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.
Risk
13. Feld, Venture Deals (10 Jun 2015)
Economics and control are the primary features of a venture capital investment. The book surveys various mechanisms toward these objectives including the term sheet, the letter of intent, and frequently used but obscurantist clauses. The authors helpfully describe how funds work and stand (i.e., polished) modes of seeking funding. An excellent work.
15. Lowenstein, When Genius Failed (19 Aug 2015)
Narrates the spectacular rise and fall of Long Term Capital Management, 1993-98. The disgraced John Merriwether assembled former Salmon traders, leading academics, and investment capital into a quantitative, secretive hedge fund. Relying on models to reduce anticipable risk, leverage to magnify gains, and bravado to minimize trading costs, LTCM initially did so well as to return client funds, in order to trade entirely for its own benefit. The Russian default of 1998 exposed excessive faith in (low) probability of risk, and concentration of risk inherent in leverage, sending the firm spiraling toward bankruptcy. Because LTCM traded many bespoke instruments, many of Wall Street’s blue-chip firms were implicated as counterparties, threatening system malfunction. The Federal Reserve orchestrated a fraught bailout. Mostly brisk and dramatically told.