June 19, 2010

The clever investors who made fortunes from the Great Recession

Great RecessionThe Big Short by Michael Lewis

@@@@@ (5 out of 5)

If you’ve heard of Michael Burry, Steve Eisman, Charlie Ledley, Jamie Mai, or Ben Hockett, there may be something wrong with you. Knowing one or more of these characters might suggest you’ve spent far too much time on the fringes of Wall Street, because it’s unlikely you would have encountered any of them unless you were tightly wrapped up in the subprime mortgage mess that practically overturned the global economy in 2008.

It’s these marginal players who populate the pages of Michael Lewis’ masterful study of the decline and fall of Wall Street, not their much better-known counterparts who played such leading roles in making the mess that has been troubling us all ever since. This delightfully entertaining book explains how that handful of marginal actors in the financial markets anticipated the collapse of the subprime mortgage market and its dire consequences — and walked away with tens of millions of dollars each while the rest of us were counting our losses.

What a fascinating bunch of people they are! There’s Michael Burry, a physician turned stock-picker with Asperger’s Syndrome who found it exceedingly difficulty to interact with other people and supremely easy to focus on obscure details no one of sound mind would ever consider. And Steve Eisman, a Wall Street wizard with a genius for financial analysis and a seemingly boundless talent for pissing people off. And Jamie Mai and Charlie Ledley, who started off in a Berkeley basement with $110,000 and a vague notion that they could (perhaps, maybe) build their little nest-egg into something a little larger. Every one of these unlikely seers was absolutely right in calling the decline of the subprime market, years ahead of others who gained the attention of the news media. And, in Lewis’ telling, every one of them greeted with astonishment the disbelief and ostracism they faced for their views.

To the author, Michael Lewis, The Big Short is a sequel of sorts to his breakthrough 1989 bestseller, Liar’s Poker, the first of his thirteen books, which was based on his eye-opening experiences at Salomon Brothers in the go-go years of Gordon Gekko. In an epilogue to The Big Short, recounting an awkward recent lunch with John Gutfreund, the disgraced former CEO of Salomon Brothers and Lewis’ first boss  in the industry, Lewis finds the roots of the financial meltdown of 2008 in decisions Gutfreund made at Salomon in the 1980s.

The Big Short is a joy to read because of Michael Lewis’ easy way with words. It’s also one of the most insightful of the many recent books that have examined the financial implosion, and unlike many of those other books, this one pulls no punches about who is to blame, and why they did what they did.

This book is included in my list of 29 good books about business history.

June 4, 2010

An authoritative insider’s take on the threat of cyber war

cyber warCyber War: The Next Threat to National Security and What to Do About It by Richard. A. Clarke and Robert K. Knake

@@@@ (4 out of 5)

BE AFRAID. BE VERY AFRAID. If you’ve been conjuring up nightmare visions of terrorists toting suitcase nukes to Chicago or San Francisco, get ready for an even more ominous threat. The term of art is “cyber war,” and because in theory it poses no direct threat to human life, it may strike the casual observer as no more than a potential nuisance. But for Americans, cyber war is to terrorism as a lethal influenza epidemic is to mad cow disease: the latter may be unspeakably awful in its effects, but few people are affected — and the former has potential to wreak nationwide damage impacting millions.

Forget technical definitions: cyber war means that a future enemy of the U.S., potentially a rogue state as well as a rival power, could immobilize the U.S. military, destroy the nationwide power grid, bring all our transportation networks using planes and trains and trucks to a halt, and wipe out the international financial system — all by hacking into the vulnerable computer systems that run these functions through their connections to the Internet. In other words, cyber war has the potential to catapult the United States back to the 19th Century, if not the Stone Age . . . in a matter of days!

