The Black Swan

I finished this book a couple of days ago. Very interesting. It is about how not linear or logical are philosophy, economics and life. About how we try to find logic/causality to everything. How history only teaches what we have only discovered. How we can’t predict properly, and much less financial market using Gaussian and Bayeasian models when these are non-linar systems, how we should run away from “experts”, how the academy is built in a status-quo that can’t be refreshed. It is intense, it touches a lot of subjects. And sometimes I feel I get it, and later on I am not sure. Examples like the turkey that is feed for 100 days, and very likely “thinks” that will last forever, until without knowing, Thanksgiving comes, are brilliant. Similar examples for Casanova (who survived any type of incident) and NYC (like Casanova but at city level).

A black swan is considered something very unlikely to happen that actually happens or similarly, that something very likely to happen, it doesnt.

The book was written in 2007 just before the 2008 financial meltdown so its attacks to the “risk” management can’t fit better.

It uses references from Daniel Kahneman who some years later wrote a great book about how we (badly) reason. And won a nobel prize in Economics… funny enough, that’s a prize who Nassim attacks a lot around the book. As well, I enjoyed the part regarding the application of chaos theory/fractals from Benoit Mandelbrot (that I read from his book) in the markets. He mentions many other authors like Karl Popper (whom I have never paid attention), Herni Poincare, etc. As well, he mentions Godel.

The entries about Skepticism and Empiricism are really great. From how started, how it is related to the black swans and how Medicine killed more people than cure them until not long ago. And when I was reading about Sextus Empiricus, I wasnt sure if he was joking, but I was really surprised by the discovery of this philosopher/physician.

I think I need to read it again.

Chips Water Innovation

This is a bit old news. But I found interesting the connection between chips manufacturing and water. And this is brilliant.

I want the world to be dependent on me, but I don’t want to be dependent on anybody else.” I don’t think it’s going to happen.

As well, I left for granted that all innovation for COVID vacciones was just miraculous, but it seems it was something feeding from successful innovation strategies.

So moving forwards, and I guess that should be valid to any country, you need to invest in innovation, R&D. It is expensive but it is worth long run. See TSMC.

The Ascent of Money

Somehow I had low expectations about this book, but I have been totally delighted with it. It is one of the best books (mainly in economy) I have read recently.

It is about about the evolution of finance in the world from the small tablets in Babylon to today’s crypto-currencies.

The shows how the economy development in the world started to speed up when the Spaniards starting to bring tones of silver (Potosi) to Europe (and obviously they didnt make the most it). Still the economy was based in hard currency but after this ,banks, insurance, stock exchanges, bonds and other financial products started to develop in Florence/Venice (Renaissance), Amsterdam, London and Paris. Still early advances were done in the Middle Ages like the case of Fibonacci who wrote the formula to calculate the compound interest of an investment.

I liked the reference to Mary Poppins film regarding a bank run. I actually didnt remember the movie very well but was interesting to make sense to the story.

As well, there is basic example showing how money is created based on debt (based on the fact that the banks dont have to keep your deposit only a small percentage).

It is clear that we dont have that much info about the economies of 4000 years ago but based on the book, the finance has evolved like a living thing. It has become more and more complex,like us, with time. And each crisis has improved it. And each main empire, kingdom, etc in history was strongly connected to an advance it is financial/economy system.

As well, there are good references about finance and war, like the America Civil War, WW1, Napoleon wars, etc

Another topic that was very interesting is the creation of welfare systems (and how different are some of them like Europe, USA and Japan) and the evolution of the pension system. I was really surprised about the example of Chile (when it become a dictatorship) as the first country introducing the private pension system that has been exported to many other countries (Idea from Milton Friedman) And how Argentina was one of the top 10 economies in the early XX century and how things turned sour and became a defaulting machine.

There is a big part of the book focus in the subprime crisis, from the origins, development and aftermath. It is interesting that one of the factors was the “democratization” of home ownership in USA that helped to create the bubble. And how really globalization has made the world not as strong as we thought.

I have managed to make connections to other books I have read before about politics, psychology and economics so it is interesting to see similar and different opinions in several subject (mainly the subprime crisis)

As well, this book was initially published during the Subprime crisis of 2008 and the revision I had, just added two new chapters for the years up to 2018. The final part is mainly about the relationship USA-China post subprime (and Trump), Europe (Brexit), how China is taking the lead in financial technology (so that means they will (or already are) the next empire) and the explosion of crypto-currencies.


I finished this book during the week. It is about how good companies became great ones. They set some tough requirements as 15y performing below market and then after a transition point, 15y performing three times above market. The book was completed by 2000 so just in the middle of the .com bubble so I would be curious what the result would be now (and after the subprime crisis in 2008). And all of them are companies trading in USA and public markets. As well, for each candidate there is a counterpart to demonstrate how two companies in similar circumstances, became one great and the other not.

