Book review: How the beast works

“The Global Minotaur: America, Europe and the future of the global economy” by Yanis Varoufakis

There are many books that discussed how Germany and Japan were re-built, using the protectionist formula that successfully built the British Empire and the US economy, and how successful these two countries have since become. But this is the first time that anyone has explained why Germany and Japan were specifically re-built by the US, and why they need these two countries to become a developed nation: as the two pillars of the Global Plan (the Bretton Woods system 1945-1971), to act as the shock absorbents if the American economy took one of its many periodic downturns from the trade surplus against everyone.

From this basis the book then elaborate on the surplus recycling mechanism that the world eventually used, which ignored the original idea of surplus recycling mechanism put forward by John Maynard Keynes, that would balance out global trade imbalances more fairly and evenly.

The book then gives the best explanation on Petrodollar recycling mechanism, which author Yanis Varoufakis refer as the Global Minotaur period, a period when Global Minotaur really took off (from when Nixon abolished the Gold Standard in 1971 – until the crash of 2008), named after the Cretan mythology creature that has to be given a tribute of human flesh to stay alive, and able to create peace in the region as long as the sacrificing foreign tributes keep on coming.

What proceeded next is an extraordinary explanation on how the global economy truly works. Many pointed out that neoliberalism began with Roland Reagan, but Varoufakis proof that it started earlier than that, with Richard Nixon lay out the foundations that would eventually allow Reagan to afford his Reaganomics. The book also provides an excellent explanation on how exactly The Minotaur re-build Germany from virtually a wreck from the war into an economic powerhouse, and shows the stark differences with the way The Minotaur handles Greece.

Indeed, all those explanations on global mechanisms eventually lead the book to the Greek crisis. As the finance minister for Greece during the worst years of its economy, Yanis Varoufakis had the first-hand knowledge of the crisis, which makes this book a very important one to read to understand both Greek crisis and the EU economic crisis, with fresh point of views straight from the voice of the oppressed.

He also made the best argument against the currency union of EU (and why it is doomed to fail), in which he argued “[s]urplus recycling becomes, however, ever more pressing when the various regions are tied together by a common currency or some form of fixed exchange rate. The persistent deficits and surpluses within such a currency union are like tectonic plates pushing against one another.” He then elaborate that “[o]nce currency devaluations are no longer possible, to take some of the strain, the forces generated by ever-expanding trade imbalances threaten the union with earthquakes of increasing strength. Since a currency cannot be devalued to lessen the accumulating trade deficits of the union’s ‘poor relations’, the strains on the fixed exchange rate or on the common currency will grow and grow until the system cracks.”

Furthermore, Varoufakis also provides one of the best explanations on China’s role in the current world economic system, and why China increased its investment in Latin America from $300 million in 2009 to $1.7 billion in 2010, as part of their big plan since US economy collapsed in 2008. And this raises a serious question of whether China can “take over” the mantle of world leader if their phenomenal growth rely heavily on the consumption of their goods in the US market (and recycling the proceeds back to the US to keep the cycle ongoing, and not as a display of power, i.e. Owning trillions of US debts and other assets).

The book has excellent historical references, which really shows Yanis Varouvakis’s grasps of knowledge. It is right up there, at par with the likes of Bad Samaritans, Debt: the first 5000 years, Capital in the 21st century, and Currency Wars, which masterfully describe how the global economy works. It is as if we are learning directly from the professor of Game Theory himself. I would give it 4.5 star if only Amazon had it.

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Book review: One of the most innovative person in Silicon Valley has a very interesting life story

“Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future” by Ashlee Vance

There was a time when Elon Musk lived in South Africa, reads 2 books a day, and was being bullied. A time when he started off backpacking then living in Canada, and ended up nearly pursuing a PhD at Stanford before dropping it to pursue an opportunity in a new trend called the internet. There was also a time when he’s trying to make it in Silicon Valley but got back stabbed, a time when he backstabbed people. There was a time when he got fired from his job during his honeymoon, and years later when he finally take a vacation he almost died of malaria.

