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Article Archive: Books

Die with zero
08/27/23   Books
"he argues that the purpose of life is to accumulate as many fulfilling experiences as possible, and in doing so we should aim to die with zero dollars."

Start many, finish few
08/07/23   Books
"Most books I don't read past the first chapter. I'm not burdened by bad books"

How incentives work
04/22/23   Books
"Too often there's a conflict between what you say and what your incentives signal. You can tell everyone that you care about honesty, but talk is cheap. For the claim to be credible, you need to back it up by taking actions that are costly to you, such as paying the full entrance fee. If you align what you say with the incentives you offer, the signal will be credible and easy to understand."

Learned along the way
04/22/23   Books
"There are many paths to the top of the mountain. Most journeys start haphazardly, trying one route and then another. But eventually, successful investors settle down and do mostly the right thing for many years, and they end up with surprising wealth - and nobody's more surprised than the investors themselves, who discover that a huge pile of dollars has resulted from decades of prosaic prudence."

Book publishing
04/16/23   Books
"BookScan found that only 6.7 percent of the new titles released by (the top ten publishers in the U.S. trade market) were selling more than 10,000 copies in their first year of sales, only 12.3 percent were selling more than 5,000 copies in their first year, and only 33.9 percent of these titles were selling more than 1,000 copies in their first year."

Worth a read
12/04/22   Books
"Personal finance books don't exactly rank as the most sought-after holiday gifts. Still, if there's a money nerd in your life - or someone who aspires to be one - below are 10 personal finance book recommendations."

Personal-finance books are wrong
09/11/22   Books
"Economists tend to offer more rational advice, because they are dealing with numbers; best sellers tend to offer more practical advice, because they are grappling with human behavior - with all of its mess and irrationality."

Value Investing: From Theory to Practice
02/08/22   Books
"Giving a fresh take on investing, Value Investing: From Theory to Practice shows the readers a process that will enable them to find the stocks worth investing in. The book is not giving the reader stock tips, but, instead, is teaching an approach to pick stocks through a step-by-step, end-to-end process. This process includes identifying possibly undervalued stocks, estimating their intrinsic value, and making a decision to buy or not."

5 books Bill loved
01/02/22   Books
"My holiday reading list this year includes two terrific science fiction stories. One takes place nearly 12 light-years away from our sun, and the other is set right here in the United States - but both made me think about how people can use technology to respond to challenges. I've also included a pair of non-fiction books about cutting-edge science and a novel that made me look at one of history's most famous figures in a new light."

The great book shortage of 2021
10/07/21   Books
"The place where readers are most likely to find themselves in a crunch, though, is with surprise bestsellers. Every year, there are books that do much better than either publishers or booksellers expected them to and sell out their initial print runs. Normally when that happens, booksellers immediately order more books, and publishers are able to print those books and ship them out rapidly. In 2021, that's going to be a lot more difficult. If a publisher unexpectedly sells out of a book early, it may not be able to send new copies to bookstores until well into 2022."

On Thinking: Fast and Slow
05/02/21   Books
"It is likely that Kahneman's book, or at least some of his chapters, would be very different from the actual book, if it had been written just a few years later."

Debt: the first 5000 years
05/16/20   Books
"Graeber's broader point is that all debt, especially interest-drawing debt, is intimately related to its enforcement mechanism. IOUs don't exist in a vacuum; they're made in societal context. In an economic system where money is fundamentally a unit of trust, the rules around recoupment and enforcement of debts are made in an environment where people generally know each other, so we see recurring features like strong creditor protection and pretty sophisticated dispute resolution. In contrast, when money is a hard, fungible unit of scarcity, enforcement isn't a matter of trust; it's a matter of force. When your enforcement mechanism is state-backed violence, lenders and debtors have a pretty different relationship."

The SleepEasy Retirement Guide
12/27/19   Books
"But he says a 'basic' retirement at age 65 can be achieved with just $200,000 for a couple or $375,000 for a single."

Finance books in one sentence
08/12/19   Books
"Give yourself a margin of safety because Mr. Market can be insane."

