Too Big to Fail by Andrew Ross Sorkin

Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System is an in depth look at the credit crunch from the time that Bear Sterns was bought by JP Morgan (it does not cover this in any great detail) to the introduction of the bail outs for the major US Banks.

This book is the most in depth look at the near collapse of the financial system in America (although it briefly touches on the impacts on the international financial system) and is the most in depth look at a financial crises since the 1990's classic Barbarians at the Gate which dealt with the takeover of RJR Nabisco.  It is written in a similar fashion as well - it looks at the crises from each individual bank CEO and senior management as well as regulators and investors. 

What Sorkin has attempted to do in this book, and does so amazingly effectively, is look at the financial crisis from every viewpoint so that we the reader understand what was going through the minds of decision makers when important decisions were being made (whether they were the right or wrong ones at the time).  It was a mammoth task and one that few books previously have emulated.

The necessary trade off for the amount of detail required is that this book takes a seriously long time to read if you are following all the detail.  I like to think that I am a rather quick reader however this book took me a very very long time to finish.  I enjoyed every moment of it. 

The beauty in a book like this is that most of us know the highlights - Lehman's fails, Morgan Stanley and Goldman Sachs become bank holding companies, AIG, Fannie Mae and Freddie Mac are effectively nationalised, the banks are bailed out etc etc.  Therefore we are not reading to see what happens but rather HOW it happens.  In this way the detail is not too much - we are reading for the detail, for the thought processes and for the insights that this book gives us into the way that CEO's, regulators and law makers think.

Because this book is not pushing one point of view or another, but rather going through a series of events, and these are from the view of the professionals involved in it it may seem like it is very much pro business and does not tackle the underlying flaws in the system.  But this book is not meant to preach - it is giving insights into what actually happened - not what should have happened.

Pros

• The level of information that author has been able to get from interviews etc is truly amazing - if you want the detail behind the effort to save Wall Street then this is the book for you
• It is not biased at all - you actually

Before you buy with Amazon...c​heck out these two sites

I think almost everyone would realise how much money they can save when buying books online rather than in store.  The price difference is really astounding (the discount is often well above 50%) and the books are rarely out of stock (compared to going into your traditional book stores which actually have to physically stock the book.  It is no surprise therefore that many book stores are going out of business.

When we think of an online book store most people automatically think of Amazon and why not?  It was the first on the scene, it's prices are consistently low and it's reputation for shipping things on time is unbeatable.  However, especially for people outside the US and UK (where the big amazon stores are based) there are other options which you should consider.  The big problem with Amazon is that the shipping charges for customers outside the US and UK are really quite high which makes their books much more than the sticker price that you see.  Here are two other options you may want to consider

1. Book Depository

Book Depository was originally started as a UK site and it's big selling point was that it charged no shipping for customers ANYWHERE in the world.  Even if the book was slightly more expensive on book depository you could save a lot of money on shipping.

In 2011 Book Depository was acquired by Amazon but they kept the free shipping angle.  This means that you get Amazon's great price, service and range but do not get charged shipping at all. 

For some reason the prices do differ between Amazon and Book Depository so it is always worth checking both sites (remembering to including the shipping charges on Amazon's site) to see which gives you the better deal.

2. Fishpond.com.au

Fishpond is a site dedicated to Australians and New Zealanders who often pay the highest shipping charges from Amazon.  Like Book Depository, Fishpond does not charge shipping fees to customers located in Australia or New Zealand.  It is not Amazon however which means it's processes are not as good.  Often I have found that their ordering system means that I've had to wait an extra 2 - 3 weeks for a book to arrive (but on the upside occasionally I'll get two books instead of just the one). 

One of best aspects of Fishpond which they do not advertise (but really should) is that if they have a book in their warehouse you can pay $0.50 extra and get it within 2 - 3 days.  For Australian and NZ buyers this is almost unheard off as Book Depository and Amazon typically take a few weeks to deliver anything to Australia.  They tend to keep a lot of popular titles in their warehouse and for a nominal amount more you can get it much quicker.  I LOVE this aspect of Fishpond which is why they are normally my preferred site.

