See the Q1 (24) and Q2 (26) lists. For the 3rd quarter read 34 books for a total of 84 year to date.

  • The Collected Works of Armen A. Alchian: Volume 2 (3/5) See full review. I have had Alchian on my list to read since writing about his paper three years ago.
  • Bronze Age Mindset (1/5) BAP is an amusing twitter account. I don't know how anyone was able to "review" his book (1,2,3) since it is incoherent gibberish.
  • The First Five Pages: A Writer's Guide to Staying Out of the Rejection Pile (3/5) Things not to do: reasons that literary agents and publishers will immediately reject fiction manuscripts. But many of the principles apply to other types of writing. And good writing about investments tells a story. Maybe all good writing is storytelling? The problem with investment writing that limits its quality is that it needs to be done quickly. It can’t spend six months being polished like a John McPhee piece. He suggests reading poetry to improve writing by cultivation attention to language. What should I try - Kipling perhaps? He also suggests doing deliberate vocabulary building. 
  • The Passing of the Great Race (4/5) Written in 1916 - more than a century old. As with reading Mencken earlier this year, it is interesting how people just do not write like this anymore: "Every generation of human beings carries the blood of thousands of ancestors, stretching back through thousands of years, superimposed upon a prehuman inheritance of still greater antiquity and the face and body of every living man offer an intricate mass of hieroglyphs that science will some day learn to read and interpret." Along the lines of First Five Pages suggestion to read more poetry in order to write better, reading more books, and older books, could help as well.
  • Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports, Second Edition (4/5) Now in its fourth edition. The 1990s had really bad accounting fraud. Ever wonder why you got so many AOL floppy disks in the mail in the mid 90s? They were capitalizing those costs as "deferred subscriber acquisition costs," and by June 1996 these were 61% of shareholder equity! Note that, like AOL, many of the companies that engaged in "aggressive accounting" did not fail. They got an edge with this type of behavior - and it worked. (Think of Larry Ellison.) A lot of these techniques were and are legal. The one thing that does not lie is a dividend or interest coupon check in the mail. Also, the more stupid investors in the market (who do not read financial statements), the bigger the advantage in cost of capital that crooks have over honest people. Perhaps this is why there is so much fraud at the top of economic cycles. Consider staying away from minority investments in businesses where the profitability is difficult to assess? Or at least be very careful of earnings quality (cash). A candy or soda company, or a book publisher, has fewer opportunities for creative accounting than an aerospace manufacturer or contractor.
  • Rising from the Plains (4/5) McPhee follows a geologist born in Wyoming whose mother moved there to be a one room schoolteacher and whose father came from Scotland to be a rancher - both pioneers, not immigrants. There was a saying among homesteaders in Wyoming: "If summer falls on a weekend, let's have a picnic." Wyoming hematite made Rawlins Red paint. Geologists are influenced by rock where they grew up. Also, "in the contrast between erosion and orogeny, erosion never loses." The Union Pacific runs across the famous "gangplank". (This is where the Union Pacific crossed the mountains.) Interstate 80 runs through Wyoming and it can get closed by snow in every month but August. Geologist lived to be 90. McPhee could really use diagrams and maps in his books - wonder if he has ever read any of Tufte's thoughts on information density?
  • Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street Reread. (4/5) Main characters: Claude Shannon, John Kelly, Ed Thorp. All three had good insights into markets at the beginning of the hedge fund era. John Kelly died very young. Claude Shannon was odd, although he ended up investing in and being on the board of Teledyne. The best positioned to take advantage was Thorp who got famous with Beat the Dealer, but realized that casino gambling was a big waste of time. He starts an investing partnership and evolves from warrants to convertible bonds to options. Then there is LTCM. Such low ROA multiplied by 30x leverage. Stay in the game!
  • When Genius Failed: The Rise and Fall of Long-Term Capital Management (5/5) They started the fund right after the 1994 rate surprise, when spreads widened, but then tightened again as bubble continued so they made money initially. Very high leverage on very small spreads. Betting on ~12 bps spread between on-the-run and off-the-run treasuries to narrow. Their trades were liquidity providing - they tended to buy the less liquid security every time. Always betting on spread convergence. Short vol: "The MIT types always want to short volatility". Ironically the August 1998 event that killed them was a great opportunity for their key strategies, which they had drifted from because those opportunities dried up!! They had plenty of money; if they had patiently waited in cash they could have taken advantage. Crazy huge and leveraged - $100 billion of assets on a few billion of equity.
