Taewoo IT had been posting tremendous quarterly results, and what had once started as a department 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 game 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 become the project leader.
Of course, there was always someone 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 moment I walked into the office, eagerly briefing me on the current situation, it seemed he had his own ambitions for power.
"How many people can we mobilize immediately?"
"There are about 100 employees who just finished their last project and are waiting for the next assignment."
"Call all of them to the main conference room."
By the time I finished my coffee and returned, nearly 100 employees had gathered, their eyes
sparkling with anticipation for a new project.
"First, let me apologize in advance. This project is not about the result, but the process itself.
There's a chance that no tangible outcome will come from this."
A few employees' faces showed signs of disappointment.
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 times higher, making Taewoo IT the most coveted department.
"However, this is something 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 mentioned 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 time 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 time to prepare documents due to the urgency, so I'll explain using the whiteboard."
I began scribbling down the list of features on the board:
Mini homepage
Background music
Friendship networks
Guestbooks
SNS currency systems
Online diaries
Every feature that Cyworld was planning to implement 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 remember from my previous life.
By the time I was done, the whiteboard was completely filled.
"This should be enough."
The meeting had lasted a grueling four hours.
It took that long to meticulously 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 development?"
"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 mention 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 home.
"And by the end of this year, I plan to expand Taewoo IT to 1,500 employees. Once that happens, we'll implement 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 excitement.
"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 something 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 come to Korea yet?"
"He's tied up with work in the States. He won't be able to come for a while."
Dimon replied without turning his head, still staring out the window.
Something about him felt... off — like his soul had left his body.
"Is something wrong?"
"I don't know what I'm even doing here anymore."
He finally turned to look at me, his eyes empty.
"I came to Korea because I trusted you — because I believed in your promise to make me
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 — immediately.
"Funny you mention that... I was just about to start."
Dimon's expression twitched slightly.
"The time I've been waiting for has finally arrived."
"What time?"
"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 investment option."
Real estate never loses.
That phrase was gospel — not just in Korea, but in the U.S. as well.
Especially in America, where the sheer land size and market scale made Korean real estate
speculation look like child's play.
"I heard the Fed is preparing measures 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
investment... but I still don't think it'll become 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 mere mention 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 Subprime 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 some kind of cult leader right now."
I chuckled.
"You don't have to believe me right now. Time will prove everything. All I need you to remember 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 me.
If I didn't give him a vision to cling to, he'd eventually walk away.
"Hearing such an outrageous story... somehow 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.
Commercials 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 become rich.)
It looked like an ordinary credit card ad — nothing strange.
But the next commercial... was from another credit card company.
"Doesn't it feel like every commercial 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 remembered 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 time 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 consumerist 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 Subprime Mortgage Crisis.
***
[
Mortgage: A legal agreement 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 becomes void upon the payment of the debt.
Example:
Dave takes a mortgage loan of $100,000 for 25 years at 7% interest, resulting in a monthly payment of $707. The total payable amount is $212,035.
-> If the tenure is 30 years, the monthly payment is reduced to $665.
-> If the loan amount increases to $250,000 for 25 years, the monthly payment will be $1,767.
The values vary when different parameters are adjusted, demonstrating the significance of choosing the right amount and length of time. 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 subprime 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).
**
Investment Climate =>
-> People had money but limited investment options due to the declining stock market and low bank fixed deposit (FD) interest rates.
-> To boost the economy, the U.S. government 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 investment or living purposes. With the low mortgage interest rates, people had a new option for investment:
Real estate (houses, properties, land, etc.).
]
**
Real Estate Investment =>
-> People began buying houses as investments due to low mortgage rates.
-> Banks received numerous loan applications and began lending money to those who could repay the loans. (Banks analyse credit history to assess repayment capability.) These borrowers are known as PRIME 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 America, and Citigroup.
-> As banks lent money to PRIME borrowers, their liquidity decreased. (they had less money on hand because they lent it to prime 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 home ownership.
]
**
Debt Refinancing Concept => (don't need to go into details)
-> Banks sold loans to Investment Banks (IBs) to increase liquidity, earning commissions on these sales.
-> PRIME borrowers began repaying loans to the IBs instead of the banks.
