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SuperFreakonomics is a thought provoking sequel to Freaknomics. This book takes forward the core theme from the first book – People respond to incentives in myriad ways. Unlike other books on economics, SuperFreakonomics has no big concepts or frameworks. It does not conform strictly to a book on macro or micro economics.

Instead, the book – backed by empirical data – argues;  how hard economics drive prostitution, how seemingly innocuous TV shows had impact on the crime in America, why terrorists should buy life insurance, how much good do car seats do, why the simple solutions to global warming are being ignored and finally why most of us really are not that altruistic when donating. The book drives you think critically and explore the hidden side of simple life events. I will argue that it is a book for psychologists and not economists.

Perhaps none of the themes catch the attention of a mainstream economist. But we face most of the themes in our daily lives and the book will make us see these life events differently. That is what makes this an interesting read. For those who enjoyed Freakonomics (as I had), this will be a must read. Read reviews on Amazon.

This book tracks the history of credit derivatives market from their roots in J.P.Morgan to their eventual role in Wall Street collapse in 2008.

ABS and MBS have been around for sometime that allowed banks to offload credit risk to other investors. However J.P.Morgan had a peculiar problem with their corporate lending. They needed a way to keep the loans on their books yet find a way to offload the risk. Out of this need are born Bistro instruments which allowed banks keep the loans on books yet remove the risk. Better still, they could reduce the capital charge required by regulators against such loans and thus free up capital.

This concept is later borrowed by other investment banks and used to create derivative products on residential mortgages. Thus we have CDOs (Collaterized Debt Obligations) that are born with a premise that risk will be spread across the system instead of concentrating with a few banks.

Soon banks set-up assembly lines and started churning out CDOs in various forms worth $billions of dollars. In the then low interest rate environment, investors are too happy to snap up the instruments offering higher return. Eventually the supply of underlying mortgages is not enough to meet the demand. Thus are born CDO derivatives and CDS that allowed investors speculate on the prices of mortgages.

All is well until interest rates are low and the default rates on mortgages are minimal. Both have changed to worse by mid 2007. Banks and brokerages who themselves held a few super-senior CDOs on their books hoping for higher return were staring at huge losses. To make matters worse the ABCP market that supplies short term funding for brokerages dried up. A panic took hold that finally altered the westeren financial system permanently.

As the book describes, derivative instruments – used for the right purpose – are never meant to be harmful. However once the greed is mixed it became potent weapon.

Read this book if you are keen to know the history behind the collapse of our lifetime. Read reviews on Amazon.

This book is a definitive account of the events leading up to the crash of 2008. The narration of the events starts from March of that fateful year when Bear Stearns agreed to be sold to JPM at dirt cheap price. This was the beginning of the end of famous wall street business model. The book gives a blow-by-blow account of the bankruptcy of Lehman, government’s take over of world’s largest insurer (AIG), Freddie Mac and Fannie Mae; conversion of Goldman and Morgan Stanley to banking entities and fire sale of Wachovia to Wells Fargo. It is interesting to read about the actors and their personalities at the heart of the crisis including Paulson, Geithner, Dick Fuld, Bernake, Dimon, John Mack, just to name a few.

Although the book does not dwell much into the actual reasons for the wall street collapse, it still offers a good chronicle of every event that led to the final blow-out of the crisis. Read this book if you are keen to know the inside story that led to the fatal fall of wall street. Read reviews on Amazon

This is one of the most well researched books written about India and about our success and failures since independence in economic and social spheres. While India could be proud of our democracy, science and technological advances, innovations at the bottom of the pyramid and our outsourcing success – a lot is desired on all other indicators.

Each chapter in the book narrates how we fare on key economic and social indicators, how we compare with developed world and what could be done to progress to the next level. the book is also practical and narrates the inherent conflicts and vested interests in our democratic system. The book is inspiring and changed my “nothing-will-happen-in-this country” mindset. This is a must read and a good addition to the collection.

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This book is an interesting read about the personal life of Indira Gandhi. It is difficult for most of us Indians to talk impassively about the life of Indira Gandhi as a person and not as the prime minister of India. During her tenure and even till today she is said to be most hated or the most loved prime minister of India. No other prime minister evokes such extreme reactions.

