Thursday, 24 May 2012
The book’s conclusion is that each industry has started out chaotically with many different companies employing rival standards and establishing their own network. However eventually a large company or small group of large companies has arisen to dominate each industry. These larger companies often offers lower prices, higher quality services or universal service which attracts consumers. However the result of this is the formation of monopolies which ultimately inhibit the creative process. The dominate monopolist will use a variety of methods to inhibit anything that threatens their position such as patients, buying rivals, pricing to remove competitors or surpressing innovations that threaten their core market(an example is AT&T discovering but surpressing the Answerphone).
The monopolisation matters as the result is that a small group have control of the “master switch” that determines the flow of information. The trends the author highlights are then applied to the new internet technologies and the relate to the patient wars that are currently being thought in the mobile phone/internet arena.
The author argues that there is a cycle effect as new technologies emerge which disrupt the existing industries or regulators break them up. A new cycle of consolidation then commences. The book draws on the ideas of Schumpter’s “Creative Distruction”, arguing that the collapse of old monopoly spurs innovation.
I enjoyed the history of film making which has become increasingly high risk, so failures can bring down film studies. Films have increasingly adopted strategies to mitigate that risk,
1. Vertical integration – buying cinemas in order to guarantee a market for films. Regulators have broken up the older Hollywood studio system and forced the studios to sell of their cinemas.
2. Sequels and remakes, this gaurantees a market for fans of previous versions and reduces the risk of developing new intellectual property
3. Films also have a longer product lifecycle, with revenue from sales of DVDs, to television and video game ties ins.
4. Merchandising, especially for children’s films or comics.
5. Establishment of smaller studios owned by larger studios that develop low cost, high risk films.
6. Finally some studies are owned by large conglomerates who can stand the risk of large losses.
A possible flaw in the book is assuming that the Master Switch is as possibly going to matter as much in the internet age. It is fair easier for media owners to censor television, radio or film that YouTube. YouTube and Facebook offer close to zero cost of content creation and distribution, resulting in too much content for any Master Swith owner to moderate. The only way it could be done would be to limit the form in which people can publish their information, but it seems hard to see how that can be “closed down” without user migrating elsewhere.
Tuesday, 22 May 2012
In terms of structure the book follows to imaginary people, Harold and Erika, following them from Harold’s birth to his death. Oddly the events always take place in the 21st century, which gives it a rather unusual feel. The characters are bright and generally lead successful upper middle class lives. Despite the title neither character seem to lead especially social lives. Harold’s influences are his parents and a teacher. Erika is influenced more by a people she meets as she strives to climb the corporate greasy pole. Friends and family of the characters do not feature.
The author believes that:
1. The unconscious mind is far more important in our decisions than we realize.
2. Emotions are bound up in reason and motivate and influence even our most rational thought processes
3. That we are learn from institution and relationships and these have a profound impact on us
The book therefore argues against the model of human beings that are seen to be rational decision makers as in simple economic models. It aims to replace older models of human behavior with deeper, more subtle modesl. However the book suffers as the science is rather weak. There is nothing especially original, and there are better books on aspects of behavioural economics, evolutionary economics and psychology. The author attempts to bring lots of themes together, but it all lacks rigour. There probably is a gap in the market for a book that analyses how people make decisions and the science behind it, but this book falls somewhat short.
A big problem for me is that the main characters are rather dull and the stories of their lives are not especially compelling. If this were a novel it would be a rather tedious one. They don’t really help to draw out his key insights, rather they seem to pad out the word count. The continual setting of the book in the present day makes it hard to suspend disbelief. Finally the characters are not really embodied in any culture or social group and seem to live successful middle class lives, largely on the basis of the fact they are quite intelligent and make good decisions.
Saturday, 5 May 2012
This book broadly argues that whilst
stock market investing promises high returns – either via funds or
directly the truth is that in reality the returns for the normal
investor have been disappointing. There are a few reasons for this: -
- Fees – individual investors have to pay an array of fees. These include bid/offer spreads, stamp duty, professional fees for brokers and advisors, dealing costs, etc. It is not easy to assertain these costs as they are not really clearly disclosed.
- Psychological Costs – individuals make mistakes on when they trade often being sucked into rising markets and selling when the pain of falling markets is too low.
