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Kurosawa and the crisis

IP — Wed, 08 Feb 2012 07:00:52 +0000

MIT economist Andrew Lo had published a paper (41-page PDF available here) where he reviews twenty one (yes, 21) books about the global financial crisis. In search of common explanations and themes, he found confusion instead. “After each book, I felt like I knew less,” Mr. Lo told the NPR reporter whose article was highlighted by Tuesday’s Dealbook email. “For an academic, that’s a pretty frustrating feeling.” In his introduction to the paper, Mr. Lo highlights Akira Kurosawa’s Rashomon, a movie classic where two crimes are explained by four different people and no single vision can be ultimately extracted from their accounts. He calls this “multiple truths” and the implications of this to actually learning something useful from the crisis are very interesting.

There is, of course, always the choice of simplifying the matter and assume that risk “comes from not knowing what you’re doing”. If more people had followed this simple idea – from homeowners to Central Bankers – then past, present and future impacts from the crisis might have been less severe.

Follow-up: reading lists and the speed of light

IP — Thu, 24 Nov 2011 06:00:56 +0000

Not to be outdone by our recent post about reading lists, Booz & Co.’s Best Business Books 2011 feature is a sprawling selection of books covering Management, Economics, Marketing, Ethics and other business-oriented fields. Some of the books were already in our wish lists, others were pleasant surprises. There’s a 35-page PDF of the feature here, but it requires (free) registration. Inside we highlight the second follow-up.

Finally, it appears that the speed of light (as a limit) is indeed in question as recent studies were able to repeat the first experiment’s results. We’ll certainly hear a lot more about this in the near future, as there is still plenty of doubt. In the meantime, for those concerned with the state of a world in which not even the speed of light is a certainty, we suggest a further cause for concern: our degrees of separation, which used to be 6, are now down to 4.74, according to researchers from the University of Milan and Facebook. Yes, apparently Facebook has a research department.

Weekend reading

IP — Mon, 07 Nov 2011 05:00:31 +0000

Always great to be able to catch up on reading, or almost, and here are a few articles that caught our attention. First and foremost is “The man who inspired Steve Jobs“, about Jobs’ “hero”, Edwin H. Land of Polaroid. The parallels between both men are very interesting, as is the article’s “warning” to Apple from now on. Next: two reading lists and more.

The reading lists come one from Seth Godin and another from the Financial Times. The FT named “Poor Economics” its 2011 Business Book of the Year, but other finalists also look pretty interesting. In this page you can see how the process works, excerpts from all finalists and the winners of past editions. One of the 2011 finalists, Daniel Yergin’s “The Quest”, was reviewed recently in the New York Times. Mr. Yergin is the famous author of “The Prize”, about the “history” of oil – reviewed by the NYT in 1990 – while “The Quest” is about its “future”.

Last but not least, an article that says something we’ve been saying for a while, although they only apply it to “western sovereign debt”: that one should question the “risk-free” status associated with it. In this asset class’ case, it has regulatory implications that could have a huge impact. In summary, it’s generally OK for banks to assume ‘zero’ risk for a western sovereign bond, so it’s collateral for huge leverage for riskier assets, loans, trades etc. – what happens when this ‘safe’ part of your balance sheet isn’t safe anymore? You can check out our articles on the subject below:

Life without a risk-free benchmark – July 22nd, 2011

Beware of safe havens – July 29th, 2011

Don’t panic – August 9th, 2011

The “risk-free” conundrum – September 7th, 2011

Is high volatility the new reality? – September 14th, 2011

Economic “Genius” – a history

IP — Fri, 16 Sep 2011 10:00:59 +0000

Roger Lowenstein (author of “When Genius Failed”) wrote a very favorable review of Sylvia Nasar’s “Grand Pursuit: The Story of Economic Genius” book. Now Booz & Co’s Strategy & Business magazine has published a “Thought Leader” interview with her, 10 pages strong. Sylvia Nasar is famous for her book on John Nash, “A Beautiful Mind” (yes, the one made into a blockbuster movie). We haven’t read the book yet and suspect both “heroes” in general (interestingly, each reviewer had a list of ‘heroes’ missing from the book!) and the ascribing of too much importance to Economics – and risk it looking like a “hard” science. We respect it and it belongs to our mental models/ toolkits, but we prefer to seek the high quality companies and business models, with great and aligned managers and controlling shareholders, trading at a price that allows for significant margin of safety.

More reviews by the Washington Post, Fortune, Wall Street Journal (by James Grant of “Grant’s Interest Rate Observer”) and the Christian Science Monitor.

Great books and anti-libraries

IP — Tue, 28 Jun 2011 13:45:10 +0000

The Farnam Street blog has a great post today on “great books” – what this used to mean to the author, what it does now, and how to deal with the unread – the things you realize you don’t know yet and probably should. The exercise is a very interesting one, almost on a daily basis: what don’t we know that would be of the best possible use – and how to best seek out this knowledge? What do we know that isn’t helping or, worse, is actually getting in the way of achieving some sort of knowledge about what we need to know? And how does this evolve over time given one’s experiences and associations – are we to just go with the flow or should we proactively seek to close perceived gaps with some sort of strategic plan? We were immediately reminded of Umberto Eco’s Anti-Library, as described by Nassim Taleb in his book The Black Swan. Finally and while very different from the anti-library concept, we were also reminded of a post we wrote about anti-portfolios a while ago. As recognizing what you don’t know is an exercise in humility, so is recognizing and learning from one’s mistakes.

