Book Reviews

Over the last decade or so there have been a number of books that have been written on the failures of finance, the financial crisis of 2008, and popular science books that try and engage the general public to the subject of economics and other related academic disciplines. Here I write my book reviews; if any one has further suggestions then please leave a comment.


  • Fortune’s Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street

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One of the most enjoyable ones. It provides a narrative on the history of scientific betting: starting from the the practices mobsters used to employ, through to counting cards, game theory and the development of information theory. It also brings various characters to light, for example Claude Shannon and Ed Thorpe, and how they were able play the financial markets with their theories. A must read!


  • The (Mis)Behaviour of Markets: A Fractal View of Risk, Ruin and Reward

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Another must read for anyone in the field of Quant finance. Benoit Mandelbrot is the inventor of fractal mathematics. This book provides an enjoyable history of various developments in financial theory, such as the CAPM, Black-Scholes Option pricing and the efficient markets hypothesis. Mandelbrot then goes on to introduce the reader to the Fractal view of markets in a clear and enjoyable way.


  • The Quants: The maths geniuses who brought down Wall Street

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Amazing book! This books starts by introducing the great Ed Thorpe, and then goes onto introduce a number of major hedge fund managers that derived a lot of inspiration from the “Beat the Dealer” godfather. It provides a great summary of a number of types of key concepts in mathematical finance and quant trading strategies. Scott Patterson is one of the best writers in the realm of these popular finance books and this one is certainly one of the best. Moreover, I was expecting another type  of “this is a CDO” book, however, this was not it (although there was a small section on it). Instead, this book is more of a “Fortunes Formula” type book (see above), which is a much more fun and interesting read. It finishes on a great opening to “Dark Pools” as well, so I would recommend reading this one before.


  • Dark Pools: The rise of A.I. trading machines and the looming threat to Wall Street

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This was a hugely enjoyable narrative on the creation of electronic trading exchanges and dark pools. In particular, it is told from the standpoint of: Archipelago and Island. Furthermore, it brings the readers attention to a bunch of immoral HFT trading practices through Haim Bodek’s story.


  • Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe

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There’s been a lot of books written on the financial crisis; but this book was on our suggested pre-reading list at University for a course on the current financial crisis. It is told from the perspective from J.P. Morgan and written by the FT reporter and anthropologist Gillian Tett. I thoroughly enjoyed this book, and it gave a well reported background to the development to mortgage derivatives and the issue of moral hazard.


  • Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

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I read Fooled by Randomness after Black Swan, and given my review below I was ex ante very sceptical. However, I read the whole book on a flight back from Bali, and I can say that I throughly enjoyed it and would recommend to anyone in the trading profession. Although I would still argue that Taleb is not really saying anything here except for the fact that one should not be overconfident in their views on how the world works when it is subject to so much randomness and feedback. I could not agree with Taleb more on the fact that a little knowledge is dangerous. However, I disagree with Taleb’s view that Economics is all rubbish; he comes across as having a bit of a chip on his shoulder here. I do agree with Taleb that efficient markets and all that kind of financial econ is subject to serious assumption errors, however, the behavioural finance movement, led by Shiller (which to be fair Taleb pays respect to) is in complete agreement, and this movement is now part of the mainstream. I therefore think he needs to target his contempt with economics with that subgroup rather than the whole profession. Also, as a final point, Taleb comes across as a lot more humble in this book than Black Swan, which makes me warm to it a lot more.


  • The Black Swan: The Impact of the Highly Improbable

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So I am yet to find a trader that doesn’t think Taleb is awesome after reading his books. However, I do not feel quite as strongly. I did enjoy reading this but it is a lot of the same message: expect the unexpected – and that it is wrong to assume a Gaussian distribution in a lot of finance and Economics because of feedback effects. I find Taleb however very opinionated and I think that he comes off as ignorant on a some stuff, yes I agree that he has rightly pointed out that a number of people have failed to accept the lunacy of their assumptions, and in many cases have been ignorant of their obvious failures; however I believe that it is wrong to say that all models that are subject to a black swan are worthless and that Economics is a fraudulent subject. Nevertheless, as Taleb wrote these ideas before the financial crisis I think much credit is due. However, there is a lot of philosophical fluff around his key points, which I think is unnecessary. As a part solution to the Black Swan he suggests using the fractal mathematics developed by Mandelbrot, however he does not go into that much detail on its application. I thought this was shame as this was the most enjoyable chapter.


