BR 153: Flash Boys by Michael Lewis

Category: 3 – SHELF it (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments:  If you have any interest whatsoever on the financial markets, this book is a must read. If not, well, put it on your shelf. Michael Lewis’ books are like art – you’ll never tire of flipping the pages. He makes  a heavy financial book feel like a fascinating novel.

Top 3 Learnings:

1. Every time a new regulation is put in place, it creates an unforeseen set if market conditions that inevitably results in arbitrage by those looking to game the financial system. This sort of quick money scheme repeats itself – the housing bubble in the 80s, the credit default swaps in early 2000s and then high frequency trading in the late 2000s and perhaps now.

2. Such arbitrage causes billions of dollars to move from the pockets of investors to middlemen.

3. The behavior of the big Wall Streets bank is shocking. That’s not to say the people in these banks are bad. Somehow, the incentives and existing cultures result in horrible short term decision making. (I can’t help but wonder if the system of reporting earnings every quarter does more harm than good. It seems to drive short term thinking everywhere!

BR 152: The Hard Thing about Hard Things by Ben Horowitz

Category: 1 – Read ASAP! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: If you are, even in the slightest, interested in running a company of your own someday, this book is an absolute must read. This is probably the closest any book will come to being a “CEO how-to” manual.

It is a book I will revisit from time to time.

Top 3 Learnings:

1. Leadership is about 3 things – the ability to articulate an idea so people follow you (The Steve Jobs attribute), the ability to be ambitious for the team and not for yourself /to have the right kind of ambition (the Bill Campbell attribute) and the ability to achieve the results you articulate (the Andy Grove attribute) – I’ve never heard leadership spelt out as clearly.

2. The purpose of an organization chart is to facilitate communication. The closer people are on an organization chart, the more they will communicate. (Such a simple idea but one I’d never understood.)]

3. A few money quotes –

The amount of communication required in a relationship is inversely proportional to the amount of trust there is.
‘Managing by numbers is like painting by numbers. It is only for amateurs.’
‘The hero and the coward feel the same. They just do different things. People who watch you judge you on what you do not what you feel.’
‘Hire for strength, not for lack of weakness’
‘Embrace the struggle and remember – the hard things will always be hard things.’

Book notes here.

BR 151: Things a Little Bird Told Me by Biz Stone

Category: 3 – SHELF it (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: This book is another one of those really good books I’d recommend to anyone interested in technology. This is Biz Stone’s story and thus, in large part, his narration of important parts of the Twitter story.

It feels sincere and heartfelt and, that is, from what I’ve heard, what Biz Stone is all about.

Top 3 Learnings:

1. Opportunity is manufactured. As Biz Stone did not train in the traditional sports, he was well behind sporting level in his high school. As he really wanted to play sports, he started a high school lacrosse team. Since everyone who signed up was a beginner, he was on a level playing field and  had a great time.

2. Constraints are great. When Steven Spielberg was shooting jaws, he wanted to create a realistic model of a shark so they could film it attacking people for all the scary scenes. However, this was going to be very expensive and beyond their budget. Faced with this constraint, Spielberg had a new low budget idea – shoot it from the point of view of the shark under water.  And guess what? Way scarier!

Twitter did well with constraints as well, of course. 🙂

3. Pick opportunities based on what inspires you. Biz Stone lives this idea. He left university because he got an inspiring opportunity to apprentice in a creative agency. He then left Google even though he had millions of dollars worth of stock options to vest because he wanted to continue working with his former boss and friend, Evan Williams. It’s a great story and it obviously works out for him. But, the thing to note is his incessant positivity and his habit of zeroing on the things that really matter.

Book notes here.

BR 150: How an Economy Grows and Why it Crashes by Peter D Schiff and Andrew J Schiff

Category: 1 – Read ASAP! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: First, let me get the obvious out of the way – yes, this book isn’t perfect. It can be very simplistic at times and the writer does have a clear political agenda against the US government’s financial policy.

