Book Bits | 14 March 2015

Coined: The Rich Life of Money and How Its History Has Shaped Us
By Kabir Sehgal
Review via Financial Times
Kabir Sehgal, a vice-president at JPMorgan, started out to write a book about the 2008 financial crisis, but got carried away and ended up in the Galápagos Islands. After poring over research on financial crises, he was driven to research on human behaviour related to money, which led him to behavioural economics. He then questioned the roots of behaviour, and delved into evolutionary economics, which led to evolution itself, and the notion that exchange — according to some, the purpose of money — is an evolutionary adaptation. From there it was a short hop to the Galápagos to watch a fish eat parasites off a turtle. Mutually beneficial exchange — later facilitated by money — has its roots at the cellular level, and here at the cell, Sehgal finally must rest, at least until we arrive at the next topic in the book.

The Thin Green Line: The Money Secrets of the Super Wealthy
By Paul Sullivan
Review via Publishers Weekly
This book’s message can be summed up in the title of its epilogue: “It’s Better to Be Wealthy than Rich, Even If You’re Poor.” The titular green line is the author’s useful conceit for describing this desirable state of being. A financial journalist, Sullivan consults with experts from the “one percent” to prescribe a set of strategies for achieving financial stability, such as investing in education for one’s children rather than spending time and energy on avoiding taxes. Most important, in his opinion, is understanding how your feelings about earning, saving, and spending motivate financial decisions.

Our Kids: The American Dream in Crisis
By Robert Putnam
Review via The New York Times
In “Our Kids,” Putnam brings his talent for launching a high-level discussion to a timely topic — the state of upward mobility. Widening income gaps, he argues, have brought profound but underappreciated changes to family life, neighborhoods and schools in ways that give big advantages to children at the top and make it ever harder for those below to work their way up.

Data-ism: The Revolution Transforming Decision Making, Consumer Behavior, and Almost Everything Else
By Steve Lohr
Summary via publisher (HarperCollins)
Steve Lohr, a technology reporter for the New York Times, chronicles the rise of Big Data, addressing cutting-edge business strategies and examining the dark side of a data-driven world. Coal, iron ore, and oil were the key productive assets that fueled the Industrial Revolution. Today, data is the vital raw material of the information economy. The explosive abundance of this digital asset, more than doubling every two years, is creating a new world of opportunity and challenge. Data-ism is about this next phase, in which vast, Internet-scale data sets are used for discovery and prediction in virtually every field. It is a journey across this emerging world with people, illuminating narrative examples, and insights. It shows that, if exploited, this new revolution will change the way decisions are made—relying more on data and analysis, and less on intuition and experience—and transform the nature of leadership and management.

Masters of the Universe, Slaves of the Market
By Stephen Bell and Andrew Hindmoor
Summary via publisher (Harvard University Press)
This account of the financial crisis of 2008–2009 compares banking systems in the United States and the United Kingdom to those of Canada and Australia and explains why the system imploded in the former but not the latter. Central to this analysis are differences in bankers’ beliefs and incentives in different banking markets. A boom mentality and fear of being left behind by competitors drove many U.S. and British bank executives to take extraordinary risks in creating new financial products. Intense market competition, poorly understood trading instruments, and escalating system complexity both drove and misled bankers. Formerly illiquid assets such as mortgages and other forms of debt were repackaged into complex securities, including collateralized debt obligations (CDOs). These were then traded on an industrial scale, and in 2007 and 2008, when their value collapsed, economic activity fell into a deep freeze. The financial crisis threatened not just investment banks and their insurers but also individual homeowners and workers at every level…. Stephen Bell and Andrew Hindmoor argue that trading and systemic risk in the banking system need to be reined in. However, prospects for this are not promising given the commitment of governments in the crisis-hit economies to protect the “international competitiveness” of the London and New York financial markets.

Financial Cycles: Sovereigns, Bankers, and Stress Tests
By Dimitris N. Chorafas
Summary via publisher (Palgrave Macmillan)
As financial positions expand, the economy becomes more vulnerable to adverse and unexpected developments taking place outside the six to seven year business cycle. Over 50 years ago Nikolai Kondratieff developed the theory of “The Long Waves in Economic Life”, which incorporated an extended cycle of innovation and upward thrust, and changed our understanding of business cycles in financial settings. Financial Cycles concentrates on two areas that have thus far been omitted from mainstream economics. The first is the impact of the longer term financial cycle; the second is the beginning of de-globalization as the world enters an era of iron-glad economic blocks. Chorafas argues that to overcome the more narrow limits of the business cycle, we need to go beyond its traditional six to seven year focus and address the longer term. This includes the building-up and running-off of economic risks characterizing the financial cycle, as well as the appreciation of forces underwriting both its growth and its decay. An ever-increasing public debt and the behavior of the banking industry are two principal reasons why the structure of analysis characterizing the previous financial cycle no longer fits present-day realities. A new methodology starts getting in shape, even if it still has to acquire political legitimacy.

The Universal Man: The Seven Lives of John Maynard Keynes
By Richard Davenport-Hines
Review via The Telegraph
Who said economists were dull? For anyone practising economics today (declaration of interest, that includes me) this book is a treat. We can only dream of being as influential as Keynes was in his day. He shaped economic theory. He used knowledge to influence policy and change the course of history – as he did most emphatically in the first half of the 20th century by shaping global economic architecture.
We read endlessly about Keynes the economist. But he was so much more and this unputdownable book explores not so much Keynes the economist as much as Keynes the man. The ”dismal science”, as Thomas Carlyle called it, is thought to breed boring nerds. This book shows this to be a monumental error of casting. Keynes was what Richard Davenport-Hines describes as a ”Universal man”. He was variously a loyal civil servant, a supporter and lover of the arts, an internationalist, a businessman, and a shrewd investor in art for the nation, to name but a few.