Resources for a Teenager – ‘Economics’

The fourth in a series of posts detailing those resources I’m finding useful on my own particular (life) journey.

Meta

I did Economics A Level, back in the mists of time.

Since then I’ve done a Psychology degree and an MBA.

Humans are not rational actors seeking to maximise their economic utility.

We’re meat bags, and (too) often meat puppets. Let’s treat each other – and our Selves – on the basis of that insight. I.e. with understanding, compassion, and a pinch of salt!

The List

The rationale

• Predictably Irrational – i.e. humans are irrational, but in predictable ways
• The Lean Startup – a business passion of mine, and a means to experiment your way to success. Has turned business failure into something valuable – if in the context of continual learning
• Business Model Generation – essential complement to The Lean Startup. When I first read it, half way through I thought: “this is McKinsey quality material”. Not sure if McKinsey knows a great deal about this domain though… #discuss
• On the basis of reading Moneyball(and watching the film), I am a huge Michael Lewis fan. His lighthearted style turns non-fiction subjects into page-turners. A pleasure and an indulgence to read his work

To read:

• Nudge - the book that started the Behavioural Economics movement, and brought groundedness to stale academic debate
• Liar’s Poker – Wall Street excess and nuttiness
• Flash Boys – the operations (or not) of high-frequency financial trading
• The Undoing Project: A Friendship that Changed the World – shining a fond light into the professional collaboration of Amos Tversky & Danny Kahneman. This will be a reward for doing something special ;D
• The Big Short – Michael’s treatment of one of the pivotal moments of this century so far
• The English Constitution – Walter Bagehot’s take on the UK’s unwritten constitution
• Lombard Street - according to Wikipedia: "Bagehot was one of the first writers to describe and explain the world of international and corporate finance, banking, and money in understandable language"
• The Madness of Crowds – definitely not rational economics actions, surely undercutting efficient market theory…?
• The Smartest Guys in the Room: epic folly, cynical pyramid schemes, and still on my shelf. The Enron story and the subsequent collapse. Whistleblowers everywhere - 

The Task

Let’s learn how to empower ourselves to make the best decisions possible, and de-mystify the jargon and de-fang the prognosticators – based on our own experiments!

Students everywhere: take control of your own learning in this domain, bring it to life with stuff more readily intelligible, and become passionate about such as important topic.

Feedback

Any thoughts, additions, amendments – whatever – please add in respectful and constructive comments below. Thank you!

Goodreads

I endeavour to record what I’m reading via my profile on Goodreads.

How to make a small Fortune

Some people say it's by starting with a big fortune and then buying a football club or string of racehorses.

However, the folks connected with Bear Stearns must be feeling it. It puts the performance of my FTSE ISA in a good light. :-s

I've been reading some articles in The Economist which make scary reading.

• This from 5th Nov 07:
• "Some think that Jimmy Cayne, Bear Stearns’s boss—fingered for playing golf and bridge while two of his bank’s hedge funds imploded—will be the next to pack his briefcase."
  
• This from 10th Jan 08 (when :
• "Mr Cayne had been under huge pressure to go, thanks to $1.9 billion of mortgage write-downs—leading to the bank's first-ever quarterly loss—and accusations that he had been more interested in improving his own performance at bridge and golf than shoring up his bank's standing in the markets.
• He will remain as non-executive chairman, continuing to command an eight-figure salary, after Alan Schwartz, a trusted lieutenant, takes over as chief executive. Mr Cayne's durability prompted one observer to dub him the “Harry Houdini of the boardroom”."
• This from 19th Mar 08:
• Bear's executives have lost billions.
  
• At $2 a share, the 5% stake held by Jimmy Cayne, the chairman and former chief executive, worth $1.2 billion at the shares' peak last year, is now valued at $11m (less than half of what Mr Cayne recently paid—mortgage-free, naturally—for an apartment in the Plaza Hotel).

For other investors (large and small), the damage is phenomenal (same article):

• "Lowlier workers have been hit even harder. Bear encouraged them to buy shares after it went public in 1985. Their purchases have pushed employees' combined stakes to one-third. Some have lost their main nest eggs, others the money to put children through college. Worse, half or more of the 14,000 staff are expected to lose their jobs. Counsellors are on hand. Comparisons are being made with Enron, where the employees lost $2 billion in pensions.

  The shock is fast turning to anger: that bosses left it so late to seek capital; that employees were prevented from selling shares because an earnings announcement was coming; and, above all, that JPMorgan Chase has probably got a bargain.

  Allied with big shareholders such as Joe Lewis, a Bahamas-based billionaire who spent $1 billion on Bear stock last year, some employees like to think they can muster a majority against the deal when the vote is held in six weeks. On March 18th Bear's shares closed at $6.51, reflecting the chance of a higher offer."

That's a shocking turn-around.

Jimmy Cayne will presumably get a pay-off in the tens of millions of dollars. As our friends in the US say - go figure.