- Surviorship Bias- this is a direct cost, but more the reported returns of stock exchanges to include only the winners. Because the losers dissappear they are not included in the average returns(as the data can only include shares that exist at the beginning and end of a period being considered). A similar argument applies to funds as poorly performing funds are closed.
The author believes these costs will
total about 6% per year, the costs being broadly similar whether an
individual invests in funds or individual shares. The funds seem to
be based on “actively managed funds” rather than passive funds
which track an index, these in theory offer lower costs.
The author reconsiders another form of
investing which is simply to use money held in cash accounts such as
building society rates. He believes that the returns from equities
are usually based on money market rates rather than the rates
available to high street savers. The savers rates are often loss
leaders and often exceed money market rates by a significant margin.
For those who wish to invest in shares
the advise is to drive costs as low as possible and avoid the urge to
churn a portfolio too often. The author also seems to advise that
investors ought to have some sort of strategy and stick to it. These
ventures into the territory of looking at charts and trying to spot
trends, the author only seems to consider this anecdotally and it is
a weak part of the book in my opinion. I don't believe there is much
evidence that this kind of analysis works.
The final section of the book looks
briefly at the future of the industry where the author sees the
investment industry entering a period of disintermediation –
predicting a decline in IFAs, fund managers and an era of lower
costs.
Friday, 4 May 2012
An
interesting idea for a book. It claims we can deduce much about a
person from their living or working space.
The book starts by detailing the big five traits of psychology
The book starts by detailing the big five traits of psychology
Openness - how willing you are to experience new things
Conscientiousness - organisation
Extraversion - outgoingness
Agreeableness - how much you like other people
Neuroticism - worrying
The book goes on to argue that you can read clues about these traits from people’s living space. However mostly it is on merely two of these traits. If a person is open they are likely to have a wide range of books and if a person is very tidy then they are likely to be conscientious.
In many ways the book seems to argue that snooping might not be so useful. In general people tend to underestimate context(except with regard to themselves), and the book argues it is hard to deduce much from a few cues. For example, a messy person can tidy up or certain items can belong to other people or company policy might change the way a person’s desk is set up, etc. And things such as music tastes or drinking tastes are less important than we imagine.
The big problem with this book is that it obvious that conscientious organised people are likely to have organised personal spaces and open people are likely to have interesting reading material. This book counsels against making big deductive jumps, but that rather limits the scope of snooping. Snooping can be quite good at determining gender and the attractiveness of people (by the photographs of their partners).
The book is quite long as the author goes into various anecdotes about experiment he has done with college students. It is actually quite interesting, although I found myself a bit disappointed at the end of the book to discover that there aren’t really a set of rules that turn us into super snoopers and that in practice it is not such a good way to find out about people.
I enjoyed this book, but it is a bit of a guilt pleasure kind of book than on that will change lives or offers much in the way of deep insight.
Saturday, 28 April 2012
The central thesis of this book is that
people determine how they vote based on emotions rather than cold,
logical thinking. The candidates that do well need to tell stories
that inspire people and link in with the candidates beliefs. To win
elections to some extent requires a triumph of substance over form.
The book outlines this central thesis
and then uses examples of how Republicans have already done this in
debates and illustrates how a Democrat should respond, by creating
hypothetical responses. The author regards the Democrats as being too
considered with policies that generally bore or do not connect with
an electorate. While the Republicans have stronger narratives that
appeal to the people. Republicans are also more prepared to fight
dirty, and this makes them appear stronger. An example is John
Kerry’s unwillingness to fight when George Bush's criticism of his
Kerry's war record. In theory as a decorated veteran this ought to
have been a clear win for Kerry, but instead Kerry tried to rise
above it and so appeared to have something to hide or to be weak.
The impression is that Democrats need
to be nastier, the author does not have a problem with negative
campaigns, especially if they are retaliatory. This is in part
because not to respond does not raise a candidate up so much as make
them seem weak and unable to respond.
Much is made of the way Republicans
have hijacked language. An example would be a term such as "tax
relief" which seems to have a positive impression, the fact
these are often limited to a few executives is ignored. The Democrats
need to have simple narratives that are clearly described in every
day language and using stories that connect with electorates lives.
