"Against the Gods" is a good historical overview of the development of risk management, from the first mathematical ideas, to the development of stati"Against the Gods" is a good historical overview of the development of risk management, from the first mathematical ideas, to the development of statistics, and onward to the invention of modern tools like derivatives. But be warned: Bernstein largely focuses on academics, and follows a "Great Man" theory of history- there are a lot of Bernoullis in this book, for instance. What he does not spend a lot of time on is the application of those academic theories to real world situations- only a few dozen pages on topics like the invention of insurance or modern futures and options, for instance. That makes this book about risk somewhat dull, which, on further reflection, seems rather ironic. ...more
When Francis Ford Coppola directed The Godfather, he thought he had made a tragedy about a man's fall from grace- he was stunned that anyone thought MWhen Francis Ford Coppola directed The Godfather, he thought he had made a tragedy about a man's fall from grace- he was stunned that anyone thought Michael Corrleone was someone worth emulating. So when he directed The Godfather Part II, he went to extra lengths to underline the point: Michael kills his brother, he's abandoned by his friends, and he's left at the end of the movie entirely alone. Still, no one got it- rappers started writing songs about the films.
I'm reminded of this because Michael Lewis has something of the same problem: when he wrote his first book about Wall Street, Liar's Poker, he intended it as a stinging moral indictment of a culture founded on reckless greed and materialism. Instead, it was received as paean to Wall Street, and inspired a generation of young people to go into finance. Fast forward twenty years, and the same system he wrote about the first time, mortgage bond trading, goes and blows up the American financial system. So this time, he's hellbent to make himself absolutely clear. His points are the same as in his first book: almost everyone who works on Wall Street is a selfish bastard whose work has no redeeming social purpose, and allowed to run unchecked, they will destroy American society. The problem is once again, he has made work in finance seem so fun, interesting, and sexy, that I'm pretty sure his message is going to get lost- and more young people than ever are going to want to go to work for the banks.
That's a shame, because if you really pay attention to his story, you can't help but come away with a powerful disgust for Wall Street and everyone who works on it. There are some villains who are clearly worse than others- the vampire-squids who work at Goldman Sachs, for instance, or the brain-dead idiots who work for the rating agencies, or the shitty mortgage bankers who convinced the poor to load up on houses they couldn't afford. But when you think about it, even Lewis' heroes are guilty: sure, they recognized that this latest bubble was happening, but all they did with that information was short the system and make a few hundred million dollars each- money that ultimately came from the rest of us, the taxpayers, who ended up footing the bills that AIG and the banks couldn't pay. They might have been smarter than everyone else, but in the end, they're still selfish bastards who exploited the system for their own gain.
Lewis ends the book sitting at a table at an expensive restaurant with his old boss from Solomon Brothers and enjoying a deviled egg. As much as he rails against this system, you kind of get the feeling that he's as much a part of it as the rest of them- profiting while the rest of the country burns. Maybe that's why the book doesn't include any proscriptive advice about better regulating the banks, or taxing the most egregious Wall Street salaries, or lining up all the bank CEOs and throwing them in jail. Ultimately, Lewis isn't interested in fixing the system- he just wants to tell a good story about how the rest of us got screwed....more
A fun account of life on Wall Street before current security laws were put in force-- a time when grifters, bucket-shops, and manipulators ruled the mA fun account of life on Wall Street before current security laws were put in force-- a time when grifters, bucket-shops, and manipulators ruled the market. Lefevre does a great job of capturing the rough and tumble life of Jesse Livermore, the famous speculator-- the dialogue in some scenes is particularly good, and reminded me of something out of The Sting.
Of course, reading a book like this for insight into the market is like reading a book on entrepreneurship by Jesse James (or Donald Trump)-- following any of his advice would be a sure-fire way to go broke or get sent to jail. Livermore never really seems to have a handle on his own approach to speculation-- he decries trading on hunches, but trades on them all the time, and he moves between several trading approaches (day-trading, value investment, macro trends, etc) without ever giving a convincing explanation of his reasons for operating that way. But despite that he seems to have real flashes of insight into his own character-- and more than a passing sense that things weren't going to end well for him.
Definitely worth a read by anyone interested in Wall Street history. ...more
If you're looking for a colorful, narrative history of financial bubbles, this book is not for you. Kindleberger is bone dry, and his goal is mainly tIf you're looking for a colorful, narrative history of financial bubbles, this book is not for you. Kindleberger is bone dry, and his goal is mainly to analyze common features of bubble cycles. Towards that end, he tends to pick a feature, then run through ten or twenty examples of how that feature worked during past bubbles. That leads to a lot of repetition, but by the end of the book, you definitely get a clear sense of how the Minsky model views bubbles. I think that's the reason the book has become such a classic-- it's probably assigned in economics classes all over the world.
But a word of caution to the lay-reader: I have an MBA, and a couple of years of economics courses under my belt-- and some of the discussion was definitely above my head. You'll definitely need to hit Wikipedia to refresh your macro-economic knowledge-- especially at the end of the book, during the discussions of Domestic and International Lenders of Last Resort. ...more
**spoiler alert** "The Economy of Cities" is a short and compelling investigation into two questions: what makes cities form, and why do some cities g**spoiler alert** "The Economy of Cities" is a short and compelling investigation into two questions: what makes cities form, and why do some cities grow while others stagnate and shrink?
To the first question, Jane Jacobs argues that cities formed directly out of hunting and gathering societies, and then added agriculture to their economic activities. This overturns the "agricultural primacy" theory that is normally taught in schools: that small bands of hunters and gathers gradually settle down in agricultural settlements, which then expand to villages, and onwards to cities. I had never given this question much thought before, but by the end of the first chapter, Jacobs completely converted me to her point of view.
The second part of the book is longer and less interesting, but still worth a read if you're interested in urban studies. Jacobs argues that vibrant cities develop by adding new kinds of work to their existing economies, then develop these new kinds of work into export businesses serving other cities, and use the imports gained from this export work to develop still more kinds of businesses, in a repeating cycle. As readers of "Death and Life of Great American Cities" would expect, she's a strong proponent of the role of small businesses in creating new lines of work, and generally finds that large businesses lead to stagnant company towns (like Detroit.) Prescriptively, she's in favor of venture capital and government support for small business development, and cutting support to large but moribund old-line industries. Along the same lines, she favors measures that encourage the development of small business in ghettos and disadvantaged countries, and is generally against welfare programs that breed economic dependence.
One argument for the importance of this book: many of the ideas presented here have become widely accepted and implemented in urban development efforts in the U.S.— although sometimes not with the energy and vigor that Jacobs would have liked. ...more