The Next Millionaire Next Door
02/20/19   Books
"Sarah Stanley Fallaw says seventy-five percent of millionaires paid less than $1000 for their most expensive suit. Fifty percent of millionaires paid less than $300 for their most expensive watch. Three-quarters of American millionaires paid less than $300 for their most expensive pair of shoes. She also found that 65 percent of American millionaires live in homes that are currently worth less than a million dollars."

5 books I loved in 2018
12/03/18   Books
"My list is pretty eclectic this year. From a how-to guide about meditation to a deep dive on autonomous weapons to a thriller about the fall of a once-promising company, there's something for everyone. If you're looking for a fool-proof gift for your friends and family, you can't go wrong with one of these."

Lessons from Annie Duke
10/15/18   Books
"[A baseball executive] was in Las Vegas sitting next to a guy who has got a 17. So the dealer is asking for hits and everybody knows the standard in blackjack is that you sit on a 17. The guy asked for a hit. The dealer flips over 4, makes the man's hand, right, and the dealer sort of smiles and says, 'Nice hit, sir?' Well, you're thinking nice hit if you're the casino, because if that guy does that a hundred times, obviously the casino is going to take it the bulk of the time. But in that one particular instance: bad process, good outcome. If the process is the key thing that you focus on, and if you do it properly, over time the outcomes will ultimately take care of themselves. In the short run, however, randomness just takes over, and even a good process may lead to bad outcomes. And if that's the case: You pick yourself up. You dust yourself off. You make sure you have capital to trade the next day, and you go back at it."

20 rules for writers
10/15/18   Books
"Stephen King's top 20 rules for writers"

Capitalism without capital
08/22/18   Books
"The idea today that anyone would need to be pitched on why software is a legitimate investment seems unimaginable, but a lot has changed since the 1980s. It's time the way we think about the economy does, too."

Watch less, read more
08/22/18   Books
"Everywhere I have sought peace and not found it, except in a corner with a book."

Theranos lessons
06/19/18   Books
"There are jerks, egomaniacs, and hucksters everywhere. Many of them are good at their craft. Plan accordingly."

Meb's Amazon accusation
04/22/18   Books
"You've probably heard much in the media recently about Facebook, fake news, and weaponizing content to influence opinions and elections. You may have seen Mark Zuckerberg dragged in front of Congress to testify about Facebook's mistakes. Well, what you haven't heard much of in the media (yet) is how Amazon is an equally bad actor. Whereas Facebook is plagued by fake news, Amazon is littered with fake products. And these fake products encourage fraud and play a role in global money laundering."

A Christmas Carol
12/24/17   Books
"I have endeavoured in this Ghostly little book, to raise the Ghost of an Idea, which shall not put my readers out of humour with themselves, with each other, with the season, or with me. May it haunt their houses pleasantly, and no one wish to lay it."

Messiness is good for the soul
02/05/17   Books
"he says, disorder can actually be good for our brains because when conditions around us aren't perfect, we are forced to use creativity to solve problems, and perhaps come up with solutions that are better than we could have imagined otherwise."

Read 100 books a year
10/16/16   Books
"If you're an ambitious, goal oriented person, it's possible that one of your New Year's resolutions was to read more books. Books are the gateway to imagination, to worlds we may not be able to access physically, but can emotionally. Books help us to expand what we're capable of being and experiencing. Based on the math, which I'll explain below, I'll likely have read 100 books this year."

A share of Berkshire Hathaway
09/24/16   Books
"Imagine opening your mail and finding a share of Class A Berkshire Hathaway stock."

ILTB: Michael Mauboussin
09/24/16   Books
"In this episode, Michael Mauboussin and I discuss everything about asset management: the state of the industry, the active investment process, and Michael's simple but genius 'input/output' method for daily life. This is a full seminar on asset management."

ILTB: Jeff Gramm
09/17/16   Books
"My guest today is Jeff Gramm. Jeff is the founder and portfolio manager at Bandera Partners, an Adjunct Professor at Columbia Business School, and the author of Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism. Jeff and I discuss the history and current state of shareholder activism, and explore how Jeff invests himself, taking large stakes and often board seats in undervalued companies."

Why you should not write a book
08/21/16   Books
"There's an unwritten rule that published authors are supposed to encourage everyone who dreams of it to finally go for it and write that book! Except that's just not true. Many of the people who want to write a book should not."