Always check all three before you buy
I ALWAYS check the prices on all three sites before I buy.  The prices vary a surprising amount between sites and you can really save quite a bit of money if you are an avid reader by going to all three before you buy.

Do you know of any other good websites to buy books?  Are there other country specific sites which you would like to share with people?  Please post below if there are.

The Big Short by Michael Lewis

The Big Short by Michael Lewis, author of Liar’s Poker, is a well researched, although obviously biased, look at sub-prime debt crisis and the factors that led up to it.  The book has been on several best sellers lists and for good reason – it is the best book that I have read on the topic and is interesting even if you do not know anything about CDO’s, subprime debt, the US housing market and all the other factors that led to the crisis.

Although the book primarily focuses on the hedge funds (including a fund that was seeded by Joel Greenblatt, author of You Can Be a Stock Market Genius which was been previously reviewed on this site) that saw the crisis coming and made significant money out of it, Lewis also looks at the other players in the market including the buyers of the mortgage backed securities, the buyers of the credit default instruments, the investment banks that were pedalling the goods to everyone and the ratings agencies who were probably the reason that the whole thing came undone.

The strength in The Big Short is on Lewis’ ability to distil quite complex products and topics down to rather simple explanations of how they work and the relative pros and cons of either side of holding the product.  Also I liked how Lewis broadly arranged his books into time periods and then looked at that particular time period from every angle (i.e. pre-crisis when no one realised there was a problem, when people started to realise the issues, when the crisis became public knowledge etc)

As a last point of note, when I read this book I read it from the perspective of an investor (as that is what I do for a living).  However I was chatting about it to investment bankers who really focussed on the failings of their business model and incentives.  Again when chatting about it to those who have nothing to do with the financial industry the focus was on how the system failed.  There are so many different ways to interpret the lessons from this book and it all depends on the perspective you are reading it from.

Pros

The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb

The Black Swan is all about being aware of those things that we don’t know, can’t predict and which are likely to have a large impact on our lives (what Taleb calls the ‘Black Swan’ event).   This book will change the way you think about the world and the way in which it operates.   It covers a broad range of topics all attempting to prove Taleb’s central idea that the future is unknown, any attempt to predict it is inherently flawed as the next big thing to influence our world (e.g. the computer, the internet, September 11) are all inherently unknown.

This book has lessons for everyone but is especially interesting for investors and those interested in finance generally.   Among the broad variety of topics covered some of the most interesting are:

·         Forecasts are inherently flawed (especially over the long term) – how can you tell what is going to happen in 20 years time when you have no idea what innovations are going to take place in that time? (i.e. an example that the book uses is that in the early 1990s US government departments were using long term oil prices of $27 a barrel as a forecast assumption).  Also note the impaction the above has for temperature prices in the context of global warming (or climate change as it is now called)

·         Statistical inference from past events is also flawed as it does not consider the effects of the high impact unknown event.  To illustrate this Taleb uses the example of a turkey that is fattened up every day for its whole life – the turkey will assume that based on the last 1000 days of its experience it should be fed into the future (and we all know what happens around thanksgiving).  I found this particularly interesting especially when you view this idea in light of what happened to Long Term Capital Management (see my review of When Genius Failed here)

·         Modern finance is steeped in the idea of the bell curve which is based on a set of quite restrictive assumptions and historical experience – six sigma events are relatively common in finance markets (more than should statistically be the case anyway) and investors should not the probability of these at all times

·         So much of life (and financial success) is largely a matter of chance, however if you put yourself in chances way (i.e. those areas which have limited downside but are in the right spot to benefit from a positive black swan) then you are more able to take advantage of the black swan

Given the amount I obviously enjoyed the ideas in this book you may be wondering why I gave it such a (relatively) poor rating.  The reason is simply that this book needs to win some sort award for rambling and straying off topic.  I got bored and frustrated at this book putting it down at least 10 times before I could be bothered going back to it again.  The book feels like no one read it over before they hit print. 

Book Review: What they don't teach you at Harvard Business School by Mark McCormack

What They Don’t Teach You at Harvard Business School is a book of business wisdom and lessons by entrepreneur and businessman Mark McCormack, founder of IMG – the most successful sports management company in the world. The lessons are short, flow easily and have McCormack’s own experiences sprinkled through so that the reader can see the lessons in action.

