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Posted Feb. 25, 2010 2:12 p.m. by dylan
In - 800 CEO Read Blog
Patterson also tells of individuals in the "quant" community who have warned against relying on the models they helped create, and he makes good use of their voices in supporting his conclusion that there is no absolute truth in those models—that there is not a science or equation with which to predict and play the market. Beyond referring to the more popular dissidents, such as Nassim Nicholas Taleb and Benoit Mandelbrot, he refers to two I have not come across, Paul Wilmott and Emanuel Derman, and their Financial Modelers' Manifesto:
It was a cross between a call to arms and a self-help guide, but it almost amounted to something of a confession: We have met the enemy, and he is us. Bad quants were the source of the meltdown.
"A spectre is haunting markets—the spectre of illiquidity, frozen credit, and the failure of financial models," they began, ironically echoing Marx and Engels ...
What followed was a flat denunciation of the idea that quant models can approximate the Truth:
Physics, because of its astonishing success at predicting the future behavior of material objects from their present state, has inspired most financial modeling. Physicists study the world by repeating the same experiments over and over again to discover forces and their almost magical mathematical laws. ... It's a different story with finance and economics, which are concerned with the mental world of monetary value. Financial theory has tried hard to emulate the style and elegance of physics in order to discover its own laws. ... The truth is that there are no fundamental laws in finance. And even if there were, there is no way to run repeatable experiments to verify them.
In other words, there is no single truth in the chaotic world of finance, where panics, manias, and chaotic crowd behavior can overwhelm all expectations of rationality. Models designed on the premise that the market is predictable and rational are doomed to fail. When hundreds of billions of highly leveraged dollars are riding on those models, catastrophe is looming.
A Demon of Our Own Design begins tantalizingly:
While it is not true that I caused the two greatest financial crises of the late twentieth century—the 1987 stock market crash and the Long-Term Capital Management (LTCM) hedge fund debacle 11 years later—let's just say I was in the vicinity. If Wall Street is the economy's powerhouse, I was definitely one of the guys fiddling with the controls. My actions seemed insignificant at the time, and certainly the consequences were unintended. You don't deliberately obliterate hundreds of billions of dollars in investor money. And that is at the heart of this book—it is going to happen again.
It happened again, alright, and Patterson's book does a good job of documenting it on the other side. Patterson doesn't have the narrative genius of a Micheal Lewis or Andrew Ross Sorkin, and The Quants is no Liar's Poker or Too Big To Fail, but Scott Patterson has turned in a valiant debut effort and The Quants is a very good book.
Why You Should Read Michael Lewis
Posted March 24, 2009 4:30 a.m. by todd-sattersten
In Finance and Economics - 800 CEO Read Blog
There are a set of writers who we assign superpowers to in The 100 Best. To the Wall Street trader turned juggernaut writer Michael Lewis, we assigned interpretation. And that may not seem like much of a gift, but it is his ability to make apparent, to bring meaning and understanding to those hidden forces. Take his answer to the question asked by Fortune Magazine, "The stars of your books typically find ways to capitalize on market inefficiencies. Is contrariness necessary for greatness?" for example.
We chose Lewis' book Moneyball for The 100 Best because the story of Billy Beane and his management of the Oakland Athletics transcends baseball. It is the story of a man disrupting an institution. These are lessons for design engineers, HR managers, and corporate strategists.
There are two other sports stories that Lewis has written that capture the same disruptive effect. The first was his 8,787 word story that appeared in Play, the now-defunct sport magazine of The New York Times, about Texas Tech football coach Mike Leach and his game-changing view for how college football should be played (consider the effect in their run at the national championship this year). The second appeared just a few weeks ago in The New York Times Magazine. The 9,004 word story centered on Houston Rockets Shane Battier and his almost unmatched ability to make his team better when he is on the court (and not through offense). Both are brilliant and should be read.
I'll leave you with a few others if you find Lewis to your liking:
- Commie Ball: A Journey to the End of a Revolution - How sports agent Gus Dominguez, who has been convicted (wrongly, Lewis believes) of smuggling Cuban baseball players to the United States.
- The End - This is the current day afterword to Liar's Poker.
