Lehman Bust Left Goldmanite Derman, Das Reading Spinoza, Twain
Stock Chart for Lehman Brothers Holdings Inc (LEHMQ)
Writing books on finance is one thing; reading them is another.
So I discovered when I invited Satyajit Das and Emanuel Derman to discuss their reading in the wake of the crisis that killed off Lehman Brothers Holdings Inc. (LEHMQ)
Das, the derivatives specialist who wrote “Extreme Money,” cited “The Great Gatsby” and “The Gilded Age.”
Derman, author of “Models.Behaving.Badly” and former head of quantitative finance at Goldman Sachs Group Inc. (GS), gleaned insights from Spinoza’s “Ethics.”
Here’s a peek at the volumes on their nightstands.
Pressley: What books helped you most in assessing the fallout from the crisis?
Das: I don’t read many finance books. They are dull and repetitive, like minimalist music without the entertainment value.
But one I have re-read several times recently is John Kenneth Galbraith’s “The Great Crash, 1929” -- to see what it tells about the dynamics of collapse.
Another one I re-read is Piers Brendon’s “The Dark Valley,” a fine history of the world around the time of the Great Depression.
Brendon gives us a sense of what happened and could happen again. I also re-read F. Scott Fitzgerald’s “The Great Gatsby” and Mark Twain’s “The Gilded Age.”
Derman: It’s not quite a book, but I am always influenced by Jim Grant’s Interest Rate Observer newsletters, which persistently question the role of fiat money and the Fed in creating and exacerbating the distorted kinds of capitalism going on right now. He’s got a very eloquent style; it’s almost British.
Pressley: What’s the best book you’ve read on the rise of China or on the decline of the West?
Das: It’s pointless to look at the economics of China, as that is merely a byproduct of its political structure.
Richard McGregor’s “The Party” is insightful. It sets out how the Communist Party controls every aspect of life and the economy. Party membership is largely driven by potential access to power and status, often to gain immunity and protection that allows engaging in activities, including business transactions, unavailable to non-Party members.
“The Party” exposes a system focused on only one objective: its own survival and power. The inherent conflicts are captured by Zhang Ruimin, chief executive of China’s largest white-goods maker, Haier. (1169)
“I appointed myself party secretary of Haier,” he is quoted as saying. “So I can’t have any conflicts with myself, can I?” He could and did have conflicts, with predictable consequences: He wisely favored the Party, of course.
Derman: The best book I’ve read that addresses, very indirectly, the supposed decline of the West is Spinoza’s “Ethics,” which is in part about the role of the transcendent in human affairs. Saul Bellow discussed this in a 1988 talk published posthumously in the New York Review of Books.
“For people who have no access to any such core consciousness, no mysteries exist,” he said. “This world of truly modern, educated, advanced consciousness suspects the core consciousness that I take to be a fact of being inauthentic and probably delusive.”
I dislike the naive materialism so prevalent in the West right now, the irrational belief that rationality is our salvation.
Pressley: What book is now on your nightstand -- or freshly downloaded on your iPad or Kindle?
Das: I am a Luddite, so it’s a real book, not an e-book. I am finishing up Rebecca Solnit’s books on the Wild West and landscapes, “Savage Dreams,” “Wanderlust” and “River of Shadows.”
She is one of the most interesting writers on the intersection about humans, culture and the natural world. Given what we have done and continue to do to our environment, I love reading her.
Derman: I’m reading “Exile on Wall Street” by Mike Mayo. I normally don’t read a lot of financial books, but somebody gave me this one and I was pulled into it.
I like Mayo’s persistent refusal to buckle under and accept the system as it is. I know people who, during the tech bubble, said that “everyone understands what analyst recommendations really mean.”
So it’s refreshing to see Mayo try to make words carry their original meaning as opposed to a wink.
Gregor von Rezzori
Another book by my bedside is “An Ermine in Czernopol” by the late Gregor von Rezzori. He was an East European who lived in Italy, made movies and was a sort of bon vivant. He wrote a famous book called “Memoirs of an Anti-Semite,” which is not what it sounds like from the title.
It’s five connected stories by someone who, over his life, gets intimately involved with Jews on a personal level -- lovers, friends -- but who has an anti-Semitic background and father. It’s got a very nostalgic air about a lost world, the Austro-Hungarian Empire and Europe between the wars.
“Extreme Money: Masters of the Universe and the Cult of Risk” is published by FT Press (459 pages, $29.99, 20 pounds).
“Models.Behaving.Badly: Why Confusing Illusion With Reality Can Lead to Disaster, on Wall Street and in Life” is from Free Press in the U.S. and from Wiley-Blackwell in the U.K. (231 pages, $26, 16.99 pounds).
(James Pressley writes for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are his own. These comments were condensed from e-mail exchanges and a phone conversation.)
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