The Big Short Epilogue: Everything Is Correlated - What Happened After
The epilogue of The Big Short is called “Everything Is Correlated.” And that title carries more weight than it first appears. The financial system, the government response, the bailouts, the lack of accountability, the people who got rich from causing the disaster, and the ordinary people who lost everything - it was all connected. And not in the way Wall Street’s risk models assumed.
Lunch with the King
Lewis opens the epilogue with a scene that is, honestly, perfect. He is sitting in a restaurant on the east side of Manhattan, waiting for John Gutfreund - his old boss from Salomon Brothers, the man Lewis wrote about in Liar’s Poker twenty years earlier.
And the thing is, Lewis did not write Liar’s Poker to destroy Gutfreund. He wrote it because the whole system seemed absurd, and he expected the absurdity to end. But it didn’t end. It got twenty years worse.
Gutfreund, by this point, had fallen from grace. He had been forced to resign from Salomon Brothers years ago. Lewis heard that at some business school panel, when Gutfreund started talking about his career, he broke down and cried. That detail hit me hard. Here was the man who was once called the King of Wall Street, weeping in front of business students.
But at lunch, Gutfreund was still Gutfreund. Tough. Blunt. Direct. Lewis says he still had “the same animal impulse to see the world as it is, rather than as it should be.” They spent twenty minutes figuring out whether they could survive sitting at the same table together. Gutfreund’s explanation for the financial crisis was simple: “Greed on both sides - greed of investors and the greed of the bankers.”
Lewis thought it was more complicated. Greed on Wall Street was a given, almost an obligation. The real problem was the system of incentives that channeled the greed.
The Pebble That Started the Avalanche
Here is the argument Lewis makes, and I think it is the most important idea in the entire book.
In 1981, Gutfreund turned Salomon Brothers from a private partnership into a public corporation. He was the first on Wall Street to do this. The other Wall Street CEOs were horrified. They said it was an awful thing to do. And then, when they saw how much money it made, they all did it too.
Why does this matter? Because when Wall Street firms were private partnerships, the partners’ own money was at risk. If a trader made a catastrophic bet, the partners lost their own fortunes. That tends to make people careful. But once these firms became public corporations, the risk shifted to shareholders. And eventually, when the shareholders’ money ran out, the risk shifted to taxpayers.
Lewis puts it simply: No partnership would have borrowed 35 dollars for every dollar it owned. No partnership would have bought $50 billion in mezzanine CDOs. No partnership would have tried to game the rating agencies, or gotten into bed with predatory lenders. The short-term gain would not have justified the long-term risk - because it was their own money.
This is such a clean, clear explanation. I spent twenty years in IT, and I have seen versions of this same dynamic everywhere. When people don’t bear the consequences of their decisions, they make different decisions. Not because they are evil. Because they are human.
The Winners and the Losers (Hint: The Winners Won Twice)
And this is where the epilogue gets bitter.
Lewis lays out what happened to everyone after the crisis. Pretty much all the important people on both sides of the bet left the table rich. Eisman, Burry, the Cornwall Capital guys - they made tens of millions each. Fair enough. They were right. They took the risk.
But here’s the thing. The people on the wrong side of the bet? They also got rich.
Wing Chau, the CDO manager who had lost billions of dollars of other people’s money, walked away with tens of millions. He even had the audacity to try to start a new business buying up the same garbage bonds he had previously destroyed investors with. Howie Hubler, who lost more money than any single trader in the history of Wall Street - $9 billion - was allowed to keep the tens of millions he had previously made. The CEOs of every major Wall Street firm either ran their companies into bankruptcy or were saved from bankruptcy by the government. Every single one of them got rich.
Lewis asks: 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?
Where I grew up, in the Soviet Union, we had a saying for this kind of thing. Actually, we had many sayings. None of them are polite enough to print here.
Free Money for Capitalists, Free Markets for Everyone Else
The government response to the crisis was, to use Gutfreund’s own words, “laissez-faire until you get in deep shit.”
Bear Stearns was sold at a discount to J.P. Morgan with government guarantees. Fannie Mae and Freddie Mac were nationalized. Lehman Brothers was allowed to fail - the government first said it was a deliberate lesson in discipline, then changed the story to “we didn’t have legal authority.” AIG got $85 billion, then $180 billion. Citigroup got $25 billion, then another $20 billion, plus a $306 billion guarantee on its assets - roughly the combined budgets of six federal departments, presented as a gift.
