Recommending Books for Purchase (Bulletin 8 - January 2018) - Choice Review: Finance

In this edited volume, Jones (Univ. of Bristol, UK) has done an effective job integrating wide-ranging topics into a coherent argument for identifying values for biodiversity. The author makes the argument that although the accounting profession has in general begun to embrace environmentally sustainable practices and provide methodologies for accounting for sustainability, it has not yet effectively incorporated protection of biodiversity into those practices. Fourteen chapters written by a selected team of experts highlight case studies, primarily in Europe, in which protection of biodiversity is identified and valued according to varying procedures; the general conclusion is that firms engage in this type of accounting in different ways with differing levels of success. Other chapters offer techniques that could incorporate the valuation of biodiversity into standard accounting methodology (i.e., through the concept of full cost accounting). All the authors indicate a need to account for the value of biodiversity in firm practices, and several question the overall benefit of identifying a specific value for the protection of species, invoking Diamond and Hausman’s question posed in the Journal of Economic Perspectives in 1994: is some number better than no number? This question will likely require an answer before such practices become commonplace.

Gerlis (art market editor of The Art Newspaper) opens with an anecdote designed to illustrate the peculiarity of the art market: a willing buyer was denied the chance to complete the purchase of a piece in which he was interested. This story serves to set the stage for the author to analyze a market that sidesteps the usual restrictions of supply and demand and functions without resort to rationality. Gerlis selects a handful of other familiar investment markets and compares operations in them to the art market. Some alternatives would be on most people's lists of investment options (stocks, gold), while others are similar to art esoterically (wine, luxury goods). The author identifies the characteristics that distinguish the various markets and discusses the similarities and differences with the art market deftly, comparing the risks and potential returns in art with other options that have either an intrinsic use-value (i.e., property) or an enduring sustainability (i.e., gold). The book draws on extensive research and interviews with key players in the markets to clarify the specifics of art as an asset class. The question mark in the title provides a clue as to Gerlis's conclusions regarding the appeal of art as an investment.

Although white collar crime represents disproportionately significant financial (and other) consequences for its victims, it remains a relatively underrepresented area of study in criminal justice and criminology. In part, white collar crimes—at least in neoliberal democratic states—are only reluctantly regarded as crime. Often they are seen as simply the vagaries of the free market operating in predominantly capitalist economic systems. Eren’s work on the conflation of Bernie Madoff’s Ponzi scheme with the financial crises in the late 2000s in the US and the UK is a welcome case study in the portrayal of white collar crime. It employs a dense methodological approach, incorporating discursive analysis of media coverage of Madoff and the financial crises, and interviews with reporters who covered the stories as well as those who were covered by the reporters (Madoff and former government officials included). Eren incorporates a critical criminological perspective to examine how the narratives surrounding Madoff, the embattled SEC, and the financial institutions precipitating the economic crises hewed toward the atomistic blaming of the individuals involved as opposed to questioning of the value basis of the economic system.

When Charlie Munger (b. 1924) talks, people listen, especially if they want to know how to invest their money. Munger, who is the vice-chairman of Berkshire Hathaway, has provided invaluable advice to Berkshire's legendary founder, Warren Buffett ("Oracle of Omaha"), and many others. In this book Griffin (Microsoft) shares Munger's strategies. Using what Munger calls "elementary world wisdom," Munger's system balances risk and reward, maximizing fact-based data and minimizing emotion. Keeping it simple, Munger says, "I observe what works and what doesn't and why." Like Buffett, Munger draws much of his inspiration from post–Great Depression era investor Benjamin Graham, a "value investor." Graham looked for "mispriced assets" with values greater than people think. Relating Munger's advice, Griffin emphasizes doing one's homework and becoming a "detective" in researching companies to find investment gems. He also advises people to look for "moats"—barriers to entry that keep others from competing with one's business. Along with numerous Munger quotes, tips, and principles, the book has an extensive bibliography. All who are interested in finance will want this book.

This meticulous study by Auld (Carleton Univ., Canada) examines how certification institutions evolved as private governance initiatives to address social and environmental practices in the forestry, coffee, and fisheries sectors. The author describes variations in initial certification programs and analyzes why programs change and evolve over time. Efforts to reduce local versus global certification conflicts motivate this change; concerns by nongovernmental organizations (NGOs), pressure from government and intergovernmental institutions, and reaction from businesses may also impact the evolution of certification standards. The author formulates nine hypotheses relating to certification initiation and evolution, with the forestry, coffee, and fisheries businesses serving as case studies to analyze his hypotheses. He concludes that certification institutions are just as important as certification incentives. This study—although excellent—requires additional discussion and analysis of the effectiveness of different certification monitoring and inspections systems found in the businesses examined. Absolute and relative data relating to certification is somewhat fragmented and sometimes incomplete within each chapter; such data should be expanded and presented in a data appendix. Still, this is a significant book on the evolution of certification systems.

