A lively, provocative examination of a little-understood financial realm.
A history of hedge funds that also looks at their role in the recent market crash.
Using his extensive background in international finance, Washington Post columnist and Council on Foreign Relations senior fellow Mallaby (The World’s Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations, 2004, etc.) effectively combines an insider’s knowledge with a colorful storytelling ability. What we now know as hedge funds began in the late 1940s as a “hedged fund” invented by a low-profile investor named Alfred Winslow Jones. By then nearing 50, Jones had traveled the world before becoming a Fortune magazine writer. In clear, accessible language, Mallaby explains how Jones devised a specific combination of buying and selling stocks simultaneously, which allowed him to capitalize on bull and bear markets alike—i.e., he hedged against market downturns while riding higher on market upturns than most other money managers. After relating the Jones saga, the author provides a mostly chronological account of later investors who earned billions from variations on the Jones model. Mallaby avoids the sex-drugs-and-rock-’n’-roll aspects of the fast pace and fabulous wealth within the hedge-fund realm to concentrate on the buy-and-sell philosophies promulgated by the “boys.” And it is indeed a boys’ world—in more than 400 pages of text, no significant female players emerge. In the final third of the book, Mallaby explores the role of hedge funds in the horrific collapse of markets during the first decade of the 21st century. The author explains why he believes hedge funds are less of a risk to the markets than banks and insurers that grew too big to fail. One caveat: Hedge-fund managers usually invest lots of their own money, which means they lose wealth when clients lose wealth.
A lively, provocative examination of a little-understood financial realm.Pub Date: June 14, 2010
ISBN: 978-1-59420-255-1
Page Count: 448
Publisher: Penguin Press
Review Posted Online: Sept. 17, 2010
Kirkus Reviews Issue: March 15, 2010
Striking research showing the immense complexity of ordinary thought and revealing the identities of the gatekeepers in our...
A psychologist and Nobel Prize winner summarizes and synthesizes the recent decades of research on intuition and systematic thinking.
The author of several scholarly texts, Kahneman (Emeritus Psychology and Public Affairs/Princeton Univ.) now offers general readers not just the findings of psychological research but also a better understanding of how research questions arise and how scholars systematically frame and answer them. He begins with the distinction between System 1 and System 2 mental operations, the former referring to quick, automatic thought, the latter to more effortful, overt thinking. We rely heavily, writes, on System 1, resorting to the higher-energy System 2 only when we need or want to. Kahneman continually refers to System 2 as “lazy”: We don’t want to think rigorously about something. The author then explores the nuances of our two-system minds, showing how they perform in various situations. Psychological experiments have repeatedly revealed that our intuitions are generally wrong, that our assessments are based on biases and that our System 1 hates doubt and despises ambiguity. Kahneman largely avoids jargon; when he does use some (“heuristics,” for example), he argues that such terms really ought to join our everyday vocabulary. He reviews many fundamental concepts in psychology and statistics (regression to the mean, the narrative fallacy, the optimistic bias), showing how they relate to his overall concerns about how we think and why we make the decisions that we do. Some of the later chapters (dealing with risk-taking and statistics and probabilities) are denser than others (some readers may resent such demands on System 2!), but the passages that deal with the economic and political implications of the research are gripping.
Striking research showing the immense complexity of ordinary thought and revealing the identities of the gatekeepers in our minds.Pub Date: Nov. 1, 2011
ISBN: 978-0-374-27563-1
Page Count: 512
Publisher: Farrar, Straus and Giroux
Review Posted Online: Sept. 3, 2011
Kirkus Reviews Issue: Sept. 15, 2011
BOOK REVIEW
Occasionally wonky but overall a good case for how the dismal science can make the world less—well, dismal.
“Quality of life means more than just consumption”: Two MIT economists urge that a smarter, more politically aware economics be brought to bear on social issues.
It’s no secret, write Banerjee and Duflo (co-authors: Poor Economics: A Radical Rethinking of the Way To Fight Global Poverty, 2011), that “we seem to have fallen on hard times.” Immigration, trade, inequality, and taxation problems present themselves daily, and they seem to be intractable. Economics can be put to use in figuring out these big-issue questions. Data can be adduced, for example, to answer the question of whether immigration tends to suppress wages. The answer: “There is no evidence low-skilled migration to rich countries drives wage and employment down for the natives.” In fact, it opens up opportunities for those natives by freeing them to look for better work. The problem becomes thornier when it comes to the matter of free trade; as the authors observe, “left-behind people live in left-behind places,” which explains why regional poverty descended on Appalachia when so many manufacturing jobs left for China in the age of globalism, leaving behind not just left-behind people but also people ripe for exploitation by nationalist politicians. The authors add, interestingly, that the same thing occurred in parts of Germany, Spain, and Norway that fell victim to the “China shock.” In what they call a “slightly technical aside,” they build a case for addressing trade issues not with trade wars but with consumption taxes: “It makes no sense to ask agricultural workers to lose their jobs just so steelworkers can keep theirs, which is what tariffs accomplish.” Policymakers might want to consider such counsel, especially when it is coupled with the observation that free trade benefits workers in poor countries but punishes workers in rich ones.
Occasionally wonky but overall a good case for how the dismal science can make the world less—well, dismal.Pub Date: Nov. 12, 2019
ISBN: 978-1-61039-950-0
Page Count: 432
Publisher: PublicAffairs
Review Posted Online: Aug. 28, 2019
Kirkus Reviews Issue: Sept. 15, 2019
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