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Monday, April 5, 2010

New addition to the non-traditional MBA Reading List

My non-traditional MBA reading list has one been of my more popular posts on this blog. It's even more popular than my post about how I was a sperm donor which surprises me but reassures me about the general state of my blog readership. Since I consider myself to be market driven and responsive to my readership, this post will be an addition to the book list. Readers, please remember my humble gesture the next time that you have to endure a post about animal husbandry or colonoscopies.

My non-traditional MBA booklist is for future MBA's who were like myself. These are folks who are still surprised that they enrolled in an MBA program, may have worked in very non-business fields like non-profits, education, or the arts, or think of animal husbandry when they hear about the stock market. These books are intended to be clear to the novice but yet informative enough to allow the reader to a hold a conversation with the most cynical banker. Additionally, they are entertaining enough so they don't feel like homework. Benjamin Graham's book on value investing is not on this list. Andrew Sorkin's Too Big to Fail does make this list.

Too Big to Fail tells the tail of the economic melt down from the viewpoint of all of the players on Wall Street. It gives a both a beautiful and frighteningly clear picture of what the players were thinking or not thinking. The fates of Bear Sterns, Lehman Brothers, Merrill Lynch, Goldman Sachs, Morgan Stanley, Bank of America, JP Morgan, AIG, Wachovia, and Henry Paulson and the Treasury Department are all woven together in a way that provides a systematic view of how companies with hundreds of years of history changed in a matter of weeks. Sorkin writes clearly enough that the novice can understand (avoiding the biggest problem with House of Cards which was written in some banker dialect) but drops enough f bombs to demonstrate that he really did know the industry.

The highlights or what I learned was:

The financial industry did have some idea that the financial crisis was coming: The fact that years of easy credit and leveraging would come to a catastrophic end was not a surprise to the Treasury Department or Wall Street firms. Well, it probably was a surprise to Bear Sterns who appeared to have made a strategic decision to never be strategic but rather be as opportunistic as possible. For everyone else, the crash itself was as surprising as another celebrity sex video tape. The severity, swiftness, and lack of ability to contain the spread was the surprise. I found this to be reassuring that the US financial experts at least did see the crash coming but I don't think anyone could have predicted its severity.

When the going gets tough, the tough make deals: Henry Paulson or at least some investment banker was probably the best person to be Treasury Secretary during this time period. A more policy oriented secretary would not have been able to unleash the flood of mergers and other deals that Paulson helped trigger. This probably mitigated the financial crash significantly. Paulson was careful enough so that there was no documentation of him orchestrating Bank of America's purchase of Merrill Lynch or any other mergers. However, the frenzy of the Treasury Department's brokering and deal making got so extensive that even technocrat Tim Geithner was screaming for deals as loudly as any seasoned banker. Investment bank CEO's starting calling Geithner "Eharmony" because of all his attempted matchmaking.

A whole new view of Wall Street CEO's: Despite my MBA, I've never thought that highly of Wall Street CEO's. Mainly because I think that they had to sell their soul and humanity to out elbow other contenders. However, I did start to view some CEO's in a more favorable light after reading this book. JP Morgan's Jamie Dimon was pushed to buy almost every single player in the list above and had both the business acumen and intestinal fortitude to repeatedly tell Paulson and company no. If Lehman Brother's Dick Fuld was in that position he probably would have bought every single firm just because it would make his penis feel wonderful.

A combination of Too Big To Fail, When Genius Failed (about a bank on bank Wall Street bail out involving the hedge fund, Long Term Capital Management), and Barbarians at the Gate (about investment banking in the 80's and corporate raiders) will give a reader a very complete chronology of Wall Street over the last 30 years. Add American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century for a little populism and you'll be able to score some points in your argument with even the most cynical investment banker.

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