Books

My Best Reads of 2011
Part II

by AJIT SINGH

 

 

 

CONTINUED FROM YESTERDAY ...

 

MANAGEMENT / ECONOMICS:

6   Carmen M. Reinhart & Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press, 2009.

I decided to read this book for three reasons. First, it was published by Princeton University Press (as you know from my past reviews, I do have a positive bias for their monographs). Second, I had heard Avinash Dixit talk about Reinhart’s work over the years - most recently at a dinner in Basel in 2010.

Finally, I had developed a distaste for pretty much anything on the subject of financial crisis that I could find on bookstore displays (based only on preface and back cover reviews, I must confess); I found them too linear and too prescriptive.

Covering data from over sixty countries and over several hundred years, the book conducts a very disciplined and meticulous analysis of financial crises. In this endeavor, the authors look at government defaults, banking crises, inflation and institutional ratings. Their conclusions regarding frequency, duration, and extent of the crises are compelling, and expose a (consistent and
repeatable) series of mis-steps that led up to these financial disasters.

Reinhart and Rogoff bring a unique, integrative background to the debate. Reinhart has spent time in Policy Research at the International Monetary Fund, has been on Wall Street as the chief economist at Bear Stearns, as well as at the University of Maryland. Also, she started with Bear Stearns in 1982, just before Mexico’s default that had inflicted much collateral impact on the banking industry in the U.S.

Rogoff, a U.S. grandmaster in chess studied at Yale and MIT, was on faculty at the University of Wisconsin, Berkeley, and Princeton, and is now at Harvard.

Reinhart and Rogoff began their collaboration at the IMF.

The authors start with the simple premise that a financial crisis and a recession is always preceded by a boom phase during which there is a huge buildup of debt, and that deleveraging of this debt is always a long process. From this premise on, they draw heavily of historical, well backed hard facts, and follow (at least in their writing) a very deductive, as opposed to an inductive approach. Their conclusions are not always quantitatively crisp but they always take a clear stand:

There isn't a lot of convincing evidence that you can simply grow your way out of this kind of debt. The answer is usually a combination of fiscal austerity, debt restructuring, or a more subtle type of restructuring like we did after World War II: financial repression.

If you look at historic periods where the gross debt of the public sector exceeds 90% of GDP -- which we have surpassed - economic growth has been subpar.

The book is generally dry and very data-heavy. The drudgery you suffer is more than made up for in the insights it offers. But if you don’t have the patience to slog through 450+ pages, there is a six-page digest available in: Carmen M. Reinhart & Kenneth S. Rogoff, Growth in a Time of Debt, American Economic Review, vol. 100(2), 2010, pages 573-78.

For a narrower, somewhat more freelance treatment of the issues specifically focused on the role of Wall Street, try Emanuel Derman’s Models Behaving Badly: Why Confusing Illusion with Reality Can Lead to Disaster, on Wall Street and in Life. Trained as a physicist, Derman was the Head of Quantitative Analysis at Goldman Sachs, and is the author of My Life as a Quant.

7   Niall Ferguson, Civilization: The West and the Rest, Penguin, 2011

Niall Ferguson’s Ascent of Money, and Colossus: The Rise and Fall of American Empire have appeared on this list in the past. He is a Professor of History at Harvard University. He is also a Senior Fellow at the Hoover Institution, Stanford University, and a Senior Research Fellow at Oxford.

In his latest book, Ferguson formulates am ambitious thesis on the rise of the Western Civilizations. He starts with the following observations: The one thousand years between 1000 AD and 2000 AD witnessed a massive change in the distribution of wealth and development between the Western World, and everyone else. If you zero in on the middle of the millennium, and then the end of the millennium, volte face is obvious. The list of richly developed civilizations in the fifteenth century would have included Beijing, Delhi, Ottoman Empire, the Aztecs and the Incas. By contrast, England, France, Portugal and Scotland were at best tired states, marred by an endless series of skirmishes and battles. All of North America was mere wilderness.

By the end of the twentieth century, this had completely switched.