And here is what really got to Eisman. The people who were given the job of resolving the crisis were the same people who failed to see it coming. Henry Paulson. Timothy Geithner. Ben Bernanke. Lloyd Blankfein. John Mack. All of them had proved, as Lewis puts it, “far less capable of grasping basic truths in the heart of the U.S. financial system than a one-eyed money manager with Asperger’s syndrome.”
The president of Goldman Sachs even said, publicly, that Goldman never actually needed government help. Lewis’s response is devastating. In an old-fashioned panic, perception creates reality - someone shouts “Fire!” in a crowded theater and the audience crushes itself rushing for the exits. But in 2008, it wasn’t a panic. The theater actually burned down with people still in their seats. Every major firm was bankrupt or fatally intertwined with a bankrupt system. “The problem wasn’t that Lehman Brothers had been allowed to fail. The problem was that Lehman Brothers had been allowed to succeed.”
That line may be the best single sentence in the entire book.
What Happened to the Characters
Let me tell you what happened to the people we have been following through this whole series.
Michael Burry closed Scion Capital. He had made his investors a 489% return. In 2007 alone, he made them $750 million. But they were angry at him for the ride he had put them through - the years of waiting, the locked-up funds, the painful uncertainty. No new investors called. No one asked for his predictions. He wasn’t invited onto the lists of top hedge funds, even though his returns deserved the number one spot. He felt chest pains, couldn’t eat, couldn’t sleep. He wrote one final letter to investors and shut everything down. He ended where he began - alone in his office in Cupertino, California, comforted by solitude. He kept two credit default swaps on Lehman Brothers subprime bonds, just to prove a point. They paid out in full. Five million dollars on a $200,000 bet.
Steve Eisman went through something nobody expected. He started becoming… nice. His wife Valerie watched in shock as this man, who had been rude and abrasive for decades, started caring about how he came across. He went to a Christmas party and behaved himself. He felt bad about taunting a Merrill Lynch executive. His wife and his therapist formed what she called an “Eisman social emergency task force” and told him to knock it off with the ego trip. And he listened. “He’s become a pleasure,” Valerie said. “Go figure.”
Charlie Ledley and Jamie Mai at Cornwall Capital spent the aftermath trying to figure out how to fight back against the system. They tried to organize lawsuits against the rating agencies. They drove to Maine to find a law firm willing to take the case. The lawyers told them it would be like suing Motor Trend magazine for recommending a car that crashed. Charlie started calling a historian friend late at night, explaining CDOs, trying to work through what had happened. He took it personally. He always took it personally.
The Deviled Egg
The epilogue ends with a small, perfect moment. Lewis is sitting across from Gutfreund, and after all the tough talk, after Gutfreund tells him “Your fucking book destroyed my career and it made yours,” the former King of Wall Street picks up his plate and asks, sweetly: “Would you like a deviled egg?”
Lewis takes one. And writes: “Something for nothing. It never loses its charm.”
That is how Michael Lewis ends The Big Short. With a deviled egg. With something for nothing. Because that is what the whole financial crisis was about. Everyone was reaching for something for nothing. The borrowers. The banks. The investors who bought bonds without reading them. The rating agencies that blessed it all for fees. The regulators who looked the other way.
And the few people who saw through it all? They also got something for nothing, in a way. They bet against a system that was clearly broken, and they won. The difference is, they were right.
My Take on This Epilogue
I have read many books about financial crises. I grew up in a country where the entire economic system collapsed, so the subject is not abstract to me. What makes The Big Short special is not the financial details. What makes it special is this epilogue.
Because the epilogue is where Lewis stops being a storyteller and becomes something closer to a prosecutor. He traces the crisis back to a single structural change - partnerships becoming corporations - and shows how that one shift made everything that followed inevitable. Not because of evil people. Because of broken incentives.
Nobody went to jail. The people who caused the crisis got bailed out. The people who saw it coming were ignored or resented. The ordinary people who lost their homes and their savings never got a deviled egg from anyone.
Everything is correlated. And the thing that correlated most tightly with the crisis was this: the distance between the people who took the risks and the people who paid for them. The further apart those two groups got, the worse things became. That was true in 2008. I suspect it is still true today.
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