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Quick Thoughts:
- This was a tough book for me to get through. I'm not sure if the subject is getting stale, the book was stale, or if I was just too sleepy for reading this book on the train in the morning (Tough week). I think the latter may have had much to do with my sentiments, because my reading in the afternoon was much more fun.
- The authors do a great job of going step-by-step through the recent crisis. They show how large the unregulated shadow banking system had become. They combine this with their deep knowledge of economic history and the steps which occur during any financial meltdown. It is notable that Nouriel Roubini, one of the authors, is widely known for sounding warnings of the potential crisis well before the meltdown.
- I really enjoyed the section in the book when they go through what different major economists believe needs to happen during a crisis. They do a good job of showing the problems that both liberal and conservative economists run into if their theories are carried through to their conclusions. In the crisis that just occurred, our government played rescue and threw lifelines to all banks in order to save the financial system and the economy. This has created huge problems in terms of moral hazard. Banks now know they can take on extremely large and irresponsible risks and get a bailout from the government. On the other hand, the middle of an economic meltdown isn't exactly a great time to allow entities to fail due to all the linkages in the financial system. Letting AIG fail would have damaged far more than just AIG.
- After reading this book, I'm very interested in how the authors feel about the financial reform bill that just passed. They had a number of suggestions for how to reform our system, and from my reading some of these ideas were taken on by congress. My instinct is that the authors will feel that the reforms did not go far enough and will result in another crisis. These guys are regarded as pessimists, so I can't imagine that they will be very encouraged by a political settlement.
- I enjoyed the outlook section of the book at the end where they go region-by-region and issue-by-issue and discuss potential threat and opportunities. They are extremely concerned with the US current account deficit. They are certain that it is unsustainable and will end badly even if we take their suggested mitigating steps.
- I will say that the book is very clear. The authors make economic concepts intuitive for the reader. Given my level of exhaustion last week, I should picked a different book for the morning. However, I will say that the authors have me thinking about reading some of the more conservative economists (Like Hayek), so I can better understand the moral hazard issue.
Quick Thoughts:
- Tyler Cowen has a fantastic blog called Marginal Revolution where he pushed his book. I don't think I would have picked it up if it wasn't for that. I'm glad I did, because it changed my thinking on how I want to use the internet.
- The fundamental concept I took away from the book is that different forms communication suit different parts of our personality. I wouldn't have bothered to go active on twitter account without that (fairly obvious) insight. Here's more thinking on that on the Where's Wiebe blog (link).
- The author seems pretty obsessed with autism and its benefits. If that sounds counter-intuitive, he knows it. He actually spends the entire first chapter attacking the idea of autism as a disability and defending his own viewpoint. The basic idea is that autism is really a different way of dealing with information, which (depending on the level of autism) is particularly well suited to the internet. He builds on this idea through-out the book.
- Overall, the book feels pretty dis-jointed and works anyway. The author jumps from subject to subject. He spends half a chapter dissecting why people liked the Sherlock Holmes. Everything sorta holds together. I have to say that it kept the reading fun. You never really had idea what examples he was going to use to advance his arguments. He covers music, instant messaging, philosophy, and even alien life. Reading this book is like having a really great conversation with someone who is brilliant. The ideas just flow and things you wouldn't expect to hang together (Sherlock Holmes?) fit in with his points.
Quick Thoughts:
- This book is another blend of the ideas of behavioral economics with traditional economic analysis. It's a pretty quick read and I found it interesting.
- The major idea behind the book is that traditional economic analysis misses a lot and actually gets things pretty wrong. The authors present the idea that key concepts are not well understood by economists which really explain why the economy can get so overheated and so depressed. The concepts are confidence, fairness, corruption, money illusion, and stories. The authors devote a chapter defining each concept and how each affects the economy.
- OK, so the book feel a little mushy. The concepts are fairly clear and the authors answer several questions using them. But, it's hard to feel like this is an all-inclusive theory for economic behavior. One of the fun thing about economics is that it pretends to be so predictive with all of its fun charts and curves. These guys, fully aware of all the niceties, decide to take it down. I actually think they are right, humanity can't be fully explained with math, but I really do like pretty and predictive charts.
- I'm probably overstating things a bit. These guys are fully capable of using traditional economic analysis. They just want to overlay it with softer, less mathematical concepts. They mess with the models and show 'general' flaws. Rather than getting it exactly wrong, they strive to get the arrows pointed in the right direction.