- An Interview with Michael Lewis - The Atlantic Monthly's Business Channel interviewed the writer in January 2009 on the anthology he edited Panic, his crazy long, two-part New York Times op-ed he wrote with David Einhorn from the beginning of that month and the future of journalism (of which Lewis has little to worry about).
- Wall Street on the Tundra - His latest from the April 2009 issue of Vanity Fair about the fall of Iceland's economy.
Our Response to BusinessWeek
Posted Feb. 8, 2009 3:32 p.m. by todd-sattersten
In 100 Best - 800 CEO Read Blog
There are only a few people in the media who know business books as well as Jack and I. Hardy Green, an associate editor at BusinessWeek, is one of those people.
We met with Hardy in New York two weeks ago and he quickly commenced with critiquing our selections for The 100 Best. He has also written a great piece for BusinessWeek.com titled, "What Makes a 'Best' Business Book?" that captures his thoughts on the omissions and gaffes in the book.
The way we see it Green's argument is two-fold.
His first criticism is that we have overlooked too many histories and narratives; the most glaring omissions being Barbarians at the Gate by Burrough and Heylar and Liar's Poker by Michael Lewis. He points out the imbalance between the 21 books in the categories of biographies, narratives, and "big ideas" to the 29 management titles when he combines our strategy, leadership, and management chapters.
His second point is one of recency. He asks, "What about something like The House of Mondavi: The Rise and Fall of an American Wine Dynasty by Julia Flynn Siler (Gotham Books, 2007)? What about entries on Silicon Valley or the digital world, such as Planet Google: One Company's Audacious Plan to Organize Everything We Know by Randall Stross (Free Press, 2008)?," His preference for more current titles seems to speak to his perspective as an editor at weekly business magazine.
We love the work Green does for the business book category, but we obviously disagree.
First, he seems to overlook books we've included within other chapters when he tallies the count of narratives versus management manuals. Contained within our entrepreneurship chapter is the wonderful incubation story of The Republic of Tea . Or sitting squarely in the leadership chapter is the GE history Control Your Destiny Or Someone Else Will by Tichy and Sherman. Who Says Elephants Can't Dance? by former IBM CEO Lou Gerstner appears in our strategy chapter. The Tipping Point, Why We Buy, and Orbiting the Giant Hairball also all fulfill Green's hope for books promoting a more thoughtful synthesis of business.
In fact, we could provide Green with even more titles that could have been included if we were to have used his criteria. How about Father, Son, and Company by Thomas Watson Jr.? Or Charles Fishman's The Wal-Mart Effect? Or Typo, the wonderful and woeful tale of David Silverman's adventure trying to revive a typesetting company in rural Iowa. All would have been wonderful additions--and they are in the book. We recommended these and 292 other books as further reading at the end of the reviews and in sidebars sprinkled throughout the book.
In regards to his request for more current titles, Green surely knows publishing well enough to know that this book was finished almost a year ago, months before the current economic mess. If we were to update the book today, we would love to recommend the Michael Lewis edited compilation Panic to our readers. And we may have looked past some accessibility problems to suggest Nassim Nicholas Taleb and either his Fooled by Randomness or The Black Swan.
Many of the narratives Green would like to see more of have a short shelf-life given the speed as which the world moves. Do we still have the same interest in Ebay or Starbucks that we had a few years ago? We solved this problem by producing an online chapter of industry narratives for which the sidebar on page 262 is a jumping-off point. Barbarians at the Gate appears in this additional section along with Where The Suckers Moon, The Box, Oil on The Brain, and Better. We feel the selections show both ingenuity and recency and exist in an online form that is more easily updated.
All this leads to a bigger point: You can't solve all of the problems of business with 100 books. The scope and variety of challenges, both personal and organizational, require a larger inventory of titles. Of course, we needed to make tough decisions about what was included in The 100 Best and we'll be judged--by Hardy Green and others--on our taste and discernment, but the structure and format of the book clearly shows our hope that by reading our book you will be encouraged to read more business books.
Maybe, after reading the review of a book you are familiar with, you will read the additional books we recommend. Or maybe you'll choose your own adventure by following a 'Where To Next?', jump to a book you never expected...and read it. Or maybe you'll become so enraged that we have overlooked one of your favorites that you go back and read it again to ensure its position in your personal 100 Best. In any of these instances, our book will have accomplished its task.
