Books from 2020

Here are my book-readings from 2020 along with recommendations. This is my second year of publishing this. As I noted last year, I have benefited from such posts of others, and hope this continues the tradition. The book names click through to Amazon's US kindle versions, or else to the physical versions that I read.

History

1.      Smells: A Cultural History of Odours - Robert Muchembled

An exquisite book on the shifting role of smells over the last ~500 years in human societies. Robert Muchembled dives deep into the influence of biology, religion, sensuality, technology, medical science and industry on people’s attitudes towards smells and how such attitudes shaped societal norms around beauty, culture, hygiene, town-planning, religious ceremonies, and the like. Overall, a fascinating journey.

“Smell is arguably the only one of our senses to be acquired from experience, rather than being innate.”

“Disgust at smells is a fundamental sensation in humans, but not one that is biologically programmed…Until the 1620s, literature and poetry both delighted in excreta which now disgust us… Things do not smell good or bad in and of themselves: our brains categorize them and then record the memory. Humans adapt perfectly to strong smells: after about fifteen minutes, we stop smelling even the worst stench or most delightful fragrance.”

“The sense of smell was terribly gendered. Sight let men select a robust-seeming … partner from a certain distance…Close up, the nose took over, particularly in sixteenth- and seventeenth-century society, when all the women at court and the bourgeoisie all looked more or less the same. The body was generally hidden…”

“In the sixteenth and seventeenth centuries, learning about smells had powerful moral overtones… two opposing paths that lay open…On the one hand, pleasant smells were among the heavenly delights heralding God’s presence on earth, like the ‘odour of sanctity’ arising from the earthly remains of saints. On the other hand, foul smells were strongly associated with the putrid odour of the Devil, who ruled over the mephitic vapours of Hell that awaited doomed souls. Bad smells still triggered reactions of terror, even when they were wholly natural, since medical theory blamed repeated outbreaks of plague on airborne contagion via corrupt smells.”

2.      Debt: The First 5,000 Years – David Graeber

One of the finest books dealing with the history and nature of Debt/Credit using first principles. As one peels the onion, one realises that to understand debt, one needs to understand money, trade, violence, slavery, empires, wars...and to understand these, one needs to go another level down and understand morality, social structures, power, gender, culture, marriage, markets, governments...And then to understand these, one dives another level. And so it continues. In the process, one tends to feel lost at times, and for me it led to a re-read, which ended up being worth it, all over again.

“The story of the origins of capitalism...is not the story of the gradual destruction of traditional communities by the impersonal power of the market. It is...the story of how an economy of credit was converted into an economy of interest; of the gradual transformation of moral networks by the intrusion of the impersonal—and often vindictive—power of the state.”

“The fact that a gold coin has no intrinsic value is the basis of its value as money, since this very lack of intrinsic value is what allows it to “govern,” measure, and regulate the value of other things.”

“Modern money is based on government debt, and that governments borrow money in order to finance wars. This is just as true today as it was in the age of King Phillip II. The creation of central banks represented a permanent institutionalization of that marriage between the interests of warriors and financiers that had already begun to emerge in Renaissance Italy, and that eventually became the foundation of financial capitalism.”

“Any system that reduces the world to numbers can only be held in place by weapons, whether these are swords and clubs, or nowadays, “smart bombs” from unmanned drones…(and)…if history shows anything, it is that there’s no better way to justify relations founded on violence, to make such relations seem moral, than by reframing them in the language of debt—above all, because it immediately makes it seem that it’s the victim who’s doing something wrong.”

3.      Against the Gods: The Remarkable Story of Risk – Peter L. Bernstein

This book has been on my list for the last 22 years. I am glad I did not read it earlier as perhaps I may not have absorbed it adequately. I had not imagined that to understand the history of the human understanding of and relationship with Risk, one needs to understand the history of Numbers, Mathematics, Accounting, Probability theory, Game theory, Physics, and the like. I still do not know what I liked more about this book – the adventurous history of Math or the sophisticated history of Risk. The book has subtle undertones of philosophy that lie deep behind the veneer of rationality, and everything interesting is situated in between.

“Today, we rely less on superstition and tradition than people did in the past, not because we are more rational, but because our understanding of risk enables us to make decisions in a rational mode.”

“The story that I have to tell is marked all the way through by a persistent tension between those who assert that the best decisions are based on quantification and numbers, determined by the patterns of the past, and those who base their decisions on more subjective degrees of belief about the uncertain future. This is a controversy that has never been resolved.”

