The global recession of 2008 – and previously, the avarice of the ‘80s – provided new fodder for Hollywood in the form of the financial thriller (see: Wall Street, Gordon Gekko). But with this new breadth of timely material came a challenge for script writers that us investment writers face on a daily basis: how to distil the jargon-filled language of finance into a clear, digestible and captivating package?
Anyone who’s ever aspired to write – or really, anyone who’s attended grade school – has heard the favoured adage “Write what you know.” But when it comes to financial concepts, we advise that you, well . . . don’t.
The key to successful fund commentary (as we’ve mentioned before) is to lay your facts out in as simple, straightforward a way as possible. While it’s essential for a financial editor to know about, say, duration positioning and beta risk, it’s equally important for an editorial team to have the ability to convey these concepts to the public in a way that can be quickly and easily understood. And with a new raft of financial films filling cinemas as of late, it’s come to our attention that the unsung heroes of the investment-writing world may just be Hollywood’s screenwriters.
Below are our five fave examples of movie-makers who got it right when explaining out-of-the-ordinary financial concepts to the masses:
What exactly happened in 2008?
Too Big to Fail, 2011. Written by Peter Gould & Andrew Ross Sorkin.
In 2008, the sub-prime mortgage crisis in the US led to a financial collapse that sent shock waves around the globe. The brilliance of this clip, from 2011’s Too Big to Fail, lies in the use of its characters to deliver the thesis of the whole problem. In this scene, Cynthia Nixon’s PR manager has to glean a thorough understanding of why the economy collapsed in order to convey it to the public in a next-day press conference. Her colleagues on the financial side of things attempt twice to explain the crisis, until finally the key line is delivered by William Hurt’s Hank Paulson: “She has to do this in English!” What follows is a clear, educational, and bleak account of what went wrong.
What are sub-prime mortgages?
Inside Job, 2010. Directed by Charles Ferguson.
The directors and editors of Inside Job get the credit here, as the film is a documentary about the sub-prime crisis of the late 2010s, rather than a story based on it. Sub-prime mortgages are home-buying loans granted to borrowers with low credit scores – simply put, to borrowers who potentially do not have the ability to pay the loan back (forget about that whole 20% down thing). This clip details just how serious and extreme the practice became in the months and years leading up to the credit crunch. People were taking out loans for up to 99.3% of the price of a home, and investors were being told that the securities that contained these mortgages were sure-fire money-makers. Not so, they discovered, when the defaults came rolling in.
What counts as a commodity?
Trading Places, 1983. Written by Timothy Harris & Herschel Weingrod.
Con artist Billy Ray Valentine (played by Eddie Murphy) mistakes his ‘bread ‘n butter’ for his actual bread and butter is this scene from the 1983 hit Trading Places. Dropped into a lucrative life as a commodities trader in a film inspired by Mark Twain’s The Prince and the Pauper, Valentine gets a lesson in figuring out just exactly what ‘commodities’ consist of. Put simply, says his boss, “Commodities are agricultural products”. While that’s a bit simplistic, it’s largely true − though the term is more frequently used to cover natural resources such as gold, oil, and iron ore. Coffee beans, cocoa, and copper are other examples. But the real gold is this scene is Murphy’s brilliant, sarcastic example of breaking the fourth wall.
What happens in a fire sale?
Margin Call, 2011. Written & directed by J.C. Chandor.
As Kevin Spacey’s character so candidly puts in this scene from our pick for the best finance movie of all time, a fire sale is what happens when “the party’s over.” A fire sale, generally speaking, is bad: this happens when a firm has to sell stocks or securities at a very low price and very quickly, and often when bankruptcy is on the table. (The clip also features some eye-popping stats on how much money there was to be made on Wall Street from the afore-mentioned sub-prime mortgages).
And collateralized debt obligations are . . . ?
The Big Short, 2015. Written by Adam McKay & Charles Randolph (based on the book by Michael Lewis).
A collateralized debt obligation (CDO) is essentially a pool of loans, sliced into “tranches” – layers defined by differing levels of risk – and resold to investors. By the film’s admission, the practice could be considered “morally onerous.” In this clip, celebrity chef Anthony Bourdain uses unsold seafood as an analogy for the assets that are redistributed as CDOs (fish that didn’t sell on Friday is chopped up into a fish stew on Sunday) and rebranded as something desirable: “It’s not old fish – it’s a whole new thing!” The film also features pretty ladies Margot Robbie and Selena Gomez explaining sub-prime mortgages and synthetic CDOs, respectively.
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