Oftentimes people interested in business and finance read autobiographies of successful businesspeople (e.g. Richard Branson’s Losing My Virginity) in order to try and extract the underlying reasons for their success and in order to gain insights in how we can improve our business dealings.  The benefit of What They Don’t Teach You at Harvard Business School is that you don’t have to sift through hundreds of pages of someone’s childhood, education and life story in order to find these messages.  Mark McCormack has laid these out for the reader in a simple, easy to read and follow format.

Although this book was written in the mid 1980s its principles are timeless.   If there weren’t constant references to sportspeople of yesteryear the reader would be hard pressed to realise that this book was not printed in the last decade.  I could not find a single tip, or bit of wisdom that was clearly outdated and irrelevant and that alone speaks to the quality of this book.

The book is broken into three main sections:

·         People: Reading people, Creating impressions, Taking the Edge, Getting ahead;

·         Sales and Negotiation : The Problems of Selling, Timing, Silence, Marketability, Negotiation; and

·         Running a Business: Building a business, Staying in business, Getting things done, For Entrepreneurs only

Pros

·         Easy to read, simple principles which should stand the reader in good stead in their business career

·         Doesn’t try and appeal to all people.  E.g. many business writers have I have read suggest that everyone should try and be an entrepreneur and it is the best way to get ahead.  McCormack says that 99% of people shouldn’t start their own business and goes through all the wrong reasons to start a business (including the desire to make a lot of money)

·         One of the most appealing things about this book is that McCormack first gained his success in business and then wrote a book in order to share his wisdom with the rest of us.  Too often business authors are known for their books rather than their business acumen.

Cons

·         Leaves the reader wanting much more information for almost every topic that he talks about.  The concepts are great but I wish there was more detail.  E.g. In the section on negotiation McCormack says to use emotion to your advantage when the other person displays it first and then does not go on to explain or give an example of how this can be done

Overall

·         What They Don’t Teach You at Harvard Business School is a great book for those who are looking to improve the way they do business, interact in the workplace and sell to clients and customers

·         The book is full of lessons, tips, skills and wisdom that everyone can apply (although it is very management orientated). 

·         While I wish there was more information on each of the topics – this is a book that every manager, business person and entrepreneur (or those who hope to be those) should read.

Book Review: The Intelligent Investor by Benjamin Graham

The Intelligent Investor is one of the most well known and most recommended investment books ever written – and with good reason. Written by Benjamin Graham this book summarises and distills the lessons that Graham and Dodds taught in their epic text-book like work Security Analysis. Warren Buffett is probably the most well known disciple of the value investment philosophy (see my review of The Essential Buffett) however there are many more value investors out there who all use this book as the foundation for their investment style.   I believe this is a must read book for all investors.

For those who don’t know, value investing is all about buying companies that trade at a significant discount to their intrinsic value and waiting for the market to realise this discount. It relies on the fundamental valuation of companies and demands a ‘margin of safety’ for any purchase (to prevent against the risk of valuation error on the investors behalf).

The version I reviewed was the one with commentary by Jason Zweig however I found his commentary no value to the original text (it was the cheapest on bookdepository which is why I originally bought it – I didn’t realise however that he would replace the original footnotes with his own and relegate Graham’s to the end. In hindsight I would have bought the more expensive copy with no commentary).

I believe that, although the last version of The Intelligent Investor was written in the early 1970s, this book is still the best book out there for those looking for a foundation for their investment style. It provides sufficient information and guidance that the reader can go out and start applying the lessons learned straight away and it gives step by step examples of what the investor needs to do to make ‘abnormal profits’. The book is also good in that it acknowledges that not everyone wants to spend the time doing this – it therefore steps through what the investor who does not want to spend hundreds of hours trawling through Annual Reports, 10-Ks, 10-Qs, management commentary and industry research should do.

