My Side of the Street

 

by Jason DeSena Trennert

I’m always up for a good book with an insider’s look at the world of finance and hijinks on Wall Street. The tri-named author of this book, who I’ll call Jase because that’s what he goes by and because his name is so long, seems to have been an insider for something like thirty years, lately as the owner of his own research firm. He has plenty of interesting stories, unusual anecdotes, and some unheard tales from inside the world of finance. Unfortunately, many of his stories fall a little flat, and none of them deliver on the promise of this book’s enticing subtitle. I expected a “warts and all” look at how Jase and his moral bearing, ethical, everyday friends and colleagues bested the “wolves, quants, and flash boys” in battles in the trenches of high finance, but after the subtitle, there is nary a mention of any of those things, much less any high pitched, multi-million dollar investment battles. It’s just Jase going about his business being a good fiduciary representative.

All that’s well and good but I expected a lot more. At least Jase is a skilled writer. He’s clear, succinct, and highly readable, at times humorous, at times philosophical, at times poignant. His stories and anecdotes for the most part are worth telling and reading. I don’t know that his 9/11 story added much to the book (it certainly didn’t add to the diaspora of stories surrounding that infamous day), but it’s nice that he has a personal take on these things and it certainly makes us feel for him more as we get to know him better. Still, with no thread to tie the stories together, the whole book just muddles through. Some of the stories seem to be thrown in at the last minute because Jase remembered something and wanted to share it with the reader. Maybe this isn’t a bad reason to include something interesting, but I would have preferred a more well-constructed approach.

All that said, I really enjoyed this book. I would have preferred some more fireworks and war stories, but I still felt that I got something out of it for the effort of reading the whole thing. Maybe Jase can get together with another Wall Street insider like Joshua Brown, author of Backstage Wall Street. Beefier, more broad-ranging stories would make a best seller for sure, which this, unfortunately is not. Still I give it three and a half dollar marks.

The Innovator’s Hypothesis

by Michael Schrage

One of the things I liked about this book is, the author starts out by immediately explaining how the Innovator’s Hypothesis works and what is used for, as well as how it works. One of the things I didn't like about this book is, after that, he spend six chapters or so telling stories that are supposed to support the effect of the 5x5x5 (five people, five days, five experiments) strategy that tests, and hopefully proves, The Innovator’s Hypothesis. Is it fluff? Well, not exactly. Is it useful? Yeah, kind of. Then what’s the problem? Well, saying that cheap fast, easy experiments that test a workable hypothesis on improving a business is easy to say, but,

it isn't all that easy to do. Plus, if you are in the twilight of your career (hello, me), are you going to undertake a bunch of experiments to improve your business? Yeah, I didn't think so.

Obviously, there’s more to it than that, which is what this book is about. The author is a long time business consultant who draws on his experience to demonstrate his analysis of different types of successful (and not) businesses. Amazon, Google, P&G, Blockbuster, big pharma companies, credit card companies, and more, all have been part . There is lots of food for thought and plenty of practical advice. I thought that the 5x5x5 model the author propounds was clever and workable, especially towards the end of the book when he explains that you don’t necessarily have to stick to the 5x5x5 formula. I also thought that the examples he provides will be quite helpful to people who really read this book with a mind to doing experiments in their own company. (I, myself, have no intention of attempting this, because there is no benefit to my company that will directly impact me.)

Something that I thought was kind of glossed over in this book is coming up with the testable hypothesis is more difficult than I think most people appreciate, and, once the hypothesis is in place, coming up with the experiments to test the hypothesis also will be a considerable challenge. To be fair, the author provides guidelines for executing both of those tasks, I just think he makes it sound a lot easier than it really is. From an execution standpoint, everything is fairly cut-and-dried if you follow the author’s train of thought, but ultimate success and meaningful results will be, I think, much harder to come by.

This book is intelligently written and the methodologies and logic supporting the author’s arguments are well-documented throughout. As long as the reader has no misconceptions about how difficult it might be to implement and execute these strategies in their own business, I think most business operators and company managers will at least gain some valuable perspective from this book, even if they don’t start doing their own experiments. I too was able to imagine having been motivated by this book earlier in my career, but business experiments sound like a lot of hard work, so I leave them to somebody else to actually do. Still, the book is good, the writing is fluid and clear, and it gave me a lot to think about, so I value the whole package at three and a half dollar marks.

A Force for Good

Edited by John Taft

After reading this book, I actually wrote three reviews. Two of them I ended up discarding because after rereading some sections, my opinion either changed or I thought of something better to explain what I felt on reading that part of the book. That makes this the fourth review I’m writing.

