Book Review: The New New Thing: A Silicon Valley Story by Michael Lewis

newnewthing

Somehow I picked up a copy of The New New Thing: A Silicon Valley Story, which is a Michael Lewis bestseller published back in 1999 about the internet boom. The central character is Jim Clark, founder of Silicon Graphics (SGI), Netscape, and Healtheon/WebMD. That means Clark started three separate companies in three different industries that were all worth at least hundred of millions of dollars to over a billion dollars. Although Silicon Graphics has since filed for bankruptcy and younger folks probably don’t even know the same, for a while it was one of the most prestigious places for computer engineers to work.

It’s been over 15 years since the dot-com boom, and reading it actually felt nostalgic to this 36-year-old, but as with any Michael Lewis book it was at least a good story. It was light on practical finance-related material, but as always I like to record my notes.

  • The 1990s were a turning point where a young person with strong technology skills could get stupid rich. Before that, it seemed that you needed to work somewhere on Wall Street after showing off your Ivy League credentials. Even today, the smartest people want to be tech entrepreneurs. Geeks are cool and nerds can be treated like rock stars.
  • Clark grew up poor and had a chip on his shoulder. He grew up poor in a small town in Texas with an abusive father. Now on one of his rare returns “home”, he buzzes the town in his private jet, has lunch with his mom, and then jets off again the same day.
  • Jim Clark’s personality was perfect for this era. He had the smarts and street cred of a techie, but also the visionary skills and lack of self-doubt that made him a leader of other techies. Netscape was a web browser without a plan to make money (this was pre-Google!), yet it made Clark a billionaire. I liked this quote:

    Most people don’t enjoy making huge gambles on the future. They would just as soon have someone else tell them what to do. And that is what Jim Clark did. From the moment Netscape made him a billionaire […] half the engineers in the Valley wanted to work for whatever company he started

  • Rich men have a thing for big boats. Since Michael Lewis spent a lot of time following Jim Clark around and Clark was obsessed with his big-ass sailboat (which would barely fit under the Golden Gate Bridge), a lot of the book is somewhat boring stuff about trying to make a computerized sailboat called Hyperion. Then he commissioned an even bigger boat, Athena. Now go check out Steve Jobs’ super-yacht that cost over $100 million: Venus. Shrug.
  • “If money is how your measure yourself, you’ll never have enough” is a recent quote that I came across, source unknown. But that’s pretty much Clark (and probably a lot of other billionaires to be fair). Before founding his first big company SGI, he said he just wanted $10 million. After becoming a multimillionaire, he wanted $100 million. After his Netscape shares hit $600 million, he wanted a billion. After the Healtheon IPO made him an after-tax billionaire, he wanted more than Larry Ellison ($13B at the time).
  • The book ends with Jim Clark starting another business called myCFO, which was supposed to cater to all those new internet millionaires and help them manage their money without having to go with one of those stuffy, established institutions like Merrill Lynch or Goldman Sachs. myCFO ended up being sold off for “only” $30 million, but I think it was a precursor to modern non-traditional advisors like Wealthfront which also specifically targets Silicon Valley engineers.
  • Jim Clark’s more recent ventures since the publishing of this book have much been less exciting. The only one I hard heard of is Shutterfly, and he was really only involved with the funding. It appears that now he’s just enjoying life with his big boats and family.

The Elements of Investing – Book Review (Updated Edition)

elements180

There are two major types of investing books for beginner investors: “Instructional to-do list” books basically tell you what you should do. “Inspirational big-picture” focus more on the philosophical reasons why you should do those things. Both can be equally important and useful.

The Elements of Investing: Easy Lessons for Every Investor by Burton G. Malkiel and Charles D. Ellis falls more into the former “list” category. Malkiel is a noted academic and wrote the classic bestseller A Random Walk Down Wall Street. Ellis is a former director of Vanguard Group and wrote the classic bestseller Winning the Loser’s Game.

Basically, two pillars of the investment world got together and tried to whittle down their 80 years of experience into 200 pages and roughly 2-3 hours of reading time. The pages aren’t even big, as the hardcover version is only 7 inches tall. You could read the entire thing in an afternoon or in snippets before going to bed within a week.