The book flows logically and the reader is never confused about the point Graham is trying to make. I normally try and summarise the lessons learned from the book but this book is simply too dense.  Below are the chapter headings which should give you an idea of what is covered in the book::

• Introduction: What This Book Expects to Accomplish
• Chapter 1: Investment versus Speculation: Results to Be Expected by the Intelligent Investor
• Chapter 2: The Investor and Inflation
• Chapter 3: A Century of Stock-Market History: The Level of Stock Prices in Early 1972
• Chapter 4: General Portfolio Policy: The Defensive Investor
• Chapter 5: The Defensive Investor and Common Stocks
• Chapter 6: Portfolio Policy for the Enterprising Investor: Negative Approach
• Chapter 7: Portfolio Policy for the

Book Review: Freakonomics by Steven Levitt and Stephen Dubner

Freakonomics was the hit book that brought economics and economic theory to the masses in an interesting, witty and oddly trivial fashion.   The book is a great read for those who are new to economics as it is easy to read and simplifies economic theories quiet well, and it is an eye opener for those who have studied traditional economic theories in the various applications that it can take.

The primary author of the book is Steven Levitt, a chaired professor of economics at the University of Chicago.  He is probably best described as an empiricist who uses his economic background to answer interesting (though sometimes seemingly trivial) questions.  In Freakonomics he uses economics to answer a wide variety of questions including:

• What do schoolteachers and sumo wrestlers have in common? (They sometimes have very strong incentives to cheat – and evidence shows that they often do)
• How is the Klu Klux Klan like a group of Real Estate Agents? (The power of information is on their side)
• Why do drug dealers still live with their moms?
• Where have all the criminals gone? (Probably the most controversial point in the book.  Levitt argues that the fall in the crime rate in the US has a direct link to the introduction of abortion in the 70s.  Personally I don’t subscribe to this view though his use of data is compelling)
• What makes a perfect parent? (What child rearing strategies have an impact on grades in later life)
• How does naming affect children in later life?

As mentioned previously the topics covered above seem rather trivial and are probably not going to win Levitt a Nobel Prize any time soon.  However for a light read on a weekend or if you’re really looking for some real life application of economics then this is a great book.

Pros

• Easy to read and understand.  There is no complexity here and Levitt and Dubner have gone to significant effort to ensure that most readers can understand what they are trying to say.
• Easy to put down and pick up again at a later point.  You can read this book in one setting or simply pick it up and read an odd chapter – there is no prior knowledge assumed anywhere in the book

Cons

• The topics covered are generally pretty trivial.  You will not learn anything that you can apply in your life however economics is generally like that so perhaps we should not be surprised.

Book Review: Damn it feels good to be a banker by Leveraged Sell Out

Damn It Feels Good to Be a Banker is a satirical look at the Wall Street lifestyle.  It is written by “Leveraged Sell Out”, who in the book poses as a Princeton undergraduate student who went into banking and then onto the buyside in a private equity roll.   On his blog, leveraged sell-out confessed that he actually never worked as a banker, but actually roomed with a couple of bankers and drew his observations from his time.

This is the type of book that you will either love or hate.  You will HATE it if you have no idea about the Wall Street culture that the book is satirising. However if you have ever worked in an investment bank (of any sort) or been involved in finance or even have friends who are involved in finance in any way you will get some of the references.  On the other hand if you have worked or work as an analyst at an investment bank this book is a hilarious take on the industry (and the ‘posers’ within it).

The book is broken into 5 rough sections:

·         Business: deals with what investment bankers do (along with all the misconceptions and elitism that goes with it)

·         People: deals with the schools investment bankers recruit at, recruiting, women in banking, diversity and front office versus back office roles

·         Culture:  deals with fashion, reimbursement policies, culture in central offices versus regional offices

·         Entertainment: what bankers listen to / read / enjoy doing in their spare time

My summary above somehow makes Damn It Feels Good to be a Banker seem like the perfect book to get an idea of what investment banking is.  It most definitely is not.  Actually the only people who think being an analyst at an investment bank is anything like this book are college students who are desperate to live the ‘models and bottles’ lifestyle (see link to the Wall Street Oasis and pick any thread where it is mainly college kids talking about why they want to get into Investment Banking to get an idea). 

