Last Updated on April, 2024 by Edison
The Big Short is without a doubt one of my favorite movies.
Recently, I watched again (for the third or fourth time) and I noticed that the scene where Jared is pitching the idea to Frontpoint Partners is a masterclass on persuasion. Jared is skillfully using a lot of advanced techniques to keep them hooked on the presentation and to sell a “crazy” idea.
So I created this video to explain all of these techniques he is using. These insights will help you a lot in persuading people.
The following is the transcript of the video.
The meteoric rise of social media and smartphones has dramatically reduced our attention spans.
Or has it?
I mean think about it… Sometimes you drift off during a conversation but also watch lectures or listen to podcasts.
It’s not that we have shorter attention spans. But more things are screaming for our attention. And our brain chooses to focus on tasks that it finds interesting and useful.
So when trying to persuade someone, you’re competing with their phone.
Here I’ll give you some techniques that will help you become more persuasive.
Before we begin, let me give you some context, in case you haven’t seen the movie. If you have, you can skip this part.
Introducing the characters
Jared Vennett is a trader at Deutsche Bank. He’s purely driven by self-interest and is very open about it.
Then we have Mark Braum, leader of the Hedge Fund, Front Point Partners. He has a strong moral compass and is a very skeptical person.
Vinny Daniel is a research analyst and is probably more suspicious and darker than Mark.
Danny Moses is the head trader while Porter Collins worked with Mark at a previous firm and then joined him at Front Point Partners.
Jared is pitching the idea that the housing market will collapse and they can make a huge profit by betting against it.
At the time, this was a crazy idea because public and private financial institutions were supposed to monitor and regulate the market.
It’s like taking care of a hydropower plant. You expect that the engineers are constantly working to identify and prevent potential flaws because if the dam collapses, it’s catastrophic for the country.
Some systems should never fail.
Now Jared is trying to persuade them that… [the governments, the banks, the regulation agencies are all sleeping in the wheel]
The Scene Analysis
[Jared Vennett] Hi! How are you? Have a seat.
He starts by telling them where to sit. Keep in mind that it’s their office.
He doesn’t start the meeting with enthusiasm by shaking their hands, and thanking them for the opportunity to meet; especially considering that he got all those rejections before.
But despite all the rejections, he maintains the attitude that he’s right without a doubt.
He knows that if you show signs of desperation, you are less likely to be believed even if you are right.
In addition, we must be careful of the Act As If advice… Act as if you’re confident; act as if you’re prepared.
This stuff can work on gullible people. But when you face someone who’s a skilled communicator or knowledgeable in their field, they can tear you into pieces with a few well-thought-out questions.
So don’t act as if you are confident, but work on your issues and actually become confident.
Don’t act as if you’re prepared, go above and beyond to learn about the subject and actually be prepared.
When you do this, it doesn’t matter how powerful your counterpart is, because you can create something called situational status. I’ll talk more about how it works later in the article.
[Mark Baum] Ok, Mr. Bennett, from Deutsche bank. How many people have you talked to about this trade?
[Jared Vennett] A few. There’s definitely some interest.
[Mark Baum] This is why you’re here talking to us with the wrong number. Sounds like there’s a lot of interest.
When you’re trying to persuade people, they might try to throw you off before you even start the presentation. But Jared knows the game has started before they even enter the door.
So, he’s attentive and responds quickly to regain the power.
[Jared Vennett] Alright, a few people have invited us just to laugh at me on this deal. Is that you? Is that what this is?
He confronts their skepticism head-on and cleverly frames them as people who don’t see a huge opportunity and that they have time to waste by meeting just to make fun of him.
In addition, I want to give you a technique I have found very helpful in handling interruptions.
When you try to have a serious conversation, he/she might interrupt you and start ranting.
In that case, you need to take charge of the conversation right away.
You can do that by using a tool called the moral authority frame.
You frame their behavior as wrong while positioning yourself as having the moral high ground.
You may say something like: “Look, I want to have a conversation like adults, which means that we listen to each other. But if you constantly interrupt me, it means you don’t care about what I have to say. You are multiplying my opinions with zero.
If you’re not willing to listen then why should we have this conversation? It’s a waste of time.”
Be ready to end the conversation if they don’t comply.
Always remember that you have the power frame when they’re reacting to your words. So defy them when needed to regain control.
Jared uses this strategy throughout the entire presentation. He keeps the power frame by subtly defying them, sometimes in a funny way.
He also doesn’t hesitate to create a little tension. Tension is good.
As a result, they’re always following his lead.
My comment was a bit lengthy, but as I said there are a lot of insights we can extract from this scene.
[Vinny Daniel] That’s not what this is. That’s just how Mark is. Let’s see what you got.
[Mark] I’m sorry.
[Jared] Do you smell that? What is that? Your new cologne? Opportunity. No. Money. I smell money.
[Mark] Okay
Mark obviously did not like how he started.