Quench your own thirst
08/06/16   Books
"In 1984, Koch left his consulting job and started a small brewery in Boston, using a family recipe to create a beer that would start the craft beer revolution in the U.S. His book offers unique insights into the whirlwind ride from scrappy start-up to thriving public company. His innovative business model and frank stories offer counterintuitive lessons that you can apply to business and to life."

Read books, live longer
08/06/16   Books
"Book readers lived an average of almost two years longer than those who did not read at all."

For food stamps
05/22/16   Books
"My income per book always reminds me of how tough it is to make at living at this gig, especially for writers who only produce one book per year. If I did the same, and my one book performed as well as TF, and my family of four were solely dependent on my income, my net would be only around $2500.00 over the income level considered to be the U.S. poverty threshhold (based on 2008 figures.) Yep, we'd almost qualify for foodstamps."

Pound foolish
04/30/16   Books
"The real story with most of these individuals is that they didn't earn their money by living below their means, saving and investing prudently, but rather by selling products and services that we're told will save and/or empower us. They're more salesman than missionary, telling us what we want to hear and not what we need to hear."

JK Rowling's rejection letter
03/26/16   Books
"They have been some of the most painful career mistakes in history: the record-label which turned down the Beatles, the editor who told Walt Disney he lacked imagination, and the publishers who rejected J K Rowling. The misery of the latter has today been compounded after Rowling shared the painful rejection letter she received, warning her adult crime novels could never be commercially successful."

Hollywood bets on The Big Short
11/29/15   Books
"Then, the following year, as I was handing the manuscript of The Big Short to my publisher, Billy Beane called and said, 'You bastard, Brad Pitt is on his way to my house. The babysitter showed up wearing a dress, and my wife is putting on makeup.'"

John Cleese: So, Anyway
11/28/15   Books
"John Cleese stopped by the Google NYC office to further discuss So, Anyway... a book chronicling the early life of his career." [video]

Guessing the future
11/28/15   Books
"Dan Gardner is the co-author of "Superforecasting: The Art and Science of Prediction," on the groundwork it takes to accurately predict the future. What makes some better able to hone in and others not? The Agenda examines what it takes to be prepared for the future." [video]

Other people's money
11/07/15   Books
"Industry insider John Kay argues that the finance world's perceived profitability is not the creation of new wealth, but the sector's appropriation of wealth - of other people's money." [video]

William Thorndike talks about The Outsiders
10/24/15   Books
"What is the hallmark of exceptional CEO performance? Quite simply, it is the returns for the shareholders of that company over the long term."

Michael Lewis on Tom Wolfe
10/18/15   Books
"Michael Lewis delves deep into the archives of the legendary reporter turned novelist to discover what made the man in the white suit the voice of a journalistic generation."

The art of investing
09/05/15   Books
"The market values of our leading securities [are] determined by...a howling mob of incurable lunatics" [via Jason Zweig]

Bob Cable's inevitable wealth
09/05/15   Books
"If you're the type of investor who is driven to act emotionally, then a buy-and-hold strategy is the answer for you. Ignore the market."

Ten tips for writing a book
07/04/15   Books
"Never write a book ..."

MiB: Patrick O'Shaughnessy
01/12/15   Books
"O'Shaughnessy discusses that despite the difficulties of the economic environment, youth have tremendous advantages youth in terms of an investment horizon of up to half a century. This allows compounding to take place. In our conversation, we discuss active versus passive, why investors are their own worst enemies, and what they should - and should not - be doing."

The education of a value investor
01/04/15   Books
"Guy Spier talks about his book at Google" [video]

Believing what you read
11/29/14   Books
"Mackay's book is still enormously entertaining - and worth reading - 170 years after it was published. But Mackay is often quoted as though he were an objective authority on the history of notorious bubbles like the 17th century Dutch tulip mania and the South Sea stock bubble of 1720 in England. Readers should bear in mind that Mackay was a storyteller, and that modern researchers have been unable to confirm some of his best-known anecdotes - and have disproved others altogether."

101 Years on Wall Street
11/01/14   Books
"A great book for investors to read to get a long-term, historical perspective on the stock market's ups and downs is '101 Years on Wall Street' by John Dennis Brown. It chronicles each year from 1890 through 1990, and as you read about each year, several things will become obvious - investors have not changed at all"

Taleb mishandles fragility
11/28/12   Books
"Another key to understanding Taleb is that he has a French post-modern tendency to write to impress rather than explain. He provides hundreds of loosely related anecdotes, reminding me of the Talmud quote that 'when a debater's point is not impressive, he brings forth many arguments.'"

