Michael Lewis began thinking about his new book, The Fifth Risk, in late 2016 or early 2017 during the weeks before Donald Trump’s inauguration. He was bedridden after surgery and was “laying there going crazy about Trump,” he recalls. Lewis had just published his latest bestseller, The Undoing Project, about two Israeli psychologists, the Nobel prize-winner Daniel Kahneman and Amos Tversky, who studied how people grapple with risk. “One of the insights that dropped out of some of their experiments was: people don’t,” Lewis says. “When you change something that has a one in a million chance of happening to a one in ten thousand chance, people don’t feel that.”
One way to think about the US government, Lewis realised, was as a manager of big risks – from military conflict, to financial collapse, to natural disaster. As risk-manager-in-chief, Trump now had the frightening ability to boost the odds of catastrophe from, say, one in a million to one in ten thousand “over a vast portfolio of risks”. “People sense an unease,” Lewis continues, “but nobody quite puts it that way.”
Lewis was contemplating the nation’s dire risk portfolio when Trump tapped the former Texas governor Rick Perry to be secretary of the Department of Energy. Five years earlier, Perry had said in a presidential debate that he wanted to eliminate that cabinet-level department. At least, he had tried to say it: in a moment that helped sweep his ruinous candidacy into oblivion, Perry forgot the department’s name.
“It’s bad enough Rick Perry has no sense of this,” Lewis thought after hearing of his appointment. But he had to acknowledge he didn’t know anything about the department either. So he decided to find out. “It took about two phone calls before I learned, ‘Oh, that’s where the nuclear weapons are. Oh my God.’”
What Lewis went on to discover was even more shocking. On the morning after the presidential election, as the balloons from the previous night’s parties are still settling on the ballroom floors, the president-elect is expected to send teams into every department of the US federal government to begin the transition of power. But at the Department of Energy last November – and, it turned out, at many of the country’s 14 other federal departments – one day passed, and then another, and no one came.
Bureaucrats in the Obama administration had worked for a year to prepare thousands of pages of briefings on the risks their successors could face. Yet by Thanksgiving, no one from the Trump team had arrived to receive them. “I was fucking nervous … ,” Steve Bannon later told friends about Trump’s handling of the transition, Lewis reports in the book. “I go, ‘Holy fuck, this guy doesn’t know anything. And he doesn’t give a shit.’”
As Trump came to power, the department that manages one of civilisation’s most obvious existential risks was effectively going without leadership. So was the department that keeps millions of Americans from going hungry. And the one tracking the next superstorm. So Lewis decided to find out what was in the Obama briefings himself.
Risk – and the people who attempt, with arrogance or humility, for profit or disaster, to exploit it – has been the central theme of Lewis’s highly successful career. In his debut book, the 1989 memoir Liar’s *****, he watched from his seat on the London trading floor as the investment bank Salomon Brothers turned Wall Street into what he later described as a black box of exotic risks that were poorly understood by investors and bankers alike.
Two decades later, in the highly leveraged mortgage-securities market that Salomon pioneered, the US’s largest banks were again mining profits in a mountain of complex risk. When the mine collapsed, the CEOs got massive paydays, and the rest of us got buried by the global financial crisis. A small handful of rogues who bet against the banks’ unsustainable risks also made tens of millions of dollars. In The Big Short – a book turned into an Oscar-winning film starring Christian Bale, Steve Carell and Ryan Gosling – Lewis explored the disaster through their stories.
In between these tales of financial ********, Lewis wrote bestsellers-turned-films on baseball statistics (Moneyball, 2003) and the intersection of offensive strategy and race relations in American football (The Blind Side, 2006). He also produced reams of journalism and more than half a dozen other books on topics from Silicon Valley (The New New Thing, 1999) to his high school baseball coach (Coach, 2005), whom he credits as a source of his work ethic.
Collateralised debt obligations and on-base percentages don’t seem like promising popular subjects, but Lewis is often celebrated for his conversational style and narrative flair. He says he absorbed this from the New Orleans milieu into which he was born, in 1960: “People in New Orleans have a pretty high standard for storytelling. What comes out of their mouths is more interesting than what comes out of the average American mouth. And there’s a humour that ripples through everything there.”
His accent seems to grow stronger as he tells me that New Orleans was also a place “where you were so clearly defined by who your momma was”. For his part, Lewis was “born on third base”, as he put it in Coach. His mother was descended from two US presidents, James Polk and James Monroe; his father’s great-great-grandfather was sent to the territory of Orleans by Thomas Jefferson in 1803 to be a judge following that year’s Louisiana Purchase.
Tall and trim with caramel-coloured hair and a hawkish profile, Lewis was the under-16 king of the Mardi Gras. “We’re both royals,” he recalls telling Princess Diana when they met in London, not long before her *****. “But did they ever teach you to wave a sceptre?” When Diana said no, Lewis wheeled her around the room, her hand on his, and they practised with forks. “She was tickled.”
Despite his knack for serving up both revealing little anecdotes and big narratives such as the financial crisis, Lewis felt it was brave of Graydon Carter, then editor of Vanity Fair, to publish his more recent reportage, not from the aestheticised bustle of Wall Street but from the grey hallways of American bureaucracy. (Two of those pieces, published in 2017, are chapters in The Fifth Risk.)
But when we talk in his writing studio, a small red wood cabin behind his house in Berkeley, California, Lewis also draws a direct connection between The Big Short and his new work. It is 10 years since President Obama, Timothy Geithner, then president of the Federal Reserve, the CEOs of the world’s largest investment banks, and other financial players decided to bail out Wall Street without exacting what Geithner called “Old Testament vengeance” on the banks.