- And they are very convincing. It's very helpful that they are writing in early 2009 when the entire world economy looked ready to fail. Their ideas make a great deal of sense in this context.
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Quick Thoughts:
- This is an older book, originally issued in 2000, updated and re-issued in 2005, and then re-issued with no substantial update in 2009. The timing for the 2000 and 2005 releases is pretty incredible given that the book is basically about stock market/housing bubbles. He warns that the markets are significantly over-valued. And he was right.
- What's really interesting about this book is how the author blends work on behavioral economics with finance. Students of finance are always introduced to the Efficient Market theory which is basically the idea that investors are rational and will make rational plays in the market. Frankly, its a core assumption for much of the hard mathematical work of finance. So this book takes finance and blends it with the core assumption of behavioral economics that people will behave irrationally.
- So you can guess where this going. Financial markets can and will behave irrationally. The author is pretty clear that we can't know the exact reasons for the creation of "bubbles", certainly not with mathematical precision. But, he does make it clear that certain behaviors repeated over and over again, make it a certainty that markets will become over-valued. He adds that once its realized by enough people, watch out below.
- The book does a good job of chronicling historical market run-ups and how they are treated by the greater investing public and the press. He also takes studies in behavioral economics and uses them to illustrate specific irrational aspects of market history. Then he has his own studies which he cites that very convincingly demolish the idea that financial market participants are fully rational in their trades.
- The book is definitely on the dry side. I'm lucky to be reading it on a commute with no significant distractions. I wouldn't make this beach reading. That said, I think the book's points are well taken and I'd definitely recommend it to anybody who is playing the investment game. His thoughts are excellent and should make you ask key questions about your investment strategy. It will also help to make you more aware of the forces in the overall market that can really damage your portfolio.
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Quick Thoughts:
- Excellently written, well argued, entertaining, and likely correct.
- I really enjoyed the way that the author blended in study after study to prove his case.
- Bottom-line. This book is well worth reading by anyone and everyone. He proves that the number of choices we have increases our discontent. The strategies that the author recommends for dealing with choices are well-thought out given the scope of the problem.
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Quick Thoughts:
- This is a quick and entertaining read.
- The author seems to believe that people are on the cusp of being extremely predictable. In some ways, he continues the the same assault on bell curves that was in 'The Black Swan'. He believes that we function by way of 'power rules' which basically mean that we do things in bursts (Hence the title of the book).
- I felt that the author was getting ahead of himself. The best evidence in the book came from his research into cell phone records. His team used them to see where people are when they make calls and found that they could predict (with an accuracy between 80% and 95%) where the person would be next.
- That sounds pretty impressive, and the author goes on to suggest all the positive/negative things people/companies/governments could do with this information.
- This seems about as accurate as predicting the weather. It really breaks down if you try to carry the prediction out over time. If patterns were static this kind of information would be very powerful. But patterns change all the time. People move, have kids, change jobs, meet new people, etc... Any of these life events can significantly change our movement patterns and completely screw up somebody's algorithm for predicting where people will be. Also, is 80% predictable a good algorithm? I think we're farther away from making good predictions than the author believes.
- I feel like the author confirmed, with data, what police detectives have known for awhile. If you follow a person, chances are they will go to the same places, on the same days, at the same times. If want to know where they will be, look at their history.
- The author blends the history of a failed crusade that resulted in lots of bloodshed. I'm not convinced that it helped his overall points about our predictability. I found the history lesson entertaining and a nice break from his research presentation. I kept hoping he would find some brilliant way to connect the two themes of his book (The history lesson with the research presentation). If he did, then I missed it.
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Quick Thoughts:
- This book felt LONG.
- The main idea in the book, that the bell curve is misleading and its reliance by all types of social scientists (economists, psychologists, financial experts) whom we rely upon, has left us more prone to improbable events that will definitely occur, is well stated. The first half of the book is a good read just to get the author's insights.
- At first, I found the author's completed disdain of journalists, historians, philosophy departments, pundits, and noble prize winners somewhat enjoyable. He writes from a position of superiority and lets the reader in on his viewpoint. But it got old. By the end of the book, the author felt like a know-it-all with a large chip on his shoulder.
- I'm not sure I can really recommend the extended version of the book that I read. The financial crisis of 2008 got the author a lot of attention. There is a section the original book (published in 2006) where he stated his opinion the banking system is weak and had the potential to blow-up. And he was right. But seriously, the additional section added in 2009, reads like an "I told you so". He comes across as arrogant and I found it annoying at best, condescending at worst. Sure, he's a smart guy. Sure, he's made a ton a money with his ideas. Does he have to gloat so much? Does he have to insult everybody all the time?