Indeed, Elon Musk has a very interesting life story, and his story is brilliantly captured by author Ashlee Vance in this gripping book, the most engaging biography I’ve ever read since Richard Branson’s autobiography Losing my Virginity.

According to neuropsychologists Musk’s behavior closely resembles someone who is profoundly gifted: “These are people who in childhood exhibit exceptional intellectual depth and max out IQ tests. It’s not uncommon for these children to look out into the world and find flaws—glitches in the system—and construct logical paths in their minds to fix them.”

And fix them he did. Nothing that he does is actually a groundbreaking idea like Thomas Edison’s lightbulb or Tim Berners-Lee’s World Wide Web, but he took the most obvious idea (like a failed electric car industry) and make some thinkering and changes to make them work brilliantly and more efficiently. Musk does not implement how a business usually done, but instead he change the methods completely.

With Tesla he tried to revamp how cars are manufactured and sold, and he also builds a worldwide fuel distribution network too. In SpaceX instead of sub-contracting the manufacturing of the parts, they make every single item themselves down to radio and power distribution unit, to save cost and to freely tinkering them.

An out-of-the-box visionary who managed to surround himself with fellow mad scientists, the trial and error stories of his ventures are very intriguing, such as creating a 6-men task force and give them money to blow up stacks of batteries to learn more about it. In everything all he does Musk shows the importance of picking up a plan, test it to the limit, and if it failed it failed fast and he then try a new approach.

To that end, this book is also a short history of the Silicon Valley, and the back stories of his “mad scientists” surroundings, like Tom Mueller, J.B. Straubel, Gwynne Shortwell, Franz von Holzhausen and of course Musk’s legendary assistant Mary Beth Brown.

Musk is very involved in his ventures and very in control, in fact he interview himself the first 1000 employees in SpaceX, not only the engineers and software developers, but also the janitors and technicians.

And as you can guess, Musk is a no-nonsense type of person, very efficient, and hates wasting time. Like other pioneering entrepreneurs like Gates, Bezos and Jobs, Musk is also known of being difficult at times, including when he fired a marketing guy for having a typo error, in which the author elaborate “ the perceived lack of emotion is a symptom of Musk sometimes feeling like he’s the only one who really grasps the urgency of his mission. He’s less sensitive and less tolerant than other people because the stakes are so high.”

The stakes are truly very high that he neary lose his entire fortune and on a verge on a nervous breakdown during the 2008 crisis, during which Tesla nearly ran out of money for development, and when the crisis meant that nobody was buying a car. By July 2008 he only had money for the companies to survive until end of year, was even on a verge of bankruptcy hours before a new deal was signed and save his companies and his personal fortune. It was that close. It was that interesting.

His larger-than-life character is so interesting that Robert Downey Jr once spent time with Elon Musk, took a tour of his factories and had a long conversation over a meal to get into Musk’a psyche. After that visit Downey then requested a Tesla Roadster to be installed at his newly-inspired character’s workshop in his upcoming Iron Man movie. That’s right, Elon Musk is the real-life inspiration for the movie character Tony Stark.

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Book review: The summary of every single Berkshire Hathaway annual shareholders meeting between 1986 and 2015

“University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting” by Daniel Pecaut and Corey Wrenn

Warren Buffett never writes a book. Instead, he delivers his wisdom through 4 mediums: Berkshire Hathaway annual meetings, his op-ed pieces, his TV interviews and his letter to shareholders. This book is about the 1st medium.

Often dubbed the Woodstock of Capitalism, Berkshire Hathaway annual meeting have grown significantly in attendance size from only half a dozen people in 1970s, to 300 in 1986, 1000 people in 1989, 10,000 people in 2001, and up to 45,000 people in 2013.