“Why, given their advanced mathematical ideas, did the … not proceed to probability theory and risk management? The answer, I believe, has to do with their view of life. Who determines our future: the fates, the gods, or ourselves? The idea of risk management emerges only when people believe that they are to some degree free agents.”

“Greeks had little interest in experimentation; theory and proof were all that mattered to them. They appear never to have considered the idea of reproducing a certain phenomenon often enough to prove a hypothesis, presumably because they admitted no possibility of regularity in earthly events. Precision was the monopoly of the gods.”

“Granted, the arithmetic mean is simple to use, but Keynes quotes a French mathematician who had pointed out that nature is not troubled by difficulties of analysis, nor should humanity be so troubled.”

“The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite. Life is not an illogicality; yet it is a trap for logicians. It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait.”

4.      East & West - C. Northcote Parkinson

The macro view of history, that this year’s reading dominated for me (at least in terms of page count), has this 1960’s work from the creator of Parkinson’s law akin to the fine after-taste one experiences in many of the exquisite Japanese Gyokurus. No kindle version is available though, and in fact even a print version is not only hard to find but also expensive to procure. I will not quote from the book here as I do not like marking the pages of printed books.

The basic premise here is that last 4000 years have seen power shift back and forth between the “East” and the West” in 500 year cycles, broadly speaking. Starting with about 1200 BCE, which was the setting of The Iliad and The Odyssey, the West expanded into and dominated over the East. The Eastern resistance came from the Persian Empire led by Darius and Cyrus from about 700 BCE. The West rose again, led by Alexander (the Great) who died young in 323 BCE at the age of 32 but by then had built perhaps the largest empire the world had ever seen. The Eastern resistance came under the leadership of Chandragupta Maurya and his grandson Ashoka (the Great) but their great empire withered away after their embrace of peace over war. Next came the age of the Arabs whose domination came in times generally considered the Dark Ages for Europe. And then the European crusades starting around 1100 ACE resulted in rising power of empires allegiant to the church led by the seafarers from the Iberian peninsula. And so it goes. As one of the reviewers noted, “The book is a delight…Parkinson is having a ball with history”

Each of these three books – Debt, Risk and this one – are so similar yet so different. They cover the last 4000 years, and have the same basic cast of characters – Greeks, Persians, Mauryans, Dark Ages, Arabs, Europeans, and Americans – but look at them and their interconnects from interestingly (or rather, fascinatingly, as Leonard Nimoy’s Spock would say) different lenses.

Biology

5.      Spillover – David Quammen

A fine book to read in present times of nCov2 and Covid19. David Quammen does a great job of informing us about the science behind viruses and developing our sensibilities relating to the same by giving in-depth accounts of how some well-known viruses such as Ebola, HIV, Coronavirus-1 and others were identified, traced, tracked and dealt with…revealing in the process how they behave, what could go wrong, and the like. Highly recommended.

“Ecological disturbance causes diseases to emerge. Shake a tree, and things fall out…these disease outbreaks coming one after another… are not simply happening to us...They reflect the convergence of two forms of crisis on our planet...ecological (and) medical.”

“Epidemics don’t end because all the susceptible individuals are either dead or recovered. They end because susceptible individuals are no longer sufficiently dense within the population.”

“Viruses face four basic challenges: how to get from one host to another, how to penetrate a cell within that host, how to commandeer the cell’s equipment and resources for producing multiple copies of itself, and how to get back out—out of the cell, out of the host, on to the next. A virus’s structure and genetic capabilities are shaped parsimoniously to those tasks. A virus doesn’t necessarily achieve anything by making its host sick. Its self-interest requires just replication and transmission.”

“The different attributes of DNA and RNA account for one of the most crucial differences among viruses: rate of mutation. DNA is a double-stranded molecule, the famed double helix, and because its two strands fit together by way of those very specific relationships…, it generally repairs mistakes … as it replicates itself…So the rate of mutation in most DNA viruses is relatively low. RNA viruses, coded by a single-strand molecule with no such corrective arrangement, no such buddy-buddy system, no such proofreading polymerase, sustain rates of mutation that may be thousands of times higher. RNA viruses mutate profligately. Mutation supplies new genetic variation. Variation is the raw material upon which natural selection operates. Most mutations are harmful, causing crucial dysfunctions and bringing the mutant forms to an evolutionary dead end. But occasionally a mutation happens to be useful and adaptive. And the more mutations occurring, the greater chance that good ones will turn up.”