  • Anti fragile: Things that Gain from Disorder

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Finally, I have finished reading the last of Taleb’s trilogy. I am glad I read them, and I would recommend others to also; however, I am hard pushed to rave about them. Moreover, I disagreed with a number of things and moreover, Taleb wound me up more times than I can count. The basic idea of this book I do agree with, which is that we should all take a step back and embrace the randomness in our lives, in doing so we are able to become “Antifragile”. This means that we are not subject to falling to pieces when something out the ordinary and unexpected happens, which because of these feedback effects we can’t predict. What we want to be doing is embracing it and in doing so we are more resiliant. Using this principle Taleb explains to the reader a number of his own life lessons, and as such he covers pretty much everything in everyday life. A few of these lessons I could not agree more with, for example the Lindy Effect, however a number of them he just comes across as downright opinionated. There is also an enormous amount of fluff around what he is trying to get at, for example he has about a 30 page chapter just describing a convex function. Nevertheless, Taleb’s works are certainly worth a read and have provided hours of debating fun with Economists.


  • Flash Boys

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Great book about the practices of HFT! The US stock market is made up of many fragmented markets and as this book describes is subject to many immoral trading practices. This is the story of Brad Katsuyama and his team’s fight against Wall Street. It is their mission to understand the financial plumbing of this and they take on the battle to build a fair electronic trading exchange despite the opposition many of the big Wall Street banks. Furthermore, this book provides a hugely entertaining narrative on the increasing technological arms race of this industry and how maths and science geniuses take their place as the gate keepers of the financial markets. A must read!


  • The Big Short: Inside the Doomsday Machine

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  • Boomerang: The Meltdown Tour

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  • Panic!: The Story of Modern Financial Insanity

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  • Liar’s Poker

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A finance classic! This book is a must read for anyone entering the world of investment banking. It is Michael Lewis’ own semi-autobiographical account of his journey climbing the ranks at Solomon Brothers (now a subsidiary of Citigroup). It starts with him leaving University, to going through the interview process, to completing the grad scheme, to being a geek and then onto a being a successful bond salesman. This book talks about the “Big Swinging Dicks” that defined the trading floors of the 1980s and the office politics that went on as the culture of greed and excess sought to attain bigger and bigger bonuses. Michael Lewis also provides am illuminating account of Wall Street back in the 80s, and how Salomon Brothers single-handedly created the market for mortgage bonds, and how it was eventually outdone by the junk bond market.


  • The Money Culture

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  • The Greatest Trade Ever: How One Man Bet Against the Markets and Made $20 Billion

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Is this not the same story as the Big Short? That is what I thought after reading this; although I don’t know what came first as they both look to be published in the same year. Regardless, it was a great read and told the story of how a few traders saw the 2008 financial crisis coming and decided to short the US housing market by going long on Credit Default Swaps. Its key characters were Michael Burry and James Paulson and mentions a number of the other key characters that were in the Big Short.


  • More Money Than God: Hedge Funds and the Making of the New Elite

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  • When Genius Failed: The Rise and Fall of Long Term Capital Management

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Great book about the fall of Long Term Capital Management. Not really more to say about this book really: if you want to know how it started, its bond arbitrage strategies, it’s thirst for leverage and how much arrogance and greed it’s partners had then this book says it all. The rise and fall of LTCM is a major event in the history of the financial markers and reading this book now illuminates that despite many years after the event, we still unknowingly misunderstand risk.


  • A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

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  • The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal

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  • Irrational Exuberance

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I am a massive fan of Shiller and I think he is truly one of the most insightful economists to have lived. If you believe in the efficient markets hypothesis read this book; I think Shiller puts forth an extremely humble, academic, and well balanced discussion on efficient markets and he provides an extremely well written prose debating it. If you are interested in market’s (stock market, bond market and real estate market) then read this book!


  • Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism

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This was a truly fantastic book, and I can’t recommend it enough! It puts together a fantastic argument on the failures of the macroeconomics and finance profession to adequately model animal spirits. They argue that such a description requires detailed understanding of confidence, fairness, opportunities of corruption, money illusion, and how the development of “stories” are also key. Moreover, to the trained economist they also provide a fantastic summary of the development of many key ideas, such as: IS-LM, AD-AS, Natural Rate Theory, the Phillips Curve, the role of monetary policy, and money illusion. They are able to link these together in a highly articulate way to put forth their case that the economics profession must take into account the behavioural aspect of economic agents, and not just their economic motives.


  • Finance and the Good Society

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  • Phishing for Phools: The Economics of Manipulation and Deception

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  • The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It

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  • End This Depression Now!

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I have found many people in the finance industry to have complete disregard for Krugman, however I generally this he is awesome! Moreover, I find Krugman’s view on many things to be clear and well thought out and this book in my opinion is just that. Krugman has a clear IS-LM type view of the macroeconomy, and although a simplistic Macro 101 type view, this framework has been excellent in describing the events that have taken place since the 2008 financial crisis. Krugman uses this view to outline the “liquidity trap” and given this argues how to escape it, namely through aggressive fiscal policy. He also fights his anti-austerity view and provides concrete arguments of how aggressive austerity measures are exactly not what you want to be doing in the depths of a recession. Whether you like Krugman or not I think this book is a must read and is key to understanding the anti-austerity debate.


  • The Return of Depression Economics

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Great Book! Krugman outlines with great clarity the currency crises that took place in the 90s and links these with Japan’s experience of a lost decade to show that depression economics is today more relevant than ever. In particular, he provides a great account of the tequila crisis, the Latin American debt crisis, the Asian crisis, the UK’s departure of the ERM, Japan and then ties all this together with the 2008 financial crisis. It’s interesting reading this now, many years after the crisis, and seeing just how right Krugman has been all along!


  • Peddling Prosperity: Economic Sense and Nonsense in an Age of Diminished Expectations

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  • Jimmy Stewart is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking

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I read this book a while back now, and I very much enjoyed it; moreover I found Kotlikoff’s proposal of Limited Purpose Banking pretty cool. Basically he addresses the main market failures in banking: moral hazard and adverse selection and then goes on to argue how LPB is the cure. LPB is basically a method of breaking up the banks into essentially mutual funds, if you are already curious then you should definitely read it.


  • The Global Minotaur: America, Europe and the Future of the Global Economy

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To be honest not a huge fan of this book, however, I still want to read Varoufakis’ second book given his role in Greece’s debt crisis. This book however, was part of Varoufakis’ broader theory that the US has established itself as the world superpower through its careful design and manipulation of other countries’ industrialisation phases and that role in world trade. Although Varoufakis puts forth a number of strong arguments, this reads a bit like a conspiracy theory as opposed to the nice economics of for example Shiller’s work. So I would say it is still worth a read, but there are a number of other books on this list you should definitely go to first.


  • And The Weak Suffer What They Must?: Europe, Austerity and the Threat to Global Stability

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  • This Time Is Different: Eight Centuries of Financial Folly

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  • Manias, Panics, and Crashes: A History of Financial Crises

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  • Hall of Mirrors: The Great Depression, The Great Recession, and the Uses-and Misuses-of History

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  • The Courage to Act: A Memoir of a Crisis and its Aftermath

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  • The Age of Turbulence: Adventures in a New World

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  • The End of Alchemy: Money, Banking and the Future of the Global Economy

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  • Other People’s Money: Masters of the Universe or Servants of the People?