  • John James Audubon: The Making of an American (3.5/5) Visits family in France, smuggled out to avoid military service. Moves to Louisville (fall line of Ohio River). When Audubon moved there the majority of the American population was under 20! Hunting and eating of all birds even songbirds. He lost everything in the depression in 1819. Traveled incredibly widely for the pre-railroad era - thought nothing of walking 50 miles to get somewhere. Could be worth reading more of the prolific Richard Rhodes. Audubons had trouble holding on to money. The copper plates used to print his bird portraits were scrapped after he died. He traveled so much. 
  • Audubon, On The Wings Of The World (4/5) This is a graphic novel of Audubon's life. Very much abbreviated (and some creative license) compared with the Rhodes biography. Excellent drawings and a culturally conservative children's book. Audubon represents early American pioneers, settlers, and frontiersmen (words you never hear anymore, replaced by "immigrants").
  • The Nesting Season: Cuckoos, Cuckolds, and the Invention of Monogamy (4/5) By the great Bernd Heinrich. As with John McPhee, Peter Hessler, etc., one should have all of his books. I like the natural historian approach to birding: watching local species throughout their lives, over multiple seasons. As opposed to flying all over the planet just to see a bird for a few seconds to check it off a list. Bernd says that wherever he lives, he plants some trees and puts up some birdhouses. After reading about natural history and nest parasitism, it is amazing to see behavior like this in a species that has cognitive faculties and reasoning ability that birds lack. But actually, the human mind is extremely susceptible to (harmful) memes just as a sparrow is vulnerable to having cowbird eggs dumped in its nest for it to take care of.
  • Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals (4.5/5) Written by a prop trader who used technical analysis and then got interested in philosophy of science. He differentiates between subjective and objective TA. Subjective means too vague to be implemented by a computer. (Artisanal TA.) Frailty of the mind - reminds me of Drawing on the Right Side... TA has great appeal to retail investors who are intimidated by financial statements and primary research. (Not as hard as it looks - Sleuthing and Oddball Stocks.) Also relevant is ever changing investment styles. In the past, the signal to noise ratio of these technical signals may have been stronger, and fewer people were looking. Meteorologists and horse bettors have an easier time with calibrating their predictive abilities because they make explicit predictions every day and get swift and precise feedback. He thinks EWT is worthless: "loosely defined rules and the ability to postulate a large number of nested waves of varying magnitude [gives] the Elliot analyst the same freedom and flexibility that allowed pre-Copernican astronomers the ability to explain all observed planetary movements." Also, confirmation bias creates a "vicious cycle of growing self deception" and "TA practitioners most experienced with a useless method [are] least able to recognize its flaws because of more lengthy exposure to the method's chance based successes".
  • The One Percenter Code (1/5) Saw this on the front table at a used bookstore in hipster Wicker Park Chicago, which I thought was amusing. Very disappointing though. Here is a negative review summarizing many of the problems. I would read the bullish case on being part of a group of outlaws that recklessly risk their lives on motorcycles written by an intelligent, philosophical person. Perhaps that intersection is an empty set? It would be funny if this guy were made aware that motorcycle enthusiasm comes from living too close to cats.
  • Airframe (2.5/5) Not my favorite Michael Crichton novel. His best was clearly Jurassic Park, and Andromeda Strain is up there too. "Airframe is unlike many of Crichton's other works in that the story has almost no outright science fiction elements." Having the airplane manufacturer conduct the investigation of an incident with one of its planes does not ring true. (In addition to reading all Delaware Chancery opinions, we like to read all NTSB reports.) Many of his novels were polemics, this one was against the media and television journalism. What a quaint concern. 
