10 Books That Take An Alternative View Of The Economy And How It Functions.
1. The Halo Effect: ... and the Eight Other Business Delusions That Deceive Managers
This tart takedown of fashionable management theories is a refreshing antidote to the glut of simplistic books about achieving high performance. Rosenzweig, a veteran business manager turned professor, argues that most popular business ideas are no more than soothing platitudes that promise easy success to harried managers. Consultants, journalists and other pundits tap scientifically suspect methods to produce what he calls "business delusions": deeply flawed and widely held assumptions tainted by the "halo effect," or the need to attribute sweeping positive qualities to any company that has achieved success. Following these delusions might provide managers with a comforting story that helps them frame their actions, but it also leads them to gross simplification and to ignore the constant demands of changing technologies, markets, customers and situations. Mega-selling books like Good to Great, Rosenzweig argues, are nothing more than comforting, highbrow business fables. Unfortunately, Rosenzweig hedges his own principles for success so much that managers will find little practical use for them. His argument about the complexity of sustained achievement, and his observation that success comes down to "shrewd strategy, superb execution and good luck," may end up limiting the market for this smart and spicy critique.
2. Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
If the prescriptions for getting rich that are outlined in books such as The Millionaire Next Door and Rich Dad Poor Dad are successful enough to make the books bestsellers, then one must ask, Why aren't there more millionaires? In Fooled by Randomness, Nassim Nicholas Taleb, a professional trader and mathematics professor, examines what randomness means in business and in life and why human beings are so prone to mistake dumb luck for consummate skill. This eccentric and highly personal exploration of the nature of randomness meanders from the court of Croesus and trading rooms in New York and London to Russian roulette, Monte Carlo engines, and the philosophy of Karl Popper. Part of what makes this book so good is Taleb's ability to make seemingly arcane mathematical concepts (at least to this reviewer) entirely relevant in evaluating and understanding everything from the stock market to the success of those millionaires cited in the aforementioned bestsellers.
3. Managers Not MBAs: A Hard Look at the Soft Practice of Managing and Management Development
"Conventional MBA programs train the wrong people in the wrong ways with the wrong consequences," states this academic and author, who here examines and proposes drastic change in our traditional form of management education. He believes MBA programs are schools of business that pretend to develop managers, and he addresses such issues as what can be done to develop managers in a serious educational process, offering a critique of MBA programs and an analysis of the practice of management itself. Mintzberg's recommendations include program changes, as well as his observations on faculty tenure, prima donnas, and entrenched thinking. He believes MBA programs have failed to develop better managers who should be improving their organizations and thereby creating a better society. This book offers an important perspective for the global MBA community, which serves its students, business, and society in general.
4. The Misbehavior of Markets: A Fractal View of Financial Turbulence
"...forty years after I started battle on the subject, most economists now acknowledge that prices do not follow the bell curve, and do not move independently. But for many, after acknowledging those points, their next comment is: So what? Independence and normality are, they argue, just assumptions that help simplify the math of modern financial theory. What matters are the results. Do the standard models correctly predict how the market behaves over all? Can an investor use Modern Portfolio Theory to build a safe, profitable investment strategy? Will the Capital Asset Pricing Model help a financial analyst, or a corporate financial officer, make the right decision? If so, then stop arguing about it. This is the so called positivist argument, first advanced by University of Chicago economist Milton Friedman."
5. The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street
Justin Fox has a great blog and writes for Time magazine, having previously written for Fortune magazine. So it was not a surprise that his book is well written and fast paced. Better yet, he has chosen to cover the most critical topic in all of finance: does the market correctly price stocks, bonds and real estates? In delivering a masterpiece he has either killed himself in thoroughly researching the subject or someone talented has directed him to all the right issues. He correctly dates the emergence of the efficient markets theory to the early twentieth century, then covers the contribution of Paul Samuelson, who is oddly enough always forgotten in any coverage about the efficient markets doctrine. He then goes through the sequence of Markowitz, Miller, Modigliani, Fama and Michael Jensen (an odd insertion indeed, since Jensen sweared by efficient markets theories but made his name emphasizing firm level inefficiencies, ones profitably eliminated by buyout funds, but whose profits would not be so impressive if the market could correctly price their coming contribution). He then introduces Richard Thaler and Robert Shiller, and thus downplays Amos Twersky and Daniel Kahneman, which is a failing of the book.
