Book Reviews

Book Reviews Finance & Development, December 2015, Vol. 52, No. 4

The Jaws of Finance Joris Luyendijk

Swimming with Sharks

My Journey into the World of the Bankers

Guardian Faber, London, 2015, 288 pp., £12.99 (paper).

Reality is complicated and the human mind can have a hard time grasping it. Events usually need an explanation, a causal source. The origins of earthquakes and other natural catastrophes are on some level easy to grasp: they just happen. No human hands involved. Social and economic events are often harder to understand or accept. They do not just happen. The human mind craves a cause-and-effect paradigm, which can give rise to conspiracy theories: the moon landing was a hoax; global warming is a fabrication of the liberal left; greed and collusion among unscrupulous bankers are behind the 2008–09 financial crisis.

How then does an investigative journalist transcend easy answers? Well, ask the people involved. Be humble, start with the most basic questions, and reach out to the widest sample of players. This is what Joris Luyendijk set out to do when the Guardian invited him in 2011 to blog about “understanding the financial sector.” After many postings and interviews with more than 200 staff members from large investment and commercial banks, hedge funds, financial supervisors, and others, Swimming with Sharks was born. The author’s quest: to discover what went wrong in 2008 and figure out whether the same type of crisis could happen again. His investigative work borrows from what anthropologists do, including by creating an analytical taxonomy for his analysis that he uses to divide his interviewees into three groups: front-office, high-profile traders; back-office support staff; and mid-office compliance and risk-management officers. He studied how members of the financial sector think by reading memoirs and exposés. Then he did field work, trying not to go “native”—meaning without letting his sympathies, biases, and emotions get in the way of analysis. A hard task.

Luyendijk’s answer: the 2008–09 financial crisis was not caused by individual character flaws, such as greed, which pervade human society. The crisis was caused by perverse incentives against a backdrop of a male-dominated, competitive culture that punishes (perceived!) failure swiftly. Scant job security has eroded people’s attachment to the institutions they work for, which may have encouraged excessive risk taking. Changes in the governance of large financial...