The Wealth Chef – Ann Wilson

“Each and every day wasted on not investing will cost you dearly. Not only will it cost you in terms of the lost impact of compounding, but you’ll also lose the most important thing of all: the opportunity to learn from experience…The sooner you start gaining your 10,000 hours of investor experience, the sooner you’ll have this investing business figured out.”

Financial literacy is hugely important in the modern world, but unless you grew up in a family that talked about money, it can feel overwhelming. I frequently speak to friends who are interested in money and want to get out of debt/invest/save, but simply have no idea where to start. It’s an interesting challenge.

Ann Wilson introduces money through an extended conceit: cooking. There are four wealth flavours (assets, liabilities, income, expenditures) which you need to develop your palate to distinguish, two spices (time and interest rates), and a number of useful kitchen implements (your motivation as a a wealth obsession magnet, income statement as scales). Yeast, of course, is compound interest. The goal is to be a Wealth Chef, not just a cook!

Some first steps: use your last 3 months of bank statements to estimate your expenses, then write up a balance sheet listing all your income generating assets (sadly, your home would not count, and if you’re hoping to retire your job might not either). You are financially free when your generated income is enough to cover all your expenses.

It’s a fun way of introducing financial concepts, and judging by her own successful wealth-counselling business, an effective one. Her markets particularly to housewives and other women, which is reasonable – as she points out, at least historically men were frequently the one who managed the money, but in a world of increased equality and divorce, this is nonsense.

I have a few complaints at the margin: Wealth Chef uses 8-10% as a conservative interest rate on savings, for example, which is reflective of the historical return on the stock market but not of most people’s portfolios, which are a balance between equity and bonds. Italso emphasizes the credit score more than I would, though I agree that for people working their way out of debt, it is a useful way of tracking progress. For my tastes, the book also has a few too many exclamation marks, but it adds to the non-confrontational style.

Overall, definitely recommended if you’re intimidated by money and like cooking. If you’re an investment banker, probably not: consider reading guides on how baking cupcakes is like investing instead.

Disclosure: I read it as an advance reader copy. You can read more reviews of The Wealth Chef on Amazon.

College Disrupted – Ryan Craig

“We can no longer afford for higher education to be a slot machine with a few hitting the jackpot and most going home with less money in their pocket and no better off.”

Are you myopic about American higher education? To find out, see if you can name 50 universities in the U.S. that i) don’t have the name of a state in their name and ii) don’t have a division I football or basketball team. Remember that there are 6000 Title IV eligible colleges and universities in the US, so I’m asking you to name less than 1 in 100 of American schools.

Most people can’t. And most people, when they picture a college, think of an 18-22 year old at Harvard. Yet only 29% of America’s students are 18-22 year-olds attending a four year college full time. By comparison, 43% are over 25.

This, says Craig, is symptomatic of a problem in American higher education: that people think that the Ivy Leagues have discovered the only way to teach, and that everywhere else is just an inferior version trying to be like them. Leaving aside whether a school with no endowment can emulate one with $30 billion in the bank, it is this illusion that means many students drop out, take out loans they regret, and are otherwise disappointed by the system. In the top 50 schools, graduation rates are near 90%: for four year colleges overall, they’re 55%, and for 2 year colleges they are 29%.

College Disrupted looks at a range of modern trends in higher education, from technology to unbundling to internationalization, and looks at what education can and should look like in response. The book is choc-full of fascinating ideas and insights, and if some of his predictions are almost certainly wrong, they are all worth thinking about.

His final suggestion is that, appalling as the idea may initially sound, the American education system learn to value diversity, and establish a two-tier system: Harvard and its ilk for the elite students, and cheaper, online and technology-rich credentials for the rest. Not an ideal system, but a more honest one, in which students can get what they pay for, instead of paying enormous tuitions to support faculty who do not benefit them and buildings that do not enhance their learning.

I can’t possibly cover all the interesting ideas College Disrupted does, and I’m not going to try. There are a lot. My only criticism would be the book can sometimes feel disorganized, and a bit hard to take concise lessons away from. Since that’s also true of higher education sometimes, perhaps that’s unsurprising. Regardless, a fascinating and educational book, and well worth the read.

Disclosure: I read College Disrupted as an advance reader copy. You can see Amazon’s reviews of College Disrupted here.

The Conservatarian Manifesto – Charles Cooke

“If there is a conservatarian ideology, its primary tenet should be to render the American framework of government as free as possible and to decentralize power, returning the important fights to where they belong; with the people who are affected by their conclusions and who are therefore best equipped to resolve them.”

