Taewoo IT had been posting trendous quarterly results, and what had once started as a departnt with fewer than 100 employees had now grown into a team of over 1,000 experts.
"There are quite a few empty desks."
"A lot of staff are currently dispatched to various projects, so only about 70% of the employees are in the office right now. However, the employees sent to ga companies will be returning soon, so we can proceed with all projects without any manpower shortages."
Taewoo IT didn't have a strict hierarchy system.
Whenever a project was assigned, anyone who wanted to take the lead could step up and beco the project leader.
Of course, there was always soone who stepped up — and that person was usually Yang
Young-won.
It wasn't just that he liked taking the initiative.
He was exceptionally talented, which was why I'd already marked him as a future Taewoo IT
executive.
Judging by how he clung to my side the mont I walked into the office, eagerly briefing on the current situation, it seed he had his own ambitions for power.
"How many people can we mobilize imdiately?"
"There are about 100 employees who just finished their last project and are waiting for the next assignnt."
"Call all of them to the main conference room."
By the ti I finished my coffee and returned, nearly 100 employees had gathered, their eyes
sparkling with anticipation for a new project.
"First, let apologize in advance. This project is not about the result, but the process itself.
There's a chance that no tangible outco will co from this."
A few employees' faces showed signs of disappointnt.
Taewoo IT employees received higher salaries than any other Taewoo Group subsidiary.
Base salaries were standard across the group, but their performance bonuses were several tis higher, making Taewoo IT the most coveted departnt.
"However, this is sothing that must be done — so I'm asking for your cooperation."
[If the Vice Chairman asks, of course we'll do it!]
[Just tell us what to build! My fingers are itching to start coding!]
Their reaction was far better than I'd expected.
I'd prepared a special incentive to offer, but the employees were already fired up before I even ntioned it.
Were they always this loyal?
Curious, I quickly scanned through their profiles — and sure enough, nearly all of them
had exceptionally high loyalty scores.
Was it the power of money?
Or was it simply because the Vice Chairman himself had made the request?
Whatever the reason, the atmosphere was set.
It was ti to mobilize the troops.
"The goal is to create a website with the features I describe — as quickly as possible — and file patents for everything. The Patent Division from the Technology Research Center will assist with the patent applications."
"What kind of features are we building?"
"I didn't have ti to prepare docunts due to the urgency, so I'll explain using the whiteboard."
I began scribbling down the list of features on the board:
Mini hopage
Background music
Friendship networks
Guestbooks
SNS currency systems
Online diaries
Every feature that Cyworld was planning to implent in the next 1-2 years — I laid them all out in advance.
Not only that — I even added features from future platforms like Facebook, Instagram, and every other SNS function I could rember from my previous life.
By the ti I was done, the whiteboard was completely filled.
"This should be enough."
The eting had lasted a grueling four hours.
It took that long to ticulously explain every feature and field countless questions — but by the end, all 100 employees had a crystal-clear understanding of what they needed to build.
"When will you be able to complete developnt?"
"If each project team takes responsibility for one feature, we should be able to finalize all
functions within a month."
"If you successfully complete this project, all Taewoo IT employees will receive the highest
holiday bonus in the company's history. Additionally, I'm planning to introduce one day of remote work per week for all Taewoo IT employees."
[Wooaaah!]
Surprisingly, the employees cheered louder at the ntion of remote work than they did for the bonus.
Well, who wouldn't love remote work?
No matter how free-spirited a company culture might be, nothing could ever beat the comfort of working from ho.
"And by the end of this year, I plan to expand Taewoo IT to 1,500 employees. Once that happens, we'll implent long-term leave and sabbatical programs. Employees will be able to choose between three months of paid leave or a one-year sabbatical — if they want it."
[Wooooooaaahhhhhh!]
The conference room erupted like they'd just won the World Cup against Japan.
"However!"
I deliberately raised my voice to calm down the excitent.
"To make that happen, our productivity and profits must increase — even more than they are
now. If the company shows negative growth, this plan will be scrapped."
[We'll give it everything we've got!]
[If anyone goes out for a smoke break, I'll kill them myself!]
[Chew nicotine gum instead, you bastard!]
I had originally planned to offer these incentives before assigning the project — as the final
carrot.
Honestly, this kind of welfare was probably sothing the employees wanted even more than performance bonuses — and no other major Korean corporation had ever dared to offer such benefits.
After leaving Taewoo IT...