You can't trust airport security
09/08/12   Books
"When the plumber knocks at your door, why do you let him in? He's probably bigger and stronger than you. And he has a wrench. He could easily kill you and steal your money and your stuff, which would certainly be a better deal for him than receiving a moderate payment and having to fix your toilet. But you trust that he won't; and trust, that mysterious and invaluable substance, is the subject of Bruce Schneier's ambitious "Liars and Outliers: Enabling the Trust That Society Needs to Survive," which starts with the homely parable of the plumber and builds into a treatise on every aspect of trust, from marital fidelity to transnational terrorism."

David and Goliath
07/10/12   Books
"What should the strategy of the weak be when facing the strong? Does being an underdog - whether as a team a country or an individual - help foster creativity?"

Figuring it out
07/07/12   Books
"Before Benjamin Graham started to work on Wall Street, investment analysis was a hit-and-miss affair, focusing more on recent price movements than on the merits of individual companies. Graham, a brilliant mathematician, took the process to a much higher level."

The real genius of Steve Jobs
11/12/11   Books
"One of the great puzzles of the industrial revolution is why it began in England. Why not France, or Germany? Many reasons have been offered. Britain had plentiful supplies of coal, for instance. It had a good patent system in place. It had relatively high labor costs, which encouraged the search for labor-saving innovations. In an article published earlier this year, however, the economists Ralf Meisenzahl and Joel Mokyr focus on a different explanation: the role of Britain's human-capital advantage - in particular, on a group they call "tweakers." They believe that Britain dominated the industrial revolution because it had a far larger population of skilled engineers and artisans than its competitors: resourceful and creative men who took the signature inventions of the industrial age and tweaked them - refined and perfected them, and made them work."

Why chasing success makes us happy
08/04/11   Books
"As he researched his subject, exploring economics, neuroscience and evolutionary biology, Buchholtz became convinced that much of the modern happiness project was a crock - not just unhelpful economically, but unhealthy and unnatural."

Super Rich
02/07/11   Books
"In both authors' works, it's difficult to find concrete business lessons. And perhaps that's the point. For example, writes Chopra: 'Your body is a constant projection of you in the world. Every cell eavesdrops on your thoughts.' The author views our metabolisms as chat rooms, with epidermal cells listening in to what's going on in the cranium. If you don't understand what he means, your foot can explain it to you."

Jim Otar's Christmas freebie
12/16/10   Books
"I'd be happy to make the green edition of my book 'Unveiling the Retirement Myth - Advanced Retirement Planning based on Market History', a textbook on non-Gaussian approach to retirement planning, to your readers for a limited time, from now until January 2nd."

It's Not Rocket Science
12/02/10   Books
"We've compiled four years of Tom's articles and blogs into a new book titled It's Not Rocket Science: Plain-English Advice for Managing Your Investments. The pieces are short narratives that reinforce some of the basic, yet most important, principles of investing."

The Rational Optimist
11/29/10   Books
"Today's Outside the Box is two essays, by Matt Ridley and Bill Gates, from the Review section of the WSJ. Ridley has written a book called The Rational Optimist... Bill Gates writes a longer essay to say why he thinks Ridley has some things wrong, while overall giving the book high marks. This is one of the more thought-provoking exchanges I have read in a while."

The Non-Economist's Economist
10/05/10   Books
"Now comes the test of whether his popular writings will endure longer than the memory of his celebrity and the pleasure of his prose. 'The Great Crash' has a fighting chance, because of its very lack of analytical pretense. 'History that reads like a poem,' raved Mark Van Doren in his review of the 1929 book. Or, he might have judged, that eats like whipped cream.But the other books in this volume seem destined for only that kind of immortality conferred on amusing period pieces. When, for example, Galbraith complains in 'The Affluent Society' that governments can't borrow enough, or that the Federal Reserve is powerless to resist inflation, you wonder what country he was writing about, or even what planet he was living on."