The Republican Party has always seemed like a bit of an unstable alliance to me: libertarians, who value individual freedom and so are economically but also socially liberal, and conservatives, who are economically liberal but socially conservative. Thomas Friedman argues a more reasonable party would be those who support trade and globalization, both Democrats and Libertarians, against those who do not, such as trade unions and social conservatives. I’m not so sure, but it’s generally interesting to see attempts to fuse libertarians and conservatives together, even those with aesthetically displeasing words like conservatarian.

Cooke is worried that this instability and an increasing failure to connect with the population is damaging the Republican Party, and lays out areas where the two sides can agree, and how they can built a platform that can truly connect with Americans again.

Cooke is a thoughtful and reflective writer, and – as can sometimes be unusual these days – is willing to grant a point to the other side while still making the more nuanced argument that though the other side has good points, the costs still outweigh the benefits. Broadly, he argues for a decentralization of power, as has traditionally been the case in the US: when Republicans argue for power centralization in order to stop Obama, he argues, they sacrifice what matters in the long run for short-run benefits, exactly what they object to in Democrats.

The Conservatarian Manifesto has some weaknesses: issues such as gun control and drug legalization are well-trodden, and he doesn’t have that much to add to the existing discussion. Some of his arguments are also based on an echo-chamber effect: appeals to authority and the founding fathers as reasons the constitution is important, for example, are arguments that aren’t convincing unless you already believe in conservative ideals. As a result, left-wing readers may find some sections more annoying than convincing.

The media tends to portray the Republican Party as choosing between a fast slide into oblivion or a slow one. As Cooke points out, this is almost certainly nonsense. Their stance may change on specific issues, but the appeal of small government remains an enduring one for many. The right is likely interested from the perspective of winning elections, but even the left can benefit from thinking carefully about what the right believes.

Disclosure: I read the Conservatarian Manifesto as an advance reader copy. It is released on March 10th.

How to Live: A Life of Montaigne – Sarah Bakewell

“The Essays is thus much more than a book. It is a centuries-long conversation between Montaigneand all those who have got to know him: a conversation which changes through history, while starting out afresh almost every time with that cry of ‘How did he know all that about me?’”

Regular readers know I think Montaigne is excellent, and highly recommend him. For some variety, though, I thought I’d try a biography of him. Our writing is shaped by our lives, after all, and so placing an author in the context of his or her life is often useful. For a man like Montaigne, who was fascinated by the world around him, it becomes even more important.

Following Gustave Flaubert’s advice on Montaigne (“Don’t read him as children do, for amusement, nor as the ambitious do, to be instructed. No, read him in order to live.”), Bakewell tries to extract lessons for how to live from both Montaigne’s writings and his life. He lived in a tumultuous time, with frequent civil wars between Catholics and Protestants in France, and Bakewell does well to provide background information that helps deepen and extend Montaigne.

That said, I think the book faces an almost insurmountable challenge: since Montaigne already seeks to explain how to live, the book can often feel like a lesser shadow of the original text. Montaigne’s prose is generally clear and careful already, and so interpretation can feel superfluous. How to Life is well written and interesting, but is unavoidably inferior to the Essays themselves. For a lover of Montaigne, and interesting read, but probably best to read it after, not before, you’ve read Montaigne himself.

The Road – Cormac McCarthy

“The blackness he woke to on those nights was sightless and impenetrable. A blackness to hurt your ears with listening.”

“Where men cant [sic] live gods fare no better.”

How do you keep hope when there is little left to hope for? Worse yet, how do you convince others to hope when you are unsure if you have any hope left? Do you lie? Would that make it worse when they found out? Do you honestly confess your own doubts, risking making the other’s worse?

How encouraging to be when things are going badly is always tricky, whether to a friend who lost their job or a child trying a new sport. The extreme, though, is expertly painted by McCarthy in The Road. A post-apocalyptic father and son journey South in the hope of finding a warmer climate. The timid son is confronted by a reality that had his mother abandon them without hope years past, while his father does his best to keep the fire alive. They strike bargains: the son demands his father not give him a larger share of the food they find, for if he is dishonest in small things, how can he be trusted in large things? They face a world in which killing themselves might be merciful, rather than cruel: the father wonders this for himself, but cannot face the reality of doing the same to his son. Given his own doubts, however, how can he keep his son going?

The Road has won numerous awards, including the Pulitzer, and has also been turned into a relatively successful movie. McCarthy himself has had a series of bestselling books, including All the Pretty Horses, Blood Meridian, and No Country for Old Men, which in its movie version won Best Picture. He is also often mentioned as a candidate for the Nobel Prize for Literature. The Road is not an uplifting read, but it is an important read, and like all the best fiction, gives the reader a better understanding of his fellow humans and even himself.

Nurtureshock – Po Bronson and Ashley Merryman

“The central premise of this book is that many of modern society’s strategies for nurturing children are in fact backfiring — because key twists in the science have been overlooked.”