I headed to Captain Kang's office.
There, I found Dimon sitting by the window, gazing blankly outside.
"David hasn't co to Korea yet?"
"He's tied up with work in the States. He won't be able to co for a while."
Dimon replied without turning his head, still staring out the window.
Sothing about him felt... off — like his soul had left his body.
"Is sothing wrong?"
"I don't know what I'm even doing here anymore."
He finally turned to look at , his eyes empty.
"I ca to Korea because I trusted you — because I believed in your promise to make
the CEO of the world's greatest bank. But since I arrived, all I've done is work on things completely unrelated to finance. I feel... hollow."
Damn...
Had I neglected Dimon for too long?
If I left him like this, he might pack up and leave any day now.
I had to reel him back in — imdiately.
"Funny you ntion that... I was just about to start."
Dimon's expression twitched slightly.
"The ti I've been waiting for has finally arrived."
"What ti?"
"Opportunity is born from crisis — and crisis is born from opportunity. Right now, the perfect
storm is brewing for us to create the world's greatest bank."
"I don't follow... What kind of situation are you talking about?"
"The U.S. interest rates are continuing to fall, aren't they?"
After the 9/11 attacks, the U.S. Federal Reserve had slashed interest rates to below 2%.
There were even rumors they might drop as low as 1.75% — or lower.
"Yes... I've seen reports predicting rates could fall to 1.75%."
"When interest rates fall, where does all the money go? Would people leave their money in
savings accounts earning almost zero interest?
Or would they throw their money into the dot-com stock market that's already in shambles?"
Dimon furrowed his brows, quickly connecting the dots.
"My guess is that the majority of funds will flow into the real estate market. The housing price surge in the U.S. is already becoming unstoppable"
As expected — Dimon was still Dimon.
I might have the advantage of regression, but this man was predicting the future with his first-life experience alone.
"And what happens when that much money floods into real estate?"
"Madness never disappears. It simply moves on to the next target. It was the dot-com
bubble before — now, it's shifting toward real estate."
"The real estate market is different from the stock market. Especially in the U.S., where the
market size is trillions of dollars. No matter how much money floods into real estate, the market can absorb it all. Besides, not all money will flow into real estate — there's still the U.S. Treasury bonds as a stable investnt option."
Real estate never loses.
That phrase was gospel — not just in Korea, but in the U.S. as well.
Especially in Arica, where the sheer land size and market scale made Korean real estate
speculation look like child's play.
"I heard the Fed is preparing asures to limit profits from U.S. Treasury bonds. If that happens, money will have no choice but to flow into the real estate market."
"If property prices rise faster than interest rates, people will naturally turn to real estate as an
investnt... but I still don't think it'll beco another dot-com bubble."
"Not if people are simply taking out loans to invest in real estate, no. But what happens
when derivatives get involved?"
The re ntion of derivatives sent a chill down Dimon's spine.
He had personally witnessed how I had collapsed Japan's private loan market using derivatives.
"Are you saying the U.S. real estate market will collapse... because of derivatives?"
"If the dot-com bubble hadn't happened, maybe not. But the bubble left behind a tidal wave of speculative money with nowhere to go. I'm not saying it will crash tomorrow — the balloon will need at least five years of hot air before it finally bursts."
The Subpri Mortgage Crisis.
What would eventually blow up the U.S. housing market — and the entire global economy —
had actually begun with the dot-com bubble.
After the bubble burst and the 9/11 attacks, the U.S. introduced ultra-low interest rates in the 1% range.
That cheap money had nowhere to go but into real estate speculation.
"Predicting anything more than five years into the future is nearly impossible."
"This isn't about predicting the future — it's about reading the flow of madness. When too much money floods into one place... an accident is bound to happen."
"...I trust you, but you sound like so kind of cult leader right now."
I chuckled.
"You don't have to believe right now. Ti will prove everything. All I need you to rember is this — I haven't forgotten my promise.
I will make you the CEO of the greatest bank in the world."
I brought up Lehman Brothers for one reason — to anchor Dimon to .
If I didn't give him a vision to cling to, he'd eventually walk away.
"Hearing such an outrageous story... sohow cleared all the clutter in my mind."
"Good. The U.S. housing crash is still years away — for now, let's focus on the madness right in front of us. Korea has its own bubble forming as we speak."
"I don't understand... Neither the stock market nor real estate in Korea shows any signs of
madness."