Michael Eisner on Teamwork
09/26/10   Books
"Eisner slips into the realm of the absurd when he proposes that more successful partnerships might be an antidote to the virus of executive greed that led, he boldly asserts, to the recent financial crisis.For anyone who remembers the hundreds of millions in stock options that Eisner garnered during his tenure at Disney, when he was one of the highest-paid executives in the world, this insight is the most hilarious punch line of all. Particularly, it so happens, as Eisner is said to be a candidate to take over the Tribune Co. If Wells were alive, let's hope he'd lean forward and suggest gently to Eisner that he's making a fool of himself. Though all evidence indicates that their beautiful partnership would never have survived if Wells did anything of the kind."

The elements of investing
08/29/10   Books
"The Elements of Investing.written by former Vanguard board members Charles Ellis and Burton G. Malkiel.distills investing into five fundamental principles: save, index, diversify, avoid blunders, and keep it simple. Simply visit the publisher's website and download your copy today."

The original captain of industry
08/03/10   Books
"Lipton's story starts out as a period piece but turns out to be completely contemporary. Unfortunately, The Great Lipton lived in an age before The Apprentice, when there were few options for a flamboyant CEO outside the C-suite. Without him, though, there might never have been such a show."

Into thin error
07/16/10   Books
"I sought Viesturs out because I was curious about the kind of attitude you develop toward error when a single mistake can easily cost you your life. I also wanted to test a hypothesis that I call "the paradox of error": If your goal is to avoid making mistakes, then you must constantly assume that you are about to make one. That's why fields like aviation and medicine have, at their best, a productive obsession with error. It turns out the same goes for mountaineering - or, at least, mountaineering as practiced by Viesturs. He's totally comfortable with being wrong, he says; the important thing is that, "if you goof up, it's in the right direction.""

The zeroes
07/16/10   Books
"Lane believed he would make his own fortune by giving luxury advertisers a forum to reach this small but growing mob of ultrarich arrivistes. Unfortunately he chose a medium that would prove to be a surefire prophylactic against profits. Despite zealously attempting to sell out, Lane couldn't make a buck. When stock markets collapsed in 2008, so did his publishing empire."

The confidence game
07/05/10   Books
"There really are loans that so safe that they can be written with a zero-loss standard and levered 150 times - but they are only that safe if you have removed the possibility of fraud - and you can only really do that by getting your fingers dirty. You cannot do that with a mathematical model."

Hyperbolic Geometry defeats Nazi Spoons
03/26/10   Books
"Worm hunters, Nazi spoons and homicidal robots were crushed in one of Britain.s quirkiest literary contests, as a book that uses crochet to introduce non-Euclidean geometry won the annual Diagram Prize for Oddest Book Title."

Gary Gorton vs. Michael Lewis
03/22/10   Books
"The basic idea is that the repo market had developed as an independent source of funds, and when some AAA rated mortgaged backed securities started to fall in price, this tainted all AAA securities, especially asset backed paper. AAA securities have a 0.01% default rate, so from a bayesian perspective, when you see a default here the probability is not that one was very unfortunate, but rather, the rating was wrong. Perhaps all ratings are wrong?!. Everyone was scrambling to understand these securities work to assess how much they are worth, and found them insanely complicated, so people naturally assumed the root cause could be anything related to 'debt', derivatives, rated securities, was complicated, etc. Everything was painted by the same brush, as when one bad cow tainted with e. coli causes a wholesale destruction of all beef products sold in the US, because one can't be sure. A run on the repo market was a classic bank run, causing the banking system to be insolvent, and lending to sharply contract."

Michael Lewis on Charlie Rose
03/17/10   Books
"An hour with Michael Lewis, author of 'The Big Short'"

Quantifying qualitative factors
02/23/10   Books
"I've just finished Ian Ayres's book Super Crunchers, which I found via Andrew McAfee's Harvard Business Review blog post, The Future of Decision Making: Less Intuition, More Evidence (discussed in Intuition and the quantitative value investor). Super Crunchers is a more full version of James Montier's 2006 research report, Painting By Numbers: An Ode To Quant, providing several more anecdotes in support of Montier's thesis that simple statistical models outperform the best judgements of experts."

