) from their invention of financial derivatives in the early 1990’s to the crisis in 2008. The book features rare if tepid access to J.P. Morgan CEO Jamie Dimon, and if you can stomach roughly one in every five quotes ending in exclamation (“They’re terrible results! Just terrible!”), it is as good a journalistic account as I have found on the history and development of credit derivatives.
Yet while Tett’s book is highly informative, there is perhaps no better example of the many problems inherent to financial writing. The journalistic effort she has poured into Fool’s Gold is both remarkable and vexing. Seemingly every interviewee claims to have “invented” this or that technique and to have, you guessed it, “seen it all.” I’ve now read about no less than thirty individuals at six or seven different firms who claim to have invented derivatives trading, a discrepancy that mires knowledgeable writers (most notably William D. Cohan) in pages and pages of what amounts to due diligence on gossip. Journalists are only as good as their ability to mine sources, and the sources in this case are so outsized in perceived and real intellect and so deficient in humility that the personalities can be difficult to swallow and even harder to trust.
This personality problem isn’t what’s most notable about Fool’s Gold, though—these bankers are not the first interviewees to come off poorly in print, and they will not be the last. What’s far more concerning to me as both a reader and taxpayer is the inability of very bright individuals to explain the financial instruments behind the crisis (credit derivatives, credit default swaps, synthetic credit debt obligations of asset-backed securities, etc.). To be more specific: what concerns me is the financial industry’s overdependence on figurative language. Perhaps this dependency is to be expected in an industry founded on the notions of bull and bear markets and bubbles and craters, an industry where Warren Buffet, the “oracle of Omaha,” speaks unironically about getting “caught with your pants down” because “financial weapons of mass destruction” caused “an economic Pearl Harbor.” It is one thing for industry folks and politicians to approach shareholders and constituents via metaphor, but in reading about the economic crisis of 2008, I wanted to move past its many similes. I wanted to immerse myself in its complexity.
Here, then, is a sampling of how Tett explains credit derivatives and CDOs in Fool’s Gold:
- as a spiderweb of deals
- as buckets under a waterfall
- like calculating rotten apples in a bushel
- something to do with pizza slices
- Russian dolls
- “It’s like a small retail store.”
There are dozens more. I share these examples not to disparage Tett’s book, but to inform you that these are the most accessible and reasonable analogies you will encounter on the topic. Cohan makes frequent reference to the “mad cow disease of structured finance” in House of Cards: A Tale of Hubris and Wretched Excess on Wall Street. The Academy-Award winning documentary Inside Job likens the failure of the CDO market to the failure of the Titanic’s airtight compartments. And hey, speaking of the Titanic: on podcasts and in person, Nassim Nicholas Taleb, author of The Black Swan: The Impact of Highly Improbable Events, frequently explains the financial crisis as being a “black swan event” like 9/11 or, yes, the Titanic, events we rarely see coming because we assume they are rare. None of these writers is technically wrong, but when grouped together, their efforts are more absurd than educational—a CDO, you could argue, is like piling rotten apples on a slice of pizza until it sinks the Titanic. Their predicament seems clear: either cite the instruments as complex, or deeply enmesh yourself in figurative financial language.
here is a third option, one notably absent in the five-year publishing frenzy: cold hard math. One of the most helpful books I found was Herwig and Patricia Langohr’s The Rating Agencies and Their Credit Ratings: What They Are, How they Work, And Why They Are Relevant, a text that backends its similes with thorough explanations. Being bankrupt, they write, is like being pregnant: you either are or you aren’t. The jokey analogy has been delivered, and whereas the more journalistic and theoretical books would use the comparison to cap their discussions of bankruptcy, Langhor and Langhor use it as an entry point. They discuss a company’s Z-score, a term accredited to a 1968 study by E.I. Altman in which Z = 0.012X1 + 0.014X2 + 0.033X3 + 0.006X4 + 0.999X5, where X1 is working capital/total assets, X2 is retained earnings/total assets, X3 is EBIT/total assets, X4 is stock market capitalization/book value of debt, and X5 is sales/total assets. If your company’s number is higher than 2.675, you’re in the clear. Below 2.675, you’re bankrupt.
This is (apparently) a fairly common concept used in all sorts of personal and corporate credit ratings, though I have no idea why 2.675 is the magic number. I am positively clueless as to what each X’s numerical prefix means. And in spite of my ignorance, I did not run and hide beneath my bed frame when I saw the numbers. They made sense: a company can argue whether or not it has been selling bad loans, but it will have a harder time arguing with a rating agency who says its Z-score falls well below 2.675. There are hundreds of such factors that go into the designation of a corporate credit rating, and Langhor and Langhor don’t skimp on explicating them.