Politics

6.      Blood and Oil – Bradley Hope & Justin Scheck

I read this as a follow-on book to the excellent 2009 vintage book by Steve Coll on the origins of the Kingdom of Saudi Arabia. This book, written by WSJ reporters, presents a fairly well researched journalistic account of the current politics in KSA. I would recommend the Steve Coll book for where KSA has come from, and this for where it might be headed.

General Arts

7.      The Making of Casablanca: Bogart, Bergman, and World War II - Harmetz, Aljean

I try and read at least one book in this Genre every year. Last year was the autobiography of Leonard Nimoy who played the character ‘Spock’ in Star Trek. And this year is the book on politics and personalities behind perhaps one of the the most celebrated movies of all times – Casablanca. This well written book takes us behind the scenes not only with respect to the casting, script, story and stars of the movie but also provides interesting insights into the origins and state of the studio system, balance of power between stars and studios, how movies were created from start to finish, how risk was managed, and how the economics broadly worked. This book has enchantingly enhanced the allure of Casablanca in my mind.

Finance and Investing

8.      Anatomy of the Bear – Russel Napier

This is a fascinating, in-depth, analysis of the four greatest bear markets of the 20th century in the USA. An unimaginable amount of work must have gone into producing this book. It provides us with a plethora of dots and an interesting way to connect them; but also leaves open enough possibilities for us to connect them in our own ways too. Russel Napier also employs this interesting technique of listing the major daily news headlines, three months before and after each of the market bottoms, as a window into what the consensus thought was around the time of the bottom. Again, it perhaps requires dual-read - I would highly recommend.

“Great equity bear markets will occur as deflation, or the real risk of deflation, develops”

“If you don’t retire your debt, you don’t get to retire, while anyone seeking to retire debt is likely to save more and spend less. This structural shift to lower levels of consumption by the baby-boom generation, as they retire their debt in preparation for retirement, is a sizeable impediment to US economic growth and inflation.”

“The average investor will likely encounter a bear market every three years or so, and every 13 years the bear will be particularly mean…For nine of the years of the past century, subsequent ten-year total real returns from US equities were negative. This is frequent enough, even for an investor with a ten-year time horizon…”

“Can it be coincidence that the four years covered in this book - 1921, 1932, 1949, 1982 - also mark momentous change in American society. There was the birth of the consumer society (1921), the birth of big government (1932), the birth of the military-industrial complex (1949) and the rebirth of free markets (1982).”

“There had been a long-held belief, summed up by the report of the Bullion Committee to the British House of Commons in 1810, that the introduction of any human element in the monetary process could be dangerous. The most detailed knowledge of the actual trade of the country, combined with the profound Science in all the principles of Money and circulation, would not enable any man or set of men to adjust, and keep always adjusted, the right proportion of circulating medium in a country to the wants of trade.”

“If there is one key difference between other 20th Century bear markets and what happened in 1929-32, it is the collapse of the banking system.”

9.      The Long Good Buy – Peter C. Oppenheimer

This book comprised this year’s reading on market cycles and capital flows. Thinking about cycles is a tricky affair as it supposedly employs correlation, causation, deduction and possibly induction for forecasting the future. But perhaps market cycles are interesting largely to be knowledgeable about the past and be aware of the risks and opportunities they pose for the future, in case history repeats, without forming an expectation that history will repeat in exactly the same shape, size and timing as before. Hence the value lies more in signaling, and less in predicting or forecasting. A very good book.

“Avoiding sharp corrections, and participating in the early stages of a market recovery, are the times that can make the most difference to an investor's returns.”

“Reinvesting dividends is one of the most powerful and reliable ways to grow wealth over the long term. Since the early 1970s, roughly 75% of the total return of the S&P 500 can be attributed to reinvested dividends and the power of compounding.”

“Light touch regulation, or deregulation, is often an ingredient in the buildup of financial bubbles”

“In general, we can say that equity markets perform best when economic conditions have been weak, valuations are low, but there is an improvement in the second derivative of growth”

“In the UK… a stock market peak … achieved in 1825…was not surpassed for more than 100 years.”

10.  Pioneering Portfolio Management – David F. Swensen

We must be thankful that David F. Swensen took time out to write this important book. And what a pleasure it was to read. The ethos is similar to that echoed by Seth Klarman (whose book I noted last year), Howards Marks (whose Memos I noted last year), and a few other thoughtful investors who also are thoughtful writers. A majority these writings highlight thoughtfulness, rationality, experience, knowledge, self-awareness, hard work, character, righteousness, morality and an understanding of human psychology as the key drivers to long term investment success.