  • Permission Marketing: Turning Strangers into Friends and Friends into Customers (3/5) Interesting economic statistic is advertising expense per capita. Do we have the most impressionable rubes or what? Permission marketing (as opposed to interruption marketing) is "anticipated, personal, relevant". Newspapers and magazines developed as a vehicle to attract attention to advertisements for goods of the mass production age. Some of these new products were junk, like Crisco, produced by P&G and made out of the same thing (cottonseed oil) as ivory soap. This replaced lard and homemade soap from animal fats. Frequency is key in advertising but it is expensive and boring. The book is essentially saying you should have a mailing list. Same as Ryan Holiday links recently. He predicted (in 1999) that a car company would go direct to consumer with showrooms in shopping malls. Basically wrote the book to plug his company Yoyodyne which was bought by Yahoo. What's he doing now?
  • White Gold: The Extraordinary Story of Thomas Pellow and Islam's One Million White Slaves (4/5) Islamic pirates from Morocco capturing Europeans from ships and coastal villages all over Europe (and even the American colonies) and bringing them to North Africa and Arabia as slaves. The British under Charles II were extremely naive at dealing with the Moroccans who were abducting and enslaving British citizens. They invited the pirates' "ambassador" to London and entertained him for six months, even made an honorary member of Royal Society. In 1702 Queen Anne was able to free the remaining English slaves by agreeing to help attack a Spanish outpost, and it was the first time in 150 years there had not been English slaves held in Morocco. Only a handful of English vessels ever attempted to defend themselves. Salé did a brisk business in European slaves for centuries. European powers would clumsily allow arms to fall into Moroccan hands, e.g. when the Spanish surrendered two different heavily armed forts there without a fight. (Reminds me of the British in Kabul.) Bet you have never heard of the Society of Knights Liberators of the White Slaves of Africa. The Bombardment of Algiers was a big deal that finally ended white slavery by north Africans. Celebrate with a 9,000 piece jigsaw puzzle.
  • The Fates of Nations: A Biological Theory of History (4.5/5) A deterministic theory of history based on ecology - Colinvaux examines wars, rises and falls of civilizations, and human history from ecological principles to give a predictive theory for the fates of civilizations. Reproductive effort makes no difference to the size of a population - which is set by niche size. Small young vs large young strategy. View: Malthus was right but technology has temporarily postponed. "The Earth is finite... we can defer the final poverty but not avoid it." So physicists and ecologists believe in Malthusian limits, but not economists. "When we gave up hunting for farming... we broke the primeval restraints on number and marched down a food chain to where the energy was." During the last ice Age there was more land in temperate latitudes than there is today due to retreat of seas into glaciers. Ecology's first social law: "all poverty is caused by the continued growth of population" after resources have stopped growing. Bill Gates is a lunatic who thinks poverty causes large families, rather than the ecological truth that large families cause poverty. Having the cause and effect backwards he is breeding a precarious population bubble. Social upheavals come from disaffected individuals of the middle and upper classes. (This agrees with Turchin's elite overproduction theory. Unprofitable startups made by Stanford students seem to be an indicator of this overproduction.) Social oppression is an inevitable consequence of the continued rise of population. 2nd law: "aggressive war is caused by the continued growth of population in a relatively rich society" that can steal niche space from its neighbors. Once an empire is crowded for the upper classes, collapse is near. At this point bureaucracy is more complex and bureaucrats more numerous. "Opportunity for betterment wanes and initiative must wane with it."
  • Ramp Hollow: The Ordeal of Appalachia (2/5) His summary: "How people get kicked off land and why we don't talk about them." Written by someone who describes himself as a "democratic socialist". His facts about the oppression of Scots-Irish Appalachians are interesting, but sadly he never read anything like Fates of Nations so his theories and conclusions are no good. Colinvaux mentions that conquered people are less often massacred than just forced to leave their territory. (But they leave fewer descendants, or none at all, like the birds each season who don't win a territory for a nest. This also happened to the Carthaginians.) This author's thesis is that Scots-Irish farmers in 1880 went through something like English peasants in 1650 enclosure movement. Unfortunately he's sympathetic to Marxist economics and also doesn't know his ecology. (p 146 Thinks that cattle raising households would allow predators like bears to feed on their lifestock at will so they could eat the predators if needed - this makes no sense as it would result in an energy deficit.) For example, he describes a population increase and says "the absolute number of cleared acres fell along with the relative area available to support each person. But why should this have cause a crisis?" The mistake is in thinking about the ecological forces effecting humans any differently than other animals or species. Also he talks about the plight of labor without talking about the market forces (supply and demand) that dictate how capital will treat labor. Interestingly he admits that "socialists hated Malthus, none more than Marx". Colinvaux explains the plight of Appalachia much better (FoN p122) "The poverty of people with compressed lives, which is always the result of letting populations rise to soak up the resources released by new technology or conquest."