Richard A. Clarke knows whereof he writes. From the early 1970s until George W. Bush’s invasion of Iraq, he filled high-level national security positions under seven Presidents, from Nixon to Bush the Younger, and he advised candidate Barack Obama on national security issues. In an earlier, bestselling book (Against All Enemies: Inside America’s War on Terror), Clarke provided an authoritative, high-level perspective on the evolution of policy and action against the non-state entities classified as terrorists by the U.S. government. Against All Enemies was largely an indictment of Bush Administration national security policies, and it raised its author’s profile and made him an easy target for knee-jerk, Right-Wing attacks.

Although Clarke is generally supportive of President Obama, Cyber War is, like the earlier book, a full-throated critique on the shortsightedness and misdirection of the Obama Administration’s weak-kneed response to a potential cybernetic attack. The book is detailed in relating several little-known recent examples of cyber war activity, in its portrayal of the cyber war games played within the U.S. government in recent years, in conveying the long history of prescient official studies about cyber war and how they were disbelieved or entirely ignored, and, perhaps most important of all, in laying out a full-bore policy prescription to prepare the U.S. for a major cyber attack. The policies Clarke recommends in this important book are, presumably, the same he tried — unsuccessfully — to sell to the Obama Administration. Which explains why Clarke, still under the age of 60 and eminently qualified for a very high national security position, is working on his own as a consultant rather than extending his three-decade career in government.

Another book brings additional information to light about our government’s involvement in cyber war: see my review at Concerned about NSA surveillance? Read this book! For another, less authoritative but still informative take on this subject, see The secret history of cyber war.

May 14, 2010

Historical perspective on the surprising rise of Barack Obama

Historical perspectiveThe Bridge: The Life and Rise of Barack Obama by David Remnick

@@@@ (4 out of 5)

The White House has been home to many colorful characters in the more than two centuries since it was first occupied in 1800—think of the polymath Thomas Jefferson, the swashbuckling Andrew Jackson, and the big game hunter and peacemaker Teddy Roosevelt—but Barack Obama is at least their equal. With a life story no Hollywood screenwriter would dare concoct, President Obama is the avatar of multicultural America. In David Remnick’s formulation, he is “the bridge” between white and black, the elite and the street, and—equally important—between the generation of African-Americans who followed Martin Luther King, Jr., and John Lewis in the civil rights movement, and those who were born too late to have experienced its pains and joys directly.

This is familiar territory to anyone who has dipped even briefly into the flood of writing about Barack Obama, much of it essentially biographical, and Remnick brings few new insights to the story. However, what he brings is the fruit of hundreds of interviews with Obama himself, his closest aides and advisers, as well as others in the media and academia who can help cast light on the workings of the President’s mind.

The special emphasis in this book is race. Remnick follows the threads of Obama’s own journey of self-discovery and his sometimes-troubled interaction with others, especially older leaders, in Chicago’s African-American populous diaspora, and he puts Obama’s rise to the presidency in historical perspective as an expression of the black community’s centuries-long struggle for equality in America. To Remnick, Dr. King and his colleagues represented the “Moses generation,” destined to approach the walls of Jericho but never to enter the promised land beyond. Obama embodies the “Joshua generation” that stands on the shoulders of its parents and now seeks to claim the fruits of this historic struggle.

David Remnick is best known now as editor of The New Yorker for the past dozen years, but in his relatively short life–he’s just a few years older than his subject in The Bridge—he distinguished himself as a reporter, first for the Washington Post and later for the New York Times. He won a Pulitzer for Lenin’s Tomb, the 1993 book based on his years as Moscow correspondent for the Post.

April 5, 2010

The ins and outs of community organizing from a longtime expert

Creative Community Organizing by Si KahnCreative Community Organizing: A Guide for Rabble-Rousers, Activists, & Quiet Lovers of Justice by Si Kahn

@@@@@ (5 out of 5)

There’s a little something for just about everybody in Si Kahn’s delightful little memoir, Creative Community Organizing. In the space of a couple of hours of reading, you can gain a front-row seat on history from the vantage-point of SNCC (the Student Nonviolent Coordinating Committee, one of the most militant elements in the civil rights struggle) to the UMWA (the Mineworkers Union) to the recent nationwide campaign to end immigrant family detention. You’ll learn about music and art and their central role in what Kahn calls “creative community organizing,” with folksong lyrics prefacing every chapter. You’ll learn about Si’s remarkable rabbi father and radical mother. You’ll even learn the meaning of the puzzling word “hod,” as in “hod carrier.”