Then Jared dives into explaining how mortgage bonds changed from basic investments backed by the US government to complex bonds structured by private banks.
These bonds became so complicated that even the banks didn’t know exactly the quality of the product they were selling and they didn’t give a fuck because they were making a lot of money.
[Jared Vennett] This is your basic mortgage bond, alright? The originals were simple. They were just thousands of Triple-A mortgages bundled together, guaranteed by the US government.
The modern ones are different. They’re private, and they’re made up of layers of tranches. The highest-level Triple A’s getting paid first, the lowest-rated B’s getting paid last, taking on defaults first.
Despite who’s listening, you need to package the information that appeals to their primitive brain.
Our primitive brain loves to conserve energy.
So you should explain in a simple, concise, and interesting way.
Now Jared is talking to people who are in finance. He could’ve used complicated language and they would be able to follow him. However, he wouldn’t be very persuasive because it would be harder for them to concentrate.
[Jared Vennett] Now, obviously, if you’re buying B’s… You can make more money, but they’re a little risky. Sometimes they fail. Somewhere along the line, these B’s and BB’s went from a little risky to dog sh*t. Where’s the trash? I’m talking rock-bottom FICO scores, no income verification, adjustable rates dog sh*t
Using the Jenga blocks serves as a powerful visual analogy. It simplifies the subject and adds a dramatic flair to the presentation.
[Jared Vennett] The default rates are already up from 1 to 4 percent, fellas, and if they rise to 8 percent, and they will, a lot of these Triple B’s are going to 0 too, and that, my friends, is an opportunity.
If you struggle to figure out how to present your idea, then a great way to start is by explaining the large forces at play – Economic, social, and technological. And how these forces have aligned in a way that opens a brief window of huge opportunity.
That’s what Jared did here.
[Mark] Okay, you’re saying that at 8%, the bonds fail. And we are already at 4%.
[Jared] That’s right.
[Mark] If they go to 8, it’s Armageddon.
[Jared] Yeah, that’s right.
[Porter Collins] How come nobody’s talking about this?
[Danny Mosses] You’re completely sure of the math.
There are two objections at the same time.
He deflects the first and responds to the second because that conversation thread helps him more in advancing the pitch.
[Jared] Yeah, I’m sure of the math.
The way he presents the math specialist is uncalled for.
And he makes it look like Jiang works for him. When in fact, he was employed by Deutsche Bank.
However, by including him in the presentation, no one questions his math or his data.
[Vinny Daniel] So, you’re offering us a chance to short this pile of blocks. How?
[Jared] With something called a credit default swap. [The Financial Instrument] It’s like insurance on the bond [Analogy], and if it goes bust, you can make ten to one, even twenty to one return [Opportunity], and it’s already slowly going bust [Urgency and Intrigue]
The way he responded to a technical question makes it much more compelling than simply giving a definition or explaining a procedure.
[Porter Collins] Ten to one, twenty-one? No way.
[Jared] And no one’s paying attention. No one is paying attention because the banks are too busy. Getting paid obscene fees to sell these bonds.
Still, he ignores his statement and continues with the narrative but this time he focuses on the social element… which is that people who run the banks are blinded by greed and are making a costly mistake.
This angle plays well with Mark because he fucking hates the banks. And the fact that Jared who works for the bank, has managed to keep him interested so far, shows how good is he.
[Vinny Daniel] But wait, you are the bank. You work for the bank. I bet your margins are pretty nice and fat.
He asks a very logical question, Aren’t you the bank? Isn’t there a conflict of interest? But he doesn’t respond directly. He breaks his power frame in a funny way. The message here is not to relieve the tension but to show that he’s confident enough to navigate this area.
[Jared Vennett] Let’s not talk about my margins. By the way, being nice and fat, that’s a nice shirt. Do they make it for men?
[Vinny Daniel] Aren’t you the bank?
[Jared Vennett] I work for the bank. I don’t think like a bank, big bank, small bank. I like to make money, alright? Let me put it this way: I’m standing in front of a burning house and I’m offering you fire insurance on it.
That’s a great analogy. I’m standing in front of a burning house and I’m offering you fire insurance on it.
Since he has established that he doesn’t care about the banks and that he’s only in it for the money, he can continue with the narrative that banks are greedy and that he knows something they don’t.
[Danny Moses] How can these underlying bonds be as… Bad as you say it wouldn’t be legal?
[Jared Vennett] Nobody knows what’s in them.
Nobody knows what’s in the bonds. I’ve seen some that are 65% Triple-A rated that I know for a fact are filled with 95% subprime sh*t with FICOs below 550.
[Vinny Daniel] Get the fuck out of here.
[Jared Vennett] You want me to really blow your mind?
When the market deems a bond too risky to buy, what do you think we do with it? Take a guess.
[Vinny Daniel] I don’t know. You tell me.
As you may have noticed he uses a conversational style. It keeps them engaged in the presentation but most importantly it creates some tension.