“devotion to rigorous thinking that penetrates complexity while rejecting the temptations of oversimplification.”

“the real secret to Yale’s remarkable continuing success is defense, defense, defense.”

“The sixth secret is that, as Charles Darwin tried to explain, survival of the fittest is not determined by competitive strength, but rather by social desirability.”

“Market timing, defined as a short-term bet against long-term policy targets, requires being right in the short run about factors that are impossible to predict in the short run.”

“Market observers frequently confuse strong economic growth with strong equity market prospects.”

“The human desire to make a visible contribution shortens time horizons. Because investment staff and trustees wish to leave their marks on the portfolio, potential problems exist if the investment fund’s horizon exceeds a staff member’s expected tenure or trustee’s term.”

11.  Unconventional Success – David F. Swensen

While Pioneering Portfolio Management is written with institutional investors in mind, this book (Unconventional Success) is focused on individual investors and hence also covers personal investment products such as mutual funds in some detail. I would highly recommend reading any one book, given large overlaps between the two.

“The mutual-fund industry sits at the center of a massive market failure. The asymmetry between sophisticated institutional providers of investment management services and unsophisticated individual consumers results in a monumental transfer of wealth from individual to institution.”

12.  The Moonshot Game – Rahul Chandra

I now try and read at least one book every year relating to the Indian private markets. This book was a whimsical pick - something I seldom do. The idea was to finish it on the plane on a day trip to Delhi. It was an ambitious target as several comments made by Rahul Chandra made me thing and reminisce. It is an interesting read and is on-the-mark on several counts with respect to what I have personally encountered in the Indian VC investment space.

13.  The Psychology of Money – Morgan Housel

I have read several articles by Morgan Housel and was hence curious about his book. It is a very well written book that is targeted towards finance-laypersons.

“The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people.”

“Someone has to own every asset at every point in time. That means the mere idea of bubbles will always be controversial, because no one wants to think they own an overvalued asset.”

“An idea exists in finance that seems innocent but has done incalculable damage. It’s the notion that assets have one rational price in a world where investors have different goals and time horizons.”

India

14.   A Game Changer’s Memoir – G. N. Bajpai

G. N. Bajpai moved from being the Chairperson at LIC (India's largest life insurance company), to being the Chairperson at SEBI (India's securities markets regulator). SEBI was still finding its feet at that time and was generally not considered among the most desirable places to lead. This account is a fascinating story of the sheer number of things that got done in the three year tenure. It also provides a unique insight into the origins of many security markets regulations in India.

“Even though, legislatively, SEBI is an autonomous body and the chairman is independent, he has to coordinate with, if not report to, the finance minister in the discharge of his responsibilities.”

“Under Indian law the burden of proof normally rests with the complainant. However, it is a settled principle…that in administrative and quasi-judicial actions, the onus of proof sometimes shifts to the party challenging the validity of the orders of the administrative or quasi-judicial authority like SEBI”

“But this meant being answerable to the likes of the Comptroller and Auditor General of India and the Central Vigilance Commission, the risk of government intervention and later, politicization of the issue. These swords perennially hang over the neck of every public servant. A progressive decision made with good intent could be perceived as a ‘wrong’ move, and then all the swords could come down, vying for one’s blood.”

“The socio-economic fabric of India with its robust democratic order does not permit decisions to be implemented immediately, even if they make perfect sense.”

“Stock trading in India was informally begun by twenty-two enterprising traders in the mid-nineteenth century under a banyan tree at Horniman Circle in the Fort area of Mumbai. In 1875, this informal group organized themselves formally as an Association of Persons (AoP), with all the traders as its broker-members, mainly to trade among themselves. They created Bombay Stock Exchange (BSE), the oldest stock exchange in the country.”

15.  Going Public: My Time at SEBI – U. K. Sinha

U.K. Sinha journeyed from the Finance Ministry to heading UTI to heading SEBI. Not many regulators in India have written memoirs and this one provides a nice continuation of how thinking at SEBI evolved from G. N. Bajpai’s time to U. K. Sinha’s time.

“Stock exchanges have traditionally been managed like clubs…brokers have traditionally had three main rights in a stock exchange—the exclusive right to trade, manage the affairs and exercise ownership rights…Since the mid-eighties, global consensus emerged that there are inherent risks in the existing system…The concept of demutualization, where the trading rights, ownership rights and management rights are not mutual and can be allotted to others as well developed and gained ground.”

“Many people feel that the Vastu of SEBI is defective. Being dragged into controversies is in its DNA.”

