September 7, 2013
Book Bits | 9.7.13
● Scarcity: Why Having Too Little Means So Much
By Sendhil Mullainathan and Eldar Shafir
Audio interview with co-author Sendhil Mullainathan via Marketplace
At first blush, there is little in common between a Harvard economics professor who's very busy and a poor person from India, struggling to simply put food on the table. But according to Sendhil Mullainathan, the Harvard economist, what they have in common is an idea: Of scarcity. "Both of us are touching on the exact same psychology," Mullainathan says. "There is actually something primitive that happens to the human brain when experiencing very little." In a book he's written, with Eldar Shafir, about this topic, called "Scarcity: Why Having Too Little Means So Much," Mullainathan says that scarcity can focus the mind. "Everyone has had the experience of two weeks left to do something, and you doddle," he adds. "One day left to do something, wow, you are focused." He says this same focus applies to people with limited money. "They become incredibly focused on every little dollar, every little penny," he says.
● Deep Risk: How History Informs Portfolio Design
By William Bernstein
Review via The Wall Street Journal
In [a recently published] e-book, “Deep Risk: How History Informs Portfolio Design,” Mr. Bernstein sifts through decades of financial data and global history to identify what creates deep risk. The four causes he came up with sound almost like lyrics to the old Temptations song “Ball of Confusion,” but they are deadly serious: inflation, deflation, confiscation and devastation. “These forces can make assets lose most of their value and never recover,” he told me this week.
● Confronting Mistakes: Lessons from the Aviation Industry when Dealing with Error
By Jan Hagen
Excerpt via publisher, Palgrave Macmillan
Confronting Mistakes is a book for managers describing the error management in the cockpits of commercial aircraft. I am not talking about a code of conduct along the lines of “what managers can learn from pilots.” Rather, Confronting Mistakes is an exciting book that deals with the consequences resulting from a lack of error management. Some of the cases are hair-raising; others shocking yet foreseeable. All had fatal consequences – for those who caused them as well as for bystanders. Yet with the help of a functioning error management, these consequences could have been avoided. This realization, recognized 30 years ago in aviation, eventually led to Crew Resource Management, or CRM. Introduced in the early 1980s, it has by now become well established in the aviation industry, which has continually worked on improving it to make those in the cockpit
Proactively aware of potential sources of error.
Now is the time to introduce the knowledge we have gained since then to a wider audience. After all, the aviation industry, for obvious reasons, has learned error management earlier and more systematically than other industries. Accusations and sanctions have no place therein – the only concern is with a root-cause analysis to prevent the next accident or disaster.
● The Dao of Capital: Austrian Investing in a Distorted World
By Mark Spitznagel
Summary via publisher, Wiley
In The Dao of Capital, hedge fund manager and tail-hedging pioneer Mark Spitznagel—with one of the top returns on capital of the financial crisis, as well as over a career—takes us on a gripping, circuitous journey from the Chicago trading pits, over the coniferous boreal forests and canonical strategists from Warring States China to Napoleonic Europe to burgeoning industrial America, to the great economic thinkers of late 19th century Austria. We arrive at his central investment methodology of Austrian Investing, where victory comes not from waging the immediate decisive battle, but rather from the roundabout approach of seeking the intermediate positional advantage (what he calls shi), of aiming at the indirect means rather than directly at the ends. The monumental challenge is in seeing time differently, in a whole new intertemporal dimension, one that is so contrary to our wiring.
● Soldier of Finance: Take Charge of Your Money and Invest in Your Future
By Jeff Rose
Summary via publisher, McGraw Hill
Too much debt? Not enough savings? Stop your whining and get to work. It's time to become a battle-ready financial warrior, prepared to tackle any money challenge. Modeled on the Soldier's Handbook, which is issued to all new U.S. Army recruits, Soldier of Finance is a no-nonsense, military-style training manual to overcoming financial obstacles and building lasting wealth. Written by Jeff Rose, a Certified Financial Planner' and army veteran with extensive combat experience, the book is divided into 14 modules, each section covering an essential element of financial success.
● Get Wise to Your Advisor: How to Reach Your Investment Goals Without Getting Ripped Off
By Steven D. Lockshin
Summary via publisher, Wiley
The financial services world is changing. Technology is enabling an automated approach to investing that should bring down the cost of commodity services. No longer do you have to fund the lifestyle of a broker or advisor to have him tell you how to diversify or where to find the next investment that cannot be missed. This book will provide the tools for calculators that tell you most of what you need to know; from how much insurance you need to have to how you should diversify.
● Crony Capitalism in America: 2008-2012
By Hunter Lewis
Summary via author's website, againstcronycapitalism.org
When private interests need a political favor, they know whom to call. When politicians need money, they also know whom to call. The people involved try to keep most of it concealed behind closed doors. This is the system that prevailed in Russia after the fall of Communism. But increasingly it is America’s system as well. Many people regard Wall Street as the epicenter of American capitalism. In reality it is the epicenter of American crony capitalism. Where Wall Street stops and Washington begins is impossible to say. This situation was not caused, as many suppose, by the Crash of 2008. Rather the Crash was caused by the longstanding Wall Street–Washington partnership. But the problem extends far beyond Wall Street to every corner of America.
● The Ethical Economy: Rebuilding Value After the Crisis
By Adam Arvidsson and Nicolai Peitersen
Summary via publisher, Columbia University Press
A more ethical economic system is now possible, one that rectifies the crisis spots of our current downturn while balancing the injustices of extreme poverty and wealth. Adam Arvidsson and Nicolai Peitersen, a scholar and an entrepreneur, outline the shape such an economy might take, identifying its origins in innovations already existent in our production, valuation, and distribution systems. Much like nineteenth-century entrepreneurs, philosophers, bankers, artisans, and social organizers who planned a course for modern capitalism that was more economically efficient and ethically desirable, we now have a chance to construct new instruments, institutions, and infrastructure to reverse the trajectory of a quickly deteriorating economic environment. Considering a multitude of emerging phenomena, Arvidsson and Peitersen show wealth creation can be the result of a new kind of social production, and the motivation of continuous capital accumulation can exist in tandem with a new desire to maximize our social impact.
Posted by jp at September 7, 2013 4:17 AM