The original review title was: “A step in the right direction that (unfortunately) won’t get you very far”. I went with that because I felt that the book had too many vagaries as far as actual execution of a financial plan. That is to say that I found the premise (promise?) of this book exciting: Get a bunch of qualified, serious-minded, economic thinkers and doers, and have them analyze the recent economic crisis and the current state of economic affairs so that they can then lend us an ethical and moral standard on which to base future economic activity so that everybody ends up better off and economic crises become things of the past. But in the end, they didn’t really come up with a way to make all their ideas become reality. Still the book has a lot of positives.

The list of essay writers reads like a veritable who’s who of economic thought, which raises the expectations higher. The editor, himself a leading economic thinker, explains how the book came into being and what it is trying to accomplish, and then, we plunge right in.

The chapters and essays come steadily and relentlessly with many being quite short and concise. Some essays provide history lessons, some just analysis, some a combination thereof. All of them present some ideas for avoiding financial crises in the future.  Most are very dry, but everything was quite readable. The common tenet throughout the book is, companies and individuals who are entrusted with other people’s money need to act responsibly, not be greedy, and use a moral and high ethical approach to business. It sounds good, and more than a few of the contributors make it sound achievable. A number of the essays, however, fall back on legislation and legislating bodies (politicians) as the way to go, but given the current pusillanimous state of Congress, those ideas (I thought) fell flat.

That is to say, there is absolutely nothing wrong with any of the ideas and proposals and supporting theoretical arguments that are presented en masse by the great thinkers assembled here, except, there is no plan of execution and nobody is going to undertake it upon himself or herself to be the one to start the great “ethical economics at any cost” movement. (For one, it’s hard to make much money doing that.) I like what the writers have to say for the most part, and I like the presentation and concept of this book. Ultimately though, high-minded does not always result in high-achieving. Of course, we want our financial advisors and consultants to behave themselves. Of course we all want to play win-win games that benefit everybody. Of course, we want to be part of something that is great and beneficial to all of mankind. Unfortunately, we are all human, and none of the writers has a clear concept of how we can motivate people to ignore their own profitability and success and sacrifice it for something else. (After all, as a member of society, if I make myself a little better off, isn’t society a little better off for my achievement, as long as I haven’t taken something from another member of my society?) In the end, I give this book three dollar marks for its readability and for being a highly informative book. I just don’t think it is all that good.

The Intelligent Option Investor

by Erik Kobayashi-Solomon

Having only started trading options in the last year, I've had good success so far, but I’m always willing to learn more. Mr. Kobayashi-Salomon, a former Morningstar strategist who now runs his own company providing institutional investors with analysis and strategies,  now brings us The Intelligent Option Investor, a book that is not only about options, but about finding the true value of stocks and then acting on those findings within the limits of one’s risk tolerance (and ultimately, budget). The information could just as easily be used for regular stock investing, but it is targeted for broader use in the options market.

Based mainly on the Black-Scholes-Merton valuation formula and the resulting BSM “cone”, the author builds a formidable structure of value analysis tools and methods, carefully illustrating and explaining their actual application not only in finding the value of stocks, but also in finding the projected value of those stocks based on the options market prices that lie either inside or outside the valuation cone. It is heavy going but is very useful information that I found very useful and intriguing. This first section of the book is also very important to understanding the rest of the book, which deals entirely with options. The author demonstrates the uses of the BSM cone in a number of different option strategies. Because it is all about making the reader “intelligent”, this book is not so much about finding the best strategy, per se. So it tells you what to look for, what to expect, and then leaves it to you to do the grunt work of figuring out where to put your money. (There are plenty of online tools for achieving this, mostly just by using a good brokerage’s website.)

Personally, I found the value cone quite intuitive, but because I don’t have much experience with options, it really gave me a lot to think about and consider in my own investing (not just options). A more experienced option investor might feel talked down to, but nothing is lost by going over this material as a review or refresher. Another thing I found valuable is that this book provides different types of option investing strategies based on the BSM cone. This is great for me, because I am becoming more risk averse, so I have no problem using the strategies that limit downside risk and avoiding the big risk, big upside potential strategies. It’s nice that the author gives the reader these kinds of options (sorry).

One caveat is, you should already know how to trade options before diving into this book. The author doesn't spend a lot of time telling you what options are, how they are traded, and what the fundamental differences are between the options types. It really just sticks close to its title and the premise that it will make you an intelligent options investor, because it assumes you are already an options investor. In the end, I found this book really did teach me a lot about options that I didn't

know and it does make me a more intelligent options investor. The careful explanation of the BSM cone and is application makes this a valuable book for any investor, but for an option investor, it’s the most useful tool I’ve ever run across, which is why I rank this book at five dollar marks.