I do not claim to have read every book on finance that has been published in the last five years, but I, like Lo, can confidently report that the slow, diligent approach you see above was rare in the several dozen sources I read. In a growing number of books, cold hard math has been replaced by a popular “greedy evil-doer” narrative that while gratifying in the moment (and in many cases true) leaves a sober, curious reader unsatisfied. To wit: Matt Taibbi—who frequently rushes through the complex inner-workings of a financial concept in dashed or parenthetical real estate such as this—has been covering the financial industry for Rolling Stone since 2009. He has conducted quality journalism that has irked more than a few industry figures, most notably by tagging the financial firm Goldman Sachs as “vampire squids,” yet his approach seems to encourage bitterness rather than continued study. The following quote concerns the configurations of the government bank bailout and is taken from his collection of essays, Griftopia: A Story of Bankers, Politicians, and the Most Audacious Power Grab in American History:
The mechanism involved in these operations—whose real mission was to filter out the unredeemable crap from the merely temporarily distressed crap and stick the taxpayer with the former and Geithner’s buddies with the latter—would be enormously complex, a kind of labyrinthine financial sewage system designed to stick us with all with the raw waste and pump clean water back to Wall Street.
Ignore the twice mentioned “crap” and the schoolyardish claim of “buddies.” Set aside the fact that this is no less than the third reference to a labyrinth (“Unseen labyrinths of the Grifter Archipelago,” and later, the “immensely complex, labyrinthine political system”). What I find most disheartening is the repetition of the verb “stick.” Even if we were to applaud its tonal aggression, the word “stick” does not explain how the burden will be redistributed or how such a tax will be borne out in various states and over how many years. Taibbi often chooses animosity over explication, and though he has set aside all fears of angering the financial industry, this anxiety has been replaced by one more damaging in the long run: the fear of boring his readers. In Griftopia, he repeatedly apologizes for the way in which “All this stuff sounds complicated.” And again: “This sounds complicated.” Before long he elides the pertinent details all together, assuring us that what we’re missing out on is “Stuff that is fiendishly complicated and that if ingested too quickly can feature a truly toxic boredom factor.”
To which I say: why else would I be reading a book on finance? To learn about pizza slices and apples and the buddies who get the good ones?
Readers and writers alike can agree that this subject matter is nefariously complex and complicated—no writer can be faulted for not understanding every facet of an industry that developed over many years across many companies and did so largely in secret. My concerns and quibbles arise not from snark but from the sincere belief that contemporary financial writers are tasked with one of the steepest writing challenges possible. Yet the point remains: when faced with explaining remarkably dense and esoteric financial machinations, financial writers too often fall into the habit of patronizing their readers. They fear bestowing too much complexity, opt instead for figurative language, and in doing so encourage the type of discrepancy in comprehension that the financial industry would very much like to preserve. If I am certain of anything after embarking on my Loean journey, it is this: language is a central concern of the financial crisis in this country. It may even be the concern. There are those who understand, and those who do not. Often times, this has been a documentless buyer across the table from a crafty seller. Often times, these factions have been within the same financial company. Occasionally, books on finance will approach an exploration of financial metaphor—Tett writes (albeit via simile) that “Like priests in the medieval church, ratings agencies spoke the equivalent of financial Latin”—but there are sources to be followed, quotes to be given, concepts to analogize. They come close to exploring the role of language in our financial crisis, then immediately swerve to spiderwebs and Russian dolls, widening the gap they seek to close. It is a habit that is really not all that complicated to figure out.
Aifric Campbell. Her writing about finance includes similes “written with animalistic flair.”
iction about the economic crisis has lacked a certain tact. At the risk of contributing another noisy metaphor to the discussion, I would like to advance the notion that many of these fictional narratives strike me as the product of a laid-off or cleaned-out banker’s unreflective therapy session. Write about it, advises the therapist, dressed in red and goateed. Better yet, write about your boss. Really stick it to him. After all, he’s to blame, isn’t he?
