Published onMarch 27, 2016

The Little Thick in Adam McKay's "The Big Short"

I got around to watching "The Big Short" this weekend as I embraced the rain’s permission to hit the sofa a few hours before March Madness tipped off.

I was hooked at the beginning narration when Paul Vennett (played by Ryan Gosling) sets the stage that regular folks mostly don’t really understand what happened in the housing crisis and subsequent economic collapse of 2007/08. This conceit is brilliantly returned to throughout the movie as jargon-laden scenes involving Wall Street hedge fund managers, traders, and bankers cut to pop culture icons breaking things down for the audience in everyday language we can understand. We are forgiven for not understanding all of the numbers and terms bandied about because the banking industry alternately uses complexity by design and self-appointed authority to make regular folk feel intimidated into silence.

Among the many tastes that this brilliant movie (based on the true story by Michael Lewis) put in my mouth, there are two takeaways that stood out for me: First, I identified with the frustration Michael Burry (Christian Bale) and Mark Baum (Steve Carrell) felt as people who spent disproportionate personal energy trying to open minds and hearts. They were men in a constant push against accepted thinking and accepted behavior simply because people do not like the discomfort of change. Burry’s insight into human behavior and Baum’s virtuous ethos were no match for status quo in the early days of the crisis.

I too am in the business of pushing against the reluctance for change despite evidence of a prosperous, more human way forward. I am a business ethnographer. My currency is empathy. I help businesses and brands differentiate and grow by understanding people and culture. It’s a simple idea that suggests if you get people wrong, you get the market wrong. Big Data (numbers) needs Thick Data (human insights) to create enduring business value. In a consumer economy, everything asks us for time and money. The company that truly understands what matters to people is the one who gets their attention, and their dollar. You’d be surprised what a tough sell this can be.

This leads me to my second, most important takeaway from the movie. It comes after Paul Vennett pitches his impending doom of the fraudulently rated ‘bundled-mortgages-as-game-of-Jenga’ to Mark Baum’s hedge fund team to invest in a credit default swap. Gosling’s character presents the housing crisis argument based on correlating multiple sets of quantitative data. Basically, he’s asking them to bet against conventional wisdom about how the market behaves. Up to this point, everyone had rejected the argument that a housing market collapse loomed. Why? Because numbers can be sculpted and manipulated to a narrative. When numbers are presented in a way that challenges convention, industry’s reflex is often to shiftshape them back to representing a more comfortable history.

Baum’s team is intrigued but unwilling to accept wholesale what Vennett’s argument is implying: that the humans behind the numbers were not behaving as they always had. So, Baum’s team decides to go to Miami (where rampant housing development had occurred) and put boots on the ground to do fieldwork. They knock on doors and find suckered renters in defaulted homes. They ride around with an incredulous real estate agent who glibly refers to out of work homeowners as “motivated to sell”. They have drinks with two gleefully amoral mortgage brokers who are making a fortune off of approving unqualified buyers who will be unable to pay their loans. They attend a trade show in Vegas and witness delusional greed and self-aggrandized debt managers.

In a word, they did ethnography. They put a face to the numbers. They saw with their own eyes and listened with their own ears. By getting out from behind the desk they were able to uncover the true motivations for the market’s behavior. Now Vennett’s numbers made sense. Baum’s team returns from Miami and joins Vennett by investing millions in credit default swaps. Their critical insight into people, gained from Thick Data, yielded a billion dollar return.

Numbers alone are not the full story of a market. They can describe behavior, but they cannot explain behavior. Big Data tells us the what, where, when, and how much of human behavior. But it takes Thick Data to illuminate why a market behaves as it does.

To wit, one of the layperson cutaway scenes involves Selena Gomez and Richard Thaler (a noted behavioral economist) having a teaching moment about the importance of understanding people. Selena Gomez comments that what happened leading up to the crisis was “crazy shit, right?” And Thaler responds, “not crazy, just human. The crazy part is assuming people will act logically all the time.”

In “The Big Short”, it was Thick Data that gave Steve Carrell’s character the confidence to bet against convention. This confidence was only made possible by his gut instinct about the humans in the system. Gut instinct is only made possible by gathering data with your senses. You have to get out from behind the screen. In the movie, as in real life, those who were willing to do so won big.

For those in the consumer brand marketplace, there is much business value and meaningful growth to be gained by understanding the messiness of life and what truly motivates people. Numbers need a dance partner and that partner is Thick Data.

Bad Babysitters Productions © 2016