6. The Black Swan: The Impact of the Highly Improbable
If, as Socrates would have it, the only true knowledge is knowledge of one's own ignorance, then Nassim Nicholas Taleb is the world's greatest living teacher. In The Black Swan, Taleb's second book for laypeople, he gives a full treatment to concepts briefly explored in his first book "Fooled by Randomness." The Black Swan is basically a sequel to that book, but much more focused, detailed and scholarly. This is a book of serious philosophy that reads like a stand-up comedy routine. (Think Larry David...)
7. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
Economists, in pursuit of mathematical precision, seem to have forgotten that not everything can be easily counted. Traditional economic theory centers on the premise that people make perfectly rational decisions. People, however, are not so rational. Despite many attempts, not every variable that goes into our decision-making process can be easily quantified, weighted, and stuffed into a formula. As any non-economist knows psychology -- and its hard to measure variables -- plays a large role in how people make decisions.
George Akerlof and Robert Shiller's book, Animal Spirits, offers an accessible look at how traditional economics can be expanded by incorporating some basic concepts from psychology. The term "animal spirits," originally coined John Maynard Keynes in the 1930's, describes how impulses and emotions naturally lead to economic boom and bust cycles. Traditional economists seem to have ignored even the most primitive of these spirits.
8. Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street
Fortune's Formula is a fascinating study of the connections between such seemingly unrelated topics as gambling, information theory, stock investing, and applied mathematics. The story involves the stunning brainpower of men such as MIT professor Claude Shannon, who single-handedly invented information theory, the science behind the Internet and all digital media; Ed Thorpe; and John Kelly of Bell Laboratories, who developed the "Kelly criterion," a now-legendary investment strategy for maximizing growth while controlling risk. Initially, Shannon and Thorpe took Kelly's theory to Las Vegas and applied it to roulette and blackjack. Later, they took it to Wall Street and cleaned up--Shannon made a personal fortune while Thorpe created the highly successful hedge firm Princeton-Newport Partners. They both discovered that Kelly's system was particularly effective when applied to arbitrage (minute price differences that result from market inefficiencies). As Poundstone ably demonstrates, the merits of Kelly's criterion are still hotly debated today.
9. A Failure of Capitalism: The Crisis of '08 and the Descent into Depression
Posner (How Judges Think) is uncharacteristically dry in this dense book that states flatly that we are in a recession only because we are too frightened to call it a depression. He makes a near-heroic attempt to delve into the roots of the current crisis, citing some of the harder questions: how did it happen? why was it not anticipated? how is the government responding? A great deal of ground is covered, and the book takes the form of a high-altitude survey, assessing all the major points without getting bogged down in detail. Quickie explanations of subprime mortgages and the credit crunch orient the reader, and Posner addresses the takeaway lessons about capitalism and government, the puzzling lack of foresight from the economist community, the apportioning of blame and the resulting future of conservatism. All good topics, thoroughly and thoughtfully presented, but much of Posner's material is already woefully out of date. This book will make a serviceable study of the current crisis, but it does not serve its intended audience well in the meantime.
10. Outliers: The Story of Success
The main tenet of Outliers is that there is a logic behind why some people become successful, and it has more to do with legacy and opportunity than high IQ. In his latest book, New Yorker contributor Gladwell casts his inquisitive eye on those who have risen meteorically to the top of their fields, analyzing developmental patterns and searching for a common thread. The author asserts that there is no such thing as a self-made man, that "the true origins of high achievement" lie instead in the circumstances and influences of one's upbringing, combined with excellent timing. The Beatles had Hamburg in 1960-62; Bill Gates had access to an ASR-33 Teletype in 1968. Both put in thousands of hours-Gladwell posits that 10,000 is the magic number-on their craft at a young age, resulting in an above-average head start.
This tart takedown of fashionable management theories is a refreshing antidote to the glut of simplistic books about achieving high performance. Rosenzweig, a veteran business manager turned professor, argues that most popular business ideas are no more than soothing platitudes that promise easy success to harried managers. Consultants, journalists and other pundits tap scientifically suspect methods to produce what he calls "business delusions": deeply flawed and widely held assumptions tainted by the "halo effect," or the need to attribute sweeping positive qualities to any company that has achieved success. Following these delusions might provide managers with a comforting story that helps them frame their actions, but it also leads them to gross simplification and to ignore the constant demands of changing technologies, markets, customers and situations. Mega-selling books like Good to Great, Rosenzweig argues, are nothing more than comforting, highbrow business fables. Unfortunately, Rosenzweig hedges his own principles for success so much that managers will find little practical use for them. His argument about the complexity of sustained achievement, and his observation that success comes down to "shrewd strategy, superb execution and good luck," may end up limiting the market for this smart and spicy critique.
2. Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
If the prescriptions for getting rich that are outlined in books such as The Millionaire Next Door and Rich Dad Poor Dad are successful enough to make the books bestsellers, then one must ask, Why aren't there more millionaires? In Fooled by Randomness, Nassim Nicholas Taleb, a professional trader and mathematics professor, examines what randomness means in business and in life and why human beings are so prone to mistake dumb luck for consummate skill. This eccentric and highly personal exploration of the nature of randomness meanders from the court of Croesus and trading rooms in New York and London to Russian roulette, Monte Carlo engines, and the philosophy of Karl Popper. Part of what makes this book so good is Taleb's ability to make seemingly arcane mathematical concepts (at least to this reviewer) entirely relevant in evaluating and understanding everything from the stock market to the success of those millionaires cited in the aforementioned bestsellers.
3. Managers Not MBAs: A Hard Look at the Soft Practice of Managing and Management Development
"Conventional MBA programs train the wrong people in the wrong ways with the wrong consequences," states this academic and author, who here examines and proposes drastic change in our traditional form of management education. He believes MBA programs are schools of business that pretend to develop managers, and he addresses such issues as what can be done to develop managers in a serious educational process, offering a critique of MBA programs and an analysis of the practice of management itself. Mintzberg's recommendations include program changes, as well as his observations on faculty tenure, prima donnas, and entrenched thinking. He believes MBA programs have failed to develop better managers who should be improving their organizations and thereby creating a better society. This book offers an important perspective for the global MBA community, which serves its students, business, and society in general.
4. The Misbehavior of Markets: A Fractal View of Financial Turbulence
"...forty years after I started battle on the subject, most economists now acknowledge that prices do not follow the bell curve, and do not move independently. But for many, after acknowledging those points, their next comment is: So what? Independence and normality are, they argue, just assumptions that help simplify the math of modern financial theory. What matters are the results. Do the standard models correctly predict how the market behaves over all? Can an investor use Modern Portfolio Theory to build a safe, profitable investment strategy? Will the Capital Asset Pricing Model help a financial analyst, or a corporate financial officer, make the right decision? If so, then stop arguing about it. This is the so called positivist argument, first advanced by University of Chicago economist Milton Friedman."
5. The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street
Justin Fox has a great blog and writes for Time magazine, having previously written for Fortune magazine. So it was not a surprise that his book is well written and fast paced. Better yet, he has chosen to cover the most critical topic in all of finance: does the market correctly price stocks, bonds and real estates? In delivering a masterpiece he has either killed himself in thoroughly researching the subject or someone talented has directed him to all the right issues. He correctly dates the emergence of the efficient markets theory to the early twentieth century, then covers the contribution of Paul Samuelson, who is oddly enough always forgotten in any coverage about the efficient markets doctrine. He then goes through the sequence of Markowitz, Miller, Modigliani, Fama and Michael Jensen (an odd insertion indeed, since Jensen sweared by efficient markets theories but made his name emphasizing firm level inefficiencies, ones profitably eliminated by buyout funds, but whose profits would not be so impressive if the market could correctly price their coming contribution). He then introduces Richard Thaler and Robert Shiller, and thus downplays Amos Twersky and Daniel Kahneman, which is a failing of the book.