Ferguson’s thesis: He attributes the rise of the West during the past five centuries to “six killer apps”: competition, science, democracy and private property rights, medicine, consumerism, and the work ethic.

You will recall Guns, Germs and Steel by Jared Diamond, posted some years ago. The basic question that Diamond addressed in his book was the same as in Ferguson’s work. What’s the difference between the two theses?

Diamond’s “pivot point” is geography and natural resources, whereas Ferguson’s is man-made institutions. Also, Diamond studies a much longer time horizon of over ten millennia.

In an interview with NPR last month, Ferguson illustrates his preference for the man-made institution theory:

"And one reason that I incline strongly towards that second view is that we've conducted some interesting experiments in the last 100 years to see what happens when you make radical institutional changes. We took two very similar populations, living in pretty much the same place, and we divided them - the Germans and the Koreans - into communist and non-communist or capitalist parts. And with incredible speed, the institutional changes had massive material consequences. They just changed the way that people behaved. So Germans living in Germany, Koreans living in Korea started to behave totally differently because they had different institutions. That seems to me a pretty good illustration of the way institutions matter. And that's why my book is much more about institutions. Although I call them the killer applications to try to attract the attention of my teenage readers, including my own children, I'm really talking about institutions here. And I think they're more important, in the end, than geography."

His take on the rise of China:

"In many ways, China has downloaded five, but not six, of our killer applications, and it may have got the competition in its economy, and it certainly has made great strides in science, not to mention medicine. The consumer society is flourishing there. Indeed, it's part of the five-year plan to grow it. And the work ethic, you bet. They've got it. But they don't have the rule of law based on private property rights - they really don't - and they certainly aren't moving in the direction of representative government. And that's their biggest weakness. That's their Achilles' heel.”

Ferguson has also written and presented five major television series, including The Ascent of Money, which won the 2009 International Emmy award for Best Documentary. You can find it on YouTube (http://www.youtube.com/watch?v=kXMygmS_Ank). A TV series based on West and the Rest will air on PBS in 2012.

If Ferguson’s overall approach appeals to you, there are some very interesting resources online. The slide-deck for his presentation at the Oslo Skagen Funds event in January 2011 can be found at: http://www.businessinsider.com/niall-ferguson-the-west-and-the-rest-2011-4. Also, his talk on the Sovereign Debt Crisis at the Peterson Institute for International Economics in Washington DC in May 2010 can be found at: http://www.businessinsider.com/niall-ferguson-sovereign-debt-2011-3.

There are two very interesting companions to Ferguson’s work. Why the West Rules - for Now: The Patterns of History, and What They Reveal About the Future, by Ian Morris, published in 2010, belongs to the “geography” camp, and offers a compelling, alternate view on the dominance of the west. Morris is a Professor of Archeology at Stanford. For a forward-looking view on the impending shift of geopolitical power, try Robert Kaplan’s The Indian Ocean and the Future of American Power.

Another interesting piece is by Michael Adas, titled Machines as the Measure of Men: Science, Technology, and Ideologies of Western Dominance. The subtitle is self-explanatory. The book is somewhat dated (published in 1989), but the basic premise is well founded. My rationale for including it here: the book was published just prior to the onset of broad-based changes in the economic policies in India and China.

HISTORY / POLITICS

8   Leo Hollis, London Rising, Walker and Company, 2008.

My entries in this section in the earlier years have focused on personalities and events. A book on the history of a city is a first for this list. While I have read a number of books on the history of cities, and a few have even been my all-time favorites (William Dalrymple’s City of Djinns on Delhi, Orhan Pamuk’s Istanbul), none in my opinion quite had the significance - as a work of history - as London Rising.

In the mid 1600’s, London was at a tipping point for a complete breakdown. Factors leading up to the dismal state of affairs covered a full spectrum: plague, the Great Fire, creaking infrastructure, and the English Civil War. Yet, London escaped collapse. By the middle of the eighteenth century, London was a thriving, vibrant, and dynamic epicenter of commerce, art, science, and technology.

Hollis argues that this turnaround can be attributed in most part to five extraordinary men - John Locke, John Evelyn, Robert Hooke, Nicholas Barbon, and Christopher Wren. The one common thread across their conjoined lives: they were all deeply influenced by the Civil War.

