He suggests investing in obesity, identity theft and auto safety--lasting demographic trends. He's on the NPR site. Check it out here.

If you enjoy identifying the ways the current economic situation is reminiscent of past event in recent history (say, the Reagan era and the recessions between the late 1960s and early 1980s), The Great Inflation and its Aftermath will deliver all-too-familiar reminders of economic instability, federal intervention, and renewed faith in the American system of innovation and reconstruction. Samuelson's book focuses, too, on the shifting influences of pessimism and optimism on economic security.

From the (somewhat tired-sounding) review:

Samuelson believes in the power of ideas, but he doesn't put much stock in the thoughts of economists. He says they peddle optimism instead of hard-nosed realism to an entitlement-besotted populace. Take the experience of the '50s through the '70s. Then, he says, economists sold the Keynesian notion that the business cycle could be fine-tuned into insignificance, wrongly assuring the populace and policymakers that the problem of unemployment could be solved. Instead, the country ended up with roaring inflation. The same over-optimism, many observers believe, characterizes the profession's embrace of deregulation and free markets. Want to see the effects of free-market prescriptions? Read today's headlines, they say.

But Samuelson regards economists as having more power than they really do. Hence his worries about the reform ideas now gaining currency, including notions of how to bolster the economic security of the middle class, provide universal health coverage, and curb global warming. The fervor bothers him because it fails to account for the rising cost of the welfare state, enormous household debt burdens, and the "twilight of Pax Americana."

Samuelson's book, as the reviewer says, "draws parallels between the Reagan era and today, but underestimates the power of U.S. innovation and resilience." Perhaps readers are feeling saturated by the clamor of economic woe and constant analysis. It's hard to say. What do you think?

This past weekend, the subject was financial meltdowns. The column was curated by Martin Mayer, an author of 35 books, many on the financial system. His own bibliography includes The Bankers (1975) and its follow-up The Bankers: The Next Generation (1997), The Fate of the Dollar (1980), Risky Business: The Collapse of Lloyd's of London (1995), and The Fed (2002).

His current recommendations are:

• Manias, Panics, and Crash: A History of Financial Crises by Charles Kindleberger (1978) - "the definitive overview of financial emergencies"
• Bailout: An Insider's Account of Bank Failures and Rescues by Irvine Sprague (1986) - "first person account of the big bank traumas of the 1980's" by then FDIC director
• Beyond Greed by Stephen Fay (1982, out of print) - "a wonderful tale of how Bunker and Herbert Hunt of the Texas oil Hunts, together [with others], tried to corner the silver market in the late 1970's."
• When Genius Failed: The Rise & Fall of Long-Term Capital Management by Roger Lowenstein (2000) - the subtitle says it all.
• The Trouble With Prosperity by James Grant (1996, out of print) - "[B]ooms are followed by busts, and the louder the boom, the more devastating the bust" with the opposite true as well.

• The Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crunch by Charles Morris
• The World Is Curved: Hidden Dangers to the Global Economy by David Smick
• The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means by George Soros
• Bad Money: Reckless Finance, Failed Politics, and The Global Crisis of American Capitalism by Kevin Phillips
• Crash Proof: How to Profit from the Coming Economic Collapse by Peter Schiff

The article also says that you will probably find a similar display at your local Barnes & Noble the next time you visit.

On Friday, they ran the piece under the heading Meltdown Lit: Recommended Books for the Wall Street Debacle. Please go check out the whole piece. There are great suggestions.

Below is our original submission, which they used extensively for the article:

--The Subprime Solution by Robert Shiller

Shiller's work on housing values is well-known and originally established in Irrational Exuberance. His latest book just released in August describes pretty clearly the mortgage crisis we are in and offers some solutions to get out.

--Essays on the Great Depression by Ben Bernanke

You want some insight into what the current Fed chairman is thinking, reading his perspective on the last event of this magnitude may help understand what he does in this one.

--The Age of Turbulence by Alan Greenspan

Hearing from the latest Fed Chairman might also be useful. Many are laying the blame at Mr. Greenspan's feet. The paperback that was released on September 9th has a new chapter with his thoughts on the current credit crisis.