This book is interesting and highlights
the ideas that much of how we vote is based on how we feel about a
candidate rather than a rational analysis of their points. The book
is very US centric, and the same doesn't apply in other countries, as
many issues such as abortion and gun control are not so contested.
Tuesday, 24 April 2012
This book is a study of genius and what makes some people very high achievers.
The author's conclusion is that genius
is that genius is not something iniate, an intelligence or gift that
a person is born with. Rather it is something that is developed. High
achievers often seem to have first mover advantages getting an
initial lead that means they build more experience and are that
little bit better than those that just miss out. So it is not so much
that genius are unique as born in the right place at the right time.
He invokes a 10,000 hour rule which is a rule of thumb which states
that you are likely to be expert at anything if you devote that much
time to it. Often the number of spaces at the top(or in the team or
industry or group) are limited. Those who are the first to get 10,000
hours of football in, or hockey, or computer programming will become
the elite. Those who get their second will never be able to catch up.
This explains why many of the founders of the large computer
companies are the same age(they got the 10,000 in first), why
footballers tend to have birthdays clustered around certain
months(those in certain months get picked for the most game and why
the Beatles dominated pop music(they got thousands of hours playing
in Germany and Liverpool).
There is an interesting chapter which
looks at the history of air crashes and how different societies lead
to different interactions between pilot and co-pilot. Cultures where
subordinates are able to criticise their superiors have better safety
records as co-pilots are actually able to overrule their pilots. The
point is presumably the culture is a key driver in human activity. I
found this rather fascinating, although it almost seemed like it
could be built into another book.
A criticism of the book is that often I
do not feel the author actually proves his point. It is still
plausible that some geniuses have some innate advantage. He seems to
pick a few anecdotes that do back up his argument. But on the other
hand it seems his books are often designed to encourage you to think
about things in a slightly different way. I suspect that even the
author is not discounting natural intelligence or an individual’s
hard work, but arguing that environment is important too.
Saturday, 21 April 2012
This book analyses the last century of
the Western Roman empire. The fundamental thesis is that it was not
the direct influence of the Huns or internal divisions in the Roman
empire that lead to the collapse of the empire.
Instead the impact of Rome on the
border regions lead to those societies becoming more sophisticated
and politically unified. In the first and second century the Roman
empire was vastly richer than the less civilised Germanic world.
Indeed the beyond the edge of the empire was territory it was not
economically viable to conquer(being far removed from the
Mediterranean trade routes). The Germanic tribes were politically
divided into many small groups. This individual small groups were
unable to trouble the Roman empire, except by low level raiding. The
Germanic armies were not professional soldier and lacked iron
weapons, armour and training. This allowed the Romans to often win
battles even when outnumbered by more than five to one.
The centuries that followed saw the gap
between the Roman world and Germanic world narrowing. Trade and
warfare between the two saw the Germanic world becoming more advance.
The Germans gradually acquired more weapons and armour through trade
and acting as mercenaries within the Roman empire. Meanwhile the
various tribes fought to get closer to the Roman border which was a
source of wealth. This saw a gradual consolidation into larger
political groups.
The Romans were unable to simply
address the threat presented by the Germanic tribes as they faced a
rising empire to the East(Persia). They struggled throughout the
period to defend their borders and to raise their tax rates to a high
enough level to pay for an enlarged military. However they did manage
to contain the Persian threat, although they were not able to defeat
Persia decisively.
Germanic tribes from the start of the
fifth century crossed the border and settled in Roman territory,
initially some were accepted to assist in battling other groups. War
with Persia distracted Rome from the issue. Eventually the sheer
number of non-Roman within the empire lead to revolts and breakaway
kingdoms that reduced the Roman tax base and so size of the
professional army. This made it harder and harder to fight back and
reunite the empire. The empire unravelled surprisingly quickly as
North Africa, Spain and France fell became separate kingdoms.
The role of the Huns was indirect in
that there rise forced the Germanic tribes into the Roman empire to
escape their advance. But the Huns were numerically too small to
destroy the Roman empire, and ultimately lacked the political
organisation to survive and so did not establish a successor state to
the Roman empire. Instead the Western world of the dark ages was then
dominated by the political confederations of Goths, Alans, etc that
began to cross the border in the 5th century.
