Liar's Poker

Michael Lewis’s Liar’s Poker documents the dramatic shift in the financial world during the 1980s, when investment banking evolved from a conservative and predictable profession into an arena dominated by aggressive risk-takers and speculative trading. Historically, investment banks functioned with restraint and long-term discipline, relying on steady profits and traditional financial models. But by the time Lewis arrived at Salomon Brothers in 1985, Wall Street resembled a casino more than a banking institution. Deregulation of financial markets, technological upgrades that accelerated trading speed, and new types of financial instruments opened the door to a culture where short-term profit overshadowed stability or ethics.

The 1970s had been economically unstable, plagued by inflation and slow growth. In response, the Federal Reserve decided to allow interest rates to move freely rather than attempting to stabilize them. This decision unintentionally transformed the investing landscape. When interest rates fluctuated, bonds—previously viewed as safe, conservative instruments—suddenly became volatile and therefore lucrative for speculation. Investment houses that had once relied mostly on stock trading now poured their attention into bond markets. For Salomon Brothers, this was the catalyst that changed its trajectory, turning the firm into the most profitable force on Wall Street.

With enormous returns on the table, investment banks recruited armies of young college graduates who believed they were stepping into the most prestigious and thrilling profession imaginable. These new financiers were not trained to evaluate businesses or study economic fundamentals; instead, they were taught to exploit temporary price discrepancies, manipulate client perceptions, and gamble fearlessly with other people’s money. Liar’s Poker portrays this world as chaotic, adrenaline-fueled, and devoid of restraint—revealing how a culture built on bravado and greed reshaped global finance.

Inside the Culture of Salomon Brothers: Competition Without Limits

At the peak of its influence, Salomon Brothers symbolized everything extreme about 1980s high finance. The firm was infamous for its cutthroat internal environment, where colleagues functioned more like rivals than teammates and where status depended entirely on earnings. Traders celebrated displays of dominance: shouting wars on the trading floor, six-figure lunches, humiliating pranks, and decadent spending meant to intimidate competitors. The environment produced a twisted meritocracy—seniority and credentials meant nothing if someone newer could bring in more profit.

The culture was deeply hierarchical and aggressively masculine. Women were permitted to work as sales assistants or client support but were largely locked out of trading roles, which were seen as arenas for ruthlessness, aggression, and bravado. Advancement depended less on intelligence or technical skill and more on toughness and the ability to bluff, manipulate, and emotionally outmaneuver both clients and colleagues. The unofficial training ground for these traits was a gambling game called Liar’s Poker, played with dollar bills whose serial numbers became bets. The game revolved around deception, reading opponents, and maintaining composure under pressure—precisely the qualities celebrated on the trading floor.

One of the most famous stories Lewis recounts is CEO John Gutfreund challenging trader John Meriwether to play a hand of Liar’s Poker for one million dollars. The moment symbolized the excess and recklessness that drove ...