Present in every single one of these meetings between 1986-2015 is Daniel Pecaut, which later joined by his longtime business partner Corey Wrenn. This book is the accumulation of their note taking from those meetings, 30 years worth of the shareholders’ meetings, which they summarized into 30 short chapters that contain only the gold, the best gems worthy of a university education.

Just like any company’s annual meeting, it is first and foremost filled with the discussion of their holdings and its issues. With their usual wit and wisdom, Warren Buffett and his partner Charlie Munger provide a very open reasoning of why they purchase a particular company (including the methods they use to calculate the values), explain us the way they solve or avoid any problems that arise, and lay out their detailed-enough plans for the future for these companies. The 2014 chapter in particular gives a great summary of the inner workings of Berkshire Hathaway and Buffett’s and Munger’s thought process, which is nothing short of a masterpiece.

True to their nature, Buffett and Munger deliver all of their information in such an entertaining way. For example, Buffett referencing a Woody Allen quote on being bisexual increases the chance of having a date on a Saturday night, to make the case for issuing 1 million shares of preferred stock. Or when asked about buying a stock at a premium price, he responded with “if you were going to buy a parachute, you wouldn’t necessarily take the low bid.” Or his analogy on reverse engineering as singing a country song backwards, “then you get your house back, your wife back.”

Moreover, never absent in their annual meetings are their hilarious take-downs on the likes of efficient market hypothesis and modern portfolio theories, in which Buffett said “people market these fad theories to justify needing high priests”, while in contrast his winning investing method is astonishingly simple: he said if he were teaching a business school, he would only teach “1.) How to value a business, and 2) How to think about market fluctuations – that the market is there to serve you, not influence you.”

Indeed, Buffett and Munger believe that investing and running a business should not be complicated. Berkshire is buying companies like people buying groceries or cars, they welcome lower prices and deplore price increases. They avoid buying companies with confusing accounting because the confusion “may well be intentional and reveal the character of the management.” To them an attitude of trust is the best compliance, and they don’t even employ lawyers for their deal makings. And as we all know, these clear and simple methods of investing and running a business have resulted their stock price to grow from $2475 in 1986 (a benchmark of the year the authors first attended the meeting) to a whopping $226,000 in 2015.

Moreover, as they grow in stature, a growing majority of the attendants of the meetings come to the annual meetings to seek investment lessons, and they were not disappointed. Buffett and Munger believe the key to investment success is to buy wonderful businesses, and that “3 wonderful businesses is more than you need in this life and would serve you much better than 100 average businesses.”

But they also warn that “there is no one easy mechanical formula to determine intrinsic value and margin of safety. You have to apply lots of models. So it takes time to get goos at it. You don’t become a great investor rapidly any more than you become a bone-tumor specialist quickly.” On this matter, Buffett said that in 40 years he has never gotten an idea from a Wall Street report, instead he directly reads annual reports himself. This highlight the importance of doing you own due diligence.

This approach is probably best described by their analogy of buying a farm: “Let’s say you want to buy a farm, and you calculate that you can make $70/acre as the owner. How much will you pay for that farm? You might decide you wanted a 7% return, so you’d pay $1000/acre. If it’s for sale at $800/acre, you buy, but if it’s for sale for $1200/acre, you don’t. You wouldn’t base this decision on what you saw on TV or what a friend said. You would do your own homework. It’s the same with stocks.”

Buffett also claim to have read the entire investment section of the Omaha public library by the age of 10, and that he is big on reading everything in sight. In fact he concluded that “if you read 20 books on a subject you are interested in, you are bound to learn a lot.” He also recommended a number of good books along the way, such as “The Intelligent Investor” by Benjamin Graham (especially chapter 8 and 20 which changed his life), and John Maynard Keynes’ “The general theory of employment, interest and money” (with chapter 12 Buffett regard as the best description of the way capital market function), while Munger noted that “we’re here to go to sleep each day smarter than when we woke up”, and recommended Robert Cialdini’s book “Influence.”

