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I’m out of the office for just over a week, so rather than the usual news of the day, I thought I’d come up with a few suggestions to add to your holiday reading list.
Rather than review the same new books that everyone else has half-read, I’ve just picked a sample of the books I’ve read and enjoyed myself this year.
There are a few new-ish titles in there, a couple of classics, and a couple that are nothing to do with investment but that you might enjoy anyway…
How to spot your own bad behaviour – and dodgy companies
by Daniel Crosby (2018)
I enjoyed this book on behavioural investing a lot (Crosby is a US author, hence the US spelling), and not just because it covers similar ground to my own book The Sceptical Investor. Crosby knows his stuff – he’s a proper psychologist as well as an asset manager – and it’s always fun to read about the long list of flaws that get in the way of our ability to invest, particularly when it’s presented in a chatty, approachable voice.
However, most people who are fans of James Montier or Kahneman and Tversky will have read these sorts of books before, and know the case studies and famous experiments inside out. Where Crosby scores highly and differentiates himself is in gathering these flaws into a manageable mental framework (each falls under one of four main categories of behavioural vice) and then giving practical ideas on how to structure your investment process to avoid falling prey to them. Well worth your time.
by Tim Steer (2018)
A series of 22 case studies into recent accounting disasters may not sound like your ideal beach read. But you don’t have to be an accountant to enjoy this extremely well-written book. Steer is an expert, authoritative guide, explaining exactly what went wrong at corporate disasters from outsourcer Carillion to doorstep lender Cattles to booze vendor Conviviality, and flagging up the warning signs in the accounts that could have enabled the alert investor to bail out before the crash came. He manages to do all of this in plain English, which is an extraordinary achievement.
You may not be a forensic accountant once you’ve finished, but any attentive investor will take three vital lessons from this book: one, cash is not just king – it’s the entire deck of cards; two, always read the footnotes; and three, never put all your eggs in one basket – some of these disasters were indeed easy to spot (we highlighted Carillion well in advance of its demise, and we were far from the only ones), but others in Steer’s book caught even the smartest investors on the hop. Even if you’re primarily an investor in funds, you’ll enjoy this – but if you’re remotely serious about stock picking, it’s an absolute must-read.
The classic guide to investment psychology
by Daniel Kahneman (2012)
Even if you haven’t yet read Kahneman’s book, odds are that you might “feel” as though you have, because his work has been so hugely influential. Almost any pop psychology, self-help, marketing or investment book you’ve read in the last couple of decades will at least nod to Kahneman, and many are just outright retreads.
However, it’s worth getting the stories and studies direct from the man who told them in the first place, because you’ll realise that many nuances are lost in the re-telling. His research on the relationship between happiness and income, for example, is often over-simplified (turns out, unsurprisingly, that while there’s a certain level of income at which more money won’t make you any happier on a minute-to-minute basis, it can certainly make you more satisfied with your life overall). Kahneman is also an excellent writer – humane, clear-thinking, and self-assured enough to share his own frequent errors of judgement.
by Peter L Bernstein (2005)
I read this classic for the first time this year when Bloomberg’s John Authers ran it as a pick for his online book club. Bernstein’s Against the Gods is a brilliant history of risk and probability and the human striving for certainty; Capital Ideas is an equally brilliant history of modern Wall Street.
If you want to know how we got to where we are today – from a world where gentleman amateurs picked individual stocks on the behalf of wealthy investors using little more than their gut and a deluded view of their own competence, to one where mass-market index trackers increasingly dominate a market run by algorithms based on years of academic research – then you need to read this book.
Not only is it a fascinating history, but Capital Ideas is also a useful reminder of just how young the investment industry is, and how much it has changed in a very short space of time. It makes you wonder about what we’re taking for granted today that will also be considered as naive or hopelessly outmoded in a few decades’ time.
Rants, art, sci-fi and podcasts
Other books you might enjoy include The City Grump Rides Out (2019), by Stephen Hazell-Smith. This is a collection of Hazell-Smith’s columns for Real Business. There’s a dollop of Telegraph-esque harrumphing on politics and the monarchy, which may or may not be to your taste, but when the Grump sticks to topics such as corporate pay, the Bank of England’s unimpressive performance in recent years, and the financial system’s over-reliance on debt and the importance of equity, he can’t be faulted.
Leonardo da Vinci (2018) by Walter Isaacson is an elegantly structured, beautifully illustrated, and highly readable biography of Leonardo da Vinci. I’ll admit to knowing very little about art history – I found Isaacson’s explanations of the artist’s techniques and the mores and politics of the time to be perfectly pitched at the lay reader. It’s also inspiring and uplifting. A rampant curiosity and an inability to stay on top of his Renaissance-era inbox appear to have been da Vinci’s defining characteristics, which is nice to know in an era where we’re all grappling with constant distraction and the tyranny of our “to-do” lists.
Oh and if you fancy a bit of sci-fi, one book that I recently enjoyed was Sea of Rust (2018), by C. Robert Cargill. It’s a fast-moving, easy read, with just the right amount of pondering on the nature of the soul and existence before the next piece of scenery gets blown up. A good one for the plane.
Finally, if you like podcasts (and you’ve run out of MoneyWeek episodes to listen to), then what should you listen to? There are lots of good podcasts out there, but they’re pretty time consuming, so I’m only going to recommend one. With that in mind, I reckon the one I’ve got the most value from in terms of investment thinking so far this year is Invest Like the Best, a US podcast hosted by asset manager Patrick O’Shaughnessy.
O’Shaughnessy is a great interviewer. He asks pertinent questions and knows his stuff inside out, but he also stays out of the way – the podcast is about the guest, not his ego. And his guests are always interesting and experts in their fields. Some episodes are more technical than others, but you’ll get a wide range of perspectives on everything from moats to tech stocks to factor investing. Highly recommended.
So hopefully that’s plenty for you to be getting on with. Any recommendations you have for me (non-fiction, fiction, podcasts, films…), do feel free to email email@example.com (put FAO John Stepek in the subject line) or send me a tweet at @John_Stepek.