John Locke’s ideas became the foundation for a new social system based on natural rights; John Evelyn’s treatise on relevant issues of the time - such as urban pollution - influenced public and policymakers alike; Robert Hooke formulated the key principles for urban development that would impact the next two centuries of London’s expansion; Nicholas Barbon rebuilt much of the city infrastructure after the fire; finally, Christopher Wren was synonymous with the reconstruction of St. Paul’s Cathedral.

Hollis manages to paint a rich portrait of these five personalities - larger than life, yet real, complete with their quirks, failings, and brushes with the law. And in so doing, he chronicles the survival and ascent to modernity of London, the sixth protagonist. My true new insight from the book: that London managed to rebuild at all.

Leo Hollis is a London native, and this was his first book. His upcoming second book, The Stones of London: A History in Twelve Buildings has a much broader scope of 2000 years - spread over twelve distinct periods.

SCIENCE / MATH

9   Steve Johnson, Where do Good Ideas Come From: A Natural History of Innovation, Riverhead Books, 2010

It is the “… Natural History” part that caught my attention. Within the first few pages it was obvious that this wasn’t just a catchy subtitle. Let’s look at the Table of Contents:

The Adjacent Possible
Liquid Networks
The Slow Hunch
Serendipity
Error
Exaptation
Platforms

The title of Chapter 1 was my second clue that this book explores the topic of Innovation from the standpoint of Complexity Theory. (You might recall the concept of Adjacent Possible from Stuart Kauffmann’s At Home in the Universe posted in 2003).

The book begins with Darwin’s observation on the Keeling Islands in 1836 that there is a remarkable difference between the diversity of life on the Islands, and in the coral reef waters:

On land, the flora and fauna of the Keeling Islands are paltry at best. Among the plants, there is little but cocoa-nut trees, lichen, and weeds. The list of land animals is even poorer than that of plants ... Yet just a few feet away from this desolate habitat, in the coral reef waters, an epic diversity … Coral reefs make up one-tenth of a percent of earth’s surface, and yet roughly a quarter of the known species of marine life make their homes there.

What coral reefs are to nature’s innovations, are places like Silicon Valley or Boston to man-made innovations?

You can’t explain the bio-diversity of the coral reef by studying the genetics of the coral itself. The reef generates and sustains so many different forms of life because of patterns that recur on the scales of cells, organisms, and the wider ecosystem itself. The sources of innovation in the city and the Web are equally fractal. In this sense, seeing the problem of innovation from the long-zoom perspective does not just give use new metaphors. It gives us new facts.

What the book lacks in rigor, it more than makes up for it in the examples. All in all, a fantastic read, and a significant addition to my (still very short) list of great books on complexity. If you would like a quick preview into Steve Johnson’s thought process and approach, check out the following TED talk:

http://www.ted.com/talks/steven_johnson_where_good_ideas_come_from.html.

There is a “heavier”, more rigorous treatment of this topic in Koen Frenken’s Innovation, Evolution and Complexity Theory. A review can be found at http://jasss.soc.surrey.ac.uk/10/3/reviews/morone.html.

10   David Eagleman, Incognito: The Secret Lives of the Brain, Pantheon Books, 2011

If you liked any of the works by Oliver Sacks, V.S. Ramachandran, or Gerald Edelman posted in my review in the past years, this one is for you. Disclaimer: Eagleman’s case-studies lack the long-term follow-up of Sacks, his experiments lack the originality of Ramachandran, and his theories lack the rigor of Edelman. Yet, the book is worth a read for one simple reason: it explores a few new vignettes not covered before.

An example is how brain deals with secrets - both keeping them and revealing them.

You have competing populations in the brain - one part that wants to tell something and one part that doesn't … And the issue is that we're always cussing at ourselves or getting angry at ourselves or cajoling ourselves ... What we're seeing here is that there are different parts of the brain that are battling it out. And the way that that battle tips, determines your behavior.

Correlation between the levels of stress hormones and secrets is well understood. Keeping secrets increases the levels of stress hormones, and the act of sharing with someone decreases them. It is Eagleman’s analysis of the feedback loop between the levels of stress hormones and the brain’s eventual resolution, that is new (for me, anyway).

Eagleman doesn’t shy away from wandering off into philosophy. His discussion on how our understanding of neurobiology will change our views on crime, punishment, and rehabilitation is bold and provocative. Citing an extreme example to illustrate the principle, he talks about Charles Whitman, who shot and killed 16 people at the University of Texas. An autopsy of his brain revealed a brain tumor that had damaged his amygdala - the center responsible for emotional regulation, and for the neural mechanics of fear and aggression.

Eagleman is a neuroscientist at Baylor College of Medicine and directs the Laboratory for Perception and Action.

(BONUS CATEGORY)

NOTABLE AUTHORS FROM THE SUB-CONTINENT

11   Khushwant Singh, The Sunset Club, Penguin, 2010

Each new book by Khushwant Singh signals, through its title or otherwise, that it might be his last. Until the next one, that is. He will be 97 years old this February.

For those of you unfamiliar with Khushwant Singh, he is a historian, journalist, and a novelist. Most of all, he is a people watcher. His second work of fiction, Train to Pakistan, was published in 1956 and won him the coveted Grove Press Award. His two-volume History of the Sikhs remains to date one of the most comprehensive treatments of the subject. His weekly syndicated column With Malice Toward One and All has been carried by multiple newspapers since the 1970’s.

The plot of The Sunset Club is basic and primal: three friends in Delhi who have known each other for forty years, now approaching the sunset of their lives, share their memories of the years gone by. The three men are Pandit Sharma - a Hindu, a bureaucrat and a bachelor, Nawab Barakatullah - a Muslim who practices Yunani medicine, and Boota Singh - a Sikh.

Taking us through the passage of twelve months, Khushwant Singh narrates the daily conversations between the friends as they meet at a bench in the Lodi Gardens.

The candor and uninhibitedness of expression is center-stage as the conversations bounce between topics as diverse as politics, religion, sexual encounters of the past, friendships, and most poignant of all, coming to terms with ageing and finality.

The Sunset Club is by no means a great book. Its scope is unambitious, and its prose unsophisticated and simple. Its achievement lies in the real-ness of its stories. And, as one reviewer puts it, “… the real achievement of The Sunset Club is simply that it exists.”

You will recall Rohinton Mistry’s A Fine Balance, posted last year. Mistry’s 2006 novel Scream captures the same general theme as The Sunset Club. It is a man’s narration of the predicaments of old age - reflections of at the end of his life. Mistry was recently named a recipient of the Neustadt International Prize for Literature.

CONCLUDED

 

[The author, Dr. Ajit Singh, is currently a partner at Artiman Ventures and focuses on early-stage Technology and Life Science investments. On behalf of Artiman, he serves on the Board of Directors of CardioDx Inc., OncoStem Diagnostics Pvt Ltd, and Aditazz Inc.

Ajit is also a Consulting Professor in the School of Medicine at Stanford University and serves on Board of Directors of Max Healthcare based in New Delhi.

Prior to joining Artiman, Ajit was the President and CEO of BioImagene, a company specializing in Cancer Diagnostics. BioImagene was acquired by Roche in September 2010. Before BioImagene, Ajit spent nearly twenty years at Siemens in various roles, most recently as the CEO of the Digital Radiology business of Siemens Healthcare, based in Germany.

Ajit has a Ph.D. in Computer Science from Columbia University, a Master’s degree in Computer Engineering from Syracuse University and a Bachelor’s degree in Electrical Engineering from Banaras Hindu University, India. He has published two books and numerous refereed articles, and holds five patents.

Ajit has been active in various initiatives pertaining to Sikhism. He has taught at various Sikh summer camps in the New York/ New Jersey area, and has spoken extensively on Women’s issues in the community. He currently mentors Sikh professionals on entrepreneurship, and is active in various programs of the Sikh Research Institute (SikhRI) and the Sikh Coalition.

Ajit and his family live in Palo Alto, New York, and Boston .]

December 22, 2011

 

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