  • Uniforms (3.5/5) By the great Paul Fussell, author of (not yet reviewed) 5/5 classic "Class". Points out that you see dark blue (naval inspired) uniforms everywhere.
  • Looking for a Ship (4/5) More John McPhee: "Columbus sailed with fifty-two men on a square-rigger that was a hundred and seventeen feet long. Washburn is sailing with thirty-three on a merchant ship that is six hundred and sixty-five feet long. Washburn calls this undermanning. Steaming between the Scylla of automation and the Charybdis of bankruptcy, contemporary American shipping companies find ways to get along without crewmen." Remember the story of the El Faro?
  • The Chief Culprit: Stalin's Grand Design to Start World War II (3/5) Vladimir Bogdanovich Rezun aka Victor Suvorov defected from the USSR to UK in 1978 and then wrote a number of books about WWII. The Bolsheviks thought that more mass slaughters like WWI would serve their purpose (of global takeover), so they started by backing the Spanish Civil War and when that failed, Stalin backed Hitler's rise to power. Thus Stalin agreed to divide Poland but let Hitler be first to attack, starting the another world war. Suvorov says that Stalin was weeks away from attacking Germany when Hitler preempted him, catching the Soviet military in completely helpless pre-offensive formations. The German attack was suicidal, so it caught Stalin totally off guard. (For example, no preparations for winter. If they had ordered sheepskin jackets, Soviet agents would have noticed falling lamb prices. If they had cold weather gun lubricants, Soviet agents would have picked them up on the used gun cleaning rags that they shipped back for analysis.)
  • No Exit: Struggling to Survive a Modern Gold Rush (4/5) About a hapless SF startup, written by Gideon Lewis-Kraus all the way back in 2014 - at the precise moment that the VC bubble seemingly peaked. Although somehow this has not (yet?) resulted in a crash. Three years later, the company he profiled in the story ended up being acquired.
  • Forever Nomad: The Ultimate Guide to World Travel, From a Weekend to a Lifetime (2/5) The forever-traveling Nomads have not found solutions to the problems of constant travel (relationships, living out of a tiny suitcase) - they just do not care about them the way normal people would. These guys are the ultimate in the openness to experience personality factor. One funny thing though: "If you want a real treat, take a trans-oceanic cruise that goes west rather than east. On these cruises, you move your clock back an hour on around half the days, giving you a bunch of 25 hour days, known as Martian days. Forget about spas and fine dining; 25 hour days are the ultimate luxury of life." His favorite places to visit are Japan and Budapest.
  • The Bank Investor's Handbook (4/5) By Nate Tobik, see our update here about the Oddball Stocks Newsletter. One of Nate's very good points is that lenders get exposure to parts of the economy that are not otherwise investable, like very small businesses. And the interest coupon on a small business loan is often roughly the same as the return on equity of that business, so the lender gets a similar reward with less risk. Nate did very well investing in small banks post-crisis when they were trading at big discounts to tangible book value. They have three problems now though (not discussed in the book, but we are writing about in the Newsletter). First, they are trading at substantial premia to book. This does not make sense since they are levered credit funds run by idiots. Second, most of them have gotten massively long government debt even though the bond bull market is ending. And third, because the fixed costs of running the bank (including the cost of gathering deposits) are so high, the returns on equity of the banks are actually less than the coupons of the loan book! Bank investors do not seem to have noticed this, but we have been writing about it. (Catch up on back issues of the Newsletter, 19 and 20.)