If you read this book (and do not work in the industry) please keep in mind that it is a satire!  If you do work in the industry Damn It Feels Good to be a Banker is funny, arrogant and cocky look at the industry which will keep you laughing right through the book.

Pros

·         Hilariously funny

·         Damn It Feels Good to be a Banker actually verbalises (in a satirical fashion) some of the underlying prejudices

Book review: The Adventure Capitalist by Connor Woodman

The Adventure Capitalist is a fun and entertaining read that takes us back to the basics of trade.  You will not find any mention in this book of housing markets, stock markets and Wall Street.  Instead Connor Woodman attempts to answer the question:  can an individual get out there and start trading in goods in the international marketplace and make a decent profit?  The reader rides the highs and lows with author as he seeks to answer this central question. 

Through the author’s adventures the reader discovers the answers to many more questions including: Is it possible to buy camels in Sudan and then take them to Egypt and sell for a profit?  Can you really buy wine in South Africa and then ship it to China or is the market too young (and snobbish)?  And will tourists in Mexico buy inflatable surfboards made in China?

This book will not provide you with the knowledge to get out there and start making money, nor does it have any ‘special formula’ for success and we found that to be the books greatest strength.  We, the reader, discover that there is no great secret to the business of international trade – you need to do your research and more importantly just get out there and make your mark on the world.

Pros

ü  Interesting and

Book Review: Rich Dad Poor Dad by Robert Kiyosaki

Rich Dad Poor Dad is a book by Robert Kiyosaki that attempts to teach the reader the strategies learned from his ‘rich dad’ on his journey to riches.  On the front cover of the book he makes a big promise – he promises to teach the reader “What the rich teach their kids about money – that the poor and middle class do not”.   For a book that had reached the number 1 position on the NY Times Bestseller list, I found that this book did not achieve what it set out to do and there were very few (if any) strategies or lessons that the reader could take away from reading the book.  I would rate this book 0.5 / 5.0.

Normally when I summarise a book at the start of my review I try and identify the overarching theme of the author and then bullet the supporting topics they use to discuss this.  I found this exceptionally hard to do with Rich Dad Poor Dad.  The general idea throughout the book seems to be that it’s not the readers’ fault that they are not rich – the government, employers and bad education system are all biased against them.

I started writing specific examples of what I thought this book did wrong but then I kept finding more so instead I have summarised the thing that I found most distasteful about this book.  Instead of dealing with facts, figures, strategies, studies and investment techniques (as any book on investing should), Kiyosaki preys on the readers inherent biases and misconceptions (that the government, employers and a lack of education is the reason they can’t get ahead).   While this rhetoric is certainly appealing it is not what a book about investing and personal finance should contain.

Pros

ü  The book seems to motivate some people to go out and get further education in order to improve their financial well being.   This seems rather strange given that most people would have bought this book for the very same reason

ü  Has basic tips like ‘spend less than you earn’ and ‘pay yourself first’ which are great ideas but certainly not ones that you would buy a book on

Cons

û  Does not do what it sets out to – this book does not teach an average person a single lesson that the rich would teach their children

û  Not a single investment strategy in the whole book.  While the book is full of anecdotes of how Kiyosaki purportedly has made

Book Review: Pitch Anything by Oren Klaff

‘Pitch Anything’ by Olen Klaff is a book which has a big claim on the front cover: “An Innovative Method for Presenting, Persuading and Winning the Deal”.   I’m a big fan of books that clearly set out what they intend to cover in the book and then spend the whole book covering it and this book is one of those - I would rate this book 4.5 / 5.0. 

On the first page Klaff sets out his aim in the book:

“There is a fundamental disconnect between the way we pitch anything and the way it is received by our audience.  As a result, at the crucial moment, when it is most important to be convincing, nine out of ten times we are not.  Our most important messages have a surprising low chance of getting through.  You need to understand why this disconnect occurs in order to overcome it, succeed and profit.  This book tells you how”

The basic premise behind the book (as I read it) is that in order to be successful a pitch needs to be ‘simple, clear, nonthreatening and above all intriguing and novel’.    The formula that Klaff is summed up by the acronym STRONG:

• Setting the frame
• Telling the story
• Revealing the intrigue
• Offering the prize
• Nailing the hookpoint
• Getting a decision

The book covers several topics including:

• The theoretical and psychological basis for the method
• Frame control
• Status
• Pitching the big idea
• Frame stacking and hot cognitions
• Eradicating neediness

The greatest strength of this book is that it gets right the balance of providing background, instructions, examples and evidence of how the different techniques work.    It is worth a read for the reader who is looking for a different technique to pitch or simply for those looking to be more effective in their commercial dealings.