"Just watch a little TV. You'll see it right away."
I turned on the TV.
Comrcials flooded the screen — and I quickly found the one I was looking for.
(A Korean celebrity in red gloves, smiling in the snow, wishing everyone to beco rich.)
It looked like an ordinary credit card ad — nothing strange.
But the next comrcial... was from another credit card company.
"Doesn't it feel like every comrcial break these days is filled with credit card ads?"
"I know the card companies are in fierce competition. Ever since you sold Taewoo Card to CL Group, the battle has only intensified...
Wait — are you saying the credit card industry is the one swept up in madness?"
"Exactly. They're issuing cards to college students now... even high school students."
The Card Crisis.
2002 would be rembered as the year of the World Cup fever — but beneath the surface, it
would also mark the beginning of Korea's credit card disaster.
A nationwide frenzy where millions of people went into debt without even realizing they were
holding ticking ti bombs in their wallets.
TL/n -
The "Korea credit card crisis" refers to a significant period of widespread credit card debt defaults in South Korea that occurred primarily between 2003 and 2005, where a large portion of the population overused credit cards, leading to a surge in bad debts and a major strain on the
country's financial system; this was largely fueled by aggressive credit card marketing promoting a consurist lifestyle, resulting in many people taking on more debt than they could manage.
You can watch the Hollywood movie The Big Short, which is based on the Subpri Mortgage Crisis.
***
[
Mortgage: A legal agreent by which a bank lends money at interest in exchange for taking the title of the debtor's property, with the condition that the conveyance of title becos void upon the paynt of the debt.
Example:
Dave takes a mortgage loan of $100,000 for 25 years at 7% interest, resulting in a monthly paynt of $707. The total payable amount is $212,035.
-> If the tenure is 30 years, the monthly paynt is reduced to $665.
-> If the loan amount increases to $250,000 for 25 years, the monthly paynt will be $1,767.
The values vary when different paraters are adjusted, demonstrating the significance of choosing the right amount and length of ti. The interest chosen should be within the borrower's paying capacity.
Note: Financial institutions determine the amount to be lent after estimating the property's market value.
In simple language: Mortgage = House loan.
]
***
The subpri mortgage crisis started in 2007 and ended around 2010. But before we dive into what the crisis was all about, you need to understand why it occurred in the first place. It all began way before the 2000s.
< 1990 – 2002 >
Events =>
-> Dot-com bubble burst (I'll explain it in another chapter).
-> 9/11 terrorist attacks.
-> Sharp decline in the stock market.
-> The Nasdaq index peaked at 5,048 on March 10, 2000, then dropped to 1,114 by October 2002 (a 78% decrease).
**
Investnt Climate =>
-> People had money but limited investnt options due to the declining stock market and low bank fixed deposit (FD) interest rates.
-> To boost the economy, the U.S. governnt encouraged banks to lend money for mortgages at very low interest rates (1% - 2%) for 3-4 years, expecting rates to rise as the economy improved.
[
People buy houses for investnt or living purposes. With the low mortgage interest rates, people had a new option for investnt:
Real estate (houses, properties, land, etc.).
]
**
Real Estate Investnt =>
-> People began buying houses as investnts due to low mortgage rates.
-> Banks received nurous loan applications and began lending money to those who could repay the loans. (Banks analyse credit history to assess repaynt capability.) These borrowers are known as PRI Borrowers.
**
Banking Dynamics =>
-> Banks that provide mortgage loans to people are Savings and Loan Associations (S&Ls) type. Such as Wells Fargo, JPMorgan Chase, Bank of Arica, and Citigroup.
-> As banks lent money to PRI borrowers, their liquidity decreased. (they had less money on hand because they lent it to pri borrowers.)
[
There are various types of Banks (explained at the end)
Savings and Loan Associations (S&Ls) Focus primarily on accepting savings deposits and making mortgage loans. They aim to promote ho ownership.
]
**
Debt Refinancing Concept => (don't need to go into details)
-> Banks sold loans to Investnt Banks (IBs) to increase liquidity, earning commissions on these sales.
-> PRI borrowers began repaying loans to the IBs instead of the banks.
**
Investnt Banks (IBs) =>
-> As the interest on mortgage loans was very low, the Investnt Banks also want liquidity, but they can not sell the loan like Banks do.
-> Investnt Banks created CDOs (Collateralised Debt Obligations) by bundling loans into financial instrunts.
