Big Jim Boss

You don't tug on Superman's cape

You don't spit into the wind

You don't pull the mask off the old Lone Ranger

And you don't mess around with Jim, da do da do...

I think Jim Croce forgot to mention one thing you should never do: Miss anything written by Michael Lewis.

Michael Lewis, best selling author of Moneyball and Blindside, is one of those rare intellectual talents that can make any subject he writes about interesting. I still contend the article Lewis wrote about his high school baseball coach, Coach Fitz, for the New York Times Magazine is one of the best articles ever written on any subject.

Lewis' latest piece, entitled The Man Who Sank the World's Economy is a fascinating study in finance, human folly and human vanity.

The piece focuses on A.I.G. Financial Products division and how one man, Joe Cassano, who ran A.I.G. F.P., helped bring the financial world to its knees.

I want to specifically point to two parts of Lewis' article.

The first is financial:

In a normal economy, when interest rates rise, consumer borrowing falls - and in the normal end of the U.S. economy that happened: from June 2004 to June 2005 prime-mortgage lending fell by half. But in that same period subprime lending doubled - and then doubled again. In 2003 there bad been a few tens of billions of dollars of subprime-mortgage loans. From June 2004 until June 2007, Wall Street underwrote $1.6 trillion ($1,600,000,000,000) of new subprime-mortgage loans and another $1.2 trillion ($1,200,000,000,000) of so-called Alt-A loans - loans which for some reason or another can be dicey, usually because the lender did not require the borrower to supply him with the information typically required before making a loan.

The second is psychological:

The problem is that they (his subordinates) knew him (Cassano). Andy they believe that his crime was not mere legal fraudulence but the deeper kind: a need for subservience in others and an unwillingness to acknowledge his own weaknesses. "When he said that he could not envision losses, that we wouldn't lose a dime, I am positive that he believed that," says one of the traders. The problem with Joe Cassano wasn't that he knew he was wrong. It was that it was too important to him that he be right. More than anything, Joe Cassano wanted to be one of Wall Street's big shots. He wound up being its perfect customer.

Numbers matter. Spreadsheets matter. Formulas matter.

But so does leadership, psychology, and the vanity of human wishes, wants, and desires.

A.I.G. F.P.'s collapse ultimately came down to the numbers, but the numbers were driven by men like Cassano, whose megalomania blinded them to the reality that their seemingly impenetrable financial system was really skating along on extremely thin ice.