In opinion, they did a pretty good job. Topics are covered in a brief, straighforward manner. If you’ve read your share of personal finance material, none of it will be new to you, but they remain critically important. The key takeaways are clearly laid out and repeated over and over to drill them into your head. Things like:

  • Save regularly and never take on credit card debt (most important).
  • Utilize any available tax-advantaged plans like IRAs, 401ks, 403bs.
  • Keep a safe, liquid emergency fund.
  • Diversification, rebalancing, dollar-cost averaging, and low-cost indexing are the keys to investing success.

There are also a lot of little nuggets of wisdom in the book. My two favorite quotes:

The real purpose of saving is to empower you to keep your priorities—not to make you sacrifice. Your goal in saving is not to “squeeze orange juice from a turnip” or to make you feel deprived. Not at all! Your goal is to enable you to feel better and better about your life and the way you are living it by making your own best-for-you choices. Savings can give you an opportunity to take advantage of attractive future opportunities that are important to you.

As in so many human endeavors, the secrets to success are patience, persistence, and minimizing mistakes.

The updated 2013 edition of the book (original edition was 2009) includes some interesting (controversial?) suggestions for dealing with the current low-interest environment for bonds. Since the current yield for US Treasury bonds is so low, and thus the future expected return just as low, they offer up tax-exempt municipal bonds, emerging markets bonds, and even blue-chip dividend stocks.

It was sort of weird to be told “stay the course!” and then in the next chapter be told “here’s how to change course!”. I actually appreciate that they express their honest opinions, even if it appears to contradict passive-investing dogma. Jack Bogle himself does it from time to time. (I personally choose to hold muni bonds instead of US Treasuries as well.)

Bottom line: This investing primer would make a very good gift for a recent college graduate or young worker if they are ready to start getting serious about investing. If they aren’t, the book may be a bit dry. I will be adding it to my recommended books list, once I get around to updating it…

Dinner: The Playbook Book Review – Preplanning is Critical For Success

dinnerplaybookWe hit consecutive 10 weeks of cooking at home x 5 times a week! (Now we’re going on vacation so the streak must end.) Some days are fun, some days you just want to get it on the table.

Since I liked the first book by Jenny Rosenstrach so much, I also bought her second book Dinner: The Playbook – A 30-Day Plan for Mastering the Art of the Family Meal. While the first book was more autobiographical, this one is more focused on what you need to make home-cooked dinners happen. First, you need the right recipes:

I can’t stress this enough: You will cook more regularly if you choose simple recipes. By choosing simple recipes, you will get dinner on the table more efficiently and you will not end up with a pile of dirty dishes that makes you want to chug a bottle of beta-blockers. By minimizing the prep work and the cleanup (and the beta-blockers), you will be far more likely to do it again the next night. And that is the goal. Sustainable routines. Pleasant tableside experiences. Success. Which for our purposes right now will be defined as “a fifteen-minute period of time during which food is consumed without drama.” In short: The best home cooks choose the easiest recipes.

The book contains over 80 such recipes. But even with a dead-simple recipe, if I am faced with another trip to the grocery store after work, I’m going straight to the frozen lasagna (or worse, my kid’s chicken nugget stash!). You’ll also need to incorporate some structure and pre-planning for success.

The best tip that I learned from Jenny Rosenstrach’s books was to plan every week’s dinner out in advance. I plan for 5 nights cooking, 1 dinner-from-a-box (frozen dumplings, lasagna, premade burritos, etc.), and one dining out each week. Every Saturday night or Sunday morning, I pick out 5 recipes that I want to try. (Usually three come from a Rosenstrach book or blog!) I scan the recipes and (1) make sure that it really is doable with my limited culinary skills and (2) note what ingredients I need. Once you get better, you can pick the ones that share ingredients to save money, but I wouldn’t worry about that in the beginning. Just pick whatever sounds both tasty and easy.

My older kid wakes up at 6 am every single day, so on Sunday morning at 7am we hit the grocery store and Farmer’s market (in the same complex, sweet!). The world is still quiet, the man at the farmer’s market stand with the good salad mix always gives her a free banana, and I never have to go decide if I want to go to the store at 6pm on a Wednesday just for one ingredient.