So we should be thankful that Aifric Campbell has come along. We should count her as part of our literary tribe and bar her from returning to her post at Morgan Stanley’s London trading floor, where she worked for thirteen years and became Managing Director before leaving to receive her PhD in Critical and Creative Writing from the University of East Anglia. There are many things to recommend about her new novel, On The Floor, which details Geri Malloy’s tumultuous romantic and business life at a London financial firm in the early 1990’s. Some of the novel’s highlights for me might strike others as inconsequential, but I loved them nonetheless—that an American intern is called Bud Light, that a character tapes a live episode of Twin Peaks. Campbell is funny and light at the right moments and slow and brutal at the right moments, the latter being the case with a family member’s suicide that is rendered in later pages with disturbing bits of dialogue and physicality. The most important discussion the book advances is the role of high-ranking women in high-stakes environments, a discussion made fresh both by Gerri’s refusal to see herself as a victim of anything but her own poor judgment and her quickness to laugh off easy catch-all labels (“Since when was I feminist anyways?”). As much as her officemates define her as both a math whiz and a woman, I found it telling how much the character identifies with Ireland. Geri is no doubt infused with Campbell’s own experiences as an Irishwoman, and the manner in which the country is depicted as an isolated and apologetic nation is perhaps a better reflection on Geri than any of her own self-assessments. Her childhood interest in Ireland’s distinction as the only country beside Japan to send a sympathy message to the German government upon Hitler’s death did the neat trick of simultaneously educating me with a bit of compelling history and making a character’s interest in this history seem more compelling than the history itself.
Plus there is the sex writing, which I found to be pleasantly weird. Positional power dynamics, the slow reveal of inter-office relations, the physical toll a woman must endure when having sex and then immediately departing on a fourteen hour flight: each scene is distinct and strange without feeling overdone. Sexual cliche is firmly resisted.
This resistance falters when it comes to the business side of things. I was interested to see how a skilled fiction writer would apply her descriptive powers to derivatives trading, the explanation of which is, I’ll reiterate, no small task. I thought there might be a way for fiction to expose the empty language of such subject matter, yet On The Floor identifies authenticity as its master from the outset. Geri’s biggest client, Felix Mann, is introduced early on:
The rumoured rustle of his presence in the market can kick-start a lame stock and send it soaring to new heights, the whispered mention of his name can pierce the bubble of some chart topper, unleash a herd of ambulance chasers and a bloody plummet into oblivion. Felix is ready to pounce on anything that moves. His expert claws rip the meat from a whole range of financial instruments with an extraordinary ability to extract value from chaos. He stalks the battlefield carnage, picking at the bruised flesh of failed mergers and acquisitions, resuscitating dying deals. Wealth creation and wealth destruction, Geraldine. The most primitive of pleasures. Felix moves markets like Jesus walks on water.
I was positive that the last line had been delivered ironically, but as I carried on, so did the similes, particularly those written with animalistic flair:
A sudden sunburst blazed through the window and [their boss] the Grope flexed his shoulders, his white shirt flared yellow, like the rippling hide of a slow-motion lion tearing into a felled antelope. The two guys from Capital Markets tensed like a pair of craning coyotes.
In this world, a banker had better walk in with “a nice big juicy deal between his teeth” otherwise it will be assumed that “he doesn’t feel safe in the jungle.” His co-workers will tear him apart “like a pack of hungry hyenas.” It’ll be “like watching a fucking alligator,” like watching “predators moving in for the kill,” all of this within the first thirty pages or so, and like animals on the hunt, these bankers are always “making a killing,” occasionally stepping out of their animal suits when they want to act more like humans and, in a fit of rage, express desire to “machine gun the whole room.” When one character says to another “I wouldn’t hurry to find him. He’s been a fucking animal,” it is unclear whether the language is authentic or poking fun at its own ridiculous dedication to authenticity.
As was the case with the financial journalists and their eccentric sources, I was willing to forgive these shortcomings. Any written account of the financial world will include a few cliches. Yet financial explication—analogized ad nauseum by Lewis, Tett, Cohan, Andrew Ross Sorkin, Simon Johnson, James Kwak, and countless others—creates the same problems in On the Floor, which goes to great lengths to assure us that Geri is a mathematical genius. More than one character pays her the compliment that she “will never find a greater admirer of your talents,” talents that amount to calculating: that she spent 2,304 hours talking with her ex-boyfriend; that on average 54 cars a minute pass by her house between one and two p.m.; that working five more years would net her $7,908,024.37 “assuming a conservative 30% annual growth.” Curiously, there is no scene in the book where she applies her mathematical prowess to her actual job, an oddity that led me to at one point believe that Geri was a con artist of sorts.
There is no con, though, only a writing challenge deftly danced around: displaying Geri’s intellect in action at the office would require explaining what she’s working on. And what is her company now working on? Derivatives. Her main client, Felix, “has been the convertibles king for five years, making a killing out of these quirky little creatures that can generate vast returns.” So, is a convertible bond like a Gremlin? No, they are “like fine wines from a vineyard. You can pick them up for a song. The convertible bond is a financial hermaphrodite—outcast and frequently ignored.” The company rakes it in with “Jap-structured derivatives designed by some clever math quants,” the company’s “very own little Silicon Valley, puttering away like a nuclear reactor.”