[
If you start trading in Future & Option (FnO) without having the knowledge of FnO, you will have no Future & left with no Option.
***
FnO is a type of derivative contract.
Derivative =>
- it ans a by-product of sothing.
(For Science Student -> Derivation in mathematics)
(For Economic Student -> Financial Instrunt is a derivative)
example:-
Milk ---> Tea, Coffee
Sugarcane ---> Sugar
Here, Tea, Coffee, and Sugar are the derivatives of their underlying asset, which is Milk and Sugarcane.
I think you have got an idea of what derivative ans.
***
Financial Instrunt =>
- A Financial Instrunt is an asset that can be traded.
- A Financial Instrunt is a real or virtual docunt representing a legal agreent involving any kind of monetary value.
Financial Instrunt ---> Tradable, Legal Agreent, Monetary Value
Financial Instrunt is -
Derivatives (Indes, Shares, etc) Cash (Bond, Cheque, etc) Asset Class (Debt-based, Equity-based, Forex, etc)
example:-
Shares [Tradable(✓) Legal Agreent(✓) Monetary Value(✓)]
Shares are (Tradable) on the stock market and you spend money (monetary value) to buy them after buying you receive a share certificate (Legal Agreent) so Shares are a Financial Instrunt.
Debentures --> [Tradable(✓) Legal Agreent(✓) Monetary Value(✓)]
Bonds --> [Tradable(✓) Legal Agreent(✓) Monetary Value(✓)]
Fixed Deposit (FD) --> [Tradable(☓) Legal Agreent(✓) Monetary Value(✓)]
As FDs are not Tradable they are not a type of Financial Instrunt
Land Property --> [Tradable(☓) Legal Agreent(✓) Monetary Value(✓)]
You can not find the buyer for your property whenever you want so it is not tradable and does not fall into a type of Financial Instrunt.
NOTE --> Financial assets (e.g. Land, Car) & Financial Instrunts are different.
]
Financial Instrunt = CDO (collateralized debt obligation)
CDOs ---> Loans
The underlying asset for CDO is the Loans
Here cos the question: why would people buy the CDOs (Financial Instrunt)?
-> Investnt Banks (IBs) provide high interest rates (4% - 6%) on CDO [these are similar to bonds, fixed deposits, but with higher risk]
-> Credit Rating Agency rated the CDOs as AAA
People invest in any Financial Instrunt after they look at its credit rating, and this rating is given by a Credit Rating Agency, CRA.
[
It's not like you'll buy any Financial Instrunt (Shares, Bonds, Debentures, etc), you need to know whether there's any situation of defaults, so the CRA rates all the Financial Instrunts as AAA, AA, A, and so on.
AAA: Highest quality, lowest risk.
AA: Very high quality, low risk.
A: High quality, moderate risk.
]
**
Risks of CDOs =>
When will the CDOs (Financial Instrunts) default?
As the underlying asset for CDOs is the loan if the loan repaynt stops, then CDOs will default.
(default => the Investnt Banks can't pay the interest to the people who bought CDOs from them)
**
Earnings Structure =>
-> Banks earn commissions on loans sold.
-> Investnt Banks earn money from selling CDOs.
-> CDO investors earn high interest.
Everyone is happy.
**
Investnt Banks (beco greedier) want more CDOs due to high demand.
Investnt Banks (IBs) can't sell more CDOs as they have no more loans to make more CDOs (Loans are the underlying asset for CDOs). They need more loans.
Investnt Banks (IBs) pressure Banks to sell more loans to them. But there are no PRI borrowers anymore.
**
Shift in Lending Practices =>
-> Banks began granting loans to individuals whose applications had previously been rejected due to poor credit histories. These individuals are referred to as subpri borrowers.
-> Subpri borrowers typically lack repaynt capability, making them riskier to lend to.
-> Banks did not inform borrowers about the impending increase in interest rates after the initial 3-4 years of low rates.
Example:
A case from the movie (The Big Short) illustrates a bargirl who was able to buy four houses due to low interest rates. Her credit history clearly indicated that she would struggle to repay the loans once interest rates rose.
-> Investnt Banks (IBs) bundle both pri and subpri loans to create CDOs (Collateralized Debt Obligations)
Logically the Credit Rating Agency (CRA) should have lowered the credit rating for CDOs as now there are subpri loans are also involved. But the credit rating for CDOs was still AAA.
