Multi-Disciplinary Reading - Book Reviews

[phreakv6]

Anti-fragile, Nassim Nicholas Taleb, 2012 - This took me a while to finish for various reasons, one of which was the repetitive nature of the book, sort of like essays/blogposts revisiting similar themes, so reading a few pages at a time feels complete and fulfilling that you don’t feel like reading more - sort of like having a chocolate from a box of favourites; you save it and savour it over time like wine or cheese, unlike a pizza.

As with any Taleb book, you learn a lot about psychology, probability, philosophy, empiricism and arts, mostly ancient. Some of the best I picked in this book are: via negativa which is to arrive at decisions by subtraction or negation, sort of like Munger’s inversion. Anti-fragility or being able to benefit from harm by positioning oneself for optionalities with limited downsides. Lindy-effect or how things that have lasted a long time will in all probability last a similarly long time and how neomania fits in the scheme of things and Iatrogenics where treatment is worse than the disease.

Using non-predictive approaches to building things by making them robust to change and conflation of event and exposure - or mistaking function of a variable for the variable itself (in investing most things are functions of themselves, so second (f’(x)) or third-order effects simply can’t be ignored). Another thing I take seriously when it comes to building things is tinkering - or what Taleb calls rational flâneur, where you tinker with passion and let the end-product take care of itself by changing decisions as the product takes shape - this is how any artisanal creation comes into existence - not by central planning and spreadsheets.

The book ends with the asymmetry in modern society where one gets to keep the optionality while another suffers the fragility (politicians, banks, big pharma) and argues for how old societies used to work where a ship’s captain will go down with the ship or where the builder of a bridge will have to live under it for a period (or as in Hammurabi’s code where a builder will be put to death if a building he builds crashes) and so on and leads into ‘skin in the game’, the last book in the series which I hope to read next year. 9/10

[cathene]

which book is this passage from?

[shettdeepak]

I had the opportunity to read “what works on Wall Street” 2004 edition. Author talks about various investing strategies and back test them on US equities from 1950 to 2000. It was interesting to see how pure algorithmic strategies combined with value principles can beat best of actively managed funds/indexes.

I would like to test some of those on Indian equities. Does anyone know of a site/blog who has already done that? Else I will need to write couple of functions in google sheets. Challenge is getting historical data around sales, eps, dividend yield etc. Any available api I can consume? Does screener has an API?

[phreakv6]

Sapiens, Yuvel Noah Harari, 2014 - This felt like a prequel to Guns, Germs and Steel in a lot of ways though Guns, Germs and Steel was a lot more multi-disciplinary while Sapiens is mostly anthropological. Guns traces the history of the last 13000 years while Sapiens traces the last 75000 years.

The history is nicely split into 4 parts in sync with the 4 major shifts that Homo Sapiens have gone through during the last 75000 years. The first is the Cognitive Revolution - the evolution of imagination or the ability to tell stories, sometimes based on real things and sometimes abstract. This must have happened circa 70000 BC among the foraging and hunter-gatherer sapiens. The Agricultural Revolution follows next and lead to sapiens settling around their farms and increasing in numbers and in some ways becoming slaves with respect to their hunter-gatherer ways.

The unification of humankind follows next exploring the origins of money, empires and religion all inexplicably intertwined with each other. The industrial/scientific revolution follows next and covers the last 400 odd years exploring everything from the steam engine, capitalism/communism, wars, science, joint-stock corporations, colonialism etc and the last part gives a glimpse of where we might be headed, posing some important existential and philosophical questions.

Like Guns, Germs and Steel and Dawkins’ ‘The Selfish Gene’, this book too should be essential reading. 9/10

[phreakv6]

Seven brief lessons on physics, Carlo Rovelli, 2014 - Translated from Italian, this book was originally written as columns in an Italian newspaper and so assumes nothing of its audience while talking about general relativity, quantum mechanics, the universe, particle physics, bridging the paradox between general relativity and quantum mechanics using loop quantum gravity, probability and heat of the universe and the irreversibility of time where heat is involved and finally, of ourselves and our consciousness.

You get a low-down on these along with a who’s who of twentieth century physics. Commendable it is that it does all this without complicated mathematics and excessive theory. There is enough here to get a layman hooked onto physics and seek more and that is a big win for the book. This book is so brief and small that a slow reader such as myself was able to read it in one sitting. 8/10

[phreakv6]

Business Adventures, John Brooks, 2014 - This is a fabulous book based on pieces written by John Brooks between 1959 and 1969. There are 12 of them and subjects are very diverse but tied by the common theme of business/wall st. The book starts with the market crash of '62 (titled ‘the fluctuation’) and covers it in intricate detail of what was happening on the trading floor of the exchange during those tumultuous hours of an incredible crash and equally incredible recovery all within a short-span of time. The title it borrows from JP Morgan, the elder’s remark on the whole situation when questioned if the market will go up or down wherein he apparently remarked dryly that ‘it will fluctuate’.