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  • The Shifts and the Shocks: What we’ve learned – and have still to learn – from the financial crisis

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  • Thinking, Fast and Slow

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Started off great, got really interesting, then got as bit boring. He then went into a very detailed discussion on expected utility theory and Prospect Theory, which is what won Kahneman his Nobel Prize; but then went on to try and bring this together into a unified framework. I think his work regarding prospect theory is awesome and deserving of much attention, and I think his fictitious System 1 and System 2  characters are a great analytical way to view the cognitive process, however I don’t think he did a great job in pulling it all together; although he did provide a great survey of the literature on experimental psychology and of course his utility theory discussion was excellent.


  • The Signal and the Noise: The Art and Science of Prediction

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Started off quite well, fast paced and fun to read but then I found it very unoriginal and quite boring. Nate Silver basically just summarises a load of stuff that has already been well documented in the pop science literature. For example baseball stats, which has already been well written about in Michael Lewis’s bestseller Money Ball. There was a chapter near the end I quite liked on Bayes, and his argument that basically advocates the Bayesian approach to statistical forecasting. However, the chapters on poker, weather forecasting, baseball stats, and election results pretty darn boring. Would not recommend.


  • Alex’s Adventures In Numberland: Dispatches From the Wonderful World of Mathematics

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Really interesting book! It covers a wide range of mathematical theory and is written in a pop-science kind of way, whilst still dipping in and out of some more formal explanation. For someone with prior maths training it is awesome. Topics included: (1) counting and the history of our number system; (2) base numbers, why do we use 10? why is time base 60? (3) geometry and shapes; (3) zero; (4) pi; (5) the development of algebra: (x,y); (6) mathematical puzzles; (7) series and progressions; (8) the golden ratio and fractals in nature; (9) chance: probability and statistics; (10) the normal distribution; and (11) infinity.


  • Messy: The Power of Disorder to Transform Our Lives

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So not going to pretend I did not enjoy reading this book; especially as the opening chapter discussed Keith Jarrett’s Koln Concert; and there was some interesting discussion on Miles Davis and Jazz. However, The general concept of this book is entirely ripped off of Taleb’s Anti Fragile. Moreover, a lot of the stories were regurgitated from the Freakonomics’ Books, and Malcom Gladwell’s books. So very unoriginal but fun to read nevertheless.


  • Sapiens: A Brief History of Humankind

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Really interesting book; I learnt a loads of cool things to add to my general knowledge. It covers things like: genes and the evolution of Homo-Sapiens, religion, politics, capitalism, the environment, empires, colonisation, data and then briefly discusses the future of Artificial Intelligence, which is the opening to the follow up book. One comment I do have though is on his discussion of Adam Smith and needs to take his argument with a pinch of salt. Adam Smith outlines the Invisible Hand in his Theory of Moral Sentiments, not just the misinterpreted segment in the Wealth of Nations. As such I think Harari has misused the theory, which is very bad scholarship.


  • How Not to be Wrong: The Hidden Maths of Everyday Life

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Having read Alex’s Adventures in Wonderland first I was expecting a bit of a repeat but it was quite different. This book is primarily concerned with stats and in particular: regression, correlation and causation, and inference. There is also a section on linearity, which is essentially a point that Taleb always bangs on about. Fun and entertaining read; picked up a few facts along the way but new a lot of it already.


  • Nerds on Wall Street: Math, Machines and Wired Markets

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Great book, really enjoyed it, could relate to loads and learnt a lot about the development of technology and AI in financial markets. There was some cool chat on genetic algorithms, ensemble methods, neural nets and natural language processing. Has some awesome references in it and provides some great introductions to various pieces of literature. For a practicing quant trader would highly recommend!


  • A Man for All Markets

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Wow, what a book! I guess if I could name one hero of mine I would say Ed Thorpe. From inventing card counting, to inventing the first wearable computer alongside Claude Shannon, to becoming a professor of Mathematics, and to becoming the first of the great quantitative investors. Thorpe has subsequently run several quant funds and has had amassed an enormous personal fortune. In this book he not only tells the story of his life and each of these achievements, he also provides a level of instruction to people and how they should think about things, about how they should manage their wealt. I have genuinely walked away after reading this book with the impression that Ed Thrope just got “life” and lived it to its maximal potential whilst respecting others and with a solid moral compass. What a guy!