In this book, Pedersen (Copenhagen Business School and New York Univ. Stern School of Business; principal, AQR Capital Management) combines an academic background with hands-on experience in wealth management. His title is gleaned from his observations as a trader and analyses as an economist finding that financial market imperfections permit profitable investment strategies, which are limited in their success by active trading among market participants. Pedersen argues that investment techniques generate a return for managers because of delays (inefficiencies) in market price adjustments. He further asserts that the most sophisticated techniques in seeking those opportunities are found in hedge fund management, and he organizes them into three main categories: criteria for selecting individual securities; considerations when allocating a portfolio into major asset classes; and exploiting opportunities for arbitrage, pricing, and selling almost simultaneously the same or similar securities. In addition to his own insights into financial market investing, the author includes interviews with recognized masters of various investment strategies, including, among others, George Soros, Myron Scholes, and John A. Paulson. The book is designed to serve as a reference for financial market practitioners and as a text for students interested in financial markets.

This volume is truly surprising in the breadth of its coverage. While there are separate books available to cover such topics as business plans, choosing the form of an organization, basic accounting concepts, and valuing a business, this author incorporates them all into one volume while additionally covering the areas of financing sources and the entity’s cost structure. Woven throughout the book are several areas that the author holds critical to successful entrepreneurship: personality and risk tolerance, technological innovation, dealing with resource limitations, assessment of advantages and disadvantages of start-ups, and governance issues. The book is well written and quite technical when dealing with valuation models. There are two substantial cases that illustrate the application of material discussed to real world companies. An extensive index is included.

A report on a high-tech predator stalking the equity markets, this book by financial journalist Lewis illustrates the rise of the modern high-frequency trading system based solely upon speed, with participants making riskless trades for a few pennies per share that add up to billions of dollars annually. The book begins with the building of a direct line between the futures market in Chicago and the computer terminals of financial institutions and high-speed traders in "New Pricing" that line at a cost of $300 million. The book ends with the development of an exchange (IEX) designed to offer investors direct access to a trade that is executed at the midpoint of the bid/ask spread. Those teaching principles of economics and intermediate microeconomic theory can use some of the examples employed to develop a cost-benefit analysis of the current system of trading in what are now fragmented markets, with much of the trading not on public markets but in "dark pools." The researcher will find this volume a useful starting point while searching for the data necessary to quantify the benefits and costs of the current system for trading. Finally, the general reader will find this volume of great interest.

Kahan (Ohlone College) provides a brief account of one of the labor movement's hallmark events. The book opens with profiles of steel magnate Andrew Carnegie and coke manufacturing king Henry Clay Frick, both described as the most important individuals involved in the 1892 Homestead Strike. After a survey of the labor movement from 1600 onward, Kahan examines the political and economic developments that made Homestead a near inevitable showdown between capital and labor, highlighting the deceitful tactics of steel industry leaders. The chapter focusing on the strike itself vividly evokes the scene of conflict, while Kahan's conclusion examines the legacy of the strike within a diminishing labor movement. Though the book profiles the personalities on the side of management and government, it unfortunately treats the union simply as a mass of men, with the personal histories of its leaders left unexplored. Only Alexander Berkman's and Emma Goldman's lives are sufficiently explicated, though they don't enter the story until the end. The book's documents section contains selections from various memoirs, a union song, selections of testimony, and newspaper excerpts. Its flaws aside, this is a welcome, classroom-ready survey, entertaining and accessible to students.

Most books on real estate development focus on how it should be done; few reveal how it is actually carried out. Using interviews with successful developers in Miami, Portland (OR), and Chicago, Brown (Univ. of Minnesota) fills a niche with his narrative. In doing so, he describes the developer’s personality type (e.g., tenacious, visionary), depicts the development process, discusses the relationship between developers and architects (and good design), reflects on the marketing and selling of projects, and notes how projects create places. Throughout, Brown recognizes that good development is driven by more than a desire to maximize profits. A real strength of the book is its presentation of key ideas using extended examples and the words of those interviewed by the author. Bracketing the core chapters is a discussion of how citizens can have influence with developers during public review processes. Brown is not shy in his admiration for developers and their role in the building and rebuilding of cities; however, his stance is uncritical, and the few forays into genetics and social psychology seem superfluous. Nevertheless, the book has real value for those unfamiliar with real estate development, and it will be particularly useful for students.

