MUST READ BOOKS: Wealth is of the mind, not the wallet.
The following books are part of my summer Risk Management reading. Contrary to mainstream portfolio managers and economists, true risk is not volatility (who says they dont buy something because the price fluctuates?). True risk is unforseen.
Nassim Talebs two books Black Swan and Antifragile are corner stone to my portfolio managing. Investors use models to think how bad something can go, yet the future can always be much worse than expected. A random catalyst that no models could predict is a Black Swan.
Antifragility are things that gain from disorder. Fragile investments (tech stocks) crash during panics. Robust investments (defensive stocks) resist the crash, no better yet no worse. But antifragile profits from the disorder (gold, us bonds).
Thus, Black Swan and Antifragility are must reads because of how often economists and elites are burned by their unrealistic models of the future.
The last book in the 3 pillars of risk managing is Complexity Theory. Complex systems are systems where multiple agents (people) are competing with limited resources which an emergent phenomena occurs naturally without any central controller. Example of this is a market crash in real estate - normally real estate markets work fine until suddenly seller overwhelm buyers which causes prices to collapse and panic to engulf other markets. Another example is Rush Hour - roads usually work fluid and fine until 6:30 when everyone is trying to rush home.
The elites dont understand and almost none of them have studied complexity. The real world is complex and people engaging in complex systems - not obtuse models.
These 3 are must reads - especially in today's geopolitical mess and highly globalized countries with over-indebted, bubble economies. Like dominoes - if one goes down, they all will.
Hi! This post has a Flesch-Kincaid grade level of 8.9 and reading ease of 59%. This puts the writing level on par with Leo Tolstoy and David Foster Wallace.
great picks! can you give me a few more details on Simply Complexity?
Sure, simply complexity is about 220 pages. It is written by a leading complexity theorist, Neil Johnson. He uses the study of complexity to show how it can be used in multiple topics. I thought his chapter on complexity and cancer/sickness and chapter on complex systems and war and complex systems on networking was pivotal. After reading the book (i recommend take lot of notes - I did in my evernote I can email out) one realizes how there is a universal pattern in life and these complex events - the Fractals.
Basically humans are at all times competing for resources, whether it be fresh food at store, a good share price or driving space to get home on. Thus complex systems are important in giving individuals tools and ideas to out think the other humans ("during rush hour, will everyone think this road is empty, therefor making it crowded as they all come, thinking theyre smarter?")
I upvote U