Here’s a quick review on a book that had great impact on me.
The Basics
- Category: History, Investing
- Originally Published: 2005
- Pages: 329
Book Summary / What This Book Is About
This book is hard define… let me try. I would call this the history of the science of investing. Maybe a better way to put it is: the story of how science and math geniuses tried to figure out how to bet and win. Note: investors are going to be quick to tell me that speculation is not the same as investing, and I would agree. But I would also argue that any time you invest in a company, even based on sound investment principles (that is, buying stock in a financially strong company with the intent of holding for the long term), you are betting on that stock going up so there’s a little bit of a crossover. I don’t want to digress to the debate about what is and isn’t considered “investing” but if I read this book correctly, much of how we use technology today to buy and sell stocks comes from an evolution of thought started by curious researchers mostly at Bell Labs that were fascinated with beating odds when they learned about how the mafia used the telegraph to get an edge in horse racing. This books shows us the theories by pioneers that you’ve probably never heard about such as Claude Shannon, John Kelly, and Ed Thorp, to name a few. Their theories started with horse racing, then applied to casinos, then finally to equities. By the end of the book you realize how much of an influence these men had on our modern world of investing.
Main Takeaway / The First Thing I Think About When I Think About This Book
The practical application of this book for me was: learn more about investing like the guys in this book. I subscribe to the Benjamin Graham school of thought, as applied by Warren Buffet and Charlie Munger, which is buying stocks in great companies and holding long term without being swayed by temporary ups and downs of the market. So while you don’t need to be a genius to be a great investor (thankfully) and sometimes being a super high IQ person gets in the way of successful investing, this book nevertheless ignited my curiosity and instilled a desire in me to understand numbers, odds, probability, and other math principles involved in investing at a much deeper level than I do now. And although I know I’ll continue to focus on temperament and the personal characteristics that lead to better investing than I will the math behind it all, it’s still fun to imagine myself like Good Will Hunting furiously scribbling the formulas of fortune on a chalk board.
Final Thoughts
Man, really good book. What a great work. William Poundstone went all the way back to the beginning of the 20th century and told a cohesive story about hedge funds and investing that somehow included the mob, horse racing, casinos, Vegas, and underrated geniuses at Bell Labs, MIT and Harvard. It’s got all the excitement of the 80s with Michael Milken, corporate raiders and even Rudy Giuliani making appearances. It really has it all. This book was a gift from my employee, fellow Toastmaster and Rotarian, scholar and gentleman, Paul Goetz. Thank you Paul!
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