Lu’s work is a must-have for anyone teaching or studying finance. Even if you have a shelf full of books about Warren Buffett and his investing style, this is an excellent edition. As noted in the book’s subtitle, Lu provides a chronology of Buffett’s successes in case studies of 20 investments in the period from 1958 to 2011. Moreover, each of the studies provides a detailed discussion of the firm acquired, and the author maintains a consistent pattern of analysis: why the firm was attractive, what changes were made, etc. Lu provides analysis from his expertise as both a portfolio manager and an economist, and the case studies are concise, insightful, and provide lots of useful data as illustration. The writing is excellent and engaging, and Lu delivers on what he promises in the introduction: he tells Buffett's story through successful investments. It is therefore a fascinating bridge between the biographies and the “how to invest” books. One would assign this book to students just to have them learn from Lu’s use of primary source materials, his approach of seeking to understand the qualitative factors and context in each case, and his upfront description of his methodology of valuation.

“Encyclopedic” best describes this remarkable account of investing over the course of Boston’s long history. Under the auspices of the Massachusetts Historical Society, Allen (principal, Allen Associates) provides countless vignettes of individuals, families, and institutions in addition to lessons in financial terminology and processes. His research spans documents, interviews, and previous studies. Insights abound in Allen's book, such as the observation that by the 1830s, “individuals came to see interest as the improvement of money ... no longer as a mutual aid among men.” Institutions arose to formalize financial practices, facilitating and responding to Bostonians’ changing economic activities. Allen effectively connects financial pursuits with Boston’s economic and social evolution. He notes that endowment management and international trade dominated the earliest stages, but industrialization, railroads, mining, and securities brokerage led the 19th century. The 20th-century practices and fluctuating fortunes of banks, trusts, pension funds, mutual funds, endowments, and venture capital firms fill most pages of the book. Finally, Allen concludes that Boston’s traditional attitudes “endure,” with prudence trumping “the quickest or largest return.” To know if this remains accurate, readers need to learn more about recent outcomes than they do here. Well written and engaging throughout, with endnotes full of additional details and resources.

Writing an analytical book that does not overcomplicate material and overwhelm the reader is close to impossible. However, Davenport (Babson College; editor, Enterprise Analytics, CH, Mar'13, 50-3938) and Kim (Korea National Defense Univ., South Korea) have produced an accessible, practical work dealing with complex material by using real world situations to engage the reader and formatting the material almost in the style of a novel while sticking to the process theme so prevalent in education today. The authors' goal is to guide the reader in determining when and how to use the mass of analytical data that organizations collect to make better decisions. They address who needs this analytical information and why; the stages of analytical thinking, which they present as framing the problem, solving the problem, and results presentation and action; and when such analytical thinking is important and what is considered valid. This reviewer found the non-numerical examples sometimes helpful but occasionally annoying in their simplicity. Overall the authors do a nice job of presenting analytics in a manner accessible to a wide readership without deemphasizing complexity. See related, Getting Started with Business Analytics by David Roi Hardoon and Galit Shmueli (CH, Aug'13, 50-6856).

Ladies of the Ticker adroitly and effectively targets gendered myths—as did many of the women it portrays. Robb (William Paterson Univ.) deftly details engaging narratives of individual women who sought gains in financial markets, and he weaves their stories together with evidence about the activities and outcomes of countless others. Robb’s work on women in US financial arenas between 1870 and 1930 builds on recent decades of research to reintegrate women into the many areas of business activity in which they operated, often quite successfully. He contrasts women’s “actual behavior and investment choices” as revealed in archives with how popular culture portrayed them, reminding us of the risks of relying on commercial media for evidence. Legal, political, and social dynamics undermined female investors, including gender-based criticisms and double standards that assailed their character, attacks that somewhat diminished through the 1920s. Robb highlights Victoria Woodhull and her sister, the “Bewitching Brokers,” and Hetty Green, the “Witch of Wall Street,” among many others. Beyond high profile figures, he draws attention to a wide range of other female investors across class lines, including victims and victimizers, for a fascinating and well-argued read.

Despite its lurid title, this is a serious book. Drawing on decades as a financial practitioner, Coleman (Univ. of Melbourne, Australia) offers a blunt analysis of modern finance. He finds that financial theory floats uselessly in the academic clouds, its notions of capital asset pricing and efficient markets largely irrelevant to the messy real world it supposedly serves. Although his depiction of theory divorced from practice is familiar, Coleman's portrayal of applied finance and suggestions for reform are notable. His interviews with financial fund officials and comprehensible interpretations of arcane financial instruments provide some feel for the inner workings of the financial sector, which collapsed so spectacularly in 2008. Staffed with creative, self-serving individuals, the financial industry has little concern for the public interest; private gains always trump public risks. Prohibiting one socially irresponsible financial procedure only prods clever practitioners to develop another; regulators are always one step behind. The author's solution is to criminalize outcomes rather than procedures. Coleman argues that executives causing the death of a company, like individuals causing the death of a person, should be prosecuted. Bankrupting a company that is "too big to fail" should never leave its CEO "too big to jail."