“They set the banks back up on their feet, and enabled the bankers to pay themselves what they pay themselves and expose the heart of capitalism to the rest of society as this rigged game, this sham,” Lewis says. “I think they underestimated the political consequences of that.” In other words, they hadn’t understood the risks.
In early summer 2017, Lewis went out to Long Island to meet John MacWilliams, a highly respected energy investor who became the Department of Energy’s chief risk officer during the Obama administration. Lewis was the first to hear a version of the briefing MacWilliams had prepared for his counterpart in the Trump administration.
“Just give me the top five risks I need to worry about right away,” Lewis said to him, sitting at his kitchen table. “Start at the top.” Lewis didn’t have the security clearance needed to be briefed on the first risk, but neither did the few people from the Trump administration who eventually showed up at the department. MacWilliams could only hint that the first risk involves the theft, loss or accidental detonation of nuclear weapons. “It’s a thing Rick Perry should worry about every day,” MacWilliams said.
The second risk is a conflict with North Korea involving nuclear or chemical weapons; the third, Iran’s rush to build a ****, which has been sped along by Trump pulling out of the nuclear agreement. The fourth risk is the failure, through espionage, ******, disaster or other means, of the nation’s patchwork electrical grid.
That brought them to the fifth risk. The nuclear football – “the button” or the “emergency satchel” that contains nuclear launch codes – is often a symbol of the awesome dangers of American power. But there are other, entirely unpredictable risks that may be equally grave. This echoes something Kahneman and Tversky discovered in their work: people believe the obvious risks are the largest, like ********* attacks. But we’re actually much more likely to *** driving to the shops. The fifth risk is something impossible to conceive of in advance, or to prepare for directly. What matters is having a well-organised government in place to respond to these contingencies when they hit – exactly what the Trump administration has failed to do.
To understand more about the kind of risk the US government helps cushion its citizens from, Lewis looked at three agencies that are little discussed and poorly understood by the public: the Department of Energy, the Department of Agriculture and the Department of Commerce. What results, in the new book, is a surprising “civics lesson” that seeks to reverse some of Americans’ deepest prejudices about government.
Slothful, wasteful, idiotic – this is how the bureaucracy is often portrayed. Many people are fed a media diet of government flops, and are not encouraged to appreciate what it gets right. There are of course real failures. The rollout of HealthCare.gov by Obama “was unforgivable”, Lewis says, the result of not paying enough attention to the civil service. But he is quick to add that Obama learned his lesson, and was never at “Trumpian levels of neglect”.
But Lewis found that many of the people working in the government are scientists and administrators at the top of their fields working on some of the thorniest problems facing the world, such as cancer and climate change. (Much of the innovation we attribute to Silicon Valley started life inside a government programme.)
They are the opposite, in other words, of Rick Perry. And they often shared something else. Lewis not only found “hundreds of fantastically important success stories in the United States government”, but that “a surprising number of the people responsible for them were first-generation Americans who had come from places without well-functioning governments”.
For Lewis, the most interesting character was a man named Ali Zaidi. A Muslim immigrant growing up poor in rural Pennsylvania, Zaidi became a staunch small-government Republican, devoted to the myth of pulling yourself up by the bootstraps. After volunteering in post-Katrina New Orleans, however, Zaidi began to suspect that “there were no bootstraps”. He eventually joined the Obama administration, where at a very young age he was put in charge of overseeing budgets at the Department of Agriculture. It was only then he realised that one of the services he was helping to administer, a school-lunch programme, had kept him from going hungry as a child.
The people who eventually turned up to run Trump’s federal government were nothing like MacWilliams, Zaidi or the other public servants Lewis met. They are more like intellectually limp versions of the arrogant “Big Swinging Dicks” Lewis described on the Salomon trading floor. Many government positions remain unfilled, but those who are in office are there not by dint of intelligence or expertise, but through cronyism and loyalty to Trump.
“The woman who ran the Obama department’s energy-policy analysis unit received a call from Department of Energy staff telling her that her office was now occupied by Eric Trump’s brother-in-law,” Lewis writes (Eric is Donald’s son). “Why? No one knew.” Trump’s people, Lewis makes clear, are largely inept and animated by greed, anti-government ideology and a “commitment to scientific ignorance”. Trump himself is, in Lewis’s view, “the single worst business manager that’s ever occupied the office. He’s obsessed only with himself, he doesn’t manage anything.”
Lewis is currently working on a TV script about Cuban immigrants who may have been smuggled into the US to play baseball, and on a six-episode podcast about people and institutions in the US who are regarded as neutral, arbiters of truth, relied on to maximise fairness. “The people in these roles are on the run, and the feelings of fairness are also on the run,” he says. “If you want to get at what drives the Trump phenomenon it is anger at a perceived injustice or unfairness.”
Lewis traces the roots of this civic breakdown to several sources, including the Republicans’ longstanding political strategy of eroding faith in government. He also points to the incursion of markets into places where they don’t belong, a story he dramatised in Flash Boys which is about the once-neutral stock exchanges becoming unfair for-profit enterprises. There’s also an intellectual story, which he told in The Undoing Project, about our justifiably eroded faith in human judgment. And there’s a technological story about algorithms usurping human discretion.
With the new book, Lewis is planning to tour a lot of small college towns, places in swing states, in the runup to the midterms in November. He wants to “force people to confront the consequences” of keeping Trump in power. About the fifth risk facing the country, he says: “If you’re worried about it to the degree you should be worried about it, there’s no way you have this man running the country.”
• The Fifth Risk by Michael Lewis is published by Allen Lane on 2 October.