Why is this important? See my flowchart. If you get arrive home from work and you don’t have all the raw materials in front of you and a plan to make into a meal, you will fail. Remove all roadblocks! Fail to plan, and you plan to fail! Insert other cliche here!

In addition, try to do whatever prep work you can each morning. My thing is just to double-check that I have all the ingredients, like making sure the spice containers aren’t nearly empty or the herbs aren’t yellow or rotten.

Finally, you need a 30-day challenge to get you going. By committing to 30 days and 30 dinners, you will hopefully be able to break out of your current rut and have enough momentum to make homemade dinners a regular habit. I suggest taking her option of backing this off to 20 dinners in a month, making each week 5 days on and 2 days off.

Bottom line: Good book, similar ideas to first book but less about her and more clear on purpose. I bought it mostly for the additional simple recipes. Cooking at home saves us so much money each month, this book easily pays for itself.

Dinner: A Love Story Book Review – An Ode to Family Dinners

dinnerlove

Every since completing the Dinner Boot Camp over 8 weeks ago, we have cooked dinner at home at least 5 times every single week (heating up frozen lasagna doesn’t count). Two months! That has never happened before… The weeklong boot camp (see if still online) was done by Jenny Rosenstrach to promote her new book, but I always like starting at the beginning so I read her first book Dinner: A Love Story: It all begins at the family table. Both books were inspired by her popular blog at DinnerALoveStory.com.

The book itself is probably 50% non-fiction story about her journey and 50% recipes. The author felt strongly about the importance of family dinners and kept a journal of every single dinner she cooked for several years. I think the two excerpts below do a good job of encapsulating her views.

It’s for mothers and fathers—working, staying home, single, divorced, any kind—who crave more quality time with their children and have a sneaking suspicion that the answer may lie in the ritual of family dinner, in the ritual of sitting down together at the end of the day to slow down and listen to each other. […]

…no matter how different and harried family dinner looked during this new baby phase of our lives, it still served its main purpose: It was our day’s deadline. Even when we were in a house in the suburbs with two kids under two and the evening hours between six o’clock and eight thirty felt like we were trapped in a high-speed game of playground dodge-ball, even when the girls got a little older and we’d try and fail and try and fail to get them to eat the same dinner as us at the same time, even though each of us would have our share of late nights at the office, and even though we’d regress to our frozen veggie burger nights more often than I care to admit, the ritual of sitting down together at the end of the day remained our default mode, our time to be together. And a decade later, dinner has happened regularly enough for me to feel I’ve stayed true to my vow.

It helped that we identified with her situation as we also have two kids under two and often felt like the time between 6 and 8 pm every night was like running the last few miles of a marathon. Most recipes in the book are for a family of four. However, having two tiny ones meant we were really just cooking for two adults. So the book works equally well for couples without kids (if you don’t mind eating leftovers for lunch).

Throughout the book, you can definitely tell that she has professional experience as a magazine writer and editor. The writing is approachable and she uses a friendly, self-deprecating tone that doesn’t scare you off.

The best part about her recipes also comes from her editing skill. These are recipes explicitly honed for the tired, busy, working home cook. The recipes avoid being one-dimensional with simple ingredients like vinegar to make it salty and acidic, or honey to make things sweet and salty. There will usually be a texture component (crunchy, crusty, chewy) and at least one fresh herb. There are no added ingredients just for showing off, but if you leave something out you’ll miss it. As Albert Einstein is credited with saying:

Everything should be made as simple as possible, but not simpler.

There are many recipes in the book that are not on the blog. These are recipes from this book that I actually made and I could find links for. Of course some recipes we liked better than others, but that is mostly due to personal taste and none of them were bombs.

Bottom line: If you can’t spend all day in the kitchen but the idea of making minimally-processed meals appeals to you, this book includes both a nice personal story and many practical recipes for quick after-work meals. Recipe books are often about style, and I really connected with her style and taste. I would say at least half my cooking for the last 8 weeks has come from this book or the blog. If this speaks to you, I encourage you to try out the Dinner Boot Camp or the sample recipes above.