Si is a 45-year veteran of organizing in the civil rights movement, the labor movement, and through the scrappy little nonprofit organization he founded 30 years ago to work for social and economic justice in the South and Southwest, Grassroots Leadership. He is also a writer and singer of folksongs, most of them on radical themes tied to his organizing work. Oh, and by the way: he’s a really nice guy.

This book, subtitled A Guide for Activists, Rabble-Rousers, and Quiet Lovers of Justice, can also be read as a primer on creative community organizing. The material is organized into chapters that correspond to the guiding principles of Si’s craft. And I can testify to the wisdom of those principles, having worked as a community organizer myself for several years in the 1970s — operating more from the seat of my pants rather than the solid experience Si has gained through a lifetime of organizing.

Note well: Si hasn’t just organized and run campaigns. He has helped win a number of notable victories over the years. He knows whereof he writes. And our country is much the stronger for Si’s tireless efforts on behalf of justice, equality, and freedom.

March 21, 2010

Seth Godin: “Managers make widgets. Leaders make change.”

Tribes by Seth GodinTribes by Seth Godin

@@@ (3 out of 5)

“Leaders have followers,” Seth Godin writes. “Managers have employees. Managers make widgets. Leaders make change.”

Tribes, one of Godin’s recent efforts to enlighten humanity with the wisdom of Silicon Valley, builds on this underwhelming insight to paint a picture of leadership that seems limited to questioning conventional wisdom and making a pest of yourself. There’s insight to be found in Tribes, as there is (more frequently) in Godin’s other books. But the true value of this little essay on making change in the world lies in the innumerable examples and anecdotes liberally scattered throughout.

Oh, yes: that title. “Tribes,” in Godin’s phrasebook, are the apparently random collections of people who follow those he regards as leaders. No leader, no tribe. No tribe, no leader. Get it?

Now, don’t misunderstand me. Seth Godin is a very smart man with a brilliant marketing mind. Here’s how he defines marketing in this little volume: “Marketing is the act of telling stories about the things we make — stories that sell and stories that spread.” It’s hard to find a better contemporary definition of that widely misunderstood concept. And it ties neatly into Godin’s theme in this book because, he adds, “Today, marketing is about engaging with the tribe and delivering products and services with stories that spread.”

There is genuine insight in that statement, but Godin doesn’t develop it sufficiently. In a longer and more carefully written book, he might have explored how networks and networking are pushing aside traditional communications media . . . how celebrity affects the sales of books, music, and clothing . . . how ever-smaller and more specialized subcultures are multiplying like amoebae. Maybe somebody else will take this up someday. Or — who knows? — maybe somebody already has.

Godin is quick to lavish scorn on those he dislikes or disrespects, and apparently the 12 or 13 million people who work in or for the U.S. nonprofit sector are high on his list. (Presumably, that would include me.) For example, he writes, “Take a look at the top fifty charities on the Chronicle of Philanthropy‘s top four hundred charity list. During the last forty years, only a handful of charities on this list have changed. Why? Because donors didn’t want to take risks.” Godin’s writing is littered with silly generalizations like this.

So, with all these flaws, is Tribes worth the time and trouble to read? Yes. Here, for example, is how Godin illustrates his highly unconventional definition of faith: “People don’t believe what you tell them. They rarely believe what you show them. They often believe what their friends tell them. They always believe what they tell themselves. What leaders do: they give people stories they can tell themselves. Stories about the future and about change.” You’re not likely to find a simpler or more direct definition of leadership than that.

