Free The Age of the Unthinkable by Joshua Cooper Ramo

he told me a few days later, as we were catching up by phone. “This is the end. And it will now all start
     to unravel.”
    Writing to his investors that week, Browder explained that he had seen what a $40 billion hole in the Russian balance sheet
     had done to that country (demolished its financial system) and that from where he sat, “a US$300-billion problem is simply
     a lot larger than a US$40-billion problem, and the implications for world markets will be similarly greater.” And, he cautioned,
     the final price tag on what would come to be known as the subprime-mortgage crisis was likely to be much bigger than $300
     billion. Almost immediately, he began stockpiling cash, reducing his exposure to stocks as much as he could, and moving his
     and his investors’ money into any safe haven he could find. He began to pioneer what he called an “off-the-grid” investing
     style. “The analogy is an electrical black-out,” he wrote his investors. “Those working in an office building get paralyzed,
     but those living in a cabin in the mountains hardly notice. We want to achieve the financial markets’ equivalent of living
     in a cabin in the mountains.” Or, if you wanted to put it another way, he was trying to outrun a tsunami.
    One of the lessons of international finance is that from time to time large economic storms come along and wipe out huge pieces
     of the global economy. And our modern trading systems often seem to be self-fulfilling disaster machines in this regard. “The
     problem with global financial markets,” Larry Summers mused to me at the height of the 1997 Asian economic crisis, “is that
     they are like modern jet planes. They get you where you need to go faster, but the crashes are far, far worse.” This was what
     happened to some degree in the 1987 U.S. stock market crash, when an accumulation of small factors led to a sudden systemic
     change that tore up years of market value. It happened again during the Asian crisis that in 1997 and 1998 lopped Browder’s
     fund by 75 percent. In each case the markets had simply become unglued from any normal rules of behavior, had gone “nonlinear,”
     as the hedge-fund jockeys liked to say. None of the tools used to predict or explain what was happening worked. With no better
     reason than that
everyone else is getting out,
investors dumped and ran. “In crises like this,” Browder said, “people sell first and ask questions later.” Sometimes these
     ripples of unknowable economic physics hit only a few innocent bystanders — the arrogant yuppies tagged by the 1987 crash,
     a poorly educated Mexican treasury hit in 1995, the random unlucky Thai real estate developer nailed in 1998. But every once
     in a while the physics come along and munch away decades of civilized life, the way the 1929 stock market crash tightened
     Europe’s downward economic spiral, helping to elevate Hitler and the whole horrible historical train wreck that came afterward.
     Looking at what was happening in 2007 and then into 2008, Browder asked himself,
Is this another one of those historic crises?
    A unique kind of panic emerges at such moments. If you went to one of the hastily called meetings in the wood-paneled rooms
     of the Council on Foreign Relations or if you sat with the best financial minds in the City in London or at a Starbucks in
     Greenwich, you could see a strange and creeping fear. It was weird in a way, because these were investors who had made fortunes
     from instability and volatility in markets. They had devised instruments to capture and contain and profit from it. Even to
encourage
it. But when what they thought of as the usual rules didn’t apply, they became, very quickly, like Greenspan in his fall
     2008 congressional testimony: humbled, perplexed, and worried.
    Browder never made a decision without thinking about the downside — not just once but constantly. He knew this was the only
     safe approach in markets that could, like one of