Thursday, 19 April 2012
argues the case for cities. The major advantages of cities are that:
1. Cities allow intelligent people to congregate within a relatively small geographic area. Because lots of different skills can be found within cities there is a tendency for knowledge cross pollination.
2. Cities allow economies of scale in entertainment facilities (theatres, museums, restaurants, etc). This allows them to offer rewards to their citizens.
3. Cities are environmentally friendly as a major source of environmental damage is transportation and space usage. Cities can build upwards and use less space and transportation can better be managed on foot or via public transport.
The author provides some evidence that cities dwellers are more prosperous and that higher rates are associated with higher national incomes.
This book does consider that cities sometimes decline, either as a result of environmental shift or government policies. The cities of the USA have shifted over time. This was due initially to the movements associated with the opening of land to the west and changes in the size of boats which required larger harbours. The rustbelt of the USA is due to cities that were overly focused on single industries that have subsequently declined, such as the automobile industry or steel. The author recommends that rather than try to fight the decline with grand public works such cities should have a managed decline with empty buildings being demolished, and funds should follow people rather than buildings.
The book is largely free-market in approach, although it does see a role for government that goes slightly beyond getting out of the way of business. It is argued that governments ought to provide a decent infrastructure and public goods, as things like sanitation can only really be dealt with on a large scale. In general the tone of the book is that governments ought to focus on doing a few things well.
The book then looks at “suburbanisation” which is the trend for large sprawling cities that are common in the South of the USA. These are car based, decentralised cities built on cheap land. The appeal of these cities is their lower cost relative to the more centralised, older cities. They also offer better education and more space which makes them more appealing to young families. The book does not regard this as a positive trend as it increases environmental damage from transport (and also air conditioning required as these new cities are in very hot regions). The blame for this is placed on planning regulations which prevent older cities from building up in skyscrapers and force inner city land values high.
The book ends up asking if the cities in China and India end up as sprawling cities with the related environmental damage of being car powered, or if they will be skyscraper based and rely on lifts and public transport.
Monday, 16 April 2012
Unconventional Success: A Fundamental Approach to Personal Investment
is written by the head of Yale endowment fund.
Like “Smarter Investing” this is no “get rich quick” guide to investment book, it differs from that book in that it is focused on USA rather than the UK. The book similarly advocates investors hold a diversified portfolio - generally preferring government bonds, property and stock market trackers. Investors are advised to avoid the high fees associated with the active investment fund management industry. Where the book is strongest is in examining agent-principle issues. This occurs when the investors aims differ from the managers of the asset or their owner.
Developed World Shares - The management are supposed to be operating for the benefit of shareholders and are often remunerated to increase the returns to shareholders.
Government Bonds (Gilts) - Generally government lend to their own citizens and so are broadly neutral. In developing countries most Gilts are held domestically and in a democracy default is very unlikely.
Company Bonds – Interest payments on bonds are a cost for companies and so they will seek to minimise them. There is a downside risk of default and complex contractual arrangements that can allow bond issues to buy back Bonds if interest rates fall, but unlike shares the potential upside is limited. This leads him to prefer Gilts.
Property - Investments in commercial real estate which have a predictable revenue stream (like bonds) and a residual value at the end of the lease. This makes them operate a bit like a cross between Bonds and Shares.
Developing World Shares – These offer potentially returns are higher, but political factors may limit potential for shareholder as returns are diverted to workers, governments or managements.
He recommends avoiding asset classes where the cost of information are too high for private investors – such as high yield bonds(junk bonds), private equity, hedge funds and asset backed securities. These do tend to form part of his professional portfolio, but he has more resources to evaluate these asset classes than a private investor. A problem with this is that much of his returns are generated from these assets as the high barriers to entry presumably offer the potential for higher profits.
The book argues that professional advisors suffer from a severe agent-principle issue. These professionals as agents seek to maximise their fees. The structures of the industry mean there is often little incentive for these to be aligned with the interest of investors. The result is complex and overly large fee structures (“Where are the Customers’ Yachts?” as another book asks).
The writing feels like it is written by an academic economist and the issues are considered rigorously. What it does not do is offer much in the way of example portfolios or concrete advice for the UK investor. Instead it is more a call to be careful on costs and consider how the interest of the person issuing or managing an asset is aligned with the interest of investors.
