Tag: review

In the book Atomic Habits: An Easy and Proven Way to Build Good Habits and Break Bad Ones (Amazon,) author James Clear lays out a step-by-step guide on how to adopt better habits.

An excerpt from the book that hit the spot for me:

Your current habits are not necessarily the best way to solve the problems you face; they are just the methods you learned to use. Once you associate a solution with the problem you need to solve, you keep coming back to it.
Habits are all about associations.
You see a cue, categorize it based on past experience, and determine the appropriate response.
Every action is preceded by a prediction. Life feels reactive, but it is actually predictive.
Our behavior is heavily dependent on these predictions. Put another way, our behavior is heavily dependent on how we interpret the events that happen to us, not necessarily the objective reality of the events themselves.

Most investors are well aware of biases that they should overcome. However, when the hypothetical becomes real, they feel powerless to control their behavior. How do you go about making the right choices by default? By making them a habit. And this book will put you on a path where you can make better choices.

Recommendation: Must read!

In The Geometry of Wealth: How to shape a life of money and meaning (Amazon,) author Brian Portnoy starts with the difference between being rich and being wealthy and takes us through what it means to our investments and career choices.

While it may come across as a cross between a self-help and a personal-finance book, it is not as boring as those typically are. Besides, it is concise, running at around 150 pages.

What I like the most about this book is that it makes you take a step back and question why you are doing what you are doing. What is the whole point of saving and investing? It is a means to an end. Not an end in itself. Also, we are wired to think that something complex is better. But in investing, it is the simpler things that compound your portfolio. And simple doesn’t mean easy.

Recommendation: Worth a read.

In the book Everybody Lies: Big Data, New Data, and What the Internet Can Tell Us About Who We Really Are (Amazon,) author Seth Stephens-Davidowitz provides a peek into how “big data” can help us understand the world around us provided we know how to ask the right questions. And that, depressingly, people are consistently lying to themselves.

The author goes on to show how some of the most successful companies in recent memory are based on capitalizing on the difference between what people say they are and what they really are.

The book also touches on a common problem faced by quants who are trying to use big data for building trading models: the curse of dimensionality. We discussed this in our GEM and SMA series of articles (GEM, SMA) – there is no single “best” look-back period for calculating momentum or moving averages. There are trade-offs involved and there is always risk. These issues tend to snowball when using large, multi-dimensional data-sets to a point where it is hard to discern signal from noise.

The principal take-away from this book is that big-data is useful to answer questions typically raised in the social sciences and public policy. But a poor fit where the underlying data is heteroscedastic or the system itself is complex-adaptive.

Recommendation: must read!

In the book Scarcity: Why having too little means so much (Amazon,) authors Sendhil Mullainathan and Eldar Shafir show how scarcity impairs judgment, and decision making.

The book lays out how scarcity – of time, money and attention – ends up creating tunnel vision that trades short-term hacks to longer-term solutions. However, the book is short on solutions and long on anecdotes. It is almost reads like a teaser to Nudge. The book is also a strong endorsement for having a bit of slack in our lives.

Toward the end of the book, I couldn’t help but conclude that the only way not to fall into the scarcity trap is to automate an increasing amount decisions that we make. Everything from buying toothpaste to scheduling appointments can be handled by bots so that we can take longer naps.

Recommendation: worth a read.

In Why Nations Fail: The Origins of Power, Prosperity and Poverty (Amazon,) authors Daron Acemoglu and James A. Robinson compress over 15 years of research on what drives the growth of nations.

Some hard-hitting excerpts:

• Poor countries are poor because those who have power make choices that create poverty. They get it wrong not by mistake or ignorance but on purpose.
• Growth moves forward only if not blocked by the economic losers who anticipate that their economic privileges will be lost and by the political losers who fear that their political power will be eroded.
• Many of the micro-market failures that are apparently easy to fix may be illusory: the institutional structure that creates market failures will also prevent implementation of interventions to improve incentives at the micro level.

India is a bit like the hapless victim in the old Ajit joke, immersed in a vat of liquid oxygen. The liquid will not let it live and the oxygen will not let it die.

Recommendation: must read!