--When Genius Failed by Roger Lowenstein

This from a review I wrote:

"Throughout When Genius Failed, financial journalist Roger Lowenstein foreshadows the coming doom and so there is no surprise in how the story of Long-Term Capital Management ends. But what Lowenstein does best is show how blind arrogance brought down the company and almost the entire financial system. Building on the work of two Nobel Laureates and growing capabilities of computer technology, Long-Term Capital Management pushed academic theory further into real-world practice than had ever been done before, and becomes a case study for how markets defy formulaic explanation. Lowenstein’s narrative, while set in the complicated financial market of today, tells an ages-old story many will recognize." (P.S. This was peanuts compared to the current crisis.)

--Smartest Guys In The Room by By Bethany McLean and Peter Elkind

This from a review Jack wrote:

"In my research, I have not found any evidence that anybody colluded to rob the place. Smart, rich, influential men do not deliberately destroy the source of their wealth and influence. Instead, they got trapped in a nightmare of their own creation, or perhaps their own ego. Enron's failure was not deliberate; it was the result of a series of interconnected events. Can this happen again? Sure, when you have hubris at the CEO level, sales peoples’ compensation based on short term success, upper level people totally focused on growth to satisfy short term Wall Street success, an accounting system that supports this concept, and finally an accounting firm that doesn’t do a good job of oversight. Add to this a deregulated industry and watch what happens." (this sounds familiar too).

Shrink Not - Adjust the sail and seek The New Gold Standard of Leadership

By Joseph A. Michelli, author of The New Gold Standard: 5 Leadership Principles for Creating a Legendary Customer Experience Courtesy of the Ritz-Carlton Hotel Company

Soaring gas prices and the US credit crunch have many business owners scurrying to reduce costs and "do more with less." But this natural and reflexive approach to economic uncertainty is often the worst path a business leader can take. In fact, while researching my recently released book The New Gold Standard: 5 Principles for Creating a Legendary Customer Experience Courtesy of The Ritz-Carlton Hotel Company, Ed Staros, a founder of the modern-day Ritz-Carlton Hotel Company noted that during difficult economic times in the 1980s many hotel chains were cutting back on flower arrangements in the lobby and not placing mouthwash in guest rooms. Ed shared. "We always believed that economic challenges didn't mean that people didn't need or want mouthwash. It meant we had to raise the standard in a quality efficient way." So, how do business leaders decide when to pull-back products or service versus expanding them, particularly when business begins to slow? For example, many marketers suggest that the best time to advertise is in a tight market, namely because fewer people are doing so (allowing you to position your product with less clutter) and because it is the time when customers need most to be reminded that you are still there.

While cost cutting may be inevitable in tighter economic cycles, I gained key insights during my conversations with the leadership at The Ritz-Carlton Hotel Company about how to avoid a scarcity mentality in challenging times:

1. When consumers face economic challenges they often place a greater emphasis on value. While many customers will "pinch pennies" and "clip coupons" to address financial hardships, they will still look for opportunities to "treat" themselves. When consumers do spend money freely they will want to experience true quality and not a watered-down or corporately scaled-back version of quality.
2. Focused excellence prevails. If cutbacks are necessary, companies can and should reallocate resources toward their core areas of excellence. To be "excellent" means resisting the urge to overreach into areas where your products or service will be mediocre. Doing a few things expertly beats doing many things adequately.
3. Inspire staff to focus on purpose and outcomes, not fulfillment and procedures. I have long believed that all business is personal. This is particularly clear in the world of luxury hotels and resorts. While most hotel companies that compete for this market segment have exquisitely clean and well-appointed facilities, the primary driver for guest loyalty emerges from the personal attention and caring of staff. From the onset of their employee selection process, leadership at Ritz-Carlton looks for underlying talent in service characteristics. They then train and certify the skills necessary for the new hires to do their jobs while constantly linking job function to the overarching purpose of the business - namely to provide for "the genuine care and comfort" of their guest.
4. Empowering the front-line saves money. While many business leaders talk about their empowered workforce, few put money behind the hype. At Ritz-Carlton, staff members (referred to as the Ladies and Gentlemen of The Ritz-Carlton) are given the authority to spend up to $2,000 per day per guest, without seeking the approval of their supervisors. This authority allows front-line workers to immediately resolve service breakdowns for guests or simply engage guests by doing something unexpected that will make the hotel stay memorable. The cost-saving nature of this seemingly risky level of financial empowerment is derived from the morale and loyalty of employees, the clear cost savings of resolving problems immediately, and the impact that this type of empowered workforce has on customers. Essentially, empowered employees consistently transform otherwise satisfied customers into fully-engaged brand loyalists that spend more and refer family and friends to the business.