Reading list

IP — Tue, 12 Apr 2011 15:43:14 +0000

Books we want to read but haven’t yet: “Bismarck: A Life”, by Jonathan Steinberg, reviewed by Henry Kissinger in the New York Times. “The Origins of Political Order: From Prehuman Times to the French Revolution”, by Francis Fukuyama, reviewed in The Economist. Finally, this review about “Money and Power: How Goldman Sachs Came to Rule The World” by Willian Cohan actually made us want to revisit “The Partnership: The Making of Goldman Sachs” by Charles Ellis.

For historical purposes, here’s a link to the now-classic April 2010 Rolling Stone article on Goldman Sachs, calling it “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

Fun with David Einhorn

IP — Tue, 04 Jan 2011 16:01:54 +0000

That David Einhorn is a poker fan is not news, and his great book “Fooling Some of The People All of the Time” has been out for a while. We’ve discussed that and other “whistleblower”/ fraud” books here in March. But since there’s a new epilogue for the book, the DealBreaker blog did a fun interview with Einhorn over a few hands of heads up poker – a game about which the reporter didn’t know the first thing. That’s a lesson in risk management right there. You won’t find brilliant investment insights or killer poker tips, but if you haven’t yet read the book and this post makes you finally do it, we’ll be happy.

Where do good ideas come from?

IP — Thu, 30 Sep 2010 13:30:14 +0000

We love it when readers send us great material, and when they’re 16 years old we’re even more impressed. This video is a very well-crafted, 4-minute summary of and ad for Steven Johnson’s new book (same name as our post). There’s also an 18-minute TED talk (July 2010) that expands somewhat and exemplifies. In the TED video Mr. Johnson gets a bit more “pro-crowdsourcing”, in the sense that there’s an obvious trade-off between intellectual property protection vs. opening up to collaborative business models. His last example of how Sputnik’s success inspired a wave of innovations and the way he “closes the circle” in the end makes for a very entertaining presentation (in the “aren’t we all geeks?” sense). But this wouldn’t be a Buysiders.com post if we didn’t have a word of caution: as we’ve posted here almost a year ago, there are limits to crowdsourcing that should be minded before launching any type of “open” initiative.

Keep those ideas coming! E-mail us with your suggested links, texts and so on.

Book: The Curse of The Mogul

IP — Fri, 02 Jul 2010 16:54:15 +0000

Strategy & Business published a review for The Curse of The Mogul, which we’ve read recently. It’s a must-read for several reasons: media, capital allocation, competitive strategy and leadership. Not that we agree with Greenwald 100% – especially when he talks about telephone/cable as dumb-pipe winners vs. the lackluster future for content generators and aggregators (there is stuff/players missing there and you could think of some counter-examples). Chapter 2, on competitive strategy, is especially interesting.

That’s because it assesses the competitive strategy framework from a specific industry’s standpoint (always better than ‘generic speeches’) and it was useful for thinking about other industries as well.

The book was generated from the course Strategic Management of Media @ Columbia.

This article shares Mr. Greenwald’s view on media. We don’t necessarily agree with his view on the future of media, but it’s good food for thought and discussion.

Easter bonus: Michael Lewis

IP — Mon, 05 Apr 2010 00:26:16 +0000

Update (April 6th, 2010): Please see inside for Mike Burry’s op-ed in the New York Times ranting on the Fed (Greenspan specifically) for not seeing the crisis develop.

On tour to promote his book “The Big Short“, Michael Lewis interviews have been popping up all over the Internet. You can find some of the best inside. Required reading is this excerpt from the book at Vanity Fair’s website. Great stuff, we especially liked this bit: “I hated discussing ideas with investors,” (Mike Burry said), “because I then become a Defender of the Idea, and that influences your thought process. Once you became an idea’s defender, you had a harder time changing your mind about it.”

Have a great Easter Sunday!

UPDATE: Mike Burry wrote an op-ed in the New York Times recently on how he saw the crisis and why the Fed should have seen it too. We especially like this bit: “I demanded daily collateral settlement — if positions moved in our favor, I wanted cash posted to our account the next day. This was something I knew that Goldman Sachs and other derivatives dealers did not demand of AAA-rated A.I.G.”. Not only did he get the intellectual challenge right, but he also followed through quite well in terms of execution. Impressive enough, and all by himself.

VIDEOS

Bloomberg Television interview (42:37):

CBS’ 60 Minutes segments:

- Inside the collapse, part 1:

Watch CBS News Videos Online

- Inside the collapse, part 2:

Watch CBS News Videos Online

- Wall Street misfit (on Mike Burry):

Watch CBS News Videos Online

- The $8.4 Bi bet:

Watch CBS News Videos Online