(I don't know whether the CRA doesn't know about the subpri loans or they were paid to keep the credit rating to AAA)
**
A few investors, including Dr. Michael Burry, began to doubt the stability and sustainability of the housing market and the associated financial products, particularly CDOs.
Dr. Burry wanted to short (sell) CDOs, betting against them but faced challenges because there was no established platform for directly selling CDOs.
(You can imagine why investors were doubtful as even a bargirl had bought 4 houses and these subpri borrowers will definitely default when the interest rate rises.)
**
Greed of Investnt Banks =>
Recognizing the potential for profit, investnt banks sought to create a new financial instrunt to facilitate shorting and manage risk, leading to the developnt of Credit Default Swaps (CDS).
-> CDS were introduced as a way for investors to hedge (protect) against the risk of default on CDOs. They effectively acted as insurance against losses from these financial products.
-> Investnt Banks (IBs) marketed CDS as a form of insurance for investors holding CDOs, assuring them that they could protect their investnts against potential defaults.
(I've already explained the concept of Hedge and for CDS you can think of them as insurance on CDOs. What it ans is that if CDOs default then CDS will protect your money.)
**
Involvent of Insurance Companies =>
Arican International Group (AIG) was the largest insurance company in the U.S. and began selling Credit Default Swaps (CDS) as a form of insurance for Collateralized Debt Obligations (CDOs).
-> Investors who bought CDOs could purchase CDS from AIG, effectively insuring their investnts against defaults.
-> Typically, insurance can only be purchased for sothing you own, which logically applies here: only CDO holders should buy CDS.
-> There were minimal regulations regarding these newly created financial instrunts, leading to an environnt where risks were not fully understood.
[
Car Purchase and Insurance Scenario =>
You bought a car valued at 10 lakh rupees.
Insurance Policy:
You purchased an insurance policy for the car, paying a premium of 5,000 rupees per month.
Insurance Coverage:
The insurance policy covers damage to the car, aning if the car is involved in an accident or sustains damage, you can file a claim.
Claim Process:
If an accident occurs:
-> You will contact the insurance company to report the incident.
-> After assessing the damage, the insurance company will approve the claim.
-> The company will then pay for the repairs to your car, up to the limits outlined in your policy.
Financial Protection:
This insurance provides financial protection, ensuring that you are not burdened with the full cost of repairs after an accident.
]
Similarly, CDS protects your money if CDOs from default.
**
Financial Crisis Unfolds =>
In 2007, bank interest rates rose to about 4%, leading to increased financial strain on subpri borrowers, many of whom began to default on their loans.
As subpri borrowers stopped making paynts, investnt banks (IBs) faced liquidity issues and were unable to pay CDO holders. This triggered claims on the CDS.
Investnt banks found themselves in a precarious situation due to the rising defaults from subpri loans, leading to widespread financial distress.
(Lehman Brothers was the biggest Investnt Bank that sold a large number of CDOs and due to default they were not able to pay CDO holders.)
AIG faced the biggest losses as it was obligated to pay out on the CDS contracts when defaults occurred, putting its financial stability at risk.
**
Lehman Brothers' =>
In September 2008, as the financial situation worsened, Lehman Brothers sought a governnt bailout to stabilize its operations and avoid bankruptcy.
(A governnt bailout ans that the governnt will give you money to stabilize the market and guess what from where will the money co, obviously from your pocket, which is taxes)
Lehman Brothers was denied a governnt bailout. The U.S. Treasury and Federal Reserve believed that allowing Lehman to fail would not pose the sa systemic risk as other institutions.
(There were a lot of politics involved in whom to provide the bailout.)
On September 15, 2008, Lehman Brothers filed for bankruptcy, marking the largest bankruptcy filing in U.S. history at that ti. This event sent shockwaves through global financial markets.
Lehman was operational for 158 years from its founding in 1850 until 2008.
The U.S. governnt intervened, providing bailout funds to save AIG, Bank of Arica, Citigroup, Morgan Stanley and Goldman Sachs
**
Michael Burry's Strategy =>
Investing in CDS:
Dr. Michael Burry opted to buy only CDS, as he could not short CDOs directly.He stood to profit if defaults occurred on the CDOs, as the CDS would provide payouts.
Low Premiums:
The premiums for CDS were relatively low, making it an attractive option for investors seeking to hedge against risk.
He made a personal profit of $100 million and a profit for his remaining investors of more than $700 million.
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