Surveys mathematical and epistemological understanding of risk in the Western era, focusing on it’s roles in modern investing. Initially the problem concerned Renaissance-era advances in quantitative certainty, while gradually the understanding that past results cannot determine (but only suggest) future events introduced a moral / emotional context. Two poles in the latter 20th-century understanding are diversification (reduced likelihood of losing it all at once) and chaos theory (nonlinerarity tells us that ends are not proportionate to events). Whichever may become predominant according to events, risk has become a scientific approach to increasing opportunity for sustained gains (or, reduced exposure to unwanted outcomes). Well synthesized if occasionally blocky prose. Worth re-reading; next step, the au courant Black Swans.
Book abstracts
4. Koesterich, ETF Strategies (22 Sep 2008)
Shows that ETFs are more likely to be effective for retail investors, and surveys popular equity and fixed income products. Harry Markowitz’s Capital Asset Pricing Model asserts investors should be compensated for market risk but not idiosyncratic risk. Equity returns were abnormally high from 1990-2007, and pro money managers enjoy increasing advantages — but winning managers themselves are hard to find. Thus retailers should avoid beta masquerading as alpha and utilize low-cost, diversified financial products (investments). Equity funds are categorized by sector, size (tradeable creation units), and style (value of growth); international funds are crossovers that provide additional diversification. Fixed income funds, mostly bonds but also commodities, are categorized by duration and credit risk. Other maxims: what is the risk-adjusted return? how is the fund correlated to the portfolio? what is the cost in fees and transaction costs? ETFs should make self-directed investors more efficient. Well organized and timely (for me) in sketching the size and role of the bond market around the time of the Global Financial Crisis.
5. Burlingham, Small Giants (29 Sep 2008)
Entrepreneurial companies which choose to remain smallish can achieve things closed off to companies focused on growth. Empirically, they are privately owned and closely held; they are not bound to deliver returns at any cost. The book is largely a collection of anecdotes and reads like an overlong magazine article. Forgettable.
10. Bostert, ed., Newhall and Williams College (14 June 2023)
Collected letters of Richard Newhall, one of Williams College’s foremost history professors, a dean of the faculty, and wartime stand-in president. Arranged by topic rather than chronology, the assemblage demonstrates the views of a Harvard-trained, (medieval) Europeanist dedicated to teaching rather than research, whose characteristic approach was to expose ignorance so as to promote humility, to encourage self-discovery is the basis of real education. A World War I officer and casualty, he emphasized facts as evidence of decision making and outcomes – how leaders managed important affairs – while disfavoring documentary sources as tending toward abstract ideas which would mislead one from the heart of the matter. Decisions, like journalism and history, were always made with partial evidence. It was appropriate to give actors the benefit of the doubt, and more important for businessmen and lawyers to learn about what we know was done than to prepare for research degrees or to search for the absolute (a ‘mental disease’, according to a favored colleague). The teacher himself must be willing to be forgotten.
His influence on Hyde, Waite, Bahlman, and Bostert are evident. The latter’s narration is useful if sometimes repetitive, notably the summation that history and scholarship had moved over 1920-70 from understanding and explanation to post facto criticism and challenge, from the dispassionate to the ideological.
Well footnoted so as to identify contemporary academics and politicians, the book’s themes include comparison of military training to education (the former suppresses individualism, the latter cultivates it with a view toward citizenship); faculty debate over isolationism, college administration, curricular changes (e.g., instruction in classics, mandatory chapel); and sundry academic and political matters. A review should tell what the author attempted and whether he succeeded by his own standards, since it was unlikely the reviewer could match the scholar in the latter’s specialty. Newhall helped Bailyn transition from English to history by recommending his Harvard application ignore lack of undergraduate studies. Politically a Wilsonian who nonetheless believed political leaders knew more than journalists (and presumably bureaucrats?), he came to be a neoconservative avant la lettre.
9. Whiting, Bloody Aachen (28 May 2023)
Narrates the fall of Aachen in fall 1944, the first German city conquered by the Allies. Part of the Siegfried Line but otherwise lacking strategic importance – the border town of 165,000 was merely on the way to American objectives in the Ruhr – the ancient Carolingian capital nonetheless possessed cultural significance. Ample men and materiel were reallocated from the Eastern front. The defenders’ first commanding officer tried (and failed) to surrender the city; the second fought nearly to its destruction, having held out long enough for Germany to provision counterattack in the Ardennes – the famous Battle of the Bulge. Highly personified from general to private, less effectively mapped, the story moves briskly.
13. Farnsworth, Socratic Method (21 July 2022)
The Socratic method – an ethic of patience, humility, inquiry, doubt – acts to counteract politicized, social media-fueled decay of social discourse. It won’t change one’s opinions but how they are conceived and updated.
Socratic philosophy identifies happiness with virtue and so wisdom (knowledge). Consistency of behavior with thinking is supreme in the search for truth. Failure of will is merely failure to act on knowing better.
The Stoics thought that if equanimity were reached, it would be so via Socrates. The Skeptics, mistrusting of claims to certainty, nonetheless share Socrates views’ that virtue is a matter of knowledge.
Elements:
• Elenchus: introduces possibility of inconsistency – consistency being vital to establishing knowledge
• Systole / diastole: consistency of apparently different things, and differences of seemingly similar things. What generalizations hold and why might they fail?