  • The Wilder Shores of Marx: Journeys in a Vanishing World (4/5) Theodore Dalrymple's tour of 20th C communist dictatorships right as that style of communism was collapsing: Albania, North Korea, Romania, Cuba, and Vietnam. "In my study of communist societies, I came to the conclusion that the purpose of communist propaganda was not to persuade or convince, not to inform, but to humiliate; and therefore, the less it corresponded to reality the better." The PC dictatorship in the west today has the stifling feel that he described in these countries. I have heard that certain countries in eastern Europe are places where it is possible to speak openly and honestly today.
  • The Man Who Would be King (5/5) Rudyard Kipling's story is a rare case where the movie turned is as good as the book.
  • Calvin Pardee, 1841-1923: His Family and His Enterprises (3/5) Calvin Pardee as in Pardee Resources. Copies of this are scarce and expensive because it was a small printing of a family history for a wealthy family. A certain number were given to outsiders and have ended up on the used book market. Mine was given to Manford O. Lee of VF Corp - a big deal apparel company both now and when the copy was sent in May 1981. Pardees have been mostly on the right side of things for almost 400 years. Their ancestor was a Parliamentarian who came to New Haven during the English Civil War. They had family members in the Union army during the U.S. civil war. During the 19th century a Pardee got interested in Lehigh Valley anthracite coal, and that is where the story of wealth starts. The one mistake they made, or the reason they did not become a household name like Carnegie, is that they did not follow the coal and steel industry west to Pittsburgh. (The reason for the westward shift was that steelmaking using bituminous coking coal made more sense in Pittsburgh, nearer to deposits of that type of coal. Plus the market for steel rails was in the expanding west, not the east.) Ultimately, though, Calvin Pardee did take the cash generated by the eastern PA mines and reinvested it towards the end of the 19th century in lands in Louisiana (timber, later oil and gas), West Virginia, Kentucky, and Virginia (the latter three all coal). The Louisiana lands that were bought based on timber value but proved to have oil were the big winner. That leaves PDER as a family owned resource company that has been mining coal, growing timber, and producing oil and gas for more than a century. I can't think of anything else quite like it. Texas Pacific Land Trust has been around since 1888 but is not actively managed.
  • Something from Nothing: Joe B. Foster and the People Who Built Newfield Exploration (3/5) Great quote: "a seismic dollar is the hardest dollar to find in the oil patch". Newfield was founded by Joe Foster after Tenneco sold off Tenneco Oil (where he had been working) in pieces. Foster raised money from employees, the UT endowment, and from an instant coffee company heir. Newfield started out in the Gulf of Mexico, competing by operating on a shoestring and using 3D seismic to find hydrocarbons that had been overlooked. Basically they were small and scrappy compared to the majors and big independents in the Gulf and looked at times while the competition cared more about dollars. Also it always helps to start a commodity company right before a big bull market in that commodity. One thing that occurred to me reading this is that oil exploration in the Gulf of Mexico started in 1954, and while there were oil bear markets before, this is the first time that the GoM hydrocarbons have occupied such an unfavorable position in the marginal cost curve. Thus, Conrad Industries is in pretty uncharted territory, with a demand crunch in its primary market due to a technological innovation.
  • Helium: The Disappearing Element (3/5) See full review.
  • Building on Air: The International Industrial Gases Industry, 1886-2006 (2/5) More than you wanted to know about the history of industrial gas companies, as opposed to the technology or the economics of the industry. Mentions David Landes book The Unbound Prometheus about the "second industrial revolution" starting late 19th C that relied on theoretical understanding as a prerequisite for further technological development. Linde patented process for liquefying air in 1895. His company is still around. The French equivalent, Air Liquide, was founded simultaneously and is still around as well. By 2007 four firms accounted for 75% of world industrial gas market. Earliest pure oxygen was generated chemically (from barium oxide) instead of physically (separated through liquefaction) and used in lighting: limelight. The Union Carbide Co was created to produce calcium carbide using hydropower, which was then used to create acetylene. The Nobel Prize in physics in 1912 was given for acetylene lighthouse keeping technology. An observation: "Until the 1990s, Linde was an engineering company that sold gasses, whereas Air Liquide has been throughout its existence a gases company that also built specialist plant." Early demand for hydrogen was for lifting gas, input into Haber Bosch process, and for the hydrogenation of fats. German inventor Carl von Linde lost his ownership interests - without compensation - in UK industrial gas when WWI broke out. Air Products invented the idea of locating an air separation plant just over the fence from a major customer (eg steelmill). Two innovations in the 1980s: pressure swing adsorption and a membrane process for separation.