There are two ingredients for keeping people’s attention: Novelty and Tension.
Novelty is when you give new information. You frame your idea differently from what they are used to hearing, or you use metaphors and analogies to explain complex topics.
Then we have TENSION.
You can build tension by explaining the consequences of failing.
In addition, tension is also created when they give objections.
Look, If they agree with everything you say, there’s no interest. They’re just wasting your time.
So don’t get baffled when people object to your ideas. That’s a good thing; it means they are interested.
You want them to give objections; you want them to try to dominate the conversation. It makes the interaction more interesting and you are knocking down all the reasons why they shouldn’t act.
Now back to the scene:
Then he explains that the banks do not accept the loss from the toxic bonds that didn’t sell but combine it with other toxic bonds. Somehow that’s a new and high-quality product. But a few individuals saw these products for what they are… BS.
[Jared Vennett] Alright, you think we just warehouse it on the books? No, we just repackage it with a bunch of other sh*t that didn’t sell and put it into a CDO
[Mark] A CDO.
[Jared] Yes, a CDO.
[Mark] What is that?
[Jared Vennett] This is where we take a bunch of B’s, double B’s, and triple B’s that haven’t sold, and we put them in a file. I mean, the pile gets large enough, the whole thing is suddenly considered diversified, and then the whores at the rating agency give it a 92, 93% Triple-A rating, no questions asked.
Let’s pause here because it’s a very important concept.
Earlier I mentioned that when you have done your homework, you can create situational status.
When you have a higher status, even temporarily, your chances of closing the deal are high.
Now, in most situations where Mark and Jared would be… Mark has a higher status because he is the head of a hedge fund and has more money.
However, they are talking about mortgage bonds where Jared is an expert.
So, in this situation, Jared has a higher status.
Here’s how you can gain situational status no matter how powerful your counterpart is:
The first step is to break their power frame with small acts of defiance.
Correct them when they make a statement about your field. Of course, we do it in a subtle, respectful manner.
You withhold information. When they want to discuss something else, you may say something like: “We’ll discuss that later but for now we need to make sure we are on the same page with this”
Most importantly, you maintain a confident body language and you send the vibe that there’s something really important going on and they need to pay attention.
The second step is to redirect the conversation to your area of expertise, where your statements are unquestionable.
The third step is to frame yourself or your service as a prize to be won.
Now let’s continue…
[Mark] Say that again:
[Jared Vennett] Collateralized Debt Obligation. It’s important to understand because it’s what allowed a housing crisis to become a nationwide economic disaster.
Then they explain what a CDO is, which as we said is basically dog sh*t wrapped in cat sh*t
[Jared Vennett] Institutions treat these CDOs like they are as solid as Treasury bonds, and they’re going to 0.
[Danny Moses] That can’t be right. There are 500 billion in a housing bust… So last year alone, the rating agencies, the Banks, the fu*cking government, you’re saying they’re all asleep at the wheel.
[Jared] Yeah, my whole department’s long on this stuff. They call me Chicken Little. They call me Bubble Boy,
A’s 0
B’s 0
BB’s zero
BBB’s zero
and then that happens…
[Mark] What is that?
[Jared] That’s America’s housing market.
The terror in his eyes.
After the meeting, Vinny does not want to believe he’s right while Mark wants it to be right just to see the banks getting screwed.
Both are in a heightened emotional state which is normal after a great presentation.
But Mark quickly goes above the emotional process and says let’s figure this out… Is there a housing bubble, and if there is, how exposed are the banks?
Now, I think you will find it helpful if we make a summary of all the psychological insights we got from this scene:
1. Maintain a confident attitude.
One of the ways to do that is by actually being prepared.
2. The game has started before you even say the first word so always be attentive.
3. Don’t be afraid to confront skepticism head-on.
4. Always frame yourself or your service as a prize to be won.
5. Use the moral authority frame to deal with interruptions.
6. In my last video, we explained that you have the power frame when they are reacting to your words so defy them when needed to maintain control of the conversation.
7. Explain in a simple, concise, and interesting way because you want to please their primitive brain.
8. Put your idea in the context of large forces at play.
9. Focus on conversation threads that get you closer to reaching your goal.
10. Present an authority figure to add credibility to your idea.
11. Use analogies to simplify complex topics.
12. Use a conversational style. You know, include them by asking simple questions, or by using rhetorical questions to emphasize key points.
13. Be aware of the two key ingredients for keeping people’s attention – Novelty and Tension
14. If the counterpart has a higher status, you can create situational status which is enough for you to close the deal.
However, once the interaction is over that status you’ve established disappears and you have to start again.
15. No matter how tough the situation is, learn to go above the emotional process and make a logical decision… like Jared did throughout the presentation and Mark did in the end.
If you want to learn more about persuasion and being calm in stressful situations, I recommend watching these videos.
I just finished reading the book Pitch Anything by Oran Klaff and man what an amazing book. It’s a must-read if you want to take your persuasion skills to the next level.