In my book The New Gold Standard, I identify 5 key business principles that have allowed The Ritz-Carlton to continue to be a recognized leader in product quality and service excellence (two time winner of the Malcolm Baldridge award for service excellence). Rather than contracting or adopting a defensive posture during economic uncertainty, The Ritz-Carlton leadership stays the course with these five principles:

Define and Refine

Empower through Trust

It's Not About You

Deliver Wow!

Leave a Lasting Footprint

While concepts like empower through trust have been alluded to earlier, concepts such as "define and refine" and "it's not about you" warrant further exploration. By clearly "defining" the core components of the company's values, quality standards, and service tradition, Ritz-Carlton constantly communicates the path by which a guest's experience can be elevated, how the staff member can purposefully add value and the means by which the company will thrive. By having every staff member take time every day at every hotel worldwide to participate in a process called line-up, Ritz-Carlton leadership re-engages staff in a discussion of the overarching mission they all share. Further, by being attentive to the need to "refine" the brand so that it remains relevant in changing economic times, for evolving customer segments and in diverse international markets, leadership builds on their well-defined culture.

The "It's not about you" principle reflects the disciplined practice of listening to staff, customers, vendors and all stakeholders to constantly assure that business does not principally serve the needs and preferences of leadership. By adopting a penchant for listening to stated and unstated needs while maintaining a passion for service, great leaders produce businesses that endure. From the customer's perspective, these businesses are extensions of themselves and not commodities.

While none of us can control the winds of economic change, taking a few lessons from The Ritz-Carlton Hotel Company can help us adjust our sails to arrive at our desired destination. I welcome your thoughts about the journey...

ABOUT THE AUTHOR

Joseph A. Michelli, Ph.D., is an internationally sought-after speaker and business consultant whose clients include Bridgestone Firestone, Nokia, The Hartford Insurance Group, UCLA Health System, and USMC. Michelli has vast media experience, including television programs such as "The Glenn Beck Show" and CNBC's "On the Money," and has conducted hundreds of radio and print interviews.

If the fruit of the Economic Stimulus Act of 2008 hasn't landed in your bank account yet, it's likely just a matter of time before you're throwing $600 on the bed just to see what it feels like to roll around in that much cash. The government, of course, hopes that we won't just pay bills or sock it away in savings but that we'll circulate the money back into the marketplace and thereby jump-start our sagging economy. As I write, the government is also engaged in another kind of largesse, literally printing money and offering it to banks and government-backed mortgage players Fannie Mae and Freddie Mac to stave off the continuing ripple effects of the credit crisis. Leaving aside whether those moves will reverse the current economic slump, the question is: Why do we think they might?

The answer may be found in a new science called evolutionary economics. This discipline looks at the economy as an ever-changing, complex adaptive system -- not unlike that of biological evolution. Immune systems, language, the law, and the Internet are all examples of other complex adaptive systems. They learn and grow from the bottom up. Individual elements (organisms in evolution, people in economics) interact and adapt to changing conditions. These systems are so intricate that they often look as though they've been designed from the top down. So our minds naturally infer the existence of an intelligent designer for complex life and a government designer for complex economies. This is why we instinctually look to Fed chairman Ben Bernanke, Treasury secretary Henry Paulson, or Congress and the President to fix the economy.

But there's more to it than that...

Keep reading on evolutionary economics over at Fast Company.

On Tuesday May 27, The Wall Street Journal begins a three part analysis of the collapse of Bear Stearns.

Buffeted by the most treacherous market forces in a generation and hobbled by indecision, the firm's leaders missed opportunities that might have been able to save the 85-year-old brokerage.

Part one was sad yet fascinating...I look forward to the next installment.

Writer David Berreby tells us that:

Another sign that times are changing is "Predictably Irrational," a book that both exemplifies and explains this shift in the cultural winds. Here, Dan Ariely, an economist at M.I.T., tells us that "life with fewer market norms and more social norms would be more satisfying, creative, fulfilling and fun." By the way, the conference where he had this insight wasn't sponsored by the Federal Reserve, where he is a researcher. It came to him at Burning Man, the annual anarchist conclave where clothes are optional and money is banned. Ariely calls it "the most accepting, social and caring place I had ever been."