Money for nothing
01/18/10   Books
"I'm not even Andrew Ross Sorkin, the superstar financial writer at the New York Times. The advance for my new book wasn't in the millions of dollars. It wasn't even in the high six figures. Instead, we're talking more the, um, low five figures. After you deduct my agent's commission and the costs involved in research and writing, my take was in the very low five figures. This is, I'm sorry to say, more typical for authors. Indeed, most writers don't get published at all. Only giants like Sorkin or Palin command the great publishing sums. It raises a question that financial writers, for obvious questions, rarely ask: Should you really take financial advice from someone foolish enough to write for a living?"

Improve results with checklists
01/06/10   Books
"What's a low-tech way to improve the performance of everyone from doctors to investors to airline pilots? According to Atul Gawande, it's the humble checklist."

Money for nothing
01/05/10   Books
"Should you really take financial advice from someone foolish enough to write for a living? Run the numbers. If a typical author earns, say, $3 per book sold and the book sells 20,000 copies, then that's $60,000 in gross income -- before costs. But that may be for a year's work. We're talking maybe $30 an hour."

What matters now
12/14/09   Books
"Here are more than seventy big thinkers, each sharing an idea for you to think about as we head into the new year. From bestselling author Elizabeth Gilbert to brilliant tech thinker Kevin Kelly, from publisher Tim O'Reilly to radio host Dave Ramsey, there are some important people riffing about important ideas here. The ebook includes Tom Peters, Jackie Huba and Jason Fried, along with Gina Trapani, Bill Taylor and Alan Webber. Here's the deal: it's free."

Malcolm Gladwell, eclectic detective
11/14/09   Books
"Readers have much to learn from Gladwell the journalist and essayist. But when it comes to Gladwell the social scientist, they should watch out for those igon values."

Where SuperFreakonomics falls down
10/28/09   Books
"Almost everybody has had the experience of wondering if the problem with one's car is really as serious as the auto mechanic says - or if the mechanic is blowing it up to charge more. In our dealings with the body shop, as in many other situations, we are at what the experts would call a humongous informational disadvantage. We are always conscious of the possibility of getting charged way too much. And we sometimes are - but rarely do we run into the perfectly unscrupulous tradesman who rips us off as badly as we fear he can. Car repair isn't one of the professions that Steven D. Levitt and Stephen Dubner look at in their best-selling Freakonomics or their new SuperFreakonomics. But it's an example that's familiar to everyone and useful in thinking about questions like 'How do we know when we're getting a fair deal?' or 'How likely are we to be misled in our dealings?' or (for those who are, like me, clueless about cars), 'Why don't we get ripped off all the time?'"

Praise for Peter Bernstein
06/18/09   Books
"Peter Bernstein aimed for large targets, and gave broad and convincing evidence of how markets worked. He only erred in letting Modern Portfolio Theory and Keynesianism affect him. With that, I hail Peter Bernstein, regretting his demise. He will be missed, as few of us had such global vision of markets as he had."

The fat tail
05/26/09   Books
"In their entertaining new book, The Fat Tail, Eurasia Group investment strategists Ian Bremmer and Preston Keat observe that while banks likely spent $8 billion on credit-risk software in 2008, most spent 'far less energy on the assessment and management of political risk.' It's easy to make the argument that banks and businesses of all stripes ignore risk of the policy variety at their peril."

Findependence day
12/01/08   Books
"The protagonists grapple with two key concepts - financial independence and guerrilla frugality. Financial independence (the book's title is a contraction of the term) refers to the goal for most of us: the day on which our assets are large enough to cover our living expenses and we don't have to work for a living anymore. ... Guerrilla frugality is the key means to achieve the end, financial independence."

Are your stocks protected by moats?
05/29/08   Books
"Thanks to The Rothery Report's Norman Rothery - with whom I had the pleasure of dining this week - I came across a copy of a book that is focused on the topic of economic moats. It's called The Little Book That Builds Wealth (Wiley, 2008), by Pat Dorsey, who is the director of equity research at Morningstar Inc. Morningstar is famous for its mutual fund ratings, but also rates individual stocks using an 'economic moat' rating system. The book divulges most of its approach to this system and makes for a fascinating read."