The Big Flavor Grill Cookbook: No Marinade, No Hassle Recipes (Book Review)

bigflavorbookAnother thing I’ve been getting into this summer is grilling over 100% natural hardwood charcoal. My gateway drug was Alton Brown’s Steak on Coals recipe. The smell and flavor brings me back to my childhood, even though technically that was a pile of Kingsford with tons of lighter fluid…

So I agreed to a free review copy of a new cookbook called The Big-Flavor Grill: No-Marinade, No-Hassle Recipes, written by chef Chris Schlesinger and Cook’s Illustrated executive editor John Willoughby.

The basic premise of this book is to save you time and energy by avoiding marinades, brines, or complicated sauces. Instead, while your grill is heating up you smear on a pre-rub, and after the food is cooked you add on a flavorful sauce. You do all the prep in the 30 minutes or so that it takes your charcoal to heat up (preferably with a cheap chimney starter to avoid lighter fluid). Here are some sample recipe names, unfortunately I couldn’t find a sample full recipe online:

  • Five-Spice Steak Tips with Grilled Pineapple and Sweet-Sour Sauce
  • Coriander-Crusted Pork Skewers with Maple-Mustard Barbecue Sauce
  • Chicken Breasts with Maple-Soy Glaze and Peanut-Ginger Relish
  • Spicy Curry-Rubbed Lamb Kebabs with Grilled Peaches
  • Cumin Seed–Crusted Shrimp with Charred Corn Vinaigrette
  • Fish Steaks with Sriracha-Basil Butter

Did the pre-rub + sauce work? Well, yes and no. I didn’t have to marinate or brine. The food tasted good. Can some citrus and herbs brighten things up easily in a pinch? Yes. But I still had to make a special trip to the store to get all the ingredients for my exotic sauces, so that took time. Marinating is basically just doing the same amount of work ahead of time and letting it sit there overnight. Yes, planning ahead is harder but so is shopping for all those ingredients. Is that extra convenience worth the decrease in taste, tenderness, or juiciness from no marinating or brining? I’m not sure.

I found the true benefit of this book is that it reminded me that simple grilled food is great all by itself. For every section, they have something called “Super-Basic” XXX, where XXX is everything from steak to shrimp to corn to cherry tomatoes. And you know what? I liked the grilled shrimp straight-up off the grill more than the shrimp plus ginger/lime/sesame sauce because the sauce made everything a bit soggy. Grilled blistered tomatoes, grilled mushrooms, grilled asparagus… all great with just some olive oil and salt. Grilled peaches, grilled avocados, smokey and awesome right off the grill. I guess I’m a simple guy.

The cookbook itself looks great in hardcover, with good photography inside and the pages are thick and feel high quality. It would make a good gift for the busy grilling enthusiast. I don’t think it’ll be a timeless classic, but I will definitely keep this book around for the Super Basic XXX recipes to provide inspiration on Friday nights when I am short on time and want to cook outdoors.

In the end, just grill baby! It feels special but costs very little extra. I use a simple $30 Weber Smokey Joe grill and real charcoal can be surprisingly cheap too. After reading Omnivore’s Dilemmna by Pollan I think cooking from scratch at home is overall better for both my wallet and health.

I received a review copy of this book for free from Blogging for Books. If you are a blogger, check them out for some free review books in your niche.

Book Review: Wide-Eyed Wanderers by Richard and Amanda Ligato

wideeyedbookA couple of weeks ago I wrote about the non-traditional retirement story of Richard and Amanda Ligato, which was highlighted in a Nationwide Insurance commercial. Usually TV commercials are too busy convincing you to buy buy buy, so the idea that people who saved half their incomes were shown was amusing.

I ended up buying a copy of their book Wide-Eyed Wanderers: A Befuddling Journey from the Rat Race to the Roads of Latin America & Africa* which covers their journey through Mexico, South America, and Africa. For simplicity and frugality, they bought a 1978 Volkswagen camper-van and basically lived in it the entire trip, driving to all of their destinations (besides being shipped from Panama to Ecuador, and then Chile to South Africa). They cooked their own meals and slept nearly every night in the van.

The Ligato’s are one feisty couple. There are multiple stories about them being shaken down by police officers, customs officials, and other government workers for bribes and how they refused to pay any of them. (I think it helped that Amanda is a native speaker of Spanish.) In another incident, they actually tackled a woman who was trying to pickpocket them and ended up arrested in an Argentinian police station (they were eventually released). They weren’t as lucky when they reached the bottom of South American and tried to talk their way into a cheap ticket to Antarctica, as they ultimately had to give up as the price was too high.