However, Buffett also highlight the importance of temperament: “being clever and very informative are nothing if we don’t have the right temperament. Successful investing requires not extraordinary intellect but extraordinary discipline”, in which he pointed out the story of the genius Issac Newton who lost a lot of money in South Sea Bubble.

Yes, the amount of wisdom from Buffett and Munger is abundant, and could not possibly fit all into this short review. Some of my personal favourites are the theory of Ovarian Lottery (which puts the world in perspective), the story of a genie granting a 17 year old any car he wants with a condition that he takes care of the car for the rest of his life (which underline the importance of maintaining our well-being), and the newspaper standard (how we should behave as if our actions will be on the front page of the local newspaper).

Munger also repeatedly remarked the importance of good habits, and knowing what to avoid (such as bad marriage, an early death, risking AIDS, experimenting with cocaine or getting into debt). And when asked about their theory for life, Munger said “pragmatism! Do what suits your temperament. Do what works better with experience. Do what works and keep doing it. That’s the fundamental algorithm of life – REPEAT WHAT WORKS.” Buffett added that “if you’re fast, you can run the 100 metres for the gold medal. You don’t have to throw the shot put. The key is knowing the edge of one’s circle of competence.”

Indeed, the grandfatherly wisdom that come out in these meetings are plentiful, and this book construct the writings in such a way that we will feel that we are there all along for 30 years, attending every single meeting ourselves and directly learning from the maestros themselves. That’s an invaluable experience, which is why this book is one of the best on Buffettology.

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There’s such thing as atheist extremists

Just like religion, the problem with atheism is not the [non] religion but the people. For me atheists people who hold dear the principles of harmony, do good to other and apply the Golden Rule, are acting like a good Christians and good Muslims. It’s the right kind of atheism.

But just like in any religion, there are those who are badmouthing even insulting other religions, and force people to see everything from their point of view / scripture / principles / version of religion.

This also applies to atheism. So the argument is not about religion vs non religion, but it’s about persuading people to subscribe to their point of view. To me, this is the definition of extremists. And there’s such thing as atheist extremists.

Book review: A very smart book, on a passionately entertaining subject

“Inverting the Pyramid: The History of Football Tactics” by Jonathan Wilson

This is the fascinating long history of the Great Game, from the tactical perspectives and the philosophies that come with them.

The book began right from where it all started: the meeting organised by H.C. Malden of Godalming, Surrey, in his Cambridge rooms in 1848, which summons university representatives of Harrow, Eaton, Shrewsbury, Winchester, Rugby, and 2 non-public schoolboys, to create the first unified Laws of the Game, the “Cambridge Rules.” The rules then spread around the world in the next few decades via British men of various occupations, blended in with the local culture and create distinctively local style of play, until it became a truly global phenomenon in the 20th century.

The title of the book brilliantly captures this phenomenon, through the evolution of its formation from the pyramid-like shape 2-3-5 in the early days, to 3-2-5, 4-2-4, 4-4-2 to the inverted pyramid shape 4-5-1 and even 4-6-0 that several teams use today, complete with all the advantages-disadvantages, blank spots, and all the major incidents that colour the many transformations.

Within this long tactical evolution the author, Jonathan Wilson, demonstrates a very thorough research down to the smallest incidents on any match played, such as a big match in 1890 or 1953 when there weren’t even a television coverage. And he can describe the socio-cultural influences of every team thoughout history. For instance, the style of play of a football team is apparently largely influenced by the contemporary political system and economic condition, like in Italy and Spain in 1930s and Argentina in 1960s when they were under military dictatorship they played a tough, muscular, and pragmatic football.

The book also delightfully gives small trivial facts every now and then, such as the first man to be caught offside after the 1866 law change was Charles W. Alcock. Or how the father of modern football, Viktor Maslov, was the first to use 4-4-2 formation. Or that time Louis Van Gaal dropped his troussers in Bayern Munich’s dressing room, to literally show that he “has the balls” to drop star names.