The overabundance of figurative language is in some respects warranted. Campbell has set her novel in 1991, a year when foreboding allusions to derivatives trading wouldn’t require much elaboration because there wasn’t much to elaborate on. Credit derivatives existed only in the minds and computers of the aforementioned “clever math quants,” and their increasing role in the industry is of much interest to Campbell. One quant snaps to a trader, “You don’t even understand the instruments you trade,” and while this feels like a theme that could carry the novel, Campbell puts too fine a point on the interaction for it to simmer (“It’s a faceoff between past and future,” she writes). Read as a book primarily concerned with finance—the central storyline, endless feral descriptions of bankers, and ticker tape on the cover seem to promote such a reading—On The Floor adds little to a review of the financial world. But read as book about a woman who has left behind her country and settled nervously into a position of prominence, this book has much to recommend. When it narrates away from the intricacies of the banking world and not around them, a wounded, doubting voice emerges that transcends gender and nation and certainly industry: “To be so desired, to be so exactly loved that it could be quantified, that I could see it in numbers—a big, fat, back-slapping cheque at the end of each year, isn’t that all the proof a person needs?”
s a young reader, I adored figurative language. I underlined similes. I memorized metaphors. “There is always one moment in childhood,” writes Graham Greene in The Power and the Glory, “when the door opens and lets the future in,” and I spent many teenage hours wondering about these doors—which I’d been through, which were forthcoming, what Greene actually meant by “door.” My life actually was progressing, I thought, even if I sat there and simply read. Doors snuck their way into whatever I wrote. Eventually a professor sat me and all my door similes down and explained that similes tacitly establish the following: Item A is kind of like Item B, but it is obviously not Item B. Childhood is not, in reality, a door.
This distinction is small but important. In literature and other descriptive or essayistic forms of writing, Item A is often a scene or sense we know intimately yet take for granted—a landscape, a nose, the smell of coffee—and the comparison with Item B is meant to reignite or reshape our understanding of this entity. Figurative language, in short, takes what is stock and makes it unique. But used as a teaching tool in scenarios where Item A is unknown, figurative language often works in reverse. You might assure your teenager otherwise, but driving a car is obviously not like riding a bike. They have never driven a car (Item A), and by using figurative language to better explain it (Item B: “It’s like riding a bike”), you are not making a simile in the interest of descriptive accuracy (nor should you, really). The simile is made to ease their fears so that the young driver can ultimately define Item A on their own terms. Like Greene’s line about the door, “Driving a car is like riding a bike” is a nice, hopefully harmless example of how figurative language can be used to make the world seem more approachable.
But whereas everyone has a childhood and most people learn to drive, only a handful of the world’s individuals were at the forefront of synthetic CDOs of ABS. High-level finance is decidedly unapproachable and has few stock explanations. Like heart surgery or piloting, it is a complex field that comes equipped with a language in which substitutions cannot be made. Figurative financial language has done its best to serve as a substitute, and it has proven to be both misleading and damaging. A “like-riding-a-bike” tone of assurance does not, in fact, equip one to handle or even understand the field’s modern innovations, and it is distressing to think of how few people in the financial world can thoroughly explain what Item A is when it comes to the latest in financial engineering. How many traders were taught with approximation in the same way that we as lay readers are taught? How many buyers? How many writers of financial books understand their field only through simile? When we are taught by analogy and Item B is then removed, where does that leave us?
When it comes to the ongoing financial crisis, these are the questions we should seek to answer as citizens, readers, and writers. If novels, textbooks, and journalistic endeavors are to move beyond stereotyped representations of bankers and their financial instruments, then writers must trust that they have their readers’ attention, and readers must be willing to engage in language that does not pander to them. Figurative language isn’t given its due as a nefariously complex device: it can establish comprehension just as easily as it can direct our gaze infinitesimally to the left or right of the object in question. Hank Stamper knows all too well the danger of mythologizing the river he lives on in Ken Kesey’s Sometimes a Great Notion:
“I know, for instance, that, if you want to play this way, you can make the river stand for all sorts of other things. But doing that seems to me is taking your eye off the ball; making it more than what it is lessens it. Just to see it clear is plenty. Just to feel it cold against you or watch it flood or smell it when the damn things back up from Wakonda with all the town’s garbage and sewage and dead crud floating around in it stinking up a breeze, that is plenty. And the best way to see it is not looking behind it—or beneath it or beyond it—but dead at it.”
Patrick McGinty’s fiction has appeared, most recently, in ZYZZYVA and The Portland Review. He recently wrote about Rachel Kushner’s The Flamethrowers.