The author also guest lectures on the Yale finance lectures with Robert Shiller, this is available from iTunesU.
is written by the head of Yale endowment fund.Like “Smarter Investing” this is no “get rich quick” guide to investment book, it differs from that book in that it is focused on USA rather than the UK. The book similarly advocates investors hold a diversified portfolio - generally preferring government bonds, property and stock market trackers. Investors are advised to avoid the high fees associated with the active investment fund management industry. Where the book is strongest is in examining agent-principle issues. This occurs when the investors aims differ from the managers of the asset or their owner.
Developed World Shares - The management are supposed to be operating for the benefit of shareholders and are often remunerated to increase the returns to shareholders.
Government Bonds (Gilts) - Generally government lend to their own citizens and so are broadly neutral. In developing countries most Gilts are held domestically and in a democracy default is very unlikely.
Company Bonds – Interest payments on bonds are a cost for companies and so they will seek to minimise them. There is a downside risk of default and complex contractual arrangements that can allow bond issues to buy back Bonds if interest rates fall, but unlike shares the potential upside is limited. This leads him to prefer Gilts.
Property - Investments in commercial real estate which have a predictable revenue stream (like bonds) and a residual value at the end of the lease. This makes them operate a bit like a cross between Bonds and Shares.
Developing World Shares – These offer potentially returns are higher, but political factors may limit potential for shareholder as returns are diverted to workers, governments or managements.
He recommends avoiding asset classes where the cost of information are too high for private investors – such as high yield bonds(junk bonds), private equity, hedge funds and asset backed securities. These do tend to form part of his professional portfolio, but he has more resources to evaluate these asset classes than a private investor. A problem with this is that much of his returns are generated from these assets as the high barriers to entry presumably offer the potential for higher profits.
The book argues that professional advisors suffer from a severe agent-principle issue. These professionals as agents seek to maximise their fees. The structures of the industry mean there is often little incentive for these to be aligned with the interest of investors. The result is complex and overly large fee structures (“Where are the Customers’ Yachts?” as another book asks).
The writing feels like it is written by an academic economist and the issues are considered rigorously. What it does not do is offer much in the way of example portfolios or concrete advice for the UK investor. Instead it is more a call to be careful on costs and consider how the interest of the person issuing or managing an asset is aligned with the interest of investors.
The author also guest lectures on the Yale finance lectures with Robert Shiller, this is available from iTunesU.
Sunday, 15 April 2012
The book portrays Gordon Brown as almost a Shakespearian tragic figure. The man who waited years to be Prime Minister and yet when he achieved that goal he rather failed and did not seem to enjoy it. He failed to live up to his own high standards for several reasons;
1. He surrounded himself with schemers who plotted and back-stabbed to get him to number ten and was unable to ditch them when he was there. This meant he had a lot of divisions festering within the Labour party.
2. After planned for so long to get into Number 10, once he was there he did not really have much of an idea what to do and lacked a clear vision for domestic policies. His policies were little different to Blair's.
3. He was a poor organiser and weak at man management. This meant it was hard to develop ideas from others within his government. Policies that were adopted were often poorly implemented.
4. He was also poor at communicating with the public, he compared poorly with Tony Blair in this regard and had difficulty connecting with the electorate.
The strength of Gordon Brown seemed to be that he was an intelligent, hard working and decent individual and he seemed to do best in a time of crisis.
1. He was well good in a crisis. He seemed able to focus on the issue, determine the best course of action and get things done. In many ways he seemed to enjoy crisis, frequently rushing to the COBRA crisis room to take personal command.
2. On the international stage he seemed to do much better with a vision of fighting poverty, a deep commitment to globalisation and a determination to deal with the financial crisis. The banking crisis was the area in which he was able to lead the world and act far more decisively than the confused administration in the USA.
3. He was skilled political operator who managed to survive the challenges from within his party. The Labour Party went into the election united and ultimately prevented an outright Conservative victory.
The book ends with Gordon Brown heading off into the sunset to do more on the international stage in areas such as development. The book portrays him in a balanced, if not slightly positive light. I found this book has a lot of research behind it, but this can make it feel a bit unstructured. It is also a bit long.
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