  • Grand Canyon: A Natural History Guide (3.5/5) A good overview of the geology and ecology of GC. Great part: "Grand Canyon is remarkable not for its bigness but for its smallness. The Grand Wash trough just below the GC is much bigger in terms of sheer volume removed by erosion, but it is nowhere near as impressive to look at because it's too big. And for real size, consider what the Mississippi River has done. It has eroded a volume of material that would fill the GC many times over. Yet no one stands in Denver and looks out to the east thinking what an amazing erosional feat has been performed between the Rockies and the Appalachians. [...] Canyons, as opposed to valleys or larger landforms, are created by a tension between erosion and the lack of erosion. They are features of arid regions, where a river or stream works at the bottom, but there isn't enough erosion to widen the sides. This is best illustrated by slot canyons, where walls actually overhang and in places block one's view of the sky." Also: "Rock type influences the shape of the GC. Softer rock forms slopes. Harder forms cliffs. The hardest of all, the Vishnu [at the bottom] forms a steep walled V. In combination, the varying hardness of rocks account for the canyon's distinctive starstep profile."
  • In Suspect Terrain (4/5) More McPhee! Highlights: "The Pleistocene - the Ice Age - is all behind us. The Holocene appears to be nothing more than a relatively deglaciated interval. It will last until a glacier two miles thick plucks up Toronto and deposits it in Tennessee." "Rocks are the record of events that took place at the time they formed. They are books." When the book was written in 1982, a character mentions that "he would not go near Williamsburg, or for that matter a good many other places in Brooklyn" - what a time to buy! Less skilled geologists in the USGS were sent to "penal quadrangles" such as "the lesser bayous of Louisiana." "If they did not know strike from dip, they could go where they would encounter neither." If a Chinese geologist wanted to see exposed rock, "they don't depend on streambanks and roadcuts as we do... the peasants dig out a mountainside." "Figuring out the Appalachians was Problem 1 in American geology, and a difficult place to begin, for it was scarcely a matter of layer-cake legibility, like the time scale in the walls of the Grand Canyon." Check out these slabs of Martinsburg slate. "The mountains of Pennsylvania are far less known and visited than many of the American ranges at much greater distance, and even less than many of the European ranges, while they may be said to vie in beauty with any others upon Earth..." This is a good scientific history of two revolutions: acceptance of glaciation (Agassiz in the 19th century) and of plate tectonics, which was new and controversial when McPhee started writing about geology.
  • Moon San Juan Islands (3.5/5) Apparently Antonio Garcia Martinez, the author of the book about Facebook which we reviewed in August 2016, lives part of the year off the grid in a yurt on Orcas Island. He mentioned that he was "burning the first firewood from trees I cut down myself, split myself, and seasoned myself in a firewood shed I made. This fire possesses a warmth no Nest thermostat can beat."
  • The Man Who Walked Through Time: The Story of the First Trip Afoot Through the Grand Canyon (3/5) Books can't describe what the canyon is like. Colin Fletcher did the first recorded through hike entire length of Grand Canyon national park as it was defined in 1963. Strangely, the book was not published until 1968. Reading it, it seems like he really struggled to come up with 230 pages of material about the two month experience. Maybe a good sign that spending more than a few days at a time in the canyon would have seriously diminishing returns? Lucky that the USBR was not able to dam the Grand Canyon. Another canyon through hiker is Kenton Grua who hiked the expanded national park and therefore the entire canyon in 1977.
Authors we are exploring
Also, this is a good point regarding books:
The Lindy Effect has become my top heuristic to decide what to read next. This phenomenon describes how some things tend to live longer, the longer they've lived — to speak plainly, if something has stood the test of time it must be important. When you're tempted to read a book published only 2 years ago, chances are you're just sitting downstream of the author's self-promotion efforts. [Florent Crivello]
The Lindy is a term from Albert Goldman, Mandelbrot, and Taleb.