Mark Twain says, "The man who doesn't read good books has no advantage over the man who can't read them." In that spirit, here are 11 great books I've read lately that you should read, too.
Edge.org asked 150 of the world's smartest scientists to write a short (one or two page) article on a concept that will help average people think better. The authors are physicists, astronomers, and mathematicians, but each article is digestible to someone with no experience in these subjects. Every one is good. I could hardly put it down.
Bull!, Maggie Mahar
Warren Buffett recommended this book in Berkshire Hathaway's 2003 letter to shareholders. I now realize why he gave it a plug: It is one of the best investing books I've ever come across. Mahar is a journalist, so there's no opinion or advice in this book -- and that's what makes it great. It's a detailed history of the modern American stock market, chronicling how retail investors consistently fall for bubble highs and get crushed by bear market lows.
Gerontologist Karl Pillemer spent years interviewing more than 1,000 elderly Americans with a simple goal: Ask those with the most life experience for advice on how to live a good life. Here's one key takeaway:
No one -- not a single person out of a thousand -- said that to be happy you should try to work as hard as you can to make money to buy the things you want.
No one -- not a single person -- said it's important to be at least as wealthy as the people around you, and if you have more than they do it's real success.
No one -- not a single person -- said you should choose your work based on your desired future earning power.
Conversations With Wall Street, Peter Ressler, Monika Mitchel
Peter Ressler and Monika Mitchell interviewed Wall Street traders, often anonymously, to figure out what was going through their heads leading up to, during, and after the financial crisis of 2008. My big takeaway is that most of Wall Street's "dirtiest" players are actually good people who believe in morality -- but good people do crazy things when you dangle a $10 million carrot in front of them.
The Information Diet, Clay Johnson
Someone in the middle of nowhere with a $50 cell phone has access to more information than Ivy League scholars did just a few decades ago. But we are any smarter because of it? Are we making better decisions? Probably not. And it's our fault.
Clay Johnson starts his book with a great quote by Steve Jobs:
When you're young, you look at television and think, There's a conspiracy. The networks have conspired to dumb us down. But when you get a little older, you realize that's not true. The networks are in business to give people exactly what they want. That's a far more depressing thought. Conspiracy is optimistic! You can shoot the bastards! We can have a revolution! But the networks are really in business to give people what they want. It's the truth.
Pretty well sums it up.
Mistakes Were Made (But not By Me), Carol Tavris, Elliot Aronson
Everyone makes bad decisions and terrible forecasts. Few, however, live up to their faults. Tavris and Aronson show that this behavior goes beyond saving face. We systematically delude ourselves into believing our decisions were smart even when they obviously weren't. The authors write:
Most people, when directly confronted by evidence that they are wrong, do not change their point of view or course of action but justify it even more tenaciously. Even irrefutable evidence is rarely enough to pierce the mental armor of self-justification.
Highly relevant to investors who attempt to justify their bad returns. Which is to say, most investors.
Ignorance: How It drives Science, Stuart Firestein
"Knowledge is a big subject," Firestein writes. "Ignorance is bigger. And it is more interesting."
No analyst or financial advisor wants to be caught saying, "I don't know." But in science, ignorance is the heart of success. Questions are more important than answers. "As a scientist, you don't do something with what you know to defend someone, treat someone, or make someone a pile of money. You use those facts to frame a new question," Firestein writes. Highly relevant to investing.
What to Expect When No One's Expecting, Jonathan Last
Two things lead to economic growth: Population growth and productivity growth. Jonathan Last shows how we're slowly losing the first half of that equation: "In 1979, the world's fertility rate was 6.0; today it's 2.52." This leads to everything from entitlement shortfalls to labor shortages to changes in medicine. If the forecasts are right the drop in birth rates will be one of the most important stories of the next half-century. An incredibly well-researched and thought-provoking book.
It's Getting Better All the Time, Stephen Moore, Julian Simon
Moore and Simon write:
Most Americans do not fully appreciate how truly fortunate they are to live in the midst of this most amazing time ... life expectancy has increased so rapidly that San Francisco Chronicle columnist Jon Carrol recently quipped that 'Americans have come to view death as optional' ... Today, the average U.S. household spends about 10 times as much on recreation as it did in 1900 and 3 times more on leisure time over the course of their lifetimes than their great-grandparents did.
This book was published in 2000, at the end of the longest economic boom in modern history. Bad timing? Yes. But the authors' main points -- people like progress, and things generally get better over time -- is still relevant. As author Matt Ridley once wrote:
Today, of Americans officially designated as 'poor,' 99 per cent have electricity, running water, flush toilets, and a refrigerator; 95 per cent have a television, 88 per cent a telephone, 71 per cent a car and 70 percent air conditioning. Cornelius Vanderbilt had none of these.
Life Without Lawyers, Philip Howard
The label on my jar of peanuts warns, "PRODUCT MAY CONTAIN NUTS." Doctors order unnecessary tests to protect against lawsuits. Elementary school kids have been suspended for bringing scissors to school. A 14-year-old girl had a stroke in her classroom, but no one called an ambulance for 90 minutes because the school has a rule preventing teachers from calling 911 without the principal's permission.
Howard persuasively argues that Americans' obsession with suing everyone in sight has suffocated people's ability to do what is right. The lawyers now make the decisions. He then offers a set of solutions, with laws that both protect society yet are flexible enough to let people make reasonable decisions.
The Success Equation, Michael Mauboussin
Only a small handful of money managers will outperform an index fund over time. And some of those who do will win thanks to luck alone. Which ones? We really don't know.
Most of life is like this. Intuitively, we know luck can play a big role in outcomes, but it's difficult to separate luck from skill when assessing success -- particularly our own.
Well written and analytical, this book completely changed how I think about success. This line I found particularly meaningful: "There's a quick and easy way to test whether an activity involves skill: ask whether you can lose on purpose."
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