But this book is a revelation about the “real” Indira Gandhi. Contrary to what people say she was not a born leader (if leadership is ever innate). Indira Nehru was aloof and frail as a child and in her youth. She was a mediocre student and her initial public appearances for disastrous. No one including Nehru had high expectations of her. Nehru had dreamt that his only child will be a great leader one day but later he too moderated his expectations. She had a troubled childhood and even more troubled marriage.Indira’s letters to her trusted friends abroad show that she wanted to lead a normal life.

After Nehru’s death she was invited to head the congress party. All the senior leaders of the party thought she is just a beautiful doll that they can use to get votes. What happened after that is a remarkable rise in Indian political history. Indira Gandhi rose to become the most decisive and courageous prime minister that India ever had. She became politically adroit and a great public speaker.

If her first decade as prime minister was great for India the next decade was disastrous. The infamous emergency and her eventual downfall are well known. But very few people realize that behind the curtains she was emotionally weak and depended on men who could have led her in the wrong direction.

This book is a must for any one who wants to know more about the troubled 70′s of India and about Indira Gandhi’s personal life.

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Outliers tries to debunk the theory of “self-made-men”; about how we often associate success with just the personal qualities of individual like intelligence, hard work, courage. The point in the book is that there are many men with same qualities out there but not everyone is as successful. We owe something to our parentage and patronage. It makes a difference when we are born, where we are born, our cultural legacy and the opportunities presented to us (sometimes by just luck). We cant simply reach top on our own.

The takeaway from the book for me is not to look down upon successful people but appreciate the ones who were not as lucky enough to reach there. The book is dotted with interesting stories of Bill Joy, Bill Gates, Mozart, Beatles, Jewish lawyers in New York and Oppenheimer. It is interesting to read that today’s software tycoons were born between 1954-56 and that most successful Jewish lawyers in NY were born in early 1930s.

Just like in “Tipping point” and Blink, the author presents some interesting theories in the book like the 10,000 hour rule. Another one is “Hofstede’s Dimensions” of cultural differences and how our culture shapes our thinking. I shall be reading Hofstede’s book “Culture’s Consequences”

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It is hard to keep this book in any one category, particularly so when the author is a philosopher, a literary essayist and most interestingly a quant trader. The message of this book is the futility of creating complex mathematical models (and in believing them) to forecast future events. The real life is too complex and random to fit in any models.

Most of the book revolves around the limitations of Gaussian bell curve. He shows with examples how the predictions based on bell curve could go wrong when applied to scalable variables such as stock market returns, bank defaults, personal wealth etc. When one single random event can erase decades of gains (like personal wealth etc) it is time to stay away from forecast pundits.

He also talks about the typical statical biases such as confirmation bias, survivor ship bias, pattern finding, sampling errors etc. While these may look too basic we are in recession today because the CDO models used had all these statistical biases built in. (note that the book came well before the current recession)

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If there is even a one percent chance that America will be attacked by any organization in the world, America considers it as credible threat and acts now. Whether the threat is real or not is not important. This is the Cheney Doctrine that governs American Policy for Foreign Affairs and terrorism in future.

The book starts on the day of September 11 attacks and sketches American response to the event. Interesting insights and anecdotes into the dealings of power centers at Capitol hill, various intelligence agencies and foreign governments make the book really interesting. Read the book if you like reading current history.

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This book goes in great detail on the collapse of Enron. One of the best books on Corporate Scandals and probably the best after Barbarians at the Gate. It is hard to believe that a Fortune 50 company could ever make such a mess of its finances and tries to cover it up with accounting fraud & bogus deals.

At the heart of the collapse of Enron are a set of people with diverse characteristics. Some are driven by personal greed. Some are driven by fame. some just thought any amount of fraud is okay if it gets new business. Some are over confident that the empire they built can outlast every disaster, Some are just incompetent. And there were few good men who tried to save Enron until the last day.

Keeping the people reasons apart there are some bad business decisions and financial gimmickry that led to Enron’s downfall.

A. Mistakenly applying Mark-to-Market accounting used by Investment banks to an old world asset-heavy Energy business. It simply allowed Enron to book 20 years of Energy contracts revenue in the first year itself. It was just the revenue booking without actual cash inflow. This inflated the P&L but brought in little cash. (SEC approved it!)

