Older Reading Pile

1) Liar’s Poker by Michael Lewis (1989)

From Wikipedia: “~ is a non-fiction, semi-autobiographical book by Michael Lewis describing the author’s experiences as a bond salesman on Wall Street during the late 1980s. […] The book captures an important period in the history of Wall Street. Two important figures in that history feature prominently in the text, the head of Salomon Brothers’ mortgage department Lewis Ranieri and the firm’s CEO John Gutfreund.”

Favorite Quotes:

Every ego has its price.

He said that every decision he has forced himself to make because it was unexpected has been a good one. It was refreshing to hear a case for unpredictability in this age of careful career planning.

My Take: The book is insightful and well-written. Michael Lewis is very good at balancing intricate technical nuances with his more autobiographical narrative part. Lewis wanted the book to be a warning sign to many would-be-traders, but while it was a book which described the era quite nicely, it actually had the opposite effect. Instead it was an advertisement.
Link(s): The 18 Most Iconic Scenes From ‘Liar’s Poker’

2) The Big Short: Inside the Doomsday Machine by Michael Lewis (2010)

From Wikipedia: “~ is a 2010 non-fiction book by Michael Lewis about the build-up of the housing and credit bubble during the 2000s. It describes several of the key players in the creation of the credit default swap market that sought to bet against the collateralized debt obligation (CDO) bubble and thus ended up profiting from the financial crisis of 2007–2010. The book also highlights the eccentric nature of the type of person who bets against the market or goes against the grain.”

Favorite Quotes:

The rebellion by American youth against the money culture never happened. Why bother to overturn your parent’s world when you can buy it and sell off the pieces?

Those who can’t get a job on Wall Street get a job at Moodys, as one Goldman Sachs trader-turned-hedge fund manager put it.

Eisman had a curious way of listening; he didn’t so much listen to what you were saying as subcontract to some remote region of his brain the task of deciding whether whatever you were saying was worth listening to, while his mind went off to play on its own.”

My Take: It’s more critical of the financial crisis than Andrew R. Sorkin‘s book Too Big to Fail (you can find a short review by moi here) and I highly recommended it as a complement for it. Lewis shows why banning short selling is often so important for a market to function properly. If anything we might need more and not less of them. Like in Liar’s Poker, Lewis is at his best when he describes people and their intimate thoughts and reasoning. It makes this book very enjoyable and fascinating.
Link(s): NYT review, WP review

3) Fooled by Randomness by Nassim N. Taleb (2001)

From Wikipedia” ~ is a book that deals with the fallibility of human knowledge.”

Favorite Quotes:

I do not dispute that arguments should be simplified to their maximum potential; but people often confuse complex ideas that cannot be simplified into a media-friendly statement as symptomatic of a confused mind. MBAs learn the concept of clarity and simplicity – the five-minute-manager take on things.

This is one of the many reasons that journalism may be the greatest plague we face today – as the world becomes more and more complicated and our minds are trained for more and more simplification.

My Take: It is a much less formal book than for example Daniel Kahneman‘s Thinking, Fast and Slow. In a typical Taleb-esque manner the book edgily describes how humans live and thrive in lies and overconfidence. They misinterpret chance for skill, simple luck for ability.

At the same time he’s saying that their behaviour lies in our nature. We are wired to see patterns in randomness and to attribute causality to correlation. Sadly, the sole knowledge of these deficits does not allow one to turn these influences on/off. One can merely acknowledge them and try to be self-aware enough, so to curb their effect on one’s actions and thoughts. These hopefully produce better outcomes than (further) indulging in our faults and mistakes.

One of its strongest points is that it was written before the financial crisis. Taleb was aware of the hybris of many traders and bankers, who did (or do?) not properly understand the probability and statistics involved in the system or turned a blind towards the dangers because they profited from it.
Link(s): Andrew Gelman’s review


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