Can you tell if children are lying? Most adults believe they can: they also frequently believe that boys are more prone to lying than girls, and that younger children lie more than older ones. Sadly, none of that is true. Parents do no better than chance at telling whether random kids are lying, and only slightly better than chance with their own children. Gender does not correlate with lying, and younger children actually lie less than older ones. Less is a relative term, though: in household studies, 96% of kids lie, an average of once an hour for six year olds. Threatening punishment doesn’t appear to make a difference: what helps is emphasizing that telling the truth makes parents happy (since that is often the goal of the child anyway), and the value of honesty more generally.

For all that we were all kids once, it turns out our intuitions about what they are like are depressingly poor. Nurtureshock aims to capture some of the counter-intuitive or novel ideas researchers have found from actually working with large numbers of children, rather than just guessing (Ahem, Freud). Seeing their parents fight isn’t bad for children, it turns out, if they also witness a successful resolution. If the parents end the fight without resolving it, or move it upstairs or otherwise out of the child’s presence, on the other hand, children tend to be more aggressive and act out more afterwards.

Nurtureshock tries to cover a wide range of issues, sometimes at the price of oversimplifying. Some of the chapters are also fairly well known, at least to me, such as Carol Dweck’s work on fixed and growth mindsets. Others, though, raise some great points, ones parents may not even have considered, and even if the treatment is probably too brief to satisfy, it can serve as a useful starting point to tracking down more research. After all, research about kids is usually pretty cute, whether of children singing to themselves to resist eating a marshmallow, or managing to stand still for 2 minutes when asked to stay still, or 11 minutes if asked to mimic a soldier. A challenge for both parenting and teaching is that you often don’t see others parent or teach, and so rarely have your intuitions challenged: a little bit of critical reflection can go a long way.

Climate Shock – Gernot Wagner and Martin L. Weitzman

“We, together with most economists, would be fine with either carbon taxes or caps, done correctly.”

What, you might frequently wonder, is geoengineering? If you’re a scifi fan, you’ll know terraforming is shaping the earth’s surface. Geoengineering refers to using similar techniques on Earth, usually particularly in reference to controlling the temperature. The release of particle such as sulfate aerosols help block sunlight from reaching the earth, similar to the effect of the eruption of volcanoes: in 1815, the eruption of Tambora encouraged Mary Shelly to spend her summer holiday indoors, writing Frankenstein. You may think this is better than sliced bread, or absolutely crazy, solving a symptom rather than the disease. Economics, though, says that what you think doesn’t really matter: since geoengineering is relatively easy, so much so it could be done by a single country, it will be hard to stop someone from doing it, whether a rogue climate engineer or Vanuatu as it gradually submerges beneath the waves.

Climate Shock looks at the insights economics can provide as we try to understand and prevent climate change. In particular, it focuses on the economics of uncertainty – how we deal with things when we are unsure of them – and externalities – how people decide to do things when the decision will affect others. Geoengineering is a classic externality (as are carbon emissions): if someone decides to release chemicals into the air because they’re too hot, everyone is affected.

The uncertainty relates to the fact that we really don’t know the potential outcomes of warming. In the Pliocene era, carbon dioxide levels were similar to today, but the seas were 20 meters higher, and Canada had camels. We don’t know how likely that is to happen again, but we probably want to avoid it (unless you’re a camel).

The book is a great survey of some economic insights for global warming, and Martin Weitzman in particular is a titan in the field. My only comment is I suspect it would struggle to convince anyone who isn’t already a believer. If you’re looking to arm yourself with facts about warming to argue with your friends, it’s a great resource: if you’re not sure what to think, less so. Some of their arguments also feel a little hasty, not really engaging with other perspectives. David Friedman, for example, argues that uncertainty cuts two ways: global warming could also end up being good for the world, as well as bad. I’m not sure I find that convincing, but I would have liked to see Climateshock rebut or acknowledge it.  Their final point, however, is a good one: even if everyone agrees that carbon emissions are immoral, and that in itself is unlikely, the immediacy of the problem means taking the economics of it seriously.

You can see more reviews and buy it on amazon here: Climate Shock.

The ABCs of Real Estate Investing (Rich Dad Advisors) – Ken McElroy

How, you might be wondering, would I go about buying an apartment building (or multiplex, or whatever) with the intention of renting it out? First, check out cities: what are supply and demand like? Is there something limiting supply, like an urban boundary? Is population growing, increasing demand? Is a new business moving in, boosting employment? Second, focus on a submarket: if the city is in a downturn, which region or neighbourhood is likely to turn around first? Third, get down to the nitty gritty: focus on gathering as much information as possibly to really get a feel for the area: meet with officials, local real estate agents, etc. At every stage, focus on the big forces of supply and demand, and also on location: is it near services, close to employment, in a good area? Then, buy the property, become wealthy, and wash, rinse, and repeat.