To be honest, from the eleven companies passing the exam, I knew five: Gillete (shaving stuff), Kimberly-Clark (paper based things), Phillip Morries (tobacco), Fannie Mae (mortgages, that collapsed in 2008 crisis..), Wells-Fargo (bank). And I was surprised for the lack of other big names.

It is interesting the history of each company and most of them related to very different sectors. So there is no really lucky strike as the study covers nearly 30y history of a company.

So the goal is to identify the traits that all these great companies had to made that transition.

The book treat the following points in each chapter:

  • Level 5 leadership: Leaders no super-stars. They are ambitious about their company and not just during their tenure. I like the example of those CEOs, people who didnt have big head and just looked through the window to explain their success. So it is that mix of humility and will that “create” them.
  • First Who, then What: Your biggest asset is the good people, no just people. So having the best ingredients and knowing how to use them, you will get a great meal. As well, you need to get rid of the no good people. This is something the level5 leader has to accomplish. So hiring is a critical part (or have the process to form these people) and dont hire until you have your candidate. And looks like money wasnt the main thing to get or maintain the good people in your bus, comparing with the counterpart companies.
  • Stockdale Paradox – Confront the brutal facts, yet never lose faith. This is based on the experience of a Vietnam war prisoner. “The optimistics” were the ones who didnt make it out. All these companies faced a challenge that after passing it, became great. They didnt ignore the reality but believed they could go through.
  • Hedgehog Concept: This is the concept I struggled more to understand. This is based in the hedgehog and fox paradox. In summary, the fox tries many different things to hunt the hedgehog, but the hedgehog always sticks with the same plan (become a spiky ball) to defeat it. So this is based on Keep It Simple Stupid (KISS) from my point of view. So see the complex world and simplified it, you focus in the essential and ignore the rest. From the business perspective this translate into the three circles:
  1. What you can be the best in the world at (and what you can’t be the best too)
  2. What drives your economic engine:
  3. What you are deeply passionate about: This is not just get passionate about something, you need to have it before. Wrong example.
  • Culture of Discipline: If you have that, you dont need hierarchy and motivation. This is based on disciplined people, disciplined thought and disciplined action. Two interesting points in this chapter are
  1. Budgeting: Based on the hedgehog concept, it is just decide what areas to be fully funded and what not at all.
  2. “Stop doing” list: Again, this is another point in just focus in the important thing.
  • Technology Accelerators: You would think that technology made some companies great. But the summary here is, technology was just a tool. You buy the technology or develop it to stick with your hedgehog concept.
  • The Flywheel: “Revolution means turning the wheel”. So you need to push the flywheel. At the beginning is hard, but with time, once it gets momentum, get easier. So this is based on a compound investment of effort, and there is no miracle involved. And the results will speak by themselves. This contrary to the doom loop where you avoid the buildup, just implement big/radical programs, without thinking.

And what after being great? It is to last as great. This is another book from the author that was written before this one about this concept.

So, based in the book, all these concepts make a great company, but it is not the recipe to last forever.

Gillete was merged by P&G in 2005. Fannine Mae didnt do very well during the mortage crisis in 2007/8. Tobacco is not healthy business, etc.

In summary, interesting book, as I used to think only the “big” corporations, famous CEOs were great companies (at revenue level) and here you can find more successful companies (at revenue level) with much less glitter around beating them very badly those for long runs.

Stock Operator

This book was recommended by last employer CEO. It is based on the life of a stock trader Jesse Livermore from the early XX century.

One of the first shocking things in the book is in the introduction. This is a book about speculation.

That tells you a lot what was the market before, and what is today.

He made millions trading, lost them, recover, and at the end commit suicide. Still the book has good points for a trader point of view. I will never be a trader, because long term, very few, win.

I like his beginning in the trading world. He was very good at the bucket shops and he was forbidden to trade once he beat the house each time. Like in a casino.

One thing I realised about his trading in bucket shops is, his actions didn’t have impact in the market so it was a very reliable technique. But when he moved to the real market, he struggled. It is like the Schrodinger’s cat, until you dont trade, dont know if the stock is going to go up or down. And the other one, is the execution time. Low latency in those times were via telegraph lines, and they were critical. It is seems Western Union started in that business. If you have to buy many shares, very likely you will not buy all of them at the same price (it will go up, so it will be more expensive for you) and it will take some time. So for that period of execution, you are a bit at the mercy of the “market”.

There are many references to other early grate traders, scandals, crisis, etc. It was interesting how the American Civil War was financed by selling bonds to the European markets and then how during the WWI, all Europe gold came back to USA to finance all the arms needed for the war.

War is business. And then, they tell you is patriotic.

Another curious thing, is the trade of cane sugar. There was so much sugar that it was needed a market for it so it wouldn’t crash… then it was invented our “sugary breakfasts” and the chocolate bars!