Pros

ü  Sets the book’s premise in a

Book Review: The Essential Buffett by Robert G Hagstrom

The Essential Buffett is a book which attempts to simplify and explain the life, teachings, investment philosophy of Warren Buffett – the world’s richest investor.  The book is a cross between a Warren Buffett biography and a ‘how to’ book on focus investing.  I would rate this book 3 / 5.

Topics covered include:

• A background to Warren Buffet including a biography of the man and his most visible investments; 
• The theories and individuals that influenced his development as an investor;
• The criteria and method that Buffett uses to choose his investments; 
• The theoretical basis for focus investing; 
• Evidence of others who use focus investing; 
• The emotional side to investment ; and 
• Applying the principals of focus investing beyond the scope of what Warren Buffet invests in

Writing a book (especially one less than 300 pages) that covers all these topics adequately was always going to be a challenge for any author and while Hagstrom does a reasonable job in ‘The Essential Buffett’ the reader is left feeling that there is a lot more reading that they need to do before they are able to apply any of what Buffett does.

This book is suited to those who are beginning their investment journey and are seeking an investment framework that works for them.  It covers a lot of in depth concepts at a very high level – those who have already embraced the concept of Focus investing are best placed to look elsewhere for more detailed books on methodology. 

The core lesson from this book is that investing should be able core value – are you getting a good deal (and not paying too much) for what the underlying business really is?  The author provides very strong (albeit unintended from his point of view) evidence for this.  The book was written prior to the tech bubble bursting in the early 2000s and it attempts to provide a value investing analogy to invest in technology stocks.  In hindsight we see that the principals of value investing hold true in all sorts of markets while attempting to extend the philosophy to new concepts and ‘fads’ without proven earnings rarely yields the same returns.

Pros

ü  A good high level book for beginners in the value investing philosophy

ü  Does not attempt to make the

Book Review - Liar's Poker by Michael Lewis

Liar’s Poker is a fantastically written expose on Salomon Brothers, the powerhouse of sales and trading in the 1980s.  A cross between an autobiography and a contemporary history of the bond markets and Salomon’s place within them, the book gets to the heart of what it is to be a trader. I rate this book 4 / 5.

Lewis begins Liar’s Poker with his experience getting recruited into the firm and his experiences with the training programme.   He explains his experiences in trying to get recruited into a corporate finance (i.e. investment banking) job without success in a chapter aptly named ‘Never Mention Money’.   Lewis then walks the reader through his experiences in the Salomon training programme (though it was a bit strange that he dedicated the same amount of time describing this as he did his actual experiences on the trading floor). 

There is then a slightly awkward shift in the book to a history of the mortgage trading department at Salomon Brothers, the most profitable section on the trading floor at the time (though this seems to be contradicted in Roger Lowenstein’s When Genius Failed which gives the honour to The Arbitrage Group).   While the history of the mortgage trading department becomes fascinating as you keep reading through it (3 chapters), there is a real disconnect with the first section of the book. 

Liar’s Poker then, almost as suddenly, jumps back to Lewis’ experiences on the trading floor and his experience going ‘From Geek to Man’ and the information and insights contained from this chapter to the end of the book are what truly make this book a standout.  Lewis discusses many of the issues and problems that he saw while working at Salomon Brothers including:

·    The willingness of a multinational firm, and indeed at the time one of the bastions of Wall Street, to sacrifice clients and their well being in order for an inexperienced salesman/trader to get experience

·    The inherent conflicts of interest within a firm that deals with both external clients as well as on its own proprietary account

·    The politics of making money, including the need to constantly defend ones turf on the trading floor

·    Compensation: why

Book Review - Monkey Business: Swinging Through the Wall Street Jungle by John Rolfe and Peter Troob

Monkey Business is a funny, outlandish and surprisingly honest insider’s look into life as a junior investment banker.   For any junior investment banker who reads this book, you will be able to relate to 90% of this book straight away and for any student who is considering pursuing an investment banking career (undergraduate and MBA alike) this book offers insights and warnings about the life you are letting yourself in for.  I rated this book 5 / 5.