Real estate is an investment niche that frequently appeals to people: unlike the stock market, it provides something concrete that people can admire, and is often easier to understand because everyone owns or rents a house of their own. On the downside, however, it can often require a fair amount of capital to get started, in order to make the down payment, and though house prices generally (though not always) increase, covering the mortgage payments and taxes may mean you’re making less of a return than you would have if you’d just put it in the stock market and forgotten about it.

Rich Dad Poor Dad is a tremendously popular series, and has sparked a number of spinoffs, including this one, focused on real estate investing. It is intended for a novice in the field, and focuses on apartment buildings, though many of the lessons are also relevant to single-family homes. McElroy’s approach is also quite mathematical: he focuses on calculating your return on investment, and then using that number to calculate what the building is worth. Buy it only if you can get it for less. Words that could have done a lot for people who suffered in the sub-prime crisis, I suspect.

The book is not as strong as some of Rich Dad Poor Dad’s other works, but if you have a particular interest in real estate, it’s not a bad introduction. I think for most people, though, the sums he talks about in buying and selling apartment buildings make it seem a bit far away: many families have experience buying single family homes, but most haven’t considered buying multi-million dollar apartments. The principles are the same, but it makes it feel less relevant. Still, if you can get past that (or are considering buying apartments yourself!), then a solid introduction to a very popular field.

The Perfect Swarm – Len Fisher

“Simple rules, patterns and formulae can often help us steer our way through, but in the end it is the complexity that rules. OK?”

The world is pretty complicated these days. How, you might wonder, should you best navigate in a world that seems overwhelming? Perfect Swarm argues that we can use simple rules to defeat and exploit complexity. Locusts, for example, have tremendously large swarms – the largest can be 513,000 km2 and contain 12.5 million insects – but their wings are delicate, and if they collide in midair they might die. Fortunately, no ESP is needed to guide the swarm: instead, they individually follow simple rules of avoidance, alignment, and attraction to create a seemingly chaotic mass out of order. Fish, bees, birds, and many other animals do the same.

What does this mean for humans? One fascinating implication for leadership is that if most people are just swarming, even if only a very few members of the group have a clear direction, the entire group will move that way. Charisma, dignity, etc., might all help, but in the end as long as you have a goal and other members of the group don’t, everyone will follow you there. This has even been rather charmingly demonstrated in a room of students asked to wander randomly but not get too far from other students: adding a couple students with a destination to the mix means all the students end up at that destination!

To achieve clarity, the book trades a lot of elegance and detail, and it can sometimes feel oversimplified. The later chapters of the book focus on heuristics (simple rules for decision-making), and perhaps it’s because it is my field, but for me the section felt so simplified as to be hard to extrapolate from. If you’re looking for a fairly simple introduction to chaos theory and how different disciplines have attempted to resolve the problem, though, as well as some personally applicable insights on how to move through a crowd or decide between multiple options, Perfect Swarm can certainly provide.

Dear Undercover Economist – Tim Harford

“When a dinner party guest wonders how much to spend on a bottle of good wine, Dear Economist ignores the Good Wine Guide and reaches for the Journal of Wine Economics.”

What, you might wonder, is the secret to happiness? Harford, citing Kahneman, says that sex is best, but that exercise, food, and prayer are also good. In fact, all human contact is good, except for that with your boss, which is quite bad. The secret to happiness? Don’t have sex with your boss.

Tim Harford is a frequent writer for the Financial Times, and has also published several excellent pop economics books, including The Undercover Economist. Dear Undercover Economist, however, is a collection of advice columns he published in the FT. Written in the classic style of Dear Abby columns, they use economics to answer questions about love, family, careers, and other domains. He gives advice to a man who gives bad first impressions (give a signal of quality, like giving the girl theatre tickets for a third date with him when they first meet); a student who is too busy with his karate club activities to study (gains from trade: find a weakling to do his homework and beat up the weakling’s enemies); someone looking for missing socks (give up on them: instead, focus on interchangeable parts, and just buy all identical socks); and, in response to someone concerned about inflation and the shrinking size of Mars Bars, points out they are actually a very stable unit of account, with about 20,000 bars buying you a small car for the last 70 years.

This is classic pop economics, freakonomics-style. It takes the insights of economics, particularly signalling, screening, and trade, and applies them to problems outside economics’ traditional gaze. I’m not sure I’d take the advice myself, but the columns are entertaining and well written: you could do worse if you’re trying to learn some microeconomics for yourself, or if you’re a student taking microeconomics. After all, how many other opportunities will you have to make economics fun? Overall, a great romp through the insights of economics, applied to everyday problems.