You may also be interested in 29 good books about business history.

March 14, 2010

Philanthropy and Social Investing: Blueprint 2010 by Lucy Bernholz

Philanthropy and Social Investing by Lucy BernholzPhilanthropy and Social Investing: Blueprint 2010 by Lucy Bernholz

@@@@ (4 out of 5)

Lucy Bernholz is a blogger with a Stanford Ph.D. who has been consulting with foundations about program research and design or otherwise working in the foundation sector for two decades. In this brief monograph, published online by the Stanford Social Innovation Review and available for the Amazon Kindle and as a PDF, she examines the wide and fast-proliferating options available to philanthropists and socially minded investors today — and offers guarded predictions about the future course of several key present-day trends in this field. Bernholz does a masterful job of covering the waterfront, scanning every new development from the B Corporations and L3Cs on the frontiers of Triple-Bottom-Line business in the U.S. to the social capital exchanges coming into being in Brazil, South Africa, and England. She leaves no stones unturned.

Bernholz identifies three high-potential trends as likely keys to the future financial undercarriage of the social sector: impact investing, hybrid organizational structures, and new platforms for information. These seem as good a set of choices as any. Impact investors, in Bernholz’s view, are “funders focused on using investment funds as well as grant dollars to pursue their goals.” Hybrid organizational structures “bring together familiar business practices — such as earned revenue or return on investments — with the mission and purposes usually associated with the social sector.” In this category, she singles out B Corporations (for-profit companies dedicated to public benefit) and L3Cs (low-profit, limited liability companies) for special attention. New platforms for information, mostly online, encompass an extraordinary variety of efforts to make widely available the hard data demanded by all investors and most philanthropists before they will put their money to work in the business of social change. Among them are the Web sites (such as GlobalGiving and Kiva.org)  that link individual donors or investors with specific projects,  a growing number of collaborative efforts linking donors or social investors to one another, and online communities for foundation staff and trustees.

Squarely zeroing in on conditions in 2010, Bernholz asserts that nonprofits, already reeling from a year in which a majority laid off staff, will face even harsher conditions this year. Many of the 1.5 million organizations in the U.S. nonprofit sector were widely predicted to go out of business   in 2009. They may actually do so in 2010, Bernholz believes.

There’s a lot more that’s worthy of comment in this very slim monograph. I’ll refrain from writing more, though, since I’m fearful that this review might end up longer than the work it reviews! If you’re involved in any sort of effort to promote social betterment through either investing or philanthropy, read this little book.

FYI: my company, Mal Warwick Donordigital, is a Founding B Corporation, a California Benefit Corporation and a Certified Green Business, and I was a member of the Social Venture Network from 1990 to 2016.

You may also be interested in 29 good books about business history.

March 13, 2010

Chip Heath and Dan Heath: how to change things when change is hard

Switch by Dan Heath and Chip HeathSwitch: How to Change Things When Change Is Hard by Chip Heath and Dan Heath

@@@@@ (5 out of 5)

Here we’ve got a professor of organizational management and a high-powered management consultant, both young (at least from the perspective of my advanced age), who can actually write in an engaging and entertaining way — and they deliver a message that is truly both profound and practical. Switch is one of the most useful books for managers written in recent years. Combine it with another excellent recent book, Drive by Daniel Pink (reviewed earlier in this blog), and you’ve got an unbeatable set of tools for anyone faced with the need to engineer change in a business, nonprofit, or government.

What is most remarkable about Switch, aside from the authors’ amusing style, is the profusion of fascinating examples drawn from a wide variety of sources, from academics in many disparate fields to self-help literature to personal experiences. However, unlike the authors of most how-to literature, the Heath brothers refer again and again to examples cited earlier in the book, deepening the reader’s understanding and making it far more likely that she’ll recall at least some of these fascinating stories.