Obviously, this sly and lucid book is not about your grandfather's dismal science. Ariely's trade is behavioral economics, which is the study, by experiments, of what people actually do when they buy, sell, change jobs, marry and make other real-life decisions.

Berreby provides just a few of the insightful stories Ariely uses to illustrate irrationality, touching on concepts like the power of suggestion and the unfortunately common social habit of "wanting stuff we can't afford and don't need."

These sorts of rigorous but goofy-sounding experiments lend themselves to a genial, gee-whiz style, with which Ariely moves comfortably from the lab to broad social questions to his own life (why did he buy that Audi instead of a sensible minivan?). He is good-tempered company -- if he mentions you in this book, you are going to be called "brilliant," "fantastic" or "delightful" -- and crystal clear about all he describes. But "Predictably Irrational" is a far more revolutionary book than its unthreatening manner lets on. It's a concise summary of why today's social science increasingly treats the markets-know-best model as a fairy tale.

Many have criticized the book for encouraging selfishness. Yet, Greenspan refuted it in a letter to the NYTimes in 1957:

'Atlas Shrugged' is a celebration of life and happiness. Justice is unrelenting. Creative individuals and undeviating purpose and rationality achieve joy and fulfillment. Parasites who persistently avoid either purpose or reason perish as they should.

You'll find he's not the only famous businessman who learned from and enjoyed Ayn Rand's novel.

p.s. If you haven't heard, Greenspan's memoir The Age of Turbulence is due out today.

It started with Portfolio Magazine article by John Cassidy which will appear in the October issue but showed up online earlier this week. There are vague references to the material in the book and is more of a critic of Greenspan's tenure as Federal Reserve Chairman.

The Wall Street was skipped the indirect route and featured the an extensive article on the front page of their Saturday edition. The lead is:

In a withering critique of his fellow Republicans, former Federal Reserve Chairman Alan Greenspan says in his memoir that the party to which he has belonged all his life deserved to lose power last year for forsaking its small-government principles.

In "The Age of Turbulence: Adventures in a New World," published by Penguin Press, Mr. Greenspan criticizes both congressional Republicans and President George W. Bush for abandoning fiscal discipline.

and later in the article is the stuff people are going to be interested in:

In coming years, as the globalization process winds down, he predicts inflation will become harder to contain. Recent increases in the price of imports from China and a rise in long-term interest rates suggest "the turn may be upon us sooner rather than later."

Left alone, he said, the Fed's policy-making body, the Federal Open Market Committee, can keep inflation between 1% and 2%, but that could require forcing interest rates to double-digits, a level "not seen since the days of Paul Volcker," his predecessor as Fed chairman. "I fear that my successors on the FOMC, as they strive to maintain price stability in the coming quarter century, will run into populist resistance from Congress, if not from the White House," he writes.

If the Fed succumbs to that pressure, inflation could rise from a little over 2% at present to an average of 4% to 5% by the year 2030, he writes. Ten-year Treasury yields, now below 5%, will rise to "at least 8%" with the potential to go "significantly higher for brief periods." This, he says, will lead to stagnant returns on stocks and bonds and much smaller gains in housing prices.

You are going to be seeing alot of Alan in the next couple of weeks. Here is a head start:

• Videos from 60 Minutes
• Interesting Excerpts on Leading Blog
• AP's Story on the Book

The Pitcher of Water Versus the Empty Glass

When I give seminars, this is the moment that I introduce the most memorable visual aids I have ever used. Picture yourself holding an empty drinking glass in one hand and a pitcher containing water in the other. The glass represents your house. For simplicity's sake, let's say it is worth $100,000. It's an asset. Let's say you have $100,000 of cash in the bank (the pitcher) -- that's liquid wealth. The glass is empty because you have not put a penny into your house, but on paper, on a balance sheet, you would still list it as a $100,000 asset. Meanwhile the pitcher of water represents another asset -- $100,000 in cash.

What's the total amount of your assets? $200,000. What happens if you pour the water into the glass? You have reduced your assets by $100,000. You've combined $100,000 in cash to a glass already listed as an asset worth $100,000, and all you have to show for it is $100,000. You have cut your assets in half!