Me being me, I wanted to learn more about the economics of how they saved, planned, and budgeted for their journey. Unfortunately, they really don’t cover this in the book. The topic is only mentioned briefly when they have to hang out with what you might call the “average American traveler”. For example, on the Inca Trail in Peru, they wrote about how a fellow hiker realized that the Ligatos had spent as much on their last 15 weeks coming through Mexico and into South America as she alone had spent on her 2-week packaged tour.

For the most part, the book consists of journal entries, each from a different town or city. The stories were nice, although as a whole I wouldn’t say the book was exceptionally funny (although there are light moments) or enthralling (although there are some exciting moments). What I’m trying to say is that they aren’t professional writers and you shouldn’t expect the humor of Bill Bryson or the romanticism of Peter Mayle. This is just a true journal of real people who had a life-changing journey that most people can only dream about.

I highlighted this quote from Rich Ligato, expressed while watching a ceremony to remember the dead in Patzcuaro, Mexico:

If I were to die now would I go without regret? Have I really lived? Unlike many of those who created these ancient traditions, I’ve been given the free will to choose my path. Have I?

If are reading this, it is likely that you have more freedom in your life than most. Books like this remind me to ask myself: Are you consciously living or just passively getting by?

* I bought a physical copy, but this title should also be included for free if you are part of the Kindle Owner’s Lending Library or Kindle Unlimited. It is self-published which is probably why I couldn’t find it at my library, but you could still check.

Kindle Unlimited Review: Personal Finance and Investing Books

kindleu2Amazon has just announced Amazon Unlimited, an eBook and audiobook subscription service that costs $9.99 a month (30-day free trial) and not included in Amazon Prime. They claim over 600,000 titles in their library, although that number is padded by a lot of little-known self-published eBooks. “Thousands” of those books come with free audiobook versions. You can read unlimited books (max 10 out at once) and on any Kindle app (Windows, Mac, web browser, iPhone/iPad, Android, etc).

It’s a library card with 24/7 instant availability, but how well-stocked is this virtual library?

My personal reading habits include mainly business, personal improvement, and finance books. I compiled a list of notable books that I have read or want to read first, and then checked if Amazon Unlimited had it. I’m also including the findings from my Oyster review (a competing eBook app) for comparison purposes.

Book Oyster.com Amazon Unlimited
William Bernstein’s Recommended Reading List for Young Investors
The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas Stanley and William Danko. Yes No
Common Sense on Mutual Funds by Jack Bogle. Yes No
Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor. No No
The Great Depression: A Diary by Benjamin Roth. Yes No
Your Money and Your Brain by Jason Zweig. Yes No
How a Second Grader Beats Wall Street by Allan Roth. Yes No
All About Asset Allocation by Rick Ferri. No No
5 Recent Bestsellers
Flash Boys: A Wall Street Revolt by Michael Lewis. No Yes
Pound Foolish: Exposing the Dark Side of the Personal Finance Industry by Helaine Olen. No No
Think Like a Freak: The Authors of Freakonomics Offer to Retrain Your Brain by Steven Levitt and Stephen Dubner. No No
Capital in the Twenty-First Century by Thomas Piketty. No Yes
Thinking, Fast and Slow by Daniel Kahneman. No No
5 Personal Favorite Financial Books
Your Money or Your Life by Vicki Robin and Joe Dominguez. No No
Work Less, Live More: The Way to Semi-Retirement by Robert Clyatt. Yes No
The Richest Man in Babylon by George S. Clason. No No
The Four Pillars of Investing by William Bernstein. No No
A Random Walk Down Wall Street by Burton G. Malkiel. No No

 
* Oyster catalog checked June 2014 and Amazon Unlimited checked July 2014.

Recap

In the “major publisher, popular, well-reviewed” category, Oyster wins hands-down. AmazonUnlimited reportedly does not have any of the major “Big 5” publishers (they are not BFFs right now). In the “recent business bestseller” category, neither is great but Amazon actually has a slightly better showing. Many of Michael Lewis’s other books are also on AmazonUnlimited (The Big Short, Liar’s Poker, The Blind Side). In the “niche DIY early retirement personal finance nerd” category, again neither does great although Oyster technically wins by a nose.