Switch can serve as model for writers of how-to books (and I ought to know, having written a slew of them myself).

As the subtitle makes clear, Switch is about how to bring about change — in an organization, in a spouse or coworker, or in yourself. The book is organized into three principal sections, corresponding to the three dimensions of successful change-making: the intellectual (referred to here as The Rider), the emotional (here, The Elephant), and the specific course of action (The Path). This concept is based on the image of a person riding atop an elephant and trying to persuade it to move onto an unfamiliar course — a daunting proposition, as you might imagine. In each of the three sections, the authors cite a substantial number of examples to illustrate the significance of respecting these three elements. Additional examples tie all three together by showing how individual people have successfully engineered change — often very far-reaching change in business or government — by pursuing an approach based on an intuitive understanding of the three dimensions. Fascinating!

Just in case you didn’t notice: the brothers Heath collaborated on another excellent and useful book three years ago: Made to Stick: Why Some Ideas Survive and Others Die.

You may also be interested in 29 good books about business history.

March 5, 2010

A stirring account of the watershed 2008 election

2008 electionGame Change: Obama and the Clintons, McCain and Palin, and the Race of a Lifetime by John Heilemann and Mark Halperin

@@@@ (4 out of 5)

If you want to know what really went on behind the scenes in the historic presidential election campaign of 2008, read this book. But don’t expect an uplifting tale that restores your confidence in American democracy: practically none of the candidates or their spouses comes off well in this no-holds-barred saga of the political clusterf*** of 2008.

Well, practically none. Barack and Michelle Obama emerge fairly unscathed. But everyone else who is treated at any depth in Game Change comes out wounded, most of them grievously so. Not just McCain and Palin, either (although the authors’ portraits of them are especially colorful). Hillary Clinton, Bill Clinton, John Edwards, and Elizabeth Edwards (yes, even Saint Elizabeth) shriek and cuss and fume and generally make total fools of themselves. Others treated more cursorily — particularly Rudy Giuliani and Mitt Romney — come off poorly, too, but the authors’ fire is largely reserved for the eventual front-runners.

Heilemann and Halperin obviously spent a great deal of time with sources inside each of the leading campaigns. conducting hundreds of interviews — and their accounts are fully consistent with the tales campaign insiders were telling out of school at the time.

So, what are we to conclude from this discouraging story? Several thoughts come to mind:

(1) The complexity of the American presidential election system — a two-year slog through donor meetings, primaries, caucuses, and media interviews — is one hell of a terrible way to choose the most powerful person in the world. And the complications and confusion of the primary season are compounded by the irrationality of the Electoral College.

(2) Presidential politics is no place for a normal, sane human being. Any reasonably well-balanced person who spends more than a short time on the presidential campaign trail — and, I can say from experience, not just the candidates but senior staff members as well — is highly likely to wrap up the experience as a candidate for a straight jacket.

(3) In fact, high-level political campaigns — including gubernatorial, Congressional, and Senatorial races — have a pronounced tendency to attract candidates with severe personality defects. Anyone who’s spent much time around the people who contend to run the country knows full well that there’s often something badly wrong with our most senior politicians. Not the corruption that they’re so loosely accused of committing, but simple character flaws that are magnified in the spotlight of center stage.

(4) As Winston Churchill reminded us, democracy is the worst form of government except all those other forms that have been tried from time to time.

Enjoy reading about politics? Check out 35 excellent nonfiction books about politics.

For more good books on the history of the US, see Understanding American history: a reading list.

February 25, 2010

The dark side of medical history: The Immortal Life of Henrietta Lacks

medical historyThe Immortal Life of Henrietta Lacks by Rebecca Skloot

@@@@@ (5 out of 5)

The Immortal Life of Henrietta Lacks is extraordinary on several levels: as a beautifully researched work of medical history, as a portrait of the profound impact of racism in America, and as a brutally honest first-person account of a writer’s challenging, decade-long struggle to write a serious book. If The Immortal Life of Henrietta Lacks doesn’t win at least one of the major awards for books published this year, I’ll be hugely disappointed.

