Too Big to Fail, by Andrew Ross Sorkin
As the Wall Street crisis went global, Sorkin updated his account of the crisis’s ground zero to include more recent events.
Too Big to Fail: “Perhaps the most disquieting development that has taken place during the past year hasn’t been on Wall Street or in Washington, but global. No longer is the phrase ‘too big to fail’ being associated with banks alone. It is now being used to describe municipalities and countries that, like many home borrowers, have become overleveraged. Much recent concern has focused on Greece, but Spain, Italy, Portugal, and Ireland are all considered vulnerable. In the United States, worries persist about whether the state of California will ultimately meet its day of reckoning.”
The Upside of Irrationality, by Dan Ariely
A defense of the forces of irrationality in human life.
Upside of Irrationality: “By now I hope it’s clear that if we place human beings on a spectrum between the hyperrational Mr. Spock and the fallible Homer Simpson, we are closer to Homer than we realize. At the same time, I hope you also recognize the upside of irrationality — that some of the ways in which we are irrational are also what makes us wonderfully human (our ability to find meaning in work, our ability to fall in love with our creations and ideas, our willingness to trust others, our ability to adapt to new circumstances, our ability to care about others, and so on). Looking at irrationality from this perspective suggests that rather than strive for perfect rationality, we need to appreciate those imperfections that benefit us, recognize the ones we would like to overcome, and design the world around us in a way that takes advantage of our incredible abilities while overcoming some of our limitations. Just as we use seat belts to protect ourselves from accidents and wear coats to keep the chill off our backs, we need to know our limitations when it comes to our ability to think and reason — particularly when making important decisions as individuals, business executives, and public officials. One of the best ways to discover our mistakes and the different ways to overcome them is by running experiments, gathering and scrutinizing data, comparing the effect of the experimental and control conditions, and seeing what’s there. As Franklin Delano Roosevelt once said, ‘The country needs, and unless I mistake its temper, the country demands, bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something.'”
The Invisible Gorilla, by Christopher Chabris and Daniel Simons
Two psychologists unravel the mysteries of illusion in daily life.
The Invisible Gorilla: “Once you know about everyday illusions, you will view the world differently and think about it more clearly. You will see how illusions affect your own thoughts and actions, as well as the behavior of everyone around you. And you will recognize when journalists, managers, advertisers, and politicians — intentionally or accidentally — take advantage of illusions in an attempt to obfuscate or persuade. Understanding everyday illusions will lead you to recalibrate the way you approach your life to account for the limitations — and the true strengths — of your mind. You may even come up with ways to exploit these insights for fun and profit. Ultimately, seeing through the veils that distort how we perceive ourselves and the world will connect you — for perhaps the first time — with reality.”
Akerlof and Shiller’s work, written at the nadir of the economic collapse in 2008 and 2009, about how human irrationality drives markets.
Animal Spirits: “To understand how economies work and how we can manage them and prosper, we must pay attention to the thought patterns that animate people’s ideas and feelings, their animal spirits. We will never really understand important economic events unless we confront the fact that their causes are largely mental in nature.”