Bottom line: Amazon Unlimited has a relatively limited catalog for personal finance enthusiasts.

Keep in mind that the Amazon Kindle Owner’s Lending Library still exists (at least for now) and boasts 500,000+ titles (again padded by self-published eBooks). The Kindle Lending Library is free if you already have both a Kindle (any model) and an Amazon Prime subscription. You can only read on a Kindle device though, and you only get one title per month.

There are some promising titles available if you dig around, for example I noticed that William Bernstein’s “Investing for Adults” series of books (The Ages of the Investor, Skating Where the Puck Was, Deep Risk, and Rational Expectations so far) are all available with both Kindle Unlimited and Kindle Lending Library.

Personally, I might sign-up for the free trial and read whatever books I can during that window and maybe it’ll spill over for a month (though you can cancel now and still enjoy you free month without worry of auto-bill), but I can’t see myself paying $120 a year for a limited selection of books (that interest me) that I can’t keep forever.

Book Review: Young Entrepreneur’s Guide to Starting and Running a Business

youngentI believe that entrepreneurialism is, like many things, a combination of talent and learned skill. Some people will take to it naturally, but a great many more can become successful and independent business people with the proper inspiration and guidance. I plan to help and encourage my daughters to set up their own micro-businesses once they are teenagers, whether it is coding apps or starting a booth at the farmer’s market. Some things you can’t learn from a book.

Oh wait, this a book review! Anyhow, since I love the idea of young folks starting businesses I took the opportunity to review a copy of the revised 3rd edition of The Young Entrepreneur’s Guide to Starting and Running a Business by Steve Mariotti. (I received a free review copy of this book from the publisher, as apparently did most of the Amazon reviewers. If you are a blogger, check out Blogging for Books for review books in your area of interest.)

This is a rather thick paperback at nearly 500 pages, and it uses that space to try to be a little of everything:

  • A reference book, covering everything from basic accounting and balance sheets to legal structures (corporation vs. sole proprietorship vs. LLC) to franchising.
  • An easy-to-read guide for beginners, which means that the treatment of all the above topics is concise and simplified (and thus not very thorough or detailed).
  • A collection of inspirational case studies from the non-profit group Network for Teaching Entrepreneurship (NFTE), which the author founded. You’ll read about many young folks who started their own business in various fields and most of them plan to continue working on them through college and beyond. Sample businesses include website design, party DJ, landscaping, sport or fashion apparel, and Honest Tea.

In the end, like many things that try to be all things to all people, it ends up not being great at any one single thing. It is somewhat all over the place. The book spends time telling you to save money by plugging in your computer and printer into a smart power strip to reduce “vampire” draw. A bit later, it wants to help you prepare for franchising and an IPO. Huh?

Personally, I would tell a young reader to just read all the “An Entrepreneur Like You” case studies first, and see if they have the fire to just go ahead and try to get that first customer. Then, after some successes and failures, they can use this book as a resource to answer any specific questions. How many young people want to read about OSHA regulations or double-entry bookkeeping before making their first dollar?!

For me, I did enjoy reading the case studies but for the other stuff I’d probably just look up on the internet as needed. I might read the marketing section again. All in all, this might make a nice gift for a recent graduate or young person that has shown some entrepreneurial spirit.

Book Review: The Four Pillars of Investing

Update: Yanking this one from waaaay back in the archives! Today (6/4) only, the Kindle eBook version of The Four Pillars of Investing is only $1.99. I read this book nearly 10 years ago, and I still have my hardcover copy sitting on my bookshelf. One of my favorites.

My original review published on December 26, 2004:

4pbookWhile A Random Walk Down Wall Street was more of a primer on investing in general, The Four Pillars of Investing by William Bernstein focuses on forming your portfolio. The four pillars are investment theory, history, psychology, and finally investment business.