Fooling some of the people all of the time
04/24/08   Books
"Now Mr. Einhorn has written a book. But instead of packaging the real or contrived "secrets" to his success - as cliche would have it - he has tried to do something less triumphant and far gutsier. In "Fooling Some of the People All of the Time," he turns the spotlight on a single, stubborn investment play that never made much money for him but created six years of headaches."

Taleb outsells Greenspan
03/30/08   Books
"On a freezing day in March 2007, Nassim Taleb walked into a conference room at Morgan Stanley's Manhattan offices on 47th Street and Broadway to address a group of the firm's risk managers. His message: Your models don't work. Using a whiteboard to scribble out his calculations, Taleb, now 48, began one of his rants, this time against stress tests -- Wall Street lingo for examining how a market rout will play out. Stress tests are inherently risky because they ignore rare but potentially devastating events, Taleb said. 'Past shortfall doesn't predict future shortfall,' the options trader turned best-selling author recalls telling the assembled group of about 40. The risk managers, part of a tribe of mathematical model makers known in the finance world as quants, stared back at him blankly, and a debate ensued, according to people who were there. Only six months later, Morgan Stanley experienced its own rout. The world's second-biggest mergers adviser announced in December that it had written down its subprime-related holdings by $9.4 billion after the firm's traders misjudged how fast and far prices of the debt would fall. Their risk management had failed."

Six books you need to make money
07/17/07   Books
"Knowing how to invest is a life skill that can pay off big. If you're just getting into the game though, learning how to play the markets to your advantage can be complicated. The books below tell you what you need to know to make money, without a lot of financial terminology. They're not your typical textbooks - they're as fun as they are informative, and must reads for anyone interested in business and investing."

What else is new?
06/21/07   Books
"Old technologies persist; they even flourish. In that sense, they're as much a part of the present as recently invented technologies. It is said that we live in a "new economy," yet, of the world's top thirty companies (by revenue), only three are mainly in the business of high tech - General Electric (No. 11), Siemens (No. 22), and I.B.M. (No. 29) - and all three go back more than a century. The heights of the early-twenty-first-century corporate world are still occupied - as they have long been - by petroleum companies (Exxon Mobil, Royal Dutch Shell, and B.P., Nos. 1, 3, and 4), retailing (Wal-Mart, No. 2), automobiles (General Motors, No. 5), and finance (I.N.G. and Citigroup, Nos. 13 and 14). No Hewlett-Packard (No. 33); no Microsoft (No. 140); no Merck (No. 289)."

Everybody's an expert
03/07/07   Books
"People who are not experts in the psychology of expertise are likely (I predict) to find Tetlock's results a surprise and a matter for concern. For psychologists, though, nothing could be less surprising. 'Expert Political Judgment' is just one of more than a hundred studies that have pitted experts against statistical or actuarial formulas, and in almost all of those studies the people either do no better than the formulas or do worse. In one study, college counsellors were given information about a group of high-school students and asked to predict their freshman grades in college. The counsellors had access to test scores, grades, the results of personality and vocational tests, and personal statements from the students, whom they were also permitted to interview. Predictions that were produced by a formula using just test scores and grades were more accurate. There are also many studies showing that expertise and experience do not make someone a better reader of the evidence. In one, data from a test used to diagnose brain damage were given to a group of clinical psychologists and their secretaries. The psychologists' diagnoses were no better than the secretaries'."

A devilish delusion
03/01/07   Books
"In 1982, the Academy Award for Best Costume Design went to a film called Chariots of Fire, the story of a couple of upper-class Brits as they trained for and competed in the 1924 Paris Olympics. (You had to be there.) The movie was the year's big hit; it won a slew of awards, including Best Picture. Have you seen Chariots of Fire? It's about track and field; the actors basically spend the bulk of the movie running around in their underwear. Bam - give'em the costumes Oscar!"

Extraordinary Popular Delusions
01/31/07   Books
"Among the bubbles described by Mackay is the Dutch tulip mania of the early seventeenth century. According to Mackay, during this bubble, speculators from all walks of life bought and sold tulip bulbs and even futures contracts on them. Allegedly, some tulip bulb varieties briefly became the most expensive objects in the world, until the bubble burst in 1637. Other bubbles described by Mackay are the South Sea Company bubble of 1711.1720, and the Mississippi Company bubble of 1719.1720." [Note that the books themselves can now be downloaded for free.]

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