As football evolves, so do the chapters in the book. And we’ll move forward from the likes of the day rugby separated itself from football to the most exciting part for me, the tactics that differentiates modern football from the old: pressing.

And this is where it really gets down to business. The book gives the technical explanations of a lot of matches and team set-up, a lot of which gives a whole new angle on the matches we thought we knew when we watch them. Such as how Greece can (deservedly) won Euro 2004, by controling matches without even controling the ball. Why Sergio Busquet was the most vital player in Guardiola’s Barcelona. And why Arrigo Sacchi had to instruct Carlo Anchelotti to train an hour early with the youth team to make sure his playmaker understands his specific tactics.

Jonathan Wilson declared right in the beginning that he loves Bielsa-esque style of play, with high speed passings and high pressure. And it shows. The discussion of modern football evolve mainly on the style of Bielsa, Sacchi and Cruyff and their descendants like Guardiola and Van Gaal, and not so much on the style applied, for example, by Alex Ferguson, Marcello Lippi, or Jose Mourinho, although their styles (and many more modern managers’ styles) are still analysed albeit not as thorough.

Just like when watching these fast-paced footballing style, reading the analysis of the tactics, in almost scientific approach, is just downright exhilarating. It gives a bright shining light on how the modern game is really constructed, and makes Marcelo Bielsa in particular – and his protégés – looks nothing short of a genius. A very enjoyable reading!

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Book review: The importance of Khatam

“Misquoting Muhammad: The Challenge and Choices of Interpreting the Prophet’s Legacy” by Jonathan A.C. Brown

For Muslims Al Quran is infallable. And Hadiths, despite composed by men, are a close second. But in reality the people who read them are still subject to (mis)interpretation, are prone to errors and human emotions like greed and envy, or can have their own hidden agendas using religious doctrines. This book is about that human fallability.

The book shows the complex intellectual and spiritual debates on the interpretation of Al Quran, and how complicated and political the writings of the Hadiths are. It shows that Islam is where it is today not only through the conquerings and assimilations, but also as a result of many theological frictions occurring for the past 1400 years.

The central message of this book is very straight to the point: we need to read Al Quran wholly, from cover to cover (or Khatam). Reading only some verses of Al Quran or just bits and pieces would take the verses out of context, and thus their individual messages could be highly misleading – the major problem the world has always had since the 600s, especially today.

Chapter 3 was spot on in highlighting this point. The author, Jonathan A.C. Brown, shows the infalibility of the work of Shakespeare, the Bibble, even Homer’s Illiad and Odyssey, where each one of them have obvious flaws but were overlooked. So why should we intellectually scrutinise the blank spots of the Quran? The point of this chapter is, if we read the texts separately it will indeed produce oddities and flaws (or blank spots), but if we read them wholly the big picture will make sense in the end, just like the work of Shakespeare and Homer.

Moreover, it seems like everything are being discussed by his book. Everything, including controversial topics like the Hadith about masturbation, the long debate about who is entitled for zakat, and the relevancy of Quranic verses and Hadiths in modern time. It also discusses whether a woman can lead a mass prayer, an extensive discussion and analysis on syariah banking, and those 72 virgins alledgedly “promised” to martyrs.

It also shows the extensive debate between Muslim ulamas and philosophers on reading the Quran and Hadiths in a literal way, including the literal reality of heaven and hell. Most importantly, using many references from various ulamas and scholars, the author also directly answer one controversial verse with another verse that cancels it out, and explains the reasoning and the context for those particular verses to emerge.

For example, the controversial verse “when you meet the unbelievers in battle, smite their necks until you overcome them, then bind them as prisoners, either then setting them free out of munificence or for a ransom, until the war ends….” (47:4) is actually cancelled out by “It is not for a prophet to take prisoners until he has triumphed in the land” (8:67) and “Fight the polytheists altogether as they fight you altogether” (9:36).