The book uses statistics and research to support it’s conclusions, which are (briefly and in my opinion) that:

  1. Markets go up and down, but timing it is hard if not impossible, and any success one may have is basically luck.
  2. As risk increases, so does the return. (Ex. Small-cap stocks vs. Large-cap stocks.)
  3. Yes, many actively-managed mutuals fund beat the market every year, but there is no way that you could pick them ahead of time. This year’s winners are just as likely to be next year’s losers. Stick with index funds with the risk-return profile that you desire.
  4. Brokerage firms and stock brokers make their money on commissions and spreads. Most mutual fund companies are similar in that they make their money from fees, without actually being very good at market-beating returns.
  5. Proper diversification in low-expense ratio products can bring you the best chance to keep your money and make it grow.

The book is pretty easy to read, with minimal math. I also briefly browsed Bernstein’s previous book, The Intelligent Asset Allocator, which has a similar focus but is very heavy in the math department. I’d read this book first and see if you thirst for the mathematical underpinnings. I didn’t.

Oyster App Review: Personal Finance and Investing Books

oysterssWouldn’t a Netflix for books be neat? You could borrow all the books that you wanted to read and then return them when you’re done. Oh wait, they already invented it and called it a library.

But seriously, what if you wanted it all available 24/7 on your iPhone or iPad, and you don’t want to wait if someone else has checked it out already. Enter the new eBook subscription app Oyster. For $10 a month (first month free, iPhone/iPad + Android app added as of 6/17/14) they’ll let you read all the books you want from their catalog of 500,000+ books. That sounds good me as I buy about a book per month on Amazon as it is. The question is if Oyster’s library is big enough for my personal reading habits. I couldn’t find a way to search through their entire collection without an active subscription, so I signed up for a trial (credit card required).

As I mainly read business, personal improvement, and personal finance books these days, that is going to be the focus of my review. I decided to compile a list of notable books that I have read or want to read first, and then check Oyster to see if they have it in their library.

William Bernstein’s Recommended Reading List for Young Investors

5 Recent Bestsellers

5 Personal Favorite Financial Books

Conclusion

Oyster has been steadily increasing the publishers participating in their service, but it looks like they still have a way to go. They do have a pretty good showing in older, popular, well-reviewed books. The problem is that these are exactly the type of books that are readily available in most libraries. On the other hand, they are weak in recent business bestsellers, which is where they could provide me with the most value and convenience (I’d like to just browse and skim many of these first). I read that they will not have it if the book was released within the last 3 months. They also don’t have enough depth to carry some of the better books in the early retirement niche.

I won’t be paying $10 a month for this as I only read about a book a month (cost $10-$15) and Oyster probably won’t have it in their library. I will note that on a user-experience basis, actually reading the books and navigating around the app has been pretty easy.

Alternatives to Oyster include Scribd and the Amazon Kindle Lending Library which boasts 350,000+ titles. The latter is free if you already have both a Kindle (any model) and an Amazon Prime subscription.

Recommended Reading List for Young Investors

ifyoucanbookI just finished reading If You Can: How Millennials Can Get Rich Slowly, a free starter book on personal finance by respected author William Bernstein. As the PDF was only 16 pages long, you could probably finish it during a lunch hour or commute. I recommend it, but even Bernstein notes that his “inexpensive, small booklet” is more of a map than a complete book. Included were several book assignments to address specific topics. The idea is a young person could read all of these books over the span of a year or two and round out their financial education. In the meantime, start saving 15% of your income!

Here is the recommended reading list:

Bernstein thinks it tacky to recommend his own books, so let me do it. Back when I was a young lad with no investing knowledge (2004), my favorite introductory book was Four Pillars of Investing by William Bernstein. (The new edition is really just the old edition though, so buy a used copy of the old edition and save some money.) However, more recently I have heard good things about Investor’s Manifesto which supposedly has less math-y stuff.

I’ve read all but two of these books and agree that they were all excellent building blocks of knowledge. Most if not all of these books have been around for a while and should be readily available for free at your local library. Even if you pay for them, the return will be well worth the investment. I added a new copy of all seven books to my cart and it came to under $100 at Amazon ($91.48 to be exact). Good graduation gift ideas?

Flash Boys by Michael Lewis: Book Notes and Highlights

flashboyscoverIf you’ve read any financial news at all over the past month, you know that Michael Lewis has a new book out called Flash Boys: A Wall Street Revolt. I finished it over a week ago, but it’s rather intimidating to write a review when everyone else already has an opinion.