The text on the cover telegraphs the essence of the story: “Doctors took her cells without asking. Those cells never died. They launched a medical revolution and a multimillion-dollar industry. More than twenty years later, her children found out. Their lives would never be the same.”

Henrietta Lacks, we discover, was an ill-educated African-American woman who died of cervical cancer at the age of 31 nearly sixty years ago. She was a patient at Johns Hopkins Hospital in Baltimore, home of one of the nation’s most prestigious medical schools and of some of the world’s leading researchers in fields such as cell culture and oncology. One of those researchers asked Henrietta’s physician for a sample of her diseased cervix in faint hopes that, unlike every other tissue sample anyone to that date had ever tested, the cells he extracted would divide indefinitely,thus become “immortal,” and open up new vistas for medical research. To his and everyone else’s astonishment, they did. And not only did those cells continuously divide from 1951 to the present, they proved to be so aggressive and so persistent that they contaminated every other cell culture they came in contact with — invalidating years of medical research that was conducted before the contamination was discovered. To this day, HeLa cells, named as a contraction of Henrietta’s name, constitute one of medicine’s most pervasive experimental tools.

The medical history in this book is engrossing. As Skloot amply demonstrates, it’s also scientifically significant. But for me what was most powerful about The Immortal Life of Henrietta Lacks was the unfolding story of Henrietta’s life and of the lives of her many children and grandchildren. Skloot devoted a decade to befriending and later interviewing Henrietta’s daughter, Deborah, Deborah’s brothers, and other influential members of the Lacks family in Virginia and Maryland. Theirs is one of the most dramatic and moving tales I’ve ever encountered of the profound impact of racism in our society. At Deborah Lacks’ insistence, Skloot reported every incident and every conversation precisely as it occurred, with no sugar-coating. The power of her reporting is irresistible.

Rebecca Skloot is an accomplished science journalist, but amazingly this is her first book. If she never writes another one, her contribution to the history of medicine and science will be assured.

 

If this book intrigues you, you might take a look at Science history and science explained in 33 excellent popular books. This one is included.

February 19, 2010

A medical student flees genocide in Burundi to New York City

Strength in What Remains by Tracy KidderStrength in What Remains: A Journey of Remembrance and Forgiveness by Tracy Kidder

@@@@@ (5 out of 5)

“Strength in What Remains is the story of Deogratias,” as the author writes (more succinctly than I could) in a post on Amazon.com, “a young man from the central African nation of Burundi. In 1993, through no fault of his own, he was forced onto a terrifying journey, a journey that split his life in two. First he made a six-months-long escape, on foot, from ethnic violence in Burundi and from genocide in Rwanda. Then, in a strange twist of fate, he was, as it were, transported to New York City, where it sometimes seemed that his travails had only just begun.”

Deo, as he is called, was a medical student in Burundi when the genocidal campaign was launched. He fled on foot for hundreds of miles through the bloodcurdling upheaval of both Burundi and Rwanda and eventually arrived in New York, penniless, friendless, and hungry. Kidder relates Deo’s story both before and after his escape from the violence in East Africa, through an Ivy League education at university and medical school to his current work building a medical clinic in his homeland, a disciple of the famed Dr. Paul Farmer (the subject of Kidder’s next book).

Tracy Kidder is one of America’s most accomplished nonfiction writers. He has won most of the major awards that writers can receive. I was first attracted to his work two decades ago through The Soul of a New Machine, his now-classic look at the fast-changing computer industry, which was an extraordinary experience for me. Kidder seems to write where his instincts take him, covering such diverse topics as his home town and building a house to the exotic stories of Deo and Paul Farmer. Everything of Kidder’s that I’ve read has been rewarding. I recommend Strength in What Remains for the sheer humanity of its subject — and its author.