Gogerty, who has extensive experience as a portfolio manager and adviser to institutional investors, provides considerable sound advice to individual investors and professional capital allocators. Using evolution as the template to understand growth, the author's key argument is that the economy is a complex adaptive system that can be best understood through its parallels with equally complex adaptive ecological systems. As understanding ecosystems starts with thermodynamics, genes, organisms, and their niches, similar strategies can be applied to economies by using the parallel concepts of inos (informational units of innovation with the potential for aiding in economic value creation), organizations, and business clusters. Although this analogy has some slippage, Gogerty concludes that because evolutionary systems like the economy have so much feedback and so many complex new structures being created, there are simply too many contingent pathways to be able to correctly anticipate value’s next change, making it very hard to invest wisely. Still, the author offers some useful advice--especially pitfalls to avoid--to give the investor food for thought, without promising too much. The volume is packed with interesting information and questions serious investors should ask themselves, such as when and how a firm’s earnings stream will ultimately die.

Malin (Colorado State Univ.) has produced an incisive inquiry into the history and future prospects of uranium mining in the American West. Through ethnographic study, she tracks contradictions that exist in relation to the global renaissance of nuclear power, especially as nuclear power relates to the quest for alternative fuel sources. Malin profiles emotions and actions defining communities in the American West that benefit and support uranium mining as well as those that resist and loathe it. She deftly portrays this complex relationship, avoiding a distillation of rural and poor communities versus developed and wealthy communities and offering needed reminders on the web of relations, and constellation of costs, that define the current paradigm of “all of the above” energy policies. The book most importantly provides a strong qualitative method for understanding environmental justice and situates the positive and negative implications of uranium mining in a way that underscores an image-driven “local to global” relationship. Though not a deficit, Malin's focus is chiefly on Western settings and impact, with scant attention to analogous international communities; readers must extend their research to other texts for commentary in this area. A vanguard contribution to examining the pitfalls of alt-energy zeal.

Now in its fourth edition, Qfinance (1st ed., CH, Mar'10, 47-3909) is one of the best overall resources for finance professionals and finance students. Although the information contained in the signed articles can be found elsewhere, Qfinance brings it together in one reference source. This volume is organized in ten substantive sections: best practice, finance checklists, calculations and ratios, finance thinkers and leaders, finance library digests, country profiles, sector profiles, finance information sources, quotations, and dictionary. Each section has a different page layout. Most sections include a brief bibliography or resource list, usually containing at least one reference source and/or one website. Individual country profiles and individual sector profiles include a general statement in the introduction indicating that government sources are used as well as Whitaker's Almanack; it points the user to the website, which will be updated. Qfinance covers the formulas used to track individual stocks; the way to report financial data and the appropriate numbers to use in figuring the calculations; and the financial outlook for different countries and market segments. A detailed table of contents and an index assist users. See also the Qfinance complementary free website http://www.qfinance.com/home.

Written by a leading financial journalist, Smart Money is a welcome and inspiring counterargument to the post-2008 vilification of the finance industry. Interesting and well-written, the book shines a light on the virtues of financial innovation. Part 1, “Lessons Badly Learned," sets the stage with three chapters that trace the extensive history of the industry in meeting the needs of individuals. Part 2, “A Force for Good," comprises six chapters that include numerous examples of creative financial ideas aimed at benefiting society, including social impact bonds that channel private funds for prisoner rehabilitation and a drug-development “mega-fund” that raises capital for anticancer drugs. Palmer traveled to the centers of finance around the world and then wrote an enlightening book that provides a new perspective on an important and timely issue: banking is capable of doing good, and the industry offers a powerful means for solving intractable social problems.

This book is all about clearheaded thinking and observation of problems in business and, once they are identified, how to develop clearheaded strategies to solve them. The authors place the emphasis on managerial action rather than digital formulas. To help diagnose challenges they have created a “Daily Waste Score Survey” to quantify and rank problems requiring managerial solutions, and they categorize them into five categories or “traps”: The Expertise, Winner’s, Agreement, Communication, and Micromanagement Trap(s). This structure focuses largely on “management” as a series of human interactions and observations that are directed within the corporate structure and internalized by the manager. This is a close relative to “management by walking around,” but it’s far deeper than that. In this lucid, clear, and engaging text, these processes are illustrated with ample practical examples that speak directly to the reader. Menon and Thompson have reminded us that clear thinking and attention to detail in the development of a course of corrective action that chooses appropriate tools when applicable is something we all need to be reminded of in this perhaps overly digitized age.