Now that I’ve said that, this book is a must read for everyone. I say everyone because we all deserve to understand how an economy works. The authors lay out the principles of economics and call bullshit on the idea that micro economics is essentially different from macro economics. They do it by taking us through the growth and crash of an island’s economy (and do this with lots of digs at the US-China relationship. The islands are called Usonia and Sinopia :))

Fantastic book. It points to a scary conclusion – the whole idea of a paper currency anchored in nothing but trust is a massive experiment and one that could result in mass default and failure.

Top 3 Learnings:

1. Why should a country be treated differently from a household? Why should a country be allowed to spend more than it makes (via taxes)?

The reason governments take on so much debt is because the economic policy is driven by political agenda. As a result, instead of taking the hard decisions and cutting public spending, the government always attempts to take the easy way out by printing more money.

2. Deflation is not a bad thing. Deflation means productivity is increasing and things are getting cheaper. This means it is time to allocate resources to new investments – the technology industry is a good example of this. The American economy was deflationary until the 1930s when Keynesian economists came along and said inflation is the way to go. This has resulted in economists insisting that inflation needs to be maintained. When you hear that, ask why.

3. American consumption has been lauded as a strength. Well, it is not. Production is a strength. Consumption is not. An economy’s strength is built on savings. It is because of savings that interest rates fall and allow for cheaper credit and cheaper investments. America is surviving on the fact that China is hugely invested in it and the fact that it’s currency is global reserve currency. Things could fall very quickly (ominous, I know)

 My summary of the full book is on The Bookbytes Project.

BR 149: Moneyball by Michael Lewis

Category: 2 – BUY it! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: Another Michael Lewis masterpiece. I saw the movie before I read the book. The book was really interesting. Many of the baseball terms and statistics went a bit over the head as I’ve never watched baseball. However, the story and insight were fantastic.

Top 3 Learnings:

1. Value is created when you understand market inefficiencies and exploit them. In the case of baseball, the whole player measurement system was flawed and based on the look of a player rather than statistics that actually contributed to the team. Billy Beane simply went ahead and used these inefficiencies to cause a revolution in the way players were scouted.

2. If you HAVE to do a deal, you are doing to pay too much for it.

3. My favorite insight was Beane’s approach of building a baseball team rather than a collection of players. For example, Beane and his team identified that a play off team needed to score 900 runs to qualify for the play offs (if I remember right). So, they went about building a team that would score the runs together building on each other’s strengths. Focus on the whole, not on the parts. Don’t replace players.. Replace their statistics with one or more players. Top draw insight!

Book notes here.

BR 148: Boomerang by Michael Lewis

Category: 2 – BUY it! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: This was a really good read. I have to say this about all Michael Lewis books. His books are a real lesson in writing. He really takes you on a journey with him and beautifully extracts the insight out of it. He doesn’t do many interesting stories and anecdotes. Instead, he runs a few stories in parallel bringing out a central theme or insight. Just fantastic.

Boomerang is about his travels in Europe following the credit crisis. He explores what Iceland,  Greece, Ireland and Germany did with the explosion of cheap credit.

Top 3 Learnings:

1. It’s hard to do the right things when conflicts of interest are afoot. Banks, for example, employed analysts who were supposed to give an unbiased view of the markets. However, in the case of Phil Werner, who predicted the Irish property bubble, this didn’t work in practice because Merrill Lynch’s angry clients were the banks who were behind the property bubble.

2. It’s amazing how quickly old financial institutions let go of traditions when a new upstart comes in with a ridiculous idea that seems to make money.

Anglo Irish Bank was that upstart. A property developer could practically walk in the morning and walk out by afternoon with 100s of millions of euros. Soon, all Irish banks had divisions which paid their staff based on the amount of money they lent (talk about bad incentives). Allied Irish even had a department called ABA – anybody but Anglo with salespeople focused on poaching anglos customer.