‘The fate of the Edsel’ was an in-depth study of Ford motors on setting expectations, product development, production, market factors, economic situation and the fiasco of what followed post launch. A dispassionate dissection of the federal income tax follows next with a detailed history of its adoption and how it crept into our culture. Texas Gulf hitting copper in Canada and the subsequent mess the insiders got themselves in and the birth of groundbreaking insider trading regulations follows next. The rise and fall of xerox and the importance of innovation in business was one of my favourite parts of the book.

Stories about wall st. can’t be complete without an episode of a broker going belly-up but this one had an interesting twist where the exchange (NYSE) and its members pooled in their own resources to save the day. GE’s price-fixing and anti-trust case and the discussion on 20.5 and the power of incentives and vagueness of corporate communication brings to the fore the grey areas large companies operate in.

‘The last great corner’ reminded me of the jesse livermore book I read last year and unsurprisingly, he plays one of the essential parts of the short-squeeze. Most of these cases have lead to groundbreaking regulations from insider-trading, anti-trust to exchange regulations. There is a piece on how a govt. official could use his powers in the corporate world post retirement and follows the career of Lilienthal. ‘Stockholder season’ was a hilarious relief in observing what goes on in AGMs and the last one which occupied a quarter of the book is about central banks and currencies and a particular episode of defending the sterling in the 60s and the subsequent devaluation and gold rush.

This is a gold-mine of a business book as the topics covered are extremely diverse and the quality of writing keeps you turning the pages as it has almost a fictional quality to it. 9/10

[edwardlobo]

This book apparently was given to bill gates by warren buffet when bill gates was relatively less well known
There is another book recommended by warren in one of his old letters during the partnership times called “the money game” by Adam smith which you will find entertaining is you found Business Adventures a good read
(Don’t read the new money game by the same author, it’s not so great)

[phreakv6]

Influence, Robert B Cialdini - This is the most concise book on human behaviour I have read so far. While ‘thinking, fast & slow’ is exhaustive and jam-packed with tasty nuggets, this book limits itself to 6 weapons of influence that we often fall victim to, pretty much on a day-to-day basis (all of these are covered in thinking fast & slow as well, so if you are going to read one book, it should still be ‘thinking fast & slow’).

Reciprocity is the social contracts we subject ourselves to, knowingly or unknowingly. It could be a small unwanted gift delivered to influence the decision in favour of a larger decision. The book takes a particularly harsh view of the ‘Hare Krishna’ society of the 60s and 70s that used reciprocity to solicit donations. There are several variations and subtleties of reciprocation, like asking for a bigger favour when all that was required was a smaller one (door-in-the-face technique), to make the smaller one more palatable through contrast effects and concession.

Commitment & consistency is the exploitation of behavioural consistency that is expected of us in social interactions. Commitment bias is exploited by foot-in-the-door techniques in marketing regularly. Then there is the vicious lowball where an attractive offer is made and then reneged post extraction of commitment.

Social proof, or monkey-see-monkey-do happens a lot under uncertainty where people just follow other people’s decisions with the unconscious belief that other people know better. At the harmful extreme this has lead to mass suicides in the jonestown massacre and to several manias and hysterias in the financial markets.

Liking, either by physical attractiveness, similarities or compliments can lead to distorted decisions via halo effects, as can authority bias illustrated for a bulk of the chapter via the Milgram experiments and its variations. The book winds up with ‘Scarcity’ which is used in marketing everything from toys (limited editions), automobiles to real houses and gets an exhaustive discussion on ‘psychological reactance’ which is much like deprival super-reaction syndrome. A lot of this is applicable on a day-to-day minute-to-minute basis for everyone indulging in transactions with other human beings. 9/10

[phreakv6]

Some parts of the book I am reading that really resonated with me. All highlighted parts are about Soros from a chapter called ‘The Alchemist’ from the book ‘More money than God’.

When a system is in equilibrium and its hard to say which way things will move

It isn’t about the number of predictions or the accuracy of it but the allocations when you are dead right

The cognitive dissonance this guy thrived in is amazing

with a thoroughly empirical approach

and a focus on causal loops

to be the jack of all trades (literally)

[phreakv6]

More money than God, Sebastian Mallaby, 2010 - This is like a crash course on hedge funds, their strategies and the who’s who and what’s what and all that has transpired in this niche in the last 60 odd years from the time A.W Jones setup the first one. There is amazing level of detail in each of the cases covered because this is based on some deep research and hundreds of hours of interviews. We hear first about AW Jones’ Long-short strategy and how it was market-risk neutral and pathbreaking for its day and then about block-trading of Steinhardt which took advantage of institutional weaknesses in liquidating large positions.

