- Technological Revolutions and Financial Capital
- Capital Returns
- Modern Monopolies
- How the Music Got Free
- Laws of Human Nature
- Debt’s Dominion: A History of Bankruptcy Law in America
- Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts
- The Coffee Trader
- Three Body Trilogy :
- Pattern Recognition
Technological Revolutions and Financial Capital did more to advance my understanding of the modern economy than any other book I read in 2018. Traditional economics treats sudden changes of technology as a separate exogenous factor. This mode of thinking is pretty much useless for anyone forced to allocate capital under uncertain conditions. In reality there is strong empirical evidence that financial markets and technology interact in repeated cycles . Carlota Perez shows the pattern in these cycles by breaking them down into Installation and Deployment Phases. She identifies four main parts of each technological cycle: Irruption, Frenzy, Synergy and Maturity. The book illustrates these patterns in the most important disruptions in economic history, including: the industrial revolution , steam engines/railways, steel/electricity/heavy engineering, automobiles/mass production, and information/telecom. Marc Andreesen hailed Technological Revolutions and Financial Capital as the single best book for understanding the software industry. Since software is eating the world, its probably also the best book for understanding any industry.
Capital Returns is about how competitive advantages change over time, and how changes in capital availability can alter industry dynamics. It covers a fund manager’s thoughts and activities from 2002- 2015, including periods of disruption and volatility in a variety of industries. Ultimately the book is about how mean reversion occurs and and impacts investors.
Modern Monopolies deserves most of the hype that it has received. Many business decision makers were schooled in “linear” business models, but the most valuable and disruptive businesses are platforms, business model that facilitate the exchange of value between two or more user groups, a consumer and a producer. This book covers how technology has enabled more platform business models, and what the implications are for investors and entrepreneurs.
How the Music Got Free tells the story of how streaming music and piracy upended the music industry. It also covers the story of how the MP3 format struggled to gain acceptance for many years before becoming ubiquitous. The contrasting attitudes and actions of the winners and losers in the story are an entertaining juxtaposition , and a useful case study. As a teenager I had been one of the early pirates, but was less aware of what was going on inside the old line music companies, and had not zoomed out to consider the broader industry implications.
Laws of Human Nature is an essential guide for understanding how people act and how society functions. It teases out key lessons from psychology along with successes and failures throughout history. Reading one Robert Greene book provides a reader with the benefits of reading dozens of business biographies and history books. It provides ideas for avoiding certain problematic tendencies in oneself and exploiting traits in others. Laws of Human Nature looks at the dark reality of patterns in thought and behavior that don’t conform to an idealistic rational expectation:
As long as there are humans, the irrational will find its voices and means of spreading. Rationality is something to be acquired by individuals, not by mass movements or technological progress. Feeling superior and beyond it is a sure sign that the irrational is at work.
Debt’s Dominion: A History of Bankruptcy Law in America, is a bit wonkish, but well worth the slog for the insight into the American bankruptcy system. Its easier to understand the subtle nuances of the bankruptcy process and navigate opportunities in the distressed debt market when I think about how the system evolved. Indirectly the book is also about the slow process of institutional change.
Thinking in Bets is basically a long essay on behavioral economics, with one valuable message. Under a plethora of entertaining anecdotes about professional poker it provides an immediately applicable framework for functionning in an uncertain world. Basically its a slightly less nerdy and less nuanced companion to Fortune’s Formula. It also fits in well with some of the more important behavioral finance books, such as…. Misbehaving, and Hour Between Dog and Wolf, Kluge, etc. (more notes here)
The Coffee Trader is historical fiction taking place in 17th century Amsterdam, when coffee was first brought to Europe and the modern concept of stock and derivative markets were just beginning to form. It tells the story from the vantage point of Miguel Lienzo, a small time speculator who must navigate complex social structures, and deal with shady counter parties and aggressive creditors and competitors while trying to get rich in a nascent market. He is also a Jewish refugee who fled the Portuguese inquisition but then struggles with overly conservative Jewish leaders in Amsterdam, who constantly threaten to shun him. Complicating matters further, he has a conflict with his brother, who is at the beginning a far more successful and respected member of the community.
The first person narration includes gems like this one:
There was no shortage of my kind in Amsterdam. We were as specialized as taverns, each of us serving one particular group or another: this lender serves artisans; that one, merchants; yet another, shopkeepers. I resolved never to lend to fellow Jews, for I did not want to travel down that path. I would not want to have to enforce my will on my countrymen and then have them speak of me as one who had turned against them. Instead, I lent to Dutchmen, and not just any Dutchmen. I found myself again and again lending to Dutchmen of the most unsavory variety: thieves and bandits, outlaws and renegades. I would not have chosen so vile a bunch, but a man has to earn his bread, and I had been thrust into this situation against my will.
Three Body Trilogy is a deep character study of humanity itself in the form of an epic science fiction story spanning multiple centuries. It ultimately focuses on the way people act in situations of duress and conflict, both within and between different countries and groups. The Three Body Problem starts slowly, opening during the Chinese Cultural revolution, and tells of the initial contact with alien civilizations. The Dark Forest explores the paradoxical alignment of incentives in high stakes inter galactic diplomacy. The ultimate conclusion for the future of civilization in Death’s End is pessimistic, but getting there is thrilling.
Pattern Recognition is a thriller set in the early 2000s that feels like a science fiction take on modern media. The protagonist is a branding consultant/corporate spook who gets sent on a mission to uncover the anonymous creator behind a series of video clips that have spawned an obsessive subculture of fans. She tracks people and clues down in London, Tokyo and Moscow meeting many bizarre and unseemly characters along the way.
As with all Gibson novels, the dialogue and descriptions are fantastic.
“Of course,” he says, “we have no idea, now, of who or what the inhabitants of our future might be. In that sense, we have no future. Not in the sense that our grandparents had a future, or thought they did. Fully imagined cultural futures were the luxury of another day, one in which ‘now’ was of some greater duration. For us, of course, things can change so abruptly, so violently, so profoundly, that futures like our grandparents’ have insufficient ‘now’ to stand on. We have no future because our present is too volatile.” He smiles, a version of Tom Cruise with too many teeth, and longer, but still very white. “We have only risk management. The spinning of the given moment’s scenarios. Pattern recognition.