6. The Black Swan: The Impact of the Highly Improbable
If, as Socrates would have it, the only true knowledge is knowledge of one's own ignorance, then Nassim Nicholas Taleb is the world's greatest living teacher. In The Black Swan, Taleb's second book for laypeople, he gives a full treatment to concepts briefly explored in his first book "Fooled by Randomness." The Black Swan is basically a sequel to that book, but much more focused, detailed and scholarly. This is a book of serious philosophy that reads like a stand-up comedy routine. (Think Larry David...)
7. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
Economists, in pursuit of mathematical precision, seem to have forgotten that not everything can be easily counted. Traditional economic theory centers on the premise that people make perfectly rational decisions. People, however, are not so rational. Despite many attempts, not every variable that goes into our decision-making process can be easily quantified, weighted, and stuffed into a formula. As any non-economist knows psychology -- and its hard to measure variables -- plays a large role in how people make decisions.
George Akerlof and Robert Shiller's book, Animal Spirits, offers an accessible look at how traditional economics can be expanded by incorporating some basic concepts from psychology. The term "animal spirits," originally coined John Maynard Keynes in the 1930's, describes how impulses and emotions naturally lead to economic boom and bust cycles. Traditional economists seem to have ignored even the most primitive of these spirits.
8. Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street
Fortune's Formula is a fascinating study of the connections between such seemingly unrelated topics as gambling, information theory, stock investing, and applied mathematics. The story involves the stunning brainpower of men such as MIT professor Claude Shannon, who single-handedly invented information theory, the science behind the Internet and all digital media; Ed Thorpe; and John Kelly of Bell Laboratories, who developed the "Kelly criterion," a now-legendary investment strategy for maximizing growth while controlling risk. Initially, Shannon and Thorpe took Kelly's theory to Las Vegas and applied it to roulette and blackjack. Later, they took it to Wall Street and cleaned up--Shannon made a personal fortune while Thorpe created the highly successful hedge firm Princeton-Newport Partners. They both discovered that Kelly's system was particularly effective when applied to arbitrage (minute price differences that result from market inefficiencies). As Poundstone ably demonstrates, the merits of Kelly's criterion are still hotly debated today.
9. A Failure of Capitalism: The Crisis of '08 and the Descent into Depression
Posner (How Judges Think) is uncharacteristically dry in this dense book that states flatly that we are in a recession only because we are too frightened to call it a depression. He makes a near-heroic attempt to delve into the roots of the current crisis, citing some of the harder questions: how did it happen? why was it not anticipated? how is the government responding? A great deal of ground is covered, and the book takes the form of a high-altitude survey, assessing all the major points without getting bogged down in detail. Quickie explanations of subprime mortgages and the credit crunch orient the reader, and Posner addresses the takeaway lessons about capitalism and government, the puzzling lack of foresight from the economist community, the apportioning of blame and the resulting future of conservatism. All good topics, thoroughly and thoughtfully presented, but much of Posner's material is already woefully out of date. This book will make a serviceable study of the current crisis, but it does not serve its intended audience well in the meantime.
10. Outliers: The Story of Success
The main tenet of Outliers is that there is a logic behind why some people become successful, and it has more to do with legacy and opportunity than high IQ. In his latest book, New Yorker contributor Gladwell casts his inquisitive eye on those who have risen meteorically to the top of their fields, analyzing developmental patterns and searching for a common thread. The author asserts that there is no such thing as a self-made man, that "the true origins of high achievement" lie instead in the circumstances and influences of one's upbringing, combined with excellent timing. The Beatles had Hamburg in 1960-62; Bill Gates had access to an ASR-33 Teletype in 1968. Both put in thousands of hours-Gladwell posits that 10,000 is the magic number-on their craft at a young age, resulting in an above-average head start.
posted by UncommonBusiness at 4:02 AM
<< Home