**
Investment Banks (IBs) =>
-> As the interest on mortgage loans was very low, the Investment Banks also want liquidity, but they can not sell the loan like Banks do.
-> Investment Banks created CDOs (Collateralised Debt Obligations) by bundling loans into financial instruments.
[
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 means a by-product of something.
(For Science Student -> Derivation in mathematics)
(For Economic Student -> Financial Instrument 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 means.
***
Financial Instrument =>
- A Financial Instrument is an asset that can be traded.
- A Financial Instrument is a real or virtual document representing a legal agreement involving any kind of monetary value.
Financial Instrument ---> Tradable, Legal Agreement, Monetary Value
Financial Instrument is -
Derivatives (Indes, Shares, etc) Cash (Bond, Cheque, etc) Asset Class (Debt-based, Equity-based, Forex, etc)
example:-
Shares [Tradable(✓) Legal Agreement(✓) 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 Agreement) so Shares are a Financial Instrument.
Debentures --> [Tradable(✓) Legal Agreement(✓) Monetary Value(✓)]
Bonds --> [Tradable(✓) Legal Agreement(✓) Monetary Value(✓)]
Fixed Deposit (FD) --> [Tradable(☓) Legal Agreement(✓) Monetary Value(✓)]
As FDs are not Tradable they are not a type of Financial Instrument
Land Property --> [Tradable(☓) Legal Agreement(✓) 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 Instrument.
NOTE --> Financial assets (e.g. Land, Car) & Financial Instruments are different.
]
Financial Instrument = CDO (collateralized debt obligation)
CDOs ---> Loans
The underlying asset for CDO is the Loans
Here comes the question: why would people buy the CDOs (Financial Instrument)?
-> Investment 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 Instrument 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 Instrument (Shares, Bonds, Debentures, etc), you need to know whether there's any situation of defaults, so the CRA rates all the Financial Instruments 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 Instruments) default?
As the underlying asset for CDOs is the loan if the loan repayment stops, then CDOs will default.
(default => the Investment Banks can't pay the interest to the people who bought CDOs from them)
**
Earnings Structure =>
-> Banks earn commissions on loans sold.
-> Investment Banks earn money from selling CDOs.
-> CDO investors earn high interest.
Everyone is happy.
**
Investment Banks (become greedier) want more CDOs due to high demand.
Investment 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.
Investment Banks (IBs) pressure Banks to sell more loans to them. But there are no PRIME 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 subprime borrowers.
-> Subprime borrowers typically lack repayment 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.
-> Investment Banks (IBs) bundle both prime and subprime 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 subprime 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 subprime 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 subprime borrowers will definitely default when the interest rate rises.)
**
Greed of Investment Banks =>
Recognizing the potential for profit, investment banks sought to create a new financial instrument to facilitate shorting and manage risk, leading to the development 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.
-> Investment Banks (IBs) marketed CDS as a form of insurance for investors holding CDOs, assuring them that they could protect their investments 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 means is that if CDOs default then CDS will protect your money.)
**
Involvement of Insurance Companies =>
American 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 investments against defaults.
-> Typically, insurance can only be purchased for something you own, which logically applies here: only CDO holders should buy CDS.
-> There were minimal regulations regarding these newly created financial instruments, leading to an environment 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, meaning 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 subprime borrowers, many of whom began to default on their loans.
As subprime borrowers stopped making payments, investment banks (IBs) faced liquidity issues and were unable to pay CDO holders. This triggered claims on the CDS.
Investment banks found themselves in a precarious situation due to the rising defaults from subprime loans, leading to widespread financial distress.
(Lehman Brothers was the biggest Investment 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 government bailout to stabilize its operations and avoid bankruptcy.
(A government bailout means that the government will give you money to stabilize the market and guess what from where will the money come, obviously from your pocket, which is taxes)
Lehman Brothers was denied a government bailout. The U.S. Treasury and Federal Reserve believed that allowing Lehman to fail would not pose the same 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 time. This event sent shockwaves through global financial markets.
Lehman was operational for 158 years from its founding in 1850 until 2008.
The U.S. government intervened, providing bailout funds to save AIG, Bank of America, 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.