Another example is the “wife beating verse” (An-Nisa 4:34) that is often misinterpreted, because the syariah in no way condoned a husband striking his wife, and the Prophet himself never struck a hand on any of his wives. A similar controversy lies in “honour killing”, where the book clearly state that no Muslim scholar of any sect throughout history has sanctioned a man killing his wife or sister or daughter for tarnishing family honour. The author then elaborate the context that honour killing is a product of patriarchal societies in underdeveloped economies, including those not predominantly Muslim countries like Brazil and India.

This is no doubt a truly inspiring book, and it definitely will be my go-to reference book whenever I need to understand any specific matters under Islamic law. The fact that so many briliant scholars debating so many specific aspects of the Quran and Hadiths – as analysed extensively in the book – it humbles me, and show how small I am in the presence of the many experts, and how little I know about my own Holy Book and the sayings of my Prophet. With so much wealth of hard truths and brilliant reasonings this book is a must-read for every Muslims.

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Book review: How to control our cognitive biases

“Thinking, fast and slow” by Daniel Kahneman

When 9/11 happened, the world suddenly feels like a much dangerous place. When Malaysian Air planes crashed almost nobody wanted to fly with them anymore. When your teenage daughter comes home late from a party you can’t help but imagining all sorts of crimes you read on the news. These are the examples of cognitive bias, a big part of our decision making process. And this book is about how to recognise them and how control them.

The book is written by Daniel Kahneman, the only Nobel Prize Winner on Economics who is actually NOT an economist but a psychologist. Due to his scientist nature the theories he presented in the book have been tested, published, peer-reviewed, and re-tested by many more scientists. And he also uses a lot more theories in the book that are based on experiments made by these peers, to make some excellent points.

The result is an exceptional book, a complex sets of extraordinary findings written in a simple language that makes them easy to digest. Findings that look at decision making process using very specific filters.

First, there is the Halo Effect filter, and the importance of moving first (to establish an anchor or parameter) in a single-issue negotiations. Then there’s a Hindsight Bias, as Kahneman argues “If an event had actually occurred, people exaggerated the probability that they had assigned to it earlier. If the possible event had not come to pass, the participants erroneously recalled that they had always considered it unlikely.”

Furthermore, there’s also Availability Heuristic, which points out that just because the information is readily available in your mind it doesn’t make it right. For example, all the constant gossips about Hollywood celebrity divorces makes you think that celebrity divorces are common compared with ordinary couple. Or after you become a victim of a crime you suddenly feel that the world is not a safe place anymore. Or after watching so many spy movies suddenly every corner of the earth is a conspiracy. Or just because one kid becomes autistic after vaccinated you think that vaccination causes autism.

Moreover, the chapter on Anchoring Effect makes father of spin Edward Bernays looks like an amateur, in which kahneman makes a very vital remarks in this data-driven world: “The world in our heads is not a precise replica of reality; our expectations about the frequency of events are distorted by the prevalence and emotional intensity of the messages to which we are exposed.”

There are also several interesting facts about the small things in our daily lives. Such as his interesting approach to dismantling regret. Or the scientific answers to some of the questions that have been lingering on my mind, like the illusion of time, in which he answers with the Duration Neglect in chapter 35 and 36. Or the power of smiling and frowning, where frowning generally increases the vigilance of what Kahneman called System 2, and reduces both overconfidence and the reliance on intuition.

But the most mind-blowing for me, out of many, is the interesting thing that is happening in our brain when we change our mind. As Kahneman put it, “A general limitation of the human mind is its imperfect ability to reconstruct past states of knowledge, or beliefs that have changed. Once you adopt a new view of the world (or of any part of it), you immediately lose much of your ability to recall what you used to believe before your mind changed.” In other words we can actually change the past, by changing the way we look at it.

All in all, this is one of the most intelligent books I’ve ever read, that gives us the manual of the inner workings of our thought processes. Reading it can help us understand the wiring in our brain and how we can make the most efficient use of it, for our decision making process. And that, is why he won the Nobel Prize.

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