B. Enron sunk billions of dollars into bad projects in countries it was never familiar with. That was hard cash burnt for the bad projects. There was hardly any revenue coming in. From the start Enron was on a collision course with two competing businesses. One showed billions of revenue on paper with hardly any cash. Other suck up all the cash but got no revenue. It was a disaster in the making

C. Obviously with no real revenues and expenditure going through the roof Enron would have collapsed long back. What kept the lights still on is its accounting creativity. Enron hid its debt off the books by simply transferring its debt to a bogus SPV and showing part of it as revenues!. It got into murky deals with banks and showed loans from them as revenues. It was living off its credit cards in a lavish way. All that was needed to bring Enron down was a bad credit score. It did happen and Enron was downgraded to junk bond category. Enron went bankrupt in 6 weeks after it was down graded.

The story of Enron is probably a corporate almanac on how not to run a business. Every body who is into business should read this book to really understand what went wrong when something goes wrong.

It was all the business villainy in one single company. Auditors helped Enron do accounting fraud to get more consulting business, Investment Banks gave better stock ratings to Enron to get more advisory fee, Banks gave loans and showed it as revenues simply to get even more loan deals, politicians turned blind eye to receive more election funding. The people who lost everything in the end are Enron’s employees and the people who invested in Enron stock. It was the entire American corporate rot in one single story.

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Authors define Blue oceans as unchartered territories where existing competition is made irrelevant. As we have read in marketing stories and acknowledged by authors too, the term “Blue Oceans” is new but not the existence of it. Every day new industries are born and new market segments are defined in the world. This is an outcome of a few companies striving to create a brand new value proposition in a crowded competitive space.

While the concept and existence are not new, the book does a good job of defining new strategic frameworks to achieve a viable blue ocean outcome. Authors hope these frameworks can help business people to redefine new market boundaries in a process oriented manner rather than as an accidental outcome.

My opinions of this book are mixed. While the definition and articulation of new frameworks is certainly helpful, on the whole it is an old wine in the new bottle.

Strategy Canvas and ERRC are two useful frameworks to analyze existing industry space and to define how new propositions can be evolved from it. Strategy Canvas defines customer defined value parameters on the X axis and a scale from Low-High on the Y Axis. You then need to plot yours and your competitors Value curves. The purpose of this framework is to slot all the parameters into ERRC grid.

The end result of using these two frameworks is that we can precisely identify value parameters that need to be eliminated, Reduced, Raised or Created from scratch.

The book identifies 6 paths around which a company should first attempt reconstruct the market boundaries. By reconstruct it means beyond our prevalent assumptions on market space

1. Look across alternative Industries: Try to understand the alternative choices available to customers across different industries compared to your industry offerings.

2. Look across strategic groups within industry: Look across different market segments within same industry and decide whether boundaries of market segments in your industry should remain as they are

3. Look across industry buyer groups: Look across different buyer groups in the industry across influences, users buyers and so on. Decide whether your offerings can be made more appealing to a different buyer group

4. Look across complimentary products and service offerings. This is nothing but the 6th competitive force defined in “Only The Paranoid Survive”

5. Rethink funcional and emotional orientation of the industry. Can your products move from a pure utility based industry view to a one driven by emotional overtones.

6. Participate in shaping external industry trends over time rather than trying to adapt to them

Based on the market analysis along above parameters and after reconstruction of the market boundaries the book moves on to the next step of actual strategy definition.

The book recommends 4 steps for arriving at a final strategy plan for Blue Oceans.

1. Visual awakening : Understand where you are
2. Visual Exploration : Define where you want to be
3. Visual Strategy Fair : Draw your strategy to get there
4. Visual Communication : Tell your people what this strategy means to them

Until here is the best part of the book. It does a poor job on execution part as most of the content in these chapter is generic. It does not come out clearly how to derive an implementation plan and how to execute the process

In the end the case studies on how 3 different industries moved through phases of Blues oceans is worth going through.

On the whole,I suggest readers to focus on first few chapters and try to internalize the frameworks and strategy definition process. Rest of the book can be largely ignored.

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