16.  Overdraft – Urjit Patel

Urijit Patel was until very recently the Governor of the Reserve Bank of India. This book is not an memoir, but deals with some specific issues and how they were planned to be dealt with, principally the bad-loans on commercial banks’ books.

“At the heart of the subject is the increasing risk, in effect, due to the failure, over decades, to arrest a creeping banking sector-fiscalization; ownership of banks as a means for day-to-day macroeconomic management rather than primarily for efficient intermediation between savers and borrowers”

“We have been in the realm of political credit cycles for at least the last decade or so”

“Regardless of where the country stands in the economic cycle, the fiscal tap is hardly ever restrained”

“A critical public policy choice is playing out in India. There is a trilemma or cul-de-sac at the conjuncture of a dominant government sector, limited fiscal space and independent regulation. If it is an ‘impossible trilemma’, as it increasingly seems to be, something has to give way”

“It is worrying that some of the recent initiatives by the principal owner, like the quick-disbursing Mudra credit scheme, have been more akin to transfers”

“Only a bank that fears losing its deposit base or incurring the wrath of its shareholders is likely to recognize losses in a timely manner. In many of our banks, such market discipline is simply not present at the moment”

“Sowing disorder by confusing issues is a tried-and-trusted, distressingly often successful routine by which stakeholders, official and private, plant the seeds of policy/regulation reversal in India; this has been the case for as long as I can remember”

Fiction

17.  A Gentleman in Moscow – Amor Towles

One of the finest pieces of English language writing that I have come across in several years. Such finesse, such wit, such play of words, such characters, such settings – a treat for the soul. Must be read in hardcover, in my opinion.

“And your Occupation?

             It is not the business of gentlemen to have occupations.

Very well then. How do you spend your time?

             Dining. Discussing. Reading. Reflecting. The usual rigmarole.

And you write poetry?

             I have been known to fence with the quill”

Others

18.  Thinking in Bets – Annie Duke

When I started this book, my sense was that it will be a quick read as I expected this to reinforce what I already knew, and not offer much more. I allocated time to it simply because it came so highly recommended from so many folks that I otherwise allocate time to. I could not have been more wrong. While many people explain how the human brain works and what needs to be done for it to not misbehave, Annie Duke offers insights on how to go about doing those things. Nothing could be more valuable. This book is a masterpiece.

“Winning and losing are only loose signals of decision quality. You can win lucky hands and lose unlucky ones.”

“We have this thin layer of prefrontal cortex made just for us, sitting on top of this big animal brain. Getting this thin little layer to handle more is unrealistic. The prefrontal cortex doesn’t control most of the decisions we make every day. We can’t fundamentally get more out of that unique, thin layer of prefrontal cortex. It’s already overtaxed…The challenge is not to change the way our brains operate but to figure out how to work within the limitations of the brains we already have.”

“Chess is not a game. Chess is a well-defined form of computation…Trouble follows when we treat life decisions as if they were chess decisions.”

“As with many of our irrationalities, how we form beliefs was shaped by the evolutionary push toward efficiency rather than accuracy.”

“Fake news isn’t meant to change minds. As we know, beliefs are hard to change. The potency of fake news is that it entrenches beliefs its intended audience already has, and then amplifies them…If we think of beliefs as only 100% right or 100% wrong, when confronting new information that might contradict our belief, we have only two options: (a) make the massive shift in our opinion of ourselves from 100% right to 100% wrong, or (b) ignore or discredit the new information. It feels bad to be wrong, so we choose (b). Information that disagrees with us is an assault on our self-narrative. We’ll work hard to swat that threat away. On the flip side, when additional information agrees with us, we effortlessly embrace it.”

As artist and writer Jean Cocteau said, “We must believe in luck. For how else can we explain the success of those we don’t like?”

“Another way to disentangle the message from the messenger is to imagine the message coming from a source we value much more or much less.”

“Our brains weren’t built for rationality…To start, our brains evolved to create certainty and order.”

“We all have a blind spot about recognizing our biases. The surprise is that blind-spot bias is greater the smarter you are.”

“It turns out the better you are with numbers, the better you are at spinning those numbers to conform to and support your beliefs. Unfortunately, this is just the way evolution built us. We are wired to protect our beliefs even when our goal is to truthseek.”

““Don’t shoot the message,” for some reason, hasn’t gotten the same historical or literary attention, but it addresses an equally important decision-making issue: don’t disparage or ignore an idea just because you don’t like who or where it came from.”