3.The effect of cheap credit had different effects in different places. Americans decide to use it to buy houses they couldnt afford. The Greeks decided to use it to fund a lifestyle that was definitely beyond their means. The Irish used it to buy more of Ireland from each other. The Germans behaved responsibly within but went crazy in enabling everyone else. In fact, the Germans were the ones who bought all crap assets until the very end. The followed the rules and took AAA rated bonds at face value to devastating effects

Book notes here.

BR 147: Alex Ferguson – The Autobiography by Alex Ferguson

Category: 3 – SHELF it (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: For some reason, Sir Alex Ferguson fell a bit in my opinion after reading this book. I am still in awe of the man’s ability and achievements and the relentless spirit that he possesses like many greats to keep winning. However, I felt like this book contained one too many pot-shots at ex-players, e.g. Roy Keane. While he asserts a couple of times that he doesn’t carry grudges, his actions seem to say otherwise.

No doubt an incredible manager who will go down as one of the greatest ever. I think he would have gone down as THE greatest ever if he had won another European cup.

Top 3 Learnings:

1. Pay attention to the little things. Ferguson and the United staff always paid detailed attention to a potential new signing’s family background, attitude, reputation and mental make up. He believed these signs were a very useful sign of success aside from what the player did on the field.

2. Focus on the infrastructure. Fergie invested incessantly into the United infrastructure – the youth team, the training facility, the medical facility, etc. These undoubtedly set the stage for generations of success.

3. Change is the only constant. He is one of those who truly understood the meaning of “what got you here won’t get you there.” Football teams work in cycles and he ensured he was constantly and proactively bringing change about. He was relentless – both after victory or defeat.

BR 146: Liar’s Poker by Michael Lewis

Category: 3 – SHELF it (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: Liars poker was a quick breezy listen about Michael Lewis 2 years at Salomon Brothers in the 1980s. He tells it as it is and walks away after 2 years at the end of which he’d made about 400,000 dollars just out of school.

The experience clearly had an impact on Lewis as he’s gone onto write about one Wall Street head fake after another calling for tougher action and more regulation on the industry. Interestingly, while he wrote this book intending to keep people away from investment banking, he revealed later that he received one thank you note too many from trader hopefuls who said his book really inspired him.

Not a book you get tons of specific insights from but definitely one that gives you insight into what still is a very sought after industry for its ability to make people rich.

BR 145: In the Plex by Steven Levy

Category: 3 – SHELF it (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments:  I really enjoyed the book. I find Google, as a company, awe-inspiring and this book gave great insight into why Google functions the way it functions by giving an insight into the genius that is Larry Page. Sergey Brin is painted as the dependable supporting act. It is a great read if you are a technology enthusiast.

We can’t all be like Larry Page. But, what I found amazing about him is that he is a learning machine. He has clearly learnt how to learn and goes on accumulating expertise and understanding of a broad array of topics. Great entrepreneurs demonstrate that ability – I’ve seen the same trend in the books about Jobs and Bezos. They were/are learning machines.

Top 3 Learnings:

1. Larry Page is exceptionally smart. That’s one of those things that just strikes you when you read this book. He is probably as high IQ as it gets and just thinks on a whole different level. To really understand Google, you have to understand Larry Page. Google is Larry Page’s machine learning project – he wants to shove as much information into this machine and then make sure they use it make humanity smarter/better.

2. Both Sergey and Larry built Google by constantly asking “why not.” Google has practically reinvented the idea of an office by making it similar to a lovely university dorm. Larry refused to have customer service staff and instead suggesting replacing it with support forums where users helped each other. They did their IPO differently, they did email differently –  by consistently asking “why not.”

3. A bit tangential – people fantasize about college drop outs who go on to become billionaires. It is telling that the billionaires who are talked about are drop outs from Harvard college (Bill Gates, Mark Zuckerberg), or in this case, from the top computer science P.hD program in the world at Stanford university.