On the other hand, when you separate the liquid cash from the glass-sized house that is free and clear, you double your assets. That's what happens when you separate equity from your house and put it in a liquid investment. But you're not finished. Assume the empty glass-house appreciates at an average of 5 percent a year. After one year, what's the value of the empty glass? $105,000. If you pay off the mortgage on the glass (pour the water -- or money -- back into the house) what is it worth? The same $105,000 -- whether it is mortgaged or it is free and clear -- because equity has no rate of return when it is trapped in a house.

Next, pour the water from the glass back into the big pitcher. You've just removed $100,000 from your house and put it into an investment earning -- let's say -- 10 percent. At the end of the year, how much money will you have in that pitcher? Look at that! It's grown to $110,000! In your other hand is your house, worth $105,000 at the end of the same year, thanks to appreciation.

Leave the water in the pitcher.

How much have you earned by separating your equity from your house in the course of just a single year? $15,000. How much would you have earned if you had left the water in the glass? Only $5,000 -- one-third as much.

"But, but, but -- the mortgage wasn't free! I had to pay some interest." That's right, you did. Let's say the mortgage was at 7.5 percent. That's $7,500 subtracted from $15,000 for a net gain of $7,500, instead of just $5,000. You are still 50 percent ahead than if you had not removed the equity from your house. If the mortgage interest is deductible, then the net cost of the mortgage is really not $7,500, but $5,000 in a 33.3 percent marginal tax bracket. So the net profit is $10,000 ($15,000 minus a net, after-tax mortgage expense of $5,000) -- or twice as much as you made if the house was paid off!

Here's another quick analogy: Would you rather have one horse working for you or two? Can two horses work for you, even if you owe money on one of the horses?

The object of this demonstration is that no matter what else you do, when you separate your equity from your house, you increase your assets. Even though there is a charge for doing that -- the simple interest you pay on a mortgage -- it makes a whole lot of sense to take out a mortgage and use it to make your assets grow.

Do you recall the president of the bank I mentioned at the start of this chapter? What you've just done -- taken out a mortgage and used the money to make more money -- is what he did. You didn't make billions, but you made a profit in the same exact manner. By separating equity from your house, you give it the ability to earn a rate of return. Employ this strategy each year, and the profits will compound.

Copyright © 2007 Douglas R. Andrew

The Last Chance Millionaire by Douglass R. Andrew
Published by Warner Business Books; June 2007

In Discover Your Inner Economist, Tyler Cowen, an economics professor at George Mason University, talks readers through economic rationales for dating (flowers work because they are expensive), charity (give to those who aren't asking) and eating well (at expensive restaurants, avoid dishes that rely too heavily on top-quality raw ingredients). But sales of other new titles that aim to explain weird phenomena in economic terms don't bode well for Mr. Cowen's book: More Sex Is Safer Sex, by Steven E. Landsburg, and The Economic Naturalist, by Robert H. Frank, have sold just 12,000 copies combined since their spring releases according to data from Nielsen BookScan, which tracks approximately 70% of retail book sales. Meanwhile, an expanded edition of "Freakonomics," which came out in October, has sold 119,000 copies since January. In his book, Mr. Cowen describes a potential explanation: a marketing principle called "scarcity of attention."

These questions and their answers now make up his recently published book, The Economic Naturalist. Over at another famous economics site you'll find a few excerpts including this one:

Why do fast food places promise a free meal if you aren't given a receipt at the time of purchase?

To deter theft, owners of restaurants and other retail establishments require cashiers to reconcile the total amount of cash collected during their shift with the total volume of sales rung up at their register...One way cashiers can circumvent this control is by neglecting to ring up a proportion of their transactions...Thus if a cashier failed to ring up a customer's $20 meal, he or she could pocket the $20 without creating an accounting discrepancy...By offering a complimentary meal to anyone who fails to receive a receipt, owners provide an economic incentive for customers to monitor cashiers for free.

1. The Elegant Solution Interview with Matt May
2. Marketing and Sales for Big Complex Selling Interview - Part 1 with Brian Carroll
3. Marketing and Sales for Big Complex Selling Interview - Part 3 with Brian Carroll and Jill Konrath
4. Everyday Greatness Interview with Stephen Covey
5. The Difference Maker Interview with John Maxwell
6. Confessions of An Economic Hitman Audio Excerpt
7. Made To Stick Interview with Dan Heath
8. Growing Great Employees Interview - Part 2 with Erika Anderson
9. Purpose Interview with Nikos Mourkogiannis
10. Growing Great Employees Interview - Part 1 with Erika Anderson