Perhaps I just seek out the critical reviews, but I see many financial pundits basically saying “Pfft. Everyone thinks this Michael Lewis guy is just sooo smart and sooo clever. Well, I’m smarter than him so here are all the things he didn’t get exactly right.” I’ll keep with my usual format of notes and highlights:

  • The book was an entertaining and educational read. If you like other books by Michael Lewis (The Big Short, Liar’s Poker, Moneyball, The Blind Side), you’ll probably like this one. As a gifted storyteller, he made learning about high-frequency trading (HFT) into an intriguing adventure complete with heroes and villains.
  • The most impactful form of frequency trading is slow market arbitrage. Here, HF traders use their speed advantage of microseconds (gained by paying off exchanges or drilling through mountains):

    …a high-frequency trader was able to see the price of a stock change on one exchange, and pick off orders sitting on other exchanges, before the exchanges were able to react. Say, for instance, the market for P&G shares is 80–80.01, and buyers and sellers sit on both sides on all of the exchanges. A big seller comes in on the NYSE and knocks the price down to 79.98–79.99. High-frequency traders buy on NYSE at $79.99 and sell on all the other exchanges at $80, before the market officially changes. This happened all day, every day, and generated more billions of dollars a year than the other strategies combined.

    Each trade may make a penny or even a fraction of a penny, but it all adds up. You could view it like a small tax of less than 1/10th of 1% of every trade.

  • Many people in the industry have come to the defense of HFT in the wake of the book. Some say that HFT improves liquidity, but others say that HFT actually makes the market more volatile and fragile. Others rationalize that someone is always screwing you, it’s just different people this time. (How comforting.) Traditional market-makers make money from trading but expose themselves to risk by providing valuable liquidity. In contrast, the successful HFT traders took nearly no risk:

    In early 2013, one of the largest high-frequency traders, Virtu Financial, publicly boasted that in five and a half years of trading it had experienced just one day when it hadn’t made money, and that the loss was caused by “human error.” In 2008, Dave Cummings, the CEO of a high-frequency trading firm called Tradebot, told university students that his firm had gone four years without a single day of trading losses. This sort of performance is possible only if you have a huge informational advantage.

  • HF traders should just admit that they’re doing it for the money. I think the best defense would simply be that these traders are operating within the current laws and regulations (although Providence, Rhode Island is now suing several HFT traders, stock exchanges, and large brokers). Is it ethical or helpful to society? Questionable. Consider this analogy from the book:

    It was like a broken slot machine in the casino that pays off every time. It would keep paying off until someone said something about it; but no one who played the slot machine had any interest in pointing out that it was broken.

    Do we hate the player or the game? Brad Katsuyama, one of the primary heroes who eventually creates a new stock exchange to neutralize HFT:

    “I hate them a lot less than before we started,” said Brad. “This is not their fault. I think most of them have just rationalized that the market is creating the inefficiencies and they are just capitalizing on them. Really, it’s brilliant what they have done within the bounds of the regulation. They are much less of a villain than I thought. The system has let down the investor.

  • Another common argument is whether it really affects the little guy investor, or just the big institutional investors. Yes, it’s easy to think of hedge funds trading on behalf of the super-wealthy and not really feel sorry for them. But institutional investors include pensions, mutual funds, and life insurance (annuity) companies. Of course, on a relative basis the big money managers often charge their own layer of fees which are much higher than any HFT “tax”. But since HFT is essentially a transaction tax, the less that your mutual fund or pension plan trades, the less they’ll be affected.

    The CEO of Vanguard actually stated in an interview with Financial Times that HFT firms had actually helped investors cut their transaction costs through tighter trading spreads. Perhaps things aren’t so black and white. Excess trading has long been linked with worse performance, so my index funds are probably barely affected at all. (Vanguard does support some HFT-related reforms.)

  • Can you stop HFT without opening the door to another form of skimming? Maybe Vanguard’s CEO is hinting that HFT is the lesser of many possible evils. Whenever there is big money sloshing around, there will always be splashing. I don’t know. But now that Michael Lewis had thrown a big spotlight on this issue, that in itself may get rid of this market inefficiency. People have written about HFT before but this finally got people’s attention.

If you want to learn about high-frequency trading or like a good investigative story, I would recommend reading the book for yourself. If you’re still on the fence, here are two links which are essentially direct excerpts from the book: