What happened, told so the mechanism is visible.
A bank fails when its liabilities come due faster than its assets, which can happen to a solvent bank.
Any banking interview question on runs, deposit insurance, liquidity rules or March 2023.
From It's a Wonderful Life · 1946
In distress, a claim is worth what its documents let it argue for, not where it sits on the slide.
Restructuring and distressed interviews, credit modelling, and any discussion of covenant-lite lending.
From The Caesars Palace Coup · Max Frumes and Sujeet Indap
The market misprices what is hard to measure, so a consistent cheap signal can beat an expensive expert.
Quant interviews, any debate about discretionary against systematic investing, and understanding how you yourself are being assessed in recruiting.
From Moneyball · 2011
Judge a chief executive by what they do with the cash, not by how well they run what produces it.
Private equity interviews, assessing a management team, and any question about buybacks, dividends or acquisitions.
From The Outsiders · William N. Thorndike
A short position is a promise to deliver; whoever controls what must be delivered controls the price.
Questions on futures, short squeezes, margin or physical delivery in a markets interview.
From Trading Places · 1983
In a management buyout the insider is the buyer, so the board's job is to make the market, not take the offer.
Any take-private, management-led bid, or fairness question in M&A and private equity interviews.
From Barbarians at the Gate · 1993
A model predicts the past decisions in its training data; if those were biased, the model is a bias machine with a straight face.
Any model used on people, credit underwriting, hiring tools, and AI governance questions in a bank.
From Weapons of Math Destruction · Cathy O’Neil
Ask what a rating assumes about defaults happening together before trusting what it says about the pool.
Any question about 2008, about structured credit, or about why a highly rated instrument lost most of its value.
From The Big Short · 2015
A limit is an escalation rule: it decides when a problem must move up the firm, not just how big it may be.
Markets and risk interviews, especially the question of what a risk function actually does.
From Margin Call · 2011
When the filings are what is in doubt, the evidence has to come from outside them.
Building a short thesis, or any diligence where the reported numbers seem too good for the business described.
From The China Hustle · 2017
Settlement takes days, and the collateral call arrives before the trade clears. That gap is where a squeeze does its damage.
Any long/short, prime brokerage or market structure conversation that touches GameStop.
From Eat the Rich: The GameStop Saga · 2022
Expect an edge to be small, to fade, and to cost more to find than to run; a large, durable, obvious one is probably not an edge.
Quant interviews, and any conversation about whether a published strategy can still work.
From The Man Who Solved the Market · Gregory Zuckerman
Separate what you can do from the structure that makes it valuable, and watch the structure.
Choosing a seat, judging the effect of automation on a role, or answering what AI changes about an analyst job.
From Floored · 2009
Value each part a bidder is acquiring; what the bid leaves at zero is the argument against it.
Take-private analysis, fairness opinions, conglomerate valuation and any activist defence of a holding.
From Southeastern Asset Management's letter to the Dell board (February 2013) · Mason Hawkins and Staley Cates
A take-private proposal is a complete case: the public record that failed, the price, the premium, the financing and the timetable, in that order.
Take-private analysis, premium questions, and private equity interviews on how a deal is proposed.
From Elliott Management's letter to the athenahealth board proposing a take-private (May 2018) · Jesse Cohn
Judge an adjustment by whether an owner of the whole business would also get to ignore the cost.
Reading any earnings release, pitch deck or S-1 that leads with a non-GAAP measure.
From WeWork: Or the Making and Breaking of a $47 Billion Unicorn · 2021
A seller sells certainty of closing as much as price; a bidder who offers more of it can pay less.
M&A process questions, sell-side mandates, and any private equity interview about how to win a deal.
From Barbarians at the Gate · Bryan Burrough and John Helyar
The 2023 runs redistributed deposits towards the largest banks and exposed a pricing gap that already existed; they did not reprice the system.
Any question about the 2023 banking crisis, deposit flight or the funding advantage of the largest banks.
From Deposits and the March 2023 Banking Crisis–A Retrospective · Stephan Luck and Matthew Plosser, Federal Reserve Bank of New York (Liberty Street Economics)
Ask when the debt comes due, what it can reach, and what trips it, before asking how much there is.
Real estate, infrastructure and any capital structure question where leverage is measured only as a ratio.
From Brookfield Asset Management's 2008 letter to shareholders · Bruce Flatt
Ask where a market is in the sequence rather than whether it is a bubble; the stages are more recognisable than the verdict.
Any market history question, any debate about whether a current theme is overdone, and macro interviews.
From Manias, Panics, and Crashes · Charles P. Kindleberger
Profit is not cash, and growth widens the gap; model the cash a business needs to grow before admiring its sales.
Any three-statement question, any growth company's cash flow, and any founder conversation about runway.
From Shoe Dog · Phil Knight
Lending cures illiquidity; only capital cures insolvency. Decide which problem you have before choosing the remedy.
Questions about why Lehman was allowed to fail and AIG was not, about central bank lending, or about any distressed situation.
From Too Big to Fail · 2011
The fair test of a decision is the information available when it was made; hindsight is a different exam.
Discussing the Lehman decision, or any post-mortem where later knowledge is contaminating the judgement.
From Inside the Meltdown · 2009
State the liquidity first, because the argument that prices overshoot value is only available to those who can wait.
Any crisis communication, any question about buying in a crash, and infrastructure or real asset valuation.
From Bruce Flatt's March 2020 update to Brookfield shareholders · Bruce Flatt
A firm that did what the rules allowed and lost has not been excused by the rules; management chose the position.
Banking interviews, risk culture questions, and any post-mortem that reaches for the regulator as the explanation.
From JPMorgan Chase letter to shareholders, 2008 · Jamie Dimon
Build a margin case from countable inputs, headcount, cost per head and incremental margin on growth, so that every disagreement is about a number.
Activist situations, any margin expansion thesis, and the interview question of how you would improve a company's profitability.
From Starboard Value's letter to Autodesk shareholders on margins and board change · Jeffrey Smith
Profit is an opinion about the future; cash is a fact. When they diverge for long, find out why.
Any question about quality of earnings, accrual accounting or how a fraud can pass an audit.
From Enron: The Smartest Guys in the Room · 2005
A track record with no bad months is a question, not a credential.
Due diligence on any manager, strategy or product that reports steady positive returns.
From Madoff: The Monster of Wall Street · 2023
A steepening is mostly term premium; a move in the two-year is half expectations, half premium. Use the rule, then say which model you trust.
A markets interview asks why long yields moved, or a desk needs a quick decomposition before the models update.
From The Treasury Tantrum of 2023 · Anthony M. Diercks and Dev Asnani, Board of Governors of the Federal Reserve System (FEDS Notes)
Judge an acquisition by what happened to the acquired brand's share of its market afterwards; the number is public and hard to argue with.
Post-deal assessment, consumer and brand coverage, and any activist case built on competitive evidence rather than financial engineering.
From Trian's July 2017 letter to Procter & Gamble shareholders · Trian Fund Management
A hedge is a premium paid every year; over a long bull market the premium is the whole story, so account for it as a cost from the start.
Portfolio hedging decisions, insurance company analysis, and any discussion of tail protection.
From Fairfax Financial's 2016 letter to shareholders · Prem Watsa
In a post-mortem, separate the direction from the pace and the explanation, and say which one failed.
Subscription pricing, crisis communication, and the behavioural question about a mistake you made.
From Netflix's third-quarter 2011 letter to shareholders · Reed Hastings and David Wells
A short thesis is a public claim set against a fact the company does not control, with the arithmetic that joins them shown.
Short pitches, forensic work, and any thesis that depends on reported figures being false.
From Muddy Waters' initiating report on Sino-Forest · Muddy Waters Research
Read the notes before the numbers; the disclosure that matters is usually there and usually ignored.
Any model review, any quality of earnings exercise, and any short thesis.
From The Signs Were There · Tim Steer