If you are interested in continuing the disucssion, jump over to BusinessWeek and leave your thoughts with the others already there.
The Best Books OF ALL TIME! - The Independent Edition
Posted Dec. 16, 2008 3:52 a.m. by dylan
In Uncategorized - 800 CEO Read Blog
Jack and Todd will soon have the definitive list of the best business books of all time published, but, in the meantime, here is what The Independent's Sean O'Grady has to say on the matter. He chooses from both "timeless classics [and] the latest crop of credit crunch chronicles." It's an interesting list because it's from a newspaper that leans to the left side of the British political spectrum, providing a perspective from the side of the aisle that doesn't speak up on business books as often.
The choices from all time include:
The Great Crash by J.K Galbraith, Mariner Books Capitalism Unleashed: Finance, Globalization, and Welfare by Andrew Glyn, Oxford University Press What Management Is: How It Works and Why It's Everyone's Business by Joan Magretta with Nan Stone, Free Press Competitive Advantage: Creating and Sustaining Superior Performance by Michael E Porter, Free Press When Markets Collide: Investment Strategies for the Age of Global Economic Change by Mohamed El-Erian, McGraw-Hill Reminiscences of a Stock Operator by Edwin Lefevre, John Wiley & Sons Liar's Poker: Rising Through the Wreckage on Wall Street by Michael Lewis, Penguin Books Hotel Babylon by Anonymous & Imogen Edwards-Jones, Blue Hen Books The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb, Random House End of the Road: The True Story of the Downfall of Rover by Chris Brady & Andrew Lorenz, FT Press
The choices dealing specifically with the current crisis are:
The Crunch: Uncovering the Truth Behind the Great Credit Scandal by Alex Brummer, Random House Business Books The Gods That Failed: How Blind Faith in Markets Has Cost Us Our Future by Larry Elliott & Dan Atkinson, Nation Books (being released in the States next month) The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means by George Soros, PublicAffairs The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It by Robert Shiller, Princeton University Press The Credit Crunch: Housing Bubbles, Globalisation and the Worldwide Economic Crisis by Graham Turner, Pluto Press The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash by Charles R Morris, PublicAffairs The Age of Turbulence: Adventures in a New World, by Alan Greenspan, Penguin Books Who Runs Britain? and Who's to Blame for the Economic Mess We're In by Robert Peston (Not available in the States) The Ascent of Money: A Financial History of the World by Niall Ferguson, Penguin Press
To read the explanation behind the choices and descriptions of the books, head over to The Independent for the original article.
And the bull collapses.
Posted Dec. 5, 2008 9:51 a.m. by kate
In Current Events - 800 CEO Read Blog
Back in Liar's Poker, Michael Lewis wrote of the deceit behind Wall Street's. How firms got away with hiring 24-year-olds fresh out of college as advisers to large corporations and for large sums of money.
The time frame: the 1980s.
Lewis thought the happenings on Wall Street were an anomaly; a period of time that would meet its demise when the American youth planted their stakes in the ground and rebelled against greed; when the youth abandoned Wall Street ideals and overturned the system. Lewis waited and instead of rebellion found that:
Somehow that message failed to come across. Six months after Liar's Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They'd read my book as a how-to manual.
In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents' world when you can buy it, slice it up into tranches, and sell off the pieces?
This October that changed. The economy brought us all to our knees. Wall Street's pockets of air came crashing down and much of the world stopped.
Is this is the the end of Wall Street? Probably not. But perhaps its the end of this period of anomalies.
Lewis' latest book Panic! The Story of Modern Financial Insanity is a compilation of articles on what lead to present-day Wall Street, beginning with the crash of 1987.
In an interview with the Wall Street Journal, he's asked what the next get-rich-quick scheme will be. He speculates:
Mr. Lewis: We have entered a period of risk aversion unlike anything we've seen in our lifetime. Investors will be too wary for a while. You'll read stories about people who got rich betting against subprime mortgages and then about people who combed through the wreckage and found bargains. The next rich wave will be those who figure out where the value is. As for the average American investor, he'll be a deer in the headlights for years. It will be a while until greed gets comfortable again.
Let's hope greed doesn't get too comfortable anytime soon.