By far my favourite parts of the book were the ones involving Soros/Druckenmiller and Quantum fund. I have highlighted the best parts separately in the post above. Value investor Julian Robertson’s Tiger fund and their strategies were probably my second favourite parts of the book. Moving from the commodity trading of the 70s and currency trading of the 80s and early 90s where there was considerable irrational pegging of currencies by central banks to the dollar or other currencies, the book moves onto Greenspan’s asset bubbles. There is a very detailed coverage of LTCM from a very neutral perspective in explaining what went wrong with their bond arbitrage positions.

James Simons’ Renaissance and Medallion fund get a blackbox coverage on statistical arbitrage and then there is the big crash of 2008 and the mortgage bonds from the perspective of Paulson who bet heavily against the mortgage bonds. Citadel and Farallon’s unorthodox methods of buying stressed assets and focusing on odds of mergers and acquisitions going through respectively were very unique. The biggest shapeshifter in the entire series of colorful characters was Paul Tudor Jones whose strategy seems to have shifted with every passing decade, keeping himself relevant with the times.

The biggest learning for me was to not ignore other aspects of what moves the markets, mainly liquidity and leverage, credit and economic cycles, currencies to get a fair idea of the goings on. This is a must read to understand the capital markets from a holistic perspective. The author advocates and supports the existence of hedge funds because they are the exact opposite of too-big-to-fail and they have considerable skin in the game. Taleb would approve. 10/10

[bheeshma]

@phreakv6

James Simons’ Renaissance and Medallion fund get a blackbox coverage on statistical arbitrage

James Simmons is an enigmatic individual whose Medallion fund and its quantitative methods have remained hidden and are likely to remain so. For some colour on the general strategy one can refer to James Bakers comments on Quora on the same. There was a congressional hearing on the Medallion strategies (the link doesnt work now) however, of the lot that is mentioned in the book i am most impressed by Dr Simmons.

The most important part though is the fact that the “edge” that his models create is tiny but any edge however tiny is enough to generate superior returns. In my view, the achievements of his team are astonishing.

If you go through some of videos, he mentions that as a PhD candidate he observed price patterns and was sure that they weren’t random. Later on, he goes on to explain the evolution of Renaissance Technologies. Its an interesting life history for sure.

Source: https://www.quora.com/What-are-the-investment-strategies-of-James-Simons-Renaissance-Technologies-I-understand-he-employs-complex-mathematical-models-along-with-statistical-analyses-to-predict-non-equilibrium-changes

[phreakv6]

This is not my review but I decided to post it here because someone has taken so much effort to summarise the book so well.

Seeking Wisdom: From Darwin to Munger by Peter Bevelin - The Rabbit Hole

[phreakv6]

Mastery, Robert Greene, 2012 - Greene studies numerous masters in various fields, past and present, from Einstein, Buckmister Fuller, Goethe, Ford, Faraday, Paul Graham, Mozart, Leonardo Da Vinci, V.S Ramachandran, Wright bros and three of my favourites - Benjamin Franklin, John Coltrane and Marcel Proust, among several others and deciphers the common elements in their mastery.

The idea is simply to find what drives you - it could be a field, an idea, a cause, a niche etc. - then take up an apprenticeship in that field - via deep and passionate observation, acquiring requisite skills via practice (the 10,000 hour rule is something that gets its due here as well) and then by experimentation i.e by doing and learning empirically and overcoming hangups and fears. Important stuff in the apprentice phase is to value learning over money, focus on process over result, understand your weaknesses so that they can be overcome, keep expanding your field of learning by picking up ancillary skills in connected fields, learn from mistakes and melding theory and practice - the how and what and progress through tinkering.

The next step after apprenticeship is to find a mentor to fast-track the learning. There is a lot that can be picked up by observing a master in the field, as our mirror neurons are capable of learning by imitation. It is also important to know the limitations of the mentor, so that you can get a move on.

Technical skills of the field aren’t the only requisite elements for mastery as it is equally important to master social intelligence. Non-verbal communication, cues, reading people, their motives and intentions and decoding incentives, looking for patterns of behaviour etc. Also important to avoid envy, conformism, rigidity, self-obsession, laziness, flightiness and passive aggression.