At the end, I noticed that the whole trading experience could be repeated in our days without much difference. Maybe without the excess like the Wolf of Wall Stree movie/book.

This time is not different

I had this book in the pipeline. It is a bit technical but is interesting as it tries to provide data for several centuries about financial crisis. That is quite challenging not just because governments from middle age didn’t have much accountability but even nowadays the authors struggled getting hard number regarding domestic debt.

The book was written about the subprime crises in 2007-8 so that’s the main focus to proof that the event is not that different from other crisis. And it is remarkable how many crisis I have been through since 1980s without really noticing (but my parent sure they noticed…)

The book preface is super direct. The one common theme to most crisis is the excessive debt accumulation (governments, banks, corps, consumers). Even during a boom. So debt-fueled booms are not very healthy. And it was proved during the subprime that the financial markets dont correct themselves.

One of the most interesting points of the whole book is the evolution of default-prone countries (like France and Spain) to “stable” ones. This graduation process is long and hard, and not many pass the exam. As well, there are a lot figures about deb before 1929 crash, post WWII to put thing in perspective.

So it was interesting read mainly for the historic background and our psychological naivety during crisis times. At the end of the day, the economic is a cycle.


MM is one of the few people I read/folllow and his newsletter (and books) is one of the best in my opinion. And today I had a laugh about this week entry. I have never heard about the impact of CO2 with obesity but who knows. The funny part was the theory about the “world peace period” is mainly chased by the big corporations (McDonalds, Dell, etc) because war doesnt make profit for them. In one side, makes sense, USA-China are like a old married couple, standard war is not profitable. Just do it somewhere else.

Depression Economics

I finished reading this book from Paul Krugman. I have really enjoyed it. It is short book and got me hooked. And it is much more easier to read the Keynes book… that was proper hardcore. He explains the crisis we have seen in XIX and XX in a way that you dont need to be economist.

It is really interesting the connections of the economic crisis globally and how complex it is getting everything. It seems the only power that the governments have is print money and play with the interest rates. And it is clear that there is no a perfect system and we will carry on seeing crisis like this. There were some big figures in the economic world that said there will not be more macro economical crisis anymore. And it is funny how the IFM hasn’t followed the practices to improve economies from countries in crisis, they have made things worse.

The baby setting Co-Op is a great example that is used in several parts of the book so explain the type of crisis in that scenario. Really useful.

And seems he is honest, he doesnt have the explanations for all crisis. For example for the Asia crisis of the late 90s, he uses the psychological concept that investors put all countries is Asia in the same basket and treated some countries with stronger economies like weakest one.

And Keynes is mentioned several times. It is clear he was great (although I didnt understand much from his book).

It is clear that things that behave like a bank and they are not bank, they should play by the same rules to protect consumers and avoid crisis like the 2008.

And how important is the confidence. Even well run banks can go down extremely easy when there is a “run on the bank” (people want to take the money out of the bank). It is like a domino effect.

As in Mandelbrot book, it is impossible to foresee the economy long run… And Keynes says that in the long run we are dead.

Enjoy the moment.


I am reading The General Theory of Employment, Interest and Money of John Maynard Keynes. The intro is really good and give you a good glimpse of Keynes’ life. The book itself is quite hard for me to digest. It is not my field but I am courius about Economics/Finance. One day, I would like to understand how money really works…. I think I bought the book after references from other books from Yanis Varoufakis.

Things I have learned he was against the Treaty of Versailles as the conditions over Germany were too abusive and that could cause an economic disaster for future generations. Well, you have created the easiest scenario for a crazy guy to play with the feelings of a proud nation to raise and get back what it was theirs…. Yeah, very simplify, but it works in my head. He wrote about it in “Consequences of the Peace”.

I think we have seen similar scenarios (without war involved thanks x (x = choose your god’s religion)) with Greece and Argentina.

Then after WWII, he helped to create the “International Monetary Fund” and “World Bank”. And attended Bretton Woods Conference. One of the important points of that conference was the fix rate gold/dollar and the lack of banking crisis as a consequence of this agreement. As well, I think the book from “The Signal and the Noise” says that during this conference, the American president couldnt understand Keynes ideas as he couldnt explain them easily. That conference is important because when the deal was cancelled in 1971 it caused some interesting economic shocks (books from Varoufakis are good) as countries couldn’t change dollar/gold as before and the banking crisis started to roll.

As per my understaning, Keynes believed that economic balance (mainly low unemployment) was the basic of a peaceful world. If you have most of your needs satisfied, I dont think you will pick your rifle whenever a lunatic tells you to do so.

As well, he was pro-European…. look now, we are in Brexit times…

…look now… it seems unemployment is going to skyrocket all around the world…. and we have too many dumb presidents in too powerful countries…. look now… how far right has been gathering support in the last years….

All the ingredientes for the cocktel of W..