- In the end, I found that his complete confidence in his own viewpoint was an overcompensation for something. I just had no insight into what. I believe there is a baseline insecurity here that he is covering up.
- I'd only read this book if you wanted to experience what everybody else was talking about. Otherwise, I'd pass.
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Quick Thoughts:
- I have to admit, I was prepared to be disappointed in this book. The preface was written by one of author's colleagues and it seemed like the entire point was trying to make economics sound interesting. I do find economics interesting. So when you tell me that most people think its boring, but this book will make it interesting, I get concerned that the book is going to dumb it down, ironically making the entire subject uninteresting. So, my expectations were lowered.
- The introduction lowered my expectations further when the author made a pejorative statement about democrats. He quickly pivoted to another subject, but at this point, I didn't want to like the author. In fact, I almost put the book down. I was afraid that I had made a mistake and bought a piece of political propaganda. I didn't see myself sitting through 250 pages of being insulted.
- But, my fears were unfounded. It was actually a very entertaining and informative book about economics. The author covered lots of the fun issues like market success, market failure, the role of government, development economics, public goods, taxes, fiscal policy, international trade, and money supply. Really he hit the classical issues in a really common sense way. When he reached an issue that was normative, he would label it as such and then move on. Basically, he took many difficult and varied economic concepts and made them understandable without resorting to math equations and charts. That's fairly impressive.
- I picked this book as a counter to the popular behavioral economic books I've been reading. Instead, it was a good review of the concepts that I had during my college days.
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Quick Thoughts
- This book begins with the premise (that I agree with) that we are not entirely rational. Pretty easy thing to say. Then the writer show us how 'predictable' our irrationality can be. He's very convincing and cites much of his own research to demonstrate our predictability.
- The writing style is not technical and reads well. Often, the writer draws from personal experiences and analogies to connect the results of his experiments to his larger points.
- Some of conclusions are extremely interesting. A couple of points on cheating stood out to me. On average, people cheat when given the opportunity. But, they tend to only cheat a little bit. Unless you remind them of their honor (Like have them read the ten commandments) right before the opportunity to cheat presents itself. Then, they tend not to cheat. Strangely, people tend to cheat less if real (hold it in your hand - tangible) cash is involved but more if the cash is one step removed.
- The writer does get on a soapbox about the way thing should be and changes we (government/business) could make that would make society better. I wasn't sure I agreed with him on these points, but I was happy to read how he wanted the conclusions of his experiments to be used for the greater good.
- I'm wondering how his theories apply to groups of people. If a group has to make a decision, are they 'predictably irrational' as well? Most of the studies cited related to individual decisions. So I wonder if teams (corporations) wouldn't correct some of the faults of the individual.
Amazon
Quick Thoughts
- This is the 'how to make a better 401k plan for your employees' book. It's smart. They know that when people are faced with multifaceted decisions, they need help. But they demand that its better to give people as much choice as possible while leading them in the direction that they probably should be taking anyway.
- Tons of great studies and ideas for improving public policy. They are best when they are critical of existing programs (Like Medicare part D).
- At a certain point (late in the book), I think the authors got a little into their overall theory and started pressing it a bit too hard. I didn't really accept their ideas for public education and by the end of the book I felt like their ideas could be very difficult to effectively implement. That said, I'm pretty sure this book is why my firm offers a low-fee mutual fund that is time-stamped to automatically adjust the portfolio away from equities as I get closer to retirement.
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Quick Thoughts
- Lots of great case studies illustrate his argument that much of our thought processes and ability to make complex decision/judgments is from our sub-conscious mind.
- Found it much more interesting and well-supported than The Tipping Point.
- Loved the part on the war games for GWB's gulf war. The idea that one group could have so much information that they lost the ability to react effectively to the opposition carries a lot of weight. In my day job, I often wonder when we can stop the analysis and just take a read of our gut and make a decision.
- This a very quick read. The anecdotes are fun and memorable.
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Quick Thoughts
- Great history book on bank runs (and bank-like runs).
- Fun writing style. Uses easy to understand analogies to communicate difficult concepts.
- Has a great understanding of alternative viewpoints, their strengths and their weaknesses. Love the way he uses them to illustrate what he thinks are the true root causes of each crash.
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Quick Thoughts
- Neat vision on how information/change can make it's way through society.
- Great anecdotal examples.
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