The book follows a chronological timeline of Rolfe and Troob’s journey through their associate investment banking career at DLJ (since acquired by Credit Suisse) from the MBA and recruiting processes, through the summer associate program to life as a full time associate and then their experiences leaving the investment banking world.

What this book does particularly well is strip away the hype and the mystery surrounding investment banking including answering

·         What does a junior banker actually do?

·         How does the investment banking hierarchy work and what role each level play (from the analyst monkeys, to the Cro-Magnon man associates, to the processing robot vice president and above)?

·         Why do investment bankers get paid so much?

·         Why is turnover so high at investment banks and when do you decide to leave?

Some aspects of the book are a little dated including the now irrelevant word processing department (which typed up the handwritten documents) and to a lesser extent the production

Book Review - When Genius Failed: The Rise and Fall of Long Term Capital Management

When Genius Failed is a comprehensive look at the amazing rise and fall of one of the most noted and hyped hedge funds of all time.  This book severs as a warning to all investors about the risks of leverage and hubris.   I would rate this book 4.5 / 5.0.

Long Term Capital Management (“LTCM”) was a fund set up by the superstars of finance including the rainmakers from Salomon Brothers (then the premier Wall Street trading firm) as well as stars from academia including Robert Merton and Myron Scholes.   LTCM was considered absolutely foolproof by investors, Wall Street counterparties as well as the fund managers themselves. 

When Genius Failed is broken into two sections: The Rise of Long Term Capital Management and The Fall of Long Term Capital Management which provies an in depth look at the founding, funding, operating and eventually the fall of LTCM.  The book provides a spectacular amount of detail on a range of topics including:

·         The rise of John Merriwether (who famously challenged John Gutfreund to a single hand of Liar’s Poker for $10m as described in Michael Lewis’ Liar’s Poker) and the unlikely team of academics that he hired into Salomon Brothers’ trading floor

·         What a hedge fund is and the prevalence of these at the time LTCM was formed (though the book does not spend too long on pointless filler unlike Liar’s Poker)

·         A basic overview of LTCM’s arbitrage strategies as well as the theoretical basis behind these.  One of the great revelations of the book was how these brilliant minds, who must have known the shortcomings of their models and theories, were lulled into a false sense of security that their models could never fail

·         The inherent secretiveness of LTCM and their ability to play the investment banks off against each other in order to get better terms

·         The greed shown by the managers of the fund which eventually contributed to their own personal downfall and bankruptcy

·         LTCM’s move away from convergence strategies into much more risky areas including merger arbitrage which was well outside the managers experience

·         The collapse of Russia and the total dislodgement of the market for risk including the flight to risk in the market which was catastrophic for LTCM

·         The attempts to re-capitalise and save LTCM and the eventual deal that was pieced together by the banks in order to save the financial system

While this book is not written for

Book review: Who Moved My Cheese by Spencer Johnson

‘Who Moved My Cheese’ is a short (should take you no more than 30 – 60 minutes) parable like book about dealing with, and embracing change.  I would rate this book 3 / 5.

At the core of the book is a short story about two mice and two mice sized humans who live in a maze and have to find cheese every day.  When the cheese in one location runs out the story has the mice run off in look for new cheese while the humans complain and bemoan the fact that there is no cheese left in them.  The story has one human slowly embracing the need for change while the other is too scared and stubborn to change.

This book is not necessarily about business but about change generally.  To emphasise this point the author includes a post script to the story where group of friends are chatting about the lessons they took from the story with some applying the lessons to their career, business and even relationships.