• Analogy: vivid imagery doesn’t make it helpful. Analogies look like observations but more often make claims
• Numbers: large ones are unhelpful, ‘one truthful witness’ is sufficient, screening out social pressure
• Ignorance: use feignment to build up, to flesh out argument before arguing against something
• Aporia: raise questions until paralysis is reached. Truths isn’t consistent with the ability to discuss
Tactics: all propositions sprout implications for testing
• Use the offered principle to challenge the preceding claim
• Challenge the new claim
• Push for path to the new claim as generalized from the preceding claims.
Examples
• Clarify: what do you mean by? Can we say it another way?
• Probe assumption(s): what are you assuming? How did you choose that assumption? What might have been chosen instead?
• Assess reason and evidence: how do we know? Why is that true? What would change one’s mind?
• Identify the viewpoint/perspective: what’s the implication? The effect? The alternative?
• Identify consequences: why is this important? How can we find out? What generalizations can we draw?
20. Mancoll, ed., ‘Reassessing Ideological Origins’, New England Quarterly 151(1); (8 October 2022)
A collection of essays addressing aspects of Bernard Bailyn’s
- Ideological Origins of the American Revolution
, on the occasion of its 50th anniversary of publication. The work has stood up quite well, notwithstanding the radical changes in historical fashion.
• Bailyn: the author writes of his continuing interest in those moments when familiar words / constructs take on new meanings, and still holds the Revolution’s primary interest was safeguarding liberty against power and corruption
• Rakove: Bailyn cut the Gordian knot of ideas versus economics as the tumult’s driver by demonstrating attitudes had already changed and how these changes explain actual events
• Slauter: Perry Miller influenced Bailyn to consider Puritan writings along with classical and Enlightenment documents
• Wood: The Patriots were more involved in social revolution than Ideological Origins acknowledges, since in the 18th century society and government were indivisible. (French Revolutionary theorists faced the problem of ‘modern’ private property separate of government power.) He got the political thought right not but the social change. That is, Bailyn’s student is enunciating the thesis of his Radicalism of the American Revolution
• Even if ideas don’t cause behavior, one needn’t entirely concede the impetus to materialist or psychological factors (i.e., hidden motivations)
• Bilder: Bailyn pinpointed the process of America’s discovery the virtue of written constitution
• Nelson: For Burke, the American Revolution was borne not of theory but by practice and consequently of the people’s character
• Political though and political consciousness are distinct. 18th-century America saw the world as it di not because it was an ideological support for its way of life and society but because they were 18th-century Americans
• Pincus: In an interesting comparison to contemporary Irish politics, asserts the upheaval of the 1770s-80s exhibits political discourse very similar to the American Revolutionary era (e.g., corruption, liberty, virtue). Grattan’s failure to push through a Billing of rights in 1780 marked the turning from Stormont to the Volunteers, analogous to the Committees of Correspondence. But Pincus carries too far in suggesting the American process was ‘not exceptional’ – there is no record of 150 years, as in America
6. Thornton, Imperial Idea and Its Enemies (23 Oct 2008)
Chronicles the trajectory of imperialism in British (English) political thought circa 1850-1950. Relying sometimes on Socratic dialogue and occasionally on Parliamentary speeches, the book skips through India, Egypt and the Sudan, South Africa, and other locales, paying more attention to ideas than chronology. Leading thinkers of the two parties are the stars. The dominions and the two wars play a limited role, as do Victoria and Kitchener. Obviously sympathetic to the left and also contemporary opinion (a Whiggish historian?), the author concludes imperialism belongs to the liberal political tradition and so (as of 1957, the height of scuttle) had yet to run its course.
4. Schales, Forgotten Man (7 Apr 2009)
Reevaluates the Great Depression’s political economy, finding FDR’s policy to be statist, jejeune, and ultimately ineffective. After an overview of the Coolidge and Hoover administrations’ failure to grasp secular changes, the book describes the baleful effects of seeking to balance the budget, the Smoot-Hawley tariff, and decreased liquidity. The incoming Democrats showed themselves heavily enamored of the social engineering and centralized planning of Soviet Russia. Their conceits (not least FDR’s vanity) were most evident in the Tennessee Valley Authority, Rex Tugwell’s utopian settlements, and the scheme to pack the Supreme Court. FDR used demagoguery (via radio), politicized prosecutions, and taxation to hound the ‘rich’ while rewarding the favored socioeconomic classes that carried him to reelection in 1936. He then caused the 1937 downturn, and blamed capital for staying out of the market. Eventually standards were lowered from the goal of recovery to the cause of improvement. Figures like Wendell Wilkie are woven into the narrative, while the title refers to the contest for popular opinion — was the government to help the ward of the state or the defenseless taxpayer? Persuasive and provocative: the Obama administration is heading the same route with its questionable, phony stimulus.
5. Cramer, Confessions of a Street Addict (20 Sep 2009)
An autobiography of hedge fund-cum-commentator Jim Cramer through 2002. Following a Harvard law education, the author joined Goldman Sachs before leaving to start a successful fund. Simultaneously, his (pre law) journalism background led to TV roles and founding TheStreet, which he was ill-prepared to manage. 1998 was a poor year for the fund due to hubris; the 2000-01 dot-com tech crash wounded TSCM. Cramer is well-connected and clairvoyant on Wall Street’s machinations, and thus able to provide many useful insights, but hyperbole (admittedly borne of passion) keeps him from becoming statesmanlike / achieving gravitas.