The final phase of mastery is the creative-active phase where works of lasting value are created. While 10,000 hours could give you abilities to master a field, a 20,000 hours and above makes you fuse the intuitive/instinctive with the rational - as the neural pathways in the brain are accustomed to the environment of the field of work.

This was an interesting book, albeit a bit unstructured and repetitive. It could have perhaps been much shorter to convey the same core ideas. It was however interesting to read all the mini-biographies of various masters across time in human history in a single book. 8.5/10

[jamit05]

A good book, shall strive to read it.

[phreakv6]

Spy the Lie, by ex-CIA officers, 2013 - This is a very good primer on deception detection. There are 3 types of lies - of omission, commission and influence and the framework provided in the book can help us get closer to the truth. The idea is to look and listen simultaneously (the book calls it L-squared mode) for verbal and non-verbal cues - several of them listed in the book with various real-life examples to cement the concepts.

The important takeaway for me - A deceptive person would try to “convince” rather than “convey”, or answer a question with convincing statements, non-answer statements, repeat the question, pretend not to understand a simple question, go out on an attack or be too polite, use exclusion qualifiers, make inconsistent statements, use referral statements, give overly specific answers, invoke God, religion, country and so on, instead of a straight-forward ‘Yes’ or ‘No’. Then there are the non-verbal cues, from anchor point movements, pauses, micro-expressions, fight-or-flight responses and disconnects between verbal and non-verbal responses. The key is to look for these in a cluster, immediately post a question, probably within 5 seconds.

There’s also lot of tips on types of questions to ask, if you have to detect deception by doing so - by asking bait questions, leading questions, close-ended questions, opinion and presumptive questions and avoiding negative questions and open-ended questions, starting with a prologue and tuning the environment with techniques like ‘projection of blame’ and ‘rationalisation’.

I think we are naturally attuned to a lot of these, as long as we are willing and unbiased to know the truth. Even these doesn’t still prove a lie, but only gets us closer to the probabilistic truth, so in probabilistic arts, can be very useful where certainty is a necessity and a lot of information comes from sources that can’t be trusted outright. 8/10

P.S. After reading the book, I request you to do these and see if you can spot something - listen to the recent DHFL concalls, 8k miles’ Suresh Venkatachari CNBC interviews, interviews of Ved Prakash of Prakash Industries, Shilpi Cables interview after the board meeting was cancelled/postponed in 2017 and so on. Easier in hindsight of course but good for training nevertheless. Thanks @diffsoft for the book reco.

[diffsoft]

Very well summarized, I have read the book twice, even then your summary has added something new to my understanding! The author Phil also has some great videos and analysis that reveals how he goes about it with nearly magical results.

Older concalls where subsequent outcomes are known as the best way to practice this. I too found DHFL to be a giveaway, not to mention chieftans at PEL and 8K Miles.

[spvk1]

There is also a tv series on micro expressions guided by Master and Founder of Micro Expression, Paul Ekman. named Lie to Me, there are 3 seasons, with first hand guide on micro expression in finding truth, false, deception, shame, anger, contempt, genuine smile, surprise.

[Harsh04]

Lie to me was a great series on micro expressions and behavioural give-aways, however as the name suggests, these “micro” expressions are indeed MICRO for our untrained eyes and chances are that mostly our eyes will end up picking and seeing what it wants to see.

‘What EveryBODY is saying’ is a book authored by Joe Navarro, a ex-FBI agent that also delves into body language to identify deceit and lies.

while these books are great reads, the authors themselves agree that the body can be taught to lie by practice and it really takes a experienced eye to catch then.

[Mandeepk]

Yes, Dr. Paul Ekman has been working in this field for a long time ! Good to see his name here

[deevee]

Hi

Happened to be reading a book called The Obesity Code. Though I have not finished it yet. I thought it’s important to share it with as many people as I can.

The book is written by Dr Jason Fung whose multiple videos on diabetes and weight loss are available on YouTube. He advocates Intermittent Fasting and a low Carbohydrate diet.

In the first part of the book he talks about how we have been made to believe that calorie in and out is the primary equation of the state of obesity one has. He removed this misconception and quotes multiple studies on the same. He focuses on the play of hormones specifically insulin and cortisol and other hunger and satiety hormones. He shows how they are actually responsible for our weight.

The second half of the book focuses on on our diets and a solution to obesity.

Though I am not obese though a little overweight I have been following intermittent fasting for 2 odd months. It has led to just under 10% loss in my bodyweight. I was able to bring down my blood pressure to normal levels within a few weeks.

I had only seen his videos before on the advice of @crazymama

Do read this for the benefit of your health and family.

Rgds
Deepak