‘Who Moved My Cheese’ is written very simplistically (sometimes overly so) but by keeping it as a parable the reader finds it easy to apply the lessons in the story to their own life.  The reader is

Weekend Warrior: Book reviews on Journey to 90 Million

I thought I would post a quick weekend update to let readers know that I have decided to close down the Investor Book Review website (per my previous post on when to give up on an unsuccessful business) but there was a lot of good information there so I have decided to transfer those posts to this website over the next few weeks.  Any further books I review will also go on this website.

I have also added advertising for the best (in my opinion) book websites (amazon, book depository and fishpond).  Each of these has its own benefits and downsides but using one of them will almost always be the best option so I encourage people who are interested in the books I review to follow all of the links before buying one as there is often a meaningful price difference.

When to fold an unsuccessful business idea

Last year I started book review website (Investor Book Review) as a site which I hoped to build up into a resource which people could use (for free) to read reviews on investment and business related books because there were so many books out there and there was no site which gave feedback for this.

It was not strictly a 'business' in the strict sense of a trading for profit business but it is something I hoped I could build up and eventually monetise.  However after several months of virtually no traffic and a whole lot of effort (it takes some serious commitment to even upload one review a week as you need to read, digest and distill often quite complex books in a short period of time) I stopped putting in the required effort on the site.

I let the website sit for a couple of months though as I mulled over whether to give it another go or whether to scrap it altogether.  Matters came to a head a few days ago when I received my renewal notice from my web hosting provider.  Letting the site was one thing but shelling out more cash for it was another.

This made me consider the issue of when should you fold an unsuccessful business idea?  There are a couple of obvious scenarios and some which are less obvious

1. When you are losing money
2. When you are putting in a lot of effort and not making money - your time is valuable too!
3. When it becomes a headache for little benefit.  Starting a business is not easy and you should expect headaches along the way but if there is no return on the horizon it is time to re-evaluate your options

Before you fold your business you need to:

• Give it a sufficient amount of time to get off the ground - killing it quickly because of a lack of immediate response is short sighted
• If you are not enjoying yourself give yourself time for the 'bad period' to pass.  There is no use being in a business or even in a line of work for that matter if you hate waking up in the morning and committing to it
• Work out how much it is going to cost you to close down your business.  Often there are rules / guidelines you need to follow depending on your jurisdiction.  This is especially true if you have offered warranties on products or if your personal reputation is on the line for something you have provided or already sold.  For an Internet based, information business like a blog this is not something which is really an issue
• Save any intellectual property you have created.  For my book review website I am going to take down those posts and re-post them on this website (which as an aside I actually enjoy updating a whole lot more and have had reasonable traffic through since I started it)

The issues involve get much more complex (and emotional) the longer you have been involved with the business, the more things you have given up for it and if you have employees which you feel obligated too.  There are lots of things to consider and it should not be done on a whim.  If you have any other tips for people looking to close down a business please add them below.

Investor Book Review - Damn It Feels Good to be a Banker

I have finally uploaded my latest book review to my Investor Book Review website. Check it out:

Damn It Feels Good to be a Banker by Leveraged Sell Out

Once again this site seems to have 'fallen through the cracks'. I think there are a few reasons for this.

1. I am devoting much more of my time to this blog and tracking my personal financial journey
2. In my new job I am finally 'doing what I want to do' and am involved in investing decisions and research every day so my desire to read books on the subject has been somewhat limited
3. The last book I started reading 'Guns, Germs and Steel' has defeated me in a way that very few other books have. I find it really interesting though extremely dense so I can really only read one chapter at a time (compared to other books which I just fly through)

Anyway hopefully I will be able to find more books to write about in the near future. I may even tackle some technical books which I actually use more frequently but are not for your 'average punter'

Investor Book Review - What they dont teach you at Harvard Business School

See my latest investing / business book review of Mark McCormack's "What they Dont Teach You at Harvard Business School"

As an aside, I haven't updated my book review site for investing books for almost 6 months. I was warned that the hardest thing to do with a website, especially a blogging one was to keep it up to date. While I do that with this site relatively often, Investor Book Review has somehow fallen through the cracks over the last 6 months. The one advantage I have is that book reviews dont really get stale so it does not necessarily need to be updated from week to week.

I have 3 more book reviews already written so look out for them over the next few weeks